CNPC eyes mixed-ownership structure

China National Petroleum Corporation (CNPC), the nation's largest oil and gas producer by annual output, pledged on Monday to develop a mixed-ownership structure, as part of the country's efforts to reform its State-owned enterprises (SOEs).

The company said it has set up a leading team to work on "comprehensively deepening reform," led by Chairman Zhou Jiping. The team's major tasks include developing a mixed-ownership structure and improving mechanisms for preventing corruption, according to a statement posted on CNPC's website Monday.

The statement did not specify which fields the reform will target. But during China's annual two sessions held earlier this month, Zhou told reporters that CNPC will seek joint cooperation to build pipelines and develop untapped reserves, unconventional gas resources and its refining business.

In terms of oil and gas exploration and production, CNPC will invite private capital to jointly develop some projects, but CNPC's stake in these projects should be no less than 51 percent, Zhou was quoted as saying by Beijing Times newspaper on March 7.

CNPC's move followed that of Sinopec, another State-owned oil firm, which announced on February 19 that it would introduce private capital to its sales unit, which was also seen as a move to experiment with a mixed-ownership structure.

The oil giants' moves reflect the central authorities' determination to develop a mixed-ownership economy, Wang Jintao, an analyst with Shandong-based commodity information website chem365.net, told the Global Times Monday.

"CNPC's reform blueprint is more broad and comprehensive, as it includes the firm's core oil and gas exploration business," he said.

CNPC is the parent company of Hong Kong- and Shanghai-listed PetroChina, whose profits in its exploration and production division fell 10 percent year-on-year to 147.01 billion yuan ($23.93 billion) in the first three quarters of 2013, while still far above profits from its other divisions.

A series of recent corruption cases at CNPC have put pressure on the oil giant to speed up reform, Han Xiaoping, chief information officer at energy portal china5e.com, told the Global Times Monday.

"Introducing private investors will help the company prevent corruption in procurement and sales," he said.

SOEs dominate the upstream and downstream of China's oil and gas sector, so reform of the SOEs tends to have major knock-on effects throughout the industry, CCB International said in a research note published Friday.

However, "CNPC's chairman only gave an oral pledge. We expect to see more detailed measures," said Wang. "Also, to break monopolies in the oil and gas sector, there are other things that need to be done, such as opening up China's crude oil import market."

As well as the move toward mixed ownership, analysts from CCB International also expect reforms such as lowering entry barriers and introducing market-based pricing in China's oil and gas industry.

Liang Jun, a research fellow at the Guangdong Academy of Social Sciences, said the ultimate goal of developing a mixed-ownership structure is to help SOEs build a modern corporate system.

The purpose of developing mixed-ownership is not necessarily to let "non-public capital have a majority stake in SOEs" but to develop better balance, Liang told the Global Times on Monday.

"But without a built-in system of checks and balances between public and non-public capital, it is dangerous to sell stakes in SOEs to private investors," he said.