China’s biggest oil companies say they’ll cut costs, but not employees.
As the collapse in crude prices curbs profits and prompts a wave of layoffs in the energy industry from Schlumberger Ltd. to Royal Dutch Shell Plc, Chinese state energy giants say their employees are safe.
The oil and gas industry has cut more than 176,000 jobs globally this year and more reductions are likely, according to Swift Worldwide Resources. While eschewing those layoffs may avoid a repeat of protests early last decade when China Petroleum & Chemical Corp. and PetroChina Co. fired tens of thousands of workers, it’s going to make further cost savings a challenge, said Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc.
“It’s not easy to just remove thousands of people from their post,” Tian Miao, an analyst at North Square Blue Oak Ltd., a researcher, said by phone from Beijing. “Plus, what if they protest in the streets, causing social unrest? That’s something the government won’t tolerate.”
Beijing-based PetroChina will cut capital expenditure by 9 percent to 266 billion yuan ($41.6 billion) in 2015, the third consecutive year of reductions. Sinopec, as China Petroleum is known, plans to reduce capital spending by 12 percent to 135.9 billion yuan, while Cnooc Ltd. will lower the expenditure by as much as 35 percent to 70 billion to 80 billion yuan. The three employ more than 900,000 people, not counting their parent companies, according to data compiled by Bloomberg.
Their international peers reduced capital spending by an average 14 percent in the first half, according to Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. BP cut by 19 percent in the first half, while Shell slashed 18 percent and Repsol SA axed 20 percent. Brent crude, which has fallen by more than 50 percent in the last year, was trading at $47.93 a barrel at 8:05 a.m. in London.
Sinopec will look for any way to lower costs without laying off workers, Chairman Wang Yupu said Thursday after the company reported a 22 percent slide in first-half earnings. PetroChina, the country’s biggest oil and gas producer, said it managed to shrink labor costs for the first time since 2012 without laying off any employees.
“That doesn’t mean we won’t cut headcount,” Wang Dongjin, PetroChina’s president, said after posting a 63 percent decline in profit. “We can reduce our headcount by controlling the number of new hires, and by not replacing employees who retired or left the company for whatever reasons.”
Cnooc, the nation’s biggest offshore oil and gas explorer, also ruled out cuts after reporting a 56 percent slide in first half earnings. Layoffs aren’t easily accepted in China, non- executive chairman Yang Hua told reporters Wednesday.
“They probably can’t do it under the current social circumstances, as state-owned enterprises are more than just businesses,” Kwan said. “They carry a certain amount of social responsibility and should contribute to social stability.”
© Copyright 2023 Bloomberg News. All rights reserved.