PetroChina to set 2020 capex, output in line with oil price movements

Singapore — Chinese integrated oil giant PetroChina will set its capital expenditure and production in line with oil price movements in 2020 to meet the challenges of poor demand caused by the coronavirus pandemic and low crude prices, company executives said late Thursday.

This is the first time since at least since 2015 that PetroChina has not disclosed precise capex and output targets for the ongoing year during its annual financial result briefing, suggesting the company prefers more operational flexibility amid an unexpectedly volatile market environment.

PetroChina is the listed arm of China National Petroleum Corporation, China's top oil and gas company by assets.

It produced 4.28 million boe/d of oil and gas in 2019.

"The crude oil price has slumped since February, dampening our Exploration and Production segment mostly, so that we will focus more on efficiency and will balance among profit, long-term versus short-term development and the effort to secure the nation's energy supply to plan our upstream production," vice president Li Luguang said during the 2019 results call.

PetroChina did not disclose its all-in cost for upstream production but said its lifting cost edged down 1.6% year on year to $12.11/b in 2019.

Executive director and president Duan Liangwei predicted the crude oil price would remain low in 2020.

Refining

Duan said the coronavirus pandemic would not only have a big impact on oil prices, but also PetroChina's production and operations as both oil product prices and consumption have dropped in the domestic market, Duan said.

"As a result, PetroChina has slashed throughput since February while crude and product inventories went up," Duan said, adding that the company's refineries are gradually raising utilization rates as China gets the coronavirus under control.

S&P Global Platts survey on 60% of PetroChina's refining capacity showed a utilization rate of 64% in March and 66% in February.

PetroChina in 2019 lifted its crude throughput by 4.1% year on year to 1.228 billion barrels, accounting for 89% of its total crude oil primary distillation capacity of 3.78 million b/d.

Capex

"The external environment has undergone lots of significant changes. Because of these changes we have to prepare a capex plan in relation to the changes in oil prices," Chief Financial Officer Chai Shouping said.

"The general principles of the capex plan are to spend no more than our income, concentrate investment on key projects and try to achieve free cash flow."

PetroChina spent Yuan 296.8 billion ($41.92 billion) in 2019, up 12.5% year on year, Chai said, adding that 77.54% of the budget went on the Exploration and Production segment.

PetroChina's operational results

* Oil, gas outputs from both domestic and overseas

Source: company report

PetroChina's domestic production

(Unit: million mt)

* conversion factor: 1 cubic meter = 35.31 cubic feet

** conversion factor: 1 mt = 7.389 barrels

^ Divide PetroChina's output by China's total production

Source: company report, National Bureau of Statistics

PetroChina's oil product sales volume

(Unit: million mt)

Source: company report