‘China oil firms must reform faster’

HONG KONG: China’s biggest stateowned companies will see “dramatic changes” in the next few years as they may 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’s pushed prices down by 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 US$60 (RM260.68) a barrel to stabilise China’s slumping oil production, he said.

“We are a big elephant already,” he said in New York City on Tuesday at Columbia University’s Centre 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 first-half even after booking a 24.5 billion yuan (RM15.89 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 oilrefining business, which benefits from low crude prices. Bloomberg