Sinochem To Form E&P Division
Sinochem has set up a separate division for exploration and production using expertise from rival PetroChina, taking another step towards becoming an integrated oil firm, according to a statement by a senior company official. Overshadowed by China's three globally listed oil majors and seeing domestic market share increasingly squeezed, state-owned Sinochem wants to be an independent exploration and production company focused on projects outside its own borders with an eye to sell production into China. Sinochem sees itself as a small independent player because of its weaker financial position.
One of China's four top state traders, Sinochem handles about 15 percent of Chinese crude imports and owns about 30 percent of the 164,000 barrel per day WEPEC refinery in Dalian. The E&P investment division will concentrate primarily on small and medium-sized oilfields valued at $100-200 million mostly in the Far East and West Africa. The company aims to bring in approximately three million tons of oil and gas production a year in about three years.
In its golden days between 1987 and 1993, Sinochem was designated as the state-monopoly trader for petroleum, rubber and fertilizers. But business started to go downhill in 1993 when China opened oil and petrochemicals markets to new players. Analysts said that since the early 1990s, Sinochem has looked for opportunities to integrate, but has been hampered by a lack of support from policy makers and upstream expertise.
Success came earlier this year when Sinochem paid $215 million for Atlantis, an E&P unit of Norwegian oil services company Petroleum Geo-Services. Atlantis operates assets in the Middle East including production of about 20,000 barrels per day of oil equivalent in Oman and a gas supply contract in the United Arab Emirates. The deal was orchestrated by Zeng Xingqiu, a 60-year-old upstream expert from PetroChina with a decade of experience dealing with foreign oil firms. Zeng now heads Sinochem's E&P team.