Analysis: Under new management, scandal-hit PetroChina changes course

Tue Sep 3, 2013 10:07pm EDT
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By Charlie Zhu

HONG KONG (Reuters) - PetroChina Co Ltd's (0857.HK: Quote) (601857.SS: Quote) days of super-charged spending may be over as the Chinese national oil giant seeks to steer clear of the legacy of former chairman Jiang Jiemin, now under an official corruption probe.

PetroChina will likely record an annual drop in capital spending for 2013, according to company officials and industry specialists. That would be its first such decline since its Hong Kong and New York stock market listings in 2000.

The world's third most valuable oil company by market capitalization remains on the prowl for global takeover targets but has vowed to become more choosy and focus on what it calls large-scale and quality projects, company officials said.

"The new management is completely different from Jiang Jiemin, under whom PetroChina has been spending like crazy and got into a lot of deals at home and abroad with questionable economics," a PetroChina official who has attended some recent strategy briefings by the firm's new management, led by chairman Zhou Jiping, told Reuters. He declined to be identified because he was not authorized to speak to the media.

PetroChina spokesman Mao Zefeng declined to comment on the quality of the firm's overseas projects, but said previous acquisitions were mainly driven by the need to secure reserves and expand the company's international footprint.

Beijing said on Sunday that it was investigating Jiang for "serious discipline violations" - shorthand the government generally uses to describe graft - in what appears to be a deepening crackdown on corruption and a push for reform. It came after an official announcement last week that three top executives at PetroChina and one at its parent China National Petroleum Corp (CNPC) - China's second largest company by revenue - were facing inquiry.

Under Jiang, a vocal proponent of expansion and what he called political and social responsibility for state-owned enterprises, PetroChina's capital expenditure surged to 352.5 billion yuan ($57.60 billion) last year from 181.6 billion yuan in 2007. Jiang was head of PetroChina and CNPC from late 2006 until early this year.

The spending rise may partly reflect cost inflation in the global oil sector and extra resources required to stem production falls at its ageing oil fields, especially China's largest oilfield Daqing, but critics contend that the company invested too heavily in its refining and petrochemicals businesses at the expense of oil and gas exploration and production.   Continued...

A security camera is seen in front of the logo of Petrochina at its gas station in Beijing August 29, 2013. REUTERS/Kim Kyung-Hoon