With repeated outbreaks and geopolitical tensions, international oil prices have continued to rise since last year, and the “high fever” has not subsided. How will China Petroleum & Chemical Corporation(600028) as the world’s largest oil refining company respond?
At the annual performance teleconference of China Petroleum & Chemical Corporation(600028) 2021 held on the 28th, China Petroleum & Chemical Corporation(600028) Chairman Ma Yongsheng accepted a question from the reporter of Shanghai Securities News and said that there is still great uncertainty about the future oil price trend. The oil price is expected to be about $100 (unit barrel, the same below) and $85 respectively this year and next year. In view of the high oil price, the company is actively formulating countermeasures and will seize the opportunity to strengthen the benefit exploitation of crude oil and natural gas.
“At present, there are many factors affecting oil prices, including geopolitics, macroeconomic trend, the implementation of OPEC plus policy, the strength of the US dollar, etc. we still have great uncertainty in judging the future oil price trend. It is unlikely to accurately predict oil prices, but we can predict a general trend.” Ma Yongsheng said.
According to him, international institutions generally have an estimate of the oil price this year and next year, which is expected to be about $100 this year and about $85 next year. With the easing of geopolitical and other factors, oil prices will be lower next year than this year.
The risk of wide-ranging fluctuations in international oil prices has greatly increased, which has also brought severe challenges to the production and operation of China Petroleum & Chemical Corporation(600028) . Ma Yongsheng said that the company is closely following the changes of the situation, actively formulating countermeasures and vigorously preventing business risks.
“Specifically, the refining business is facing great challenges under the current refined oil pricing mechanism. Therefore, the company will take multiple measures to reduce the impact of high oil prices.” According to Ma Yongsheng, China Petroleum & Chemical Corporation(600028) will take the following measures: first, arrange the import and processing of crude oil according to the market demand, increase the procurement of cost-effective crude oil and strive to reduce the procurement cost; Second, dynamically measure the marginal benefits of each product chain, and timely optimize and adjust the product structure and device load; Third, strengthen market research and judgment, and scientifically arrange production and operation plans around the goal of maximizing the overall benefits of the company.
According to Article 6 of the current measures for the administration of oil prices, when the price of crude oil in the international market is higher than US $80 per barrel, the processing profit margin shall be deducted until the price of refined oil is calculated according to the processing zero profit. When the price is higher than 130 dollars per barrel (inclusive), appropriate fiscal and tax policies shall be adopted to ensure the production and supply of refined oil. In principle, the price of gasoline and diesel shall not be mentioned or less mentioned. This “ceiling price” regulation makes the oil refining business easy to fall into losses under the background of high oil prices.
“In addition, the chemical business will also face the pressure of rising costs and narrowing gross profit in the short term. The company will optimize production operation, diversify and expand raw material channels, reduce costs, increase the R & D and production of high value-added new materials, and further improve the profitability of the chemical business.” Ma Yongsheng said.
On the other hand, high oil prices will also bring opportunities to upstream businesses. Ma Yongsheng said that the current high volatility of international oil prices is a good opportunity for upstream business to increase production and efficiency. The company will increase the efficiency exploitation of crude oil and natural gas and improve the efficiency creation ability.
Not long ago, the national development and Reform Commission and the National Energy Administration issued the 14th five year plan for modern energy system. The plan puts forward that the main objectives of the construction of modern energy system during the 14th Five Year Plan period include the recovery of annual crude oil production in 2025 and its stabilization at the level of 200 million tons.
“Over the years, China Petroleum & Chemical Corporation(600028) has been vigorously improving the oil and gas exploration and development at home and abroad in strict accordance with the requirements of the government. Last year, the company made a major breakthrough in continental shale oil exploration, the substitution rate of domestic oil and gas reserves reached 154%, the natural gas production increased by 11.9% year-on-year, and the results of increasing reserves, stabilizing oil and increasing gas were remarkable.” Ma Yongsheng said.
He said that in the next step, China Petroleum & Chemical Corporation(600028) still needs to, in accordance with the national unified deployment and the needs of the company’s development, in view of the short board of oil and gas resources, seize the opportunity of the current high oil price, effectively develop the resources that could not be moved under the background of low oil price, strive to stabilize oil, increase gas and improve efficiency, and strengthen efforts to promote the better growth of reserves and substitution rate.
“In order to achieve this goal, on the one hand, we should increase investment and scientific and technological investment, including the steady growth of investment plans in exploration and development this year, and strengthen scientific research in areas that need technical breakthrough and enhanced oil recovery; on the other hand, we should also increase management innovation and strive to better achieve this goal from all aspects.” Ma Yongsheng said.
