CHINESE PETROLEUM INDUSTRY SINOPEC CORP SINOPEC CORP. CHINA PETROLEUM & CHEMICAL CORPORATION...
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Transcript of CHINESE PETROLEUM INDUSTRY SINOPEC CORP SINOPEC CORP. CHINA PETROLEUM & CHEMICAL CORPORATION...
C H I N E S E P E T R O L E U M I N D U S T RY
S I N O P E C C O R P S I N O P E C C O R P. C H I N A P E T R O L E U M & C H E M I C A L
C O R P O R AT I O N
SOCIALIST MARKET ECONOMY: ENERGY
SOCIALIST CHINA
Chinese petroleum industry is controlled by 3 major players all of whom are state owned incl. CNOOC, CNPC (PetroChina), Sinopec;
Over the years China has retained firm control of key & strategic industries in the country;
These industries have been under absolute state control:
- power generation- Mining i.e. Coal- Oil & Petrochemicals- Telecommunications etc.
COMPANY BACKGROUND (SINOPEC)
One of the largest integrated energy and chemical company in China China Petroleum and Chemical Corporation (Sinopec Corp.) is the largest
refiner and petrochemical producer in China. Public company listed in Hong Kong, New York, London and Shanghai Parent company is state-owned China Petrochemical (Sinopec Group), Government of China controls about 75% of the company through the
Sinopec Group. Its businesses include:
oil and gas exploration and production; crude oil processing; oil products trading, transportation, Distribution and marketing; petrochemicals manufacturing. owns more than 29,055 gas stations 643 franchises
TurnoverGROSS PROFIT MARGIN BY
PRINCIPAL OPERATIONS BY SEGMENT
2005 2006 2007 2008 2009
Turnover
824005 1061588 1205860 1495148 1345052
100,000
300,000
500,000
700,000
900,000
1,100,000
1,300,000
1,500,000
Ex
plo
rati
on
& P
r...
Re
fin
ing
Ch
em
ica
ls
Ma
rke
tin
g &
dis
tr...
Oth
ers
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
GROSS PROFIT MARGIN
COMPANY PERFOMANCE
RETURNS PROFITS
2005 2006 2007 2008 2009
Return on Capital Employed
0.125 0.1258 0.1166 0.0515 0.1113
Return on Net Assets
0.1931 0.203 0.1816 0.087 0.1633
2.50%
7.50%
12.50%
17.50%
22.50%
Percen
tag
e
2005 2006 2007 2008 2009
Operating Profit
71517 81250 85496 26336 84431
Profit
43743 53773 55914 28525 61760
5,000
15,000
25,000
35,000
45,000
55,000
65,000
75,000
85,000
PROFITS & RETURNS
COMPETITORS
Exxon, BP and Royal Dutch/Shell However foreign companies have established
strategic partnerships with Chinese companiesIntra-competition among the SINOPEC Group
of companies20,000 private / Independent gas stationsSPC has managed competition well because of
the government's price controls and its proximity to large customer base
Coal Suppliers Other suppliers
Company Logo Supplier Name
SDIC Xinji Co., Ltd
Yangquan Coal Industry (Group) Co., Ltd
WanBei Coal-Electricity Group Co., Ltd
Pingdingshan Coal (Group) Co., Ltd.
Jiangsu Xuzhou Mining (Group) Co., Ltd.
Huainan Mining (Group) Co., Ltd.
Shenhua Energy Co., Ltd.
China Shenggui Valve Co.,Ltd
Aquachem Industrial Limited
SINOPEC Yizheng Chemical Fibre Co., Ltd.
Sinopec International
Guangzhou Taida Steel Tube Co. Ltd.
Jiangsu Sunchem New Materials Co.,Ltd
SUPPLIERS
CUSTOMERS
Lube products used by aviation, spaceflight, nuclear industry, electronics, military weapons,
shipping, automobile, mechanical processing, metallurgical, refining, chemical, and
instrumentation areas
Asphalt products motorways, urban public
roads, airport runways, racing tracks and bridge pavements
railway
Industry Key Success Factors Category Key Success Factors
Integration •Vertical integration is more successful
Innovation •Research and development
•Technological advancement
•Ability to advance in new areas
Management
structure
•Adaptable management structure
•Efficient management structure
Marketing and
Distribution
related
•Proximity to the market
•Strategic partnerships and linkages are critical.
•A solid track record
•Experience of company personnel to undertake work
•Fast technical assistance and Customer satisfaction
Skills and
capability related
•Skilled workforce is a major KSF in the sector
•Communication with client
•Short delivery time capability and constant liaison with clients
SINOPEC KEY SUCCESS FACTORS
integrated upstream, midstream and downstream operations
strong oil & petrochemical core businessescomplete marketing networkestablished a standardized structure of corporate
governance adopted a management system of centralized decision-making, delegated authorities at different levels and Business assets and principal markets are located in the east,
south and middle part of China, where China's most developed and dynamic economy lies.
• business operations handled by specialized business units
CHINESE FEATURES / SOCIALIST STATE
1978 Deng Xiaopin• Introduced a program of market socialist reform;China has since grown & became a regional & global
economic force;China has recorded double digit real GDP growth since
1980’s;China is said to be contributing app. Half of the Asian
GDP;Since the reform, GDP rose from 150 Billion USD to
more than 1.6 trillion USD;Under this regime private sector share of GDP rose
from less than 1% in 1978 to app. 70% in 2005.
2005 MARKET REFORM
Privatisation was almost halted / partially reversed;
All strategic industries were consolidated into SOE, the rational being to increase international competitive national industries;
There are about 150 or more large SOE reporting to Govt.
SOE’s contribute to increased state revenue.Private ownership is in the main restricted to
secondary & service industries.
CHINESE FEATURES
Macroeconomic policies and government regulations government is liberalizing the market entry regulations on petroleum and
petrochemicals sector Sector is subject to entry regulations to a certain degree
- Including issuing of licences- Setting maximum retail and distribution prices for diesel, gasoline & jet fuels- Imposing of special levies, tax and fees- Formulation of quotas for import and export
Exchange Rate: China implements an administered floating exchange rate
regime based on market supply and demand with reference to a basket of currencies in terms of the exchange rate of RMB.
43%
27%
13%
8% 7%2%
Market Share of the petroleum industry
State owned 44%Sinopec 28.2%PetroChina 12.9%CNCP 7.7%Joint Venture 7.3%Multi-National 0.2%
Participation of Multi - Nationals
•Partnerships have been established with SHELL & BP in the main. SOE still dominant
OPPORTUNITIES
China has largest automotive market 1,3 billion people;2nd Largest oil consuming nation; China is concerned with energy security & has vested
interest in cleaner & efficient fuels;Country is leading in key alternative fuels research &
govt. is investing billions in R&D;Govt. intends to deregulate the sector to address
chronic inefficiencies of current distribution. Opportunities exists for foreign oil companies to join
forces with the 3 local oil companies on upstream & downstream.
CONCLUSIONS
The petro-chemical industry is amongst the strategic industries controlled by he state; More especially the upstream activities Multi-nationals are allowed some in downstream activities
Since China is not well endowed with crude oil resources, the govt favors meaningful partnerships with other govt & multinationals in oil rich countries; Technological investment Financial investment
Opportunities for foreign companies exist in green technologies, JVs & partnerships
End!
THANK YOU ALL!