Scandal-hit PetroChina tightens control over managers to keep firm running

BEIJING/HONG KONG (Reuters) - PetroChina 0857.HK601857.SS has tightened control over its managers and stepped up safety inspections to ensure the "shock" from a deepening corruption scandal doesn't disrupt the global operations of the Chinese energy giant, officials told Reuters.

PetroChina's logo are seen at its gas station in Beijing, August 29, 2013. REUTERS/Kim Kyung-Hoon

So far there have been no reports of operational problems or signs PetroChina is backing out of any deals or tenders in the wake of the investigation, which has implicated five former senior executives at PetroChina and its parent company, including ex-chairman Jiang Jiemin, in the past 10 days.

PetroChina’s operations span the globe, from oil production facilities and pipelines to refineries and petrochemical projects. Its market capitalization of $232 billion makes it one of the world’s most valuable oil firms.

“This is an extraordinary period. PetroChina is afraid this incident will affect normal production,” said one senior PetroChina official who declined to be identified because he was not authorized to speak to the media.

PetroChina spokesman Mao Zefeng could not be reached for comment.

The company had issued an internal memo asking director-level managers - a group numbering up to 1,000 people - to essentially clock-in each day to show they were at work, a second PetroChina official said.

He said the aim was to make sure operations were not disrupted, but also in case directors tried to flee China or were needed as part of the investigation, one of the biggest ever at a Chinese state-owned firm.

The first official said the company had “stepped up day-to-day management” and supervision of operations and was ensuring all employees reported for work daily.

For example, safety inspections were being done more frequently to make sure there were no industrial accidents that could cause supply disruptions.

PetroChina has operations throughout China as well as in Asia, Latin America, Africa, Central Asia, the Middle East, Russia and the United States.

Company representatives were also in Hong Kong on Thursday to meet investors to try to soothe their concerns about the outlook for the company, said the first official.

PetroChina officials and industry specialists have already said the company’s days of super-charged spending could be over as it seeks to steer clear of the legacy of Jiang, who oversaw a surge in capital expenditure to 352.5 billion yuan ($57.60 billion) last year from 181.6 billion yuan in 2007.

The company’s shares in Hong Kong closed down more than 4 percent on August 28 after it announced the first investigations, but it has since recouped those losses.


The two officials said there was shock and confusion inside PetroChina, a company with 550,000 employees and 320,000 contractors.

“You could describe it as an earthquake, or even a volcanic eruption,” said the second official, who declined to be named due to the sensitivity of the topic.

Executives close to the officials being investigated were frightened, he added.

The government said on Sunday it was investigating Jiang, who is also a former chairman of parent company China National Petroleum Corp (CNPC), for “serious discipline violations”, shorthand generally used to describe graft.

The others under investigation are former CNPC vice president Wang Yongchun and three former executives at PetroChina - vice president Ran Xinquan, chief geologist Wang Daofu and board secretary Li Hualin, who was also a vice president of CNPC and chairman of PetroChina's liquefied natural gas distribution arm Kunlun Energy 0135.HK.

The government has not detailed the accusations against them. It was unclear if they or Jiang have lawyers.

In an apparent bid to calm nerves, a senior regulator met PetroChina’s top management in Beijing earlier this week and said the investigations were only targeting select individuals, according to a statement posted on CNPC’s website.

“These are problems about individuals,” said Zhang Yi, the Communist Party chief of the State-owned Assets Supervision and Administration Commission (SASAC), a ministerial-level body that is responsible for more than 100 state-owned companies.

Most of the leadership of PetroChina and its subsidiaries were good, Zhang said.

Former chairman Jiang was appointed head of SASAC in March. State media announced on Tuesday he had been fired.

Nevertheless, many in China's oil industry are in shock at the scandal, the biggest in the sector since the former chairman of Sinopec Corp 600028.SS0386.HK, Chen Tonghai, was handed a suspended death sentence in 2009 for taking bribes worth 195 million yuan ($31.86 million).

One Chinese oil engineering firm, Hong Kong-listed Wison Engineering Services Co Ltd 2236.HK, said on Tuesday its chairman was helping the authorities with an unspecified investigation. Wison has not elaborated but PetroChina is one of its major customers.

“I’m avoiding calling my PetroChina friends as they are all afraid to talk,” said a Beijing-based official with a multinational oil major.

($1 = 6.1201 Chinese yuan)

Editing by Dean Yates and Alex Richardson