Shares in Chinese oil companies fell Tuesday on the Hong Kong stock market after Britain oil major BP sold off its holdings in PetroChina -- the nation's largest oil company -- to cash in US$1.65 billion.

BP, however, has no plan to sell off its holdings in other oil companies including Sinopec -- the nation's second largest oil firm, and Zhenhai Refining & Chemical-- a refinery unit of Sinopec, according to Daniel Teo, vice-president of BP China.

But investors worried that the sell-off may trigger other strategic shareholders including Royal Dutch/Shell and ExxonMobil to reduce their stakes in Sinopec -- the second largest domestic oil firms. Sinopec's shares have already touched a historical high, and almost tripled over the prices the foreign companies bought.

BP, the world's third-largest oil company, yesterday concluded the selling of its 2 per cent stake in PetroChina at HK$3.70 (47.4 US cents) a share to raise HK$13 billion (US$1.65 billion).

Responding to the news, shares of PetroChina lost 2.48 per cent to end at HK$3.9 (50 US cents) yesterday with the lowest dropping nearly 5 per cent.

The stock had fallen 17 per cent in the past five sessions, pondered by rumours of the share sale.

"It is not a surprise for BP to sell off the holdings. BP wanted to sell it for quite a long time," said an analyst with a Hong Kong-based Investment Bank. "They want to sell any non-core assets."

BP bought PetroChina's stake as a strategic investor in the initial public offering of PetroChina when the shares were valued at HK$1.28 (16.4 US cents).

BP, along with Shell and ExxonMobil, also have bought a combined 8.03 per cent stakes in Sinopec. BP has a 9.4 per cent stake in Zhenhai.

Sinopec shed 1.54 per cent, falling to HK$3.2 (41 US cents) Tuesday.

Royal Dutch/Shell refused to comment on whether it will follow BP's move.

Teo said BP retains good relations with PetroChina, and committed to its businesses with other partners in China.

Analysts agreed that the impact of will not last long. But they are divided over the outlook of the Chinese oil companies.

"In the short-term, it is on the down-turn trend as investors worry whether others will follow," said the Hong Kong analyst. "In the long-term, we don't recommend it because they are overvalued... The high oil price already lasted longer than expected. It will be on the downturn."

Another analyst from an investment bank based in Shanghai said Sinopec will still maintain a good performance as its downstream business continues to pick up.

JP Morgan said yesterday it had revised upwards its earnings forecasts for the three Chinese oil majors on expected higher crude prices.

The investment bank said it has revised upwards China's largest oil and gas producer PetroChina's earnings forecast by 13 per cent to 72.51 billion yuan (US$8.8 billion) in 2004.

JP Morgan has also raised profit forecasts for Sinopec Corp by 12 per cent to 27.63 billion yuan (US$3.3 billion) in 2004.

BP in China

As one of the largest foreign investors in China, BP has invested more than US$4 billion in the nation by the end of 2002.

BP has a 30 per cent stake in China's first liquefied natural gas (LNG) terminal and trunk line project in Guangdong Province, with an estimated cost of US$600 million.

A retail fuels joint venture between BP and PetroChina was formed in 2001 to build 500 service stations in Guangdong.

BP is the only foreign company participating in China's aviation fuel sector.

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