Rising China and Africa's development: oil
Rising China and Africa's development: oil

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5 Chinese oil companies in Africa

Chinese national oil companies (NOCs) were formed out of various ministerial restructurings following the initiation of the major reforms. Reforms in 1982 and 1988 saw a number of NOCs emerging for the first time in Chinese history. Nevertheless, at the early transitional stage from planning to marketisation, the industry was not completely separated from the government. The NOCs went through another wave of transformation in the late 1990s which was occasioned partly by China’s further economic and governmental reforms to establish a socialist market economy as well as the need to position the NOCs for global competition that would result from China’s impending WTO membership. Hence, in 1998 CNPC and Sinopec were restructured to become fully vertically integrated companies with both upstream and downstream operations, and their administrative functions were removed completely.

In theory, Chinese NOCs no longer enjoy administrative ranking in the Chinese political system. However, as the CEOs of the three oil majors are still appointed by the Central Organisation of the Chinese Communist Party (CCP), many believe that the NOCs are in effect vice-ministerial level corporations, though their CEOs could be seen as higher ranking officials.

Between April 2000 and February 2001, CNPC’s subsidiary PetroChina, Sinopec and CNOOC were all listed on international stock markets, allowing the NOCs to better integrate with the international system. However, since the majority of their shares were owned by the Chinese government, the NOCs did not become fully commercial companies through international listing.

Despite the enduring power of the Chinese government over NOCs’ key personnel appointments and ownership of NOCs’ shares, the actual control of the government over the NOCs has been less effective than many could envisage, for two main reasons. The first is NOCs’ bargaining power against the government via political networks among their powerful leaders. Many of the CEOs either have had a close relationship with the top leadership, or were promoted to higher levels after their tenure as CEOs. The second reason relates to the NOCs’ remaining monopoly in China’s oil sector, which not only undermined the government’s efforts to reform the domestic fuel pricing system, but also enabled the NOCs to employ the government’s ‘going global’ strategy to serve their own benefit.

While the three NOCs all emerged from government ministries, significant differences do exist between them, especially with respect to their corporate mission, market position and relationship with the Chinese leadership, all of which are also linked with their history and evolution. CNPC maintains the greatest ties with the Chinese Communist Party and it is able to leverage more government support, while CNOOC, which is currently the smallest among the three, has an advantage in building partnerships with multinational firms because part of its initial mandate was to partner foreign firms in order to develop technological capabilities in offshore operations. Having been incorporated as the downstream producer of energy for direct consumption, Sinopec is ahead of the rest in terms of refining and downstream activities. For now, all three should be viewed as competitors who in many ways still retain their unique characteristics and advantages.

You saw earlier how China began importing oil from 1993, which was around the time it actively went in search of new oil fields. In Africa, this began in Sudan, as you’ll discuss in more detail in Session 4. Now watch Janet Liao and Giles Mohan outline the evolution of the Chinese NOCs in Africa.

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