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PetroChina Pumping Up Refining Capacity

Friday, 28 Aug 2009 09:28 AM

HONG KONG -- PetroChina, the world's most valuable oil and gas producer, said it plans to pump up its refining capacity by two-thirds by 2017, banking on fuel pricing reforms at home to improve its finances as it bids to become a major global refiner.

PetroChina, China's No. 2 refiner after Sinopec, is aiming to raise its annual refining capacity to 200 million tonnes per year within seven to eight years, in its bid for 40 percent of its home market, President Zhou Jiping told reporters at a media briefing on Friday.

He added the company needs such capacity to be more like its global rivals such as Exxon Mobil, BP and Royal Dutch Shell .

"PetroChina's largest contribution to profits comes from our upstream business," Zhou said. "Comparing our major metrics to Exxon Mobil and BP, our disadvantages lie in the ratio and structure of our value chain."

PetroChina is also looking for overseas M&A opportunities in the downstream business, Zhou said.

Zhou made his comments as PetroChina posted its best profit in three quarters on Friday, as higher fuel prices in China offset the steep slide in crude oil prices.

PetroChina grappled with an environment of falling crude prices in the first half, with prices halving from a year ago, prompting international oil majors, including Exxon and Royal Dutch Shell, to cut costs and lower investments.

"We are seeing a number of uncertain factors in front of us," Zhou said. "We aim to have stricter control over investments and do our best to reduce costs."

Zhou said PetroChina aims to reduce lifting costs by 5 percent compared to last year and reduce non-operating expenses by 10 percent.

STRONG H2

In the second half, PetroChina's profits should be stronger, said David Johnson, Macquarie's head of oil and gas research, amid expectations that China may raise domestic retail gasoline and diesel prices by this week, the fourth hike this year.

"If it comes through tonight, then the downstream refining margins should be better for them," Johnson said. "The upstream business is going to be better for them in the second half."

Like rival Asian refiner Sinopec Corp., PetroChina, ranked as China's No. 2 refiner, benefitted from Beijing's two fuel price hikes in June.

The price increases are part of the government's fuel price reform, which guarantees refiners a profit margin if crude stays below $80 a barrel.

PetroChina, which produces over 70 percent of China's total natural gas, aims to have an annual natural gas production capacity of 130 billion cubic metres, Zhou said. That target would represent a more than doubling from the current capacity of 61.7 billion cubic metres.

PetroChina is participating in the second round of bidding to develop one of Iraq's oilfields, Zhou said, adding that the world's oil majors are interested in teaming up with PetroChina on the bid.

PetroChina's net profit was 31.5 billion yuan ($4.62 billion) in April-June, compared with a restated 25.14 billion yuan in the same quarter last year and against a consensus forecast of 30.1 billion yuan from five analysts polled by Reuters.

For a link to the graphic of PetroChina's earnings, click on: here

Separately, PetroChina said it will pay 2.81 billion yuan to buy South Oil, a Chinese oil and gas firm, from one of its non wholly owned subsidiaries and a unit of its state-run parent firm, China National Petroleum Corp

Sinopec reported record quarterly profits last Sunday, while offshore specialist CNOOC Ltd reported on Wednesday its lowest half-year earnings since 2005 on weak crude oil prices.

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HONG KONG -- PetroChina, the world's most valuable oil and gas producer, said it plans to pump up its refining capacity by two-thirds by 2017, banking on fuel pricing reforms at home to improve its finances as it bids to become a major global refiner.PetroChina, China's No....
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2009-28-28
Friday, 28 Aug 2009 09:28 AM
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