On August 17, the National Development and Reform Commission and the National Energy Administration unveiled the 15th Five-Year Plan for oil and gas development, setting a goal to establish a modern oil and gas industry system by 2030. The plan emphasizes enhancing pipeline networks, reserves, processing capabilities, and technological innovation, while also promoting a green and low-carbon transition within the sector. Analysts suggest that amid ongoing global energy supply uncertainties, the importance of domestic oil and gas reserve expansion and infrastructure development has grown significantly. For the oil and gas segment, a multi-layered investment thesis combining energy security, cyclical pricing, central enterprise dividends, and capital expenditure is likely to provide robust support.
Looking at the specifics of the plan, the primary focus over the next five years remains securing supply and boosting reserves. The plan calls for refined exploration in mature eastern fields, concentrated efforts in central, western, and offshore regions, and riskier ventures into new zones, while also encouraging diversification among upstream gas suppliers. Policy backing for exploration and production is unmistakably strong. In reality, China's oil and gas industry has already pushed forward with reserve and output growth in recent years. According to the China Oil and Gas Exploration and Development Report (2026) released by the National Energy Administration, crude oil production reached 216 million tonnes in 2025, natural gas output posted a ninth consecutive year of growth, and total oil and gas production hit 420 million tonnes of oil equivalent. Against this backdrop, the plan targets a domestic supply of 440 million tonnes of oil equivalent by 2030, signaling that the supply system must retain considerable resilience over the coming half-decade.
For capital markets, the most direct beneficiaries of this policy direction are upstream resource companies. Oil and gas exploration is highly capital-intensive, requiring sustained investment to add proven reserves and lift output. At the same time, the rising complexity of domestic resource development—spanning deep layers, deepwater, and unconventional plays—will further entrench the competitive advantages of large energy central enterprises that possess the necessary technology, equipment, and financial muscle. Consequently, the upstream segment is expected to maintain a relatively steady capital expenditure cycle throughout the 15th Five-Year Plan period.
Beyond upstream resources, the plan's provisions on oil and gas infrastructure also warrant close attention. By 2030, the national long-distance pipeline network is slated to reach 220,000 kilometers, with an additional 20,000 kilometers of new pipelines, while enhancing natural gas storage capacity, LNG receiving terminal throughput, and overland pipeline import capabilities. This indicates that investment opportunities in the sector over the next five years extend well beyond rising oil prices alone. Since early this year, the National Energy Administration has repeatedly stressed the need to step up investment in oil and gas infrastructure. The 2026 work conference on oil and gas infrastructure planning and pipeline protection called for the full and timely launch of major projects under the 15th Five-Year Plan, improving the nationwide pipeline network and steadily expanding storage capacity. Meanwhile, the 15th Five-Year Plan for Building a New Energy System, issued in June, similarly proposed adding 20,000 kilometers to the national pipeline network while reinforcing trunk routes such as West-to-East Gas Transmission, Sichuan-to-East Gas Delivery, North-to-South Gas Flow, and Offshore Gas Landing.
From an industry chain perspective, pipeline construction will spur investment across multiple segments, including natural gas storage and transportation, long-distance pipelines, LNG terminals, and gas storage facilities. Natural gas storage is particularly critical. Given the seasonal demand profile—where winter heating drives a notable uptick in consumption—storage infrastructure is not merely a commercial asset but a vital component of the energy security framework. As gas consumption expands and its role in peaking within the new energy system strengthens, the strategic importance of storage caverns, LNG terminals, and long-haul pipelines will continue to rise. This underscores that the oil and gas sector is forging an investment logic increasingly independent of international oil prices—even if crude benchmarks remain range-bound, domestic infrastructure development is likely to sustain strong policy-driven momentum.
That said, for oil and gas equities, short-term price action still hinges on global crude dynamics. Latest data show renewed tensions in the Middle East, with international oil prices climbing overnight. Brent for October delivery rose 2.7% to settle at $90.87 per barrel, while WTI for September delivery gained 2.6% to close at $84.50. U.S. President Donald Trump stated that Washington is not seeking to extend the memorandum of understanding with Iran. The MOU, published on June 17, stipulated in its third clause that both nations would negotiate and reach a final agreement within 60 days. That window expired on August 17, yet talks have stalled over serious disagreements on issues like the Strait of Hormuz, with no substantive progress achieved.
Looking ahead, Tianfeng Securities believes the international crude market experienced a roller-coaster first half dominated by geopolitical risks, with prices surging toward $120 per barrel before a sharp retreat. Recently, although the Strait of Hormuz has again stirred concerns, overall risks appear manageable. The core pricing logic for crude is transitioning from extreme geopolitical risk to a three-way tug-of-war among tail risks, political intervention, and fundamental equilibrium. In the second half, oil prices are likely to trade in a wide range with both upside caps and downside support, potentially showing strength early and weakness later, with Brent expected to average between $70 and $75 per barrel.
CICC points out that repeated geopolitical conflicts are tightening the energy supply-demand balance. First, crude flows through the Strait of Hormuz during the week of July 20 have again neared zero, and exports via the Bab el-Mandeb Strait are also facing disruption. Second, under conservative assumptions—drawing on the previous conflict that lasted two to four weeks—and given that crude inventories have fallen to historical lows alongside restocking demand for refined products in the second half, CICC judges that the oil market will remain in a tight balance at least through the third quarter of 2026. The firm also notes that platforms like China National Investment and Guaranty Corporation continue to increase holdings of central enterprise stocks, while state-owned giants such as Sinopec have announced share buyback and increase plans. Currently, the A-share dividend yield for the oil and gas and petrochemical sector stands at roughly 4-5%, with H-shares around 7-8%, and valuations may strengthen further with support from buying funds. Additionally, as supply disruption risks become more entrenched, crude prices still carry elevated upside risk.
Related stocks: PetroChina (00857): Citigroup has updated its model for China's petroleum giant to reflect its latest Brent assumptions, pegging Q3/Q4 2026 at $75 and $70 per barrel respectively, and $65 for 2027. The bank raised its 2026 EPS forecast by 26% while keeping 2027 broadly flat with a 1% cut, and introduced 2028 estimates. The target price is lifted from HK$10 to HK$12, reflecting revised exploration and production DCF valuations with a long-term Brent price of $65 per barrel, up from $60 previously.
Shandong Molong (00568): In the first quarter of 2026, the company posted revenue of RMB 666 million, up 128.53% year-on-year. Net profit attributable to shareholders reached RMB 5.584 million, a rise of 2.96%, with basic earnings per share of RMB 0.0070.
China Oilfield Services (02883): In Q1 2026, revenue came in at RMB 11.296 billion, up 4.6% year-on-year. Net profit attributable to shareholders was RMB 856 million, down 3.6%, with basic EPS of RMB 0.18.
Comments