China Petroleum and Chemical Corporation (SNP – Free Report), also known as Sinopec, has halted negotiations to invest in a major petrochemical plant and gas marketing company in Russia in response to the country’s invasion of Ukraine, according to a report by Reuters.
The severe sanctions imposed by the West have exposed weaknesses in Russia. As a result, Sinopec suspended talks to invest up to $500 million in the country’s new gas chemical plant. In view of the Ukraine crisis, the company does not see any immediate risk of impairment of its assets in Russia.
Sinopec planned to work with Sibur, Russia’s largest petrochemical producer, on a project similar to the $10 billion Amur gas chemical complex in eastern Siberia. Amur, which is expected to come online in 2024, is owned by Sinopec and Sibur. However, Sinopec decided to scrap the project after it was discovered that Sibur’s minority shareholder, Gennady Timchenko, had been sanctioned by the West for his alleged ties to Putin.
Sinopec has also suspended negotiations on the gas marketing venture with Novatek amid concerns that one of Novatek’s shareholders is on the latest US sanctions list. In 2019, Novatek, the largest independent natural gas producer in Russia, entered into an agreement to establish a joint venture with Sinopec and Gazprombank to commercialize LNG and natural gas in China.
The Chinese government is skeptical about the country’s companies violating sanctions imposed by various Western countries. It is urging companies to exercise caution when investing in Russia, its second-biggest oil supplier and third-biggest supplier of natural gas. In particular, Sinopec has set up task forces on Russia-related matters and is working on business disruption contingency plans and against secondary sanctions.
Headquartered in Deyang, China, Sinopec is a leading integrated energy company engaged in the exploration, production and transportation of petroleum products. It is the largest refiner and marketer of refined petroleum products in China.
Zacks Rank & Other Stocks to Consider
The company currently has a Zack rank of #2 (Buy).
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