China dashes hope of quick Ineos oil deal

Published on Saturday 20 June 2009 14:46

OFFICIALS at PetroChina have cast doubt over whether a deal could be struck with Ineos over Grangemouth oil refinery in time for a crucial restructuring deadline next month.

PetroChina has been confirmed as one of the firms in talks with Ineos, Britain's largest private company, about an investment in the Scottish refinery.

But officials at the Chinese energy giant in Beijing have warned talks are likely to be protracted as there are serious concerns about refining margins.

Jim Ratcliffe, chairman and controlling stakeholder of Ineos, is working to a 17 July deadline to find a solution to the company's mounting financial woes.

The group's finances are bending under the weight of 6.5 billion of debt and Ratcliffe must produce a restructuring plan to lenders by next month after they agreed to a waiver in May.

But officials in Beijing have dashed hopes of a rapid deal with PetroChina.

"Downstream business has a poor margin nowadays and talks can take a really long time," said a trading manager at the company, who is not officially authorised to speak to the media.

He added: "It's nothing unusual for PetroChina to look beyond Asia. The key issue is if it's a good asset. A refinery in Europe will aid our trading activities in Europe."

Ineos has confirmed that it is in talks with a number of parties about Grangemouth, one of the largest refineries in Britain. However, a spokesman stressed that discussions are still at the "preliminary" stage.

"Grangemouth petro-chemical and refining complex continues to be a core part of Ineos and the company remains committed to the long-term development of the site," he said.

It is understood talks are revolving around the sale of either key parts of the Grangemouth operation or an overall stake.

It has been suggested that PetroChina could buy the refinery while Ineos would retain the polymer and petro-chemical processing plants located on the same site. Ineos has appointed Morgan Stanley to advise it on the talks.

Chinese energy firms such as PetroChina have been keen to expand their overseas purchases as they seek to fuel the country's commodities-fed boom. So far, however, most of their investments have been focused on upstream assets.

PetroChina recently made a $2.2bn (1.3bn) bid to buy nearly half of the Singapore Petroleum Company, which owns one of the island state's largest refineries. It is close to finalising another refinery investment in Japan.

Ineos bought Grangemouth on the Firth of Forth from BP in 2005. It employs 1,400 staff at the site.