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While the United States’ oil industry is in panic as demand has fallen from the oil market, China is suffering from its own oil crisis, resulting in capital cuts for its major oil giants seeking to derail the ambitious Asian nation’s plans for a stronger position in the world oil market.
China’s three largest state-owned oil and gas companies, PetroChina, CNOOC and Sinopec, are making significant cuts to their spending plans for 2020 as oil prices fall.
CNOOC will reduce capital spending this year by 11% over previously published figures. By 2020, CONOOC’s capital spending will drop to 75-85 trillion yuan (US $ 10.6-12.0 trillion). It will not only reduce capital spending at home, but also abroad, including in all its operations in Canada and the United States. In the U.S.
PetroChina is planning an even bigger cut to spending this year, to $ 28 billion from $ 41.6 billion. That’s after a first-quarter loss of $ 2.29 billion. For comparison, it made a profit of $ 10.25 billion in the first quarter of 2019, according to various media sources.
Sinopec is making a 20% -25% cut to capital spending by 2020, to 108 billion – 115 billion yuan ($ 15.2 billion to $ 16.2 billion), according to a Sanford C. Bernstein & Co. research note, cited by Bloomberg.
The cuts in capital spending for China’s large oil companies are a departure from their practice of pumping oil over many years to meet significant oil consumption needs, which have been reduced in Q1 and Q2 due to declining industrial production due to the spread of oil. coronavirus that originated in Wuhan, China.
As Bloomberg pointed out, China’s oil industry capital spending cuts are in line with other major oil capital spending cuts we’ve seen in the past month.
Brent’s price had dropped to $ 22.61 on Thursday morning, down from more than $ 65 a barrel earlier in the year.
By Julianne Geiger for Oilichelin
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