No details available yet on timing or size of IPO
China National Petroleum Corp., the country’s largest oil and gas producer, is looking to spin off its oilfield service sector as part of the ongoing process to overhaul the world’s second largest economy.
During an industry conference held in Houston this week, CNPC Chairman Wang Yilin said that the company was considering an IPO of its oilfield service sector in order to streamline CNPC. Wang did not provide timing or details on the size of the offering during his presentation, reports Bloomberg.
The proportion of the company that could come to market would certainly still leave the ruling party in charge of the company, though.
Company leadership is appointed by the Communist Party; the Party will not cede power to international players
“The national oil and gas companies are extremely important [to China],” Kerry Brown, professor Chinese Studies and Director of the Lau China Institute at King’s College, London, told Oil & Gas 360®. “The Communist Party will not cede power to international players.”
“This is a vast state enterprise. Some of these companies employ a couple million people,” said Kerry. “The key thing is their leadership is appointed by the Party. They have strong political relationships.”
The news comes amid President Xi Jinping’s attempts to bring reform to state-owned sectors like oil and gas. CNPC’s listed unit, PetroChina Co. (ticker: PTR, PetroChina.com), sold off pipeline assets recently, while China Petroleum & Chemical Corp., Asia’s biggest refiner, agreed to sell a stake in its retail business in 2014.
“This CNPC, drilling business spinoff is part of China’s state-owned enterprise reform blueprint,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings, said. State-run oil companies have been implementing cost-cutting reforms together with asset restructuring amid depressed energy prices.”
Other Chinese oil majors spinning off oilfield service businesses
CNPC is not the first Chinese oil major to move toward spinning off its oilfield service sector in recent months. Sinopec spun off Sinopec Oilfield Service Corp. from its operations as part of a $5 billion reorganization in 2014, while China National Offshore Oil Company (CNOOC) took China Oilfield Services Ltd. public in 2002.
“This reform follows on from CNOOC and Sinopec, who have partially spun off their oil services divisions,” said Neil Beveridge, an analyst at Sanford C. Bernstein. “However, with the severe downturn in the industry and low valuations, the timing is not good.”
