PetroChina shows no interest in taking discounted Russian oil, gas: Executives

The state-owned oil giant PetroChina is not interested in taking discounted Russian oil and gas cargoes, but sticks to the producers' term supplies, CFO Chai Shouping said during the company's first quarter result conference call on May 6.

Meanwhile, PetroChina's settlements against the Russian goods were impacted to a certain extent from usual which were settled in US dollar or EURO, due to sanctions and some other factors, Chai said.

But generally, the ongoing long-term contracts with Russia are proceeding and operating as usual, Chai add.

PetroChina's parent company CNPC has long-term agreements with Russia's Rosneft, Transneft, Gazprom and Arctic LNG 2 to import crude oil, natural gas or LNG from Russia. CNPC has resold, and will for the foreseeable future resell, all or a substantial portion of the imported crude oil under the crude oil agreements to the company, its file to US Securities and Exchange Commission showed on April 29.

The company has also imported natural gas via pipeline from Gazprom, and LNG from a subsidiary of Russia's OAO Yamal LNG.

According to the file, the share of revenue derived from Russia-related operations in PetroChina's total revenue was 4.5% in 2021.

With the term deals, CNPC agreed to import 800,000 b/d of pipeline crude from Russia, which is estimated to account for about 40% of China's total crude inflow from the non-OPEC producer, S&P Global Commodity Insights' data showed.

Due to the Russia-Ukraine war, spot Russian ESPO's differential against Dubai has flipped to negative territory since March 4 on FOB Kozmino basis and is assessed at a discount of $23/b on May 6, S&P Global Commodity Insights Platts' assessment showed. While the discount for a Suezmax cargo of Urals against Dated Brent stay at a deep level of $36.615/b on an FOB Novorossiisk basis May 5.

Oil product stock, demand

In the refining sector, PetroChina's "oil product inventory is at a rather high level comparing with that of the beginning of 2022," senior vice president Ren Lixin said.

Tight movement controls against the recent wave of COVID-19 have dampened domestic oil product demand.

PetroChina slightly cut its refining utilization rate to 74% in April from 75% in the previous month to offset high inventory.

Ren expected the stock level would go down when economic activities recover from COVD-19 resurgence.

"For the entire 2022, China's economy growth will be maintained in a very appropriate range. We expect oil product demand to see a growth from last year," said Wang Hua, a finance director of PetroChina.

Wang added oil product demand in Q1 was flat to slightly higher than the same period of last year, boosted by gasoil but pulled down by jet fuel.

S&P Global's Platts Analytics estimated that China's oil demand would fall 6% year on year in Q2 and said that it is uncertain whether the reduction in Q2 will be compensated by recovery in H2 if Beijing continues with its zero-COVID strategy.

Gas sales

PetroChina sold 60.6 billion cubic meters of natural gas in the domestic market in the first quarter of 2022, up 10.9% year on year, the company's senior executive said.

The growth was lower than that of 14.6% seen in the same period of last year, the company's historical data showed, but it was much high than a rise of 0.5% for the total natural gas consumption in China in Q1 2022, according to the senior executive.

PetroChina imported 21.2 Bcm of natural gas, comprising pipeline gas and LNG, in the first three months of 2022, with a net profit of Yuan 3.47 billion, or Yuan 0.162/cu, Chai said.

The volume was up by 2.3 Bcm or 12.2% from 18.9 Bcm PetroChina imported in the same period of last year, S&P Global Commodity Insights' calculations based on the company's historical data showed.