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CNPC reports profit of $12.7 billion for full-year 2015

China’s largest oil and gas producer, China National Petroleum Corp. (CNPC), reported its full-year 2015 profit, showing a 52% decline year-over-year. The company reported $12.7 billion in total profit for the year, reports Shanghai Daily, and revenues of $308 billion, down 26% from 2014.

The company produced 260 million metric tons of oil and gas equivalent (196 MMBOE) in 2015, up 1.8% from the year before. Its domestic crude output reached 110 million metric tons (82.9 MMBOE) accounting for 52.3% of China’s total production. Natural gas output reached 95.4 billion cubic meters (3.4 trillion cubic feet), or 72.7% of the country’s total.

“We properly dealt with all the risks and challenges and steered the company from the model of chasing speedy expansion to a model focusing more on quality growth,” Chairman Wang Yilin said in the statement.

CNPC’s listed oil and gas arm, PetroChina (ticker: PTR), reported an even bigger hit this year, with net profit down 67% from last year. The reported profits were the lowest the company has seen since 1999, reports Bloomberg.

CNPC faces unique challenges

The dramatic fall in oil prices have affected oil and gas companies all around the globe, but Chinese companies face a unique set of challenges. Wang said last month the company will not cut front line oil and gas workers as it looks to reduce costs, a measure used by companies elsewhere in the world.

ExxonMobil (ticker: XOM) and PetroChina both reported about $260 billion in operating revenue for 2015. Yet, Exxon’s net profit of $16 billion was roughly three times PetroChina’s. Looking at employees, PetroChina has more than 500,000, compared with fewer than 75,000 at Exxon.

Chinese oil companies, which are owned by the state, must balance political concerns along with the economic ones. China is currently in the process of restructuring the industrial sector to become more competitive on the global scale, but must still keep employment up to avoid political unrest.

The Communist Party secretary of China’s biggest oil field, Daqing, told the legislature during its annual meeting that Daqing, which is owned by PetroChina, lost around $800 million in the first two months of this year. In response, Chinese President Xi Jinping said the government must protect its workers first.

“Today’s economic restructuring cannot come at the cost of workers’ well-being,” he said. “We must guarantee the incomes and treatment of the front-line employees.”

China buying in to Russian oil and gas

While its own companies post substantially lower profits, the Chinese government continues to look for new ways to meet its growing energy demand. The country’s oil imports in February were up 20% this year over 2015, and CNPC is looking at buying a 19.5% stake in Russia’s largest oil producer, Rosneft.

CNPC Deputy Chief Executive Wang Zhongcai said the company was interested in purchasing the stake, which the Russian government believes is worth $10 billion, as the countries look to strengthen ties in the energy sector.

“The process is more political than commercial,” said Chris Weafer, senior partner at Macro Advisory, a Moscow-based consultancy. “It’s an opportunity to expand relations.” The deal highlights the importance of meeting political goals through the use of the oil and gas industry, even as oil prices continue to squeeze profit margins.

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