BEIJING - China's largest refiner Sinopec Corp plans to sell 43 billion yuan ($6.3 billion) of bonds to fund project construction and upgrades, in a move to meet rising domestic demand for oil products.
The company's shareholders approved the proposal on Tuesday to sell as much as 23 billion yuan of convertible bonds, said Sinopec spokesman Huang Wensheng, adding the plan still needs regulatory approval.
Sinopec has also got approval from the China Securities Regulatory Commission to issue up to 20 billion yuan of bonds.
The refiner will use the proceeds from the 23-billion-yuan bond issue to construct and upgrade several projects, including upgrade of oil products at projects in Anqing in Anhui province and Shijiazhuang in Hebei province.
It will also use part of the proceeds to build an ethylene project in Wuhan, Hubei province, a natural gas pipeline linking Yulin in Shaanxi and Jinan in Shandong, and a crude oil pipeline linking Rizhao in Shandong and Yizheng in Jiangsu.
Sinopec's annual spending on its assets in the next two years, excluding funds for overseas acquisitions, will reach about 120 billion yuan, according to Wang Xinhua, chief financial officer.
Analysts said the rapid recovery of the Chinese economy will provide strong support to the consumption of oil products this year, and Sinopec will be a major beneficiary.
Sinopec refined 20 percent more crude oil in the first quarter compared with a year earlier to meet higher domestic demand. It processed 49.5 million tons of crude during the period and reported a 40 percent jump in profits.
"The company is likely to report robust business performance in the second quarter, but some uncertainties still exist," said Liu Gu, an analyst with Guotai Jun'an Securities in Shenzhen.
Chinese companies led by PetroChina and Sinopec have speeded up building oil refining and chemical manufacturing capacity to meet the rising demand in the domestic market.
Sinopec put into operation a 34-billion-yuan petrochemical complex in Tianjin on May 11. The facility will be able to refine 10 million tons of crude annually and produce 1 million tons of ethylene every year.
The ethylene-manufacturing project is a 50-50 joint venture between Sinopec and Saudi Basic Industries Corp (SABIC) of Saudi Arabia.
The company has received initial approval from the government to start feasibility studies on building a refinery with Kuwait Petroleum Corp in Zhanjiang, Guangdong province, Su Shulin, chairman of Sinopec Corp, told reporters on Tuesday when attending the company's annual shareholders meeting. The project may cost 60 billion yuan, he said.
The project is expected to start operations by the end of 2013, Sinopec said earlier.
