The China National Petroleum Corporation (CNPC) is one of the world’s leading petroleum producers in the world, responsible for over a third of a trillion dollars in the petroleum industry. Centered around the core concept of providing and supplying petroleum products to China proper, CNPC has long since transitioned from its initial place as a government-owned domestic petroleum provider to a state-run multination organization with operations in over thirty countries. This paper analyzes the specific ways in which the organizational culture of the company directly impacts its operations overseas, the way the international economic policy, monetary, and political environment reacts to the Chinese expansion, and how trade parameters and policies offer both opportunities and barriers for continued growth. In addition, the CNPC’s management methods and organizational structure are discussed and analyzed. Overall, it is clear that the CNPC offers a fascinating insight into the ways in which a multinational corporation, coming from a very unique origin point as a state-controlled enterprise, operates very profitably internationally while simultaneously balancing company performance with corporate citizenship.
2. History of the Company
2.1. The China National Petroleum Company has its roots in the aftermath of the Chinese Civil War, in which the new Communist government quickly realized the need for state control over its growing oil concerns.
2.1.1. In 1988, the CNPC was formed following the restructuring of the Chinese department relating to oil and resource extraction.
2.1.2. This new state-owned corporation would regulate all Chinese petroleum interests domestically, as well as act to guarantee the longevity and sustainability of the Chinese oil market.
18.104.22.168. SOURCE: Ewing, R. D. (2005). Chinese Corporate Governance and Prospects for Reform. Journal of Contemporary China, 14(43), 317-338
2.2. History and Expansion into the Global Market
2.2.1. Though initially chartered to be a corporation designed to harness China’s domestic petroleum-based resources, the CNCP in 1993 began operations overseas, starting with the Talara oilfield in Peru.
2.2.2. The Company then expanded to Sudan, Kazakhstan, Venezuela, Canada, Southeast Asia, as well as Iran, Iraq, and many states in Africa.
22.214.171.124. “The establishment of a "strategic partnership" between the two countries in 2001 has defined a stable framework for collaboration”
126.96.36.199.1. SOURCE: Mackiewicz Wolfe, W., & Leung Evans, A. S. (2011). China's Energy Investments and the Corporate Social Responsibility Imperative. Jo5urnal of International Law & International Relations, 6(2), 83-108.
188.8.131.52. CNPC, in 2013, purchased $4.2bn worth of shale petroleum in Mozambique.
184.108.40.206.1. SOURCE: Eni sells 20% of Mozambique shale gas stake to CNPC. (2013). TCE: The Chemical Engineer (862), 17-17.
220.127.116.11. Through a partnership with KazMunaiGas, CNPC owns sufficient oil and gas fields near the Caspian Sea region that produce a cumulative 40m bbl. of oil (2008 figures).
18.104.22.168.1. KazMunaiGas, CNPC take control of MangistauMunaiGaz. (2009a). TCE: The Chemical Engineer (816), 12-12.
3. Cultural Aspects
3.1. CNPC operates a state-owned arm of the People’s Republic of China.
3.1.1. “China is still a developing country and needs a peaceful environment for its modernization program. China’s global energy search, including its 5-year action plan in Central Asia, serves the purpose of economic development and seeks to ensure a better living standard for the Chinese people”.
22.214.171.124. Janet Xuanli, L. (2005). A Silk Road for Oil: Sino-Kazakh Energy Diplomacy. Brown Journal of World Affairs, 12(2), 39-51.
3.1.2. As such, CNPC exists as a functional tool of the PRC government and exists in contrast when compared to independent, third party multinationals. The Company does not exist solely to generate profit, but also to ensure long-term stability of Chinese petroleum interests.
3.2. This long-term approach necessitated by the CNPC’s state-owned character means that CNPC is seen as a predator on the international scene, often viewed as an entity that exists to acquire petroleum production for the Chinese government in regions where human rights violations and government corruption are a fact on the ground.
3.2.1. CNPC interests in many African states, includin4g Angola, Sudan, and the Democratic Republic of Congo are numerous and widespread.
126.96.36.199. Angola, in particular, is a prime location for Chinese industrial investment.
188.8.131.52.1. “In 2010, Angola supplied one-quarter of China's oil imports”
184.108.40.206.1.1. SOURCE: Corkin, L. (2011). Uneasy allies: China's evolving relations with Angola. Journal of Contemporary African Studies, 29(2), 169-180
220.127.116.11. The “Angola Model”, or
18.104.22.168.1. The Chinese government is heavily involved in the national reconstruction program through various financial institutions as a means to ensure closer relations with Angola and thus access to oil. China's strategy is thus ostensibly to accumulate political capital through the provision of infrastructure, financed by oil-backed concessional loans extended by Chinese state-owned banks.
22.214.171.124.1.1. SOURCE: Burgos, S., & Ear, S. (2012). China's Oil Hunger in Angola: history and perspective. Journal of Contemporary China, 21(74), 351-367Economic, Monetary, and Political Environment
4. International Economic Factors
4.1. The fresh arrival of the Chinese investors and petroleum developers on the international scene has caused a substantial disturbance in the ways in which Western companies in particular view the CNPC.
4.1.1. Seen as an intruder or an invader, these comments are peculiar in that the Company is merely doing what other multinationals are doing as well, albeit very successfully.
4.1.2. With a revenue stream that exceeds a third of a trillion dollars, the CNPC is a global force to be reckoned with.
4.1.3. The CNPC is adept at utilizing international disturbances to capitalize on petroleum gains
126.96.36.199. Sudan Civil War and Chinese investment
4.2. CNPC Conflicts with existing multinationals in investment regions
4.2.1. Conflict with Exxon, Mobil, and Shell
188.8.131.52.1. Middle East
184.108.40.206.1.1. Iraq specifically
5. Trade Parameters
5.1. World Trade Organization
5.1.1. International barriers to trade and facilitation of continued growth
5.1.2. Subsidies for state-owned enterprises and the ways in which the PRC manipulates tariff and trade barriers to increase access to developing oil supplies
5.2.1. Investment in Middle Eastern states
5.2.2. Competitive price modeling and supply control, distribution networks and relative CNPC reactions to market acquisition
5.2.3. Conflict with existing Corporations (see Section 4.2)
5.3. Western-based multinationals
6. Organizational Structure and Management Methods
6.1. Company hierarchy and design
6.1.1. Ways in which the company’s organizational structure is reflected in Chinese reform methodology
6.1.2. Method by which the Chinese domestic laws regarding industrial regulation affect domestic development and subsequent growth
6.1.3. How the policies discussed in 5.1.2 are reflected in CNPC operations overseas
Burgos, S., & Ear, S. (2012). China's Oil Hunger in Angola: history and perspective. Journal of Contemporary China, 21(74), 351-367. doi: 10.1080/10670564.2012.635935
CNPC to cut over 80,000 admin staff. (2008). TCE: The Chemical Engineer (807), 8-8.
Corkin, L. (2011). Uneasy allies: China's evolving relations with Angola. Journal of Contemporary African Studies, 29(2), 169-180. doi: 10.1080/02589001.2011.555192
Eni sells 20% of Mozambique shale gas stake to CNPC. (2013). TCE: The Chemical Engineer (862), 17-17.
Ewing, R. D. (2005). Chinese Corporate Governance and Prospects for Reform. Journal of Contemporary China, 14(43), 317-338. doi: 10.1080/10670560500065520
Janet Xuanli, L. (2005). A Silk Road for Oil: Sino-Kazakh Energy Diplomacy. Brown Journal of World Affairs, 12(2), 39-51.
KazMunaiGas, CNPC take control of MangistauMunaiGaz. (2009a). TCE: The Chemical Engineer (816), 12-12.
Mackiewicz Wolfe, W., & Leung Evans, A. S. (2011). China's Energy Investments and the Corporate Social Responsibility Imperative. Journal of International Law & International Relations, 6(2), 83-108.