PetroChina gains on Beijing’s gas production subsidy hope as trade war stokes energy security fears
Beijing is mulling to extend subsidies for shale and coal seam gas production after 2020 and to provide aid to tight gas production
Shares of PetroChina and subsidiary Kunlun Energy gained after Beijing said it was mulling financial incentives to bolster natural gas production and logistics capacity to enhance national energy security as the US-China trade war rages on.
Beijing may extend subsidies on shale and coal seam gas production for five more years beyond 2020 and provide aid to tight gas production for the first time, according to a circular released by the State Council on Wednesday.
The subsidies were among various measures to implement Beijing’s “energy security strategy” and ensure “fast growth in reserve proving and production”, it said.
The circular came a month after President Xi Jinping told the three national oil and gas giants to boost output to enhance national energy security amid an ongoing trade war which saw Beijing slapping a 25 per cent tariff on US gas.
PetroChina is the country’s largest producer of conventional and unconventional gas, responsible last year for two-thirds of the national output of the cleaner burning fuel – key to Beijing’s “war on air pollution”. It is also the biggest gas importer.
But the company’s target to raise gas output by 4 to 5 per cent in the next few years has fallen short of Beijing’s goal of an 11 per cent annual output growth until 2020, according to a Jefferies report.
Unconventional gas – including tight gas, shale gas and coal seam gas – adheres tightly to geological structures and whose extraction requires advanced drilling techniques. Producers of shale and coal seam gas enjoy a subsidy of 0.3 yuan per cubic metre, a substantial source of income.