Chinese Oil firms pledge cooperation

PETROCHINA Co and Sinopec Corp, the nation's two biggest oil companies, have signed a framework cooperative deal to supply crude oil to each other in 2009, according to a company newsletter yesterday.

The move aimed to safeguard national energy security and to ensure a stable market supply, the Sinopec Group newsletter said without giving details on the agreement.

"My understanding is this could help solve the problems of an imbalance confronting the companies," said energy consultant Han Xuegong. "For example, Sinopec could now supply its crude pumped in Tahe field in Xinjiang to the nearby PetroChina refineries as Sinopec itself doesn't have refining facilities there. That will save money, otherwise Sinopec will have to transport the Xinjiang crude to its refinery in south Guangdong Province."

The companies expect to work together to deal with the difficult economic situation as they counted on their respective advantage on marketing and resources. Sinopec focuses on downstream refining while PetroChina is more of an upstream player.

PetroChina's parent, China National Petroleum Corp, said yesterday that it has approved five major investment plans including a crude oil pipeline network between 2009 and 2020, natural gas pipelines and refining and chemical projects.

CNPC didn't elaborate on the projects, only saying they would bring returns in the long term. Last week, it said it would cut capital spending by over 10 percent next year amid the global economic slowdown.