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State-owned China Petroleum and Chemical Corp, or Sinopec Corp, posted modest gains in its 2013 upstream and downstream oil and gas production and has pledged to reduce its capital expenditure this year.

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In its annual financial results released late Sunday, the company said it increased its total upstream output last year by 3.5% year on year to 442.82 million barrels of oil equivalent.

It was a slight adjustment from the 442.38 million boe of oil and gas output announced on January 27 when it released its operational statistics for 2013.

Sinopec Corp. is the listed subsidiary of Chinese refining giant Sinopec Group, which owns 73.96% of the company.


Natural gas production for the listed unit jumped 10.4% year on year in 2013 to 660.18 Bcf, unchanged from the January report, although crude oil output edged up 1.3% year on year to 332.54 million barrels, slightly higher than the 332.35 million barrels reported earlier.

Sinopec Corp.'s domestic crude output edged up 1.4% year on year to 310.84 million barrels, but overseas crude production rose 0.1% year on year to 21.7 million barrels last year.

In January, the company announced a 0.8% year-on-year contraction in overseas crude output to 21.51 million barrels.

This year, Sinopec Corp. said it plans to produce 363.76 million barrels of crude.

The company reported net profit of Yuan 66.1 billion ($10.6 billion) last year, up 3.5% from 2012, while total revenue increased 3.4% year on year to Yuan 2.88 trillion.

Turnover in the upstream segment jumped 13.2% year on year last year to Yuan 60.8 billion, mainly due to higher crude sales volumes and an increase in both sales prices and sales volumes of natural gas.

Sinopec Corp.'s realized crude prices fell 7.1% year on year to Yuan 4,253/mt, although average gas prices rose 4.3% year on year to Yuan 1,336/thousand cu m.

The company said it added 3.13 million barrels to domestic proved reserves last year, achieving an oil reserve replacement rate of more than 100%.

HIGHER GAINS IN REFINERY THROUGHPUT

Sinopec Corp.'s refinery throughput was unchanged from the previous announcement, rising 4.8% year on year to 231.95 million mt in 2013. This translated into an average 4.67 million b/d, using the company's conversion factor for crude throughput at 1 mt to 7.35 barrels of crude.

The growth in refinery throughput last year accelerated from the 1.8% year-on-year expansion seen in 2012, although the company did not meet its 2013 crude processing target of 238 million mt announced in March last year.

The target for refining throughput this year has been set at 244 million mt of crude, Sinopec Corp. said.

Its total gasoline production rose 12.4% year on year in 2013 to 45.56 million mt, while jet/kerosene output jumped 16.1% to 17.43 million mt. Gasoil production however, was flat at 77.4 million mt last year, compared with 77.39 million mt in 2012.

Following the Chinese government's introduction a year ago of the current oil product pricing mechanism -- which automatically adjusts prices every 10 days in line with international crude price movements -- Sinopec Corp.'s refining segment improved significantly, posting operating profit of Yuan 8.6 billion last year, versus a Yuan 11.4 billion loss in 2012.

In the marketing and distribution segment, Sinopec Corp.'s total sales volumes of oil products rose 4% year on year to 179.99 million mt, with domestic sales up 4% year on year to 165.42 million mt. Total operating profit in the segment slid 17.6% year on year to Yuan 35.1 billion.

Sinopec Corp., which operates 30,523 service stations, announced last month that it would divest up to a third of its marketing division to private and social capital in a bid to fulfil the government's aim of promoting mixed ownership in state-owned resources.

Analysts said at the time that this would allow the company to focus more of its capital expenditure on investments in the upstream. The move also marked a shift for Chinese state-owned oil companies toward quality over quantity, with more emphasis placed on cost controls, asset-light strategies and an increased focus on shareholder returns.

CAPITAL SPENDING FALLS

Sinopec Corp. said its total capital expenditure last year totaled Yuan 168.6 billion, 7% less than originally budgeted at the start of the year and stable from total capex of Yuan 169 billion in 2012.

Its total budgeted expenditure this year is set to fall further to Yuan 161.6 billion, with 54.4% of the budget to be poured into its exploration and production segment, while the refining segment will account for 15.8% of total spending.

This mirrors rival PetroChina, which announced on Thursday a 7% year-on-year reduction in its 2014 capex to Yuan 296.5 billion as management said the company would now focus on quality over quantity in terms of spending, with more focus on efficiency and returns on investments.

--Song Yen Ling, yenling.song@platts.com
--Edited by Meghan Gordon, meghan.gordon@platts.com