Sinopec Boasts $22 Billion African Resource Assets, Plans $20 Billion More

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Sinopec (NYSE:SHI) (Shanghai, China) plans to make a big move for Africa's reserves of oil and natural gas over the next five years. The company plans to invest a further $20 billion and deepen cooperation and exchanges with African governments. Sinopec already had assets totaling $22 billion in Africa as of June this year, after operating on the continent for the past 20 years.

By the end of 2012, the company had operations in 15 countries across Africa, covering upstream exploration and development; petroleum and petrochemical engineering services; oil trading; geothermal projects; and refining investment.

There has been mutual benefit for the company and the continent. In 2012, Sinopec paid more than $4.3 billion in taxes and fees to various African governments and created more than 9,000 jobs. Sinopec's overseas businesses accounted for 36.5% of its total assets, and overseas sales represented 31.6% of its total sales.

The company's latest African move was in November when purchased 33% of Apache Corporation's (NYSE:APA) (Houston, Texas) Egyptian oil and gas business for $3.1 billion. The two companies formed a global strategic partnership on August 30 this year.

In 2009, Sinopec bought the Swiss-based Addax Petroleum, which was then listed in London and Toronto. Sinopec Addax Petroleum has now become a key overseas subsidiary and accounts for about 33% of Sinopec's total overseas oil output. The Addax oil and gas assets are mainly in Nigeria, Gabon, Cameroon, Nigeria, and Sao Tome and Principe.

At the end of June this year, Sinopec had a cumulative investment of about $14.1 billion in Africa (complementary to the $22 billion assets), according to China Daily.

Moves have been made to enter the market in Gabon, where Sinopec now has production of 35,000 barrels per day (BBL/d) of crude oil, plus another project scheduled to begin production in the first half of 2015.

In Angola, Sinopec is increasing its cooperation with national oil company Sonangol EP. Sinopec has participated in six deepwater oil and gas projects in Angola to date, and by June 30 had invested about $6 billion in these projects.

In 2012, the company signed a framework agreement on geothermal energy cooperation with the government of Djibouti, under which Sinopec agreed to use its advanced technology and experience in project development.

Proven oil and gas reserves have increased rapidly in Africa beyond the traditionally energy-rich regions in the northern and western regions of the continent. Positive results have come from exploration in the southern and eastern regions in the past few years. According to CNPC's economic and technology research institute's report, Africa's oil reserves stood at 132.1 billion barrels at the end of 2011, equivalent to 8% of the global total.

There are more than 60 oil and gas projects under construction in Africa, most of which will be in operation by 2017. Downstream refining project investment is now favored by local governments, as it adds value to the crude resource. Sinopec has entered into a framework agreement with South Africa's national oil company, PetroSA, to conduct joint research on the Motombo refinery project at the Coega industrial zone adjacent to Port Elizabeth.

Sinopec has made a priority of softening relationships with local populations and workers with community projects, aid and skills training for locals, sometimes in China. This is a big improvement from the past profiles of some Chinese companies on the continent.

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