Oil Giant Sinopec Profits Fall 8.7% as Refining Business Struggles
State oil giant China Petroleum & Chemical Corp., or Sinopec, posted a 8.7% drop in its net profit for 2019 to 57.6 billion yuan ($8.1 billion), its latest annual report shows.
The conglomerate’s refining business — including purchasing crude oil and processing it into petroleum products — recorded a 44.1 % decline in operating profit to 30.6 billion yuan, while its chemicals segment’s profit fell 36.5% to 17.1 billion yuan, according to its 2019 annual report, released Sunday.
Sinopec’s exploration and production business, however, managed to reverse a downward trend by earning 9.3 billion yuan last year, which the company attributed to an increase in natural gas sales and higher market prices.
“We expect international oil prices to fluctuate at a low level,” Sinopec said in the report. “Domestic demand for energy and chemical products will be relatively weak in the first half, but aggregate demand is expected to rapidly pick after the outbreak (ends).”
Sinopec has cut its capital spending budget by 2.5% to counter the fallout from the coronavirus and a depressed oil price. It budgeted a preliminary 143.4 billion yuan for 2020, with 42% going into the construction and capacity expansion of four oil and shale gas fields in China, as well as a natural gas pipeline and storage facilities. A total of 15% of the spending has been allocated to construction and renovation of refineries, while 22.5% will be used for natural gas construction projects.
One of China’s two other state-owned oil giants has adopted similar measures to soften the dual blows of low oil prices and low demand as people around the world are told to remain indoors to avoid spreading Covid-19. China National Offshore Oil Corp. pledged Wednesday to cut its spending and lower its output target for the year — without giving exact numbers — after oil prices plunged below the company’s breakeven price of $29.78 per barrel.
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