PetroChina 1Q profit falls 31.5 percent on cost controls

BEIJING—PetroChina Ltd., China's biggest oil company, said Monday its first-quarter profit plunged 31.5 percent and it cited government controls that bar it from passing on record crude costs to consumers.

Profit was 28.8 billion yuan ($4.1 billion) for the three months ending March 31, according to PetroChina, the publicly traded arm of government-owned China National Petroleum Corp.

At a time when global oil giants are reporting record profits, Chinese producers are suffering heavy losses blamed on government controls that have frozen retail gasoline and diesel prices while suppliers must pay rising market prices for crude.

PetroChina said first-quarter revenue jumped 41.9 percent over the same period of 2007 to 259 billion yuan ($37 billion). Sales of gasoline, diesel and kerosene rose 18.5 percent, driven by China's economic boom and increased car ownership.

Also Monday, Sinopec said its first-quarter profit fell 69 percent due to price controls. Sinopec, also known as China Petroleum & Chemical Corp., has been hit harder because it is Asia's biggest refiner by volume, while PetroChina produces more oil than it refines and has benefited from rising crude prices.

PetroChina gave no details of its refining losses but said earlier that unit has lost money since last year.

Both companies said last week the government would pay them subsidies to cover refining losses -- an indication that Beijing has no plans to ease price controls in the near future.

Sinopec said it received a 7.4 billion yuan ($1 billion) government subsidy to cover refining losses in the first quarter.

Areas in China's fast-growing south have suffered gasoline and diesel shortages that disrupted trucking in key export areas. Suppliers blamed the price controls, which they said prompted refiners to cut production to avoid losses. Beijing ordered PetroChina and Sinopec to import refined fuel to fill the gap.

Beijing froze gasoline and diesel prices in September as part of efforts to contain rising inflation. It raised prices by about 10 percent in November to curb surging demand but has rejected appeals by the oil companies for more increases.

PetroChina became the world's most valuable company in November when its market capitalization briefly rose above $1 trillion -- more than double No. 2 Exxon Mobil Corp.'s $488 billion at that time.

PetroChina is the world's most valuable company. Exxon Mobil, however, is more profitable, with total 2007 earnings of $40.6 billion.

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PetroChina Ltd.: http://www.petrochina.com.cn

Sinopec: http://english.sinopec.com/

Sinopec (in Chinese): http://www.sinopec.com.cn