As the fourth-largest state-owned oil company in China, Sinochem has long been waiting for its first unconventional oil and gas project. According to a report from yesterday, Sinochem has signed an agreement with Pioneer Natural Resources Company to acquire a 40% stake in a shale oil and gas block located in the southern part of the Midland sub-basin in Texas, USA. The deal was finalized on January 30, marking Sinochem's first direct entry into the U.S. upstream oil and gas sector.
"This is a milestone for Sinochem," said Zeng Xingqiu, former chief geologist at Sinochem Group. "It's our first unconventional oil and gas project and represents a significant step toward expanding our global footprint."
Under the agreement, Sinochem will pay $1.7 billion, including $500 million in cash, and commit to covering 75% of the drilling and completion costs in the joint venture area over the next few years—approximately $1.2 billion. This investment gives Sinochem development rights over about 82,800 acres, allowing it to explore and develop the Wolfcamp shale formations and deeper reservoirs beneath the surface.
The transaction is expected to be approved by relevant government authorities, with delivery anticipated in the second quarter of 2013. Pioneer will act as the operator, handling land leasing, drilling, completion, production, and sales within the cooperation area.
Zhang Wei, vice president of Sinochem Group, emphasized that the acquisition strengthens the company’s overseas portfolio. "This deal allows us to access high-quality assets in the U.S. shale basin and further diversify our international investments," he said. "We look forward to deepening our collaboration with Pioneer in the future."
According to Sinochem’s internal data, the area involved in the deal has already seen over 400 horizontal wells drilled, with more than 35 rigs currently operating. This indicates strong potential for future development.
However, Zeng Xingqiu noted that while the project is resource-rich, it may not deliver immediate profitability due to its long development cycle. He added that this type of stable, long-term project aligns well with Sinochem’s current scale and strategic goals. "This project will help us gain valuable experience in unconventional oil and gas development and establish a foothold in the U.S. market," he said.
Sinochem entered the upstream oil and gas sector in 2002, establishing Sinochem Petroleum Exploration and Development Co., Ltd. By the end of 2011, the company had 23 oil and gas contracts across 10 countries, including Brazil, Colombia, UAE, and Indonesia. Despite this expansion, earlier overseas projects faced challenges.
A 2011 audit by the National Audit Office revealed that out of six overseas oil and gas projects, only two were profitable by 2009. The rest fell short of financial targets, with cumulative losses reaching $156.26 million. However, Sinochem’s spokesperson, Li Qiang, later stated that the company’s overall overseas operations remain profitable.
This new venture in the U.S. shale region could mark a turning point, offering Sinochem the opportunity to learn, adapt, and build sustainable growth in the global energy market.
High Speed Doors,High Speed Roll Up Doors,Rapid Roller Doors,Rapid Roll Up Door
SHANGHAI KENVO DOOR CO.,LTD , https://www.kenvodoor.com