{"id":307,"date":"2012-12-02T17:17:17","date_gmt":"2012-12-02T17:17:17","guid":{"rendered":"http:\/\/www.chinaoiltrader.com\/?p=307"},"modified":"2012-12-02T17:21:02","modified_gmt":"2012-12-02T17:21:02","slug":"profitability-drives-sinopecs-african-oil-investments","status":"publish","type":"post","link":"http:\/\/www.chinaoiltrader.com\/?p=307","title":{"rendered":"Profitability Drives Sinopec’s African Oil Investments"},"content":{"rendered":"

Gabe Collins, \u201cProfitability Drives Sinopec’s African Oil Investments<\/span><\/a>,<\/strong>\u201d China Oil Trader\u2122, No. 10 (2 December 2012).<\/span><\/p>\n

CHINA\u2019S OIL & GAS SECTOR FROM WELLHEAD TO CONSUMER<\/strong><\/span><\/p>\n

It is important to focus on Chinese NOC’s economic motivations when analyzing their plans for overseas investment in destinations including Africa, Canada, the U.S, and elsewhere. Company managements (both commercial personnel and government bureaucrats) will have additional strategic objectives–such as technology acquisition, but at the core, investments need to be profitable to justify the risk of putting large amounts of capital into faraway oilfields.<\/span><\/p>\n

Chinese investment in African oil & gas fields often fuels skepticism regarding state-linked companies\u2019 strategic motives. Yet the economic benefits of investing African fields are clear for ambitious corporate managers wanting to advance their careers and for profit seeking shareholders.<\/span><\/p>\n

Sinopec\u2019s African operations (primarily offshore Angola) are a minority portion of the company\u2019s total crude oil production\u2014roughly 6% of crude oil output in 2011, but are more profitable than the company\u2019s fields in China tend to be. For instance, Sinopec\u2019s African oil cost 22% less<\/strong> per barrel to produce than the company\u2019s China domestic crude and sold for 12% more<\/strong> per barrel due largely to its higher quality (Exhibit 1<\/strong>). Higher productivity helps the African wells pump at a lower unit cost. Sinopec\u2019s African wells produced nearly 2,800 barrels per day of crude on average in 2011, as opposed to an average rate of only 19 bpd in Sinopec\u2019s core domestic oilfield, Shengli.<\/span><\/p>\n

Exhibit 1: Attractive Economics of Sinopec\u2019s African Oil Investments<\/strong><\/span><\/p>\n

Production cost advantage and sales price premium relative to production in China<\/span><\/p>\n

\u00a0\"\"<\/span><\/a><\/span><\/p>\n

Source: Company reports<\/span><\/p>\n

About Us<\/strong><\/span><\/p>\n

China Oil Trader\u2122 strives to provide a holistic, globally-oriented analysis of Chinese oil and gas issues. In doing so, we often view multiple classes of commodities simultaneously and assess how they interact with each other. Our ultimate goal is to provide a focused source of fresh, creative, and anticipatory research for policymakers, investors, and others interested in China\u2019s development as an energy and commodity superpower.<\/em><\/span><\/p>\n

China Oil Trader\u2122 founder Gabe Collins grew up in the Permian Basin and has experience dealing with energy issues for both the U.S. government and as a private sector commodity analyst. He speaks and reads Mandarin, Russian, and Spanish. Gabe has published numerous oil and gas analyses in outlets including\u00a0Oil & Gas Journal,\u00a0The Naval War College Review,\u00a0Orbis,\u00a0Geopolitics of Energy,\u00a0Hart\u2019s Oil and Gas Investor,\u00a0The National Interest, and The Wall Street Journal China Real Time Report. Gabe also co-founded the\u00a0www.chinasignpost.com<\/span>\u00a0analytical portal. He can be reached at gabe@chinaoiltrader.com<\/span>.<\/em><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Gabe Collins, \u201cProfitability Drives Sinopec’s African Oil Investments,\u201d China Oil Trader\u2122, No. 10 (2 December 2012). CHINA\u2019S OIL & GAS SECTOR FROM WELLHEAD TO CONSUMER It is important to focus on Chinese NOC’s economic motivations when analyzing their plans for overseas investment in destinations including Africa, Canada, the U.S, and elsewhere. Company managements (both commercial […]<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16,4],"tags":[23,17],"class_list":["post-307","post","type-post","status-publish","format-standard","hentry","category-overseas-investment","category-upstream-2","tag-overseas-investment","tag-upstream"],"_links":{"self":[{"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=\/wp\/v2\/posts\/307","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=307"}],"version-history":[{"count":0,"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=\/wp\/v2\/posts\/307\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=307"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=307"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.chinaoiltrader.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=307"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}