PetroChina backs Beijing's call for state-private tie-ups
Oil and gas producer posts first-half profit drop of 6 per cent, thanks to domestic fuel price controls
PetroChina, the nation's largest oil and gas producer, yesterday echoed Beijing's call for state-owned companies in oligopolistic industries to invite private enterprises to co-invest in major projects.
The statement came as the energy giant announced a 6 per cent year-on-year fall in first-half net profit to 62.03 billion yuan (HK$75.94 billion).
Vice-chairman Zhou Jiping said the firm's 120 billion yuan, 7,000 kilometre third west-to-east pipeline would be partly backed by the National Social Security Fund, an infrastructure fund supported by private businesses under the All-China Federation of Industry and Commerce, and China's second-largest steelmaker, Baosteel Group.
"The reason for inviting private participation is not because PetroChina is short of cash," Zhou said. "Rather, it would promote healthy growth of the economy."
PetroChina, hit by losses from oil refining and gas imports due to domestic fuel price controls, saw its first-half net cash inflows from operating activities drop 62.8 per cent year on year to 48 billion yuan. But Zhou said its liabilities-asset ratio of 44.9 per cent meant it still had ample room to raise more debt.
The company has a 52 per cent stake in the pipeline, which is expected to start commercial operation by 2015, while its three other investors each holds 16 per cent, according to a China Securities Journal report.
Zhou said PetroChina had also teamed up on major projects with local government-owned enterprises, in response to Beijing's directive for major energy and infrastructure projects to have diverse ownership to improve governance, efficiency and accountability.
The joint projects include oil and gas drilling in Shaanxi province and Xinjiang, and natural gas processing terminals in Liaoning province.
Beijing is trying to expand use of gas as part of its strategy to cut air pollution. It has kept domestic prices much lower than global levels to make gas more affordable. Zhou expected the mainland's reliance on gas imports to rise above 30 per cent in 2015 from more than 20 per cent now.
But gas importers such as PetroChina have already been suffering losses due to high import costs and low domestic selling prices. In the year's first half alone, PetroChina recorded an operating loss of 19.6 billion yuan on gas imports, after accounting for a 3 billion yuan value-added tax rebate to ease the losses.
The losses were 12.5 billion yuan higher than the year-earlier period, as PetroChina increased imports from Turkmenistan, Qatar and Australia to meet demand. This was the biggest factor behind its first-half operating profit drop to 90.6 billion yuan from 97.5 billion yuan a year earlier. First-half oil refining operating losses of 23.3 billion yuan were flat year on year.
Zhou said Beijing considered further reform of gas and fuel pricing as key tasks in the year's second half, which would ease PetroChina's losses.