FuelClub Discount

PetroChina Ltd., the world’s most valuable company by market capitalization, said Wednesday profits rose by just 2.3 percent in 2007 as government controls blocked it from passing on record-high crude costs to consumers, though a Chinese auto-buying boom drove a 21 percent jump in total sales.

Earnings were 145.6 billion yuan (US$20.5 billion; €13.1 billion) on revenues of 835 billion yuan (US$118 billion; €75 billion), said state-owned PetroChina, the country’s biggest oil company.

Profits were squeezed by a 20.1 billion yuan (US$2.9 billion; €1.8 billion) loss at PetroChina’s refining unit due to a government freeze on retail gasoline and diesel prices, the company said.

“During the second half of 2007, international crude oil prices rocketed and as a result, domestic refineries incurred heavy losses in processing,” said a PetroChina statement. It said supplies of gasoline and other refined goods were “very tight.”

Sales by China’s state-owned oil industry have soared as the number of vehicles on its roads multiplied. Demand for plastics and other petroleum products is growing rapidly amid a long-running boom that propelled economic growth to 11.4 percent last year.

But oil refiners say they are losing money due to price controls.

Some have tried to avoid losses by cutting back or stopping production. That has led to fuel shortages, especially in the fast-growing southeast, where filling stations were forced to ration diesel this week, disrupting trucking as drivers waited in long lines.

Companies such as PetroChina with both drilling and refining arms have made windfall profits from oil production, which has helped to compensate for losses elsewhere.

Beijing froze gasoline and diesel prices in September in an effort to rein in a surge in inflation. It raised prices by about 10 percent in November to curb surging demand but has rejected appeals by oil companies for further increases.

PetroChina is China’s biggest oil producer and its No. 2 refiner after rival China Petroleum & Chemical Co., or Sinopec.

PetroChina said 2007 sales of gasoline, diesel and kerosene totaled 600 million barrels, while production was 500 million barrels.

The volume of fuel sold at PetroChina’s network of filling stations rose by nearly 8 percent over 2006, the company said.

PetroChina is the publicly traded unit of government-owned China National Petroleum Corp. Its market capitalization — including Beijing’s majority stake — briefly rose above US$1 trillion in November, more than double Exxon Mobil Corp.’s US$488 billion. PetroChina shares are traded in New York, Hong Kong and Shanghai.

Market cap later fell back below US$1 trillion, but PetroChina still is the world’s most valuable company. Exxon Mobil, however, is far more profitable, with total 2007 earnings of US$40.6 billion.

In 2008, PetroChina said it expects government regulation of the industry to become even “more stringent,” though it gave no details or any indication when it expects the retail price freeze to end.

The company said it will step up exploration for new oil and gas sources in China and abroad. Chinese state oil companies have invested heavily in projects in Africa, Latin America and Central Asia.

“The group will continue to place top priority on resources exploration and development and further consolidate its leading position of the upstream business in China,” it said.

Source: PetroChina

Delta Air Lines has said it hopes to cut at least 2,000 jobs through a voluntary redundancy programme as it battles high fuel prices.
An estimated 30,000 non-pilot staff - about half of the firm’s employees- will be eligible for the payout.

The third largest US carrier also said it would cut 5% of its domestic services by August.

Delta said that its fuel costs had risen 20% over the past three months as oil prices hit record levels.

The firm wants to cut 1,300 rank and file jobs and 700 administrative and management posts.

There has been intense speculation that the firm was on the brink of a merger with rival Northwest Airlines, but analysts believe that this is now unlikely to happen in the near-term because of obstacles from pilots’ unions.

Airlines worldwide are suffering as a consumer slowdown in the US and Europe makes it more difficult to increase ticket prices at the same time as their fuel costs head higher on the surging oil price.

Fuel costs

“Our 2008 fuel bill is now expected to increase by nearly $900m (£450m) compared to our business plan and more than $2bn over 2007.”

The company’s existing budget for jet fuel is based on oil costing $90 a barrel.

Oil prices, which influence the cost of fuel, have remained strongly above $100 in recent weeks and Delta expects them to stay at this level.

The cooling US economy is also putting pressure on the business, it said in a filing with the Securities and Exchange Commission.

The airline said it would not cut back on its international schedule, “where fares more readily cover higher fuel costs”, pledging to expand its international routes by 15% this year.

Source: BBC

Oil prices fell yesterday, pulling back at least temporarily from record levels as investors feared that the financial crisis that forced the sale of the Bear Stearns Cos. Inc. was a sign of deep economic trouble.

Crude’s drop came even as diesel prices rose to a new record above $4 a gallon, and gasoline prices remained high.

Diesel, used to transport the vast majority of the nation’s goods, rose 1.3 cents to a national average of $4.002 a gallon, according to AAA and the Oil Price Information Service. The national average price of a gallon of gasoline, meanwhile, dipped slightly to $3.283 a gallon, but remained 73 cents higher than a year ago.

In the five-county Philadelphia area, yesterday’s average pump price was $3.22 a gallon, up four cents in the last week. In South Jersey, the average was $3.04, six cents higher than a week ago.

Oil’s steep decline - falling $4.53 to settle at $105.68 a barrel on the New York Mercantile Exchange - came hours after futures had reached a new trading high of $111.80 on the Federal Reserve’s move Sunday to lower a key interest rate a quarter of a percentage point.

In the last several months, Fed rate cuts have prompted rallies in oil prices because crude futures offer a hedge against a falling dollar. Interest-rate cuts tend to weaken the dollar further.

But the big decline yesterday could be a sign that the oil market’s momentum has turned negative, analysts said.

“People are saying, well, things are a lot worse than we thought,” said Phil Flynn, an analyst at Alaron Trading Corp., of Chicago.

Source: Associated Press

Shell’s Canadian oil sands business is suffering a profitability squeeze because of the soaring cost of energy needed to extract bitumen from sand.

The oil company’s annual report, published yesterday, reveals that operating expenses at the Athabasca Oil Sands Project in Alberta have soared by almost 50 per cent in the two years since 2005, while output at the bitumen mining project has either remained static or declined.

Shell’s oil sands profits dipped sharply last year when a fire temporarily reduced the output of its upgrader, a refinery that converts bitumen into a synthetic crude oil. Earnings from oil sands fell from $651 million in 2006 to $582 million (£291 million), which the company attributes to lost output from the shutdown. The net production of the oil sands business, after deducting royalty payments, fell from 95,000 barrels per day (bpd) in 2005 to 81,000 bpd in 2007.

However, Shell’s filing to the US Securities and Exchange Commission (SEC), published yesterday, also shows a massive surge in the operating cost of the Athabasca project. It rose from $664 million in 2005 to $722 million 2006 and $967 million in 2007.

The burgeoning overheads in Canada emerged as Shell revealed that it had fully replaced its oil and gas output in 2007 with additional reserves. Shell’s total proven reserves were unchanged at 11.9 billion barrels of oil and gas, Jeroen van der Veer, Shell’s chief executive, said.

Excluding the effect of purchases and sales of oil-producing assets, such as the sale of part of its Sakhalin gas project to Gazprom and the buy-in of Shell Canada’s minority interest, Shell added 1.5 billion barrels of oil to its reserves last year. According to Shell, that equates to a reserve replacement ratio of 124 per cent, compared with an average for the top five oil companies of 108 per cent.

A big proportion of the extra barrels relate to gas reserves, notably in Qatar, where Shell has agreed sales contracts for liquefied natural gas, which enables Shell to book reserves. Other reserve additions include gas in Australia’s North West Shelf and the Ormen Lange gasfield in Norway.

Peter Voser, Shell’s finance director, said that overall internal cost inflation was running at 10 per cent per annum. He estimated that the operating cost of an oil sands barrel was in the range of $20 to $25 per barrel.

Shell will not reveal the development cost of its oil sands projects, including an expansion that will add 100,000 barrels per day of output, but it is likely to be close to $20 per barrel, well above the average of between $6 and $7 per barrel for the company as a whole.

Oil sands represent about 10 per cent of Shell’s proven reserves of 11.9 billion barrels and are assessed separately by the SEC, which considers oil sands to be a mining business. However, the potential resource in the ground in Shell’s acreage is 20 billion - which is not in dispute, since the reserves are close to the surface.

Separately, Shell disclosed yesterday that the US Department of Justice is investigating Shell’s use of Panal-pina, a Swiss freight forwarding company, in connection with alleged corruption in relation to customs officials in Nigeria. The Justice Department began a criminal investigation last year into illegal payments to customs agents in Nigeria and sent letters to 11 oil and oil-service firms. Shell said that it had started an internal investigation and would cooperate with the Justice Department.

Source: The Times

The average price of diesel oil on the Czech market increased by 20 hellers against a week ago to Kc30.96 a litre, while the top-selling petrol Natural 95 dipped by eight hellers to an average Kc30.50, data from the company CCS showed.

The gap between petrol and diesel oil prices has therefore widened. In contrast, from the start of the year the prices were getting closer together.

Analysts believe diesel prices will continue to grow in the coming days, while petrol prices will rather stagnate.

“The growth in diesel prices came mainly due to the sharply increasing price [on the bourse] in Rotterdam which has climbed up by over 28 percent since February 1, and this will soon be felt at Czech petrol stations,” Colosseum analyst Petr Cermak said.

Not even the constant firming of the crown will prevent diesel prices from growing, Cermak said.

“Petrol stations will probably be unable to resist the pressure of the growing oil prices and will raise their prices as well,” he said.

Cermak believes that in a fortnight, diesel prices will be tens of hellers higher.

Next Finance economist Vladimir Pikora does not expect a dramatic growth in fuel prices.

“Despite the record-high oil prices, the growth will be only in the order of several tens of hellers in the horizon of several weeks. For now, there is no reason for panic,” Pikora said.

The growth in oil prices by 16 percent since the beginning of the year and by over 75 percent in the last twelve months is not such a bad news for motorists as it may seem at first sight.

“The oil price in crowns is only moderately above the 50-day sliding average. And the crown still has room for further firming to the dollar,” Pikora said.

Fuel prices decreased slightly in previous days after a significant price growth in the second half of February that interrupted the downward trend of the last two months.

Average Czech fuel prices (Kc/litre) as of March 17, 2008:

Source: PragueMonitor

Iran’s motorists, whose consumption of petrol is rationed, will be allowed to buy unlimited amounts of gasoline over the New Year holidays but at unsubsidised prices, the oil ministry said.

Iran in June 2007 implemented a long-awaited plan to ration its hugely subsidised petrol, and now limits gas-guzzling motorists to 120 litres a month at the price of just 1000 rials (10 cents) a litre.

But Oil Minister Gholam Hossein Nozari said late on Monday that for the New Year holiday period Iranians would be allowed to buy petrol in excess of this quota for the non-subsidised price of 4000 rials (40 cents) a litre.

Motorists will be allowed to buy the extra petrol from one month from Wednesday, he said. Once this period is over, they will again be limited to buying just the cheap but rationed petrol.

The measure is aimed at helping people over the Iranian New Year (Norouz) holiday period which is traditionally a time when hundreds of thousands of people take to the roads for trips to the provinces.

Iran, Opec’s number two oil producer, decided to ration petrol to decrease the colossal state subsidies paid for keeping pump prices down to less than a comparable amount of mineral water.

The country lacks the refineries necessary to produce sufficient petrol for its car-loving 71-million population and is forced to spend billions of dollars each year importing petrol from abroad.

It had been hoped that traffic in Tehran — one of the most congested cities in the Middle East — would be reduced as a result of the rationing plan.

But Iranian motorists have displayed their ingenuity by readily finding petrol on the black market, which is usually priced at around three to four times the pump price.

The rationing initially triggered angry protests, with demonstrators torching petrol stations and yelling slogans against the government, but these rapidly petered out.

Source: iAfrica