Master of Finance
MFIN 7001
(Session B)
Project Proposal
Business Study – PetroChina Co. Ltd.
PetroChina is currently the largest oil exploration and production company in China. It was
established as a joint stock company on November 5, 1999, as part of the restructuring of the China
National Petroleum Corporation (CNPC). In the restructuring, CNPC injected into the company most
of the assets and liabilities of CNPC relating to its exploration and production, refining and marketing,
Petrochina is the biggest producer of the three stat-owned oil companies, while the other two are
China Petroleum and Chemical Corporation (Sinopec) and China National Offshore Oil Corporation
(CNOOC). In 2006, its combined oil and gas output was 1062 billion barrels oil equivalent, up 5.5%
year on year and almost two-thirds of total national output. It operates a chain of around 17,000
service stations.
• The exploration, development, production and sales of crude oil and natural gas
• The refining, transportation, storage and marketing of crude oil and petroleum products
• The production and sales of basic petrochemical products, derivative chemical products and
• The transmission of natural gas, crude oil and refined products, and the sales of natural gas
Area of Interest and Analysis
As Chinese economy continued to expand at a yearly average of 9% over the past two decades, the
domestic demand for resources and energy has been increasing tremendously. This rapid growth
results in China’s overtaking on Japan as the second largest consumer of energy in the world behind
U.S. Among the various energy sectors, petroleum and natural gas is undoubtedly one of the key
players which influence the whole economy and finance. Therefore we select PetroChina Co., the
PetroChina is growing rapidly and is currently the second largest oil company in the world (15 Oct
2007). We would like to analysis the company’s performance under its risky business environment
and the impact of oil price volatility and oil reserve replacement ratio against the company’s
performance. And to study the company’s financial independence and other external factors affecting
Apart from analysis on company’s performance and business value, we will also address some
• How to deal with non-financial factors? e.g. political influence from other country, macro-
economic control, etc. And how to realize these handling through financial planning?
• How to offset high cost for oil extraction in China, when it is compared to other countries?
• How to deploy company’s strategy to face competitions with other peer companies,
supplementary industries?