Oil major BP has agreed to buy an equity stake in Beijing-backed jet fuel trader China Aviation Oil (CAO) (Singapore) Corp Ltd as part of its rescue plan, although the deal is not final.
A CAO spokesman in Singapore initially had told Reuters that a deal had been concluded but later said the agreement had not yet received final approval and that the companies hoped to make a formal announcement next week.
The deal is among restructuring efforts to revive CAO, which nearly collapsed a year ago under more than half a billion dollars in trading losses.
"A formal announcement will be made soon regarding the new investors," the CAO spokesman said.
A Beijing-based source close to the situation said it was not yet clear whether BP would get the full 23 per cent share it had offered to buy for about $45 million.
European oil trader Vitol has made a similar offer, while Singapore's Temasek Holdings is seeking a stake of less than 10 per cent for about $10 million, the source said.
CAO's parent firm, state-owned China Aviation Oil Holding Group (CAOHC), only wants to sell a total of 30 per cent. "The parent is in the final appraisal period for the three potential investors," said the source.
The CAO spokesman, asked later to confirm those details of the deal, declined to comment further.
"(We are) unable to reveal any details on the equity restructuring because it has not been finalised yet," CAO spokesman Gerald Woon said.
The Beijing source said it was unclear whether the parent would want all three as joint strategic partners or would pick two of the three, given the cap on the available stake.
Both Temasek and BP declined to comment, while Vitol was not immediately available for comment.
A sale to Western firms would signal a major shift in Beijing's thinking that its state-dominated oil companies need to pick up sophisticated management skills in risk control and trading, especially as the world's No. 2 oil consumer guzzles more foreign oil.
CAO Singapore holds a near-monopoly on China's jet fuel imports and is the international procurement arm of state-owned China Aviation Oil Holding Co. (CAOHC), which owns a separate firm that distributes and sells aviation fuel in China.
BP is eager to replicate in Asia the success it had in breaking into No. 2 producer Russia by buying half of TNK.
Local media had reported that shares in CAO could resume trading at the end of 2005 or early next year, after being suspended in the wake of Singapore's biggest trading scandal since the downfall of Barings Bank a decade ago.
