Sinopec aims to bifold foreign investment, sets a target exceeding USD 30 billion

Sinopec Limited, renowned Chinese oil and gas company headquartered in Beijing, China, plans to increase invest more than USD 30 billion to expand its market overseas. The company, which is reportedly owned by the Chinese government, had already invested around USD 16 billion between 2010 to 2015, for the expansion of its operations abroad. This investment was targeted for business expansion in 30 countries, where Sinopec Ltd., also called China Petroleum and Chemical Corporation, already has more than 50 projects in continuum.

Sinopec’s move - a government sanctioned line of expenditure, has been received with accolades from state-owned and private companies. Trade analysts are of the opinion that this policy could help Chinese companies evade stringent finance controls that have been the cause of investment curtailing abroad. In addition, it is also expected that this initiative will help China look for growth opportunities abroad and access energy resources, on the grounds that the country’s resources seem insufficient.

Reliable statistics prove that Sinopec, one of the key players operating in global oil & gas market, has a sufficient finance pool to double its investment and strengthen its business base abroad. The firm’s balance sheet depicts more than USD 19 billion in cash, which amounts to more than 130 billion yuan. The year 2016 also witnessed Sinopec take over Chevron’s key assets in South Africa, for an estimated amount of USD 1 billion.

A leading report states that the 2013 foreign investment of Apache Corp, leading petroleum and natural gas company based in Houston, Texas, was one of Sinopec’s largest acquisition. For the uninitiated, Sinopec, in 2013, bought around 33% of the business operations of Apache Corporation in Egypt, for a valuation of approximately USD 3.1 billion. Back then, a regional protest involving the then President had threatened the successful turnaround of Sinopec’s newly signed deal, however, the company had apparently gone ahead with and acquired a stake in the country’s valuable oil & gas assets. This deal, back then, had been touted as Sinopec’s biggest acquisition in the Middle East.

Trade analysts had reported that this deal would bring about an increase of 9% in the company’s annual production, subject to their strategic decision of buying up the operations of the Western Desert, which was far away from the centers witnessing political anarchy. Today, more than three years hence, the company proudly declares the Egypt venture to be a resounding success, for despite the drastic fall in oil prices worldwide, Sinopec has continued to maintain its growth pace, manufacturing around 350,000 barrels of oil in Egypt per day, churning out a business of more than USD 620 million. The company has reinvested around USD 1 billion in the last three years in the country of Egypt, aiming to achieve long-term growth in the region, and is currently planning to construct a petrochemical refinery to the south of the Suez Canal.

Riding high on the success of its earlier ventures, Sinopec is confident that its plan to double the investment for its foreign expansion will bring in fruitful results. However, it is likely that there will be risks to be dealt with, in the event that the countries are not able to pay back China. Experts suggest that the settlement of the transactions in the Chinese Renminbi may ease the issue.