Exclusive-Sinochem may keep the refineries insolvent as the auctions attract less interest, sources said.
Written by Chen Aizhu
SINGAPORE (Reuters) – Sinochem Group may keep three bankrupt oil refineries in eastern China after auctions to sell them attracted little interest from other companies, sources familiar with the matter said.
The lack of interest in the plants reflects the sorry state of the refining sector in China, the world's largest oil importer and second largest consumer. Due to flagging fuel demand amid a slow economic growth that has eroded opportunities, the country's industries are still viewed less green than last year.
Sinochem's plants, which are small, old and underdeveloped refineries known as teapots, are also facing major regulatory scrutiny that threatens the lives of other companies in Shandong province, where most of the tea plants are located.
Failure to sell the refineries during their individual auctions could mean that state-owned Sinochem will end up writing down debts to creditors and negotiating tax arrears, according to two sources familiar with Sinochem's thinking.
Sinochem declined to comment.
The exact amount of the debt was not immediately available, but tax administration records in Shandong cities where the refineries are located show that by mid-2024 the plants had accumulated a combined unpaid consumption tax of about 13.2 billion yuan ($1.82 billion).
The plants, Changyi Petrochemical, Huaxing Petrochemical Group and Zhenghe Group Co, have a combined crude processing capacity of 380,000 barrels per day, or 3% of national output, and were put up for auction in October through the Shandong Property Right Exchange Center supported by the government. .
Huaxing was awarded 8.7 billion yuan, Changyi was worth 6.4 billion yuan and Zhenghe was worth 6.3 billion yuan, data on the agency's website showed.
Sinochem, which separately owns a refinery and petrochemical complex in southeastern Fujian province, inherited the troubled Shandong refineries in a 2021 merger planned by Beijing with their previous operator, state-run ChemChina.
The auctions follow a local court order in September that declared all three companies insolvent after restructuring proceedings were withdrawn.
Documents on the Center's website show that the factories do not have crude oil quotas and that the new owner will need to reapply for all operating licenses.
That could be a deterrent for potential buyers, said several sources at other private refiners operating in Shandong.
Without oil-free quotas from other countries, the plants must rely on refining imported fuel oil, a stock that is more expensive because of costs and taxes on use, the sources said.
Source link
