PETROCHINA COMPANY LIMITED
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
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o |
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
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þ |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2007.
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
or
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o |
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
Commission File Number [1-15006]
(Exact name of Registrant as specified in its charter)
PetroChina Company Limited
(Translation of Registrants name into English)
The Peoples Republic of China
(Jurisdiction of incorporation or organization)
16 Andelu
Dongcheng District, Beijing, 100011
The Peoples Republic of China
(Address of principal executive offices)
Li Huaiqi
Telephone number: 8610 84886270
Facsimile number: 8610 84886260
Email address: xwzou@petrochina.com.cn
Address: 16 Andelu, Dongcheng District, Beijing, 100011,The
Peoples Republic of China
(Name, telephone, e-mail and/or facsimile number and address of registrants contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of |
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Name of each exchange |
Each class |
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on which registered |
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American Depositary Shares, each representing 100 H Shares, par value RMB 1.00 per share*
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New York Stock Exchange, Inc. |
H Shares, par value RMB 1.00 per share
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New York Stock Exchange, Inc.** |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report:
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A Shares, par value RMB 1.00 per share*** |
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161,922,077,818 |
(1) |
H Shares, par value RMB 1.00 per share |
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21,098,900,000 |
**** |
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(1): |
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Includes the 157,922,077,818 A Shares held by CNPC and the 4,000,000,000 A Shares held
by the public shareholders. |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes þ No o
If this is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes o No þ
NoteChecking
the box above will not relieve any registrant required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) or the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer þ Accelerated Filer o Non-Accelerated Filer o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:
o U.S. GAAP þ International Financial Reporting Standards as issued by the International
Accounting Standards Board o Other
If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the registrant has elected to follow.
Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
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* |
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PetroChinas H Shares are listed and traded on The Stock Exchange of Hong Kong Limited. |
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** |
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Not for trading, but only in connection with the registration of American Depository Shares. |
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*** |
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PetroChinas A Shares were became listed on the Shanghai Stock Exchange on November 5, 2007. |
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**** |
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Includes 19,004,728,000 H Shares represented by American Depositary Shares. |
CERTAIN TERMS AND CONVENTIONS
Conventions Which Apply to this Annual Report
Unless the context otherwise requires, references in this annual report to:
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CNPC or CNPC group are to our parent, China National Petroleum
Corporation and its affiliates and subsidiaries, excluding PetroChina,
its subsidiaries and its interests in long-term investments, and where
the context refers to any time prior to the establishment of CNPC,
those entities and businesses which were contributed to CNPC upon its
establishment. |
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PetroChina, we, our, our company and us are to: |
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PetroChina Company Limited, a joint stock company incorporated in the
Peoples Republic of China with limited liability and its subsidiaries
and branch companies, or |
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the CNPC groups domestic crude oil and natural gas exploration and
production, refining and marketing, chemicals and natural gas
businesses that were transferred to us in the restructuring of the
CNPC group in 1999. |
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PRC or China are to the Peoples Republic of China, but do not
apply to Hong Kong, Macau or Taiwan for purposes of this annual
report. |
We publish our consolidated financial statements in Renminbi or RMB. The audited consolidated
financial statements included in this annual report have been prepared as if the operations and
businesses transferred to us from CNPC were transferred as of the earliest period presented or from
the date of establishment of the relevant unit, whichever is later, and conducted by us throughout
the period. In this annual report, IFRS refers to International Financial Reporting Standards as
issued by the International Accounting Standards Board.
Conversion Table
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1 barrel-of-oil equivalent |
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= 1 barrel of crude oil |
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= 6,000 cubic feet of natural gas |
1 cubic meter |
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= 35.315 cubic feet |
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1 ton of crude oil |
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= 1 metric ton of crude oil |
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= 7.389 barrels of crude oil (assuming an
API gravity of 34 degrees) |
Certain Oil and Gas Terms
Unless the context indicates otherwise, the following terms have the meanings shown below:
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acreage
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The total area, expressed in acres, over which an entity has
interests in exploration or production. Net acreage is the
entitys interest, expressed in acres, in the relevant
exploration or production area. |
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API gravity
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An indication of the density of crude oil or other liquid
hydrocarbons as measured by a system recommended by the
American Petroleum Institute (API), measured in degrees. The
lower the API gravity, the heavier the compound. |
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condensate
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Light hydrocarbon substances produced with natural gas that
condense into liquid at normal temperatures and pressures
associated with surface production equipment. |
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crude oil
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Crude oil, including condensate and natural gas liquids. |
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development cost
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For a given period, costs incurred to obtain access to proved reserves
and to provide facilities for extracting, treating, gathering and storing
the oil and gas. |
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finding cost
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For a given period, costs incurred in identifying areas that may warrant
examination and in examining specific areas that are considered to have
prospects of containing oil and gas reserves, including costs of drilling
exploratory wells and exploratory-type stratigraphic test wells. Finding
cost is also known as |
4
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exploration cost. |
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lifting cost
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For a given period, costs incurred to operate and maintain wells and
related equipment and facilities, including applicable operating costs of
support equipment and facilities and other costs of operating and
maintaining those wells and related equipment and facilities. Lifting
cost is also known as production cost. |
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natural gas liquids
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Hydrocarbons that can be extracted in liquid form together with natural
gas production. Ethane and pentanes are the predominant components, with
other heavier hydrocarbons also present in limited quantities. |
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offshore
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Areas under water with a depth of five meters or greater. |
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onshore
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Areas of land and areas under water with a depth of less than five meters. |
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primary distillation capacity
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At a given point in time, the maximum volume of crude oil a refinery is
able to process in its basic distilling units. |
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proved developed reserves
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Reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods. Additional oil and gas expected
to be obtained through the application of fluid injection or other
improved recovery techniques for supplementing the natural forces and
mechanisms of primary recovery are included as proved developed
reserves only after testing by a pilot project or after the operation of
an installed program has confirmed through production response that
increased recovery will be achieved. |
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proved reserves
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Estimated quantities of crude oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable
in future years from known reservoirs under existing economic and
operating conditions, i.e., prices and costs as of the date the estimate
is made. Prices include consideration of changes in existing prices
provided only by contractual arrangements, but not of escalations based
upon future conditions. |
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proved undeveloped reserves
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Reserves that are expected to be recovered from new wells on undrilled
acreage, or from existing wells where a relatively major expenditure is
required for recompletion. Reserves on undrilled acreage shall be limited
to those drilling units offsetting productive units that are reasonably
certain of production when drilled. Proved reserves for other undrilled
units can be claimed only where it can be demonstrated with certainty
that there is continuity of production from the existing productive
formation. Under no circumstances should estimates for proved undeveloped
reserves be attributable to any acreage for which an application of fluid
injection or other improved recovery technique is contemplated, unless
such techniques have been proved effective by actual tests in the area
and in the same reservoir. |
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reserve-to-production ratio
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For any given well, field or country, the ratio of proved reserves to
annual production of crude oil or, with respect to natural gas, to
wellhead production excluding flared gas. |
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sales gas
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Marketable production of gas on an as sold basis, excluding flared gas,
injected gas and gas consumed in operations. |
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water cut
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For a given oil region, the percentage that water constitutes of all
fluids extracted from all wells in that region. |
References to:
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BOE is to barrels-of-oil equivalent, |
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Mcf is to thousand cubic feet, and |
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Bcf is to billion cubic feet. |
5
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934,
as amended. These forward-looking statements are, by their nature, subject to significant risks and
uncertainties. These forward-looking statements include, without limitation, statements relating
to:
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the amounts and nature of future exploration, development and other capital expenditures; |
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future prices and demand for crude oil, natural gas, refined products and chemical products; |
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development projects; |
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exploration prospects; |
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reserves potential; |
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production of oil and gas and refined and chemical products; |
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development and drilling potential; |
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expansion and other development trends of the oil and gas industry; |
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the planned development of our natural gas operations; |
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the planned expansion of our refined product marketing network; |
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the planned expansion of our natural gas infrastructure; |
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the anticipated benefit from the acquisition of certain overseas assets from CNPC, our parent company; |
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the plan to continue to pursue attractive business opportunities outside China; |
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our future overall business development and economic performance; |
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our anticipated financial and operating information regarding, and the future development and economic performance of our business; |
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our anticipated market risk exposure arising from future changes in interest rates, foreign exchange rates and commodity prices; and |
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other prospects of our business and operations. |
The words anticipate, believe, could, estimate, expect, intend, may, plan,
seek, will and would and similar expressions, as they related to us, are intended to identify
a number of these forward-looking statements.
By their nature, forward-looking statements involve risks and uncertainties because they
relate to events and depend on circumstances that will occur in the future and are beyond our
control. The forward-looking statements reflect our current views with respect to future events and
are not a guarantee of future performance. Actual results may differ materially from information
contained in the forward-looking statements as a result of a number of factors, including, without
limitation, the risk factors set forth in this annual report and the following:
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fluctuations in crude oil and natural gas prices; |
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failure to achieve continued exploration success; |
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failures or delays in achieving production from development projects; |
6
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continued availability of capital and financing; |
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acquisitions and other business opportunities that we may pursue; |
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general economic, market and business conditions, including volatility in interest rates,
changes in foreign exchange rates and volatility in commodity markets; |
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liability for remedial actions under environmental regulations; |
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impact of the PRCs entry into the World Trade Organization; |
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the actions of competitors; |
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wars and acts of terrorism or sabotage; |
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changes in policies, laws or regulations of the PRC, including changes in applicable tax rates; |
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the other changes in global economic and political conditions affecting the production, supply
and demand and pricing of crude oil, refined products, petrochemical products and natural gas;
and |
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the other risk factors discussed in this annual report, and other factors beyond our control. |
You should not place undue reliance on any forward-looking statement.
PART I
ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable. However, see Item 6 Directors, Senior Management and Employees
Directors, Senior Management and Supervisors.
ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3 KEY INFORMATION
Exchange Rates
The noon buying rate in New York City for cable transfers as certified for customs purposes by
the Federal Reserve Bank of New York was US$1.00=RMB 6.9880 on May 16, 2008. The following table
sets forth the high and low noon buying rates between Renminbi and U.S. dollars for each month
during the previous six months:
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Noon buying rate |
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High |
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Low |
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(RMB per US$) |
December 2007 |
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7.4120 |
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7.2946 |
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January 2008 |
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7.2946 |
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7.1818 |
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February 2008 |
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7.1973 |
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7.1100 |
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March 2008 |
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7.1110 |
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7.0105 |
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April 2008 |
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7.0185 |
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6.9840 |
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May 2008 (ending as of May 16) |
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7.0000 |
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6.9860 |
|
7
The following table sets forth the average noon buying rates between Renminbi and U.S. dollars
for each of 2003, 2004, 2005, 2006 and 2007, calculated by averaging the noon buying rates on the
last day of each month during the relevant year:
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Average noon buying rate |
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(RMB per US$) |
2003 |
|
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8.2772 |
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2004 |
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8.2768 |
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2005 |
|
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8.1826 |
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2006 |
|
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7.9579 |
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2007 |
|
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7.5806 |
|
Selected Financial Data
Historical Financial Information
You should read the selected historical financial data set forth below in conjunction with the
consolidated financial statements of PetroChina and their notes and Item 5 Operating and
Financial Review and Prospects included elsewhere in this annual report. The selected historical
income statement and cashflow data for the years ended December 31, 2005, 2006 and 2007 and the
selected historical balance sheet data as of December 31, 2006 and 2007 set forth below are derived
from our audited consolidated financial statements included elsewhere in this annual report. The
selected historical income statement data and cashflow data for the years ended December 31, 2003
and 2004 and the selected historical balance sheet data as of December 31, 2003, 2004 and 2005 set
forth below are derived from our audited financial statements, not included in this annual report.
The financial information included in this section may not necessarily reflect our results of
operations, financial position and cash flows in the future.
8
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Year ended December 31, |
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2003 (1) |
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2004 (1) |
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2005 |
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2006 |
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2007 |
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RMB |
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RMB |
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RMB |
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RMB |
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RMB |
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(in millions, except for per share |
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and per ADS data) |
Income Statement Data |
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Revenues |
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Sales and other operating revenues |
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310,431 |
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397,354 |
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552,229 |
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688,978 |
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835,037 |
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Operating expenses |
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Purchases, services and other |
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(89,741 |
) |
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(114,249 |
) |
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(200,321 |
) |
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(271,123 |
) |
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(370,740 |
) |
Employee compensation costs |
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(20,044 |
) |
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(22,934 |
) |
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(29,675 |
) |
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(39,161 |
) |
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(50,616 |
) |
Exploration expenses, including exploratory dry holes |
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(10,624 |
) |
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(12,090 |
) |
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(15,566 |
) |
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(18,822 |
) |
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(20,648 |
) |
Depreciation, depletion and amortization |
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(42,163 |
) |
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(48,362 |
) |
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(51,305 |
) |
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(61,388 |
) |
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(66,625 |
) |
Selling, general and administrative expenses |
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(25,982 |
) |
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(28,302 |
) |
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(36,538 |
) |
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(43,235 |
) |
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(51,576 |
) |
Employee separation costs and shutting down of
manufacturing assets |
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(2,355 |
) |
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(220 |
) |
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Taxes other than income taxes |
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(16,821 |
) |
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(19,943 |
) |
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(23,616 |
) |
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(56,666 |
) |
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(73,712 |
) |
Revaluation loss of property, plant and equipment |
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(391 |
) |
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Other expenses, net |
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(598 |
) |
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(116 |
) |
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(3,037 |
) |
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(607 |
) |
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(1,265 |
) |
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Total operating expenses |
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(208,719 |
) |
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(246,216 |
) |
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(360,058 |
) |
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(491,002 |
) |
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(635,182 |
) |
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Income from operations |
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101,712 |
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151,138 |
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192,171 |
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197,976 |
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199,855 |
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Income from equity affiliates and jointly controlled entities |
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933 |
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1,621 |
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2,401 |
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2,277 |
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6,997 |
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Exchange gain (loss), net |
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(36 |
) |
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8 |
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|
88 |
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|
74 |
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(866 |
) |
Interest income |
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|
973 |
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|
1,373 |
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|
1,924 |
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|
2,066 |
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|
|
1,990 |
|
Interest expense |
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|
(2,889 |
) |
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|
(2,896 |
) |
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|
(2,762 |
) |
|
|
(3,220 |
) |
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(3,595 |
) |
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Income before taxes |
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|
100,693 |
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151,244 |
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193,822 |
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199,173 |
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|
204,381 |
|
Income taxes |
|
|
(28,796 |
) |
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|
(43,598 |
) |
|
|
(54,180 |
) |
|
|
(49,776 |
) |
|
|
(49,152 |
) |
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Income for this year |
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|
71,897 |
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|
107,646 |
|
|
|
139,642 |
|
|
|
149,397 |
|
|
|
155,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
69,835 |
|
|
|
103,843 |
|
|
|
133,362 |
|
|
|
142,224 |
|
|
|
145,625 |
|
Minority shareholders |
|
|
2,062 |
|
|
|
3,803 |
|
|
|
6,280 |
|
|
|
7,173 |
|
|
|
9,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,897 |
|
|
|
107,646 |
|
|
|
139,642 |
|
|
|
149,397 |
|
|
|
155,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to shareholders for this year (2) |
|
|
0.40 |
|
|
|
0.59 |
|
|
|
0.75 |
|
|
|
0.79 |
|
|
|
0.81 |
|
Basic and diluted net income per ADS (3) |
|
|
39.72 |
|
|
|
59.06 |
|
|
|
75.44 |
|
|
|
79.45 |
|
|
|
81.04 |
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2003 (1) |
|
2004 (1) |
|
2005 |
|
2006 |
|
2007 |
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
(in millions, except for per share and |
|
|
per ADS data) |
Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
11,613 |
|
|
|
11,688 |
|
|
|
80,905 |
|
|
|
48,559 |
|
|
|
65,494 |
|
Time deposits with maturities after three months but
within 12 months |
|
|
2,648 |
|
|
|
1,425 |
|
|
|
1,691 |
|
|
|
3,012 |
|
|
|
18,042 |
|
Investments in collateralized loans |
|
|
24,224 |
|
|
|
33,217 |
|
|
|
235 |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
4,115 |
|
|
|
3,842 |
|
|
|
4,630 |
|
|
|
8,488 |
|
|
|
18,419 |
|
Inventories, at net book value |
|
|
30,064 |
|
|
|
47,377 |
|
|
|
62,733 |
|
|
|
76,038 |
|
|
|
88,467 |
|
Prepaid expenses and other current assets |
|
|
18,845 |
|
|
|
24,704 |
|
|
|
25,701 |
|
|
|
26,125 |
|
|
|
40,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
91,509 |
|
|
|
122,253 |
|
|
|
175,895 |
|
|
|
162,222 |
|
|
|
231,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, less accumulated
depreciation, depletion and amortization |
|
|
442,311 |
|
|
|
485,612 |
|
|
|
563,890 |
|
|
|
645,337 |
|
|
|
762,882 |
|
Long-term investments, at net book value |
|
|
9,405 |
|
|
|
11,504 |
|
|
|
13,608 |
|
|
|
35,010 |
|
|
|
29,116 |
|
Prepaid operating lease rentals |
|
|
7,286 |
|
|
|
12,307 |
|
|
|
16,235 |
|
|
|
20,468 |
|
|
|
23,417 |
|
Intangible and other assets |
|
|
3,027 |
|
|
|
3,020 |
|
|
|
5,011 |
|
|
|
6,627 |
|
|
|
8,488 |
|
Time deposits mature after one year |
|
|
3,485 |
|
|
|
3,751 |
|
|
|
3,428 |
|
|
|
2,499 |
|
|
|
5,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
465,514 |
|
|
|
516,194 |
|
|
|
602,172 |
|
|
|
709,941 |
|
|
|
828,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
557,023 |
|
|
|
638,447 |
|
|
|
778,067 |
|
|
|
872,163 |
|
|
|
1,060,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt |
|
|
34,328 |
|
|
|
34,937 |
|
|
|
28,689 |
|
|
|
35,763 |
|
|
|
30,934 |
|
Accounts payable and accrued liabilities |
|
|
66,700 |
|
|
|
73,072 |
|
|
|
99,758 |
|
|
|
120,182 |
|
|
|
144,353 |
|
Income tax payable |
|
|
12,068 |
|
|
|
17,484 |
|
|
|
20,567 |
|
|
|
17,744 |
|
|
|
11,709 |
|
Other taxes payable |
|
|
9,251 |
|
|
|
5,032 |
|
|
|
4,824 |
|
|
|
6,190 |
|
|
|
11,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
122,347 |
|
|
|
130,525 |
|
|
|
153,838 |
|
|
|
179,879 |
|
|
|
198,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
51,601 |
|
|
|
44,648 |
|
|
|
44,570 |
|
|
|
35,634 |
|
|
|
39,688 |
|
Other long-term obligations |
|
|
2,010 |
|
|
|
2,481 |
|
|
|
1,046 |
|
|
|
995 |
|
|
|
1,035 |
|
Assets retirement obligations |
|
|
735 |
|
|
|
919 |
|
|
|
14,187 |
|
|
|
18,481 |
|
|
|
24,761 |
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2003 (1) |
|
2004 (1) |
|
2005 |
|
2006 |
|
2007 |
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
(in millions, except for per share and |
|
|
per ADS data) |
Deferred taxes |
|
|
13,436 |
|
|
|
16,902 |
|
|
|
20,759 |
|
|
|
19,583 |
|
|
|
20,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current liabilities |
|
|
67,782 |
|
|
|
64,950 |
|
|
|
80,562 |
|
|
|
74,693 |
|
|
|
85,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
190,129 |
|
|
|
195,475 |
|
|
|
234,400 |
|
|
|
254,572 |
|
|
|
283,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
Share capital |
|
|
175,824 |
|
|
|
175,824 |
|
|
|
179,021 |
|
|
|
179,021 |
|
|
|
183,021 |
|
Retained income |
|
|
88,152 |
|
|
|
143,115 |
|
|
|
203,812 |
|
|
|
264,092 |
|
|
|
332,432 |
|
Reserves |
|
|
93,952 |
|
|
|
108,834 |
|
|
|
132,556 |
|
|
|
143,564 |
|
|
|
217,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
357,928 |
|
|
|
427,773 |
|
|
|
515,389 |
|
|
|
586,677 |
|
|
|
733,405 |
|
Minority interest |
|
|
8,966 |
|
|
|
15,199 |
|
|
|
28,278 |
|
|
|
30,914 |
|
|
|
42,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
|
366,894 |
|
|
|
442,972 |
|
|
|
543,667 |
|
|
|
617,591 |
|
|
|
776,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
|
|
557,023 |
|
|
|
638,447 |
|
|
|
778,067 |
|
|
|
872,163 |
|
|
|
1,060,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital, issued and outstanding, RMB 1.00 par value
State-owned shares |
|
|
158,242 |
|
|
|
158,242 |
|
|
|
157,922 |
|
|
|
157,922 |
|
|
|
|
|
A Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
161,922 |
|
H Shares and ADSs |
|
|
17,582 |
|
|
|
17,582 |
|
|
|
21,099 |
|
|
|
21,099 |
|
|
|
21,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2003 (1) |
|
2004 (1) |
|
2005 |
|
2006 |
|
2007 |
|
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
RMB |
|
|
(in millions) |
Other Financial Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend per share |
|
|
0.18 |
|
|
|
0.26 |
|
|
|
0.34 |
|
|
|
0.36 |
|
|
|
0.36 |
|
Dividend per ADS |
|
|
17.82 |
|
|
|
26.34 |
|
|
|
33.80 |
|
|
|
35.75 |
|
|
|
36.25 |
|
Capital expenditures |
|
|
(86,373 |
) |
|
|
(98,946 |
) |
|
|
(124,801 |
) |
|
|
(148,746 |
) |
|
|
(181,583 |
) |
Cash Flow Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
139,570 |
|
|
|
141,691 |
|
|
|
203,885 |
|
|
|
198,102 |
|
|
|
203,748 |
|
Net cash used for investing activities |
|
|
(102,549 |
) |
|
|
(102,276 |
) |
|
|
(91,576 |
) |
|
|
(158,451 |
) |
|
|
(184,205 |
) |
Net cash used for financing activities |
|
|
(35,593 |
) |
|
|
(39,586 |
) |
|
|
(42,634 |
) |
|
|
(71,739 |
) |
|
|
(2,648 |
) |
|
|
|
Notes: |
|
(1) |
|
Certain financial data for these periods and as of these dates are
derived from our audited consolidated financial statements, not
included in this annual report, and were retroactively restated. In
2005, we retroactively restated our prior years consolidated
financial statements to reflect the effect as if the refinery and
petrochemical operations of Ningxia Dayuan Refinery and Petrochemical
Company Limited, or Dayuan, Qingyang Refinery and Petrochemical
Company Limited, or Qingyang, both of which we acquired from CNPC, and
the operations of CNPC Exploration and Development Company Limited, or
CNPC E&D, of which we acquired a 50% interest from China National Oil
and Gas Exploration and Development Corporation, or CNODC, a
wholly owned subsidiary of CNPC, had always been combined since
inception. |
|
(2) |
|
The basic and diluted income per share for the years ended December
31, 2003 and 2004 has been calculated by dividing the net income by
the |
11
|
|
|
|
|
number of 175,824 million shares issued and outstanding for the
corresponding years. The basic and diluted income per share for the
year ended December 31, 2005 was calculated by dividing the net
income
by the weighted average number of 176,770 million shares issued and
outstanding for the year presented. The basic and diluted income per
share for the year ended December 31, 2006 was calculated by dividing
the net income by the number of 179,021 million shares issued and
outstanding for the year presented. The basic and diluted income per
share for the year ended December 31, 2007 was calculated by dividing
the net income by the number of 179,700 million shares issued and
outstanding for the year presented. |
|
(3) |
|
The basic and diluted income per ADS for the years ended December 31,
2003 and 2004 has been calculated by dividing the net income by the
number of 175,824 million shares issued and outstanding for the
corresponding years, each ADS representing 100 H Shares. The basic and
diluted income per ADS for the year ended December 31, 2005 has been
calculated by dividing the net income by the weighted average number
of 176,770 million shares issued and outstanding for the year
presented, each ADS representing 100 H Shares. The basic and diluted
income per ADS for the year ended December 31, 2006 has been
calculated by dividing the net income by the number of 179,021 million
shares issued and outstanding for the year presented, each ADS
representing 100 H Shares. The basic and diluted income per ADS for
the year ended December 31, 2007 was calculated by dividing the net
income by the number of 179,700 million shares issued and outstanding
for the year presented, each ADS representing 100 H Shares. |
Risk Factors
Our business is primarily subject to various changing competitive, economic and social
conditions in the PRC. Such changing conditions entail certain risks, which are described below.
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Our operations are affected by the volatility
of prices for crude oil and refined products.
We and China Petroleum and Chemical
Corporation, or Sinopec, set our crude oil
median prices monthly based on the Singapore
trading prices for crude oil. In 2006, the
PRC government, under its macroeconomic
controls, introduced a new mechanism for
determining the prices of refined products.
Historically, international prices for crude
oil and refined products have fluctuated
widely in response to changes in many
factors, such as global and regional economic
and political developments, and global and
regional supply and demand for crude oil and
refined products. We do not have, and will
not have, control over the factors affecting
international prices for crude oil and
refined products. A decline in crude oil
prices will reduce our crude oil revenues
derived from external customers. If crude oil
prices remain at a low level for a prolonged
period, our company has to determine and
estimate whether our oil and gas assets may
suffer impairment losses and, if so, the
amount of the impairment losses. An increase
in crude oil prices may, however, increase
the production costs of refined products. In
addition, a decline in refined products
prices will reduce our revenue derived from
refining operations. An increase in the
refined products prices, however, will
increase the production costs of chemical
products which use refined products as raw
materials. |
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The crude oil and natural gas reserve data in
this annual report are only estimates. The
reliability of reserve estimates depends on a
number of factors, assumptions and variables,
such as the quality and quantity of our
technical and economic data and the
prevailing oil and gas prices applicable to
our production, some of which are beyond our
control and may prove to be incorrect over
time. Results of drilling, testing and
production after the date of the estimates
may require substantial upward or downward
revisions in our reserve data. Our actual
production, revenues and expenditures with
respect to our reserves may differ materially
from these estimates because of these
revisions. |
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Our proved crude oil reserves decreased
gradually and modestly from 2001 to 2003
because the decrease in the crude oil
reserves in our Daqing and Liaohe oil regions
could not be offset by the increase in the
crude oil reserves in our oil regions in
northwestern China, such as the Xinjiang oil
region, the Changqing oil and gas region and
the Tarim oil region. Although our proved
crude oil reserves increased slightly in
2004, 2005, 2006 and 2007 compared to prior
years, we cannot assure you that we will be
able to increase or maintain our crude oil
reserves in the future by our exploration
activities in China. We are actively pursuing
business opportunities outside China to
supplement our domestic resources. For
instance, we acquired certain overseas crude
oil and natural gas assets from CNPC. We
cannot assure you, however, that we can
successfully locate sufficient alternative
sources of crude oil supply or at all due to
the complexity of the international
political, economic and other conditions. If
we fail to obtain sufficient alternative
sources of crude oil supply, our results of
operations and financial condition may be
materially and adversely affected. |
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The United States Securities and Exchange
Commission, or the SEC, as required by
Section 404 of the Sarbanes-Oxley Act of
2002, adopted rules requiring every public
company in the United States to include a
management report on such companys internal
control over financial reporting in its
annual report, which contains managements
assessment of the effectiveness of the
companys internal control over financial
reporting. Although our management concluded
that our internal control over our financial
reporting for the fiscal year ended December
31, 2007 was effective, we may discover other
deficiencies in the course of our future
evaluation of our internal control over our
financial reporting and may be unable to
remediate such deficiencies in a timely
manner. If we fail to maintain the adequacy
of our internal control over financial
reporting, we may not be able to conclude
that we have effective internal control over
financial reporting on an ongoing basis, in
accordance with the Sarbanes-Oxley Act.
Moreover, effective internal control is
necessary for us to produce reliable
financial reports and is important to prevent
fraud. As a result, our failure to achieve
and maintain effective internal control over
financial reporting could result in the loss
of investor confidence in the reliability of
our financial statements, which in turn could
harm our business and negatively impact the
trading prices of our ADSs, H Shares or A
Shares. |
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Exploring for, producing and transporting crude oil and
natural gas and producing and transporting refined products
and chemical products involve many hazards. These hazards may
result in: |
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fires; |
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explosions; |
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spills; |
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blow-outs; and |
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other unexpected or dangerous conditions causing personal injuries or
death, property damage, environmental damage and interruption of
operations. |
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Some of our oil and natural gas fields are surrounded by residential areas or
located in areas where natural disasters, such as earthquakes, floods and
sandstorms, tend to occur more frequently than in other areas. As with many
other companies around the world that conduct similar businesses, we have
experienced accidents that have caused property damage and personal injuries
and death. |
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Significant operating hazards and natural disasters may cause partial
interruptions to our operations and property and environmental damage that
could have an adverse impact on our financial condition. |
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Except for limited insurance coverage for vehicles and certain assets that we
consider to be subject to significant operating risks, we do not carry any
other insurance for our property, facilities or equipment in respect of our
business operations. We do not currently carry any third party liability
insurance against claims relating to personal injury or death, property or
environmental damage arising from accidents on our property or relating to our
operations. We also do not currently carry any business interruption insurance.
The limited insurance coverage of our assets exposes us to substantial risks
and will not cover most losses. |
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CNPC owns approximately 86.29% of our share capital. This ownership
percentage enables CNPC to elect our entire board of directors without
the concurrence of any of our other shareholders. Accordingly, CNPC is
in a position to: |
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control our policies, management and affairs; |
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subject to applicable PRC laws and regulations and provisions of our
articles of association, affect the timing and amount of dividend
payments and adopt amendments to certain of the provisions of our
articles of association; and |
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otherwise determine the outcome of most corporate actions and, subject
to the requirements of the Listing Rules of the Hong Kong Stock
Exchange, cause our company to effect corporate transactions without
the approval of minority shareholders. |
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CNPCs interests may sometimes conflict with those of some or all of our
minority shareholders. We cannot assure you that CNPC, as controlling
shareholder, will always vote its shares in a way that benefits our minority
shareholders. |
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In addition to its relationship with us as our controlling shareholder, CNPC by itself or through its affiliates also provides us
with certain services and products necessary for our business activities, such as construction and technical services, production
services and supply of material services. The interests of CNPC and its affiliates as providers of these services and products to
us may conflict with our interests. Although we have entered into a Comprehensive Products and Services Agreement with CNPC and our
transactions with CNPC over the past three years have been conducted on open, fair and competitive commercial terms, we have only
limited leverage in negotiating with CNPC and its affiliates over the specific terms of the agreements for the future provision of
these services and products. |
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The eastern and southern regions of China have a higher demand for refined products and chemical products than the western and
northern regions. Most of our refineries and chemical plants are located in the western and northern regions of China. We incur
relatively higher transportation costs for delivery of our refined products and chemical products to certain areas of the eastern
and southern regions from our refineries and chemical plants in western and northern China. While we continue to expand the sales
of these products in the eastern and southern regions of China, we face strong competition from Sinopec and China National Offshore
Oil Corp, or CNOOC. As a result, we expect that we will continue to encounter difficulty in increasing our sales of refined
products and chemical products in these regions. |
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We are currently constructing new and expanding some existing refinery and petrochemical facilities and constructing several
natural gas pipelines, which could require substantial capital expenditures and investments. We cannot assure you that the cash
generated by our operations will be sufficient to fund these development plans or that our actual future capital expenditures and
investments will not significantly exceed our current planned amounts. If either of these conditions arises, we may have to seek
external financing to satisfy our capital needs. Under such circumstance, our inability to obtain sufficient funding for our
development plans could adversely affect our business, financial condition and results of operations. |
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We are also subject to a number of risks relating to the PRC and the PRC oil and gas industry. These risks are described as follows: |
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Our operations, like those of other PRC oil and gas companies, are
subject to extensive regulations and control by the PRC government.
These regulations and control affect many material aspects of our
operations, such as exploration and production licensing,
industry-specific and product-specific taxes and fees and
environmental and safety standards. As a result, we may face
significant constraints on our ability to implement our business
strategies, to develop or expand our business operations or to
maximize our profitability. Our business may also be adversely
affected by future changes in certain policies of the PRC government
with respect to the oil and gas industry. For example, since March 26,
2006, we have been subject to a crude oil special gain levy imposed by
the PRC government. As a result, we recorded an aggregate of RMB
28,914 million and an aggregate of RMB44,582 million as such levy to
the PRC government in relation to our domestic sales of crude oil in
2006 and in 2007, respectively. |
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Currently, the PRC government must approve the construction and major
renovation of significant refining and petrochemical facilities as
well as the construction of significant natural gas and refined
product pipelines and storage facilities. We presently have several
significant projects pending approval from the relevant government
authorities and will need approvals from the relevant government
authorities in connection with several other significant projects. We
do not have control over the timing and outcome of the final project
approvals. |
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We receive most of our revenues in Renminbi. A portion of our Renminbi
revenues must be converted into other currencies to meet our foreign
currency obligations. The existing foreign exchange limitations under
the PRC laws and regulations could affect our ability to obtain
foreign exchange through debt financing, or to obtain foreign exchange
for capital expenditures. |
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Prior to 2005, our company performed capping or plugging on wellheads
and surface facilities that could be salvaged for alternative use. For
safety reasons, our company also performed capping or plugging on
certain wells that were considered to be in areas with extensive human
use at the time of the abandonment. Our company, however, did not
perform capping or plugging on wells that were neither considered to
be in areas with extensive human use nor could be salvaged for
alternative use. Consequently, such wellheads and surface facilities
were left at their original sites after the wells were retired. |
The Environmental Protection Regulation for Oil and Gas Exploration and
Production Activities in Heilongjiang Province and The Environmental Protection
Regulation for Oil and Gas Exploration and Production Activities in Gansu
Province were issued in mid and late 2005. Based on our reading of the new
provincial regulations and in consultation with the environmental
administrative authorities in Heilongjiang and Gansu provinces, we believe that
such regulations only apply to the oil and gas properties retired after these
regulations were issued in 2005. Accordingly, our company established standard
abandonment procedures, requesting that all of its branch and
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subsidiary
companies recognize asset retirement provisions for their currently used oil
and gas properties.
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Our company believes it had no obligation to adopt such abandonment procedures
prior to the issuance of the new regulations in 2005. For the oil and gas
properties that were retired prior to the issuance of such regulations, the
activities required to retire these assets, at a level that would be in
compliance with the regulations and our internal policy, have not been
performed. The costs associated with these activities have not been included in
the asset retirement obligations accrued during 2005. However, Heilongjiang
Province and Gansu Province could enact new regulations, amend the current
regulations or retroactively apply the relevant requirements. If any of these
regulations is determined to be applicable to assets other than those that were
retired subsequent to the dates that these regulations were issued in 2005, we
could be required to incur substantial costs associated with such asset
retirement obligations. In addition, we cannot assure you that the provincial
governments other than Heilongjiang Province and Gansu Province will not enact
new regulations which will require our company to perform additional asset
retirement activities related to the assets retired before the establishment of
our companys internal policy and areas in which these assets were or continue
to be located.
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Because PRC laws, regulations and legal requirements dealing with
economic matters are relatively new and continue to evolve, and
because of the limited volume of published judicial interpretations
and the non-binding nature of prior court decisions, the
interpretation and enforcement of these laws, regulations and legal
requirements involve some uncertainty. We have included the Mandatory
Provisions and certain additional requirements that are imposed by the
Hong Kong Stock Exchange Listing Rules in our Articles of Association
for the purpose of reducing the scope of difference between the Hong
Kong Company Law and the PRC Company Law. However, because the PRC
Company Law is different in certain important aspects from company
laws in the United States, Hong Kong and other common law
jurisdictions, and because the PRC securities laws and regulations are
still at an early stage of development, you may not enjoy
shareholders protections that you may be entitled to in other
jurisdictions. |
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In addition to the adverse effect on our revenues, margins and
profitability from any future fall in oil and natural gas prices, a
prolonged period of low prices or other indicators would lead to a
review for impairment of our oil and natural gas properties. This
review would reflect managements view of long-term oil and natural
gas prices. Such a review could result in a charge for impairment
which could have a significant effect on our results of operations in
the period in which it occurs. |
See also Item 4 Information on the Company Regulatory Matters, Item 5 Operating
and Financial Review and Prospects, Item 8 Financial Information and Item 11 Quantitative
and Qualitative Disclosures About Market Risk.
ITEM 4 INFORMATION ON THE COMPANY
Introduction
History and Development of the Company
Overview of Our Operations
We are one of the largest companies in China in terms of sales. We are engaged in a broad
range of petroleum and natural gas related activities, including:
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the exploration, development, production and sale of crude oil and natural gas; |
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the refining, transportation, storage and marketing of crude oil and petroleum products; |
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the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; and |
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the transmission and storage of crude oil, refined products and natural gas as well as the sale of natural gas. |
We are Chinas largest producer of crude oil and natural gas. Currently, substantially all of
our crude oil and natural gas reserves and production-related assets are located in China. In the
year ended December 31, 2007, we had total revenue of RMB 835,037 million and net income of RMB
145,625 million.
Our exploration, development and production activities commenced in the early 1950s, when we
conducted exploration activities in the Yumen oil region in northwestern China. The discovery of
crude oil in 1959 in northeastern Chinas Daqing oil region, one of the worlds largest oil regions
in terms of proved crude oil reserves, marked the beginning of our large-scale upstream activities.
Over more than four decades, we
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have conducted crude oil and natural gas exploration activities in
many regions of China. As of December 31, 2007, we had estimated proved reserves of approximately
11,705.6 million barrels of crude oil and approximately 57,110.6 billion cubic feet of natural gas.
We believe that we hold production licenses for a majority of Chinas proved crude oil reserves and
proved natural gas reserves. In the year ended December 31, 2007, we produced 838.8 million barrels
of crude oil and 1,627.0 billion cubic feet of natural gas for sale, representing an average
production of 2.30 million barrels of crude oil and 4.46 billion cubic feet of natural gas for sale
per day. In 2007, we sold 857.2 million barrels of crude oil and 1,647.8 billion cubic feet of
natural gas. Approximately 84% of the crude oil we sold in the year ended December 31, 2007 was
supplied to our refineries.
We commenced limited refining activities in the mid-1950s, when we began producing gasoline
and diesel at refineries in the Yumen oil region. We now operate 26 refineries located in eight
provinces, four autonomous regions and one municipality. In 2007, our refineries processed
approximately 823.6 million barrels of crude oil or an average of 2.3 million barrels per day. In
the year ended December 31, 2007, we produced approximately 71.38 million tons of gasoline, diesel
and kerosene and sold approximately 85.74 million tons of these products. In the year ended
December 31, 2007, approximately 80% of the crude oil processed in our refineries was provided by
our exploration and production segment and approximately 18.9% of the crude oil processed in our
refineries was imported. As of December 31, 2007, our retail distribution network consisted of
17,070 service stations that we own and operate, 282 service stations, wholly owned by CNPC or
jointly owned by CNPC and third parties, to which we provide supervisory support and 1,296 franchise
service stations.
Our chemicals operations commenced in the early 1950s, when we began producing urea at our
first petrochemical plant in Lanzhou in northwestern China. In the early 1960s, we began producing
ethylene. We currently produce and sell a wide range of basic and derivative petrochemical products
and other chemical products through 12 chemical plants and four chemical products sales companies
located in five provinces, three autonomous regions and two municipalities under the direct
administration of the central government in China. Our other segments supply substantially all of
the hydrocarbon feedstock requirements of our chemicals operations.
We are Chinas largest natural gas transporter and seller in terms of sales volume. Our
natural gas transmission and marketing activities commenced in Sichuan in southwestern China in the
1950s. In 2007, our sales of natural gas totaled 1,647.8 billion cubic feet, of which 1,502.0
billion cubic feet was sold through our natural gas and pipeline segment. As of December 31, 2007,
we owned and operated regional natural gas pipeline networks consisting of 22,043 kilometers of
pipelines, of which 19,792 kilometers were operated by our natural gas and pipeline segment. As of
December 31, 2007, we owned and operated a crude oil pipeline network consisting of 10,559
kilometers of pipelines with an average daily throughput of approximately 3.13 million barrels of
crude oil. As of December 31, 2007, we also had a refined product pipeline network consisting of
2,669 kilometers of pipelines with an average daily throughput of approximately 39,525 tons of
refined products.
We have increased our efforts to pursue attractive business opportunities outside China as
part of our business growth strategy to utilize both domestic and international resources to
strengthen our competitiveness. In June 2005, we entered into a capital contribution agreement with
CNODC, Central Asia Petroleum Company Limited and CNPC E&D, pursuant to which, in December 2005, we
acquired a 50% interest in CNPC E&D, a subsidiary of CNODC, for a consideration of RMB 20,741
million, which was paid to CNPC E&D as a part of our capital contribution. Under this agreement,
CNODC, a wholly owned subsidiary of CNPC, transferred certain of its overseas oil and natural gas
assets to CNPC E&D in November 2005. Following the completion of the transactions contemplated by
this agreement, each of CNODC and us obtained a 50% interest in CNPC E&D and CNODC subsequently
transferred its 50% interest in CNPC E&D to CNPC, which resulted in CNPC holding the 50% interest
in CNPC E&D directly. We have the right to appoint four of the seven directors of CNPC E&D, which
enables us to maintain effective control over CNPC E&D. We also entered into a transfer agreement
with CNPC E&D in December 2005 to transfer all of our interest in PTRI, the operating entity of our
oil and natural gas assets in Indonesia, as the remaining part of our capital contribution to CNPC
E&D for a consideration of RMB 579 million.
Following the completion of the acquisition of CNPC E&D through capital contribution, we
obtained a 50% interest in the oil and natural gas assets held by CNPC E&D in twelve countries,
including, among others, Kazakhstan, Venezuela and Peru. The consummation of the transactions
described above has significantly expanded our overseas operations, effectively increased our oil
and gas reserves and production volumes, and streamlined our existing overseas business in
Indonesia with the acquired businesses.
In August 2006, CNPC E&D entered into an acquisition agreement to acquire a 67% equity
interest in PetroKazakhstan Inc., or PKZ, from CNPC for a consideration of US$2,735 million. This
acquisition was consummated in December 2006. This acquisition has streamlined our existing
exploration and development operations in Kazakhstan and increased our oil and gas assets.
In 2006, we acquired a 100% interest in an exploration block in Chad through CNPC E&D. This
Chad Block covers an area of 220,000 square kilometers and a trap resource of more than 1,000
million barrels of crude oil and is currently one of our most important overseas exploration
blocks. The term trap resource means the geological reserve estimated on a non-filled-trap basis.
It is equal to the trap area multiplied by the unit reserve factor and then multiplied by the filling percentage of the trap. The term unit
reserve factor means the geological serve within one unit area and one unit depth.
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On
December 27, 2007, we entered the Capital Injection Agreement Concerning CNPC
Exploration and Development Company Limited with CNODC and CNPC E&D. Pursuant to that agreement,
we and CNODC, as shareholders of CNPC E&D, shall inject capital in the aggregate of
RMB16,000 million into CNPC E&D. The Company and CNODC shall each inject RMB8,000 million in cash,
payable in one lump sum. Upon completion of the capital injection,
each of us and CNODC
will continue to hold 50% of the shares of CNPC E&D.
In addition, we are currently assessing the feasibility of making further investments in
international oil and gas markets.
In the year ended December 31, 2007, we imported approximately 272.3 million barrels of crude
oil, as compared to 228.8 and 184.9 million barrels of crude oil in the years ended December 31,
2006 and 2005, respectively.
Acquisitions
Pursuant to our board resolutions dated October 26, 2005, we made an offer to the holders of
the A Shares of Jinzhou Petrochemical Co., Ltd. or Jinzhou Petrochemical, to acquire at the
purchase price of RMB 4.25 per share 150 million outstanding Jinzhou Petrochemical A Shares.
Jinzhou Petrochemical was delisted from the Shenzhen Stock Exchange on January 4, 2006 upon
approval from the China Securities Regulatory Commission.
Pursuant to our board resolutions dated October 26, 2005, we made separate offers to the
holders of the A Shares of Jilin Chemical Industrial Company Limited, or Jilin Chemical, and the
holders of the H Shares of Jilin Chemical to acquire at the purchase price of RMB 5.25 per share
200 million outstanding A Shares, and at the purchase price of HK$2.80 per Share 964.778 million
outstanding H Shares (including Jilin Chemical ADSs). Jilin Chemical H Shares, A Shares, and ADSs
were delisted from the Hong Kong Stock Exchange, the Shenzhen Stock Exchange, and the New York
Stock Exchange on January 23, February 20 and February 15, 2006, respectively.
Pursuant to our board resolutions dated October 26, 2005, we made an offer to the holders of A
Shares of Liaohe Jinma Oilfield Co., Ltd. or Liaohe Jinma, to acquire at the purchase price of RMB
8.80 per share 200 million issued and outstanding Liaohe Jinma A Shares. Liaohe Jinma was delisted
from the Shenzhen Stock Exchange on January 4, 2006.
In 2007, we completed the acquisition of the remaining interest in Jinzhou Petrochemical,
Liaohe Jinma and Jilin Chemical. Each of Jinzhou Petrochemical, Liaohe Jinma and Jilin Chemical
completed the cancellation of its business registration in 2007.
On December 6, 2005, we entered into two separate purchase agreements with two wholly owned
subsidiaries of CNPC, Liaohe Petroleum Exploration Bureau and China Petroleum Pipeline Bureau, to
acquire from the two companies a 15.56% equity interest and a 20.17% equity interest, respectively,
in PetroChina Fuel Oil Company or the Fuel Oil Company, a 55.43% subsidiary of our company, with a
total cash consideration of RMB 559 million.
On August 23, 2007, we entered into an transfer agreement with CNPC, pursuant to which we
acquired the assets of the risk operation service business from CNPC. Under the transfer
agreement, we paid CNPC RMB 1,652.28 million as consideration, representing the value of the net
assets of the risk operation service business as at December 31, 2006. The parties shall adjust
the consideration by reference to the net assets generated by the risk operation service business
for the period from January 1, 2007 to August 31, 2007 as shown in the management accounts for that
period.
On April 28, 2008, we entered into an acquisition agreement with CNPC, pursuant to which we
acquired from CNPC the Northeastern Inspection, Maintenance and Repair Business Division of CNPC.
Upon the closing of the agreement, we shall pay RMB 43.8 million to CNPC as consideration,
representing the net asset value of the Northeastern Inspection, Maintenance and Repair Business
Division as at September 30, 2007. The parties shall adjust the consideration by reference to the
net assets generated by the Northeastern Inspection, Maintenance and Repair Business Division for
the period from October 1, 2007 to April 30, 2008 as shown in the management accounts for that
period.
Disposal
Pursuant
to an equity transfer agreement with CNPC dated March 18, 2007, we disposed of our
70% equity interests in China National United Oil Corporation (China United Oil) to CNPC for a
consideration of RMB1.01 billion. This transaction was approved by our shareholders at our annual shareholders meeting for 2006 held on May 16, 2007. We have also
received the internal approval of CNPC and the approval from the
State-owned Assets Supervision and Administration Commission, or
SASAC, and other relevant
regulatory authorities with respect to this transaction. The consideration for this transaction
was determined on the basis of the equal discussions between the parties thereto and the net asset
value of China United Oil as at December 31, 2006
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equal to
RMB1.44 billion as appraised by China
Enterprise Appraisal Co., Ltd. The consideration for this transaction is equal to 70% of such
appraised net asset value.
Our Corporate Organization and Shareholding Structure
PetroChina was established as a joint stock company with limited liability under the Company
Law of the PRC on November 5, 1999 as part of a restructuring in which CNPC transferred to us most
of the assets and liabilities of CNPC relating to its exploration and production, refining and
marketing, chemicals and natural gas businesses. CNPC retained the assets and liabilities relating
to its remaining businesses and operations, including assets and liabilities relating to
international exploration and production and refining and pipeline operations. CNPC is our primary
provider of a wide range of services and products. On April 7, 2000, PetroChina completed a global
offering of H Shares and ADSs. In September 2005, PetroChina completed a follow-on offering of over
3 billion H Shares at the price of HK$6.00 per share. In October 2007 PetroChina issued 4 billion A
Shares at an issue price of RMB16.7 per share. The A Shares were listed on the Shanghai Stock
Exchange on November 5, 2007. Currently, CNPC owns an approximate 86.29% interest in PetroChina.
The following chart illustrates our corpporate organization and our shareholding structure:
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Indicates approximate shareholding. |
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Includes subsidiary companies and those branches without legal person status. |
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Represents enterprises directly administered and operated by such segment. |
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Includes PetroChina Planning & Engineering Institute, PetroChina Exploration & Development Research Institute, CNPC E&D, PetroChina Foreign Cooperation
Administration Department, Beijing Oil and Gas Pipeline Network Dispatching Center, IT Service Center, PetroChina International Co., Ltd., and
Petrochemical Research Institute. |
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The following chart illustrates our management structure:
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Includes subsidiary companies and those branches without legal person status. |
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Represents enterprises directly administered and operated by such segment. |
General Information
Our
legal name is
, and its English translation is PetroChina
Company Limited. Our headquarters are located at 16 Andelu, Dongcheng District, Beijing, China,
100011, and our telephone number at this address is (86-10) 8488-6270. Our website address is
www.petrochina.com.cn. The information on our website is not part of this annual report.
Launch of New Logo
Effective December 26, 2004, we began using a new logo
that is jointly owned by us and CNPC. We have applied for trademark
registration of the new logo with the State Trademark Bureau of the PRC. To date, some of these
applications have been approved, for which we have received
trademark registration certificates, and
others are either in the process of review or public announcement. In addition, we
have applied for international trademark registration for the new logo in other jurisdictions. To
date, we have received two Madrid International Trademark Registration Certificates for the new
logo covering 31 jurisdictions, including the U.S., U.K., Japan, and Korea, and 25 national
trademark registration certificates for the new logo from seven jurisdictions, including Canada,
Myanmar, and Hong Kong.
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Exploration and Production
We are engaged in crude oil and natural gas exploration, development and production.
Substantially all of our total estimated proved crude oil and natural gas reserves are located in
China, principally in northeastern, northern, southwestern and northwestern China. The Songliao
basin, located in Heilongjiang and Jilin provinces in northeastern China, including the Daqing and
Jilin oil regions, accounted for 39.6% of our proved crude oil reserves as of December 31, 2007 and
41.8% of our crude oil production in 2007. We also have significant crude oil reserves and
operations in the area around the Bohai Bay. The Bohai Bay basin includes the Liaohe, Dagang,
Huabei and Jidong oil regions and accounted for 21.4% of our proved crude oil reserves as of
December 31, 2007 and 20.4 of our crude oil production in 2007. Our proved natural gas reserves and
production are generally concentrated in northwestern and southwestern China, specifically in the
Erdos, Tarim and Sichuan basins. Our overseas proved crude oil reserves and proved natural gas
reserves accounted for 5.5% of our proved crude oil reserves and 1.1% of our proved natural gas
reserves as of December 31, 2007 and our overseas oil production and natural gas production
accounted for 6.0% of our crude oil production and 2.7% of our natural gas production in 2007.
We currently hold exploration licenses covering a total area of approximately 446.4 million
acres and production licenses covering a total area of approximately 16.4 million acres. In 2007,
our exploration and production segment had income from operations of RMB 206,587 million.
To further develop our crude oil and natural gas businesses, we have applied to the Ministry
of Land and Resources for oil and gas exploration and production licenses covering the southern
part of the South China Sea to commence offshore crude oil and natural gas exploration and
production. We cannot assure you that we will ultimately obtain these licenses or that we will have
sufficient capital to fund these activities.
Reserves
Our estimated proved reserves as of December 31, 2007 totaled approximately 11,705.6 million
barrels of crude oil and approximately 57,110.6 billion cubic feet of natural gas. As of December
31, 2007, proved developed reserves accounted for 77.3% and 45.6% of our total proved crude oil and
natural gas reserves, respectively. Total proved hydrocarbon reserves on a barrels-of -oil
equivalent basis increased by 3.4% from approximately 20,529.4 million barrels-of -oil equivalent
as of the end of 2006 to approximately 21,223.9 million barrels-of -oil equivalent as of the end of
2007, taking account of our overseas crude oil reserves of 643.2 million barrels and overseas
natural gas reserves of 600.6 billion cubic feet, totaling 743.3 barrels-of -oil equivalent.
Natural gas as a percentage of total proved hydrocarbon reserves increased from 43.4% as of
December 31, 2006 to 44.8 as of December 31, 2007.
The following table sets forth our estimated proved reserves (including proved developed
reserves and proved undeveloped reserves) and proved developed reserves of crude oil and natural
gas as of December 31, 2005, 2006 and 2007. We prepared our reserve estimates as of December 31,
2005, 2006 and 2007, on the basis of reports prepared by DeGolyer & MacNaughton and Gaffney, Cline
& Associates, independent engineering consultants, in accordance with Statement of Financial
Accounting Standards No. 69, or SFAS No. 69. Our reserve estimates include only crude oil and
natural gas which we believe can be reasonably produced within the current terms of our production
licenses. See Regulatory Matters Exploration Licenses and Production Licenses for a discussion
of our production licenses. Also see Item 3 Key Information Risk Factors for a discussion
of the uncertainty inherent in the estimation of proved reserves.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil |
|
Natural gas (1) |
|
Combined (1) |
|
|
(millions of barrels) |
|
(Bcf) |
|
(BOE, in millions) |
Proved developed and undeveloped reserves |
|
|
|
|
|
|
|
|
|
|
|
|
Reserves as of December 31, 2005 |
|
|
11,536.2 |
|
|
|
48,123.1 |
|
|
|
19,556.7 |
|
Revisions of previous estimates |
|
|
196.1 |
|
|
|
685.9 |
|
|
|
310.4 |
|
Extensions and discoveries |
|
|
635.3 |
|
|
|
6,247.7 |
|
|
|
1,676.5 |
|
Improved recovery |
|
|
81.1 |
|
|
|
|
|
|
|
81.1 |
|
Production for the year |
|
|
(830.7 |
) |
|
|
(1,587.5 |
) |
|
|
(1,095.3 |
) |
Reserves as of December 31, 2006 |
|
|
11,618.0 |
|
|
|
53,469.2 |
|
|
|
20,529.4 |
|
Revisions of previous estimates |
|
|
83.7 |
|
|
|
(1,063.0 |
) |
|
|
(93.4 |
) |
Extensions and discoveries |
|
|
763.9 |
|
|
|
6,331.4 |
|
|
|
1,819.1 |
|
Improved recovery |
|
|
78.8 |
|
|
|
0 |
|
|
|
78.8 |
|
Production for the year |
|
|
(838.8 |
) |
|
|
(1,627.0 |
) |
|
|
(1,110.0 |
) |
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil |
|
Natural gas (1) |
|
Combined (1) |
|
|
(millions of barrels) |
|
(Bcf) |
|
(BOE, in millions) |
Reserves as of December 31, 2007 |
|
|
11,705.6 |
|
|
|
57,110.6 |
|
|
|
21,223.9 |
|
Proved developed reserves |
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2005 |
|
|
9,194.8 |
|
|
|
19,857.8 |
|
|
|
12,504.4 |
|
As of December 31, 2006 |
|
|
9,185.2 |
|
|
|
22,563.9 |
|
|
|
12,945.8 |
|
As of December 31, 2007 |
|
|
9,047.1 |
|
|
|
26,047.1 |
|
|
|
13,388.3 |
|
|
|
|
(1) |
|
Represents natural gas remaining after field separation for condensate removal and reduction for flared gas. |
The following tables set forth our crude oil and natural gas proved reserves and proved
developed reserves by region as of December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
Proved |
|
|
|
|
|
Proved |
|
|
|
|
|
Proved |
|
|
|
|
developed |
|
|
|
|
|
Developed |
|
|
|
|
|
developed |
|
|
|
|
and |
|
Proved |
|
And |
|
Proved |
|
and |
|
Proved |
|
|
undeveloped |
|
developed |
|
Undeveloped |
|
developed |
|
undeveloped |
|
developed |
|
|
(millions of barrels) |
Crude oil reserves |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daqing |
|
|
4,396.9 |
|
|
|
3,863.9 |
|
|
|
4,200.3 |
|
|
|
3,516.0 |
|
|
|
3,856.1 |
|
|
|
3,324.3 |
|
Liaohe |
|
|
1,114.6 |
|
|
|
937.5 |
|
|
|
1,067.5 |
|
|
|
845.8 |
|
|
|
1,121.0 |
|
|
|
888.1 |
|
Xinjiang |
|
|
1,261.8 |
|
|
|
1,010.8 |
|
|
|
1,306.6 |
|
|
|
1,077.0 |
|
|
|
1,354.9 |
|
|
|
1,198.9 |
|
Changqing |
|
|
1,267.0 |
|
|
|
840.6 |
|
|
|
1,450.6 |
|
|
|
1,182.9 |
|
|
|
1,488.9 |
|
|
|
1,194.8 |
|
Jilin |
|
|
675.0 |
|
|
|
472.2 |
|
|
|
775.5 |
|
|
|
501.8 |
|
|
|
784.2 |
|
|
|
463.4 |
|
Dagang |
|
|
516.1 |
|
|
|
426.7 |
|
|
|
482.1 |
|
|
|
400.0 |
|
|
|
523.2 |
|
|
|
346.7 |
|
Tarim |
|
|
543.8 |
|
|
|
418.1 |
|
|
|
523.9 |
|
|
|
370.4 |
|
|
|
590.3 |
|
|
|
379.7 |
|
Huabei |
|
|
536.2 |
|
|
|
381.5 |
|
|
|
500.9 |
|
|
|
388.4 |
|
|
|
448.0 |
|
|
|
307.0 |
|
Qinghai |
|
|
243.0 |
|
|
|
185.5 |
|
|
|
227.9 |
|
|
|
187.2 |
|
|
|
200.1 |
|
|
|
186.3 |
|
Tuha |
|
|
165.0 |
|
|
|
110.8 |
|
|
|
156.5 |
|
|
|
104.9 |
|
|
|
164.7 |
|
|
|
91.7 |
|
Sichuan |
|
|
8.0 |
|
|
|
5.5 |
|
|
|
11.7 |
|
|
|
5.4 |
|
|
|
9.5 |
|
|
|
4.4 |
|
Jidong |
|
|
122.7 |
|
|
|
73.6 |
|
|
|
180.4 |
|
|
|
98.3 |
|
|
|
413.1 |
|
|
|
126.0 |
|
Other regions (1) |
|
|
686.1 |
|
|
|
468.1 |
|
|
|
734.1 |
|
|
|
507.1 |
|
|
|
751.5 |
|
|
|
535.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11,536.2 |
|
|
|
9,194.8 |
|
|
|
11,618.0 |
|
|
|
9,185.2 |
|
|
|
11,705.6 |
|
|
|
9,047.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
Proved |
|
|
|
|
|
Proved |
|
|
|
|
|
Proved |
|
|
|
|
developed |
|
|
|
|
|
developed |
|
|
|
|
|
developed |
|
|
|
|
and |
|
Proved |
|
and |
|
Proved |
|
and |
|
Proved |
|
|
undeveloped |
|
developed |
|
undeveloped |
|
developed |
|
undeveloped |
|
Developed |
|
|
(Bcf) |
Natural gas reserves (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sichuan |
|
|
9,211.2 |
|
|
|
5,063.5 |
|
|
|
10,362.8 |
|
|
|
4,867.3 |
|
|
|
10,400.5 |
|
|
|
4,365.5 |
|
Changqing |
|
|
15,765.6 |
|
|
|
4,089.8 |
|
|
|
17,846.1 |
|
|
|
4,559.7 |
|
|
|
19,105.0 |
|
|
|
6,943.9 |
|
Xinjiang |
|
|
1,686.8 |
|
|
|
1,120.4 |
|
|
|
1,723.0 |
|
|
|
1,047.0 |
|
|
|
1,537.1 |
|
|
|
999.3 |
|
Daqing |
|
|
1,936.8 |
|
|
|
813.3 |
|
|
|
1,894.6 |
|
|
|
740.2 |
|
|
|
3,039.7 |
|
|
|
1,046.2 |
|
Qinghai |
|
|
4,534.1 |
|
|
|
1,528.0 |
|
|
|
4,467.0 |
|
|
|
1,584.0 |
|
|
|
4,352.8 |
|
|
|
3,003.5 |
|
Tarim |
|
|
11,838.8 |
|
|
|
5,347.9 |
|
|
|
14,443.6 |
|
|
|
7,818.4 |
|
|
|
15,114.3 |
|
|
|
7,918.8 |
|
Liaohe |
|
|
489.8 |
|
|
|
417.6 |
|
|
|
429.3 |
|
|
|
338.8 |
|
|
|
386.4 |
|
|
|
296.2 |
|
Tuha |
|
|
677.4 |
|
|
|
367.8 |
|
|
|
640.5 |
|
|
|
401.8 |
|
|
|
581.6 |
|
|
|
350.4 |
|
Huabei |
|
|
369.3 |
|
|
|
211.8 |
|
|
|
340.3 |
|
|
|
264.6 |
|
|
|
193.1 |
|
|
|
119.2 |
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
Proved |
|
|
|
|
|
Proved |
|
|
|
|
|
Proved |
|
|
|
|
developed |
|
|
|
|
|
developed |
|
|
|
|
|
developed |
|
|
|
|
and |
|
Proved |
|
and |
|
Proved |
|
and |
|
Proved |
|
|
undeveloped |
|
developed |
|
undeveloped |
|
developed |
|
undeveloped |
|
Developed |
|
|
(Bcf) |
Dagang |
|
|
586.9 |
|
|
|
207.8 |
|
|
|
275.0 |
|
|
|
189.7 |
|
|
|
347.4 |
|
|
|
197.1 |
|
Jilin |
|
|
187.8 |
|
|
|
132.7 |
|
|
|
198.6 |
|
|
|
113.7 |
|
|
|
1,169.9 |
|
|
|
104.1 |
|
Jidong |
|
|
38.9 |
|
|
|
27.2 |
|
|
|
52.7 |
|
|
|
31.5 |
|
|
|
191.4 |
|
|
|
40.4 |
|
Other regions (1) |
|
|
799.7 |
|
|
|
530.0 |
|
|
|
795.7 |
|
|
|
607.2 |
|
|
|
691.4 |
|
|
|
662.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
48,123.1 |
|
|
|
19,857.8 |
|
|
|
53,469.2 |
|
|
|
22,563.9 |
|
|
|
57,110.6 |
|
|
|
26,047.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents Yumen oil regions, oil regions in South China, and our overseas oil and gas fields as a result
of our acquisition of overseas assets. |
|
(2) |
|
Represents natural gas remaining after field separation for condensate removal and reduction for flared gas. |
Exploration and Development
We are currently conducting exploration and development efforts in 11 provinces, two
municipalities under the direct administration of the central government and three autonomous
regions in China. We believe that we have more extensive experience in the exploration and
development of crude oil and natural gas than any of our principal competitors in China. Since
early 1950s, we have been working on developing exploration and recovery technologies and methods
tailored to the specific geological conditions in China.
The following table sets forth the number of wells we drilled, or in which we participated,
and the results thereof, for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year |
|
|
|
Daqing |
|
Xinjiang |
|
Liaohe |
|
Changqing |
|
Huabei |
|
Dagang |
|
Sichuan |
|
Others (1) |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
Net exploratory
wells drilled (2) |
|
|
250 |
|
|
|
191 |
|
|
|
71 |
|
|
|
456 |
|
|
|
83 |
|
|
|
39 |
|
|
|
58 |
|
|
|
360 |
|
|
|
1,508 |
|
|
|
|
|
Crude oil |
|
|
78 |
|
|
|
92 |
|
|
|
47 |
|
|
|
200 |
|
|
|
53 |
|
|
|
22 |
|
|
|
0 |
|
|
|
152 |
|
|
|
644 |
|
|
|
|
|
Natural gas |
|
|
6 |
|
|
|
1 |
|
|
|
0 |
|
|
|
24 |
|
|
|
0 |
|
|
|
0 |
|
|
|
30 |
|
|
|
15 |
|
|
|
76 |
|
|
|
|
|
Dry (3) |
|
|
166 |
|
|
|
98 |
|
|
|
24 |
|
|
|
232 |
|
|
|
30 |
|
|
|
17 |
|
|
|
28 |
|
|
|
193 |
|
|
|
788 |
|
|
|
|
|
Net development
wells drilled (2) |
|
|
3,722 |
|
|
|
1,608 |
|
|
|
563 |
|
|
|
2,608 |
|
|
|
250 |
|
|
|
192 |
|
|
|
101 |
|
|
|
2,587 |
|
|
|
11,631 |
|
|
|
|
|
Crude oil |
|
|
3,712 |
|
|
|
1,604 |
|
|
|
549 |
|
|
|
2,364 |
|
|
|
248 |
|
|
|
188 |
|
|
|
6 |
|
|
|
2,495 |
|
|
|
11,166 |
|
|
|
|
|
Natural gas |
|
|
10 |
|
|
|
4 |
|
|
|
12 |
|
|
|
195 |
|
|
|
2 |
|
|
|
4 |
|
|
|
83 |
|
|
|
88 |
|
|
|
398 |
|
|
|
|
|
Dry (3) |
|
|
0 |
|
|
|
0 |
|
|
|
2 |
|
|
|
49 |
|
|
|
0 |
|
|
|
0 |
|
|
|
12 |
|
|
|
4 |
|
|
|
67 |
|
|
2006 |
|
|
Net exploratory
wells drilled (2) |
|
|
250 |
|
|
|
180 |
|
|
|
64 |
|
|
|
466 |
|
|
|
83 |
|
|
|
50 |
|
|
|
62 |
|
|
|
390 |
|
|
|
1,545 |
|
|
|
|
|
Crude oil |
|
|
73 |
|
|
|
88 |
|
|
|
35 |
|
|
|
203 |
|
|
|
49 |
|
|
|
21 |
|
|
|
|
|
|
|
114 |
|
|
|
583 |
|
|
|
|
|
Natural gas |
|
|
7 |
|
|
|
21 |
|
|
|
1 |
|
|
|
37 |
|
|
|
|
|
|
|
7 |
|
|
|
31 |
|
|
|
6 |
|
|
|
110 |
|
|
|
|
|
Dry (3) |
|
|
170 |
|
|
|
71 |
|
|
|
28 |
|
|
|
226 |
|
|
|
34 |
|
|
|
22 |
|
|
|
31 |
|
|
|
270 |
|
|
|
852 |
|
|
|
|
|
Net development
wells drilled (2) |
|
|
4,183 |
|
|
|
1,605 |
|
|
|
713 |
|
|
|
2,023 |
|
|
|
330 |
|
|
|
179 |
|
|
|
57 |
|
|
|
2,361 |
|
|
|
11,451 |
|
|
|
|
|
Crude oil |
|
|
4,160 |
|
|
|
1,586 |
|
|
|
688 |
|
|
|
1,772 |
|
|
|
225 |
|
|
|
173 |
|
|
|
9 |
|
|
|
2,235 |
|
|
|
10,848 |
|
|
|
|
|
Natural gas |
|
|
23 |
|
|
|
8 |
|
|
|
14 |
|
|
|
216 |
|
|
|
105 |
|
|
|
6 |
|
|
|
40 |
|
|
|
123 |
|
|
|
535 |
|
|
|
|
|
Dry (3) |
|
|
0 |
|
|
|
11 |
|
|
|
11 |
|
|
|
35 |
|
|
|
0 |
|
|
|
0 |
|
|
|
8 |
|
|
|
3 |
|
|
|
68 |
|
|
2007 |
|
|
Net exploratory
wells drilled (2) |
|
|
294 |
|
|
|
183 |
|
|
|
68 |
|
|
|
447 |
|
|
|
104 |
|
|
|
70 |
|
|
|
48 |
|
|
|
415 |
|
|
|
1,629 |
|
|
|
|
|
Crude oil |
|
|
103 |
|
|
|
103 |
|
|
|
49 |
|
|
|
186 |
|
|
|
47 |
|
|
|
59 |
|
|
|
3 |
|
|
|
141 |
|
|
|
691 |
|
|
|
|
|
Natural gas |
|
|
12 |
|
|
|
15 |
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
16 |
|
|
|
114 |
|
|
|
|
|
Dry (3) |
|
|
179 |
|
|
|
65 |
|
|
|
19 |
|
|
|
220 |
|
|
|
57 |
|
|
|
11 |
|
|
|
15 |
|
|
|
258 |
|
|
|
824 |
|
|
|
|
|
Net development
wells drilled (2) |
|
|
4,670 |
|
|
|
1,350 |
|
|
|
529 |
|
|
|
3,087 |
|
|
|
528 |
|
|
|
260 |
|
|
|
83 |
|
|
|
2,377 |
|
|
|
12,884 |
|
|
|
|
|
Crude oil |
|
|
4,643 |
|
|
|
1,346 |
|
|
|
515 |
|
|
|
2,652 |
|
|
|
259 |
|
|
|
252 |
|
|
|
8 |
|
|
|
2,208 |
|
|
|
11,883 |
|
|
|
|
|
Natural gas |
|
|
17 |
|
|
|
4 |
|
|
|
11 |
|
|
|
384 |
|
|
|
269 |
|
|
|
8 |
|
|
|
75 |
|
|
|
163 |
|
|
|
931 |
|
|
|
|
|
Dry (3) |
|
|
10 |
|
|
|
|
|
|
|
3 |
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
70 |
|
|
|
|
(1) |
|
Represents the Jilin, Tarim, Tuha, Qinghai, Jidong and Yumen oil regions. |
|
(2) |
|
Net wells refer to the wells after deducting interests of others. No third parties own any interests in any of our wells. |
22
|
|
|
(3) |
|
Dry wells are wells with insufficient reserves to sustain commercial production. |
Oil-and-Gas Properties
The following table sets forth our interests in developed and undeveloped acreage by oil
region and in productive crude oil and natural gas wells as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acreage (1) (thousands of acres) |
|
|
Productive wells (1) |
|
Developed |
|
Undeveloped |
Oil region |
|
Crude oil |
|
Natural gas |
|
Crude oil |
|
Natural gas |
|
Crude oil |
|
Natural gas |
Daqing |
|
|
71,314 |
|
|
|
196 |
|
|
|
762.5 |
|
|
|
83.4 |
|
|
|
788.8 |
|
|
|
113.2 |
|
Liaohe |
|
|
20,608 |
|
|
|
627 |
|
|
|
190.9 |
|
|
|
35.8 |
|
|
|
91.3 |
|
|
|
6.5 |
|
Xinjiang |
|
|
23,293 |
|
|
|
98 |
|
|
|
299.7 |
|
|
|
37.1 |
|
|
|
152.4 |
|
|
|
20.3 |
|
Jilin |
|
|
23,883 |
|
|
|
112 |
|
|
|
292.2 |
|
|
|
28.4 |
|
|
|
309.3 |
|
|
|
22.6 |
|
Changqing |
|
|
21,957 |
|
|
|
1,725 |
|
|
|
470.4 |
|
|
|
2,191.9 |
|
|
|
335.2 |
|
|
|
1,730.8 |
|
Huabei |
|
|
7,383 |
|
|
|
105 |
|
|
|
140.3 |
|
|
|
12.3 |
|
|
|
60.0 |
|
|
|
2.9 |
|
Dagang |
|
|
4,959 |
|
|
|
63 |
|
|
|
104.6 |
|
|
|
24.5 |
|
|
|
62.2 |
|
|
|
20.7 |
|
Tuha |
|
|
2,301 |
|
|
|
90 |
|
|
|
40.8 |
|
|
|
21.2 |
|
|
|
27.2 |
|
|
|
8.3 |
|
Tarim |
|
|
937 |
|
|
|
167 |
|
|
|
105.9 |
|
|
|
66.2 |
|
|
|
49.1 |
|
|
|
190.6 |
|
Sichuan |
|
|
425 |
|
|
|
1,409 |
|
|
|
335.5 |
|
|
|
377.7 |
|
|
|
|
|
|
|
329.1 |
|
Other regions (2) |
|
|
5,517 |
|
|
|
322 |
|
|
|
68.3 |
|
|
|
32.5 |
|
|
|
48.3 |
|
|
|
25.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
182,577 |
|
|
|
4,914 |
|
|
|
2,811.2 |
|
|
|
2,910.9 |
|
|
|
1,923.7 |
|
|
|
2,470.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes all wells and acreage in which we have an interest. No third parties own any interests in any of our wells or acreage. |
|
(2) |
|
Represents the Qinghai, Jidong and Yumen oil regions. |
Approximately 66.8% of our proved crude oil reserves are concentrated in the Daqing, Liaohe
and Xinjiang oil regions and the Changqing oil and gas region, and approximately 85.8% of our
proved natural gas reserves are concentrated in the Changqing oil and gas region, the Tarim oil
region, the Sichuan gas region and the Qinghai oil region. We believe that the Erdos, Junggar, and
Songliao basins and Bohai Bay have the highest potential for increasing our crude oil reserve base
through future exploration and development, and that the Erdos, Tarim, Sichuan, and Qaidam basins
have the highest potential for increasing our natural gas reserve base through future exploration
and development.
Production
The following table sets forth our historical average net daily crude oil and natural gas
production by region and our average sales price for the periods ended December 31, 2005, 2006 and
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
|
|
December 31, |
|
% of |
|
|
2005 |
|
2006 |
|
2007 |
|
2007 Total |
Crude oil production (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands of barrels per day, except
percentages or otherwise indicated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daqing |
|
|
915.1 |
|
|
|
883.1 |
|
|
|
847.3 |
|
|
|
36.9 |
|
Liaohe |
|
|
238.2 |
|
|
|
230.4 |
|
|
|
231.3 |
|
|
|
10.1 |
|
Xinjiang |
|
|
238.8 |
|
|
|
244.2 |
|
|
|
249.4 |
|
|
|
10.9 |
|
Changqing |
|
|
191.4 |
|
|
|
215.6 |
|
|
|
246.9 |
|
|
|
10.7 |
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended |
|
|
|
|
December 31, |
|
% of |
|
|
2005 |
|
2006 |
|
2007 |
|
2007 Total |
Tarim |
|
|
122.8 |
|
|
|
123.9 |
|
|
|
131.6 |
|
|
|
5.7 |
|
Huabei |
|
|
88.4 |
|
|
|
89.4 |
|
|
|
90.8 |
|
|
|
4.0 |
|
Jilin |
|
|
112.1 |
|
|
|
115.6 |
|
|
|
120.0 |
|
|
|
5.0 |
|
Dagang |
|
|
102.6 |
|
|
|
93.6 |
|
|
|
91.2 |
|
|
|
4.0 |
|
Tuha |
|
|
45.2 |
|
|
|
44.4 |
|
|
|
44.8 |
|
|
|
2.0 |
|
Other (2) |
|
|
200.0 |
|
|
|
235.7 |
|
|
|
244.8 |
|
|
|
10.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,254.5 |
|
|
|
2,275.9 |
|
|
|
2,298.1 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual production (million barrels) |
|
|
822.9 |
|
|
|
830.7 |
|
|
|
838.8 |
|
|
|
|
|
Average sales price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(RMB per barrel) |
|
|
396.2 |
|
|
|
476.8 |
|
|
|
496.3 |
|
|
|
|
|
(US$ per barrel) |
|
|
48.37 |
|
|
|
59.81 |
|
|
|
65.27 |
|
|
|
|
|
Natural gas production (1)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(millions of cubic feet per day, except
percentages or otherwise indicated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sichuan |
|
|
1,107.9 |
|
|
|
1,233.9 |
|
|
|
1,329.8 |
|
|
|
29.8 |
|
Changqing |
|
|
640.7 |
|
|
|
650.4 |
|
|
|
838.4 |
|
|
|
18.8 |
|
Daqing |
|
|
133.8 |
|
|
|
138.0 |
|
|
|
123.7 |
|
|
|
2.8 |
|
Qinghai |
|
|
172.8 |
|
|
|
200.7 |
|
|
|
286.0 |
|
|
|
6.4 |
|
Tuha |
|
|
121.1 |
|
|
|
133.4 |
|
|
|
111.5 |
|
|
|
2.5 |
|
Xinjiang |
|
|
109.8 |
|
|
|
114.2 |
|
|
|
102.3 |
|
|
|
2.3 |
|
Liaohe |
|
|
56.0 |
|
|
|
52.8 |
|
|
|
43.9 |
|
|
|
1.0 |
|
Huabei |
|
|
43.5 |
|
|
|
41.3 |
|
|
|
39.1 |
|
|
|
0.9 |
|
Tarim |
|
|
479.5 |
|
|
|
1,015.7 |
|
|
|
1,383.1 |
|
|
|
31.0 |
|
Dagang |
|
|
26.2 |
|
|
|
28.7 |
|
|
|
43.0 |
|
|
|
1.0 |
|
Other (4) |
|
|
175.9 |
|
|
|
149.6 |
|
|
|
156.7 |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,067.2 |
|
|
|
3,758.7 |
|
|
|
4,457.5 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual production (Bcf) |
|
|
1,119.5 |
|
|
|
1,371.9 |
|
|
|
1,627.0 |
|
|
|
|
|
Average sales price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(RMB per Mcf) |
|
|
23.35 |
|
|
|
27.6 |
|
|
|
29.0 |
|
|
|
|
|
(US$ per Mcf) |
|
|
2.85 |
|
|
|
3.46 |
|
|
|
3.81 |
|
|
|
|
|
|
|
|
(1) |
|
Production volumes for each region include our share of the production
from all of our cooperative projects with foreign companies in that
region. |
|
(2) |
|
Represents production from the Qinghai, Jidong and Yumen oil regions,
the Sichuan gas region and our share of overseas production as a
result of our acquisition of overseas assets. |
|
(3) |
|
Represents production of natural gas for sale. |
|
(4) |
|
Represents production from the Jilin, Jidong and Yumen oil regions and
our share of overseas production as a result of our acquisition of
overseas assets. |
In 2007, we supplied approximately 84.4% of our total crude oil sales to our refineries, 6.0%
to Sinopecs refineries, 6.6% to companies or entities outside China, and the remaining 3.0% to
regional refineries or other entities. We entered into a crude oil mutual supply framework
agreement with Sinopec on January 8, 2008 for the supply of crude oil to each others refineries in
2008. Under this agreement, we agreed in principle to supply 48.5 million barrels of crude oil to
Sinopec, and Sinopec agreed in principle to supply to us approximately 8.0 million barrels of crude
oil in 2008 at negotiated prices based on the Singapore market FOB prices for crude oil. See Item
5 Operating and Financial Review and Prospects General Factors Affecting Results of
Operations Crude Oil Prices for a detailed discussion of the crude oil premium and discount
calculation agreement and its supplemental agreement. For the years ended December 31, 2005, 2006
and 2007, the average lifting costs
24
of our crude oil and natural production were US$5.28 per
barrel-of-oil equivalent, US$6.74 per barrel-of-oil equivalent and US$7.75 per barrel-of-oil
equivalent, respectively.
Principal Oil and Gas Regions
Daqing Oil Region
The Daqing oil region, our largest oil and gas producing property, is located in the Songliao
basin and covers an area of approximately one million acres. The successful discovery and
development of the oil fields in the Daqing oil region marked a critical breakthrough in the
history of both our company and the PRC oil and gas industry. In terms of proved hydrocarbon
reserves and annual production, the Daqing oil region is the largest oil region in China and one of
the most prolific oil and gas properties in the world. We commenced exploration activities in the
Daqing oil region in 1955 and discovered oil in the region in 1959. Annual crude oil production
volume in the Daqing oil region reached one million barrels per day in 1976 and remained relatively
stable until 2002. In 2005, 2006 and 2007, our crude oil production volume in the Daqing oil region
was 915.1 thousand barrels per day, 883.1 thousand barrels per day and 847.3 thousand barrels per
day, respectively. As of December 31, 2007, we produced crude oil from 20 fields in the Daqing oil
region.
As of December 31, 2007, our proved crude oil reserves in the Daqing oil region were 3,856.1
million barrels, representing 32.9% of our total proved crude oil reserves. The proved crude oil
reserves in our Daqing oil region have gradually decreased since 1996 because the crude oil
production exceeded the crude oil reserve additions in our Daqing oil region in each year since
1996. As of December 31, 2005, 2006 and 2007, the proved crude oil reserves in our Daqing oil
region were 4,396.9 million barrels, 4,200.3 million barrels, and 3,856.1 million barrels,
respectively. In 2007, our oil fields in the Daqing oil region produced an average of 847.3
thousand barrels of crude oil per day, representing approximately 36.9% of our total daily crude
oil production. The crude oil production in our Daqing oil region decreased by 4% from 322.3
million barrels in 2006 to 309.3 million barrels in 2007. In 2007, the crude oil
reserve-to-production ratio of the Daqing oil region was 12.47 years, compared to 13.0 years in
2006.
The crude oil we produce in the Daqing oil region has an average API gravity of 35.7 degrees.
In 2007, the crude oil we produced in the Daqing oil region had an average water cut of 90.98%,
increased from the average water cut of 90.44% in 2006.
The crude oil in the Daqing oil region is primarily located in large reservoirs with
relatively moderate depths of approximately 900 meters to 1,500 meters and with relatively simple
geological structures and most of the crude oil produced at Daqing is medium viscosity oil. Crude
oil produced using enhanced recovery techniques accounted 26.9%, 27.0% and 27.0% of our crude oil
production from the Daqing oil region in 2005, 2006 and 2007, respectively.
Because our oil fields in the Daqing oil region are relatively mature, the difficulty of
extracting crude oil from these fields has increased in recent years and is likely to continue to
increase gradually in the future. As a result, our lifting costs at these fields increased by 17.9%
from US$6.86 per barrel for the year ended December 31, 2006 to US$8.09 per barrel for the year
ended December 31, 2007. However, we have adopted a number of measures to contain the increase in
our lifting costs at these fields. Those measures include:
|
|
|
terminating unprofitable or marginally profitable exploration and production activities; |
|
|
|
|
reducing expenditures on ancillary ground facilities in the outer areas of the Daqing oil region; |
|
|
|
|
increasing preventive maintenance to prolong the useful life of our production facilities; and |
|
|
|
|
applying new technologies to reduce energy consumption. |
Although we plan to continue to carry out these measures to contain the increase in our
lifting costs, we expect our lifting costs at these fields will continue to increase gradually in
the future.
We have an extensive transportation infrastructure network to transport crude oil produced in
the Daqing oil region to internal and external customers in northeastern China and beyond. Crude
oil pipelines link our oil fields in the Daqing oil region to the port of Dalian and the port of
Qinhuangdao in Bohai Bay, providing efficient transportation for selling Daqing crude oil. These
crude oil pipelines have an aggregate length of 2,590 kilometers and an aggregate throughput
capacity of approximately 911 thousand barrels per day.
Daqings crude oil has a low sulfur and high paraffin content. As many refineries in China,
particularly those in northeastern China, are configured to refine Daqing crude oil, we have a
stable market for the crude oil we produce in the Daqing oil region. In 2007, we refined
approximately 82.2% of Daqing crude oil in our own refineries, exported approximately 1.3% and sold
the remaining portion to Sinopec or local refineries.
25
Liaohe Oil Region
The Liaohe oil region is one of our three largest crude oil producing properties and is
located in the northern part of the Bohai Bay basin. We began commercial production in the Liaohe
oil region in 1971. The Liaohe oil region covers a total area of approximately 580,000 acres.
As of December 31, 2007, proved crude oil reserves in the Liaohe oil region were 1,121.0
million barrels, representing 9.6% of our total proved oil reserves. In 2007, our oil fields in the
Liaohe oil region produced an average of 231.3 thousand barrels of crude oil per day, representing
approximately 10.1% of our total daily crude oil production. In 2007, the crude oil reserve-to
-production ratio in the Liaohe oil region was 13.28 years. In 2007, the crude oil we produced in
the Liaohe oil region had an average API gravity of 26 degrees and an average water cut of 78.58%.
We have proved crude oil reserves in 39 fields in the Liaohe oil region, all of which are currently
in production. We produce several varieties of crude oil in the Liaohe oil region, ranging from
light crude oil to heavy crude oil and high pour point crude oil.
We have easy access to crude oil pipelines for Liaohe crude oil. The pipelines linking Daqing
to Dalian port and Qinhuangdao port pass through the Liaohe oil region. In 2007, we sold about
approximately 90.1% of the crude oil we produced at the Liaohe oil region to our own refineries.
Xinjiang Oil Region
The Xinjiang oil region is one of our three largest crude oil producing properties and is
located in the Junggar basin in northwestern China. We commenced our operations in the Xinjiang oil
region in 1951. The Xinjiang oil region covers a total area of approximately 900 thousand acres.
As of December 31, 2007, our proved crude oil reserves in the Xinjiang oil region were 1,354.9
million barrels, representing 11.6% of our total proved crude oil reserves. In 2007, our oil fields
in the Xinjiang oil region produced an average of 249.4 thousand barrels of crude oil per day,
representing approximately 10.9% of our total crude oil production. In 2007, the crude oil
reserve-to -production ratio at the Xinjiang oil region was 14.88 years. In 2007, the crude oil we
produced in the Xinjiang oil region had an average API gravity of 36.8 degrees and an average water
cut of 74.87%.
Sichuan Gas Region
We began natural gas exploration and production in Sichuan in the 1950s. The Sichuan gas
region covers a total area of approximately 2.3 million acres. The natural gas reserve-to
-production ratio in the Sichuan gas region was approximately 21.43 years in 2007. As of December
31, 2007, we had 107 natural gas fields under development in the Sichuan gas region.
As of December 31, 2007, our proved natural gas reserves in the Sichuan gas region were
10,400.5 billion cubic feet, representing 18.2% of our total proved natural gas reserves and an
increase of 0.4% from 10,362.8 billion cubic feet as of December 31, 2006. In 2007, our natural gas
production for sale in the Sichuan gas region reached 485.4 billion cubic feet, representing 29.8%
of our total natural gas production for sale and an increase of 7.8% from 450.4 billion cubic feet
in 2006.
In 2007, we discovered and proved significant natural gas reserves in Guangan field in the
Sichuan gas region in our border expansion in that region. As of December 31, 2007, Guangan gas
field had a proved natural gas reserve of 1,795.7 billion cubic feet. Currently, Guangan gas field
is the largest gas field in the Sichuan basin. We have developed a broad range of technologies
relating to natural gas exploration, production, pipeline systems and marketing activities tailored
to local conditions in Sichuan.
In November 2002, we obtained approval from the State Development Planning Commission, the
predecessor of the National Development and Reform Commission, to construct pipelines to transmit
natural gas produced in the Sichuan gas region to major cities in central China. This is known as
the Zhong County to Wuhan City natural gas pipeline project. By the end of 2004, we completed the
construction and commenced the commercial operation of the main line of the Zhong County to Wuhan
City natural gas pipeline and its Xiangfan branch pipeline and Huangshi branch pipeline. In
addition, we completed the construction of the Xiangtan branch pipeline and commenced the
commercial operation of this branch pipeline in July 2005. As of March 31, 2008, we had entered
into take-or-pay contracts with 29 customers in Hubei Province and Hunan Province, including
municipal governments and enterprises, to supply them with natural gas through the main line and
branch lines of the Zhong County to Wuhan City natural gas pipeline. See Natural Gas and
Pipeline Expansion of Our Natural Gas Transmission and Marketing Business for a discussion of
the Zhong County to Wuhan City natural gas pipeline project.
Changqing Oil and Gas Region
26
The Changqing oil and gas region covers parts of Shaanxi Province and Gansu Province and the
Ningxia and Inner Mongolia Autonomous Regions. We commenced operations in the Changqing oil and gas
region in 1970. In 2007, we produced 90.1 million barrels of crude oil in the Changqing oil and gas
region.
In the early 1990s, we discovered the Changqing gas field, which had total estimated proved
natural gas reserves of 19,105.0 billion cubic feet as of December 31, 2007, representing 33.5% of
our total proved natural gas reserves. In January 2001, we discovered the Sulige gas field, which
had total estimated proved natural gas reserves of 4,223.7 billion cubic feet as of December 31,
2007. In 2007 we produced 306.0 billion cubic feet of natural gas for sale in the Changqing oil and
gas region, representing an increase of 28.9% from 237.4 billion cubic feet in 2006. The
establishment of a natural gas pipeline from Shaanxi to Beijing in 1997 has significantly expanded
the range of target markets for natural gas produced in the Changqing oil and gas region over the
years. In July 2005, we completed the construction and commenced commercial operation of the second
Shaanxi to Beijing natural gas pipeline, with a designed annual throughput capacity of 423.8
billion cubic feet of natural gas. In 2007, we sold 245.5 billion cubic feet of natural gas through
the first and the second Shaanxi to Beijing natural gas pipelines. See Natural Gas and Pipeline
Expansion of Our Natural Gas Transmission and Marketing Business for a discussion of this
additional Shaanxi to Beijing natural gas pipeline project.
Tarim Oil and Gas Region
The Tarim oil and gas region is located in the Tarim basin in northwestern China with a total area
of approximately 590 thousand acres. As of December 31, 2007, our proved crude oil reserves in the
Tarim oil region were 590.3 million barrels. The Kela 2 natural gas field, which we discovered in
1998 in the Tarim oil and gas region, had proved natural gas reserves of approximately 6,587.71
billion cubic feet as of December 31, 2007. As of December 31, 2007, the proved natural gas
reserves in the Tarim oil and gas region reached 15,114.3 billion cubic feet, representing 26.5% of
our total proved natural gas reserves. Currently, the Kela 2 natural gas field is the largest
natural gas field in China in terms of proved natural gas reserves.
In 2007, we produced 504.8 billion cubic feet of natural gas for sale in the Tarim oil and gas
region. We have completed the construction of the pipelines to deliver natural gas in the Tarim oil
and gas region to the central and eastern regions of China where there is strong demand for natural
gas transmitted through our West to East natural gas pipeline project. See Natural Gas and
Pipeline Expansion of Our Natural Gas Transmission and Marketing Business for a discussion of
our West to East natural gas pipeline project. The commencement of the operation of this West to
East natural gas pipeline significantly increased our natural gas production in the Tarim oil and
gas region.
27
Refining and Marketing
We engage in refining and marketing operations in China through 26 refineries, 22 regional
sales and distribution branch companies and one lubricants branch company. These operations include
the refining, transportation, storage and marketing of crude oil, and the wholesale, retail and
export of refined products, including gasoline, diesel, kerosene, lubricant, paraffin, and asphalt.
In 2007, our refining and marketing segment had loss from operations of RMB 20,680 million.
The following sets forth the highlights of our refining and marketing segment in 2007:
|
|
|
as of December 31, 2007, our refineries annual primary distillation capacity
totaled 941.7 million barrels of crude oil per year, or 2,580.1 thousand
barrels per day; |
|
|
|
|
we processed 823.6 million barrels of crude oil, or 2.3 million barrels per day; |
|
|
|
|
we produced approximately 71.38 million tons of gasoline, diesel and kerosene
and sold approximately 85.74 million tons of these products; |
|
|
|
|
as of December 31, 2007, our retail distribution network consisted of: |
|
|
|
17,070 service stations owned and operated by us, |
|
|
|
|
282 service stations either wholly owned by CNPC or jointly owned by
CNPC and third parties and to which we provide supervisory support,
representing a significant decrease from last year, as a result of our
taking ownership of or operating certain service stations previously
owned by CNPC or jointly owned by CNPC and third parties, and |
|
|
|
|
1,296 franchise service stations owned and operated by third parties
with which we have long-term refined product supply agreements,
representing a significant decrease from last year, as a result of our
termination of cooperation arrangements with certain franchise service
stations that had demonstrated deficiencies in image, service or oil
quality; and |
|
|
|
in 2007, our service stations, which are located throughout China,
sold approximately 54.8 million tons of gasoline and diesel,
representing 66.9% of the total of these products sold through our
marketing operations. |
Refining
Our refineries are located in eight provinces, four autonomous regions and one municipality in
the northeastern, northwestern and northern regions of China.
Refined Products
We produce a wide range of refined products at our refineries. Some of the refined products
are for our internal consumption and used as raw materials in our petrochemical operation. The
table below sets forth production volume for our principal refined products for each of the three
years ended December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
Product |
|
2005 |
|
2006 |
|
2007 |
|
|
(in thousands of tons) |
Diesel |
|
|
43,000.7 |
|
|
|
44,226.5 |
|
|
|
47,345.4 |
|
Gasoline |
|
|
21,414.6 |
|
|
|
22,027.2 |
|
|
|
22,018.7 |
|
Fuel oil |
|
|
3,816.3 |
|
|
|
3,491.4 |
|
|
|
4,162.0 |
|
Naphtha |
|
|
4,872.8 |
|
|
|
6,317.9 |
|
|
|
7,491.9 |
|
Asphalt |
|
|
1,484.7 |
|
|
|
1,605.7 |
|
|
|
1,563.4 |
|
Kerosene |
|
|
1,970.3 |
|
|
|
2,063.7 |
|
|
|
2,017.2 |
|
Lubricants |
|
|
1,528.6 |
|
|
|
1,488.4 |
|
|
|
1,760.4 |
|
Paraffin |
|
|
1,139.3 |
|
|
|
1,051.8 |
|
|
|
1,003.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
79,227.3 |
|
|
|
82,272.6 |
|
|
|
87,362.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We optimize our production facility mix to meet market demand and to focus on the production of
high margin products. This has resulted in an overall modest increase in the production of lighter
refined products which generally are higher margin products, such as gasoline and diesel. In 2007,
our diesel production increased to 47,345.4 thousand tons. In 2005 and 2006, we produced 1,528.6
thousand tons and 1,488.4 thousand tons of lubricants, respectively. In 2007, we increased our
lubricant production to 1,760.4 thousand tons to meet the growing market demands for lubricants.
In recent years, we have made significant capital investments in facility expansions and
upgrades to improve product quality to meet evolving market demand and environmental requirements
in China. In each of the three years ended December 31, 2005, 2006 and 2007, our capital
expenditures for our refining and marketing segment were RMB 16,454 million, RMB 19,206 million,
and RMB 26,546 million, respectively. These capital expenditures were incurred primarily in
connection with the expansion and upgrades of our refining facilities, upgrade of our product
quality, and expansion of our refined product retail marketing network and storage infrastructure
for the purpose of maintaining and increasing our market share. We built or renovated 10 of our
refining facilities in 2005, including, among others, the regular pressure reducing unit at Dalian
Petrochemical with a designed annual capacity of 10 million tons, the delayed coking unit at
Lanzhou Petrochemical with an annual capacity of 1,000 thousand tons and the catalytic reforming
unit at Jinzhou Petrochemical with an annual capacity of 600 thousand tons. In 2006, we built a
coking unit at Daqing Petrochemical with an annual capacity of 1.2 million tons and upgraded the
heavy oil catalytic cracking unit at Jinxi Petrochemical to increase its annual capacity to 1.8
million tons. In 2007, we had completed the construction or renovation of 18 refining projects,
including, among others, the expansion and renovation of the 10 million tons/year refining unit at
Dagang Petrochemical, the construction of the new 1.2 million tons/year hydrocracking unit at
Changqing Petrochemical, the construction of the 800 thousand/year propane deasphalting unit and
accessory facilities at Karamay Petrohemical, and the renovation of the 1.8 million tons/year
diesel hydrofining unit at North China Petrochemical. In 2007, we operated an aggregate of 18,648
service stations. In addition, we have also focused on enhancing our processing technologies and
methods. These efforts have enabled us to improve the quality of refined products at our
refineries, particularly that of gasoline and diesel. We believe that our refined products are
capable of meeting product specification and environmental protection requirements as set by the
PRC government, including the specification limiting the olefin and benzene content in gasoline.
Our Refineries
Most of our refineries are strategically located close to our crude oil storage facilities,
along our crude oil and refined product transmission pipelines and/or railways. These systems
provide our refineries with secure supplies of crude oil and facilitate our distribution of refined
products to the domestic markets. In each of the three years ended December 31, 2005, 2006 and
2007, our exploration and production operations supplied approximately 89%, 82%, and 80%,
respectively, of the crude oil processed in our refineries.
The table below sets forth certain operating statistics regarding our refineries as of
December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2005 |
|
2006 |
|
2007 |
Primary distillation capacity (1) (thousand barrels per day) |
|
|
|
|
|
|
|
|
|
|
|
|
Lanzhou Petrochemical |
|
|
212.6 |
|
|
|
212.6 |
|
|
|
212.6 |
|
Dalian Petrochemical |
|
|
212.6 |
|
|
|
415.0 |
|
|
|
415.0 |
|
Fushun Petrochemical |
|
|
186.2 |
|
|
|
186.2 |
|
|
|
186.2 |
|
Daqing Petrochemical |
|
|
121.5 |
|
|
|
121.5 |
|
|
|
121.5 |
|
Jinzhou Petrochemical |
|
|
131.6 |
|
|
|
131.6 |
|
|
|
131.6 |
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
|
2005 |
|
2006 |
|
2007 |
Jinxi Petrochemical |
|
|
131.6 |
|
|
|
131.6 |
|
|
|
131.6 |
|
Jilin Petrochemical |
|
|
141.7 |
|
|
|
141.7 |
|
|
|
141.7 |
|
Urumqi Petrochemical |
|
|
101.2 |
|
|
|
101.2 |
|
|
|
121.5 |
|
Other refineries |
|
|
1,098.2 |
|
|
|
1,122.5 |
|
|
|
1,118.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,337.2 |
|
|
|
2,563.9 |
|
|
|
2,580.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refining throughput (thousand barrels per day) |
|
|
|
|
|
|
|
|
|
|
|
|
Lanzhou Petrochemical |
|
|
178.7 |
|
|
|
191.4 |
|
|
|
213.9 |
|
Dalian Petrochemical |
|
|
223.7 |
|
|
|
244.7 |
|
|
|
233.5 |
|
Fushun Petrochemical |
|
|
194.4 |
|
|
|
196.4 |
|
|
|
196.6 |
|
Daqing Petrochemical |
|
|
125.5 |
|
|
|
128.5 |
|
|
|
124.3 |
|
Jinzhou Petrochemical |
|
|
127.9 |
|
|
|
137.8 |
|
|
|
133.6 |
|
Jinxi Petrochemical |
|
|
129.2 |
|
|
|
132.1 |
|
|
|
133.6 |
|
Jilin Petrochemical |
|
|
138.0 |
|
|
|
146.5 |
|
|
|
146.1 |
|
Urumqi Petrochemical |
|
|
85.3 |
|
|
|
98.0 |
|
|
|
106.1 |
|
Other refineries |
|
|
858.4 |
|
|
|
875.3 |
|
|
|
968.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,061.1 |
|
|
|
2,150.8 |
|
|
|
2,256.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion equivalent (2) (percent) |
|
|
|
|
|
|
|
|
|
|
|
|
Lanzhou Petrochemical |
|
|
53.3 |
|
|
|
53.3 |
|
|
|
53.3 |
|
Dalian Petrochemical |
|
|
54.3 |
|
|
|
27.8 |
|
|
|
27.8 |
|
Fushun Petrochemical |
|
|
68.5 |
|
|
|
70.7 |
|
|
|
70.7 |
|
Daqing Petrochemical |
|
|
76.7 |
|
|
|
76.7 |
|
|
|
76.7 |
|
Jinzhou Petrochemical |
|
|
84.6 |
|
|
|
84.6 |
|
|
|
84.6 |
|
Jinxi Petrochemical |
|
|
66.2 |
|
|
|
66.2 |
|
|
|
66.2 |
|
Jilin Petrochemical |
|
|
61.4 |
|
|
|
61.4 |
|
|
|
61.4 |
|
Urumqi Petrochemical |
|
|
62.0 |
|
|
|
62.0 |
|
|
|
51.7 |
|
Average of other refineries |
|
|
50.5 |
|
|
|
51.8 |
|
|
|
51.9 |
|
|
|
|
(1) |
|
Represents the primary distillation capacity of crude oil and condensate. |
|
(2) |
|
Stated in fluid catalytic cracking, delayed coking and hydrocracking
equivalent/ topping (percentage by weight), based on 100% of balanced
distillation capacity. |
In each of the three years ended December 31, 2005, 2006 and 2007, the average utilization
rate of the primary distillation capacity at our refineries was 95.5%, 95.9% and 97.7%,
respectively. The average yield for our four principal refined products (gasoline, kerosene, diesel
and lubricants) at our refineries was 66.7%, 65.7 and 65.6%, respectively, in the same periods.
Yield represents the number of tons of a refined
product expressed as a percentage of the number of tons of crude oil from which that product is
processed. In each of the three years ended December 31, 2005, 2006 and 2007, the yield for all
refined products at our refineries was 92.3%, 92.2% and 93.0%, respectively.
Dalian Petrochemical, Fushun Petrochemical and Lanzhou Petrochemical were our leading
refineries in terms of both primary distillation capacity and throughput in 2007. They are all
located close to our major oil fields in the northeast and northwest regions of China and produce a
wide range of refined products. Lanzhou Petrochemical has a strategic position in our plan to
expand our markets in refined product sales in the southwestern and central regions of China. It is
located in the northwestern part of China, providing easy access to markets in the southwestern and
central regions in China. As of December 31, 2007, these three refineries had an aggregate primary
distillation capacity of 297.0 million barrels per year, or 813.8 thousand barrels per day,
representing approximately 31.5% of the total primary distillation capacity of all our refineries
as of the same date. In 2007, these three refineries processed an aggregate of 235.1 million
barrels of crude oil, or 644.0 thousand barrels per day, representing approximately 28.5% of our
total throughput in the same period.
30
Marketing
We market a wide range of refined products, including gasoline, diesel, kerosene and
lubricants, through an extensive network of sales personnel and independent distributors and a
broad wholesale and retail distribution system across China. As of December 31, 2007, our marketing
network consisted of:
|
|
|
approximately 802 regional wholesale distribution outlets nationwide.
Substantially all of these outlets are located in high demand areas
such as economic centers across China, particularly in the coastal
areas, along major railways and along the Yangtze River; and |
|
|
|
|
17,070 service stations owned and operated by us, 282 service stations
wholly owned by CNPC or jointly owned by CNPC and third parties that
exclusively sell refined products produced or supplied by us and to
which we provide supervisory support under contractual arrangement,
and 1,296 franchise service stations owned and operated by third
parties. |
In 2007, we sold approximately 82.0 million tons of gasoline and diesel. The PRC government
and other institutional customers, including railway, transportation and fishery operators, are our
long-term purchasers of the gasoline and diesel that we produce. We sell gasoline and diesel to
these customers at the ex-works median prices published by the PRC government with an 8% floating
range. See Regulatory Matters Pricing Refined Products for a discussion of refined
product pricing. In 2007, sales of gasoline and diesel to these customers accounted for
approximately 3% and 13% of our total sales of gasoline and diesel, respectively.
The following table sets forth our refined product sales volumes by principal product category
for each of the three years ended December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
Product |
|
2005 |
|
2006 |
|
2007 |
|
|
(in thousands of tons) |
Diesel |
|
|
47,811.0 |
|
|
|
48,863.9 |
|
|
|
54,844.3 |
|
Gasoline |
|
|
26,161.6 |
|
|
|
23,993.2 |
|
|
|
27,115.7 |
|
Fuel oil |
|
|
6,409.6 |
|
|
|
8,711.2 |
|
|
|
9,656.2 |
|
Naphtha |
|
|
5,574.1 |
|
|
|
6,887.6 |
|
|
|
8,347.6 |
|
Kerosene |
|
|
2,008.0 |
|
|
|
2,047.4 |
|
|
|
3,782.2 |
|
Lubricants |
|
|
2,181.6 |
|
|
|
2,044.4 |
|
|
|
2,348.5 |
|
Asphalt |
|
|
2,475.6 |
|
|
|
3,321.2 |
|
|
|
4,387.1 |
|
Paraffin |
|
|
1,160.3 |
|
|
|
1,104.3 |
|
|
|
1,021.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
93,781.8 |
|
|
|
96,973.2 |
|
|
|
111,503.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Marketing
We sell refined products both directly and through independent distributors into various
wholesale markets, as well as to utility, commercial, petrochemical, aviation, agricultural,
fishery and transportation companies in China. Our gasoline and diesel sales also include the
amount we transferred to our retail operations. We made wholesale sales of approximately 0.7
million tons of gasoline and diesel to Sinopec in 2007, representing approximately 0.9% of our
total sales of these products in the same period. In 2007, we sold approximately 20.2 million tons
of our other principal refined products.
Retail Marketing
In 2007, we sold approximately 54.8 million tons of gasoline and diesel through our service
station network, accounting for 66.9% of the total of these products sold through our marketing
operations in the same period. Although sales volumes vary significantly by geographic region, the
weighted average sales volume of gasoline and diesel per business day at our service station
network in 2005, 2006 and 2007 was 6.7 tons, 7.8 tons and 8.4 tons per service station,
respectively.
31
We sell our refined products to service stations owned and operated by CNPC. These service
stations sell exclusively refined products produced or supplied by us in accordance with
contractual arrangements between CNPC and us. Under these contractual arrangements, we also provide
supervisory support to these service stations.
We
currently operate a majority of our service stations under the trade
name of
. We intend to gradually
adopt our new logo
for all our service
stations in the next few years.
Most of the service stations in our service station network are concentrated in the northern,
northeastern and northwestern regions of China where we have a dominant wholesale market position.
However, the eastern and southern regions of China have a higher demand for gasoline and diesel. We
have made significant efforts in recent years to expand our sales and market share in those regions
through expanding the number of our service stations and storage facilities in those regions. As
part of our expansion initiatives, on May 14, 2004, we entered into the Joint Venture Contract and
the Articles of Association with BP Global Investments Limited, a subsidiary of BP Amoco p.l.c., to
form BP PetroChina Petroleum Company Limited in Guangdong Province. We and BP Global Investments
Limited hold 51% and 49% equity interests in BP PetroChina Petroleum Company Limited, respectively.
We expect that BP PetroChina Petroleum Company Limited will build, acquire and manage approximately
500 service stations in Guangdong Province within three years from its establishment. As of
December 31, 2007, BP PetroChina Petroleum Company Limited owned and operated 461 service stations
in the Pearl River Delta of Guangdong Province.
We invested a total of RMB 5,683.52 million in expanding our service station network in 2007,
of which 76.4% was invested in the eastern and southern regions of China. In 2007, we sold
approximately 25,660 thousand tons of gasoline and diesel through our owned and franchised service
stations in these regions, as compared to approximately 17,490 thousand tons and approximately
21,480 thousand tons we sold in 2005 and 2006, respectively.
In 2007, we acquired or constructed an aggregate of 729 service stations that are owned and
operated by us, of which 436 are in the eastern and southern regions of China. We plan to further
increase our retail market share and improve the efficiency of our retail operations, with a
continued focus on the eastern and southern regions of China. We plan to invest approximately RMB
5,066.85 million in 2008 to expand our service station network and storage infrastructure by adding
approximately 450 new service stations.
The following table sets forth the number of the service stations in our marketing network as
of December 31, 2007:
|
|
|
|
|
Owned and operated by us (1) |
|
|
17,070 |
|
Wholly owned by CNPC or jointly owned by CNPC and third parties (2) |
|
|
282 |
|
Franchised |
|
|
1,296 |
|
Total |
|
|
18,648 |
|
|
|
|
Note: |
|
|
|
(1) |
|
Includes 461 service stations owned and operated by BP PetroChina Petroleum Company Limited. |
|
(2) |
|
These service stations exclusively sell refined products produced or supplied by us. We
also provide supervisory support to these service stations. |
In order to improve the efficiency and profitability of our existing service station network,
we standardize the interior and exterior of our service stations, our service procedures, staff
uniforms and the product quality of all our service stations. We are in the process of constructing
a centralized service station management system covering all our sales branches and promoting the
use of pre-paid gasoline/diesel filling cards at our service stations. In addition, we are
developing convenience-store-like service stations with a view to improving the management and
client
service quality of our service stations. In addition to selling gasoline and diesel, we have
planned to gradually increase the sale of lubricants and other non-fuel products at our service
stations.
32
Chemicals and Marketing
Through 12 chemical plants and four chemical products sales companies, we produce and market
basic petrochemical products, derivative petrochemical products, and other chemical products. As of
December 31, 2007, our chemicals and marketing segment had income from operations of RMB 7,831
million.
Our chemical plants and sales companies are located in five provinces, three autonomous
regions and two municipalities under the direct administration of the central government in China.
Most of our chemical plants are co-located with our refineries and are also connected with the
refineries by pipelines, providing additional production flexibility and opportunities for cost
competitiveness. Our exploration and production, refining and marketing, and natural gas and
pipeline operations supply substantially all of the hydrocarbon feedstock requirements for our
chemicals operations. We believe that the proximity of our refineries to our chemical plants
promotes efficiency in production, secures feedstock supply and minimizes the risk of production
interruption. Our production capacity and our market share in China for chemical products allow us
to solidify our dominant position in the northern and western regions of China. In addition, our
stable customer base in the eastern and southern regions of China provides us with the opportunity
to expand our market share in these regions.
Our Chemical Products
The table below sets forth the production volumes of our principal chemical products for each
of the three years ended December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
(in thousand tons) |
Basic petrochemicals |
|
|
|
|
|
|
|
|
|
|
|
|
Propylene |
|
|
2,493.5 |
|
|
|
2,671.2 |
|
|
|
3,083.2 |
|
Ethylene |
|
|
1,887.9 |
|
|
|
2,067.9 |
|
|
|
2,581.5 |
|
Benzene |
|
|
707.9 |
|
|
|
749.6 |
|
|
|
827.8 |
|
Derivative petrochemicals |
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic resin
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyethylene |
|
|
1,355.9 |
|
|
|
1,531.3 |
|
|
|
2,101.2 |
|
Polypropylene |
|
|
1,142.8 |
|
|
|
1,291.0 |
|
|
|
1,630.2 |
|
ABS |
|
|
223.0 |
|
|
|
223.0 |
|
|
|
215.0 |
|
Other synthetic resin products |
|
|
35.2 |
|
|
|
15.8 |
|
|
|
16.1 |
|
Synthetic fiber
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyacrylic fiber |
|
|
97.1 |
|
|
|
81.0 |
|
|
|
79.3 |
|
Terylene fiber |
|
|
86.2 |
|
|
|
53.3 |
|
|
|
48.1 |
|
Other synthetic fiber products |
|
|
6.3 |
|
|
|
6.4 |
|
|
|
9.3 |
|
Synthetic rubber
|
|
|
|
|
|
|
|
|
|
|
|
|
Styrene butadiene rubber |
|
|
194.4 |
|
|
|
212.9 |
|
|
|
210.6 |
|
Other synthetic rubber products |
|
|
87.0 |
|
|
|
99.1 |
|
|
|
100.0 |
|
Intermediates
|
|
|
|
|
|
|
|
|
|
|
|
|
Alkylbenzene |
|
|
205.7 |
|
|
|
207.9 |
|
|
|
197.5 |
|
Other chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
Urea |
|
|
3,577.6 |
|
|
|
3,576.3 |
|
|
|
3,634.5 |
|
We are one of the major producers of ethylene in China. We use the bulk of the ethylene we
produce as a principal feedstock for the production of many chemical products, such as
polyethylene. In 2001, we implemented a five-year plan to invest RMB 10,000 million to upgrade our
ethylene production facilities at Daqing Petrochemical, Jilin Petrochemical, Liaoyang
Petrochemical, Dushanzi Petrochemical and Lanzhou Petrochemical. As of December 31,
34
2006, we had
completed the upgrades of all ethylene projects included in such five-year plan. In 2006, we also
completed a new capacity-expansion project at Jilin Petrochemical. As of December 31, 2007, our
annual ethylene production capacity was 2,710 thousand tons, an increase of 80 thousand tons from
the year ended December 31, 2006. Our production volume of ethylene increased by 24.8% from 2,067.9
thousand tons in 2006 to 2,581.5 thousand tons in 2007. We expect to complete the 1,000,000 tons/
year ethylene production project at Dushanzi Petrochemical by the end of 2009. The petrochemical
ethylene projects at Fushun Petrochemical, Sichuan Petrochemical and Daqing Petrochemical have been
approved by the National Development and Reform Commission and we are currently in the process of
implementing these projects.
In 2007, the monthly average capacity utilization rate at our ethylene production facilities
was 95.0%. The cost of ethylene production is an important component of our overall chemical
production costs. Reduction of energy consumption and raw material loss is a key factor in reducing
ethylene production costs. We have implemented a series of measures to reduce energy consumption.
The average energy consumption of our ethylene production facilities was 751.5, 748.4 and 743.8
kilograms of standard oil per ton in 2005, 2006 and 2007, respectively. This is significantly
higher than the world average of 500 to 690 kilograms of standard oil per ton. We plan to continue
to implement measures to reduce our energy consumption.
In addition, high ethylene percentage loss has also contributed to the relatively high cost of
our ethylene production. In order to reduce high ethylene percentage loss in our ethylene
production, we have implemented a series of measures at our chemical plants in the past several
years, such as improving our process management of key units for ethylene production, reducing
unplanned temporary interruptions of our chemical facilities and enhancing pyrolysis material
composition and production plans. As a result, the average ethylene percentage loss at our chemical
plants decreased from 0.57% in 2003 to 0.54% in 2004. The average ethylene percentage loss rate
went up to 0.61% in 2005, due to the significant losses resulting from the trial of an upgraded
ethylene production facility. In 2006, our average ethylene percentage loss decreased to 0.55%. In
2007, our average ethylene percentage loss went up to 0.63%. We believe that our measures will
enable us to further reduce the cost of our ethylene production without incurring significant
capital expenditures.
We produce a number of synthetic resin products, including polyethylene, polypropylene and
ABS. As of December 31, 2007, our production capacities for polyethylene, polypropylene and ABS
were 2,212 thousand tons, 1,863.5 thousand tons and 220 thousand tons, respectively. In 2007, we
produced 2,101.2 thousand tons and 1,630.2 thousand tons of polyethylene and polypropylene,
respectively, which respectively increased by 37.2% and 26.3% as compared with 2006. In 2007, we
produced 215 thousand tons of ABS, representing a decrease of 3.6% from 2006. Currently, China
imports significant volumes of these products to meet the domestic demand due to an inadequate
supply of high-quality domestically produced polyethylene and polypropylene. We intend to increase
the production, and improve the quality, of these products. We have built new production facilities
with new technology for the production of these products in Daqing Petrochemical, Daqing Refining
and Chemical, Jilin Petrochemical, Lanzhou Petrochemical, Dalian Petrochemical and other branch
companies to meet this target.
Sales and Marketing
Our chemical products are distributed to a number of industries that manufacture components
used in a wide range of applications, including automotive, construction, electronics, medical
manufacturing, printing, electrical appliances, household products, insulation, packaging, paper,
textile, paint, footwear, agriculture and furniture industries.
The following table sets forth the sales volumes of our chemical products by principal product
category for each of the three years ended December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
Product |
|
2005 |
|
2006 |
|
2007 |
|
|
(in thousands of tons) |
Derivative petrochemicals |
|
|
|
|
|
|
|
|
|
|
|
|
Synthetic resin
|
|
|
|
|
|
|
|
|
|
|
|
|
Polyethylene |
|
|
1,477.0 |
|
|
|
1,594.8 |
|
|
|
2,102.4 |
|
Polypropylene |
|
|
972.3 |
|
|
|
1,069.6 |
|
|
|
1,434.8 |
|
ABS |
|
|
232.0 |
|
|
|
233.4 |
|
|
|
216.7 |
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
Product |
|
2005 |
|
2006 |
|
2007 |
|
|
(in thousands of tons) |
Synthetic fiber
|
|
|
|
|
|
|
|
|
|
|
|
|
Terylene fiber |
|
|
103.3 |
|
|
|
59.4 |
|
|
|
56.6 |
|
Polyacrylic fiber |
|
|
95.5 |
|
|
|
91.2 |
|
|
|
71.6 |
|
Synthetic rubber
|
|
|
|
|
|
|
|
|
|
|
|
|
Butadiene styrene rubber |
|
|
202.2 |
|
|
|
203.4 |
|
|
|
219.0 |
|
Intermediates
|
|
|
|
|
|
|
|
|
|
|
|
|
Alkylbenzene |
|
|
112.3 |
|
|
|
127.9 |
|
|
|
156.6 |
|
Other chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
Urea |
|
|
3,413.8 |
|
|
|
3,570.6 |
|
|
|
3,662.2 |
|
36
Natural Gas and Pipeline
We are Chinas largest natural gas transporter and seller in terms of sales volume, with
revenues of RMB 50,066 million and total sales volume of 1,647.8 billion cubic feet in 2007, of
which 1,502.0 billion cubic feet was sold by our natural gas and pipeline segment. In 2007, our
natural gas and pipeline segment generated income from operations of RMB 12,495 million. We sell
natural gas primarily to fertilizer and chemical companies, commercial users and municipal
utilities owned by local governments.
The following table sets forth the length of our natural gas pipelines as of December 31,
2005, 2006 and 2007 and the volume of natural gas sold by us in each of the three years ended
December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31 or year |
|
|
ended December 31, |
|
|
2005 |
|
2006 |
|
2007 |
Length of natural gas pipelines used by our natural gas segment (km) |
|
|
19,212 |
|
|
|
19,662 |
|
|
|
19,792 |
|
Total length of natural gas pipelines (km) |
|
|
20,340 |
|
|
|
20,590 |
|
|
|
22,043 |
|
Volume of natural gas sold by our natural gas segment (Bcf) |
|
|
888.8 |
|
|
|
1,200.5 |
|
|
|
1,502.0 |
|
Total volume of natural gas sold(1)(Bcf) |
|
|
1,052.2 |
|
|
|
1,357.0 |
|
|
|
1,647.8 |
|
|
|
|
(1) |
|
Including both the natural gas sold to third parties and the natural gas sold within our company for the production of other products. |
In addition, we also conduct the operation of crude oil and refined product transmission and
storage infrastructure in the natural gas and pipeline segment.
Our Principal Markets for
Natural Gas
In 2007,
31.87%, 17.85%, 16.54%, 4.06%, 3.02% and 26.66% of our
natural gas sales were to the
southwestern, northern, northwestern, northeastern, central, and eastern regions of the PRC,
respectively.
Currently, Sichuan Province and Chongqing Municipality in southwest China are two of our
principal markets for natural gas. We sold 462.1 billion cubic feet of natural gas to Sichuan
Province and Chongqing Municipality in 2007, as compared to 415.6 billion cubic feet in 2006,
representing approximately 28.0% of our total natural gas sales in 2007. We supply natural gas to
Sichuan Province and Chongqing Municipality from our exploration and production operations in the
Sichuan oil region. Our natural gas pipelines in these areas are well developed, consisting of a
natural gas transmission network with a total length of approximately 5,923 kilometers. As these
areas lack adequate supply of alternative energy resources, such as coal, we believe that we can
further expand our natural gas sales as energy demand increases in these areas.
Beijing Municipality, Tianjin Municipality, Hebei Province and Shandong Province in northern
China have high energy consumption levels. These areas are also important markets for our natural
gas transmission and marketing business. We sold an aggregate of 261.3 billion cubic feet of
natural gas to these areas in 2007, as compared to 217.5 billion cubic feet in 2006. Our natural
gas sales to Beijing Municipality increased 11.4% from 135.6 billion cubic feet in 2006 to 151.1
billion cubic feet in 2007. We supply natural gas to Beijing Municipality, Tianjin Municipality and
Hebei Province primarily from the Changqing oil region through the Shaanxi to Beijing natural gas
pipeline, which is one of our natural gas trunk pipelines, and from the Huabei and Dagang oil
regions. Currently, we have 2,827 kilometers of natural gas pipelines in these areas.
Gansu Province, Qinghai Province, Shanghai Municipality, Jiangsu Province, Zhejiang Province,
Anhui Province, Henan Province, Shanxi Province, Hubei Province and Hunan Province are also our
natural gas markets. In 2001, we completed the construction of the Sebei to Xining to Lanzhou
natural gas pipeline and in 2004, we completed the construction and commenced commercial operation
of the mainlines of the West to East natural gas pipeline and the Zhong County to Wuhan City
natural gas pipeline. These three pipelines link our Xinjiang, Changqing, Sichuan and Qinghai gas
fields with our natural gas markets referred to above. Shanghai Municipality, Jiangsu Province,
Zhejiang Province and Anhui Province located in Yangtze River Delta have become our significant
natural gas markets. In 2007, we sold 342.1 billion cubic feet of natural gas to this area,
representing approximately 20.8% of our total natural gas sales in 2007.
Each year, we must supply natural gas to customers subject to the government-formulated
guidance supply plan first as required by the PRC government. We enter into natural gas supply
contracts with those customers on the basis of the amount of natural gas to be supplied according
to the guidance supply plan for the following years supply.
We have entered into long-term take-or-pay contracts with 23 municipalities and enterprises in
Qinghai Province, Gangsu Province, Shanxi Province and Tianjin Municipality, 29 municipalities and
enterprises in Hubei Province and Hunan Province, 16 municipalities in Shandong
38
Province and 59
municipalities and enterprises in Henan Province, Anhui Province, Shanghai Municipality and other
provinces located in the Yangtze River Delta. Under these take-or-pay contracts, we will supply
natural gas to these customers in the next 20 to 25 years at prices determined based on the prices
published by the National Development and Reform Commission, formerly the State Development
Planning Commission . See Regulatory Matters Pricing Natural Gas for a discussion of
natural gas pricing.
Driven by environmental and efficiency concerns, the PRC government is increasingly
encouraging industrial and residential use of natural gas to meet primary energy and environmental
protection needs. The PRC government has adopted a number of laws and regulations to require
municipal governments to increase the use of clean energy, such as natural gas and liquefied
petroleum gas, to replace the use of raw coal. Several municipal governments, including that of
Beijing, have adopted policies to facilitate natural gas consumption in order to reduce the air
pollution level. The PRC government has also adopted a preferential value-added tax rate of 13% for
natural gas production as compared to a 17% value-added tax rate for crude oil production.
We believe that these policies have had a positive effect on the development and consumption
of natural gas in many municipalities that are our existing or potential markets for natural gas.
We believe that these favorable policies will continue to benefit our natural gas business.
Natural Gas Transmission Infrastructure
As of December 31, 2007, our natural gas and pipeline segment owned and operated approximately
19,792 kilometers of natural gas pipelines in China, which represented the vast majority of Chinas
onshore natural gas pipelines. Our existing natural gas pipelines form regional natural gas supply
networks in northwestern, southwestern, northern and central China as well as the Yangtze River
Delta. Our experience in the design, construction management and operation of our existing natural
gas pipelines has enabled us to develop relatively advanced technologies and skills in China in
long distance pipeline design, construction and automated operational communications. We believe
that we will continue to benefit from those technologies and skills in the future expansion of our
natural gas pipeline networks and their ancillary facilities.
Expansion of Our Natural Gas Transmission and Marketing Business
In October 2004, we completed the construction of the main line of our West to East natural
gas pipeline and commenced commercial operation in December 2004. Our West to East natural gas
pipeline project is designed to link our natural gas fields in Xinjiang and Changqing with Henan
Province, Anhui Province, Shanghai Municipality and other areas in the Yangtze River Delta. The
total length of the main line for the West to East natural gas pipeline project is 3,786
kilometers. As of December 31, 2007, we had invested RMB 40,023.58 million in this project. We
have completed the construction of three connecting pipelines for the West to East natural gas
pipeline project, the Hebei to Nanjing pipeline, the Huaiyang to Wuhan pipeline and the Lanzhou to
Yinchuan pipeline. The Hebei to Nanjing pipeline starts at Qingshan, Jiangsu Province and ends at
Anping, Hebei Province, with its mainline having a length of 886 kilometers. We completed the
construction and commenced the commercial operation of the main line of this pipeline in January
2006. The Huaiyang to Wuhan pipeline starts at Huaiyang, Anhui Province and ends at Wuhan, Hubei
Province with a total length of 455 kilometers. We completed the construction and commenced the
commercial operation of this pipeline in December 2006. The Lanzhou to Yinchuan pipeline starts at
Lanzhou, Gansu Province and ends at Yinchuan, Ningxia Autonomous Region, with a total length of 402
kilometers. We completed the construction and commenced the commercial operation of this pipeline
in July 2007. The Daqing to Harbin pipeline starts at Daqing, Heilongjiang Province and ends at
Harbin, Heilongjiang Province, with a total length of 78 kilometers. We completed the construction
and commenced the commercial operation of this pipeline in December 2007. As of March 31, 2008, we
entered into take-or-pay contracts with 59 subscribers and distributors to supply them with natural
gas through the West to East natural gas pipeline. We believe that the successful completion of
this natural gas pipeline and associated storage facilities will substantially enhance our ability
to capitalize on anticipated growth in demand for natural gas in these regions. We are currently
expanding the transmission capacity of the West to East natural gas pipeline by upgrading the
existing 10 gas compression stations and building additional 12 gas compression stations to
increase the capacity from 12 billion cubic meters to 17 billion cubic meters per year.
The Zhong County to Wuhan City natural gas pipeline is designed to link the Sichuan gas region
with Wuhan City, the other areas in Hubei province and Hunan Province, and has a designed annual
throughput capacity of 105.9 billion cubic feet of natural gas. We commenced the construction of
the pipeline in August 2003. In December 2004, we completed the construction and commenced
commercial operation of the main line of the Zhong County to Wuhan City natural gas pipeline and
its Xiangfan branch pipeline and Huangshi branch pipeline. We completed the construction and
commenced commercial operation of the Xiangtan branch line in July 2005. As of March 31, 2008, we
had entered into take-or-pay contracts with 29 customers in Hubei Province and Hunan Province
including municipal governments and enterprises, to supply them with natural gas to be transmitted
through the main line and branch lines of the Zhong County to Wuhan City pipeline.
We completed constructing the second natural gas pipeline from Shaanxi to Beijing Municipality
in July 2005. This second Shaanxi to Beijing natural gas pipeline has a total length of 935
kilometers and can be used to deliver natural gas from our Changqing oil and gas region to Shaanxi
Province, Shanxi Province, Hebei Province and Beijing Municipality with a designed annual
throughput capacity of 423.8 billion cubic feet of natural gas. In 2007, we sold 245.5 billion
cubic feet of natural gas through the first and the second Shaanxi to Beijing natural gas
pipelines.
Crude Oil and Refined Product Transportation and Storage Infrastructure
39
We have an extensive network for the transportation, storage and distribution of both crude oil and
refined products, which covers many regions of China. Our goal is to exploit and optimize our
existing infrastructure to further consolidate our presence as the leading integrated oil and gas
company in China.
In 2005, we completed the construction of the PRC portion of the Sino-Kazakhstan oil pipeline.
The PRC portion starting at Ala Mountain Pass and ending at Dushanzi in Xinjiang Autonomous Region
have a total length of 246 kilometers. Commercial operation of the Sino-Kazakhstan oil pipeline
commenced in July 2006.
In June 2007, we completed the construction and commenced the commercial operation of the
Dagang to Zaozhuang oil pipeline, which starts at Dagang, Tianjin and ends at Zaozhuang, Shandong
Province, with a total length of 605 kilometers.
As of December 31, 2007, our crude oil transportation and storage infrastructure consisted of:
|
|
|
10,559 kilometers of crude oil pipelines with an average daily throughput of approximately 3.13 million barrels; and |
|
|
|
|
crude oil storage facilities with an aggregate storage capacity of approximately 18.1 million cubic meters. |
We deliver crude oil to customers through our pipeline and storage facility network, through
crude oil storage facilities that we lease from third parties and by ships leased by customers. In
2007, approximately 86.37% of our crude oil production was delivered to refineries through our
crude oil pipeline network. We believe that our crude oil pipeline network is sufficient for our
current and anticipated transportation needs. During the past three years, we have not experienced
any delays in delivering crude oil due to pipeline capacity constraints.
Our transportation and storage infrastructure also includes:
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2,669 kilometers of refined product pipelines with an average daily throughput of approximately 39,525 tons; and |
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refined product storage facilities with a total storage capacity of approximately 19.2 million cubic meters. |
Most of our refineries are located in the northeastern and northwestern regions of China. Our
ability to distribute products through our own product distribution infrastructure to the eastern
and southern regions will provide us with greater flexibility in supplying refined products to the
domestic markets across China. We plan to continue to enhance our product distribution
infrastructure in the northeastern, northwestern, northern and southwestern regions where we
already have a significant market share, and to expand our product distribution infrastructure in
the eastern and southern regions by acquiring and constructing transportation storage facilities
and distribution storage facilities in these regions.
Together with the expansion of our service stations, we expect that our pipelines, primary
storage and secondary distribution storage facilities will significantly enhance our existing
distribution infrastructure for refined products. We believe that our enhanced distribution
infrastructure will help us increase the sales of our refined products.
Competition
As an oil and gas company operating in a competitive industry, we compete in each of our
business segments in both China and international markets for desirable business prospects and for
customers. Our principal competitors in China are Sinopec, including its subsidiary China National
Star Petroleum Corporation, or CNSPC, and China National Offshore Oil Corporation, or CNOOC.
Exploration and Production Operations
We are the largest onshore oil and gas company in China in terms of proved crude oil and
natural gas reserves as well as crude oil and natural gas production and sales. However, we compete
with Sinopec for the acquisition of desirable crude oil and natural gas prospects. Similarly, we
will face some competition in the development of offshore oil and gas resources. We believe that
our experience in crude oil and natural gas exploration and production and our advanced exploration
and development technologies that are suitable for diverse geological conditions in China will
enable us to maintain our dominant position in discovering and developing crude oil and natural gas
reserves in China.
Refining and Marketing and Chemicals and Marketing Operations
We compete with Sinopec in our refining and marketing and chemicals and marketing operations
on the basis of price, quality and customer service. Most of our refineries and chemical plants are
located in the northeastern, northwestern and northern regions of China where we have the dominant
market share for refined products and chemical products. We also sell our refined products and
chemical products in the eastern, southern, southwestern and central-southern regions of China,
where our products have a considerable market share. The eastern and southern
regions of China, where refined products and chemical products are in
higher demand, are important
markets for our refined products and
40
chemical products. Sinopec has a strong presence in the
eastern and southern regions of China in competition with us, and most of Sinopecs refineries,
chemical plants and distribution networks are located in these regions in close proximity to these
markets. Moreover, as the newly constructed facilities of CNOOC commenced operation, the
competition is further intensified. We expect that we will continue to face competition from, among
other competitors, Sinopec in increasing our refined products and chemical products sales in these
regions. See Item 3 Key Information Risk Factors.
We also face competition from imported refined products and chemical products on the basis of
price and quality. As a result of Chinas entry into the WTO, we expect that competition from
foreign producers of refined products and chemical products may increase as tariff and non-tariff
barriers for imported refined products and chemical products will be reduced or eliminated over
time, including the opening over time of retail and wholesale markets in China for refined products
and chemical products to foreign competition. Our ability to compete with foreign producers of
refined products and chemical products will depend on our ability to reduce our production costs
and improve the quality of our products. See Item 3 Key Information Risk Factors.
Natural Gas and Pipeline Operations
We are the largest supplier of natural gas in terms of volume of natural gas supplied in the
PRC. Currently, we face very limited competition in the supply of natural gas in Beijing
Municipality, Tianjin Municipality, Hebei Province, Shanghai Municipality, Jiangsu Province,
Zhejiang Province, Anhui Province, Henan Province, Hubei Province, Hunan Province and the
northwestern regions of China, our existing principal markets for natural gas. Currently, Sinopec
has natural gas fields in Sichuan Province and Chongqing Municipality and sells natural gas to
users in Sichuan and Chongqing. We, therefore, have limited competition from Sinopec in our markets
in Sichuan Province and Chongqing Municipality. Further, we intend to expand our markets for
natural gas into the coastal regions in southeastern China where we may face competition from CNOOC
and, to a lesser extent, Sinopec. We believe that our dominant natural gas resources base, our
relatively advanced technologies and skills in managing long distance pipelines will enable us to
continue to be a dominant player in the natural gas markets in China.
Environmental Matters
Together with other companies in the industries in which we operate, we are subject to
numerous national, regional and local environmental laws and regulations concerning our oil and gas
exploration and production operations, petroleum and petrochemical products and other activities.
In particular, these laws and regulations:
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require an environmental evaluation report to be submitted and approved prior to the
commencement of exploration, production, refining and chemical projects; |
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restrict the type, quantities, and concentration of various substances that can be
released into the environment in connection with drilling and production activities; |
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limit or prohibit drilling activities within protected areas and certain other areas; and |
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impose penalties for pollution resulting from oil, natural gas and petrochemical
operations, including criminal and civil liabilities for serious pollution. |
These laws and regulations may also restrict air emissions and discharges to surface and
subsurface water resulting from the operation of natural gas processing plants, chemical plants,
refineries, pipeline systems and other facilities that we own. In addition, our operations are
subject to laws and regulations relating to the generation, handling, storage, transportation,
disposal and treatment of solid waste materials.
We anticipate that the environmental laws and regulations to which we are subject will become
increasingly strict and are therefore likely to have an increasing impact on our operations. It is
difficult, however, to predict accurately the effect of future developments in such laws and
regulations on our future earnings and operations. Some risk of environmental costs and liabilities
is inherent in certain of our operations and products, as it is with other companies engaged in
similar businesses. We cannot assure you that material costs and liabilities will not be incurred.
However, we do not currently expect any material adverse effect on our financial condition or
results of operations as a result of compliance with such laws and regulations. We paid pollutant
discharge fees of approximately RMB 199 million, RMB 211 million and RMB 231 million in 2005, 2006
and 2007, respectively.
To meet future environmental obligations, we are engaged in a continuous program to develop
effective environmental protection measures. This program includes research on:
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building environment-friendly projects; |
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reducing sulphur levels in heavy fuel oil and diesel fuel; |
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reducing olefin and benzene content in gasoline, and continuously
reducing the quantity of emissions and effluents from our refineries
and petrochemical plants; and |
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developing and installing monitoring systems at our pollutant
discharge openings and developing environmental impact assessments for
construction projects. |
Our capital expenditures on environmental programs in 2005, 2006 and 2007 were approximately
RMB 1,633 million RMB 4,634 million and RMB 2,299 million, respectively.
Because a number of our production facilities are located in populated areas, we have
established a series of preventative measures to improve the safety of our employees and
surrounding residents and minimize disruptions or other adverse effects on our business. These
measures include:
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providing each household in areas surrounding our production facilities with printed
materials to explain and illustrate safety and protection knowledge and skills; and |
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enhancing the implementation of various safety production measures we have adopted previously. |
We believe that these preventative measures have helped minimize the possibility of similar
incidents resulting in serious casualties and environmental consequences. In addition, the adoption
of these preventative measures has not required significant capital expenditures to date, and
therefore, will not have a material adverse effect on our results of operations and financial
condition.
Legal Proceedings
We are not involved in any judicial and arbitral proceedings, the results of which, in the
aggregate, would have a material adverse impact on our financial condition.
Properties
Under a restructuring agreement we entered into with CNPC on March 10, 2000, CNPC undertook to
us the following:
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CNPC would use its best endeavors to obtain formal land use right
licenses to replace the entitlement certificates in relation to the
28,649 parcels of land, which were leased or transferred to us from
CNPC, within one year from August, September and October 1999 when the
relevant entitlement certificates were issued; |
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CNPC would complete, within one year from November 5, 1999, the
necessary governmental procedures for the requisition of the
collectively owned land on which 116 service stations owned by us are
located; and |
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CNPC would obtain individual building ownership certificates in our
name for all of the 57,482 buildings transferred to us by CNPC, before
November 5, 2000. |
As of December 31, 2007, CNPC obtained formal land use right certificates for 27,554 of the
28,649 parcels of land and ownership certificates for some buildings. The governmental procedures
for the above-mentioned service stations located on collectively owned land have not been completed
to date. Our directors believe that the use of and the conduct of relevant activities at the
above-mentioned parcels of land, service stations and buildings are not affected by the fact that
the relevant land use right certificates or building ownership certificates have not been obtained
or the fact that the relevant governmental procedures have not been completed. Our directors
believe that this will not have any material adverse effect on our results of operations and
financial condition.
We hold exploration and production licenses covering all of our interests in developed and
undeveloped acreage, oil and natural gas wells and relevant facilities. See Exploration and
Production Properties.
Regulatory Matters
42
Overview
Chinas oil and gas industry is subject to extensive regulation by the PRC government with
respect to a number of aspects of exploration, production, transmission and marketing of crude oil
and natural gas as well as production, transportation and marketing of refined products and
chemical products. The following central government authorities exercise control over various
aspects of Chinas oil and gas industry:
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The Ministry of Land and Resources has the authority for granting,
examining and approving oil and gas exploration and production
licenses, the administration of registration and transfer of
exploration and production licenses. |
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The Ministry of Commerce: |
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sets the import and export volume quotas for crude oil and refined products according to the overall supply and
demand for crude oil and refined products in China as well as the WTO requirements for China; |
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issues import and export licenses for crude oil and refined products to oil and gas companies that have obtained
import and export quotas; and |
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examines and approves production sharing contracts and Sino-foreign equity and cooperative joint venture contracts. |
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The National Development and Reform Commission: |
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has the industry administration and policy coordination authority over Chinas oil and gas industry; |
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determines mandatory minimum volumes and applicable prices of natural gas to be supplied to certain fertilizer producers; |
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publishes guidance prices for natural gas and retail median guidance prices for certain refined products, including
gasoline and diesel; |
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approves significant petroleum, natural gas, oil refinery and chemical projects set forth under the Catalogues of
Investment Projects Approved by the Central Government; and |
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approves Sino-foreign equity and cooperative projects exceeding certain capital amounts. |
Exploration Licenses and Production Licenses
The Mineral Resources Law authorizes the Ministry of Land and Resources to exercise
administrative authority over the exploration and production of mineral resources within the PRC.
The Mineral Resources Law and its supplementary regulations provide the basic legal framework under
which exploration licenses and production licenses are granted. The Ministry of Land and Resources
has the authority to issue exploration licenses and production licenses. Applicants must be
companies approved by the State Council to engage in oil and gas exploration and production
activities.
Applicants for exploration licenses must first register with the Ministry of Land and
Resources blocks in which they intend to engage in exploration activities. The holder of an
exploration license is obligated to make a progressively increasing annual minimum exploration
investment relating to the exploration blocks in respect of which the license is issued.
Investments range from RMB 2,000 per square kilometer for the initial year to RMB 5,000 per square
kilometer for the second year, and to RMB 10,000 per square kilometer for the third and subsequent
years. Additionally, the holder has to pay an annual exploration license fee that starts at RMB 100
per square kilometer for each of the first three years and increases by an additional RMB 100 per
square kilometer per year for subsequent years up to a maximum of RMB 500 per square kilometer. The
maximum term of an oil and natural gas exploration license is seven years, subject to twice renewal
upon expiration of the original term, with each renewal being up to two years. At the exploration
stage, an applicant can also apply for a progressive exploration and production license that allows
the holder to test and develop reserves not yet fully proven. Upon the detection and confirmation
of the quantity of reserves in a certain block, the holder must apply for a production license
based on economic evaluation, market conditions and development planning in order to shift into the
production phase in a timely fashion. In addition, the holder needs to obtain the right to use that
block of land. Generally, the holder of a full production license must obtain a land use rights
certificate for industrial land use covering that block of land.
43
The Ministry of Land and Resources issues production licenses to applicants on the basis of
the reserve reports approved by the relevant authorities. Production license holders are required
to pay an annual production right usage fee of RMB 1,000 per square kilometer. Administrative rules
issued by the State Council provide that the maximum term of a production license is 30 years. In
accordance with a special approval from the State Council, the Ministry of Land and Resources has
issued production licenses with terms coextensive with the projected productive life of the
assessed proven reserves as discussed above. Each of our production licenses is renewable upon our
application 30 days prior to expiration. If oil and gas prices increase, the productive life of our
crude oil and natural gas reservoirs may be extended beyond the current terms of the relevant
production licenses.
Among the major PRC oil and gas companies, the exploration licenses and production licenses
held by PetroChina, Sinopec and CNOOC account for the majority of mining rights in China. Among
those companies, PetroChina and Sinopec primarily engage in onshore exploration and production,
while CNOOC primarily engages in offshore exploration and production.
Pricing
Crude Oil
PetroChina and Sinopec set their crude oil median prices each month based on the average
Singapore market FOB prices for crude oil of different grades in the previous month. In addition,
PetroChina and Sinopec negotiate a premium or discount to reflect transportation costs, the
differences in oil quality and market supply and demand. The National Development and Reform
Commission will mediate if PetroChina and Sinopec cannot agree on the amount of premium or
discount.
Refined Products
Since October 2001, PetroChina has set its retail prices within an 8% floating range of the
published retail median guidance prices of gasoline and diesel published by the National
Development and Reform Commission (but after March 26, 2006, the price of diesel for fishing
vessels has been set in line with the published retail base price, with no upward adjustment for
the time being). These retail median guidance prices of gasoline and diesel vary in each provincial
level distribution region. From October 2001 to early 2006, the National Development and Reform
Commission published the retail median guidance prices of gasoline and diesel from time to time
based on the weighted average FOB Singapore, Rotterdam and New York trading prices for diesel and
gasoline plus transportation costs and taxes. Generally, adjustments were made only if the weighted
average prices fluctuate beyond 8% of the previously published retail median guidance price. In
2006, the PRC government, under its macro economic controls, introduced a new mechanism for
determining the prices of refined products.
PetroChina sets the wholesale prices for its gasoline and diesel on the basis of its retail
prices and a discount to its retail prices of at least 4.5% as required by the National Development
and Reform Commission.
In addition, the National Development and Reform Commission sets the ex-works median prices
for gasoline and diesel sold for military use and national reserve. For other institutional
customers including airlines and railway operators, PetroChina may charge on the basis of the
ex-works median prices adjustment within an upward or downward adjustment up to 8%.
Chemical Products
PetroChina determines the prices of all of its chemical products.
Natural Gas
The price of natural gas has two components: ex-works price and pipeline transportation
tariff.
Prior to December 26, 2005, ex-works prices varied depending on whether or not the natural gas
sold was within the government-formulated natural gas supply plan. For natural gas sold within the
government-formulated supply plan, the National Development and Reform Commission fixed ex-works
prices according to the nature of the customers. Most of these customers were fertilizer producers.
For natural gas sold to customers not subject to the government-formulated supply plan, the
National Development and Reform Commission published median guidance ex-works prices, and allowed
natural gas producers to adjust prices upward or downward by up to 10%.
On December 26, 2005, the National Development and Reform Commission reformed the mechanism
for setting the ex-works prices of domestic natural gas by changing the ex-works prices to
governmental guidance prices, and categorizing domestic natural gas into two categories.
44
On the basis of the ex-works price set by the government, subject to the negations between the
seller and the buyer, the actual ex-works price of the first category may float upward or downward
up to 10%; while the actual ex-works price of the second category may float upward up to 10% and
downward to any level. The price of the first category will be adjusted to the same level as the
second category within three to five years. The National Development and Reform Commission does not
allow PetroChina and Sinopec to charge different prices towards internal and external enterprises.
On November 10, 2007, the National Development and Reform Commission increased the ex-works price
of the industrial use natural gas by RMB 400/1000 cubic meters.
PetroChina negotiates the actual ex-works price with natural gas users within the benchmark
price set by the government and the adjustment range.
The National Development and Reform Commission sets the pipeline transportation tariff for the
natural gas transported by pipelines constructed prior to 1991. For natural gas transported by
pipelines constructed after 1991, PetroChina submits to the National Development and Reform
Commission for examination and approval proposed pipeline transmission tariffs based on the capital
investment made in the pipeline, the depreciation period for the pipeline, the ability of end users
to pay and PetroChinas profit margin.
Production and Marketing
Crude Oil
Each year, the National Development and Reform Commission publishes the projected target for
the production and sale of crude oil by PetroChina, Sinopec and CNOOC, based on the domestic
consumption estimates submitted by domestic producers, including PetroChina, Sinopec and CNOOC, the
production of these companies as well as the forecast of international crude oil prices. The actual
production levels are determined by the producers themselves and may vary from the submitted
estimates. Since January 1, 2007, when the Measures on the Administration of the Refined Products
Market promulgated by the Ministry of Commerce became effective, qualified domestic producers are
permitted to engage in the sale and storage of crude oil. Foreign companies are also allowed to
establish and invest in enterprises to conduct crude oil-related business.
Refined Products
Previously, only PetroChina, Sinopec and joint ventures established by the two companies had
the right to conduct gasoline and diesel wholesale business. Other companies, including foreign
invested companies, were not allowed to engage in wholesale of gasoline and diesel in Chinas
domestic market. In general, only domestic companies, including Sino-foreign joint venture
companies, were permitted to engage in retail of gasoline and diesel. Since December 11, 2004,
wholly foreign-owned enterprises are permitted to conduct refined oil retail business. Since
January 1, 2007, when the Measures on the Administration of the Refined Products Market became
effective, all entities meeting certain requirements are allowed to submit applications to the
Ministry of Commerce to conduct gasoline and diesel wholesale, retail and storage businesses.
Natural Gas
The National Development and Reform Commission publishes each year the production targets
for natural gas producers based on the annual production target prepared on the basis of
consumption estimates submitted by all natural gas producers such as PetroChina. The National
Development and Reform Commission also formulates the annual natural gas guidance supply plan,
which requires natural gas producers to distribute a specified amount of natural gas to specified
fertilizer producers, municipal governments and enterprises. The actual production levels of
natural gas, except the amount supplied to the fertilizer producers, are determined by the natural
gas producers.
Foreign Investments
Cooperation in Exploration and Production with Foreign Companies
Currently, only CNPC and Sinopec have the right to cooperate with foreign companies in onshore
crude oil and natural gas exploration and production in China. CNOOC has the right to cooperate
with foreign companies in offshore crude oil and natural gas exploration and production in China.
Sino-foreign cooperation projects and foreign parties in onshore oil and gas exploration and
production in China are generally selected through open bids and bilateral negotiations. Those
projects are generally conducted through production sharing contracts. The Ministry of Commerce
must approve those contracts.
45
As authorized by the Regulations of the PRC on Exploration of Onshore Petroleum Resources in
Cooperation with Foreign Enterprises, CNPC has the right to enter into joint cooperation
arrangements with foreign oil and gas companies for onshore crude oil and natural gas exploration
and production. PetroChina does not have the capacity to enter into production sharing contracts
directly with foreign oil and gas companies under existing PRC law. Accordingly, CNPC will continue
to enter into production sharing contracts. After signing a production sharing contract, CNPC will,
subject to approval of the Ministry of Commerce, assign to PetroChina most of its commercial and
operational rights and obligations under the production sharing contract as required by the
Non-competition Agreement between CNPC and PetroChina. See Item 7 Major Shareholders and
Related Party Transactions Contract for the Transfer of Rights under Production Sharing
Contracts.
Transportation and Refining
Since December 1, 2007, PRC regulations encourage foreign investment in the construction and
operation of oil and gas pipelines and storage facilities but restrict foreign investment in
refineries with an annual capacity of 8 million tons or lower.
Construction of new refinery or ethylene facilities, expansion of existing refinery facilities and
upgrading of existing ethylene facilities by increasing annual production capacity of more than 200
thousand tons are subject to the approval of relevant government authorities. The ethylene
production projects with an annual production capacity exceeding 800 thousand tons must be
majority-owned by Chinese parties. Furthermore, when appropriate, projects must receive necessary
approvals from relevant PRC government agencies. See Item 3 Key Information Risk Factors.
Import and Export
Since January 1, 2002, state-owned trading companies have been allowed to import crude oil
under an automatic licensing system. Non-state-owned trading companies have been allowed to import
crude oil and refine products subject to quotas. The export of crude oil and refined oil products
by both state-owned trading companies and non-state-owned trading companies is subject to quota
control. The Ministry of Commerce has granted PetroChina the right to conduct crude oil and refined
product import and export business.
Capital Investment and Financing
Capital investments in exploration and production of crude oil and natural gas made by Chinese
oil and gas companies are subject to approval by or filing with relevant government authorities.
The following projects are subject to approval by the National Development and Reform Commission:
(1) new oil field development projects with an annual capacity of 1 million tons or above and new
gas field development projects with an annual capacity of 2 billion cubic meters or above;
(2) facilities
for taking delivery of, storing or transporting imported liquefied natural gas, and
cross-province (region or municipality) major oil transmission pipeline facilities;
(3) cross-province (region or municipality) gas transmission facilities, or gas transmission
facilities with an annual capacity of 500 million cubic meters or above;
(4) new refineries, first expansion of existing refineries, new ethylene projects, and
transformation or expansion of existing ethylene projects which will result in an additional annual
capacity of 200 thousand tons;
(5) new PTA, PX, MDI and TDI projects, and transformation of existing PTA and PX projects which
will result in an additional capacity of 100 thousand tons;
(6) potassium mineral fertilizer projects with an annual capacity of 500 thousand tons or more; and
(7) national crude oil reserve facilities.
Taxation, Fees and Royalty
PetroChina is subject to a variety of taxation, fees and royalty. The table below sets forth
the various taxation, fees and royalty payable by PetroChina or by Sino-foreign oil and gas
exploration and development cooperative projects. Since January 1, 2000, PetroChina and its
wholly owned subsidiary, Daqing Oilfield Company Limited, and branch companies have been taxed on a
consolidated basis as approved by the Ministry of Finance and the State Taxation Bureau.
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Tax Rate |
Enterprise income tax
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Taxable income
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Since January 1, 2008,
applicable to the legal rate of
25%. However, our qualified
branch companies in the
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Tax base |
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Tax Rate |
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west
regions of the PRC are entitled
to a rate of 15%. Tax
concession or exemption enjoyed
by any subsidiary or branch
company continues to apply.
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Value-added tax
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Revenue
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13% for liquified natural gas,
natural gas, liquified
petroleum gas, agricultural
film and fertilizers and 17%
for other items. PetroChina
charges value-added tax from
its customers at the time of
settlement on top of the
selling prices of its products
on behalf of the taxation
authority. The value-added tax
paid by PetroChina for
purchasing materials to be
consumed during the production
process and for charges paid
for drilling and other
engineering services and labor
is deducted from output
value-added tax payable by
PetroChina. Since March 14,
2006, the rebate of the
value-added tax paid in
connection with export of
gasoline has been suspended.
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Sales volume
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5% for the Sino-foreign oil and
gas exploration and development
cooperative projects. However
input value-added tax cannot be
deducted.
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Business tax
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Revenue from transportation services
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3% |
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Consumption tax
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Aggregate volume sold or self-consumed
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RMB 277.6 per ton for leadless
gasoline; RMB 388.64 per ton
for leaded gasoline.
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RMB 117.6 per ton for diesel.
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Since April 1, 2006, RMB 277
per ton for naphtha and levied
at the rate of 30% of the
taxable amount for the time
being.
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Since April 1, 2006, RMB 256.4
per ton for solvent naphtha and
levied at the rate of 30% of
the taxable amount for the time
being.
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Since April 1, 2006, RMB 225.2
per ton for lubricants and
levied at the rate of 30% of
the taxable amount for the time
being.
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Since April 1, 2006, RMB 101.5
per ton for fuel oil and levied
at the rate of 30% of the
taxable amount for the time
being.
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Since April 1, 2006, RMB 124.6
per ton for aviation kerosene
and not levied for the time
being.
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Resource tax
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Aggregate volume sold or self-consumed
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Since July 1, 2005, resource
tax applicable to crude oil of
our company was adjusted upward
from the original RMB 8 to 30
per ton to RMB 14 to 30 per
ton, and the resource tax for
natural gas was adjusted from
the original RMB 2 to 15 per
thousand cubic meter to RMB 7
to 15 per thousand cubic meter.
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The actual applicable rate for
each oil field may differ
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Tax item |
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Tax base |
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Tax Rate |
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depending on the resource
differences, volume of the
exploration and production
activities and costs required
for the production at the
particular oil field.
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Compensatory fee for
mineral resources
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Revenue
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1% for crude oil and natural gas
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Crude oil special
gain levy
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Sales amount above certain threshold
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Effective March 26, 2006,
levied on the domestic crude
oil sold at or above US$40/barrel, with a five-level
progressive tax rates, varying
from 20% to 40% |
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Tax item |
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Tax base |
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Tax Rate |
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Exploration license fee
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Area
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RMB 100 to 500 per square kilometer per year |
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Production license fee
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Area
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RMB 1,000 per square kilometer per year |
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Royalty fee (1)
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Production volume
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Progressive rate of 012.5% for crude oil
and 03% for natural gas |
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Payable only by Sino-foreign oil and gas exploration and development
cooperative projects. The project entity of those cooperative projects
is not subject to any other resource tax or fee. |
The PRC Highway Law, as amended on October 31, 1999, provides that the PRC government will
collect funds for highway maintenance by imposing fuel taxes. The State Council will formulate
specific implementation methods and procedures for the imposition of fuel tax. The State Council
has not yet announced or published any specific rate, implementation method or procedure for the
imposition of the tax.
Environmental Regulations
China has adopted extensive environmental laws and regulations that affect the operation of
the oil and gas industry. There are national and local standards applicable to emissions control,
discharges to surface and subsurface water and disposal, and the generation, handling, storage,
transportation, treatment and disposal of solid waste materials.
The environmental regulations require a company, such as us, to register or file an
environmental impact report with the relevant environmental bureau for approval before it
undertakes any construction of a new production facility or any major expansion or renovation of an
existing production facility. The new facility or the expanded or renovated facility will not be
permitted to operate unless the relevant environmental bureau has inspected to its satisfaction
that environmental equipment that satisfies the environmental protection requirements has been
installed for the facility. A company that wishes to discharge pollutants, whether it is in the
form of emission, water or materials, must submit a pollutant discharge declaration statement
detailing the amount, type, location and method of treatment. After reviewing the pollutant
discharge declaration, the relevant environmental bureau will determine the amount of discharge
allowable under the law and will issue a pollutant discharge license for that amount of discharge
subject to the payment of discharge fees. If a company discharges more than is permitted in the
pollutant discharge license, the relevant environmental bureau can fine the company up to several
times the discharge fees payable by the offending company for its allowable discharge, or require
the offending company to close its operation to remedy the problem.
ITEM 4A UNRESOLVED STAFF COMMENTS
We do not have any unresolved Staff comments that are required to be disclosed under this
item.
48
ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS
General
You should read the following discussion together with our consolidated financial statements and
their notes included elsewhere in this annual report. Our consolidated financial statements have
been prepared in accordance with IFRS.
Overview
We are engaged in a broad range of petroleum and natural gas related activities, including:
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the exploration, development, production and sale of crude oil and natural gas; |
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the refining, transportation, storage and marketing of crude oil and petroleum products; |
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the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; and |
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the transmission and storage of crude oil, refined oil products and natural gas as well as the sale of natural gas. |
We are Chinas largest producer of crude oil and natural gas and are one of the largest
companies in China in terms of sales. In the year ended December 31, 2007, we produced
approximately 838.8 million barrels of crude oil and approximately 1,627.0 billion cubic feet of
natural gas for sale. Our refineries also processed approximately 823.6 million barrels of crude
oil in the year ended December 31, 2007. In the year ended December 31, 2007, we had total revenue
of RMB 835,037 million and net income of RMB 145,625 million.
Factors Affecting Results of Operations
Our results of operations and the period-to -period comparability of our financial results are
affected by a number of external factors, including changes in the prices of crude oil, refined
products, natural gas and chemical products, decrease in our crude oil reserves in China and
fluctuations in exchange rates and interest rates.
Crude Oil Prices
Our results of operations are substantially affected by crude oil prices. Since March 2001, we
and Sinopec have set our crude oil median prices monthly based on the Singapore market FOB prices
for crude oil. Our actual realized crude oil prices include a premium on, or discount from, the
median prices which primarily reflects transportation costs, differences in oil quality and market
supply and demand conditions.
Since September 1, 1999, the discounts and premiums applied to our crude oil sales have been
determined in accordance with a crude oil premium or discount calculation agreement and its
supplemental agreement we entered into with Sinopec. These agreements establish premiums or
discounts which effect adjustments to the benchmark prices. These agreements do not obligate either
party to purchase or sell any crude oil and is thus subject to renegotiation. Under these
agreements, the National Development and Reform Commission, formerly the State Development Planning
Commission, will mediate if we cannot agree with Sinopec on the premium or discount applicable to a
particular crude oil purchase. The table below sets forth the median prices for our principal
grades of crude oil in 2005, 2006 and 2007 and the negotiated premiums or discounts applicable to
those grades of crude oil since 2005.
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Median prices for principal grades of |
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Premium/(discount) |
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crude oil (RMB/barrel) |
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(RMB/barrel) |
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Year 2005 |
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Year 2006 |
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Year 2007 |
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Grade of crude oil |
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Benchmark |
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average |
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average |
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average |
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2005 |
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2006 |
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2007 |
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Daqing |
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Minas |
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430 |
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513 |
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536 |
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(4.4 |
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(3.8 |
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(3.8 |
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Jidong |
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Minas |
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430 |
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513 |
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536 |
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(4.4 |
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(3.8 |
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(3.8 |
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Huabei |
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Minas |
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430 |
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513 |
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536 |
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(3.0 |
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(2.4 |
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(3.9 |
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Dagang |
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Cinta |
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412 |
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494 |
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512 |
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(1.8 |
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(2.5 |
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(4 |
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Tarim |
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Minas |
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430 |
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513 |
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536 |
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(34.9 |
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(34.6 |
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(51 |
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Tuha |
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Tapis |
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457 |
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554 |
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571 |
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49
In 2007, the median prices for our principal grades of crude oil and crude oil produced in our
Daqing oil region were RMB 511 per barrel and RMB 534 per barrel, respectively.
Increases or decreases in the price of crude oil in China have a significant effect on the
revenue from our exploration and production segment. In the year ended December 31, 2007, our average realized
selling price for crude oil was RMB 496 per barrel, increased by 4.0% from RMB 477 per barrel in
the year ended December 31, 2006. See Item 4 Information on the Company Regulatory Matters
Pricing for a more detailed discussion of current PRC crude oil pricing regulations.
Refined Product Prices
Prior to October 2001, the State Development Planning Commission published from time to time
retail median gasoline and diesel guidance prices for major cities and provinces. Once published,
the retail median prices remained unchanged until either we or Sinopec requested an adjustment and
demonstrated that the cumulative change of the FOB Singapore gasoline or diesel trading price from
the then applicable retail median guidance price exceeded 5%. From October 2001 to early 2006, the
State Development Planning Commission or the National Development and Reform Commission has
adjusted such retail median prices from time to time to reflect the FOB Singapore, Rotterdam and
New York trading prices for gasoline and diesel, supplemented by transportation costs and taxes. In
2006, the PRC government, under its macro economic controls, introduced a new mechanism for
determining the prices of refined products. See Item 4 Information on the Company Regulatory
Matters Pricing for a more detailed discussion of current PRC refined products pricing
regulations.
Since October 2001, we and Sinopec have set our retail prices within an 8% floating range of
the published median gasoline and diesel guidance prices. We determine the prices of other refined
products with reference to the published median guidance prices of gasoline and diesel. Our retail
prices may differ from those of Sinopec within a given market. Our average realized selling prices
tend to be higher in the western and northern regions of China, where we dominate the market, as
compared to our average realized selling prices in the eastern and southern regions, where Sinopec
has a stronger presence.
The following table sets forth the retail median prices for 90(#) gasoline and 0(#) diesel
published by the State Development Planning Commission or the National Development and Reform
Commission from January 2007 to March 2008 when such adjustments were made.
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90(#) |
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0(#) |
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Diesel |
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January 14, 2007 |
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5,452 |
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November 1, 2007 |
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5,980 |
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5,520 |
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Chemical Product Prices
We determine and set the prices of all chemical products produced by our chemicals business
segment.
Natural Gas Prices
Our natural gas price is comprised of the ex-works price and pipeline transportation tariff.
Prior to December 26, 2005, ex-works prices varied depending on whether the natural gas sold
was within the government-formulated natural gas supply plan. For natural gas sold within the
government-formulated supply plan, the National Development and Reform Commission fixed ex-works
prices according to the nature of the customers. Most of these customers were fertilizer producers.
For natural gas sold to customers not subject to the government-formulated supply plan, the
National Development and Reform Commission published median guidance ex-works prices, and allowed
natural gas producers to adjust the prices upward or downward by up to 10%.
50
On November 10, 2007, the National Development and Reform Commission adjusted the natural gas
ex-works benchmark price upward by RMB 400/1000 cubic meter.
On December 26, 2005, the National Development and Reform Commission reformed the mechanism
for setting the ex-works prices of domestic natural gas by changing the ex-works prices to
governmental guidance prices, and categorizing the domestic natural gas into two tiers. On the
basis of the ex-works price set by the government, subject to the negotiations between the seller
and the buyer, the actual ex-works price of the first tier may float upward or downward of up to
10%; while the actual ex-works price of the second tier may float upward of up to 10% and downward
to any level. The price of the first tier will be adjusted to the same level as the second tier
within three to five years.
PetroChina negotiates the actual ex-works price with natural gas users on the basis of the
benchmark price set by the government and the adjustment range.
The National Development and Reform Commission sets the pipeline transportation tariff for the
natural gas transported by pipelines constructed prior to 1991. For natural gas transported by
pipelines constructed after 1991, PetroChina submits to the National Development and Reform
Commission for examination and approval proposed pipeline transmission tariffs based on the capital
investment made in the pipeline, the depreciation period for the pipeline, the ability of end users
to pay and PetroChinas profit margin.
We sold our natural gas at prices which exceed our production and transportation costs in
2007.
Foreign Currency Exposure
For a discussion of the effect of exchange rate fluctuations on our results of operations,
please see Item 11 Quantitative and Qualitative Disclosures About Market Risk Foreign
Exchange Rate Risk.
Interest Rate Exposure
For a discussion of the effect of interest rate changes on our results of operations, please
see Item 11 Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk.
Critical Accounting Policies
The preparation of our consolidated financial statements requires our management to select and
apply significant accounting policies, the application of which may require management to make
judgments and estimates that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities as of the date of our financial statements, and the reported
amounts of revenue and expenses during the reporting period. Notwithstanding the presentation of
our principal accounting policies in Note 3 to our consolidated financial statements included
elsewhere in this annual report, we have identified the accounting policies below as most critical
to our business operations and the understanding of our financial condition and results of
operations presented in accordance with IFRS. Although these estimates are based on our
managements best knowledge of current events and actions, actual results ultimately may differ
from those estimates.
Accounting of Oil and Gas Exploration and Production Activities
We use successful efforts method of accounting, with specialized accounting rules that are
unique to the oil and gas industry, for oil and gas exploration and production activities. Under
this method, geological and geophysical costs incurred are expensed prior to the discovery of
proved reserves. However, all costs for developmental wells, support equipment and facilities, and
mineral interests in oil and gas properties are capitalized. Costs of exploratory wells are
capitalized as construction in progress pending determination of whether the wells find proved
reserves. The costs of exploratory wells will be further capitalized pending determination of
whether the wells find sufficient economically exploitable reserves. For exploratory wells located in regions that do not require substantial
capital expenditures before the commencement of production, the evaluation of the economic benefits
of the reserves in such wells will be completed within one year following the completion of the
exploration drilling. Where such evaluation indicates that no economic benefits can be obtained,
the relevant costs of exploratory wells will be converted to dry hole exploration expenses. The
relevant costs will be capitalized if the evaluation indicates that economic benefits can be
obtained. For wells that found economically viable reserves in areas where a major capital
expenditure would be required before production can begin, the related well costs remain
capitalized only if additional drilling is under way or firmly planned. Otherwise the well costs
are expensed as dry holes. We have no costs of unproved properties capitalized in oil and gas
properties.
51
Oil and Gas Reserves
The estimation of the quantities of recoverable oil and gas reserves in oil and gas fields is
integral to effective management of our exploration and production operations. Because of the
subjective judgments involved in developing and assessing such information, engineering estimates
of the quantities of recoverable oil and gas reserves in oil and gas fields are inherently
imprecise and represent only approximate amounts.
Before estimated oil and gas reserves are designated as proved, certain engineering criteria
must be met in accordance with industry standards and the regulations of the United States
Securities and Exchange Commission. Proved oil and gas reserves are the estimated quantities of
crude oil and natural gas which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under existing economic and
operating conditions. Therefore, these estimates do not include probable or possible reserves. Our
proved reserve estimates are updated annually by independent, qualified and experienced oil and gas
reserve engineering firms in the United States. Our oil and gas reserve engineering department has
policies and procedures in place to ensure that these estimates are consistent with these
authoritative guidelines. Among other factors as required by authoritative guidelines, this
estimation takes into account recent information about each field, including production and seismic
information, estimated recoverable reserves of each well, and oil and gas prices and operating
costs as of the date the estimate is made. Prices include consideration of changes in existing
prices provided only by contractual arrangements, but not on escalations based upon future
conditions. Therefore, as prices and cost levels change from year to year, the estimate of proved
reserves also changes. We have no costs of unproved properties capitalized in oil and gas
properties.
Despite the inherent imprecision in these engineering estimates, estimated proved oil and gas
reserve quantity has a direct impact on certain amounts reported in the financials statements. In
addition to the capitalization of costs related to oil and gas properties on the balance sheet
discussed earlier, estimated proved reserves also impact the calculation of depreciation, depletion
and amortization expenses of oil and gas properties. The cost of oil and gas properties is
amortized at the field level on the unit of production method. Unit of production rates are based
on the total oil and gas reserves estimated to be recoverable from existing facilities based on the
current terms of our production licenses. Our reserve estimates include only crude oil and natural
gas which management believes can be reasonably produced within the current terms of the production
licenses that are granted by the Ministry of Land and Resources, ranging from 30 years to 55 years
from the effective date of issuance in March 2000, renewable upon application 30 days prior to
expiration. Consequently, the impact of changes in estimated proved reserves is reflected
prospectively by amortizing the remaining book value of the oil and gas property assets over the
expected future production. If proved reserve estimates are revised downward, earnings could be
affected by higher depreciation expense or an immediate write-down of the propertys book value had
the downward revisions been significant See Property, Plant and Equipment below. Given our
large number of producing properties in our portfolio, and the estimated proved reserves, it is
unlikely that any changes in reserve estimates will have a significant effect on prospective
charges for depreciation, depletion and amortization expenses.
In addition, due to the importance of these estimates to better understanding the perceived
value and future cash flows of a companys oil and gas operations, we have also provided
supplemental disclosures of proved oil and gas reserve estimates prepared in accordance with
authoritative guidelines elsewhere in this annual report.
Property, Plant and Equipment
We record property, plant and equipment, including oil and gas properties, initially at cost
less accumulated depreciation, depletion and amortization. Cost represents the purchase price of
the asset and other costs incurred to bring the asset into existing use. Subsequent to their
initial recognition, property, plant and equipment are carried at revalued amount, being the
estimated fair value at the date of the revaluation less accumulated depreciation and impairment
losses. Revaluations are performed by independent qualified valuers on a periodic basis to ensure
that the carrying amount does not differ materially from that which would be determined using fair
value at the balance sheet date. Revaluation surpluses realized through the depreciation or
disposal of revalued assets are retained in the revaluation reserve and will not be available to
offset against possible future revaluation losses. As disclosed in Note 17 to our consolidated
financial statements included elsewhere in this annual report, our property, plant and equipment,
excluding oil and gas reserves, were revalued as of June 30, 1999. Subsequently, our refining and
chemical production equipment and oil and gas properties were revalued as of September 30, 2003 and
our oil and gas properties as of March 31, 2006.
Depreciation, depletion and amortization to write off the cost or valuation of each asset,
other than oil and gas properties, to its residual value is calculated using the straight-line
method over the estimated useful life of such asset as follows:
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8-40 years |
Equipment and machinery |
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4-30 years |
Motor vehicles |
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7-14 years |
Other |
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5-12 years |
52
We do not provide depreciation for construction in progress until it is completed and ready
for use.
The useful lives of non-oil-and-gas properties are estimated at the time these purchases are
made after considering future changes, business developments and our strategies. Estimated
production lives for oil aid gas properties are also made after considering the specific factors
discussed under Oil and Gas Reserves above. Should there be unexpected adverse changes in
these circumstances or events, which include, among others, declines in projected operating results
and negative industry or economic trends we would be required to assess the need to shorten the
useful lives and/or make impairment provisions.
In performing this impairment assessment, we review internal and external sources of
information to identify indications of these unexpected adverse changes. The sources utilized to
identify indications of impairment are often subjective in nature and require us to use judgment in
applying such information to our businesses. Our interpretation of this information has a direct
impact on whether an impairment assessment is performed as at any given balance sheet date. Such
information is particularly significant as it relates to our oil and gas properties. If an
indication of impairment is identified, the recoverable amount of each cash generating unit is
estimated, which is the higher of its fair price net of selling cost and its value in use, which is
the estimated net present value of future cash flows to be derived from the continuing use of the
asset and from its ultimate disposal. To the extent the carrying amount of a cash generating unit
exceeds the recoverable amount, an impairment loss is recognized in the income statement.
Depending on our assessment of the overall materiality of the asset under review and
complexity of deriving reasonable estimates of the recoverable value, we may perform such
assessment utilizing internal resources or we may engage external advisors to advise us in making
this assessment. Regardless of the resources utilized, we are required to make many assumptions in
making this assessment, including our utilization of such asset, plans to continue to produce and
develop proved and associated probable or possible reserves, the cash flows to be generated based
on assumptions for future commodity prices and development costs, appropriate market discount rates
and the projected market and regulatory conditions. Changes in any of these assumptions could
result in a material change to future estimates of the recoverable value of any asset.
Provision for Asset Decommissioning
Provision
for future decommissioning and restoration is recognized in full on
the installation of oil and gas properties. The amount recognized is the present value
of the estimated future expenditure determined in accordance with local conditions and
requirements. A corresponding addition to the related oil and gas properties of an amount
equivalent to the provision is also created. This is subsequently depreciated as part of the
capital costs of the oil and gas properties. Any change in the present value of the estimated
expenditure other than the one due to passage of time which is regarded as interest cost, is
reflected as an adjustment to the provision and oil and gas properties.
Impairment of Accounts Receivable
Accounts receivables are recognized initially at fair value and subsequently measured at
amortized costs, using the effective interest method, less provisions made for the impaired
receivables. Accounts where there are indications that a receivable may be impaired or not
collectible, a provision would be recorded based on best estimates to reduce the receivable balance
to the amount that is expected to be collected. Factors considered in making a provision include
the historical payment and collection experience, debtors credit worthiness and appropriate
discount rates. The recording of provisions requires the application of judgments about the
ultimate resolution of these accounts receivable. As a result, provisions are reviewed at each
balance sheet date and adjusted to reflect our current best estimates.
Deferred Tax Assets
We are required to exercise considerable judgment in making provisions for deferred tax under
the liability method. Under this method, deferred tax is provided for temporary differences arising
between the tax bases of assets and liabilities and their carrying values for financial reporting
purposes. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable income or loss. Deferred tax is determined using tax rates
(and tax laws) that has been enacted or substantially enacted by the balance sheet date and are expected to apply to the
period when the related deferred tax asset is realized or deferred
tax liability is settled. If these rates change, we would have to adjust our
deferred tax in the period in which these changes happen through the income statement.
The principal temporary differences arise from depreciation on oil and gas properties and
equipment and provision for impairment of receivables, inventories, investments and property, plant
and equipment. Deferred tax assets relating to the carry-forward of unused tax losses are
recognized to the extent that it is probable that future taxable income will be available against
which the unused tax losses can be utilized.
53
Revenue Recognition
Sales are recognized upon delivery of products and customer acceptance or performance of
services, net of sales taxes and discounts. Revenues are recognized only when we have transferred
to the buyer the significant risks and rewards of ownership of the goods in the ordinary course of
business, and when the amount of revenue and the costs incurred or to be incurred in respect of the
transaction can be measured reliably and the collectibility of the related receivables is
reasonably assured.
We sell part of the natural gas produced by us under take-or-pay contracts entered into with
our customers. Customers who entered into such a take-or-pay contract are required to take or pay
for the minimum amount of natural gas specified in the contract. Revenues from the sale and
transportation of natural gas under take-or-pay contracts are recognized under the above accounting
policies. Any advance payment for natural gas that has not been consumed will be recorded as
deferred revenue until the natural gas has been actually consumed.
We entered into a Crude Oil Mutual Supply Framework Agreement with Sinopec on January 8, 2008,
which can be characterized as a buy/sell contract, and recognized the revenue derived from this
agreement in our consolidated statements of income. Since the transactions under the agreement are
separately invoiced and settled and cannot be offset with each other, they were not treated as
non-monetary transactions as defined in APB Opinion No. 29 Accounting for Non-monetary
transactions. In February 2005, the U.S. Securities and Exchange Commission issued a letter to the
oil and gas industry requesting additional disclosures regarding buy/sell contracts. Accordingly,
we have reviewed such transactions and estimated that, if we are required to report the net amount
of such buy/sell contracts, our reported amount in the line items of Sales and other operating
revenues and Purchase, services and other for the year ended December 31, 2005, 2006 and 2007
would be reduced by RMB 1,384 million, RMB 2,119 million and RMB 4,694 million, respectively. No
change will occur to our net income as a result of this.
Acquisitions
In June 2005, we entered into a capital contribution agreement with CNODC, Central Asia
Petroleum Co., Ltd. and CNPC E&D, whereby, in December 2005 we acquired a 50% interest in CNPC E&D,
a subsidiary of CNODC, for a consideration of RMB 20,741 million which was paid to CNPC E&D as our
capital contribution. Upon consummation of the transaction, we obtained a 50% interest in certain
overseas oil and gas assets transferred by CNODC to CNPC E&D. We also entered into a transfer
agreement, pursuant to which, in December 2005, we transferred all of our interest in PTRI to CNPC
E&D for a consideration of RMB 579 million. See Item 4 Information on the Company
Introduction History and Development of the Company Overview of Our Operations.
Upon completion of the acquisition and transfer, we obtained control over CNPC E&D by having
the right to appoint four of the seven directors. Our investment in CNPC E&D and the transfer of
PTRI to CNPC E&D will be accounted for in a manner similar to a uniting of interests since these
transactions are among entities under common control by CNPC. Our consolidated financial statements
will be restated as if operations of PetroChina and CNPC E&D had always been combined.
We plan to continue to pursue attractive opportunities outside China as part of our business
growth strategy to utilize both domestic and international resources to strengthen our
competitiveness. As we continue to implement this strategy, we expect that acquisitions of overseas
assets will over time have a material effect on our results of operations and financial condition.
Pursuant to an acquisition agreement by and between our company and CNPC dated March 28, 2005,
we acquired the refinery and petrochemical operations respectively owned by CNPCs wholly owned
subsidiaries, Dayuan and Qingyang, from CNPC for which we paid a cash consideration of RMB 9
million.
The acquisition is deemed a combination of entities under common control since we and the
refinery and petrochemical operations of Dayuan and Qingyang are under the common control of CNPC.
As a result, we have accounted for the acquisition in a manner similar to a uniting of interests,
whereby the assets and liabilities of the refinery and petrochemical operations acquired are
accounted for at historical cost to CNPC with net liabilities of RMB 183 million as at the
effective date. Our prior years consolidated financial statements were restated to give effect to
the
acquisition in these periods as if the operations of our company and these operations had always
been combined in these periods. The difference between the RMB 9 million acquisition price and the
net liabilities transferred from CNPC was adjusted against equity.
Pursuant to our board resolutions dated October 26, 2005, we made an offer to the holders of
the A Shares of Jinzhou Petrochemical to acquire 150 million outstanding Jinzhou Petrochemical A
Shares at the purchase price of RMB 4.25 per share. Jinzhou Petrochemical was delisted from the
Shenzhen Stock Exchange on January 4, 2006.
Pursuant to our board resolutions dated October 26, 2005, we made separate offers to the
holders of the A Shares of Jilin Chemical and the holders of the H Shares of Jilin Chemical to
acquire 200 million outstanding A Shares at the purchase price of RMB 5.25 per share, and 964.778
million outstanding H Shares (including ADSs) at the purchase price of HK$2.80 per Share. Jilin
Chemical H Shares, A Shares and ADSs were delisted from the Hong Kong Stock Exchange, Shenzhen
Stock Exchange and the New York Stock Exchange on January 23, February 20 and February 15, 2006,
respectively.
54
Pursuant to our board resolutions dated October 26, 2005, we made an offer to the holders of A
Shares of Liaohe Jinma to acquire 200 million issued and outstanding Liaohe Jinma A Shares at the
purchase price of RMB 8.80 per share. Liaohe Jinma was delisted from the Shenzhen Stock Exchange on
January 4, 2006.
In 2007, we completed the acquisition of the entire interest in Jinzhou Petrochemical, Liaohe
Jinma and Jilin Chemical. Each of Jinzhou Petrochemical, Liaohe Jinma and Jilin Chemical completed
the cancellation of its business registration in 2007.
On December 6, 2005, we entered into two separate purchase agreements with two wholly owned
subsidiaries of CNPC, Liaohe Petroleum Exploration Bureau and China Petroleum Pipeline Bureau, to
acquire from the two companies a 15.56% equity interest and a 20.17% equity interest, respectively,
in the Fuel Oil Company, a 55.43% subsidiary of our company, with a total cash consideration of RMB
559 million.
In August 2006, CNPC E&D entered into an acquisition agreement to acquire a 67% equity
interest in PetroKazakhstan Inc., or PKZ, from CNPC for a consideration of US$2,735 million. This
acquisition, completed in December 2006, has been accounted for in a manner similar to a pooling of
interests. This acquisition increased the level of our oil and gas assets and streamlined our
existing exploration and development operations in Kazakhstan. On December 12, 2007, through a supplementary agreement between CNPC E&D and the minority
shareholder of PKZ, we gained control over PKI from that date.
In 2006, we acquired a 100% interest in an exploration block in Chad through CNPC E&D. This
Chad Block covers an area of 220,000 square kilometers and a trap resource of more than 1,000
million barrels of crude oil and is currently one of our most important overseas exploration
blocks.
On August 23, 2007, we entered into an transfer agreement with CNPC, pursuant to which we
acquired the assets of the risk operation service business from CNPC. Under the transfer
agreement, we paid CNPC RMB1,652.28 million as consideration, representing the value of the net
assets of the risk operation service business as at December 31, 2006. The parties shall adjust
the consideration by reference to the net assets generated by the risk operation service business
for the period from January 1, 2007 to August 31, 2007 as shown in the management accounts for that
period.
On April 28, 2008, we entered into an acquisition agreement with CNPC, pursuant to which we
acquired from CNPC the Northeastern Inspection, Maintenance and Repair Business Division of CNPC.
Upon the closing of the agreement, we shall pay RMB 43.8 million to CNPC as consideration,
representing the net asset value of the Northeastern Inspection, Maintenance and Repair Business
Division as at September 30, 2007. The parties shall adjust the consideration by reference to the
net assets generated by the Northeastern Inspection, Maintenance and Repair Business Division for
the period from October 1, 2007 to April 30, 2008 as shown in the management accounts for that
period.
Operating Results
The following discussion is based on our historical results of operations. As a result of the
factors discussed above, such results of operations may not be indicative of our future operating
performance.
Our income statement for each of the three years ended December 31, 2005, 2006 and 2007 is
summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
in million RMB |
|
in million RMB |
|
In million RMB |
Total revenues |
|
|
552,229 |
|
|
|
688,978 |
|
|
|
835,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
(360,058 |
) |
|
|
(491,002 |
) |
|
|
(635,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
192,171 |
|
|
|
197,976 |
|
|
|
199,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange gain (loss), net |
|
|
88 |
|
|
|
74 |
|
|
|
(866 |
) |
Interest expense, net |
|
|
(838 |
) |
|
|
(1,154 |
) |
|
|
(1,605 |
) |
Income from equity affiliates and jointly
controlled entities |
|
|
2,401 |
|
|
|
2,277 |
|
|
|
6,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
in million RMB |
|
in million RMB |
|
In million RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
193,822 |
|
|
|
199,173 |
|
|
|
204,381 |
|
Income taxes |
|
|
(54,180 |
) |
|
|
(49,776 |
) |
|
|
(49,152 |
) |
(Income) loss attributable to minority interest |
|
|
(6,280 |
) |
|
|
(7,173 |
) |
|
|
(9,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
133,362 |
|
|
|
142,224 |
|
|
|
145,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below sets forth our revenues by business segment for each of the three years ended
December 31, 2005, 2006 and 2007 as well as the percentage changes in revenues for the periods
shown.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vs. |
|
|
|
|
|
vs. |
|
|
|
|
|
|
2005 |
|
2006 |
|
2005 |
|
2007 |
|
2006 |
|
|
|
|
|
|
(RMB in millions, except percentages) |
|
|
|
|
Sales and other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and production |
|
|
337,208 |
|
|
|
421,340 |
|
|
|
24.9 |
% |
|
|
468,175 |
|
|
|
11.1 |
% |
|
|
|
|
Refining and marketing |
|
|
428,494 |
|
|
|
543,299 |
|
|
|
26.8 |
% |
|
|
670,844 |
|
|
|
23.5 |
% |
|
|
|
|
Chemicals and marketing |
|
|
73,978 |
|
|
|
82,791 |
|
|
|
11.9 |
% |
|
|
102,718 |
|
|
|
24.1 |
% |
|
|
|
|
Natural gas and pipeline |
|
|
26,214 |
|
|
|
38,917 |
|
|
|
48.5 |
% |
|
|
50,066 |
|
|
|
28.6 |
% |
|
|
|
|
Other |
|
|
|
|
|
|
1,080 |
|
|
|
|
|
|
|
1,718 |
|
|
|
59.1 |
% |
|
|
|
|
Total |
|
|
865,894 |
|
|
|
1,087,427 |
|
|
|
25.6 |
% |
|
|
1,293,521 |
|
|
|
19.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less intersegment sales |
|
|
(313,665 |
) |
|
|
(398,449 |
) |
|
|
27.0 |
% |
|
|
(458,484 |
) |
|
|
15.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net sales from operations |
|
|
552,229 |
|
|
|
688,978 |
|
|
|
24.8 |
% |
|
|
835,037 |
|
|
|
21.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below sets forth our operating profits by business segment for each of the three
years ended December 31, 2005, 2006 and 2007, as well as the percentage changes in operating income
for the periods shown. Other income from operations shown below consists of research and
development, business services and infrastructure support to our operating business segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
vs. |
|
|
|
|
|
vs. |
|
|
2005 |
|
2006 |
|
2005 |
|
2007 |
|
2006 |
|
|
(RMB in millions, except percentages) |
Income (loss) from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration and production |
|
|
208,080 |
|
|
|
219,860 |
|
|
|
5.7 |
% |
|
|
206,587 |
|
|
|
(6.0 |
)% |
Refining and marketing |
|
|
(19,810 |
) |
|
|
(29,164 |
) |
|
|
|
|
|
|
(20,680 |
) |
|
|
|
% |
Chemicals and marketing |
|
|
3,276 |
|
|
|
5,058 |
|
|
|
54.4 |
% |
|
|
7,831 |
|
|
|
54.8 |
% |
Natural gas and pipeline |
|
|
3,183 |
|
|
|
8,986 |
|
|
|
182.3 |
% |
|
|
12,495 |
|
|
|
39.0 |
% |
Other |
|
|
(2,558 |
) |
|
|
(6,764 |
) |
|
|
|
|
|
|
(6,738 |
) |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
192,171 |
|
|
|
197,976 |
|
|
|
3.0 |
% |
|
|
199,855 |
|
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Consolidated Results of Operation
Overview
56
For the twelve months ended December 31, 2007, our income before taxation was RMB 204,381
million, representing an increase of 2.6% compared with the previous year. Net income attributable
to equity holders of our Company (Net income) was RMB 145,625 million, representing an increase
of 2.4% compared with the previous year. Our basic and diluted earnings per share attributable to
our shareholders for the year ended December 31, 2007 was RMB 0.81 while the same for 2006 was RMB
0.79.
Total Revenue. Total revenue increased 21.2% from RMB 688,978 million for the twelve months
ended December 31, 2006 to RMB 835,037 million for the twelve months ended December 31, 2007. This
was primarily due to the increases in the selling prices and changes in the sales volume of major
products including crude oil, natural gas and refined products. In addition, the increase in our
refined oil product supply operations during the year also increased our revenue.
The table below sets out the external sales volume and average realized prices for major
products sold by us for 2006 and 2007 and percentages of change in the sales volume and average
realized prices during these two years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Volume (000 ton) |
|
Average Realized Price (RMB/ton) |
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
|
|
|
|
|
|
|
Percentage of |
|
|
|
2007 |
|
|
2006 |
|
|
Change (%) |
|
|
2007 |
|
|
2006 |
|
|
Change (%) |
|
|
Crude oil* |
|
|
18,730 |
|
|
|
20,066 |
|
|
|
(6.7 |
) |
|
|
3,594 |
|
|
|
3,487 |
|
|
|
3.1 |
|
Natural gas
(million cubic
meter, RMB/000
cubic meter) |
|
|
435.70 |
|
|
|
357.15 |
|
|
|
22.0 |
|
|
|
693 |
|
|
|
678 |
|
|
|
2.2 |
|
Gasoline |
|
|
27,003 |
|
|
|
23,899 |
|
|
|
13.0 |
|
|
|
5,168 |
|
|
|
5,035 |
|
|
|
2.6 |
|
Diesel |
|
|
54,377 |
|
|
|
48,516 |
|
|
|
12.1 |
|
|
|
4,668 |
|
|
|
4,411 |
|
|
|
5.8 |
|
Kerosene |
|
|
3,782 |
|
|
|
2,054 |
|
|
|
84.1 |
|
|
|
4,684 |
|
|
|
4,502 |
|
|
|
4.0 |
|
Heavy oil |
|
|
8,772 |
|
|
|
8,009 |
|
|
|
9.5 |
|
|
|
2,519 |
|
|
|
2,482 |
|
|
|
1.5 |
|
Polyethylene |
|
|
2,102 |
|
|
|
1,590 |
|
|
|
32.2 |
|
|
|
10,497 |
|
|
|
10,299 |
|
|
|
1.9 |
|
Lubricant |
|
|
2,378 |
|
|
|
2,059 |
|
|
|
15.5 |
|
|
|
6,420 |
|
|
|
6,433 |
|
|
|
(0.2 |
) |
|
|
|
|
|
* |
|
The external sales volume of crude listed above is the crude
oil produced by our company. |
Operating Expenses. Operating expenses increased 29.4% from RMB 491,002 million for the twelve
months ended December 31, 2006 to RMB 635,182 million for the twelve months ended December 31,
2007, of which:
Purchases, Services and Other Expenses. Purchases, services and other expenses increased 36.7%
from RMB 271,123 million for the twelve months ended December 31, 2006 to RMB 370,740 million for
the twelve months ended December 31, 2007. This was primarily
due to (i) an increase in the
purchase prices and purchase volume of crude oil, feedstock oil and refined products from external
suppliers that resulted in the increase in the purchase costs; and (ii) an increase in the lifting
costs of oil and gas operations and the processing cost of our refineries that resulted from the
increase in prices of raw materials, fuel, energy and other production materials in the PRC as well
as an expansion of the production scale of our company. In addition, the increase in the purchase
expenses also resulted from an increase in the refined product supply operations in 2007.
Employee Compensation Costs. The remuneration paid by us in cash rose 15.3% or increased RMB
3,752 million from RMB 24,538 million to RMB 28,290 million for 2007. Other employees costs
increased RMB 7,703 million from RMB 14,623 million to RMB 22,326 million for 2007. As a result of
the above increment, employees compensation costs and benefits increased RMB 11,455 million. This
was primarily due to (i) our upward adjustment of the level of salaries and performance bonuses;
(ii) an increase in the employees compensation costs that resulted from the expansion of our
operation scale and retail network; and (iii) a sequential increase in the welfare expenses as a
result of the increase in the salaries.
57
Exploration Expenses. Exploration expenses increased 9.7% from RMB 18,822 million for the
twelve months ended December 31, 2006 to RMB 20,648 million for the twelve months ended December
31, 2007.
Depreciation, Depletion and Amortization. Depreciation, depletion and amortization increased
8.5% from RMB 61,388 million for the twelve months ended December 31, 2006 to RMB 66,625 million
for the twelve months ended December 31, 2007. This was primarily due to an increase in
depreciation, depletion and amortization that resulted from an increase in the average amount of
property, plant and equipment and the average net value of oil and gas properties during 2007.
Selling, General and Administrative Expenses. Selling, general and administrative expenses
increased 19.3% from RMB 43,235 million for the twelve months ended December 31, 2006 to RMB 51,576
million for the twelve months ended December 31, 2007. This was primarily due to an increase in
transportation, leasing, maintenance and other related costs that resulted from expansion in the
production scale and business development.
Taxes other than Income Taxes. Taxes other than income taxes increased 30.1% from RMB 56,666
million for the twelve months ended December 31, 2006 to RMB 73,712 million for the twelve months
ended December 31, 2007. The increase was primarily due to a sharp increase in our payment of the
special levy on our sale of domestic crude oil as international crude oil prices remained high
throughout 2007.
Income from Operations. As a result of the factors discussed above, income from operations
increased 0.9% from RMB 197,976 million for the twelve months ended December 31, 2006 to RMB
199,855 million for the twelve months ended December 31, 2007.
Net Exchange Loss. For the twelve months ended December 31, 2007, a net exchange loss of RMB
866 million was recorded. For the twelve months ended December 31, 2006, there was net exchange
gain of RMB 74 million. The net exchange loss was primarily due to a combination of
the effects of the appreciation of Renminbi against the United States Dollar and other currencies.
Net Interest Expense. Net interest expenses increased 39.1% from RMB 1,154 million for the
twelve months ended December 31, 2006 to RMB 1,605 million for the twelve months ended December 31,
2007. The increase in net interest expenses was primarily due to an increase in interest expenses
recognized as a result of the accretion expense in relation to asset retirement obligations.
Income Before Income Taxes. Income before taxation rose by 2.6% from RMB 199,173 million for
the twelve months ended December 31, 2006 to RMB 204,381 million for the twelve months ended
December 31, 2007.
Income Taxes. Income taxes decreased 1.3% from RMB 49,776 million for the twelve months ended
December 31, 2006 to RMB 49,152 million for the twelve months ended December 31, 2007. The decrease
was primarily due to a reduction in our income tax for the twelve months ended December 31, 2007 as
we reassessed our deferred taxes based on the corporate income tax rate applicable to us under the
Corporate Income Tax Law of the PRC which came into effect on January 1, 2008.
Net
Income. As a result of the factors discussed above, net income increased 2.4% from RMB
142,224 million for the twelve months ended December 31, 2006 to RMB 145,625 million for the twelve
months ended December 31, 2007.
Exploration and Production
Sales and Other Operating Revenue. Sales and Other Operating Revenue increased 11.1% from RMB
421,340 million for the year ended December 31, 2006 to RMB 468,175 million for the year ended
December 31, 2007. The increase was primarily due to increases in the prices and sales volumes of
crude oil and natural gas. Our average realized selling price of crude oil in 2006 was US$65.27 per
barrel, representing an increase of 9.1% from US$59.81 per barrel in the year ended December 31,
2006. In 2007, our exploration and production segment sold 857.2 million barrels of crude oil and
1,599.3 billion cubic feet of natural gas, representing an increase of 2.9% and 20.9% from 2006,
respectively.
Intersegment sales revenue increased 10.8% from RMB 339,619 million for the year ended
December 31, 2006 to RMB 376,451 million for the year ended December 31, 2007. This increase was
mainly due to an increase in the prices of crude oil and natural gas and an increase in the
intersegment sales volume.
58
Operating Expenses. Operating expenses increased 29.8% from RMB 201,480 million for the year
ended December 31, 2006 to RMB 261,588 million for the year ended December 31, 2007. The increase
was primarily due to a sharp increase in the payment of the special levy on the sale of domestic
crude oil by us as international crude oil prices remained high throughout 2007.
Income
from Operations. Income from operations decreased 6.0% from RMB219,860 million for
the twelve months ended December 31, 2006 to RMB206,587 million for the twelve months ended
December 31, 2007. The Exploration and Production segment remains our main source of external
sales revenue.
Refining and Marketing
Sales and Other Operating Revenue. Sales and other operating revenue increased 23.5% from
543,299 million for the year ended December 31, 2006 to RMB 670,844 million for the year ended
December 31, 2007. The increase was due primarily to increases in the selling prices and changes in
sales volume of our key refined products. The Refining and Marketing segment is our main
source of external sales revenue.
Sales revenue from gasoline increased 16.0% from RMB 120,771 million for the year ended
December 31, 2006 to RMB 140,126 million for the year ended December 31, 2007, primarily due to a
2.7% increase in our average realized selling price from RMB 5,034 per ton for the year ended
December 31, 2006 to RMB 5,168 per ton for the year ended December 31, 2007 and a 14.5% increase in
the sales volume from 23.99 million tons for the year ended December 31, 2006 to 27.12 million tons
for the year ended December 31, 2007.
Sales revenue from diesel increased 18.8% from RMB 215,459 million for the year ended December
31, 2006 to RMB 255,952 million for the year ended December 31, 2007. The average realized selling
price of diesel increased 5.9% from RMB 4,409 per ton for the year ended December 31, 2006 to RMB
4,667 per ton for the year ended December 31, 2007. The sales volume of diesel increased 12.2% from
48.86 million tons for the year ended December 31, 2006 to 54.84 million tons for the year ended
December 31, 2007.
Sales revenue from kerosene increased 92.1% from RMB 9,219 million for the year ended December
31, 2006 to RMB 17,709 million for the year ended December 31, 2007.
Intersegment sales revenue increased 42.3% from RMB 44,806 million for the year ended December
31, 2006 to RMB 63,766 million for the year ended December 31, 2007. This increase was primarily
due to increases in the selling prices and increase in intersegment sales volume of key refined
products.
Operating Expenses. Operating expenses increased 20.8% from RMB 572,463 million for the year
ended December 31, 2006 to RMB 691,524 million for the year ended December 31, 2007. This increase
was primarily due to an increase in purchase expenses of crude oil, other feedstock and refined
products from external suppliers, and an increase in the selling, general and administrative
expenses. In addition, the increase in our supply of refined products in 2007 also contributed to
the increase in the operating expenses. In 2007, we purchased 813 million barrels of crude oil,
representing an increase of 38 million barrels as compared with 2006. The average purchase price of
crude oil in 2007 was RMB 517 per barrel, representing an increase of RMB 23 per barrel as compared
with 2006. As a result, our expenses for purchased crude oil in 2007 were RMB 420,475 million,
representing an increase of RMB 37,388 million as compared with 2006.
Loss from Operations. Loss from operations amounted to RMB20,680 million for the twelve months
ended December 31, 2007, representing a reduction of RMB8,484 million for the twelve months ended
December 31, 2006. The loss from the Refining and Marketing segment was primarily due to the
control of the domestic prices of refined products by the PRC Government, as a result of which
despite persistently high crude oil prices, prices of refined products were lower than that of the
international market.
Chemicals and Marketing
Sales and Other Operating Revenue. Sales and other operating revenue increased 24.1% from RMB
82,791 million for the year ended December 31, 2006 to RMB 102,718 million for the year ended
December 31, 2007, primarily due to increases in the sales volumes and selling
prices of certain chemical products. Our chemicals and marketing segment sold 15,573 thousand tons
of chemical products for the year ended December 31, 2007, representing an increase of 14.8% from
the year ended December 31, 2006.
59
Operating Expenses. Operating expenses increased 22.1% from RMB77,733 million for the twelve
months ended December 31, 2006 to RMB94,887 million for the twelve months ended December 31, 2007.
The increase was primarily due to an increase in the purchase costs for direct materials and
selling, general and administrative expenses.
Income from Operations. As a result of the factors discussed above, income from operations
increased 54.8% from RMB 5,058 million for the year ended December 31, 2006 to RMB 7,831 million
for the year ended December 31, 2007.
Natural Gas and Pipeline
Sales and Other Operating Revenue. Sales and other operating revenue increased 28.6% from RMB
38,917 million for the year ended December 31, 2006 to RMB 50,066 million for the year ended
December 31, 2007. The increase was primarily due to increases in the sales volume and selling
prices of natural gas, as well as increases in the transmission volume and average transmission
price of natural gas. Our natural gas and pipeline segment sold 1,502.0 billion cubic feet of
natural gas in the year ended December 31, 2007, representing an increase of 25.1% from the year
ended December 31, 2006. The selling price of natural gas in the year ended December 31, 2007 was
US$2.64 per thousand cubic feet, representing an increase of 8.2% from the year ended December 31,
2006. Our natural gas and pipeline segment transmitted 1,466 billion cubic feet of natural gas in
the year ended December 31, 2007, representing an increase of 30.5% from the year ended December
31, 2006. The average natural gas transmission price in the year ended December 31, 2007 was US$1.3
per thousand cubic feet, representing an increase of 8.3% from the year ended December 31, 2006.
Operating Expenses. Operating expenses increased 25.5% from RMB 29,931 million for the year
ended December 31, 2006 to RMB 37,571 million for the year ended December 31, 2007 due primarily to
an increase of 302 billion cubic feet in the natural gas purchase volume, as well as the
increase of the average purchase price of natural gas from US$1.9 per thousand cubic feet in 2006
to US$2.1 per thousand cubic feet in 2006.
Income from Operations. As a result of the factors discussed above, income from operations
increased 39.0% from RMB8,986 million for the twelve months ended December 31, 2006 to RMB12,495
million for the twelve months ended December 31, 2007. The natural gas and pipeline business grew
rapidly and has become our new income growth engine.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Consolidated Results of Operation
Overview
For the year ended December 31, 2006, our total revenue was RMB 688,978 million, representing
an increase of 24.8% from the total revenue of RMB 552,229 million for the year ended December 31,
2005. Our net income for the year ended December 31, 2006 was RMB 142,224 million, representing an
increase of 6.6% from RMB 133,362 for the year ended December 31, 2005. Our basic and diluted
earnings per share attributable to our shareholders for the year ended December 31, 2006 was RMB
0.79, representing an increase of 5.3% from RMB 0.75 for the year ended December 31, 2005.
Sales and Other Operating Revenue. Sales and other operating revenue increased 24.8% from
RMB 552,229 million for the year ended December 31, 2005 to RMB 688,978 million for the year ended
December 31, 2006. This was primarily due to the increases in the selling prices and sales volume
of our principal products, including crude oil, natural gas and certain refined products. The
average realized selling price for crude oil increased from US$48.37 per barrel for the year ended
December 31, 2005 to US$59.81 per barrel for the year ended December 31, 2006.
Operating Expenses. Operating expenses increased 36.4% from RMB 360,058 million for the year
ended December 31, 2005 to RMB 491,002 million for the year ended December 31, 2006. This was
primarily due to (i) a 35.3% increase in purchases, services and other expenses, (ii) a 32.0%
increase in employee compensation costs, (iii) a 19.7% increase in depreciation, depletion and
amortization, (iv) a 18.3% increase in selling, general and administrative expenses and (v) a 20.9%
increase in exploration expenses.
Purchases, Services and Other Expenses. Purchases, services and other expenses increased 35.3%
from RMB 200,321 million for the year ended December 31, 2005 to RMB 271,123 million for the year
ended December 31, 2006. This was primarily due to (i) an increase in the purchase cost of crude
oil and other feedstock as a result of the increases in the purchase price and purchase volume of
crude oil and other feedstock from external suppliers, as we purchased an aggregate of 22.22
million tons of crude oil and other feedstock at an average price of
60
RMB 3,832 per ton in 2006, as
compared to 18.98 million tons of crude oil and other feedstock at an average price of RMB 3,194
per ton in 2005; (ii) an increase in the purchase cost of refined products as a result of the
increases in the purchase price and purchase volume of refined products from external suppliers, as
we purchased 16.93 million tons of refined products at an average price of RMB 3,308 per ton in
2006 as compared to 13.11 million tons of refined oil products at an average price of RMB 2,883 in
2005; and (iii) an increase in the lifting costs of oil and gas operations and the processing costs
of our refineries as a result of the increases in prices of raw materials, fuel, electricity and
other production materials as well as our expanded production scale. In addition, the increase in
the purchase expenses also resulted from an increase in the refined product supply operation in
2006.
Employee Compensation Costs. Employee compensation costs increased 32.0% from RMB 29,675
million for the year ended December 31, 2005 to RMB 39,161 million for the year ended December 31,
2006. This was primarily due to an increase of RMB 7,278 million in the employees salaries and
benefits as a result of the improvement of our operating results and the expansion of our
production scale and retail distribution network.
Depreciation, Depletion and Amortization. Depreciation, depletion and amortization increased
19.7% from RMB 51,305 million for the year ended December 31, 2005 to RMB 61,388 million for the
year ended December 31, 2006. This was primarily due to an increase of RMB 8,220 million in the
provision for depreciation, depletion and amortization that resulted from increases in the average
balance of fixed assets and the average balance of oil and gas assets during 2006.
Selling, General and Administrative Expenses. Selling, general and administrative expenses
increased 18.3% from RMB 36,538 million for the year ended December 31, 2005 to RMB 43,235 million
for the year ended December 31, 2006. This was primarily due to (i) an increase of RMB 3,050
million in transportation expenses that resulted from increases in railway freights and marine fuel
prices and an increase in the sales volume of refined and petrochemical products, and (ii) an
increase of RMB 1,065 million in research and development expenses as a result of intensified
research and development efforts.
Exploration Expenses. Exploration expenses increased 20.9% from RMB 15,566 million for the
year ended December 31, 2005 to RMB 18,822 million for the year ended December 31, 2006. This
increase was due primarily to increased expenditures in exploration activities, for the purpose of
increasing our crude oil and gas reserves, and an increase in the expensing of exploratory well
costs.
Taxes other than Income Taxes. Taxes other than income taxes increased 139.9% from RMB 23,616
million for the year ended December 31, 2005 to RMB 56,666 million for the year ended December 31,
2006. The increase was primarily due to (i) a recorded levy of RMB 28,914 million to the PRC
government as the PRC government commenced to impose a special levy on petroleum exploration
enterprises such as our company from March 26, 2006; (2) an increase of RMB 1,510 million in
consumption tax as a result of increased sales volume of gasoline and diesel and an expansion of
the scope of consumption tax in the PRC in 2006; and (3) an increase of RMB 632 million in resource
tax as a result of an increase in resource tax rates in the second half of 2005 and increased
production volumes of crude oil and natural gas.
Income from Operations. As a result of the factors discussed above, income from operations
increased 3.0% from RMB 192,171 million for the year ended December 31, 2005 to RMB 197,976 million
for the year ended December 31, 2006.
Net Exchange Gain. Net exchange gain decreased 15.9% from RMB 88 million for the year ended
December 31, 2005 to RMB 74 million for the year ended December 31, 2006. The decrease in the net
exchange gain was primarily due to the appreciation of Renminbi against both the United States
Dollar and the Japanese Yen, offset by the depreciation in Renminbi against both the Euro and the
Pound Sterling.
Net Interest Expense. Net interest expenses increased 37.7% from RMB 838 million for the year
ended December 31, 2005 to RMB 1,154 million for the year ended December 31, 2006. This increase
was primarily due to an increase of RMB 736 million in accretion expense, recognized as interest
expense, in relation to asset retirement obligations.
Income before Income Taxes. Income before income taxes increased by 2.8% from RMB 193,822
million for the year ended December 31, 2005 to RMB 199,173 million for the year ended December 31,
2006.
Income Taxes. Income taxes decreased 8.1% from RMB 54,180 million for the year ended December
31, 2005 to RMB 49,776 million for the year ended December 31, 2006. This decrease was primarily
due to the reversal of a tax liability of RMB 4,401 million in relation to certain crude oil sales
that were exempted from income tax prior to the establishment of our company in November 1999.
Net Income. As a result of the factors discussed above, net income increased 6.6% from RMB
133,362 million for the year ended December 31, 2005 to RMB 142,224 million for the year ended
December 31, 2006.
Exploration and Production
61
Sales and Other Operating Revenue. Sales and other operating revenue increased 24.9% from RMB
337,208 million for the year ended December 31, 2005 to RMB 421,340 million for the year ended
December 31, 2006. The increase was primarily due to increases in the prices and sales volumes of
crude oil and natural gas. Our average realized selling price of crude oil in 2006 was US$59.81 per
barrel, representing an increase of US$11.44 per barrel or 23.7% from US$48.37 per barrel in the
year ended December 31, 2005. In 2006, our exploration and production segment sold 832.8 million
barrels of crude oil and 1,322.7 billion cubic feet of natural gas, representing an increase of
5.6% and 26.0% from 2005, respectively.
Intersegment sales revenue increased 25.3% from RMB 270,943 million for the year ended
December 31, 2005 to RMB 339,619 million for the year ended December 31, 2006. This increase was
mainly due to an increase in the prices of crude oil and natural gas and an increase in the
intersegment sales volume.
In 2006, our revenue from sales of crude oil to Sinopec was RMB 33,682 million, representing
an increase of 21.9% from 2005.
Operating Expenses. Operating expenses increased 56.0% from RMB 129,128 million for the year
ended December 31, 2005 to RMB 201,480 million for the year ended December 31, 2006. The increase
was primarily due to an increase of RMB 31,114 million in taxes other than income taxes, an
increase of RMB 27,564 million in purchase expenses and an increase of RMB 7,021 million in
depreciation, depletion and amortization.
Income from Operations. Income from operations increased 5.7% from RMB 208,080 million for the
year ended December 31, 2005 to RMB 219,860 million for the year ended December 31, 2006.
Refining and Marketing
Sales and Other Operating Revenue. Sales and other operating revenue increased 26.8% from RMB
428,494 million for the year ended December 31, 2005 to RMB 543,299 million for the year ended
December 31, 2006. The increase was due primarily to increases in the selling prices and sales
volume of our key refined products.
Sales revenue from gasoline increased 9.4% from RMB 110,438 million for the year ended
December 31, 2005 to RMB 120,771 million for the year ended December 31, 2006, primarily due to a
19.3% increase in our average realized selling price from RMB 4,221 per ton for the year ended
December 31, 2005 to RMB 5,034 per ton for the year ended December 31, 2006, partially offset by a
8.3% decrease in the sales volume from 26.16 million tons for the year ended December 31, 2005 to
23.99 million tons for the year ended December 31, 2006.
Sales revenue from diesel increased 21.7% from RMB 176,999 million for the year ended December
31, 2005 to RMB 215,459 million for the year ended December 31, 2006. The average realized selling
price of diesel increased 19.1% from RMB 3,702 per ton for the year ended December 31, 2005 to RMB
4,409 per ton for the year ended December 31, 2006, resulting in an increase in revenue by RMB
34,544 million. The sales volume of diesel increased 2.2% from 47.81 million tons for the year
ended December 31, 2005 to 48.86 million tons for the year ended December 31, 2006, resulting in an
increase in revenue by RMB 3,916 million.
Sales revenue from kerosene increased 23.2% from RMB 7,480 million for the year ended December
31, 2005 to RMB 9,219 million for the year ended December 31, 2006.
Intersegment sales revenue increased 35.7% from RMB 33,019 million for the year ended December
31, 2005 to RMB 44,806 million for the year ended December 31, 2006. This increase was primarily
due to increases in the selling prices and changes in intersegment sales volume of key refined
products.
Operating Expenses. Operating expenses increased 27.7% from RMB 448,304 million for the year
ended December 31, 2005 to RMB 572,463 million for the year ended December 31, 2006. This increase
was primarily due to an increase of RMB 80,650 million in purchase expenses of crude oil, other
feedstock and refined products from external suppliers, and an increase of RMB 2,784 million in the
selling, general and administrative expenses. In addition, the increase in our supply of refined
products in 2006 also contributed to the increase in the operating expenses. In 2006, we purchased
775 million barrels of crude oil, representing an increase of 31 million barrels as compared with
2005. The average purchase price of crude oil in 2006 was RMB 494 per barrel, representing an
increase of RMB 85 per barrel as compared with 2005. As a result, our expenses for purchased crude
oil in 2006 were RMB 383,087 million, representing an increase of RMB 78,731 million as compared
with 2005.
Loss From Operations. Loss from operations amounted to RMB 29,164 million for the year ended
December 31, 2006, compared to RMB 19,810 million for the year ended December 31, 2005, primarily
due to the fact that the price increase for crude oil in the international market exceeded that of
refined products in the domestic market.
Chemicals and Marketing
62
Sales and Other Operating Revenue. Sales and other operating revenue increased 11.9% from RMB
73,978 million for the year ended December 31, 2005 to RMB 82,791 million for the year ended
December 31, 2006, primarily due to increases in the sales volumes and selling prices of certain
chemical products. The average realized selling prices of polyethylene, polyester, styrene
butadiene rubber and urea in 2006 increased 11%, 4%, 22% and 3%, respectively, from 2005. Our
chemicals and marketing segment sold 13,562 thousand tons of chemical products for the year ended
December 31, 2006, representing an increase of 3.4% from the year ended December 31, 2005.
Operating Expenses. Operating expenses increased 9.9% from RMB 70,702 million for the year
ended December 31, 2005 to RMB 77,733 million for the year ended December 31, 2006. The increase
was primarily due to the increase in purchase expenses for direct materials.
Income from Operations. As a result of the factors discussed above, income from operations
increased 54.4% from RMB 3,276 million for the year ended December 31, 2005 to RMB 5,058 million
for the year ended December 31, 2006.
Natural Gas and Pipeline
Sales and Other Operating Revenue. Sales and other operating revenue increased 48.5% from RMB
26,214 million for the year ended December 31, 2005 to RMB 38,917 million for the year ended
December 31, 2006. The increase was primarily due to increases in the sales volume and selling
prices of natural gas, as well as increases in the transmission volume and average transmission
price of natural gas. Our natural gas and pipeline segment sold 1,200.5 billion cubic feet of
natural gas in the year ended December 31, 2006, representing an increase of 35.1% from the year
ended December 31, 2005. The selling price of natural gas in the year ended December 31, 2006 was
US$2.44 per thousand cubic feet, representing an increase of 15.1% from the year ended December 31,
2005. Our natural gas and pipeline segment transmitted 1,123 billion cubic feet of natural gas in
the year ended December 31, 2006, representing an increase of 36.8% from the year ended December
31, 2005. The average natural gas transmission price in the year ended December 31, 2006 was US$1.2
per thousand cubic feet, representing an increase of 24.7% from the year ended December 31, 2005.
Operating Expenses. Operating expenses increased 30.0% from RMB 23,031 million for the year
ended December 31, 2005 to RMB 29,931 million for the year ended December 31, 2006 due primarily to
(i) an increase of RMB 5,155 million in purchase expenses of natural gas primarily as a result of
the increase of 312 billion cubic feet in the natural gas purchase volume, as well as the increase
of the average purchase price of natural gas from US$1.8 per thousand cubic feet in 2005 to US$1.9
per thousand cubic feet in 2006, and (ii) an increase of RMB 785 million in depreciation expenses.
Income from Operations. As a result of the factors discussed above, income from operations
increased 182.3% from RMB 3,183 million for the year ended December 31, 2005 to RMB 8,986 million
for the year ended December 31, 2006.
Liquidity and Capital Resources
Our primary sources of funding include cash generated by operating activities and short-term
and long-term borrowings. Our primary uses of funds were for operating activities, acquisitions,
capital expenditures, repayment of short-term and long-term borrowings and distributions of
dividends to shareholders. Our payments to CNPC are limited to dividends and payments for services
provided to us by CNPC. In the year ended December 31, 2007, we distributed as dividends 45% of
our reported net income. We expect that we will continue to distribute as dividends approximately
40% to 50% of our reported net income for all years. See Item 8 Financial Information Dividend
Policy for a discussion of factors which may affect the determination by our board of directors of
the appropriate level of dividends.
Our financing ability may be limited by our financial condition, our results of operations and
the international and domestic capital markets. Prior to accessing the international and domestic
capital markets, we must obtain approval from the relevant PRC government authorities. In general,
we must obtain PRC government approval for any project involving significant capital investment for
our refining and marketing, chemicals and marketing and natural gas and pipeline segments. For a
more detailed discussion of factors which may affect our ability to satisfy our financing
requirements, see Item 3 Key Information Risk Factors.
We plan to fund the capital and related expenditures described in this annual report
principally through cash generated by operating activities, short-term and long-term borrowings and
cash and cash equivalents. Net cash generated by operating activities in the year ended December
31, 2007 was RMB 203,748 million. As of December 31, 2007, we had cash and cash equivalents of RMB
65,494 million. While each of the projects described in this annual report for which significant
capital expenditures will be required is important to our future development, we do not believe
that failure to implement any one of these projects would have a material adverse effect on our
financial condition or results of operations. If the price of crude oil undergoes a steep decline
in the future, it is likely that we would delay or reduce the scale of the capital expenditures for
our exploration and production segment
63
Our shareholders approved at our shareholders meeting held on May 28, 2003 the proposed
issuances of our corporate bonds in the principal amount of up to RMB 1,500 million and RMB 4,000
million to PRC citizens and enterprises. Upon the grant of PRC government approval, we issued a
portion of these corporate bonds in the principal amount of RMB 1,500 million in October 2003. We
received RMB 1,500 million in net proceeds from this issuance. We used the proceeds received from
the issuance of these corporate bonds for various crude oil and natural gas exploration projects in
a number of our oil and gas regions, as well as for upgrading refining facilities in Daqing
Petrochemical and constructing the natural gas pipeline from Zhong County to Wuhan City. We issued
another portion of these corporate bonds in the principal amount of RMB 2,000 million in October
2006. We received RMB 2,000 million in net proceeds from this issuance. We used the proceeds
received from the issuance of these corporate bonds for various crude oil and natural gas
exploration projects in a number of our oil and gas regions, as well as for the construction of
supporting facilities to transmit natural gas from our Southwest Oil and Gas Field to eastern China
and upgrading PTA (Pure Terephthalic Acid) and raw materials facilities in Liaoyang PetroChemical.
In addition, we consider from time to time opportunities to fund our capital needs by accessing the
domestic equity capital markets.
In October 2007, we issued 4 billion A Shares, which have been listed and traded on the Shanghai
Stock Exchange from November 5, 2007. The total proceeds and net proceeds from such issuance were
RMB66,800 million and RMB66,243 million respectively. Of the net proceeds, approximately RMB 6,840
million were used for the project to increase the crude oil production capacity of Changqing
Oilfield; approximately RMB 5,930 million were used for the project to increase the crude oil
production capacity of Daqing Oilfield; approximately RMB1,500 million were used for the project to
increase the crude oil production capacity of Jidong Oilfield; approximately RMB 17,500 million
were used for the project to process and refine sulphur-bearing crude oil imported from Kazakhstan
and the ethylene technology development project of Dushanzi Petrochemical, and approximately RMB
6,000 million were used for the 1.2 million tons/year ethylene redevelopment and expansion project
of Daqing Petrochemical. The balance of the net proceeds would be used as additional working
capital and for general commercial purpose. Out of the proceeds raised for the above five projects
in the amount of RMB37,770 million, RMB13,943 million were used for the year, and the unused amount
currently is deposited a special bank account of our company.
We currently do not have any outstanding options, warrants or other rights for any persons to
require us to issue any common stock at a price below its market value. We do not currently intend
to issue any such rights or to otherwise issue any common stock for a price below its market value.
In addition, we did not have for the year ended December 31, 2007, and do not currently have,
any transactions, arrangements or other relationships with unconsolidated entities or other persons
that are reasonably likely to materially affect the liquidity or availability of or requirements
for our capital resources.
The table below sets forth our cash flows for each of the three years ended December 31, 2005,
2006 and 2007 and our cash equivalents at the end of each period.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
(RMB in millions) |
Net cash generated by operating activities |
|
|
203,885 |
|
|
|
198,102 |
|
|
|
203,748 |
|
Net cash used for investing activities |
|
|
(91,576 |
) |
|
|
(158,451 |
) |
|
|
(184,205 |
) |
Net cash used for financing activities |
|
|
(42,634 |
) |
|
|
(71,739 |
) |
|
|
(2,648 |
) |
Currency translation difference |
|
|
(458 |
) |
|
|
(258 |
) |
|
|
40 |
|
Cash and cash equivalents at the end of period |
|
|
80,905 |
|
|
|
48,559 |
|
|
|
65,494 |
|
Our cash and cash equivalents increased by 34.9% from RMB 48,559 million as of December 31,
2006 to RMB 65,494 million as of December 31, 2007.
Cash Generated by Operating Activities
Our net cash flow generated by operating activities was RMB 203,748 million for the year ended
December 31, 2007, representing an increase of RMB 5,646 million from RMB 198,102 million for the
year ended December 31, 2006. As of December 31, 2007, our cash and cash equivalents were mainly
denominated in RMB (approximately 88.9% were denominated in RMB, and approximately 11.1% were
denominated in US$).
We had a working capital balance of RMB 33,080 million for the year ended December 31, 2007,
compared with the working capital deficit of RMB 17,657 million for the year ended December 31,
2006. This increase in working capital balance was due primarily to the successful issuance of A
Shares and decrease of the income tax paid.
64
Our net cash generated by operating activities was RMB 198,102 million for the year ended
December 31, 2006, representing a decrease of RMB 5,783 million from RMB 203,885 million for the
year ended December 31, 2005, due primarily to an increase of RMB 6,657 million in income tax paid
during the year ended December 31, 2006.
We had a working capital deficit of RMB 17,657 million for the year ended December 31, 2006,
compared with a working capital balance of RMB 22,057 million for the year ended December 31, 2005.
This decrease in working capital was due primarily to (i) a payment of approximately RMB 21,376
million for the acquisition of the 67% equity interest of PKZ, and (ii) an increase of RMB 14,922
million in the dividends we distributed to our shareholders.
Our notes and other receivables include notes receivable from customers. Other receivables
represent advances to employees, non-trade related receivables from other companies, and
receivables from government agencies. Allowance for doubtful accounts were primarily related to
other receivables which we estimated to be uncollectible. Our notes receivable do not include past
due customer amounts and, as a majority portion of our notes receivable are approved by banks, we
do not have special arrangements with respect to extended payment terms on notes receivable.
Cash Used for Financing Activities
Our net borrowings as of December 31, 2005, 2006 and 2007 were as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
2005 |
|
2006 |
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt (including current portion of long-term debt) |
|
|
28,689 |
|
|
|
35,763 |
|
|
|
30,934 |
|
Long-term debt |
|
|
44,570 |
|
|
|
35,634 |
|
|
|
39,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
73,259 |
|
|
|
71,397 |
|
|
|
70,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
80,905 |
|
|
|
48,559 |
|
|
|
65,494 |
|
Time deposits with term exceeding three months within one year |
|
|
1,691 |
|
|
|
3,012 |
|
|
|
18,042 |
|
Investments in Collateralized Loans |
|
|
235 |
|
|
|
|
|
|
|
|
|
Time deposits exceeding one year |
|
|
3,428 |
|
|
|
2,499 |
|
|
|
5,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt |
|
|
(13,000 |
) |
|
|
17,327 |
|
|
|
(17,967 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Note 22 to our consolidated financial statements included elsewhere in this annual report
for information regarding the maturity profile of debt, currency and interest rate structure.
The debts which were guaranteed by CNPC amounted to RMB 674 million, RMB 597 million and RMB
498 million in the three years ended December 31, 2005, 2006 and 2007, respectively. CNPC and we
have undertaken to the Hong Kong Stock Exchange that we will continue to, on a best endeavor basis,
approach each lender with respect to these guaranteed debts with a view toward obtaining the
unconditional release of such guarantees.
Of the total debts outstanding as of December 31, 2007, approximately 17% were fixed-rate
loans and approximately 83% were floating-rate loans. Of the total debts outstanding as of
December 31, 2007, approximately 67.4% were denominated in Renminbi, approximately 28.8% were
denominated in the U.S. dollar and approximately 3.8% were denominated in other major foreign
currencies.
Our debts included short-term and long-term debts owed to China Petroleum Finance Company
Limited of RMB 27,319 million, RMB 27,184 million and RMB 24,482 million in the three years ended
December 31, 2005, 2006 and 2007, respectively. The amount of such short-term debts in the three
years ended December 31, 2005, 2006 and 2007 were RMB 520 million, RMB 320 million and RMB 50
million, respectively. The amount of such long-term debts in each of the three years ended
December 31, 2005, 2006 and 2007 were RMB RMB 26,799 million, RMB 26,864 million and RMB 24,432
million, respectively. These debts were unsecured with interest at below the prime rate as
65
published by the Peoples Bank of China. We also maintain a portion of our deposits at China
Petroleum Finance Company Limited at the same deposit interest rate for commercial banks published
by the Peoples Bank of China.
Our net cash used for financing activities decreased 96.3% from RMB 71,739 million for the year
ended December 31, 2006 to RMB 2,648 million for the year ended December 31, 2007. This decrease
resulted primarily from the following:
|
|
|
an increase in repayment of short-term debts leading to a increase of RMB 4,678 million in cash outflow; |
|
|
|
|
an increase in the repayment of long-term debts leading to an increase of RMB 6,484 million in cash outflow; and |
|
|
|
|
an increase in the distribution of dividends to minority shareholders leading to an increase of RMB 3,117 million in cash outflow; |
These changes were offset primarily by the following:
|
|
|
an increase in new short-term debts leading to an increase of RMB 6,659 million in cash inflow; |
|
|
|
|
an increase in new long-term debts leading to an increase of RMB 6,455 million in cash inflow; and |
|
|
|
|
our offering of A Shares leading to an increase of RMB 66,243 million in cash inflow. |
Our net cash used for financing activities increased 68.3% from RMB 42,634 million for the
year ended December 31, 2005 to RMB 71,739 million for the year ended December 31, 2006. This
increase resulted primarily from the following:
|
|
|
an increase in the distribution of dividends leading to an increase of RMB 14,922 million in cash outflow; and |
|
|
|
|
our follow-on offering of H Shares in 2005 leading to an increase of RMB 19,692 million in cash inflow while
no such financing activity occurred in 2006. |
As at December 31, 2007, our debts consisted of RMB 3,607 million secured loans, most of which
were secured by our assets and time deposits with a term longer than one year.
Our debt to capital employed ratio (calculated by dividing interest-bearing debts by the
aggregate of interest-bearing debts and shareholders equity) as of December 31, 2007 was 8.3%, as
compared to 10.4% as of December 31, 2006.
Capital Expenditures and Investments
Our net cash used for investing activities includes capital expenditures and investments,
offset by proceeds from the sale of assets and dividends received. The table below sets forth our
capital expenditures and investments (including non dry hole exploration expenses) by business
segment for each of the years ended December 31, 2005, 2006 and 2007 as well as those anticipated
for the year ending December 31, 2008. Actual capital expenditures and investments for periods
after January 1, 2008 may differ materially from the amounts indicated below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2005 |
|
2006 |
|
2007 |
|
anticipated |
|
|
(RMB in |
|
|
|
|
|
(RMB in |
|
|
|
|
|
(RMB in |
|
|
|
|
|
(RMB in |
|
|
|
|
millions) |
|
% |
|
millions) |
|
% |
|
millions) |
|
% |
|
millions) |
|
% |
Exploration and production |
|
|
92,233 |
|
|
|
68.92 |
|
|
|
114,520 |
|
|
|
72.44 |
|
|
|
145,743 |
|
|
|
75.49 |
|
|
|
143,200 |
|
|
|
65.45 |
|
Refining and marketing |
|
|
16,454 |
|
|
|
12.30 |
|
|
|
19,206 |
|
|
|
12.15 |
|
|
|
26,546 |
|
|
|
13.75 |
|
|
|
23,000 |
|
|
|
10.51 |
|
Chemicals and marketing |
|
|
13,569 |
|
|
|
10.14 |
|
|
|
10,681 |
|
|
|
6.76 |
|
|
|
8,165 |
|
|
|
4.23 |
|
|
|
13,200 |
|
|
|
6.03 |
|
Natural gas and pipeline |
|
|
11,137 |
|
|
|
8.32 |
|
|
|
11,309 |
|
|
|
7.15 |
|
|
|
11,003 |
|
|
|
5.70 |
|
|
|
37,700 |
|
|
|
17.23 |
|
Corporate and other |
|
|
427 |
|
|
|
0.32 |
|
|
|
2,358 |
|
|
|
1.50 |
|
|
|
1,613 |
|
|
|
0.83 |
|
|
|
1,700 |
|
|
|
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
133,820 |
|
|
|
100.0 |
|
|
|
158,074 |
|
|
|
100.0 |
|
|
|
193,070 |
|
|
|
100.00 |
|
|
|
218,800 |
|
|
|
100.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
Our capital expenditures and investments increased 22.1% from RMB 158,074 million for the year
ended December 31, 2006 to RMB 193,070 million for the year ended December 31, 2007. This increase
was due primarily to an increase of RMB 31,223 million in capital expenditures and investments in
the exploration and production segment and an increase of RMB 7,340 million in capital expenditures
in the refining and marketing segment, which were partially offset by a decrease of RMB 2,516
million in capital expenditures in the chemicals and marketing segment. Taking into account the
exclusion of the investments relating to the non-dry hole exploration expenses, our capital
expenditures for the years ended 2005, 2006 and 2007 would have been RMB 124,801 million, RMB
148,746 million and RMB 181,583 million, respectively.
As of December 31, 2007, the capital expenditures contracted for at the balance sheet date but
not recognized in our consolidated financial statements were approximately RMB 11,621 million.
Exploration and Production
A majority of our capital expenditures and investments relate to our exploration and
production segment. Our capital expenditures and investments in this segment for the year ended
December 31, 2007 totaled RMB 145,743 million, including RMB 35,401 million for development
activities and RMB 91,463 million for exploration activities. Our capital expenditures and
investments in this segment for the year ended December 31, 2006 totaled RMB 114,520 million,
including RMB 29,809 million for exploration activities and RMB 75,050 million for development
activities. The increase in our capital expenditures and investments from the year ended December
31, 2006 to the year ended December 31, 2007 was primarily due to the increased capital
expenditures for oil and natural gas exploration activities as a part of our efforts to achieve a
stable production of crude oil in eastern regions, a rapid development of our operations in western
regions and an expedited development of our natural gas business. In addition, we also increased
our capital expenditures for safety and environmental protections for this segment in 2007. Taking
into account the exclusion of the investments relating to the non-dry hole exploration expenses,
the capital expenditures of our exploration and production segment for the years ended December 31,
2005, 2006 and 2007 would have been RMB 83,214 million, RMB 105,192 million and RMB 134,256
million, respectively.
Our anticipated capital expenditures and investments for our exploration and production
segment for the year ending December 31, 2008 amount to RMB 143,200 million. Approximately RMB
35,100 million is expected to be used for exploration activities and approximately RMB 90,500
million for development activities. We plan to focus our exploration and development efforts in
Ordos, Junggar, Tarim, Songliao, Sichuan, Bohai Bay and Qaidam basins.
Refining and Marketing
Our capital expenditures for our refining and marketing segment for each of the three years
ended December 31, 2005, 2006 and 2007 were RMB 16,454 million, RMB 19,206 million and RMB 26,546
million, respectively. The increase in 2007 is due primarily to an increase of RMB 4,343 million
in our investment in the construction of refining facilities. In addition, we also increased the
capital expenditures for safety production protection for this segment in 2007.
Our anticipated capital expenditures for our refining and marketing segment for the year
ending December 31, 2008 amount to RMB 23,000 million, which include:
|
|
|
approximately RMB 16,100 million for the construction and expansion of our refining facilities; and |
|
|
|
|
approximately RMB 6,900 million for the construction of our distribution networks and storage facilities for oil products. |
Chemicals and Marketing
Our capital expenditures for our chemicals and marketing segment for each of the three years
ended December 31, 2005, 2006 and 2007 were RMB 13,569 million, RMB 10,681 million and RMB 8,165
million, respectively.
Our anticipated capital expenditures for our chemicals and marketing segment for the year
ending December 31, 2008 amount to RMB 13,200 million, which mainly include capital expenditures
for the construction and expansion of chemical facilities.
Natural Gas and Pipeline
67
Our capital expenditures for our natural gas and pipeline segment for each of the three years
ended December 31, 2005, 2006 and 2007 were RMB 11,137 million, RMB 11,309 million and RMB 11,003
million, respectively.
Our anticipated capital expenditures for our natural gas and pipeline segment for the year
ending December 31, 2008 amount to approximately RMB 37,700 million, which are expected to be used
primarily for major oil and gas transmission projects such as the Lanzhou-Zhengzhou-Changsha
refined oil pipeline project, the Second West-East Gas Pipeline project and associated gas storage
facilities and LNG projects. See Item 4 Information on our company Natural Gas and Pipeline
Expansion of Our Natural Gas Transmission and Marketing Business for a more detailed discussion
of the expansion plans of our natural gas and pipeline segment.
Others
Our non-segment-specific capital expenditures and investments for each of the three years
ended December 31, 2005, 2006 and 2007 were RMB 427 million, RMB 2,358 million and RMB 1,613
million, respectively.
Our anticipated non-segment-specific capital expenditures and investments for the year ending
December 31, 2008 amount to RMB 1,700 million. These planned capital expenditures and investments
mainly include capital expenditures for scientific research activities and the construction of the
ERP information system.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to investors.
All information that is not historical in nature disclosed under Item 5 Operating and
Financial Review and Prospects Long-Term Contractual Obligations and Other Commercial
Commitments and Payment Obligations is deemed to be a forward looking statement. See Forward
Looking Statements for additional information.
Long-Term Contractual Obligations and Other Commercial
Commitments and Payment Obligations
The tables below set forth certain information in connection with our long-term contractual
obligations and other commercial commitments outstanding as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment due by period |
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
|
|
After |
Contractual obligations |
|
Total |
|
1 year |
|
1-3 years |
|
3-5 years |
|
5 years |
|
|
(RMB in millions) |
Long-term debt |
|
|
51,888 |
|
|
|
12,200 |
|
|
|
19,819 |
|
|
|
5,833 |
|
|
|
14,036 |
|
Capital lease obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
94,395 |
|
|
|
3,394 |
|
|
|
6,004 |
|
|
|
5,972 |
|
|
|
79,025 |
|
Capital commitments |
|
|
11,621 |
|
|
|
5,003 |
|
|
|
6,402 |
|
|
|
55 |
|
|
|
161 |
|
Unconditional purchase obligations |
|
|
3,061 |
|
|
|
1,474 |
|
|
|
1,549 |
|
|
|
17 |
|
|
|
20 |
|
Other long-term obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations |
|
|
160,965 |
|
|
|
22,071 |
|
|
|
33,774 |
|
|
|
11,877 |
|
|
|
93,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of commitment expiration per period |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
amounts |
|
Less than |
|
|
|
|
|
|
|
|
|
Over |
Other commercial commitments |
|
committed |
|
1 year |
|
1-3 years |
|
3-5 years |
|
5 years |
|
|
(RMB in millions) |
Lines of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standby letters of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantees |
|
|
77 |
|
|
|
18 |
|
|
|
22 |
|
|
|
37 |
|
|
|
|
|
Total commercial commitments |
|
|
77 |
|
|
|
18 |
|
|
|
22 |
|
|
|
37 |
|
|
|
|
|
68
We are obligated to make annual payment with respect to our exploration and production
licenses to the Ministry of Land and Resources. The table below sets forth the estimated amount of
the annual payments in the future five years:
|
|
|
|
|
Year |
|
Annual payment |
|
|
(RMB in millions) |
2008 |
|
|
906 |
|
2009 |
|
|
906 |
|
2010 |
|
|
906 |
|
2011 |
|
|
906 |
|
2012 |
|
|
906 |
|
Assets Retirement Obligation
Before the issuance of two provincial regulations, The Environmental Protection Regulation for
Oil and Gas Exploration and Production Activities in Heilongjiang Province and The Environmental
Protection Regulation for Oil and Gas Exploration and Production Activities in Gansu Province,
which set forth specific abandonment and disposal processes for oil and gas exploration and
production activities in 2005, our company was neither legally obligated to, nor was our company
under the constructive obligation, to take any abandonment measures for its retired oil and gas
properties located in China. In 2005, our company established standard abandonment procedures,
including plugging all retired wells, dismantling all retired metering stations and other related
facilities and performing site restoration, in response to the issuance of two provincial
regulations which set forth specific abandonment and disposal processes for oil and gas exploration
and production activities. As a result, our company became legally obligated to take abandonment
measures for its retired oil and gas properties located in the two provinces where the new
regulations were enacted, and is under the constructive obligation to take abandonment measures for
its retired oil and gas properties located in other provinces where comparable regulations were not
enacted. An additional obligation of RMB 4,818 million was recorded in 2007 and did not have a
material impact on our financial results.
Research and Development
We have a research and development management department, directly under which there are three
research institutions. Except for our branch companies which are engaged in marketing activities,
each of our branch companies has its own research and development management department. Most of
our branch companies have their own research institutions. Our research and development management
departments are mainly responsible for managing and coordinating the research and development
activities conducted by each of the research institutions. As of December 31, 2007, we had 25,502
employees engaged in research and development functions.
In 2007, we applied for 445 patents and we were granted patent rights for 364 patents in China
in the same year.
In each of the three years ended December 31, 2005, 2006 and 2007, our total expenditures for
research and development were approximately RMB 3,195 million, RMB 4,260 million and RMB 5,315
million respectively.
Exploration and Production
Most of Chinas major oil and gas fields are characterized by a broad range of geological
conditions, and a majority of Chinas oil and gas fields are in continental sedimentary basins with
complex structures. Our research and development efforts with respect to our exploration and
production business focus on:
|
|
|
theories and technologies of crude oil and natural gas exploration; |
|
|
|
|
oil and gas development and surface engineering technology; |
|
|
|
|
oil and gas production and pipeline transportation; and |
|
|
|
|
security, energy conservation and environment protection. |
Refining and Chemicals
In order to organize and coordinate our research and development activities related to our
refining and chemicals businesses, we established PetroChina Refining & Chemicals Technology
Research Center in July 2003. In order to enhance our competitiveness and develop core
technologies, we have integrated the resources of our down-stream scientific research and
development. In April 2006, we expanded PetroChina Refining & Chemicals Technology Research Center
and renamed it to PetroChemical Research Institute to carry out our research and
69
development of
technologies for refining and chemicals. In the meantime, we have integrated the research and
development resources of our local petrochemical companies, and established four research and
development centers in Lanzhou Petrochemical, Daqing Petrochemical, Jilin Petrochemical and
Liaoyang Petrochemical. In order to further integrate our research and development resources in
refining and chemicals and speed up the construction of the research and development capability of
PetroChemical Research Institute, we subjected Daqing Petrochemical research center and Lanzhou
Petrochemical research center to the administration of PetroChemical Research Institute in 2007.
Trend Information
Streamlining of Production Facilities
We plan to continue to streamline our production facilities within the next several years to
further improve our operating efficiency and competitiveness by consolidating or shutting down some
of our production facilities. We do not believe that the implementation of such plans will have a
material adverse impact on our financial position, although we believe that it could have a
material adverse effect on our results of operations because we would be required under our
accounting policies to recognize in our income statement any impairment loss or impairment
provision associated with shutting down our production facilities. See General Critical
Accounting Policies and General Factors Affecting Results of Operations above for a
detailed discussion of other trend information.
Other Information
Inflation
Inflation or deflation has not had a significant impact on our results of operations for the
year ended December 31, 2007.
Non-Exchange Traded Contracts
We did not engage for the year ended December 31, 2007, and do not currently engage, to a
material extent, in any trading activities involving commodity contracts that are accounted for at
fair value but for which a lack of market price quotations makes it necessary to apply fair value
estimation techniques.
Related Party Transactions
For a discussion of related party transactions, see Item 7 Major Shareholders and Related
Party Transactions Related Party Transactions and Note 32 to our consolidated financial
statements included elsewhere in this annual report.
Recent IFRS
As we prepared our consolidated financial statements in accordance with IFRS, any adoption of
new standards or amendment or interpretation to existing standards, when effective, may affect our
consolidated results of operation, consolidated financial position and consolidated cash flows.
The following standard and interpretations to existing standards, which are relevant to our
operations, have been published and are mandatory for accounting periods beginning on or after
March 1, 2007. We did not adopt such standard or interpretations as of December 31, 2007:
IAS 1 (Amendment), Presentation of financial statements requires all changes in equity
arising from transactions with owners in their capacity as owners and related current and deferred
tax impacts be presented separately from non-owner changes in equity. Recognized income and
expenses shall be presented in a single statement (a statement of comprehensive income) or in two
statements (a statement of income or loss and a statement of comprehensive income), separately from
owner changes in equity. IAS 1 (Amendment) is effective from
January 1, 2009 and we are
currently evaluating the impact of IAS 1 (Amendment) on our financial statements.
IAS 23 (Amendment), Borrowing costs requires an entity to capitalise borrowing costs
directly attributable to the acquisition, construction or production of a qualifying asset (one
that takes a substantial period of time to get ready for use or sale) as part of the cost of that
asset. The option of immediately expensing those borrowing costs is removed. IAS 23 (Amendment) is
effective from January 1, 2009 and the adoption of IAS 23 (Amendment) is not expected to affect
our financial statements as interest and other costs on borrowings to finance the construction
of property, plant and equipment are capitalized under the Groups current accounting policy.
IFRS
8, Operating segments replaces IAS 14. The new standard requires a management
approach, under which segment information is presented on the same basis as that used for internal
reporting purposes. IFRS 8 is effective from January 1, 2009 and
we are currently evaluating
the impact of IFRS 8 on our financial statements.
70
IFRIC 11, IFRS 2Group and treasury share transactions, provides guidance on whether
share-based transactions involving treasury shares or involving group entities (for example,
options over a parents shares) should be accounted for as equity-settled or cash-settled
share-based payment transactions. IFRIC 11 is effective for annual periods beginning on or after
March 1, 2007 and we are currently evaluating the impact of IFRIC 11 on our financial
statements.
IFRIC 13, Customer loyalty programs clarifies that where goods or services are sold together with
a customer loyalty incentive (for example, loyalty points or free products), the arrangement is a
multiple-element arrangement and the consideration receivable from the customer is allocated
between the components of the arrangement using fair values. IFRIC 13 is effective from January 1,
2009 and we are currently evaluating the impact of IFRIC 13 on our financial
statements.
IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirements and their
interaction provides guidance on assessing the limit in IAS 19 on the amount of the funding
surplus that can be recognized as defined benefit asset. It also explains how the pension asset or
liability may be affected by a statutory or contractual minimum funding requirement. IFRIC 14 is
effective from January 1, 2009 and we are currently evaluating the impact of IFRIC 14 on our financial statements.
Environmental Expenses and Capital Expenditures
We paid pollutant discharge fees of approximately RMB 199 million, RMB 211 million and RMB 231
million respectively, in 2005, 2006 and 2007. Our capital expenditures on environmental programs
in 2005, 2006 and 2007 were approximately RMB1,633 million, RMB 4,634 million and 2,299 million,
respectively.
ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors, Senior Management and Supervisors
Currently, our board of directors consists of fourteen directors, five of whom are independent
non-executive directors. The directors are elected at a meeting of our shareholders for a term of
three years. The directors may be re-elected and re-appointed upon the expiration of his/her term
of office. The functions and duties conferred on the board of directors include:
|
|
|
convening shareholders meetings and reporting its work to the shareholders meetings; |
|
|
|
|
implementing the resolutions of the shareholders meetings; |
|
|
|
|
determining our business plans and investment plans; |
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formulating our annual budget and final accounts; |
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formulating our proposals for dividend and bonus distributions and for the increase or reduction of capital; and |
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exercising other powers, functions and duties as conferred by our articles of association. |
Eight of the directors are currently affiliated with CNPC or an affiliate of CNPC.
The PRC Company Law requires a joint stock company with limited liability to establish a
supervisory board. This requirement is reflected in our articles of association. The supervisory
board is responsible for monitoring our financial matters and overseeing the corporate actions of
our board of directors and our management personnel. The supervisory board consists of nine
supervisors, six of whom are elected, including four shareholders representatives and two
independent supervisors, and may be removed, by the shareholders in a general meeting and three of
whom are employees representatives who are elected by our staff, and may be removed, by our staff.
Four of our supervisors are affiliated with CNPC. The term of office of our supervisors is three
years. The supervisors may be re-elected and re-appointed upon the expiration of his/her term of
office. An elected supervisor cannot concurrently hold the position of a director, manager or
financial controller. The functions and powers conferred on the supervisory board include:
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attending board meetings; |
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examining our financial affairs; |
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examining balance sheets, profit and loss accounts, business reports, dividend distribution proposals and other
financial information proposed at shareholders meetings by the directors from time to time; and |
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overseeing the actions of our board of directors and our senior management personnel in carrying out their duties. |
In the event that any action of our directors adversely affects our interests, supervisors
shall confer with or initiate legal proceedings against such directors on our behalf. A resolution
proposed at any meeting of the supervisory board shall be adopted only if it is approved by
two-thirds or more of our supervisors.
Our senior management is appointed by and serves at the discretion of our board of directors.
The following table sets forth certain information concerning our current directors, supervisors
and executive officers.
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Name |
|
Age |
|
Position |
|
Date of election (1) |
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|
|
|
|
|
|
Jiang Jiemin
|
|
|
52 |
|
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Chairman of the board of directors
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|
May 15, 2008 |
Zhou Jiping
|
|
|
55 |
|
|
Vice Chairman of the board of
directors and president
|
|
May 15, 2008 |
Wang Yilin
|
|
|
51 |
|
|
Director
|
|
May 15, 2008 |
Zeng Yukang
|
|
|
57 |
|
|
Director
|
|
May 15, 2008 |
Wang Fucheng
|
|
|
57 |
|
|
Director
|
|
May 15, 2008 |
Li Xinhua
|
|
|
55 |
|
|
Director
|
|
May 15, 2008 |
Liao Yongyuan
|
|
|
45 |
|
|
Director and vice president
|
|
May 15, 2008 |
Wang Guoliang
|
|
|
55 |
|
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Director
|
|
May 15, 2008 |
Jiang Fan
|
|
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44 |
|
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Director
|
|
May 15, 2008 |
Chee-Chen Tung
|
|
|
65 |
|
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Independent non-executive director
|
|
May 15, 2008 |
Liu Hongru
|
|
|
77 |
|
|
Independent non-executive director
|
|
May 15, 2008 |
Franco Bernabè
|
|
|
59 |
|
|
Independent non-executive director
|
|
May 15, 2008 |
Li Yongwu
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|
|
63 |
|
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Independent non-executive director
|
|
May 15, 2008 |
Cui Junhui
|
|
|
62 |
|
|
Independent non-executive director
|
|
May 15, 2008 |
Li Huaiqi
|
|
|
58 |
|
|
Secretary to the board of directors |
|
|
Sun
Longde
|
|
|
45 |
|
|
Vice president |
|
|
Shen Diancheng
|
|
|
48 |
|
|
Vice president |
|
|
Liu Hongbin
|
|
|
44 |
|
|
Vice president |
|
|
Zhou Mingchun
|
|
|
40 |
|
|
Chief financial officer |
|
|
Li Hualin
|
|
|
45 |
|
|
Vice president |
|
|
Zhao Zhengzhang
|
|
|
51 |
|
|
Vice president |
|
|
Lin Aiguo
|
|
|
49 |
|
|
Chief engineer |
|
|
Wang Daofu
|
|
|
52 |
|
|
Chief geologist |
|
|
Huang Weihe
|
|
|
50 |
|
|
Chief engineer |
|
|
Chen Ming
|
|
|
57 |
|
|
Chairman of the supervisory board |
|
|
Wen Qingshan
|
|
|
49 |
|
|
Supervisor |
|
|
Sun Xianfeng
|
|
|
55 |
|
|
Supervisor |
|
|
Yu Yibo
|
|
|
44 |
|
|
Supervisor |
|
|
Wang Yawei
|
|
|
53 |
|
|
Supervisor |
|
|
Qin Gang
|
|
|
54 |
|
|
Supervisor |
|
|
Wang Shali
|
|
|
53 |
|
|
Supervisor |
|
|
Wu Zhipan
|
|
|
51 |
|
|
Independent supervisor |
|
|
Li Yuan
|
|
|
61 |
|
|
Independent supervisor |
|
|
Directors
Jiang
Jiemin, aged 52, is the Chairman of our company and the
General Manager of CNPC. Mr.
Jiang is a senior economist and holds a masters degree. Mr. Jiang has over 30 years of working
experience in Chinas oil and gas industry. He was made Deputy Director of the Shengli Petroleum
Administration Bureau in March 1993, Senior Executive of the Qinghai Petroleum Administration
Bureau in June 1994 and Director of Qinghai Petroleum Administration Bureau in November 1994, and
Assistant to the General Manager and Team Leader for the Restructuring and Listing Preparatory Team
of CNPC in February 1999, and a Director and Vice President of our company in November 1999. Mr.
Jiang was
72
appointed Deputy Provincial Governor of the Qinghai Province in June 2000, was made a
member of the provincial party committee of the Qinghai Province and Deputy Provincial Governor of
Qinghai in November 2000, and the deputy secretary of the provincial party committee of Qinghai
Province and Deputy Provincial Governor of Qinghai in June 2003. Mr. Jiang became the Deputy
General Manger of CNPC in April 2004, and Vice Chairman and President of our company in May 2004.
Mr. Jiang has been the General Manager of CNPC since November 2006, and the Chairman of our company
since May 2007. Mr. Jiang stepped down as the President of our company in May 2008.
Zhou Jiping, aged 55, is the Vice Chairman and President of our company and a Deputy General
Manager of CNPC. Mr. Zhou is a professor-level senior engineer and holds a masters degree. He
has over 35 years of working experience in Chinas oil and gas industry. In November 1996, he was
appointed Deputy Director of the International Exploration and Development Cooperation Bureau of
China National Petroleum Corporation and Deputy General Manager of China National Oil & Gas
Exploration and Development Corporation. In December 1997, he was appointed General Manager of
China National Oil & Gas Exploration and Development Corporation and Deputy Director of the
International Exploration and Development Cooperation Bureau of China National Petroleum
Corporation, and in August 2001, he was appointed Assistant to the General Manager of CNPC and
General Manager of China National Oil & Gas Exploration and Development Corporation. Mr. Zhou has
been a Deputy General Manager of CNPC since December 2003, and a Director of our company since May
2004. In May 2008, Mr. Zhou was appointed the Vice Chairman and President of our company.
Wang Yilin, aged 51, is a Director of our company and a Deputy General Manager of CNPC. Mr.
Wang is a professor-level senior engineer and holds a doctoral degree. He has over 25 years of
working experience in Chinas oil and gas industry. Mr. Wang was appointed the Deputy Director and
Chief Exploration Geologist of Xinjiang Petroleum Administration Bureau in June 1996, and the
General Manager of our Xinjiang Oilfield Company in September 1999. He was appointed the Senior
Executive of Xinjiang Petroleum Administration Bureau and the General Manager of our Xinjiang
Oilfield Company in June 2001. In July 2003, he was appointed Assistant to General Manager of CNPC
and Senior Executive of Xinjiang Petroleum Administration Bureau, and the General Manager of our
Xinjiang Oilfield Company concurrently. In December 2003, he was appointed Deputy General Manager
of CNPC and Senior Executive of Xinjiang Petroleum Administration Bureau and the General Manager of
our Xinjiang Oilfield Company concurrently. From May 2004, he ceased to work as the Senior
Executive of Xinjiang Petroleum Administration Bureau and the General Manager of our Xinjiang
Oilfield Company. From July 2004 to July 2007, he concurrently worked as the Safety Director of
CNPC. He has been a Director of our company since November 2005.
Zeng Yukang, aged 57, is a Director of our company and a Deputy General Manager of CNPC. Mr.
Zeng is a professor-level senior economist and holds a college degree. He has nearly 40 years of
working experience in Chinas oil and gas industry. Mr. Zeng had been the Senior Executive of the
Exploration and Development Institute of Daqing Petroleum Administration Bureau since December
1996. From February 2000, he was appointed the Standing Deputy Director of Daqing Petroleum
Administration Bureau. In March 2001, he was appointed the Director of Daqing Petroleum
Administration Bureau, and in November 2002, he was appointed the Assistant to the General Manager
of CNPC. He has been a Deputy General Manager of CNPC since September 2005, and a Director of our
company since November 2005.
Wang Fucheng, aged 57, is a Director of our company and concurrently a Deputy General Manager
of CNPC. Mr. Wang is a professor-level senior economist and holds a bachelors degree. Mr. Wang
has over 40 years of working experience in Chinas oil and gas industry. From August 1986, Mr.
Wang worked as Senior Executive of the Shengli Petroleum Administration Bureau. Since December
1992, Mr. Wang had worked as Senior Executive of the Liaohe Petroleum Administration Bureau. Since
November 1997, Mr. Wang had worked as Director of the Liaohe Petroleum Administration Bureau. Since
October 1999, Mr. Wang had been the General Manager of the Liaohe Oilfield Branch of our company.
Mr. Wang had been a Director of our company from June 2000 to November 2005. Mr. Wang was
appointed a Vice President of our company in July 2000, and the Chairman of the Supervisory Board
of our company in November 2005. Prior to the appointment as Supervisor of our company, Mr. Wang
resigned from his office as Director of our company. Mr. Wang has been a Deputy General Manager of
CNPC since September 2007. In May 2008, Mr. was again appointed Director of our company. Prior to
the appointment as Director of our company, Mr. Wang resigned from his office as Supervisor of our
company.
Li Xinhua, aged 55, is a Director of our company and a Deputy General Manager of CNPC. Mr. Li
is a senior engineer. He graduated from the Chemical Engineering Department of Kunming College of
Engineering, majored in fundamental organic synthesis. Mr. Li
has over in June, 1985 and 30 years of working
experience in Chinas oil and gas industry. Mr. Li was
appointed the Deputy Manager and the Factory Manager of Yunnan
Petrochemical Factory in June, 1985 and in February
1992, the Chairman and General Manager of Yuntianhua Group in March 1997, the Assistant
Governor of Yunnan Province in March 2002, a Deputy Governor of Yunnan Province in January 2003,
and a Deputy General Manager of CNPC in April 2007. Since May 2008, Mr. Li has become a Director
of our company.
Liao Yongyuan, aged 45, is a Director and Vice President of our company and concurrently
serves as the Deputy General Manager and Safety Director of CNPC. Mr. Liao holds a masters degree
and is a professor-level senior engineer. He has nearly 25 years of working experience in Chinas
oil and gas industry. He was Deputy Director of the New Zone Exploration and Development
Department of China National Petroleum Corporation from June 1996, the Standing Deputy Commander
and then Commander of Tarim Petroleum Exploration and Development Headquarters from November 1996.
He was the General Manager of Tarim Oilfield Branch Company from September 1999, and also Deputy
Director of Gansu Provincial Economic and Trade Committee from October 2001. He has worked as the
Assistant to the General Manager of CNPC since January 2004 and has been concurrently the Head of
Coordination Team for Oil Enterprises in Sichuan and Chongqing and Director
73
of Sichuan Petroleum
Administration since April 2004. He was appointed a Deputy General Manager of CNPC in February
2007, and Safety Director of CNPC in July 2007. He has been a Vice President of our company since
November 2005 and a Director of our company since May 2008.
Wang Guoliang, aged 55, is a Director of our company and the General Accountant of CNPC. Mr
Wang is a professor - level senior accountant and holds a masters degree. Mr Wang has 26 years of working
experience in Chinas oil and gas industry. Mr Wang had worked as the Vice President of China
Petroleum Finance Company Limited from October 1995. In November 1997, he was appointed a Deputy
General Manager and the General Accountant of China National Oil & Gas Exploration and Exploitation
Corporation. Mr Wang had been the Chief Financial Officer of our company from November 1999 to
February 2007. From November 1999 to March 2002, he concurrently served as the General Manager of
our Finance Department. He was appointed General Accountant of CNPC in February 2007, and Director
of our company in May 2008.
Jiang Fan, aged 44, is a Director of our company and the General Manager of Dalian
Petrochemical Company. Mr. Jiang is a professor-level senior engineer and holds a masters degree.
He has over 20 years of working experience in Chinas oil and gas industry. Mr. Jiang was
appointed the Deputy Manager of Dalian Petrochemical Company in December 1996 and the Deputy
General Manager of Dalian Petrochemical Company in September 1999. He has been the General Manager
of Petrochina Dalian Petrochemical Company since February 2002, and a Director of our company since
November 2005.
Independent Non-executive Directors
Chee-Chen Tung, aged 65, is an independent non-executive Director of our company. Mr. Tung is
the Chairman and Chief Executive Officer of Orient Overseas (International) Limited. He was
educated at the University of Liverpool, England, where he received his Bachelor of Science degree.
He later acquired a Masters degree in Mechanical Engineering at the Massachusetts Institute of
Technology in the United States. He served as Chairman of the Hong Kong Shipowners Association
between 1993 and 1995. From 1999 to 2001, he was the Chairman of the Hong Kong General Chamber of
Commerce. He is an independent non-executive director of Zhejiang Expressway Co., Ltd., BOC Hong
Kong (Holdings) Limited, Wing Hang Bank Limited, Sing Tao News Corporation Limited, Cathay Pacific
Airways Limited and U-Ming Marine Transport Corporation, and a member of the Hong Kong Port
Development Board. Mr. Tung is also the Chairman of the Institute for Shipboard Education
Foundation, the Chairman of the Advisory Council and a member of the Board of Trustees of the Hong
Kong Polytechnic University and a member of the Board of Trustees of the International Academic
Center of the University of Pittsburgh and the School of Foreign Service of Georgetown University.
Mr. Tung has been an independent non-executive Director of our company since November 5, 1999.
Liu Hongru, aged 77, is an independent non-executive Director of our company. Mr. Liu is a
professor and holds a doctoral degree. He graduated from the Faculty of Economics of the
University of Moscow in 1959 with an associate Doctoral degree. Mr. Liu worked as Vice Governor of
the Agricultural Bank of China, Vice-Governor of the Peoples Bank of China, Deputy Director of the
State Economic Restructuring Committee, and the Chairman of the China Securities Regulatory
Commission. Mr. Lius current position include President of the Shanghai Institute of Finance and
Law and he is also a professor at the Peking University, the Postgraduate School of the Peoples Bank of China
and the City University of Hong Kong. Mr. Liu also serves as a non-executive director of OP
Financial Investments Limited and as an independent non-executive director of CITIC 21CN Company
Limited and Minerals Resources Limited, and possesses the accounting or financial management
qualification required under the Listing Rules of Hong Kong Stock Exchange. Mr. Liu was appointed
an independent Supervisor of our company in December 1999. Upon his resignation from this post in
November 2002, he has become an independent non-executive Director of our company since November
19, 2002.
Franco Bernabè , aged 59, is an independent non-executive Director of our company. He holds a
doctoral degree in political economics. Mr. Bernabè is the Chairman of the Franco Bernabè Group,
the Vice Chairman of H3G, the Vice Chairman of Rothschild Europe, a non-executive director of
Pininfarina Spa and an independent non-executive director of Areoportidi Bologna. He was CEO of
ENI and of Telecom Italia and a special representative of the Italian government for the
reconstruction of the Balkan region. Mr. Bernabè joined ENI in 1983 to become an
assistant to the chairman; in 1986 he became director for development, planning and control; and
between 1992 and 1998 he was the Chief Executive Officer of ENI. Mr. Bernabè led the restructuring
program of the ENI Group, making it one of the worlds most profitable oil companies. Between 1998
and 1999, Mr. Bernabè was the Chief Executive Officer of Telecom Italia. Prior to his joining ENI,
Mr. Bernabè was the head of economic studies at FIAT. Mr. Bernabè was a senior economist at the
OECD Department of Economics and Statistics in Paris. Earlier he was a professor of economic
politics at the School of Industrial Administration, Turin University. Mr. Bernabè has been an
independent non-executive Director of our company since June 2000.
Li Yongwu, aged 63, is an independent non-executive Director of our company. Mr. Li is a
senior engineer and holds a bachelors degree. In June 1991, Mr. Li was appointed as the Director
of Tianjin Chemicals Bureau. In July 1993, he was appointed as the Director of Tianjin Economic
Committee. He was elected as the Vice Minister of the PRC Ministry of Chemical Industry in April
1995. He became Director of the States Petroleum and Chemical Industry Bureau since March 1998.
In April 2001, he was appointed a Deputy Director of the Liaison Office of
74
the Central Government
at the Special Administrative Region of Macau. In December 2004, he was appointed the Vice
President of China Petroleum and Petrochemical Industry Association. In May 2005, he became the
Chairman of China Petroleum and Petrochemical Industry Association and in November 2005, he became
an Independent Supervisor of our company. In 2003, he was elected as a standing member of
the Tenth Chinese Peoples Consultative Conference. In May 2008, Mr. Li was appointed an
independent non-executive Director of our company. Prior to the appointment as Director of our
company, Mr. Li resigned from his office as Supervisor of our company.
Cui Junhui, aged 62, is an independent non-executive Director of our company. Mr. Cui
graduated from the Graduate Class of the Party School of the Central Committee of C.P.C.. The
positions he held from February 1987 include Deputy Director of the Local Tax Bureau of Shandong
Province, Deputy Director-General of the Financial Department of Shandong Province, Director of the
Local Tax Bureau of Shandong Province and Director of the National Tax Bureau of Shandong Province.
From December 1999 to December 2006, he served as a Deputy Director of the State Administration of
Taxation. In December 2006, he was made a Vice President of China Society of Taxation and a Vice
President of China Charity Federation. Mr. Cui was elected as a representative of the
11th National Peoples Congress and a member of the Financial and Economic Affairs
Committee of the National Peoples Congress in March 2008. Mr. Cui has become a non-executive
Director of our company since May 2008.
Secretary to the Board of Directors
Li Huaiqi, aged 58, is the Secretary to the Board of Directors of our company. Mr. Li is a
senior economist. He has over 35 years of working experience in Chinas oil and gas industry. Mr.
Li once worked in the Daqing Oilfield, the Liaohe Oilfield and the Huabei Oilfield and in the
Nanhai Petroleum Company. From June 1992, Mr. Li worked as Deputy Director and Director of the
Foreign Affairs Bureau of China National Petroleum Corporation successively. From October 1998, Mr.
Li was appointed as Director of the International Co-operation Department (Foreign Affairs Bureau)
of CNPC. Mr. Li has been the Secretary to the Board of Directors of our company since August 2001.
Other Senior Management Personnel
Sun Longde, aged 45, is a Vice President of our company. Mr. Sun is a professor-level senior
engineer and holds a doctoral degree. He has nearly 25 years of working experience in Chinas oil
and geological industry. Mr. Sun was appointed the Deputy Chief Geologist of Xianhe Oil Extraction
Plant and Deputy Manager of Dongxin Oil Extraction Plant of Shengli Petroleum Administration Bureau
in January 1994, Chief Deputy Director-General of Exploration Business Department of Shengli
Petroleum Administration Bureau in April 1997, the Manager of Exploration & Development Company of
Shengli Petroleum Administration Bureau in September 1997, Chief Geologist of Tarim Petroleum
Exploration & Development Headquarters in November 1997, Deputy General Manager of PetroChina Tarim
Oilfield Company in September 1999 and the General Manager of PetroChina Tarim Oilfield Company in
July 2002. Mr. Sun has been a Vice President of our company since June 2007.
Shen Diancheng, aged 48, is the Vice President of our company and concurrently the General
Manager of Chemical & Marketing Company of our company. Mr. Shen is a professor-level senior
engineer and holds a college degree. He has nearly 25 years of working experience in Chinas oil
and gas industry. Mr. Shen was appointed the Deputy Manager of the Chemical Agent Plant of Daqing
Oilfield in June 1994, the Deputy Manager, Standing Deputy Director and acting Manager of the
Chemical Headquarters Plant of Daqing Oilfield in January 1997, the Standing Deputy General Manager
of PetroChina Daqing Refining & Chemical Company in October 2000, the General Manager of PetroChina
Liaoyang Petrochemical Company in April 2002, and the General Manager of PetroChina Jilin
Petrochemical Company in December 2005. Mr. Shen has been the Vice President of our company and
General Manager of Chemical & Marketing Company since June 2007.
Liu Hongbin, aged 44, is the Vice President of our company. Mr. Liu is a senior engineer and
holds a college degree. He has nearly 25 years of working experience in Chinas oil and gas
industry. Mr. Liu was appointed the Vice President of Exploration & Development Research Institute
of Yumen Petroleum Administration Bureau in May 1991, the Director of the Development Division of
Tuha Petroleum Exploration & Development Headquarters in October 1994, the Chief Engineer of Tuha
Petroleum Exploration & Development Headquarters in June 1995, the Deputy General Manager of
PetroChina Tuha Oilfield Company in July 1999, the Commander of Tuha Petroleum Exploration &
Development
Headquarters in July 2000, the General Manager of the Planning Department of our company in
March 2002 and the Director of the Planning Department of CNPC in September 2005. Mr. Liu has
become a Vice President of our company since June 2007.
Zhou Mingchun, aged 40, is the Chief Financial Officer of our company. Mr. Zhou is a
professor-level senior accountant and holds a masters degree. He has nearly 20 years of working
experience in Chinas oil and gas industry. Mr. Zhou was appointed the Director of the Finance
Division and the Director-General of Financial Settlement Centre of Daqing Petroleum Administration
Bureau in October 1998, the Executive of the Finance & Assets Division of Daqing Oilfield Company
from in 1999, the director and Deputy Chief Accountant of Daqing Oilfield Company Limited in
January 2000, the director and Chief Accountant of Daqing Oilfield Company Limited in October 2000,
and the General Manager of the Finance Department of our company in March 2002. Mr. Zhou serves as
the Chief Financial Officer of our company from June 2007.
75
Li Hualin, aged 45, is the Vice President of our company. Mr. Li holds a masters degree and
is a senior engineer. Mr. Li has nearly 25 years of experience in the oil and gas industry in
China. Mr. Li became the Deputy Director-General of the Houston Office of China National Petroleum
Company in March 1993, the director and General Manager of China National Oil and Gas Corporation
(Canada) in May 1995, the Deputy General Manager of the China National Oil and Gas Exploration
Development Corporation and the Chairman and General Manager of CNPC International (Canada) Ltd in
December 1997, the General Manager of CNPC International (Kazakhstan) Ltd. and the Deputy General
Manager of the China National Oil and Gas Exploration Development Corporation in September 1999,
the Deputy General Manager of China Petroleum Hongkong (Holding) Limited in January 2001, the
Chairman of Shenzhen Petroleum Industrial Co., Ltd in December 2001, and the Vice-Chairman and
General Manager of China Petroleum Hongkong (Holding) Limited, whilst remaining as the Chairman of
Shenzhen Petroleum Industrial Co., Ltd. in July 2006. Mr. Li was appointed as the Vice President
of our company and the Vice Chairman and General Manager of China Petroleum Hongkong (Holding)
Limited in November 2007.
Zhao
Zhengzhang, aged 51, is a Vice President of our company and concurrently the General Manager of Exploration
and Production Company of our Company. Mr Zhao holds a masters
degree. He is a senior engineer and has nearly 25 years of working experience in Chinas oil and
industry. Mr Zhaos past positions include Deputy Chief Geologist of the Northern China Petroleum
Administration Bureau, Deputy Director of the Oil Exploration Bureau and Director of New District
Exploration Department of China National Petroleum Company, Deputy Director of the Oil and Gas
Exploration Department of CNPC, and Deputy General Manager of PetroChina Exploration and Production
Company. Mr. Zhao was appointed a principle leader of PetroChina Exploration and Production
Company in January 2005 and the General Manager of PetroChina Exploration and Production Company in
January 2006. Mr. Zhao has become a Vice President of our company since May 2008.
Lin Aiguo, aged 49, is the Chief Engineer of our company. Mr. Lin is a professor-level senior
engineer and holds a college degree. He has over 30 years of working experience in Chinas oil and
petrochemical industry. Mr. Lin was appointed the Deputy Manager and the Standing Deputy Manager of
Shengli Refinery of Qilu Petrochemical Company in July 1993, the Deputy General Manager of Dalian
West Pacific Petrochemical Co. Ltd. in May 1996, and the General Manager of Dalian West Pacific
Petrochemical Co. Ltd. in August 1998, and the General Manager of Refining & Marketing Company of
our company in December 2002. Mr. Lin serves as the Chief Engineer of our company from June 2007.
Wang Daofu, aged 52, is the General Geologist of our company . Mr. Wang holds a doctoral
degree. He is a senior engineer and has over 25 years of working experience in Chinas oil and gas
industry. Mr. Wang worked as Chief Engineer, Deputy Director and Director of the Development
Department of the Changqing Oil Exploration Bureau. He was appointed Deputy General Manager of
PetroChina Changqing Oilfield Company in October 1999 and General Manager of PetroChina Changqing
Oilfield Company in January 2003. He was elected as a representative of the 11th
National Peoples Congress of the PRC in 2008. Mr. Wang has become the General Geologist of our
company since May 2008.
Huang
Weihe, aged 50, is the General Engineer of our Company and
concurrently the General Manager of Natural Gas and Pipelines Company
of our Company. Mr. Huang holds a doctoral degree. He
is a senior engineer and has nearly 25 years of working experience in Chinas oil and gas industry.
Mr. Huangs past positions include Vice President and President of the Exploration Design
Institute of the China Petroleum Pipeline Bureau, Assistant to the Director (and concurrently the
Deputy General Manager of Pipeline Construction Company), Deputy Director (and concurrently the
Chief Engineer) of the China Petroleum Pipeline Bureau, the General Manager of PetroChina Pipeline
Branch Company, and General Manager of PetroChina West East Gas Pipeline Company. Mr. Huang was
appointed the General Manager of PetroChina Natural Gas and Pipelines Company in December 2002 and
concurrently the General Manager of PetroChina West East Gas Pipeline Company. Mr. Huang became
the General Manager of PetroChina Natural Gas and Pipelines Company in February 2006, and was
appointed the General Engineer of our company in May 2008.
Supervisors
Chen Ming, aged 57, is the Chairman of the Supervisory Board of our company and team leader of
the discipline inspection team of CNPC.. Mr. Chen is a professor-level economist and holds a
bachelors degree. He has over 30 years of working experience in Chinas oil and gas industry.
Mr. Chen was appointed Deputy Commissioner of CNPC in November 1996, Deputy Director of the
Supervisory Department of CNPC
in October 1998, Deputy General Manager of Human Resource
Department of our Company and concurrently Director of the Supervisory Department of
our company in September 1999, General Manager of the Supervisory Department of our company in
September 2001, Assistant to the General Manager of CNPC in January 2007, and Team Leader of the
Discipline Team of CNPC in September 2007. He has become the Chairman of our Supervisory Board
since May 2008.
Wen Qingshan, aged 49, is a Supervisor of our company and the Deputy Chief Accountant and the
Director of the Finance and Assets Department of CNPC. Mr. Wen is a professor-level senior
accountant and holds a masters degree in economics. Mr. Wen has over 30 years of working
experience in Chinas petrochemical industry. He was the Deputy Chief Accountant of the Finance
and Assets Department of CNPC from November 1998, Deputy Director of the Finance and Assets
Department of CNPC from May 1999 and Director of the Finance and Assets Department of CNPC from May
2002. He has been a Supervisor of our company since November 2002 and the Deputy Chief Accountant
of CNPC since November 2007.
76
Sun Xianfeng, aged 55, is a Supervisor and the General Manager of the Audit Department of our
company, and the Director of the Audit Department of CNPC. Mr. Sun is a senior economist and
holds a bachelors degree. Mr. Sun has over 35 years of working experience in Chinas oil and gas
industry. Mr. Sun worked as Deputy Director of the Supervisory Bureau of China National Petroleum
Corporation from November 1996, and was transferred to the Eighth Office of the State Council
Compliance Inspectors General Office (Supervisory Committee of Central Enterprises Working
Commission) as its temporary head in June 1998. He was appointed the Deputy Director of the Audit
Department of CNPC in October 2000 and concurrently became the Director of the Audit Services
Centre in December 2000. He has been the Director of the Audit Department of CNPC and the Director
of the Audit Service Centre from April 2004, a Supervisor of our company since May 2004 and the
General Manager of the Audit Department of our company since July 2007.
Yu Yibo, aged 44, is a Supervisor and the General Manager of our company and the Director of
the Capital Operation Department of CNPC. Mr. Yu is a professor-level senior accountant and
holds a doctoral degree. He graduated from the Business School of Hitotsubashi University in
Japan, with a major in finance. Mr. Yu has 10 years of working experience in Chinas oil and gas
industry. He was appointed Assistant to the President of China Petroleum Finance Company Limited
in November 1998, member of the Restructuring and Listing Preparatory Team of CNPC in February
1999, Deputy General Manager of the Finance Department of our company in November 1999, Deputy
General Manager of PetroChina Dagang Oilfield Branch Company in March 2002, Deputy General Manager
of the Finance Department of our company in October 2002, and General Manager of the Capital
Operation Department of our company in April 2003. Mr. Yu serves concurrently as the Director of
the Capital Operation Department of CNPC from April 2007, and has become a Supervisor of our
company since May 2008.
Wang Yawei, aged 53, is an employee representative of our companys Supervisory Board and the
Chairman of the Labour Union of Daqing Oil Field Co. Ltd. Mr. Wang is a professor-level senior
engineer and graduated as a master in petroleum and natural gas engineering from Daqing Petroleum
Institute in July 2001. Mr. Wang worked as the Deputy Manager of No.3 Drilling Company of Daqing
Petroleum Administrative Bureau, the Secretary of the Party Committee in Daqing Energy Development
Company, and the Assistant to the Director (and concurrently the General Manager of Drilling
Technology Service Company), the Deputy Director, the Chairman of the Labour Union and the Standing
Committee Member of the Party Committee of Daqing Petroleum Administrative Bureau. Mr. Wang has
become a Supervisor of our company since May 2008.
Qin Gang, aged 54, is an employee representative of our companys Supervisory Board and a
Senior Executive of the PetroChina West-East Gas Pipeline Company. Mr. Qin is a senior engineer
and has nearly 35 years of experience in Chinas oil and gas industry. Mr. Qin had acted as a
Deputy Commander of Tarim Petroleum Exploration and Development Headquarters since November 1997
and a Deputy General Manager of Tarim Oilfield Company since September 1999. In June 2000, Mr. Qin
was appointed the Senior Executive of Tarim Southwest Company concurrently. In July 2002, Mr. Qin
was appointed an executive and the Chairman of Labour Union of PetroChina Tarim Oilfield Company.
Mr. Qin has been the Senior Executive and the Chairman of the Labour Union of Petrochina West-East
Gas Pipeline Company since June 2007, and a Supervisor of our company since November 2005.
Wang Shali, aged 53, is an employee representative of our companys Supervisory Board and a
Senior Deputy General Manager and the General Legal Counsel of CNPC Exploration and Development Company
Limited. Ms. Wang is a professor-level senior economist. She received her bachelors degree in
English language and literature at the Zhengzhou University in August 1977 and her LL.M. degree at
Southern Methodist University, USA in June 1987. Ms. Wangs past positions include Chief Economist
and Deputy General Manager (concurrently the Chief Economist). Ms. Wang has become a Supervisor of
our company since May 2008.
Wu Zhipan, aged 51, is an independent Supervisor of our company. Mr. Wu is a holder of
doctoral degree. He is a professor, a LL.D. Supervisor, Standing Vice Chairman of Peking
University Council and Chief Legal Advisor of Peking University, Dean of the Asia-Pacific Research
Institute of Peking University and Director of Financial Law Institute of Peking University. He is
also an expert consultant of the Supreme Peoples Court of the PRC, an arbitrator of the
Arbitration Panel of China International Economic and Trade Arbitration Commission and President of
the China Economic Law Research Societies. Mr. Wu also serves as an independent non-executive
director of Air China Limited, Fortune SGAM Fund Management Co., Ltd. and China Minsheng Banking
Corp., Ltd. Mr. Wu has been an independent Supervisor of our company since December 1999.
Li Yuan, aged 61, is an independent Supervisor of our company. Mr. Li graduated from Renmin
University of China with a major in economics. Mr. Lis past positions include Deputy Director of
the Foreign Affairs Department of Ministry of Petroleum Industry, Team Leader of the Business Team
of the CPC Central Committees General Office, Director of the Administrative Reform Bureau of the
Political System Reform Studies Office of the CPC Central Committee, Director of the Distribution
Department of the National Economic System Reform Committee, Deputy Director of the State
Administration of Land, and Deputy Minister and concurrently the Deputy Chief Land Inspector of
the Ministry of Land and Resources. Mr. Li is now a Deputy Director of the Committee of
Population, Resources and Environment of the 11th National Committee of the Chinese
Peoples Political Consultative Conference, and has become an independent Supervisor of our company
since May 2008.
77
Compensation
Senior Management Compensation System
Our senior management compensation system links our senior management members financial
interests, including those of our executive directors and our supervisors, with our results of
operations and the performance of our shares. All of our senior management members have entered
into performance contracts with us. Under this system, the senior management members compensation
has three components, namely, fixed salaries, performance bonuses and stock appreciation rights.
The variable components in their compensation account for approximately 70% to 75% of our senior
management officers total potential compensation, including up to 25% forming the performance
bonus component and approximately 50% to 70% forming the stock appreciation rights component.
Variable compensation rewards are linked to the attainment of specific performance targets, such as
net income, return on capital and cost reduction targets. The chart below sets forth the
components of the total potential compensation for key officers.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Stock |
|
|
|
|
% Fixed |
|
appreciation |
|
% Performance |
|
|
salary |
|
rights |
|
bonus |
Chairman |
|
|
30 |
|
|
|
70 |
|
|
|
0 |
|
President |
|
|
25 |
|
|
|
60 |
|
|
|
15 |
|
Vice President |
|
|
25 |
|
|
|
60 |
|
|
|
15 |
|
Department GM |
|
|
25 |
|
|
|
50 |
|
|
|
25 |
|
We have granted stock appreciation rights to 300 persons, including members of the board of
directors and the supervisory board, president, vice presidents and departmental managers, general
managers and deputy general managers of specialized companies and local subsidiaries. Upon exercise
of these stock appreciation rights, members of the senior management will not receive any of our
shares, but will, by way of stock appreciation rights, receive a monetary sum that is calculated on
the basis of the price of our H Shares. Since companies are not permitted to repurchase and hold
their own shares for offering stock options under current PRC law, we expect to calculate our book
gains and losses on the basis of share prices and in accordance with stock appreciation rights
measures and make cash payment of such compensations. None of the directors and senior management
exercised any of the stock appreciation rights granted to them. All of such stock appreciation
rights have vested in April 2008. We have established a new senior management compensation system,
pending for the approval of the State-owned Assets Supervision and Administration Commission of the
State Council.
Directors and Supervisors Compensation
Our directors and supervisors, who hold senior management positions or are otherwise employed
by us, receive compensation in the form of salaries, housing allowances, other allowances and
benefits in kind, including our contribution to the pension plans for these directors and
supervisors.
The aggregate amount of salaries, housing allowances, other allowances and benefits in kind
paid by us to the five highest paid individuals of PetroChina during the year ended December 31,
2007 was RMB 3,635,615. We paid RMB 148,154 as our contribution to the pension plans in respect of
those individuals in the year ended December 31, 2007.
The aggregate amount of salaries or other compensation, housing allowances, other allowances
and benefits in kind paid by us to our directors, who hold senior management positions or are
otherwise employed by us, during the year ended December 31, 2007 was RMB 2,745,962.
Save as disclosed, no other payments have been paid or are payable, in respect of the year
ended December 31, 2007, by us or any of our subsidiaries to our directors. In addition, we have no
service contracts with our directors that provide for benefits to our directors upon the
termination of their employment with us.
In 2007, we paid RMB 134,619 as our contribution to the pension plans in respect of our
directors and supervisors, who hold senior management positions or are otherwise employed by us.
The aggregate amount of salaries or other compensation, housing allowances, other allowances and
benefits in kind paid by us to our supervisors, who hold senior management positions or are
otherwise employed by us, during the year ended December 31, 2007 was RMB 1,021,618.
Board Practices
Our board of directors has four principal committees: an audit committee, an investment and
development committee, an evaluation and remuneration committee and a health, safety and
environment committee.
Audit Committee
78
Our audit committee is currently composed of three non-executive independent directors, Mr.
Franco Bernabè, Mr. Chee-Chen Tung and Mr. Cui Junhui, and one non-executive director, Mr. Wang
Guoliang. Mr. Franco Bernabè serves as the chairman of the committee. Under our audit committee
charter, the chairman of the committee must be an independent director and all resolutions of the
committee must be approved by independent directors. The audit committees major responsibilities
include:
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|
|
supervising the integrity of financial reporting process to ensure fair, transparent and true financial disclosure; |
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|
|
|
evaluating the effectiveness of the internal control and risk management framework; |
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|
inspecting and supervising the effectiveness of the internal audit functions; |
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|
reviewing and supervising the engagement and work of external auditors, including evaluating the performance of
external auditors annually and raising proposals together with the supervisory board to the shareholders meetings
with respect to the engagement, re-engagement and dismissal of external auditors and the compensation of such
external auditors; |
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|
|
|
receiving, keeping and dealing with complaints regarding
accounting, internal control or auditing matters; and |
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|
|
receiving and dealing with anonymous submissions and complaints by employees regarding accounting or auditing
matters, and keeping such submission and complaints confidential, and other duties from time to time provided by
applicable laws and regulations and Listing Rules of the market where the securities of our company listed. |
Investment and Development Committee
The current members of our investment and development committee are Mr. Li Yongwu, as chairman
of the committee and Mr. Wang Yilin and Mr. Li Xinhua, as members of the committee. The investment
and development committees major responsibilities include:
|
|
|
studying strategic action plans as proposed by our President and making recommendations to the board of directors; |
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|
|
|
studying the annual investment budget and the adjustment proposal regarding the investment plan as proposed by
our President and making recommendations to the board of directors; and |
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|
|
|
reviewing preliminary feasibility studies and feasibility studies for material investment projects requiring
approval of the board of directors and making recommendations to the board of directors. |
Evaluation and Remuneration Committee
The current members of our evaluation and remuneration committee are Mr. Liu Hongru, as
chairman of the committee, Mr. Chee-Chen Tung and Mr. Wang Fucheng, as members of the committee.
The evaluation and remuneration committees major responsibilities include:
|
|
|
managing the performance evaluations for our President and submitting
report to our board and monitoring performance evaluations led by our
President for Senior Vice President, Vice Presidents, Chief Financial
Officer and other senior management personnel; and |
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|
|
studying our incentive plan, compensation plan and stock appreciation
rights plan, supervising and evaluating the implementation of these
plans and making recommendations for improvements to and perfection of
such plans. |
Health, Safety and Environment Committee
The current members of our health, safety and environment committee are Mr. Liao Yongyuan, as
chairman of the committee, Mr. Zeng Yukang and Mr. Jiang Fan, as member of the committee. The
health, safety and environment committees major responsibilities include:
|
|
|
supervising the effective implementation of our Health, Safety and Environmental Protection Plan; |
|
|
|
|
making recommendations to the board of directors and our President for major decisions with respect of health, safety and
environmental protection; and |
79
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inquiring the occurrence of and responsibilities for material accidents and supervising the remedial measures of material accidents. |
Employees
As of December 31, 2005, 2006 and 2007, we had 439,220, 446,290 and 466,502 employees,
respectively (excluding temporary staff). The table below sets forth the number of our employees
by business segment as of December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
Employees |
|
% of total |
Exploration and production |
|
|
261,802 |
|
|
|
56.12 |
|
Refining and marketing |
|
|
122,593 |
|
|
|
26.28 |
|
Chemicals and marketing |
|
|
61,635 |
|
|
|
13.21 |
|
Natural gas and pipeline |
|
|
15,706 |
|
|
|
3.37 |
|
Other (1) |
|
|
4,766 |
|
|
|
1.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
466,502 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Including the numbers of employees of the management of our
headquarters, specialized companies, PetroChina Exploration &
Development Research Institute, PetroChina Planning & Engineering
Institute, Petrochemical Research Institute and other units. |
Our employees participate in various retirement benefit plans organized by municipal and
provincial governments whereby we are required to make monthly contributions to these plans at
rates ranging from 16% to 22% of the employees salary. Expenses incurred by us in connection with
the retirement benefit plans were approximately RMB 3,104 million, RMB 4,645 million and RMB 5,744
million, respectively, for the three years ended December 31, 2005, 2006 and 2007, respectively.
In 2007, we have not experienced any strikes, work stoppages, labor disputes or actions which
affected the operation of any of our businesses. Our company maintains good relationship with our
employees.
Share Ownership
Our directors, senior officers and supervisors do not have share ownership in PetroChina or
any of PetroChinas affiliates. We have granted stock appreciation rights relating to our H Shares
to our directors, senior officers and supervisors. Upon exercise of these stock appreciation
rights, members of the senior management will not receive any of our shares, but will, by way of
stock appreciation rights, receive a monetary sum which is calculated on the basis of the price of
our H Shares. Because the relevant PRC laws limit the ownership of the H Shares of a
company incorporated under the PRC laws to only non-PRC nationals, and companies are not permitted
to repurchase and hold their own shares for offering stock appreciation rights under current PRC
law, our directors, senior officers and supervisors do not hold our H Shares under the stock
options granted to them. Instead, we expect to calculate the book gains and losses on the basis of
share prices and in accordance with our stock appreciation rights granting criteria, and make cash
payments of such compensation to our directors, senior officers and supervisors.
ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
Prior to the restructuring of the CNPC group in November 1999, CNPC was one of the largest
companies in the PRC in terms of sales. As part of the restructuring of the CNPC group, CNPC
transferred to PetroChina substantially all its businesses and assets in China relating to the
exploration and production of crude oil and natural gas, refining and marketing, chemicals and
natural gas sales and transmission. Since the restructuring of the CNPC group, CNPC has engaged in
crude oil and natural gas exploration and production business activities outside the PRC and
limited chemicals production and retail of refined products. CNPCs primary business activities
relate to the provision of various services and products to PetroChina.
PetroChina was established on November 5, 1999 with CNPC as its sole promoter. As of December
31, 2007, CNPC owned 157,922,077,818 shares, representing approximately 86.29% of the share capital
of PetroChina, and, accordingly, CNPC is our controlling shareholder.
The
following table sets out the shareholding of the major H shareholders of our company as of
December 31, 2007:
80
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of the |
|
|
|
|
|
|
|
|
issued share |
|
Percentage of |
|
|
Number of shares |
|
capital of the same |
|
the total share |
Name of shareholders |
|
held |
|
class of shares (%) |
|
capital (%) |
|
UBS AG1
|
|
|
1,089,453,631 |
(L) |
|
|
5.16 |
(L) |
|
|
0.60 |
|
|
|
|
|
414,468,390 |
(S) |
|
|
1.96 |
(S) |
|
|
0.23 |
|
|
|
|
|
1 |
|
UBS AG owns 1,089,453,631 H Shares in our company in
the aggregate through its several wholly owned subsidiaries. |
The following table set out the shareholding of the major A shareholders of our company as of
December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of the |
|
|
|
|
|
|
|
|
issued share |
|
Percentage of |
|
|
Number of shares |
|
capital of the same |
|
the total share |
Name of shareholders |
|
held |
|
class of shares (%) |
|
capital (%) |
|
CNPC |
|
|
157,922,077,818 |
|
|
|
97.53 |
|
|
|
86.29 |
|
|
The shares held by CNPC are domestic shares in the share capital of PetroChina. However,
CNPC has identical voting rights as holders of H Shares. Holders of domestic shares and H
Shares are deemed to be shareholders of different classes for certain matters which may have effect
on their respective interest.
Related Party Transactions
As at December 31, 2007, CNPC directly owns an aggregate of approximately 86.29% of the shares
of our company and therefore transactions of PetroChina constitute related party
transactions of PetroChina under the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited,
or the Listing Rules, and the listing rules of the
Shanghai Stock Exchange, or SSE Listing Rules. As at December 31, 2007, CNPC (Hong Kong) Limited
(stock code: 135), or CNPC (HK), is a 51.89% owned subsidiary of CNPC. Therefore, transactions
between PetroChina and CNPC (HK) constitute related party transactions of PetroChina under the
Listing Rules and SSE Listing Rules. As Beijing Gas Group Co., Ltd.,
or
Beijing Gas, and China
Railway Materials and Suppliers Corporation, or CRMSC, are respectively a substantial shareholder
(as defined under the Listing Rules) of Beijing Huayou Gas Corporation Limited and PetroChina &
CRMSC Oil Marketing Company Limited, and PetroChinas subsidiaries, pursuant to the Listing
Rules, the transactions between PetroChina, and Beijing Gas and CRMSC respectively constitute
related party transactions of PetroChina. China National Oil and Gas Exploration and Development
Corporation, or CNODC, a state-owned enterprise, the entire interest of which is owned by CNPC, is
interested in 50% interest in CNPC Exploration and Development
Company Limited, or CNPC E&D, a not
wholly owned subsidiary of our company. Pursuant to the Listing Rules, CNPC E&D is a connected
person of our company and any transaction between our company and CNPC E&D constitutes related
party transaction of PetroChina. On December 28, 2006, our company became interested in 67% equity
interest in PetroKazakhstan Inc., or PKZ, through CNPC E&D. Pursuant to the
Listing Rules, CNPC E&D and any affiliates of CNPC E&D will also be treated as a connected person(s) of PetroChina. Accordingly,
transactions between PetroChina and PKZ constitute related party transactions of our company.
One-off Related Party Transactions
1. Disposal of Equity Interests in China National United Oil Corporation
On March 18, 2007, our company entered into an equity transfer agreement with CNPC pursuant
to which our company has agreed to dispose 70% of the equity interests in China National United Oil
Corporation to CNPC for a consideration of approximately RMB 7.01 billion. As CNPC is the
controlling shareholder of our company, CNPC is a connected person of our company under the Listing
Rules and therefore such equity transfer constitutes a related party transaction of our company.
Details of the transaction were announced by our company on March 18, 2007 and in the circular to
the shareholders dated March 30, 2007. The transaction was approved by the independent
shareholders of our company at the annual general meeting held on May 16, 2007.
2. Acquisition of Assets of the Risk Operation Service Business from CNPC
On August 23, 2007, our company entered into an transfer agreement with CNPC pursuant to
which our company has agreed to acquire the assets of the risk operation service business from
CNPC. Pursuant to the transfer agreement, our company has paid CNPC a consideration in the sum of
RMB 1,652.28 million, representing the value of the net assets of the risk operation service
business as at December 31, 2006. The parties shall adjust the consideration by reference to the
net assets generated by the risk operation service business for the period from January 1, 2007 to
81
August 31, 2007 as shown in the management accounts for that period. As CNPC is the controlling
shareholder of our company, CNPC is a connected person of our company under the Listing Rules and
therefore such asset acquisition constitutes a related party transaction of our company. Details of
the transaction were announced by our company on the website of the Hong Kong Stock Exchange on
August 23, 2007.
3. Acquisition of Northeastern Inspection, Maintenance and Repair Business Division of CNPC
On April 28, 2008, we entered into an acquisition agreement with CNPC pursuant to which we
acquired from CNPC the Northeastern Inspection, Maintenance and Repair Business Division of CNPC.
Upon the closing of the agreement, we shall pay RMB 43.8 million to CNPC as consideration,
representing the net asset value of the Northeastern Inspection, Maintenance and Repair Business
Division as at September 30, 2007. The parties shall adjust the consideration by reference to the
net assets generated by the Northeastern Inspection, Maintenance and Repair Business Division for
the period from October 1, 2007 to April 30, 2008 as shown in the management accounts for that
period.
CNPC is our controlling shareholder. As defined under the Listing Rules, CNPC is a related
party of our company and the acquisition constitutes a related party transaction of our company.
Given that the percentage ratios involved in the acquisition are more than 0.1% and less than 2.5%
for CNPC, the acquisition is only subject to reporting and announcement requirement and is exempted
from the independent shareholders approval requirement under the Listing Rules. Details of the
transaction have been posted on the website of Hong Kong Stock Exchange on April 28, 2008.
4. Capital Injection concerning CNPC Exploration and Development Company Limited
On December 27, 2007, our
company entered the Capital Injection Agreement Concerning CNPC
Exploration and Development Company Limited with CNODC and CNPC E&D. Pursuant to the agreement,
our company and CNODC, as shareholders of CNPC E&D, shall inject capital in the aggregate amount of
RMB 16,000 million into CNPC E&D. Our company and CNODC shall each make a capital injection of
RMB 8,000 million in cash, payable in one lump sum. Upon completion of the capital injection, our
company and CNODC will continue to hold 50% of the shares of CNPC E&D respectively.
As CNODC is a
wholly owned subsidiary of CNPC, the controlling shareholder of our company,
CNODC is a connected person of our company pursuant to the SSE Listing Rules and the Listing Rules.
As CNODC holds 50% of the shares of CNPC E&D, and CNPC E&D is a non-wholly owned subsidiary of our
company, CNPC E&D is also a connected person of our company under the Listing Rules. Therefore, the
capital injection by our company and CNODC into CNPC E&D also constitutes a related party
transaction of our company under the SSE Listing Rules and the Listing Rules. Details of the
transaction were announced by our company on the websites of the Hong Kong Stock Exchange and the
Shanghai Stock Exchange on December 27, 2007.
Continuing Related Party Transactions
(I) Continuing Related Party Transactions with CNPC
PetroChina and CNPC continue to carry out certain existing continuing related party
transactions. Our company sought independent shareholders approval at the general meeting held on
November 8, 2005 for a renewal of the existing continuing related party transactions and the new
continuing related party transactions and proposed the new caps for existing continuing related
party transactions and the new continuing related party transactions for January 1, 2006 to
December 31, 2008. Our company further sought independent shareholders approval at the general
meeting held on November 1, 2006 for an increase of the proposed caps which were previously approved on November 8, 2005.
PetroChina and CNPC will continue to carry out the existing continuing related party
transactions referred to in the following agreements:
1. Comprehensive Products and Services Agreement, First Supplemental Comprehensive Agreement
and Second Supplemental Comprehensive Agreement
(1) PetroChina and CNPC continue to implement the Comprehensive Products and Services
Agreement (Comprehensive Agreement) entered into on March 10, 2000 for the provision (i) by
PetroChina to CNPC and (ii) by CNPC to PetroChina, of a range of products and services which may be
required and requested from time to time by either party and/or its subsidiary companies and
affiliates. The Comprehensive Agreement has been amended by the First Supplemental Comprehensive
Agreement and the Second Supplemental Comprehensive Agreement.
The term of the Comprehensive Agreement was initially 10 years starting from the date when our
companys business license was issued. This term has been amended by the Second Supplemental
Comprehensive Agreement to three years commencing from January 1, 2006.
During the term of the Comprehensive Agreement, termination of the product and service
implementation agreements described below may be effected from time to time by the parties to the
product and service implementation agreements providing at least six months written notice of
termination in relation to any one or more categories of products or services. Further, in respect
of any products or services already contracted to be provided, termination may not take place until
after such products and services have been provided.
82
(A) Products and Services to be provided by PetroChina to CNPC
Under the Comprehensive Agreement, products and services to be provided by PetroChina to CNPC
include such products as refined products, chemical products, natural
gas, crude oil, and such
services as relating to the supply of water, electricity, gas and heating, quantifying and
measuring and quality inspection and other products and services as may be requested by the CNPC
Group for its own consumption, use or sale from time to time.
(B) Products and Services to be provided by CNPC to PetroChina
More products and services are to be provided by CNPC to PetroChina, both in terms of quantity
and variety, than those to be provided by PetroChina to CNPC. Products and services to be provided
by CNPC to PetroChina have been grouped together and categorized according to the following types
of products and services:
|
|
|
Construction and technical services, including but not limited to exploration
technology service, downhole operation service, oilfield construction service, oil
refinery construction service and engineering and design service; |
|
|
|
|
Production services, including but not limited to water supply, electricity
generation and supply, gas supply and communications; |
|
|
|
|
Supply of materials services, including but not limited to purchase of materials,
quality control, storage of materials and delivery of materials |
|
|
|
|
Social services, including but not limited to security services, education and
hospitals; |
|
|
|
|
Ancillary services, including but not limited to property
management, training centers and guesthouses; and |
|
|
|
|
Financial services, including but not limited to loans and deposits services. |
The Comprehensive Agreement details specific pricing principles for the products and services
to be provided pursuant to the Comprehensive Agreement. If, for any reason, the specific pricing
principle for a particular product or service ceases to be applicable, whether due to a change in
circumstances or otherwise, such product or service must then be provided in accordance with the
following general pricing principles as defined in the Comprehensive Agreement:
(a) state-prescribed prices; or
(b) where there is no state-prescribed price, then according to the relevant market prices; or
(c) where neither (a) nor (b) is applicable, then according to:
(i) the actual cost incurred; or
(ii) the agreed contractual price.
In particular, the Comprehensive Agreement stipulates, among other things, that:
(i) the loans and deposits shall be provided at prices determined in accordance with the
relevant interest rate and standard for fees as promulgated by the Peoples Bank of China. Such
prices must also be more favourable than those provided by independent third parties; and
(ii) the guarantees shall be provided at prices not higher than the fees charged by the
state policy banks in relation to the provision of guarantees. References must also be made to
the relevant state-prescribed price and market price.
(2) First Supplemental Comprehensive Agreement
The First Supplemental Comprehensive Agreement dated June 9, 2005 was entered principally to
amend the definitions of state-prescribed price and market price in the Comprehensive Agreement
in view of the characteristics of overseas business and to amend the term of the Comprehensive
Agreement to three years. The First Supplemental Comprehensive Agreement took effect on December
19, 2005.
(3) Second Supplemental Comprehensive Agreement
The Second Supplemental Comprehensive Agreement entered into by CNPC and our company on
September 1, 2005 provides for certain new continuing related party transactions between our company
and certain companies in which both our company and CNPC are shareholders, and where CNPC and/or
its subsidiaries and/or affiliates (individually or together) is/are entitled to exercise, or
control the exercise of, 10% or more of the voting power at any general meeting of such company
(Jointly-owned Companies). In the Second Supplemental Comprehensive Agreement, CNPC and our
company agreed to amend certain terms of the Comprehensive Agreement, including, among other
things, that:
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both CNPC and our company shall provide and shall procure their respective entities
including their subsidiaries, branches and other relevant units to provide products and
services in accordance with the terms and principles of the Comprehensive Agreement; |
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the CNPC Group will provide certain risk operation services as part of the construction
and technical services to PetroChina, and these include the provision of exploration,
production and other relevant services within certain and specific reserves of our company
with exploration and exploitation difficulties; |
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PetroChina will provide certain financial assistance to the Jointly-owned Companies
including entrustment loans and guarantees; and |
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the Jointly-owned Companies will provide certain financial assistance to PetroChina
including entrustment loans and guarantees. |
Under the Second Supplemental Comprehensive Agreement, the products and services shall be
provided at prices determined according to the pricing principles for the corresponding products or
services under the Comprehensive Agreement (as amended).
The Second Supplemental Comprehensive Agreement has taken effect on January 1, 2006.
2. Product and Service Implementation Agreements
According to the current arrangements, from time to time and as required, individual product
and service implementation agreements may be entered into between the relevant service companies
and affiliates of CNPC or PetroChina providing the relevant products or services, as appropriate,
and the relevant members of PetroChina or CNPC, requiring such products or services, as
appropriate.
Each product and service implementation agreement will set out the specific products and
services requested by the relevant party and any detailed technical and other specifications which
may be relevant to those products or services. The product and service implementation agreements
may only contain provisions which are in all material respects consistent with the binding
principles and guidelines and terms and conditions in accordance with which such products and
services are required to be provided as contained in the Comprehensive Agreement.
As the product and service implementation agreements are simply further elaborations on the
provision of products and services as contemplated by the Comprehensive Agreement, they do not as
such constitute new categories of related party transactions.
3. Land Use Rights Leasing Contract
Our company and CNPC continue to implement the Land Use Rights Leasing Contract entered into
on March 10, 2000 under which CNPC has leased a total of 42,476 parcels of land in connection with
all aspects of the operations and business of our company covering an aggregate area of
approximately 1,145 million square metres, located throughout the PRC, to our company for a term of
50 years at an annual fee of RMB2 billion. The total fee payable for the lease of all such property
may, after the expiration of 10 years from the date of the Land Use Rights Leasing Contract, be
adjusted (to reflect market conditions prevalent at such time of adjustment, including the then
prevailing marketing prices, inflation or deflation (as applicable) and such other factors
considered as important by both parties in negotiating and agreeing to any such adjustment) by
agreement between our company and CNPC. In addition, any governmental, legal or other
administrative taxes and fees required to be paid in connection with the leased properties will be
borne by CNPC. However, any additional amount of such taxes and fees payable as a result of
changes in the PRC government policies after the effective date of the contract shall be
shared proportionately on a reasonable basis between CNPC and our company.
4. Buildings Leasing Contract and Buildings Supplementary Leasing Agreement
Our company and CNPC continue to implement the Buildings Leasing Contract entered into on
March 10, 2000 pursuant to which CNPC has leased to our company a total of 191 buildings covering
an aggregate of area of approximately 269,770 square metres, located throughout the PRC for the use
by our company for its business operation including the exploration, development and production of
crude oil, the refining of crude oil and petroleum products, the production and sale of chemicals,
etc. The 191 buildings were leased at a price of RMB145 per square metre per year, that is, an
aggregate annual fee of RMB39,116,650 for a term of 20 years. Our company is responsible for the
payment of any governmental, legal or other administrative taxes and maintenance charges required
to be paid in connection with these 191 buildings. The details of the buildings leased to our
company by other member companies within CNPC are set out in the Buildings Leasing Contract.
Further to the Buildings Leasing Contract mentioned above, our company entered into a
Supplemental Buildings Leasing Agreement (the Supplemental Buildings Agreement) with CNPC on
September 26, 2002 under which CNPC agreed to lease to our company another 404 buildings in
connection with the operation and business of our company, covering an aggregate of 442,730 square
meters. Compared to the Buildings Leasing Contract, the increase in the units being leased in the
Supplemental Buildings Agreement is mainly attributable to the expansion of our companys
operations mainly in the areas such as oil and natural gas exploration, the West-East Gas Pipeline
Project and the construction of the northeast refineries and chemical operation base. The total
rent payable under the Supplemental Buildings Agreement amounts to RMB157,439,540 per annum. Our
company and CNPC will, based on any changes in their production and operations, and changes in
84
the
market price, adjust the sizes and quantities of buildings leased under the Buildings Leasing
Contract as well as the Supplemental Buildings Agreement every three years. The Supplemental
Buildings Agreement became effective on January 1, 2003 and will expire at the same time as the
Buildings Leasing Contract. The terms and conditions of the Buildings Leasing Contract will, to the
extent not contradictory to the Supplemental Buildings Agreement, continue to apply.
5. Intellectual Property Licensing Contracts
Our company and CNPC continue to implement the three intellectual property licensing contracts
entered into on March 10, 2000, being the Trademark Licensing Contract, the Patent and Know-how
Licensing Contract and the Computer Software Licensing Contract. Pursuant to these licensing
contracts, CNPC has granted our company the exclusive right to use certain trademarks, patents, and
know-how and computer software of CNPC at no cost. These intellectual property rights relate to the
assets and businesses of CNPC which were transferred to our company pursuant to the restructuring.
6. Contract for the Transfer of Rights under Production Sharing Contracts
Our company and CNPC continue to implement the Contract for the Transfer of Rights under
Production Sharing Contracts dated December 23, 1999. As part of the restructuring, CNPC
transferred to our company relevant rights and obligations under 23 production sharing contracts
entered into with a number of international oil and natural gas companies, except for the rights
and obligations relating to CNPCs supervisory functions.
During the period between the establishment of our company and December 31, 2007, CNPC further
entered into 10 additional production sharing contracts which are currently effective. All the
rights and obligations under these production sharing contracts have been assigned to our company,
which have also been approved by the Ministry of Commerce of the PRC. According to the Contract for
the Transfer of Rights for the Exploration and Oil Production in the Daqing Zhaozhou Oilfield
Blocks 13 (3-6) and the Contract for the Transfer of Rights under Production Sharing Contracts
entered into in May 2002 and April 2007, respectively, between our company and CNPC, CNPC has
agreed to assign to our company all of its rights and obligations
under seven out of these 10
additional production sharing contracts executed on or prior to June 30, 2007 at nil consideration
and subject to applicable PRC laws and regulations, except for the rights and obligations relating
to CNPCs supervisory functions.
7. Guarantee of Debts Contract
Our company and CNPC continue to implement the Guarantee of Debts Contract entered into on
March 10, 2000, pursuant to which all of the debts of CNPC relating to the assets transferred to
our company in the restructuring were also transferred to, and assumed by, our company.
In the Guarantee of Debts Contract, CNPC has agreed to guarantee certain of the debts of our
company at no cost. As at December 31, 2007, the total amount
guaranteed was RMB 498 million.
As each of the applicable percentage ratio(s) (other than the profits ratio) in respect of the
Trademark Licensing Contract, the Patent and Know-how Licensing Contract, the Computer Software
Licensing Contract, the Contract for the Transfer of Rights under Production Sharing Contracts and
the Guarantee of Debts Contract is less than 0.1%, these transactions are exempted from the
reporting, announcement and independent shareholders approval requirements under Chapter 14A of
the Listing Rules. The Directors believe that these transactions had been entered into in the
normal and ordinary course of business for the benefits of our company and are in the interests of
the shareholders as a whole.
(II) Continuing Related Party Transactions with CNPC E&D
The following continuing related party transactions arose as a result of the completion of the
acquisition of the 67% equity interest in PKZ, which was announced by our company on August 23,
2006, on December 28, 2006:
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the provision of production services by CNPC to PetroChina; |
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the provision of construction and technical services by CNPC
to PetroChina; and |
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the provision of material supply services by CNPC to PetroChina. |
Upon completion of the acquisition of the 67% equity interest in PKZ, PKZ became a subsidiary
(as defined under the Listing Rules) of CNPC E&D. As CNPC is the controlling shareholder of our
company and as each of CNPC and our company is interested in 50% interest in CNPC E&D respectively,
therefore, CNPC and CNPC E&D are connected persons of our company under the Listing Rules. The
caps for these continuing related party transactions have already been included in that for
continuing related party transactions between PetroChina and CNPC.
(III) Continuing Related party transactions with CNPC (HK)
As part of the restructuring of CNPC and in preparation for the listing of our company on
Hong Kong Stock Exchange, and as disclosed in our companys prospectus dated March 27, 2000, CNPC and
our company entered into the Contract for the Transfer of Rights under Production Sharing Contracts
whereby the relevant rights and obligations (other than the supervisory functions related to CNPCs
role as
85
representative of the PRC government) of CNPC under certain contracts, including the Blocks
9-1 to 9-5 of the Xinjiang Karamay Oilfield Petroleum Contract dated July 1, 1996, entered into
between CNPC and Hafnium Limited (Xinjiang Contract) and the Leng Jiapu Area Petroleum Contract
dated December 30, 1997, entered into between CNPC and Beckbury International Limited (Liaohe
Contract), were novated to our company.
CNPC (HK) is a company listed on the Hong Kong Stock Exchange and a 51.89% owned subsidiary of
CNPC. Upon the effective novation by CNPC to our company of the above interest in the PRC Oil
Production Sharing Contracts (the Xinjiang Contract and the Liaohe Contract), certain transactions
pursuant to the PRC Oil Production Sharing Contracts constitute continuing related party
transactions of our company pursuant to the Listing Rules and the SSE Listing
Rules.
Summary of the major terms and conditions of these continuing related party transactions under
the Xinjiang Contract and the Liaohe Contract are as follows:
(1) Production and development cost sharing between our company and CNPC (HK): Our company and
CNPC (HK) shall share the development costs as well as the oil and natural gas produced from blocks
9-1 to 9-5 of the Karamay Oilfield, as to 46% by our company and 54% by CNPC (HK), and from the
Leng Jiapu Block of Liaohe Oilfield (Leng Jiapu Oilfield), as to 30% by our company and 70% by
CNPC (HK).
(2) Provision of assistance by our company to CNPC (HK): Our company shall provide assistance
to CNPC (HK), including: (i) leasing warehouses, terminal facilities, barges, pipeline and land,
etc.; (ii) obtaining approvals necessary for the conduct of the petroleum operations; and (iii)
obtaining office space, office supplies, transportation and communication facilities. For such
assistance, CNPC (HK) will pay an annual assistance fee of US$50,000 for each of blocks 9-1 to 9-5
of the Karamay Oilfield and the Leng Jiapu Oilfield. The amount of such fee was determined after
negotiations, and has taken into account the actual circumstances and conditions, including the
scope of the projects and the level of demand for such assistance. This fee shall be accounted for
as operating costs and shared by our company and CNPC (HK) in accordance with the procedures
described in the Xinjiang Contract and the Liaohe Contract.
(3) Payment of training fees: In the course of development and operations of each oilfield,
CNPC (HK) shall pay our company an amount of US$50,000 annually for the training of personnel
carried out by our company for each of blocks 9-1 to 9-5 of the Karamay Oilfield and the Leng Jiapu
Oilfield. The amount of such fee was determined after negotiations, and has taken into account the
actual circumstances and conditions, including the scope of the projects and the level of demand
for training.
(4) Sale of crude oil by CNPC (HK) to our company: CNPC (HK) has the right to deliver its
share of oil production from each of blocks 9-1 to 9-5 of the Karamay Oilfield and the Leng Jiapu
Oilfield to a destination of its choice, except for destinations which infringe on the political
interests of the PRC. However, given the transportation costs and the prevailing oil prices, the
only likely purchaser of the oil production attributable to CNPC (HK) from each of blocks 9-1 to
9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield is CNPC or its affiliates, including our
company, which will accept delivery of oil produced in blocks 9-1 to 9-5 of the Karamay Oilfield
and the Leng Jiapu Oilfield at the market price. Since the signing of the PRC Oil Production
Sharing Contracts, CNPC (HK) has sold all of its share of the oil production to CNPC or its
affiliates, including our company. As far as the Board of Directors is aware, CNPC (HK) intends to
continue with this arrangement. There is no contractual obligation upon our company to purchase oil
produced from blocks 9-1 to 9-5 of the Karamay Oilfield and the Leng Jiapu Oilfield, although, from
a commercial perspective, our company intends to continue to accept part of the deliveries. The
price of various grades of crude oil sold shall be set either with reference to the price approved
by the relevant PRC authorities, or as determined with reference to the prevailing fair
market price for transactions of crude oil of a similar quality in the major oil markets. This
will be adjusted to take into account the terms of transportation, payment and other terms.
The waiver in respect of the above continuing related party transactions between our company
and CNPC (HK) granted by the Hong Kong Stock Exchange expired on December 31, 2006. As each of the
applicable percentage ratio(s) (other than the profits ratio) in respect of the above continuing
related party transactions between our company and CNPC (HK) is more than 0.1% but less than 2.5%,
these transactions are exempted from the independent shareholders approval requirements and are
only subject to the reporting and announcement requirements under Rule 14A.34 of the Listing Rules.
An announcement was made by our company on August 23, 2006 in respect of the reporting and
announcement obligations for these continuing related party transaction for the period from January
1, 2007 to December 31, 2008.
(IV) Continuing Related Party Transactions with CRMSC and Beijing Gas
According
to Listing Rules, PetroChina has entered into continuing related party transactions with Beijing Gas and CRMSC
pursuant to the following agreements. For the transactions with Beijing Gas, PetroChina has
complied with the procedures for reporting and announcements obligations to the Hong Kong Stock
Exchange. The transactions with CRMSC and the caps for these transactions have been approved by
Hong Kong Stock Exchange and the same were first approved by shareholders at the
general meeting held on November 8, 2005 and subsequently approved by shareholders at the
general meeting held on November 1, 2006 with the revised caps.
(a) Beijing Gas Products and Services Agreement
86
Our company entered into a products and
services agreement with Beijing Gas on September 1,
2005. Pursuant to the agreement, PetroChina shall continuously provide products and services to
Beijing Gas, including the provision of natural gas and natural gas related transmission services.
The agreement was effective from January 1, 2006 with a term of
three years.
(b) CRMSC Products and Services Agreement
On September 1, 2005, our company entered into the CRMSC Products and Services Agreement with
CRMSC. Under the CRMSC Products and Services Agreement, products and services to be continuously
provided by our company to CRMSC include, among other things, refined products (such as gasoline,
diesel and other petroleum products). The term of the CRMSC Products
and Services Agreement is three
years commencing from January 1, 2006.
During the term of the CRMSC Products and Services Agreement, the product and service
implementation agreements may be terminated from time to time by the contracting parties providing
at least six months written notice of termination in relation to any one or more categories of
products or services. Further, in respect of any products or services already contracted to be
provided, termination may not take place until after such products and services have been provided.
Independent Non-Executive Directors Confirmation
In relation to the related party transactions undertaken by PetroChina in 2007, the
independent non-executive Directors of our company confirm that:
(i) the related party transactions mentioned above have been entered into in the ordinary and
usual course of business of our company;
(ii) the related party transactions mentioned above have been entered into on terms that are
fair and reasonable to the shareholders of our company;
(iii) the related party transactions mentioned above have been entered into on normal
commercial terms either (1) in accordance with the terms of the agreements governing such
transactions, or (2) (where there is no such agreement) on terms no less favourable than terms
available to independent third parties; and
(iv) where applicable, the related party transactions have been entered into within the annual
caps.
Loans or Guarantees with Related Parties
As of December 31, 2007, we had unsecured short-term and long-term loans from CP Finance in an
aggregate amount of RMB 24,482 million. The average annual interest rate on these loans is 5.17%.
ITEM 8 FINANCIAL INFORMATION
Financial Statements
See
pages F-1 to F-64 following Item 19.
Dividend Policy
Our board of directors will declare dividends, if any, in Renminbi
on a per share basis and will pay such dividends in Renminbi with respect to A Shares
and HK dollars with respect to H Shares. Any final dividend for a financial year shall be subject
to shareholders approval. The Bank of New York will convert the HK dollar dividend payments and
distribute them to holders of ADSs in U.S. dollars, less expenses of conversion. The holders of
the A Shares and H Shares will share proportionately on a per share basis in all dividends and
other distributions declared by our board of directors.
The declaration of dividends is subject to the discretion of our board of directors. Our board
of directors will take into account factors including the following:
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general business conditions; |
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our financial results; |
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capital requirements; |
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contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us; |
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our shareholders interests; |
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the effect on our debt ratings; and |
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other factors our board of directors may deem relevant. |
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We may only distribute dividends after we have made allowance for: |
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recovery of losses, if any; |
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allocations to the statutory common reserve fund; and |
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allocations to a discretionary common reserve fund if approved by our shareholders. |
The allocation to the statutory funds is 10% of our net income determined in accordance with
PRC accounting rules. Under PRC law, our distributable earnings will be equal to our net income
determined in accordance with PRC accounting rules or IFRS, whichever is lower, less allocations to
the statutory and discretionary funds.
Subject to the above and to ensure that our dividend policy is consistent with that of major
international oil and gas companies, we currently expect that we will distribute as dividends
approximately 40% to 50% of our reported net income for all years commencing on or after January 1,
2000. We believe that our dividend policy strikes a balance between two important goals:
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providing our shareholders with a competitive return on investment; and |
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assuring sufficient reinvestment of profits to enable us to achieve our strategic objectives. |
A dividend of RMB 0.205690 per H share (inclusive of applicable tax) for the six months ended
June 30, 2007 was paid to our shareholders on September 28, 2007. The board of directors proposed
to distribute the final dividend of RMB 0.156859 per H share (inclusive of applicable tax) which
was calculated on the basis of the balance between 45% of our net income under IFRS for the year
ended December 31, 2007 and the interim dividend for 2007 which was paid on September 28, 2007.
The final dividend to be paid has been approved by the annual shareholders meeting to be held
on May 15, 2008. The final dividend will be paid around June 13, 2008.
Significant Changes
None.
ITEM 9 THE OFFER AND LISTING
Nature of the Trading Market and Market Price Information
Our ADSs, each representing 100 H Shares, par value RMB 1.00 per H share, have been listed and
traded on the New York Stock Exchange since April 6, 2000 under the symbol PTR. Our H Shares have
been listed and traded on the Hong Kong Stock Exchange since April 7, 2000. In September 2005, our
company issued an additional 3,196,801,818 H Shares. CNPC also sold 319,680,182 state-owned shares
it held concurrently with our Companys issue of new H Shares in September 2005. In October 2007,
PetroChina issued 4 billion A Shares and these shares were listed on the Shanghai Stock Exchange on
November 5, 2007. Following the issuance of A Shares, all the domestic shares of our
company existing prior to the issuance of A Shares, i.e. the shares held by CNPC (our controlling
shareholder) in our company, have been registered with China Securities Depository and Clearing
Corporation Limited as tradable A shares. The New York Stock Exchange, the Hong Kong Stock
Exchange and Shanghai Stock Exchange are the principal trading markets for our ADSs, H Shares and A
Shares, respectively.
As of December 31, 2007, there were 21,098,900,000 H Shares and 4,000,000,000 A Shares issued
and outstanding. As of December 31, 2007, there were 316 registered holders of American depositary
receipts evidencing 19,004,728 ADSs. The depositary of the ADSs is The Bank of New York.
The high and low closing sale prices of the A Shares on the Shanghai Stock Exchange, H Shares
on the Hong Kong Stock Exchange and of the ADSs on the New York Stock Exchange for each quarterly
period from 2003 through May 16, 2008 are set forth below.
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Price Per H Share |
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Price Per ADS |
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Price Per A Share |
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HK$ |
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US$ |
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RMB |
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High |
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Low |
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High |
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Low |
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High |
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Low |
2003 |
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First quarter |
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1.70 |
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1.55 |
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21.61 |
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19.10 |
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Second quarter |
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2.38 |
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1.62 |
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30.82 |
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20.94 |
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Third quarter |
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2.80 |
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2.15 |
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35.89 |
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27.67 |
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Fourth quarter |
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4.45 |
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2.60 |
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57.05 |
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33.75 |
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2004 |
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First quarter |
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4.85 |
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3.75 |
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63.70 |
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47.53 |
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Second quarter |
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4.00 |
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3.20 |
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50.96 |
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41.63 |
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Third quarter |
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4.175 |
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3.60 |
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53.76 |
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45.98 |
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Fourth quarter |
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4.375 |
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4.075 |
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56.60 |
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52.22 |
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2005 |
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|
First quarter |
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5.10 |
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4.025 |
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65.36 |
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51.65 |
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Second quarter |
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5.85 |
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4.675 |
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74.65 |
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59.71 |
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Third quarter |
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7.35 |
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5.90 |
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94.50 |
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74.95 |
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Fourth quarter |
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6.50 |
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5.65 |
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83.70 |
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72.70 |
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2006 |
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First quarter |
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8.10 |
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6.35 |
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|
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104.95 |
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|
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83.50 |
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Second quarter |
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9.55 |
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7.10 |
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|
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122.75 |
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|
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90.63 |
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Third quarter |
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9.09 |
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8.17 |
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|
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117.20 |
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104.60 |
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Fourth quarter |
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11.12 |
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8.12 |
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142.12 |
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104.95 |
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2007 |
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First quarter |
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11.08 |
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8.57 |
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137.90 |
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109.55 |
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Second quarter |
|
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11.90 |
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8.89 |
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152.05 |
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112.14 |
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Third quarter |
|
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14.74 |
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|
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9.83 |
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185.58 |
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125.92 |
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Fourth quarter |
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19.90 |
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13.46 |
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263.70 |
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172.43 |
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43.96 |
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29.24 |
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2007 |
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|
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|
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|
November |
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19.90 |
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|
14.12 |
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|
255.06 |
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|
180.52 |
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43.96 |
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31.52 |
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December |
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15.88 |
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|
13.50 |
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|
205.60 |
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172.43 |
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31.96 |
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29.24 |
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2008 |
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|
|
|
|
|
|
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|
|
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|
|
|
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|
January |
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|
14.24 |
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|
9.62 |
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|
182.12 |
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|
140.70 |
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31.31 |
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24.02 |
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February |
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|
12.22 |
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|
10.64 |
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|
155.50 |
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|
140.57 |
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26.39 |
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21.91 |
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March |
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|
11.26 |
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|
9.17 |
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|
144.44 |
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|
120.63 |
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23.03 |
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16.99 |
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April |
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|
11.84 |
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9.77 |
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151.14 |
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125.92 |
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18.35 |
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16.01 |
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May (through |
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11.12 |
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10.90 |
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156.97 |
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140.21 |
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18.35 |
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17,39 |
|
May 16,
2008) |
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The closing prices per A share, per H share and per ADS on May 16, 2008 were RMB 17.61,
HK$11.52 and US$146.94, respectively.
ITEM 10 ADDITIONAL INFORMATION
Memorandum and Articles of Association
Our Articles of Association Currently in Effect
The following is a summary based on the significant provisions of our articles of association
currently in effect, which is filed with the Commission as an exhibit to this annual report on Form
20-F. We hereby incorporate by reference the relevant exhibit to this annual
report.
Enforceability of Shareholders Rights
Our articles of association provide that all differences or claims
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between a holder of H Shares and us; |
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between a holder of H Shares and any of our directors, supervisors, general managers,
deputy general managers or other senior officers; or |
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between a holder of H Shares and a holder of domestic shares, arising from any
provision of the articles of association, any right or obligation conferred or imposed by the PRC
Company Law or any other relevant law or administrative regulation which concerns our affairs
must, with certain exceptions, |
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be referred to arbitration at either the China International Economic and Trade Arbitration
Commission in the PRC or the Hong Kong International Arbitration Center. Our articles of
association provide that such arbitration will be final and conclusive. |
If the directors, president, senior vice presidents, chief financial officer or any other
executive officers violate any laws, administrative regulations or the articles of association of
our company during the performance of their corporate duties, which results in any damage to our
company, shareholders individually or in the aggregate hold more than 1% of the shares in our
company for a consecutive 180 days shall have the right to request our supervisory board in
writing to bring a lawsuit to the competent courts. If our supervisory board violates any laws,
administrative regulations or the articles of association of our company during the performance of
its corporate duties, which results in any damage to our company, the shareholders may request our
board of directors in writing to bring a lawsuit to the competent courts.
If the supervisory board or the board of directors refuses to bring such lawsuits upon receiving
the written request of the shareholders, or fails to file such lawsuit within 30 day following
their receipt of such written request, or in case of emergency under which our company would
sustain losses hard to be recovered if such lawsuit fails to be filed immediately, such
shareholders as described in the above paragraph shall have the right, in the interests of our
company, to bring a lawsuit directly in their own name.
If any third parties infringe our legal interests and make our company sustain any losses, the
shareholders described in the above paragraphs may file a lawsuit to the competent court in
accordance with the provisions in the above two paragraphs.
Restrictions on Transferability and the Share Register
The articles of association provide that PRC investors are not entitled to be registered as
holders of H Shares.
As provided in the articles of association, we may refuse to register a transfer of H Shares
unless:
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any relevant transfer fee is paid; |
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the instrument of transfer is accompanied by the share certificates to
which it relates, or such other evidence is given as may be reasonably
necessary to show the right of the transferor to make the transfer; |
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the instrument of transfer is in respect of one class of shares only; and |
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the transfer is conducted in accordance with the laws and administrative
regulations of or required by the securities exchanges on which the
shares are listed. |
Our articles of association provide that the shares held by our promoter in our company may
not be transferred within one year from the establishment date of our company. The shares issued
prior to the public offering of our company may not be transferred within one year from the date
the stocks issued in such public offering commencing to be listed on the relevant stock exchange.
The directors, supervisors, president, senior vice presidents, vice presidents, chief
financial officer and other executive officers shall report the number and change of the number of
shares they hold in our company, and may not transfer more than 25% of the total number of shares
he/she holds in our company in each year during his/her term of office. No shares held by such
persons in our company may be transferred (i) within one year from the date the stocks of our
company commencing to be listed on the relevant stock exchange, or (ii) within half a year from the
date of their resignation or removal, other than any transfer of such shares due to judicial
enforcement, inheritance, legacy, or partition of property by operation of law.
If any director, supervisor, president, senior vice president, vice president, chief financial
officer and any other executive officer holds less than 1,000 shares in our company, the transfer
of such shares is not subject to the above restriction on the percentage of share transfer, all of
which may be transferred in one time.
If the directors, supervisors, president, senior vice presidents, vice presidents, chief
financial officer and other executive officers or the shareholders holding at least 5% of the
domestic shares of our company sell the shares they hold in our company within six months
of acquiring the same, or buy such shares back within six months of selling the same, the gains
obtained therefrom shall belong to our company and
the board of directors of the company shall recover such gains from
them and disclose the relevant situation timely. However, a
securities company that underwrote shares on a firm commitment basis and which, after purchasing
the shares remaining after the sale, holds at least 5% of the shares shall not be subject to the
six month time limit when selling such shares.
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If the board of directors of our company fails to act in accordance with the preceding
paragraph, the shareholders shall have the right to demand that the board of directors act within
30 days. If the board of directors of our company fails to act within such 30-day time period, the
shareholders shall have the right, in the interests of our company, to directly institute legal
proceedings in a competent court in their own name. If the board of directors of our company fails
to act in accordance with the above provisions, the responsible directors shall be jointly and
severally liable in accordance with the law.
We are required to keep a register of our shareholders which shall be comprised of various
parts, including one part which is to be maintained in Hong Kong in relation to H Shares to be
listed on the Hong Kong Stock Exchange.
Dividends
We may distribute dividends twice a year, with the final dividend for any financial year being
subject to the approval of the shareholders by way of an ordinary resolution. The articles of
association allow for distribution of dividends in the form of cash or shares or any other form
permitted under applicable laws and regulations. If a proposal concerning distribution of
dividends in the form of cash or shares or conversion of the common reserve fund into share capital
is approved in a shareholders meeting, we shall implement a specific plan in connection with such
proposal within two months following the shareholders meeting.
Dividends may only be distributed, however, after allowance has been made for:
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recovery of losses, if any and the statutory common reserve fund is not enough to recover such losses; |
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allocations to the statutory common reserve fund; and |
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allocations to a discretionary common reserve fund if approved by the shareholders. |
The minimum and maximum aggregate allocations to the statutory funds are 15% and 20%,
respectively, of our net income determined in accordance with PRC accounting rules.
We shall allocate ten percent of our after-tax income to the statutory common reserve fund.
If the statutory common reserve fund of our company amounts to more than 50% of our registered
capital, we may cease any further allocation.
If the shareholders meeting of our company distributes profits to our shareholders before
recovering the losses and making allocations to the statutory common reserve fund, the shareholders
must return such profits they have received to our company. The shares held by our company in
itself do not participate any dividends distribution.
The articles of association require us to appoint on behalf of the holders of H Shares a
receiving agent which is registered as a trust corporation under the Trustee Ordinance of Hong Kong
to receive dividends declared by us in respect of the H Shares on behalf of such shareholders. The
articles of association require that cash dividends in respect of H Shares be declared in Renminbi
and paid by us in HK dollars.
Voting Rights and Shareholders Meetings
Our board of directors will convene a shareholders annual general meeting once every year and
within six months from the end of the preceding financial year. Our board will convene an
extraordinary general meeting within two months of the occurrence of any one of the following
events:
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where the number of directors is less than the number stipulated in the PRC Company law or two-thirds of the number specified
in our articles of association; |
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where our unrecovered losses reach one-third of the total amount of our share capital; |
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where shareholders individually or in the aggregate holding 10% or more of our issued and outstanding voting shares request
in writing the convening of an extraordinary general meeting; |
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where our board deems necessary or our supervisory board so request; or |
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any other events provided by applicable laws, administrative regulations, rules or the articles of association of our company. |
Meetings of a special class of shareholders must be called in certain enumerated situations
when the rights of the holders of such class of shares may be modified or adversely affected, as
discussed below. Shareholders holding 3% or more of the total number of voting shares may present
special proposals ten day prior to the shareholders meetings and shall deliver such proposal in
writing to the persons convening the shareholders meetings. The matters proposed in the special
proposals shall fall within the scope of the functions and powers of shareholders meetings, and
such proposals shall have specific subjects as well as specific matters to be resolved, and shall
be in compliance with the requirements of applicable laws, administrative regulations and the
articles of association of our company. The persons convening the shareholders meetings shall
send additional notices of shareholders meetings within two days after receiving such proposals
and announce the matters proposed therein.
All shareholders meetings must be convened by our board by written notice given to
shareholders not less than 45 days before the meeting. Based on the written replies received by us
20 days before a shareholders meeting, we will calculate the number of voting shares represented
by shareholders who have indicated that they intend to attend the meeting. Otherwise, we will,
within five days, inform the shareholders again of the motions to be considered and the date and
venue of the meeting by way of public announcement. After the announcement is made, the
shareholders meeting may be convened. The accidental omission by us to give notice of a meeting
to, or the non-receipt of notice of a meeting by, a shareholder will not invalidate the proceedings
at that shareholders meeting.
Shareholders at meetings have the rights, among other things, to approve or reject our profit
distribution plans, the annual budget, the financial statements, an increase or decrease in share
capital, the issuance of debentures, the merger or liquidation of PetroChina, any amendment to our
articles of association, external guarantees, purchase or sale of significant assets of PetroChina,
change of the purposes of the funds raised and our stock incentive plans. In addition, the rights
of a class of shareholders may not be modified or abrogated, unless approved by a special
resolution of all shareholders at a general shareholders meeting and by a special resolution of
shareholders of that class of shares at a separate meeting.
Our articles of association enumerate, without limitation, certain amendments which would be
deemed to be a modification or abrogation of the rights of a class of shareholders, including
increasing or decreasing the number of shares of a class disproportionate to increases or decreases
of other classes of shares, removing or reducing rights to receive dividends in a particular
currency or creating shares with voting or equity rights superior to shares of such class.
Each H share is entitled to one vote on all matters submitted to a vote of our shareholders at
all shareholders meetings, except for meetings of a special class of shareholders where only
holders of shares of the affected class are entitled to vote on the basis of one vote per share of
the affected class. The shares held by our company in itself are not entitled to any vote, and
such shares will not be included in the total number of voting shares in any shareholders meeting.
When any shareholder is required to abstain from voting on any particular resolution or restricted
to voting only for or against any particular resolution under the Listing Rules, any votes cast by
or on behalf of such shareholder in contravention of such requirement or restriction shall not be
counted.
Shareholders are entitled to attend and vote at meetings either in person or by proxy. Proxies
must be in writing and deposited at our legal address, or such other place as is specified in the
meeting notice, not less than 24 hours before the time for holding the meeting at which the proxy
proposes to vote or the time appointed for the passing of the relevant resolutions. When the
instrument appointing a proxy is executed by the shareholders attorney-in -fact, such proxy when
deposited must be accompanied by a notarially certified copy of the relevant power of attorney or
other authority under which the proxy was executed.
Except for those actions discussed below which require supermajority votes, resolutions of the
shareholders are passed by a simple majority of the voting shares held by shareholders who are
present in person or by proxy. Special resolutions must be passed by more than two-thirds of the
voting rights represented held by shareholders who are present in person or by proxy.
The following decisions must be adopted by special resolution:
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an increase or reduction of our share capital or the issue of shares of any class, warrants and other similar securities; |
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the issue of our debentures; |
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our division, merger, dissolution and liquidation; |
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amendments to our articles of association; |
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any purchase or sale of significant assets or any guarantee provided by our company within one year exceeding 30% of our
most recent audited aggregate assets; |
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stock incentive plans; and |
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any other matters required by applicable laws, administrative regulations or our articles of association, or considered
by the shareholders in a general meeting and which they have resolved by way of an ordinary resolution to be of a nature
which may have a material impact on us and should be adopted by special resolution. |
All other actions taken by the shareholders, including the appointment and removal of our
directors and independent auditors and the declaration of normal dividend payments or stock
distributions, will be decided by an ordinary resolution of the shareholders.
In addition, certain amendments to the articles of association require the approval and
consent of the relevant PRC authorities.
If any resolutions of our shareholders meetings or our board meetings violate any applicable
laws or administrative regulations, the shareholders shall have the right to request competent
courts to decide that such resolutions are invalid. If the procedures to convene any shareholders
meetings or any board meetings or any voting methods violate any applicable laws, administrative
regulations or our articles of association, or any resolutions violate our articles of association,
the shareholders shall, within 60 days from the adoption of such resolutions, have the right to
request competent courts to cancel such resolutions.
Board of Directors
Directors will be elected by shareholders at a general meeting. Because the shares do not
have cumulative voting rights, a holder of a majority of our shares is able to elect all of the
directors. Directors are elected for a term of not more than three years.
Meetings of the board of directors shall be held at least four times every year and shall be
convened by the Chairman of the board of directors, who shall notify all directors 14 days before
each meeting.
Our board of directors is accountable to the shareholders in general meetings and exercises
the following functions and powers to:
(a) be responsible for the convening of shareholders meetings and reporting on its work to the shareholders at such meetings;
(b) implement the resolutions passed by the shareholders in general meetings;
(c) determine our business plans and investment proposals;
(d) formulate our annual preliminary and final budgets;
(e) formulate our profit distribution proposal and loss recovery proposals;
(f) formulate proposals for the increase or reduction of our registered capital and the issuance of our debentures or other
securities and listings;
(g) draw up plans for our acquisition of our shares or our merger, division or dissolution, or change of our corporation form;
(h) decide on our internal management structure;
(i) appoint or remove our president and to appoint or remove the vice presidents and other senior officers, including the
financial controller, based on the recommendation of the general manager, and to decide on their remuneration;
(j) formulate our basic management system;
(k) formulate proposals for any amendment of our articles of association;
(l) manage the information disclosures of our company; and
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(m) exercise any other powers conferred by the shareholders in general meetings.
Except for items (f), (g) and (k), which require the affirmative vote of more than two-thirds
of all of our directors, resolutions on any other items may be approved by the affirmative vote of
a simple majority of our directors.
A director shall abstain from voting on any resolutions of the board of directors if he/she or
any of his/her associates or the relevant significant shareholder is interested therein, and he/she
shall not be counted in the quorum of the directors for such meetings. The board of directors
shall transact its businesses by convening a board meeting instead of by circulation of papers. If
an independent non-executive director or any of its associates does not have any significant
interest in the matters to be resolved in a board meeting, he/she shall attend the board meeting.
For purpose of this paragraph, the relevant significant shareholder and the associate herein have
the same meaning ascribed to it in the Hong Kong Stock Exchange Listing Rules. If any listing
rules of other stock exchanges on which our stocks listed have stricter stipulations on the
abstention of voting by directors, then such stipulations shall be followed.
In addition to obligations imposed by laws, administrative regulations or the listing rules of
the stock exchanges on which our H Shares are listed, the articles of association place on each of
our directors, supervisors, president, vice presidents and any other senior officers a duty to each
shareholder, in the exercise of our functions and powers entrusted to such person:
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not to cause us to exceed the scope of business stipulated in our business license; |
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to act honestly in our best interests; |
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not to expropriate our property in any way, including, without limitation, usurpation of opportunities which benefit us; and |
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not to expropriate the individual rights of shareholders, including,
without limitation, rights to distributions and voting rights, save
and except according to a restructuring which has been submitted to
the shareholders for their approval in accordance with the articles of
association. |
Our articles of association further place on each of our directors, supervisors, president,
vice presidents and senior officers:
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a duty, in the exercise of such persons powers and discharge of such
persons duties, to exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances; |
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a fiduciary obligation, in the exercise of our powers entrusted to him
or her, not to place himself or herself in a position where his or her
duty to us and his or her interests may conflict; and |
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a duty not to direct a person or entity related or connected to a
director, supervisor, president, vice president or senior officer in
certain relationships enumerated in the articles of association to act
in a manner which such director, supervisor, president, vice president
or senior officer is prohibited from doing. |
Subject to compliance with all relevant laws and administrative regulations, the shareholders
in a general meeting may by ordinary resolution remove any director before the expiration of his
term of office. Subject to certain qualifications, a director, supervisor, president, vice
president or other senior officer may be relieved of liability for a specific breach of his or her
duties by the informed consent of shareholders in a general meeting.
Supervisory Board
The Supervisory board is composed of seven members appointed to monitor our financial matters:
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to review the periodic reports prepared by the board of
directors and issue written opinions in connection with such review; |
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to verify financial reports and other financial information which have been prepared by the board and which are proposed
to be presented at shareholders meetings; |
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to oversee our directors, president, vice presidents and other senior officers in order to prevent such persons from
abusing their authority or infringing upon our interest; and |
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to contact with the directors on behalf of our company, or bring lawsuits against the directors, president, senior vice
president, vice president, chief financial officer or any other executive officers pursuant to Article 152 of the PRC
Company Law. |
The rights of the supervisory board are generally limited to investigating and reporting to
shareholders and management on our affairs and to calling shareholders extraordinary general
meetings.
One member of the supervisory board will be an employee representative appointed by our
employees. The remaining members will be appointed by the shareholders in a general meeting. One
member of the supervisory board shall be the chairman. A member of the supervisory board may not be
a director, the president, a vice president or the chief financial officer. The term of office of
each member of the supervisory board is three years, including the term of office of the chairman
of the supervisory board, both of which terms are renewable upon re-election and
re-appointment. Reasonable expenses incurred by the supervisory board in carrying out its duties
will be paid by us.
The supervisory board is accountable, and will report, to the shareholders in the
shareholders meetings.
Restrictions on Large or Controlling Shareholders
Our articles of association provide that, in addition to any obligation imposed by laws and
administrative regulations or required by the listing rules of the stock exchanges on which our
H Shares are listed, a controlling shareholder shall not exercise his voting rights in a manner
prejudicial to the interests of the shareholders generally or of some part of the shareholders:
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to relieve a director or supervisor from his or her duty to act honestly in our best interests; |
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to approve the expropriation by a director or supervisor of our assets in any way, including,
without limitation, opportunities which may benefit us; or |
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to approve the expropriation by a director or supervisor of the individual rights of other
shareholders, including, without limitation, rights to distributions and voting rights, except
according to a restructuring of our company which has been submitted for approval by the
shareholders in a general meeting in accordance with our articles of association. |
A controlling shareholder, however, will not be precluded by our articles of association or
any laws and administrative regulations or the listing rules of the stock exchanges on which our H
Shares are listed from voting on these matters.
A controlling shareholder is defined by our articles of association as any person who acting
alone or in concert with others:
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is in a position to elect more than one-half of the board of directors; |
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has the power to exercise, or to control the exercise of, 30% or more of our voting rights; |
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holds 30% or more of our issued and outstanding shares; or |
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has de facto control of us in any other way. |
Amended Articles of Association Pending for Approval
Our
company issued A Shares in 2007. Therefore, in order to comply with the PRC
regulatory requirements, our company proposed amendment to the articles of association in March
2008, which is subject to the approval of our shareholders at the annual shareholders meeting and
applicable regulatory approval and filing before they become effective. Accordingly, before
obtaining the approval of our shareholders and competent regulatory authorities, we are still
governed by our current articles of association in effect. We expect the approval for our amended
articles of association to be granted in due course.
The proposed amendment to our articles of association includes, among other things, the
composition of the board of directors, term of office of the directors and re-election of
directors, authority of providing external guarantees and investments, and the exercise and
protection of shareholders rights.
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Share Capital Structure
Upon the completion of our companys global initial public offering, the aggregate number of
common shares of our company was 175,824,176,000, of which the promoter CNPC held 158,241,758,000
shares, representing 90% of our total share capital at the time, and H shareholders held
17,582,418,000 shares, representing 10% of our total share capital at the time.
On September 15, 2005, our company issued 3,196,801,818 new shares. Concurrently CNPC sold
319,680,182 state-owned shares it held. Following these transactions, the share capital structure
of our company changed to the following: the number of common shares is 179,020,977,818, of which
CNPC holds 157,922,077,818 shares, representing 88.21% of the total share capital, and H
shareholders hold 21,098,900,000 shares, representing 11.79% of the total share capital.
In October 2007, our company issued 4 billion A Shares. Accordingly, the share capital
structure of our company changed to the following: the total share capital of our company
amounted to 183,020,977,818 shares, of which 157,922,077,818 shares were held by CNPC, representing
approximately 86.29% of the total share capital of our company, 4,000,000,000 shares were held
by holders of A Shares, representing approximately 2.18% of the total share capital of our company,
and 21,098,900,000 shares were held by holders of H Shares, representing approximately 11.53% of
the total share capital of our company.
Material Contracts
The following contracts, not being contracts in the ordinary course of business, have been
entered into by our company and/or its subsidiaries within the two years preceding the date of this
annual report and are or may be material.
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Share Purchase Agreement in respect of the shares of PetroKazakhstan,
dated August 23, 2006, between Pervinage Holding B.V. (a wholly owned
subsidiary of CNPC E&D) and 819 Luxembourg S. a r. l. (an indirect
wholly owned subsidiary of CNPC); |
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Capital Injection Agreement Concerning CNPC
Exploration and Development Company Limited, dated
December 27, 2007, among CNODC, CNPC E&D and
PetroChina (English Translation); and |
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Risk Operation Service Business Assets Transfer
Agreement, dated August 23, 2007, between CNPC and
PetroChina. |
The Renminbi currently is not a freely convertible currency. We receive most of our revenues
in Renminbi. A portion of our Renminbi revenues must be converted into other currencies to meet our
foreign currency obligations. We have substantial requirements for foreign currency, including:
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debt service on foreign currency-denominated debt; |
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purchases of imported equipment and materials; and |
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payment of any dividends declared in respect of the H Shares. |
Under the existing foreign exchange regulations in China, we may undertake current account
foreign exchange transactions, including the payment of dividends, without prior approval from the
State Administration of Foreign Exchange by producing commercial documents evidencing such
transactions, provided that they are processed through Chinese banks licensed to engage in foreign
exchange transactions. The PRC government has stated publicly that it intends to make the Renminbi
freely convertible in the future. However, uncertainty exists as to
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whether the PRC government may
restrict access to foreign currency for current account transactions if foreign currency becomes
scarce in the PRC.
Foreign exchange transactions under the capital account, including principal payments with
respect to foreign currency-denominated obligations, continue to be subject to limitations and
require the prior approval of the State Administration of Foreign Exchange. These limitations could
affect our ability to obtain foreign exchange through debt financing, or to obtain foreign exchange
for capital expenditures.
We have been, and will continue to be, affected by changes in exchange rates in connection
with our ability to meet our foreign currency obligations and will be affected by such changes in
connection with our ability to pay dividends on the H Shares in Hong Kong dollars and on ADSs in US
dollars. We believe that we have or will be able to obtain sufficient foreign exchange to continue
to satisfy these obligations. We do not engage in any financial contract or other arrangement to
hedge our currency exposure.
We are not aware of any other PRC laws, decrees or regulations that restrict the export or
import of capital or that affect the remittance of dividends, interest or other payments to
non-resident holders.
Taxation
The following discussion addresses the main PRC and United States tax consequences of the
ownership of H Shares or ADSs purchased held by the investor as capital assets.
PRC Taxation
Dividends and Individual Investors
Under the Provisional Regulations of China Concerning Questions of Taxation on Enterprises
Experimenting with the Share System (the Provisional Regulations) and other applicable tax laws
and regulations, dividends paid by PRC companies on shares experimenting with the share system to
individuals are generally subject to a PRC withholding tax of 20%. However, on July 21, 1993, the
PRC State Administration of Taxation issued the Notice Concerning the Taxation of Gains on Transfer
and Dividends from Shares (Equities) Received by Foreign Investment Enterprises, Foreign
Enterprises and Foreign Individuals (the Tax Notice). Under the Tax Notice, dividends paid by a
PRC company to foreign persons with respect to shares listed on an overseas stock exchange
(Overseas Shares), including the H Shares and ADSs, are not subject to PRC withholding tax for
the time being.
The Individual Income Tax Law of the PRC was amended effective January 1, 1994 and states that
it supersedes any contradictory prior administrative regulation concerning individual income tax.
The amended Individual Income Tax Law can be interpreted as providing that all foreign individuals
are subject to the 20% withholding tax on dividends paid by a PRC company on its Overseas Shares
unless specifically exempted by the financial authority of the State Council of the PRC. However,
in a letter dated July 26, 1994 to the former State Commission for Restructuring the Economic
System, the former State Council Securities Committee and the China Securities Regulatory
Commission, the PRC State Administration of Taxation restated the exemption. In the event that the
letter is withdrawn, a 20% tax may be withheld on dividends paid to you, subject to reduction by an
applicable tax treaty between China and the country where you reside. To date, the relevant tax
authorities have not collected withholding tax from dividend payments on sucH Shares exempted under
the Tax Notice.
Dividends and Foreign Enterprises
According to the Provisional Regulations and other applicable tax laws and regulations,
dividends paid by PRC companies to foreign enterprises are ordinarily subject to a PRC withholding
tax levied at a flat rate of 20%. However, according to the Tax Notice, a foreign enterprise with
no permanent establishment in China receiving dividends paid on Overseas Shares will temporarily
not be subject to the 20% withholding tax. If such withholding tax becomes applicable in the
future, such rate may still be reduced under relevant tax treaties, if applicable.
Tax Treaties
If you are a resident or citizen of a country that has entered into a double-taxation treaty
with the PRC, you may be entitled to a reduction in the amount of tax withheld, if any, imposed on
the payment of dividends. The PRC currently has such treaties with a number of countries, including
but not limited to:
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the United States; |
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Australia; |
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Canada; |
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France; |
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Germany; |
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Japan; |
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Malaysia; |
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Singapore; |
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the United Kingdom; and |
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the Netherlands. |
Under each one of such treaties, the rate of withholding tax imposed by Chinas taxation
authorities is generally reduced. For example, under the double taxation treaty between China and
the United States, China may tax dividends paid by us to an eligible U.S. holder up to a maximum of
10% of their gross amount. Under the treaty, an eligible U.S. holder is a person who, by reason of
domicile, residence, place or head office, place of incorporation or any other criterion of similar
nature is subject to taxation in the United States, as applicable under the treatys treaty
shopping provisions.
Capital Gains
The Tax Notice provides that gains realized by foreign enterprises upon the sale of Overseas
Shares which are not held by entities established by such enterprises in the PRC and gains realized
by foreign individuals upon the sale of Overseas Shares are not subject to withholding tax for the
time being. However, as far as individuals are concerned, the Individual Income Tax Law of the PRC,
as amended on October 31, 1993 and effective on January 1, 1994, provides for a capital gains tax
of 20% on individuals. On January 28, 1994, the Provisions for Implementing the Individual Income
Tax Law of the PRC was promulgated which provides that the measures to levy individual income tax
on the gains realized on the sale of shares will be made in the future by the Ministry of Finance
and subject to the approval of the State Council. On June 20, 1994, February 9, 1996 and March 30,
1998, the Ministry of Finance and the State Administration of Taxation issued notices providing
that temporarily no capital gains tax will be imposed on gains from the sale of shares by
individuals. However, it is uncertain whether the above exemption for foreign enterprises and
foreign individuals will continue to apply or be renewed in the future. If such exemption does not
apply or is not renewed, and the Tax Notice is found not to apply, as a holder of H Shares or ADSs
you may be subject to a 20% tax on capital gains, unless reduced by an applicable double taxation
treaty.
Additional PRC Tax Considerations
Under the Provisional Regulations of the Peoples Republic of China Concerning the Stamp Duty,
a stamp duty is not imposed by the PRC on the transfer of shares, such as the H Shares or ADSs, of
PRC publicly traded companies that take place outside of China.
United States Federal Income Taxation
The following is a general discussion of the material United States federal income tax
consequences of purchasing, owning and disposing of the H Shares or ADSs if you are a U.S. holder,
as defined below, and hold the H Shares or ADSs as capital assets within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended, or the Code. This discussion does not
address all of the tax consequences relating to the purchase, ownership and disposition of the H
Shares or ADSs, and does not take into account U.S. holders who may be subject to special rules
including:
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tax-exempt entities; |
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certain insurance companies; |
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broker-dealers; |
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traders in securities that elect to mark to market; |
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U.S. holders liable for alternative minimum tax; |
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U.S. holders that own 10% or more of our voting stock; |
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U.S. holders that hold the H Shares or ADSs as part of a straddle or a hedging or conversion transaction; or |
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U.S. holders whose functional currency is not the U.S. dollar. |
This discussion is based on the Code, its legislative history, final, temporary and proposed
United States Treasury regulations promulgated thereunder, published rulings and court decisions as
in effect on the date hereof, all of which are subject to change, or changes in interpretation,
possibly with retroactive effect. In addition, this discussion is based in part upon
representations of the depositary and the assumption that each obligation in the deposit agreement
and any related agreements will be performed according to its terms.
You are a U.S. holder if you are:
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a citizen or resident of the United States for United States federal income tax purposes; |
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a corporation, or other entity treated as a corporation for United States federal income tax purposes,
created or organized under the laws of the United States or any political subdivision thereof; |
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an estate the income of which is subject to United States federal income tax without regard to its source; or |
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a trust: |
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subject to the primary supervision of a United States court and the control of one or more United States persons; or |
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that has elected to be treated as a United States person under applicable United States Treasury regulations. |
If a partnership holds the H Shares or ADSs, the tax treatment of a partner generally will
depend on the status of the partner and the activities of the partnership. If you are a partner of
a partnership that holds the H Shares or ADSs, we urge you to consult your tax advisors regarding
the consequences of the purchase, ownership and disposition of the H Shares or ADSs.
This discussion does not address any aspects of United States taxation other than federal
income taxation.
We urge you to consult your tax advisors regarding the United States federal, state, local and
non-United States tax consequences of the purchase, ownership and disposition of the H Shares or
ADSs.
In general, if you hold ADRs evidencing ADSs, you will be treated as the owner of the H Shares
represented by the ADSs. The following discussion assumes that we are not a passive foreign
investment company, or PFIC, as discussed under PFIC Rules below.
Distributions on the H Shares or ADSs
The gross amount of any distribution (without reduction for any PRC tax withheld) we make on
the H Shares or ADSs out of our current or accumulated earnings and
income (as determined for
United States federal income tax purposes) will be includible in your gross income as dividend
income when the distribution is actually or constructively received by you, in the case of the H
Shares, or by the depositary in the case of ADSs. Subject to certain limitations, dividends paid to
non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation
if we are deemed to be a qualified foreign corporation for United States federal income tax
purposes. A qualified foreign corporation includes:
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a foreign corporation that is eligible for the benefits of a
comprehensive income tax treaty with the United States that includes
an |
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exchange of information program; or |
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a foreign corporation if its stock with respect to which a dividend is
paid (or ADSs backed by such stock) is readily tradable on an
established securities market within the United States, |
but does not include an otherwise qualified foreign corporation that is a PFIC. We believe
that we will be a qualified foreign corporation so long as we are not a PFIC and we are considered
eligible for the benefits of the Agreement between the Government of the United States of America
and the Government of the Peoples Republic of China for the Avoidance of Double Taxation and the
Prevention of Tax Evasion with Respect to Taxes on Income, or the Treaty. Our status as a qualified
foreign corporation, however, may change.
Distributions that exceed our current and accumulated earnings and profits will be treated as
a return of capital to you to the extent of your basis in the H Shares or ADSs and thereafter as
capital gain. Any dividend will not be eligible for the dividends-received deduction generally
allowed to United States corporations in respect of dividends received from United States
corporations. The amount of any distribution of property other than cash will be the fair market
value of such property on the date of such distribution.
If we make a distribution paid in HK dollars, you will be considered to receive the U.S.
dollar value of the distribution determined at the spot HK dollar/ U.S. dollar rate on the date
such distribution is received by you or by the depositary, regardless of whether you or the
depositary convert the distribution into U.S. dollars. Any gain or loss resulting from currency
exchange fluctuations during the period from the date the dividend payment is includible in your
income to the date you or the depositary convert the distribution into U.S. dollars will be treated
as United States source ordinary income or loss for foreign tax credit limitation purposes.
Subject to various limitations, any PRC tax withheld from distributions in accordance with PRC
law, as limited by the Treaty, will be deductible or creditable against your United States federal
income tax liability. For foreign tax credit limitation purposes, dividends paid on the H Shares or
ADSs will be foreign source income, and for taxable years beginning on or before December 31, 2006,
generally will be treated as passive income or, in the case of some U.S. holders, financial
services income. For taxable years beginning after December 31, 2006, such dividends generally
will be treated as passive category income or, in the case of some U.S. holders, general
category income. You may not be able to claim a foreign tax credit (and instead may claim a
deduction) for non-United States taxes imposed on dividends paid on the H Shares or ADSs if you (i)
have held the H Shares or ADSs for less than a specified minimum period during which you are not
protected from risk of loss with respect to sucH Shares, or (ii) are obligated to make payments
related to the dividends (for example, pursuant to a short sale).
Sale, Exchange or Other Disposition
Upon a sale, exchange or other disposition of the H Shares or ADSs, you will recognize a
capital gain or loss for United States federal income tax purposes in an amount equal to the
difference between the U.S. dollar value of the amount realized and your tax basis, determined in
U.S. dollars, in such H Shares or ADSs. Any gain or loss will generally be United States source
gain or loss for foreign tax credit limitation purposes. Capital gain of certain non-corporate U.S.
holders, including individuals, is generally taxed at a maximum rate of 15% where the property has
been held more than one year. Your ability to deduct capital losses is subject to limitations.
If you are paid in a currency other than U.S. dollars, any gain or loss resulting from
currency exchange fluctuations during the period from the date of the payment resulting from sale,
exchange or other disposition to the date you convert the payment into U.S. dollars will be treated
as United States source ordinary income or loss for foreign tax credit limitation purposes.
PFIC Rules
In general, a foreign corporation is a PFIC for any taxable year in which, after applying
relevant look-through rules with respect to the income and assets of subsidiaries:
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75% or more of its gross income consists of passive income, such as dividends, interest, rents and royalties; or |
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50% or more of the average quarterly value of its assets consists of assets that produce, or are held for the
production of, passive income. |
We believe that we will not meet either of the PFIC tests in the current or subsequent taxable
years and therefore will not be treated as a PFIC for such periods. However, there can be no
assurance that we will not be a PFIC in the current or subsequent taxable years.
If we were a PFIC in any taxable year that you held the H Shares or ADSs, you generally would
be subject to special rules with respect to excess distributions made by us on the H Shares or
ADSs and with respect to gain from your disposition of the H Shares or ADSs. An excess
distribution generally is defined as the excess of the distributions you receive with respect to
the H Shares or ADSs in any taxable year over 125% of the average annual distributions you have
received from us during the shorter of the three preceding years, or your holding period for the H
Shares or ADSs. Generally, you would be required to allocate any excess distribution or gain from
the disposition of the H Shares or ADSs
100
ratably over your holding period for the H Shares or ADSs.
The portion of the excess distribution or gain allocated to a prior taxable year, other than a year
prior to the first year in which we became a PFIC, would be taxed at the highest United States
federal income tax rate on ordinary income in effect for such taxable year, and you would be
subject to an interest charge on the resulting tax liability, determined as if the tax liability
had been due with respect to such particular taxable years. The portion of the excess distribution
or gain that is not allocated to prior taxable years, together with the portion allocated to the
years prior to the first year in which we became a PFIC, would be included in your gross income for
the taxable year of the excess distribution or disposition and taxed as ordinary income.
The foregoing rules with respect to excess distributions and dispositions may be avoided or
reduced if you are eligible for and timely make a valid mark-to -market election. If your H
Shares or ADSs were treated as shares regularly traded on a qualified exchange for United States
federal income tax purposes and a valid mark-to -market election was made, in calculating your
taxable income for each taxable year you generally would be required to take into account as
ordinary income or loss the difference, if any, between the fair market value and the adjusted tax
basis of your H Shares or ADSs at the end of your taxable year. However, the amount of loss you
would be allowed is limited to the extent of the net amount of previously included income as a
result of the mark-to -market election. The New York Stock Exchange on which the ADSs are traded is
a qualified exchange for United States federal income tax purposes.
Alternatively, a timely election to treat us as a qualified electing fund under Section 1295
of the Code could be made to avoid the foregoing rules with respect to excess distributions and
dispositions. You should be aware, however, that if we become a PFIC, we do not intend to satisfy
record keeping requirements that would permit you to make a qualified electing fund election.
If you own the H Shares or ADSs during any year that we are a PFIC, you must file Internal
Revenue Service, or IRS, Form 8621. We encourage you to consult your own tax advisor concerning the
United States federal income tax consequences of holding the H Shares or ADSs that would arise if
we were considered a PFIC.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividends in respect of the H
Shares or ADSs or the proceeds of the sale, exchange, or redemption of the H Shares or ADSs paid
within
the United States, and in some cases, outside of the United States, other than to various exempt
recipients, including corporations. In addition, you may, under some circumstances, be subject to
backup withholding with respect to dividends paid on the H Shares or ADSs or the proceeds of any
sale, exchange or transfer of the H Shares or ADSs, unless you
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are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or |
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provide a correct taxpayer identification number on a properly completed IRS Form W-9 or a substitute form,
certify that you are exempt from backup withholding and otherwise comply with applicable requirements of the
backup withholding rules. |
Any amount withheld under the backup withholding rules generally will be creditable against
your United States federal income tax liability provided that you furnish the required information
to the IRS in a timely manner. If you do not provide a correct taxpayer identification number you
may be subject to penalties imposed by the IRS.
Significant Differences in Corporate Governance Practices
We have filed a summary of the significant differences in our corporate governance practices
for purposes of Section 303A.11 of the New York Stock Exchange Listed Company Manual with the
Commission as an exhibit to this annual report on Form 20-F and have disclosed the same on our
website, www.petrochina.com.cn , which may be accessed as follows:
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From our main web page, first click on Investor Relations. |
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2. |
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Next, click on Corporate Governance Structure. |
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3. |
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Finally, click on Significant Differences In Corporate Governance
Practices For Purposes Of Section 303A.11 of The New York Stock
Exchange Listed Company Manual. |
Documents on Display
101
You may read and copy documents referred to in this annual report on Form 20-F that have been
filed with the U.S. Securities and Exchange Commission at the Commissions public reference room
located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms and their copy charges.
The Commission allows us to incorporate by reference the information we file with the
Commission. This means that we can disclose important information to you by referring you to
another document filed separately with the Commission. The information incorporated by reference is
considered to be part of this annual report on Form 20-F.
ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we hold or issue various financial instruments which expose
us to interest rate and foreign exchange rate risks. Additionally, our operations are affected by
certain commodity price movements. We historically have not used derivative instruments for hedging
or trading purposes. Such activities are subject to policies approved by our senior management.
Substantially all of the financial instruments we hold are for purposes other than trading. We
regard an effective market risk management system as an important element of our treasury function
and are currently enhancing our systems. A primary objective of our market risk management is to
implement certain methodologies to better measure and monitor risk exposures.
The following discussions and tables, which constitute forward-looking statements that
involve risks and uncertainties, summarize our market-sensitive financial instruments including
fair value, maturity and contract terms. Such discussions address market risk only and do not
present other risks which we face in the normal course of business.
Interest Rate Risk
Our interest risk exposure arises from changing interest rates. The tables below provide
information about our financial instruments including various debt obligations that are sensitive
to changes in interest rates. The tables present principal cash flows and related weighted-average
interest rates at expected maturity dates. Weighted-average variable rates are based on effective
rates as of December 31, 2005, 2006 and 2007. The information is presented in Renminbi
equivalents, our reporting currency.
Foreign Exchange Rate Risk
We conduct our business primarily in Renminbi. However, a portion of our RMB revenues are
converted into other currencies to meet foreign currency financial instrument obligations and to
pay for imported equipment, crude oil and other materials. Foreign currency payments for imported
equipment represented 29.1%, 33.6% and 13.6% of our total payments for equipment in 2005, 2006 and
2007 respectively. Foreign currency payments for imported crude oil and other materials represented
3.4%, 5.5% and 1.9% of our total payments for materials in 2005, 2006 and 2007 respectively.
The Renminbi is not a freely convertible currency. Limitation in foreign exchange transactions
imposed by the PRC government could cause future exchange rates to vary significantly from current
or historical exchange rates. The tables below provide information about our financial instruments
including foreign currency denominated debt instruments that are sensitive to foreign currency
exchange rates. The tables below summarize such information by presenting principal cash flows and
related weighted-average interest rates at expected maturity dates in RMB equivalents, using the
exchange rates in effect as of December 31, 2005, 2006 and 2007, respectively.
December 31, 2007
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Percentage |
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to total |
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Expected maturity date |
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long-term |
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Fair |
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2008 |
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2009 |
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2010 |
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2011 |
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2012 |
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Thereafter |
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Total |
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debt (%) |
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value |
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(RMB equivalent in millions, except percentages) |
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Long term debt |
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Loan in RMB |
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|
|
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Fixed rate |
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|
272 |
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|
2 |
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|
1 |
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275 |
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|
0.53 |
% |
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|
254 |
|
Average interest rate |
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|
3.83 |
% |
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|
0 |
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|
|
0 |
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|
Variable rate (1) |
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|
7,280 |
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|
5,220 |
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|
11,182 |
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10 |
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20 |
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8,700 |
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32,412 |
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62.45 |
% |
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|
32,412 |
|
Average interest rate |
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|
5.49 |
% |
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|
5.07 |
% |
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|
5.46 |
% |
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|
6.89 |
% |
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|
6.89 |
% |
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|
5.84 |
% |
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Loan in Euro |
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|
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Fixed rate |
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|
16 |
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|
16 |
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|
16 |
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16 |
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16 |
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|
|
167 |
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|
|
247 |
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|
|
0.48 |
% |
|
|
163 |
|
Average interest rate |
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|
2.12 |
% |
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|
2.12 |
% |
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|
2.12 |
% |
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|
2.12 |
% |
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2.12 |
% |
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|
2.10 |
% |
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|
|
102
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Percentage |
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to total |
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Expected maturity date |
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long-term |
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Fair |
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2008 |
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2009 |
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2010 |
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2011 |
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2012 |
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Thereafter |
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Total |
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debt (%) |
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value |
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(RMB equivalent in millions, except percentages) |
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Variable rate |
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Average interest rate |
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Loan in United States Dollar |
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Fixed rate |
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|
137 |
|
|
|
79 |
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|
45 |
|
|
|
39 |
|
|
|
39 |
|
|
|
468 |
|
|
|
807 |
|
|
|
1.56 |
% |
|
|
539 |
|
Average interest rate |
|
|
5.25 |
% |
|
|
3.62 |
% |
|
|
1.44 |
% |
|
|
1.43 |
% |
|
|
1.43 |
% |
|
|
1.38 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
4,234 |
|
|
|
249 |
|
|
|
2,629 |
|
|
|
77 |
|
|
|
3,431 |
|
|
|
2,867 |
|
|
|
13,487 |
|
|
|
25.99 |
% |
|
|
13,487 |
|
Average interest rate |
|
|
4.92 |
% |
|
|
5.33 |
% |
|
|
5.07 |
% |
|
|
5.50 |
% |
|
|
7.40 |
% |
|
|
5.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loan in Japanese Yen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
20 |
|
|
|
9 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37 |
|
|
|
0.07 |
% |
|
|
36 |
|
Average interest rate |
|
|
3.40 |
% |
|
|
2.42 |
% |
|
|
2.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debenture in United States Dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
241 |
|
|
|
181 |
|
|
|
184 |
|
|
|
183 |
|
|
|
|
|
|
|
334 |
|
|
|
1,123 |
|
|
|
2.17 |
% |
|
|
1,123 |
|
Average interest rate |
|
|
10.83 |
% |
|
|
9.50 |
% |
|
|
9.50 |
% |
|
|
9.50 |
% |
|
|
|
|
|
|
3.30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Debenture in RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
1,500 |
|
|
|
3,500 |
|
|
|
6.75 |
% |
|
|
2,981 |
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.76 |
% |
|
|
|
|
|
|
4.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
12,200 |
|
|
|
5,754 |
|
|
|
14,066 |
|
|
|
2,325 |
|
|
|
3,507 |
|
|
|
14,036 |
|
|
|
51,888 |
|
|
|
100.00 |
% |
|
|
50,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to total |
|
|
|
|
|
|
Expected maturity date |
|
|
long-term |
|
|
Fair |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
Thereafter |
|
|
Total |
|
|
debt (%) |
|
|
value |
|
|
|
(RMB equivalent in millions, except percentages) |
|
Long term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan in RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
62 |
|
|
|
272 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
335 |
|
|
|
0.60 |
% |
|
|
320 |
|
Average interest rate |
|
|
4.45 |
% |
|
|
3.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate (1) |
|
|
13,740 |
|
|
|
7,280 |
|
|
|
5,220 |
|
|
|
1,142 |
|
|
|
|
|
|
|
7,590 |
|
|
|
34,972 |
|
|
|
62.17 |
% |
|
|
34,972 |
|
Average interest rate |
|
|
5.21 |
% |
|
|
5.35 |
% |
|
|
4.64 |
% |
|
|
5.01 |
% |
|
|
|
|
|
|
5.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loan in Euro |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
17 |
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
176 |
|
|
|
257 |
|
|
|
0.46 |
% |
|
|
214 |
|
Average interest rate |
|
|
2.12 |
% |
|
|
2.12 |
% |
|
|
2.12 |
% |
|
|
2.12 |
% |
|
|
2.12 |
% |
|
|
2.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan in United States Dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
568 |
|
|
|
146 |
|
|
|
73 |
|
|
|
41 |
|
|
|
41 |
|
|
|
562 |
|
|
|
1,431 |
|
|
|
2.55 |
% |
|
|
1,200 |
|
Average interest rate |
|
|
7.69 |
% |
|
|
5.12 |
% |
|
|
3.96 |
% |
|
|
1.43 |
% |
|
|
1.43 |
% |
|
|
1.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
4,541 |
|
|
|
4,042 |
|
|
|
706 |
|
|
|
297 |
|
|
|
82 |
|
|
|
3,217 |
|
|
|
12,885 |
|
|
|
22.91 |
% |
|
|
12,885 |
|
Average interest rate |
|
|
5.68 |
% |
|
|
6.81 |
% |
|
|
5.95 |
% |
|
|
5.79 |
% |
|
|
4.72 |
% |
|
|
5.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loan in British Pound |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|
|
0.09 |
% |
|
|
47 |
|
Average interest rate |
|
|
2.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan in Japanese Yen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
37 |
|
|
|
21 |
|
|
|
9 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
75 |
|
|
|
0.13 |
% |
|
|
78 |
|
Average interest rate |
|
|
4.25 |
% |
|
|
3.40 |
% |
|
|
2.42 |
% |
|
|
2.42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debenture in United States Dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
|
205 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
781 |
|
|
|
343 |
|
|
|
1,349 |
|
|
|
2.40 |
% |
|
|
1,403 |
|
Average interest rate |
|
|
13.48 |
% |
|
|
15.00 |
% |
|
|
|
|
|
|
|
|
|
|
9.50 |
% |
|
|
3.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Debenture in RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
1,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
1,500 |
|
|
|
4,888 |
|
|
|
8.69 |
% |
|
|
4,449 |
|
Average interest rate |
|
|
4.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.76 |
% |
|
|
4.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to total |
|
|
|
|
|
|
Expected maturity date |
|
|
long-term |
|
|
Fair |
|
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
Thereafter |
|
|
Total |
|
|
debt (%) |
|
|
value |
|
|
|
(RMB equivalent in millions, except percentages) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
20,607 |
|
|
|
11,797 |
|
|
|
6,024 |
|
|
|
1,504 |
|
|
|
2,921 |
|
|
|
13,388 |
|
|
|
56,241 |
|
|
|
100.00 |
% |
|
|
55,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to total |
|
|
|
|
|
|
Expected maturity date |
|
|
long-term |
|
|
Fair |
|
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
Thereafter |
|
|
Total |
|
|
debt (%) |
|
|
value |
|
|
|
(RMB equivalent in millions, except percentages) |
|
Long term debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan in RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
|
|
|
|
66 |
|
|
|
274 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
341 |
|
|
|
0.57 |
% |
|
|
323 |
|
Average interest rate |
|
|
1.53 |
% |
|
|
4.18 |
% |
|
|
3.80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate (1) |
|
|
9,128 |
|
|
|
13,740 |
|
|
|
6,390 |
|
|
|
100 |
|
|
|
911 |
|
|
|
6,000 |
|
|
|
36,269 |
|
|
|
60.54 |
% |
|
|
36,269 |
|
Average interest rate |
|
|
5.18 |
% |
|
|
5.08 |
% |
|
|
5.12 |
% |
|
|
5.51 |
% |
|
|
4.77 |
% |
|
|
4.90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loan in Euro |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
15 |
|
|
|
177 |
|
|
|
256 |
|
|
|
0.43 |
% |
|
|
221 |
|
Average interest rate |
|
|
2.11 |
% |
|
|
2.11 |
% |
|
|
2.11 |
% |
|
|
2.11 |
% |
|
|
2.11 |
% |
|
|
2.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan in United States Dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
409 |
|
|
|
621 |
|
|
|
142 |
|
|
|
74 |
|
|
|
43 |
|
|
|
624 |
|
|
|
1,913 |
|
|
|
3.19 |
% |
|
|
1,633 |
|
Average interest rate |
|
|
6.26 |
% |
|
|
7.56 |
% |
|
|
5.02 |
% |
|
|
3.92 |
% |
|
|
1.43 |
% |
|
|
1.39 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
5,508 |
|
|
|
2,497 |
|
|
|
4,371 |
|
|
|
2,293 |
|
|
|
79 |
|
|
|
1,649 |
|
|
|
16,397 |
|
|
|
27.38 |
% |
|
|
16,397 |
|
Average interest rate |
|
|
5.60 |
% |
|
|
5.42 |
% |
|
|
5.99 |
% |
|
|
5.37 |
% |
|
|
2.69 |
% |
|
|
4.69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Loan in British Pound |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
116 |
|
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160 |
|
|
|
0.27 |
% |
|
|
156 |
|
Average interest rate |
|
|
2.85 |
% |
|
|
2.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan in Japanese Yen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
148 |
|
|
|
39 |
|
|
|
21 |
|
|
|
9 |
|
|
|
9 |
|
|
|
|
|
|
|
226 |
|
|
|
0.38 |
% |
|
|
242 |
|
Average interest rate |
|
|
4.74 |
% |
|
|
4.84 |
% |
|
|
4.48 |
% |
|
|
5.02 |
% |
|
|
5.02 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debenture in United States Dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
|
|
|
|
|
|
|
|
179 |
|
|
|
|
|
|
|
|
|
|
|
1,304 |
|
|
|
1,483 |
|
|
|
2.48 |
% |
|
|
1,509 |
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
8.25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Debenture in RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate |
|
|
|
|
|
|
1,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500 |
|
|
|
2,850 |
|
|
|
4.76 |
% |
|
|
2,664 |
|
Average interest rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
15,325 |
|
|
|
18,373 |
|
|
|
11,393 |
|
|
|
2,492 |
|
|
|
1,057 |
|
|
|
11,255 |
|
|
|
59,895 |
|
|
|
100 |
% |
|
|
59,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Due to the declining interest rates in recent years in China, the PRC
government has implemented a program to adjust interest rates on
certain fixed RMB loans periodically to reflect the market rates in
effect published by the Peoples Bank of China, or the PBOC, from time
to time. As a result, these previously fixed RMB loans are categorized
as variable rate loans as of December 31, 2005, 2006 and 2007. The
newly adjusted rates usually become effective one year after the
announcement by the PBOC. The average interest rates on these loans
are calculated based on the then effective rates as of December 31,
2005, 2006 and 2007, respectively. |
Commodity Price Risk
We are engaged in a broad range of petroleum related activities. The hydrocarbon commodity
markets are influenced by global as well as regional supply and demand conditions. We publish the
prices of crude oil supplied to the domestic and foreign market on a monthly basis with reference
to international prices of crude oil. A decline in prices of crude oil and refined products could
adversely affect our financial performance. We historically have not used commodity derivative
instruments to hedge the potential price fluctuations of crude oil and other refined products.
Therefore, during 2008 and years thereafter, we will be exposed to the general price fluctuations of
broadly traded oil and gas commodities.
ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
104
PART II
ITEM 13 DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES
None.
ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS
TO SECURITY HOLDERS
None.
ITEM 15 CONTROLS AND PROCEDURES
Evaluation of the Management on Disclosure Controls and Procedures
Our Chairman, who performs the functions of Chief Executive Officer, and our Chief Financial
Officer, after evaluating the effectiveness of PetroChinas disclosure controls and procedures (as
defined in the United States Exchange Act Rules 13a-15(e) and 15d(e)) as of the end of the period
covered by this annual report, have concluded that, as of such date, our companys disclosure
controls and procedures were effective to ensure that material information required to be disclosed
in the reports that we file and furnish under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange Commissions rules
and regulations.
Managements Report on Internal Control over Financial Reporting
Our companys management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act Rules 13a-15(f). Under the
supervision and with the participation of our companys management, including our principal
executive officer and principal financial officer, our company evaluated the effectiveness of the
its internal control over financial reporting based on criteria established in the framework in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, our companys management has concluded that its
internal control over financial reporting was effective as of December 31, 2007.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies and procedures may deteriorate.
The effectiveness of the companys internal control over financial reporting as of December
31, 2007 has been audited by PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), the
companys independent registered public accountants, as stated in its report included on page F-3.
Changes in Internal Control over Financial Reporting
During the year ended December 31, 2007, there were no changes in the companys internal
control over financial reporting that have materially affected, or are reasonably likely to
materially affect, the companys internal control over financial reporting.
ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT
Our audit committee is composed of three non-executive independent directors, Messrs. Franco
Bernabè, Chee-Chen Tung and Cui Junhui, and one non-executive director, Wang Guoliang. See Item 6
Directors, Senior Management and Employees Board
Practices Audit Committee. Cui Junhui, our non-executive
independent director, is currently in the process of being confirmed as a
financial expert, as defined in Item 16A of Form 20-F. In June 2006, with the consent of the
audit committee, we retained COSO Chairman, Dr. Larry E Rittenberg, as the financial advisor to our
audit committee to give assistance with relevant work. In April 2008, Dr. Larry E Rittenberg,
resigned from the position of the financial advisor to our audit
committee due to health reasons.
ITEM 16B CODE OF ETHICS
We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial
Officer, Chief Accounting Officer, other executives and senior officers and a separate Code of
Ethics that applies to all of our employees. We have included these two Codes of Ethics as Exhibit
16.1 and 16.2 to this annual report.
These two Codes of Ethics are also posted on our website, www.petrochina.com.cn, and may be
accessed as follows:
|
1. |
|
From our main web page, first click on Investor Relations. |
|
|
2. |
|
Next, click on Corporate Governance Structure. |
|
|
3. |
|
Finally, click on Code of Ethics for Senior Management or Code of Ethics for Employees of PetroChina Company Limited. |
105
ITEM 16C PRINCIPAL ACCOUNTANT FEES AND SERVICES
PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) has served as PetroChinas
independent registered public accountants for each of the fiscal years in the three-year period ended December
31, 2007, for which audited financial statements appear in this annual report on Form 20-F. The
auditors are elected annually at the annual general meeting of PetroChina.
The offices of PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) are located at
Princes Building, 22nd Floor, Central, Hong Kong.
The following table presents the aggregate fees for professional audit services and other
services rendered by PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) to PetroChina
for each of the years ended December 31, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
(in millions) |
|
Audit fees |
|
|
140 |
|
|
|
119 |
|
Audit-related fees |
|
|
|
|
|
|
|
|
Tax fees |
|
|
|
* |
|
|
|
* |
All other fees |
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
165 |
|
|
|
119 |
|
|
|
|
|
|
|
|
Audit fees consist of fees billed for the annual audit services and other audit services,
which are those services that only the external auditor reasonably can provide, and include the
group audit, statutory audits, and assistance with and review of documents filed with SEC.
Tax fees include fees billed for tax compliance services and the aggregate fees are less than
RMB 1 million for each of years ended December 31, 2006 and 2007.
Included in other fees mainly include fees approved in 2006 in relation to the
services in connection with our companys preparedness project on internal control procedures over
financial reporting under Section 404 of the Sarbanes-Oxley Act
Audit Committee Pre-approved Policies and Procedures
Currently, all non-audit services to be provided by our independent registered public
accountants, PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), must be approved by
our audit committee.
During 2007, services relating to all audit-related fees provided to us by
PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) were approved by our audit
committee in accordance with the de minimis exception to the pre-approval requirement provided by
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
ITEM 16D EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
PART III
ITEM 17 FINANCIAL STATEMENTS
We have elected to provide the financial statements and related information specified in Item
18 in lieu of Item 17.
ITEM 18 FINANCIAL STATEMENTS
See
page F-1 to F-64 following Item 19.
106
ITEM 19 EXHIBITS
(a) |
|
See Item 18 for a list of the financial statements as part of this annual report. |
|
(b) |
|
Exhibits to this annual report. |
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibits |
1.1
|
|
Articles of Association (as amended) (English translation) |
|
|
|
1.2
|
|
Articles of Association (as amended and pending for approval of SASAC) (English translation) |
|
|
|
4.1
|
|
Form of 2008 Management Performance Contract (English Translation) |
|
|
|
4.2
|
|
Risk Operation Service Business Assets Transfer Agreement, dated August 23, 2007, between
CNPC and PetroChina (English Translation) |
|
|
|
4.3
|
|
Capital Injection Agreement Concerning CNPC Exploration and Development Company Limited,
dated December 27, 2007, among CNODC, CNPC E&D and PetroChina (English Translation) |
|
|
|
4.4
|
|
Crude Oil Mutual Supply Framework
Agreement, dated January 8, 2008, between China
Petroleum and Chemical Corporation and PetroChina (English translation) |
|
|
|
4.5
|
|
Second Supplemental Agreement to Comprehensive products and Services Agreement, dated
September 1, 2005, between CNPC and PetroChina (English
translation) (2) |
107
|
|
|
Exhibit |
|
|
Number |
|
Description of Exhibits |
4.6
|
|
Supplementary Agreement to Comprehensive Products and Services Agreement, dated June 9, 2005, between
CNPC and PetroChina (English Translation) (3) |
|
|
|
4.7
|
|
Form of Non-competition Agreement between CNPC and PetroChina (together with English translation) (4) |
|
|
|
4.8
|
|
Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (together with
English translation) (4) |
|
|
|
4.9
|
|
Form of Land Use Rights Leasing Contract between CNPC and PetroChina (together with English
translation) (4) |
|
|
|
4.10
|
|
Form of Buildings Leasing Contract between CNPC and PetroChina (together with English translation) (4) |
|
|
|
4.11
|
|
Form of Trademark Licensing Contract between CNPC and PetroChina (together with English translation)
(4) |
|
|
|
4.12
|
|
Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (together with English
translation) (4) |
|
|
|
4.13
|
|
Form of Computer Software Licensing Contract between CNPC and PetroChina (together with English
translation) (4) |
|
|
|
4.14
|
|
Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina
(together with English translation) (4) |
|
|
|
4.15
|
|
Form of Guarantee of Debts Contract between CNPC and PetroChina (together with English translation) (4) |
|
|
|
4.16
|
|
Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina
(together with English translation) (4) |
|
|
|
4.17
|
|
Form of Agreement for Transfer of Rights and Interests under the Crude Oil Premium and Discount
Calculation Agreement between China Petrochemical Corporation, CNPC and PetroChina (together with
English translation) (4) |
|
|
|
4.18
|
|
Form of Agreement for the Transfer of Rights and Interests under the Retainer Contracts relating to
Oil Exploration and Exploitation in Lengjiapu Area, Liaohe Oil Region and No. 9.1-9.5 Areas, Karamay
Oil Field (together with English translation) (4) |
|
|
|
4.19
|
|
Share Purchase Agreement in respect of the shares of PetroKazakhstan, dated August 23, 2006, between
Pervinage Holding B.V. (a wholly owned subsidiary of CNPC E&D) and 819 Luxembourg S. a r. l. (an
indirect wholly owned subsidiary of CNPC) (1) |
|
|
|
8.1
|
|
List of major subsidiaries |
|
|
|
10.1
|
|
Significant Differences in Corporate Governance Practices for Purposes of Section 303A.11 of the New
York Exchange Listed Company Manual (3) |
|
|
|
12.1
|
|
Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
12.2
|
|
Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
13.1
|
|
Certification of Chief Executive Officer required by 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
13.2
|
|
Certification of Chief Financial Officer required by 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
16.1
|
|
Code of Ethics for Senior Management (3) |
|
|
|
16.2
|
|
Code of Ethics for Employees (3) |
(1) |
|
Incorporated by reference to our annual report on Form 20-F for the
fiscal year ended December 31, 2006 (File No. 1-15006) filed with the
Commission. |
|
(2) |
|
Incorporated by reference to our annual report on Form 20-F for the
fiscal year ended December 31, 2005 (File No. 1-15006) filed with the
Commission. |
|
(3) |
|
Incorporated by reference to our annual report on Form 20-F for the
fiscal year ended December 31, 2004 (File No. 1-15006) filed with the
Commission. |
|
(4) |
|
Incorporated by reference to our Registration Statement on Form F-1
(File No. 333-11566) filed with the Commission, as declared effective
on March 29, 2000. |
108
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this annual report on its
behalf.
|
|
|
|
|
|
PETROCHINA COMPANY LIMITED
|
|
|
/s/ Li Huaiqi
|
|
|
Name: |
Li Huaiqi |
|
|
Title: |
Secretary to Board of Directors |
|
|
Date: May 23, 2008
109
INDEX OF FINANCIAL STATEMENTS
|
|
|
|
|
Page |
PetroChina Company Limited and its Subsidiaries
Consolidated Financial Statements |
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
F-3 |
|
|
|
|
|
F-4 |
|
|
|
|
|
F-5 |
|
|
|
|
|
F-6 |
|
|
|
|
|
F-8 |
|
|
|
|
|
F-9 |
|
|
|
|
|
F-60 |
F-1
Managements Report on Internal Control over Financial Reporting
Our companys management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act Rules 13a-15(f). Under the
supervision and with the participation of our companys management, including our principal
executive officer and principal financial officer, our company evaluated the effectiveness of the
its internal control over financial reporting based on criteria established in the framework in
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on this evaluation, our companys management has concluded that its
internal control over financial reporting was effective as of December 31, 2007.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies and procedures may deteriorate.
The
effectiveness of our companys internal control over financial reporting as of December
31, 2007 has been audited by PricewaterhouseCoopers (Certified Public
Accountants, Hong Kong), our
companys independent registered public accountants, as stated in its report included herein.
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of PetroChina Company Limited:
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of income, of changes in equity and of cash flows (consolidated financial statements)
present fairly, in all material respects, the financial position of PetroChina Company Limited
(the Company) and its subsidiaries (collectively referred to as the Group) at December 31, 2007
and 2006, and the results of their operations and their cash flows for each of the three years in
the period ended December 31, 2007 in conformity with International Financial Reporting Standards
as issued by the International Accounting Standards Board. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys
management is responsible for these financial statements, for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting, included in the accompanying Managements Report on Internal Control Over
Financial Reporting. Our responsibility is to express opinions on these financial statements and
on the Companys internal control over financial reporting based on our audits which were
integrated audits in 2007 and 2006. We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement and whether effective internal control over financial reporting
was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, May 22, 2008
F-3
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
Notes |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues |
|
|
|
|
|
|
552,229 |
|
|
|
688,978 |
|
|
|
835,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases, services and other |
|
|
|
|
|
|
(200,321 |
) |
|
|
(271,123 |
) |
|
|
(370,740 |
) |
Employee compensation costs |
|
|
6 |
|
|
|
(29,675 |
) |
|
|
(39,161 |
) |
|
|
(50,616 |
) |
Exploration expenses, including
exploratory dry holes |
|
|
|
|
|
|
(15,566 |
) |
|
|
(18,822 |
) |
|
|
(20,648 |
) |
Depreciation, depletion and amortization |
|
|
|
|
|
|
(51,305 |
) |
|
|
(61,388 |
) |
|
|
(66,625 |
) |
Selling, general and administrative
expenses |
|
|
|
|
|
|
(36,538 |
) |
|
|
(43,235 |
) |
|
|
(51,576 |
) |
Taxes other than income taxes |
|
|
7 |
|
|
|
(23,616 |
) |
|
|
(56,666 |
) |
|
|
(73,712 |
) |
Other expense, net |
|
|
|
|
|
|
(3,037 |
) |
|
|
(607 |
) |
|
|
(1,265 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES |
|
|
|
|
|
|
(360,058 |
) |
|
|
(491,002 |
) |
|
|
(635,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM OPERATIONS |
|
|
|
|
|
|
192,171 |
|
|
|
197,976 |
|
|
|
199,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCE COSTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange gain |
|
|
|
|
|
|
942 |
|
|
|
1,830 |
|
|
|
1,693 |
|
Exchange loss |
|
|
|
|
|
|
(854 |
) |
|
|
(1,756 |
) |
|
|
(2,559 |
) |
Interest income |
|
|
|
|
|
|
1,924 |
|
|
|
2,066 |
|
|
|
1,990 |
|
Interest expense |
|
|
8 |
|
|
|
(2,762 |
) |
|
|
(3,220 |
) |
|
|
(3,595 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL NET FINANCE COSTS |
|
|
|
|
|
|
(750 |
) |
|
|
(1,080 |
) |
|
|
(2,471 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FROM EQUITY AFFILIATES AND
JOINTLY CONTROLLED ENTITIES |
|
|
18 |
|
|
|
2,401 |
|
|
|
2,277 |
|
|
|
6,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
|
|
|
|
193,822 |
|
|
|
199,173 |
|
|
|
204,381 |
|
INCOME TAXES |
|
|
9 |
|
|
|
(54,180 |
) |
|
|
(49,776 |
) |
|
|
(49,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME FOR THE YEAR |
|
|
|
|
|
|
139,642 |
|
|
|
149,397 |
|
|
|
155,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATTRIBUTABLE TO: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY HOLDERS OF THE COMPANY |
|
|
|
|
|
|
133,362 |
|
|
|
142,224 |
|
|
|
145,625 |
|
MINORITY INTEREST |
|
|
|
|
|
|
6,280 |
|
|
|
7,173 |
|
|
|
9,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,642 |
|
|
|
149,397 |
|
|
|
155,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED NET INCOME PER SHARE
FOR INCOME ATTRIBUTABLE TO EQUITY
HOLDERS OF THE COMPANY DURING THE YEAR
(RMB yuan) |
|
|
10 |
|
|
|
0.75 |
|
|
|
0.79 |
|
|
|
0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NUMBER OF SHARES |
|
|
10 |
|
|
|
179,021 |
|
|
|
179,021 |
|
|
|
183,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS
OF THE COMPANY |
|
|
11 |
|
|
|
53,667 |
|
|
|
68,589 |
|
|
|
64,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-4
PETROCHINA COMPANY LIMITED
CONSOLIDATED
BALANCE SHEETS
As of December 31, 2006 and 2007
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
Notes |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
12 |
|
|
|
48,559 |
|
|
|
65,494 |
|
Time deposits with maturities over three months but within one
year |
|
|
|
|
|
|
3,012 |
|
|
|
18,042 |
|
Notes receivable |
|
|
13 |
|
|
|
2,844 |
|
|
|
4,735 |
|
Accounts receivable, less allowance for doubtful
accounts receivable |
|
|
14 |
|
|
|
8,488 |
|
|
|
18,419 |
|
Inventories |
|
|
15 |
|
|
|
76,038 |
|
|
|
88,467 |
|
Prepaid expenses and other current assets |
|
|
16 |
|
|
|
23,281 |
|
|
|
36,018 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS |
|
|
|
|
|
|
162,222 |
|
|
|
231,175 |
|
Property, plant and equipment, less accumulated
depreciation, depletion and amortization |
|
|
17 |
|
|
|
645,337 |
|
|
|
762,882 |
|
Investments in equity affiliates and jointly controlled entities |
|
|
18 |
|
|
|
32,956 |
|
|
|
26,535 |
|
Available-for-sale financial assets |
|
|
19 |
|
|
|
2,054 |
|
|
|
2,581 |
|
Advance operating lease payments |
|
|
20 |
|
|
|
20,468 |
|
|
|
23,417 |
|
Intangible and other assets |
|
|
21 |
|
|
|
6,627 |
|
|
|
8,488 |
|
Time deposits with maturities over one year |
|
|
|
|
|
|
2,499 |
|
|
|
5,053 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
|
|
872,163 |
|
|
|
1,060,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debts |
|
|
23 |
|
|
|
35,763 |
|
|
|
30,934 |
|
Accounts payable and accrued liabilities |
|
|
22 |
|
|
|
120,182 |
|
|
|
144,353 |
|
Income tax payable |
|
|
9 |
|
|
|
17,744 |
|
|
|
11,709 |
|
Other taxes payable |
|
|
|
|
|
|
6,190 |
|
|
|
11,099 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
|
|
|
|
|
179,879 |
|
|
|
198,095 |
|
Long-term debts |
|
|
23 |
|
|
|
35,634 |
|
|
|
39,688 |
|
Other long-term obligations |
|
|
|
|
|
|
995 |
|
|
|
1,035 |
|
Asset retirement obligations |
|
|
24 |
|
|
|
18,481 |
|
|
|
24,761 |
|
Deferred taxes |
|
|
25 |
|
|
|
19,583 |
|
|
|
20,205 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
|
254,572 |
|
|
|
283,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY |
|
|
|
|
|
|
|
|
|
|
|
|
State-owned shares |
|
|
26 |
|
|
|
157,922 |
|
|
|
|
|
A shares |
|
|
26 |
|
|
|
|
|
|
|
161,922 |
|
H shares |
|
|
26 |
|
|
|
21,099 |
|
|
|
21,099 |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital, issued and outstanding, RMB1.00 Par value |
|
|
26 |
|
|
|
179,021 |
|
|
|
183,021 |
|
Retained earnings |
|
|
|
|
|
|
264,092 |
|
|
|
332,432 |
|
Capital reserve |
|
|
27 |
|
|
|
(8,881 |
) |
|
|
53,362 |
|
Revaluation reserve |
|
|
27 |
|
|
|
79,946 |
|
|
|
79,946 |
|
Statutory common reserve fund |
|
|
27 |
|
|
|
89,928 |
|
|
|
102,696 |
|
Currency translation differences |
|
|
27 |
|
|
|
(570 |
) |
|
|
(1,341 |
) |
Other reserves |
|
|
27 |
|
|
|
(16,859 |
) |
|
|
(16,711 |
) |
MINORITY INTEREST |
|
|
|
|
|
|
30,914 |
|
|
|
42,942 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL EQUITY |
|
|
|
|
|
|
617,591 |
|
|
|
776,347 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
|
|
|
|
|
872,163 |
|
|
|
1,060,131 |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-5
PETROCHINA COMPANY LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
Notes |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income for the year |
|
|
|
|
|
|
139,642 |
|
|
|
149,397 |
|
|
|
155,229 |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
9 |
|
|
|
54,180 |
|
|
|
49,776 |
|
|
|
49,152 |
|
Depreciation, depletion and amortization |
|
|
|
|
|
|
51,305 |
|
|
|
61,388 |
|
|
|
66,625 |
|
Capitalized exploratory costs charged to
expense |
|
|
|
|
|
|
6,547 |
|
|
|
9,494 |
|
|
|
9,161 |
|
Income from equity affiliates and jointly
controlled entities |
|
|
18 |
|
|
|
(2,401 |
) |
|
|
(2,277 |
) |
|
|
(6,997 |
) |
Allowance for doubtful receivables, net |
|
|
14, 16 |
|
|
|
(455 |
) |
|
|
(316 |
) |
|
|
(2,353 |
) |
Write down in inventories, net |
|
|
15 |
|
|
|
(139 |
) |
|
|
140 |
|
|
|
55 |
|
Impairment of available-for-sale financial
assets, net |
|
|
19 |
|
|
|
(23 |
) |
|
|
32 |
|
|
|
|
|
Impairment of investments in equity affiliates
and jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Loss on disposal of property, plant and
equipment |
|
|
|
|
|
|
2,026 |
|
|
|
1,753 |
|
|
|
1,808 |
|
Loss/(Income) on disposal of intangible and
other assets |
|
|
|
|
|
|
106 |
|
|
|
192 |
|
|
|
(2 |
) |
Loss/(Income) on disposal of equity affiliates
and jointly controlled entities |
|
|
|
|
|
|
2 |
|
|
|
(10 |
) |
|
|
(320 |
) |
Loss/(Income) on disposal of
available-for-sale financial assets |
|
|
19 |
|
|
|
27 |
|
|
|
(3 |
) |
|
|
(142 |
) |
Dividend income |
|
|
|
|
|
|
(109 |
) |
|
|
(208 |
) |
|
|
(111 |
) |
Interest income |
|
|
|
|
|
|
(1,924 |
) |
|
|
(2,066 |
) |
|
|
(1,990 |
) |
Interest expense |
|
|
8 |
|
|
|
2,762 |
|
|
|
3,220 |
|
|
|
3,595 |
|
Advance payments on long-term operating leases |
|
|
|
|
|
|
(5,170 |
) |
|
|
(5,694 |
) |
|
|
(4,803 |
) |
Changes in working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- accounts receivable and prepaid expenses
and other current assets |
|
|
|
|
|
|
165 |
|
|
|
(3,115 |
) |
|
|
(16,498 |
) |
- inventories |
|
|
|
|
|
|
(15,896 |
) |
|
|
(13,445 |
) |
|
|
(12,042 |
) |
- accounts payable and accrued liabilities |
|
|
|
|
|
|
22,089 |
|
|
|
5,346 |
|
|
|
19,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH GENERATED FROM OPERATIONS |
|
|
|
|
|
|
252,734 |
|
|
|
253,604 |
|
|
|
260,307 |
|
Interest received |
|
|
|
|
|
|
1,917 |
|
|
|
1,993 |
|
|
|
1,962 |
|
Interest paid |
|
|
|
|
|
|
(3,628 |
) |
|
|
(3,700 |
) |
|
|
(4,154 |
) |
Income taxes paid |
|
|
|
|
|
|
(47,138 |
) |
|
|
(53,795 |
) |
|
|
(54,367 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING
ACTIVITIES |
|
|
|
|
|
|
203,885 |
|
|
|
198,102 |
|
|
|
203,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-6
PETROCHINA COMPANY LIMITED
CONSOLIDATED
STATEMENTS OF CASH FLOWS(Continued)
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
Notes |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
(119,227 |
) |
|
|
(130,409 |
) |
|
|
(172,511 |
) |
Acquisition of equity affiliates and jointly
controlled entities |
|
|
|
|
|
|
(2,334 |
) |
|
|
(1,173 |
) |
|
|
(1,903 |
) |
Acquisition of available-for-sale financial assets |
|
|
|
|
|
|
(782 |
) |
|
|
(62 |
) |
|
|
(324 |
) |
(Acquisition) /Consolidation of PetroKazakhstan Inc. |
|
|
|
|
|
|
|
|
|
|
(21,376 |
) |
|
|
1,542 |
|
Net proceeds of investments in collateralized loans
with maturities not greater than three months |
|
|
|
|
|
|
26,896 |
|
|
|
235 |
|
|
|
|
|
Acquisition of investments in collateralized loans
with maturities over three months |
|
|
|
|
|
|
(443 |
) |
|
|
|
|
|
|
|
|
Acquisition of intangible assets |
|
|
|
|
|
|
(1,600 |
) |
|
|
(1,358 |
) |
|
|
(2,521 |
) |
Acquisition of other non-current assets |
|
|
|
|
|
|
(1,133 |
) |
|
|
(1,706 |
) |
|
|
(857 |
) |
Return of capital to minority interest due to
liquidation of subsidiaries |
|
|
|
|
|
|
(935 |
) |
|
|
|
|
|
|
|
|
Purchase from minority interest in listed subsidiaries |
|
|
35 |
|
|
|
(2,019 |
) |
|
|
(4,095 |
) |
|
|
(149 |
) |
Other purchase from minority interest |
|
|
|
|
|
|
(376 |
) |
|
|
(640 |
) |
|
|
(29 |
) |
Proceeds from investments in collateralized loans
with maturities over three months |
|
|
|
|
|
|
6,529 |
|
|
|
|
|
|
|
|
|
Repayment of capital by equity affiliates
and jointly controlled entities |
|
|
|
|
|
|
115 |
|
|
|
99 |
|
|
|
6,618 |
|
Proceeds from disposal of property, plant and
equipment |
|
|
|
|
|
|
898 |
|
|
|
346 |
|
|
|
1,014 |
|
Proceeds from disposal of equity affiliates
and jointly controlled entities |
|
|
|
|
|
|
1,102 |
|
|
|
69 |
|
|
|
1,033 |
|
Proceeds from disposal of available-for-sale
financial assets |
|
|
|
|
|
|
976 |
|
|
|
4 |
|
|
|
276 |
|
Proceeds from disposal of intangible and other
non-current assets |
|
|
|
|
|
|
22 |
|
|
|
2 |
|
|
|
|
|
Dividends received |
|
|
|
|
|
|
678 |
|
|
|
2,099 |
|
|
|
1,463 |
|
Decrease/(Increase) in time deposits with maturities
over three months |
|
|
|
|
|
|
57 |
|
|
|
(486 |
) |
|
|
(17,857 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED FOR INVESTING ACTIVITIES |
|
|
|
|
|
|
(91,576 |
) |
|
|
(158,451 |
) |
|
|
(184,205 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of short-term debts |
|
|
|
|
|
|
(34,529 |
) |
|
|
(28,349 |
) |
|
|
(33,027 |
) |
Repayments of long-term debts |
|
|
|
|
|
|
(19,175 |
) |
|
|
(17,587 |
) |
|
|
(24,071 |
) |
Principal payment on capital lease obligations |
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
Dividends paid to minority interest |
|
|
|
|
|
|
(1,486 |
) |
|
|
(3,033 |
) |
|
|
(6,150 |
) |
Dividends paid to equity holders of the Company |
|
|
11 |
|
|
|
(53,667 |
) |
|
|
(68,589 |
) |
|
|
(64,517 |
) |
Issuance of A shares |
|
|
26,27 |
|
|
|
|
|
|
|
|
|
|
|
66,243 |
|
Increase in short-term debts |
|
|
|
|
|
|
32,019 |
|
|
|
30,183 |
|
|
|
36,842 |
|
Increase in long-term debts |
|
|
|
|
|
|
15,514 |
|
|
|
14,195 |
|
|
|
20,650 |
|
Capital contribution from minority interest |
|
|
|
|
|
|
454 |
|
|
|
1,492 |
|
|
|
1,349 |
|
Change in other long-term obligations |
|
|
|
|
|
|
(1,435 |
) |
|
|
(51 |
) |
|
|
33 |
|
Issuance of H shares |
|
|
26,27 |
|
|
|
19,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED FOR
FINANCING ACTIVITIES |
|
|
|
|
|
|
(42,634 |
) |
|
|
(71,739 |
) |
|
|
(2,648 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSLATION OF FOREIGN CURRENCY |
|
|
|
|
|
|
(458 |
) |
|
|
(258 |
) |
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(Decrease) in cash and cash equivalents |
|
|
|
|
|
|
69,217 |
|
|
|
(32,346 |
) |
|
|
16,935 |
|
Cash and cash equivalents at beginning of the year |
|
|
12 |
|
|
|
11,688 |
|
|
|
80,905 |
|
|
|
48,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year |
|
|
12 |
|
|
|
80,905 |
|
|
|
48,559 |
|
|
|
65,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of these financial statements.
F-7
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2005, 2006 and 2007
(Amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority |
|
|
Total |
|
|
|
Attributable to equity holders of the Company |
|
|
interest |
|
|
Equity |
|
|
|
Share |
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
Earnings |
|
|
Reserves |
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
Balance at January 1, 2005 |
|
|
175,824 |
|
|
|
143,115 |
|
|
|
108,834 |
|
|
|
427,773 |
|
|
|
15,199 |
|
|
|
442,972 |
|
Currency translation differences |
|
|
|
|
|
|
|
|
|
|
(268 |
) |
|
|
(268 |
) |
|
|
(465 |
) |
|
|
(733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss recognized directly in equity |
|
|
|
|
|
|
|
|
|
|
(268 |
) |
|
|
(268 |
) |
|
|
(465 |
) |
|
|
(733 |
) |
Net income for the year ended December
31, 2005 |
|
|
|
|
|
|
133,362 |
|
|
|
|
|
|
|
133,362 |
|
|
|
6,280 |
|
|
|
139,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recognized income/(loss) for 2005 |
|
|
|
|
|
|
133,362 |
|
|
|
(268 |
) |
|
|
133,094 |
|
|
|
5,815 |
|
|
|
138,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of
H shares (Note 26 and 27) |
|
|
3,197 |
|
|
|
|
|
|
|
16,495 |
|
|
|
19,692 |
|
|
|
|
|
|
|
19,692 |
|
Transfer to
reserves (Note 27) |
|
|
|
|
|
|
(18,998 |
) |
|
|
18,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
dividends for 2004 (Note 11) |
|
|
|
|
|
|
(25,936 |
) |
|
|
|
|
|
|
(25,936 |
) |
|
|
|
|
|
|
(25,936 |
) |
Interim
dividends for 2005 (Note 11) |
|
|
|
|
|
|
(27,731 |
) |
|
|
|
|
|
|
(27,731 |
) |
|
|
|
|
|
|
(27,731 |
) |
Payment to CNPC for the acquisition of
the refinery and petrochemical
business (Note 2) |
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
(9 |
) |
Dividends to minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,568 |
) |
|
|
(1,568 |
) |
Return of capital to minority interest
due to liquidations of subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(935 |
) |
|
|
(935 |
) |
Purchase from minority interest of
listed subsidiaries (Note 35) |
|
|
|
|
|
|
|
|
|
|
(1,438 |
) |
|
|
(1,438 |
) |
|
|
(581 |
) |
|
|
(2,019 |
) |
Other movement in minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
242 |
|
|
|
242 |
|
Capital contribution to CNPC
Exploration and Development Company
Limited (Note 2) |
|
|
|
|
|
|
|
|
|
|
(10,056 |
) |
|
|
(10,056 |
) |
|
|
10,106 |
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005 |
|
|
179,021 |
|
|
|
203,812 |
|
|
|
132,556 |
|
|
|
515,389 |
|
|
|
28,278 |
|
|
|
543,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences |
|
|
|
|
|
|
|
|
|
|
(191 |
) |
|
|
(191 |
) |
|
|
(204 |
) |
|
|
(395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss recognized directly in equity |
|
|
|
|
|
|
|
|
|
|
(191 |
) |
|
|
(191 |
) |
|
|
(204 |
) |
|
|
(395 |
) |
Net income for the year ended December
31, 2006 |
|
|
|
|
|
|
142,224 |
|
|
|
|
|
|
|
142,224 |
|
|
|
7,173 |
|
|
|
149,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
recognized income/(loss) for 2006 |
|
|
|
|
|
|
142,224 |
|
|
|
(191 |
) |
|
|
142,033 |
|
|
|
6,969 |
|
|
|
149,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to
reserves (Note 27) |
|
|
|
|
|
|
(13,355 |
) |
|
|
13,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
dividend for 2005 (Note 11) |
|
|
|
|
|
|
(32,282 |
) |
|
|
|
|
|
|
(32,282 |
) |
|
|
|
|
|
|
(32,282 |
) |
Interim
dividend for 2006 (Note 11) |
|
|
|
|
|
|
(36,307 |
) |
|
|
|
|
|
|
(36,307 |
) |
|
|
|
|
|
|
(36,307 |
) |
Dividends to minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,000 |
) |
|
|
(3,000 |
) |
Purchase from minority interest of
subsidiaries (Note 35) |
|
|
|
|
|
|
|
|
|
|
(2,156 |
) |
|
|
(2,156 |
) |
|
|
(2,579 |
) |
|
|
(4,735 |
) |
Capital contribution from minority
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,492 |
|
|
|
1,492 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(246 |
) |
|
|
(246 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006 |
|
|
179,021 |
|
|
|
264,092 |
|
|
|
143,564 |
|
|
|
586,677 |
|
|
|
30,914 |
|
|
|
617,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation differences |
|
|
|
|
|
|
|
|
|
|
(771 |
) |
|
|
(771 |
) |
|
|
(798 |
) |
|
|
(1,569 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
recognized directly in equity |
|
|
|
|
|
|
|
|
|
|
(771 |
) |
|
|
(771 |
) |
|
|
(798 |
) |
|
|
(1,569 |
) |
Net income for the year ended
December 31, 2007 |
|
|
|
|
|
|
145,625 |
|
|
|
|
|
|
|
145,625 |
|
|
|
9,604 |
|
|
|
155,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
recognized income/(loss) for 2007 |
|
|
|
|
|
|
145,625 |
|
|
|
(771 |
) |
|
|
144,854 |
|
|
|
8,806 |
|
|
|
153,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer to
reserves (Note 27) |
|
|
|
|
|
|
(12,768 |
) |
|
|
12,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
dividends for 2006 (Note 11) |
|
|
|
|
|
|
(27,694 |
) |
|
|
|
|
|
|
(27,694 |
) |
|
|
|
|
|
|
(27,694 |
) |
Interim
dividends for 2007 (Note 11) |
|
|
|
|
|
|
(36,823 |
) |
|
|
|
|
|
|
(36,823 |
) |
|
|
|
|
|
|
(36,823 |
) |
Dividends to minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,144 |
) |
|
|
(6,144 |
) |
Purchase of minority interest
in subsidiaries (Note 35) |
|
|
|
|
|
|
|
|
|
|
(113 |
) |
|
|
(113 |
) |
|
|
(65 |
) |
|
|
(178 |
) |
Issuance of
A shares (Note 26 and 27) |
|
|
4,000 |
|
|
|
|
|
|
|
62,243 |
|
|
|
66,243 |
|
|
|
|
|
|
|
66,243 |
|
Consolidation of PetroKazakhstan Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,101 |
|
|
|
8,101 |
|
Capital contribution from
minority interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,349 |
|
|
|
1,349 |
|
Fair value gain from available-for-
sale financial assets |
|
|
|
|
|
|
|
|
|
|
261 |
|
|
|
261 |
|
|
|
|
|
|
|
261 |
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
|
183,021 |
|
|
|
332,432 |
|
|
|
217,952 |
|
|
|
733,405 |
|
|
|
42,942 |
|
|
|
776,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-8
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
1 ORGANIZATION AND PRINCIPAL ACTIVITIES
PetroChina Company Limited (the Company) was established in the Peoples Republic of China (
PRC or China) on November 5, 1999 as a joint stock company with limited liability as a result
of a group restructuring (the Restructuring) of China National Petroleum Corporation (CNPC) in
preparation for the listing of the Companys shares in Hong Kong and in the United States of
America in 2000 (Note 26). The Company and its subsidiaries are collectively referred to as the
Group.
The Group is principally engaged in (i) the exploration, development and production and sale
of crude oil and natural gas, (ii) the refining, transportation, storage and marketing of crude oil
and petroleum products, (iii) the production and sale of chemicals, and (iv) the transmission,
marketing and sale of natural gas (Note 34).
2 BASIS OF PREPARATION
The consolidated financial statements (comprising the consolidated balance sheets, the
consolidated statements of income, consolidated statements of cash flows and consolidated
statements of changes in equity and a summary of significant accounting policies and other
explanatory notes) have been prepared in accordance with the International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The
consolidated financial statements of the Group have been prepared under the historical cost
convention except as disclosed in the accounting policies below.
The preparation of financial statements in conformity with IFRS requires the use of estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Although these estimates are based on managements best
knowledge of current events and actions, actual results may ultimately differ from those estimates.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are disclosed in Note 5.
In 2007, with the exception of IFRS 7, Financial instruments: Disclosures, and the
complementary amendment to IAS 1, Presentation of financial statements Capital disclosures
that introduces certain new disclosures (Note 4) related to financial instruments, the adoption of
other relevant new standards and interpretations does not have any significant impact on the
consolidated financial statements.
In accordance with the acquisition agreement between the Company and CNPC dated
March 28, 2005, the Company acquired the refining and petrochemical businesses owned by
CNPCs wholly owned subsidiaries, Ningxia Dayuan Refinery and Petrochemical Company Limited
(''Dayuan) and Qingyang Refinery and Petrochemical
Company Limited (''Qingyang) with a total
consideration of Renminbi 9 (''RMB, the national currency of the PRC).
The acquisition was a combination of businesses under common control since the Company and
CNPCs refinery and petrochemical businesses owned by Dayuan and Qingyang were under the
common control of CNPC. As a result, the Company accounted for the acquisition in a manner
similar to a uniting of interests, whereby the assets and liabilities acquired are accounted for at
CNPCs historical cost (net liabilities of RMB 183 at the effective date). The consolidated financial
statements have been restated to give effect to the acquisition with all periods presented as if
the operations of the Group and these refinery and petrochemical businesses had always been
combined. The difference between the RMB 9 payable and the net liabilities transferred from CNPC
was adjusted against equity.
In August 2005 the shareholders of the Company approved the acquisition and transfer
agreements relating to the Companys acquisition of a 50% ownership interest in CNPC Exploration
and Development Company Limited (''CNPC E&D). CNPC E&D was formed in 2005 and was wholly
owned by China National Oil and Gas Exploration and Development Corporation (''CNODC, wholly
owned by CNPC) and one of its subsidiaries. Under the terms of the related agreements, CNODC
transferred certain oil and gas exploration operations into CNPC
E&D and the Company contributed to CNPC E&D its wholly owned subsidiary, PetroChina International Limited (''PTRI), and cash
amounting to approximately RMB 20,162, which is the difference between the cash contribution of
RMB 20,741 payable by the Company according to the acquisition agreement and cash
consideration of RMB 579 for PTRI receivable by the Company.
F-9
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
The terms of the agreements grant the Company the right to appoint four of the seven directors
of CNPC E&D and enable the Company to maintain effective control over CNPC E&D.
Similar to the acquisition of the refinery and petrochemical businesses from CNPC described
above, the investment in CNPC E&D and related transactions have been accounted for in a manner
similar to uniting of interests as all entities involved are under the common control of CNPC. The
consolidated financial statements of the Company have been restated as if the operations of the
Company and CNPC E&D had always been combined. The payment was made directly to CNPC
E&D, therefore the difference between the RMB 20,162 paid and the net assets of RMB 35,551 at the
effective date acquired (including RMB 20,162 contributed by the Company and RMB 50 for the
contributed paid-in capital by CNODC and its subsidiary) was adjusted against equity.
3 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
(a) Basis of consolidation
Subsidiaries are those entities in which the Group has an interest of more than one half of
the voting rights or otherwise has the power to govern the financial and operating policies.
A subsidiary is consolidated from the date on which control is transferred to the Group and is
no longer consolidated from the date that control ceases. The purchase method of accounting is used
to account for the acquisition of subsidiaries except for the business combinations under common
control. The cost of an acquisition is measured as the fair value of the assets given up, shares
issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date,
irrespective of the extent of any minority interest. The excess of the cost of acquisition over the
fair value of the Groups share of the identifiable net assets of the subsidiary acquired is
recorded as goodwill. If the cost of acquisition is less than the fair value of the identifiable
net assets of the subsidiary acquired, the difference is recognized directly in the consolidated
statements of income.
An acquisition of a business which is a business combination under common control is accounted
for in a manner similar to a uniting of interests whereby the assets and liabilities acquired are
accounted for at carryover predecessor values to the other party to the business combination with
all periods presented as if the operations of the Group and the business acquired had always been
combined. The difference between the consideration paid by the Group and the net assets or
liabilities of the business acquired is adjusted against equity.
Intercompany transactions, balances and unrealised gains on transactions between group
companies are eliminated; unrealised losses are also eliminated but considered an impairment
indicator of the asset transferred. Where necessary, accounting policies of subsidiaries have been
changed to ensure consistency with the policies adopted by the Group.
A listing of the Groups principal subsidiaries is set out in Note 35.
(b) Investments in equity affiliates
Equity affiliates are entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
equity affiliates are accounted for by the equity method of accounting in the consolidated
financial statements of the Group and are initially recognized at cost. Under this method of
accounting the Groups share of the post-acquisition income or losses of equity affiliates is
recognized in the consolidated statements of income and its share of post-acquisition
movements in reserves is recognized in consolidated reserves. The cumulative post-acquisition
movements are adjusted against the carrying amounts of the investments. When the Groups share of
losses in an equity affliate equals or exceeds its interest in the equity affliate, including any
other unsecured receivables, the Group does not recognize further losses, unless it has incurred
obligations or made payments on behalf of the equity affliate. Unrealised gains on transactions
between the Group and its equity affiliates are eliminated to the extent of the Groups interest in
the equity affiliates; unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. The Groups investment in equity affiliates
includes goodwill identified on acquisition, net of any accumulated loss and is tested for
impairment as part of the overall balance. Goodwill represents the excess of the cost of an
acquisition over the fair value of the Groups share of the net identifiable assets of the acquired
equity affliate at the date of acquisition.
A listing of the Groups principal equity affiliates is shown in Note 18.
F-10
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(c) Investments in jointly controlled entities
Jointly controlled entities are those over which the Group has contractual arrangements to
jointly share control with one or more parties. The Groups interest in jointly controlled entities
is accounted for by the equity method of accounting (Note 3(b)) in the consolidated financial
statements.
A listing of the Groups principal jointly controlled entities is shown in Note 18.
(d) Transactions with minority interest
The Group applies a policy of treating transactions with minority interest as transactions
with equity participants of the Group. Gains and losses resulting from disposals to minority
interest are recorded in equity. The differences between any consideration paid and the relevant
share of the carrying value of net assets of the subsidiary acquired, resulting from the purchase
from minority interest, are recorded in equity.
(e) Foreign currencies
Items included in the financial statements of each entity in the Group are measured using the
currency of the primary economic environment in which the entity operates (the functional
currency). Most of the assets and operations of the Group are located in the PRC (Note 34), and
the functional currency of the Company and most of the consolidated subsidiaries is the RMB. The
consolidated financial statements are presented in the reporting currency of RMB.
Foreign currency transactions of the Group are accounted for at the exchange rates prevailing
at the respective dates of the transactions; monetary assets and liabilities denominated in foreign
currencies are translated at exchange rates at the balance sheet date; gains and losses resulting
from the settlement of such transactions and from the translation of monetary assets and
liabilities are recognized in the consolidated statements of income.
For the Groups entities that have a functional currency different from the Groups reporting
currency, assets and liabilities for each balance sheet presented are translated at the closing
rate at the balance sheet date. Income and expenses for each income statement presented are
translated at average exchange rates and the resulting exchange
differences are recognized as a
separate component of equity.
The Group has no material hedge contracts during any of the years presented. No foreign
currency exchange gains or losses were capitalised in any of the years presented.
(f) Property, plant and equipment
Property, plant and equipment, including oil and gas properties (Note 3(g)), are initially
recorded at cost less accumulated depreciation, depletion and amortization. Cost represents the
purchase price of the asset and other costs incurred to bring the asset into existing use.
Subsequent to their initial recognition, property, plant and equipment are carried at revalued
amounts. Revaluations are performed by independent qualified valuers periodically.
In the intervening years between independent revaluations, the directors review the carrying
values of the property, plant and equipment and adjustments are made if the carrying values differ
significantly from their respective fair values.
Increases in the carrying values arising from revaluations are credited to the revaluation
reserve. Decreases in the carrying values arising from revaluations are first offset against
increases from earlier revaluations in respect of the same assets and are thereafter charged to the
consolidated statements of income. All other decreases in carrying values are charged to the
consolidated statements of income. Any subsequent increases are credited to the consolidated
statements of income up to the respective amounts previously charged.
F-11
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Revaluation surpluses realised through the depreciation or disposal of revalued assets are
retained in the revaluation reserve and will not be available for offsetting against future
revaluation losses.
Depreciation, to write off the cost or valuation of each asset, other than oil and gas
properties (Note 3(g)), to their residual values over their estimated useful lives is calculated
using the straight-line method.
The Group uses the following useful lives for depreciation purposes:
|
|
|
|
Buildings and Plant
|
|
8 40 years |
Equipment and Machinery
|
|
4 30 years |
Motor vehicles
|
|
7 14 years |
Other
|
|
5 12 years |
|
No depreciation is provided for construction in progress until they are completed and ready
for use.
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at
each balance sheet date.
Property, plant and equipment, including oil and gas properties (Note 3(g)), are reviewed for
possible impairment when events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of
a cash generating unit exceeds the higher of its fair value less costs to sell and its value in
use, which is the estimated net present value of future cash flows to be derived from the cash
generating unit.
Gains and losses on disposals of property, plant and equipment are determined by reference to
their carrying amounts and are recorded in the consolidated statements of income.
Interest and other costs on borrowings to finance the construction of property, plant and
equipment are capitalised during the period of time that is required to complete and prepare the
asset for its intended use. Costs for planned major maintenance activities, primarily related to
refinery turnarounds, are expensed as incurred except for costs of components that result in
improvements or betterments which are capitalised as part of property, plant and equipment and
depreciated over their useful lives.
(g) Oil and gas properties
The successful efforts method of accounting is used for oil and gas exploration and production
activities. Under this method, all costs for development wells, support equipment and facilities,
and proved mineral interests in oil and gas properties are capitalised. Geological and geophysical
costs are expensed when incurred. Costs of exploratory wells are capitalised as construction in
progress pending determination of whether the wells find proved oil and gas reserves. Proved oil
and gas reserves are the estimated quantities of crude oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date
the estimate is made. Prices include consideration of changes in existing prices provided only by
contractual arrangements, but not on escalations based upon future conditions. Exploratory wells
in areas not requiring major capital expenditures are evaluated for economic viability within one
year of completion of drilling. The related well costs are expensed as dry holes if it is
determined that such economic viability is not attained. Otherwise, the related well costs are
reclassified to oil and gas properties and subject to impairment review (Note 3(f)). For
exploratory wells that are found to have economically viable reserves in areas where major capital
expenditure will be required before production can commence, the related well costs remain
capitalised only if additional drilling is under way or firmly planned. Otherwise the related well
costs are expensed as dry holes. The Group does not have any significant costs of unproved
properties capitalised in oil and gas properties.
The Ministry of Land and Resources in China issues production licenses to applicants on the
basis of the reserve reports approved by relevant authorities. Future oil and gas price increases
may extend the productive lives of crude oil and natural gas reservoirs beyond the current terms of
the relevant production licenses. Payments on such licenses are made annually and are expensed as
incurred.
F-12
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
The cost of oil and gas properties is amortised at the field level based on the unit of
production method. Unit of production rates are based on oil and gas reserves estimated to be
recoverable from existing facilities based on the current terms of the Groups production licenses.
The Groups oil and gas reserves estimates include only crude oil and condensate and natural gas
which management believes can be reasonably produced within the current terms of these production
licenses.
(h) Intangible assets
Expenditures on acquired patents, trademarks, technical know-how and licenses are capitalised
at historical cost and amortised using the straight-line method over their useful lives, generally
less than 10 years. Intangible assets are not revalued. The carrying amount of each intangible
asset is reviewed annually and adjusted for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
impairment loss is recognized whenever
the carrying amount of an asset exceeds its recoverable amount and is
recognized in the
consolidated statements of income. The recoverable amount is measured as the higher of fair value
less costs to sell and value in use which is the estimated net present value of future cash flows
to be derived from the asset.
(i) Financial assets
Financial assets are classified into the following categories: financial assets at fair value
through income or loss, held-to-maturity investments, loans and receivables and available-for-sale
financial assets. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition.
The Group has only loans and receivables and available-for-sale financial assets. The detailed
accounting policies for loans and receivables and available-for-sale financial assets held by the
Group are set out below.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are included in current assets, except for those with
maturities greater than 12 months after the balance sheet date which are classified as non-current
assets. The Groups loans and receivables comprise accounts receivable, notes receivable, other
receivables, time deposits and cash and cash equivalents in the balance sheet. The recognition
methods for loans and receivables are disclosed in the respective policy statements.
(ii) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this
category or not classified in any of the other categories; these are included in non-current assets
unless management intends to dispose of the investment within 12 months of the balance sheet date.
The Groups available-for-sale financial assets primarily comprise equity instruments that are not
quoted in an active market.
Regular
purchases and sales of available-for-sale financial assets are recognized on
settlement date, the date that the asset is delivered to or by the Group (the effective acquisition
or sale date). Available-for-sale financial assets are initially
recognized at fair value plus
transaction costs. Available-for-sale financial assets are derecognized when the rights to receive
cash flows from the investments have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership in the investment. Available-for-sale
financial assets are measured at fair value except where there are no quoted market prices in
active markets and the fair values cannot be reliably measured using valuation techniques.
Available-for-sale financial assets that do not have quoted market prices in active markets and
whose fair value cannot be reliably measured are carried at cost. The Group assesses at each
balance sheet date whether there is objective evidence that an available-for-sale financial asset
is impaired. The amount of the impairment loss is measured as the difference between the carrying
amount of the available-for-sale financial asset and the present value of the estimated cash flows.
F-13
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(j) Leases
Leases of property, plant and equipment where the Group assumes substantially all the benefits
and risks of ownership are classified as capital leases. The Group has no significant capital
leases.
Leases of assets under which a significant portion of the risks and benefits of ownership are
effectively retained by the lessors are classified as operating leases. Payments made under
operating leases (net of any incentives received from the lessors) are expensed on a straight-line
basis over the lease terms. Payments made to the PRCs land authorities to secure land use rights
are treated as operating leases. Land use rights are generally obtained through advance lump-sum
payments and the terms of use range up to 50 years.
(k) Related parties
Related parties include CNPC and its subsidiaries, other state-controlled enterprises and
their subsidiaries directly or indirectly controlled by the PRC government, corporations in which
the Company is able to control, jointly control or exercise significant influence, key management
personnel of the Company and CNPC and their close family members.
Transactions with related parties do not include those entered into in the ordinary course of
business with terms consistently applied to all public and private entities and where there is no
choice of supplier such as for electricity, telecommunications, postal services and local
government retirement funds.
(l) Inventories
Inventories include oil products, chemical products and materials and supplies which are
stated at the lower of cost and net realisable value. Cost is primarily determined by the weighted
average cost method. The cost of finished goods comprises raw materials, direct labour, other
direct costs and related production overheads, but excludes debt costs. Net realisable value is the
estimated selling price in the ordinary course of business, less the cost of completion and selling
expenses.
(m) Accounts receivable
Accounts
receivable are recognized initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision made for impairment of these
receivables. Such provision for impairment of accounts receivable is established if there is
objective evidence that the Group will not be able to collect amounts due according to the original
terms of the receivables. The factors the Group considers when assessing whether an account
receivable is impaired include but are not limited to significant financial difficulties of the
customer, probability that the debtor will enter bankruptcy or financial reorganization and default
or delinquency in payments. The amount of the provision is the difference between the assets
carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate.
(n) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held with banks and highly liquid
investments with original maturities of three months or less from the time of purchase.
(o) Accounts payable
Accounts
payable are recognized initially at fair value and subsequently measured at amortised
cost using the effective interest method.
(p) Debts
Debts
are recognized initially at fair value, net of transaction costs incurred. In subsequent
periods, debts are
stated at amortised cost using the effective yield method. Any difference between proceeds
(net of transaction costs) and the redemption value is recognized in the consolidated statements of
income over the period of the debts.
Debt
costs should be recognized as an expense in the period in which they are incurred except
for the portion eligible for capitalization as part of qualifying property, plant and equipment.
Debts are classified as current liabilities unless the Group has unconditional rights to defer
settlements of the liabilities for at least 12 months after the balance sheet date.
F-14
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(q) Taxation
The Company has obtained approval from the State Administration for Taxation to report taxable
income on a consolidated basis.
Deferred tax is provided in full, using the liability method, for temporary differences
arising between the tax bases of assets and liabilities and their carrying values in the financial
statements. However, deferred tax is not accounted for if it arises from initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable income or loss. Deferred tax is determined using
tax rates (and tax laws) that has been enacted or substantially enacted by the balance sheet date
and are expected to apply to the period when the related deferred tax asset is realised or deferred
tax liability is settled.
The principal temporary differences arise from depreciation on oil and gas properties and
equipment and provision for impairment of receivables, inventories, investments and property, plant
and equipment. Deferred tax assets relating to the carry forward of unused tax losses are
recognized to the extent that it is probable that future taxable income will be available against
which the unused tax losses can be utilised.
The Group also incurs various other taxes and levies that are not income taxes. Taxes other
than income taxes, which form part of the operating expenses, primarily comprise a special levy on
domestic sales of crude oil (Note 7), consumption tax, resource tax, urban construction tax,
education surcharges and business tax.
(r) Revenue recognition
Sales
are recognized upon delivery of products and customer acceptance or performance of
services, net of sales taxes and discounts. Revenues are recognized only when the Group has
transferred to the buyer the significant risks and rewards of ownership of the goods in the
ordinary course of the Groups activities, and when the amount of revenue and the costs incurred or
to be incurred in respect of the transaction can be measured reliably and collectability of the
related receivables is reasonably assured.
The Group markets a portion of its natural gas under take-or-pay contracts. Customers under
the take-or-pay contracts are required to take or pay for the minimum natural gas deliveries
specified in the contract clauses. Revenue recognition for natural gas sales and transmission
tariffs under the take-or-pay contracts follows the accounting policies described in this note.
Payments received from customers for natural gas not yet taken are recorded as deferred revenues
until actual deliveries take place.
(s) Provisions
Provisions
are recognized when the Group has present legal or constructive obligations as a
result of past events, it is probable that an outflow of resources will be required to settle the
obligations, and reliable estimates of the amounts can be made.
Provision
for future decommissioning and restoration is recognized in full on the installation
of oil and gas properties. The amount recognized is the present value of the estimated future
expenditure determined in accordance with local conditions and requirements. A corresponding
addition to the related oil and gas properties of an amount equivalent to the provision is also
made. This is subsequently depreciated as part of the costs of the oil and gas properties. Any
change in the present value of the estimated expenditure other than due to the passage of time
which is regarded as interest expense, is reflected as an adjustment to the provision and oil and
gas properties.
(t) Research and development
Research
expenditures incurred are recognized as an expense. Costs incurred on development
projects are
recognized as intangible assets to the extent that such expenditure is expected to generate
future economic benefits.
(u) Retirement benefit plans
The
Group contributes to various employee retirement benefit plans
organized by PRC municipal
and provincial governments under which it is required to make monthly contributions to these plans
at prescribed rates for its employees in China. The relevant PRC municipal and provincial
governments undertake to assume the retirement benefit obligations of existing and future retired
employees of the Group in China. The Group has similar retirement benefit plans for its employees
in its overseas operations. Contributions to these PRC and overseas plans are charged to expense as
incurred.
F-15
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
The Group currently has no additional material obligations outstanding for the payment of
retirement and other post-retirement benefits of employees in the PRC or overseas other than the
monthly contributions described above.
(v) Share-based compensation Share appreciation rights
Compensation under the share appreciation rights is measured based on the fair value of the
liability incurred and is expensed over the vesting period. The liability is remeasured at each
balance sheet date to its fair value until settlement with all the changes in the liability
recorded in employee compensation costs in the consolidated statements of income; the related
liability is included in the salaries and welfare payable.
(w) New accounting developments
IAS 1 (Amendment), Presentation of financial statements requires all changes in equity
arising from transactions with owners in their capacity as owners and related current and deferred
tax impacts be presented separately from non-owner changes in equity.
Recognized income and
expenses shall be presented in a single statement (a statement of comprehensive income) or in two
statements (a statement of income or loss and a statement of comprehensive income), separately from
owner changes in equity. IAS 1 (Amendment) is effective from
January 1, 2009 and we are currently evaluating the impact of
IAS 1 (Amendment) on our financial statements.
IAS 23 (Amendment), Borrowing costs requires an entity to capitalise borrowing costs
directly attributable to the acquisition, construction or production of a qualifying asset (one
that takes a substantial period of time to get ready for use or sale) as part of the cost of that
asset. The option of immediately expensing those borrowing costs is removed. IAS 23 (Amendment) is
effective from January 1, 2009 and the adoption of IAS 23
(Amendment) is not expected to affect our financial statements as interest and other costs on borrowings to finance the construction
of property, plant and equipment are capitalised under the Groups current accounting policy.
IFRS 8, Operating segments replaces IAS 14. The new standard requires a management
approach, under which segment information is presented on the same basis as that used for internal
reporting purposes. IFRS 8 is effective from January 1, 2009 and
we are currently evaluating
the impact of IFRS 8 on our financial statements.
IFRIC 11, IFRS 2Group and treasury share transactions, provides guidance on whether
share-based transactions involving treasury shares or involving group entities (for example,
options over a parents shares) should be accounted for as equity-settled or cash-settled
share-based payment transactions. IFRIC 11 is effective from
March 1, 2007 and we are
currently evaluating the impact of IFRIC 11 on our financial statements.
IFRIC 13, Customer loyalty programmes clarifies that where goods or services are sold
together with a customer loyalty incentive (for example, loyalty points or free products), the
arrangement is a multiple-element arrangement and the consideration receivable from the customer is
allocated between the components of the arrangement using fair values. IFRIC 13 is effective from
January 1, 2009 and we are currently evaluating the impact of
IFRIC 13 on the our
financial statements.
IFRIC 14, IAS 19 The limit on a defined benefit asset, minimum funding requirements and
their interaction provides guidance on assessing the limit in IAS 19 on the amount of the funding
surplus that can be recognized as defined benefit asset. It also explains how the pension asset or
liability may be affected by a
statutory or contractual minimum funding requirement. IFRIC 14 is effective from January 1, 2009
and we are currently evaluating the impact of IFRIC 14 on our financial statements.
F-16
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
4 FINANCIAL RISK MANAGEMENT
4.1 Financial risk factors
The Groups activities expose it to a variety of financial risks, including market risk,
credit risk and liquidity risk.
(a) Market risk
(i) Foreign exchange rate risk
The Group conducts its business primarily in RMB, but maintains a portion of its assets in
other currencies to meet its needs for normal business operations. The RMB is not a freely
convertible currency and is regulated by the PRC government. Limitation in foreign exchange
transactions imposed by the PRC government could cause future exchange rates to vary significantly
from current or historical exchange rates. Management is not in a position to anticipate changes in
the PRC foreign exchange regulations and as such is unable to reasonably anticipate the impacts on
the Groups results of operations or financial position arising from future changes in exchange
rates. The Group did not enter into material hedge contracts during any of the years presented to
hedge against its foreign exchange rate risk.
(ii) Cash flow and fair value interest rate risk
The Group is exposed to the risk arising from changes in interest rates. A detailed analysis
of the Groups debts, together with their respective interest rates and maturity dates, are
included in Note 23.
(iii) Price risk
The Group is engaged in a wide range of petroleum-related activities. Prices of crude oil and
petroleum products are affected by a wide range of global and domestic factors which are beyond the
control of the Group. The fluctuations in such prices may have favourable or unfavourable impacts
on the Group. The Group historically has not used commodity derivative instruments to hedge against
potential price fluctuations of crude oil or petroleum products and therefore the Group is exposed
to general price fluctuations of crude oil and petroleum products.
(b) Credit risk
Credit risk arises primarily from cash and cash equivalents, accounts receivable, other
receivables, notes receivable and time deposits. As the majority of cash at bank and time deposits
are placed with state-owned banks and financial institutions, the corresponding credit risk is
relatively low. The Group has controls in place to assess the credit quality of its customers. The
carrying amounts of cash and cash equivalents, accounts receivable, other receivables, notes
receivable and time deposits included in the consolidated balance sheets represent the Groups
maximum exposure to credit risk. No other financial assets carry a significant exposure to credit
risk.
The Group has no significant concentration of credit risk.
(c) Liquidity risk
The Groups liquidity risk management involves maintaining sufficient cash and cash
equivalents and availability of funding through an adequate amount of committed credit facilities.
Analysis of the Groups financial liabilities based on the remaining period at the balance
sheet date to the contractual maturity dates are presented in Note 23.
4.2 Capital risk management
The Groups objectives when managing capital are to safeguard its ability to continue as a
going concern, so as to provide returns for equity holders and to reduce its cost of capital.
F-17
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
4.3 Fair value estimation
The methods and assumptions applied in determining the fair value of each class of financial
assets and financial liabilities of the Group at December 31, 2007 and 2006 are disclosed in the
respective accounting policies.
The carrying amounts of the following financial assets and financial liabilities approximate
their fair value as all of them are short-term in nature: cash and cash equivalents, time deposits
with maturities over three months but within one year, accounts receivable, other receivables,
trade payables, other payables and short-term debts. The fair values of fixed rate long-term debts
are likely to be different from their respective carrying amounts. Analysis of the fair values and
carrying amounts of long-term debts are presented in Note 23.
5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are regularly evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The matters described below are considered to be the most critical in understanding the
estimates and judgements that are involved in preparing the Groups consolidated financial
statements.
(a) Estimation of oil and natural gas reserves
Oil and natural gas reserves are key elements in the Groups investment decision-making
process. They are also an important element in testing for impairment. Changes in proved oil and
natural gas reserves, particularly proved developed reserves, will affect unit-of-production
depreciation, depletion and amortization recorded in the Groups consolidated financial statements
for property, plant and equipment related to oil and gas production activities. A reduction in
proved developed reserves will increase depreciation, depletion and amortization charges (assuming
constant production) and reduce net income. Proved reserve estimates are subject to revision,
either upward or downward, based on new information, such as from development drilling and
production activities or from changes in economic factors, including product prices, contract terms
or development plans. In general, changes in the technical maturity of oil and natural gas
reserves resulting from new information becoming available from development and production
activities have tended to be the most significant cause of annual revisions.
(b) Estimation of impairment of property, plant and equipment
Property, plant and equipment, including oil and gas properties, are reviewed for possible
impairments when events or changes in circumstances indicate that the carrying amount may not be
recoverable. Determination as to whether and how much an asset is impaired involves management
estimates and judgements such as future prices of crude oil, refined products and chemical products
and production profile. However, the impairment reviews and calculations are based on assumptions
that are consistent with the Groups business plans. These assumptions also include those relative
to the pricing regulations by the regulatory agencies in China that the pricing regulations will
not restrict the income margins of refined products to levels that will be insufficient to recover
the carrying values of the related production assets. Favourable changes to some assumptions may
allow the Group to avoid the need to impair any assets in these years, whereas unfavourable changes
may cause the assets to become impaired.
(c) Estimation of asset retirement obligations
Provision
is recognized for the future decommissioning and restoration of oil and gas
properties. The amounts of the provision recognized are the present values of the estimated future
expenditures. The estimation of the future expenditures is based on current local conditions and
requirements, including legal requirements, technology, price level, etc.. In addition to these
factors, the present values of these estimated future expenditures are also impacted by the
estimation of the economic lives of oil and gas properties. Changes in any
of these estimates will impact the operating results and the financial position of the Group
over the remaining economic lives of the oil and gas properties.
F-18
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
6 EMPLOYEE COMPENSATION COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages and salaries |
|
|
19,351 |
|
|
|
26,629 |
|
|
|
32,562 |
|
Social security costs (i) |
|
|
10,324 |
|
|
|
12,532 |
|
|
|
18,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,675 |
|
|
|
39,161 |
|
|
|
50,616 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Social security costs mainly represent contributions to funds for staff welfare organized by
the PRC municipal and provincial governments and others including contribution to the retirement
benefit plans. (Note 28). |
7 TAXES OTHER THAN INCOME TAXES
Taxes other than income taxes include RMB 28,914 and RMB 44,582 for the years ended December 31,
2006 and 2007 of special levy which is paid or payable on the portion of income realized from the
sales of domestically-produced crude oil at prices above certain level. This levy was imposed by
the PRC government and became effective from March 26, 2006.
8 INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on |
|
|
|
|
|
|
|
|
|
|
|
|
- loans |
|
|
3,766 |
|
|
|
3,739 |
|
|
|
4,127 |
|
- capital leases |
|
|
1 |
|
|
|
|
|
|
|
|
|
Accretion expense (Note 24) |
|
|
60 |
|
|
|
796 |
|
|
|
1,202 |
|
Less: amounts capitalized |
|
|
(1,065 |
) |
|
|
(1,315 |
) |
|
|
(1,734 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
2,762 |
|
|
|
3,220 |
|
|
|
3,595 |
|
|
|
|
|
|
|
|
|
|
|
Amounts capitalized are debt costs related to funds borrowed specifically for the purpose of
acquiring qualifying assets. Interest rates on such capitalized debts range from 5.265% to 5.832%
per annum in 2006 and 5.832% to 6.966% per annum in 2007.
F-19
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
9 INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxes |
|
|
50,221 |
|
|
|
50,972 |
|
|
|
48,332 |
|
Deferred taxes (Note 25) |
|
|
3,959 |
|
|
|
(1,196 |
) |
|
|
820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,180 |
|
|
|
49,776 |
|
|
|
49,152 |
|
|
|
|
|
|
|
|
|
|
|
In accordance with the relevant PRC income tax rules and regulations, the PRC income tax rate
applicable to the Group is principally 33% for the years ended December 31, 2005, 2006 and 2007.
Operations of the Group in certain regions in China have qualified for certain tax incentives in
the form of reduced income tax rate to 15% through the year 2010 or accelerated depreciation of
certain property, plant and equipment.
The tax on the Groups income before income taxes differs from the theoretical amount that
would arise using the statutory tax rate in the PRC applicable to the Group as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
193,822 |
|
|
|
199,173 |
|
|
|
204,381 |
|
|
|
|
|
|
|
|
|
|
|
Tax calculated at a tax rate of 33% |
|
|
63,961 |
|
|
|
65,727 |
|
|
|
67,446 |
|
Prior year tax return adjustment |
|
|
364 |
|
|
|
243 |
|
|
|
451 |
|
Effect of income taxes from international operations
in excess of taxes at the PRC statutory tax rate |
|
|
|
|
|
|
1,512 |
|
|
|
644 |
|
Effect of preferential tax rate |
|
|
(10,744 |
) |
|
|
(14,169 |
) |
|
|
(16,930 |
) |
Effect of changes in PRC corporate income tax rate |
|
|
|
|
|
|
|
|
|
|
(3,758 |
) |
Tax effect of income not subject to tax |
|
|
(427 |
) |
|
|
(1,602 |
) |
|
|
(3,138 |
) |
Tax effect of taxable items deductible not expensed |
|
|
|
|
|
|
|
|
|
|
(2,365 |
) |
Tax effect of expenses not deductible for tax purposes |
|
|
1,026 |
|
|
|
2,466 |
|
|
|
3,884 |
|
Tax effect of unused tax losses which had expired |
|
|
|
|
|
|
|
|
|
|
2,918 |
|
Tax effect of temporary differences in relation to certain
crude oil sales which no longer existed at year end |
|
|
|
|
|
|
(4,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
|
54,180 |
|
|
|
49,776 |
|
|
|
49,152 |
|
|
|
|
|
|
|
|
|
|
|
On March 16, 2007, the National Peoples Congress approved the Corporate Income Tax Law of the
PRC (the new CIT Law), which is effective from January 1, 2008. Under the new CIT Law, the
corporate income tax rate applicable to the Group is reduced to 25% from January 1, 2008, replacing
the previously applicable tax rate of 33%.
The management of the Group has reassessed its tax position in the year ended December 31,
2007 by reference to the enacted new CIT Law and accordingly a net decrease in deferred tax charge
for the year ended December 31, 2007 of RMB 3,758 was recorded.
10 BASIC AND DILUTED NET INCOME PER SHARE
Basic and diluted earnings per share for the year ended December 31, 2005 have been computed
by dividing income for the year attributable to equity holders of the Company by the weighted
average number of 176,770 million shares issued and outstanding for the year.
Basic and diluted earnings per share for the year ended December 31, 2006 have been computed
by dividing income for the year attributable to equity holders of the Company by the number of
179,021 million shares issued and outstanding for the year.
Basic and diluted earnings per share for the year ended December 31, 2007 have been computed
by dividing income for the year attributable to equity holders of the Company by the weighted
average number of 179,700 million shares issued and outstanding for the year.
There are no potential dilutive ordinary shares.
F-20
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
11 DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final dividends attributable to
equity holders of the Company for
2004 (Note (i)) |
|
|
25,936 |
|
|
|
|
|
|
|
|
|
Interim dividends attributable to
equity holders of the Company for
2005 (Note (ii)) |
|
|
27,731 |
|
|
|
|
|
|
|
|
|
Final dividends attributable to
equity holders of the Company for
2005 (Note (iii)) |
|
|
|
|
|
|
32,282 |
|
|
|
|
|
Interim dividends attributable to
equity holders of the Company for
2006 (Note (iv)) |
|
|
|
|
|
|
36,307 |
|
|
|
|
|
Final dividends attributable to
equity holders of the Company for
2006 (Note (v)) |
|
|
|
|
|
|
|
|
|
|
27,694 |
|
Interim dividends attributable to
equity holders of the Company for
2007 (Note (vi)) |
|
|
|
|
|
|
|
|
|
|
36,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,667 |
|
|
|
68,589 |
|
|
|
64,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Final dividends attributable to equity holders of the Company in respect of 2004 of
RMB 0.147511 yuan per share amounting to a total of RMB 25,936 were approved by the
shareholders in the Annual General Meeting on May 26, 2005 and accounted for in equity as
an appropriation of retained earnings in the year ended December 31, 2005, and were paid
on June 10, 2005. |
|
(ii) |
|
Interim dividends attributable to equity holders of the Company in respect of 2005 of
RMB 0.157719 yuan per share amounting to a total of RMB 27,731 were accounted for in
equity as an appropriation of retained earnings in the year ended December 31, 2005, and
were paid on September 30, 2005. |
|
(iii) |
|
Final dividends attributable to equity holders of the Company in respect of 2005 of
RMB 0.180325 yuan per share amounting to a total of RMB 32,282 were approved by the
shareholders in the Annual General Meeting on May 26, 2006 and accounted for in equity as
an appropriation of retained earnings in the year ended December 31, 2006, and were paid
on June 9, 2006. |
|
(iv) |
|
Interim dividends attributable to equity holders of the Company in respect of 2006 of
RMB 0.202806 yuan per share amounting to a total of RMB 36,307 were accounted for in
equity as an appropriation of retained earnings in the year ended December 31, 2006, and
were paid on September 26, 2006. |
|
(v) |
|
Final dividends attributable to equity holders of the Company in respect of 2006 of
RMB 0.154699 yuan per share amounting to a total of RMB 27,694 were approved by the
shareholders in the Annual General Meeting on May 16, 2007 and accounted for in equity as
an appropriation of retained earnings in the year ended December 31, 2007, and were paid
on June 1, 2007. |
|
(vi) |
|
Interim dividends attributable to equity holders of the Company in respect of 2007 of
RMB 0.205690 yuan per share amounting to a total of RMB 36,823 were accounted for in
equity as an appropriation of retained earnings in the year ended December 31, 2007, and
were paid on September 28, 2007. |
|
(vii) |
|
At the meeting on March 19, 2008, the Board of Directors proposed final dividends
attributable to equity holders of the Company in respect of 2007 of RMB 0.156859 yuan per
share amounting to a total
of RMB 28,708. These consolidated financial statements do not reflect this dividend payable
as the final dividends were proposed after the balance sheet date and will be accounted for
in equity as an appropriation of retained earnings in the year ending December 31, 2008
when approved at the forthcoming Annual General Meeting. |
F-21
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
12 CASH AND CASH EQUIVALENTS
The weighted average effective interest rates on bank deposits were 1.95% and 2.00% for the
years ended December 31, 2006 and 2007, respectively.
13 NOTES RECEIVABLE
Notes receivable represents mainly the bills of acceptance issued by banks for sale of goods
and products. All notes receivables are due within one year.
14 ACCOUNTS RECEIVABLE
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Accounts receivable due from third parties |
|
|
9,498 |
|
|
|
15,296 |
|
Accounts receivable due from related parties |
|
|
2,247 |
|
|
|
6,002 |
|
Less: allowance for doubtful accounts receivable |
|
|
(3,257 |
) |
|
|
(2,879 |
) |
|
|
|
|
|
|
|
|
|
|
8,488 |
|
|
|
18,419 |
|
|
|
|
|
|
|
|
Movement in allowance for doubtful accounts receivable is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year |
|
|
4,848 |
|
|
|
3,998 |
|
|
|
3,257 |
|
Write back |
|
|
(333 |
) |
|
|
(126 |
) |
|
|
(90 |
) |
Amount written off against allowance |
|
|
(517 |
) |
|
|
(615 |
) |
|
|
(288 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at end of the year |
|
|
3,998 |
|
|
|
3,257 |
|
|
|
2,879 |
|
|
|
|
|
|
|
|
|
|
|
Amounts due from related parties are interest free and unsecured (Note 32).
The aging analysis of accounts receivable at December 31, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
8,299 |
|
|
|
18,260 |
|
Between 1 to 2 years |
|
|
33 |
|
|
|
39 |
|
Between 2 to 3 years |
|
|
59 |
|
|
|
32 |
|
Over 3 years |
|
|
3,354 |
|
|
|
2,967 |
|
|
|
|
|
|
|
|
|
|
|
11,745 |
|
|
|
21,298 |
|
|
|
|
|
|
|
|
F-22
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
15 INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Crude oil and other raw materials |
|
|
24,143 |
|
|
|
30,308 |
|
Work in progress |
|
|
5,493 |
|
|
|
6,083 |
|
Finished goods |
|
|
47,263 |
|
|
|
52,791 |
|
Spare parts and consumables |
|
|
41 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
76,940 |
|
|
|
89,214 |
|
Less: Write down in inventories |
|
|
(902 |
) |
|
|
(747 |
) |
|
|
|
|
|
|
|
|
|
|
76,038 |
|
|
|
88,467 |
|
|
|
|
|
|
|
|
Movements in allowance for write down in inventories, which relate primarily to oil and
chemical products, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year |
|
|
926 |
|
|
|
770 |
|
|
|
902 |
|
(Write back)/Provision |
|
|
(139 |
) |
|
|
140 |
|
|
|
55 |
|
Amount written off against allowance |
|
|
(17 |
) |
|
|
(8 |
) |
|
|
(210 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at end of the year |
|
|
770 |
|
|
|
902 |
|
|
|
747 |
|
|
|
|
|
|
|
|
|
|
|
Cost of inventory (approximates cost of goods sold) recognized as expense amounted to RMB
257,957, RMB 341,456 and RMB 459,472 for the years ended December 31, 2005, 2006 and 2007,
respectively.
Inventories of the Group carried at net realizable value amounted to RMB 3,415 and RMB 1,981
at December 31, 2006 and 2007, respectively.
16 PREPAID EXPENSES AND OTHER CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Other receivables |
|
|
7,083 |
|
|
|
9,329 |
|
Amounts due from related parties |
|
|
15,925 |
|
|
|
19,556 |
|
Advances to suppliers |
|
|
6,087 |
|
|
|
10,720 |
|
|
|
|
|
|
|
|
|
|
|
29,095 |
|
|
|
39,605 |
|
Less: Allowance for doubtful receivables |
|
|
(6,506 |
) |
|
|
(4,079 |
) |
|
|
|
|
|
|
|
|
|
|
22,589 |
|
|
|
35,526 |
|
Prepaid expenses |
|
|
326 |
|
|
|
304 |
|
Other current assets |
|
|
366 |
|
|
|
188 |
|
|
|
|
|
|
|
|
|
|
|
23,281 |
|
|
|
36,018 |
|
|
|
|
|
|
|
|
Other receivables consist primarily of taxes other than income taxes refund receivables,
subsidies receivables,
and receivables for the sale of materials and scrap.
Except for loans to related parties (Note 32 (g)), amounts due from related parties are
interest free, unsecured and with no fixed terms of repayment.
F-23
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Movements in allowance for doubtful receivables are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year |
|
|
7,255 |
|
|
|
6,814 |
|
|
|
6,506 |
|
Write back |
|
|
(122 |
) |
|
|
(190 |
) |
|
|
(2,263 |
) |
Amount written off against allowance |
|
|
(319 |
) |
|
|
(118 |
) |
|
|
(164 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at end of the year |
|
|
6,814 |
|
|
|
6,506 |
|
|
|
4,079 |
|
|
|
|
|
|
|
|
|
|
|
17 PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
Oil and Gas |
|
|
and |
|
|
Motor |
|
|
|
|
|
|
Construction |
|
|
|
|
December 31, 2006 |
|
Buildings |
|
|
Properties |
|
|
Machinery |
|
|
vehicles |
|
|
Other |
|
|
in Progress |
|
|
Total |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of the year |
|
|
73,133 |
|
|
|
497,632 |
|
|
|
277,364 |
|
|
|
10,829 |
|
|
|
7,051 |
|
|
|
55,597 |
|
|
|
921,606 |
|
Additions |
|
|
516 |
|
|
|
4,080 |
|
|
|
656 |
|
|
|
1,597 |
|
|
|
20 |
|
|
|
145,361 |
|
|
|
152,230 |
|
Transfers |
|
|
7,156 |
|
|
|
85,178 |
|
|
|
33,621 |
|
|
|
|
|
|
|
989 |
|
|
|
(126,944 |
) |
|
|
|
|
Disposals or write off |
|
|
(723 |
) |
|
|
(11,420 |
) |
|
|
(3,756 |
) |
|
|
(297 |
) |
|
|
(102 |
) |
|
|
|
|
|
|
(16,298 |
) |
Currency translation
differences |
|
|
61 |
|
|
|
(149 |
) |
|
|
(50 |
) |
|
|
(17 |
) |
|
|
18 |
|
|
|
(122 |
) |
|
|
(259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
80,143 |
|
|
|
575,321 |
|
|
|
307,835 |
|
|
|
12,112 |
|
|
|
7,976 |
|
|
|
73,892 |
|
|
|
1,057,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation and
impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of the year |
|
|
(16,029 |
) |
|
|
(203,416 |
) |
|
|
(128,932 |
) |
|
|
(5,555 |
) |
|
|
(3,686 |
) |
|
|
(98 |
) |
|
|
(357,716 |
) |
Charge for the year |
|
|
(3,643 |
) |
|
|
(31,540 |
) |
|
|
(21,431 |
) |
|
|
(1,107 |
) |
|
|
(755 |
) |
|
|
(199 |
) |
|
|
(58,675 |
) |
Disposals or write off |
|
|
418 |
|
|
|
1,186 |
|
|
|
2,544 |
|
|
|
126 |
|
|
|
67 |
|
|
|
|
|
|
|
4,341 |
|
Currency translation
differences |
|
|
(19 |
) |
|
|
93 |
|
|
|
(35 |
) |
|
|
6 |
|
|
|
(7 |
) |
|
|
|
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
(19,273 |
) |
|
|
(233,677 |
) |
|
|
(147,784 |
) |
|
|
(6,530 |
) |
|
|
(4,381 |
) |
|
|
(297 |
) |
|
|
(411,942 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
60,870 |
|
|
|
341,644 |
|
|
|
160,051 |
|
|
|
5,582 |
|
|
|
3,595 |
|
|
|
73,595 |
|
|
|
645,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of the
property, plant and
equipment had they been
stated at cost less
accumulated
depreciation |
|
|
57,204 |
|
|
|
338,007 |
|
|
|
145,571 |
|
|
|
5,171 |
|
|
|
3,120 |
|
|
|
73,595 |
|
|
|
622,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
Oil and Gas |
|
|
and |
|
|
Motor |
|
|
|
|
|
|
Construction |
|
|
|
|
December 31, 2007 |
|
Buildings |
|
|
Properties |
|
|
Machinery |
|
|
vehicles |
|
|
Other |
|
|
in Progress |
|
|
Total |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost or valuation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of the year |
|
|
80,143 |
|
|
|
575,321 |
|
|
|
307,835 |
|
|
|
12,112 |
|
|
|
7,976 |
|
|
|
73,892 |
|
|
|
1,057,279 |
|
Additions |
|
|
2,928 |
|
|
|
7,513 |
|
|
|
2,296 |
|
|
|
3,237 |
|
|
|
293 |
|
|
|
170,031 |
|
|
|
186,298 |
|
Transfers |
|
|
8,778 |
|
|
|
96,332 |
|
|
|
25,916 |
|
|
|
|
|
|
|
885 |
|
|
|
(131,911 |
) |
|
|
|
|
Consolidation of
PetroKazakhstan Inc. |
|
|
184 |
|
|
|
8,119 |
|
|
|
247 |
|
|
|
170 |
|
|
|
136 |
|
|
|
1,310 |
|
|
|
10,166 |
|
Disposals or write off |
|
|
(1,585 |
) |
|
|
(17,700 |
) |
|
|
(2,443 |
) |
|
|
(423 |
) |
|
|
(265 |
) |
|
|
|
|
|
|
(22,416 |
) |
Currency translation
differences |
|
|
(52 |
) |
|
|
(878 |
) |
|
|
(133 |
) |
|
|
(10 |
) |
|
|
(19 |
) |
|
|
(189 |
) |
|
|
(1,281 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
90,396 |
|
|
|
668,707 |
|
|
|
333,718 |
|
|
|
15,086 |
|
|
|
9,006 |
|
|
|
113,133 |
|
|
|
1,230,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation and
impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of the year |
|
|
(19,273 |
) |
|
|
(233,677 |
) |
|
|
(147,784 |
) |
|
|
(6,530 |
) |
|
|
(4,381 |
) |
|
|
(297 |
) |
|
|
(411,942 |
) |
Charge for the year |
|
|
(5,023 |
) |
|
|
(36,400 |
) |
|
|
(19,939 |
) |
|
|
(1,213 |
) |
|
|
(775 |
) |
|
|
(5 |
) |
|
|
(63,355 |
) |
Disposals or write off |
|
|
1,459 |
|
|
|
4,687 |
|
|
|
1,073 |
|
|
|
344 |
|
|
|
102 |
|
|
|
17 |
|
|
|
7,682 |
|
Currency translation
differences |
|
|
8 |
|
|
|
398 |
|
|
|
25 |
|
|
|
6 |
|
|
|
14 |
|
|
|
|
|
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
(22,829 |
) |
|
|
(264,992 |
) |
|
|
(166,625 |
) |
|
|
(7,393 |
) |
|
|
(5,040 |
) |
|
|
(285 |
) |
|
|
(467,164 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
67,567 |
|
|
|
403,715 |
|
|
|
167,093 |
|
|
|
7,693 |
|
|
|
3,966 |
|
|
|
112,848 |
|
|
|
762,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of the
property, plant and
equipment had they been
stated at cost less
accumulated
depreciation |
|
|
64,439 |
|
|
|
400,611 |
|
|
|
154,734 |
|
|
|
7,342 |
|
|
|
3,557 |
|
|
|
112,848 |
|
|
|
743,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates the changes to the Groups exploratory well costs, which are
included in construction in progress, for the years ended December 31, 2005, 2006 and 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance at January 1 |
|
|
5,751 |
|
|
|
8,296 |
|
|
|
8,998 |
|
Additions to capitalized exploratory well costs
pending the determination of proved reserves |
|
|
16,181 |
|
|
|
19,076 |
|
|
|
22,649 |
|
Reclassified to wells, facilities, and equipment
based on the determination of proved reserves |
|
|
(7,089 |
) |
|
|
(8,880 |
) |
|
|
(10,534 |
) |
Capitalized exploratory well costs charged to expense |
|
|
(6,547 |
) |
|
|
(9,494 |
) |
|
|
(9,161 |
) |
|
|
|
|
|
|
|
|
|
|
Ending balance at December 31 |
|
|
8,296 |
|
|
|
8,998 |
|
|
|
11,952 |
|
|
|
|
|
|
|
|
|
|
|
Number of wells at year end |
|
|
993 |
|
|
|
869 |
|
|
|
928 |
|
|
|
|
|
|
|
|
|
|
|
F-25
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
The following table provides an aging of capitalised exploratory well costs based on the date
the drilling was completed.
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
One year or less |
|
|
8,359 |
|
|
|
10,981 |
|
Over one year |
|
|
639 |
|
|
|
971 |
|
|
|
|
|
|
|
|
Balance at December 31 |
|
|
8,998 |
|
|
|
11,952 |
|
|
|
|
|
|
|
|
RMB 971 at December 31, 2007 for capitalized exploratory well costs over one year are
principally related to wells that are under further evaluation of drilling results or pending
completion of development planning to ascertain economic viability.
Buildings owned by the Group are on leased land. The net book values of the buildings owned
by the Group analyzed by the following categories of lease terms:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Short-term lease (less than 10 years) |
|
|
363 |
|
|
|
764 |
|
Medium-term lease (10 to 50 years) |
|
|
60,507 |
|
|
|
66,803 |
|
|
|
|
|
|
|
|
|
|
|
60,870 |
|
|
|
67,567 |
|
|
|
|
|
|
|
|
Substantially all the buildings of the Group are located in the PRC.
Property, plant and equipment under capital leases at the end of year are as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Exploration and Production |
|
|
45 |
|
|
|
45 |
|
Refining and Marketing |
|
|
|
|
|
|
7 |
|
Accumulated depreciation |
|
|
(18 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
28 |
|
|
|
|
|
|
|
|
Capital leases are principally related to plant and equipment and generally contain purchase
options at the end of the lease terms.
Depreciation expenses on property, plant and equipment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned assets |
|
|
49,198 |
|
|
|
58,669 |
|
|
|
63,349 |
|
Assets under capital lease |
|
|
13 |
|
|
|
6 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,211 |
|
|
|
58,675 |
|
|
|
63,355 |
|
|
|
|
|
|
|
|
|
|
|
The depreciation charge of the Group included RMB 3,019, RMB 2,642 and RMB 294 relating to
impairment provision for property, plant and equipment held for use for the year ended December 31,
2005, 2006 and 2007, respectively. Of this amount, RMB 1,955, RMB 908 and RMB 93 for the year ended
December 31, 2005, 2006 and 2007 respectively was related to the Chemicals and Marketing segment,
RMB 372, RMB1,734 and RMB 201 for the year ended December 31, 2005, 2006 and 2007 respectively was for the
Refining and Marketing segment, and RMB 692, RMB Nil and RMB Nil for the year ended December 31,
2005, 2006 and 2007 respectively was for the Exploration and Production segment.
F-26
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Repair and maintenance costs were RMB 7,880, RMB 9,233 and RMB 10,691 for the years ended
December 31, 2005, 2006 and 2007, respectively.
Bank loans are secured on property, plant and equipment with a net book value of RMB 39 and
RMB Nil at December 31, 2006 and 2007, respectively.
A valuation of the Groups property, plant and equipment, excluding oil and gas reserves, was
carried out during 1999 by independent valuers on a depreciated
replacement cost basis.
The June 1999 revaluation resulted in RMB 80,549 in excess of the prior carrying value and a
revaluation loss of RMB1,122 on certain property, plant and equipment.
As at September 30, 2003, a revaluation of the Groups refining and chemical production
equipment was undertaken by a firm of independent valuers, China United Assets Appraiser Co., Ltd,
in the PRC on a depreciated replacement cost basis.
The September 2003 revaluation resulted in RMB 872 in excess of the carrying value of certain
property, plant and equipment immediately prior to the revaluation and a revaluation loss of RMB
1,257 on certain property, plant and equipment.
As at March 31, 2006, a revaluation of the Groups oil and gas properties was undertaken by
independent valuers, China United Assets Appraiser Co., Ltd and China Enterprise Appraisals, on a
depreciated replacement cost basis. The revaluation did not result in a significant difference from
their carrying value.
F-27
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
18 |
|
INVESTMENTS IN EQUITY AFFILIATES AND JOINTLY CONTROLLED ENTITIES |
The Groups interests in its principal equity affiliates and jointly controlled entities, all
of which are unlisted, together with its share of their respective assets, liabilities, revenues,
and net income, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Assets |
|
|
Liabilities |
|
|
Revenues |
|
|
Net income |
|
|
Interest |
|
|
Type of |
|
Name |
|
Incorporation |
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
Held % |
|
|
Share |
|
As of or for the
year ended
December 31, 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalian West Pacific
Petrochemical
Co., Ltd. |
|
PRC |
|
|
4,044 |
|
|
|
3,097 |
|
|
|
10,116 |
|
|
|
174 |
|
|
|
28.44 |
|
|
ordinary |
China Marine Bunker
(PetroChina) Co.,
Ltd. |
|
PRC |
|
|
3,128 |
|
|
|
2,006 |
|
|
|
17,030 |
|
|
|
137 |
|
|
|
50.00 |
|
|
ordinary |
PetroKazakhstan Inc. |
|
Canada |
|
|
|
|
|
|
|
|
|
|
12,361 |
|
|
|
4,498 |
|
|
|
67.00 |
|
|
ordinary |
Other |
|
|
|
|
34,929 |
|
|
|
10,463 |
|
|
|
38,549 |
|
|
|
2,188 |
|
|
|
20.00-50.00 |
|
|
ordinary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,101 |
|
|
|
15,566 |
|
|
|
78,056 |
|
|
|
6,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of or for the
year ended December
31, 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dalian West Pacific
Petrochemical Co.,
Ltd. |
|
PRC |
|
|
3,410 |
|
|
|
2,608 |
|
|
|
10,188 |
|
|
|
6 |
|
|
|
28.44 |
|
|
ordinary |
China Marine Bunker
(PetroChina) Co.,
Ltd. |
|
PRC |
|
|
3,388 |
|
|
|
2,098 |
|
|
|
19,003 |
|
|
|
139 |
|
|
|
50.00 |
|
|
ordinary |
PetroKazakhstan Inc. |
|
Canada |
|
|
22,642 |
|
|
|
1,240 |
|
|
|
144 |
|
|
|
43 |
|
|
|
67.00 |
|
|
ordinary |
Other |
|
|
|
|
26,995 |
|
|
|
17,533 |
|
|
|
40,903 |
|
|
|
2,089 |
|
|
|
20.00-70.00 |
|
|
ordinary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,435 |
|
|
|
23,479 |
|
|
|
70,238 |
|
|
|
2,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends received and receivable from equity affiliates and jointly controlled entities were
RMB 1,730 and RMB 1,357 at December 31, 2006 and 2007, respectively.
In 2007, investments in equity affiliates and jointly controlled entities of RMB 59 and RMB
833 were disposed of for a gain of RMB 10 and RMB 320 for the year ended December 31, 2006 and
2007, respectively.
On December 28, 2006, the Group acquired a 67% equity interest in PetroKazakhstan Inc. from
CNPC International Limited, a subsidiary of CNPC for a consideration of RMB 21,376. Pursuant to
the shareholders agreement in relation to the acquisition of PetroKazakhstan Inc., each
shareholder had a veto right relating to certain financial and operating decisions, and the Group
was therefore considered to have joint control over PetroKazakhstan Inc. As such, in accordance
with the Groups accounting policy, the Group accounted for its investment in PetroKazakhstan Inc.,
using the equity method of accounting from December 28, 2006. The revenue and net income disclosed
in the table above represents the Groups share of PetroKazakhstan Inc.s revenue and net income
for the period from December 28, 2006 to December 31, 2006, and also from January 1, 2007 to
December 11, 2007.
On December 12, 2007, through a supplementary agreement between the Group and the minority
shareholder of PetroKazakhstan Inc., the Group gained control over PetroKazakhstan Inc. from that
date. Therefore, as of the date it acquired control over PetroKazakhstan Inc., December 12, 2007,
the Group accounts for its investment in PetroKazakhstan Inc. as a subsidiary in accordance with
IFRS 3, Business combinations.
The net assets of PetroKazakhstan Inc. at December 12, 2007 amounted to RMB 24,549. The fair
value (which approximated their carrying value) of assets and liabilities of PetroKazakhstan Inc.
consolidated on December 12, 2007 were as follows:
F-28
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
RMB |
|
|
Current assets |
|
|
6,587 |
|
Non-current assets |
|
|
20,456 |
|
Current liabilities |
|
|
(1,732 |
) |
Non-current liabilities |
|
|
(762 |
) |
|
19 |
|
AVAILABLE-FOR-SALE FINANCIAL ASSETS |
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Unlisted available-for-sale financial assets |
|
|
2,562 |
|
|
|
3,068 |
|
Less: Impairment provision |
|
|
(508 |
) |
|
|
(487 |
) |
|
|
|
|
|
|
|
|
|
|
2,054 |
|
|
|
2,581 |
|
|
|
|
|
|
|
|
Available-for-sale financial assets comprise principally unlisted equity securities.
Dividend income from available-for-sale financial assets was RMB 109, RMB 208 and RMB 111 for
the years ended December 31, 2005, 2006 and 2007, respectively.
In 2007, available-for-sale financial assets of RMB 1 and RMB 145 were disposed of with a gain
of RMB 3 and RMB 142 for the years ended December 31, 2006 and 2007, respectively.
Movements in provision for impairment of available-for-sale financial assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year |
|
|
755 |
|
|
|
677 |
|
|
|
508 |
|
(Write back)/Provision |
|
|
(23 |
) |
|
|
32 |
|
|
|
|
|
Amount written off against provision |
|
|
(55 |
) |
|
|
(201 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
Balance at end of year |
|
|
677 |
|
|
|
508 |
|
|
|
487 |
|
|
|
|
|
|
|
|
|
|
|
20 |
|
ADVANCE OPERATING LEASE PAYMENTS |
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Land use rights |
|
|
12,184 |
|
|
|
14,411 |
|
Advance lease payments |
|
|
8,284 |
|
|
|
9,006 |
|
|
|
|
|
|
|
|
|
|
|
20,468 |
|
|
|
23,417 |
|
|
|
|
|
|
|
|
Land use rights have terms up to 50 years. Advance lease payments are principally for use of
land sub-leased from entities other than the PRC land authorities. These advance operating lease
payments are amortised over the related lease terms using the straight-line method.
F-29
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
21 |
|
INTANGIBLE AND OTHER ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Cost |
|
|
Amortization |
|
|
Net |
|
|
Cost |
|
|
Amortization |
|
|
Net |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents |
|
|
2,325 |
|
|
|
(1,109 |
) |
|
|
1,216 |
|
|
|
2,621 |
|
|
|
(1,343 |
) |
|
|
1,278 |
|
Technical know-how |
|
|
276 |
|
|
|
(103 |
) |
|
|
173 |
|
|
|
281 |
|
|
|
(124 |
) |
|
|
157 |
|
Other |
|
|
3,369 |
|
|
|
(1,041 |
) |
|
|
2,328 |
|
|
|
5,273 |
|
|
|
(1,242 |
) |
|
|
4,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
5,970 |
|
|
|
(2,253 |
) |
|
|
3,717 |
|
|
|
8,175 |
|
|
|
(2,709 |
) |
|
|
5,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
2,910 |
|
|
|
|
|
|
|
|
|
|
|
3,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,627 |
|
|
|
|
|
|
|
|
|
|
|
8,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization on intangible and other assets was RMB 888, RMB 1,250 and RMB 1,491 for the years
ended December 31, 2005, 2006 and 2007, respectively.
Patents principally represent expenditure incurred in acquiring processes and techniques that
are generally protected by relevant government authorities. Technical know-how is amounts
attributable to operational technology acquired in connection with purchase of equipment. The
costs of technical know-how are included as part of the purchase price and are distinguishable.
22 |
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Trade payables |
|
|
22,490 |
|
|
|
40,447 |
|
Advances from customers |
|
|
9,310 |
|
|
|
9,846 |
|
Salaries and welfare payable |
|
|
8,844 |
|
|
|
11,585 |
|
Accrued expenses |
|
|
10 |
|
|
|
5 |
|
Dividends payable by subsidiaries to minority shareholders |
|
|
60 |
|
|
|
67 |
|
Interest payable |
|
|
3 |
|
|
|
65 |
|
Construction fee and equipment cost payables |
|
|
28,349 |
|
|
|
30,784 |
|
One-time employee housing remedial payment payable |
|
|
933 |
|
|
|
221 |
|
Other payables |
|
|
14,910 |
|
|
|
10,999 |
|
Amounts due to related parties |
|
|
35,273 |
|
|
|
40,334 |
|
|
|
|
|
|
|
|
|
|
|
120,182 |
|
|
|
144,353 |
|
|
|
|
|
|
|
|
Other payables consist primarily of customer deposits.
Amounts due to related parties are interest-free, unsecured and with no fixed terms of
repayment (Note 32).
The aging analysis of trade payables at December 31, 2006 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Within 1 year |
|
|
19,994 |
|
|
|
39,005 |
|
Between 1 to 2 years |
|
|
1,966 |
|
|
|
819 |
|
Between 2 to 3 years |
|
|
196 |
|
|
|
307 |
|
Over 3 years |
|
|
334 |
|
|
|
316 |
|
|
|
|
|
|
|
|
|
|
|
22,490 |
|
|
|
40,447 |
|
|
|
|
|
|
|
|
F-30
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
|
|
|
|
|
|
- secured |
|
|
23 |
|
|
|
320 |
|
- unsecured |
|
|
14,812 |
|
|
|
18,363 |
|
Loans from a fellow CNPC subsidiary |
|
|
320 |
|
|
|
50 |
|
Other |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
15,156 |
|
|
|
18,734 |
|
Current portion of long-term debts |
|
|
20,607 |
|
|
|
12,200 |
|
|
|
|
|
|
|
|
|
|
|
35,763 |
|
|
|
30,934 |
|
|
|
|
|
|
|
|
F-31
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(b) Long-term debts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
Interest Rate and Final Maturity |
|
2006 |
|
|
2007 |
|
|
|
|
|
RMB |
|
|
RMB |
|
Renminbi denominated debts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for the
development of oil fields and
construction of refining
plants
|
|
Majority floating interest
rates ranging from 6.16% to
6.80% per annum as of December
31, 2007, with maturities
through 2022
|
|
|
8,390 |
|
|
|
6,720 |
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for working capital
|
|
Floating interest rates ranging
from 5.67% to 6.89% per annum
as of December 31, 2007, with
maturities through 2012
|
|
|
6,000 |
|
|
|
6,030 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans from a fellow CNPC
subsidiary for the development
of oil fields and construction
of refining plants
|
|
Floating interest rates ranging
from 4.46% to 5.76% per annum
as of December 31, 2007, with
maturities through 2032
|
|
|
16,782 |
|
|
|
19,862 |
|
|
|
|
|
|
|
|
|
|
|
|
Working capital loans from a fellow CNPC subsidiary
|
|
Fixed interest rate at 4.61%
per annum as of December 31,
2007, with maturities through
2008
|
|
|
4,130 |
|
|
|
70 |
|
|
|
|
|
|
|
|
|
|
|
|
Working capital loans
|
|
Fixed interest rate at 6.32%
per annum as of December 31,
2007, with no fixed repayment
terms
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debenture for the
development of oil fields and
construction of refining
plants
|
|
Fixed interest rate at 4.50%
per annum as of December 31,
2007, with maturities through
2007
|
|
|
1,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debenture for the
development of oil and gas
properties
|
|
Fixed interest rates ranging
from 3.76% to 4.11% per annum
as of December 31, 2007, with
maturities through 2013
|
|
|
3,523 |
|
|
|
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
US Dollar denominated debts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for the development
of oil fields and construction
of refining plants
|
|
Fixed interest rates ranging
from zero to 8.66% per annum as
of December 31, 2007, with
maturities through 2038
|
|
|
969 |
|
|
|
403 |
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for the development
of oil fields and construction
of refining plants
|
|
Floating interest rates ranging
from 5.10% to 7.50% per annum
as of December 31, 2007, with
maturities through 2014
|
|
|
3,589 |
|
|
|
4,927 |
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for working capital
|
|
Floating interest rates ranging
from LIBOR plus 0.30% to LIBOR
plus 2.50% per annum as of
December 31, 2007, with
maturities through 2010
|
|
|
1,326 |
|
|
|
2,630 |
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for acquisition of
overseas oil and gas
properties
|
|
Floating interest rate at LIBOR
plus 0.55% per annum as of
December 31, 2007, with
maturities through 2009
|
|
|
1,368 |
|
|
|
821 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans from a fellow CNPC
subsidiary for the development
of oil fields and construction
of refining plants
|
|
Floating interest rates ranging
from LIBOR minus 0.25% to LIBOR
plus 0.50% per annum as of
December 31, 2007, with
maturities through 2020
|
|
|
4,481 |
|
|
|
4,171 |
|
F-32
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
Interest Rate and Final Maturity |
|
2006 |
|
|
2007 |
|
|
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
Loans from a fellow CNPC
subsidiary for working capital
|
|
Floating interest rate at LIBOR
plus 0.60% per annum as of
December 31, 2007, with
maturities through 2008
|
|
|
1,471 |
|
|
|
329 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans for the development of oil
fields and construction of
refining plants
|
|
Fixed interest rate at 1.55%
per annum as of December 31,
2007, with maturities through
2022
|
|
|
462 |
|
|
|
404 |
|
|
|
|
|
|
|
|
|
|
|
|
Loans for working capital
|
|
Majority floating interest rate
at LIBOR plus 0.35% per annum
as of December 31, 2007, with
maturities through 2008
|
|
|
650 |
|
|
|
609 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debenture for the
development of oil fields and
construction of refining plants
|
|
Fixed interest rate at 3.00%
per annum as of December 31,
2007, with maturities through
2019
|
|
|
353 |
|
|
|
335 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debenture for the
development of oil and gas
properties
|
|
Fixed interest rate at 9.50%
per annum as of December 31,
2007, with maturities through
2011
|
|
|
817 |
|
|
|
730 |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debenture for the
development of oil and gas
properties
|
|
Fixed interest rate at 15.00%
per annum as of December 31,
2007, with maturities through
2008
|
|
|
179 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
|
Japanese Yen denominated debts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for the development of
oil fields and construction of
refining plants
|
|
Fixed interest rates ranging
from 2.42% to 4.10% per annum
as of December 31, 2007, with
maturities through 2010
|
|
|
75 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
|
Euro denominated debts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for the development of
oil fields and construction of
refining plants
|
|
Fixed interest rates ranging
from 2.00% to 2.30% per annum
as of December 31, 2007, with
maturities through 2023
|
|
|
257 |
|
|
|
247 |
|
|
|
|
|
|
|
|
|
|
|
|
British Pound denominated
debts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank loans for the development of
oil fields and construction of
refining plants
|
|
Fixed interest rate at 2.85%
per annum as of December 31,
2007 with maturities through
2007
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debts
|
|
|
|
|
56,241 |
|
|
|
51,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current portion of
long-term debts
|
|
|
|
|
(20,607 |
) |
|
|
(12,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,634 |
|
|
|
39,688 |
|
|
|
|
|
|
|
|
|
|
|
|
F-33
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
For loans denominated in RMB with floating interest rates, the interest rates are re-set
annually on the respective anniversary dates based on interest rates announced by the Peoples Bank
of China. For loans denominated in currencies other than RMB with floating interest rates, the
interest rates are re-set quarterly or semi-annually as stipulated in the respective agreements.
Other loans represent loans from independent third parties other than banks. Interest free loans
amounted to RMB 68 and RMB 60 at December 31, 2006 and 2007, respectively.
Debts of RMB 597 and RMB 498 were guaranteed by CNPC and its subsidiaries at December 31, 2006
and 2007, and debts of RMB Nil and RMB 30 were guaranteed by the Company and third parities at
December 31, 2006 and 2007, respectively.
The Groups debts include secured liabilities (bank loans) totalling RMB 359 and RMB 3,607 at
December 31, 2006 and 2007 respectively. These bank debts are secured over certain of the Groups
notes receivable, inventories and time deposits with maturities over one year.
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Total debts: |
|
|
|
|
|
|
|
|
- interest free |
|
|
68 |
|
|
|
60 |
|
- at fixed rates |
|
|
20,850 |
|
|
|
11,940 |
|
- at floating rates |
|
|
50,479 |
|
|
|
58,622 |
|
|
|
|
|
|
|
|
|
|
|
71,397 |
|
|
|
70,622 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average effective interest rates: |
|
|
|
|
|
|
|
|
- bank loans |
|
|
5.51 |
% |
|
|
5.54 |
% |
- loans from a fellow CNPC subsidiary |
|
|
4.98 |
% |
|
|
5.17 |
% |
- other loans |
|
|
3.93 |
% |
|
|
3.64 |
% |
- corporate debentures |
|
|
5.04 |
% |
|
|
4.87 |
% |
The carrying amounts and fair values of long-term debts are as follows:
|
|
|
|
|
|
|
|
|
|
|
Carrying Amounts |
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
22,023 |
|
|
|
21,815 |
|
Loans from a fellow CNPC subsidiary |
|
|
26,864 |
|
|
|
24,432 |
|
Corporate debentures |
|
|
6,237 |
|
|
|
4,623 |
|
Other |
|
|
1,117 |
|
|
|
1,018 |
|
|
|
|
|
|
|
|
|
|
|
56,241 |
|
|
|
51,888 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values |
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Bank loans |
|
|
21,858 |
|
|
|
21,580 |
|
Loans from a fellow CNPC subsidiary |
|
|
26,861 |
|
|
|
24,428 |
|
Corporate debentures |
|
|
5,852 |
|
|
|
4,104 |
|
Other |
|
|
997 |
|
|
|
883 |
|
|
|
|
|
|
|
|
|
|
|
55,568 |
|
|
|
50,995 |
|
|
|
|
|
|
|
|
The fair values are based on discounted cash flows using applicable discount rates based upon
the prevailing market rates of interest available to the Group for financial instruments with
substantially the same terms and characteristics at the balance sheet dates. Such discount rates
range from 0.53% to 6.54% and range from 0.81% to 7.71% per annum as of December 31, 2006 and 2007
respectively depending on the type of the debts. The carrying amounts of short-term debts approximate their fair value.
F-34
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Maturities of long-term debts at the dates indicated below are as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
First year |
|
|
20,607 |
|
|
|
12,200 |
|
Second year |
|
|
11,797 |
|
|
|
5,754 |
|
Third year |
|
|
6,024 |
|
|
|
14,065 |
|
Fourth year |
|
|
1,504 |
|
|
|
2,325 |
|
Fifth year |
|
|
2,921 |
|
|
|
3,508 |
|
Thereafter |
|
|
13,388 |
|
|
|
14,036 |
|
|
|
|
|
|
|
|
|
|
|
56,241 |
|
|
|
51,888 |
|
|
|
|
|
|
|
|
24 ASSET RETIREMENT OBLIGATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of the year |
|
|
919 |
|
|
|
14,187 |
|
|
|
18,481 |
|
Liabilities incurred |
|
|
13,258 |
|
|
|
3,589 |
|
|
|
4,818 |
|
Consolidation of PetroKazakhstan Inc. |
|
|
|
|
|
|
|
|
|
|
385 |
|
Liabilities settled |
|
|
(1 |
) |
|
|
(105 |
) |
|
|
(110 |
) |
Accretion expense (Note 8) |
|
|
60 |
|
|
|
796 |
|
|
|
1,202 |
|
Currency translation differences |
|
|
(49 |
) |
|
|
14 |
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
14,187 |
|
|
|
18,481 |
|
|
|
24,761 |
|
|
|
|
|
|
|
|
|
|
|
Asset retirement obligations are in relation to oil and gas properties (Note 17).
The Group does not have any assets that are legally restricted for purposes of setting asset
retirement obligations.
F-35
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
25 DEFERRED TAXES
Deferred taxes are calculated on temporary differences under the liability method using a
principal tax rate of 33% and 25% at December 31, 2006 and 2007, respectively.
The movements in the deferred taxes account are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
At beginning of the year |
|
|
16,902 |
|
|
|
20,759 |
|
|
|
19,583 |
|
Transfer to income statement (Note 9) |
|
|
3,959 |
|
|
|
(1,196 |
) |
|
|
820 |
|
Charge to equity |
|
|
|
|
|
|
|
|
|
|
87 |
|
Consolidation of PetroKazakhstan Inc. |
|
|
|
|
|
|
|
|
|
|
(174 |
) |
Currency translation differences |
|
|
(102 |
) |
|
|
20 |
|
|
|
(111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of the year |
|
|
20,759 |
|
|
|
19,583 |
|
|
|
20,205 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax balances are attributable to the following items:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2006 |
|
|
2007 |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
Deferred tax
assets |
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
Provisions, primarily for receivables and inventories |
|
|
7,107 |
|
|
|
5,391 |
|
Tax losses of subsidiaries |
|
|
2,175 |
|
|
|
95 |
|
Non current: |
|
|
|
|
|
|
|
|
Shut down of manufacturing assets and impairment of long-term assets |
|
|
4,342 |
|
|
|
3,172 |
|
Other |
|
|
457 |
|
|
|
1,635 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
14,081 |
|
|
|
10,293 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
Non current: |
|
|
|
|
|
|
|
|
Accelerated tax depreciation |
|
|
33,398 |
|
|
|
30,435 |
|
Other |
|
|
266 |
|
|
|
63 |
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
33,664 |
|
|
|
30,498 |
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities |
|
|
19,583 |
|
|
|
20,205 |
|
|
|
|
|
|
|
|
|
|
There
were no material unrecognized tax losses at December 31, 2007.
F-36
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
26 SHARE CAPITAL
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2006 |
|
|
2007 |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
Registered, issued and fully paid: |
|
|
|
|
|
|
|
|
State-owned shares |
|
|
157,922 |
|
|
|
|
|
A shares |
|
|
|
|
|
|
161,922 |
|
H shares |
|
|
21,099 |
|
|
|
21,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
179,021 |
|
|
|
183,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
Number of Shares of the Company (millions) |
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
|
175,824 |
|
|
|
179,021 |
|
|
|
179,021 |
|
Issuance of shares |
|
|
3,197 |
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
179,021 |
|
|
|
179,021 |
|
|
|
183,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In accordance with the Restructuring Agreement between CNPC and the Company effective as of
November 5, 1999, the Company issued 160 billion state-owned shares in exchange for the assets and
liabilities transferred to the Company by CNPC. The 160 billion state-owned shares were the
initial registered capital of the Company with a par value of RMB 1.00 yuan per share.
On April 7, 2000, the Company issued 17,582,418,000 shares, represented by 13,447,897,000 H
shares and 41,345,210 ADSs (each representing 100 H shares) in a global initial public offering
(Global Offering) and the trading of the H shares and the ADSs on the Stock Exchange of Hong Kong
Limited and the New York Stock Exchange commenced on April 7, 2000 and April 6, 2000, respectively.
The H shares and ADSs were issued at prices of HK$1.28 per H share and US$16.44 per ADS
respectively for which the net proceeds to the Company were approximately RMB 20 billion. The
shares issued pursuant to the Global Offering rank equally with existing shares.
Pursuant to the approval of the China Securities Regulatory Commission, 1,758,242,000
state-owned shares of the Company owned by CNPC were converted into H shares for sale in the Global
Offering.
In September 2005, the Company issued 3,196,801,818 new H shares at HK$6.00 per share and net
proceeds to the Company amounted to approximately RMB 19,692. CNPC also sold 319,680,182
state-owned shares it held concurrently with PetroChinas sale of new H shares in September 2005.
On November 5, 2007, the Company issued 4,000,000,000 new A shares at RMB 16.70 yuan per share
and net proceeds to the Company amounted to approximately RMB 66,243 and the listing and trading
of the A Shares on the Shanghai Stock Exchange commenced on November 5, 2007.
Following the issuance of the A shares, all the existing state-owned shares issued before
November 5, 2007 held by CNPC have been registered with the China Securities Depository and
Clearing Corporation Limited as A shares.
Shareholders rights are governed by the Company Law of the PRC that requires an increase in
registered capital to be approved by the shareholders in shareholders general meetings and the
relevant PRC regulatory authorities.
F-37
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
27 RESERVES
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2006 |
|
|
2007 |
|
|
RMB |
|
|
RMB |
Revaluation Reserve |
|
|
|
|
|
|
|
|
Beginning balance |
|
|
79,946 |
|
|
|
79,946 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
79,946 |
|
|
|
79,946 |
|
Capital Reserve |
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(8,881 |
) |
|
|
(8,881 |
) |
Issuance of A shares (Note 26) |
|
|
|
|
|
|
66,243 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
(8,881 |
) |
|
|
53,362 |
|
Statutory Common Reserve Fund (Note a) |
|
|
|
|
|
|
|
|
Beginning balance |
|
|
48,736 |
|
|
|
89,928 |
|
Transfer from retained earnings |
|
|
13,355 |
|
|
|
12,768 |
|
Transfer from Statutory Common Welfare Fund |
|
|
27,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
89,928 |
|
|
|
102,696 |
|
Statutory Common Welfare Fund (Note b) |
|
|
|
|
|
|
|
|
Beginning balance |
|
|
27,837 |
|
|
|
|
|
Transfer from retained earnings |
|
|
|
|
|
|
|
|
Transfer to Statutory Common Reserve Fund |
|
|
(27,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
|
|
|
|
|
|
Currency translation differences |
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(379 |
) |
|
|
(570 |
) |
Currency translation differences |
|
|
(191 |
) |
|
|
(771 |
) |
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
(570 |
) |
|
|
(1,341 |
) |
Other reserves |
|
|
|
|
|
|
|
|
Beginning balance |
|
|
(14,703 |
) |
|
|
(16,859 |
) |
Purchase from minority interest in subsidiaries (Note 35) |
|
|
(2,156 |
) |
|
|
(113 |
) |
Fair value gain of available-for-sale financial assets |
|
|
|
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
|
(16,859 |
) |
|
|
(16,711 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
143,564 |
|
|
|
217,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Pursuant to the PRC regulations and the Companys Articles of Association, the Company is
required to transfer 10% of its net income, as determined under the PRC accounting
regulations, to a Statutory Common Reserve Fund (Reserve Fund). Appropriation to the
Reserve Fund may be ceased when the fund aggregates to 50% of the Companys registered
capital. The transfer to this reserve must be made before distribution of dividends to
shareholders. |
|
|
|
The Reserve Fund shall only be used to make good previous years losses, to expand the
Companys production operations, or to increase the capital of the Company. Upon approval by a
resolution of shareholders general meeting, the Company may convert its Reserve Fund into
share capital and issue bonus shares to existing shareholders in proportion to their original
shareholdings or to increase the
nominal value of each share currently held by them, provided that the balance of the Reserve
Fund after such issue is not less than 25% of the Companys registered capital. |
|
(b) |
|
Pursuant to the Company Law of the PRC revised on October 27, 2005 and carried out as of
January 1,
2006, the Company is no longer required to allocate its net income to the Statutory Common
Welfare Fund from January 1, 2006. In accordance with the Circular on Accounting Treatment
Following the |
F-38
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
Implementation of Company Law issued by the Ministry of Finance of the PRC on
March 15, 2006, the Company transferred the Statutory Common Welfare Fund balance as at
December 31, 2005 to the Statutory Common Reserve Fund. |
|
(c) |
|
According to the relevant PRC regulations, the distributable reserve is the lower of the
retained earnings computed under PRC accounting regulations and IFRS. As of December 31, 2006
and 2007, the Companys distributable reserve amounted to RMB 205,379 and RMB 228,016 which
was computed under IFRS and under PRC accounting regulations, respectively. |
|
(d) |
|
As of December 31, 2006 and 2007, revaluation surpluses realized through the depreciation or
disposal of revalued assets amounted to approximately RMB 57,832 and RMB 61,121, respectively. |
28 PENSIONS
The Group participates in various employee retirement benefit plans (Note 3(u)). Expenses
incurred by the Group in connection with the retirement benefit plans for the year ended December
31, 2005, 2006 and 2007 amounted to RMB 3,104, RMB 4,645 and RMB 5,744, respectively.
29 CONTINGENT LIABILITIES
(a) Bank and other guarantees
At December 31, 2007, the Group had contingent liabilities in respect of guarantees made to
China Petroleum Finance Company Limited (CP Finance, a subsidiary of CNPC) from which it is
anticipated that no material liabilities will arise.
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
2006 |
|
|
2007 |
|
|
RMB |
|
|
RMB |
Guarantee of debts of equity affiliates from
CP Finance |
|
|
162 |
|
|
|
77 |
|
Guarantee of debts of third party from
a State-controlled bank |
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
203 |
|
|
|
77 |
|
|
|
|
|
|
|
|
|
|
(b) Environmental liabilities
CNPC and the Group have operated in China for many years. China has adopted extensive
environmental laws and regulations that affect the operation of the oil and gas industry. The
outcome of environmental liabilities under proposed or future environmental legislation cannot
reasonably be estimated at present, and could be material. Under existing legislation, however,
management believes that there are no probable liabilities, except for the amounts which have
already been reflected in the consolidated financial statements, that may have a material adverse
effect on the financial position of the Group.
(c) Legal contingencies
The Group is the named defendant in certain insignificant lawsuits as well as the named party
in other
proceedings arising in the ordinary course of business. While the outcome of such
contingencies, lawsuits or other proceedings cannot be determined at present, the management of the
Group believes that any resulting liabilities may not have a material adverse effect on the
financial position of the Group.
F-39
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(d) Leasing of roads, land and buildings
According to the Restructuring Agreement entered into between the Company and CNPC in 2000:
|
|
|
CNPC will use its best endeavours to obtain formal land use right certificates to
replace the entitlement certificates in relation to the 28,649 parcels of land which were leased or
transferred to the Company from CNPC, within one year from August, September and October 1999 when
the relevant entitlement certificates were issued; |
|
|
|
|
CNPC will complete, within one year from November 5, 1999, the necessary governmental
procedures for the requisition of the collectively-owned land on which 116 service stations owned
by the Company are located; and |
|
|
|
|
CNPC will obtain individual building ownership certificates in the name of the Company
for all of the 57,482 buildings transferred to the Company by CNPC, before November 5, 2000. |
As at December 31, 2007, CNPC had obtained formal land use right certificates in relation to
27,554 out of the above-mentioned 28,649 parcels of land and some building ownership certificates
for the above-mentioned buildings, but has completed none of the necessary governmental procedures
for the above-mentioned service stations located on collectively-owned land. The Directors of the
Company confirm that the use of and the conduct of relevant activities at the above-mentioned
parcels of land, service stations and buildings are not affected by the fact that the relevant land
use right certificates or individual building ownership certificates have not been obtained or the
fact that the relevant governmental procedures have not been completed. In managements opinion,
the outcome of the above events may not have a material adverse effect on the financial position of
the Group.
(e) Group insurance
Except for limited insurance coverage for vehicles and certain assets subject to significant
operating risks, the Group does not carry any other insurance for property, facilities or equipment
with respect to its business operations. In addition, the Group does not carry any third-party
liability insurance against claims relating to personal injury, property and environmental damages
or business interruption insurance since such insurance coverage is not customary in China. While
the effect of under-insurance on future incidents cannot be reasonably assessed at present,
management believes that any resulting liabilities may not have a material adverse effect on the
financial position of the Group.
F-40
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
30 COMMITMENTS
(a) Operating lease commitments
Operating lease commitments of the Group are mainly for leasing of land and buildings and
equipment. Leases range from one to 50 years and usually do not contain renewal options. Future
minimum lease payments as of December 31, 2007 and 2006 under non-cancellable operating leases are
as follows:
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
First year |
|
|
3,099 |
|
|
|
3,394 |
|
Second year |
|
|
2,749 |
|
|
|
3,077 |
|
Third year |
|
|
2,714 |
|
|
|
2,927 |
|
Fourth year |
|
|
3,040 |
|
|
|
3,322 |
|
Fifth year |
|
|
3,102 |
|
|
|
2,650 |
|
Thereafter |
|
|
80,076 |
|
|
|
79,025 |
|
|
|
|
|
|
|
|
|
|
|
94,780 |
|
|
|
94,395 |
|
|
|
|
|
|
|
|
Operating lease expenses for land and buildings and equipment were RMB 4,850, RMB 5,378 and
RMB 7,439 for the years ended December 31, 2005, 2006 and 2007, respectively.
(b) Capital commitments
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Contracted but not provided for |
|
|
|
|
|
|
|
|
Oil and gas properties |
|
|
273 |
|
|
|
26 |
|
Equipment and Machinery |
|
|
8,658 |
|
|
|
11,345 |
|
Other |
|
|
262 |
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
9,193 |
|
|
|
11,621 |
|
|
|
|
|
|
|
|
(c) Exploration and production licenses
The Company is obligated to make annual payments with respect to its exploration and
production licenses to the Ministry of Land and Resources. Payments incurred were approximately
RMB 534, RMB 662 and RMB 660 for the year ended December 31, 2005, 2006 and 2007, respectively.
Estimated annual payments for the next five years are as follows:
|
|
|
|
|
|
|
RMB |
|
|
|
|
|
|
2008 |
|
|
906 |
|
2009 |
|
|
906 |
|
2010 |
|
|
906 |
|
2011 |
|
|
906 |
|
2012 |
|
|
906 |
|
F-41
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
31 MAJOR CUSTOMERS
The Groups major customers are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
% to Total |
|
|
|
|
|
|
% to Total |
|
|
|
|
|
|
% to Total |
|
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
Revenue |
|
|
|
RMB |
|
|
% |
|
|
RMB |
|
|
% |
|
|
RMB |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
China Petroleum &
Chemical |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporation |
|
|
35,848 |
|
|
|
6 |
|
|
|
44,028 |
|
|
|
6 |
|
|
|
50,292 |
|
|
|
6 |
|
CNPC |
|
|
19,823 |
|
|
|
4 |
|
|
|
27,714 |
|
|
|
4 |
|
|
|
31,325 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,671 |
|
|
|
10 |
|
|
|
71,742 |
|
|
|
10 |
|
|
|
81,617 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32 RELATED PARTY TRANSACTIONS
CNPC, the immediate parent of the Company, is a state-controlled enterprise directly
controlled by the PRC government. The PRC government is the Companys ultimate controlling party.
State-controlled enterprises and their subsidiaries, in addition to CNPC Group companies, directly
or indirectly controlled by the PRC government are also related parties of the Group. Neither CNPC
nor the PRC government publishes financial statements available for public use.
The Group has extensive transactions with other companies of the CNPC Group. Because of the
relationship, it is possible that the terms of the transactions between the Group and other members
of the CNPC Group are not the same as those that would result from transactions with other related
parties or wholly unrelated parties.
The Company and CNPC entered into a Comprehensive Products and Services Agreement on March 10,
2000 for a range of products and services which may be required and requested by either party; a
Land Use Rights Leasing Contract under which CNPC leases 42,476 parcels of land located throughout
the PRC to the Company; and a Buildings Leasing Contract under which CNPC leases 191 buildings
located throughout the PRC to the Company.
The terms of the current Comprehensive Products and Services Agreement were amended in 2005
and the agreement is effective through December 31, 2008. The products and services to be provided
by the CNPC Group to the Company under the Comprehensive Products and Services Agreement include
construction and technical services, production services, supply of material services, social
services, ancillary services and financial services. The products and services are provided in
accordance with (1) state-prescribed prices; or (2) where there is no state-prescribed price,
relevant market prices; or (3) where neither (1) nor (2) is applicable, actual cost incurred; or
the agreed contractual price, being the actual cost plus a margin of not more than 15% for certain
construction and technical services, and 3% for all other types of services.
The Land Use Rights Leasing Contract provides for the lease of an aggregate area of
approximately 1,145 million square meters of land located throughout the PRC to business units of
the Group for a term of 50 years at an annual fee of RMB 2,000. The total fee payable for the
lease of all such property may, after every 10 years, be adjusted by agreement between the Company
and CNPC.
Under the Buildings Leasing Contract, 191 buildings covering an aggregate area of 269,770
square meters located throughout the PRC are leased at an aggregate annual fee of RMB 39 for a term
of 20 years. The Company also entered into a Supplemental Buildings Leasing Agreement with CNPC in
September
2002 to lease an additional 404 buildings covering approximately 442,730 square meters at an
annual rental of RMB 157. The Supplemental Buildings Leasing Agreement will expire at the same
time as the Buildings Leasing Agreement.
F-42
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
In addition to the related party information shown elsewhere in the consolidated financial
statements, the following is a summary of significant related party transactions entered into in
the ordinary course of business between the Group and its related parties during the years and balances arising from
related party transactions at the end of the years indicated below:
(a) Bank deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
|
At December 31, |
|
|
|
|
|
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank deposits |
|
|
|
|
|
|
|
|
|
|
|
|
CP Finance |
|
|
(i |
) |
|
|
8,937 |
|
|
|
8,393 |
|
State-controlled banks and other financial institutions |
|
|
|
|
|
|
37,744 |
|
|
|
66,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,681 |
|
|
|
75,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note |
|
|
Year Ended December 31, |
|
|
|
|
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from bank deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CP Finance |
|
|
(i |
) |
|
|
33 |
|
|
|
81 |
|
|
|
159 |
|
State-controlled banks and other financial institutions |
|
|
|
|
|
|
1,582 |
|
|
|
1,804 |
|
|
|
1,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,615 |
|
|
|
1,885 |
|
|
|
1,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) CP Finance is a subsidiary of CNPC and a non-bank financial institution established with
the approval from the Peoples Bank of China. The deposits yield interest at prevailing saving
deposit rates.
(b) Sales of goods and services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of goods |
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
|
|
|
|
|
|
|
|
|
|
- Crude Oil |
|
|
883 |
|
|
|
5,023 |
|
|
|
2,374 |
|
- Refined Products |
|
|
9,766 |
|
|
|
19,779 |
|
|
|
18,628 |
|
- Chemical Products |
|
|
308 |
|
|
|
90 |
|
|
|
753 |
|
CNPC and its subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
- Crude Oil |
|
|
155 |
|
|
|
1,546 |
|
|
|
1,766 |
|
- Refined Products |
|
|
12,364 |
|
|
|
16,847 |
|
|
|
16,806 |
|
- Chemical Products |
|
|
4,805 |
|
|
|
5,691 |
|
|
|
7,161 |
|
- Natural Gas |
|
|
820 |
|
|
|
1,346 |
|
|
|
1,835 |
|
- Other |
|
|
650 |
|
|
|
277 |
|
|
|
339 |
|
Other state-controlled enterprises |
|
|
|
|
|
|
|
|
|
|
|
|
- Crude Oil |
|
|
37,168 |
|
|
|
39,632 |
|
|
|
47,597 |
|
- Refined Products |
|
|
86,505 |
|
|
|
68,370 |
|
|
|
58,903 |
|
- Chemical Products |
|
|
18,275 |
|
|
|
8,979 |
|
|
|
10,849 |
|
- Natural Gas |
|
|
8,127 |
|
|
|
7,713 |
|
|
|
9,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179,826 |
|
|
|
175,293 |
|
|
|
176,893 |
|
|
|
|
|
|
|
|
|
|
|
Sales of goods to related parties are conducted at market prices.
F-43
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales of services |
|
|
|
|
|
|
|
|
|
|
|
|
CNPC and its subsidiaries |
|
|
1,029 |
|
|
|
2,007 |
|
|
|
3,418 |
|
Other state-controlled enterprises |
|
|
3,592 |
|
|
|
7,761 |
|
|
|
8,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,621 |
|
|
|
9,768 |
|
|
|
11,915 |
|
|
|
|
|
|
|
|
|
|
|
Sales of services principally represent the provision of the services in connection with the
transportation of crude oil and natural gas at market prices.
(c) Purchases of goods and services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
Notes |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of goods |
|
|
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
|
|
|
|
4,220 |
|
|
|
9,868 |
|
|
|
29,239 |
|
Other state-controlled enterprises |
|
|
|
|
|
|
59,719 |
|
|
|
50,995 |
|
|
|
58,726 |
|
Purchases of services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
|
|
|
|
43 |
|
|
|
126 |
|
|
|
136 |
|
CNPC and its subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Fees paid for construction and technical services |
|
(ii) |
|
|
|
|
|
|
|
|
|
|
|
|
- exploration and development services |
|
(iii) |
|
|
39,653 |
|
|
|
50,485 |
|
|
|
60,194 |
|
- other construction and technical services |
|
(iv) |
|
|
25,010 |
|
|
|
32,256 |
|
|
|
37,063 |
|
- Fees for production services |
|
|
(v) |
|
|
|
23,344 |
|
|
|
32,730 |
|
|
|
38,395 |
|
- Social services charges |
|
(vi) |
|
|
2,153 |
|
|
|
2,301 |
|
|
|
2,229 |
|
- Ancillary services charges |
|
(vii) |
|
|
2,345 |
|
|
|
2,458 |
|
|
|
2,635 |
|
- Commission expense and other charges |
|
(viii) |
|
|
1,612 |
|
|
|
1,241 |
|
|
|
1,178 |
|
Other state-controlled enterprises |
|
(ix) |
|
|
6,390 |
|
|
|
7,703 |
|
|
|
3,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
164,489 |
|
|
|
190,163 |
|
|
|
233,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Purchases of goods principally represent the purchases of raw materials, spare parts
and low cost consumables at market prices. |
|
(ii) |
|
Under the Comprehensive Products and Services Agreement entered into between CNPC and
the Company, certain construction and technical services provided by CNPC are charged at
cost plus an additional margin of not more than 15%, including exploration and development
services and oilfield construction services. |
|
(iii) |
|
Direct costs for exploration and development services comprise geophysical survey,
drilling, well cementing, logging and well testing. |
|
(iv) |
|
The fees paid for other construction and technical services comprise fees for
construction of refineries and chemical plants and technical services in connection with
oil and gas exploration and production activities such as oilfield construction,
technology research, engineering and design, etc.. |
|
(v) |
|
The fees paid for production services comprise fees for the repair of machinery,
supply of water, electricity and gas at the state-prescribed prices, provision of services
such as communications, transportation, fire fighting, asset leasing, environmental
protection and sanitation, maintenance of roads, manufacture of replacement parts and
machinery at cost or market prices. |
F-44
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(vi) |
|
These represent expenditures for social welfare and support services which are
charged at cost. |
|
(vii) |
|
Ancillary service charges represent mainly fees for property management, the
provision of training centers, guesthouses, canteens, public shower rooms, etc., at market
prices. |
|
(viii) |
|
CNPC purchases materials on behalf of the Company and charges commission thereon. The
commission is calculated at rates ranging from 1% to 5% of the goods purchased. |
|
(ix) |
|
Purchases of services from other state-controlled enterprises principally represent
the purchases of the construction and technical services at market prices. |
(d) Purchases of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of assets |
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
11 |
|
|
|
2 |
|
|
|
|
|
CNPC and its subsidiaries |
|
|
5,870 |
|
|
|
1,795 |
|
|
|
2,395 |
|
Other state-controlled enterprises |
|
|
6,813 |
|
|
|
6,617 |
|
|
|
5,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,694 |
|
|
|
8,414 |
|
|
|
8,235 |
|
|
|
|
|
|
|
|
|
|
|
Purchases of assets principally represent the purchases of manufacturing equipment, office
equipment, and transportation equipment, etc., at market prices.
(e) Year-end balances arising from sales/purchases of goods/services/assets
F-45
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
Accounts receivable from related parties at the end of the year |
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
82 |
|
|
|
296 |
|
Fellow subsidiaries (CNPC Group) |
|
|
599 |
|
|
|
3,796 |
|
Other state-controlled enterprises |
|
|
1,566 |
|
|
|
1,910 |
|
|
|
|
|
|
|
|
|
|
|
2,247 |
|
|
|
6,002 |
|
|
|
|
|
|
|
|
|
|
Less: Allowance for doubtful accounts receivable |
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
(5 |
) |
|
|
|
|
Fellow subsidiaries (CNPC Group) |
|
|
(232 |
) |
|
|
(189 |
) |
Other state-controlled enterprises |
|
|
(861 |
) |
|
|
(708 |
) |
|
|
|
|
|
|
|
|
|
|
(1,098 |
) |
|
|
(897 |
) |
|
|
|
|
|
|
|
|
|
|
1,149 |
|
|
|
5,105 |
|
|
|
|
|
|
|
|
Prepayments and other receivables from related parties at the end of the year |
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
4,307 |
|
|
|
2,412 |
|
Parent (CNPC) |
|
|
196 |
|
|
|
|
|
Fellow subsidiaries (CNPC Group) |
|
|
7,220 |
|
|
|
10,335 |
|
Other state-controlled enterprises |
|
|
4,202 |
|
|
|
6,809 |
|
|
|
|
|
|
|
|
|
|
|
15,925 |
|
|
|
19,556 |
|
|
|
|
|
|
|
|
|
|
Less: Allowance for doubtful receivables |
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
(212 |
) |
|
|
(39 |
) |
Fellow subsidiaries (CNPC Group) |
|
|
(4 |
) |
|
|
(22 |
) |
Other state-controlled enterprises |
|
|
(299 |
) |
|
|
(79 |
) |
|
|
|
|
|
|
|
|
|
|
(515 |
) |
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
15,410 |
|
|
|
19,416 |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities to related parties at the end of the year |
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
1,444 |
|
|
|
117 |
|
Parent (CNPC) |
|
|
2,321 |
|
|
|
922 |
|
Fellow subsidiaries (CNPC Group) |
|
|
26,046 |
|
|
|
32,154 |
|
Other state-controlled enterprises |
|
|
5,462 |
|
|
|
7,141 |
|
|
|
|
|
|
|
|
|
|
|
35,273 |
|
|
|
40,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
Net changes in allowance for doubtful accounts receivable
from related
parties charged to the consolidated statements of income |
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
|
|
|
|
5 |
|
|
|
(5 |
) |
Fellow subsidiaries (CNPC Group) |
|
|
24 |
|
|
|
(11 |
) |
|
|
(32 |
) |
Other state-controlled enterprises |
|
|
(62 |
) |
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
(58 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
|
|
|
|
Net changes in allowance for doubtful receivables
from related parties charged to the consolidated
statements of income |
|
|
|
|
|
|
|
|
|
|
|
|
Equity affiliates and jointly controlled entities |
|
|
(55 |
) |
|
|
(20 |
) |
|
|
(173 |
) |
Fellow subsidiaries (CNPC Group) |
|
|
55 |
|
|
|
(32 |
) |
|
|
18 |
|
Other state-controlled enterprises |
|
|
(35 |
) |
|
|
12 |
|
|
|
(218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(35 |
) |
|
|
(40 |
) |
|
|
(373 |
) |
|
|
|
|
|
|
|
|
|
|
F-46
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(f) Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
Notes |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
Advance operating lease payments paid to related
parties: |
|
|
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent (CNPC) |
|
|
|
|
|
|
232 |
|
|
|
|
|
|
|
|
|
Other state-controlled enterprises |
|
|
|
|
|
|
33 |
|
|
|
49 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
265 |
|
|
|
49 |
|
|
|
88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
operating lease payments paid to related parties: |
|
(ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent (CNPC) |
|
|
|
|
|
|
2,192 |
|
|
|
2,276 |
|
|
|
2,292 |
Other state-controlled enterprises |
|
|
|
|
|
|
5 |
|
|
|
16 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,197 |
|
|
|
2,292 |
|
|
|
2,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Advance operating lease payments principally represent the advance payment paid for the
long-term operating lease of land and gas stations at prices prescribed by local
governments or market prices. |
|
(ii) |
|
Other operating lease payments to CNPC principally represent the rental paid for the
operating lease of land and buildings at the prices prescribed in the Land Use Rights
Leasing Contract, the Buildings Leasing Contract and Supplemental Buildings Leasing
Agreement with CNPC. |
|
|
|
|
|
|
|
|
|
|
|
At December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
Operating lease payable to related parties |
|
|
|
|
|
|
|
|
Parent (CNPC) |
|
|
|
|
|
|
16 |
|
Other state-controlled enterprises |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
16 |
|
|
|
|
|
|
|
|
(g) Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
Loans to related parties |
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to equity affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the year |
|
|
569 |
|
|
|
1,640 |
|
|
|
1,800 |
|
Loans advanced during year |
|
|
1,392 |
|
|
|
1,034 |
|
|
|
366 |
|
Loans repayments received |
|
|
(321 |
) |
|
|
(884 |
) |
|
|
(322 |
) |
Interest charged |
|
|
29 |
|
|
|
154 |
|
|
|
129 |
|
Interest received |
|
|
(29 |
) |
|
|
(144 |
) |
|
|
(120 |
) |
|
|
|
|
|
|
|
|
|
|
End of the year |
|
|
1,640 |
|
|
|
1,800 |
|
|
|
1,853 |
|
|
|
|
|
|
|
|
|
|
|
Loans to equity affiliates are included in prepaid expenses and other current assets (see Note
16).
F-47
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
The loans to related parties are mainly with interest rates ranging from 9.07% to 9.36% and
5.20% to 8.60% per annum as of December 31, 2006 and 2007, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
|
Notes |
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
Loans from related parties |
|
|
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans from CP Finance: |
|
|
(i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the year |
|
|
|
|
|
|
29,932 |
|
|
|
27,319 |
|
|
|
27,184 |
|
Loan received during year |
|
|
|
|
|
|
10,187 |
|
|
|
7,408 |
|
|
|
7,238 |
|
Loan repayments paid |
|
|
|
|
|
|
(12,706 |
) |
|
|
(7,350 |
) |
|
|
(9,575 |
) |
Interest charged |
|
|
|
|
|
|
1,297 |
|
|
|
1,327 |
|
|
|
1,377 |
|
Interest paid |
|
|
|
|
|
|
(1,294 |
) |
|
|
(1,305 |
) |
|
|
(1,388 |
) |
Currency translation differences |
|
|
|
|
|
|
(97 |
) |
|
|
(215 |
) |
|
|
(343 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the year |
|
|
|
|
|
|
27,319 |
|
|
|
27,184 |
|
|
|
24,493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans from state-controlled banks
and other financial institutions: |
|
(ii) |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the year |
|
|
|
|
|
|
36,562 |
|
|
|
31,178 |
|
|
|
32,810 |
|
Loan received during year |
|
|
|
|
|
|
24,715 |
|
|
|
28,457 |
|
|
|
38,320 |
|
Loan repayments paid |
|
|
|
|
|
|
(29,976 |
) |
|
|
(26,576 |
) |
|
|
(36,335 |
) |
Interest charged |
|
|
|
|
|
|
1,670 |
|
|
|
1,598 |
|
|
|
1,869 |
|
Interest paid |
|
|
|
|
|
|
(1,664 |
) |
|
|
(1,626 |
) |
|
|
(1,875 |
) |
Currency translation differences |
|
|
|
|
|
|
(129 |
) |
|
|
(221 |
) |
|
|
(526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the year |
|
|
|
|
|
|
31,178 |
|
|
|
32,810 |
|
|
|
34,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans from other related parties: |
|
(iii) |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the year |
|
|
|
|
|
|
16 |
|
|
|
62 |
|
|
|
5 |
|
Loan received during year |
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
Loan repayments paid |
|
|
|
|
|
|
(5 |
) |
|
|
(57 |
) |
|
|
|
|
Interest charged |
|
|
|
|
|
|
1 |
|
|
|
2 |
|
|
|
|
|
Interest paid |
|
|
|
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of the year |
|
|
|
|
|
|
62 |
|
|
|
5 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
The loans from CP Finance are mainly with interest rates ranging from 4.46% to 6.06% and
4.46% to 7.47% per annum as of December 31, 2006 and 2007, respectively with maturities through
2032. |
|
(ii) |
|
The loans from state-controlled banks and other financial institutions are mainly with
interest rates ranging from zero to 8.66% and zero to 8.66% per annum as of December 31, 2006 and
2007, respectively with maturities through 2038. |
|
(iii) |
|
The loans from other related parties are mainly with interest rate at 6.32% and 6.32%
per annum as of December 31, 2006 and 2007 respectively, and with no fixed repayment terms. |
The secured loans from related parties amounted to RMB 23 and RMB Nil at December 31, 2006 and
2007, respectively.
The guaranteed loans amounted to RMB 597 and RMB 528 at December 31, 2006 and 2007,
respectively. Debts of RMB 498 are from non-related parties, long-term and guaranteed by CNPC and
debts of RMB 30 are from non-related parties, short-term and guaranteed by the Company and third
parities.
Information on loans from related parties are included in Note 23.
F-48
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
(h) Key management compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB000 |
|
|
RMB000 |
|
|
RMB000 |
|
Fee for key management personnel |
|
|
|
|
|
|
|
|
|
|
|
|
- Directors and supervisors |
|
|
897 |
|
|
|
1,473 |
|
|
|
1,504 |
|
Salaries, allowances and other benefits(i) |
|
|
|
|
|
|
|
|
|
|
|
|
-Directors and supervisors |
|
|
4,031 |
|
|
|
3,937 |
|
|
|
3,767 |
|
-Other key management |
|
|
2,207 |
|
|
|
2,447 |
|
|
|
5,002 |
|
Contribution to retirement benefit scheme |
|
|
|
|
|
|
|
|
|
|
|
|
- Directors and supervisors |
|
|
57 |
|
|
|
165 |
|
|
|
136 |
|
- Other key management |
|
|
37 |
|
|
|
133 |
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,229 |
|
|
|
8,155 |
|
|
|
10,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
Salaries, allowances and other benefits do not include deferred payments made to directors
and other key management in accordance with the relevant PRC government regulations, in respect of
2004 to 2006 in the amount of RMB 5,143 thousand. |
As at December 31, 2007, none of the key management personnel had exercised the share
appreciation rights. The liability for the units awarded to key management personnel amounted to
approximately RMB 177, RMB 329 and RMB 395 at December 31, 2005, 2006 and 2007, respectively.
(i) Contingent liabilities
The Group has disclosed in Note 29 in respect of the contingent liabilities arising from the
guarantees made for related parties.
(j) Collateral for debts
The Group pledged time deposits with maturities over one year as collaterals with certain
banks for the debts of subsidiaries and equity affliates.
As at December 31, 2006 and 2007, the time deposits with maturities over one year of RMB
2,499 and RMB 5,053, were secured including for the debts of subsidiaries of RMB 312 and RMB 3,287
and for the debts of equity affliates of RMB 2,187 and RMB 1,757, respectively.
F-49
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
33 EMOLUMENTS OF DIRECTORS AND SUPERVISORS
Details of the emoluments of directors and supervisors for the years ended December 31, 2007,
2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
Fee for |
|
|
Salaries, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
directors |
|
|
allowances |
|
|
Contribution |
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
and other |
|
|
to retirement |
|
|
|
|
|
|
|
|
|
|
Name |
|
supervisors |
|
|
benefits |
|
|
benefit scheme |
|
|
Total |
|
|
Total |
|
|
Total |
|
|
|
RMB000 |
|
|
RMB000 |
|
|
RMB000 |
|
|
RMB000 |
|
|
RMB000 |
|
|
RMB000 |
|
Chairman: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Chen Geng (iii), (iv) |
|
|
|
|
|
|
586 |
|
|
|
12 |
|
|
|
598 |
|
|
|
797 |
|
|
|
790 |
|
Mr. Jiang Jiemin (iv) |
|
|
|
|
|
|
886 |
|
|
|
30 |
|
|
|
916 |
|
|
|
722 |
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,472 |
|
|
|
42 |
|
|
|
1,514 |
|
|
|
1,519 |
|
|
|
1,415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Su Shulin (ii) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
684 |
|
|
|
686 |
|
Mr. Duan Wende (iv) |
|
|
|
|
|
|
794 |
|
|
|
30 |
|
|
|
824 |
|
|
|
684 |
|
|
|
686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
794 |
|
|
|
30 |
|
|
|
824 |
|
|
|
1,368 |
|
|
|
1,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-executive directors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Zheng Hu |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Zhou Jiping |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wang Yilin |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Zeng Yukang |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Gong Huazhang |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Jiang Fan |
|
|
|
|
|
|
480 |
|
|
|
19 |
|
|
|
499 |
|
|
|
461 |
|
|
|
33 |
|
Mr. Chee-chen Tung |
|
|
264 |
|
|
|
|
|
|
|
|
|
|
|
264 |
|
|
|
275 |
|
|
|
275 |
|
Mr. Liu Hongru |
|
|
349 |
|
|
|
|
|
|
|
|
|
|
|
349 |
|
|
|
279 |
|
|
|
274 |
|
Mr. Franco Bernabè |
|
|
257 |
|
|
|
|
|
|
|
|
|
|
|
257 |
|
|
|
259 |
|
|
|
279 |
|
Mr. Zou Haifeng (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
870 |
|
|
|
480 |
|
|
|
19 |
|
|
|
1,369 |
|
|
|
1,274 |
|
|
|
1,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supervisors: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Wang Fucheng |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
530 |
|
Mr. Wen Qingshan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Sun Xianfeng |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Xu Fengli (iii) |
|
|
|
|
|
|
252 |
|
|
|
12 |
|
|
|
264 |
|
|
|
459 |
|
|
|
374 |
|
Mr. Qin Gang |
|
|
|
|
|
|
454 |
|
|
|
15 |
|
|
|
469 |
|
|
|
295 |
|
|
|
|
|
Mr. Li Yongwu |
|
|
315 |
|
|
|
|
|
|
|
|
|
|
|
315 |
|
|
|
330 |
|
|
|
12 |
|
Mr. Wu Zhipan |
|
|
319 |
|
|
|
|
|
|
|
|
|
|
|
319 |
|
|
|
330 |
|
|
|
57 |
|
Mr. Sun Chongren (i) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81 |
|
Mr. Zhang Jinzhu |
|
|
|
|
|
|
315 |
|
|
|
18 |
|
|
|
333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
634 |
|
|
|
1,021 |
|
|
|
45 |
|
|
|
1,700 |
|
|
|
1,414 |
|
|
|
1,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,504 |
|
|
|
3,767 |
|
|
|
136 |
|
|
|
5,407 |
|
|
|
5,575 |
|
|
|
4,985 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) |
|
No longer a director or supervisor since November 8, 2005. |
|
(ii) |
|
No longer a director since November 24, 2006.
|
|
(iii) |
|
No longer a director or supervisor since May 16, 2007. |
|
(iv) |
|
Salaries, allowances and other benefits do not include deferred payments made to
directors in accordance with the relevant PRC government regulations, in respect of 2004
to 2006 in the amount of RMB 2,402 thousand. |
F-50
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
The emoluments of the directors and supervisors fall within the following bands (including
directors and supervisors whose term expired during the year):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
Number |
|
|
Number |
|
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMB Nil RMB 1 million |
|
|
20 |
|
|
|
20 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
Fee for directors and supervisors disclosed above included RMB 828 thousand, RMB 813 thousand
and RMB 870 thousand respectively, for the years ended December 31, 2005, 2006 and 2007 paid to
independent non-executive directors.
None of the directors and supervisors has waived their remuneration during the years indicated
above.
The five highest paid individuals in the Group for each of the years indicated above were also
directors or supervisors and their emoluments are reflected in the analysis shown above.
During 2005, 2006 and 2007, the Company did not incur any severance payment to any director
for loss of office or any payment as inducement to any director to join the Company.
The Company has adopted a share-based compensation scheme which is a share appreciation right
arrangement payable in cash to the recipients upon exercise of the rights which became effective on
the initial public offering of the H shares of the Company on April 7, 2000. The directors,
supervisors and senior executives of the Company are eligible for the scheme. 87,000,000 units of
share appreciation rights were granted to senior executives. 35,000,000 units were granted to the
directors and supervisors; of these 35,000,000 units, 33,130,000 units are outstanding, net of
subsequent forfeiture of 1,870,000 units by a former independent director.
The rights can be exercised on or after April 8, 2003, the third anniversary of the grant, up
to April 7, 2008. The exercise price is the price as at the initial public offering being HK $1.28
per share (Note 26).
As at December 31, 2007, none of the holders of the share appreciation rights had exercised
the rights. The liability for the units awarded under the scheme has been calculated based on the
fair value of the liability incurred and is expensed over the vesting period. The liability is
remeasured at each balance sheet date to its fair value, and amounted to approximately RMB 1,167
and RMB 1,400 at December 31, 2006 and 2007.
F-51
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
34 SEGMENT INFORMATION
The Group is engaged in a broad range of petroleum related activities through its four major
business segments: Exploration and Production, Refining and Marketing, Chemicals and Marketing and
Natural Gas and Pipeline.
The Exploration and Production segment is engaged in the exploration, development, production
and sale of crude oil and natural gas.
The Refining and Marketing segment is engaged in the refining, transportation, storage and
marketing of crude oil and petroleum products.
The Chemicals and Marketing segment is engaged in the production and sale of basic
petrochemical products, derivative petrochemical products, and other chemical products.
The Natural Gas and Pipeline segment is engaged in the sale of natural gas and the
transmission of natural gas, crude oil and refined products.
In addition to these four major business segments, the Other segment includes the assets,
income and expenses relating to cash management, financing activities, the corporate center,
research and development, and other business services to the operating business segments of the
Group.
Most assets and operations of the Group are located in the PRC, which is considered as one
geographic location in an economic environment with similar risks and returns. In addition to its
operations in the PRC, the Group also has overseas operations through subsidiaries engaging in the
exploration and production of crude oil and natural gas.
The accounting policies of the operating segments are the same as those described in Note 3 -
Summary of Principal Accounting Policies.
Operating segment information for the years ended December 31, 2005, 2006 and 2007 is
presented below:
F-52
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Primary reporting format business segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration |
|
|
Refining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
and |
|
|
Chemicals and |
|
|
Natural |
|
|
|
|
|
|
|
Year Ended December 31, 2005 |
|
Production |
|
|
Marketing |
|
|
Marketing |
|
|
Gas and Pipeline |
|
|
Other |
|
|
Total |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
Sales and other operating
revenues (including
intersegment) |
|
|
337,208 |
|
|
|
428,494 |
|
|
|
73,978 |
|
|
|
26,214 |
|
|
|
|
|
|
|
865,894 |
|
Less: Intersegment sales |
|
|
(270,943 |
) |
|
|
(33,019 |
) |
|
|
(4,754 |
) |
|
|
(4,949 |
) |
|
|
|
|
|
|
(313,665 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and other
operating revenues from
external customers |
|
|
66,265 |
|
|
|
395,475 |
|
|
|
69,224 |
|
|
|
21,265 |
|
|
|
|
|
|
|
552,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and
amortization |
|
|
(30,896 |
) |
|
|
(8,964 |
) |
|
|
(6,869 |
) |
|
|
(4,478 |
) |
|
|
(98 |
) |
|
|
(51,305 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
|
220,452 |
|
|
|
2,116 |
|
|
|
6,896 |
|
|
|
3,639 |
|
|
|
(1,357 |
) |
|
|
231,746 |
|
Other costs |
|
|
(12,372 |
) |
|
|
(21,926 |
) |
|
|
(3,620 |
) |
|
|
(456 |
) |
|
|
(1,201 |
) |
|
|
(39,575 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from operations |
|
|
208,080 |
|
|
|
(19,810 |
) |
|
|
3,276 |
|
|
|
3,183 |
|
|
|
(2,558 |
) |
|
|
192,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(750 |
) |
Income from equity
affiliates and jointly controlled
entities |
|
|
1,851 |
|
|
|
522 |
|
|
|
15 |
|
|
|
|
|
|
|
13 |
|
|
|
2,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,822 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(54,180 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(including
intersegment) |
|
|
3,912 |
|
|
|
998 |
|
|
|
387 |
|
|
|
100 |
|
|
|
5,763 |
|
|
|
11,160 |
|
Less: Intersegment
interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,236 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from external
entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(including
intersegment) |
|
|
(3,631 |
) |
|
|
(2,659 |
) |
|
|
(636 |
) |
|
|
(1,105 |
) |
|
|
(3,967 |
) |
|
|
(11,998 |
) |
Less: Intersegment
interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense to external
entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,762 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
460,814 |
|
|
|
207,168 |
|
|
|
76,414 |
|
|
|
69,229 |
|
|
|
543,894 |
|
|
|
1,357,519 |
|
Elimination of
intersegment balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(591,830 |
) |
Investments in equity affiliates
and jointly controlled entities |
|
|
5,470 |
|
|
|
6,605 |
|
|
|
250 |
|
|
|
|
|
|
|
53 |
|
|
|
12,378 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
778,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditure
for property, plant and
equipment |
|
|
83,214 |
|
|
|
16,454 |
|
|
|
13,569 |
|
|
|
11,137 |
|
|
|
427 |
|
|
|
124,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
|
147,610 |
|
|
|
97,918 |
|
|
|
30,559 |
|
|
|
40,847 |
|
|
|
161,755 |
|
|
|
478,689 |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,735 |
|
Elimination of
intersegment balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(291,024 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-53
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration |
|
|
Refining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
and |
|
|
Chemicals and |
|
|
Natural |
|
|
|
|
|
|
|
Year Ended December 31, 2006 |
|
Production |
|
|
Marketing |
|
|
Marketing |
|
|
Gas and Pipeline |
|
|
Other |
|
|
Total |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
Sales and other operating
revenues (including
intersegment) |
|
|
421,340 |
|
|
|
543,299 |
|
|
|
82,791 |
|
|
|
38,917 |
|
|
|
1,080 |
|
|
|
1,087,427 |
|
Less: Intersegment sales |
|
|
(339,619 |
) |
|
|
(44,806 |
) |
|
|
(7,983 |
) |
|
|
(5,617 |
) |
|
|
(424 |
) |
|
|
(398,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and other
operating revenues from
external customers |
|
|
81,721 |
|
|
|
498,493 |
|
|
|
74,808 |
|
|
|
33,300 |
|
|
|
656 |
|
|
|
688,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and
amortization |
|
|
(37,080 |
) |
|
|
(12,080 |
) |
|
|
(6,417 |
) |
|
|
(5,263 |
) |
|
|
(548 |
) |
|
|
(61,388 |
) |
Segment result |
|
|
232,404 |
|
|
|
(5,206 |
) |
|
|
8,208 |
|
|
|
9,470 |
|
|
|
(3,058 |
) |
|
|
241,818 |
|
Other costs |
|
|
(12,544 |
) |
|
|
(23,958 |
) |
|
|
(3,150 |
) |
|
|
(484 |
) |
|
|
(3,706 |
) |
|
|
(43,842 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from operations |
|
|
219,860 |
|
|
|
(29,164 |
) |
|
|
5,058 |
|
|
|
8,986 |
|
|
|
(6,764 |
) |
|
|
197,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,080 |
) |
Income from equity
affiliates and jointly controlled
entities |
|
|
1,889 |
|
|
|
333 |
|
|
|
38 |
|
|
|
1 |
|
|
|
16 |
|
|
|
2,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
199,173 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,776 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(including
intersegment) |
|
|
4,853 |
|
|
|
1,471 |
|
|
|
634 |
|
|
|
157 |
|
|
|
7,171 |
|
|
|
14,286 |
|
Less: Intersegment interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from external
entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(including
intersegment) |
|
|
(5,043 |
) |
|
|
(3,790 |
) |
|
|
(679 |
) |
|
|
(1,614 |
) |
|
|
(4,314 |
) |
|
|
(15,440 |
) |
Less: Intersegment interest
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense to external
entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
484,547 |
|
|
|
246,828 |
|
|
|
79,964 |
|
|
|
75,432 |
|
|
|
638,616 |
|
|
|
1,525,387 |
|
Elimination of intersegment
balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(686,180 |
) |
Investments in equity affiliates
and jointly controlled entity |
|
|
27,127 |
|
|
|
5,587 |
|
|
|
153 |
|
|
|
20 |
|
|
|
69 |
|
|
|
32,956 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
872,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditure
for property, plant and
equipment |
|
|
105,192 |
|
|
|
19,206 |
|
|
|
10,681 |
|
|
|
11,309 |
|
|
|
2,358 |
|
|
|
148,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
|
181,542 |
|
|
|
116,002 |
|
|
|
27,092 |
|
|
|
43,616 |
|
|
|
170,152 |
|
|
|
538,404 |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,517 |
|
Elimination of intersegment
balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(327,349 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
254,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-54
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration |
|
|
Refining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and |
|
|
and |
|
|
Chemicals and |
|
|
Natural |
|
|
|
|
|
|
|
Year Ended December 31, 2007 |
|
Production |
|
|
Marketing |
|
|
Marketing |
|
|
Gas and Pipeline |
|
|
Other |
|
|
Total |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
Sales and other operating
revenues (including
intersegment) |
|
|
468,175 |
|
|
|
670,844 |
|
|
|
102,718 |
|
|
|
50,066 |
|
|
|
1,718 |
|
|
|
1,293,521 |
|
Less: Intersegment sales |
|
|
(376,451 |
) |
|
|
(63,766 |
) |
|
|
(11,009 |
) |
|
|
(6,610 |
) |
|
|
(648 |
) |
|
|
(458,484 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales and other
operating revenues from
external customers |
|
|
91,724 |
|
|
|
607,078 |
|
|
|
91,709 |
|
|
|
43,456 |
|
|
|
1,070 |
|
|
|
835,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and
amortization |
|
|
(42,945 |
) |
|
|
(11,184 |
) |
|
|
(5,923 |
) |
|
|
(5,926 |
) |
|
|
(647 |
) |
|
|
(66,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment result |
|
|
220,430 |
|
|
|
9,341 |
|
|
|
13,256 |
|
|
|
13,057 |
|
|
|
(3,388 |
) |
|
|
252,696 |
|
Other costs |
|
|
(13,843 |
) |
|
|
(30,021 |
) |
|
|
(5,425 |
) |
|
|
(562 |
) |
|
|
(2,990 |
) |
|
|
(52,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income/(loss) from operations |
|
|
206,587 |
|
|
|
(20,680 |
) |
|
|
7,831 |
|
|
|
12,495 |
|
|
|
(6,378 |
) |
|
|
199,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,471 |
) |
Income from equity
affiliates and jointly controlled
entities |
|
|
6,460 |
|
|
|
477 |
|
|
|
41 |
|
|
|
2 |
|
|
|
17 |
|
|
|
6,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
204,381 |
|
Income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income(including
intersegment) |
|
|
7,346 |
|
|
|
2,021 |
|
|
|
804 |
|
|
|
122 |
|
|
|
8,846 |
|
|
|
19,139 |
|
Less: Intersegment interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from external
entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,990 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(including
intersegment) |
|
|
(7,492 |
) |
|
|
(4,695 |
) |
|
|
(901 |
) |
|
|
(1,720 |
) |
|
|
(5,936 |
) |
|
|
(20,744 |
) |
Less: Intersegment interest
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense to external
entities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,595 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
548,895 |
|
|
|
274,435 |
|
|
|
94,976 |
|
|
|
80,252 |
|
|
|
819,153 |
|
|
|
1,817,711 |
|
Elimination of intersegment
balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(784,115 |
) |
Investments in equity affiliates
and jointly controlled entities |
|
|
21,339 |
|
|
|
4,973 |
|
|
|
138 |
|
|
|
17 |
|
|
|
68 |
|
|
|
26,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,060,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditure- for
property, plant and equipment |
|
|
134,256 |
|
|
|
26,546 |
|
|
|
8,165 |
|
|
|
11,003 |
|
|
|
1,613 |
|
|
|
181,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment liabilities |
|
|
225,483 |
|
|
|
145,263 |
|
|
|
33,389 |
|
|
|
39,790 |
|
|
|
188,774 |
|
|
|
632,699 |
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,013 |
|
Elimination of intersegment
balances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(391,928 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
283,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Note (a) |
|
Intersegment sales are conducted principally at market price. |
|
Note (b) |
|
Segment result is income from operations before other costs. Other costs include
selling, general and administrative expenses and other net expense. |
|
Note (c) |
|
Segment results for the years ended December 31, 2005, 2006 and 2007 include
impairment provision for property, plant and equipment (Note 17). |
|
Note (d) |
|
Other liabilities mainly include income tax payable, other taxes payable and deferred
income taxes. |
|
Note (e) |
|
Elimination of intersegment balances represents elimination of intersegment accounts
and investments. |
|
Note (f) |
|
Effective January 1, 2006, the results of operations, together with the corresponding
assets and liabilities, of certain research and development activities of the Group are
reclassified from the Exploration and Production segment, the Refining and Marketing segment,
the Chemicals and Marketing segment and the Natural Gas and Pipeline segment to the Other
segment to reflect the changes in the manner under which these activities are managed. The
results of operations, together with the corresponding assets and liabilities, of these
research and development activities were included in the previously reported segments in the
segment information for the year ended December 31, 2005. Selected financial data of these
research and development activities as of December 31, 2005 and for the year ended December
31, 2005 are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration |
|
|
Refining |
|
|
Chemicals |
|
|
Natural |
|
|
|
|
|
|
and |
|
|
and |
|
|
and |
|
|
Gas and |
|
|
|
|
Year
ended December 31, 2005 |
|
Production |
|
|
Marketing |
|
|
Marketing |
|
|
Pipeline |
|
|
Total |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
Turnover (including intersegment) |
|
|
543 |
|
|
|
|
|
|
|
39 |
|
|
|
|
|
|
|
582 |
|
Turnover from external customers |
|
|
21 |
|
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
50 |
|
Depreciation, depletion and
amortization |
|
|
(295 |
) |
|
|
(26 |
) |
|
|
(64 |
) |
|
|
(6 |
) |
|
|
(391 |
) |
Segment result |
|
|
(714 |
) |
|
|
(88 |
) |
|
|
(162 |
) |
|
|
(21 |
) |
|
|
(985 |
) |
Other costs |
|
|
(664 |
) |
|
|
(96 |
) |
|
|
(81 |
) |
|
|
(42 |
) |
|
|
(883 |
) |
Loss from operations |
|
|
(1,378 |
) |
|
|
(184 |
) |
|
|
(243 |
) |
|
|
(63 |
) |
|
|
(1,868 |
) |
Income from equity affiliates and
jointly controlled entities |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15 |
) |
Segment assets |
|
|
2,163 |
|
|
|
272 |
|
|
|
374 |
|
|
|
52 |
|
|
|
2,861 |
|
Segment liabilities |
|
|
1,183 |
|
|
|
320 |
|
|
|
164 |
|
|
|
21 |
|
|
|
1,688 |
|
Secondary reporting format geographical segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
Total assets |
|
|
Capital expenditure |
|
Year Ended December 31, |
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRC |
|
|
665,267 |
|
|
|
807,706 |
|
|
|
811,919 |
|
|
|
979,124 |
|
|
|
142,371 |
|
|
|
171,510 |
|
Other (Exploration and Production) |
|
|
23,711 |
|
|
|
27,331 |
|
|
|
60,244 |
|
|
|
81,007 |
|
|
|
6,375 |
|
|
|
10,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688,978 |
|
|
|
835,037 |
|
|
|
872,163 |
|
|
|
1,060,131 |
|
|
|
148,746 |
|
|
|
181,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-56
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
35 PRINCIPAL SUBSIDIARIES
The principal subsidiaries of the Group are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable |
|
|
|
|
Country of |
|
Paid-up |
|
Type of |
|
Equity |
|
|
Company Name |
|
Incorporation |
|
Capital RMB |
|
Legal Entity |
|
Interest % |
|
Principal Activities |
Daqing Oilfield
Company
Limited
|
|
PRC
|
|
47,500 |
|
Limited liability
company
|
|
100.00 |
|
Exploration,
production and sale
of crude oil and
natural gas;
production and sale
of refined products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daqing Yu Shu Lin
Oilfield Company
Limited
|
|
PRC
|
|
1,272 |
|
Limited liability
company
|
|
88.16 |
|
Exploration,
production and sale
of crude oil and
natural gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CNPC Exploration
and Development
Company Limited
|
|
PRC
|
|
100 |
|
Limited liability
company
|
|
50.00 |
|
Exploration,
production and sale
of crude oil and
natural gas outside
of the PRC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PetroKazakhstan
Inc. (Note 18)
|
|
Canada
|
|
US Dollar
2,465 million
|
|
Joint stock company
with limited
liability
|
|
67.00 |
|
Exploration,
production and sale
of crude oil and
natural gas outside
of the PRC |
F-57
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
Pursuant to the resolutions passed at the Board of Directors meeting held on October 26, 2005, the
Company offered to acquire and complete the acquisition of all of the outstanding shares from the
minority shareholders of the following entities of the Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Number of |
|
Purchase |
|
|
|
Total cash |
|
interest held |
|
|
Entity |
|
outstanding |
|
price per |
|
Number of shares |
|
consideration |
|
after the |
|
|
name |
|
shares |
|
share |
|
acquired |
|
paid |
|
acquisition % |
|
|
|
Jinzhou
PetroChemical
Company Limited
(JCPL)
|
|
150,000,000 A shares
|
|
RMB 4.25 yuan per A
share
|
|
150,000,000 A
shares as of June
30, 2007
|
|
RMB 638 as of
December 31, 2007
|
|
100.00 |
|
JCPL was delisted
from the Shenzhen
Stock Exchange on
January 4, 2006. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In November 2007,
the Liaoning
Administration for
Industry and
Commerce approved
JCPLs
deregistration as
an incorporated
company. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jilin Chemical
Industrial Company
Limited (JCIC)
|
|
200,000,000 A shares
|
|
RMB 5.25 yuan per A
share
|
|
200,000,000 A
shares as of
December 31, 2007
|
|
RMB 3,862 as of
December 31, 2007
|
|
100.00 |
|
JCIC was delisted
from the Shenzhen
Stock Exchange on
February 20, 2006. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
964,778,000 H
shares (including
American Depositary
Shares) (ADS)
|
|
HK$2.80 per H share
|
|
964,778,000 H
shares (including
ADS) as of December
31, 2007
|
|
|
|
|
|
|
|
JCIC was delisted
from the Stock
Exchange of Hong
Kong Limited and
the New York Stock
Exchange on January
23, 2006 and
February 15, 2006,
respectively. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In December 2007,
the Jilin
Administration for
Industry and
Commerce approved
JCICs
deregistration as
an incorporated
company. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liaohe Jinma
Oilfield Company
Limited (LJOCL)
|
|
200,000,000 A shares
|
|
RMB 8.80 yuan per A
share
|
|
200,000,000 A
shares as of June
30, 2007
|
|
RMB 1,763 as of
December 31, 2007
|
|
100.00 |
|
LJOCL was delisted
from the Shenzhen
Stock Exchange on
January 4, 2006. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In May 2007, the
Liaoning
Administration for
Industry and
Commerce approved
LJOCLs
deregistration as
an incorporated
company. |
The excess of the cost of purchase over the carrying value of the underlying assets and
liabilities of the above non-wholly owned principal subsidiaries and other non-wholly subsidiaries
acquired was recorded in equity, and this amounted to RMB 2,156 and RMB 113 for the year ended
December 31, 2006 and 2007, respectively.
F-58
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Amounts in millions unless otherwise stated)
36 EVENTS AFTER BALANCE SHEET DATE
On May 12, 2008, an earthquake struck the Wenchuan area of Sichuan Province of the PRC. The
Company is currently assessing the financial effect on the consolidated financial statements of
Group arising from the earthquake.
37 APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of Directors on March 19, 2008 and by the
shareholders of the Company at the annual general meeting held on May 15, 2008.
F-59
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
In accordance with US Statement of Financial Accounting Standard No. 69, Disclosures about Oil
and Gas Producing Activities, this section provides supplemental information on oil and gas
exploration and producing activities of the Company and its subsidiaries (the Group) and also the
Groups investments that are accounted for using the equity
method of accounting.
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and other operating revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Sales to third parties |
|
|
66,265 |
|
|
|
81,721 |
|
|
|
91,724 |
|
Intersegment sales |
|
|
261,558 |
|
|
|
313,654 |
|
|
|
336,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,823 |
|
|
|
395,375 |
|
|
|
428,723 |
|
Production costs excluding taxes |
|
|
(41,713 |
) |
|
|
(54,800 |
) |
|
|
(63,118 |
) |
Exploration expenses |
|
|
(15,566 |
) |
|
|
(18,822 |
) |
|
|
(20,648 |
) |
Depreciation, depletion and amortization |
|
|
(25,819 |
) |
|
|
(31,540 |
) |
|
|
(36,400 |
) |
Taxes other than income taxes |
|
|
(10,239 |
) |
|
|
(41,354 |
) |
|
|
(56,474 |
) |
Accretion expense |
|
|
(60 |
) |
|
|
(796 |
) |
|
|
(1,202 |
) |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
234,426 |
|
|
|
248,063 |
|
|
|
250,881 |
|
Income taxes |
|
|
(64,816 |
) |
|
|
(65,554 |
) |
|
|
(57,386 |
) |
|
|
|
|
|
|
|
|
|
|
Results of operations from producing activities |
|
|
169,610 |
|
|
|
182,509 |
|
|
|
193,495 |
|
|
|
|
|
|
|
|
|
|
|
Income from
producing activities of equity affiliates and jointly controlled
entities |
|
|
1,880 |
|
|
|
4,424 |
|
|
|
5,293 |
|
|
|
|
|
|
|
|
|
|
|
Capitalised Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property costs |
|
|
|
|
|
|
|
|
|
|
|
|
Producing assets |
|
|
359,539 |
|
|
|
425,172 |
|
|
|
497,117 |
|
Support facilities |
|
|
138,093 |
|
|
|
150,149 |
|
|
|
171,590 |
|
Construction-in-progress |
|
|
19,394 |
|
|
|
25,461 |
|
|
|
43,070 |
|
|
|
|
|
|
|
|
|
|
|
Total capitalized costs |
|
|
517,026 |
|
|
|
600,782 |
|
|
|
711,777 |
|
Accumulated depreciation, depletion
and amortization |
|
|
(203,416 |
) |
|
|
(233,677 |
) |
|
|
(264,992 |
) |
|
|
|
|
|
|
|
|
|
|
Net capitalized costs |
|
|
313,610 |
|
|
|
367,105 |
|
|
|
446,785 |
|
|
|
|
|
|
|
|
|
|
|
Share of net
capitalized costs of equity affiliates and jointly controlled entities |
|
|
20,597 |
|
|
|
25,136 |
|
|
|
14,252 |
|
|
|
|
|
|
|
|
|
|
|
Costs Incurred in Property Acquisitions, Exploration and Development Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2007 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
Exploration costs |
|
|
25,335 |
|
|
|
30,567 |
|
|
|
36,046 |
|
Development costs |
|
|
72,551 |
|
|
|
79,902 |
|
|
|
96,449 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
97,886 |
|
|
|
110,469 |
|
|
|
132,495 |
|
|
|
|
|
|
|
|
|
|
|
Share of
costs of property acquisition, exploration, and development of equity
affiliates and jointly controlled entities |
|
|
2,590 |
|
|
|
4,371 |
|
|
|
2,911 |
|
|
|
|
|
|
|
|
|
|
|
F-60
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
Proved Reserve Estimates
Oil and gas proved reserves cannot be measured exactly. Reserve estimates are based on many
factors related to reservoir performance that require evaluation by the engineers interpreting the
available data, as well as price and other economic factors. The reliability of these estimates at
any point in time depends on both the quality and quantity of the technical and economic data, and
the production performance of the reservoirs as well as engineering judgement. Consequently,
reserve estimates are subject to revision as additional data become available during the producing
life of a reservoir. When a commercial reservoir is discovered, proved reserves are initially
determined based on limited data from the first well or wells. Subsequent data may better define
the extent of the reservoir and additional production performance, well tests and engineering
studies will likely improve the reliability of the reserve estimate. The evolution of technology
may also result in the application of improved recovery techniques such as supplemental or enhanced
recovery projects, or both, which have the potential to increase reserves beyond those envisioned
during the early years of a reservoirs producing life.
Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which
geological and engineering data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating conditions, i.e., prices and
costs as of the date the estimate is made. Prices include consideration of changes in existing
prices provided only by contractual arrangements, but not on escalations based upon future
conditions. Proved developed reserves are those reserves, which can be expected to be recovered
through existing wells with existing equipment and operating methods. Proved undeveloped reserves
are those reserves which are expected to be recovered from new wells on undrilled acreage or from
existing wells where relatively major expenditure is required.
The Ministry of Land and Resources in China issues production licenses to applicants on the
basis of the reserve reports approved by relevant authorities. Administrative rules issued by the
State Council provide that the maximum term of a production license is 30 years. However, in
accordance with a special approval from the State Council, the Ministry of Land and Resources
issued production licenses effective from March 2000 to the Group for all of its crude oil and
natural gas reservoirs with terms similar with the projected productive life of those reservoirs,
ranging up to 55 years. Production licenses to be issued to the Group in the future will be
subject to the 30-year limit unless additional special approvals can be obtained from the State
Council. Each of the Groups production licenses is renewable upon application by the Group 30
days prior to expiration. Future oil and gas price increases may extend the productive lives of
crude oil and natural gas reservoirs beyond the current terms of the relevant production licenses.
Proved reserve estimates as of December 31, 2007, 2006 and 2005 were based on reports prepared
by DeGolyer and MacNaughton and Gaffney, Cline & Associates, independent engineering consultants.
The Groups reserve estimates were prepared for each oil and gas field within oil and gas regions
and adjusted for the estimated effects of using prices and costs prevailing at the end of the
period. The Companys reserve estimates include only crude oil and natural gas, which the Company
believes can be reasonably produced within the current terms of production licenses.
Estimated quantities of net proved oil and condensate and natural gas reserves and of changes
in net quantities of proved developed and undeveloped reserves for each of the period indicated are
as follows:
F-61
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
Crude Oil and |
|
|
|
|
|
|
Condensate |
|
|
Natural Gas |
|
|
|
(millions of barrels) |
|
|
(billions of cubic feet) |
|
|
|
|
|
|
|
|
|
|
Proved developed and undeveloped |
|
|
|
|
|
|
|
|
Reserves at January 1, 2005 |
|
|
11,501 |
|
|
|
45,249 |
|
Changes resulting from: |
|
|
|
|
|
|
|
|
Revisions of previous estimates |
|
|
157 |
|
|
|
213 |
|
Improved recovery |
|
|
101 |
|
|
|
|
|
Extensions and discoveries |
|
|
606 |
|
|
|
4,005 |
|
Production |
|
|
(829 |
) |
|
|
(1,344 |
) |
|
|
|
|
|
|
|
Reserves at December 31, 2005 |
|
|
11,536 |
|
|
|
48,123 |
|
|
|
|
|
|
|
|
Changes resulting from: |
|
|
|
|
|
|
|
|
Revisions of previous estimates |
|
|
197 |
|
|
|
686 |
|
Improved recovery |
|
|
81 |
|
|
|
|
|
Extensions and discoveries |
|
|
635 |
|
|
|
6,248 |
|
Production |
|
|
(831 |
) |
|
|
(1,588 |
) |
|
|
|
|
|
|
|
Reserves at December 31, 2006 |
|
|
11,618 |
|
|
|
53,469 |
|
|
|
|
|
|
|
|
Changes resulting from: |
|
|
|
|
|
|
|
|
Revisions of previous estimates |
|
|
84 |
|
|
|
(1,062 |
) |
Improved recovery |
|
|
79 |
|
|
|
|
|
Extensions and discoveries |
|
|
764 |
|
|
|
6,331 |
|
Production |
|
|
(839 |
) |
|
|
(1,627 |
) |
|
|
|
|
|
|
|
Reserves at December 31, 2007 |
|
|
11,706 |
|
|
|
57,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves at: |
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
9,195 |
|
|
|
19,858 |
|
December 31, 2006 |
|
|
9,185 |
|
|
|
22,564 |
|
December 31, 2007 |
|
|
9,047 |
|
|
|
26,047 |
|
Proportional interest in proved reserves of equity
affiliates
and jointly controlled entities at: |
|
|
|
|
|
|
|
|
December 31, 2005 |
|
|
631 |
|
|
|
145 |
|
December 31, 2006 |
|
|
543 |
|
|
|
105 |
|
December 31, 2007 |
|
|
141 |
|
|
|
79 |
|
At December 31, 2007, 11,062 million barrels of crude oil and condensate and 56,510.0 billion
cubic feet of natural gas proved developed and undeveloped reserves are located within China, and
644 million barrels of crude oil and condensate and 601.0 billion cubic feet of natural gas proved
developed and undeveloped reserves are located overseas.
F-62
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
Standardized Measure
The following disclosures concerning the standardized measure of future cash flows from proved
oil and gas reserves are presented in accordance with the US Statement of Financial Accounting
Standards No.69, Disclosures about Oil and Gas Producing Activities. The amounts shown are based on
prices and costs at the end of each period, currently enacted tax rates and a 10 percent annual
discount factor. Since prices and costs do not remain static, and no price or cost changes have
been considered, the results are not necessarily indicative of the fair market value of estimated
proved reserves, but they do provide a common benchmark which may enhance the users ability to
project future cash flows.
The standardized measure of discounted future net cash flows related to proved oil and gas
reserves at the end of each of the three years in the period ended December 31, 2005 ,2006 and 2007
is as follows (in millions of RMB):
|
|
|
|
|
At December 31, 2005 |
|
|
|
|
Future cash
inflows from sales of oil and gas |
|
|
5,337,329 |
|
Future production costs |
|
|
(1,043,358 |
) |
Future development costs |
|
|
(156,575 |
) |
Future income tax expense |
|
|
(1,279,133 |
) |
|
|
|
|
Future net cash flows |
|
|
2,858,263 |
|
Discount at 10% for estimated timing of cash flows |
|
|
(1,472,069 |
) |
|
|
|
|
Standardized measure of discounted future net cash flows |
|
|
1,386,194 |
|
|
|
|
|
|
|
|
|
|
At December 31, 2006 |
|
|
|
|
Future cash
inflows from sales of oil and gas |
|
|
5,611,306 |
|
Future production costs |
|
|
(1,620,761 |
) |
Future development costs |
|
|
(296,175 |
) |
Future income tax expense |
|
|
(1,202,980 |
) |
|
|
|
|
Future net cash flows |
|
|
2,491,390 |
|
Discount at 10% for estimated timing of cash flows |
|
|
(1,336,045 |
) |
|
|
|
|
Standardized measure of discounted future net cash flows |
|
|
1,155,345 |
|
|
|
|
|
|
|
|
|
|
At December 31, 2007 |
|
|
|
|
Future cash
inflows from sales of oil and gas |
|
|
8,714,483 |
|
Future production costs |
|
|
(3,049,226 |
) |
Future development costs |
|
|
(437,946 |
) |
Future income tax expense |
|
|
(1,569,898 |
) |
|
|
|
|
Future net cash flows |
|
|
3,657,413 |
|
Discount at 10% for estimated timing of cash flows |
|
|
(1,835,343 |
) |
|
|
|
|
Standardized measure of discounted future net cash flows |
|
|
1,822,070 |
|
|
|
|
|
|
|
|
|
|
Share of
standardized measure of discounted future net cash flows of equity
affiliates and jointly controlled entities |
|
|
|
|
At December 31, 2005 |
|
|
31,703 |
|
At December 31, 2006 |
|
|
59,825 |
|
At December 31, 2007 |
|
|
33,543 |
|
Future net cash flows were estimated using period-end prices and costs, and currently enacted
tax rates.
F-63
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION
AND PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
Changes in the standardized measure of discounted net cash flows for the Group for each of the
three years ended December 31, 2005, 2006 and 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2005 |
|
|
2006 |
|
|
2006 |
|
|
|
RMB |
|
|
RMB |
|
|
RMB |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHANGES IN STANDARDISED MEASURE OF DISCOUNTED FUTURE
CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of the year |
|
|
1,000,458 |
|
|
|
1,386,194 |
|
|
|
1,155,345 |
|
Sales and transfers of oil and gas produced, net of
production costs |
|
|
(274,921 |
) |
|
|
(328,001 |
) |
|
|
(309,269 |
) |
Net changes in prices and production costs and other |
|
|
523,089 |
|
|
|
(317,593 |
) |
|
|
804,330 |
|
Extensions, discoveries and improved recovery |
|
|
157,343 |
|
|
|
166,249 |
|
|
|
256,476 |
|
Development costs incurred |
|
|
(11,282 |
) |
|
|
(47,551 |
) |
|
|
(39,031 |
) |
Revisions of previous quantity estimates |
|
|
21,678 |
|
|
|
32,306 |
|
|
|
(3,567 |
) |
Accretion of discount |
|
|
144,709 |
|
|
|
200,771 |
|
|
|
171,389 |
|
Net change in income taxes |
|
|
(174,880 |
) |
|
|
62,970 |
|
|
|
(213,603 |
) |
|
|
|
|
|
|
|
|
|
|
End of the year |
|
|
1,386,194 |
|
|
|
1,155,345 |
|
|
|
1,822,070 |
|
|
|
|
|
|
|
|
|
|
|
F-64