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PetroChina hit by refining loss

By Wan Zhihong (China Daily)
Updated: 2009-03-26 07:48

Traffic moves past a PetroChina gas station in Hong Kong. [Agencies]

PetroChina Co, the country's largest oil and gas producer, yesterday said its 2008 net profit fell 22 percent because of oil price volatility and widening refining losses.

Related readings:  PetroChina's net profit for 2008 down 22%  PetroChina earnings rise 30%  PetroChina to increase investment in oil, gas  PetroChina H1 net profit down 34.5%

It is the company's first drop in full-year profit since 2001. PetroChina is currently the world's second largest oil company by market value after the US-based Exxon Mobil.

The Beijing-based PetroChina's net profit last year was 114 billion yuan according to international financial reporting standards, it said in a statement to the Hong Kong bourse yesterday.

The company's turnover in 2008 reached 1,071 billion yuan, an increase of 28.1 percent from a year ago.

"PetroChina's profits were negatively impacted to a certain extent as a result of the global financial crisis and State policy factors such as taxation and pricing. However, the company maintains a steady, orderly and healthy growth momentum," said Zhou Jiping, vice-chairman and president of PetroChina.

Last year, PetroChina's refining and marketing segment recorded a loss of 82.97 billion yuan, due to "domestic price controls and shrinking sales of refined products towards the end of 2008", the company said.

The fluctuating oil price had the biggest effect on PetroChina's business performance last year, and other factors such as windfall taxes also played a role, said Liu Gu, energy analyst with Guotai Jun'an Securities in Shenzhen.

However, this year, the company can expect better revenues due to a rebound in domestic demand and relatively stable oil prices, she said.

The stimulus package for the petrochemical industry will also give the company a boost, she said.

China's two other top oil companies, Sinopec and CNOOC, have not released their 2008 annual reports yet. China Petroleum and Chemical Industry Association (CPCIA) said earlier that these two companies, along with PetroChina, are expected to make combined profits of 222.8 billion yuan in 2008, a decrease of 31.3 percent from a year earlier.

Sinopec, which has the most oil refineries in China, said in January that the company's net profit for 2008 would drop by over 50 percent from a year earlier.

High oil prices in the first half of 2008 and weak domestic demand for petrochemical products since October are two reasons why oil companies performed badly, said Lin Boqiang, energy professor with Xiamen University.

But the situation will be better this year, he said.

CPCIA had said earlier that China's petrochemical industry had seen some recovery in February. Total turnover of the sector was 394.5 billion yuan, an increase of 7.4 percent from January this year.

The National Development and Reform Commission, China's top economic planning body, on Tuesday announced a hike in the price of gasoline by 290 yuan a ton and diesel by 180 yuan a ton.

Analysts said PetroChina would benefit from the new fuel pricing system.