The Chinese government is considering merging certain state owned energy companies and one of the mergers being considered is that among China National Petroleum Corp. (CNPC; Beijing), the parent company of PetroChina; and Sinopec, the Wall Street Journal reports, citing officials familiar with the matter. Another merger being studied is that among China National Offshore Oil Corp. (CNOOC; Beijing), and Sinochem (Beijing). No time frame has been set for a decision on these mergers. The government aims to create oil giants in the country through such mergers and it is also expected to enable these companies to operate more efficiently as crude oil prices fall. Sinopec and PetroChina also have huge chemical businesses, and a merger would create a chemical industry giant. In 2013, Sinopec’s chemicals business reported sales of 437.6 billion renminbi ($70.0 billion), and PetroChina’s refining and chemicals business generated sales of Rmb871.8 billion. Sinopec, last year, was ranked number two in CW’s Billion-Dollar Club—an annual ranking of chemical makers by revenue. BASF has the top ranking.
CNPC, Sinopec, CNOOC and Sinochem have been dominant players in the oil industry in China, and competition among these companies has intensified in the past 15 years. The recent fall in crude oil prices have created more challenges for these companies, and the government believes that merging these companies and streamlining their operations could increase efficiency and reduce costs.
By Deepti Ramesh