Edited from: 'Chairman's statement', 'President's statement' and annual report
Sinopec says that it was confronted with ‘soaring international crude oil prices, regulated domestic refined oil products prices and relatively large fluctuations in the petrochemical market, compounded by various pressures and difficulties such as maintaining refined oil products supply and overcoming transportation capacity constraints’. In pursuit of building up an integrated energy and chemical company with strong competitive edges in the international market, Sinopec will continue with its strategy of ‘expanding resources, exploring markets and increasing competitiveness’.
It will also continue with its ‘eleventh five-year plan period’. Sinopec faces favourable opportunities as well as adverse and uncertain factors. However, the company believes that opportunities are, in general, more than that of challenges.
By closely monitoring the market and pursuing economic return, we will carefully organise production and operation, constantly deepen reform, push on structural adjustment, reinforce management, promote innovation, save energy, and protect the environment’, says president, Wang Tianpu.
Its strategy focuses on the following key areas:
Exploration and production segment: The company will make further efforts to develop economic reserves, complement the construction of production capacity in new blocks and accelerate construction of natural gas production capacity, trial production and marketing to ensure stable growth of oil and gas production and to improve the recovery rate and commodity rate of oil and gas as well as total production and economic benefits.
Refining segment: It intends to optimise the existing systems while increasing throughput of sour and heavy oil to reduce crude oil costs. It intends to more efficiently utilise the capacity of large wharfs, ports and pipeline transportation to reduce transportation costs.
It further intends to optimise the processing plans of each refinery to strive for more flexible adjustment of processing volume in line with the demand of each regional market and the overall situations of crude supply and demand, while endeavouring to adjust product mix and increase production of higher value-added products.
Chemical segment: Sinopec intends to strengthen its management to ensure safe, stable and high load operation of its chemical facilities, and intends to produce higher value-added products. Priority will be given to test run and commercial operation of those revamping facilities, including Maoming ethylene revamping.
It further intends to fully leverage on the strengths of its chemicals sales subsidiary to improve competitiveness by optimising operational process, improving sales networks and solidifying the linkage between production and sales.
Marketing and distribution segment: The company intends to better deploy its marketing networks to improve service quality and increase the percentage of retail and direct sales. Moreover, it intends to better deploy its refined oil product pipelines to reduce storage and transportation costs.
Cost saving and capital expenditure: The company plans to achieve cost savings of Rmb2.5bn and with a planned capital expenditure of Rmb70bn.
Looking forward, China’s economy is expected to maintain a stable and rapid growth, which would help sustain a stable growth of domestic demand for oil and petrochemical products, providing good market conditions for the Sinopec. The international crude oil prices are expected to continue to maintain at a high price level.
The domestic prices of refined oil products are expected to gradually reflect the international prices following the integrated reform of crude oil pricing mechanism, but ‘continue facing challenges’. While the prices for chemicals are expected to continue to stay at a ‘relatively high level’, but due to the expected increase of feedstock cost, the gross profit margin for chemicals segment may experience further decline.
Meanwhile, with the opening of the domestic wholesale market of refined oil products, competition in domestic refined oil products market may be stronger. ‘Looking forward, the company has enjoyed a favourable domestic market that has shown steady increase in fundamental demand for energy and chemicals. Yet, the future is also fraught with various uncertainties, such as market fluctuations and increasing competition, both overseas and domestically’, concludes chairman, Chen Tonghai.
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China Petroleum & Chemical Corporation is referred to as Sinopec and is one of the largest integrated petroleum and petrochemical companies in China. Its business covers exploration, development, production and marketing of petroleum and natural gas, refining and marketing, production and sales of petrochemicals, chemical fibres, chemical fertilisers, and other chemicals, pipeline transportation of petroleum and natural gas, import and export and import/export agency business of petroleum, natural gas, refined oil products, petrochemicals, other chemicals, and other commodities and technologies, R&D and application of technology and information.
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