Beijing plays down end of partnership between Sonangol and Sinopec

9 March 2007

Beijing, China, 9 March – The Chinese government played down Friday the end of negotiations between Angolan state oil company Sonangol and its Chinese counterpart Sinopec for the joint construction of the Lobito refinery, saying that this was a consequence of the way the market worked.

“Some cases [of international economic cooperation] are successful, other are not,” said the spokesman of the Chinese Foreign Affairs Ministry, Qin Gang, at a routine press conference.

Qin was commenting on the announcement from Sonangol, made Tuesday, that it would build the Lobito refinery, in central Angola, itself, which is a project valued at US$3.7 billion, after negotiations with Sinopec failed.

The breakdown of the deal is the first significant failure of a Chinese oil company in Africa, after Beijing had invested time, money and diplomatic efforts in its relationship with Africa in general and Angola in particular, in order to ensure safe and preferential access to the continent’s natural resources, which China needs to feed its rapid economic growth.

The spokesman did not reply to a question about the consequences for China of the failure of the deal with Sonangol, which analysts have said could threaten the Chinese power cooperation strategy in Africa.

Zhao Qing of Sinopec’s International Department, responsible for the company’s partnerships, told Portuguese news agency Lusa in Beijing that he was not aware of the end of negotiations with Sonangol.

Recently, at a press conference in Luanda, the chairman of the board of Sonangol said that negotiations had continued until January but that later they came to a stalemate due to a lack of agreement about what to produce at the refinery.

“We cannot build a refinery just to make products for China,” said Manuel Vicente, cited by Angolan newspaper, Semanario Angolense.

In June 2006, Sinopec, which is Asia’s largest oil companu by refining capacity, bought stakes in three Angolan offshore oil blocs at a cost of over US$2 billion, with total proven reserves of 3.2 billion barrels, for joint exploration with Sonangol, in a joint venture in which the Chinese company has a 75 percent stake.

The Chinese government, through the Exim Bank, over the last three years has granted over US$4.4 billion in loans to Angola, to be repaid in barrels of oil. (macauhub)