Details

Abstract / Summary

China's three National Oil Companies (NOCs) collectively represent a potent force in the world of oil and gas. While they have been mostly focused on domestic priorities since their founding, they started a methodical program of globalization at the behest of the Chinese government in the mid 1990s. By 2016, they had completed a string of overseas acquisitions and seemed poised to gain enough strength to become contenders in the competitive battles against the more established International oil Companies (IOCs). The government had announced its intent to reform the NOCs in order to make them more efficient such that they would be able to compete against the best globally. The idea was to create a Chinese ExxonMobil out of the three NOCs. However, the road ahead appeared rocky. There were three main issues that posed formidable obstacles. First, the governance structure and state control had bred a culture that did not seem ready for transformative change. Political interference and lack of a clear strategic direction were just two of the outcomes associated with the resistive culture. These shortcomings manifested themselves in the second major obstacle, namely the instinct to protect resources although the NOCs themselves did not seem to have the technology to monetize the reserves. The slow development of shale was a case in point. Despite controlling the world’s largest reserves of shale, China had not been able to come anywhere close to replicating the runaway success that the US had demonstrated. The government had not articulated a clear shale development strategy, and had been dragging its feet with respect to trying imported technology and allowing foreign companies to operate leases. Lastly, there were clouds on the horizon with respect to global expansion as well. The decline in energy prices and a slowing down of domestic economic growth in China had stifled the global march of the NOCs. The case study builds on this complex context to explore whether reforms are likely to be implemented and whether they are likely to succeed. The case was written with a global strategy audience in mind and hence can be used to (a) illustrate a range of important concepts relating to the external context of firms competing in a global industry. Since it deals with State Owned Organizations (SOEs), it (b) provides additional insights that are not accessible in the typical corporate business cases. It is also suitable in courses dealing with global/regional studies with an emphasis on energy issues and works very well with an executive audience in the oil and gas industry.

Field of Interest

Business & Economics

Author

Kannan Ramaswamy, fl. 2016

Copyright Message

Copyright © 2016 Thunderbird School of Global Management, a unit of the Arizona State University Knowledge Enterprise.

Content Type

Case study

Duration

0 sec

Format

Text

Original Publication Date

2016

Page Count

13

Publication Year

2016

Publisher

Thunderbird Global School of Management

Place Published / Released

Glendale, AZ

Subject

Business & Economics, Social Sciences, Energy & Environment, Oil mines and mining, Petroleum, Globalization, Petroleum and Coal Products Manufacturing, China, Chinese