Sinopec unit buys North Sea crude oil

Chinese oil companies are becoming more active in the international crude trading market, rather than just acquiring the fuel for domestic use.

China's top oil refiner, Sinopec Group, has purchased crude from the Forties oil field, the largest field in the North Sea, the Financial Times has reported.

The purchase was carried out by subsidiary China International United Petroleum & Chemicals Co, known as Unipec, said the report.

The newspaper said that Chinese refineries are looking to stock up on crude ahead of winter and crude supplies were constrained in several regions, but Wang Zhen, deputy head of the China University of Petroleum, said the deal was a purely commercial one.

Wang said that China's economy has been developing well this year, but there is no need to stock up on crude for winter.

The International Energy Agency said that China's domestic crude output has fallen by 300,000 barrels per day as a result of floods in northeastern China.

However, Wang said that the Daqing oil field in northeastern China, where floods occurred in August, doesn't account for a big portion of China's total crude output. Wang added that the floods cut output for just one to two weeks, which will not have a marked impact on full-year production.

"Plus, our crude imports from the Middle East, China's major supplier, are stable," said Wang. "Other suppliers such as Libya, Nigeria and Iraq have had their issues for at least two years, not in recent months. There is no sudden change."

In past years, China's top crude importers - Sinopec and PetroChina Co - have increased their trading of crude in the global market.

As much as 60 percent of PetroChina's purchases in the international crude market aren't transported back to China for downstream production but are for international trading, according to Wang.

The figure for Sinopec is less, at about 50 percent, because the company needs more crude for its domestic refining business, said Wang.

"Increasing crude trading by Chinese companies in the international market means that China's energy industry is more globalized, with a mature trading and import structure," he said.

Wang contended that Sinopec wouldn't ship the North Sea cargo into China because of higher transport costs, though another analyst disagreed.

"It can be a new attempt to import high-quality crude for domestic use," said Li Li, research director at ICIS C1 Energy, a Shanghai-based energy information consultancy.

She said that the company might ship the cargo back to China, which would be the first North Sea crude brought back for domestic use since May.

"Geopolitical factors cause regional tight supply, but it is a temporary thing," she said. "It is true that the shipping cost is high for China to import crude from the North Sea, but since it is temporary, it's not bad to try new ideas and find opportunities."

This isn't the first time Sinopec has shown an interest in the North Sea. In December, it said it had acquired a 49-percent stake in the United Kingdom subsidiary of Canada-based Talisman Energy Inc for $1.5 billion, which was the first direct investment by a Chinese company in the North Sea.