PetroChina Eyeing Singapore As Refining Base

HONG KONG -

China's largest oil firm, PetroChina, is reportedly planning to build a multibillion-dollar refinery in Singapore, seeking an overseas production base to meet its home country's rising energy demand.

PetroChina (nyse: PTR - news - people ) is shooting for a world-class refinery, with a capacity of at least 400,000 to 500,000 barrels per day, a scale comparable to Exxon Mobil (nyse: XOM - news - people )'s 605,000 bpd refinery on Singapore’s Jurong Island and Shell (nyse: RDSA - news - people )'s 500,000 bpd plant on Pulau Bukom, another small island just off Singapore. "It is currently doing a feasibility study and doing due diligence on this ... and so far the feedback has been positive," The Business Times in Singapore reported Tuesday, citing an unnamed source.

The project may cost PetroChina in excess of $10 billion, according to The Business Times. Its forecast made reference to an earlier estimate by Singapore Petroleum Co. CEO Koh Ban Seng that it would $5 billion to build a moderately complex 200,000 bpd refinery in the country and then factored in the island state’s current high engineering, procurement and construction costs.

PetroChina's refinery plan will be welcome news to the Economic Development Board of Singapore, which has announced several initiatives in the past year favoring refinery construction. The country aims to preserve its status as the world's No. 3 oil trading hub after New York and London.

A refinery in Singapore would enable PetroChina to increase its oil imports over the medium term to satisfy China's exploding energy demand. The Chinese media reported Tuesday that the oil giant is planning to import 300,000 tons of diesel oil this month, 50% more than it did in February, to meet higher oil consumption as the huge agricultural sector gears up for planting in March.

To ensure sufficient oil supply, Beijing has recently been reducing import tariffs on diesel oil, to 1% at the beginning of the year from 6% in November 2007.

Besides Singapore, PetroChina has targeted new production sites within China's borders. The company is considering a refinery in the northeastern province of Liaoning with a capacity of 10 million metric tons a year, equivalent to around 200,000 barrels a day, the state-controlled China Daily said Tuesday, citing an unnamed official.