Cross-strait oil pact close to approval

Chinese Petroleum Corp (中油) is awaiting official approval to sign a deal with a subsidiary of PetroChina Co Ltd (中國石油), company executives said yesterday.

In the partnership, Chinese Petroleum will refine oil for its cross-strait counterpart and sell finished oil products to PetroChina and in Taiwan.

Hsieh Rong-hui (謝榮輝), vice president of Chinese Petroleum, told the Taipei Times yesterday that the Ministry of Economic Affairs was reviewing the proposal but had "agreed in principle to approve the deal."

The partnership -- which would be formed between Chinese Petroleum and a Singapore subsidiary of PetroChina -- could begin as early as next month, Hsieh said.

Chinese Petroleum would receive crude oil from wells in Sudan owned by PetroChina's parent company, China National Petroleum Corp (CNPC), and refine it into fuel oil, gasoline, diesel, naphtha and kerosene, Hsieh said.

Under the deal Chinese Petroleum would keep gasoline, naphtha and kerosene produced from PetroChina's crude and ship diesel and fuel oil back across the Strait via a third location such as Hong Kong or Japan, Hsieh said.

According to a report in the latest issue of the Far Eastern Economic Review, PetroChina, which owns no foreign production assets, is seeking overseas oil and gas properties with the aim of acquiring an amount equivalent to 10 percent of its domestic production within five years.

PetroChina's total domestic production of oil and gas last year was equal to 858 million barrels. According to analysts quoted in the report, PetroChina is likely looking for foreign production assets in Russia, the Middle East or Algeria.

According to another Chinese Petroleum executive, the deal will see the company initially refine around 600,000 barrels of crude, or 80,000 tonnes.

If the deal is approved, it would signal a further deepening of the relationship between Taiwan's state-run oil giant and Chinese oil companies.

Also currently awaiting government approval is a deal between Chinese Petroleum and the China National Offshore Oil Corp (中國海洋石油) -- which is also government controlled and accounts for 10 percent of China's crude production -- to jointly explore for oil in the Taiwan Strait.

Although a final decision has been repeatedly pushed back from last December, Hsieh said the Mainland Affairs Council is almost in the "final stages" of deciding on the deal.

"Since December there has been a Cabinet reshuffle, so they given our proposal low priority," Hsieh said.

In related news, international oil giant ExxonMobil announced recently that its first shipment of oil had arrived in Taiwan on March 12 since the government opened the market to foreign competition.

Through its local subsidiary Esso Petroleum Taiwan Inc, which is a joint venture between ExxonMobil and Pan Overseas Corp (匯僑), the firm will supply its chain of 16 service stations along with other independent stations around the nation.

"The expansion of our service-station network in Taiwan has generated a lot of interest from potential dealers," said Yap Shek-seng, Esso's Taiwan general manager.