PetroChina Maintained Production and Operations

Source: 3/25/2010, Location: Asia

PetroChina Company Limited announced that, as of 31 December, 2009, the Company recorded net profit attributable to the owners of the Company of RMB103.39 billion, representing a decrease of 9.7% when compared to 2008 according to International Financial Reporting Standards (“IFRS”), or RMB103.17 billion, representing a decrease of 9.4% when compared to 2008 according to China Accounting Standards (“CAS”), despite a year-on-year decrease of 38.4% in the crude oil price.

In 2009, as per IFRS, the Company realized a turnover of RMB1,020 billion, and basic earnings of RMB0.56 per share. According to the resolution of the Board of Directors, the Company will distribute 45% of net profit under IFRS as dividend. The proposed final dividend is RMB0.13003 per share. The proposed total dividend for 2009 is RMB0.25420 per share, including the interim dividend of RMB0.12417.

In 2009, the Company experienced substantial challenges. In the face of the serious impact posed by the international financial crisis, the management calmly analyzed and responded to the situation with a series of effective measures. Firstly, we correctly analyzed the situation, which ensured we could grasp opportunities in difficult situations and overcome difficulties.

Secondly, according to the principle of “Market Oriented and Efficiency Focused” and based on market demand and price changes, we properly arranged for oilfield production limits and restoration, allocated the processing quantity of crude oil scientifically, shut down low-efficiency and ineffective facilities, and realized a comprehensive balance among production, transportation, sales and storage.

Thirdly, we strengthened control on investment, ensured investment in certain projects and reduced investment in others, optimized the investment structure, and increased the return on investment. Fourthly, we seized the opportunities for development, accelerated adjustments to the layout and structure of our businesses, and made efforts to achieve major breakthroughs in international oil and gas cooperation, construction of cross border pipelines, adjustment to refining and chemical sectors, and building of oil and gas reserve capacity.

Fifthly, we implemented refined management procedures, conducted our activities under the theme of “Diligence and Frugality, Tapping Potential and Efficiency Improvement,” and strictly controlled production costs and non-production expenditures. These measures have achieved good results. The production and operation of the Company were maintained at a smooth and sound state, and the operating environment improved during the year, while the performance indicators for 2009 were better than expected at the beginning of the year.

Exploration and Production
In 2009, giving prominence to exploration of oil and gas, the Company continued to implement the "High Growth in Oil and Gas Reserves" Program, with a number of strategic discoveries and great results achieved in major exploration areas. For domestic oil and gas exploration, significant discoveries were made in Erdos Basin, Hailar-Tamsag Basin, Tarim Basin, Junggar Basin, Sichuan Basin, Songliao Basin, Bohai Bay Basin and Qaidam Basin, all showing favorable prospects. As reviewed by an independent reserve appraisal agency, the Company achieved oil and gas reserve replacement ratio of 1.32.

For oil and gas field development and production, the Company kept up with the changing market to optimize the yield structure and capacity construction, strengthened the investment cost management and shrank the output of some low-efficiency blocks. Thus, the oil and gas production was kept safe, stable and effective. In 2009, the total crude production was 840 million barrels, down 3.1% year-on-year; the marketable gas production was 2,100 billion cubic feet, up 13.3% year-on-year continuing fast growth; the total annual oil and gas production was 1.196 billion barrels, up 1.2% year-on-year.

The exploration and production segment realized operating profit of RMB105.02 billion, despite a sharp drop in the oil price year-on-year. It remains a key source of profit of the Company.

Refining and Chemicals
In 2009, faced with a changing market, the Company adjusted the refining and chemical output as planned, deepened benchmarking management, arranged the commissioning of additional plants in an orderly manner and actively promoted the overall optimization of resources. As a result, the segment achieved sustainable and stable development. During the year, the total crude oil processing was 112 million tons, down 2.5% year-on-year, and the petrochemical production was 17.2 million tons, up 5.7% year-on-year.

For the refining and chemicals segment, significant progress was achieved in construction of key projects. For instance, the 10-million-ton refining and 1-million-ton ethylene Dushanzi Petrochemical project, the largest integrated refining & chemical project in China, was completed and has commenced production; the 10-million-ton Guangxi Petrochemical refining facility and the major Urumqi Petrochemical aromatic hydrocarbon facility were basically completed; the 10-million-ton integrated refining and chemical Sichuan Petrochemical project and ethylene processing projects of Fushun and Daqing Petrochemical were progressing smoothly.

The refining and chemicals segment realized an operating profit of RMB17.3 billion, or an increase of RMB111.1 billion from the previous year.

In 2009, against the stress of shrinking market demand and decrease in the sale of oil products, the Company enhanced terminal marketing, explored institutional users, expanded its marketing network construction and accelerated the construction of storage facilities, to increase the sales volume of oil products, with market share rising steadily. The sales of oil products for the year exceeded 100 million tons, up 12.2% year-on-year, and the retail market share increased by 0.7 percentage points to 38.2%.

The marketing segment realized operating profit of RMB13.27 billion, up 66.2% year-on-year.

Natural Gas and Pipeline
In 2009, the Company achieved major breakthroughs in the construction of oil and gas pipelines, and maintained fast development of natural gas operations. Line A in Phase 1 of the Central-Asia Natural Gas Pipeline, the first onshore channel to import natural gas from beyond China, was completed and became operational. The construction of the Sino-Russia Crude Oil Pipeline was fully commenced. The West Section of the Second West-East Gas Pipeline, the Lanzhou-Zhengzhou-Wuhan section of the Lanzhou-Zhengzhou-Changsha Refined Product Pipeline, the Yongqing-Tangshan-Qinhuangdao Gas Transmission Pipeline, the Transmission Capacity Increasing Projects for the First West-East Gas Pipeline and the Second Shaanxi-Beijing Gas Pipeline were completed and put into operation.

For natural gas marketing, by taking the advantages of pipeline networking, the Company strengthened the balance of production, transportation and marketing. In the whole year, total natural gas sales was 59.6 bcm, up 16.8% year-on-year, ensuring safe and stable supply to civil public utilities and key industrial users.

The natural gas and pipeline segment realized an operating profit of RMB19.05 billion, up 18.6% year-on-year.

International Business
In 2009, for overseas oil and gas businesses, the Company responded actively to the challenges arising from the global financial crisis. The Company pushed forward steadily the overseas cooperation of oil and gas, and achieved continuous operation expansion internationally and promising development in international trades.

The Company successively won the development projects for the Rumaila Oilfield and Halfaya Oilfield in Iraq, highlighting new and significant breakthroughs in cooperation with the Middle East for oil and gas development. A number of agreements for oil and gas cooperation were signed with oil and gas companies in Turkmenistan, Kazakhstan, Uzbekistan and Russia to enlarge resource bases for cross border oil and gas pipelines. The Company signed an agreement with Canadian Athabasca Oil Sands Corporation to jointly develop oil sands projects, for which the closing was completed on 11 February 2010, marking new progress in unconventional energy resources. The successful acquisition of Singapore Petroleum Company Limited provided a new platform for international operations. A series of discoveries were made in overseas oil and gas venture exploration in Chad, Niger, Algeria and Kazakhstan, booking much more reserves.

In the whole year, net oil and gas production of overseas businesses was 104 million barrels, up 13% year-on-year, accounting for 8.7% of the Company’s total production.

Outlook for 2010
In 2010, the Chinese economy still faces a complex economic development climate. The growth of the national economy and adjustments in industrial policies will bring new opportunities and challenges to the oil and gas industry. The state reforms, e.g. improving the oil products pricing mechanism, carrying out natural gas price reform, and launching the resource tax in proper time, will create a more regulated environment for the Company’s development.

PetroChina has a good foundation for sustainable development and is standing in front of an important strategic opportunity. The Company will continue to execute the strategy on resources, marketing and internationalization actively, give full play to the market orientation, focus on the efficiency and endeavor to maintain stable and fast development.

The Company will actively respond to changes in the business environment at home and abroad, and make all efforts to meet the business goals identified by the Board of Directors. We will reduce costs, improve efficiency and promote scientific and management innovation, safety, environmental protection, energy conservation and emission reduction, with higher confidence and more effective measures. In this way, we will strive to realize better and faster development, improve our overall strength, international competitiveness and sustainability in development, and repay our shareholders and the society with better results.

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