China's dueling energy giants, PetroChina and Sinopec, are exemplifying the difficulty of balancing profit with patriotism, says Breakingviews' Ethan Bilby.
(SOUNDBITE) (ENGLISH) REUTERS REPORTER, JON GORDON, SAYING: "State-owned enterprises may be created equal in China, Ethan, but they don't seem to stay that way. This latest Russia/China gas deal an illustration of diverging fortunes perhaps." (SOUNDBITE) (ENGLISH) COLUMNIST, REUTERS BREAKINGVIEWS, ETHAN BILBY, SAYING: "That's right, it's more evidence PetroChina's getting a better deal. PetroChina has a monopoly on importing natural gas into China. I mean, these companies are made with a kind of diverging structure. PetroChina was always supposed to be an upstream company, sourcing and drilling, and PetroChina was supposed to be selling fuel to consumers. Now as oil prices have risen a lot over the last decade that's become far more lucrative to source oil and drill for it and both companies would like to be doing that. I mean all oil majors have been having a problem worldwide at the moment as, you know, oil prices have fallen from 100 dollars a barrel to around 80. But still, it's far better to be drilling and you know if this deal can lower PetroChina's average gas cost, that can really help their profits in the future." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, JON GORDON, SAYING: "I think that's the other wild card is the shale reserves within China, Ethan. But we're also partway through a major drive for reform across state-owned enterprises within China. How in particular is that affecting the energy companies though?" (SOUNDBITE) (ENGLISH) COLUMNIST, REUTERS BREAKINGVIEWS, ETHAN BILBY, SAYING: "Well both companies are trying to play to their strengths. Sinopec is trying to get money from a stake sale. They sold 30 percent of their petrol station business for about 17.5 billion dollars. They hope that outside investors can help them turn that business around, make it even better and maybe spin it off for more like an IPO. But I mean, that money they've gotten they hope to put into shale gas projects and that's their big upstream play, which actually isn't as certain because if the oil price stays low in the future it's harder to make those costs pay off. "PetroChina has a lot more proven reserves for oil. It's got the gas importing and actually the Chinese government's been raising the average price that can be charged for gas. That's been helping PetroChina do better on that front." (SOUNDBITE) (ENGLISH) REUTERS REPORTER, JON GORDON, SAYING: "Alright, a lot coming here certainly as the market continues to play more of a role within China in this space going forward." ENDS