MILESTONES: CHINA
By Valentina Pasquali
Energy demand in emerging countries has skyrocketed in recent years due to rapid economic growth. In China, oil production has followed suit, although not at the same pace. The country remains a net importer.
In a sign of changing times, however, PetroChina recently became the world’s most prolific publicly traded oil producer, surpassing Exxon Mobil. In 2011, PetroChina yielded 2.43 million barrels of crude per day to Exxon’s 2.3 million.
This milestone did not necessarily come as a surprise. “I would not characterize the company as an overnight success story,” says analyst Robert Bellinski of market research firm Morningstar. “When the Chinese oil and gas assets were organized into their respective corporate holding structures, allocation was primarily determined by geography, and the best upstream assets were in the north half of the country and were eventually IPO’ed as PetroChina.”
Different ownership structures in the US and China (the Chinese government has an 86% stake in PetroChina) also played a part. “The US still produces and uses twice as much oil as China,” says Julian Jessop, director at macro research company Capital Economics. “But the industry in the US is more fragmented, which has allowed PetroChina to overtake Exxon.”
When natural gas is taken into account, Exxon remains well ahead—with 4.5 million barrels a day of oil-equivalent production versus PetroChina’s 3.5 million barrels. James Hubbard, head of oil and gas research, Asia, at Macquarie Group in Hong Kong, notes: “Of more importance is that PetroChina’s gas production should grow at 10% for several years, closing the gap with Exxon.”
Last year was good for PetroChina in terms of production, but net profits were down 5%. Exxon’s grew 35%. According to Hubbard this is “due to rising oil prices versus regulated Chinese gasoline and diesel prices,” a problem viewed as temporary because “eventually we expect Beijing to enact price reforms that will allow Chinese refiners to make ‘normal’ refining profits.”
