China CPNC to buy into Malaysia oil refinery-source

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KUALA LUMPUR, Nov 8 (Reuters) Top Chinese oil producer China National Petroleum Corp (CNPC) will sign a deal to take a stake in a new Malaysian oil refinery, a Malaysian government source said on Thursday.

The deal, which comes after CNPC signed a supply deal last month, will help boost the viability of the project undertaken by a little-known private-held Malaysian firm, Merapoh Resources Corp Sdn Bhd, the source said.

Energy-hungry China has been snapping up oil and gas assets around the world to boost its petroleum reserves and meet the fast-growing industrial and consumer demand fueled by its fast-expanding economy.

Merapoh, which is building the 200,000-barrels-per-day refinery in the northern Malaysian coastal area of Yan, provisionally agreed last month to sell the entire production to CNPC under a 20-year contract from 2013.

''Merapoh will sign an agreement on Nov. 22 with CNPC in Beijing to form a joint venture and secure the supply deal,'' said the source who is familiar with the deal. ''We are now waiting for the outcome of an environmental impact study on the project.'' The source declined to give the size of the stake in the refinery the Chinese firm would hold.

CNPC is Asia's top oil and gas producer and most of its current refining businesses are run by its listed unit PetroChina <0857.HK> <601857.SS>.

The state government of Kedah, where Yan is sited, is turning 4,000 acres in Yan into an oil and gas hub worth 50 billion ringgit ( billion). Infrastructure work on the zone is expected to start in the first quarter of 2008.

The source also said another refinery, initially slated for Yan, will be moved to an inland town of Bukit Kayu Hitam at the Malaysian-Thai border.

The SKS refinery, to be developed by Malaysian tycoon Syed Mokhtar Albukhary and the Iranian state oil firm will process Iranian crude for exports.

''The Ministry of International Trade has approved the change of site. The crude oil will land in Kuala Jerlun and then pipe to Bukit Kayu Hitam,'' the source said.

The coastal town of Kuala Jerlun is located some 50 km (30 miles) north of Yan, which is also the proposed starting point for an ambitious billion oil pipeline across the country.


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