China Mulling Mergers Among State Oil Companies?

China's government is said to be exploring ways to consolidate the country's oil industry to create new national champions and operate more efficiently as prices slide.

According to the newspaper Wall Street Journal, quoting sources, one option under consideration would combine China National Petroleum Corp (CNPV) and its main domestic rival, China Petrochemical Corp (Sinopec). Others could include merging two other major energy companies, China National Offshore Oil Corp (CNOOC) with the Sinochem Group.

No timetable evidently has been set for a decision on whether or when to proceed with any merger. The companies up to now have been mute on the subject.

The mergers would be the latest consolidation of Chinese state companies as the government tries to regear a slowing economy. As part of that effort, President Xi Jinping is trying to revamp major state firms to make them more competitive globally, WSJ notes.

Mergers could also boost efficiencies in an economy increasingly burdened by excess capacity, observers say - a problem that has caused Chinese manufacturers to compete against each other by cutting prices.

With international oil prices plunging, those problems have become more pronounced. Combining and then streamlining the operations of the major Chinese oil producers could help reduce waste caused by redundant staff and projects, the newspaper quotes officials as saying.

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