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Energy Giants Plan to Increase Output
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After seeing profits surge in 2006, China's top three oil and gas suppliers are planning to increase production to meet mounting domestic demand.


"I can assure you that the huge profit we collected last year and in the years before will be reinvested in exploration and production, to pump enough oil and gas for local consumption," Jiang Jiemin, vice-chairman and president of China National Petroleum Corp (CNPC)'s listed arm PetroChina said on Friday.


"We will not spend the money elsewhere. In fact, we plan to inject around 250 billion more yuan into oil and gas production and refining this year."


CNPC is China's largest oil and gas producer, with sales hitting 800 billion yuan last year.


Thanks to the surging global oil price and measures to trim costs, China's leading oil producers' upstream business boasted high profits in 2006. PetroChina's profit for 2006 reached 185 billion yuan, with offshore oil company CNOOC's net income being 32.8 billion yuan, according to the heads of the two companies.


Wang Tianpu, president of Sinopec Group's overseas-listed unit Sinopec, did not release last year's profit, only revealing that the firm's industrial output hit 100 billion yuan in 2006.


PetroChina's crude oil output amounted to 106.6 million tons last year. With more investment for this year, Jiang is confident of more than meeting local demand.


On gas supply, Jiang is also upbeat about bringing more natural gas from Russia, saying the price is the only obstacle to a final agreement. The PetroChina head's target is to import 68 billion cubic meters (bcm) of gas from Russia every year.


"Negotiations are still going on with two pipelines East and West on the agenda. I am confident positive results will arise from the negotiation," said Jiang.


Media reports implied last year that CNPC was close to sealing a deal with Moscow-based Gazprom to build two pipelines to transport up to 68 bcm gas from Russia to China annually. The western line, from Russia's West Siberia to China's Xinjiang Uygur Autonomous Region would reportedly connect with China's West-East Gas Pipeline.


The West-East Gas Pipeline, put into commercial operation at the end of 2004, pipes natural gas from resource-rich western China to the energy-thirsty east.


With ambitious production plans, CNPC has expressed its desire to list in the mainland stock market. "As Asia's most profitable listed company, we hope to list on the A-shares market. The move is also in line with our interests in the long run, since the bulk of our business is in China and we need local support," said Jiang.


Sinopec's plan


Sinopec, Asia's largest refiner, also expects to extract more oil and gas next year by increasing investment in upstream operations.


The move is designed to meet rising domestic energy demand and to cover losses from oil refining.


The efforts to strengthen its upstream operations also involve overseas exploration and production projects, and breakthroughs are expected in overseas markets, Chen Tonghai, chairman of Sinopec Group, was quoted by Shanghai Securities Journal saying on Thursday.


"Our overseas exploration operations are expected to produce, first of all, more resources and secondly, high profits.


"The Middle East, South America, Africa and Central Asia are our priorities overseas," Sinopec President Wang said.


He said collaboration is needed between the three energy giants, CNPC, Sinopec Group and CNOOC, to explore more overseas oil and gas markets.


Sinopec Group said on its website it would produce 1.9 percent more crude oil and 11 percent more gas this year to meet the rising energy demand.


CNOOC's Iranian talks


China National Offshore Oil Corp, known as CNOOC, confirmed on Friday that it was in intense negotiations with its Iranian counterpart, hoping to tap a gigantic gas field in Iran.


CNOOC Chairman Fu Chengyu refused to elaborate on the potential deal, only releasing exclusively to China Daily that most details reported so far, such as investment figures, are incorrect.


According to Iran Daily, the National Iranian Oil Company and CNOOC penned a memorandum of understanding on the exploration and liquefaction of the North Pars gas field late last year.


As China's top offshore oil and gas producer, CNOOC hopes to ship up to 25 million tons of liquefied natural gas (LNG) to China annually by 2010.


Fu said he was optimistic about the goal thanks to the company's local and overseas exploration efforts. "We believe our accumulated efforts will eventually pay off," he said.


China is committed to raising the ratio of natural gas in its total energy consumption from the current 3 to 5 percent to between 8 and 10 percent by 2010.


CNOOC plans to build as many as seven LNG-importing terminals in six provinces and municipalities. By the end of October 2006, two of them had obtained government approval.


(China Daily January 6, 2007)

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