Posts Tagged ‘sinopec’

China stocks up on energy & raw materials while prices are depressed

001320d123b90949ce3308 China has embarked on an ambitious spending spree in order to help stave off recessionary pressures & attempt to maintain a growth target of  8% in 2009. Following on from its massive $585M stimulus package, announced in early November, news of deals in energy & metals has been flowing over the last week. When the stimulus package was originally announced, we heard this from our friends at RBS :

“Whats important here is just how quickly that money hits the street,” said Ben Simfendorfer, chief China economist for Royal Bank of Scotland, speaking on CNBC

Well it would seem not to have taken too long, as we have news that apart from pulling forward the long anticipated 3G rollout, as reported on MyStockVoice in an earlier post, China is beginning to stockpile oil & gas via imports whilst building an inventory of  aluminium & other metals from domestic producers.

Zhang Guobao, the head of the National Energy Administration, said in remarks published on Monday that China would actively push forward the construction of the second phase of state strategic oil reserves after having largely completed the first phase. China has completed the planning of the second phase of government storage facilities that would be able to hold up to 26.8 million cubic metres of oil, or some 170 million barrels, but has not disclosed whether construction has begun. Nor has the government disclosed if the tank farms set up in four locations in the first phase, with total capacity of some 102 million barrels, have been fully filled.

The world’s second-largest oil user will also take advantage of opportunities resulting from the financial crisis and weak energy market to expand energy cooperation with neighboring countries and major energy producers, Zhang said.

State controlled Sinopec (NYSE – SNP) recently completed the construction of oil storage tanks with a capacity of 3.8 million cubic metres in the coastal province of Zhejiang & has also announced a mutual supply agreement with fellow oil giant CNPC  . Similarly, rival PetroChina (NYSE – PTR) has begun to fill a new facility of 1 million cubic metres in the northwestern Xinjiang region in partnership with Kazakhstani oil firm KazMunay. Zhang also confirmed that China will push forward the construction of the proposed China-Myanmar oil and gas pipelines while also proceeding with the China-Central Asia gas pipes and the second phase of the China-Kazakh oil lines.

Meanwhile, counterparts at the State Reserve Bureau (SRB), have announced that will buy 300,000 tons of aluminum at 12,300 yuan (about $1,750) per ton in January 2009 to push up prices and support producers, as reported by Rednet. China’s aluminium producers, like their competitors worldwide and their peers in other base metals, have been forced to shut down some production to cope with the impact of the global economic crisis, which has crippled demand. 

“Aluminium prices were encouraged on the reserve purchase news,” said analyst Jia Zheng at Southwest Futures. “The decided purchase volume seems to be lower than expected but we are looking forward to more movement by the reserve bureau.”

 

Chinese officials have said they plan to buy up resources and materials to support producers, who are smarting from prices that have fallen below the cost of production, rumours abound that this buy up on aluminium could reach a total of 1 million tons by April 2009. The major recipient for this windfall will be state controlled Chinalco subsidiary Chalco (NYSE – ACH), who is reported to be receiving 50% of the order, whilst the remainder will be shared by seven regional producers.

 On the same day as the SRB announced the procurement plan, Bao Steel Group, China’s top steel maker, raised its February steel prices by 100 yuan/ton to 300 yuan/ton, this is widely believed to be in response to a previous SRB announcement that  another 3 trillion yuan ($400M)would be set aside for railway infrastructure construction projects and post-quake reconstruction efforts, the investments are expected to increase steel demand by 200 million tons in 2009. This could also be potential good news for other steel majors, particularly Mittal Steel (NYSE – MT), which acquired a 37% stake in government owned  Hunan Valin, Mittal  already has a $100 million steel plant under construction in the northeast China port city of Yingkou, Liaoning province.

Update 1 (30/12/08) : Myanmar signs gas deal with SKorea, India, China as reported in The Times of India

Military-run Myanmar has signed a deal with South Korean and Indian companies to pipe natural gas from the energy-rich nation’s offshore fields to China, state media reported Monday.

“The agreement was signed to export natural gas to China from Shwe natural gas project at Block A-1 and A-3 at Rakhine coastal region through pipelines,” the New Light of Myanmar newspaper said. The paper gave no other details of the project, but Beijing media reported last month that China was planning to start construction on a gas pipeline to Myanmar in early 2009.

 

India & China move to secure oil reserves

ongcHaving written about Lukoil making moves for a stake in Spanish oil company Repsol (NYSE – REP), (Russian Energy Bears) I thought it may be interesting to have a look & see what else is going on with regards to securing oil reserves & rights. It would seeem that India’s Oil & National Gas Corporation – Videsh ONGC is in the final stages of acquiring London based Imperial Energy for $1.9Bn.

As Imperial is a Russian focussed player, ONGC had to jump the bureaucratic hoops with the Russian Competition board, which it successfully concluded in mid-October. ONGC agreed to buy  Imperial  in August, valuing the company at 1.3 billion pounds ($1.9 bln).

Analysts at JP Morgan said in a research note on Wednesday that the shares offered a potential 236% annualized return. The bid is conditional on ONGC receiving acceptances in respect of 90% of the shares and ONGC is expected to pull out if this threshold is not met by the close of the offer period. Imperial and its advisors are therefore working around the clock to ensure that all investors tender their shares by the 1300 GMT Dec. 30 deadline.

“We’re leaving no stone unturned,” a source close to the company said. “It’s going to go right down to the wire”.

This follows a long & exhaustive battle earlier this year with Chinese state controlled Sinopec (NYSE – SHI) where the offer had been pushed as high as £12.90 rather than todays price of £12.50. Sinopec is China’s largest oil refiner, which is thought to have carried out due diligence on Imperial and to have requested clearance for a possible bid from the Russian authorities. Some analysts had suggested that a bid proposal from Sinopec might encounter resistence within Russia from officials nervous about ceding oilfield interests to a company controlled by the Chinese State.

The sale means that Peter Levine, the chairman of Imperial Energy, is heading for a cash windfall. The former corporate lawyer, who owns 6 per cent of the company, stands to collect about £90 million if the sale goes through. The grandson of Russian émigrés, Mr Levine, a fluent Russian-speaker, has transformed Imperial from a £2 million minnow listed on the Alternative Investment Market in London four years ago into a £1.27 billion group. Last year he successfully negotiated his way through a dispute with the authorities in Russia that had threatened to jeopardise Imperial’s future in the country.

Having been spurned, the Chinese have played a waiting game, watching as the oil price has heavily declined from $147 a barrell to near $43 a barrel in the last few weeks. On Wednesday, it emerged that China has made an offer to Brazilian oil major Petrobras (NYSE – PBR) of $10Bn in “aid” to assist the company in developing its recent offshore find.

“Conversations with a number of funding sources, including the Chinese development bank, are ongoing,” Petrobras investor relations manager Theodore Helms said today in an interview in New York, without giving more details. The company plans to invest about $30 billion this year, with about half that amount going to Brazilian exploration and production projects, he said.

The Chinese bank has offered Petrobras $10 billion in loans for development of the offshore pre-salt fields known as the Tupi Cluster, a spokesman at the energy ministry in Brasilia, who asked not to be named under ministry rules, said today. This follows State owned CNPC in the securing of oil development rights in Iraq, as reported in November by The New York Times. The United Arab Emirates sovereign wealth fund has also approached Petrobras about financing oil projects in Brazil, he said.

Petrobras on Nov. 21 said it found light oil in two wells off the coast of Brazil’s Espirito Santo state, expanding its pre-salt discoveries. The company in November 2007 said that Tupi, off the coast of Rio de Janeiro, may hold an estimated 5 billion to 8 billion barrels of recoverable oil, making it the largest oil discovery in the Americas since 1976.

So, along with my forecasted long on REP, I am now also looking at PBR as an interesting destination for investing some beer vouchers.