ChemChina may end CNOOC deal

China National Chemical Corporation has been granted approval for a quota of 10 million tons of crude oil imports, mainly to supply its oil and gas companies, National Business Daily reported on Wednesday.

It is the first time ChemChina, which owns nine refinery plants and is capable of processing 25 million tons of crude oil annually, has obtained a crude oil import quota. The company received a refined oil import license in 2005.

The imported oil will be used to develop new chemical materials and special chemicals, the report quoted a vice-manager of ChemChina as saying.

ChemChina's crude oil processing accounts for 30 to 40 percent of the nation's total amount. The company currently is understocked to the tune of 60 percent of raw oil, according to statistics.

Some of its refinery plants, such as Shandong Huaxing Petrochemical Group Co Ltd, are at only 30 to 40 percent of operational ability.

The import quota for 10 million tons of crude oil will greatly improve the situation, experts said.

China National Offshore Oil Corporation is the main material oil supplier to ChemChina. They signed an offshore oil supply contract at the beginning of 2010, with 300,000 tons being traded each month.

Analysts said ChemChina may walk away from CNOOC after obtaining the quota because under the terms of their agreement ChemChina has to purchase a certain proportion of imported fuel oil - and fuel oil processing is a heavy loss maker.