Sinopec "Goes Global" for Upstream Buys

Wang Ying and John Duce, Bloomberg

China Petroleum & Chemical Corp., Asia’s biggest refiner, is seeking to increase stakes in oil and gas projects in Africa and Latin America to secure supplies and guard against the risk of a rebound in oil prices.

The state-controlled company, also known as Sinopec, will look at projects in politically stable countries with “high- quality” gas and oil reserves, Chairman Su Shulin told reporters in Hong Kong today, without elaborating.

Sinopec’s oil reserves fell 6.1 percent to 2.8 billion barrels as of the end of last year, and the company’s financial performance will suffer if it doesn’t invest “large amounts” of money to replenish stocks, the refiner said yesterday. Crude in New York has slumped 65 percent since reaching a record $147.27 a barrel in July last year.

“Sinopec is state-controlled and falling oil reserves are also of concern to the government,” said Grace Liu, an energy analyst at Guotai Junan Securities in Shenzhen.

Sinopec has been asked by the government to build emergency crude oil stockpiles in Zhoushan in Zhejiang province and in Shandong’s Qingdao and Rizhao, President Wang Tianpu said today.

Securing overseas oil and gas projects was previously largely controlled by parent China Petrochemical Corp. Sinopec will now take more of a lead in seeking foreign acquisitions, Su also said.

“Sinopec has adopted a ‘go global’ policy in terms of upstream acquisitions,” according to Su.

China Petrochemical completed its purchase of Tanganyika Oil Co. for about $1.8 billion in December. Vancouver-based Tanganyika holds stakes in two Syrian production-sharing agreements covering the Oudeh and Tishrine/Sheikh Mansour blocks after expanding from Tanzania in 1996.

Sinopec’s parent also has assets in Russia, Angola, Ecuador, Australia, Canada, Kazakhstan and Myanmar, Su said.

“The big Chinese energy companies have for a long time had a policy of looking for resources overseas, but there seems to be a greater emphasis in foreign acquisitions at Sinopec,” Liu said.  

- Copyright 2009, Bloomberg. All rights reserved.

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