PetroChina, China’s largest oil and gas producer, replaced Exxon Mobil as the world’s largest listed company by market value as its share price surged 163% to close at 43.96 yuan on its first day of trading on the Shanghai Stock Exchange.

The company’s share price opened at 48.6 yuan on Monday, almost tripling its IPO price of 16.7 yuan, and ended the morning session at 43.65 yuan.

By offering shares on the mainland, the company is trying to increase its crude oil production to match its refining capacity, said Zheng Yi, an analyst with Guangfa Securities.

The company’s market value on the Shanghai bourse swelled to above the one-trillion-dollar mark, surging past Exxon Mobil, valued at US$487.7 billion. It is the first time a company has been valued at one trillion dollars.

The share offering would reduce the weight of bank and financial institution stocks to 30% from 39% and help increase that of industrial sectors such as power, coal and refining, said Wang Jing, an analyst with Orient Securities Co. Ltd.

PetroChina is the first of the country’s three petrochemical giants, including Sinopec and the China National Offshore Oil Corp. (CNOOC), to be listed on overseas stock markets.

“Returning to the mainland’s capital market has been our long-cherished wish,” said Jiang Jiemin, president of PetroChina’s parent company China National Petroleum Corporation (CNPC), “the mainland offering will give domestic investors opportunities to share the outcome of PetroChina’s fast growth and help expand the company’s business in the mainland,” he added.

The return of the company would help drain excess liquidity on the domestic market and add weight to the industrial blue chips, which in turn would help maintain the stability of the domestic capital market, said a report released by Citic Securities.

PetroChina raised 66.8 billion yuan (US$8.9 billion) in Shanghai by selling four billion A shares, or 2.18% of its expanded share capital, in the world’s biggest initial public offering (IPO) so far this year.

Apart from the four billion A-shares issued in the public offering, the CNPC holds the other 158 billion A shares, 86.29% of the total.

According to the company’s prospectus, it will use 6.84 billion yuan and 5.93 billion yuan respectively to boost production capacity at its Changqing and Daqing oil fields. A total of 1.5 billion yuan will be used to build production facilities at Jidong field, the country’s largest.

It also plans to invest 17.5 billion yuan to upgrade its Dushanzi oil refinery and ethylene facilities and six billion yuan in expanding an ethylene plant in Daqing, in northeast China.

Daqing, one of China’s largest oil fields, produced more than 43 million tons of crude oil last year, accounting for almost 25% of the nation’s total. Changqing produced more than 10.5 million tons of oil in 2006.

Jidong Nanpu Oilfield, the largest oil discovery by PetroChina in four decades, will have an annual output of 10 million tons by 2012, according to the company’s plan.

“The oil fields that PetroChina is putting money into will be China’s major oil sources in the future,” said Han Xuegong, an oil expert.

China will be able to produce enough refined oil to meet domestic demand after the completion of more than 20 refining projects of at least 10 million tons by 2010, according to the nation’s medium and long-term plan for the oil refining industry.

The PetroChina IPO surpassed the 66.58 billion yuan (US$8.88 billion) achieved by China Shenhua Energy Company, the country’s largest coal producer, earlier last month.

PetroChina began trading in Hong Kong and its American Depository Receipts were listed on the New York Stock Exchange in 2000. Its Hong Kong share price was 19.60 HK dollars last Friday.

Citic Securities Co., UBS Securities Co. and China International Capital Corp. are the main underwriters of the issue.

“The return of blue chips indicates an advance of service quality within the domestic capital markets,” said Zhu Congjiu, general manager of the Shanghai Stock Exchange.

The A-share offering of China Railway Engineering Corp., Asia’s biggest railway and tunnel contractor, will be discussed by officials of China Securities Regulatory Commission (CSRC). If the offering is approved, the company could raise around two billion U.S. dollars in Shanghai, according to company sources.

The stream of offerings had “frozen” a considerable amount of money as investors could have withheld their money to buy blue chips, said analysts.

On news of PetroChina’s listing, China’s major stock index dropped 2.31% on Nov. 2, also the last trading day before its Shanghai debut.

Chinese stock market on Monday continued its downward trend last Friday with the benchmark Shanghai Composite Index closing at 5,634.45 points, down 2.48%. (One U.S. dollar equals to 7.46 yuan)

(Rigzone)