doing business in china: road map for success · • china is the 2nd largest consumer of petroleum...
TRANSCRIPT
For Rotary Club
Calgary
December, 2009
By Jim Wong - Zenalta Management Ltd.
&
Angelo Zia - Canada Link Resources Development Co. Ltd.
Doing Business in China: Road Map
for Success
Angelo Zia
President
Canada Link Resources Development Co. Ltd.
Tel : 403-242-2886
Fax: 403-242-2187
Cell: 403-612-2287
Email: [email protected]
223 Signature Close SW
Calgary, Alberta
T3H 2W5
James Wong
President
Zenalta Management Ltd.
Tel : 403-238-4505
Fax: 403-281-1655
Cell: 403-540-4688
Email: [email protected]
40 Bayview Drive SW
Calgary, Alberta
T2V 3N6
Who are we?
40 Bayview Drive SW
Calgary, AB Canada T2V-3N6
The Petroleum Industry in China: Road Map for Success
The theme (objective) of this presentation:
•Market entry strategies;
•Petroleum opportunities;
•Successes and failures;
•Cultural factors
Outline
o Current China facts
o Chinese Petroleum
Industry
o Opportunities for Alberta
companies (petroleum)
o Strategy and Road map
for success
The Petroleum Industry in China: Road Map for Success
Beijing
Shanghai
China’s Topography
Population (2006)
Total GDP by Province (2006)
Top ten coal producer and consumers
Songliao
Basin
Bo Hai
Basin
HuaBei
Basin
Ordos
BasinQaidam
Basin
Junggar
Basin
Tarim Basin East
China
Sea
BasinSichuan
Basin
Pearl
Mouth
Basin
1 Daqing
2 Changqing
3 Dagang
4 Jilin
5 Kelamayi
6 Liaohe
7 Qinghai
8 Shengli
9 Talimu
10Zhonghaiyou
(Tianjin)
Top Ten Oil Fields
Canada Through Chinese Eyes
•Maple leaf•“Da Shan” – Mark Roswell•Dr. Norman Bethune•A neighbour of the United States •A peaceful nation •A multicultural country •World’s 2nd largest country but few people•Conservative
China Profile
Population:China – 1.32 billion (July 2007 est.) Canada – 32. 9 million
(2007 est.)GDP per capita:
China – $ 2,196 (2006) Canada – $ 38,126 (2006)GDP Growth Rate:
China – 11.1% (2006) Canada – 2.0% (2006) (Alberta – 3.0% ) Total GDP
China – $ 2.904 trillion (2006) Canada – $ 1.319 trillion (2006) (Alberta – $189 billion)
( all figures are in Canadian Dollars)
China’s Middle Class
• 200 million at present
• 400 million by 2010
• over 500 million make
brand choices
Did You Know?China has the world’s 1st Largest foreign currency reserves-approximately US$1.4 trillion (2008)
Chinese residents’ savings until 2002 is $2042 billion 17.8% growth from previous year
China Gini coefficient: (Source: China International Business)
1978 0.15
1980s 0.28
1995 0.39
2001 0.40
2004 0.447
2005 0.47 (Canada 0.3)
2006 0.496 (USA 0.4)-the higher the ratio the greater the difference
( United Nations Human Development Report)
Alberta Exports by Region
Alberta Merchandise Export to China
(1995-2007)
• In 2008, Alberta merchandise exports to
China totaled $3.05 billion Canadian.
Primary exports included ethylene glycol
and polymer, sulfur, nickel, agri products,
etc.
• In 2008, Alberta’s imports from China were
valued at approximately $ 4.5 billion
Canadian consisting of computer parts,
telecommunications equipment, consumer
goods, and machinery.
Energy:
Alberta’s expertise in oil and gas technology is particularly relevant to China.
Since 2004 with the assistance of Alberta government, China has shown interests in oil sands and heavy oil, and interested in Alberta’s oil sands development projects.
The China National Offshore Oil Corporation (CNOOC) and Sinopec Group invested in oil-sands projects in Alberta.
Recently PetroChina proposed an investment of 1.9 billion dollars in Athabasca Oil Sand Corporation.
All 3 major Chinese oil companies (CNPC, CNOOC and Sinopec) have offices in Calgary.
Energy:
Promote joint energy development projects
in China.
Strengthen mutual ties by enhancing science
and technology cooperation, providing
training program, and promotes trades in the
oil and gas sector.
Alberta companies like Husky and Sunwing
/ Ivanhoe have set up offices and
production in China.
Chinese Petroleum Industry
Chinese Petroleum Sector
The three largest Chinese oil and gas firms :
• The China National Petroleum Corporation
(CNPC/Petrochina)
www.cnpc.com.cn; www.petrochina.com.cn
• The China Petroleum and Chemical Corporation
(Sinopec) www.sinopec.com.cn
• The China National Offshore Oil Corporation
(CNOOC) www.cnooc.com.cn
Chinese Petroleum Sector
2007
Oil
production
2007
Gas
production
2007
Oil reserve
2007
Gas reserve
PetroChina 2.75 M bopd 5.6 bcfpd 3.06 B tons 2320.1 bcm
Sinopec 0.79 M bopd 0.77 bcfpd 0.42 B tons 180.8 bcm
CNOOC 0.59M bopd 0.95bcfpd __ __
Chinese Petroleum Sector
• China is the 2nd largest consumer of petroleum
products in the world behind the US only
• China became a net importer of oil since 1993, now
is the 3rd largest importer
• China had 18.3 billion barrels of proven oil reserves
as of January 2007 (OGJ)
• China produced 3.8 (mmbbl/d) of oil in 2008; It
consumed 7.85 (mmbbl/d) of oil in 2008.
• Gas consumption is expected to triple by year 2010
Chinese Petroleum Sector
• Domestic Business
– CNPC covers upstream, midstream, downstream areas, and related activities and services.
– Sinopec covers upstream, midstream, downstream areas, and related activities and services also.
– CNOOC handles offshore exploration and production, active in LNG, and also gets into refinery and petrochemical sectors.
– The three largest firms can compete in every areas.
• International Business
– CNPC and Sinopec have projects in following countries:
Sudan , Nigeria , Libya , Iran , Pakistan, Myanmar, Indonesia, Peru , Mexico , Ecuador, Venezuela, Russia, Kazakhstan, etc
– CNOOC: Projects in Malacca Oilfield, Indonesia, Australia, Myanmar, Morocco and Nigeria
– CNPC, Sinopec and CNOOC now have investment in Alberta
Opportunities for Alberta
companies
• Opportunities for Alberta companies In China:
Equipment, technology and consulting services
Regulatory, standards and governance training
Technology, trainers and management training
Oil and gas recovery enhancement and infrastructures (midstream and down stream)
Production sharing contract in unconventional resources such as CBM, shale gas and heavy oil
Collaborative research in upgrading technology, CO2 capture and storage, energy efficiency and alternative energy
Investment Attraction to Alberta:
1. Oil sand investment opportunities
(mineable or in-situ)
2. Conventional oil and gas
3. Value added process and
infrastructures (pipelines, upgraders,
refining and petrochemical)
4. Potash
Strategy and Road Map to Success
General Market Entry Considerations
Suggested Business Practices: Key to Success
•BE COMMITTED.•Patience, patience and more patience•Understand the market and its needs•Design the entry strategy that best fits your products or services•Develop a strong and constant local presence•Maintain a high contact frequency•Have a quick response to prospect enquiries•Conduct sales and marketing activities in principal city like Beijing, Shanghai and Shenzhen and second tier cities like Chongqing and Tianjin•Market your products and services to both end-users and the supply chain
• General Market Entry Considerations (Cont.)
Suggested Business Practices: Key to Success (cont.)
•Find appropriate distributors, agents, representatives or local partners•Participate in selected national trade shows, conferences and business development missions to China•Participate in events in Canada as well•Don`t focus exclusively on trade shows and major events•Assess and mitigate political and financial risks•Use the services of the experienced Canadian consultants, who are knowledgeable of the China market•Use the services of the Canadian consulates and embassy, Provincial and city economic development offices and EDC
General Market Entry Considerations (Cont.)
Barriers to Entry
•Language•Price•Country risk•Import and export regulations and procedures•After-sales services•Prospect`s perception of risk using new technology•Brand loyalty and competition•Security of National data•Registration requirements•Patents and copyrights
Cultural Factors
Useful tips
•Existing school mates` and business network•IPR•Do not pressure or be pushy•Do not expect smooth negotiation•Respect face•Listen more than talk (Use no humour and slang)•Document well, use more diagrams and sketches•Prepare thoroughly•Check facts carefully•Ensure all team members to avoid costly gaffes
Success and Failure
• Successes
– Bombardier
– Husky
– Propak
– Westport
– U of A
– NAIT
– Amec
– HighKelly
• Not so successful
– Beef import
– Canola import
Zenalta and CLRD
Thank you!!
•Market Intelligence
Services (Overview and
customized reports and
matchmaking and business
trip facilitation)
•Business Development
Support Services (sector
capabilities and Chinese
suppliers search and
business trip coordination
Contact us
•Jim Wong
•Angelo Zia