The Two Major Oil Companies Will Make A Profit Of 40 Billion Yuan In 2020 And Increase Investment To Promote The "Carbon Neutral" Strategy

On the afternoon of March 25, PetroChina (601587. SH) (00857. HK) and CNOOC (00883. HK) released their 2020 annual reports. The total net profit of the two barrels of oil totaled 40 billion yuan, but both decreased by nearly 60% year on year.

Specifically, PetroChina's operating revenue reached 1.93 trillion yuan, a year-on-year decrease of 23.2%, and domestic oil and gas equivalent output reached 1.409 billion barrels, up 4.8% year-on-year. The net profit attributable to the shareholders of the parent company was 19.01 billion yuan, down 58.4% year on year.

CNOOC achieved an oil and gas sales revenue of 139.6 billion yuan, a year-on-year decrease of 29.2%, and domestic oil and gas equivalent output reached 528 million barrels, an increase of 4.3% year-on-year. The net profit was 24.956 billion yuan, down 59.1% year on year. The company's proven reserves reached a record high of 5.373 billion barrels of oil equivalent.

It is worth mentioning that the two major oil companies announced their low-carbon transformation strategy towards carbon neutrality at the performance conference. Whether it is PetroChina's natural gas based exploration of wind solar thermal hydrogen diversified integrated energy company strategy or CNOOC's investment in wind power projects, we can see that the two companies are concerned about low-carbon energy.

Output growth and performance decline

2020 is a tough year for oil companies. At the beginning of the year, with the rapid drop of oil price and the impact of shrinking demand brought by the new crown epidemic, the market expects that all oil companies will suffer Waterloo in that year.

For China's oil companies, one of the most important tasks at present is to ensure that domestic oil and gas production is "increased storage and production" and ensure the safety of domestic energy supply. The importance of this task is more prominent after many uncertain events in 2020.

In terms of PetroChina, it is not difficult to find that natural gas plays a decisive role in the process of realizing the year-on-year increase of domestic oil and gas equivalent production.

In 2020, domestic crude oil production will reach 743 million barrels, with a year-on-year increase of only 0.6%; domestic natural gas production will reach 3.993 trillion cubic feet, with a year-on-year increase of 9.9%, while overseas natural gas production will drop by 17.7%. It is worth mentioning that this has set a new high in the absolute increase of domestic natural gas of PetroChina in recent years, and also made the oil and gas production proportion of PetroChina more reasonable.

It is also worth noting that PetroChina's overall revenue of exploration and development sector has reached 530.8 billion yuan with a drop of only 21.5% under the condition of a sharp drop of 34.9% in the price of Brent crude oil, indicating its progress in cost control.

In addition, the sales of imported natural gas, a traditional huge loss project of PetroChina, has also made great progress in 2020. Sales of imported gas recorded a net loss of 14.159 billion yuan, a decrease of 16.651 billion yuan over the same period of last year. In particular, in the fourth quarter, the business achieved profits, becoming the first quarter since the sale of imported gas.

Huang Yongzhang, CEO of PetroChina, predicted that the growth rate of domestic natural gas demand will pick up in 2021, supported by the improvement of international epidemic situation, the continuous implementation of domestic demand expansion strategy and environmental protection policies. It is estimated that the annual consumption of natural gas will be about 350 billion cubic meters, with a year-on-year increase of 8.7%.

In terms of CNOOC, when the oil and gas equivalent output is far lower than that of PetroChina, it has obtained 1.39 trillion yuan of oil and gas sales revenue, and also obtained a net profit greater than that of CNPC exploration and development plate, which shows the effectiveness of CNOOC in cost control.

In 2020, the main cost of CNOOC's barrel oil will drop to 26.34 US dollars, a decrease of 11.6% year-on-year, a new low in the past decade; the operating cost of barrel oil will be reduced to $6.90, a year-on-year decrease of 6.7%, a new low in 13 years.

Meanwhile, CNOOC will obtain 16 commercial discoveries in 2020, including two 100 million ton oil and gas fields of Kenli 6-1 and Bozhong 13-2 in Bohai Sea area, Huizhou 26-6 medium-sized oil and gas field in eastern South China Sea, and three new discoveries in Stabroek block of Guyana. The reserves have reached a record high of 5.373 billion barrels of oil equivalent, and the reserve replacement rate is 136%. The reserve life has been stable for more than 10 years for four consecutive years.

"Even compared with international oil companies, CNOOC's reserve substitution rate is quite excellent." A long-term observer of oil listed companies told reporters, "and for listed oil companies, reserve substitution rate is one of the most important valuation indicators."

He believes that as China's oil companies, the primary task for a period of time to come is to ensure that domestic oil and gas resources are increased in storage and production, and that the low-carbon transformation towards the target of carbon neutrality by 2060 will be the primary task.

Transformation Roadmap

At the press conference on March 25, Dai Houliang, chairman of CNPC, interpreted PetroChina's future carbon neutral transformation route in three stages

In the first stage, we will make full use of the low carbon emission intensity of natural gas, give full play to the advantages of PetroChina's natural gas resources, and promote the further growth of production. It is hoped that the proportion of natural gas will further increase to about 55% by 2025, leading the industry.

In the second stage, we will give full play to the key supporting role of natural gas in the future energy system, make good use of the wind energy, photovoltaic and geothermal resources within the scope of the company's existing mineral rights, vigorously implement the integrated development of wind and solar power and the industrial utilization of hydrogen energy industry, continuously increase the scale development and comprehensive utilization of geothermal resources, and promote the company's transformation into an oil, gas, thermal, and hydrogen integrated energy company.

In the third stage, we will actively promote the action plan of green enterprises, vigorously implement energy conservation and emission reduction and clean substitution, and strive to reduce carbon emissions. At the same time, actively develop and promote carbon capture, utilization and storage (CCUs) technology, not only to achieve carbon peak and carbon neutralization, but also to contribute clean "zero carbon" resources to the society.

"At present, the proportion of new energy in capital expenditure is still in the stage of layout. We have a clear investment plan, and the annual growth rate is very large." "In the future, we will gradually increase the proportion of investment in new energy in order to achieve our goal of green and low-carbon development," said Dai Houliang

In terms of technology, Dai Houliang believes that the development and utilization of geothermal resources are related to the current technical route of PetroChina. "PetroChina has a relatively mature technology in geothermal field. At the same time, we will adhere to independent development, import cooperation and cooperation with a third party to jointly promote." Dai Houliang said.

From the current strategy of PetroChina, it is not difficult to see that natural gas has become an important starting point for its next clean transformation. Huang Yongzhang said that during the "14th five year plan" period, the company hopes to achieve about 600 billion cubic meters of proven natural gas reserves, and the company's natural gas production is expected to reach 150 billion cubic meters in 2025.

In terms of CNOOC, CNOOC's thinking is similar to that of PetroChina. In its future business strategy, the top priority task is to vigorously promote the exploration and development of natural gas and realize the growth of natural gas production. On the other hand, based on the advantages of CNOOC in offshore engineering, the development of offshore wind power projects has become an important growth point in new energy.

CNOOC said that in 2020, it is actively promoting the new energy business mainly based on offshore wind power, and the company's first offshore wind power project will realize the grid connected power generation of 57 wind turbines within the year. In addition, the company actively promotes digital and intelligent construction, implements Bohai Bay shore power project, and so on, to help green and low-carbon production.

"Our second wind power project has obtained the relevant operation rights and is currently doing the preliminary design of this project." Xu Keqiang, CEO of CNOOC, said, "in the past, we planned to invest 3% - 5% in new energy every year in the next few years. Now we need to further increase our investment, strive to invest more than 5% every year to further obtain our wind farm resources and increase our investment in offshore wind power."