China’s exclusive Sinopec halts Russian projects, Beijing wary of sanctions

March 25 (Reuters) – China’s state-run Sinopec Group has suspended talks on a major petrochemical investment and gas marketing project in Russia in response to a government call for caution as sanctions escalate over the invasion of Ukraine, sources told Reuters.

Asia’s biggest refiner’s move to put the brakes on a potentially half-billion dollar investment in a gas chemical plant and Russian gas marketing project in China highlights the risks, even for Russia’s most important diplomatic partner, from the unexpectedly heavy West. Penalties.

Beijing has repeatedly expressed its opposition to the sanctions, insisted it will maintain normal economic and trade exchanges with Russia, and has refused to condemn Moscow’s actions in Ukraine or describe them as an invasion. Read more

Register now to get free unlimited access to

But behind the scenes, the government is concerned about Chinese companies’ conflict with the sanctions – it is pressing companies to move cautiously with investments in Russia, the second-largest oil supplier and third-largest gas supplier.

Since Russia invaded a month ago, three energy giants in China – Sinopec, China National Petroleum Corp (CNPC), and China National Offshore Oil Corp (CNOOC) have (0883.HK) – Sources directly familiar with this matter said that they were assessing the impact of sanctions on their investments, estimated at billions of dollars in Russia. Read more

“Companies will strictly follow Beijing’s foreign policy in this crisis,” an executive of a state oil company said. “There is absolutely no scope for companies to take any initiatives with regards to new investments.”

See also  NATO is on high alert after a Russian plane nearly crashes into a Polish plane over the Black Sea

Two sources familiar with the meeting said the State Department this month summoned officials from the three energy companies to review their commercial relationships with Russian partners and local operations. One said the ministry urged them not to take any rash steps to buy Russian assets.

The sources said the companies have set up working teams on issues related to Russia and are working on contingency plans for business disruption and in the event of secondary sanctions being imposed.

The sources requested anonymity due to the sensitivity of the matter. Sinopec and other companies declined to comment.

The ministry said there is no need for China to inform other parties “whether there are internal meetings or not.”

“China is a large and independent country. We have the right to carry out normal economic and trade cooperation in various fields with other countries around the world,” it said in a faxed statement.

US President Joe Biden said on Thursday that China knows its economic future is tied to the West, after Chinese leader Xi Jinping warned that Beijing might regret siding with Russia’s invasion of Ukraine. Read more

Major international oil companies Shell (sigh) and BP (BP.L)Norway’s Equinor pledged to exit its Russian operations shortly after the Russian invasion on February 24. Moscow says its “special operation” is not aimed at occupying territory but rather at destroying Ukraine’s military capabilities and capturing what it calls dangerous nationalists. Read more

waiting for talks

One of the sources said Sinopec, officially the China Petroleum and Chemical Corporation, has suspended discussions to invest up to $500 million in a new gas chemical plant in Russia.

See also  How to watch a rare solar eclipse pass over remote Australia, Indonesia

The plan was to collaborate with Sibur, Russia’s largest petrochemical producer, on a project similar to the $10 billion Amur Gas chemical complex in Eastern Siberia, 40% owned by Sinopec and 60% by Sibur, scheduled to start operating in 2024.

“The companies wanted to replicate the Amur project by building another one and were in the middle of the site selection process,” the source said.

The source said Sinopec paused after realizing that Gennady Timchenko, a minority shareholder and member of its board of directors, had been sanctioned by the West. The European Union and Britain last month imposed sanctions on Timchenko, a longtime ally of Russian President Vladimir Putin, and other billionaires linked to Putin. Read more

Timchenko’s spokesman declined to comment on the sanctions.

Two sources said the Amur project itself is facing funding hurdles, as sanctions threaten to choke off funding from major lenders, including Russia’s state-controlled Sberbank. (SBER.MM) and European credit agencies. Read more

“It’s an existing investment,” said an industry executive in Beijing with first-hand knowledge. “Sinopec is trying to overcome difficulties in financing.”

Sibur said it continues to cooperate with Sinopec, including joint work on the implementation of the Amur plant. And it denied that there is a plan to cooperate with Sinopec in a similar project to the Amur chemical gas complex in eastern Siberia.

“Sinopec is actively involved in project construction management issues including equipment supplies and work with suppliers and contractors. We are also jointly working on project financing issues,” Sibur told Reuters by email.

Sinopec also suspended talks on a gas marketing project with the Russian gas production company, Novatek (NVTK.MM) A source familiar with the matter said there are concerns that Sberbank, one of Novatek’s shareholders, is on the latest US sanctions list. Read more

See also  Ukraine says it struck a missile system on Russian territory with Western weapons

Timchenko resigned from the Novatek board of directors on Monday in the wake of the sanctions. Novatek declined to comment. Read more

Novatek, Russia’s largest independent gas producer, entered into an initial deal in 2019 with Sinopec and Gazprombank to create a joint venture to market liquefied natural gas to China as well as distribute natural gas in China.

Besides Sinopec’s planned Amur plant, CNPC and CNOOC have been among the latest investors in Russia’s natural gas sector, taking minority stakes in a major export project Arctic LNG 2 in 2019 and Yamal LNG in 2014. Read more

Register now to get free unlimited access to

(Reporting by Chen Aizhou, Julie Zhou, and Muyu Shuo); Editing by William Mallard and Jason Neely

Our criteria: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published. Required fields are marked *