Oil tax increases as Beijing claims a share of fat profits
Rise barely felt by China's oil majors gives hefty boost to government coffers
Beijing has raised resource taxes levied on oil and gas producers for the first time in 12 years, hoping to skim off a meatier share of windfall petroleum profits.
The move follows similar tax rises in countries such as Venezuela and Russia, two of the world's largest oil exporters, as crude prices continue their seemingly inexorable ascent through record highs.
The State Administration of Taxation said resource taxes levied on PetroChina and China Petroleum & Chemical (Sinopec) had been raised to between 14 yuan and 30 yuan per tonne of crude oil, effective retroactively from July 1, depending on the region where the oil is produced. Their previous tax band was eight yuan to 30 yuan.
PetroChina is the nation's largest oil producer and Asia's most profitable company, while Sinopec is China's second-largest oil producer and Asia's largest oil refiner.
It is unclear whether the country's third-largest oil firm, CNOOC, will be subject to tax increases. Taxation of CNOOC - which was not mentioned in the circular - is administered by a separate government body, the China Offshore Oil Tax Bureau.
For natural gas, the resource tax has been raised to between nine yuan and 15 yuan per thousand cubic metres for PetroChina and to between nine yuan and 13 yuan for Sinopec. Previously, it was two to 15 yuan for both companies.
The tax was raised to 30 yuan per tonne from 24 yuan for the Daqing oil field, which accounted for 44 per cent of PetroChina's output last year. Taxes on output from Sinopec's key Shengli oil field, which produced 69 per cent of the company's crude oil last year, rose to 22 yuan per tonne from 14 yuan.
The tax increases will not affect downstream fuel prices, which are centrally regulated in China, and the added costs will be absorbed by primary producers. Analysts estimated the rises would cut PetroChina and Sinopec profits by less than 1 per cent. The tax haul, however, should rise significantly.
China's resource taxes are far lower than those in most other countries. Fitch Ratings associate director Ma Shang says that global oil resource taxes average 1,020 yuan a tonne - 34 times China's level, assuming all its oil attracts the top tax rate of 30 yuan a tonne.
'At the low end of the international range, you are talking US$19 a tonne. Resource taxes are especially high in Europe's North Sea and the United States,' Mr Ma said.
CLSA oil and gas research director Gordon Kwan said China's lower resource taxes were part of the reason why, per barrel, PetroChina's oil and gas operations were more profitable than those of global oil giant ExxonMobil.
Speculation that China would raise resource taxes has been brewing for some time but the increase is milder than many expected.
Despite repeated suggestions from academics, the government continues to levy the tax based on volume rather than price.
'Many people suggested the linking of the tax to oil price but the government considered it too complicated,' said Dong Xiucheng, vice-dean of the School of Business Administration at the University of Petroleum in Beijing. 'The government may collect more while oil prices are high but what if prices come down?'
Additional reporting by Fiona Lau