Home Impact producer EXCLUSIVE Chinese Sinopec suspends Russian projects, Beijing wary of sanctions

EXCLUSIVE Chinese Sinopec suspends Russian projects, Beijing wary of sanctions


March 25 (Reuters) – Chinese state-owned group Sinopec has suspended talks for a major petrochemical investment and gas marketing venture in Russia, sources told Reuters, responding to the government’s call for caution as sanctions pile up following the invasion of Ukraine.

The decision of Asia’s largest oil refiner to curb a potential half-billion-dollar investment in a gas chemical plant and a Russian gas marketing venture in China highlights the risks, even for the partner Russia’s most important diplomatic post, of surprisingly heavy Western weight. – directed sanctions.

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

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But behind the scenes, the government is wary of Chinese companies violating sanctions – it is urging companies to be cautious about investing in Russia, its second-largest oil supplier and third-largest gas supplier.

Since the invasion of Russia a month ago, the three Chinese energy giants – Sinopec, China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC) (0883.HK) – have assessed the impact of the sanctions on their billion dollar investments in Russia, said sources with direct knowledge of the matter. Read more

“Companies will rigidly follow Beijing’s foreign policy in this crisis,” said an executive at a state oil company. “There is no leeway for companies to take initiatives in terms of new investments.”

The Foreign Ministry summoned officials from the three energy companies this month to review their business relationships with Russian partners and their local operations, two sources with knowledge of the meeting said. One said the ministry had urged them not to make rash moves to buy Russian assets.

The companies have set up task forces on Russia-related issues and are working on contingency plans for business disruptions and secondary sanctions, sources said.

The sources asked not to be named, given the sensitivity of the issue. Sinopec and the other companies declined to comment.

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

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

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

Global oil majors Shell (SHEL.L) and BP (BP.L) and Norwegian firm Equinor pledged to quit their Russian operations soon after the February 24 Russian invasion. Moscow says its “special operation” is not aimed at occupying territory but at destroying Ukraine’s military capabilities and capturing what it calls dangerous nationalists. Read more


Sinopec, formerly China Petroleum and Chemical Corp, has suspended talks to invest up to $500 million in the new gas chemical plant in Russia, one of the sources said.

The plan was to partner 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, which should be commissioned in 2024.

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

Sinopec paused after realizing that minority shareholder and Sibur board member Gennady Timchenko had been sanctioned by the West, the source said. Last month, the European Union and Britain 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.

The Amur project itself is facing funding problems, two of the sources said, as sanctions threaten to choke off funding from major lenders, including Russia’s Sberbank (SBER.MM) and European credit agencies. Read more

“It’s an existing investment. Sinopec is trying to overcome funding difficulties,” said a Beijing-based industry executive with direct knowledge of the matter.

Sibur said it continues to cooperate with Sinopec, including working jointly on the implementation of the Amur plant. He denied there was a plan to team up with Sinopec for a similar project at the Amur gas chemical complex in eastern Siberia.

“Sinopec is actively involved in construction management issues of the project, including supplying equipment, working with suppliers and contractors. We are also working jointly on project financing issues,” Sibur told Reuters by E-mail.

Sinopec has also suspended talks over the gas marketing venture with Russian gas producer Novatek over concerns that Sberbank, one of Novatek’s shareholders, is on the latest U.S. sanctions list, a said a source with direct knowledge of the matter. Read more

Timchenko resigned from Novatek’s board on Monday following the sanctions. Novatek declined to comment. Read more

Novatek, Russia’s largest independent gas producer, reached a preliminary agreement in 2019 with Sinopec and Gazprombank to create a joint venture to market liquefied natural gas in China and distribute natural gas in China.

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

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Reporting by Chen Aizhu, Julie Zhu and Muyu Xu; edited by William Mallard and Jason Neely

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