The country's top oil company, PetroChina, will pay 559 million yuan (US$69 million) to its parent the China National Petroleum Corp (CNPC) for its stake of a fuel oil unit.

PetroChina will buy a 35.73 percent stake in the PetroChina Fuel Oil Co from two wholly-owned subsidiaries of CNPC, increasing PetroChina's stake in the PetroChina Fuel Oil Co to 95.52 percent, the company said in a statement to the Hong Kong stock exchange yesterday.

The remaining 4.48 percent share belongs to an independent third party and PetroChina has disclosed plans to acquire this remaining stake in the future, though details on this were not given.

"The market for fuel oil is fairly competitive and active in China," PetroChina said. "The consolidation will streamline the upstream and downstream businesses of the company."

PetroChina, the country's biggest market player in the oil and gas exploitation market, is building up investments to strengthen its refining and petrochemical business, also known as the downstream sector.

"The business integration of oil companies will greatly reduce operation risks, especially at times when crude oil prices are fluctuating," Liu Gu, a senior analyst for oil and gas with the Guotai Jun'an (Hong Kong) Securities Co Ltd, said.

"The acquisition will not have a great impact on the overall performance of the Hong Kong-listed PetroChina, given the moderate size of the deal," said the analyst.

PetroChina is expected to finalize the acquisition by June 30 next year, after obtaining approvals from government bodies such as the State-owned Assets Supervision Administration Commission (SASAC) of the State Council, the Hong Kong-listed oil firm said in the statement.

Government macrocontrols to cool down the over-heated major heavy industries like steel have slowed the country's growth in consumption of refined oil such as gasoline and diesel. But the current speed of economic development should ensure that the market carries on growing, Liu Yan, an oil market analyst with Sinopec, told a petroleum market forum hosted by the International Petroleum Economics magazine.

According to figures from the National Bureau of Statistics (NBS) of China, the country used 139 million tons of refined oil in the first 10 months of this year, a year-on-year increase of 5 percent, though the rate of growth has slowed down.

Consumption of fuel oil, a kind of refined oil used by utilities and ships to drive turbines, is expected to increase by 4.8 percent next year after a 3 percent increase this year, sources from the National Development and Reform Commission (NDRC) said at the end of last month.

It said demand for fuel oil might rise as high as 47 million tons in 2006 from the estimated 44.9 million tons this year.

Guotai Jun'an's Liu said China relies on imports for more than half of the country's fuel oil consumption, and domestic supplies come mainly from Sinopec and PetroChina.

Shares of PetroChina yesterday went up 2.4 per cent to HK$6.4 (82 US cents) on the Hong Kong Stock Exchange.

(China Daily December 8, 2005)