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Price Reforms Help Limit PetroChina's Natural Gas and Refining Losses
Summary:An increase in domestic natural gas prices as well as changes to the domestic fuel pricing mechanism both helped to limit losses from the company's oil refining and natural gas segments.


Aug 23, 2013
Translated by Zhu Na

PetroChina Co. Ltd's turnover exceeded one trillion yuan in the first half of the year, a year-on-year increase of 5.2 percent, according to a company filing made to the Hong Kong stock exchange yesterday.

The company, which is a subsidiary of the state-owned China National Petroleum Corporation (CNPC) and Asia's biggest oil producer, also revealed a half-year net profit of 65.5 billion yuan, an increase of 5.6 percent on the same period last year.

The company said that an increase in domestic natural gas prices as well as changes to the domestic fuel pricing mechanism both helped to limit losses from the company's oil refining and natural gas segments.

Wang Dongjin (汪东进), who took on the role of company president in July, told investors that "Natural gas price reform is conducive to the company's business development. It is expected that natural gas sales will improve in the second half of the year and could make 10 billion yuan in profits for the whole year. From 2014, the profits from natural gas may increase by 20 billion yuan a year."

In the first half of the year, the company's natural gas and pipeline business recorded profits of 21.88 billion yuan, up by more than 20 billion yuan on the 1.6 billion earned in the first half of 2012. The company posted a 2.1 billion yuan loss on its natural gas operations for the whole of 2012

That said, PetroChina continued to report losses of 23.5 billion yuan on natural gas imports. In 2012, CNPC lost 42 billion yuan on their gas-importing business, and a further 14.5 billion yuan in the first quarter of 2013.

Despite recent changes to natural gas prices, the cost of much of the gas imported into China is still higher than the government-set domestic gas price.

PetroChina also said that reforms to China's fuel price mechanism introduced by the National Development and Reform Commission in March also helped to narrow losses at its refining and chemicals business.

In the first half of the year, the refining and chemicals segment accounted for losses of 15.86 billion yuan, a 13 billion yuan reduction on the more than 28 billion yuan in losses recorded in the first six months of 2012.

The company's oil refining business accounted for 7.77 billion yuan in losses, more than 15 billion yuan less than the losses recorded during the same period in 2012. The chemicals section registered losses of over 8 billion yuan.

However, profits from traditionally strong sectors like exploration and production fell in the first half, down by over 13 percent to 99 billion yuan.

Retail sales were also weak, impacted by soft demand for refined oil and other factors. In the first half of the year, profits from sales decreased by 65.7 percent year on year, to reach 3.43 billion yuan. However, Wang Dongjin noted that refined oil sales had picked up in July.

"It is worth noting that in the first half of the year PetroChina's capital expenditure in exploration and production was only 76.4 billion yuan, much lower than expected, showing that the company has reduced expenditure in the exploration sector," a securities analyst told China Securities Journal.

Links and Sources
China Securities Journal: 天然气管道业务盈利大增 中石油半年日赚3.6亿元

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