China's CNPC and Russia's Rosneft to Build Refinery in China

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Researched by Industrial Info Resources (Sugar Land, Texas)--China National Petroleum Corporation (CNPC) (Beijing, China) and Russia's national oil company, Rosneft (MCX:ROSN)(Moscow), have agreed to invest $4 billion to build a joint-venture oil-refining company in China with an annual capacity of 10 million tons.

As early as 2006, the two parties signed a cooperation agreement to establish joint-venture companies. One of these companies will be built in Russia to engage in oil and gas exploration and excavation; another will be established in China to carry out oil refining and sales.

According to CNPC, the joint-venture company, China Russia Dongfang Petrochemical Company Limited, will be built in Tianjin. The company has already decided who will sit on its board of directors and board of supervisors and who will hold management positions.

Currently, both oil giants in China, CNPC and China Petroleum and Chemical Corporation (NYSE:SNP) (Sinopec) (Beijing, China), are trying to strengthen some of their perceived weaknesses. CNPC is working on strengthening its refining operations, and Sinopec is trying to expand its upstream oil exploration capability. In addition, joint-venture oil refineries generally have an oil exporting quota. Oil exportation almost always guarantees a profit.

CNPC also announced that it will establish a joint-venture oil company with Syria's Ministry of Petroleum and Mineral Resources. The two parties have recently signed an agreement establishing the framework for this venture.

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