Profits Fall At Chinese Giants

Once a year, China’s two big oil and petrochemical giants, Sinopec and PetroChina, report their annual results, lifting the veil of secrecy that normally envelops their vast operations. The state-owned firms disclose how they performed financially and also detail the operating rates of their facilities and the status of the new plants they are building.

For both conglomerates, 2012 was a difficult year, especially in their petrochemical operations. Chemical earnings at Sinopec’s China Petroleum & Chemical—the publicly listed portion of the firm—dropped 96% compared with 2011 to a mere $189 million. The firm’s overall net profit was $10 billion, down 11% from 2011.

PetroChina’s refining and chemical unit lost $7 billion, an improvement on the $10 billion loss reported in 2011. The firm does not break out its chemical results separately. PetroChina overcame the refining and chemical problems to post an overall net profit of $21 billion—down 9% compared with 2011—on sales of $353 billion.

By contrast, ExxonMobil, the largest U.S. oil firm, had a decidedly more profitable year. It posted $45 billion in overall earnings, up 9% over 2011, and almost $4 billion in chemical earnings, down 11% from the previous year.

Both of the Chinese firms blame the deterioration in their performance on the global economy. “The world witnessed difficult macroeconomic conditions in 2012, as well as a complex and volatile environment in the petroleum and petrochemical markets,” says Sinopec Chairman Chengyu Fu.

Conditions in the chemical market were sluggish in 2012, the firms say. Sinopec reduced its production of the key petrochemical ethylene by 4.5% to 9.4 million metric tons in 2012. This year it plans to produce 9.8 million tons, still less than it made in 2011. Domestic demand is not growing as fast as in past years, the companies say.

The conglomerates also provided an update on their new projects. Sinopec says a $1.8 billion petrochemical complex in Wuhan, central China, will likely come on-line this spring or early this summer. PetroChina notes that it will spend $5.2 billion on capital projects in its refining and chemical segment in 2013, compared with $5.8 billion in 2012.