PetroChina seeks more ‘Belt and Road’ acquisitions, lifts gas output to feed China’s war on air pollution
State-backed PetroChina will step up its acquisition efforts in nations covered by President Xi Jinping’s “Belt and Road Initiative” and boost gas output to meet rising demand stemming from Beijing’s war on pollution, according to its chief.
“We will focus more on acquisition opportunities in nations covered by the initiative as part of our globalisation strategy,” chairman Wang Yilin told reporters on Friday, referring to the more than 60 countries where Beijing is pushing for greater trade and investment cooperation.
His comments came close on the heels of PetroChina’s winning bids on Wednesday to invest a total of US$1.17 billion for 10 per cent stakes in two projects off the coast of Abu Dhabi.
The energy giant has been largely absent from the international asset acquisition arena except for smaller exploration projects since the oil price slump began in mid-2014.
Wang said it saw off many international majors to clinch the Abu Dhabi investments and is confident the deals will prove beneficial to PetroChina’s overseas asset portfolio.
PetroChina on Thursday posted a 190 per cent jump in net profit to 22.8 billion yuan for 2017, closer to the high end of the 165 to 203 per cent range it had forecast in late January.
A 27.2 per cent increase in the average oil selling-price and a 12.7 per cent rise in that of natural gas more than offset a 3.7 per cent fall in oil output, resulting in a fivefold rise in operating profit from oil and gas production to 15.5 billion yuan.
The company is targeting a 0.1 per cent rise in oil output and a gas production increase of 3.3 per cent this year.
Vice-chairman Wang said it aims to lift gas output by 23.7 per cent between last year and 2020 when the target is 120 billion cubic metres – an average annual increase of 7.4 per cent.
This would help PetroChina – which has 70 per cent of the domestic gas market – meet Chinese demand that grew 15.3 per cent last year, besides raising imports.
Gas output from shale rock formations is expected to see the fastest growth, quadrupling to 12 billion cubic metres in 2020 from last year, after it doubled its 2020 target for the cleaner burning fuel.
PetroChina’s high revenues last year from oil and gas production were partly offset by lower fuel marketing profits, a 60 per cent surge in losses on gas imports to 23.9 billion yuan due to state price control and a doubling in asset impairment writedowns to 26 billion yuan.
“While higher commodity prices will benefit the company, growth in gas [import] losses will continue to impair earnings visibility,” Sanford Bernstein senior analyst Neil Beveridge said in a note on PetroChina’s profit prospects for this year.
The vice-chairman said further partial liberalisation of the nation’s gas pricing, and maiden delivery this year of cheaper gas on short- to medium-term contracts signed with suppliers in the US and Russia will help stem gas import losses.
