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Reuters

China's largest independent refiner, Shandong Dongming Petrochemical, is looking for long-term Latin American crude supply deals to hedge against a rise in oil prices in the next five to 10 years, a company executive said.
Dongming is part of a growing group of Asian refiners looking to widen their oil selection beyond Middle Eastern suppliers to cheaper crude from Latin America.
"Currently, there are more benefits to reap from the spot market," director Zhang Liucheng said, given ample global supplies that had pushed benchmark crude prices to six-year lows.
"But … over five to 10 years, we will go for longer-term deals," he added.
Dongming had signed annual contracts to buy Latin American crude, Zhang said, but declined to specify with which countries.
The firm's pursuit of supply contracts comes just months after it received government approval to import crude directly as part of mainland reforms to allow more private participation in a sector long dominated by state oil giants.
Dongming's refinery could process crude with an API gravity of 16 to 31 degrees, and it preferred Latin American oil to Middle Eastern grades as the latter market was already dominated by big Chinese state refiners Sinopec and PetroChina, he said. Lower API corresponds to heavier crude oils.
"We are striving to find cheaper oil with better product yields to increase our profit margin," Zhang said, adding that Dongming's refinery had processed 20 crude grades in the past year in its search for suitable oil.
Crude imports had allowed Dongming to operate its refinery at 90 per cent capacity, he said. The firm wants to apply for quotas to export petrol and diesel in Asia.
Higher refinery throughput and bleak local demand as its economy slows has prompted Beijing to consider relaxing curbs on fuel exports to ease a domestic glut.
"If our products are only sold locally, we'll be vying for market share with Sinopec and PetroChina," Zhang said. "We hope to find a way out in the global market."


China refiner Dongming Petrochemical seeks long-term Latin crude

Independent refiner wants to hedge against rising oil prices. Photo: AFP

Business

Commodities

China's largest independent refiner, Shandong Dongming Petrochemical, is looking for long-term Latin American crude supply deals to hedge against a rise in oil prices in the next five to 10 years, a company executive said.
