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RPT-UPDATE 2-PetroChina vows more capex cuts as corruption probe widens

(Repeats to fix format with no changes)

Forecasts 7 pct drop in capex to 296.5 bln yuan in 2014

* Decline would be second since company listed; aimed at boosting shareholder returns

* PetroChina posts 21 pct yr-yr rise in Q4 net profit; 2013 profit up 12 pct

* Company centre of massive corruption probe by government

By Charlie Zhu

HONG KONG, March 20 (Reuters) - China's largest oil and gas

producer PetroChina Co Ltd said on

Thursday it would cut capital spending for the second consecutive year in 2014 as it sought to boost shareholder returns in the midst of a massive corruption probe.

The state-run oil giant on Thursday forecast capital expenditure would fall 7 percent year-on-year this year to 296.5 billion yuan ($47.85 billion), and said capex would remain at around the 300 billion yuan level for the next "several years".

In 2013, capital spending fell 9.6 percent to 318.7 billion yuan, the first such decline since the company's 2000 debut on the Hong Kong and New York stock exchange.

"Last year marked a turning point for PetroChina," Chairman Zhou Jiping told reporters after the company posted a 21 percent rise in fourth quarter net profit, largely due to government hikes in natural gas prices and an improvement in its refining business.

"The company began to shift attention to quality and returns from speed and scale," he told the earnings briefing.

PetroChina and its parent firm, China National Petroleum Corp (CNPC), are at the centre of one of the biggest corruption investigations into the Chinese state sector in years, launched by the government half a year ago.

The probe, part of a nationwide anti-corruption campaign led by Chinese President Xi Jinping, is still expanding and there are no signs it will end soon.

Zhou declined to give details about the probe but said the company had been through "unprecedented challenges". PetroChina's Hong Kong shares have fallen nearly 15 percent over the past six months, underperforming an around 10 percent dip in the benchmark Hang Seng Index.

"The management seems to be saying the right things and giving the right messages to people. But the market is not going to pay too much attention to words until its clear the government has stopped investigating," James Hubbard, Hong Kong-based head of Asia oil and gas research at investment bank Macquarie, said before the earnings were announced.

BIG SPENDING DAYS OVER

Five former top executives from both PetroChina and CNPC are being investigated for "serious discipline violations", shorthand generally used to describe graft. They include Jiang Jiemin, chairman of both entities, who was a vocal proponent of expansion and of what he called the national and social responsibilities of state-owned enterprises.

Jiang was head of PetroChina and CNPC from late 2006 until early last year and under his leadership, PetroChina's capital expenditure almost doubled to 352.5 billion yuan in the five years to 2012.

Critics say Jiang invested too heavily in the downstream business - which includes refining and petrochemicals - at the expense of more profitable oil and gas exploration and production.

This runaway spending, combined with rising costs and hefty losses at the refining and natural gas import business due to government controls on domestic fuel prices, have eaten into returns and hurt the finances of PetroChina for several years.

Total liabilities ballooned to 1.07 trillion yuan at the end of 2013 from 348.3 billion yuan in 2008, while return on equity fell to 10 percent in 2012 from a peak of 30 percent in 2005.

Since Jiang was removed, PetroChina has vowed to divest more non-core assets such as pipelines and marginal oil and gas fields to reinforce investment in large upstream projects at home and abroad and boost shareholder returns.

This strategy mirrors the current trend in the global oil industry, and echoes plans by rival Chinese energy firm Sinopec Corp , which plans to sell up to 30 percent of its vast network of convenience stores, petrol stations and oil-products pipelines and storage facilities.

Global oil majors such as Exxon Mobil, Total , BP and Royal Dutch Shell have also said the would cap spending due to pressure from their shareholders, who want more generous payouts before cyclical oil prices start heading lower.

PetroChina shares closed down 0.91 percent at HK$7.62 ($0.98) in Hong Kong ahead of the results announcement. The stock is still way below its 2007 peak of over HK$20, unlike some Western oil majors like Exxon Mobil whose shares are hovering near record highs. ($1 = 6.1965 Chinese Yuan)

($1 = 7.7649 Hong Kong Dollars)

(Reporting by Charlie Zhu and Twinnie Siu; Additional reporting by Farah Master; Editing by Miral Fahmy)