China takeover of Malaysian refinery rescued 85% of the jobs

shell_work1PETALING JAYA: Private Chinese refiner Shangdong Hengyuan Petrochemical Company Limited has taken over control of Malaysia’s Shell Refining Company, a move that has saved 85% of the Malaysian jobs at stake.

The purchase of the Malaysian refinery at Port Dickson has made Shandong Hengyuan one of the few smaller refining firms in China to own an overseas refinery.

Shandong Hengyuan bought 51% of the SRC’s shares through a subsidiary in Malaysia, Malaysia Hengyuan International Limited (MHIL) last week.

In an earlier statement quoted by Deal Street Asia, SRC chairman Iain Lo said: “If SRC had not sold the stake to MHIL, the refinery operations would have converted to a terminal and we would have to cut about 85 per cent of the jobs. MHIL has growth aspirations for SRC.”

According to Lo, MHIL was prepared to invest in upgrading the refinery to meet EURO 4 and 5 fuel specifications. The Chinese company has already said it will buy all of the shares in SRC.

It also plans to increase SRC’s revenue by expanding the value chain to wholesale trading and petrochemicals.

A report by Global Times last week stated that MHIL had agreed to buy the controlling stake for USD66.3 million and will continue to provide petroleum products to Shell’s downstream businesses in Malaysia.

It is one of a few such acquisitions done by petroleum companies outside the three major state-owned China enterprises, including Sinopec and PetroChina, said the report.

It also quoted Shandong Hengyuan’s chairman Wang Youde, as saying the acquisition will benefit his company by allowing them a platform for overseas sales.

He estimated that the purchase will add another six million tonnes of crude oil to the current 3.5 million tonnes at its disposal.