‘Dra­matic changes ahead for SOEs’

China Daily (Hong Kong) - - BUSINESS - By BLOOMBERG

China’s big­gest State-owned com­pa­nies will see “dra­matic changes” in the next few years as they will have to down­size and be­come more ef­fi­cient, ac­cord­ing to the for­mer chair­man of two of the coun­try’s big­gest pro­duc­ers.

Chi­nese oil com­pa­nies have “tremen­dous room” to im­prove ef­fi­ciency and will be “suf­fer­ing for the next few years” amid the oil crash that has pushed prices down to roughly half their value from mid-2014, said Fu Chengyu, for­mer chair­man of both CNOOC Ltd and China Petroleum & Chem­i­cal Corp, known as Sinopec. Do­mes­tic pro­duc­ers need at least $60 a bar­rel to sta­bi­lize China’s slump­ing oil pro­duc­tion, he said.

“We are a big ele­phant al­ready,” Fu said in New York City on Tues­day at Co­lum­bia Univer­sity’s Cen­ter on Global En­ergy Pol­icy. “If we don’t move faster, re­form our­selves faster, we will be­come a di­nosaur.”

China’s ex­plor­ers have been hit hard by the slump in in­ter­na­tional crude oil prices be­cause of pro­duc­tion costs in­flated by large work forces and ma­ture do­mes­tic re­sources. Out­put from the world’s sec­ond-big­gest con­sumer has slid this year as the coun­try’s pro­duc­ers shut fields that are too ex­pen­sive to op­er­ate at cur­rent prices, forc­ing the coun­try to seek more oil from over­seas.

PetroChina Co, the coun­try’s big­gest oil and gas pro­ducer, barely broke even in the firsthalf, even af­ter book­ing a 24.5 bil­lion yuan ($3.56 bil­lion) one-time gain from pipe­line sales. CNOOC Ltd, the big­gest off­shore ex­plorer, posted a first-half loss as low crude prices forced it to write down as­sets. Sinopec, the world’s big­gest re­finer, posted a profit in the first three quar­ters this year, thanks to its oil-re­fin­ing busi­ness, which ben­e­fits from low crude prices.

Fu re­tired as Sinopec’s chair­man in May 2015 af­ter work­ing in China’s oil in­dus­try for al­most four decades, in­clud­ing serv­ing as CNOOC’s chair­man. Fu was one of the first State-owned en­ter­prise chair­men to start mixed-own­er­ship re­form by sell­ing 30 per­cent of Sinopec’s re­tail di­vi­sion to out­side in­vestors for $17.5 bil­lion in 2014.

China’s crude pro­duc­tion from Jan­uary to Oc­to­ber fell 6.7 per­cent from a year ago to 166.8 mil­lion met­ric tons, ac­cord­ing to data from the Na­tional Bureau of Sta­tis­tics last month. Oc­to­ber crude out­put dropped 11.3 per­cent to 16.05 mil­lion tons, or about 3.795 mil­lion bar­rels a day, down 2.7 per­cent from Septem­ber.

Fir­ing em­ploy­ees is not an op­tion “ei­ther legally or cul­tur­ally”, Fu said.


A Sinopec em­ployee records sta­tis­tics at Shengli Oil­field, Shan­dong prov­ince.

Fu Chengyu, for­mer chair­man of both Cnooc Ltd and China Petroleum & Chem­i­cal Corp

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