Oil producers are preparing to ramp up multi-billion dollar capital spending plans that were put on hold amid a corruption inquiry that implicated at least 11 former senior executives at PetroChina and its parent company China National Petroleum Corp (CNPC). “The crackdown bodes well for mid- to long-term development of the economy as it would undermine state monopolies and improve investment efficiency,” said Zhu Jianfang, Economist with CITIC Securities in Beijing. PetroChina’s first-half spending fell 16% year-on-year to CNY91 billion. The company attributed the drop to its efforts to “optimize its investment structure and reasonably adjust the pace of construction of projects”, but reiterated its target is to spend CNY297 billion this year, down 7% from 2013. Sinopec said it will cut expenditure by 4% to CNY162 billion this year, and reported a 25% drop in capex in the first half. It vowed to step up investment in major producing projects in the second half. Half of the about 20 major listed Chinese oilfield service suppliers posted sharply lower profits, or even losses, for the first half of the year. Anton Oilfield, Petro-king, Shandong Molong and Kingdream all took a first-half pounding, reporting 80% to 85% drops in interim earnings. Sichuan Renzhi and Tong Oil posted losses, with Renzhi blaming Sinopec’s recycling of drilling fluids, one of its core products. Some companies predict an imminent recovery as PetroChina and Sinopec invest more in upstream projects, the South China Morning Post reports.

The private firm Xinjiang Guanghui Petroleum Co was granted a crude oil import license of 200,000 metric tons of crude oil for 2014, becoming the first private company to obtain such a license. Five state-owned companies－PetroChina, Sinopec, CNOOC, Sinochem and Zhuhai Zhenrong－have no limits on crude imports; 22 other companies with import licenses, are given rights to import crude via a quota system. In 2013, China imported 282 million tons of crude, with the second group accounting for only 29.1 million tons, its maximum quota. The government has recently made moves to be more open to private investors as part of the country’s energy industry reform. Xinjiang Guanghui Petroleum has acquired a 49% stake in Kazakhstan-based Tarbagatay Munay in 2009, thus gaining indirectly a 49% stake in the Zaysan oilfield owned by TBM. The Zaysan oilfield is expected to have an annual production capacity of 500 million to 600 million cubic meters of natural gas and about 1 million tons of thick oil, according to ICIS C1 Energy, a Shanghai-based energy information consultancy. Xinjiang Guanghui Petroleum signed an agreement in 2012 with Kazakhstan to acquire another oilfield with expected crude reserves of 210 million tons. Li Li, Research and Strategy Director at ICIS C1 Energy, said the oil import license can bring approximately CNY1 billion annually in sales revenue to Xinjiang Guanghui Petroleum, the China Daily reports.

PetroChina and CNOOC reported first-half results that reflected weaker demand for refined products. CNOOC recorded a 2.3% year-on-year decline in first-half net profit to CNY33.6 billion. Chief Financial Officer Zhong Hua said increased selling prices had failed to offset higher production costs. The company’s average oil price was USD106.30 a barrel in the first half, up 2%, while the average gas price rose 13.5% year-on-year to USD6.44 per 1,000 cubic feet. The operating cost was USD11.78 per barrel of oil equivalent (BOE), up 7%, mainly attributable to the consolidation of two more months of Canada-based Nexen’s performance. Separately, PetroChina, the country’s largest oil and gas explorer, reported net profit growth of 4% to CNY68 billion. Its gas and pipeline segment achieved a first-half operating profit of CNY4 billion. Crude output edged up 0.2% to 500 million barrels and oil product output increased 1.9% to about 46 million metric tons. The refining and chemical segment remained in the red with an operating loss of CNY3.4 billion. Crude oil output from overseas operations totaled 56.2 million barrels, and marketable natural gas output reached 65 billion cubic feet. The oil and natural gas equivalent output was 67.1 million barrels, on par with the year-earlier volume.

PetroChina is reviewing its multi-billion-dollar push to produce liquefied natural gas (LNG) in place of diesel, shutting two loss making gas liquefaction plants operated by subsidiary Kunlun Energy. LNG is cleaner and nearly a third cheaper than diesel. Kunlun, a relative latecomer, emerged as a leader of the business, having spent billions of dollars on a dozen LNG plants, mainly in the country’s west and north, and building over 600 gas refueling stations. It also operates two multi-billion-dollar LNG import terminals on China’s east coast. But since the second half of 2013, Kunlun has seen utilization rates at some of its plants fall below 50%, amid a broad economic slowdown and as Beijing rolled out a gas price reform that pushed up prices of feed gas. An anti-corruption probe of top PetroChina executives, including Kunlun’s former Chairman Li Hualin, added to uncertainty about the company’s business strategy.

China Merchants Energy Shipping and Sinotrans & CSC Holdings have announced a USD1.1 billion crude oil tanker joint venture which seeks to ensure better and safer control over China’s oil imports. The venture aims to boost both companies’ capacity in ferrying China’s oil imports. China Merchants will provide USD566 million in assets, including nine very large crude carriers (VLCCs), for a 51% stake, while Sinotrans & CSC Holdings will offer USD544 million in cash. The deal is due to be finalized by September 30. China Merchants owns 17 large oil tankers that can carry 3.71 million tons in total, while Sinotrans & CSC Holdings has partnerships with more than 400 foreign transport and logistics suppliers.