Chinese Sinochem looks to Africa in oil hunt
The company plans to spend as much as $2 billion in projects outside China over the next three to five years - ramping up from just $250 million over the last three years, Sinochem Vice President Han Gensheng, who oversees the company’s exploration and production program said in an interview.
Sinchem, known best for its trading operations, has recently ventured into oil exploration outside China as it pushes ahead in its ambition to become an integrated oil firm.
“We are very interested in Africa and South America,” said Han.
Sinochem, which already has projects in Tunisia, the United Arab Emirates and Ecuador, plans to bid in Libya’s oil and gas licensing round later this year and is eyeing other African nations like Nigeria and Ghana, he said.
Unlike the large Western majors, which have adopted a cautious approach to raising spending based on record prices, Sinochem says it is betting that oil prices will stay high over the next few years, turning once marginal oilfields into potentially profitable ventures.
Sinochem evaluates investing in a project under the assumption that oil prices will be at least $50 a barrel over the long-term, Han said.
Large Western majors like Exxon and Chevron, by comparison, have been reluctant to raise their own internal forecasts to match oil’s dizzy rise in recent years and use oil price assumptions of between $20 and $30 a barrel to evaluate projects.
Despite their smaller size and relative lack of experience, Chinese firms like Sinochem are viewed warily by Western oil majors, who fear they will be outbid in the quest for oil.
In the most prominent example of that threat so far, Chinese offshore producer CNOOC Ltd. last year locked horns with Chevron in a battle to acquire U.S. oil producer Unocal Corp., though it lost out in the end due to U.S. political opposition.