September 11, 2013 / 5:50 AM / 6 years ago

PetroChina partner China Oil & Gas denies former executive under investigation

HONG KONG (Reuters) - China Oil & Gas Group Ltd (0603.HK), a joint venture partner with state-owned PetroChina (0857.HK), on Wednesday denied a newspaper report that one of its former executives was being investigated as part of a corruption probe.

A garbage collector stands in front of a PetroChina company logo at its gas station in Shanghai September 9, 2013. REUTERS/Aly Song

Shares in the company, which distributes piped gas in Chinese cities, were suspended in Hong Kong following the 21st Century Business Herald article.

Citing unnamed sources, the newspaper said Su Shi Feng, former president of China Oil and Gas’ joint venture with Kunlun Energy (0135.HK) - PetroChina’s liquefied natural gas (LNG) distribution arm - was under investigation in connection with a widening probe into the national oil giant.

“Such (a) report is inconsistent with the facts,” China Oil and Gas said in a filing to the stock exchange, adding that Su had retired. An official at the company’s Hong Kong office declined to comment further.

Trading in the company’s shares resumed in the afternoon, with the stock down 1.87 percent at HK$1.05 by 0531 GMT, versus a 0.15 percent fall in the benchmark Hang Seng Index .HSI.

The Chinese government said earlier this month it was investigating Jiang Jiemin, a former chairman of PetroChina and parent company China National Petroleum Corp (CNPC), for “serious discipline violations”, shorthand generally used to describe graft.

Similar investigations have been announced into a former CNPC vice president and three former executives at PetroChina. One of those men, Li Hualin, was also a former chairman of Kunlun Energy.

The investigation has sparked a sell-off in shares of mainland and Hong Kong-listed firms with close ties to PetroChina. China Oil and Gas, which has a market value of $687 million, has lost around 25 percent in the past month.

It raised $344 million in April from an overseas note issue to fund capital expenditure and has been relying heavily on its venture with Kunlun - China City Natural Gas Co Ltd - for the growth of its natural gas distribution business in China.

China Oil and Gas holds 51 percent in the venture, which accounts for the bulk of its revenue. Kunlun owns the rest.

Like many other gas distributors, China Oil and Gas has been jostling to secure licenses to distribute natural gas in Chinese cities to meet fast-growing demand.

Such distributors buy natural gas from dominant supplier PetroChina and sell to industrial, commercial and residential users through pipelines and LNG or compressed natural gas refueling stations.

China Oil and Gas said it had invested in 91 gas projects in 14 Chinese provinces in China as at the end of 2012.

Its executives have been telling investors in Hong Kong that the venture would be the “main growth driver” for the company, an investment analyst who attended one of the briefings told Reuters.

Senior officials at the company, including executive director Zhu Yuan, used to work at CNPC, official filings showed. China Oil and Gas’ largest shareholder is mainland businessman Xu Tie-liang, who is chairman and chief executive officer with a 22.93 percent stake in the company as of August 30, the filings showed.

Reporting by Charlie Zhu and Twinnie Siu; Editing by Anne Marie Roantree and Dean Yates

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