PetroChina Co., the world’s second- biggest company by value, plans to “rapidly” increase natural gas production to help meet energy demand in the fastest-growing major economy. Gas output may match that of crude by “about 2015,” while gains in oil production will be marginal, Vice President Li Hualin said in an interview in Beijing on Oct. 14. PetroChina produced gas equivalent to 170 million barrels of oil between January and June, compared with crude output of 418 million barrels, data provided by the state-controlled company show. China, the world’s biggest polluter, is increasing gas imports and building pipelines to ramp up supplies from fields in Xinjiang and Sichuan in the west to commercial hubs including Shanghai and Guangdong. The country wants to cut dependence on coal, which accounts for 80 percent of power generation, as it takes steps to curb greenhouse gases blamed for global warming. “PetroChina has been actively expanding its gas business as part of the nation’s plan to boost clean energy use and fight climate change,” Anna Yu, an energy analyst with Tai Fook Securities Ltd., said by telephone in Hong Kong. The shares have risen 50 percent in Hong Kong this year, lagging behind the Hang Seng Index’s 54 percent gain. PetroChina advanced 1.6 percent to HK$10.16 as of 10:28 a.m. local time. Chinese companies have invested $30 billion over the past five years building pipelines to carry gas from Sichuan, Xinjiang and Ordos in Inner Mongolia to urban centers in the east, Sanford Bernstein & Co. said in a report on Oct. 13. PetroChina is still exploring its Longgang gas area in Sichuan, Li said, declining to give a reserves estimate. “We are confident of good results from the field,” he said. Increasing Gas Supplies China’s gas supplies, including imports, may double to 120 billion cubic meters by 2015 from 2010, Liu Xiaoli, a researcher at the National Development and Reform Commission, the country’s economic planner, said in September. Beijing-based PetroChina signed a 20-year liquefied natural gas supply contract in August with Exxon Mobil Corp., which will start shipping the fuel from the Gorgon project in Australia from 2014 or 2015. The deal is worth about A$50 billion ($46 billion), according to the Australian government. Refinery Expansion PetroChina’s annual oil refining capacity may increase to 200 million metric tons in five years as new plants start operating, compared with 129 million tons currently, Li said. The company will seek to buy refineries overseas, Li said, without naming potential targets. “We aim to have a vertically integrated business to maximize our profitability.” China National Petroleum Corp., PetroChina’s parent, expects its overseas oil and gas production to match domestic output by 2020 as the company acquires more assets to meet demand and bolster energy security, Li said. Total production, including domestic output, may reach 400 million tons of oil equivalent by then, he said. PetroChina is accelerating its overseas strategy “not only because of the nation’s rising domestic demand,” Li said. “More importantly, our overseas projects have proved to be profitable, more profitable than some of our domestic projects.” China National Petroleum received a $30 billion loan from state-run China Development Bank to fund its overseas expansion as the government stepped up its hunt for energy resources. “We still have our own cash flow and the loan so far seems to be more than sufficient,” Li said. PetroChina is seeking an “appropriate return” on overseas acquisitions, he said, without giving figures. PetroChina aims to maintain a market share of about 40 percent in China’s fuel distribution market in the coming years, Li said, without elaborating. Crude oil prices between $60 and $80 a barrel are “reasonable,” he added. To contact the reporters on this story: Ying Wang in Beijing at ywang30@bloomberg.n

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