* Sinopec's crude imports in 2013 estimated at near $150 bln
* Unipec to target price of $1/bbl discount to avg of
* May lead to Unipec hedging more, buying more Iraqi oil
By Chen Aizhu and Judy Hua
BEIJING, March 4 China's Sinopec Corp
is seeking to buy crude oil at a lower price starting from
April, trade sources said, as Asia's biggest refiner aims for
savings after spending nearly $150 billion on crude shipments
The move comes amid a push by Beijing to make bloated state
behemoths more efficient and as Sinopec attempts to restructure
to add value for investors. Two weeks ago Sinopec announced it
will partially privatize its marketing arm.
Sinopec has asked its trading arm China International United
Petroleum and Chemical Co. Ltd., or Unipec, to target a purchase
price of $1 per barrel discount to the weighted average of
benchmark crude Brent, Dubai and WTI on free-on-board basis,
said three traders with direct knowledge of the matter.
Sinopec has previously tried to rein in crude costs but the
latest plan is seen as more aggressive, with one company trader
putting the cost-saving target at nearly $1.5 billion a year.
The move is unlikely to impact China's oil import volumes or
weigh significantly on global oil prices that have drawn support
for a good part of the past decade from the country's ballooning
But it may make Unipec, one of the world's biggest crude
buying companies, tap the swaps and futures market actively to
hedge costs and drive it to buy more cost-competitive crudes
such as Iraqi Basra Light.
The new plan was mooted by Sinopec's refining department,
which has over the past few years pressed Unipec to curb costs.
But this time the plan has won the backing of Sinopec Chairman
Fu Chengyu, two company traders said.
"The message from Sinopec's management is clear: to squeeze
more profits from the markets, setting a higher standard for the
Unipec traders," said a crude trader who is a former Sinopec
State-owned Sinopec currently does not have a target price
for its crude buying. It was not immediately clear how the new
target price compares with last year's actual buying cost.
Sinopec and Unipec officials were not immediately available
Sinopec, formally known as China Petroleum & Chemical Corp
, spent nearly $150 billion on its crude
imports in 2013, according to Reuters estimates based on customs
data. It is China's largest crude oil importer, taking up
roughly two-thirds of its total imports that averaged 5.6
million barrels per day (bpd) last year.
Sinopec operates 35 refineries in China and procures most of
the nearly 4 million bpd foreign crude via Unipec, but also uses
state traders such as Sinochem Corp and Zhuhai Zhenrong Corp as
Despite signing up with Iraq for higher term imports, Unipec
may be tempted to buy more Iraqi Basra oil from the spot market
as the Middle Eastern exporter offers flexible contract terms
and thus more room for discounts, said another trader.
There are hurdles, however, for Sinopec.
Unipec traders may not be motivated enough as the company
does not provide incentive schemes that are as attractive as
those offered by western trading houses, traders said.
"Nor would they have the stomach for speculation in the
paper markets, as this is still a big taboo for state traders,"
said the third trader, who has close dealings with Unipec.
But Unipec's new chief Simon Chen will be under pressure to
make the plans work. Chen, formerly head of the firm's crude
trading, replaced Dai Zhaoming, previously a refinery manager
and planning official as Unipec president around mid-2013.
Unipec was founded in 1993, initially as a joint venture of
Sinopec and the then monopoly state-trader Sinochem. Since 2004,
Sinopec took full control of the trading vehicle and has
expanded it to a global operation with offices in London, Hong
Kong, Singapore and New York.
(Addtional reporting by Jacob Gronholt-Pedersen in SINGAPORE;
Editing by Muralikumar Anantharaman)