Sinopec to Increase LNG Capacity and Domestic Shale Output

China Petroleum & Chemical Corporation or Sinopec SNP, per Reuters, has recently declared its plan of increasing liquefied natural gas (LNG) receiving capacity by more than double within 2024. The company will also boost its shale gas production in the domestic territory by two thirds within the next two years.

The plan is in line with the company's strategy of shifting its energy focus to cleaner resources. It will also benefit China’s fight against pollution, and the shift from coal to LNG for heating. By 2023, Sinopec aims clean fuel to account for almost half of the company's total supply of energy. During this time, the company expects to increase its natural gas supply capacity that incorporates both domestic and imported output, to 60 billion cubic meters (bcm) compared with 2017's figure of 27 bcm.

Capacity Increase

The new imported LNG receiving facilities will be added along China’s east coast, increasing the company's capacity to a total of 26 million tonnes per annum from its present capacity of 9 million tonnes. To achieve the target, Sinopec plans to expand its Dongjiakou and Tianjin terminals. Moreover, a new terminal will be built in eastern Zhejiang province to facilitate the expansion.

Production Boost

The state-owned energy company's domestic shale production ramp-up plans include Weirong block discovery, located in the southwestern Sichuan province. The new find is expected to enable Sinopec reach its goal of 10 bcm of shale gas output by 2020. Notably, the company operates in Fuling in Chongqing, the country's largest commercial shale gas field. Along with improved technologies and cost-reducing measures, Sinopec expects government subsidies to facilitate the company in reaching its production ramping-up targets. Additionally, by 2023, Sinopec intends to build 1,000 natural gas filling stations.

Since the beginning of 2015, Sinopec’s cash balance jumped from $1.6 billion to roughly $32 billion, tremendously reflecting balance sheet strength, which the company can use to achieve its targets.

Price Performance

Sinopec, one of the leading integrated energy players in the world, has gained 11.1% in the last year compared with 26.5% growth of its industry.

Zacks Rank and Other Stocks to Consider

Sinopec has a Zacks Rank #2 (Buy).

Other top-ranked stocks in the oil and energy sector are Pioneer Natural Resources Company PXD, EOG Resources, Inc. EOG and Continental Resources, Inc. CLR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Irving, TX-based Pioneer Natural is an independent oil and gas exploration and production company. Its revenues for first-quarter 2018 are anticipated to improve 23.7% from the prior-year quarter. The company witnessed an average positive earnings surprise of 66.9% in the trailing four quarters.

Houston, TX-based EOG Resources is an upstream energy player. Its earnings for 2018 are anticipated to skyrocket 282.1% year over year. The company delivered an average positive earnings surprise of 25.7% in the trailing four quarters.

Oklahoma City, OK-based Continental Resources is an oil and gas exploration and production company. Its revenues for first-quarter 2018 are estimated to soar 54.9% from the year-ago quarter’s figure. For 2018, the bottom line is likely to be up 366.7%.

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