Beijing has unveiled its latest Five Year Plan for the nation’s sprawling energy sector. The plan will see a deepening of reforms at its state-owned giants coupled with serious investment in clean and renewable energy.
The nation will focus on building strategic reserves and increasing the adoption of new technologies in a bid to lower pollution and decrease dependence on imports. As the “Beijing Heavy Pollution Emergency Plan”, the inter-provincial pollution watchdog and emissions clampdowns show, the government is serious about stamping out pollution and isn’t afraid to take an agressive approach in doing so.
In a recent interview with the Beijing Times, Sinopec Group Chairman Fu Chengyu vigorously defended the state-owned giant’s record on pollution. Fu claimed that coal made up 66% of resources used and that the oil industry contributed a comparatively minimal 18%.
The Chairman continued that while National IV and even National V standards for both diesel and gasoline products were being expedited at a national level, often provincial governments were nominally responsible for setting and regulating local emissions. Conscious not to burden local industries with rising costs, provincial authorities often let substandard oils slide.
Even those that adopt the new regulations may still find themselves out of pocket, however. A manager at a Wuhan based logistics operator claimed that a recent 30m yuan ($4.8m) spend on a new fleet might become unusable in a few years if emissions regulations continue to tighten. Truck sales already fell 8.9% last year as manufacturers struggled to produce cost-effective clean technologies.
This creates a dual problem for state-owned producers. Investing in R&D is costly, and if they are unable to shift their inventory they will have to cut costs. Being state-owned makes redundancies tricky and falling oil prices only compound the problem.
Chinese automakers have long been squeezed at both ends. Domestic market share is giving way to foreign automakers, while exports to emerging markets are waning. Could a similar fate befall China’s oil majors? And would the rumoured (yet unlikely) mega-merger between CNPC and Sinopec save the day?
The key differences here are, of course, scale and market share. Chinese majors benefit from an enormous pool of resources and huge market dominance. Nonetheless, rigorous reforms will present interesting challenges to the nation’s giants in the near future.
Facing these environmental and sales complexities, lubricants engineers and marketers alike require the most up-to-date data available to enable accurate decision-making when it comes to product development and sales. OATS continues to provide such data through its earlFUSiON platform and the solutions being developed from it.
For the latest updates on earlFUSiON, or to comment on anything you have read in this Bulletin, simply contact Diana Shen. As always, we look forward to hearing from you.
Sebastian Crawshaw
Chairman