The challenge:

With the massive internationalisation of CNPC’s business, its treasury has been evolving to ensure it can meet growth requirements and the additional complexity brought about by operating worldwide.

Specifically, the following challenges needed to be addressed:

• Lack of account visibility.

• Complexity of settlements.

• Decentralised liquidity management.

• Inefficient control on collections and payments.

• High and rising debt-to-asset ratio.

• Difficulties in unified global enterprise management.

The solution:

The company’s vision was achieved in August 2013, and the launch of an ‘Integrated Treasury System (ITS)’. CNPC’s treasury evolution has incorporated a wide range of solutions that are drawn from global best practices. These include:

• Extending the concept of treasury management from traditional simple cash management to comprehensive management of financial resources and established solid policies which apply to its subsidiaries globally.

• Refining business operations and management models covering liquidity, financing, investment, and risk management and integrated all these aspects to ITS:

  • Liquidity management.

  • Financing management.

  • Investment management.

  • Risk management.

Best practice and innovation:

Through this re-engineering project CNPC has been able to implement best practice solutions across the board and greatly improve its treasury function. These were implemented using well defined objectives with a global outlook. These improvements include rationalising and streamlining its banking relationships. CNPC now uses three Chinese banks for local needs and six international banks. In addition the implementation of corporate to bank hostto- host connectivity had given full visibility of its real-time (intra-day) domestic cash position and daily overseas cash position of all accounts.

CNPC has also been able to centralise its liquidity management, seeing 100% of its RMB and 90% of its foreign currencies centralised through its global cash pools established in Beijing, Hong Kong, Singapore and Dubai through its in-house bank (China Petroleum Finance Co. Ltd. or “CPF”) using a zero balancing sweeping structure. This has allowed CPF to provide financing of US$84.3 billion to group subsidiaries. CPF as a settlement centre has supported US$4 trillion-worth of settlements for CNPC group subsidiaries. Its centralised cash management practice has effectively supported CNPC’s overall international development strategies.

The comprehensiveness of the project and the implementation of ITS has enabled holistic, centralised management of CNPC’s risk (liquidity, operational, foreign exchange, interest rate, and credit) to Group level. FX settlements are centralised to CPF as well as through the ITS platform. FX trading totalled US$62.5 billion in 2013 and saved up to US$100m in FX settlement costs for the Group.

CNPC has also demonstrated the benefits of using other companies’ knowledge when working though a project. In the design and development of the platform, the company consulted leading industry peers such as BP, Shell, Total and GE to learn about their experience and best practices in treasury management. The outcome of this learning is a highly original, customised framework that addresses the specific strategic and operational needs of CNPC. CNPC previously had 400 procedures for liquidity, payments and collections, financing, investment and risk management. ITS has enabled the company to redesign and streamline processes into 80 endto- end procedures.