CHINA will move to cut oil company tax bills as crude oil prices head for the biggest annual decline since 2008, sparking gains by producers led by PetroChina Co.

    China will raise the level for the windfall tax on output to US$65 a barrel, from US$55, starting Jan. 1, according to a Dec. 26 finance ministry statement. Nomura Holdings Inc. expects China to boost the threshold again to US$75 in a year.

    “It’s an encouraging policy move by the government because the oil price slump is putting a lot of pressure on cash flow,” Gordon Kwan, Nomura’s Hong Kong-based head of regional oil and gas research, said yesterday.

    “China needs to reduce the windfall profit tax to accommodate struggling producers. Otherwise there’s a lack of incentive to invest,” Kwan said.

    Raising the tax threshold would increase profits of China’s biggest oil companies by at least 10 percent next year, if other factors are unchanged, according to UOB Kay Hian Ltd.

    Prices have slumped 46 percent this year as members of the Organization of Petroleum Exporting Countries resist supply cuts to defend market share and the United States pumps at the highest level in more than three decades.

    PetroChina’s Shanghai-listed shares rose as much as 5.30 percent, while China Petroleum & Chemical Corp., also known as Sinopec Corp., increased as much as 3.08 percent in Shanghai.

    “We are still bearish on the long-term performance of the stocks because of weakening oil prices,” said Shanghai-based UOB analyst Zhou Yinhe. “The 10 percent lift isn’t enough to offset a negative impact brought by the falling oil prices.”

    PetroChina will cut output at the Daqing oilfield next year because of falling oil prices and rising development costs, with annual output expected to fall 20 percent in 2020 from this year, Xinhua reported Dec. 27.

    China about three years ago boosted the threshold from US$40 a barrel. With that adjustment, a tax rate of 20 percent started at US$55 a barrel and rose to a maximum of 40 percent at US$75 a barrel. The levy was introduced in 2006. (SD-Agencies)