Message from
the Chairman

In 2020, COVID-19 raged across the world, international oil prices plunged at historic scale, the world economy recessed and market demand shrank, posing unprecedented risks to the Company. Faced with the severe and complex environment, we followed the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and the leadership of the CPC Central Committee and the State Council, implemented the decisions and strategies by the Company, and stressed on systemic optimization, defending red lines, converting risks into opportunities and succeeded in both pandemic control and business operations. We recorded better-than-expected performances that outran the overall market.

We focused on market and profit improvements, achieving new progress in development quality. Market and profit oriented, we arranged productions and operations accordingly, implemented measures to tide over difficulties and improve profit, increased synergies of the business value chain and hit fullyear targets. Despite the year-on-year decrease in oil price by 21 USD per barrel, we recorded a revenue of 2.14 trillion yuan, total profit of 72.62 billion yuan, net profit of 62.05 billion yuan, and total taxes and fees of 299.3 billion yuan in 2020, delivering first tier performance among central SOEs. Domestic oil and gas E&P efficiency was further enhanced according to the seven-year campaign, with natural gas value chain covering production, supply, storage and marketing further improved. In 2020, crude production was 35.14 million tonnes and natural gas output was 30.28 billion cubic meters, break even point further lowered. Outside China, equity production was 36.72 million tonnes of oil equivalent, with continued progress in turning around the previous loss and free cash flow for three consecutive years. Refining and marketing synergies were further tapped, with crude throughput at 239 million tonnes and domestic oil products business volume at 168 million tonnes. Low-sulfur heavy bunker fuel, asphalt, and lubricants saw significant growth in sales. Chemicals structure continued to optimize with 12.06 million tonnes of ethylene production and 4.94 million tonnes of PX. High added-value products proportion in the three synthetic materials further rose and chemicals business volume reached 83 million tonnes. Oil field services business witnessed increasing weight of external market revenues and petchem engineering services business also saw growth from external market.

We focused on industrial pattern restructuring and transformation. Sticking to supply side structural reform and the one foundation, two wings and three growth drivers pattern, we continued with investment and industry layout optimization and stressed on improving competitiveness along the value chain. A number of major projects progressed smoothly including capacity building at Shunbei, West Sichuan and Weirong. A host of pipeline and storage and transmission projects were commissioned and commercial crude oil reserve projects in Tianjin, Kuche and Zhanjiang were mechanically completed. World-scale refining and chemical sites further progressed, with Zhongke commissioned and Gulei, Zhenhai, Hainan and Jiujiang accelerated. Tianjin, SECCO, Yangzi, Tahe projects were pushed ahead in an orderly manner. New businesses also grew fast with 8 hydrogen stations and 281 e-vehicle charging stations operational, and progress in wind, PV and geothermal. International operations expanded as well. The transaction of Amur gas chemical project was completed, Sibur joint venture recorded successful operations and LNG term contracts were signed. The Company also compiled its development plan and related reports for the fourteenth Five-Year Plan period.

We focused on science and technology innovation and achieved new results. By vigorously implementing innovation driven strategy, we continued to increase R&D input, headed national key R&D projects with breakthroughs in melt-blown fabric and other medical materials, ultra-deep oil and gas exploration and development, functional film, ultra-high temperature MWD, and Smart Point seismic acquisition. High efficiency cat-cracking technology was commercialized, test production of 48K large tow fiber was started and pilot facility for high purity hydrogen for fuel cell use started up successfully. In the year, we filed 7,972 patent applications, and were granted 5,140 patents, won one gold prize, three silver prizes and 6 outstanding prizes. We were also lead winner of one fist prize and three second prizes for National Science and Technology Progress. In addition, we won a second prize for National Technology Invention. As a result, we continued to rank the first among central SOEs in terms of patents capability. We deepened reform to delegate power to subsidiaries, established an innovation incubator company, unveiled pilot programme for R&D system, and inaugurated a new material research institute in Ningbo. Integration of industrialization and informatization was enhanced with smart model of incorporating field, plants, stations and institutes further promoted, and construction in smart operations centers and cloud system advanced. The supporting role of informatization and digitalization was further strengthened.

We focused on enhancing dynamism through deepened reform. The three-year SOEs reform was further pushed forward with continued reform at headquarter level and streamlining. Related assets and personnel transfer due to national pipeline reform was completed, Zhongke and Zhanjiang Dongxing assets merger was concluded and consolidation of listed and non-listed business of Baling was closed. Pilot was conducted in Zhenhai for additional profit sharing mechanism. Social functions handover was basically concluded, and loss-making affiliates’ turning around goal was further met with dual decrease in both the number of loss-making affiliates and loss scale. SASAC initiated reform and mechanism for professional managers and executives were further implemented with market oriented approach. Benchmarking and improvement measures were carried out, centralized capital management was reinforced, debt structure was optimized, and inventory and receivables were further lowered. The Company’s cash flow strengthened and debt ratio was within reasonable range. Total cost control was implemented in every business segment with cost cutting effect seen in crude purchase, materials sourcing, logistics, and commercial storage. Non-production expenses were reduced remarkably and lean management philosophy was practices thoroughly. The three-year production safety campaign was pushed ahead with more emphasis on contractors and direct operation supervision, stabilizing safety performance. We fought and won the battle against pollution, constantly reducing pollutants emission and improving green development. We also conducted major operation risks evaluation and improved risk control system, safeguarding out bottom line.

The new journey promises new challenges yet new starting point leads to new hope. In 2021, 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 for the world leading goal under the leadership of the Company’s Leading Party Member Group and the Board of Directors. We will aim for high-quality development, ensure full completion of the goals for the whole year, and make better performances to celebrate the centenary of the Communist Party of China in the beginning year of the fourteenth Five-Year Plan period.

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