Soaring crude prices and demand offset losses from refining, making the mainland oil firm the most profitable outfit in Asia PetroChina, the mainland's largest oil and gas producer, saw first-half net profit jump 29.4 per cent as surging crude prices and demand overwhelmed losses from refining. Net earnings were 80.68 billion yuan, up from 62.36 billion yuan in the same period last year, the company announced yesterday, making it the most profitable Asian outfit. Turnover was up 25.3 per cent at 326.55 billion. The results were in line with market expectations. Boosted by a 35.6 per cent rise in oil selling prices, the operating profit of PetroChina's oil and gas production division surged 39.6 per cent to 124.45 billion yuan. That more than made up for government fuel price caps that caused the refinery division's operating loss to widen to 13.88 billion yuan from 5.94 billion yuan. The company also paid 10.3 billion yuan in windfall taxes because of near-record oil prices in the first half, vice-chairman Jiang Jiemin told reporters. Mainland oil firms need to pay a 20 to 40 per cent tax on crude sold at more than US$40 a barrel. The company will pay a first-half dividend of 20.2806 fen a share, compared with 15.7719 fen a year earlier. To quench the mainland's rising demand for energy, PetroChina has raised its capital expenditure budget for this year from 149 billion yuan to 166 billion yuan, as it spends more on exploration, production, refining and pipeline construction. PetroChina also said it planned to buy for US$2.73 billion its parent firm's 67 per cent stake in PetroKazakhstan, a Canada-based, Central Asia-focused company. The widely anticipated purchase would be made through CNPC E&D, a 50-50 joint venture with parent China National Petroleum Corp. The deal would add 2.4 per cent to PetroChina's earnings per share, chief financial officer Wang Guoliang said. PetroKazakhstan's oil and gas output amounted to 42.27 million barrels of oil equivalent last year or 4.18 per cent of PetroChina's output of 1.0 billion boe. The Canadian firm had 340.46 million boe of proven reserves at the end of last year, amounting to 1.74 per cent of PetroChina's 19.55 billion boe. The acquisition, to be completed by the end of the year, was struck at a slightly lower valuation than that paid last year by CNPC, which bought 100 per cent of PetroKazakhstan for US$4.2 billion and sold 33 per cent to Kazakhstan oil firm Kazmunaigaz earlier this year. Mr Jiang said PetroChina would speed up expansion of its west-east gas pipeline from 12 billion cubic metres of annual capacity to 18 bcm, and was studying the construction of a second parallel pipeline to meet demand. The company is also spending to arrest output decline at its mainstay Daqing oil field. Mr Jiang said the field's oil and gas output would stay at more than 40 million tonnes of oil equivalent until 2020, declining steadily from 45 million tonnes last year and the peak of 55 million tonnes in the mid-1980s. Deployment of advanced technology had raised the oil recovery rate by 10 per cent and major gas reserves had been found in deeper geological layers, he added. The recovery rate was 50 per cent last year, according to China Petroleum Daily. The field is the nation's largest, accounting for 40 per cent of China's oil output since its oil industry began in 1959. Mr Jiang also confirmed that PetroChina was holding talks with rival China Petroleum & Chemical Corp on co-investing in a proposed 10 million tonnes a year, 13 billion yuan oil refinery in Guangxi province. Each of the companies has submitted a similar investment proposal to the central government. 'Whether it will be a 70-30, 80-20 or 60-40 shareholding, it has not been decided,' Mr Jiang said. PetroChina shares closed flat at HK$9.02 before the results.