Improved profits at China's state-owned oil majors are helping them meet Beijing's energy security demands. Third-quarter earnings show PetroChina and Sinopec benefiting from higher oil prices linked to Persian Gulf war. Upstream operations drove gains, while downstream businesses held up despite weak transport fuel demand.
Cnooc Ltd reports later Friday. The government outlined key tasks for energy security over the next decade. The three majors presented plans to raise oil and gas reserves and output.
Supply disruption threats are pushing companies from a defensive stance. A weak economy and fossil fuel transition had hurt the industry, especially Sinopec, the top refiner. China remains the world's biggest energy consumer, needing stockpiles after Middle East disruptions.
Local oil and gas is premium when trade choke-points like the Strait of Hormuz are vulnerable. China imports about 40% of its natural gas needs and 70% of oil overseas. PetroChina, the top producer, aims to maintain domestic exploration spending above 40 billion yuan ($6 billion) through 2030.
Petrochemicals have become more profitable as China runs down surplus. While domestic fuel margins remain shaky, Beijing allows export channels for better returns. Sinopec's export margins hit $65 a barrel versus $10-$25 domestic margins.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing