PetroChina is planning to raise $6 billion (£3.03 billion) in a listing of new shares in Shanghai, the latest in a queue of long-awaited cash calls on mainland bourses by leading Chinese enterprises.

The oil colossus, controlled by CNPC, the state oil company, said that the new money would finance exploration and overseas acquisitions.

News of the cash-call and Shanghai listing sent PetroChina stock soaring to record levels, valuing the group at $273 billion, ahead of Royal Dutch Shell. However, Shanghai’s market closed 2 per cent lower as investors anticipated the impact of the huge fundraising on share values.

The PetroChina listing and an expected $10 billion fundraising by China Mobile is expected to cool the overheated Shanghai bourse, which has quadrupled in value over the past year in a fever of speculation by private investors.

Last month PetroChina, which invested $19 billion in 2006, announced a big discovery in Bohai Bay, an oilfield with more than seven billion barrels of reserves. After news that the company also plans to invest $5.2 billion over five years to develop the Jidong Nanpu field, reports quickly followed that it had made a significant natural gas discovery in Sichuan Province.

Faced with a large and growing energy deficit, Chinese oil companies are under pressure to raise their oil output and reserves. A dearth of domestic opportunities is pushing them to seek opportunities overseas, notably in Africa. PetroChina has made efforts to secure a position in Canadian oil sands and it has a preliminary agreement to buy half of the crude shipped through a $4 billion pipeline to be built from Alberta, across the Rockies to Canada’s Pacific coast.

The Chinese company plans to sell four billion shares in its Shanghai listing. Only 12 per cent of the company’s stock is in public hands; the remainder is controlled by CNPC, which is itself under Chinese state control.

Most of China’s main enterprises are listed in Hong Kong, these shares being unavailable to mainland Chinese investors. The Beijing Government is encouraging these firms to list their stock on mainland bourses, such as Shanghai and Shenzen, hoping that big fundraisings by large companies will raise standards and dampen some of the speculative fever.

Share valuations in Shanghai are often double the price of their equivalents in Hong Kong and the combined capitalisation of the two mainland markets is $2.5 trillion.

The move by companies to raise funds on the mainland could pose a threat to Hong Kong’s market, which has seen most of the capital-raising activity. Hong Kong’s bankers reckon that about $40 billion could be raised in 2007 in the mainland markets.

$273bn

The value of PetroChina after its listing in Shanghai

Source: Shanghai stock exchange

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