Competitive Intelligence Report: Sinopec’s Batam Project - Essay Example

This report Is made for the Bat local government and aims to analyses and predict the current and future Investment of Since. It will also evaluate and predict the influence of the Bat project. The final objective is to provide strategic choices for Bat government. The data of this report are all from open source. They are from three main aspects which are Since, Bat and International oil industry.

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The most data are collected from Internet via various search engines such as Google and Discovery. The official websites of Since and Bat has also provided amounts of data. In addition, some existent reports and journals is an important component of this report’s data collection. In findings, this report firstly analyses the current global expansion strategy of Since. Then in strategic Importance of the Bat Project is determined. Based on those two findings, the author Justifies the Bat Project and predicts that there will be more similar investment of Since in this area in the future.

Moreover, this report also evaluates the predicable influences on local society from Syncope’s new project. In terms of positive, this project can pull the development of local economy in some aspects such as promoting employment and increasing government income. However, the project is also a potential threat of local environment and the tourist At the final part, this report provides two strategies to local government. In the industry- oriented strategy, the government is suggested to concentrate on the oil industry development.

In the environment-oriented strategy, the author recommends linen to restrict this kind of investment and to put the environment at the first place in order to acquire long-term benefits. Introduction China Petrochemical Corporation (Since Group), which is established in July 1998, is a super-large petroleum and petrochemical enterprise group. Since Group is a state-owned company solely invested by the State, functioning as a state-authorized investment organization in which the state holds the controlling share. Headquartered in Beijing, it has a registered capital of EYE. 2 billion (Since, 2012).

Following the rapidly development of China economy, as one of the most important Chinese state-owned company, Since has significantly increased its market power and influence in international petrochemical market in last decade. Nowadays, it has become one of the largest petrochemical enterprises worldwide and is ranked the 5th in Fortune Global 500 in 2012 (Fortune, 2012). Originally, although Since has great business scale and market value, it has held their most business within China. Compared with its competitors such as British Petroleum and Royal Dutch Shell, Since still has a weaker international market position.

However, in recent years, Since start to spread its business overseas. On 10th October 2012, Since announced its Bat Oil Storage Project which located in the West Point Industrial Park of Bat, Aria Islands Province of Indonesia. The project will be built with 2. 6 million cubic meters of crude oil and oil products storage facilities, and supporting piers (Since, 2012). Bat is one of the largest islands in the Aria Archipelago and is actually one of fastest growing tourist destinations in Indonesia (Bat, 2013).

Such an investment certainly will have a deep influence on local society. Therefore, as a consultant hired by Bat local government, the author will focus on evaluating and predicting the influence of the new project and, in addition, also provide reasonable strategies to client in order to respond the Syncope’s investment. Data collection This report has only sought the open source information which refers publicly available information appearing in form of electronic or print. Because that this type of information is plentiful and costless to obtain.

Another advantage of open source information is that it may be the most timely and accurate information available Operations Security Intelligence Threat Handbook, 1996). Besides that, collecting open source is completely legal. The author has collected data from three main aspects which are Syncope’s strategies, Batman’s information, and the external environment of petrochemical industry. Development direction and strategies of recent years. The annual report may be the most official and accurate open source. Through past several years Syncope’s annual reports, the changes and development of its strategies can be defined.

The official website of Since is an effective open source because the official news there can be ensured both timeliness and reliability. Secondly, the basic information of Bat such as population, culture, social class and economy may decide the degree of the influence from Syncope’s Project. Thus, it has deep impacts on the local government’s response. That information has been mostly collected from the island’s home page on Internet. Thirdly, the existent reports and Journals of petrochemical industry and companies are also used as references to evaluate the influences of Syncope’s Bat Projects on local society.

They may provide previous and similar cases to help the tutor to analyses the data and to present optional strategic choices to the client. In addition, the relevant reports from public media can be used to collect extra information as replenishments which may contribute the data more comprehensive and more particular. In terms of the methods used to collect data, Internet and traditional methods such as textbook and business Journal are the two main techniques. The former provide a fast way to search and obtain relevant information. Several search engines such as Google would present a wide range of source.

In addition, various websites of public Edie, for example, Wall Street Journal, and Reuters may provide some useful business report with professional insights which are important components of this report data. The latter is more complex to conduct compared with Internet. However, tradition methods such as collecting data in library can access to some information which is unavailable on Internet. In addition, Discovery of University of Liverpool is a professional search engine where can acquire numerous academic data such as journal articles and publications in form of electronic.

This report has combined those different methods to obtain data. Findings Syncope’s Global Business Strategy Syncope’s Bat Project is not an isolated incident. The author believes that it is a part of its global expansion strategy. In recent years, Since has a rapid development. Based on its annual reports from 2009 to 2011, the operating income has kept an increase rate over 30% and the amount has almost doubled in these three years (Since 2011 annual report, 2012). Its total assets have also increased over 10% per year (Since 2011 annual report, 2012).

Consider the scale of Syncope’s business (above El 74. 5 billion), the domestic market is certainly difficult to support such speed of development. Obviously, the expansion of overseas market is an inevitable choice of Since. As the evidences, the proportion of overseas assets in Syncope’s total assets had increased from 10. 6% to 36. 56% between 2005 and 2011(Chinese News, 2012). In 2012, Syncope’s overseas assets were above EYE billion (Chinese News, 2012). Syncope’s expansion has two main structures.

On the one hand, Since has built facilities in their supplier countries such as the Bat project. On the other hand, it (M&A). Actually, in recent years, Since has repeatedly invested in foreign market. In October 2011, Since bought Daylight Energy Ltd. , a Canadian oil and natural-gas producer, for 2. 12 billion US dollars (Welsh, 2011). In July 2012, Since injected around $2. 1 billion into Australia Pacific LONG to finalize its acquisition of 25% equity totally in the Joint venture (Forester, 2012).

February 2013, Since purchased an oil and natural-gas field straddling the Oklahoma and Kansas border from Chesapeake Energy Corp., an US company, for 1 billion US dollar (Leftover, 2013). Those examples can prove that Since is actively expanding outward and focus on the developed countries. Therefore, the author deems the Bat project as a part of Syncope’s global expansion strategy and believes Since will continue this kind of projects. Syncope’s Bat Project Besides of Syncope’s global strategy, the future actions can also be predicted via analyzing of Bat project itself.

This project, in details, has been invested $850 million and planned to build between 18 and 24 months and will be the largest oil storage terminal in Southeast Asia (Pachyderms and Chin, 2012). The author believes that this investment has great strategic importance and may create huge benefits for Since. Firstly, according to the media data, above 70% of Since crude oil resource is rely on import and Indonesia is one of its main supplier countries (Shah, 2012). Thus, locating the faculties near the suppliers can reduce amounts of transportation expenses.

Secondly, Bat is only 20 km away to Singapore (Bat, 2013) which is the region’s top trading hub and is the world’s top three export refining centers (Singapore DB, 2009). Therefore, the Bat project can be a foothold in order to contribute Since to spread its business into Southeast Asia, Northeast Asia and Middle East markets. In addition, this project can also play an important role in safeguarding the oil supply and energy security of China. Therefore, as the first overseas oil storage terminal of Since, the Bat project will be a start and example of this expansion structure.

The author predicts that after this project Since will continue its investment in this area in order to enhance its market position. Predictable Influences of the Bat Project As mentioned before, Batman’s information is a key factor which may decide the influence of Syncope’s project. Based on the research, Bat has population of round 1 million and its economy structure is mainly composed by Oil support industry, electronics industry and tourist industry (Bat, 2013). Obviously, Syncope’s new project will deeply influence the local society in both positive and negative terms.

Positive Impacts In terms of Positive impacts, firstly, the project can make considerable economics contribution. In 2011, Since has totally paid taxes of E 32. 98 billion (Since 2011 corporate social responsibility report) and part of it should be paid to host governments. Therefore, the new project can increase the financial income of Bat overspent. Secondly, the project will create amounts of Jobs. According to the corporate social responsibility report of Since (201 1), their overseas employees has total. In Bat, Worker is an important part of population.

Besides the local people, various ethnic groups from all over Indonesia have come here in search for Jobs with the rapid growth and development of the area (Bat, 2013). Thus, the project can meet these demands. Since also has held various forms of comprehensive trainings in host countries for employees (Since 2011 corporate social responsibility report). It can not only improve the personal skills of employees but also can make contribution of the development of local oil industry. Moreover, Syncope’s project can also promote the economic of scale of oil industry.

Singapore is located by about 70% of the international oil and gas suppliers manufacture (Tan, 2010) and the region around it include Bat has become the new target of global oil companies’ oil infrastructure projects, for example, Vocal and Viral began their constructions in southern Malaysia in progression (Pachyderms and Chin, 2012). Therefore, those oil projects will generate a regional economic of scale which can gush the development of local oil industry. Since’ current and future investments will play a role in this background.

Negative Impacts However, the Bat project will have negative impacts on local environment and tourist industry. On the one hand, the environmental problem are very serious for oil companies (Titan et al, 2011) a recent example is the Departed Horizon oil spill on 2010, which leaded too horrendous environmental disaster. This tragedy was deemed as the worst oil spill in U. S. History and caused widespread economic consequences from Texas to Florida (Align et al, 2012). Therefore, such a large-scale oil project will be a potential threat of environment especially in Bat which is a tourist destination.

On the other hand, this oil project will consume amounts of resource such as water and electric power which may cause encumbrances of local society. Moreover, the tourist industry could be damaged by Syncope’s project which includes the pollutions of both construction and daily petrochemical production after operating. Strategic Implications Based on the findings, Syncope’s Bat project is an implementation of its global expansion strategy. It chose Batman’s as the location in order to close Indonesia which is the main oil supplier countries and Singapore which is one of the world largest trading and refining centers.

To acquiring a stronger international market position, Since will invest in this area further. For Batman’s local government, the client, this project can stimulate Batman’s economic growth and also is a potential threat in terms of local environment and tourist industry. This report provides two strategic choices based on two orientations respectively which are oil industry-oriented and environment-oriented. Industry-oriented strategy Generally, this strategy suggests that the local government can focuses on the oil industry growth. It should utilities the trend of Syncope’s strategy to introduce more foreign oil investments.

The core principle is to promote the Since’ project and continue attracting similar investments. Moreover, local government should also pay attention on environment protection. Firstly, the government should create a favorable environment for foreign oil investment. On the one hand, relevant preferential policies such as reducing the the project finish which within 18 months. On the other hand, government can be an actively intermediary between foreign investors and local business groups immediately in order to enhance the communication and improve the relationships between them.

For example, government can promote the cooperation between local pipeline producers and Since in order to contribute its construction. Secondly, government should provide convenient to Since in terms of the infrastructure and labor resource. The former mainly refers to the transportation conditions which can seriously influence the oil companies. Based on the actual situation, road should be upgraded and maintained. Besides the road construction, traffic regulation is important as well. A reasonable transportation system can not only reduce the transportation cost but also increase the efficiency.

For example, the special railway lines can be established for heavy tracks of Since which ensure the safety and efficiency at same time. Because those actions need be adjusted in real situation they are planned to be done within half year after the Bat project finish. For the later, local government can open the labor market for Since while it seeking employees. In addition, some basic skills training program such as language lass should be started to hold for local people in order to reduce the training cost of Thirdly, planning ahead of the location of oil projects is essential to maximize the economic benefits and synergy effects.

One is that extra land around current project should be prepared in case of possible extension. Another one is that government should make plan to move current and future oil projects into a same region in order to create external economic of scale. It also can attract further investment from oil industry. However, environment problems cannot be ignored. The oil industry area should pep away from the living and tourist areas in Bat in order to reduce the influences of possible pollution from production. Government also should set environmental policies to standardize Syncope’s operation.

Environment-oriented Strategy Although Syncope’s Bat Project will create amounts of benefits for local society, it will be a potential threat of environment and may hurt tourist industry. Therefore, this strategy suggests that local government should put the environment at the first place. It should cautiously face the Syncope’s current and future investments in order to protect the local tourism resource. On the one hand, government should formulate strict polices of environmental protection and determine oil production standards for Since and other current oil companies.

Specifically, government should set restriction and punishment mechanism in order to avoid resource wasting and pollution. Moreover, the frequent monitoring and testing systems are also necessary. Those actions should be done as soon as possible. On the other hand, for the possible investment in the future from on the environment influences rather than economic growth. Obviously, restricting those oil companies’ investment will slow the development of coal economy.

Therefore, in order to keep the economic growth, the government should focus on developing the tourist and service industries vigorously instead of the oil industry.