Sinopec suspends 2 top officials at trading arm

In a photo from Oct 15, 2018, workers inspect a natural gas facility by Sinopec at its Dongsheng gas field in Erdos, Inner Mongolia Autonomous Region, China.
In a photo from Oct 15, 2018, workers inspect a natural gas facility by Sinopec at its Dongsheng gas field in Erdos, Inner Mongolia Autonomous Region, China.PHOTO: REUTERS

Chinese state oil giant Sinopec has suspended the two top officials at its trading arm Unipec after the company suffered losses, sources with knowledge of the matter said yesterday.

Unipec's president Chen Bo, an industry veteran who helped the company become one of the world's largest oil traders, has been suspended along with the senior Communist Party representative at the company, Mr Zhan Qi, said five sources, who asked not to be identified due to the sensitivity of the issue.

"The government inspectors were looking into the company's operations for the past few years... One of the problems they found was the severe trading losses in the second half of this year because of wrong market judgment," said one of the sources. The sources did not refer to any wrongdoing on the part of the two men.

A spokesman at Sinopec said in an e-mail statement that Mr Chen and Mr Zhan have been suspended from their duties due to work-related reasons and that deputy general manager Chen Gang has been appointed to handle the company's administrative work.

Unipec operates as normal, the spokesman added.

Benchmark Brent and West Texas Intermediate (WTI) oil prices have fallen by about 40 per cent since hitting their highest in four years in October, amid oversupply concerns as major producers ramped up output while the United States unexpectedly issued waivers that allowed countries to continue importing Iranian oil despite sanctions.

A sudden widening of WTI's spread with Brent earlier this year also led to hefty losses at major traders.

Mr Chen Bo, who rose through the ranks to take on Unipec's top role, started the company's liquefied natural gas trading desk. He also advocated boosting China's crude oil imports from the Americas to help the world's largest oil importing country diversify its suppliers.

Oil traders said Mr Chen's removal could create uncertainty at Unipec. "He's been a key man in the oil trading industry in the past decade," said a veteran oil trader in Asia who spoke on condition of anonymity.

Shares in Sinopec closed at 5.25 yuan on the Shanghai Stock Exchange, the lowest in two years and down 6.7 per cent from Wednesday.

"Sinopec's stock has been performing badly in the fourth quarter," said a Beijing-based equity analyst who cannot be named due to local stock exchange rules.

News of the suspensions caused "a sell-off and decline in prices", the analyst added.

In October, Sinopec reported that third-quarter net profit fell from the previous quarter, after rising for five consecutive quarters.

For the first nine months of this year, the firm reported a loss of 5.47 billion yuan (S$1 billion) from foreign exchange rate changes and holdings in derivative financial instruments, according to financial reports issued in October.

A version of this article appeared in the print edition of The Straits Times on December 28, 2018, with the headline 'Sinopec suspends 2 top officials at trading arm'. Print Edition | Subscribe