Chinese state-controlled oil giants crashed in Hong Kong trading after Reuters reported on Monday that the Trump administration was poised to add China’s top offshore oil and gas producer to a sanctions list, threatening to cripple its international operations. CNOOC slumped 14 per cent to HK$8.13, its biggest one-day slump since a 17.2 per cent setback on March 9, just weeks before global oil prices slipped below zero for the first time. The oil explorer is a 64 per cent-owned flagship of China National Offshore Oil Corporation while foreign investors owned about 16 per cent. The potential action against CNOOC’s parent, as reported by Reuters, and other Chinese corporations would follow a decision in August against 11 Chinese firms and a designation of 20 top Chinese firms including those “owned or controlled” by the People’s Liberation Army. Noting the news report, CNOOC said that its parent company has not yet received any official notice or decision from relevant US government agency, according to an exchange filing on Monday. A spokesman for its parent company did not answer phone calls seeking comments. The escalation in sanctions is likely to make life harder for President-elect Joe Biden in his policy on the soured US-China relationship. Trump himself signed an executive order earlier this month banning US persons from transacting in securities of “Communist Chinese military companies.” “The most damaging would be restrictions on access to US dollar financing, or equally bad, restricting work with US companies or persons,” said Neil Beveridge, a senior analyst at Sanford C. Bernstein. “This could effectively paralyse CNOOC’s international operations. This does not feel like a buy-on-the-dip moment.” Beveridge cautioned that the Reuters report remained unconfirmed. “We don’t know if this may apply to the listed unit or the parent company, and what sort of measures the US may be seeking,” he added. PetroChina, the listed arm of China National Petroleum Corporation, dropped 6.1 per cent to HK$2.47 while. China Petroleum & Chemical Corp or Sinopec fell 6.9 per cent to HK$3.51. Both stocks declined by the most since May 4. Trump bans US investments in what he calls Chinese ‘military-controlled’ companies China National Offshore Oil Corporation and three other companies will raise the number of blacklisted firms to 35, Reuters said, citing a document and three sources. The other trio are Semiconductor Manufacturing International Corp, China Construction Technology and China International Engineering Consulting. Potential sanctions, if true, could include demanding US pension funds to divest shares in CNOOC, restrictions on cooperation with US and other international firms, and limits on dollar-denominated financing, Beveridge said. Because the structure and nature of their businesses are very similar, other state-linked Chinese oil groups could also be implicated, said Stanley Chan, director of research at Emperor Securities. “Investors are worried whether more related Chinese companies could be added to the list before the US presidential transition finishes,” Chan said. Having amassed a significant international assets portfolio in the past two decades, CNOOC’s overseas operations made up a third of its total production in the first half of this year, including from projects in the Gulf of Mexico and Guyana where major discoveries have been made in a venture with ExxonMobil. Late last month, CNOOC surrendered its exclusive rights to upstream oil and gas operations, thus allowing its parent company to directly engage in the business. The parent company owns significant assets in oil refining, petrochemicals production, natural gas import and distribution and power generation. CNOOC said the arrangement would give it flexibility, while avoiding or mitigating significant legal risks due to laws and regulations that may lead to potential penalties, restrictions on its operational capabilities, or being required to split or terminate part of its business. This unusual move was widely seen as a mitigation plan in the event of escalating tensions with the US, Beveridge said.