REUTERS

HONG KONG

PETROCHINA is in talks to buy Valero Energy’s shuttered refinery in Aruba, sources said, the latest move by China’s oil giants to take advantage of a global refining downturn to beef up supply.

PetroChina, Asia’s largest oil and gas producer, has made a string of overseas refinery acquisitions in the past few years to strengthen its global refinery foothold and boost its trading and marketing capabilities.

In a filing with the US Securities and Exchange Commission, Valero said it had received a non-binding indication of interest for the 235,000 barrel-per-day Aruba plant for $350 million plus working capital, but did not identify the interested party.

Sources familiar with the negotiations said the approach had been made by PetroChina. It was the second time in two years the Chinese company had discussed the purchase of the plant, which is located near Venezuela, China’s fourth largest crude supplier, sources said.

A local media website, Amigoe, reported that PetroChina signed a memorandum of understanding with the government of Aruba on April 30, 2012, but details of the deal had not been made public yet due to the sensitive nature of the negotiations.

Petrochina was not immediately available for comment.

Chinese oil giants, which have been suffering heavy refining losses at home due to state-controlled oil products prices, are pushing into the overseas refining sector to optimise their refinery operations and maximize the value of crude they produce overseas, energy bankers and analysts say.

Sinopec Group, parent of Asia’s largest refiner Sinopec Corp, signed a deal with Saudi Aramco earlier this year to build a new 400,000 barrels a day (bpd) oil refinery in Yanbu in Saudi Arabia, its first overseas refining project.

“They hold the concept of building a global trading business.

The concept is it allows them to get cheaper crude to China,” James Hubbard, head of Asia oil and gas research at Macquarie, said of Chinese oil firms’ overseas refining strategy.

PetroChina has said it wants to double its global trading and marketing of oil — including crude oil and refined fuel —to 8 million barrels a day by 2015 from 2010 levels.

PetroChina bought a 50 percent stake in chemical group Ineos’ European refining business last year for $1 billion, its third overseas refinery deal after acquisitions in Singapore and Japan for more than $2 billion combined.

Sources said PetroChina has reached a deal with Petroleos de Venezuela to supply the Aruba plant with heavy crude.

“PetroChina has a presence in the Venezuelan upstream.

This is related to them looking for an upgrader for that heavy crude,” said John Auers, a refinery specialist with Houston-based Turner Mason.

The Aruba plant has two fairly new coker units to handle the heavy Venezuelan crude as well as recently upgraded hydrotreating capability, sources familiar with the refinery said. This would allow PetroChina to semiprocess heavy crude and then ship the product to China for finishing in the mainland refineries there, which can only run lighter grades.

Venezuela is currently supplying 460,000 barrels of oil per day to China, and is set to increase its shipments to 1 million barrels per day by 2015, according to government officials.