June 19 (Bloomberg) -- PetroChina Co., the world’s biggest company by market value, may invest in the Grangemouth oil- processing plant in Scotland, according to local government official Angus MacDonald.

Negotiations are under way with PetroChina and other parties, the Falkirk councillor said yesterday, citing comments by an unidentified manager at Scotland’s only refinery to a community meeting on June 16. PetroChina, which separately announced a 9.7 billion yuan ($1.4 billion) acquisition of pipelines from its parent, declined to comment.

A stake in Grangemouth would give PetroChina its first European refining operation, adding to the $2.2 billion acquisition of Singapore Petroleum Co. last month. Owner Ineos Group Holdings Plc, the U.K.’s biggest chemicals company, is seeking partners as it tries to renegotiate 7.5 billion euros ($10.5 billion) of debt.

“The potential Ineos refinery investment will provide the Chinese firm an opportunity to crack into the lucrative U.K. energy market at distressed valuation, thus hedging against any future refinery margin clampdowns in China,” Gordon Kwan, the head of energy research at Mirae Asset Securities Ltd., said in an e-mail today. “The investment could also serve as a launching pad for PetroChina to tap into enhanced oil recovery projects in the North Sea.”

North Sea

Oil companies including Total SA are expanding exploration in the North Sea after the cost of drilling eased following oil’s 51 percent decline from a record $147.27 a barrel reached in July last year. Det Norske Oljeselskap ASA, the oil and gas explorer part-owned by billionaire Kjell Inge Roekke’s Aker ASA, said this month an oil discovery at the North Sea Grevling prospect is larger than initially estimated.

PetroChina shares have increased 30 percent this year, outperforming a 24 percent gain in the Hang Seng Index. The stock rose 0.6 percent to HK$8.50 at the market’s midday break.

Ineos Chief Executive Officer Jim Ratcliffe built the company by acquiring surplus assets from major oil companies. It paid BP Plc $9 billion in 2005 for chemical and refining assets including Grangemouth, which is connected to the Forties Pipeline System. The system transports almost half of the U.K.’s oil production from more than 70 fields in the North Sea.

Grangemouth, located approximately 20 miles west of Edinburgh, has a daily oil-processing capacity of about 200,000 barrels, according to Ineos’s Web site. The plant supplies about 95 percent of the fuel used in Scotland’s central belt, including the capital of Edinburgh and Glasgow, Scotland’s biggest city.

Ineos Profit

Ineos said May 6 profit will fall this year as the global recession cuts demand for refined products such as gasoline.

Ineos spokesman Richard Longden said yesterday the company is talking with potential partners, declining to identify the parties in the talks. The discussions are exploratory and may or may not lead to investment in Grangemouth, he said.

PetroChina is boosting investments in oil refining overseas after processing losses widened fourfold to 83 billion yuan last year. The Chinese government controls fuel prices to curb their impact on inflation, preventing the company from passing on higher crude costs.

The company won shareholders approval on May 12 to sell as much as 100 billion yuan of bonds to fund exploration, pipeline and overseas projects. The company said separately yesterday it plans to buy pipeline assets from its parent China National Petroleum Corp.

Pipelines

The assets to be acquired from China National include one crude oil pipeline and one refined oil link, each with a length of 1,858 kilometers (1,154 miles) stretching west-to-east from Urumqi, Xinjiang to Lanzhou, Gansu, PetroChina said in yesterday’s statement to the Hong Kong stock exchange.

The crude oil pipeline and the fuel link have designed annual capacities of 20 million metric tons and 10 million tons respectively, it said.

PetroChina will be able to save costs by buying the pipelines, Kwan said. The company currently pays the parent a fee for using the facilities, he said.

Mao Zefeng, a Hong Kong-based spokesman for PetroChina, said the assets will help the company to be “more integrated in its operations.”

To contact the reporters on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net

Last Updated: June 19, 2009 02:25 EDT