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How far are we from aligning with the international standards? An Analysis of Petroleum Construction Enterprises’ Transition from “Historical Transformation” to “Top-Level Qualifications” Editor’s Note: Engineering technology services have always been an important part of China National Petroleum Corporation’s core business. Oil construction companies are the key organizers and implementers of this business. From pipeline construction to the building of refinery facilities, every aspect reflects the efforts and sweat of oil industry constructors. As China National Petroleum Corporation stepped out onto the international stage, oil construction companies played a pioneering role. Under the same banner of CNPC, they carried forward the Daqing Spirit and the Iron Man Spirit, composing songs of builders and songs of friendship in foreign lands. While learning advanced international management practices, I also honed my skills and improved my overall capabilities and management level. Amidst increasingly fierce competition in the international construction market and intensifying competition in the domestic market, how can oil construction companies integrate with international standards? What impacts will arise for these companies when international standards come into conflict with the actual conditions of construction sites? What preparations should construction companies make to succeed in the future? The reporter conducted in-depth interviews on this topic. China National Petroleum First Construction Company is one of the enterprises with the \"Special Grade Qualification for General Contracting of Chemical and Petroleum Engineering Projects\". The image shows this company lifting tower structures in a condensate oil project in Algeria. Photo by Wang Jin. Since the beginning of this year, the three major Chinese oil companies—China National Petroleum Corporation, Sinopec, and China National Offshore Oil Corporation—have accelerated their efforts in exploration and development, expanding their operations overseas, and venturing into marine areas. This has given rise to a new wave of activity in infrastructure construction, international project execution, as well as marine exploration, development, and engineering projects. The wise act in accordance with the circumstances. The construction companies under China National Petroleum Corporation have seized this once-in-a-lifetime opportunity, quickly embarking on a path of rapid development and navigating the challenges in domestic and international engineering construction markets. Since the restructuring and reform, Chinese petroleum construction enterprises have undergone tremendous changes, with many of them embarking on the path to the international market. How is their development? How can sustainable competitiveness be further enhanced? It has become an issue of concern for people. Strategic transformation: Construction companies entering the international market. 9 years ago, against the backdrop of strategic reorganizations in the oil and petrochemical industries, China National Petroleum Corporation and Sinopec Group were established in Beijing. Subsequently, in order to break through the \"bottlenecks\" restricting corporate development, China National Petroleum Corporation underwent restructuring and the separation of its core and auxiliary businesses, entering a period of historical transformation. At the beginning of the restructuring, China National Petroleum Corporation’s various construction companies found themselves in a difficult situation: their overall economic output was low, with an annual per capita labor productivity of 80,000 yuan ； The historical burden is heavy and the overall number of personnel is excessive; technical service teams generally have more than 30% excess staff ； Lack of funds, shortage of talent, and insufficient equipment weaken market competitiveness. Coupled with **policy changes and a saturated domestic market, a number of projects that were originally planned were halted, forcing construction companies to find ways to sustain their operations. Where does the money come from, and where do people go? Under the pressure of survival, construction companies have chosen to \"obtain funds from the market and send people there\", bravely \"going out\" to expand their opportunities for survival. As one of the engines driving China National Petroleum Corporation’s expansion overseas, China Petroleum Engineering Construction (Group) Company (abbreviated as CPECC) plays a key role in the international division of labor in oil engineering by leveraging the country’s excess production and service capabilities to enter international markets, thereby providing engineering contracting and labor cooperation services abroad. Driven by CPECC, China National Petroleum Pipeline Bureau, China National Petroleum First Construction Company, China National Petroleum Sixth Construction Company, and China National Petroleum Seventh Construction Company have all set out to expand their operations overseas. Starting from lower-tier markets, they have taken the first steps toward entering the international market. Unfamiliar with the rules of the international market, faced with significant barriers to communication in language, and confronted by the extremely \"strict\" international management practices of foreign parties, construction companies that ventured into this field for the first time really encountered many difficulties and were subjected to unprecedented challenges and tests. After several years of working abroad, they have accumulated considerable experience. In 2001, when the entire team from the company’s Kuwait project department returned to home country after three years of hard work, they said to reporters with emotion that working in accordance with international construction practices had truly broadened their horizons. Kuwait Station No. 27 is a world-class oil collection station, with over 700 international standards to be followed during its construction; merely for pipeline installation and various quality management standards, there are more than 40 such standards. Before each delivery, it is necessary to carefully transfer the material number, drawing number, pipe segment number, pipeline number, etc., onto the pipe segments with precision. After the pipe segments are prefabricated, they are subjected to weld flaw detection and strict inspection of their dimensional specifications at high temperatures. Following sandblasting for rust removal, each segment is checked thoroughly to ensure accuracy before it is sent to the site for installation. It is precisely this commitment to rigorous and standardized operations that has enabled Yijian Company to build high-quality projects in foreign countries in accordance with international standards, ensuring the successful commissioning of this world-class oil collection station from the very first attempt. Kuwait** held grand celebrations for this occasion, spoke highly of this project, and stated that it would erect monuments in honor of the Chinese people at the oil collection stations. Under the influence of the international market trends, China’s oil engineering and technical service teams, adhering to the corporate spirit of \"patriotism, entrepreneurship, pragmatism, and dedication\", have rapidly improved the quality of their services, thereby significantly enhancing their international competitiveness. Among them, as China’s largest international oil and petrochemical engineering EPC company, China National Petroleum Engineering Corporation ranked 58th in the list of the 225 largest international contractors worldwide in 2005, and third among the top 30 domestic companies in the field of overseas contracting projects in 2006. Today, CNPC has 361 teams of engineering and technical services overseas, with an increasingly wide range of service projects. It has undertaken and successfully completed a number of large-scale oil engineering projects in various markets, including North Africa centered on Sudan, the Middle East centered on Kuwait, South Asia centered on Pakistan, Central Asia centered on Kazakhstan, and South America centered on Venezuela. This has earned CNPC Group a reputation abroad and laid the foundation for it to enter the high-end segment of the international engineering market. Why do \"rejection reactions\" occur in domestic construction? As construction companies expand their operations overseas and adapt to international construction practices, competing with foreign counterparts on the global stage, they provide many valuable experiences that can be used as references for domestic construction. However, while some construction companies are aligning themselves with international construction practices, two different implementation models have emerged in domestic construction. One is to strictly abide by the contract terms when carrying out engineering contracts signed with foreign companies. The contracts signed by foreign parties strictly adhere to international practices, and such contracts are solemn and immutable. When one of the parties to a contract fails to fulfill its obligations as stipulated in the terms, the other party will point it out immediately, and the offending party will correct it right away. Strictly enforcing contracts is the essence of the international management model. When executing domestic contracts, despite clear commitments from both Party A and Party B, they still subconsciously believe that the contract \"can be changed\". This is evident in design firms: sometimes, as the project start date approaches, the construction drawings are not delivered on time, resulting in delays in the project timeline ； After work began, there was a mismatch between the drawings and the actual installation, forcing temporary changes to the construction plan. On the part of the owner, it is common for the construction conditions not to be provided within the time frame specified in the contract before work begins, and various \"modification notices\" that are not in line with the contract keep appearing during the construction process. On the part of the construction contractor, the personnel for key tasks and some construction equipment failed to arrive on time, which delayed the project schedule. These failures to fulfill commitments as stipulated in the contract are common in the construction of some domestic projects, and international practices show a \"rejection response\" in such situations. When problems arise between the two parties to the contract, instead of referring to the contract itself, they* tend to seek coordination from higher-level departments. Why do management models that work well in international projects fail when applied locally? An expert pointed out incisively that the habit of thinking that \"it’s good enough as long as it meets the standards\" is deeply rooted. “The attitude of \"it’s fine as long as it’s more or less okay\" tends to contaminate the entire market environment, increase the difficulties in integrating with international standards, and also pose risks to the quality and safety of projects. Without changing it, it is impossible to achieve leapfrog development for the enterprise. Some industry insiders believe that the lessons learned by China National Petroleum Corporation through its overseas operations show that the Chinese are fully capable of managing both international and domestic projects, with a workforce that includes many technical experts and supervision engineers of international standard. What is lacking is an overall environment and climate in the country that allows for operating according to international rules. To truly integrate with the international community, it is not merely a matter of improving management and technical standards; what is more urgent is the comprehensive development of market environments and rules, which requires efforts from multiple parties. To fully integrate with the international community, we still have a long way to go! By obtaining the \"golden key\", construction companies can rely on their qualifications to succeed in the future. Changing the market environment and implementing market access rules is not only necessary to keep up with the trends of the times, but also essential for aligning with internationally accepted standards. The general contracting of engineering projects is considered the prevailing international management model for construction companies today. As early as July 1, 2001, the **Ministry of Construction officially issued and implemented the \"Standards for the Qualification Grades of Construction Enterprises,\" which covered a wider range of areas and had a broader scope than ever before. Among them, the qualification level standards for general construction contractors include 12 criteria, those for specialized contractors include 60 criteria, and the qualification standards for labor subcontractors include 13 criteria. Therefore, all construction companies are fully aware that corporate qualifications are the key to demonstrating strength, serve as a \"pass\" to enter the market, and are moreover the most important indicator of a company’s competitiveness. For a construction company, not having a qualification certificate issued by the Ministry of Construction means it will be left far behind in the fierce competitive landscape and excluded from the market ； Companies with top-tier qualifications can demonstrate a significant advantage through their leadership role in the competition among numerous enterprises. It is worth celebrating that, among hundreds of thousands of enterprises competing in terms of \"qualification levels\" across the country, China National Petroleum & Natural Gas First Construction Company, China National Petroleum Pipeline Bureau, Daqing Oilfield Construction Group Co., Ltd., and CNPC Huahua Construction Engineering Co., Ltd. have stood out as the only 4 companies in China to hold the \"Special Grade Qualification for General Contracting of Petrochemical and Petroleum Engineering Projects.\" Their leadership roles in their respective fields of construction have had a profound impact on their ability to compete at a higher level in the market, attracting widespread attention both within and outside the industry. What is even more noteworthy is that on March 13 this year, the **Ministry of Construction revised the ‘Standards for Special Grade Qualifications of General Contracting Enterprises for Construction Projects’. The new Standards set four high thresholds: the enterprise’s creditworthiness, requirements for its key management personnel and professional technical staff, the level of scientific and technological progress, and representative project achievements. Among these requirements, enterprises are expected to have a corporate technology center at the provincial or ministerial level or above, 50 or more registered first-class construction engineers, 3 or more **-level construction methods, and a total of 8 or more valid patents (with at least one invention patent). At the same time, under the section on project experience, high standards are set for enterprises with the top-level qualification for general contracting of petrochemical engineering projects; such enterprises are required to have undertaken more than 3 large-scale petrochemical engineering projects over the past 5 years in terms of general contracting, construction general contracting, or main project contracting, with the quality of those projects being satisfactory. As the highest-level qualification in the hierarchy of construction enterprise qualifications in our country, the new Standards aim to regulate market operations, encouraging construction enterprises to place greater emphasis on the quality of their development and operational performance. They seek to guide these enterprises toward becoming leaders with high technical capabilities, strong financing abilities, and excellent management skills, thereby facilitating their transition toward general contracting for construction projects. In this regard, industry experts analyze that EPC, as an internationally accepted method for organizing construction projects, has a history of development spanning over a hundred years. Implementing EPC has four major advantages: the EPC contractor is responsible for the overall planning, comprehensive arrangement, coordinated management, seamless coordination across different stages, and systematic management of the entire project construction ； It enables close integration of design and construction, ensures that the design intent is properly implemented during the construction process, and reduces conflicts ； While ensuring project quality, the design and construction plans are continuously optimized according to actual needs in order to save costs ； Implementing professional project management through a specialized management team helps to compensate for the owner’s shortcomings in project management capabilities, thereby improving the efficiency and effectiveness of construction projects. In light of the rapid development in domestic oil and petrochemical engineering construction, some experts warn that there are still certain drawbacks in the general contracting model currently in use in China. During the implementation of construction projects, it is common to conduct separate bidding for design and construction, which makes it difficult to achieve scientific overall management throughout the entire project lifecycle ； Some construction companies have relatively limited functions; they lack the capability to undertake comprehensive contracting for project planning, financing, design, procurement, construction, and operation, and they are short of comprehensive capabilities in areas such as funding, management, and technology. In response to this, many industry experts are calling for, first, the improvement of the market system; changing the practice of separating bidding processes for design and construction, and implementing \"general contract bidding for projects\" in accordance with international standards” ； Secondly, the competent departments of the group companies, associations of petroleum engineering technology contractors, and refining and construction enterprises should work together, leveraging their respective strengths to expand their service offerings. They should strive to create leading enterprises that are well-funded, staffed with talented professionals, and equipped with advanced technology, as well as having the capabilities in research and development, design, procurement, construction management, and financing ； Third, accelerate the functional transformation of existing construction enterprises and speed up the integration of design, procurement, construction, and operation ； Fourth, it is necessary to focus on the training of professionals in engineering general contracting, as well as on corporate technological innovation and management innovation, in order to comprehensively enhance a company’s capabilities in engineering general contracting and its core competitiveness. As they move from growth to maturity, construction companies will face more challenges both within and outside the industry.