The company's oil refining business is projected to see profits in Nov 2008 against a background of plummeting international oil prices, said Jiang Jiemin, Chairman of PetroChina Co., Ltd., during the Extraordinary General Meeting of Shareholders on 21 Oct 2008. USD 80 a barrel is the ideal price for generating profit.

The government has long been in control of the retail prices of oil products in China; leading to the disparity between soaring international and domestic crude oil prices in 1H 2008, and then to losses in the oil refining sector. China's government is awaiting a window to loosen its control on the price of domestic gasoline, diesel and aviation fuel, according to Jiang.

Insiders point out that the biggest challenge PetroChina faces was the weakening profitability of its core businesses backed by an unabated decline in international oil price.

Yet, the current assets-liabilities ratio of PetroChina is lower than 30%, and "there will not be any problem in fund raising", said Jiang. He also mentioned that the global financial crisis has a limited impact on the company, which has been investing in oil and natural gas for many years. In 2009, PetroChina will stay focused on strategic projects; boosting investment percentage for them from 65% to 70%. Already, its natural gas business has raised its production volume by 15% in the first three quarters 2008.

According to Wang Guoliang, CFO of PetroChina, the crux of the situation is how to peg domestic oil price to international prices. "Relevant government authorities are working on that and I'm convinced that we will have a solution in the near future", said Wang.

Source: Shanghai Securities News

Date: 22 Oct 2008

CN01/BJ/JL/NK