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Analysis Report on Merging and Restructuring Decision-Making in China¨s Oil Industry

Abstract :

1 Current China 's oil industry

Oil industry is an industry with high and risky investing concentration. Overseas oil corporations are combined upstream and downstream businesses into one, and their business covers all over the world. The imbalance of global economic development makes their investment return in different regions is different. In overall production chain, the investment return in different times is quite different in upstream (reconnaissance and exploitation), midstream (pipeline transportation) and downstream (oil refining and selling), as well as chemical business. The difference makes international oil corporations have more choices. And those corporations are concerning about how to fully, reasonably make sure of investment scale and field to seek higher investment return.

Since 2006, oil processing and coking industries are decreasing faster, and the whole industrial GDP decreased than that in the last year. Also, in sub-industries, oil processing, petroleum products manufacturing and coking industries, their growth is slower than that in the last year, especially coking industry. In aspect of saleroom, the growth speed is slower, but in coking industry, the growth speed of saleroom is decreasing very fast.

In May 2006, the overall industry reached GDP 579.934Billion, increased 29.9% than that in the last year, but growth speed decreased 61%; they totally sold 567.045billion, increased 29.36%, but decreased 74.6% in growth speed.

In sub-industries, the growth speed has had a little increase in crude oil refining and related products manufacturing. In May 2006, the GDP in theses two industries increased 32.81% than that in the last year; growth speed decreased 1.9%; total saleroom increased to 32.06%, decreased 26.7% in growth speed.

Because of slowering down in steel industry and export control, the growth speed of coking industry has been continued to decrease. In May 2006, total industrial output value, an increase of 9.27% coking industry, significantly higher than the growth rate dropped by 47.73 percentage points year-on-year; total sales revenue showed an increase of 9.62%. The growth rate of 46.03% over the same period last year declined substantially.

Since 2006, Chinese oil output in the international market and high oil prices driven by the rapid growth of the domestic economy continues to grow : first half of the domestic crude oil output reached 91.664 million tons, an increase of 2.1% refined oil output reached 84.822 million tons, an increase of 5.6%. Output of crude oil and finished oil products over the same period last year although the growth rate dropped by 2.7 and 1.4 percentage points respectively. However, the absolute value is output hit historic high. With regard to import and export, 06, the first half of the year, China 's net import of 70.33 million tons of crude oil, an increase of 17.6% net import of 12.03 million tons of refined oil, a year-on-year increase of 48.3%.

China 's oil demand has been filled with dynamic international price of oil has risen sharply in the past two years as a key factor. China has replaced Japan as the world's second largest oil consumption; China 's oil demand is estimated that 10 years from the current level of 6 million barrels per day to 11.5 million barrels expansion nearly doubled. Ten years ago, the ratio of oil imports accounted for only 6% of total oil demand, has risen to third. 2020 is expected to be 60% of oil imports. Automobile gasoline and diesel consumption will be the main driving force of business. Chemical ethylene industrial development will fuel further rise, China needs to import more oil. The next 20 years, while domestic crude oil output will continue to show an upward trend, it is limited. expected in 2010 and 2020, output will reach 170 million tons and 180 million tons.

Although China 's petrochemical industry was mixed, with opportunities as well as challenges. However, since China and the reality of the petrochemical products have tremendous potential market demand, the development of the industry as a whole had just entered the mature stage. Therefore, the dominant position in the national economy will continue to exist for quite a long time, the prospects remain favorable.

2 Merging and restructuring purposes in oil industry

1 、 Deepening economic globalization. Nowadays, economic globalization is the trend. Along with the deepening of the process, corporate mergers and acquisitions sweeping the globe, especially since the beginning of the 21st century. Transnational mergers and acquisitions group reached an unprecedented active state. M & Exchange from the amount of money involved, industry, geographical, has intensified. IBM century that the further promotion of cross-border mergers between capital flows and trade development, essentially deepening of the integration of global, international competition has intensified. accelerate technological progress and the multinational reorganization and restructuring wave.

2 、 Many countries now are opening their oil market. Since people into the 21st century, the country's oil resources to promote the development of its oil industry; gradually relaxing or lifting of the monopoly control of its oil industry, the introduction of a series of open door policy. Many major oil-producing countries, such as Latin American countries such as Venezuela, Brazil, Argentina, Peru, Ecuador, the Asia-Pacific region in Indonesia, Malaysia, Vietnam, Papua New Guinea, so as to revive its oil industry, promoting economic recovery and development, attract foreign investment and encourage international cooperation. for foreign oil companies involved in the funds and technology has opened up a new space for cooperation. Even by the special nationalization of the oil industry since the 1970s to achieve foreign oil companies have been allowed into the country exploration and development of oil producers also began to market in the Middle East policy looser. Capital markets and the market for petroleum resources in a dual mechanism, these countries to gradually relax its control over the oil industry. Open up its oil market for the oil transnational business approach provided an unprecedented broad market. Created a situation of the global oil resources.

3 、 Global strategies of international oil corporations. Multinational companies across national boundaries, and the whole world as a unified economic unit. its chain of the industry value chain in the best position to achieve its strategic goal of globalization. The 21st century, the new situation in the oil market and competition intensifies, many Western oil corporations like Exxon. Shell Oil, Mobil, British Petroleum and other forward to globalization phase, From multinational corporations have developed into a global company focused on global strategy. The " Union " and "joint", "merger" and "acquisition ', etc., to increase revenue. increase the company's economic development strategy has become the first choice for the multinational oil companies. Meanwhile, the developing countries are difficult to international oil companies approached the stage, More and more large companies are setting international, global strategy.

4 、 Pushing by new technology and low cost. World oil and gas technology has made rapid progress and revolutionary advances are leading to a significant decline in exploration and production costs. Multinational oil companies in China and the contribution rate of science and technology has been over 60%. Three-dimensional seismic imaging technology to improve the accuracy of the geological structure of the observed increase the success rate of exploratory wells; wider application of horizontal well technology has markedly enhanced the production wells, and the successful development of a number of direct and difficult to use commercial sexual exploitation of the oil field; Underwater recovery technology greatly reduces the cost of exploration and exploitation of the sea, but also the deep sea recovery possible. The application of these technologies for oil companies is to save billions of dollars. New technologies, increasing the proved reserves and the global oil supply, exploration and processing by reducing operating costs, create huge economic benefits for the oil companies, the oil industry as a whole to promote innovation and progress. However, it is undeniable is that the new technology, which is a "double-edged sword" for the oil industry, one huge profit. The other, it also brings low-cost pressure, further exacerbating competition. In such serious challenges facing the volatile situation in the international market, Only large multinational oil companies can use their huge financial and technical resources, make full use of technology and regional differences buy oil reserves in the world oil market, the development of new markets.

5 、 Share split reform in China's securities market pushed merging and restructuring. As share split reform of the shares of listed companies into circulation from some of circulation. it shares with the full market value can be used as a means of payment. thus greatly reduced merger and reorganization of cash.

6 、 In aspect of business achievement, China's oil industry is far falling behind of other countries', so that China's oil industry has to integrate. Because of "transportation of coal, power and oil" bottleneck, and the four stages of the development of heavy industry and high-energy characteristics of the larger burden of staff constraints, More and more enterprises in China and its international counterparts to form an increasingly obvious others only high profits and loss situation. The most obvious example is the oil refining industry. Information, Australia 's biggest oil and gas producer Woodside Petroleum Ltd. record second quarter revenue. Others like the BP refinery, the world-renowned Singapore Refining Company refinery profits have also increased significantly; China 's oil refining companies have comprehensive loss. Shijiazhuang Refining Chemical Co., Ltd. announced on October 25 this year, the third quarter results show. Admission for the first three quarters of the company's main business 1177847 million. 1.34892 billion yuan main business profits and losses, a deficit of 1.36 yuan per share. Facing similar enterprises in China 's high-profit but a fall in the oil refining industry performance. The Chinese government will grant subsidies, such as the end of last year, Sinopec 10 billion yuan to subsidize the refinery. other industrial integration requirements of large enterprise groups, in the awkward position of solving the deficit alone.

7 、 China's government will gradually implement promises of entering WTO, which also quickened merging and restructuring in oil industry.


Two parties




CNPU purchased PK with 4.2billion USD.


CNPC, Liaohe Oil Field, Jinzhou Petrochemical Corporation, Jilin Chemical Company

CNPC purchased Liaohe Oil Field, Jinzhou Petrochemical Corporation, Jilin Chemical Company with 6.15billion RMB, CNPC holds respectively 67.29% 、 81.82% and 80.95%.


Sinopec, TNK-BP

CNPC purchased Udmurtneft, which is the sub-company of TNK-BP, with around 3billion USD.

3. Analysis on merging and restructuring trend in China 's oil industry

The soaring global oil price environment has also helped oil giants into China . China Petrochemical International listing not only increased the China Oil and several Chinese mainland and overseas Chinese oil industry group listing common strength, but also for the international strategic investors into China and the Chinese concept of a space. It can be expected that when involved in the oil industry in the international capital into horizontal integration, with the chemical industry. and the vertical integration of the pharmaceutical industry will be speeded up. The original "strategic industry" planning will become increasingly "global resource industry" nature of the market place.

European major transnational petrochemical companies in the merger and reorganization, Japan , South Korea , China 's oil refining industry reorganization and integration of the world's oil products distribution business reorganization and integration, greatly improving the competitive edge also changed the world of competition. Meanwhile, large companies from Europe and the United States in optimizing the allocation of resources, markets, rationally adjust the layout considerations, accelerated to China . India mainly to the pace of growth and expansion in Asia and other emerging markets. Shell refinery in Europe and the United States to consolidate its position in the market while actively into the Asia-Pacific and other emerging markets. in the Asia Pacific / Middle East oil operations in the occupied capital ratio from 2003 to 2010 to upgrade the 40 24%% Private consumption expenditure. Exxon Mobil's refining capacity above its 60%% focus on the Gulf coast of the United States, Western Europe, Japan, Southeast Asia (including China Fujian) four oil refining centers. Meanwhile, a number of countries and companies will change under the new situation, steps were taken to improve the competitive edge and enhance control of the market, adapt to high oil prices and the need to upgrade product quality measures and have achieved good results. Opening up new markets such as Brazil , India , China and the strengthening of crude oil and refined oil transportation route network, and placed under the control of state-owned companies. To meet the situation of high oil prices and lower costs, adapt to the changing needs of the quality of imported crude oil, India, China, petroleum and petrochemical companies in the United States and many of the refineries to strengthen the reform, the increase in sulfur crude oil, heavy crude processing capacity. Many large corporations for the world to step up the structural adjustment process, increase capacity and hydrogenation processing capacity. to promote industrial upgrading and a new generation of products, development of clean fuels and other high value-added petroleum products production. to meet their needs and requirements. Many companies also use modern information technology to actively carry out the refining and marketing performance evaluation, to promote efficiency and optimize the work of the various drop.

China 's petroleum and petrochemical industries is in the state of oligopoly with limited competition. According to analysis of us , world history and present situation of the development of the petroleum and petrochemical industries, As the scale and capital-intensive and technology-intensive notable features petroleum and petrochemical industry is an oligopoly in the market and the legal effect of the inevitable choice. In the context of globalization of the world economy and increasing competition that transcends national boundaries. Strong joint international and transnational mergers as a strategic option for companies improve their international competitiveness. China 's Entry into WTO and Chinese enterprises in economic strength, management, marketing, technology and operating systems with large multinational companies have, combined forces scattered, enable Chinese enterprises to multinational corporations in the face of strong competition thrown into passivity. The further integration of the domestic petrochemical industry is the rapid increase in a short period of time an important way to the international competitiveness of domestic enterprises.

Chapter One   Research Summary 
Section one   Background 
Section two   Content 
Section three Method 
Chapter Two Current Development of Global Oil Industry 
Section one   Developing features 
Section two   Supply and demand structure 
1、Production structure
2、Scale development 
3、Demand trend 
Section three  Analysis on competition structure of global oil industry 
4、Middle East 
Chapter Three  Analysis on Current China's Oil Industry 
Section one   Analysis on current features of China¨s oil industry 
10、Developing trend 
12、Competition structure 
13、Competition trend 
Section two   Analysis on current investment of China¨s oil industry 
14、Investment scale and features 
15、Investment benefit 
16、Scale structure 
Section three  Analysis on supply and demand relationship of China¨s oil industry 
17、Overall supply 
18、Demand scale 
19、Oil import and export 
Section four   Analysis on foreign capital oil industry in China 
20、Features and distribution 
21、Main modes 
22、Developing strategy 
Chapter Four  Analysis on Subdivided Market in China¨s Oil Industry 
Section one   Analysis on oil excavating market 
23、Market scale and current development 
24、Analysis on investment benefit and risk 
25、Prospect of market development
Section two   Analysis on oil refining market 
26、Market scale and current development
27、Analysis on investment benefit and risk
28、Prospect of market development
Section three  Analysis on oil reserves market 
29、Market scale and current development
30、Analysis on investment benefit and risk
31、Prospect of market development
Chapter Five   Analysis on Regional Development in China¨s Oil Industry 
Section one   Coastal area in East 
31.1Features and competitivity 
31.2Feasibility and trend 
Section two   Central area 
32、Features and competitivity
33、Feasibility and trend
Section three  West 
34、Features and competitivity
35、Feasibility and trend
Section four   Northeast 
36、Features and competitivity
37、Feasibility and trend
Chapter Six   Analysis on Import and Export of China¨s Oil Industry 
Section one   Basic information on import and export of oil industry in recent years 
Section two   Scale of import and export and developing trend 
Section three  Variety structure of importing and exporting products 
Section four   Main trade countries and regions 
Section five  Trade barriers 
Chapter Seven   Analysis on Political Environment in China¨s Oil Industry 
Section one   Effect of macroeconomic policy on oil industry 
Section two   Effect of industrial policy on oil industry 
Section three Effect of environmental protecting policy  on oil industry 
Chapter Eight   Analysis on Strategic Factors Affecting Development of Oil Industry 
38、Entering and seceding barriers 
38.1Features of entering barriers 
38.2Features of seceding barriers 
39、SWOT analysis on business development of China¨s oil industry 
Section two   Problems in development of China¨s oil industry 
Chapter Nine   Analysis on Current Merging and Restructuring in China¨s Oil Industry 
Section one   Background 
Section two   Features and trend 
Section three  Obstacles 
Chapter Ten   Analysis on Merging and Restructuring Cases in Overseas Oil Industry 
Section one   Exxon purchased Mobil 
43、Background and core value 
44、Process and plans 
45、Developing strategy after integration 
Section two   Mitsubishi Oil Company incorporated with Cosmo Oil Company 
46、Background and core value 
47、Process and plans 
48、Developing strategy after integration 
Section three   Yukos incorporated with Sibneft
49、Background and core value 
50、Process and plans 
51、Developing strategy after integration 
Section four   Shell purchased Enterprise Oil PLC
52、Background and core value 
53、Process and plans 
54、Developing strategy after integration 
BP merged AMOCO 
55、Background and core value 
56、Process and plans 
57、Developing strategy after integration 
Chapter Eleven Analysis on Merging and Restructuring Trend of Overseas Oil Companies in China 
Section one   Development in China 
58、Investment policy 
59、Current investment 
60、Investment trend 
61、Market performance 
Section two   Shell 
62、Current investment in China
63、Core competitiveness
64、Trend of investment and merging and restructuring 
Section three   BP 
65、Current investment in China
66、Core competitiveness
67、Trend of investment and merging and restructuring 
Section four   Mobil 
68、Current investment in China
69、Core competitiveness
70、Trend of investment and merging and restructuring 
Section five   IPO
71、Current investment in China
72、Core competitiveness
73、Trend of investment and merging and restructuring 
Section six   ChevronTexaco
74、Current investment in China
75、Core competitiveness
76、Trend of investment and merging and restructuring 
Section seven  Italian ENI Group 
77、Current investment in China
78、Core competitiveness
79、Trend of investment and merging and restructuring 
Section eight   Total 
80、Current investment in China
81、Core competitiveness
82、Trend of investment and merging and restructuring 
Section nine SK 
83、Current investment in China
84、Core competitiveness
85、Trend of investment and merging and restructuring 
Chapter Twelve   Analysis on Merging and Restructuring Cases in China¨s Oil Industry 
Section one   CNPC purchases PK
86、Analysis on merging and restructuring background and core value 
87、Analysis on process and plans of merging and restructuring
88、Developing strategy after integration 
Section two CNPC purchased Liaohe Oil Field, Jinzhou Petrochemical Company and Jinlin Chemical  
89、Analysis on merging and restructuring background and core value 
90、Analysis on process and plans of merging and restructuring
91、Developing strategy after integration 
Section three  China and India together purchased stock of Columbia Oil Company 
92、Analysis on merging and restructuring background and core value 
93、Analysis on process and plans of merging and restructuring
94、Developing strategy after integration 
Section four   Sinopec purchases BP Qiuming 
95、Analysis on merging and restructuring background and core value 
96、Analysis on process and plans of merging and restructuring
97、Developing strategy after integration 
Section five   CNOOC purchased Unocal 
98、Analysis on merging and restructuring background and core value 
99、Analysis on process and plans of merging and restructuring
100、Developing strategy after integration 
Chapter Thirteen   Analysis on Merging and Restructuring Main Competitivities 
in China¨s Main Oil Industry 
Section one   CNPC
102、Financial operation 
103、Market competition 
104、Marketing network 
105、Developing strategy 
106、Merging and restructuring trend and feasibility 
Section two   Sinopec 
108、Financial operation 
109、Market competition 
110、Marketing network 
111、Developing strategy 
112、Merging and restructuring trend and feasibility 
Section three  CNOOC
114、Financial operation 
115、Market competition 
116、Marketing network 
117、Developing strategy 
118、Merging and restructuring trend and feasibility 
Section four   Sinochem
120、Financial operation 
121、Market competition 
122、Marketing network 
123、Developing strategy 
124、Merging and restructuring trend and feasibility 
Section five   CNPC Jilin Petroleum 
126、Financial operation 
127、Market competition 
128、Marketing network 
129、Developing strategy 
130、Merging and restructuring trend and feasibility 
Section six   Yangzhou Petroleum Chemical Company 
132、Financial operation 
133、Market competition 
134、Marketing network 
135、Developing strategy 
136、Merging and restructuring trend and feasibility 
Section seven   WEPEC 
138、Financial operation 
139、Market competition 
140、Marketing network 
141、Developing strategy 
142、Merging and restructuring trend and feasibility 
Section eight   Dongying Hualiang Petroleum Chemical Company 
144、Financial operation 
145、Market competition 
146、Marketing network 
147、Developing strategy 
148、Merging and restructuring trend and feasibility 
Section nine   Yanchang Oil Field Company Ltd. 
150、Financial operation 
151、Market competition 
152、Marketing network 
153、Developing strategy 
154、Merging and restructuring trend and feasibility 
Section ten   Guangxi Tiandong Petrochemical Company 
156、Financial operation 
157、Market competition 
158、Marketing network 
159、Developing strategy 
160、Merging and restructuring trend and feasibility 
Chapter Fourteen   Analysis on Merging and Restructuring Methods in China¨s Oil Industry 
Section one   Industrial chain 
Section two   Entering into oil industry via vertical merger and acquisition 
Section three  Entering into oil industry via transverse merger and acquisition
Section four   Entering into oil industry via mixed merger and acquisition
Chapter Fifteen Analysis on Merging and Restructuring Opportunities in China¨s Oil Industry 
Section one   Large-size enterprises 
161、CNPC Daqing 
161.1Market channel 
161.2Developing strategy 
161.3Core competitivity 
161.4Merging and restructuring feasibility 
161.5Merging and restructuring value 
162、Sinopec Qilu 
162.1Market channel 
162.2Developing strategy 
162.3Core competitivity 
162.4Merging and restructuring feasibility 
162.5Merging and restructuring value 
163、Sinopec Yanshan 
163.1Market channel 
163.2Developing strategy 
163.3Core competitivity 
163.4Merging and restructuring feasibility 
163.5Merging and restructuring value 
Section two   Medium-size enterprises 
164、Shandong Dongming Petrochemical Group 
164.1Market channel 
164.2Developing strategy 
164.3Core competitivity 
164.4Merging and restructuring feasibility 
164.5Merging and restructuring value 
165、Guangda Petrochemical Company 
165.1Market channel 
165.2Developing strategy 
165.3Core competitivity 
165.4Merging and restructuring feasibility 
165.5Merging and restructuring value 
166、Fushun Petrochemical Company 
166.1Market channel 
166.2Developing strategy 
166.3Core competitivity 
166.4Merging and restructuring feasibility 
166.5Merging and restructuring value 
167、Hubei Tianfa Group 
167.1Market channel 
167.2Developing strategy 
167.3Core competitivity 
167.4Merging and restructuring feasibility 
167.5Merging and restructuring value 
168、Beijing Huayou Natural Gas Company Ltd. 
168.1Market channel 
168.2Developing strategy 
168.3Core competitivity 
168.4Merging and restructuring feasibility 
168.5Merging and restructuring value 
Section three  Small-size enterprises 
169、Hebei Hengshui Donggang Chemical Company Ltd. 
169.1Market channel 
169.2Developing strategy 
169.3Core competitivity 
169.4Merging and restructuring feasibility 
169.5Merging and restructuring value 
170、Hangzhou Yinhu Chemical Company Ltd. 
170.1Market channel 
170.2Developing strategy 
170.3Core competitivity 
170.4Merging and restructuring feasibility 
170.5Merging and restructuring value 
171、Qingdao Hongxing Chemical Group 
171.1Market channel 
171.2Developing strategy 
171.3Core competitivity 
171.4Merging and restructuring feasibility 
171.5Merging and restructuring value 
172、Qiwei Petroleum Company 
172.1Market channel 
172.2Developing strategy 
172.3Core competitivity 
172.4Merging and restructuring feasibility 
172.5Merging and restructuring value 
173、Jiangshu Hai¨an Petrochemical Company 
173.1Market channel 
173.2Developing strategy 
173.3Core competitivity 
173.4Merging and restructuring feasibility 
173.5Merging and restructuring value 
174、Fujian Oil Refining Chemical Company Ltd. 
174.1Market channel 
174.2Developing strategy 
174.3Core competitivity 
174.4Merging and restructuring feasibility 
174.5Merging and restructuring value 
Chapter Sixteen Analysis on Merging and Restructuring Risks in China¨s Oil Industry 
Section one   Analysis on integrating risks of enterprises 
175、Strategic integration 
176、Business integration 
177、System integration 
178、Personnel integration
179、Enterprise culture 
Section two   Financing risk 
Section three  Managing risk 
Section four   Risk evasion 
Chapter Seventeen   Suggestion on Merging and Restructuring in China¨s Oil Industry 

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