Sinopec sees unprofitable downstream operations amid rising oil prices
By YVONNE LEE
HONG KONG -- China Petroleum & Chemical Corp., or Sinopec, said Monday its refining operations posted losses in January and February and that it expects the downstream operations to remain unprofitable if oil prices keep going up.
Asia's largest refiner by capacity is diversifying its business to shield itself from volatile oil prices, and chairman Fu Chengyu told reporters in Hong Kong the firm would accelerate the development of its natural gas business and acquire overseas oil and gas assets from its parent, China Petrochemical Corp., or Sinopec Group.
"We see rapid growth in natural gas output in the next five years, mainly from unconventional gas projects," Fu said.
"We are conducting an assessment of the parent's assets. There is currently no specific timetable when the assets would be injected into the listed company," he said.
Earlier this month, Sinopec said it intended to buy overseas oil and gas assets from Sinopec Group to increase its hydrocarbon-reserve base and help it become a fully-integrated oil major.
Since 2010, Sinopec Group has invested $14 billion in oil and gas deals in the US, Canada, Brazil and Australia, according to data provider Dealogic.
In February it entered into a $2.5 billion deal with Devon Energy Corp. for a one-third stake in five US shale oil and gas fields.
Separately, Fu said Sinopec won't pay above the market value for China Gas Holdings shares and stressed the company has no plan to lay off China Gas staff after the acquisition.
Last week, Sinopec and gas supplier ENN Energy Holdings said negotiations on their planned $2.15 billion acquisition of China Gas had been extended until May 15. They had hoped to have completed the deal by March 31.
China Gas president Eric Leung said the delay was "wholly unacceptable."
Sinopec teamed with ENN in December to bid for China Gas, which controls gas pipelines serving more than 6 million customers in China. China Gas rejected the deal at that time saying the HK$3.50 a share offer was "wholly unsolicited, opportunistic" and one that failed "to reflect its fundamental value."
China Gas still views the offer as unsolicited.
Sinopec said Sunday its 2011 net profit rose 2% to CNY73.23 billion from CNY71.78 billion as higher oil prices and fuel sales outweighed the effect of narrower refining margins.
Dow Jones Newswires
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