Table of Contents

1. Introduction.......................................................................................................................2

2. Historical Development of Company..............................................................................2

2.1. Company Overview...................................................................................................2

2.2. Core Competencies....................................................................................................3

2.3. Sinopec key success factors.......................................................................................4

2.3.1. Integrated upstream, midstream and downstream operations......................4

2.3.2. Joint ventures and mutual partners.................................................................5

2.3.3. Capability to enter foreign exchange................................................................5

2.3.4. Robust Government Participation....................................................................5

2.3.5. Uniform structure of corporate governance....................................................5

2.3.6. Oil reserves.........................................................................................................5

2.3.7. Comprehensive marketing network.................................................................5

3. Current Situation of Sinopec in midst of Covid-19 Crisis:...........................................6

3.1. Pandemic crisis in that particular country.............................................................6

3.2. Economy of that particular country........................................................................7

3.3. Sinopec’s Financial Health.......................................................................................7

4. Future Direction for Sinopec...........................................................................................8

5. Conclusion.........................................................................................................................9

References...............................................................................................................................11
 1. Introduction
Transitions are major, non-linear changes in societal cultures, structures and practices that
arise from the co-evolution between economy, society and ecology [ CITATION Gri10 \l
16393 ]. The transitional paradigm begins with the assumption that the challenges of
sustainable growth of society are persistent and are only addressed by systemic
improvements in technology, economics, culture, ecology, structures and organizational
change. Thus, transitions are visualised as multi-level, multi-phase shift
processes[ CITATION Gee02 \l 16393 ] . Each organization is part of one or more societal
systems and linked to various social actors. Organizational transitions can take different
forms, such as family turnover, management buy-outs, sales of third parties, business
merger, or perhaps shut-down. Over the period of last one year, Covid-19 crisis has
brought major fluctuations in which companies in all areas and regions have changed
their way of operating. Hallegardh & Goksor [CITATION Fan20 \n \t \l 1033 ] stated that
travel restrictions and global lockdowns adversely impacted the overall financial market.
The pandemic and ensuing lockdown have led to major economic disturbances,
compelling companies to quickly adapt and take a new approach to their corporate
strategies. Companies must now be more than ever prepared to adapt instantly to changes.
This means that rigid systems must be fully eliminated and a transition into a data-driven,
technological company consisting of motivated team members and powerful leadership
must be created.

This paper demonstrates the transition phase faced by the China’s leading corporation,
Sinopec Corporation. It provides an overview of the company and further reflects on
Sinopec’s core competencies and its success factors that has helped the company maintain
a strong position. In addition, the paper focuses primarily on the pandemic crisis of
Covid-19, the effects it has had in China where the company is headquartered, the impact
on the economy of that country and, consequently, highlights the recommendation
provided for the future direction of the company. The central focus of this report is to
analyse the organization's current change in the midst of Covid-19 crisis.

2. Historical Development of Company

2.1. Company Overview
China Petroleum & Chemical Corps (Sinopec Corp.) was founded on 25 February 2000
under the laws of the People's Republic of China, by its sole founder, the China
2
Petrochemical Company [CITATION For19 \l 16393 ]. The company operates mainly in
China and is headquartered in Chaoyang district of Beijing. Sinopec Corp. is one of
China's leading integrated energy and chemical companies with an amalgamated
upstream, midstream and downstream operations, strong oil & petrochemical core
businesses, and wide-ranging marketing network.

Its primary operations include exploration and production, the transport and distribution
of petroleum and natural gas pipelines; selling, storage and transport of petroleum
products, petrochemical products, coal chemical goods, synthetic fibres, fertilizers and
other chemical products; imports and exports, including companies of imports and
exports of petroleum, natural gas, petroleum products, and other chemical goods and
other commodities and technologies and research, development and application of
technologies and information.

The company ranked 1st in China as the largest supplier of refined oil products in terms of
refining capacity with the well-developed network for the sales of petroleum products. In
addition, the company has a well-established marketing network for chemical products,
which ranks 1st in China with regard to ethylene production capacity.

Sinopec's goal is to become China's largest producer of chemical fertilizer and resource
manufacturing firm in the chemical industry, which is also oriented towards competing on
the international market. It has over the years adopted the scientific philosophy of
sustainability, vigorously seeking sustainable growth, generating wealth and energy for
the community, fulfilling its organizational responsibilities and also aiming for
harmonious development between production and security, energy and environment,
businesses and employees, business and society.

2.2. Core Competencies

As a worldwide energy and chemical corporation, the company aims to execute policies
on resource, business, incorporation and globalization with greater emphasis on
advancement in research, technology and management, and also strengthened employee
productivity. With 15 oil and gas branches, Sinopec Corp. is China's 2 nd largest oil and
gas producer. It has a team of technical specialists in oil & gas research and development
with comprehensive experience.

It is a pioneer in technology for petroleum exploration and production, including 3D

seismic method, tertiary oil recovery, maximum and quick drilling, complex well design

3
drilling, in specific ultra-deep well drilling for Palaeozoic carbonate resources, multi-
stage fracturing technology for horizontal well in tight oil and gas creation.

Sinopec Corp. is the world's second-largest refiner of petroleum and oil product
manufacturer in China. Its refineries lie in the economically most dynamic areas of China,
with easy transport and strong consumer demand. The main petroleum products of
Sinopec Corp comprise lube oil, kerosene, diesel and gasoline. Followed by years of self-
development on technologies that align international progresses it retains a broad array of
processing facilities. Further, the company has a robust and skilled team in refining,
R&D, engineering and construction. Its key refining systems contain RFCC, catalytic
reforms, high-pressure hydrocracking, medium-pressure hydrocracking, hydrofining,
residue hydro, lube oil hydrotreating, reforming technologies, effective catalyst and
marketing abilities.

In China, Sinopec Corp is the leading producer and retailer of petrochemicals, with
petrochemical industries in Eastern, Central and Southern China serving high consumer
demand and a diverse economy. The Petrochemicals manufactured and sold by the firm,
includes intermediates, synthetic resin, synthetic fibre monomers and polymers, synthetic
fiber, synthetic rubber and chemical fertilizer etc. The company distributes most
petrochemical products on the domestic market.

Sinopec aims to maximize and implement its strategic capabilities in the key business
growth of fundamental science, technology research and technological advancement.
With its plan, the organization has made technical advancements in research and
manufacturing, has mastered the advanced global stage of process refining technology,
and hastened the innovation in petrochemical technology integration. Furthermore,
Sinopec Corp.'s technical education has led to the development of emerging technology
before others by its technological strengths and its competitiveness. The corporation
emphases on market demands by the effective manufacture of products and patents for
distinct and high value-added goods.

2.3. Sinopec key success factors

2.3.1. Integrated upstream, midstream and downstream operations
SINOPEC has adopted the core values "responsibility, integrity, shared values and
enterprising" since its existence in 2001 and strengthens friendly relations with resource
countries and business partners and has practiced the advantages of upstream, medium
and downstream integration to attain the win-win goal. Via its asset reorganisation and

4
transformation, China's market supremacy and competition with Sinopec and its other
National Oil Companies (NOCs) has brought multinational giants into the country from
upstream to downstream. It opened up the upstream exploration and development through
NOC leadership and resource-based analysis.

2.3.2. Joint ventures and mutual partners

Sinopec has used joint ventures and mutual partners to expand manufacturing capacity,
with the multinational giants most technologically oriented. Sinopec built a global
business structure that brought substantial growth of global giants into the company
through its Joint Ventures. With joint ventures that strengthen its supremacy and also
grow upstream of the global giants, Sinopec participated in various companies such as
Exxon Mobil and Schell, and BP.

2.3.3. Capability to enter foreign exchange

Sinopec's another success was its capacity to enter a foreign exchange to collect funds and
broaden its investment mechanisms in the international market with government support
as part of the oil industry's transformation. Sinopec has significant domestic influence
over the sector by national policies as part of NOCs and under the State Assets
Supervision and Administration Commission (SASAC).

2.3.4. Robust Government Participation

After the government aimed at restructuring the industry by the purchase of enormous
properties, Sinopec was one of the firms that was integrated vertically in its assets during
the production process. It was one of the NOCs carried over by the state in order to
achieve China's entry into the global petroleum industry. By their domestic capacities,
CCPs were assured of their contribution to energy protection and steady economic
development through their technical expertise and experience in local and international
energy industry.

2.3.5. Uniform structure of corporate governance

Sinopec Corp. has a centralized corporate governance structure with hierarchical
decision-making control structures, delegated supervisors at varying levels, and specialist
corporate units that manage company processes. It holds over 100 subsidiaries and
franchises, and including wholly-owned equity and stakeholder firms.

2.3.6. Oil reserves

Besides that, another critical factors to the success of the company has been its oil
reserves. The company stated that, China's Sinopec Corp has increased its crude oil
5
production by approximately 30% to around one million tons at a comparatively recently
discovered oil field in north-western Xinjiang [ CITATION The20 \l 16393 ].

2.3.7. Comprehensive marketing network

Sinopec has developed its distribution networks effectively and controlled them. The
organization has chosen an integrated business model which relies mainly on its adequate
infrastructure. The core competence of Sinopec lies in its reforms, business model
restructuring and the advancement of technology. Such key expertise has allowed it to
progress consistently for a number of years. Due to its distribution and marketing the
capacity and operating efficiency have markedly increased, thus optimizing and
expanding existing platforms and networks.

3. Current Situation of Sinopec in midst of Covid-19 Crisis:

3.1. Pandemic crisis in that particular country
China was the first country to face actual impact of COVID-19 pandemic. It has triggered
severe economic, social and psychological costs which have extensive human welfare
repercussions. In December 2019, several cases of the emerging coronavirus were
reported in Wuhan, Hubei Province. The first official COVID-19 confirmation occurred
on 31 December 2019, when a cluster of 27 unidentified cases of pneumonia confirmed
by the WHO China Country Office in Wuhan [ CITATION Wor20 \l 16393 ]. Later on, in
early and mid-January 2020, during the Chinese New Year holidays, more cases begin to
emerge in other provinces due to the population movement, further in other countries like
Thailand, USA, Japan and South Korea due to international travel. The surge in the
number of cases in China as well as the reporting of deaths, led the Chinese authorities to
sense the alarming condition and prompt action.

Numerous health, social and economic challenges and implications for populations
emerged as a result of outbreaks. Likewise, China’s several peculiar attributes and its
management approach in relation to the epidemic caused an increasing public mental
health crisis. Along with it fear and anxiety emerged within the Chinese residents from
the unpredictable virus incubation period and its potential asymptomatic spread. The
regional quarantine followed immediately and created tremendous outrage across the
nation over reporting of a lack of medical protective equipment, medical personnel and
hospital beds in Wuhan and surrounding region. Additionally, according to[ CITATION
Bus20 \l 16393 ], it has been estimated that several weeks after the lockdown was elevated,

6
70 to 80 million Chinese lost their jobs at the end of March and thus were unable to work.
Similarly, China faced a major impact on its economy. In the first quarter of 2020, its
economic activity contracted by 6.8%.

3.2. Economy of that particular country

The global COVID-19 pandemic has resulted to a change in the economic and political
objectives of countries. China had a comparatively huge effect from the coronavirus
outbreak. During several weeks of government-imposed lockdowns in dozens of cities,
manufacturing, retail sales, construction and other economic activities declined abruptly.
Domestic advances may expand as economies are liberalizing trade, impacting partner
countries. The supply side, for example, has had an unfavourable effect on many
developing countries that belong to Chinese values chains with the shutdown of Chinese
factories. In terms of demand, the position of China as a buyer was significant as well,
domestic demand feed for imports collapsing that negatively impacted countries
dependent on exports to China.

During the first few months of 2020, China's economic impact was quite severe. With the
suspension of market operation in virus control measure, in the first quarter the actual
GDP contracted 6.8% on an annual basis, its first contraction since 1992[ CITATION
Tan21 \l 16393 ]. Exports of products dropped by 40.4% in February and declined again by
6.8% in March due to temporary closures of the factory. Further, unemployment rate hit
6.2%, which is absolutely higher than at the end of 2019[ CITATION Tan21 \l 16393 ].

Despite the challenges faced by the coronavirus pandemic which it has largely managed
to resolve, China remains the only major economy which prevented recession in 2020.
According to data reported on Monday by the National Statistics Bureau, China’s
economy rose by 2.3% in 2020, with recovery in the fourth quarter becoming the world's
second largest economy. In over four decades since the Communist country undertook
massive economic reforms in the 1970s, this was China's slowest economic growth.

3.3. Sinopec’s Financial Health

As coronavirus hampered industrial operations and limited travel, Sinopec faced its first
half-year net loss from a collapse in oil prices and slump in demand. As of August 2020,

7
its net loss was 22.88 billion yuan ($3.33 billion) compared to CNY31.34 billion net
profits during the same period a year ago. As the pandemic crippled energy consumption,
the first half revenue decreased 31% from a year ago to 1.03 trillion yuan, while refined
product sales decreased to 26.1%. Further, operating profits declined by 31% to
CNY1.034 trillion, mainly as a result of reduced corporate volumes and product’s lower
selling prices [ CITATION Tom20 \l 16393 ]. Besides, oil and gas production remained stable
for both Sinopec and PetroChina, despite market conditions. Sinopec's oil and gas
production were equivalent to 225.71 metric barrels of oil, down just 0.4% a year, while
PetroChina produced a volume equivalent to 833.7 metric barrels, up 7%. In addition,
Sinopec was most likely to have suffered from its jet fuel production as most domestic
flights stopped when the coronavirus first struck China and several international flights
were cancelled in order to avoid the further spread. Our usage levels decreased
dramatically from the normal level in January to 66% in February, said Sinopec’s senior
vice president Ling.

China’s oil majors’ unprecedented economic downturn is a continuation of the bottom-

line hits of businesses worldwide with BP slashing its dividend for the first time in a
decade earlier this month. Though world oil prices remain feeble, China's fuel demand
began to rebound in April following an easing of the severe lockdown. Amidst the effect
of COVID-19, production and sales volume of the company had already recovered in
March to the average levels seen in previous years owing to intensive effort to reduce
costs and increase efficiency. The company’s branch in Wuhan, Hubei province,
completely reopened its activities on 16th of March and joined the first group of
companies working in the district of Jiang’an. Furthermore, the company announced that
by March end, all Sinopec’s subsidiaries had resumed operations.

Nevertheless, Sinopec is in impressive financial health and is well equipped to withstand

the harsh business environment. In April, when most companies were still struggling in
midst of Covid-19 crisis, Sinopec Lubricant Co-a high-end production arm under central
Stated-owned Sinopec, reported 50% rise in total sales, with profit rocketing 70%. In the
second half of the year, Sinopec signalled “increased instability and complexity” in the
world financial system but emphasized a continuing economic revival in China, where the
gross domestic product was re-entered into development after a historical downturn at the
beginning of the year. "China has made substantial achievements in controlling and
preventing the COVID-19 outbreak and has maintained a stable and positive growth in its

8
economy, the domestic demand for oil and petrochemical products is therefore expected
to experience a successful transition” said the company.

4. Future Direction for Sinopec

With the fluctuation of global prices across a large spectrum and the over-release of new
refining and petrochemical capacities, competition on the market has dramatically
increased. Which resulted in a drastic rise in internal and external uncertainties and risks
of the business. In such a challenging and dynamic environment, Sinopec must follow the
criteria to make progress with an emphasis both on short and long-term goals while
preserving sustainability and consistency.

As strong corporate governance is the key to sustainable development and creates a

framework for achieving the corporate growth objective. Sinopec must focus on
modernizing its company’s corporate governance. It should reinforce its systems
construction, enhance management and more thoroughly mobilize its programs, such that
synergies are continuously improved, efficiencies are increased and risks mitigated.

The company must execute a plan of action in its upstream business for the robust
production and exploration of oil and gas with an emphasis on high-quality explorations
and profits, and further strengthening of the oil & gas resources base. In order to clean
and effectively use emerging energies, renewable energy and coal resources and
encourage the divergence of the energy mix, the company should implement an integrated
strategy.

For the refining and marketing sector, Sinopec should meticulously monitor the demand
of the market, adjust the system, encourage the development of advanced production
capability, develop supply chain’s potential and improve operations quality. Additionally,
in regard to the chemical business, it should speed up the supply of high-end synthetic
materials, establish a more efficient and beneficial fundamental chemical product chain
and boost its marketing and performance, with a view to concentrate on technological
advancement and the expansion of production.

Furthermore, Sinopec can intensify key technological research, strengthen proprietary

innovation efficiency, speed up low carbon transition, and boost energy conversion

9
efficiency to minimize carbon emissions, which is expected to contribute to strategic
objectives for green development.

5. Conclusion
The outbreak of Covid-19 and the ensuing lockdown led to massive economic
disturbances, pushing companies to move rapidly from traditional to digital, taking a
completely new approach to their corporate strategies. Over the months, Sinopec
Company has undergone major market fluctuations as a result of a pandemic crisis. Thus,
the purpose of this paper was to highlight the undergoing transition phase of the company
in midst of pandemic.

Along with the outline of Sinopec’s overview and its core competencies, the study
highlights Sinopec’s key success factors such as integrated upstream, midstream and
downstream operations, strong oil & petrochemical core businesses, complete marketing
network and oil reserves, etc.

In addition, the report addressed the pandemic crisis faced by China, where the
organization is headquartered, and illustrated the major impact of crisis on China's
economy such as decrease of GDP and exports of products. Further, this paper explained
the financial health of Sinopec in the first half year and in the second half of the year.
Lastly, the paper displays some key suggestions made for the future direction of Sinopec
Corp.

10
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