Beijing not likely to raise fuel prices, says PetroChina chief
The world's most valuable oil and gas producer has warned that China may hold off on fuel price rises because of fears of rising inflationary pressures on the mainland. PetroChina yesterday posted a 9.7 per cent fall in net profit to 103.39 billion yuan (HK$117.53 billion) in 2009. This is 4.4 per cent less than the 108.17 billion yuan average estimate of 26 analysts polled by Thomson Reuters, and its chairman poured cold water on speculation that the government might respond to rising crude oil prices with a fuel price hike. 'I have not heard that fuel prices will be raised by the end of this month as people in the market are speculating,' company chairman Jiang Jiemin said. 'I personally don't think the chances of a fuel hike are that high because the February consumer price index hit 2.7 per cent, which is close to Beijing's 3 per cent annual target. Now is not a good time to raise prices.' PetroChina has risen 36 per cent in Hong Kong in a year, to regain its position as the world's most valuable company from Exxon Mobil Corp, which fell 5.2 per cent. Jiang said the existing fuel pricing system, which is supposed to be adjusted whenever weighted average benchmark crude oil prices moved more than 4 per cent over a 22-day period, is 'too transparent'. This does not bode well for refiners' operations, which are negatively affected by activities of speculators. PetroChina's oil refining operation swung from an operating loss of 90.95 billion yuan to a profit of 12.32 billion yuan, thanks to lower crude oil prices and the implementation of a new fuel-pricing system that better matched domestic fuel price movements to those of international crude oil. This works well for refiners as long as crude prices stay below US$80 a barrel, above which price controls kick in and profit margins are squeezed. Jiang said PetroChina should remain profitable as long as international crude prices stayed around US$80 a barrel. Average selling prices fell 38.4 per cent to US$53.90 a barrel in 2009 from US$87.55 in the previous year, and its oil and gas production operating profit was pared to 105 billion yuan from 240.47 billion yuan, more than offsetting a rise in refining profit. This year, PetroChina plans to raise oil and gas output by 2.8 per cent to 1.23 billion barrels of oil equivalent (boe), of which oil production is targeted to increase 1.2 per cent to 853.7 million barrels and gas output to gain 6.7 per cent to 2.25 trillion cubic feet. Overseas oil and gas output is expected to continue to grow after rising 13 per cent to 104 million boe last year, accounting for 8.7 per cent of total output, up from 7.8 per cent in 2008. Jiang said the company's three oil production projects in Iraq will have annual total output of 90 million tonnes, without giving a time frame. However, two of the projects are service contracts, which analysts said only entitle the firm to a razor-thin profit margin. Refining throughput is targeted to rise 8.8 per cent to 122 million barrels this year. PetroChina has budgeted 293 billion yuan of capital expenditure to boost future production capacity, up 9.7 per cent from 266.8 billion yuan in 2008. A final dividend of 13 fen was proposed. The full-year payout is in line with its long-term policy of 45 per cent of net profit. Meanwhile, Jiang said PetroChina plans to sell its liquefied natural gas receiving terminal projects in Jiangsu and Liaoning provinces to listed sister firm CNPC (Hong Kong), which has recently been renamed Kunlun Gas. He did not elaborate.