China, as the largest contributor to global carbon dioxide emissions, has pledged to limit global warming to 1.5 to 2.0 degrees Celsius above pre-industrial levels jointly with other nations, as set out under the 2015 Paris Agreement. The country officially announced in September 2020 its goal to reach a CO2 emission peak by 2030 and to become CO2 neutral by 2060. China’s three national oil companies have pledged to support the government’s climate objectives by initiating their own energy transition roadmaps, without compromising national energy security.

The three NOCs are China National Petroleum Corporation (CNPC, A+/Stable, Standalone Credit Profile (SCP): aa-) and its key subsidiary, PetroChina Company Limited (A+/Stable, SCP: aa-), China Petroleum & Chemical Corporation (Sinopec) (A+/Stable, SCP: a-) and CNOOC Limited (CNL, A+/Stable, SCP: a). From Pure-Play to Integrated Energy: The Chinese NOCs aim to transform their oil and gas (O&G) business models into integrated energy companies. We expect such adjustment to take time, as fossil fuel remains a large part of China’s energy mix in the absence of immediate cost-effective substitutes. The pace of energy transition also hinges on external factors, including technological progress, demand-side factors as well as government policy that supports the development of infrastructure and the adoption of new technology. This report explores key questions about the energy transition roadmap of Chinese NOCs. What Role do Chinese NOCs Play in the Country’s Energy Transition? How are NOCs Positioned to Meet CO2 Neutrality Goals? How Do the Decarbonisation Strategies of Chinese NOCs Differ From Global Peers? How Does Fitch View Associated Energy Transition Risk Among Chinese NOCs? How Will the Energy Transition Affect the Ratings of Chinese NOCs?
Source: Fitch Ratings