This paper examines why Chinese National Oil Companies (cnocs) conduct transnationalization and why the level of transnationalization remains low.
Part one of the paper reveals the three main factors behind the transnationalization process since China has become a net importer of oil. Firstly, following economic reform in the 1990s, oil companies acquired autonomy and began to address the problem of domestic resource scarcity by seeking business opportunities abroad. Given the dependency on oil imports, the Chinese government is worried about energy security and so supports the overseas activities of nocs to ensure reliable sources of international oil. Furthermore, some basic conditions for transnationalization have been met: nocs have more than 30 years of domestic experience in oil exploration and development; the structural change of the international oil market, with resource countries looking East and welcoming cooperation with China; and the strategic adjustment of established international companies, making room for participation by Chinese companies. Part two evaluates the level of transnationalization of Chinese oil companies from a comparative perspective using uncted’s Transnationality Index (tni). Subsequently, four challenges to transnationalization are identified: geopolitical risks, resource nationalism, business competitiveness and human resources development. Part three provides empirical analysis on the performance of cnocs in Sudan and Saudi Arabia, focusing primarily on the driving forces, conditions, achievements and challenges of cnocs in these two countries; it also shows how some of the challenges are successfully addressed.
Three conclusions are reached: that the ongoing transnationalization of cnocs is a necessary result of the combination of a number of factors; that we should not exaggerate the level of transnationalization of cnocs, which remains low. Moreover, by addressing the challenges, cnocs are exploring a new way of transnationalization.
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