---
endpoint: analytics
pattern: Energy
status: done
latency_ms: 157039
conversation_id: ff78269d-a33f-4748-875d-de361450e6d5
citations: 3
created: 2026-05-31 18:27:00Z
---

# What is PetroChina’s core business franchise and the key components of its operating model?

# PetroChina (857 HK / 601857 CH / PTR): Core Business Franchise & Operating Model

PetroChina Company Limited is the listed flagship of China National Petroleum Corporation (CNPC) — the country's largest integrated oil & gas major, vertically integrated from wellhead exploration through to retail forecourt. Its franchise is structured around four reported business segments operating as a closed-loop hydrocarbon value chain, with a fifth "Headquarters and Other" segment housing corporate functions [1].

## 1. The Four-Segment Franchise (Company-of-Record Definition)

Per PetroChina's audited segment reporting [1]:

| Segment | Activities | Role in the Value Chain |
|---|---|---|
| **Exploration & Production (E&P)** | Exploration, development, production and sales of crude oil and natural gas [1] | Upstream — the historical profit engine; supplies feedstock to the rest of the system |
| **Refining & Marketing** (now reported as Refining & Chemicals / Marketing in current disclosures) | Refining, transportation, storage and marketing of crude oil and petroleum products [1] | Midstream/Downstream conversion + retail fuel distribution via PetroChina's service-station network |
| **Chemicals & Marketing** | Production and sale of basic petrochemical products, derivative petrochemical products, and other chemical products [1] | Higher value-add monetisation of refining streams |
| **Natural Gas & Pipeline** | Transmission of natural gas, crude oil and refined products and the sale of natural gas [1] | The growth pillar — gas import, trunkline transmission, and city-gate sales |

The "Other" segment captures corporate-level activities, research, and unallocated items [1].

## 2. Operating Backbone — Principal Operating Subsidiaries

The franchise is delivered through a portfolio of consolidated operating entities, each mapped to a segment. Per the 2025 Interim Report and 2024 Annual Report subsidiary disclosures [2][3]:

| Subsidiary | Segment Role | Registered Capital (RMB m) | Equity Interest |
|---|---|---|---|
| **Daqing Oilfield Company Limited** | Exploration, production and sales of crude oil and natural gas [2] | 47,500 [2] | 100% [2] |
| **CNPC Exploration and Development Company Limited** | Exploration, production and sales of crude oil and natural gas **outside the PRC** [2] | 16,100 [2] | 50% direct / 100% voting [2] |
| **Guangdong Petrochemical Co., Ltd.** | Production, sale and storage of oil refining, petrochemical and chemical products [2] | 20,000 [2] | 90% [2] |
| **PetroChina Hong Kong Limited** | Investment holding — subsidiaries cover crude oil exploration/production/sales in and outside the PRC, plus natural gas sale and transmission in the PRC [3] | HKD 7,592m [3] | 100% [3] |
| **PetroChina International Investment Company Limited** | Investment holding for overseas operations [3] | 31,314–36,042 [3] | 100% [3] |

The Daqing Oilfield anchor (RMB 47.5bn registered capital, wholly owned) underscores the dominant weight of legacy domestic upstream in the asset base; CNPC Exploration & Development extends the footprint internationally; Guangdong Petrochemical embodies the integrated refining-petrochemical push in South China.

## 3. Buy-Side / Sell-Side Framing of the Operating Model

CLSA's sum-of-the-parts (SoTP) valuation, used to derive its PetroChina-H target price of HK$8.00 and A-share target of Rmb11.20, breaks the operating model into **four discrete profit centres** (note: CLSA further bifurcates "Refining & Marketing" / "Chemicals & Marketing" into "Refining & Chemical" and "Marketing", and treats Natural Gas as its own bucket — matching the way PetroChina monetises each franchise) [4]:

| SoTP Bucket | Valuation (Rmb bn) | Per H-share (HK$) | Methodology [4] |
|---|---|---|---|
| **E&P** | 800.4 | 4.7 | DCF, 8% WACC, 0% terminal growth |
| **Refining & Chemical** | 220.6 | 1.3 | 4.0× 25CL EV/EBITDA |
| **Marketing** | 120.0 | 0.7 | 3.0× 25CL EV/EBITDA |
| **Natural Gas** | 291.5 | 1.7 | 1.2× P/B target multiple |
| **Total Asset Value** | **1,432.5** | **8.4** | |

This SoTP structure is informative because it reveals **how each component contributes to enterprise value**: E&P is still ~56% of asset value, but Natural Gas (~20%) is now the second-largest bucket and the marginal driver, while downstream (Refining & Chemical + Marketing) accounts for ~24% combined [4].

## 4. The Evolving Operating Model — Less E&P-Dependent, More Gas-Levered

CLSA's investment thesis frames the modern operating model as a deliberate de-risking away from pure oil-price beta:

> "A revival of its natural gas business, coupled with a more resilient downstream profitability, suggest PetroChina is now less reliant on its E&P segment relative to history. This should translate to more steady earnings even if oil prices are under pressure, giving investors confidence in its dividend sustainability." [5]

Key components of the current operating model:

- **Upstream resilience via cost discipline**: 1Q25 E&P EBIT was up 7% YoY despite oil & gas production being up only 1% YoY and realised oil/gas prices being down 7%/4% YoY respectively — implying lifting-cost and tax-efficiency tailwinds rather than price-led growth [6].

- **Natural Gas as the structural growth lever**: 1Q25 Natural Gas EBIT was up 10% YoY on 4% YoY sales growth and higher ASP from residential price hikes during the winter heating season. PetroChina has historically been unable to push city-gate price increases through, but a more favourable domestic gas pricing policy and a relaxed approach to utility hikes in a deflationary macro environment are now allowing it to monetise earlier infrastructure investments — "a multi-year process" [7].

- **Downstream as a counter-cyclical ballast (with pockets of weakness)**: 1Q25 aggregate downstream EBIT (Refining + Chemical + Marketing) was down 30% YoY, and marketing sales volume was -6% YoY, reflecting soft domestic consumption. Yet for full-year 2024, refining was more resilient than expected (4Q24 refining EBIT +405% QoQ) even as chemicals swung to a loss for the first time since 1Q23 [8][6].

- **Capital allocation and shareholder-return discipline**: 2024 NP of Rmb164.7bn (+2% YoY) was in line, generating an 8% dividend yield with a payout lifted to 52% (FY23: 50%). 2025 capex is budgeted at Rmb262bn, the **first YoY decline (-5%) after three years flat at Rmb275bn** — explicitly framed as leaving more room for higher shareholder returns [8].

## 5. Synthesis — The Operating Model in One Frame

PetroChina's operating model is best understood as **an integrated hydrocarbon platform pivoting from oil-price-cyclical earnings toward a gas-and-dividend story**:

1. **Upstream (E&P)** remains the bulk of asset value and is anchored in legacy Chinese onshore fields (Daqing) plus an overseas arm (CNPC E&D) [1][2].
2. **Midstream (Natural Gas & Pipeline)** is the strategic growth franchise — leveraging trunkline assets, import infrastructure, and improving city-gate pricing economics [1][7].
3. **Downstream (Refining + Chemicals)** acts as a counter-cyclical hedge: when crude is weak, refining margins typically widen, dampening earnings volatility [5][8].
4. **Marketing (retail fuel)** is a relatively low-margin but stable, ROIC-accretive distribution layer [4].
5. **Capital framework**: lower capex intensity + higher dividend payout = positioning as a yield/quality name rather than a pure oil-price play, with policy-supported natural gas pricing as the incremental earnings driver [8][5].

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**Sources**
[1] PetroChina Company Limited, Q4 2005 Annual Report — Segment Information (TFS)
[2] PetroChina Company Limited, Q2 2025 Interim Report — Principal Subsidiaries Disclosure (TFS)
[3] PetroChina Company Limited Class H, 2024 Annual Report — Subsidiaries Note (TFS)
[4] PetroChina – O-PF (Bearing fruit) — CLSA (29 Apr 2025) — 607957521LinqAlpha.PDF
[5] PetroChina – O-PF (Bearing fruit) — CLSA (29 Apr 2025) — 607957521LinqAlpha.PDF (Investment thesis)
[6] PetroChina – O-PF (Bearing fruit) — CLSA (29 Apr 2025) — 607957521LinqAlpha.PDF (1Q25 results review)
[7] PetroChina – O-PF (Bearing fruit) — CLSA (29 Apr 2025) — 607957521LinqAlpha.PDF (Natural gas commentary)
[8] PetroChina – O-PF (All you need is yield) — CLSA (30 Mar 2025) — 607954432LinqAlpha.PDF (2024 earnings review & capex / dividend framework)

## Citations

- [1] **PetroChina Company Limited, Q4 2005 Report** · external
- [2] **PetroChina Company Limited - Q2 2025 - Interim Report** · external
- [3] **PetroChina Company Limited Class H: 2024 ANNUAL REPORT** · external

