PetroChina Co. (857), surpassing Exxon Mobil Corp. (XOM:US) and OAO Rosneft as the world’s biggest publicly traded crude producer last year, plans to buy additional assets to ramp up output and expand into overseas markets.
“We will buy assets on a large scale,” Chairman Jiang Jiemin told reporters in Hong Kong yesterday. “Our focus is on the Chinese market, but in the long term, we will expand outside China,” he said, after the Beijing-based company posted fourth- quarter profit that missed estimates because of losses from selling fuels at prices controlled by the government.
PetroChina plans to invest at least $60 billion this decade in global oil and natural gas assets to increase the share of overseas output to half of its total, Jiang said in 2010. Production outside China rose 18 percent last year, five times faster than that of domestic fields, according to data from the company’s earnings statement.
“The goal makes sense, as almost all of PetroChina’s domestic oilfields are mature and have little room for growth,” said Simon Powell, the Hong Kong-based head of Asian Oil and Gas Research at CLSA Ltd. “All of the incremental growth will be from overseas sites.”
Overseas oil and gas production reached 120.8 million barrels last year, less than a tenth of the total of 1.3 billion barrels, or 3.5 million barrels a day. Assuming daily output of 4 million barrels in six to seven years, PetroChina’s overseas fields have to account for about 2 million, equal to the production of ConocoPhillips (COP:US), Powell said.
PetroChina dropped 7.9 percent in the past year in Hong Kong trading, compared with the 13 percent decline in the benchmark Hang Seng Index. The stock rose 0.2 percent to HK$10.76 as of 9:36 a.m. local time.
The unit of state-controlled China National Petroleum Corp. bought a 50 percent share in the European refining operations of Ineos Group Holdings Plc for $1.02 billion last year, building on its acquisitions of processing plants in Singapore and Japan.
“The world has 11 countries with populations of more than 100 million, and we are studying their markets,” Jiang said, without identifying them. “In five to eight years, our overseas business will account for about 50 percent of the company’s oil and gas production, reserves, revenue and profit.”
Not all of PetroChina’s deals were successful. In June, PetroChina walked away from a C$5.4 billion ($5.4 billion) bid for Encana Corp.’s Cutbank Ridge gas assets after failing to agree on the price. The acquisition would have been its largest overseas purchase.
Fourth-quarter net income slumped 26 percent to 29.6 billion yuan ($4.7 billion), according to calculations made by subtracting nine-month earnings from the full-year profit. That compares with the mean estimate of 35.4 billion yuan in a survey of seven analysts compiled by Bloomberg. Mao Zefeng, a Beijing- based spokesman for the world’s third-largest company by market value, declined to confirm the figure.
Full-year profit dropped 5 percent to 133 billion yuan, also trailing estimates, after crude rose at almost triple the pace of China’s fuel prices last year. The government considers changing fuel prices when the 22-day moving average of a basket of crude varieties gains more than 4 percent from the last revision under a system introduced in December 2008.
“PetroChina still lives in the mercy of government policy changes in the refining sector,” CLSA’s Powell said.
The company’s refining segment posted an operating loss of 60.1 billion yuan last year, compared with a loss of 37.6 billion yuan at rival Sinopec, as China Petroleum & Chemical Corp. (386) is known.
Overall profit declined at PetroChina while Sinopec posted a 2 percent gain. Hong Kong-listed Cnooc Ltd. (883), which doesn’t refine oil, reported a 29 percent jump. Exxon and Royal Dutch Shell Plc, not bound by government fuel-pricing rules, reported increases of 35 percent and 54 percent, respectively.
PetroChina’s oil output rose 3.3 percent to 886.1 million barrels last year, or 2.43 million a day. That compares with Rosneft and Exxon’s daily production of 2.38 million barrels and 2.31 million barrels, respectively. Unlisted Saudi Arabian Oil Co. produces almost 10 million barrels a day.
While PetroChina is the world’s largest publicly traded crude producer, the company still has “huge” potential to expand its oil output, Jiang said.
Gas production increased 7.9 percent to 2.4 trillion cubic feet (68 billion cubic meters) last year, PetroChina said. “In three to five years, our natural gas production could easily reach 120 billion cubic meters,” Jiang told reporters.
Chinese companies are acquiring overseas shale-gas assets to gain expertise in developing the resource in China, holder of the world’s largest reserves of the fuel. PetroChina, which bought a 20 percent stake in Shell’s Groundbirch shale-gas project in British Columbia last month, said it will “actively” develop coal-seam gas and shale gas.
PetroChina plans to produce 1 billion cubic meters of shale gas by 2015, President Zhou Jiping told reporters yesterday. China aims to produce 6.5 billion cubic meters annually by 2015 and ramp up output to between 60 billion and 100 billion by the end of the decade.
“The key is to master shale-gas technologies,” Zhou said.
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