Sinopec and the Shocking Lack of Self Awareness

abarrelfullabarrelfull wrote on 29 Mar 2010 06:26
Tags: china refining sinopec

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This story really has to rank as one of the best examples of a complete lack of self awareness I have seen in the sector.

China Petroleum & Chemical Corp., Asia’s biggest refiner, announced its first acquisition of a foreign oil field stake and said it faced “challenges” in the oil-processing business as competitors expand capacity.

Lets just remind you of how many projects Sinopec has completed recently.

In 2007, the 160,000 bpd Guangzhou Refinery was commissioned, followed by the new 200,000 bpd Qingdao Refinery and 30,000 bpd expansion of the Wuhan Company Refinery in 2008. In early 2009 a 160,000 bpd expansion of the Fuijan Refinery was completed and later in the same year, the 200,000 bpd Tianjin Refinery was commissioned.

After that they took a break, but over the next few years, we can expect to see an additional 750,000 bpd of extra capacity added. Its not like the company needs to gain market share.

The country’s second-biggest oil company and supplier of 80 percent of China’s fuel needs

They are already market leader.

It is exactly this type of beggar my competitor strategy, the belief in god given right to market share, that destroys value in a sector. What the refining sector needs is a little bit more circumspection, a little more humility, and companies that focus on profitability, not empire building.


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