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The Squeeze on PetroChina

With domestic production falling, it must buy costly oil abroad to sell at subsidized prices at home

PetroChina (PTR) has been the sweetest of China plays for global investors in recent years. Warren Buffett started investing in the mainland's biggest oil producer back in 2003, and the company's shares appreciated more than sevenfold from that point until last November. Last fall, when PetroChina listed in Shanghai, it enjoyed a surreal market capitalization of just over $1 trillion, a figure roughly equal to the economic output of India and $600 billion more than the value of ExxonMobil (XOM) shares.

These days the mood is likely far more subdued at PetroChina's Beijing headquarters. It's a primary target of a divestiture push by human rights groups. They are outraged by the investments of PetroChina parent China National Petroleum Corp. (CNPC) in Sudan, which has drawn international criticism over atrocities in the war-torn province of Darfur. And PetroChina's shares on the Shanghai and Hong Kong stock exchanges have fallen 40%-plus over the last four months, thanks in part to a slower earnings outlook. (Weep not for Buffett: He sold off his estimated 2.3 billion shares, or 1.3% stake, in the company last October and made a killing.)