PetroChina plans to double its gas pipeline network and raise gas output by two-thirds in the next five years. The strategy comes despite an analyst's warning that it may rack up 13 billion yuan (HK$15.86 billion) this year in losses from gas imports because it cannot lift domestic prices.
The losses would combine with a 23.4 billion yuan operating loss in the first half on its oil refining operation. Beijing was reluctant to lift retail prices out of fears it would stoke already high inflation. That dragged down PetroChina's first-half profits despite higher crude oil prices.
The nation's largest oil and gas producer yesterday unveiled a net profit of 66 billion yuan for the first six months, barely 1 per cent higher than the year-earlier period. The flat performance was despite a 5 per cent rise in oil output and a 40 per cent rise in average selling prices. Profit was 3.4 per cent below the 68.33 billion yuan average estimate from nine analysts polled by Reuters.
The unfavourable policy environment meant its profit was 68 per cent higher than state-controlled CNOOC, a pure offshore oil and gas producer with no refining operations and gas imports. PetroChina's oil and gas output in the first half was 3.8 times higher than CNOOC's.
PetroChina's vice-chairman sought to allay investors' concerns about the negative impacts of the policies. 'I believe the situation of domestic gas prices being lower than import prices is temporary - the central government has already noticed the [losses].
'According to our understanding, Beijing is actively studying the establishment of a reasonable pricing mechanism,' Zhou Jiping said.
Such an arrangement would ideally help move towards gradually establishing a market-based system, allowing for better pricing of natural gas, one that accounts for its environmental benefits compared to coal, and its finite supply, Zhou said.
Chief financial officer Zhou Mingchun said PetroChina would lose 1 yuan on each cubic metre of gas imported from Turkmenistan via the second pipeline linking Central Asia to Hong Kong by the end of next year.