Bankrupt China “teapot” refinery plans restart after bailout -sources
Chinese independent refiner Shandong Haiyou Petrochemical Group aims to restart its key crude oil unit in June, a year after it was idled following a bankruptcy filing, according to four sources with knowledge of the matter.
The refinery in Juxian county in the eastern province of Shandong is preparing to restart a 70,000 barrels per day crude unit shut since last May after local government-led investment helped the firm clear most of its debts.
“The dead is returning… after the local government injected funds and became its new shareholder,” said a trading executive active in the Shandong crude oil market who was briefed on the matter.
Two local government-backed companies in June 2017 injected a total 300 million yuan ($44.7 million) into Haiyou Petrochemical for a combined 60 percent stake, according to official business credit information portal, the National Enterprise Credit Information System.
The local government also helped Haiyou raise about 2.8 billion yuan using its assets such as raw materials and inventories as collateral, said a statement posted on the local government’s website last December.
“The restructuring is still underway, but things are looking up,” said a Haiyou Petrochemical manager based in Shandong, who declined to be named as he’s not authorized to speak to press.
The plant aims to restart the crude facility in June, but the final decision hinges upon when Haiyou receives further funding for operational matters, the manager added.
Multiple calls to Haiyou Petrochemical’s phone number listed on its website went unanswered.
Emma Li, an analyst with Refinitiv, which tracks oil tanker movements into China, said Haiyou received 730,000 barrels of Russian crude ESPO blend in late February.
A group of more than 40 independent Chinese refiners, sometimes known as “teapots”, enjoyed bumper growth after Beijing allowed them to import crude oil. However, they have recently faced greater regulatory scrutiny and fierce competition in an increasingly over-supplied fuel market.
It was not clear what exactly led to the bankruptcy of Haiyou. Some small refiners are heavily leveraged and entangled in cross debt guarantees to secure financing, making them vulnerable to collective defaults if one part of the web of guarantees collapses.
Haiyou Petrochemical, established in 2006, filed for bankruptcy last July, the first teapot refiner to file for bankruptcy in recent years.
A Juxian county official told Reuters the local government has set up a special panel to restructure debts held by Haiyou and its previous parent Shandong Sunrise Group.
Sunrise, a soybean crusher, also filed for bankruptcy last July after failing to pay back loans. ($1 = 6.7169 Chinese yuan renminbi)
Source: Reuters (Reporting by Chen Aizhu in SINGAPORE, Min Zhang in BEIJING; editing by Richard Pullin)