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PetroChina's acquisition spree

PETROCHINA Co plans to buy pipeline assets in west China from its parent for 9.7 billion yuan (US$1.4 billion) and is said to be in talks about investing in a refinery in Scotland.

The assets to be acquired include a crude oil pipeline and a refined oil pipeline, each 1,858 kilometers long, stretching from Urumqi in the Xinjiang Uygur Autonomous Region to Lanzhou in Gansu Province, Asia's top oil firm said in a stock exchange filing.

The crude pipeline has an annual transport capacity of 20 million tons while that for the refined oil pipeline is 10 million tons, PetroChina said. The asset purchase will strengthen the company's capabilities in pipeline transmission, it said.

BOC International analyst Tang Qian said the purchase will help PetroChina lower costs but won't contribute much to earnings.

Meanwhile, PetroChina is looking to invest in a refinery of chemical group Ineos in Grangemouth, Scotland, the Financial Times reported yesterday, citing local politicians.

The potential deal would be PetroChina's first investment in a European refining business. PetroChina last month agreed to pay US$1 billion for a 45.5-percent stake in Singapore Petroleum Co, tapping the city-state's refining sector.

"Just like PetroChina's recent acquisition of Singapore Petroleum, this potential Ineos refinery investment will offer the Chinese firm a crack into the lucrative UK energy market at distressed valuation, thus hedging against any future domestic refinery margin clampdowns in China," said Gordon Kwan, head of energy research at Mirae Asset Securities.

China is making its fuel prices more market-oriented, although prices are still regulated, which exposes refiners to losses when crude prices soar.

The Scottish investment could also serve as a launching pad for PetroChina to tap into oil recovery projects in the North Sea, Kwan said.

Ineos confirmed it was in talks with potential partners but refused to name any, and says such preliminary discussions are exploratory and may or may not lead to an investment. PetroChina also wouldn't comment.


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