PetroChina to seek price talks with gas suppliers as coronavirus hits

A view of the PetroChina (CNPC) liquefied natural gas (LNG) import terminal on September 22, 2016 in Rudong, China.

Feature China | Barcroft Media via Getty Images

PetroChina, China's top natural gas importer, will seek to renegotiate prices with global suppliers to control costs and curb losses at its gas import business, senior executives said on Thursday.

The impact of the novel coronavirus has been devastating for energy prices as measures to contain it have destroyed demand, while supplies have swollen.

Earlier this month, PetroChina cancelled some gas contracts with suppliers — including of piped gas from central Asia and liquefied natural gas from Qatar and Australia.

“Our gas import costs will trend lower with falling oil prices, but we're not going to pin hope on that to cut losses,” Lin Xiao, a vice president at PetroChina, said during the group's annual earnings briefing on Thursday.

“We'll actively engage in price renegotiations…and keep optimising the pace in imports and adjust the import volume where contracts allow.”

PetroChina is also striving for a deal with China's newly-established national pipeline group on the transfer of pipeline assets.

Lin said no agreement had yet been reached.

PetroChina, also China's second-largest refiner, cut refinery operations significantly in February after China became the first country to suffer from the outbreak of the conoronavirus.

Chinese production has started to pick up this month as efforts to contain the virus succeeded, PetroChina said.

But now the virus has spread to the rest of the world, energy companies across the world are reviewing costs.

PetroChina said it would “dynamically optimise” and adjust spending this year from an earlier planned budget of 295 billion yuan ($41.66 billion). It did not give a new target.

The contrast with last year is stark. PetroChina raised spending to a near-record level of 297 billion yuan in response to Beijing's call to boost domestic oil and gas supply security.

So far this year, the company's Hong Kong-listed shares have fallen by 35%, compared with an 18% fall in the broader Hang Seng Index.

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PetroChina on Thursday reported a 13.9% fall in 2019 net profit at 45.68 billion yuan.

Its natural gas import business recorded a 30.71 billion yuan net loss last year, 5.803 billion yuan deeper than the previous year's loss because of slower demand growth at home and as import costs exceeded domestic rates.

The state energy group said it expects to maintain steady domestic oil production and to speed up natural gas development, including new shale gas discoveries in the southwest Sichuan basin.

Its total crude oil output rose 2.1% last year to 909 million barrels and gas increased by 8.3% to 3.91 trillion cubic feet.

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