OREANDA-NEWS. October 25, 2012. Sinopec’s purchase this week of half of oil tank firm Vesta Terminals takes China one step closer towards creating its own super majors as the state uses its USD3.3tn cash pile to increase its influence over the world market.

The deal with Swiss trading house Mercuria helps state-owned Sinopec increase the profitability of its oil products and gives it extra leverage in the vital Amsterdam-Rotterdam-Antwerp (ARA) trading hub at the heart of northwest Europe.

Sinopec and its powerful trading unit, Unipec, will use the tanks to optimise trade in gasoil (heating oil and diesel) and gasoline and position itself for future oil flows.

The Vesta purchase is one small piece of a giant jigsaw slowly being fitted together to allow Sinopec and fellow Chinese state oil company CNOOC to compete against Western traders and majors such as ExxonMobil and Royal Dutch Shell.

“Chinese companies (are) seeking to build access to European trade as part of their attempt to replicate the global reach of IOCs (international oil companies),” said Robert Turner, a director specialising in refining at consultancy PwC.

“This is an example of traders and oil companies seeing value in owning physical assets as a way of securing market access to support their trading positions,” he added.

The Chinese state oil companies are still some way from matching the worldwide reach of an Exxon or a Shell and are still acquiring oilfields and transport infrastructure, but little by little the picture is coming together.

A senior oil industry consultant with knowledge of Sinopec’s acquisition strategy said Chinese companies, directed from Beijing, were methodically creating a global supply network.
“China’s footprint is going global,” said the consultant, who has advised Chinese state firms. “It is building strategic assets worldwide and intends to form major oil companies.”

With USD 3.3tn of foreign exchange reserves at hand to invest abroad, China has targeted natural resources and the oil industry as priorities, often in preference to stock holdings and low yielding bonds.

Sinopec’s USD 4.8bn purchase of 30% of Petrogal Brazil from Portuguese oil company Galp was the single biggest Chinese overseas deal in the first quarter of this year.
It has also invested heavily in a USD 10bn refinery in a joint venture with Saudi Aramco near the city of Yanbu on the Red Sea.

From the end of 2014, Yanbu Aramco Sinopec Refining Co’s (Yasref) plant will produce around 350,000 barrels per day of diesel and gasoline at one of the world’s strategic crossroads.
In the Atlantic basin, Sinopec has agreed to buy a 49% stake in the North Sea operations of Canadian exploration company Talisman for USD 1.5bn, giving it a foothold in the key North Sea market.

The venture has interests in 46 oilfields, operates 12 platforms and gives Sinochem access to crude flows from a variety of fields including streams that are linked to the North Sea Brent benchmark.

But the growing Chinese influence has met stiff opposition in some quarters, especially in North America.

Canada said last week it needed more time to review a USD 15.1bn bid by CNOOC for oil and gas explorer Nexen, operator of the UK’s biggest oilfield, Buzzard.