Sinopec Essay

Built upon the former China Petrochemical Company, Sinopec Corporation was founded in 1998. Sinopec Corporation is a publicly listed company in which 68 percent interest is held by Sinopec Group (Sinopec). With its headquarters in Beijing, China, Sinopec is a state-owned enterprise (SOE) of the Chinese government. After two decades’ development, Sinopec has become one of the largest petroleum and petrochemical companies in Asia and ranks seventh in the world.

Sinopec is an integrated energy and chemical company with upstream (exploring for crude oil and natural gas), midstream (producing refined oil), and downstream (producing petrochemical products) operations. It comprises more than 80 subsidiaries and branches in six business sectors: oil and gas exploration, refining, chemicals, marketing, research and development (R&D), and foreign trade. The formats of these companies include wholly owned, equity holding, and equity sharing. As the largest Chinese petrochemical company, Sinopec’s business assets and operations are mainly located in the east, south, and middle of China, the most well-developed areas and dynamic economic zones in China.

In the fast-developing petroleum market in China, Sinopec has firmly grasped the opportunities and grown rapidly. As the most recognizable brand in the Chinese petrochemical market, Sinopec’s competitive advantages are reflected in its brand reputation, leading market position in China, and its emphasis on technological innovation. In addition to Sinopec’s internal strengths, operating in the petroleum and petrochemical industry, the highest economic growth area in China, has facilitated Sinopec’s development.

As the largest producer and distributor of petrochemical products in China and Asia, Sinopec’s record of growth has been strong. In 2006 its output of crude oil of 40.17 million tons and natural gas of 7.27 billion cubic meters made it the second-largest producer of crude oil and natural gas in China. As the key provider of energy in China, Sinopec keeps refineries running at full capacity and guarantees a stable supply for the domestic oil product market. Since its foundation, Sinopec has ensured its leading market position in the Chinese petrochemical market. In 2005 Sinopec ranked first in the top 500 Enterprises of China and 17th in the Fortune Global 500 in 2007, up from its rank of 23rd in 2006.

Listing on the stock exchange markets was a milestone in the history of Sinopec’s development. In October 2000 and August 2001, Sinopec Group issued H-shares and A-shares in both overseas and home stock markets in New York, London, Hong Kong, and Shanghai. By 2007 Sinopec had a total of 86.7 billion shares, 75.84 percent of which is held by Sinopec Group, 19.3 percent by foreign investors, and 4.81 percent by domestic investors in China.

In addition to its strong brand and leading market position, Sinopec has successfully promoted technological innovation throughout its business. To maintain its cost leadership market position, Sinopec has been insisting on innovation as one of its core values. Since its foundation, Sinopec has established six research institutions and invested a vast amount of resources to sustain its technological competitive edge. Sinopec’s R&D team provides the requisite technology and knowledge and applies them to its production and operations. By the end of 2005, Sinopec held 5,466 valid patents. In 2007 the company applied for 905 domestic patents and 122 foreign patents, of which 677 were granted.

Additionally, China’s continuing economic growth and huge domestic demand for oil and petrochemical products puts Sinopec in a more favorable market position than other industries in China. Compared with two decades ago, China’s economic growth has witnessed remarkable changes. Consequently, the Chinese petroleum and chemical industry has rapidly developed. In 1993 domestic demand for gasoline, kerosene, and diesel was 7,600 million tons. This figure increased to 1.6 billion in 2007. Experts predict that by 2010, China’s domestic demands will increase to 1.89 billion tons. Undoubtedly, the market demands in petroleum and chemical products in China created business opportunities for Sinopec in the past and will bring more opportunities for it in the future.

Bibliography:

  1. S. Chu, “Marketing Development Is the Natural Choice of the Chinese Petroleum Industry Reform,” Securities News (June 6, 2008);
  2. Wang Jun, “Gasoline Supplier Sinopec,” Beijing Review (v.51/10, 2008);
  3. Sinopec, Sinopec Annual Report (2007), www.english.sinopec.com (cited March 2009);
  4. M. Wang, “Analysis of the Chinese and Foreign Petroleum Market Trends Under the Pressure of High Oil Price,” International Petroleum Economics (v.15/12, 2007);
  5. M. Wang, “The World Energy Outlook 2007,” International Petroleum Economics (v.15/11, 2007).

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