MOSCOW (MRC) -- 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, reported S&P Global with reference to company executives' statement.
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 USD12.11/b in 2019.
Executive director and president Duan Liangwei predicted the crude oil price would remain low in 2020.
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.
"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 (USD41.92 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.
As MRC wrote previously, PetroChina shut its Guangxi Petrochemical in southern Guangxi province on February 9, 2020, for scheduled 50-day maintenance. The maintenance should help the refinery to offset stock pressure after product demand slumped due to the coronavirus outbreak.
We also remind that Sichuan Petrochemical (part of PetroChina) undertook an emergency shutdown at its naphtha cracker in Sichuan province of China on July 11, 2018 owing to a gas leak at its natural gas supply pipeline. Further details on duration of the outage could not be ascertained. Located at Sichuan province of China, the cracker has an ethylene capacity of 800,000 mt/year.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim. At the same time, PP shipments to the Russian market were 192,760 tonnes in January-February 2020, down by 6% year on year. Homopolymer PP accounted for the main decrease in imports.
PetroChina Company Limited, is a Chinese oil and gas company and is the listed arm of state-owned China National Petroleum Corporation, headquartered in Dongcheng District, Beijing. It is China's biggest oil producer.