PetroChina aims to raise natural gas production to 55% of total output by 2025

China's biggest state-owned oil and gas company PetroChina aims to increase the proportion of natural gas production to 55% of its total oil and gas output by 2025, Chairman Dai Houliang said March 31.

The proportion of gas is estimated to rise nearly 10 percentage points from about 45.4% in 2021, based on the previous year's data, and represents China's strategic push to boost domestic production to reduce dependence on costly imports amid growing energy security concerns.

"Fossil fuels, especially natural gas as well as crude oil, will still play an important role in achieving carbon peak and carbon neutrality targets, therefore, we will further strengthen the development of natural gas business, enhance gas and oil exploration and development efforts to ensure domestic supply," Dai said at an earnings conference call.

PetroChina plans to produce 4,625.1 Bcf, or 130.97 Bcm, of marketable natural gas in 2022, up 4.6% year on year and is estimated to account for 46.2% of its total oil and gas production target of 1,669.7 million barrels.

Of its 4,625.1 Bcf natural gas production goal, 4,432.6 Bcf, or 125.52 Bcm, of natural gas is expected to be produced domestically in 2022, up 5% year on year, PetroChina said.

It expects to intensify conventional gas exploration in the Tarim Bozi-Dabei region and the northern slope of Gulongqi in the central Sichuan province, and increase large-scale shale gas production in southern Sichuan.

PetroChina's domestic gas production target accounts for around 59% of the country's total natural gas production target of 214 Bcm in 2022 set by the National Energy Administration in a March 29 report.

The company's production growth target of 5% for natural gas in 2022 is higher than that of 4.2% set by the NEA, and also higher than 4.8% set by another state-owned oil and gas company Sinopec, but is slightly lower than PetroChina's growth rate of 5.7% in 2021, data showed.

PetroChina plans to spend Yuan 8 billion ($1.26 billion) in the natural gas and pipeline segment in 2022, accounting for 4.4% of its total capital expenditure of Yuan 181.2 billion for the exploration and production segment, mainly for building LNG terminals, natural gas pipelines, city gas distribution, gas-fired power generation and new energy integration projects.

At the end of 2021, PetroChina's domestic oil and gas pipelines had a total length of 26,076 km, of which 17,329 km was natural gas pipelines, the company said.

Import losses

The Russia-Ukraine conflict has not only increased oil and gas supply risks, but also raised import costs, Dai said. He said the company is raising domestic production while strengthening trading capabilities and increasing investment in new energy to meet domestic demand.

"PetroChina has maintained good cooperative relations with global major natural gas and crude oil producers, holding a large number of long-term contracts, which are being implemented normally," Dai said.

PetroChina imported about 80 Bcm of natural gas in 2021, resulting in a loss of around Yuan 7.21 billion ($1.13 billion), down Yuan 6.95 billion from last year, CFO Chai Shouping said.

The narrower loss in the imported natural gas business in 2021 is due to the expansion of direct sales to end-users, more market-oriented gas pricing, a tax refund of Yuan 5 billion from the government for long-term contracts signed before 2014, and lower natural gas import costs that reflect crude prices with a nine-month lag, Chai said.

PetroChina sold a total 273.97 Bcm of natural gas in 2021, up 10.1% year on year, of which domestic sales were 194.59 Bcm, an increase of 12.7% over the same period last year, the company's data showed.

The average natural gas sales price in the domestic market was Yuan 1.81/cu m in 2021, up 6.5% year on year, PetroChina said, noting that its gas business made a profit of Yuan 12.6 billion last year due to higher prices and sales volume, up Yuan 5.45 billion year on year.

"We have set up a mechanism to negotiate natural gas purchase and sales contracts and enhance the online trading of natural gas, which has given more options to both sellers and buyers," Chai said, adding that the company will decide on natural gas imports this year based on the prevailing market situation and available resources.