China's top oil company will strengthen its financing might by purchasing a controlling stake of a local bank.

An official from the capital operation arm of China National Petroleum Corporation (CNPC) confirmed with China Daily yesterday that it was approaching Zhuhai City Commercial Bank for a possible takeover.

"It's true that negotiations are underway, and we are aiming for a controlling stake," the CNPC source said, without elaborating whether an agreement has been hammered out.

The 21st Century Business Herald quoted unnamed sources yesterday as saying that CNPC has already inked a deal with Zhuhai City Commercial Bank, buying more than 86 percent of its stake for 2 billion yuan.

The financial office of the bank declined to comment on the report. An official with the China Banking Regulatory Commission also refused to disclose anything on the supposed deal.

"It would be a good idea for CNPC to buy the local bank, because by doing so, the financing channel of the top oil company will be further broadened," said Liu Gu, a senior analyst with Guotai Junan Securities Co.

As China's top oil and gas producer, PetroChina has plenty of financing options. So, it may not be that big of a deal for CNPC.

Big boost or not, the potential takeover of Zhuhai City Commercial Bank will give CNPC a general leg-up in its operation in Zhuhai and South China.

PetroChina, CNPC's listed arm, plans to build a 10 million-ton-a-year refinery in Zhuhai, South China's Guangdong Province, China Oil, Gas & Petrochemicals newsletter reported earlier this year, without revealing the source of this information.

The country's top economic planner the National Development and Reform Commission has already approved a new PetroChina refinery in the Guangxi Zhuang Autonomous Region, which would require an investment of 15.2 billion yuan and have a crude processing capacity of 10 million tons. It will supply fuel to not only Guangxi, but also Yunnan and Guizhou provinces of Southwest China.

(China Daily November 14, 2007)