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Sinopec drills deep into Africa

Updated: 2013-12-10 07:34
By Du Juan ( China Daily)

Sinopec drills deep into Africa

China Petroleum & Chemical Corp registered year-on-year growth of 24 percent in its profits in the first half, benefiting from China's efforts to launch a new pricing mechanism in the domestic fuel market early this year. [Photo / China Daily]

China Petrochemical Corp, Asia's top refiner, is expanding in Africa through investment and social involvement, Du Juan reports

As Africa becomes increasingly important in the global energy structure, with growing proven reserves of oil and natural gas, China Petrochemical Corp has big plans for the continent.

In the next five years, the company - usually called Sinopec - plans to invest another $20 billion in Africa and deepen cooperation and exchanges with African governments, companies, people and other stakeholders, said Fu Chengyu, chairman of Sinopec.

Having operated in Africa for the past 20 years, the company's assets there totaled $22 billion as of June 30, according to its official statements.

As of the end of last year, it was doing business in 15 countries across Africa, with operations spanning upstream exploration and development, petroleum and petrochemical engineering services, oil trading, geothermal projects and refining investment.

Africa was Sinopec's first step toward internationalization back in the 1990s. Since 1993, Sinopec has been providing the continent with oilfield services, helping the local exploration industry.

The years of effort have paid off for both sides. In 2012, Sinopec's overseas assets accounted for 36.5 percent of its total assets, and overseas sales represented 31.6 percent of the total.

Sinopec drills deep into Africa

Meanwhile, the company paid more than $4.3 billion in taxes and fees to various governments in Africa last year and created more than 9,000 jobs.

Sinopec's latest move in Africa came on Nov 14, when it completed the acquisition of one-third of Apache Corp's Egyptian oil and gas business for $3.1 billion.

Apache is an independent United States-based upstream oil and gas company, which has 24 contractual blocks in Egypt.

The two sides formed a global strategic partnership on Aug 30.

Most energy resources in politically stable African countries have already been taken up by the international oil giants from developed countries, so China's players have to buy assets in riskier locations to satisfy soaring domestic demand.

However, Sinopec said the operations in Egypt aren't being affected by political turmoil.

In 2009, the company bought Addax Petroleum, a Swiss company that was listed in Toronto and London.

Sinopec Addax Petroleum has become a key overseas subsidiary, accounting for about one-third of Sinopec's total overseas oil output. The subsidiary's oil and gas assets in Africa are mainly in Nigeria, Gabon, Cameroon, Nigeria and Sao Tome and Principe.

Business decisions

As of the end of June 2013, Sinopec had cumulative investment of about $14.1 billion in Africa. Sun Shangru, deputy manager of the Sinopec Addax Petroleum Gabon project, told China Daily that the company aims to make business decisions in the region based on crude oil prices and political risks.

"Gabon is highly internationalized in Africa. There are oil companies such as Total and Shell doing business locally," said Sun. "The political and natural environment of Gabon is also more favorable, compared with other African countries.

"However, the new government of Gabon, under the powerful influence of Western countries, seems to be less friendly toward Chinese enterprises now."

She said the company should strengthen communication and cooperation with resource-rich countries to improve its business performance.

The Gabon project has daily production of 35,000 barrels of crude oil. Another project in Gabon is under construction, but it's expected to start production in the first half of 2015, according to Sun.

Beyond Gabon, Sinopec has been strengthening its strategic cooperation with the national oil company of Angola - Sonangol EP. Sinopec has participated in six deepwater oil and gas projects in Angola so far. As of June 30, it had invested about $6 billion in these projects.

Sinopec also signed a framework agreement on geothermal energy cooperation with the government of the Republic of Djibouti last year, under which Sinopec agreed to use its advanced technology and experience.

"Sinopec is not only an investor but also a technical service provider, and an advocate and practitioner of low-carbon and sustainable development," said Fu.

As Chinese investors expand in Africa, they've also had to learn how to communicate and fit in, a must for China's "going global".

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