Known as ‘teapots’, China’s independent oil refineries have been gaining market share at the expense of state-owned energy majors. Dongming Petrochemical’s Li Xiangping has been tipped by local media as one of the new oil barons to watch.
Born in 1962, Li started as a government official in Dongming county in Shandong after graduating from a Party-run university. He climbed the ranks from the local audit bureau to become chief accountant of a refinery in Dongming, which later became Dongming Petrochemical.
In 2001 a Shanghai-listed firm offered Li a lucrative deal to leave the state-owned plant, which was on the verge of bankruptcy. Li decided to stay put and assumed chairmanship of the lossmaking venture. He was elected as a lawmaker in Shandong in 2003 and his political background helped in the turnaround at the refinery, which got bank loans to improve its production and distribution capacity. By 2008 Li had been promoted to a member of the National People’s Congress and Dongming Petrochemical had grown into the largest private sector refinery.
(In typically Chinese style, the firm had morphed from state control to private ownership in a complex and not entirely transparent fashion.)
The teapot refiner’s fortunes began to broaden last year when the central government granted crude oil import licences to the private sector. Prior to this the teapots could only stockpile their supply by buying from the likes of CNPC and Sinopec.
Li went a step further by writing a letter to Shandong’s governor Guo Shuqing (the pro-reform former CSRC boss), seeking approval to establish a trade body to help the teapots strike better deals with foreign sellers. Li’s wish was granted and in February Dongming became one of the 16 independent refiners to form a coalition for importing oil. He was named the body’s president.
By the end of last year, Dongming Petrochemical had grown its assets to about Rmb30 billion ($4.56 billion) with a primary processing capacity of 15 million tonnes per year. The company is set to grow further following a deal last year which saw two Qatar companies paying about $5 billion for a 49% stake in Dongming. The proceeds will be used to build a liquefied natural gas terminal in Shandong.
Li is also targeting gasoline sales to motorists. In Shandong alone there are more than 6,000 privately-owned petrol stations, many of which may be bought up by the teapot refiners. Dongming says that it is planning to build 1,000 such retail spots in six provinces.
© ChinTell Ltd. All rights reserved.
Exclusively sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.