PetroChina may lose RMB50 billion

PetroChina President Zhou Jiping said that the company expects to have a net refining loss of RMB50 billion (US$7.8 billion) this year, compared to last year’s profit of RMB7.85 billion (US$1.2 billion) because of government-mandated fuel pricing. In October, the Chinese government brought the ceiling on gasoline prices down by 3.2% and diesel fuel prices by 3.5%. The price cuts were caused by falling global crude oil prices, but the increase in international prices were not fully reflected earlier in the year because the Chinese government held prices down as a way to curb inflation. Zhou said that the government could continue setting fuel price ceilings as long as inflation is a concern but he emphasized that the government should consider granting the companies the freedom to set their own prices. Zhou revealed that a revised resource tax on oil and gas could cost PetroChina RMB29 billion (US$ 4.5 billion) annually, up from RMB4 billion (US$627.3 million) under the old system. Last June, China introduced a 5% resource tax in the Xinjiang Uyghur Autonomous Region and later extended it to 12 provinces and regions in the west. A 5-10% resource tax took effect nationwide last November 1. Zhou also said that PetroChina has asked the government to raise the threshold for a special oil income levy, which is also known as windfall profit tax. The tax applies to revenues above US$40 for a barrel of oil. He said, “The government is studying and resolving the problem.” He added, “If the threshold can be raised, it will be good news for the company.” (October 20, 2011)