The world’s second largest oil and gas producer by market value, PetroChina Co. Ltd. (PTR), inked an agreement with China’s top power firm Huaneng Power International to join forces on natural gas power generation projects. The agreement will increase the proportion of natural gas usage in Chinese power generation activity and promote clean energy in the country.
 
China is planning to gradually increase natural gas usage for power generation. This is to mitigate pollution problems from its coal-fired power plants. At present, two-thirds of China’s electricity comes from coal-fired power plant sources that generate tremendous amounts of greenhouse gases and lead to air pollution.
 
Natural gas is expected to be a key growth area for PetroChina. In 2008, natural gas production increased by more than 14% year-over-year. In addition to the domestic initiatives, PetroChina is also making progress with securing natural gas resources abroad. In this context, the company bought 45.5% stake in Singapore Petroleum Company in May.
 
However, we are concerned about the rising costs and downstream-centric assets portfolio. As such, our Neutral recommendation for the company stays unchanged at this stage.
Read the full analyst report on “PTR”
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