State-controlled Chinese energy giant PetroChina Co. Ltd. (PTR) has closed the formation of its previously announced two joint ventures with a privately held British chemicals firm, INEOS Group Holdings plc. PetroChina contributed $1.015 billion in cash for the shares in the joint ventures and executed the deal through its subsidiary PetroChina International (London) Company.
Although the agreement to form the ventures was signed between the companies in January, the transaction was completed only recently following the approval by INEOS employees and lenders along with relevant government and regulatory bodies.
The joint ventures — Ineos Refining Ltd. and Ineos Refining II Ltd — will be involved in trading and refining activities at the Grangemouth refinery in Scotland and the Lavera refinery in France. The joint venture business, with an annual turnover of $15 billion, employs as many 1,000 people.
PetroChina and INEOS have also entered into a strategic co-operation agreement to share refining and petrochemical technology and expertise on their respective operations.
Located at the Firth of Forth, the Grangemouth refinery has direct access to crude oil and gas from the North Sea and transports fuel to Scotland, Northern England and Northern Ireland. The other processing plant — Lavera — is situated on the coast of the Mediterranean crude oil trading basin and renders services to the markets of France, Switzerland and Southern Germany. Each unit has a daily processing capacity of about 210,000 barrels of crude oil.
This endeavor marks PetroChina’s foray within the European boundary and would provide it a global resource and market base, making it a leading international energy player. Apart from expanding the company’s global refining foothold, this venture will also provide a hedge against the uncertain Chinese product pricing policies.
Management of both companies believes that the alliance will strengthen the operational capability of the refineries, open doors for further future investment opportunities and boost theircompetitiveness in European markets.
Headquartered in Beijing, PetroChina is engaged in exploration, development, production and sale of crude oil and natural gas; refining, transportation, storage and marketing of petroleum products; manufacture and sale of chemical products as well as transmission of natural gas, crude oil and refined products.
We are maintaining our long-term Neutral rating on the stock. PetroChina, which competes with peers such as Sinopec Shanghai Petrochemical Co. Ltd. (SHI) and CNOOC Ltd. (CEO), currently retains a Zacks #3 Rank (short-term Hold rating).
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