Page 192 - 2018 White Paper on the Business Environment in China
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8 White Paper on the Business Environment in China
price of fuel and diesel will be more market-oriented, reforms that the industry more than likely needs. China’s
but the government will still step in when abnormal domestic oil output has dropped by 6 percent in 2017 to
price fluctuations occur (Bignell). 3.9 million barrels per day due to high production costs.
Imports had to meet the demand growth (Lelyveld).
As part of new plans, China’s government announced
it would also allow private companies to invest in the The Wall Street Journal claims CNPC, Sinopec and
country’s oil and gas storage sector. The State Council CNOOC all spend too much money employing too many
admitted it will increase government investment in the people while being expected to sell fuel at a discount
country’s own oil storage facilities, while also allowing when prices rise sharply. CNPC alone had over 500,000
non-state firms to operate storage. Although no further workers in 2016, but produced only slightly more oil and
details were released (Bignell), oil heavyweights began less natural gas than Exxon Mobil’s 71,000 employees.
taking action by middle of the year. Sinopec Group The company’s labor costs clocked in at nearly $17
announced plans to cooperate with private companies in billion, more than three times its actual earnings (Taplin).
the sale of refined oil, while the CNPC said it would allow Analysts claim the guidelines move the industry in the
private companies to hold no more than 49 percent of right direction toward reforms, but how far and how
stake in oil exploration businesses. China aims to increase fast is still up in the air. The reforms could actually lead
domestic crude oil output to 200 million tons by 2020 to “some erosion of the national oil companies (NOCs)’
according to government plans published in January current dominant market positions,” said a review by
2017 (Liu). London-based Fitch Ratings. “The opinions continue the
government’s drive to reform the oil and gas industry,”
Within a couple of months of its announcement, Fitch said. “However, the government has not set any
China’s reform plan for its oil and gas industry drew mixed timelines or taken any substantial regulatory measures,
reviews. The Big Three oil companies have been pressured which imply the execution of the reforms will take time”
by the decline in world oil prices since mid-2014, (Song, Expansion of Oil).
although first-quarter earnings in 2017 showed a partial
recovery at both CNPC and Sinopec after recent price Meanwhile, China will fast track developing oil and
increases. CNOOC does not report quarterly earnings, gas distribution in the next decade to ensure energy
but industry insiders claim revenues rose 55.8 percent security and help boost industry. According to a plan
due to higher prices. The National Development and by the National Development and Reform Commission
Reform Commission said that nearly 20 SOEs had opened and the National Energy Administration, the nation
their doors to mixed-ownership investments. Other than will have an oil and gas distribution network as long as
Sinopec’s decision to sell up to a 30-percent share in 240,000 kilometers by 2025, up from 112,000 km at the
its marketing operations for oil products to “social and end of 2015. Focus will be on the northeast, northwest
private investors,” examples of such partial privatization and southwest regions, which lack pipelines to export
in the petroleum sector remain few. CNPC announced it oil and gas. China expects to improve energy supply
is ready for private interests to take up to a minority share and transport self-sufficiency in the next decade and will
of 49 percent in its exploration activities (Lelyveld). CNPC upgrade equipment to help it better deal with natural
Chairman Wang Yilin said that the country’s biggest oil disasters. Upgrading the energy transport system will
and gas company wants to import more U.S. supplies and also boost the heavy machinery industry and engineering
will consider participating in projects, while Sinopec’s industries. The developing energy network will cover the
trading unit, Unipec, is also considering the U.S. as a country. Oil channels will reach cities with more than one
producer for possible long-term liquefied natural gas million residents and the gas network will cover those
contracts starting in 2022. China oil explorers are not the with at least 500,000 by 2025. Officials also set a mid-
only ones being lured by cheap, plentiful reserves and the term target for the network to reach 169,000 km by 2020.
possibility of greater sales from America. Qatar Petroleum Natural gas will be given higher priority for development
International Ltd has now teamed up with Exxon Mobil (Song, Expansion of Oil).
Corp. to build a $10 billion natural gas export plant in
Texas – winning approval by federal energy regulators in Clean Electricity
2016 (Bignell). The latest reform announcement may push
the door slightly more open for private investment in 2016 also saw a dramatic increase in China’s investment
China’s national oil companies, but it falls far short of the in renewable energy production – making it the biggest
192
price of fuel and diesel will be more market-oriented, reforms that the industry more than likely needs. China’s
but the government will still step in when abnormal domestic oil output has dropped by 6 percent in 2017 to
price fluctuations occur (Bignell). 3.9 million barrels per day due to high production costs.
Imports had to meet the demand growth (Lelyveld).
As part of new plans, China’s government announced
it would also allow private companies to invest in the The Wall Street Journal claims CNPC, Sinopec and
country’s oil and gas storage sector. The State Council CNOOC all spend too much money employing too many
admitted it will increase government investment in the people while being expected to sell fuel at a discount
country’s own oil storage facilities, while also allowing when prices rise sharply. CNPC alone had over 500,000
non-state firms to operate storage. Although no further workers in 2016, but produced only slightly more oil and
details were released (Bignell), oil heavyweights began less natural gas than Exxon Mobil’s 71,000 employees.
taking action by middle of the year. Sinopec Group The company’s labor costs clocked in at nearly $17
announced plans to cooperate with private companies in billion, more than three times its actual earnings (Taplin).
the sale of refined oil, while the CNPC said it would allow Analysts claim the guidelines move the industry in the
private companies to hold no more than 49 percent of right direction toward reforms, but how far and how
stake in oil exploration businesses. China aims to increase fast is still up in the air. The reforms could actually lead
domestic crude oil output to 200 million tons by 2020 to “some erosion of the national oil companies (NOCs)’
according to government plans published in January current dominant market positions,” said a review by
2017 (Liu). London-based Fitch Ratings. “The opinions continue the
government’s drive to reform the oil and gas industry,”
Within a couple of months of its announcement, Fitch said. “However, the government has not set any
China’s reform plan for its oil and gas industry drew mixed timelines or taken any substantial regulatory measures,
reviews. The Big Three oil companies have been pressured which imply the execution of the reforms will take time”
by the decline in world oil prices since mid-2014, (Song, Expansion of Oil).
although first-quarter earnings in 2017 showed a partial
recovery at both CNPC and Sinopec after recent price Meanwhile, China will fast track developing oil and
increases. CNOOC does not report quarterly earnings, gas distribution in the next decade to ensure energy
but industry insiders claim revenues rose 55.8 percent security and help boost industry. According to a plan
due to higher prices. The National Development and by the National Development and Reform Commission
Reform Commission said that nearly 20 SOEs had opened and the National Energy Administration, the nation
their doors to mixed-ownership investments. Other than will have an oil and gas distribution network as long as
Sinopec’s decision to sell up to a 30-percent share in 240,000 kilometers by 2025, up from 112,000 km at the
its marketing operations for oil products to “social and end of 2015. Focus will be on the northeast, northwest
private investors,” examples of such partial privatization and southwest regions, which lack pipelines to export
in the petroleum sector remain few. CNPC announced it oil and gas. China expects to improve energy supply
is ready for private interests to take up to a minority share and transport self-sufficiency in the next decade and will
of 49 percent in its exploration activities (Lelyveld). CNPC upgrade equipment to help it better deal with natural
Chairman Wang Yilin said that the country’s biggest oil disasters. Upgrading the energy transport system will
and gas company wants to import more U.S. supplies and also boost the heavy machinery industry and engineering
will consider participating in projects, while Sinopec’s industries. The developing energy network will cover the
trading unit, Unipec, is also considering the U.S. as a country. Oil channels will reach cities with more than one
producer for possible long-term liquefied natural gas million residents and the gas network will cover those
contracts starting in 2022. China oil explorers are not the with at least 500,000 by 2025. Officials also set a mid-
only ones being lured by cheap, plentiful reserves and the term target for the network to reach 169,000 km by 2020.
possibility of greater sales from America. Qatar Petroleum Natural gas will be given higher priority for development
International Ltd has now teamed up with Exxon Mobil (Song, Expansion of Oil).
Corp. to build a $10 billion natural gas export plant in
Texas – winning approval by federal energy regulators in Clean Electricity
2016 (Bignell). The latest reform announcement may push
the door slightly more open for private investment in 2016 also saw a dramatic increase in China’s investment
China’s national oil companies, but it falls far short of the in renewable energy production – making it the biggest
192
