Wang Tianpu: Walking on a Balance Beam

Wang Tianpu, 44, Manager of Qilu Petrochemical Company Ltd. in
the past, President of China Petroleum & Chemical Corporation
(Sinopec Corp. SH: 600028) today.

Both official and businessman
In all the positions held by Wang Tianpu, the most essential one
is the dual status of "both official and businessman". To keep
pace with the commitment made by Sinopec Corp. "to earnestly
perform political, social and economic duties of a super large
state-owned enterprise", Wang Tianpu is trying to find the best
balancing point between corporate developments that represent
efficiency and political and social duties that represent
fairness.
   The situation in Sinopec Corp. today is that due to the
irrational price of oil products in the domestic market, the
refining business has suffered a huge loss since 2004, but the
oil demand must be satisfied and social duties must be performed.
   The reason for the loss is very simple. In a scenario of the
drastic oil price rise in the international market, the price
of oil products in China is still maintained at a relatively low
level due to the control exercised by the state. Sinopec Corp.
is the largest refining corporation in China. Great quantities
of crude oil have to be imported from abroad each year for
processing. The refining business has therefore suffered a
sustained loss.
   2005 was the first year for Wang Tianpu to be the president
of Sinopec Corp. The huge loss already reached a high level. To
search for a balance, the state allocated RMB10 billion to
compensate for the loss suffered by Sinopec Corp. and its
subsidiaries in the refining business.
   The move taken by the state could however in no way fully make
up for the loss of over RMB50 billion suffered by the company
in the refining business.
   According to the analysis made by experts, Sinopec Corp. has
already passed the most difficult time in May. The demand of oil
products in the domestic market has not been suppressed by the
rising oil price. The loss in the refining business will have
a gradual reduction with further readjustments to be made by the
state to the price of oil products.

Capital market
During the 306 transaction days from March 25th, 2005, the first
day Wang Tianpu became the president of Sinopec Corp. to June
29th, 2006, the opening price of Sinopec stock increased by
around 50% from RMB4.12 per share.
   By now Sinopec Corp. has drawn from Hubei Xinghua Co., Ltd.
(SH: 600866) and China Phoenix Co., Ltd. (SZ: 000520), bought
back Qilu Petrochemical Co., Ltd. (SH: 600002), Shengli Oilfield
Dynamic Group Co., Ltd. (SZ: 000406), Yangzi Petrochemical and
Zhongyuan Oil/Gas Co., Ltd. (SZ: 000956) in cash and merged
Beijing Yanhua Petrochemical Co., Ltd. and Zhenhai Refining &
Chemical Co., Ltd. in cash in Hong Kong stock market.
   Sinopec Corp. still owns 5 listed companies including Yizheng
Chemical Fiber Co., Ltd. (SH: 600871), Shanghai Petrochemical
Co., Ltd. (SH: 600688), Wuhan Petroleum Co., Ltd. (SZ: 000688),
Shijiazhuang Refining & Chemical Co., Ltd. (SZ: 000783) and
Taishan Petroleum Co., Ltd. (SZ: 000554).
   Wang Tianpu has taken the initiative in his hands in the
capital market.

Industrial balance
The petrochemical background Wang Tianpu has is also a strong
point of Sinopec Corp. As an oil company with
upstream/downstream integration, Sinopec Corp. stresses
mid-stream and downstream operations.
   The total crude oil processing amount in China was 286 million
tons in 2005. The crude oil processing amount in Sinopec Corp.
was 140 million tons, accounting for 49%. The apparent
consumption of domestic oil products (gasoline, diesel and
kerosene) was 164 million tons in 2005. The sales amount of oil
products in Sinopec Corp. was 104 million tons, accounting for
63%.
   By the end of 2005, China had around 80 000 filling stations
among which Sinopec Corp. owned 30 000 ones with most of them
located in economically developed provinces in eastern and
southeastern coastal areas. It virtually controls nearly 40% of
oil product retail-sale channels and the market share reached
more than 50%.
   Besides, Sinopec Corp. also owns 558 oil depots with a total
volume of 13 million m3 and 299 oil product terminals with a total
tonnage of 800 000 tons. It basically controls oil product
terminals and oil depots in coastal areas and areas along the
Yangtze River and the Pearl River. Oil product terminals and oil
depots are major channels for the wholesale of oil products.
   Strong mid-stream and downstream operations in Sinopec Corp.
have shadowed its upstream oil exploration and production.
   According to experts, Wang Tianpu has two cards in his hands.
One is natural gas and the other is overseas assets purchase.
They can bring a real breakthrough in upstream operations and
help achieve a balance of the industrial chain.
   The discovery of Puguang Gas Field and the market development
surrounding the gas field are a very good start. (CCR2006 No.
25)
   While making breakthroughs in gas fields in China, the
purchase of overseas resources has also achieved progress. "Oil
resources belong to the world and also belong to China," said
Wang Tianpu at a seminar.
   Sinopec Corp. is a big buyer in the world oil spot market.
In addition to importing around 100 million tons of crude oil
each year, its parent company Sinopec Group has already acquired
considerable resources from abroad. According to an expert from
Sinopec Group, the overseas share oil is 3.2 million tons a year
today and will increase to 10.0 million tons a year in future.
   As a matter of fact, more "pleasant surprises" will come from
abroad. As Sinopec Corp. has the right to preferential purchase,
it can share the fruits of expansion activities made by its
parent company in overseas oil/gas resources.