August 22nd, 2011 | Xinhua CNPC terminates 6 overseas projects
China National Petroleum Corp (CNPC), the country’s largest oil and gas producer, terminated six exploration projects in Libya and Niger amid ongoing political turbulence in the Middle East and North Africa, the Securities Daily said Monday.
The termination of the six projects run by Great Wall Drilling Co (GWDC), a wholly-owned subsidiary of CNPC, is estimated to cause 1.2 billion yuan ($187.51 million) in losses for the company, higher than losses incurred during the 2009 financial crisis, said the report.
“For CNPC, the current priority should be avoiding massive losses. It should elevate its risk evaluation and management to strengthen the assessment of overseas projects,” Ren Haoning, an analyst with the China Investment Consulting Corp (CICC), said in the report.
GWDC’s revenue stood at 16.8 billion yuan in 2010, with 7.5 billion yuan coming from overseas markets.
Since its establishment three years ago, GWDC has contributed 2.08 billion yuan in profits to its parent company, CNPC, Ren said.
Meanwhile, CNPC said GWDC has brought in $994 million in overseas contracts this year, despite terminating the six major projects, according to the report.
A lack of experience and regulation as well as errors in judgment are the main causes for losses in the country’s three largest oil companies during recent and rapid overseas expansions, Zhou Xiujie, also a CICC analyst, said, as cited in the report.
The three oil giants include CNPC, Sinopec and China National Offshore Oil Corp.
Data from China Petroleum and Chemical Industry Association show that the three oil giants’ merger and acquisition (M&A) scale amounted to a record high of $30 billion in 2010, or 20 percent of the global total in terms of the M&A scale at the industry’s upstream.