Oil giant's net rises 2.39pc amid tighter controls PetroChina failed to meet analysts' annual profit targets for the first time since listing in 1999 after being hit by higher drilling and tax costs. Beijing's controls on energy prices also affected the nation's largest oil and gas producer, which recorded only a 2.39 per cent gain in net earnings last year despite a 9.13 per cent increase in the average selling price of oil. PetroChina said it would seek to increase overseas earnings, amid Beijing's determination to tame inflation running at a 12-year high, by holding steady key energy and staple product prices. As part of the strategy, chairman Jiang Jiemin said the company would buy its parent firm's stake in a jointly owned international unit. PetroChina invested 20.74 billion yuan (HK$22.78 billion) in the venture in 2005 while its parent firm injected a basket of petroleum assets in Central Asia, South America, Canada, Middle East and Southeast Asia into the project. The company's net profit rose to 145.63 billion yuan last year from 142.22 billion yuan in 2006 as turnover jumped 21.19 per cent to 835.04 billion yuan. The result was 4.17 per cent lower than the 152 billion yuan mean forecast of 28 analysts polled by Thomson Financial. Still, the oil giant retained its status as Asia's most profitable listed company, after HSBC Holdings. Beijing in 2006 imposed a special levy on oil revenues to help subsidise fuel prices for the poor. 'The levy combined with downstream refining losses are big headwinds for PetroChina's 2008 profit ... all but erasing the energy giant's earnings leverage to booming crude prices,' CLSA head of China energy research Gordon Kwan wrote in a research note. Mr Kwan downgraded the stock's target price to HK$12 from HK$16. PetroChina shares closed up 2.5 per cent at HK$9.84 yesterday. Operating profit from oil and gas production declined 6 per cent to 219.86 billion yuan, as the cost to produce each barrel of oil surged 15 per cent to US$7.75, after a 28 per cent jump in 2006. This offset a rise in average oil selling price to US$65.27 per barrel from US$59.81 in 2006. The levy cost the company 44.58 billion yuan last year, or 15.6 billion yuan more than 2006. The April introduction of the levy that year meant PetroChina was liable for only nine months of payment. Refining and marketing operating losses narrowed to 20.68 billion yuan from 29.16 billion yuan in the previous year, due to higher gross margins and sales volume. Mr Jiang said PetroChina's refining break-even point was about US$67 a barrel of oil, adding it stood to lose 3.24 billion yuan annually for each US$1 above US$67. PetroChina aims to raise oil and gas output 3.91 per cent to 871.6 million barrels of oil equivalent this year. Capital expenditure will be 207.9 billion yuan, up 14.5 per cent from last year. More money is being allocated for the nation's second west-east gas pipeline from Turkmenistan to southern and eastern China.