©Reuters Sinopec has suffered operating losses of $550m during the past three years on Argentine assets bought in 2011 Chinese oil group Sinopec stands to lose about $2.5bn on ageing oilfields in Argentina purchased at the peak of the oil market in a vivid illustration of the costs of Beijing’s pricey attempt to secure natural resources overseas. At the peak of the oil boom, Chinese state-owned companies’ willingness to pay far more than other bidders for oil deposits and mines was legendary, as executives responded to Beijing’s political goal of guaranteeing energy security with direct investments in natural resources. Since then, the steady slide in oil prices to below $50 a barrel has left many of those Chinese purchases deep in the red. Sinopec has suffered operating losses of $550m during the past three years on Argentine assets purchased from Occidental Petroleum in 2011 for $2.45bn, according to an internal company audit. At oil prices of $60 a barrel or less, Sinopec stands to lose $2.5bn over the life of the project, the audit found. As of the end of 2015, with prices hovering below $40, projected losses reached $2.9bn, it was first reported by the respected Chinese magazine Caixin this week. Sinopec said on Friday that rather than being “a slap in the face”, the audit served the function of a “woodpecker” in identifying problems. “A the moment, the Argentine project has met some difficulties in its operation. However, overseas oil and gas mergers and acquisitions are very complicated and high-risk deals,” the statement said. No one would have thought that the oil price could drop from more than $100 a barrel to $40.” The company disputed the $2.5bn loss projection, saying: “What if the oil price picks up again soon?” Sinopec’s Hong Kong-listed arm reported an operating loss of Rmb21.9bn ($3.3bn) on its upstream oil and gas business in the first half of this year, although better returns from refining and marketing kept it profitable overall. It reduced crude production 11 per cent in the first half because of lower prices. About two years ago Sinopec began an internal review of its overseas acquisitions to figure out which were profitable at lower prices. The process has revealed that it spent billions on underproducing fields in Angola, among other issues. Its rivals have also run into difficulty with expensive assets, including Cnooc’s oil sands in Canada, and very low production for China National Petroleum Corp’s controversial investments in South Sudan amid renewed conflict there. Additional reporting by Luna Lin and Benedict Mander Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link

©Bloomberg India’s oil minister has spent the last week in the US courting the world’s biggest energy companies for investment, touting the country’s expanding economy and future resource needs. For Dharmendra Pradhan, it has been an easy sell. “India is on a high growth trajectory,” he told the FT in Houston, where he was on an investor roadshow. More On this topic IN Emerging Markets “But not only are we seeking partnerships with these foreign companies, they want to come to India,” Mr Pradhan adds. India’s fast-expanding economy is expected to grow by 7.5 per cent this year and it is forecast to overtake Japan as the world’s third-largest oil consumer, behind the US and China. Its demand growth — key for companies looking to invest — will this year outstrip China’s for the first time since Beijing embarked on more than a decade of resource-devouring expansion. Prime Minister Narendra Modi’s industrialisation programme has piqued the interest of international energy companies which are keen to invest in refineries, petrol stations and even exploration and production, says Mr Pradhan, despite the oil price languishing below $50 a barrel. India’s 1.3bn population still lags behind other emerging market powerhouses in oil consumption per capita, giving it room for rapid growth. There are only 25 cars for every 1000 people, data from energy consultancy FGE shows, compared with 110 in China. Plastic consumption is only 12kg per capita a year, compared to more than 10 times that amount in Europe. “India is coming from a very low base,” says Cuneyt Kazokoglu at FGE. “It is getting richer and it has a growing middle class which is spending more on things such as cars to airline tickets — this is pushing up oil demand.” There are, however, doubts among analysts that India will follow the same growth and energy demand trajectory as China, with a less heavy-handed state guiding the economy. Two-thirds of the population live in rural areas and some question whether the country is truly on the cusp of a car buying binge that has driven consumption in major developing countries. Car purchases have increased by 12 per cent since 2011, Society of Indian Automobile Manufacturers data shows, but that is dwarfed by the growth of two-wheelers such as scooters which are far less thirsty and cheaper to run. Sales of scooters, mopeds and motorbikes have jumped by 40 per cent in the past five years and comprise four out of every five vehicle purchases. The most popular brand of scooter sells for less than £600 (Rs50,000) compared with more than £4,300 for the most frequently bought car. Nevertheless consumption is on the rise and has been propelled by lower oil prices, although New Delhi has cut fuel subsidies. India spent $60bn less on crude oil imports last year than 2014, even as it bought more foreign barrels. Demand for 2016 is expected to reach almost 4.3m barrels a day, up 300,000 b/d from the prior year, according to the IEA. By 2040 it is seen at 10m b/d. “Lower oil prices have acted as a giant subsidy for the domestic market,” says Saad Rahim, chief economist at Swiss oil trader Trafigura. “There has been a huge boost for consumer countries.” India’s emergence as the centre of oil demand growth is bolstered by a drive to raise manufacturing’s share of the economy to 25 per cent from 18 in 2014. At the same time, China is shifting towards a more services-led economy that is less energy intensive after a period of rapid industrialisation. Just like China a decade ago, India is now trying to secure its future demand for crude oil and refined products such as gasoline, diesel and jet fuel. Mr Pradhan says India is seeking stronger relationships with global oil exporters, such as Saudi Arabia, Iran, Venezuela and Nigeria, and producer companies to guarantee crude supplies. India is offering both national oil companies and energy majors greater access to its domestic market, while also pushing to develop its own oilfields. Saudi Aramco, Shell and Total are among companies looking to start or expand petrol station networks, says Mr Pradhan. Other companies are also looking at India’s refineries, which processed a record 5m b/d of crude earlier this year. Russia’s Rosneft and independent oil traders have been eyeing stakes in Essar Oil, which supplies 12 per cent of India’s petroleum products. “Access to the Indian market is an attraction,” says Prashant Ruia, chief executive of Essar Group. “From our refineries to retail outlets.” Seth Kleinman, oil analyst at Citigroup says India will need to work hard to meet its ambitious targets, but the country is still a bright spot for the oil industry. “It’s the best looking emerging market out there.” Copyright The Financial Times Limited 2016. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web. Source link

Sir Michael Fallon, the Defence Secretary, has announced that 1,500 different UK organisations have signed the Armed Forces Covenant. This Covenant is a pledge by those organisations to treat Service personnel and veterans fairly. The 1,500th signature was made by Travis Perkins during the third annual Partnering with Defence conference for employers at the Queen Elizabeth II Conference Centre in London. Travis Perkins is a Building materials supplier That has now agreed to provide Armed Forces personnel and veterans with a mixture of different work experience placements throughout their organisation. This covenant is designed to make sure that the people who have served or still serve our country are supported in an increasingly better way. The covenant has reached a significant milestone by engaging with 1,500 organisations who hope to help forces personnel and veterans by utilizing their unique set of skill and experience. Travis Perkins is pledging to support members of the Royal Engineers in gaining NVQ qualifications for construction skills. The Building materials supplier currently employs nine reservists and members of the Armed Forces community across the country. The company is able to provide military personnel with the opportunity to build a career outside of the military, as well as allow them to use the skills they already have. Prior to this announcement, the Defence Minister announced that the UK’s main broadband providers, that represents 95% of the broadband market in Britain have agreed to waive fees on contracts for personnel that have had to cancel their subscription when posted away. This posting usually happens with very little notice. The broadband providers doing this are Virgin Media, Sky, Talk Talk, BT, EE and Plusnet. Other positive outcomes from the covenant includes better motor insurance, better access to banking facilities. There has also been improved access to mentoring and work experience places, as well as improvements to the credit rating system, to put former personnel in a better position when looking for a mortgage, or having to rent their home when posted overseas.