China largest refiner to cut 5% of workforce

By Yu Tianyu and Wan Zhihong (China Daily)
Updated: 2008-07-26 09:08

China National Petroleum Corp (CNPC), the country's largest oil and gas producer, plans to cut 5 percent of its workforce over the next three years due to soaring labor costs.

CNPC General Manager Jiang Jiemin announced the planned job cuts at a recent annual meeting of company executives in Yan'an, Shaanxi province.

Analysts said the job cuts would be an effective way for CNPC to control its costs.

According to CNPC statistics, its staff totaled 1.67 million last year, so the move would result in a job cut of 80,000 people.

CNPC's job-cut plan came after it saw a large fall in earnings this year. The company's listed arm PetroChina's first-quarter profit fell 31.5 percent, as refining losses and windfall taxes cut its earnings from record crude prices.

CNPC earlier said it would cut office costs and spending on entertainment and travel by at least 10 percent this year.

It will not approve rental or purchase of luxury cars or construction of new buildings or hotels. It will also limit spending on parties and ceremonies and cut back on meetings and overseas trips.

According to China Petroleum and Chemical Industry Association (CPCIA), in the first half of the year, refineries under CNPC and Sinopec incurred 57.1 billion yuan of losses, 47.9 percent more than a year earlier.

The country's largest refiner Sinopec earlier said its net profit for the first half would decrease by over half, as the gap between high crude prices on the international market and the relatively low prices of refined oil products domestically has put its refining business deeply in the red.

The government in June raised the prices of gasoline and diesel by 1,000 yuan per ton. But analysts said the move could not put domestic refiners back in the black.

According to Liu Gu, an analyst with Guotai Jun'an Securities in Shenzhen, Sinopec would suffer 101 billion yuan in refining losses for the full year. As for PetroChina, which has a lower refining capacity than Sinopec, the loss would be around 80 billion yuan for the full year.

Last year, CNPC lost 36.2 billion yuan in its oil refining and processing businesses, according to company statistics.

In 2007, CNPC spent about 100 billion yuan on oil prospecting and another 32.2 billion yuan on oil refining projects in a bid to ensure domestic supplies.

Last year, CNPC processed 120 million tons of crude oil, an increase of around 6 million tons over the previous year.