J.P. Morgan: The ten-year oil and gas action plan strengthens upstream policy support; maintain PETROCHINA (00857) as the top pick in the sector.

J.P. Morgan released a research report on China's energy sector, stating that the National Energy Administration held a mid- and long-term oil and gas reserve and production increase work promotion meeting on October 21, reiterating policy support for sustained upstream investment and unconventional resource development. The bank believes that renewed emphasis on energy security and support for upstream capital expenditure will support PetroChina's oil and gas production compound annual growth rate of 3% to 4% from 2026 to 2030, broadly in line with overseas peers. The bank noted that PETROCHINA (00857) is a major beneficiary, benefiting from continued unconventional natural gas subsidies and improved coalbed methane economics. PetroChina's current full cost of coalbed methane is already lower than that of shale gas. With advances in drilling technology, the cost is expected to fall from RMB1.1 per cubic meter to RMB0.8 per cubic meter, a decline of more than 25%. The bank believes this places PetroChina's domestic natural gas portfolio at the far left of China's natural gas supply cost curve, giving it a cost advantage over imported liquefied natural gas (LNG) and helping support its medium- to long-term natural gas margin expansion. J.P. Morgan reiterated PetroChina as its top pick in China's energy sector, while also favoring CNOOC (00883) and CHINA OILFIELD (02883), mainly based on attractive valuations and a high oil price environment.