March 21 (Bloomberg) -- PetroChina Co. is cutting spending as it prepares to invite private investment in line with the government’s push to reduce state dominance at the country’s biggest oil and gas producer.
The company’s target for capital expenditure in 2014 at 297 billion yuan ($47.7 billion) is 7.1 percent lower than last year. PetroChina will keep investment at that level for “the next couple of years,” Chairman Zhou Jiping said yesterday at an earnings press conference in Hong Kong.
China is pushing the most aggressive reforms in more than a decade as President Xi Jinping works to increase market forces in the economy. The government raised retail natural gas prices and signaled it will start allowing private companies to invest in areas traditionally dominated by state-owned giants.
“One of the reasons we can keep the spending at this level is that we will invite social and private investors to join our oil and gas projects in China,” Zhou said. “We’re trying to achieve high-quality growth under this mixed-shareholding model.”
PetroChina climbed as much as 2.1 percent to HK$7.78, the most in a month, and traded at HK$7.75 as of 11:50 a.m. in Hong Kong. The shares have dropped 25 percent in the past year, compared with a 4.6 percent decline in the Hang Seng Index.
China raised the price of gas for sale to industry by 15 percent in July. The increase will help boost PetroChina’s profit by 20 billion yuan on an annual basis, President Wang Dongjin said in August.
Net income for last year rose 12 percent to 129.6 billion yuan, the Beijing-based company said yesterday in a statement. That compares with the 125.7 billion-yuan mean of 13 analyst estimates compiled by Bloomberg. Sales rose 2.9 percent to 2.26 trillion yuan.
PetroChina and its state-owned parent China National Petroleum Corp. are considering opening up areas including pipelines, oil and gas exploration and refining to private investment, Zhou said last week.
“The drop in capex also shows reform policies intended to encourage more private investment in energy are moving forward,” said Grace Lee, a Hong Kong-based analyst at Bloomberg Industries. “Capex will continue to decline as more private capital and refinery upgrades are completed.”
Oil and gas production rose 4.2 percent to 1.4 billion barrels of oil equivalent. PetroChina plans to increase its output to 1.44 billion barrels in 2014. The company expects to process 139.4 million tons of crude oil in 2014, an increase of 3.8 percent over 2013.
PetroChina and CNPC came under scrutiny last year following a corruption probe that ensnared senior managers at PetroChina and Kunlun Energy Co.
Kunlun Energy’s 2013 net income rose 5 percent to HK$6.85 billion, compared with the HK$7.35 billion mean of 10 analyst estimates compiled by Bloomberg. The shares fell as much as 5.9 percent to HK$12.66, the most in almost seven months, and traded at HK$12.78 as of 11:50 a.m. in Hong Kong.
To contact the editors responsible for this story: Andrew Hobbs at email@example.com Abhay Singh, Indranil Ghosh