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Eric Ng

China's largest oil and gas producer will raise spending 25pc to 250b yuan as production from mature oil fields dwindles

China National Petroleum Corp (CNPC), the nation's largest oil and gas producer, will raise investment in production and distribution capacity by 25 per cent to 250 billion yuan this year, as it strives to offset dwindling output from mature oil fields and lift gas production.

CNPC, the parent company of Hong Kong and New York-listed PetroChina, aims to raise its natural gas output by 20 per cent this year, according to a report posted on the company's website quoting comments by president Jiang Jiemin to mainland media  on Friday.

Mr Jiang said the increase in investment from last year's 200 billion yuan was necessary to keep up with the mainland's energy demand and offset the 6 per cent to 8 per cent annual output decline of its mature fields.

He also attempted to deflect mainland media criticism that PetroChina had been slow to issue A shares and allow mainlanders to share in its huge profits.

'A share issue has been our wish and hope,' he was quoted as saying. 'As Asia's most profitable company, we ought to return to the A-share market to let mainland citizens share the fruit of our reform.

'We have always been studying the issue of A-share listing, but there is no timetable.'

CNPC had a net profit of 106.11 billion yuan in 2005, according to its website. PetroChina's audited net profit was 133.36 billion yuan for the same year.

Domestic oil output for CNPC was 106.6 million tonnes last year, little changed from 105.95 million tonnes in 2005.

Its Chinese gas production rose 21.35 per cent to 44.5 billion cubic metres. Gas sales volume rose 26.6 per cent to 36.6 bcm.

Oil output of overseas fields in which CNPC has invested surged  50 per cent to 54 million tonnes, while gas output of foreign fields rose 42 per cent to 5.7 bcm.

On an equity-accounting basis, the company booked 28 million tonnes of oil output and 3.5 bcm of gas output from overseas fields.

Of its 200 billion yuan investment in exploration, production, refining and pipeline construction last year, subsidiary PetroChina took the lion's share. It budgeted 166 billion yuan of spending, up from 149 billion yuan in 2005.

In answer to charges that Beijing had failed to pass on sharp falls in crude oil prices to customers, Mr Jiang said domestic refined product prices remained below international levels since previous price  rises had not kept pace with increases overseas.

He said the price of  petrol leaving domestic  last month was set at 5,200 yuan per tonne, compared with 5,509 yuan in regional oil trading hub Singapore; the price of China-produced diesel was 4,570 yuan per tonne as against  5,352 yuan in Singapore.

China Petroleum & Chemical Corp, Asia's largest oil refiner, said its refining operations had returned to the black in October with a profit margin of 62 US cents per barrel of oil processed. Crude oil prices have fallen some 10 per cent since then, although domestic refined prices have not changed.



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China National Petroleum Corporation (CNPC)