BizChina

China Petroleum & Chemical Corp., or Sinopec, said Friday the company is in talks with BP PLC to explore and develop shale gas resource in China, adding that it plans to bid for six more shale gas blocks to step up its investment in cleaner-burning fuels in the country.

During a conference call with analysts to discuss the company's third-quarter results, Chief Financial Officer Wang Xinhua said the company's arm in eastern China already owns 42 shale gas blocks with a total area of 190,000 square kilometers. "We are now in talks with BP on potential cooperation," he said, but didn't provide further details.

China, which is heavily dependent on imported oil and gas, hopes to replicate the success seen in the U.S. with their own shale gas reserves. So far China has focused on inviting U.S. and European companies into its tightly controlled onshore gas acreage in order to gain technical know-how.

Shale gas is trapped in relatively impermeable rock, and producers need to crack the tight rock formations using streams of water and chemicals.

The Ministry of Land and Resources said Wednesday China plans to auction six shale gas blocks within a month to the country's biggest energy companies, including Sinopec, PetroChina Co., Cnooc Ltd., and Shaanxi Yanchang Petroleum Group.

The auction will involve three blocks in Guizhou province, one in Chongqing municipality, one in Shanxi province, and one along the border between Anhui and Zhejiang provinces. The six blocks are each spread over 6,000-7,000 squared kilometers.

Sinopec imports 70% of its crude oil needs and is therefore more sensitive to a mismatch between domestic and international fuel prices than domestic peers like PetroChina.

In the January-September period, operating profit from Sinopec's refining business fell 61% to 8.49 billion Chinese yuan ($1.27 billion) due to rising fuel costs and government controls on fuel product prices, despite a rise of more than 14% in crude processing volumes.

Wang said the company is optimistic on its fourth-quarter performance following a fuel price increase earlier this week. "We expect the fourth quarter will be a relatively good one for us based on expectations of stable economic growth and demand for our products," he said.

Analysts said they expect Sinopec's refining margins to improve in the fourth quarter. "We estimate this (price hike) could lift the company's refining margin from an average of $5 a barrel to $8 in November given the low-cost inventory on a 50-day time delay," said Shi Yan, an analyst at UOB KayHian. "This should boost its fourth-quarter earnings significantly."

Earlier this week, China raised domestic ex-factory gasoline, diesel and jet fuel prices by 3% to 4% due to higher crude oil prices. Fourteen analysts polled by Thomson Reuters said they expect Sinopec's 2010 net profit to rise to an average of 66.32 billion yuan from 61.8 billion yuan last year.

China is breaking into the top ranks of global power-equipment exporters with a $10 billion deal signed with India on Thursday.

By nabbing the deal with India, which is on an infrastructure spending spree, China poses a new competitive threat to established suppliers of technology such as General Electric Co., Siemens AG and Alstom SA.

China's new position is also evidence of a growing trend of emerging markets doing business among themselves, after years of focusing on trade with partners in developed nations.

On Thursday, Shanghai Electric Group Co. signed a $10 billion deal to sell power-producing equipment to Indian conglomerate Reliance ADA Group.The contract for coal plant turbines dwarfs the $750 million contract Reliance inked with GE last week for gas turbine power equipment. GE doesn't have a large presence in coal-based turbines, but it has roughly 40% of the global market share for gas turbine power equipment. It is likely to face competition in gas turbines from Chinese power equipment firms in the future.

Apple Inc. announced Tuesday that it launched an online store and a simplified-Chinese version of its App Store for customers in China, the latest move in an aggressive expansion by the company after years of neglecting the market.

Chinese customers can now order Apple products, including the iPhone 4 and the iPad, online and have the products delivered. Prior to this move, iPhone buyers had to order the devices on Apple's Chinese website and pick them up at one of Apple's four mainland Chinese Apple Stores in Beijing and Shanghai.

According to the new Chinese online store, Apple is shipping iPhones in China in one to two weeks, and iPads in 24 hours as of Tuesday morning.

The company's expansion in China comes as competition in China's nascent but fast-growing smartphone market is heating up, with Taiwanese smartphone maker HTC Corp. also planning an expansion here.

After years of relying on legal and political muscle to fight rampant piracy in China, big software companies have started wielding a new weapon: lower prices. And the early results are encouraging.

Software companies including Microsoft Corp. and Autodesk Inc. have seen unit sales jump since lowering prices to lure users away from pirated copies, executives said in interviews.

For instance, Autodesk, which makes AutoCAD and other design software, saw its number of licenses in China more than double to an estimated 300,000 as of July after it slashed local software prices last year, said Patrick Williams, Autodesk's senior vice president for the Asia-Pacific region.

The U.S. company's prices in China are now about half the level in the U.S., compared with about 20% to 30% lower before last year's reduction. Autodesk sells its flagship AutoCAD 2011 software on its U.S. website starting at $3,975.