PetroChina posted a 5.8% year-on-year rise in first quarter net profit to CNY39.15 billion, as sharply higher profit from oil-and-gas production was mostly offset by widened losses in oil-refining and gas-import operations. Revenues increased 17.9% to CNY525.65 billion. Operating profit from oil-and-gas production surged 31.6% to CNY60.38 billion on the back of a 3.6% increase in oil output to 227 million barrels, and a 14.8% jump in the average crude-oil selling price, to USD105.48 per barrel. Natural-gas output grew 11.2% to 710.9 billion cubic feet, while the average selling price climbed 9.9% to USD4.87 per thousand cubic feet. The group’s operating loss on oil refining and chemical production widened to CNY10.82 billion, from CNY3.69 billion in the year-earlier period. Fuel and chemical distribution’s operating profit tumbled 21% to CNY6.06 billion, reflecting the weak global economy, and the operating profit for gas-distribution and pipeline operations dived 71% to CNY2 billion. “We expect refining margins to remain weak in [this year's first-half], despite the increases in product prices announced in the first-quarter,” said Sanford Bernstein Analysts Neil Beveridge and Lou Ying in a research report.  They also expected that PetroChina’s benefits from gas price increases in Guangdong and Guangxi this year would be offset by higher gas imports from Turkmenistan in Central Asia, which is a loss-making business because Beijing also kept domestic-gas prices below international levels. PetroChina Vice Chairman Zhou Jiping has said the group planned to raise gas imports to 28.2 billion cubic meters of gas this year, from 17.3 billion last year, the South China Morning Post reports.

Australia’s Linc Energy and Chinese green power firm GCL Projects will team up in a venture to make diesel fuel from coal gas, with GCL buying a 5% stake in Linc for AUD124 million. Linc Energy Chief Executive Peter Bond, who owns 40% of the company, said the joint venture aimed to produce 100,000 barrels a day of diesel for the Chinese market. The venture with GCL Projects, a unit of Hong Kong-based Golden Concord Holdings, will build plants that will turn gas extracted deep underground from coal into diesel. Their first gas-to-liquids plant is scheduled to start in 2014. “I think China will become a significant player,” Bond said. “You’ve got so many advantages in China in terms of fast-tracking a project, cheap capital, a huge consumer base, a fairly low tax regime,” he said. He added that ideally half of Linc’s production would be in China within three years. “It will take probably four to five years before it’s 50% of our income,” Bond said. Linc’s Chinese partner, Golden Concord, also owns GCL Poly Energy Holdings. Linc first started producing diesel from gas in 2008 at a demonstration plant in Queensland. It has also started producing jet fuel, which it plans to use on a flight across Australia for the first time in May. Bond said the joint venture’s first plant in China would probably be in Inner Mongolia. It aims to start construction later this year.

The contribution of unconventional natural gas to China’s supply is expected to surge to 30% of total supply by the end of this decade from 1.5% currently, according to Shi Xin, Deputy Director of the Strategic Development Office of China Petrochemical’s Economics and Development Research Institute. China has only 1% of the world’s proven reserve of conventional natural gas that is easily extracted using traditional methods. Chinese gas producers are increasing production of unconventional, or hard-to-extract, gases in the form of tight gas, coal-bed methane and shale gas. The U.S. already sources half its gas output from unconventional sources, compared to the world average of 13%, Shi said. The National Energy Administration (NEA) has targeted for shale gas output to reach 6.5 billion cubic meters (BCM) in 2015, rising to between 60 BCM and 100 BCM in 2020. Production is currently undergoing small-scale trials. Beijing also aims to raise natural gas extracted from coal mines and coal seams to 30 BCM in 2015 from 1 BCM in 2010. As China’s annual gas consumption growth accelerated from an average of 16% in the decade to 2010 to 20% last year – and output growth lagging at 14% in the past 11 years – imports have surged. Last year’s imports, via tankers in chilled and liquefied form or long-distance pipelines, jumped 90.3% to 31.6 BCM. This amounted to 24% of consumption of 130.7 BCM, up from 11% three years ago and 6% five years ago, due to a huge piped gas import deal with Turkmenistan, as well as liquefied natural gas (LNG) imports from Australia, Indonesia, Malaysia and Qatar, the South China Morning Post reports.

China Bluechemical, the fertilizer unit of state-owned China National Offshore Oil Corp, expects this year’s profit to be supported by a plant expansion and firm prices due to steadily growing demand and higher feedstock costs. Prices of urea, or nitrogenous fertilizer, its main profit generators, are expected to remain steady this year from last year, Chief Executive Yang Yexin said. Chinese fertilizer demand has been growing at 1.6% to 2% annually in the past few years. China Bluechemical posted a 69% jump in net profit to CNY1.99 billion. The profit rise was driven mainly by the commissioning of the second-phase expansion of a methanol plant in Hainan in December 2010, which saw the firm’s methanol output rise 81% last year. Higher product prices also contributed. The firm’s average selling price for urea rose 23.2% to CNY2,198 a ton, while that of phosphate fertilizer jumped 22% to CNY3,143 and methanol leapt 14.2% to CNY2,262. China Bluechemical mainly uses natural gas feedstock from fields operated by sister company CNOOC near Hainan to make urea and methanol. Production trials will start at its phosphate fertilizer plant in Hubei next month, which will double its annual capacity to one million tons. But the expected start-up time of its urea project in Heilongjiang province, with 520,000 tons of annual capacity, using coal as feedstock, has been pushed back by 18 months to the end of 2014. Yang said this was due to the longer-than-expected time to get government approval for a coal mining license. The firm produced 1.91 million tons of urea last year. Another project in Shanxi province, with an annual output capacity of 1.04 million tons of urea and originally expected to come on stream mid-2013, has been stalled due to a dispute between the firm’s investment partner, a private enterprise, and its coal mining contractor. In Guizhou, where China Bluechemical is developing a phosphate fertilizer and chemicals project, progress is also pending granting of mining rights for phosphorous rocks, and completion of ore processing technology development.

The China National Offshore Oil Corp (CNOOC) signed a production-sharing contract (PSC) with Eni China for a deepwater block in the South China Sea. Italy-based Eni will operate the 30/27 block, which has a total area of 5,130 square kilometers and lies 400 km off the coast of Hong Kong. CNOOC will have up to a 51% interest in any commercial discoveries in the block. Eni, which entered China in 1980, holds a 16.77% share in two offshore blocks, 16/08 and 16/19, in the South China Sea, which have a daily output of about 10,000 barrels of oil equivalent (BOE). Zhu Weilin, Executive Vice President of CNOOC, said that deepwater oil and gas in the South China Sea will be one of the company’s main sources of medium- and long-term development. CNOOC is testing its first domestic semi-submersible drilling rig, the Haiyang Shiyou 981, which is capable of operating at a maximum water depth of 3,000 meters, as part of its ambitions to achieve deepwater output of 50 million tons of oil equivalent by 2020. The Ministry of Land and Resources announced last week that domestic and foreign companies that explore onshore and offshore for oil and gas resources must pay compensation fees for the mineral resources, the first time that the government has imposed such a fee. It is a signal that China is becoming more concerned about resource protection.