1.1 The Board of Directors of PetroChina Company Limited (the “Company”), the Supervisory Committee and the Directors, Supervisors and Senior Management of the Company warrant that there are no material omissions from, or misrepresentation or misleading statements contained in this announcement, and jointly and severally accept full responsibility for the truthfulness, accuracy and completeness of the information contained in this announcement. This announcement is a summary of the 2007 Annual Report. Full version of the 2007 Annual Report can be downloaded from the websites of the Shanghai Stock Exchange (website: http://www.sse.com.cn), The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) (website: http://www.hkex.com.hk) and the Company (website: http://www.petrochina.com.cn). Investors should read the 2007 Annual Report carefully for more details.

1.2 The 2007 Annual Report has been approved unanimously at the tenth meeting of the Third Session of the Board. No Director has any doubt as to, or the inability to warrant, the truthfulness, accuracy and completeness of the 2007 Annual Report.

1.3 Mr Duan Wende, Director of the Company, was absent from the tenth meeting of the Third Session of the Board. Mr Duan Wende authorised in writing Mr Zhou Jiping to attend this meeting by proxy and to exercise his voting rights on his behalf.

1.4 The financial statements of the Company and its subsidiaries (the “Group”) for the year ended December 31, 2007 prepared in accordance with the Basic Standard and 38 specific standards of Accounting Standards for Business Enterprises issued by the Ministry of Finance (the “MOF”) on February 15, 2006, Application Guidance of Accounting Standard for Business Enterprises, Interpretation of Accounting Standards for Business Enterprises 2 and other regulations issued thereafter (hereafter referred to as the “Accounting Standard for Business Enterprises”, “China Accounting Standards” or “CAS”) and the International Financial Reporting Standards (“IFRS”) have been audited by PricewaterhouseCoopers Zhong Tian CPAs Limited Company and PricewaterhouseCoopers, respectively, and both firms have issued unqualified opinions on the financial statements.

1.5 Mr Jiang Jiemin, Chairman of the Board and President of the Company, and Mr Zhou Mingchun, Chief Financial Officer and Head of the Finance Department of the Company, warrant the truthfulness and completeness of the financial statements in the 2007 Annual Report.

Stock name PetroChina PetroChina PetroChina

Stock code 857 PTR 601857

Place of listing Hong Kong Stock Exchange The New York Stock Exchange, Inc Shanghai Stock Exchange

Registered address and office address World Tower, 16 Andelu, Dongcheng District, Beijing, PRC

Postal code 100011

Website http://www.petrochina.com.cn

Email address xwzou@petrochina.com.cn

Name Li Huaiqi Liang Gang Mao Zefeng

Address World Tower, 16 Andelu, Dongcheng District, Beijing, PRC

Postal code 100011

Telephone 86 (10)8488 6270 86 (10)8488 6959 (852) 2899 2010

Facsimile 86 (10)8488 6260 86 (10)8488 6260 (852) 2899 2390

Email address xwzou@petrochina.com.cn liangg@petrochina.com.cn hko@petrochina.com.hk

Total assets 1,060,131 872,163 21.6 778,067

Equity attributable to equity holders of the Company 677,367 541,467 25.1 476,238

Net assets per  hare attributable to equity holders of the Company 3.70 3.02 22.5 2.66

3.2.3 Non-recurring profit/loss item

√ Applicable □ Not applicable

□ Applicable √ Not applicable

√ Applicable □ Not applicable

III Total Shares 179,020,977,818 100.00 +4,000,000,000 - - - +4,000,000,000 183,020,977,818 100.00

Changes in Shares with Selling Restrictions Unit: Shares

The number of shareholders of the Company as at December 31, 2007 was 1,883,990, including 1,879,207 holders of A shares and 4,783 holders of H shares (including holders of the American Depository Shares). The public float of the Company satisfied the requirements of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (the “Listing Rules”).

4.2.1 Shareholdings of the top ten shareholders Unit: Shares

CNPC(1) State-owned shares 86.29 157,922,077,818 157,922,077,818 0 HKSCC Nominees Limited(2) H shares 11.44 20,937,754,152 0 0 China Life Insurance (Group) Company- Traditional- Ordinary Insurance Product(3) A shares 0.031 56,797,000 25,069,000 0

China Life Insurance Company Limited - Dividends - Personal Dividends - 005L - FH002 Shanghai(3) A shares 0.016 30,238,570 25,069,000 0 China Life Insurance Company Limited - Traditional - Ordinary Insurance Product - 005L - CT001 Shanghai(3) A shares 0.014 25,069,000 25,069,000 0 China Life Insurance Company Limited - Dividends - Group Dividends - 005L - FH001 Shanghai(3) A shares 0.014 25,069,000 25,069,000 0 Ping An Life Insurance Company of China, Ltd. - Traditional - Ordinary Insurance Products(3) A shares 0.014 25,069,000 25,069,000 0 New China Life Insurance Company Limited-Dividends- Group Dividends-018L FH001 Shanghai(3) A shares 0.014 25,069,000 25,069,000 0 Ping An Life Insurance Company of China, Ltd. - Proprietary Funds(3) A shares 0.014 25,069,000   ,069,000 0 Ping An Life Insurance Company of China, Ltd.-Dividends- Personal Insurance Dividends(3) A shares 0.014 25,069,000 25,069,000 0

Note 1: CNPC is a substantial shareholder within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “Securities and Futures Ordinance”) whose interest is recorded in the register of interests in shares and short positions kept by the Company pursuant to Section 336 of the Securities and Futures Ordinance.

Note 2: HKSCC Nominees Limited is a subsidiary of the Hong Kong Stock Exchange and its principal business is to act as nominee on behalf of shareholders.

3 Bank of China －Shanghai and Shenzhen 300 Index Jiashi Securities Investment Fund 14,035,426 A shares

4 China Construction Bank － Boshi Yufu Securities Investment Fund 12,626,642 A shares

5 China Pacific Insurance (Group) Co., Ltd. －Group Level－Proprietary Funds －012G－ZY001 Shanghai 7,387,982 A shares 6 Ling Foo Sang and Wong Ngar Kum 6,912,000 H shares 7 Tongde Securities  Investment Fund 6,906,951 A shares 8 Baosteel Co., Ltd. 6,440,000 A shares 9 Sinochem Corporation 5,819,000 A shares

China Life Insurance Company Limited －Dividends－ Personal Dividends－005L－FH002 Shanghai 5,169,570 A shares Statement on the connection or activities acting in concert among the above-mentioned shareholders: Except for China Life Insurance (Group) Company-Traditional-Ordinary Insurance Products, China Life Insurance Company Limited - Dividends - Personal Dividends- 005L-FH002 Shanghai, China Life Insurance Company Limited- Traditional-Ordinary Insurance Product-005L-CT001 Shanghai and China Life Insurance Company Limited- Dividends-Group Dividends-005L-FH001 Shanghai, all of which are under the management of China Life Insurance Asset Management Co., Ltd and Ping An Life Insurance Company of China, Ltd.-Traditional-Ordinary Insurance Products, Ping An Life Insurance Company of China, Ltd.-Proprietary Funds and Ping An Life Insurance Company of China, Ltd.-Dividends- Personal Insurance Dividends, all of which are under the management of Ping An Asset Management Co. Ltd., the Company is not aware of any connection among or between the top ten shareholders and top ten shareholders of shares without selling restrictions or that they are persons acting in concert as provided for in the Measures for the Administration of Acquisitions by Listed Companies.

UBS AG (Note) 1,089,453,631 (L) 414,468,390 (S) 5.16 (L) 1.96 (S) 0.60 0.23

4.3 Information on Controlling Shareholder and the Ultimate Controller

□ Applicable √ Not applicable

4.3.2 Information on controlling shareholder and the ultimate controller The controlling shareholder of the Company is CNPC which was established in July 1998. CNPC is a petroleum and petrochemical conglomerate that was formed in the wake of the restructuring launched by the State Council to restructure the predecessor of CNPC, China National Petroleum Company (中國石油天然氣總公司). CNPC is also a state-authorised investment corporation and state-owned enterprise and its registered capital is RMB240,440.02 million. Its legal representative is Mr Jiang Jiemin. CNPC is an integrated energy corporation with businesses covering oil and gas exploration and development, refining and petrochemical, oil product marketing, oil and gas storage and transportation, oil trading, engineering and technical services and petroleum equipment manufacturing. CNPC is the ultimate controller of the Company.

4.3.3 The equity interest structure and controlling relationship between the Company and the ultimate controller CNPC PetroChina Company Limited 86.29%

Jiang Jiemin(1) M 52 Chairman and President 2007.05- 2010.05 916 No 0 0

Duan Wende(1) M 56 Executive Director/ Senior Vice President 2007.05- 2010.05 824 No 0 0

5.1.2 Information on current Supervisors

Each member of the senior management of the Company (including the executive Directors and Supervisors) has entered into a performance appraisal agreement with the Company. The remuneration policy of the senior management of the Company links the financial interest of the senior management with the operating results of the Company and the performance of the Company’s shares in the market.

In 2007, domestic refined product prices were still under the macro economic controls of the PRC Government, resulting in such prices were lower than the prices in the international market. Annual average ex-factory prices of domestic gasoline and diesel were RMB5,071 per ton and RMB4,653 per ton respectively, being RMB1,225 and RMB1,513 lower than the CIF per ton prices quoted in the Singapore market, respectively, while the maximum price difference reaching over RMB2,000 per ton in 2007. During the second half of 2007, international crude 15 oil prices rocketed and as a result, domestic refineries incurred heavy losses in processing. Production ceased in certain local refineries. Supply in the refined products market was once very tight. On November 1, 2007, the PRC Government raised the ex-factory prices of gasoline, diesel and aviation fuel by RMB500 per ton. Balance of demand and supply was basically restored after such price increase. According to the relevant information, nominal consumption of domestic refined products increased by 6.9% to 186 million tons in 2007.

In 2007, the Group stepped up oil and gas exploration in the PRC. Major breakthroughs of strategic significance were achieved through further geological research and emphasis on the application of new technologies, and concerted efforts on oil and gas exploration activities. In 16 particular, the Company discovered the Jidong Nanpu Oilfield which is with relatively high crude oil reserves. Moreover, significant progress was achieved during the oil and gas exploration in the Sichuan Basin, the Erdos Basin, the Songliao Basin and the Tarim Basin. With a better composition of orderly managed reserves, the Company has entered into the peak in the growth of reserves. In respect of overseas oil and gas exploration, new progress was made with discovery of relatively high reserves in regions including Chad and Kazakhstan. In 2007, the Group achieved crude oil reserve replacement ratio of 1.104 and natural gas reserve replacement ratio of 3.238. In the development of domestic oilfields, the policy of “steady development in the east, and rapid development in the west” was upheld. New ways in the exploration of oilfield and natural gas fields were actively adopted. The Company has extensively initiated works for the secondary recovery of mature oilfields so as to maintaining a steady oil and gas production through the deployment of various comprehensive measures including deepening fine reservoir characterisation, stabilising oil production by water-cut control, tertiary oil recovery and so forth, as well as actively promoting sophisticated technologies such as horizontal application and under-balanced drilling. The foundation for oil stabilization in the mature oilfields has been consolidated. The Company has also conducted overall assessment, planning and development building up the production capacity in new fields. In respect of regions outside China, various measures were adopted to slow down the reduction in the productivity of mature oilfields, strengthen the organisational operation and management of drilling and maintenance of wells and enhance the productivity of newly discovered wells. Through the above measures, in 2007, the total crude oil and natural gas output of the Group was 1,110.0 million barrels of oil equivalent, including 838.8 million barrels of crude oil and 1,627.0 billion cubic feet of marketable natural gas. In 2007, the lifting cost for the oil and gas operations of the Group was US$7.75 per barrel, representing an increase of 15.0% from US$6.74 per barrel in 2006.

In 2007, faced with the growing demand in the market, the Group organised refining processing meticulously, scientifically modified refining arrangements, and optimised allocation of resources actively. Safe, steady, long-term, full-load and optimised production was achieved resulting from improvement of the production control management system. Crude oil processing and production of key refined products reached a historically high level. In order to react to changes in the sales market proactively, resources were organised through various means. Production, transportation and distribution arrangements were enhanced and better coordinated. Allocation of resources was optimised. The scale of sales to end-users was expanded. The level of retail sales management and the quality of services were enhanced continuously. All these have paved the way to form a strongly focused and highly efficient nationwide distribution network throughout the PRC, thereby ensuring a gradual stable market supply. The Group’s refineries processed 823.6 million barrels of crude oil, approximately 80% of which was supplied by the Exploration and Production segment. The Group produced approximately 71.38 million tons of gasoline, diesel and kerosene and sold approximately 85.74 million tons of these products. The cash processing cost of the Group’s refineries decreasedfrom RMB169 per ton in 2006 to RMB155 per ton in 2007.

Turnover Turnover increased 21.2% from RMB688,978 million for the twelve months ended December 31, 2006 to RMB835,037 million for the twelve months ended December 31, 2007. This was primarily due to the increases in the selling prices and changes in the sales volume of major products including crude oil, natural gas and refined products, and the efforts made by the Group in expanding resources and developing markets by making use of the opportunities presented by persistently high prices in crude oil and petrochemical products in  the international market. In addition, the increase of the sales of oil and gas products during the  year also increased the turnover of the Group. The table below sets out the external sales volume and average realised prices for major products sold by the Group for 2006 and 2007 and percentages of change in the sales volume and average realised prices during these two years.

Crude oil* 18,730 20,066 (6.7) 3,594 3,487 3.1

Operating Expenses Operating expenses increased 29.4% from RMB491,002 million for the twelve months ended December 31, 2006 to RMB635,182 million for the twelve months ended December 31, 2007, of which:

Purchases, Services and Other Expenses Purchases, services and other expenses increased 36.7% from RMB271,123 million for the twelve months ended December 31, 2006 to RMB370,740 million for the twelve months ended December 31, 2007. This was primarily due to (1) an increase in the purchase prices and purchase volume of crude oil, feedstock oil and refined products from external suppliers that resulted in the increase in the purchase costs; and (2) an increase in the lifting costs of oil and gas operations and the processing cost of the Group’s refineries that resulted from the increase in prices of raw materials, fuel, energy and other production materials in the PRC as well as an expansion of the production scale of the Group. In addition, the increase in the purchase expenses also resulted from an increase in the refined product supply operations in 2007.

Employee Compensation Costs The remuneration paid by the Group in cash rose 15.3% or increased RMB3,752 million from RMB24,538 million to RMB28,290 million for 2007. Other employees’ costs increased RMB7,703 million from RMB14,623 million to RMB22,326 million for 2007. As a result of the above increment, employees’ compensation costs and benefits increased RMB11,455 million. This was primarily due to (1) an increase in the level of salaries and performance bonuses as a result of growth in the performance of the Group and the increase in the commodity price; (2) an increase in the employees’ compensation costs that resulted from the expansion of the scale of operations and the retail network of the Group; and (3) a sequential increase in the welfare expenses as a result of an increase in the salaries.

Exploration Expenses Exploration expenses increased 9.7% from RMB18,822 million for the twelve months ended December 31, 2006 to RMB20,648 million for the twelve months ended December 31, 2007. To further boost crude oil and natural gas resources, the Group undertook more exploration activities for crude oil and natural gas.

Depreciation, Depletion and Amortisation Depreciation, depletion and amortisation increased 8.5% from RMB61,388 million for the twelve months ended December 31, 2006 to RMB66,625 million for the twelve months ended December 31, 2007. This was primarily due to an increase in depreciation, depletion and amortisation that resulted from an increase in the average amount of property, plant and equipment and the average net value of oil and gas properties during 2007.

Selling, General and Administrative Expenses Selling, general and administrative expenses increased 19.3% from RMB43,235 million for the twelve months ended December 31 2006 to RMB51,576 million for the twelve months ended December 31, 2007. This was primarily due to an increase in transportation, leasing, maintenance and other related costs that resulted from expansion in the production scale and business development.

Taxes other than Income Taxes Taxes other than income taxes increased 30.1% from RMB56,666 million for the twelve months ended December 31, 2006 to RMB73,712 million for the twelve months ended December 31, 2007. The increase was primarily due to a sharp increase in the payment of the special levy on the sale of domestic crude oil by the Group as international crude oil prices remained high throughout 2007.

Profit from Operations As a result of the factors discussed above, profit from operations increased 0.9% from RMB197,976 million for the twelve months ended December 31, 2006 to RMB199,855 million for the twelve months ended December 31, 2007.

Net Exchange Loss For the twelve months ended December 31, 2007, a net exchange loss of RMB866 million was recorded. For the twelve months ended December 31, 2006, there was net exchange gain of RMB74 million. The increase in the net exchange loss was primarily due to a combination of the effects of the appreciation of Renminbi against the United States Dollar and other currencies.

Net Interest Expenses Net interest expenses increased 39.1% from RMB1,154 million for the twelve months ended December 31, 2006 to RMB1,605 million for the twelve months ended December 31, 2007. The increase in net interest expenses was primarily due to an increase in interest expenses recognised as a result of the accretion expense in relation to asset retirement obligations.

Profit Before Taxation Profit before taxation rose by 2.6% from RMB199,173 million for the twelve months ended December 31, 2006 to RMB204,381 million for the twelve months ended December 31, 2007.

Taxation Taxation decreased 1.3% from RMB49,776 million for the twelve months ended December 31, 2006 to RMB49,152 million for the twelve months ended December 31, 2007. The decrease was primarily due to a reduction in the income tax of the Group for the twelve months ended December 31, 2007 as the Group reassessed its deferred taxes based on the enacted corporate income tax rate under the Corporate Income Tax Law of the PRC which came into effect on January 1, 2008.

Net Profit As a result of the factors discussed above, net profit increased 2.4% from RMB142,224 million for the twelve months ended December 31, 2006 to RMB145,625 million for the twelve months ended December 31, 2007.

Profit from operations decreased 6.0% from RMB219,860 million for the twelve months ended December 31, 2006 to RMB206,587 million for the twelve months ended December 31, 2007. The Exploration and Production segment remains the main source of profit of the Group.

Operating expenses increased 22.1% from RMB77,733 million for the twelve months ended December 31, 2006 to RMB94,887 million for the twelve months ended December 31, 2007. The increase was primarily due to an increase in the purchase costs for direct materials and selling, general and administrative expenses.

Profit from operations increased 39.0% from RMB8,986 million for the twelve months ended December 31, 2006 to RMB12,495 million for the twelve months ended December 31, 2007. The natural gas and pipeline business grew rapidly and has become a new profit growth engine of the Group.

Total assets amounted to RMB1,060,131 million, representing an increase of 21.6% from that at the end of 2006, of which: Current assets amounted to RMB231,175 million, representing an increase of 42.5% from the current assets as at the end of 2006. The increase in the current assets was primarily due to: an increase in cash, cash equivalents and time deposits with maturities over three months but within one year in the aggregate amount of RMB31,965 million resulting from a combinationeffect of the issuance of A shares by the Company and an increase in the investment activities expenditures of the Company; an increase in inventories of an amount of RMB12,429 million as a result of rising prices and volume of inventories; an increase in accounts receivable in the amount of RMB9,931 million as a result of the development of the principal operations and the increase in income from the principal operations of the Group and an increase in advances in the amount of RMB12,737 million as a result of an increase in investment expenditures. Non-current assets amounted to RMB828,956 million, representing an increase of 16.8% from the non-current assets as at the end of 2006. The increase in non-current assets was primarily due to an increase in capital expenditures, resulting in an increase in property, plant and equipment (including fixed assets, oil and gas properties etc.) in the amount of RMB117,545 million. Total liabilities amounted to RMB283,784 million, representing an increase of 11.5% from the total liabilities as at the end of 2006, of which: Current liabilities amounted to RMB198,095 million, representing an increase of 10.1% from the current liabilities as at the end of 2006. The increase in current liabilities was primarily due to an increase in procurement expenditure that resulted in an increase in accounts payable and accrued liabilities of RMB24,171 million. Non-current liabilities amounted to RMB85,689 million, representing an increase of 14.7% from the non-current liabilities as at the end of 2006. The increase in non-current liabilities was primarily due to an increase in estimated liabilities of RMB6,280 million in relation to assets retirement obligations, and an increase in long-term borrowings of RMB4,054 million. Equity attributable to the equity holders of the Company amounted to RMB733,405 million, representing an increase of 25.0% from the equity attributable to equity holders of the Company as at the end of 2006. The increase in equity attributable to the Company’s equity holders was primarily due to an increase in the amount of the retained earnings and the issuance of A shares resulting in an increase in the share capital and reserves.

(4) Cash Flows

The net cash flows of the Group generated from operating activities for the twelve months ended December 31, 2007 was RMB203,748 million, representing an increase of 2.9% compared with RMB198,102 million generated for the twelve months ended December 31, 2006. As at December 31, 2007, the Group had cash and cash equivalents of RMB65,494 million. The cash and cash equivalents were mainly denominated in Renminbi (approximately 88.9% were denominated in Renminbi, and approximately 11.1% were denominated in United States Dollars).

Of the total borrowings of the Group as at December 31, 2007, approximately 17.0% were fixed-rate loans and approximately 83.0% were floating-rate loans. Of the borrowings as at December 31, 2007, approximately 67.4% were denominated in Renminbi, approximately 28.8% were denominated in United States Dollars, approximately 2.8% were denominated in Hong Kong Dollars, approximately 0.6% were denominated in Singapore Dollars, approximately 0.3% were denominated in Euro and approximately 0.1% were denominated in Japanese Yen. As at December 31, 2007, the gearing ratio of the Group (gearing ratio = interest-bearing debts/(interest-bearing debts + total equity)) was 8.3% (10.4% as at December 31, 2006).

Exploration and Production 134,256* 73.94 105,192* 70.72 132,300* 63.64

* If investments related to geological and geophysical exploration costs were included, the capital expenditures and investments for the Exploration and Production segment for 2006 and 2007, and the estimates for the same in 2008 would be RMB114,520 million, RMB145,743 million and RMB143,200 million, respectively.

The majority of the Group’s capital expenditures were related to the Exploration and Production segment. For the twelve months ended December 31, 2007, capital expenditures in relation to the Exploration and Production segment amounted to RMB134,256 million, including RMB23,914 million for oil and gas exploration activities and RMB91,463 million for oil and gas development activities. The increase in capital expenditures was primarily due to an increase in expenditures relating to oil and gas exploration and development of new proven oilfields and gas fields which reflects the Group’s goal to boost reserves and achieve steady growth of oil and gas output. The Group anticipates that capital expenditures for the Exploration and Production segment for 2008 will amount to RMB132,300 million. Approximately RMB24,200 million will be used for oil and gas exploration, and RMB90,500 million will be used for oil and gas development. Exploration and development activities will mainly emphasise the overall control of Jidong Nanpu region and other regions. Construction of new proven oilfields and gas fields ill be carried out, while secondary recovery of and steady production of mature oilfields will also be emphasised.

Capital expenditures in the Natural Gas and Pipeline segment for the twelve months ended December 31, 2007 amounted to RMB11,003 million. The Group incurred RMB8,980 million of these expenditures on the construction of long distance pipelines. The Group anticipates that capital expenditures for the Natural Gas and Pipeline segment for 2008 will amount to RMB37,700 million, which are expected to be used primarily for main oil and gas transmission projects such as the Lanzhou-Zhengzhou-Changsha refined oil pipeline project, the Second West-East Gas Pipeline project and associated gas storage  acilities and LNG projects.

Net profit attributable to equity holders of the Company 134,574 136,229

Total 994,092 815,144 22.0

Looking forward in 2008, the global economy will hopefully maintain steady growth, and the Chinese economy will maintain its rapid growth momentum. These will continue to fuel the demand for oil and natural gas and petrochemical products. Government regulations will become more stringent. The public will be more concerned with changes in crude oil prices and stability in oil and gas supply. Confronted with complicated and ever changing external environment, and ever increasing market competition, the Group will seek new growth engines positively in order to achieve good and rapid business developments, and continue to implement the three main strategies in the areas of resources, marketing and internationalisation of operations. The Group will continue to place top priority on resources exploration and development and further consolidate its leading position of the upstream business in China. The Group will speed up modification of the strategic structure of its refinery and petrochemical business and to develop such business in an orderly and efficient manner. Sales of refined products and petrochemical products could be improved to ensure market supply. Construction of strategic pipelines and the domestic pipeline network will be enhanced with a view to building up a diversified oil and gas supply system. The Group will continue to enhance international energy co-operation opportunities in order to be mutually benefited, and endeavour to achieve efficient and sustainable development of its overseas businesses. In respect of exploration and production, the Group will continue to place top priority on resources exploration and development and further consolidate the leading position of its upstream business in China. The Group will stress the parallel development of oil and gas exploration, carry out exploration at the key basins and focus on key preliminary exploration projects. Exploration of mature oilfields will be enhanced, and venture into the exploration of new oilfields will be pushed forward actively. The Group will endeavour to unearth sizeable and high quality reserves with a view to meet the annual reserves target. In oilfield exploration,emphasis will be placed on the overall development of new oilfields. The Group has extensively initiated works to achieve a steady oil and gas production in mature oilfields through the deployment of various comprehensive measures including conducting secondary recovery of mature oilfields, strengthening the descriptive analysis of reserves and unearthing potential resources. In natural gas exploration, emphasis will be placed on construction in key gas regions, overall planning and development and production planning. Production capacity will be enhanced at a quicker pace so that rapid growth of natural gas production can be sustained. In respect of refining and petrochemicals, the Group will speed up modification of the strategic structure of its refinery and petrochemical business to expedite and facilitate the construction of large-scale refinery and petrochemical bases and to develop such business in an orderly and efficient manner. The Group will strive to meet market requirements for refined products and petrochemical products necessitated by rapid growth in the economic and social developments by improving production organisation and management, arranging for resources processing in a scientific manner, and ensuring full load operation of refinery facilities and hig load, safe and steady operation of petrochemical facilities. The Group will continue to improve different economic and technological indicators, optimise product mix, and improve market competitiveness. In respect of the sale of refined products, the Group will further improve the refined products sales and distribution network and sales information system. Efforts will be made to explore profitable markets. Regulated management of service stations and regulated sales of refinery products will be strengthened with a view to increase the retail sales and daily sales of individual service station. The Group will endeavour to improve the marketing quality and operating efficiency of the sale of high quality lubricants business. Increasing efforts will be made to achieve overall balance of better resources allocation, optimisation and utilisation of resources in various markets in order to ensure supply of refined products in the domestic market. In respect of natural gas and pipeline construction, the Group will continue to pursue actively key construction projects. Construction of the four major strategic oil and gas pipelines in the northwestern, northeastern and southwestern China as well as in the sea and the domestic trunk pipeline network will be sped up. Storage and transportation facilities and resources despatch capabilities will be improved. A nationwide pipeline network and supply system characterised by diversification of resources, flexible despatch priority and stable supply will be established. Overall balance of the allocation of natural gas resources will be enhanced. Linkage of production, transportation and marketing will be enhanced. Utilisation of gas will be optimised, and marketing efficacy could be boosted. Further studies on extended natural gas business will be conducted with a view to achieving secondary value-added benefits to the application of natural gas. In respect of international operations, the Group will continue to enhance international energy co-operation opportunities in order to obtain mutual benefits, and endeavour to achieve efficient and sustainable development of the scale of its overseas businesses. The Group will focus on oil and gas exploration, continue to expand the scale of reserves and speed up the pace of overseas businesses development. Subject to proper risk management, the Group will develop its current businesses steadily in the global market, continue to utilise various business forms, and gradually improving the allocation of resources of the Group to an international level. In respect of safety and environmental protection, the Group will continue to adhere firmly to the principle of “prioritising of safety, environmental protection and people-orientation” and minimise potential risks in full force. The Group will promote the effective operation of the Health, Safety and Environment (HSE) management system. The Group will put its emphasis on energy saving, water saving and land saving and reducing emission of pollutants, and continue to improve efficiency in utilisation of resources. In its future development, the Group will continue to emphasise two main guiding principles, namely, scientific development and social harmony. The Group will continue to conduct its business in a prudent and steady manner, thereby increasingly enhancing its corporate value and actively fulfilling its economic, environmental and social responsibilities to maximise returns to its equity holders, the society and its staff.

The Group is engaged in a wide range of petroleum-related activities. The prices of crude oil and refined products in the international market are affected by various factors such as changes in global and regional politics and economy, the supply and demand conditions of crude oil and refined products and unexpected political events and disputes with international repercussions. The domestic crude oil price is determined with reference to international price of crude oil, and in 2006, the PRC established new refined products pricing mechanism based on macro economic controls. However, as affected by the macro economic controls in the PRC, the prices of domestic refined products were not adjusted in line with the prices in the international market. The Group has not adopted any commodity derivative instruments to hedge against potential price fluctuations of crude oil and refined products. Therefore, theGroup is exposed to general price fluctuations of oil and gas commodities in 2008 and thereafter.

Oil and gas exploration, development, storage and transportation and the production, storage and transportation of refined products and petrochemical products are faced with certain risks, which may cause unexpected or dangerous events, such as personal injuries or death, property damage, environmental damage and interruption of operations etc. With the expansionof operations scale and regions, the safety risks faced by the Group also increase accordingly.Meanwhile, new regulations adopted in recent years set out higher standard for safety production. The Group has implemented a strict HSE management system and used its best endeavours to prevent the occurrence of various accidents. However, the Group cannot completely avoid potential financial losses caused by such contingent incidents. In addition, natural disasters such as earthquake, typhoon, tsunami and emergency public health events may cause losses to the properties and personnel of the Group, and may affect the normal operations of the Group.

√ Applicable □ Not applicable

Accumulated amount of proceeds used

Project to increase the crude oil production capacity of Changqing Oilfield No 6,840 2,718 Yes Internal rate of return above 12% To be confirmed only upon commissioning Project to increase the crude oil production capacity of Daqing Oilfield No 5,930 1,772 Yes Internal rate of return above 12%

To be confirmed only upon commissioning Project to increase the crude oil production capacity of Jidong Oilfield No 1,500 495 Yes Internal rate of return above 12% To be confirmed only upon commissioning Dushanzi Petrochemical’s projects - processing and refining sulphurbearing crude oil imported  rom Kazakhstan and ethylene technology  development projects No 17,500 8,867 Yes  Internal rate of return above 12% To be confirmed only upon commissioning Daqing  Petrochemical 1.2 million tons/year ethylene redevelopment and expansion project No 6,000 91 Yes Internal rate of return above 12% To be  confirmed only upon commissioning Total 37,770 13,943 － －  Projects not progressing as  lanned and not  achieving estimated  eturn

Application and status of unused proceeds The unutilised portion of the net proceeds of RMB37,770 million from the A share issuance has been deposited into the designated bank accounts maintained by the Company.

√ Applicable □ Not applicable