Sinopec posts fall in profits on weak domestic gas and petchem markets

Friday, 31 March 2023
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China Petroleum and Chemical Corp. (Sinopec), one of the world’s top 10 oil and gas companies and a significant LNG importer to back up its refining and petrochemical activities, reported a 21 percent increase in annual
revenues but net profits dropped by almost the same amount on weak domestic demand. 

Sinopec, an importer of LNG cargoes from Queensland in Australia and from nations such as the US and Qatar, said annual revenues soared to 3.31 trillion Chinese yuan ($483 billion) an increase of 21 percent from the 2.74 trillion yuan ($399bn) logged in 2021.

However, net profits excluding extraordinary items fell by 20.8 percent to 57.18 billion yuan ($8.32bn) from 72.22 billion yuan ($11.24bn) in the previous year as China's energy sector was affected by a fall in domestic sales and higher import prices.

Net cash flow from operating activities tumbled by 48.3 percent to 116.2 billion yuan ($16.9Bln) from 225.1 billion yuan ($32.7bn) in 2021. Sinopec explained that while Chinese gross domestic product grew by 3 percent year-on-year international oil prices retreated from a major rally and saw wide fluctuations, though ended the year with big increases.

But the Chinese major described demand for petrochemical products and natural gas as “weak” in the domestic market. Sinopec said that the jump in revenues was mainly attributed to the increase of both realised prices and the sales volume of crude oil and natural gas.

Sales volumes

“In 2022, the segment sold 34.28 million tonnes of crude oil, representing an increase of 0.6 percent over 2021. Natural gas sales volume came to 31.9 billion cubic metres (Bcm), representing an increase of 3.3 percent over 2021,” Sinopec said, explaining: “Regasified LNG sales volumes were 21.5 Bcm, representing an increase of 12.5 percent over 2021.”

“LNG sales volumes came to 1.42 million tonnes, representing a decrease of 77.0 percent over 2021, as a result of flexible adjustment of sales strategy based on purchase prices and market conditions,” it added, specifying the procurement cost of LNG had increased by 12.3 billion yuan ($1.8Bln) year-on-year.

Sinopec's average gas price was 1,816 yuan ($264) per thousand cubic metres, up 13.1 percent.

Regasified LNG prices were up 66.8 percent to 3,535 yuan ($514) per thousand cubic metres.

Output increases

Natural gas production increased by 4.1 percent to 1,248 billion cubic feet from 1,199 Bcf in the previous year. Based on national statistics, China’s domestic consumption of natural gas reached 366.3 billion cubic metres in 2022 which was down by 1.7 percent year-on-year.

After the weak performance in 2022, Sinopec was more optimistic for 2023 with a fast-improving demand landscape. “China’s economy was now expected to recover and demand for natural gas, refined oil products and petrochemical products is expected to grow rapidly,” stated Sinopec in its outlook, forecasting: “International oil prices are expected to fluctuate at mid-to-high levels."

Sinopec said its capital expenditure plan for 2023 is to spend 165.8 billion yuan ($24.1Bln), including 74.4 billion yuan in the exploration and production segment, mainly on crude production capacity building in Jiyang and Tahe, natural gas production capacity building in west Sichuan and oil and gas storage and transportation facilities. 

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