Oil Big Three Exposed to Loss of State-owned Assets Due to Large Loss of Overseas Projects

"Three barrels of oil" overseas adventures a large number of overseas losses, causing the loss of state-owned assets

“Thirty merits of dust and soil, eight thousand miles of road and moon.” Speaking of overseas operations in the oil and gas sector, a middle-level SASAC official made such an evaluation, harvested certain oil and gas resources and lessons learned, but spent A lot of manpower, time and financial resources, as well as a large loss of state-owned assets of overseas companies.

The huge profits brought by the monopoly of the market and rising oil prices have already made the “three barrels of oil” a target of public criticism. With the investigation of overseas assets of the state-owned enterprises by the SASAC, “three barrels of oil” is the most talked about overseas business. The risks are also exposed one by one.

Large losses in overseas projects

When a company employee of the Central Oil Company, Mr. Chen (a pseudonym), was transferred to an overseas company from the previous domestic business department, staying in this subsidiary company that has become very popular due to the “going out” policy made him very frustrated.

“Overseas companies can hardly make substantial achievements because many overseas projects of oil companies are losses,” Mr. Chen told the reporter frankly.

According to statistics from China National Petroleum Corporation (9.74, -0.05, -0.51%) and the Chemical Industry Federation, by the end of 2010, the three major oil companies have invested in overseas oilfields and projects totaling 144, with a total investment amounting to nearly 70 billion yuan. The U.S. dollar is about 448 billion yuan. According to the latest statistics from the State-owned Assets Supervision and Administration Commission, from January to November 2011, the foreign-owned crude oil equity production of the central enterprises was 66.043 million tons, the natural gas equity production was 17.63 billion cubic meters, and the overseas engineering contract value was 279.75 billion yuan, an increase of 16.9% and 19.8% year-on-year respectively. And 9.7%.

Although the “three barrels of oil” overseas project and overseas oil and gas production increased rapidly, the profitability was not high. In addition to an insider of an oil company and insiders of the SASAC saying that the loss of overseas projects by oil companies is not small, a report of China University of Petroleum in 2010 also showed that the three major oil companies are affected by factors such as the management system and the international investment environment. Loss items overseas have reached 2/3.

In addition to the loss of overseas projects, CNPC has also had difficulties in overseas mergers and acquisitions.

In October 2011, CNOOC’s agreement for the development of a total of US$16 billion in natural gas fields in the Gulf region was suspended by Iran’s Pars Oil and Gas Company. Previously in September 2006, the two parties signed a total contract of US$15 billion to develop the North Pals Gas Field. However, CNOOC Limited has not yet commenced operations. The suspension of this agreement was intended to push CNOOC to fulfill its development obligations.

The custody of the company was far more than that of CNOOC. Due to capital and profitability, overseas projects of Chinese oil companies have been repeatedly warned and halted by the host country.

In August 2011, Iran’s state oil company declared that if CNPC continued to delay the development of the 11th phase of South Pars Field, it would be certain that it issued an ultimatum and may transfer the entire project to a strong domestic contractor. . It is understood that the current progress of the project has only been completed by 10%, instead of the planned 17%. Prior to this, PetroChina stated that it was unable to provide the necessary funds for South Pars Field Project investment due to the "funding problem."

Does not supply domestic market

Although the “three barrels of oil” overseas M&A activity has always been elevated to ensure a high level of international energy security, in fact, the “three barrels of oil” has been exported to China for a long period of time. China’s share is very small.

"Oil companies have few profitable projects in their overseas operations. If overseas oil and gas resources are exported to China at a large scale and the domestic oil refining business is sluggish, it will bring more losses to the company, so most of them are based on spot sales. To the international market," said the middle-tier oil company told reporters.

In fact, the "three barrels of oil" is currently being pushed back to the top of the list because of the issue of refining losses.

On October 28, 2011, PetroChina and Sinopec issued the third quarter earnings report. The report shows that in the first three quarters of 2011, the net profit of the two major oil companies reached 160 billion yuan, equivalent to an annual profit of 600 million yuan. However, the figures for oil refining losses shown in PetroChina and Sinopec's financial report are quite serious: In the first three quarters, the refining business suffered losses of 41.5 billion yuan and 23.09 billion yuan respectively, totaling 64.5 billion yuan.

Interestingly, the data from the refinery industry disclosed by the National Development and Reform Commission recently showed that the entire refining industry had accumulated a loss of 1.17 billion yuan in the first nine months, including a loss of 4.8 billion yuan in a single month in July and a loss of 4.24 billion yuan in a single month in August. .

The data of mutual fighting made the industry question that in the first 9 months, the two major oil companies suffered huge losses of 64.5 billion yuan in oil refining, while the entire industry suffered only a loss of 1.17 billion yuan. As such, the remaining small refineries that survived in the cracks were profitable for the first 9 months. It should reach 63.33 billion yuan.

Regardless of the suspense of oil refining losses, “three barrels of oil” is under the strong support of the government’s “going global” policy. In recent years, it has continued to make land acquisitions overseas. The loss of projects and the loss of state-owned assets have not been discussed yet, but they have not been able to make corresponding overseas investments. Oil and gas production may be brought to the domestic market, which is in short supply, and it is sold directly to the international market according to the spot price for profit maximization.

SASAC's investigation

Fortunately, no matter whether it is from the government level or the enterprise level, the problems of the “going out” of the central enterprises have gradually begun to regulate.

On December 19, 2011, Wang Yong, director of the SASAC, said that SASAC will strengthen the management of major issues concerning foreign investment, property rights, funds, contracts, and disposal of assets by central enterprises, conduct regular audits of overseas operations and management, and strengthen overseas operations. Business legal risk prevention.

Since 2009, the SASAC has carried out a series of investigations on the overseas assets of the central SOEs. The earliest investigations involved nearly 6,000 overseas foreign-owned assets of foreign companies and foreign enterprises of central SOEs.

On June 27, 2011, the State-owned Assets Supervision and Administration Commission announced the Interim Measures for the Supervision and Administration of Foreign-owned Assets of Central Enterprises and the Interim Measures for the Administration of Foreign-owned Property Rights of Central Enterprises, and made a relatively complete provision for the supervision of foreign-owned assets of central enterprises. The central SOEs are responsible entities for overseas foreign asset management. There are serious deficiencies in out-of-control corporate management, overreaching investment, internal control and risk prevention, failure to establish foreign companies’ state-owned assets and property rights monitoring systems, and resulting in the loss of state-owned assets. The State-owned Assets Supervision and Administration Commission will, in accordance with laws, administrative regulations, and the relevant regulations concerning the supervision and management of state-owned assets, investigate the responsibilities of those responsible.

“After several years of repeated investigations, the SASAC has generally grasped the state of the overseas assets of the central SOEs. However, because companies have developed overseas for many years, overseas companies have become one of the main channels for the loss of state-owned assets. It will take time to completely regulate.” The SASAC middle officials told reporters.

The SASAC also disclosed that from January to November 2011, the central SOEs had achieved an operating income of 3.4 trillion yuan overseas and a total profit of 128 billion yuan, a year-on-year increase of approximately 30%. This also means that the increase in the profits of the central SOEs exceeds that of the domestic ones, and that overseas has become a new growth point for the increase in profit of the SOEs. Li Rongrong, deputy director of the Economic Committee of the Chinese People's Political Consultative Conference and former director of the State-owned Assets Supervision and Administration Commission of the State Council, pointed out that the construction industry has shifted its business focus overseas mainly in recent years.

The SASAC internal experts also told reporters that from the specific analysis, although the total volume of overseas business of the oil industry rose rapidly, the improvement of profitability was not great.

However, the oil companies themselves have continued to reflect on themselves for many years in overseas development.

The related person in charge of CNOOC told the reporter that at present, the assessment of overseas projects by oil companies will be more rational and rigorous, and overseas companies that are not conducive to the development of the company will be appropriately eliminated. Recently, CNOOC Ltd. has offered US$212 million to sell its stake in an offshore oil and gas project in Java to a subsidiary company of a family company in Indonesia. Li Fanrong, chief executive of CNOOC, believes that the transaction is in line with the value-driven M&A strategy of the company.