China National Petroleum plans to spin off non-energy assets

The logo of CNPC (China National Petroleum Corporation) is pictured at the 26th World Gas Conference in Paris, France, June 2, 2015. REUTERS/Benoit Tessier/File Photo

China National Petroleum Corp. plans to spin off most non-energy assets — a portfolio comprising roughly 10 percent of its workforce — as low oil prices force the state-run behemoth to streamline, according to people with knowledge of the matter.

Under a plan detailed at an internal meeting in Beijing last month, CNPC would bundle businesses employing about 140,000, including hotels, hospitals, schools and utility companies, into regional units, said the people, who asked not to be identified because the information isn’t public. The reorganization, which would see the assets taken over by local governments or folded into joint ventures with outside investors, must be completed before 2019, the people said.

A Beijing-based spokesman for CNPC, which employed 1.46 million people as of last year, said Monday the company was unable to immediately comment. State-owned Assets Supervision and Administration Commission, which oversees government-owned companies, didn’t respond to a faxed request for comment.

Most employees covered by the plan work in unprofitable units that supply and service CNPC operations in remote areas of the country, the people said. The majority of the divisions to be sold off are wholly owned by CNPC and aren’t part of PetroChina Co., its main publicly listed unit that employs more than half a million people.

CNPC is the world’s sixth-biggest employer, according to data compiled by the World Economic Forum and Bloomberg. By comparison, Exxon Mobil Corp. — the world’s largest oil company by market capitalization — has 73,500 workers, according to data compiled by Bloomberg.

‘Zombie’ Reforms

President Xi Jinping’s government has been pressuring state-owned enterprises to overhaul or shut unprofitable “zombie” companies as part of broader restructuring of the world’s second-largest economy. CNPC has come under additional pressure from a two-year slump in oil prices that’s forced it to sell assets and cut high-cost production.

While Brent crude has recovered from 12-year low in January, the global benchmark has averaged about $44 this year, less than half 2014 levels.

CNPC was recently compelled to sell pipeline assets to meet annual profit targets set by regulators. PetroChina’s net income in the first nine months of this year, fell 94 percent to 1.73 billion yuan ($253 million), even after incorporating the 24.5 billion yuan pipeline sales, the company said last month. Full-year results are expected to “decrease substantially” from last year.

Chairman Wang Yilin said in March that the company wouldn’t cut front-line oil-and-gas workers as it seeks to reduce costs.
“We are not like international oil companies where layoffs are the most convenient way to cut cost in the capitalist world,” Wang said during an interview. “We won’t have massive employees layoffs despite facing challenges from a low oil price.”

Bloomberg

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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