PetroChina refineries continue suffering losses

PetroChina, Asia's largest oil and gas producer by market value, suffered losses of more than 50 billion yuan ($8 billion) from processing crude at its refining department last year and the loss is "still widening", the company's chairman said on Monday.

"That loss was partly due to China's fuel pricing system under which domestic pump rates often lagged rises in crudes," Jiang Jiemin was quoted by Bloomberg as saying yesterday.

"Higher costs for imported crude oil outpaced the gains in prices of our products," company spokesperson Li Runsheng told the Global Times yesterday.

"Our profits from the dominant upstream oil production business have outweighed losses in the refining business," Li said, without giving last year's net profit figures.

However, the company's third quarter profit in 2011 stood at 37.4 billion yuan compared to its refining loss of 41.5 billion yuan in the same period, according to company figures. The figure of the fourth quarter is not available yet.

The company does not have a plan to raise the import volume of Russian crude oil via the East Siberia-Pacific Ocean (ESPO) pipeline, Jiang noted.

PetroChina shares dropped 2.7 percent to close at HK$11.44 per share in Hong Kong trading yesterday, the biggest drop since December 15 last year. The company's A shares also slumped 1.13 percent to close at 10.47 yuan on the Shanghai Stock Exchange yesterday.

"PetroChina's refiners struggled because their scale of expansion is so limited that they are unable to conduct a comprehensive technological upgrade, which eventually lowers the refining efficiency and increases processing costs," said Liu Yijung, a professor at China University of Petroleum.

The State-owned company has posted losses from producing gasoline and diesel as the Chinese government's controls on fuel prices prevents them from passing on higher crude costs to consumers, analysts said.

To help narrow their losses, the National Development and Reform Commission, China's top economic planner, increased the cost of gasoline and diesel for the first time this year in February, indicating that it may let retail fuel rates track global crude prices more closely after allowing an increase of as much as 4 percent.

"The decision is a sign China is willing to let retail fuel prices rise further, but there's no window to implement the new pricing mechanism yet," Lin Boqiang, an expert of Energy Economics said.