The Zhitong Finance App learned that J.P. Morgan Chase released the China Energy Industry Research Report that the National Energy Administration held a medium- to long-term oil and gas storage and production promotion meeting on October 21 to reaffirm policy support for continued upstream investment and development of unconventional resources. The bank believes that the renewed emphasis on energy security and support for upstream capital expenditure will support the Chinese oil giant to maintain the compound annual growth rate of 3% to 4% in oil and gas production from 2026 to 2030, roughly on par with overseas peers.
The bank pointed out that CNPC shares (00857) are the main beneficiaries, benefiting from continued unconventional natural gas subsidies and improvements in the economy of coalbed methane. CNPC's current total cost of coalbed methane is lower than shale gas. With the advancement of drilling technology, the cost is expected to drop from RMB 1.1 to RMB 0.8 per cubic meter, a reduction of more than 25%. The bank believes that this places CNPC's domestic gas portfolio at the far left end of China's natural gas supply cost curve. It has a cost advantage over imported liquefied natural gas (LNG), and helps support medium- to long-term gas profit margin expansion.
J.P. Morgan reiterated that CNPC is the first choice for China's energy industry. At the same time, it is optimistic about CNOOC (00883) and CNOOC Oilfield Services (02883), mainly based on attractive valuations and the high oil price environment.