Page 202 - 2017 White Paper
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7 White Paper on the Business Environment in China
Towards year-end last year, the industry was being overdue – the key learnings from such a disaster still needs
squeezed on both ends of the supply chain. The Wall to be applied to the overall chemicals industry nationwide.
Street Journal summed up the Chinese chemical industry
supply chain conundrum as such: the country’s export To Welcome or Not to Welcome Foreign
ambitions in global chemicals, coupled with its slowing Investment
domestic economy, contributed to sharp overcapacity in
parts of the industry, with industry analysts observing that Even with the overall economy slowing down, China’s
the over-supply was squeezing margins of major chemical appetite for energy continues unabated. Tantalizingly, this
companies (Spegele 2015). appetite may lead to the government possibly entertaining
a strategy of opening up former government-only sectors
At the same time, the industry was still reeling from a to outside investment, for the first time ever.
series of disastrous explosions, which had already caused
the Chinese public to mistrust and fear the chemicals In 2016, China’s oil imports increased by 16% from
industry and its government regulators. In April 2015, an last year, with the country poised to pass the U.S. as the
explosion hit the Gulei PX factory in Zhangzhou, leaving world’s largest crude oil importer. China’s domestic oil
15 people injured. The accident involved paraxylene, a production peaked last year at approximately 4.3 million
chemical used in making polyester fibre and plastics. A barrels per day (bpd), the Wall Street Journal reports. As
similar explosion had actually happened at the same plant for its foreign oil dependency rate, however, Xinhua,
in 2013, which had prompted local officials to promise citing Qian Xingkun, deputy head of the China National
residents such accidents would never happen again. Also Petroleum Corporation (CNPC) Economics & Technology
in 2013, explosions at a refinery of state-owned PetroChina Research Institute in January 2016, said that the country’s
in Dalian left two people injured and two missing. The foreign oil dependency rate would reach 62% this year as
company had five incidents of fires and blasts in just oil and energy demand continues to grow at 4.3% due to
over a year around 2011. In 2015, three other explosions car ownership increases, urbanization advances and filling
occurred in chemical plants across China, as noted by strategic reserves (Daiss 2016).
NGOCN, a Guangzhou-based support group for volunteers
and NGOs. But by far the single most damaging incident An intriguing plan outlined by the head of the
to the industry was the series of noxious chemical-related National Development and Reform Commission (NDRC),
explosions which rocked Tianjin port area on August Xu Shaoshi, during a March 2016 press conference in
12, 2015, killing 179 people, including 104 firefighters, Beijing, proposed the launch of pilot programs for “mixed
hundreds injured, thousands evacuated and a direct ownership” in oil and gas industries currently run by state-
economic loss of 6.8 billion yuan (US$ 1.2 billion). The blast owned enterprises. No specific oil and gas opportunities
zone became a wasteland of incinerated cars, crushed were specified as open for outside investment (Forest
shipping containers, and burnt-out buildings (Huang 2016b).
2015).
Following on the heels of the announcement of the
An environmental monitoring station was established mixed ownership program came the news of China
by the Ministry of Environmental Protection to scrutinize National Offshore Oil Corp (CNOOC), one of the country’s
the port and surrounding areas 24 hours a day. The city biggest oil and gas players, offering up a slate of offshore
checked more than 2,000 enterprises that dealt with drilling opportunities for foreign partners. According to
dangerous substances and chemicals for four months Reuters, the licenses on offer included 18 offshore blocks
after the blast. Cards of different colors were given to these in Chinese waters, including Bohai Bay, South Yellow Sea,
enterprises to indicate if they had to halt production and Pearl River Mouth, Yinggehai, and Qiong Dongnan basins.
bring their operations up to standard. Blue cards meant no With some of the blocks covering deepwater plays —
action was required, but yellow and red cards meant they where CNOOC will reportedly offer preferential terms to
had to immediately check their workshops and processes attract skilled partners (Forest 2016b).
(Hu 2016).
The surprising trend continued in August 2016, when
While the aftermath resulted in an extensive industry- China Petroleum and Chemical Corp. (Sinopec) announced
wide clean-up in the wider Tianjin area, perhaps long that it was selling up to a 50% stake in a key pipeline asset,
the Sichuan-East China natural gas pipeline, to foreign
202
Towards year-end last year, the industry was being overdue – the key learnings from such a disaster still needs
squeezed on both ends of the supply chain. The Wall to be applied to the overall chemicals industry nationwide.
Street Journal summed up the Chinese chemical industry
supply chain conundrum as such: the country’s export To Welcome or Not to Welcome Foreign
ambitions in global chemicals, coupled with its slowing Investment
domestic economy, contributed to sharp overcapacity in
parts of the industry, with industry analysts observing that Even with the overall economy slowing down, China’s
the over-supply was squeezing margins of major chemical appetite for energy continues unabated. Tantalizingly, this
companies (Spegele 2015). appetite may lead to the government possibly entertaining
a strategy of opening up former government-only sectors
At the same time, the industry was still reeling from a to outside investment, for the first time ever.
series of disastrous explosions, which had already caused
the Chinese public to mistrust and fear the chemicals In 2016, China’s oil imports increased by 16% from
industry and its government regulators. In April 2015, an last year, with the country poised to pass the U.S. as the
explosion hit the Gulei PX factory in Zhangzhou, leaving world’s largest crude oil importer. China’s domestic oil
15 people injured. The accident involved paraxylene, a production peaked last year at approximately 4.3 million
chemical used in making polyester fibre and plastics. A barrels per day (bpd), the Wall Street Journal reports. As
similar explosion had actually happened at the same plant for its foreign oil dependency rate, however, Xinhua,
in 2013, which had prompted local officials to promise citing Qian Xingkun, deputy head of the China National
residents such accidents would never happen again. Also Petroleum Corporation (CNPC) Economics & Technology
in 2013, explosions at a refinery of state-owned PetroChina Research Institute in January 2016, said that the country’s
in Dalian left two people injured and two missing. The foreign oil dependency rate would reach 62% this year as
company had five incidents of fires and blasts in just oil and energy demand continues to grow at 4.3% due to
over a year around 2011. In 2015, three other explosions car ownership increases, urbanization advances and filling
occurred in chemical plants across China, as noted by strategic reserves (Daiss 2016).
NGOCN, a Guangzhou-based support group for volunteers
and NGOs. But by far the single most damaging incident An intriguing plan outlined by the head of the
to the industry was the series of noxious chemical-related National Development and Reform Commission (NDRC),
explosions which rocked Tianjin port area on August Xu Shaoshi, during a March 2016 press conference in
12, 2015, killing 179 people, including 104 firefighters, Beijing, proposed the launch of pilot programs for “mixed
hundreds injured, thousands evacuated and a direct ownership” in oil and gas industries currently run by state-
economic loss of 6.8 billion yuan (US$ 1.2 billion). The blast owned enterprises. No specific oil and gas opportunities
zone became a wasteland of incinerated cars, crushed were specified as open for outside investment (Forest
shipping containers, and burnt-out buildings (Huang 2016b).
2015).
Following on the heels of the announcement of the
An environmental monitoring station was established mixed ownership program came the news of China
by the Ministry of Environmental Protection to scrutinize National Offshore Oil Corp (CNOOC), one of the country’s
the port and surrounding areas 24 hours a day. The city biggest oil and gas players, offering up a slate of offshore
checked more than 2,000 enterprises that dealt with drilling opportunities for foreign partners. According to
dangerous substances and chemicals for four months Reuters, the licenses on offer included 18 offshore blocks
after the blast. Cards of different colors were given to these in Chinese waters, including Bohai Bay, South Yellow Sea,
enterprises to indicate if they had to halt production and Pearl River Mouth, Yinggehai, and Qiong Dongnan basins.
bring their operations up to standard. Blue cards meant no With some of the blocks covering deepwater plays —
action was required, but yellow and red cards meant they where CNOOC will reportedly offer preferential terms to
had to immediately check their workshops and processes attract skilled partners (Forest 2016b).
(Hu 2016).
The surprising trend continued in August 2016, when
While the aftermath resulted in an extensive industry- China Petroleum and Chemical Corp. (Sinopec) announced
wide clean-up in the wider Tianjin area, perhaps long that it was selling up to a 50% stake in a key pipeline asset,
the Sichuan-East China natural gas pipeline, to foreign
202
