Sinopec-Henan Win Chinese Blocks - Analyst Blog
July 08 2011 - 12:08PM
Zacks
China Petroleum and Chemical
Corporation, or Sinopec (SNP) and Henan
Provincial Coal Seam Gas Development and Utilization Co. were
awarded a shale gas block each by the Chinese government in its
first auction of the unconventional gas resource.
The auction was initiated last week, offering four blocks to six
Chinese companies for the development of its potentially huge
unconventional gas resource. Out of these, two blocks –– Nanchuan
and Xiushan –– are near the southwestern city of Chongqing.
However, bids for the other two blocks were cancelled as they were
very few in number.
Sinopec has been selected to explore the Nanchuan block, while
Henan Coal Seam Gas has been contracted for the Xiushan block. With
an area of 2,198 square kilometers (848 square miles), the Nanchuan
block includes the Chongqing municipality and Guizhou province in
the southwest. The Xiushan block, spanning Chongqing, Guizhou and
Hunan, covers an area of 2,039 square kilometers (787 square
miles).
Sinopec intends to spend approximately 591.1 million yuan ($91
million) for exploration activities in the Nanchuan block, while
Henan Coal Seam Gas is expected to invest 247.6 million yuan ($38.1
million).
With an objective to popularize the use of gas, China aims to
speed-up shale-gas development activities. According to the U.S.
Energy Information Agency, as of March 2011, China possessed 36.1
trillion cubic meters (1,275 trillion cubic feet) of technically
recoverable shale gas reserves while the U.S. came in second with
24.4 trillion cubic meters.
China’s impressive economic growth and huge shale gas reserves
have significantly increased its demand for oil, natural gas and
chemicals. This growth momentum presents attractive opportunities
for industry players, like Royal Dutch Shell Plc
(RDS.A), BP Plc (BP), Hess Corp.
(HES) and Newfield Exploration Co. (NFX), which
can meet the country’s fast-growing energy needs.
Although overseas companies are not entitled to participate in
any Chinese auctions for shale areas, they are allowed to form
local ventures. Chevron Corp. (CVX) and BP are in
discussions with China Petrochemical Corp. and its affiliate
Sinopec. Norway’s Statoil ASA (STO) also intends
to acquire stakes in shale-gas assets in China. Shell is currently
exploring the Jinqiu block in southwestern Sichuan province with
China National Petroleum Corp. (CNPC).
Sinopec, with its head office in Beijing, China, is one of the
largest petroleum and petrochemical companies in Asia. The company
is the second largest crude oil and natural gas producer, and the
largest refiner and marketer of refined petroleum products in
China.
The company is also the largest producer and distributor of
petrochemicals in the nation. Being one of the two integrated oil
companies in China, Sinopec is well positioned to capitalize on the
favorable trends.
We maintain our long-term Neutral recommendation for Sinopec,
which retains a Zacks #1 Rank (short-term Strong Buy rating).
BP PLC (BP): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
HESS CORP (HES): Free Stock Analysis Report
NEWFIELD EXPL (NFX): Free Stock Analysis Report
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
CHINA PETRO&CHM (SNP): Free Stock Analysis Report
STATOIL ASA-ADR (STO): Free Stock Analysis Report
Zacks Investment Research
Newfield Exp Com (NYSE:NFX)
Historical Stock Chart
From May 2024 to Jun 2024
Newfield Exp Com (NYSE:NFX)
Historical Stock Chart
From Jun 2023 to Jun 2024