By Lillian Liu (China Daily)
Updated: 2008-03-20 09:16

PetroChina Co Ltd, China's largest oil and gas producer, yesterday posted a lower-than-expected 2.4 percent growth in its net profit in 2007 of 145.63 billion yuan.

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PetroChina's turnover in 2007 reached 835.04 billion yuan, an increase of 21.2 percent from the previous year. Its total output of crude oil and natural gas was 1.11 billion barrels of oil equivalent, an increase of 4.8 percent from 2006.

Analysts said windfall taxes and refining losses are eating into the company's profits. PetroChina paid 44.58 billion yuan in windfall levies in 2007, 54 percent more than in 2006. Its refining arm reported a loss of 20.68 billion yuan in 2007, compared with a 8.5 billion yuan loss in 2006.

Rising cost is another drag on growth. Exploration and production expenses climbed 30 percent last year. Oil and gas lifting costs rose 15 percent to $7.75 a barrel.

Dick Lee, a corporate finance officer with Phillip Securities in Hong Kong, said PetroChina's result was lower than his expectation. "The market had expected PetroChina to post better earnings amid the soaring crude prices that helped other oil groups book record profits."

The company will continue to search for resources at home and abroad, aiming to increase overall oil and gas production by 7 percent to 1.189 billion barrels of oil equivalent in 2008, exceeding last year's 4.8 percent increase. It said it will earmark 132.3 billion yuan for exploration and production this year.

But analysts expect a tough year for PetroChina in 2008, saying the government's tightening policies and rising costs will hit the oil producer.