Sinopec’s profit soars; announces plans to boost oversea expansion

Sinopec’s (a.k.a China Petroleum & Chemical Corp.) net income rose at least tenfold to 22 billion yuan ($3.22 billion usd) in the second quarter according to this Bloomberg article.

The company has also announced it is planning a “rapid” overseas expansion in order to secure energy supply adequate to feed Chinese demand.

[Sinopec I passed on a bus ride to Shanxi, October – 2006]

The announcement, along with the company’s record gains in profit come as other global giants in the energy industry such as Royal Dutch Shell and Exxon Mobil have seen their earnings decline as prices plummeted and demand waned when the global slowdown ensued at the end of 2008.

According to Bloomberg, Sinopec supplies 80% of China’s fuel needs and is China’s largest refiner of crude oil. The company is looking for new foreign partners, expand its refining capacity and reduce operational costs. The company expects demand will remain strong in China and that oil prices will continue to rise throughout the second half of the year.

Here are a few highlights from the Bloomberg article, “Sinopec to Boost Expansion Abroad After Profit Surges to Record,” which you can access in full by clicking here.

“Sinopec’s main business is refining and it needs to increase its oil reserves and reduce its reliance on other oil producers,” said Larry Grace, an independent oil analyst based in Hong Kong. “There’s a government directive to increase overseas oil and gas assets.”

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Sinopec gets almost all its revenue from refining and the sale and distribution of fuels. Oil production accounted for just over 2 percent of sales, according to its 2008 annual report. The company imports about 80 percent of the crude it processes.

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Su said the company will accelerate its “go global” strategy.

Parent company China Petrochemical Corp. said on Aug. 18 it had concluded the C$8.3 billion ($7.7 billion) acquisition of Addax Petroleum Corp. to secure reserves in Iraq and Africa. China Petrochemical has assets in Russia, Angola, Ecuador, Australia, Canada, Kazakhstan and Myanmar.

Sinopec’s parent completed the 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.

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China Negotiates for Deepwater Oil Blocks Offshore Brazil

[South-South Cooperation] — Brazil, China — Rigzone

Lula’s visit to China has been anything but boring. On the heels of the $10 billion oil for cash deal reached between Brazil and China this past week, comes news of negotiations for two deepwater oil blocks between Petroleo Brasileiro SA (PBR) and China Petroleum & Chemical Corp.

Rigzone reports in this article:

The two oil blocks under negotiation between oil giants China Petroleum & Chemical Corp. (SNP) and Petroleo Brasileiro SA (PBR) are deepwater exploration blocks located in the north of Brazil, the Brazilian company’s top financial official told Dow Jones Newswires on Thursday.

Conversations, however, are still ongoing and the deal isn’t closed, said Almir Barbassa, chief financial officer of Petrobras, as the Brazilian company is known.

The blocks under consideration are within Brazilian waters, are 100% owned by Petrobras and run deep, or about 2,000 meters, he said. They are located off the coast of the two neighboring states of Para and Maranhao in northern Brazil, Barbassa added.

Earlier this week, China’s National Energy Administration Chairman Zhang Guobao told reporters in Beijing that Brazil would offer two oil blocks to Sinopec, as the Chinese company is known, as a way to strengthen energy cooperation between the two countries. He didn’t give any further details.

Click here to access the full article from Rigzone

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China and Brazil seal $10 billion deal

[South-South Cooperation] — China, Brazil

Lula da Silva & Hu Jintao

Chinese President Hu Jintao and his Brazilian counterpart, Lula da Silva, finished writing the latest chapter in Sino-Brazilian Cooperation earlier today in Beijing.

ChinaSouthAmerica has been following this story for a few months now, and I must say, it is nice to see a classic example of South-South Cooperation / Emerging Market Cooperation (whatever you want to call it) develop and eventually get finalized.

Here are a few excerpts from a WSJ article that a great job of summing up the details.

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State-owned Brazilian oil giant Petroleo Brasileiro SA said it finalized a $10 billion loan agreement from China in return for a long-term supply of oil, another victory for China’s new strategy of using its cash-rich banks to help secure the natural resources the country needs to keep its economy growing.
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Petroleo Brasileiro, known as Petrobras, said under the terms of the 10-year loan from China Development Bank, which has been at the center of China’s resources policy, Brazil would supply China Petrochemical Corp., known as Sinopec, 150,000 barrels of oil a day for the first year, rising to 200,000 barrels a day for another nine years.

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Mr. Gabrielli said the loan’s interest rate was under 6.5%, and the loan used oil revenue as collateral but would be repaid in cash — not oil. Although the deal didn’t include guarantees to buy Chinese products or services, other deals will work on exploring closer cooperation, such as moving Chinese equipment factories to Brazil.

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China’s mission to secure commodities does not stop with Brazil–as you are well aware if your a frequent reader at this site.

Beijing has struck similar agreements with energy producers world-wide in recent months, including a $10 billion deal with Kazakhstan and a $25 billion deal with Russian oil and pipeline companies.

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Stay tuned for further developments and ChinaSouthAmerica’s analysis this deal and growth of Sino-Brazilian Cooperation.

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The Middle Kingdom meets the Middle East

[South-South Cooperation] — China, Middle East — Reuters Analysis — by Alan Wheatley, China Economics Editor

Alan Wheatley is an intelligent journalist with years of experience reporting news in both Taiwan and mainland China whom I respect a great deal. Alan’s article does a superb job of combining hard data with different points of views from experts on all sides to present a unbiased report.

This is the general principle Reuters journalists follow. By providing the reader with the necessary perspectives and hard data to back them up, the reader is expected to make their own decision on the significance of the article.

As there always are, I am sure some bad apples exist. After a internship with Reuters Beijing Bureau back in 2006, I can personally testify that the Beijing staff makes a concerted effort to uphold the journalist’s creed and report both sides of the story.

En route to the Silk Road

With no fanfare, a $5 billion (3.3 billion pounds) refinery in which Saudi Aramco has a 25 percent stake quietly began processing oil a couple of weeks ago in eastern China.

The start-up of the Fujian plant, half-owned by top state-owned refiner Sinopec (0386.HK), testifies to the thickening trade and investment ties between China and the Arab world.

China’s exports to the 22 members of the Arab League jumped to $62.3 billion last year from just $7.2 billion in 2001, the year China joined the World Trade Organisation. The share in total Chinese exports rose to 4.4 percent from 2.7 percent.

Imports from the Arab world over the same period grew to $70.3 billion from $7.5 billion, doubling the share in total imports to 6.2 percent, according to official Chinese data.

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Nowhere is this more in evidence than in Yiwu, a town in eastern China whose vast wholesale markets draw traders from across the globe in search of cheap consumer goods.

“We don’t see too many Europeans any more. These days, most of our customers are from the Middle East,” Zhu Shanshan, a sales representative at Dove Candle, which sells scented candles and handicrafts, said on a recent visit to Yiwu.

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