By DU JUAN and BAO CHANG ( China Daily)
The central government's move to fight corruption in the oil and gas industry will accelerate thereform of China's energy sector and improve the corporate management of State-ownedenterprises, experts said.
On Sept 1, China's top discipline watchdog said authorities are investigating Jiang Jiemin, theformer head of the State assets regulator.
Jiang, the former chairman of the State-owned Assets Supervision and AdministrationCommission, SASAC, is being probed for "grave discipline violations”, which usually refers tocorruption, according to a statement by the Central Commission for Discipline Inspection.
He was named as the head of SASAC in March after serving as chairman of China NationalPetroleum Corp, the country's largest oil and gas company, for about two years.
Jiang, 58, was the first company executive to be promoted to the position, rather than agovernment official.He became the third chief in charge of SASAC that was established in 2003to regulate 118 central State-owned enterprises.
Jiang became chairman of CNPC in April 2011. After joining Shandong Shengli Oilfield Co as atechnician in 1972, he worked in the petroleum industry, apart from four years as vice-governorof Qinghai province between 2000 and 2004.
Jiang's probe is mainly related to his previous working experience in CNPC rather than inSASAC. Just a few days before his investigation was announced, another four top executives atthe vice-president level in the company were reported to have been put under investigationand resigned from their posts.
Wang Yongchun, deputy general manager of CNPC; Li Hualin, vice-president of PetroChina,CNPC's listed unit; Ran Xinquan, vice-president of PetroChina; and Wang Daofu, PetroChina'schief geologist, are being investigated for suspected corruption by the CCDI.
"The series of corruption probes in CNPC may improve the energy companies' reform processand bring management changes,"said Lin Boqiang, director of the Xiamen-based China Centerfor Energy Economic Research.
He said it is usually a long-term process for energy companies in developing countries tobecome mature in their corporate management structure.
"In the short term, it will have a bad impact on CNPC in both its public image and its listed-company PetroChina's share price,"he said. "However, from a long-term perspective, the casewill not bring too many changes to the company concerning its businesses.”
Unlike in private companies, the leader of an SOE is not the soul of the company, he said.
"In fact, it doesn't matter too much who in particular will become the head of an SOE, butstricter supervision and better management matter.”
The probes on Jiang, Wang, Li and others show the central government's determination andclear attitude to crack down on corruption, said Zhang Yi, vice-chairman at SASAC.
He said the investigations are individual problems and that the central government stillacknowledges the achievements and contribution of CNPC.
"The most important task for CNPC is ensuring stable development, production and safety,"saidZhang.
On Sept 4 and 5, Zhang went to CNPC's two major oilfields — Daqing and Changqing — tohold meetings about oil exploration and production safety, to ensure the healthy and stableoperation of the oilfields.
The Changqing oilfield is located in Shaanxi province, while the Daqing oilfield is in Heilongjiangprovince.
Changqing oilfield's annual output has soared from 10 million tons to 20 million tons from 2003to 2007. In the last year, its oil equivalent output reached 45 million tons, exceeding Daqingoilfield where output was 43.3 million tons.
Wang Daofu and Ran Xinquan, both worked in the Daqing oilfield for years starting in 2003.
According to industrial insiders, during the period that Wang and Ran were in charge of theoilfields, the company sold "low-quality"oil wells to private companies and it was during thatprocess that corruption occurred.
So-called "low-quality"oil wells are those with low output and high costs, including taxes andfees.
The company usually sells those wells to private investors and then buys back the crude toraise its total output. However, the sale processes were seldom public and transparent, said anindustry insider who declined to be named.
"Unlike SOEs such as CNPC, private companies will cause some environmental problemsduring crude production because they don't usually invest much in maintaining thesustainability of the wells,"said the insider. "To own the rights to explore the ‘low-quality wells',the private companies sometimes pay big sums of money in order to get connections.”
"It is absolutely not wrong to introduce more private capital to the oil and gas sector, but itshould not become a way to make exorbitant profits,"the insider added.
Lin the expert said there are many regulations and related documents about bidding for "low-quality"wells. There is no shortage of documents, but there is of supervision.
"Who is responsible for ensuring that these regulations are respected and obeyed is thecentral issue,"he said. "It is not reasonable when someone plays the role of rule maker andsupervisor at the same time.”
"There are always inside stories. The solution is a better system,"said Li Li, research director atICIS C1 Energy, a Shanghai-based energy information consultancy.
She said the corruption probes will not bring clear changes to well bidding processes in theshort term and their impact on the other two major oil and gas companies, Sinopec Group andCNOOC Ltd, will be limited.
So long as the upstream oil fields of the three top majors are not re-divided, their businessscale will not change too much, she said.
"However, I believe the industry will develop from an extensive management style to anintensive pattern, which is a good direction,"said Li.
"The case will not boost China's oil and gas industry. Other positive policies including political,financial and cultural measures will be the driver for future demand, which will boost the energymarket.”
"Many factors, including the anti-corruption move, are all pointing toward the direction of reformand opening-up,"she added.