PetroChina Plans $60B in Overseas Investments

BEIJING (Dow Jones), May 28, 2010  

PetroChina, China's largest listed oil firm by capacity plans to invest $60 billion to boost its overseas oil and gas output to 200 million metric tons annually, equivalent to around 4.0 million barrels a day, the company's president told reporters Thursday.

Jiang Jiemin didn't mention the timeframe for the investments, although in late March he had been quoted as saying spending on this scale would be made over the next decade.

His remarks signal that China's well-established overseas resources buying spree seems likely to continue unabated for years to come, building on strings of multibillion overseas investments by PetroChina and peers like China Petroleum & Chemical (SNP) and Cnooc (CEO), as well as by China's mining companies.

Jiang also said PetroChina plans to acquire most of the overseas assets of its parent, China National Petroleum, other than those in sensitive areas such as Sudan, where CNPC has extensive oil exploration and production operations.

The acquisition of such assets is well in hand--for example, last August PetroChina said it would buy CNPC's share of a Turkmenistan gas field for $1.19 billion.

The two companies have structured their overseas operations to ensure that activities in potentially controversial countries like Sudan, Iran and Syria are held by the parent, and are separate from those of PetroChina, which in addition to being quoted in Hong Kong and Shanghai has American Depository Receipts traded in New York.

PetroChina has historically relied on support from state-owned CNPC when making deals abroad, with all business handled via a joint venture known as CNPC Exploration & Development Co.

PetroChina has owned 50% of CNPC E&D since June 2005 when it paid CNPC CNY20.74 billion for the stake.

However, Jiang Thursday said PetroChina has now shelved plans to buy the remaining 50% of CNPC E&D and that eventually it would be deregistered.

Jiang, who is also CNPC president, was speaking on the sidelines of the company's annual general meeting in Beijing.

As part of PetroChina's growth plans, the company plans to build a refinery in Syria with an annual capacity of 5 million tons, or 100,000 barrels a day, and later this year it would bring a small 1-million-ton-a year Iranian oil field online, he said.

On Wednesday, CNPC said it had acquired a 35% stake in Shell's oil production assets in Syria, which now produce some 23,000 barrels a day of crude.

Jiang said the company's January-April financial results "look very good" and that he doesn't expect the current slump in global oil prices to have much of an impact on first-half earnings.

On April 27 PetroChina said its net profit for the three months ended March 31 totaled CNY32.49 billion, up 71% from CNY18.97 billion a year earlier due to higher oil prices and strong energy demand.

Jiang said he supports the government's plan to introduce a resources tax in China, firstly in a trial stage in northwestern China's Xinjiang Uygur Autonomous Region, where much of the country's oil and gas reserves are located.

He added that the existing windfall tax should be combined with the new resources tax.

PetroChina plans to accelerate efforts to develop shale gas and tight gas output, and Jiang said the company hopes to have an annual coal bed methane capacity in China of 4 billion cubic meters within five years.

In November 2009, PetroChina and Shell signed an agreement to jointly develop shale gas resources in Sichuan province in southwestern China.

China's Ministry of Land and Resources said in February the country aimed to raise its annual output capacity of shale gas to 15 billion-30 billion cubic meters by 2020.

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