Sinopec said to be in talks to merge with China’s aviation fuel giant

[BEIJING] China’s largest oil refiner, Sinopec, is in discussions to take over the nation’s dominant distributor of jet fuel, said people with direct knowledge of the talks.

The tie-up talks between Sinopec – also known as China Petrochemical – and China National Aviation Fuel (CNAF) were initiated by Beijing, said the people, who asked not to be named as the information is not public.

The negotiations are still in progress, and there is no timetable or guarantee that the deal will proceed, they added.

Sinopec, which processes both imported and domestic crude into refined oil products, supplies jet fuel to CNAF, which manages the country’s airport fuelling network.

From time to time, CNAF also balances domestic supplies by importing or exporting cargoes through trading arms such as China Aviation Oil (CAO), of which it owns 51 per cent.

If the tie-up goes ahead, Sinopec is expected to absorb all of CNAF’s assets and operations, one of the people said.

One of the world’s biggest civil aviation markets, China has seen demand rebound sharply from the pandemic as flights return to the skies.

The country is expected to consume more than 40 million tonnes of jet fuel this year, or close to a million barrels a day – equivalent to about US$30 billion at prevailing prices.

CAO said earlier in an exchange filing that its controlling shareholder “will be undergoing a corporate restructuring with another corporate conglomerate”, without identifying the counter-party.

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That overhaul remains subject to further approvals and will not have a material impact on normal business operations, the company noted.

Sinopec and CNAF did not immediately respond to requests for comment.