Chinese Petrochemical Company's Bankruptcy Filing Highlights Refiner Turmoil

Reuters, July 24, 2018

Chinese independent refiner Shandong Haiyou Petrochemical Group and a chemical trader have filed for joint bankruptcy, according to a court filing, the latest sign of deepening pain for the sector amid high oil prices and greater regulatory scrutiny. The companies registered their joint bankruptcy at a court in the county of Juxian in Shandong province on July 16, according to a court filing on a website run by China’s Supreme Court.

The two companies, which share highly similar business scope, company structure, finance and assets, own assets that are smaller than their debts and are unable to service their loans, are applying for joint bankruptcy,” the local court filing said.

Smaller independent or “teapot” refiners have enjoyed strong growth in recent years as China liberalized oil imports to increase competition in a sector dominated by state-owned giants, but their expansion has been curbed by tighter conditions.

Shandong Haiyou Petrochemical, established in 2006, is the first teapot refiner to file for bankruptcy in recent years. Its crude oil distillation unit with capacity of around 70,000 barrels per day has been shut since May. The other company, Shandong Hongju New Energy Co, is a fuel and chemicals dealer based in the same county and was set up in 2013. A person who answered the phone at Haiyou said she was not able to comment. Calls to the company president’s office went unanswered.

Chinese soybean crusher Shandong Sunrise Group, which used to control Haiyou, also filed for bankruptcy on Friday after failing to repay its debts. Juxian Public Transport Development Co Ltd and the county’s assets regulator, the State Asset Supervision and Administration Commission (SASAC) each own 30 percent of Haiyou, according to an online portal run by the State Administration for Industry & Commerce (SAIC). Four individuals own the remaining 40 percent, according to SAIC.


(Reporting by Aizhu Chen and Meng Meng; Writing by Josephine Mason; Editing by Richard Pullin and Christian Schmollinger)

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