Sinochem Energy: Growing through the Storm and Developing as it Innovates

Source:     Author:     Date:2021-10-13     

As a traditional business segment of Sinochem Holdings Co., Ltd. (Sinochem Holdings), Sinochem Energy Co., Ltd. (Sinochem Energy) successfully transformed from a purely policy-oriented foreign trade enterprise to an operator and comprehensive service provider with a complete petrochemical industry chain since its establishment. Throughout its more than fifty years of development, Sinochem Energy has always mustered the courage to reform, implemented said reforms and built up its capacity to reform. The concept of “reform has been woven into the fabric of Sinochem Energy and constitutes a powerful gene in the company’s DNA.

Growing Together with New China and Building a Solid “Red” Foundation

In the 1950s, with various projects waiting to be restarted, the national economy urgently needed a recovery. Sinochem Holdings responded to the nation’s call and gradually grew from a small company to an internationally influential oil and petrochemical trader.

Since the 1960s, Sinochem Holdings, China's first foreign trade company, has actively cooperated with China's diplomatic needs to carry out aid-based oil export trade, actively expanded trade with countries around the world, and gradually developed into an import and export enterprise specializing in petroleum and petrochemical trade. In the early 1970s, with the steady increase in the production of Daqing Oilfield and Shengli Oilfield, China's oil production rapidly expanded. In 1973, Sinochem Holdings exported Daqing crude oil to Japan, making it the first company in China to do so. Afterward, Sinochem Holdings began to export oil to markets such as Brazil, Singapore, and the United States.

In 1978, with the tide of reform and opening up, Sinochem Holdings entered a new stage of development. Sinochem Holdings by this time had established stable oil trade relations with multiple countries and explored various trade methods such as oil transit and entrusted processing. Additionally, Sinochem Holdings began a shift from trade to industry, while still maintaining its original advantages. In the late 1980s, it invested in overseas refineries and initiated the construction of Aoshan Oil Island. In the 1990s, as the largest shareholder, it invested in the construction of the first Sino-foreign joint venture refinery in China, West Pacific Petrochemical Company Ltd. On the basis of stabilizing its oil trade business, Sinochem Holdings gradually expanded to include industrial chains such as oil refining and warehousing, thus enabling it to make new breakthroughs.

Having entered the 21st century, Sinochem has faced the surging waves of economic globalization and accelerated global structural change, which has pushed Sinochem Energy to quicken the pace of its strategic transformation. In terms of the warehousing business, it has further improved China's petrochemical warehousing and logistics network around the Bohai Sea, Yangtze River Delta, and Pearl River Delta. The company also shoulders the heavy responsibility of constructing and operating the Zhoushan National Petroleum Reserve Base. In the field of petroleum distribution and retail, it has accelerated its distribution of gas stations and has supported the construction of oil depots nationwide to consolidate the markets in North China, East China, and South China. In 2006, Sinochem Quanzhou Photochemical was established. The first 10 million-ton refining project landed in Quanzhou and was officially put into operation in 2014.

Sinochem Energy has expanded its operations to various regions of China and has gradually grown from an enterprise specializing in the import and export trade to a large energy enterprise with a complete upstream and downstream industry chain and prominent international characteristics. Its industrial foundation and sustainable development capabilities are constantly growing stronger.

Transform Through "Management Plus Technology" and Stay True to the Mission of Reform

Sinochem workers are confronted with development challenges posed by new technologies and models, the instability and uncertainty that have arisen from a new round of global development, major changes, and adjustments, as well as the intensified competition and cyclical fluctuations that challenge the industry. Nevertheless, these employees who are operating in a new era of the industry have inherited and continue to pass down the fine traditions and revolutionary spirit that can be found throughout the revolutionary era, construction period, and reform and opening up period. They do not shy away from challenges. Quite the opposite, they dare to take risks and continue to strive tirelessly to spur on the continuous development of China's petroleum industry.

Self-targeted reform. In order to meet the requirements of development in a new era of business, Sinochem Holdings restructured itself at the end of 2016. The result was the formation of five business units: energy, chemical, agriculture, real estate, and finance. In June 2018, Sinochem Energy Co., Ltd. was established, marking the completion of the joint-stock transformation of the company on the basis of asset restructuring. In the same year, Sinochem Energy, as a pilot enterprise of Sinochem Holdings, was selected for the “Double Hundred Enterprises” list, which highlighted state-owned enterprise reform. With the “Fuse-warhead and Hybrid Transformation” as the core focus of the company’s reform, it actively created a demonstration and driving effect of the “Double Hundred Enterprises.” In June 2019, Sinochem Energy began introducing strategic investors and completed a hybrid transformation aimed at attracting strategic investors in December. It successfully introduced five strategic investors with a total investment of 11.555 billion yuan, becoming the largest fuse-warhead project attracting strategic investors among the Double Hundred Enterprises.

The business prospects of Sinochem Energy have been enhanced by a number of sectors, including oil trade, oil refining, petrochemical warehousing, oil product sales, petrochemical sales, and park construction. In recent years, Sinochem Energy has advanced the construction of key energy projects, such as ethylene. In September 2020, the million-ton ethylene project was successfully launched, marking a new stage for the company's refining and chemical integration development. At the same time, it has been exploring business models and new business, areas such as the Internet of Energy and asset-light development.

Sinochem Energy prioritizes science and achieves growth via innovation. The optimization of its organizational structure and the fuse-warhead capital increase have provided the assistance needed for Sinochem Energy to achieve stronger development. As an operator and comprehensive service provider of petroleum and petrochemical industry driven by science and technology, innovative growth, and excellent management, Sinochem Energy has continuously consolidated its business foundation and improved its management level. In the refining and chemical industry, it has improved the petrochemical industry chain through large-scale, integrated, and park-oriented development and adheres to the overall cost leadership strategy. The company actively plans for the future layout of the petrochemical industry and the extension of the industrial chain, strengthens the basic chemical industry, and consolidates its foundation to become a world-class comprehensive chemical enterprise. It continually facilitates the transformation and innovation of business models in trade, marketing, and other aspects. The company constantly improves the efficiency of industrial development and further optimizes the industrial structure while focusing on its main business. Finally, Sinochem Energy intensifies technological innovation, improves business management level, promotes business model transformation, enhances industrial chain transformation, upgrading, and innovation, and achieves high-quality development.

Ready for Innovative Development and New Vitality

As the company enters a new stage, Sinochem Energy faces new challenges and embraces new missions. Along the way, the very DNA of the company is engraved with the spirit of working hard, taking responsibility, and blazing new trails. Since the completion of the shareholding system reform, Sinochem Energy has implemented a new development concept, all while relying on the existing foundation of energy business, persisting in innovative development, and delving into regulating corporate governance. These efforts have allowed the company to optimize the system, improve incentive mechanisms, and strengthen other institutional and mechanism reforms. By reforming the company’s management system and related mechanisms, it has consolidated its foundation for innovation and achieved breakthroughs in establishing new layouts, new technologies, new products, and new business models. At present, Sinochem Energy is riding upon a wave of digitalization and continuously implementing digital upgrades for the industry through a new Internet-based business platform for petroleum and petrochemical products, which has been independently researched and developed by Sinochem Energy. Sinochem Energy is becoming a practitioner of high-quality and sustainable development for China's energy and chemical industry.

While promoting the continuous development of its own business, Sinochem Energy remains true its original aspiration and mission of “improving people's livelihood and promoting revitalization.” Sinochem Energy has gradually formed a pattern of providing aid that is based on education assistance, industrial assistance, and living environment improvement. This pattern can be seen in the company’s various aid projects, including the Hundred Houses and Hundred Kitchens, medical and health stations in Gangba, Tibet, the Sinochem Energy Class and Tianshan Campus Football Development Fund in Aqi, Inner Mongolia, as well as its industrial poverty alleviation project in Fujian (the New Rural Comprehensive Service Station), the provincial-level poverty alleviation village living environment improvement project, and other poverty alleviation projects. In particular, during the 19 years the company has provided assistance to Tibet, Sinochem Energy has adhered to the development concept of putting people at the center of what it does, focus more on people's livelihood issues that are of general concern to the people themselves, and strengthen the construction of border infrastructure. It has always been a strong performer in helping people through concrete actions. It has continuously selected and sent outstanding company officials to the front line to carry out assistance work and provide a boost to rural revitalization efforts.

The road ahead will be long and our search will continue. Sinochem Energy has witnessed and participated in the changes and growth of China's energy industry, from specializing in the oil trade to building a comprehensive petrochemical industry chain layout, from mastering oil and gas resources to providing for energy consumption and people's livelihood, from cultivating oil storage to contributing to national oil reserves. It was founded in response to the needs of China’s development and became new once more amidst the reform and opening-up period.

In the grand wave of reform that is coming in the future, Sinochem Energy will adhere to the direction of market-oriented reforms. By putting science first, it will focus on technological innovation as the driving force for the sustainable development of enterprises, strive to create a batch of key petrochemical products and technologies as the source of its growth, and make new and greater contributions to achieving high-quality economic development in the new era, which will, in turn, allow the company to contribute to achieving the “Two Centenary Goals” and the Chinese Dream for a great national rejuvenation.

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