Shares of world’s biggest oil refiner, Sinopec, plunge after suspension of two top executives in trading unit

  • General manager Chen Bo and party secretary Zhan Qi have been suspended from their posts at China International United Petroleum & Chemicals, also known as Unipec
PUBLISHED : Thursday, 27 December, 2018, 7:02pm
UPDATED : Friday, 28 December, 2018, 10:28am

Shares of China Petroleum & Chemical (Sinopec), the world’s largest oil refiner, tumbled sharply on Thursday after the sudden suspension of two senior executives in its trading unit which incurred heavy losses.

The nation’s second biggest integrated oil and gas company said it has suspended general manager Chen Bo and party secretary Zhan Qi from their posts at China International United Petroleum & Chemicals, also known as Unipec. Party secretary is the title given to the top Communist Party representative within a state-owned company.

The unit’s deputy general manager Chen Gang will take over their roles, Sinopec’s spokesman said, declining to provide more details.

Government inspectors had been looking into the company’s operations for the last few years and had uncovered “severe trading losses in the second half of this year”, according to an unnamed source quoted by Reuters.

Sinopec, world’s largest oil refiner, wary of secondary US sanctions on Iranian crude importers

The Sinopec spokesman refused to be drawn on whether the suspensions were related to the reported losses. He said they were due to “work reasons”.

The company late on Thursday said in a filing to Hong Kong’s bourse, that it was informed that Unipec has incurred some losses “during certain crude oil transactions due to the oil price drop”, without giving a time frame.

“The company is currently in the process of evaluating the details of such circumstance,” it added, without saying whether the suspensions were linked to the losses.

Unipec was established in 1993 and is China’s largest international trading company by throughput value. It trades crude oil, oil products and liquefied natural gas, besides providing fuel warehousing and logistics.

Sinopec shares closed 4.7 per cent lower at HK$5.7 on Thursday, almost at the intra-day low of HK$5.68.

“With no official explanation, there will be more than one school of thought in the market as to the circumstances behind the suspension and whether it [the company] suffered losses,” said Louis Tse Ming Kwong, managing director at VC Asset Management.

“If there were indeed losses, it could be due to poor hedging execution, or it could be due to other reasons … uncertainty breeds a sell-first, ask-later mentality among some investors.”

Chen Bo is also chairman and executive director of Hong Kong-listed oil storage and logistics unit Sinopec Kantons Holding, a subsidiary of Sinopec. A Kantons spokesman said he had not been notified of any imminent change to Chen’s position at Kantons.

According to Kantons’ website, Chen joined Unipec in 1993 and climbed through the ranks, holding various positions including business manager of crude oil and deputy general manager.

Sinopec chairman Wang Yupu steps down to take director’s role at national safety regulator

Crude oil prices plunged from a high of US$85 a barrel on September 12 to US$50.5 on Monday, partly as worries about a reduction in Iranian supply subsided. The US government, which reimposed sanctions on Tehran in early November, has allowed eight nations to continue to buy Iranian oil for now.

Another factor driving the decline was the trade war, and a marked economic slowdown in China, the world’s second largest oil consumer and biggest net importer.

Sinopec last year sourced 8.57 per cent of its total refinery crude oil from Iran, according to its annual filing to the US’ Securities and Exchange Commission.

The biggest oil derivatives scandal to hit China’s petroleum sector came in 2006 when Chen Jiulin, the former head of China Aviation Oil (Singapore), a unit of state-owned China Aviation Oil Holding, was sentenced to more than four years in prison after the country’s biggest jet-fuel trader went to the brink of bankruptcy with some US$550 million of oil derivative trading losses.