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: angelows.zia@gmail.com

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: zenalta@telus.net

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