What do you get for one trillion dollars, the official valuation of PetroChina after yesterday’s first day of trading on the Shanghai stock exchange of the oil company’s A shares?

What you get is a piece of Beijing Inc, because despite all the ballyhoo about PetroChina scooting past Exxon in the global energy lists, this is still a Government of China tool, not an independent company with an independent commercial future. That is no reason to dismiss PetroChina, but the company needs to be seen in context.

What was listed was a package of 4 billion yuan-denominated shares that were issued to raise almost $9 billion (£4.3 billion) for the company. It is the largest Chinese public offering and it was heavily subscribed. The excitement over a near $100-a-barrel oil price and the hysteria of the domestic Shanghai market helped to push the stock’s value up to almost three times the offer price, allowing investors to forget that the 4 billion shares represented only 2.5 per cent of the stock listed in Shanghai.

The Chinese Government owns PetroChina, holding 158 trillion shares through China National Petroleum Corporation. There are also 21 billion H shares available to foreigners and traded in Hong Kong and New York after an initial public offering in 2000. Domestic Chinese exchanges were at that time considered too immature to handle the flotation of such a large and prestigious enterprise. Including the Hong Kong and Shanghai share floats, the Chinese Government owns 87 per cent of PetroChina and that is important because China suffers an energy deficit and oil demand is forecast to increase by 7 per cent this year.

China is already importing almost half of its oil consumption and the job of companies such as PetroChina is to fulfil the heroic task of making up the difference.

That means buying oil assets overseas and Chinese oil companies are aggressive bidders in most auctions.

The relatively tiny share float goes some way to explain why PetroChina, which has fewer reserves and smaller profits than Exxon, is worth twice as much, according to Chinese investors. These took little heed of Berkshire Hathaway, the investment fund founded by Warren Buffett, which sold its PetroChina stock in October.

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