Hans Energy / Corporate News

SINGAPORE (Dow Jones)--The Guangdong unit of China Petroleum & Chemical Corp. (SNP), or Sinopec Corp., is in talks with various fuel-oil trading companies over extending the leases on oil-storage tanks at Xiaohudao, industry players said Friday.

In the past week, market talk has emerged that Sinopec Guangdong may not renew the leases on storage tanks at the oil terminal in southern China's Guangzhou city when existing leases expire, mostly around June 2006.

When contacted, a Sinopec Guangdong official said the unit hadn't received any official notice from its parent.

But according to the general manager of a fuel-oil importer that leases 30,000 cubic meters of storage space at Xiaohudao terminal, the company is in discussions with Sinopec Guangdong over renewing the lease from next year.

"Nothing is final at this moment," he said.

Last December, Sinopec Guangdong signed a 20-year lease agreement with Hong Kong-based Hans Energy Co. (0554.HK), which owns the Xiaohudao storage facilities.

Currently, 140,000 cubic meters out of a total storage capacity of 326,000 cubic meters at Xiaohudao is used for fuel oil. The tanks are leased to various companies including Royal Dutch/Shell Group (RD), Glencore AG, Vitol Asia Pte. Ltd. and Guangzhou Twinace Petroleum & Chemicals Co.

"The stickiest issue is rent; Sinopec Guangdong wants to charge CNY30/ton per month. This is CNY10/ton more than we are paying now," said an official from a fuel-oil trader.

In comparison, rental for fuel-oil tanks at Nansha Terminal, operated by BP PLC (BP), is currently around CNY25/ton per month.

Oil trader sources say they are in negotiations with Sinopec Guangdong and believe the state-owned company will not increase its rental charges.

"Based on current rental rates, the total cost for 140,000 cubic meters is about CNY3 million, that is a lot for Sinopec Guangdong to shoulder alone," said an official of a private fuel oil importer.

"There is still time, and I believe we will still be renting the tanks come next June," the official said.