BP taps three sites for China refinery

BEIJING (Reuters) - Oil major BP (BP.L) is courting PetroChina and Sinopec for joint refinery investments in China, tapping three coastal cities for possible sites, in its renewed effort to enter the world's No.2 fuel market.

BP is in discussions with top refiner Sinopec (0386.HK) on a joint-venture refinery in Beihai, Guangxi province or Zhanjiang, Guangdong province, both on the southern coast, Beijing-based industry executives said.

The European oil giant is also tapping PetroChina (0857.HK) to erect a plant in Shanghai, but all the discussions are at an early stage and parties have yet to prepare proposals for initial government approvals.

"The discussions are very preliminary. BP, like other foreign firms, is re-evaluating the investment risks as many new plants are being built or have recently started in China, pressuring margins," said one source familiar with BP's China activities.

China has long kept its 8 million-barrels-per-day refining and fuel marketing business to oil duopoly Sinopec and PetroChina, with only Exxon Mobil (XOM.N), Saudi Aramco and France's Total (TOTF.PA) owning part of two out of scores of refineries.

But China's fuel demand, fuelled by near 8-percent economic expansion and rapid growth of private cars, has remained a magnet to investors like Shell (RDSa.L), BP and oil exporters such as Kuwait and Qatar.

BP unloaded its 9.41 percent stake in Sinopec's Zhenhai refinery in early 2006, when the top Asian refiner took the country's largest oil processor and one of the most profitable private.

A Chinese newspaper reported on Wednesday that BP was looking to integrate its potential China refinery with its petrochemical operations in Shanghai, where the firm runs a 900,000 tonnes-per-year ethylene plant in partnership with Sinopec.

The firm was also keen to supply its hundreds of petrol stations in east China under a joint marketing venture with Sinopec, the paper said.

(Reporting by Chen Aizhu; Editing by Jonathan Hopfner)