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Sinopec Corp. Announces 2009 Annual Results

rebounded from the bottom. China's domestic market has undertaken reform on refined oil price and tax, which has exerted huge impact to all the business segments.

BUSINESS REVIEW AND PROSPECTS

Exploration and Production Segment

In 2009, the Company further implemented oil-and-gas resource strategy by reducing cost and fees instead of trimming production when oil price was low. The Company produced 42.42 million tones of crude oil and 8.5 billion cubic meters of natural gas, representing an increase of 1.5% and 2% respectively compared to those of last year. Sichuan to Eastern China Gas Transmission Project started trial operation. Songnan Gas Field with an annual capacity of 1 billion cubic meters was put into operation. Due to substantial decline in crude price, the segment's operating profit was RMB 19.6 billion, a decline of 70.5% over 2008. However, sales of crude oil and natural gas in volume were increased when compared with the same period of last year.

Summary of Operations of Exploration and Production Segment

    
    
    --------------------------------------------------------------------------
                                                                   Change from
                                        2009     2008     2007        2008
                                                                   to 2009 (%)
    --------------------------------------------------------------------------
    Crude oil production (mmbbls)     301.15   296.80   291.67         1.5
    Natural gas production (bcf)      299.01   293.07   282.59         2.0
    Newly added proved reserve of
     crude oil (mmbbls)               280.19   114.02    20.67       145.7
    Newly added proved reserve
     of natural gas (bcf)              78.38   921.60 3,756.67       (91.5)
    Proved reserve of crude oil
     (mmbbls)                          2,820    2,841    3,024        (0.7)
    Proved reserve of natural
     gas (bcf)                      6,738.70 6,959.31 6,330.81        (3.2)
    Proved reserve of oil and
     gas (mmboe)                       3,943    4,001    4,079        (1.4)
    --------------------------------------------------------------------------

Refining Segment

In 2009, capitalizing on the advantage of achievements made from crude oil adaptive upgrading and revamping, the Company expanded its throughput, with refineries running at full capacity since the second quarter. The Company adjusted the product mix by increasing the proportion of gasoline and jet fuel. It also actively promoted sales of asphalt, LPG and petroleum coke and expanded the contracts of processing client-supplied materials. Construction of refining facilities and quality upgrading of Fujian and Tianjin refining and chemical integration projects were completed and brought into production. In 2009, the Company processed 183 million tonnes of crude oil and produced 113.69 million tonnes of refined oil products, up 6.7% and 5.9% from the previous year respectively. Thanks to the implementation of new oil products pricing mechanism and relevant tax reform, and a series of operational measures including the adjustment of product structure, optimization of production program, and high capacity utilization rate, operating profit of refining business recorded RMB23.1 billion, an significant increase of RMB86.7 billion over an operating loss of RMB 63.6 billion last year.

Summary of Production and Operations of Refining Segment

    
    
                                                                  Change from
                                     2009     2008     2007           2008
                                                                   to 2009 (%)
    --------------------------------------------------------------------------
    Refinery throughput
     (million tonnes)              182.62   171.14   164.00               6.7
    Gasoline, diesel and
     kerosene production
     (million tonnes)              113.69   107.37    98.28               5.9
    Of which: Gasoline
     (million tonnes)               34.43    29.65    26.55              16.1
    Diesel (million tonnes)         68.86    69.74    63.41              (1.3)
    Kerosene (million tonnes)       10.39     7.99     8.32              30.0
    Light chemical feedstock
     (million tonnes)               26.87    23.12    24.00              16.2
    Light products yield(%)         75.54    74.75    74.48   0.79 percentage
                                                                        point
    Refinery yield (%)              94.53    94.05    93.95   0.48 percentage
                                                                        Point
    --------------------------------------------------------------------------
    
    Note:  1. The data of 2008 was restated for the acquisition of Qingdao
              Petrochemical.
           2. Refinery throughput is converted at 1 tonne to 7.35 barrels.

Marketing and Distribution

Capitalizing on the well-established marketing network, logistics systems and strong brand, the Company's marketing business successfully expanded its operational scale by adopting innovative marketing approaches, flexible promotional programs and customer-oriented after-sales service, in response to the severe competition in the domestic oil products market. Total number of service stations reached 29,698. Meanwhile, the Company widely encouraged the use of IC cards and substantially increased non-fuel business, with accumulated total IC card in issue reached 37.13 million and total number of Yijie convenience shop reached 12 thousand. In 2009, the Company sold 124 million tonnes of refined oil products, a slight increase over 2008, while the segment's operating profit recorded RMB 30.3 billion, a decline of 21.3% over 2008.

Summary of Operations of Marketing and Distribution Segment

    
    
                                          2009    2008    2007   Change from
                                                                2008  to 2009
                                                                      (%)
    --------------------------------------------------------------------------
    Total domestic sales volume of refined
     oil products (million tonnes)      124.02  122.98  119.39       0.8
    Of which: Retail volume
     (million tonnes)                    78.90   84.10   76.62      (6.2)
    Direct sales volume (million tonnes) 25.61   19.63   20.17      30.5
    Wholesale volume (million tonnes)    19.52   19.25   22.60       1.4
    Average annual throughput per
     station (tonne/ station)            2,715   2,935   2,697      (7.5)
    Total number of service stations    29,698  29,279  29,062       1.4
    Of which: Company- operated         29,055  28,647  28,405       1.4
    Franchised                             643     632     657       1.7
    --------------------------------------------------------------------------

Chemicals

In 2009, the Company made tremendous efforts to explore the market, strengthen the integration among production, sales and research, improve customer services and establish the strategic alliances with major clients. The main chemical production facilities operated at full capacity since March amid the unfavorable market circumstances. Fujian ethylene project was completed and put into production. Tianjin ethylene project achieved mechanical completion. In 2009, the Company produced 6.713 million tonnes of ethylene with a year-on-year increase of 6.7%, and sold 40.8 million tonnes of chemical products. The Chemicals Segment achieved operating profit of RMB 13.6 billion, and increased of RMB26.6 billion over 2008.

Summary of Production of Major Chemical Products

    
    
                                                        Unit: thousand tonnes
                                          2009    2008    2007   Change from
                                                                2008  to 2009
                                                                      (%)
    --------------------------------------------------------------------------
    Ethylene                             6,713   6,289   6,534        6.7
    Synthetic resin                     10,287   9,643   9,660        6.7
    Synthetic rubber                       884     834     800        6.0
    Synthetic fiber monomer and polymer  7,798   7,264   8,018        7.4
    Synthetic fiber                      1,302   1,260   1,417        3.3
    Urea                                 1,752   1,649   1,565        6.2
    Note: 100% production of ethylene joint ventures was included.

CAPITAL EXPENDITURE

In 2009, the Company's total capital expenditure registered RMB 110 billion, among which RMB 51.55 billion was used in E&P Segment, RMB15.47 billion in Refining Segment, RMB 16.28 billion in Marketing & Distribution, RMB 25.20 billion in Chemicals Segment, and RMB 1.51 billion mostly for corporate headquarters and others.

ENERGY SAVING AND EMISSION REDUCTION

In 2009, the Company maintained safe production and made impressive achievement in reducing energy consumption and emission, with energy consumption per RMB 10,000 output lowered by 1.14%, industrial water consumption decreased by 3.3%; COD in waste water declined by 3.6%; sulfur dioxide discharge fell by 14%; and the recycling rate of industrial water stood around 95%.

BUSINESS PROSPECTS

With the recovery of the world economy, demands for oil products in international market is expected to rebound and grow with oil price likely exceeding that of 2009.  As the basis of Chinese economic recovery is further strengthened, the policies of stimulating domestic demands and improving people's quality of life will continue to take effect, hence demands for petroleum, natural gas and chemical products at home country are expected to grow steadily. However, due to the addition of external capacity in refining and chemical production, competition in the market will remain fierce.

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