Page 120 - 2015_WhitePaper_web
P. 120
5 White Paper on the Business Environment in China
shortage in diesel fuel. According to Reuters, “State re ners 2002 and 2015.”57
had said the teapots had reduced runs or shut down because While the May 12, 2008 earthquake in Sichuan caused
they were unwilling to put up with negative margins,” while
“Several independent re ners […] said the real problem was a massive disruption in transportation links as well as manu-
lack of feedstock.” e fact that “independents largely re ne facturing operations (although the concentration of chemi-
fuel oil as feedstock because crude oil imports are tightly cal manufacturers in a ected areas was reportedly not as high
controlled by the state-run re ners” would seem to lend as in other regions)58, a larger concern for the sector turned
credence to their complaints.52 out to be downstream users of chemical products—while the
brunt of the initial e ects of the global economic slowdown
Accordingly, it was reported that several independent re- in China was borne primarily by exporters, many providers
ners were forced to “[sell] stakes to state re ners such as Pet- of raw materials faced signi cant di culties as production
roChina and China National O shore Oil Corp (CNOOC) slowed and customers stopped ordering. Often singled out,
in exchange for crude oil supplies.”52 for example, were producers of polyester.59
is situation appears an entirely domestic one, and the Exemplary of this di culty was the case of Zhejiang Hual-
eld is likely to remain a mostly “locals-only” game accord- ian Sunshine Petro-Chemical, which was deemed, much as
ing to one foreign petro-executive: “Nationalization is gaining banks in the U.S. were, ‘too big to fail’. Accounting for nearly
pace in many sectors in China, I doubt China is heading for a half the scal revenue of its home municipality, the company
liberalized oil market any time soon.”52 was the recipient of a “virtually unprecedented o er of gov-
ernment money to a non-state rm” totaling some 1.5 billion
Indeed, “CNOOC aims to more than double its annual yuan in order to resume operation.59
output to 2.6 million barrels per day by 2020 under a strat-
egy [Chairman Wang Yilin] dubs the company’s ‘New Leap Regardless of relative slowdown during 2008 and 2009
Forward.’”53 things began to look up in 2010, with recovery noted in
downstream sectors.60 A KPMG survey showed similar down-
Indeed, in December 2011, new restrictions were issued stream growth as a result of an increased focus on domestic
on foreign participation in re ning, with the minimum ca- consumption.61 e report went on to identify four key is-
pacity for crude oil distillation being raised to 200,000 bar- sues it expects to in uence the chemical industry’s outlook in
rels per day (up from 160,000 barrels per day), the minimum coming years:
threshold for investment in catalytic cracking capacity and
hydrocracking capacity both being set to 1.5 million tonnes 1. Chinese government’s goal to shift the current
per year and that for continuous reforming capacity being set production model towards a more balanced and resilient
to 1 million tonnes per year.54 one, as set out in the 12th Five-Year Plan;
Interestingly, the one improvement for foreign enterprises 2. Both new and old mega-trends which include increased
in that round of market access adjustments was the result internal demand in China, continuous urbanization,
of “the government [encouraging] foreign investment in ex- shifts in value chains and environmental awareness;
ploration and development of unconventional oil resources
including shale oil, oil sands and heavy oil, and unconven- 3. Enhanced economic and financial volatility in global
tional gas resources including shale gas and seabed gas hydrate markets; and
through joint ventures or cooperation deals with domestic
companies.”54 4. Market dynamics which can narrow the gap between
local Chinese manufacturers and multinational players.61
Nonetheless, in 2012 foreign enterprises were excluded
from the rst shale gas tender that year, “despite a need for In late 2012, chemical purveyor BASF not only
overseas technology to help exploit massive reserves of gas completed a $1.4 billion petrochemical joint-venture with
trapped within shale rock formations in the world’s top energy China Petroleum and Chemical Corporation (also known as
user.”55 e Financial Times later reported that foreign-funded Sinopec) in Nanjing62, but also “inaugurated” an unsubtly-
joint ventures were permitted to bid in a second round later named “innovation campus” in Shanghai—the company’s
that year.56
rst such facility in Asia Paci c, according to China Daily.63
While energy-related chemicals saw a decline in produc- In addition to KPMG’s positive outlook and foreign par-
tion and consumption as a result of the global economic slow-
down, it appeared to be non-energy related chemicals that ties’ increased participation in the sector, here has also been an
were hardest hit, and in the face of strong historical growth increase in ‘NIMBY’, or “Not In My Backyard” protests by
and optimism about future progress—it was noted in 2005 ordinary Chinese citizens against industrial projects; in sev-
by the Royal Society of Chemistry’s monthly journal that eral cases, the source of locals’ ire has been a chemical facility
“demand for chemicals in China expected to double between planned to produce paraxylene (PX).
120 In late 2012 protests against one such planned expansion by
shortage in diesel fuel. According to Reuters, “State re ners 2002 and 2015.”57
had said the teapots had reduced runs or shut down because While the May 12, 2008 earthquake in Sichuan caused
they were unwilling to put up with negative margins,” while
“Several independent re ners […] said the real problem was a massive disruption in transportation links as well as manu-
lack of feedstock.” e fact that “independents largely re ne facturing operations (although the concentration of chemi-
fuel oil as feedstock because crude oil imports are tightly cal manufacturers in a ected areas was reportedly not as high
controlled by the state-run re ners” would seem to lend as in other regions)58, a larger concern for the sector turned
credence to their complaints.52 out to be downstream users of chemical products—while the
brunt of the initial e ects of the global economic slowdown
Accordingly, it was reported that several independent re- in China was borne primarily by exporters, many providers
ners were forced to “[sell] stakes to state re ners such as Pet- of raw materials faced signi cant di culties as production
roChina and China National O shore Oil Corp (CNOOC) slowed and customers stopped ordering. Often singled out,
in exchange for crude oil supplies.”52 for example, were producers of polyester.59
is situation appears an entirely domestic one, and the Exemplary of this di culty was the case of Zhejiang Hual-
eld is likely to remain a mostly “locals-only” game accord- ian Sunshine Petro-Chemical, which was deemed, much as
ing to one foreign petro-executive: “Nationalization is gaining banks in the U.S. were, ‘too big to fail’. Accounting for nearly
pace in many sectors in China, I doubt China is heading for a half the scal revenue of its home municipality, the company
liberalized oil market any time soon.”52 was the recipient of a “virtually unprecedented o er of gov-
ernment money to a non-state rm” totaling some 1.5 billion
Indeed, “CNOOC aims to more than double its annual yuan in order to resume operation.59
output to 2.6 million barrels per day by 2020 under a strat-
egy [Chairman Wang Yilin] dubs the company’s ‘New Leap Regardless of relative slowdown during 2008 and 2009
Forward.’”53 things began to look up in 2010, with recovery noted in
downstream sectors.60 A KPMG survey showed similar down-
Indeed, in December 2011, new restrictions were issued stream growth as a result of an increased focus on domestic
on foreign participation in re ning, with the minimum ca- consumption.61 e report went on to identify four key is-
pacity for crude oil distillation being raised to 200,000 bar- sues it expects to in uence the chemical industry’s outlook in
rels per day (up from 160,000 barrels per day), the minimum coming years:
threshold for investment in catalytic cracking capacity and
hydrocracking capacity both being set to 1.5 million tonnes 1. Chinese government’s goal to shift the current
per year and that for continuous reforming capacity being set production model towards a more balanced and resilient
to 1 million tonnes per year.54 one, as set out in the 12th Five-Year Plan;
Interestingly, the one improvement for foreign enterprises 2. Both new and old mega-trends which include increased
in that round of market access adjustments was the result internal demand in China, continuous urbanization,
of “the government [encouraging] foreign investment in ex- shifts in value chains and environmental awareness;
ploration and development of unconventional oil resources
including shale oil, oil sands and heavy oil, and unconven- 3. Enhanced economic and financial volatility in global
tional gas resources including shale gas and seabed gas hydrate markets; and
through joint ventures or cooperation deals with domestic
companies.”54 4. Market dynamics which can narrow the gap between
local Chinese manufacturers and multinational players.61
Nonetheless, in 2012 foreign enterprises were excluded
from the rst shale gas tender that year, “despite a need for In late 2012, chemical purveyor BASF not only
overseas technology to help exploit massive reserves of gas completed a $1.4 billion petrochemical joint-venture with
trapped within shale rock formations in the world’s top energy China Petroleum and Chemical Corporation (also known as
user.”55 e Financial Times later reported that foreign-funded Sinopec) in Nanjing62, but also “inaugurated” an unsubtly-
joint ventures were permitted to bid in a second round later named “innovation campus” in Shanghai—the company’s
that year.56
rst such facility in Asia Paci c, according to China Daily.63
While energy-related chemicals saw a decline in produc- In addition to KPMG’s positive outlook and foreign par-
tion and consumption as a result of the global economic slow-
down, it appeared to be non-energy related chemicals that ties’ increased participation in the sector, here has also been an
were hardest hit, and in the face of strong historical growth increase in ‘NIMBY’, or “Not In My Backyard” protests by
and optimism about future progress—it was noted in 2005 ordinary Chinese citizens against industrial projects; in sev-
by the Royal Society of Chemistry’s monthly journal that eral cases, the source of locals’ ire has been a chemical facility
“demand for chemicals in China expected to double between planned to produce paraxylene (PX).
120 In late 2012 protests against one such planned expansion by
