Table of Contents

Title of		Name of each exchange
Each class		on which registered
American Depositary Shares, each representing 100 H Shares, par value RMB 1.00 per share*			New York Stock Exchange, Inc.
H Shares, par value RMB 1.00 per share			New York Stock Exchange, Inc.**

State-owned shares, par value RMB 1.00 per share			158,241,758,000
H Shares, par value RMB 1.00 per share			17,582,418,000	***

	*	PetroChina’s H Shares are listed and traded on The Stock Exchange of Hong Kong Limited.

**	Not for trading, but only in connection with the registration of American Depository Shares.

***	Include 2,424,087,400 H Shares represented by American Depositary Shares.

---

Table of Contents

						Page
				Certain Terms and Conventions			3
				Forward-looking Statements			6
Part I		Item 1		Identity of Directors, Senior Management and Advisors			8
		Item 2		Offer Statistics and Expected Timetable			8
		Item 3		Key Information			8
				Exchange Rates			8
				Selected Financial Data			9
				Risk Factors			12
		Item 4		Information on the Company			16
				Introduction			16
				Exploration and Production			23
				Refining and Marketing			34
				Chemicals and Marketing			41
				Natural Gas and Pipeline			45
				Competition			49
				Environmental Matters			50
				Legal Proceedings			51
				Properties			51
				Regulatory Matters			52
		Item 5		Operating and Financial Review and Prospects			59
				General			59
				Operating Results			67
				Liquidity and Capital Resources			76
				Research and Development			84
				Trend Information			85
				Other Information			85
		Item 6		Directors, Senior Management and Employees			89
				Directors, Senior Management and Supervisors			89
				Compensation			95
				Board Practices			96
				Employees			98
				Share Ownership			98
		Item 7		Major Shareholders and Related Party Transactions			99
				Major Shareholders			99
				Related Party Transactions			99
		Item 8		Financial Information			103
		Item 9		The Offer and Listing			103
		Item 10		Additional Information			105
				Memorandum and Articles of Association			107
				Material Contracts			113
				Exchange Controls			113
				Taxation			114
				Significant Differences in Corporate Governance Practices			115
				Documents on Display			116
		Item 11		Quantitative and Qualitative Disclosures About Market Risk			117
		Item 12		Description of Securities Other Than Equity Securities			121
Part II		Item 13		Defaults, Dividend Arrearages and Delinquencies			121
		Item 14		Material Modifications to the Rights to Security Holders			121
		Item 15		Controls and Procedures			121

1

---

Table of Contents

						Page
		Item 16A		Audit Committee Financial Expert			122
		Item 16B		Code of Ethics			122
		Item 16C		Principal Accountant Fees and Services			122
		Item 16D		Exemptions from Listing Standards for Audit Committees			123
		Item 16E		Purchases of Equity Securities by the Issuer and its Affiliates			123
Part III		Item 17		Financial Statements			123
		Item 18		Financial Statements			123
		Item 19		Exhibits			123
				Consolidated Financial Statements			F-1
EX-1.1 ARTICLES OF ASSOCIATION
EX-4.1 2005 MANAGEMENT PERFORMANCE CONTRACT
EX-4.2 CRUDE OIL MUTUAL SUPPLY AGREEMENT
EX-4.3 CAPITAL CONTRIBUTION AGREEMENT
EX-4.4 TRANSFER AGREEMENT
EX-4.5 SUPPLEMENTARY AGREEMENT, DATED JUNE 9, 2005
EX-8.1 LIST OF MAJOR SUBSIDIARIES
EX-10.1 SIGNIFICANT DIFFERENCES OF GOV'T PRACTICES
EX-12.1 CERTIFICATION OF CEO REQUIRED BY SEC. 302
EX-12.2 CERTIFICATION OF CFO REQUIRED BY SEC. 302
EX-13.1 CERTIFICATION OF CEO REQUIRED BY SEC. 1350
EX-13.2 CERTIFICATION OF CFO REQUIRED BY SEC. 1350
EX-16.1 CODE OF ETHICS FOR SENIOR MANAGEMENT
EX-16.2 CODE OF ETHICS FOR EMPLOYEES

2

---

Table of Contents

	•	“CNPC” or “CNPC group” are to our parent, China National Petroleum Corporation and its affiliates and subsidiaries, excluding PetroChina, its subsidiaries and its interests in long-term investments, and where the context refers to any time prior to the establishment of CNPC, those entities and businesses which were contributed to CNPC upon its establishment.
	•	“PetroChina”, “we”, “our”, “our company” and “us” are to:

	—	PetroChina Company Limited, a joint stock company incorporated in the People’s Republic of China with limited liability and its subsidiaries and branch companies, or
	—	the CNPC group’s domestic crude oil and natural gas exploration and production, refining and marketing, chemicals and natural gas businesses that were transferred to us in the restructuring of the CNPC group in 1999.

	•	“PRC” or “China” are to the People’s Republic of China, but do not apply to Hong Kong, Macau or Taiwan for purposes of this annual report.

1 barrel-of-oil equivalent		= 1 barrel of crude oil		= 6,000 cubic feet of natural gas
1 cubic meter		= 35.315 cubic feet
1 ton of crude oil		= 1 metric ton of crude oil		= 7.389 barrels of crude oil (assuming an API gravity of 34 degrees)

“acreage”		The total area, expressed in acres, over which an entity has interests in exploration or production. Net acreage is the entity’s interest, expressed in acres, in the relevant exploration or production area.
“API gravity”		An indication of the density of crude oil or other liquid hydrocarbons as measured by a system recommended by the American Petroleum Institute (API), measured in degrees. The lower the API gravity, the heavier the compound.
“condensate”		Light hydrocarbon substances produced with natural gas that condense into liquid at normal temperatures and pressures associated with surface production equipment.
“crude oil”		Crude oil, including condensate and natural gas liquids.

3

---

Table of Contents

“development cost”		For a given period, costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing the oil and gas.
“finding cost”		For a given period, costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to have prospects of containing oil and gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test wells. Finding cost is also known as exploration cost.
“lifting cost”		For a given period, costs incurred to operate and maintain wells and related equipment and facilities, including applicable operating costs of support equipment and facilities and other costs of operating and maintaining those wells and related equipment and facilities. Lifting cost is also known as production cost.
“natural gas liquids”		Hydrocarbons that can be extracted in liquid form together with natural gas production. Ethane and pentanes are the predominant components, with other heavier hydrocarbons also present in limited quantities.
“offshore”		Areas under water with a depth of five meters or greater.
“onshore”		Areas of land and areas under water with a depth of less than five meters.
“primary distillation capacity”		At a given point in time, the maximum volume of crude oil a refinery is able to process in its basic distilling units.
“proved developed reserves”		Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included as “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.
“proved reserves”		Estimated quantities of crude oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not of escalations based upon future conditions.
“proved undeveloped reserves”		Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is

4

---

Table of Contents

		continuity of production from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.
“reserve-to-production ratio”		For any given well, field or country, the ratio of proved reserves to annual production of crude oil or, with respect to natural gas, to wellhead production excluding flared gas.
“sales gas”		Marketable production of gas on an “as sold” basis, excluding flared gas, injected gas and gas consumed in operations.
“water cut”		For a given oil region, the percentage that water constitutes of all fluids extracted from all wells in that region.

	•	BOE are to barrels-of-oil equivalent,
	•	Mcf are to thousand cubic feet, and
	•	Bcf are to billion cubic feet.

5

---

Table of Contents

	•	the amounts and nature of future exploration, development and other capital expenditures;
	•	future prices and demand for crude oil, natural gas, refined products and chemical products;
	•	development projects;
	•	exploration prospects;
	•	reserves potential;
	•	production of oil and gas and refined and chemical products;
	•	development and drilling potential;
	•	expansion and other development trends of the oil and gas industry;
	•	the planned development of our natural gas operations;
	•	the planned expansion of our refined product marketing network;
	•	the planned expansion of our natural gas infrastructure;
	•	the anticipated benefit from our proposed acquisition of certain overseas assets from CNPC, our parent company;
	•	the plan to continue to pursue attractive business opportunities outside China;
	•	our future overall business development and economic performance;
	•	our anticipated financial and operating information regarding, and the future development and economic performance of, our business;
	•	our anticipated market risk exposure arising from future changes in interest rates, foreign exchange rates and commodity prices; and
	•	other prospects of our business and operations.

	•	fluctuations in crude oil and natural gas prices;
	•	failure to achieve continued exploration success;
	•	failures or delays in achieving production from development projects;
	•	continued availability of capital and financing;
	•	acquisitions and other business opportunities that we may pursue;

6

---

Table of Contents

	•	general economic, market and business conditions, including volatility in interest rates, changes in foreign exchange rates and volatility in commodity markets;
	•	liability for remedial actions under environmental regulations;
	•	impact of the PRC’s entry into the World Trade Organization;
	•	the actions of competitors;
	•	wars and acts of terrorism or sabotage;
	•	changes in policies, laws or regulations of the PRC;
	•	the other changes in global economic and political conditions affecting the production, supply and demand and pricing of crude oil, refined products, petrochemical products and natural gas; and
	•	the other risk factors discussed in this annual report, and other factors beyond our control.

7

---

Table of Contents

		Noon buying rate
		High				Low
		(RMB per US$)
December 2004			8.2767				8.2765
January 2005			8.2765				8.2765
February 2005			8.2765				8.2765
March 2005			8.2765				8.2765
April 2005			8.2765				8.2765
May 2005			8.2765				8.2735
June 2005 (through June 24)			8.2765				8.2765

		Average noon buying rate
		(RMB per US$)
2000		8.2784
2001		8.2770
2002		8.2772
2003		8.2772
2004		8.2768

8

---

Table of Contents

9

---

Table of Contents

				Year ended December 31,
				2000(2)				2001(2)				2002				2003				2004				2004
				RMB				RMB				RMB				RMB				RMB				US$
				(in millions, except for per share and per ADS data)
Income Statement Data
IFRS
Revenues
	Sales and other operating revenues				245,279				241,320				244,424				303,779				388,633				46,956
Operating expenses
	Purchases, services and other				(64,251	)			(78,529	)			(71,690	)			(90,850	)			(116,353	)			(14,058	)
	Employee compensation costs				(15,129	)			(14,608	)			(16,248	)			(19,542	)			(22,309	)			(2,695	)
	Exploration expenses, including exploratory dry holes				(8,680	)			(7,344	)			(8,095	)			(10,577	)			(11,723	)			(1,416	)
	Depreciation, depletion and amortization				(34,209	)			(33,615	)			(36,782	)			(40,531	)			(46,411	)			(5,608	)
	Selling, general and administrative expenses				(17,621	)			(21,735	)			(22,474	)			(23,930	)			(26,377	)			(3,187	)
	Employee separation costs and shutting down of manufacturing assets				(6,579	)			(487	)			(2,121	)			(2,355	)			(220	)			(27	)
	Taxes other than income taxes				(13,258	)			(13,951	)			(14,613	)			(15,879	)			(18,685	)			(2,258	)
	Revaluation loss of property, plant and equipment				—				—				—				(391	)			—				—
	Other (expenses) income, net				(119	)			88				(60	)			(538	)			31				4
		Total operating expenses			(159,846	)			(170,181	)			(172,083	)			(204,593	)			(242,047	)			(29,245	)
Income from operations					85,433				71,139				72,341				99,186				146,586				17,711
Income from equity affiliates					584				341				268				985				1,824				220
Exchange gain (loss), net					1,172				250				(316	)			(180	)			(73	)			(9	)
Interest income					591				809				463				677				1,107				134
Interest expense					(6,286	)			(4,408	)			(3,516	)			(2,346	)			(2,303	)			(278	)
Income before taxes					81,494				68,131				69,240				98,322				147,141				17,778
Income taxes					(27,014	)			(23,066	)			(22,231	)			(28,072	)			(42,563	)			(5,143	)
Income before minority interests					54,480				45,065				47,009				70,250				104,578				12,635
Income (loss) applicable to minority interests					165				404				(99	)			(636	)			(1,651	)			(199	)
Net income					54,645				45,469				46,910				69,614				102,927				12,436
Basic and diluted net income per share(3)					0.32				0.26				0.27				0.40				0.59				0.07
Basic and diluted net income per ADS(4)					31.84				25.86				26.68				39.59				58.54				7.07
US GAAP
Net income					60,236				50,934				49,837				75,419				108,135				13,065
Basic and diluted net income per share(3)					0.35				0.29				0.28				0.43				0.62				0.07
Basic and diluted net income per ADS(4)					35.10				28.97				28.34				42.89				61.50				7.43

				As of December 31,
				2000(1)				2001(2)				2002				2003				2004				2004
				RMB				RMB				RMB				RMB				RMB				US$
				(in millions, except for per share and per ADS data)
Balance Sheet Data
IFRS
Assets
Current assets
	Cash and cash equivalents				18,085				11,127				9,977				11,231				11,304				1,366
	Time deposits with maturities over three months				—				3,253				2,612				2,640				1,400				169
	Receivables under resale agreements				5,815				11,505				9,786				24,224				33,217				4,013
	Accounts receivable, less allowance for doubtful accounts				12,786				7,392				6,079				3,263				2,662				322
	Inventories, at net book value				32,499				28,313				28,441				28,872				45,771				5,530
	Prepaid expenses and other current assets				11,913				24,427				18,269				15,944				22,387				2,705
		Total current assets			81,098				86,017				75,164				86,174				116,741				14,105

10

---

Table of Contents

				As of December 31,
				2000(1)				2001(2)				2002				2003				2004				2004
				RMB				RMB				RMB				RMB				RMB				US$
				(in millions, except for per share and per ADS data)
Non-current assets
	Property, plant and equipment, less accumulated depreciation, depletion and amortization				341,175				363,367				393,296				427,875				468,519				56,608
	Long-term investments, at net book value				4,948				5,530				5,680				7,410				9,433				1,140
	Prepaid operating lease rentals				3,924				5,383				6,249				7,252				12,248				1,480
	Intangible and other assets				901				2,368				2,760				3,024				2,987				361
	Total non-current assets				350,948				376,648				407,985				445,561				493,187				59,589
		Total assets			432,046				462,665				483,149				531,735				609,928				73,694
Liabilities and shareholders’ equity
Current liabilities
	Short-term debt				41,514				25,323				20,633				28,890				27,276				3,296
	Accounts payable and accrued liabilities				39,550				53,210				57,793				64,180				70,696				8,542
	Income tax payable				9,399				5,672				5,412				12,043				17,484				2,112
	Other taxes payable				7,171				8,762				5,515				8,916				4,633				560
		Total current liabilities			97,634				92,967				89,353				114,029				120,089				14,510
Non-current liabilities
	Long-term debt				53,412				65,546				60,655				41,959				38,458				4,646
	Deferred credits and other long-term obligations				1,196				1,380				1,684				2,000				2,438				294
	Deferred income taxes				3,169				7,030				9,927				11,526				14,340				1,733
		Total non-current liabilities			57,777				73,956				72,266				55,485				55,236				6,673
		Total liabilities			155,411				166,923				161,619				169,514				175,325				21,183
Minority interest					4,989				5,136				4,854				5,608				9,391				1,135
Shareholders’ equity					271,646				290,606				316,676				356,613				425,212				51,376
		Total liabilities and shareholders’ equity			432,046				462,665				483,149				531,735				609,928				73,694
Share capital, issued and outstanding, RMB 1.00 par value
	State-owned shares				158,242				158,242				158,242				158,242				158,242				19,120
	H shares and ADSs				17,582				17,582				17,582				17,582				17,582				2,124
US GAAP
Property, plant and equipment, less accumulated depreciation, depletion and amortization					274,457				304,895				343,093				386,417				434,924				52,549
Total assets					365,328				404,193				432,946				492,784				576,481				69,653
Shareholders’ equity					227,489				251,914				283,464				329,205				403,012				48,693
Other Financial Data
Dividend per share					0.14				0.12				0.12				0.18				0.26				0.03
Dividend per ADS					14.14				11.98				12.00				17.82				26.34				3.18
Capital expenditures					(59,311	)			(59,964	)			(72,766	)			(82,929	)			(95,349	)			(11,520	)
Cash Flow Data
IFRS
Net cash provided by operating activities					102,490				82,854				97,290				137,236				137,299				16,589
Net cash used for investing activities					(59,307	)			(59,906	)			(70,611	)			(96,213	)			(98,533	)			(11,905	)
Net cash used for financing activities					(43,188	)			(29,906	)			(27,829	)			(39,769	)			(38,693	)			(4,675	)

(1)	Certain financial data for these periods and as of these dates are derived from our unaudited consolidated financial statements, not included in this annual report, and were retroactively restated in 2002. See the paragraphs preceding these table for a detailed description.
(2)	Certain financial data for these periods and as of these dates are derived from our audited consolidated financial statements, not included in this annual report, and were retroactively restated in 2002. See the paragraphs preceding these tables for a detailed description.
(3)	Historical income per share for the years ended December 31, 2001, 2002, 2003 and 2004 has been calculated by dividing the net profit by the number of 175,824 million shares issued and outstanding for the periods presented. Historical income per share for the year ended December 31, 2000 has been calculated by dividing the net profit by the weighted average number of 171,630 million shares issued and outstanding for the period presented.
(4)	Historical income per ADS for the years ended December 31, 2001, 2002, 2003 and 2004 has been calculated by dividing the net profit by the number of 175,824 million shares issued and outstanding for the periods presented, assuming each ADS representing 100 H shares. Historical income per ADS for the year ended December 31, 2000 has been calculated by dividing the net profit by the weighted average number of 171,630 million shares issued and outstanding for the period presented, assuming each ADS representing 100 H shares.

11

---

Table of Contents

	•	Our operations are affected by the volatility of prices for crude oil and refined products. We and China Petroleum and Chemical Corporation, or Sinopec, set our crude oil median prices monthly based on the Singapore trading prices for crude oil. The PRC government publishes the retail median guidance prices for gasoline and diesel based on the FOB Singapore, Rotterdam and New York gasoline and diesel trading prices. Historically, international prices for crude oil and refined products have fluctuated widely in response to changes in many factors, such as global and regional economic and political developments and global and regional supply and demand for crude oil and refined products. We do not have, and will not have, control over the factors affecting international prices for crude oil and refined products. We expect continued volatility and uncertainty in international prices for crude oil and refined products. Declines in crude oil prices may adversely affect our business, results of operations and financial condition, our capital expenditure plans and the value of our proved reserves.
	•	The crude oil and natural gas reserve data in this annual report are only estimates. The reliability of reserve estimates depend on a number of factors, assumptions and variables, such as the quality and quantity of our technical and economic data and the prevailing oil and gas prices applicable to our production, many of which are beyond our control and may prove to be incorrect over time. Results of drilling, testing and production after the date of the estimates may require substantial upward or downward revisions in our reserve data. Our actual production, revenues and expenditures with respect to our reserves may differ materially from these estimates because of these revisions.
	•	Our proved crude oil reserves decreased gradually and modestly from 2001 to 2003 because the decrease in the crude oil reserves in our Daqing and Liaohe oil regions could not be offset by the increase in the crude oil reserves in our oil regions in northwestern China, such as the Xinjiang oil region, the Changqing oil and gas region and the Tarim oil region. Although our proved crude oil reserves increased slightly in 2004 mainly as a result of the increases in the crude oil reserves in our Xinjiang and Changqing oil regions, we cannot assure you that we will be able to increase or maintain our crude oil reserves in the future by our exploration activities in China. We are actively pursuing business opportunities outside China to supplement our domestic resources. For instance, in June 2005, we entered into an agreement to acquire certain overseas crude oil and natural gas assets from CNPC. We cannot assure you, however, that we can successfully locate sufficient alternative sources of crude oil supply or at all due to the complexity of the international political, economic and other conditions. If we fail to obtain sufficient alternative sources of crude oil supply, our results of operations and financial condition may be materially and adversely affected.
	•	The United States Securities and Exchange Commission, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company in the United States to include a management report on such company’s internal controls over financial reporting in its annual report, which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on management’s assessment of the effectiveness of the company’s internal controls over financial reporting. These requirements will first apply to our annual report on Form 20-F for the fiscal year ending December 31, 2006. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still be unable to attest to our management’s assessment or may issue a report that concludes that our internal controls over financial reporting are not effective. In

12

---

Table of Contents

		preparation for the implementation of the requirements of Section 404, we are undertaking company-wide documentation of internal controls, performing the system and process evaluation and testing required. During the course of our evaluation, documentation and attestation, we have identified certain deficiencies that could adversely affect our ability to record, process, summarize and report financial data consistent with our management’s assertions in our financial statements. Although we have commenced planing for remedial measures to make necessary improvements, we cannot assure you that we will be able to remedy those identified deficiencies in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. We are also in the process of conducting further evaluation of our internal control over financial reporting and may identify other deficiencies that we may not be able to remedy in time by the deadline for compliance with Section 404. If we fail to achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls, on an ongoing basis, over financial reporting in accordance with the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading prices of our ADSs or H shares. Furthermore, we have already incurred considerable costs and spent significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. We anticipate that we will continue to incur considerable costs and use significant resources for compliance with Section 404.
	•	Exploring for, producing and transporting crude oil and natural gas and producing and transporting refined products and chemical products involve many hazards. These hazards may result in:

	—	fires;
	—	explosions;
	—	spills;
	—	blow-outs; and
	—	other unexpected or dangerous conditions causing personal injuries or death, property damage, environmental damage and interruption of operations.

	Some of our oil and natural gas fields are surrounded by residential areas or located in areas where natural disasters, such as earthquakes, floods and sandstorms, tend to occur more frequently than in other areas. As with many other companies around the world that conduct similar businesses, we have experienced accidents that have caused property damage and personal injuries and death.
	Significant operating hazards and natural disasters may cause partial interruptions to our operations and property and environmental damage that could have an adverse impact on our financial condition.
	Except limited insurance coverage for vehicles and certain assets that we consider to be subject to significant operating risks, we do not carry any other insurance for our property, facilities or equipment in respect of our business operations. We do not currently carry any third party liability insurance against claims relating to personal injury or death, property or environmental damage arising from accidents on our property or relating to our operations. We also do not currently carry any business interruption insurance. The limited insurance coverage of our assets exposes us to substantial risks and will not cover most losses.

13

---

Table of Contents

	•	CNPC owns approximately 90% of our share capital. This ownership percentage enables CNPC to elect our entire board of directors without the concurrence of any of our other shareholders. Accordingly, CNPC is in a position to:

	—	control our policies, management and affairs;
	—	subject to applicable PRC laws and regulations and provisions of our articles of association, determine the timing and amount of dividend payments and adopt amendments to certain of the provisions of our articles of association; and
	—	otherwise determine the outcome of most corporate actions and, subject to the requirements of the Listing Rules of the Hong Kong Stock Exchange, cause our company to effect corporate transactions without the approval of minority shareholders.

	CNPC’s interests may sometimes conflict with those of some or all of our minority shareholders. We cannot assure you that CNPC, as controlling shareholder, will always vote its shares in a way that benefits our minority shareholders.

	•	In addition to its relationship with us as our controlling shareholder, CNPC by itself or through its affiliates also provides us with certain services and products necessary for our business activities, such as construction and technical services, production services and supply of material services. The interests of CNPC and its affiliates as providers of these services and products to us may conflict with our interests. Although we have entered into a Comprehensive Products and Services Agreement with CNPC and our transactions with CNPC over the past three years have been conducted on open, fair and competitive commercial terms, we have only limited leverage in negotiating with CNPC and its affiliates over the specific terms of the agreements for the provision of these services and products.
	•	The eastern and southern regions of China have a higher demand for refined products and chemical products than the western and northern regions. Most of our refineries and chemical plants are located in the western and northern regions of China. While we continue to expand the sales of these products in the eastern and southern regions of China, we face strong competition from Sinopec. In addition, we incur relatively higher transportation costs for delivery of our refined products and chemical products to certain areas of these regions from our refineries and chemical plants in western and northern China. As a result, we expect that we will continue to encounter difficulty in increasing our sales of refined products and chemical products in these regions.
	•	We are currently constructing and renovating several natural gas pipelines and plan to construct and renovate other natural gas pipelines. In addition, we may, subject to obtaining requisite licenses from the relevant authority, commence offshore crude oil and natural gas exploration and production activities, which could require substantial capital expenditures and investments. We cannot assure you that the cash generated by our operations will be sufficient to fund these development plans or that our actual future capital expenditures and investments will not significantly exceed our current planned amounts. If either of these conditions arises, we may have to seek external financing to satisfy our capital needs. Under such circumstance, our inability to obtain sufficient funding for our development plans could adversely affect our business, financial condition and results of operations.
	•	We are also subject to a number of risks relating to the PRC and the PRC oil and gas industry. These risks are described as follows:

	—	Our operations, like those of other PRC oil and gas companies, are subject to extensive regulations and control by the PRC government. These regulations and control affect many material aspects of our operations, such as exploration and production licensing, industry-specific taxes and fees and environmental and safety standards. As a result, we may face significant constraints on our ability to implement our business strategies, to develop or

14

---

Table of Contents

		expand our business operations or to maximize our profitability. Our business may also be adversely affected by future changes in certain policies of the PRC government with respect to the oil and gas industry.
	—	Currently, the PRC government must approve the construction and major renovation of significant refining and petrochemical facilities as well as the construction of significant natural gas and refined product pipelines and storage facilities. We presently have several significant projects pending approval from the relevant government authorities and will need approvals from the relevant government authorities in connection with several other significant projects. We do not have control over the timing and outcome of the final project approvals.
	—	We receive most of our revenues in Renminbi. A portion of our Renminbi revenues must be converted into other currencies to meet our foreign currency obligations. The existing foreign exchange limitations under the PRC laws and regulations could affect our ability to obtain foreign exchange through debt financing, or to obtain foreign exchange for capital expenditures.
	—	Because PRC laws, regulations and legal requirements dealing with economic matters are relatively new and continue to evolve, and because of the limited volume of published judicial interpretations and the non-binding nature of prior court decisions, the interpretation and enforcement of these laws, regulations and legal requirements involve some uncertainty. We have included the Mandatory Provisions and certain additional requirements that are imposed by the Hong Kong Stock Exchange Listing Rules in our Articles of Association for the purpose of reducing the scope of difference between the Hong Kong company law and the PRC Company Law. However, because the PRC Company Law is different in certain important aspects from company laws in the United States, Hong Kong and other common law jurisdictions and because the PRC securities laws and regulations are still at an early stage of development, you may not enjoy shareholders’ protections that you may be entitled to in other jurisdictions.
	—	In addition to the adverse effect on our revenues, margins and profitability from any future fall in oil and natural gas prices, a prolonged period of low prices or other indicators would lead to a review for impairment of our oil and natural gas properties. This review would reflect management’s view of long-term oil and natural gas prices. Such a review could result in a charge for impairment which could have a significant effect on our results of operations in the period in which it occurs.

15

---

Table of Contents

	Overview of Our Operations

	•	the exploration, development, production and sale of crude oil and natural gas;
	•	the refining, transportation, storage and marketing of crude oil and petroleum products;
	•	the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; and
	•	the transmission and storage of crude oil, refined products and natural gas as well as sale of natural gas.

16

---

Table of Contents

17

---

Table of Contents

	Our Corporate Organization and Shareholding Structure

18

---

Table of Contents

(1)	Indicates approximate shareholding.
(2)	Includes subsidiary companies and branches without legal person status.
(3)	Represents enterprises directly administered and operated by such segment.
(4)	Includes PetroChina Planning & Engineering Institute, PetroChina Exploration & Development Research Institute, PetroChina International Limited, PetroChina International Co., Ltd and PetroChina Refining & Chemicals Technology Research Center.

19

---

Table of Contents

(1)	Includes subsidiary companies and branches without legal person status.
(2)	Represents enterprises directly administered and operated by such segment.

20

---

Table of Contents

21

---

Table of Contents

22

---

Table of Contents

23

---

Table of Contents

			Crude oil				Natural gas(1)				Combined(1)
			(millions of barrels)				(Bcf)				(BOE, in millions)
Proved developed and undeveloped reserves
Reserves as of December 31, 2002				10,937.0				38,816.8				17,406.4
	Revisions of previous estimates			199.2				277.6				245.4
	Extensions and discoveries			475.7				2,853.3				951.3
	Improved recovery			81.2				0				81.2
	Purchased reserves(2)			0				0				0
	Production for the year(3)			(773.7	)			(878.5	)			(920.1	)
Reserves as of December 31, 2003				10,919.3				41,069.2				17,764.2
	Revisions of previous estimates			147.3				55.7				156.6
	Extensions and discoveries(4)			542.2				4,405.3				1,276.4
	Purchased reserves			0				0				0
	Improved recovery			109.0				43.0				116.2
	Production for the year(5)			(777.4	)			(1,019.6	)			(947.3	)
Reserves as of December 31, 2004				10,940.5				44,553.6				18,366.1
Proved developed reserves
	As of December 31, 2002			9,198.1				11,921.2				11,185.0
	As of December 31, 2003(6)			8,884.8				13,373.7				11,113.7
	As of December 31, 2004(7)			8,748.1				16,787.1				11,546.0

(1)	Represents natural gas remaining after field separation for condensate removal and reduction for flared gas.
(2)	Excludes our share of the purchased reserves of approximately 16.8 million barrels of crude oil and approximately 76.6 billion cubic feet of natural gas in the Jabung block in Indonesia, totaling approximately 29.6 million barrel-of-oil equivalent, as a result of our acquisition of a 50% interest in Amerada Hess Indonesia Holdings Co. in April 2003.
(3)	Excludes our share of the production of approximately 1.2 million barrels of crude oil and approximately 1.0 billion cubic feet of natural gas in the Jabung block in Indonesia, totaling approximately 1.4 million barrels-of-oil equivalent, as a result of our acquisition of a 50% interest in Amerada Hess Indonesia Holdings Co. in April 2003.
(4)	Excludes our share of the reserve extensions and discoveries of approximately 0.69 million barrels of crude oil and approximately 4.60 billion cubic feet of natural gas in the Jabung block in Indonesia, totaling approximately 1.45 million barrels-of-oil equivalent, as a result of our acquisition of a 50% interest in Amerada Hess Indonesia Holdings Co. in April 2003.
(5)	Excludes our share of the production of approximately 1.07 million barrels of crude oil and approximately 3.67 billion cubic feet of natural gas in the Jabung block in Indonesia, totaling approximately 1.68 million barrels-of-oil equivalent, as a result of our acquisition of a 50% interest in Amerada Hess Indonesia Holdings Co. in April 2003.
(6)	Excludes our share of the proved developed reserves of approximately 4.1 million barrels of crude oil and approximately 21.3 billion cubic feet of natural gas in the Jabung block in Indonesia, totaling approximately 7.7 million barrel-of-oil equivalent, as a result of our acquisition of a 50% interest in Amerada Hess Indonesia Holdings Co. in April 2003.
(7)	Excludes our share of the proved developed reserves of approximately 2.9 million barrels of crude oil and approximately 19.2 billion cubic feet of natural gas in the Jabung block in Indonesia, totalling approximately 6.1 million barrel-of-oil equivalent, as a result of our acquisition of a 50% interest in Amerada Hess Indonesia Holdings Co. in April 2003.

24

---

Table of Contents

			As of December 31,
			2002								2003								2004
			Proved								Proved								Proved
			developed								developed								developed
			and				Proved				and				Proved				and				Proved
			undeveloped				developed				undeveloped				developed				undeveloped				developed
			(millions of barrels)
Crude oil reserves
Daqing				5,073.8				4,729.6				4,832.3				4,407.7				4,615.0				4,122.3
Liaohe				1,227.0				1,007.5				1,168.5				965.0				1,123.1				915.1
Xinjiang				1,102.2				912.5				1,186.9				930.9				1,232.1				921.9
Changqing				885.7				623.1				1,063.6				706.9				1,191.6				769.6
Jilin				585.8				377.2				585.9				367.0				643.8				404.4
Dagang				458.4				364.9				452.1				361.0				482.3				402.0
Tarim				522.0				342.6				553.9				342.2				507.6				374.8
Huabei				494.2				350.8				486.1				335.8				510.3				353.9
Qinghai				240.6				192.7				229.7				182.8				226.1				181.2
Tuha				208.7				189.9				206.9				169.2				218.3				168.4
Sichuan				5.5				5.5				7.1				3.9				8.6				5.3
Other regions(1)				133.1				101.9				146.3				112.4				181.7				129.2
	Total			10,937.0				9,198.1				10,919.3				8,884.8				10,940.5				8,748.1

			As of December 31,
			2002								2003								2004
			Proved								Proved								Proved
			developed								developed								developed
			and				Proved				and				Proved				and				Proved
			undeveloped				developed				undeveloped				developed				undeveloped				developed
			(Bcf)
Natural gas reserves(2)
Sichuan				7,461.7				4,040.6				8,131.4				4,522.4				8,729.8				4,767.9
Changqing				11,222.6				2,719.5				12,976.3				3,847.6				14,932.7				4,091.3
Xinjiang				1,707.3				1,036.1				1,698.7				1,084.3				1,712.3				1,036.8
Daqing				1,324.8				1,171.9				1,122.9				946.5				1,060.5				879.4
Qinghai				3,416.1				837.2				3,379.7				889.9				4,603.6				1,583.4
Tarim				11,026.0				591.2				11,086.6				528.7				10,897.8				2,934.8
Liaohe				606.6				530.5				571.8				507.5				522.7				455.4
Tuha				621.2				338.4				711.6				430.1				705.3				427.8
Huabei				395.8				237.5				386.0				227.3				375.9				217.5
Dagang				655.4				252.4				609.5				201.9				599.5				186.8
Jilin				174.3				109.9				191.9				134.4				203.9				150.4
Other regions(1)				204.9				55.9				202.8				53.1				209.6				55.6
	Total			38,816.8				11,921.2				41,069.2				13,373.7				44,553.6				16,787.1

(1)	Represents the Jidong and Yumen oil regions and our oil and gas fields in Indonesia as a result of our acquisition of Devon Energy Indonesia Limited in April 2002.
(2)	Represents natural gas remaining after field separation for condensate removal and reduction for flared gas.

25

---

Table of Contents

Year				Daqing				Xinjiang				Liaohe				Changqing				Huabei				Dagang				Sichuan				Others(1)				Total
2002		Net exploratory wells drilled(2)			67				84				61				170				67				30				28				149				656
		Crude oil			27				63				28				69				28				21				4				60				300
		Natural gas			1				3				0				10				4				0				7				11				36
		Dry(3)			39				18				33				91				35				9				17				78				320
		Net development wells drilled(2)			1,988				1,247				603				1,285				246				212				40				955				6,576
		Crude oil			1,975				1,235				583				1,197				238				205				13				926				6,372
		Natural gas			6				7				20				55				2				3				25				22				140
		Dry(3)			7				5				0				33				6				4				2				7				64
2003		Net exploratory wells drilled(2)			291				170				103				371				82				46				25				287				1,375
		Crude oil			140				115				57				128				49				25				0				99				613
		Natural gas			1				11				2				22				0				0				12				5				53
		Dry(3)			150				44				44				221				33				21				13				183				709
		Net development wells drilled(2)			2,986				1,363				547				1,677				244				202				61				1,192				8,272
		Crude oil			2,975				1,354				528				1,489				241				199				8				1,173				7,967
		Natural gas			4				4				8				134				0				3				36				17				206
		Dry(3)			7				5				11				54				3				0				17				2				99
2004		Net exploratory wells drilled(2)			221				153				68				427				96				53				32				355				1,405
		Crude oil			85				85				40				201				49				32				4				172				668
		Natural gas			3				0				0				22				0				0				17				9				51
		Dry(3)			133				68				28				204				47				21				11				174				686
		Net development wells drilled(2)			2,857				1,440				622				1,675				224				188				76				1,463				8,545
		Crude oil			2,853				1,440				605				1,597				223				184				6				1,387				8,295
		Natural gas			4				0				13				46				1				3				56				73				196
		Dry(3)			0				0				4				32				0				1				14				3				54

(1)	Represents the Jilin, Tarim, Tuha, Qinghai, Jidong and Yumen oil regions.
(2)	“Net” wells refer to the wells after deducting interests of others. No third parties own any interests in any of our wells.
(3)	“Dry” wells are wells with insufficient reserves to sustain commercial production.

26

---

Table of Contents

	Properties

			Acreage(1) (thousands of acres)
			Productive wells(1)								Developed								Undeveloped
Oil region			Crude oil				Natural gas				Crude oil				Natural gas				Crude oil				Natural gas
Daqing				37,833				145				625.7				41.2				615.4				79.6
Liaohe				16,577				587				167.9				28.2				117.6				11.1
Xinjiang				15,182				70				317.6				39.1				53.4				8.8
Jilin				12,623				42				267.6				19.5				248.2				25.4
Changqing				9,864				514				271.7				632.0				386.6				2,143.0
Huabei				4,833				78				100.1				9.5				101.8				6.6
Dagang				3,181				53				86.4				15.3				75.5				23.5
Tuha				1,142				43				33.6				11.4				19.7				16.5
Tarim				565				79				113.1				72.2				47.3				84.8
Sichuan				396				987				324.0				372.6				8.2				87.9
Other regions(2)				2,942				167				65.8				10.9				16.1				25.4
	Total			105,138				2,765				2,373.5				1,251.9				1,689.8				2,512.6

(1)	Includes all wells and acreage in which we have an interest. No third parties own any interests in any of our wells or acreage.
(2)	Represents the Qinghai, Jidong and Yumen oil regions.

		For the year ended
		December 31,
														% of
		2002				2003				2004				2004 total
Crude oil production(1)
(thousands of barrels per day, except percentages or otherwise indicated)
Daqing			1,020.5				985.3				942.0				44.4
Liaohe			259.1				253.6				245.4				11.6
Xinjiang			206.0				217.2				227.1				10.7
Changqing			124.2				142.8				164.6				7.7
Tarim			102.7				107.5				109.9				5.2
Huabei			89.0				88.4				87.6				4.1

27

---

Table of Contents

			For the year ended
			December 31,
															% of
			2002				2003				2004				2004 total
Jilin				90.4				96.7				102.6				4.8
Dagang				79.2				84.7				97.9				4.6
Tuha				54.1				50.7				48.4				2.3
Other(2)				83.8				92.9				98.5				4.6
	Total			2,109.1				2,119.8				2,124.0				100.0	%
Annual production (million barrels)				763.5				773.7				777.4
Average sales price
	(RMB per barrel)			186.08				225.2				280.4
	(US$ per barrel)			22.48				27.2				33.88
Natural gas production(1)(3)
(millions of cubic feet per day, except percentages or otherwise indicated)
Sichuan				808.2				849.0				905.7				39.6
Changqing				335.7				440.3				651.4				28.5
Daqing				137.7				136.2				135.4				5.9
Qinghai				92.3				122.5				145.5				6.4
Tuha				69.8				82.6				92.2				4.0
Xinjiang				53.3				75.9				95.7				4.2
Liaohe				56.0				57.6				58.7				2.6
Huabei				42.1				45.8				44.2				1.9
Tarim				24.6				34.7				89.2				3.9
Dagang				30.6				27.8				26.5				1.1
Other(4)				7.2				18.8				43.8				1.9
	Total			1,657.5				1,891.2				2,288.3				100.0	%
Annual production (Bcf)				605.0				690.3				837.5
Average sales price
	(RMB per Mcf)			19.20				19.37				21.11
	(US$ per Mcf)			2.32				2.34				2.55

(1)	Production volumes for each region include our share of the production from all of our cooperative projects with foreign companies in that region.
(2)	Represents production from the Qinghai, Jidong and Yumen oil regions, the Sichuan gas region and our share of production from the oil and gas fields in Indonesia as a result of our acquisition of Devon Energy Indonesia Limited in April 2002.
(3)	Represents production of natural gas for sale.
(4)	Represents production from the Jilin, Jidong and Yumen oil regions and our share of production the oil and gas fields in Indonesia as a result of our acquisition of Devon Energy Indonesia Limited in April 2002.

28

---

Table of Contents

	Daqing Oil Region

29

---

Table of Contents

	•	terminating unprofitable or marginally profitable exploration and production activities;
	•	reducing expenditures on ancillary ground facilities in the outer areas of the Daqing oil region;
	•	increasing preventive maintenance to prolong the useful life of our production facilities; and
	•	applying new technologies to reduce energy consumption.

	Liaohe Oil Region

	Xinjiang Oil Region

30

---

Table of Contents

	Sichuan Gas Region

	Changqing Oil and Gas Region

31

---

Table of Contents

	Tarim Oil and Gas Region

32

---

Table of Contents

33

---

Table of Contents

	•	as of December 31, 2004, our refineries’ annual primary distillation capacity totaled 771.4 million barrels of crude oil per year, or 2,113.5 thousand barrels per day;
	•	we processed 697.8 million barrels of crude oil, or 1.9 million barrels per day;
	•	we produced approximately 60.2 million tons of gasoline, diesel and kerosene and sold approximately 67.0 million tons of these products;
	•	as of December 31, 2004, our retail distribution network consisted of:

	—	14,039 service stations owned and operated by us,
	—	427 service stations wholly owned by CNPC or jointly owned by CNPC and third parties and to which we provide supervisory support, and
	—	2,937 franchise service stations owned and operated by third parties with which we have long-term refined product supply agreements; and

	•	in 2004, our service stations, which are located throughout China, sold approximately 30.2 million tons of gasoline and diesel, representing 46.5% of the total of these products sold through our marketing operations.

	Refined Products

			Year ended December 31,
Product			2002				2003				2004
			(in thousands of tons)
Diesel				29,229.2				32,778.3				38,185.6
Gasoline				16,646.4				18,255.4				20,049.8
Fuel oil				6,176.8				4,546.1				4,256.8
Naphtha				3,066.0				3,602.8				4,942.8
Asphalt				1,653.5				1,870.5				1,946.8
Kerosene				1,774.7				1,759.3				1,961.8
Lubricants				1,358.9				1,192.5				1,467.8
Paraffin				856.4				984.9				1,140.0
	Total			60,761.9				64,989.8				73,951.4

34

---

Table of Contents

	Our Refineries

			As of December 31,
			2002				2003				2004
Primary distillation capacity(1) (thousand barrels per day)
Lanzhou Petrochemical(2)				151.8				222.7				212.6
Dalian Petrochemical				212.6				212.6				212.6
Fushun Petrochemical				162.0				162.0				186.2
Daqing Petrochemical				121.5				121.5				121.5
Jinzhou Petrochemical(3)				113.3				113.3				127.5
Jinxi Petrochemical				111.3				111.3				131.6
Jilin Petrochemical(4)				101.2				101.2				107.3
Urumqi Petrochemical				101.2				101.2				101.2
Other refineries				911.1				844.1				913.0
	Total			1,986.0				1,989.9				2,113.5

35

---

Table of Contents

			As of December 31,
			2002				2003				2004
Refining throughput (thousand barrels per day)
Lanzhou Petrochemical(2)				128.6				140.5				166.4
Dalian Petrochemical				136.6				187.7				242.3
Fushun Petrochemical				166.3				172.2				181.7
Daqing Petrochemical				108.2				115.5				119.2
Jinzhou Petrochemical(3)				101.3				105.7				120.8
Jinxi Petrochemical				97.2				108.2				123.9
Jilin Petrochemical(4)				92.3				114.6				129.6
Urumqi Petrochemical				71.7				72.7				81.8
Other refineries				656.7				685.0				740.8
	Total			1,558.9				1,702.1				1,906.5
Conversion equivalent(5) (percent)
Lanzhou Petrochemical(2)				31.3				41.9				41.9
Dalian Petrochemical				54.3				54.3				54.3
Fushun Petrochemical				66.9				70.7				70.7
Daqing Petrochemical				61.0				61.0				76.7
Jinzhou Petrochemical(3)				62.5				72.7				63.5
Jinxi Petrochemical				67.3				70.9				60.0
Jilin Petrochemical(4)				54.0				69.8				75.5
Urumqi Petrochemical				50.0				50.0				62.0
Average of other refineries				43.7				39.5				62.4

(1)	Represents the primary distillation capacity of crude oil and condensate.
(2)	Includes Lanzhou Refinery, which was merged into Lanzhou Petrochemical in October 2000 as part of our ongoing restructuring.
(3)	Includes a 19.05% minority interest held by unrelated third parties in Jinzhou Petrochemical Company Limited in the relevant periods.
(4)	Includes Jilin Chemical Industrial Company Limited, in which we held a 67.29% equity interest in the relevant periods. Data regarding the primary distillation capacity, refining throughput and conversion equivalent of Jilin Petrochemical includes a 32.71% minority interest held by unrelated third parties in Jilin Chemical Industrial Company Limited in the relevant periods.
(5)	Stated in fluid catalytic cracking, delayed coking and hydrocracking equivalent/ topping (percentage by weight), based on 100% of balanced distillation capacity.

36

---

Table of Contents

	•	approximately 790 regional wholesale distribution outlets nationwide. Substantially all of these outlets are located in high demand areas such as economic centers across China, particularly in the coastal areas, along major railways and along the Yangtze River; and
	•	14,039 service stations owned and operated by us, 427 service stations wholly owned by CNPC or jointly owned by CNPC and third parties that exclusively sell refined products produced or supplied by us and to which we provide supervisory support under contractual arrangement, and 2,937 franchise service stations owned and operated by third parties.

37

---

Table of Contents

			Year ended December 31,
Product			2002				2003				2004
			(in thousands of tons)
Diesel				33,167.1				36,680.7				43,178.3
Gasoline				19,001.3				19,872.5				21,714.2
Fuel oil				4,327.8				5,748.7				5,747.4
Naphtha				4,142.5				4,836.2				5,325.9
Kerosene				1,884.5				1,789.1				2,116.2
Lubricants				1,997.0				1,774.5				1,974.0
Asphalt				1,344.0				1,711.3				2,348.7
Paraffin				868.7				1,055.5				1,138.1
	Total			66,732.9				73,468.5				83,542.8

	Wholesale Marketing

	Retail Marketing

38

---

Table of Contents

Owned and operated by us(1)				14,039
Wholly owned by CNPC or jointly owned by CNPC and third parties(2)				427
Franchised				2,937
	Total			17,403

(1)	Includes 395 service stations owned and operated by BP PetroChina Petroleum Company Limited.
(2)	These service stations exclusively sell refined products produced or supplied by us. We also provide supervisory support to these service stations.

39

---

Table of Contents

40

---

Table of Contents

				Year ended December 31,
				2002				2003				2004
				(in thousand tons)
Basic petrochemicals
	Propylene				1,523.9				1,833.7				1,969.1
	Ethylene				1,582.0				1,817.9				1,845.6
	Benzene				558.7				683.8				712.7
Derivative petrochemicals
	Synthetic resin
		Polyethylene			1,014.4				1,208.0				1,309.5
		Polypropylene			759.0				917.1				961.6
		ABS			166.7				208.7				228.1
		Other synthetic resin products			27.3				35.1				27.6
	Synthetic fiber
		Polyacrylic fiber			78.6				83.7				108.1
		Terylene fiber			173.0				116.6				94.3
		Other synthetic fiber products			15.5				11.4				7.4
	Synthetic rubber
		Butadiene styrene rubber			134.9				147.3				190.2
		Other synthetic rubber products			79.1				98.8				95.6
	Intermediates
		Alkylbenzene			175.3				204.7				194.9
Other chemicals
	Urea				3,411.2				3,579.6				3,652.3
	Ammonium nitrate				143.2				46.5				32.0

41

---

Table of Contents

42

---

Table of Contents

				Year ended December 31,
Product				2002				2003				2004
				(in thousands of tons)
Derivative petrochemicals
	Synthetic resin
		Polyethylene			1,008.3				1,205.0				1,423.6
		Polypropylene			589.2				717.2				793.3
		ABS			210.5				204.5				231.8
	Synthetic fiber
		Terylene fiber			172.2				132.9				103.6
		Polyacrylic fiber			84.9				81.2				115.8
	Synthetic rubber
		Butadiene styrene rubber			136.5				144.7				187.8
	Intermediates
		Alkylbenzene			135.3				110.1				110.9
Other chemicals
	Urea				2,967.5				3,766.8				3,662.8
	Ammonium nitrate				145.5				51.1				32.8

43

---

Table of Contents

44

---

Table of Contents

		As of December 31 or
		year ended December 31,
		2002				2003				2004
Length of natural gas pipelines used by our natural gas segment (km)			12,299				14,017				17,868
Total length of natural gas pipelines (km)			13,391				15,144				18,995
Volume of natural gas sold by our natural gas segment (Bcf)			486.3				543.4				657.3
Total volume of natural gas sold(1)(Bcf)			588.4				651.0				781.4

(1)	Represents the aggregate volume of natural gas sold by our natural gas and pipeline segment and our exploration and production segment, including the sales to our natural gas and pipeline segment by our exploration and production segment.

45

---

Table of Contents

46

---

Table of Contents

47

---

Table of Contents

	•	9,167 kilometers of crude oil pipelines with an average daily throughput of approximately 2.0 million barrels; and
	•	crude oil storage facilities with an aggregate storage capacity of approximately 13.9 million cubic meters.

	•	2,460 kilometers of refined product pipelines with an average daily throughput of approximately 28,243 tons; and
	•	refined product storage facilities with a total storage capacity of approximately 16.6 million cubic meters.

48

---

Table of Contents

49

---

Table of Contents

	•	require an environmental evaluation report to be submitted and approved prior to the commencement of exploration, production, refining and chemical projects;
	•	restrict the type, quantities, and concentration of various substances that can be released into the environment in connection with drilling and production activities;
	•	limit or prohibit drilling activities on certain lands lying within protected areas; and
	•	impose criminal and civil liabilities for pollution resulting from oil, natural gas and petrochemical operations.

	•	reducing sulphur levels in heavy fuel oil and diesel fuel;
	•	reducing olefin and benzene content in gasoline and the quantity of emissions and effluents from our refineries and petrochemical plants; and
	•	developing and installing monitoring systems at our facilities and developing environmental impact assessments for major projects.

50

---

Table of Contents

	•	providing each household in areas surrounding our production facilities with printed materials to explain and illustrate safety and protection knowledge and skills; and
	•	enhancing the implementation of various safety production measures we have adopted previously.

	•	CNPC would use its best endeavours to obtain formal land use right certificates to replace the entitlement certificates in relation to the 28,649 parcels of land, which were leased or transferred to us from CNPC, within one year from August, September and October 1999 when the relevant entitlement certificates were issued;
	•	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
	•	CNPC would obtain individual building ownership certificates in our name for all of the 57,482 buildings transferred to the Company by CNPC, before November 5, 2000.

51

---

Table of Contents

	•	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.
	•	The Ministry of Commerce, which was established in March 2003 to consolidate the authorities and functions of the former State Economic and Trade Commission and the former Ministry of Foreign Trade and Economic Cooperation:

	—	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;
	—	issues import and export licenses for crude oil and refined products to oil and gas companies that have obtained import and export quotas; and
	—	examines and approves production sharing contracts and Sino-foreign equity and cooperative joint venture contracts.

	•	The National Development and Reform Commission, which was established in March 2003 to consolidate the authorities and functions of the former State Development Planning Commission and the former State Economic and Trade Commission:

	—	has the industry administration and policy coordination authority over China’s oil and gas industry;
	—	determines mandatory minimum volumes and applicable prices of natural gas to be supplied to certain fertilizer producers;
	—	publishes guidance prices for natural gas and retail median guidance prices for certain refined products, including gasoline and diesel;
	—	approves significant petroleum, natural gas, oil refinery and chemical projects set forth under the Catalogues of Investment Projects Approved by the Central Government; and
	—	approves Sino-foreign equity and cooperative projects exceeding certain capital amounts.

52

---

Table of Contents

	Crude Oil

	Refined Products

53

---

Table of Contents

	Chemical Products

	Natural Gas

	•	ex-factory price; and
	•	pipeline transportation tariff.

	Crude Oil

54

---

Table of Contents

	Refined Products

	Natural Gas

	Cooperation in Exploration and Production with Foreign Companies

	Transportation and Refining

55

---

Table of Contents

56

---

Table of Contents

Tax item		Tax base		Tax Rate
Corporate income tax		Taxable income		Generally 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.
Value-added tax		Revenue		13% for liquified natural gas, natural 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 are deducted from output value-added tax payable by PetroChina. 11% of the value-added tax paid in connection with export of gasoline is subject to rebate.
		Sales volume		5% for the Sino-foreign oil and gas exploration and development cooperative projects. However input value-added tax cannot be deducted.
Business tax		Revenue from transportation services		3%
Consumption tax		Aggregate volume sold or self-consumed		RMB 277.6 per ton for gasoline; since January 1, 1999, RMB 388.64 per ton for leaded gasoline. RMB 117.6 per ton for diesel All consumption taxes paid in connection with export of gasoline are subject to a full rebate.
Resource tax		Aggregate volume sold or self-consumed		RMB 8 to 30 per ton for crude oil RMB 2 to 15 per thousand cubic meter for natural gas 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.

57

---

Table of Contents

Tax item		Tax base		Tax Rate
Compensatory fee for mineral resources		Revenue		1% for crude oil and natural gas
Exploration license fee		Area		RMB 100 to 500 per square kilometer per year
Production license fee		Area		RMB 1,000 per square kilometer per year
Royalty fee(1)		Production volume		Progressive rate of 0–12.5% for crude oil and 0–3% for natural gas

(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.

58

---

Table of Contents

	•	the exploration, development, production and sale of crude oil and natural gas;
	•	the refining, transportation, storage and marketing of crude oil and petroleum products;
	•	the production and marketing of basic petrochemical products, derivative chemical products and other chemical products; and
	•	the transmission and storage of crude oil, refined products and natural gas as well as sale of natural gas.

59

---

Table of Contents

	Crude Oil Prices

						Median prices for principal grades												Premium/(discount)
						of crude oil (RMB/barrel)												(RMB/barrel)
Grade of						Year 2002				Year 2003				Year 2004				June 2001-				July 2002-				January 2003-				Since
crude oil		Benchmark				average				average				average				June 2002				December 2002				December 2003				January 2004
Daqing			Minas				198.7				240.8				300.7				0.9				0				–0.3				0
Jidong			Minas				198.7				240.8				300.7				0.9				0				–0.3				0
Huabei			Minas				198.7				240.8				300.7				1.6				1.3				1				1.3
Dagang			Cinta				192.6				237.0				290.5				1.7				1.4				1.4				1.4
Tarim			Minas				198.7				240.8				300.7				–30.4				–34.6				–33.7				–34.6
Tuha			Tapis				203.9				247.0				329.2				–25.1				–25.5				–25.5				–25.5

	Refined Product Prices

60

---

Table of Contents

		90(#)
Date		Gasoline				0(#) Diesel
		(RMB/ton)				(RMB/ton)
March 31, 2004			4,032				—
May 18, 2004			—				3,590
August 25, 2004			4,272				3,810

	Chemical Product Prices

	Natural Gas Prices

	•	Ex-factory Price. We set our ex-factory price within a 10% floating range of the median ex-factory price published by the National Development and Reform Commission, except for natural gas sold within the PRC government’s natural gas supply plan, which must be sold at prices determined by the National Development and Reform Commission; and
	•	Pipeline Transportation Tariff. The National Development and Reform Commission sets the pipeline transportation tariff for natural gas transported by pipelines constructed prior to 1991. For natural gas transported by pipelines constructed after 1991, we prepare a tariff schedule

61

---

Table of Contents

		based on our actual cost plus a profit margin and submit it to the National Development and Reform Commission for approval.

	Foreign Currency Exposure

	Interest Rate Exposure

	Accounting of Oil and Gas Exploration and Development Activities

62

---

Table of Contents

	Oil and Gas Reserves

63

---

Table of Contents

	Property, Plant and Equipment

Land and buildings		25-50 years
Plant and machinery		10-15 years
Equipment and motor vehicles		3-16 years

64

---

Table of Contents

	Impairment of Accounts Receivable

	Deferred Tax Assets

	Revenue Recognition

65

---

Table of Contents

	One-time Remedial Payments for Staff Housing

	Acquisitions of Overseas Assets

66

---

Table of Contents

	Acquisition of Certain Refined Products Marketing Enterprises from CNPC

		Year ended December 31,
		2002				2003				2004				2004
		in million RMB				in million RMB				in million RMB				in million US$
Total revenues			244,424				303,779				388,633				46,956
Operating expenses			(172,083	)			(204,593	)			(242,047	)			(29,245	)
Income from operations			72,341				99,186				146,586				17,711
Exchange gain (loss), net			(316	)			(180	)			(73	)			(9	)
Interest expense, net			(3,053	)			(1,669	)			(1,196	)			(144	)
Income from equity affiliates			268				985				1,824				220
Income before income taxes			69,240				98,322				147,141				17,778
Taxes			(22,231	)			(28,072	)			(42,563	)			(5,143	)
(Income) loss applicable to minority interests			(99	)			(636	)			(1,651	)			(199	)
Net income			46,910				69,614				102,927				12,436

67

---

Table of Contents

										2003								2004
										vs.								vs.
		2002				2003				2002				2004				2003
		(RMB in millions, except percentages)
Sales and other operating revenues
Exploration and production			147,308				177,271				20.3	%			222,305				25.4	%
Refining and marketing			174,621				223,584				28.0				295,598				32.2
Chemicals and marketing			29,661				39,211				32.2				57,179				45.8
Natural gas and pipeline			12,733				15,067				18.3				18,255				21.2
Total			364,323				455,133				24.9	%			593,337				30.4	%
Less intersegment sales			(119,899	)			(151,354	)			(26.2	)			(204,704	)			35.2
Consolidated net sales from operations			244,424				303,779				24.3	%			388,633				27.9	%

										2003								2004
										vs.								vs.
		2002				2003				2002				2004				2003
		(RMB in millions, except percentages)
Income (loss) from operations
Exploration and production			72,139				92,370				28.0	%			125,571				35.9	%
Refining and marketing			2,818				5,035				78.7				11,981				138.0
Chemicals and marketing			(3,162	)			1,041				132.9				7,655				635.4
Natural gas and pipeline			1,552				1,922				23.8				2,535				31.9
Other			(1,006	)			(1,182	)			(17.5	)			(1,156	)			(2.2	)
Total			72,341				99,186				37.1	%			146,586				47.8	%

	Consolidated Results of Operation

	Overview

68

---

Table of Contents

69

---

Table of Contents

	Exploration and Production

70

---

Table of Contents

	Refining and Marketing

	Chemicals and Marketing

71

---

Table of Contents

	Natural Gas and Pipeline

	Consolidated Results of Operation

	Overview

72

---

Table of Contents

73

---

Table of Contents

	Exploration and Production

74

---

Table of Contents

	Refining and Marketing

75

---

Table of Contents

	Chemicals and Marketing

	Natural Gas and Pipeline

76

---

Table of Contents

77

---

Table of Contents

		Year ended December 31,
		2002				2003				2004
		(RMB in millions)
Net cash generated by operating activities			97,290				137,236				137,299
Net cash used for investing activities			(70,611	)			(96,213	)			(98,533	)
Net cash provided by (used for) financing activities			(27,829	)			(39,769	)			(38,693	)
Cash and cash equivalents at the end of period			9,977				11,231				11,304

78

---

Table of Contents

				December 31,
				2002				2003				2004
				(RMB in millions)
Short-term debt (including current portion of long-term debt)					20,633				28,890				27,276
Long-term debt					60,655				41,959				38,458
	Total debt				81,288				70,849				65,734
Less:
	Cash and cash equivalents				9,977				11,231				11,304
	Time deposits with term exceeding three months				2,612				2,640				1,400
	Receivables under resale agreements				9,786				24,224				33,217
		Net debt			58,913				32,754				19,813

	•	an increase in the repayment of long-term loans leading to an increase of RMB 14,832 million in cash outflow;
	•	an increase in the distribution of dividends leading to an increase of RMB 4,650 million in cash outflow; and
	•	a decrease in new short-term loans leading to a decrease of RMB 1,339 million in cash inflow;

79

---

Table of Contents

	•	an increase in new long-term loans leading to an increase of RMB 12,791 million in cash inflow; and
	•	a decrease in the repayment of short-term loans leading to a decrease of RMB 8,673 million in cash outflow.

	•	an increase in the distribution of dividends leading to an increase of RMB 12,028 million in cash outflow;
	•	a decrease in new long-term loans leading to a decrease of RMB 7,062 million in cash inflow; and
	•	a decrease in new short-term loans leading to a decrease of RMB 3,600 million in cash inflow;

	•	a decrease in the repayment of long-term loans leading to a decrease of RMB 5,993 million in cash outflow; and
	•	a decrease in the repayment of short-term loans leading to a decrease of RMB 4,177 million in cash outflow.

																											2005
			2002								2003								2004								anticipated
			(RMB in								(RMB in								(RMB in								(RMB in				%
			millions)				%				millions)				%				millions)				%				millions)
Exploration and production				50,646				65.5				58,599				66.0				66,493				65.0				66,660				64.7
Refining and marketing				10,503				13.6				12,650				14.2				17,467				17.0				14,590				14.2
Chemicals and marketing				3,140				4.0				3,898				4.4				4,319				4.2				8,350				8.1
Natural gas and pipeline				12,912				16.7				13,530				15.2				13,901				13.6				12,400				12.0
Corporate and other				133				0.2				138				0.2				174				0.2				1,000				1.0
	Total			77,334				100.0				88,815				100.0				102,354				100.0				103,000				100.0

80

---

Table of Contents

	Exploration & Production

	Refining and Marketing

	•	approximately RMB 7,340 million for the construction of the sales network of refined products; and
	•	approximately RMB 7,250 million for the construction and expansion of refining facilities.

	Chemicals and Marketing

81

---

Table of Contents

	Natural Gas and Pipeline

	Corporate and Other

82

---

Table of Contents

		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			54,445				15,987				24,624				6,467				7,367
Capital lease obligations			21				21				0				0				0
Operating leases			95,451				2,701				4,925				4,790				83,035
Capital commitments			5,370				4,398				972				0				0
Unconditional purchase obligations			5,108.9				3,992.8				726.4				290.3				99.4
Other long-term obligations			0				0				0				0				0
Total contractual cash obligations			160,395.9				27,099.8				31,247.4				11,547.3				90,501.4

		Amount of commitment expiration per period
		Total
		amounts				Less than				1-				3-				Over
Other commercial commitments		committed				1 year				3 years				5 years				5 years
		(RMB in millions)
Lines of credit			0				0				0				0				0
Standby letters of credit			0				0				0				0				0
Guarantees			203				50				3				67				83
Total commercial commitments			203				50				3				67				83

83

---

Table of Contents

Year		Annual payment
		(RMB in millions)
2005			618
2006			681
2007 and thereafter			712

		Quantities
		(billion of cubic feet)
2005			229
2006			443
2007			581
2008			637
2009			701
2010 and thereafter			6,111

	•	geological structures of crude oil and natural gas reserves;
	•	oil and gas exploration and development;
	•	oil and gas production and pipeline transportation; and
	•	monitoring of the environment.

84

---

Table of Contents

85

---

Table of Contents

	Revaluation of Property, Plant and Equipment

	Related Party Transactions

86

---

Table of Contents

	One-time Remedial Payments for Staff Housing

	Recent US Accounting Pronouncements

87

---

Table of Contents

	Quantitative Disclosure Relating to US GAAP and IFRS

	Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

	Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

88

---

Table of Contents

	•	convening shareholders’ meetings and reporting its work to the shareholders’ meetings;
	•	implementing the resolutions of the shareholders’ meetings;
	•	determining our business plans and investment plans;
	•	formulating our annual budget and final accounts;
	•	formulating our proposals for dividend and bonus distributions and for the increase or reduction of capital; and
	•	exercising other powers, functions and duties as conferred by our articles of association.

	•	attending board meetings;
	•	examining our financial affairs;
	•	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
	•	overseeing the actions of our board of directors and our senior management personnel in carrying out their duties.

89

---

Table of Contents

Name		Age				Position		Date of election(1)
Chen Geng			58			Chairman of the board of directors			May 18, 2004
Jiang Jiemin			49			Vice Chairman of the board of directors and President			May 18, 2004
Ren Chuanjun			60			Vice Chairman of the board of directors			November 19, 2002
Su Shulin			42			Director and Senior Vice President			November 19, 2002
Duan Wende			53			Director and Vice President			May 18, 2004
Wang Fucheng			54			Director and Vice President			May 28, 2003
Zheng Hu			58			Director			May 28, 2003
Zhou Jiping			52			Director			May 18, 2004
Gong Huazhang			58			Director			November 19, 2002
Zou Haifeng			58			Director			November 19, 2002
Chee-Chen Tung			62			Independent non-executive director			November 19, 2002
Liu Hongru			74			Independent non-executive director			November 19, 2002
Franco Bernabè			56			Independent non-executive director			May 28, 2003
Li Huaiqi			55			Secretary to the board of directors
Wang Guoliang			52			Chief Financial Officer
Liu Baohe			58			Vice President
Jia Chengzao			56			Chief Geologist
Li Kecheng			61			Chairman of Supervisory Committee
Wen Qingshan			46			Supervisor
Sun Xianfeng			52			Supervisor
Xu Fengli			57			Supervisor
Sun Chongren			54			Supervisor
Zhang Youcai			63			Independent supervisor
Wu Zhipan			48			Independent supervisor

(1)	For directors only.

90

---

Table of Contents

91

---

Table of Contents

92

---

Table of Contents

93

---

Table of Contents

94

---

Table of Contents

						% 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

95

---

Table of Contents

	•	supervising the integrity of financial reporting process to ensure fair, transparent and true financial disclosure;
	•	evaluating the effectiveness of the internal control and risk management framework;
	•	inspecting and supervising the effectiveness of the internal audit functions;
	•	reviewing the independent auditing process, evaluating the performance of external auditors annually and raising proposals together with the supervisory committee to the shareholders’ meetings with respect to the retention of external auditors and the compensation of such external auditors;

96

---

Table of Contents

	•	receiving and dealing with submissions and complaints by employees regarding accounting, internal control or auditing matters.

	•	studying strategic action plans as proposed by our President and making recommendations to the board of directors;
	•	studying the annual investment budget as proposed by our President and making recommendations to the board of directors; and
	•	reviewing preliminary feasibility studies and feasibility studies for material investment projects requiring approval of the board of directors and making recommendations to the board of directors.

	•	managing the performance evaluations for our President and monitoring performance evaluations led by our President for Senior Vice President, Vice Presidents, Chief Financial Officer and other senior management personnel;
	•	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.

	•	supervising the effective implementation of our Health, Safety and Environmental Protection Plan;
	•	making recommendations to the board of directors and our President for major decisions with respect of health, safety and environmental protection;
	•	inquiring the occurrence of and responsibilities for material accidents and supervising the remedial measures of material accidents.

97

---

Table of Contents

			Employees				% of total
Exploration and production				236,591				55.8
Refining and marketing				116,813				27.5
Chemicals and marketing				57,765				13.6
Natural gas and pipeline				10,191				2.4
Other(1)				2,815				0.7
	Total			424,175				100.0	%

(1)	Including PetroChina Exploration & Development Research Institute, PetroChina Plan and Design Institute, PetroChina Refining & Chemicals Technology Research Center, and the management of our headquarters and specialized companies.

98

---

Table of Contents

	Products and Services Provided by Us to the CNPC Group

99

---

Table of Contents

	Products and Services Provided by the CNPC Group to Us

	•	construction and technical services,
	•	production services,
	•	supply of material services,
	•	social services,
	•	ancillary services, and
	•	financial services.

100

---

Table of Contents

101

---

Table of Contents

	(1) Production sharing and development cost apportionment between CNPC (HK) and us. We and CNPC (HK) share the oil and natural gas produced from the Karamay Oilfield Area Blocks 9(1)-9(5), as to 46% by us and 54% by CNPC (HK), and from the Liaohe Oilfield Leng Jiapu Area, as to 30% by us and 70% by CNPC (HK). CNPC (HK) is responsible for all of the development costs in respect of the Karamay Oilfield Area Blocks 9(1)-9(5). We are responsible for 30% and CNPC (HK) is responsible for 70% of the development costs in respect of the Liaohe Leng Jiapu Oilfield.
	(2) Provision of assistance by us to CNPC (HK). We are have agreed to provide assistance to CNPC (HK) for, among other things: (i) leasing warehouses, terminal facilities, barges, pipelines and land; (ii) obtaining approvals necessary for the petroleum operations; and (iii) obtaining office space, office supplies, transportation and communication facilities. CNPC (HK) has agreed to pay us an annual assistance fee in the amount of US$50,000 for each of the Karamay Oilfield Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area. The amount of such fee was determined through negotiations by taking into account the actual circumstances and conditions, including the scope of the projects and the level of demand for such assistance. This fee is accounted for as operating costs and shared by us and CNPC (HK) in accordance with 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) is obligated to pay us an amount of US$50,000 annually for training of our personnel for each of the Karamay Oilfield Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area. The amount of this fee was determined through negotiations by taking 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 us. CNPC (HK) has the right to deliver its share of oil production from each of the Karamay Oilfield Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area 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 purchaser of the oil production attributable to CNPC (HK) from each of the Karamay Oilfield Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area is likely to be CNPC or its affiliates, including us, which will purchase oil produced in the Karamay Oilfield Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area at the market price. Since the entering into of the petroleum production sharing contracts, CNPC (HK) has sold all of its share of the oil production to CNPC or its affiliates, including us. As far as our board of directors is aware, CNPC (HK) intends to continue with this arrangement. Although there is no contractual obligation on us to purchase oil production from the Karamay Oilfield Area Blocks 9(1)-9(5) and the Liaohe Leng Jiapu Oilfield Area, from a commercial perspective, we intend to continue to make such purchases. The price of various grades of crude oil sold will be determined either with reference to the price approved by the relevant PRC authorities or with reference to the prevailing price in arm’s length transactions of crude oil of a similar quality in the market, adjusted to take into account the terms of transportation, payment and other factors.

102

---

Table of Contents

	•	general business conditions;
	•	our financial results;
	•	capital requirements;
	•	contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us;
	•	our shareholders’ interests;
	•	the effect on our debt ratings; and
	•	other factors our board of directors may deem relevant.

	•	recovery of losses, if any;
	•	allocations to the statutory common reserve fund;
	•	allocations to the statutory common welfare fund; and
	•	allocations to a discretionary common reserve fund if approved by our shareholders.

103

---

Table of Contents

	•	providing our shareholders with a competitive return on investment; and
	•	assuring sufficient reinvestment of profits to enable us to achieve our strategic objectives.

104

---

Table of Contents

			Price per								Price per
			H share								ADS
			High				Low				High				Low
			(HK$)								(US$)
2000
	Second quarter			1.78				1.11				22.56				14.25
	Third quarter			2.05				1.49				26.19				19.38
	Fourth quarter			1.75				1.30				23.00				15.94
2001
	First quarter			1.48				1.26				18.73				16.55
	Second quarter			1.84				1.35				23.60				17.40
	Third quarter			1.67				1.43				21.15				18.43
	Fourth quarter			1.48				1.29				19.30				16.80
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

105

---

Table of Contents

			Price per								Price per
			H share								ADS
			High				Low				High				Low
			(HK$)								(US$)
2005
	January			4.325				4.025				56.10				51.65
	February			4.925				4.30				62.93				55.40
	March			5.10				4.70				65.36				60.76
	April			5.05				4.675				64.76				59.71
	May			4.975				4.70				64.48				60.21
	June (through June 24, 2005)			5.80				4.95				73.71				64.14

106

---

Table of Contents

	Enforceability of Shareholders’ Rights

	•	between a holder of H shares and us;
	•	between a holder of H shares and any of our directors, supervisors, general managers, deputy general managers or other senior officers; or
	•	between a holder of H shares and a holder of State-owned 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

	Restrictions on Transferability and the Share Register

	•	any relevant transfer fee is paid;
	•	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;
	•	the instrument of transfer is in respect of one class of shares only; and
	•	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.

	Dividends

	•	recovery of losses, if any;
	•	allocations to the statutory common reserve fund;

107

---

Table of Contents

	•	allocations to the statutory common welfare fund; and
	•	allocations to a discretionary common reserve fund if approved by the shareholders.

	Voting Rights and Shareholders’ Meetings

	•	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;
	•	where our unrecovered losses reach one-third of the total amount of our share capital;
	•	where shareholders holding 10% or more of our issued and outstanding voting shares request in writing the convening of an extraordinary general meeting; or
	•	where our board deems necessary or our board of supervisors so request.

108

---

Table of Contents

	•	an increase or reduction of our share capital or the issue of shares of any class, warrants and other similar securities;
	•	the issue of our debentures;
	•	our division, merger, dissolution and liquidation;
	•	amendments to our articles of association; and
	•	any other matters 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.

	Board of Directors

	(a) be responsible for the convening of shareholders’ meetings and reporting on its work to the shareholders at such meetings;

109

---

Table of Contents

	(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;
	(g) draw up plans for our merger, division or dissolution;
	(h) decide on our internal management structure;
	(i) appoint or remove our president and to appoint or remove the vice presidents and other senior officers, including the financial controller, based on the recommendation of the general manager, and to decide on their remuneration;
	(j) formulate our basic management system;
	(k) formulate proposals for any amendment of our articles of association; and
	(l) exercise any other powers conferred by the shareholders in general meetings.

	•	not to cause us to exceed the scope of business stipulated in our business license;
	•	to act honestly in our best interests;
	•	not to expropriate our property in any way, including, without limitation, usurpation of opportunities which benefit us; and
	•	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.

	•	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;
	•	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
	•	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.

110

---

Table of Contents

	Board of Supervisors

	•	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, and
	•	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.

	Restrictions on Large or Controlling Shareholders

	•	to relieve a director or supervisor from his or her duty to act honestly in our best interests;
	•	to approve the expropriation by a director or supervisor of our assets in any way, including, without limitation, opportunities which may benefit us; or
	•	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.

	•	is in a position to elect more than one-half of the board of directors;
	•	has the power to exercise, or to control the exercise of, 30% or more of our voting rights;
	•	holds 30% or more of our issued and outstanding shares; or

111

---

Table of Contents

	•	has de facto control of us in any other way.

	Share Certificates and Register of Shareholders

	• a complete duplicate of the register of shareholders;
	• a report showing the status of our issued share capital;
	• the latest audited financial statements, directors’ report, auditors’ report, and supervisors’ Reports;
	• our special resolutions;
	• reports showing the number and nominal value of securities repurchased by us since the end of the last financial year, the aggregate amount paid for such securities and the maximum and the minimum prices paid in respect of each class of securities repurchased;
	• a copy of the latest annual examination report filed with the State Administration of Industry and Commerce of the PRC; and
	• for shareholders only, copies of the shareholder meetings’ minutes.

	Shareholders’ General Meetings

	Board of Directors

112

---

Table of Contents

	Secretary of the Board of Directors

	•	organize board meetings and general meetings; and
	•	circulate minutes of the meetings of the board of directors to all directors for their signature and records within 14 days after the board meeting is held, and make the minutes available for inspection.

	Financial and Accounting Systems and Profit Distribution

	•	debt service on foreign currency-denominated debt;
	•	purchases of imported equipment and materials; and
	•	payment of any dividends declared in respect of the H shares.

113

---

Table of Contents

	•	the United States;

114

---

Table of Contents

	•	Australia;
	•	Canada;
	•	France;
	•	Germany;
	•	Japan;
	•	Malaysia;
	•	Singapore;
	•	the United Kingdom; and
	•	the Netherlands.

	1.	From our main web page, first click on “Investor Relations”.
	2.	Next, click on “Corporate Governance Structure”.

115

---

Table of Contents

	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”.

116

---

Table of Contents

117

---

Table of Contents

																															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			260				6				4				200				—				1				471				0.86%				457
	Average interest rate			5.30%				0.03%				4.72%				3.60%				—				6.10%
	Variable rate(1)			12,234				6,366				13,718				4,440				100				4,500				41,358				75.97%				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				0.66%				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			463				406				255				169				103				693				2,089				3.84%				1,863
	Average interest rate			6.38%				6.29%				5.96%				5.48%				4.50%				1.57%
	Variable rate			2,670				1,017				1,055				71				1,318				418				6,549				12.03%				6,549
	Average interest rate			2.78%				3.13%				3.27%				1.65%				3.23%				1.65%
Loan in British Pound
	Fixed rate			154				133				51				—				—				—				338				0.62%				326
	Average interest rate			2.85%				2.85%				2.85%				—				—				—
Loan in Japanese Yen
	Fixed rate			170				167				43				24				9				17				430				0.79%				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				5.23%				2,632
	Average interest rate			—				—				4.50%				—				—				4.11%
Total				15,987				8,130				16,493				4,921				1,547				7,367				54,445				100%				53,950

118

---

Table of Contents

																															Percentage
			Expected maturity date																												to total
																															long-term				Fair
			2004				2005				2006				2007				2008				Thereafter				Total				debt (%)				value
			(RMB equivalent in millions, except percentages)
Long term debt
Loan in RMB
	Fixed rate			43				39				5				—				—				3				90				0.15%				88
	Average interest rate			2.06%				4.81%				4.44%				—				—				2.03%
	Variable rate(1)			16,686				12,448				6,366				3,720				3,720				3,000				45,940				74.55%				45,940
	Average interest rate			5.05%				5.08%				5.12%				5.18%				5.10%				4.65%
Loan in Euro
	Fixed rate			43				39				34				16				16				233				381				0.62%				319
	Average interest rate			6.08%				5.47%				5.33%				2.11%				2.11%				2.10%
	Variable rate			—				—				—				—				—				—				—				—				—
	Average interest rate			—				—				—				—				—				—
Loan in United States Dollar
	Fixed rate			596				582				531				349				257				1,152				3,467				5.62%				3,253
	Average interest rate			6.05%				6.03%				5.97%				5.65%				5.34%				3.06%
	Variable rate			1,997				4,754				111				116				121				755				7,854				12.75%				7,854
	Average interest rate			1.16%				1.45%				2.33%				2.36%				2.38%				2.32%
Loan in British Pound
	Fixed rate			143				142				122				47				—				—				454				0.74%				432
	Average interest rate			2.85%				2.85%				2.85%				2.85%				—				—
Loan in Japanese Yen
	Fixed rate			164				162				162				42				23				25				578				0.94%				628
	Average interest rate			4.50%				4.49%				4.49%				4.35%				3.56%				2.68%
	Variable rate			—				—				—				—				—				—				—				—				—
	Average interest rate			—				—				—				—				—				—
Debenture in RMB
	Fixed rate			—				—				—				1,350				—				1,500				2,850				4.63%				2,640
	Average interest rate			—				—				—				4.50%				—				4.11%
Total				19,672				18,166				7,331				5,640				4,137				6,668				61,614				100%				61,154

119

---

Table of Contents

																															Percentage
			Expected maturity date																												to total
																															long-term				Fair
Long term debt			2003				2004				2005				2006				2007				Thereafter				Total				debt %				value
			(RMB equivalent in millions, except percentages)
Loan in RMB
	Fixed rate			127				80				1				—				1				2				211				0.32%				207
	Average interest rate			4.71%				3.46%				6.94%				—				7.00%				—
	Variable rate(1)			3,798				16,087				13,033				6,366				3,720				6,521				49,525				74.20%				49,525
	Average interest rate			5.18%				5.02%				5.15%				5.20%				5.31%				5.01%
Loan in Euro
	Fixed rate			107				36				30				30				15				201				419				0.63%				328
	Average interest rate			3.74%				5.80%				5.16%				5.16%				2.13%				2.11%
	Variable rate			22				22				—				—				—				—				44				0.07%				44
	Average interest rate			1.99%				2.01%				—				—				—				—
Loan in United States Dollar
	Fixed rate			1,037				873				869				741				496				1,403				5,419				8.12%				5,137
	Average interest rate			6.51%				6.43%				6.43%				6.23%				6.01%				3.39%
	Variable rate			372				2,071				2,018				2,208				185				575				7,429				11.13%				7,429
	Average interest rate			4.31%				1.61%				1.45%				2.08%				3.86%				2.71%
Loan in British Pound
	Fixed rate			216				210				210				209				129				348				1,322				1.98%				1,288
	Average interest rate			3.79%				3.82%				3.82%				3.82%				4.41%				5.17%
Loan in Japanese Yen
	Fixed rate			147				146				146				146				39				51				675				1.01%				743
	Average interest rate			4.59%				4.59%				4.59%				4.59%				4.30%				3.55%
	Variable rate			17				16				15				—				—				—				48				0.07%				48
	Average interest rate			3.61%				3.58%				1.97%				—				—				—
Debenture in RMB
	Fixed rate			300				—				—				—				1,350				—				1,650				2.47%				1,646
	Average interest rate			9.00%				—				—				—				4.50%				—
Total				6,143				19,541				16,322				9,700				5,935				9,101				66,742				100%				66,395

(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, 2002, 2003 and 2004. 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, 2002, 2003 and 2004, respectively.

120

---

Table of Contents

121

---

Table of Contents

	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”.

		December 31,
		2003				2003				2004				2004
		RMB				US$				RMB				US$
		(in millions)
Audit fees			44				5				43				5
Audit-related fees			—				—				—				—
Tax fees			—				—				—				—
Other fees			—				—				23				3
Total			44				5				66				8

122

---

Table of Contents

	Audit Committee Pre-approved Policies and Procedures

Exhibit
Number		Description of Exhibits
1.1		Articles of Association (as amended) (English translation) (1)
1.2		Articles of Association (as amended and pending for approval of SASAC) (English translation)
4.1		2005 Management Performance Contract (English Translation)
4.2		Crude Oil Mutual Supply Framework Agreement, dated December 1, 2004, between China Petroleum and Chemical Corporation and PetroChina (English translation)
4.3		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)
4.4		Transfer Agreement, dated June 9, 2005, between Zhong You Kan Tan Kai Fa Company Limited and PetroChina (English Translation)

123

---

Table of Contents

Exhibit
Number		Description of Exhibits
4.5		Supplementary Agreement to Comprehensive Products and Services Agreement, dated June 9, 2005, between CNPC and PetroChina (English Translation)
4.6		Form of Non-competition Agreement between CNPC and PetroChina (together with English translation)(2)
4.7		Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (together with English translation)(2)
4.8		Form of Land Use Rights Leasing Contract between CNPC and PetroChina (together with English translation)(2)
4.9		Form of Buildings Leasing Contract between CNPC and PetroChina (together with English translation)(2)
4.10		Form of Trademark Licensing Contract between CNPC and PetroChina (together with English translation)(2)
4.11		Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (together with English translation)(2)
4.12		Form of Computer Software Licensing Contract between CNPC and PetroChina (together with English translation)(2)
4.13		Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina (together with English translation)(2)
4.14		Form of Guarantee of Debts Contract between CNPC and PetroChina (together with English translation)(2)
4.15		Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina (together with English translation)(2)
4.16		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)(2)
4.17		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)(2)
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
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
16.2		Code of Ethics for Employees

(1)	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2001 (File No. 1-15006) filed with the Commission.
(2)	Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-11566) filed with the Commission, as declared effective on March 29, 2000.

124

---

Table of Contents

	PETROCHINA COMPANY LIMITED
	/s/ LI HUAIQI
	Name: Li Huaiqi
	Title:   Secretary to Board of Directors

125

---

Table of Contents

			Page
PetroChina Company Limited and its Subsidiaries
	Consolidated Financial Statements
	Report of Independent Registered Public Accounting Firm			F-2
	Consolidated Statements of Income for each of the three years in the period ended December 31, 2004			F-3
	Consolidated Balance Sheets as of December 31, 2003 and 2004			F-4
	Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2004			F-5
	Consolidated Statements of Changes in Shareholders’ Equity for each of the three years in the period ended December 31, 2004			F-7
	Notes to the Consolidated Financial Statements			F-8
	Supplementary Petroleum Data (unaudited)			F-57

F-1

---

Table of Contents

	PricewaterhouseCoopers
	Certified Public Accountants
	Hong Kong, June 28, 2005

F-2

---

Table of Contents

							Year Ended December 31,
			Note				2002				2003				2004				2004
							RMB				RMB				RMB				US$
REVENUES
	Sales and other operating revenues							244,424				303,779				388,633				46,956
OPERATING EXPENSES
	Purchases, services and other							(71,690	)			(90,850	)			(116,353	)			(14,058	)
	Employee compensation costs			4				(16,248	)			(19,542	)			(22,309	)			(2,695	)
	Exploration expenses, including exploratory dry holes							(8,095	)			(10,577	)			(11,723	)			(1,416	)
	Depreciation, depletion and amortization							(36,782	)			(40,531	)			(46,411	)			(5,608	)
	Selling, general and administrative expenses							(22,474	)			(23,930	)			(26,377	)			(3,187	)
	Shut down of manufacturing assets			5				(2,121	)			(2,355	)			(220	)			(27	)
	Taxes other than income taxes							(14,613	)			(15,879	)			(18,685	)			(2,258	)
	Revaluation loss of property, plant and equipment			16				—				(391	)			—				—
	Other (expense)/income, net							(60	)			(538	)			31				4
TOTAL OPERATING EXPENSES								(172,083	)			(204,593	)			(242,047	)			(29,245	)
INCOME FROM OPERATIONS								72,341				99,186				146,586				17,711
FINANCE COSTS
	Exchange gain							133				53				50				6
	Exchange loss							(449	)			(233	)			(123	)			(15	)
	Interest income							463				677				1,107				134
	Interest expense			6				(3,516	)			(2,346	)			(2,303	)			(278	)
TOTAL FINANCE COSTS								(3,369	)			(1,849	)			(1,269	)			(153	)
INCOME FROM EQUITY AFFILIATES				17				268				985				1,824				220
INCOME BEFORE INCOME TAXES								69,240				98,322				147,141				17,778
INCOME TAXES				7				(22,231	)			(28,072	)			(42,563	)			(5,143	)
INCOME BEFORE MINORITY INTERESTS								47,009				70,250				104,578				12,635
INCOME APPLICABLE TO MINORITY INTERESTS								(99	)			(636	)			(1,651	)			(199	)
NET INCOME								46,910				69,614				102,927				12,436
BASIC AND DILUTED NET INCOME PER SHARE				8				0.27				0.40				0.59				0.07
NUMBER OF SHARES				8				175,824				175,824				175,824				175,824
DIVIDENDS ATTRIBUTABLE TO:
	Interim dividend declared during the year			9				8,811				17,379				20,381				2,463
	Final dividend proposed after the balance sheet date			9				12,299				13,947				25,936				3,134
								21,110				31,326				46,317				5,597

F-3

---

Table of Contents

						At December 31,
		Note				2003				2004				2004
						RMB				RMB				US$
ASSETS
Current assets
Cash and cash equivalents			10				11,231				11,304				1,366
Time deposits with maturities over three months							2,640				1,400				169
Receivables under resale agreements			11				24,224				33,217				4,013
Notes receivable			12				2,416				4,824				583
Accounts receivable, less allowance for impairment of receivables			13				3,263				2,662				322
Inventories			14				28,872				45,771				5,530
Prepaid expenses and other current assets			15				13,528				17,563				2,122
TOTAL CURRENT ASSETS							86,174				116,741				14,105
Property, plant and equipment, less accumulated depreciation, depletion and amortization			16				427,875				468,519				56,608
Investments in equity affiliates			17				5,571				7,923				958
Available-for-sale investments			18				1,839				1,510				182
Advance operating lease payments			19				7,252				12,248				1,480
Intangible and other assets			20				3,024				2,987				361
TOTAL ASSETS							531,735				609,928				73,694
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Short-term debt			22				28,890				27,276				3,296
Accounts payable and accrued liabilities			21				64,180				70,696				8,542
Income tax payable							12,043				17,484				2,112
Other taxes payable							8,916				4,633				560
TOTAL CURRENT LIABILITIES							114,029				120,089				14,510
Long-term debt			22				41,959				38,458				4,646
Other long-term obligations							2,000				2,438				294
Deferred income taxes			23				11,526				14,340				1,733
TOTAL LIABILITIES							169,514				175,325				21,183
MINORITY INTERESTS							5,608				9,391				1,135
SHAREHOLDERS’ EQUITY
State-owned shares			24				158,242				158,242				19,120
H shares			24				17,582				17,582				2,124
Share capital, issued and outstanding, RMB 1.00 par value							175,824				175,824				21,244
Retained earnings							89,577				143,624				17,353
Capital reserve			25				(28,557	)			(28,557	)			(3,450	)
Revaluation reserve			25				79,946				79,946				9,660
Statutory common reserve fund			25				26,370				36,071				4,358
Statutory common welfare fund			25				16,653				21,504				2,598
Other reserves			25				(3,200	)			(3,200	)			(387	)
SHAREHOLDERS’ EQUITY							356,613				425,212				51,376
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY							531,735				609,928				73,694

F-4

---

Table of Contents

								Year Ended December 31,
				Note				2002				2003				2004				2004
								RMB				RMB				RMB				US$
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income								46,910				69,614				102,927				12,436
	Adjustments for:
		Income applicable to minority interests							99				636				1,651				199
		Income taxes			7				22,231				28,072				42,563				5,143
		Depreciation, depletion and amortization							36,782				40,531				46,411				5,608
		Provision for shut down of manufacturing assets			5				2,121				2,355				220				27
		Dry hole cost							3,527				4,691				4,718				570
		Income from equity affiliates			17				(268	)			(985	)			(1,824	)			(220	)
		Impairment of receivables, net			13, 15				284				1,434				480				58
		Write down in inventories, net			14				(122	)			136				146				17
		Impairment of available-for-sale investments, net			18				4				158				26				3
		Loss on disposal of property, plant and equipment							647				1,048				2,806				339
		Loss on disposal of equity affiliates							—				—				33				4
		Loss on disposal of available-for-sale investments							21				21				6				1
		Loss on disposal of intangible and other assets							17				143				50				6
		Revaluation loss of property, plant and equipment			16				—				391				—				—
		Dividend income			18				(60	)			(69	)			(90	)			(11	)
		Interest income							(463	)			(677	)			(1,107	)			(134	)
		Interest expense			6				3,516				2,346				2,303				278
	Advance payments on long-term operating leases								(1,051	)			(1,584	)			(5,598	)			(676	)
	Changes in working capital:
		— accounts receivable and prepaid expenses and other current assets							4,554				3,612				(5,649	)			(683	)
		— inventories							157				(567	)			(17,045	)			(2,059	)
		— accounts payable and accrued liabilities							2,047				8,738				533				64
CASH GENERATED FROM OPERATIONS									120,953				160,044				173,560				20,970
	Interest received								463				677				1,107				134
	Interest paid								(4,564	)			(3,769	)			(3,405	)			(411	)
	Income taxes paid								(19,562	)			(19,716	)			(33,963	)			(4,104	)
NET CASH PROVIDED BY OPERATING ACTIVITIES									97,290				137,236				137,299				16,589

F-5

---

Table of Contents

							Year Ended December 31,
			Note				2002				2003				2004				2004
							RMB				RMB				RMB				US$
CASH FLOWS FROM INVESTING ACTIVITIES
	Capital expenditures							(69,739	)			(79,739	)			(90,448	)			(10,928	)
	Acquisition of subsidiaries			30				(2,150	)			—				—				—
	Acquisition of equity affiliates							(1,119	)			(1,044	)			(485	)			(59	)
	Acquisition of available-for-sale investments							(231	)			(722	)			(476	)			(58	)
	Net acquisition of receivables under resale agreements with maturities not greater than three months							(497	)			(10,182	)			(8,049	)			(972	)
	Acquisition of receivables under resale agreements with maturities over three months							(420	)			(4,676	)			(8,301	)			(1,003	)
	Acquisition of intangible assets							(666	)			(473	)			(531	)			(64	)
	Acquisition of other non-current assets							(295	)			(569	)			(280	)			(34	)
	Proceeds from receivables under resale agreements with maturities over three months							2,636				420				7,357				889
	Repayment of capital by equity affiliates							301				336				206				25
	Proceeds from disposal of property, plant and equipment							497				202				778				94
	Proceeds from disposal of equity affiliates							243				23				27				3
	Proceeds from disposal of available-for-sale investments							97				87				83				10
	Proceeds from disposal of intangible and other non-current assets							—				—				37				5
	Dividends received							91				152				309				37
	Decrease/(Increase) in time deposits with maturities over three months							641				(28	)			1,240				150
NET CASH USED FOR INVESTING ACTIVITIES								(70,611	)			(96,213	)			(98,533	)			(11,905	)
CASH FLOWS FROM FINANCING ACTIVITIES
	Repayments of short-term debt							(34,550	)			(30,373	)			(21,700	)			(2,622	)
	Repayments of long-term debt							(13,944	)			(7,951	)			(22,783	)			(2,753	)
	Principal payment on capital lease obligations							(104	)			(66	)			(35	)			(4	)
	Dividends paid to minority interests							(135	)			(85	)			(357	)			(43	)
	Cash payment for acquisition of CNPC marketing enterprises			2				(430	)			(170	)			(1,476	)			(178	)
	Dividends paid			9				(17,650	)			(29,678	)			(34,328	)			(4,148	)
	Increase in short-term debt							28,728				25,128				23,789				2,874
	Increase in long-term debt							9,885				2,823				15,614				1,887
	Capital contribution from minority interests							57				287				2,145				259
	Change in other long-term obligations							304				316				438				53
	Contribution from CNPC to marketing enterprises							10				—				—				—
NET CASH USED FOR FINANCING ACTIVITIES								(27,829	)			(39,769	)			(38,693	)			(4,675	)
	(Decrease)/Increase in cash and cash equivalents							(1,150	)			1,254				73				9
	Cash and cash equivalents at beginning of year			10				11,127				9,977				11,231				1,357
	Cash and cash equivalents at end of year			10				9,977				11,231				11,304				1,366

F-6

---

Table of Contents

		Share
		Capital				Retained				Reserves
		(Note 24)				Earnings				(Note 25)				Total
		RMB				RMB				RMB				RMB
Balance at January 1, 2002			175,824				35,607				79,175				290,606
Net income for the year ended December 31, 2002			—				46,910				—				46,910
Transfer to reserves (Note 25)			—				(5,863	)			5,863				—
Final dividend for 2001 (Note 9)			—				(8,839	)			—				(8,839	)
Interim dividend for 2002 (Note 9)			—				(8,811	)			—				(8,811	)
Contribution from CNPC to marketing enterprises (Note 2)			—				—				10				10
Payment to CNPC for acquisition of marketing enterprises (Note 2)			—				—				(3,200	)			(3,200	)
Balance at December 31, 2002			175,824				59,004				81,848				316,676
Net income for the year ended December 31, 2003			—				69,614				—				69,614
Revaluation surplus of property, plant and equipment, net of tax			—				—				527				527
Revaluation loss offset against previous revaluation surplus of property, plant and equipment, net of tax			—				—				(526	)			(526	)
Transfer to reserves (Note 25)			—				(9,363	)			9,363				—
Final dividend for 2002 (Note 9)			—				(12,299	)			—				(12,299	)
Interim dividend for 2003 (Note 9)			—				(17,379	)			—				(17,379	)
Balance at December 31, 2003			175,824				89,577				91,212				356,613
Net income for the year ended December 31, 2004			—				102,927				—				102,927
Transfer to reserves (Note 25)			—				(14,552	)			14,552				—
Final dividend for 2003 (Note 9)			—				(13,947	)			—				(13,947	)
Interim dividend for 2004 (Note 9)			—				(20,381	)			—				(20,381	)
Balance at December 31, 2004			175,824				143,624				105,764				425,212
Balance at December 31, 2004 in US$			21,244				17,353				12,779				51,376

F-7

---

Table of Contents

1	ORGANIZATION AND PRINCIPAL ACTIVITIES

2	BASIS OF PREPARATION

F-8

---

Table of Contents

3	SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

	(a) Basis of consolidation

	(b) Investments in equity affiliates

	(c) Foreign currencies

F-9

---

Table of Contents

	(d) Financial instruments

	(e) Investments

	(f) Property, plant and equipment

F-10

---

Table of Contents

Buildings			25-40 years
Plant and machinery			10-15 years
Equipment and motor vehicles			3-16 years

	(g) Oil and gas properties

F-11

---

Table of Contents

	(h) Intangible assets

F-12

---

Table of Contents

F-13

---

Table of Contents

F-14

---

Table of Contents

F-15

---

Table of Contents

4	EMPLOYEE COMPENSATION COSTS

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Wages and salaries			10,631				12,893				14,926
Social security costs(i)			5,617				6,649				7,383
			16,248				19,542				22,309

	(i)	Social security costs represent contributions to funds for staff welfare organized by the municipal and provincial governments including contribution to the retirement benefit plans (Note 26).

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Refining facilities			1,179				1,596				192
Chemical facilities			942				759				28
			2,121				2,355				220

F-16

---

Table of Contents

			Year Ended December 31,
			2002				2003				2004
			RMB				RMB				RMB
Interest on
	— loans			4,402				3,662				3,306
	— capital leases			10				4				2
Less: amounts capitalized				(896	)			(1,320	)			(1,005	)
				3,516				2,346				2,303

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Current tax			19,289				26,347				39,404
Deferred income tax (Note 23)			2,897				1,594				2,814
Share of tax of equity affiliates			45				131				345
			22,231				28,072				42,563

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Income before income taxes			69,240				98,322				147,141
Tax calculated at a tax rate of 33%			22,849				32,446				48,556
Prior year tax return adjustment			618				419				27
Effect of preferential tax rate			(2,377	)			(5,190	)			(6,886	)
Utilization of previously unrecognized tax loss of subsidiaries			—				—				(832	)
Income not subject to tax			(93	)			(566	)			(605	)
Expenses not deductible for tax purposes			1,234				963				2,303
Tax charge			22,231				28,072				42,563

F-17

---

Table of Contents

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Final dividend for 2001 (Note (i))			8,839				—				—
Interim dividend for 2002 (Note (ii))			8,811				—				—
Final dividend for 2002 (Note (iii))			—				12,299				—
Interim dividend for 2003 (Note (iv))			—				17,379				—
Final dividend for 2003 (Note (v))			—				—				13,947
Interim dividend for 2004 (Note (vi))			—				—				20,381
			17,650				29,678				34,328

(i)	A final dividend in respect of 2001 of RMB 0.050272 per share amounting to a total of RMB 8,839 was paid on June 21, 2002, and was accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2002.
(ii)	An interim dividend in respect of 2002 of RMB 0.050113 per share amounting to RMB 8,811 was paid on October 8, 2002, and was accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2002.
(iii)	A final dividend in respect of 2002 of RMB 0.069951 per share amounting to a total of RMB 12,299 was paid on June 12, 2003, and was accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2003.
(iv)	An interim dividend in respect of 2003 of RMB 0.098841 per share amounting to a total of RMB 17,379 was paid on October 8, 2003, and was accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2003.
(v)	A final dividend in respect of 2003 of RMB 0.079324 per share amounting to a total of RMB 13,947 was paid on June 2, 2004, and was accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2004.
(vi)	As authorized by shareholders in the Annual General Meeting on May 18, 2004, the Board of Directors, in a meeting held on August 26, 2004, resolved to distribute an interim dividend in respect of 2004 of RMB 0.115919 per share amounting to a total of RMB 20,381.The interim dividend was paid on October 8, 2004, and was accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2004.
(vii)	At the meeting on March 16, 2005, the Board of Directors proposed a final dividend in respect of 2004 of RMB 0.147511 per share amounting to a total of RMB 25,936. These financial statements do not reflect this dividend payable, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the year ended December 31, 2005.

F-18

---

Table of Contents

10	CASH AND CASH EQUIVALENTS

		At December 31,
		2003				2004
		RMB				RMB
Cash at bank and in hand			11,231				11,304

12	NOTES RECEIVABLE

			At December 31,
			2003				2004
			RMB				RMB
Accounts receivable due from third parties				8,263				6,905
Less: Impairment provision				(5,872	)			(4,740	)
				2,391				2,165
Accounts receivable due from related parties
	— Fellow CNPC subsidiaries			592				482
	— Equity affiliates			280				15
				3,263				2,662

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Balance at beginning of year			6,663				6,356				5,872
(Write back)/Provision			(45	)			210				(442	)
Amount written off against provision			(262	)			(694	)			(690	)
Balance at end of year			6,356				5,872				4,740

F-19

---

Table of Contents

		At December 31,
		2003				2004
		RMB				RMB
Crude oil and other raw materials			9,553				13,895
Work in progress			3,652				5,320
Finished goods			16,367				27,394
Spare parts and consumables			66				59
			29,638				46,668
Less: Write down in inventories			(766	)			(897	)
			28,872				45,771

		Year Ended
		December 31,
		2002				2003				2004
		RMB				RMB				RMB
Balance at beginning of year			800				653				766
(Write back)/Provision			(122	)			136				146
Amount written off against provision			(25	)			(23	)			(15	)
Balance at end of year			653				766				897

15	PREPAID EXPENSES AND OTHER CURRENT ASSETS

		At December 31,
		2003				2004
		RMB				RMB
Other receivables			10,173				8,948
Less: Impairment provision			(6,283	)			(7,046	)
			3,890				1,902
Amounts due from CNPC			2,038				3,385
Amounts due from fellow CNPC subsidiaries			2,705				4,397
Advances to suppliers			4,105				7,539
Prepaid expenses			103				230
Other current assets			687				110
			13,528				17,563

F-20

---

Table of Contents

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Balance at beginning of year			5,074				5,313				6,283
Provision			329				1,224				922
Amount written off against provision			(90	)			(254	)			(159	)
Balance at end of year			5,313				6,283				7,046

16	PROPERTY, PLANT AND EQUIPMENT

Year Ended						Oil and Gas				Plant and				Motor								Construction
December 31, 2003		Buildings				Property				Equipment				Vehicles				Other				in Progress				Total
		RMB				RMB				RMB				RMB				RMB				RMB				RMB
Cost or valuation
At beginning of the year			50,539				337,998				205,921				7,384				5,272				30,594				637,708
Additions			243				289				952				946				73				80,426				82,929
Revaluation surplus			—				—				(1,568	)			—				—				—				(1,568	)
Revaluation loss			—				—				(2,133	)			—				—				—				(2,133	)
Transfers			6,263				43,308				27,834				—				354				(77,759	)			—
Disposals or write off			(1,738	)			(12,785	)			(8,285	)			(537	)			(249	)			—				(23,594	)
At end of the year			55,307				368,810				222,721				7,793				5,450				33,261				693,342
Accumulated depreciation and impairment
At beginning of the year			(10,866	)			(137,653	)			(90,462	)			(3,649	)			(1,783	)			—				(244,413	)
Charge for the year			(1,817	)			(21,060	)			(15,120	)			(731	)			(586	)			—				(39,314	)
Revaluation surplus			—				—				2,440				—				—				—				2,440
Revaluation loss			—				—				876				—				—				—				876
Disposals or write off			1,474				7,871				5,007				416				176				—				14,944
At end of the year			(11,209	)			(150,842	)			(97,259	)			(3,964	)			(2,193	)			—				(265,467	)
Net book value
At end of the year			44,098				217,968				125,462				3,829				3,257				33,261				427,875
Carrying value of the property, plant and equipment had they been stated at cost less accumulated depreciation			39,229				203,025				104,976				3,304				2,622				33,261				386,417

F-21

---

Table of Contents

Year Ended						Oil and Gas				Plant and				Motor								Construction
December 31, 2004		Buildings				Property				Equipment				Vehicles				Other				in Progress				Total
		RMB				RMB				RMB				RMB				RMB				RMB				RMB
Cost or valuation
At beginning of the year			55,307				368,810				222,721				7,793				5,450				33,261				693,342
Additions			940				203				2,130				1,227				76				90,773				95,349
Transfers			9,327				48,240				28,865				—				370				(86,802	)			—
Disposals or write off			(2,142	)			(8,703	)			(5,508	)			(241	)			(61	)			—				(16,655	)
At end of the year			63,432				408,550				248,208				8,779				5,835				37,232				772,036
Accumulated depreciation and impairment
At beginning of the year			(11,209	)			(150,842	)			(97,259	)			(3,964	)			(2,193	)			—				(265,467	)
Charge for the year			(2,049	)			(24,839	)			(16,569	)			(794	)			(610	)			(202	)			(45,063	)
Disposals or write off			843				2,985				2,931				208				46				—				7,013
At end of the year			(12,415	)			(172,696	)			(110,897	)			(4,550	)			(2,757	)			(202	)			(303,517	)
Net book value
At end of the year			51,017				235,854				137,311				4,229				3,078				37,030				468,519
Carrying value of the property, plant and equipment had they been stated at cost less accumulated depreciation			46,520				226,567				118,590				3,711				2,506				37,030				434,924

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Beginning balance at January 1			4,880				3,764				4,255
Additions to capitalized exploratory well costs pending the determination of proved reserves			5,813				9,232				10,908
Reclassified to wells, facilities, and equipment based on the determination of proved reserves			(3,402	)			(4,050	)			(4,756	)
Capitalized exploratory well costs charged to expense			(3,527	)			(4,691	)			(4,718	)
Ending balance at December 31			3,764				4,255				5,689
Number of wells at year end			476				636				782

		At December 31,
		2003				2004
		RMB				RMB
One year or less			3,988				5,278
Over one year			267				411
Balance at December 31			4,255				5,689

F-22

---

Table of Contents

		At December 31,
		2003				2004
		RMB				RMB
Short-term lease (less than 10 years)			1,125				335
Medium-term lease (10 to 50 years)			42,973				50,682
			44,098				51,017

		At December 31,
		2003				2004
		RMB				RMB
Exploration and Production			—				45
Refining and Marketing			94				94
Chemicals and Marketing			221				110
Accumulated depreciation			(75	)			(74	)
			240				175

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Owned assets			36,018				39,293				45,040
Assets under capital lease			27				21				23

F-23

---

Table of Contents

17	INVESTMENTS IN EQUITY AFFILIATES

Attributable

Country of

Paid-up/

Equity

Incorporation

Registered

Interest

Company Name

and Operations

Capital

Held (%)

Principal Activities

Dalian West Pacific Petrochemical Co., Ltd.

PRC

USD258

28.4

Production and sale of refined and petrochemical products

China Marine Bunker (PetroChina) Co., Ltd.

PRC

RMB 1,000

50

Supplying bunker oils, marine lubricant and fresh water to foreign trading vessels and coastal vessels, transportation, storage, import and export of oil products

F-24

---

Table of Contents

18	AVAILABLE-FOR-SALE INVESTMENTS

		At December 31,
		2003				2004
		RMB				RMB
Unlisted available-for-sale investments			2,652				2,265
Less: Impairment provision			(813	)			(755	)
			1,839				1,510

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Balance at beginning of year			665				660				813
Provision			4				158				26
Amount written off against provision			(9	)			(5	)			(84	)
Balance at end of year			660				813				755

19	ADVANCE OPERATING LEASE PAYMENTS

		At December 31,
		2003				2004
		RMB				RMB
Land use rights			5,544				7,952
Advance lease payments			1,708				4,296
			7,252				12,248

F-25

---

Table of Contents

20	INTANGIBLE AND OTHER ASSETS

		At December 31,
		2003												2004
						Accumulated												Accumulated
		Cost				Amortization				Net				Cost				Amortization				Net
		RMB				RMB				RMB				RMB				RMB				RMB
Patents			1,721				(769	)			952				1,873				(958	)			915
Technical know-how			239				(155	)			84				248				(181	)			67
Other			1,300				(348	)			952				1,421				(395	)			1,026
Intangible assets			3,260				(1,272	)			1,988				3,542				(1,534	)			2,008
Other assets											1,036												979
											3,024												2,987

F-26

---

Table of Contents

21	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

			At December 31,
			2003				2004
			RMB				RMB
Trade payables				10,150				11,802
Advances from customers				6,861				6,950
Salaries and welfare payable				5,413				5,869
Accrued expenses				5				7
Dividends payable by subsidiaries to minority shareholders				118				38
Interest payable				130				33
Construction fee and equipment cost payables				13,760				17,113
Payable to Sinopec				610				663
Advances from Sinopec				233				42
One-time employee housing remedial payment payable				2,270				1,740
Other payables				10,628				10,986
Amounts due to related parties
	— CNPC			1,531				2,681
	— Fellow CNPC subsidiaries			11,880				12,202
	— Equity affiliates			591				570
				64,180				70,696

22	DEBT

			At December 31,
			2003				2004
			RMB				RMB
Bank loans
	— secured			114				29
	— unsecured			8,450				10,631
Loans from fellow CNPC subsidiaries				610				600
Other				5				8
				9,179				11,268
Current portion of long-term debt				19,711				16,008
				28,890				27,276

F-27

---

Table of Contents

				At December 31,
		Interest Rate and Final Maturity		2003		2004
				RMB		RMB
Renminbi-denominated loans:
Bank loans for the development of oil fields and construction of refining plants		Majority variable interest rates ranging from 4.94% to 5.85% per annum as of December 31, 2004, with maturities through 2010		20,327		16,195
Bank loans for working capital		Majority variable interest rate at 4.94% per annum as of December 31, 2004, with maturities through 2007		6,073		6,016
Loans from related parties for the development of oil fields and construction of refining plants		Floating interest rate ranging from 4.46% to 5.18% per annum as of December 31, 2004, with maturities through 2032		15,620		15,610
Working capital loans from related parties		Floating interest rate at 4.39% per annum as of December 31, 2004, with maturity through 2007		4,000		4,000
Working capital loans		Fixed interest rates at 6.32% per annum with no fixed repayment term		10		8
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		1,350
Corporate debenture for the development of oil and gas properties		Fixed interest rate at 4.11% per annum with maturities through 2013		1,500		1,500
US Dollar-denominated loans:
Bank loans for the development of oil fields and construction of refining plants		Fixed interest rates ranging from free to 8.66% per annum with maturities through 2038		2,881		1,535
Bank loans for the development of oil fields and construction of refining plants		Floating interest rates ranging from 1.65% to 3.43% per annum as of December 31, 2004, with maturities through 2014		1,403		1,609
Bank loans for working capital		Floating interest rate at LIBOR plus 0.60% per annum as of December 31, 2004 with maturities through 2006		—		492
Bank loans for acquisition of overseas oil and gas properties		Floating interest rates ranging from LIBOR plus 0.55% to LIBOR plus 0.60% per annum as of December 31, 2004, with maturities through 2009		1,493		1,490
Loans from related parties for the development of oil fields and construction of refining plants		Floating interest rate at LIBOR minus 0.25% per annum as of December 31, 2004, with maturities through 2005		3,633		1,633
Loans from related parties for acquisition of overseas oil and gas properties		Floating interest rate at LIBOR plus 0.40% per annum as of December 31, 2004, with maturities through 2006		608		608

F-28

---

Table of Contents

				At December 31,
		Interest Rate and Final Maturity		2003		2004
				RMB		RMB
Loans from related parties for working capital		Floating interest rate at LIBOR plus 0.40% per annum as of December 31, 2004, with maturities through 2006		717		717
Loans for the development of oil fields and construction of refining plants		Fixed interest rate at 1.55% per annum with maturities through 2022		586		554
Japanese Yen-denominated loans:
Bank loans for the development of oil fields and construction of refining plants		Fixed interest rates ranging from 4.10% to 5.30% per annum with maturities through 2010		578		430
Euro-denominated loans:
Bank loans for the development of oil fields and construction of refining plants		Fixed interest rates ranging from 2.00% to 8.30% per annum with maturities through 2023		381		360
British Pound-denominated loans:
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		454		338
				61,614		54,445
Capital lease obligations				56		21
Total long-term debt				61,670		54,466
Less: Current portion of long-term debt				(19,711)		(16,008)
				41,959		38,458

F-29

---

Table of Contents

			At December 31,
			2003				2004
			RMB				RMB
Total debt:
	— at fixed rates			17,024				17,790
	— at variable rates			53,825				47,944
				70,849				65,734
Weighted average effective interest rates:
	— bank loans			4.77	%			4.73	%
	— loans from related parties			4.23	%			4.55	%
	— loans from third parties			1.64	%			1.68	%
	— corporate debentures			4.30	%			4.30	%
	— capital lease obligations			3.22	%			4.78	%

		Carrying amounts
		At December 31,
		2003				2004
		RMB				RMB
Bank loans			33,590				28,465
Loans from related parties			24,578				22,568
Corporate debentures			2,850				2,850
Other			596				562
			61,614				54,445

		Fair values
		At December 31,
		2003				2004
		RMB				RMB
Bank loans			33,514				28,346
Loans from related parties			24,578				22,568
Corporate debentures			2,640				2,632
Other			422				404
			61,154				53,950

F-30

---

Table of Contents

		At December 31,
		2003				2004
		RMB				RMB
First year			19,672				15,987
Second year			18,166				8,130
Third year			7,331				16,493
Fourth year			5,640				4,921
Fifth year			4,137				1,547
Thereafter			6,668				7,367
			61,614				54,445

		At December 31,
		2003				2004
		RMB				RMB
First year			41				22
Second year			17				—
			58				22
Future finance charges on capital lease obligations			(2	)			(1	)
Present value of capital lease obligations			56				21
The present value of capital lease obligations can be analyzed as follows:
First year			39				21
Second year			17				—
			56				21

			Year Ended December 31,
			2002				2003				2004
			RMB				RMB				RMB
At beginning of year				7,030				9,927				11,526
Income statement charge (Note 7)				2,897				1,594				2,814
Charged to equity
	— net surplus on revaluation			—				5				—
At end of year				9,927				11,526				14,340

F-31

---

Table of Contents

				At December 31,
				2003				2004
				RMB				RMB
Deferred tax assets
	Current
		Provisions, primarily for receivables and inventories			4,015				4,549
		Tax losses of subsidiaries			39				—
	Non current
		Shut down of manufacturing assets and impairment of long-term assets			1,039				2,454
		Other			579				538
Total deferred tax assets					5,672				7,541
Deferred tax liabilities
	Current
		Sales (Note(i))			4,401				4,401
	Non current
		Accelerated tax depreciation			12,519				17,230
		Other			278				250
Total deferred tax liabilities					17,198				21,881
Net deferred tax liabilities					11,526				14,340

(i)	Prior to the formation of the Company in November 1999, certain crude oil sales were exempted from income tax. Upon formation of the Company, such exemption ceased to be available. A portion of the previously exempted items may become taxable at a later date in certain circumstances at the discretion of the tax authorities.
(ii)	There were no material unrecognized tax losses at December 31, 2004.

			At December 31,
			2003				2004
			RMB				RMB
Registered, issued and fully paid:
	State-owned shares			158,242				158,242
	H shares			17,582				17,582
				175,824				175,824

F-32

---

Table of Contents

F-33

---

Table of Contents

			Year Ended
			December 31,
			2003				2004
			RMB				RMB
Revaluation Reserve
Beginning balance				79,945				79,946
Revaluation surplus of property, plant and equipment (Note e)
	— gross			774				—
	— tax			(247	)			—
Revaluation loss offset against previous revaluation surplus of property, plant and equipment
	— gross			(768	)			—
	— tax			242				—
Ending balance				79,946				79,946
Capital Reserve
Beginning balance				(28,557	)			(28,557	)
Ending balance				(28,557	)			(28,557	)
Statutory Common Reserve Fund (Note a)
Beginning balance				20,128				26,370
Transfer from retained earnings				6,242				9,701
Ending balance				26,370				36,071
Statutory Common Welfare Fund (Note b)
Beginning balance				13,532				16,653
Transfer from retained earnings				3,121				4,851
Ending balance				16,653				21,504
Other Reserves
Beginning balance				(3,200	)			(3,200	)
Ending balance				(3,200	)			(3,200	)
				91,212				105,764

(a)		Pursuant to 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 statutory common reserve fund until 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 statutory common 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 a resolution of shareholders’ general meeting, the Company may convert its statutory common reserve fund into share capital and issue bonus shares to existing shareholders in proportion to their original shareholdings or to increase the nominal value of each share currently held by them, provided that the balance of the reserve fund after such issue is not less than 25% of the registered capital.

F-34

---

Table of Contents

(b)		Pursuant to the PRC regulations and the Company’s Articles of Association, the Company is required to transfer 5% to 10% of its net income, as determined under the PRC accounting regulations, to the statutory common welfare fund. This fund can only be used to provide common facilities, of which the Group retains the titles, and other collective benefits to the Company’s employees. This fund is non-distributable other than in liquidation. The directors have proposed to transfer 5% (2003: 5%) of the net income, as determined under the PRC accounting regulations, for the year ended December 31, 2004 to the statutory common welfare fund.
(c)		The Company’s distributable reserve is the retained earnings computed under the PRC accounting regulations, which amounted to RMB 59,104 and RMB 95,248 as of December 31, 2003 and 2004, respectively. The distributable reserve computed under the PRC accounting regulations at December 31, 2004 has been arrived at after the accrual for the proposed final dividend in respect of year 2004 of RMB 25,936 (Note 9 (vii)).
(d)		As of December 31, 2004, Revaluation surplus relating to depreciation and disposals amounted to approximately RMB 38,064 and RMB 46,757 as of December 31, 2003 and 2004, respectively.
(e)		The revaluation surplus recognized during the formation of the Group in 1999 was partially utilized to offset against the revaluation loss on the same assets arising in 2003 (Note 16). Additional valuation surplus arising in 2003 was credited to the revaluation reserve.

26	PENSIONS

27	FINANCIAL INSTRUMENTS

	(a) Credit risk

F-35

---

Table of Contents

	(b) Interest rate risk

(c)	Foreign exchange rate risk

(d)	Commodity price risk

(e)	Fair values

F-36

---

Table of Contents

28	CONTINGENT LIABILITIES

		At December 31,
		2003				2004
		RMB				RMB
Guarantee of debts of equity affiliates			448				203

	•	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;
	•	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.

F-37

---

Table of Contents

F-38

---

Table of Contents

		At December 31,
		2003				2004
		RMB				RMB
First year			2,552				2,701
Second year			2,433				2,473
Third year			2,409				2,452
Fourth year			2,391				2,434
Fifth year			2,380				2,356
Thereafter			84,776				83,035
			96,941				95,451

			At December 31,
			2003				2004
			RMB				RMB
Capital expenditure contracted for at the balance sheet date but not recognized in the financial statements is as follows:
	Oil and gas properties			896				645
	Plant and equipment			10,055				4,614
	Other			194				111
				11,145				5,370

F-39

---

Table of Contents

		Quantities
		(billion of cubic feet)
2005			229
2006			443
2007			581
2008			637
2009			701
2010 and thereafter			6,111
			8,702

		RMB
2005			618
2006			681
2007			712
2008			712
2009			712

F-40

---

Table of Contents

		Devon				Jilian				Tashu				Total
		RMB				RMB				RMB				RMB
Assets			2,145				1,050				897				4,092
Liabilities			(77	)			(664	)			(262	)			(1,003	)
			2,068				386				635				3,089
Equity interest acquired			100.0%				35.0%				53.1%
Fair value of net assets acquired			2,068				135				337				2,540
Less: Cash and cash equivalents acquired			(64	)			(8	)			(264	)			(336	)
Consideration not yet settled			—				(54	)			—				(54	)
Cash outflow on acquisition			2,004				73				73				2,150

		Year Ended December 31,
		2002								2003								2004
						% to								% to								% to
						Total								Total								Total
		Revenue				Revenue				Revenue				Revenue				Revenue				Revenue
		RMB				%				RMB				%				RMB				%
Sinopec			26,497				11				35,932				12				36,977				9
CNPC			7,772				3				9,323				3				14,516				4
			34,269				14				45,255				15				51,493				13

F-41

---

Table of Contents

F-42

---

Table of Contents

			Notes				Year Ended December 31,
							2002				2003				2004
							RMB				RMB				RMB
Sale of goods				(a	)			7,772				9,323				14,516
Fees paid for construction and technical services				(b	)
	— Exploration and development services			(c	)			21,781				25,180				29,030
	— Other construction and technical services			(d	)			16,324				15,688				18,469
Fees for production services				(e	)			15,743				16,042				16,313
Social services charge				(f	)			1,243				1,326				1,289
Ancillary service charges				(g	)			1,713				1,683				1,717
Interest income				(h	)			25				30				25
Interest expense				(i	)			1,086				1,052				1,097
Rental expense				(j	)			1,916				2,001				2,106
Commission expense and other charges				(k	)			936				971				884

(a)	Represents sale of crude oil, refined and chemical products conducted principally at market prices.
(b)	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 cost of no more than 15%, including exploration and development services and oilfield construction services.
(c)	Direct costs for exploration and development services comprise geophysical survey, drilling, well cementing, logging, and well testing.
(d)	The fees paid for other construction and technical services comprise fees for construction of refineries and chemical plants and technical services in connection with oil and gas exploration and production activities such as oilfield construction, technology research, engineering and design, etc.
(e)	The fees paid for production services comprise fees for the repair of machinery, supply of water, electricity and gas, provision of services such as communications, transportation, fire fighting, asset leasing, environmental protection and sanitation, maintenance of roads, manufacture of replacement parts and machinery.
(f)	These represent expenditures for social welfare and support services which are charged at cost.
(g)	Ancillary service charges represent mainly fees for property management, the provision of training centers, guesthouses, canteens, public shower rooms, etc.
(h)	The Group had deposits placed with China Petroleum Finance Company Limited (“CP Finance”), a subsidiary of CNPC and a non-bank financial institution approved by the People’s Bank of China, amounting to RMB 2,861, RMB 2,331 and RMB 1,782 as of December 31, 2002, 2003 and 2004 respectively. The deposits yield interest at prevailing saving deposit rates.

F-43

---

Table of Contents

(i)	The Group had unsecured short-term and long-term loans from CP Finance amounting to RMB 24,702, RMB 25,188 and RMB 23,168 as of December 31, 2002, 2003 and 2004 respectively, included under loans from related parties. The loans were interest bearing at market rates.
(j)	Rental expenses are calculated in accordance with the lease agreements entered into between the Company and CNPC.
(k)	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.
(l)	The Group had a 4.73%, 7.5% and 7.5% equity interest in CP Finance at a book value of RMB 94, RMB 299 and RMB 299 as of December 31, 2002, 2003 and 2004 respectively.

		Year Ended December 31,
		2002				2003				2004
		RMB’000				RMB’000				RMB’000
Fee for directors and supervisors			128				83				120
Salaries, allowances and other benefits			1,042				1,377				2,012
Contribution to retirement benefit scheme			25				34				43
			1,195				1,494				2,175

		Year Ended December 31,
		2002				2003				2004
		Number				Number				Number
Nil — RMB 1			23				19				24

F-44

---

Table of Contents

F-45

---

Table of Contents

		Exploration				Refining				Chemicals				Natural Gas
		and				and				and				and
Year Ended December 31, 2002		Production				Marketing				Marketing				Pipeline				Other				Total
		RMB				RMB				RMB				RMB				RMB				RMB
Sales and other operating revenues (including intersegment)			147,308				174,621				29,661				12,733				—				364,323
Less: Intersegment sales			(106,266	)			(9,988	)			(1,093	)			(2,552	)			—				(119,899	)
Total sales and other operating revenues from external customers			41,042				164,633				28,568				10,181				—				244,424
Depreciation, depletion and amortization			(21,972	)			(7,144	)			(6,336	)			(1,213	)			(117	)			(36,782	)
Segment result			76,943				17,815				(1,217	)			1,796				(462	)			94,875
Other costs			(4,804	)			(14,997	)			(1,945	)			(244	)			(544	)			(22,534	)
Income/(loss) from operations			72,139				2,818				(3,162	)			1,552				(1,006	)			72,341
Finance costs																							(3,369	)
Equity in (loss)/income of affiliates accounted for by equity method			(38	)			12				(8	)			71				231				268
Income before income taxes																							69,240
Income taxes																							(22,231	)
Minority interests																							(99	)
Net income																							46,910
Interest income (including inter-segment)			1,942				1,061				1,136				109				4,499				8,747
Less: Intersegment interest income																							(8,284	)
Interest income from external sources																							463
Interest expense (including intersegment)			(2,979	)			(2,516	)			(1,810	)			(263	)			(4,232	)			(11,800	)
Less: Intersegment interest expense																							8,284
Interest expense to external sources																							(3,516	)
Segment assets			289,277				113,751				64,169				33,740				427,709				928,646
Elimination of intersegment balances																							(449,642	)
Investments in equity affiliates			1,422				1,774				178				6				765				4,145
Total assets																							483,149

F-46

---

Table of Contents

Exploration

Refining

Chemicals

Natural Gas

and

and

and

and

Year Ended December 31, 2002

Production

Marketing

Marketing

Pipeline

Other

Total

RMB

RMB

RMB

RMB

RMB

RMB

Segment capital expenditure — for property, plant and equipment

46,078

10,503

3,140

12,912

133

72,766

Segment liabilities

89,663

68,701

44,318

22,488

113,236

338,406

Other liabilities

20,927

Elimination of intersegment balances

(197,714

)

Total liabilities

161,619

		Exploration				Refining				Chemicals				Natural Gas
		and				and				and				and
Year Ended December 31, 2003		Production				Marketing				Marketing				Pipeline				Other				Total
		RMB				RMB				RMB				RMB				RMB				RMB
Sales and other operating revenues (including intersegment)			177,271				223,584				39,211				15,067				—				455,133
Less: Intersegment sales			(128,963	)			(16,867	)			(2,263	)			(3,261	)			—				(151,354	)
Total sales and other operating revenues from external customers			48,308				206,717				36,948				11,806				—				303,779
Depreciation, depletion and amortization			(25,486	)			(7,601	)			(5,795	)			(1,543	)			(106	)			(40,531	)
Segment result			98,819				20,679				2,621				2,248				(713	)			123,654
Other costs			(6,449	)			(15,644	)			(1,580	)			(326	)			(469	)			(24,468	)
Income/(loss) from operations			92,370				5,035				1,041				1,922				(1,182	)			99,186
Finance costs																							(1,849	)
Equity in (loss)/income of affiliates accounted for by equity method			(33	)			104				42				13				859				985
Income before income taxes																							98,322
Income taxes																							(28,072	)
Minority interests																							(636	)
Net income																							69,614
Interest income (including intersegment)			2,222				552				446				117				4,403				7,740
Less: Intersegment interest income																							(7,063	)
Interest income from external sources																							677
Interest expense (including intersegment)			(2,537	)			(1,686	)			(843	)			(356	)			(3,987	)			(9,409	)
Less: Intersegment interest expense																							7,063
Interest expense to external sources																							(2,346	)

F-47

---

Table of Contents

		Exploration				Refining				Chemicals				Natural Gas
		and				and				and				and
Year Ended December 31, 2003		Production				Marketing				Marketing				Pipeline				Other				Total
		RMB				RMB				RMB				RMB				RMB				RMB
Segment assets			310,431				117,652				55,595				46,450				451,949				982,077
Elimination of intersegment balances																							(455,913	)
Investments in equity affiliates			1,184				1,889				232				41				2,225				5,571
Total assets																							531,735
Segment capital expenditure — for property, plant and equipment			52,713				12,650				3,898				13,530				138				82,929
Segment liabilities			86,050				58,372				17,634				33,535				104,326				299,917
Other liabilities																							32,548
Elimination of intersegment balances																							(162,951	)
Total liabilities																							169,514

		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)			222,305				295,598				57,179				18,255				—				593,337
Less: Intersegment sales			(176,458	)			(21,862	)			(2,679	)			(3,705	)			—				(204,704	)
Total sales and other operating revenues from external customers			45,847				273,736				54,500				14,550				—				388,633
Depreciation, depletion and amortization			(29,092	)			(8,829	)			(5,741	)			(2,645	)			(104	)			(46,411	)
Segment result			131,448				28,502				11,025				2,475				(518	)			172,932
Other costs			(5,877	)			(16,521	)			(3,370	)			60				(638	)			(26,346	)
Income/(loss) from operations			125,571				11,981				7,655				2,535				(1,156	)			146,586
Finance costs																							(1,269	)
Equity in income of affiliates accounted for by equity method			99				108				214				24				1,379				1,824
Income before income taxes																							147,141
Income taxes																							(42,563	)
Minority interests																							(1,651	)
Net income																							102,927
Interest income (including intersegment)			2,336				891				205				27				4,723				8,182
Less: Intersegment interest income																							(7,075	)
Interest income from external sources																							1,107

F-48

---

Table of Contents

		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
Interest expense (including intersegment)			(2,559	)			(1,721	)			(502	)			(693	)			(3,903	)			(9,378	)
Less: Intersegment interest expense																							7,075
Interest expense to external sources																							(2,303	)
Segment assets			339,322				140,405				55,568				61,631				507,164				1,104,090
Elimination of intersegment balances																							(502,085	)
Investments in equity affiliates			1,407				2,832				280				192				3,212				7,923
Total assets																							609,928
Segment capital expenditure — for property, plant and equipment			59,488				17,467				4,319				13,901				174				95,349
Segment liabilities			93,871				73,529				18,484				35,385				99,711				320,980
Other liabilities																							36,470
Elimination of intersegment balances																							(182,125	)
Total liabilities																							175,325

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)/income.

Note (c) —	Segment results for the years ended December 31, 2002, 2003 and 2004 included impairment provision for property, plant and equipment (Note 16) and shut down of manufacturing assets (Note 5).

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 current accounts and investments.

																		Capital
		Revenue								Total assets								expenditure
Year Ended December 31,		2003				2004				2003				2004				2003				2004
		RMB				RMB				RMB				RMB				RMB				RMB
PRC			302,854				387,639				529,209				606,147				82,275				94,235
Other (Exploration and Production)			925				994				2,526				3,781				654				1,114
			303,779				388,633				531,735				609,928				82,929				95,349

F-49

---

Table of Contents

			Year Ended December 31,
			2002				2003				2004				2004
			RMB				RMB				RMB				US$
Net income under IFRS				46,910				69,614				102,927				12,436
US GAAP adjustments:
	Reversal of revaluation loss of property, plant and equipment			—				391				—				—
	Depreciation charges on property, plant and equipment revaluation gain			8,157				8,053				8,170				987
	Depreciation charges on property, plant and equipment revaluation loss			(112	)			(144	)			(830	)			(100	)
	Loss on disposal of revalued property, plant and equipment			224				451				523				63
	Income tax effect			(2,729	)			(2,886	)			(2,595	)			(314	)
	Minority interests			(60	)			(60	)			(60	)			(7	)
	One-time remedial payments for staff housing			(2,553	)			—				—				—
Net income under US GAAP				49,837				75,419				108,135				13,065
Basic and diluted net income per share under US GAAP (RMB)				0.28				0.43				0.62				0.07

F-50

---

Table of Contents

			At December 31,
			2003				2004				2004
			RMB				RMB				US$
Shareholders’ equity under IFRS				356,613				425,212				51,376
US GAAP adjustments:
	Reversal of property, plant and equipment revaluation gain			(80,555	)			(80,555	)			(9,733	)
	Depreciation charges on property, plant and equipment revaluation gain			37,273				45,443				5,490
	Reversal of property, plant and equipment revaluation loss			1,513				1,513				183
	Depreciation charges on property, plant and equipment revaluation loss			(480	)			(1,310	)			(158	)
	Loss on disposal of revalued property, plant and equipment			791				1,314				159
	Deferred tax assets on revaluation			13,686				11,091				1,340
	Minority interests			364				304				36
	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	)			(308	)
	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				308
Shareholders’ equity under US GAAP				329,205				403,012				48,693

F-51

---

Table of Contents

		Year Ended December 31,
		2002				2003				2004				2004
		RMB				RMB				RMB				US$
Balance at beginning of year			251,914				283,464				329,205				39,776
Net profit for the year			49,837				75,419				108,135				13,065
Contribution from CNPC to marketing enterprises			10				—				—				—
Final dividend for year 2001			(8,839	)			—				—				—
Interim dividend for year 2002			(8,811	)			—				—				—
Final dividend for year 2002			—				(12,299	)			—				—
Interim dividend for year 2003			—				(17,379	)			—				—
Final dividend for year 2003			—				—				(13,947	)			(1,685	)
Interim dividend for year 2004			—				—				(20,381	)			(2,463	)
Payment to CNPC for acquisition of marketing enterprises			(3,200	)			—				—				—
Contribution from CNPC for one-time remedial staffing housing			2,553				—				—				—
Balance at end of year			283,464				329,205				403,012				48,693

	As described in Note 16, the property, plant and equipment, excluding oil and gas reserves, transferred to the 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. 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 June 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.
	The September 2003 revaluation resulted in RMB 872 in excess of the carrying value of certain property, plant and equipment immediately prior to the revaluation and a revaluation loss of RMB 1,257.
	With respect to the RMB 872 revaluation gain resulting from the 2003 revaluation, RMB 98 were related to property, plant and equipment that in 1999 experienced revaluation loss, and

F-52

---

Table of Contents

	were credited to the income statement. The remaining RMB 774 was credited to the revaluation reserve in the shareholders’ equity.
	With respect to the RMB 1,257 revaluation loss resulting from the 2003 revaluation, RMB 768 were related to property, plant and equipment that in 1999 experienced revaluation gain. The remaining RMB 489 were charged to the income statement.
	The depreciation charge, which includes impairment charge, on the revaluation surplus from January 1, 2002 to December 31, 2002 was RMB 8,157, from January 1, 2003 to December 31, 2003 was RMB 8,053, and from January 1, 2004 to December 31, 2004 was RMB 8,170.
	The depreciation charge, which includes impairment charge, on the revaluation loss from January 1, 2002 to December 31, 2002 was RMB 112, from January 1, 2003 to December 31, 2003 was RMB 144, and from January 1, 2004 to December 31, 2004 was RMB 830.
	The loss on disposal of revalued property, plant and equipment, which includes shut down of manufacturing assets, from January 1, 2002 to December 31, 2002 was RMB 224, from January 1, 2003 to December 31, 2003 was RMB 451, and from January 1, 2004 to December 31, 2004 was RMB 523.
	For purposes of reconciling to the US GAAP financial data, the effect of the revaluation, the related depreciation charges and loss on disposal 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.

The Group has disclosed in Note 31, transactions with significant customers and in Notes 13, 15, 21, 22 and 32 transactions and balances with its immediate parent, CNPC, and related companies. CNPC is owned by the PRC government, which also owns a significant portion of the productive assets in the PRC. IFRS exempts state controlled enterprises from disclosing transactions with other state controlled enterprises. IFRS also excludes from related parties government departments and agencies to the extent that such dealings are in the normal course of business. US GAAP contains no similar exemptions but requires disclosure of material related party transactions. The Group believes that it has provided meaningful disclosures of related party transactions through the major customer disclosures in Note 31 and the transactions with the CNPC Group disclosed in Note 32. Although the majority of the Group’s activities are conducted with the PRC government and its affiliates and other state controlled enterprises, none individually constitutes a major customer or supplier other than those disclosed.

The Ministry of Finance of the PRC issued several public notices and regulations during the year 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-53

---

Table of Contents

	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 Group.
	Under IFRS, such direct payments to employees or reimbursements will not be recorded through the consolidated income statement 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 income statement. 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 shareholders’ equity of the Group. There are no significant changes in this estimates during 2003 and 2004.

	In December 2004, the FASB revised FAS No. 123 (FAS 123(R)). FAS 123(R), “Share-based Payment”, requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Pro forma disclosure is no longer an alternative to financial statement recognition. FAS 123(R) is effective as of the beginning of the Company’s first fiscal year that begins after June 15, 2005. The Group is evaluating the transition provisions allowed by FAS 123(R). The Group does not expect the adoption of FAS 123(R) to have a material impact on the Group’s financial position or operational results.
	On November 24, 2004, the FASB issued Statement No. 151, “Inventory Costs”, an amendment of ARB No. 43, Chapter 4 (FAS 151). FAS 151 requires that abnormal amounts of idle capacity and spoilage costs be excluded from the cost of inventory and expensed when incurred. The provisions of FAS 151 are applicable to inventory costs incurred during fiscal years beginning after June 15, 2005. The Group does not expect the adoption of FAS 151 to have a material impact on the Group’s financial position or results of operation.
	On December 15, 2004, the FASB issued Statement No. 153, “Exchanges of Nonmonetary Assets”, an amendment of APB Opinion No. 29 (FAS 153). FAS 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. FAS 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Group does not expect the adoption of FAS 153 to have a material impact on the Group’s financial position or results of operation.

F-54

---

Table of Contents

Country

Type of

Attributable

of Incorporation

Paid-up

Legal

Equity

Company Name

and Operations

Capital

Entity

Interest

Principal Activities

RMB

%

*Daqing Oilfield Company Limited

PRC

47,500

phi

100.00

Exploration, production and the sale of crude oil and natural gas; production and sale of refined products

*Jinzhou Petrochemical Company Limited

PRC

788

psi

80.95

Production and sale of oil and chemical products

*Jilin Chemical Industrial Company Limited

PRC

3,561

psi

67.29

Production and sale of chemical products

Daqing Yu Shu Lin Oilfield Company Limited

PRC

1,272

phi

88.16

Exploration and production of crude oil and natural gas

*Liaohe Jinma Oilfield Company Limited

PRC

1,100

psi

81.82

Exploration, production, transportation and sale of crude oil and natural gas

*PetroChina International Limited

British Virgin Islands

USD 0.9

phi

100.00

Exploration and production of crude oil and natural gas outside of PRC

PetroChina International Indonesia Limited

Bahamas

USD0.005

phi

100.00

Exploration and production of crude oil and natural gas in Indonesia

phi —	Limited liability company.
psi —	Joint stock company with limited liability.

* —	Subsidiaries directly held by the Company as of December 31, 2004.

F-55

---

Table of Contents

			RMB
Results of operations
	Turnover			4,582
	Net loss			(148	)
Financial position:
	Current assets			822
	Total assets			2,077
	Current liabilities			1,237
	Total liabilities			2,314
	Net liabilities			(237	)

F-56

---

Table of Contents

			Year Ended December 31,
			2002				2003				2004
			RMB				RMB				RMB
Sales and other operating revenues
	Sales to third parties			41,042				48,308				45,847
	Intersegment sales			106,266				128,963				173,223
				147,308				177,271				219,070
Production costs excluding taxes				(29,913	)			(30,691	)			(32,863	)
Exploration expenses				(8,095	)			(10,577	)			(11,723	)
Depreciation, depletion and amortization				(18,302	)			(21,060	)			(24,839	)
Taxes other than income taxes				(5,299	)			(5,524	)			(6,729	)
Income before income taxes				85,699				109,419				142,916
Income taxes				(25,958	)			(32,376	)			(40,014	)
Results of operations from producing activities				59,741				77,043				102,902
Income from equity affiliates’ results of operations from producing activities				132				324				471

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Property costs			—				—				—
Producing assets			236,856				262,638				291,910
Support facilities			101,142				106,172				116,640
Construction-in-progress			7,895				10,485				14,114
Total capitalized costs			345,893				379,295				422,664
Accumulated depreciation, depletion and amortization			(137,653	)			(150,842	)			(172,696	)
Net capitalized costs			208,240				228,453				249,968
Share of equity affiliates’ net capitalized costs			815				1,604				777

F-57

---

Table of Contents

		Year Ended December 31,
		2002				2003				2004
		RMB				RMB				RMB
Property acquisition costs			—				—				—
Exploration costs			10,704				15,137				18,160
Development costs			35,558				39,587				43,712
Total			46,262				54,724				61,872
Share of equity affiliates’ costs of property acquisition, exploration, and development			228				592				274

F-58

---

Table of Contents

F-59

---

Table of Contents

					Crude Oil and
					Condensate				Natural Gas
					(millions of				(billions of
					barrels)				cubic feet)
Proved developed and undeveloped
	Reserves at January 1, 2002					10,959				36,103
		Changes resulting from:
			Revisions of previous estimates			349				(225	)
			Improved recovery			31				—
			Extensions and discoveries			330				3,540
			Purchases of Minerals in Place			38				193
			Production			(770	)			(794	)
	Reserves at December 31, 2002					10,937				38,817
		Changes resulting from:
			Revisions of previous estimates			199				278
			Improved recovery			81				—
			Extensions and discoveries			476				2,853
			Production			(774	)			(879	)
	Reserves at December 31, 2003					10,919				41,069
		Changes resulting from:
			Revisions of previous estimates			148				56
			Improved recovery			109				43
			Extensions and discoveries			542				4,405
			Production			(777	)			(1,019	)
	Reserves at December 31, 2004					10,941				44,554
	Proved developed reserves at:
		December 31, 2002				9,198				11,921
		December 31, 2003				8,885				13,374
		December 31, 2004				8,748				16,787
	Proportional interest in proved reserves of equity affiliates
		December 31, 2002				62				2
		December 31, 2003				78				78
		December 31, 2004				78				91

F-60

---

Table of Contents

At December 31, 2002
Future cash inflows			2,710,152
Future production costs			(745,866	)
Future development costs			(73,344	)
Future income tax expense			(562,289	)
Future net cash flows			1,328,653
Discount at 10% for estimated timing of cash flows			(713,267	)
Standardized measure of discounted future net cash flows			615,386
At December 31, 2003
Future cash inflows			2,991,193
Future production costs			(765,111	)
Future development costs			(88,556	)
Future income tax expense			(635,169	)
Future net cash flows			1,502,357
Discount at 10% for estimated timing of cash flows			(807,037	)
Standardized measure of discounted future net cash flows			695,320
At December 31, 2004
Future cash inflows			3,894,766
Future production costs			(865,257	)
Future development costs			(90,938	)
Future income tax expense			(906,035	)
Future net cash flows			2,032,536
Discount at 10% for estimated timing of cash flows			(1,061,260	)
Standardized measure of discounted future net cash flows			971,276

F-61

---

Table of Contents

Share of equity affiliates’ standardized measure of discounted future net cash flows
	At December 31, 2002			2,612
	At December 31, 2003			3,744
	At December 31, 2004			5,371

			Year Ended December 31,
			2002				2003				2004
			RMB				RMB				RMB
CHANGES IN STANDARDIZED MEASURE OF DISCOUNTED FUTURE CASH FLOWS
	Beginning of year			405,999				615,386				695,320
	Sales and transfers of oil and gas produced, net of production costs			(116,977	)			(146,580	)			(179,478	)
	Net changes in prices and production costs and other			259,016				90,150				355,109
	Extensions, discoveries and improved recovery			53,024				65,150				117,560
	Development costs incurred			(1,983	)			1,730				9,693
	Revisions of previous quantity estimates			17,364				15,520				13,236
	Accretion of discount			60,095				87,580				98,935
	Purchases of minerals in place			2,351				—				—
	Net change in income taxes			(63,503	)			(33,616	)			(139,099	)
	End of year			615,386				695,320				971,276

F-62

---

Table of Contents

Exhibit
Number		Description of Exhibits
1.1		Articles of Association (as amended) (English translation) (1)
1.2		Articles of Association (as amended and pending for approval of SASAC) (English translation)
4.1		2005 Management Performance Contract (English Translation)
4.2		Crude Oil Mutual Supply Framework Agreement, dated December 1, 2004, between China Petroleum and Chemical Corporation and PetroChina (English translation)
4.3		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)
4.4		Transfer Agreement, dated June 9, 2005, between Zhong You Kan Tan Kai Fa Company Limited and PetroChina (English Translation)
4.5		Supplementary Agreement to Comprehensive Products and Services Agreement, dated June 9, 2005, between CNPC and PetroChina (English Translation)
4.6		Form of Non-competition Agreement between CNPC and PetroChina (together with English translation)(2)
4.7		Form of Comprehensive Products and Services Agreement between CNPC and PetroChina (together with English translation)(2)
4.8		Form of Land Use Rights Leasing Contract between CNPC and PetroChina (together with English translation)(2)
4.9		Form of Buildings Leasing Contract between CNPC and PetroChina (together with English translation)(2)
4.10		Form of Trademark Licensing Contract between CNPC and PetroChina (together with English translation)(2)
4.11		Form of Patent and Know-how Licensing Contract between CNPC and PetroChina (together with English translation)(2)
4.12		Form of Computer Software Licensing Contract between CNPC and PetroChina (together with English translation)(2)
4.13		Form of Contract for Transfer of Rights under Production Sharing Contracts between CNPC and PetroChina (together with English translation)(2)
4.14		Form of Guarantee of Debts Contract between CNPC and PetroChina (together with English translation)(2)
4.15		Form of Contract for the Supervision of Certain Sales Enterprises between CNPC and PetroChina (together with English translation)(2)
4.16		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)(2)
4.17		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)(2)
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
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.

---

Table of Contents

Exhibit
Number		Description of Exhibits
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
16.2		Code of Ethics for Employees

(1)	Incorporated by reference to our annual report on Form 20-F for the fiscal year ended December 31, 2001 (File No. 1-15006) filed with the Commission.
(2)	Incorporated by reference to our Registration Statement on Form F-1 (File No. 333-11566) filed with the Commission, as declared effective on March 29, 2000.