UPDATE 1-China buys Europe oil storage in Mercuria venture

Mon Oct 15, 2012 12:46pm EDT

* Sinopec buys 50 pct stake in European oil tank company

* Chinese co pays $167 mln for half of Vesta Terminals

* Sinopec Kantons gets access to 10 mln bbls of storage

* Mercuria sees expansion of storage facilities (Adds value of deal, detail, comment; paragraphs 1-3, 7-8, 15-16, 18)

By Christopher Johnson

LONDON, Oct 15 (Reuters) - In the first major move by a Chinese state company into European oil storage, Sinopec is buying half of tank firm Vesta Terminals through a joint venture with Swiss-based trader Mercuria Energy.

Sinopec Kantons Holdings, a unit of state-owned Sinopec, will pay 128.6 million euros ($166.76 million) for a 50 percent stake in Vesta Terminals, the Chinese company told the Hong Kong Stock Exchange in a statement on Monday.

Based on the details in the stock exchange statement, which shows net debt of 82.8 million euros, the deal gives Vesta Terminals an enterprise value of 340 million euros.

The deal will give Sinopec Kantons access to Vesta Terminals' 10 million barrels of oil products storage in Tallinn in Estonia, the Dutch port of Vlissingen and Antwerp in Belgium, Mercuria said in a statement sent to Reuters.

"It is the first major move by a Chinese state-owned enterprise into the European oil storage market," Paul Chivers, Mercuria's Group Head of Corporate Development, told Reuters.

"We believe this deal offers us the best potential for future expansion," Chivers said by telephone from Beijing where the deal was signed on Monday.

Chinese oil companies are increasingly active in Western markets, expanding into crude and oil products trading and buying strategic infrastructure.

"Chinese companies are expanding everywhere," said Amrita Sen, chief oil analyst at consultancy Energy Aspects in London, adding Sinopec's move fitted a strategic aim of acquiring a variety of key assets in major energy markets.

"They are picking up all sorts of assets: oilfields, terminals, refining," she said.

"STRATEGIC CORNERSTONE"

Sinopec subsidiary Unipec is already a dominant player in the West African crude oil market and Petrochina , the listed arm of China's biggest oil producer, state-controlled China National Petroleum Corp. (CNPC), is also expanding quickly in Europe.

Petrochina is ramping up oil trading via a joint venture with Ineos Group Ltd, which owns refineries in Britain and France.

But this is the first significant move by a Chinese state company into the lucrative oil storage business in the region.

Vesta Terminals stores a range of oil products, including fuel oil, middle distillates such as gasoil, as well as naphtha, mainly used as a petrochemical feedstock, and biofuels.

Mercuria, with headquarters in Geneva, is one of the world's top five energy trading houses and has this year expanded its Chinese operations with new commodities trading units in base metals, iron ore and coal.

"China is a strategic cornerstone of Mercuria," Chivers said. "We are delighted we can seal this deal with a major player. It will give us a significant platform in the future."

Chivers said Mercuria expected Vesta Terminals to expand operations in future, but declined to give specific details.

"We expect more expansion. We believe this deal offers us the best potential for future expansion," he said.

"Partnerships and joint ventures make most sense to develop these types of businesses: they are very capital intensive, require significant resources globally and substantial access to finance," Chivers said.

Sinopec Kantons said its financial adviser for the deal was Nomura Holdings. Mercuria was advised by Bank of America Merrill Lynch. ($1 = 0.7712 euro) (Additional reporting by Denny Thomas in Hong Kong; editing by James Jukwey)

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