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British oil giant BP Tuesday raised US$742 million from the sale of its entire equity stake in China Petroleum and Chemical Corp (Sinopec), Asia's largest refinery. The sale followed a similar move by BP last month to unload its 2 percent stake in PetroChina, China's biggest oil firm, for US$1.66 billion.
BP paid about US$385 million for a 2.1 percent Sinopec stake in October 2000 when Sinopec launched its initial public offering on the Hong Kong, New York and London stock markets.
BP sold 1.8 billion Sinopec shares for HK$3.15 (40.4 US cents) per share, it said Tuesday in a statement.
"The decision to sell our stake in Sinopec is entirely separate from our joint business activities with the company, to which we remain committed," Gary Dirks, president of BP China, said.
"The equity investment of BP made in Sinopec has been very successful and BP believes now is an appropriate time to sell the shares."
Shares of Sinopec fell 5.9 percent to HK$3.18 (38.5 US cents) on the Hong Kong stock market yesterday, just before the announcement was made. The shares have more than doubled over the past year due to the strong oil price and robust domestic demand for oil and petrochemical products.
Analysts say BP's move is understandable given investing in the stock market is not the oil giant's core business. But they said they were worried that the sell-off could create concerns among investors about pressure on the share price in the short-term.
And the sale may also trigger other strategic shareholders including Royal Dutch/Shell and ExxonMobil to reduce their stakes in Sinopec to cash in the price hike.
ExxonMobil held 3.65 percent of Sinopec as of June 30, while Royal Dutch/Shell owned 2.27 percent.
Scott Weaver, an energy analyst with ING, said in the long term, the sale will be positive for Sinopec shares.
"The sell-off will increase the liquidity of Sinopec's shares," he said.
BP still has a 9.4 percent stake in the Hong Kong listed Zhenhai Refining & Chemical Corp - a refinery unit of Sinopec. It is the only investment for BP in Chinese oil companies.
Daniel Teo, vice-president of BP China's Strategy and Corporate Affairs, said the company has no plan to sell its stake in Zhenhai at the time.
BP has said it will invest a further US$3 billion in China over the next five years.
(China Daily February 11, 2004)
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