PetroChina Plans to Add Oil, Gas Assets as Japan Earthquake Boosts Demand

PetroChina Co. pledged to accelerate acquisitions of energy assets and develop the country’s domestic natural gas resources as demand for the fuel rises following Japan’s nuclear reactor crisis.

“We will accelerate our global expansion,” PetroChina President Zhou Jiping said at a media briefing in Hong Kong yesterday, after the company posted a record quarterly profit. “The nuclear plant closure in Japan will boost its demand for oil and gas. That will have a pretty big impact as Japan is the world’s largest liquefied natural gas importer.”

Gas prices rose to a two-year high in Europe after the March 11 temblor crippled Japan’s Fukushima Dai-Ichi plant, triggering the worst nuclear disaster since Chernobyl. PetroChina bought a $5.4 billion stake in Encana Corp.’s Cutbank Ridge shale-gas assets last month and is intensifying exploration to supply the world’s fastest-growing major economy.

“What is happening in Japan means China will use more fossil fuels in coming years than originally planned,” said Neil Beveridge, an analyst at Sanford C. Bernstein & Co. in Hong Kong. “China will have to speed up the development of its gas resources at home and look for more resources overseas.”

PetroChina’s gas output rose 5.2 percent in 2010, more than three times as fast as the 1.7 percent gain in crude production. The company aims to boost output of gas by 10.4 percent this year, compared with 3.3 percent for oil, Vice President Sun Longde said at the media briefing. Proven gas reserves climbed 3.6 percent last year, while those for crude rose 0.1 percent.

Photographer: Jerome Favre/Bloomberg

PetroChina Co. vice chairman and president Zhou Jiping. Close

PetroChina Co. vice chairman and president Zhou Jiping.

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Photographer: Jerome Favre/Bloomberg

PetroChina Co. vice chairman and president Zhou Jiping.

Shares Rise

The shares increased 18 percent in the past 12 months in Hong Kong trading, compared with the 5.3 percent gain in the benchmark Hang Seng index. PetroChina, rated a “buy” by 17 of 31 analysts surveyed by Bloomberg, climbed 2.9 percent to HK$10.76 by the lunchtime trading break. The Hang Seng gained 0.75 percent.

Fourth-quarter profit gained 81 percent to 39.96 billion yuan ($6.1 billion), according to calculations made by subtracting nine-month earnings from the 2010 net income. That beat the previous record of 39.89 billion yuan in the third quarter of 2008.

The company didn’t give fourth-quarter figures in its earnings statement. Mao Zefeng, PetroChina’s Beijing-based spokesman, didn’t reply to two phone calls today seeking comment.

Full-year profit climbed 35 percent to 140 billion yuan, surpassing a mean estimate of 135.7 billion yuan in a Bloomberg survey of 17 analysts. PetroChina gained as the Chinese economy grew at its fastest pace in three years, boosting fuel demand and helping drive a 15 percent advance in New York crude prices in 2010.

Photographer: Nelson Ching/Bloomberg

The PetroChina Co. Ltd. logo hangs outside a company office in Beijin. Close

The PetroChina Co. Ltd. logo hangs outside a company office in Beijin.

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Photographer: Nelson Ching/Bloomberg

The PetroChina Co. Ltd. logo hangs outside a company office in Beijin.

Japan Impact

China suspended approvals for nuclear projects and Germany ordered the closure of seven atomic plants as Japan’s nuclear crisis escalated and authorities scrambled to contain radioactive pollution. U.K. natural-gas contracts rose 75 pence a therm on March 16, the highest since November 2008.

“There will be a continued growth momentum in China’s oil and gas demand even if we don’t consider the impact of the Japan earthquake,” Zhou said. “There’s tremendous demand for natural gas in China, providing a huge potential for PetroChina.”

China, the world’s biggest polluter, is seeking to triple the use of cleaner-burning gas to about 10 percent of energy consumption by 2020 and reduce dependence on coal. Gas demand may rise to 230 billion cubic meters in 2015 from 130 billion cubic meters this year, PetroChina’s state-controlled parent China National Petroleum Corp. said in a report on Jan. 20.

Overseas Gas

PetroChina has spent $9.2 billion since the start of last year on assets. In February 2010, China’s biggest oil and gas producer paid C$1.9 billion ($1.9 billion) for a 60 percent stake in Athabasca Oil Sands Corp.’s MacKay River and Dover oil- sands projects, the Chinese company’s largest overseas deal until it was surpassed by the Encana transaction.

“We will step up the exploration and development of natural gas and increase the imports of LNG,” Zhou said. “We will also tap unconventional gases like tight gas, shale gas and coal-bed methane.”

The company wants half its oil and gas to come from abroad by 2020, Chairman Jiang Jiemin said in March last year. PetroChina currently gets less than a tenth of its production from overseas.

Royal Dutch Shell Plc (RDSA) and PetroChina completed the purchase of Brisbane-based coal-bed gas producer Arrow Energy Ltd. for A$3.5 billion ($3.4 billion) in August to help the Chinese company develop China’s reserves of the fuel.

Exploration and production accounted for 68 percent of PetroChina’s 2009 operating income, which excludes taxes and interest payments. Refining and chemicals had an 11 percent share that year.

Overall profit in 2011 may rise to 158 billion yuan, partly on higher oil prices, according to a mean estimate of 16 analysts compiled by Bloomberg.

--John Duce, Wang Ying and Paul Gordon. With assistance from Chua Baizhen in Beijing and Winnie Zhu in Shanghai. Editors: Ryan Woo, Jonas Bergman.

To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net; Wang Ying in Beijing at ywang30@bloomberg.net; Paul Gordon in Hong Kong at pgordon6@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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