PetroChina Co., China’s biggest oil producer is faced with a sharpest decline in oil and gas production for the first time in 17 years. The decline has seen many high-cost oil fields being shut as hope of their profitability dwindles, according to Wang Dongjin, the firm’s president.
PetroChina Records Up To 70% Loss in 2015
Laban Yu, director of Asia oil and gas equities at Hong Kong- based Jefferies Group LLC said, “The present oil prices force PetroChina to give up the fields.”
He added, “The forecast reduction in output is due to PetroChina’s plan to close high-cost and old fields.”
PetroChina, which is also second largest oil company in the world by market capitalization, said production would slide by 2.7 percent in 2016 down to 1.45 billion barrels of oil.
The company’s shares fell by 3.9 percent in the early trading hours of Thursday in Hong Kong, compared with a 1.1 percent from the Hang Seng Index.
In the past year, PetroChina’s share value has declined by 37 percent compared with 16 percent for the country’s index.
The company’s production plan may be helpful in easing the global glut and perhaps boost the prices from the lowest they have been in 12 years.
There could be a glimmer of hope for oil prices as the Organization of Petroleum Exporting Countries and their member countries work to ease a global overproduction, according to a statement by the International Energy Agency earlier this month.
Closing down the fields
China’s 2016 output is set reduce by up to 5 percent, down from last year’s high of 4.3 million barrels a day, according to Sanford C. Bernstein & Co. and Nomura Holdings Inc. This would be the first decline in seven year and the largest since 1990.
Oil and gas fields that do not look like they will make profits will be closed down this year, according to Wang.
Brent’s oil prices, the world’s benchmark, declined to about $54 per barrel in 2015, from an average of $99 in 2014.
PetroChina’s chairman, Wang Yilin said that the company and state-owned China National Petroleum Corp will not lay off its frontline workers.