State-owned China Petrochemical Corp., (or Sinopec Group) −
the parent company of
China Petroleum & Chemical Corporation
or Sinopec Corp.) − has formed a new oilfield service unit to
facilitate its upstream oil and gas operations in China and other
countries. The international market of the new entity − Sinopec
Oilfield Service Corp. − include North America, the Middle East,
Africa, Central Asia and South East Asia.
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With a total $12.2 billion (76.6 billion yuan) worth of fixed
asset and 140,000 employees, this unit was launched at Beijing
while restructuring the service departments of eight secondary
oilfields such as Shengli, Zhongyuan and Jianghan. The company
expects this oilfield service arm to collect $15.2 billion (95
billion yuan) of revenue in 2012. It has already gathered $14.2
billion worth of 480 contracts in 43 countries.
Recently, Sinopec Group created an engineering and construction
arm − Sinopec Engineering (Group) Co Ltd − for its refining and
petrochemical operation. This unit is expected to be listed by
next year in Hong Kong. Sinopec Oilfield Service is also expected
to be listed eventually, but the company did not give any
specific timeline for it.
These days, Sinopec Group is busy in several exploration and
production activities in China, while expanding its portfolio
worldwide. Major Chinese energy companies are in the quest of
expanding their international territories to meet the country's
increasing energy need. As the world's second-largest economy,
China has a huge energy requirement.
Along with other oil giants like, China National Petroleum
Corporation and China National Offshore Oil Corporation, the
Sinopec group already holds a major position in the country's
oilfield services market. These three energy biggies of China
occupy more than 80% of the market share. The balance is being
shared between the country's 1,200 oilfield services providers
that comprise Anton Oilfield Services Group.
With the launch of the new oilfield service unit, the company
will be able to gain an additional grip in the oilfield services
market, enhancing its competitive edge in China and the
Recently, Sinopec Corp. inked an agreement with the U.S. energy
) to conduct a joint unconventional oil and gas development study
in the shale gas rich Qijiang block in the Sichuan basin. This
effort of boosting commercial shale gas output in China will
assist the country in meeting its targeted shale gas output of
6.5 billion cubic meters annually by 2015 and 100 billion cubic
meters by 2020.
Sinopec Corp. holds a Zacks #3 Rank (short-term Hold rating).
Longer term, we maintain our Neutral recommendation for the