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Oil giant collective decline in refining profitability of the business

Date: 2015-07-23
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Recently, semi-annual report have been released of the three major oil companies, PetroChina, Sinopec and CNOOC were to produce an interim net profit rose "report card." Among them, the CNOOC net profit surged 109.6% to net profit growth of 29.4% of oil in second place, while Sinopec third, an increase of 6.7%.

Industry analysts pointed out that, throughout the interim results for the three oil giants, the biggest feature is due to the international oil prices, profits were mainly contributed by the exploration and mining sector, while the refining performance is almost the same time decreased.

Refinery profits shrinking dramatically

CITIC Securities (11.74, -0.17, -1.43%) analyst Yin Xiaodong, chief of the petrochemical industry, crude oil prices rose sharply during the first half, and three major oil and gas production company's rapid growth, profit growth is the main reason for the three companies.

Last year the global economy into a quagmire, as the market bearish prices, when oil in a 3-year low since the average price of about 50 U.S. dollars / barrel. In contrast, international oil prices during the first half of this year showed more substantial increases. In China, crude oil prices into line with international crude oil prices directly, and promote the three major growth for the company.

Exploration and exploitation of oil companies "pocketbook" contribution to the most obvious. Accordance with International Financial Reporting Standards, by the production of oil and gas prices and promote two-liter, in the petrochemical exploration and production segment realized an operating income 22.0 billion, an increase of 299.7%; in the first half of the oil sector operating profit 73.372 billion yuan, up 94.9 %.

And the dazzling performance of exploration and mining sector is very different, PetroChina and Sinopec have a larger degree of refining segment earnings decline.

As Asia's largest refiner, oil refining sector has always been the traditional strengths of Sinopec. But the first half of the announcements, refining segment realized an operating profit of RMB 5.7 billion, representing a decrease of 71.4%. At the same time, profits in the refining of oil, down nearly Qi Cheng, down 68.3%, operating profit was 54.6 billion yuan.

Overall competitiveness should be improved

Investment Advisor in the energy industry researcher Zhou Xiujie in the "China's Sankei Shimbun," an interview of this year, the domestic refining sector oil giant is the main reason for falling profits rise in international crude oil prices increased the cost of domestic oil refining companies, which reduces oil refining profit sector. As the price of oil is linked to international crude oil prices, currently China's dependence on foreign oil has more than 50% of the domestic needs of more than half the crude oil imported from abroad, high crude oil prices in the international context, the domestic refining sector under pressure from business inevitably .

Meanwhile, Zhou Xiujie said, domestic oil prices have actively integrate with the international oil prices, but still only part of the standards, is still in the state regulation being. International crude oil prices and domestic oil price fluctuations are inconsistent, inevitably affect the profitability of refining segment.

However, Xiamen University, China Center for Economic Research Lin Boqiang Energy had told the "China Sankei Shimbun" reporter, now refined oil pricing mechanism is in fact beneficial for the oil companies, the state will consider the reserved space for refinery profitability. In fact, it is the price of domestic refined oil pricing mechanism to implement the new, which makes the company the first half of last year, significantly improve the profitability of refining operations, reversed several years of losses.

Some analysts argue that the low level of technology, high production costs may be the most fundamental reason. It is understood that China's oil refining chemical technology than the international advanced level in the gap of 10 to 15 years, oil and chemical process not yet formed a set of technologies, the low level of oil refining enterprise technology, resulting in product cost is much higher than the advanced international level, the domestic product oil tons of oil refining fees are generally higher than that of the large foreign oil companies about 50%.

In the application of new technology and the production of high added business, the greater the gap of business. Have observers pointed out that nearly 80% of lead-free diesel oil imported. Because the lack of price competitiveness of oil products, new product development capability is weak and other factors, the market share of domestic oil products is declining. According to statistics, foreign oil products in the Chinese market share, the current refined oil, lubricating oil, liquefied gas 20%, respectively.

Not just refining sector, China Petroleum (10.29, -0.06, -0.58%), university professors Pangchang Wei pointed out that in the mining, exploration and other comprehensive level of the whole industrial chain, the Chinese oil companies are far behind the international oil companies.

It is understood that under normal circumstances, the cost of oil production should be 10 U.S. dollars / barrel. The high cost of China's crude oil production, better performance of Daqing oil field production costs up to 17 ~ 19 dollars / barrel. While Africa and the Middle East production costs only $ 3.73 / barrel. Saudi Arabia is the oil one of the lowest production cost per barrel for the l ~ 2 dollars.


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