Ladies and gentlemen, welcome to PetroChina Company Limited 2020 fourth quarter conference call. At this time, on the computer screen, I am in Zoom remote. Following the presentation, there will be a Q&A session. Now, let's welcome the host. Thank you.
Good morning, ladies and gentlemen. On behalf of PetroChina Company Limited, I would like to welcome you and thank you for attending the company's 2020 third quarter results analyst conference call. I am Xing Brian, Deputy Director of Investor Relations and the Deputy Chief Representative in Hong Kong. For the call today, we have Mr. Wei Fang, Assistant Secretary to the Board and Head of Investor Relations, Madam Yu Hong, Deputy Director of Financial Disclosure and IR Team in Beijing. First, it's my pleasure to invite Mr. Wei Fang, Assistant Secretary to the Board, for an opening remark. Mr. Wei, please.
Thank you, Brian, for the kind introduction. This is Wei Fang. First of all, on behalf of the management and my team at PetroChina, I would like to thank you all for attending today's third quarter results conference call and webcast. I would also like to thank all the research team and PMs, especially our shareholders, for your long-term support to PetroChina and our team in Beijing and Hong Kong, particularly at this very difficult time. Since the beginning of the year, in face of the unprecedented challenges brought by COVID-19 and lower oil prices, the board of directors and management have actively responded to the severe test. We actively coordinated pandemic prevention and control to ensure smooth operation and production.
In particular, the management have launched a rigorous campaign to improve quality and efficiency across the company and carried out careful budgeting and intensive production and operation optimization to minimize the losses caused by COVID-19 and the impact of low oil prices. Through the joint efforts of all staff, the company has made great progress in the third quarter, and we are now seeing very encouraging signs of recovery. Production and business operations have gradually returned to normal. Business performance has improved month by month since the second quarter. In the third quarter, the net profit was CNY 40 billion , with a sharp turnaround and profit increase of CNY 53.8 billion Q-on-Q and CNY 31 billion year-on-year. As you all can see from the result announcement, the overall financial position remains solid and sound. The CapEx and cost control were further strengthened.
Leasing costs were around $10 per barrel, down by 10.7%, significantly lower than our domestic and global peers. The SG&A was down by 7.9%. At present, the company is facing a better macroenvironment. With the solid progress of resumption of work and production, China's economy is showing good momentum for further improvement. The domestic refined oil product and natural gas market have gradually recovered, and demand has basically returned to normal. These factors all benefited the company's production and management. With these positive factors in mind, I will now give the floor to Dr. Xing again, who will share a quick update on the third quarter results. Again, as a reminder, the presentation material can be downloaded at our corporate website at www.petrochina.com.cn. Thank you, Brian.
Thank you, Mr. Wei. Now, I would like to give a brief introduction of PetroChina's 2020 third quarter results. Please go to slide three. For the first three quarters of 2020, the global economy was in deep recession affected by the COVID-19, which in turn further loosened the supply and demand balance in the international oil markets. After witnessing a cliff-like drop, the international crude oil price recorded its rebound and is currently fluctuating at a low level. As China managed to bring COVID-19 under effective control, the domestic macroeconomic operation has been recovering steadily, with signs of improvement from quarter on quarter, and there was a change in the domestic economic growth in the first three quarters from negative growth to positive. In addition, the imbalance between the supply and demand arising from the abundant production capacity in the domestic refined oil product market was further widened.
The situation of supply over demand in the natural gas market is changing better. Slide four. For the financial highlights, in the first three quarters of 2020, in light of the adverse situation arising from the sharp fall in oil and gas prices, the company continued to enhance quality and profitability. The operating results recorded a significant quarter-on-quarter increase, and all business segments have been improving gradually. According to IFRS, during the third quarter of 2020, PetroChina achieved a revenue of CNY 497.1 billion, an increase of 18.4% in comparison with the second quarter. Profit from operations was CNY 66.3 billion, representing a substantial quarter-on-quarter increase of CNY 69 billion from the previous loss in the second quarter.
The net profit attributable to owners of the company realized in the third quarter stood at CNY 40 billion, representing a substantial quarter-on-quarter increase of CNY 53.8 billion from the previous loss in the second quarter, or a substantial increase of CNY 21.8 billion from the previous loss after excluding profits generated from the pipeline asset restructuring. Basic earnings per share was CNY 0.219, an increase of CNY 0.294 in comparison with the second quarter. Slide five. According to IFRS, during the first three quarters of 2020, PetroChina achieved a turnaround with revenue of CNY 1,426 billion. Profit from operations was CNY 60.3 billion. The net profit attributable to owners of the company was CNY 10 billion, and basic earnings per share was CNY 0.055. Slide six.
In the first nine months of 2020, the average realized price for crude oil of the company was $40.06 per barrel, representing a decrease of 34.9% as compared with the same period of last year, of which the domestic realized price was $41.43 per barrel, representing a decrease of 32.5% as compared with the same period of last year. The average realized natural gas price was $4.61 per thousand cubic feet, representing a decrease of 16% as compared with the same period of last year, of which the domestic realized price was $5.25 per thousand cubic feet, representing a decrease of 11.6% year-on-year. In light of the adverse situation arising from the sharp fall in oil and gas prices, the company facilitated the implementation of initiatives to improve both quality and profitability and enhance its control over all capital expenditure and also cost and expenses.
There was a 10.7% year-on-year decrease in the unit oil and gas lifting cost and a 7.9% year-on-year decrease in the selling and administrative expenses. Slide seven. As for the E&P sector, in the third quarter of 2020, the sector recorded a profit from operations of CNY 9.65 billion, representing a significant quarter-on-quarter increase of CNY 14.2 billion from the second quarter as a loss. In the first nine months of the year, due to the combined effect of factors such as a decrease in oil prices, increase in the sale volume of crude oil, and also natural gas, and the exploration and production segment generated an operating profit of CNY 20 billion, representing a decrease of 74% as compared with the same period of last year.
Irrespective of domestic exploration and production business, the company continued to optimize the deployment of its exploration activities and to strengthen its comprehensive geological research and the risk exploration target research, by focusing on launching sizable and profitable exploration activities in large basins and key areas. The company made important discoveries and strategic breakthroughs in Tarim, Sichuan, Junggar, Ordos, and other basins. In adhering to the practice of strengthening both the production quality and profitability, the company, on one hand, secured stable production in the existing oil fields and, on the other hand, focused on building up its centralized production capacity in a sizable and profitable manner so as to strictly control its investments as well as production and operating costs, and in turn to promote improvements in terms of both production and proficiency.
For overseas operations, in addition to coordinating the safe and stable operation of its existing projects and the development of new projects, the company also stepped up its efforts in prevention and control of risks, including those arising from COVID-19. In the third quarter, the oil and gas equivalent output was 390 million bbl, down by 9.3% Q-on-Q, and in the first nine months of the year, the oil and gas equivalent output was 1.2 billion bbl, up by 4.3% year. Slide eight. As for the refining and chemical segment, irrespective of the refining, the company actively implemented the reduction of refining and increase of chemicals, effectively increasing production of value-added products. In the third quarter, the company processed a total amount of 300 million bbl of crude oil, representing an increase of 6% from quarter to quarter.
In the first nine months, the company processed a total amount of 877 million bbl of crude, representing a decrease of 3.2% in comparison with the same period of last year. In the third quarter, the refining and chemical segment recorded the profit from operations of CNY 8.8 billion, achieving a significant quarter-on-quarter increase of CNY 10.7 billion from the previous loss in the second quarter. In particular, the refining business recorded a profit from operations of CNY 5.4 billion, representing a quarter-on-quarter increase of CNY 12.7 billion from the previous loss in the second quarter. Chemical business recorded a profit from operations of CNY 3.5 billion, representing an increase of 25 x year-on-year. In the first nine months of the year, the refining and chemical segment recorded a loss from operations of CNY 1.7 billion, representing a decrease of CNY 10.7 billion from last year.
In particular, the refining business recorded a loss from operations of CNY 8.3 billion, representing a decrease of CNY 13.55 billion, and the chemicals business recorded a profit from operations of CNY 6.6 billion, representing an increase of 77% year-on-year. Slide nine. In the third quarter of the year, the company produced 12 million tons of gasoline, up by 10.1% quarter-on-quarter, and 2.9 million tons of kerosene, up by 56% Q-on-Q, and 13 million tons of diesel, down by 66.7% Q-on-Q. In the first nine months of the year, the company produced 34 million tons of gasoline, down by 8.3%, and 7.2 million tons of kerosene, down by 23.4%, and 39 million tons of diesel, down by 2.8% year-on-year.
For the production of major chemical products in the third quarter, the ethylene production up by 3%, and the urea production down by 0.1% Q-on-Q, and for the first nine months, the ethylene production up by 9.9% year-on-year, the urea production up by 77.8%. Slide 10. In the marketing segment, the company stringently controlled its marketing costs to improve the overall profitability of the industry chain. Sales of refined oil products reached 44 million tons in the third quarter, representing an increase of 7.3% Q-on-Q, of which the sales of gasoline up by 11.4%, the sales of kerosene up by 29%, and the sales of diesel up by 1.1% in comparison with the second quarter.
In the first nine months, the marketing segment sold 120 million tons of refined oil products, representing a decrease of 13%, of which the sales of gasoline down by 11.6%, the sales of kerosene down by 31.7%, and the sales of diesel down by 10% year-on-year. As for the operating profit, in the third quarter of 2020, the marketing segment generated an operating profit of CNY 7.96 billion, an increase of 115.4% in comparison with the second quarter. Due to the impact brought by factors such as decrease in sales volume, volume price, and decline in profit from inventories prevailing in domestic refined oil markets, the marketing segment recorded an operating loss of CNY 4.9 billion, representing an increase in loss of CNY 3.5 billion year-on-year for the first nine months. Slide 11.
As for the natural gas and the pipeline segment, the company strived to lower the natural gas purchase costs and steadily promoted the restructuring of its pipeline assets. Due to the combined effect of factors such as the decrease in both the sales volume and prices of natural gas, and also the impact brought by the profit from pipeline assets restructuring, the natural gas and pipeline segment in the third quarter of the year generated an operating profit of CNY 43.3 billion, representing a significant increase of 13.4 x quarter-on-quarter. And in the first nine months of the year, the segment generated an operating profit of CNY 57.7 billion, representing an increase of about 163% year-on-year.
In the third quarter, the net loss incurred from the sales of imported pipeline gas and LNG amounted to CNY 5.7 billion, a decrease in the loss of CNY 2.2 billion in comparison with the second quarter. In the first nine months of the year, the net loss incurred from the sales of the imported natural gas amounted to CNY 17.5 billion, a significant decrease in loss of CNY 4.2 billion as compared with the same period of last year. The company will make further efforts to lower the import loss by controlling the import volume, lowering import costs together with other relevant measures. Slide 12. During the period, PetroChina has successfully completed the pipeline restructuring transaction.
On July 23rd of this year, PetroChina entered into the transaction agreement with PipeChina to dispose of target assets, including major oil and gas pipelines, certain gas storage, LNG terminals, and some of the piping oil and gas, in exchange for PipeChina's equity interest and cash consideration. On September 28th of the year, the transaction was reviewed and approved by the second EGM of the company, which was a supporting rate of 99.9963%. On September 30th of the year, all of the conditions set out in the transaction agreement have been satisfied. The ownership of the target assets was passed to PipeChina at 24 o'clock on September 30th, 2020. The total assets sold in the transaction amounted to CNY 354 billion. The book value of the net assets attributable to the owners of the company was CNY 200.66 billion, and the transaction value was CNY 247.2 billion.
As a consideration, the company recognized a long-term equity investment of CNY 149.5 billion in PipeChina and received a consideration in cash of CNY 97.75 billion. For the transaction, the company recognized profit before tax of CNY 45.8 billion and the net profit after tax of CNY 32 billion. The transaction has a profound meaning for both PetroChina and the oil and gas industry and is conducive to the sustainable and healthy development of PetroChina and achieving sustainable and positive operating results in the long term. As the largest natural gas developer and importer in China, and as one of the major suppliers and service providers of the natural gas terminal markets, PetroChina will make great use of nationwide oil and gas storage and transmission facilities to improve operational efficiency and value creation capabilities. Slide 13.
Looking forward, the company will focus more on the development of upstream oil and gas exploration and downstream business, continuously explore a brand new business model of low carbon, accelerate the pace in transformation and upgrade, aiming to achieve near-zero emission by the year 2050 and create a competitive advantage in green development. PetroChina will continue to vigorously implement its strategy of innovation, resources, market, internationalization, and green and low carbon development, promoting high-quality development of its main business, strengthening its foundation for sustainable development, further improving the natural gas industry value chain, and accelerating the integration of natural gas and the new energy business to achieve green and low carbon transformation endeavored to generate greater value for our shareholders. Thank you. We will now open the floor to the questions.
To allow more of you to ask questions, please limit your questions to two each and state the organization you presented before your question. May we have the first question, please?
Ladies and gentlemen, if you have any questions, please press star one on your telephone keypad, and we will interview you. After you hear from Tom, you may start your question. Thank you. Ladies and gentlemen, if you do have any questions, please press star one on your telephone keypad, and we will interview you. After you hear from Tom, you may start your question. Thank you. Our first question is from Horace Tse.
Thank you. Hi, good morning. Thank you, Wei Fang and Brian, for the presentation. I have two questions. The first one, can I just clarify on the PipeChina transaction? Because I saw from your announcement yesterday, the book value of the transaction and the transaction value is actually lower than the July announcement. It's lower by about CNY 21 billion. So can I just verify the difference between the July one and the one that you have in the announcement yesterday? The second question I have is, with a lower oil price on a year-on-year basis for 2020, will you look to book some of the impairments in the upcoming full-year results? Thank you.
[Foreign language]
Thank you, Horace. This is Wei Fang. This question was actually raised by a number of domestic shareholders, so I will try to answer in Chinese, and I'll translate it into English later. [Foreign language]
Thank you. It has been a huge topic among our domestic shareholders as well. The PipeChina transaction has been an important product and task for PetroChina this year, and also one of the biggest major events in the past 20 years in China's oil and gas industry. So I want to thank you for your support and the approval of our shareholders. On September 28th, our EGM has already passed the proposed PipeChina transaction with a support rate of 99.996%. And on September 30th, based on the transaction agreement signed between PetroChina and PipeChina, the conditions precedent have already been satisfied. Therefore, the two companies have completed the handover of target assets along with the transfer of personnel.
[Foreign language]
During this transaction, the target asset totaled a value of CNY 354.08 billion, net asset attributable to parent CNY 201.43 billion. As a consideration, PetroChina recognized a long-term equity investment into PipeChina of 149.5 billion CNY, along with cash proceeds totaling 97.75 billion CNY. The total profit before tax in these transactions is 45.82 billion CNY, with a net profit after tax of 32 billion CNY.
[Foreign language]
According to our previous circular, the consideration of the 268.7 billion CNY, which was based on the appraisals and valuations as of December 21st, 2019, which differs from that of the closing date of September 30th, 2020. The difference mainly lies in the following items. First, the PipeChina dividend payout in 2019 of 12.3 billion CNY, and the first three quarters dividend of 7.9 billion CNY of 2020, which is tax-free. At the same time, there are changes in the volume and prices of initial oil and gas in the pipeline, which is a result determined by the audit of both parties.
[Foreign language]
As for the second question, this is from the finance department, we'll take it. PetroChina attaches great importance to the impact of international oil and gas prices to the value of a long-term asset. They carry out testing on impairment every half a year. According to the Chinese accounting standards, once the write-off has been confirmed on long-term assets, there shall be no recoveries. However, IFRS does allow recoveries of long-term asset impairment. Therefore, PetroChina treats it with more discretion.
[Foreign language]
In the first three quarters of 2020, the oil prices have suffered drastic declines due to various factors. We believe the current oil prices level shall not reflect that of the long term. At the same time, from 2017 to 2019, PetroChina has the written-off long-term asset impairment totaling CNY 61.29 billion, in which oil and gas assets and mining blocks equity totaling CNY 14.1 billion. In the fourth quarter of 2020, PetroChina believes that its consideration over the value of long-term assets has already been fully demonstrated. Therefore, in the fourth quarter, we did not write off any long-term assets.
[Foreign language]
In the fourth quarter, according to accounting standards, PetroChina will maintain close communications with auditors and follow international oil and gas prices dynamics to carry out a scientific analysis of the changes, so as to better carry out testing of the asset value and consolidate the base of assets and maintain a prudent financial profile. Thank you.
We're waiting for the next question.
Ladies and gentlemen, if you have any questions, please press star one on your telephone keypad, and we will interview you. After you hear your prompt tone, you may start your question. Thank you. The next question comes from Neil. Thank you.
Good morning. This is Neil Beveridge from Bernstein. I've got two questions. My first question is, we've seen a strong recovery in 3Q. Assuming oil prices stay around $40 a barrel for the rest of the year, and based on the data that you're seeing for October and presumably higher winter gas prices, do you think we'll see a sequential improvement again in profitability in 4Q versus what we've seen in 3Q? My second question is more about the long term. You've highlighted that PetroChina aims for a net zero target by 2050. Can you, first of all, clarify this is just for scope one and two emissions only? And secondly, with China declaring a target of net zero by 2060, how does this impact your business plans for oil and gas?
And can you give us any specific targets for new energy and low-carbon investments that you plan to make, either in terms of a CapEx number or the types of investments that you're going to be allocating capital to? Thank you.
[Foreign language]
Thank you, Neil, for your quick question. This is Wei Fang. I'd like to take your first question. As I just mentioned, my apologies for not being, you guys were not being tuned in in the first portion of my opening statement. During my opening statement, I actually mentioned that in the third quarter, we have seen very encouraging signs of recovery and improvement. As you can see, the GDP growth in the third quarter was 4.9%, which averaged the first nine months' GDP to 0.7%. So currently, the government's implied growth for the whole year is around 2% and 2.5%.
That indicates about a higher growth in the fourth quarter. So we saw this number in October, and it was also very encouraging because of the winter season. So now the oil price is locked. The future is locked for December. So basically, the oil price will be quite foreseeable in the next two months. So for natural gas realization, I think we are entering into the winter stage. So if the pandemic, the outbreak is further controlled, I think the economy will grow. We'll have a strong momentum of growth. So I'm quite optimistic about the fourth quarter results. And in terms of your second question about green and low-carbon development, yeah, let's go back to your first question.
At the first quarter announcement, we actually announced that the two bottom lines for the company for this year is that to maintain positive earnings and positive cash flow at a $40 price environment. I think our record in the third quarter and the first nine months have actually showcased that our commitment, that we are positive, and also in earnings, and we're positive in cash flow. So I think with further recovery in the fourth quarter domestic, I think the fourth quarter is quite optimistic. In terms of your second question about green or low-carbon development, when our chairman took office in January, actually, he laid out his vision for the transition for the company. That is to grow gas, grow clean, go green. So the green and low-carbon development strategy is a dedicated, a decided strategy of PetroChina.
You're right that yesterday, the 19th CPC Central Committee meeting approved the guidelines of the 14th Five-Year Plan, among which the Carbon Neutral goal was very much emphasized in that plan. PetroChina is currently adopting the new green and low-carbon development in line with the drafting of the 14th Five-Year Plan for the company. Basically, we have like three step plans, including clean alternatives, strategic replacement, and green transition. Our goal is to build a low-carbon energy ecosphere with integrated development of fossil fuel and clean energy. For the next five years, we'll be focusing more on the integrated development of natural gas and power. We'll be more focused on the development of geothermal, wind power, and solar energy. We will launch pilot projects in the hydrogen industry value chain.
So as indicated by our CEO, our current target is that by 2050, we will reach near-zero emissions on Scope 1. Currently, our rough estimate is that within the next five years, we'll be spending about $10 billion on green and low-carbon transition each year for the next five years. Thank you.
Ladies and gentlemen, we are now going to the Q&A session. If you would like to ask a question, please press star then one on your telephone keypad. Thank you. The next question comes from Andy from Morgan Stanley. Thank you.
Thank you for the presentation. I have two questions. The first question is related to the natural gas division. If you look at the gas production volume, I think the third quarter is seeing some slowdown versus the first half. And also, I see the price is seeing lower versus the previous quarters.
But it's interesting to know we have successfully narrowed the gas import loss. So that's very exciting. I want to know what about the outlook for the fourth quarter regarding the volume and the price? And how do you think about the gas import loss as well as the total gas division operating profit for the fourth quarter outlook? The second question is related to the dividend. So we know due to the large earnings in the third quarter, we have turned the total average profit for the company in the first three quarters to profit-making. In that case, for the full year of 2020, highly likely the whole company will be profit-making. And when we consider the dividend, will we consider based on the total earnings or total cash flow or just the profit generated in the second half? So what will be the benchmark when we think about the dividend for the full year? Thank you.
[Foreign language]
Thank you, Andy, for the good question. So I will answer your first question in English. And the second question, because some of the domestic shareholders were quite concerned about the dividend, so I will be answering in Chinese and translated into English. So the third quarter was actually the lower season, the summer season for natural gas. So the demand was relatively low, and the price was actually applied by the summer price arrangement. So we actually made some maintenance in some of the fields and reduced domestic production by 3.8 billion compared to the second quarter. So we actually increased our import because the import price was, the spot price was quite low. So that is the reason for the reduction, substantial reduction of the import losses.
And so, fourth quarter, that will be now we have this relatively cold winter in the northern part of China. So we will be soon trying to implement the wintertime pricing. So fourth quarter, in terms of pricing, I think we will be seeing improvements. And in terms of volume, I think it will be this if the winter, so I like warm weather, but our natural gas marketing really wants the weather to be cold so that they can deliver better earnings. So I think the fourth quarter, in terms of production, so I think it will be as a sign of the recovery of the economy and the weather, I think the price and volume will be increased quite substantially. In regards to the second, your question on the dividend, I would like to answer your question in Chinese.
[Foreign language]
Due to the COVID-19 pandemic and the low oil prices, PetroChina suffered rather large loss in H1. However, given coordinated consideration of our performance, financial profile, cash flow, as well as the proceeds from pipeline transactions. Despite the nearly CNY 30 billion losses, we still issued a total dividend of CNY 16 billion, which is CNY 0.087 , and up 12% year-on-year. In the past five years, we not just maintained the 45% payout ratio, but also issued special dividends based on the oil prices and the earnings of the company. We will continue to uphold the principle of rewarding our shareholders in H2 and practice a flexible and pragmatic dividend payout policy. We will coordinate between the long-term interest of the company, cash flow, major M&A projects in considering our payout policy.
Thank you.
Thank you very much.
The next question comes from Mengqi Zhao from Merrill Lynch . Thank you.
Thank you. Thank you, management, for the presentation. And also, congratulations on the results. We noticed that all segments achieved positive results from exit level in Q3, so congrats on that. Two questions from me. Firstly, we saw some quarterly improvement in the refining and marketing division. May we know what's the inventory write-down for third quarter? Also, what's our expectation for the fourth quarter inventory write-down and also some outlook for the refining division and refining margin? Second question, we saw some cost reduction in E&P with lifting costs down nearly 11% in the first nine months. Is it more due to the optimization of the production, i.e., suspend a high-cost well? What's the further room for the cost reduction in the fourth quarter? Thank you.
[Foreign language]
Okay. Thank you for the questions. I'm Meng Yu from IR. I want to take your first question regarding the exploration and the refining department. Because we are using the moving average method to measure our inventory loss with non-static and our peers such as Sinopec. At the end of September, the inventory loss in the refining segment is around CNY 0.17 billion, and it's lower than at the beginning of the year about CNY 40 million. And so the second question is the outlook of the fourth quarter because yes, in the first nine months, our company implemented the portfolio shift, reducing the refinery and increased the chemicals, and we have good results from that. In the fourth quarter, we also will continue to make efforts to do this, and I think we will have a better result in the fourth quarter according to the numbers of October.
And the chemical segment is very good, and the refinery market, because it's probably going to the low season of the consumption of the oil product, the earnings of this segment is stable. So for the whole picture of the fourth quarter, I think that we will do good in this segment.
I'm looking at also from the investor relations. I'd like to take your second question with regards to the cost. And we are happy to see that in the third quarter, the EBIT of our EMP segment came at CNY 9.6 billion, reversal of a net of CNY 4.5 billion in the second quarter. And one reason is higher realized oil price, and the other reason is what you mentioned, a good job we've done in our cost cutting. Our lifting cost for the first three quarters raised the $2.07 per barrel, down by 2.7% year-on-year.
For the third quarter, we're looking at raised $11.94 per barrel, up $1.71 per barrel for Q-on-Q. There are several reasons. One of the reasons is, as you mentioned, that we optimized the production of our upstream to slow down production of those high-cost oil wells in an effort to lower the overall cost. There are other reasons, such as the exchange rate, which has contributed to a $0.28 per barrel cost increase in the per-unit lifting cost. The other reason is a volume reduction for the overall production, which also increased the per-unit lifting cost of $0.50 per barrel. The last reason is the increase in some costs, such as raw materials, laborers, and engines. All of this led to a cost increase of $0.93 per barrel.
In summary, although we have made the achievement in cost cutting, but with the recovery of the economy, the room for further cost reduction is limited. But we actually have set up this principle of all the costs can be reduced. [Foreign language] But still, our pressure for cost cutting for inflation might be an issue for fourth quarter. Thank you.
The next question comes from Liu Zhicheng from Bank of China International. Thank you.
Hi. Hi, Zhicheng. It's Liu Zhicheng from BOCI. Just a question on your marketing segment. We noticed the profitability in the third quarter further improved from the second quarter. So I would like to know that, first of all, can you break down the quarter into, say, domestic retailing and wholesaling operation, and also international trading? And what do you expect for the fourth quarter for this segment? Thank you.
[Foreign language]
Thank you for the question. This is Adam Yao. I'm answering questions. So we all know that for the first three quarters of this year, the marketing segment faced several challenges, such as the volatile oil prices and the shrinking demand, as well as the pandemic. But our marketing segment actively responded to the market situation and strengthened some efforts to further increase the pricing regulation. And in the meantime, we also strengthened the coordination between production and sales, and effectively controlled the inventory level. The export volume of our refined oil product was controlled, according to the market situation and the changes in the price of the oil. So in the first three quarters of this year, the domestic refined oil sales volume reached 77.84 million, decreased by 20.5%. And among them, the export volume surged 3.345 million tons, and the export volume of the kerosene is 54 million tons, and the diesel is by 36.7 million tons.
And in terms of the international trading, in the third quarter, the trading volume of the four companies is GBP 0.11 billion, and recorded a pre-tax profit of CNY 4.49 billion. And in the first three quarters, the international trading volume is GBP 0.348 billion and has a pre-tax profit of CNY 5.33 billion. And as we mentioned before, with the further control of the pandemic, we expect the economy will continue to recover. So we expect this marketing segment will continue to perform well in the fourth quarter. Thank you.
Madam Liu. So the international third quarter, the trading profit EBIT was CNY 4.45 billion CNY versus the EBIT of the marketing segment is CNY 7.9 billion.
Thank you.
Thank you, Zhicheng.
The next question comes from Wang Kaijian from Zhongying Zhengsheng. Thank you.
[Foreign language]
The question was regarding the price floor mechanism as well as the risk fund for oil price regulation. As China enacts the price floor mechanism for oil products, we have also set up a risk fund for oil price regulation, which means that when the international crude price is lower than $40 per barrel, the oil product prices in domestic China will not be adjusted down. But instead, the unregulated amount of the prices will be included in a risk fund to be turned over to the State Treasury and used in a coordinated manner on energy conservation and emission costs, improving the quality of oil products, ensuring the supply security of petroleum, as well as addressing volatile changes in the international oil prices. So far, these policies have seen no changes.
[Foreign language]
According to such a policy, the Company has registered a provision for the risk fund totaling CNY 13.297 billion, due to the intense competition in refined oil product markets as well as being unable to fully push up prices, such a policy does pose certain impacts on the profitability of PetroChina. Thank you.
As for the subsidies for the unconventional natural gas, I'd like to take this question. For unconventional natural gas, as PetroChina, it's mainly in the central. I will call back my colleagues and ask them if you could. Until 2020, the Ministry of Finance pushed out a temporary policy on the management of a special fund tied to the development of clean energy. And this special fund, it will be used to subsidize the production of shale gas, coalbed methane, and tight gas. And as for the subsidy, there is a benchmark.
The benchmark is the production volume of last year. For the new year, the incremental volume you produced will be subsidized. In general, the more you produced, the more you will be subsidized. As for the formula, it's quite complicated. It will differ from different kinds of resources and in different seasons. You can find the detailed formula in the website of the Finance Department as well as NDRC. For our company, for this year, based on this temporary policy for the subsidy of unconventional natural gas, we are expected to have a subsidy of around CNY 4 billion .
[Foreign language]
Thank you. Next question.
The next question comes from Tom from HSBC. Thank you.
Performance and a nice bounce off the bottom. Three quick questions. Firstly, how should we think about the operating profit in the pipeline segment in 2021 after the restructuring? Can you guide us on unit profitability in terms of total gas sales in BCM or BCF? Secondly, what are your expectations for equity-accounted income from PipeChina in fourth quarter 2020 and in fiscal year 2021? And does PipeChina have a dividend policy? And do you expect to get a dividend, and how much is it? Thirdly, what is the expected effective tax rate in fiscal year 2020 and fiscal year 2021 versus the 50% tax rate through the nine months of 2020? And then lastly, can you confirm that your CNY 10 billion CapEx per annum over the next five years on green and low carbon, CNY 10 billion R&D per annum? That seems relatively modest. Thank you.
Tom, to answer your third question, the CNY 10 billion is for the next five years, not for per annum. Maybe I made a mistake, or maybe you didn't hear it correctly. This is my answer to your third question. First, two questions, can you translate? Thank you.
[Foreign language]
To answer your second question, that we actually had in the articles of association, the PipeChina actually committed to pay dividends no lower than 30%. And we are currently in negotiation with the PipeChina because we have two Board seats at PipeChina. So we expect them to pay a higher dividend. But it will be determined by the dividend for 2021. It will be determined by their Board meeting, and our Board members will participate. I will try to pass on your questions and your concerns to our directors and see if we could push for a higher dividend. For the first question, Madam Liu.
[Foreign language]
First, in terms of the pipeline assets, now that these assets have been handed over to PipeChina and we hold a 29.9% equity in the company, in the future, we have set up a long-term coordination of production and operation mechanism with this company based on the agreement previously signed. And we expect the process to be very stable and sound and reliable based on the contracts we've signed. And we estimate the operating profit of these assets to be very sound and steady.
[Foreign language]
As for the dividend of PipeChina, it will be no less than 30% of its yearly distributable profit. As for the specific details, it will be determined by the board of directors through its cash flow profile as well as its operating performance and go through an internal approval process. We believe it is also a rather good news for PetroChina. Thank you.
The next question comes from Leo from Daiwa Capital Markets. Thank you.
Hi, this is Leo from Daiwa Capital Markets. First of all, congratulations on the successful completion of pipeline asset transfer, as well as getting a positive profit in third quarter this year. My first question is regarding production. We calculate the overseas oil and gas production in third quarter this year, which actually saw a 15% year-on-year decline and 30% quarter-on-quarter decline. Therefore, shall we expect the low level of overseas oil and gas production to be maintained in fourth quarter this year? And if it really happens, is PetroChina still confident about achieving 5% year-on-year growth in total gas production given fourth quarter last year is actually quite a high base? My second question is regarding CapEx.
I saw that in nine months, I mean in the first three quarters this year, CapEx in cash actually declined by only 7.8% versus the guidance of full-year decline of roughly 22%-23%. So shall we expect that by the end of this year we will actually see a CapEx in cash, which is beating previous guidance? And although I also understand that fourth quarter last year is actually a high base, and that's all for my questions.
[Foreign language]
Thank you. This is fine. I'll take your questions. As for the first question regarding the overseas natural gas and oil production, as you may have no doubt, most of our contracts overseas are PSC or service contracts, which usually has a connection with oil price. When oil price increases, the calculated production will decline. So this is a major reason for the overseas production decline.
In the third quarter, because for domestic natural gas production, we had some mainly facility repairing in the third quarter. So in the second quarter, in the third quarter, our domestic natural gas production also declined. And also because of the low oil price, the import of natural gas price will be relatively low in the first quarter. So in the third quarter, we're using this time window to have some further natural gas imports. This also is another reason for the natural gas decline. And for the long-term, for this full-year natural gas production target, I think the 5%-6% kind of target is achievable. And if you take a look at for the first nine months, our natural gas production actually increased for 5% as a total. And of course, domestic production actually increased about 8.2%.
And the 5%-6% kind of crude production increase mainly referring to domestic production. This is for the first question. And for the CapEx, I think usually the cash CapEx is only what we have made at the current level. But currently, we still maintain the full-year target by 22%-25% kind of cut for the total CapEx of the year. And also because of the auditing usually in the fourth quarter, some of the cost and CapEx will be reflected usually in the fourth quarter. If you take a look at the track record of the previous years, you will see that usually the fourth quarter CapEx reflection usually is the highest. Thank you.
That's very good. Thank you.
[Foreign language]
And Ms. Yu would like to add one point. You can see that the cash CapEx from first to third quarter still concerns that of pipeline operation. And since pipeline assets have been handed over to PipeChina, such a fund needed in pipeline construction will no longer exist in the fourth quarter. And therefore, we believe we will continue to follow the targets and guidelines set earlier this year. Thank you.
Thank you, Mike. I see that there's no other further questions. So let me wrap up today's conference call and webcast. Dear shareholders, although we entered an unprecedented challenge, we have encountered unprecedented challenges in 2020. The company has come out stronger on the other side. The operation performance improved month by month in the second quarter, and all sectors achieved profitability in the third quarter, showing our strong resilience in a difficult situation.
With less than two months left in front of us until the end of the year, I think the management will seize the current favorable opportunities, adhere to the market-oriented and performance-focused approach, fully implement our special action plan for improving quality and efficiency, and resolutely win the battle against the pandemic and safeguard the profit. At the same time, we will combine the trend of global economic development and industry development trend to further align the company's 14th Five-Year Plan to provide a new roadmap for green and high-quality development. Lastly, I would like to draw attention to the upcoming EGM on next Thursday, November the 5th, focusing on the renewal of continuing connected transaction with CNPC for the next three years. We have sent our shareholders the circular for the event. As we discussed in our last call, the continuing connected transaction benefits PetroChina.
Through careful calculation and consideration, a reasonable amount of continuing connected transaction will be decided in line with the company's development need, reflecting a trend of declining in the total amount of related transaction year by year, and we would really appreciate if our shareholders could show your support by casting your vote for the resolution. Again, before we wrap up, we all hope you're safe and healthy and prosperous, and I hope to see you again soon in Hong Kong, Shanghai, and Beijing. Thank you.
Thank you, Mr. Wei. This concludes today's presentation. If you have any further inquiries, please feel free to contact us or send your questions to PetroChina Investor Relations via email at hko@petrochina.com.hk. Also for today's presentation, we have replay. Once again, thank you for joining us today. See you next time.
Thank you again, Meng. Thanks for your participation. You may now disconnect. Bye.