PetroChina's Jan-Sep natural gas profit rises 25% on year to $2.7 bil

PetroChina's operating profit from its natural gas business rose around 24.5% year on year to Yuan 19.48 billion ($2.66 billion) in the first nine months of 2023, helped by the ongoing market-based reforms of natural gas pricing in China, the national oil company as well as the country's largest natural gas supplier, said at its Jan-Sept earnings conference Oct. 31.

"China has been actively promoting the market-based reforms of natural gas pricing, allowing end user prices to better reflect market dynamics," said Huang Yongzhang, Executive Director and President of PetroChina in the conference.

The company's total natural gas sales rose 1.9% year on year to 193.13 Bcm in the first three quarters of 2023, with domestic gas sales rising 5.5% year on year to 155.36 Bcm, allowing the company to maintain a market share of above 60% in China, Huang noted.

Higher sales were helped by PetroChina's total marketable natural gas production, which was 3,656.6 Bcf over January-September, rising 6.1% year on year. Out of this, the company's domestic gas production was 3,513.7 Bcf, up 6.6% year on year, while overseas gas production was 142.9 Bcf, down 4% year on year, according to data from PetroChina.

However, PetroChina's natural gas import business still suffered losses in the first three quarters, Mu Xiuping, General Manager of PetroChina's Finance Department said, noting that the company imported around 67.4 Bcm of natural gas, with a loss of about Yuan 10 billion during this period.

PetroChina's imported natural gas comprises long-term contract cargoes and spot LNG cargoes, out of which the oil-linked term contracts reflect crude oil price movements with a lag of several months, according to Mu.

To minimize the trading losses of imported natural gas, PetroChina has taken measures on both the procurement side and the sales side, to reduce the cost of imported gas as well as raising its sales prices, Mu added.

PetroChina's domestic natural gas ex-well sales price was about Yuan 1.84/cubic meters, a 1.3% year-on-year increase, and the end-user sales price was around Yuan 2.18/cu m, up 1.1%, said Zhao Tangyu, deputy GM of PetroChina's Production and Operation Management Department.

"Our natural gas sales prices in the fourth quarter will follow the relevant terms in annual contracts we signed with users at the beginning of this year," Zhao said, and noting that the supplies contain both regulated gas and unregulated gas, while the sales price will follow a bit of adjustments with the off season and heating season changes.

China has a complicated downstream gas pricing mechanism, under which the prices of imported LNG, offshore natural gas, unconventional gas, imported pipeline gas under projects launched since 2015, and the city-gate gas prices in a few provinces are not regulated, while those of onshore natural gas and imported pipeline gas under projects launched before end-2014 are still regulated.

"In addition to taking into account the cost of imported gas and some government policies and requirements on price, we in principle formulate gas sales strategies and prices with the goal of maximizing the benefits of natural gas business," Zhao added.

Regarding the development plan of natural gas business, PetroChina will actively acquire high-quality overseas oil and gas projects, continue to optimize asset and natural gas sales structure, as well as optimizing business layout and regional layout, President Huang Yongzhang said.

In addition, the company will deepen the international trade business, participate in global oil and gas trade, strengthen market-oriented and standardized operations, and continuously improve the trading system, Huang added.