Exxon, Late to Teapot Party, Woos China’s Oil Market

(Reuters) — ExxonMobil Corp.’s global oil marketing team stormed into China this week hoping to elbow aside rivals and gain access to the nation’s “teapot” refining market, executives told Reuters.

The push by Exxon, the world’s biggest oil and gas company by market value, to court independent refiners known as teapots illustrates the clout they are exerting on the global oil market since winning crude import licenses from the government in 2015. The refiners are big foreign crude buyers in a country that is now the world's largest oil importer.

To make up for a late arrival, Exxon this week sent a dozen traders and marketers including global crude marketing manager Thomas Martenak to an oil trade show in Dongying, a hub for the independent refiners in the eastern province of Shandong. The team, from Houston, Singapore, Thailand and Shanghai, also included finance staff.

At a booth at the center of Dongying’s downtown exhibit hall, the Exxon representatives handed out gift bags containing backpacks emblazoned with the ExxonMobil logo. The Exxon display was flanked by stands from Malaysia’s Petroliam Nasional and France’s Total SA and about 20 local refiners.

On Monday evening, Exxon’s team wined and dined prospective customers and traders at a dinner for 200, according to multiple people who attended. Swag bags at the party contained flasks for travel use, they said.

The marketing blitz is a departure from Exxon’s traditional methods of peddling crude such as one-on-one meetings.

“I have never seen ExxonMobil ever do this kind of thing in my whole career,” said Lau Kay Hoe, a delegate who retired recently after more than three decades working in shipping and trading at the company.

Exxon produces 2.5 million barrels per day (bpd) of crude from Europe, Africa, the Middle East and the Americas and mainly supplies its own refining system.

The marketing push occurs amid a looming trade war between the U.S. and China, the worlds two biggest economies. The two sides agreed in talks earlier this month that U.S. energy sales were crucial to offsetting the $335 billion trade deficit the U.S. has with China, its top trading partner.

Martenak, who flew in from Houston, said Exxon was drawn by the growing importance in the regional market of China’s independent refiners, rather than politics. This was the first publicity push by the oil sales and supply team in the eight years since he took over as the global marketing chief, he said.

“We probably are not as fast as some of the traders,” Martenak told a seminar on Tuesday. “We want to make it up quickly so we can become a major supplier in the region.”

Martenak’s team has also met privately with potential teapot clients this week, but the main purpose was to act as Exxon’s “ambassador” rather than cutting deals, he told Reuters.

New rules from the International Maritime Organization requiring ships to use low-sulfur fuel starting in 2020 will also most likely increase China’s need for U.S. sweet, or low-sulfur, crude, he said.

Exxon’s charm offensive is starting in Dongying, an oil town built in the 1960s on China’s second-largest oilfield. The city is now the country’s biggest refining center with more 32 refineries and total annual capacity of 69 million tons, or about 1.38 million bpd.

China has nearly 40 independent refiners. Since winning their import quotas three years ago, they now buy one-fifth of China's crude oil imports of 9.6 million bpd. Most of China’s teapots are in Shandong, sucking in crude from West Africa, Russia, Oman and Brazil.