US-sanctioned Chinese refiner Hengli restructures Singapore unit

[SINGAPORE] China’s Hengli Group has changed the ownership structure of its Singapore-based oil trading arm after the US sanctioned its refining unit, according to sources with knowledge of the matter.

The change means the Singapore entity, Hengli Petrochemical International, is now only 5 per cent owned by Hengli Petrochemical (Dalian) Refinery, which was sanctioned by the US Treasury Department’s Office of Foreign Assets Control (OFAC) on Friday (Apr 24) over alleged links to Iran, the sources said, asking not to be named due to the sensitivity of the matter.

The Singapore unit is now no longer majority-owned by an entity targeted by the US, and thus should not be treated as being sanctioned by association, the sources said, citing a notice from Hengli to its clients.

Hengli is the second-largest private refiner in China, operating a modern oil-processing and chemical complex in Liaoning province. OFAC cited oil purchases from Iran when sanctioning Hengli, although the company has denied the claim.

The US also sanctioned shipping companies and tankers involved in the Iran oil trade, ramping up pressure on the Islamic Republic as the war in the Middle East drags on.

The Singapore unit is responsible for the trading and sourcing of crude feedstock for Hengli’s China-based oil-processing plants among other businesses.

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Before the sanctions, Hengli’s Dalian unit held complete ownership of the Singapore entity. The remaining 95 per cent of the company is now owned by Dalian Changxing International Trade, which is a Chinese government-linked trading house, according to the sources.

Representatives for Hengli did not immediately respond to a request for comment. BLOOMBERG