Sinopec unveils chemical plant acquisition and plan to list marketing business overseas

Sinopec unveils confident plans as profits from fuel marketing and chemicals more than double

PUBLISHED : Thursday, 27 April, 2017, 10:42pm
UPDATED : Thursday, 27 April, 2017, 11:11pm

Oil and gas major China Petroleum & Chemical (Sinopec) has unveiled a US$1.68 billion chemical plant acquisition and approved a plan to separately list its fuel marketing business on an overseas stock exchange.

The moves underline the firm’s confident outlook for the downstream fuel and chemicals sector amid a prolonged period of low crude oil prices.

The nation’s third largest oil producer and the world’s second largest refiner by capacity, through its wholly-owned Shanghai-based subsidiary Gaoqiao Petrochemical, has struck a deal to pay US$1.68 billion to international oil giant BP for the latter’s 50 per cent stake in petrochemical joint venture Shanghai Secco Petrochemical.

“This decision aligns our petrochemicals business in China with our global focus on areas where BP has leading proprietary technologies and competitive advantage,” BP Global Petrochemicals chief operating officer Rita Griffin said in a statement.

Caojing, Shanghai-based Secco, a base chemicals maker whose US$2.7 billion plant started commercial operation in 2005, booked a net profit of 3.8 billion yuan last year, up from 2.2 billion yuan in 2015, Sinopec said in a stock exchange filing late on Thursday.

Secco and Gaoqiao have a mutual feedstocks supply relationship, and the acquisition will enhance their “synergy” through business integration, the filing added.

The transaction will result in Sinopec taking full ownership of Secco, with Gaoqiao holding 50 per cent, Sinopec Shanghai Petrochemical owning 20 per cent, and the remaining 30 per cent directly held by Sinopec.

Sinopec Shanghai is 50.6 per cent owned by Sinopec.

Sinopec’s board on Thursday passed a resolution for its fuel marketing business, called Sinopec Marketing, to float shares on an unspecified overseas exchange so that 10 per cent of its issued shares will be listed.

A timetable for the flotation will be a decision for Sinopec Marketing’s board. Some 30 per cent of the latter’s shares were sold to more than two dozen firms in 2014.

Sinopec also posted a 158 per cent year-on-year jump in first-quarter net profit to 17.2 billion yuan, higher than its own estimate late last month of a 150 per cent rise, as higher oil prices returned its oil production operation to profit, while both fuel marketing and chemicals profit more than doubled.

Rival PetroChina, the nation’s largest oil and gas producer, posted a first-quarter net profit of 5.7 billion yuan, in line with its own estimate of between 5 billion and 6 billion yuan indicated around three weeks ago.

That compares with a loss of 13.8 billion yuan in the same quarter last year, its first quarterly loss since its stock market listing 17 years ago.

The oil giant attributed the marked turnaround to an 88.3 per cent year-on-year jump in the average oil selling price to US$50.6 a barrel.

The benefit was partly offset by a 10.7 per cent slump in the firm’s oil output as it was forced to shut or curtail output at some of its high-cost fields as oil price remained at relatively low levels.

Despite the sharp oil price jump, PetroChina recorded a first-quarter operating profit from oil and gas production of just 1.9 billion yuan. That still compared favourably to a 20.3 billion yuan loss in the year-earlier period.

the company’s oil refining and chemicals business saw profit slump 44 per cent from a year ago to 8.2 billion yuan, while that of gas distribution surged 109 per cent to 9.9 billion yuan thanks to higher sales volume and gas prices. Distribution of imported gas, however, remained loss-making.

Meanwhile, dominant offshore oil and gas producer CNOOC on Thursday reported a 4.2 per cent year-on-year decline in total oil and gas production to 119.1 million barrels of oil equivalent (boe) in the year’s first three months, on the back of a “natural decline” of its producing fields.

Revenues, however, were up 55.8 per cent year-on-year to 38.4 billion yuan, thanks to a 58.7 per cent jump in the average oil selling price to US$51.6 a barrel, while gas prices climbed 5.4 per cent.