Another Merger and Acquisition Hike in China’s Private Refineries

In the first quarter of 2017, three acquisition cases relating to Chinese independent refineries were reported, including Rizhao Shida Technology, Binzhou Tianhong New Energy and Zhuhai Baota Petrochemical. Therein, the first two refineries were acquired by state-owned enterprises. In 2002, CNOOC acquired CNOOC Offshore Bitumen. In 2006, ChemChina acquired six independent refineries. At the end of 2010, Sinochem increased investment in Hongrun Petrochemical.

There are three main reasons for the acquisitions, according to SCI. First, the future of independent refineries is predicted to be bright, backed by policies supports. Second, the oil refining industry enjoys fine gross margins, due to low crude oil prices and the China’s pricing mechanism for refined oil products. This attracts the attention of financial enterprises. Third, the acquired refineries have the right to process imported crude oil, which is good for acquirers to enter the industry. But SCI holds that the independent refineries should be more effective in adapting to the marketization rapidly, besides depending on policies.