China’s Sinopec Oilfield Service Corporation (SSC) said on Tuesday it will increase its capex this year by 18.4% year-on-year, despite the current market outlook, Kallanish Energy reports.
The company will raise its spending to 3.4 billion yuan ($481.7 million), from 2.87 billion yuan last year. The strategy is to support the Chinese companies push for higher domestic oil and gas production.
Spending will be allocated in key investments including equipment upgrades to enable international expansion, particularly in Saudi Arabia and Kuwait, as well as the purchase of electrified drilling rigs for Sinopec’s deep-well explorations in China.
“Despite the coronavirus outbreak and fluctuation of oil prices, the trend of growth and expansion on Chinese economy remains unchanged and trend of growing oil and gas demand is also unchanged,” the firm said in a statement.
The fast spread of the Covid-19 virus across the world has choked demand for crude oil, starting in China. As countries battle to contain the pandemic, travel restrictions are killing the aviation industry and the demand for crude oil.
This has been matched with a surge in supply following the failure of the Opec+ alliance in reaching a new agreement. As Russia opted out of new output cuts, Saudi Arabia decided to raise its supply to maximum capacity, while also granting customers large discounts.
The combination has driven oil prices to historic low levels, prompting oil and gas producers all over the world to slash their capital spending.
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