Profit: In Q1 2024, PetroChina (+10.9%, +4.7%) and CNOOC (+14.1%, +23.7%) saw increases in both revenue and net profit, while Sinopec (-0.17%, -9.7%) experienced declines. This is primarily because PetroChina and CNOOC focus more on upstream oil and gas exploration and production (E&P). Increased natural gas production and sales, along with higher oil prices boosted their profits in these areas. Conversely, Sinopec's greater focus on downstream refining, petrochemicals, and marketing, coupled with weak demand recovery for refined oil products, has hindered its profitability rebound.
Investment: Driven by the carbon peaking and neutrality goals, China's national oil companies (NOCs) have slowed investments in refining, petrochemicals, and the marketing of refined oil products, while accelerating their ventures into new energy and low-carbon transition businesses, particularly in the EV charging sector. In 2023, the total number of charging and battery swapping stations of PetroChina and Sinopec surged by about 122% and 183% YoY, respectively. This rapid growth trend is expected to continue in 2024.
E&P: Rising oil prices boosted upstream profits. In Q1 2024, international crude oil prices increased by 2.4% compared to Q1 2023, leading to a profit growth of 4.8% for PetroChina and 11% for Sinopec's upstream E&P businesses. Although PetroChina's larger scale in oil and gas exploration and production led to a higher absolute profit increase, its growth rate was lower than Sinopec's.
Refining: The refining profit margins were squeezed as upstream crude oil costs rose while the recovery in refined oil product demand weakened compared to year-ago levels. Consequently, profits from the refining business of PetroChina and Sinopec fell sharply by 25.8% and 34.2% YoY, respectively. Sinopec, with its larger refining business, was more significantly impacted.
Chemicals: The profitability of the chemical segments for both PetroChina and Sinopec improved, showing a year-on-year growth of 223.7% and 46.8%, respectively. However, overall demand in the chemical market remained limited, causing chemical product prices to lag behind crude oil price growth. Despite its larger scale, Sinopec still struggled to turn a profit in this segment.
Marketing: The marketing segment profits of PetroChina decreased by 17.1% YoY, while those of Sinopec rose by 2.4%. Sinopec's growth was mainly bolstered by a 5.8% year-on-year increase in its non-oil business profits in the first quarter.
EV Charging Business Accelerates: Driven by the carbon peaking and carbon neutrality goals, state-owned oil companies in China have accelerated investment in new energy and low-carbon transition businesses, with a prominent focus on the EV charging infrastructure sector.
By March 2024, Sinopec had constructed over 6,500 EV charging and battery swapping stations with a total of 51,000 terminal charging piles, primarily superchargers and fast chargers. Meanwhile, PetroChina had developed over 900 charging and battery swapping stations, with plans to build over 1,000 additional stations by 2025.
Since early 2024, Sinopec has formed a joint venture with Wanbang Digital Energy Co., China's second-largest charging pile company, and expanded its strategic partnership with BP to enhance cooperation in the EV charging sector.
In September 2023, PetroChina acquired Potevio New Energy Co., a central government-owned pioneer in China's EV charging sector that operates 25,000 public charging piles and around 2,300 charging stations.
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Edited by Aggie Hu, huchenying@mysteel.com