PetroChina, China’s largest oil and gas producer, has recorded a one-off gain of 24.53 billion yuan ($3.68 billion; €3.26 billion) from the sale of a 50 percent stake in a Central Asia gas pipeline, about 9 billion yuan more than what it expected to pocket last year.
Last November, PetroChina said it would sell half of its Trans-Asia Gas Pipeline subsidiary to a unit of China Reform Holdings Corporation for about $15-$15.5 billion yuan. China Reform is an asset management unit owned by the government-run Assets Supervision and Administration Commission of the State Council.
During a press briefing on Thursday, Dongjin Wang, vice-chairman and president of PetroChina, said that the transaction was closed this April. PetroChina executives didn’t elaborate further on the bump in sale proceeds.
The company plans to inject two new pipeline assets, including the third phase of the West-East Gas Pipeline and China-Russia East Route Gas Project, into a platform subsidiary it set up last December, according to Wang. With 13 Chinese institutional investors holding a combined share of about 28 percent and PetroChina holding the rest, the platform company now owns three pipeline businesses across China.
China Petroleum & Chemical Corporation, PetroChina’s arch-rival better known as Sinopec, has also decided to sell a 50 percent stake in a 2,200km gas pipeline to raise fund for new projects.
The moves by the two giants have been considered as a signal that the Chinese government has shelved previous plans to spin gas pipelines out of the two companies.
PetroChina has been struggling to swing back into profit since the collapse of global crude oil prices. In the first half of 2016, the group’s exploration and production business recorded a $2.42 billion yuan operating loss, compared with a profit of $32.9 billion yuan in the first half of 2015, according to its interim results.
In addition to shutting down some of the loss-making production facilities, PetroChina thought to weather low oil prices by extending its distribution network to end users as well as building service stations and branch lines of natural gas. After allocating resources to other non-core businesses, the company saw a fourfold increase in profits from its refining businesses, from $5.55 billion yuan last year to $21.4 billion yuan this year.
The company may tweak its approach to mitigate changes in oil prices but “oil and gas exploration has been and will continue to be the core business of PetroChina,” stressed Wang, adding that a recovery to $60-80 per barrel could see the company rebound.
PetroChina aims to increase its oil and gas production to more than 300 million tons equivalent by 2030, with half of that coming from overseas projects. By then, gas could account for half of the total output, Wang said.