Signs agreement worth $5.76b with Sinopec subsidiary
Sinopec Engineering (2386), the engineering subsidiary of Chinese oil giant China Petrochemical Corporation (Sinopec), is slated to build what is expected to be the biggest oil storage terminal in Southeast Asia in an agreement worth US$738 million (HK$5.76 billion).
The company said it has entered into the Batam Construction Project Framework Master Agreement with a subsidiary of Sinopec Kantons Holdings (0934), according to a stock exchange notice issued Tuesday.
Sinopec Kantons is controlled by China Petroleum & Chemical Corporation (0386), the listed arm of Sinopec.
The agreement calls for Sinopec Engineering to act as the general contractor for the construction of an oil storage facility in West Point Maritime Industrial Park at Batam Island in Indonesia for a maximum fee of US$738 million.
The company will design and build storage facilities for 2.6 million cubic metres of crude oil and petroleum products, ancillary facilities, supporting quay and port facilities and undertake dredging of a navigation channel.
The agreement is conditional upon independent shareholders of Sinopec Kantons giving the nod at a special general meeting to be arranged later.
According to a stock exchange notice issued also on Tuesday by Sinopec Kantons, Sinopec Engineering would also have to be successful in the bidding process for the project.
The contract will commence on 1 January 2014 and will last two years.
In October last year, Sinopec Kantons announced it would pay about HK$3.84 million for a 95 percent equity interest in an Indonesian company PT. West Point Terminal which would develop the oil storage project at a 75 hectare site at West Point Maritime Industrial Park.
The estimated project cost is US$841 million (HK$6.52 billion).
Batam Island is strategically located in the Malacca Strait with access to the markets of Southeast Asia, Northeast Asia and the Middle East.
“In addition, the project is adjacent to Singapore which is also a global trading centre for refined oil,” Sinopec Kantons said in its October 2012 notice.
In May this year, Sinopec Engineering, the biggest company in the mainland specialising in the construction of oil refining and chemical facilities, raised HK$13.7 billion one of the most popular initial public offerings so far this year.
Apart from building oil and chemical facilities in its home market in mainland China, the company has also worked on overseas projects such as a polyolefin plant for Saudi Arabian client YANSAB and a lubricating blending plant in Singapore for Sinopec.
In line with other big mainland construction companies, it has a large workforce.
As of December last year, the company had 6,916 professional staff and 819 technicians.
Earlier this month it announced that it had secured new contracts with a total value of 54.81 billion yuan (HK$69.72 billion) during the first nine months of 2013.