Chinese energy giant PetroChina Co. Ltd. (PTR) has entered into a strategic co-operation agreement to share refining and petrochemical technology and expertise with INEOS Group Holdings Plc, a privately-held British chemicals firm.
Per the framework deal between the entities, PetroChina will buy into two refineries in France and Scotland. The transaction will allow China’s second-largest refiner to co-own projects at the Lavera refinery in France and Grangemouth in Scotland. PetroChina and INEOS plan to form a joint venture by the end of June to refine and trade oil products at the two plants, each of which has a daily oil processing capacity of about 210,000 barrels.
We see the INEOS transaction as part of PetroChina’s efforts to expand its global refining foothold as well as provide a hedge against the uncertain domestic product pricing policies, with China keen on initiating ways to tame the inflation. The proposal is also in line with the company’s policy of building a broader business platform in Europe and taking lead as the international energy player.
Headquartered in Beijing, PetroChina is the largest integrated energy firm in China and the second-biggest oil company in the world by market value behind ExxonMobil (XOM).
The company’s activities include: the exploration, development, production and sale of crude oil and natural gas, the refining, transportation, storage and marketing of petroleum products, the manufacture and sale of chemical products, and the transmission of natural gas, crude oil and refined products. It operates in four segments: Exploration & Production, Natural Gas & Pipelines, Refining & Chemicals and Marketing.
Even though PetroChina has a Zacks #2 Rank (short-term Buy rating) in the short run, we are Neutral on the ADRs in the longer term.
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