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Sinochem Aims to Quadruple Overseas Oil Output by 2020 -Sources

Date:2012-02-10 Source:Sinochem Group

* Current output 80,000 boepd

* Brazil, Colombia, Mideast key operation points

* Planning $5.5 bln Shanghai IPO, $4.6 bn Quanzhou refinery

By Chen Aizhu

BEIJING, Feb 10 (Reuters) - China's Sinochem Corp aims to nearly quadruple its overseas oil and gas output to 300,000 barrels oil equivalent per day by 2020, building three production hubs in Colombia, Brazil and the Middle East, company sources said.

The plan will require billions of dollars in investment and may prove a tough task for the state-run company that is largely a trader of oil and fertiliser and a property developer. Its oil and gas assets are dwarfed by "big oil" firms such as Sinopec Corp, PetroChina and CNOOC Ltd.

Though the target means a big leap in Sinochem's upstream portfolio, 300,000 bpd is equivalent to just 3 percent of China's total oil use.

Sinochem, which posted a record net profit of more than 10 billion yuan ($1.6 billion) for last year, said last November it planned to raise up to $5.5 billion from an initial public offering in Shanghai.

In January, Sinochem agreed to acquire Total SA's stakes in several oil pipelines and a small oilfield in Colombia.
The company did not disclose the value of the deal, which adds to its $878 million purchase in 2009 of then London-listed Emerald Energy, which operates in the South American nation and provides infrastructure to develop blocks.

Sinochem has long aspired to become an integrated company with upstream oil and gas assets, refineries and petrol stations, joining the same league as oil giants such as PetroChina Co Ltd and China Petroleum & Chemical Corp (Sinopec) .

The company's plan to build its first fully-owned oil refinery in China's Fujian province -- the $4.6 billion, 240,000-bpd Quanzhou plant -- is awaiting central government approval that is taking longer than expected.

"One of the reasons for the slow regulatory approval is that the government believes we don't have sufficient resources to back up the refinery. That's why we want to accelerate upstream investment," said a company official.

Sinochem wants to pump 100,000 barrels oil equivalent per day (boepd) by 2020 from each of the three key points of operation -- Colombia, Brazil and the Middle East, the latter in Syria, Yemen and the United Arab Emirates.

For now, it produces just under 80,000 boepd nearly a decade after it launched its upstream business.

Some industry insiders were skeptical about Sinochem's ambition, especially after it brought on board in 2010 a new upstream chief, Li Pilong, a former Sinopec oilman with limited international exposure.

"That (target) is only a blueprint. Li's acquisition strategy appears to be pro-exploration rather than production. That can be very risky to Sinochem, which does not have such rich financial resources as the big oil firms," said a Beijing-based oil executive who wanted anonymity to avoid repercussions.

Sinochem sources said operations in Colombia had been curbed by a lack of infrastructure to ship the oil out of the jungles where it operates, pumping about 5,000 bpd of oil, far below its eventual target of more than 30,000 bpd.
The sources said that was the reason behind the January deal to buy Total's pipeline stakes.

In Brazil, Sinochem agreed last month to buy a 10 percent stake in five offshore oil blocks in the Espirito Santo basin from London-based Perenco, a deal that extends Sinochem's reach offshore Brazil after its $3 billion acquisition in 2010 of some of Statoil ASA's deepsea assets in Peregrino.

Last year, Sinochem recorded a 30-percent rise in annual turnover of more than 400 billion yuan ($63 billion) and its net profit jumped 40 percent to top 10 billion yuan, company media officials said.

The net profit is roughly one-eighth of Sinopec Group, parent of Sinopec Corp, which posted a net profit of 79.9 billion yuan last year.