Sinopec to close four oil­fields in Shan­dong

Clo­sures are first in pro­duc­tion base in more than five decades

China Daily (Canada) - - LIFE - By LYUCHANG lvchang@chi­nadaily.com.cn

China’s se­cond-largest oil ma­jor will shut down four oil­fields in the coun­try’s east­ern Shan­dong prov­ince to stay afloat amid plum­met­ing oil prices.

China Pe­tro­leum & Chem­i­cal Corp, also known as Sinopec, will close the four oil­fields in the Shengli oil­field, the na­tion’s sec­ond­largest oil­field, later this year, com­pany sources said. It will be the first shut­down af­ter the first bar­rel of oil was pumped from the Shengli oil­field more than five decades ago.

The four oil­fields are the least prof­itable projects in the area, sources said.

The clo­sures sig­nify a dra­matic fall for the com­pany. The Shengli oil­field, once one of the most prof­itable oil com­pa­nies in China, re­ported about 9.2 bil­lion yuan ($1.4 bil­lion) in losses last year as global oil prices have fallen sharply over the past year.

Since June, global oil prices have fallen by more than half, with Brent crude oil cur­rently below $30 a bar­rel for the first time since May 2009.

Ex­perts said the sharp fall in global oil prices have led to rev­enue short­falls for many en­ergy ma­jors in the world.

The Daqing oil­field, the largest oil­field ex­plored by China’s ma­jor oil and gas pro­ducer China Na­tional Pe­tro­leum Corp, re­duced cruide oil pro­duc­tion in 2015 for the first time in seven years.

It pro­duced

about

38.4 mil­lion met­ric tons of oil last year, about 1.5 mil­lion tons lower than in 2014. Lo­cated in North­east China’s Hei­longjiang prov­ince, the oil­field will fur­ther cut its pro­duc­tion to 32 mil­lion tons by 2020.

Ac­cord­ing to of­fi­cial data, the av­er­age cost of oil pro­duc­tion in China is roughly $40 a bar­rel. Ex­perts said many oil pro­duc­ers failed to reach a profit when oil prices dropped un­der $30 a bar­rel.

“Many oil pro­duc­ers are fac­ing the same kind of prob­lem when crude prices fall,” said Gao Jian, a crude oil an­a­lyst at Shan­dong­based con­sul­tant SCI In­ter­na­tional.

“It is nor­mally the last straw when oil pro­duc­ers shut down oil­fields be­cause af­ter the shut­down, if they wanted to re­open them, they could stand to lose mil­lions of dol­lars per day,” he said.

He said more rigs could be­gin to see a fall in pro­duc­tion this year.

Many oil pro­duc­ers are fac­ing the same kind of prob­lem when crude prices fall.”

HU QING­MING / FOR CHINA DAILY

Work­ers check fa­cil­i­ties at the Shengli Oil­field near Dongy­ing, Shan­dong prov­ince. The oil pro­ducer is to shut down four oil­fields to re­duce costs amid plum­met­ing oil prices.

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