PetroChina Parent May Invest $2B in Peru


Reuters reported on May 27, 2014 that China National Petroleum Corporation (“CNPC”) – the parent company of Chinese energy giant, PetroChina Co. Ltd. (PTR) – intends to invest roughly $2.0 billion in Peru over a period of 10 years.  In the recent past, CNPC purchased a natural gas block in Peru form Petroleo Brasileiro SA or Petrobras (PBR) – the largest integrated oil company in Brazil.

CNPC has already received permission from the regulatory bodies of Peru for investing $1.0 billion in upstream operations in the natural gas field bought from Petrobras. The mother company of PetroChina− the largest integrated oil firm in China− is also looking for opportunities to invest $4.0 billion in southern Peru for a natural gas pipeline project. The pipeline is expected to carry gas to the thermoelectric plants located at the Pacific coast of Peru from Camisea gas fields.

Latin America has caught China’s attention for its natural gas resources that could fuel the Asian country’s future economic growth. This led the Chinese state-owned firm CNPC to expand its presence over there. CNPC has already started operations at Colombia, Ecuador, Cuba, Brazil, Costa Rica and Venezuela.

CNPC holds a majority stake of 86.35% in PetroChina, which was established in Nov 1999. PetroChina currently retains a Zacks Rank #4 (Sell) − implying that it is expected to underperform the broader U.S. equity market over the next one to three months – for its profits might be affected as the Chinese government caps the prices of refined-products (particularly gasoline and diesel) to control inflation.

Meanwhile, one can look at better-ranked players in the energy sector like Ultra Petroleum Corp. (UPL) and Encana Corporation (ECA). Both the stocks sport a Zacks Rank #1 (Strong Buy). 

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