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Sinopec's New Refinery in Alberta to Help Local Producers

China Petroleum & Chemical Corporation SNP, widely known as Sinopec, recently joined a group to build an oil sands refinery in Alberta. Apart from Sinopec, the group consists of an Albertan indigenous group, China State Construction Engineering Corp. and Alberta management company Teedrum. The partnership will be known as SinoCan Global, which has selected Stantec Inc. STN for providing consulting services concerning the project’s regulatory review and permitting process.

Although a financing plan and ownership of the project is yet to be determined, the facility is expected to cost around C$8.5 billion. Per the project plans, the refinery, with a daily processing capacity of 167,000 barrels of diluted bitumen, will be built in the province. The product basket of the project includes diesel fuel, basic chemicals, gasoline and jet fuel, which will be used for both domestic consumption and export purposes.

Importance of the Project

Notably, the previous government of the country declined a similar proposal in 2012, which was supposed to back the aboriginals, due to the lack of economic benefits. Since then, the Canadian energy market has come a long way amid several ups and downs. Currently, the industry is facing takeaway capacity constraints, resulting in a bottleneck situation, hampering the overall economy.

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The situation has resulted in declining investments in Canadian oil sands. This has forced the producers to sell their products at heavy discounts. The SinoCan Global refinery will bring in new opportunities for the producers in the region. It is expected to strengthen the demand for local heavy crude gathered from the oil sands. Moreover, if built, the refinery will become the second-largest one in the province.

Alberta First Nations Energy Development fund intends to hold stakes in the project, which will help it to support activities in Indigenous communities. The project is expected not to take more than two years in clearing regulatory hurdles from the authorities.

Price Performance

State-run Sinopec, one of the leading integrated energy players in the world, has gained 23.4% in the past year compared with 27.7% collective growth of the industry it belongs to.

 

 

Zacks Rank and Stocks to Consider

Currently, Sinopec has a Zacks Rank #4 (Sell). Investors interested in the energy sector can opt for some better-ranked stocks like Ecopetrol S.A. EC and Petroleo Brasileiro S.A. or Petrobras PBR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bogotá, Colombia-based Ecopetrol’s full-year earnings are expected to surge 90.8% from 2017. The company recorded a positive earnings surprise of 32.4% in the last reported quarter.

Rio de Janeiro, Brazil-based Petrobras is an integrated energy company. The company’s top line for 2018 is likely to improve 7.5% year over year. In the last four reported quarters, it delivered an average positive earnings surprise of 10.4%.

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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
 
China Petroleum & Chemical Corporation (SNP) : Free Stock Analysis Report
 
Ecopetrol S.A. (EC) : Free Stock Analysis Report
 
Stantec Inc. (STN) : Free Stock Analysis Report
 
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