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Breaking News:

Oil Likely To Hit $200: SEB Group

China's Sinopec Bows Out Of Russian Petchem, Gas Projects

China's state-run oil refiner, Sinopec, has paused discussions with Russia about a petrochemical investment and a deal to market Russian gas in China, Reuters sources suggested on Friday.

Reuters sources have suggested that the reason for the pause in talks is due to China's wariness over its own companies butting up against Western-levied Russian sanctions.

While the petrochemical deal wasn't named, Reuters sources said it was in the site selection process and was supposed to be similar in size to the $10 billion Amur gas chemical complex in Siberia. Amur is a joint venture between Sinopec and Russian Sibur.

The new investment in question—which was also a deal with Sibur—was estimated at $500 million for a gas chemical plant.

Sinopec reportedly paused the talks when it realized that one of Sibur's minority shareholders and board members, Gennady Timchenko, had been sanctioned by the EU and Britain due to his ties with Russian President Vladimir Putin. Timchenko was also on Novatek's board until Monday, when he resigned.

Russia is China's second-largest oil supplier and third-largest gas provider.

Sinopec did not comment on its plans.

The Amur project is also in jeopardy, as funding sources in Russia, including from Russia's state-run Sberbank, also find themselves limited due to sanctions.

Sibur has denied that a new project with Sinopec similar to Amur was in the works. It did say, however, that Sibur continues to work with Sinopec on the Amur project.

"Sinopec is actively participating in the issues of the project's construction management, including equipment supplies, work with suppliers and contractors. We are also jointly working on the issues of project financing," Sibur told Reuters.

China's Ministry of Foreign Affairs has recently met with Sinopec, CNPC, and CNOOC—its three energy giants—to review its ties to Russia. Reuters sources have suggested that those companies have been told to tread carefully in its dealings with Russia and to not make any rash moves in buying Russian assets.

By Julianne Geiger for Oilprice.com

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  • Mamdouh Salameh on March 26 2022 said:
    China has been openly defying US sanctions against Iran and Venezuela for years. Does anyone think even for a second it will hesitate in supporting its closest strategic partner against US and EU sanctions against it?

    Russia is China’s largest recipient of Chinese investments under the Belt and Road Initiative (BRI). It is also the largest supplier of gas to China and the second largest supplier of crude as well. Therefore the insinuation by Reuters that China's state-run oil refiner, Sinopec, has paused discussions with Russia about a petrochemical investment and a deal to market Russian gas in China because of Western sanctions could be false news. Delays of projects if it is true in this case happen all the time.

    Moreover. Reuters’ claim that the Amur project is also in jeopardy because of sanctions affecting funding could equally be false news. China and Russia use their national currencies in their transactions as the ruble is virtually legal tender in Chinese regions bordering Russia.

    Trade between Russia and China has grown from $13 bn in the early 2000s to $150 bn in 2021 and still expanding.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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