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Kunlun Energy Chairman Said to Be Detained in Government Probe

Petrochina Signage
Petrochina Co. signage is illuminated at one of the company's gas stations in the South Bay area of Hong Kong. Photographer: Jerome Favre/Bloomberg

Dec. 17 (Bloomberg) -- The Chairman of Kunlun Energy Co., the gas distribution arm of China National Petroleum Corp., has been detained by the government to help with an investigation, said a person familiar with the matter.

Kunlun suspended its shares in Hong Kong following a report in China’s Caixin magazine yesterday that Chairman Wen Qingshan is assisting in a graft probe. The magazine didn’t name its sources. Wen was taken into custody to assist with an investigation, said the person with knowledge of the matter, who asked not to be identified as he wasn’t authorized to speak publicly about it.

Wen’s detention follows government investigations into five other officials at CNPC, China’s largest energy company. Four senior managers at CNPC’s listed unit, PetroChina Co., were removed from their posts in August after corruption allegations, while former chairman Jiang Jiemin was dismissed as head of the state assets regulator and is under investigation, the official Xinhua News Agency said in September.

China’s new leaders have pledged to tackle graft, which President Xi Jinping has said threatens the communist party’s 64-year grip on power. Zhou Yongkang, the former head of China’s security apparatus and a party member with ties to the oil industry, is being investigated for corruption, the New York Times reported yesterday, citing people with political ties to senior officials.

Wen was promoted to CNPC’s chief accountant in July, and elected as chairman of Hong Kong-listed Kunlun Energy after former Chairman Li Hualin resigned in August amid the probe.

Diminish Trust

If Wen were directly implicated in graft it would diminish trust in promotions from CNPC’s inner circle, said Shi Yan, an analyst with UOB-Kay Hian Ltd. in Shanghai.

“This is a vivid example that CNPC’s corruption may be rotten to its core,” she said. “It’s rarely seen in such cases that a newly picked chairman is taken down after merely a few months.”

Wen and a second official, Wang Lihua, head of PetroChina’s unlisted oil trading unit China National United Oil Corp., or Chinaoil, in Beijing were detained by the government as part of the graft investigation, Reuters reported today without naming its sources.

A person answering the phone at Kunlun Energy’s Hong Kong headquarters, who wouldn’t be named, said Wen isn’t available for comment. An e-mail to Kunlun wasn’t answered. Five calls to CNPC’s Beijing-based spokesman Li Runsheng went unanswered. A person who answered the phone at Chinaoil’s Beijing headquarters said Wang isn’t available for comment.

Anti-corruption Campaign

Kunlun fell 3.1 percent to HK$14.18 yesterday. The stock is down 12 percent this year. PetroChina declined 0.9 percent to HK$8.57 as of 1:34 p.m. local time, while the benchmark Hang Seng Index gained 0.3 percent.

Xi’s anti-corruption campaign has focused on people with links to Zhou, who was a supporter of Bo Xilai, the ousted Politburo member sentenced in September to life in prison for corruption. Former PetroChina chairman Jiang and Zhou were top executives who served together at an oilfield in eastern China from 1989-90, according to their official biographies. Jiang was also chairman of CNPC until earlier this year and Zhou led the company in the 1990s as general manager.

Hua Bangsong, the chairman of PetroChina supplier Wison Engineering Services Co., is also assisting the authorities in their investigation, the company said in September. PetroChina was Wison’s biggest customer before 2012.

To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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