CNPC Unloads High-risk Businesses      

China National Petroleum Corporation (CNPC) has put strengthening investment management on top of its agenda recently, to avoid risks of excessive investment growth and falling return rate in face of the uncertainties caused by the financial crisis.
    "To step up investment management is so crucial to the speed and profitability of the company's development, as well as its goal of becoming an integrated international energy company," CNPC deputy general manager Zhou Jiping said in a conference on December 16th, 2008.
    CNPC's investment scale has been expanding gradually over the recent years, rising 21% per year on average from 2003 to 2008, compared to the average level of 15% for major international petroleum companies. The rate of return on investment for CNPC has been declining, however.
    The years between 2009 and 2012 will be a concentrated period for CNPC's investment plans which include strategic oil and gas pipelines, refinery construction as well as overseas businesses expansions. Such mid- and long-term strategic projects, which are capital intensive, are usually hard to have return in short term, particularly at a time of global economic recession and domestic slowdown. Excessive investment growth while contracting return rate would be one of the biggest challenges for CNPC over the coming a few years.
    CNPC is beefing up control on investments, dividing all projects into four groups subject to approvals from corresponding authorities of the company.
   Group-one projects need approval by the company's executive council. They include any new oil fields with annual output of more than 1 million tons, new gas fields with annual output of more than 2 billion cubic meters, refinery expansion, cross provincial oil and gas pipelines, overseas projects worth US$500 million or more as well as overseas asset acquisition worth US$1 billion or more.
   Group-two projects have to secure approval by group's management after being reviewed by the company's planning department or other related departments. They include projects that have been submitted to central government for approval, new exploration projects, projects of new energies, oil and gas field supporting facilities worth RMB100 million or more, oil and gas reserves and transport projects, refining, petrochemical projects and their supporting projects, distribution channel projects and supporting ones, projects regarding safety control and energy-saving and pollution-reduction, engineering and technical service projects with investment of more than RMB50 million, equity investment as well as asset acquisition.
   Group-three projects should be approved by specialized subsidiary companies while Group-four by subsidiary companies they belong to.
   CNPC's Daqing Oilfield Co., Ltd. has quit certain high-risk investment, following the group's requirement to tighten investment management.