China's oil and gas industry seeks a great leap forward, judging from statements of PetroChina's Chairman Jiang Jiemin, who sees the acquisition of new technology as the basis of future growth.
"Ten years ago, PetroChina was a state-owned oil company, but now we have a goal of becoming an international, integrated energy company," said Jiang. "A total investment of not less than $60 billion is needed to form our five regions of global oil and gas cooperation by 2020."
Jaing's goal has not gone unnoticed, especially in Australia where local media noted that PetroChina spent $7 billion in the past year to buy refineries and reserves in Australia, Canada, Singapore, and Asia.
Recently, PetroChina also joined with Royal Dutch Shell PLC to bid $3.4 billion (Aus.) for the Australian assets of Queensland coal seam gas player Arrow Energy.
According to Australia's Courier-Mail newspaper, "the recent expansion pits PetroChina against [ExxonMobil Corp.], which agreed to pay about $30 billion for US gas producer XTO Energy in December."
A step-up
Neil Beveridge, an analyst at Sanford C. Bernstein in Hong Kong, told the paper that PetroChina spent $2-3 billion/year in the past 5 years, so the planned investment "is clearly a step-up."
"Every 5, 10 years or so, you'll get the occasional $30 billion deal, but this is at least $6 billion every year and that's significant for any major oil company," Beveridge said. "This puts PetroChina on par or exceeding some international oil majors in spending."
ExxonMobil is said to be counting on natural gas to provide the bulk of its future growth with the acquisition of XTO Energy as well as new developments from the South Pacific to the Celtic Sea.
BP, vying with Shell as Europe's biggest oil company, paid at least $8.3 billion to acquire assets over the past 12 months. But PetroChina may be in the lead over its international rivals, according to the paper.
Seeking technology
"Longer-term investors are betting on PetroChina's success, driving the Hong Kong-listed shares up 40% in the past 12 months," the paper said. "That beat the 38% gain in BP and well outperformed the 3.1% decline in Exxon."
But the Chinese are not simply looking for more reserves or even profits. For them, the key to future growth lies in greater energy independence through acquisition of technology.
Along those lines, Jiang said the main upshot from PetroChina's joint bid with Shell for Arrow Energy was to tap into the latter's expertise in exploiting the unconventional energy.
"Coal seam gas production cost, including investment and operating costs, exceeds that of conventional gas by 30-50%," he said. "We must achieve some technology breakthrough to speed up development of our domestic resources," he said.
It looks like PetroChina wants the tiger of technology in its tank. That's its best hope for the great leap forward.
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