Top Chinese state-owned conglomerates are having to reevaluate their oil-related operations as the country moves to implement President Xi Jinping’s vision for achieving zero net carbon emissions by 2060.
Affiliates of state groups involved with offshore oil drilling, tanker rental and oil storage each said in stock exchange disclosures at the end of last week that they will take heavy write-downs on the value of their assets when they report results for 2021.
The accounting charges total more than $1.1 billion and come even as oil prices have surged to a seven-year high due to worries about supply disruptions and possible surges in demand during the Northern Hemisphere winter.
China Oilfield Services Ltd. (COSL), a subsidiary of China National Offshore Oil Corp., said it would record an impairment provision of 2.01 billion yuan ($317 million) on its oil rig assets as it cited the “accelerated transformation of the energy industry,” as well as lingering effects from the COVID pandemic.
As a result, COSL expects its annual net income to decline 87% to 91% from 2020 levels, bringing earnings down to between 243 million yuan and 351 million yuan.
“International oil companies remain prudent in the investment in oil and gas exploration and development,” the company said, citing a glut in the oil field services market that has kept utilization and price rates of some of its large-scale equipment stuck at low levels.