China oil giants seek asset sales to meet annual growth targets

Hong Kong

CHINA'S biggest energy companies are seeking to unload assets and urging workers to cut costs in a last-minute rush to meet annual government-set growth targets as lower crude prices drag down earnings.

China Petrochemical Corp faces "unprecedented pressure" amid falling prices and workers should "give their full efforts", according to a statement on its website on Tuesday. PetroChina Co and its state-owned parent plan to sell assets that may include pipelines and refineries before the end of the year, people with knowledge of the situation said this week.

Efforts to meet the goals are complicated by the slowest economic growth in more than two decades and a global crude glut that has nearly halved prices over the past year. China Petrochemical, whose listed unit China Petroleum & Chemical Corp posted a 92 per cent third-quarter profit decline, offered this month to sell a four billion yuan (S$880.1 million) stake in an insurance company and has said that it hasn't yet met its target.

"Like all oil companies, state-owned firms have suffered from the crude price plunge and need to find a way to survive," said Lin Boqiang, director at the China Center for Energy Economics Research at Xiamen University and an independent director on PetroChina's board. "If they use the opportunity to sell assets that aren't essential to operations they can move forward with a sharper focus on core businesses."

PetroChina gained 0.4 per cent to close at HK$5.73 in Hong Kong. China Petroleum fell 0.6 per cent. The city's benchmark Hang Seng index lost 0.4 per cent.

China's State-owned Assets Supervision and Administration Commission (Sasac) sets annual profit targets for the 110 companies under its supervision as a benchmark for annual performance reviews. The chairmen of each company commit at the beginning of the year to meet the goals and can face punishment for failure such as demotion or a company-wide salary freeze.

"Failure to meet the target will have a significant impact to the company's growth as well as employee compensation," China Petrochemical, also known as Sinopec Group, said in its statement on Tuesday, without providing details of its target.

Profits, in principle, should rise every year at companies controlled by the central government, Sasac said in a statement in February.

PetroChina's third-quarter net income fell 81 per cent to the lowest since Bloomberg started compiling the data in 2007. CNOOC Ltd, listed unit of China National Offshore Oil Corp, posted a 32 per cent plunge in sales during the same period even as oil and gas output rose by almost a quarter.

Sinopec Group on Nov 17 listed for sale 561 million shares of Huatai Insurance Group, or 13.94 per cent of the insurer, on the China Beijing Equity Exchange, according to the bourse's website.

A Beijing-based spokesman for Sinopec Group and its listed unit didn't answer calls to his office seeking comment. Spokesmen for China National Petroleum Corporation and PetroChina didn't answer calls seeking comment. BLOOMBERG