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
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.
Refining and Marketing and Chemicals Operations and Marketing Operations
We compete with Sinopec in our refining and marketing and chemicals operations 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 northernnorthwestern regions of China where we have the dominant market share for refined products and chemical products. We also sell the remainder of our refined products and chemical products into 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 chemical products. Sinopec has a strong presence in the eastern and southern regions of China in competition with us, and most of Sinopec’s refineries, chemical plants and distribution networks are located in these regions in close proximity to these
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markets. Moreover, as the newly constructed facilities of CNOOC commenced operation in the same region, large quantity of chemical products have been marketed into that area. As a result, the competition ishas further intensified. We expect that we will continue to face competition from, among other competitors, Sinopec and CNOOC 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 China’s entry into the WTO we expect thatand the continuous expansion of China’s free trade zones, competition from foreign producers of refined products and chemical products may increasehas increased and the retail and wholesale markets in China for refined products and chemical products will be gradually opened to foreign competition as tariff and non-tariff barriers for imported refined products and chemical products will be reduced or eliminatedare being lifted over time, includingtime. For example, sales of chemical products imported from the opening over time of retail and wholesale marketsMiddle East have increased rapidly in China forin recent years. We will face more and more challenges in the competition of 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 abilityproducts. All these force us to reduce our production costs, and improve the quality of our products.products and optimize our product mix. See “Item 3 — Key Information — Risk Factors”.
Natural Gas and Pipeline Operations
We are the largest supplier of natural gas supplier in terms of volume of natural gas supplied.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 easternsoutheastern 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 concerningand environmental regulations promulgated by the governments in whose jurisdictions we have operations. These laws and regulations concern our oil and gas exploration and production operations, petroleum and petrochemical products and other activities. In particular, some of 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
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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 182RMB231 million, RMB 199RMB200 million and RMB 211RMB301 million in 2004, 20052007, 2008 and 2006,2009, 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 majorconstruction projects. |
Our capital expenditures on environmental programs in 2004, 20052007, 2008 and 20062009 were approximately RMB 1,345RMB2,299 million, RMB 1,633RMB1,366 million and RMB 4,634RMB1,336 million, respectively.
On December 23, 2003, a gas blow-out incident occurred at our Luojia No. 16H gas well located in Kaixian County, Chongqing Municipality. The gas blow-out caused the leakage of a large quantity of sulfurated hydrogen, resulting in injuries and death to many residents living in the surrounding areas. The PRC government investigated this gas blow-out and found CNPC, who had provided drilling services to us for the Luojia No. 16H gas well, liable. This incident has not had, and we do not believe it will have, a material adverse effect on our results of operations and financial condition.
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 effective safety production measures we have adopted previously. |
We believe that these preventative measures have helped minimize the possibility of similar incidents resultingthat may result 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.
On November 13, 2005, an explosion occurred at one
Legal Proceedings
We are involved in certain legal proceedings concerning matters arising in the ordinary course of our branch companies in Jilin Province. The Chinese government completed the investigation of this accident in December 2006. Basedbusiness. We believe, based on the results of the investigation, our company paid a fine of RMB 1 million in settlement of all liabilities arised from the accident.
We have implemented the following measures to prevent future occurrences of similar incidents:
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| • | conducting environmental risk monitoring; and |
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| • | establishing preventive systems for emergency use at refinery and petrochemical enterprises. |
Legal Proceedings
We are not involved in any judicial and arbitralcurrently available information, that these proceedings, the results of which,individually or in the aggregate, wouldwill not have a material adverse impacteffect on our results of operations or financial condition.
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Properties
Under a restructuring agreement we entered into with CNPC on the date of our establishment in 1999,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, 2006,2009, CNPC obtained formal land use right certificates for 27,49427,765 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 directorsWe 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 own substantially all of the equipment and production facilities relating to all our business activities.
We hold exploration and production licenses covering all of our interests in developed and undeveloped acreage, and oil and natural gas wells.wells and relevant facilities. See “ —“— Exploration and Production — Properties”.
Regulatory Matters
OverviewIntellectual Property
Our company logo “” is jointly owned by us and CNPC and has been used since December 26, 2004. We have applied for trademark registrations of the logo with the State Trademark Bureau of the PRC. To date, several of our applications have been approved and others are either in the process of review or public announcement phase. In addition, we have applied for international trademark registration for our logo in other jurisdictions. We have received 27 Madrid International Trademark Registration Certificates for our logo covering 50 jurisdictions and 390 trademark registration certificates from individual countries and regions. As of December 31, 2009, we owned approximately 3,800 patents in China and other jurisdictions. We were granted 700 patents in China in 2009.
Regulatory Matters
Overview
China’s 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 China’s 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 China’s 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 2,000RMB2,000 per square kilometer for the initial year to RMB 5,000RMB5,000 per square kilometer for the second year, and to RMB 10,000RMB10,000 per square kilometer for the third and subsequent years. Additionally, the holder has to pay an annual exploration license fee that starts at RMB 100RMB100 per square kilometer for each of the first three years and increases by an additional RMB 100RMB100 per square kilometer per year for subsequent years up to a maximum of RMB 500RMB500 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 for a two-year term.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.
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 1,000RMB1,000 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 those reservoirs.the assessed proven reserves as discussed above. Each of our production licenses is renewable upon our application 4030 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,
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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, published in the current year, 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
On December 18, 2008, the wholesalePRC government further improved the pricing mechanism and the domestic prices for its gasoline and dieselof refined oil products continue to be indirectly linked to the international market. Under the improved mechanism, the domestic selling price of the refined oil products are determined on the basis of itsthe corresponding international crude oil prices and by taking consideration of the average domestic processing cost, tax, selling expenses and appropriate profit margin. The prices of diesel and gasoline continue to follow the government set prices and the government guiding prices. The retail pries of diesel and gasoline are subject to highest retail prices and a discount to its retail prices of at least 4.5% as requiredset by the National Developmentgovernment. The highest retail price is determined on the basis of the ex-works price and Reform Commission.the profit margin for retailing activities.
In addition,
On May 7, 2009, the National Development and Reform Commission setspromulgated and implemented the ex-works medianMeasures for Administration of Petroleum Price(on trial) (the “Oil Price Measures”). The Oil Price Measures officially specifies the relevant conditions and mechanisms for the adjustment of the prices of China’s domestic refined oil products. Under the Oil Price Measures, when the change in the average price of crude oil on the international market for gasoline and diesel sold for military use and national reserve. For other institutional customers including airlines and railway operators, PetroChina22 consecutive days exceeds 4%, prices of domestic refined oil products may chargebe adjusted accordingly. When the price of crude oil on the international market becomes lower than US$80 per barrel, the prices of domestic refined oil products shall be computed on the basis of normal profit margin for processing. On the ex-works mediancontrary, when the price of crude oil on the international market becomes higher than US$80 per barrel, the profit margin for processing shall be reduced until being reduced to zero. When the price of crude oil becomes higher than US$130 per barrel, appropriate financial and tax policies shall be adopted to ensure the production and supply of refined oil products and the stability of the domestic gasoline and diesel prices. Retailers of refined oil products may set the retail prices adjustment within an upward or downward adjustment up to 8%.freely as long as their retail prices are not higher than the highest retail prices of gasoline and diesel set by the government.
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.
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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%.
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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. On the basis of the ex-works price set by the government, subject to the negationsnegotiations 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 year.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 RMB400/thousand cubic meters.
On June 1, 2010, the National Development and Reform Commission raised the median ex-works prices of the domestic onshore natural gas and as a result of that, the median ex-works price of all the oil and gas fields in China increased by RMB0.23/cubic meter. At the same time, the National Development and Reform Commission combined the first category and the second category median ex-works prices of the natural gas from Dagang Oil Field, Liaohe Oil Field and Zhongyuan Oil Field, thus ending the “dual-track natural gas pricing system” as described above. In addition, the National Development and Reform Commission expanded the floating range of the median ex-works price by allowing the median ex-works price to float upward to 10% and downward to any level.
PetroChina negotiates the actual ex-works price with natural gas users within the benchmark price and the adjustment range set by the government and the adjustment range.government.
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 PetroChina’s profit margin.
On April 25, 2010, the National Development and Reform Commission adjusted the originally government-set flat pipeline transportation tariff for the natural gas transported by pipelines. As a result of such adjustment, our average pipeline transportation tariff for the natural gas transported by pipelines increased from RMB0.06 per cubic meter to RMB0.14 per cubic meter.
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-relatedoil business.
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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 China’s 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-owned foreignwholly foreign-owned enterprises are permitted to conduct cruderefined 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 dieselrefined oil products wholesale, retail and storage businesses.
Natural Gas
The National Development and Reform Commission publishes in 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.
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Foreign Investments
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| Cooperation in Exploration and Production with Foreign Companies |
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.
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”.
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| Transportation and Refining |
Transportation and Refining
Since December 1, 2007, PRC regulations permitencourage foreign minority ownershipinvestment in pipeline transportation,the construction and operation of oil and gas pipelines and storage facilities and oil jetties. There is no express general restriction onbut restrict foreign investment in refineries and petrochemical facilities. However, constructionwith 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 of ethyleneprojects with an annual production capacity exceeding 600800 thousand tons must be conducted by companies majority-owned by Chinese entities.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, 2004, the2002, 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
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products subject to quotas. The export of crude oil and refined oil products by state-owned trading companies has been exempted from import quota and licensing control. Non-state-owned trading companies which are qualified to import crude oil and refine products are subject to quotas. Bothboth state-owned trading companies and non-state-owned trading companies are permitted to export crude oil and refined oil productsis subject to quotas.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 development of new oil field with an annual production capacity equalfollowing projects are subject to or exceeding one million tons and new natural gas field with an annual production capacity equal to or exceeding two billion cubic meters is required to be approvedapproval by the National Development and Reform Commission. Any otherCommission:
(1) new oil field development projectprojects 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 and natural gas needs to be filed with the National Development and Reform Commission. Oil and gas companies need to obtain approval from thereserve facilities.
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National Development and Reform Commission and the State Administration of Foreign Exchange to borrow from foreign banks and foreign governments in connection with those capital investments.
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-ownedwholly 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 itemItem | | Tax baseBase | | Tax Rate |
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Enterprise income tax | | Taxable income | | Effective January 1, 2008, charged at the legal rate of 25%. However, certain of our qualified operations in west regions of the PRC are entitled to a rate of 15% prior to 2010. |
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Enterprise incomeValue-added tax
| | Taxable income | | Currently at a rate of 33%. However, our qualified branch companies in the 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. Effective from January 1, 2008, PRC enterprises will be subject to new income tax rates. Its impact on our operating results and financial positions of future periods remains uncertain until more detailed regulations and measures are announced. |
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Value-added tax
| | RevenueTurnover | | 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 | | 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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Tax itemBusiness tax | | Tax baseIncome from transportation services | | Tax Rate3% |
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Business tax
| | Revenue from transportation services | | 3% |
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Consumption tax | | Aggregate volume sold or self-consumed | | RMB 277.6 per ton for gasoline; sinceEffective January 1, 1999, RMB 388.64 per ton for leaded gasoline.
RMB 117.6 per ton for diesel.
Since April 1, 2006, RMB 277 per ton for naphtha and levied at2009, the rate of 30%unit tax amount of the taxable amountconsumption tax for the time being.
Since April 1, 2006, RMB 256.4refined oil products was increased as follows: |
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| | | | RMB1.0 per tonliter for solvent naphtha and levied at the rate of 30% of the taxable amountunleaded gasoline |
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| | | | RMB0.8 per liter for the time being.
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.
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.
Since April 1, 2006, RMB 124.6 per ton for aviation kerosene and not levied for the time being.diesel. |
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Tax Item | | Tax Base | | Tax Rate |
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| | | | RMB1.0 per liter for naphtha, solvent naphtha and lubricants. |
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| | | | RMB0.8 per liter for fuel oil |
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Resource tax | | Aggregate volume sold or self-consumed | | SinceEffective July 1, 2005, resource tax applicable to crude oil of our company was adjusted upward from the original RMB 8RMB8 to 30 per ton to RMB 14RMB14 to 30 per ton, and the resource tax for natural gas was adjusted from the original RMB 2RMB2 to 15 per thousand cubic meter to RMB 7RMB7 to 15 per thousand cubic meter.
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| | | | The actual applicable rate for each oil field may differ, 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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| | | | Effective from June 1, 2010, the resource tax payable by the resource tax payers in connection with their extraction of crude oil and natural gas in Xinjiang shall be collected based on value at the rate of 5%. The amount of the resource tax payable = sales value × tax rate. Taxpayers shall be eligible for a reduced resource tax rate in connection with their extraction of viscous oil, high pour-point oil, and high sour natural gas as well as enhanced oil recovery. |
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Compensatory fee for mineral resources | | RevenueTurnover | | 1% for crude oil and natural gas |
| | | | |
Crude oil special gain levy | | Sales amount above certainspecific threshold | | 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 itemExploration license fee | | Tax baseArea | | Tax RateRMB100 to 500 per square kilometer per year |
| | | | |
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ExplorationProduction license fee
| | Area | | RMB 100 to 500RMB1,000 per square kilometer per year |
|
Production license fee
| | Area | | RMB 1,000 per square kilometer per year |
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Royalty fee(1) | | Production volume | | Progressive rate of 0–12.5%0-12.5% for crude oil and 0–3%0-3% for natural gas |
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(1) | | 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. TheOn December 18, 2008, the State Council will formulate specific implementation methodspromulgated theCircular on Implementing the Reform of Refined Oil Product Pricing and procedures forRelevant Tax and Charge Collection. According to the imposition ofCircular, effective January 1, 2009, the PRC government ceased to impose the fuel oil tax. The State Council has not yet announced or published any specific rate, implementation method or procedure for the impositionInstead, as part of the tax.reform of the refined oil product pricing, the government used the existing system of taxation, methods of tax collection and means of taxation administration to further improve the refined oil product pricing mechanism. As a result, the unit tax amount of the consumption tax for refined oil products was increased.
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Environmental Regulations
We are subject to various PRC national environmental laws and regulations and also environmental regulations promulgated by the local governments in whose jurisdictions we have operations. 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.
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ITEM 4A — | UNRESOLVED STAFF COMMENTS |
ITEM 4A — UNRESOLVED STAFF COMMENTS
We do not have any unresolved Staff comments that are required to be disclosed under this item.
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ITEM 5 — | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
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, which differ in many respects from US GAAP. Note 37 to our consolidated financial statements included elsewhere in this annual report and the section headed “— Other Information — US GAAP Reconciliation” summarize the significant differences between IFRS and US GAAP as they relate to us.IFRS.
Overview
We are engaged in a broad range of petroleum and natural gas related activities, including:
| | |
| • | the exploration, development, production and sale of crude oil and natural gas; |
|
| • | the refining transportation, storage and marketing of crude oil and petroleum products; |
|
| • | products, and the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; |
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| • | marketing and trading of refined oil products; and |
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| • | the transmission and storage of natural gas, crude oil and refined oil products and natural gas as well as the sale of natural gas. |
We are China’s 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, 2006,2009, we produced approximately 830.7843.5 million barrels of crude oil and approximately 1,371.92,122.2 billion cubic feet of natural gas for sale. Our refineries also processed approximately 785828.6 million barrels of crude oil in the year ended December 31, 2006.2009. In the year ended December 31, 2006,2009, we had total revenueturnover of RMB 688,978RMB1,019,275 million and net incomeprofit attributable to the owners of RMB 142,224our company of RMB103,387 million.
Factors Affecting Results of Operations
Our results of operations and theperiod-toperiod-to-period-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.
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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 2004, 20052007, 2008 and 20062009 and the negotiated premiums or discounts applicable to those grades of crude oil since 2004.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Median prices for principal grades of | | Premium/(discount) |
| | | | crude oil (RMB/barrel) | | (RMB/barrel) |
| | | | | | |
| | | | Year 2004 | | Year 2005 | | Year 2006 | | |
Grade of crude oil | | Benchmark | | average | | average | | average | | 2004 | | 2005 | | 2006 |
| | | | | | | | | | | | | | |
Daqing | | | Minas | | | | 300.7 | | | | 430 | | | | 513 | | | | 0 | | | | (4.4 | ) | | | (3.8 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jidong | | | Minas | | | | 300.7 | | | | 430 | | | | 513 | | | | 0 | | | | (4.4 | ) | | | (3.8 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Huabei | | | Minas | | | | 300.7 | | | | 430 | | | | 513 | | | | 1.3 | | | | (3.0 | ) | | | (2.4 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dagang | | | Cinta | | | | 290.5 | | | | 412 | | | | 494 | | | | 1.4 | | | | (1.8 | ) | | | (2.5 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tarim | | | Minas | | | | 300.7 | | | | 430 | | | | 513 | | | | (34.6 | ) | | | (34.9 | ) | | | (34.6 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Tuha | | | Tapis | | | | 329.2 | | | | 457 | | | | 554 | | | | (25.5 | ) | | | | | | | (29.0 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
In 2006, the median prices for our principal grades of crude oil and crude oil produced in our Daqing oil region were RMB 501 per barrel and RMB 513 per barrel, respectively.2007.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Median Prices for Principal Grades of
| | | | | | |
| | | | Crude Oil (RMB/Barrel) | | Premium/(Discount)
|
| | | | Year 2007
| | Year 2008
| | Year 2009
| | (RMB/Barrel) |
Grade of Crude Oil | | Benchmark | | Average | | Average | | Average | | 2007 | | 2008 | | 2009 |
|
Daqing | | | Cinta | | | | 536 | | | | 701 | | | | 390 | | | | (3.8 | ) | | | (3.8 | ) | | | (3.8 | ) |
Jidong | | | Cinta | | | | 536 | | | | 701 | | | | 390 | | | | (3.8 | ) | | | (3.8 | ) | | | (3.8 | ) |
Huabei | | | Cinta | | | | 536 | | | | 701 | | | | 390 | | | | (3.9 | ) | | | (3.9 | ) | | | (3.9 | ) |
Dagang | | | Duri | | | | 512 | | | | 651 | | | | 350 | | | | (4 | ) | | | (4 | ) | | | (4 | ) |
Tarim | | | Cinta | | | | 536 | | | | 701 | | | | 390 | | | | (51 | ) | | | (51 | ) | | | (51 | ) |
Tuha | | | Minas | | | | 571 | | | | 729 | | | | 418 | | | | (36 | ) | | | (36 | ) | | | (36 | ) |
Increases or decreases in the price of crude oil in China have a significant effect on the revenueturnover from our exploration and production segment. As a result ofOur turnover from the increases in the prices and sales volume of crude oil and natural gas, the revenue from our exploration and production segment increased 24.9% from RMB 337,208 million infor the year ended December 31, 2005 to2009 was RMB 421,340405,326 million, inrepresenting a decrease of 35.3% from RMB626,367 million for the year ended December 31, 2006.2008, mainly as a result of the decreases in the prices of crude oil. In the year ended December 31, 2006,2009, our average realized selling price for crude oil was RMB 477RMB368 per barrel, increaseddecreased by 20%39.5% from RMB 396RMB608 per barrel in the year ended December 31, 2005.2008. 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,December 18, 2008, we and Sinopec have set our retail prices within an 8% floating range of the published median gasoline and diesel guidance prices published by the National Development and Reform Commission or its predecessor, the State Planning Commission. Beginning from December 19, 2008, the PRC government set upper limits for the retail prices of various refined oil products, which had previously been allowed to float within a floating range of the median 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. See “Item 4 — Information on the company — Regulatory Matters — Pricing” for a more detailed discussion of current PRC refined products pricing regulations.
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As of the end of 2008, the ex works prices were RMB 6,229 per ton for 90# gasoline and RMB 5,625 per ton for 0# diesel. The following table sets forth the retailadjustments that were made to such median prices for 90(#) gasoline and 0(#) dieselfrom January 2009 to June 18, 2010, as published by the State Development Planning Commission or the National Development and Reform Commission from January 2006 to March 2007 when such adjustments were made.Commission.
| | | | | | | | |
| | 90(#) | | | 0(#) | |
Date | | Gasoline | | | Diesel | |
| | | | | | |
| | (RMB/ton) | | | (RMB/ton) | |
March 26, 2006 | | | 5,172 | | | | 4,510 | |
May 24, 2006 | | | 5,672 | | | | 5,010 | |
January 14, 2007 | | | 5,452 | | | | — | |
| | | | | | | | |
| | 90(#)
| | 0(#)
|
Date | | Gasoline | | Diesel |
| | (RMB/ton) | | (RMB/ton) |
|
January 15, 2009 | | | (140 | ) | | | (160 | ) |
March 25, 2009 | | | 290 | | | | 180 | |
June 10, 2009 | | | 400 | | | | 400 | |
June 30, 2009 | | | 600 | | | | 600 | |
July 29, 2009 | | | (220 | ) | | | (220 | ) |
September 2, 2009 | | | 300 | | | | 300 | |
September 30, 2009 | | | (190 | ) | | | (190 | ) |
November 10, 2009 | | | 480 | | | | 480 | |
April 14, 2010 | | | 320 | | | | 320 | |
June 1, 2010 | | | (230 | ) | | | (220 | ) |
Chemical Product Prices
We determine and set the prices of all chemical products produced by our chemicals business segment.segment based on market conditions.
Natural Gas Prices
The price of our
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%.
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 negotiatesWe negotiate 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 PetroChina’s profit margin.
We sell our natural gas at prices which exceed our production and transportation costs.
The results of operations of these segments will be impacted to the extent that our prices do not vary to reflect increases or decreases in our costs. See “Item 4 — Information on the Companycompany — Regulatory Matters — Pricing” for a furthermore detailed discussion of thesecurrent PRC natural gas products pricing controls.regulations.
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| Foreign Currency Exposure |
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 revenueturnover 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 management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.
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Accounting for Oil and Gas Exploration and Production Activities
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| Accounting of Oil and Gas Exploration and Production Activities |
We use the 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.
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.SEC. Proved oil and gas reserves are the estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable
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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 property’s 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.
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In addition, due to the importance of these estimates to better understanding the perceived value and future cash flows of a company’s 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.
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| Property, Plant and Equipment |
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 1816 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.
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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:
| | | | | | | | |
Buildings and plant | | 20-40 | | | | | 8-40 years | |
PlantEquipment and machinery | | 10-25 | | | | | 4-30 years | |
Motor vehicles | | 7-15 | | | | | 4-14 years | |
Other | | | | | | | 5-12 years | |
We do not provide depreciation for construction in progress until it is completed and ready for use.
The useful lives of non-oil-and-gasnon-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 aidand 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 livesand/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 pricevalue 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.
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| |
| Provision for Asset Decommissioning |
Provision for Asset Decommissioning
Provision is recognized for the future decommissioning and restoration is recognized in full upon the actual decommissioning and restoring of oil and gas properties. The amountamounts of the provision recognized isare the present valuevalues of the estimated future expenditure determined in accordance withexpenditures. The estimation of the future expenditures is based on current local conditions and requirements. A correspondingrequirements, including legal requirements, technology, price level, etc. In addition to these factors, the relatedpresent values of these estimated future expenditures are also impacted by the estimation of the economic lives of oil and gas propertiesproperties. Changes in any of an amount equivalent tothese estimates will impact the provision is also created. This is subsequently depreciated as partoperating results and the financial position of the capital costscompany over the remaining economic lives 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.
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| 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
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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.
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. Specifically, we must make estimates of projected capital expenditures to be incurred and the resulting incremental timing difference that such capital expenditures would generate for the determination of the amount of temporary difference that will be recovered. We use currently enacted tax rates to determine deferred tax. 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.
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, 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, 2004, 2005 and 2006 would be reduced by RMB 2,217 million, RMB 1,384 million and RMB 2,119 million, respectively. No change will occur to our net income as a result of this.
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For detailed discussions of significant differences between IFRS and US GAAP, see Note 37 to our consolidated financial statements included elsewhere in this annual report and the section headed “— Other Information — US GAAP Reconciliation” below.
AcquisitionsOperating Results
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 CNPC’s 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. As of December 31, 2006, we acquired 141,497,463 Jinzhou Petrochemical A Shares, representing 17.97% of the total share capital of Jinzhou Petrochemical, for a total cash consideration of approximately RMB 602 million. After the acquisition, we own 98.92% of the total share capital of Jinzhou Petrochemical. 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 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.
68
As of December 31, 2006, we paid an aggregate of RMB 3,799 million and acquired 189,357,726 A Shares and 961,495,999 H Shares (including ADSs) of Jilin Chemical, representing 32.32% of the total issued and outstanding shares of Jilin Chemical. Following the completion of this acquisition, we owned 99.61% of the total share capital of Jilin Chemical. 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.
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. As of December 31, 2006, we acquired 194,360,943 Liaohe Jinma A Shares, representing 17.67% of the total share capital of Liaohe Jinma for a total consideration of approximately RMB 1,713 million. Following the completion of this acquisition, we own 99.49% of the total share capital of Liaohe Jinma. Upon the approval by China Securities Regulatory Commission, Liaohe Jinma was delisted from the Shenzhen Stock Exchange on January 4, 2006.
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. The Fuel Oil Company principally engages in investing in and developing of fuel oil in the upstream and downstream areas outside the PRC. Upon completion of the above acquisitions, we increased our interest in the Fuel Oil Company to 91.16%.
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.
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.
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. In 2009, we restated our consolidated financial statements to reflect the corporate mergers between the certain subsidiaries of our company and the certain subsidiaries of CNPC. These corporate mergers, whether individually or taken as a whole, do not have a significant effect on our company.
69
Our income statement for each of the three years ended December 31, 2004, 20052007, 2008 and 20062009 is summarized in the table below.
| | | | | | | | | | | | |
| | Year ended December 31, |
| | |
| | 2004 | | 2005 | | 2006 |
| | | | | | |
| | in million RMB | | in million RMB | | in million RMB |
Total revenues | | | 397,354 | | | | 552,229 | | | | 688,978 | |
| | | | | | | | | | | | |
Operating expenses | | | (246,216 | ) | | | (360,058 | ) | | | (491,002 | ) |
| | | | | | | | | | | | |
Income from operations | | | 151,138 | | | | 192,171 | | | | 192,976 | |
| | | | | | | | | | | | |
Exchange gain (loss), net | | | 8 | | | | 88 | | | | 74 | |
Interest expense, net | | | (1,523 | ) | | | (838 | ) | | | (1,154 | ) |
Income from equity affiliates and jointly controlled entities | | | 1,621 | | | | 2,401 | | | | 2,277 | |
| | | | | | | | | | | | |
Income before income taxes | | | 151,244 | | | | 193,822 | | | | 199,173 | |
Income taxes | | | (43,598 | ) | | | (54,180 | ) | | | (49,776 | ) |
(Income) loss attributable to minority interest | | | (3,803 | ) | | | (6,280 | ) | | | (7,173 | ) |
| | | | | | | | | | | | |
Net income | | | 103,843 | | | | 133,362 | | | | 142,224 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | 2007 | | | 2008 | | | 2009 | |
| | (RMB in millions) | |
|
Turnover | | | 837,542 | | | | 1,072,604 | | | | 1,019,275 | |
Operating expenses | | | (636,525 | ) | | | (913,033 | ) | | | (875,831 | ) |
Profit from operations | | | 201,017 | | | | 159,571 | | | | 143,444 | |
Exchange gain (loss), net | | | (751 | ) | | | (1,081 | ) | | | (783 | ) |
Interest expense, net | | | (1,572 | ) | | | (767 | ) | | | (3,813 | ) |
Share of profit of affiliates and jointly controlled entities | | | 6,445 | | | | 4,290 | | | | 1,184 | |
Profit before income tax expense | | | 205,139 | | | | 162,013 | | | | 140,032 | |
Income tax expense | | | (49,802 | ) | | | (35,211 | ) | | | (33,473 | ) |
Profit for the year attributable to non-controlling interest | | | (8,541 | ) | | | (12,349 | ) | | | (3,172 | ) |
| | | | | | | | | | | | |
Profit for the year attributable to owners of the company | | | 146,796 | | | | 114,453 | | | | 103,387 | |
| | | | | | | | | | | | |
The table below sets forth our revenuesturnover by business segment for each of the three years ended December 31, 2004, 20052007, 2008 and 20062009 as well as the percentage changes in revenuesturnover for the periods shown.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | 2005 | | | | | 2006 | |
| | | | | | vs. | | | | | vs. | |
| | 2004 | | | 2005 | | | 2004 | | | 2006 | | | 2005 | |
| | | | | | | | | | | | | | | |
| | (RMB in millions, except percentages) | |
Sales and other operating revenues | | | | | | | | | | | | | | | | | | | | |
Exploration and production | | | 233,948 | | | | 337,208 | | | | 44.1 | % | | | 421,340 | | | | 24.9 | % |
Refining and marketing | | | 296,427 | | | | 428,494 | | | | 44.6 | % | | | 543,299 | | | | 26.8 | % |
Chemicals and marketing | | | 57,179 | | | | 73,978 | | | | 29.4 | % | | | 82,791 | | | | 11.9 | % |
Natural gas and pipeline | | | 18,255 | | | | 26,214 | | | | 43.6 | % | | | 38,917 | | | | 48.5 | % |
Other | | | 0 | | | | 0 | | | | — | | | | 1,080 | | | | — | |
Total | | | 605,809 | | | | 865,894 | | | | 42.9 | % | | | 1,087,427 | | | | 25.6 | % |
| | | | | | | | | | | | | | | |
Less intersegment sales | | | (208,455 | ) | | | (313,665 | ) | | | 50.5 | % | | | (398,449 | ) | | | 27.0 | % |
| | | | | | | | | | | | | | | |
Consolidated net sales from operations | | | 397,354 | | | | 552,229 | | | | 39.0 | % | | | 688,978 | | | | 24.8 | % |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 2008
| | | | | | 2009
| |
| | | | | | | | vs.
| | | | | | vs.
| |
| | 2007 | | | 2008 | | | 2007 | | | 2009 | | | 2008 | |
| | (RMB in millions, except percentages) | |
|
Turnover | | | | | | | | | | | | | | | | | | | | |
Exploration and production | | | 473,117 | | | | 626,367 | | | | 32.4 | % | | | 405,326 | | | | (35.3 | % |
Refining and chemicals | | | 481,726 | | | | 560,729 | | | | 16.4 | % | | | 501,300 | | | | (10.6 | )% |
Marketing | | | 584,115 | | | | 778,141 | | | | 33.2 | % | | | 768,295 | | | | (1.3 | )% |
Natural gas and pipeline | | | 50,066 | | | | 63,315 | | | | 26.5 | % | | | 77,658 | | | | 22.7 | % |
Other | | | 1,718 | | | | 1,418 | | | | (17.5 | )% | | | 1,372 | | | | (3.2 | )% |
Total | | | 1,590,742 | | | | 2,029,970 | | | | 27.6 | % | | | 1,753,951 | | | | (13.6 | )% |
| | | | | | | | | | | | | | | | | | | | |
Less intersegment sales | | | (753,200 | ) | | | (957.366 | ) | | | 27.1 | % | | | (734,676 | ) | | | (23.3 | )% |
| | | | | | | | | | | | | | | | | | | | |
Consolidated net sales from operations | | | 837,542 | | | | 1,072,604 | | | | 28.1 | % | | | 1,019,275 | | | | (5.0 | )% |
| | | | | | | | | | | | | | | | | | | | |
62
70
The table below sets forth our operating profitsincome by business segment for each of the three years ended December 31, 2004, 20052007, 2008 and 2006,2009, as well as the percentage changes in operating income for the periods shown. Other incomeprofit from operations shown below consists of research and development, business services and infrastructure support to our operating business segments.
| | | | | | | | | | | | | | | | | | | | |
| | | | | | 2005 | | | | | 2006 | |
| | | | | | vs. | | | | | vs. | |
| | 2004 | | | 2005 | | | 2004 | | | 2006 | | | 2005 | |
| | | | | | | | | | | | | | | |
| | (RMB in millions, except percentages) | |
Income (loss) from operations | | | | | | | | | | | | | | | | | | | | |
Exploration and production | | | 130,213 | | | | 208,080 | | | | 59.8 | % | | | 219,860 | | | | 5.7 | % |
Refining and marketing | | | 11,891 | | | | (19,810 | ) | | | — | | | | (29,164 | ) | | | — | |
Chemicals and marketing | | | 7,655 | | | | 3,276 | | | | (57.2 | )% | | | 5,058 | | | | 54.4 | % |
Natural gas and pipeline | | | 2,535 | | | | 3,183 | | | | 25.6 | % | | | 8,986 | | | | 182.3 | % |
Other | | | (1,156 | ) | | | (2,558 | ) | | | 121.3 | % | | | (6,764 | ) | | | — | |
| | | | | | | | | | | | | | | |
Total | | | 151,138 | | | | 192,171 | | | | 27.1 | % | | | 197,976 | | | | 3.0 | % |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 2008
| | | | | | 2009
| |
| | | | | | | | vs.
| | | | | | vs.
| |
| | 2007 | | | 2008 | | | 2007 | | | 2009 | | | 2008 | |
| | (RMB in millions, except percentages) | |
|
Profit (loss) from operations | | | | | | | | | | | | | | | | | | | | |
Exploration and production | | | 207,749 | | | | 240,470 | | | | 15.8 | % | | | 105,019 | | | | (56.3 | )% |
Refining and chemicals | | | (23,659 | ) | | | (93,830 | ) | | | — | | | | 17,308 | | | | — | |
Marketing | | | 10,810 | | | | 7,982 | | | | (26.2 | )% | | | 13,265 | | | | 66.2 | % |
Natural gas and pipeline | | | 12,495 | | | | 16,057 | | | | 28.5 | % | | | 19,046 | | | | 18.6 | % |
Other | | | (6,378 | ) | | | (11,108 | ) | | | — | | | | (11,194 | ) | | | — | |
| | | | | | | | | | | | | | | | | | | | |
Total | | | 201,017 | | | | 159,571 | | | | (20.6 | )% | | | 143,444 | | | | (10.1 | )% |
| | | | | | | | | | | | | | | | | | | | |
Year Ended December 31, 20062009 Compared to Year Ended December 31, 20052008
| |
| Consolidated Results of Operation |
Consolidated Results of Operations
Overview
Our profit before taxation was RMB140,032 million for the year ended December 31, 2009, representing a decrease of 13.6% compared with the previous period. Profit attributable to the owners of the company for the year ended December 31, 2009 was RMB103,387 million, representing a decrease of 9.7% compared with the previous period. For the year ended December 31, 2006, our total revenue was RMB 688,978 million, representing an increase of 24.8% from2009, the total revenue of RMB 552,229 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 shareholdersthe owners of the company were RMB0.56 while the same for the year ended December 31, 20062008 was RMB 0.79, representing an increase of 5.3%RMB0.63.
Turnover. Turnover decreased 5.0% from RMB 0.75 for the year ended December 31, 2005.
Total Revenue. Total revenue increased 24.8% from RMB 552,229RMB1,072,604 million for the year ended December 31, 20052008 to RMB 688,978RMB1,019,275 million for the year ended December 31, 2006.2009. This was primarily due to decreases in the selling prices and changes in the sales volume of major products including crude oil, gasoline, diesel and kerosene.
The table below sets out the external sales volume and average realized prices for major products sold by us for 2008 and 2009 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
|
| | 2009 | | 2008 | | Change (%) | | 2009 | | 2008 | | Change (%) |
|
Crude oil* | | | 53,768 | | | | 38,603 | | | | 39.3 | | | | 2,750 | | | | 4,348 | | | | (36.8 | ) |
Natural gas (million cubic metre, RMB/’000 cubic metre) | | | 59,614 | | | | 51,054 | | | | 16.8 | | | | 814 | | | | 813 | | | | 0.1 | |
Gasoline | | | 30,777 | | | | 29,399 | | | | 4.7 | | | | 5,763 | | | | 5,881 | | | | (2.0 | ) |
Diesel | | | 64,659 | | | | 56,081 | | | | 15.3 | | | | 4,965 | | | | 5,526 | | | | (10.2 | ) |
Kerosene | | | 5,817 | | | | 4,798 | | | | 21.2 | | | | 3,896 | | | | 6,355 | | | | (38.7 | ) |
Heavy oil | | | 8,472 | | | | 7,061 | | | | 20.0 | | | | 2,903 | | | | 3,541 | | | | (18.0 | ) |
Polyethylene | | | 2,349 | | | | 2,195 | | | | 7.0 | | | | 8,430 | | | | 10,219 | | | | (17.5 | ) |
Lubricant | | | 1,796 | | | | 2,003 | | | | (10.3 | ) | | | 7,204 | | | | 7,515 | | | | (4.1 | ) |
| | |
* | | The crude oil listed above represents all the external sales volume of crude oil of the company. |
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Operating Expenses. Operating expenses decreased 4.1% from RMB913,033 million for the year ended December 31, 2008 to RMB875,831 million for the year ended December 31, 2009, of which:
Purchases, Services and Other Expenses. Purchases, services and other expenses decreased 12.5% from RMB562,851 million for the year ended December 31, 2008 to RMB492,472 million for the year ended December 31, 2009. This was primarily due to (1) a decrease in the purchase prices of crude oil and feedstock oil from external suppliers that resulted in a decrease in purchase costs; (2) a decrease in the prices of raw materials, fuel, energy and other production materials as well as changes in inventories that resulted in a decrease in purchase costs.
Employee Compensation Costs. Employee compensation costs of the company were RMB65,977 million for the year ended December 31, 2009, representing an increase of 6.1% compared with that of last year. Taking into account factors including the expansion of business of the company, the level of employee compensation was basically the same as that of last year, which demonstrated that the company has maintained effective control on labor cost.
Exploration Expenses. Exploration expenses decreased 11.3% from RMB21,879 million for the year ended December 31, 2008 to RMB19,398 million for the year ended December 31, 2009. This was primarily due to adjustments made by the company to optimize the structure and workload of exploration and to further strengthen the management of oil and gas exploration as well as control over the process of exploration.
Depreciation, Depletion and Amortization. Depreciation, depletion and amortization decreased 2.6% from RMB94,759 million for the year ended December 31, 2008 to RMB92,259 million for the year ended December 31, 2009. This was primarily due to the impairment charges recorded by the company against its refining assets and oil and gas properties in 2008.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 9.7% from RMB59,617 million for the year ended December 31, 2008 to RMB65,423 million for the year ended December 31, 2009. This was primarily due to higher production safety expenses in 2009 as required by the relevant PRC regulations.
Taxes Other than Income Taxes. Taxes other than income taxes increased 9.1% from RMB124,132 million for the year ended December 31, 2008 to RMB135,465 million for the year ended December 31, 2009. The change was primarily due to (1) a significant decrease in the payment of the special levy on the sale of domestic crude oil by the company compared with that of last year, from RMB85,291 million for the year ended December 31, 2008 to RMB20,020 million for the year ended December 31, 2009; (2) a sharp increase in consumption tax expenses borne by the company as a result of the implementation of a new policy on fuel consumption tax in 2009, from RMB13,570 million for the year ended December 31, 2008 to RMB82,429 million for the year ended December 31, 2009; and (3) an increase of RMB5,368 million in urban maintenance and construction tax and educational surcharge as a result of the increase in tax payments including fuel consumption tax.
Other Incomes/(Expenses), net. Other incomes/expenses, net was RMB4,837 million for the year ended December 31, 2009, while other incomes, net was RMB12,372 million for the year ended December 31, 2008. This was primarily due to the recognition by the company of government grants for the supply of crude oil and refined products in 2008.
Profit from Operations. Profit from operations of the company for the year ended December 31, 2009 was RMB143,444 million, representing a decrease of 10.1% from RMB159,571 million for the preceding year.
Net Exchange Loss. Net exchange loss decreased from RMB1,081 million for the year ended December 31, 2008 to RMB783 million for the year ended December 31, 2009. The decrease in the net exchange loss was primarily due to the appreciation of the Renminbi against the U.S. dollar and other currencies in 2008 being more significant than the changes in exchange rates in 2009.
Net Interest Expenses. Net interest expenses increased 397.1% from RMB767 million for the year ended December 31, 2008 to RMB3,813 million for the year ended December 31, 2009. The increase in net interest expenses was primarily due to the combined effect of a substantial increase in the outstanding balance of interest-
64
bearing debts and a decrease in interest income resulting from a decrease in the average outstanding balance of deposits.
Profit before Income Tax Expense. Profit before income tax expense decreased 13.6% from RMB162,013 million for the year months ended December 31, 2008 to RMB140,032 million for the year ended December 31, 2009.
Income Tax Expense. Income tax expense decreased 4.9% from RMB35,211 million for the year ended December 31, 2008 to RMB33,473 million for the year ended December 31, 2009. The decrease was primarily due to a reduction in the taxable income for the year and taxation adjustments.
Profit for the Year. Profit for the year decreased 16.0% from RMB126,802 million for the year ended December 31, 2008 to RMB106,559 million for the year ended December 31, 2009.
Profit Attributable to Non-controlling Interest of the Company. As international crude oil prices in 2009 were lower than that during 2008, certain subsidiaries of the company recorded material decreases in profits. This resulted in a significant decrease in the profit attributable to non-controlling interest, from RMB12,349 million for the year ended December 31, 2008 to RMB3,172 million for the year ended December 31, 2009.
Profit Attributable to Owners of the Company. Profit attributable to the owners of the company decreased 9.7% from RMB114,453 million for the year ended December 31, 2008 to RMB103,387 million for the year ended December 31, 2009.
Exploration and Production
Turnover. Turnover decreased 35.3% from RMB626,367 million for the year ended December 31, 2008 to RMB405,326 million for the year ended December 31, 2009. The decrease was primarily due to a significant decrease in crude oil prices.
Operating Expenses. Operating expenses decreased 22.2% from RMB385,897 million for the year ended December 31, 2008 to RMB300,307 million for the year ended December 31, 2009. The decrease was primarily due to a decrease in the purchase costs of imported crude oil as international crude oil prices remained low throughout 2009 and a sharp decrease in the payment of special levy on the sale of domestic crude oil by the company.
Profit from Operations. Impacted by factors such as the sharp decrease in crude oil prices, the profit from operations for the year ended December 31, 2009 was RMB105,019 million, representing a decrease of 56.3% from RMB240,470 million for the preceding year. However, the exploration and production segment remains the most important contributor to the profit of the company.
Refining and Chemicals
Turnover. Turnover decreased 10.6% from RMB560,729 million for the year ended December 31, 2008 to RMB501,300 million for the year ended December 31, 2009. The decrease was primarily due to decrease in the selling prices of key refining and chemical products.
Operating Expenses. Operating expenses decreased 26.1% from RMB654,559 million for the year ended December 31, 2008 to RMB483,992 million for the year ended December 31, 2009. The decrease was primarily due to the international crude oil price being lower than last year, which resulted in a decrease in the purchase costs of crude oil and feedstock oil from external suppliers.
Profit/Loss from Operations. The profit from operations amounted to RMB17,308 million for the year ended December 31, 2009, compared with a loss of RMB93,830 million for the year ended December 31, 2008.
Marketing
Turnover. Turnover decreased 1.3% from RMB778,141 million for the year ended December 31, 2008 to RMB768,295 million for the year ended December 31, 2009. The decrease in turnover was primarily due to a
65
decrease in the selling prices of refined products and reductions in sales revenues from the oil products trading business.
Operating Expenses. Operating expenses decreased 2.0% from RMB770,159 million for the year ended December 31, 2008 to RMB755,030 million for the year ended December 31, 2009. The decrease was primarily due to a decrease in the purchase costs of refined products from external suppliers, together with a decrease in expenses relating to the oil products trading business.
Profit from Operations. Profit from operations was RMB13,265 million for the year ended December 31, 2009, representing an increase of 66.2% from RMB7,982 million for the proceeding year.
Natural Gas and Pipeline
Turnover. Turnover increased 22.7% from RMB63,315 million for the year ended December 31, 2008 to RMB77,658 million for the year ended December 31, 2009. The increase was primarily due to an increase in the natural gas sales volume and the volume of natural gas from pipeline transmission.
Operating Expenses. Operating expenses increased 24.0% from RMB47,258 million for the year ended December 31, 2008 to RMB58,612 million for the year ended December 31, 2009. The increase was primarily due to an increase in the purchase costs of natural gas.
Profit from Operations. Profit from the natural gas and pipeline segment to the company continue to grow. Profit from operations of the natural gas and pipeline segment was RMB19,046 million for the year ended December 31, 2009, representing an increase of 18.6% from RMB16,057 million for the year ended December 31, 2008.
Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Consolidated Results of Operations
Overview
Our profit before taxation was RMB162,013 million for the year ended December 31, 2008, representing a decrease of 21.0% compared with the previous period. Profit attributable to the owners of the company was RMB114,453 million, representing a decrease of 22.0% compared with the previous period. For the year ended December 31, 2008, the basic and diluted earnings per share attributable to the owners of the company were RMB0.63 while the same for 2007 was RMB0.82.
Turnover. Our turnover increased 28.1% from RMB837,542 million for the year ended December 31, 2007 to RMB1,072,604 million for the year ended December 31, 2008. This was primarily due to the increases in the selling prices and changes in the sales volume of our principalmajor products including crude oil, natural gas and certain refined products. products, and the efforts made by us in expanding resources and developing markets by leveraging on the opportunities presented by high prices in crude oil and petrochemical products in the international market. In addition, the increase of the trading business of refined oil products during the year also increased our turnover.
66
The table below sets out the external sales volume and average realized selling priceprices for crude oil increased from US$48.37 per barrelmajor products sold by us for 2007 and 2008 and percentages of change in the year ended December 31, 2005 to US$59.81 per barrel for the year ended December 31, 2006.sales volume and average realized prices during these two years.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Sales Volume (’000 ton) | | Average Realized Price (RMB/ton) |
| | | | | | Percentage of
| | | | | | Percentage of
|
| | 2008 | | 2007 | | Change (%) | | 2008 | | 2007 | | Change (%) |
|
|
Crude oil* | | | 38,603 | | | | 29,154 | | | | 32.4 | | | | 4,348 | | | | 3,659 | | | | 18.8 | |
Natural gas (million cubic metre, RMB/’000 cubic metre) | | | 51,054 | | | | 43,570 | | | | 17.2 | | | | 813 | | | | 693 | | | | 17.3 | |
Gasoline | | | 29,399 | | | | 27,003 | | | | 8.9 | | | | 5,881 | | | | 5,168 | | | | 13.8 | |
Diesel | | | 56,081 | | | | 54,377 | | | | 3.1 | | | | 5,526 | | | | 4,668 | | | | 18.4 | |
Kerosene | | | 4,798 | | | | 3,782 | | | | 26.9 | | | | 6,355 | | | | 4,684 | | | | 35.7 | |
Heavy oil | | | 7,061 | | | | 8,772 | | | | (19.5 | ) | | | 3,541 | | | | 2,519 | | | | 40.6 | |
Polyethylene | | | 2,195 | | | | 2,102 | | | | 4.4 | | | | 10,219 | | | | 10,497 | | | | (2.6 | ) |
Lubricant | | | 2,003 | | | | 2,378 | | | | (15.8 | ) | | | 7,515 | | | | 6,420 | | | | 17.1 | |
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* | | The crude oil listed above represents all the external sales volume of crude oil of the company. |
Operating Expenses.Operating expenses increased 36.4%43.4% from RMB 360,058RMB636,525 million for the year ended December 31, 20052007 to RMB 491,002RMB913,033 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.2008, of which:
Purchases, Services and Other Expenses.Purchases, services and other expenses increased 35.3%52.2% from RMB 200,321RMB369,786 million for the year ended December 31, 20052007 to RMB 271,123RMB562,851 million for the year ended December 31, 2006.2008. This was primarily due to (i)(1) an increase in the purchase cost of crude oil and other feedstock as a result of the increases in the purchase priceprices 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 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 tonthat resulted in
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2006 as compared to 13.11 million tons of refined oil products at an average price of RMB 2,883 the increase in 2005; and (iii)the purchase costs; (2) an increase in the lifting costs of oil and gas operations and the processing costs of our refineries as a result ofthat resulted from the increasesincrease in prices of raw materials, fuel, electricityenergy and other production materials in the PRC as well as an expansion of our expanded production scale.scale; and (3) impairment losses for decline in the value of inventories in the amount of RMB8,608 million were recorded during 2008, which was driven by the low price market conditions. In addition, the increase in the purchase expenses was also resulted fromdue to an increase in theour refined product supply operationoil products trading operations in 2006.2008.
Employee Compensation Costs.Employee compensation costs increased 32.0% from RMB 29,675were RMB62,167 million for the year ended December 31, 20052008, representing an increase of 11.7% compared with that of 2007. This increase in employee compensation costs was mainly due to RMB 39,161the adjustment to the level of salaries in line with the domestic commodity prices.
Exploration Expenses. Exploration expenses increased 4.4% from RMB20,956 million for the year ended December 31, 2006.2007 to RMB21,879 million for the year ended December 31, 2008. To further boost crude oil and natural gas resources, we undertook more exploration activities for crude oil and natural gas.
Depreciation, Depletion and Amortisation. Depreciation, depletion and amortisation increased 40.5% from RMB67,423 million for the year ended December 31, 2007 to RMB94,759 million for the year ended December 31, 2008. This was primarily due to (1) an increase in depreciation, depletion and amortisation that resulted from an increase in the average costs of fixed assets and the average net value of oil and gas properties; and (2) as a result of the significant volatility in international crude oil prices in 2008 and deterioration in the overall international and domestic economic conditions since the fourth quarter of 2008 which resulted in the recoverable amounts of certain property, plant and equipment being less than their carrying amounts, we recorded impairment charges of RMB11,949 million and RMB4,235 million against the refining and chemical production assets and oil and gas properties, respectively.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 13.8% from RMB52,389 million for the year ended December 31, 2007 to RMB59,617 million for the year ended December 31, 2008. This was primarily due to an increase of RMB 7,278 million in the employees’ salariestransportation, maintenance and benefits as a result of the improvement of our operating results and theother related costs that resulted from expansion of ourin production scale and retail distribution network.business development.
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Depreciation, Depletion and Amortization.Taxes Other than Income Taxes. Depreciation, depletion and amortization Taxes other than income taxes increased 19.7%68.2% from RMB 51,305RMB73,806 million for the year ended December 31, 20052007 to RMB 61,388RMB124,132 million for the year ended December 31, 2006. This2008. The increase was primarily due to an increase of RMB 8,220RMB40,629 million compared with 2007 in the provision for depreciation, depletion and amortization that resulted from increases inpayment of the special levy on the sale of domestic crude oil by us as the average balance of fixed assets and the average balance ofcrude oil and gas assets during 2006.prices remained high throughout 2008.
Selling, General and Administrative Expenses.Other Incomes/(Expenses), net. Selling, general and administrative expenses increased 18.3% from RMB 36,538 Other incomes, net, was RMB12,372 million for the year ended December 31, 2005 to RMB 43,2352008, while the other expenses, net, was RMB1,225 million for the year ended December 31, 2006.2007. This was primarily due to (i) an increasethe recognition 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 milliongovernment grants to our company 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 ourimported 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 torefined products by 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 increaseamount 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.RMB15,700 million.
IncomeProfit from Operations. As a result of the factors discussed above, incomeprofit from operations increased 3.0%decreased 20.6% from RMB 192,171RMB201,017 million for the year ended December 31, 20052007 to RMB 197,976RMB159,571 million for the year ended December 31, 2006.2008.
Net Exchange Gain.Loss. Net exchange gain decreased 15.9%loss increased from RMB 88RMB751 million for the year ended December 31, 20052007 to RMB 74RMB1,081 million for the year ended December 31, 2006.2008. The decreaseincrease in the net exchange gainloss was primarily due to the combined effect of 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.other currencies.
Net Interest Expense.Expenses. Net interest expenses increased 37.7%decreased 51.2% from RMB 838RMB1,572 million for the year ended December 31, 20052007 to RMB 1,154RMB767 million for the year ended December 31, 2006. This increase2008. The decrease in net interest expenses was primarily due to the combined effect of a decrease in the interest expenses from the sharp reduction of average interest rates on loans and an increase in interest income from an increase in the average outstanding balance of RMB 736 million in accretion expense, recognized as interest expense, in relation to asset retirement obligations.deposits.
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Profit before Income Before Income Taxes.Tax Expense.Income Profit before income taxes increased by 2.8%tax expense decreased 21.0% from RMB 193,822RMB205,139 million for the year ended December 31, 20052007 to RMB 199,173RMB162,013 million for the year ended December 31, 2006.2008.
Income Taxes.Tax Expense. Income taxestax expense decreased 8.1%29.3% from RMB 54,180RMB49,802 million for the year ended December 31, 20052007 to RMB 49,776RMB35,211 million for the year ended December 31, 2006. This2008. The decrease was primarily due to the reversalcombined effect of a tax liabilityreduction in the taxable income and the reduction of RMB 4,401 million in relation to certain crude oil sales that were exempted fromcorporate income tax priorrate for 2008.
Profit Attributable to Owners of the establishment of our company in November 1999.
Net Income.Company. As a result of the factors discussed above, net income increased 6.6% from RMB 133,362profit attributable to the owners of the company was RMB114,453 million for the year ended December 31, 2005 to RMB 142,2242008, a decrease of 22.0% from 2007.
Exploration and Production
Turnover. Turnover from our exploration and production segment increased 32.4% from RMB473,117 million for the year ended December 31, 2006.
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| Exploration and Production |
Sales and Other Operating Revenue.Sales and other operatingrevenue increased 24.9% from RMB 337,2082007 to RMB626,367 million for the year ended December 31, 20052008. The increase was primarily due to RMB 421,340an increase in the prices and sales volume of crude oil and natural gas.
Intersegment sales turnover increased 32.1% from RMB378,888 million for the year ended December 31, 2006. The increase was primarily due2007 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 270,943RMB500,522 million for the year ended December 31, 2005 to RMB 339,619 million for the year ended December 31, 2006.2008. 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%45.4% from RMB 129,128RMB265,368 million for the year ended December 31, 20052007 to RMB 201,480RMB385,897 million for the year ended December 31, 2006.2008. The increase was primarily due to: (1) a significant increase in the expenses for crude oil imports; (2) an increase in the payment of the special levy on our sale of domestic crude oil as international crude oil prices were higher in 2008; (3) impairment charges for oil and gas properties increased sharply as a result of the significant volatility in the international crude oil prices.
Profit from Operations. Profit from operations increased 15.8% from RMB207,749 million for the year ended December 31, 2007 to RMB240,470 million for the year ended December 31, 2008. The profit from the exploration and production segment reached a historically high level.
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Refining and Chemicals
Turnover. Turnover from our refining and chemicals segment rose 16.4% from RMB481,726 million for the year ended December 31, 2007 to RMB560,729 million for the year ended December 31, 2008. 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 expensesthe selling prices and an increase of RMB 7,021 million in depreciation, depletion and amortization.the processing quantity.
Income
Intersegment sales turnover increased 20.0% from Operations. Income from operations increased 5.7% from RMB 208,080RMB330,281 million for the year ended December 31, 20052007 to RMB 219,860RMB396,410 million for the year ended December 31, 2006.
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
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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, 2006.2008. This increase was primarily due to increases in the selling prices and changesincrease in intersegment sales volume of key refined products.
Operating Expenses. Operating expenses increased 27.7%29.5% from RMB 448,304RMB505,385 million for the year ended December 31, 20052007 to RMB 572,463RMB654,559 million for the year ended December 31, 2006. This2008. The increase was primarily due to an increase of RMB 80,650 million in the purchase expensescosts of crude oil, other feedstock oil 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.suppliers.
Loss Fromfrom Operations. Loss from operations amounted to RMB 29,164RMB93,830 million for the year ended December 31, 2006,2008, representing an increase of RMB70,171 million in loss from the year ended December 31, 2007. The loss was primarily due to (i) the fact that there was a substantial increase in the prices of refined oil products on the international market but the prices of the refined oil products in China’s domestic market were much lower than those on the international market due to China’s macro-economic control, and (ii) a substantial decline in domestic market demands for certain chemical products in the second half of 2008 caused by the global financial crisis. In addition, impairment charges for refining production assets increased significantly compared with that of 2007 due to RMB 19,810the deterioration of overall economic conditions in 2008.
Marketing
Turnover. Turnover from our marketing segment rose 33.2% from RMB584,115 million for the year ended December 31, 2005, primarily due2007 to the fact that the price increase for crude oil in the international market exceeded that of refined products in the domestic market.
Sales and Other Operating Revenue. Sales and other operating revenue increased 11.9% from RMB 73,978RMB778,141 million for the year ended December 31, 20052008. The growth was primarily due to RMB 82,791an increase in the selling prices and sales volume of certain refined oil products.
Operating Expenses. Operating expenses increased 34.3% from RMB573,305 million for the year ended December 31, 2006, primarily due2007 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 70,702RMB770,159 million for the year ended December 31, 20052008. The increase was primarily due to RMB 77,733an increase in the prices and sales of refined oil products and an increase in the trading business of oil products.
Profit from Operations. Profit from operations decreased 26.2% from RMB10,810 million for the year ended December 31, 2006. The increase was primarily due2007 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 3,276RMB7,982 million for the year ended December 31, 20052008. The decrease was mainly due to RMB 5,058the significant increase of the impairment charges for inventory in 2008 compared with that of 2007.
Natural Gas and Pipeline
Turnover. Turnover from our natural gas and pipeline segment increased 26.5% from RMB50,066 million for the year ended December 31, 2006.
Sales and Other Operating Revenue.Sales and other operating revenue increased 48.5% from RMB 26,2142007 to RMB63,315 million for the year ended December 31, 20052008. The increase was primarily due to RMB 38,917an increase in the selling prices of natural gas and an increase in the sales volume.
Operating Expenses. Operating expenses increased 25.8% from RMB37,571 million for the year ended December 31, 2006. The increase was primarily due2007 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
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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 23,031RMB47,258 million for the year ended December 31, 20052008. The increase was primarily due to RMB 29,931an increase in the purchase costs of natural gas and an increase in depreciation charges.
Profit from Operations. Profit from operations increased 28.5% from RMB12,495 million for the year ended December 31, 2006 due primarily2007 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 3,183RMB16,057 million for the year ended December 31, 2005 to RMB 8,986 million for the year ended December 31, 2006.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
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| Consolidated Results of Operation |
For the year ended December 31, 2005, our total revenue was RMB 552,229 million, representing an increase of 39.0% from the year ended December 31, 2004. Our net income in the year ended December 31, 2005 was RMB 133,362 million, increased 28.4% from the year ended December 31, 2004. Our basic and diluted earnings per share for the year ended December 31, 2005 was RMB 0.75, representing an increase of 27.1% from RMB 0.59 for the year ended December 31, 2004.
Total Revenue.Total Revenue increased 39.0% from RMB 397,354 million for the year ended December 31, 2004 to 552,229 million for the year ended December 31, 2005.2008. The increase was primarily due to the increases in the sales prices and sales volume of the principal products, such as crude oil, gasoline and diesel, as well as increases in the sales volume of natural gas. The average realized selling price for crude oil increased 43.4% from US$33.72 per barrel for the year ended December 31, 2004 to US$48.37 per barrel for the year ended December 31, 2005.
Operating Expenses.Operating expenses increased 46.2% from RMB 246,216 million for the year ended December 31, 2004 to RMB 360,058 million for the year ended December 31, 2005. This increase was due primarily to (i) a 75.3% increase in purchases, services and other expenses, (ii) a 29.4% increase in employee compensation costs, (iii) a 28.8% increase in exploration expenses, (iv) a 6.1% increase in depreciation, depletion and amortization and (v) a 29.1% increase in selling expenses and in general and administrative expenses.
Purchases, Services and Other Expenses.Purchases, services and other expenses increased 75.3% from RMB 114,249 million for the year ended December 31, 2004 to RMB 200,321 million for the year ended December 31, 2005. This increase was due primarily to (i) increases in the processing volume at our refineries and the increase of crude oil prices, as we purchased 157 million barrels of crude oil, 15.7 million tons of refined products and 1,706 thousand tons of chemical products in 2005, as compared to 121.8 million barrels of crude oil, 12.0 million tons of refined products and 990 thousand tons of chemical products in 2004; the average purchase price of the crude oil in 2005 was RMB 423 per barrel, representing a 30.6% increase from 2004, (ii) increases in the prices of other raw materials such as water and electricity, and (iii) the
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expansion of our production scale. The increase in our refined product supply operation in 2005 also contributed to the increase in purchase, services and other expenses.
Employee Compensation Costs.Employee compensation costs increased 29.4% from RMB 22,934 million for the year ended December 31, 2004 to RMB 29,675 million for the year ended December 31, 2005. This increase was due primarily to an increase of RMB 4,992 million in salaries and other benefits with the improvement of our operating results and an increase in labor costs as a result of the expansion of our retail distribution network.
Depreciation, Depletion and Amortization.Depreciation, depletion and amortization increased 6.1% from RMB 48,362 million for the year ended December 31, 2004 to RMB 51,305 million for the year ended December 31, 2005. This increase was due primarily to an increase of RMB 4,020 million in the allocation of depreciation and depletion expenses as a result of the increase in the average balance of the assets, and a decrease of RMB 1,720 million in the depreciation expenses as a result of fixed asset disposals and a decrease in the provisions for impairment.
Selling, General and Administrative Expenses.Selling, general and administrative expenses increased 29.1% from RMB 28,302 million for the year ended December 31, 2004 to RMB 36,538 million for the year ended December 31, 2005. This increase was due primarily to an increase of RMB 2,580 million in transportation expenses as a result of our increased sales volume of refined products and the increased railway transportation price, as well as an increase of RMB 720 million in repair expenses and lease expenses.
Exploration Expenses.Exploration expenses increased 28.8% from RMB 12,090 million for the year ended December 31, 2004 to RMB 15,566 million for the year ended December 31, 2005. This increase was due primarily to increased expenditures in exploration activities for the purpose of increasing our crude oil and gas reserves.
Taxes Other than Income Taxes.Taxes other than income taxes increased 18.4% from RMB 19,943 million for the year ended December 31, 2004 to RMB 23,616 million for the year ended December 31, 2005. This increase was due primarily to an increase of RMB 1,309 million in consumption tax as a result of increased sales volume of gasoline and diesel, an increase of RMB 951 million in resources compensation fees as a result of increased revenues from crude oil and natural gas, as well as an increase of RMB 504 million in resources tax as a result of the government’s upward adjustment to the tax rate.
Income From Operations.As a result of the factors discussed above, income from operations increased 27.1% from RMB 151,138 million for the year ended December 31, 2004 to RMB 192,171 million for the year ended December 31, 2005.
Net Exchange Gain.Net exchange income increased from RMB 8 million for the year ended December 31, 2004 to RMB 88 million for the year ended December 31, 2005. This increase was due primarily to the appreciation of RMB in 2005.
Net Interest Expense.Net interest expense decreased 45.0% from RMB 1,523 million for the year ended December 31, 2004 to RMB 838 million for the year ended December 31, 2005. This decrease was due primarily to a decrease of RMB 134 million in the interest expenses resulted from the decrease in the average outstanding balance of interest-bearing debts and an increase of RMB 551 million in the interest income as a result of sufficient cashflow derived from operating activities.
Income Before Income Taxes.Income before income taxes increased 28.2% from RMB 151,244 million for the year ended December 31, 2004 to RMB 193,822 million for the year ended December 31, 2005.
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Income Taxes.Income taxes increased 24.3% from RMB 43,598 million for the year ended December 31, 2004 to RMB 54,180 million for the year ended December 31, 2005, due primarily to the increase in the taxable income.
Net Income.As a result of the factors discussed above, net income increased 28.4% from RMB 103,843 million for the year ended December 31, 2004 to RMB 133,362 million for the year ended December 31, 2005.
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| Exploration and Production |
Sales and Other Operating Revenue.Sales and other operating revenue increased 44.1% from RMB 233,948 million for the year ended December 31, 2004 to RMB 337,208 million for the year ended December 31, 2005. This increase was due primarily to increases in the price and sales volume of crude oil, as well as an increase in sales volume of natural gas. Our average realized selling price of crude oil for the year ended December 31, 2005 was US$48.37 per barrel, representing an increase of US$14.65 per barrel or 43.4% from US$33.72 per barrel for the year ended December 31, 2004. In 2005, we sold 788.8 million barrels of crude oil, representing an increase of 21.5 million barrels as compared with 2004. Our exploration and production segment sold 1,049.4 billion cubic feet of natural gas in the year ended December 31, 2005, as compared to 810.4 billion cubic feet of natural gas in the year ended December 31, 2004.
Intersegment sales increased 50.4% from RMB 180,129 million for the year ended December 31, 2004 to RMB 270,943 million for the year ended December 31, 2005. This increase was due primarily to an increase in the price of crude oil and an increase of intersegment sales volume of crude oil and natural gas. Sales of crude oil to Sinopec increased 14.9% from 24,053 million in 2004 to 27,640 million in 2005 as a result of the increase in the price of crude oil.
Operating Expenses.Operating expenses increased 24.5% from RMB 103,735 million for the year ended December 31, 2004 to RMB 129,128 million for the year ended December 31, 2005. This increase was due primarily to (i) an increase of RMB 13,543 million in purchase expenses, and (ii) an increase of RMB 3,822 million in exploration expenses resulting from the increase of the investment in the hydrocarbon exploration for the purpose of increasing hydrocarbon reserve, and (iii) an increase of RMB 3,221 million in salaries and other benefits.
Income From Operations.As a result of the factors discussed above, income from operations increased 59.8% from RMB 130,213 million for the year ended December 31, 2004 to RMB 208,080 million for the year ended December 31, 2005.
Refining and Marketing
Sales and Other Operating Revenue. Sales and other operating revenue increased 44.6% from RMB 296,427 million for the year ended December 31, 2004 to RMB 428,494 million for the year ended December 31, 2005. This increase was due primarily to increases in the prices and the sales volumes of our products.
Sales revenue from gasoline increased 43.6% from RMB 76,919 million for the year ended December 31, 2004 to RMB 110,438 million for the year ended December 31, 2005. The average realized selling price of gasoline increased 19.2% from RMB 3,542 per ton for the year ended December 31, 2004 to RMB 4,221 per ton for the year ended December 31, 2005, which contributed RMB 17,763 million to the increase of gasoline sales revenue. We sold approximately 26,160 thousand tons of gasoline for the year ended December 31, 2005, representing an increase of 20.5% from approximately 21,710 thousand tons for the year ended December 31, 2004, which contributed RMB 15,756 million to the increase of gasoline sales revenue.
Sales revenue from diesel increased 29.5% from RMB 136,649 million for the year ended December 31, 2004 to RMB 176,999 million for the year ended December 31, 2005. The average realized selling price of diesel increased 17.0% from RMB 3,165 per ton for the year ended
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December 31, 2004 to RMB 3,702 per ton for the year ended December 31, 2005, which contributed RMB 25,674 million to the increase of diesel sales revenue. Sales volume of diesel increased from 43,180 thousand tons for the year ended December 31, 2004 to 47,810 thousand tons for the year ended December 31, 2005, representing an increase of 10.7%, which contributed RMB 14,676 million to the increase of diesel sales revenue.
Sales revenue from kerosene increased 27.2% from RMB 5,881 million for the year ended December 31, 2004 to RMB 7,480 million for the year ended December 31, 2005.
Intersegment sales revenue increased 51.0% from RMB 21,862 million for the year ended December 31, 2004 to RMB 33,019 million for the year ended December 31, 2005, due primarily to increases in the prices and intersegement sales volume of our principal products.
Operating Expenses. Operating expenses increased 57.6% from RMB 284,536 million for the year ended December 31, 2004 to RMB 448,304 million for the year ended December 31, 2005. This increase was due primarily to (i) an increase of RMB 141,600 million in purchasing crude oil and refined oil, and (ii) an increase of RMB 5,354 million in sales and administrative expenses. In 2005, we purchased 744 million barrels of crude oil, representing an increase of 58 million barrels as compared with 2004. The average purchase price of crude oil was RMB 409 per barrel, which was an increase of RMB 116 per barrel as compared with 2004. As a result, our expenses for purchased crude oil in 2005 were RMB 304,400 million, representing an increase of RMB 103,200 million as compared with 2004. In addition, the increase in our sales volume of refined products in 2005 also contributed to the increase in the operating expenses.
Loss From Operations. As a result of the factors discussed above, in the year ended December 31, 2005 we suffered a loss of RMB 19,810 million from operations while in the year ended December 31, 2004 we realized an income of RMB 11,891 million from operations, due primarily to the fact that, in 2005, the price increase of crude oil exceeded that of refined oil products in China.
Chemicals and Marketing
Sales and Other Operating Revenue. Sales and other operating revenue increased 29.4% from RMB 57,179 million for the year ended December 31, 2004 to RMB 73,978 million for the year ended December 31, 2005. This increase was due primarily to increases in the prices and sales volumes of chemical products. The average realized selling prices of polyethylene, polyester, styrene butadiene rubber and urea in 2005 increased 13.9%, 3.4%, 9.6% and 17.4%, respectively, from 2004. Our chemicals and marketing segment sold 13,113 thousand tons of chemical products for the year ended December 31, 2005, representing an increase of 10.5% from the year ended December 31, 2004.
Operating Expenses. Operating expenses increased 42.8% from RMB 49,524 million for the year ended December 31, 2004 to RMB 70,702 million for the year ended December 31, 2005, due primarily to an increase of RMB 11,892 million in the purchase expenses of direct materials and an increase of RMB 782 million in the sales and administrative expenses.
Income From Operations. As a result of the factors discussed above, income from operations decreased 57.2% from RMB 7,655 million for the year ended December 31, 2004 to RMB 3,276 million for the year ended December 31, 2005 due primarily to the increase in the prices of the raw materials.
Natural Gas and Pipeline
Sales and Other Operating Revenue. Sales and other operating revenue increased 43.6% from RMB 18,255 million for the year ended December 31, 2004 to RMB 26,214 million for the year ended December 31, 2005, due primarily to increases in the sales volume and selling price of natural gas, as well as increases in the transmission volume and transmission price of natural gas.
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Our natural gas and pipeline segment sold 888.81 billion cubic feet natural gas inbusiness developed rapidly and has continued to increase its contributions to the year ended December 31, 2005, representing an increaseincome of 231.51 billion cubic feet from 657.3 billion cubic feet in the year ended December 31 2004, which resulted in an increase in sales revenue of RMB 4,020 million. In 2005, our average realized selling price of natural gas was US$2.12 per thousand cubic feet, representing an increase of US$0.09 as compared with 2004. The increase of RMB 2,848 million in our income from pipeline transmission of natural gas in 2005 was attributable to an increase in the pipeline transmission volume of natural gas from 616.0 billion cubic feet in 2004 to 820.9 billion cubic feet in 2005, and an increase in the transmission price of natural gas from RMB 5.6 per thousand cubic feet in 2004 to RMB 7.7 per thousand cubic feet in 2005.company.
Operating Expenses. Operating expenses increased 46.5% from RMB 15,720 million for the year ended December 31, 2004 to RMB 23,031 million for the year ended December 31, 2005, due primarily to (i) an increase of RMB 3,479 million in purchase expenses of natural gas primarily as a result of the increase of 235.1 billion cubic feet in the natural gas purchase volume, as well as the increase of the average purchase price of natural gas from RMB 14.6 per thousand cubic feet in 2004 to RMB 14.7 per thousand cubic feet in 2005, and (ii) an increase of RMB 1,833 million in depreciation expenses.
Income From Operations. As a result of the factors discussed above, income from operations increased 25.6% from RMB 2,535 million for the year ended December 31, 2004 to RMB 3,183 million for the year ended December 31, 2005.
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, 2006,2009, 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.the year attributable to our shareholders. See “Item 8
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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.
We finance a significant portion of our business operations with short-term borrowings, including short-term debt obtained from PRC State-owned banks. As of December 31, 2006, short-term debt comprised approximately 5.2% of our capital employed as compared to approximately 4.7% as of December 31, 2005.
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 byfrom operating activities, short-term and long-term borrowings and cash and cash equivalents. Net cash generated byflows from operating activities in the year ended December 31, 20062009 was RMB 198,102RMB261,972 million. As of December 31, 2006,2009, we had cash and cash equivalents of RMB 48,559RMB86,925 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.
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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,
In October 2007, we issued a portion of these corporate bonds in4 billion A Shares, which have been listed and traded on the principal amount of RMB 1,500 million in October 2003. We received RMB 1,500 million inShanghai Stock Exchange since November 5, 2007. The total proceeds and net proceeds from this issuance. Wesuch issuance were RMB66,800 million and RMB66,243 million respectively. Of the net proceeds, approximately RMB6,840 million were used for the proceeds received fromproject to increase the issuance of these corporate bonds for various crude oil production capacity of Changqing Oilfield; approximately RMB5,930 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 RMB17,500 million were used for the project to process and natural gas exploration projects inrefine sulphur-bearing crude oil imported from Kazakhstan and the ethylene technology development project of Dushanzi Petrochemical, and approximately RMB6,000 million were used for the 1.2 million tons/year ethylene redevelopment and expansion project of Daqing Petrochemical. The balance of the net proceeds will be used as additional working capital and for general commercial purpose. A total of RMB61,621 million were used by the end of 2009, and the unused amount currently is deposited a numberspecial bank account 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.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, 2006,2009, 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, 2004, 20052007, 2008 and 20062009 and our cash equivalents at the end of each period.
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | (RMB in millions) | |
Net cash generated by operating activities | | | 141,691 | | | | 203,885 | | | | 198,102 | |
Net cash used for investing activities | | | (102,276 | ) | | | (91,576 | ) | | | (158,451 | ) |
Net cash used for financing activities | | | (39,586 | ) | | | (42,634 | ) | | | (71,739 | ) |
Currency translation difference | | | 246 | | | | (458 | ) | | | (258 | ) |
Cash and cash equivalents at the end of period | | | 11,688 | | | | 80,905 | | | | 48,559 | |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | 2007 | | | 2008 | | | 2009 | |
| | (RMB in millions) | |
|
Net cash flows from operating activities | | | 207,663 | | | | 172,465 | | | | 261,972 | |
Net cash flows used for investing activities | | | (183,656 | ) | | | (211,797 | ) | | | (261,453 | ) |
Net cash flows from financing activities | | | (5,838 | ) | | | 3,777 | | | | 53,077 | |
Currency translation difference | | | (221 | ) | | | (112 | ) | | | 179 | |
Cash and cash equivalents at year end | | | 68,817 | | | | 33,150 | | | | 86,925 | |
Our cash and cash equivalents decreasedincreased by 40.0%162.2% from RMB 80,905RMB33,150 million as of December 31, 20052008 to RMB 48,559RMB86,925 million as of December 31, 2006.2009.
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Net Cash Generated byFlows from Operating Activities
Our net cash flows from operating activities for the year ended December 31, 2009 was RMB261,972 million, representing an increase of 51.9% compared with RMB172,465 million generated for the year ended December 31, 2008. This was mainly due to the decrease in cash outflow arising from the strengthened working capital management by the company in response to the global financial crisis, and the reduction of value-added taxes as a result of the new pricing mechanism for refined products implemented by the PRC government. As at December 31, 2009, the company had cash and cash equivalents of RMB86,925 million. The cash and cash equivalents were mainly denominated in Renminbi (approximately 77.2% were denominated in Renminbi, approximately 17.2% were denominated in U.S. dollar, approximately 4.5% were denominated in HK dollar and approximately 1.1% were denominated in other currencies).
Our net cash flows from operating activities was RMB 198,102RMB172,465 million for the year ended December 31, 2006,2008, representing a decrease of RMB 5,783 million16.9% from RMB 203,885RMB207,663 million for the year ended December 31, 2005, due primarily2007, mainly as a result of a decrease in our profit attributable to an increasethe owners of RMB 6,657 million in income tax paid during the year endedcompany compared with that of 2007. As of December 31, 2006.2008, our cash and cash equivalents amounted to RMB33,150 million, which were mainly denominated in RMB (approximately 67.7% were denominated in Renminbi, and approximately 32.3% were denominated in U.S. dollar).
We had a working capital deficit of RMB 17,657 million
Net Cash Flows Used for Investing Activities
Our net cash flows used for investing activities for the year ended December 31, 2006,2009 was RMB261,453 million, representing an increase of 23.4% compared with a working capital balance of RMB 22,057RMB211,797 million used for investing activities for the year ended December 31, 2005. This decrease2008. The net increase was primarily due to an increase in working capital was due primarily to (i)expenditures paid in cash during the year as a payment of approximately RMB 21,376 million for the acquisitionresult of the 67% equity interestconstruction of PKZ,the strategic projects (including the Second West-East Gas Pipeline project) and (ii) an increase of RMB 14,922 million inmajor programs by the dividends we distributed to our shareholders.company.
Our net cash flow generated by operatingflows used for investing activities was RMB 203,885 million for the year ended December 31, 2005,2008 was RMB211,797 million, representing an increase of RMB 62,19415.3% compared with RMB183,656 million from RMB 141,691 millionused for
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the year ended December 31, 2004, due primarily to an increase of RMB 31,996 million in income for the year and an increase of RMB 22,089 million in our accounts payable.
We had a working capital balance of RMB 22,057 million investing activities for the year ended December 31, 2005, compared with2007. The net increase in cash used for investing activities was primarily due to an increase in capital expenditures paid in cash during the working capital deficit of RMB 8,272year.
Net Cash Flows from Financing Activities
Our net cash flows from financing activities for year ended December 31, 2009 was RMB53,077 million, while our net cash flows from financing activities for the year ended December 31, 2004.2008 was RMB3,777 million. This increase was primarily because we increased our financing activities in working capital balanceresponse to the financial crisis.
Our net cash flows from financing activities for the year ended December 31, 2008 was RMB3,777 million, while our net cash flows from financing activities for the year ended December 31, 2007 was RMB5,838 million. This decrease was primarily due primarily to (i) the increase in our cash and cash equivalents as a result of a substantial increase of RMB 154,875 million in our sales revenue and (ii) an increase of RMB 15,356 million in inventory, as a result of the expansion of our sales and an increase in the purchase price.amount of net borrowings and capital contributions by minority shareholders during the year.
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, 2004, 20052007, 2008 and 20062009 were as follows:
| | | | | | | | | | | | | | |
| | December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | (RMB in millions) | |
Short-term debt (including current portion of long-term debt) | | | 34,937 | | | | 28,689 | | | | 35,763 | |
Long-term debt | | | 44,648 | | | | 44,570 | | | | 35,634 | |
| | | | | | | | | |
| Total debt | | | 79,585 | | | | 73,259 | | | | 71,397 | |
| | | | | | | | | |
Less: | | | | | | | | | | | | |
| Cash and cash equivalents | | | 11,688 | | | | 80,905 | | | | 48,559 | |
| Time deposits with term exceeding three months within one year | | | 1,425 | | | | 1,691 | | | | 3,012 | |
| Investments in Collateralized Loans | | | 33,217 | | | | 235 | | | | — | |
| Time deposits exceeding one year | | | 3,751 | | | | 3,428 | | | | 2,499 | |
| | | | | | | | | |
| | Net debt | | | 29,504 | | | | (13,000 | ) | | | 17,327 | |
| | | | | | | | | |
See Note 24 to
| | | | | | | | | | | | |
| | December 31, | |
| | 2007 | | | 2008 | | | 2009 | |
| | (RMB in millions) | |
|
Short-term debt (including current portion of long-term debt) | | | 31,578 | | | | 93,670 | | | | 148,851 | |
Long-term debt | | | 40,067 | | | | 32,852 | | | | 85,471 | |
| | | | | | | | | | | | |
Total debt | | | 71,645 | | | | 126,522 | | | | 234,322 | |
| | | | | | | | | | | | |
Less: | | | | | | | | | | | | |
Cash and cash equivalents | | | 68,817 | | | | 33,150 | | | | 86,925 | |
| | | | | | | | | | | | |
Net debt | | | 2,828 | | | | 93,372 | | | | 147,397 | |
| | | | | | | | | | | | |
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Of 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 756 million, RMB 674 million and RMB 597 million in the three years endedtotal borrowings as at December 31, 2004, 2005 and 2006, 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, 2006,2009, approximately 29.3%69.7% were fixed-rate loans and approximately 70.7%30.3% were floating-rate loans. Of the total debts outstandingborrowings as ofat December 31, 2006,2009, approximately 74.0%83.2% were denominated in Renminbi, approximately 24.8%16.7% were denominated in the U.S. dollar, and approximately 1.2%0.1% were denominated in other major foreign currencies.Euro dollar.
Our debts included short-term and long-term debts owed to China Petroleum Finance Company Limited of RMB 29,932 million, RMB 27,319 million and RMB 27,184 million in the three years ended December 31, 2004, 2005 and 2006, respectively. The amount of such short-term debts in the three years ended December 31, 2004, 2005 and 2006 were RMB 4,351 million, RMB 520 million and RMB 320 million, respectively. The amount of such long-term debts in each of the three years ended
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December 31, 2004, 2005 and 2006 were RMB 25,581 million, RMB 26,799 million and RMB 26,864 million, respectively. These debts were unsecured with interest at below the prime rate as published by the People’s Bank of China. We also maintain a portion ofOf our deposits at China Petroleum Finance Company Limited at the same deposit interest rate for commercial banks published by the People’s Bank of China.
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. |
Our net cash used for financing activities increased 7.7% from RMB 39,586 million for the year ended December 31, 2004 to RMB 42,634 million for the year ended December 31, 2005. This increase resulted primarily from the following:
| | |
| • | a decrease in new long-term debts leading to a decrease of RMB 2,939 million in cash inflow; |
|
| • | an increase in the repayment of short-term debts leading to an increase of RMB 10,667 million in cash outflow; and |
|
| • | an increase in the distribution of dividends leading to an increase of RMB 19,339 million in cash outflow; |
These changes were offset primarily by the following:
| | |
| • | our follow-on offering of H shares leading to an increase of RMB 19,692 million in cash inflow. |
|
| • | an increase in new short-term debts leading to an increase of RMB 3,906 million in cash inflow; and |
|
| • | a decrease in the repayment of long-term debts leading to a decrease of RMB 9,156 million in cash outflow. |
Astotal borrowings as at December 31, 2006, our debts consisted of RMB 359 million secured2008, approximately 67.1% were fixed-rate loans most of whichand approximately 32.9% were secured by our assetsfloating-rate loans. Of the borrowings as at December 31, 2008, approximately 84.3% were denominated in Renminbi, approximately 15.5% were denominated in U.S. dollar, and time deposits with a term longer than one year.approximately 0.2% were denominated in Euro dollar.
Our debt to capital employed ratio (calculated by dividing interest-bearing debts by the aggregate of interest-bearing debts and shareholder’s equity) as of December 31, 20062009 was 10.4%20.5%, as compared to 11.9%13.0% as of December 31, 2005.2008.
Capital Expenditures and Investments
Our net cash used for investing activities includes
For the year ended December 31, 2009, our capital expenditures increased 14.8% to RMB266,836 million from RMB232,377 million for the year ended December 31, 2008. The increase in capital expenditures was primarily due to an increase in expenditures relating to construction of sales network and investments, offsetconstruction of natural gas pipelines by proceeds from the sale of assets and dividends received. our company.
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, 2004, 20052007, 2008 and 20062009 as well as those anticipated for the
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year ending December 31, 2007.2010. Actual capital expenditures and investments for periods after January 1, 20072010 may differ materially from the amounts indicated below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 2007 | |
| | 2004 | | | 2005 | | | 2006 | | | anticipated | |
| | | | | | | | | | | | |
| | (RMB in | | | | | (RMB in | | | | | (RMB in | | | | | (RMB in | | | |
| | millions) | | | % | | | millions) | | | % | | | millions) | | | % | | | millions) | | | % | |
Exploration and production | | | 70,217 | | | | 66.06 | | | | 92,233 | | | | 68.92 | | | | 114,520 | | | | 72.44 | | | | 127,200 | | | | 64.34 | |
Refining and marketing | | | 17,684 | | | | 16.64 | | | | 16,454 | | | | 12.30 | | | | 19,206 | | | | 12.15 | | | | 28,000 | | | | 14.16 | |
Chemicals and marketing | | | 4,319 | | | | 4.06 | | | | 13,569 | | | | 10.14 | | | | 10,681 | | | | 6.76 | | | | 16,000 | | | | 8.09 | |
Natural gas and pipeline | | | 13,901 | | | | 13.08 | | | | 11,137 | | | | 8.32 | | | | 11,309 | | | | 7.15 | | | | 18,000 | | | | 9.10 | |
Corporate and other | | | 174 | | | | 0.16 | | | | 427 | | | | 0.32 | | | | 2,358 | | | | 1.50 | | | | 8,500 | | | | 4.31 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | 106,295 | | | | 100.0 | | | | 133,820 | | | | 100.0 | | | | 158,074 | | | | 100.0 | | | | 197,700 | | | | 100.0 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Our capital expenditures and investments increased 18.1% from RMB 133,820 million for the year ended December 31, 2005 to RMB 158,074 million for the year ended December 31, 2006. This increase was due primarily to an increase of RMB 22,287 million in capital expenditures and investments in the exploration and production segment and an increase of RMB 2,752 million in capital expenditures in the refining and marketing segment, which were partially offset by a decrease of RMB 2,888 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 2004, 2005 and 2006 would have been RMB 98,946 million, RMB 124,801 million and RMB 148,746 million, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | 2010
|
| | 2007 | | 2008 | | 2009 | | Anticipated |
| | (RMB in
| | | | (RMB in
| | | | (RMB in
| | | | (RMB in
| | |
| | millions) | | % | | millions) | | % | | millions) | | % | | millions) | | % |
|
Exploration and production(1) | | | 135,351 | | | | 74.1 | | | | 157,194 | | | | 67.6 | | | | 129,017 | | | | 48.4 | | | | 157,700 | | | | 53.9 | |
Refining and chemicals | | | 21,499 | | | | 11.8 | | | | 30,619 | | | | 13.2 | | | | 42,558 | | | | 15.9 | | | | 49,500 | | | | 16.9 | |
Marketing | | | 13,212 | | | | 7.2 | | | | 4,974 | | | | 2.1 | | | | 18,174 | | | | 6.8 | | | | 19,600 | | | | 6.7 | |
Natural gas and pipeline | | | 11,003 | | | | 6.0 | | | | 36,848 | | | | 15.9 | | | | 74,754 | | | | 28.0 | | | | 62,000 | | | | 21.2 | |
Corporate and other | | | 1,613 | | | | 0.9 | | | | 2,742 | | | | 1.2 | | | | 2,333 | | | | 0.9 | | | | 3,900 | | | | 1.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 182,678 | | | | 100.0 | | | | 232,377 | | | | 100.0 | | | | 266,836 | (2) | | | 100.00 | | | | 292,700 | | | | 100.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(1) | | If investments related to geological and geophysical exploration costs are included, the capital expenditures and investments for the exploration and production segment for 2008 and 2009, and the estimates for the same in 2010 would be RMB168,732 million, RMB138,396 million and RMB169,000 million, respectively. |
|
(2) | | The capital expenditure for 2009 has excluded the consideration for the acquisition of Singapore Petroleum Company Limited in the amount of Singapore dollars (“S$”)3,239 million (approximately RMB15,296 million). |
As of December 31, 2006,2009, the capital expenditures contracted for at the balance sheet date but not recognized in our consolidated financial statements were approximately RMB 9,193RMB56,657 million.
| |
| Exploration and Production |
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, 2006 totaled RMB 114,520 million, including RMB 29,809 million for exploration activities and RMB 75,050 million for development activities. Our capital expenditures and investments for the segment for the year ended December 31, 2005 totaled RMB 92,233 million, including RMB 25,518 million for exploration activities and RMB 59,113 million for development activities. The increase in our capital expenditures and investments from the year ended December 31, 2005 to the year ended December 31, 2006 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 2006. 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, 2004, 2005 and 2006 would have been RMB 62,868 million, RMB 83,214 million and RMB 105,192 million, respectively.
Our anticipated capital expenditures and investments for our exploration and production segment for the year ending December 31, 2007 amount to RMB 127,200 million. Approximately RMB 32,000 million is expected to be used for exploration activities and approximately RMB 95,200 million for development activities. We plan to focus our exploration and development efforts in Erdos, Junggar, Tarim, Songliao, Sichuan, Bohai Bay and Qaidam basins.
Our capital expenditures for our refining and marketing segment forFor each of the three years ended December 31, 2004, 20052007, 2008, and 20062009, capital expenditures in relation to the exploration and production segment amounted to RMB135,351 million, 157,194 million, 129,017 million, respectively. The capital expenditures and investments in the exploration and production segment were RMB 17,684 million, RMB 16,454 millionprimarily used for large oil and gas exploration projects such as in the oil and gas fields located in Changqing, Daqing, Tarim and Southwestern
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RMB 19,206 million, respectively. The increaseoil and gas fields in 2006 is due primarily to an increase of RMB 4,034 million in our investment inChina and Aktyubinsk oil and gas fields and for the construction of refining facilities. In addition, we also increased thekey production capacities for various oil and gas fields.
We anticipate that capital expenditures for safetythe exploration and production protectionsegment for thisthe year ended December 31, 2010 will amount to approximately RMB157,700 million, of which approximately RMB29,000 million will be mainly used for oil and gas exploration activities, and approximately RMB128,700 million will be used for the oil and gas developmen activities. Domestic exploration activities will be mainly focused on the overall development of regions in Songliao Basin, Bohai Basin, Erdos Basin, Sichuan Basin, Tarim Basin and other key oil and gas regions. Development activities will be focused on the construction of new proved oil and gas fields, while the steady and increasing production of Daqing, Changqing, Tarim and Southwestern oil and gas fields will also be emphasized; oil and gas exploration and development in Central Asia and the Middle East will be the focus of our overseas development efforts.
Refining and Chemicals
Our capital expenditures for our refining and chemicals segment in 2006.for each of the years ended December 31, 2007, 2008 and 2009 were RMB21,499 million, RMB30,619 million and RMB42,558 million, respectively.
Our anticipated capital expenditures for our refining and marketingchemicals segment for the year ending December 31, 20072010 amount to RMB 28,000RMB49,500 million, which include:
| | |
| • | approximately RMB 20,000RMB26,400 million for the construction and expansion of our refining facilities;facilities, mainly including the construction of large-sized refining projects in Sichuan Petrochemical and Huhhot Petrochemical; and |
|
| • | approximately RMB 8,000RMB23,100 million for the construction of our service stationschemical facilities, mainly including the large-sized ethylene projects at Sichuan Petrochemical, Fushun Petrochemical and retail facilities for finished oil products. |
| |
| Chemicals and MarketingDaqing Petrochemical. |
Marketing
Our capital expenditures for our chemicals and marketing segment for each of the three years ended December 31, 2004, 20052007, 2008 and 20062009 were RMB 4,319RMB13,212 million, RMB 13,569RMB4,974 million and RMB 10,681RMB18,174 million, respectively. LowerOur capital expenditures for the marketing segment in 20062009 were primarily due tomainly used for the completionconstruction of service stations, storage facilities and commencement of commercial production of the upgrades and expansion of the ethylene productionother facilities in Jilin Petrochemical and Lanzhou Petrochemical in 2006.for our sales network.
Our anticipated capital expenditures for our chemicals and marketing segment for the year ending December 31, 20072010 amount to RMB 16,000RMB19,600 million, which are expected to be mainly includeused for the construction and expansion of our sales network.
Natural Gas and Pipeline
Our capital expenditures for the ethylene facilities in Dushanzi Petrochemical and Fushun Petrochemical.
Our capital expenditures for our natural gas and pipeline segment for each of the three years ended December 31, 2004, 20052007, 2008 and 20062009 were RMB 13,901RMB11,003 million, RMB 11,137RMB36,848 million and RMB 11,309 million,RMB74,754, respectively. Our capital expenditures for the natural gas and pipeline segment in 2009 were mainly used for the construction of the SecondWest-to-East Pipeline project, the Russia to China crude oil transmission pipeline and theLanzhou-Zhengzhou-Changsha refined oil product transmission pipeline project.
Our anticipated capital expenditures for our natural gas and pipeline segment for the year ending December 31, 20072010 amount to approximately RMB 18,000RMB62,000 million, which are expected to be used primarily for increasing transmission capacity of the West-East Gas Pipeline, the construction of underground naturalmajor oil and gas storage facilities andtransmission projects such as the constructionsecond phase of pipelines fortheWest-to-East Gas Pipeline project, the Russia to China crude oil transmission pipeline and refined products. See “Item 4 — Information on the Company — Natural Gas and Pipeline — Expansion of Our Natural Gas Transmission and Marketing Business” for a more detailed discussion of the expansion plans of ourassociated liquefied natural gas and pipeline segment.gas storage facilities.
Others
Our non-segment-specific capital expenditures and investments for each of the three years ended December 31, 2004, 20052007, 2008 and 20062009 were RMB 174RMB1,613 million, RMB 427RMB2,742 million and RMB 2,358RMB2,333 million, respectively. Since we started from January 1, 2006 to include capital expenditures and investments for certain research and development activities, which were previously included in the capital expenditures of our four operational segments, in our non-segment-specific capital expenditures, our expenditures for this category increased significantly in 2006.
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Our anticipated non-segment-specific capital expenditures and investments for the year ending December 31, 20072010 amount to RMB 8,500RMB3,900 million. These planned capital expenditures and investments mainly include capital expenditures for scientific research activities and the construction of the ERP information system.
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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.
Long-Term Contractual Obligations and Other Commercial
Commitments and Payment Obligations
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“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, 2006.2009.
| | | | | | | | | | | | | | | | | | | | |
| | 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 | | | 56,241 | | | | 20,607 | | | | 18,211 | | | | 4,035 | | | | 13,388 | |
Capital lease obligations | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Operating leases | | | 94,780 | | | | 3,099 | | | | 5,463 | | | | 6,142 | | | | 80,076 | |
Capital commitments | | | 9,193 | | | | 4,871 | | | | 4,315 | | | | 3 | | | | 4 | |
Unconditional purchase obligations | | | 1,412.1 | | | | 1,063.2 | | | | 274.1 | | | | 28.4 | | | | 46.4 | |
Other long-term obligations | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Total contractual cash obligations | | | 161,626.1 | | | | 29,640.2 | | | | 28,263.1 | | | | 10,208.4 | | | | 93,514.4 | |
| | | | | | | | | | | | | | | | | | | | |
| | 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 million) | |
Lines of credit | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Standby letters of credit | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
Guarantees | | | 203 | | | | 87 | | | | 49 | | | | 22 | | | | 45 | |
Total commercial commitments | | | 203 | | | | 87 | | | | 49 | | | | 22 | | | | 45 | |
| | | | | | | | | | | | | | | | | | | | |
| | 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 | | | 99,700 | | | | 14,229 | | | | 49,473 | | | | 25,560 | | | | 10,438 | |
Capital lease obligations | | | — | | | | — | | | | — | | | | — | | | | — | |
Operating leases | | | 93,934 | | | | 4,071 | | | | 6,383 | | | | 6,095 | | | | 77,385 | |
Capital commitments | | | 56,657 | | | | 44,306 | | | | 11,996 | | | | 65 | | | | 290 | |
Unconditional purchase obligations | | | 1,817 | | | | 796 | | | | 836 | | | | 60 | | | | 125 | |
Other long-term obligations | | | — | | | | — | | | | — | | | | — | | | | — | |
Total contractual cash obligations | | | 252,108 | | | | 63,402 | | | | 68,688 | | | | 31,780 | | | | 88,238 | |
| | | | | | | | | | | | | | | | | | | | |
| | 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 | | | 21 | | | | — | | | | 21 | | | | — | | | | — | |
Total commercial commitments | | | 21 | | | | — | | | | 21 | | | | — | | | | — | |
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 futurenext five years:
| | | | |
Year | | Annual payment |
| | |
| | (RMB in millions) |
2007 | | | 750 | |
2008 | | | 780 | |
2009 | | | 800 | |
2010 | | | 850 | |
2011 | | | 900 | |
| | | | |
Year | | Annual Payment |
| | (RMB in millions) |
|
2010 | | | 1,000 | |
2011 | | | 1,000 | |
2012 | | | 1,000 | |
2013 | | | 1,000 | |
2014 | | | 1,000 | |
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We sell a substantial portionAssets Retirement Obligation
A number of provinces and regions in which our naturaloil and gas under long-term take-or-pay contracts. Under these contracts, the customersexploration and production activities are required to take or pay, and we are obligated to deliver, minimum quantities of natural gas annually.
As of December 31, 2006, our future minimum delivery commitments under such take-or-pay contracts are as follows:
| | | | |
| | Quantities |
| | |
| | (billion of |
| | cubic feet) |
2007 | | | 720 | |
2008 | | | 885 | |
2009 | | | 943 | |
2010 | | | 1,002 | |
2011 | | | 1,050 | |
2012 and thereafter | | | 10,460 | |
| |
| Oil-and-Gas Assets Retirement Obligation |
Before the issuance of two provinciallocated have promulgated environment protection regulations,The Environmental Protection Regulation for Oil and Gas Exploration and Production Activities in Heilongjiang ProvinceandThe 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 companyactivities. We have 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 twothese 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.regional regulations. An additional obligation of RMB 3,589RMB7,162 million was recorded in 2006 and did not have a material impact on our financial condition.2009.
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, 2006,2009, we had 22,03519,800 employees engaged in research and development functions.
In 2006, we applied for 423 patents and 135 trademarks in China and 499 trademarks in other countries. We were granted patent rights for 259 patents in China in the same year.
In each of the three years ended December 31, 2004, 20052007, 2008 and 2006,2009, our total expenditures for research and development were approximately RMB 2,977RMB5,315 million, RMB 3,195RMB7,760 million and RMB 4,260RMB9,887 million, respectively.
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Exploration and Production
Most of China’s major oil and gas fields are characterized by a broad range of geological conditions, and a majority of China’s 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:
| | |
| • | geological structurestheories and technologies of crude oil and natural gas reserves;exploration; |
|
| • | oil and gas explorationdevelopment and development;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
Currently, our research and development activities related to ourefforts in the 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 integratedsegment are focusing on 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 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.following areas:
| | |
| • | technology for clean refined oil products; |
|
| • | core technology for heavy oil processing; |
|
| • | technology for developing high quality and high value synthetic resin products; |
|
| • | high performance synthetic rubber products; and |
|
| • | production technology for low cost chemical raw materials. |
Trend Information
Streamlining of Production Facilities
We plan
The world economic situation and energy industry are developing and changing rapidly. China may encounter unexpected challenges and obstacles in maintaining a stable economic development. The rebound of China’s domestic demand for refined oil products is still subject to continuemany uncertainties. The competition on China’s domestic petroleum and petrochemical market will be more intense.
Other than as disclosed above and elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the periods from January 1, 2007 to streamline our production facilities within the next several yearsDecember 31, 2009 that are reasonably likely 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 net revenues, income, profitability, liquidity or capital
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resources, or that would cause the disclosed financial information to be not necessarily indicative of future operating 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.financial conditions.
Other Information
Inflation
Inflation
Inflation or deflation has not had a significant impact on our results of operations for the year ended December 31, 2006.
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Non-Exchange Traded Contracts2009.
We did not engage for the year ended December 31, 2006, 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 3537 to our consolidated financial statements included elsewhere in this annual report.
Recent IFRSEnvironmental Expenses
We paid pollutant discharge fees of approximately RMB231 million, RMB200 million and RMB301 million, respectively, in 2007, 2008 and 2009. Our capital expenditures on environmental programs in 2007, 2008 and 2009 were approximately RMB2,299 million, RMB1,366 million and 1,336 million, respectively.
Recent Developments in 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 standardstandards and interpretations to existing standards, which are relevant to our operations, have been published and are mandatory for accounting periods beginning on or after MayJanuary 1, 2006.2010. We didhave not adopt such standardadopted these standards or interpretations as of December 31, 2006:2009.
IFRS 3 (Revised), ‘Business combinations’ — effective July 1, 2009. The IFRS 7, Financial Instruments: Disclosures, andrevised standard continues to apply the complementary Amendmentacquisition method to IAS 1, Presentation of Financial Statements — Capital Disclosures, introduces new disclosures relatingbusiness combinations, with some significant changes. For example, all payments to financial instruments. We do not expect this standard to have any impact on the classification or valuation of our financial instruments.
The IFRIC Interpretation 10, Interim Financial Reporting and Impairment, prohibits impairment losses, recognized in an interim period, relating to goodwill, investments in equity instruments and investments in financial assets carried at costpurchase a business are to be reversedrecorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a subsequent balance sheet date. Wechoice on anacquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair vale or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The company will adopt IFRIC Interpretation 10 fromapply the revised standard prospectively to all business combinations for which the acquisition date is on or after January 1, 2007, but do not expect it will have any impact on our consolidated financial statements.
US GAAP Reconciliation2010.
We prepared our consolidated financial statements
IFRS 5 (Amendment), ‘Non-current assets held for sale and discontinued operations’ — effective July 1, 2009. The amendment clarifies that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal plan results in accordance with IFRS. This basisloss of accounting may differ from US GAAP. Such differences involve methodscontrol, and relevant disclosure should be made for measuringthis subsidiary if the amounts shown indefinition of a discontinued operation is met. The Company is currently evaluating the financial statements, as well as additional disclosures required by US GAAP.
A summaryimpact of the principal differences and additional disclosures applicable to us is set out below:
Acquisition of PKZ
As described in Note 19 toamendment on the consolidated financial statements included elsewhere in this annual report, we acquired a 67% equity interest in PKZ from CNPC International limited (CNPCI), a subsidiary of CNPC, for a consideration of RMB 21,376 million. The acquisition was completed on December 28, 2006, when we paid the consideration for the acquisitionbut it is not expected to CNPCI. As both CNPCI and our company are under common control by CPNC, our acquisition of the 67% equity interest in PKZ has been accounted for in a manner similar to pooling of interest under US GAAP accounting and the US GAAP financial data reflects the acquisition since PKZ was first acquired by CNPCI on October 26, 2005.have any significant impact.
On December 15, 2006, PKZ paid to CNPCI a dividend
IFRS 5 (Amendment), ‘Measurement of RMB 3,044 million and was recordednon-current assets (or disposal groups) classified as a deemed distribution to CNPCI.
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| |
| Revaluation of Property, Plant and Equipment |
As described in Note 18 to the consolidated financial statements, the property, plant and equipment, excluding oil and gas reserves, transferred to our company by CNPC were appraised as of June 30, 1999, as required by the relevant PRC regulations, by a firm of independent valuers registered in the PRC, China Enterprise Appraisal. In September 2003, our company’s refining and chemical production equipment was revalued by a firm of independent valuers registered in the PRC, China United Assets Appraiser Co., Ltd, on a depreciated replacement cost basis. In March 2006, our company’s oil and gas properties were revalued by two independent valuers, China United Assets Appraiser Co., Ltd and China Enterprise Appraisals, on a depreciated replacement cost basis.
The June 1999 revaluation resulted in RMB 80,549 million in excess of the prior carrying value and a revaluation loss of RMB 1,122 million on certain property, plant and equipment.
The September 2003 revaluation resulted in RMB 872 million 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 million.
The March 2006 revaluation did not result in significant differences from the carrying value of our oil and gas properties.
The depreciation charge, which includes impairment charge, on the revaluation surplus fromheld-for-sale’ — effective January 1, 2006 to December 31, 2006 was RMB 3,828 million, from January 1, 2005 to December 31, 2005 was RMB 6,528 million, and from January 1, 2004 to December 31, 2004 was RMB 8,170 million.
2010. The depreciation charge, which includes impairment charge, on the revaluation loss from January 1, 2006 to December 31, 2006 was RMB Nil, from January 1, 2005 to December 31, 2005 was RMB 149 million, and from January 1, 2004 to December 31, 2004 was RMB 830 million.
The loss on disposal of revalued property, plant and equipment, which includes shut down of manufacturing assets, from January 1, 2006 to December 31, 2006 was RMB 287 million, from January 1, 2005 to December 31, 2005 was RMB 432 million, and from January 1, 2004 to December 31, 2004 was RMB 523 million.
For purposes of reconciling to the US GAAP financial data, the effect of the revaluation, the related depreciation charges and loss on disposalamendment is reversed. A deferred tax asset relating to the reversal of the effect of revaluation in 1999 is established, together with a corresponding increase in the shareholders’ equity. Under a special approval granted by the Ministry of Finance, the effect of the revaluation in 1999 is available as additional depreciation base for purposes of determining taxable income.
| |
| One-time Compensatory Payments for Staff Housing |
The Ministry of Finance of the PRC issued several public notices and regulations during the years ended December 31, 2000 and 2001 with respect to the one-time compensatory payments for staff housing payable to certain employees who joined the workforce prior to December 31, 1998 and have housing conditions below local standards as determined in accordance with government regulations and guidelines. These Ministry of Finance notices and regulations also provided that the portion of remedial payments attributable to the periods prior to a restructuring of the employer enterprise from a wholly state-owned status to a less than wholly state-owned status is to be borne by the state shareholder of the enterprise.
The restructuring that resulted in the formation of CNPC group took place in November 1999. As such, the one-time compensatory housing payments payable to the eligible employees of our company are to be borne by the state shareholder of our company.
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Under IFRS, such direct payments to employees or reimbursements will not be recorded through the consolidated profit and loss account of CNPC. US GAAP contains no such exemption but requires this principal shareholder’s action on behalf of our company to be recorded in the consolidated profit and loss account. In the last quarter of year 2002, our company and CNPC completed the process of estimating the amount payable to qualified employees of our company. This amount, RMB 2,553 million, was reflected in determining net income of CNPC for the year ended December 31, 2002, under US GAAP. Since this amount is borne by CNPC, a corresponding amount has been included as an addition to the other reserves in the shareholders’ equity of our company. There were no significant changes in this estimate during 2005 and 2006.
In accordance with the revised IAS 1, “Presentation of Financial Statements” and IAS 27, “Consolidated and Separate Financial Statements”, minority interest becomes part of the profit forIASB’s annual improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the yeardisclosures required in respect of non-current assets (or disposal groups) classified asheld-for-sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and total equityparagraph 125 (sources of our company, whereas under US GAAP, it is respectively excluded from the net income and shareholders’ equityestimation uncertainty) of our company. In addition, the reconciling item also includes the impact of minority interest’s share of the revaluation gain and loss, on the property, plant and equipment of non-wholly owned subsidiaries and minority interest arising as a result of the acquisition of 67% equity interest in PKZ through a non-wholly owned subsidiary of our company, to net income and shareholders’ equity under US GAAP.
| |
| Purchase from Minority Interest of Listed Subsidiaries |
As described in Note 39 to the consolidated financial statements, our company acquired certain outstanding A shares from the minority interest of Jinzhou Petrochemical Company Limited (“JPCL”) and Liaohe Jinma Oilfield Company Limited (“LJOCL”) and certain A shares and H shares (including ADSs) from the minority interest of Jilin Chemical Industrial Company Limited (“JCC”). Under IFRS, our company applies a policy of treating transactions with minority interest as transactions with equity participants of our company. Therefore, the assets and liabilities of JPCL, LJOCL and JCC additionally acquired by our company from minority interest were recorded by our company at cost.IAS 1. The difference between the company’s purchase cost and the book value of the interests in JPCL and LJOCL acquired by our company from minority interest was recorded in equity. Under US GAAP, the acquisition of additional minority interest is accounted for under purchase method. Assets and liabilities additionally acquired were restated to fair value and the difference of purchase cost over fair value of the minority interest acquired and identified intangible assets was recorded as goodwill. Additional depreciation charge for the assets restated to fair value was recorded.
| |
| Recent US Accounting Pronouncements |
In September 2005, the Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 04-13, “Accounting for Purchases and Sales of Inventory with the Same Counterparty” (“EITF 04-13”) which requires two or more inventory purchase and sales transactions with the same counterparty that are entered into in contemplation of one another to be combined for purposes of applying Opinion 29, “Accounting for Nonmonetary Transactions”. The Task Force also agreed that an entity should disclose the amount of revenue and costs (or gains and losses) associated with inventory exchanges recognized at fair value. EITF 04-13 should be applied to new arrangements entered into, or modifications or renegotiations of existing arrangements, beginning in the first interim or annual reporting period beginning after March 15, 2006 and early application is permitted in periods for which financial statements have not been issued. Our company did not early adopt EITF 04-13 and does not expect the adoption of EITF 04-13 to have a material impact on our financial position or results of operations.
In June 2006, EITF issued No. 06-3, “How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement” (“EITF 06-3”).
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EITF 06-3 requires disclosure of the presentation of taxes on either a gross or a net basis as an accounting policy decision. The provisions of EITF 06-3 are effective for interim and annual reporting periods beginning after December 15, 2006, and early application is permitted. Our company did not early adopt EITF 06-3 and does not expect the adoption of EITF 06-3 to have a material impact on the presentation of our financial statements.
In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements uncertain tax positions that an enterprise has taken or expects to take in its tax returns. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of an enterprise’s fiscal year, provided the enterprise has not yet issued financial statements, including financial statements for any interim period, for that fiscal year. The cumulative effect of applying the provisions of this Interpretation should be reported as an adjustment to the opening balance of retained earnings for that fiscal year. Our company is currently evaluating the impact of adopting FIN 48.the amendment on the disclosures in the consolidated financial statements but it is not expected to have any significant impact.
In September 2006,
IAS 1 (Amendment), ‘Presentation of financial statements’ — effective January 1, 2010. The amendment is part of the FASB issued StatementIASB’s annual improvements project published in April 2009. The amendment provides clarification
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that the potential settlement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. FAS 157 doesa liability by the issuance of equity is not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 willrelevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. Earlier application is permitted ifclassified as non-current (provided that the entity has not issued interiman unconditional right to defer settlement by transfer of cash or annual financial statementsother assets for at least 12 months after the accounting period) notwithstanding the fact that fiscal year. Ourthe entity could be required by the counterparty to settle in shares at any time. The company is currently evaluating the impact of adopting FAS 157the amendment on the consolidated financial statements but doesit is not expected the adoption of which to have any significant impact.
IAS 27 (Revised), ‘Consolidated and separate financial statements’ — effective July 1, 2009. The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. IAS 27 (Revised) also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a material effectgain or loss is recognized in profit or loss. The company will apply the revised standard prospectively to transactions with non-controlling interests from January 1, 2010.
IAS 38 (Amendment), ‘Intangible Assets’ — effective January 1, 2010. The amendment is part of the IASB’s annualimprovements project published in April 2009 and the company will apply IAS 38 (Amendment) from the date IFRS 3 (Revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The company is currently evaluating the impact of the amendment on our company’sthe consolidated financial position and results of operations.
In September 2006, the U.S. Securities and Exchange Commission (“SEC”) released SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the SEC’s views on the consideration of effects of prior year misstatements in quantifying current year misstatements for the purpose of determining whether the current year’s financial statements are materially misstated. The provisions of SAB 108 are effective for fiscal years ending after November 15, 2006. The application of SAB 108 didbut it is not expected to have any material effect on our company’s consolidated financial position, and results of operations.significant impact.
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| Quantitative Disclosure Relating to US GAAP and IFRS |
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| Year Ended December 31, 2006 Compared to Year Ended December 31, 2005 |
Net income. Net income under US GAAP increased 6.0% from RMB 137,866 million for the year ended December 31, 2005 to RMB 146,087 million for the year ended December 31, 2006. This increase was due primarily to an increase of RMB 9,755 million in the net income under IFRS as discussed in “Item 5 — Operating and Financial Review and Prospects — Operating Results”.
Shareholders’ equity. Shareholders’ equity under US GAAP increased 12.6% from RMB 510,141 million as of December 31, 2005 to RMB 574,470 million as of December 31, 2006. This increase was due primarily to the net income of RMB 146,087 million under US GAAP, which was partially offset by the payment of (i) the final dividend of RMB 32,282 million for the year of 2005 and (ii) the interim dividend of RMB 36,307 million for the year of 2006.
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| Year Ended December 31, 2005 Compared to Year Ended December 31, 2004 |
Net income. Net income under US GAAP increased 26.4% from RMB 109,051 million for the year ended December 31, 2004 to RMB 137,866 million for the year ended December 31, 2005.
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This increase was due primarily to an increase of RMB 31,996 million in the net income under IFRS as discussed in “Item 5 — Operating and Financial Review and Prospects — Operating Results”.
Shareholders’ equity. Shareholders’ equity under US GAAP increased 25.8% from RMB 405,573 million as of December 31, 2004 to RMB 510,141 million as of December 31, 2005. This increase was due primarily to the net income of RMB 137,866 million under US GAAP, which was partially offset by the payment of (i) the final dividend of RMB 25,936 million for the year of 2004 and (ii) the interim dividend of RMB 27,731 million for the year of 2005.
Environmental Expenses and Capital Expenditures
We paid pollutant discharge fees of approximately RMB 182 million, RMB 199 million and RMB 211 million respectively, in 2004, 2005 and 2006. Our capital expenditures on environmental programs in 2004, 2005 and 2006 were approximately RMB 1,345 million, RMB 1,633 million and RMB 4,634 million, respectively. On November 13, 2005, an explosion occurred at our branch company in Jilin Province. The Chinese government completed its investigation of this accident in December 2006, and we paid a fine of RMB 1 million in settlement of all liabilities arising from the accident.
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ITEM 6 —DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors, Senior Management and Supervisors
Our
Currently, our board of directors currently consists of twelvefourteen directors, threefive 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 ofhis/her term of office. The functions and duties conferred on the board of directors include:
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| • | convening shareholders’ meetings and reporting its work to the shareholders’ meetings; |
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| • | implementing the resolutions of the shareholders’ meetings; |
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| • | 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. |
Seven
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 committee.board. This requirement is reflected in our articles of association. The supervisory committeeboard is responsible for monitoring our financial matters and overseeing the corporate actions of our board of directors and our management personnel. The supervisory committeeboard consists of sevennine 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 onethree of whom is anare employees’ representativerepresentatives who isare elected by our staff, and may be removed, by our staff. ThreeFour 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 ofhis/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 committeeboard 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’ general 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 committeeboard 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.
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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) | |
| | | Position | | Date of Election(1) | |
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Jiang Jiemin | | | | | |
Chen Geng | | | 6054 | | | Chairman of the board of directors | | | May 18, 200415, 2008 | |
Jiang JieminZhou Jiping | | | 5157 | | | Vice Chairman of the board of directors and Presidentpresident | | | May 18, 200415, 2008 | |
Duan WendeWang Yilin | | | 55 | | | Director and Senior Vice President | | | May 18, 2004 | |
Zheng Hu | | | 6053 | | | Director | | | May 26, 200615, 2008 | |
Zhou JipingZeng Yukang | | | 5459 | | | Director | | | May 18, 200415, 2008 | |
Wang YilinFucheng | | | 5059 | | | Director | | | November 8, 2005May 15, 2008 | |
Zeng YukangLi Xinhua | | | 56 | | | Director | | | November 8, 2005May 15, 2008 | |
Gong HuazhangLiao Yongyuan | | | 6047 | | | Director and vice president | | | May 15, 2008 | |
Wang Guoliang | | | 57 | | | Director | | | November 8, 2005May 15, 2008 | |
Jiang Fan | | | 4346 | | | Director | | | November 8, 2005May 15, 2008 | |
Chee-Chen Tung | | | 64 | | | Independent non-executive director | | | November 8, 2005 | |
Liu Hongru | | | 76 | | | Independent non-executive director | | | November 8, 2005 | |
Franco Bernabè | | | 5867 | | | Independent non-executive director | | | May 26, 200615, 2008 | |
Liu Hongru | | | 79 | | | Independent non-executive director | | | May 15, 2008 | |
Franco Bernabè | | | 61 | | | Independent non-executive director | | | May 15, 2008 | |
Li HuaiqiYongwu | | | 5765 | | | Independent non-executive director | | | May 15, 2008 | |
Cui Junhui | | | 63 | | | Independent non-executive director | | | May 15, 2008 | |
Li Hualin | | | 47 | | | Vice President and Secretary to the board of directors | | | | |
Wang GuoliangSun Longde | | | 5447 | | | Chief Financial OfficerVice president | | | | |
Liao YongyuanShen Diancheng | | | 4450 | | | Vice president | | | | |
Liu Hongbin | | | 46 | | | Vice president | | | | |
Zhou Mingchun | | | 42 | | | Chief financial officer | | | | |
Zhao Zhengzhang | | | 53 | | | Vice president | | | | |
Bo Qiliang(2) | | | 47 | | | Chief engineer | | | | |
Sun Bo(2) | | | 49 | | | Vice President | | | | |
Jia ChengzaoLin Aiguo | | | 5851 | | | Vice President | | | | |
Hu Wenrui | | | 57 | | | Vice PresidentChief engineer | | | | |
Wang FuchengDaofu | | | 5654 | | | Chief geologist | | | | |
Huang Weihe | | | 52 | | | Chief engineer | | | | |
Chen Ming | | | 59 | | | Chairman of the supervisory committeeboard | | | | |
Wen Qingshan | | | 4851 | | | Supervisor | | | | |
Sun Xianfeng | | | 5457 | | | Supervisor | | | | |
Xu FengliYu Yibo | | | 5946 | | | Supervisor | | | | |
Wang Yawei | | | 55 | | | Supervisor | | | | |
Qin Gang | | | 5356 | | | Supervisor | | | | |
Wang Shali | | | 55 | | | Supervisor | | | | |
Li YongwuYuan | | | 62 | | | Independent supervisor | | | | |
Wu ZhipanWang Daocheng(3) | | | 5069 | | | Independent supervisor | | | | |
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| | |
(1) | | For directors only. |
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(2) | | Mr. Bo Qiliang and Mr. Sun Bo were appointed as Vice Presidents of our company from January 2010. |
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(3) | | Mr. Wang Daocheng has been acting as our independent supervisor since May 2009. |
Directors
Chen Geng,aged 60, is Chairman of the Board of our company. Mr Chen is a senior economist and holds a college degree. He has nearly 40 years of working experience in China’s oil and gas industry. Mr Chen was appointed Deputy Director of Changqing Petroleum Exploration Bureau in October 1983, Deputy Director of the Labor Department under the Ministry of Petroleum Industry in April 1985, Director of the Labor Bureau of China National Petroleum Corporation from August 1988, Assistant to the General Manager of China National Petroleum Corporation in December 1993, Deputy General Manager of China National Petroleum Corporation in September 1997, Deputy Director of the State Petroleum and Chemical Industry Bureau in March 1998, Deputy General Manager of CNPC in February 2001, and the General Manager of CNPC from April 2004 to November 2006. Mr Chen was appointed as a Director of our company in June 2001. He was the President of our company from December 2002 to May 2004. He became the Chairman of our company in May 2004.
Jiang Jiemin,aged 51,54, is the Vice Chairman President of our company and the General Manager of CNPC. MrMr. Jiang is a senior economist and holds a master’s degree. Mrhas been awarded with post-graduate qualification. Mr. Jiang has over 3035 years of working experience in China’s oil and gas industry. He was made Deputy Director of the
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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. MrMr. Jiang was appointed Deputy Provincial Governor of the Qinghai Province sincein 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. MrMr. Jiang became the Deputy General Manger of CNPC in April 2004, and Vice Chairman and President of our company in May 2004 and the General Manager of CNPC in November 2006.
Duan Wende,aged 55, is a Director and Senior Vice President of our company. He is a senior engineer and holds a master’s degree. He2004. Mr. Jiang has over 35 years of working experience in China’s petrochemical industry. From April 1975, Mr Duan was the Deputy Factory Manager of Fushun Chemical Fibers Factory, the Commander of the Fushun Ethylene Project Command Division, Deputy Factory Manager of the ethylene factory, the Factory Manager of the acrylic fibers factory and the Factory Manager of the detergent factory. He was made Deputy Manager of Fushun Petrochemical Corporation in May 1997 and Manager in May 1999. He was made General Manager of PetroChina Fushun Petrochemical Company in October 1999. He had been an Assistant to the General Manager of CNPC since August 2001. He had been a Vice President of our company since March 2002. He has been a DirectorNovember 2006, and the Chairman of our company since May 2004. He has been a Senior Vice2007. Mr. Jiang stepped down as the President of our company since November 2005.in May 2008.
Zheng Hu,Zhou Jiping,aged 60,57, is a Directorthe Vice Chairman and President of our company and a Deputy General Manager of CNPC. Mr ZhengMr. Zhou is a senior engineer and holds a college degree. He has nearly 40 years of working experience in China’s oil and gas industry. From May 1990, Mr Zheng was the Vice Chancellor of Beijing Petroleum Managers Training Institute. From July 1992, Mr Zheng worked as Deputy General Manager of China Petroleum Materials and Equipment (Group) Corporation and concurrently as General Manager of China Petroleum Technology Development Corporation. Mr Zheng was appointed Director of Personnel and Labour Department of CNPC in September 1999. He has been a Director of our company since June 2000, and a Deputy General Manager of CNPC since August 2000.
Zhou Jiping,aged 54, is a Director of our company and a Deputy General Manager of CNPC. Mr Zhou is aprofessor-level senior engineer and holds a master’s degree. He has over 35nearly 40 years of working experience in China’s 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. SinceCorporation, 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. Since December 2003, MrMr. Zhou has been a Deputy General Manager of CNPC. Mr Zhou was appointedCNPC since December 2003, and a Director of our company insince May 2004. In May 2008, Mr. Zhou was appointed the Vice Chairman and President of our company.
Wang Yilin,aged 50,53, is a Director of our company and a Deputy General Manager and the Safety Director of CNPC. MrMr. Wang is a rofessor-level senior engineer and holds a doctor’sdoctoral degree. He has nearlyover 25 years of working experience in China’s oil and gas industry. MrMr. Wang had beenwas appointed the Deputy Director and Chief Exploration Geologist of Xinjiang Petroleum Administration Bureau sincein June 1996. He was appointed as1996, and the General Manager of theour Xinjiang Oilfield Branch of our companyCompany in September 1999. He had beenwas appointed the Senior Executive of Karamay City and Xinjiang Petroleum Administration Bureau and the General Manager of theour Xinjiang Oilfield Branch of our company sinceCompany in June 2001. FromIn July 2003, onwards, he had been thewas appointed Assistant to General Manager of CNPC, Senior Executive of Xinjiang Petroleum Administration Bureau and the General Manager of Xinjiang Oilfield Branch of our company concurrently.CNPC. In December 2003, he was appointed Deputy General Manager of CNPC and
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Senior Executive of Xinjiang Petroleum Administration Bureau and the General Manager of Xinjiang Oilfield Branch of our company concurrently.CNPC. From May 2004, he ceased to work as the Senior Executive of Karamay City and Xinjiang Petroleum Administration Bureau and the General Manager of theour Xinjiang Oilfield Branch of our company.Company. From July 2004 onwards,to July 2007, he had alsoconcurrently worked as the Safety Director of CNPC. He has been a Director of our company since November 2005.
Zeng Yukang,aged 56,59, is a Director of our company and a Deputy General Manager of CNPC. MrMr. Zeng is a professor-level senior economist and holds a college degree. He has nearlyover 40 years of working experience in China’s oil and gas industry. MrMr. Zeng had been the Senior Executive of the Exploration and Development Institute of Daqing Petroleum Administration Bureau since December 1996. From February 2000, onwards, he was appointed as the Standing Deputy Director of Daqing Petroleum Administration Bureau. SinceFrom March 2001 to February 2008 he had beenwas acting as the Director of Daqing Petroleum Administration Bureau. SinceBureau, and in November 2002, he had beenwas appointed the Assistant to the General Manager of CNPC. From September 2005 onwards, heHe has been a Deputy General Manager of CNPC. He has beenCNPC since September 2005, and a Director of our company since November 2005.
Gong Huazhang,Wang Fucheng,aged 60,59, is a Director of our company and theconcurrently a Deputy General AccountantManager of CNPC. Mr GongMr. Wang is a professor-level senior accountanteconomist and holds a bachelor’s degree. Mr. Wang has over 40 years of working
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experience in China’s oil and gas industry. Mr GongFrom August 1986, Mr. Wang worked as Chief Accountant, Deputy Director andSenior Executive of the Shengli Petroleum Administration Bureau. Since December 1992, Mr. Wang had worked as Senior Executive of the Liaohe Petroleum Exploration Administration Bureau. Since November 1997, Mr. Wang had worked as Director of the Finance Bureau of China NationalLiaohe Petroleum Corporation from 1991. HeExploration Administration Bureau. Since October 1999, Mr. Wang had been the DirectorGeneral Manager of Finance and Assets Departmentthe Liaohe Oilfield Branch of CNPC since October 1998 and has been the General Accountant of CNPC since February 1999. Mr Gong hasour company. Mr. Wang had been a Director of our company from June 2000. Mr. Wang was appointed a Vice President of our company in July 2000. From November 2005 to May 2008, Mr. Wang had worked as the Chairman of the Supervisory Board of our company. Mr. Wang has been a Deputy General Manager of CNPC since November 1999.September 2007. In May 2008, Mr. was again appointed Director of our company.
Jiang Fan,Li Xinhua,aged 43,56, is a Director of our company and thea Deputy General Manager of Dalian Petrochemical Company. Mr JiangCNPC. Mr. Li is a senior engineer and holds a master’scollege degree. HeMr. Li has over 20nearly 35 years of working experience in China’s petrochemical industry. Mr JiangIn June, 1985 Mr. Li was appointed asthe Vice Director of Yunnan Province Natural Gas Chemical Plant, in February 1992 the Director of Yunnan Province Natural Gas Chemical Plant, in March 1997 the Chairman and General Manager of Yunnan Province Yuntianhua Group, in March 2002 the Assistant Governor of Yunnan Province, In January 2003 the Deputy Governor of Yunnan Province, and in April 2007a Deputy General Manager of Dalian Petrochemical Company since December 1996. In September 1999, he was appointedCNPC. Since May 2008, Mr. Li has been acting as a Director of our company.
Liao Yongyuan,aged 47, is a Director and Vice President of our company and concurrently serves as the Deputy General Manager of Dalian Petrochemical Company. In February 2002, he became the General Manager of Petrochina Dalian Petrochemical Company. Mr Jiang has been aand Safety Director of our company since November 2005.
Independent Non-executive Directors
Chee-Chen Tung,aged 64, 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 acquiredCNPC. Mr. Liao holds a Master’smaster’s 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, Sing Tao News Corporation Limited, Wing Hang Bank Limited and Cathay Pacific Airways Limited, 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 of the Hong Kong Polytechnic University and is 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 76, is an independent non-executive Director of our company. Mr Liu graduated from the Faculty of Economics of the University of Moscow in 1959 with an associate Doctorate’s degree. Mr Liu worked as Vice Governor of the Agricultural Bank of China, Vice-Governor of the People’s Bank of China, Deputy Director of the State Economic Restructuring Committee, and the Chairman of the China Securities Regulatory Commission. Mr Liu is currently the Chairman of the China Foundation for Development of Financial Education and the Chairman of the Capital Market Research Institute. Mr Liu is also a professor at the Peking University, the
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Postgraduate School of the People’s Bank of China and the City University of Hong Kong. Mr Liu serves as an independent non-executive director or non-executive director in three listed companies in Hong Kong, and possesses the accounting or financial management qualification required under the Listing Rules. Mr Liu was appointed as an independent Supervisor of our company in December 1999. Upon his resignation from this post, he has been an independent non-executive Director of our company since November 19, 2002.
Franco Bernabè, aged 58, is an independent non-executive Director of our company. Mr Bernabè is the Chairman of the Franco Bernabè Group and Vice Chairman of H3G. He is also a Vice Chairman of Rothschild Europe. He is a former CEO of ENI and of Telecom Italia. He has also served as 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 was the Chief Executive Officer of ENI. Mr Bernabè led the restructuring program of the ENI Group, making it one of the world’s 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 30, 2000.
Secretary to the Board of Directors
Li Huaiqi,aged 57, 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 China’s 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
Wang Guoliang,aged 54, is Chief Financial Officer of our company. Mr Wang is a senior accountant and holds a master’s degree. Mr Wang has 25 years of working experience in China’s oil and gas industry. Mr Wang worked as the Vice President of China Petroleum Finance Company Limited from October 1995. From November 1997, he was the Deputy General Manager and General Accountant of China National Oil & Gas Exploration and Exploitation Corporation. Mr Wang had been the Chief Financial Officer of our company since November 1999. From November 1999 to March 2002, he was also the General Manager of our company’s Finance Department.
Liao Yongyuan,aged 44, is the Vice President of our company. Mr Liao is a master’s degree holder and aprofessor-level senior engineer. He has nearlyover 25 years of working experience in China’s 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 of Sichuan Petroleum Administration since April 2004. He has been a Vice President of our company since November 2005.
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Jia Chengzao,aged 58, is He was appointed a Vice President of our company. Mr Jia is a Doctorate degree holder, a senior engineer and a fellow of the Chinese Academy of Sciences. He has over 25 years of working experience in China’s oil and geological industry. From August 1994, Mr Jia worked as the Deputy Chief Geologist, the Chief Geologist and Deputy Commander of the Tarim Petroleum Exploration and Development Headquarters. From February 1998 to July 2000, he worked as a Vice President of the China Oil Exploration and Exploitation Scientific Research Institute of CNPC. From September 1999, Mr Jia worked as the Deputy General Manager of the Tarim Oilfield BranchCNPC in February 2007, and Safety Director of our company.CNPC in July 2007. He has been the Chief Geologist of our company from July 2000. Mr Jia also served as the President of the China Oil Exploration and Exploitation Research Institute from December 2002 to October 2006. Mr Jia has been a Vice PresidentDirector of our company since November 2005.May 2008.
Hu Wenrui,Wang Guoliang,aged 57, is a Vice PresidentDirector of our company.company and the General Accountant of CNPC. Mr HuWang is a professor-level senior engineeraccountant and holds a master’s degree. Mr Wang has over 35nearly 30 years of working experience in China’s oil and gas industry. From April 1984, Mr HuWang 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 Changqing Oilfield No. 2China National Oil Extraction Plant. He& Gas Exploration and Exploitation Corporation. Mr Wang had been Deputythe Chief Financial Officer of our company from November 1999. He was appointed General Accountant of CNPC in February 2007, and Director of Changqing Petroleum Exploration Bureau since April 1989, Standing Deputy Director since November 1996, and eventuallyour company in May 2008.
Jiang Fan,aged 46, is a Director of Changqing Petroleum Exploration Bureau since April 1999. From September 1999, he wasour company and the General Manager of Changqing Oilfield BranchDalian Petrochemical Company. He has been the General Manager of our company’s Exploration and Production Branch since December 2002. Mr Hu has been a Vice President of our company since November 2005.
Supervisors
Wang Fucheng,aged 56, is the Chairman of the Supervisory Committee. Mr WangMr. Jiang is a professor-level senior economistengineer and holds a bachelor’smaster’s degree. Mr WangHe has over 40nearly 25 years of working experience in China’s oil and gas industry. From August 1986, Mr Wang worked as Senior ExecutiveMr. Jiang was appointed the Deputy Manager of Dalian Petrochemical Company in December 1996 and the Shengli Petroleum Administration Bureau. Since December 1992, Mr Wang had worked as Senior ExecutiveDeputy General Manager 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 hadDalian Petrochemical Company in September 1999. He has been the General Manager of the Liaohe Oilfield Branch of our company. Mr Wang was appointed asPetrochina Dalian Petrochemical Company since February 2002, and a Director of our company in June 2000 and was appointed as the Vice President of our company in July 2000. Prior to the appointment as Supervisor of our company, Mr Wang resigned from his office as Director of our company. Mr Wang has been the Chairman of the Supervisory Committee of our company since November 2005.
Independent Non-executive Directors
Wen Qingshan,Chee-Chen Tung,aged 48,67, is a Supervisoran independent non-executive Director of our companycompany. 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 Master’s 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
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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 DirectorSchool of the Finance and Assets DepartmentForeign Service of CNPC. Mr Wen is a senior accountant and holds a master’s degree. 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. HeGeorgetown University. Mr. Tung has been a Supervisoran independent non-executive Director of our company since November 2002.1999.
Sun Xianfeng,Liu Hongru,aged 54,79, is an independent non-executive Director of our company. Mr. Liu is a Supervisorprofessor and holds a doctoral degree. He graduated from the Faculty of our company and the DirectorEconomics of the Audit Department andUniversity of Moscow in 1959 with an associate Doctoral degree. Mr. Liu worked as Vice Governor of the Audit Services CentreAgricultural Bank of CNPC. Mr Sun holds a college degree. Mr Sun worked asChina, Vice-Governor of the People’s Bank of China, Deputy Director of the Supervisory BureauState Economic Restructuring Committee, and the Chairman of the China Securities Regulatory Commission. Mr. Liu is also a professor at the Peking University, the Postgraduate School of the People’s Bank 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 had been the Deputy Director of the Audit Department of CNPC from October 2000 and has been the Director of the Audit Services Centre from December 2000. He had been the Director of the Audit Department of CNPC and the DirectorCity University of Hong Kong. Mr. Liu also serves as a non-executive director of OP Financial Investments Limited and possesses the Audit Service Centre from April 2004. He has been a Supervisoraccounting or financial management qualification required under the Rules Governing the Listing of our company since May 2004.
Xu Fengli,aged 59, is a Supervisor and General Manager ofSecurities on the Audit Department of our company. Mr Xu is a senior accountant and has nearly 35 years of work experience in China’s petrochemical industry. Mr XuStock Exchange Hong Kong Limited. Mr. Liu was appointed as the Chief Accountant of Fushun Petrochemical Corporation in November 1995, Deputy Director of the Finance and Assets Department of CNPC in
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November 1998, Deputy General Manager of the Finance Departmentan independent Supervisor of our company in December 1999, and1999. After his resignation from this position as independent supervisor, Mr. Liu was appointed an independent non-executive Director of the Administrative Office of the Supervisory Committee of our company in October 2003.November 2002.
Franco Bernabè,aged 61, is an independent non-executive Director of our company. He holds a doctoral degree in political economics. He is currently the Chief Executive Officer of Telecom Italia (serving a second time). Prior to that, he held the responsibilities of 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. 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 world’s most profitable oil companies. Between 1998 and 1999, Mr. Bernabè was the Chief Executive Officer of Telecom Italia. Between 1999 and 2000, he has also served as a special representative of the Italian government for the reconstruction of the Balkan region. He was the Chairman of La Biennale di Venezia from 2001 to 2003 and has been the Chairman of the Modern Arts Museum of Trento and Rovereto since 2005. Prior to his joining ENI, Mr. Bernabè was the head of economic studies at FIAT. Mr. Bernabè was a Supervisorsenior 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. He had also served on the Advisory Board of the Council of Foreign Relations and is currently an International Governor of the Peres Center for Peace. Mr. Bernabè has been an independent non-executive Director of our company since May 2004 and the General Manager of the Audit Department of our company since November 2005.June 2000.
Qin Gang,aged 53, is an employee representative of our company’s Supervisory Committee and a Senior Executive of Tarim Oilfield Branch of our company. Mr Qin is a senior engineer and has nearly 35 years of experience in China’s 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. From June 2000, Mr Qin worked as the Senior Executive of Tarim Southwest Company concurrently. Since July 2002, Mr Qin has worked as an executive and the Chairman of Labour Union of PetroChina Tarim Oilfield Company. Mr Qin has been a Supervisor of our company since November 2005.
Li Yongwu,aged 62,65, is an independent Supervisornon-executive Director of our company. MrMr. Li is a senior engineer and holds a bachelor’s degree. In June 1991, MrMr. 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 State’s Petroleum and Chemical Industry Bureau sincein March 1998. In April 2001, he was appointed as a Deputy Director of the Liaison Office of the Central Government at the Special Administrative Region of Macau. In December 2004, he was appointed as the Vice President of China Petroleum and Petrochemical Industry Association. In May 2005, he became the Chairman of China Petroleum and Petrochemical Industry Association. Mr Li has beenAssociation and in November 2005, he became an Independent Supervisor of our company since November 2005.company. In 2003, he was elected as a standing member of the Tenth Chinese People’s Consultative Conference. In May 2008, Mr. Li was appointed an independent non-executive Director of our company.
Wu Zhipan,Cui Junhui,aged 63, is an independent non-executive Director of our company. Mr. Cui is a representative of the 11th National People’s Congress of the PRC and a Committee Member of the Financial and Economic Affairs Committee of the National People’s Congress of the PRC. He is holder of a postgraduate degree (part-time study). The positions he held include Deputy Director of the Tax Bureau of Shandong Province and the Director of State Tax Bureau of Shandong Province. From January 2000 to January 2007, 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 People’s Congress and a member of the Financial and Economic Affairs Committee of the National People’s Congress in March 2008. In April 2008, Mr Cui was elected as the President of the sixth term of the Chinese Taxation Institute. Mr. Cui has served as a non-executive Director of our company since May 2008.
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Secretary to the Board of Directors
Li Hualin,aged 47, is the Secretary to the Board of Directors and Vice President of our company and Vice Chairman and General Manager of China Petroleum Hongkong (Holding) Limited. Mr Li holds a master’s degree and is a professor-level senior economist. Mr Li has 25 years of experience in the oil and gas industry in China. In March 1993, Mr Li became the Deputy Director-General of the Houston Office of China National Petroleum Company. In May 1995, he was appointed as the director and General Manager of China National Oil and Gas Corporation (Canada). In December 1997, Mr. Li became 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 September 1999, Mr. Li became the General Manager of CNPC International (Kazakhstan) Ltd. whilst remaining as the Deputy General Manager of the China National Oil and Gas Exploration and Development Corporation. In January 2001, Mr. Li became the Deputy General Manager of China Petroleum Hongkong (Holding) Limited. In December 2001, he was appointed as the Chairman of Shenzhen Petroleum Industrial Co., Ltd. From July 2006, Mr Li became the Vice-Chairman and General Manager of China Petroleum Hongkong (Holding) Limited, whilst remaining as the Chairman of Shenzhen Petroleum Industrial Co., Ltd. Mr. Li has been acting as the Vice President of our company while concurrently acting as the General Manager of China Petroleum Hong Kong (Holding) Limited since November 2007. Mr. Li was appointed as the Secretary to the Board of Directors of our company in May 2009.
Other Senior Management Personnel
Sun Longde,aged 47, is a Vice President of our company. Mr. Sun is a professor-level senior engineer and holds a doctoral degree. He has 25 years of working experience in China’s 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 50, is the Vice President of our company and concurrently and concurrently the General Manager of the Refining & Chemicals Company of our company. Mr. Shen is a professor-level senior engineer and holds a college degree. He has 25 years of working experience in China’s 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 General Chemical 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 November 2005. Mr. Shen has been the Vice President of our company and General Manager of Chemical & Marketing Company since June 2007. Mr. Shen has served as the Vice President of our company and concurrently as the General Manager of the Refining and Chemicals Company since November 2007.
Liu Hongbin,aged 46, is the Vice President of our company and concurrently the General Manager of the Marketing Company of our company. Mr. Liu is a senior engineer and holds a college degree. He has 25 years of working experience in China’s 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. Mr. Liu has served as the Vice President of our company and concurrently as the General Manager of the Marketing Company since November 2007.
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Zhou Mingchun,aged 42, is the Chief Financial Officer of our company and currently the General Manager of the Finance Department of our company. Mr. Zhou is a professor-level senior accountant and holds a master’s degree. He has nearly 20 years of working experience in China’s 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 principal officer of the Finance & Assets Division of Daqing Oilfield Company 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.
Zhao Zhengzhang,aged 53, is a Vice President of our company and concurrently the General Manager of Exploration and Production Company of our company. Mr Zhao holds a master’s degree. He is a professor-level senior engineer and has nearly 25 years of working experience in China’s oil and industry. In June 1996, Mr Zhao was appointed as the Deputy Director of the New District Exploration Department of China National Petroleum Company. In November 1996, he was appointed as Deputy Director of the Exploration Bureau of China National Petroleum Company and Director of the New District Exploration Department. In October 1998, Mr Zhao was appointed as Deputy Director of the Exploration Department of China National Petroleum Company. In September 1999, he was appointed as a member of the Preparatory Group of CNPC Exploration and Production Company. In December 1999, Mr Zhao was appointed as Deputy General Manager of CNPC Exploration and Production Company. In January 2005, he was appointed as Senior Executive and Deputy General Manager of CNPC Exploration and Production Company. In January 2006, he was appointed as the General Manager of CNPC Exploration and Production Company. In May 2008, Mr Zhao was appointed as a Vice President of the company and the General Manager of the Exploration and Production Company.
Bo Qiliang,aged 47, is the Vice President of our company and concurrently the General Manager of PetroChina International Ltd. Mr. Bo holds a doctor’s degree and is a professor-level senior engineer. He has nearly 25 years of working experience in China’s oil and gas industry. In June 2001, he obtained his master of business administration degree from the Massachusetts Institute of Technology, USA. In June 2005, he obtained his doctor’s degree from China University of Petroleum (Beijing), majoring in Oil and Gas Field Development. Mr. Bo became the Vice President of the Scientific Research Institute of Petroleum Exploration and Development in February 1997, key leader of CNPC International (E&D) Ltd. in December 2001, Senior Deputy General Manager of China National Oil and Gas Exploration and Development Corporation in October 2004, President of PetroKazakhstan Inc. and was concurrently leader of the Kazakhstan Coordination and Steering Team since November 2005, General Manager of China National Oil and Gas Exploration and Development Corporation since September 2008. Mr. Bo began to act as the General Manager of PetroChina International Ltd. while concurrently acting as the General Manager of China National Oil and Gas Exploration and Developing Corporation from November 2009. Mr. Bo has been acting as the Vice President of our company and concurrently as the General Manager at PetroChina International Ltd. since January 2010.
Sun Bo,aged 49, is the Vice President of our company and the General Manager of Tran-Asia Gas Pipeline Company Limited. Mr. Sun is a professor-level senior engineer and has over 25 years of working experience in China’s oil and gas industry. He was appointed the Deputy General Manager of Al Waha Oil Company Ltd. in June 1996; Vice President of CNPC International (Venezuela) Ltd. in October 1998; Chief Engineer and Deputy General Manager of China National Oil and Gas Exploration and Development Corporation and concurrently President of CNPC International (Venezuela) Ltd. in September 1999; General Manager of China Petroleum Engineering & Construction Corporation in January 2004; Vice Chairman and President of CNPC Services & Engineering Ltd. and concurrently General Manager of China Petroleum Engineering & Construction Corporation in June 2006. Mr. Sun was appointed as the General Manager of Trans-Asia Gas Pipeline Company Limited in September 2007. Mr. Sun has been acting as the Vice President of our company and the General Manager of Tran-Asia Gas Pipeline Company Limited in January 2010.
Lin Aiguo,aged 51, 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 China’s 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.
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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 54, is the General Geologist of our company and Director of the Exploration and Development Institute. Mr Wang is a professor-level senior engineer and holder of a doctorate degree. He has over 25 years of working experience in China’s oil and gas industry. He was appointed Deputy General Manager of PetroChina Changqing Oilfield Company in September 1999 and General Manager of PetroChina Changqing Oilfield Company in January 2003. He was elected as a representative of the 11th National People’s Congress of the PRC in 2008. Mr. Wang has become the General Geologist of our company since May 2008. Mr. Wang has been acting concurrently as the Director of the Exploration and Development Institute since September 2008.
Huang Weihe,aged 52, is the Chief Engineer of our company and the General Manager of PetroChina Natural Gas and Pipelines Company. Mr Huang is a professor-level senior engineer and holds a doctorate degree. He has over 25 years of working experience in China’s oil and gas industry. In December 1998, he was appointed as Deputy Director of the Petroleum and Pipelines Bureau. In November 1999, he was appointed Deputy Director of the Petroleum and Pipelines Bureau while concurrently acting as Chief Engineer. In October 2000, Mr Huang was appointed as the General Manager of PetroChina Pipelines Company and in May 2002, concurrently as the General Manger of PetroChinaWest-to-East Natural Gas Transmission Pipelines Company. In November 2002, Mr Huang was appointed as the General Manager of PetroChinaWest-to-East Natural Gas Transmission Pipelines Company. In December 2002, he was appointed as the General Manager of PetroChina Natural Gas and Pipelines Company under the company and the General Manager of PetroChinaWest-to-East Natural Gas Transmission Pipelines Company. In February 2006, Mr Huang ceased to be the General Manager of PetroChina Natural Gas Transmission Pipelines Company. In May 2008, Mr Huang was appointed as the Chief Engineer of the company and the General Manager of PetroChina Natural Gas and Pipelines Company.
Supervisors
Chen Ming,aged 59, is the Chairman of the Supervisory Board of our company. Mr. Chen is a professor-level senior economist and holds a bachelor’s degree. He has over 35 years of working experience in China’s 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 been acting as the Chairman of our Supervisory Board since May 2008.
Wen Qingshan,aged 51, is a Supervisor of our company and the Deputy Chief Accountant of CNPC and the Director of the Finance and Assets Department of CNPC. Mr. Wen is a professor-level senior accountant and holds a master’s degree in economics. Mr. Wen has nearly 30 years of working experience in China’s petrochemical industry. He had acted as the 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. He has been acting as the Deputy Chief Accountant and the Director of the Finance and Assets Department of CNPC since November 2007.
Sun Xianfeng,aged 57, is a Supervisor and the General Manager of the Audit Department of our company. Mr. Sun is a senior economist and holds a bachelor’s degree. Mr. Sun has nearly 40 years of working experience in China’s 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. He was appointed as the Vice Director of the Audit Department and the concurrently the Director of the Audit Institute in December 2000. Mr. Sun has been the Director of the Audit Department of CNPC and the Director of the Audit Service Centre since April 2004. Mr. Sun has been a Supervisor of our company since May 2004. In October 2005, Mr Sun was appointed as a concurrent State-owned Company Supervisor from State-owned
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Assets Supervision and Administration Commission to CNPC. Mr. Sun has been acting as the General Manager of the Audit Department of our company since July 2007.
Yu Yibo,aged 46, is a Supervisor and the General Manager of the Capital Operation Department of our company. Mr. Yu is a professor-level senior accountant and holds a doctoral degree. Mr. Yu has 10 years of working experience in China’s oil and gas industry. In February 1999, Mr. Yu was appointed as a member of the Restructuring and Listing Preparatory Team of CNPC . In September 1999, Mr. Yu was appointed as the Deputy General Manager of the Finance Department of our company. Mr. Yu had been acting as the Deputy General Manager of PetroChina Dagang Oilfield Branch Company from March 2002 to October 2002. In April 2003, Mr. Yu was appointed as the General Manager of the Capital Operation Department of our company. Mr. Yu has been acting as a Supervisor of our company since May 2008.
Wang Yawei,aged 55, is an employee representative of the Supervisory Committee of our company and a Senior Executive of the Daqing Refining & Chemicals Company of our company. Mr. Wang is a professor-level senior engineer and holds a master’s degree. He has over 25 years of working experience in China’s oil and gas industry. Mr. Wang was acting as the Deputy Director of Daqing Petroleum Administration Bureau since November 1997 and as the Chairman of the Labour Union of Daqing Petroleum Administration Bureau since March 2001. He was appointed as the Chairman of the Labour Union of Daqing Oilfield Company Limited in February 2008. Since May 2008, Mr. Wang has been acting as a Supervisor of our company. Mr. Wang has served as the principal officer of Daqing Refining and Chemical since August 2009.
Qin Gang,aged 56, is an employee representative of the Supervisory Board of our company and a Senior Executive and Chairman of the Labor Union of PetroChina West-East Gas Pipeline Company. Mr. Qin is a senior engineer and has nearly 40 years of experience in China’s 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 July 2002, Mr. Qin was appointed as the Chairman of Labour Union of PetroChina Tarim Oilfield Company. Mr. Qin has been the Senior Executive and the Chairman of the Labor Union of Petrochina West-East Gas Pipeline Company since June 2007. Since November 2005, Mr. Qin has become a member of our Supervisory Board.
Wang Shali,female, aged 55, is an employee representative of Supervisory Board of our company and a Senior Executive of PetroChina International Ltd. Ms. Wang is a professor-level senior economist and holder of a master’s degree. She has nearly 40 years of working experience in China’s oil and gas industry. She was appointed as the General Economist of China National Oil and Gas Exploration and Development Corporation in November 1996 and Deputy General Manger and General Economist of China National Oil and Gas Exploration and Development Corporation in December 1997. Ms Wang began to act concurrently as the Executive Deputy General Manager of the CNPC International (Nile) Company in April 1998. She was appointed as the Deputy General Manger of China National Oil and Gas Exploration and Development Corporation and the leader of the Project Coordination Group in August 2004, and the Senior Deputy General Manager of the CNPC Exploration and Development Company in June 2006. She has been acting as a Supervisor of our company since May 2008. In September 2008, Ms Wang was appointed as Senior Executive, Senior Deputy General Manager and General Legal Counsel of CNPC Exploration and Development Company Limited. Ms. Wang ceased to act as the General Legal Counsel of CNPC Exploration and Development Company Limited in April 2009. Ms. Wang has acted concurrently as a Senior Executive of PetroChina International Ltd. since November 2009.
Li Yuan,aged 62, is an independent Supervisor of our company. Mr Wu isMr. Li was graduated from Renmin University of China with a holder of doctor’s degree. Mr Wu is currently the Vice Chancellorbachelor’s degree in Economics. Mr. Li’s past positions include Deputy Director of the Peking University. He is also an expert consultantForeign Affairs Department of Ministry of Petroleum Industry, Team Leader of the Supreme People’s CourtBusiness Team of the PRC, an arbitratorCPC Central Committee’s General Office, Director of the Arbitration Panel of China International Economic and Trade Arbitration Commission and PresidentAdministrative Reform Bureau of the ChinaPolitical System Reform Studies Office of the CPC Central Committee, Director of the Distribution Department of the National Economic Law Research Societies. Mr WuSystem 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 People’s Political Consultative Conference, and has been acting as an independent Supervisor of our company since December 1999.May 2008.
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Wang Daocheng,aged 69, is an independent supervisor of our company. Mr. Wang is currently the President of the China Institute of Internal Audit. He is a senior auditor and holds a bachelor’s degree. He has over 40 years of experience in finance and auditing. From 1981 to 1984, he led the preparatory committee within the audit department of the Ministry of Finance and headed the science and technology training centre of the National Audit Office as well as the financial and monetary authority. From August 1984, Mr Wang held a number of positions, including Deputy Director of Xicheng District Audit Bureau of Beijing, Deputy Director of the Research Department of the National Audit Office, and successively, the Deputy Director of the General Affairs Bureau, Deputy Director of the Foreign Investment Bureau, Director of the Foreign Investment Department, Director of the Financial Audit Department and Director of the General Office of the National Audit Office. From March 1999 to March 2005, Mr Wang headed the discipline inspection panel of the Central Commission for Discipline Inspection in the National Audit Office. In June 2005, he became the President of the China Institute of Internal Audit. Mr. Wang has been an independent supervisor of our company since May 2009.
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
The senior management members’ compensation has threetwo components, namely, fixed salaries performance bonuses and stock appreciation rights.variable compensation. The variable components in their compensation accountcomponent, which accounts for approximately 70% to 75% of our senior management officers’the 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 arepackage, is linked to the attainment of specific performance targets, such as netour income for the year, return on capital and cost reduction targets. The chart below sets forth the components of the total potential compensation for key officers.individual performance evaluation results.
| | | | | | | | | | | | |
| | | | % 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 committee, 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. In 2006, none of the directors and senior management exercised any of the stock appreciation rights granted to them. 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.
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, 20062009 was RMB 3,303,929.RMB3,251,352. We paid RMB 133,110RMB182,700 as our contribution to the pension plans in respect of those individuals in the year ended December 31, 2006.2009.
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, 20062009 was RMB 3,223,043.RMB1,940,739.16.
Save as disclosed, no other payments have been paid or are payable, in respect of the year ended December 31, 2006,2009, 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.
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In 2006,2009, we paid RMB 162,830RMB132,620.16 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, 20062009 was RMB 714,423.RMB507,180.2.
For discussions about the compensations of our individual directors and supervisors, please see Note 11 to our consolidated financial statements included elsewhere in this annual report.
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.
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Audit Committee
Our audit committee is currently composed of three non-executive independent directors, Mr. Franco Bernabè, Mr. Chee-Chen Tung and Mr. Liu Hongru,Cui Junhui, and one non-executive director, Mr. Gong Huazhang.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 committee’s major responsibilities include:
| | |
| • | supervising the integrity of financial reporting process to ensure fair, transparent and true financial disclosure; |
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| • | reviewing and 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 committeeboard 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.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 provided in the Listing Rules from time to time.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. Zhou JipingLi Yongwu, as chairman of the committee and Mr. Wang Yilin and Mr. Li Xinhua, as membermembers of the committee. The former chairman of the investment and development committee, Mr. Su Shulin, resigned as a Director of our company in November 2006. The investment and development committee’s major responsibilities include:
| | |
| • | studying strategic action plansthe long-term development strategies of the company as proposed by our Presidentpresident 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 Presidentpresident and making recommendations to the board of directors; and |
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| • | reviewing preliminary feasibility studies and feasibility studies for material investment and financing proposals, material capital operation projects requiringand material asset operation projects subject to the approval of the board of directors and making recommendations to the board of directors; and |
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| • | studying any other significant matters that may affect the development of the company and making recommendations to the board of directors. |
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Evaluation and Remuneration Committee
The current members of our evaluation and remuneration committee are Mr. Liu Hongru, as chairman of the committee, Mr. Zheng HuChee-Chen Tung and Mr. Chee-Chen Tung,Wang Fucheng, as membermembers of the committee. The evaluation and remuneration committee’s major responsibilities include:
| | |
| • | managingstudying the criteria for and conducting the evaluation of the performance evaluationsof the directors and the management members and making recommendations to the board of directors; |
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| • | studying and reviewing the director and management compensation policies and proposals, including the policies and proposals regarding the compensation payable to directors and senior management for their loss of positions or retirement; |
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| | |
| • | organizing the evaluation of the performance of our Presidentpresident and submitting reportreporting the evaluation result to the board of directors, supervising the evaluation of the performance of our board and monitoring performance evaluations led by our President for Senior Vice President, Vice Presidents, Chief Financial Officersenior vice presidents, vice presidents, chief financial officer and other senior management personnel;members conducted under the leadership of the president; 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 Duan Wende,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 committee’s major responsibilities include:
| | |
| • | supervising the effective implementation of our Health, Safety and Environmental Protection Plan;Plan (HSE Plan); |
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| • | making recommendations to the board of directors and our Presidentpresident for major decisions or major issues with respect of health, safety and environmental protection;protection that may affect the company; and |
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| • | inquiring the occurrence of and responsibilities for material accidents with respect to the operation, property and assets, employees and other facilities of the company, and supervising the remedial measurestreatment of materialsuch accidents. |
Employees
As of December 31, 2004, 20052007, 2008 and 2006,2009, we had 424,175, 439,220466,502, 477,780 and 446,290539,168 employees, respectively.respectively (excluding temporary staff). The table below sets forth the number of our employees by business segment as of December 31, 2006.2009.
| | | | | | | | | |
| | Employees | | % of total |
| | | | |
Exploration and production | | | 247,442 | | | | 55.44 | |
Refining and marketing | | | 118,504 | | | | 26.55 | |
Chemicals and marketing | | | 61,152 | | | | 13.70 | |
Natural gas and pipeline | | | 15,496 | | | | 3.47 | |
Other(1) | | | 3,696 | | | | 0.84 | |
| | | | | | | | |
| Total | | | 446,290 | | | | 100.0 | % |
| | | | | | | | |
| | | | | | | | |
| | Employees | | % of Total |
|
Exploration and production | | | 265,499 | | | | 49.24 | |
Refining and chemicals | | | 178,689 | | | | 33.15 | |
Marketing | | | 68,803 | | | | 12.76 | |
Natural gas and pipeline | | | 20,667 | | | | 3.83 | |
Other(1) | | | 5,510 | | | | 1.02 | |
| | | | | | | | |
Total | | | 539,168 | | | | 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 benefitbasic social insurance plans organized by municipal and provincial governments whereby we are required to make monthly insurance contributions to these plans at certain rates ranging from 16% to 22% of the employees’ salary.salary as stipulated by relevant local regulations. Expenses incurred by us in connection with the retirement benefit plans were approximately RMB 2,476RMB5,754 million, RMB 3,104RMB6,997 million and RMB 4,645RMB8,437 million, respectively, for the three years ended December 31, 2004, 20052007, 2008 and 2006,2009, respectively.
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In 2006,2009, we have not experienced any strikes, work stoppages, labor disputes or actions which affected the operation of any of our businesses. We consider ourOur company maintains good relationship with our employees to be good.employees.
Share Ownership
Our
Other than two supervisors, our directors, senior officers and supervisors do not have share ownership in PetroChina or any of PetroChina’s 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 anyAs at May 31, 2010, Mr. Yu Yibo, one of our supervisors, held 66,500 A shares but will, by way of stock appreciation rights, receive a monetary sum which is calculatedour company, including shares acquired on the basis of the pricesecondary market and Ms. Wang Shali, one of our H shares. Because the relevant PRC laws limit the ownership of thesupervisors, held 7,000 A shares and 18,000 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 to be finalized, and make cash payments of such compensation to our directors, senior officers and supervisors.company.
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ITEM 7 — MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
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. CNPC’s 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 DecemberMay 31, 2006,2010, CNPC beneficially owned 157,922,077,818 State-owned158,035,717,259 shares, which include 271,120,000 H shares indirectly held by CNPC through Fairy King Investments Limited, an overseas wholly owned subsidiary of CNPC, representing approximately 88.21%86.348% of the share capital of PetroChina, and, accordingly, CNPC is our controlling shareholder.
The following table sets forth the major shareholders of our A shares as of May 31, 2010:
| | | | | | | | | | | | | | | | |
| | | | | | Percentage
| | |
| | | | | | of the
| | |
| | | | | | Issued Share
| | Percentage
|
| | | | | | Capital of the
| | of
|
| | | | | | Same
| | the Total
|
| | | | Number of Shares
| | Class of
| | Share
|
Name of Shareholders | | Class of Shares | | Held | | Shares (%) | | Capital (%) |
|
CNPC | | | A shares | | | | 157,764,597,259 | | | | 97.432 | | | | 86.200 | |
The following table sets forth the major shareholders of our H shares as of May 31, 2010:
| | | | | | | | | | | | | | | | |
| | | | | | Percentage of
| | |
| | | | | | Such Shares
| | |
| | | | | | in That Class
| | Percentage of
|
| | Class of
| | | | of the Issued
| | Total Share
|
Name of Shareholder | | Shares | | Number of Shares | | Share Capital (%) | | Capital (%) |
|
CNPC | | | H shares | | | | 271,120,000(1 | ) | | | 1.285 | | | | 0.148 | |
JPMorgan Chase & Co. | | | H shares | | | | 1,132,355,050(2 | ) | | | 5.37 | | | | 0.62 | |
| | |
(1) | | Held by Fairy King Investments Limited, an overseas wholly-owned subsidiary of CNPC. |
|
(2) | | Includes (i) 61,594,980 shares held by JPMorgan Chase & Co. through various subsidiaries in short position in its capacity as beneficial owner and (ii) 1,070,760,070 shares held by JPMorgan Chase & Co. through various subsidiaries in long position in its capacity as beneficial owner, investment manager and custodian/approved lending agent under Hong Kong laws. |
Related Party Transactions
CNPC is a controlling shareholder of our company. We enter into extensive transactions with CNPC and other members of the CNPC group, all of which constitute related party transactions for us. We also continue to carry out existing continuing transactions with other related parties in the reporting period.
One-off Related Party Transactions
Acquisition of City Gas Business from CNPC
On May 15, 2009, Kunlun Gas, a wholly owned subsidiary of our company, entered into a transfer agreement with each of China Huayou Group Corporation and China Petroleum Pipeline Bureau, wholly owned subordinated entities of CNPC, pursuant to which Kunlun Gas agreed to acquire city gas business from the transferors. The targets of the acquisitions include the equity interests in eight companies held by China Huayou Group Corporation and China Petroleum Pipeline Bureau and relevant assets owned by China Huayou Group Corporation. Upon completion of the acquisition agreement, Kunlun Gas paid the transferors a consideration of approximately RMB1,093.9 million.
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Acquisition of Western Pipeline Assets of CNPC
On June 18, 2009, an acquisition agreement was entered into between PetroChina West Pipeline Branch Company and CNPC are state-owned sharesWest Pipeline Company Limited, pursuant to which Western Pipeline Branch Company agreed to acquire the western pipeline assets from the transferor. Upon completion of the acquisition on June 30, 2009, the parties referred to the appraised net assets value of the western pipeline assets as at March 31, 2009, the valuation date, and adjusted the consideration by reference to the change in the net asset value of the western pipeline assets for the period from the valuation date to the completion date on adollar-for-dollar basis. The final consideration paid by our company to the transferor was approximately RMB8,355.4 million.
Acquisition of 100% Equity Interest in South Oil from CNPC
On August 28, 2009, our company entered into an equity transfer agreement with CNPC E&D and CNPC Central Asia, pursuant to which our company agreed to acquire the 100% share capital in South Oil from CNPC E&D and CNPC Central Asia. Upon completion of PetroChina. However,the acquisition, the company will pay a consideration of approximately RMB2,813.3 million to CNPC E&D and CNPC Central Asia. Such consideration will be adjusted by reference to the final appraised value filed with the State-owned Assets Supervision and Administration Commission. Any net profit or loss incurred during the period from the valuation date to the completion date shall be attributable to the transferors. As at the end of the reporting period, the transaction has identical votingnot yet been completed.
Acquisition of the Refinery Equipment Assets from CNPC
On August 28, 2009, several asset transfer agreements were entered into between ten of our company’s branch companies and ten subordinated entities of CNPC (including CNPC Daqing Petrochemical Factory), pursuant to which our company agreed to acquire refinery equipment assets from the transferors. Upon completion of the acquisition on November 30, 2009, the parties referred to the appraised net asset value of the refinery equipment assets as at February 28, 2009, the valuation date, and adjusted the consideration by reference to the change in the net asset value of the refinery equipment assets for the period from the valuation date to the completion date on adollar-for-dollar basis. The final consideration paid by our company to the transferors was approximately RMB11,327.2 million.
Acquisition of the Contractual Rights under the Production Sharing Contract from CNPC
On August 28, 2009, PetroChina Amu Darya Natural Gas Exploration and Development (Beijing) Company Limited, a wholly owned subsidiary of the company, and CNPCI, a subsidiary of CNPC, entered into the Contractual Rights Transfer Agreement, pursuant to which we have agreed to acquire from CNPCI the contractual rights under the production sharing contract on the Bagtyiarlyk area at Amu Darya Right Bank in Turkmenistan, and the relevant assets and liabilities formed in the course of CNPCI’s fulfillment of the same. Upon completion of the acquisition, the company will pay the consideration in the sum of approximately US$1,186.5 million (approximately RMB8,106.6 million), of which the company will pay approximately US$350.5 million in cash to CNPCI, and assume bank loans amounting to approximately US$836.0 million owed by CNPCI in the course of performing its obligations under the production sharing contract. The consideration is determined by reference to the valuation results and will be adjusted by reference to the final valuation results filed with the State-owned Assets Supervision and Administration Commission and the change in value of the net asset in connection with this acquisition for the period from the valuation date to the completion date. As at the end of the reporting period, the acquisition has not yet been completed.
Acquisition of the Equity Interest in Zhongqing Gas from CNPC
On December 30, 2009, Kunlun Gas, one of our wholly owned subsidiaries, and Daqing Petroleum Administrative Bureau, a wholly owned subordinated entity of CNPC, entered into an asset transfer agreement, pursuant to which Kunlun Gas will acquire the 100% equity interest in Zhongqing Gas held by Daqing Petroleum Administrative Bureau. Upon completion of the acquisition, Kunlun Gas will pay to the Daqing Petroleum Administrative Bureau the consideration in the amount of approximately RMB1,088.1 million, representing the net asset value of the target equity interest as holdersat the date of H shares. Holdersvaluation. This consideration will be adjusted by any gain/loss attributable to the target equity interest which arise between the reference date of state-owned sharesvaluation and H sharesthe completion date on the basis
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of such floor price of the target equity interest as submitted for the open tender by the Daqing Petroleum Administrative Bureau. As at the end of the reporting period, the acquisition has not yet been completed.
Subscription of Additional Share Capital of China Petroleum Finance Co., Ltd (CPF)
On March 25, 2010, our company entered into a Subscription Agreement with CPF and CNPC, pursuant to which we have agreed to unilaterally contribute a total capital of approximately RMB9.6 billion to (a) subscribe for a total of RMB2.4 billion new registered capital of CPF and (b) account the remaining approximately RMB7.2 billion into the capital reserves of CPF. The capital contribution by our company to CPF will be paid in cash in full with our own funds at the closing date agreed in the Subscription Agreement. Following the completion of this subscription, we will hold 49% and CNPC will hold 51% of the enlarged total registered capital of CPF.
Continuing Related Party Transactions
During the reporting period, our company continued to engage in a variety of continuing related party transactions with CNPC, which provide a number of services to us. These transactions are deemedgoverned by several agreements between CNPC and us, including the comprehensive products and services agreement and its supplemental agreements, product and service implementation agreements, land use rights leasing contract, buildings leasing contract and buildings supplementary leasing agreement, intellectual property licensing contracts, contract for the transfer of rights under production sharing contracts and guarantee of debts contract. A detailed discussion of these agreements is set forth in Note 37 to be shareholdersour consolidated financial statements included elsewhere in this annual report and under the heading “Item 7 — Major Shareholders and Related Party Transactions — Related Party Transactions” in our annual report onForm 20-F filed with the SEC on May 27, 2008.
Our comprehensive products and services agreement and its supplemental agreements expired on December 31, 2008. On August 27, 2008, we and CNPC entered into a new comprehensive products and services agreement that incorporates the provisions from the previous agreements and became effective on January 1, 2009 for a period of different classes for certain matters which may have effect on their respective interest.
three years. As of December 31, 2006, Warren E. Buffett, Berkshire Hathaway Inc., OBH, Inc., National Indemnity Company, GEICO Corporation and Government Employees Insurance Company, as a group as defined under Rule 13d-1(b)(1)(ii)(J)2009, the balance of the Securities Exchange Act of 1934, as amended, collectively owned 2,347,761,000 H shares, representing approximately 1.311% of the total outstanding share capital of PetroChina, or approximately 11.13% of the H shares of PetroChina.
Related Party Transactions
As of December 31, 2006, CNPC directly owns an aggregate of approximately 88.21% of the sharesamount of our companydebts guaranteed by CNPC and therefore transactions between our company and CNPC constituteits affiliates was RMB 1,154.0 million.
During the reporting period, we continue to carry out a number of continuing related party transactions between our companywith CNPC Exploration and CNPC under the Rules Governing the Listing of Securities on The Stock Exchange of Hong KongDevelopment Company Limited, or the Listing Rules. As of December 31, 2006, CNPC (Hong Kong) Limited, or CNPC (HK), is a 51.99% owned subsidiary of CNPC. Therefore, transactions between our company and CNPC (HK) constitute related party transactions between our company and CNPC (HK) under the 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 definedCorporation. A detailed discussion of our relationships and transactions with these parties is set forth in Note 37 to our consolidated financial statements included elsewhere in this annual report and under the Listing Rules) of Beijing Huayou Gas Corporation Limitedheading “Item 7 — Major Shareholders and PetroChina and CRMSC Oil Marketing Company Limited, both of which are our company’s subsidiaries, pursuant to the Listing Rules, the transactions between our company and Beijing Gas and CRMSC respectively constitute related party transactions of our company. Moreover, CNPC and our company each holds 50% interest in CNPC E&D; according to the Listing Rules, CNPC E&D is a connected person of our company. On December 28, 2006, our company acquired 67% equity interest in PKZ through CNPC E&D. Pursuant to the Listing Rules, any subsidiaries of a connected person of our company will also be treated as connected person(s) of our company. Therefore, transactions between our company and (i) CNPC E&D and (ii) PKZ constitute related party transactions of our company under the Listing Rules.
One-off Related Party Transactions
| |
| Acquisition of a 67% interest in PKZ |
Pursuant to an acquisition agreement dated August 23, 2006 entered into 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), CNPC E&D has acquired from CNPC the 67% equity interest
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indirectly held by CNPC in PKZ for a cash consideration of RMB 21,376 million. The acquisition was completed on December 28, 2006. As CNPC is the controlling shareholder of our company, and as CNPC and our company each holds 50% interest in CNPC E&D, CNPC and CNPC E&D are both connected persons of our company. The acquisition constitutes a related party transaction for our company under the Listing Rules. Details of the transaction were announced by our company on August 23, 2006.
Continuing Related Party Transactions
Continuing Related Party Transactions — Related Party Transactions” in our annual report onForm 20-F filed with CNPCthe Securities and Exchange Commission on May 27, 2008.
Loans from Related Parties
Our company and CNPC continue to carry out certain existing continuing related party transactions. We obtained 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; in addition, at the same general meeting we proposed the new caps for existing continuing related party transactions and the new continuing related party transactions from January 1, 2006 to December 31, 2008. We further sought independent shareholders’ approval at the general meeting held on November 1, 2006 for a renewal of the caps for the existing continuing related party transactions for January 1, 2006 to December 31, 2008, which were previously approved by independent shareholders at the general meeting held on November 8, 2005.
Our company and CNPC will continue to carry out the existing continuing related party transactions referred to in the following agreements:
Comprehensive Products and Services Agreement, First Supplemental Comprehensive Agreement and Second Supplemental Comprehensive Agreement
Our company and CNPC continue to implement the Comprehensive Products and Services Agreement (“Comprehensive Agreement”) entered into on March 10, 2000 for the provision (i) by our company to CNPC and (ii) by CNPC Group to our company, 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 ten years starting from the date when our company’s 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.
Under the Comprehensive Products and Services Agreement, products and services to be provided by our company to CNPC Group 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.
More products and services are to be provided by CNPC to our company, both in terms of quantity and variety, than those to be provided by our company to CNPC. Products and services to
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be provided by CNPC to our company have been grouped together and categorized according to the following types of products and services:
| | |
| • | Construction and technical services, |
|
| • | Production services, |
|
| • | Supply of materials services, |
|
| • | Social services, |
|
| • | Ancillary services, and |
|
| • | Financial services. |
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.
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.
The Second Supplemental Comprehensive Agreement took effect on January 1, 2006.
| |
| 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 Group or our company providing the relevant products or services, as appropriate, and the relevant members of our company or CNPC Group, 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.
| |
| 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 meters, located throughout the PRC, to our company for a term of 50 years at an annual fee of RMB 2 billion. The total fee payable for the lease of all such property may, after the expiration of ten years from the effective date of the Land Use Rights Leasing Contract, be adjusted (to reflect market conditions prevalent at such time of adjustment,
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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 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.
| |
| 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 in which CNPC has leased to our company a total of 191 buildings covering an aggregate of area of 269,770 square meters, located throughout the PRC for the use by our company for its business operations including the exploration, development and production of crude oil, the refining of crude oil and petroleum products, and the production and sale of chemicals. The 191 buildings were leased at a price of RMB 145 per square meter per year, that is, an aggregate annual fee of RMB 39,116,650 for a term of 20 years. Our company is responsible for the payment of any governmental, legal or other administrative taxes and maintenance charges in connection with these 191 buildings. The Building Leasing Contract sets forth the details of the buildings leased to our company by other member companies within CNPC group.
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 agrees to lease to our company an additional 404 buildings covering an aggregate of 442,730 square meters. The increase in the number of units being leased in the Supplemental Buildings Agreement is primarily attributed to the expansion of our company’s 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 RMB 157,439,540 per annum. Our company and CNPC will, based on changes in their production and operations, and changes in 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, remain in full force.
| |
| 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, 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.
| |
| 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 March 10, 2000. 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 CNPC’s supervisory functions.
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| |
| 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 debts of our company at no cost. As of December 31, 2006, the total amount guaranteed was RMB 597 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 continuing transactions had been entered into in the ordinary course of business for the benefits of our company, and are in the interests of the shareholders as a whole.
| |
| New Continuing Related Party Transactions with CNPC E&D |
The following new continuing related party transactions arose as a result of the completion of the acquisition of the 67% equity interest in PKZ on December 28, 2006, which was set forth on the announcement dated August 23, 2006:
| | |
| • | the provision of production services by CNPC Group to our company; |
|
| • | the provision of construction and technical services such as exploration technology services by CNPC Group to our company; |
|
| • | the provision of materials supply services by CNPC Group to our company. |
| |
| Continuing Related Party Transactions with CNPC (HK) |
As part of the restructuring of CNPC and in preparation for the listing of our company on HKSE, and as disclosed in our company’s 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 CNPC’s role as 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 51.99% owned subsidiary of CNPC. CNPC is also our company’s controlling shareholder which holds approximately 88.21% of the issued share capital of our company. 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 between our company and CNPC (HK).
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):For both Leng Jiapu Oilfield and blocks 9-1 to 9-5 of the Karamay Oilfield, our company and CNPC (HK) share the development costs for these oilfields as to 46% by our company and 54% by CNPC (HK), and share the oil and natural gas produced from these oilfields, as to 30% by our company and 70% by CNPC (HK). |
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| |
| (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 to each of blocks9-1 to9-5 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 the 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 blocks9-1 to9-5 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 blocks9-1 to9-5 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 blocks9-1 to9-5 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 HKSE expired on December 31, 2006. Our company made an announcement 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. |
| |
| Continuing Related Party Transactions with CRMSC and Beijing Gas |
Our company entered into a Products and Services Agreement with Beijing Gas on September 1, 2005. Pursuant to the agreement, our company 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.
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.
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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.
Loans or Guarantees with Related Parties
As of December 31, 2006,2009, we had unsecured short-term and long-term loans from CP FinanceCNPC and its affiliates in an aggregate amount of RMB 27,184 million. TheRMB77,305 million with an average annual interest rate on these loans is 4.98%of 3.35%.
Interests of Experts and Counsel
Not applicable.
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ITEM 8 —FINANCIAL INFORMATION
Financial Statements
See pages F-1 to F-78F-56 following Item 19.
Dividend Policy
Our board of directors will declare dividends, if any, in Renminbi with respect to H shares on a per share basis and will pay such dividends in Renminbi with respect to A Shares and HK dollars.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 sharesShares 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. |
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 for the year attributable to our shareholders determined in accordance with PRC accounting rules. Under PRC law, our distributable earnings will be equal to our net income for the year attributable to our shareholders 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
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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 0.202806RMB0.12417 per H share (inclusive of applicable tax) for the six months ended June 30, 20062009 was paid to our shareholders on September 26, 2006.October 16, 2009. The board of directors proposed to distribute the final dividend of RMB 0.154699RMB0.13003 per H share (inclusive of applicable tax) which was calculated on the basis of the balance between 45% of our net income for the year attributable to our shareholders under IFRS for the year ended December 31, 20062009 and the interim dividend for 20062008 which was paid on September 26, 2006.October 16, 2009. The final dividend to be paid is subject to approvalfor the year ended December 31, 2009 was approved by the annual shareholders’ general meeting to be held on May 16, 2007.20, 2010. The final dividendpayment will be paid aroundmade to shareholders whose names appear on the register of the company at close of business on June 1, 2007.2, 2010.
Significant Changes
None.
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Significant Changes
Operating and Financial Results in the First Quarter of 2010
In the first quarter of 2010, net profit attributable to our company’s shareholders was RMB32,492 million, and the basic earnings per share was RMB0.18, up 71.2%year-on-year. In the first quarter of 2010, we produced 210 million barrels of crude oil, representing an increase of 2.1% as compared with the same period last year, and produced 609.9 billion cubic feet of marketable natural gas, representing an increase of 16.5% as compared with the same period last year. In the first quarter of 2010, we processed 215 million barrels of crude oil, representing an increase of 16.2% compared with the same period last year; produced 18.824 million tons of gasoline, diesel and kerosene, representing an increase of 15.0% as compared with the same period last year; and produced 0.908 million tons of ethylene, representing an increase of 37.0% as compared with the same period last year. In the first quarter of 2010, we sold 27.05 million tons of gasoline, diesel and kerosene, representing an increase of 27.3% as compared with the same period last year.
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ITEM 9 —THE OFFER AND LISTING
Nature of the Trading Market and Market Price Information
Our ADSs, each representing 100 H shares,Shares, par value RMB 1.00RMB1.00 per H share,Share, have been listed and traded on the New York Stock Exchange since April 6, 2000 under the symbol “PTR”. Our H sharesShares 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.Shares. CNPC also sold 319,680,182 state-owned shares it held concurrently with our Company’s issuecompany’s issuance of new H sharesShares 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, and the Hong Kong Stock Exchange and Shanghai Stock Exchange are the principal trading markets for our ADSs, H Shares and H shares,A Shares, respectively.
As of December 31, 2006,2009, there were 21,098,900,000 H sharesShares and 161,922,077,818 A Shares issued and outstanding. As of December 31, 2006,2009, there were 303311 registered holders of American depositary receipts evidencing 31,661,23019,706,673 ADSs. The depositary of the ADSs is Thethe Bank of New York.
The high and low closing sale prices of our A Shares on the Shanghai Stock Exchange, of H sharesShares on the Hong Kong Stock Exchange and of the ADSs on the New York Stock Exchange for each quarterly periodyear from 20022005 through 20072009 for each quarter from 2008 to 2010 (up to the end of the first quarter of 2010), and for each month from December 2009 to June 2010 (through April 30, 2007)June 18, 2010) are set forth below.
| | | | | | | | | | | | | | | | | |
| | Price per | | | |
| | H share | | | Price per ADS | |
| | | | | | |
| | High | | | Low | | | High | | | Low | |
| | | | | | | | | | | | |
| | (HK$) | | | (US$) | |
2002 | | | | | | | | | | | | | | | | |
| First quarter | | | 1.62 | | | | 1.39 | | | | 21.07 | | | | 18.03 | |
| Second quarter | | | 1.75 | | | | 1.52 | | | | 22.40 | | | | 19.23 | |
| Third quarter | | | 1.72 | | | | 1.53 | | | | 21.72 | | | | 19.25 | |
| Fourth quarter | | | 1.57 | | | | 1.44 | | | | 20.75 | | | | 18.40 | |
2003 | | | | | | | | | | | | | | | | |
| First quarter | | | 1.70 | | | | 1.55 | | | | 21.61 | | | | 19.10 | |
| Second quarter | | | 2.38 | | | | 1.62 | | | | 30.82 | | | | 20.94 | |
| Third quarter | | | 2.80 | | | | 2.15 | | | | 35.89 | | | | 27.67 | |
| Fourth quarter | | | 4.45 | | | | 2.60 | | | | 57.05 | | | | 33.75 | |
2004 | | | | | | | | | | | | | | | | |
| First quarter | | | 4.85 | | | | 3.75 | | | | 63.70 | | | | 47.53 | |
| Second quarter | | | 4.00 | | | | 3.20 | | | | 50.96 | | | | 41.63 | |
| Third quarter | | | 4.175 | | | | 3.60 | | | | 53.76 | | | | 45.98 | |
| Fourth quarter | | | 4.375 | | | | 4.075 | | | | 56.60 | | | | 52.22 | |
2005 | | | | | | | | | | | | | | | | |
| First quarter | | | 5.10 | | | | 4.025 | | | | 65.36 | | | | 51.65 | |
| Second quarter | | | 5.85 | | | | 4.675 | | | | 74.65 | | | | 59.71 | |
| Third quarter | | | 7.35 | | | | 5.90 | | | | 94.50 | | | | 74.95 | |
| Fourth quarter | | | 6.50 | | | | 5.65 | | | | 83.70 | | | | 72.70 | |
2006 | | | | | | | | | | | | | | | | |
| First quarter | | | 8.10 | | | | 6.35 | | | | 104.95 | | | | 83.50 | |
| Second quarter | | | 9.55 | | | | 7.10 | | | | 122.75 | | | | 90.63 | |
| Third quarter | | | 9.09 | | | | 8.17 | | | | 117.20 | | | | 104.60 | |
| Fourth quarter | | | 11.12 | | | | 8.12 | | | | 142.12 | | | | 104.95 | |
2006 | | | | | | | | | | | | | | | | |
| November | | | 9.90 | | | | 8.66 | | | | 128.10 | | | | 110.74 | |
| December | | | 11.12 | | | | 9.91 | | | | 142.12 | | | | 128.10 | |
2007 | | | | | | | | | | | | | | | | |
| January | | | 11.08 | | | | 9.39 | | | | 137.90 | | | | 120.75 | |
| February | | | 9.73 | | | | 9.11 | | | | 124.70 | | | | 114.25 | |
| March | | | 9.27 | | | | 8.57 | | | | 118.40 | | | | 109.55 | |
| April | | | 9.26 | | | | 8.90 | | | | 118.80 | | | | 112.14 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Price Per H
| | | | |
| | Share | | Price Per ADS | | Price Per A Share |
| | HK$ | | US$ | | RMB |
| | High | | Low | | High | | Low | | High | | Low |
|
Annual Data | | | | | | | | | | | | | | | | | | | | | | | | |
2005 | | | 7.35 | | | | 4.025 | | | | 94.50 | | | | 51.65 | | | | — | | | | — | |
2006 | | | 11.12 | | | | 6.35 | | | | 142.12 | | | | 83.50 | | | | — | | | | — | |
2007 | | | 19.90 | | | | 8.57 | | | | 263.70 | | | | 109.55 | | | | 43.96 | | | | 29.24 | |
2008 | | | 14.24 | | | | 4.25 | | | | 182.12 | | | | 57.25 | | | | 31.31 | | | | 9.95 | |
2009 | | | 10.48 | | | | 5.10 | | | | 133.65 | | | | 64.09 | | | | 16.38 | | | | 10.02 | |
Quarterly Data | | | | | | | | | | | | | | | | | | | | | | | | |
2008 | | | | | | | | | | | | | | | | | | | | | | | | |
First quarter | | | 14.24 | | | | 9.17 | | | | 182.12 | | | | 120.63 | | | | 31.31 | | | | 16.99 | |
Second quarter | | | 12.12 | | | | 9.77 | | | | 156.97 | | | | 125.92 | | | | 18.35 | | | | 14.94 | |
Third quarter | | | 10.66 | | | | 7.45 | | | | 136.92 | | | | 92.79 | | | | 15.63 | | | | 10.17 | |
Fourth quarter | | | 8.14 | | | | 4.25 | | | | 104.30 | | | | 57.25 | | | | 12.19 | | | | 9.95 | |
2009 | | | | | | | | | | | | | | | | | | | | | | | | |
First quarter | | | 7.82 | | | | 5.10 | | | | 101.25 | | | | 64.09 | | | | 12.16 | | | | 10.02 | |
Second quarter | | | 9.41 | | | | 6.11 | | | | 122.78 | | | | 80.98 | | | | 14.48 | | | | 11.22 | |
Third quarter | | | 9.49 | | | | 7.66 | | | | 122.34 | | | | 101.31 | | | | 16.38 | | | | 12.57 | |
Fourth quarter | | | 10.48 | | | | 8.52 | | | | 133.65 | | | | 109.67 | | | | 14.16 | | | | 12.98 | |
2010 | | | | | | | | | | | | | | | | | | | | | | | | |
First quarter | | | 10.18 | | | | 8.25 | | | | 130.51 | | | | 106.30 | | | | 14.28 | | | | 12.65 | |
Monthly Data | | | | | | | | | | | | | | | | | | | | | | | | |
2009 | | | | | | | | | | | | | | | | | | | | | | | | |
December | | | 9.92 | | | | 8.97 | | | | 128.01 | | | | 116.43 | | | | 13.99 | | | | 13.06 | |
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | Price Per H Share | | | Price Per ADS | | | Price Per A Share | |
| | HK$ | | | US$ | | | RMB | |
| | High | | | Low | | | High | | | Low | | | High | | | Low | |
|
2010 | | | | | | | | | | | | | | | | | | | | | | | | |
January | | | 10.18 | | | | 8.80 | | | | 130.51 | | | | 111.49 | | | | 14.28 | | | | 13.08 | |
February | | | 9.13 | | | | 8.25 | | | | 116.58 | | | | 106.30 | | | | 13.05 | | | | 12.70 | |
March | | | 9.25 | | | | 8.75 | | | | 119.82 | | | | 111.78 | | | | 13.06 | | | | 12.65 | |
April | | | 9.55 | | | | 8.92 | | | | 122.67 | | | | 113.26 | | | | 13.23 | | | | 11.92 | |
May | | | 8.99 | | | | 7.97 | | | | 115.74 | | | | 101.92 | | | | 11.97 | | | | 10.73 | |
June (through June 18, 2010) | | | 8.99 | | | | 8.1 | | | | 115.57 | | | | 104.04 | | | | 11.05 | | | | 10.34 | |
The closing prices per A Share, per H shareShare and per ADS on April 30, 2007June 18, 2010 were RMB10.58, HK$8.918.82 and US$112.14,114.51, respectively.
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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 onForm 20-F. We hereby incorporate by reference the relevant exhibit to this annual report.
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| Enforceability of Shareholders’ Rights |
Objectives and Purposes
We are a joint stock limited company established in accordance with the company Law and certain other laws and regulations of the PRC. We are registered with the PRC State Administration for Industry and Commerce with a business license number being 100000000032522. Article 10 of our articles of association provides that our scope of businesses includes, among other things, exploration and production of oil and natural gas; production and sale of crude oil, refined oil, petrochemical and chemical products; import and export; construction and operation of oil and natural gas pipelines; technical development, consultation and service for oil exploration and petrochemistry and related engineering; sale of materials, equipment and machines necessary for production and construction of oil and gas, petrochemicals and pipelines.
Enforceability of Shareholders’ Rights
Our articles of association provide that all differences or claims
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| • | between a holder of H sharesShares and us; |
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| • | between a holder of H sharesShares and any of our directors, supervisors, general managers, deputy general managerspresident, senior vice presidents, vice presidents, chief financial officer or other senior officers; or |
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| • | between a holder of H sharesShares and a holder of State-owneddomestic 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, 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. |
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| Restrictions on Transferability and the Share Register |
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
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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.Shares.
As provided in the articles of association, we may refuse to register a transfer of H sharesShares 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 shareshe/she holds in our company in each year duringhis/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.
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 such30-day time period, the shareholders shall have the right, in the interests of our
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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 sharesShares 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.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.
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Dividends may only be distributed, however, after allowance has been made for:
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| • | recovery of losses, if any;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; |
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| • | allocations to the statutory common welfare fund; and |
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| • | allocations to a discretionary common reserve fund if approved by the shareholders. |
The minimum
We shall allocate ten percent of income for the year attributable to the equity holders of our company 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 maximum aggregatemaking allocations to the statutory funds are 15% and 20%, respectively, ofcommon reserve fund, the shareholders must return such profits they have received to our net income determinedcompany. The shares held by our company in accordance with PRC accounting rules.itself do not participate any dividends distribution.
The articles of association require us to appoint on behalf of the holders of H sharesShares 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 sharesShares on behalf of such shareholders. The articles of association require that cash dividends in respect of H sharesShares be declared in Renminbi and paid by us in HK dollars.
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| Voting Rights and Shareholders’ Meetings |
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; or |
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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 supervisors so request.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. Resolutions proposed by shareholdersShareholders holding 5%3% or more of the total number of voting shares will be includedmay present special proposals ten days prior to the annual shareholders meetings and shall deliver such proposal in writing to the persons convening such shareholders’ meetings. The matters proposed in the agenda for the relevant annual general meeting if they are matters whichspecial proposals shall fall within the scope of the functions and powers of
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shareholders meetings, and such proposals shall have specific subjects as well as specific matters to be resolved, and shall be in general meeting.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. Where the number of voting shares represented by those shareholders amount to more than one-half of our total voting shares, we may convene the shareholders’ general meeting, regardless of the number of shareholders who actually attend. 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 ourthe annual 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, and any amendment to our articles of association.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.
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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 shareShare 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 Rules Governing the Listing of Securities on the Stock Exchange Hong Kong Limited, or the HKSE 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 shareholder’sattorney-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.
Any shareholder resolution which is in violation
If any resolutions of our shareholders’ meetings or our board meetings violate any applicable laws or administrative regulations, of the PRCshareholders shall have the right to request competent courts to decide that such resolutions are invalid. If the procedures to convene any shareholders’ meetings or theany board meetings or any voting methods violate any applicable laws, administrative regulations or our articles of association, will be null and void.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.
There are no limitations imposed by PRC law or our articles of association on the right of non-residents or foreign shareholders to hold or vote our company’s shares, other than limitations that would generally apply to all of the shareholders.
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.
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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:
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| (a) be responsible for the convening of shareholders’ meetings and reporting on its work to the shareholders at such meetings; |
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| (b) implement the resolutions passed by the shareholders in general meetings; |
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| (c) determine our business plans and investment proposals; |
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| (d) formulate our annual preliminary and final budgets; |
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| (e) formulate our profit distribution proposal and loss recovery proposals; |
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| (f) formulate proposals for the increase or reduction of our registered capital and the issuance of our debentures; |
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| (g) draw up plans for our merger, division or dissolution; |
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| (h) decide on our internal management structure; |
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| (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; |
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| (j) formulate our basic management system; |
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| (k) formulate proposals for any amendment of our articles of association; and |
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| (l) exercise any other powers conferred by the shareholders in general meetings. |
(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;
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(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
(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 ifhe/she or any ofhis/her associates or the relevant significant shareholder is interested therein, andhe/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 hashave the same meaning ascribed to it in the HKSE 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 sharesShares are listed, the articles of association place on each of our directors, supervisors, president, senior vice presidents, 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 person’s powers and discharge of such person’s 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 of Supervisors
The Supervisory board of supervisors is composed of sevennine 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, andmeetings; |
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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.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 of supervisors are generally limited to investigating and reporting to shareholders and management on our affairs and to calling shareholders’ extraordinary general meetings.
One member
At least one third of the boardmembers of supervisorsthe supervisory board will be an employee representative appointedrepresentatives elected by our employees. The remaining members will be appointed by the shareholders in a general meeting. One member of the supervisory board of supervisors shall be the chairman. A member of the supervisory board of supervisors 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 of supervisors is three years, including the term of office of the chairman of the supervisory board, of supervisors, both of which terms of office are renewable upon re-election and re-appointment. Reasonable expenses incurred by the supervisory board of supervisors in carrying out its duties will be paid by us.
The supervisory board of supervisors is accountable, and will report, to the shareholders in the shareholders’ general meetings.
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| Restrictions on Large or Controlling Shareholders |
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
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H sharesShares 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 sharesShares 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
On May 15, 2008, our annual shareholders’ meeting for 2007 approved certain amendments to our articles of Association Pending for Approvalassociation. Those amendments were approved by the State-owned Assets Supervision and Administration Commission on October 24, 2008.
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Material Contracts
In November 2006, our shareholders approved our amended articles of association at the annual general meeting of shareholders, which is subject to the applicable regulatory approval and filing before they become effective. Accordingly, 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 amended articles of association purports to expand our business scope to allow us to operate convenient stores in service stations and provide related services.
Upon the completion of our company’s 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.
Material Contracts
The followinghave not entered into any material contracts not being contractsother than in the ordinary course of business have been entered into by our company and/and other than those described under Item 4 — Information on the Company, Item 7 — Major Shareholders and Related Party Transactions or its subsidiaries within the two years preceding the date ofelsewhere in this Form annual report and are or may be material.report.
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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 Contribution Agreement, dated June 9, 2005, among China National Oil and Gas Exploration and Development Corporation, Central Asia Petroleum Company Limited, Zhong You Kan Tan Kai Fa Company Limited and our company (English Translation); and |
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| • | Transfer Agreement, dated June 9, 2005, between Zhong You Kan Tan Kai Fa Company Limited and our company (English Translation). |
Foreign Exchange Controls
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,obligations, 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.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 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 sharesShares in Hong Kong dollars and on ADSs in USU.S. 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 sharesShares or ADSs purchased held by the investor as capital assets.
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PRC Taxation
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| Dividends and Individual Investors |
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
On July 21, 1993, the PRC State Administration of Taxation issued theNotice 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”). UnderAccording to the Tax Notice, dividends paid by a PRC company to foreign personsindividuals with respect to shares listed on an overseas stock exchange (“Overseas Shares”), including the H sharesShares and ADSs, are not subject towere provisionally exempted from PRC withholding tax for the time being.
The first amendment to theIndividual Income Tax Law of the PRC was amendedbecame effective on 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
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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 sharesShares exempted under the Tax Notice.
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| Dividends and Foreign Enterprises |
Dividends and Foreign Enterprises
According
Prior to January 1, 2008, on which theEnterprise Income Tax Law of the Provisional Regulations and other applicable tax laws and regulations,PRCbecame effective, dividends paid by a PRC companiescompany to foreign enterprises are ordinarily subjectwith respect to aOverseas Shares were provisionally exempted from PRC withholding tax levied at a flat rate of 20%. However,FEIT according to the Tax Notice,Notice.
Pursuant to theEnterprise Income Tax Law of the PRCwhich is effective from January 1, 2008 and the implementing rules thereunder, and theCircular on Issues Concerning the Withholding of Corporate Income Tax by PRC Resident Enterprises from Dividends Payable to H Share Non-resident Corporate Shareholders, or the Circular, each PRC resident enterprise, when paying any of its H share non-resident corporate shareholders any dividends for 2008 and the years thereafter, is required to withhold the corporate income tax from such dividends at a foreign enterprise with no permanent establishment in China receivinguniform rate of 10%. After its receipt of any dividends paid on Overseas Shares will temporarily not be subjectits H shares, an H share non-resident corporate shareholder may by itself or through an agent or the withholding agent, apply to the 20% withholding tax. Ifcompetent taxation authority for the treatment under the applicable tax treaty (arrangement) against the documents evidencing that such withholdingshareholder is qualified to be a beneficial owner as defined under the applicable tax becomes applicabletreaty (arrangement). The competent tax authority after having verified the correctness of such documents, shall refund the difference between the amount of the tax actually paid by such shareholder and the amount of the tax payable by such shareholder as calculated on the basis of the rate stipulated in the future, such rate may still be reduced under relevantapplicable tax treaties, if applicable.treaty (arrangement).
Tax Treaties
If you are a tax 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 suchcertain treaties, the rate of withholding tax imposed by China’s taxation authorities is generallymay be reduced. For example,Pursuant to theMeasures for the Administration of the Enjoyment by Non-residents of the Treatments under the double taxation treaty between China andTax Treaties(Trial) promulgated by the United States, China mayState Administration of Taxation on August 24, 2009, non-PRC resident are required to apply for approval or filing in order to claim any benefit under tax dividends paid by ustreaties.
Capital Gains
The fifth amendment 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 treaty’s “treaty shopping provisions”.
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 andwhich became effective on JanuaryMarch 1, 1994,2008, provides for a capital gainsgain tax of 20% on individuals. On January 28, 1994, the TheProvisions for Implementing the Individual Income Tax Law of the PRC was promulgated whichas amended on February 18, 2008, provides that the measures to levy individual income tax on the
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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. However, the Tax Notice provides that gains realized by foreign individuals upon the sale of Overseas Shares are not subject to withholding tax for the time being. 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 aan individual holder of H sharesShares or ADSs you may be subject to a 20% tax on capital gains, unless reduced by an applicable double taxation treaty.
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| Additional PRC Tax Considerations |
Before the effectiveness of the new Enterprise Income Tax Law, gains realized by foreign enterprises that are holders of Overseas Shares excluding the shares held through their PRC domestic establishments were exempted from the withholding tax according to the Tax Notice. However, theCircular of the Ministry of Finance and the State Administration of Taxation concerning Several Preferential Policies for Enterprise Income Tax(Cai Shui [2008] No.) promulgated on February 22, 2008 provides that, other than those preferential policies specially stipulated thereunder, any other preferential policies concerning enterprise income tax that were implemented prior to January 1, 2008 shall all be repealed. The Tax Notice does not fall into the category of preferential policies defined under theCircular of the Ministry of Finance and the State Administration of Taxation concerning Several Preferential Policies for Enterprise Income Tax.
Under the Enterprise Income Tax Law that became effective on January 1, 2008, capital gains realized by foreign enterprises which are non-resident enterprises in the PRC upon the sale of Overseas Shares are generally subject to a PRC withholding tax levied at a rate of 10%, unless exempted or reduced pursuant to an applicable double-taxation treaty or other exemptions. Currently pursuant to theCircular of the State Administration of Taxation on Printing and Issuing the Interim Measures for Administration of Withholding at Source of Income Tax of Non-resident Enterprisespromulgated on January 9, 2009, where both parties to the transaction of equity transfer are non-resident enterprises and such transaction is conducted outside the territory of PRC, the non-resident enterprise that receives incomes shall, by itself or through its agent, declare and pay tax to the competent tax authority in the place where the Chinese enterprise whose equities have been transferred is located.
Additional PRC Tax Considerations
Under the Provisional Regulations of the People’s 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 sharesShares 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 sharesShares or ADSs if you are a U.S. holder, as defined below, and hold the H sharesShares 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 sharesShares 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 sharesShares 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. |
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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 sharesShares 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 sharesShares or ADSs, we urge you to consult your tax advisors regarding the consequences of the purchase, ownership and disposition of the H sharesShares 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 andnon-United States tax consequences of the purchase, ownership and disposition of the H sharesShares or ADSs.
In general, if you hold ADRsAmerican depositary receipts evidencing ADSs, you will be treated as the owner of the H sharesShares 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.
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| Distributions on the H Shares or ADSs |
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 sharesShares or ADSs out of our current or accumulated earnings and profitsincome (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,Shares, or by the depositary in the case of ADSs. Subject to certain limitations, dividends paid for taxable years beginning prior to January 1, 2011 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 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.PFIC in the taxable year that the dividend is paid or in the prior taxable year. 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 People’s 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.
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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 sharesShares 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 sharesShares 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) fornon-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,Shares, or (ii) are obligated to make payments related to the dividends (for example, pursuant to a short sale).
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| Sale, Exchange or Other Disposition |
Sale, Exchange or Other Disposition
Upon a sale, exchange or other disposition of the H sharesShares 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 sharesShares 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 maximumreduced rate of 15% where the property has been held more than one year. Your ability to deduct capital losses is subject to limitations. If any PRC tax is withheld from your gain on a disposition of H Shares or ADSs, such tax would only be creditable against your United States federal income tax liability to the extent that you have foreign source income. However, in the event that such PRC tax is withheld, a U.S. holder that is eligible for the benefit of the Treaty may be able to treat the gain as foreign source income for foreign tax credit satisfaction purposes. You are urged to consult your tax advisors regarding the United States federal income tax consequences if PRC tax is withheld from your gain on the sale or other disposition of H Shares or ADSs, including the availability of a foreign tax credit under your particular circumstances.
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.
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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 did not meet either of the PFIC tests in the taxable year that ended December 31, 2009 and believe that we will not meet either of the PFIC tests in the current or subsequent taxable years and therefore will not be
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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 sharesShares or ADSs, you generally would be subject to special rules with respect to “excess distributions” made by us on the H sharesShares or ADSs and with respect to gain from your disposition of the H sharesShares or ADSs. An “excess distribution” generally is defined as the excess of the distributions you receive with respect to the H sharesShares 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 sharesShares or ADSs. Generally, you would be required to allocate any excess distribution or gain from the disposition of the H sharesShares or ADSs ratably over your holding period for the H sharesShares 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 “mark-to -market” election. If your H sharesShares or ADSs were treated as shares regularly traded on a “qualified exchange” for United States federal income tax purposes and a validmark-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 sharesShares 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 themark-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 sharesShares or ADSs during any year that we are a PFIC, you must file Internal Revenue Service, or IRS, Form 8621.8621 for each taxable year in which you recognize gain, receive distributions, or make a reportable election with respect to such H Shares or ADSs, and file any such other form as is required by the United States Treasury Department. We encourage you to consult your own tax advisor concerning the United States federal income tax consequences of holding the H sharesShares or ADSs that would arise if we were considered a PFIC.
| |
| Backup Withholding and Information Reporting |
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to dividends in respect of the H sharesShares or ADSs or the proceeds of the sale, exchange, or redemption of the H sharesShares or ADSs paid within
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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 sharesShares or ADSs or the proceeds of any sale, exchange or transfer of the H sharesShares or ADSs, unless you
| | |
| • | are a corporation or fall within various other exempt categories, and, when required, demonstrate this fact; or |
|
| • | provide a correct taxpayer identification number on a properly completed IRSForm 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.
107
Significant Differences in Corporate Governance PracticesRecent Legislative Developments
We have filed a summary
Newly enacted legislation requires certain U.S. holders who are individuals, estates or trusts to pay up to an additional 3.8% tax on, among other things, dividends and capital gains for taxable years beginning after December 31, 2012. In addition, for taxable years beginning after March 18, 2010, new legislation requires certain U.S. holders who are individuals that hold certain foreign financial assets (which may include the H Shares or ADSs) to report information relating to such assets, subject to certain exceptions. You should consult your own tax advisors regarding the effect, if any, of this legislation on your ownership and disposition 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:H Shares or ADSs.
| | |
| 1. | From our main web page, first click on “Investor Relations”. |
|
| 2. | Next, click on “Corporate Governance Structure”. |
|
| 3. | 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
You may read and copy documents referred to in this annual report onForm 20-F that have been filed with the U.S. Securities and Exchange Commission at the Commission’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the Commission at1-800-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 onForm 20-F.
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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, 2004, 20052007, 2008 and 2006.2009. 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 18.6%13.6%, 29.1%5.8% and 33.6%5.0% of our total payments for equipment in 2004, 20052007, 2008 and 20062009 respectively. Foreign currency payments for imported crude oil and other materials represented 9.6%1.9%, 3.4%2.8% and 5.5%1.4% of our total payments for materials in 2004, 20052007, 2008 and 20062009 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.
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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, 2004, 20052007, 2008 and 2006,2009, respectively.
December 31, 2009
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Percentage
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | to Total
| | | | |
| | Expected Maturity Date | | | Long-Term
| | | Fair
| |
| | 2010 | | | 2011 | | | 2012 | | | 2013 | | | 2014 | | | Thereafter | | | Total | | | Debt (%) | | | Value | |
| | (RMB equivalent in millions, except percentages) | |
|
Long term debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 233 | | | | 221 | | | | 5560 | | | | — | | | | — | | | | 26 | | | | 6,040 | | | | 6.06 | % | | | 5,824 | |
Average interest rate | | | 4.64 | % | | | 4.78 | % | | | 4.32 | % | | | — | | | | — | | | | 2.91 | % | | | — | | | | — | | | | — | |
Variable rate(1) | | | 11,306 | | | | 135 | | | | 68 | | | | 33 | | | | 552 | | | | 6,045 | | | | 18,139 | | | | 18.19 | % | | | 18,139 | |
Average interest rate | | | 4.90 | % | | | 5.38 | % | | | 5.33 | % | | | 5.40 | % | | | 6.03 | % | | | 3.07 | % | | | — | | | | — | | | | — | |
Loans in Euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 16 | | | | 16 | | | | 16 | | | | 16 | | | | 15 | | | | 113 | | | | 192 | | | | 0.19 | % | | | 65 | |
Average interest rate | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.11 | % | | | — | | | | — | | | | — | |
Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Loans in United States Dollars | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 37 | | | | 37 | | | | 37 | | | | 37 | | | | 37 | | | | 1,225 | | | | 1,410 | | | | 1.41 | % | | | 1,517 | |
Average interest rate | | | 1.43 | % | | | 1.43 | % | | | 1.43 | % | | | 1.43 | % | | | 1.43 | % | | | 5.95 | % | | | — | | | | — | | | | — | |
Variable rate | | | 2,456 | | | | 9,632 | | | | 1,580 | | | | 83 | | | | 8,287 | | | | 2,735 | | | | 24,733 | | | | 24,85 | % | | | 24,733 | |
Average interest rate | | | 1.00 | % | | | 1.95 | % | | | 2.54 | % | | | 1.91 | % | | | 1.80 | | | | 1.72 | % | | | — | | | | — | | | | — | |
Loans in Japanese Yen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 10 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 10 | | | | 0.01 | % | | | 10 | |
Average interest rate | | | 2.42 | % | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Debentures in United States Dollar | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed Rate | | | 171 | | | | 171 | | | | — | | | | — | | | | — | | | | 294 | | | | 636 | | | | 0.64 | % | | | 630 | |
Average interest rate | | | 9.50 | % | | | 9.50 | % | | | — | | | | — | | | | — | | | | 3.00 | % | | | — | | | | — | | | | — | |
Debentures in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | — | | | | 2,000 | | | | — | | | | 1,500 | | | | — | | | | — | | | | 3,500 | | | | 3.51 | % | | | 3,516 | |
Average interest rate | | | — | | | | 3.76 | % | | | — | | | | 4.11 | % | | | — | | | | — | | | | — | | | | — | | | | — | |
Medium term note in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | — | | | | — | | | | 30,000 | | | | — | | | | 15,000 | | | | — | | | | 45,000 | | | | 45.14 | % | | | 43,587 | |
Average interest rate | | | — | | | | — | | | | 2.49 | % | | | — | | | | 3.35 | % | | | — | | | | — | | | | — | | | | — | |
Total | | | 14,229 | | | | 12,212 | | | | 37,261 | | | | 1,669 | | | | 23,891 | | | | 10,438 | | | | 99,700 | | | | 100.00 | % | | | 98,061 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
109
126
December 31, 20062008
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage | | | |
| | Expected maturity date | | | to total | | | |
| | | | | 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% | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total | | | 20,607 | | | | 11,797 | | | | 6,024 | | | | 1,504 | | | | 2,921 | | | | 13,388 | | | | 56,241 | | | | 100.00% | | | | 55,568 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Percentage
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | to Total
| | | | |
| | Expected Maturity Date | | | Long-Term
| | | Fair
| |
| | 2009 | | | 2010 | | | 2011 | | | 2012 | | | 2013 | | | Thereafter | | | Total | | | Debt (%) | | | Value | |
| | (RMB equivalent in millions, except percentages) | |
|
Long term debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 2 | | | | 2 | | | | — | | | | — | | | | — | | | | 3 | | | | 7 | | | | 0.02 | % | | | 5 | |
Average interest rate | | | 0 | | | | 7.47 | % | | | — | | | | — | | | | — | | | | 0 | | | | — | | | | — | | | | — | |
Variable rate(1) | | | 5,220 | | | | 11,351 | | | | 274 | | | | 20 | | | | — | | | | 6,000 | | | | 22,865 | | | | 59.59 | % | | | 22,865 | |
Average interest rate | | | 6.07 | % | | | 5.51 | % | | | 5.84 | % | | | 6.20 | % | | | — | | | | 6.26 | % | | | — | | | | — | | | | — | |
Loans in Euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 15 | | | | 17 | | | | 17 | | | | 16 | | | | 16 | | | | 126 | | | | 207 | | | | 0.54 | % | | | 147 | |
Average interest rate | | | 2.11 | % | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.10 | % | | | — | | | | — | | | | — | |
Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Loans in United States Dollars | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 66 | | | | 37 | | | | 37 | | | | 37 | | | | 37 | | | | 416 | | | | 630 | | | | 1.64 | % | | | 367 | |
Average interest rate | | | 3.88 | % | | | 1.43 | % | | | 1.43 | % | | | 1.43 | % | | | 1.43 | % | | | 1.38 | % | | | — | | | | — | | | | — | |
Variable rate | | | 63 | | | | 3,826 | | | | 2,805 | | | | 248 | | | | 254 | | | | 3,132 | | | | 10,328 | | | | 26.92 | % | | | 10,328 | |
Average interest rate | | | 2.36 | % | | | 2.80 | % | | | 2.88 | % | | | 6.23 | % | | | 6.15 | % | | | 2.94 | % | | | — | | | | — | | | | — | |
Loans in Japanese Yen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 7 | | | | 13 | | | | — | | | | — | | | | — | | | | — | | | | 20 | | | | 0.05 | % | | | 19 | |
Average interest rate | | | 2.42 | % | | | 2.42 | % | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Debentures in United States Dollars | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 171 | | | | 171 | | | | 171 | | | | — | | | | — | | | | 301 | | | | 814 | | | | 2.12 | % | | | 758 | |
Average interest rate | | | 9.50 | % | | | 9.50 | % | | | 9.50 | % | | | — | | | | — | | | | 3.00 | % | | | — | | | | — | | | | — | |
Debentures in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | — | | | | — | | | | 2,000 | | | | — | | | | 1,500 | | | | — | | | | 3,500 | | | | 9.12 | % | | | 3,262 | |
Average interest rate | | | — | | | | — | | | | 3.76 | % | | | — | | | | 4.11 | % | | | — | | | | — | | | | — | | | | — | |
Total | | | 5,544 | | | | 15,417 | | | | 5,304 | | | | 321 | | | | 1,807 | | | | 9,978 | | | | 38,371 | | | | 100.00 | % | | | 37,751 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
December 31, 2007
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Percentage
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | to Total
| | | | |
| | Expected Maturity Date | | | Long-Term
| | | Fair
| |
| | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | Thereafter | | | Total | | | Debt (%) | | | Value | |
| | (RMB equivalent in millions, except percentages) | |
|
Long term debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loans in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 272 | | | | — | | | | 2 | | | | — | | | | 1 | | | | — | | | | 275 | | | | 0.53 | % | | | 254 | |
Average interest rate | | | 3.83 | % | | | — | | | | 0 | | | | — | | | | 0 | | | | — | | | | — | | | | — | | | | — | |
Variable rate(1) | | | 7,280 | | | | 5,220 | | | | 11,182 | | | | 10 | | | | 20 | | | | 8,700 | | | | 32,412 | | | | 62.45 | % | | | 32,412 | |
Average interest rate | | | 5.49 | % | | | 5.07 | % | | | 5.46 | % | | | 6.89 | % | | | 6.89 | % | | | 5.84 | % | | | — | | | | — | | | | — | |
Loans in Euros | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 16 | | | | 16 | | | | 16 | | | | 16 | | | | 16 | | | | 167 | | | | 247 | | | | 0.48 | % | | | 163 | |
Average interest rate | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.12 | % | | | 2.10 | % | | | — | | | | — | | | | — | |
Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
110
127
December 31, 2005 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Percentage
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | to Total
| | | | |
| | Expected Maturity Date | | | Long-Term
| | | Fair
| |
| | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | Thereafter | | | Total | | | Debt (%) | | | Value | |
| | (RMB equivalent in millions, except percentages) | |
|
Loans in United States Dollars | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fixed rate | | | 137 | | | | 79 | | | | 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 | % | | | — | | | | — | | | | — | |
Loans 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 | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Debentures in United States Dollars | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | % | | | — | | | | — | | | | — | |
Debentures 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage | | | |
| | Expected maturity date | | | to total | | | |
| | | | | 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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
128
December 31, 2004
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Percentage | | | |
| | Expected maturity date | | | to total | | | |
| | | | | long-term | | | Fair | |
| | 2005 | | | 2006 | | | 2007 | | | 2008 | | | 2009 | | | Thereafter | | | Total | | | debt (%) | | | value | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (RMB equivalent in millions, except percentages) | |
Long term debt | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Loan in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | 1,021 | | | | 221 | | | | 100 | | | | 200 | | | | — | | | | 1 | | | | 1,543 | | | | 2.43% | | | | 1,529 | |
| Average interest rate | | | 4.57% | | | | 4.32% | | | | 4.25% | | | | 3.60% | | | | — | | | | 6.10% | | | | | | | | | | | | | |
| Variable rate(1) | | | 12,234 | | | | 6,366 | | | | 13,718 | | | | 4,440 | | | | 100 | | | | 4,500 | | | | 41,358 | | | | 65.01% | | | | 41,358 | |
| Average interest rate | | | 5.08% | | | | 5.12% | | | | 4.85% | | | | 5.03% | | | | 5.18% | | | | 4.62% | | | | | | | | | | | | | |
Loan in Euro | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | 36 | | | | 35 | | | | 17 | | | | 17 | | | | 17 | | | | 238 | | | | 360 | | | | 0.57% | | | | 302 | |
| Average interest rate | | | 5.47% | | | | 5.42% | | | | 2.13% | | | | 2.13% | | | | 2.13% | | | | 2.01% | | | | | | | | | | | | | |
| Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Loan in United States Dollar | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | 480 | | | | 406 | | | | 586 | | | | 169 | | | | 103 | | | | 693 | | | | 2,437 | | | | 3.83% | | | | 2,172 | |
| Average interest rate | | | 6.46% | | | | 6.29% | | | | 7.57% | | | | 5.48% | | | | 4.50% | | | | 1.57% | | | | | | | | | | | | | |
| Variable rate | | | 4,868 | | | | 2,817 | | | | 2,442 | | | | 960 | | | | 2,725 | | | | 482 | | | | 14,294 | | | | 22.47% | | | | 14,294 | |
| Average interest rate | | | 3.78% | | | | 4.43% | | | | 3.41% | | | | 3.19% | | | | 3.41% | | | | 2.10% | | | | | | | | | | | | | |
Loan in British Pound | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | 154 | | | | 133 | | | | 51 | | | | — | | | | — | | | | — | | | | 338 | | | | 0.53% | | | | 326 | |
| Average interest rate | | | 2.85% | | | | 2.85% | | | | 2.85% | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Loan in Japanese Yen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | 170 | | | | 167 | | | | 43 | | | | 24 | | | | 9 | | | | 17 | | | | 430 | | | | 0.68% | | | | 463 | |
| Average interest rate | | | 4.63% | | | | 4.62% | | | | 4.84% | | | | 4.45% | | | | 5.02% | | | | 5.02% | | | | | | | | | | | | | |
| Variable rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Average interest rate | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | |
Debenture in RMB | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fixed rate | | | — | | | | — | | | | 1,350 | | | | — | | | | — | | | | 1,500 | | | | 2,850 | | | | 4.48% | | | | 2,632 | |
| Average interest rate | | | — | | | | — | | | | 4.50% | | | | — | | | | — | | | | 4.11% | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 18,963 | | | | 10,145 | | | | 18,307 | | | | 5,810 | | | | 2,954 | | | | 7,431 | | | | 63,610 | | | | 100% | | | | 63,076 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
(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 People’s 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, 2004, 20052007, 2008 and 2006.2009. 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, 2004, 20052007, 2008 and 2006,2009, respectively. |
Commodity Price Risk
We are engaged in a broadwide range of petroleum related activities.petroleum-related activities and purchase certain quantity of oil from the international market to meet our demands. 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 hedgein the potential price fluctuationsinternational market are affected by various factors such as changes in global and regional politics and economy, the demand and supply of crude oil and other refined products. Therefore, during 2007products, as well as unexpected events and years thereafter, we were exposeddisputes with international repercussions. The domestic crude oil price is determined with reference to the generalinternational price fluctuations of broadly tradedcrude oil and gas commodities.whereby the prices of domestic refined products were allowed to adjust more in line with the prices in the international crude oil market. Other than certain subsidiaries of our company, we generally do not use any derivative instruments to evade such price risks.
111
129
ITEM 12 —DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
Fees paid by our ADS holders
The Bank of New York Mellon, the depositary of our ADS program, collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.
| | |
Persons Depositing or Withdrawing Shares Must Pay: | | For: |
|
| | |
$5.00 (or less) per 100 ADSs (or portion of 100 ADSs) | | Issuance of ADSs, including issuances resulting from a distribution of shares or rights or other property |
| | |
| | Cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates |
| | |
$0.02 (or less) per ADS | | Any cash distribution to ADS registered holders |
| | |
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs | | Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders |
| | |
Registration or transfer fees | | Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares |
| | |
Expenses of the depositary | | Cable, telex and facsimile transmissions (when expressly provided in the deposit agreement) |
| | |
| | Converting foreign currency to U.S. dollars |
| | |
Taxes and other governmental charges the depositary or the custodian have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes, stamp duty or withholding taxes | | As necessary |
| | |
Any charges incurred by the depositary or its agents for servicing the deposited securities | | As necessary |
Fees and Payments from the Depositary to Us
From January 1, 2009 to December 31, 2009, we received from the depositary a reimbursement of US$473,333.11, net of withholding tax, for our continuing annual stock exchange listing fees and our expenses incurred in connection with investor relationship programs. In addition, the depositary has agreed to reimburse us certain amount per year of the facility, including but not limited to, investor relations expenses or any other American depositary receipts program related expenses. The amount of such reimbursements is subject to certain limits.
PART II
ITEM 13 —DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES
None.
ITEM 14 —MATERIAL MODIFICATIONS TO THE RIGHTS
TO SECURITY HOLDERS AND USE OF PROCEEDS
None.
112
ITEM 15 —CONTROLS AND PROCEDURES
| |
| Evaluation of the Management on Disclosure 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 PetroChina’s disclosure controls and procedures (as defined in the United States Exchange ActRules 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 company’s 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 Commission’s rules and regulations.regulations and that such information is accumulated and communicated to our company’s management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.
| |
| Management’s Report on Internal Control over Financial Reporting |
Management’s Report on Internal Control over Financial Reporting
Our company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange ActRules 13a-15(f). Under the supervision and with the participation of our company’s 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 inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our company’s management has concluded that its internal control over financial reporting was effective as of December 31, 2006.2009.
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.
Our independent registered public accounting firm, PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), has audited management’s assessment of the
The effectiveness of our company’s internal control over financial reporting as of December 31, 2006,2009 has been audited by PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), our company’s independent registered public accountants, as stated in theirits report which is included elsewhereattached hereto.
Changes in this annual report.Internal Control over Financial Reporting
During the year ended December 31, 2009, there were no changes in the company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our company’s 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 Liu Hongru,Cui Junhui, and one non-executive director, Gong Huazhang.Wang Guoliang. See “Item 6 — Directors, Senior Management and Employees — Board Practices — Audit Committee”. Our board of directors has determined that Liu Hongru,Cui Junhui, our non-executive independent director is
130
qualifiedhas been confirmed as a “financial expert,” as defined in Item 16A ofForm 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.
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 16.111.1 and Exhibit 16.211.2 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”. |
1. From our main web page, first click on “Investor Relations”.
2. Next, click on “Corporate Governance Structure”.
113
3. Finally, click on “Code of Ethics for Senior Management” or “Code of Ethics for Employees of PetroChina Company Limited”.
ITEM 16C —PRINCIPAL ACCOUNTANT FEES AND SERVICES
PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) has served as PetroChina’s independent registered public accountants for each of the fiscal years in the three-year period ended December 31, 2006,2009, for which audited financial statements appear in this annual report onForm 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 Prince’s 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, 20052008 and 2006.2009.
| | | | | | | | |
| | December 31, |
| | |
| | 2005 | | 2006 |
| | | | |
| | RMB | | RMB |
| | (in millions) |
Audit fees | | | 50 | | | | 140 | |
Audit-related fees | | | — | | | | — | |
Tax fees | | | — | * | | | — | * |
All other fees | | | — | | | | 25 | |
| | | | | | | | |
Total | | | 50 | | | | 165 | |
| | | | | | | | |
| | | | | | | | |
| | December 31, | |
| | 2008 | | | 2009 | |
| | RMB | | | RMB | |
| | (In millions) | |
|
Audit fees | | | 95 | | | | 80 | |
Audit-related fees | | | — | | | | — | |
Tax fees | | | — | | | | — | |
All other fees | | | — | | | | — | |
| | | | | | | | |
Total | | | 95 | | | | 80 | |
| | | | | | | | |
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 1RMB1 million for each of years ended December 31, 20052008 and 2006.2009.
Included in other fees mainly include fees approved
Audit Committee Pre-approved Policies and billed in 2006 in relation to the services in connection with the Company’s preparedness project on internal control procedures over financial reporting under Section 404 of the Sarbanes-Oxley Act.Procedures
131
| |
| Audit Committee Pre-approved Policies and Procedures |
Currently, all non-auditaudit services to be provided by our independent registered public accountants, PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), must be approved by our audit committee.
During 2006,2009, services relating to all audit-relatednon-audit-related fees provided to us by PricewaterhouseCoopers (Certified Public Accountants, Hong Kong) were approved by our audit committee in accordance with thede minimisexception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) ofRule 2-01 ofRegulation S-X.
ITEM 16D —EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
We rely on an exemption contained in paragraph (b)(1)(iv)(D) ofRule 10A-3 under the Securities and Exchange Act of 1934, as amended, from the New York Stock Exchange listing requirement that each member of the audit committee of a listed issuer must be independent. Our single non-independent audit committee member, who is a representative of CNPC, has only observer status on the audit committee of our board of directors and is not an executive officer of our company, which qualifies us for the exemption from the independence requirements available under paragraph (b)(1)(iv)(D) ofRule 10A-3. See “Item 6 — Directors, Senior Management and Employees — Board Practice — Audit Committee.” We believe our reliance on this exemption does not have any adverse effect on the ability of our audit committee to act independently.
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ITEM 16E —PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F —CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
ITEM 16G —CORPORATE GOVERNANCE
We are incorporated under the laws of the People’s Republic of China, or the PRC, with A Shares publicly traded on the Shanghai Stock Exchange, or the SSE and H Shares publicly traded on the Hong Kong Stock Exchange, or the HKSE and American Deposit Shares representing H Shares on the NYSE. As a result, our corporate governance framework is subject to the mandatory provisions of the PRC Company Law and the Corporate Governance Rules as well as the securities laws, regulations and the listing rules of Hong Kong and the United States.
The following discussion summarizes the significant differences between our corporate governance practices and those that would apply to a U.S. domestic issuer under the NYSE corporate governance rules.
Director Independence
Under the NYSE corporate governance rule 303A.01, a listed company must have a majority of independent directors on its board of directors. A company of which more than 50% of the voting power is held by an individual, a group or another company, or a controlled company, is not required to comply with this requirement. We are not required under the PRC Company Law and the HKSE Listing Rules to have a majority of independent directors on our board of directors. Currently, five of our fourteen directors are independent non-executive directors.
Under the NYSE corporate governance rule 303A.03, the non-management directors of a listed company must meet at regularly scheduled executive sessions without management. There are no mandatory requirements under the PRC Company Law and the HKSE Listing Rules that a listed company should hold, and we currently do not hold, such executive sessions.
Nominating/Corporate Governance Committee
Under the NYSE corporate governance rule 303A.04, a listed company must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties, but a controlled company is not required to comply with this requirement. We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, a nominating/corporate governance committee.
Compensation Committee
Under the NYSE corporate governance rule 303A.05, a listed company must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. A controlled company is not required to comply with this requirement. We are not required under the PRC Company Law to have a compensation committee. Under the Corporate Governance Code of the HKSE Listing Rules, a listed company must have a remuneration committee composed of a majority of independent non-executive directors, with a written terms of references that covers certain minimum specified duties.
We currently do not have a compensation committee composed entirely of independent directors. However, we have an evaluation and remuneration committee including a majority of independent non-executive directors.
115
Corporate Governance Guidelines
Under the NYSE corporate governance rule 303A.09, a listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects. We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, formal corporate governance guidelines.
However, we have the Articles of Association, the Rules and Procedures of Board of Directors and the Trial Implementation Rules for Compensation of Senior Management that address the following subjects:
| | |
| • | director qualification standards and responsibilities; |
|
| • | key board committee responsibilities; |
|
| • | director compensation; and |
|
| • | director orientation and continuing education. |
In addition, under the HKSE Listing Rules, we are expected to comply with, but may choose to deviate from, certain code provisions in the Corporate Governance Code of the Listing Rules which sets forth the principles and standards of corporate governance for listed companies. Pursuant to the HKSE Listing Rules, if we choose to deviate from any code provisions of the Corporate Governance Code, we must disclose such deviations in our annual report.
In 2009, we formulated the Administrative Measures on Independent Directors, the Administrative Rules on Holding of Company Shares by Directors, Supervisors and Senior Management, the Administrative Measures on Investor’s Relationship and the rules and procedures of the Audit Committee, the Performance Review and Compensation Committee, the Investment and Development Committee, and the Safety and Environmental Protection Committee. All these policies have further enhanced our corporate governance system and can ensure the better performance of duties of directors, supervisors, senior managers and committee members.
Code of Business Conduct and Ethics
Under the NYSE corporate governance rule 303A.10, a listed company must adopt and disclose its code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. We adopted our code of business conduct and ethics for senior management on March 23, 2004 and have disclosed the content of this code on our website and in the annual report onForm 20-F for the fiscal year ended December 31, 2003. In addition, we adopted our code of business conduct and ethics for employees on March 2, 2005 and have disclosed the content of this code on our website. We are not required under the PRC Company Law and the HKSE Listing Rules to have, and we do not currently have, a code of business conduct and ethics for directors. However, pursuant to the HKSE Listing Rules, all of our directors must comply with the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) as set out in the Listing Rules. The Model Code sets forth required standards with which the directors of a listed company must comply in securities transactions of the listed company.
Certification Requirements
Under the NYSE corporate governance rule 303A.12(a), each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. Our CEO is not required under the PRC Company Law and the HKSE Listing Rules to submit, and our CEO does not currently submit, such certification.
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.
116
ITEM 18 —FINANCIAL STATEMENTS
SeepageF-1 toF-78 F-56 following Item 19.
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 2007 Management Performance Contract (English Translation) |
4.2 | | Crude Oil Mutual Supply Framework Agreement, dated January 29, 2007, between China Petroleum and Chemical Corporation and PetroChina (English translation) |
4.3 | | Second Supplemental Agreement to Comprehensive products and Services Agreement, dated September 1, 2005, between CNPC and PetroChina (English translation)(1) |
4.4 | | Capital Contribution Agreement, dated June 9, 2005, among China National Oil and Gas Exploration and Development Corporation, Central Asia Petroleum Company Limited, Zhong You Kan Tan Kai Fa Company Limited and PetroChina (English Translation)(2) |
4.5 | | Transfer Agreement, dated June 9, 2005, between Zhong You Kan Tan Kai Fa Company Limited and PetroChina (English Translation)(2) |
| | | | |
Exhibit
| | |
Number | | Description of Exhibits |
|
| 1 | .1 | | Articles of Association (as amended) (English translation)(5) |
| 1 | .2 | | Articles of Association (as amended on May 15, 2008) (English translation)(5) |
| 4 | .1 | | 2010 Management Performance Contract (English Translation) |
| 4 | .2 | | Risk Operation Service Business Assets Transfer Agreement, dated August 23, 2007, between CNPC and PetroChina (English Translation)(5) |
| 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)(5) |
| 4 | .4 | | Annual Crude Oil Mutual Supply Framework Agreement, dated December 30, 2009, 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) |
| 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 andNo. 9.1-9.5 Areas, Karamay Oil Field (together with English translation)(4) |
| 4 | .19 | | Inspection and Maintenance Business Equity and Assets Transfer Agreement, dated April 28, 2008, between CNPC and Petrochina (English translation)(6) |
| 4 | .20 | | Assets Transfer Agreement, date June 10, 2008, between Petrochina and CNPC (English translation)(6) |
117
132
| | |
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)(2) |
4.7 | | Form of Non-competition Agreement between CNPC and PetroChina (together with English translation)(3) |
4.8 | | Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (together with English translation)(3) |
4.9 | | Form of Land Use Rights Leasing Contract between CNPC and PetroChina (together with English translation)(3) |
4.10 | | Form of Buildings Leasing Contract between CNPC and PetroChina (together with English translation)(3) |
4.11 | | Form of Trademark Licensing Contract between CNPC and PetroChina (together with English translation)(3) |
4.12 | | Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (together with English translation)(3) |
4.13 | | Form of Computer Software Licensing Contract between CNPC and PetroChina (together with English translation)(3) |
4.14 | | Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina (together with English translation)(3) |
4.15 | | Form of Guarantee of Debts Contract between CNPC and PetroChina (together with English translation)(3) |
4.16 | | Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina (together with English translation)(3) |
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)(3) |
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)(3) |
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) |
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(2) |
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(2) |
16.2 | | Code of Ethics for Employees(2) |
133
| | | | |
Exhibit
| | |
Number | | Description of Exhibits |
|
| 4 | .21 | | Agreement for the Sale and Purchase of Shares in Sun World Limited, dated August 27, 2008, among Petrochina, CNPC and China Petroleum Hong Kong (Holding) Limited (English translation)(6) |
| 4 | .22 | | Form of Risk Operation Service Business Assets Transfer Agreements, dated August November 19, 2008, among six branch companies of Petrochina and six subordinate enterprises of CNPC (English translation)(6) |
| 4 | .23 | | Equity Interests Transfer Agreement, dated May 15, 2009, between PetroChina Kunlun Gas Limited and China Petroleum Pipeline Bureau; Form of Equity Interests Transfer Agreements, dated May 15, 2009, between PetroChina Kunlun Gas Limited and China Huayou Group Corporation; Assets Transfer Agreement, dated May 15, 2009, between PetroChina Kunlun Gas Limited and China Petroleum Pipeline Bureau (English translation)(6) |
| 4 | .24 | | Asset Transfer Agreement, dated June 18, 2009, between PetroChina West Pipeline Company and CNPC West Pipeline Company Limited (English translation) |
| 4 | .25 | | Equity Transfer Agreement, dated August 28, 2009, among CNPC E&D, CNPC Central Asia and PetroChina (English translation) |
| 4 | .26 | | Asset Transfer Agreement, dated August 28, 2009, between ten branch companies of PetroChina and ten subordinated entities of CNPC including CNPC Daqing Petrochemical Factory (English translation) |
| 4 | .27 | | Contractual Rights Transfer Agreement, dated August 28, 2009, between Beijing Amu Darya Company and CNPCI (English translation) |
| 4 | .28 | | Equity Transfer Agreement, dated December 30, 2009, between PetroChina Kunlun Gas Limited and Daqing Petroleum Administrative Bureau (English translation) |
| 4 | .29 | | Subscription Agreement, Dated March 25, 2010 among PetroChina, CNPC and CPF (English translation) |
| 8 | .1 | | List of major subsidiaries |
| 11 | .1 | | Code of Ethics for Senior Management(3) |
| 11 | .2 | | Code of Ethics for Employees(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 |
| 15 | .1 | | Reserve Report for the year ended on December 31, 2009 prepared by DeGolyer and MacNaughton |
| 15 | .2 | | Reserve Report for the year ended on December 31, 2009 prepared by Gaffney, Cline & Associates (Consultants) Pte Ltd |
| | |
(1) | | Incorporated by reference to our annual report onForm 20-F for the fiscal year ended December 31, 2005 (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, 2004 (File2006(File No. 1-15006) filed with the Commission. |
|
(2) | | Incorporated by reference to our annual report onForm 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 onForm 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 onForm F-1 (FileNo. 333-11566) filed with the Commission, as declared effective on March 29, 2000. |
|
(5) | | Incorporated by reference to our annual report onForm 20-F for the fiscal year ended December 31, 2007(File No. 1-15006) filed with the Commission. |
|
(6) | | Incorporated by reference to our annual report onForm 20-F for the fiscal year ended December 31, 2008(File No. 1-15006) filed with the Commission. |
118
134
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing onForm 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 |
PETROCHINA COMPANY LIMITED
Name: Li Hualin
| | |
| Title: | Secretary to Board of Directors |
Date: May 11, 2007June 25, 2010
119
135
INDEX OF CONSOLIDATED FINANCIAL STATEMENTS
| | | | | |
| | Page |
| | |
PetroChina Company Limited and its Subsidiaries | | | | |
| Consolidated Financial Statements | | | | |
| | | | F-2 | |
| | | | F-3 | |
| | | | F-5F-3 | |
| | | | F-6F-4 | |
| | | | F-7F-5 | |
| | | | F-9F-7 | |
| | | | F-11F-8 | |
| | | | F-73F-49 | |
F-1
F-1
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Company’s 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 the Company’s management, including our principal executive officer and principal financial officer, the Company evaluated the effectiveness of the its internal control over financial reporting based on criteria established in the framework inInternal Control-integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company’s management has concluded that its internal control over financial reporting was effective as of December 31, 2006.
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 Company’s independent registered public accounting firm, PricewaterhouseCoopers (Certified Public Accountants, Hong Kong), has audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, as stated in their report which is included herein.
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of PetroChina Company Limited:
We have completed an integrated audit of PetroChina Company Limited’s 2006 consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 and audits of its 2005 and 2004 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements
In our opinion, the accompanying consolidated statementsstatement of income, consolidated balance sheetsfinancial position and the related consolidated statementsstatement of cash flows andcomprehensive income, of changes in equity and of cash flows (“consolidated financial statements”) present fairly, in all material respects, the consolidated financial position of PetroChina Company Limited (“the Company”(the “Company”) and its subsidiaries (collectively referred to as the “Group”) at December 31, 20062009 and 2005,2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 20062009 in conformity with International Financial Reporting Standards. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits of these consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes 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. We believe that our audits provide a reasonable basis for our opinion.
International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated net income for each of the three years in the period ended December 31, 2006 and the determination of consolidated equity at December 31, 2006 and 2005 to the extent summarized in Note 37 to the consolidated financial statements.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore,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, 2006,2009, based on criteria established inInternal Control — Integrated Frameworkissued by the COSO.Committee of Sponsoring Organisations of the Treadway Commission (“COSO”). The Company’s 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. Our responsibility is to express opinions on management’s assessmentthese financial statements and on the effectiveness of the Company’s internal control over financial reporting based on our audit.integrated audits. We conducted our audit of internal control over financial reportingaudits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. AnOur audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 includesincluded obtaining an understanding of internal control over financial reporting, evaluating management’s assessment,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control andbased on the assessed risk. Our audits also included performing such other procedures as we
F-3
consider considered necessary in the circumstances. We believe that our audit providesaudits provide a reasonable basis for our opinions.
A company’s 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 company’s 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 authorizationsauthorisations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorizedunauthorised acquisition, use, or disposition of the company’s 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 10, 2007 |
PricewaterhouseCoopers
Hong Kong, May 20, 2010
F-2
F-4
PETROCHINA COMPANY LIMITED
For the YearsYear Ended December 31, 2004, 20052009, 2008 and 2006
2007
(Amounts in millions except for per share data)millions)
| | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | |
| | | | | |
| | Notes | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
REVENUES | | | | | | | | | | | | | | | | |
| Sales and other operating revenues | | | | | | | 397,354 | | | | 552,229 | | | | 688,978 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Purchases, services and other | | | | | | | (114,249 | ) | | | (200,321 | ) | | | (271,123 | ) |
| Employee compensation costs | | | 5 | | | | (22,934 | ) | | | (29,675 | ) | | | (39,161 | ) |
| Exploration expenses, including exploratory dry holes | | | | | | | (12,090 | ) | | | (15,566 | ) | | | (18,822 | ) |
| Depreciation, depletion and amortization | | | | | | | (48,362 | ) | | | (51,305 | ) | | | (61,388 | ) |
| Selling, general and administrative expenses | | | | | | | (28,302 | ) | | | (36,538 | ) | | | (43,235 | ) |
| Shut down of manufacturing assets | | | 6 | | | | (220 | ) | | | — | | | | — | |
| Taxes other than income taxes | | | 7 | | | | (19,943 | ) | | | (23,616 | ) | | | (56,666 | ) |
| Other expense, net | | | | | | | (116 | ) | | | (3,037 | ) | | | (607 | ) |
| | | | | | | | | | | | |
TOTAL OPERATING EXPENSES | | | | | | | (246,216 | ) | | | (360,058 | ) | | | (491,002 | ) |
| | | | | | | | | | | | |
INCOME FROM OPERATIONS | | | | | | | 151,138 | | | | 192,171 | | | | 197,976 | |
| | | | | | | | | | | | |
FINANCE COSTS | | | | | | | | | | | | | | | | |
| Exchange gain | | | | | | | 225 | | | | 942 | | | | 1,830 | |
| Exchange loss | | | | | | | (217 | ) | | | (854 | ) | | | (1,756 | ) |
| Interest income | | | | | | | 1,373 | | | | 1,924 | | | | 2,066 | |
| Interest expense | | | 8 | | | | (2,896 | ) | | | (2,762 | ) | | | (3,220 | ) |
| | | | | | | | | | | | |
TOTAL NET FINANCE COSTS | | | | | | | (1,515 | ) | | | (750 | ) | | | (1,080 | ) |
| | | | | | | | | | | | |
INCOME FROM EQUITY AFFILIATES AND JOINTLY CONTROLLED ENTITIES | | | 19 | | | | 1,621 | | | | 2,401 | | | | 2,277 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | | 151,244 | | | | 193,822 | | | | 199,173 | |
INCOME TAXES | | | 9 | | | | (43,598 | ) | | | (54,180 | ) | | | (49,776 | ) |
| | | | | | | | | | | | |
INCOME FOR THE YEAR | | | | | | | 107,646 | | | | 139,642 | | | | 149,397 | |
| | | | | | | | | | | | |
ATTRIBUTABLE TO: | | | | | | | | | | | | | | | | |
| | EQUITY HOLDERS OF THE COMPANY | | | | | | | 103,843 | | | | 133,362 | | | | 142,224 | |
| | MINORITY INTEREST | | | | | | | 3,803 | | | | 6,280 | | | | 7,173 | |
| | | | | | | | | | | | |
| | | | | | | 107,646 | | | | 139,642 | | | | 149,397 | |
| | | | | | | | | | | | |
BASIC AND DILUTED NET INCOME PER SHARE FOR INCOME ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY DURING THE YEAR | | | 10 | | | | 0.59 | | | | 0.75 | | | | 0.79 | |
| | | | | | | | | | | | |
NUMBER OF SHARES | | | 10 | | | | 175,824 | | | | 179,021 | | | | 179,021 | |
| | | | | | | | | | | | |
DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | | | | | | | | | | | | | | | | |
| Interim dividends declared during the year | | | 11 | | | | 20,381 | | | | 27,731 | | | | 36,307 | |
| Final dividends proposed after the balance sheet date | | | 11 | | | | 25,936 | | | | 32,282 | | | | 27,694 | |
| | | | | | | | | | | | |
| | | | | | | 46,317 | | | | 60,013 | | | | 64,001 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | Notes | | 2009 | | | 2008 | | | 2007 | |
| | | | RMB | | | RMB | | | RMB | |
|
TURNOVER | | 6 | | | 1,019,275 | | | | 1,072,604 | | | | 837,542 | |
| | | | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | | | |
Purchases, services and other | | | | | (492,472 | ) | | | (562,851 | ) | | | (369,786 | ) |
Employee compensation costs | | 8 | | | (65,977 | ) | | | (62,167 | ) | | | (50,940 | ) |
Exploration expenses, including exploratory dry holes | | | | | (19,398 | ) | | | (21,879 | ) | | | (20,956 | ) |
Depreciation, depletion and amortisation | | | | | (92,259 | ) | | | (94,759 | ) | | | (67,423 | ) |
Selling, general and administrative expenses | | | | | (65,423 | ) | | | (59,617 | ) | | | (52,389 | ) |
Taxes other than income taxes | | 9 | | | (135,465 | ) | | | (124,132 | ) | | | (73,806 | ) |
Other (expenses)/income, net | | | | | (4,837 | ) | | | 12,372 | | | | (1,225 | ) |
| | | | | | | | | | | | | | |
TOTAL OPERATING EXPENSES | | | | | (875,831 | ) | | | (913,033 | ) | | | (636,525 | ) |
| | | | | | | | | | | | | | |
PROFIT FROM OPERATIONS | | | | | 143,444 | | | | 159,571 | | | | 201,017 | |
| | | | | | | | | | | | | | |
FINANCE COSTS | | | | | | | | | | | | | | |
Exchange gain | | | | | 552 | | | | 1,774 | | | | 1,808 | |
Exchange loss | | | | | (1,335 | ) | | | (2,855 | ) | | | (2,559 | ) |
Interest income | | | | | 1,459 | | | | 2,277 | | | | 2,101 | |
Interest expense | | 10 | | | (5,272 | ) | | | (3,044 | ) | | | (3,673 | ) |
| | | | | | | | | | | | | | |
TOTAL NET FINANCE COSTS | | | | | (4,596 | ) | | | (1,848 | ) | | | (2,323 | ) |
| | | | | | | | | | | | | | |
SHARE OF PROFIT OF ASSOCIATES AND JOINTLY CONTROLLED ENTITIES | | 17 | | | 1,184 | | | | 4,290 | | | | 6,445 | |
| | | | | | | | | | | | | | |
PROFIT BEFORE INCOME TAX EXPENSE | | 7 | | | 140,032 | | | | 162,013 | | | | 205,139 | |
INCOME TAX EXPENSE | | 12 | | | (33,473 | ) | | | (35,211 | ) | | | (49,802 | ) |
| | | | | | | | | | | | | | |
PROFIT FOR THE YEAR | | | | | 106,559 | | | | 126,802 | | | | 155,337 | |
| | | | | | | | | | | | | | |
OTHER COMPREHENSIVE INCOME: | | | | | | | | | | | | | | |
Currency translation differences | | | | | (3,500 | ) | | | (2,676 | ) | | | (1,852 | ) |
Fair value gain/(loss) fromavailable-for-sale financial assets | | | | | 191 | | | | (340 | ) | | | 395 | |
Income tax relating to components of other comprehensive income/(loss) | | | | | (38 | ) | | | 67 | | | | (87 | ) |
| | | | | | | | | | | | | | |
OTHER COMPREHENSIVE LOSS, NET OF TAX | | | | | (3,347 | ) | | | (2,949 | ) | | | (1,544 | ) |
| | | | | | | | | | | | | | |
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | | | | | 103,212 | | | | 123,853 | | | | 153,793 | |
| | | | | | | | | | | | | | |
PROFIT FOR THE YEAR ATTRIBUTABLE TO: | | | | | | | | | | | | | | |
Owners of the Company | | | | | 103,387 | | | | 114,453 | | | | 146,796 | |
Non-controlling interest | | | | | 3,172 | | | | 12,349 | | | | 8,541 | |
| | | | | | | | | | | | | | |
| | | | | 106,559 | | | | 126,802 | | | | 155,337 | |
| | | | | | | | | | | | | | |
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO: | | | | | | | | | | | | | | |
Owners of the Company | | | | | 102,067 | | | | 113,044 | | | | 146,144 | |
Non-controlling interest | | | | | 1,145 | | | | 10,809 | | | | 7,649 | |
| | | | | | | | | | | | | | |
| | | | | 103,212 | | | | 123,853 | | | | 153,793 | |
| | | | | | | | | | | | | | |
BASIC AND DILUTED EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY (RMB) | | 14 | | | 0.56 | | | | 0.63 | | | | 0.82 | |
| | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-3
F-5
PETROCHINA COMPANY LIMITED
STATEMENT OF FINANCIAL POSITION
As of December 31, 20052009 and 2006
2008
(Amounts in millions)
| | | | | | | | | | | | |
| | | | At December 31, | |
| | | | | |
| | Notes | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | | | RMB | | | RMB | |
ASSETS |
Current assets | | | | | | | | | | | | |
Cash and cash equivalents | | | 12 | | | | 80,905 | | | | 48,559 | |
Time deposits with maturities over three months but within one year | | | | | | | 1,691 | | | | 3,012 | |
Investments in collateralized loans | | | 13 | | | | 235 | | | | — | |
Notes receivable | | | 14 | | | | 3,028 | | | | 2,844 | |
Accounts receivable, less provision for impairment of accounts receivables | | | 15 | | | | 4,630 | | | | 8,488 | |
Inventories | | | 16 | | | | 62,733 | | | | 76,038 | |
Prepaid expenses and other current assets | | | 17 | | | | 22,673 | | | | 23,281 | |
| | | | | | | | | |
TOTAL CURRENT ASSETS | | | | | | | 175,895 | | | | 162,222 | |
Property, plant and equipment, less accumulated depreciation, depletion and amortization | | | 18 | | | | 563,890 | | | | 645,337 | |
Investments in equity affiliates and jointly controlled entities | | | 19 | | | | 12,378 | | | | 32,956 | |
Available-for-sale investments | | | 20 | | | | 1,230 | | | | 2,054 | |
Advance operating lease payments | | | 21 | | | | 16,235 | | | | 20,468 | |
Intangible and other assets | | | 22 | | | | 5,011 | | | | 6,627 | |
Time deposits with maturities over one year | | | | | | | 3,428 | | | | 2,499 | |
| | | | | | | | | |
TOTAL ASSETS | | | | | | | 778,067 | | | | 872,163 | |
| | | | | | | | | |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
Current liabilities | | | | | | | | | | | | |
Short-term debts | | | 24 | | | | 28,689 | | | | 35,763 | |
Accounts payable and accrued liabilities | | | 23 | | | | 99,758 | | | | 120,182 | |
Income tax payable | | | | | | | 20,567 | | | | 17,744 | |
Other taxes payable | | | | | | | 4,824 | | | | 6,190 | |
| | | | | | | | | |
TOTAL CURRENT LIABILITIES | | | | | | | 153,838 | | | | 179,879 | |
Long-term debts | | | 24 | | | | 44,570 | | | | 35,634 | |
Other long-term obligations | | | | | | | 1,046 | | | | 995 | |
Asset retirement obligations | | | 25 | | | | 14,187 | | | | 18,481 | |
Deferred taxes | | | 26 | | | | 20,759 | | | | 19,583 | |
| | | | | | | | | |
TOTAL LIABILITIES | | | | | | | 234,400 | | | | 254,572 | |
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | | | | | | | | | | | | |
State-owned shares | | | 27 | | | | 157,922 | | | | 157,922 | |
H shares | | | 27 | | | | 21,099 | | | | 21,099 | |
| | | | | | | | | |
Share capital, issued and outstanding, RMB 1.00 Par value | | | 27 | | | | 179,021 | | | | 179,021 | |
Retained earnings | | | | | | | 203,812 | | | | 264,092 | |
Capital reserve | | | 28 | | | | (8,881 | ) | | | (8,881 | ) |
Revaluation reserve | | | 28 | | | | 79,946 | | | | 79,946 | |
Statutory common reserve fund | | | 28 | | | | 48,736 | | | | 89,928 | |
Statutory common welfare fund | | | 28 | | | | 27,837 | | | | — | |
Currency translation differences | | | 28 | | | | (379 | ) | | | (570 | ) |
Other reserves | | | 28 | | | | (14,703 | ) | | | (16,859 | ) |
MINORITY INTEREST | | | | | | | 28,278 | | | | 30,914 | |
| | | | | | | | | |
TOTAL EQUITY | | | | | | | 543,667 | | | | 617,591 | |
| | | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | | | | | | 778,067 | | | | 872,163 | |
| | | | | | | | | |
| | | | | | | | | | | | |
| | Notes | | | 2009 | | | 2008 | |
| | | | | RMB | | | RMB | |
|
NON-CURRENT ASSETS | | | | | | | | | | | | |
Property, plant and equipment | | | 16 | | | | 1,075, 467 | | | | 900,424 | |
Investments in associates and jointly controlled entities | | | 17 | | | | 28,223 | | | | 28,850 | |
Available-for-sale financial assets | | | 18 | | | | 2,343 | | | | 2,034 | |
Advance operating lease payments | | | 20 | | | | 30,236 | | | | 26,280 | |
Intangible and other assets | | | 21 | | | | 18,017 | | | | 10,694 | |
Deferred tax assets | | | 31 | | | | 289 | | | | 497 | |
Time deposits with maturities over one year | | | | | | | 1,330 | | | | 2,510 | |
| | | | | | | | | | | | |
TOTAL NON-CURRENT ASSETS | | | | | | | 1,155,905 | | | | 971,289 | |
| | | | | | | | | | | | |
CURRENT ASSETS | | | | | | | | | | | | |
Inventories | | | 22 | | | | 114,781 | | | | 90,685 | |
Accounts receivable | | | 23 | | | | 28,785 | | | | 16,810 | |
Prepaid expenses and other current assets | | | 24 | | | | 59,595 | | | | 69,557 | |
Notes receivable | | | 25 | | | | 4,268 | | | | 4,319 | |
Time deposits with maturities over three months but within one year | | | | | | | 29 | | | | 10,425 | |
Cash and cash equivalents | | | 26 | | | | 86,925 | | | | 33,150 | |
| | | | | | | | | | | | |
TOTAL CURRENT ASSETS | | | | | | | 294,383 | | | | 224,946 | |
| | | | | | | | | | | | |
CURRENT LIABILITIES | | | | | | | | | | | | |
Accounts payable and accrued liabilities | | | 27 | | | | 204,739 | | | | 156,780 | |
Income taxes payable | | | | | | | 9,721 | | | | 1,271 | |
Other taxes payable | | | | | | | 25,242 | | | | 13,930 | |
Short-term borrowings | | | 28 | | | | 148,851 | | | | 93,670 | |
| | | | | | | | | | | | |
TOTAL CURRENT LIABILITIES | | | | | | | 388,553 | | | | 265,651 | |
| | | | | | | | | | | | |
NET CURRENT LIABILITIES | | | | | | | (94,170 | ) | | | (40,705 | ) |
| | | | | | | | | | | | |
TOTAL ASSETS LESS CURRENT LIABILITIES | | | | | | | 1,061,735 | | | | 930,584 | |
| | | | | | | | | | | | |
EQUITY | | | | | | | | | | | | |
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY: | | | | | | | | | | | | |
Share capital | | | 29 | | | | 183,021 | | | | 183,021 | |
Retained earnings | | | | | | | 424,067 | | | | 378,473 | |
Reserves | | | 30 | | | | 240,135 | | | | 229,416 | |
| | | | | | | | | | | | |
TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY | | | | | | | 847,223 | | | | 790,910 | |
NON-CONTROLLING INTEREST | | | | | | | 60,478 | | | | 56,930 | |
| | | | | | | | | | | | |
TOTAL EQUITY | | | | | | | 907,701 | | | | 847,840 | |
| | | | | | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | | | | | |
Long-term borrowings | | | 28 | | | | 85,471 | | | | 32,852 | |
Asset retirement obligations | | | 32 | | | | 44,747 | | | | 36,262 | |
Deferred tax liabilities | | | 31 | | | | 21,449 | | | | 12,466 | |
Other long-term obligations | | | | | | | 2,367 | | | | 1,164 | |
| | | | | | | | | | | | |
TOTAL NON-CURRENT LIABILITIES | | | | | | | 154,034 | | | | 82,744 | |
| | | | | | | | | | | | |
TOTAL EQUITY AND NON-CURRENT LIABILITIES | | | | | | | 1,061,735 | | | | 930,584 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
| | | | |
| | | | |
Chairman | | Vice Chairman and President | | Chief Financial Officer |
Jiang Jiemin | | Zhou Jiping | | Zhou Mingchun |
F-4
F-6
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS
For the YearsYear Ended December 31, 2004, 20052009, 2008 and 2006
2007
(Amounts in millions)
| | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | |
| | | | | |
| | Notes | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | | | | | |
| Net income | | | | | | | 107,646 | | | | 139,642 | | | | 149,397 | |
| Adjustments for: | | | | | | | | | | | | | | | | |
| | Income taxes | | | 9 | | | | 43,598 | | | | 54,180 | | | | 49,776 | |
| | Depreciation, depletion and amortization | | | | | | | 48,362 | | | | 51,305 | | | | 61,388 | |
| | Provision for shut down of manufacturing assets | | | 6 | | | | 220 | | | | — | | | | — | |
| | Dry hole costs | | | | | | | 4,741 | | | | 6,547 | | | | 9,494 | |
| | Income from equity affiliates and jointly controlled entities | | | 19 | | | | (1,621 | ) | | | (2,401 | ) | | | (2,277 | ) |
| | Provision for impairment of receivables, net | | | 15, 17 | | | | 676 | | | | (455 | ) | | | (316 | ) |
| | Write down in inventories, net | | | 16 | | | | 147 | | | | (139 | ) | | | 140 | |
| | Impairment of available-for-sale investments, net | | | 20 | | | | 26 | | | | (23 | ) | | | 32 | |
| | Loss on disposal of property, plant and equipment | | | | | | | 2,818 | | | | 2,026 | | | | 1,753 | |
| | Loss/(Profit) on disposal of equity affiliates and jointly controlled entities | | | | | | | 33 | | | | 2 | | | | (10 | ) |
| | Loss/(Profit) on disposal of available-for-sale investments | | | | | | | 6 | | | | 27 | | | | (3 | ) |
| | Loss on disposal of intangible and other assets | | | | | | | 50 | | | | 106 | | | | 192 | |
| | Dividend income | | | 20 | | | | (113 | ) | | | (109 | ) | | | (208 | ) |
| | Interest income | | | | | | | (1,373 | ) | | | (1,924 | ) | | | (2,066 | ) |
| | Interest expense | | | 8 | | | | 2,896 | | | | 2,762 | | | | 3,220 | |
| Advance payments on long-term operating leases | | | | | | | (5,624 | ) | | | (5,170 | ) | | | (5,694 | ) |
| Changes in working capital: | | | | | | | | | | | | | | | | |
| | — accounts receivable and prepaid expenses and other current assets | | | | | | | (6,195 | ) | | | 165 | | | | (3,115 | ) |
| | — inventories | | | | | | | (17,460 | ) | | | (15,896 | ) | | | (13,445 | ) |
| | — accounts payable and accrued liabilities | | | | | | | 398 | | | | 22,089 | | | | 5,346 | |
| | | | | | | | | | | | |
CASH GENERATED FROM OPERATIONS | | | | | | | 179,231 | | | | 252,734 | | | | 253,604 | |
| Interest received | | | | | | | 1,373 | | | | 1,917 | | | | 1,993 | |
| Interest paid | | | | | | | (3,998 | ) | | | (3,628 | ) | | | (3,700 | ) |
| Income taxes paid | | | | | | | (34,915 | ) | | | (47,138 | ) | | | (53,795 | ) |
| | | | | | | | | | | | |
NET CASH PROVIDED BY OPERATING ACTIVITIES | | | | | | | 141,691 | | | | 203,885 | | | | 198,102 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | |
| | RMB | | | RMB | | | RMB | |
|
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | | | | |
Profit for the year | | | 106,559 | | | | 126,802 | | | | 155,337 | |
Adjustments for: | | | | | | | | | | | | |
Income tax expense | | | 33,473 | | | | 35,211 | | | | 49,802 | |
Depreciation, depletion and amortisation | | | 92,259 | | | | 94,759 | | | | 67,423 | |
Capitalised exploratory costs charged to expense | | | 10,019 | | | | 10,341 | | | | 9,161 | |
Share of profit of associates and jointly controlled entities | | | (1,184 | ) | | | (4,290 | ) | | | (6,445 | ) |
(Reversal) of provision/provision for impairment of receivables, net | | | (123 | ) | | | 4 | | | | (2,318 | ) |
Write down in inventories, net | | | 354 | | | | 8,593 | | | | 55 | |
Impairment ofavailable-for-sale financial assets, net | | | 2 | | | | 45 | | | | — | |
Impairment of investments in associates and jointly controlled entities | | | 8 | | | | 29 | | | | 5 | |
Loss on disposal of property, plant and equipment | | | 1,642 | | | | 2,602 | | | | 1,808 | |
Loss/(gain) on disposal of intangible and other assets | | | 10 | | | | 19 | | | | (2 | ) |
(Gain)/loss on disposal of investments in associates and jointly controlled entities | | | (33 | ) | | | 3 | | | | (320 | ) |
Gain on disposal ofavailable-for-sale financial assets | | | (4 | ) | | | (5 | ) | | | (142 | ) |
Gain on disposal of subsidiaries | | | (22 | ) | | | (259 | ) | | | — | |
Dividend income | | | (177 | ) | | | (252 | ) | | | (126 | ) |
Interest income | | | (1,459 | ) | | | (2,277 | ) | | | (2,101 | ) |
Interest expense | | | 5,272 | | | | 3,044 | | | | 3,673 | |
Advance payments on long-term operating leases | | | (6,045 | ) | | | (4,675 | ) | | | (4,803 | ) |
Changes in working capital: | | | | | | | | | | | | |
Accounts receivable and prepaid expenses and other current assets | | | 16,240 | | | | (26,815 | ) | | | (16,054 | ) |
Inventories | | | (20,044 | ) | | | (10,775 | ) | | | (12,041 | ) |
Accounts payable and accrued liabilities | | | 41,637 | | | | (5,715 | ) | | | 19,799 | |
| | | | | | | | | | | | |
CASH FLOWS GENERATED FROM OPERATIONS | | | 278,384 | | | | 226,389 | | | | 262,711 | |
Income taxes paid | | | (16,412 | ) | | | (53,924 | ) | | | (55,048 | ) |
| | | | | | | | | | | | |
NET CASH FLOWS FROM OPERATING ACTIVITIES | | | 261,972 | | | | 172,465 | | | | 207,663 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-5
F-7
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWS — (Continued)
For the YearsYear Ended December 31, 2004, 20052009, 2008 and 2006
2007
(Amounts in millions)
| | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | |
| | | | | |
| | Notes | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | | | | | |
| Capital expenditures | | | | | | | (94,045 | ) | | | (119,227 | ) | | | (130,409 | ) |
| Acquisition of equity affiliates and jointly controlled entities | | | | | | | (1,000 | ) | | | (2,334 | ) | | | (22,549 | ) |
| Acquisition of available-for-sale investments | | | | | | | (476 | ) | | | (782 | ) | | | (62 | ) |
| Net (acquisition)/proceeds of investments in collateralized loans with maturities not greater than three months | | | | | | | (8,049 | ) | | | 26,896 | | | | 235 | |
| Acquisition of investments in collateralized loans with maturities over three months | | | | | | | (8,301 | ) | | | (443 | ) | | | — | |
| Acquisition of intangible assets | | | | | | | (531 | ) | | | (1,600 | ) | | | (1,358 | ) |
| Acquisition of other non-current assets | | | | | | | (280 | ) | | | (1,133 | ) | | | (1,706 | ) |
| Return of capital to minority interest due to liquidation of subsidiaries | | | | | | | — | | | | (935 | ) | | | — | |
| Purchase from minority interest of listed subsidiaries | | | 38 | | | | — | | | | (2,019 | ) | | | (4,095 | ) |
| Other purchase from minority interest | | | | | | | — | | | | (376 | ) | | | (640 | ) |
| Proceeds from sale of investments in collateralized loans with maturities over three months | | | | | | | 7,357 | | | | 6,529 | | | | — | |
| Repayment of capital by equity affiliates and jointly controlled entities | | | | | | | 272 | | | | 115 | | | | 99 | |
| Proceeds from disposal of property, plant and equipment | | | | | | | 873 | | | | 898 | | | | 346 | |
| Proceeds from disposal of equity affiliates and jointly controlled entities | | | | | | | 27 | | | | 1,102 | | | | 69 | |
| Proceeds from disposal of available-for-sale investments | | | | | | | 83 | | | | 976 | | | | 4 | |
| Proceeds from disposal of intangible and other non-current assets | | | | | | | 37 | | | | 22 | | | | 2 | |
| Dividends received | | | | | | | 800 | | | | 678 | | | | 2,099 | |
| Decrease/(Increase) in time deposits with maturities over three months | | | | | | | 957 | | | | 57 | | | | (486 | ) |
| | | | | | | | | | | | |
NET CASH USED FOR INVESTING ACTIVITIES | | | | | | | (102,276 | ) | | | (91,576 | ) | | | (158,451 | ) |
| | | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | | | | | |
| Repayments of short-term debts | | | | | | | (23,862 | ) | | | (34,529 | ) | | | (28,349 | ) |
| Repayments of long-term debts | | | | | | | (28,331 | ) | | | (19,175 | ) | | | (17,587 | ) |
| Principal payment on capital lease obligations | | | | | | | (35 | ) | | | (21 | ) | | | — | |
| Dividends paid to minority interest | | | | | | | (736 | ) | | | (1,486 | ) | | | (3,033 | ) |
| Cash payment for acquisition of CNPC marketing enterprises | | | | | | | (1,476 | ) | | | — | | | | — | |
| Dividends paid to equity holders of the Company | | | 11 | | | | (34,328 | ) | | | (53,667 | ) | | | (68,589 | ) |
| Increase in short-term debts | | | | | | | 28,113 | | | | 32,019 | | | | 30,183 | |
| Increase in long-term debts | | | | | | | 18,453 | | | | 15,514 | | | | 14,195 | |
| Capital contribution from minority interest | | | | | | | 2,145 | | | | 454 | | | | 1,492 | |
| Change in other long-term obligations | | | | | | | 471 | | | | (1,435 | ) | | | (51 | ) |
| Issuance of H shares | | | 27 | | | | — | | | | 19,692 | | | | — | |
| | | | | | | | | | | | |
NET CASH USED FOR FINANCING ACTIVITIES | | | | | | | (39,586 | ) | | | (42,634 | ) | | | (71,739 | ) |
| | | | | | | | | | | | |
TRANSLATION OF FOREIGN CURRENCY | | | | | | | 246 | | | | (458 | ) | | | (258 | ) |
| | | | | | | | | | | | |
| Increase/(Decrease) in cash and cash equivalents | | | | | | | 75 | | | | 69,217 | | | | (32,346 | ) |
| Cash and cash equivalents at beginning of the year | | | 12 | | | | 11,613 | | | | 11,688 | | | | 80,905 | |
| | | | | | | | | | | | |
| Cash and cash equivalents at end of the year | | | 12 | | | | 11,688 | | | | 80,905 | | | | 48,559 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | |
| | RMB | | | RMB | | | RMB | |
|
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | |
Capital expenditures | | | (257,562 | ) | | | (215,610 | ) | | | (173,528 | ) |
Acquisition of investments in associates and jointly controlled entities | | | (1,487 | ) | | | (3,641 | ) | | | (1,903 | ) |
Acquisition ofavailable-for-sale financial assets | | | (111 | ) | | | (23 | ) | | | (328 | ) |
Consolidation of PetroKazakhstan Inc. | | | — | | | | — | | | | 1,542 | |
Acquisition of intangible assets and other non-current assets | | | (3,505 | ) | | | (3,909 | ) | | | (3,378 | ) |
Purchase of non-controlling interest | | | (533 | ) | | | (177 | ) | | | (178 | ) |
Acquisition of subsidiaries | | | (16,451 | ) | | | (6,693 | ) | | | — | |
Repayment of capital by associates and jointly controlled entities | | | — | | | | — | | | | 6,618 | |
Proceeds from disposal of property, plant and equipment | | | 4,053 | | | | 436 | | | | 1,028 | |
Proceeds from disposal of investments in associates and jointly controlled entities | | | 139 | | | | 67 | | | | 1,033 | |
Proceeds from disposal of subsidiaries | | | 60 | | | | 535 | | | | — | |
Proceeds from disposal ofavailable-for-sale financial assets | | | 136 | | | | 52 | | | | 276 | |
Proceeds from disposal of intangible and other non-current assets | | | 26 | | | | 37 | | | | — | |
Interest received | | | 1,425 | | | | 2,365 | | | | 2,074 | |
Dividends received | | | 783 | | | | 4,095 | | | | 1,113 | |
Decrease in time deposits with maturities over three months | | | 11,574 | | | | 10,669 | | | | (18,025 | ) |
| | | | | | | | | | | | |
NET CASH FLOWS USED FOR INVESTING ACTIVITIES | | | (261,453 | ) | | | (211,797 | ) | | | (183,656 | ) |
| | | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
Repayments of short-term borrowings | | | (113,212 | ) | | | (84,471 | ) | | | (33,556 | ) |
Repayments of long-term borrowings | | | (7,947 | ) | | | (14,196 | ) | | | (24,218 | ) |
Interest paid | | | (5,238 | ) | | | (4,065 | ) | | | (4,232 | ) |
Dividends paid to non-controlling interest | | | (2,425 | ) | | | (2,805 | ) | | | (4,832 | ) |
Dividends paid to owners of the Company | | | (50,092 | ) | | | (52,835 | ) | | | (64,517 | ) |
Dividends paid to owners from business combinations pre-acquisition | | | — | | | | (801 | ) | | | (9 | ) |
Issuance of A shares | | | — | | | | — | | | | 66,243 | |
Increase in short-term borrowings | | | 157,576 | | | | 153,444 | | | | 37,236 | |
Increase in long-term borrowings | | | 67,880 | | | | 4,472 | | | | 20,650 | |
Capital contribution from non-controlling interest | | | 7,098 | | | | 8,788 | | | | 1,364 | |
Capital reduction of subsidiaries | | | (671 | ) | | | (3,754 | ) | | | — | |
Increase in other long-term obligations | | | 108 | | | | — | | | | 33 | |
| | | | | | | | | | | | |
NET CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES | | | 53,077 | | | | 3,777 | | | | (5,838 | ) |
| | | | | | | | | | | | |
TRANSLATION OF FOREIGN CURRENCY | | | 179 | | | | (112 | ) | | | (221 | ) |
| | | | | | | | | | | | |
Increase/(decrease) in cash and cash equivalents | | | 53,775 | | | | (35,667 | ) | | | 17,948 | |
Cash and cash equivalents at beginning of the year | | | 33,150 | | | | 68,817 | | | | 50,869 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of the year | | | 86,925 | | | | 33,150 | | | | 68,817 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-6
F-8
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTSSTATEMENT OF CHANGES IN EQUITY
For the YearsYear Ended December 31, 2004, 20052009, 2008 and 2006
2007
(Amounts in millions)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Attributable to equity holders | | | | | |
| | of the Company | | | | | |
| | | | | | | |
| | Share | | | Retained | | | | | Minority | | | Total | |
| | Capital | | | Earnings | | | Reserves | | | Subtotal | | | interest | | | equity | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
Balance at January 1, 2004 | | | 175,824 | | | | 88,152 | | | | 93,952 | | | | 357,928 | | | | 8,966 | | | | 366,894 | |
| | | | | | | | | | | | | | | | | | |
Currency translation differences | | | — | | | | — | | | | 330 | | | | 330 | | | | 677 | | | | 1,007 | |
| | | | | | | | | | | | | | | | | | |
Net income recognized directly in equity | | | — | | | | — | | | | 330 | | | | 330 | | | | 677 | | | | 1,007 | |
Net income for the year ended December 31, 2004 | | | — | | | | 103,843 | | | | — | | | | 103,843 | | | | 3,803 | | | | 107,646 | |
| | | | | | | | | | | | | | | | | | |
Total recognized income for 2004 | | | — | | | | 103,843 | | | | 330 | | | | 104,173 | | | | 4,480 | | | | 108,653 | |
| | | | | | | | | | | | | | | | | | |
Transfer to reserves (Note 28) | | | — | | | | (14,552 | ) | | | 14,552 | | | | — | | | | — | | | | — | |
Final dividends for 2003 (Note 11) | | | — | | | | (13,947 | ) | | | — | | | | (13,947 | ) | | | — | | | | (13,947 | ) |
Interim dividends for 2004 (Note 11) | | | — | | | | (20,381 | ) | | | — | | | | (20,381 | ) | | | — | | | | (20,381 | ) |
Dividends to minority interest | | | — | | | | — | | | | — | | | | — | | | | (656 | ) | | | (656 | ) |
Other movements of minority interest | | | — | | | | — | | | | — | | | | — | | | | 2,409 | | | | 2,409 | |
| | | | | | | | | | | | | | | | | | |
Balance at December 31, 2004 | | | 175,824 | | | | 143,115 | | | | 108,834 | | | | 427,773 | | | | 15,199 | | | | 442,972 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Non-
| | | | |
| | | | | Controlling
| | | Total
| |
| | Attributable to Owners of the Company | | | Interest | | | Equity | |
| | Share
| | | Retained
| | | | | | | | | | | | | |
| | Capital | | | Earnings | | | Reserves | | | Subtotal | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
|
Balance at December 31, 2006 | | | 179,021 | | | | 267,850 | | | | 143,552 | | | | 590,423 | | | | 31,749 | | | | 622,172 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Business combinations under common control | | | — | | | | (183 | ) | | | 174 | | | | (9 | ) | | | 456 | | | | 447 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at January 1, 2007 | | | 179,021 | | | | 267,667 | | | | 143,726 | | | | 590,414 | | | | 32,205 | | | | 622,619 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income/(loss) for the year ended December 31, 2007 | | | — | | | | 146,796 | | | | (652 | ) | | | 146,144 | | | | 7,649 | | | | 153,793 | |
Special Reserve-Safety Fund Reserve | | | — | | | | (3,536 | ) | | | 3,536 | | | | — | | | | — | | | | — | |
Transfer to reserves | | | — | | | | (12,768 | ) | | | 12,768 | | | | — | | | | — | | | | — | |
Final dividend for 2006 | | | — | | | | (27,694 | ) | | | — | | | | (27,694 | ) | | | — | | | | (27,694 | ) |
Interim dividend for 2007 (Note 15) | | | — | | | | (36,823 | ) | | | — | | | | (36,823 | ) | | | — | | | | (36,823 | ) |
Dividends to non-controlling interest | | | — | | | | — | | | | — | | | | — | | | | (4,823 | ) | | | (4,823 | ) |
Purchase of non-controlling interest in subsidiaries | | | — | | | | — | | | | (113 | ) | | | (113 | ) | | | (65 | ) | | | (178 | ) |
Consolidation of PetroKazakhstan Inc. | | | — | | | | — | | | | — | | | | — | | | | 8,101 | | | | 8,101 | |
Issuance of A shares | | | 4,000 | | | | — | | | | 62,243 | | | | 66,243 | | | | — | | | | 66,243 | |
Capital contribution from non-controlling interest | | | — | | | | — | | | | — | | | | — | | | | 1,364 | | | | 1,364 | |
Dividends to owners from business combinationspre-acquisition | | | — | | | | (2 | ) | | | — | | | | (2 | ) | | | (15 | ) | | | (17 | ) |
Other | | | — | | | | — | | | | 77 | | | | 77 | | | | 57 | | | | 134 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2007 | | | 183,021 | | | | 333,640 | | | | 221,585 | | | | 738,246 | | | | 44,473 | | | | 782,719 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income/(loss) for the year ended December 31, 2008 | | | — | | | | 114,453 | | | | (1,409 | ) | | | 113,044 | | | | 10,809 | | | | 123,853 | |
Special Reserve-Safety Fund Reserve | | | — | | | | (3,214 | ) | | | 3,214 | | | | — | | | | — | | | | — | |
Transfer to reserves | | | — | | | | (12,770 | ) | | | 12,770 | | | | — | | | | — | | | | — | |
Final dividends for 2007 (Note 15) | | | — | | | | (28,708 | ) | | | — | | | | (28,708 | ) | | | — | | | | (28,708 | ) |
Interim dividends for 2008 (Note 15) | | | — | | | | (24,127 | ) | | | — | | | | (24,127 | ) | | | — | | | | (24,127 | ) |
Dividends to non-controlling interest | | | — | | | | — | | | | — | | | | — | | | | (2,842 | ) | | | (2,842 | ) |
Purchase of non-controlling interest in subsidiaries | | | — | | | | — | | | | (17 | ) | | | (17 | ) | | | (160 | ) | | | (177 | ) |
Capital contribution from non-controlling interest | | | — | | | | — | | | | — | | | | — | | | | 8,788 | | | | 8,788 | |
Capital reduction of subsidiaries | | | — | | | | — | | | | (61 | ) | | | (61 | ) | | | (3,693 | ) | | | (3,754 | ) |
Dividends to owners from business combinations pre-acquisition | | | — | | | | (801 | ) | | | — | | | | (801 | ) | | | — | | | | (801 | ) |
Disposal of subsidiaries | | | — | | | | — | | | | — | | | | — | | | | (429 | ) | | | (429 | ) |
Acquisition of a subsidiary | | | — | | | | — | | | | (6,693 | ) | | | (6,693 | ) | | | — | | | | (6,693 | ) |
Other | | | — | | | | — | | | | 27 | | | | 27 | | | | (16 | ) | | | 11 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2008 | | | 183,021 | | | | 378,473 | | | | 229,416 | | | | 790,910 | | | | 56,930 | | | | 847,840 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total comprehensive income/(loss) for the year ended December 31, 2009 | | | — | | | | 103,387 | | | | (1,320 | ) | | | 102,067 | | | | 1,145 | | | | 103,212 | |
Special Reserve-Safety Fund Reserve | | | — | | | | 2,280 | | | | 1,325 | | | | 3,605 | | | | 3 | | | | 3,608 | |
Transfer to reserves | | | — | | | | (9,981 | ) | | | 9,981 | | | | — | | | | — | | | | — | |
Final dividends for 2008 (Note 15) | | | — | | | | (27,367 | ) | | | — | | | | (27,367 | ) | | | — | | | | (27,367 | ) |
Interim dividends for 2009 (Note 15) | | | — | | | | (22,725 | ) | | | — | | | | (22,725 | ) | | | — | | | | (22,725 | ) |
Dividends to non-controlling interest | | | — | | | | — | | | | — | | | | — | | | | (2,358 | ) | | | (2,358 | ) |
Acquisition of subsidiaries | | | — | | | | — | | | | (248 | ) | | | (248 | ) | | | 590 | | | | 342 | |
Purchase of non-controlling interest in subsidiaries | | | — | | | | — | | | | (179 | ) | | | (179 | ) | | | (354 | ) | | | (533 | ) |
Capital contribution from non-controlling interest | | | — | | | | — | | | | 1,158 | | | | 1,158 | | | | 5,940 | | | | 7,098 | |
Capital reduction of a subsidiary | | | — | | | | — | | | | — | | | | — | | | | (1,354 | ) | | | (1,354 | ) |
Other | | | — | | | | — | | | | 2 | | | | 2 | | | | (64 | ) | | | (62 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2009 | | | 183,021 | | | | 424,067 | | | | 240,135 | | | | 847,223 | | | | 60,478 | | | | 907,701 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-7
F-9
PETROCHINA COMPANY LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY — (Continued)
For the Years Ended December 31, 2004, 2005 and 2006
(Amounts in millions)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Attributable to equity holders | | | | | |
| | of the Company | | | | | |
| | | | | | | |
| | Share | | | Retained | | | | | Minority | | | Total | |
| | Capital | | | Earnings | | | Reserves | | | Subtotal | | | interest | | | Equity | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
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 | |
| | | | | | | | | | | | | | | | | | |
Issue of H shares (Note 27 and 28) | | | 3,197 | | | | — | | | | 16,495 | | | | 19,692 | | | | — | | | | 19,692 | |
Transfer to reserves (Note 28) | | | — | | | | (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 businesses (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 38) | | | — | | | | — | | | | (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 28) | | | — | | | | (13,355 | ) | | | 13,355 | | | | — | | | | — | | | | — | |
Final dividends for 2005 (Note 11) | | | — | | | | (32,282 | ) | | | — | | | | (32,282 | ) | | | — | | | | (32,282 | ) |
Interim dividends 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 38) | | | — | | | | — | | | | (2,156 | ) | | | (2,156 | ) | | | (2,579 | ) | | | (4,735 | ) |
Other movement of minority interest | | | — | | | | — | | | | — | | | | — | | | | (246 | ) | | | (246 | ) |
Minority interest paid-in capital | | | — | | | | — | | | | — | | | | — | | | | 1,492 | | | | 1,492 | |
| | | | | | | | | | | | | | | | | | |
Balance at December 31, 2006 | | | 179,021 | | | | 264,092 | | | | 143,564 | | | | 586,677 | | | | 30,914 | | | | 617,591 | |
| | | | | | | | | | | | | | | | | | |
Balance at December 31, 2006 in US$ | | | 22,939 | | | | 33,840 | | | | 18,396 | | | | 75,175 | | | | 3,961 | | | | 79,137 | |
| | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
F-10
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in millions except for per share data or unless otherwise stated)
1 ORGANIZATIONORGANISATION AND PRINCIPAL ACTIVITIES
PetroChina Company Limited (the “Company”) was established in the People’s Republic of China (the “PRC” or “China”) on November 5, 1999 as a joint stock company with limited liability as a result of a group restructuring (the “Restructuring”) ofon November 5, 1999 by China National Petroleum Corporation (“CNPC”) as the sole proprietor in preparation foraccordance with the listingapproval Guo Jing Mao Qi Gai [1999] No. 1024 “Reply on the approval of the Company’s sharesestablishment of PetroChina Company Limited” from the former State Economic and Trade Commission of the People’s Republic of China (“China” or “PRC”). CNPC restructured (“the Restructuring”) and injected its core business and the related assets and liabilities into the Company. CNPC is a wholly state-owned company registered in Hong Kong and in the United States of America in 2000 (See Note 27).China. The Company and its subsidiaries are collectively referred to as the “Group”.
The Group is principally engaged in (i) the exploration, development and production of crude oil and natural gas, (ii) the refining, transportation, storage and marketing of crude oil and natural gas; (ii) the refining of crude oil and petroleum products, production and marketing of primary petrochemical products, derivative petrochemical products and other chemical products; (iii) the productionmarketing of refined products and sale of chemicals,trading business; and (iv) the transmission marketingof natural gas, crude oil and refined products and the sale of natural gas (See Note 36)(Note 38).
2 BASIS OF PREPARATION
The consolidated financial statements and the statement of financial position of the Group (comprising the consolidated statements of income, consolidated balance sheets, consolidated statements of cash flows and the consolidated statements of changes in equity of the Group )Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”IFRSs”) as issued by the International Accounting Standards Board (“IASB”). The consolidated financial statements and the statement of financial position of the GroupCompany have been prepared under the historical cost convention except as disclosed in the accounting policies below.
The preparation of financial statements in conformity with IFRSIFRSs 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 of the statement of financial position and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s 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 4.5.
In 2006, the Group adopted the following amendments and interpretations to existing standards which are relevant to its operations. The adoption of these amendments and interpretations did not result currently in changes to the Group’s accounting policies. In summary:
| |
| (a) Amendments and interpretations to existing standards effective in 2006 |
| | |
| • | International Accounting Standard (“IAS”) No 39 (IAS 39) and IFRS 4 (Amendment), Financial Guarantee Contracts; and |
|
| • | International Financial Reporting Interpretations Committee (“IFRIC”) Interpretation 4, Determining whether an Arrangement contains a Lease; |
| |
| (b) Interpretations to existing standards early adopted by the Group |
| | |
| • | IFRIC Interpretation 8, Scope of IFRS 2 (effective for annual periods beginning on or after May 1, 2006) |
The following amendments and interpretations are mandatory for accounting periods beginning on or after January 1, 2006 but are not relevant to the Group’s operations:
| | |
| • | IAS 19 (Amendment), Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures; |
F-11
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | |
| • | IAS 21 (Amendment), Net Investment in a Foreign Operation; |
|
| • | IAS 39 (Amendment), Cash Flow Hedge Accounting of Forecast Intragroup Transactions; |
|
| • | IAS 39 (Amendment), The Fair Value Option; |
|
| • | IFRIC Interpretation 5, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds; and |
|
| • | IFRIC Interpretation 6, Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment. |
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 CNPC’s 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 CNPC’s refinery and petrochemical businesses owned by Dayuan and Qingyang are 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 historical cost to CNPC (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 have always been combined. The difference between RMB 9 payable and the net liabilities transferred from CNPC have been adjusted against equity.
In August 2005 the shareholders of the Company approved the acquisition and transfer agreements relating to the Company’s 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.
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 common control by CNPC. The consolidated financial statements of the Company have been restated as if the operations of the Company and CNPC E&D have always been combined. The payment was made directly to CNPC E&D, therefore the difference between 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) have been adjusted against equity.
F-12
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
3 SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
| |
| (a) Basis of consolidation |
(a) Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries.
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.
Subsidiaries are
A subsidiary is consolidated from the date on which control is transferred to the Group and areis no longer consolidated from the date that control ceases. Other than the business combination under common control for which the accounting policy is disclosed in Note 2, theThe purchase method of accounting is used to account for the acquisition of subsidiaries.subsidiaries except for 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 minoritynon-controlling interest. The excess of the cost of an acquisition over the fair value of the Group’s 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 Group’s share of the identifiable net assets of the subsidiary acquired, the difference is recognizedrecognised directly in the consolidated statementsprofit or loss.
An acquisition of income. 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
F-8
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
the Group and the business acquired have 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 unrealizedunrealised gains on transactions between group companies are eliminated; unrealizedunrealised 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 Group’s principal subsidiaries is set out in Note 38.19.
| |
| (b) Investments in equity affiliates |
(b) Investments in associates
Equity affiliates
Associates 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 affiliatesassociates are accounted for by the equity method of accounting in the consolidated financial statements of the Group and are initially recognizedrecognised at cost. Under this method of accounting the Group’s share of the post-acquisition incomeprofits or losses of equity affiliatesassociates is recognizedrecognised in the consolidated statements of incomeprofit or loss and its share of post-acquisition movements in reservesother comprehensive income is recognizedrecognised in reserves.other comprehensive income. The cumulative post-acquisition movements are adjusted against the costcarrying amounts of the investment.investments. When the Group’s share of losses in an equity affiliateassociate equals or exceeds its interest in the equity affiliate,associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the equity affiliate. Unrealizedassociate. Unrealised gains on transactions between the Group and its equity affiliatesassociates are eliminated to the extent of the Group’s interest in the equity affiliates; unrealizedassociates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in equity affiliatesassociates 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 Group’s share of the net identifiable assets of the acquired associate at the date of acquisition.
A listing of the Group’s principal equity affiliatesassociates is shown in Note 19.17.
F-13
PETROCHINA COMPANY LIMITED(c) Investments in jointly controlled entities
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or 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 Group’s interest in joint venturesjointly controlled entities is accounted for by the equity method of accounting (Note 3(b)) in the consolidated financial statements.
A listing of the Group’s principal jointly controlled entities is shown in Note 19.17.
| |
| (d) Transactions with minority interest |
(d) Transactions with non-controlling interest
The Group applies a policy of treating transactions with minority interestnon-controlling interests as transactions with equity participantsowners in their capacity as owners of the Group. Gains and losses resulting from the disposals to minority interestnon-controlling interests 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,non-controlling interests, 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 assets and operations of the Group are located in the PRC (Note 38), and the functional currency of the Company and most of the consolidated subsidiaries is RMB. For the majority of the overseas oil and gas exploration and production operations, the functional currency is United States Dollar.Renminbi (“RMB”). The consolidated financial statements and the balance sheet of the Company are presented in RMB which is the presentation currency of the Company and most of the consolidated subsidiaries.RMB.
F-9
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
Foreign currency transactions of the Group are accounted for at the exchange rates prevailing at the daterespective dates of the transactions; monetary assets and liabilities denominated in foreign currencies are translated at balance sheetexchange rates at the date exchange rates;of the statement of financial position; gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities are recognizedrecognised in the consolidated statements of income. Statements of income and cash flows ofprofit or loss.
For the Group’sGroup entities that have a functional currency different from the Group’s presentation currency, assets and liabilities for each statement of financial position presented are translated intoat the Group’s presentation currencyclosing rate at the date of the statement of financial position. Income and expenses for each statement of comprehensive income presented are translated at the average exchange rates for each period and the year and their balance sheets are translated at theresulting exchange rates at the balance sheet date. Currency translation differences are recognizedrecognised in shareholders’ equity.other comprehensive income.
The Group did not enter into material hedge contracts during any of the years presented. No foreign currency exchange gains or losses were capitalized in any of the years presented.
| |
| (f) Financial instruments |
Financial instruments carried at the balance sheet date include cash(f) Property, plant and cash equivalents, investments (including available-for-sale investments and time deposits), receivables, payables, lease obligations and debts. Where necessary, the particular recognition methods adopted are disclosed in the individual policy statements associated with each item.equipment
Derivatives are initially recognized at fair value on the date a derivative contract is entered into with subsequent changes in the fair value recognized in the consolidated statements of income. The Group did not hold any derivative financial instruments for hedging or risk management purposes in any of the years presented.
F-14
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
The Group classifies its investments into the following categories: at fair value through income or loss,held-to-maturity, loans and receivables and available-for-sale.
Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as investments at fair value through income or loss and included in current assets. The Group did not hold any investments in this category in any of the years presented.
Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified asheld-to-maturity and are included in current assets if their respective maturity dates are twelve months or less from balance sheet date, or in non-current assets if their respective maturity dates are more than twelve months from balance sheet date; the Group did not hold any investments in this category in any of the years presented.
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 from the balance sheet date. These are classified as non-current assets. Loans and receivables are initially recorded at fair value and subsequently at amortized cost.
Available-for-sale investments are non-derivatives that are either designated in this category or not classified in any other categories; these are included in non-current assets unless management intends to dispose of the investment within twelve months of the balance sheet date. Management determines the appropriate classification of the investments at the time of the purchase andre-evaluates such designation on a regular basis.
Regular purchases and sales of available-for-sale investments 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 investments are initially recognized at fair value plus transaction costs. Available-for-sale investments 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 risks and rewards of ownership in the investment. Available-for-sale investments 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 investments carried at cost are subject to review for impairment.
| |
(h) | Property, plant and equipment |
Property, plant and equipment, including oil and gas properties (Note 3(i)3(g)), are initially recorded at cost less accumulated depreciation, depletion and amortization.amortisation. 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.on a periodic basis.
In the intervening years between independent revaluations, the directors review the carrying values of the property, plant and equipment and adjustment isadjustments are made whereif the carrying value differsvalues differ materially from their respective fair value.values.
Increases in the carrying amountvalues arising on revaluationfrom revaluations are credited torecognised in other comprehensive income and accumulated in equity under the heading of revaluation reserve. Decreases in valuation of property, plant and equipmentthe carrying values arising from revaluations are first offset against increases from earlier revaluations in respect of the same assetassets and are thereafter charged to the consolidated statements of income.profit or loss. All other decreases in valuationcarrying values are charged to the consolidated statements of income.
F-15
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share dataprofit or unless otherwise stated)
loss. Any subsequent increases are credited to the consolidated statements of incomeprofit or loss up to the amountrespective amounts previously charged.
Revaluation surpluses realizedrealised through the depreciation or disposal of revalued assets are retained in the revaluation reserve and will not be available for offsetting against possible future revaluation losses.
Depreciation, to write off the cost or valuation of each asset, other than oil and gas properties (Note 3(i)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 | | 20-40 | 8-40 years | |
PlantEquipment and equipmentMachinery | | 10-25 | 4-30 years | |
Motor vehicles | | 7-15 | 4-14 years | |
Other | | | 5-12 years | |
|
|
No depreciation is provided foron construction in progress until theythe assets are completed and ready for use.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each balance sheet date.reporting period.
Property, plant and equipment, including oil and gas properties (Note 3(i)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 recognizedrecognised for the amount by which the carrying amount of a cash generating unit exceeds the
F-10
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
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 continuing use of the assets.cash generating unit.
Gains and losses on disposaldisposals of property, plant and equipment are determined by reference to their carrying amountamounts and are recorded in the consolidated statements of income.profit or loss.
Interest and other costs on debtsborrowings to finance the construction of property, plant and equipment are capitalizedcapitalised during the period of time that is required to complete and prepare the propertyasset for its intended use. Costs for planned majorrepairs and maintenance activities primarily related to refinery turnarounds, are expensed as incurred except for costs of components that result in improvements andor betterments which are capitalizedcapitalised as part of property, plant and equipment and depreciated over their useful lives.
| |
(i) | Oil and gas properties |
(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 capitalized.capitalised. Geological and geophysical costs are expensed when incurred. Costs of exploratory wells are capitalizedcapitalised 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 natural gas and natural gas, liquids which, geologicalby analysis of geoscience and engineering data, demonstratecan be estimated with reasonable certainty to be recoverable in future yearseconomically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and operatinggovernment regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether the estimate is a deterministic estimate or probabilistic estimate. Existing economic conditions i.e.,include prices and costs asat which economic producibility from a reservoir is to be determined. The price shall be the average price during the12-month period before the ending date of the dateperiod covered by the estimate is made. Prices include considerationreport, determined as an unweighted arithmetic average of changes in existingthefirst-day-of-the-month price for each month within such period, unless prices provided onlyare defined by contractual arrangements, but not onexcluding escalations based upon future conditions. The costs shall be that prevailing at the end of the period.
Exploratory wells in areas not requiring major capital expenditures are evaluated for economic
F-16
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
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 are subject to impairment review (Note 3(h)3(f)). For exploratory wells that are found to have economically viable reserves in areas where major capital expenditure wouldwill be required before production can begin,commence, the related well costs remain capitalizedcapitalised only if additional drilling is under wayunderway or firmly planned. Otherwise the related well costs are expensed as dry holes. The Group does not have any significant costs of unproved properties capitalizedcapitalised 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. 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 has issued production licenses effective from March 2000 to the Group for all of its crude oil and natural gas reservoirs with terms coextensive with the projected production life of those reservoirs, ranging up to 55 years. Production licenses to be issued to the Group in the future will be subject to the30-year maximum unless additional special approvals can be obtained from the State Council. Each of the Group’s 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. Payments on such licenses are made annually and are expensed as incurred.
The cost of oil and gas properties is amortizedamortised at the field level based on the unitunits of production method. UnitUnits of production rates are based on oil and gas reserves estimated to be recoverable from existing facilities based on the current terms of the Group’s production licenses. The Group’s oil and gas reserves estimates include only crude oil and natural gas which management believes can be reasonably produced within the current terms of these production licenses.
(h) Intangible assets
Expenditure
Expenditures on acquired patents, trademarks, technical know-how and licenses is capitalizedare capitalised at historical cost and amortizedamortised using the straight-line method over their estimated useful lives, generally over 10 years.lives. Intangible assets are not subsequently 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 recognizedrecognised whenever the carrying amount of an asset exceeds its recoverable amount and is recognizedrecognised in the
F-11
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
consolidated statements of income.profit or loss. 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 estimated future cash flows to be derived from continuing usethe asset.
(i) Financial assets
Financial assets are classified into the following categories: financial assets at fair value through profit or loss,held-to-maturity investments, loans and receivables andavailable-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 andavailable-for-sale financial assets. The detailed accounting policies for loans and receivables andavailable-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 date of the asset.statement of financial position, which are classified as non-current assets. The Group’s loans and receivables comprise accounts receivable, notes receivable, other receivables, time deposits and cash and cash equivalents. The recognition methods for loans and receivables are disclosed in the respective policy notes.
(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 date of the statement of financial position. The Group’savailable-for-sale financial assets primarily comprise unquoted equity instruments.
Regular purchases and sales ofavailable-for-sale financial assets are recognised 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 recognised at fair value plus transaction costs.Available-for-sale financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all 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 date of the statement of financial position whether there is objective evidence that anavailable-for-sale financial asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of theavailable-for-sale financial asset and the present value of the estimated cash flows.
(j) Leases
Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as capitalfinance leases. Capital leases are capitalized at the inception of the lease at the lower of the fair value of the leased property and the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability andThe Group has no significant finance charges so as to achieve a constant rate on the finance balance outstanding. Property, plant and equipment acquired under capital leases are generally depreciated over the useful life of the asset as the Group usually obtains ownership of such leased assets by the end of the lease term.leases.
Leases of assets under which a significant portion of the risks and benefits of ownership are effectively retained by the lessorlessors are classified as operating leases. Payments made under operating
F-17
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
leases (net of any incentives received from the lessor)lessors) are expensed on a straight-line basis over the lease term.terms. Payments made to the PRC’s 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 forof use range up to 50 years.
F-12
| |
| (l) Related partiesPETROCHINA COMPANY LIMITED |
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 or exercise significant influence, key management personnel of the Company and CNPC and their close family members.
Transactions with related parties do not
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
(k) Inventories
Inventories include those done 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 electricity, telecommunications, postal service and local government retirement funds.
Inventories are oil products, chemical products and materials and supplies which are stated at the lower of cost and net realizablerealisable 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 cost.borrowing costs. Net realizablerealisable value is the estimate of theestimated selling price in the ordinary course of business, less the cost of completion and selling expenses.
(l) Accounts receivable
Accounts receivable are recognizedrecognised initially at fair value and subsequently measured at amortizedamortised 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 all 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 reorganisation and default or delinquency in payments. The amount of the provision is the difference between the asset’s carrying amount and the present value of expectedestimated future cash flows, discounted at the market rate oforiginal effective interest for similar borrowers.rate.
| |
| (o) Cash and cash equivalents |
(m) 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.
(n) Accounts payable
Debts
Accounts payable are recognizedrecognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
(o) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. In subsequent periods, debtsborrowings are stated at amortizedamortised cost using the effective yield method. Any difference between proceeds (net of transaction costs) and the redemption value is recognizedrecognised in the consolidated statements of incomeprofit or loss over the termsperiod of the debts,borrowings.
Borrowing costs are recognised as an expense in the period in which they are incurred except for the portion eligible for capitalization.capitalisation as part of qualifying property, plant and equipment.
Debts
Borrowings are classified as current liabilities unless the Group has an unconditional rightrights to defer settlementsettlements of the liabilityliabilities for at least 12 months after the balance sheet date.reporting period.
F-18
PETROCHINA COMPANY LIMITED(p) Taxation
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
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 incomeprofit or loss. Currently enactedDeferred tax is determined using tax rates that have been enacted or substantively enacted by the date of the statement of financial position and are usedexpected to determineapply to the period when the related deferred tax.tax asset is realised or deferred tax liability is settled.
F-13
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
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 carryforwardcarry forward of unused tax losses are recognizedrecognised to the extent that it is probable that future taxable income will be available against which the unused tax losses can be utilized.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 (See Note 7)(Note 9), consumption tax (Note 9), resource tax, urban construction tax, education surcharges and business tax.
(q) Revenue recognition
Sales are recognizedrecognised upon delivery of products and customer acceptance or performance of services, net of sales taxes and discounts. Revenues are recognizedrecognised 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 Group’s 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 production undertake-or-pay contracts. Customers under thetake-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 tariff under thetake-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.
The Group reports gross the revenue under take-or-pay contracts in the consolidated statements of income. As a result of a communication to the oil and gas industry issued by the US Securities and Exchange Commission in February 2005 requesting additional disclosures regarding buy/sell contracts, the Group reviewed such contracts and estimated that, if buy/sell contracts were reported net, both “Sales and other operating revenues” and “Purchase, services and other” for the years ended December 31, 2004, 2005 and 2006 would be reduced by RMB 2,217, RMB 1,384 and RMB 2,119, respectively, with no impact on net income.
(r) Provisions
Provisions are recognizedrecognised when the Group has a present legal or constructive obligationobligations as a result of past events, it is probable that an outflow of resources will be required to settle the obligation,obligations, and a reliable estimateestimates of the amountamounts can be made.
F-19
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Provision for future decommissioning and restoration is recognizedrecognised in full on the installation of oil and gas properties. The amount recognizedrecognised 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 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,expense, is reflected as an adjustment to the provision and oil and gas properties.
| |
| (t) Research and development |
(s) Research and development
Research expenditure incurred is recognizedrecognised as an expense. Costs incurred on development projects are recognizedrecognised as intangible assets to the extent that such expenditure is expected to generate future economic benefits. Research and development expenses were RMB 2,977, RMB 3,195 and RMB 4,260 for the years ended December 31, 2004, 2005 and 2006, respectively.
| |
| (u) Retirement benefit plans |
(t) Retirement benefit plans
The Group contributes to various employee retirement benefit plans organised by ChinesePRC municipal and provincial governments under which it is required to make monthly contributions to these plans at prescribed rates prescribed by the related municipal and provincial governments.for its employees in China. The Chineserelevant PRC municipal and provincial governments undertake to assume the retirement benefit obligations of existing and future retired Chinese employees of the Group.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. In addition, the Group joined the corporate annuity plan approved by relevant PRC authorities. Contribution to the annuity plan is charged to expense as incurred.
F-14
PETROCHINA COMPANY LIMITED
NOTES TO THE 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 Chinathe PRC or overseas other than the monthly contributionswhat described above.
| |
| (v) Share-based compensation — Share appreciation rights |
(u) New accounting developments
Compensation under
(i) New and amended standards adopted by the share appreciation rights is measured basedGroup
The Group adopted the following relevant new and amended IFRSs as of January 1, 2009:
IFRS 7 ‘Financial instruments — Disclosures’ (Amendment) — effective January 1, 2009. The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The amendment did not have a material impact 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 changes included in employee compensation costdisclosures in the consolidated statementsfinancial statements.
IFRS 8, ‘Operating segments’ — effective January 1, 2009. IFRS 8 replaces IAS 14, ‘Segment reporting’. It requires a ‘management approach’ under which segment information is presented on the same basis as that used for internal reporting purposes (Note 38).
IAS 1 (Revised), ‘Presentation of income;financial statements’ — effective January 1, 2009. The revised standard requires all changes in equity arising from transactions with owners in their capacity as owners and the related liability is includedcurrent and deferred tax impacts be presented separately from non-owner changes in the salariesequity. Recognised income and welfare payable. expenses shall be presented in a single statement (a statement of comprehensive income) or in two statements (a statement of profit and loss and a statement of comprehensive income), separately from owner changes in equity.
The Group doeshas elected to present recognised income and expenses in a single statement of comprehensive income and these consolidated financial statements have been prepared under the revised disclosure requirements.
IAS 19 (Amendment), ‘Employee benefits’ — effective January 1, 2009. The amendment clarifies that the distinction between short-term and long-term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered. The amendment did not have any significant impact on the consolidated financial statements.
IAS 23 (Amendment), ‘Borrowing costs’ — effective January 1, 2009. The amendment 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 will be removed. The amendment did not have any impact on the consolidated financial statements as the Group has always capitalised borrowing costs directly attributable to the acquisition, construction or production of qualifying assets.
IAS 24 (Revised), ‘Related Party Disclosures’ — effective January 1, 2011. The revised standard exempts disclosures in relation to related party transactions and outstanding balances, including commitments, with a government that has control, joint control or significant influence over the reporting entity and another entity that is related party because the same government has control, joint control or significant influence over both the reporting entity and the other share-based compensation.entity. The Group has elected to early adopt the partial exemption in paragraphs 25 -27 of the revised standard for government-related entities from January 1, 2009.
| |
| (w) New accounting developments |
IAS 28 (Amendment), ‘Investments in associates’ — effective January 1, 2009. The amendment requires an investment in an associate be treated as a single asset for the purposes of impairment testing and any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases. The amendment did not have any significant impact on the consolidated financial statements.
(1) New standards
IAS 36 (Amendment), ‘Impairment of assets’ — effective January 1, 2009. The amendment requires that where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those
F-15
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
forvalue-in-use calculation should be made. The amendment did not have any significant impact on the consolidated financial statements.
IAS 38 (Amendment), ‘Intangible assets’ — effective January 1, 2009. The amendment requires a prepayment only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services. The amendment did not have any significant impact on the consolidated financial statements.
(ii) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following new standard and interpretationsrelevant IFRSs, amendments to existing standardsIFRSs and interpretation of IFRSs have been published thatand are mandatory for accounting periods beginning on or after MayJanuary 1, 20062010 or later periods but thatand have not been early adopted by the Group has not early adopted:Group:
| | |
| • | IFRS 7, Financial Instruments: Disclosures, and the complementary Amendment to IAS 1, Presentation of Financial Statements — Capital Disclosures |
IFRS 7 introduces new disclosures relating3 (Revised), ‘Business combinations’. The revised standard continues to financial instruments. The Group does not expectapply the standardacquisition method to have any impactbusiness combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income. There is a choice on anacquisition-by-acquisition basis to measure the classification and valuationnon-controlling interest in the acquiree either at fair vale or at the non-controlling interest’s proportionate share of the Group’s financial instruments.
| | |
| • | IFRIC Interpretation 10, Interim Financial Reporting and Impairment (effective for annual periods beginning on or after November 1, 2006) |
F-20
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
IFRIC Interpretation 10 prohibits the impairment losses recognized in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost toacquiree’s net assets. All acquisition-related costs should be reversed at a subsequent balance sheet date.expensed. The Group will apply IFRIC Interpretation 10 fromthe revised standard prospectively to all business combinations for which the acquisition date is on or after January 1, 2007,2010.
IFRS 5 (Amendment), ‘Non-current assets held for sale and discontinued operations’ — effective July 1, 2009. The amendment clarifies that all of a subsidiary’s assets and liabilities are classified as held for sale if a partial disposal plan results in loss of control, and relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. The Group is currently evaluating the impact of the amendment on the consolidated financial statements but it is not expected to have any significant impact.
IFRS 5 (Amendment), ‘Measurement of non-current assets (or disposal groups) classified asheld-for-sale’ — effective January 1, 2010. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that IFRS 5 specifies the disclosures required in respect of non-current assets (or disposal groups) classified asheld-for-sale or discontinued operations. It also clarifies that the general requirement of IAS 1 still apply, particularly paragraph 15 (to achieve a fair presentation) and paragraph 125 (sources of estimation uncertainty) of IAS 1. The Group is currently evaluating the impact of the amendment on the disclosures in the consolidated financial statements but it is not expected to have any significant impact.
IAS 1 (Amendment), ‘Presentation of financial statements’ — effective January 1, 2010. The amendment is part of the IASB’s annual improvements project published in April 2009. The amendment provides clarification that the potential settlement of a liability by the issuance of equity is not relevant to its classification as current or non current. By amending the definition of current liability, the amendment permits a liability to be classified as non-current (provided that the entity has an unconditional right to defer settlement by transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the fact that the entity could be required by the counterparty to settle in shares at any time. The Group is currently evaluating the impact of the amendment on the consolidated financial statements.statements but it is not expected to have any significant impact.
(2) Interpretations
IAS 27 (Revised), ‘Consolidated and separate financial statements’ — effective July 1, 2009. The revised standard requires the effects of all transactions with non-controlling interests to existing standards that are not yetbe recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. IAS 27 (Revised) also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss. The Group will apply the revised standard prospectively to transactions with non-controlling interests from January 1, 2010.
F-16
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
IAS 38 (Amendment), ‘Intangible Assets’ — effective and not relevant for the Group’s operations
January 1, 2010. The following interpretations to existing standards have been published that are mandatory for accounting periods beginning on or after May 1, 2006 or later periods but are not relevant for the Group’s operations:
| | |
| • | IFRIC Interpretation 7, Applying the Restatement Approach under IAS 29, Financial Reporting in Hyperinflationary Economies (effective from March 1, 2006) |
|
| • | IFRIC Interpretation 9, Reassessment of Embedded Derivatives (effective for annual periods beginning on or after June 1, 2006) |
| |
| (x) Convenience translation |
The consolidated financial statements are expressed in RMB. Solely for the convenienceamendment is part of the reader,IASB’s annual improvements project published in April 2009 and the December 31, 2006,Group will apply IAS 38 (Amendment) from the date IFRS 3 (Revised) is adopted. The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and it permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives. The Group is currently evaluating the impact of the amendment on the consolidated financial statements but it is not expected to have any significant impact.
4 FINANCIAL RISK AND CAPITAL MANAGEMENT
4.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk.
(a) Market risk
(i) Foreign exchange risk
The Group conducts its business primarily in RMB, but maintains a portion of its assets in other currencies to pay for imported crude oil, imported equipment and other materials and to meet foreign currency financial liabilities. The Group is exposed to currency risks arising from fluctuations in various foreign currency exchange rates against the RMB. The RMB is not a freely convertible currency and is regulated by the PRC government. Limitations on foreign exchange transactions imposed by the PRC government could cause future exchange rates to vary significantly from current or historical exchange rates. The Group did not enter into material hedge contracts to hedge against its foreign exchange rate risk during the current year.
(ii) Interest rate risk
The Group has no significant interest rate risk on interest-bearing assets. The Group’s exposure to interest rate risk arises from its borrowings. The Group’s borrowings at floating rates expose the Group to cash flow interest rate risk and its borrowings at fixed rates expose the Group to fair value interest rate risk. However, the exposure to interest rate risk is not material to the Group. A detailed analysis of the Group’s borrowings, together with their respective interest rates and maturity dates, is included in Note 28.
(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.
(b) Credit risk
Credit risk arises from cash and cash equivalents, time deposits with banks and credit exposure to customers with outstanding receivable balances.
A substantial portion of the Group’s cash at bank and time deposits are placed with the major state-owned banks and financial institutions in China and management believes that the credit risk is low.
The Group performs ongoing assessment of the credit quality of its customers and sets appropriate credit limits taking into account the financial position and past history of defaults of customers. The Group’s accounts receivable balances over 3 years have been translated into United States dollarssubstantially provided for and accounts receivable balances within one year are generally neither past due nor impaired. The Group’s accounts receivable balances that are neither past due nor impaired are with customers with no recent history of default.
F-17
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
The carrying amounts of cash and cash equivalents, time deposits placed with banks, accounts receivable, other receivables and notes receivable included in the consolidated statement of financial position represent the Group’s 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 Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and availability of funding through an adequate amount of committed credit facilities.
Given the low level of gearing and continued access to funding, the Group believes that its liquidity risk is not material.
Analysis of the Group’s financial liabilities based on the remaining period at the noon buying ratedate of the statement of financial position to the contractual maturity dates are presented in New York CityNote 28.
4.2 Capital management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, optimise returns for owners and to minimise its cost of capital. In meeting its objectives of managing capital, the Group may issue new shares, adjust its debt levels or the mix between short-term and long-term borrowings.
The Group monitors capital on the basis of the gearing ratio which is calculated as interest-bearing borrowings/(interest-bearing borrowings + total equity). The gearing ratio at December 31, 2006 for cable transfer2009 is 20.5% (2008: 13.0%).
4.3 Fair value estimation
The methods and assumptions applied in RMB as certified for customs purposes bydetermining the Federal Reserve Bankfair value of New Yorkeach class of US$1.00 = RMB 7.8041. No representation is made thatfinancial assets and financial liabilities of the RMB amounts could have been, or could be, converted into United States dollarsGroup at that rate or at any other certain rate on December 31, 2006, or at any2009 and 2008 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 date.receivables, trade payables, other payables and short-term borrowings. The fair values of fixed rate long-term borrowings are likely to be different from their respective carrying amounts. Analysis of the fair values and carrying amounts of long-term borrowings are presented in Note 28.
| |
4 | CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS |
5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continuallyregularly 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 Group’s consolidated financial statements.
| |
| (a) Estimation of oil and natural gas reserves Estimates of oil and natural gas reserves |
Oil and nature gas reserves are key elements in the Group’s 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 affectunit-ofunit-of-production-production depreciation, depletion and amortization charges to the consolidated statement of 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. Changes to the Group’s estimates of proved reserves, particularly proved developed reserves, affect the amount of depreciation, depletion and amortizationamortisation recorded in the Group’s consolidated financial statements for property, plant and equipment related to oil and gas production activities. A reduction
F-21
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
in proved developed reserves will increase depreciation, depletion and amortization charges (assuming constant production)amortisation charges. Proved reserve estimates are subject to revision, either upward or downward, based on new
F-18
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
information, such as from development drilling and reduce net income.production activities or from changes in economic factors, including product prices, contract terms, evolution of technology or development plans.
| |
| (b) Estimated impairment of property, plant and equipment |
(b) Estimation of impairment of property, plant and equipment
Property, plant and equipment, including oil and gas properties, are reviewed for possible impairmentimpairments 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 the future pricesprice of crude oil, refined products and chemical products and the production profile. However, the impairment reviews and calculations are based on assumptions that are consistent with the Group’s business plan. These assumptions also include those relative to the pricing regulations by the regulatory agencies in China that the policies will not restrict the profit margins of refined products to levels that will be insufficient to recover the carrying cost of the related production assets. Favorableplans. 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 |
(c) Estimation of asset retirement obligations
Provisions are recognized
Provision is recognised for the future decommissioning and restoration of oil and gas properties. The amounts of the provisions recognizedprovision recognised 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, etclevels, etc. In addition to these factors, the present valuesvalue of these estimated future expenditures are also impacted by the estimation of the economic lifelives 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 lifelives of the oil and gas properties.
| |
5 | EMPLOYEE COMPENSATION COSTS |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Wages and salaries | | | 15,449 | | | | 19,351 | | | | 26,629 | |
Social security costs(i) | | | 7,485 | | | | 10,324 | | | | 12,532 | |
| | | | | | | | | |
| | | 22,934 | | | | 29,675 | | | | 39,161 | |
| | | | | | | | | |
6 TURNOVER
Turnover represents revenues from the sale of crude oil, natural gas, refined products and petrochemical products and from the transportation of crude oil, refined products and natural gas. Analysis of turnover by segment is shown in Note 38.
| |
(i) | Social security costs mainly represent contributions to funds for staff welfare organized by the PRC municipal and provincial governments including contribution to the retirement benefit plans (See Note 29). |
F-22
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
7 PROFIT BEFORE INCOME TAX EXPENSE
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
Items credited and debited in arriving at the profit before income tax expense include: | | | | | | | | | | | | |
Credited | | | | | | | | | | | | |
Dividend income fromavailable-for-sale financial assets | | | 177 | | | | 252 | | | | 126 | |
Reversal of provision for impairment of receivables | | | 240 | | | | 184 | | | | 2,473 | |
Reversal of write down in inventories | | | 23 | | | | 15 | | | | 98 | |
Government grants(i) | | | 1,097 | | | | 16,914 | | | | 1,197 | |
Charged | | | | | | | | | | | | |
Amortisation on intangible and other assets | | | 2,153 | | | | 1,888 | | | | 1,507 | |
Auditors’ remuneration | | | 80 | | | | 95 | | | | 119 | |
Cost of inventories recognised as expense | | | 613,702 | | | | 662,758 | | | | 459,281 | |
Provision for impairment of receivables | | | 117 | | | | 188 | | | | 155 | |
Loss on disposal of property, plant and equipment | | | 1,642 | | | | 2,602 | | | | 1,808 | |
Operating lease expenses | | | 7,367 | | | | 6,819 | | | | 7,448 | |
Research and development expenses | | | 9,887 | | | | 7,760 | | | | 5,315 | |
Write down in inventories | | | 377 | | | | 8,608 | | | | 153 | |
| | |
6(i) | SHUT DOWN OF MANUFACTURING ASSETS | Government grants during the year 2008 primarily comprise financial support measures provided by the PRC government to ensure supply of crude oil and refined products in the domestic market implemented from 2008. |
During
8 EMPLOYEE COMPENSATION COSTS
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
Wages, salaries and allowances | | | 44,202 | | | | 39,008 | | | | 32,856 | |
Social security costs | | | 21,775 | | | | 23,159 | | | | 18,084 | |
| | | | | | | | | | | | |
| | | 65,977 | | | | 62,167 | | | | 50,940 | |
| | | | | | | | | | | | |
Social security costs mainly represent contributions to plans for staff welfare organised by the years ended December 31, 2004, 2005PRC municipal and 2006,provincial governments and others including contributions to the Group provided RMB 220, RMB Nil and RMB Nil respectively for the shut down of certain less efficient operating facilities in the refining and chemical manufacturing plants.
The charge of RMB 220 provided for in the year ended December 31, 2004 represented the net book value of the refining facilities (RMB 192) and chemical facilities (RMB 28)retirement benefit plans (Note 33).
There were no employee termination or relocation costs relating to the shut down of these manufacturing equipments.
9 TAXES OTHER THAN INCOME TAXES
| |
7 | TAXES OTHER THAN INCOME TAXES |
Taxes other than income taxes include consumption taxes of RMB Nil, RMB Nil and RMB 28,91482,429 for the year ended December 31, 2004, 20052009 (2008: RMB 13,570, 2007: RMB 12,931) and 2006 of special levy which is paid or payablelevies on the portion of income realized by petroleum exploration enterprises from thedomestic sales of domestic crude oil at prices higher thanof RMB 20,020 for the year ended December 31, 2009 (2008: RMB 85,291, 2007: RMB 44,662).
F-20
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
10 INTEREST EXPENSE
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
Interest on | | | | | | | | | | | | |
Bank loans | | | | | | | | | | | | |
— wholly repayable within five years | | | 1,339 | | | | 2,065 | | | | 2,058 | |
— not wholly repayable within five years | | | 90 | | | | 22 | | | | 181 | |
Other loans | | | | | | | | | | | | |
— wholly repayable within five years | | | 4,624 | | | | 1,365 | | | | 1,643 | |
— not wholly repayable within five years | | | 477 | | | | 598 | | | | 327 | |
Accretion expense (Note 32) | | | 1,943 | | | | 1,746 | | | | 1,202 | |
Less: Amounts capitalised | | | (3,201 | ) | | | (2,752 | ) | | | (1,738 | ) |
| | | | | | | | | | | | |
| | | 5,272 | | | | 3,044 | | | | 3,673 | |
| | | | | | | | | | | | |
Amounts capitalised are borrowing costs that are attributable to the construction of a specific level. This levyqualifying asset. The average interest rate used to capitalise such borrowings cost was imposed by5.184% per annum for the PRC governmentyear ended December 31, 2009.
11 EMOLUMENTS OF DIRECTORS AND SUPERVISORS
Details of the emoluments of directors and became effective from March 26, 2006.supervisors for the years ended December 31, 2009, 2008 and 2007 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | Fee for
| | Salaries,
| | | | | | | | |
| | Directors
| | Allowances
| | Contribution
| | | | | | |
| | and
| | and Other
| | to Retirement
| | | | | | |
Name | | Supervisors | | Benefits | | Benefit Scheme | | Total | | Total | | Total |
| | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 |
|
Chairman: | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Chen Geng(i) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 598 | |
Mr. Jiang Jiemin | | | — | | | | — | | | | — | | | | — | | | | — | | | | 916 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,514 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Vice Chairman: | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Zhou Jiping | | | — | | | | 737 | | | | 37 | | | | 774 | | | | 515 | | | | — | |
Executive directors: | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Duan Wende(iii) | | | — | | | | — | | | | — | | | | — | | | | 366 | | | | 824 | |
Mr. Liao Yongyuan | | | — | | | | 710 | | | | 37 | | | | 747 | | | | 869 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | — | | | | 710 | | | | 37 | | | | 747 | | | | 1,235 | | | | 824 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
F-21
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | Fee for
| | Salaries,
| | | | | | | | |
| | Directors
| | Allowances
| | Contribution
| | | | | | |
| | and
| | and Other
| | to Retirement
| | | | | | |
Name | | Supervisors | | Benefits | | Benefit Scheme | | Total | | Total | | Total |
| | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 | | RMB’000 |
|
Non-executive directors: | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Wang Yilin | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Zeng Yukang | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Wang Fucheng | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Wang Guoliang | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Li Xinhua | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Jiang Fan | | | — | | | | 494 | | | | 25 | | | | 519 | | | | 569 | | | | 499 | |
Mr. Chee-chen Tung | | | 260 | | | | — | | | | — | | | | 260 | | | | 249 | | | | 264 | |
Mr. Liu Hongru | | | 339 | | | | — | | | | — | | | | 339 | | | | 343 | | | | 349 | |
Mr. Li Yongwu(ii) | | | 344 | | | | — | | | | — | | | | 344 | | | | 197 | | | | — | |
Mr. Cui Junhui | | | 348 | | | | — | | | | — | | | | 348 | | | | 331 | | | | — | |
Mr. Franco Bernabè | | | 246 | | | | — | | | | — | | | | 246 | | | | 243 | | | | 257 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 1,537 | | | | 494 | | | | 25 | | | | 2,056 | | | | 1,932 | | | | 1,369 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Supervisors: | | | | | | | | | | | | | | | | | | | | | | | | |
Mr. Chen Ming | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Wen Qingshan | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Sun Xianfeng | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Yu Yibo | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Xu Fengli(i) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 264 | |
Mr. Wang Yawei | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Qin Gang | | | — | | | | 507 | | | | 34 | | | | 541 | | | | 521 | | | | 469 | |
Ms. Wang Shali | | | — | | | | — | | | | — | | | �� | — | | | | — | | | | — | |
Mr. Li Yongwu(ii) | | | — | | | | — | | | | — | | | | — | | | | 110 | | | | 315 | |
Mr. Zhang Jinzhu(iii) | | | — | | | | — | | | | — | | | | — | | | | 206 | | | | 333 | |
Mr. Wu Zhipan(iv) | | | 107 | | | | — | | | | — | | | | 107 | | | | 234 | | | | 319 | |
Mr. Li Yuan | | | 217 | | | | — | | | | — | | | | 217 | | | | 124 | | | | — | |
Mr. Wang Daocheng(iv) | | | 117 | | | | — | | | | — | | | | 117 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 441 | | | | 507 | | | | 34 | | | | 982 | | | | 1,195 | | | | 1,700 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 1,978 | | | | 2,448 | | | | 133 | | | | 4,559 | | | | 4,877 | | | | 5,407 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Interest on | | | | | | | | | | | | |
| — loans | | | 3,846 | | | | 3,766 | | | | 3,739 | |
| — capital leases | | | 2 | | | | 1 | | | | — | |
Accretion expense (Note 25) | | | 54 | | | | 60 | | | | 796 | |
Less: amounts capitalized | | | (1,006 | ) | | | (1,065 | ) | | | (1,315 | ) |
| | | | | | | | | |
| | | 2,896 | | | | 2,762 | | | | 3,220 | |
| | | | | | | | | |
Amounts capitalized are debt costs related to funds borrowed specifically for the purpose of acquiring qualifying assets. Interest rates on such capitalized debts were 5.020% per annum in 2004, 5.265% per annum in 2005 and ranged from 5.265% to 5.832% per annum in 2006.
| |
9(i) | INCOME TAXES | No longer a director or supervisor since May 16, 2007. |
|
(ii) | | Elected as an independent non-executive director in May 16, 2008 and no longer a supervisor since then. |
|
(iii) | | No longer an executive director or a supervisor since May 16, 2008. |
|
(iv) | | Mr. Wu Zhipan no longer as a supervisor since May 12, 2009 and Mr. Wang Daocheng was elected as a supervisor since then. |
|
(v) | | Emoluments exclude the one-off payments by the Company to some of the independent non-executive directors of approximately RMB7.30 million in 2009. |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Current taxes | | | 40,331 | | | | 50,221 | | | | 50,972 | |
Deferred taxes (Note 26) | | | 3,267 | | | | 3,959 | | | | (1,196 | ) |
| | | | | | | | | |
| | | 43,598 | | | | 54,180 | | | | 49,776 | |
| | | | | | | | | |
The emoluments of the directors and supervisors fall within the following bands (including directors and supervisors whose term expired during the year):
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | Number | | Number | | Number |
|
RMB Nil — RMB 1 million | | | 24 | | | | 25 | | | | 20 | |
| | | | | | | | | | | | |
F-22
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
None of the directors and supervisors has waived their remuneration during the year ended December 31, 2009 (2008: None, 2007: None).
The five highest paid individuals in the Company for each of the three years ended December 31, 2009, 2008 and 2007 were also directors or supervisors and their emoluments are reflected in the analysis shown above.
During 2009, 2008 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.
12 INCOME TAX EXPENSE
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
Current taxes | | | 24,862 | | | | 43,423 | | | | 48,995 | |
Deferred taxes (Note 31) | | | 8,611 | | | | (8,212 | ) | | | 807 | |
| | | | | | | | | | | | |
| | | 33,473 | | | | 35,211 | | | | 49,802 | |
| | | | | | | | | | | | |
In accordance with the relevant PRC income tax rules and regulations, the PRC corporate income tax rate applicable to the Group is principally 33%25% for the years ended December 31, 2004, 20052009 and 2006.2008 and 33% for 2007. Operations of the Group in certain regions in China have qualified for certain tax incentives in the form of reduceda preferential income tax rate toof 15% through the year 2010 or accelerated depreciation of certain property, plant and equipment.
F-23
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)2010.
The tax on the Group’s incomeprofit before income taxestaxation differs from the theoretical amount that would arise using the statutorycorporate income tax rate in the PRC applicable to the Group as follows:
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Income before income taxes | | | 151,244 | | | | 193,822 | | | | 199,173 | |
| | | | | | | | | |
Tax calculated at a tax rate of 33% | | | 49,911 | | | | 63,961 | | | | 65,727 | |
Prior year tax return adjustment | | | 27 | | | | 364 | | | | 243 | |
Effect of preferential tax rate | | | (6,886 | ) | | | (10,744 | ) | | | (14,169 | ) |
Tax effect of income not subject to tax | | | (913 | ) | | | (427 | ) | | | (1,602 | ) |
Tax effect of expenses not deductible for tax purposes | | | 2,428 | | | | 1,026 | | | | 2,466 | |
Effect of income taxes from international operations in excess of taxes at the PRC statutory rate | | | — | | | | — | | | | 1,512 | |
Reversal of a tax liability in an amount of RMB 4,401 million in relation to certain crude oil sales that were exempted from tax prior to the establishment of the company in November 1999 | | | — | | | | — | | | | (4,401 | ) |
Utilization of previously unrecognized tax loss of subsidiaries | | | (969 | ) | | | — | | | | — | |
| | | | | | | | | |
Tax charge | | | 43,598 | | | | 54,180 | | | | 49,776 | |
| | | | | | | | | |
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
Profit before income tax expense | | | 140,032 | | | | 162,013 | | | | 205,139 | |
| | | | | | | | | | | | |
Tax calculated at a tax rate of 25% (2007: 33%) | | | 35,008 | | | | 40,503 | | | | 67,696 | |
Prior year tax return adjustment | | | (2,216 | ) | | | 25 | | | | 451 | |
Effect of income taxes from international operations in excess of taxes at the PRC statutory tax rate | | | 1,820 | | | | 6,876 | | | | 633 | |
Effect of preferential tax rate | | | (5,502 | ) | | | (10,907 | ) | | | (17,043 | ) |
Effect of change in statutory income tax rates on deferred taxes | | | (184 | ) | | | (3,134 | ) | | | (3,788 | ) |
Tax effect of income not subject to tax | | | (1,140 | ) | | | (1,357 | ) | | | (2,840 | ) |
Tax effect of taxable items deductible for tax purposes | | | — | | | | — | | | | (2,365 | ) |
Tax effect of expenses not deductible for tax purposes | | | 5,687 | | | | 3,205 | | | | 4,140 | |
Tax effect of unused tax losses which had expired | | | — | | | | — | | | | 2,918 | |
| | | | | | | | | | | | |
Taxation | | | 33,473 | | | | 35,211 | | | | 49,802 | |
| | | | | | | | | | | | |
| |
10 | BASIC AND DILUTED NET INCOME PER SHARE |
13 PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY
The profit attributable to owners of the Company is dealt with in the consolidated financial statements of the Group to the extent of RMB 103,387 for the year ended December 31, 2009 (2008: RMB 114,453, 2007: RMB 146,796).
F-23
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
14 BASIC AND DILUTED EARNINGS PER SHARE
Basic and diluted earnings per share for the year ended December 31, 20042009 and December 31, 2008 have been computed by dividing profit for the year attributable to owners of the Company by the 183,021 million shares issued and outstanding for the year.
Basic and diluted net income 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 175,824179,700 million shares issued and outstanding for the year.
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 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.
There are no potentialpotentially dilutive ordinary shares.
F-24
PETROCHINA COMPANY LIMITED15 DIVIDENDS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
Interim dividends attributable to owners of the Company for 2009 (note a) | | | 22,725 | | | | — | | | | — | |
Proposed final dividends attributable to owners of the Company for 2009 (note b) | | | 23,799 | | | | — | | | | — | |
Interim dividends attributable to owners of the Company for 2008 (note c) | | | — | | | | 24,127 | | | | — | |
Final dividends attributable to owners of the Company for 2008 (note d) | | | — | | | | 27,367 | | | | — | |
Interim dividends attributable to owners of the Company for 2007 (note e) | | | — | | | | — | | | | 36,823 | |
Final dividends attributable to owners of the Company for 2007 (note f) | | | — | | | | — | | | | 28,708 | |
| | | | | | | | | | | | |
| | | 46,524 | | | | 51,494 | | | | 65,531 | |
| | | | | | | | | | | | |
(Amounts in millions except for per share data or unless otherwise stated)
| |
11 | DIVIDENDS ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Final dividends attributable to equity holders of the Company for 2003 (Note (i)) | | | 13,947 | | | | — | | | | — | |
Interim dividends attributable to equity holders of the Company for 2004 (Note (ii)) | | | 20,381 | | | | — | | | | — | |
Final dividends attributable to equity holders of the Company for 2004 (Note (iii)) | | | — | | | | 25,936 | | | | — | |
Interim dividends attributable to equity holders of the Company for 2005 (Note (iv)) | | | — | | | | 27,731 | | | | — | |
Final dividends attributable to equity holders of the Company for 2005 (Note (v)) | | | — | | | | — | | | | 32,282 | |
Interim dividends attributable to equity holders of the Company for 2006 (Note (vi)) | | | — | | | | — | | | | 36,307 | |
| | | | | | | | | |
| | | 34,328 | | | | 53,667 | | | | 68,589 | |
| | | | | | | | | |
| |
(i) (a) | Final | Interim dividends attributable to equity holdersowners of the Company in respect of 20032009 of RMB 0.0793240.12417 yuan per share amounting to a total of RMB 13,94722,725 and were paid on June 2, 2004, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2004.October 16, 2009. |
|
(ii) (b) | Interim dividends attributable to equity holders of the Company in respect of 2004 of RMB 0.115919 per share amounting to a total of RMB 20,381 were paid on October 8, 2004, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2004. |
|
(iii) | Final dividends attributable to equity holders of the Company in respect of 2004 of RMB 0.147511 per share amounting to a total of RMB 25,936 were paid on June 10, 2005, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2005. |
|
(iv) | Interim dividends attributable to equity holders of the Company in respect of 2005 of RMB 0.157719 per share amounting to a total of RMB 27,731 were paid on September 30, 2005, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2005. |
|
(v) | Final dividends attributable to equity holders of the Company in respect of 2005 of RMB 0.180325 per share amounting to a total of RMB 32,282 were paid on June 9, 2006, and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2006. |
|
(vi) | Interim dividends attributable to equity holders of the Company in respect of 2006 of RMB 0.202806 per share amounting to a total of RMB 36,307 were paid on September 26, 2006 and were accounted for in equity as an appropriation of retained earnings in the year ended December 31, 2006. |
|
(vii) | At the meeting on March 19, 2007,25, 2010, the Board of Directors proposed final dividends attributable to equity holdersowners of the Company in respect of 20062009 of RMB 0.1546990.13003 yuan per share amounting to a total of RMB 27,694.23,799. These consolidated financial statements do not reflect this dividend |
F-25
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| payable as the final dividends were proposed after the balance sheet datereporting period and will be accounted for in equity as an appropriation of retained earnings in the year ending December 31, 20072010 when approved at the forthcoming annual general meeting.Annual General Meeting. |
|
(c) | | Interim dividends attributable to owners of the Company in respect of 2008 of RMB 0.13183 yuan per share amounting to a total of RMB 24,127 and were paid on October 16, 2008. |
|
(d) | | Final dividends attributable to owners of the Company in respect of 2008 of RMB 0.14953 yuan per share amounting to a total of RMB 27,367 were approved by the shareholders in the Annual General Meeting on May 12, 2009 and were paid on June 19, 2009. |
|
(e) | | Interim dividends attributable to owners of the Company in respect of 2007 of RMB 0.205690 yuan per share amounting to a total of RMB 36,823 and were paid on September 28, 2007. |
| |
12 | CASH AND CASH EQUIVALENTS |
The weighted average effective interest rate on bank deposits was 1.97% and 1.95% for the years ended December 31, 2005 and 2006, respectively.
| |
13(f) | INVESTMENTS IN COLLATERALIZED LOANS | Final dividends attributable to owners of the Company in respect of 2007 of RMB 0.156859 yuan per share amounting to a total of RMB 28,708 and were paid on June 13, 2008. |
Securities, in the form of loans collateralized by principally PRC government bonds, purchased by the Group are recorded as investments in collateralized loans. These securities have terms ranging from 3 days to 182 days. The difference between the purchase price and the amount that the Group is expected to receive upon the maturity of these securities is accounted as interest income and accrued over the lives of the corresponding securities using the effective yield method. Investments in collateralized loans are accounted for as collateralized financing transactions and are recorded at their contractual amounts plus interest accrued.
F-24
Notes receivable represent mainly the bills of acceptance issued by banks for sale of goods and products. All notes receivable are due within one year.
| | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Accounts receivable due from third parties | | | 6,483 | | | | 9,498 | |
Accounts receivable due from related parties | | | 2,145 | | | | 2,247 | |
Less: Provision for impairment of receivables | | | (3,998 | ) | | | (3,257 | ) |
| | | | | | |
| | | 4,630 | | | | 8,488 | |
| | | | | | |
Movement in provision for impairment of accounts receivable is as follows:
| | | | | | | | | | | | |
| | Year Ended | |
| | December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Balance at beginning of the year | | | 5,952 | | | | 4,848 | | | | 3,998 | |
Provision/(Write back) | | | (408 | ) | | | (333 | ) | | | (126 | ) |
Amount written off against provision | | | (696 | ) | | | (517 | ) | | | (615 | ) |
| | | | | | | | | |
Balance at end of the year | | | 4,848 | | | | 3,998 | | | | 3,257 | |
| | | | | | | | | |
Amounts due from related parties are interest free and unsecured (Note 34).
F-26
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Crude oil and other raw materials | | | 22,396 | | | | 24,143 | |
Work in progress | | | 5,933 | | | | 5,493 | |
Finished goods | | | 35,131 | | | | 47,263 | |
Spare parts and consumables | | | 43 | | | | 41 | |
| | | | | | |
| | | 63,503 | | | | 76,940 | |
Less: Write down in inventories | | | (770 | ) | | | (902 | ) |
| | | | | | |
| | | 62,733 | | | | 76,038 | |
| | | | | | |
Movements in allowance for write down in inventories, which relate primarily to oil and chemical products, are as follows:
| | | | | | | | | | | | |
| | Year Ended | |
| | December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Balance at beginning of the year | | | 803 | | | | 926 | | | | 770 | |
Provision /(Write back) | | | 147 | | | | (139 | ) | | | 140 | |
Amount written off against provision | | | (24 | ) | | | (17 | ) | | | (8 | ) |
| | | | | | | | | |
Balance at end of the year | | | 926 | | | | 770 | | | | 902 | |
| | | | | | | | | |
Cost of inventory (approximates cost of goods sold) recognized as expense amounted to RMB 174,169, RMB 257,957 and RMB 341,456 for the years ended December 31, 2004, 2005 and 2006, respectively.16 PROPERTY, PLANT AND EQUIPMENT
Inventories of the Group carried at net realizable value amounted to RMB 2,236 and RMB 3,415 at December 31, 2005 and 2006, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Equipment
| | | | | | | | |
| | | | Oil and Gas
| | and
| | Motor
| | | | Construction
| | |
Year Ended December 31, 2009 | | Buildings | | Property | | Machinery | | Vehicles | | Other | | in Progress | | Total |
| | RMB | | RMB | | RMB | | RMB | | RMB | | RMB | | RMB |
|
Cost or valuation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of the year | | | 99,680 | | | | 790,354 | | | | 366,953 | | | | 17,537 | | | | 9,924 | | | | 172,353 | | | | 1,456,801 | |
Additions | | | 4,516 | | | | 11,141 | | | | 27,315 | | | | 3,277 | | | | 2,880 | | | | 236,285 | | | | 285,414 | |
Transfers | | | 9,746 | | | | 97,136 | | | | 62,540 | | | | — | | | | 1,497 | | | | (170,919 | ) | | | — | |
Disposals or write offs | | | (2,167 | ) | | | (5,838 | ) | | | (3,842 | ) | | | (503 | ) | | | (3,107 | ) | | | (11,614 | ) | | | (27,521 | ) |
Currency translation differences | | | (415 | ) | | | (3,944 | ) | | | (402 | ) | | | (127 | ) | | | (143 | ) | | | (626 | ) | | | (5,657 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | 110,910 | | | | 888,849 | | | | 452,564 | | | | 20,184 | | | | 11,051 | | | | 225,479 | | | | 1,709,037 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated depreciation and impairment |
At beginning of the year | | | (27,710 | ) | | | (317,301 | ) | | | (196,842 | ) | | | (8,536 | ) | | | (5,723 | ) | | | (265 | ) | | | (556,377 | ) |
Charge for the year | | | (5,614 | ) | | | (57,088 | ) | | | (24,988 | ) | | | (1,657 | ) | | | (1,012 | ) | | | (11 | ) | | | (90,370 | ) |
Disposals or write offs or transfers | | | 1,087 | | | | 3,455 | | | | 3,363 | | | | 378 | | | | 2,873 | | | | — | | | | 11,156 | |
Currency translation differences | | | 124 | | | | 1,497 | | | | 179 | | | | 83 | | | | 137 | | | | 1 | | | | 2,021 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | (32,113 | ) | | | (369,437 | ) | | | (218,288 | ) | | | (9,732 | ) | | | (3,725 | ) | | | (275 | ) | | | (633,570 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net book value | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | 78,797 | | | | 519,412 | | | | 234,276 | | | | 10,452 | | | | 7,326 | | | | 225,204 | | | | 1,075,467 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| |
17 | PREPAID EXPENSES AND OTHER CURRENT ASSETS |
| | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Other receivables | | | 9,404 | | | | 7,083 | |
Amounts due from related parties | | | 13,524 | | | | 15,925 | |
Less: Provision for impairment of these receivables | | | (6,814 | ) | | | (6,506 | ) |
| | | | | | |
| | | 16,114 | | | | 16,502 | |
Advances to suppliers | | | 5,819 | | | | 6,087 | |
Prepaid expenses | | | 279 | | | | 326 | |
Other current assets | | | 461 | | | | 366 | |
| | | | | | |
| | | 22,673 | | | | 23,281 | |
| | | | | | |
F-25
F-27
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Other receivables consist primarily of taxes other than income taxes refund receivables, subsidies receivable, and receivables for the sale of materials and scrap.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Equipment
| | | | | | | | |
| | | | Oil and Gas
| | and
| | Motor
| | | | Construction
| | |
Year Ended December 31, 2008 | | Buildings | | Property | | Machinery | | Vehicles | | Other | | in Progress | | Total |
| | RMB | | RMB | | RMB | | RMB | | RMB | | RMB | | RMB |
|
Cost or valuation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of the year | | | 90,951 | | | | 676,011 | | | | 334,948 | | | | 15,284 | | | | 9,034 | | | | 113,283 | | | | 1,239,511 | |
Additions | | | 1,006 | | | | 14,382 | | | | 3,720 | | | | 2,816 | | | | 288 | | | | 220,202 | | | | 242,414 | |
Transfers | | | 10,287 | | | | 106,930 | | | | 32,296 | | | | — | | | | 930 | | | | (150,443 | ) | | | — | |
Disposals or write offs | | | (2,317 | ) | | | (3,946 | ) | | | (3,631 | ) | | | (496 | ) | | | (222 | ) | | | (10,341 | ) | | | (20,953 | ) |
Currency translation differences | | | (247 | ) | | | (3,023 | ) | | | (380 | ) | | | (67 | ) | | | (106 | ) | | | (348 | ) | | | (4,171 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | 99,680 | | | | 790,354 | | | | 366,953 | | | | 17,537 | | | | 9,924 | | | | 172,353 | | | | 1,456,801 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated depreciation and impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of the year | | | (22,907 | ) | | | (269,289 | ) | | | (167,074 | ) | | | (7,446 | ) | | | (5,050 | ) | | | (285 | ) | | | (472,051 | ) |
Charge for the year | | | (5,869 | ) | | | (50,848 | ) | | | (31,916 | ) | | | (1,466 | ) | | | (946 | ) | | | (1 | ) | | | (91,046 | ) |
Disposals or write offs or transfers | | | 1,008 | | | | 1,868 | | | | 2,039 | | | | 340 | | | | 214 | | | | 20 | | | | 5,489 | |
Currency translation differences | | | 58 | | | | 968 | | | | 109 | | | | 36 | | | | 59 | | | | 1 | | | | 1,231 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | (27,710 | ) | | | (317,301 | ) | | | (196,842 | ) | | | (8,536 | ) | | | (5,723 | ) | | | (265 | ) | | | (556,377 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net book value | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | 71,970 | | | | 473,053 | | | | 170,111 | | | | 9,001 | | | | 4,201 | | | | 172,088 | | | | 900,424 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Except for loans to related parties (Note 34 (g)), amounts due from related parties are interest free, unsecured and with no fixed terms of repayment.
Movements in provision for impairment of these receivables are as follows:
| | | | | | | | | | | | |
| | Year Ended | |
| | December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Balance at beginning of the year | | | 6,365 | | | | 7,255 | | | | 6,814 | |
Provision/(Write back) | | | 1,084 | | | | (122 | ) | | | (190 | ) |
Amount written off against provision | | | (194 | ) | | | (319 | ) | | | (118 | ) |
| | | | | | | | | |
Balance at end of the year | | | 7,255 | | | | 6,814 | | | | 6,506 | |
| | | | | | | | | |
| |
18 | PROPERTY, PLANT AND EQUIPMENT |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended | | | | Oil and Gas | | | Plant and | | | Motor | | | | | Construction | | | |
December 31, 2005 | | Buildings | | | Properties | | | Equipment | | | Vehicles | | | Other | | | in Progress | | | Total | |
| | | | | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
Cost or valuation | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of the year | | | 64,824 | | | | 428,577 | | | | 250,840 | | | | 9,397 | | | | 6,705 | | | | 39,137 | | | | 799,480 | |
Additions | | | 1,394 | | | | 14,308 | | | | 1,292 | | | | 1,744 | | | | 122 | | | | 119,199 | | | | 138,059 | |
Transfers | | | 7,661 | | | | 67,223 | | | | 27,451 | | | | — | | | | 362 | | | | (102,697 | ) | | | — | |
Disposals or write off | | | (714 | ) | | | (11,817 | ) | | | (2,152 | ) | | | (286 | ) | | | (95 | ) | | | — | | | | (15,064 | ) |
Currency translation differences | | | (32 | ) | | | (659 | ) | | | (67 | ) | | | (26 | ) | | | (43 | ) | | | (42 | ) | | | (869 | ) |
| | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | 73,133 | | | | 497,632 | | | | 277,364 | | | | 10,829 | | | | 7,051 | | | | 55,597 | | | | 921,606 | |
| | | | | | | | | | | | | | | | | | | | | |
Accumulated depreciation and impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At beginning of the year | | | (12,905 | ) | | | (180,926 | ) | | | (112,000 | ) | | | (4,810 | ) | | | (3,025 | ) | | | (202 | ) | | | (313,868 | ) |
Charge for the year | | | (3,454 | ) | | | (25,819 | ) | | | (18,234 | ) | | | (955 | ) | | | (749 | ) | | | — | | | | (49,211 | ) |
Disposals or write off | | | 329 | | | | 3,054 | | | | 1,279 | | | | 200 | | | | 76 | | | | 104 | | | | 5,042 | |
Currency translation differences | | | 1 | | | | 275 | | | | 23 | | | | 10 | | | | 12 | | | | — | | | | 321 | |
| | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | (16,029 | ) | | | (203,416 | ) | | | (128,932 | ) | | | (5,555 | ) | | | (3,686 | ) | | | (98 | ) | | | (357,716 | ) |
| | | | | | | | | | | | | | | | | | | | | |
Net book value | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At end of the year | | | 57,104 | | | | 294,216 | | | | 148,432 | | | | 5,274 | | | | 3,365 | | | | 55,499 | | | | 563,890 | |
| | | | | | | | | | | | | | | | | | | | | |
Carrying value of the property, plant and equipment had they been stated at cost less accumulated depreciation | | | 52,779 | | | | 289,820 | | | | 131,411 | | | | 4,787 | | | | 2,810 | | | | 55,499 | | | | 537,106 | |
| | | | | | | | | | | | | | | | | | | | | |
F-28
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year Ended | | | | Oil and Gas | | | Plant and | | | Motor | | | | | Construction | | | |
December 31, 2006 | | Buildings | | | Properties | | | Equipment | | | 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 | |
| | | | | | | | | | | | | | | | | | | | | |
The additions of oil and gas propertiesdepreciation charge of the Group included RMB 13,258 and RMB 3,589 for the year ended December 31, 20052009 included impairment losses of RMB 1,580 and 2006 respectively relatingRMB 478 (2008: RMB 4,235 and RMB 11,950, 2007: RMB Nil and RMB 294) primarily related to the asset retirement obligations recognized during the year (See Note 25).
The depreciation chargecertain of the Group included RMB 4,020, RMB 3,019Group’s oil and RMB 2,642 relatinggas properties and refining and chemical production assets. The carrying values of these assets were written down to impairment provision fortheir recoverable values.
A valuation of all of the Group’s property, plant and equipment, excluding oil and gas reserves, was carried out during 1999 by independent valuers on a depreciated replacement cost basis. As at September 30, 2003, a revaluation of the years ended DecemberGroup’s 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 revaluation surplus net of applicable deferred income taxes was credited to equity.
As at March 31, 2004, 20052006, a revaluation of the Group’s oil and 2006, respectively. Of this amount, RMB 798, RMB 1,955gas properties was undertaken by independent valuers, China United Assets Appraiser Co., Ltd. and RMB 908 for the years ended December 31, 2004, 2005 and 2006 respectively was related to the Chemicals and Marketing segment, RMB 1,423, RMB 372 and RMB 1,734 for the year ended December 31, 2004, 2005 and 2006 respectively was for the Refining and Marketing segment, and RMB 1,799, RMB 692 and RMB Nil for the year ended December 31, 2004, 2005 and 2006 respectively was for the Exploration and Production segment.China Enterprise Appraisals, on a depreciated replacement cost basis. The revaluation did not result in significant differences from their carrying values.
F-26
F-29
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Buildings owned by the Group are on leased land. The net book values of the buildings owned by the Group can be analyzed by the following categories of lease terms:
| | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Short-term lease (less than 10 years) | | | 336 | | | | 363 | |
Medium-term lease (10 to 50 years) | | | 56,768 | | | | 60,507 | |
| | | | | | |
| | | 57,104 | | | | 60,870 | |
| | | | | | |
Substantially all the buildings of the Group are located in the PRC.
The net book values of property, plant and equipment under capital leases at the end of year are as follows:
| | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Exploration and Production | | | 45 | | | | 45 | |
Refining and Marketing | | | — | | | | — | |
Chemicals and Marketing | | | — | | | | — | |
Accumulated depreciation | | | (12 | ) | | | (18 | ) |
| | | | | | |
| | | 33 | | | | 27 | |
| | | | | | |
Capital leases are principally related to plant and equipment and generally contain purchase options at the end of the lease terms.
The following table indicates the changes to the Group’s exploratory well costs, which are included in construction in progress, for the years ended December 31, 2004, 20052009, 2008 and 2006.
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Beginning balance at January 1 | | | 4,335 | | | | 5,751 | | | | 8,296 | |
Additions to capitalized exploratory well costs pending the determination of proved reserves | | | 10,913 | | | | 16,181 | | | | 19,076 | |
Reclassified to wells, facilities, and equipment based on the determination of proved reserves | | | (4,756 | ) | | | (7,089 | ) | | | (8,880 | ) |
Capitalized exploratory well costs charged to expense | | | (4,741 | ) | | | (6,547 | ) | | | (9,494 | ) |
| | | | | | | | | |
Ending balance at December 31 | | | 5,751 | | | | 8,296 | | | | 8,998 | |
| | | | | | | | | |
Number of wells at year end | | | 783 | | | | 993 | | | | 869 | |
| | | | | | | | | |
F-30
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)2007.
| | | | | | | | | | | | |
| | 2009 | | 2008 | | 2007 |
| | RMB | | RMB | | RMB |
|
At beginning of the year | | | 15,853 | | | | 11,975 | | | | 9,005 | |
Additions to capitalised exploratory well costs pending the determination of proved reserves | | | 22,891 | | | | 26,503 | | | | 23,067 | |
Reclassified to wells, facilities, and equipment based on the determination of proved reserves | | | (11,504 | ) | | | (12,284 | ) | | | (10,936 | ) |
Capitalised exploratory well costs charged to expense | | | (10,019 | ) | | | (10,341 | ) | | | (9,161 | ) |
| | | | | | | | | | | | |
At end of the year | | | 17,221 | | | | 15,853 | | | | 11,975 | |
| | | | | | | | | | | | |
The following table provides an aging of capitalizedcapitalised exploratory well costs based on the date the drilling was completed.
| | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
One year or less | | | 8,023 | | | | 8,359 | |
Over one year | | | 273 | | | | 639 | |
| | | | | | |
Balance at December 31 | | | 8,296 | | | | 8,998 | |
| | | | | | |
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
One year or less | | | 15,560 | | | | 14,318 | |
Over one year | | | 1,661 | | | | 1,535 | |
| | | | | | | | |
Balance at December 31 | | | 17,221 | | | | 15,853 | |
| | | | | | | | |
RMB 6391,661 at December 31, 2006 for capitalized2009 of capitalised 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.
Cash payments of RMB 25,099 and RMB 26,052 have been incurred in connection with exploration activities, including RMB 9,019 and RMB 9,328 related to operating activities and RMB 16,080 and RMB 16,724 related to investing activities for the year ended December 31, 2005 and 2006, respectively.
17 INVESTMENTS IN ASSOCIATES AND JOINTLY CONTROLLED ENTITIES
A valuation
The summarised financial information of the Group’s property, plant and equipment, excluding oil and gas reserves, was carried out during 1999 by independent valuers on depreciated replacement costs basis.
The 1999 revaluation resulted in RMB 80,549 in excess of the prior carrying value and a revaluation loss of RMB 1,122 on certain property, plant and equipment.
As at September 30, 2003, a revaluation of the Group’s 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 on certain property, plant and equipment immediately prior to the revaluation and a revaluation loss of RMB 1,257.
As at March 31, 2006, a revaluation of the Group’s 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 significant difference from their carrying value.
Repair and maintenance costs were RMB 6,314, RMB 7,880 and RMB 9,233 for the years ended December 31, 2004, 2005 and 2006, respectively.
Bank debts are secured on property, plant and equipment with a net book value of RMB 75 and RMB 39 at December 31, 2005 and 2006, respectively.
Depreciation expenses on property, plant and equipment are as follows:
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Owned assets | | | 46,988 | | | | 49,198 | | | | 58,669 | |
Assets under capital lease | | | 23 | | | | 13 | | | | 6 | |
| | | | | | | | | |
| | | 47,011 | | | | 49,211 | | | | 58,675 | |
| | | | | | | | | |
F-31
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
19 | INVESTMENTS IN EQUITY AFFILIATES AND JOINTLY CONTROLLED ENTITIES |
The Group’s interests in its principal equity affiliatesassociates and jointly controlled entities, (allincluding the aggregated amounts of which are unlisted), together with its share of their respective assets, liabilities, revenues, profit or loss and incomes,the interest held by the Group were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Country of | | | | | | | | | | | Interest | | | Type of | |
Name | | Incorporation | | | Assets | | | Liabilities | | | Revenue | | | Income | | | Held % | | | Share | |
| | | | | | | | | | | | | | | | | | | | | |
At December 31,2005 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dalian West Pacific Petrochemical Co., Ltd. | | | PRC | | | | 3,114 | | | | 2,233 | | | | 8,563 | | | | 135 | | | | 28.4 | | | | ordinary | |
China Marine Bunker (PetroChina) Co., Ltd. | | | PRC | | | | 3,210 | | | | 2,098 | | | | 14,021 | | | | 127 | | | | 50.0 | | | | ordinary | |
Other | | | | | | | 19,832 | | | | 9,447 | | | | 30,579 | | | | 2,139 | | | | 20.0-70.0 | | | | ordinary | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | 26,156 | | | | 13,778 | | | | 53,163 | | | | 2,401 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
At December 31,2006 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dalian West Pacific Petrochemical Co., Ltd. | | | PRC | | | | 3,410 | | | | 2,608 | | | | 10,188 | | | | 6 | | | | 28.4 | | | | ordinary | |
China Marine Bunker (PetroChina) Co., Ltd. | | | PRC | | | | 3,388 | | | | 2,098 | | | | 19,003 | | | | 139 | | | | 50.0 | | | | ordinary | |
PetroKazakhstan Inc. | | | Canada | | | | 22,642 | | | | 1,240 | | | | 144 | | | | 43 | | | | 67.0 | | | | ordinary | |
Other | | | | | | | 26,995 | | | | 17,533 | | | | 40,903 | | | | 2,089 | | | | 20.0-70.0 | | | | ordinary | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | 56,435 | | | | 23,479 | | | | 70,238 | | | | 2,277 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Country of
| | | | | | | | | | Interest
| | Type of
|
Name | | Incorporation | | Assets | | Liabilities | | Revenues | | Profit/(loss) | | Held % | | Share |
| | | | RMB | | RMB | | RMB | | RMB | | | | |
|
As of or for the year ended December 31, 2009: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dalian West Pacific Petrochemical Co., Ltd. | | | PRC | | | | 10,168 | | | | 12,228 | | | | 28,205 | | | | 1,076 | | | | 28.44 | | | | ordinary | |
China Marine Bunker (PetroChina) Co., Ltd. | | | PRC | | | | 6,546 | | | | 3,501 | | | | 27,510 | | | | 358 | | | | 50.00 | | | | ordinary | |
As of or for the year ended December 31, 2008: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dalian West Pacific Petrochemical Co., Ltd. | | | PRC | | | | 10,433 | | | | 13,182 | | | | 41,643 | | | | (5,660 | ) | | | 28.44 | | | | ordinary | |
China Marine Bunker (PetroChina) Co., Ltd. | | | PRC | | | | 6,619 | | | | 3,972 | | | | 43,037 | | | | 392 | | | | 50.00 | | | | ordinary | |
Dividends received and receivable from equity affiliatesassociates and jointly controlled entities were RMB 634 and568 in 2009 (2008: RMB 1,730 at December 31, 2005 and 2006, respectively.3,886, 2007: RMB 991).
F-27
PETROCHINA COMPANY LIMITED
Investments
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in equity affiliatesmillions unless otherwise stated)
In 2009, investments in associates and jointly controlled entities of RMB 1,104 and345 (2008: RMB 5936, 2007: RMB 833) were disposed of, withresulting in a gain of RMB 33 (2008: A loss of RMB 2 and a profit3, 2007: A gain of RMB 10 incurred for the years ended December 31, 2005 and 2006, respectively.320).
The Group acquired a 67% equity interest in PetroKazakhstan Inc. from CNPC International Limited, a subsidiary of CNPC, effective on December 28, 2006 for RMB 21,376. The revenue and income disclosed in the table above represents the Group’s share of PetoKazakhstan Inc.’s revenue and income for the period from December 28, 2006 to December 31, 2006. Pursuant to the shareholders’ agreement in relation to the acquisition of PetroKazakhstan Inc., each shareholder has a veto right relating to certain financial and operating decisions, and is therefore considered as having joint control over PetroKazakhstan Inc.. In accordance with the Group’s accounting policy, the Group accounts for its investment in PetroKazakhstan Inc., using the equity method of accounting from December 28, 2006.
| |
20 | AVAILABLE-FOR-SALE INVESTMENTS |
| | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Unlisted available-for-sale investments | | | 1,907 | | | | 2,562 | |
Less: Impairment provision | | | (677 | ) | | | (508 | ) |
| | | | | | |
| | | 1,230 | | | | 2,054 | |
| | | | | | |
F-32
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED18 AVAILABLE-FOR-SALE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)ASSETS
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
Available-for-sale financial assets | | | 2,799 | | | | 2,509 | |
Less: Impairment losses | | | (456 | ) | | | (475 | ) |
| | | | | | | | |
| | | 2,343 | | | | 2,034 | |
| | | | | | | | |
Available-for-sale investments financial assets comprise principally unlisted equity securities.
Dividend income from available-for-sale investments was RMB 113, RMB 109 and RMB 208 for the years ended December 31, 2004, 2005 and 2006, respectively.
Available-for-sale investmentsIn 2009,available-for-sale financial assets of RMB 1,003 and137 (2008: RMB 174, 2007: RMB 145) were disposed of, withresulting in the realisation of a lossgain of RMB 274 (2008: RMB 5, 2007: RMB 142).
19 SUBSIDIARIES
The principal subsidiaries of the Group are:
| | | | | | | | | | | | | | | | |
| | | | | | | | Attributable
| | |
| | Country of
| | Paid-Up
| | Type of
| | Equity
| | |
Company Name | | Incorporation | | Capital | | Legal Entity | | Interest % | | Principal Activities |
| | | | (RMB) | | | | | | |
|
Daqing Oilfield Company Limited | | | PRC | | | | 47,500 | | | Limited liability company | | | 100.00 | | | Exploration, production and sale of crude oil and natural gas |
CNPC Exploration and Development Company Limited | | | PRC | | | | 16,100 | | | Limited liability company | | | 50.00 | | | Exploration, production and sale of crude oil and natural gas in and outside the PRC |
PetroKazakhstan Inc. | | | Canada | | | | US Dollar 665 | | | Joint stock company with limited liability | | | 67.00 | | | Exploration, production and sale of crude oil and natural gas outside the PRC |
PetroChina Hong Kong Limited | | | Hong Kong | | | | HK Dollar 7,592 | | | Limited liability company | | | 100.00 | | | Investment holding. The principal activities of its subsidiaries, associates and jointly controlled entities are the exploration and production of crude oil and natural gas in and outside the PRC |
Business combinations under common control between certain subsidiaries of the Group and a profitsubsidiaries of RMB 3 incurred forCNPC were completed during the years ended December 31, 2005year and 2006, respectively.accordingly, the financial statements have been restated. These business combinations are not individually or in aggregate material to the Group.
F-28
PETROCHINA COMPANY LIMITED
Movements
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in provision for impairment of available-for-sale investments are as follows:millions unless otherwise stated)
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Balance at beginning of the year | | | 813 | | | | 755 | | | | 677 | |
Provision/ (Write back) | | | 26 | | | | (23 | ) | | | 32 | |
Amount written off against provision | | | (84 | ) | | | (55 | ) | | | (201 | ) |
| | | | | | | | | |
Balance at end of the year | | | 755 | | | | 677 | | | | 508 | |
| | | | | | | | | |
20 ADVANCE OPERATING LEASE PAYMENTS
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
Land use rights | | | 19,901 | | | | 16,954 | |
Advance lease payments | | | 10,335 | | | | 9,326 | |
| | | | | | | | |
| | | 30,236 | | | | 26,280 | |
| | | | | | | | |
| |
21 | ADVANCE OPERATING LEASE PAYMENTS |
| | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Land use rights | | | 9,786 | | | | 12,184 | |
Advance lease payments | | | 6,449 | | | | 8,284 | |
| | | | | | |
| | | 16,235 | | | | 20,468 | |
| | | | | | |
Land use rights have terms up to 50 years. Advance lease payments are principally for use of landsub-leased from entities other than the PRC land authorities. These advance operating lease payments are amortizedamortised over the related lease periodsterms using the straight-line method.
21 INTANGIBLE AND OTHER ASSETS
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2009 | | December 31, 2008 |
| | | | Accumulated
| | | | | | Accumulated
| | |
| | Cost | | amortisation | | Net | | Cost | | amortisation | | Net |
| | RMB | | RMB | | RMB | | RMB | | RMB | | RMB |
|
Patents | | | 3,076 | | | | (1,939 | ) | | | 1,137 | | | | 3,071 | | | | (1,729 | ) | | | 1,342 | |
Technical know-how | | | 1,654 | | | | (242 | ) | | | 1,412 | | | | 372 | | | | (174 | ) | | | 198 | |
Goodwill(i) | | | 2,818 | | | | — | | | | 2,818 | | | | 148 | | | | — | | | | 148 | |
Other | | | 11,025 | | | | (2,992 | ) | | | 8,033 | | | | 7,098 | | | | (2,109 | ) | | | 4,989 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Intangible assets | | | 18,573 | | | | (5,173 | ) | | | 13,400 | | | | 10,689 | | | | (4,012 | ) | | | 6,677 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other assets | | | | | | | | | | | 4,617 | | | | | | | | | | | | 4,017 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 18,017 | | | | | | | | | | | | 10,694 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | |
22(i) | INTANGIBLE AND OTHER ASSETS | During the current year, the Group through PetroChina International (Singapore) Pte. Ltd. (an indirectly wholly owned subsidiary of the Company), acquired 100% of the share capital in Singapore Petroleum Company Limited for cash consideration of Singapore Dollars S$3,239 (approximately RMB 15,296). At the date of acquisition, the fair value of the net assets in Singapore Petroleum Company Limited is S$2,668 (approximately RMB 12,597) and consequently, goodwill of S$571 (approximately RMB 2,699) was recognised. |
Intangible and other assets consist of the following:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | | | Accumulated | | | | | | | Accumulated | | | |
| | Cost | | | Amortization | | | Net | | | Cost | | | Amortization | | | Net | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
Patents | | | 2,166 | | | | (1,140 | ) | | | 1,026 | | | | 2,325 | | | | (1,109 | ) | | | 1,216 | |
Technical know-how | | | 325 | | | | (209 | ) | | | 116 | | | | 276 | | | | (103 | ) | | | 173 | |
Other | | | 2,664 | | | | (684 | ) | | | 1,980 | | | | 3,369 | | | | (1,041 | ) | | | 2,328 | |
| | | | | | | | | | | | | | | | | | |
Intangible assets | | | 5,155 | | | | (2,033 | ) | | | 3,122 | | | | 5,970 | | | | (2,253 | ) | | | 3,717 | |
| | | | | | | | | | | | | | | | | | |
Other assets | | | | | | | | | | | 1,889 | | | | | | | | | | | | 2,910 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | 5,011 | | | | | | | | | | | | 6,627 | |
| | | | | | | | | | | | | | | | | | |
F-33
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Amortization on intangible and other assets was RMB 755, RMB 888 and RMB 1,250 for the years ended December 31, 2004, 2005 and 2006, respectively.
Patents principally represent expenditure incurred in acquiring processes and techniques that are generally protected by the relevant government authorities. Identifiable technicalTechnical know-how areis amounts attributable to operational technology acquired in connection with the purchase of equipment. The costs of technical know-how are included as part of the purchase price and are separately distinguishable from the other assets acquired.
F-29
PETROCHINA COMPANY LIMITED
| |
23 | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
| | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Trade payable | | | 13,749 | | | | 22,490 | |
Advances from customers | | | 7,698 | | | | 9,310 | |
Salaries and welfare payable | | | 7,353 | | | | 8,844 | |
Accrued expenses | | | 4 | | | | 10 | |
Dividends payable by subsidiaries to minority shareholders | | | 93 | | | | 60 | |
Interest payable | | | 27 | | | | 3 | |
Construction fee and equipment cost payables | | | 16,420 | | | | 28,349 | |
One-time employee housing remedial payment payable | | | 1,174 | | | | 933 | |
Other payables | | | 12,158 | | | | 14,910 | |
Amounts due to related parties | | | 41,082 | | | | 35,273 | |
| | | | | | |
| | | 99,758 | | | | 120,182 | |
| | | | | | |
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
22 INVENTORIES
| | | | | | | | |
| | December 31, 2009 | | December 31, 2008 |
| | RMB | | RMB |
|
Crude oil and other raw materials | | | 30,928 | | | | 31,319 | |
Work in progress | | | 7,006 | | | | 3,472 | |
Finished goods | | | 77,685 | | | | 65,074 | |
Spare parts and consumables | | | 28 | | | | 31 | |
| | | | | | | | |
| | | 115,647 | | | | 99,896 | |
Less: Write down in inventories | | | (866 | ) | | | (9,211 | ) |
| | | | | | | | |
| | | 114,781 | | | | 90,685 | |
| | | | | | | | |
The carrying amounts of inventories of the Group, which are carried at net realisable value, amounted to RMB 7,216 (2008: RMB 53,551) at December 31, 2009.
23 ACCOUNTS RECEIVABLE
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
Accounts receivable | | | 30,909 | | | | 19,233 | |
Less: Provision for impairment of receivables | | | (2,124 | ) | | | (2,423 | ) |
| | | | | | | | |
| | | 28,785 | | | | 16,810 | |
| | | | | | | | |
The aging analysis of accounts receivable at December 31, 2009 and December 31, 2008 is as follows:
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
Within 1 year | | | 28,579 | | | | 16,563 | |
Between 1 to 2 years | | | 112 | | | | 156 | |
Between 2 to 3 years | | | 84 | | | | 25 | |
Over 3 years | | | 2,134 | | | | 2,489 | |
| | | | | | | | |
| | | 30,909 | | | | 19,233 | |
| | | | | | | | |
The Group offers its customers credit terms up to 180 days.
Movements in the provision for impairment of accounts receivable are as follows:
| | | | | | | | |
| | 2009 | | 2008 |
| | RMB | | RMB |
|
At beginning of the year | | | 2,423 | | | | 2,880 | |
Provision for impairment of accounts receivable | | | 38 | | | | 36 | |
Receivables written off as uncollectible | | | (232 | ) | | | (388 | ) |
Reversal of provision for impairment of accounts receivable | | | (105 | ) | | | (105 | ) |
| | | | | | | | |
At end of the year | | | 2,124 | | | | 2,423 | |
| | | | | | | | |
F-30
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
24 PREPAID EXPENSES AND OTHER CURRENT ASSETS
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
Other receivables | | | 8,528 | | | | 10,122 | |
Advances to suppliers | | | 36,009 | | | | 37,209 | |
| | | | | | | | |
| | | 44,537 | | | | 47,331 | |
Less: Provision for impairment | | | (3,741 | ) | | | (3,943 | ) |
| | | | | | | | |
| | | 40,796 | | | | 43,388 | |
Prepaid income taxes | | | — | | | | — | |
Value-added tax recoverable | | | 15,663 | | | | 25,677 | |
Prepaid expenses | | | 421 | | | | 275 | |
Other current assets | | | 2,715 | | | | 217 | |
| | | | | | | | |
| | | 59,595 | | | | 69,557 | |
| | | | | | | | |
Other receivables consist primarily of taxes other than income tax refunds, subsidies receivable, and receivables for the sale of materials and scrap.
25 NOTES RECEIVABLE
Notes receivable represent mainly bills of acceptance issued by banks for the sale of goods and products. All notes receivable are due within one year.
26 CASH AND CASH EQUIVALENTS
The weighted average effective interest rate on bank deposits was 1.46% per annum for the year ended December 31, 2009 (2008: 2.24% per annum).
27 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Trade payables | | | 62,840 | | | | 38,795 | |
Advances from customers | | | 21,193 | | | | 13,008 | |
Salaries and welfare payable | | | 5,105 | | | | 6,377 | |
Accrued expenses | | | 31 | | | | 20 | |
Dividends payable by subsidiaries to non-controlling shareholders | | | 105 | | | | 154 | |
Interest payable | | | 1,448 | | | | 156 | |
Construction fee and equipment cost payables | | | 93,920 | | | | 79,491 | |
Other payables | | | 20,097 | | | | 18,779 | |
| | | | | | | | |
| | | 204,739 | | | | 156,780 | |
| | | | | | | | |
Other payables consist primarily of customer deposits.
Amounts due to related parties are interest-free, unsecured and with no fixed terms of repayment (Note 34).
F-31
| | | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Bank loans | | | | | | | | |
| — secured | | | 34 | | | | 23 | |
| — unsecured | | | 12,753 | | | | 14,812 | |
Loans from fellow CNPC subsidiary | | | 520 | | | | 320 | |
Other | | | 57 | | | | 1 | |
| | | | | | |
| | | 13,364 | | | | 15,156 | |
Current portion of long-term debts | | | 15,325 | | | | 20,607 | |
| | | | | | |
| | | 28,689 | | | | 35,763 | |
| | | | | | |
F-34
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | |
| | | | At December 31, |
| | | | |
| | Interest Rate and Final Maturity | | 2005 | | 2006 |
| | | | | | |
| | | | RMB | | RMB |
Renminbi — denominated debts: | | | | |
Bank loans for the development of oil fields and construction of refining plants | | Majority floating interest rates ranging from 5.18% to 6.16% per annum as of December 31, 2006, with maturities through 2022 | | 9,778 | | 8,390 |
Bank loans for working capital | | Floating interest rate at 5.18% per annum as of December 31, 2006, with maturities through 2007 | | 6,030 | | 6,000 |
Loans from fellow CNPC subsidiary for the development of oil fields and construction of refining plants | | Floating interest rates ranging from 4.46% to 5.18% per annum as of December 31, 2006, with maturities through 2032 | | 16,462 | | 16,782 |
Working capital loans from fellow CNPC subsidiary | | Majority floating interest rates at 4.61% per annum as of December 31, 2006, with maturities through 2008 | | 4,335 | | 4,130 |
Working capital loans | | Fixed interest rates at 6.32% per annum with no fixed repayment term | | 5 | | 5 |
Corporate debenture for the development of oil fields and construction of refining plants | | Fixed interest rate at 4.50% per annum with maturities through 2007 | | 1,350 | | 1,365 |
Corporate debenture for the development of oil and gas properties | | Fixed interest rates ranging from 3.76% to 4.11% per annum with maturities through 2013 | | 1,500 | | 3,523 |
US Dollar — denominated debts: | | | | |
Bank loans for the development of oil fields and construction of refining plants | | Fixed interest rates ranging from free to 9.00% per annum with maturities through 2038 | | 1,404 | | 969 |
Bank loans for the development of oil fields and construction of refining plants | | Floating interest rates ranging from 4.72% to 6.17% per annum as of December 31, 2006, with maturities through 2014 | | 6,751 | | 3,589 |
Bank loans for working capital | | Floating interest rates ranging from LIBOR plus 0.40% to LIBOR plus 5.00% per annum as of December 31, 2006 with maturities through 2008 | | 1,362 | | 1,326 |
Bank loans for acquisition of overseas oil and gas properties | | Floating interest rate at LIBOR plus 0.55% per annum as of December 31, 2006, with maturities through 2009 | | 1,614 | | 1,368 |
Loans from 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, 2006, with maturities through 2020 | | 2,852 | | 4,481 |
The aging analysis of trade payables at December 31, 2009 and 2008 is as follows:
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Within 1 year | | | 60,420 | | | | 36,892 | |
Between 1 to 2 years | | | 1,404 | | | | 1,054 | |
Between 2 to 3 years | | | 505 | | | | 306 | |
Over 3 years | | | 511 | | | | 543 | |
| | | | | | | | |
| | | 62,840 | | | | 38,795 | |
| | | | | | | | |
28 BORROWINGS
(a) Short-term borrowings
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Bank loans | | | | | | | | |
— secured | | | 1,876 | | | | 1,841 | |
— unsecured | | | 18,377 | | | | 25,111 | |
Loans from CNPC and a fellow CNPC subsidiary | | | 54,369 | | | | 60,819 | |
Short-term financing bills | | | 60,000 | | | | — | |
Other | | | — | | | | 1 | |
| | | | | | | | |
| | | 134,622 | | | | 87,772 | |
Current portion of long-term borrowings | | | 14,229 | | | | 5,898 | |
| | | | | | | | |
| | | 148,851 | | | | 93,670 | |
| | | | | | | | |
(b) Long-term borrowings
| | | | | | | | | | |
| | | | December 31,
| | December 31,
|
| | Interest rates and final maturities | | 2009 | | 2008 |
| | | | RMB | | RMB |
|
Renminbi — denominated borrowings: | | | | | | | | | | |
Bank loans for the development of oil fields and construction of refining plants | | Floating interest rate at 5.35% per annum as of December 31, 2009, with maturities through 2010 | | | 100 | | | | 200 | |
Bank loans for working capital | | Majority floating interest rates ranging from 4.86% to 6.23% per annum as of December 31, 2009, with maturities through 2019 | | | 7,013 | | | | 6,409 | |
F-32
F-35
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | |
| | | | At December 31, |
| | | | |
| | Interest Rate and Final Maturity | | 2005 | | 2006 |
| | | | | | |
| | | | RMB | | RMB |
Loans from fellow CNPC subsidiary for acquisition of overseas oil and gas properties | | Floating interest rate at LIBOR plus 0.40% per annum as of December 31, 2006, with maturities through 2006 | | 593 | | — |
Loans from fellow CNPC subsidiary for working capital | | Floating interest rates ranging from LIBOR plus 0.50% to LIBOR plus 0.69% per annum as of December 31, 2006, with maturities through 2008 | | 2,557 | | 1,471 |
Loans for the development of oil fields and construction of refining plants | | Fixed interest rate at 1.55% per annum with maturities through 2022 | | 509 | | 462 |
Loans for working capital | | Floating interest rate at LIBOR plus 0.35% per annum as of December 31, 2006, with maturities through 2008 | | 668 | | 650 |
Corporate debenture for the development of oil fields and construction of refining plants | | Fixed interest rate at 3.00% per annum with maturities through 2019 | | 347 | | 353 |
Corporate debenture for the development of oil and gas properties | | Fixed interest rate at 9.50% per annum with maturities through 2011 | | 844 | | 817 |
Corporate debenture for the development of oil and gas properties | | Fixed interest rate at 15.00% per annum with maturities through 2008 | | 292 | | 179 |
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 5.30% per annum with maturities through 2010 | | 226 | | 75 |
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 with maturities through 2023 | | 256 | | 257 |
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 with maturities through 2007 | | 160 | | 49 |
| | | | | | |
Total long-term debts | | | | 59,895 | | 56,241 |
| | | | | | |
| Less: Current portion of long-term debts | | | | (15,325) | | (20,607) |
| | | | | | |
| | | | 44,570 | | 35,634 |
| | | | | | |
| | | | | | | | | | |
| | | | December 31,
| | December 31,
|
| | Interest rates and final maturities | | 2009 | | 2008 |
| | | | RMB | | RMB |
|
Loans from CNPC and a fellow CNPC subsidiary for the development of oil fields and construction of refining plants | | Majority floating interest rates ranging from 2.48% to 5.04% per annum as of December 31, 2009, with maturities through 2032 | | | 16,262 | | | | 16,181 | |
Working capital loans from a fellow CNPC subsidiary | | Fixed interest rates ranging from 4.32% to 4.90% per annum as of December 31, 2009, with maturities through 2012 | | | 760 | | | | 456 | |
Working capital loans | | Majority fixed interest rates ranging from 2.55% to 6.32% per annum as of December 31, 2009, with no fixed repayment terms | | | 44 | | | | 5 | |
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, 2009, with maturities through 2013 | | | 3,500 | | | | 3,500 | |
Medium-term notes for the development of oil and gas properties | | Fixed interest rates ranging from 2.28% to 3.35% per annum as of December 31, 2009, with maturities through 2014 | | | 45,000 | | | | — | |
US Dollar — denominated borrowings: | | | | | | | | | | |
Bank loans for the development of oil fields and construction of refining plants | | Fixed interest rates ranging from zero to 1.50% per annum as of December 31, 2009, with maturities through 2038 | | | 240 | | | | 278 | |
Bank loans for the development of oil fields and construction of refining plants | | Floating interest rates ranging from LIBOR plus 0.50% to LIBOR plus 3.00% per annum as of December 31, 2009, with maturities through 2014 | | | 4,577 | | | | 3,825 | |
Bank loans for working capital | | Floating interest rates ranging from LIBOR plus 0.30% to LIBOR plus 2.00% per annum as of December 31, 2009, with maturities through 2014 | | | 10,632 | | | | 2,392 | |
F-33
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
| | | | | | | | | | |
| | | | December 31,
| | December 31,
|
| | Interest rates and final maturities | | 2009 | | 2008 |
| | | | RMB | | RMB |
|
Loans from a fellow CNPC subsidiary for the development of oil fields and construction of refining plants | | Floating interest rates ranging from LIBOR plus 0.30% to 0.40% per annum as of December 31, 2009, with maturities through 2020 | | | 2,688 | | | | 2,691 | |
Loans from fellow CNPC subsidiaries for working capital | | Majority floating interest rate at LIBOR plus 1.00% per annum as of December 31, 2009, with maturities through 2015 | | | 7,674 | | | | 851 | |
Loans for the development of oil fields and construction of refining plants | | Fixed interest rate at 1.55% per annum as of December 31, 2009, with maturities through 2022 | | | 325 | | | | 352 | |
Loans for working capital | | Floating interest rate at 5.00% per annum as of December 31, 2009, with no fixed repayment terms | | | 47 | | | | 569 | |
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, 2009, with maturities through 2019 | | | 295 | | | | 301 | |
Corporate debenture for the development of oil and gas properties | | Fixed interest rate at 9.50% per annum as of December 31, 2009, with maturities through 2011 | | | 341 | | | | 513 | |
Japanese Yen — denominated borrowings: | | | | | | | | | | |
Bank loans for the development of oil fields and construction of refining plants | | Fixed interest rate at 2.42% per annum as of December 31, 2009, with maturities through 2010 | | | 10 | | | | 20 | |
Euro — denominated borrowings: | | | | | | | | | | |
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, 2009, with maturities through 2023 | | | 192 | | | | 207 | |
| | | | | | | | | | |
Total long-term borrowings | | | 99,700 | | | | 38,750 | |
Less: Current portion of long-term borrowings | | | (14,229 | ) | | | (5,898 | ) |
| | | | | | | | |
| | | | | 85,471 | | | | 32,852 | |
| | | | | | | | | | |
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 People’s Bank of China. For loans
F-34
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
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
F-36
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
from independent third parties other than banks. Interest free loans amounted to RMB 110 and RMB 68 at December 31, 2005 and 2006, respectively.
Debts
Borrowings of the Group of RMB 674 and RMB 5971,154 were guaranteed by CNPC and its subsidiaries at December 31, 2005 and 2006, respectively.2009 (2008: RMB 941).
The Group’s debtsborrowings include secured liabilities (bank debts) totalling RMB 1,108 and RMB 3597,904 at December 31, 2005 and 2006, respectively.2009 (2008: RMB 3,403). These bank debtsborrowings are mainly secured mostly over certain of the Group’s propertiesnotes receivable, inventories, fixed assets, intangible assets, cash and cash equivalents and time deposits with maturities over one year.year amounting to RMB 8,693(2008:RMB 4,031).
| | | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Total debts: | | | | | | | | |
| — interest free | | | 110 | | | | 68 | |
| — at fixed rates | | | 19,640 | | | | 20,850 | |
| — at floating rates | | | 53,509 | | | | 50,479 | |
| | | | | | |
| | | 73,259 | | | | 71,397 | |
| | | | | | |
Weighted average effective interest rates: | | | | | | | | |
| — bank loans | | | 5.26% | | | | 5.51% | |
| — loans from fellow CNPC subsidiary | | | 4.90% | | | | 4.98% | |
| — other loans | | | 3.38% | | | | 3.93% | |
| — corporate debentures | | | 5.86% | | | | 5.04% | |
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Total borrowings: | | | | | | | | |
— interest free | | | 51 | | | | 53 | |
— at fixed rates | | | 163,155 | | | | 85,170 | |
— at floating rates | | | 71,116 | | | | 41,299 | |
| | | | | | | | |
| | | 234,322 | | | | 126,522 | |
| | | | | | | | |
Weighted average effective interest rates: | | | | | | | | |
— bank loans | | | 3.10 | % | | | 4.20 | % |
— loans from CNPC and fellow CNPC subsidiaries | | | 3.21 | % | | | 4.32 | % |
— corporate debentures | | | 4.31 | % | | | 4.51 | % |
— medium-term notes | | | 2.78 | % | | | — | |
— short-term notes | | | 2.01 | % | | | — | |
— other loans | | | 2.22 | % | | | 3.05 | % |
The carrying amounts and fair values of long-term debtsborrowings are as follows:
| | | | | | | | |
| | Carrying Amounts | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Bank loans | | | 27,581 | | | | 22,023 | |
Loans from fellow CNPC subsidiary | | | 26,799 | | | | 26,864 | |
Corporate debentures | | | 4,333 | | | | 6,237 | |
Other | | | 1,182 | | | | 1,117 | |
| | | | | | |
| | | 59,895 | | | | 56,241 | |
| | | | | | |
| | | | | | | | |
| | Fair Values At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Bank loans | | | 27,397 | | | | 21,858 | |
Loans from fellow CNPC subsidiary | | | 26,795 | | | | 26,861 | |
Corporate debentures | | | 4,173 | | | | 5,852 | |
Other | | | 1,049 | | | | 997 | |
| | | | | | |
| | | 59,414 | | | | 55,568 | |
| | | | | | |
| | | | | | | | |
| | Carrying Amounts | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Bank loans | | | 22,764 | | | | 13,331 | |
Loans from CNPC and fellow CNPC subsidiaries | | | 27,384 | | | | 20,179 | |
Corporate debentures | | | 4,136 | | | | 4,314 | |
Medium-term notes | | | 45,000 | | | | — | |
Other | | | 416 | | | | 926 | |
| | | | | | | | |
| | | 99,700 | | | | 38,750 | |
| | | | | | | | |
F-35
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
| | | | | | | | |
| | Fair Values | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Bank loans | | | 22,601 | | | | 13,111 | |
Loans from CNPC and fellow CNPC subsidiaries | | | 27,377 | | | | 20,179 | |
Corporate debentures | | | 4,146 | | | | 4,020 | |
Medium-term notes | | | 43,587 | | | | — | |
Other | | | 350 | | | | 798 | |
| | | | | | | | |
| | | 98,061 | | | | 38,108 | |
| | | | | | | | |
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
F-37
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
substantially the same terms and characteristics at the balance sheet dates.dates of the statement of financial position. Such discount rates ranged from 0.13%1.02% to 7.45% and 0.53% to 6.54%5.93% per annum as of December 31, 2005 and 2006, respectively2009 (2008: 1.47% to 7.41%) depending on the type of the debts.borrowings. The carrying amounts of short-term debtsborrowings approximate their fair value.values.
Maturities of long-term debtsborrowings at the dates indicated below are as follows:
| | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
First year | | | 15,325 | | | | 20,607 | |
Second year | | | 18,373 | | | | 11,797 | |
Third year | | | 11,393 | | | | 6,024 | |
Fourth year | | | 2,492 | | | | 1,504 | |
Fifth year | | | 1,057 | | | | 2,921 | |
Thereafter | | | 11,255 | | | | 13,388 | |
| | | | | | |
| | | 59,895 | | | | 56,241 | |
| | | | | | |
| |
25 | ASSET RETIREMENT OBLIGATIONS |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
At beginning of the year | | | 735 | | | | 919 | | | | 14,187 | |
Liabilities incurred | | | 48 | | | | 13,258 | | | | 3,589 | |
Liabilities settled | | | — | | | | (1 | ) | | | (105 | ) |
Accretion expense (Note 8) | | | 54 | | | | 60 | | | | 796 | |
Currency translation differences | | | 82 | | | | (49 | ) | | | 14 | |
| | | | | | | | | |
At end of the year | | | 919 | | | | 14,187 | | | | 18,481 | |
| | | | | | | | | |
Asset retirement obligations are in relation to oil and gas properties (See Note 18).
| | | | | | | | |
| | December 31,
| | | December 31,
| |
Bank Loans | | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Within one year | | | 8,756 | | | | 579 | |
Between one to two years | | | 2,996 | | | | 9,991 | |
Between two to five years | | | 10,668 | | | | 2,395 | |
After five years | | | 344 | | | | 366 | |
| | | | | | | | |
| | | 22,764 | | | | 13,331 | |
| | | | | | | | |
The 2004 opening balance represented the obligation recognized by CNPC E&D acquired by the Company through a business combination under common control (See Note 2).
| | | | | | | | |
| | December 31,
| | | December 31,
| |
Loans Other than Bank Loans | | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Within one year | | | 5,473 | | | | 5,319 | |
Between one to two years | | | 9,216 | | | | 5,451 | |
Between two to five years | | | 52,153 | | | | 5,037 | |
After five years | | | 10,094 | | | | 9,612 | |
| | | | | | | | |
| | | 76,936 | | | | 25,419 | |
| | | | | | | | |
Before the issuance of two provincial regulations which set forth specific abandonment and disposal processes for oil and gas exploration and production activities in 2005, the Group was neither legally obligated to, nor was the Group under any constructive obligations to take any abandonment measures for its retired oil and gas properties located in China. For safety purposes, the Group performed capping or plugging on certain wells, which were considered to be in areas with extensive human use at the time of the abandonment.
29 SHARE CAPITAL
In 2005, the Group 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 of this change in legal requirements as well as the Group’s practice in China, the Group became legally obligated to take abandonment measures for its retired oil and gas properties located
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Registered, issued and fully paid: | | | | | | | | |
A shares | | | 161,922 | | | | 161,922 | |
H shares | | | 21,099 | | | | 21,099 | |
| | | | | | | | |
| | | 183,021 | | | | 183,021 | |
| | | | | | | | |
F-36
F-38
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
in the two provinces where the new regulations were enacted and is constructively obligated to take abandonment measures for its retired oil and gas properties located in all other provinces in China.
The Group does not have any assets that are legally restricted for purposes of setting asset retirement obligations.
Deferred taxes are calculated on temporary differences under the liability method using a principal tax rate of 33%.
The movements in the deferred tax liabilities are as follows:
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
At beginning of the year | | | 13,436 | | | | 16,902 | | | | 20,759 | |
Income statement charge/(credit) (Note 9) | | | 3,267 | | | | 3,959 | | | | (1,196 | ) |
Charged to/(credit) equity | | | | | | | | | | | | |
| — currency translation difference | | | 199 | | | | (102 | ) | | | 20 | |
| | | | | | | | | |
At end of the year | | | 16,902 | | | | 20,759 | | | | 19,583 | |
| | | | | | | | | |
Deferred tax balances are attributable to the following items:
| | | | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Deferred tax assets | | | | | | | | |
| Current: | | | | | | | | |
| | Provisions, primarily for receivables and inventories | | | (4,767 | ) | | | (7,107 | ) |
| | Tax losses of subsidiaries | | | (1,014 | ) | | | (2,175 | ) |
| Non current: | | | | | | | | |
| | Shut down of manufacturing assets and impairment of long-term assets | | | (4,022 | ) | | | (4,342 | ) |
| | Other | | | (796 | ) | | | (457 | ) |
| | | | | | |
Total deferred tax assets | | | (10,599 | ) | | | (14,081 | ) |
| | | | | | |
Deferred tax liabilities | | | | | | | | |
| Current: | | | | | | | | |
| | Sales | | | 4,401 | | | | — | |
| Non current: | | | | | | | | |
| | Accelerated tax depreciation | | | 26,615 | | | | 33,398 | |
| | Other | | | 342 | | | | 266 | |
| | | | | | |
Total deferred tax liabilities | | | 31,358 | | | | 33,664 | |
| | | | | | |
Net deferred tax liabilities | | | 20,759 | | | | 19,583 | |
| | | | | | |
There were no material unrecognized tax losses at December 31, 2006.
F-39
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Registered, issued and fully paid: | | | | | | | | |
| State-owned shares | | | 157,922 | | | | 157,922 | |
| H shares | | | 21,099 | | | | 21,099 | |
| | | | | | |
| | | 179,021 | | | | 179,021 | |
| | | | | | |
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
Number of Shares of the Company (millions) | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Beginning balance | | | 175,824 | | | | 175,824 | | | | 179,021 | |
Issue of shares | | | — | | | | 3,197 | | | | — | |
| | | | | | | | | |
Ending balance | | | 175,824 | | | | 179,021 | | | | 179,021 | |
| | | | | | | | | |
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 American Depositary Shares (“ADSs”)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 PetroChina’s 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 PRC 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 Government and regulatory authorities.
F-37
F-40
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | |
| | Year Ended | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Revaluation Reserve | | | | | | | | |
Beginning balance | | | 79,946 | | | | 79,946 | |
| | | | | | |
Ending balance | | | 79,946 | | | | 79,946 | |
Capital Reserve | | | | | | | | |
Beginning balance | | | (25,376 | ) | | | (8,881 | ) |
Issue of shares (Note 27) | | | 16,495 | | | | — | |
| | | | | | |
Ending balance | | | (8,881 | ) | | | (8,881 | ) |
Statutory Common Reserve Fund(Note a) | | | | | | | | |
Beginning balance | | | 36,071 | | | | 48,736 | |
Transfer from retained earnings | | | 12,665 | | | | 13,355 | |
Transfer from Statutory Common Welfare Fund | | | — | | | | 27,837 | |
| | | | | | |
Ending balance | | | 48,736 | | | | 89,928 | |
Statutory Common Welfare Fund(Note b) | | | | | | | | |
Beginning balance | | | 21,504 | | | | 27,837 | |
Transfer from retained earnings | | | 6,333 | | | | — | |
Transfer to Statutory Common Reserve Fund | | | — | | | | (27,837 | ) |
| | | | | | |
Ending balance | | | 27,837 | | | | — | |
Currency translation differences | | | | | | | | |
Beginning balance | | | (111 | ) | | | (379 | ) |
Currency translation adjustments | | | (268 | ) | | | (191 | ) |
| | | | | | |
Ending balance | | | (379 | ) | | | (570 | ) |
Other Reserves | | | | | | | | |
Beginning balance | | | (3,200 | ) | | | (14,703 | ) |
Payment to CNPC for the acquisition of the refinery and petrochemical business | | | (9 | ) | | | — | |
Purchase from minority interest of subsidiaries (Note 38) | | | (1,438 | ) | | | (2,156 | ) |
Paid-in capital to CNPC E&D (Note 2) | | | (10,056 | ) | | | — | |
| | | | | | |
Ending balance | | | (14,703 | ) | | | (16,859 | ) |
| | | | | | |
| | | 132,556 | | | | 143,564 | |
| | | | | | |
30 RESERVES
| | | | | | | | |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Revaluation Reserve | | | | | | | | |
Beginning balance | | | 79,946 | | | | 79,946 | |
| | | | | | | | |
Ending balance | | | 79,946 | | | | 79,946 | |
Capital Reserve | | | | | | | | |
Beginning balance | | | 53,362 | | | | 53,362 | |
| | | | | | | | |
Ending balance | | | 53,362 | | | | 53,362 | |
Statutory Common Reserve Fund(Note a) | | | | | | | | |
Beginning balance | | | 115,466 | | | | 102,696 | |
Transfer from retained earnings | | | 9,981 | | | | 12,770 | |
| | | | | | | | |
Ending balance | | | 125,447 | | | | 115,466 | |
Special Reserve-Safety Fund Reserve | | | | | | | | |
Beginning balance | | | 6,750 | | | | 3,536 | |
Safety fund reserve | | | 1,325 | | | | 3,214 | |
| | | | | | | | |
Ending balance | | | 8,075 | | | | 6,750 | |
Currency translation differences | | | | | | | | |
Beginning balance | | | (2,726 | ) | | | (1,554 | ) |
Currency translation differences | | | (1,460 | ) | | | (1,172 | ) |
| | | | | | | | |
Ending balance | | | (4,186 | ) | | | (2,726 | ) |
Other reserves | | | | | | | | |
Beginning balance | | | (23,382 | ) | | | (16,401 | ) |
Purchase of non-controlling interest in subsidiaries | | | (179 | ) | | | (17 | ) |
Acquisition of subsidiaries | | | (248 | ) | | | (6,693 | ) |
Capital reduction of a subsidiary | | | — | | | | (61 | ) |
Fair value gain/(loss) onavailable-for-sale financial assets | | | 140 | | | | (237 | ) |
Capital contribution from non-controlling interest | | | 1,158 | | | | — | |
Other | | | 2 | | | | 27 | |
| | | | | | | | |
Ending balance | | | (22,509 | ) | | | (23,382 | ) |
| | | | | | | | |
| | | 240,135 | | | | 229,416 | |
| | | | | | | | |
| | |
(a) | | Pursuant to the PRC regulations and the Company’s Articles of Association, the Company is required to transfer 10% of its net profit, as determined under the PRC accounting regulations, to a Statutory Common Reserve Fund (“Reserve Fund”). Appropriation to the Reserve Fund may be ceasedcease when the fund aggregates to 50% of the Company’s 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 Company’s production operations, or to increase the capital of the Company. Upon approval by |
F-41
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | |
| | of a resolution of shareholders’ in a 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 issueissuance is not less than 25% Company’s of the Company’s registered capital. |
F-38
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
| | |
(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 required to cease to draw the statutory common welfare from January 1, 2006. In accordance with the Circular on Accounting Treatment Following the 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 the December 31, 2005 into the Reserve Fund. |
|
(c) | | According to the Company’s Articles of Association,relevant PRC regulations, the distributable reserve is the lower of the retained earnings computed under PRC accounting regulations and IFRS. As of December 31, 2006,2009, the Company’s distributable reserve amounted to RMB 205,379 million which was computed under IFRS. |
|
(d) | | As of December 31, 2006, revaluation surplus realized through the depreciation or disposal of revalued assets amounted to approximately358,415 (2008: RMB 53,717 and RMB 57,832 as of December 31, 2005 and 2006, respectively. |
31 DEFERRED TAXATION
Deferred taxation is calculated on temporary differences under the liability method using a principal tax rate of 25% at December 31,2009 and 2008 and 33% at December 31,2007.
The movements in the deferred taxation account are as follows:
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | RMB | | | RMB | | | RMB | |
|
At beginning of the year | | | 11,969 | | | | 20,571 | | | | 19,979 | |
Transfer to profit and loss (Note 12) | | | 8,611 | | | | (8,212 | ) | | | 807 | |
Charge/(credit) to other comprehensive income | | | 38 | | | | (67 | ) | | | 87 | |
Acquisition of a subsidiary | | | 991 | | | | — | | | | (174 | ) |
Currency translation differences | | | (420 | ) | | | (364 | ) | | | (128 | ) |
Others | | | (29 | ) | | | 41 | | | | — | |
| | | | | | | | | | | | |
At end of the year | | | 21,160 | | | | 11,969 | | | | 20,571 | |
| | | | | | | | | | | | |
Deferred tax balances before offset are attributable to the following items:
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Deferred tax assets: | | | | | | | | |
Current: | | | | | | | | |
Receivables and inventories | | | 7,173 | | | | 9,165 | |
Tax losses of subsidiaries | | | 166 | | | | 294 | |
Non-current: | | | | | | | | |
Impairment of long-term assets | | | 3,983 | | | | 4,580 | |
Other | | | 2,379 | | | | 885 | |
| | | | | | | | |
Total deferred tax assets | | | 13,701 | | | | 14,924 | |
| | | | | | | | |
Deferred tax liabilities: | | | | | | | | |
Non-current: | | | | | | | | |
Accelerated tax depreciation | | | 32,348 | | | | 24,613 | |
Other | | | 2,513 | | | | 2,280 | |
| | | | | | | | |
Total deferred tax liabilities | | | 34,861 | | | | 26,893 | |
| | | | | | | | |
Net deferred tax liabilities | | | 21,160 | | | | 11,969 | |
| | | | | | | | |
F-39
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
Deferred tax balances after offset are listed as below:
| | | | | | | | |
| | December 31,
| | December 31,
|
| | 2009 | | 2008 |
| | RMB | | RMB |
|
Deferred tax assets | | | 289 | | | | 497 | |
Deferred tax liabilities | | | 21,449 | | | | 12,466 | |
There were no material unrecognised tax losses at December 31, 2009 and 2008.
32 ASSET RETIREMENT OBLIGATIONS
| | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | |
| | RMB | | | RMB | | | RMB | |
|
At beginning of the year | | | 36,262 | | | | 24,761 | | | | 18,481 | |
Liabilities incurred | | | 7,162 | | | | 10,033 | | | | 4,818 | |
Consolidation of PetroKazakhstan Inc. | | | — | | | | — | | | | 385 | |
Liabilities settled | | | (434 | ) | | | (169 | ) | | | (110 | ) |
Accretion expense (Note 10) | | | 1,943 | | | | 1,746 | | | | 1,202 | |
Currency translation differences | | | (186 | ) | | | (109 | ) | | | (15 | ) |
| | | | | | | | | | | | |
At end of the year | | | 44,747 | | | | 36,262 | | | | 24,761 | |
| | | | | | | | | | | | |
Asset retirement obligations relate to oil and gas properties (Note 16).
33 PENSIONS
The Group participates in 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 rates ranging from 16% to 22% of the employees’ basic salary for the relevant periods.(Note 3(t)). Expenses incurred by the Group in connection with the retirement benefit plans were RMB 2,476, RMB 3,104 and RMB 4,645, for the yearsyear ended December 31, 2004, 20052009 amounted to RMB 8,437 (2008: RMB 6,997, 2007: RMB 5,754).
34 CONTINGENT LIABILITIES
(a) Bank and 2006, respectively.
The Group holds or issues various financial instruments which expose it to credit, interest rate, foreign exchange rate and fair value risks. In addition, the Group’s operations are affected by certain commodity price movements. The Group historically has not used derivative instruments for hedging or trading purposes. Such activities are subject to policies approved by the Group’s senior management. Substantially all of the financial instruments the Group holds is for purposes other than trading. The Group regards an effective market risk system as an important element of the Group’s treasury function and is continuously enhancing its systems. A primary objective is to implement certain methodologies to better measure and monitor risk exposures.
The carrying amounts of accounts receivable included in the balance sheet represent the Group’s maximum exposure to credit risk in relation to its financial assets. Majority of cash and time deposits are placed with state-owned banks and financial institutions. No other financial assets carry a significant exposure to credit risk. The Group has no significant concentration of credit risk.
F-42
PETROCHINA COMPANY LIMITEDguarantees
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
The Group is exposed to the risk arising from changing interest rates. A detailed analysis of the Group’s debts, together with their respective interest rates and maturity dates, are included in Note 24.
| |
(c) | Foreign exchange rate risk |
From July 21, 2005, the PRC government reformed the Renminbi exchange rate regime and implemented a regulated floating exchange rate regime based on market supply and demand with reference to a basket of currencies. However, Renminbi is still regulated in capital projects. The exchange rates of Renminbi are affected by domestic and international economic developments and political changes, and supply and demand for Renminbi. Future exchange rates of Renminbi against other currencies could vary significantly from the current exchange rates. As Renminbi is the functional currency of the Company and most of its consolidated subsidiaries, the fluctuation of the exchange rate of Renminbi may have positive or negative impacts on the results of operations of the Group. An appreciation of Renminbi against United States Dollar may decrease the Group’s turnover, but the cost of acquiring imported materials and equipment may be reduced. A devaluation of Renminbi against United States Dollar may not have a negative impact on the Group’s turnover but may increase the cost for acquiring imported materials and equipment as well as the debt obligations denominated in foreign currencies of the Group.
The Group is engaged in a wide range of petroleum-related activities. The oil and gas markets are affected by global and regional demands and supplies. Prices of onshore crude oil are determined with reference to the prices of crude oil on the international markets. A decline in the prices of crude oil and refined products could adversely affect the Group’s financial position. The Group historically has not used commodity derivative instruments to hedge against potential price fluctuations of crude oil and refined products. Therefore, the Group is exposed to the general price fluctuations of broadly traded oil and gas commodities in 2007 and thereafter.
The carrying amounts of the following financial assets and financial liabilities approximate their fair value as all of them are in short-term in nature: cash and cash equivalents, short-term investments (comprising investments in collateralized loans and time deposits with maturities over three months but within one year), accounts receivable and trade payable, other receivables and payables, lease obligations, short-term debts and floating rate long-term debts. The fair value of the fixed rate long-term debts is likely to be different from their carrying amounts. As the majority of the debts are at floating rates, the fair value of these debts approximate their carrying amounts. Analysis of the fair value and carrying amounts of long-term debts are presented in Note 24.
F-43
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
31 CONTINGENT LIABILITIES
| |
(a) | Bank and other guarantees |
At December 31, 2006,2009, borrowings of associates of RMB 21 (2008: RMB 43) from China Petroleum Finance Company Limited (“CP Finance”, a subsidiary of CNPC) were guaranteed by the Group. The Group had contingent liabilities in respect of the guarantees made to China Petroleum Finance Company Limited (“CP Finance”), a subsidiary of CNPC, and a State-controlled bank from which it is anticipated that no material liabilities will arise.
| | | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Guarantee of debts of equity affiliates from | | | | | | | | |
| CP Finance | | | 187 | | | | 162 | |
Guarantee of debts of third party from | | | | | | | | |
| a State-controlled bank | | | — | | | | 41 | |
| | | | | | |
| | | 187 | | | | 203 | |
| | | | | | |
| |
(b) | Environmental liabilities |
CNPC and the Group have operated in China for many years.
(b) Environmental liabilities
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 willwhich may have a material adverse effect on the financial position of the Group.
On November 13, 2005, explosions occurred at a manufacturing facility of a branch of the Company located in the Jilin Province. The investigation into the accident was completed by the PRC Government in December 2006. Based on the results of the investigation, the Company paid a fine of RMB 1 in settlement of all liability related to the accident.
(c) Legal contingencies
The Group is the named defendant in
Notwithstanding certain insignificant lawsuits as well as the named party in other proceedings arising in the ordinary course of business. While the outcomes of such contingencies, lawsuits or other proceedings cannot be determined at present, theoutstanding, management of the Group believes that any resulting liabilities will not have a material adverse effect on the financial position of the Group.
F-40
PETROCHINA COMPANY LIMITED
| |
(d) | Leasing of roads, land and buildings |
According
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
(d) Leasing of roads, land and buildings
As at December 31, 2009, CNPC is still in the process of completing the process of obtaining the formal land use right certificates, necessary governmental procedures for the requisition of collectively-owned land on which gas stations are located and building ownership certificates for buildings transferred to the Group under the Restructuring Agreement entered into between the Company and CNPC in 1999 upon the formation of the Company, CNPC has undertaken to the Company the following:2000.
| | |
| • | CNPC will use its best endeavors 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; |
F-44
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | |
| • | 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, 2006, CNPC obtained formal land use right certificates in relation to 27,494 out of the above-mentioned 28,649 parcels of land, 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 confirmManagement confirms 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 certain relevant land use right certificates or individual building ownership certificates have not been obtained to date or the fact that the relevant governmental procedures have not been completed. In management’s opinion, the outcome of the above events will not have a material adverse effect on the results of operations or the financial position of the Group.
(e) Group insurance
Except for limited
The Group has insurance coverage for vehicles and certain assets that are 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 it may have a material impact on the operating results but will not have a material adverseresult from accidents and also employer liabilities insurance. The potential effect on the financial position of the Group.Group of any liabilities resulting from future uninsured incidents cannot be estimated by the Group at present.
35 COMMITMENTS
| |
| (a) Operating lease commitments |
(a) Operating lease commitments
Operating lease commitments of the Group are mainly for leasing of land, and buildings and equipment. Leases range from one1 to fifty50 years and usually do not contain renewal options. Future minimum lease payments as of December 31, 20052009 and 20062008 under non-cancelablenon-cancellable operating leases are as follows:
| | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
First year | | | 3,208 | | | | 3,099 | |
Second year | | | 2,595 | | | | 2,749 | |
Third year | | | 2,558 | | | | 2,714 | |
Fourth year | | | 2,437 | | | | 3,040 | |
Fifth year | | | 2,926 | | | | 3,102 | |
Thereafter | | | 81,266 | | | | 80,076 | |
| | | | | | |
| | | 94,990 | | | | 94,780 | |
| | | | | | |
F-45
PETROCHINA COMPANY LIMITED
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
No later than one year | | | 4,071 | | | | 3,634 | |
Later than one year and no later than five years | | | 12,478 | | | | 12,492 | |
Later than five years | | | 77,385 | | | | 78,970 | |
| | | | | | | | |
| | | 93,934 | | | | 95,096 | |
| | | | | | | | |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)(b) Capital commitments
Operating lease expenses
At December 31, 2009, the Group’s capital commitments contracted but not provided for land and buildings and equipment were RMB 3,873,56,657 (2008: RMB 4,85022,719).
(c) Exploration and RMB 5,378 for the years ended December 31, 2004, 2005 and 2006, respectively.
| | | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Contracted but not provided for | | | | | | | | |
| Oil and gas properties | | | 847 | | | | 273 | |
| Plant and equipment | | | 12,496 | | | | 8,658 | |
| Other | | | 22 | | | | 262 | |
| | | | | | |
| | | 13,365 | | | | 9,193 | |
| | | | | | |
| |
| (c) Long-term natural gas supply commitments |
The Group markets a portion of its natural gas production under long-term take-or-pay contracts. Under these contracts, the customers are required to take or pay, and the Group is obligated to deliver, minimum quantities of natural gas annually. The prices for the natural gas are based on those approved by the PRC State Development and Reform Commission at the time of deliveries.licenses
As at December 31, 2005 and 2006, future minimum delivery commitments under the contracts are as follows:
| | | | |
| | At December 31, |
| | 2005 |
| | Quantities |
| | |
| | (billion of cubic feet) |
2006 | | | 451 | |
2007 | | | 583 | |
2008 | | | 639 | |
2009 | | | 704 | |
2010 | | | 583 | |
2011 and thereafter | | | 5,528 | |
| | | | |
| | | 8,488 | |
| | | | |
| | | | |
| | At December 31, |
| | 2006 |
| | Quantities |
| | |
| | (billion of cubic feet) |
2007 | | | 720 | |
2008 | | | 885 | |
2009 | | | 943 | |
2010 | | | 1,002 | |
2011 | | | 1,050 | |
2012 and thereafter | | | 10,460 | |
| | | | |
| | | 15,060 | |
| | | | |
F-46
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| (d) 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 444, RMB 534 and RMB 662752 for the yearsyear ended December 31, 2004, 2005 and 2006, respectively.2009 (2008: RMB 944).
F-41
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
Estimated annual payments for the next five years are as follows:
| | | | |
| | At December 31, |
| | 2005 |
| | |
| | RMB |
2006 | | | 681 | |
2007 | | | 712 | |
2008 | | | 712 | |
2009 | | | 712 | |
2010 | | | 850 | |
| | | | |
| | At December 31, |
| | 2006 |
| | |
| | RMB |
2007 | | | 750 | |
2008 | | | 780 | |
2009 | | | 800 | |
2010 | | | 850 | |
2011 | | | 900 | |
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Within one year | | | 1,000 | | | | 1,000 | |
Between one and two years | | | 1,000 | | | | 1,000 | |
Between two and three years | | | 1,000 | | | | 1,000 | |
Between three and four years | | | 1,000 | | | | 1,000 | |
Between four and five years | | | 1,000 | | | | 1,000 | |
36 MAJOR CUSTOMERS
The Group’s major customers are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | | | % to | | | | | % to | | | | | % to | |
| | | | Total | | | | | Total | | | | | Total | |
| | Revenue | | | Revenue | | | Revenue | | | Revenue | | | Revenue | | | Revenue | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | % | | | RMB | | | % | | | RMB | | | % | |
Sinopec | | | 36,977 | | | | 9 | | | | 35,848 | | | | 6 | | | | 44,028 | | | | 6 | |
CNPC | | | 10,720 | | | | 3 | | | | 19,823 | | | | 4 | | | | 27,714 | | | | 4 | |
| | | | | | | | | | | | | | | | | | |
| | | 47,697 | | | | 12 | | | | 55,671 | | | | 10 | | | | 71,742 | | | | 10 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | |
| | | | | Percentage
| | | | | | Percentage
| | | | | | Percentage
| |
| | | | | of total
| | | | | | of total
| | | | | | of Total
| |
| | Revenue | | | revenue | | | Revenue | | | revenue | | | Revenue | | | revenue | |
| | RMB | | | % | | | RMB | | | % | | | RMB | | | % | |
|
China Petroleum & Chemical Corporation | | | 67,137 | | | | 7 | | | | 57,594 | | | | 5 | | | | 50,292 | | | | 6 | |
CNPC and its subsidiaries | | | 32,437 | | | | 3 | | | | 46,645 | | | | 4 | | | | 31,325 | | | | 4 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 99,574 | | | | 10 | | | | 104,239 | | | | 9 | | | | 81,617 | | | | 10 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
34 | RELATED PARTY TRANSACTIONS |
37 RELATED PARTY TRANSACTIONS
CNPC, the immediate parentcontrolling shareholder of the Company, is a state-controlled enterprise directly controlled by the PRC government. The PRC government is the Company’s ultimate controlling party. State-controlled
Related parties include CNPC and its subsidiaries, other state-owned enterprises and their subsidiaries in addition to CNPC Group companies, directly or indirectly controlled bywhich the PRC government are also related partieshas control, joint control or significant influence over and enterprises which the Group is able to control, jointly control or exercise significant influence over, key management personnel of the Group. NeitherCompany and CNPC norand their close family members.
(a) Transactions with CNPC and its subsidiaries, associates and jointly controlled entities of the PRC government publishes financial statements available for public use.Group
The Group has extensive transactions with other members ofcompanies in the CNPC Group. Because of the relationship,and its subsidiaries. Due to these relationships, it is possible that the terms of the transactions between the Group and other members
F-47
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
of the CNPC Groupand its subsidiaries are not the same as those that would result from transactions with other related parties or wholly unrelated parties.
As a result
The principal related party transactions with CNPC and its subsidiaries, associates and jointly controlled entities of the restructuringGroup which were carried out in the ordinary course of CNPC to form the Company in 1999,business, are as follows:
On August 27, 2008, the Company and CNPC entered into a Comprehensive Products and Services Agreement (“the Comprehensive Products and Services Agreement”), amending the original Comprehensive Products and Services Agreements and the First Supplemental Agreement and the Second Supplemental Agreement thereto. The Comprehensive Products and Services Agreement provide 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 term of the current Comprehensive Products and Services Agreement were amended in 2005 and the agreement is effective through December 31, 2008.party. The products and services to be provided by the CNPC Groupand its subsidiaries to the CompanyGroup under the Comprehensive Products and Services Agreement include construction and
F-42
PETROCHINA COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
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-prescribedgovernment-prescribed prices; or (2) where there is no state-prescribedgovernment-prescribed price, with reference to relevant market prices; or (3) where neither (1) nor (2) is applicable, the actual cost incurred;incurred or the agreed contractual price, beingprice.
| | |
| • | Sales of goods represent the sale of crude oil, refined products, chemical products and natural gas, etc. The total amount of these transactions amounted to RMB 37,448 in the year ended December 31, 2009 (2008: RMB 51,714, 2007: RMB 49,662). |
|
| • | Sales of services principally represent the provision of services in connection with the transportation of crude oil and natural gas, etc. The total amount of these transactions amounted to RMB 7,128 in the year ended December 31, 2009 (2008: RMB 9,300, 2007: RMB 3,418). |
|
| • | Purchases of goods and services principally represent construction and technical services, production services, social services, ancillary services and material supply services, etc. The total amount of these transactions amounted to RMB 199,826 in the year ended December 31, 2009 (2008: RMB 204,670, 2007: RMB 169,755). |
|
| • | Purchase of assets principally represent the purchases of manufacturing equipment, office equipment and transportation equipment, etc. The total amount of these transactions amounted to RMB 2,327 in the year ended December 31, 2009 (2008: RMB 3,576, 2007: RMB 2,404). |
|
| • | Amounts due from and to CNPC and its subsidiaries, associates and jointly controlled entities of the Group included in the following accounts captions are summarised as follows: |
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
Accounts receivable | | | 3,780 | | | | 4,737 | |
Prepayments and other receivables | | | 16,548 | | | | 15,816 | |
Accounts payable and accrued liabilities | | | 57,076 | | | | 42,121 | |
| | |
| • | Interest income represents interests from deposits placed with CP Finance. The total interest income amounted to RMB 143 in the year ended December 31, 2009 (2008: RMB 114, 2007: RMB 159). The balance of deposits at 31 December 2009 was RMB 10,433 (2008: RMB 8,424). |
|
| • | Purchases of financial service principally represent interest charged on the loans from CNPC and fellow CNPC subsidiaries, insurance fee, etc. The total amount of these transactions amounted to RMB 3,541 in the year ended December 31, 2009 (2008: RMB 1,623, 2007: RMB 1,388). Information on loans from related parties are included in Note 28. |
On March 10, 2000, the actual cost plusCompany and CNPC entered into a margin of no more than 15% for certain construction and technical services, and 3% for all other types of services.
Land Use Rights Leasing Contract. The Land Use Rights Leasing Contract provides for the lease of 42,476 parcels of land to the business units of the Group with 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.
On March 10, 2000, the Company and CNPC entered into a Buildings Leasing Contract. Under the Buildings Leasing Contract, 191 buildings covering an aggregate area of 269,770 square meters located throughout the PRC arewere 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 inon September 26, 2002, which became effective on January 1, 2003 to lease an additional 404 buildings covering approximately 442,730 square meters at an annual rental of approximately RMB 157. The Supplemental Buildings Leasing Agreement will expire at the same time as the Buildings Leasing Agreement.
F-43
PETROCHINA COMPANY LIMITED
In addition
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
(b) Key management compensation
| | | | | | | | | | | | |
| | Year Ended December 31 | |
| | 2009 | | | 2008 | | | 2007 | |
| | RMB’000 | | | RMB’000 | | | RMB’000 | |
|
Emoluments and other benefits | | | 9,885 | | | | 10,581 | | | | 10,273 | |
Contribution to retirement benefit scheme | | | 479 | | | | 444 | | | | 345 | |
| | | | | | | | | | | | |
| | | 10,364 | | | | 11,025 | | | | 10,618 | |
| | | | | | | | | | | | |
(c) Transactions with other state-controlled entities in the PRC
Apart from transactions with CNPC and its subsidiaries, associates and jointly controlled entities of the Group, the Group has transactions with other state-controlled entities include but not limited to the related party information shown elsewhere in the financial statements, the following is a summaryfollowing:
• Sales and purchases of significant related partygoods and services,
• Purchases of assets,
• Lease of assets; and
• Bank deposits and borrowings
These transactions entered intoare conducted in the ordinary course of business betweenbusiness.
38 SEGMENT INFORMATION
With effect from January 1, 2009, the Group andhas redefined its related parties during the years and balances arising from related party transactions at the endoperating segments as follows:
• The businesses of the years indicated below:
| | | | | | | | | | | | | |
| | | | At | |
| | | | December 31, | |
| | | | | |
| | Note | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | | | RMB | | | RMB | |
Bank deposits balance | | | | | | | | | | | | |
| CP Finance | | | (i) | | | | 24,356 | | | | 8,937 | |
| State-controlled banks and other financial institutions | | | | | | | 55,139 | | | | 37,744 | |
| | | | | | | | | |
| | | | | | | 79,495 | | | | 46,681 | |
| | | | | | | | | |
F-48
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | |
| | | | Year Ended | |
| | | | December 31, | |
| | | | | |
| | Note | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
Interest income from bank deposits | | | | | | | | | | | | | | | | |
| CP Finance | | | (i) | | | | 29 | | | | 33 | | | | 81 | |
| State-controlled banks and other financial institutions | | | | | | | 132 | | | | 1,582 | | | | 1,804 | |
| | | | | | | | | | | | |
| | | | | | | 161 | | | | 1,615 | | | | 1,885 | |
| | | | | | | | | | | | |
| | |
| (i) | CP Finance is a subsidiary of CNPC and a non-bank financial institution, established with the approval from the People’s Bank of China. The deposits yield interest at prevailing saving deposit rates. |
| |
| (b) Sales of goods and services |
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Sales of goods | | | | | | | | | | | | |
Equity affiliates and jointly controlled entities | | | | | | | | | | | | |
| — Crude Oil | | | 2,597 | | | | 883 | | | | 5,023 | |
| — Refined Products | | | 6,397 | | | | 9,766 | | | | 19,779 | |
| — Chemical Products | | | 153 | | | | 308 | | | | 90 | |
Fellow subsidiaries (CNPC Group) | | | | | | | | | | | | |
| — Crude Oil | | | 100 | | | | 155 | | | | 1,546 | |
| — Refined Products | | | 5,720 | | | | 12,364 | | | | 16,847 | |
| — Chemical Products | | | 2,927 | | | | 4,805 | | | | 5,691 | |
| — Natural Gas | | | 737 | | | | 820 | | | | 1,346 | |
| — Other | | | 320 | | | | 650 | | | | 277 | |
Other state-controlled enterprises | | | | | | | | | | | | |
| — Crude Oil | | | 34,212 | | | | 37,168 | | | | 39,632 | |
| — Refined Products | | | 61,138 | | | | 86,505 | | | | 68,370 | |
| — Chemical Products | | | 14,155 | | | | 18,275 | | | | 8,979 | |
| — Natural Gas | | | 5,093 | | | | 8,127 | | | | 7,713 | |
| | | | | | | | | |
| | | 133,549 | | | | 179,826 | | | | 175,293 | |
| | | | | | | | | |
Sales of goods to related parties are conducted at market prices.
F-49
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | |
| | Year Ended | |
| | December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Sales of services | | | | | | | | | | | | |
Fellow subsidiaries (CNPC Group) | | | 916 | | | | 1,029 | | | | 2,007 | |
Other state-controlled enterprises | | | 3,047 | | | | 3,592 | | | | 7,761 | |
| | | | | | | | | |
| | | 3,963 | | | | 4,621 | | | | 9,768 | |
| | | | | | | | | |
Sales of services principally represent the provision of the services in connection with the transportationrefining of crude oil and natural gas at market prices.petroleum products and the production and marketing of primary petrochemical products, derivative petrochemical products and other chemical products have been combined to form a new Refining and Chemicals segment.
| |
| (c) Purchases of goods and services |
| | | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | |
| | | | | |
| | Notes | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
Purchases of goods | | | (i) | | | | | | | | | | | | | |
Equity affiliates and jointly controlled entities | | | | | | | 2,185 | | | | 4,220 | | | | 9,868 | |
Other state-controlled enterprises | | | | | | | 36,048 | | | | 59,719 | | | | 50,995 | |
|
Purchases of services | | | | | | | | | | | | | | | | |
Equity affiliates and jointly controlled entities | | | | | | | 29 | | | | 43 | | | | 126 | |
Fellow subsidiaries (CNPC Group) | | | | | | | | | | | | | | | | |
| — Fees paid for construction and technical services | | | (ii) | | | | | | | | | | | | | |
| | — exploration and development services | | | (iii) | | | | 30,058 | | | | 39,653 | | | | 50,485 | |
| | — other construction and technical services | | | (iv) | | | | 18,673 | | | | 25,010 | | | | 32,256 | |
| — Fees for production services | | | (v) | | | | 16,313 | | | | 23,344 | | | | 32,730 | |
| — Social service charges | | | (vi) | | | | 1,289 | | | | 2,153 | | | | 2,301 | |
| — Ancillary service charges | | | (vii) | | | | 1,717 | | | | 2,345 | | | | 2,458 | |
| — Commission expense and other charges | | | (viii) | | | | 884 | | | | 1,612 | | | | 1,241 | |
| Other state-controlled enterprises | | | (ix) | | | | 4,752 | | | | 6,390 | | | | 7,703 | |
| | | | | | | | | | | | |
| | | | | | | 111,948 | | | | 164,489 | | | | 190,163 | |
| | | | | | | | | | | | |
| | |
| (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 no 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 |
F-50
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | |
| | 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. |
|
| (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 centres, 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. |
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Purchases of assets | | | | | | | | | | | | |
| Equity affiliates and jointly controlled entities | | | 9 | | | | 11 | | | | 2 | |
| Fellow subsidiaries (CNPC Group) | | | 4,018 | | | | 5,870 | | | | 1,795 | |
| Other state-controlled enterprises | | | 3,480 | | | | 6,813 | | | | 6,617 | |
| | | | | | | | | |
| | | 7,507 | | | | 12,694 | | | | 8,414 | |
| | | | | | | | | |
Purchases• The marketing of assets principally represent the purchases of manufacturing equipment, office equipment, transportation equipment, etc., at market prices.
F-51
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| (e) Year-end balances arising from sales/ purchases of goods/ services/assets |
| | | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Accounts receivable from related parties at the end of the year | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | 12 | | | | 82 | |
| — Fellow subsidiaries (CNPC Group) | | | 337 | | | | 599 | |
| — Other state-controlled enterprises | | | 1,796 | | | | 1,566 | |
| | | | | | |
| | | 2,145 | | | | 2,247 | |
Less: Provision for impairment of accounts receivable | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | — | | | | (5 | ) |
| — Fellow subsidiaries (CNPC Group) | | | (246 | ) | | | (232 | ) |
| — Other state-controlled enterprises | | | (924 | ) | | | (861 | ) |
| | | | | | |
| | | (1,170 | ) | | | (1,098 | ) |
| | | | | | |
| | | 975 | | | | 1,149 | |
| | | | | | |
Prepayments and other receivables from related parties at the end of the year | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | 3,634 | | | | 4,307 | |
| — Parent (CNPC) | | | 103 | | | | 196 | |
| — Fellow subsidiaries (CNPC Group) | | | 7,430 | | | | 7,220 | |
| — Other state-controlled enterprises | | | 2,357 | | | | 4,202 | |
| | | | | | |
| | | 13,524 | | | | 15,925 | |
Less: Provision for impairment of other receivables | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | (240 | ) | | | (212 | ) |
| — Fellow subsidiaries (CNPC Group) | | | (70 | ) | | | (4 | ) |
| — Other state-controlled enterprises | | | (330 | ) | | | (299 | ) |
| | | | | | |
| | | (640 | ) | | | (515 | ) |
| | | | | | |
| | | 12,884 | | | | 15,410 | |
| | | | | | |
Accounts payable and accrued liabilities to related parties at the end of the year | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | 3,118 | | | | 1,444 | |
| — Parent (CNPC) | | | 2,516 | | | | 2,321 | |
| — Fellow subsidiaries (CNPC Group) | | | 20,285 | | | | 26,046 | |
| — Other state-controlled enterprises | | | 15,163 | | | | 5,462 | |
| | | | | | |
| | | 41,082 | | | | 35,273 | |
| | | | | | |
F-52
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | |
| | Year Ended | |
| | December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Provision for impairment of accounts receivable from related parties charged to the consolidated statements of income | | | | | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | — | | | | — | | | | 5 | |
| — Fellow subsidiaries (CNPC Group) | | | 42 | | | | 24 | | | | (11 | ) |
| — Other state-controlled enterprises | | | (36 | ) | | | (62 | ) | | | (52 | ) |
| | | | | | | | | |
| | | 6 | | | | (38 | ) | | | (58 | ) |
| | | | | | | | | |
Provision for impairment of prepayment and other receivables from related parties charged to the consolidated statements of income | | | | | | | | | | | | |
| — Equity affiliates and jointly controlled entities | | | 49 | | | | (55 | ) | | | (20 | ) |
| — Fellow subsidiaries (CNPC Group) | | | 47 | | | | 55 | | | | (32 | ) |
| — Other state-controlled enterprises | | | 82 | | | | (35 | ) | | | 12 | |
| | | | | | | | | |
| | | 178 | | | | (35 | ) | | | (40 | ) |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | Year Ended | |
| | | | December 31, | |
| | | | | |
| | Notes | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
Advance operating lease payments paid to related parties | | | (i | ) | | | | | | | | | | | | |
| — Parent (CNPC) | | | | | | | 186 | | | | 232 | | | | — | |
| — Other state-controlled enterprises | | | | | | | 15 | | | | 33 | | | | 49 | |
| | | | | | | | | | | | |
| | | | | | | 201 | | | | 265 | | | | 49 | |
| | | | | | | | | | | | |
Other operating lease payments paid to related parties | | | | | | | | | | | | | | | | |
| — Parent (CNPC) | | | (ii | ) | | | 2,106 | | | | 2,192 | | | | 2,276 | |
| — Other state-controlled enterprises | | | | | | | 5 | | | | 5 | | | | 16 | |
| | | | | | | | | | | | |
| | | | | | | 2,111 | | | | 2,197 | | | | 2,292 | |
| | | | | | | | | | | | |
| | |
| (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 |
F-53
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | |
| | Leasing Contract, the Buildings Leasing Contract and Supplemental Buildings Leasing Agreement with CNPC. |
| | | | | | | | | |
| | At | |
| | December 31, | |
| | | |
| | 2005 | | | 2006 | |
| | | | | | |
| | RMB | | | RMB | |
Operating lease payable to related parties | | | | | | | | |
| — Parent (CNPC) | | | 2 | | | | — | |
| — Other state-controlled enterprises | | | 1 | | | | 7 | |
| | | | | | |
| | | 3 | | | | 7 | |
| | | | | | |
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
Loans to related parties | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Loans to equity affiliates: | | | | | | | | | | | | |
| Beginning of the year | | | 1,718 | | | | 569 | | | | 1,640 | |
| Loans advanced during year | | | 235 | | | | 1,392 | | | | 1,034 | |
| Loans repayments received | | | (1,384 | ) | | | (321 | ) | | | (884 | ) |
| Interest charged | | | 41 | | | | 29 | | | | 154 | |
| Interest received | | | (41 | ) | | | (29 | ) | | | (144 | ) |
| | | | | | | | | |
| End of the year | | | 569 | | | | 1,640 | | | | 1,800 | |
| | | | | | | | | |
Loans to equity affiliatesrefined products and trading businesses are now included in prepaid expenses and other current assets (See Note 17).
F-54
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)a new Marketing segment.
The loans to related parties are mainly with interest rates ranging from 5.26% to 8.54% and 9.07% to 9.36% per annum as of December 31, 2005 and 2006, respectively.
| | | | | | | | | | | | | | | | | |
| | | | Year Ended December 31, | |
| | | | | |
Loans from related parties | | Notes | | | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | |
| | | | RMB | | | RMB | | | RMB | |
Loans from CP Finance: | | | (i | ) | | | | | | | | | | | | |
| Beginning of the year | | | | | | | 29,575 | | | | 29,932 | | | | 27,319 | |
| Loan received during year | | | | | | | 12,003 | | | | 10,187 | | | | 7,408 | |
| Loan repayments paid | | | | | | | (11,646 | ) | | | (12,803 | ) | | | (7,565 | ) |
| Interest charged | | | | | | | 1,234 | | | | 1,297 | | | | 1,327 | |
| Interest paid | | | | | | | (1,234 | ) | | | (1,294 | ) | | | (1,305 | ) |
| | | | | | | | | | | | |
| End of the year | | | | | | | 29,932 | | | | 27,319 | | | | 27,184 | |
| | | | | | | | | | | | |
Loans from state-controlled banks and other financial institutions: | | | (ii | ) | | | | | | | | | | | | |
| Beginning of the year | | | | | | | 38,341 | | | | 36,562 | | | | 31,178 | |
| Loan received during year | | | | | | | 24,990 | | | | 24,715 | | | | 28,457 | |
| Loan repayments paid | | | | | | | (26,739 | ) | | | (30,105 | ) | | | (26,797 | ) |
| Interest charged | | | | | | | 1,847 | | | | 1,670 | | | | 1,598 | |
| Interest paid | | | | | | | (1,877 | ) | | | (1,664 | ) | | | (1,626 | ) |
| | | | | | | | | | | | |
| End of the year | | | | | | | 36,562 | | | | 31,178 | | | | 32,810 | |
| | | | | | | | | | | | |
Loans from other related parties: | | | (iii | ) | | | | | | | | | | | | |
| Beginning of the year | | | | | | | 13 | | | | 16 | | | | 62 | |
| Loan received during year | | | | | | | 5 | | | | 51 | | | | — | |
| Loan repayments paid | | | | | | | (2 | ) | | | (5 | ) | | | (57 | ) |
| Interest charged | | | | | | | — | | | | 1 | | | | 2 | |
| Interest paid | | | | | | | — | | | | (1 | ) | | | (2 | ) |
| | | | | | | | | | | | |
| End of the year | | | | | | | 16 | | | | 62 | | | | 5 | |
| | | | | | | | | | | | |
| | |
| (i) | The loans from CP Finance are mainly with interest rates ranging from 4.45% to 5.70% and 4.46% to 6.06% per annum as of December 31, 2005 and 2006, 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, 2005 and 2006, respectively with maturities through 2038. |
|
| (iii) | The loans from other related parties are mainly with interest rates at 6.32% and 6.32% per annum as of December 31, 2005 and 2006, respectively and with no fixed repayment term. |
The secured loans from related parties amounted RMB 54 and RMB 23 at December 31, 2005 and 2006, respectively.
F-55
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
The guaranteed loans amounted to RMB 674 and RMB 597 at December 31, 2005 and 2006, respectively. All these guaranteed loans are from non-related parties, long-term and guaranteed by CNPC.
| |
| (h) Key management compensation |
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB’000 | | | RMB’000 | | | RMB’000 | |
Fee for key management personnel | | | | | | | | | | | | |
| — Directors and supervisors | | | 120 | | | | 897 | | | | 1,473 | |
Salaries, allowances and other benefits | | | | | | | | | | | | |
| — Directors and supervisors | | | 2,012 | | | | 4,031 | | | | 3,937 | |
| — Other key management | | | 1,330 | | | | 2,207 | | | | 2,447 | |
Contribution to retirement benefit scheme | | | | | | | | | | | | |
| — Directors and supervisors | | | 43 | | | | 57 | | | | 165 | |
| — Other key management | | | 31 | | | | 37 | | | | 133 | |
| | | | | | | | | |
| | | 3,536 | | | | 7,229 | | | | 8,155 | |
| | | | | | | | | |
As at December 31, 2006, none of the key management personnel had exercised the stock appreciation rights. The liability for the units awarded to key management personnel amounted to approximately RMB 177 and RMB 329 at December 31, 2005 and 2006, respectively.
| |
| (i) Contingent liabilities |
The Group has disclosed in Note 31 in respect of the contingent liabilities arising from the guarantees made for related parties.
The Group pledged time deposits with maturities over one year as collaterals with Citibank, N.A., Singapore Branch for the debts of subsidiaries and equity affiliates. The balance of these time deposits amounted to RMB 3,428 and RMB 2,499 including RMB 968 and RMB 312 for the debts of subsidiaries and RMB 2,460 and RMB 2,187 for the debts of equity affiliates at December 31, 2005 and 2006, respectively.
F-56
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
35 | EMOLUMENTS OF DIRECTORS AND SUPERVISORS |
Details of the emoluments of directors and supervisors for the years ended December 31, 2004, 2005 and 2006 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 | | | 2005 | | | 2004 | |
| | | | | | | | | |
| | | | Contribution | | | | | | | |
| | Fee for | | | Salaries, | | | to retirement | | | | | | | |
| | directors and | | | allowances and | | | benefit | | | | | | | |
Name | | supervisors | | | other benefits | | | scheme | | | Total | | | Total | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
Chairman: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mr. Chen Geng | | | — | | | | 770 | | | | 27 | | | | 797 | | | | 790 | | | | 389 | |
Vice Chairman: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mr. Jiang Jiemin | | | — | | | | 695 | | | | 27 | | | | 722 | | | | 625 | | | | 130 | |
Executive directors: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mr. Su Shulin(iii) | | | — | | | | 657 | | | | 27 | | | | 684 | | | | 686 | | | | 352 | |
| Mr. Duan Wende | | | — | | | | 657 | | | | 27 | | | | 684 | | | | 686 | | | | 222 | |
| Mr. Wang Fucheng(ii) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 300 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | 1,314 | | | | 54 | | | | 1,368 | | | | 1,372 | | | | 874 | |
| | | | | | | | | | | | | | | | | | |
Non-executive directors: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mr. Zheng Hu | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Zhou Jiping | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Wang Yilin | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Zeng Yukang | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Gong Huazhang | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Jiang Fan | | | — | | | | 444 | | | | 17 | | | | 461 | | | | 33 | | | | — | |
| Mr. Chee-chen Tung | | | 275 | | | | — | | | | — | | | | 275 | | | | 275 | | | | 29 | |
| Mr. Liu Hongru | | | 279 | | | | — | | | | — | | | | 279 | | | | 274 | | | | 33 | |
| Mr. Franco Bernabè | | | 259 | | | | — | | | | — | | | | 259 | | | | 279 | | | | 33 | |
| Mr. Ren Chuanjun(ii) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Zou Haifeng(ii) | | | — | | | | — | | | | — | | | | — | | | | 283 | | | | 238 | |
| Mr. Ma Fucai(i) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Wu Yaowen(i) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | 813 | | | | 444 | | | | 17 | | | | 1274 | | | | 1,144 | | | | 333 | |
| | | | | | | | | | | | | | | | | | |
Supervisors: | | | | | | | | | | | | | | | | | | | | | | | | |
| Mr. Wang Fucheng | | | — | | | | — | | | | — | | | | — | | | | 530 | | | | — | |
| Mr. Wen Qingshan | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Sun Xianfeng | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Mr. Xu Fengli | | | — | | | | 432 | | | | 27 | | | | 459 | | | | 374 | | | | 153 | |
| Mr. Qin Gang | | | — | | | | 282 | | | | 13 | | | | 295 | | | | — | | | | — | |
| Mr. Li Yongwu | | | 330 | | | | — | | | | — | | | | 330 | | | | 12 | | | | — | |
| Mr. Wu Zhipan | | | 330 | | | | — | | | | — | | | | 330 | | | | 57 | | | | 12 | |
| Mr. Li Kecheng(ii) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
F-57
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 2006 | | | 2005 | | | 2004 | |
| | | | | | | | | |
| | | | Contribution | | | | | | | |
| | Fee for | | | Salaries, | | | to retirement | | | | | | | |
| | directors and | | | allowances and | | | benefit | | | | | | | |
Name | | supervisors | | | other benefits | | | scheme | | | Total | | | Total | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | | | RMB’000 | |
Mr. Sun Chongren(ii) | | | — | | | | — | | | | — | | | | — | | | | 81 | | | | 272 | |
Mr. Zhang Youcai(ii) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 12 | |
Mr. Bai Xinhe(i) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Mr. Chen Weizhang(i) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | |
| | | 660 | | | | 714 | | | | 40 | | | | 1,414 | | | | 1,054 | | | | 449 | |
| | | | | | | | | | | | | | | | | | |
| | | 1,473 | | | | 3,937 | | | | 165 | | | | 5,575 | | | | 4,985 | | | | 2,175 | |
| | | | | | | | | | | | | | | | | | |
| |
(i) | No longer a director or supervisor since May 18, 2004. |
| |
(ii) | No longer a director or supervisor since November 8, 2005. |
| |
(iii) | No longer a director since November 24, 2006 |
The emoluments of the directors and supervisors fall within the following bands (including directors and supervisors whose term expired during the year):
| | | | | | | | | | | | |
| | 2006 | | | 2005 | | | 2004 | |
| | | | | | | | | |
| | Number | | | Number | | | Number | |
RMB Nil – RMB 1 | | | 20 | | | | 25 | | | | 24 | |
| | | | | | | | | |
Fee for directors and supervisors disclosed above included RMB 95 thousand, RMB 828 thousand and RMB 813 thousand respectively, for the year ended December 31, 2004, 2005 and 2006 paid to independent non-executive directors.
None of the directors and supervisors has waived their remuneration during the years ended December 31, 2005 and 2006.
The five highest paid individuals in the Group for each of the three years ended December 31, 2004, 2005 and 2006 above were also directors or supervisors and their emoluments are reflected in the analysis shown above.
During 2004, 2005 and 2006, 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 option 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 or approximately RMB 1.36 per share.
F-58
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
As at December 31, 2006, 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 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 630 and RMB 1,167 at December 31, 2005 and 2006 respectively.
36 SEGMENT INFORMATION
The Group is principally engaged in a broad range of petroleum related activities through its four major business segments:products, services and activities. From a products and services perspective and pursuant to the above re-segmentation, the Group’s operating segments comprise: Exploration and Production, Refining and Marketing, Chemicals, and Marketing, and Natural Gas and Pipeline. Comparative amounts have been restated to reflect the re-segmentation. Additionally, the Group has presented geographical information based on entities located in regions with similar risk profile.
The Exploration and Production segment is engaged in the exploration, development, production and salesmarketing of crude oil and natural gas.
The Refining and MarketingChemicals segment is engaged in the refining transportation, storage and marketing of crude oil and petroleum products.
The Chemicals and Marketing segment is engaged in theproducts, production and salemarketing of basicprimary petrochemical products, and derivative petrochemical products and other chemical products.
The Marketing segment is engaged in the marketing of refined products and the trading of crude oil and petrochemical 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.products and the sale of natural gas.
In addition to these four major business segments, the
The Other segment includes the assets, income and expenses relatingrelates to cash management and financing activities, the corporate centre,center, research and development, and other business services tosupporting the operating business segments of the Group.
F-44
PETROCHINA COMPANY LIMITED
Most assets and operations
NOTES TO THE FINANCIAL STATEMENTS — (Continued)
(Amounts in millions unless otherwise stated)
Sales between operating segments are conducted principally at market prices. On the basis of these operating segments, the management of the Group are located inCompany assesses the PRC, which is considered as one geographic location in an economic environment with similar riskssegmental operating results and returns. In addition to its operations in the PRC, the Group also has oversea operations through subsidiaries engaging in the exploration and production of crude oil and natural gas.allocates resources.
The accounting policies of the operating segments are the same as those described in Note 3 — “Summary of Principal Accounting Policies”.
Operating
The segment information for the operating segments for the years ended December 31, 2004, 20052009, 2008 and 20062007 is presented below:as follows:
Primary reporting format — business segments
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration | | | Refining | | | Chemicals | | | Natural Gas | | | | | |
| | and | | | and | | | and | | | and | | | | | |
Year Ended December 31, 2004 | | Production | | | Marketing | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
Sales and other operating revenues (including intersegment) | | | 233,948 | | | | 296,427 | | | | 57,179 | | | | 18,255 | | | | — | | | | 605,809 | |
Less: Intersegment sales | | | (180,129 | ) | | | (21,862 | ) | | | (2,679 | ) | | | (3,785 | ) | | | — | | | | (208,455 | ) |
| | | | | | | | | | | | | | | | | | |
Total sales and other operating revenues from external customers | | | 53,819 | | | | 274,565 | | | | 54,500 | | | | 14,470 | | | | — | | | | 397,354 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration
| | | Refining
| | | | | | Natural
| | | | | | | |
| | and
| | | and
| | | | | | Gas and
| | | | | | | |
Year Ended December 31, 2009 | | Production | | | Chemicals | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
|
Turnover | | | 405,326 | | | | 501,300 | | | | 768,295 | | | | 77,658 | | | | 1,372 | | | | 1,753,951 | |
Less: intersegment sales | | | (308,649 | ) | | | (381,522 | ) | | | (35,489 | ) | | | (8,756 | ) | | | (260 | ) | | | (734,676 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Turnover from external customers | | | 96,677 | | | | 119,778 | | | | 732,806 | | | | 68,902 | | | | 1,112 | | | | 1,019,275 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation, depletion and amortisation | | | (64,595 | ) | | | (11,824 | ) | | | (7,088 | ) | | | (7,694 | ) | | | (1,058 | ) | | | (92,259 | ) |
Profit/(loss) from operations | | | 105,019 | | | | 17,308 | | | | 13,265 | | | | 19,046 | | | | (11,194 | ) | | | 143,444 | |
Finance costs: | | | | | | | | | | | | | | | | | | | | | | | | |
Exchange gain | | | | | | | | | | | | | | | | | | | | | | | 552 | |
Exchange loss | | | | | | | | | | | | | | | | | | | | | | | (1,335 | ) |
Interest income | | | | | | | | | | | | | | | | | | | | | | | 1,459 | |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | (5,272 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net finance costs | | | | | | | | | | | | | | | | | | | | | | | (4,596 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share of profit of associates and jointly controlled entities | | | 590 | | | | 53 | | | | 519 | | | | 8 | | | | 14 | | | | 1,184 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Profit before income tax expense | | | | | | | | | | | | | | | | | | | | | | | 140,032 | |
Income tax expense | | | | | | | | | | | | | | | | | | | | | | | (33,473 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Profit for the year | | | | | | | | | | | | | | | | | | | | | | | 106,559 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment assets | | | 756,122 | | | | 256,040 | | | | 237,534 | | | | 198,774 | | | | 1,095,827 | | | | 2,544,297 | |
Other assets | | | | | | | | | | | | | | | | | | | | | | | 289 | |
Investments in associates and jointly controlled entities | | | 22,183 | | | | 579 | | | | 5,393 | | | | 68 | | | | — | | | | 28,223 | |
Elimination of intersegment balances(a) | | | | | | | | | | | | | | | | | | | | | | | (1,122,521 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | | | | | | | | | | | | | | | | | 1,450,288 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment capital expenditure and acquisition | | | | | | | | | | | | | | | | | | | | | | | | |
— Capital expenditure | | | 129,017 | | | | 42,558 | | | | 18,174 | | | | 74,754 | | | | 2,333 | | | | 266,836 | |
— Acquisition (Note 21) | | | — | | | | — | | | | 15,296 | | | | — | | | | — | | | | 15,296 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 282,132 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment liabilities | | | 280,573 | | | | 98,590 | | | | 142,254 | | | | 92,538 | | | | 357,107 | | | | 971,062 | |
Other liabilities | | | | | | | | | | | | | | | | | | | | | | | 56,412 | |
Elimination of intersegment balances(a) | | | | | | | | | | | | | | | | | | | | | | | (484,887 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | | | | | | | | | | | | | | | | | 542,587 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
F-45
F-59
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration | | | Refining | | | Chemicals | | | Natural Gas | | | | | |
| | and | | | and | | | and | | | and | | | | | |
Year Ended December 31, 2004 | | Production | | | Marketing | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
Depreciation, depletion and amortization | | | (30,915 | ) | | | (8,957 | ) | | | (5,741 | ) | | | (2,645 | ) | | | (104 | ) | | | (48,362 | ) |
Segment result | | | 138,129 | | | | 28,445 | | | | 11,025 | | | | 2,475 | | | | (518 | ) | | | 179,556 | |
Other costs | | | (7,916 | ) | | | (16,554 | ) | | | (3,370 | ) | | | 60 | | | | (638 | ) | | | (28,418 | ) |
| | | | | | | | | | | | | | | | | | |
Income/(loss) from operations | | | 130,213 | | | | 11,891 | | | | 7,655 | | | | 2,535 | | | | (1,156 | ) | | | 151,138 | |
| | | | | | | | | | | | | | | | | | |
Finance costs | | | | | | | | | | | | | | | | | | | | | | | (1,515 | ) |
Equity in income of equity affiliates and jointly controlled entities accounted for by equity method | | | 225 | | | | 75 | | | | 211 | | | | 16 | | | | 1,094 | | | | 1,621 | |
| | | | | | | | | | | | | | | | | | |
Income before income taxes | | | | | | | | | | | | | | | | | | | | | | | 151,244 | |
Income taxes | | | | | | | | | | | | | | | | | | | | | | | (43,598 | ) |
| | | | | | | | | | | | | | | | | | |
Income for the year | | | | | | | | | | | | | | | | | | | | | | | 107,646 | |
| | | | | | | | | | | | | | | | | | |
Interest income (including intersegment) | | | 2,598 | | | | 895 | | | | 205 | | | | 27 | | | | 4,723 | | | | 8,448 | |
Less: Intersegment interest income | | | | | | | | | | | | | | | | | | | | | | | (7,075 | ) |
| | | | | | | | | | | | | | | | | | |
Interest income from external sources | | | | | | | | | | | | | | | | | | | | | | | 1,373 | |
| | | | | | | | | | | | | | | | | | |
Interest expense (including intersegment) | | | (3,096 | ) | | | (1,777 | ) | | | (502 | ) | | | (693 | ) | | | (3,903 | ) | | | (9,971 | ) |
Less: Intersegment interest expense | | | | | | | | | | | | | | | | | | | | | | | 7,075 | |
| | | | | | | | | | | | | | | | | | |
Interest expense to external sources | | | | | | | | | | | | | | | | | | | | | | | (2,896 | ) |
| | | | | | | | | | | | | | | | | | |
Segment assets | | | 364,477 | | | | 142,480 | | | | 55,568 | | | | 61,631 | | | | 507,164 | | | | 1,131,320 | |
Elimination of intersegment balances | | | | | | | | | | | | | | | | | | | | | | | (502,771 | ) |
Investments in equity affiliates and jointly controlled entities | | | 3,352 | | | | 2,862 | | | | 280 | | | | 192 | | | | 3,212 | | | | 9,898 | |
| | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | | | | | | | | | | | | | | | | | 638,447 | |
| | | | | | | | | | | | | | | | | | |
Segment capital expenditure-for property, plant and equipment | | | 62,868 | | | | 17,684 | | | | 4,319 | | | | 13,901 | | | | 174 | | | | 98,946 | |
Segment liabilities | | | 109,602 | | | | 75,664 | | | | 18,484 | | | | 35,385 | | | | 99,711 | | | | 338,846 | |
Other liabilities | | | | | | | | | | | | | | | | | | | | | | | 39,440 | |
Elimination of intersegment balances | | | | | | | | | | | | | | | | | | | | | | | (182,811 | ) |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | | | | | | | | | | | | | | | | | 195,475 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration
| | | Refining
| | | | | | Natural
| | | | | | | |
| | and
| | | and
| | | | | | Gas and
| | | | | | | |
Year Ended December 31, 2008 | | Production | | | Chemicals | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
|
Turnover | | | 626,367 | | | | 560,729 | | | | 778,141 | | | | 63,315 | | | | 1,418 | | | | 2,029,970 | |
Less: intersegment sales | | | (500,522 | ) | | | (396,410 | ) | | | (53,557 | ) | | | (6,706 | ) | | | (171 | ) | | | (957,366 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Turnover from external customers | | | 125,845 | | | | 164,319 | | | | 724,584 | | | | 56,609 | | | | 1,247 | | | | 1,072,604 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation, depletion and amortisation | | | (58,927 | ) | | | (22,796 | ) | | | (5,871 | ) | | | (6,310 | ) | | | (855 | ) | | | (94,759 | ) |
Profit/(loss) from operations | | | 240,470 | | | | (93,830 | ) | | | 7,982 | | | | 16,057 | | | | (11,108 | ) | | | 159,571 | |
Finance costs: | | | | | | | | | | | | | | | | | | | | | | | | |
Exchange gain | | | | | | | | | | | | | | | | | | | | | | | 1,774 | |
Exchange loss | | | | | | | | | | | | | | | | | | | | | | | (2,855 | ) |
Interest income | | | | | | | | | | | | | | | | | | | | | | | 2,277 | |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | (3,044 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net finance costs | | | | | | | | | | | | | | | | | | | | | | | (1,848 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share of profit/(loss) of associates and jointly controlled entities | | | 4,561 | | | | (609 | ) | | | 314 | | | | 5 | | | | 19 | | | | 4,290 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Profit before income tax expense | | | | | | | | | | | | | | | | | | | | | | | 162,013 | |
Income tax expense | | | | | | | | | | | | | | | | | | | | | | | (35,211 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Profit for the year | | | | | | | | | | | | | | | | | | | | | | | 126,802 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment assets | | | 662,454 | | | | 290,758 | | | | 197,950 | | | | 121,368 | | | | 973,128 | | | | 2,245,658 | |
Other assets | | | | | | | | | | | | | | | | | | | | | | | 497 | |
Investments in associates and jointly controlled entities | | | 24,021 | | | | 1,686 | | | | 3,074 | | | | 20 | | | | 49 | | | | 28,850 | |
Elimination of intersegment balances(a) | | | | | | | | | | | | | | | | | | | | | | | (1,078,770 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | | | | | | | | | | | | | | | | | 1,196,235 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment capital expenditure | | | 157,194 | | | | 30,619 | | | | 4,974 | | | | 36,848 | | | | 2,742 | | | | 232,377 | |
Segment liabilities | | | 264,230 | | | | 70,879 | | | | 132,340 | | | | 53,294 | | | | 334,972 | | | | 855,715 | |
Other liabilities | | | | | | | | | | | | | | | | | | | | | | | 27,667 | |
Elimination of intersegment balances(a) | | | | | | | | | | | | | | | | | | | | | | | (534,987 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | | | | | | | | | | | | | | | | | 348,395 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
F-46
F-60
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration | | | Refining | | | Chemicals | | | Natural Gas | | | | | |
| | and | | | and | | | and | | | and | | | | | |
Year Ended December 31, 2005 | | Production | | | Marketing | | | Marketing | | | 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 | ) |
Equity in income of affiliates and jointly controlled entities accounted for by equity method | | | 1,851 | | | | 165 | | | | 15 | | | | — | | | | 370 | | | | 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 sources | | | | | | | | | | | | | | | | | | | | | | | 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 sources | | | | | | | | | | | | | | | | | | | | | | | (2,762 | ) |
| | | | | | | | | | | | | | | | | | |
Segment assets | | | 460,814 | | | | 207,724 | | | | 76,439 | | | | 69,232 | | | | 631,696 | | | | 1,445,905 | |
Elimination of intersegment balances | | | | | | | | | | | | | | | | | | | | | | | (680,216 | ) |
Investments in equity affiliates and jointly controlled entities | | | 5,470 | | | | 4,531 | | | | 250 | | | | — | | | | 2,127 | | | | 12,378 | |
| | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | | | | | | | | | | | | | | | | | 778,067 | |
| | | | | | | | | | | | | | | | | | |
F-61
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration
| | | Refining
| | | | | | Natural
| | | | | | | |
| | and
| | | and
| | | | | | Gas and
| | | | | | | |
Year Ended December 31, 2007 | | Production | | | Chemicals | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
|
Turnover | | | 473,117 | | | | 481,726 | | | | 584,115 | | | | 50,066 | | | | 1,718 | | | | 1,590,742 | |
Less: intersegment sales | | | (378,888 | ) | | | (330,281 | ) | | | (36,773 | ) | | | (6,610 | ) | | | (648 | ) | | | (753,200 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Turnover from external customers | | | 94,229 | | | | 151,445 | | | | 547,342 | | | | 43,456 | | | | 1,070 | | | | 837,542 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Depreciation, depletion and amortisation | | | (43,731 | ) | | | (11,504 | ) | | | (5,615 | ) | | | (5,926 | ) | | | (647 | ) | | | (67,423 | ) |
Profit/(loss) from operations | | | 207,749 | | | | (23,659 | ) | | | 10,810 | | | | 12,495 | | | | (6,378 | ) | | | 201,017 | |
Finance costs: | | | | | | | | | | | | | | | | | | | | | | | | |
Exchange gain | | | | | | | | | | | | | | | | | | | | | | | 1,808 | |
Exchange loss | | | | | | | | | | | | | | | | | | | | | | | (2,559 | ) |
Interest income | | | | | | | | | | | | | | | | | | | | | | | 2,101 | |
Interest expense | | | | | | | | | | | | | | | | | | | | | | | (3,673 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total net finance costs | | | | | | | | | | | | | | | | | | | | | | | (2,323 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Share of profit of associates and jointly controlled entities | | | 5,908 | | | | 463 | | | | 55 | | | | 2 | | | | 17 | | | | 6,445 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Profit before income tax expense | | | | | | | | | | | | | | | | | | | | | | | 205,139 | |
Income tax expense | | | | | | | | | | | | | | | | | | | | | | | (49,802 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Profit for the year | | | | | | | | | | | | | | | | | | | | | | | 155,337 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment assets | | | 558,589 | | | | 212,179 | | | | 151,758 | | | | 80,252 | | | | 819,153 | | | | 1,821,931 | |
Other assets | | | | | | | | | | | | | | | | | | | | | | | 307 | |
Investments in associates and jointly controlled entities | | | 21,069 | | | | 2,279 | | | | 2,734 | | | | 17 | | | | 68 | | | | 26,167 | |
Elimination of intersegment balances(a) | | | | | | | | | | | | | | | | | | | | | | | (778,794 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total assets | | | | | | | | | | | | | | | | | | | | | | | 1,069,611 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Segment capital expenditure | | | 135,351 | | | | 21,499 | | | | 13,212 | | | | 11,003 | | | | 1,613 | | | | 182,678 | |
Segment liabilities | | | 227,965 | | | | 75,155 | | | | 98,023 | | | | 39,790 | | | | 188,774 | | | | 629,707 | |
Other liabilities | | | | | | | | | | | | | | | | | | | | | | | 43,792 | |
Elimination of intersegment balances(a) | | | | | | | | | | | | | | | | | | | | | | | (386,607 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | | | | | | | | | | | | | | | | | 286,892 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
PETROCHINA COMPANY LIMITEDGeographical information
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Turnover | | | Non-Current Assets(b) | |
Year Ended December 31, | | 2009 | | | 2008 | | | 2007 | | | 2009 | | | 2008 | | | 2007 | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
|
Mainland China | | | 790,748 | | | | 824,703 | | | | 716,134 | | | | 1,073,865 | | | | 902,370 | | | | 765,571 | |
Other | | | 228,527 | | | | 247,901 | | | | 121,408 | | | | 78,078 | | | | 63,878 | | | | 60,057 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 1,019,275 | | | | 1,072,604 | | | | 837,542 | | | | 1,151,943 | | | | 966,248 | | | | 825,628 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration | | | Refining | | | Chemicals | | | Natural Gas | | | | | |
| | and | | | and | | | and | | | and | | | | | |
Year Ended December 31, 2005 | | Production | | | Marketing | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
Segment capital expenditure- for property, plant and equipment | | | 83,214 | | | | 16,454 | | | | 13,569 | | | | 11,137 | | | | 427 | | | | 124,801 | |
Segment liabilities | | | 146,616 | | | | 97,918 | | | | 30,559 | | | | 40,847 | | | | 161,753 | | | | 477,693 | |
Other liabilities | | | | | | | | | | | | | | | | | | | | | | | 47,731 | |
Elimination of intersegment balances | | | | | | | | | | | | | | | | | | | | | | | (291,024 | ) |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | | | | | | | | | | | | | | | | | 234,400 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration | | | Refining | | | Chemicals | | | Natural Gas | | | | | |
| | and | | | and | | | and | | | and | | | | | |
Year Ended December 31, 2006 | | Production | | | Marketing | | | Marketing | | | 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 | ) |
Equity in income of affiliates and jointly controlled entities accounted for by equity method | | | 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 sources | | | | | | | | | | | | | | | | | | | | | | | 2,066 | |
| | | | | | | | | | | | | | | | | | |
F-62
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Exploration | | | Refining | | | Chemicals | | | Natural Gas | | | | | |
| | and | | | and | | | and | | | and | | | | | |
Year Ended December 31, 2006 | | Production | | | Marketing | | | Marketing | | | Pipeline | | | Other | | | Total | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
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 sources | | | | | | | | | | | | | | | | | | | | | | | (3,220 | ) |
| | | | | | | | | | | | | | | | | | |
Segment assets | | | 507,073 | | | | 248,027 | | | | 81,032 | | | | 75,433 | | | | 729,079 | | | | 1,640,644 | |
Elimination of intersegment balances | | | | | | | | | | | | | | | | | | | | | | | (801,437 | ) |
Investments in equity affiliates and jointly controlled entities | | | 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 | | | 185,185 | | | | 115,352 | | | | 28,024 | | | | 43,644 | | | | 171,059 | | | | 543,264 | |
Other liabilities | | | | | | | | | | | | | | | | | | | | | | | 62,021 | |
Elimination of intersegment balances | | | | | | | | | | | | | | | | | | | | | | | (350,713 | ) |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | | | | | | | | | | | | | | | | | | | | | 254,572 | |
| | | | | | | | | | | | | | | | | | |
| |
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) — (a) | Segment results for the years ended December 31, 2004, 2005 and 2006 included impairment of property, plant and equipment (Note 18) and shut down of manufacturing assets (Note 6). |
| |
Note (d) — | Other liabilities mainly include income tax payable, other taxes payable and deferred taxation. |
|
Note (e) — | Elimination of intersegment balances represents elimination of intersegment accounts and investments. |
|
Note (f) — (b) | Effective January 1, 2006, the results of operations, together with the corresponding | Non-current assets mainly include non-current assets other than financial instruments 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 activitiesdeferred tax assets. |
F-47
F-63
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| as of December 31, 2005 and 2006 and for the year ended December 31, 2005 and 2006 are as follows: |
| | | | | | | | | | | | | | | | | | | | |
| | Exploration | | Refining | | Chemicals | | Natural Gas | | |
| | and | | and | | and | | and | | |
Year Ended December 31, 2005 | | Production | | Marketing | | Marketing | | Pipeline | | Total |
| | | | | | | | | | |
| | RMB | | RMB | | RMB | | RMB | | RMB |
Sales and other operating revenues (including intersegment) | | | 558 | | | | 4 | | | | 40 | | | | — | | | | 602 | |
Sales and other operating revenues from external customers | | | 28 | | | | — | | | | 37 | | | | — | | | | 65 | |
Depreciation, depletion and amortization | | | (310 | ) | | | (18 | ) | | | (30 | ) | | | (3 | ) | | | (361 | ) |
Segment result | | | (543 | ) | | | (63 | ) | | | (96 | ) | | | (14 | ) | | | (716 | ) |
Other costs | | | (523 | ) | | | (103 | ) | | | (72 | ) | | | (31 | ) | | | (729 | ) |
Loss from operations | | | (1,066 | ) | | | (166 | ) | | | (168 | ) | | | (45 | ) | | | (1,445 | ) |
Share of profit of equity affiliates and jointly controlled entities | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest income | | | — | | | | — | | | | — | | | | — | | | | — | |
Interest expense | | | — | | | | (1 | ) | | | — | | | | — | | | | (1 | ) |
Segment assets | | | 2,050 | | | | 251 | | | | 295 | | | | 51 | | | | 2,647 | |
Segment liabilities | | | 995 | | | | 249 | | | | 128 | | | | 13 | | | | 1,385 | |
| | | | | | | | | | | | | | | | | | | | |
| | Exploration | | Refining | | Chemicals | | Natural Gas | | |
| | and | | and | | and | | and | | |
Year ended December 31, 2006 | | Production | | Marketing | | Marketing | | Pipeline | | Total |
| | | | | | | | | | |
| | RMB | | RMB | | RMB | | RMB | | RMB |
Sales and other operating revenues (including intersegment) | | | 543 | | | | — | | | | 39 | | | | — | | | | 582 | |
Sales and other operating revenues 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 | ) |
Share of profit of 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 | |
F-64
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Secondary reporting format — geographical segments
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Capital | |
| | Revenue | | | Total assets | | | expenditure | |
| | | | | | | | | |
Year Ended December 31, | | 2005 | | | 2006 | | | 2005 | | | 2006 | | | 2005 | | | 2006 | |
| | | | | | | | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | RMB | | | RMB | | | RMB | |
PRC | | | 531,520 | | | | 665,267 | | | | 717,934 | | | | 811,919 | | | | 119,505 | | | | 142,371 | |
Other (Exploration and Production) | | | 20,709 | | | | 23,711 | | | | 60,133 | | | | 60,244 | | | | 5,296 | | | | 6,375 | |
| | | | | | | | | | | | | | | | | | |
| | | 552,229 | | | | 688,978 | | | | 778,067 | | | | 872,163 | | | | 124,801 | | | | 148,746 | |
| | | | | | | | | | | | | | | | | | |
37 SIGNIFICANT DIFFERENCES BETWEEN IFRS AND US GAAP
The consolidated financial statements of the Group have been prepared in accordance with IFRS, which differ in certain material respects from the accounting principles generally accepted in the United States of America (US GAAP). Such differences involve methods for measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by US GAAP.
Effect on income of significant differences between IFRS and US GAAP is as follows:
| | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | US$ | |
Income for the year under IFRS | | | 107,646 | | | | 139,642 | | | | 149,397 | | | | 19,143 | |
US GAAP adjustments: | | | | | | | | | | | | | | | | |
| | Share of income of jointly controlled entities | | | — | | | | 2 | | | | 2,735 | | | | 350 | |
| Depreciation charges on property, plant and equipment revaluation gain | | | 8,170 | | | | 6,528 | | | | 3,828 | | | | 491 | |
| Depreciation charges on property, plant and equipment revaluation loss | | | (830 | ) | | | (149 | ) | | | — | | | | — | |
| Loss on disposal of revalued property, plant and equipment | | | 523 | | | | 432 | | | | 287 | | | | 37 | |
| Income tax effect | | | (2,595 | ) | | | (2,248 | ) | | | (1,358 | ) | | | (174 | ) |
| Minority interest | | | (3,863 | ) | | | (6,341 | ) | | | (8,600 | ) | | | (1,102 | ) |
| | Depreciation charges on property, plant and equipment arising from purchase from minority interest of subsidiaries | | | — | | | | — | | | | (202 | ) | | | (26 | ) |
| | | | | | | | | | | | |
Net income under US GAAP | | | 109,051 | | | | 137,866 | | | | 146,087 | | | | 18,719 | |
| | | | | | | | | | | | |
Basic and diluted net income per share under US GAAP (RMB) | | | 0.62 | | | | 0.78 | | | | 0.82 | | | | 0.10 | |
| | | | | | | | | | | | |
F-65
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Effect on equity of significant differences between IFRS and US GAAP is as follows:
| | | | | | | | | | | | | |
| | At December 31, | |
| | | |
| | 2005 | | | 2006 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | US$ | |
Equity under IFRS | | | 543,667 | | | | 617,591 | | | | 79,137 | |
US GAAP adjustments: | | | | | | | | | | | — | |
| Acquisition of PetroKazakhstan Inc. | | | 22,129 | | | | 22,129 | | | | 2,836 | |
| Share of income of jointly controlled entities | | | 2 | | | | 2,737 | | | | 351 | |
| Deemed distribution to CNPC International Limited | | | — | | | | (3,044 | ) | | | (390 | ) |
| Payment for the acquisition of PetroKazakhstan Inc. | | | — | | | | (21,376 | ) | | | (2,739 | ) |
| Reversal of property, plant and equipment revaluation gain | | | (80,555 | ) | | | (80,555 | ) | | | (10,322 | ) |
| Depreciation charges on property, plant and equipment revaluation gain | | | 51,971 | | | | 55,799 | | | | 7,150 | |
| Reversal of property, plant and equipment revaluation loss | | | 1,513 | | | | 1,513 | | | | 194 | |
| Depreciation charges on property, plant and equipment revaluation loss | | | (1,459 | ) | | | (1,459 | ) | | | (187 | ) |
| Loss on disposal of revalued property, plant and equipment | | | 1,746 | | | | 2,033 | | | | 261 | |
| Deferred tax assets on revaluation | | | 8,843 | | | | 7,485 | | | | 959 | |
| Minority interest | | | (39,100 | ) | | | (30,953 | ) | | | (3,966 | ) |
| Effect on the retained earnings from the one-time remedial payments for staff housing borne by the state shareholder of the Company | | | (2,553 | ) | | | (2,553 | ) | | | (327 | ) |
| Effect on the other reserves of the shareholders’ equity from the one-time remedial payments for staff housing borne by the state shareholder of the Company | | | 2,553 | | | | 2,553 | | | | 327 | |
| Purchase from minority interest of subsidiaries (Note 38) | | | 1,438 | | | | 3,594 | | | | 461 | |
| Depreciation charges on property, plant and equipment arising from purchase from minority interest of subsidiaries | | | — | | | | (202 | ) | | | (26 | ) |
| Currency translation differences | | | (54 | ) | | | (822 | ) | | | (108 | ) |
| | | | | | | | | |
Shareholders’ equity under US GAAP | | | 510,141 | | | | 574,470 | | | | 73,611 | |
| | | | | | | | | |
F-66
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
Changes in shareholders’ equity under US GAAP for each of the years ended December 31, 2004, 2005 and 2006 are as follows:
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | | | 2006 | |
| | | | | | | | | | | | |
| | RMB | | | RMB | | | RMB | | | US$ | |
Balance at beginning of the year | | | 330,520 | | | | 405,573 | | | | 510,141 | | | | 65,368 | |
Net income for the year | | | 109,051 | | | | 137,866 | | | | 146,087 | | | | 18,719 | |
Acquisition of PetroKazakhstan Inc. | | | — | | | | 11,064 | | | | — | | | | — | |
Deemed distribution to CNPC International Limited | | | — | | | | — | | | | (1,522 | ) | | | (195 | ) |
Payment for the acquisition of PetroKazakhstan Inc. | | | — | | | | — | | | | (10,688 | ) | | | (1,370 | ) |
Final dividends for year 2003 | | | (13,947 | ) | | | — | | | | — | | | | — | |
Interim dividends for year 2004 | | | (20,381 | ) | | | — | | | | — | | | | — | |
Final dividends for year 2004 | | | — | | | | (25,936 | ) | | | — | | | | — | |
Interim dividends for year 2005 | | | — | | | | (27,731 | ) | | | — | | | | — | |
Final dividends for year 2005 | | | — | | | | — | | | | (32,282 | ) | | | (4,136 | ) |
Interim dividends for year 2006 | | | — | | | | — | | | | (36,307 | ) | | | (4,652 | ) |
Payment to CNPC for acquisition of refinery and petrochemical businesses (Note 2) | | | — | | | | (9 | ) | | | — | | | | — | |
Issue of H shares (Notes 27 and 28) | | | — | | | | 19,692 | | | | — | | | | — | |
Capital contribution to CNPC E&D (Note 2) | | | — | | | | (10,056 | ) | | | — | | | | — | |
Currency translation differences | | | 330 | | | | (322 | ) | | | (959 | ) | | | (123 | ) |
| | | | | | | | | | | | |
| Balance at end of the year | | | 405,573 | | | | 510,141 | | | | 574,470 | | | | 73,611 | |
| | | | | | | | | | | | |
In preparing the summary of differences between IFRS and US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the estimates of revenues and expenses. Accounting estimates have been employed in these consolidated financial statements to determine reported amounts, including realizability, useful lives of tangible and intangible assets, income taxes and other factors. Actual results may differ from those estimates.
A summary of the principal differences and additional disclosures applicable to the Group is set out below:
| |
(a) | Acquisition of PetroKazakhstan Inc. |
| |
| As described in Note 19 to the consolidated financial statements of the Group, the Group acquired a 67% equity interest in PetroKazakhstan Inc. from CNPC International Limited (CNPCI), a subsidiary of CNPC, effective on December 28, 2006 for RMB 21,376. As both CNPCI and the Group are under common control by CPNC, the acquisition of the 67% equity interest in PetroKazakhstan Inc. has been accounted for in a manner similar to pooling of interests under US GAAP accounting and the US GAAP financial data reflects the acquisition of the 67% equity interest in PetroKazakhstan Inc. since PetroKazakhstan Inc. was first acquired by CNPCI on October 26, 2005. |
F-67
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| On December 15, 2006, PetroKazakhstan Inc. paid to CNPCI a dividend amount to RMB 3,044 and was recorded as a deemed distribution to CNPCI. |
|
| The purchase consideration for the acquisition of the 67% equity interest in PetroKazakhstan Inc. was paid by the Group to CNPCI on December 28, 2006. |
| |
(b) | Revaluation of property, plant and equipment |
| |
| As described in note 18, the property, plant and equipment, excluding oil and gas reserves, transferred to the Company by CNPC were appraised during 1999 by a firm of independent valuers on a depreciated replacement cost basis. The 1999 revaluation resulted in RMB 80,549 in excess of the carrying value immediately prior to the revaluation and a revaluation loss of RMB 1,122 on certain property, plant and equipment. |
|
| As at September 30, 2003, a revaluation of the Group’s refining and chemical production equipment was undertaken by a firm of independent valuers registered in the PRC, China United Assets Appraiser Co., Ltd, on a depreciated replacement cost basis. The September 2003 revaluation resulted in RMB 872 in excess of the carrying value 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 Group’s 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 significant difference from their carrying value. |
|
| The depreciation charge, which includes impairment charge, on the revaluation surplus from January 1, 2006 to December 31, 2006 was RMB 3,828 and from January 1, 2005 to December 31, 2005 was RMB 6,528, respectively. |
|
| The depreciation charge, which includes impairment charge, on the revaluation loss from January 1, 2006 to December 31, 2006 was Nil, and from January 1, 2005 to December 31, 2005 was RMB 149. |
|
| The loss on disposal of revalued property, plant and equipment from January 1, 2006 to December 31, 2006 was RMB 287, and from January 1, 2005 to December 31, 2005 was RMB 432 which includes shut down of manufacturing assets. |
|
| For purposes of reconciling to the US GAAP financial data, the effect of the revaluation, the related depreciation charges and loss on disposal was reversed. A deferred tax asset relating to the reversal of the effect of revaluation in 1999 was established, together with a corresponding increase in the equity. Under a special approval granted by the Ministry of Finance, the effect of the revaluation in 1999 is available as additional depreciation base for purposes of determining taxable income. |
| |
(c) | One-time remedial payments for staff housing |
| |
| The Ministry of Finance of the PRC issued several public notices and regulations during the years ended December 31, 2000 and 2001 with respect to the one-time remedial payments for staff housing payable to certain employees who joined the workforce prior to December 31, 1998 and have housing conditions below local standards as determined in accordance with government regulations and guidelines. These Ministry of Finance notices and regulations also provided that the portion of remedial payments attributable to the periods prior to a restructuring |
F-68
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| of the employer enterprise from a wholly state-owned status to a less than wholly state-owned status is to be borne by the state shareholder of the enterprise. |
|
| The restructuring that resulted in the formation of the Group took place in November 1999. As such, the one-time remedial housing payments payable to the eligible employees of the Group are to be borne by the state shareholder of the Company. |
|
| Under IFRS, such direct payments to employees or reimbursements will not be recorded through the consolidated statements of income of the Group. US GAAP contains no such exemption but requires this principal shareholder’s action on behalf of the Company to be recorded in the consolidated statements of income. In the last quarter of year 2002, the Group and CNPC completed the process of estimating the amount payable to qualified employees of the Group. This amount, RMB 2,553, was reflected in determining net income of the Group for the year ended December 31, 2002, under US GAAP. Since this amount is borne by CNPC, a corresponding amount has been included as an addition to the other reserves in the equity of the Group. There were no significant changes in this estimate during 2005 and 2006. |
| |
| In accordance with the revised IFRS 1“Presentation of Financial Statements”and IAS 27“Consolidated and Separate Financial Statements”, minority interest becomes part of the profit for the year and total equity of the Group, respectively, whereas under US GAAP, it is respectively excluded from the net income and equity of the Group. |
|
| This reconciling item includes the impact of minority interest’s share of the revaluation gain and loss, on the property, plant and equipment of non-wholly owned subsidiaries and the impact of minority interest arising from the acquisition of the 67% equity interest in PetroKazakhstan Inc. by a non-wholly owned subsidiary of the Group to net income and equity under US GAAP. |
| |
(e) | Purchase from minority interest of listed subsidiaries |
| |
| As described in note 38, the Company acquired certain outstanding A shares from the minority interest of Jinzhou Petrochemical Company Limited (“JPCL”) and Liaohe Jinma Oilfield Company Limited (“LJOCL”) and certain A shares and H shares (including ADSs) from the minority interest of Jilin Chemical Industrial Company Limited (“JCIC”). Under IFRS, the Company applies a policy of treating transactions with minority interest as transactions with equity participants of the Group. Therefore, the assets and liabilities of JPCL, LJOCL and JCIC additionally acquired by the Company from minority interest were recorded by the Company at cost. The difference between the Company’s purchase cost and the book value of the interests in JPCL LJOCL and JCIC acquired by the Company from minority interest was recorded in equity. Under US GAAP, the acquisition of additional minority interest is accounted for under purchase method. Assets and liabilities additionally acquired were restated to fair value and the difference of purchase cost over fair value of the minority interest acquired and identified intangible assets was recorded as goodwill. Additional depreciation charges were provided for the assets which were restated to fair value. |
| |
(f) | Recent US accounting pronouncements |
| |
| In September 2005, the Emerging Issues Task Force (“EITF”) reached consensus on Issue No. 04-13,“Accounting for Purchases and Sales of Inventory with the Same Counterparty”(“EITF 04-13”) which requires two or more inventory purchase and sales transactions with the |
F-69
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
| same counterparty that are entered into in contemplation of one another should be combined for purposes of applying Opinion 29, “Accounting for Nonmonetary Transactions”. The Task Force also agreed that an entity should disclose the amount of revenue and costs (or gains and losses) associated with inventory exchanges recognized at fair value. This Issue should be applied to new arrangements entered into, or modifications or renegotiations of existing arrangements, beginning in the first interim or annual reporting period beginning after March 15, 2006 and early application is permitted in periods for which financial statements have not been issued. The Group did not early adopt EITF 04-13 and does not expect the adoption of EITF 04-13 to have a material impact on the Group’s financial position or results of operations. |
|
| In June 2006, EITF issued No. 06-3,“How Sales Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement”(“EITF 06-3”). EITF 06-3 requires disclosure of the presentation of taxes on either a gross or a net basis as an accounting policy decision. The provisions of EITF 06-3 are effective for interim and annual reporting periods beginning after December 15, 2006, and early application is permitted. The Group did not early adopt EITF 06-3 and does not expect the adoption of EITF 06-3 to have a material impact on the presentation of the Group’s financial statements. |
|
| In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a comprehensive model for recognising, measuring, presenting and disclosing in the financial statements uncertain tax positions that the Group has taken or expects to take in its tax returns. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. Earlier adoption is permitted as of the beginning of an enterprise’s fiscal year, provided the enterprise has not yet issued financial statements, including financial statements for any interim period, for that fiscal year. The cumulative effect of applying the provisions of this Interpretation should be reported as an adjustment to the opening balance of retained earnings for that fiscal year. The Group is currently evaluating the impact of adopting FIN 48. |
|
| In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,“Fair Value Measurements”(“FAS157”), which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. FAS 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. FAS 157 will be effective for fiscal years beginning after November 15, 2007, and all interim periods within those fiscal years. Earlier application is permitted if the entity has not issued interim or annual financial statements for that fiscal year. The Group is currently evaluating the impact of adopting FAS 157 but does not expected to have a material effect on the Group’s consolidated financial position and results of operations. |
|
| In September 2006, the U.S. Securities and Exchange Commission (“SEC”) released SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 provides interpretive guidance on the SEC’s views on the consideration of effects of prior year misstatements in quantifying current year misstatements for the purpose of determining whether the current year’s financial statements are materially misstated. The provisions of SAB 108 are effective for fiscal years ending after November 15, 2006. The application of SAB 108 did not have any material effect on the Group’s consolidated financial position, and results of operations. |
F-70
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
38 PRINCIPAL SUBSIDIARIES
| | | | | | | | | | | | | | | | | | |
| | Country | | | | | Type of | | | Attributable | | | |
| | of | | | Paid-up | | | Legal | | | Equity | | | Principal |
Company Name | | Incorporation | | | Capital | | | Entity | | | Interest | | | Activities |
| | | | | | | | | | | | | | |
| | | | RMB | | | | | % | | | |
*Daqing Oilfield Company Limited | | | PRC | | | | 47,500 | | | | PHI | | | | 100.00 | | | Exploration, production and sale of crude oil and natural gas; production and sale of refined products |
|
*Jinzhou Petrochemical Company Limited (i) | | | PRC | | | | 788 | | | | PSI | | | | 98.92 | | | Production and sale of oil and chemical products |
|
*Jilin Chemical Industrial Company Limited (ii) | | | PRC | | | | 3,561 | | | | PSI | | | | 99.61 | | | Production and sale of chemical products |
|
Daqing Yu Shu Lin Oilfield Company Limited | | | PRC | | | | 1,272 | | | | PHI | | | | 88.16 | | | Exploration and production and sale of crude oil and natural gas |
|
*Liaohe Jinma Oilfield Company Limited (iii) | | | PRC | | | | 1,100 | | | | PSI | | | | 99.49 | | | Exploration, production, transportation and sale of crude oil and natural gas |
|
*CNPC Exploration and Development Company Limited | | | PRC | | | | 100 | | | | PHI | | | | 50.00 | | | Exploration and production and sale of crude oil and natural gas outside of the PRC |
| |
PHI — | Limited liability company. |
|
PSI — | Joint stock company with limited liability. |
| |
* — | Subsidiaries directly held by the Company as of December 31, 2006 |
| |
(i) | Pursuant to the resolution passed at the Board of Directors’ meeting held on October 26, 2005, the Company offered to acquire all of the 150,000,000 outstanding A shares of Jinzhou Petrochemical Company Limited (“JPCL”) from minority shareholders at RMB 4.25 per share. As at December 31, 2006, the Company had paid a total cash consideration of RMB 602 and acquired 141,497,463 A shares, representing approximately 17.97% of the total issued shares of JPCL. Upon this acquisition, the Company owns 98.92% of the outstanding shares of JPCL. The excess of the cost of purchase over the carrying value of the underlying assets and liabilities acquired was recorded in equity. As approved by China Securities Regulatory Commission, JPCL was delisted from the Shenzhen Stock Exchange on January 4, 2006. |
F-71
PETROCHINA COMPANY LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Amounts in millions except for per share data or unless otherwise stated)
| |
(ii) | Pursuant to the resolution passed by the Board of Directors’ meeting held on October 26, 2005, the Company offered to acquire all the 200,000,000 outstanding A shares and 964,778,000 H shares (including ADS) of Jilin Chemical Industrial Company Limited (“JCIC”) from minority shareholders at RMB 5.25 per A share and HK$2.80 per H share respectively. As at December 31, 2006, the Company had paid a total cash consideration of RMB 3,799 and acquired 189,357,726 A shares and 961,495,999 H shares (including ADS), representing approximately 32.32% of the total issued shares of JCIC. Upon this acquisition, the Company owns 99.61% of the outstanding shares of JCIC. The excess of the cost of purchase over the carrying value of the underlying assets and liabilities acquired was recorded in equity. 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. As approved by China Securities Regulatory Commission, JCIC was delisted from the Shenzhen Stock Exchange on February 20, 2006. |
|
(iii) | Pursuant to the resolution passed by the Board of Directors’ meeting held on October 26, 2005, the Company offered to acquire all of the 200,000,000 outstanding A shares of Liaohe Jinma Oilfield Company Limited (“LJOCL”) from minority shareholders at RMB 8.80 per share. As at December 31, 2006, the Company had paid a total cash consideration of RMB 1,713 and acquired 194,360,943 A shares, representing approximately 17.67% of the total issued shares of LJOCL. Upon this acquisition, the Company owns 99.49% of the outstanding shares of LJOCL. The excess of the cost of purchase over the carrying value of the underlying assets and liabilities acquired was recorded in equity. As approved by China Securities Regulatory Commission, LJOCL was delisted from the Shenzhen Stock Exchange on January 4, 2006. |
The acquisitions of interests from minority shareholders of the above non-wholly owned principal subsidiaries and another non- wholly owned subsidiary in the year ended December 31, 2005 and 2006 resulted in a total adjustment to equity of RMB 1,438 and RMB 2,156, respectively.
39 EVENTS AFTER BALANCE SHEET DATETHE REPORTING PERIOD
On March 16, 2007,February 5, 2010, the corporate income tax law was passedCompany issued the first tranche of medium-term notes for the year 2010 amounting to RMB 11 billion for a term of 7 years at an interest rate of 4.60% per annum.
On May 15, 2010, the Company issued the second tranche of medium-term notes for the year 2010 amounting to RMB 20 billion for a term of 7 years (with an option to determine the interest rate for the issuer and a put option for the investors in these notes at the Fifth Session of Tenth National People’s Congress of PRC whereby all enterprises with operations in the PRC will be subject to the same statutory income tax rate. The Group will evaluate the impactend of the new tax law on5th year) at an interest rate of 3.97% per annum.
On May 19, 2010, the operating results andCompany issued the financial positionthird tranche of medium-term notes for the Group when the new tax law is implemented.year 2010 amounting to RMB 20 billion for a term of 5 years at an interest rate of 3.97% per annum.
40 APPROVAL OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of Directors on March 19, 200725, 2010 and will be submitted to thewere approved by shareholders for approval at the annual general meeting to beAnnual General Meeting held on May 16, 2007.20, 2010.
F-48
F-72
PETROCHINA COMPANY LIMITED
PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
In accordance with US Statement of Financialthe Accounting Standard No. 69,Disclosures aboutStandards Update2010-03 Extractive Activities — Oil and Gas Producing(Topic 932): Oil and Gas Reserve Estimation and Disclosures (an update of Accounting Standards Codification Topic 932 Extractive Activities — Oil and Gas or “ASC 932”) issued by the Financial Accounting Standards Board and corresponding disclosure requirements of the U.S. Securities and Exchange Commission, this section provides supplemental information on oil and gas exploration and producing activities of the Company and its subsidiaries (the “Group”) and also the Group’s investments that are accounted for using the equity method.method of accounting.
The supplemental information presented below covers the Group’s proved oil and gas reserves estimates, historical cost information pertaining to capitalised costs, costs incurred for property acquisitions, exploration and development activities, result of operations for oil and gas producing activities, standardised measure of estimated discounted future net cash flows and changes in estimated discounted future net cash flows.
The “Other” geographic area includes oil and gas producing activities principally in countries such as Kazakhstan, Venezuela and Indonesia. As the Group does not have significant reserves held through its investments accounted for using the equity method, information presented in relation to these equity method investments are presented in the aggregate.
Results of Operations
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Sales and other operating revenues | | | | | | | | | | | | |
| Sales to third parties | | | 53,819 | | | | 66,265 | | | | 81,721 | |
| Intersegment sales | | | 176,894 | | | | 261,558 | | | | 313,654 | |
| | | | | | | | | |
| | | 230,713 | | | | 327,823 | | | | 395,375 | |
Production costs excluding taxes | | | (34,821 | ) | | | (41,713 | ) | | | (54,800 | ) |
Exploration expenses | | | (12,090 | ) | | | (15,566 | ) | | | (18,822 | ) |
Depreciation, depletion and amortization | | | (26,287 | ) | | | (25,819 | ) | | | (31,540 | ) |
Taxes other than income taxes | | | (7,712 | ) | | | (10,239 | ) | | | (41,354 | ) |
Accretion expense | | | (54 | ) | | | (60 | ) | | | (796 | ) |
| | | | | | | | | |
Income before income taxes | | | 149,749 | | | | 234,426 | | | | 248,063 | |
Income taxes | | | (42,089 | ) | | | (64,816 | ) | | | (65,554 | ) |
| | | | | | | | | |
Results of operations from producing activities | | | 107,660 | | | | 169,610 | | | | 182,509 | |
| | | | | | | | | |
Income from equity affiliates’ and jointly controlled entities’ results of operations from producing activities | | | 767 | | | | 1,880 | | | | 4,424 | |
| | | | | | | | | |
Capitalized Costs
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Property costs | | | — | | | | — | | | | — | |
Producing assets | | | 303,784 | | | | 359,539 | | | | 425,172 | |
Support facilities | | | 124,793 | | | | 138,093 | | | | 150,149 | |
Construction-in-progress | | | 15,856 | | | | 19,394 | | | | 25,461 | |
| | | | | | | | | |
Total capitalized costs | | | 444,433 | | | | 517,026 | | | | 600,782 | |
Accumulated depreciation, depletion and amortization | | | (180,926 | ) | | | (203,416 | ) | | | (233,677 | ) |
| | | | | | | | | |
Net capitalized costs | | | 263,507 | | | | 313,610 | | | | 367,105 | |
| | | | | | | | | |
Share of equity affiliates’ and jointly controlled entities’ net capitalized costs | | | 1,632 | | | | 20,597 | | | | 25,136 | |
| | | | | | | | | |
F-73
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED) — (Continued)
(Amounts in millions unless otherwise stated)
Costs Incurred in Property Acquisitions, ExplorationProved Oil and Development Activities
| | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
Property acquisition costs | | | — | | | | — | | | | — | |
Exploration costs | | | 18,338 | | | | 25,335 | | | | 30,567 | |
Development costs | | | 47,508 | | | | 72,551 | | | | 79,902 | |
| | | | | | | | | |
Total | | | 65,846 | | | | 97,886 | | | | 110,469 | |
| | | | | | | | | |
Share of equity affiliates’ and jointly controlled entities’ costs of property acquisition, exploration, and development | | | 1,143 | | | | 2,590 | | | | 4,371 | |
| | | | | | | | | |
ProvedGas Reserve Estimates
Oil
Proved 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.judgment. 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 reservoir’s producing life.reserves.
Proved oil and gas reserves are the estimated quantities of crude oil and natural gas, which, geologicalby analysis of geoscience and engineering data, demonstratecan be estimated with reasonable certainty to be recoverable in future yearseconomically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and operatinggovernment regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether the estimate is a deterministic estimate or probabilistic estimate.
Existing economic conditions i.e.,include prices and costs asat which economic producibility from a reservoir is to be determined. The price shall be the average price during the12-month period before the ending date of the dateperiod covered by the estimate is made. Prices include considerationreport, determined as an unweighted arithmetic average of changes in existingthefirst-day-of-the-month price for each month within such period, unless prices provided onlyare defined by contractual arrangements, but not onexcluding escalations based upon future conditions. The costs shall be that prevailing at the end of the period.
Proved developed oil and gas reserves are thoseproved reserves whichthat can be expected to be recovered throughrecovered:
a. Through existing wells with existing equipment and operating methods. methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.
b. Through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well.
Proved undeveloped oil and gas reserves are thoseproved reserves whichthat are expected to be recovered from new wells on undrilled acreage, or from existing wells where a 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 has issued production licenses effective from March 2000 to the Grouprequired for all of its crude oil and natural gas reservoirs with terms coextensive 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 the30-year maximum unless additional special approvals can be obtained from the State Council. Each of the Group’s production licenses is renewable upon application by the Group 30 days prior to expiration.recompletion.
F-49
F-74
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING
EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)
(Amounts in millions unless otherwise stated)
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, 2004, 20052009, 2008 and 20062007 were based on reports prepared by DeGolyer and MacNaughton and Gaffney, Cline & Associates, independent engineering consultants. These reserve estimates were prepared for each oil and gas region (as opposed to individual fields within a region) and adjusted for the estimated effects of using prices and costs prevailing at the end of the period. The Company’s 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 crude oil and condensate and natural gas reserves and of changes in net quantities of proved developed and undeveloped reserves for each of the periodperiods indicated are as follows:
| | | | | | | | | | | |
| | Crude Oil and | | |
| | Condensate | | Natural Gas |
| | | | |
| | (millions of | | (billions of |
| | barrels) | | cubic feet) |
Proved developed and undeveloped | | | | | | | | |
| Reserves at January 1, 2004 | | | 11,495 | | | | 41,787 | |
| | Changes resulting from: | | | | | | | | |
| | | Revisions of previous estimates | | | 141 | | | | 83 | |
| | | Improved recovery | | | 109 | | | | 43 | |
| | | Extensions and discoveries | | | 573 | | | | 4,405 | |
| | | Production | | | (817 | ) | | | (1,069 | ) |
| | | | | | | | |
| Reserves at December 31, 2004 | | | 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 | |
| | | | | | | | |
| | | | | | | | | | | | |
| | Crude Oil and
| | | | | | Total
| |
| | Condensate | | | Natural Gas | | | — All Products | |
| | (Millions
| | | (Billions
| | | (Million barrels of
| |
| | of barrels) | | | of cubic feet) | | | oil equivalent) | |
|
Proved developed and undeveloped reserves | | | | | | | | | | | | |
The Group | | | | | | | | | | | | |
Reserves at December 31, 2006 | | | 11,618 | | | | 53,469 | | | | 20,529 | |
Changes resulting from: | | | | | | | | | | | | |
Revisions of previous estimates | | | 84 | | | | (1,062 | ) | | | (93 | ) |
Improved recovery | | | 79 | | | | — | | | | 79 | |
Extensions and discoveries | | | 764 | | | | 6,331 | | | | 1,819 | |
Production | | | (839 | ) | | | (1,627 | ) | | | (1,110 | ) |
| | | | | | | | | | | | |
Reserves at December 31, 2007 | | | 11,706 | | | | 57,111 | | | | 21,224 | |
Changes resulting from: | | | | | | | | | | | | |
Revisions of previous estimates | | | (574 | ) | | | (637 | ) | | | (680 | ) |
Improved recovery | | | 75 | | | | — | | | | 75 | |
Extensions and discoveries | | | 885 | | | | 6,579 | | | | 1,982 | |
Production | | | (871 | ) | | | (1,864 | ) | | | (1,181 | ) |
| | | | | | | | | | | | |
Reserves at December 31, 2008 | | | 11,221 | | | | 61,189 | | | | 21,420 | |
Changes resulting from: | | | | | | | | | | | | |
Revisions of previous estimates | | | (192 | ) | | | (1,273 | ) | | | (405 | ) |
Improved recovery | | | 73 | | | | — | | | | 73 | |
Extensions and discoveries | | | 1,005 | | | | 5,440 | | | | 1,911 | |
Production | | | (844 | ) | | | (2,112 | ) | | | (1,196 | ) |
| | | | | | | | | | | | |
Reserves at December 31, 2009 | | | 11,263 | | | | 63,244 | | | | 21,803 | |
| | | | | | | | | | | | |
Proved developed reserves at: | | | | | | | | | | | | |
December 31, 2007 | | | 9,047 | | | | 26,047 | | | | 13,388 | |
December 31, 2008 | | | 8,324 | | | | 26,667 | | | | 12,769 | |
December 31, 2009 | | | 7,871 | | | | 30,949 | | | | 13,029 | |
Proved undeveloped reserves at: | | | | | | | | | | | | |
December 31, 2007 | | | 2,659 | | | | 31,064 | | | | 7,836 | |
December 31, 2008 | | | 2,897 | | | | 34,522 | | | | 8,651 | |
December 31, 2009 | | | 3,392 | | | | 32,295 | | | | 8,774 | |
Equity method investments | | | | | | | | | | | | |
Share of proved developed and undeveloped reserves of associates and jointly controlled entities | | | | | | | | | | | | |
December 31, 2007 | | | 141 | | | | 79 | | | | 154 | |
December 31, 2008 | | | 372 | | | | 65 | | | | 383 | |
December 31, 2009 | | | 310 | | | | 50 | | | | 319 | |
At December 31, 2009, total proved developed and undeveloped reserves of the Group and equity method investments is 22,122 million barrels of oil equivalent (2008: 21,803, 2007: 21,378), comprising 11,573 million
F-50
F-75
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING
EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED) — (Continued)
(Amounts in millions unless otherwise stated)
| | | | | | | | | |
| | Crude Oil and | | |
| | Condensate | | Natural Gas |
| | | | |
| | (millions of | | (billions of |
| | barrels) | | cubic feet) |
Proved developed reserves at: | | | | | | | | |
| December 31, 2004 | | | 9,068 | | | | 17,255 | |
| December 31, 2005 | | | 9,195 | | | | 19,858 | |
| December 31, 2006 | | | 9,185 | | | | 22,564 | |
Proportional interest in proved reserves of equity affiliates and jointly controlled entities | | | | | | | | |
| December 31, 2004 | | | 439 | | | | 100 | |
| December 31, 2005 | | | 631 | | | | 145 | |
| December 31, 2006 | | | 543 | | | | 105 | |
At December 31, 2006, 10,975 million
barrels of crude oil and condensate (2008: 11,593, 2007: 11,847) and 52,673.463,294.4 billions of cubic feet of natural gas (2008: 61,254.2, 2007: 57,189.6).
At December 31, 2009, 10,516 million barrels (2008: 10,576, 2007: 11,062) of crude oil and condensate and 62,376.9 billion cubic feet (2008: 60,246.7, 2007: 56,510.0) of natural gas proved developed and undeveloped reserves of the Group are located within Mainland China, and 643747 million barrels (2008: 645, 2007: 644) of crude oil and condensate and 795.6866.9 billion cubic feet (2008: 942.6, 2007: 601.0) of natural gas proved developed and undeveloped reserves of the Group are located overseas.
Standardized MeasureCapitalised Costs
The following disclosures concerning the standardized measure
| | | | | | | | |
| | December 31,
| | | December 31,
| |
| | 2009 | | | 2008 | |
| | RMB | | | RMB | |
|
The Group | | | | | | | | |
Property costs and producing assets | | | 666,644 | | | | 592,122 | |
Support facilities | | | 222,205 | | | | 197,919 | |
Construction-in-progress | | | 61,581 | | | | 59,078 | |
| | | | | | | | |
Total capitalised costs | | | 950,430 | | | | 849,119 | |
Accumulated depreciation, depletion and amortisation | | | (369,437 | ) | | | (317,233 | ) |
| | | | | | | | |
Net capitalised costs | | | 580,993 | | | | 531,886 | |
| | | | | | | | |
Equity method investments | | | | | | | | |
Share of net capitalised costs of associates and jointly controlled entities | | | 13,020 | | | | 17,237 | |
| | | | | | | | |
Costs Incurred for Property Acquisitions, Exploration and Development Activities
| | | | | | | | | | | | |
| | Year Ended December 31, 2009 | |
| | Mainland
| | | | | | | |
| | China | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Property acquisition and exploration costs | | | 29,786 | | | | 2,949 | | | | 32,735 | |
Development costs | | | 94,130 | | | | 5,977 | | | | 100,107 | |
| | | | | | | | | | | | |
Total | | | 123,916 | | | | 8,926 | | | | 132,842 | |
| | | | | | | | | | | | |
Equity method investments | | | | | | | | | | | | |
Share of costs of property acquisition, exploration and development of associates and jointly controlled entities | | | — | | | | 1,620 | | | | 1,620 | |
| | | | | | | | | | | | |
F-51
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
| | | | | | | | | | | | |
| | Year Ended December 31, 2008 | |
| | Mainland
| | | | | | | |
| | China | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Property acquisition and exploration costs | | | 34,773 | | | | 2,895 | | | | 37,668 | |
Development costs | | | 117,772 | | | | 7,083 | | | | 124,855 | |
| | | | | | | | | | | | |
Total | | | 152,545 | | | | 9,978 | | | | 162,523 | |
| | | | | | | | | | | | |
Equity method investments | | | | | | | | | | | | |
Share of costs of property acquisition, exploration and development of associates and jointly controlled entities | | | — | | | | 4,003 | | | | 4,003 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Year Ended December 31, 2007 | |
| | Mainland
| | | | | | | |
| | China | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Property acquisition and exploration costs | | | 35,070 | | | | 1,350 | | | | 36,420 | |
Development costs | | | 90,427 | | | | 6,022 | | | | 96,449 | |
| | | | | | | | | | | | |
Total | | | 125,497 | | | | 7,372 | | | | 132,869 | |
| | | | | | | | | | | | |
Equity method investments | | | | | | | | | | | | |
Share of costs of property acquisition, exploration and development of associates and jointly controlled entities | | | — | | | | 2,798 | | | | 2,798 | |
| | | | | | | | | | | | |
F-52
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
Results 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 aboutOperations for 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.Activities
| | | | | | | | | | | | |
| | Year Ended December 31, 2009 | |
| | Mainland
| | | | | | | |
| | China | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Sales and other operating revenues | | | | | | | | | | | | |
Sales to third parties | | | 62,799 | | | | 33,878 | | | | 96,677 | |
Intersegment sales | | | 259,847 | | | | 404 | | | | 260,251 | |
| | | | | | | | | | | | |
| | | 322,646 | | | | 34,282 | | | | 356,928 | |
Production costs excluding taxes | | | (68,236 | ) | | | (4,355 | ) | | | (72,591 | ) |
Exploration expenses | | | (18,426 | ) | | | (972 | ) | | | (19,398 | ) |
Depreciation, depletion and amortisation | | | (53,018 | ) | | | (4,005 | ) | | | (57,023 | ) |
Taxes other than income taxes | | | (31,210 | ) | | | (9,660 | ) | | | (40,870 | ) |
Accretion expense | | | (1,787 | ) | | | (156 | ) | | | (1,943 | ) |
Income taxes | | | (30,196 | ) | | | (3,783 | ) | | | (33,979 | ) |
| | | | | | | | | | | | |
Results of operations from producing activities | | | 119,773 | | | | 11,351 | | | | 131,124 | |
| | | | | | | | | | | | |
Equity method investments | | | | | | | | | | | | |
Share of profit for producing activities of associates and jointly controlled entities | | | — | | | | 3,326 | | | | 3,326 | |
| | | | | | | | | | | | |
Total of the Group and equity method investments results of operations for producing activities | | | 119,773 | | | | 14,677 | | | | 134,450 | |
| | | | | | | | | | | | |
F-53
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
| | | | | | | | | | | | |
| | Year Ended December 31, 2008 | |
| | Mainland
| | | | | | | |
| | China | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Sales and other operating revenues | | | | | | | | | | | | |
Sales to third parties | | | 72,218 | | | | 52,169 | | | | 124,387 | |
Intersegment sales | | | 431,203 | | | | 2,181 | | | | 433,384 | |
| | | | | | | | | | | | |
| | | 503,421 | | | | 54,350 | | | | 557,771 | |
Production costs excluding taxes | | | (69,469 | ) | | | (5,410 | ) | | | (74,879 | ) |
Exploration expenses | | | (20,868 | ) | | | (1,011 | ) | | | (21,879 | ) |
Depreciation, depletion and amortisation | | | (47,295 | ) | | | (3,532 | ) | | | (50,827 | ) |
Taxes other than income taxes | | | (99,970 | ) | | | (5,843 | ) | | | (105,813 | ) |
Accretion expense | | | (1,607 | ) | | | (139 | ) | | | (1,746 | ) |
Income taxes | | | (52,718 | ) | | | (9,604 | ) | | | (62,322 | ) |
| | | | | | | | | | | | |
Results of operations from producing activities | | | 211,494 | | | | 28,811 | | | | 240,305 | |
| | | | | | | | | | | | |
Equity method investments | | | | | | | | | | | | |
Share of profit for producing activities of associates and jointly controlled entities | | | — | | | | 9,872 | | | | 9,872 | |
| | | | | | | | | | | | |
Total of the Group and equity method investments results of operations for producing activities | | | 211,494 | | | | 38,683 | | | | 250,177 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Year Ended December 31, 2007 | |
| | Mainland
| | | | | | | |
| | China | | | Other | | | Total | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Sales and other operating revenues | | | | | | | | | | | | |
Sales to third parties | | | 65,709 | | | | 27,331 | | | | 93,040 | |
Intersegment sales | | | 339,436 | | | | — | | | | 339,436 | |
| | | | | | | | | | | | |
| | | 405,145 | | | | 27,331 | | | | 432,476 | |
Production costs excluding taxes | | | (60,354 | ) | | | (2,903 | ) | | | (63,257 | ) |
Exploration expenses | | | (19,703 | ) | | | (1,253 | ) | | | (20,956 | ) |
Depreciation, depletion and amortisation | | | (34,893 | ) | | | (2,129 | ) | | | (37,022 | ) |
Taxes other than income taxes | | | (56,081 | ) | | | (473 | ) | | | (56,554 | ) |
Accretion expense | | | (1,108 | ) | | | (94 | ) | | | (1,202 | ) |
Income taxes | | | (51,487 | ) | | | (6,758 | ) | | | (58,245 | ) |
| | | | | | | | | | | | |
Results of operations from producing activities | | | 181,519 | | | | 13,721 | | | | 195,240 | |
| | | | | | | | | | | | |
Equity method investments | | | | | | | | | | | | |
Share of profit for producing activities of associates and jointly controlled entities | | | — | | | | 5,244 | | | | 5,244 | |
| | | | | | | | | | | | |
Total of the Group and equity method investments results of operations for producing activities | | | 181,519 | | | | 18,965 | | | | 200,484 | |
| | | | | | | | | | | | |
F-54
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
Standardised Measure of Discounted Future Net Cash Flows
The standardizedstandardised 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, 2004, 20052009, 2008 and 20062007 is as follows (in millions of RMB):follows:
| | | | |
| | RMB | |
|
The Group | | | | |
At December 31, 20042009 | | | | |
Future cash inflows from sales of oil and gas | | | 4,046,1515,045,994 | |
Future production costs | | | (912,8811,628,794 | ) |
Future development costs | | | (106,332479,912 | ) |
Future income tax expense | | | (934,068615,290 | ) |
| | | | |
Future net cash flows | | | 2,092,8702,321,998 | |
Discount at 10% for estimated timing of cash flows | | | (1,092,4121,244,183 | ) |
| | | | |
StandardizedStandardised measure of discounted future net cash flows | | | 1,000,4581,077,815 | |
| | | | |
F-76
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED) — (Continued)
(Amounts in millions unless otherwise stated)
| | | | |
| | RMB | |
|
The Group | | | | |
At December 31, 20052008 | | | | |
Future cash inflows from sales of oil and gas | | | 5,337,3294,426,893 | |
Future production costs | | | (1,043,3581,521,416 | ) |
Future development costs | | | (156,575381,498 | ) |
Future income tax expense | | | (1,279,133522,158 | ) |
| | | | |
Future net cash flows | | | 2,858,2632,001,821 | |
Discount at 10% for estimated timing of cash flows | | | (1,472,0691,046,896 | ) |
| | | | |
StandardizedStandardised measure of discounted future net cash flows | | | 1,386,194954,925 | |
| | | | |
| | | | |
| | RMB | |
|
The Group | | | | |
At December 31, 20062007 | | | | |
Future cash inflows from sales of oil and gas | | | 5,611,3068,714,483 | |
Future production costs | | | (1,620,7613,049,226 | ) |
Future development costs | | | (296,175437,946 | ) |
Future income tax expense | | | (1,202,9801,569,898 | ) |
| | | | |
Future net cash flows | | | 2,491,3903,657,413 | |
Discount at 10% for estimated timing of cash flows | | | (1,336,0451,835,343 | ) |
| | | | |
StandardizedStandardised measure of discounted future net cash flows | | | 1,155,3451,822,070 | |
| | | | |
Share of equity affiliates’ and jointly controlled entities’ standardized |
At December 31, 2009, RMB 1,041,228 (2008: RMB 924,623, 2007: RMB 1,709,411) of standardised measure of discounted future net cash flows related to proved oil and gas reserves located within mainland China and RMB 36,587 (2008: RMB 30,302, 2007: RMB 112,659) of standardised measure of discounted future net cash flows related to proved oil and gas reserves located overseas.
F-55
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS EXPLORATION AND
PRODUCTION ACTIVITIES (UNAUDITED)
(Amounts in millions unless otherwise stated)
Share of standardised measure of discounted future net cash flows of associates and jointly controlled entities:
| | | | |
| At December 31, 20042009 | | | 10,85126,457 | |
| At December 31, 20052008 | | | 31,70317,912 | |
| At December 31, 20062007 | | | 59,82533,543 | |
Future net cash flows were estimated using period-end prices used in estimating the Group’s proved oil and gas reserves and year-end costs, and currently enacted tax rates.rates related to existing proved oil and gas reserves.
F-77
PETROCHINA COMPANY LIMITED
SUPPLEMENTARY INFORMATION ON OIL AND GAS PRODUCING
ACTIVITIES (UNAUDITED) — (Continued)
(AmountsChanges in millions unless otherwise stated)Standardised Measure of Discounted Future Net Cash Flows
Changes in the standardizedstandardised measure of discounted net cash flows for the Group for each of the three years ended December 31, 2004, 20052009, 2008 and 20062007 are as follows:
| | | | | | | | | | | | | |
| | Year Ended December 31, | |
| | | |
| | 2004 | | | 2005 | | | 2006 | |
| | | | | | | | | |
| | RMB | | | RMB | | | RMB | |
CHANGES IN STANDARDISED MEASURE OF DISCOUNTED FUTURE CASH FLOWS | | | | | | | | | | | | |
| Beginning of year | | | 715,114 | | | | 1,000,458 | | | | 1,386,194 | |
| Sales and transfers of oil and gas produced, net of production costs | | | (187,020 | ) | | | (274,921 | ) | | | (328,001 | ) |
| Net changes in prices and production costs and other | | | 366,417 | | | | 523,089 | | | | (317,593 | ) |
| Extensions, discoveries and improved recovery | | | 119,790 | | | | 157,343 | | | | 166,249 | |
| Development costs incurred | | | 14,829 | | | | (11,282 | ) | | | (47,551 | ) |
| Revisions of previous quantity estimates | | | 13,420 | | | | 21,678 | | | | 32,306 | |
| Accretion of discount | | | 101,787 | | | | 144,709 | | | | 200,771 | |
| Net change in income taxes | | | (143,879 | ) | | | (174,880 | ) | | | 62,970 | |
| | | | | | | | | |
| End of year | | | 1,000,458 | | | | 1,386,194 | | | | 1,155,345 | |
| | | | | | | | | |
| | | | | | | | | | | | |
| | Year Ended December 31 | |
| | 2009 | | | 2008 | | | 2007 | |
| | RMB | | | RMB | | | RMB | |
|
The Group | | | | | | | | | | | | |
Beginning of the year | | | 954,925 | | | | 1,822,070 | | | | 1,155,345 | |
Sales and transfers of oil and gas produced, net of production costs | | | (242,363 | ) | | | (375,269 | ) | | | (309,269 | ) |
Net changes in prices and production costs and other | | | 171,170 | | | | (1,448,443 | ) | | | 804,330 | |
Extensions, discoveries and improved recovery | | | 150,846 | | | | 139,058 | | | | 256,476 | |
Development costs incurred | | | (8,488 | ) | | | 67,673 | | | | (39,031 | ) |
Revisions of previous quantity estimates | | | (31,516 | ) | | | (46,105 | ) | | | (3,567 | ) |
Accretion of discount | | | 120,396 | | | | 260,643 | | | | 171,389 | |
Net change in income taxes | | | (37,155 | ) | | | 535,298 | | | | (213,603 | ) |
| | | | | | | | | | | | |
End of the year | | | 1,077,815 | | | | 954,925 | | | | 1,822,070 | |
| | | | | | | | | | | | |
F-56
F-78