September 14, 2016 / 5:30 AM / 3 years ago

Dancing lions herald arrival of more Chinese oil traders in Singapore

SINGAPORE (Reuters) - Dancing lions that jumped to deafening drum beats marked the opening of one of two new Chinese trading companies in Asia’s oil hub of Singapore last week, a sign of the increasing reach of China’s energy sector.

Vessels pass an oil refinery in the waters off the southern coast of Singapore, February 26, 2016. REUTERS/Edgar Su/File Photo

While guests at China Merchants Energy Trading (CMET) watched the dance, those at Zhejiang Rongsheng lunched on catering from the Ritz-Carlton hotel as the companies timed their office openings with the industry’s biggest regional meeting, the Asia Pacific Petroleum Conference (APPEC).

Zhejiang and CMET add to a growing number of Chinese companies including private refiners that have set up trading offices in Singapore this year to expand beyond China. The companies can get closer to sellers of naphtha, fuel oil and crude oil - feedstocks they need for their refining and shipping businesses, as well as the buyers of diesel, gasoline that China exports.

Independent refiners, known as teapots, have asserted themselves in China’s oil industry this year and the Singapore offices cement their place in the sector. The growth in their influence can be traced to reforms in China’s oil market, particularly crude import quotas granted to the teapots, that have bolstered trading.

“Recently, we see increased interest from Chinese private-owned enterprises to procure crude oil from Singapore, due to China’s crude market reform,” said Amreeta Eng, group director for trade, International Enterprise (IE) Singapore.

“Beyond procuring from Singapore, they may also leverage Singapore to market their refined products, and perhaps go into third-party trading.”

Rongsheng currently buys naphtha and fuel oil and its feedstock needs will surge once it brings on line a 400,000 barrel-per-day refinery in 2018. CMET is seeking to trade bunker fuel in Singapore.

They join at least seven independent refiners who have offices in Singapore to buy crude, traders that participate in the market said. Poly Energy, a unit of Heilongjiang Petrochemical, and Hongrun Petrochemical are among the latest entrants, sources close to the companies said.

Besides aiding their feedstock purchases, the Singapore offices assist product sales outside of China, which is crucial as oil demand in the world’s second-largest oil user slows, spurring a surge in Chinese fuel exports.

“Never in our industry do we have 16 or more refineries that suddenly come into the market in such a short period of time,” Eiong Tan, BP’s head of crude in eastern hemisphere, said at APPEC. “It caught us by surprise and I think a lot of companies have tried to figure it out and how we can cope with that.”

EXPANDING IN SINGAPORE

Existing Chinese firms in Singapore such as PetroEast and ZenRock have recently hired traders to supply crude to China’s new buyers, aimed at taking a slice of this pie.

Non-Chinese companies are also expanding in Singapore to capture the growing oil trade. Italian producer Eni is adding staff in the city-state, while Castleton Commodities International and Kernel Oil have made new hires. U.S.-based Freepoint Commodities will rev up operations later this year with a team made up of mostly former Noble Group traders.

Though the teapots play a key role in the overseas expansion of Chinese oil traders, there are questions about their viability because of rising doubts about whether independents will be able to renew their quotas next year on concerns of tax evasion.

Also, lower margins and higher crude prices have slowed teapot buying and some independents have used up their quota after frenzied buying earlier this year, traders from China and Singapore said last week on the sidelines of APPEC.

China’s refining sector may also see some consolidation as the teapots compete with the state-owned refiners.

“China only needs 10 refinery operators at the most,” Zhang Liucheng, vice president of trading at independent refiner Shandong Dongming Petrochemical said last week.

Reporting by Florence Tan; Editing by Christian Schmollinger

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below