Going Global & Managing Global Businesses Case Study

China National Petroleum’s Foreign Cooperative Ventures:Will It Pay Off?

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Abstract:
China's largest oil producer, China National Petroleum Corporation (CNPC) joined hands with the US-based petrochemical giant, Chevron, in developing natural gas in southwest China's Sichuan Province. It boasted a gas reserve of 58.11 billion cubic metres. This was not the first time a foreign multinational company had joined hands with CNPC. It had earlier signed two deals with Total and Shell. This growing interest of foreign multinational firms in the Chinese petroleum sector was of no surprise as it exhibited the maximum growth potential worldwide. The reason behind this was the presence of strong demand within the country and its cost advantages over the western industrial countries. However, the petrochemical industry remained one of the most protected sectors in China. Only major projects with a production volume of 800,000 tonnes per annum were permitted in the Chinese petrochemical industry, but also in the form of co-operative ventures. Thus, the presence of excessive restrictions in the petrochemical industry might hamper the growth of CNPC. In addition, a huge deficit of electricity, insufficient freight capacity, and poor road and rail infrastructure might also hamper the growth prospects of these co-operative ventures.

Pedagogical Objectives:

• To analyse the dynamics of the Chinese petrochemical industry
• To analyse the growth of CNPC as an international oil company
• To estimate the role of acquisition and joint ventures in CNPC's global expansion.
• To analyse the future of CNPC's strategic alliances.

Keywords : China National Petrochemical Corporation; Global chemical industry; Chinese chemical industry; Chinese petrochemical industry; Chevron; PetroChina; Sichuan basin; Strategic alliances; Rosneft; Transneft; Gazprom; Sinopec; Petroecuador; China National Offshore Oil Corporation; Joint venture