Sinopec arm rides BRI, advantages of geography and price, for edge in more than 20 overseas markets

"The Belt and Road Initiative proposed by China promotes regional economic cooperation and coordinated development, and offers new opportunities for Chinese enterprises to go global," said Gu Xin, general manager of the international department of Sinopec Lubricant Co Ltd, at a recent lubricant promotion meeting in Thailand.

Gu is also in charge of the company's subsidiary in Singapore, Sinopec's first lubricant plant outside China. The plant sits in the industrial park at Tuas at the southwestern tip of the island.

Covering an area of 242,811 square meters, the plant has an initial annual production capacity of 100,000 metric tons of lubricants, and was established to produce high-end products to meet the increasing regional demand for high-grade lubricants and grease.

"We began to explore overseas markets in 2003. In 2005, the company set up a three-step strategy of 'explore overseas markets first, then set up overseas plants, and finally establish a global service network'," the company said in a statement.

With a total investment of 548 million yuan ($79.9 million), Sinopec Lubricant (Singapore) Pte Ltd was successfully established and put into operation on July 11, 2013.

Sinopec's first overseas lubricant plant was set up in Singapore because of the city-state's geographical advantage. Singapore is known as the financial capital of Southeast Asia as well as an entrepot, facilitating trade between the region and the rest of the world. It has transparent investment policies and a relatively stable environment. Many major oil companies in the world chose to build plants in Singapore.

In addition, in Singapore, there are many refineries that produce base oil, as well as multiple manufacturing bases that make additives, fully satisfying the raw material supply for lubricants.

Sinopec's Singapore lubricant plant is helping the parent to expand its international business. Sinopec has seven overseas business representative offices in Singapore, the United Arab Emirates, Thailand, Vietnam, Indonesia, Malaysia, and Australia. Twenty market developers were sent from China to overseas, while 10 market developers were recruited locally.

With years of efforts, the overseas sales volume of Sinopec's lubricant business increased from the initial several thousand tons per year to 30,000 tons per year, covering more than 60 countries and regions worldwide.

The average annual growth rate of the production of the plant in Singapore reached 22 percent. It helped establish the primary international service network for the company.

Asked about the secret of Sinopec's success in Singapore, company executives attributed it to the "international practices" the subsidiary adopts. There are only three departments: administrative and financial; production; and business.

"Under the premise that major risks are controllable, we (at the parent company) fully authorized the plant in Singapore to streamline processes and improve operational efficiency," a Sinopec senior executive said.

The lubricant plant in Singapore took full advantage of the local government's favorable policies. Through active communication with the Singaporean government, the company was granted several favorable policies such as income tax incentives, employee training subsidies, special quotas for foreign staff and property tax deductions. These policies supported its operations.

The plant also serves as a platform to help Sinopec develop its marine oil business. According to the company, compared to the domestic model, the plant in Singapore has a price advantage because base oil and additives can be sourced locally.

Apart from certain special products that cannot be manufactured in Singapore, the company tries to produce and supply all of its overseas products in Singapore. It is estimated that by the end of this year, the marine oil production in Singapore could reach 10,000 tons.

Li Li, energy research director at ICIS China, a think tank focusing on energy trends, said: "Singapore is a logistics fortress for petrochemical products in the Asia-Pacific region. It is also an international financial hub. In addition, there are few language and cultural barriers between China and Singapore. Therefore, many Chinese enterprises implemented their go-global strategy by establishing subsidiaries in Singapore first."

To further explore overseas markets, Sinopec took advantage of opportunities brought by the Belt and Road Initiative, particularly in the fields of foreign project contracting, foreign trade and foreign investment. It selected several industries that are deeply related to lubricants, such as road and bridge construction, electric power construction, petroleum engineering, equipment exports and overseas plant construction. In consideration of local geographical factors, it worked out specific project schedules and assigned specific people to complete the projects.

To raise the company's image overseas, Sinopec has organized over 20 major lubricant promotion meetings since 2015 in its target countries such as Thailand, Indonesia, Malaysia and the United Arab Emirates, attracting thousands of Chinese and foreign clients.

More than 200 one-on-one exchange meetings were held with focus on technologies, in order to offer potential clients a better understanding of the company's products and services.

Up till now, Sinopec has worked on 304 Chinese-funded projects in more than 20 countries and regions, and successfully inked deals with 122 clients and began supplies to them.

For example, it is now offering lubricant services to the overseas projects of many renowned companies, including China Communication Construction, China Railway Construction Corp Ltd, China Power, Sany Group and XCMG.

To improve its overseas service network, Sinopec lays emphasis on close interactions with its clients. Since 2015, it has been paying track visits to 84 overseas and 50 domestic clients. More than 10,000 visits have been made already.

The company said that in the coming years, the lubricant plant in Singapore would continue to give full play to its geographical and price advantages, to improve its international operations and increase production.

In addition, the subsidiary would learn more about lubricant-related products and techniques, as well as the market trends. It would actively explore new approaches to cooperate with international enterprises, to expand room for development and improve brand image.