Sinopec drills deep into Africa(2)

Business decisions

As of the end of June 2013, Sinopec had cumulative investment of about $14.1 billion in Africa. Sun Shangru, deputy manager of the Sinopec Addax Petroleum Gabon project, told China Daily that the company aims to make business decisions in the region based on crude oil prices and political risks.

"Gabon is highly internationalized in Africa. There are oil companies such as Total and Shell doing business locally," said Sun. "The political and natural environment of Gabon is also more favorable, compared with other African countries.

"However, the new government of Gabon, under the powerful influence of Western countries, seems to be less friendly toward Chinese enterprises now."

She said the company should strengthen communication and cooperation with resource-rich countries to improve its business performance.

The Gabon project has daily production of 35,000 barrels of crude oil. Another project in Gabon is under construction, but it's expected to start production in the first half of 2015, according to Sun.

Beyond Gabon, Sinopec has been strengthening its strategic cooperation with the national oil company of Angola - Sonangol EP. Sinopec has participated in six deepwater oil and gas projects in Angola so far. As of June 30, it had invested about $6 billion in these projects.

Sinopec also signed a framework agreement on geothermal energy cooperation with the government of the Republic of Djibouti last year, under which Sinopec agreed to use its advanced technology and experience.

"Sinopec is not only an investor but also a technical service provider, and an advocate and practitioner of low-carbon and sustainable development," said Fu.

As Chinese investors expand in Africa, they've also had to learn how to communicate and fit in, a must for China's "going global".

Having worked in Gabon for nearly two years, Sun said it takes a long time to get used to local working procedures, which are highly Westernized. "The culture is different, which leads to different working methods and attitudes," she said.

As for Sinopec, Sun emphasized, the company should strike a balance between access to local resources and the sustainable development of the community.

"We have kept most of the positions of the local staff after the acquisition in 2009. To help them work better, we sent a certain number of local employees to China for training and experiencing our culture for better mutual understanding," said Sun.

She said local residents can use the company's utility boats for free as transport between their homes in the rain forests and the towns where they shop.

Company staff often go to the local schools to donate school bags, stationery and footballs.

"We have oil blocks in the region that we have to take good care of. Meanwhile, we need to take care of the local communities as a company," said Sun.

Sinopec has donated more than $6.58 million in Africa in recent years. Money is just one aspect, though. Caring is more valuable.

Sinopec has been trying to recruit more local employees to raise their incomes and cultivate a talent pool of professionals in Africa.

In Nigeria, Sinopec Addax helped 450 local community members in the past nine years through a training program, which helped them either start own businesses or get a job.

In 2012, Sinopec learned that people in two villages in Gabon (Gongouwe and Ineganja) had been using rainwater in the absence of clean drinking water.

After study and field investigation, the company allocated $200,000 from its community fund and hired local well-drilling companies to dig a well for each village.

The company handed the wells over to local governments with official water quality compliance reports in October 2012, to the appreciation of residents.

Looking forward

Proven oil and gas reserves has been expanded rapidly in Africa, and not only in traditional energy-rich regions in the northern and western parts of the continent. Exploration work has also achieved some important successes in southern and eastern Africa in recent years.

According to a CNPC Economics & Technology Research Institute report, Africa's oil reserves stood at 132.1 billion barrels at the end of 2011, accounting for 8 percent of the global figure.

There are more than 60 oil and gas projects under construction in Africa, most of which will be in operation by 2017.

However, since African countries lack refining capacity, they favor more investment in downstream businesses such as refining, which can bring more profit in the sector, instead of just exploration at the upstream end of the business, said Wang Zhen, deputy head of the China University of Petroleum.

Chinese companies should shift their strategy from internationalization to localization in their African businesses, experts said.

Sinopec entered into a framework agreement on cooperation with PetroSA, the national oil company of South Africa this year, to conduct joint research at the world-class Mutombo petroleum refining project in an industrial park in Port Elizabeth, South Africa.

"Looking into the future, we will adhere to the business philosophies of integrity and win-win cooperation," said Fu.