CNPC Annual Report 2010
Transcript of CNPC Annual Report 2010
2010 Annual Report
China National Petroleum Corporation
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Contents
Management
Review of the Year
Environment and Society
Human Resources
Technology
Annual Business Review
Financial Report
Major Events
Glossary
Message from the President
Energize ∙ Harmonize ∙ Realize
2010 was the final year of China’s 11th Five-Year Plan. In the past five years,
we seized strategic opportunities to further increase resources, expand
markets and seek a greater international role. We responded effectively
to the global economic downturn and natural calamities, and achieved
all our objectives and targets. CNPC is well on the way to becoming an
integrated international energy company with increased corporate value
and international competitiveness.
Our operating performance exceeded expectations in 2010, with operating
income of RMB 1,721 billion, total profit of RMB 172.7 billion, and tax
payments of RMB 290.4 billion, up 41%, 34.5% and 19.7% respectively year-
on-year.
In 2010, our core business played a more important role, increasing our
ability to maintain reliable supplies of oil and gas. Through successful
explorations, we made significant strategic discoveries, contributing to
sustained high reserve growth. In 2010, our newly proven oil and gas in
place was 655.77 million tons and 570.1 billion cubic meters respectively,
exceeding 1 billion tons in terms of oil equivalent for the fourth
consecutive year. Our domestic oil production grew to 105.41 million
tons. The natural gas operation maintained its rapid growth, with annual
production reaching a new high of 72.5 billion cubic meters, accounting
for 35.4% of our domestic production in terms of oil equivalent. Utilization
rate of refining units remained high with improved technical and economic
indicators. We managed the proportion of crude production, crude runs,
and oil products sales, and sold more than 100 million tons of refined
products in domestic market for the first time, with our market shares and
profitability also improving.
Our overseas business continued to grow in scale along with expanding
strategic cooperation with host countries and international oil companies.
We made important progress in cooperation with Russia, Kazakhstan,
Turkmenistan, Venezuela, and Canada. We acquired Australia’s Arrow
Energy, a CBM company, and established a presence in Qatar’s hydrocarbon
exploration in partnership with Shell. In Iraq, our cooperation projects
with BP, Total, and Petronas were well underway. Our overseas oil and gas
production reached a new high. Our competence and competitiveness
in oilfield services, engineering & construction, and equipment
manufacturing continued to grow. In addition, our emerging financial
services sector provided capital support to our overseas operations. In
2010, our international trading business experienced fast growth, with a
volume of 195 million tons and a value of USD 110.5 billion, up 27.5% and
67.6% respectively year-on-year.
Message from the President
We continued to build a green and resource-efficient enterprise while
firmly put people, safety and the environment first. We are fully committed
to the values of honesty, trustworthiness and excellence and have zero
tolerance for accidents and defects. Our energy saving and water efficiency
measures saved 1.87 million tons of standard coal equivalent and 38.21
million cubic meters of water in 2010. During the 11th Five-Year Plan
period, we cumulatively saved 9.37 million tons of standard coal equivalent
and 302 million cubic meters of water, and met our target one year ahead
of schedule. In July 2010, CNPC was honored with “Outstanding Award for
Energy Conservation and Emission Reduction” by the State-owned Assets
Supervision and Administration Commission of the State Council.
CNPC unfailingly fulfills its corporate social responsibilities, giving back
to society and shareholders while pursuing business development. We
are committed to local economic development, public welfare, poverty
alleviation and outreach programs, disaster rescue and relief activities, and
providing educational donations. In international cooperation, we are fully
engaged in serving both the host countries’ economy and community
based on the principle of mutually beneficial development.
Looking ahead to 2011, the first year of the 12th Five-Year Plan (2011-2015),
we are certain of doing even better. To this end, guided by the Scientific
Outlook on Development, we will accelerate the transformation of our
development model to adapt to changes at home and abroad. While
focusing on oil and gas business, we will fully utilize our advantages in
comprehensive and integrated operations, optimize the business structure,
promote technological innovation, strengthen safety procedures and
environmental protection, and enhance energy efficiency. Our goal is to
be a green and sustainable player in the global market, and provide more
clean and premium energy to fuel socio-economic development.
Jiang Jiemin, President
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Management
Jiang JieminPresident
Liao YongyuanVice President
Zhou JipingVice President
Wang GuoliangChief Financial Officer
Wang YilinVice President
Chen MingChief of Discipline &
Inspection Group
Zeng YukangVice President
Wang DongjinVice President
Wang FuchengVice President
Yu BaocaiVice President
Li XinhuaVice President
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Review of the Year
2010 was a year of frequent changes in international situation. The global financial crisis wound down, world demand for oil gradually recovered, and the oil price hovered around USD 80 per barrel.
By optimizing the use of existing
refining units and starting new ones
in response to market demand,
we processed 135.29 million tons
of crude and produced 86.33
million tons of refined products
domestically in 2010, up 8.1% and
7.3% respectively year-on-year.
Our sales sector witnessed fast
growth in 2010 with strengthened
market supply capacity. By
proactively adjusting our sales
in response to fluctuation in oil
products market, we realized
growth in the sales volumes,
market shares, and profitability. We
sold more than 100 million tons of
refined products in China, up 15.5%
year-on-year. Faced with rapid
growth in natural gas demand, we
strengthened the supply chain,
optimized pipeline operations, and
effectively managed gas storage to
ensure stable supplies to all users.
In 2010, we sold 66.86 billion cubic
meters of natural gas, up 12.6% year-on-year.
Construction of major projects, key domestic pipelines, and storage
facilities proceeded smoothly in 2010. We completed the Central Asia-
China dual gas pipelines and the Russia-China crude pipeline, and
launched the Myanmar-China oil and gas pipelines, providing China with
diverse import routes for oil and gas.
Despite market changes
and natural calamities, CNPC
greatly improved its operating
performance. We balanced
production, transport, sales and
storage operations, accelerated
our major project construction,
enhanced market supplies, and
carried forward the transformation
of our development model. Our
performance greatly surpassed
expectations in 2010, with
operating income of RMB 1,721
billion, total profit of RMB 172.7
billion, and tax payments of RMB
290.4 billion, up 41%, 34.5% and
19.7% respectively year-on-year.
We maintained steady growth in
upstream oil and gas business.
Enhanced exploration and
development activities helped us
continue high reserve growth. In
2010, our newly proven oil and
gas in place was 655.77 million
tons and 570.1 billion cubic
meters respectively, exceeding 1 billion tons in terms of oil equivalent
for the fourth consecutive year. The reserve replacement ratio remained
greater than 100%, compared to the global average of 83%. Our domestic
oil production grew to 105.41 million tons. The natural gas operation
maintained rapid growth, with its annual production reaching a new
high of 72.5 billion cubic meters, accounting for 35.4% of our domestic
production in terms of oil equivalent.
2008 2009 20102008 2009 2010
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2008 2009 2010
2008 2009 2010
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Our international business continued to grow, as we made rapid progress in key oil and
gas cooperation projects. Major achievements were obtained in overseas hydrocarbon
exploration, and operations of existing projects proceeded smoothly. In 2010, we produced
75.82 million tons of oil, of which our equity share was 36.03 million tons, up 8.9% and 4.97%
respectively year-on-year. We produced 13.7 billion cubic meters of natural gas, of which our
equity share was 10.38 billion cubic meters, up 67.1% and 88.2% respectively year-on-year.
Taking advantage of the comprehensive and integrated operations, CNPC rolled out and
pushed forward large oil and gas cooperation projects in the Middle East. We reached our
initial target of a 10% increase in daily production in a joint project with BP at the Rumaila
Oilfield in Iraq. We cooperated with resource-rich countries and international oil companies,
signed a number of new agreements, such as partnerships with Shell in Australia and Qatar.
We expanded our international trading business through multiple import channels. In 2010,
our trading volume was 195 million tons and the trading value amounted to USD 110.5
billion, up 27.5% and 67.6% respectively year-on-year.
Our competence and competitiveness in oilfield services and engineering & construction
were further strengthened. In the high-end overseas market, CNPC has grown into
a renowned EPC contractor. In the equipment manufacturing sector, we focused on
innovation and new product R&D, and optimized our product portfolio. Our emerging
financial services sector, consisting of banking, trusts, insurance, and financial leasing, helped
meet the capital demands of our fast business growth.
Newly proven oil in place | mmt (domestic)
Newly proven gas in place | bcm (domestic)
Crude production | mmt (domestic) Natural gas production | bcm (domestic)
Crude runs | mmt (domestic)
2010 Annual ReportReview of the Year
CNPC's share Total
2008 2009 2010 2008 2009 2010
CNPC's share Total
Natural gas production | bcm (overseas)Crude production | mmt (overseas)
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Environment and Society
Environment and Society
CNPC always gives top priority to people, the environment and safety.
We highlight production management and quality control in order
to build a resource-efficient and environmentally friendly enterprise,
and strive for harmonious relationships between energy and the
environment, and corporate and community interests.
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2010 Annual ReportEnvironment and Society
In 2010, we further improved our HSE management system and published
the HSE Management System Improvement Plan. Through benchmarking
and consultation with ISO31000 risk management standards and
OHSAS18000 occupational health and safety standards, we issued the
Social Safety Management System Manual for International Business
Operations based on our international business experience, which reduced
the risks faced by employees and (sub-) contractors to an acceptable
level. Continuous improvement was also realized by means of monitoring,
verification and review to ensure effective social safety management
system in our international business operations.
Operational SafetyWe continued to strictly implement the Safety Prohibition, standardize
management processes, regulate operational behavior and specify the
entities accountable for operational safety, resulting in overall stability in
the company’ s safety situation.
In 2010, we launched a new round of potential risk control by checking and
rating hidden safety risks. We also promoted HAZOP assessment and the
mechanical cleaning of oil tanks. In particular, we conducted specialized
examination of the construction of long-distance pipelines, the operation
of refining facilities and offshore operations in order to manage safety risks
and prevent accidents.
Environmental Protection We standardized the construction of environmental monitoring stations to
strengthen environmental risk management, control the sources of pollution
and prevent environmental accidents. We also enhanced the evaluation of
pollution reduction effectiveness and paid special attention to auditing major
emission reduction projects.
In addition, the company actively restored the environment at retired well sites
and other abandoned production areas by monitoring the soil environment,
controlling soil erosion and remedying petroleum contaminated soil.
Quality Control CNPC has long attached great importance to quality control and actively
improves management and product quality. To this end, we established the
internal quality guidelines of honesty and excellence, and set the goal of zero
accidents and zero defects. In 2010, we established or revised 40 national
standards, 200 industrial standards and 350 corporate standards, and urged
our affiliates to achieve third-party quality certification. By the end of 2010, our
102 affiliated enterprises had set up quality control systems and 54 had passed
quality management system certification.
To ensure that our products and services meet high quality standards,
we further standardized the overall process of product manufacturing,
engineering construction and services. Throughout the year, we randomly
inspected 1,944 batches of products produced by our 98 subsidiaries, and
terminated the purchase of, rejected or claimed compensation for products
produced by suppliers that failed to meet the company’s standards. To
The Kela-2 gas field, the major gas source of the West-East
Gas Pipeline, is located in Baicheng County, Xinjiang Uygur
Autonomous Region. The production area is surrounded by the
Gobi Desert, with its harsh natural environment featuring chronic
drought. As a result, great importance is attached to safeguarding
the environment with measures such as reinjecting treated
industrial wastewater back into the ground and using domestic
sewage for irrigation.
In the Kela production area, domestic sewage is drained to a
treatment pool one kilometer from the employee apartments to
create an artificial wetland covering 16,250 square meters. Now
the green area at the site is over 120,000 square meters, with
3,000 square meters of reeds surrounding the wetland, fostering
a healthy ecosystem. Every summer, reeds, wild ducks and various
water birds, along with the gas production facilities, form a
beautiful landscape in the Gobi desert.
Creation of a New Gobi Wetland
ensure a high-quality service to our customers, we also increased the
frequency and scope of quality inspection and supervision of oil products.
Energy Efficiency We have achieved significant results in improving energy and water
efficiency through the optimization of our business structure and the
implementation of major energy-saving projects. In 2010, CNPC saved 1.87
million tons of coal equivalent and 38.21 million cubic meters of water,
meeting the energy-saving target of the 11th Five-Year Plan one year ahead
of schedule and winning the “Outstanding Award for Energy Conservation
and Emission Reduction” by the State-owned Assets Supervision and
Administration Commission of the State Council.
In 2010, CNPC continued to carry out 10 major energy-saving projects and
strengthened their supervision and overall effectiveness. We launched
a total of 103 energy-saving projects, these included the upgrading of a
heavy oil steam flood system, the optimization of a steam and condensate
water system, reducing the power consumption of a mechanical oil
recovery system, and upgrading a heating furnace. In addition, monitoring
and evaluation of major energy and/or water intensive equipments and
facilities continued to ensure rational energy and water consumption.
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Environment and Society 2010 Annual Report
Emergency Response We improved our emergency response plan and the coordinated
emergency response system for key enterprises and facilities. In addition,
we issued the Regulation of Material Reserve Used for Emergency
Response to enhance the company’s ability to cope with emergencies.
CNPC now has rescue centers dedicated to dealing with fire, hazardous
chemical, long-distance oil and gas pipeline, well control and offshore
emergencies. We also attach great importance to cooperation and
coordination with external rescue forces.
Occupational Health We have established a unified occupational health database and employee
healthcare archives to improve occupational hazard prevention. We also
investigated occupational health hazards and tested key indicators in
thousands of workplaces. Throughout the year, 93% of our employees
received occupational health examinations.
To safeguard the health of production and field operation staff, we continue
to improve their medical and treatment conditions and sent professionals
to provide on-site medical services. Our long-standing Overseas Employee
Assistance Program provides psychological counseling to our overseas staff
and their families to help them cope with stress and emotional problems.
Public Welfare UndertakingsWe have a long-standing commitment to poverty alleviation and targeted
assistance. To this end, as part of the fulfillment of our social responsibilities,
we are actively involved in disaster relief and donations to education. In
addition, we are active in facilitating the development of host countries
and local communities.
Poverty Alleviation Since 1994, when CNPC first launched its targeted poverty alleviation
program in line with the requirements of the central government, we
have donated more than RMB 500 million to local industries and 297
development projects. Fruitful results have been seen in the socio-
economic development of targeted prefectures and counties in Xinjiang,
Tibet, Henan and Chongqing. In 2010, CNPC was granted "Annual
Outstanding Enterprise Award for Poverty Alleviation" by China Association
of Poverty Alleviation and Development.
In 2010, we invested RMB 19.9 million in seven projects in Shuanghu
Special District of Nachu Prefecture, mainly to build or repair infrastructure
and improve the living conditions of local farmers and herdsmen. We also
donated RMB 500,000 and 1,500 books to local culture and education
departments. From August 31 to September 4, our medical teams provided
free diagnosis and treatment to more than 200 farmers and herdsmen in
Shuanghu. Two local doctors were selected to receive further professional
training at the CNPC Central Hospital.
Donations to Education In 2010, CNPC donated more than RMB 180 million to domestic education
by means of establishing scholarships, offering student subsidies, funding
Hope primary schools, and financing research projects.
Since its establishment in 2001, the CNPC scholarship has been granted
to 7,872 students and 572 teachers in seven petroleum universities and
institutes and 15 prestigious universities in China in the form of Excellent
Student Awards, Motivational Awards and Talent Recommendation Awards.
Moreover, 2,302 students from poverty-stricken families completed their
college education with the financial assistance from CNPC.
Free diagnosis and treatment to local people in Shuanghu
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2010 Annual ReportEnvironment and Society
CNPC established public welfare funds for Africa under China
Foundation for Poverty Alleviation to facilitate community and
social development in Africa. In November 2010, CNPC Nile
Company donated USD 600,000 to this NGO to fund the building
of the Sino-Sudan Abu Ushar Friendship Hospital, the first-phase of
the Demonstration Projects for the Sudanese Maternal and Child
Healthcare System. The Abu Ushar Friendship Hospital, a general
hospital which also specializes in maternal and pediatric healthcare,
is located in Jonglei State covering an area of 2,000 square meters.
Completion of this hospital will significantly reduce the local maternal
and infant mortality rates, and improve medical services in rural
communities in Jonglei State.
Overseas Community Development CNPC adheres to the concept of mutually beneficial development
in international cooperation, and is dedicated to building long-term
partnerships with host countries and local communities by creating job
opportunities, training local employees and improving people’s living
conditions to contribute to local socio-economic development.
In Sudan, the four-year project of the Public Welfare Fund Agreement
(signed with the Ministry of Social Development of Khartoum State in
January 2007) was officially launched, mainly targeting disadvantaged
groups such as orphans, deaf-mute children, sick women, blind people and
those lacking employment-related skills.
In Kazakhstan, we invested USD 350 million in three major natural gas
utilization projects — the oil transfer station of Hope Oilfield, No. 4 Oil and
Gas Processing Plant, and wet gas re-injection. The three projects were built
and became operational within only eight months. CNPC-AktobeMunayGas
was therefore granted the "Golden Award of Most Socially Responsible
Enterprise" by Nursultan Abishevich Nazarbayev, President of Kazakhstan.
We also spent RMB 23.73 million on the construction and maintenance of
infrastructure, hospitals, and cultural and religious venues in Aktobe and
Astana. We also provided support to five agricultural areas, and funded
the repair and maintenance of community kindergartens in Mangystau
Province.
In Iraq, we gave holiday gifts to children at Basra orphanage and provided
air-conditioners, stationery and recreational items in order to improve their
living and learning conditions.
In Venezuela, Raul Cuenca is a community dominated by farming and
animal husbandry. Before 2007, 80% of local residents were in poverty and
more than 70% were unemployed. To help local residents improve their
living conditions, the joint venture of Intercampo and Caracoles project
invested USD 1.39 million to support local development. In 2010, the
elementary school was reconstructed and expanded to accommodate
1,250 pupils, and it now has its own canteen and a baseball field. By the
end of 2010, poverty in the community had been reduced by 30.3% and
the employment rate increased to 39.6%.
In Peru, Block 1AB/8 project employed a low-pressure high-flow wastewater
recycling technology which was based on studies of the water injection
horizon, injected water quality, formation breakdown pressure, and
dynamic monitoring and analysis of re-injected flow. A total of USD 484
million was invested in the construction and operation of the wastewater
recycling system in the two blocks to ensure that all the produced water
was properly treated and re-injected underground to enhance oil recovery.
Cooperation with China Foundation for Poverty Alleviation
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Human Resources
CNPC is committed to building a HR development system compatible
with its goal of building an integrated international energy company.
We adhere to the concept of putting people first in employment,
comply with related laws and regulations, respect and protect all the
legitimate rights and interests of our employees, and provide a growth
platform for employees at various levels to promote the synchronous
development of both employees and the company.
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2010 Annual ReportHuman Resources
In 2010, we further improved the remuneration, welfare and insurance
system and implemented EVA and performance assessment throughout
the company. We standardized the processes of performance planning,
performance assessment and performance improvement to develop a
rule-based performance assessment system that covers senior and middle
management, technicians and operatives. Remuneration continued to be
weighted towards field operation and key posts. Subsidies were increased
steadily for posts that require high technical skills and working at night. A
unified enterprise annuity management system was established, with the
management of enterprise annuity and the transitional annuity of CNPC being
improved, so that employee pensions can gradually rise. We also strengthened
the implementation of supplementary medical insurance which covers all
employees in order to ease the burden of their healthcare costs.
CNPC adheres to the principle of democracy, openness, competition and
selection to shortlist outstanding talents from inside and outside the
company to support business growth. In 2010, we appraised and elected
192 more senior technical experts. At the same time, we also investigated
the needs of high-level overseas talents based on our business growth
and built an overseas talent introduction database, and 10 people were
included in the National One Thousand People Program.
We continued to foster talents in business management, technology,
operational skills and international operations. Following the principle
of graduated management, we promote key training projects and
standardized professional training projects to ensure all our staff receiving
adequate training. In 2010, the headquarters organized 133 training
programs in business management, HSE, oil and gas exploration and
development and engineering construction, involving 20,000 trainees
included senior and middle management, technological experts,
technicians and operatives. Occupational skill competitions were
held covering oil production, ethylene unit operation, metal structure
manufacturing, well drilling and well control, with the winners receiving
promotion. Many young operatives are enthusiastic for such competitions
and a number of long-serving staff displayed their impressive talents,
resulting in an increase in the overall quality of our operational staff.
To meet the growing demand for talent from our expanding international
business, we strengthened the HR management and development for
overseas projects. Meanwhile, we proactively promoted the local hiring of
employees and created a communicative, coordinated and harmonious
working environment. By the end of 2010, we had a total of 80,000 foreign
employees working at our overseas oil and gas cooperation projects. In
Sudan, Kazakhstan and Indonesia, more than 90% of the employees are
local hires.
With its multicultural background, we underlined the improving of overall
competence of our international talents, especially in foreign language
skills, cross-cultural communication and international market operations.
We held training courses in foreign languages such as Arabic, Spanish and
Persian, and sent 190 staff to the US, Russia and other foreign countries
to receive professional training. We also sent 94 participants in overseas
project manager training programs and overseas project managers and
technical experts to obtain practical experience in overseas projects.
Through training, technical exchanges and educational cooperation with
local schools, we provided foreign employees with related knowledge and
operational skills training. The hard work and contribution of our foreign
employees is encouraged and recognized. We have rewarded and honored
outstanding Sudanese employees for three consecutive years. In 2010, the
Kazakhstan project company spent RMB 5 million to help outstanding local
youth receive education in prestigious universities in China, Kazakhstan
and other countries.
The Turkmenistan project of CPECC has 1,470 local employees, 70% of
the total staff. The project company provided 2,209 person/times of
training course to its employees and cooperated with local schools to
train more than 600 local people. The company also held five training
sessions for its partner Turkmenneftegasstroy State Concern and
trained 120 welders, 39 of whom passed the operational skills test
organized by the project supervision company in accordance with
China’s national welding testing rules.
Local employees said, “It is a pleasure to be trained here, work here
and we have learnt a lot.” “I really value my work today and my biggest
hope is that I can work in CPECC for a long time, because working
here itself is a kind of wealth.”
Training Turkmen Technicians
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In 2010, three CNPC scientists, Li Desheng, Su Yinao and Kuang Jun, were granted the Chen Jiageng Geo-
science Award, Guanghua Engineering Award and Guanghua Youth Award respectively, the highest honors
of the Chinese Academy of Sciences and the Chinese Academy of Engineering.
An expert in oil and gas explorationA professor-level senior engineerPetroChina Xinjiang Oilfield Company
A petroleum geologistAn academician of the Chinese Academy of SciencesResearch Institute of Petroleum Exploration and Development
Mr. Kuang innovatively proposed the models of oil entrapment by palaeouplift,
oil entrapment by fault, and oil and gas accumulation and dissipation. He has
conducted in-depth research into oil and gas reservoirs in the Junggar Basin,
which guided the discovery of six different types of oil and gas fields, including
Shixi Oilfield, the first 100-million-ton uncompartmentalized oilfield in the
heart of the desert. He organized and completed a number of major research
and application projects, and won one second prize of National Science and
Technology Advancement. He is the winner of Guanghua Youth Award of
Chinese Academy of Engineering.
Mr. Li is engaged in oil and gas exploration and development and was one of
the discoverers of the Daqing Oilfield. He has made significant contributions to
the study of continental oil generation theory, tectonic types of petroliferous
basins, lacustrine origin source beds, buried hill reservoirs and characteristics
of fractured reservoirs. He is the winner of Chen Jiageng Geo-science Award of
Chinese Academy of Sciences.
Mr. Su specializes in the research and application of drilling engineering
technology and is highly recognized in the field of directional well, cluster well
and horizontal well drilling. He has masterminded a number of national and
ministerial research projects and won two first prizes and one second prize of
National Science and Technology Advancement. He is the winner of Guanghua
Engineering Award of Chinese Academy of Engineering.
An expert in oil and gas drilling engineeringAn academician of the Chinese Academy of EngineeringCNPC Drilling Research Institute
Li Desheng
Kuang Jun
Su Yinao
2010 Annual Report Human Resources
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2010 Annual ReportHuman Resources
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Technology
In 2010, we made technical breakthroughs in the exploration and
development of conventional and unconventional oil and gas resources,
petrochemical production, oilfield services, and petroleum equipment
manufacturing. These were due to our focus on the integration,
optimization and application of existing proven technologies, research
and field tests at major national and corporate S&T projects, and follow-
up work and research on cutting-edge technologies that lead and drive
the oil and gas industry. Our efforts were driven by the needs of our core
businesses and oriented toward achieving production objectives.
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2010 Annual ReportTechnology
In the field of oil and gas exploration, innovations and improvements
to our geological theory and exploration technologies enabled massive
exploration of lithostratigraphic reservoirs. A geologic theory focusing on
the genetic model of sandy debris flows in open lacustrine basins and
the large-area, low-permeability hydrocarbon accumulation mechanism
assisted our rapid exploration of large lithostratigraphic reservoirs at Huaqing
in Ordos, Xujiahe Formation in Sichuan, and carboniferous volcanic strata
in northern Xinjiang, supported by high-precision sequence stratigraphic
industrial mapping and the prestack seismic prediction of reservoirs.
In oil and gas field development, improvements to water cut control and
potential release technologies, as well as chemical flooding for tertiary
recovery, helped maintain a stable output from Daqing Oilfield. Our field
tests on fracturing along horizontal wells for effective development of
low permeability reservoirs saw smooth progress. A breakthrough was
made in technical research and field tests of the Steam Assisted Gravity
Drainage (SAGD) for ultra-heavy oil recovery and the ignition of the
combustion drive. Our research on CO2 flooding and storage delivered
significant results, and will become the next-generation technology for the
development of low-permeability oilfields.
In the exploration and development of unconventional oil and gas, we further
improved the CBM accumulation theory, and developed key technologies
such as 2D seismic-based AVO prediction, drilling and completion of
multilateral horizontal wells, massive sand jet fracturing, optimal selection of
high-yielding layers, and drainage and extraction techniques. These enabled
large-scale CBM development in the Qinshui Basin.
Major breakthroughs occurred in CNPC’s petrochemical technologies in the
processing of inferior heavy oil, production of clean oil products, and R&D
of large-scale ethylene units and high value-added chemical products. In
addition to world-leading cracking catalysts and technology packages, we
also made major progress in the ethylene cracking furnace and product
forecasting system.
Our R&D in engineering technologies and equipment manufacturing
gave birth to a RTM software system with our independent intellectual
rights and suitable for onshore and offshore applications, as well as a next-
generation integrated and networked software platform for well logging.
Another R&D success was an all-welded large-diameter and high-pressure
ball valve suitable for long-distance pipelines. In addition, we mastered
core technologies in the manufacturing of coiled tubing and built the third
coiled tubing line in the world.
To meet the needs of basic research, key technical R&D, and technical
application, we promoted the construction of key labs and test bases for the
development of low-permeability reservoirs, pipeline transport security, LNG,
and the conversion of heavy oil to light oil. 2010 saw the completion of the
EOR State Key Laboratory, preliminary completion of the State Engineering
& Technology Center for CBM Development and Utilization, and the formal
incorporation of the National Energy Administration’s Shale Gas R&D (Test)
Center and the R&D (Test) Center for Technologies and Equipment of
Long-Distance Gas Pipelines. To further improve our R&D and innovative
capabilities, we also set up a technical R&D center in Houston to engage more
international talents in the research of basic issues and key technologies.
In 2010, we were granted 1,701 patents (out of 2,178 applications),
including 300 invention patents (out of 841 applications). Ten of our
scientific and technological achievements were granted national awards
in 2010 — the “High-efficiency exploration and development technologies
for continuously steady production of more than 40Mt/a in the later high-
water-cut period of Daqing Oilfield” was awarded the Special National
Scientific and Technological Advancement Prize (NSTAP), the “Technologies
and their applications in the West-East Gas Pipeline Project” won a First-
class NSTAP, the “Origins and its identification of natural gas in China” won
a Second-class National Science Prize (NSP), and the “New technologies
of two-segment riser catalytic cracking to increase the yield of light oil
products”, among others, won seven second-class NSTAPs.
Our theoretical innovations and technical breakthroughs overcame key
technological bottlenecks that had constrained our business growth, and led to
remarkable application results. These included the exploration of conventional
and unconventional oil and gas such as exploration for metamorphic
basement rocks and high-coal-rank CBM; production stabilization and water
cut control in mature oilfields and the thermal recovery of ultra-heavy oil in
the field of development; and seismic data processing, horizontal drilling,
completion, and staged fracturing, and logging processing and interpretation
in oilfield services; as well as efficient and safe blending transportation of
multiple types of crude in long-distance pipelines and FCC gasoline hydro-
upgrading.
Reservoir-forming Theory and Key Technologies for Metamorphic Basement Rocks
Based on systematic studies on the formation of metamorphic buried hill
reservoirs in the Liaohe sag, we established the reservoir-forming theory
for metamorphic basement rocks, and the evaluation theory for basement
reservoirs in mature basins. We also innovated and developed six key
technologies for the prediction and evaluation of basement reservoirs.
The "source-reservoir integration" exploration concept has been drawn
up, identifying three major potential areas for the exploration of basement
reservoirs. Three belts with 100Mt reserves in each have been discovered
in the metamorphic basement in the Bohai Bay Basin, newly adding 400
million tons of reserves.
"2+3" Waterflood-based Potential Release and Polymer Flooding for Type-II Reservoirs
Three important technical innovations that mark major progress in
"2+3" waterflood-based potential release and polymer flooding in type-
II reservoirs have been made in Changyuan, the major block of Daqing
Oilfield: (1) Innovations have been made in technologies for the fine
description of internal building elements in different types of channel
sand reservoirs and for the quantitative characterization of remaining
oil. In fact, the effectiveness of water control and potential release has
been so improved in thick reservoirs with ultra-high water cut that the
waterflood recovery efficiency has increased by 1-2% in applied blocks.
(2) Polymer flooding technology for type-II reservoirs with a permeability
of 100-300 mD has been developed, enhancing the recovery efficiency by
more than 10% compared to waterflood, and by 3% compared to legacy
15
2010 Annual Report Technology
polymer flooding technology for type-II reservoirs. (3) We have created
a "2 + 3" development mode and "2 + 3" comprehensive adjustment for
water control and potential release to tackle the ultra-high water cut in
Changyuan. Secondary recovery is combined with tertiary recovery and
potential release from type-II reservoirs is combined with that from type-III
reservoirs. Waterflood is carried out before tertiary recovery for type-II and
type-III reservoirs with abundant remaining oil. Waterflood-based recovery
has been enhanced by 4-6%, and by an additional 1-2% compared to
conventional tertiary infilling. These innovations provide important
guidelines on enhancing the development of similar continental sandstone
oilfields in China in their high or ultra-high water cut period.
Breakthroughs in Basic Research and Development of New Technology for Thermal Recovery of Ultra-Heavy Oil
CNPC has independently developed new test technologies and methods
that are embodied in a large-scale 3D thermal recovery simulation device.
This has allowed indoor testing technologies to advance from 1D simulation
to high-temperature and high-pressure 2D and 3D simulation. Numerical
simulation technologies enable the physical simulation of a variety of
recovery technologies for heavy and ultra-heavy oil of different scale and
spatial dimensions in oilfields. Pilot test bases have been built for new heavy
oil development technologies in Liaohe Oilfield and Xinjiang region. Major
R&D breakthroughs have been made in new technologies for steam flooding,
THAI, SAGD, and the combustion drive for the recovery of ultra heavy oil. As
for the combustion drive, the distribution pattern of the fire front, as well as
the thermodynamic characteristics in different zones, has been discovered.
Our understanding of the SAGD recovery mechanism with dual horizontal
wells for ultra-heavy oil has been enhanced. The eight key bottlenecks that
have already been overcome include SAGD cyclic warm-up and adjustment
for even development of the steam chamber, ignition of the combustion
drive, and monitoring and control of the fire front. In Liaohe Oilfield, steam
flooding and SAGD have enabled one million tons of oil to be produced
annually, with recovery enhanced by more than 25%.
Theoretical and Technological Breakthroughs in High-coal-rank CBM Exploration and Development
Regarding high-coal-rank CBM exploration theory and technology,
we have developed a geological theory system covering the origins,
occurrence, and formation of CBM reservoirs in China, and unveiled
the rules of CBM enrichment. We have clarified the varying pattern of
permeability throughout the recovery process of high-coal-rank CBM.
We also have developed methods for the prediction of recoverable CBM
resources and the comprehensive geological evaluation of CBM-enriched
zones. In addition, we have developed a coal crack prediction technology
with integrated 3D-3C acquisition, processing and interpretation, and
AVO prediction technology for CBM-enriched zones. Regarding CBM
development, we have independently designed the wellbore configuration
and well-spacing pattern of multilateral horizontal wells, and developed a
secondary fracturing technology to remove blockages in order to improve
the gas productivity of individual wells. We have introduced a “Five-Phase
& Three-Pressure” management approach at gas wells, and mastered five
production techniques featuring sand and coal dust control.
At Qinshui Basin, we have proved and massively developed China’s first
100bcm CBM gas field. With a 800Mcm/a capacity already established, the
field has become commercially operational, with a maximum daily output
of 11,000 cubic meters per individual vertical well and 55,000 cubic meters
per individual horizontal one.
Breakthroughs in Reverse Time Migration (RTM)
We developed GeoEast-Lightning, which, with our independent intellectual
property rights, is a Reverse Time Migration (RTM) software system suitable
for depth migration imaging in onshore and offshore applications. The
system is based on full wave equations and does not have any limit on
inclination during the course of imaging. It can plot images from primary
wave, bow tie, prism wave, ghost wave, and other multiple waves.
Moreover, it can produce better images with a higher signal-noise ratio and
a sharper border of faults and steep dips than Kirchhoff migration and one-
way wave equation migration. Running at a high efficiency but requiring
relatively few resources, the system takes only one-eighth of the time
of any other commercial software to calculate the same single-shot data
under the same conditions. The system is more flexible in application and
more adaptive to hardware systems. GeoEast-Lightning has so far provided
excellent images by processing data from 2,255 square kilometers in Xinjiang
Uygur Autonomous Region, Bohai Bay Rim, and the pre-Caspian basin.
Breakthroughs in Horizontal Drilling, Completion, and Staged Fracturing Technologies
Technical improvements were made in the optimization of wellbore
configuration, well track and drilling fluid, customization of drill bits, and
elimination of pilot drilling, which has played a significant role in reducing
the drilling cycle of horizontal wells, for example, from 132 days on average
in 2008 to 63.4 days in 2010 in Sulige region, leading to major savings in
drilling costs.
For the purpose of production stimulation, we have mastered the optimal
design methods of well pattern and staged fracturing of horizontal wells.
Moreover, three major staged fracturing technologies have been created
with double-packer-single-sticking, sliding sleeve and sand jet along
horizontal wells. We have also improved three major matching process
technologies, including the monitoring and evaluation of hydraulically
created fractures; workover and staged fracturing with liquid plugs for the
16
2010 Annual ReportTechnology
stimulation of horizontal wells; and acidizing and fracturing with high-
efficiency self-diversion acid in carbonate rocks. Field tests have been
conducted in 508 horizontal wells. The fracturing has stabilized the average
daily output from each well at 6.5 tons, 3.9 times as much as from each
vertical well. The needs of staged fracturing along horizontal wells in
conventional low-permeability reservoirs in Daqing, Jilin, and Changqing
oilfields can generally be met.
Next-generation Integrated and Networked Logging Processing and Interpretation Software Platform
We developed CIFLog, an integrated and networked software platform
for well logging interpretation, using state-of-the-art programming
tools. CIFLog is world's first third-generation logging processing and
interpretation system based on Java-NetBeans, a cutting-edge concept in
computing technology. It can run in a true 64-bit Windows, Linux, or UNIX
environment and completely integrate all aspects of the interpretation and
evaluation of open hole logging and cased well logging.
Version 1.0 of CIFLog is now available, and consists of processing and
interpretation systems such as individual well interpretation, volcanic
rock interpretation, carbonate rock interpretation, water-flooded layer
interpretation, production logging interpretation, CBM interpretation,
management and utilities support. In addition to the full set of conventional
processing programs, the individual well interpretation system includes
processing and interpretation programs for logging data of micro-resistivity
scanning and imaging, array induction, acoustic imaging, dipole acoustics,
nuclear magnetic resonance (NMR), elemental capture spectroscopy (ECS),
through-casing resistivity, and wireline formation testing. Versions in Chinese,
English and other languages are available. More than 100 sets of the software
platform are already in use and can process up to 10,000 well/times a year.
Efficient and Safe Blending Transportation of Multiple Types of Crude in Long-distance Pipelines
CNPC has overcome the challenge of efficient and safe blending
transportation of multiple types of crude in long-distance pipelines through
joint research with China University of Petroleum. Among the many new
oil-transportation technologies that have been developed are "long-
distance sequential transportation of multiple types and batches of crude
oil modified with additives in normal temperature", "simulation of thermal
effect between a crude pipeline and a refined products pipeline installed in
the same channel", "sequentially alternative long-distance transportation of
hot and cold crude", "intermittent transportation of wax-containing crude
in long-distance pipelines", and the "theory and technology for quantitative
simulation of shear and thermal effect in the transportation of crude oil
modified with pour point depressant". These new technologies have been
integrated as a package and applied in our Western Crude Pipeline.
National IV Standard Compliant FCC Gasoline Hydro-upgrading Technology
Thanks to its independently developed techniques of highly selective FCC
gasoline upgrading (GARDES) and selective hydro-desulphurization of FCC
gasoline (DSO), CNPC can hydro-desulphurize gasoline without a significant
reduction in the octane rating and produce gasoline in compliance with
the National-IV Standard. With each of these technologies, full-cut FCC
gasoline or cut RFCC gasoline first flows through a reactor containing
selective desulphurization catalyst for selective desulphurization, and
then enters a reactor containing hydroisomerization and an aromatization
catalyst to restore the octane rating.
GARDES enables the production of blending component for clean gasoline
in compliance with the National-IV standard, with sulfur content of no
more than 50PPM, directly from FCC gasoline with sulfur content of no
more than 500PPM and alkene content of no more than 50% (volume
fraction). It was applied in a 200kt/a gasoline hydro-upgrading unit at
Dalian Petrochemical on January 9, 2010. Its industrial application showed
that the technology allows hydro-upgrading without separating the heavy
from the light cut. It can reduce the content of sulfur and alkene in FCC
gasoline by 70-80% and 25-33%, respectively, with an octane rating loss no
more than 1 unit and a gasoline yield of more than 99%. It is so adaptive to
high alkene cut FCC gasoline that the content of sulfur and alkene in the
upgraded gasoline can satisfy the requirements for blending gasoline in
compliance with the National-IV standard.
DSO features a flexible process flow, mild reaction conditions, and
high desulphurization rates. Good results have been obtained from its
application in FCC gasoline hydrogenation units at Yumen Refinery and
Dalian Petrochemical in 2008 and 2009. In 2011, DSO will undergo an
industrial test on a 600kt/a FCC gasoline hydrogenation unit at Urumqi
Petrochemical to produce blending component for clean gasoline in
compliance with the National-IV standard, with sulfur content of no more
than 50PPM, directly from FCC gasoline with sulfur content of 300-500PPM.
The liquid yield is expected to be higher than 99%.
Industrial Test of Hexene-1 and 10kt/a Tech-package
A technology package for the production of hexane-1 through tri-
polymerization of ethylene independently developed by CNPC has led to
four innovations: (1) a highly selective catalyst for hexene-1; (2) an ethylene
pre-mix process; (3) a heterogeneous tank reactor of high mass transfer;
and (4) online desorption of oligomers without adhesion on the tank.
Industrial operation indicates that the catalytic efficiency is 1.3 times more
than that of the pilot run, per-pass conversion of ethylene has increased by
14.6%, and the purity of the hexene-1 product exceeds 99%.
17
In 2010, guided by the principles of stability, balance, efficiency, control
and coordination, CNPC continued to optimize its investment portfolio,
accelerate the construction of major projects, and improve capital
returns. We consolidated our upstream oil and gas business strengths,
improved technical and economic indicators in refining operations,
maintained stable market supply, and expanded international
operations. In addition, we fully utilized our advantages in oilfield
services, engineering and construction, and equipment manufacturing
to support oil and gas operations.
Annual Business Review
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2010 Annual ReportAnnual Business Review
2008 2009 2010
2008 2009 2010
2008 2009 2010
Newly proven oil in place (mmt) 643.22 627.50 655.77
Newly proven gas in place (bcm) 416.82 461.60 570.10
2D seismic (kilometers) 37,340 26,816 31,023
3D seismic (square kilometers) 11,891 11,427 13,463
Exploration wells 1,648 1,901 1,640
Preliminary prospecting wells 891 1,071 949
Appraisal wells 757 830 691
Exploration and Production
CNPC focused on its core upstream operations, and continued to invest heavily in exploration
and development, achieving a number of breakthroughs and rapid growth in oil and gas
production. Our oil and gas production in terms of oil equivalent accounted for about 60% of
China’s total.
Exploration
In 2010, our oil and gas exploration was mainly focused on key basins and target areas. Great
efforts had been made in preliminary prospecting, risk exploration, fine exploration and the
integration of exploration and development. We adopted a series of technical measures such
as vertical multi-stage fracturing, horizontal drilling and staged fracturing in the exploration
of low-permeability, carbonate and volcanic reservoirs, resulting in a number of strategic
discoveries and breakthroughs in reserve growth.
Throughout the year, we completed 31,023 kilometers of 2D lines, 13,463 square kilometers
of 3D profiles, and 1,640 exploration wells with a total footage of 4.63 million meters.
Domestically, we newly proved 655.77 million metric tons of oil in place and 570.1 billion cubic
meters of gas in place. Proven oil and gas reserves reached more than one billion metric tons
of oil equivalent for four consecutive years. The oil reserve replacement ratio remained above
100%, and natural gas above 200%, projecting a more reasonable reserve sequence and more
solid resource bases.
Major Discoveries A number of significant oil and gas discoveries were made in southwest Tarim Basin, lower-
paleozoic in the Ordos Basin, southwest Qaidam Basin, west of Longgang in the Sichuan Basin,
north Tuha Basin, northwestern flank of the Junggar Basin and Damintun Sag in the Bohai
Bay Basin. Well Kedong-1 drilled in southwest Tarim Basin yielded commercial oil and gas
flows, resulting in major breakthroughs in the risk exploration of piedmont high and steep
structures. High yield gas flows were obtained from four wells, including well Su-203, in lower-
paleozoic strata in the Ordos Basin. Thick oil and gas reservoirs were encountered in well Sha-
37 in southwest Qaidam Basin. The fine exploration in mature fields resulted in the discovery of
100-million-ton uncompartmentalized reserves.
In addition, we proved 16 blocks with sizeable reserves, including nine oil blocks and seven
natural gas blocks, in the Ordos, Qaidam, Bohai Bay, Tarim, and Sichuan basins.
Reserves and Operating Data
Newly proven oil in place | mmt (domestic)
Newly proven gas in place | bcm (domestic)
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2010 Annual Report Annual Business Review
2008 2009 2010
2008 2009 2010
Development and ProductionIn 2010, CNPC carefully managed its operations in mature oilfields and promoted the integral
development of new oilfields. To build up production capacity of both new and mature fields, we
gave priority to hydrocarbon-rich blocks, optimized well pattern, employed new technologies such
as cluster well drilling, horizontal drilling, unbalanced drilling, fracturing, and high-efficiency lifting
to enhance the protection of reservoirs and maximize single well output. The redevelopment of
our mature oilfields proceeded smoothly, achieving substantial progress in eight pilot projects in
Daqing, Liaohe and Xinjiang. Our target of increasing single well output and significantly enhancing
oil recovery was basically reached.
In 2010, we completed the development drilling of 16,564 oil wells and 989 gas wells, of which 709
were horizontal wells and 305 were unbalanced wells. We newly built an oil production capacity of
14.15 million metric tons and a gas production capacity of 12.43 billion cubic meters.
Crude Oil By continuing the Year of Waterflood Development campaign, the natural decline rate of mature
wells decreased to 12.5% and the water cut growth rate was controlled within 0.5%. We effectively
curbed the falling trend of single well output through comprehensive measures such as focusing
on fine water flooding, subdividing development layer series, reorganizing injection and production
system, implementing massive fracturing and acidizing, and controlling flooding front and profile.
Thanks to these efforts, we were able to stabilize the daily output per individual well and produced
105.41 million metric tons of crude in 2010.
In Daqing Oilfield, we further implemented water flooding to release the potential of mature
fields. Daqing’s annual crude production has been stabilized at 40 million metric tons for eight
consecutive years. The annual yield by means of tertiary recovery was maintained above 10 million
metric tons. Changqing Oilfield proactively promoted large-scale pilot tests and boosted the
production capacity of low-permeability reservoirs, resulting in a crude output increment of 2.53
million metric tons. In 2010, Changqing’s oil and gas production exceeded 35 million metric tons of
oil equivalent, of which 4 million metric tons were contributed by ultra low-permeability reservoirs.
Redevelopment of Mature Oilfields
Our eight oilfield companies — Liaohe, Xinjiang, Jilin, Daqing, Dagang, Jidong, Tuha and Yumen
— achieved substantial progress and significant results in terms of their pilot projects for the
Crude production | mmt (domestic)
Natural gas production | bcm (domestic)
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2010 Annual ReportAnnual Business Review
redevelopment of mature oilfields. Production per individual well was
increased and the oil recovery was dramatically enhanced. The pilot
projects, covering 835 million metric tons of geologic reserves, are
expected to newly add 65.38 million metric tons of recoverable reserves
and increase the oil recovery by 7.8%. The number of producing well grew
from 6,554 to 9,196, and annual oil output increased from 4.58 million
metric tons to 5.99 million metric tons. The average daily output per
newly opened single well was 3.9 metric tons, up 11% compared with
adjacent new wells. Meanwhile, we gained a better understanding of the
redevelopment of mature oilfields, and made new progress in well pattern
restructuring, flooding front control, layer sub-division in oil and water
wells, production control processes, reorganization of surface processes,
and economic evaluation.
Major Pilot Tests
In 2010, we strived to make technological breakthrough in the
development of specified reservoirs characterized by high water cut, low-
permeability, heavy oil and tidal zone, and launched a series of pilot tests.
The pilot test for the development of Changqing’s 0.3 mD reservoirs was
successful, which promoted the economical and efficient development of
ultra-low permeability reservoirs. The binary flooding test was expected
to enhance oil recovery by 15%. We also achieved preliminary results in
pilot fire flooding for heavy oil development. In Jilin Oilfield, we further
expanded the scale of CO2 flooding test, producing 1.53 million metric tons
of crude last year. CO2 flooding is expected to be a leading technology in
developing low-permeability reservoirs.
Natural GasIn natural gas development, we enhanced production management and
capacity building, which resulted in significant progress in developing
complicated reservoirs, such as low-permeability and highly acid ones, as
well as in integral and cost-efficient development. In 2010, we produced
72.5 billion cubic meters of natural gas domestically, up 6.2% year-on-year.
The four major natural gas producing areas, namely Changqing, Tarim,
Sichuan and Qinghai, witnessed stable operations and production growth.
Changqing produced 21.1 billion cubic meters of natural gas, the largest
portion of the company, of which more than 10 billion cubic meters were
output from Sulige gas field. Sulige, with its annual production capacity
reaching 13.5 billion cubic meters, becomes China’s largest gas field.
Large-scale and Efficient Development of Sulige Gas Field
Sulige gas field, characterized by low permeability, low pressure and low
abundance, is the major gas source for Shan-Jing Pipelines. Since its large-
scale development started in 2006, innovations have taken place there in
six key technologies — well location optimization, rapid drilling, separate
fracturing commingled production, downhole chocking, inter-well
concatenation, and remote control, as well as 12 support development
technologies. Meanwhile, we also achieved major breakthroughs in
development by cluster and horizontal well drilling, experimented with and
promoted mixed development modes such as vertical well + directional
well, and vertical well + directional well + horizontal well. By the end of
2010, 3,520 gas wells, 85 gas gathering stations and four gas processing
plants had been established at Sulige gas field. The annual gas production
capacity had reached 13.5 billion cubic meters, and the annual gathering,
transmission and processing capacity had reached 18 billion cubic meters.
The field produced 37 million cubic meters of natural gas per day, more
than 10 billion cubic meters throughout the year.
Trial Operation Began at Tazhong I Oil and Gas Field
Tazhong I oil and gas field is located in the hinterland of Taklimakan Desert,
featuring high sour ultra-deep buried carbonate reservoirs. In October
2010, the oil and gas processing plant, gathering and transportation
system and auxiliary facilities became operational at the pilot development
area of Tazhong I oil and gas field. It is capable of processing one billion
cubic meters of natural gas, and producing 180,000 metric tons of gas
condensate annually.
Changling Gas Field Became Operational
Changling gas field is characterized by deep buried volcanic reservoirs
associated with CO2. It is the first domestic project integrating CO2-
containing natural gas development and CO2 flooding. In December
2010, the second phase surface project of Changling gas field became
operational. This includes one decarburization unit, CO2 pressurization
facilities and auxiliary production facilities, giving it an annual gas
production and processing capacity of one billion cubic meters.
Exploration and Development of Unconventional Oil and Gas We attach great importance to the exploration and development of
unconventional oil and gas resources such as CBM, tight gas and shale
gas, and are accelerating the construction of CBM industrial base and
conducting resource evaluations of tight gas and shale gas.
CBMIn 2010, our newly proven CBM reserves — mainly in the Qinshui Basin
and the eastern edge of the Ordos Basin — exceeded 100 billion cubic
meters for this first time in history. By widely using fishbone horizontal
drilling and extracting gas by water drainage, we effectively solved the key
technological challenges to CBM development.
In Qinshui of Shanxi and Hancheng of Shaanxi, we established two
digitalized and sizeable CBM fields with an annual production capacity
of 1.3 billion cubic meters. In 2010, our annual CBM production was 280
million cubic meters. The Fanzhuang Block in Qinshui Basin started external
transmission of CBM with a daily rate of 1.3 million cubic meters.
Shale Gas CNPC launched shale gas pilot development at two blocks in Weiyuan-
Changning in Sichuan Province and Zhaotong in Yunnan Province in 2010.
The first shale gas appraisal well Wei-201 was completed in the south of
the Sichuan Basin. Commercial gas flows were obtained from two series of
shale strata of Cambrian and Silurian systems after fracturing.
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2010 Annual Report Annual Business Review
Drilling operation in Changqing Oilfield
22
2010 Annual ReportAnnual Business Review
Joint Exploration and Development Authorized by the Chinese government, CNPC cooperated with other
international oil companies to develop domestic oil and gas resources.
These joint blocks and projects mainly involve low-permeability, heavy oil,
tidal zone and shallow water area, sour, high-temperature high-pressure
and CBM reservoirs.
By the end of 2010, 35 joint exploration and development projects were in
progress, including 15 conventional crude, 10 conventional natural gas, and
10 CBM ones. These projects covered 37,600 square kilometers, producing
3.76 million metric tons of crude and 3.68 billion cubic meters of natural
gas throughout the year, i.e. 6.69 million metric tons of oil equivalent, up
3.7% year-on-year.
In 2010, we signed a gas contract on Dajing Block in Junggar Basin,
two agreements on joint evaluation and research of Daning CBM block
and Daqing tight oil project. The joint shale gas assessment for Fushun-
Yongchuan Block proceeded smoothly. CNPC was approved by the state as
a pilot enterprise for international cooperation in CBM development.
Newly Inked Projects
Dajing Block in Junggar Basin
On November 3, 2010, CNPC and Australia’s Dart Energy signed a 30 year
Production Sharing Contract (PSC) in relation to exploring the Dajing block
for natural gas. The block is located in the east of Junggar Basin covering an
area of 3,969 square kilometers.
Executive Summary of Major Projects
Chuandongbei Project
The project block is located in the Sichuan Basin, covering an area of 1,969
square kilometers. With Chevron as our partner, the proven gas fields will
be developed in three stages. The first stage is the overall development of
Luojiazhai gas field, including the construction of Xuanhan gas processing
plant. The second stage involves the overall development of Tieshanpo gas
field and the construction of a gas processing plant. The third stage refers
to the overall development of Dukouhe and Qilibei gas fields. On August 5,
2010, the overall development of Luojiazhai gas field was launched.
Changbei Project
Changbei Block is located in the Ordos Basin, covering an area of 1,691
square kilometers. Shell is our partner at this project, and also the operator.
In August 2010, the overall development plan for Chengbei project was
approved by NDRC, and the target commercial gas delivery was increased
from 3 to 3.3 billion cubic meters per annum. Since its commercial
production in March 2007, Chengbei project had cumulatively produced
more than 11 billion cubic meters of natural gas, completed and tested 26
bilateral horizontal wells. By the end of 2010, the average daily output per
individual well was 500,000 cubic meter. 15 of these wells produced more
than 1 million cubic meters each per day at the initial stage. In particular,
well CB12-1 output 2.2 million cubic meters per day at the initial stage ,
and 1.5 million cubic meters at the end of 2010. It had cumulatively yielded
1.1 billion cubic meters since being put into production in March 2008.
Zhaodong Project
Zhaodong project, located in the shallow waters of the Bohai Bay Basin,
includes two cooperative blocks: C/D and C4, covering an area of 35.85
square kilometers. We develop this project in cooperation with Australia’s
RocOil, with RocOil Bohai Company acts as the project operator.
In 2010, Zhaodong Project overcame the impact of the worst build-up of
sea ice in the Bohai Bay for 30 years and ensured the safety of personnel
and production facilities, producing 1.01 million metric tons of crude
throughout the year. The natural gas pipeline became operational on a trial
basis, delivering associated gas through an undersea pipeline to Chenghai
1-1 artificial island in the tidal area of Dagang Oilfield for processing. Once
being fully operational, the pipeline is expected to transport 60-70 million
cubic meters annually, which will provide an important new source of gas
for Beijing and Tianjin.
Yuedong Project
The project block is located at the southern tip of the Hainan-Yuedong
structural belt in the Bohai Bay Basin. Tianshi Energy Company from Hong
Kong is our partner in this project, and is also its operator.
One artificial island and two auxiliary production platforms were completed
at Hainan Yuedong Project in 2010. The project has been put into trial
production, with eight wells producing approximately 100 metric tons of
crude a day.
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2010 Annual Report Annual Business Review
69%
80%
Natural Gas and Pipeline
Natural gas and pipeline is one of our most promising sectors and has the greatest growth
potential. Natural gas currently accounts for less than 4% of China’s primary energy
consumption, much lower than the global average of 24%. Accelerating the development
of natural gas business is in line with a more balanced energy mix and also offers a practical
approach for our sustainable development.
In 2010, we leveraged our competitive edge in natural gas resources in China, while also
accelerated gas imports. In addition, we achieved a better balance in production, sales and
resources. Natural gas outputs grew in the four major producing areas of Tarim, Changqing,
Sichuan and Qinghai. A nationwide natural gas trunk pipeline network linking the four major
producing areas with major consumption markets has taken shape. Two major crude pipeline
networks were formed in the northeast and northwest. The “two-vertical and four-horizontal”
oil products pipeline networks proceeded smoothly. A nationwide, cross-border oil and gas
supply system, characterized by diverse sources and centralized distribution, has taken shape.
By the end of 2010, the total pipeline mileage in operation had reached 56,865 kilometers, of
which 14,807 kilometers were crude pipelines, 32,801 kilometers were gas pipelines, and 9,257
kilometers were refined products pipelines, accounting for 69.2%, 80.5 % and 49.1 % of the
nation’s total respectively. Throughout the year, the pipelines transmitted 158.46 million metric
tons of crude, 5.1% more than last year, and 23.74 million metric tons of refined products, up
33.3% year-on-year.
Operation and Control We strengthened oil and gas supplying capacity in 2010 through centralized control and
regional management to ensure the stable and efficient operation of our oil and gas pipelines.
Our 38 long-distance oil and gas pipelines in operation all came under centralized control. We
also established a pipeline integrity management system that connects specialized companies
and regional companies so that the pipelines, natural and geological disasters as well as third-
party damage risks could be continuously identified, evaluated and controlled. These would
ensure the safe, reliable and controllable construction and operation of pipelines. CNPC
consecutively conducted international rating of asset integrity management for the third year,
reviewing 11 processes and more than 1,000 business factors related to integrity management,
with integrity management continuously and steadily improved.
Underground Gas Storage
With the nationwide natural gas pipeline network taking shape, underground gas storage
has become the “control valve” for peak shaving, and an important gas source that can ensure
stable natural gas supplies. The gas storages at Jintan, Dagang and Huabei have played a vital
role in improving the ability of our natural gas network to respond to seasonal peak regulation
and emergency supply.
In 2010, construction of the new underground gas storage in Dagang began. The total capacity
will be as much as 2 billion cubic meters, with 1 billion cubic meters of effective working gas
and daily delivery of 8 million cubic meters. Completion of Dagang gas storage will further
improve gas supply to Beijing and Tianjin. Part of Jintan gas storage for the West-East Gas
Pipeline has become operational, and the gas delivery for peak shaving has so far reached 55
million cubic meters, while delivery for emergency response has reached more than 75 million
cubic meters. Natural gas pipeline mileage in China's total
Crude pipeline mileage in China's total
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2010 Annual ReportAnnual Business Review
Gas gathering station in Sebei, Qinghai
25
2010 Annual Report Annual Business Review
Storage and Transportation Facilities In 2010, construction of the four major oil and gas pipelines — the
northeast, northwest, southwest and offshore — all started and key
projects proceeded as scheduled. The Second West-East Gas Pipeline
(western section), the Third Shaan-Jing Pipeline, Russia -China Crude
Pipeline, Shikong-Lanzhou Crude Pipeline, Lanzhou-Zhengzhou-Changsha
Products Pipeline (Lanzhou-Wuhan section) all became operational,
opening the channels for oil and gas resources from east and west China
and foreign countries to enter domestic inland markets. The Zhongwei-
Huangpi section of the Second West-East Gas Pipeline (eastern section)
was completed and became operational, introducing natural gas from
Central Asia into central China for the first time, effectively alleviating the
gas shortage in this region. The Russian oil import and expansion project
was also fully underway. The Russia-China Crude Pipeline was linked to the
Northeast oil pipeline network. The Parallel Sebei-Xining-Lanzhou Pipeline
was also fully operational, connecting the three major gas fields of Qinghai,
Changqing and Tarim with the pipeline network.
Second West-East Gas Pipeline
The Second West-East Gas Pipeline consists of the Horgos-Zhongwei-
Guangzhou trunk and eight branches — Jingbian, Lunnan, Shiyan, Tai’an,
Xiangtan, Shanghai, Nanning and Shenzhen. It has a total length of 8,704
kilometers, including 4,978 kilometers of trunk lines and 3,726 kilometers of
branches. The pipe diameter is 1,219 mm and the designed pressure is 10
MPa with the annual gas transmission capacity of 30 billion cubic meters.
Construction of the pipeline is divided into western and eastern sections at
Zhongwei in Ningxia.
The 2,461-km long Horgos-Zhongwei trunk line became operational at the
end of 2009. By the end of 2010, it had transmitted a total of 4.38 billion
cubic meters of natural gas imported from Central Asia. Construction of the
Zhongwei-Guangzhou trunk line, 2,517 kilometers long, started in February
2009. On November 18, 2010, Zhongwei-Huangpi section became
operational. On December 8, the Zaoyang-Xiangfan section became
operational and was connected with the Zhongxian-Wuhan pipeline. By
then, the coverage of the Second West-East Gas Pipeline had stretched to
Hunan and Hubei.
Third Shaan-Jing Gas Pipeline
The 1,011-km long Third Shaan-Jing Gas Pipeline starts at Yulin in Shaanxi
and ends at Xishatun in Beijing. It has a pipe diameter of 1,016 mm,
designed pressure of 10 MPa and designed annual gas delivery capacity of
15 billion cubic meters. More than 400 kilometers of the pipeline runs in
parallel with the Second Shaan-Jing Pipeline, offering another important
channel to supply natural gas to the Bohai Rim region. On December
31, 2010, the Yulin-Liangxiang section became operational, and the
Liangxiang-Xishatun section is expected to be operational in June 2012.
Shandong Gas Pipeline Network
Shandong gas pipeline network consists of one trunk line and the Zibo,
Laigang, Rizhao, Rushan and Zhaoyuan branches. It has a total length of
1,017 kilometers. The 584-km long trunk has a pipe diameter of 1,016 mm,
designed pressure of 10 MPa, and designed annual transmission capacity
of 8.6 billion cubic meters. The branches are 433 kilometers long.
Construction of the Tai’an-Qingdao-Weihai trunk line and its branches
started in September 2009. The Tai’an-Qingdao section and Qingdao-
Weihai section were expected to be completed in April and October 2011
respectively.
Dalian-Shenyang Gas Pipeline
The Dalian-Shenyang gas pipeline includes the Dalian Xingang-Songlan-
Yingkou-Shenyang trunk line and Dalian and Fushun branches. The trunk
line is 431 kilometers long, with the pipe diameter of 711mm, designed
pressure of 10 MPa, and designed annual delivery capacity of 8.4 billion
cubic meters.
In March 2010, construction of the Dalian Xingang-Songlan section and
Shenyang-Yingkou section of the trunk line, as well as the branches started.
The Dalian Xingang-Songlan-Yingkou-Shenyang trunk line was scheduled
to be operational in June 2012. Once the Dalian-Shenyang gas pipeline
becomes fully operational, it will be linked to the Qinhuangdao-Shenyang
gas pipeline to integrate the natural gas pipeline networks of northeast
and north China.
Natural Gas Utilization and MarketingFaced with continuously growing market demand, CNPC fully utilized its
resources and advantage in the pipeline network, coordinated domestic
resources and imported resources, and optimized its natural gas sale
structure, selling 66.86 billion cubic meters of natural gas throughout
the year, up 12.6% over previous year, and ensuring stable supplies to
individual customers, public utilities, and key industrial users.
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2010 Annual ReportAnnual Business Review
Dalian LNG Project
CNPC’s natural gas supply covers 26 provinces, municipalities and
autonomous regions of China, and the number of supplied cities and users
continued to grow at a rapid pace. In 2010, we developed the downstream
market for newly constructed pipelines and signed gas supply agreements
for the Second West-East Gas Pipeline with 99 users from Xinjiang, Gansu,
Henan, Hubei, Hunan and Shenzhen.
We also quickly developed downstream businesses such as civilian gas,
CNG, LNG and natural gas power generation. By keeping pace with market
developments and focusing on profitability, we promoted professional
and integrated management of our natural gas downstream businesses,
realizing the extension and enhanced secondary value of the natural gas
industrial chain. In 2010, CNPC affiliated Kunlun Gas Utilization Company
established a joint venture, Jiangxi Provincial Natural Gas Investment
Company, with Jiangxi Provincial Investment Group Corporation. This joint
venture will invest in the construction of the second phase project of the
natural gas pipeline network in Jiangxi Province.
Liquefied Natural Gas We actively developed import channels for natural gas resources such as
LNG. The main work of the Dalian and Jiangsu LNG projects was completed
and preparations were made for their operation. The Tangshan LNG
project was approved by the state and equipped with all conditions for
construction.
Dalian LNG Project
The Dalian LNG project includes an LNG dock and receiving terminals.
The project is divided into two phases, with the capacity of the first phase
being 3 million metric tons per annum, and 6 million metric tons per
annum for the second phase.
Construction of the receiving terminals and dock was completed in
December 2010. The project is to due to be completed and become
operational in July 2011.
Jiangsu LNG Project
The Jiangsu LNG project also includes a LNG dock and receiving terminals.
Construction is in three phases, with annual capacity of the first phase
being 3.5 million metric tons, the second at 6.5 million metric tons, and a
final goal of 10 million metric tons.
In December 2010, construction of the receiving terminals and dock was
completed and the project is to be completed and become operational in
June 2011.
Tangshan LNG Project
The Tangshan LNG project includes the construction of a dock, trestle and
receiving terminals. The annual capacity of the first phase is 3.5 million
metric tons, and second phase is 6.5 million metric tons. The final capacity
will reach 10 million metric tons a year.
Feasibility studies for the project and preliminary design have been
completed. In 2010, work was conducted on the project’s foundation and
preparations were made for construction. The project is due for completion
in July 2013.
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2010 Annual Report Annual Business Review
2008 2009 2010
2008 2009 2010
2008 2009 2010
2008 2009 2010
Crude runs (mmt) 125.30 125.12 135.29
Utilization rate of refining units (%) 95.60 90.60 93.20
Refined products output (mmt) 79.22 80.45 86.33
Gasoline 25.46 25.82 26.76
Kerosene 3.60 3.64 3.66
Diesel oil 50.16 50.99 55.91
Lubricating oil output (mmt) 1.77 1.40 1.61
Ethylene output (mmt) 2.68 2.99 3.62
Synthetic resin output (mmt) 4.40 4.76 5.65
Synthetic fiber output (mmt) 0.14 0.14 0.12
Synthetic rubber output (mmt) 0.41 0.48 0.62
Urea output (mmt) 3.82 3.97 3.76
Synthetic ammonia output (mmt) 2.60 2.71 2.61
Ethylene output | mmt (domestic)
Refining and Chemicals
To improve its competitiveness, CNPC also focused on the refining and chemicals sector. Our refining capacity
ranked 9th globally, accounting for 34% of the domestic total. Our ethylene production capacity ranked 11th
globally, accounting for 29% of the domestic total.
Confronted with market changes in 2010, we adjusted the refining load, optimized resource allocation, and efficiently
managed the operation of newly built and existing units. Twenty-three major technical and economic indicators
recorded a new high, with light oil and ethylene yields leading in China. Throughout 2010, we processed 135.29
million metric tons of crude and produced 86.33 million metric tons of oil products in China, up 8.1% and 7.3%
respectively year-on-year. With Guangxi and Qingyang petrochemical complexes becoming operational, our daily
crude runs exceeded 400,000 metric tons, hitting a record high. The chemical production facilities were all operating
at full capacity, producing 3.62 million metric tons of ethylene, up 21% year-on-year.
Construction of Large Refining Bases In 2010, substantial progress was made in the strategic restructuring of our refining business and the
deployment of refining facilities. 15 major projects and 60 sets of refining units were newly completed, resulting
in a 14.6 million metric tons increment in our one-step refining capacity of crude oil. Seven 10 Mt/a refining
bases at Dalian Petrochemical, Dalian West Pacific Petrochemical, Fushun Petrochemical, Jilin Petrochemical,
Dushanzi Petrochemical and Guangxi Petrochemical, eleven 5 Mt/a refineries as well as four large ethylene
production bases were basically completed.
Guangxi Petrochemical’s 10 Mt/a refining project, Qingyang Petrochemical’s relocation and transformation project,
Tarim fertilizer project, Urumqi Petrochemical’s aromatic hydrocarbon complex were all completed and became
operational. Liaoyang Petrochemical’s Russian crude processing project was also completed basically. Ningxia
Petrochemical’s 5 Mt/a refining project and Hohhot Petrochemical’s 5 Mt/a refining capacity expansion project had
both commenced. A number of major projects in Sichuan, Fushun and Daqing proceeded smoothly as according to
plan. Ground breaking took place for the products quality upgrade project at Huabei Petrochemical and for the Sino-
Russian 13 Mt/a refining project in Tianjin.
Crude runs | mmt (domestic)
Refined products output | mmt (domestic)
Refining & Chemicals operating data
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2010 Annual ReportAnnual Business Review
Operation of the 10 Mt/a Refining Project at Guangxi Petrochemical
Guangxi Petrochemical is the first large-scale refining base built by CNPC in
southern China, mainly including more than 10 sets of production facilities
including a 10 Mt/a atmospheric-vacuum distillation unit, a 3.5 Mt/a heavy
catalytic cracking unit, a 2.2 Mt/a continuous reforming unit, a 2.2 Mt/a wax
oil hydrogenation cracking unit, and auxiliary projects such as utilities, tank
farms, dock and railway.
In November 2007, Guangxi Petrochemical’s 10 Mt/a refining project was
launched in Qinzhou. JEC, IPMT, ICMT and SPOM models were adopted in
project design, engineering construction, operation commencement and
production process respectively, which dramatically improved engineering
quality and management efficiency.
On September 6, 2010, the 10 Mt/a refining project became operational at
Guangxi Petrochemical. It is capable of supplying 8.3 million metric tons
of gasoline, diesel, aviation kerosene and LNG, as well as 900,000 tons of
petrochemical products such as polypropylene, aromatic hydrocarbon,
benzene, toluene and mixed xylene. The project adopted a sophisticated
environmentally friendly wholly hydrogenated process, with all of its products
meeting the Euro III standard and 70% consistent with the Euro IV standard. At
the same time, the company also set up a 3-tier control system to prevent and
manage environmental risks, with more than 70% of wastewater recycled.
Relocation and Transformation of Refining Plant at Qingyang Petrochemical
Qingyang Petrochemical is located in Qingyang City, the main oil
production area of the Changqing Oilfield. The 3 Mt/a refining plant
relocation and transformation project includes a 3 Mt/a atmospheric
distillation unit, a 1.6 Mt/a catalytic cracking unit, a 600 Kt/a catalytic
reforming unit, and a 100 Kt/a benzene extraction unit. The project was
launched on March 15, 2009 and became operational on October 27, 2010.
Tarim Fertilizer Project
The Tarim fertilizer project is one of China’s biggest land-based modern fertilizer
plants in terms of production capacity per single unit. It is designed to produce
450,000 tons of synthetic ammonia and 800,000 tons of urea. Construction of
the project started on September 20, 2007 and it was completed and became
operational on July 14, 2010. Under full load, the project could produce 2,640
tons of urea per day, meeting demand for SGU in southern Xinjiang.
Aromatic Hydrocarbon Complex at Urumqi Petrochemical
The aromatic hydrocarbon complex at Urumqi Petrochemical is composed of a
800 Kt/a naphtha hydrogenation unit, a 1 Mt/a continuous reforming unit, a 700
Kt/a aromatic hydrocarbon extraction unit, a 1.8 Mt/a disproportionate unit, a 4.3
Mt/a adsorptive separation unit, a 3.3 Mt/a isomerization unit, a 4.9 Mt/a xylene
distillation unit, and a 70,000 cum/hr hydrogen purification unit. The 1 Mt/a PX unit
is among the world’s largest ones. This project started construction on May 1, 2008
and became operational on July 19, 2010. It has an annual production capacity of
one million tons of PX, 376,500 tons of benzene and 1.35 million tons of fertilizer.
Upgrading of Refined Products and Development of New ProductsWe made continuous efforts to upgrade the quality of refined products and
optimize the product structure in order to turn our technological advantage
into market and economic benefits. On January 1, 2010, all gasoline produced
by CNPC for vehicle use met the national III standard, and 60% of diesel
reached the national III standard. We also produced high-grade gasoline and
diesel compatible with local requirements. Throughout the year, 74.5% of
CNPC produced gasoline was of high-grade, an increase of 12.4%, meeting
the demand of the Shanghai World Expo and Guangzhou Asian Games. On
December 30, 2010, Lanzhou Petrochemical’s 1.8 Mt/a catalytic gasoline
hydrogenation unit was successfully put into operation at the first try.
Also, we leveraged our advantage in the integration of production, sales
and R&D to highlight the differentiated production of chemical products.
Throughout the year, we developed 55 types of new products, whose
output amounted to 1.2 million tons. The new products developed by
Dushanzi Petrochemical, such as tubular goods PE100, doublet membrane
material J5008, HDPE 8920, high flowability impact polypropylene K9928
and special BOPP material F1002B, secured a foothold in the market. What
is particularly noteworthy is that K9928 won the recognition of many
customers. Our Kunlun SBR and LAB products were honored as China Well-
known Petroleum and Chemical Product Brands.
10 Mt/a Refining Project at Guangxi Petrochemical
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2010 Annual Report Annual Business Review
2008 2009 2010
Marketing and Sales
We continued to strengthen our domestic distribution network, project our brand image, and
enhance services to ensure stable supply of oil products.
Refined Products In 2010, we consolidated our position in the developed markets, made active efforts to expand
high-end market and increased terminal sales, achieving simultaneous growth in sales, market
share and profitability. Sales of refined products exceeded 100 million metric tons, up 15.5%
year-on-year. Retail sales exceeded 70 million metric tons, an increase of 19.6% compared
with previous year. The proportion of retail sales was increased by 2.1%, and our share in the
domestic refined products market was increased by 1.8% year-on-year.
Marketing Network Network development was accelerated. In 2010, we issued new design and construction
standards for service stations and oil tanks. 1,050 service stations became operational, including
570 newly developed skid-mounted service stations, bringing a retail sales increment of 6.39
million metric tons. By the end of 2010, we operated 17,996 service stations domestically.
In 2010, CNPC issued more than 5 million Kunlun fuel cards, which can now be used in our
16,050 service stations nationwide, giving the card owners quick and convenient access to
refueling services.
Non-oil ServicesIn 2010, our non-oil services witnessed rapid development in terms of both size and
profitability. The number of uSmile convenience stores grew 10.9% over the previous year, with
their operating profit increased 60.7%.
Lube Oil CNPC produces various kinds of lube which can meet different needs of end users. Our Kunlun
base oil, engine oil, additives, and auto gear oil have a leading position in the domestic market.
We sold 1.84 million tons of lube oil in 2010, and achieved sales growth of 7.5% for top grade
lube oil and 14.3% for packaged lube over the previous year. Exports of auto lube oil and
grease increased rapidly. The sales of Kunlun ship lube oil ranked first in the domestic market.
Miscellaneous Refined ProductsIn 2010, sales of miscellaneous refined products grew 20.9% over the previous year, while
asphalt sales increased 21% over the previous year and maintained the biggest market share in
China. We established six regional sales companies in northeast, north, northwest, east, central
and south China to create a network that support the rapid growth of our asphalt business.
Refined prouducts sales | mmt (domestic)
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2010 Annual ReportAnnual Business Review
Production line of Kunlun lube oil
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2010 Annual Report Annual Business Review
CNPC's share Total
2008 2009 2010
2008 2009 2010
CNPC's share Total
Overseas Oil and Gas Operations
In 2010, CNPC successfully fulfilled all of the objectives of its overseas oil and gas operations. We managed this
by optimizing the business layout and investment structure and improving the operating quality and profit of
projects abroad.
Exploration and Development 2010 saw important achievements in our overseas exploration and development. We obtained major
breakthroughs in risk exploration in our joint blocks in Niger, Chad, Uzbekistan and Turkmenistan, and made
progress in progressive exploration in joint oil and gas projects in Indonesia, Sudan and Kazakhstan.
High-yield flow was obtained from three exploration wells under formation test in the Dibeilla area,
located east of Agadem, Niger.
Formation test yielded a 1,000 tons per day oil flow from risk exploration well Cassia N-1 in Naramay area
of Block H in Chad.
High-yield gas flow of 1.44 Mcm/d was obtained from preliminary prospecting well Oja-21 in Block B on
the Right Bank of Amu-Darya River in Turkmenistan.
Oil and Gas ProductionDespite challenging changes in the external environment, production at our joint oil and gas projects was
smooth. This was attributable to the comprehensive administration and precise tapping of potential at mature
oilfields, accelerated capacity building in new oilfields, and the application of advanced technologies such as
horizontal drilling. In 2010, 75.82 million tons of oil were produced, 8.9% more than in 2009, of which CNPC's
share was 36.03 million tons, 4.97% more than in 2009. Natural gas operations yielded 13.7 billion cubic meters,
of which CNPC's share was 10.38 billion cubic meters, up 67.1% and 88.2% year-on-year, respectively.
Natural gas production | bcm
Crude production | mmt
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2010 Annual ReportAnnual Business Review
Refining and ChemicalsOur overseas refining and chemical projects maintained stable operation
and total crude runs within the year reached 10.55 million tons, up 4.9%
over 2009. Khartoum Refinery in Sudan, PetroKazakhstan's Shymkent
Refinery in Kazakhstan, and Adrar Refinery in Algeria optimized process and
production plans and realized efficient production. Construction of both
N'Djamena JV Refinery in Chad and Zinder JV Refinery in Niger smoothly
advanced into the equipment installation stage.
Oil and Gas Pipelines2010 saw smooth progress of our oil and gas pipelines being built, and
steady operation of existing ones, which transported 40.31 million tons of
crude, 2.7% more than in 2009, in addition to 6.06 billion cubic meters of
natural gas.
Central Asia-China Gas Pipeline
The Central Asia-China Gas Pipeline is the first long-distance gas pipeline
that we built and operate that traverses several foreign countries. This
3,666km-long pipeline consists of Line A and B installed in parallel to each
other, starting at Turkmen-Uzbek border city Gedaim, running through
Uzbekistan and Kazakhstan, and reaching Horgos in China's Xinjiang Uygur
Autonomous region. Line A was completed and became operational on
December 14, 2009.
After Line B and Compressor Station 4 in Kazakhstan were completed on
October 26 and December 14, 2010, respectively, the delivery capacity of
the pipeline was upgraded to 15 bcm/a. In 2010, it transported 4.38 billion
cubic meters of natural gas from Turkmenistan to China.
The Second Phase of the Kazakhstan-China Gas Pipeline
The Kazakhstan-China Gas Pipeline, an important part of the Central Asia-
China Gas Pipeline, will be built in two phases. The 1,300km-long Phase 1
is the section of the Central Asia-China Gas Pipeline through Kazakhstan,
and was completed and put into service in December, 2009. The second
phase starts from Beyneu of Mangystau Province in Kazakhstan, and will
be connected to the Central Asia-China Gas Pipeline at Shymkent of South
Kazakhstan Province. This 1,475km-long section is designed to transport
10 billion cubic meters of natural gas a year, and has a potential of up to 15
bcm/a, thus meeting the gas demand in southern Kazakhstan.
Construction of the second phase began on December 21, 2010. A
1,164km-long section from Bozoy of Aktobe Province to Shymkent will be
built to have a capacity of 6 bcm/a, and is planned to be put into service at
the end of 2012. At the second stage, a 311km-long section from Beyneu
to Bozoy will be installed, upgrading the capacity to 10-15 bcm/a.
The No.1 Natural Gas Processing Plant on the Right Bank of Amu-Darya River in Turkmenistan
33
2010 Annual Report Annual Business Review
Europe
Tunisia
Algeria
Libya
Nigeria
Niger
Equatorial Guinea
Chad
Sudan
Africa
Mongolia
Japan
Myanmar
Thailand
Singapore
Indonesia
AustraliaAsia-Paci�c
Russia
Kazakhstan
Uzbekistan
Turkmenistan
Azerbaijan
United Kingdom
France
Central Asia-Russia
Syria
Iraq
Iran
Oman
Qatar
Middle East
Canada
Costa Rica
Ecuador
Colombia
Peru
Venezuela
America
Overseas Oil and Gas Operations
34
2010 Annual ReportAnnual Business Review
Europe
Tunisia
Algeria
Libya
Nigeria
Niger
Equatorial Guinea
Chad
Sudan
Africa
Mongolia
Japan
Myanmar
Thailand
Singapore
Indonesia
AustraliaAsia-Paci�c
Russia
Kazakhstan
Uzbekistan
Turkmenistan
Azerbaijan
United Kingdom
France
Central Asia-Russia
Syria
Iraq
Iran
Oman
Qatar
Middle East
Canada
Costa Rica
Ecuador
Colombia
Peru
Venezuela
America
35
2010 Annual Report Annual Business Review
Central Asia-RussiaIn 2010, CNPC made oil and gas investments in Kazakhstan, Turkmenistan,
Uzbekistan, Azerbaijan and Russia, and pushed forward the construction of
Central Asia Demonstration Area of oil and gas cooperation.
KazakhstanNew geologic discoveries in the Pre-Caspian central block consolidated
and expanded the resource foundation of the Hope Oilfield, our joint
project in Aktobe. We made important breakthroughs in progressive
exploration of two blocks and two mature oilfields in South Turgai Basin as
part of our PK project, with oil and gas discovered above the caprock of the
region for the first time. These demonstrated new room for exploration to
tap into unstructured reservoirs.
With respect to the development of oil and gas fields, we actively
developed fine reservoir description and effectively mitigated the
production decline of mature fields through optimization of drilling
position, application of sidetrack horizontal drilling and fracturing
techniques. We also accelerated the drilling of new wells and the
construction of associated surface facilities in new blocks. These helped us
stabilize and increase production in 2010. In response to the government
of Kazakhstan’s call for complete gas utilization, AktobeMunaiGas initiated
the combined processing station, the No.4 Oil and Gas Processing Plant,
and rich gas re-injection project in the Hope Oilfield, completing them in
the same year.
Turkmenistan2010 saw the start of natural gas production together with initiation of the
second phase construction in our natural gas exploration and development
project on the Right Bank of Amu-Darya River in Turkmenistan. Efficient
and orderly seismic acquisition and drilling in contract blocks led to
significant increases in reserves in Samandepe gas field of Block A, as well
as important discoveries that opened up new directions for exploration
in the southern, eastern, and central parts of Block B. Through renovating
mature wells and developing new ones, both the production of individual
wells and total capacity were much increased at the Samandepe gas field.
Total production of natural gas in 2010 exceeded 4 billion cubic meters.
New acidizing techniques and optimal re-perforation measures increased
the daily average capacity per mature well from 300,000 cubic meters to
650,000 cubic meters. The daily average output per newly started well
reached 1-2 million cubic meters, thanks to horizontal and high-angle well
drilling. The First Natural Gas Processing Plant processed 16 million cubic
meters of natural gas and supplied 14.5 million cubic meters of commercial
gas to the Central Asia-China Gas Pipeline per day.
UzbekistanOur cooperation with Uzbekistan in the field of natural gas was
further deepened in 2010. We signed a framework agreement with
Uzbekneftegaz to receive 10 billion cubic meters of natural gas a year from
Uzbekistan. Smooth progress was made in our joint Aral Sea project with
Uzbekneftegaz, Russia's LUKoil, Petronas, and KNOC, marked by high-yield
gas flow resulting from a test at well WAEX-1, the first exploration well
completed in the Aral sea.
RussiaThe Russia-China Crude Pipeline became operational in 2010, symbolizing
a new era of our energy cooperation with Russia. We inked a general
agreement with Transneft over the operation of the Russia-China Crude
Pipeline that stretches from Russia's Skovorodino station to China's Mohe
station, a framework agreement with Gazprom to import natural gas to
China, an agreement with Rosneft on extending oil supply to the Russia-
China Crude Pipeline, and an agreement with LUKoil on expanding
strategic cooperation.
Cooperation in the oil and gas business deepened in 2010. Vostok Energy
Ltd, our joint venture with Rosneft, made progress in two exploration
projects at Verkhneichersky and West Chonsky in north Irkutsk Oblast.
We completed drilling and encountered oil and gas shows in exploration
well West Chonsky-1. Our 13 Mt/a joint veture refinery with Rosneft was
inaugurated in Binhai New District of Tianjin.
MS metering station in Uzbekistan
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2010 Annual ReportAnnual Business Review
Russia-China Crude Pipeline Being Operational
A ceremony celebrating the completion of the Russia-China Crude
Pipeline was held on September 27, 2010, with Russian President
Dmitry Medvedev and Chinese President Hu Jintao in attendance.
At the ceremony President Hu said, “The completion of Russia-China
Crude Pipeline is a model of mutual benefit and win-win, as well as a
new milestone of energy cooperation between Russia and China.”
In the 1990s, CNPC began negotiating with Russia on building the Russia-
China Crude Pipeline. On April 21, 2009, the governments of Russia
and China formally signed the “Agreement between The Government
of the People's Republic of China and The Government of the Russian
Federation on Cooperation in the Field of Petroleum”, which approved the
construction of the Russia-China Crude Pipeline and authorized CNPC and
Transneft to jointly carry out the construction. Accordingly, CNPC signed
“The Contract on Construction and Operation of the Crude Oil Pipeline
from Skovorodino to the Russia-China Border” with Transneft, as well as
agreements with Rosneft and Transneft respectively for long-term crude
trade. Under the agreements, Russia will supply 15 million tons of crude to
China each of the 20 years of the contract term.
The pipeline starts at Skovorodino off-take station in Russia and ends at
Daqing terminal station in China. With a designed annual capacity of 15
million tons, the pipeline is about 1,000 kilometers long, including 63.4
kilometers in Russia and 933 kilometers in China. Construction of the
Russian section and Chinese section (Mohe-Daqing) began in April and
May, 2009, respectively. The Mohe-Daqing section was built in such a
complex environment that constructors were technically challenged by
the permanently frozen soil in extremely cold zones, and a 1,150m-long
crossing over Heilongjiang River, the boundary river between Russia
and China. To install the pipeline, CNPC's pipeline constructors mastered
and implemented innovative new construction techniques such as
“pipeline construction in multi-year frozen soil areas”, “construction on
forest wetlands”, “construction in swamps of permanently frozen soil”, and
conscientiously minimized the operation zones to maximally protect the
nature in the protection zone while keeping to the construction schedule.
Most notably, we used fibertec protection technology for the Heilongjiang
River crossing, which kept the anticorrosion layer on the pipeline from
being damaged by the gravel layer, and ensured a more than 50-year
service life for the pipeline used in the crossing.
On January 1, 2011, the pipeline was completely put into service. This
new channel for China's import of Russian oil will play an important
role in deepening the energy cooperation between Russia and China.
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2010 Annual Report Annual Business Review
AfricaIn 2010, CNPC made oil and gas investments in Sudan, Algeria, Niger, Chad,
Nigeria, Tunis, Equatorial Guinea, and Libya.
Sudan2010 saw smooth operation of our joint projects in Sudan. In addition
to discoveries from progressive exploration in Block 1/2/4 and 3/7, we
completed drilling of two offshore exploration wells in Block 15, providing
us with experience in offshore risk exploration. For the purpose of oil and
gas field development, we enhanced comprehensive control of mature
oilfields and accelerated capacity building in new ones. The Phase-2 of
Block 3/7 and Phase-3 of Block 6 were put into operation. The acidulous
water stripping work for environmental protection of Phase-2 expansion
of Khartoum Refinery was successfully started and achieved remarkable
results in comprehensive wastewater treatment.
NigerThe Agadem upstream downstream integrated project in Niger made
orderly progress. High yield from three exploration wells in formation
test marked a major breakthrough in upstream risk exploration. Most of
the welding work was completed along the crude pipeline designed to
transport one million tons of oil per year. Construction of the Zinder JV
Refinery advanced to the installation stage.
ChadOur Chad project in Bongor Basin made key exploration discoveries, and
achieved successful formation test in risk exploration well Cassia N-1
deployed in the Naramy region. N'Djamena Refinery, our joint venture with
the Chadian Ministry of Petroleum, smoothly advanced to the installation
stage. We completed the main part of a 311km-long crude pipeline
designed to transport one million tons of oil a year at the first stage.
AmericaIn 2010, CNPC had joint oil and gas investments in Venezuela, Ecuador,
Peru, Columbia, Canada, and Costa Rica.
VenezuelaWe formally signed a joint venture operation agreement with PDVSA on
Block Junin 4 in the Orinoco heavy oil belt. Our existing joint projects ran
smoothly. With respect to the MPE3 project, we accelerated construction
of well sites, the drilling of new wells, and the speed at which new wells
were put into production. These achievements, together with enhanced
oilfield management and optimized parameters of oil producing wells,
contributed to growth in output.
EcuadorOur projects in Ecuador converted their PSC into service contracts. The
Andes projects saw the successive birth of high-yield wells in the Tarapoa
block, aided by the study of the patterns of reservoir-formation, fine reservoir
description, and the distribution of remaining oil. When these new wells were
put into production, the preliminary stage test results showed a remarkable
average output of more than 900 barrels per day. We also introduced dual well
completion and other state-of-the-art and proven oilfield production processes
and technologies, and fulfilled the objective of stabilizing oil production.
PeruDespite the high composite water-cut and the weakening capacity of
water-injection wells, all wastewater was treated and re-injected in Block
1AB/8 . This was made possible by excellent maintenance of water-
injection systems, and smooth operation of wastewater recycling systems.
The project also witnessed organic growth of oil production through
enhanced management and stimulation of existing light oil wells and
ensuring production of heavy oil in Block 1AB.
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2010 Annual ReportAnnual Business Review
秘鲁塔拉拉油田6/7区块海边油井
Drilling operation in Ecuador
39
2010 Annual Report Annual Business Review
Drilling operation in Ahdab Oilfield in Iraq
Middle EastIn 2010, we invested in oil and gas projects in Iraq, Iran, Oman and Syria,
and entered Qatar's oil and gas exploration in partnership with Shell.
Iraq2010 saw the advancement of our joint projects in Ahdab, Rumaila, and
Halfaya oilfields.
We commenced capacity building and surface work at Ahdab Oilfield.
Massive well drilling resulted in the spud-in of 27 wells and the
completion of 24 wells throughout the year. A total length of 201km of
three export pipelines was welded in 2010. The operating area, living
camp, and logistics and service area took shape. 1,703 jobs, or 58% of
the total, were locally staffed.
The Rumaila Oilfield reached its target productivity. The Rumaila Field
Operating Organization (ROO), a consortium by CNPC, BP and Iraq's
South Oil Company, took over operation management and commenced
operation in the oilfield. Over the course of the year, a total of 41 wells were
drilled, 103 workovers completed, and 122km of flowlines laid. The initially
targeted 10% increase of daily oil production was met in December, 2010,
thanks to the commencement of production at new wells and optimization
of production parameters.
In January 2010, the service contract was formally signed for the Halfaya
Oilfield, which is operated by CNPC in consortium with Total, Petronas,
and Iraq's Missan Oil. The terms of the contract require the consortium to
increase daily output to 535,000 barrels per day. In December 2010, 3D
seismic acquisition was formally commenced and the first batch of three
horizontal appraisal wells with the designed depth of more than 4,000m
were spud in.
SyriaIn 2010 we expanded our oil and gas business in Syria. We concluded an
agreement with Shell to acquire shares in Al Furat Petroleum Company.
Under the agreement, we acquired a 35% interest in Syria Shell Petroleum
Development (SSPD), which had been 100% owned by Shell.
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2010 Annual ReportAnnual Business Review
Asia-PacificIn 2010, CNPC made joint oil and gas investments in Indonesia, Myanmar,
Thailand, Mongolia, Singapore, and Japan, and entered the Australian CBM
industry for the first time.
IndonesiaOur continued progressive exploration made new discoveries in 2010. Oil
and gas fields maintained stable production by rejuvenating old wells,
optimizing production parameters, and recovering shut-in wells.
AustraliaBy acquiring 100% shares of Australia’s Arrow Energy in partnership with
Shell, at a cost of AUD 3.5 billion, we gained entrance into the Australian
CBM industry. On August 23, the settlement was approved at Arrow's
general shareholders meeting and accepted by the Chinese and Australian
governments. PetroChina International Investment Co., a subsidiary of
CNPC, and Shell Energy Holdings Australia, established a 50-50 joint
venture to develop CBM resources in Queensland and Shell's proposed
LNG plants on Curtis Island at Gladstone.
MyanmarIn 2010, construction of the Myanmar-China Oil and Gas Pipeline officially
commenced. CNPC and Myanmar Oil and Gas Enterprise (MOGE) signed
the Shareholder Agreement on Southeast Asia Oil Pipeline Co., Rights
and Obligations Agreement on Southeast Asia Gas Pipeline Co. and the
Shareholder Agreement on Southeast Asia Gas Pipeline Co. According
to these agreements, CNPC Southeast Asia Natural Gas Pipeline Co., Ltd.
would be responsible for the design, construction, operation, expansion,
and maintenance of the oil and gas pipelines.
Both pipelines will start from Myanmar's Kyaukryu and enter China at Ruili
in Yunnan Province. The gas pipeline will extend across Yunnan, Guizhou,
Chongqing, and Guangxi. The oil pipeline is designed to transport 22
million tons of oil per year, and the gas pipeline is designed to transport
10-13 billion cubic meters of gas per year. An oil terminal will be built on
the west coast of Myanmar's Kyaukryu.
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2010 Annual Report Annual Business Review
International Trade
By leveraging its integrated business advantages and adapting to market
trends, CNPC expanded international trade in 2010. We use various means
such as long-term contracts, hedging, processing on order, warehousing,
financing, and prepayment trade to strengthen the control of resources.
Throughout the year, we realized trade volume of 195 million tons of crude,
refined products, chemicals, and natural gas, worth USD 110.5 billion, up
27.5% and 67.6% over 2009, respectively.
We increased our influence in the crude oil market by focusing on market
development in major geographical regions and major oil types, and
growth of new energy resource types. In 2010, the volume of our physical
oil trade increased by 27% over 2009.
We extended our trade value chain by carrying out processing on order
of refined products and fully utilizing storage facilities. Our entry to the
refined products market of South Asia and Africa marked further expansion
of our offshore vessel refueling business. In the fourth quarter, we helped
stabilize domestic supply by importing diesel to meet market demand.
Our export of petroleum coke, paraffin, fertilizer, and other chemicals
reached a new high. New breakthroughs were made in the export of
synthetic resin and rubber. In addition to consolidating and expanding
our resources in northeast Asia and the Middle East, we enhanced market
development in South Asia and South America.
We continued to purchase natural gas from Central Asia. In addition to
concluding a gas purchasing framework agreement with Uzbekistan, we
made preparations to import LNG from Australia and Qatar.
The shipping business also increased in scale, with traffic up 23% year-on-
year. We expanded the size of our fleet by means of “shipbuilding + time
charter”. Ships were built in joint ventures with international petroleum
shipping companies from Venezuela and Russia.
Our three major overseas oil and gas operation centers in Asia, Europe, and
America all saw improvements, with the Asia center enhancing trading,
processing, storage, and transport capabilities. We also initiated a refined
products storage project in the Middle East.
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2010 Annual ReportAnnual Business Review
Domestic Overseas
2008 2009 2010
2008 2009 2010
Domestic Overseas
2008 2009 2010
Seismic crews in operation
Domestic
Overseas
177
131
46
175
112
63
170
105
65
2D seismic data acquired (kilometers)
Domestic
Overseas
114,548
45,535
69,013
74,392
31,897
42,495
81,130
32,959
48,171
3D seismic data acquired (square kilometers)
Domestic
Overseas
58,648
15,834
42,814
53,525
15,383
38,142
54,338
15,671
38,667
Oilfield Services
As one of the world's major oilfield service providers, CNPC has 597 crews providing
geophysical prospecting, well drilling, well logging, mud logging, and downhole operations in
55 countries and regions.
In 2010, our geophysical prospecting saw improved acquisition speed, with the daily efficiency
of 3D seismic acquisition increasing by 5%. We promoted large-scale application of new
technologies such as horizontal drilling, underbalanced drilling, gas drilling, and operations
under pressure. Throughout the year, we domestically completed 709 horizontal wells, 305
underbalanced wells, and under-pressure operations for 1,621 well-times, up 40.4%, 27.1%,
and 54.2% over last year, respectively. With much increased efficiency of construction and
operation, our oilfield services were more capable of providing services and support and more
competitive within the market. In the high-end overseas market, we made progress by newly
inking contracts worth USD 3.66 billion and grew into a renowned EPC contractor.
Geophysical ProspectingIn 2010, CNPC deployed 241 seismic crew-times (99 2D and 107 3D crew-times) at home
and abroad. We also have 14 VSP crews, and 21 non-seismic (gravity and magnetic survey,
electric survey, and geochemical exploration) crews in operation. In 2010, we acquired 81,130
kilometers of 2D lines, up 9.1% year-on-year, and 54,338 square kilometers of 3D profiles,
roughly the same as in 2009.
We maintained our position as the global leader in onshore prospecting and aggressively
pushed forward the development of the integrated onshore and offshore market. In 2010,
utilization rates for our deep sea operation vessels increased to 83% (from 30% in 2009). BGP
Pioneer performed the first dual-vessel operation on a site in the sea of Ghana.
In China, we performed high-density 3D seismic exploration for carbonate fracture-cave
reservoirs at well block Ha-7 in Tarim Basin, Phase-2 3D seismic acquisition at Kunbei fault-
terrace belt-Qiexi slope in Qaidam Basin, 2D seismic acquisition for the pilot zone of shale gas
industrialization at Zhaotong in Zhejiang Basin and 3D seismic acquisition as part of Shenhua
Group's 100kt/a CCS project in Ordos. Overseas, we achieved our first success in linking
Geophysical prospecting operations
2D seismic data acquired | kilometers
3D seismic data acquired | square kilometers
43
2010 Annual Report Annual Business Review
among nodes, OBC, and onshore data
acquisition with the S64 project in Saudi
Arabia. In Oman, our PDO acquisition
project set a record with a per day
average of 20,000 shots using Distance
Simultaneous Separated Sweep (DSSS)
technology. In Myanmar, our 2D seismic
acquisition in offshore block BLOCK-M1
saw smooth progress. We also
moved into the onshore geophysical
prospecting market in Egypt, Cameroon,
and Papua New Guinea.
In 2010, GeoMoutain, a software system
with our independent intellectual property that integrates mountainous
seismic acquisition, processing, and interpretation, was launched and
successfully applied in 2D seismic exploration for shale gas reservoir at
Changning structure in Sichuan Basin. Our KLSeis software maintained
its leading position in the world. GeoEast software was equipped with
more sophisticated routine functions. Our GeoEast-Lightning, a software
system for depth-migration before stack (DMBS) and tomographic velocity
modeling, achieved world-class status. We continued to advance large-
scale application of GeoEast V2.0. The onsite processing version of the
software enjoyed an installation rate of 100% in China.
The Bureau of Geophysical Prospecting (BGP), our wholly owned
subsidiary, and American ION established a joint venture — INOVA (Tianjin)
Geophysical Prospecting Equipment Co., Ltd. — to further the research and
development of new seismic apparatuses, high-performance vibroseis and
other onshore exploration apparatuses and equipment. Seismic apparatus
ES109, which embodies our independent intellectual property rights,
saw smooth progress towards scaled-up production and sales. INOVA's
Scorpion, with its 12,080 reception channels for seismic acquisition, made
3D seismic acquisition much more efficient in well block Kedong-1 of Tarim
Basin by enabling up to 426 shots per day.
Well Drilling In 2010, our 1,000 drilling rigs spudded 13,121 wells, with total footage
of 25.20 million meters, 1.65% more than in 2009. The domestic footage
increased by 4.1% to 22.97 million meters. Our overall drilling speed saw
a 5% increase, with up to a 10% increase in deep wells, thanks to the
promotion of proven technologies such as optimal selection of bits and
parameters and quality drilling fluid. Drilling efficiency was further improved,
with the average construction cycle shortened by 5.08% to 17.92 days.
In 2010, we completed 867 horizontal wells, including 709 at home and
158 abroad, much more than in 2009. Horizontal wells completed in
Sulige saw the average along-hole depth increased by 113 meters to
4,493 meters, average horizontal interval increased by 136 meters to 943
meters, and average drilling period shortened by 7 days to 71 days, as
compared to those in 2009. Our Great Wall Drilling Company successfully
finished 12 lateral horizontal wells in Xinglongtai buried hill region and
block Sheng-601. The company had an average drilling period of only
7 days longer, while seeing an average production per single well 50%
more than those of conventional horizontal wells in the same blocks. Our
Bohai Drilling Engineering Company also saw the smooth completion of
two CBM multilateral horizontal wells at well block Zhengping-02-1 and
Zhengping-05-1 in Shanxi Province, where the coal seam was prone to
collapse and leakage and the control of well track difficult to maintain.
Horizontal well Halahatang-901H in Tarim Basin was completed at a depth
of 7,069.56 meters, with a maximum slant of 90 degrees, horizontal interval
of 310 meters, and maximum borehole temperature of 158 degrees
Centigrade. Thanks to the precise pressure control adopted in the course of
drilling, the well was completed 13 days ahead of schedule, setting a new
drilling record of CNPC's ultra-deep horizontal drilling.
A number of high-yield wells were drilled by using underbalanced/gas
drilling technologies, which effectively protect the reservoirs and increase
individual-well producing rate. In 2010, we drilled 305 underbalanced wells,
27.1% more than in 2009. CNPC's Western Drilling Engineering Company
obtained high-yield industrial gas flow from well Ke-21-2 by drilling
with negative pressure all along the reservoir section in Tuha Oilfield.
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2010 Annual ReportAnnual Business Review
2008 2009 2010
Domestic Overseas
2008 2009 2010
Domestic Overseas
2008 2009 2010
Drilling rigs in operation
Domestic
Overseas
1,054
868
186
1,009
814
195
1,000
835
165
Wells drilled
Domestic
Overseas
15,161
14,125
1,036
12,900
11,570
1,330
13,043
11,919
1,124
Footage drilled (million meters)
Domestic
Overseas
28.28
26.02
2.26
24.79
22.07
2.72
25.20
22.97
2.23
Drilling operations
Underbalanced nitrogen drilling increased the penetration rate by three times and output by
3-4 times at well Ma-491 as compared to adjacent ones in Tuha Oilfield. CNPC's Chuanqing
Drilling Engineering Company registered a maximum depth record of 5,012 meters in the
311.2mm-borehole mist-drilled well Dabei-6 in Tarim Basin.
We aggressively expanded our presence in the international drilling market in 2010. We
entered the Iraqi drilling market by winning a drilling and directional drilling service contract
for Halfaya Oilfield. We also won contracts for drilling or integrated oilfield services of drilling,
mud, well logging, cementing, and mud logging for national oil companies of Uzbekistan,
Kazakhstan, Korea, and Norway. Moreover, we were awarded drilling and workover contracts
by Chevron and other international oil companies. Meanwhile, we brought our mature
technologies such as compound drilling, optimal selection of PDC bits, and pulse drilling to
overseas fields. Well Nangong-1 drilled by Western Drilling Engineering Company in Uzbekistan
was completed at a depth of 5,717 meters, 21 days ahead of schedule. This well registered a
record in terms of drilling depth, as well as the one-pass success of electrical logging, casing,
and cementing, along a 311mm wellbore using a 70 Rig.
Geothermal Power Generation in Kenya
The government of Kenya developed a new power development plan to help hydroelectric
plants meet domestic electricity demand in the dry season. It expects to convert the rich
geothermal resource available in the country into electricity, thereby enabling the state grid
to serve 90% of the country’s population by 2030 and increasing the percentage of electric
consumption in rural and mountainous regions.
In 2006, CNPC Great Wall Drilling Company (GWDC) won a drilling contract for the geothermal
power generation in Kenya, which would add 70MW generating capacity to the country. In
2007-2008, GWDC concluded a contract for the drilling of additional 25 geothermal wells
in Kenya. The average daily output of steam per single well is 5 MW. Especially, well OW909
achieved a daily testing rate of 12MW, which is now the No.1 high-yield geothermal well in
Africa. In 2010, GWDC worked with China Import and Export Bank to financially and technically
help Kenya promote the exploitation and utilization of geothermal resources under a
framework agreement in the field of energy cooperation between the governments of China
and Kenya. The company will provide comprehensive drilling services for 26 geothermal wells
in the OLKaria 4 Block, 140 kilometers west of the capital city Nairobi.
Wells drilled
Footage | million meters
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2010 Annual Report Annual Business Review
46
2010 Annual ReportAnnual Business Review
2008 2009 2010
Logging crews
Domestic
Overseas
598
523
75
644
556
88
675
556
119
Well logging operations (well-time)
Domestic
Overseas
83,966
77,835
6,131
69,776
64,277
5,499
80,319
74,826
5,493
2008 2009 2010
Downhole operation crews
Domestic
Overseas
1,696
1,641
55
1,892
1,739
153
1,877
1,698
179
Downhole operations (well-time)
Domestic
Overseas
165,116
163,931
1,185
131,321
128,397
2,924
136,382
134,201
2,181
Well Logging and Mud LoggingIn 2010, CNPC had 675 logging crews operating 121 imaging logging units
and 311 high-precision logging units. Throughout the year, these crews
completed 80,319 instances of well logging and perforation and 10,133
instances of mud logging, up 15.11% and 3.94% from 2009, respectively.
As horizontal well logging technologies improve, we can provide open-
hole logging, cementing quality logging, and perforation for these wells.
2010 saw our first successful nuclear magnetic resonance (NMR) logging in
a well with a bore as thick as 12.25 inches — the well Midong-1 in Xinjiang
Oilfield. Our overseas projects saw smooth progress. In addition to entering
the offshore logging market of Iran, our logging projects in Uzbekistan and
Mongolia were endorsed by our partners.
CNPC is a global top-4 developer and manufacturer of imaging logging
systems. As such, we continuously strive to improve the logging outfit
EILog of our intellectual property. We domestically make imaging logging
units of six types (i.e., array induction, array lateral, micro-resistivity
scanning imaging, ultrasonic imaging, array sonic wave, and nuclear
magnetic resonance logging) in three categories (“3 of the electric, 2 of the
sonic, and 1 of the nuclear magnetic category). These units provide new
technical approaches for tackling the challenges of well logging evaluation
in complex reservoirs. In 2010, we developed, domestically made and
deployed 200 imaging logging units of five types (3 of the electric and 2 of
the sonic category), and 26 logging-while-drilling (LWD) units for formation
evaluation. In addition, we signed a sales and technical service contract of
MCI5570 micro-resistivity scanning instrument with Russia’s TNG. This was
the first export of Chinese-made equipment of this kind into the Russian
well logging market.
We independently developed the well logging system LEAP800, which
embodies world-leading technologies. LEAD3.0, our next-generation
integrated platform for well logging, was put into service in 2010, and has
efficiently and accurately processed the completion data of more than
440 wells in Changqing Oilfield. Field tests indicated that the average
processing and interpretation time per well is shortened by 2-3 hours
as compared to other existing products in China. Comprehensive mud
logging unit Snow Wolf and Dema (which contain our independent
intellectual property) have been used in 12 domestic oilfields and 7 foreign
countries.
Well logging operations
Downhole operations
Downhole OperationsIn 2010, CNPC had 1,877 downhole operation crews providing operations and
services including fracturing and acidizing, well intervention, overhaul and
sidetrack drilling. We completed 136,382 downhole operations throughout the
year, 3.86% more than in 2009; and conducted formation test in 6,852 layers, a
little less than in 2009.
In 2010, we fully deployed operations under pressure and domestically applied
them for 1,621 well-times, 54.2% more than in 2009 and exceeding our annual
objective. These operations significantly protected reservoirs, maintained
formation pressure, stabilized and increased individual-well producing rate, and
reduced discharge and energy consumption. In Jilin Oilfield, we applied the
operations for 514 well-times throughout the year, reducing the discharge of
wastewater by 757,000 cubic meters and the transportation by 100,000 tanker-
times. By the end of 2010, we had 84 under-pressure operation crews and 87
under-pressure operation units.
In 2010, we successfully developed an open-hole staged fracturing tool and
its matching technologies for the stimulation of horizontal wells. This tool
enables fracturing of up to 11 stages in a single string run, with a success rate
of 100%. We carried out ten-stage sand fracturing in well Su-5-2-15H in block
Su-5 of Sulige Oilfield. The fracturing resulted in an industrial open gas flow of
553,600 cubic meters per day from the well, which, completed at a depth of
5,235 meters with the average reservoir permeability of less than 0.213 mD and
the horizontal interval of 1,512 meters. We set a number of domestic records at
horizontal well Su-75-70-6H in block Su-75: the longest horizontal interval, the
most fracturing stages with one run at an along-hole-depth of more than 3,000
meters, most sand consumption, longest duration of continuous pumping,
and the first use of carboxymethyl fracturing fluid with low gel residual and
damage in horizontal well operations.
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2010 Annual Report Annual Business Review
Engineering and Construction
In 2010, our engineering and construction business improved its ability
to provide services and support. We improved workforce coordination,
better allocated resources, optimized management flow, and enhanced
construction safety and quality supervision in the capacity building of
oil and gas fields, large-scaled refining and chemical projects, and major
pipeline works. We undertook 73 major engineering and construction
projects, including 27 delivered or made operational, 8 newly commenced,
and 19 carried out overseas.
In 2010, we continuously pushed forward high-end business of EPC, PMC,
and construction management. By focusing on large regional markets and
optimizing market layout, we improved our EPC and PMC functions. We
won construction contracts in the Middle East and saw the contribution of
high-end markets increase as a proportion of our total business.
Oil and Gas Field Surface EngineeringWe are the domestic leader in building capacity of onshore oil and gas
fields. We have the capacity to build surface works to accommodate
facilities with 20 Mt/a oil production capacity and 10 bcm/a gas production
capacity. In addition, we have established technology packages of surface
engineering in conventional oil and gas fields, in high water cut, low
permeability, ultra heavy and high condensate content oil fields, and in
high pressure, high sulfur content, and high yield gas fields.
In 2010, we standardized surface engineering design in oil and gas fields
in the domestic market by rolling out standardized and modular design,
and enhancing the engineering design, construction quality, material
procurement, engineering supervision, and matching construction. The
year saw our addition of 15 Mt/a oil capacity and 10 bcm/a gas capacity.
The surface work for pilot production of Dabei block in Kelasu gas field,
EPC-contracted by CPE and constructed by CPECC and other companies,
was completed and put into operation. The No.4 Sulige Natural Gas
Processing Plant, designed to process 5 billion cubic meters of natural gas
per year, was completed and became operational. Construction of the No.5
Sulige Natural Gas Processing Plant, expected to process 23 billion cubic
meters of natural gas per year, was commenced.
Overseas, we saw smooth progress in surface engineering of oil and gas
fields. The JAKE FPF project (the capacity building Phase 3 in Block 6 of
Sudan) was mechanically completed as scheduled in the contract. The
reconstructed and upgraded Algeria LPG processing unit was put into
operation. We won contracts for the Phase-2 Power Plant Project of Palouge
Oilfield in Block 3/7 of Sudan, EPC of Private Station of Bagtyiarlyk Contract
Block in Turkmenistan. Construction of the No.4 Oil and Gas Processing
Plant in Kazakhstan was completed in the same year that the contract was
awarded.
Pipeline and Storage Tank Construction As the domestic leader in design and world leader in construction of
onshore long-distance oil and gas pipelines, we have the annual capacity
to build 6,700-9,700 kilometers of oil and gas pipelines with a diameter
of more than 711mm. In addition, we have the technological capacity to
design and construct 150,000 cubic meters of crude tank and 10,000 cubic
meters of gas tank, and are capable of designing and building 26 million
cubic meters of crude tanks and 16 million cubic meters of refined product
tanks per year.
In 2010, we installed 5,200 kilometers of long-distance pipelines. As the EPC
contractor, China Petroleum Pipeline Bureau (CPPB) smoothly advanced the
construction of the eastern segment of the Second West-East Gas Pipeline,
and completed construction of and began operation at the Zhongwei-
Huangpi trunk. To install the trunk of the eastern segment, we successfully
applied semi-automatic downward welding with RMD + thin thread,
and made new breakthrough in the welding technique of long-distance
pipelines and small-diameter pipes on oilfield stations and yards. The
Parallel Sebei-Ningxia-Lanzhou Pipeline and the Lanzhou-Wuhan section
of Lanzhou-Zhengzhou-Changsha Products Pipeline were completed
and became operational. The Yulin-Liangxiang section of the Third Shaan-
Jing Pipeline was completely brought on stream. Rizhao-Dongming and
Taizhou-Qingdao pipelines were pushed forward as scheduled.
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2010 Annual ReportAnnual Business Review
We made smooth progress in our pipeline construction overseas. The
Russia-China Crude Pipeline was completed. In the crossing of the
Heilongjiang River, Transneft and CNPC simultaneously drilled in opposite
directions from both banks of the river, and adopted the innovative fibertec
protection for pipe pullback to ensure a service life of more than 50 years
of the crossing pipe. Line B of the Central Asia-China Gas Pipeline generally
contracted by CPPB went on stream successfully in one trial. Both lines of
the pipeline went on stream two months ahead of the original schedule.
We also set a new record of 9.3 million labor-hours in an international
project without any accident. We began construction of the Myanmar-
China Oil and Gas Pipelines, smoothly built the crude pipelines in Chad and
Niger, and completed 90% of the Abu Dhabi Crude Pipeline. Our efforts
earned the praise of both our partner in Kenya and India's supervisor. We
built and burnished our reputation within the eastern Africa market by
upgrading the Eastern Line 1 in Kenya, which has smoothly run for one year
since being put into service. In May 2010, we commenced construction on
the western pipe upgrade of Line 4 in Kenya.
In 2010, we erected 3.2 million cubic meters of crude tanks and 520,000
cubic meters of refined products tanks. Huanqiu saw smooth progress
in its LNG EPC projects in Jiangsu, Dalian, and Tangshan. Four 100,000-
cubic-meter tanks were built in Lanzhou commercial crude storage base,
which was EPC-contracted by CPPB, and the another four were built in
Lanzhou crude storage base for production and operation, which was EPC-
contracted by Huanqiu. As the EPC contractor, CPECC largely completed
the Zhuhai refined products storage.
Offshore EngineeringWe have the capacity to provide integrated and comprehensive support for
offshore production. Our services include well drilling, well completion, and
production test in tidal and shallow water regions, design and construction
of marine engineering, and vessel service. We have created advanced and
highly functional technologies in support of offshore operations. All these
have helped us develop oil and gas fields in the Bohai Bay.
In 2010, we spudded 58 wells and delivered 63 wells, with a total footage
of 146,000 meters. We also provided well-completion service for 114 well-
times. We saw a 433m-increase in the average along-the-hole depth, an
0.88% increase in time efficiency, and 100% compliance of cementing and
wellbore quality. These results were made possible by the application of
PDC bits, high-pressure jet drilling, leakage prevention, and quick-setting
cement paste system, in light of the formation characteristics in Dagang,
Liaohe, and Jidong oilfields. In well Binhai-10X1, our CPOE 6 rig completed
drilling at a depth of 4,891 meters. The penetration rate was 23.5% higher
than that of adjacent wells, and the drilling period set a record of 44.3 days,
thanks to pressure-controlled drilling. Well Binhai-6 in Dagang Oilfield
(completed at a depth of 4,742 meters) was fractured at a depth of 4,474.4
to 4,535.3 meters, a temperature of 170 degrees Centigrade, and a span of
60.9 meters. The fracturing allowed daily production to reach 103.6 tons of
oil and 29,000 cubic meters of natural gas.
Our Tangshan production support base has been equipped with a
coastline of 1,270 meters in the wharf. The first phase of construction
enables the berthing of vessels and platforms and the loading and
restocking of materials, and provides winter berthing, inspection, and
maintenance for 12 platforms, more than 20 vessels, and ships of CNPC's
Offshore Emergency Response Center. Construction of the Qingdao
offshore engineering construction base saw smooth progress, enabling the
processing of 3,400 tons of steel in 2010.
CNPC has 42 large-scaled offshore equipment units, including nine mobile
drilling platforms, one modular drilling rig, five production test platforms,
and a variety of 27 vessels. In 2010, our vessels operated 9,383 steaming
days for transportation and our platforms were engaged in 82 towing and
shifting voyages. High-precision towing and positioning with zero errors
was conducted by CPOE 7 platform in Anadarko Petroleum Corporation's
well block Caofeidian, and by CPOE 3 platform in ROC's well block C4.
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2010 Annual Report Annual Business Review
Construction of Refining and Chemicals FacilitiesWe have the capacity to simultaneously construct two or three 10Mt/a refining
plants, in addition to one or two 1 Mt/a ethylene plans.
In 2010, we undertook more than 40 major construction projects. Working through
CPECC and China Huanqiu Contracting & Engineering Corp., we completed
and put into operation Guangxi Petrochemical's 10 Mt/a refinery and Qingyang
Petrochemical's relocation and reconstruction. CPECC undertook construction
of Urumchi Petrochemical's 1 Mt/a aromatic plant, the largest project of this
type in the world, and Tarim Fertilizer Plant's 450 kt/a synthetic ammonia unit
and 800 kt/a urea plant, the largest capacity of each unit in the world. All these
plants successfully went on stream in a single trial. As the EPC contractor, Huanqiu
fully pushed forward Sichuan Petrochemical's 800 kt/a, Fushun Petrochemical's
800 kt/a, and Daqing Petrochemical's 600 kt/a ethylene plants, and saw major
progress in Hohhot Petrochemical's 5 Mt/a refinery upgrading project. As the
plant EPC contractor, CPECC made progress in Ningxia Petrochemical's 5 Mt/a
refinery reconstruction project and Karamay Petrochemical's 600 kt/a continuous
reforming unit.
We made new breakthroughs in developing our presence in the overseas refining
and chemical construction market. Huanqiu signed contracts for the refinery
foundation design and FEED contract in Cuba, feasibility study of a refinery in
Costa Rica, and maintenance in Ecuador. The environmental protection project
of Khartoum Refinery in Sudan undertaken by CPECC was completed ahead of
schedule.
50
2010 Annual ReportAnnual Business Review
Tarim Fertilizer Plant
51
2010 Annual Report Annual Business Review
Petroleum Equipment Manufacturing
In 2010, our equipment manufacturing business succeeded in optimizing
and adjusting the product portfolio, increasing industry concentration,
and improving market competiveness. This enabled us to build a modern
manufacturing industry that focuses on marketing, R&D and services.
2010 saw smooth progress in the integration of equipment manufacturing
business and the construction of large equipment manufacturing bases. As
part of the effort, the Machinery Plant of Lanzhou Petrochemical Company
was reorganized into Bohai Petroleum Equipment Manufacturing Company
Limited. We have preliminarily set up a new configuration of business
development, which consists of six manufacturers and technical developers
including Baoji Oilfield Machinery Company Limited (BOMCO), Baoji Petroleum
Steel Pipe Company Limited, Bohai Equipment Manufacturing Co., Ltd, CNPC
Jichai Power Complex, Daqing Oilfield Equipment Manufacturing Company
Ltd, and Liaohe Petroleum Equipment Manufacturing Corporation, in addition
to one professional international trading firm, China Petroleum Technology
& Development Corporation (CPTDC). Five large equipment manufacturing
bases integrating R&D, design, manufacturing, sales, and services have taken
shape in Shaanxi, Tianjin, Daqing, Liaohe, and Shandong. We have successfully
developed 53 new products, such as a 5000m trailer-mounted drilling rig,
coiled tubing, and a high-reliability diesel engine.
Our drilling equipment is evolving towards intelligent, highly reliable, and
highly mobile processes and technologies that are suitable to complex
environments. We have built our capacity to make a full series of 1,000-12,000m
rigs, and established systematic manufacturing capacity of seven models of
top drive drilling system. In 2010, our domestically made, second generation
slant well drilling rig ZJ20DBX passed a 50km road mobility test, with all test
data in compliance with the design requirements. We also succeeded in the
trial production of a large "36-inch button bit" with full drilling capacity and
China's first marine riser device for offshore drilling.
Our oil and gas production outfits are more intelligent, energy efficient, and
automatic. We can produce high-performance products such as electric
submersed oil pumps, screw pumps, insulated tubing, and gas wellhead at
scale. Our manufacturing capacity of energy-efficient motors has increased
from 2,500 units to 10,000 units a year. 2010 saw the smooth progress in the
R&D of new technologies for high steel grade HFW tubing. Technical upgrade
of the sucker rod production line was commenced at Bohai Petroleum
Equipment Manufacturing Company, where upgrade and reconstruction
projects of drill pipe production line were completed and became operational.
We have developed a wide range of multiple series of power units, including
natural gas, multi-fuel-gas, and dual-fuel engines. We have expanded the
application range of our heavy-duty compressors from well drilling to oil
and gas gathering and transportation. In 2010, construction began on a
manufacturing facility expected to produce 5,000 JC15 engines on light-duty
drilling rigs and 100 26/32 high-speed, heavy-duty engines per year.
Our manufacturing capacity of high-grade steel pipes saw marked
improvement. We develop high-steel-grade, thick-wall and large-diameter oil
and gas transport pipes, which have played an important role in support of the
construction of major pipelines. 2010 witnessed our successful trial production
of a submerged arc welded steel pipe, which is made from steel of grade X100
and has a diameter of 1,219mm and a wall thickness of 15.3mm. The finished
product of the pipe was accepted in an inspection. In addition, its matching
welding rod also passed production tests, with all performance indicators
meeting the design standard.
We can also produce high value added and state-of-the-art petroleum pipes
at scale. In 2010, an oil pipe project was launched in Xi’an, as part of a 300kt/a
production base of high-grade oil pipes to be built in Shaanxi Province.
In addition to a domestic marketing network covering all upstream, midstream,
and downstream sectors, we have international marketing sites at major oil and
gas producing regions around the world. We have established 12 large markets
valued at USD 50 million each, including those of Central Asia, the Middle
East, North Africa, South America, and North America. In 2010, our petroleum
equipment and materials were exported to 88 countries and regions, at a
total value of USD 1.6 billion. ESPs made by our Daqing Oilfield Equipment
Manufacturing Company Ltd. were introduced to the Iraq market, and the
China Geosteering Drilling System (CGDS) made by our Beijing Petroleum
Machinery Factory was introduced to North America. Baoji Petroleum Steel
Pipe Company Limited won a contract to supply pipes to the Russian East
Siberia – Pacific Pipeline. Baoji Oilfield Machinery Company Limited signed a
contract to export the drilling system for submersible offshore rig to Daewoo
Shipbuilding & Marine Engineering Co., Ltd (DSME). This was our first export of
new products such as offshore drilling rig modules, material supplies for water
injection, and well logging packages.
52
2010 Annual ReportAnnual Business Review
53
2010 Annual Report Financial Report
Financial Report
2008 2009 2010
Current assets
Cash and cash equivalent 185,818.39 257,975.98 235,670.40
Tradable financial assets 92.76 564.20 1,431.72
Net bills and accounts receivable 36,743.67 63,389.14 88,233.81
Prepayments 36,537.24 38,412.29 37,657.95
Other accounts receivables 30,244.97 18,109.40 43,564.44
Inventories 157,672.00 188,526.43 227,676.04
Other current assets 26,055.15 47,505.64 40,683.49
Total current assets 473,164.18 614,483.08 674,917.85
Fixed assets
Available-for-sale financial assets 30,619.86 38,508.08 45,553.44
Held-to-maturity investments 76,040.89 125,210.98 160,513.86
Long-term equity investments 37,665.31 39,155.85 66,070.31
Fixed assets-net value 404,152.78 470,011.78 555,665.29
Construction in progress 191,653.20 258,150.89 284,671.93
Oil and gas assets 501,473.22 551,207.55 636,605.70
Intangible assets 33,807.86 40,954.66 47,721.77
Other fixed assets (other long-term assets) 55,163.87 83,922.14 158,236.11
Total fixed assets 1,330,576.99 1,607,121.93 1,955,038.41
Total Assets 1,803,741.17 2,221,605.01 2,629,956.26
Current liabilities
Short-term loans 35,515.21 31,931.15 60,943.52
Bills and accounts payable 167,095.92 219,829.48 286,325.64
Prepayments 30,458.72 40,545.11 57,032.51
Employee pay payable 32,733.43 26,264.18 23,130.42
Taxes payable 20,138.05 25,117.64 53,071.31
Other payables 61,865.52 70,108.08 82,787.95
Other current liabilities 21,436.74 125,326.03 157,519.55
Total current liabilities 369,243.59 539,121.67 720,810.90
Non-current liabilities
Long-term loans 23,548.37 43,069.83 34,393.32
Estimated liabilities 39,344.92 48,003.47 65,440.66
Deferred income tax liabilities 13,866.76 23,883.07 23,752.57
Other non-current liabilities 47,469.30 146,365.52 217,448.21
Total non-current liabilities 124,229.35 261,321.89 341,034.76
Total liabilities 493,472.94 800,443.56 1,061,845.66
Consolidated Balance Sheet million RMB yuan
54
2010 Annual ReportFinancial Report
Consolidated Balance Sheet (continued)
2008 2009 2010Operating income 1,272,400.03 1,220,488.13 1,720,885.19
Income from core businesses 1,271,569.62 1,219,788.48 1,720,183.72
Income from other businesses 830.41 699.65 701.47
Less: Operating cost 837,133.11 778,764.31 1,154,873.26
Cost of core businesses 836,776.40 778,563.37 1,154,654.56
Cost of other businesses 356.71 200.94 218.70
Business tax and supertax 124,732.27 139,160.76 188,782.79
Sales expenses 51,943.76 53,848.23 63,531.85
Management expenses 86,447.74 90,724.85 101,427.99
Financial expenses 4,040.95 4,702.95 8,406.80
Loss on depreciation of assets 37,557.66 2,440.19 7,248.65
Others 24,835.45 22,791.93 27,140.64
Plus: Income from change in fair value (Loss is presented with "-") 4.42 101.15 -44.98
Income from investments 15,665.04 7,441.11 12,844.91
Operating profit 121,378.55 135,597.17 182,273.14
Plus: Non-operating income 23,788.11 7,566.70 7,594.28
Less: Non-operating expense 10,965.06 14,743.57 17,210.44
Total profit 134,201.60 128,420.30 172,656.98
Less: Income tax expense 43,151.12 41,196.09 48,473.02
Net profit 91,050.48 87,224.21 124,183.96
Less: Loss and gain from minority 20,271.66 17,652.96 26,931.64
Net profit attributable to owners' equity of the parent company 70,778.82 69,571.26 97,252.32
2008 2009 2010
Owners equity
Paid-in capital 297,870.99 320,429.89 348,953.24
Capital reserves 269,068.18 270,562.90 267,207.03
Special reserves 18,098.18 23,230.89 26,645.64
Surplus reserves 108,572.90 115,838.40 749,117.88
Retained profits 491,315.61 552,514.46 13,129.06
Converted difference in Foreign Currency Statements -8,647.55 -11,319.15 -10,517.80
General risk preparation 635.88 1,117.06
Total owners' equity attributable to parent company 1,176,278.31 1,271,893.27 1,395,652.11
Minority interests 133,989.92 149,268.18 172,458.49
Total owners' equity 1,310,268.23 1,421,161.45 1,568,110.60
Total liabilities and owners' equity 1,803,741.17 2,221,605.01 2,629,956.26
Consolidated Profit Statement
Note: Data in 2009 have been adjusted in accordance with Accounting Standard for Business Enterprises.
million RMB yuan
million RMB yuan
55
2010 Annual Report Financial Report
A. Description of Principal Accounting Policies and Accounting Estimates
1. Accounting standard and accounting system
Since January 1, 2007, CNPC (hereinafter referred to as the Company)
started to follow the Accounting Standard for Business Enterprises issued
by the Ministry of Finance in 2006.
2. Fiscal year
The fiscal year starts on January 1 and ends on December 31 each
calendar year.
3. Standard accounting currency
The Company adopts RMB yuan as currency used in bookkeeping.
4. Accounting basis and valuation
Accounting is based on the accrual system. All assets are measured at
historical cost, except for tradable financial assets and available-for-sale
financial assets which are initially measured at fair value.
5. Foreign currency accounting and conversion
(1) Foreign currency transaction
Our foreign currency transactions are converted into RMB yuan at the
spot exchange rate on the days the transactions occurred; the monetary
foreign currency assets and liabilities on the balance sheet date are
converted into RMB yuan at the spot exchange rate on the balance
sheet date. The exchange gains and losses arising from these translations
that occurred in construction preparation, production and operation
are taken into financial expenses; those related to the acquisition and
construction of fixed asset, oil and gas asset and other assets in line with
the capitalization condition are handled according to relevant provisions
about borrowing costs; and those occurred in the period of liquidation
are taken into liquidation gain or loss.
A non-monetary foreign currency asset measured at historical cost is
converted into RMB yuan at the spot exchange rate on the trading day, with
its amount in RMB yuan unchanged. The closing fair value of a non-monetary
asset measured at fair value is converted into RMB yuan at the closing spot
exchange rate, with the difference between the converted value and the
original amount in RMB yuan taken into the current profits and losses.
(2) Conversion of financial statement in foreign currency
All asset and liability items presented in Foreign Currency Balance Sheet are
converted into RMB yuan at spot exchange rate on the balance sheet date;
the owner’s equity other than “undistributed profit” is converted at spot
exchange rate when occurred. Foreign incomes and expenses presented in
the Income Statement are converted at the exchange rate approximating
the spot exchange rate on the date of transaction. The exchange difference
of Foreign Currency Balance Sheet arising from the conversions mentioned
above is presented separately in “Converted Difference in Foreign Currency
Statement” under owner’s equity. The exchange difference arising from
monetary foreign currency items materially invested in foreign business
due to the change in exchange rate is also presented separately in owner’s
equity when preparing consolidated financial statements. When disposing
foreign business, the related exchange difference is carried to the gains/
losses of the period the business is disposed.
The opening balances of cash and cash equivalents in the Foreign Currency
Cash Flow Statement are converted at statement’s initial exchange rate;
and the closing balances are converted at the spot exchange rate on the
balance sheet date. And other items are converted at the exchange rate
approximating the spot exchange rate on the date of transaction. The
converted difference of cash flow statement arising from the conversions
mentioned above is presented separately in Effect of the Change of
Exchange Rate on Cash.
6. Recognition of cash and cash equivalents
The cash presented in the Cash Flow Statement comprises cash in hand
and the deposits available for payment from time to time. Cash equivalents
presented in the Cash Flow Statement are short-term (mature within three
months), highly liquid investments that are readily convertible into cash
and almost have no risk of change in value.
7. Financial assets
(1) Financial assets are classified into following specified categories: financial
assets at fair values through profit or loss, held-to-maturity investments,
loans, receivables, and available-for-sale financial assets. The classification
depends on the purposes of investments and economic substance.
a. Financial assets at fair value through profit or loss are financial assets that
are acquired for the purpose of selling in the near term, and are recorded
as tradable financial assets in the Balance Sheet.
b. Held-to-maturity investments are non-derivative financial assets with fixed
or determinable payments and fixed maturity dates that the management of
the Company has the positive intent and ability to hold to maturity.
c. Loans and receivables are non-derivative financial assets including bills
receivable, accounts receivable, interests receivable, dividends receivable
Notes to the Financial Statements
56
2010 Annual ReportFinancial Report
and other receivables with fixed or determinable payments that are not
quoted in active market.
d. Available-for-sale financial assets include all non- derivative financial
assets that are designated initially as available-for-sale or the financial
assets that are not classified in any of the other three categories.
(2) Recognition and measurement of financial assets
Financial assets are initially recognized at fair value. For financial assets at
fair value through profit or loss, the costs of acquisition are directly stated
in profit and loss accounts. Transaction costs of other financial assets are
initially recognized at fair value. A financial asset is derecognized when the
rights to receive cash flow from the assets are expired, or the Company
has transferred substantially all the risks and rewards of ownership of the
financial assets to a third party.
Financial assets at fair value through profit or loss and available-for-sale
financial assets are subsequently measured at fair value; the investments in
equity instruments that are not quoted in active market and its fair value
can not be measured reliably are measured at costs; loans, receivables and
held-to-maturity investments are measured at amortized cost using the
effective interest method.
Changes in fair value of financial assets at fair value through profit or
loss are recorded in profit/loss on changes in fair value; interests or cash
dividends from the assets held are recognized as income from investment;
when disposed, the difference between its fair value and initially
recognized amount is recognized as gain/loss on investment, and its gain/
loss on changes in fair value are adjusted accordingly.
The held-to-maturity investments during the period of holding shall be
determined using the effective interest method and shall be recognized
as income from investment. The effective interest rate shall be determined
upon obtaining such investment and remain unchanged in the following
period. When disposing of the held-to-maturity investment, the difference
between the price of obtaining such investment and its book value shall
be determined as income from investment.
When recovering the loans and receivables or disposing of the loans, the
difference between the price of obtaining such investment and loan book
value shall be determined as the income statement.
Changes in fair value of available-for-sale financial assets are recorded in
owner's equity; interests are recorded in gain on investment using the
effective interest method; cash dividends of available-for-sale investment
in equity instruments are recorded in gains on investment when invested
enterprises announce to distribute dividends; when disposed, the
deference between acquisition cost and the carrying value is recorded
in, and the accumulative amount of the changes in fair value originally
recorded in the owner’s equity is carried to profit/loss on investment.
(3) Impairment of financial assets
An assessment of carrying value of financial assets, except for financial assets
at fair value through profit or loss, is made at each term end to determine
whether there is objective evidence of impairment. If there is an objective
evidence of impairment of a financial asset, a provision for impairment
is recognized. Where there is a substantial or non-temporary decrease in
fair value of available-for-sale financial assets, the accumulated losses on
decrease of fair value that are directly recorded in owner’s equity before
are recorded in losses on impairment. For available-for-sale investment
in debt instruments with recognized loss on impairment, if its fair value is
increased in a subsequent period and the increase can be related objectively
to an event occurring after the impairment was recognized, the previously
recognized loss on impairment is reversed and recognized in the income
statement. For available-for-sale investment in equity instruments with
recognized loss on impairment, if its fair value is increased in a subsequent
period and the increase can be related objectively to an event occurring
after the impairment was recognized, the previously recognized loss on
impairment is reversed and recognized in the owner’s equity. The losses on
impairment of the investment in equity instruments that are not quoted in
active market and its fair value can not be measured reliably are irreversible.
8. Inventories
(1) Inventories comprise purchase, raw materials, packing materials, low-
value consumption goods, work in progress and semi-finished goods etc.
(2) Inventories are carried at the actual cost when acquired, using perpetual
inventory method; actual cost of delivered or sold inventories are carried at
weighted average.
(3) Low-value consumption goods and packing materials are amortized
using one-off amortization method when they are put into use.
(4) Year-end inventories are carried at the lower of cost and net realizable
value. Based on wall-to-wall inventory at the end of the period, provision
for inventory write-down is retained for the estimated loss on contracted
works and the part of the cost exceeded net realizable value of the
inventories that are replaced, in part or in whole outdated, or their selling
price is lower than cost. Provision for inventory write-down is retained for
the difference between cost and net realizable value of inventories on the
individual item basis. The net realizable value is expected selling price less
estimated complete cost, selling cost and related tax.
9. Long-term equity investment
(1) Measurement of long-term equity investment
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2010 Annual Report Financial Report
For the combination of business under the same control, the carrying
amount of the owner's equity of the combined business on the day of
combination is recognized as the initial cost of the long-term equity
investment. For the long-term equity investment obtained from
combination of business under different control, the assets paid, liabilities
occurred or assumed and the fair value of the equity securities issued on
the combination or purchase day for acquiring the control of the combined
or purchased business are recognized as cost on combination. And the cost
on combination is recognized as initial cost of investment in the long-term
equity investment.
Except for the long-term equity investment obtained from combination of
business mentioned above, if a long-term equity investment is obtained
through payment of cash, payment of non-monetary assets or issue of
equity securities, its fair value is recognized as initial cost of long-term
equity investment; if a long-term equity investment is obtained from debt
reorganization, the fair value of the shares converted from financial claim
is recognized as the initial cost of investment to the debtor; if a long-term
equity investment is invested directly, the value agreed in investment
contract is recognized as initial cost of the investment, in the event that
the value agreed is unfair, the fair value of the equity invested is recognized
as initial cost of investment. If an initial cost of a long-term equity
investment is higher than the share of the fair value of the net assets that
can be identified in the invested business, the initial cost of the long-term
investment is not adjusted; the difference between the initial cost and the
share of the fair value is recorded in the income statement, and the cost of
the long-term investment is adjusted accordingly.
(2) Measurement of long-term equity investment
Investment in subsidiary is the equity investment in a business practically
controlled by the Company. The investment in subsidiary is recognized
using cost method, and is adjusted using equity method for the purpose of
consolidated financial statements.
Investment in joint venture is the equity investment in a mutual control on
a contracted commercial activity in which the sharing party agrees to share
the control on the significant financial, production and operating decision
with the Company. The investment in joint venture is recognized using
equity method.
Investment in subsidiary is the equity investment in a business on which
the Company does significant influence. The investment in associate is
recognized using equity method.
Long-term equity investment that is not quoted in active market and with
undeterminable fair value and insignificant influence are recognized using
cost method. For the long-term equity investment quoted in active market
and with determinable fair value, if it is not quite influential, its fair value is
reported in available-for-sale financial assets, and the change in fair value is
taken into owner’s equity.
(3) Provision for depreciation of long-term equity investment: At the end of
the year, if the recoverable amount of a long-term investment is lower than
its carrying value because that its market price is lower then its carrying
value in the latest two years, the investment is suspended of trading for
more than one year, the invested business suffered serious loss in the
year, the amount of loss is more than 1/3 of net assets at the beginning
of the year, the invested business run at a deficit in the latest two year, or
the invested business is in liquidation, reorganization or other business
discontinuance, the provision for the depreciation of the long-term equity
investment is retained against the difference between the recoverable
amount and the carrying value. Recoverable amount of marketable long-
term equity investment is the market price of the investment less disposal
expenses; if a long-term equity investment is not marketable, but its fair
value can be measured reliably, the recoverable amount of the investment
is determined against the lower of its fair value less disposal expenses and
the expected current value of cash flows from holding and exposal of the
investment in the future. If a long-term equity investment is not marketable
and its fair value can not be measured reliably, its recoverable amount
is determined against the discount of its future cash flow at the market
earnings ratio for the similar financial assets.
10. Deferred income
Deferred income comprises the governmental subsidy which shall be taken
into the income statements in the subsequent period and the unrealized
revenue of sale/leaseback transactions. The unrealized revenue of sale/
leaseback transactions is amortized using actual interest method.
Asset-related governmental subsidy is recognized as asset and deferred
income when received, and is contributed averagely to gains/losses of the
period against the useful life of the asset. Income-related governmental
subsidy used to recover related expenses or losses in the subsequent
period is recognized as deferred income, and is taken into the income
statement of the period in which the related expenses is recognized; those
used to recover related expenses and losses occurred in this period are
recognized directly as the gains/losses of the current period.
11. Income tax
Income tax expenses are recognized using balance sheet debt method.
Where there is a difference between carrying value of asset and liability
and their tax base, asset and liability of the deferred income tax occurred in
accordance related regulations.
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2010 Annual ReportFinancial Report
B. Main Taxes
1. Income tax
The applicable tax rate for business income taxes of the Company is 25%.
2. Value added tax
Value added tax is set at 17% for petroleum and petrochemical products
and 13% for natural gas and LPG.
3. Operating tax
Operating tax is set at 3% for transportation and construction, and at 5%
for finance and insurance, service operations, transfer of intangible assets
and real estate sales.
4. Supertax
Urban tax is calculated and paid at 1% of turnover tax. Maintenance tax is
calculated and paid at 5% of turnover tax. Construction tax is calculated
and paid at 7% of turnover tax. Educational surtax is calculated and paid
at 3% of turnover tax.
5. Excise tax
Tax payable is calculated at the rate of 1.0 yuan per liter for lead-free
gasoline, 0.8 yuan per liter for diesel, 1.0 yuan per liter for naphtha,
solvent, and lubricant, and 0.8 yuan per liter for fuel oil.
6. Personal income tax
The employees are responsible for their own income tax, which is
withheld and remitted by the Company.
7. Royalties
Royalties for crude oil and natural gas production are calculated
according to the amount sold, at the rate of 14-30 yuan per ton for crude
oil and 7-15 yuan per 1,000 cubic meters for gas, or according to the
price, at the rate of 5%.
59
2010 Annual Report Major Events
January Jan. 8 CNPC officially released the GeoMountain software system with complete proprietary
intellectual property rights. The software system is composed of three sets of software
respectively used for aquisition, processing and interpretation, which can provide users with
an integrated solution in seismic data acquisition, processing and interpretation, and reservoir
description for mountainous areas.
Jan. 27 PetroChina, a holding company of CNPC, formed a consortium with Total, Petronas
and Iraq South Oil Company in signing a 20-year development and production service
contract with Iraq’s Missan Oil for Halfaya Oilfield. PetroChina owns 37.5% of the equity
and acts as the operator.
February Feb. 10 CNPC signed documents with Canada’s Athabasca Oil Sands Corporation to complete
the handover of the MacKay River and Dover oil sands projects.
MarchMar. 12 CNPC signed a strategic cooperation framework agreement on CBM development and
utilization with Yunnan Provincial Government.
Mar. 18 CNPC signed a MOU on Sino-Bangladesh oil and gas cooperation.
Mar. 27 BGP, a wholly owned subsidiary of CNPC, signed an agreement with the US ION
Company to set up the INOVA Geophysical Equipment Limited joint venture, 51% of whose
equity is owned by BGP. The company will use this venture as a platform to strengthern the R&D
of high-performance onshore prospecting equipment.
April Apr. 14 A 30-year contract on natural gas development and production in Jinqiu Block of
Sichuan Basin reached by CNPC and Shell E&P China was approved by the Ministry of Commerce
of China. The contract block covers an area of 4,067 square kilometers.
MayMay 16 PetroChina, a holding company of CNPC, signed an Exploration and Production Sharing
Agreement with Shell and Qatar Petroleum (QP) for Qatar Block D. Under the agreement, the
partners will jointly explore for natural gas in Block D within the agreement term of 30 years.
May 19 CNPC reached an agreement with Shell to acquire a 35% interest in Syria Shell
Petroleum Development (SSPD), a wholly owned subsidiary of Shell. SSPD has 31.25% equity in
three production licenses — Deir-Ez-Zor, Fourth Annex and Ash Sham.
Major Events
Jan. 8
Mar. 18
Mar. 27
60
2010 Annual ReportMajor Events
June Jun. 3 CNPC signed the shareholder agreement of Southeast Asia Crude Pipeline Limited,
rights and obligations agreement of Southeast Natural Gas Pipeline Limited, and shareholder
agreement of Southeast Asia Natural Gas Pipeline Limited with Myanmar Oil and Gas Enterprise.
Jun. 9 CNPC signed a framework agreement on purchase and sale of natural gas with
Uzbekneftegaz, whereby Uzbekistan will supply 10 billion cubic meters of natural gas to
China annually.
Jun. 12 CNPC signed an agreement on the principles of design, financing, construction and
operation of the second phase of the Kazakhstan-China Natural Gas Pipeline with KazMunayGas.
The two companies will cooperate to construct the second phase of the pipeline to meet
natural gas demand in southern Kazakhstan.
Jun. 15 CNPC signed a cooperation memorandum of understanding with the CPC Corporation
of Taiwan.
Jun. 28 CNPC signed a strategic cooperation agreement with China Resources under which
the two companies will conduct wide-ranging cooperation in civilian gas, refined products
marketing, natural gas power generation, engineering construction and overseas investment.
JulyJul. 1 The operation management rights of Rumaila project was officially handed over to ROO,
which is jointly established by BP, CNPC and Iraq South Oil Company.
Jul. 14 The Tarim fertilizer project, with annual output of 450,000 tons of synthetic ammonia and
800,000 tons of urea, became operational. With a total annual fertilizer production capacity of 1.3
million tons, it is an important fertilizer production base in China.
Jul. 19 Urumqi Petrochemical Company’s 1 Mt/a PX and aromatic hydrocarbon project
became operational.
Jul. 28 CNPC and Chongqing Machinery & Electric Group launched the Kunlun Financing
and Leasing Company Limited joint venture in Chongqing, with its business scope covering
financing for petroleum equipment purchases, the purchase of marine transport shipping and
the development of fixed assets.
Jul. 28 CNPC signed a cooperation framework agreement with Shandong Provincial
Government, whereby the two sides will conduct cooperation in oil and gas pipelines, refining,
refined product sales network, civilian gas, and oil and gas transport and storage projects,
including ports and docks.
Jun. 3
Jun. 12
Jul. 14
61
2010 Annual Report Major Events
AugustAug. 20 The National Shale Gas Development Center was launched at Langfang branch of
CNPC Research Institute of Petroleum Exploration and Development, which will conduct
theoretical research, technological and equipment development in the field of shale gas.
Aug. 23 CNPC, in partnership with Shell, acquired a 100% interest in Australia’s Arrow Energy
for AUD 3.5 billion. The transaction was approved by the general meeting of shareholders of
Arrow Energy and all the licensing procedures of both the Chinese and Australian governments,
resulting in a smooth takeover.
Aug. 26 CNPC signed a strategic cooperation agreement with the Henan Provincial Government
whereby the company will continue to increase its supply of natural gas and refined products
in Henan and cooperate with related enterprises in the province to jointly develop CBM.
SeptemberSep. 2 Huabei Petrochemical launched its 10 Mt/a refining quality upgrade and safety and
environmental protection technological transformation project. It is due to be operational in
August 2013.
Sep. 6 Guangxi Petrochemical’s 10 Mt/a refining project became operational. It is capable
of supplying 8.3 million metric tons of gasoline, diesel and aviation kerosene, as well as LPG,
and 900,000 tons of petrochemical products including polypropylene, aromatic hydrocarbon,
benzene, toluene and mixed xylene annually.
Sep. 9 CNPC signed a strategic agreement with the Yunnan Provincial Government on the
cooperation in oil and gas pipeline construction, refining and chemicals and the sale of civilian
gas and refined products.
Sep. 10 Construction of the Chinese section of the Myanmar-China Oil and Gas Pipelines
started in Anning City, Yunnan Province, and ground breaking for the auxiliary refining project
took place in Kunming. The designed annual delivery capacity of the crude pipeline is 20 million
metric tons and the designed capacity of the gas pipeline is 10-13 billion cubic meters. The
project is due to be completed and became operational in 2013.
Sep. 15 CNPC signed a memorandum of understanding with Chevron on the on the
Maishi Project.
Sep. 26 The Parallel Sebei-Xining-Lanzhou Pipeline was completed and became operational. In
combination with the Sebei-Xining-Lanzhou Pipeline, it is capable of delivering 18.94 million
cubic meters of gas per day.
Sep. 27 Chinese President Hu Jintao and Russian President Dmitry Medvedev took part in
the ceremony to mark the completion of the Russia-China Crude Pipeline. On the same day,
CNPC inked a general agreement with Transneft over the operation of the Russia-China Crude
Pipeline that stretches from Russia's Skovorodino station to China's Mohe station, a framework
agreement with Gazprom to import natural gas to China, an agreement with Rosneft on
extending oil supply to the Russia-China Crude Pipeline, and an agreement with LUKoil on
expanding strategic cooperation.
Sep. 10
Sep. 27
62
2010 Annual ReportMajor Events
October Oct. 26 Natural gas was input into Line B of the Central Asia-China Gas Pipeline, marking the
operation of the dual line.
November Nov. 3 Our daily crude runs exceeded 400,000 metric tons for the first time, further improving our
market supply capability.
Nov. 3 CNPC and Australia’s Dart Energy signed a 30 year Production Sharing Contract (PSC) in
relation to exploring natural gas in Dajing block in the Junggar Basin.
Nov. 9 PetroChina, a holding company of CNPC, signed a memorandum on an integrated oil and
gas project in Canada and an agreement on the joint assessment of the CBM project in Daning
block in the Ordos Basin with Shell.
Nov. 18 The Zhongwei-Huangpi trunk line of the eastern section of the West-East Gas Pipeline
became operational and started supplying gas to Hunan and Hubei. The 1,393-kilometer
Zhongwei-Huangpi trunk line starts in Zhongwei, Ningxia, and passes through Gansu, Shaanxi and
Henan provinces before reaching the distribution station at Huangpi in Wuhan, Hubei Province.
Nov. 24 CNPC signed a strategic cooperation framework agreement with the Hubei Provincial
Government on the construction of refined product depots, sales network development, natural
gas supply, natural gas pipelines, and gas storage depot projects, as well as in civilian gas and
CNG projects.
DecemberDec. 1 CNPC signed an agreement on the joint-venture operation of the Junin 4 project with the
Venezuelan Ministry of Energy and Petroleum.
Dec. 15 Changling Gas Field in Jilin was completed and became operational, meaning that the
natural gas output of Jilin Oilfield will increase to 1.6 billion cubic meters. Changling Gas Field is
the domestic first gas field with high carbon content.
Dec. 21 The second phase of the Kazakhstan-China Gas Pipeline started construction. In the first
stage, a 1,164-kilometer gas pipeline from Bozoy in Aktobe to Shymkent in southern Kazakhstan
with an annual capacity of 6 billion cubic meters will be constructed. The pipeline is due to
become operational in 2012.
Dec. 31 The Yulin-Liangxiang section of the Third Shaan-Jing Gas Pipeline became operational.
With a total length of 1,011 kilometers, the Third Shaan-Jing Gas Pipeline starts at Yulin in Shaanxi
and ends at Xishatun in Beijing. The pipeline has a designed annual delivery capacity of 15
billion cubic meters and will become another important channel to supply natural gas to the
Bohai Rim region.
Nov. 9
Dec. 1
Dec. 15
63
Glossary
SAGD
Steam Assisted Gravity Drainage (SAGD) is an EOR technique suitable for
producing super heavy oil or natural asphalt with extremely high viscosity.
It combines heat conduction and thermal convection of fluid and employs
steam as the heat source. The heated heavy oil or gas condensate drains to
a lower well bore by gravity, and is then extracted to the ground.
Redevelopment
A process to enhance the ultimate recovery of a mature field which should
have reached its limit or should have been abandoned with the use of
conventional primary-development techniques. The development system
of the oilfield is reconstructed by consolidating brand new concepts, and
using and developing new secondary recovery technologies.
LNG
Liquid Natural Gas is produced by dewatering, deacidifying, dehydrating
and fractionating the natural gas produced from a gas field and then
turning it into liquid under low temperatures and high pressure.
Processing loss rate
The percentage of the crude oil that is lost when it is processed. It
immediately determines the profitability of a refinery.
Horizontal well
A class of nonvertical wells where the wellbore axis is near horizontal
(within approximately ten degrees of the horizontal), or fluctuating above
and below 90 degrees deviation. A horizontal well may produce at rates
several times greater than a vertical well, enhance recovery efficiency and
prolong the production cycle, due to the increased wellbore surface area
within the producing interval. Meanwhile, the environmental costs or land
use problems that may pertain in some situations, such as the aggregate
surface "footprint" of an oil or gas recovery operation, can be reduced by
the use of horizontal wells.
Underbalanced drilling
Underbalanced drilling is a well drilling technique in which the hydrostatic
pressure of drilling fluid column is lower than the pore pressure in the
stratum. Formation fluid is allowed to flow into the well bore, circulate out,
and be controlled on the surface. It plays an important role in discovering
and protecting reservoirs.
Occupational diseases
A disease or ailment caused due to excessive exposure to noxious fumes
or substances in a working environment.
Proven reserves
According to China National Standards, proven reserves are estimated
quantities of mineral deposits possibly to be recovered from reservoirs
proved by appraisal drilling during the period of reservoir evaluation, with
a reasonable certainty or a relative difference of no more than 20%.
Remaining recoverable reserves
Remaining recoverable reserves are the remaining portion of recoverable
reserves in an oil (gas) field (reservoir) which have been developed to a
certain stage. They are the recoverable reserves minus the volume of oil
(gas) that has been cumulatively extracted until that stage.
Reserve replacement ratio
The reserve replacement ratio refers to the value of the amount of oil
and gas reserves added in a year divided by the amount of oil and gas
produced during that same year.
Oil equivalent
Oil equivalent is the conversion coefficient with which the output of
natural gas is converted to that of crude oil by calorific value. In this report,
the coefficient is 1,255, i.e. 1,255 cubic meters of natural gas is equivalent
to one metric ton of crude oil.
Recovery factor
The percentage of oil/gas in place that is recoverable from underground.
Tertiary recovery
Tertiary recovery is also called enhanced oil recovery and it is abbreviated
as EOR. It is a method to increase the recovery of crude oil by injecting fluid
or heat to physically or chemically alter the oil viscosity or the interfacial
tension between the oil and another medium in the formation, in order
to displace any discontinuous or had-to-tap oil in reservoirs. EOR methods
mainly include thermal recovery, chemical flooding and miscible flooding.
Polymer flooding
This is an EOR method by which a polymer solution is used as the agent to
displace oil. Polymer is injected to increase the viscosity of formation water,
changing the oil/water viscosity ratio and reducing the difference between
water flowability and oil flowability in the formation. This will increase the
swept volume of water flooding and thereby the oil displacement efficiency.
ASP flooding
A flooding system prepared with alkali, surfactant and polymer. It not only
has a high viscosity but can also create an ultra-low water-oil interfacial
tension to improve the oil-washing capability.
2010 Annual Report Glossary
Plan
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: C
NPC
Inte
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E
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g: C
NPC
Res
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f Eco
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& T
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Des
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Bei
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Fine
Des
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Co.
, Ltd
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Prin
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Bei
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td.
About this Report
In this report, the expressions "CNPC", "the corporation", and "the company" are used for convenience where references are made to China National Petroleum Corporation in general. Likewise, the words "we", "us" and "our" are also used to refer to China National Petroleum Corporation in general or to those who work for it.
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2010 Annual Report
China National Petroleum
Corporation