Big news! Shandong’s local refining leader teams up with oil giant BP! Another high-end oil company has been established

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On February 2, 2018, BP announced that it had signed an agreement with Shandong Dongming Petrochemical Group in China (hereinafter referred to as “Dongming Petrochemical”) to establish a joint venture. It is very rare for private oil companies in China to partner with the world’s top oil companies. This significant partnership indicates that China’s domestic oil and gas market is undergoing a profound transformation. A powerful partnership. Reportedly, under this cooperation, BP holds a 49% stake in the joint venture, while Dongming Petrochemical holds 51%. The new company will operate high-end brand gas stations in the provinces of Shandong, Henan, and Hebei. Regarding BP: British Petroleum is one of the world’s five major international oil companies, as well as one of the top ten largest private corporate groups in the world. It has a history of over 100 years. This company was the discoverer of Middle Eastern oil; it operates in over 70 countries around the world, with annual revenues exceeding 200 billion dollars, placing it at the top of the global energy industry. The company’s main business is: oil and gas exploration and development ； refining ； Natural gas sales and power generation ； Oil product retail and transportation ； As well as the production and sales of petrochemical products. In addition, the company’s business in solar power generation is also continuing to grow. BP now has the largest renewable energy business among oil and gas industry companies in terms of operational scale. In December 2017, BP announced that it would invest $200 million over three years to acquire a 43% stake in Lightsource, Europe’s largest solar energy development company. In China, BP currently operates more than 740 dual-brand gas stations in Guangdong and Zhejiang provinces in joint ventures with CNPC and Sinopec, selling over 12 million liters of gasoline and diesel per day and serving around 400,000 customers. Regarding Dongming Petrochemical, it is the largest local refining and chemical enterprise in China. With a history of 30 years, its total assets currently amount to 30 billion yuan, and its annual processing capacity for crude oil is 15 million tons. Main products include petrochemical series products such as high-octane gasoline, diesel, liquefied petroleum gas, solvent oil, liquid paraffin, polypropylene, high-grade road asphalt, and petroleum coke. Since China lifted the restrictions on the two rights related to crude oil in 2015, Dongming Petrochemical has attracted significant attention from the oil and gas industry. Dongming Petrochemical not only became the first local refining company in China to obtain both rights related to crude oil, but it also organized other local refineries to form a market alliance, thus emerging as a leader in the industry. What kind of synergy can arise when a major multinational oil company forms a joint venture with a Chinese private enterprise? Regarding this partnership, BP stated that, following approval from relevant regulatory authorities, the joint venture is expected to commence operations in 2018. It also plans to expand its network of gas stations to 500 outlets within 10 years. “China offers exciting opportunities for growth for BP,” said Dai Shangya, BP’s Executive Vice President. “Dongming Petrochemical is a capable local partner, and we are very pleased to work with them to expand our operations in Shandong, Henan, and Hebei – these three provinces with rapid development.” ” Aiming at the high-end retail market for refined petroleum products, this joint venture will establish a modern network of gas stations to help create a safer, cleaner, and more efficient retail industry for such products in China. It will also enable BP to achieve its goal of increasing downstream revenues in the country. Driven by environmental protection concerns and the upgrading of consumer demand, there is currently a growing demand in China’s refined oil market for premium-grade oils and related services. To promote the premium development of refined oil consumption, China has accelerated reforms in the downstream sectors of oil and gas. In accordance with the \"Several Opinions on Deepening the Reform of the Oil and Gas System\" issued by China in 2017, the country will deepen reforms in the competitive segments of the downstream industry in order to enhance the capacity for producing and supplying high-quality oil and gas products. This means that in the downstream markets of the oil and gas industry, more enterprises will enter the market, and those capable of providing high-quality oil products services will gain new market opportunities. In the downstream market, BP has introduced a new strategy in recent years aimed at \"developing high-quality, differentiated fuels and providing convenient services.\" According to BP’s plans, by 2021, the profits from the sales of its downstream products are set to increase by $3 billion compared to 2014. In fact, as early as 2015, Dongming Petrochemical signed a long-term crude oil supply agreement with BP; the first batch of crude oil ordered by Dongming from BP was delivered in 2016. A collaboration similar to that between BP and Dongming Petrochemical has previously been undertaken in Australia. In 2016, BP partnered with Woolworths, Australia’s largest supermarket retailer, to upgrade the branding and services at 527 gas stations. As China’s refined oil market is undergoing upgrades, BP has seized the opportunity to extend this strategy to the Chinese market. Regarding this partnership, Li Xiangping, chairman of Dongming Petrochemical, said, “I believe that the strategic cooperation between the two parties will further drive profound changes in China’s refined oil retail market.” I also anticipate that we will surely achieve sound development featuring mutual benefit, win-win results, and complementary strengths. ” Moving toward the “fourth oil giant”: Almost every Chinese person is familiar with the “three oil giants”, but there are many differing opinions regarding the “fourth oil giant”. So far, the companies eligible to take up the position of \"the fourth oil producer\" are Yanchang Petroleum, Zhenhua Petroleum, Sinochem Group, and Shandong Refining & Chemical. This partnership between BP and Dongming Petrochemical demonstrates the robust development of China’s private oil enterprises, and also gives Shandong Refining & Chemical a greater advantage in the competition to become the “fourth major oil player”. It will have a profound impact on the future structure of China’s oil and gas market. As transformations in China’s oil and gas industry accelerate, changes in the downstream oil and gas sector have taken the lead in speeding up. Private refining and chemical enterprises in China are experiencing unprecedented growth momentum. Private oil refiners have also launched a new major strategy at present. On December 28, 2017, less than 3 months after its establishment, Shandong Refining & Chemical Energy Group (abbreviated as Shandong Da Lianhua) was officially founded, marking the creation of two provincial-level refining giants in China, each with a value of over 10 billion yuan. The overall goal of Shandong Refining, Chemicals and Energy Group is to, over a period of about 5 years and by investing 100 billion yuan, integrate its operations to achieve an annual crude oil processing capacity of 80 million tons. The group aims to generate sales revenues of 500 billion yuan and profits and taxes amounting to 100 billion yuan, thereby becoming a globally influential and domestically significant industrial-financial holding company that ranks among the world’s top 500 enterprises. Once a company of such scale is established, it will occupy an important position in both the domestic and global oil markets. It is worth noting that while expanding their operations, local refining companies also place great emphasis on improving product quality and service standards. Dongming Petrochemical has clearly stated that it will, based on the criteria of high quality and good efficiency, gradually achieve a profound transformation from a large enterprise to a strong one. Dongming Petrochemical’s partnership with BP to develop high-end gas station services also reflects this new strategic approach adopted by private oil companies.