CNPC to Sign 20-Year Fuel Supply Deal from Malaysia's Kedah Oil Refinery

China National Petroleum Corp. (CNPC) is scheduled to sign a 20-year deal today to buy fuel from the proposed 350,000barrels per day (bpd) Kedah refinery in Malaysia. CNPC signed a memorandum of understanding (MoU) in late 2007 to buy all of the refinery’s output in a deal estimated at US$6 billion, which the signing today is expected to finalize. CNPC is still in talks for a stake in the US$10-billion refinery, although previous reports suggested it would help finance the project The 20-year fuel supply agreement will help CNPC to diversify its fuel sources to protect against the possible restoration of price controls on domestic fuel prices by China’s government should international crude oil prices increase, which would result in significant losses for the company’s downstream operations. Indeed, CNPC was compensated for losses incurred in importing refined fuel but not for its domestic refining losses during the period of record crude prices last year. There have been reports, which suggest that two companies, called Hong Kong Beijing Star Ltd and Winson Investment Ltd, had already raised the finances to purchase a 40% stake in the project. (July 15, 2009)