BUENOS AIRES--China Petrochemical Corp. (SNP, 600028.SH), or
Sinopec Group, is so concerned about oil industry policy in
Argentina that it could suspend production there, a local newspaper
with close ties to the government reported Tuesday.
The Chinese company, which in late 2010 decided to pay $2.45
billion for Occidental Petroleum Corp.'s (OXY) unit in Argentina,
is the country's fourth-largest producer.
At the time, Asia's biggest refiner said the deal would raise
its production by over 51,000 barrels of oil equivalent a day and
give it access to proven and probable reserves totaling 393 million
barrels.
Since then, however, Argentina's government has changed the
rules for oil and gas companies. In February, it dropped its "Oil
and Refining Plus" programs that aimed to encourage new investment
in the exploration, production and refining of hydrocarbons.
Ending the programs saved the government about 2 billion pesos
($4.33 million) a year, but it cost oil companies the same amount.
Since 2008, the government had paid out about ARS10 billion through
the programs.
According to the report in the daily Buenos Aires Economico,
Sinopec has asked the government for overdue compensation totaling
$184 million and said the government's failure to properly
compensate it has caused financial problems for Sinopec.
The company reportedly told government officials that the
situation "could worsen drastically in the weeks ahead" and that if
the problem isn't reversed soon, Sinopec could face trouble paying
its service providers and employees.
A Sinopec spokesman in Buenos Aires couldn't be reached for
comment. A spokesman for Argentina's Planning Ministry, which
oversees the energy industry, didn't immediately respond to phone
calls and an email.
Write to Taos Turner at taos.turner@dowjones.com
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