Chinese oil group stands to lose about $2.5bn on ageing oilfields in Argentina purchased at the peak of the in a vivid illustration of the costs of Beijing’s pricey attempt to secure natural resources overseas.

At the peak of the oil boom, Chinese state-owned companies’ willingness to pay far more than other bidders for was legendary, as executives responded to Beijing’s political goal of guaranteeing energy security with direct investments in natural resources.

Since then, the steady slide in oil prices to below $50 a barrel has left many of those Chinese purchases deep in the red. has suffered operating losses of $550m during the past three years on Argentine assets purchased from Occidental Petroleum in 2011 for $2.45bn, according to an internal company audit.

At oil prices of $60 a barrel or less, Sinopec stands to lose $2.5bn over the life of the project, the audit found. As of the end of 2015, with prices hovering below $40, projected losses reached $2.9bn, it was first reported by the respected Chinese magazine Caixin this week.

Sinopec said on Friday that rather than being “a slap in the face”, the audit served the function of a “woodpecker” in identifying problems.

“A the moment, the Argentine project has met some difficulties in its operation. However, overseas oil and gas mergers and acquisitions are very complicated and high-risk deals,” the statement said. No one would have thought that the oil price could drop from more than $100 a barrel to $40.”

The company disputed the $2.5bn loss projection, saying: “What if the oil price picks up again soon?”

Sinopec’s Hong Kong-listed arm reported an operating loss of Rmb21.9bn ($3.3bn) on its upstream oil and gas business in the first half of this year, although better returns from refining and marketing kept it profitable overall. It 11 per cent in the first half because of lower prices.

About two years ago Sinopec began an internal review of its overseas acquisitions to figure out which were profitable at lower prices. The process has revealed that it spent billions on underproducing fields in Angola, among other issues.

Its rivals have also run into difficulty with expensive assets, including Cnooc’s oil sands in Canada, and very low production for China National Petroleum Corp’s controversial investments in South Sudan amid renewed conflict there.

Additional reporting by Luna Lin and Benedict Mander