Expect no radical "big bang" in China's shake-up of its giant state-run energy firms, but a series of experimental and incremental steps that Beijing has quietly embarked on may still bring meaningful change to an economically crucial sector.
BEIJING, May 12 (Reuters) - Expect no radical "big bang" in China's shake-up of its giant state-run energy firms, but a series of experimental and incremental steps that Beijing has quietly embarked on may still bring meaningful change to an economically crucial sector.
Reform of sprawling state-owned enterprises (SOEs) to improve efficiency is a priority for China's leaders as growth slows in the world's second biggest economy, and was a key plank of the country's latest five-year plan agreed in 2015.
For some sectors that means mega-mergers, such as the marriage last year of top train makers China CNR Corp Ltd and China CSR Corp Ltd, to create national champions with the heft to compete on the world stage.
Speculation of a similar tie-up in the oil sector has proved unfounded, and Beijing-based industry executives say the bolder privatisation proposals put forward by some government think-tanks - from opening mining rights to private bidders to breaking up PetroChina's pipeline monopoly - look equally remote.
Instead, Beijing is ushering in moderate pilot-based changes - granting private refiners oil licences, encouraging a first private-led mega-refinery and overhauling the management of state-run assets - steps that seem fragmented but share a common goal of boosting efficiency across the sector.
China's energy sector is dominated by three state giants: China National Petroleum Corp (CNPC), China Petrochemical Corp and China National Offshore Oil Corp.
Despite decade-low oil prices, the listed arms of that trio - PetroChina, Sinopec Corp and CNOOC Ltd - booked a combined $600 billion revenue last year and contributed nearly 9 percent of all the profits from China's state-owned enterprises (SOE), official data showed.
"At the end of the day, big SOEs like CNPC and Sinopec are seen as key stabilizing factors to the national economy," said a senior PetroChina official.
"That means the government wants to maintain strong control over the sector and changes will be paced and moderate."
Services Firms to List
Spinning off parts of the energy giants' businesses will be one element of the reform package.
Top energy firm CNPC, China's leader in oil and gas exploration and production, will spend the next 2-3 years restructuring its enormous services division, which employs nearly 1 million people, executives said.
CNPC is aiming to set up three or four companies covering oilfield drilling, refinery engineering and financial services, with a target to list them on the stock market by around 2018, according to two senior CNPC officials.
"Timing could be perfect as we expect oil prices to climb back to $70 and above by 2018, which should help CNPC fetch attractive valuations for the oil/gas services engineering IPOs," said Gordon Kwan of Nomura research.
The rise of independent refiners - so-called "teapots" - since Beijing allowed them to start importing crude in July last year is already disrupting the refining business of Sinopec and PetroChina.
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