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PetroChina Chairman Says Refining Loss Larger Than Expected

PetroChina Co. storage tanks stand on Jurong Island in Singapore. Photographer: Munshi Ahmed/Bloomberg
PetroChina Co. storage tanks stand on Jurong Island in Singapore. Photographer: Munshi Ahmed/Bloomberg

PetroChina Co., the country’s second-biggest refiner, said losses from processing crude last year were larger than expected by the company as oil prices rose.

“Losses are widening,” Chairman Jiang Jiemin said in Beijing today. “We can’t see a turnaround in the situation. It’s larger” than the 50 billion yuan ($7.9 billion) loss expected by the company, he said.

Refiners have posted losses from making gasoline and diesel as government controls on fuel prices prevent them from passing on higher crude costs to consumers. To help narrow their losses, China is planning a new system that will allow retail fuel prices to track global crude costs more closely.

“There’s no window to implement the new pricing mechanism yet,” Jiang told reporters at the Great Hall of the People during the opening of the country’s legislature.

China, which controls fuel prices to curb inflation, introduced a pricing system in December 2008 that allows retail fuel prices to be adjusted when the moving average of a basket of three crude varieties changes more than 4 percent over 22 working days.

The NDRC, the country’s top economic planner, increased the cost of gasoline and diesel for the first time in February since July last year. Inflation in the world’s fastest-growing major economy slowed to 4.5 percent in January from 6.5 percent in July. Crude rose 8.2 percent in New York last year.

Russian Gas

PetroChina dropped 2.7 percent to HK$11.44 in Hong Kong trading as of the midday break, the most since Dec. 15. The stock has risen 5 percent in the past year, compared with the 8.6 percent decline in the benchmark Hang Seng Index.

Negotiations with Russia on natural-gas imports are still ongoing, Jiang said.

“All the basic conditions have been agreed upon, what’s left is pricing,” he said. “Differences in price expectations are quite big.”

Russia plans to sign supply deals with India and China this year as it seeks to win customers outside of Europe, where demand is waning. OAO Gazprom “optimistically expects” to cut a deal with China this year, though pricing is still an issue, Deputy Chairman Alexander Medvedev said on Feb. 16.

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