ZRCC: Enforce the Implementation

In the refining sector of China, Sinopec Zhenhai Refining & Chemical Company Ltd. (ZRCC) has always held a leading position in excellent management, outstanding performance and rapid development.    The price of crude oil in the international market increased constantly in 2005, but readjustments failed to be conducted to the price of oil products in the domestic market and the refining sector therefore suffered an overall loss. ZRCC however achieved satisfactory performance through management intensification. The crude oil processing amount in the company was 17.1 million tons in 2005, an increase of 7.21% over the previous year, the sales revenue was RMB57.83 billion, an increase of 37.7%, the profit and tax was RMB6.61 billion, the profit was RMB3.63 billion. The key for the success in an unfavorable situation was the great attention paid by the company to the enforcement of implementation.

    1. Strict implementationZRCC sets great stores on the yearly plan. It formulates the production and operation plan for the next year at an early date, conducts constant optimization and segmentation, fully taps internal potentials and adopts practical measures. Once the plan is drawn up, all employees in the company are mobilized to go all out for the implementation.    Faced with a serious price imbalance between crude oil and oil products in 2005, the company tried its utmost to implement the yearly plan and attain the profit targets. Through activities of cost reduction and performance improvement, the company enhanced its competitive edge and achieved successes of projects. By the end of 2005, 66.1% of the projects were completed or attained the schedule defined in the plan. According to incomplete statistics, the direct economic returns acquired after the execution of these projects amounted to over RMB315 million.   To make satisfactory implementation of the yearly plan, the company regarded the overall budget as the focus in management and optimized monthly production and operation plans. The company strengthened the control on monthly budgets and made a good selection of process routes and processing schemes according to budgets.

    2. Constant optimizationZRCC makes great efforts in production management intensification, conducts constant optimization to production and maximizes the profit.    In 2005 the company highlighted stable production, included stable production in the target management system and emphasized accident prevention from the source. The control on unplanned shutdown produced preliminary results in 2005. With stricter requirements on production running, unplanned shutdowns were 12 times less than 2004.    Overall optimization and readjustment were conducted according to the features at the startup of new units and during other production stages. Priority was put on catalysis blending resources. The company conducted constant optimization to the product portfolio, strictly implemented the allocation plan and guaranteed the supply of high-quality resources first to units of products with high added value. Three lines of products with high added value including the optimized production of aromatics, the optimized production of LPG and propylene and the intensified production of naphtha were formed.    The company fully employed the advantages in refining and CFB boilers in the chemical fertilizer production, proposed 6 schemes for the functioning of the self-supply power station, rearranged the steam balance and the power balance, raised the running severity of the power system and achieved the whole-year stoppage of oil-fired boilers. According to estimates, the revenue increase and expenditure reduction from these measures reached nearly RMB100 million a year. Although the proportion of poor-quality crude oil was increased, the company made a rational use of limited good-quality feedstock, optimized two catalytic units and air separation units and increased the output of LPG and propylene. The output of LPG reached 924 000 tons and the output of propylene reached 269 900 tons in 2005. Owing to the drastic output increase of propylene, not only the supply of propylene to the market was fulfilled, the full-load operation of its own polypropylene unit was also ensured. The output of polypropylene was 213 000 tons in 2005. The output in the polypropylene unit reached the design target in the second year of completion.

    3. Solid enforcementZRCC highlights the enforcement of every aspect in the implementation of daily production and operation plans. A centralized management mode of "monthly plan", "ten-day control" and "daily balance" has been developed to guarantee the fulfillment of production tasks and the readjustment of targets.   The crude oil cost is a major part of the total refining cost. To purchase crude oil at a low price, the company conducted full process flow estimation to new refining units, developed a list of different varieties of crude oil with high sulfur content and made a comparative analysis to their respective costs. Besides, the company also selected crude oil resources indispensable for some processing units to meet the needs in the full-load operation of catalytic units and the output increase of propylene and LPG. The company purchased 17.1454 million tons of crude oil in 2005.    The enforcement of implementation in the company was also embodied in the reduction of financial expenses. The yearly plan raised clear-cut requirements on the reduction of financial expenses. Financial departments made great efforts and increased a lot of interest income for the company.

    4. Overall reformationIn November 2005, Sinopec announced to purchase Zhenhai Refining & Chemical Company Ltd. with RMB7.672 billion and make it a wholly-owned subsidiary. The company has therefore de-listed from Hong Kong Stock Exchange. The purchase is favorable to the overall attainment of high profits.