Chinese state-owned oil firms head into uncharted waters

After the Chinese New Year, China Petroleum and Chemical Corp. (Sinopec) announced plans to restructure its sales assets, estimated to be worth over 300 billion yuan, to introduce non-state investors in a mixed-ownership pilot in which not less than 30 percent of shares of a new company will be offered to investors.

Another oil giant, China National Petroleum Corp. (CNPC), has also promised to invite private and other non-state investors to jointly develop blocks with estimated reserves of 600 million tons of oil. The company said it would allow investors to hold up to 49 percent of the projects.

The news has excited the market because both companies have offered up their best assets for the pilots. Industry experts said Sinopec’s assets in refining and sales are quite competitive, while CNPC is stronger in upstream oilfield development.

In a previous round of SOE reforms launched in 1998, the top three oil majors, CNPC, Sinopec and China National Offshore Oil Co. (CNOOC) underwent asset restructurings and went public abroad. But shortly thereafter reforms came to a halt. The competition that policymakers wanted to bring about never happened.

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