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Mar 01, 2006
BEIJING, March 1 Asia Pulse – NYSE-listed Sinopec denied Tuesday that the company was holding talks with BP on the latter's move to buy a 25 per cent stake of the Chinese refiner with US$14 billion.
No such talks are going on, said a senior-official insider of the company.
“Remember that Sinopec is a strategically significant state-owned enterprise. It is unlikely that the government will allow such a large enterprise to be controlled by foreign capital in the near future”, the insider says.
BP, Europe's biggest oil company, used to have a stake in Sinopec. It bought the stake in October 2000 during Sinopec's initial share sale for US$385 million. In February 2004, BP earned US$357 million by selling its entire stake in Sinopec.
BP sold its Sinopec holding possibly out of expectations that the Chinese government would liberate the Chinese product oil market by yearend 2006. But reality taught it that its penetration into China should go with monopolist Chinese oil majors. For this reason, BP had done a great of PR work to lobby the Chinese government to re-enter Sinopec. The insider says the two sides did have talks on this subject but no progress was made.
But the two sides are cooperating well in other respects. BP and Sinopec are partners in operating a US$2.7 billion ethylene plant in Shanghai. The companies have an acetic acid venture in China's eastern city of Nanjing, capital of Jiangsu Province, and in May 2004 agreed to form a US$250 million venture to distribute and sell gasoline and diesel in China's eastern province of Zhejiang, targeting 500 retail stations within three years.
But their cooperation may stop there. BP's successful approach to neighboring Russia seems unlikely to work in China, at least in the near future.
But if BP succeeds, what will other oil giants such as Shell and Exxon Mobil do? After all, China is a market with huge consumer potential.

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