OREANDA-NEWS. April 19, 2012. China's three state-run oil giants — China National Petroleum Corporation, Sinopec Group and China National Offshore Oil Corp (CNOOC) — earned a total of 274.94 billion yuan (USD 43.44 billion) in 2011, but suffered losses of 119 billion yuan (USD 18.9 billion) in oil refining and the sale of natural gas, reports Shanghai Securities News.

CNOOC, mainly an offshore oilfield explorer, boasted the highest profits of the three last year, with 70.26 billion yuan (USD 11.2 billion), growth of 29.1%, despite an oil spill at its Penglai oilfield in Bohai Bay.

China National Petroleum and Sinopec, both of which focus more on exploration and refining, were struggling to keep their operations profitable. The former's profits declined 4.9%, and the latter's grew by just 1.4%. Both companies have blamed China's out-of-date pricing mechanism for their financial problems.

Sinopec suffered losses of 37.6 billion yuan (USD 6 billion) in its oil refining operations, while China National Petroleum lost 60.08 billion yuan (USD 9.5 billion).

Shanghai Securities News quoted Sinopec chairman Fu Chengyu as saying that China depended on imports for 56% of its crude oil needs. Unless the country's petroleum prices reflect international prices of crude, he said, his company will not be able to become profitable in the refining business.

The same problem exists in the sale of natural gas, for which Chinese authorities keep domestic prices on a tight leash. China imports 30% of its natural gas. China National Petroleum suffered losses of 21.4 billion yuan (USD 3.4 billion) on its natural gas imports.

Chairman Zhou Jiping told the newspaper that it doesn't serve the interests of the domestic natural gas market to force China National Petroleum to sell at a loss. He said authorities had promised to implement a new formula for determining prices this year, and that it formula had been used successfully in Guangxi Zhuang autonomous region and Guangdong province last year.

The three oil giants' overseas businesses grew in 2011. China National Petroleum's overseas revenue grew to 574.21 billion yuan (USD 91 billion), with pre-tax profits of 34.74 billion yuan (USD 5.5 billion). CNOOC's overseas oil and gas deposits account for 30% and 20%, respectively, of the total oil and gas deposits it controls.