ORIENT ACADEMIC FORUM
A Competitiveness Comparative Study on China’s “Three Energy
Giants”
LIU Jinsong
School of Business Administration, Jiangxi University of Finance and Economics, Nanchang,
China, 330013
Abstract: This paper compare the international competitiveness between China’s “Three Energy
Giants”(PetroChina Company Limited, China Petroleum & Chemical Corporation and China National
Offshore Oil Corporation) and three foreign energy giants (Exxon Mobil, BP Oil and Royal Dutch Shell
Oil Company) by using thirteen index. According to results of the comparison, this article Put forward
that china’s three energy giant Petroleum Corporation should both enhance their operation and
management ability and avoid risks ability during going out.
Keywords: Three Energy Giants, Competitiveness, Comparative Study
1 Introduction
In order to safeguard the country's energy security, chinese government has long put forward the
development strategy of resources,that is “(resources) going out” strategy .As early as 1992, Jiang
Zemin's report to the party's 14 has put forward "actively expand foreign investment of Chinese
enterprises and multinational operations", "greater using of foreign resources and introducing
advanced technology." In 2002, the Party Congress report further noted: "adhere to 'bring' and 'going
out' and improve the level of opening up" , "going out strategy is a major initiatives during new stage
of opening up." Since then, the”( resources) going out “strategy become one of major strategy of
China's economic development process
At present, china’s bigger energy companies are PetroChina Company Limited , China Petroleum &
Chemical Corporation and the China National Offshore Oil Corporation.. The three energy companies’
international competitivenes level have direct impact on the effectiveness of the”( resources) going out
“strategy. Therefore, this article will choose the three energy companies and three major international
energy companies ot compare the gap on international competitiveness between them. Then, the article
will propose some policy recommendations to improve the international competitiveness of Chinese
energy enterprises.
2 The Choice of Sample Enterprises
This paper selects china’s three energy giant Petroleum Corporation to study.They are PetroChina
Company Limited (PetroChina for short), China Petroleum & Chemical Corporation (Sinopec for short)
and China National Offshore Oil Corporation(CNOOC for short).
As a control group, this paper selects three foreign energy companies. They are ExxonMobil, British
Petroleum (BP for short) and Royal Dutch Shell Oil Company(Shell for short).
3 Methods and Data
3.1 The Model
We use principal component analysis method to study. The model as follows :
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ORIENT ACADEMIC FORUM
Among them, F is factor
；ε
loading
，
 x1 = a11 f1 + a12 f 2 + ... + a1k f k + ε 1
 x = a f + a f + ... + a f + ε
 2
21 1
22 2
2k k
2

...

 x p = a p1 f1 + a p 2 f 2 + ... + a pk f k + ε p
Or: X = AF + ε
A is factor loading matrix aij (i = 1,2,..., p; j = 1,2,..., k )
，
is factor
is the part that original variables can’t be explained by factor.
3.2 The data
3.2.1 Financial data
This paper selects five finanal index. They are total income, net profit, total assets, earnings per share
and average return on equity. Table 1 details
Table 1 Six energy companies main financial data in 2008
Net profit
Total
assets Earnings per Average
Enterprise
Total income
(billionU.S. dollar)
(billion
U.S. share
return
on
(billion U.S. dollar)
equity（%）
dollar)
(U.S. dollar)
1577.35
168.36
1759.12
0.09
14.8
PetroChina
2135.44
43.09
1129.16
0.05
8.86
Sinopec
CNOOC
286.47
76.86
633.05
0.15
17.0
ExxonMobil
4773.59
452.20
2280.52
8.70
34.2
BP
3670.53
216.66
2282.38
1.13
20.1
Shell
4583.61
264.76
2824.01
4.27
18.3
Source: CNOOC earnings per share is used the data of its main subsidiary, That is China National Offshore Oil
Company Limited . All company data are from the company's annual reports and websites.
Note: 1 U.S. dollar = 6.8 RMP yuan.
3.2.2 Reserves and production data
This paper selects six reserves and production index. They are Crude oil reserves, gas reserves, crude oil
production, gas production, Refining capacity and Oil productsales. Table 2 details
Enterprise
Table 2 Six energy companies oil and gas reserves and production in 2008
Crude
oil Gas
Crude
oil Gas
Refining
reserves
reserves(Billion production
production(Billion
capacity
(billion
cubic meters)
(billion tons)
cubic meters)
(billion
tons)
tons)
PetroChina
15.2
17327
1.18
528
1.15
Oil
product
Sales
(billion
tons)
0.90
Sinopec
4.0
1971
0.41
83
2.06
1.15
CNOOC
2.2
1599
0.21
64
0.43
0.11
ExxonMob
il
BP
16.8
18655
1.20
940
3.11
3.08
14.5
12802
1.20
861
1.34
2.60
Shell
6.2
12272
0.89
886
1.84
3.00
Source: Zhang Weizhong: "American oil Intelligence Weekly " publish rank of world's 50 largest oil companies in
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ORIENT ACADEMIC FORUM
【】
2008" J "International Petroleum Economics", 2010 (1), P67-70; CNOOC‘s refining capacity and oil sales come
from its 2008 Annual Report
3.2.3 Governance data
This paper selects two Governance index. They are nationalization proportion and employment. Table 3
details
Table 3 Six energy companies Governance Indicators in 2008
Enterprise
Nationalization Employment(Person / billion U.S. dollars)
Proportion (%)
PetroChina
86.29
272
Sinopec
75.84
320
CNOOC
100
192
ExxonMobil 0
35
BP
0
40
Shell
0
36
Source: Zhang Weizhong: "American oil Intelligence Weekly " publish rank of world's 50 largest oil companies in
2008" J "International Petroleum Economics", 2010 (1), P67-70; Note: 1 U.S. dollar = 6.8 RMP yuan.
【】
4 Analysis and Conclusions
After model analysis, we find that most of the correlation coefficients are higher. We also find the
variables has a strong linear relationship and suitable for factor analysis. Table 4 details.
Table 4 Correlation coefficient matrix
The
aver
age
Oil
Tot
retur Crud
Crude
Refini produ
Net
al Earnin n on e oil
gas
oil
gas
ng
ct
Nationaliza
pro ass gs per equit reser reser produc produc capaci sale Employm
tion
Total income fit ets share
y
ves
ves
tion
tion
ty
s
ent Proportion
Total 1.0
income
0
Net profit .81 1.0
6
0
Total assets .90 .74 1.0
5
1
0
Earnings .79 .93 .60
1.00
per share
1
7
7
The .61 .92 .47
.890 1.00
average
5
7
7
return on
equity
Crude oil .48 .69 .55
.445 .612 1.00
reserves
5
6
5
gas .25 .58 .29
.358 .579 .955 1.00
reserves
5
5
7
Crude oil .65 .72 .78
.465 .542 .939 .801
1.00
production
3
5
8
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ORIENT ACADEMIC FORUM
gas .88 .86 .94
production
2
9
8
Refining .77 .70 .51
capacity
6
8
4
Oil product .99 .81 .91
sales
4
6
8
Employme -.7 -.7 -.7
nt 69 74 44
Nationaliza -.9 -.7 -.8
tion 60 81 90
Proportion
.701 .694
.717
.503
.869
1.00
.810 .573
.420
.340
.423
.514
1.00
.767 .630
.504
.267
.675
.910
.718 1.00
-.75 -.376 -.180
1
-.63 -.476 -.234
4
-.510
-.840
-.645
-.905
-.335 -.82
0
-.612 -.98
3
-.697
-.713
1.00
.887
1.00
According to the correlation matrix, using principal component analysis method, we extracted factors
and select the characteristic roots which eigenvalue is greater than 1.
Table 5 is the initial solution of factor analysis. The second column shows the common degree of the
eigenvalue. There are relatively high common degree between variables. Each variable loss much less
information. Therefore, the overall effect of factor extraction is ideal.
Table 5 common factor variance
Variable
Initial Extract
Total income
1.000 .955
Net profit
1.000 .970
Total assets
1.000 .953
Earnings per share
1.000 .979
The average return on equity 1.000 .870
Crude oil reserves
1.000 .993
gas reserves
1.000 .994
Crude oil production
1.000 .989
gas production
1.000 .987
Refining capacity
1.000 .716
Oil product sales
1.000 .977
Employment
1.000 .780
Nationalization Proportion 1.000 .966
The Column from five to seven described the situation of factor solution in table 6. We find that when
eigenvalue is greater than 1, three factors Extracted can explain 93.305% of 13 variables’ total variance.
Overall, 13 variables loss less information .So the analysis results are satisfactory. The Column from
eight to ten described the situation of the final factor solution. We find that when factor have been
rotated, the cumulative variance ratio did not change. Table 6 details.
Table 6
Comp
onent
1
2
3
The total variance of 13 variables by Factors analysis
Squares of rotated factor
Initial eigenvalues
Squares of factor loading
loading
Accumulati
Variance Accumula
Variance Accumula
Sum
Variance %
on %
Sum
%
tion %
Sum
%
tion %
9.212
70.861
70.861
9.212
70.861
70.861
5.381
41.395
41.395
1.826
14.043
84.904
1.826
14.043
84.904
3.528
27.137
68.532
1.092
8.401
93.305
1.092
8.401
93.305
3.221
24.773
93.305
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ORIENT ACADEMIC FORUM
4
5
6
7
8
9
10
11
12
13
.722
.148
4.944E-16
1.987E-16
1.919E-16
-1.965E-18
-1.343E-16
-2.422E-16
-2.495E-16
-4.087E-16
5.556
1.139
3.803E-15
1.529E-15
1.476E-15
-1.511E-17
-1.033E-15
-1.863E-15
-1.919E-15
-3.144E-15
98.861
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
From Figure 1, we find the Eigenvalue of the first factor is much high and has the biggest contribution
to explain 13 variables; Factors after third eigenvalues have the smaller contribution o to explain 13
variables. Therefore, extracting three factors only is appropriate.
Table 7
Rotated factor loading matrix
Factor
Variable
1
2
3
Total income
0.91
0.18
0.29
Net profit
0.87
0.45
0.17
Total assets
0.83
0.49
0.14
Earnings per share
0.82
0.56
0.31
0.12
0.46
0.82
The average return on equity
Crude oil reserves
0.52
0.71
0.44
Gas reserves
0.42
0.88
0.15
Crude oil production
0.32
0.77
0.14
Gas production
0.29
0.79
0.39
Refining capacity
0.28
0.23
0.93
Oil product sales
-0.02
-0.78
0.26
-0.4
0.96
-0.09
-0.89
-0.39
-0.14
Employment
Nationalization Proportion
The six variables(Total income, Net profit , Total assets, Earnings per share, Employment and
Nationalization proportion) have higher load in first factor. So, we name first factor as "business
management factor". The four variables(Crude oil reserves, Gas reserves, Crude oil production, Gas
production) have higher load in second factor .So, we name second factor as "resource extraction factor
".The three variables(Average return on equity, Refining capacity, Oil product sales) have higher load in
third factor .So, we name third factor as " sales factor ".
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ORIENT ACADEMIC FORUM
Eigenvalue
Number of Factors
Figure 1 The diagram between number of factors and Eigenvalues
The rank of six energy companies as shown in Table 8. The final score of them is calculated, based on
three factors’ variance contribution rate.
From the comprehensive ranking in Table 8, we find three major foreign energy companies occupy the
top three, Sinopec, PetroChina and CNOOC are at 4,5,6 .
PetroChina has advantage on oil resources exploitation ; Exxon Mobil is strongest in sales; Shell Group,
the strongest management.
Table 8 The international competitiveness rank of six energy companies
Factor 1
Factor 2
Factor 3
Enterprise
score
rank
score
rank
score
rank
comprehensive scores
comprehensive rank
PetroChina
-0.91
5
1.43
1
-0.76
6
-0.57
5
Sinopec
-0.48
4
-1.04
6
-0.17
4
-0.49
4
CNOOC
-0.99
6
-1.01
5
-0.12
2
-0.85
6
ExxonMobil
0.02
3
0.559
2
1.96
1
0.23
3
BP
0.91
2
0.557
3
-0.72
5
0.67
2
Shell
1.46
1
-0.49
4
-0.18
3
1.01
1
5 Policy Recommendations
By above analysis, we find that the international competitiveness of china's energy three giants is still
low. The main reason is that management level and marketing capacity of them is lower.
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ORIENT ACADEMIC FORUM
We deem that china's energy three giants should enhance their international competitiveness from at
least three way.
First of all, china's energy three giants should continue to improve corporate governance mechanisms,
reducing the proportion of nationalization of enterprises, and constantly enhancing their technology
level, reducing labor capital ratio in order to improve continuously their operational efficiency and
business management.
Second, china's energy three giants should strengthen their marketing capabilities. Because only the sale
can bring profits, everything else are costs in corporate. China's energy three giants should strengthen
their marketing strategy, introducing and training sales talent.
Third, china's energy three giants should enhance risk awareness. Because International oil markets not
only has a number of opportunity but also lots of risks.
：
Author in brief or Acknowledgment
Liu Jinsong, male, born in June 1966, Pengze County in Jiangxi Province. Jiangxi University of Finance,
in school of Business Administration ,Associate Professor.
Address: School of Business Administration in Jiangxi University of Finance and Economics
Postal Code: 330013
Tel：13576259435
e-mail:[email protected]
References
[1]. Zhang Weizhong: "American oil Intelligence Weekly " publish rank of world's 50 largest oil
companies in 2008" J "International Petroleum Economics", 2010 (1), P67-70; (In Chinese)
[2]. China National Offshore Oil Corporation: "Sustainable Development Report 2008"
http://www.cnooc.com.cn(In Chinese)
[3]. China National Offshore Oil Corporation: "2009 Annual Report" http://www.cnooc.com.cn(In
Chinese) (In Chinese)
[4]. PetroChina Company Limited: "Sustainable Development Report 2009,"
[5]. http://www.petrochina.com.cn(In Chinese)
[6]. PetroChina Company Limited: "2009 Annual Report" http://www.petrochina.com.cn(In Chinese)
[7]. China Petroleum & Chemical Corporation: "Sustainable Development Report 2008"
http://www.sinopec.com(In Chinese)
[8]. China Petroleum & Chemical Corporation: "2009 Annual Report" http://www.sinopec.com(In
Chinese)
[9]. BP: Annual Review 2009 www.bp.com
[10]. Fxxon mobil: 2009 Financial & Operating Review http://www.exxonmobil.com
[11]. Royal Dutch /Shell Group Shell Annual Report and Form 20-F 2009 http://www.shell.com
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