An employee fills the tank of a petrol delivery vehicle at a Sinopec refinery. Picture: REUTERS
An employee fills the tank of a petrol delivery vehicle at a Sinopec refinery. Picture: REUTERS

Hong Kong — China’s Sinopec Group had hired BNP Paribas to sell its oil business in Nigeria and Gabon, three people with knowledge of the matter said, as the state-owned oil giant pares back its presence in Africa.

Sinopec and other oil groups, including China National Petroleum Corporation and China National Offshore Oil Corporation, made large acquisitions in 2009-13 with the help of low-cost loans from Chinese state-owned banks.

The hunt for overseas assets was intended to bulk up their energy reserves and meet future demand from China.

But oil prices fell to about $27 a barrel in 2016 from more than $100 in 2014, making some of these investments unprofitable. Benchmark Brent crude oil is now trading at more than $60.

Militants have recently attacked oil and gas facilities in Nigeria, further discouraging Sinopec. In addition, China’s economy, which was growing strongly when the company expanded, has slowed.

"Sinopec is trying to sever ties," one of the people told Reuters. "It has hired BNP to sell assets in Nigeria and Gabon."

A Sinopec spokesman did not respond to requests for comment and a BNP Paribas spokeswoman declined to comment on the sale.

Sinopec spent $7.24bn in 2009 for Swiss-based Addax Petroleum, its largest foreign oil acquisition, to secure land in Cameroon, Nigeria, Gabon and Iraq licensed for extraction and exploration.

It offered considerable potential as commodity prices rose but bankers expect the Nigeria and Gabon assets to sell for less than $1bn.

The sources said Sinopec was planning to sell Addax’s onshore and offshore oil and gas production sites in Nigeria and Gabon. Sinopec’s Cameroonian operation would be its only remaining project in Africa.

"We’ve already seen several Chinese companies divest some of their overseas assets," said a second person, who asked not to be named. "At the current oil prices, such investments [are not] economically viable for Chinese companies."

The sources said Sinopec had also decided to sell Addax after a recent bribery investigation by Geneva prosecutors into payments made in Nigeria.

Addax agreed to pay Sf31m ($31.3m) to settle the bribery charges, for which its executive officer and legal director had also been charged, and shut its offices in Geneva, Houston and Aberdeen. At the time, Addax said its parent company was closing the offices in response to low oil prices and did not comment on the probes.

Nigeria fell into recession for the first time in 25 years in the second quarter of 2016 as lower crude exports, the country’s mainstay, meant less money in government coffers.

Reuters

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