President’s Statement
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President’s Statement

Dear Friends,

Faced with an extremely difficult business environment in 2015, we focused on the Company’s development quality and efficiency, made every effort to increase profit and control cost, and achieved hard-won results under the strong leadership of the Board of Directors. Under the International Financial Reporting Standards, the Company’s total revenue was RMB 2.02 trillion, net profit attributable to equity shareholders of the Company was RMB 32.4 billion, and capital expenditure was RMB 112.2 billion.

Over the year, we took proactive measures to mitigate the impact by market changes and significant decline of oil prices, pursued operational excellence, and ensured reliable operations. In domestic E&P, we stressed on high-efficiency exploration and flexible development. Fuling shale gas project yielded good results in reserves and production, with proven reserves exceeding 380 billion cubic meters and phase one of 5 billion cubic meters/year capacity building completed. The testing of Wei-4 well in Beibu Gulf resulted in more than 1000 tonnes of oil production per day, making it a rare high-production exploratory well in China in the past decade and presenting new opportunities for the Company’s offshore E&P. In 2015, we produced 41.74 million tonnes of crude oil domestically, down 4.7% year-on-year, and 20.8 billion cubic meters of natural gas, up by 2.6% year-on-year. We restructured the refining and chemical businesses based on the profit-driven principle and market changes, processed 236 million tonnes of crude, up by 0.5%, and produced 11.12 million tonnes of ethylene, up by 3.9%. Chemicals sales volume was 62.87 million tonnes, up by 3.4%. Focus was put on utilizing network strength and increasing retail volume for the marketing and distribution business with domestic sales volume of refined products reaching 171 million tonnes, up by 0.2%, among which retail volume grew by 1% to 119 million tonnes. Non-fuels businesses grew by 45% to RMB 24.83 billion.

We continued to focus on the return on investment, optimized capex and improved core businesses’ quality. The phase one of Fuling shale gas project, Yuanba capacity building, Qilu Company’s refinery revamping, SECCO’s Acrylonitrile project, FREP’s EO/EG project, Shandong LNG light olefins recovery project, and fuels upgrading for Jiujiang and Tianjin were put on stream. Zhongtianhechuang coal chemical, Guangxi and Tianjin LNG terminals, Zhanjiang commercial storage facilities, Ningbo-Taizhou-Wenzhou fuels pipeline projects progressed on schedule. Some newly built petrol/LNG/CNG stations were operational. The programmes of eliminating safety hazards, ‘clear water, blue sky’, and ‘double energy efficiency’ were expedited. The acquisition of 10% equity in Russia’s Sibur company was completed.

Technology innovation focused on supporting the Company’s operations, restructuring and future growth needs as always, and a host of achievements were made. Optimized and fast drilling and completion technology for Fuling shale gas development was proven. The in-house high-efficiency and environment-friendly aromatics technology won national top prize for science and technology advance. The new type of catalyzing and related process technology for ethylene trimerization to produce 1-hexene, the value scale-up, mixing and intensification for high-concentration disperse phase stirred tank reactor technology was awarded national second prize for technology innovation, and the research, manufacturing and cluster application of super-power ultra-high voltage fracturing equipment won national second prize for technology advance. In 2015, the company was granted 3769 patents, ranking number one among state-owned enterprises.

We strengthened fundamental work to improve corporate governance and management. Work safety was given utmost importance and stringent measures were in place including contractors management, designating safety supervisors, rigorous site inspections, etc. The “clear water, blue sky” and “energy conservation campaign” projects were fast-tracked, and energy saving and pollutants emission control targets were met. Safety hazards correction for oil/gas pipelines and tank farms was conducted with full strength, with general and closed-space hazards correction completed and major hazards correction expedited. Cost control was very effective and corporate governance procedures became more standardized.

We expect a more challenging environment and daunting tasks in 2016. However, we will implement the strategy set by the Board of Directors, focus on quality, profit and transformation, and fasten restructuring. We will intensify our effort in expanding markets, optimizing operations, cutting cost, controlling risks, deepening reform, driving innovation, and pursuing better performance with full confidence to reciprocate the trust from our board directors, supervisors, investors, employees and the general public.

Li Chunguang


March 2016