Record returns: How Chinese giants outshone their global rivals

Opinion: The recent round of financial results shows an unprecedented split in the performances of Chinese and international oil companies.

China’s three leading state-owned oil companies reported record-breaking earnings for the first half of 2024, while their global counterparts wrestled with declining profits and squeezed margins.

Combined net profit at PetroChina, Sinopec and CNOOC Ltd surged by 10.3% against the same period last year to more than 2 trillion yuan (about $285 billion), while combined revenue was up 7.3% to 3.36 trillion yuan (approximately $460 billion).

PetroChina led the charge with its operating income climbing 5% year-on-year to 1.55 trillion yuan and net profit increasing 3.9% to 88.6 billion yuan, continuing the company’s trend of record-breaking performances for a third consecutive year.

CNOOC Ltd, focused on offshore oil and gas, set new records with a 25% increase in net profit to 79.7 billion yuan and an 18% increase in revenue to 226.77 billion yuan.

Meanwhile, Sinopec reported a 2.6% increase in net profit to 37.1 billion yuan, even though it saw a slight dip in revenue.

This positive trajectory contrasts sharply with global oil giants’ recent results.

Saudi Aramco, the world’s largest oil company, reported a 9% decline in net profit to $56.3 billion.

US supermajors ExxonMobil and Chevron reported profit drops of 10% and 21%, respectively, while Europe’s Shell, TotalEnergies and BP also reported a fall in net profits, with BP in particular experiencing a 27% drop.

These different fortunes can be attributed to several factors, one of which was the dramatic fall in international natural gas prices, with US Henry Hub down 7.5%, Europe’s TTF down 33%, and Asia’s JKM down 25.3%.

This handed a windfall for PetroChina and Sinopec, which depend heavily on imported gas.

Both were able to reduce their import costs, which helped boost their profit margins.

PetroChina’s natural gas segment alone saw a 19% increase in profits to 16.8 billion yuan.

On the other hand, international oil companies wrestled with the falling natural gas prices and tighter refining margins, which together increased their financial challenges.

The drop in gas prices hit their upstream operations hard, while narrowing refining margins further squeezed profitability.

Despite a rise in crude prices — Brent crude up 5.5% to $84.06 per barrel and West Texas Intermediate up 5.6% to $78.95 — the overall impact was not enough to offset the pressures brought on by the gas price drop.

Moreover, in China, CNOOC Ltd’s focus on upstream activities insulated it from the refining sector’s difficulties.

CNOOC Ltd reported record high oil and gas production, with output reaching 362.6 million barrels of oil equivalent, a 9.3% increase year-on-year.

The company’s operational efficiency led to a reduction in operating costs to $6.81 per barrel, down 4.9% from the previous year.

China also benefited from government policies that led to increased refined oil prices, boosting gasoline and diesel costs.

Despite some pressure on refining margins — Sinopec’s refining gross profit per tonne dropped by 10.7% and operating income shrank by 37.6% — the overall increase in oil revenues helped offset these losses.

This contrast in fortunes amid falling global gas prices and refining constraints highlights how regional market conditions and strategic focus can have a dramatic influence on companies’ balance sheets.

As global energy prices fluctuate, the ability of oil and gas companies to adapt to these changes is crucial.