The China National Offshore Oil Corp (CNOOC) has inked an agreement to buy 5 million tons per annum (MTPA) of LNG, starting in 2015, from BG Group and buy a 40% stake in QCLNG Train 1, increasing its equity ownership from 10% to 50% for USD1.93 billion. It will acquire a 20% equity interest in the reserves and resources of certain BG Group assets in the Walloons Fairway region of the Surat Basin, Queensland, Australia, lifting its equity ownership from 5% to 25%. It will also acquire a 25% equity interest in certain other upstream tenements held by BG Group in the Surat and Bowen Basins in Queensland.

Sinopec Kantons is raising HKD2.68 billion by selling new shares to help fund fuel storage and logistics projects overseas. The fund-raising exercise will see Sinopec Kantons’ state-backed parent China Petroleum & Chemical (Sinopec) sell 412.5 million existing shares and subscribe to the same number of new shares. Sinopec’s stake in Kantons would fall to 60.3% from 72.3% when the deal is completed. Kantons said the share sale would help it further develop its oil storage and logistics businesses in China and on a global basis. The firm is one of the smallest Hong Kong-listed subsidiaries of Sinopec, China’s second-largest crude oil and gas producer and the largest refined fuel and petrochemicals producer and distributor. But in the past year it has made a series of major acquisitions, including three deals overseas, which have made it an up-and-coming player in fuel trading and logistics. Kantons’ net profit grew 36.6% to HKD291.74 million last year from 2011, as sales increased 12% to HKD22.04 billion. Some 95% of its sales last year came from crude oil trading, with the rest from crude oil jetty and vessel charter services. It had an operating loss of HKD23.7 million on oil trading and a loss of HKD89.5 million on vessel chartering due to sinking tanker rates. These were offset by an operating profit of HKD259.3 million from oil jetty services.

PetroChina posted an 8% drop in first-quarter profit to CNY36 billion on weak demand for oil products. “Due to the macro-economic situation, there was weak demand for refined products and the chemicals market remains in a downturn,” PetroChina said. Oil and gas output climbed 2.8% to 355.3 million barrels of oil equivalent (BOE) in the first three months of this year. Crude oil output hit 231 million barrels, up 1.8% from last year. The average realized crude price was USD103.08 a barrel, down 2.3%. One big weight on profit was a CNY4.25 billion rise in operating loss on its gas import business to CNY14.5 billion. Also weighing on profit was a CNY3.94 billion cut in operating profit at its fuel distribution business to CNY2.12 billion, due to weak domestic motor fuel demand, resulting in a 4.3% fall in sales volume and lower profit margin. A third factor was a rise in operating loss at its chemicals division of CNY2.77 billion to CNY3.18 billion. The oil and gas production division, which earns the bulk of profit, recorded a 5.6% drop in operating profit to CNY57 billion. A board meeting passed a resolution to promote Deputy Chairman Zhou Jiping to the Chairman position.

Sinopec Corp posted a 25% rise in first-quarter net profit to CNY16.7 billion as improved refining margins offset lower profits from exploration and production. Sinopec should benefit from China’s market-oriented fuel pricing reform, analysts say. The main driver was its refining operation, which turned in an operating profit of CNY2.2 billion, an CNY11.4 billion improvement from a CNY9.2 billion loss in the year-earlier quarter. This more than offset a CNY3.3 billion decline in operating profit of oil and gas production to CNY16.23 billion, a CNY1.15 billion profit decline in chemical manufacturing to CNY164 million, and a CNY1.15 billion profit fall in fuel marketing to CNY9.13 billion.

CNOOC’s output jumped 17.3% to 93.6 million barrels of oil equivalent (BOE) in the first quarter from a year earlier, which helped deliver a 13.3% rise in oil and gas sales. “I am very glad to say that the company made significant progress in exploration and production in the first quarter,” said Li Fanrong, CNOOC’s CEO. The Q1 figures were the first to include Nexen in its balance sheet. CNOOC announced in January that it aimed to produce 338 million to 348 million BOE this year, an increase of up to 2% from the previous year.

The U.S. has started exporting crude oil to China for the first time since 2005. In January, the U.S. exported 9,000 barrels of crude per day to China, the highest in at least 13 years, according to the U.S. Energy Information Administration (EIA). “China will increase its oil imports in the coming years,” said Adrian Loh, Analyst at Daiwa Capital Markets in Singapore. “If U.S. oil exports to China increase, the impact on Sino-U.S. relations will be felt,” said Li Xin, Analyst at Masterlink Securities in Shanghai. “For China, the room for ramping up oil production is limited. China’s reliance on oil will increase unless it can find different energy sources. With its own oil production rising, the U.S. can cut down on oil imports,” said Lawrence Lau, Analyst at Bank of China (BOC). In December, China overtook the U.S. as the world’s biggest net importer of oil. U.S. net oil imports fell to 5.98 million barrels per day that month, while China’s net oil imports rose to 6.12 million barrels per day. “China’s oil import demand is growing at half a million barrels per day each year. China will increasingly be deeply dependent on the stability of the global oil market,” said Mikkal Herberg, Research Director at the U.S.-based National Bureau of Asian Research, during his testimony before the U.S.-China Economic and Security Review Commission. China’s growing dependence on oil and liquefied natural gas (LNG) flowing through the Indian Ocean, the Malacca Straits and the South China Sea is a key driver of the navy’s modernization towards blue water capabilities, “which is setting off alarm bells across the region and contributing to a regional naval arms race”, said Herberg.

Sinopec Shanghai Petrochemical has warned that cheap natural gas in the United States and coal from the mainland pose serious competitive threats to Chinese crude oil refiners. The subsidiary of Sinopec will have to cut costs and boost the uniqueness of its products, Vice Chairman Wang Zhiqing said. He said about a dozen firms in the U.S. have plans to build over 10 million tons of annual ethylene output capacity in the next three to five years, using gas as the raw material. Wang said petrochemical products made from low-cost U.S. gas may find their way on to the Chinese market. Another threat comes from domestic producers of petrochemicals using coal as feedstock. So far only Shenhua Group and Datang International Power Generation have entered commercial production of downstream chemicals from coal that directly competes with producers that use crude oil. The central government has received applications to exploit coal-based chemicals totaling 50 million to 60 million tons of annual output capacity. Such projects first turn coal into methanol before processing methanol into polypropylene (PP) and polyethylene (PE) used to make plastic products.