PetroChina to lift output, intensify trade and bolster green energy against rising supply risks

China's integrated giant PetroChina will invest efforts to boost domestic oil and gas output, intensify international trading activities, as well as grow renewable energies to ensure energy supply amid rising risks due to the Russia-Ukraine conflict, chairman Dai Houliang said March 31 during the company's 2021 result call.

The state-owned firm's measures are in line with China's 14th Five-Year Plan for Modern Energy System published March 22, which highlights enhancing the stability and safety of energy supply chains.

In the backdrop of rising oil and gas costs, PetroChina plans to lift its upstream output by 2.8% year on year in 2022, strengthen partnerships with international suppliers, while doubling its budget in energy transition from last year.

"Supplies are generally stable for the time being, but the costs jump sharply," Dai said.

PetroChina targets to produce 4.57 million boe/d or 1.67 billion boe of oil and gas in 2022 globally, rising from 4.45 million boe/d in 2021, according to the company report.

This includes the target of a 1.2% year-on-year increase in its global crude production to 2.46 million b/d.

PetroChina lifted its domestic crude production by 1.3% on the year to 2.06 million b/d in 2021, accounting for 51.2% of China's total crude output of the year.

Its Changqing, Tarim, Xinjiang and Southwest fields are expected to sustain PetroChina's crude output growth in the effort to meet China's production target of 4.02 million b/d for 2022.

At the same time, PetroChina's domestic crude and gas reserve replacement ratio was at its record high of 147% in 2021 according to Securities and Exchange Commission (SEC) standards, while the domestic crude reserve replacement ratio hit the historical high 221%, according to senior vice president Ren Lixin.

Moreover, the giant targets to spend 75%, or Yuan 181.2 billion ($28.54 billion), of its 2022 budget for exploration and development. The segment's capex rises 1.6% year on year, despite PetroChina' total budget falls 3.7% to Yuan 242 billion.

Crude imports

However, PetroChina's domestic crude production could only meet about 62% of its throughput needs, according to company result, leaving the rest to rely on imports.

In 2022, its throughput target is at 3.48 million b/d, up 3.6% from 2021 as the 400,000 b/d Guangdong Petrochemical is expected to be online in second half, suggesting an increase in crude imports.

"PetroChina has maintained sound partnership with many gas and crude producers. We have many ongoing long-term contracts, and the executions are generally stable currently," Dai said.

PetroChina is China's leading Russian crude importer via pipeline on the back of its parent company CNPC's term contract with Rosneft and Transneft.

The term supplies are more likely stable despite mounting sanctions against Moscow due to the Russia-Ukraine war since Feb. 24 as they are pre-existing trading, analysts said.

With the term deals, CNPC agreed to import 800,000 b/d of pipeline crude from Russia, comprising 200,000 b/d via Kazakhstan through the Atasu-Alashankou pipeline under a bilateral state agreement, and 600,000 b/d of ESPO Blend via the Skovorodino-Mohe pipeline to PetroChina's refineries.

According to latest data, S&P Global Commodity Insights estimates PetroChina imported at least 710,000 b/d of crude from Russia in 2020, accounting for 42% of China's total inflows of 1.68 million b/d from the non-OPEC producer in the year.

On Feb. 4, CNPC and Rosneft signed an agreement for supplying 100 million mt, or around 200,000 b/d, of crude oil to northwestern China through Kazakhstan for 10 years, which is likely an extension of the current contract via the same pipeline which will expire next year.

Green Energy

PetroChina also targets to increase its green energies production and utilization capacity to hit 23.5 million mt standard coal/year in 2025, as an effort to ensure energy supplies while keeping on track with its emission targets to peak by around 2025, "near-zero" by 2050, Dai said.

The capacity is expected to account for 7% of the company's energy mix by 2025, which would set a solid foundation to lift the proportion to a third by 2035 and achieve 100% in 2050, he added.

In 2021, the company hiked the capacity by 3.5 million mt standard coal/year by commissioning 39 new projects. Crude production accounted for about 55% of its energy mix last year, while PetroChina targets to raise gas output proportion to 55% in 2025 from 51.6% in 2021.

PetroChina is China's top upstream producer holding most of the onshore oil and gas fields in the country, as well as solar, wind, and geothermal resources where it has mineral rights.

In addition, the company set up six new energy bases to develop its clean energy projects in Yumen, Qinghai, Jidong, Jilin, Daqing and Beijing-Tianjin-Hebei, in the northern part of China.

PetroChina's operation targets

* Oil, gas outputs from both domestic and overseas

Source: company report

PetroChina's domestic production (Unit: mil mt)

^ Divide PetroChina's output by China's total production

Source: company report, National Bureau of Statistics

PetroChina's domestic oil product total sales volume (Unit: mil mt)

Source: company report