DOMESTIC oil and chemicals group Sinochem is in advanced talks to transfer its 33.6 percent stake in a debt-laden refinery to PetroChina Co., part of Sinochem’s plan to shed non-core assets ahead of a US$2 billion listing of its energy arm, sources briefed on the matter said.

The move is in line with a transformational strategy pushed by Sinochem chairman Ning Gao- ning to zero in on core assets as it finalizes a merger with ChemChina that will create the world’s biggest industrial chemicals firm, worth around US$120 billion.

It isn’t yet clear what the valuation of the stake in the export-focused 200,000 barrels-per-day (bpd) West Pacific Petrochemical Corp. (WEPEC) refinery will be, the sources said.

Two sources estimated the refinery’s debt exceeded assets of around 10 billion yuan (US$1.45 billion) by nearly 50 percent at end-2017, due to deep losses in 2008 and 2014, even after refining margins improved over the past few years.

PetroChina has a stake of about 28 percent in WEPEC.

Though advanced, the talks on a deal may still take months or longer to reach a conclusion, the sources said. Majority control of WEPEC could help PetroChina consolidate its dominance in the northeastern China fuel market and pave the way for future plant upgrades.

“Sinochem has two main reasons to leave [WEPEC] — the plant’s poor balance sheet, which is not going to help Sinochem’s [energy unit] IPO,” one source said. “Despite being its single-largest shareholder in the refinery, Sinochem does not have a domestic offtake deal to manage its share of fuel production, leaving it primarily as a financial investor.” (SD-Agencies)