China’s Largest Oil Refiner, Sinopec Plans Multi-billion Dollar IPO

China’s Largest Oil Refiner, Sinopec Plans Multi-billion Dollar IPO

Investors will now have  a chance to invest in China’s largest oil refinery, Sinopec which is rapidly growing to challenge industry mainstays, such as Royal Dutch Shell plc (NYSE:RDS.A) (NYSE:RDS.B) and Exxon Mobil Corporation (NYSE:XOM).

China's Largest Oil Refiner, Sinopec Plans Multi-billion Dollar IPO

IPOs haven’t faired well in the United States with both Groupon Inc (NASDAQ:GRPN) and Facebook Inc (NASDAQ:FB) turning out to be busts. Asian stock markets, however, have been undeterred and stock markets in several countries, including Malaysia, China, and Thailand, have been showing strong performances with their IPO’s. Now Sinopec, China’s largest oil refiner, is launching a massive USD 1.5 billion dollar IPO of its Engineering division in order to raise funds to expand its overseas operations. The IPO will take place in Hong Kong.

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Also known as China Petroleum and Chemical Company, Sinopec is the world’s fourth largest company by revenue and hauled in an astonishing USD 402 billion in 2011, narrowly chasing industrial stalwarts like Exxon Mobile. Sinopec has been looking to expand its presence around the globe and has been linked to potential business deals in Texas, France, the United Kingdom, and numerous other places around the world.

Sinopec is an ultra-massive conglomerate with numerous operations across a variety of energy related sectors. The current multi-billion dollar IPO is only for Sinopec Engineering, its construction and infrastructure division. Sinopec Engineering has been aggressively expanding its market presence around the globe. Sinopec Engineering specializes in oil refining and petrochemical projects.

Sinopec Engineering has completed major projects in numerous countries including  Bangledesh, Kuwait, Kazakhstan, Saudi Arabia, Nigeria, Singapore, and Bangladesh. With funding through the IPO, the parent company is hoping it can expand Sinopec’s overseas operations to compete with other construction giants, such as Schlumberger.

The IPO is being warmly welcomed in Hong Kong which has seen its IPO market dry up in recent months. Prior to 2012 Hong Kong was the world’s hottest IPO market but recent fears of an economic downturn in combination with poor stock performances of recently launched companies has slowed the sector to a near halt. Now, the multi-billion dollar Sinopec IPO could help rejuvenate Hong Kong and build a solid foundation for a strong 2013.

Led by the internationally minded Chairman Fu Chengyu, Sinopec is on track to expand its company-wide overseas operations considerably in the coming years. Sinopec’s strategy so far has been to throw a lot of money at companies it is trying to acquire. In 2011 Sinopec agreed to pay a 70% premium to investors for Daylight Energy, a Canadian Oil and Gas firm. Just a few weeks ago the company offered USD 2 billion for the small French oil company Maurel & Prom, which has operations in Africa. The move is largely seen as an effort to increase Sinopec’s toe-hold in Africa.

This move is simply the latest move in a long list of aggressive expansion efforts by Sinopec. At this rate the company could even surpass Exxon Mobile as the world’s largest energy firm and largest firm by revenue within the next decade. Chinese companies have experienced difficulty in expanding their construction operations overseas, however, so expect observers to watch Sinopec closely.

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