Years of investment helped China cushion the disruption to Middle Eastern oil supplies, but protecting domestic consumers has come at a cost for its energy companies.
A Reuters report published September 11 examined how Sinopec, PetroChina and CNOOC expanded production and storage to support Beijing’s energy-security strategy.
More production, at a higher cost
Since 2018, the three companies invested an estimated $343 billion domestically, compared with $56 billion abroad. China’s oil output rose from roughly 3.8 million to 4.3 million barrels a day.
However, extracting that oil can be expensive. Rystad Energy estimated average breakeven costs at PetroChina and Sinopec’s onshore fields at $55 a barrel, versus $37 for US shale.
Domestic supply comes before export profits
Fuel-price caps and export restrictions limited the companies’ ability to benefit from higher international prices. Sinopec’s refining business recorded an estimated 1.8 billion yuan second-quarter loss.
The impact was uneven: CNOOC and PetroChina reported record first-half earnings, showing why producers and refiners should not be treated as identical investments.
October restrictions bring fresh pressure
The policy remains relevant. An October 2 Reuters update reported that China had suspended oil-product exports for the month to destinations beyond Hong Kong and Macau.
Expectations of reduced shipments pushed Asian gasoline refining margins above $50 a barrel over Brent. Buyers including Singapore, Malaysia and Australia faced potential supply pressure.
For investors, this illustrates how domestic supply protection can affect both Chinese company margins and fuel costs elsewhere. Higher crude prices alone provide an incomplete guide to which businesses benefit.
Related: Oil Tanker Rates Top $1 Million a Day: 3 Ways Investors Can Trade the Surge.
China’s preparations strengthened its energy resilience, but shareholder returns still depend on production costs, refining exposure and government policy.
Disclosure: This article does not represent investment advice. The content is for informational and educational purposes only.
