China National Petroleum Corporation (CNPC):Roles, Responsibilities And Competitive Elements

Choose one out of the four companies listed below:

• China National Petroleum Corporation (Petrochina)

• Rosneft

• Conoco Phillips

• Statoil

1. Determine the roles and responsibilities and examine the competitive elements within the downstream division of the chosen company.

2. Assess the significance of the environment to the success of a business by looking at the two elements of PESTLE analysis listed below.

o  Economic

o  Environmental

3. Discuss twoprojects run / managed by the chosen company which contribute to the local community

The Roles And Responsibilities Of CNPC

China National Petroleum Corporation (CNPC) is an oil and gas corporation. This organization is owned by Chinese state government. CNPC is considered to be the largest integrated energy company in China. CNPC is taken over as Petro China. This company was restructured on November 5, 1999. This organization ranks third globally due to its integrated value chain management. This company promotes ever increasing internationalization. The basic management still continues to deal with very low domestic resources. In this report the roles and responsibility of CNPC are going to be discussed elaborately. CNPC proves their strong financial capability in handling the competitive elements. The PESTLE analysis of the company will be done throwing light on environmental and economic factors. Two projects managed by CNPC are going to be discussed that contribute to the local community.

CNPC stresses on the fulfillment of its responsibilities. It follows the basic guideline for its operation of action plan as the ever increasing business as a state owned company. They always pursue the fundamentals of ‘Caring for Energy, Caring for you’. CNPC is dedicated to achieve the objectives to complement the increasing demands for gas and oil. This company achieves synchronizing effect between energy and the physical environment. It creates synchronization in operation and safety. The employers and employee work together through this organization to gain national and international interest. The corporate and community interests are regained and restored by CNPC (Wang H. , 2016).

Firstly, CNPC was mostly driven by the motto to increase the oil and gas supplies. This company develops clean and recycled energy, and delivers better services to retain market saturation. More than RMB 100 billion has been calculated as the expenditure on internal research and development in 2007. CNPC creatively found out 830 million tons of oil following this year. They also contributed immense research in finding the sources of 429.4 billion cubic meters of natural gas.

Secondly, CNPC aims to attain a working atmosphere with no injuries, accident free and corruption free working and living environment. They promoted the use of clean energy and develop eco-friendly products.

Thirdly, CNPC has also developed its human resources and its mechanism to cultivate, attract and invested more on the hiring and training on human capital. CNPC engaged more than 1000 technology experts and scientists. They involved 800 scientific and research experts, 16 academicians, 60 specialists, who are devoted in making extraordinary contribution to the state.

CNPC is goal oriented to improve the economy of the society. They are dedicated to promote the socio-economic prosperity where it operates. This company cooperates with the local government to promote oil oriented local industries and create scopes for job opportunities. CNPC spent RMB 1.03 billion to social and public welfare including China Green Carbon Fund and poverty eradication in Xinjiang and Tibet in 2007.

Spokesman for Petro China in 2000 exclaimed to the media that Petro China was enhancing its reconstruction according to its promoting and accelerating of business plan which was released to the investors. Petro China put the refining and reformatory chemical business under strategic formative adjustment on a wider extent (Haley & Haley, 2013). With an addition of refining business with chemical industry the recently launched petrochemical sectors lower the cost and boost the money making capacity, ever increasing competitive capacity of the global market and risk resistance factors.

Thecompetitive Elements Within The Downstream Division Of Cnpc

CNPC has made a stable entry into varied regions in the global market and has built its consistent chain from discovering the retail markets in Africa and Kazakhstan (Peng, 2016). This company had a great experience of working abroad for more than a decade. At first the company started with limited, narrow and lesser foreign risk ventures and gradually turned themselves to the big giant.

CNPC endowed CNPCI to make the inevitable changes to expand their overseas activities in the competitive market (Verbeke, 2013). This company regulated the oil and gas development and production, technological and construction services in both upstream and downstream sectors, the outward direct investment and inward service making (Zhu, 2016).

CNPC is dedicated to long term and ever growing strategic implementation in competitive market (Grant & Jordan, 2015). These are as follows-

1. They have successfully implemented the marketing strategic alliances with their peer group and competitors.
2. They have successfully integrated of its local assets and enlarged management system based on value service and products in Africa and Central Asia.
3. Strategically this organization has been expanded into areas, localities, provinces and markets in Turkmenistan in Central Asia, Ecuador in South America, Niger and Chad in Africa, Russia and in the global market.

Despite the ever-changing global competition and challenges CNPC has to enhance their portfolio management to cope with potential uncertainties regionally and globally (Glenn, 2017). This company has to enhance and redevelop their overseas expansion strategies. They have to increase commitment to provincial government, commitment to HSE compliance; expansion of corporate partnership with foreign counterparts especially the Western counterparts must be emphasized.

The PESTLE analysis is a beneficial method for realizing the market increase or growth of an organization as well as its decline. The position, potential initiatives and direction for a business organization are extremely elementary to improve. Here the PESTEL analysis of CNPC is discussed depending on the economic and environmental factors.

CNPC was a state owned, state operated and state financed enterprise. In the backdrop of communist social system Chinese petroleum sectors were always regulated by the governments economic planning (Verma, 2016). CNPC luckily did not have to take China’s larger diplomatic priorities into consideration. The oil industry was highly concentrated and the highly balanced relative resources favored the firm. Under communism the company faced many problems like long term decline of productivity, economic inefficiencies, underinvestment and these factors largely influenced the company business and economic decline of the state. Investment was suboptimal because oil producers had no incentives to invest because of the low prices of oil. Oil prices were kept low because of fears of inflation and a general desire to fuel economic growth.  There was significant bureaucratic rivalries influenced a lot the business of CNPC. High party ranking heads were appointed as secretaries or spokespersons. By this the state was unable to control behavior of commercial factors in case of CNPC and their image was undermined internationally. China’s image as a responsible stakeholder was promoted by the state government through CNPC and many other countries. The state was unable to impose its preferences over the powerful; CNPC was a highly concentrated industry with the dominant state owned firms controlling the business.

CNPC as a Chinese company has always been facing stronger environmental policies from earlier years. After deadly air pollution, there came the strict regulations as new fuel standards for the fuel companies in China. Among the rivers of China, life threatening levels of heavy metals, hydrocarbons were found in river soil and water sources. CNPC has been found guilty for illegally disposing drilling waste and also has been found guilty for environmental misconduct. Environment holds a primary position in regulating the projects of CNPC.

Pestle Analysis Of Petrochina Analysing Two Elements

In September 2007, the Shenzhen municipal government won the opportunity to settle a branch of West-East Pipeline. CNPC was the major investor of the project. This company proposed to build an LNG project in Shenzhen in purpose of peak shaving and emergency coping for the pipeline branch. Careful study was carried out by the site selecting experts and at the end the site was chosen as Dachan Island. This company follows modern enterprise system to understand the connection between the upstream and downstream operations. There are 17 upstream companies, 33 downstream companies and 36 large scale marketing companies in CNPC. This company is the largest distributor of natural gases through pipeline. They are continuously improving their communication system all over China. Controversies emerged at that time for choosing the site. The revolt and contradiction along with the protest mainly came from the local civilians, political leaders and environmentalists that resulted the execution of the project to a halt.

The pipeline project group handled the land acquisition issues that stood on the principle of voluntary decision and lesser influence on farmland. CNPC provided the paid compensation for the reformatory land in a fair, decent and legal manner. They have reconstructed the pipelines where the land conversion plan is rejected by local residents or wherever a religious monument, educational institution, graveyard, wildlife sanctuary stand on the way. The compensation amount is negotiated based on local land price, villager’s offer and government quotation.

The Chinese government directly promotes the industries who effectively work on performance reporting of a business organization. Performance reporting is essential as it provides investment incentives, funding on research and development of the organization. CNPC has committed themselves for export issues, business and foreign exchange control and local content requirement.

CNPC throws special focus on the marketing and branding activities through oil and petroleum products, fundamental petrochemicals products, derivative chemicals, and so on. They took advantage of an organized marketing network for scientifically improved products. They formulated a marketing system regulated by the central business agency for chemicals. CNPC has established a growing and efficiently operated sales network nationwide with retail services. They have also set up service stations set up across the country to provide services to millions of customers on daily basis. This brand has successfully secured the goodwill in the globalized market. CNPC’s marketing team is made to provide super quality products and executive services to their consumers through a replacement of growth model. They took up the domestic market share of 40%. In 2015 they sold 116.25 million tons of refined products, 80.54 million tons or 69.3% in retail and sold 1.27 million tons of lube oil.

CNPC has already developed the oil and gas operation projects of Russia, Africa, Kazakhstan and many Asian countries (Zhu, 2016). The Kazakhstan Aktobe project has been widely successful after the CNPC takeover. Both the production and its economic condition turned around within five years. This project has also largely influenced in the leap of the local economy. CNPC wants to increase the amount of oil from these areas through the pipeline projects. They focused on the 400,000 barrels per day pipeline project from western Kazakhstan to western China. This pipeline was built in different stages, and the proposal was made to supply 600,000 barrels per day pipeline from Eastern Siberia to Northeastern China.

CNPC began development of Ahab which is an oil field in Wasit Governate holding one billion barrels in March 2009. CNPC became the first significant investor in Iraq. This project continued to grow in spite of security debates with local farmers.  The Halfaya Oilfield project of Iraq is executed by CNPC. They worked as the operator helping with the international petroleum company in Iraq for the first time. The project became an official contract that was signed as service contract on January 27,2010and came into reality on March 1, 2010. This company planned the total capacity of 30 million during various progressive developmental phases. The various phases were Central Processing Facility for the oilfield. The other phases were self-supplied power-plant. This company constructed Oil Gathering Manifolds, and improved the communication systems, road and other auxiliary systems in the oil fields.  This company introduced the first oil recovery ship in 2009 and increased the oil recovery production in the same year. Under the supervision of CNPC this project has moved into the rapid progression phase in advance.

Conclusion:

CNPC is a company who receives complete back up and all the necessary support from the government and also is highly regulated by the instruction and policies of the Chinese government. The above discussions emphasized on the economic and environmental factors that affect the business strategy of the organization. This company ensures in sustaining the delivery of energy and essential security measures to meet the country’s growing demand. Some drawbacks and failure of the company has been discussed with remedial measures. CNPC succeeds in operating principles and value based innovation in the global market.

References

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Grant, R., & Jordan, J. (2015). Foundations of strategy. John Wiley & Sons.

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Haley, U., & Haley, G. (2013). Subsidies to Chinese industry: state capitalism, business strategy, and trade policy. Oxford University Press.

Peng, M. ( 2016). Global business. Cengage learning.

Rowley, C., & Cooke, F. (2014). The changing face of management in China. Routledge.

Verbeke, A. (2013). International business strategy. Cambridge University Press.

Verma, R. (2016). Book review: Chinese economic statecraft: commercial actors, grand strategy and state control by William J. Norris. LSE Review of Books.

Wang, H. (2016). Energy Markets in Emerging Economies: Strategies for growth. Routledge.

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Zhu, Z. (2016). China's new diplomacy: rationale, strategies and significance. Routledge.