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Chinaoil gets nod to buy refinery stake

PETROCHINA International Co, or Chinaoil, received Chinese government approval to invest in a Nippon Oil Corp refinery in Osaka, Japan, moving closer to finalizing another overseas refinery stake buy.

The National Development and Reform Commission, China's top economic planning body, yesterday said the approval was granted last month to PetroChina. The commission did not provide further details.

PetroChina last year signed an agreement with Nippon Oil, Japan's top oil refiner, to form a joint venture for the 115,000-barrel-a-day refinery in Osaka. PetroChina has a 49-percent stake in the venture while Nippon Oil holds the remainder.

Under that agreement, Nippon Oil will operate the Osaka plant while PetroChina will purchase oil and sell the refined products.

PetroChina, through Chinaoil, has signed crude processing contracts with Nippon Oil, utilizing some of the Japanese refiner's surplus capacity. Japanese businesses and households are shifting to alternative fuels such as natural gas because of rising oil prices and environmental concerns.

Beijing-based PetroChina, already Asia's largest oil and gas producer, has expanded its refining capacity outside China. The company completed the purchase of a 45.5-percent stake in Singapore Petroleum Co for US$1 billion last month. It is also considering investing in a refinery in Scotland.

Analysts have said downstream expansion overseas could help Chinese oil companies hedge against any future domestic refinery margin clampdowns.

Regulated fuel prices expose Chinese refiners to losses when global crude prices soar.


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