PetroChina, the nation's largest oil and gas producer, is pinning its hopes on more favourable government energy pricing and tax policies this year to reverse last year's fall in profits.
The company said yesterday that its net profit last year fell 4.9 per cent to 132.9 billion yuan, despite higher output. The profit figure was 4.1 per cent lower than the average estimate of 34 analysts polled by Thomson Reuters.
The fall came despite a 31.1 per cent jump in average oil selling prices to around US$102 a barrel and a 13.3 per cent rise in gas prices to 1,082 yuan per thousand cubic metre.
The main culprit was Beijing's control over energy prices, aimed at keeping inflation in check, which resulted in retail fuel prices rising slower and by smaller amounts compared with crude oil prices. As a result, PetroChina posted an operating loss of 60.1 billion yuan in its oil refining operation, against a profit of 4 billion yuan in 2010.
The firm was also hit by a 96 per cent jump in the special levy on crude oil sales, to 102.4 billion yuan. The levy is a progressive tax that rises with oil prices. Making things worse was a revamp of the resources tax from one charged by sales volume to one levied on value, which saw PetroChina's payment double to 19.8 billion yuan.
A reform late last year that raised the levy threshold from US$40 a barrel to US$55 would help save the firm 26 billion yuan this year, assuming current crude prices prevail over the entire year, Zhou said.
PetroChina also suffered a loss of 21 billion yuan on gas imports from Central Asia and elsewhere, since international prices are higher than domestic ones. Even after a 25 per cent price rise in mid-2010, mainland prices remain well below overseas prices.
In late December the central government began trials on pricing natural gas at levels closer to international levels in Guangdong province and Guangxi autonomous region. The company's deputy chairman, Zhou Jiping, said Beijing had indicated a desire to deepen the reform of the fuel pricing system this year, although the timing will depend on international oil price trends, since inflation was still a concern.
He said PetroChina's refining operation remained loss-making, although losses have much narrowed after a price rise in February and another one this month. This year PetroChina plans to import 28.2 billion cubic metres (bcm) of gas, mainly from Central Asia, up from 17.3 bcm last year, Zhou said.
PetroChina aims to raise gas output by 5.9 per cent this year to 67.9 bcm. Last year's production grew 7.9 per cent, short of the target of 10.4 per cent. It wants to raise oil output by 1.4 per cent to 898 million barrels and total oil and gas output by 2.8 per cent to 1.32 billion barrels of oil equivalent this year.
barrels of oil per day were pumped by PetroChina in 2011, making it the world's biggest publicly traded oil producer