Chinese oil giants PetroChina and SinoPec to spend more in second half

Flagship mainland oil producers are preparing to ramp up multi-billion dollar capital spending plans that were squeezed amid a Beijing probe into industry graft, offering a lift for oil services firms suffering from belt-tightening in the first half.

State-controlled majors PetroChina and Sinopec Corp delayed investing in project launches in the first half as the government deepened its corruption investigation in the state sector. Project tendering in the mainland has been riddled with graft amid a culture of officials at state firms accepting bribes to award contracts to companies run by relatives or friends.

Oil industry executives say the probe hasn't ended but may have peaked, having ensnared at least 11 former senior executives at PetroChina and its parent company China National Petroleum Corp (CNPC). That's enough to trigger new spending at the majors as they switch focus to meeting operational targets.

"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, an economist with CITIC Securities in Beijing.

Over the past 12 months PetroChina, the dominant oil and gas producer, and CNPC were at the centre of one of the biggest corruption investigations into the state sector in years.

PetroChina's first-half spending fell 16 per cent year on year to 91 billion yuan (HK$114 billion). The company attributed the drop to its efforts to "optimise its investment structure and reasonably adjusted the pace of construction of projects", but reiterated its target is to spend 297 billion yuan this year, down 7 per cent from 2013.