BEIJING: Sinopec Group, the second-largest energy company in China, plans to cut costs by recalling 40 percent of its overseas staff in the wake of plunging oil prices.
Up to 160 employees from Sinopec International Petroleum Exploration & Production Co, a subsidiary of the group focusing on overseas upstream businesses, will be brought back to Sinopec’s headquarters in Beijing, according to a senior official at the company.
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“The fall in global crude prices since last summer has brought tough challenges to the production unit’s performance, which is the major reason for the relocation,” said the official, who declined to be named.
The company recalled 100 overseas staff in 2014 as the prices of crude tumbled amid a global glut fueled by the shale gas boom in the United States and increased production in Saudi Arabia.
Record oil exports from Iraq has also affected the market.
The US benchmark price for West Texas Intermediate crude oil futures closed at $48.52 a barrel on July 30, compared with around $100 last summer.
Liang Dan, a crude oil analyst with ICIS Energy, a Shanghai-based energy information consultancy, estimated that the global prices will continue to drop this week.
“The supply glut in the crude market has affected the refined oil products market,” she said. “It is highly likely that China’s authorities will cut retail fuel prices for the fourth time in a row this week.”
Chinese oil companies started taking measures to reduce costs late last year when the fall in crude prices triggered a sharp drop in profits.
Sinopec, which owns both upstream exploration operations and downstream refining businesses, has managed to cope better with the sharp decline, unlike PetroChina Co.
PetroChina, the country’s biggest oil company, relies mainly on crude oil and natural gas production platforms and has suffered more than other Chinese firms in the energy sector.
PetroChina reported an 82 percent drop in profit for the first quarter of this year compared with the same period in 2014. That was the company’s worst quarterly results since it was listed in 2008.
A senior official of PetroChina, who declined to be named, told China Daily that employees at management level face pay cuts in a move to trim costs.
China National Petroleum Corp, the parent company of PetroChina, held a work conference on July 30 in Langfang, Hebei province. It focused on rebuilding the firm’s reputation and maintaining stable growth.
Wang Yilin, head of the group, called for the corporation to shift into quality growth by increasing efficiency. “The company will accelerate reform and innovation to improve management levels,” he said.
As crude prices fall, it is more economical for China to import directly from the international market rather than investing in overseas exploration. Historically, China has suffered from high crude prices in its drive for economic growth.
State-owned companies such as CNPC and Sinopec were encouraged to invest heavily in overseas assets to ensure supply.
