China’s NOCs to see increased capex in 2018

9 November 2017, Week 43, Issue 667

The third-quarter rise in profits announced by China’s three national oil companies (NOCs) coupled with higher crude prices will lead to increased capital expenditure in 2018, a report said.


The focus of extra spending will be on domestic natural gas rather than oil, a BMI Research note forecast. The higher capex will be funnelled into expanding exploration and production of gas, helping rapidly growing demand and improving distribution infrastructure, BMI said.

The Beijing government-led push for greater gas use in place of coal for city heating is likely to lead to some shortages this winter, reports have said. PetroChina will reduce gas supplies to industrial users by up to 10% this winter because of the expected shortages, the state-controlled China Youth Daily newspaper said on November 6. The curb will ensure supply priority goes to household consumers first.

The emphasis on gas by the NOCs was underlined by PetroChina’s third-quarter figures last week, showing crude output slightly down year on year. The quarter’s output of 224 million barrels meant crude was now only 63% of PetroChina’s overall oil and gas production compared with 90% when it listed on the Hong Kong Stock Exchange in 2000, Interfax China said.

A recent analysis by Wood Mackenzie shows the NOCs have been more focused on paying out large dividends than capex this year. PetroChina’s first half-year dividend to shareholders amounted to US$1.9 billion .The three NOCs have collectively cut their capex since the oil price crash in 2014 by 40%, Wood Mackenzie said, and while there has been some growth in gas production, the Chinese companies lag behind their Western peers.

In a note this week, Wood Mackenzie said US President Donald Trump’s two-day visit to Beijing starting on November 8 at the head of large business delegation could see agreements for Chinese purchases of American LNG.

“[China’s] demand for LNG is growing. We estimate that demand could reach 330 bcm by 2020, up from 206 bcm in 2016,” Wood Mackenzie said. 

Edited by

Andrew Kemp


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