PetroChina bleeding on natural gas imports

PetroChina posts 900% profit drop in supplying natural gas to China.

State-owned PetroChina Company, Ltd., China’s dominant oil and gas producer, blames rising import costs for producing its lowest third-quarter profit in five years. It is being forced to import more natural gas every year for resale in the world’s largest energy market at below-market prices.

China’s insatiable appetite for gas is squeezing the company more than competitors, pushing it to seek cheaper imports from exporters such as Russia.

PetroChina’s nine-month operating profit at the gas and pipeline unit, which includes selling gas from domestic fields, plummeted 930% to US$142 million from US$2.1 billion year-on-year.

“Loss-making on gas is not likely to slow down for PetroChina, especially in the near term,” said Sonia Song, Hong Kong-based analyst at Nomura Holdings Inc.

She added it is unlikely the government will increase prices enough to return gas imports to profit. PetroChina must double gas imports over the next three years and continue selling at a loss if state-price controls remain,

Despite this, PetroChina’s total return including dividends to investors this year has been about 11.6%, beating the 4.5% average of the world’s 15 biggest oil companies.

China’s gas use will jump 56% to 5.6 quadrillion British thermal units in the four years through 2015 That’s about 10 fold the increase compared to U.S. demand.

PetroChina controls more than 80% of its China’s gas market. Imports are growing repidly and now account for about a third of China’s supply.