State-run Sinochem has reportedly tapped three banks to work on a potential Hong Kong listing of its oil assets.
The oil firm, the fourth largest in China, has received advice from Morgan Stanley, Citic Securities and BOC International over the potential listing, Reuters reported citing people familiar with the matter.
An initial public offering (IPO) of the assets could take place in the second half of 2018, although no formal mandate for the IPO has yet been awarded, they said. Preparations are still at an early stage and the size of the IPO has not yet been finalised, they added.
“These assets are considered the best under the company,” the report cited one source as saying. Another source said: “Sinochem is looking to offload its upstream business to the government rather than to investors.”
Speaking to the newswire on the sidelines of the Communist Party Congress, Sinochem chairman Ning Gaoning said: “Our people are preparing for it [the IPO] ... but it’s still far away.”
The potential listing is expected to include Sinochem’s refining, fuel marketing, trading and storage assets, but exclude its upstream business, the sources said.
The firm’s upstream business has struggled in recent years. As such, the Beijing-based firm has begun to move away from crude exploration and production in favour of refining and retail.
In recent years, Beijing has embarked on a programme of energy market liberalisation, designed to end the monopoly state-run firms previously held and promote competition in the industry.
In the downstream, private refiners have benefited from a loosening of import restrictions in an industry formerly dominated by state-run PetroChina, Sinopec and China National Oil Corp. (CNOOC), as well as a few state trading companies.
Beijing is also keen to reduce the state’s ownership of its behemoths. Last week, Chinese President Xi Jinping said the government would continue to reform state firms and develop a mixed-ownership economy. The government’s mixed-ownership reform consists of injecting private capital into state enterprises.