As oil prices continue to slump in 2016, China’s state-owned oil giants are sponging up revenue wherever they can find it, including the country’s internet-enabled tech giants.
Alibaba has sealed a deal with state-owned oil giant China National Petroleum Corp. (CNPC), to cooperate on a range of internet-enabled projects including mobile services, payments and cloud services. Alibaba will leverage CNPC’s network of 20,000 fuel stations within China to add another valuable industry channel to their payment service.
CNPC chairman Wang Yilin and Alibaba chairman Jack Ma came together for a joint signing ceremony on Thursday to launch the partnership.
The synergy between CNPC, whose listed arm is PetroChina, and Alibaba is supported by the Chinese government’s ‘Internet+’ strategy, which promotes the hi-tech disruption of traditional industries including oil and gas, agriculture, banking, healthcare and manufacturing.
It is the latest extension of an existing relationship. In August 2015 the oil giant opened a pilot store on Alibaba’s Tmall e-commerce platform, selling discount petrol cards as well as on-demand information about peak fuel pricing periods and traffic conditions.
China’s Oil Giants Go Hi-Tech To Fight Low Oil Prices
China’s oil companies are seeking to boost revenue to offset low oil prices, making them hot territory for tech companies seeking a new vertical. In a statement released on Thursday on CNPC’s website the oil company says they will seek to “enhance the vitality, power and core competitiveness of CNPC in responding effectively to the challenges of low oil prices.”
Alibaba’s core e-commerce businesses, much like Chinese oil prices, have been wrestling with the barriers of a saturated and market experiencing slowing growth. Despite this, e-retail spending has remained relatively stable and Alibaba has continued to forge ahead with a spate of mergers and acquisitions. CNPC will be seeking to tap into the vitality of China’s consumer-facing technology market.
Alibaba isn’t the only tech giant finding synergy with China’s state-owned oil giants. In August 2015 Tencent joined forces with China Petroleum & Chemical Corp, whose listed arm is Sinopec, to foster a similar marketing and mobile services relationship.
Sinopec also worked with Alibaba previously in a non-consumer-facing capacity. Alibaba assisted the oil company in building a cloud-based system for data analytics, improving efficiency throughout the company’s production chain.
It’s not clear at this point whether modernizing China’s lumbering state-owned oil giants will foster the same competition between internet giants as other industries such as entertainment, online banking and on-demand services. However Alibaba is likely to have an edge over Tencent given the former’s dominance in cloud computing. According to the government outline on the ‘Internet +’ strategy, “cloud computing and big data” are priority technologies in the push to modernize traditional industry.