China＇s Oil Firms May Be Immune to Price Slump

Oil companies around the world are gritting their teeth as the ongoing slump in crude prices cuts into their profits, but Chinese national oil firms may be immune to the energy rout, new reports suggest.

China's three major national oil companies - China National Petroleum Corporation (CNPC), Sinopec and China National Offshore Oil Corporation (CNOOC) - all of which have upstream and downstream operations, will be resilient to oil declines, Moody's said in a report this week.

Chinese state-owned energy firms have already joined their global peers in slashing capital spending. On Tuesday, CNOOC announced it will cut expenditure up to a maximum of 35 percent this year. PetroChina and Sinopec are widely expected to follow suit when they release annual earnings next month.

Gero Farruggio, head of APAC upstream research at Wood Mackenzie, also voiced a positive outlook: "Even with challenges, we expect an eventful year with several positive developments on the political and fiscal front. These will not only act to soften the blow but renew interest in upstream exploration in the [Asian] region," he said in a note.

"China has already implemented changes that reduce taxes for contractors in a lower oil price environment, which will provide some relief," Wood Mackenzie said.

In fact, CNPC is best positioned to weather the oil price decline because of its lower E&P production cost, larger natural gas businesses, and diversification into downstream businesses. Meanwhile, Beijing's reform of state-owned entities may provide an additional boost. Last year, China announced a slew of reform programs aimed at increasing private investment into multiple sectors, including oil. These "infusions of private capital will also cushion the impact of lower E&P profits," Moody's said.

（cnbc.com Edited by Topco)