CNPC to Cut Oil, Gas Lifting Costs, Project Spending

By Winnie Zhu

March 10 (Bloomberg) -- China National Petroleum Corp., the nation’s biggest oil and gas producer, plans to cut extraction costs, project spending and overseas travel this year as slowing economic growth erodes fuel demand.

The company’s oil and gas lifting costs will be reduced by at least 5 percent from a year earlier and spending on projects will be cut by more than 10 percent, the Beijing-based company said in a statement in its newsletter China Oil News today. The budget for overseas business travel and car purchases will be lowered by at least 10 percent, it said.

China’s economy, which expanded 6.8 percent in the fourth quarter, may grow 6.7 percent in 2009, the smallest gain in almost two decades, according to the International Monetary Fund. China National’s cost-cutting efforts follow similar moves by oil producers including Total SA and BP Plc as the global recession damps demand and after oil prices fell more than 70 percent from a record in July 2008.

The oil producer, the parent of Hong Kong-listed the parent of PetroChina Co., didn’t give exact cost figures in the statement. PetroChina’s oil and gas lifting cost was $7.75 a barrel in 2007, up 15 percent from a year earlier, it said on March 19.

China National will reduce the use of electricity and water by more than 5 percent this year, it said in today’s statement. The company will encourage teleconferences, ban off-site meetings and won’t construct any new buildings until 2010, it said.

China National said Dec. 16 that market uncertainties and the slowing global economy will make 2009 a “difficult year.” The state oil producer plans to cut oil and gas output this year from 2008 levels, Vice President Yu Baocai said March 7.

Oil prices in New York traded at $47.18 a barrel at 11:24 a.m. in Singapore. Prices have fallen from a record $147.27 reached on July 11 last year. China National expects crude oil prices to average $40 a barrel in 2009, Vice President Yu said March 7.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net