中国煤变油市场研究(1)

10July2006AsianDailyIMPORTANTDISCLOSURESANDANALYSTCERTIFICATIONSAREINTHEDISCLOSUREAPPENDIX.U.S.Disclosure:CreditSuissedoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethattheFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.CustomersofCreditSuisseintheUnitedStatescanreceiveindependent,thirdpartyresearchonthecompanyorcompaniescoveredinthisreport,atnocosttothem,wheresuc[e-mail]----------------------------------------------MaintainMARKETWEIGHTCoaltooil:Potentially1mnbbladaybetween2010and2013PrashantGokhale/ResearchAnalyst/85221016944/[e-mail]/ResearchAnalyst/85221016406/[e-mail]/ResearchAnalyst/85221017379/[e-mail]●InherrecentlypublishedreportCoaltoOil–acleanandbrightfuture,CreditSuissemininganalystTrinaChenhighlightsthemassivepipelineofcoaltooilplantsinChina,andthepositiveimplicationsforcoalprices.●Inthisreport,wetakeaquickglanceattheimplicationsfortheoilmarket.Incrementaloilsupplyismaterialbeyond2009,with1mnbdofnewcapacityoverfiveyears,addingabout15-25%tonon-OPEC’sannualrunrateof0.8-1.2mnbd.Thegreatestimpactisin2010-11,with0.3mnbdineachyear.●AssumingthatChina’soildemandgrowsbyabout7%p.a.,anddomesticcrudeproductiongrowsbyaround2.25%p.a.,China’simportscouldslowdowntolowsingledigits.WebelievethatcoaltooilisChina’srealstrategicreserve–itisentirelydomesticandlocatedinland,meetingstrategicneeds.●Highoilpricesaremakingalternativesmoreattractive.Theyposearisktooilpriceslaterinthedecade.Inthatperiod,oilremainswellsupportedatUS$50-55/bbl.WehaveUNDERPERFORMratingsonPetroChinaandPTTEP.WepreferCNOOCinChina.WehaveOUTPERFORMratingsonMedcoandSKCorp.CreditSuisse’smetalsandminingteamrecentlypublishedareportcalledCoaltooil–acleanandbrightfuture,dated6July.Inthereport,theanalystslookatthelargepipelineofnewcoaltooilcapacityinChinaanditsimpactoncoaldemandandprices.Inthisreport,welookattheimplicationsofthispipelineofcapacitygrowthfortheoilsector.Keytake-aways1)Ithasnoimpactinthemediumterm,butismaterialintermsofpotentialincrementalsupplygrowthfrom2010-13,addingabout1mnbblsadayofnewsupply,mainlyingasoline,naphthaanddiesel.2)Thebiggestimpactisin2010/11,withover300mnbdofnewcapacityslatedforastart-up.Thisrepresentsabout25-35%oftheincrementalnon-OPECsupplyseeninthelastfewyears.3)Assuming7%growthinChina’soildemand,coaltooilcouldmeet28%ofincrementaldemandbetween2007and2011,andabout50%ofincrementaldemandin2010/2011.4)Coincidingwiththepotentialramp-upoftheRussia-Chinapipeline,andtheexpansionoftheKazakhstan-Chinapipeline(in2010),incrementalsupplycouldmateriallyweighonthedemand-supplybalance.5)Conventionaloilisexpectedtogrowatabout2.5-3%p.a.in2006-07(globally),leadingtoabuild-upofsparecapacity.Thatsaid,aslongasdemandholdsup,oiliswellsupportedatUS$50-55/bblthroughtotheendofthisdecade.Coaltooilisagoodexampleofalternativesbecomingattractiveagainstthebackdropofhighoilprices.Whilenotaworryinthemediumterm,itcouldbeaconcernwithtime,especiallyifhighoilpricescrimpdemandandchangedemandpatterns(smaller,morefuel-efficientcars,useofLNG,etc.).6)WeremaincautiousontheoilsectorinAsia,giventhatweareonthecuspofsupplygrowingfasterthandemand(2H06).WemaintainourUNDERPERFORMratingonPetroChinaandPTTEP.WepreferCNOOCinChina.WerateMedcoandSKCorpasOUTPERFORM.Figure1:Coaltooil–capacitybuild-outCoaltoOil-NewCapacity02004006008001000120014002006200720082009201020112012201320142015MbdSource:ChinaAssociationofSocial&EconomicSystemResearch,CreditSuisseestimates.Figure2:MeetingChina’sincrementaldemand(200)-2004006008001,0002000200120022003E2004E2005E2006E2007E2008E2009E2010E2011E2012E2013EMbdDomesticProduction(mbd)CoaltoOilImports/(Exports)Source:IndustrySources,CreditSuisseestimates.Figure3:Therealstrategicreserve-10020030040050060045Days60Days90DaysCoaltoOil(annualcapacity)StrategicInventory-byDaysofImportcoverin2013vsCoaltoOilannualproductionSource:Companydata,CreditSuisseestimates.10July2006AsianDaily-2of8-CompaniesMentioned(Priceasof07Jul06)PTMedcoEnergiInternationalTBK(MEDC.JK,Rp3900.00,OUTPERFORM[V],TPRp4458.81)PTTExploration&Production(PTTE.BK,Bt110.00,UNDERPERFORM,TPBt106.00)CNOOCLtd(0883.HK,HK$6.35,NEUTRAL,TPHK$5.70)PetroChina-H(0857.HK,HK$8.55,UNDERPERFORM,TPHK$6.78)ChinaPetroleum&ChemicalCorporation-H(0386.HK,HK$4.43,NEUTRAL,TPHK$4.55)SKCorp.(003600.KS,W62,700,OUTPERFORM,TPW78,500)DisclosureAppendixImportantGlobalDisclosuresI,PrashantGokhale,certifythat(1)theviewsexpressedinthisreportaccuratelyreflectmypersonalviewsaboutallofthesubjectcompaniesandsecuritiesand(2)nopartofmycompensationwas,isorwillbedirectlyorindirectlyrelatedtothespecificrecommendationsorviewsexpressedinthisreport.SeetheCompaniesMentionedsectionforfullcompanynames.3-YearPrice,TargetP