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The University of Hong Kong

Master of Finance

MFIN 7001

Financial Statement Analysis and

Business Ethical Standards

(Session B)

Project Proposal
Business Study – PetroChina Co. Ltd.

Group members (Name, University ID, Email address, Mobile number)


NG Ka Chi, Samuel 2007964592 samuelnganu@yahoo.com 97789149
CHENG Yen Hue, Karl 1999029670 huecheng@graduate.hku.hk 92773234
NGAN Ting Ting, Kelly 2001334862 ttngan@gmail.com 93169629
WONG Wai Man, Wendy 2007965039 wwai_man@yahoo.com.hk 97205036
CHAN Wai Bong, Jacky 2001029675 jackychan1636@hotmail.com 97501610
Leung Yee Wai, Rachel 2007964982 ahchel@gmail.com 90282619
Background

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,

chemicals and natural gas businesses.

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.

Its main business areas including:

• 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

other chemical products

• 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

principle oil and gas company in China, as our study topic.

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

its business direction.

Apart from analysis on company’s performance and business value, we will also address some

interesting topics from the financial statement perspective. For example,

• How to sustain profitability when oil price fluctuates?

• 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?