How oil giant CNPC’s ‘against the sun’ sweep brought funds from EMEA to Hong Kong
Published: Feb 2025
Best Cash Pooling Solution
Overall Winner
CNPC Finance (Hong Kong) Limited
Photo of Li Yanling, CNPC Finance (Hong Kong) Limited.
Li Yanling
Executive Deputy General Manager
China National Petroleum Corporation (CNPC) is the country’s top oil and gas producer, as well as the world’s third largest oil company with a global presence in over 30 markets.
The challenge
CPF is the in-house bank of the CNPC Group. Its responsibilities extend to key performance indicators (KPIs) including global visibility, inter-company limits and internal reporting. Most importantly, flexibility to support the day-to-day operation of the subsidiaries, which are often large and time sensitive transactions. PCI, the sole trading arm of CNPC Group, has global operations across APAC, EMEA, the Middle East and the Americas. PCI had operated a decentralised cash management model until it concentrated its USD liquidity in Hong Kong in 2019. However, the non-USD currencies (namely EUR, CNH and HKD) remained decentralised, and the need for centralisation had now intensified.
The solution
In 2023, CPF designed a global cash and liquidity management structure for the non-USD business (EUR/CNH/HKD) of nine of PCI’s global trading entities. This liquidity structure boasts a unique dual-header physical cash concentration structure, combined with a single entity multi-currency notional pool (SEMCNP) at PCI Hong Kong level.
The structure has many features to meet the various objectives from both PCI and CPF, including:
The ‘against-the-sun’ sweep – facilitates the sweeping of funds from EMEA to Hong Kong with automatic back valuation to eliminate any loss in value caused by time-zone differences.
SEMCNP with layered sweeping logic enables PCI to concentrate in a customised sequence based on its unique requirements.
PCI Hong Kong will concentrate the positive balance from global subsidiaries, leaving zero balance for maximum concentration. The subsidiaries leverage receivables plus intra-day overdraft limit (IDOD) to fulfil payment needs.
PCI Hong Kong will draw funds from CPF header if there are deficits in the account, up to the amount that subsidiary has previously contributed.
If there are still uncovered negative positions, PCI will leverage the SEMCNP to cover the shortfall with its USD balances. PCI Hong Kong further concentrates to CPF via multiple intra-day and end-of-day (EOD) sweeps. Together with MT942 and MT940 reports, CPF obtains an accurate cash position throughout the day and at the end of the day to help manage its cash position and intercompany limits.
On payments, J.P. Morgan provides advice-to-receive (ATR) and holiday processing to support the daily operations. ATR enables funds received after cut-off hours to be credited into the J.P. Morgan accounts with same day value. Holiday processing enables the company to process transactions on bank holidays. These features help CPF and PCI effectively manage their payment obligations across the globe.
The structure brings efficiencies by allowing PCI to utilise its internal group funding to meet its multi-currency global payment obligations. Additional funding needs can also be managed centrally.
The implementation was phased and completed fully within just six months. Since going live in July 2024, it has already resulted in a 15-25% reduction in external borrowing and enhanced returns on surplus balances.
Best practice and innovation
While CNPC Group has several existing pools with different banks, this liquidity structure solution is the most complex, given the global reach with ‘against-the-sun’ sweep, the layered sweeping logic, and the SEMCNP with EOD pool drain. With this structure, CPF and PCI have enhanced cash visibility, and more effectively manage their global cash positions for non-USD currencies. CPF achieves maximum concentration via zero-balance sweep, and PCI subsidiaries still maintain the flexibility to make payments leveraging their intra-day receivables and daylight overdraft facilities.
In addition, the SEMCNP provides the flexibility to leverage a long position in one currency to cover a short position in another currency, without the need for foreign exchange conversion. PCI maintains the control to centrally manage the FX exposure for its subsidiaries, while the net zero pool drain facilitates the high concentration ratio required by CPF.
Key benefits
Cost savings.
Process efficiencies.
Increased automation.
Risk mitigated.
Improved visibility.
Errors reduced.
Number of banking partners/bank accounts reduced.
Manual intervention reduced.
The Adam Smith Awards Asia are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 406 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia
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