Corruption probe to boost energy sector reform

According to industrial insiders, during the period that Wang and Ran were in charge of the oilfields, the company sold "low-quality"oil wells to private companies and it was during that process that corruption occurred.

So-called "low-quality"oil wells are those with low output and high costs, including taxes and fees.

The company usually sells those wells to private investors and then buys back the crude to raise its total output. However, the sale processes were seldom public and transparent, said an industry insider who declined to be named.

"Unlike SOEs such as CNPC, private companies will cause some environmental problems during crude production because they don't usually invest much in maintaining the sustainability of the wells,"said the insider. "To own the rights to explore the ‘low-quality wells', the private companies sometimes pay big sums of money in order to get connections.”

"It is absolutely not wrong to introduce more private capital to the oil and gas sector, but it should not become a way to make exorbitant profits,"the insider added.

Lin the expert said there are many regulations and related documents about bidding for "low-quality"wells. There is no shortage of documents, but there is of supervision.

"Who is responsible for ensuring that these regulations are respected and obeyed is the central issue,"he said. "It is not reasonable when someone plays the role of rule maker and supervisor at the same time.”

"There are always inside stories. The solution is a better system,"said Li Li, research director at ICIS C1 Energy, a Shanghai-based energy information consultancy.

She said the corruption probes will not bring clear changes to well bidding processes in the short term and their impact on the other two major oil and gas companies, Sinopec Group and CNOOC Ltd, will be limited.

So long as the upstream oil fields of the three top majors are not re-divided, their business scale will not change too much, she said.

"However, I believe the industry will develop from an extensive management style to an intensive pattern, which is a good direction,"said Li.

"The case will not boost China's oil and gas industry. Other positive policies including political, financial and cultural measures will be the driver for future demand, which will boost the energy market.”

"Many factors, including the anti-corruption move, are all pointing toward the direction of reform and opening-up,"she added.