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Sinopec Starts Developing the Largest Gas Facility in China

Energy giant China Petroleum & Chemical Corporation or Sinopec SNP recently announced that it has begun developing the country's biggest natural gas storage and logistics facility in the central Henan province. The facility will likely have the capacity to store 10 billion cubic meters (bcm) of natural gas.

Work on the facility is expected to be completed next year and it is anticipated to start operations in May 2018. It will supply natural gas to Beijing, Tianjin and the central sections of China.

Reason for Developing the Facility

China’s air pollution level has drawn the government’s attention and pushed it to take measures to reduce emissions. The government is preparing to switch to cleaner alternatives of coal-fired boilers and heating systems, like natural gas and electricity, across 28 smoggiest cities of the country. The transformation to cleaner energy is likely to be completed by Oct 2017.

The state-owned energy company's decision to build the facility complements the Chinese government’s plans of investing more on natural gas pipeline and storage facilities to diversify the energy mix.

Price Performance

Sinopec’s stock outperformed the Zacks categorized Emerging Markets Integrated industry in the last three months. While shares of the company gained 4.31%, the industry registered a decrease of 4.24% during this time.

About the Company

Sinopec is one of the largest petroleum and petrochemical companies in Asia. The company is the second largest crude oil and natural gas producer, and the largest refiner and marketer of refined petroleum products in China.

However, the company’s operating expense management since the beginning of 2017 is unimpressive. During the first three months of this year, the company’s costs from operations increased nearly 40%, which is a matter of concern.

As a result, the company presently has a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks in the energy sector are Delek US Holdings, Inc. DK, Enbridge Energy, L.P. EEP and Canadian Natural Resources Limited CNQ. All of these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings’ sales for 2017 are expected to increase 74.02% year over year. The company had a positive average earnings surprise of 60.68% in the last four quarters.

Enbridge Energy’s sales for the second quarter of 2017 are expected to increase 13.17% year over year. The partnership had a positive earnings surprise of 38.22% in the last four quarters.

Canadian Natural Resources’ sales for 2017 are expected to increase 46.81% year over year. The company had a positive average earnings surprise of 30.77% in the first quarter of 2017.

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