China Petroleum and Chemical Corporation SNP, also known as Sinopec, has discontinued negotiations to invest in a major petrochemical facility and a gas marketing venture in Russia in response to the country’s invasion of Ukraine, per a report by Reuters.

The heavy sanctions, imposed by the West, have exposed vulnerabilities in Russia. Hence, Sinopec suspended the discussions to invest up to $500 million in the new gas chemical facility in the country. The company does not realize any immediate impairment risk of its Russia assets amid the Ukraine crisis.

Sinopec planned to collaborate with Russia's largest petrochemical producer, Sibur, for a project similar to the $10-billion Amur gas chemical complex in East Siberia. Amur, which is expected to come online in 2024, is owned by Sinopec and Sibur. However, Sinopec decided to discontinue the project after observing that Sibur’s minority shareholder, Gennady Timchenko, had been sanctioned by the West due to its alleged ties with Putin.

Sinopec also suspended negotiations regarding the gas marketing venture with Novatek due to concerns that one of Novatek's shareholders is on the latest U.S. sanctions list. In 2019, Novatek, the largest independent natural gas producer in Russia, entered an agreement to create a joint venture with Sinopec and Gazprombank to market LNG and natural gas in China.

The government of China is skeptical about the country’s companies running afoul of sanctions imposed by various Western countries. It is pushing companies to be cautious with investments in Russia, its second-largest oil supplier and third-largest provider of natural gas. Notably, Sinopec has initiated task forces on Russia-related affairs and is working on contingency plans for business disruptions and against secondary sanctions.

Company Profile

Headquartered in Deyang, China, Sinopec is a leading integrated energy company that engages in the exploration, production and transportation of petroleum products. It is the largest refiner and marketer of refined petroleum products in China.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zack Rank #2 (Buy).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

PBF Energy Inc. PBF, based in New Jersey, is a leading refiner of crude oil. PBF has one of the most complex refining systems in the United States, with an overall Nelson Complexity Index reading of 12.8.