{"id":50003509,"date":"2015-09-18T15:40:43","date_gmt":"2015-09-18T14:40:43","guid":{"rendered":"https:\/\/stage.dialogochino.net\/?p=3509"},"modified":"2022-12-14T10:38:39","modified_gmt":"2022-12-14T10:38:39","slug":"3509-sinopec-and-petrobras-more-than-oil-in-common","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/business\/3509-sinopec-and-petrobras-more-than-oil-in-common\/","title":{"rendered":"Sinopec and Petrobras: more than oil in common"},"content":{"rendered":"

Two of the world\u2019s largest state-owned oil companies \u2013 Brazil\u2019s Petrobras <\/a>and China\u2019s Sinopec <\/a>\u2013 are mired in major corruption scandals. But the connection doesn\u2019t end there. In December last year, as part of anti-corruption investigation operation Lava Jato<\/em> (operation Car Wash in English), Petrobras was forced to cancel a contract with Brazilian engineering company Galv\u00e3o Ingenier\u00eda<\/a>, with whom Sinopec had entered into a \u2018strategic alliance\u2019. The two companies formed an engineering, procurement and construction (EPC) consortium in order to develop a nitrogen fertilizer unit in Mato Grosso do Sul, in Brazil\u2019s agro-industrial heartland. Laja Jato<\/em> investigators are looking into an alleged kick-back scheme in which Petrobras awarded overvalued contracts to engineering firms with excess revenues going to contractors and the ruling Worker\u2019s Party<\/a> (PT). The scandal is threatening to lead to the impeachment of President Dilma Rousseff<\/a>, who was chair of Petrobras between 2003 and 2010. Chinese executives have not been implicated in the Petrobras scandal and nor has the episode deterred the country\u2019s investors, who have now loaned Petrobras a total of US$ 7billion. “For us it is very difficult to understand the reasoning behind China\u2019s decision to maintain the line of credit,” said Alejandro Salas, Transparency International<\/a>\u2019s Regional Director for the Americas, who added that investors can and should seek guarantees that their money is being spent correctly. But Salas believes there is no reason for the Petrobras scandal to reflect badly on Sinopec. Owing to pressing energy and food demands, Chinese state-backed companies have been investing heavily in Latin America, which has become a principal destination for investment in agricultural supply chains<\/a>. The overuse of chemical fertilizers<\/a> at home has led to the degradation of much arable land in China and forced it to look overseas to source food for its 1.3billlion citizens. But aside from the Galv\u00e3o plant, at which operations have now been suspended, Sinopec has other concerns. Company president Wang Tianpu, who was arrested on suspicion of carrying out a host of illicit practices including seeking bribes and using company funds for personal gain, has been\u00a0expelled from the Communist Party<\/a>. As part of his anti-graft drive<\/a>, President Xi Jinping announced last week that the state-owned oil giant would sell-off the 4,300 company cars and most of the hotels<\/a> it owns in order to clean up its tarnished image. Car wash splashes Sinopec<\/strong> Once completed, the Galv\u00e3o unit aims to produce 1,200 tons of urea and 70 thousand tons of ammonia annually, thanks to investment estimated at 3.1 billion Brazilian Reales ($US 780million). But payments into company accounts have been suspended with the plant said to be only 80% complete. Earlier this year, the press announced a plan to create a new bidding process for a different company to finish construction. The Federal Auditing Court (Tribunal de Cuentas de la Uni\u00f3 in Portuguese), an arm of the Federal Government that monitors financial accounts, also found that the contract for the Southeastern Gas Pipeline, known by the acronym GASENE<\/a>, was overvalued by a whopping 1,800%. Sinopec signed contracts to construct two stretches of the pipeline in what were its first deals in Brazil. More than twenty companies have been summoned by the Court, among which are Andrade Guti\u00e9rrez<\/a>, Queiroz Galv\u00e3o, Camargo Corr\u00eaa<\/a> and Odebrecht <\/a>\u2013 Brazil\u2019s four largest engineering companies. But according to Salas, the Petrobras brand has not become \u201ctoxic\u201d as clients can still sign agreements with the oil company and do their part to promote\u00a0a transparent agenda and to publish clear information and regulations. And Salas says despite the scandal, Petrobras should continue\u00a0to be a solid pillar of the country\u2019s development. The main problem it has is a lack of transparency, but the Brazilian government now has a historic opportunity to improve its practices, he says. Sinopec in Brazil<\/strong> Sinopec gained a foothold in Brazil in 2005, but increased its involvement in the country in November 2010, when it bought 40% of Brazilian assets owned by the Spanish oil company Repsol <\/a>for US$ 7.1billion. The following month, when it launched operations in Argentina, it acquired Occidental Petroleum<\/a>. Sinopec returned to Brazil to purchase 30% of assets held by Portuguese company Galp <\/a>for US$ 5.2billion with the intention of increasing oil production to satisfy China\u2019s growing energy demand. China Development Bank<\/a> (CDB) granted a loan of US$5 billion, of which US$3.5 billion has already been disbursed with the remainder signed off during Chinese Prime Minister Li Keqiang\u2019s Latin America tour. It was announced that repayment of these loans would be made with oil. \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

Investigation into Sinopec\u2019s Brazil projects won\u2019t hurt oil giant but it has problems at home<\/p>\n","protected":false},"author":40000225,"featured_media":50003252,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758],"tags":[547,50029971],"hashtags":[],"country":[50000021,20000110],"class_list":["post-50003509","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-fossil-fuels","tag-oil","country-brazil","country-china"],"acf":[],"yoast_head":"\nSinopec and Petrobras: more than oil in common | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"Investigation into Sinopec\u2019s Brazil projects won\u2019t hurt oil giant but it has problems at home\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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