China to consider merging oil companies

BEIJING, February 18, 2015 – China is considering the option of merging some of its state-owned oil companies in order to compete with the largest oil companies and operate more efficiently while oil prices remain low.

The companies being considered for the merger include the country’s largest oil producer, China National Petroleum Corporation, and the oil refining company, China Petrochemical Corporation, the Wall Street Journal reported.

Oil companies in China have been under pressure from the government to reduce spending and focus on returns since oil prices began to fall in June 2014. The China National Offshore Oil Corporation recently announced it would cut expenditure by 35 percent, a tone that was echoed by PetroChina and the China Petrochemical Corporation.

The proposal follows the $26 billion merger of China’s largest high-speed rail companies China CNR Corporation and CSR Corporation at the end of 2014, with the aim of competing with Germany’s Siemens and Canada-based Bombardier.

“The CSR-CNR merger created a lot of food for thought,” said Lin Boqiang, an energy adviser to PetroChina. “But the companies themselves are clearly unwilling,” Boqiang told Reuters.”