PetroChina.docx

PetroChina.docx

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PetroChina

Tableofcontents

Introduction2

AbouttheCompany3

Literaturereview4

DemandandSupplyConsiderations6

Demand6

IncomeElasticity8

Supply8

RegressionAnalysis9

MainDiscussion10

Oligopoly10

ChinesePetroleumMarket11

Petroleummarketingexcellence12

Pricingpetroleumproducts12

Petroleumcompetition13

ConclusionandRecommendations14

References15

Introduction

OneofthemostimportanteconomicsectorsofChinatodayisthepetroleumsector.Recentconcernsaboutescalatingoilpricesandrisingenergysavespendinghavesparkedconsiderableinterestinhownewwayofmoreeconomyarediscovered,tested,andsold—andinhowwellthoseprocessesservetheinterestsofChineseconsumers.Publicdialogueonthoseissues,however,suggeststhatthecomplexeconomicforcesthatgoverntheoil-productionprocessarenotwidelyunderstood.

InthisprojectthecurrentmarketsituationinChinaisfirstlydescribed.Furthermore,adescriptiveliteraturereviewisbeingascertainedrelatingthehistoryoftheoilindustrywiththepresentsituationintheoilindustrytodayaswellashowtheoilisbeinghandledbythevariouscomponentsuntilitreachesthefinalconsumer.Moreover,thereisananalysisofthepriceandnon-pricedeterminantsofdemandaswellassupplyfortheChinareality,followedbyaregressionanalysisofthemostimportantvariablesaffectingtheChinesemarket.Moreover,thetypeofmarketforwhichtheoilindustrybelongstoisbeingdescribed.

AbouttheCompany

Introduction

PetroChinaCompany,LimitedisaChineseoilcompanyandisthelistedarmofstate-ownedChinaNationalPetroleumCorporation（CNPC）,mainlandChina'sbiggestproducerofoil.IttradedinHongKongandNewYork,themainlandenterpriseannounceditsplanstoissuestockinShanghaiinNovember2007,andfollowingitsdebutontheShanghaiindex,itsmarketvaluetripled.PetroChinaovernightbecamethefirstcompanywithatrilliondollarmarketcap.Similarly,acenturyearlier,U.S.Steelwasthefirstcompanywithabilliondollarmarketcap.

CompanyBackground

ThepredecessorofCNPCwastheMinistryofPetroleumIndustryofthePeople'sRepublicofChina,whichwasfoundedinJuly1955,supervisingtheexplorationanddevelopmentofoilandgasresourcesinChina.ChinaNationalPetroleumCorporationwasestablishedonSeptember17,1988onthebasisoftheMinistryofPetroleumIndustry,mainlyinchargeofoilandgasupstreamoperations.OnJuly27,1998,ChinaNationalPetroleumCorporationwasreorganizedtobecomeanintegratedgroupwithbusinessescoveringoilandgasupstreamanddownstreamoperations,aswellasoilfieldservicesandengineeringconstruction.

ImportantStages

Jul.30,1955.TheMinistryofPetroleumIndustryisfounded.

Sept.13,1958.AcommercialoilflowisacquiredfromwellDizhong4intheLenghuareaofQinghai,markingthediscoveryoftheQinghaiOilfield.

Jun.27,1971.AcommercialoilflowisobtainedfromwellLing9atMaling,Changqing,intheLongdongareaofGansuProvince,markingthediscoveryoftheChangqingOilfield.

Sept.17,1988.TheStateCouncildissolvestheMinistryofPetroleumIndustryandChinaNationalPetroleumCorporation（CNPC）isestablished.

Oct.23,1993.TheservicecontractonBlock7inTalaraOilfieldinPeruissigned,markingthebeginningofCNPC'sinternationaloperations.

Jul.27,1998.TheChinesegovernmentdecidestorestructureandestablishtheChinaNationalPetroleumCorporation（CNPC）inaccordancewiththeprincipleofupstreamanddownstreamintegration.

Oct.28,1999.PetroChinaCompanyLimited（PetroChina）isestablished.

Apr.6,2000.TheAmericanDepositaryShares（ADS）ofPetroChinaarelistedontheNewYorkStockExchange.  

Apr.7,2000.TheHsharesofPetroChinaarelistedontheStockExchangeofHongKongLimited.

Competitors

ExxonMobilCorporation,orExxonMobil,isanAmericanoilandgascorporation.ItisadirectdescendantofJohnD.Rockefeller'sStandardOilcompany,[3]andwasformedonNovember30,1999,bythemergerofExxonandMobil.

ShellOilCompanyistheUnitedStates-basedaffiliateofRoyalDutchShell,amultinationaloilcompany（"oilmajor"）ofAngloDutchorigins,whichisamongstthelargestoilcompaniesintheworld.

Literaturereview

Petroleumorcrudeoilisanoily,flammableliquidthatoccursnaturallyindeposits,mostoftenfoundbeneaththesurfaceoftheearth.Overmillionsofyears,plantandanimalremainsfalltothefloorofshallowseas.Astheseasdrawback,theplantmaterialiscoveredbysedimentlayers,suchassilt,sand,clay,&otherplantmaterial.Burieddeepbeneathlayersofrock,theorganicmaterialpartiallydecomposes,underanabsenceofoxygen,intopetroleumthateventuallyseepsintothespacesbetweenrocklayers.Astheearth'stectonicplate’smove,therockisbentorwarpedintofoldsorit"breaks"alongfaultlines,allowingthepetroleumtocollectinpools.

Theuseofoilandgashasalongandfascinatinghistoryspanningthousandsofyears.Thedevelopmentofoilandgashasevolvedovertimeanditsnumeroususeshavealsoexpandedandbecomeanintegralpartoftoday'sglobaleconomy.Theuseofoileventuallyreplacedcoalastheworld'sprimarysourceofindustrialpowerintheearlytwentiethcentury.Justasoildrivestoday'sworldeconomy,thecontrolandavailabilityofoilplayedamajorroleinbothWorldWarsandstillremainsthecriticalfuelsourcethatpowersindustryandtransportation.

Petroleumisvitaltonearlyallindustries,ifnotindustrializedcivilizationitself,andthusiscriticalconcerntomanynations.Oilaccountsforalargepercentageoftheworld’senergyconsumption,rangingfromalowof32%forEurope,Eurasia,andtheAsiaPacificregion,uptoahighof53%fortheMiddleEast.Othergeographicregions’consumptionpatternsareasfollows:

SouthandCentralAmerica（44%）,Africa（41%）,andNorthAmerica（40%）.Theworldatlargeconsumes30billionbarrels（4.8km³）ofoilperyear,andthetopoilconsumerslargelyconsistofdevelopednations.

Marketingisthewholesaleandretaildistributionofrefinedpetroleumproductstobusiness,industry,governmentandpublicconsumers.Thepricepaidbyconsumersisintricatelylinkedtothefactthatoilisthemajorcommodityofinternationaltrade.Inotherwords,theoilindustryisinfluencedbyeconomicandpoliticalconditions.Otherfactorsinfluencingpricearerigutilizationratesandoilcontracts.

Generallycrudeoilandpetroleumproductsflowtothemarketsthatprovidethehighestvaluetothesupplier,whichusuallymeansthenearestmarketfirstbecauseoflowesttransportationcostandhighernetrevenueforthesupplier.

However,oneofthemostpowerfulmoderncartelsistheOrganizationofthePetroleumExportingCountriesmorecommonlyreferredtoasOPEC.OPECisapermanent,intergovernmentalorganizationcreatedattheBaghdadConferenceonSeptember10-14,1960.PriortotheriseofOPEC,theoilindustrywasdominatedbythelargeoilcompaniesoftenknownastheSevenSisters.OPECwasborn,tosomeextent,toreducetheinfluencetheoilmultinationals.OPECtechnicallydoesn'tsetoilprices,butbecausetheOPECcountriesproduceabout40%oftheworld'soilsupplyandtheirexportsaccountforabout55%ofthetotalexportinoil,theirdecisionsdoplayapartinprices.ThepurposeofOPECistoagreeonthequantityandpriceoftheoiltheircountriesexport.

DemandandSupplyConsiderations

Asglobalcommodities,oilandpetroleumproducts（includinggasolineanddiesel）aresubjecttothepriceswingsinfreemarketsandcanbedramaticallyinfluencedbyperceptionsaboutfuturesupplyanddemand.

Demand

Inordertochangethedemandcurveofpetroleumproducts,astheyaredifferentlyknown,inChinaisnecessarytodeterminethefactorsthatinfluencingthisdemand.Thedeterminantsareseparateintotwocategories,thepricedeterminantwhichisthemostimportantandthenonpricedeterminants.Anincrease（ordecrease）inthedemandreferstoarightward（orleftward）movementinthedemandcurve.Apossiblemovementofthedemandcurvechangestheequilibrium,andthisisasignificantreasonofacompany’sincomechangepositivelyornegatively.Acompanythatcanmanagethisdemandcurvecaneasilyincreaseitsrevenueandincomes.

ThedemandonpetroleuminChinaincludesdifferentkindsoftablets,petrol,diesel,Lubricatingoil,andotherproducts.TherearetwodimensionsforthedemandonpetroleuminChina.Thedemandismeteitherthroughprivateretailorgovernmentpurchasing.TheprivateretailneedsareownedbyspecificindividualsorentitiesinChinaandoperateindifferentcitiesandtownsinChina.Ontheotherhand,governmentpurchasingoperateswithChinesepublicdepartments.Somespecialproductsrequireaofficer’swrittenprescriptionbeforebeingpurchased.

EversinceitsestablishmentinChina,PetroChinahadstrivedtomeettheincreasingdemandofpetroleuminthenation.WithheadquartersinBeijing,thecompanyisoperatingwithcollaborationwiththeMinistryofPetroleumIndustry,CarCompany,organizationsofpetroleum,andothers.ThiscollaborationishelpingthecompanymeetthedemandinChinaandattainagoodreputationinthemarket.ThefutureofdemandonpetroleuminChinaisrisingandthecompanyistomeetthisrise.

Thelawofdemand,intheory,statesthatthereisaninverserelationshipbetweenthepriceofagoodandthequantitydemanded.Buttherearealsonon-pricedeterminantsofdemand,theseinclude:

thechangeintheconsumer'staste,changeinthebuyer’sincome,changeinpriceofrelatedgoodsandchangeinthenumberofbuyers.Thefiguresshowhowdemandchangeswith