Russell: PetroChina, Sinopec Merger Makes Little Sense

Russell: PetroChina, Sinopec Merger Makes Little Sense
The market chatter over forming a giant Chinese oil major through merging PetroChina and Sinopec has ramped up again recently, but the motivations for such a deal struggle to stand up to scrutiny.

Reuters

LAUNCESTON, Australia, Feb 27 (Reuters) - The market chatter over forming a giant Chinese oil major through merging PetroChina and Sinopec has ramped up again recently, but the motivations for such a deal struggle to stand up to scrutiny.

The Chinese authorities are mulling joining China National Petroleum Corp, the parent of PetroChina, and China Petrochemical Corp, the parent of China Petroleum and Chemical Corp, better known as Sinopec, the Wall Street Journal reported on Feb. 18.

It should be noted that even if the authorities are considering such a move doesn't necessarily mean it will happen.

However, the fact that the news has made it into the public domain most likely means the possibility is being considered.

It was also reported in other media that a merger between China National Offshore Oil Corp, the parent of CNOOC, with Sinochem Corp was under consideration as well.

The most often cited reason for creating a mega-oil company is to give China the means to compete on a truly global scale, as such an entity would no doubt eclipse Exxon Mobil as the world's biggest non-state oil company.

While both PetroChina, the country's largest oil producer, and Sinopec, the largest refiner, are effectively state controlled, they operate differently to the models of national oil companies, such as those found in Middle East countries.


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