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Chinese Mergers Considered By Authorities

Chinese Mergers Considered By Authorities

 The Chinese authorities are considering  joining China National Petroleum Corporation, the parent of PetroChina, and China Petrochemical Corp , the parent of Sinopec.

It was also reported in media that a merger between China National Offshore Oil Corp, the parent of CNOOC, with Sinochem Corp was under consideration as well.  While both PetroChina, the country's largest oil producer, and Sinopec, the largest refiner, are effectively state controlled, they operate differently to the models of national oil companies, such as those found in Middle East countries.

Chinese state-owned enterprises may in some ways resemble Western-style capitalist companies, but in other ways they don't, and the emphasis on providing employment is one such difference. It's hard to see the government approving the massive redundancy program that would have to accompany such a merger if Western-style cost savings were to be achieved.

A joined PetroChina and Sinopec would also control virtually all of the oil and gas chain in China, about 80 percent of both production and refining, and about 90 percent of retail sales. Such concentration is unlikely to foster a competitive business environment in the energy sector, and is actually more likely to lead to monopolistic practices.

It's possible that the buying clout of a merged entity would give it more negotiating power in talks with crude suppliers, but it's doubtful this would be enough to offset the potential pitfalls of creating a monolithic enterprise.
However, it is understood by PetrolWorld that such a move would not take place at this time but may reoccur in the future as the Chinese market evolves. PetrolWorld 130315

Last modified onTuesday, 17 March 2015 19:39
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