When Zhang Yuzhuo, chairman of Sinopec Group, visited SIPC, he expressed his earnest expectation of the future development of the company. SIPC turned the expectation into confidence and motivation for reducing loss and sustainable development. The company has achieved remarkable result with accumulated value of more than 42 million US dollars in the activity hard slog and making profit. We continuously focus on exploration, control costs, cut investments, improve efficiency, tighten budgets, strive for policies that support and guide the company’s value.
SIPC deepens exploration research and evaluation to improve exploration quality and efficiency. Complete analysis and assessment on the exploration targets are carried out so as to defer or suspend the construct of low-performance exploration wells, implement the drilling program of high-performance exploration wells, promptly conduct the drilling and well testing activities, and strictly control the cost of discovery additions at every level. It is expected that the newly-added equity reserves of exploration throughout year will increase significantly and the cost of the new reserves be greatly reduced. Meanwhile, optimization and evaluation of the oil block and belt will be carried out, as well as the optimization of the company’s asset portfolio. The company gives priority to the potential evaluation and demonstration for delayed exploration so as to find considerable new reserves for replacement.
Tighten the Belt
The cost management and control is conducted by entire staff through all elements and process. It has achieved remarkable performance by many effective measures, such as “production improvement, technical measures, contract negotiations, and consumables optimization.” As of current statistics, the accumulated value is up to a total of 32 million US dollars and the cost reduction is up to 12 million US dollars.
In terms of efficiency improvement, one solution is to carry out cost control on blocks and single wells and shut down low productivity wells. The second is to shut down remote receiving and transferring terminals and oil, gas and water treatment plants whichhave long distance of transportation, abundant capacity and high operational cost. The third is to cancel the inefficient and ineffective workload. The fourth is to reevaluate the higher cost measures and suspend the ineffective measures. The fifth is to optimize the technology program, delay or suspend the measures that cause economic deterioration due to the pandemic. The sixth is to wholly check the inventory of warehouse and make full use of the consumables for production efficiently.
In terms of cost reducing and profit improving, the first is to renegotiate the existing contract to reduce the purchase price of services and materials. The second is to strictly control management costs and unproductive expenditures.
Cash is King
Based on our own cash flow, we optimized investments on overseas projects. Investment on exploration and HSSE is priority. The existing development projects have been properly suspended, discretionary spending on low profitable and non-profitable new projects, facilities, workover and maintenance have been deferred or slashed. SIPC expects to reduce the investment by 814 million US dollars by decreasing drilling and workload on operation and surface facility.
Improve production structure
In response to the low oil price and OPEC production quotas, the production was reduced by 28.5 million barrels compared with the original plan by reducing the workload of new wells, shutting down low profitable and non-profitable wells, reducing the workload of non-profitable wells, optimizing production and operation, and meeting the requirements of host countries after two rounds of optimization. Meanwhile, the company actively overcomes the impact of the pandemic, steadily advances key projects, and strives to ramp up production in order to get maximum benefit most efficiently. A number of key wells in Gabon, Iraq Taqtaq project and Canada Daylight project have achieved good performance. One well in Angola has been acidized successfully, increasing the production from 8,000 bpd to 18,000 bpd .
Intensify Management of Capital
The financing methods are selected flexibly by widening the selective range of cooperative banks. The average financing cost is reduced by reasonable application of short, medium and long-term loans according to the trend of the US dollar interest rate. The renewal plan of due debts is updated and optimized according to the market conditions in order to strictly control the debt risks. The budget management is deepened to facilitate overall arrangements for fund plans and speed up the collection of historical accounts receivable. It also helps to be conversant with the dynamic funds operation, strengthen the management of monetary fund balance, and improve the efficiency of fund utilization.
Make it through
We should pay close attention to changes of fiscal and tax policies of host countries during the pandemic period, and make full use of the policies to benefit enterprises to reduce costs and expenditures. The Company sticks to problem-orientation principles and promotes positive guidance through “tackling low oil price” discussions on “how to see, what to do and how to do it” among all the employees home and abroad. It calls for us to give up the traditional concept of “investment equals production” but to form a strong sense of responsibility. The benefit awareness of “cash is king,” the cost consciousness of “living on a tight budget,” the risk awareness of “seeking opportunities from risks,” the management consciousness of “lean production” and a coordinated response. We will reinforce the responsibility and conduct ourselves honorably to achieve the goals and tasks for epidemic control and business development.