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Total plans petrochemicals thrust

By Si Tingting (China Daily)
Updated: 2009-03-20 07:54

Workers drill oil wells at Shengli Oilfield in Shandong province. [Li Linlin]

Total SA, Europe's third-biggest oil producer, is planning to set up new refining and petrochemicals projects in China to take advantage of the new oil products pricing system which allows competitive pricing and an appropriate profit margin for oil refiners, said Jacques de Boisseson, chairman and general representative, Total China.

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"The Chinese government is going towards a more competitive pricing. We like competition, because we think we are better and we can win," he told China Daily yesterday at the sidelines of China International Petroleum & Petrochemical Technology and Equipment Exhibition in Beijing. He, however, did not elaborate on the details of the plan.

Total currently operates one refining project and has no petrochemicals project in China.

China changed its pricing system for oil products in January, by moving it closer to the global level. A market-based ceiling that takes into account the cost of crude oil replaced a guidance band for retail fuel prices.

Analysts said the new mechanism, which guarantees an "appropriate margin" for oil refiners, could accelerate foreign oil companies' expansion into the Chinese market.

"The liberalization of prices will improve profitability and attract attention from foreign oil companies," said David Fridley, a researcher with the California-based China Energy Group.

The good performance of its first and only refinery in China is another factor that is boosting Total's intention to open more refineries.

Total has a 22.4-percent stake in a $1-billion refinery at Dalian in Northeast China's Liaoning province. Its partners include PetroChina Co, the nation's biggest oil company, Sinochem and the Dalian municipal government.

The refinery, known as West Pacific Petrochemical Co, has an annual crude processing capacity of 10 million tons, according to the joint venture's website.

"Our refinery (in Dalian) is making profit today and we are confident it will make good profit this year," he said.

"Our strategy in China is to grow all our businesses," Boisseson said.

Total is also planning to produce oil and gas in China in the near future, he said.

It has recently set up a venture with PetroChina to tap natural gas at the South Sulige block, in North China's Inner Mongolia autonomous region, by 2011. "The production capacity will be about 3 to 4 million cu m annually," he said.

According to Boisseson, Total has submitted a development plan to PetroChina recently and expects to hear from them soon.

The South Sulige block is said to hold more than 100 billion cu m of proven gas reserves.

Despite the financial crisis and low international oil prices, De Boisseson said Total will keep this year's investment momentum as strong as last year's.

"Independent of the financial situation, we have to prepare for production in three to five years' time. We have to invest now, otherwise the consequences will be felt in a few years' time when demand for oil goes up," he said.

Total is in good financial health and capable of financing all its projects on its own, Boisseson said.