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CEFC beefs up its oil business.

CEFC China Energy, a small chemicals and fuel company, is beefing up its oil business to get ready for more open domestic oil markets, hiring trading managers from state energy giants, building storage tanks and looking to invest in oilfields.

The moves are signs that independent Chinese firms are expecting the government this year to lift at least some restrictions on the state-dominated oil and gas sector. China's approval in December of the launch of crude oil futures in Shanghai raised the expectation that crude imports would be freed up to ensure greater participation in the yuan-denominated oil contracts.

"Dealing crude is what a mature oil trader does. CEFC seems to be shifting to that role from an earlier image as a commodity trade financing player," said a senior Beijing trader, referring to CEFC's practice of using mixed aromatics to raise bank loans to profit from the currency arbitrage. Besides hiring trading executives from state oil companies, CEFC is due to start up an 18-million-barrel tank farm on Hainan island this year, its first such asset in China to store mostly crude oil.

Traders with knowledge of CEFC's activities said the company was also looking to acquire oil producing assets from abroad, possibly Africa.

Owning upstream assets can be key in winning quotas for crude oil imports, traders said. Guanghui Energy, an owner of oil and gas assets in Xinjiang and Kazakhstan, was licensed to import crude last year.

CEFC has for the past few years been getting import quotas of about three million barrels a year, though any shipments have to fit into state refiners' throughput and production plans.

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Publication:Oil & Gas News
Geographic Code:9CHIN
Date:Feb 9, 2015
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