China Petrochemical Corp (Sinopec) has announced its second asset injection deal in a week, injecting its oil machinery business into its Shenzhen-listed drilling equipment and chemicals manufacturing unit, Kingdream, for CNY1.6 billion. “Upon completion of the deal, Kingdream’s product line will expand from drill bits to a wider array of products used in both onshore and offshore oil and gas drilling and transportation,” Kingdream said. “It will improve our product structure and expand our sales, profit and capacity to cope with market risks.” Sinopec Petroleum Engineering Machinery makes machines used in drilling and fracturing underground formations to release oil and gas, as well as steel pipes used to transport them. Kingdream plans to issue 120 million new shares to raise no more than CNY1.8 billion to pay for the acquisition. The deal forms part of China Petrochemical’s state enterprise reform, which will subject more of its assets to investors’ scrutiny and add pressure for it to improve its profitability. China Petrochemical announced earlier that it was injecting CNY24 billion of oilfield services operations into Hong Kong and Shanghai-listed Sinopec Yizheng Chemical Fiber. Yizheng will sell all of its chemical production assets to China Petrochemical’s listed flagship, China Petroleum & Chemical. Kingdream’s first-half net profit tumbled 85% year-on-year to CNY7.9 million as lower domestic exploration expenditure cut demand for its mainstay product, cone drilling bits. The firm forecast net profit would rise to CNY136.3 million this year and CNY170.2 million next year from CNY67.1 million last year.

China has made great progress in shale gas exploration with about 400 wells drilled as of July, and production this year is estimated at 1.5 billion cubic meters. As of July, about CNY20 billion had been invested to find and develop shale gas resources, mainly in the Sichuan Basin, according to the Ministry of Land and Resources. Shale gas reserves are expected to hit 500 BCM, distributed over 170,000 square kilometers, it said. “To accelerate shale gas exploration, the Ministry is preparing for the third shale gas auction and encouraging more private investors to enter the field,” Che Changbo, Deputy Director of the Ministry’s Geological Exploration Department, said at a news conference in Beijing. China has held two auctions of shale blocks since 2011. Exploration rights for 21 blocks were awarded to oil companies and private investors. Peng Qiming, Director of the Geological Exploration Department, said the winners had invested more than CNY2 billion in exploring these blocks since 2013. China’s initial goal of producing 60 to 100 BCM annually by 2020 has been cut to 30 BCM. Che said “complex geological structures and high costs” are hindering exploration and production.

Unipec, the marketing arm of Sinopec, has booked the world’s largest super-tanker – the 3.2-million-barrel TI Europe – to store crude at sea, adding to a growing flotilla of vessels used for floating storage as benchmark oil prices slip below USD100 a barrel. The TI Europe is one of just a handful of ultra-large crude carriers (ULCCs) still in service. It is listed as the world’s largest ocean-going vessel by tonnage, and is as long as the Empire State building is tall at 380 meters. The booking is the latest sign that soaring oil supplies and tumbling prices are prompting traders to store crude in volumes not seen since the financial crisis more than five years ago. Analysts estimate more than 50 million barrels of oil may already be placed in storage. The move also demonstrates the growing clout of state-backed Chinese firms in international oil trading, with Unipec and PetroChina establishing sophisticated dealing desks in key hubs such as London and Singapore in recent years. Unipec plans to ship cheap oil from Europe and store it off Singapore aboard the ULCC, trading sources said. Unipec has also bought large volumes of Russia’s main export crude, Urals.

The 13th Five Year Plan (2016-20) for the petroleum and petrochemical industry will focus on eliminating obsolete capacity and raising coal chemical output, according to Gu Zongqin, Dean of the China National Petroleum and Chemical Planning Institute. “Overcapacity will be eased during the 13th Five Year Plan period, but it will be difficult to resolve the problem entirely,” he said. According to the plan, which is still under discussion, seven petroleum and chemical production bases will be developed in Hebei, Jiangsu, Zhejiang, Fujian and Guangdong provinces. Coal chemical output will rise from about 10 million metric tons annually to 100 million tons by 2020, according to the plan. Li Yongwu, Chairman of the China Petroleum and Chemical International Federation, said that the nation’s petrochemical industry has made huge efforts to upgrade its structure and become more innovative during the years since the 2008 global financial crisis. In the first eight months of this year, the sector posted total profit of CNY558 billion, up 30% from the comparable period in 2010. However, most Chinese companies in the sector make low-end goods, so they need to upgrade their technology and products, the China Daily reports.

Tianhe Chemicals Group has strongly denied allegations of fraud – inflating sales and profits – by Anonymous Analytics, a U.S. group of anonymous analysts, and threatened to sue it for damages. “The report contains errors, misleading statements and malicious accusations against the company and its directors,” Tianhe said in a statement. Anonymous Analytics called for the company to be delisted from the Hong Kong stock exchange and its executives prosecuted. State Administration for Industry and Commerce (SAIC) filings of Tianhe’s subsidiaries show that in 2012, its revenue was 85% less than it reported and its net profit was almost 100% less, Anonymous Analytics alleged. Tianhe listed in Hong Kong in June, raising HKD3.5 billion. The joint sponsors were Morgan Stanley, UBS, and Bank of America Merrill Lynch. Morgan Stanley declined to comment. In 2012, Morgan Stanley Private Equity Asia invested USD300 million in Tianhe, the company’s initial public offering (IPO) prospectus said. The investment was the largest by the Morgan Stanley private equity fund, said a hedge fund manager who declined to be named. During Tianhe’s pre-IPO roadshow in May, its executives told the hedge fund manager that Morgan Stanley had spent millions of U.S. dollars doing due diligence on Tianhe before it listed, the hedge fund manager told the South China Morning Post. UBS confirmed that Joyce Wei, the daughter of Tianhe Chairman Wei Qi, still works at the Swiss bank after leaving JP Morgan in late 2013. In January, JP Morgan withdrew its involvement in the IPO, on concerns about the U.S. bank’s previous employment of Joyce Wei.