Tax cut boosts oil major's earnings

PUBLISHED : Friday, 24 August, 2007, 12:00am
UPDATED : Friday, 24 August, 2007, 12:00am

PetroChina pockets 81.8b yuan in first half

PetroChina, the nation's largest oil and gas producer, posted a better than expected 1.42 per cent increase in first-half net profit, as a 4.48 billion yuan income tax cut offset a drop in operating earnings.

The company yesterday reported a net profit of 81.83 billion yuan for the six months to June, an increase from 80.68 billion yuan a year earlier and beating a 79.1 billion yuan average estimate of six analysts.

Overall operating profit tumbled 5.34 per cent to 109.13 billion yuan.

PetroChina did not explain the tax cut, only saying it was related to Beijing unifying in March the profit tax rate for companies in the mainland at 25 per cent from next year. Local firm are now charged 33 per cent and foreign companies 15 per cent.

Operating profit from oil and gas production fell 22.5 per cent year on year to 96.43 billion due to a 1.8 per cent fall in realised oil price to US$57.69 and a 20 per cent jump in cash operating costs per barrel produced to US$7.10, offsetting a 3.7 per cent rise in output.

An increase in oil production windfall tax - which took effect in late March last year - from 10.28 billion yuan to 14.94 billion yuan also squeezed profits. This was offset by a turnaround in refining business from a 13.88 billion yuan loss to a 3.92 billion yuan profit, an 85.65 per cent jump in earnings from chemicals to 5.39 billion yuan, and a 33.59 per cent climb in gas distribution gains to 6.12 billion yuan.

Chairman Jiang Jiemin unveiled at the results briefing the first details of the company's plan for a cross-border gas mega-project that involves the building of what he described as the 'world's longest gas pipeline with the biggest capacity'.

The firm had signed an agreement with the Turkmenistan government to develop a gas field in the Central Asia nation with possible annual output capacity of 13 billion cubic metres (bcm), Mr Jiang said.

He said Turkmenistan also undertook to sell PetroChina 17 bcm annually from its other fields.

To channel the gas into the mainland, a feasibility study was being done on laying a 10,000km, 30 bcm a year pipeline linking Turkmenistan to the country, Mr Jiang said.

About 2,000km of the pipeline would pass through Turkmenistan, Uzbekistan, Kazakhstan and the mainland border in Xinjiang, he said.

It will be linked to 8,000km of the second west-east pipeline stretching from Urumqi in Xinjiang to Nanchang, Jiangxi province, en route to Lanzhou and Xian. From Nanchang, two proposals have been made to link it with Shanghai or Guangzhou, with a possible connection to Shenzhen and Hong Kong.

No investment amount or potential rate of return was disclosed.

The existing 3,800km, 17 bcm a year west-east pipeline from Urumqi to Shanghai cost US$5 billion and took two years to build.

CLSA analyst Gordon Kwan said the 400 bcm reserve of the Turkmen field PetroChina planned to develop would raise its gas reserve substantially but would happen only after deals were signed with customers.

PetroChina proposed an interim dividend of 20.56 fen per share.

The company's shares rose 2.6 per cent to close HK$11.04 before the results were announced.


The firm will build a 10,000km gas pipeline from Turkmenistan

Oil and gas producer's forecast-beating increase in first-half net profit: 1.4%

PetroChina's overall operating profit tumbled 5.3 per cent to, in yuan: Y109b