Chief executive Chen Jiulin appeared sombre and declined to talk to reporters as he walked into the office of the police force's white collar crime division, the Commercial Affairs Department, on Thursday afternoon.

Chen, 43, was arrested on Wednesday in connection with China Aviation Oil's losses which were incurred when the firm strayed outside of its core business as a jet fuel supplier and engaged in speculative oil trading.

Chen flew to China immediately after the firm's financial woes were first made public and was arrested when he returned to the city-state.

Chen was released on bail on Wednesday afternoon without being charged, although the police investigation, being conducted in conjunction with the Monetary Authority of Singapore and the Singapore Exchange, is continuing.

"I have come to explain. I have an obligation and responsibility to do so," Chen told reporters after his release on Wednesday.

The China Aviation Oil debacle, the biggest financial scandal in Singapore since rogue trader Nick Leeson bankrupted Britain's Barings Bank in 1995, has left the investments of 7000 shareholders virtually worthless.

Police are investigating how China Aviation Oil lost the money and why the shareholders were not informed earlier.

The company's Chinese government-owned parent firm, China Aviation Oil Holding Co (CAOHC), is also coming under scrutiny for selling a bloc of shares on October 20 when it was allegedly aware of the impending financial disaster.

In an affidavit filed to the High Court last week seeking protection for China Avitaion Oil from creditors, Chen said the losses wracked up through the speculative oil trading totalled almost $550 million.

Company spokesman Gerald Woon said Thursday, however, that those figures could not be finalised until its remaining open trading positions, which are subject to fluctuations in the oil market, were closed.

"The fluctuations will hopefully help us, or not," Woon told AFP.

In a statement released late on Wednesday, China Aviation Oil said it was trying to close out positions with 35 counterparties as quickly as possible.

"The company has informed all the counterparties for the remaining back-to-back option trades and swap derivatives that the company intends to terminate these trades immediately," the statement said.

Meanwhile, the company is hoping to convince the High Court for a six-week extension of a deadline by which it has to deliver a debt restructuring plan.

The High Court is due to give its decision on Friday.

In another development in what is becoming an increasingly complex case, China Aviation Oil said the Singapore government's investment company, Temasek Holdings, held the key to the restructuring plans.

In the affidavit filed on Wednesday seeking the extension for the restructuring plan, China Aviation Oil said parent firm CAOHC was holding talks with Temasek to be a partner in a 100-million-dollar rescue plan.

"The company is advised that the proposed (restructuring) scheme cannot be produced unless CAOHC and Temasek Holdings reach some agreement on the terms of the respective investments," China Aviation Oil director Gu Yanfei said in the affidavit.

Temasek bought a two percent stake in China Aviation Oil when CAOHC controversially reduced its stake from 75 percent to 60 percent on October 20.

Despite China Aviation Oil's financial woes, the company could still be an attractive invesment for Temasek given its previous monopoly on the import of jet fuel into China's booming aviation market.

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