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Message from the President

2019 saw complex and grim production and operation environment, with internal and external challenges rising significantly, global economic growth slowing down, international oil prices fluctuating at a wide range, domestic refining overcapacity worsening, and continued declining of chemicals prices, which altogether led to even fiercer market competition. Facing the difficulties and challenges, we followed the guidance by Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, stuck to the strong leadership of the CPC Central Committee and the State Council, conscientiously implemented the decision by the board of directors, pursued progress in stability, and promoted operations, reform, development, innovation and other aspects of work in a coordinated manner. As a result, we achieved better-than-expected business results, and realized good momentum in corporate growth and quality development.

We focused on stabilizing growth and profits, and strived to improve the quality of development. We resolutely implemented the "six stability" work plan, being market-oriented and profit-centered, and well organized production and operations. As a result, annual goals were achieved, business segments and affiliates all recorded profits, and imbalance and inadequate development were effectively improved. In 2019, despite the drop in oil prices by 6.7 USD per barrel as compared to 2018, we recorded an operating revenue 3.0 trillion yuan, an increase of 2.3%, total profit of 100.9 billion yuan, an increase of 4.3%, and net profit of 79.1 billion yuan, an increase of 9.1%. Taxes paid were 312.2 billion yuan. The upstream seven-year action plan was pushed forward, vigorously promoting high-quality exploration and efficient development, producing 35.13 million tonnes of crude oil and 29.6 billion cubic meters of natural gas, and total unit cost continued to decline; the construction of the natural gas production, supply, storage and marketing system was accelerated, and the operating volume maintained a relatively rapid growth. With important discoveries in Canada, Angola and elsewhere, we had one of the most fruitful years for exploration recently and overseas equity production was 42.52 million tonnes of oil equivalent. Synergy between refining and marketing yielded significant results, with 250 million tonnes of crude processed and 184 million tonnes of refined products sold in the home market. Chemical production and sales achieved steady growth, producing 12.49 million tonnes of ethylene, 5.04 million tonnes of paraxylene, the proportion of high value-added products in the three major synthetic materials continuing to increase, and the total business volume of chemical products hitting 89.5 million tonnes. The profit base of oilfield service was consolidated, and refining & chemical engineering market and profit were further increased.

We focused on strengthening the weak link and adjusting the structure to promote industrial transformation and upgrading. We coordinated and promoted industrial layout and structural adjustment, strengthened investment management and optimization, and progressed with of a number of key projects. Shunbei, Jiyang, Chuanxi, Dongsheng, Phase II of Fuling,Weirong and other oil and gas projects accelerated; the mechanical completion of Zhongke refining and chemical project was accomplished, the second aromatics unit in Hainan, Zhongan Coal Chemical, Zhenhai refining upgrading were completed and put into production, Fujian Tenglong aromatics repair was concluded, Hainan ethylene project was stepped up, alkylation and bunker fuel and other refining adjustment projects were accelerated. In addition, the first phase of the Wen 23 storage depot, the first phase of the Erdos-Anping-Cangzhou gas pipeline, Tianjin LNG expansion, Jingmen - Xiangyang oil products pipeline, Dongjiakou commercial crude oil storage, Zhanjiang-Beihai oil products pipeline, Nanchuan-Fuling gas pipeline were put into operation. The company made new progress in internationalization, reaching cooperation agreements on the Amur gas chemical project and LNG sales in China, injecting the refining business into Sinopec-SK joint venture in Wuhan, and implementing a host of domestic cooperation projects such as the second unit of neopentyl glycol in BYC. We formulated and implemented major plans for natural gas business and development in the Free Trade Pilot Zones, and initiated the compiling of the "Fourteenth Five-Year Plan".

We focused on technology and innovation to drive development. We formulated medium- and long-term plans for science, technology and innovation, deepened reform to delegate powers to frontline research affiliates, promoted the construction of joint research and development centers, incubators and other innovation platforms, and enhanced the vitality of science, technology and innovation institutional mechanisms. We accelerated key and core technologies research, conducted frontier technologies research and achieved numerous new breakthroughs. The research on the theory of enrichment and exploration technology of large and medium-sized gas fields in the Sichuan Basin made progress, and the self-developed rotary geo-steering drilling was successfully applied; the development of different formulations of low-sulfur bunker fuels passed the engine performance test and endurance test, and highgrade diesel oil reached the latest international specifications; the second generation of high-efficiency environment-friendly aromatics industrial demonstration was successfully started up, the SE water-coal (coke) slurry gasification, slurry bed anthraquinone method to make hydrogen peroxide, para-aramid technology industrial application were commercialized, the development of 48K large-tow carbon fiber was successful; large crude oil tank farm safety and VOCs reduction technologies saw industrial applications; the first domestic hot dry rock fracturing was tested, fuel cell high purity hydrogen production technology was available for scaling-up, the new structure molecular sieve SCM-15 was awarded the structure code by the International Molecular Sieve Association. The company won one second prize for national science and technology invention and six second prizes for national scientific and technological progress, ranking in top tiers among the central enterprises in terms of the number of patent applications and authorizations. The integration of industrialization and informatization achieved remarkable results, with the rapid development of chememall,and in-house business travel platforms.

We focused on enhancing efficiency and dynamism through strengthening reform. We promoted institutional reform and the management system reform of the headquarters, and built the operating mechanism of the four strategic business units. The marketing company’s mixed ownership reform was progressed and the geothermal company for mixed ownership reform was established. Significant results were achieved in improving performance of the loss-running affiliates and streamlining reform. The whole level of subsidiaries making losses continued to decline, and 111 legal entities were reduced, exceeding the annual target. Decisive progress was made in the separation and transfer of the "social functions", and subsidiaries-run collectively owned businesses were further reformed. The "Double Hundred Initiative" and the comprehensive pilot reform were pressed ahead with good progress. The reform of the "three systems" advanced, and the pilot reform of professional managers and equity incentives were being steadily implemented. We supported the reform of the national oil and gas pipeline operation mechanism, continued to deepen the reform of oil companies and actively promoted cooperation with domestic partners. Adhering to the comprehensive rule of enterprises in accordance with the law to strengthen management, we promoted integration of the "three bases" of work with safety management and party building at the grassroots level, and promoted the extension of the "immediate action" to the grassroots level, so that management efficiency was significantly improved. We have comprehensively strengthened budget management, deepened the management of cost targets and cash flow, achieved better results in cost reduction and cost reduction, and maintained a low rate of comprehensive financing costs. The company completed the revision of the HSSE management policies, strengthened the supervision of contractors and direct operations, implemented the green enterprise action plan, vigorously promoted the implementation of pollution prevention and control measures, maintained a good record of overseas public security, successfully completed the safety and environmental protection tasks during major national activities, and generally maintained safe and clean production.

In 2020, we will face more challenging environment and more demanding tasks. We will conscientiously implement the decisions and plans of the CPC Central Committee and the State Council, and strive to achieve progress while securing stability under the leadership of the Company’s Leading Party Member Group and the Board of Directors. We will implement the new development concept, implement the requirements for high-quality development, keep a close eye on the goals, tackle difficulties and make vigorous efforts to implement them, ensure the full completion of the goals for the whole year, and make greater contributions to the overall construction of a prosperous society.