PetroChina Company Ltd. (PTR) – the largest integrated oil company in China – plans to drastically increase its output at domestic fields that it operates with foreign companies.

To help meet the country’s increasing energy demand, all major oil and gas companies have fine-tuned their plans to increase output by any means. Like PetroChina, China’s largest offshore oil explorer, CNOOC Ltd. (CEO) intends to double its production in the western South China Sea.

On an oil equivalent basis, PetroChina plans to increase its output to at least 15 million tons a year by 2015. This is compared to 2008 output of 6.57 million tons.

The country’s strong economic growth over the last few years has significantly increased its demand for oil, natural gas and chemicals. This presents attractive opportunities for industry players that can meet the country’s fast-growing energy needs. Being one of the two Chinese integrated oil companies in all, PetroChina is well-positioned to capitalize on these favorable trends.

However, we are concerned about the company’s cost structure. PetroChina’s operating expenses have been steadily going up over the last few years, a trend that is expected to remain in place going forward. As such, we are unchanged with our Neutral rating for PetroChina ADRs.

Zacks Investment Research

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