Company Announcements

Annual Financial Report

Source: RNS
RNS Number : 7196T
China Petroleum & Chemical Corp
29 March 2021
 

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(a joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 00386)

 

Annual Results for the Year Ended 31 December 2020

 

The board of directors (the "Board") of China Petroleum & Chemical Corporation ("Sinopec Corp." or the "Company") hereby announces the audited results of Sinopec Corp. and its subsidiaries for the year ended 31 December 2020. This announcement, containing the full text of the 2020 Annual Report of Sinopec Corp., complies with the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited in relation to information to accompany preliminary announcement of annual results. The full text of the 2020 Annual Report of Sinopec Corp. is published on the websites of The Stock Exchange of Hong Kong Limited (www.hkexnews.hk) and of Sinopec Corp. (www.sinopec.com/listco/). Printed version of the 2020 Annual Report of Sinopec Corp. will be delivered to the shareholders of H shares of Sinopec Corp. in April 2021.

 

PUBLICATION OF RESULTS ANNOUNCEMENT

 

Both the Chinese and English versions of this results announcement are available on the websites of Sinopec Corp. (www.sinopec.com/listco/) and The Stock Exchange of Hong Kong Limited (www.hkex.com.hk). In the event of any discrepancies in interpretations between the English version and Chinese version, the Chinese version shall prevail.

 

By Order of the Board

China Petroleum & Chemical Corporation

Huang Wensheng

Vice President and Secretary to the Board of Directors

 

Beijing, the PRC,

26 March 2021

 

As of the date of this announcement, directors of the Company are: Zhang Yuzhuo*, Ma Yongsheng#, Yu Baocai#, Liu Hongbin#, Ling Yiqun#, Zhang Shaofeng*, Tang Min+, Cai Hongbin+, Ng, Kar Ling Johnny+.

 

#              Executive Director

*              Non-executive Director

+              Independent Non-executive Director

CONTENTS

 

2              Company Profile

3              Principal Financial Data and Indicators

6              Changes in Share Capital and Shareholdings

                 of Principal Shareholders

8              Chairman's Address

10            Business Review and Prospects

17            Management's Discussion and Analysis

28            Significant Events

37            Connected Transactions

39            Corporate Governance

46            Report of the Board of Directors

54            Report of the Board of Supervisors

56            Directors, Supervisors,

                 Senior Management and Employees

71            Principal Wholly-owned and

                 Controlled Subsidiaries

72            Financial Statements

207          Corporate Information

208          Documents for Inspection

 

This annual report includes forward-looking statements. All statements, other than statements of historical facts, that address activities, events or developments that the Company expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve and other estimates and business plans) are forward-looking statements. The Company's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties. The Company makes the forward-looking statements referred to herein as at 26 March 2021 and unless required by regulatory authorities, the Company undertakes no obligation to update these statements.

COMPANY PROFILE

 

IMPORTANT NOTICE: THE BOARD OF DIRECTORS, DIRECTORS, THE BOARD OF SUPERVISORS, SUPERVISORS AND SENIOR MANAGEMENT OF SINOPEC CORP. WARRANT THAT THERE ARE NO FALSE REPRESENTATIONS, MISLEADING STATEMENTS OR MATERIAL OMISSIONS IN THIS ANNUAL REPORT, AND JOINTLY AND SEVERALLY ACCEPT FULL RESPONSIBILITY FOR THE AUTHENTICITY, ACCURACY AND COMPLETENESS OF THE INFORMATION CONTAINED IN THIS ANNUAL REPORT. THERE IS NO OCCUPANCY OF NON-OPERATING FUNDS BY THE CONTROLLING SHAREHOLDERS OF SINOPEC CORP. MR. YU BAOCAI, A DIRECTOR OF SINOPEC CORP., WAS ON LEAVE FOR BUSINESS REASONS AND COULD NOT ATTEND THE 21ST MEETING OF THE SEVENTH SESSION OF THE BOARD, MR. YU BAOCAI HAS AUTHORISED MR. LING YIQUN TO VOTE ON HIS BEHALF FOR THE RESOLUTIONS AT THIS BOARD MEETING. MR. ZHANG YUZHUO, CHAIRMAN OF THE BOARD, MR. MA YONGSHENG, PRESIDENT, MS. SHOU DONGHUA, CHIEF FINANCIAL OFFICER AND HEAD OF THE FINANCIAL DEPARTMENT OF SINOPEC CORP. WARRANT THE AUTHENTICITY AND COMPLETENESS OF THE FINANCIAL STATEMENTS CONTAINED IN THIS ANNUAL REPORT. THE AUDIT COMMITTEE OF SINOPEC CORP. HAS REVIEWED THE ANNUAL REPORT OF SINOPEC CORP. FOR THE YEAR ENDED 31 DECEMBER 2020.

 

THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 OF THE COMPANY PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (CASs) AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) HAVE BEEN AUDITED BY PRICEWATERHOUSECOOPERS ZHONG TIAN LLP AND PRICEWATERHOUSECOOPERS RESPECTIVELY. BOTH FIRMS HAVE ISSUED STANDARD UNQUALIFIED AUDITOR'S REPORT.

 

AS APPROVED AT THE 21ST MEETING OF THE SEVENTH SESSION OF THE BOARD OF DIRECTORS OF SINOPEC CORP., THE BOARD PROPOSED A FINAL CASH DIVIDEND OF RMB 0.13 (TAX INCLUSIVE) PER SHARE FOR 2020, COMBINING WITH THE SPECIAL DIVIDEND OF RMB 0.07 (TAX INCLUSIVE) PER SHARE, THE TOTAL CASH DIVIDEND FOR 2020 WILL BE RMB 0.20 (TAX INCLUSIVE) PER SHARE. THE DIVIDEND PROPOSAL IS SUBJECT TO THE SHAREHOLDERS' APPROVAL AT THE ANNUAL GENERAL MEETING FOR THE YEAR 2020.

 

COMPANY PROFILE

Sinopec Corp. is one of the largest integrated energy and chemical companies in China. Its principal operations include the exploration and production, pipeline transportation and sale of petroleum and natural gas; the production, sale, storage and transportation of refinery products, petrochemical products, coal chemical products, synthetic fibre, and other chemical products; the import and export, including an import and export agency business, of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.

 

DEFINITIONS:

In this report, unless the context otherwise requires, the following terms shall have the meaning as set out below:

Sinopec Corp.: China Petroleum & Chemical Corporation

Company: Sinopec Corp. and its subsidiaries

China Petrochemical Corporation: The controlling shareholder of Sinopec Corp., China Petrochemical Corporation

Sinopec Group: China Petrochemical Corporation and its subsidiaries

NDRC: China National Development and Reform Commission

RMC: Oil and Natural Gas Reserves Management Committee of the Company

CSRC: China Securities Regulatory Commission

Hong Kong Stock Exchange: The Stock Exchange of Hong Kong Limited

Hong Kong Listing Rules: Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

 

CONVERSION:

For domestic production of crude oil, 1 tonne = 7.1 barrels

For overseas production of crude oil: 1 tonne = 7.20 barrels in 2020, 1 tonne = 7.21 barrels in 2019, 1 tonne = 7.21 barrels in 2018

For production of natural gas, 1 cubic meter = 35.31 cubic feet

Refinery throughput is converted at 1 tonne = 7.35 barrels

 

 

PRINCIPAL FINANCIAL DATA AND INDICATORS

 

1    FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASs

 

(1)  Principal financial data

 

 

For the year ended 31 December

 

2020

2019

(adjusted)

2019 (before

adjustment)

Change

2018

(adjusted)

2018 (before

adjustment)

Items

RMB million

RMB million

RMB million

(%)

RMB million

RMB million

Operating income

2,105,984

2,959,799

2,966,193

(28.8)

2,882,077

2,891,179

Operating income other than principal activities

67,501

77,023

65,705

(12.4)

78,152

65,566

Operating income from principal activities

2,038,483

2,882,776

2,900,488

(29.3)

2,803,925

2,825,613

Operating profit

50,331

90,134

90,025

(44.2)

101,625

101,474

Profit before taxation

47,969

90,111

90,016

(46.8)

100,731

100,502

Net profit attributable to equity shareholders of the Company

32,924

57,619

57,591

(42.9)

63,179

63,089

Net profit attributable to equity shareholders of the Company excluding
 extraordinary gains and losses

(1,565)

54,280

54,271

(102.9)

59,633

59,630

Net cash flow from operating activities

167,518

153,619

153,420

9.0

175,937

175,868

 

 

For the year of 2020

 

First

Second

Third

Fourth

 

 

Quarter

Quarter

Quarter

Quarter

Total

Items

RMB million

RMB million

RMB million

RMB million

RMB million

Operating income

554,482

478,582

519,337

553,583

2,105,984

Net profit attributable to equity shareholders of the Company

(19,866)

(3,135)

46,435

9,490

32,924

Net profit attributable to equity shareholders of the Company
 excluding extraordinary gains and losses

(20,444)

(3,960)

14,147

8,692

(1,565)

Net cash flow from operating activities

(67,970)

108,335

43,824

83,329

167,518

 

 

As of 31 December

 

2020

2019

(adjusted)

2019 (before

adjustment)

Change

2018

(adjusted)

2018 (before

adjustment)

Items

RMB million

RMB million

RMB million

(%)

RMB million

RMB million

Total assets

1,733,805

1,760,286

1,755,071

(1.5)

1,597,402

1,592,308

Total liabilities

849,929

881,912

878,166

(3.6)

738,280

734,649

Total equity attributable to equity shareholders of the Company

742,463

739,965

739,169

0.3

719,148

718,355

Total number of shares (1,000 shares)

121,071,210

121,071,210

121,071,210

-

121,071,210

121,071,210

 

(2)  Principal financial indicators

 

 

For the year ended 31 December

 

2020

2019

(adjusted)

2019 (before

adjustment)

Change

2018

(adjusted)

2018 (before

adjustment)

Items

RMB

RMB

RMB

(%)

RMB

RMB

Basic earnings per share

0.272

0.476

0.476

(42.9)

0.522

0.521

Diluted earnings per share

0.272

0.476

0.476

(42.9)

0.522

0.521

Basic earnings per share (excluding extraordinary gains and losses)

(0.013)

0.448

0.448

(102.9)

0.492

0.493

Weighted average return on net assets (%)

4.44

7.90

7.90

(3.46)

8.67

8.67

 

 

 

 

percentage

 

 

 

 

 

 

points

 

 

Weighted average return (excluding extraordinary gains and losses)

(0.21)

7.44

7.45

(7.65)

8.18

8.20

 on net assets (%)

 

 

 

percentage

 

 

 

 

 

 

points

 

 

Net cash flow from operating activities per share

1.384

1.269

1.267

9.1

1.453

1.453

 

 

As of 31 December

 

 

2020

2019

(adjusted)

2019 (before

adjustment)

Change

2018

(adjusted)

2018 (before

adjustment)

Items

RMB

RMB

RMB

(%)

RMB

RMB

Net assets attributable to equity shareholders of the Company per share

6.132

6.112

6.105

0.3

5.940

5.933

Liabilities to assets ratio (%)

49.02

50.1

50.04

(1.08)

46.22

46.14

 

 

 

 

percentage

 

 

 

 

 

 

points

 

 

 

Note: Liabilities to assets ratio= total liabilities/total assets

 

(3)  Extraordinary items and corresponding amounts

 

 

For the year ended 31 December

 

(Income)/expenses

 

2020

2019

2018

Items

RMB million

RMB million

RMB million

Net (gain)/loss on disposal of non-current assets

(973)

1,318

742

Donations

301

209

180

Government grants

(8,605)

(6,857)

(7,482)

Gain on holding and disposal of business and various investments

(37,520)

(410)

(1,023)

Other non-operating expenses, net

2,992

634

1,383

Subtotal

(43,805)

(5,106)

(6,200)

Tax effect

6,611

1,642

2,377

Total

(37,194)

(3,464)

(3,823)

Attributable to: Equity shareholders of the Company

(34,489)

(3,339)

(3,546)

                     Minority interests

(2,705)

(125)

(277)

 

(4)  Items measured by fair values

 

Unit: RMB million

 

 

 

 

 

Influence

 

Beginning

End

 

on the profit

Items

of the year

of the year

Changes

of the year

Other equity instruments

1,521

1,525

4

156

Derivative financial instruments

48

157

109

(1,252)

Cash flow hedging

(1,940)

7,545

9,485

2,886

Financial assets held for trading

3,319

1

(3,318)

114

Total

2,948

9,228

6,280

1,904

 

(5)  Significant changes of items in the financial statements

The table below sets forth the reasons for those changes of items in the financial statements where the fluctuation was more than 30% during the reporting period:

 

 

As of 31 December

Increase/(decrease)

 

 

2020

2019

Amount

Percentage

 

Items

RMB million

RMB million

RMB million

(%)

        Reasons for change

Cash at bank and on hand
 

184,412
 

128,052
 

56,360
 

44.01
 

        Cash received from pipeline business transaction and the impact of decrease in inventory and accounts receivable.

Financial assets held for trading

 

1

 

3,319

 

(3,318)

 

(99.97)

 

        Structured deposit withdrawal at maturity of RMB 3.3 billion.

Derivative financial assets

 

12,528

 

837

 

11,691

 

1,396.77

 

        Mainly due to increased floating earning from crude oil hedging.

Accounts receivable
 

35,587
 

54,375
 

(18,788)
 

(34.55)
 

        Mainly due to strengthened cash flow management and decreased product selling price.

Short-term loans

20,756

31,196

(10,440)

(33.47)

        Short-term loans repayment at maturity.

Non-current liabilities due within one year

22,493

 

69,490

 

(46,997)

 

(67.63)

 

        Mainly due to the repayment of non-interest maturity loan of shareholder.

Debentures payable
 

38,356
 

19,157
 

19,199
 

100.22
 

        Mainly due to mid-term notes with a total amount of RMB 20 billion in the first half of 2020.

Cash paid for goods and services

 

(1,754,016)

 

(2,591,739)

 

837,723

 

(32.32)

 

        Mainly due to decrease in crude oil price and business scale.

Cash received from disposal of investments

11,651

 

35,996

 

(24,345)

 

(67.63)

 

        Decrease in received structured deposit.

Net cash received from disposal of subsidiaries and other business entities

49,869


 

-


 

49,869


 

-


 

         Cash received from selling the pipeline business.
 

 

2    FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS

 

Unit: RMB million

 

 

For the year ended 31 December

Items

2020

2019

2018

2017

2016

Turnover and other operating revenues

2,105,984

2,959,799

2,882,077

2,348,931

1,923,273

Operating profit

13,193

86,374

82,564

71,817

77,664

Profit before taxation

48,143

90,022

99,339

86,964

80,544

Profit attributable to shareholders of the Company

33,096

57,493

61,708

51,384

46,884

Basic earnings per share (RMB)

0.273

0.475

0.51

0.424

0.387

Diluted earnings per share (RMB)

0.273

0.475

0.51

0.424

0.387

Return on capital employed (%)

6.22

8.98

9.24

8.27

7.32

Return on net assets (%)

4.46

7.78

8.59

7.07

6.59

Net cash generated from operating activities per share (RMB)

1.384

1.269

1.453

1.579

1.770

 

Unit: RMB million

 

 

As of 31 December

Items

2020

2019

2018

2017

2016

Non-current assets

1,278,410

1,312,976

1,091,930

1,069,984

1,089,911

Net current liabilities

66,795

132,668

63,140

52,101

74,970

Non-current liabilities

328,757

303,004

170,792

163,374

181,941

Non-controlling interests

141,364

138,358

139,921

127,509

121,046

Total equity attributable to shareholders of the Company

741,494

738,946

718,077

727,000

711,954

Net assets per share (RMB)

6.124

6.103

5.931

6.005

5.880

Adjusted net assets per share (RMB)

5.914

5.953

5.748

5.875

5.816

 

3    MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER CASs AND IFRS PLEASE REFER TO PAGE 200 OF THE REPORT.

 

 

CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERS

 

1    CHANGES IN THE SHARE CAPITAL

There is no change in the number and nature of issued shares of Sinopec Corp. during the reporting period.

 

2    NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS

As of 31 December 2020, the total number of shareholders of Sinopec Corp. was 533,319 including 527,573 holders of A shares and 5,746 holders of H shares. As of 28 February 2021, the total number of shareholders of Sinopec Corp. was 508,489. Sinopec Corp. has complied with requirement for minimum public float under the Hong Kong Listing Rules.

 

(1)  Shareholdings of top ten shareholders

The shareholdings of top ten shareholders as of 31 December 2020 are listed as below:

 

Unit: share

 

Name of shareholders

Nature of

Shareholders

Percentage of

shareholdings %

Total number of

shares held

Changes of

shareholding1

Number of

shares subject

to pledges or

lock-up

China Petrochemical Corporation

State-owned Share

68.31

82,709,227,393

0

0

HKSCC Nominees Limited2

H Share

20.97

25,385,280,408

(2,128,597)

unknown

中國證券金融股份有限公司

A Share

2.16

2,609,312,057

0

0

香港中央結算有限公司

A Share

0.69

841,072,282

269,227,962

0

中國人壽保險股份有限公司-分紅-個人分紅-005LFH002

A Share

0.67

815,670,168

605,892,688

0

中國人壽保險股份有限公司-傳統-普通保險產品-005LCT001

A Share

0.67

814,606,031

643,272,938

0

中央滙金資產管理有限責任公司

A Share

0.27

322,037,900

0

0

中國工商銀行-上證50交易型開放式指數證券投資基金

A Share

0.08

99,590,176

(3,491,593)

0

全國社保基金一一六組合

A Share

0.07

85,968,400

85,968,400

0

滙添富基金管理股份有限公司-社保基金1103組合

A Share

0.06

70,000,000

(40,000,000)

0

 

Note 1:   As compared with the number of shares held as of 31 December 2019.

 

Note 2:   Sinopec Century Bright Capital Investment Limited, an overseas wholly-owned subsidiary of China Petrochemical Corporation, held 553,150,000 H shares, accounting for 0.46% of the total issued share capital of Sinopec Corp. Those shareholdings are included in the total number of the shares held by HKSCC Nominees Limited.

 

Statement on the connected relationship or acting in concert among the above-mentioned shareholders:

 

Apart from 中國人壽保險股份有限公司-分紅-個人分紅-005LFH002 and 中國人壽保險股份有限公司-傳統-普通保險產品-005LCT001which were both managed by 中國人壽保險股份有限公司, Sinopec Corp. is not aware of any connected relationship or acting in concert among or between the above-mentioned shareholders.

 

(2)  Information disclosed by the shareholders of H shares in accordance with the Securities and Futures Ordinance (SFO) as of 31 December 2020

 

Name of shareholders

Status of shareholders

Number of shares interested

% of Sinopec Corp.'s issued

voting shares (H Share)

Citigroup Inc.

Person having a security interest in shares

7,810,000 (L)

0.03 (L)

 

Interest of corporation controlled by

121,092,483 (L)

0.47 (L)

 

 the substantial shareholder

119,342,984 (S)

0.47 (S)

 

Approved lending agent

2,167,641,996 (L)

8.50 (L)

GIC Private Limited

Investment manager

1,531,058,022 (L)

6.00 (L)

BlackRock, Inc.

Interest of corporation controlled by

1,510,306,390 (L)

5.92 (L)

 

 the substantial shareholder

1,709,000 (S)

0.01 (S)

Schroders Plc

Investment manager

1,291,515,302 (L)

5.06 (L)

 

Note: (L): Long position, (S): Short position

 

3    ISSUANCE AND LISTING OF SECURITIES

 

(1)  Issuance of securities during the reporting period

Not Applicable.

 

(2)  Existing employee shares

Not Applicable.

 

4    CHANGES IN THE CONTROLLING SHAREHOLDERS AND THE DE FACTO CONTROLLER

There was no change in the controlling shareholder and the de facto controller of Sinopec Corp. during the reporting period.

 

(1)  Controlling shareholder

The controlling shareholder of Sinopec Corp. is China Petrochemical Corporation. Established in July 1998, China Petrochemical Corporation is a state-authorised investment organisation and a state-owned enterprise. The legal representative is Mr. Zhang Yuzhuo. Through re-organization in 2000, China Petrochemical Corporation injected its principal petroleum and petrochemical businesses into Sinopec Corp. and retained certain petrochemical facilities. It provides well-drilling services, well-logging services, downhole operation services, services in connection with manufacturing and maintenance of production equipment, engineering construction, and utility services including water and power and social services.

 

      Shares of other listed companies directly held by China Petrochemical Corporation

 

 

Number of

Shareholding

Name of Company

Shares Held

Percentage

Sinopec Engineering (Group) Co. Ltd.

2,907,856,000

65.67%

Sinopec Oilfield Service Corporation

10,727,896,364

56.51%

Sinopec Oilfield Equipment Corporation

456,756,300

58.74%

China Merchants Energy Shipping Co., Ltd.

912,886,426

13.54%

 

Note:                    China Petrochemical Corporation holds 2,595,786,987 H shares of Sinopec Oilfield Service Corporation (the "SSC") through Sinopec Century Bright Capital Investment Ltd., a wholly-owned overseas subsidiary of China Petrochemical Corporation, accounting for 13.67% of the total share capital of SSC. Such shareholdings are excluded from the total shares of SSC directly held by China Petrochemical Corporation indicated above.

 

(2)  Other than HKSCC Nominees Limited, there was no other legal person shareholder holding 10% or more of the total issued share capital of Sinopec Corp.

 

(3)  Basic information of the de facto controller

China Petrochemical Corporation is the de facto controller of Sinopec Corp.

 

(4)  Diagram of the equity and controlling relationship between Sinopec Corp. and its de facto controller

 

 

* : Inclusive of 553,150,000 H shares held by Sinopec Century Bright Capital Investment Ltd. (overseas wholly-owned subsidiary of China Petrochemical Corporation) through HKSCC Nominees Limited.

 

 

CHAIRMAN'S ADDRESS

 

Dear Shareholders and Friends:

 

On behalf of the Board of Directors, the management, and our entire staff, I would like to express my sincere gratitude to our shareholders and the community for your interest and support.

 

2020 was truly an unprecedented year. Faced with the global COVID-19 pandemic and a severe economic recession worldwide, international oil prices endured a historic slide as market demand sharply contracted. Under a complex web of risks and problems, instability and unpredictability were evidently growing. In the wake of this extraordinary and severe impact, the Company's Board of Directors maintained a steady grip on all developments, while management worked closely with all staff to focus on major issues and areas such as system optimization, baseline risk prevention and control and turning risks into opportunities, as well as to stabilize basic production and operations, go all out to carry out a series of campaigns to tide over difficulties, and promote the company's reform, thus achieving industry-leading results.

 

In accordance with International Financial Reporting Standards, our turnover and other operating revenues reached RMB 2.1 trillion, while profit attributable to shareholders of the Company amounted to RMB 33.096 billion. The Company also enjoyed a cash flow from operating activities totalling RMB 167.518 billion with a year-on-year increase of 9.0%, while the liabilities to assets ratio at the end of the period was 49.08%. The Company remained in a solid financial position with a strong cash flow and robust capability to strengthen anti-risk capability. In view of the Company''s profitability, return to shareholders, and needs for future development, the Board of Directors proposed the payment of a final dividend of RMB 0.13 per share. Taking into account the interim special dividend of RMB 0.07 per share, the total dividend for the year was RMB 0.20 per share, with a dividend payout ratio of 73.2% ensuring a stable dividend payout level.

 

Over the past year, the Company's has achieved new progress across all business segments. The upstream business promoted high-quality exploration and profitable development. As natural gas reserves steadily increased, production and sales hit a record high. Further, as the oil and gas break-even point steadily declined, stabilizing oil output while increasing gas output has led to marked achievements with cost reduction. The refining and marketing businesses leveraged efforts to tackle tough problems and increased the production of marketable and value-added products. With low-sulfur fuel oil as a market leader, advantages in domestic refined oil market continued to be strengthened. Meanwhile, the Company sped up the construction of integrated service stations, innovated marketing models, and continued to develop the non-fuel business on a sound basis. The chemical business deepened structural adjustments, increased the proportion of three major synthetic raw materials products with high added value, and maintained a stable market share for major products as well as a steady and upward business development. To accelerate transformation and upgrading, major oil and gas engineering projects were introduced, and the construction of refining and chemical bases also rapidly progressed. Further, the Company proactively expanded new energy business and pushed forward the application of hydrogen and the deployment of battery charging and swapping stations. At the same time, the sales of oil and gas pipelines were completed. Under these steps, solid progress was made in overall business readjustment. The Company also made positive progress in the research and development of key technologies and equipment. Of note, the Company's comprehensive patent advantages continued to rank at the top among domestic enterprises, which underlines the role of technological innovation in supporting development.

 

Over the past year, the Company has improved its corporate governance. On the basis of efficient decision-making, the Board of Directors strengthened strategic planning and conducted an in-depth study of mid-term and long-term development strategies, contributing to a clear vision and development goal of the Company. All independent directors stayed true to their duties and offered advice and suggestions for reforms and development, which served to promote the standardized operation and efficient decision-making of the Board. The Company also continued to strengthen its information disclosure and investor relations management to further enhance transparency. To continuously upgrade management, the Company has implemented a three-year reform campaign that is fully benchmarked against world-class standards.

 

Over the past year, the Company has proactively assumed social responsibility with new contributions. Facing the outbreak of the COVID-19 pandemic, the Company donated funds and goods to support the frontline fight against the pandemic as well as adjusted its production to provide pandemic-countering items by leveraging its industrial advantages. Notably, the world's largest melt-blown cloth production facility was built up from scratch within a short time, a stable supply in the oil and gas market was ensured, thus promoting production resumption along the industrial chain from upstream to downstream operations. These achievements received wide community recognition. Additionally, to fulfill our social responsibilities, the Company focused its efforts on targeted poverty alleviation, with implementation of poverty alleviation measures in terms of industry, education and consumption, objectives to help poverty alleviation have been achieved on all fronts. Finally, the Company put forth great effort to provide clean energy for society, such as commissioning strategic studies on carbon emissions peak and carbon neutrality and adhering to a development path that is green, low carbon, and sustainable.

 

The term of the 7th Session of Board of Directors and Board of Supervisors is due to expire in 2021. Over the 3 years, and in the face of severe and complicated external conditions, the Company navigated deep industrial transformation and intense competition to achieve major targets handed down in the "13th Five-Year Plan". As a result, the Company experienced gains in the effectiveness of its corporate governance model and witnessed developmental outcomes that are inspiring and encouraging.

 

Looking back on these three years, the quality of the Company's development continues to improve. Oil and natural gas reserves have seen growth, which strengthen the upstream resource base. The company accelerated the construction of world-class refining and chemical base. The refining and polyolefin capacities have reached the world top position while the production and sales volumes are still expanding. The Company's resource coordination and allocation capabilities are continuously enhanced. The comprehensive competitive advantages in its oil products sales network are robust, and the Company's total number of service stations ranks the second in the world. Taken together, these demonstrate how the Company's comprehensive capabilities have been steadily improving. Further, an innovation-driven strategy was implemented, which helped foster a collection of outstanding and strategic technological innovations. With breakthrough and the accelerated implementation of technological researches in frontier in areas such as new energy, the Company managed to significantly upgrade its technological capabilities.

 

Looking back on these three years, the Company continues to improve efficiency. The all-in cost of oil saw a decrease of USD 13.24 per barrel of oil equivalent, and natural gas reserves experienced an accumulative growth of 17.1%. The refining and marketing businesses coordinated to respond to the increasingly fierce market competition, as a result the market share remained stable and the ability to drive profitability continued to increase, thus demonstrating the advantages of integration. The chemicals business deepened structural adjustments in raw materials, products and plants. Moreover, the proportion of high value-added products continued to increase. E-commerce platforms such as Epec, Chememall and Easy Joy also developed rapidly, and the non-fuel business is also developing well. Overall, the Company's operating profit has maintained relatively a rapid growth. In the past three years, the Company has declared a dividend of RMB 112.6 billion, with an average dividend payout ratio of 73.9%, sharing the Company's development performance with shareholders.

 

Looking back on these three years, the Company fulfilled its corporate citizenship responsibilities. The Company proactively responded to global climate change, vigorously developed clean energy, and implemented an energy efficiency improvement campaign and a green enterprise action plan, meanwhile, comprehensive energy consumption and the discharge of major pollutants continued to decline. This demonstrated new contributions made to the development of an ecological civilization. The Company also worked on targeted poverty alleviation and took the lead to make great changes in poverty-stricken areas. At the same time, the Company continued to carry out public welfare projects such as the "Lifeline Health Express" and promote the coordinated development of the economy, environment, and society in areas where the Company's domestic and overseas operations are situated. Providing additional benefits to the people, the Company's achievements in development demonstrate its commitment to social responsibility.

 

These achievements were due to the concerted efforts of the Board of Directors, the management and all staff, and is inseparable from the strong support of shareholders and the community. In accordance with regulatory requirements, Mr. Tang Min ceased to serve as a director for a new term. During his tenure, he was fully devoted to his duties, diligent, responsible, and played an important role in the scientific decision-making, standardized operation, reform and development of the Company. On behalf of our Board, I would like to express my sincere gratitude to all shareholders and the community for their support, and for the hard work and contributions made by the Independent Directors and Supervisors over the years.

 

The year of 2021 marked the commencement of China's "14th Five-Year Plan". Upon entering a new phase of development, the Company vows to implement new development concepts and world-leading development strategies. The Company will work hard to implement the following six major development strategies: value creation, market orientation, innovation-driven, green and clean, open cooperation and talent-cultivation. The Company will also implement the "One Foundation of energy and resources, Two Wings of clean fuels and advanced chemicals, and Three Growth Engines in new energy, new materials and new economy" industrial deployment pattern. The new pattern will enhance the development quality, efficiency, and core competitiveness of all industrial chains and the overall industrial system. Focusing on high-quality development, the Company strives to build a world-leading clean energy and chemical corporation.

 

We shall strive to excel in and inspire technological innovation. With enhanced R&D investment, the Company will strengthen proprietary and original innovations, and cultivate more innovative talents to become a technology-leading Company. Furthermore, we seek to optimize industry deployment to accelerate the transformation and upgrading. This is in effort to position the Company as a comprehensive energy service provider of oil, natural gas, hydrogen, electricity, and non-fuel business. The Company will stick to its commitment to high-quality exploration and effective development and to promoting breakthrough developments in natural gas. The Company will work to further deploy its hydrogen business from a leading perspective and lay a strong foundation for building China's largest hydrogen energy company. Moreover, the Company seeks to accelerate its construction of world-class advanced refining and chemical capacities and to promote further adjustments in business structures. The Company will also work hard to develop the digital and platform economies and to ascend to the mid-to-high end of the industrial and value chains. We will continue to work hard to overcome difficulties and create value, and to improve quality and efficiency in order to drive stable growth. Maximizing the advantages of upstream and downstream integration, the Company will coordinate procurement, transportation, production, storage, and marketing while exploiting the potential of system optimization. In turn, these efforts will fulfill market demand, consolidate market advantages, and maximize the overall benefits along the industrial chain. We will persist in our pursuit of green and clean development and creating low-carbon competitiveness. We will also coordinate the transformation and carbon reduction process, structural optimization and carbon emission control, and deepening of the green enterprise action plan. These efforts will allow green and clean energy to become the bright backdrop for the Company's high quality development.

 

Considering the corporate development strategy, production and operation arrangements, cash flow and other factors, the Company plans to spend RMB 167.2 billion on capital expenditures in 2021, mainly in the areas of large-scale development of natural gas, construction and transformation upgrading of advanced refining and chemical production capacity, among other aspects.

 

Greatness can be achieved through joint efforts, and nothing is impossible through collective wisdom. Striving toward a world-leading position, we need not only ambitious goals, but also a sustained willingness to continue to work hard and march forward. I cherish the strong belief that under the leadership of the new Board of Directors, and with the concerted efforts of the management and staff, as well as the strong support of shareholders and all members of society, Sinopec Corp. will surely be able to write a new chapter in quality development that creates greater value for shareholders and society.

 

 

BUSINESS REVIEW AND PROSPECTS

 

BUSINESS REVIEW

In 2020, the global economy suffered a serious recession due to the COVID-19 outbreak and rapid spread worldwide. China took the lead in controlling the spread of the pandemic in the world. Its economic growth has picked up quarter by quarter since the second quarter, with the annual gross domestic product (GDP) up by 2.3% year-on-year. The international oil prices experienced a historic slump, the global demand for oil decreased significantly, the domestic demand for refined oil products decreased, and the growth rate of natural gas demand slowed down, while demand for chemical products still maintained a rapid growth.

 

Confronted with severe challenges, the Company coordinated pandemic prevention and control, production and operation, made rapid response, took the initiative to launch "one-hundered day campaign of overcoming the difficulties and creating efficiency" and a follow-up campaign, and achieved remarkable results. On the one hand, we made full use of our resources and technological advantages to make a positive contribution to the pandemic prevention and control; on the other hand, we seized the favorable opportunity of domestic economic recovery, vigorously increased the production of marketable and high-profit products and achieved substantial improvement in production, operation and profitability in the second half of the year. Meanwhile, the Company completed the transaction of pipeline assets, realizing good appreciation in asset value.

 

 

 

1    MARKET REVIEW

 

(1)  Crude Oil & Natural Gas Market

In 2020, international oil prices fluctuated and rose after a historic slump. The spot price of Platt's Brent for the year averaged USD 41.67 per barrel, down by 35.2% year on year. Along with the changes in China's energy mix, domestic demand for natural gas continued to grow, but the growth rate declined due to COVID-19. Based on statistics released by the NDRC, domestic apparent consumption of natural gas reached 324 billion cubic meters, up by 5.6% year on year.

 

(2)  Refined Oil Products Market

In 2020, domestic refined oil products demand declined while supply exceeded the demand. According to the statistics released by NDRC, the apparent consumption of refined oil products (including gasoline, diesel and kerosene) was 331 million tonnes, down by 4.1% from the previous year. Among them, in the first half of the year, affected by the pandemic, the demand decreased by 6.0%. In the second half, the demand improved with the steady resumption of work and production nationwide. For the whole year, gasoline, diesel and kerosene fell by 0.7%, 1.2% and 30.4%, respectively. There were 13 price adjustments for domestic refined oil products throughout the year with 8 increases and 5 decreases.

 

(3)  Chemical Products Market

In 2020, the demand grew rapidly for medical raw materials and packaging materials. The rapid recovery of exports in the second half also drove the growth in the demand for chemical products. Based on our statistics, domestic consumption of ethylene equivalent increased by 12.2% from the previous year, and the apparent consumption of synthetic resin, synthetic fiber and synthetic rubber rose by 8.9%, 3.3% and 8.4%, respectively. The average margin of chemical products narrowed.

 

2    PRODUCTION & OPERATIONS REVIEW

 

(1)  Exploration and Production

In 2020, under the environment of low oil prices, we pressed ahead with high-quality exploration and profit-oriented development, accelerated the systematic integration of natural gas production, supply, storage and marketing, and achieved tangible results in maintaining oil production, increasing gas output and cutting cost. In exploration, we continued to strengthen risk exploration in strategic areas, oil and gas rich zones and shale resources, which led to new discoveries in Tarim Basin, Sichuan Basin and Bohai Bay Basin. In crude oil development, we efficiently proceeded with the capacity building of Shunbei and other oilfields, strengthened fine development in mature fields, intensified EOR technology breakthrough and application, and consolidated the basis for steady production. In natural gas development, we constantly pushed forward capacity building in Weirong and West Sichuan gas fields, expanded the market and sales, and continuously improved the sales volume with a record high domestic market share. The Company's production of oil and gas reached 459.02 million barrels of oil equivalent, with domestic crude production reaching 249.52 million barrels and natural gas production totalled 1,072.3 billion cubic feet, up by 2.3% year on year.

 

Summary of Operations for the Exploration and Production Segment

 

 

 

 

 

Change from

 

2020

2019

2018

2019 to 2020(%)

Oil and gas production (mmboe)

459.02

458.92

451.46

0.02

Crude oil production (mmbbls)

280.22

284.22

288.51

(1.4)

China

249.52

249.43

248.93

0.0

Overseas

30.70

34.79

39.58

(11.8)

Natural gas production (bcf)

1,072.33

1,047.78

977.32

2.3

 

Summary of Reserves of Crude Oil and Natural Gas

 

 

Crude oil reserves (mmbbls)

Items

31 December 2020

31 December 2019

Proved reserves

1,542

1,741

Proved developed reserves

1,389

1,588

China

1,130

1,326

Consolidated subsidiaries

1,130

1,326

Shengli

821

982

Others

309

344

Overseas

259

262

Consolidated subsidiaries

15

17

Equity accounted entities

244

245

Proved undeveloped reserves

153

153

China

102

107

Consolidated subsidiaries

102

107

Shengli

16

12

Others

86

95

Overseas

51

46

Consolidated subsidiaries

5

0

Equity accounted entities

46

46

 

 

Natural gas reserves (bcf)

Items

31 December 2020

31 December 2019

Proved reserves

8,191

7,225

Proved developed reserves

6,365

6,035

China

6,357

6,026

Consolidated subsidiaries

6,357

6,026

Puguang

1,675

1,814

Fuling

1,491

1,315

Others

3,191

2,897

Overseas

8

9

Consolidated subsidiaries

0

0

Equity accounted entities

8

9

Proved undeveloped reserves

1,826

1,190

China

1,824

1,190

Consolidated subsidiaries

1,824

1,190

 Fuling

119

65

 Others

1,705

1,125

Overseas

2

0

 Consolidated subsidiaries

0

0

 Equity accounted entities

2

0

 

Exploration and Production Activities

 

 

Wells drilled (as of 31 December)

 

2020

 

2019

 

Exploratory

Development

Exploratory

Development

 

Productive

Dry

Productive

Dry

Productive

Dry

Productive

Dry

China

383

136

2,015

3

350

174

2,098

5

Consolidated subsidiaries

383

136

2,015

3

350

174

2,098

5

Shengli

204

64

1,080

2

195

81

1,168

4

Others

179

72

935

1

155

93

930

1

Overseas

2

0

100

0

3

1

99

0

Consolidated subsidiaries

0

0

4

0

0

0

0

0

Equity accounted entities

2

0

96

0

3

1

99

0

Total

385

136

2,115

3

353

175

2,197

5

 

 

Wells drilling (as of 31 December)

 

2020

2019

 

Gross

Net

Gross

Net

 

Exploratory

Development

Exploratory

Development

Exploratory

Development

Exploratory

Development

China

92

212

92

212

117

177

117

176

Consolidated subsidiaries

92

212

92

212

117

177

117

176

Shengli

29

52

29

52

60

20

60

20

Others

63

160

63

160

57

157

57

156

Overseas

2

0

2

0

0

0

0

0

Consolidated subsidiaries

0

0

0

0

0

0

0

0

Equity accounted entities

2

0

2

0

0

0

0

0

Total

94

212

94

212

117

177

117

176

 

 

Oil productive wells (as of 31 December)

 

2020

2019

 

Gross

Net

Gross

Net

China

53,240

53,240

52,112

52,112

Consolidated subsidiaries

53,240

53,240

52,112

52,112

Shengli

34,572

34,572

33,819

33,819

Others

18,668

18,668

18,293

18,293

Overseas

7,055

2,752

7,248

2,855

Consolidated subsidiaries

28

10

28

14

Equity accounted entities

7,027

2,742

7,220

2,841

Total

60,295

55,992

59,360

54,967

 

 

Natural gas productive wells (as of 31 December)

 

2020

2019

Region

Gross

Net

Gross

Net

China

6,976

6,928

6,420

6,378

Consolidated subsidiaries

6,976

6,928

6,420

6,378

Puguang

67

67

61

61

Fuling

632

632

482

482

Others

6,277

6,229

5,877

5,835

Total

6,976

6,928

6,420

6,378

 

Unit: Square kilometers

 

 

Area under license (as of 31 December)

 

2020

2019

Acreage with exploration licenses

436,864

472,017

China

436,864

472,017

Acreage with development licenses

39,195

38,697

China

33,965

33,467

Overseas

5,230

5,230

 

(2)  Refining

In 2020, the Company actively responded to the severe situation of the sharp drop in crude oil prices and the decline in market demand, integrated and coordinated production and marketing, and maximized profits along the value chain. With a market-oriented approach, we optimized refined oil product yield and diesel-to-gasoline ratio, increased output of marketable and high-profit products, and kept a relatively high utilization rate. Thanks to our flexible crude oil procurement strategies, crude sourcing costs were continuously reduced. We sped up the construction of advanced production capacity and promoted structural adjustment in an orderly manner. We organized low-sulfur bunker fuel production with efficiency and became the domestic leader in low-sulfur fuel market. By improving the marketing mechanism, high-grade lubricants, asphalt and other products sales realized good growth. In 2020, the Company processed 237 million tonnes of crude oil, yielding 142 million tonnes of refined oil products, and 40.22 million tonnes of light chemical feedstock, with a year-on-year increase of 1.1%.

 

Summary of Operations for the Refining Segment                                                                                                                                     Unit: million tonnes

 

 

 

 

 

Change from

 

2020

2019

2018

2019 to 2020 (%)

Refinery throughput

236.91

248.52

244.01

(4.7)

Gasoline, diesel and kerosene production

141.50

159.99

154.79

(11.6)

Gasoline

57.91

62.77

61.16

(7.7)

Diesel

63.21

66.06

64.72

(4.3)

Kerosene

20.38

31.16

28.91

(34.6)

Light chemical feedstock production

40.22

39.78

38.52

1.1

Light product yield (%)

74.34

76.38

76.00

(2.04) percentage points

Refinery yield (%)

94.77

94.98

94.93

(0.21) percentage points

 

Note: Includes 100% of the production from domestic joint ventures.

 

(3)  Marketing and Distribution

In 2020, confronted with challenges from the pandemic impact and shrinking market demand, the Company brought our advantages of integrated production and marketing network into full play, seized the favorable opportunity of market recovery, coordinated allocation of resources, expanded market and increased sales, and continuously improved the quality of our retail. With focus on customer needs, we adopted a precision and differentiated marketing strategy to continuously improve our service level. We upgraded the network layout to reach end users to further strengthen our existing advantages. We accelerated the construction of comprehensive service stations including oil, gas, hydrogen, power and non-fuel businesses, and enhanced our comprehensive service competitiveness. Total sales volume of refined oil products for the year was 218 million tonnes, of which domestic sales volume accounted for 168 million tonnes. Meanwhile, we innovated the marketing model, strengthened development and marketing of company-owned brands, and actively explored emerging business models to speed up the development of non-fuel businesses.

 

Summary of Operations for the Marketing and Distribution Segment

 

 

 

 

 

Change from

 

2020

2019

2018

2019 to 2020 (%)

Total sales volume of oil products (million tonnes)*

217.91

254.95

237.69

(14.5)

Total domestic sales volume of oil products (million tonnes)

167.99

184.45

180.24

(8.9)

Retail sales (million tonnes)

113.19

122.54

121.64

(7.6)

Direct sales and distribution (million tonnes)

54.80

61.91

58.61

(11.5)

Annual average throughput per station (tonne/station)

3,686

3,992

3,979

(7.7)

 

 

31 December

2020

31 December

2019

31 December

2018

Change from

the end of the

previous year to

the end of the

reporting period

(%)

Total number of service stations under the Sinopec brand

30,713

30,702

30,661

0.04

Number of company-operated stations

30,707

30,696

30,655

0.04

 

Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume.

 

(4)  Chemicals

In early 2020, the COVID-19 outbreak led to shutdown of downstream factories, imposing severe challenges to the Company. We further adjusted product mix and producing units, scheduled utilization, rapidly switched our

production to increase the supply of medical and health raw materials, and maintained stable production and operation. Since the second quarter, with the steady resumption of work and production in China, the chemicals market witnessed a remarkable recovery. The Company seized the opportunity by actively responding to market changes, strengthened the dynamic optimization of the facilities and product chain, and realized optimal operation of the units and utilization. We further fine-tuned chemical feedstock mix to optimize feeding proportion and increase product yield. We integrated production with marketing to continuously increase the ratio of high value-added and high-end products. Ethylene production in 2020 reached 12.06 million tonnes, the ratio of high value-added products of synthetic fiber was 32.5%, up by 0.8 percentage point year on year. The ratio of high value-added products of synthetic rubber was 31.6%, up by 2.5 percentage points year on year. The ratio of new and specialty products in synthetic resin reached 67.1%, up by 1.8 percentage points year on year. Meanwhile, we innovated marketing model, deepened fine marketing strategy, targeted our tailored service, and further expanded the market. The total annual sales volume was 83 million tonnes, realizing full sales.

 

Summary of Operations for the Chemicals Segment          Unit: thousand tonnes

 

 

 

 

 

Change from

 

2020

2019

2018

2019 to 2020

(%)

Ethylene

12,060

12,493

11,512

(3.5)

Synthetic resin

17,370

17,244

15,923

0.7

Synthetic rubber

1,067

1,047

896

1.9

Synthetic fiber monomer and polymer

9,057

10,029

9,343

(9.7)

Synthetic fiber

1,313

1,289

1,218

1.9

 

Note: Includes 100% of the production of domestic joint ventures.

 

(5)  Research and Development

In 2020, with the emphasis on the support and leading role of technology and increasing investment in technology, the Company accomplished notable results in deepening reform of R&D mechanism, promoting innovation platforms such as joint R&D centers and incubators, and making breakthrough in key and core technologies. In upstream, new breakthroughs were made in shale oil and gas exploration theory and technology, and the first atmospheric shale gas resource block in China was discovered. New breakthroughs were also made in ultra-deep oil and gas exploration and development technology, and seismic node acquisition system had been developed and applied on a large scale. In refining, the industrial test of fast bed catalytic cracking technology for producing low-carbon olefins was completed, and a complete set of technologies such as heavy oil catalytic cracking with high slag content and low emission were commercialized. In chemicals, we developed a complete set of 48K large-tow carbon fiber technology, realized the industrial production of a series of biodegradable materials, and quickly mastered the production technology of medical raw materials such as meltblown material and fabric. In 2020, the Company had 6,809 patent applications at home and abroad, among which 4,254 were granted.

 

(6)  Health, Safety, Security and Environment

In 2020, the Company constantly promoted the HSSE management system, achieving an overall stable record in terms of safety and environmental protection. We promoted health management of all staff, especially strengthened the COVID-19 prevention and control measures with a focus on occupational, physical and psychological health of employees at home and abroad. The three-year programme of special rectification of work safety was implemented to strictly supervise the contractors and our direct operations, and improve our emergency response. Emphasis was laid on the control of key areas and links to safeguard a stable public security situation. In 2020, we persistently promoted the green enterprise action plan, focusing on pollution prevention and control, energy efficiency improvement, resource utilization, carbon emission reduction, and accomplished all targets. Compared with 2019, energy consumption per 10,000 yuan of output was down by 0.85%, industrial fresh water usage was down by 1.1%, COD of discharged water down by 2.3%, and SO2 emissions down by 4.2%. All solid waste was properly treated. For more detailed information, please refer to "Sinopec 2020 Communication on Progress for Sustainable Development Report".

 

(7)  Capital Expenditures

In 2020, focusing on quality and profitability of investment, the Company optimized its investment management system, with total capital expenditures of RMB 135.1 billion. Capital expenditure for the exploration and production segment was RMB 56.4 billion, mainly for Shengli and Northwest crude oil capacity building projects, Fuling and Weirong shale gas projects, phase II of Tianjin LNG project, and phase II of Shandong LNG project. Capital expenditure for the refining segment was RMB 24.7 billion, mainly for Zhongke Refining and Petrochemical project, Zhenhai, Tianjin, Maoming, Luoyang and Sinopec-SK refining upgrading projects. Capital expenditure for the marketing and distribution segment was RMB 25.4 billion, mainly for construction of service stations, oil products depots and non-fuel business. Capital expenditure for the chemicals segment was RMB 26.2 billion, mainly for Zhongke, Zhenhai and Gulei projects, Amur gas chemical complex project, Sinopec-SK ethylene revamping projects, Jiujiang aromatics project and meltblown fabric capacity building. Capital expenditure for corporate and others was RMB 2.3 billion, mainly for R&D facilities and information technology projects.

 

BUSINESS PROSPECTS

 

(1)  Market Outlook

Looking into 2021, there are many uncertainties in COVID-19 situation and external environment, and the international economic prospect is still grim and complex. China's economy has recovered steadily and is expected to achieve positive growth. It is expected that the demand for refined oil products will gradually recover and the demand for natural gas and petrochemical products will continue to grow. Considering the supply capacity of oil producing countries, global demand growth, inventory level and other factors, the international oil price is expected to be higher than last year.

 

(2)  Operations

In 2021, we will implement our development strategy to build a world leading clean energy and chemical company. We will expedite formation of our development pattern of "One Foundation of energy and resources, Two Wings of clean fuels and advanced chemicals, and Three Growth Engines in new energy, new materials and new economy", and vigorously implement development strategies of value creation, market orientation, innovation driven, green and clean, open cooperation and talent-cultivation. Our focuses are on the following aspects:

 

Exploration and Production, the Company will adhere to the principle of "sustainable development of crude oil and rapid growth of natural gas business", continue to strengthen high-quality exploration and profitable production, reduce cost, and forge the resilience against low oil prices. In crude oil development, more efforts will be made in promoting capacity building of Shunbei and west rim of Jungar oilfields, strengthening the fine reservoir characterization and modeling of mature fields, and vigorously promoting the application of EOR technology. In natural gas development, we will speed up the capacity construction of West Sichuan, Dongsheng, Weirong and other gas fields, give full play to the integration of production, supply, storage and marketing system to maximize the value of the whole business chain of natural gas. In 2021, we plan to produce 280.82 million barrels of crude oil, including 31.25 million barrels abroad, and 1,203.4 billion cubic feet of natural gas.

 

Refining, the Company will strengthen integration of production and marketing, promote the systematic upgrading of refining industry chain. We will coordinate domestic and overseas markets, constantly optimize product export volume and structure, and reasonably schedule utilization and production. We will adhere to the direction of "oil to chemical", and further adjust product slate based on market needs. The crude oil resources allocation will be optimized, and the whole process management of crude oil supply will be well coordinated to lower procurement cost. In addition, we will strengthen the production of low sulfur heavy bunker fuel, and constantly improve our market share. In 2021, we plan to process 250 million tonnes of crude oil and produce 153 million tonnes of refined oil products.

 

Marketing and Distribution, balancing volume and profit, the Company will expand the market and sales with full wings to continuously improve operational quality and volume. We will vigorously carry out differentiated marketing to continuously expand retail volume with focus on customer needs. We will constantly optimize the network layout to reach end users, and improve the network integrity, stability and competitiveness. We will deepen non-fuel business reform and improve membership system. New model of "internet+service station+convenience store+third party operation" will be promoted, and more hydrogen stations will be constructed alone or with conventional service stations to establish a new model of comprehensive energy supply and services, providing refined oil products, gas, hydrogen, power and non-fuel business. In 2021, we plan to sell 183 million tonnes of refined oil products in domestic market.

 

Chemicals, the Company will focus on the"basic plus high-end"development concept, speed up advanced capacity building, continuously deepen structural adjustment, and improve production scale in high-end and new materials, including medical and health care feedstock and degradable plastics, so as to extend our industry chain and foster new growth points. We will strengthen to measure the marginal benefits of the product chain, enhance structural adjustment of the three major synthetic materials and fine chemical products, dynamically optimize the feedstock mix, continuously reduce the cost of raw materials, and further schedule the facility utilization to fully release the effective production capacity. Meanwhile, we will strengthen market and sales expansion, improve service quality and efficiency, as well as the overall competitiveness. In 2021, we plan to produce 13 million tonnes of ethylene.

 

Research and Development, we will make every effort to implement the innovation-driven development strategy, further deepen mechanism reform, continue to increase R&D investment, to accelerate building a technology-leading company. Guided by market demands, we will closely integrate production, marketing, research and application, accelerate the industrialization of a number of key technologies supporting the Company's high-quality development, such as oil and gas exploration and development, oil refining restructuring, high-end synthetic materials, energy conservation and environmental protection. The Company will focus on new energy, new materials and other cutting-edge areas, and establish strong technical reserves to support transformation and development. We will actively leverage social science and technology resources to carry out cross-industry collaborative research and integrated innovation to consolidate our leading position, implement the "science and technology reform demonstration action", build new type of R&D institutions, and build a more efficient and dynamic innovation ecosystem.

 

Capital Expenditures, Capital expenditures for the year 2021 are budgeted at RMB 167.2 billion, among which, RMB 66.8 billion will be invested in exploration and production with focuses on the production capacity building of Fuling and Weirong shale gas fields, Shengli and Northwest crude oil development projects, and the Phase II LNG project in Tianjin and Phase II LNG project in Shandong. The refining segment will account for RMB 20.1 billion, mainly on the structural adjustment projects of Yangzi and Anqing, as well as the expansion of Zhenhai. RMB 26.5 billion is budgeted for marketing and distribution with emphasis on service stations, gas stations, hydrogen stations, depots and non-fuel business. The share for chemicals will be RMB 48.6 billion, focusing on projects such as Zhenhai, Gulei, Hainan and Tianjin Nangang, Sinopec-SK and the Amur ethylene projects, Jiujiang aromatics, Baling caprolactam project, Shanghai large-tow carbon fiber, Yizheng PTA and other projects. The capital expenditure for corporate and others will be RMB 5.2 billion, mainly for R&D facilities and information technology projects.

 

MANAGEMENT'S DISCUSSION AND ANALYSIS

 

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S AUDITED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES. PARTS OF THE FOLLOWING FINANCIAL DATA WERE ABSTRACTED FROM THE COMPANY'S AUDITED FINANCIAL STATEMENTS THAT HAVE BEEN PREPARED ACCORDING TO THE IFRS, UNLESS OTHERWISE STATED. THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED TAX.

 

1    CONSOLIDATED RESULTS OF OPERATIONS

In 2020, the Company's turnover and other operating revenues was RMB 2,106.0 billion, decreased by 28.8% compared with that of 2019. That was mainly due to the drop of petoluem and petrochemical products price and shrink of market demand resulted from the impact of COVID-19. Facing severe challenges, the Company took actions proactively and implemented "100-day campaign of overcoming difficulties and creating efficiency" and subsequent campaigns to improve performance. As a result, the Company achieved RMB 34.7 billion operating pofit in the second half and RMB 13.2 billion in the full year when it still suffered an operating loss in the first half.

 

The following table sets forth the main revenue and expenses from the Company's consolidated financial statements:

 

 

Year ended 31 December

 

2020

2019

Change (%)

 

RMB million

RMB million

 

Turnover and other operating revenues

2,105,984

2,959,799

(28.8)

Turnover

2,049,456

2,899,682

(29.3)

Other operating revenues

56,528

60,117

(6.0)

Operating expenses

(2,092,791)

(2,873,425)

(27.2)

Purchased crude oil, products and operating supplies and expenses

(1,594,130)

(2,370,699)

(32.8)

Selling, general and administrative expenses

(55,315)

(55,438)

(0.2)

Depreciation, depletion and amortisation

(106,965)

(109,172)

(2.0)

Exploration expenses, including dry holes

(9,716)

(10,510)

(7.6)

Personnel expenses

(86,006)

(82,743)

3.9

Taxes other than income tax

(234,947)

(244,517)

(3.9)

Other operating expenses, net

(5,712)

(346)

1,550.9

Operating profit

13,193

86,374

(84.7)

Net finance costs

(9,506)

(10,048)

(5.4)

Investment income and share of profits less losses from associates and joint ventures

44,456

13,696

224.6

Profit before taxation

48,143

90,022

(46.5)

Income tax expense

(6,219)

(17,939)

(65.3)

Profit for the year

41,924

72,083

(41.8)

Attributable to:

 

 

 

Shareholders of the Company

33,096

57,493

(42.4)

Non-controlling interests

8,828

14,590

(39.5)

 

(1)  Turnover and other operating revenues

In 2020, the Company's turnover was RMB 2,049.5 billion, representing a decrease of 29.3% over 2019. This was mainly due to decreased price and sales volume of refined oil products, decreased price of chemical products, and shrank international trading scale of crude oil and refined oil products, which was impacted by the COVID-19 outbreak and the slump in international crude oil price.

 

The following table sets forth the external sales volume, average realised prices and respective rates of change of the Company's major products in 2020 and 2019:

 

 

 

 

 

Average realised price

 

Sales volume (thousand tonnes)

(RMB/tonne, RMB/thousand cubic meters

 

Year ended 31 December

 

Year ended 31 December

 

 

2020

2019

Change (%)

2020

2019

Change (%)

Crude oil

7,422

6,034

23.0

2,029

3,000

(32.4)

Natural gas (million cubic meters)

26,280

27,073

(2.9)

1,352

1,562

(13.4)

Gasoline

86,193

92,233

(6.5)

6,298

7,387

(14.7)

Diesel

77,280

87,083

(11.3)

4,792

5,811

(17.5)

Kerosene

20,828

27,041

(23.0)

2,635

4,298

(38.7)

Basic chemical feedstock

36,683

41,022

(10.6)

3,635

4,599

(21.0)

Monomer and polymer for synthetic fibre

9,691

14,019

(30.9)

4,297

5,714

(24.8)

Synthetic resin

17,112

16,103

6.3

7,148

7,804

(8.4)

Synthetic fibre

1,402

1,370

2.3

6,381

8,438

(24.4)

Synthetic rubber

1,361

1,280

6.3

7,982

9,583

(16.7)

Chemical fertiliser

1,177

924

27.4

1,955

2,110

(7.3)

 

Most crude oil and a small portion of natural gas produced by the Company were internally used for refining and chemical production, with the remaining sold to external customers. In 2020, the turnover from crude oil, natural gas and other upstream products sold externally amounted to RMB 104.5 billion, representing a decrease of 5.9% over 2019. The change was mainly due to decreases in crude oil and natural gas prices.

 

In 2020, petroleum products (mainly consisting of refined oil products and other refined petroleum products) sold by Refining Segment and Marketing and Distribution Segment achieved external sales revenues of RMB 1,164.7 billion (accounting for 55.3% of the Company's turnover and other operating revenues), representing a decrease of 24.1% over 2019, mainly due to the decrease in prices and volume of major products, such as gasoline, diesel and kerosene, resulting from the impact of COVID-19 and slump of international crude oil price. The sales revenue of gasoline, diesel and kerosene was RMB 968.0 billion, representing a decrease of 25.7% over 2019, and accounting for 83.1% of the total sales revenue of petroleum products. Turnover of other refined petroleum products was RMB 196.6 billion, representing a decrease of 15.1% compared with 2019, accounting for 16.9% of the total sales revenue of petroleum products.

 

The Company's external sales revenue of chemical products was RMB 322.1 billion, representing a decrease of 24.9% over 2019, accounting for 15.3% of the Company's total turnover and other operating revenues. This was mainly due to the decrease in price of chemical products.

 

(2)  Operating expenses

In 2020, the Company's operating expenses was RMB 2,092.8 billion, decreased by 27.2% compared with 2019. The operating expenses mainly consisted of the following:

 

Purchased crude oil, products and operating supplies and expenses was RMB 1,594.1 billion, representing a decrease of 32.8% over the same period of 2019, accounting for 76.2% of the total operating expenses, of which:

 

Crude oil purchasing expenses was RMB 479.1 billion, representing a decrease of 29.7% over the same period of 2019. Throughput of crude oil purchased externally in 2020 was 222.79 million tonnes (excluding the volume processed for third parties), representing a decrease of 2.6% over the same period of 2019. The average cost of crude oil purchased externally was RMB 2,380 per tonne, representing a decrease by 28.4% over 2019.

 

The Company's purchasing expenses of refined oil products was RMB 257.6 billion, representing a decrease of 29.4% over the same period of 2019.

 

The Company's purchasing expense related to crude oil and refined oil trading activities was RMB 421.2 billion, representing a decrease of 42.6% over the same period of 2019.

 

The Company's other purchasing expenses was RMB 436.3 billion, representing a decrease of 26.1% over the same period of 2019.

 

Selling, general and administrative expenses was RMB 55.3 billion, representing a decrease of 0.2% over 2019.

 

Depreciation, depletion and amortisation was RMB 107.0 billion, representing a decrease of 2.0% compared with 2019. That was mainly due to the depletion ratio of oil and gas assets decreased.

 

Exploration expenses was RMB 9.7 billion, representing a decrease of 7.6% compared with 2019. That was mainly due to optimisation of investment scale and structure in upstream and improvement of success rate in exploration.

 

Personnel expenses was RMB 86.0 billion, representing an increase of 3.9% over 2019.

 

Taxes other than income tax was RMB 234.9 billion, representing a decrease of 3.9% compared with 2019. That was mainly due to the decrease of consumption tax resulting from the decrease of production volume in gasoline and diesel.

 

Other operating expense, net was RMB 5.7 billion, representing an increase of RMB 5.4 billion over the same period of 2019. That was mainly due to the increased impairment in fixed and long-term assets.

 

(3)  Operating profit was RMB 13.2 billion, representing a decrease of 84.7% over the same period of 2019. That was mainly due to the decrease of processing volume, sales volume, and products margin affected by the COVID-19 outbreak, slump of curde oi prices, and drop of market demand.

 

(4)  Profit before taxation was RMB 48.1 billion, representing a decrease of 46.5% compared with 2019.

 

(5)  Income tax expense was RMB 6.2 billion, representing a decrease of 65.3% year on year. That was maily due to decrease of profit before taxation, resulting in a decrease of RMB 10.5 billion in income tax.

 

(6)  Profit attributable to non-controlling shareholders was RMB 8.8 billion, representing a decrease of RMB 5.8 billion compared with 2019.

 

(7)  Profit attributable to shareholders of the Company was RMB 33.1 billion, representing a year-on-year decrease of 42.4%.

 

2    RESULTS OF SEGMENT OPERATIONS

The Company manages its operations through four business segments, namely exploration and production segment, refining segment, marketing and distribution segment and chemicals segment, and corporate and others. Unless otherwise specified, the inter-segment transactions have not been eliminated from financial data discussed in this section. In addition, the operating revenue data of each segment include other operating revenues.

 

The following table shows the operating revenues by each segment, the contribution of external sales and inter-segment sales as a percentage of operating revenues before elimination of inter-segment sales, and the contribution of external sales as a percentage of consolidated operating revenues (i.e. after elimination of inter-segment sales) for the periods indicated.

 

 

Operating revenues

Year ended 31 December

As a percentage of

consolidated operating

revenue before elimination

of inter-segment sales

Year ended 31 December

As a percentage of

consolidated operating

revenue after elimination

of inter-segment sales

Year ended 31 December

 

2020

2019

2020

2019

2020

2019

 

RMB million

RMB million

(%)

(%)

(%)

(%)

Exploration and Production Segment

 

 

 

 

 

 

External sales*

110,242

121,397

3.2

2.5

5.2

4.1

Inter-segment sales

57,513

89,315

1.7

1.8

 

 

Operating revenues

167,755

210,712

4.9

4.3

 

 

Refining Segment

 

 

 

 

 

 

External sales*

118,698

147,138

3.4

3.0

5.6

5.0

Inter-segment sales

825,812

1,077,018

23.7

22.2

 

 

Operating revenues

944,510

1,224,156

27.1

25.2

 

 

Marketing and Distribution Segment

 

 

 

 

 

 

External sales*

1,097,352

1,426,804

31.6

29.3

51.9

48.2

Inter-segment sales

4,854

4,159

0.1

0.1

 

 

Operating revenues

1,102,206

1,430,963

31.7

29.4

 

 

Chemicals Segment

 

 

 

 

 

 

External sales*

331,336

438,103

9.5

9.0

15.4

14.8

Inter-segment sales

40,518

78,165

1.2

1.6

 

 

Operating revenues

371,854

516,268

10.7

10.6

 

 

Corporate and Others

 

 

 

 

 

 

External sales*

460,210

826,357

13.2

17.0

21.9

27.9

Inter-segment sales

430,073

654,337

12.4

13.5

 

 

Operating revenues

890,283

1,480,694

25.6

30.5

 

 

Operating revenue before elimination of inter-segment sales

3,476,608

4,862,793

100.0

100.0

 

 

Elimination of inter-segment sales

(1,370,624)

(1,902,994)

 

 

 

 

Turnover and other operating revenues

2,105,984

2,959,799

 

 

100.0

100.0

 

* : Other operating revenues are included.

 

The following table sets forth the operating revenues, operating expenses and operating profit by each segment before elimination of the inter-segment transactions for the periods indicated, and the percentage change of 2020 compared to 2019.

 

 

Year ended 31 December

 

2020

2019

Change

 

RMB million

RMB million

(%)

Exploration and Production Segment

 

 

 

Operating revenues

167,755

210,712

(20.4)

Operating expenses

(184,231)

(201,428)

(8.5)

Operating (loss)/profit

(16,476)

9,284

-

Refining Segment

 

 

 

Operating revenues

944,510

1,224,156

(22.8)

Operating expenses

(950,065)

(1,193,524)

(20.4)

Operating (loss)/profit

(5,555)

30,632

-

Marketing and Distribution Segment

 

 

 

Operating revenues

1,102,206

1,430,963

(23.0)

Operating expenses

(1,081,378)

(1,401,856)

(22.9)

Operating profit

20,828

29,107

(28.4)

Chemicals Segment

 

 

 

Operating revenues

371,854

516,268

(28.0)

Operating expenses

(361,482)

(498,941)

(27.6)

Operating profit

10,372

17,327

(40.1)

Corporate and Others

 

 

 

Operating revenues

890,283

1,480,694

(39.9)

Operating expenses

(890,676)

(1,480,630)

(39.8)

Operating (loss)/profit

(393)

64

-

Elimination of inter-segment profit/(loss)

4,417

(40)

-

 

(1)  Exploration and Production Segment

Most crude oil and a small portion of the natural gas produced by the exploration and production segment were used for the Company's refining and chemical production. Most of the natural gas and a small portion of crude oil were sold externally to other customers.

 

In 2020, the operating revenues of this segment was RMB 167.8 billion, representing a decrease of 20.4% over 2019. This was mainly attributed to the decrease of realised price in crude oil, natural gas and LNG.

 

In 2020, the segment sold 34.52 million tonnes of crude oil, representing an increase of 0.5% over 2019. Natural gas sales volume was 27.8 billion cubic meters (bcm), representing a decrease of 3.6% over 2019. Regasified LNG sales volume was 15.7 bcm, representing an increase of 40.3% over 2019. LNG sales volume was 6.17 million tonnes, representing an increase of 30.2% over 2019. Average realised prices of crude oil, natural gas, Regasified LNG, and LNG were RMB 1,902 per tonne, RMB 1,360 per thousand cubic meters, RMB 1,774 per thousand cubic meters, and RMB 2,543 per tonne, representing decrease of 33.6%, 13.2%, 13.0%, and 23.1% respectively over 2019.

 

In 2020, the operating expenses of this segment was RMB 184.2 billion, representing a decrease of 8.5% over 2019. That was mainly due to the following:

 

   Procurement cost decreased by RMB 12.0 billion year on year, as a result of decrease of LNG price;

   Depreciation, depletion and amortisation decreased by RMB 4.5 billion year on year;

   Cost of power fuel and purchased materials decreased by RMB 2.1 billion year on year;

   Resource Tax and special oil income levy decreased by RMB 2.0 billion year on year;

   Impairment losses on long-lived assets increased by RMB 7.9 billion year on year;

 

In 2020, the oil and gas lifting cost was RMB 729.59 per tonne, representing a year on year decrease of 6.7%, mainly attributable to the decrease in the cost of purchased material, fuels, and power since the upstream segment proactively reinforced the cost control to cope with the low oil price environment.

 

In 2020, the operating loss of the exploration and production segment was RMB 16.5 billion, representing a decrease of RMB 25.8 billion compared with 2019, mainly attributable to decrease of international oil pricec.

 

(2)  Refining Segment

Business activities of the refining segment include purchasing crude oil from third parties and the exploration and production segment of the Company, as well as processing crude oil into refined petroleum products. Gasoline, diesel and kerosene are sold internally to the marketing and distribution segment of the Company; part of the chemical feedstock is sold to the chemicals segment of the Company; and other refined petroleum products are sold externally to both domestic and overseas customers.

 

In 2020, the operating revenues of this segment was RMB 944.5 billion, representing a decrease of 22.8% over 2019. This was mainly attributed to the decrease in products prices and crude oil throughput compared with the same period of last year as a result of recession in market demand which was impacted by the COVID-19 pandemic.

 

The following table sets forth the sales volumes, average realised prices and the respective changes of the Company's major refined oil products of the segment in 2020 and 2019.

 

 

Sales Volume (thousand tonnes)

Average realised price (RMB/tonne)

 

Year ended 31 December

 

Year ended 31 December

 

 

2020

2019

Change (%)

2020

2019

Change (%)

Gasoline

56,259

60,750

(7.4)

5,813

7,057

(17.6)

Diesel

61,167

63,509

(3.7)

4,354

5,477

(20.5)

Kerosene

17,309

23,890

(27.6)

2,673

4,252

(37.2)

Chemical feedstock

39,872

39,720

0.4

2,596

3,531

(26.5)

Other refined petroleum products

65,353

61,890

5.6

3,011

3,237

(7.0)

 

In 2020, sales revenue of gasoline was RMB 327.0 billion, representing a decrease of 23.7% over 2019.

 

The sales revenue of diesel was RMB 266.3 billion, representing a decrease of 23.4% over 2019.

 

The sales revenue of kerosene was RMB 46.3 billion, representing a decrease of 54.5% over 2019.

 

The sales revenue of chemical feedstock was RMB 103.5 billion, representing a decrease of 26.2% over 2019.

 

The sales revenue of refined petroleum products other than gasoline, diesel, kerosene and chemical feedstock was RMB 196.8 billion, representing a decrease of 1.8% over 2019.

 

In 2020, the segment's operating expenses was RMB 950.1 billion, representing a decrease of 20.4% over 2019. This was mainly attributed to the decrease in procurement cost of crude oil resulted from the slump of international crude oil price.

 

In 2020, the average processing cost for crude oil was RMB 2,456 per tonne, representing a decrease of 27.8% over 2019. Total crude oil processed was 245.92 million tonnes (excluding volume processed for third parties), representing a decrease of 2.6% over 2019. The total cost of crude oil processed was RMB 603.9 billion, representing a decrease of 29.7% over 2019, which was accounted for 63.6% of the segment's operating expenses, a decrease of 8.4 percentage points year on year.

 

In 2020, refining margin was RMB 240 per tonne, decreased by RMB 126 per tonne compared with 2019. This was mainly due to the significant shrink of margin in kerosene and other refined petroleum products which was impacted by the COVID-19 outbreak and market demand recession as well as inventory losses of crude oil and refined products due to crude oil price slump.

 

In 2020, the refining cash operating cost (defined as operating expenses less the processing cost of crude oil and refining feedstock, depreciation and amortisation, taxes other than income tax and other operating expenses, then divided by the throughput of crude oil and refining feedstock) was RMB 181.48 per tonne, an increase of 2.1% over 2019, which was mainly because the unit cost increased as a result of the throughput decreased compared with last year.

 

In 2020, the operating loss of the segment totaled RMB 5.6 billion, representing a decline of RMB 36.2 billion compared with 2019.

 

(3)  Marketing and distribution segment

The business activities of the marketing and distribution segment include purchasing refined oil products from the refining segment and the third parties, conducting direct sales and wholesale to domestic customers and retailing, distributing oil products through the segment's retail and distribution network as well as providing related services. In 2020, the operating revenues of this segment was RMB 1,102.2 billion, down by 23.0% year-on-year. This was mainly because demand and sales volume of refined oil products decreased as a result of COVID-19 impact and oil prices plunged. The sales revenues of gasoline totaled RMB 549.2 billion, down by 19.4% year-on-year; the sales revenues of diesel was RMB 377.0 billion, down by 25.7% year-on-year; the sales revenues of kerosene was RMB 54.9 billion, down by 52.8% year-on-year.

 

The following table sets forth the sales volumes, average realised prices and respective percentage changes of the segment's four major refined oil products in 2020 and 2019, including detailed information about retail, direct sales and distribution of gasoline and diesel:

 

 

Sales volume (thousand tonnes)

Average realised price (RMB/tonne)

 

Year ended 31 December

 

Year ended 31 December

 

 

2020

2019

Change (%)

2020

2019

Change (%)

Gasoline

86,216

92,261

(6.6)

6,370

7,387

(13.8)

Retail

61,446

66,440

(7.5)

6,940

7,968

(12.9)

Direct sales and distribution

24,770

25,820

(4.1)

4,955

5,892

(15.9)

Diesel

77,507

87,335

(11.3)

4,865

5,812

(16.3)

Retail

36,757

43,503

(15.5)

5,351

6,227

(14.1)

Direct sales and distribution

40,750

43,832

(7.0)

4,426

5,399

(18.0)

Kerosene

20,828

27,068

(23.1)

2,634

4,297

(38.7)

Fuel oil

23,331

21,772

7.2

2,536

3,072

(17.4)

 

In 2020, the operating expenses of the segment were RMB 1,081.4 billion, representing a decrease of RMB 320.5 billion year-on-year, down by 22.9%. This was mainly due to the decrease of sales volumes and procurement costs.

 

In 2020, the segment's marketing operating cash cost (defined as the operating expenses less the purchase costs, taxes other than income tax, depreciation and amortization, divided by sales volume) was RMB 189.86 per tonne, up by 4.0% year-on-yearwhich was mainly because the unit cost increased as a result of the decreased sales volume.

 

In 2020, the operating revenues of non-fuel business was RMB 33.9 billion, up by RMB 1.8 billion year-on-year and the profit of non-fuel business was RMB 3.7 billion, up by RMB 0.5 billion. This was mainly because the Company vigorously promoted company-owned brands and innovated marketing model to boost the increase of volume and profit of non-fuel business.

 

In 2020, the segment's operating profit was RMB 20.8 billion, down by 28.4% year-on-year. This was mainly because sales volume decreased as a result of shrinking demand of refined oil product.

 

(4)  Chemicals segment

The business activities of the chemicals segment include purchasing chemical feedstock from the refining segment and the third parties and producing, marketing and distributing petrochemical and inorganic chemical products.

 

In 2020, the operating revenues of this segment was RMB 371.9 billion, down by 28.0% year-on-year. This was mainly due to the decrease in chemical products prices and sales volume of some products because of COVID-19 impact.

 

In 2020, the sales revenue generated by the segment's six major categories of chemical products (namely basic organic chemicals, synthetic resin, synthetic fiber monomer and polymer, synthetic fibre, synthetic rubber, and chemical fertiliser) was RMB 354.4 billion, down by 24.3%, accounting for 95.3% of the operating revenues of the segment.

 

The following table sets forth the sales volume, average realised prices and respective changes of each of the segment's six categories of chemical products in 2020 and 2019.

 

 

Sales Volume (thousand tonnes)

Average Realised Price (RMB/tonne)

 

Year Ended 31 December

 

Year Ended 31 December

 

 

2020

2019

Change (%)

2020

2019

Change(%)

Basic organic chemicals

47,109

52,007

(9.4)

3,564

4,534

(21.4)

Synthetic fibre monomer and polymer

9,743

14,089

(30.8)

4,302

5,722

(24.8)

Synthetic resin

17,124

16,131

6.2

7,150

7,804

(8.4)

Synthetic fibre

1,403

1,370

2.4

6,407

8,438

(24.1)

Synthetic rubber

1,364

1,284

6.3

7,986

9,595

(16.8)

Chemical fertiliser

1,181

925

27.8

1,950

2,109

(7.5)

 

In 2020, the operating expenses of the segment was RMB 361.5 billion, down by 27.6% year-on-year.

 

In 2020, the segment's operating profit was RMB 10.4 billion, down by RMB 7 billion year-on-year. This was mainly due to the decrease in chemical product prices and narrowed gross margin as a result of COVID-19 impact.

 

(5)  Corporate and others

The business activities of corporate and others mainly consist of import and export business activities of Sinopec Corp.'s subsidiaries, research and development activities of the Company, and managerial activities of the headquarters.

 

In 2020, the operating revenues generated from corporate and others was RMB 890.3 billion (of which the operating revenues of trading companies was RMB 886.4 billion), down by 39.9% year-on-year. This was mainly because sales volume and prices of crude oil and refined oil products plunged as a result of COVID-19 impact.

 

In 2020, the operating expenses for corporate and others was RMB 890.7 billion (of which the operating expenses of trading companies was RMB 882.2 billion), down by 39.8% year-on-year.

 

In 2020, the segment's operating loss was RMB 0.4 billion, of which trading companies realised an operating profit of RMB 4.1 billion.

 

3    ASSETS, LIABILITIES, EQUITY AND CASH FLOWS

The major funding sources of the Company are its operating activities and short-term and long-term loans. The major use of funds includes operating expenses, capital expenditures, and repayment of short-term and long-term debts.

 

(1)  Assets, Liabilities and Equity

 

UnitRMB million

 

 

As of

31 December

2020

As of

31 December

2019

change

Total assets

1,733,805

1,760,286

(26,481)

Current assets

455,395

447,310

8,085

Non-current assets

1,278,410

1,312,976

(34,566)

Total liabilities

850,947

882,982

(32,035)

Current liabilities

522,190

579,978

(57,788)

Non-current liabilities

328,757

303,004

25,753

Total equity attributable to shareholders of the Company

741,494

738,946

2,548

Share capital

121,071

121,071

-

Reserves

620,423

617,875

2,548

Non-controlling Interests

141,364

138,358

3,006

Total equity

882,858

877,304

5,554

 

As of 31 December 2020, the Company's total assets were RMB 1,733.8 billion, representing a decrease of RMB 26.5 billion compared with the end of 2019, of which:

 

Current assets were RMB 455.4 billion, representing an increase of RMB 8.1 billion compared with that of the end of 2019, mainly because cash and cash equivalents increased by RMB 27.1 billion, the time deposits with financial institutions increased by RMB 32.9 billion, the derivative financial assets increased by RMB 11.7 billion, trade accounts receivable decreased by RMB 18.8 billion, inventories decreased by RMB 42.2 billion.

 

Non-current assets were RMB 1,278.4 billion, representing a decrease of RMB 34.6 billion compared with that as of the end of 2019, mainly because property, plant and equipment net decreased by RMB 36.4 billion, construction in progress decreased by RMB 49.1 billion, interest in joint ventures increased by RMB 40.4 billion and long-term prepayments and other non-current assets increased by RMB 9.1 billion.

 

Total liabilities were RMB 850.9 billion, representing a decrease of RMB 32 billion compared with that as of the end of 2019, of which:

 

Current liabilities were RMB 522.2 billion, representing a decrease of RMB 57.8 billion compared with that as of the end of 2019, mainly because short-term debts decreased by RMB 16.8 billion, loans from China Petrochemical Corporation and its subsidiaries decreased by RMB 38 billion, trade accounts payable and bills payable decreased by RMB 38.4 billion, other payables increased by RMB 30.5 billion.

 

Non-current liabilities were RMB 328.8 billion, representing an increase of RMB 25.8 billion compared with that as of the end of 2019, mainly because long-term debts increased by RMB 22.8 billion.

 

Total equity attributable to shareholders of the Company were RMB 741.5 billion, representing an increase of RMB 2.5 billion compared with that as of the end of 2019.

 

(2)  Cash Flow

The following table set forth the major items in the consolidated cash flow statements for 2020 and 2019.

 

UnitRMB million

 

Major items of cash flows

Year ended 31 December

 

2020

2019

Net cash generated from operating activities

167,518

153,619

Net cash used in investing activities

(102,203)

(121,051)

Net cash used in financing activities

(36,955)

(84,204)

 

In 2020, the net cash generated from operating activities of the Company was RMB 167.5 billion, representing an increase in cash of RMB 13.9 billion year on year. This was mainly due to the strengthened management of inventories and receivables and payables and sharp decrease of occupation of funds.

 

In 2020, the net cash used in investing activities was RMB 102.2 billion, representing a year on year decrease of RMB 18.8 billion, mainly because capital expenditures decreased by RMB 12.2 billion.

 

In 2020, the net cash used in financing activities were RMB 37.0 billion, representing a year on year decrease of RMB 47.2 billion, mainly because proceeds from bank and other loans decreased by RMB 43.8 billion, repayments of bank and other loans decreased by RMB 74.1 billion, dividends paid by the Company decreased by RMB 14.5 billion, distributions by subsidiaries to non-controlling shareholders decreased by RMB 3.2 billion.

 

At the end of 2020, the cash and cash equivalents was RMB 87.6 billion.

 

(3)  Contingent Liabilities

Please refer to "Material Guarantee Contracts and Their Performance" in the "Significant Events" section of this report.

 

(4)  Capital Expenditure

Please refer to "Capital Expenditures" in the "Business Review and Prospects" section of this report.

 

(5)  Research & Development and Environmental Expenditures

R&D expenditures include expenses occurred in the period. In 2020 the expenditures for R&D was RMB 15.2 billion, of which expense was RMB 10.1 billion, and capitalised cost was RMB 5.1 billion.

 

Environmental expenditures refer to the normal routine pollutant discharge fees paid by the Company, excluding capitalised cost of pollutant treatment properties. In 2020, the Company paid environmental expenditures of RMB 11.4 billion.

 

(6)  Measurement of fair values of derivatives and relevant system

The Company has established sound decision-making mechanism, business process and internal control systems relevant to financial instrument accounting and information disclosure.

 

Items relevant to measurement of main fair values                                                                                                                                            Unit: RMB million

 

Items

Beginning

of the year

End of

the year

Profits and

losses from

variation of

fair values

in the

current year

Accumulated

variation of

fair values

recorded

as equity

Impairment

loss

provision

of the

current year

Funding

source

Financial assets held for trading

3,319

1

114

0

0

Self-owned fund

Structured deposit

3,318

0

133

0

0

Self-owned fund

Stock

1

1

(19)

0

0

Self-owned fund

Derivative financial instruments

48

157

(1,252)

0

0

-

Cash flow hedges

(1,940)

7,545

3,051

9,207

0

-

Other equity instruments investment

1,521

1,525

0

(18)

0

-

Total

2,948

9,228

1,913

9,189

0

-

 

4    ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER CASs

The major differences between the Company's financial statements prepared under CASs and IFRS are set out in Section C of the financial statements of the Company on page 200 of this report.

 

(1)  Under CASs, the operating income and operating profit or loss by reportable segments were as follows:

 

 

Year ended 31 December

 

2020

2019

 

RMB million

RMB million

Operating income

 

 

Exploration and Production Segment

167,755

210,712

Refining Segment

944,510

1,224,156

Marketing and Distribution Segment

1,102,206

1,430,963

Chemicals Segment

371,854

516,268

Corporate and Others

890,283

1,480,694

Elimination of inter-segment sales

(1,370,624)

(1,902,994)

Consolidated operating income

2,105,984

2,959,799

Operating (loss)/profit

 

 

Exploration and Production Segment

(20,570)

6,289

Refining Segment

(6,556)

30,074

Marketing and Distribution Segment

19,634

29,781

Chemicals Segment

9,147

16,665

Corporate and Others

(2,048)

3,530

Elimination of inter-segment sales

4,417

(40)

Financial expenses, investment income, losses from changes in fair value,
 other income and asset disposal gains/(losses)

46,307

3,835

Consolidated operating profit

50,331

90,134

Net profit attributable to equity shareholders of the Company

32,924

57,619

 

Operating profit: In 2020, the operating profit of the Company was RMB 50.3 billion, representing a decrease of RMB 39.8 billion as compared with 2019.

 

Net profit: In 2020, the net profit attributable to the equity shareholders of the Company was RMB 32.9 billion, representing a decrease of RMB 24.7 billion or 42.9% compared with 2019.

 

(2)  Financial data prepared under CASs

 

 

As of 31

As of 31

 

 

December 2020

December 2019

Change

 

RMB million

RMB million

 

Total assets

1,733,805

1,760,286

(26,841)

Non-current liabilities

327,739

301,934

25,805

Shareholder's equity

883,876

878,374

5,502

 

Change analysis:

 

At the end of 2020, the Company's total assets was RMB 1,733.8 billion, representing an decrease of RMB 26.5 billion compared with that of the end of 2019.

 

At the end of 2020, the Company's non-current liabilities was RMB 327.7 billion, representing an increase of RMB 25.8 billion compared with that of the end of 2019. That was mainly due to the increase of RMB 19.2 billion in debentures payable, and the increase of RMB 5.8 billion in long-term loans.

 

At the end of 2020, the shareholders' equity of the Company was RMB 883.9 billion, representing an increase of RMB 5.5 billion compared with that of the end of 2019.

 

(3)  The results of the principal operations by segments

 

Segments

Operation

income

RMB million

Operation cost

RMB million

Gross profit

margin* (%)

Increase/

(decrease)

of operation

income on a

year-on-year

basis (%)

Increase/

(decrease) of

operation cost

on a year-on-

year basis (%)

Increase/

(decrease) of

gross profit

margin on a

year-on-year

basis (%)

Exploration and Production

167,755

148,306

7.1

(20.4)

(12.0)

(8.4)

Refining

944,510

698,838

2.6

(22.8)

(25.9)

(1.7)

Marketing and Distribution

1,102,206

1,013,788

7.8

(23.0)

(24.0)

1.2

Chemicals

371,854

329,441

10.5

(28.0)

(30.2)

2.6

Corporate and Others

890,283

873,067

1.9

(39.9)

(40.4)

0.8

Elimination of inter-segment sales

(1,370,624)

(1,375,041)

N/A

N/A

N/A

N/A

Total

2,105,984

1,688,398

8.7

(28.8)

(31.9)

0.7

 

*:     Gross profit margin = (operation income - operation cost, tax and surcharges)/operation income.

 

5    THE CAUSE AND IMPACT OF THE CHANGE IN THE COMPANY'S ACCOUNTING POLICY, ACCOUNTING ESTIMATES AND ACCOUNTING METHODS

None.

 

6    SIGNIFICANT CHANGES IN MAJOR ASSETS DURING THE REPORTING PERIOD

During the reporting period, the closing of transaction of Relevant Oil and Gas Pipeline Asset has been accomplished. For details, please refer to item 4 in section "Significant Events".

 

 

SIGNIFICANT EVENTS

 

1    MAJOR PROJECTS

 

(1)  Zhongke integrated refining and chemical project

Zhongke integrated refining and petrochemical project mainly consists of the construction of a 10,000,000 tpa refinery project, 800,000 tpa ethylene unit, 300,000 tonne capacity jetty and relevant utilities project. It was put into operation on 16 June 2020. The Company's self-owned fund accounts for 30% of the project investment, and bank loan is the main source of the remaining 70%. As of 31 December 2020, the aggregate investment was RMB 34.6 billion.

 

(2)  Zhenhai refining & chemical expansion project (phase 1)

Zhenhai Refining & Chemical expansion project (phase 1) consists of a 4,000,000 tpa crude oil modification project for old refinery and a 1,200,000 tpa ethylene project. The project was approved in June 2018, the construction started at the end of October 2018 and is expected to achieve the mechanical completion in mid-2021. The Company's self-owned fund accounts for 30% of the project investment, and bank loan is the main source of the remaining 70%. As of 31 December 2020, the aggregate investment was RMB 11.4 billion.

 

(3)  Zhenhai refining & chemical expansion project (phase 2)

Zhenhai Refining & Chemical expansion project (phase 2) consists of building a 11,000,000 tpa refinery project and a 600,000 tpa propane dehydrogenatin and downstream projects. The refinery project is expected to begin construction in October 2021 and to be put into operation in the end of 2024. The chemical project is expected to begin construction in June 2022 and to be put into oeration in June 2025. The Company's self-owned fund accounts for 30% of the project investment, and bank loan is the main source of the remaining 70%.

 

(4)  Tianjin Nanggang ethylene and downstream high-end new material industry cluster project

Tianjin Nanggang ethylene and downstream high-end new material industry cluster project consists of a 1,200,000 tpa ethylene project and downstream processing units. The project is expected to begin construction in June 2021 and be put into operation in the end of 2023. The Company's self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%.

 

(5)  Wuhan ethylene de-bottleneck project

Wuhan ethylene de-bottleneck project mainly consists of an 800,000 tpa-to-1,100,000 tpa ethylene capacity expansion project. The project started construction at the end of October 2018 and is expected to achieve the mechanical completion in March 2021. The Company's self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 31 December 2020, the aggregate investment was RMB 3.3 billion.

 

(6)  Hainan Refining 1,000,000 tpa ethylene and refinery revamping and expansion project

Hainan Refining 1,000,000 tpa ethylene and refinery revamping and expansion project mainly consists of the construction of 1,000,000 tpa ethylene and auxiliary units. The project started at the end of December 2018 and is expected to achieve the mechanical completion in May 2022. The Company's self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 31 December 2020, the aggregate investment was RMB 5.6 billion.

 

(7)  Weirong shale gas project (phase 1 and phase 2)

Under the guidance of the principle of "overall deployment, stage-wise implementation and fully consideration", the capacity construction project started comprehensively in August 2018. The construction of phase 1 project with a production capacity of 1 billion cubic meters per year was completed and put into operatin in December 2020. The phase 2 project with a production capacity of 2 billion cubic meters per year is expected to be completed and put into operation in December 2022. The Company's self-owned fund accounts for 30% of the project investment and bank loan is the main source of the remaining 70%. As of 31 December 2020, the aggregate investment was RMB 4.1 billion.

 

(8)  Tianjin LNG project (phase 2)

Tianjin LNG project (phase 2) mainly consists of a new wharf, five new 220,000-cubic-meter storage tanks etc. LNG processing capacity will reach 11 million tonnes per year after phase 2 expansion project is completed. The project started in January 2019 and is expected to be put into operation in August 2023. The Company's self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 31 December 2020, the aggregate investment was RMB 1.5 billion.

 

2    CORPORATE BONDS ISSUED AND INTEREST PAYMENTS

 

Basic information of corporate bonds

 

 

Sinopec Corp.

Sinopec Corp.

Sinopec Corp.

Bond name

2010 Corporate bond

2012 Corporate bond

2015 Corporate bond (first issue)

Abbreviation

10石化02

12石化02

15石化02

Code

122052

122150

136040

Issuance date

21 May 2010

1 June 2012

19 November 2015

Maturity date

21 May 2020

1 June 2022

19 November 2020

Amount issued (RMB billion)

9

7

4

Outstanding balance (RMB billion)

7

Interest rate (%)

4.05

4.90

3.70

Principal and interest repayment
 

Simple interest is calculated and paid on an annual basis without compounding interests. Interest is paid once a year. The principal will be paid at maturity with last installment of interest.

Payment of interests
 

Sinopec Corp. had paid in full the interest accrued of "12石化02" during the reporting period and "10石化02" and "15石化02" had been repaid and delisted from Shanghai Stock Exchange.

Investor Qualification Arrangement


 

15石化02 was publicly offered to qualified investors in accordance with Administration of the Issuance and Trading of Corporate Bonds.

 

 

Listing exchange

 

Shanghai Stock Exchange

Corporate bonds trustee                             

Name

China International Capital Corporation Limited

 

Address


 

27th-28th Floor, China World Office 2, 1 Jianguomenwai Avenue, Chaoyang District, Beijing

 

 

Contact Person

Huang Xu, Zhai Ying

                                                                           

Telephone Number

(010) 6505 1166

Credit rating agency                                     

Name

United Credit Ratings Co., Ltd.

 


                                                                           

Address


 

12th Floor, PICC building, No.2 Jianguomenwai Avenue, Chaoyang District, Beijing

 

Use of proceeds
 

Proceeds from the above-mentioned corporate bonds have been used for their designated purpose as disclosed. All the proceeds have been completely used.

Credit rating


 

 

 


 

During the reporting period, United Credit Ratings Co., Ltd. tracked and provided credit rating for 10石化02, 12石化02 and 15石化02 and reaffirmed AAA credit rating in the continuing credit rating report. The long term credit rating of Sinopec Corp. remained AAA with its outlook being stable. Pursuant to relevant regulations, the latest credit rating results will be published through media designated by regulators within six months commencing from the date of the end of each fiscal year.

 

 

Credit addition mechanism, repayment scheme and other relative events for corporate bonds during the reporting period

During the reporting period, there is no arrangement to credit addition mechanism and change of the repayment for the above-mentioned corporate bonds. Sinopec Corp. strictly followed the provisions in the corporate bond prospectus to repay interests of the corporate bonds to bondholders.

 


 

 

The guarantor of 10石化02 and 12石化02 is China Petrochemical Corporation. For more information of the guarantor, please refer to the annual report of corporate bonds which had been published on website of Shanghai Stock Exchange by China Petrochemical Corporation.

 

 

Convening of corporate bond holders' meeting

 

During the reporting period, the bondholders' meeting was not convened.

Performance of corporate bonds trustee



 

 

 

 


 

During the durations of the above-mentioned bonds, the bond trustee, China International Capital Corporation Limited, has strictly followed the Bond Trustee Management Agreement and continuously tracked the Company's credit status, utilisation of bond proceeds and repayment of principals and interests of the bond. The bond trustee has also advised the Company to fulfil obligations as described in the corporate bond prospectus and exercised its duty to protect the bondholders' legitimate rights and interests. The bond trustee has disclosed the Trustee Management Affairs Report of last year. The full disclosure is available on the website of Shanghai Stock Exchange (http://www.sse.com.cn).

 

 

Principal accounting data and financial indicators for the two years ended 31 December 2020

 

Principal data

2020

2019

Change

     Reasons for change

EBITDA (RMB million)

168,785

214,953

(46,168)

     Due to the decrease of earnings before tax

Current ratio

0.87

0.77

0.10

     Due to the decrease of current liability

Quick ratio

0.58

0.44

0.14

     Due to the decrease of current liability

Liability-to-asset ratio (%)

49.02

50.10

(1.08)

     Due to the decrease of total liability

 

 

 

percentage points

 

EBITDA to total debt ratio

1.23

1.25

(0.02)

     Due to the decrease of profit before tax

Interest coverage ratio

4.02

6.40

(2.38)

     Due to the decrease of profit before tax

Cash flow interest coverage ratio

24.51

28.70

(4.19)

     Due to the decrease of profit before tax

EBITDA-to-interest coverage ratio

10.64

12.88

(2.24)

     Due to the decrease of profit before tax

Loan repayment rate (%)

100%

100%

-

     -

Interest payment rate (%)

100%

100%

-

     -

 

During the reporting period, the Company paid in full the interest accrued for the other bonds and debt financing instruments. As at 31 December 2020, the standby credit line provided by several domestic financial institutions to the Company was RMB 444.0 billion in total, facilitating the Company to get such amount of unsecured loans. The Company has fulfilled all the relevant undertakings in the offering circular of corporate bonds and had no significant matters which could influence the Company's operation and debt paying ability.

 

On 18 April 2013, Sinopec Capital (2013) Limited, a wholly-owned overseas subsidiary of Sinopec Corp., issued senior notes guaranteed by the Company with four different maturities, namely 3 years, 5 years, 10 years and 30 years. The 3-year notes principal totaled USD 750 million, with an annual interest rate of 1.250% and had been repaid and delisted; the 5-year notes principal totaled USD 1 billion, with an annual interest rate of 1.875% and had been repaid and delisted; the 10-year notes principal totaled USD 1.25 billion, with an annual interest rate of 3.125%; and the 30-year notes principal totaled USD 500 million, with an annual interest rate of 4.250%. These notes were listed on the Hong Kong Stock Exchange on 25 April 2013, with interest payable semi-annually. The first payment of interest was made on 24 October 2013. During the reporting period, the Company has paid in full the current-period interests of all notes with maturity of 10 years and 30 years.

 

3    PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION

 

 

Type of

 

 

 

Whether bears

Whether strictly

Background

Undertaking

Party

Contents

Term for performance

deadline or not

performed or not

Undertakings related to Initial Public Offerings (IPOs)

IPOs

China Petrochemical Corporation

1       Compliance with the connected transaction agreements;

From 22 June 2001

No

Yes

 

 

 

2       Solving the issues regarding the legality of land-use rights certificates and property ownership rights certificates within a specified period of time;

 

 

 

 

 

 

3       Implementation of the Reorganisation Agreement (please refer to the definition of Reorganisation Agreement in the H share prospectus of Sinopec Corp.);

 

 

 

 

 

 

4       Granting licenses for intellectual property rights;

 

 

 

 

 

 

5       Avoiding competition within the same industry;

 

 

 

 

 

 

6       Abandonment of business competition and conflicts of interest with Sinopec Corp.

 

 

 

Other undertakings














 

 

 

 

 



 

 


 

 

 

 

 

 

Other


















 

 

 

 

 

 

 

 

 

 

 

 

 

China Petrochemical Corporation
















 

 

 

 

 

 

 

 

 

 

 

 

 

 

Given that China Petrochemical Corporation engages in the same or similar businesses as Sinopec Corp. with regard to the exploration and production of overseas petroleum and natural gas, China Petrochemical Corporation hereby grants a 10-year option to Sinopec Corp. with the following provisions: (i) within ten years from the issuance date of this undertaking, after a thorough analysis from political, economic and other perspectives, Sinopec Corp. is entitled to require China Petrochemical Corporation to sell its overseas oil and gas assets owned as of the date of the undertaking and still in its possession upon Sinopec Corp.'s exercise of the option to Sinopec Corp.; (ii) in relation to the overseas oil and gas assets acquired by China Petrochemical Corporation after the issuance of the undertaking, within 10 years of the completion of such acquisition, after a thorough analysis from political, economic and other perspectives, Sinopec Corp. is entitled to require China Petrochemical Corporation to sell these assets to Sinopec Corp. China Petrochemical Corporation undertakes to transfer the assets as required by Sinopec Corp. under aforesaid items (i) and (ii) to Sinopec Corp., provided that the exercise of such option complies with applicable laws and regulations, contractual obligations and other procedural requirements.

Within 10 years after 29 April 2014 or the date when China Petrochemical Corporation acquires the assets















 

 

 

 

 

 

 

 

 

 

 

 

 

Yes
















 

 

 

 

 


 

 

 

 

 

 

 

 

 

Yes















 

 

 

 

 




 

 

 

 

 

 

 

 

 

As of the date of this report, Sinopec Corp. had no undertakings in respect of financial performance, asset injections or asset restructuring that had not been fulfilled, nor did Sinopec Corp. make any profit forecast in relation to any asset or project.

 

4.   THE TRANSACTIONS WITH CHINA OIL & GAS PIPELINE NETWORK CORPORATION

 

On 23 July 2020, Sinopec Corp. entered into the Agreement on Additional Issuance of Equity to Purchase Relevant Oil and Gas Pipeline Assets with China Oil & Gas Pipeline Network Corporation ("PipeChina"), pursuant to which Sinopec Corp. transferred equity interests in the relevant oil and gas pipeline companies to PipeChina. PipeChina issued additional equity to Sinopec Corp. to satisfy the transaction consideration. On the same day, Sinopec Natural Gas Limited Company, entered into the Agreement on Additional Issuance of Equity and Cash Payment to Purchase Relevant Oil and Gas Pipeine Assets with PipeChina, pursuant to which Sinopec Natural Gas Limited Company transferred equity interests in the relevant oil and gas pipeline companies to PipeChina. PipeChina issued additional equity and made cash payment to Sinopec Natural Gas to satisfy the transaction consideration. On the same day, Sinopec Marketing Co., Limited ("Sinopec Marketing"), a subsidiary of Sinopec Corp., entered into the Agreement on Cash Payment to Purchase Relevant Oil and Gas Pipeline Assets with PipeChina, pursuant to which Sinopec Marketing transferred the refined oil pipelines and other assets held by it to PipeChina, in exchange for cash consideration paid by PipeChina. On 21 July 2020, Sinomart KTS Development Limited, a subsidiary of Sinopec Corp., entered into the Agreement on Cash Payment to Purchase 100% Equity in Sinopec Yu Ji Pipeline Company Limited with PipeChina (together with the Agreement on Additional Issuance of Equity to Purchase Relevant Oil and Gas Pipeline Assets with PipeChina, the Agreement on Additional Issuance of Equity and Cash Payment to Purchase Relevant Oil and Gas Pipeline Assets with PipeChina and the Agreement on Cash Payment to Purchase Relevant Oil and Gas Pipeline Assets with PipeChina, collectively, the "Relevant Agreements"), pursuant to which Sinomart KTS Development Limited transferred 100% equity interest in Sinopec Yu Ji Pipeline Company Limited, its subsidiary, to PipeChina, in exchange for cash consideration paid by PipeChina.

 

On 30 September 2020, Sinopec Marketing and PipeChina entered into the Agreement on Disposal of Pipeline Inventory in relation to the Oil and Gas Pipeline Assets Transaction, pursuant to which Sinopec Marketing disposed of the refined oil products stored in the pipelines and storage facilities in the target assets to PipeChina. On the same day, all the conditions in the Relevant Agreements have been fulfilled. The ownership, obligations, responsibilities and risks of the target assets were transferred to PipeChina from 24:00 on 30 September 2020. Sinopec Corp. and PipeChina had entered into agreements for the use of relevant oil and gas pipeline facilities, agreeing on the terms and arrangements for the relevant services.

 

On 28 January 2021, the Board of Directors of Sinopec Corp. approved the continuing connected transaction cap in relation to refined oil pipeline transportation services between Sinopec Marketing and PipeChina, within the period from 1 October 2020 to 31 December 2021. The aggregate amount of the continuing related party transaction of the Company and PipeChina from 1 October 2020 to 31 December 2020 was RMB 1.42 billion.

 

For details, please refer to the announcements published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times, and on the website of Shanghai Stock Exchange on 24 July 2020, 9 October 2020 and 29 January 2021, and on the website of Hong Kong Stock Exchange on 23 July 2020, 30 September 2020 and 28 January 2021.

 

5    MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE             Unit: RMB million

 

Major external guarantees (excluding guarantees for controlled subsidiaries)

Guarantor

Relationship

with the

Company

Name of

guaranteed

company

Amount

Transaction date

(date of signing)

Period of guarantee

Type

Whether

completed

or not

Whether

overdue

or not

Amount of

overdue

guarantee

Counter-

guaranteed

Whether

guaranteed

for

connected

parties*1

Sinopec Corp.
 

The listed company itself

Zhongtian Hechuang Energy Co., Ltd.
 

8,450

 

25 May 2016
 

25 May 2016 -31 December 2023 (the mature date is estimated)

Joint liability guarantee

No

 

No

 

None

 

No

 

Yes

 

Sinopec Corp.

 

The listed company itself

Zhong An United Coal Chemical Co., Ltd.

6,390


 

18 April 2018

 

18 April 2018-31 December 2031

 

Joint liability guarantee

No


 

No


 

None


 

No


 

No


 

Total amount of guarantees provided during the reporting period*2

None

Total amount of guarantees outstanding at the end of reporting period*2 (A)

14,840

 

 

 

 

 

 

 

 

 

 

 

 

Guarantees by the Company to the controlled subsidiaries

Total amount of guarantee provided to controlled subsidiaries during the reporting period

None

Total amount of guarantee for controlled subsidiaries outstanding at the end of the reporting period (B)

11,378

 

Total amount of guarantees for the Company (including those provided for controlled subsidiaries)

Total amount of guarantees (A+B)

26,218

The proportion of the total amount of guarantees to the Sinopec Corp.'s net assets

3.53%

Guarantees provided for shareholder, de facto controller and its related parties (C)

None

Amount of debt guarantees provided directly or indirectly to the companies with liabilities to assets ratio over 70% (D)

6,390

The amount of guarantees in excess of 50% of the net assets (E)

None

Total amount of the above three guarantee items (C+D+E)

6,390

Statement of guarantee undue that might be involved in any joint and several liabilities

None

Statement of guarantee status

None

 

*1:  As defined in the Rules Governing the Listing of Stocks on Shanghai Stock Exchange.

 

*2:  The amount of guarantees provided during the reporting period and the outstanding balance of guarantees amount at the end of the reporting period include the guarantees provided by the controlled subsidiaries to external parties. The amount of the guarantees provided by these subsidiaries is derived from multiplying the guarantees provided by Sinopec Corp.'s subsidiaries by the percentage of shareholding of Sinopec Corp. in such subsidiaries.

 

6    SPECIFIC STATEMENTS AND INDEPENDENT OPINIONS FROM INDEPENDENT NON-EXECUTIVE DIRECTORS REGARDING EXTERNAL GUARANTEES PROVIDED BY THE COMPANY DURING AND BY THE END OF 2020:

We, as Independent Directors of Sinopec Corp., hereby make the following statements after conducting a thorough check of external guarantees provided by the Company during and by the end of 2020 in accordance with the requirements of the domestic regulatory authorities:

 

The external guarantees prior to 2020 had been disclosed in previous annual reports. The aggregate balance of external guarantees provided by Sinopec Corp. for the year 2020 was RMB 26.2 billion, accounting for approximately 3.53% of the Company's net assets.

 

We hereby present the following opinions:

 

Sinopec Corp. shall continue to strengthen its management and actively monitor guarantee risks. It shall strictly follow the approval and disclosure procedures in relation to guarantee businesses for any new external guarantees provided thereafter.

 

7    SIGNIFICANT LITIGATION, ARBITRATION RELATING TO THE COMPANY

No significant litigation, arbitration relating to the Company occurred during the reporting period.

 

8    INSOLVENCY AND RESTRUCTURING

During the reporting period, the Company was not involved in any insolvency or restructuring matters.

 

9    OTHER MATERIAL CONTRACTS

Saved as disclosed by Sinopec Corp., the Company did not enter into any material contracts subject to disclosure obligations during the reporting period.

 

10  CREDIBILITY FOR THE COMPANY, CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER

During the reporting period, the Company and its controlling shareholder did not have any unperformed court's effective judgments which should be performed or any large amount of debt which should be repaid.

 

11 TRUSTEESHIP, CONTRACTING AND LEASES

During the reporting period, the Company was not involved in any events relating to significant trusteeship, contracting or leases for the assets of any other company, nor has it placed its assets with any other company under a trusteeship, contracting or lease agreement subject to disclosure obligations.

 

12 ENTRUSTED FINANCING AND LOAN

(1)  ENTRUSTED FINANCING

During the reporting period, the Company was not involved in any entrusted financing which should be disclosed but was not disclosed.

 

(2)  ENTRUSTED LOAN

 

unitRMB billion

 

Type

Source

Occurred amount

Undue amount

Overdue amount

Project construction

Self-owned fund

2.258

2.969

0

Current capital

Self-owned fund

(0.717)

0.384

0

 

(3)  OTHER FINANCING AND DERIVATIVE INVESTMENT

During the reporting period, the Company was not involved in other financing or derivative investment.

 

13  DEPOSITS AT SINOPEC FINANCE CO., LTD. AND SINOPEC CENTURY BRIGHT CAPITAL INVESTMENT, LTD.

In order to regulate connected transactions between the Company and Sinopec Finance Co., Ltd. (Sinopec Corp.'s domestic settlement center, hereinafter referred to as the "Finance Company") and to ensure the safety and liquidity of the deposits of the Company at the Finance Company, Sinopec Corp. and the Finance Company formulated the Risk Control System on Connected Transactions Between China Petroleum & Chemical Corporation and Sinopec Finance Co., Ltd., which covers the risk control system and the risk management plan of the Company to prevent financial risks and to ensure that the deposits of the Company at the Finance Company can be utilised at the Company's discretion. At the same time, as the controlling shareholder of the Finance Company, China Petrochemical Corporation undertakes that in case of an emergency when the Finance Company has difficulty in making payments, China Petrochemical Corporation will increase the capital of the Finance Company in accordance with the actual need for the purpose of making payment.

 

In order to regulate connected transactions between the Company and Sinopec Century Bright Capital Investment, Ltd. (Sinopec Corp.'s overseas settlement center, hereinafter referred to as the "Century Bright Company"), Century Bright Company ensures the safety of the deposits of the Company at Century Bright Company by strengthening internal risk controls and obtaining various supports from China Petrochemical Corporation. China Petrochemical Corporation has formulated a number of internal rules, including the Rules for the Internal Control System, the Rules for Implementation of Overseas Capital Management Methods, and the Provisional Methods for Overseas Fund Platform Management, to impose strict rules on Century Bright Company for providing overseas financial services. Century Bright Company has also established the Rules for the Implementation of the Internal Control System, which ensures the standardisation and safety of its corporate deposits business. At the same time, as the wholly controlling shareholder of Century Bright Company, China Petrochemical Corporation entered into a keep-well agreement with Century Bright Company in 2013, in which China Petrochemical Corporation undertakes that when Century Bright Company has difficulty in making payments, China Petrochemical Corporation will ensure that Century Bright Company will fulfill its repayment obligation through various channels.

 

The deposits of the Company at the Finance Company and Century Bright Company during the reporting period did not exceed the relevant caps as approved at the General Meeting of Sinopec Corp. During daily operations, the Company can withdraw the full amount of its deposits at the Finance Company and Century Bright Company.

 

14  APPROPRIATION OF NON-OPERATIONAL FUNDS BY THE CONTROLLING SHAREHOLDER AND ITS RELATED PARTIES AND THE PROGRESS FOR CLEARING UP

Not applicable.

 

15  STRUCTURED ENTITY CONTROLLED BY THE COMPANY

None.

 

16  DETAILED IMPLEMENTATION OF THE SHARE INCENTIVE SCHEME DURING THE REPORTING PERIOD

Sinopec Corp. did not implement any share incentive scheme during the reporting period.

 

17  ENVIRONMENTAL PROTECTION SITUATIONS OF COMPANIES AND THEIR SUBSIDIARIES AS MAJOR POLLUTANT DISCHARGING COMPANIES RECOGNISED BY ENVIRONMENTAL PROTECTION DEPARTMENTS

In 2020, certain subsidiaries of Sinopec Corp. which are listed as major pollutant discharge units have disclosed environmental information as required by the relevant authorities and local government. The details of such information were published on national pollutant discharge license management information platform (http://permit.mee.gov.cn/permitExt/defaults/default-index!getInformation.action) and the relevant websites of the local government. Sinopec Corp. built prevention and control facilities for sewage, flue gas, solid waste and noise in accordance with the requirements of the national and local pollution prevention and environmental protection standards, kept effective and stable operation of pollution prevention and control facilities, and realised standardised discharges and emissions of sewage, flue gas, solid waste and factory noise. For details, please refer to the Company's Communication on Progress for Sustainable Development. The Company further regulated and enhanced the environmental management of construction projects, and implemented "three-simultaneity" management (environmental facilities shall be designed, constructed and put into operation simultaneously with the main construction). All of the newly-built projects have obtained approvals from the environment authorities. Sinopec Corp. strictly complies with relevant national requirements on environment emergency plan management and continulysly improves the emergency plans for environmental emergencies and heavy pollution weather. According to the national pollution permit and self-monitoring technology guidelines in relevant industries, we acquired discharge permit and modified the self-monitoring plan, implemented new national requirements of sewage, flue gas and noise monitory, and disclosed the environmental results. For other subsidiaries that are not listed as major pollutant discharge units, the Company also completed relevant environmental protection formalities in accordance with the national and local requirements, and implemented relevant environmental protection measures. According to the requirements of national and local ecological environment departments, these companies do not need to disclose relevant information. The Company was not subject to major administrative penalties relating to environment protection.

 

18  POVERTY ALLEVIATION PROGRAM LAUNCHED BY THE COMPANY

 

(1)  Targeted Poverty Alleviation Plan

The year 2020 is the last year for the campaign of Targeted Poverty Alleviation. The Company invested around RMB 190 million in Targeted Poverty Alleviation in 2020 and in aggregate has invested over RMB 2.4 billion. All the eight targeted poverty counties have successfully got rid of poverty.

 

The Company focused on poverty alleviation in terms of industry, improving the income level of the poverty-stricken people; focused on poverty alleviation in terms of consumption, widening the sales channels for poverty-stricken people; focused on poverty alleviation in terms of education, strengthening the educatin benefit for poverty-stricken people; focused on poverty alleviation in terms of getting jobs, increasing the job opportunities for poverty-stricken people; focused on poverty alleviation in terms of medical care, improving the health care level of poverty-stricken people.

 

(2)  2020 Targeted Poverty Alleviation Work Statistics

In 2020, the Company invested RMB 140.535 million in six counties of Targeted Poverty Alleviation with 40 targeted poverty alleviation programs implemented in Yingshang county and Yuexi county in Anhui, Fenghuang county and Luxi county in Hunan, Yuepuhu county in Xinjiang and Dongxiang county in Gansu, mainly including rural industry development, village tourism development, labor output trainings and education assistance. In total, 34,699 people benefited from the programs and 1,560 students were granted financial assistance.

 

Unit: RMB million

 

Index

Data

I.    Overview

 

1.   Funds

186.44

2.   Value of goods and materials

0.95

3.   Number of people lifted out of poverty

34,699

II.   Input breakdowns

 

1.   Poverty elimination through industrial development

 

1.1 Categories of poverty alleviation programs through

   √ □□ Poverty alleviation through agriculture and forestry development

       industrial development

□√ Poverty alleviation through tourism development

 

□√ Poverty alleviation through e-commerce

 

□Poverty alleviation through assets income

 

□Poverty alleviation through science and technology development

 

□Others

1.2 Number of poverty alleviation programs

16

1.3 Input in poverty alleviation projects through industrial development

50.35

1.4 Number of people lifted out of poverty

32,135

2.   Poverty elimination through provision of employment

 

2.1 Input in professional skill training

3.69

2.2 Participants of professional skill trainings (person/time)

21,699

2.3 Number of people employed

2,564

3.   Poverty elimination through relocation

 

3.1 Number of relocated people provided with employment

0

3.2 Input in relocation

0

4.   Poverty elimination through education

 

4.1 Input in students funding

0.95

4.2 Number of students who received funding assistance (person)

1,560

4.3 Input in education resources in poverty-stricken areas

52.94

5.   Poverty alleviation through healthcare

 

5.1 Input in medical and health care resources in proverty-striken areas

14.46

6.   Poverty alleviation through ecological protection

 

6.1 Items

√□ Conduct ecological protection and construction

 

□Develop ways for ecological protection and compensation

 

√□ Set up ecological public welfare positions

 

√□ Others

6.2 Input in ecological protection

0.11

7.   Guarantee basic living standard

 

7.1 Input in left-behind children, women and senior people

0.25

7.2  Number of left-behind children, women and senior people assisted (person)

210

7.3 Input in assisting the disabled

0.23

7.4 Number of the disabled helped (person)

76

8.   Poverty alleviation through social projects

 

8.1 Input in coordinated poverty alleviation

 

8.2 Input in targeted poverty alleviation programs

140.54

8.3 Public welfare funds for poverty alleviation

0.40

9.   Other projects

 

9.1 Number of projects

24

9.2 Total input

25.69

9.3 Number of people lifted out of poverty (person)

12,659

9.4 Other

 

 

(3)  Subsequent plan

In 2021, in accordance with the guideline of "rural revitalization with prosperous industry, ecological friendly residential ambiance, communities with civilization, effective social governance and well-off rural life", the Company will further undertake its social responsibilities, helping poverty-alleviated counties as target of rural revitalization to prosper with strengthening the outcome of targeted poverty alleviation, developing their industries, improving education programs, thus promoting rural revitalization on the basis of targeted poverty alleviation.

 

 

CONNECTED TRANSACTIONS

 

1    AGREEMENTS CONCERNING CONTINUING CONNECTED TRANSACTIONS BETWEEN SINOPEC CORP. AND CHINA PETROCHEMICAL CORPORATION

Prior to Sinopec Corp.'s overseas listing, in order to ensure the smooth continuation of production and business conducted by the Company and China Petrochemical Corporation, the two parties entered into a number of agreements on continuing connected transactions, details of which are as follows:

 

(1)  The Company and China Petrochemical Corporation will mutually supply ancillary services for products, production and construction services (Mutual Supply Agreement);

 

(2)  China Petrochemical Corporation will provide trademarks, patents and computer software to the Company for use free of charge;

 

(3)  China Petrochemical Corporation will provide cultural and educational, hygienic and auxiliary services to the Company (Cultural, Educational, Hygiene and Auxiliary Services Agreement);

 

(4)  China Petrochemical Corporation will provide leasing services for lands and certain properties to the Company;

 

(5)  China Petrochemical Corporation will provide comprehensive insurance to the Company;

 

(6)  China Petrochemical Corporation will provide shareholders' loans to the Company; and

 

(7)  The Company will provide franchise licenses for service stations to China Petrochemical Corporation.

 

On 24 August 2018, Sinopec Corp. and China Petrochemical Corporation entered into a supplemental agreement of the continuing connected transactions and the Land Use Rights Leasing Agreement Amendment Memo, pursuant to which the scope of services of the Mutual Supply Agreement and the Cultural, Educational, Hygienic and Auxiliary Services Agreement were adjusted and the term of the Mutual Supply Agreement and the Cultural, Educational, Hygienic and Auxiliary Services Agreement was extended from 1 January 2019 to 31 December 2021; the term of the Properties Leasing Agreement was extended to 31 December 2021 and the term of Intellectual Property Licensing Agreements was extended to 31 December 2029. The area and rent in the Land Use Rights Leasing Agreement were also adjusted. The resolution relating to continuing connected transactions for the three years from 2019 to 2021 was approved at the first extraordinary general meeting of Sinopec Corp. for 2018 held on 23 October 2018. For details of the above continuing connected transactions, please refer to relevant announcements published on 27 August 2018 on the China Securities Journal, the Shanghai Securities News and the Securities Times and on the website of the Shanghai Stock Exchange, and on the website of the Hong Kong Stock Exchange dated 26 August 2018. The capitalised terms used in this section shall have the same meaning as that used in the above-mentioned announcements.

 

2    COMPLIANCE OF DISCLOSURE AND APPROVALS OF CONTINUING CONNECTED TRANSACTIONS BETWEEN THE COMPANY AND SINOPEC GROUP WITH HONG KONG LISTING RULES AND THE RULES GOVERNING THE LISTING OF STOCKS ON SHANGHAI STOCK EXCHANGE

Pursuant to the Hong Kong Listing Rules and the Rules Governing the Listing of Stocks on Shanghai Stock Exchange, the continuing connected transactions between the Company and Sinopec Group are subject to disclosure, Independent Non-executive Directors' approval and/or independent shareholders' approval (if needed) based on the nature and the value of the transactions. Sinopec Corp. has fully complied with the above requirements in relation to the continuing connected transaction between the Company and Sinopec Group.

 

The aggregated amount of the continuing connected transactions for 2020 of the Company is in compliance with the relevant requirements of the Hong Kong Listing Rules and the Rules Governing the Listing of Stocks on Shanghai Stock Exchange. For performance details of connected transaction agreements, please refer to Item 3 below.

 

3    ACTUAL CONTINUING CONNECTED TRANSACTIONS ENTERED INTO BY THE COMPANY DURING THE YEAR

Pursuant to the above-mentioned agreements on continuing connected transactions, the aggregate amount of the continuing connected transactions of the Company during the reporting period was RMB 385.868 billion. Among which, purchase expenses amounted to RMB 252.381 billion, representing 11.38% of the total amount of this type of transaction for the reporting period, including purchases of products and services (procurement, storage and transportation, exploration and development services, and production-related services) of RMB 236.685 billion, purchases of auxiliary and community services of RMB 3.126 billion, payment of property rent of RMB 565 million, payment of land use right of RMB 11.086 billion, and the interest expenses amounted to RMB 0.919 billion. The sales income amounted to RMB 133.486 billion, representing 5.99% of the total amount of this type of transaction for the reporting period, including RMB 132.643 billion for sales of products, RMB 140 million for agency commission income, and RMB 704 million for interest income.

 

The amounts of the above continuing connected transactions between the Company and Sinopec Group did not exceed the relevant caps for the continuing connected transactions as approved by the general meeting of shareholders and the Board.

 

Principle of pricing for the continuing connected transactions:

 

(a)  The government-prescribed price will apply;

 

(b)  where there is no government-prescribed price but where there is a government-guidance price, the government-guidance price will apply;

 

(c)  where there is neither a government-prescribed price nor a government-guidance price, the market price will apply; or

 

(d)  where none of the above is applicable, the price for the provision of the products or services is to be agreed between the relevant parties, which shall be the reasonable cost incurred in providing the same plus 6% or less of such cost.

 

For details of the pricing principle, please refer to relevant announcements published on 27 August 2018 in China Securities Journal, Shanghai Securities News and Securities Times and on the website of the Shanghai Stock Exchange, and on the website of the Hong Kong Stock Exchange on 26 August 2018.

 

Decision-making procedures:

 

The continuing connected transaction agreements were entered into in the ordinary course of the Company's business and in accordance with normal commercial terms that are fair and reasonable to the Company and its shareholders. The Company, according to its internal control procedures, adjusts the scope and the relevant caps of continuing connected transactions every three years, and will announce and implement upon the approval of the Board and/or independent shareholders. For the other connected transactions, Sinopec Corp., in strict compliance with domestic and overseas regulatory rules, will publish the announcement and implement the transactions only after submitting the relevant proposals of connected transactions to the Board and/or the general meeting of shareholders for consideration and approval according to internal control procedures.

 

Connected transactions with the Sinopec Group that occurred during the year, as set out in Note 39 to the financial statements prepared under the IFRS in this annual report, also fall under the definition of connected transactions under Chapter 14A of the Hong Kong Listing Rules.

 

The above-mentioned connected transactions between the Company and Sinopec Group in 2020 were approved at the 21st meeting of the seventh session of the Board and have complied with the requirements under Chapter 14A of the Hong Kong Listing Rules.

 

The external auditor of Sinopec Corp. was engaged to report on the Company's continuing connected transactions in accordance with the Hong Kong Standard on Assurance Engagements 3000, Assurance Engagement Other Than Audits or Reviews of Historical Financial Information, and with reference to Practice Note 740, Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules, issued by the Hong Kong Institute of Certified Public Accountants. The auditor has issued its unqualified letter containing its conclusions in respect of the above-mentioned continuing connected transactions in accordance with Rule 14A.56 of the Hong Kong Listing Rules. Sinopec Corp. has submitted a copy of the auditor's letter to the Hong Kong Stock Exchange.

 

After reviewing the above-mentioned connected transactions, the Independent Non-executive Directors of Sinopec Corp. have confirmed the following:

 

(a)  The transactions have been conducted in the ordinary course of the Company's business;

 

(b)  The transactions have been entered into based on either of the following terms:

 

i     normal commercial terms; or

ii    terms not less favorable than those available from or to independent third parties, where there is no available comparison to determine whether such terms are on normal commercial terms; and

 

(c)  The transactions were conducted pursuant to the terms of relevant agreements, and the terms were fair and reasonable and in the interests of Sinopec Corp. and its shareholders as a whole.

 

4    OTHER SIGNIFICANT CONNECTED TRANSACTIONS OCCURED THIS YEAR

For details, please refer to item 4 "The transactions with China Oil & Gas Pipeline Network Corporation" in section "Significant Events".

 

5    FUNDS PROVIDED BETWEEN RELATED PARTIES

 

Unit: RMB million

 

 

 

Funds to related parties

Funds from related parties

Related Parties

Relations

Balance

at the

beginning

of the year

Amount

incurred

Balance

at the end

of the year

Balance

at the

beginning

of the year

Amount

incurred

Balance

at the end

of the year

Sinopec Group
 

Parent company and
 affiliated companies*

10,818
 

(295)
 

10,523
 

18,388
 

(9,361)
 

9,027
 

Other related parties

Associates and joint ventures

1,738

9,590

11,328

392

5,695

6,087

Total

 

12,556

9,295

21,851

18,780

(3,666)

15,114

Reason for provision of funds between related parties

Loans and other accounts receivable and payable

Impacts of the provision of funds on the Company

No material negative impact

 

*:     Affiliated companies include subsidiaries, associates and joint ventures.

 

 

CORPORATE GOVERNANCE

 

1    IMPROVEMENTS IN CORPORATE GOVERNANCE DURING THE REPORTING PERIOD

During the reporting period, Sinopec Corp. complied with the Articles of Association as well as domestic and overseas laws and regulations, adhered to the standard operation, and further improved corporate governance structure through completion of the election of the Chairman of the Board of Directors, Directors and Employee's Representative Supervisors, the adjustment of special committees of the Board of Directors and the appointment of the senior management. Independent Non-executive Directors actively offered advice and suggestions to the "14th Five-Year" development plan and decision-making regarding major issues, examined the subsidiary's operating conditions, and contributed to the Company's reform and development. The Company continuously implemented the campaign of promoting the execution effectiveness of internal control and achieved positive results. The Company also improved its transparency by improving the information disclosure and investor relations and strengthening communications with the market, which were recognized by regulatory authorities and capital market. The Company actively fulfilled social responsibilities by promoting targeted poverty alleviation, implementing public welfare projects. Facing the COVID-19 pandemic, the Company dedicated to the prevention and control of the pandemic by ensuring the stable supply of oil and gas, increasing production and supply of medical and health raw materials, as well as driving the recovery and development of the industrial chain. The Company further enhanced the Party building to stimulate the enthusiasm of the staff to generate the strength for the Company to overcome difficulties and create efficiency, and promoted the high-quality development of the Company through facilitating the management to effectively implement the deployments of the Board of Directors.

 

During the reporting period, there is no material inconsistency between Sinopec Corp.'s corporate governance and the requirements of the PRC Company Law and relevant regulations of the CSRC. The Board of Supervisors of Sinopec Corp. agreed with all supervised matters. None of Sinopec Corp., the Board, Directors, Supervisors, senior management, controlling shareholders or de facto controllers of Sinopec Corp. were under investigation by the CSRC or received any regulatory sanction or criticised publicly by the CSRC, the Hong Kong Securities and Futures Commission, the Securities and Exchange Commission of the United States, or received any public censure from Shanghai Stock Exchange, the Hong Kong Stock Exchange, the New York Stock Exchange or the London Stock Exchange.

 

2 GENERAL MEETINGS

During the reporting period, Sinopec Corp. convened the First Extraordinary General Meeting for the year 2020 on 25 March 2020 in Beijing, China,Annual General Meeting for the year 2019 on 19 May 2020 in Beijing, China, and the Second Extraordinary General Meeting for the year 2020 on 28 September 2020 in Beijing, China in accordance with the required procedures of noticing, convening and holding pursuant to the relevant laws and regulations and the Articles of Association. For meeting details, please refer to the poll results announcements published on China Securities Journal, Shanghai Securities News, Securities Times and the website of Shanghai Stock Exchange dated 26 March 2020, 20 May 2020 and 29 September 2020 respectively, as well as on the website of Hong Kong Stock Exchange dated 25 March 2020, 19 May 2020 and 28 September 2020 respectively.

 

3    EQUITY INTERESTS OF DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT

As of December 31, 2020, Mr. Ling Yiqun, Director, Senior Vice President, held 13,000 A shares of Sinopec Corp., and Mr. Li Defang, Supervisor, held 40,000 A shares of Sinopec Corp. (the actual holder of the said shares is the spouse of Mr. Li Defang).

 

Save as disclosed above, during the reporting period, none of the Directors, Supervisors and senior management of Sinopec Corp. and their respective associates had any interests or short positions (including any interest or short position that is regarded or treated as being held in accordance with the SFO) in the shares, debentures and underlying shares of Sinopec Corp. or any associated corporations (as defined in Part XV of SFO) that would fall to be disclosed to the Sinopec Corp. and the Hong Kong Stock Exchange under the Division 7 and 8 of Part XV of SFO or which was recorded in the register required to be kept under section 352 of SFO or otherwise should notified Sinopec Corp. or the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under the Hong Kong Listing Rules.

 

4 PERFORMANCE OF THE INDEPENDENT DIRECTORS

During the reporting period, the Independent Non-executive Directors of Sinopec Corp. fulfilled their duties diligently as required by Terms of Reference of the Independent Non-executive Directors of the Company, and actively contributed to the reform and development of the Company. They actively attended Board meetings and meetings of the Board Committees (please refer to the section "Report of the Board of Directors" in this annual report for details of their attendance), reviewed the relevant documents with due care. They exercised their profession advantages to promote scientific decision-making by offering advice and suggestions to company's "14th Five-Year" development plan and decision-making on significant events, investigating on-site the business operations of the Company and its subsidiaries, and providing advice for the Company's development strategy, operations and reform. The Independent Non-executive Directors maintained timely and effective communication with the management, external auditors and internal audit department, put forward detailed requirements on auditing, and gave their independent opinions on matters such as connected transactions, special dividend distribution plan, and protected the legitimate interests of the minority shareholders' interests.

 

Pursuant to requirements of securities regulatory authority of China, Independent Non-executive Directors of Sinopec Corp. reviewed the performance of the senior management of Sinopec Corp. who held concurrent positions as senior management in China Petrochemical Corporation and published independent opinions as follows: "President Mr. Ma Yongsheng, Senior Vice President Mr. Yu Baocai, Mr. Liu Hongbin and Mr. Ling Yiqun, each of whom concurrently held position as senior management of China Petrochemical Corporation, have obtained the exemptions for holding concurrent position from CSRC. During the reporting period, Mr. Ma Yongsheng, Mr. Yu Baocai, Mr. Liu Hongbin and Mr. Ling Yiqun devoted sufficient time and energy to fulfilling their duties with diligence and due care. They protected the interests of the Company and minority shareholders effectively and didn't harm the legitimate interests of Sinopec Corp. and minority shareholders due to holding concurrent positions in China Petrochemical Corporation."

 

5    COMPANY'S INDEPENDENCE FROM CONTROLLING SHAREHOLDER

The Company is independent from its controlling shareholder in terms of, among other matters, business, assets and finances. The Company has a well-integrated independent business and independent operational capabilities.

 

6    COMPETITION BETWEEN SINOPEC CORP AND ITS CONTROLLING SHAREHOLDER

Please refer to "Performance of the Undertakings by China Petrochemical Corporation" under the section "Significant Events" in this annual report for details.

 

7    IMPROVEMENT AND IMPLEMENTATION OF THE INTERNAL CONTROL SYSTEM

For details of internal control self-assessment and internal control auditing, please refer to the internal control assessment report and the internal control auditing report disclosed by the Company on the same date of this annual report.

 

8    SENIOR MANAGEMENT APPRAISAL AND INCENTIVE SCHEMES

Sinopec Corp. has established and is continuously improving the fairness and transparency of its performance appraisal standards, incentive schemes and requirements for Directors, Supervisors and other senior management. Sinopec Corp. has implemented a number of incentive policies, including the Measures of Sinopec Corp. on the Implementation of Remuneration for Senior Managers and the Measures of Sinopec Corp. on the Management of Performance Evaluation.

 

9    CORPORATE GOVERNANCE REPORT (IN ACCORDANCE WITH HONG KONG LISTING RULES)

 

(1)  Compliance with the Corporate Governance Code

Sinopec Corp. complied with all code provisions set out in the Corporate Governance Code during the reporting period.

 

A   Board of Directors

 

A.1  Board of Directors

 

a.   The Board is the decision-making body of Sinopec Corp. and abides by good corporate governance practices and procedures. All decisions made by the Board are implemented by the Management of Sinopec Corp.

 

b.   The meeting of the Board of the Company is held at least once a quarter. The Board will usually communicate the time and proposals of the Board meeting 14 days before convening of the meeting. The relevant documents and materials for Board meetings are usually delivered to each Director 10 days in advance. In 2020, Sinopec Corp. held eleven Board meetings. For details about each Director's attendance at the Board meetings and the general meetings, please refer to the section "Report of the Board of Directors" in this annual report.

 

c.   Each Director of the Board can submit proposals to be included in the agenda of Board meetings, and each Director is entitled to request other related information.

 

d.   The Board has reviewed and evaluated its performance in 2020 and is of the view that the Board made decisions in compliance with domestic and overseas regulatory authorities' requirements and the Company's internal rules; that the Board has considered the suggestions from the Party organisation, Board of Supervisors and management during its decision-making process; and that the Board safeguarded the legitimate rights and interests of Sinopec Corp. and its shareholders.

 

e.   The Secretary to the Board assists the Directors in handling the day-to-day work of the Board, continuously informs the Directors of the regulations, policies or other requirements of domestic or overseas regulatory authorities in relation to corporate governance and ensures that the Directors comply with domestic and overseas laws and regulations when performing their duties and responsibilities. Sinopec Corp. has purchased liability insurance for all Directors to minimise their risks that might incur from the performance of their duties.

 

A.2  Chairman and President

 

a.   Mr. Zhang Yuzhuo serves as Chairman of the Board and Mr. Ma Yongsheng serves as President of Sinopec Corp. The Chairman of the Board is elected by a majority vote of all Directors, and the President is nominated and appointed by the Board. The main duties and responsibilities of the Chairman and the President are clearly distinguished from each other, and the scope of their respective duties and responsibilities are set out in the Articles of Association.

 

b.   The Chairman of the Board places great emphasis on communication with the Independent Non-executive Directors. The Chairman independently held three meetings with the Independent Non-executive Directors in respect of development strategy, corporate governance and operational management, etc.

 

c.   The Chairman encourages open and active discussions. Directors fully and deeply participated in the discussions of significant decisions in the Board meetings.

 

A.3  Board composition

a.   The Board of Directors currently consists of nine members, four Executive Directors and five Non-executive Directors. Among the Non-executive Directors, there are three Independent Non-executive Directors, accounting for one third of the total number of Directors. For details, please refer to the section "Directors, Supervisors, Senior Management and Employees" of this annual report.

b.   Sinopec Corp. has received from each of the Independent Non-executive Directors a letter of confirmation for 2020 regarding their compliance with relevant independence requirements set out in Rule 3.13 of the Hong Kong Listing Rules. Sinopec Corp. considers that each of the Independent Non-executive Directors is independent.

 

A.4  Appointment, re-election and dismissal

a.   The Directors serve three-year terms, and the consecutive term of office of an Independent Non-executive Director cannot exceed six years. During the reporting period, Mr. Zhang Yuzhuo and Mr. Liu Hongbin, nominated by the Board of Directors, and Mr. Zhang Shaofeng, nominated by China Petrochemical Corporation, were elected by the general meeting of shareholders as Directors of the Company. For details about the tenure of each Director, please refer to the section "Directors, Supervisors, Senior Management and Employees".

 

b.   All Directors of Sinopec Corp. have been elected at the general meeting of shareholders. The Board has no power to appoint temporary Directors.

 

c.   Sinopec Corp. engages professional consultants to prepare detailed materials for newly elected Directors, to notify them of the regulations of each listing place of Sinopec Corp. and to remind them of their rights, responsibilities and obligations as Directors.

 

A.5  Nomination Committee

a.   The Board of Directors established Nomination Committee, consisting of the Chairman of the Board, Mr. Zhang Yuzhuo, who serves as the Chairman, and Independent Non-executive Directors Mr. Tang Min and Mr. Ng, Kar Ling Johnny, who serve as members. The major responsibilities of Nomination Committee are to provide suggestions to the Board on Board's size and composition, as well as the selecting standards, procedures and candidates for Directors and senior management. Procedures to Propose a Person for Election as a Director of Sinopec Corp. are published on Sinopec Corp.'s website at http://www.sinopec.com.

 

b.   The Board establishes the Board Diversity Policy which stipulates that the members of the Board shall be nominated and appointed based on the skills and experience for the overall optimum operation of the Board, while taking into account the targets and requirements of the board diversity. When deciding the composition of the Board, Sinopec Corp. shall consider several factors in relation to the diversity of the Board, including but not limited to professional experience, skills, knowledge, length of service, regions, cultural and educational backgrounds, gender and age. The provisions of the Articles of Association concerning the term of office of directors help to ensure that the Board of Directors has a proper balance between continuous experience and new thinking, and enhance the level of diversity. Sinopec Corp. focuses on the implementation of the Board Diversity Policy. The Directors come from different industries at home and abroad with rich work experience. Professional backgrounds of Directors include petroleum and petrochemical corporate management, as well as economics, accounting and finance, which are conductive to scientific decision-making.

 

c.   The members of the Nomination Committee can engage professionals when performing their duties. Reasonable costs arising from such consultations are borne by Sinopec Corp. In the meantime, the Nomination Committee has also appointed consultant members and can require such member to provide advice. The working expenses of the Remuneration Committee are included in the budget of Sinopec Corp.

 

d.   During the reporting period, the Nomination Committee held five meetings (please refer to "Meetings Held by the Board Committees" under the section of "Report of the Board of Directors" in this annual report).

 

A.6  Responsibility of Directors

a.   All Non-executive Directors have the same duties and powers as the Executive Directors. In addition, the Independent Non-executive Directors are entitled to certain specific powers. The Articles of Association and the Rules of Procedure of Board Meetings clearly prescribe the duties and powers of Directors, Non-executive Directors including Independent Non-executive Directors, which are published on the Sinopec Corp.'s website at http://www.sinopec.com.

 

b.   Each of the Directors was able to devote sufficient time and efforts to handling the matters of Sinopec Corp.

 

c.   Each of the Directors confirmed that he has complied with the Model Code for Securities Transactions by Directors of Listed Issuers during the reporting period. In addition, Sinopec Corp. formulated the Rules Governing Shares Held by Company Directors, Supervisors and Senior Managers and Changes in Shares and the Model Code of Securities Transactions by Company Employees to regulate the purchase and sale of Sinopec Corp.'s securities by relevant personnel.

 

d.   Sinopec Corp. organised and arranged training sessions for Directors and paid the relevant fees as well as making relevant records. During the reporting period, the Directors actively participated in the trainings and attached great importance to continuing professional development to ensure that their contribution to the Board remains informed and relevant.

 

A.7  Provision and use of information

a.   The agenda and other reference documents for meetings of the Board and Board committees will be distributed prior to the meetings to give each Director sufficient time to review the materials so that Directors can make informed decisions.

 

b.   Each Director can obtain all related information in a comprehensive and timely manner. The Secretary of the Board is responsible for organising and preparing the materials for the Board meetings, including preparation of explanations for each proposal to ensure fully understanding by the Directors. The Management is responsible for providing the Directors with necessary information and materials. The Directors may require the Management, or require, via the Management, relevant departments to provide necessary information or explanations. The Directors may seek advices from professional consultants when necessary.

 

B   Remuneration and Appraisal Committee

a.   Remuneration and Appraisal Committee ("Remuneration Committee") consists of Independent Non-executive Director Mr. Tang Min, who serves as the Chairman, and Executive Director Mr. Ma Yongsheng and Independent Non-executive Director Mr. Ng, Kar Ling Johnny, who serve as the members of the Remuneration Committee. The Remuneration Committee is responsible for reviewing the implementation of the annual remuneration plans for Directors, Supervisors and other senior management as approved at the general meeting of the shareholders, and reporting to the Board.

 

b.   The Remuneration Committee always consults the Chairman of the Board and the President about the remuneration plans for other Executive Directors. After the Remuneration Committee's review, it is of the view that all the Executive Directors of Sinopec Corp. have fulfilled the duty clauses in their service contracts in 2020.

c.   The members of the Remuneration Committee can engage independent professionals when performing its duties. Reasonable costs arising from such consultations are borne by Sinopec Corp. In the meantime, the Remuneration Committee has also appointed consultants member and can require such member to provide advices. The working expenses of the Remuneration Committee are included in the budget of Sinopec Corp. According to the policies of Sinopec Corp., the senior management and relevant departments of Sinopec Corp. must actively cooperate with the Remuneration Committee.

d.   During the reporting period, the Remuneration Committee held one meeting (please refer to "Meetings Held by the Board Committees" under the section of "Report of the Board of Directors" in this annual report).

 

C   Accountability and Auditing

 

C.1  Financial reporting

a.   Directors are responsible for supervising the preparation of accounts for each fiscal period to ensure that the accounts truly and fairly reflect the condition of the business, the performance and the cash flow of the Company during the period. The Board approved the Financial Report for 2020 and warranted that the annual report contained no false representations, no material omissions or misleading statements and jointly and severally accepted full responsibility for the authenticity, accuracy and completeness of the content.

b.   Sinopec Corp. provides Directors with information about the financial, production and operating data of the Company every month to ensure that the Directors can learn about the latest developments of the Company in a timely manner.

 

c.   Sinopec Corp. has adopted an internal control mechanism to ensure that the Management and relevant departments have provided the Board and the Audit Committee with sufficient financial data and related explanations and materials.

 

d.   The external auditors of Sinopec Corp. made a statement on their reporting responsibilities in the auditor's report contained in the financial report.

C.2  Internal Control and Risk Management

a.   Sinopec Corp. has formulated and implemented its internal control and risk management system. The Board as a decision-making body is responsible for evaluating and reviewing the effectiveness of its internal control and risk management. The Board and the Audit Committee periodically (at least annually) receive reports of the Company regarding internal control and risk management information from the Management. All major internal control and risk management issues are reported to the Board and the Audit Committee. Sinopec Corp. has set up its internal control and risk management department and internal auditing departments, which are equipped with sufficient staff, and these departments periodically (at least twice per year) report to the Audit Committee. The internal control and risk management system of the Company are designed to manage rather than eliminate all the risks of the Company.

 

b.   In terms of internal control, Sinopec Corp. adopted the internal control framework prescribed in the internationally accepted Committee of Sponsoring Organisations of the Treadway Commission Report ("COSO"). Based upon the Articles of Association and the applicable management policies currently in effect, as well as in accordance with relevant domestic and overseas applicable regulations, Sinopec Corp. formulates and continuously improves the Internal Control Manual to achieve internal control of all factors of internal environment, risk assessment, controlling activities, information and communication, and internal supervision. At the same time, Sinopec Corp. has constantly supervised and evaluated its internal control, and conducted comprehensive and multi-level inspections including regular test, enterprise self-examination and auditing check, and included headquarters, branches and subsidiaries into the scope of internal control evaluation, with an internal control evaluation report being produced. The Board annually reviews the internal control evaluation report. For detailed information about the internal control during the reporting period, please refer to the "Report on Internal Control Evaluation" prepared by Sinopec Corp.

 

Sinopec Corp. has formulated and implemented its information disclosure policy and insider registration policy. The Company regularly evaluates the policy implementation and makes disclosure in accordance with relevant regulations. Please refer to the website of Sinopec Corp. (http://www.sinopec.com) for the details of the information disclosure policy.

 

c.   In terms of risk management, Sinopec Corp. adopts the enterprise risk management framework provided by COSO, and establishes its risk management policy and risk management organisation system. The Company annually conducts risk evaluation to identify major and important risks and perform risk management duties. It has designed major and important risks tackling strategies and measures combined with its internal control system and periodically monitors their implementation to ensure adequate care, monitor and tackling of major risks.

 

d.   Based upon the review and evaluation of internal control and risk management of the reporting period, the Board is of the view that the internal control and risk management of the Company are effective.

 

C.3  Audit Committee

a.   The Board has established an Audit Committee. The Audit Committee consists of Independent Non-executive Director Mr. Ng, Kar Ling Johnny, who serves as the Chairman, and Independent Non-executive Director Mr. Tang Min and Independent Non-executive Director Mr. Cai Hongbin, who serve as members. As verified, none of them has served as a partner or a former partner in our current auditing firm.

 

b.   During the reporting period, the Audit Committee held six meetings (please refer to the "Meetings Held by the Board Committees" under the section of "Report of the Board of Directors" in this annual report). The review opinions were issued at each meeting and submitted to the Board. During the reporting period, the Board and the Audit Committee had no disagreement.

 

c.   Audit Committee can engage independent professionals when performing its duties. Reasonable costs arising from such consultations are borne by Sinopec Corp. In the meantime, the Audit Committee has appointed consultants members and can request such member to provide advice. The working expenses of the Audit Committee are included in the budget of Sinopec Corp. In accordance with the policies of Sinopec Corp., the senior management and relevant departments of Sinopec Corp. shall actively cooperate with the Audit Committee.

 

d.   The Audit Committee has reviewed the adequacy and sufficiency of the resources for accounting and financial reporting and the qualifications and experience of the relevant employees as well as the sufficiency of the training courses and the budget thereof. Audit Committee is of the view that the Management has fulfilled the duties to establish an effective internal control system. The Company established a whistle-blowing policy in its internal control system, providing several channels as online reporting, letter reporting, receipt of appeals and a complaint mailbox, etc. to employees to report behavior that violates the internal control system of the Company. The Audit Committee has reviewed and approved such policy.

 

D   Delegation of power by the Board

a.   The Board and the Management have clear duties and responsibilities in written rules. The Articles of Association and the Rules of Procedure for the General Meetings of Shareholders and the Rules of Procedure of the Board Meetings clearly set forth the scope of duties, powers and delegation of power of the Board and Management, which are published on the website of Sinopec Corp. at http://www.sinopec.com.

 

b.   In addition to the Audit Committee, the Remuneration Committee and Nomination Committee, the Board had established the Strategy Committee and the Social Responsibility Management Committee. The Strategy Committee is responsible for overseeing long-term development strategies and significant investment decisions of the Company. The seventh Session of Strategy Committee consists of four Directors, including Chairman of the Board Mr. Zhang Yuzhuo, who serves as Chairman, as well as Executive Directors Mr. Ma Yongsheng, Mr. Ling Yiqun and Independent Non-executive Director Mr. Cai Hongbin, who serve as members. The Social Responsibility Management is responsible for preparing policies, governance, strategies and plans for social responsibility management of the Company. The Social Responsibility Management Committee consists of three Directors, including Chairman of the Board Mr. Zhang Yuzhuo, who serves as Chairman, Independent Non-executive Directors Mr. Tang Min and Mr. Cai Hongbin, who serve as members.

 

c.   Each Board Committee is required to report its decisions and recommendations to the Board and has formulated its terms of references. The Terms of Reference of the Audit Committee, The Tterms of Rreference of the Remuneration Committee and The Terms of Reference of theNomination Committee are published on the website of Sinopec Corp. at
http://www.sinopec.com.

 

E   Investor Relations

a.   Sinopec Corp. pays high attention to investor relations. The Management attends road shows every year to answer questions on subjects of concern to investors, such as introducing the development strategies and the production and business performance of the Company. Sinopec Corp. establishes a department responsible for communicating with investors. In compliance with regulatory provisions, Sinopec Corp. enhances communication with investors by holding meetings with institutional investors, setting up an investor hotline and communicating through internet platform.

b.   During the reporting period, separate resolution was proposed for each substantially separate issue at the general meeting of shareholders. All resolutions were voted by poll to ensure the interests of all shareholders. Notices of the general meeting were dispatched to shareholders 45 days (excluding the date of the general meeting) in advance.

c.   The Chairman of the Board hosted the annual general meeting for the year 2019 and the Second Extraordinary General Meeting for the year 2020. Some members of the Board of Directors and Board of Supervisors and senior management attended the meeting and communicated deeply with the investors.

d.   According to relevant rules of Sinopec Corp., the Secretary to the Board is responsible for establishing an effective communication channel between Sinopec Corp. and its shareholders, for setting up special departments to communicate with the shareholders and for passing the opinions and proposals of the shareholders to the Board and Management in a timely manner. Contact details of Sinopec Corp. can be found on the "Investor Center" section on Sinopec Corp's website.

F    Company Secretary

a.   The Hong Kong Stock Exchange recognised the Secretary to the Board as having the relevant qualifications as company Secretary. Nominated by the Chairman of the Board and appointed by the Board, the Secretary to the Board is a senior management officer of Sinopec Corp. and responsible for the Company and the Board. The Secretary gives opinions on corporate governance to the Board and arranges orientation training and professional development for the Directors.

b.   During the reporting period, the Secretary to the Board actively participated in career development training with more than 15 training hours.

G   Shareholders' Rights

a.   Shareholders who individually or collectively hold 10% of the total voting shares of Sinopec Corp. may request the Board in writing to convene the general meeting of shareholders. If the Board fails to approve the request to convene the meeting according to the Rules of Procedure for General Meetings of Shareholders, the shareholders may convene and hold the meeting at their discretion according to applicable laws, and reasonable expenses incurred will be borne by Sinopec Corp. These aforementioned provisions are subject to the following conditions: the proposals at the general meeting of shareholders must fall within the responsibilities of the general meeting of shareholders, with specific proposals and resolutions and in compliance with relevant laws, administrative regulations and the Articles of Association.

b.   When Sinopec Corp. holds the general meeting of shareholders, shareholders who individually or collectively hold 3% of the total voting shares of Sinopec Corp. may propose a supplemental proposal 10 days before the date of the general meeting.

 

c.   The eligibility for attending the general meeting, the rights of shareholders, the resolutions at the meeting and the voting procedures are clearly stated in the notice of the general meeting of shareholders of Sinopec Corp. dispatched to the shareholders.

 

d.   Sinopec Corp. establishes special organisation in charge of communication with shareholders and publishes relevant contact details to facilitate shareholders to make enquiries pursuant to Articles of Association.

 

(2)  Auditors

The appointment of PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers as Sinopec Corp.'s external auditors for 2020 and the authorisation of the Board to determine their remuneration were approved at Sinopec Corp.'s Annual General Meeting for the Year 2019 on 19 May 2020. The audit fee for 2020 is RMB 47.38 million (including audit fee of internal control), which was approved at the 21st Meeting of the Seventh Session of the Board. The annual financial statements of the year ended 31 December 2020 have been audited by PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers. The Chinese certified accountants signing the report are Zhao Jianrong and Hu Yang from PricewaterhouseCoopers Zhong Tian LLP.

 

During the reporting period, neither PricewaterhouseCoopers Zhong Tian LLP nor PricewaterhouseCoopers provided any non-audit service to the Company.

 

As PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers have served as external auditors of the Company for eight consecutive years, the Company is required to replace its external auditors in 2021 according to the regulations in China. The 15th Meeting of the Audit Committee of the seventh Session of Board of Directors and the 21st Meeting of the seventh Session of Board of Directors of Sinopec Corp. have decided to appoint KPMG Huazhen Certified Public Accountants as the external auditors of the Company in 2021. The matter has yet to be submitted to the Company's 2020 Annual General Meeting of Shareholders for consideration.

 

(3)  Other information about Sinopec Corp.'s corporate governance

Except for their working relationships with Sinopec Corp., none of the Directors, Supervisors or other senior management has any financial, business or family relationship or any relationship in other material aspects with one another. For information about shareholdings of substantial shareholders and changes in share capital, please refer to page 6 to page 7; for information about meetings of the Board, please refer to page 46; for information about meetings held by Board Committees, please refer to page 48; for information about tenure of Non-executive Directors, please refer to page 60; for information about equity interests of Directors, Supervisors and other senior management, please refer to page 39; for information about the biographies and annual remuneration of Directors, Supervisors and other senior management, please refer to page 56 to page 70.

 

 

REPORT OF THE BOARD OF DIRECTORS

 

The Board is pleased to present the Directors' report for the year ended 31 December 2020 for shareholders' review.

 

1    MEETINGS OF THE BOARD

During this reporting period, Sinopec Corp. held eleven Board meetings. The details are as follows:

(1)  The 9th meeting of the seventh session of the Board was held by written resolution on 13 January 2020, whereby the proposals in relation to the following matters were approved: (i) the appointment of Chief Financial Officer, (ii) the representative on securities matters.

 

(2)  The 10th meeting of the seventh session of the Board was held by written resolution on 7 February 2020, whereby the proposals in relation to the following matters were approved: (i) nomination of candidates for Directors; (ii) Notice of 2020 First Extraordinary General Meeting.

 

(3)  The 11th meeting of the seventh session of the Board was held by written resolution on 25 March 2020, whereby the proposals in relation to the following matters were approved: (i) the election of the Chairman of the Board, the member adjustment of Board committees; (ii) the appointment of Senior Vice President.

 

(4)  The 12th meeting of the seventh session of the Board was held by on-site meeting and via video conference on 27 March 2020, whereby the proposals in relation to the following matters were approved: (i) the Work Report of the Board for the year 2019; (ii) the completion of key targets of 2019 and work arrangements of 2020; (iii) financial results and business performance of the Company for the year 2019; (iv) provision for impairment for the year 2019; (v) the connected transactions for the year 2019; (vi) profit distribution plan for the year 2019; (vii) audit costs for the year 2019; (viii) re-appointment of external auditors of Sinopec Corp. for the year of 2020 and to authorise the Board to determine their remunerations; (ix) to authorize the Board to determine the interim profit distribution plan of Sinopec Corp. for the year 2020; (x) to authorize the Board to determine the proposed plan for issuance of debt financing instrument(s); (xi) the report of Risk Assessment for Capital Deposits at Finance Company and Century Bright Company; (xii) Internal control assessment report of Sinopec Corp. for the year 2019; (xiii) Financial Statements of Sinopec Corp. for the year 2019; (xiv) Annual Report of the Company for the year 2019; (xv) Form 20F of the Company for the year 2019; (xvi) 2019 Communication on Progress on Sustainable Development Report of Sinopec Corp.; (xvii) the proposal to the annual general meeting to grant to the Board a general mandate to issue new domestic shares and/or overseas-listed foreign shares of Sinopec Corp.

 

(5)  The 13th meeting of the seventh session of the Board was held by written resolution on 14 April 2020, whereby the proposal on external guarantees in Project AMUR was approved.

 

(6) The 14th meeting of the seventh session of the Board was held by written resolution on 29 April 2020, whereby the proposals in relation to the following matters were approved: (i) the first quarterly results of the Company for the three months ended 31 March 2020; (ii) Reorganisation and integration of assets of ZhongKe Refining and Zhanjiang Dongxing.

 

(7)  The 15th meeting of the seventh session of the Board was held by written resolution on 23 July 2020, whereby the proposals in relation to the following matters were approved: (i) Disposal of Oil and Gas Pipelines and Related Assets; (ii) the appointment of Vice President of Sinopec Corp.

 

(8)  The 16th meeting of the seventh session of the Board was held by on-site meeting and via video conference on 28 August 2020, whereby the proposals in relation to the following matters were approved: (i) the report on the fulfillment of the key targets for the first half of the year 2020 and the work arrangements for the second half of the year 2020; (ii) the 2020 interim special dividend distribution plan; (iii) the report of Risk Assessment for Capital Deposits at Finance Company and Century Bright Company; (iv) the adjustment of the 2020 investment plan; (v) the financial statements for the first half of the year 2020 reviewed by PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers; (vi) interim report for the six months ended 30 June 2020; (vii) the member adjustment of Board committees.

 

(9)  The 17th meeting of the seventh session of the Board was held by written resolution on 11 September 2020, whereby the proposals in relation to the following matters were approved: (i) the appointment of Senior Vice President of Sinopec Corp.; (ii) the nomination of candidate for Director.

 

(10)  The 18th meeting of the seventh session of the Board was held by written resolution on 28 October 2020, whereby the proposals in relation to the following matters were approved: (i) the third quarterly report for three months ended 30 September 2020; (ii) reorganisation of assets in respect of Baling Petrochemical.

 

(11)  The 19th meeting of the seventh session of the Board was held by written resolution on 4 December 2020, whereby the proposal in relation to investment and construction of Tianjin Nangang 1.2 million tonnes/year ethylene and downstream high-end new materials project was approved.

 

For details of each meeting, please refer to the announcements published on China Securities Journal, Shanghai Securities News and Securities Times after each meeting and on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and Sinopec Corp.

 

2    IMPLEMENTATION OF RESOLUTIONS APPROVED AT THE GENERAL MEETINGS OF SHAREHOLDERS BY THE BOARD

During this reporting period, in accordance with relevant laws and regulations as well as the Articles of Association, all members of the Board diligently implemented the resolutions approved at the general meetings of Sinopec Corp., and had completed all the tasks delegated to them at the general meetings.

 

3    DIRECTORS' ATTENDANCE TO THE BOARD MEETINGS AND INDEPENDENT DIRECTORS' ATTENDENCE TO THE GENERAL MEETINGS.

 

(1)  Directors of the seventh session of Board of Directors ' attendance to the board meetings and general meetings during this reporting period

 

Director titles

Name

Board meeting

General meeting

 

 

No. of

meetings held

Actual

attendance

Meetings

attended by

communication

Attended

by proxy

Absent

No.of

meetings held

Actual

attendance

Chairman

Zhang Yuzhuo

9

2

7

0

0

2

2

Director

Ma Yongsheng

11

2

9

0

0

3

3

Director

Yu Baocai

11

1

9

1

0

3

2

Director

Liu Hongbin

5

1

4

0

0

1

1

Director

Ling Yiqun

11

1

9

1

0

3

1

Director

Zhang Shaofeng

2

0

2

0

0

0

0

Independent Director

Tang Min

11

2

9

0

0

3

0

Independent Director

Cai Hongbin

11

2

9

0

0

3

0

Independent Director

Ng, Kar Ling Johnny

11

2

9

0

0

3

0

 

(2)  Former Directors of the seventh Session of Board of Directors' attendance to the board meetings and the general meetings during this reporting period

 

Director titles

Name

Board meetings

General meeting

 

 

No. of

meetings held

Actual

attendance

Meetings

attended by

communication

Attended

by proxy

Absent

No. of

meetings held

Actual

attendance

Former Chairman

Dai Houliang

1

0

1

0

0

0

0

Former Director

Li Yunpeng

2

0

2

0

0

0

0

Former Director

Li Yong

9

2

7

0

0

2

0

Former Independent Director

Fan Gang

7

1

6

0

0

2

0

 

Note 1: No Directors were absent from two consecutive meetings of the Board.

Note 2: Mr. Dai Houliang resigned as the Chairman, Director of the Board on 19 January 2020.

Note 3: Mr. Li Yunpeng resigned as a Director of the Board on 24 March 2020.

Note 4: Mr. Fan Gang resigned as an Independent Non-executive Director of the Board on 28 August 2020.

Note 5: Mr. Li Yong resigned as a Director of the Board on 22 September 2020.

 

(3)  The Independent Director's attendance to the General Meetings.

 

During the reporting period, none of the Independent Non-executive Directors had attended the general meetings of shareholders in person due to pandemic or official duties.

 

4    MEETINGS HELD BY THE BOARD COMMITTEES

During the reporting period, the board committees held sixteen meetings, Audit Committee held six meetings, the Strategy Committee held three meetings, the Remuneration and Appraisal Committee held one meeting, the Social Responsibility Management Committee held one meeting, and the Nomination Committee held five meetings. All members of each committee had attended the relevant meetings. Details of those meetings are as follows:

 

(1)  The eighth meeting of the seventh session of the Audit Committee was held by on-site meeting and via video conference on 25 March 2020, whereby the proposals in relation to the following matters were approved: (i) Annual Report of the Company for the year 2019 and Form 20F of the Company for the year 2019; (ii) Financial results and business performance of the Company for the year 2019 (including a. provision for impairment for the year 2019; b. The continuing connected transactions for the year 2019; c. Profit appropriation plan for the year 2019; d. Audit costs for the year 2019; e. the report of Risk Assessment for Capital Deposits at Finance Company and Century Bright Company); (iii) Internal control assessment report of Sinopec Corp. for the year 2019; (iv) Report on audit work in 2019 and audit work arrangement in 2020. Reports on the auditing work of the financial statements for the year 2019 prepared by the domestic and overseas auditors were also reviewed at the meeting.

 

(2)  The ninth meeting of the seventh session of the Audit Committee was held by written resolutions on 28 April 2020, whereby the proposals in relation to the following matters were approved: (i) the first quarterly report of the Company for the three months ended 31 March 2020; (ii)Reorganisation and Integration of assets of ZhongKe Refining and Zhanjiang Dongxing.

 

(3)  The tenth meeting of the seventh session of the Audit Committee was held by written resolutions on 22 July 2020, whereby the Proposal in relation to Sale of Oil and Gas Pipelines and Related Assets was approved.

 

(4)  The eleventh meeting of the seventh session of the Audit Committee was held by on-site meeting and via video conference on 26 August 2020, whereby the proposals in relation to the following matters were approved: (i) the interim financial statements for the first half of the year 2020; (ii) interim report for the six months ended 30 June 2020; (iii) the report on the business performance, financial statements and related matters for the first half of the year 2020 (including: a. the 2020 interim special dividend appropriation plan, b. the report of Risk Assessment for Capital Deposits at Finance Company and Century Bright Company); (iv) Report on the main audit work in the first half of 2020 and the overall arrangement of audit work in the second half of 2020.

 

(5)  The twelfth meeting of the seventh session of the Audit Committee was held by written resolutions on 28 October 2020, whereby the proposals in relation to the following matters were approved: (i) the third quarterly report of the Company for the three months ended 30 September 2020; (ii) reorgnisation of assets in respect of Baling Petrochemical.

 

(6)  The thirteenth meeting of the seventh session of the Audit Committee was held by on-site meeting and via video conference on 2 November 2020, whereby the proposal in relation to recruitment of accounting firms in 2021 was approved.

 

(7)  The fourth meeting of the seventh session of the Strategy Committee was held by written resolution on 25 March 2020, whereby the proposal in relation to the plan of investments of 2020 of Sinopec Corp. was approved.

 

(8)  The fifth meeting of the seventh session of the Strategy Committee was held by written resolution on 14 April 2020, whereby the proposal in relation to Project AMUR was approved.

 

(9)  The sixth meeting of the seventh session of the Strategy Committee was held by written resolution on 26 August 2020, whereby the proposal in relation to the adjustment of the 2020 investment plan was approved.

 

(10)  The second meeting of the seventh session of the Remuneration and Appraisal Committee was held by written resolution on 25 March 2020 whereby the proposal in relation to the implementation of the rules of the remuneration of Directors, Supervisors and other senior management for 2019 was approved.

 

(11)  The second meeting of the seventh session of the Social Responsibility Management Committee was held by written resolution on 25 March 2020, whereby the proposal in relation to 2019 Communication on Progress on Sustainable Development Report of Sinopec Corp. was approved.

 

(12)  The third meeting of the seventh session of the Nomination Committee was held by written resolution on 10 January 2020, whereby the proposal in relation to the appointment of Chief Financial Officer was approved.

 

(13)  The fourth meeting of the seventh session of the Nomination Committee was held by written resolution on 6 February 2020, whereby the proposal in relation to the nomination of candidates for Director was approved.

 

(14)  The fifth meeting of the seventh session of the Nomination Committee was held by written resolution on 25 March 2020, whereby the proposals in relation to the nomination of candidates for Director and the appointment of Senior Vice President were approved.

 

(15)  The sixth meeting of the seventh session of the Nomination Committee was held by written resolution on 22 July 2020, whereby the proposal in relation to the appointment of Vice President of Sinopec Corp. was approved.

 

(16)  The seventh meeting of the seventh session of the Nomination Committee was held by written resolution on 10 September 2020, whereby the proposal in relation to the appointment of Senior Vice President was approved.

 

5    BOARD COMMITTEES ISSUED REVIEW OPINIONS TO THE BOARD WHEN PERFORMING THEIR DUTIES DURING THE REPORTING PERIOD, WITHOUT OBJECTION.

 

6    BUSINESS PERFORMANCE

The financial results of the Company for the year ended 31 December 2020, which is prepared in accordance with IFRS and the financial position as at that date and the accompanying analysis are set out from page 141 to page 199 in this annual report. A fair review of the Company's business, a discussions and analysis on business performance using financial key performance indicators and the material factors underlying our results and financial position during the reporting period, particulars of significant events affecting the Company and the outlook of the Company's business are discussed throughout this annual report and included in the chapters of Chairman's Address, Business Review and Prospects, Management's Discussion and Analysis and Significant Events. All above discussions constitute parts of the report of the Board of Directors.

 

7    DIVIDEND

The profit distribution policy of Sinopec Corp. maintains consistency and steadiness, and considers the long-term interests of the Company, overall interests of all the shareholders and the sustainable development of the Company. Sinopec Corp. gives priority to adopting cash dividends for profit distribution, and is able to deliver an interim profit distribution. When the net profits and retained earnings of the Company are positive in current year, and in the event that the cash flow of Sinopec Corp. can satisfy the normal operation and sustainable development, Sinopec Corp. should adopt cash dividends, and the distribution profits in cash every year are no less than 30% of the net profits of the Company realised during the corresponding year.

 

The profit distribution plan of Sinopec Corp. for the corresponding year will be carried out in accordance with the policy and procedures stipulated in the Articles of Association, with the advice of minority shareholders being heard and considered. Meanwhile, the independent Directors will issue independent opinions.

 

Proposals for dividend distribution

At the 21st meeting of the seventh session of the Board, the Board approved the proposal to distribute a final cash dividend of RMB 0.13 (tax inclusive) per share for 2020. Taking into account the distributed special interim dividend of RMB 0.07 (tax inclusive) per share for the first half of 2020, the total dividend for the whole year is RMB 0.20 (tax included) per share.

 

The final cash dividend will be distributed on or before 28 June 2021 (Monday) to all shareholders whose names appear on the register of members of Sinopec Corp. on the record date of 16 June 2021 (Wednesday). In order to qualify for the final dividend for H shares, the holders of H shares must lodge all share certificates accompanied by the transfer documents with Hong Kong Registrars Limited located at 1712-1716, 17th Floor Hopewell Centre, 183 Queen's Road East, Wan Chai Hong Kong before 4:30 p.m. on 9 June 2021 (Wednesday) for registration. The H shares register and transfer of members of Sinopec Corp. will be closed from 10 June 2021 to 16 June 2021 (both dates inclusive). The dividend will be denominated and declared in RMB, and distributed to the domestic shareholders and investors participating in the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect Program in RMB and to the overseas shareholders in Hong Kong Dollar. The exchange rate for the dividend calculation in Hong Kong Dollar is based on the average benchmark exchange rate of RMB against Hong Kong Dollar as published by the People's Bank of China one week preceding the date of the declaration of such dividend. Arrangements for the distribution of the final dividend of A shares will be announced separately.

 

In accordance with the Enterprise Income Tax Law of the People's Republic of China which came into effect on 1 January 2008 and its implementation regulations, Sinopec Corp. is required to withhold and pay enterprise income tax at the rate of 10% on behalf of the non-resident enterprise shareholders whose names appear on the register of members for H Shares of Sinopec Corp. when distributing cash dividends or issuing bonus shares by way of capitalisation from retained earnings. Any H Shares of the Sinopec Corp. which are not registered under the name of an individual shareholder, including those registered under HKSCC Nominees Limited, other nominees, agents or trustees, or other organisations or groups, shall be deemed as shares held by non-resident enterprise shareholders. Therefore, on this basis, enterprise income tax shall be withheld from dividends payable to such shareholders. If holders of H Shares intend to change their shareholder status, please enquire about the relevant procedures with your agents or trustees. Sinopec Corp. will strictly comply with the law or the requirements of the relevant government authority to withhold and pay enterprise income tax on behalf of the relevant shareholders based on the registration of members for H shares of Sinopec Corp. as at the record date.

 

If the individual holders of the H shares who are Hong Kong or Macau residents or residents of the countries which had an agreed tax rate of 10% for the cash dividends or bonus shares by way of capitalisation from retained earnings with China under the relevant tax agreement, Sinopec Corp. will withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. Should the individual holders of the H Shares are residents of the countries which had an agreed tax rate of less than 10% with China under the relevant tax agreement, Sinopec Corp. shall withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. In that case, if the relevant individual holders of the H Shares wish to reclaim the extra amount withheld (Extra Amount) due to the application of 10% tax rate, Sinopec Corp. would apply for the relevant agreed preferential tax treatment provided that the relevant shareholders submit the evidence required by the notice of the tax agreement to the share register of Sinopec Corp. in a timely manner. Sinopec Corp. will assist with the tax refund after the approval of the competent tax authority. Should the individual holders of the H Shares are residents of the countries which had an agreed tax rate of over 10% but less than 20% with China under the tax agreement, Sinopec Corp. shall withhold and pay the individual income tax at the agreed actual rate in accordance with the relevant tax agreement. In the case that the individual holders of the H Shares are residents of the countries which had an agreed tax rate of 20% with China, or which has not entered into any tax agreement with China, or otherwise, Sinopec Corp. shall withhold and pay the individual income tax at a rate of 20%.

 

Pursuant to the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock Connect (《關於滬港股票市場交易互聯互通機制試點有關稅收政策的通知》) (Caishui [2014] No. 81) and the Notice on the Tax Policies Related to the Pilot Program of the Shenzhen-Hong Kong Stock Connect (《關於深港股票市場交易互聯互通機制試點有關稅收政策的通知》) (Caishui[2016] No.127):

 

For domestic investors investing in the H Shares of Sinopec Corp. through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect Program, the Company shall withhold and pay income tax at the rate of 20% on behalf of individual investors and securities investment funds. The Company will not withhold or pay the income tax of dividends for domestic enterprise investors and those domestic enterprise investors shall report and pay the relevant tax by themselves.

 

For dividends of investors of the Hong Kong Stock Exchange (including enterprises and individuals) investing in the A Shares of Sinopec Corp. through Shanghai-Hong Kong Stock Connect Program, the Company will withhold and pay income taxes at the rate of 10% on behalf of those investors and will report to the competent tax authorities for the withholding. For investors who are tax residents of other countries which have entered into a tax treaty with the PRC stipulating a dividend tax rate of lower than 10%, the enterprises and individuals may, or may entrust a withholding agent to, apply to the competent tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax authorities, the amount paid in excess of the tax payable based on the tax rate according to such tax treaty will be refunded.

 

According to the PRC Accounting Standards, the dividend distribution and bonus shares declared by Sinopec Corp. in the past three years are as follows:

 

 

2020

2019

2018

Cash dividends (RMB/Share, tax inclusive)

0.20

0.31

0.42

Total amount of cash dividends (RMB billion, tax inclusive)

24.214

37.533

50.850

Net profits attributed to the shareholders of the listed company shown in the
 consolidated statement for the dividend year (RMB billion)

32.924

57.619

63.179

Ratio of the dividends to the net profit attributed to the shareholders of
 the listed company in the consolidated statement (%)

73.5

65.1

80.5

 

Note: The final cash dividend for 2020 is subject to the approval at the 2020 annual general meeting.

 

The aggregate cash dividend declared by Sinopec Corp. during three years from 2018 to 2020 is RMB 0.93 per share, and the total dividend payment from 2018 to 2020 as a percentage of average net profit attributed to the shareholders of the listed company in the three years is 220%.

 

8    RESPONSIBILITIES FOR THE COMPANY'S INTERNAL CONTROL

The Board is fully responsible for establishing and maintaining the internal control system related to the financial statements as well as ensuring its effective implementation. In 2020, the Board assessed and evaluated the internal control of Sinopec Corp. according to the Basic Standard for Enterprise Internal Control, Application Guidelines for Enterprise Internal Control and Assessment Guidelines for Enterprise Internal Control. There were no material defects in relation to the internal control system as of 31 December 2020. The internal control system of Sinopec Corp. related to the financial statements is sound and effective.

 

2020 Internal Control Assessment Report of Sinopec Corp. was reviewed and approved at the 21st meeting of the seventh Session of the Board on 26 March 2021, and all members of the Board warrant that the contents of the report are true, accurate and complete, and there are no false representations, misleading statements or material omissions contained in the report.

 

9    DURING THIS REPORTING PERIOD, THE IMPLEMTATION OF ENVIRONMENTAL POLICIES BY THE COMPANY

During the reporting period, the Company complied with the environmental policy in all material aspects. Details with regard to the Company's performance in relation to environmental and social-related policies and performances are provided in the Chairman's Address and Business Review and Prospects in this annual report as well as the 2020 Communication on Progress for the Sustainable Development of Sinopec Corp. Those disclosures in relation to the environmental policies constitute part of the Report of the Board of Directors.

 

10  DURING THIS REPORTING PERIOD, THE COMPANY DID NOT VIOLATE LAWS OR REGULATIONS WHICH HAVE A MATERIAL IMPACT ON THE COMPANY

 

11  MAJOR SUPPLIERS AND CUSTOMERS

During this reporting period, the total value of the purchasing from the top five crude oil suppliers of the Company accounted for 45.2% of the total value of the crude oil purchasing by the Company, of which the total value of the purchasing from the largest supplier accounted for 17.2% of the total value of the crude oil purchasing by the Company.

 

The total revenue from the five largest customers of the Company in 2020 was RMB 212,976 million, accounting for 10.1% of the total revenue of the Company, of which the sales value to the connected party and the largest customer (Sinopec Group) among the five largest customers was RMB 105,183 million, accounting for 5.0% of the total revenue for the year.

 

During the reporting period, other than disclosed above, to the best knowledge of the Board of the Directors of the Company, none of the Directors of the Company, their close associates, and shareholders holding more than 5% of the shares of the Company had any interest in the top five suppliers or the top five customers of the Company. There were no suppliers, customers, employees or others that have a significant impact on the Company and on which the Company's success depends.

 

12  BANK LOANS AND OTHER BORROWINGS

Details of bank loans and other borrowings of the Company as of 31 December 2020 are set out in Note 30 to the financial statements prepared in accordance with IFRS in this annual report.

 

13  FIXED ASSETS

During this reporting period, changes to the fixed assets of the Company are set out in Note 17 to the financial statements prepared in accordance with IFRS in this annual report.

 

14  RESERVES

During this reporting period, the changes to the reserves of the Company are set out in the consolidated statement of changes in shareholders' equity in the financial statements prepared in accordance with IFRS in this annual report.

 

15  DONATIONS

During this reporting period, the amount of charity donations made by the Company amounted to RMB 301 million.

 

16  PRE-EMPTIVE RIGHTS

Pursuant to the Articles of Association and the laws of the PRC, the shareholders of Sinopec Corp. are not entitled to any pre-emptive rights. Therefore the existing shareholders cannot request Sinopec Corp. to issue shares to them on a preferential basis in proportion to their shareholdings.

 

17  REPURCHASE, SALES AND REDEMPTION OF SHARES

During this reporting period, neither Sinopec Corp. nor any of its subsidiaries repurchased, sold or redeemed any listed shares of Sinopec Corp. or its subsidiaries.

 

18  DIRECTORS' INTERESTS IN COMPETING BUSINESS

As at the end of the reporting period, the Company has resolved its competition with Sinopec Group in the chemical business. For details for the positions held by the Directors (excluding Independent Non-executive Directors) of Sinopec Corp. in the Sinopec Group during the reporting period, please refer to the section "Directors, Supervisors, Senior Management and Employees" of this annual report.

 

19  DIRECTORS' INTERESTS IN CONTRACTS

No Director had a material interest, either directly or indirectly, in any contract of significance to the business of the Company to which Sinopec Corp. or any of its holding companies, subsidiaries or fellow subsidiaries was a party during the reporting period.

 

20  MANAGEMENT CONTRACTS

No contracts concerning management or administration of the whole or any substantial part of the business of the Company were entered into or existed during the reporting period.

 

21  PERMITTED INDEMNITY PROVISIONS

During the reporting period, Sinopec Corp. has purchased liability insurance for all Directors to minimise their risks arising from the performance of their duties. The permitted indemnity provisions are stipulated in such Directors' liability insurance in respect of the liabilities and costs associated with the potential legal proceedings that may be brought against such Directors.

 

22  EQUITY-LINKED AGREEMENTS

As of 31 December 2020, the Company has not entered into any equity-linked agreement.

 

23  OIL & GAS RESERVE APPRAISAL PRINCIPLES

We manage our reserves estimation through a two-tier management system. Our Oil and Natural Gas Reserves Management Committee, or RMC, at the headquarters level oversees the overall reserves estimation process including organisation, coordination, monitoring and major decision-making, and reviews the reserves estimation of our Company. Each of our branches has a reserves management committee that manages and coordinates the reserves estimation, organises the estimation process and reviews the reserve estimation report at the branch level, being responsible to the RMC of the Company.

 

Our RMC consists of the senior management of the Company, related departments of headquarters, Petroleum Exploration and Production Research Institute of Sinopec (PEPRIS) and senior managers of oilfield branches. Mr. Liu Hongbin, the Chairman of RMC is Senior Vice President of Sinopec Corp., with over 30 years of experience in oil and gas industry. A majority of our RMC members hold master's or Ph.D. degrees, and have an average of more than 20 years of technical experience in relevant professional fields, such as geology, engineering and economics.

 

Our reserves estimates are guided by procedural manuals and technical guidance formulated by the Company. A number of working divisions at the production bureau level, including the exploration, development and financial divisions, are responsible for initial collection and compilation of information about reserves. Experts from exploration, development and economic divisions prepare the initial report on the reserves estimate which is then reviewed by the RMC at the subsidiary level to ensure the qualitative and quantitative compliance with technical guidance as well as its accuracy and reasonableness. We also engage external consultants to assist in our compliance with the rules and regulations of the U.S. Securities and Exchange Commission. Our reserves estimation process is further facilitated by a specialised reserves database, which is improved and updated periodically.

 

24  CORE COMPETITIVENESS ANALYSIS

The Company is a large scale integrated energy and petrochemical company with upstream, mid-stream and downstream operations. The Company is a large scaled oil and gas producer in China; in respect of refining capacity, it ranks first in China; equipped with a well-developed refined oil products sales network, the Company is the largest supplier of refined oil products in China; and in terms of ethylene production capacity, the Company ranks first in China, and has a well-established marketing network for chemical products.

 

The integrated business structure of the Company carries strong advantages in synergy among its various business segments, enabling the Company to continuously tap onto potentials in attaining an efficient and comprehensive utilisation of its resources, and endowed the Company with strong resistance against risks, as well as remarkable capabilities in sustaining profitability.

 

The Company enjoys a favourable positioning with its operations located close to the consumer markets. Along with the steady growth in the Chinese economy, sales volume of both oil products and chemical products of the Company has been increasing steadily over the years; through continuous and specialised marketing efforts, the Company's capability in international operations and market expansion has been further enhanced.

 

The Company owns a team of professionals with expertise in the production of oil and gas, operation of refineries and chemical plants, as well as marketing activities. The Company applies outstanding fine management measures with its remarkable capabilities in management of operations, and enjoys a favourable operational cost advantage in its downstream businesses.

 

The Company has formulated a well-established technology system and mechanism, and owns competent teams specialised in R&D covering a wide range of subjects; the four platforms for technology advancement is taking shape, which includes exploration and development of oil and gas, refining, petrochemicals and strategic emerging technology. With its overall technologies reaching state of the art level in the global arena, and some of them taking the lead globally, the Company enjoys a strong technical strength.

 

The Company always attaches great importance to the fulfilment of social responsibilities, and carries out the green and low carbon development strategy to pursue a sustainable development. Moreover, the Company enjoys an outstanding "Sinopec" brand name, plays an important role in the national economy and is a renowned and reputable company in China.

 

25  RISK FACTORS

In the course of its production and operations, the Company will actively take various measures to circumvent operational risks. However, in practice, it may not be possible to prevent the occurrence of all risks and uncertainties described below.

 

Risks with regard to the variations from macroeconomic situation: The business results of the Company are closely related to China's and global economic situation. The development of Chinese economy has entered New Normal. Impacted by COVID-19, with counter-globalisation emerging, aging population accelerating, climate change and environmental problem restriction etc., world economy recovery remains difficult and tortuous. The Company's business could also be adversely affected by other factors such as the impact on export due to trade protectionism from certain countries, impact on import which is likely caused by regional trade agreements, and negative impact on the investment of overseas oil and gas exploration and development and refining and chemical storage projects which results from the uncertainty of geopolitics, international crude oil price and etc.

 

Risks with regard to the cyclical effects from the industry: The majority of the Company's operating income comes from the sales of refined oil products and petrochemical products, and part of those businesses and their related products are cyclic and are sensitive to macro-economy, cyclic changes of regional and global economy, the changes of the production capacity and output, demand of consumers, prices and supply of the raw materials, as well as prices and supply of the alternative products etc. Although the Company is an integrated company with upstream, midstream and downstream operations, it can only counteract the adverse influences of industry cycle to a certain extent.

 

Risks from the macroeconomic policies and government regulation: Although the Chinese government is gradually liberalizing the market entry regulations on petroleum and petrochemicals sector, the petroleum and petrochemical industries in China are still subject to entry regulations to a certain degree, which include: issuing licenses in relation to exploration and development of crude oil and natural gas, issuing business licenses for trading crude oil and refined oil, setting caps for retail prices of gasoline, diesel and other oil products, the imposition of the special oil income levy; the formulation of refined oil import and export quotas and procedures; the formulation of safety, quality and environmental protection standards and the formulation of energy conservation policies. In addition, the changes which have occurred or might occur in macroeconomic and industry policies such as the opening up of crude oil import licenses and the right of tenure; reforming and improvement in pricing mechanism of natural gas, cost supervision of gas pipeline and access to third party; cancellation of qualification approval of the wholesale and storage of refined oil business, decentralisation of retail business authorisation of refined oil products to regional and city level government, further improvement in pricing mechanism of refined oil products, gas stations investment being fully opened to foreign investment; and reforming in resource tax and environmental tax, etc. Such changes might further intensify market competition and have certain effects on the operations and profitability of the Company.

 

Risks with regard to the changes from environmental legislation requirements: Our production activities generate waste liquids, gases and solids. The Company has built up the supporting effluent treatment systems to prevent and reduce the pollution to the environment. However, the relevant government authorities may issue and implement much stricter environmental protection laws and regulations, adopt much stricter environment protection standards. Under such situations, the Company may increase expenses in relation to the environment protection accordingly.

 

Risks from the uncertainties of obtaining additional oil and gas resources: The future sustainable development of the Company is partly dependent to a certain extent on our abilities in continuously discovering or acquiring additional oil and natural gas resources. To obtain additional oil and natural gas resources, the Company faces some inherent risks associated with exploration and development and/or with acquisition activities, and the Company has to invest a large amount of money with no guarantee of certainty. If the Company fails to acquire additional resources through further exploration, development and acquisition to increase the reserves of crude oil and natural gas, the oil and natural gas reserves and production of the Company may decline over time which may adversely affect the Company's financial situation and operation performance.

 

Risks with regard to the external purchase of crude oil: A significant amount of crude oil as needed by the Company is satisfied through external purchases. In recent years, especially influenced by the mismatch between supply and demand of crude oil, geopolitics, global economic growth and other factors, the prices of crude oil fluctuate sharply. Additionally, the supply of crude oil may even be interrupted due to some extreme major incidents in certain regions. Although the Company has taken flexible countermeasures, it may not fully avoid risks associated with any significant fluctuation of international crude oil prices and sudden disruption of supply of crude oil from certain regions.

 

Risks with regard to the operation and natural disasters: The process of petroleum chemical production is exposed to the high risks of inflammation, explosion and environmental pollution and is vulnerable to extreme natural disasters. Such contingencies may cause serious impacts to the society, major financial losses to the Company and grievous injuries to people. The Company has always been laying great emphasis on the safety production, and has implemented a strict HSSE management system as an effort to avoid such risks as far as possible. Meanwhile, the main assets and inventories of the Company as well as the possibility of damage to a third party have been insured. However, such measures may not shield the Company from financial losses or adverse impact resulting from such contingencies.

 

Investment risks: Petroleum and chemical sector is a capital intensive industry. Although the Company has adopted a prudent investment strategy, as stipulated and enforced by the new investment decision-making procedures and rules in 2020, conducted rigorous feasibility study on each investment project, which consists of special verifications in raw material market, technical scheme, profitability, safety and environmental protection, legal compliance, etc., certain investment risks will still exist and expected returns may not be achieved due to major changes in factors such as market environment, prices of equipment and raw materials, and construction period during the implementation of the projects.

 

Risks with regard to overseas business development and management: The Company engages in oil and gas exploration, refining and chemical, warehouse logistics and international trading businesses in some regions outside China. The Company's overseas businesses and assets are subject to the jurisdiction of the host country's laws and regulations. In light of the complicated factors such as imbalance of global economy, competitiveness of industry and trade structure, exclusiveness of regional trading blocs, polarisation of benefits distribution in trade, and politicisation of economic and trade issues, including sanctions, barriers to entry, instability in the financial and taxation policies, contract defaults, tax dispute, the Company's risks with regard to overseas business development and management could be increased.

 

Currency risks: At present, China implements an administered floating exchange rate regime based on market supply and demand which is regulated with reference to a basket of currencies in terms of the exchange rate of Renminbi. As the Company purchases a significant portion of crude oil in foreign currency which is based on US dollar-denominated prices, the realized price of crude oil is based on international crude oil price. Despite the fact that, the price of the domestic refined oil products will change as the exchange rate of the Renminbi changes according to the pricing mechanism for the domestic refined oil products, and the price of other domestic petrochemical products will also be influenced by the price of the imported products, which to a large extent, smooths the impact of the Renminbi exchange rate on the processing and sales of the Company's crude oil refined products. However, the fluctuation of the Renminbi exchange rate will still have an effect on the income of the upstream sector.

 

Cyber-security risks: the Company has a well-established network safety system, information infrastructure and operation system, and network safety information platform, devotes significant resources to protecting our digital infrastructure and data against cyber-attacks. However, if our systems against cyber-security risk are proved to be ineffective, we could be adversely affected by, among other things, disruptions to our business operations, and loss of proprietary information, including, intellectual property, financial information and employer and customer data, thus causing harm to our personnel, property, environment and reputation. As cyber-security attacks continue to evolve, we may be required to expend additional resources to enhance our protective measures against cyber-security breaches.

 

 

 

 

By Order of the Board

Zhang Yuzhuo

Chairman

 

Beijing, China, 26 March 2021

 

 

REPORT OF THE BOARD OF SUPERVISORS

 

Dear Shareholders:

 

In 2020, the Board of Supervisors and each Supervisor of Sinopec Corp. diligently performed their supervision responsibilities, actively participated in the supervision process of decision making, carefully reviewed and effectively supervised the major decisions of the Company, and endeavored to safeguard the interests of shareholders and the Company in accordance with the PRC Company Law and the Articles of Association of Sinopec Corp.

 

During this reporting period, the Board of Supervisors held four meetings in total, and mainly reviewed and approved the proposals in relation to the Company's periodic report, financial statements, Communication on Progress for Sustainable Development, internal control assessment report and working report of the Board of Supervisors, etc.

 

On 27 March 2020, the 8th meeting of the seventh session of the Board of Supervisors was held, and the proposals in relation to Annual Report of Sinopec Corp. for 2019, the Financial Statements of Sinopec Corp. for 2019, 2019 Communication on Progress for Sustainable Development of Sinopec Corp., Internal Control Assessment Report of Sinopec Corp. for 2019, Work Report of the Board of Supervisors of Sinopec Corp. for 2019 and Work Plan of the Board of Supervisors of Sinopec Corp. for 2020, were reviewed and approved at the meeting.

 

On 29 April 2020, the 9th meeting of the seventh session of the Board of Supervisors was held, and the proposal in relation to the First Quarterly Report of Sinopec Corp. for 2020 and Proposal on Integration and Reorganisation of Zhongke Refining and Zhanjiang Dongxing were reviewed and approved at the meeting.

 

On 28 August 2020, the 10th meeting of the seventh session of the Board of Supervisors was held, and the Interim Report of Sinopec Corp. for 2020 and the Interim Financial Statements of Sinopec Corp. for 2020 were reviewed and approved at the meeting.

 

On 28 October 2020, the 11th meeting of the seventh session of the Board of Supervisors was held, and the Third Quarterly Report of Sinopec Corp. for 2020 and Baling Petrochemical Reorganization Proposal were reviewed and approved at the meeting.

 

In addition, the Supervisors attended the general meetings of shareholders and attended meetings of the Board. The Board of Supervisors also organised some of the Supervisors to attend the trainings for directors and supervisors of listed companies organised by Beijing Securities Supervisory Bureau under CSRC, which have further improved the Supervisors' capabilities in performing supervisory duties.

 

Through supervision and inspection on the production and operation management as well as financial management conditions, the Board of Supervisors and all the Supervisors conclude that in 2020, facing the unfavourable conditions such as the outbreak of COVID-19 and a significant decline in crude oil price, the Company conscientiously implemented the decision-making and deployment of the Board of Directors, focused on prevention of COVID-19 and business operation targets, consecutively implemented "100-day overcoming difficulties and creating efficiency" campaign and subsequent campaigns to improve performance, maintaining the steadiness of business operations, and achieving better than expectation business performance. The Board of Supervisors had no objection to the supervised issues during this reporting period.

 

Firstly, the Board and the senior management of Sinopec Corp. performed their responsibilities pursuant to relevant laws and regulations, and implemented efficient management. The Board diligently fulfilled its obligations and exercised its rights under the PRC Company Law and the Articles of Association, and made informed decisions on major issues. The senior management diligently executed the resolutions approved by the Board, made all-out efforts to tap potentials and enhance efficiency, optimise business structures, committed to achieving the target of busiess operations set by the Board. During the reporting period, the Board of Supervisors did not discover any behavior of any Director or senior management which violated laws, regulations, or the Articles of Association, or was detrimental to the interests of Sinopec Corp. or its shareholders.

 

Secondly, the reports and financial statements prepared by Sinopec Corp. in 2020 complied with the relevant regulation of domestic and overseas securities regulators, the disclosed information truly, accurately, completely and fairly reflected Sinopec Corp.'s financial results and operation performance. The dividend distribution plan was made after comprehensive consideration of the long-term interests of Sinopec Corp. and the interests of the shareholders. No violation of confidential provisions of persons who prepared and reviewed the report was found.

 

Thirdly, Sinopec Corp.'s internal control system is effective. No material defects of internal control were found.

 

Fourthly, the consideration for selling assets made by Sinopec Corp. was fair and reasonable, neither insider trading, damage to shareholders' interest nor losses of corporate assets was discovered.

 

Fifthly, all connected transactions between the Company and Sinopec Group were in compliance with the relevant rules and regulations of domestic and overseas listing exchanges. The pricing of all the connected transaction was fair and reasonable. No behaviors which is detrimental to the interests of Sinopec Corp. or its shareholders was discovered.

 

In 2021, the Board of Supervisors and each Supervisor will continue to follow the principle of due diligence and integrity, earnestly perform the duties of supervision as delegated by the shareholders, strictly review the significant decisions, strengthen the process control and supervision, increase the strength of inspection and supervision on subsidiaries and protect Sinopec Corp.'s benefit and its shareholders' interests.

 

 

 

 

 

 

 

Zhao Dong

Chairman of the Board of Supervisors

 

26 March 2021

 

 

DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES

 

1    INTRODUCTION OF DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT

 

(1)  Directors

Zhang Yuzhuo, aged 59, Chairman of the Board of Directors of Sinopec Corp. Mr. Zhang is a Research Fellow, Ph.D. in engineering and Academician of the Chinese Academy of Engineering. Mr. Zhang is an alternate member of the 19th Central Committee of the Communist Party of China ("CPC"). In January 1997, he was appointed as Vice President of China Coal Research Institute; in February 1998, he temporarily served as Deputy General Manager of Yankuang Group Co. Ltd.; in July 1998, he was appointed as Vice President of China Coal Research Institute, Director and Deputy General Manager of China Coal Technology Corporation; in March 1999, he served as President of China Coal Research Institute and Chairman of China Coal Technology Corporation; in June 1999, he was appointed as President and Deputy Secretary of CPC Committee of China Coal Research Institute, and Chairman and Deputy Secretary of CPC Committee of China Coal Technology Corporation; in January 2002, he was appointed as Deputy General Manager of Shenhua Group Corporation Limited, and served concurrently as Chairman and General Manager of China Shenhua Coal Liquefaction Company Limited; in August 2003, he was appointed as Deputy General Manager and Member of the Leading Party Member Group of Shenhua Group Corporation Limited, and served concurrently as Chairman of China Shenhua Coal Liquefaction Company Limited; in December 2008, he was appointed as Director, General Manager and Member of the Leading Party Member Group of Shenhua Group Corporation Limited; in July 2009, he served concurrently as Vice Chairman of All-China Federation of Returned Overseas Chinese; in May 2014, he was appointed as Chairman and Secretary of the Leading Party Member Group of Shenhua Group Corporation Limited, and served concurrently as Chairman of China Shenhua Energy Company Limited; in March 2017, he served as a member of the Standing Committee of the CPC Tianjin Municipal Committee and Secretary of the CPC Binhai New Area Committee; in July 2017, he served concurrently as Chairman of Sino-Singapore Tianjin Eco-City Investment & Development Co., Ltd.; in May 2018, he served concurrently as Director of China (Tianjin) Pilot Free Trade Zone Administration; in January 2020, he was appointed as Chairman and Secretary of the Leading Party Member Group of China Petrochemical Corporation. In March 2020, he was elected as Chairman of the Board of Directors of Sinopec Corp.

 

Ma Yongsheng, aged 59, Director and President of Sinopec Corp. Mr. Ma is a professor level senior engineer with a Ph.D. degree and an academician of the Chinese Academy of Engineering. Mr. Ma is a member of the 13th National Committee of Chinese People's Political Consultative Conference ("CPPCC"). In April 2002, he was appointed as Chief Geologist of Sinopec Southern Exploration and Production Company; in April 2006, he was appointed as Executive Deputy Manager (in charge of overall management), Chief Geologist of Sinopec Southern Exploration and Production Company; in January 2007, he was appointed as General Manager and Party Secretary of CPC Committee of Sinopec Southern Exploration and Production Company; in March 2007, he served as General Manager and Deputy Party Secretary of CPC Committee of Sinopec Exploration Company; in May 2007, he was appointed as Deputy Commander of Sichuan-East China Gas Pipeline Project Headquarter of Sinopec Corp., General Manager and Deputy Secretary of CPC Committee of Sinopec Exploration Company; in May 2008, he was appointed as Deputy Director General of Exploration and Production Department of Sinopec Corp. (Director General Level) and Deputy Commander of Sichuan-East China Gas Pipeline Project Headquarter; in July 2010, he served as Deputy Chief Geologist of Sinopec Corp.; in August 2013, he was appointed as Chief Geologist of Sinopec Corp.; in December 2015, he served as Vice President of China Petrochemical Corporation and was appointed as Senior Vice President of Sinopec Corp.; in January 2017, he was appointed as Member of the Leading Party Member Group of China Petrochemical Corporation; in April 2019, he was appointed as Director, President and Vice Secretary of the Leading Party Member Group of China Petrochemical Corporation. In February 2016, he was elected as Director of Sinopec Corp.; in October 2018, he was appointed as President of Sinopec Corp.

 

Yu Baocai, aged 56, Director and Senior Vice President of Sinopec Corp. Mr. Yu is a senior engineer with a master's degree in economics. In September 1999, Mr. Yu was appointed as Deputy General Manager of Daqing Petrochemical Company; in December 2001, he was appointed as General Manager and Deputy Secretary of CPC Committee of Daqing Petrochemical Company; in September 2003, he was appointed as General Manager and Secretary of CPC Committee of Lanzhou Petrochemical Company; in June 2007, he was appointed as General Manager and Deputy Secretary of CPC Committee of Lanzhou Petrochemical Company and General Manager of Lanzhou Petroleum & Chemical Company; in September 2008, he was appointed as a member of the Leading Party Member Group and Deputy General Manager of China National Petroleum Corporation ("CNPC") and since May 2011, he acted concurrently as Director of PetroChina Company Limited; in June 2018, he was appointed as a Member of the Leading Party Member Group and Vice President of China Petrochemical Corporation. In October 2018, Mr. Yu was elected as Director of Sinopec Corp.; in September 2020, he was appointed as Senior Vice President of Sinopec Corp.

 

Liu Hongbin, aged 58. Director and Senior Vice President of Sinopec Corp. Mr. Liu is a senior engineer with a bachelor's degree. In June 1995, he was appointed as Chief Engineer of Tuha Petroleum Exploration & Development Headquarters; in July 1999, he was appointed as Deputy General Manager of PetroChina Tuha Oilfield Company; in July 2000, he was appointed as Commander and Deputy Secretary of CPC Committee of Tuha Petroleum Exploration & Development Headquarters; in March 2002, he served as General Manager of the Planning Department of PetroChina Company Limited; in September 2005, he served as Director of the Planning Department of CNPC; in June 2007, he was appointed as Vice President of PetroChina Company Limited, and in November 2007, he served concurrently as General Manager and Secretary of CPC Committee of the Marketing Branch of PetroChina Company Limited; in June 2009, he served concurrently as General Manager and Deputy Secretary of CPC Committee of the Marketing Branch of PetroChina Company Limited; in July 2013, he was appointed as Member of the Leading Party Member Group and Deputy General Manager of CNPC and in August 2013, he served concurrently as an Executive Director and General Manager of Daqing Oilfield Company Limited, Director of Daqing Petroleum Administration Bureau and Deputy Secretary of CPC Committee of Daqing Oilfield; in May 2014, he served concurrently as Director of PetroChina Company Limited; in November 2019, he was appointed as a member of the Leading Party Member Group of China Petrochemical Corporation; in December 2019, he was appointed as Vice President of China Petrochemical Corporation. In March 2020, he was appointed as Senior Vice President of Sinopec Corp.; in May 2020, he was elected as Director of Sinopec Corp.

 

Ling Yiqun, aged 58, Director and Senior Vice President of Sinopec Corp. Mr. Ling is a professor level senior engineer with a Ph.D. degree. From 1983, he worked in the refinery of Beijing Yanshan Petrochemical Company and the Refining Department of Beijing Yanshan Petrochemical Company Ltd.; in February 2000, he was appointed as Deputy Director General of Refining Department of Sinopec Corp.; in June 2003, he was appointed as Director General of Refining Department of Sinopec Corp.; in July 2010, he was appointed as Vice President of Sinopec Corp.; in May 2012, he was appointed concurrently as Executive Director, President and Secretary of CPC Committee of Sinopec Refinery Product Sales Company Limited; in August 2013, he was appointed concurrently as President and Secretary of CPC Committee of Sinopec Qilu Petrochemical Company, and President of Sinopec Qilu Company; in March 2017, he was appointed as Vice President of China Petrochemical Corporation; since April 2019, he has been a member of the Leading Party Member Group of China Petrochemical Corporation. In February 2018, he was appointed as Senior Vice President of Sinopec Corp.; in May 2018, he was elected as Director of Sinopec Corp.

 

Zhang Shaofeng, aged 49, Director of Sinopec Corp., Mr. Zhang is a professor level senior accountant with a master's degree in business administration. In December 2008, he was appointed as Chief Accountant and Member of the CPC Committee of Trans-Asia Gas Pipeline Company Limited of CNPC; in July 2017, he was appointed as General Manager of Finance Department of CNPC (中國石油天然氣集團公司) and served concurrently as General Manager of Finance Department of PetroChina Company Limited; in December 2017, he was appointed as General Manager of Finance Department of CNPC (中國石油天然氣集團有限公司) and served concurrently as General Manager of Finance Department of PetroChina Company Limited; in July 2020, he was appointed as Member of the Leading Party Member Group and Chief Accountant of China Petrochemical Corporation. In September 2020, he was elected as Director of Sinopec Corp.

 

Tang Min, aged 67, Independent Director of Sinopec Corp. Mr. Tang has a Ph.D. degree in economics. He presently acts as Counsellor of the State Council of the PRC and Executive Vice Chairman of YouChange China Social Entrepreneur Foundation. He was an economist and senior economist at the Economic Research Centre of the Asian Development Bank between 1989 and 2000; chief economist at the Representative office of the Asian Development Bank in China between 2000 and 2004; Deputy Representative at the Representative Office of the Asian Development Bank in China between 2004 and 2007 and Deputy Secretary-General of the China Development Research Foundation between 2007 and 2010. In May 2015, he was appointed as Independent Director of Sinopec Corp.

 

Cai Hongbin, aged 53, Independent Director of Sinopec Corp. Mr. Cai is Dean of Faculty of Business and Economics and Professor of Economics of the University of Hong Kong. Mr. Cai has a Ph.D. degree in Economics. From 1997 to 2005, Mr. Cai taught at the University of California, Los Angeles. Since 2005, he served as a professor and Ph.D. supervisor in Applied Economics Department at Guanghua School of Management at Peking University, and he once served as Director, Assistant to the Dean and Vice Dean of the Applied Economics Department. From December 2010 to January 2017, he served as Dean of Guanghua School of Management at Peking University. In June 2017, he joined the Faculty of Business and Economics of the University of Hong Kong. Mr. Cai once served as a member of the 12th National People's Congress, a member of Beijing Municipal Committee of CPPCC, a member of the 11th Central Committee of China Democratic League, Deputy Chairman of Beijing Municipal Committee of China Democratic League and a Special Auditor of the National Audit Office. He currently serves as an Independent Director of CCB International (Holdings) Limited and Ping An Bank Co., Ltd. In May 2018, he was elected as Independent Director of Sinopec Corp.

 

Ng, Kar Ling Johnny, aged 60, Independent Director of Sinopec Corp. Mr. Ng currently is a practicing Certified Public Accountant in Hong Kong, a practicing auditor and Certified Public Accountant in Macau, a Fellow of the Hong Kong Institute of Certified Public Accountants (FCPA), a Fellow of the Association of Chartered Certified Accountant (FCCA), and a Fellow of the Institute of Chartered Accountants in England and Wales (FCA). Mr. Ng obtained a bachelor's degree and a master's degree in business administration from the Chinese University of Hong Kong in 1984 and 1999, respectively. Mr. Ng joined KPMG (Hong Kong) in 1984 and became a Partner in 1996. He acted as a Managing Partner from June 2000 to September 2015 and Vice Chairman of KPMG China from October 2015 to March 2016. Mr. Ng currently serves as Independent Non-executive Director of China Vanke Co., Ltd., Fangdd Network Group Ltd. and Metallurgical Corporation of China Ltd. In May 2018, he was elected as Independent Director of Sinopec Corp.

 

LIST OF MEMBERS OF THE BOARD

 

 

 

 

 

 

Remuneration

 

 

 

 

 

 

 

paid by

Whether

 

 

 

 

 

 

in 2020

paid by

Equity interests in Sinopec Corp.

 

 

 

Position in

 

(RMB 1,000,

the holding

(as at 31 December)

Name

Gender

Age

Sinopec Corp.

Tenure

before tax)

Company

2020

2019

Zhang Yuzhuo

Male

59

Chairman

2020.03-2021.05

-

Yes

0

0

Ma Yongsheng

Male

59

Board Director, President

2016.02-2021.05

1,013.1

No

0

0

Yu Baocai

Male

56

Board Director, 

2018.10-2021.05

-

Yes

0

0

 

 

 

Senior Vice President

 

 

 

 

 

Liu Hongbin

Male

58

Board Director, 

2020.05-2021.05

-

Yes

0

0

 

 

 

Senior Vice President

 

 

 

 

 

Ling Yiqun

Male

58

Board Director,

2018.05-2021.05

-

Yes

13,000

13,000

 

 

 

Senior Vice President

 

 

 

 

 

Zhang Shaofeng

Male

49

Board Director

2020.09-2021.05

-

Yes

0

0

Tang Min

Male

67

Independent Director

2015.05-2021.05

350.0

No

0

0

Cai Hongbin

Male

53

Independent Director

2018.05-2021.05

350.0

No

0

0

Ng, Kar Ling Johnny

Male

 

60

 

Independent Director

 

2018.05-2021.05

 

350.0

 

No

 

0

 

0

 

 

LIST OF FORMER MEMBERS OF THE BOARD

 

 

 

 

 

 

Remuneration

 

 

 

 

 

 

 

paid by

Whether

 

 

 

 

 

 

in 2020

paid by

Equity interests in Sinopec Corp.

 

 

 

Position in

 

(RMB 1,000,

the holding

(as at 31 December)

Name

Gender

Age

Sinopec Corp.

Tenure

before tax)

Company

2020

2019

Dai Houliang

Male

57

Former Chairman

2009.05-2020.01

-

Yes

0

0

Li Yunpeng

Male

62

Former Director

2017.06-2020.03

-

Yes

0

0

Li Yong

Male

57

Former Director

2018.05-2020.09

-

Yes

0

0

Fan Gang

Male

67

Former Independant Director

2015.05-2020.08

-

NO

0

0

 

Note: According to regulation of the authority, Mr. Fan Gang did not get remuneration from the Company.

 

(2)  Supervisors

Zhao Dong, aged 50, Chairman of Board of Supervisors of Sinopec Corp. Mr. Zhao is a professor level senior accountant with a Ph.D. degree. In July 2002, he was appointed as Chief Accountant and General Manager of Financial Assets Department of CNPC International (Nile) Ltd.; in January 2005, he was appointed as Deputy Chief Accountant and Executive Deputy Director of Financial and Capital Operation Department of China National Oil and Gas Exploration and Development Corporation; in April 2005, he was appointed as Deputy Chief Accountant and General Manager of Financial and Capital Operation Department of China National Oil and Gas Exploration and Development Corporation; in June 2008, he was appointed as Chief Accountant of China National Oil and Gas Exploration and Development Corporation; in October 2009, he was appointed as Chief Accountant of China National Oil and Gas Exploration and Development Corporation and Chief Financial Officer of PetroChina International Investment Company Limited; in September 2012, he was appointed as Deputy General Manager of CNPC Nile Company; in August 2013, he was appointed as General Manager of CNPC Nile Company; in November 2015, he was appointed as Chief Financial Officer of PetroChina Company Limited. In November 2016, he was appointed as a Member of the Leading Party Member Group and Chief Accountant of China Petrochemical Corporation; in May 2020, he was appointed as Director and Deputy Secretary of the Leading Party Member Group of China Petrochemical Corporation. In June 2017, he was elected as Chairman of Board of Supervisors of Sinopec Corp.

 

Jiang Zhenying, aged 56, Supervisor of Sinopec Corp. Mr. Jiang is a professor level senior economist with a Ph.D. degree in management. In December 1998, he was appointed as Vice President of China Petrochemical Supplies & Equipment Co., Ltd.; in February 2000, he was appointed as Deputy Director General of Sinopec Procurement Management Department; in December 2001, he was appointed as Director General of Sinopec Procurement Management Department; in November 2005, he concurrently held the positions of Chairman of Board of Directors, President and Secretary of CPC Committee of China Petrochemical International Co., Ltd.; in March 2006, he was appointed as Director General (General Manager), Executive Director and Secretary of the CPC Committee of Sinopec Procurement Management Department (Sinopec International Co. Ltd.); in April 2010, he was appointed as Director General (General Manager), Executive Director and Deputy Secretary of the CPC Committee of Sinopec Procurement Management Department (Sinopec International Co. Ltd); in November 2014, he was appointed as Director of Safety Supervisory Bureau of China Petrochemical Corporation and Director General of Safety Supervisory Department of Sinopec Corp.; in May 2017, he was appointed as Deputy Director General (Director

General level) of the Office of Leading Party Member Group Inspection Work of China Petrochemical Corporation; in December 2018, he was appointed as Director of Audit Bureau of China Petrochemical Corporation, and Director of Audit Department of Sinopec Corp.; in December 2019, he was appointed as President of Audit Bureau of Sinopec Corp. and Director of the Office of Audit Committee of Leading Party Member Group of China Petrochemical Corporation. In December 2010, he was elected as Employee's Representative Supervisor of Sinopec Corp.; in May 2018, he was elected as Supervisor of Sinopec Corp.

 

Li Defang, aged 59, Employee's Representative Supervisor of Sinopec Corp. Mr. Li is a professor level senior engineer with a Ph.D. degree. In May 2001, he was appointed as Deputy Secretary of CPC Committee and Trade Union Chairman of Sinopec Engineering Incorporation; in December 2001, he was appointed as Director General of Information System Management Department of Sinopec Corp.; in September 2013, he was appointed as Director General of Informatization Management Department of Sinopec Corp.; in October 2014, he was appointed as Chairman of Petro-CyberWorks Information Technology Co., Ltd.; in January 2018, he was elected as Employee Supervisor of China Petrochemical Corporation; in March 2019, he was appointed as Secretary of CPC Committee of Sinopec Management Institute (Sinopec Communist Party School); in November 2020, he was appointed as the Secretary of CPC Committee of Sinopec Management Institute and Executive Vice Principal of Sinopec Communist Party School. In May 2020, he was elected as Employee's Representative Supervisor of Sinopec Corp.

 

Lv Dapeng, aged 59, Employee's Representative Supervisor of Sinopec Corp. Mr. Lv is a professor level senior administration engineer with a Master's degree of business administration. In December 2001, he was appointed as Deputy Director General of China Petrochemical News; in March 2003, he was appointed as Deputy Director General and Chief Editor of China Petrochemical News; in June 2004, he was appointed as Director General and Chief Editor of China Petrochemical News; in December 2004, he was appointed as Director General, Secretary of CPC Committee and Chief Editor of China Petrochemical News; in March 2011, he was appointed as Director General of Corporate Culture Department of Sinopec Corp., and Director General of the Political Work Department of and Deputy Secretary of the CPC Committee directly under China Petrochemical Corporation; in June 2012, he was appointed concurrently as Deputy Director General of Working Committee of Trade Union and Deputy Director of the Youth Working Committee of China Petrochemical Corporation; in March 2015, he was appointed as Director General of Corporate Culture Department of Sinopec Corp. and Director General of Communications Department (Press Office) of China Petrochemical Corporation; in December 2019, he was appointed as Director General of Corporate Culture Department of Sinopec Corp., Director General of Communication Department and Director General of Press Office of China Petrochemical Corporation. In January 2021, he was elected as Employee's Representative Supervisor of Sinopec Corp.

 

Chen Yaohuan, aged 57, Employee's Representative Supervisor of Sinopec Corp. Mr. Chen is a professor level senior engineer with a Master's degree awarded by Central Party School of the CPC. In October 2008, he was appointed as Deputy Director General of Refining Department of Sinopec Corp.; in March 2015, he was appointed as Executive Director, General Manager and Deputy Secretary of the CPC Committee of Sinopec Beihai Refining and Chemical Limited Liability Company; in May 2015, he was appointed as a member of the Standing Committee of the CPC Beihai Municipal Committee; in June 2018, he was appointed as General Manager and Deputy Secretary of the CPC Committee of Guanzhou Branch of Sinopec Corp. and General Manager of Guangzhou Branch of Sinopec Assets Management Corporation; in July 2019, he was appointed as Deputy Director General (Director General Level) and Chief Engineer of Refining Department of Sinopec Corp.; in October 2019, he was appointed concurrently as Chairman of Sinopec Kantons International Limited and Sinopec Kantons Holdings Limited; in December 2019, he was appointed as General Manager and Chief Engineer of Refining Department of Sinopec Corp.; in December 2019, he was appointed concurrently as Vice Chairman and Chairman of Audit Committee of Yanbu Aramco Sinopec Refining Company Ltd.; in August 2020, he was appointed concurrently as Executive Director and Secretary of CPC Committee of Sinopec Petroleum Marketing Company Limited and Chairman of Sinopec Petroleum Storage and Reserve Limited. In January 2021, he was elected as Employee's Representative Supervisor of Sinopec Corp.

 

LIST OF MEMBERS OF THE BOARD OF SUPERVISORS

 

 

 

 

 

 

 

Whether

 

 

 

 

 

 

Remuneration

paid by the

 

 

 

 

 

 

paid by

shareholders

 

 

 

 

 

 

Sinopec Corp.

 of the

Equity interests

 

 

 

 

 

in 2020

Company or

in Sinopec Corp.

 

 

 

Position in

 

(RMB 1,000,

 their related

(as of 31 December)

Name

Gender

Age

Sinopec Corp.

Tenure

before tax)

 entities

2020

2019

Zhao Dong

Male

50

Chairman of the

2017.06-2021.05

-

Yes

0

0

 

 

 

Board of Supervisors

 

 

 

 

 

Jiang Zhenying

Male

56

Supervisor

2018.05-2021.05

1,159.4

No

0

0

Li Defang

Male

59

Employee Representative Supervisor

2020.05-2021.05

-

Yes

40,000

40,000

Lv Dapeng

Male

59

Employee representative Supervisor

2021.01-2021.05

-

Yes

0

0

Chen Yaohuan

Male

57

Employee Representative Supervisor

2021.01-2021.05

-

Yes

0

0

 

Note: Mr. Li Defang holds 40,000 A shares of Sinopec Corp.(the actual holder of the said shares is the spouse of Mr. Li Defang).

 

LIST OF FORMER MEMBERS OF THE BOARD OF SUPERVISORS

 

 

 

 

 

 

 

Whether

 

 

 

 

 

 

 

paid by the

 

 

 

 

 

 

Remuneration

 shareholders

 

 

 

 

 

 

paid by

 of the

Equity interests

 

 

 

 

 

in 2020

 Company or

 in Sinopec Corp.

 

 

 

Position in

 

(RMB 1,000,

 their related

(as of 31 December)

Name

Gender

Age

Sinopec Corp.

Tenure

before tax)

entities

2020

2019

Yu Xizhi

Male

58

Employee Representative Supervisor

2017.06-2020.05

761.9

No

0

0

Zhou Hengyou

Male

57

Employee Representative Supervisor

2018.05-2020.05

760.0

No

0

0

Yang Changjiang

Male

 

60

 

 

Supervisor

2018.05-2020.09

 

-

 

Yes

 

0

 

0

 

Zhang Baolong

Male

61

Supervisor

2018.05-2020.09

-

Yes

0

0

Zou Huiping

Male

60

Supervisor

2006.05-2021.01

885.1

No

0

0

Sun Huanquan

Male

56

Employee Representative Supervisor

2020.05-2021.01

466.3

No

0

0

Yu Renming

Male

57

Employee Representative Supervisor

2010.12-2021.01

-

Yes

0

0

 

(3)  Other Members of Senior Management

Chen Ge, aged 58, Senior Vice President of Sinopec Corp. Mr. Chen is a senior economist with a Master's degree. In February 2000, he was appointed as Deputy Director General of the Board Secretariat of Sinopec Corp.; in December 2001, he was appointed as Director General of the Board Secretariat of Sinopec Corp.; in April 2003, he was appointed as Secretary to the Board of Directors of Sinopec Corp.; from April 2005 to August 2013, he was appointed concurrently as Director General of Corporate Reform & Management Dept. of Sinopec Corp.; in July 2010, he was appointed as Assistant to President of China Petrochemical Corporation; from December 2013 to December 2015, he was appointed temporarily as Deputy Secretary-General of Guizhou Provincial People's Government and a member of the Leading Party Member Group of Guizhou Provincial General Office; in November 2015, he was appointed as Employee's Representative Director of China Petrochemical Corporation; in December 2017, he was appointed concurrently as Director General of Corporate Reform & Management Dept. of Sinopec Corp.; in October 2018, he was appointed as Senior Vice President of Sinopec Corp.

 

Yu Xizhi, aged 58, Vice President of Sinopec Corp. Mr Yu is a professor-level senior engineer with a Ph.D. degree in engineering. In August 1997, he was appointed as Deputy General Manager of Anqing Petrochemical General Plant and concurrently as General Manager of Fertiliser Plant; in September 1999, he became a member of the CPC Standing Committee of Anqing Petrochemical General Plant; in February 2000, he was appointed as Deputy General Manager of Sinopec Anqing Company and in September 2000, he was appointed as General Manager of Sinopec Anqing Company; in January 2005, he was appointed as General Manager of Anqing Petrochemical General Plant and from May 2009 to July 2010, he temporarily served as a member of the Standing Committee of the CPC Anqing Municipal Committee; in July 2010, he became General Manager and Deputy Secretary of the CPC Committee of Maoming Petrochemical Company and General Manager of Sinopec Maoming Company; in July 2016, Mr. Yu was appointed as head of Maoming-Zhanjiang Integration Leading Group; in December 2016, he became Executive Director, General Manager and Deputy Secretary of the CPC Committee of Zhongke (Guangdong) Refining and Petrochemical Co., Ltd.; in April 2017, Mr. Yu was appointed as Director General of Human Resources Department of Sinopec Corp.; in June 2017, he was elected as Employee's Representative Supervisor of Sinopec Corp.; in December 2019, he was appointed as President of Human Resource Department of Sinopec Corp. and the Director General of Organization Department of China Petrochemical Corporation; in January 2020, he was elected as Director of China Petrochemical Corporation. In July 2020, he was appointed as Vice President of Sinopec Corp.

 

Shou Donghua, aged 51, Chief Financial Officer of Sinopec Corp. Ms. Shou is a professor level senior accountant with a Master's degree of business administration. In July 2010, she was appointed as the Chief Financial Officer of Sinopec Zhenhai Refining & Chemical Company; in October 2014, she was appointed as Deputy Director General of Human Resource Department of Sinopec Corp.; in August 2017, she was appointed as the Secretary of CPC Committee of Sinopec Zhenhai Refining & Chemical Company and Deputy General Manager of Sinopec Zhenhai Refining & Chemical Company; in August 2018, she was appointed as the Director General of Finance Department of China Petrochemical Corporation and concurrently served as the Chairman of Sinopec Century Bright Capital Investment Limited; in December 2019, she was appointed as General Manager of Finance Department of Sinopec Corp. and concurrently served as the Chairman of Sinopec Century Bright Capital Investment Limited; in January 2020, she was appointed as Chief Financial Officer of Sinopec Corp.

 

Zhao Rifeng, aged 58, Vice President of Sinopec Corp. Mr. Zhao is a professor level Senior Engineer with a Master's degree. In July 2000, he was appointed as Deputy General Manager of Sinopec Jinling Petrochemical Co., Ltd. and Deputy Manager of Sinopec Jinling Company; in October 2004, he was appointed as General Manager of Sinopec Jinling Company; in October 2006, he was appointed as Vice Chairman and General Manager of Sinopec Jinling Petrochemical Co., Ltd.; in November 2010, he was appointed as Chairman, General Manger, Deputy Secretary of CPC Committee of Sinopec Jinling Petrochemical Co., Ltd.; in August 2013, he was appointed as Director General of Refining Department of Sinopec Corp.; in December 2017, he was appointed as the Director General of the Marketing Department of Sinopec Corp. and Chairman and Secretary of CPC Committee of Sinopec Marketing Company Limited; in December 2019, he was appointed as the President of the Marketing Department of Sinopec Corp. and Chairman and Secretary of CPC Committee of Sinopec Marketing Company Limited. In February 2018, he was appointed as Vice President of Sinopec Corp.

 

Huang Wensheng, aged 54, Vice President of Sinopec Corp., Secretary to the Board of Directors. Mr. Huang is a professor level senior economist with a university diploma. In March 2003, he was appointed as Deputy Director General of the Board Secretariat of Sinopec Corp.; in May 2006, he was appointed as Representative on Securities Matters of Sinopec Corp.; in August 2009, he was appointed as the Deputy Director General of President's office of Sinopec Corp.; in September 2009, he was appointed as Director General of the Board Secretariat of Sinopec Corp.; in May 2012, he was appointed as Secretary to the Board of Directors of Sinopec Corp.; in June 2018, he was appointed concurrently as Director General of Department of Capital Management and Financial Services of China Petrochemical Corporation; in July 2018, he was appointed concurrently as Chairman, and Secretary of CPC Committee of Sinopec Capital Co., Ltd.; in December 2019, he was appointed as President of Department of Capital Management and Financial Services of China Petrochemical Corporation. In May 2014, he was appointed as Vice President of Sinopec Corp.

 

LIST OF MEMBERS OF THE SENIOR MANAGEMENT

 

 

 

 

 

 

Whether

 

 

 

 

 

 

Remuneration

paid by the

 

 

 

 

 

 

paid by

shareholders

 

 

 

 

 

 

Sinopec Corp.

of the

 

 

 

 

 

 

in 2020

 Company or

Equity interests in Sinopec Corp.

 

 

 

Position in

(RMB 1,000,

 their related

(as of 31 December)

Name

Gender

Age

Sinopec Corp.

before tax)

entities

2020

2019

Chen Ge

Male

58

Senior Vice President

1,510.6

No

0

0

Yu Xizhi

Male

58

Vice President

317.3

No

0

0

Shou Donghua

Female

51

Chief Financial Officer

805.4

No

0

0

Zhao Rifeng

Male

58

Vice President

1,622.1

No

0

0

Huang Wensheng

Male

54

Vice President, Board Secretary

1,252.4

No

0

0

 

LIST OF FORMER MEMBERS OF THE SENIOR MANAGEMENT

 

 

 

 

 

 

Whether

 

 

 

 

 

 

Remuneration

paid by the

 

 

 

 

 

 

paid by

 shareholders

 

 

 

 

 

 

Sinopec Corp.

 of the

 

 

 

 

 

 

in 2020

 Company or

Equity interests in Sinopec Corp.

 

 

 

Position in

(RMB 1,000,

 their related

(as of 31 December)

Name

Gender

Age

Sinopec Corp.

before tax)

entities

2020

2019

Lei Dianwu

Male

58

Former Senior Vice President

1,173.3

No

0

0

 

2    INFORMATION ON APPOINTMENT OR TERMINATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

On 13 January 2020, Ms. Shou Donghua was appointed as Chief Financial Officer of Sinopec Corp.

 

On 19 January 2020, Mr. Dai Houliang resigned as Chairman of the Board, Non-executive Director and Chairman of each of the Strategy Committee, Nomination Committee and Social Responsibility Management Committee of the Board of Sinopec Corp. due to change of working arrangement.

 

On 24 March 2020, Mr. Li Yunpeng resigned as Non-executive Director and member of Remuneration and Appraisal Committee of Sinopec Corp. due to his age.

 

On 25 March 2020, Mr. Zhang Yuzhuo was appointed as Chairman of the Board, Non-executive Director and Chairman of each of the Strategy Committee, Nomination Committee and Social Responsibility Management Committee of the Board of Sinopec Corp.

 

On 25 March 2020, Mr. Liu Hongbin was appointed as Senior Vice President of Sinopec Corp.

 

On 18 May 2020, Mr. Zhou Hengyou resigned as Employee's Representative Supervisor of Sinopec Corp. due to change of working arrangement.

 

On 18 May 2020, Mr. Yu Xizhi resigned as Employee's Representative Supervisor of Sinopec Corp. due to change of working arrangement.

 

On 18 May 2020, Mr. Sun Huanquan was elected as Employee's Representative Supervisor of the seventh session of of the Board of Supervisors of Sinopec Corp.

 

On 18 May 2020, Mr. Li Defang was elected as Employee's Representative Supervisor of the seventh session of of the Board of Supervisors of Sinopec Corp.

 

On 19 May 2020, Mr. Liu Hongbin was elected as Executive Director of the seventh session of Board of Directors of Sinopec Corp.

 

On 23 July 2020, Mr. Yu Xizhi was appointed as Vice President of Sinopec Corp.

 

On 12 August 2020, Mr. Lei Dianwu resigned as Senior Vice President of Sinopec Corp. due to change of working arrangement.

 

On 28 August 2020, Mr. Fan Gang resigned as Independent Non-Executive Director, member of the Strategy Committee, Chairman of the Remuneration and Review Committee and member of the Social Responsibility Management Committee of Sinopec Corp. due to need of work.

 

On 9 September 2020, Mr. Yang Changjiang resigned as Supervisor of Sinopec Corp. due to age.

 

On 9 September 2020, Mr. Zhang Baolong resigned as Supervisor of Sinopec Corp. due to age.

 

On 11 September 2020, Mr. Yu Baocai was appointed as Senior Vice President of Sinopec Corp.

 

On 22 September 2020, Mr. Li Yong resigned as Non-Executive Director of Sinopec Corp. due to change of working arrangement.

 

On 28 September 2020, Mr. Zhang Shaofeng was elected as Non-Executive Director of the seventh session of Board of Directors of Sinopec Corp.

 

On 11 January 2021, Mr. Yu Renming resigned as Employee's Representative Supervisor of Sinopec Corp. due to change of working arrangement.

 

On 11 January 2021, Mr. Sun Huanquan resigned as Employee's Representative Supervisor of Sinopec Corp. due to change of working arrangement.

 

On 11 January 2021, Mr. Lv Dapeng was elected as Employee's Representative Supervisor of the seventh session of the Board of Supervisors of Sinopec Corp.

 

On 11 January 2021, Mr. Chen Yaohuan was elected as Employee's Representative Supervisor of the seventh session of the Board of Supervisors of Sinopec Corp.

 

On 28 January 2021, Mr. Zou Huiping resigned as Supervisor of Sinopec Corp. due to age.

 

3    CHANGE OF SHAREHOLDING OF DIRECTORS, SUPERVISORS, AND THE SENIOR MANAGEMENT

There is no change in shareholdings of the Company by Directors, Supervisors and other senior managements during the reporting period.

 

4    CONTRACTRAL INTERESTS OF DIRECTORS AND SUPERVISORS

As of 31 December 2020 or any time during the reporting period, no Director or Supervisor of the Company entered into any agreement with any of Sinopec Corp., its controlling shareholder, any subsidiary or related subsidiary which shall significantly benefit such Director or Supervisor.

 

5    CONTRACTS WITH DIRECTORS AND SUPERVISORS

The Company has entered into service contracts with all the Directors and Supervisors. None of the Directors and Supervisors has entered into or will enter into service contracts that are not determinable by the Company within one year without payment of compensation (other than statutory compensation).

 

6    REMUNERATION OF DIRECTORS, SUPERVISORS, AND THE SENIOR MANAGEMENT

During this reporting period, there is a total of 14 Directors, Supervisors and other senior management that received remuneration from Sinopec Corp. with a total amount of RMB 12.7769 million.

 

7    THE COMPANY'S EMPLOYEES

As at 31 December 2020, the Company has a total of 384,065 employees. There are a total of 259,639 retired employees to be reimbursed by Sinopec Corp. Sinopec Marketing Co. Limited and China International United Petroleum and Chemical Company Limited, the principal subsidiaries of Sinopec Corp., have 1,251 and 438 employees respectively.

 

THE BREAKDOWN ACCORDING TO THE MEMBERS OF EACH OPERATION SEGMENT AS FOLLOWS: (INCLUDING EXPLORATION AND PRODUCTION, REFINING, MARKETING AND DISTRIBUTION, CHEMICALS, R&D AND OTHERS)

 

 

 

EMPLOYEES' PROFESSIONAL STRUCTURE AS FOLLOWS: (INCLUDING PRODUCTION, SALES, TECHNOLOGY, FINANCE, ADMINISTRATION AND OTHERS)

 

 

 

EDUCATIONAL BACKGROUND STRUCTURE FOR EMPLOYEES AS FOLLOWS: (INCLUDING MASTER'S DEGREE OR ABOVE, UNDERGRADUATE, JUNIOR COLLEGE, SENIOR HIGH SCHOOL AND TECHNICAL SCHOOL DEGREES OR BELOW)

 

 

 

8    CHANGES OF CORE TECHNICAL TEAM OR KEY TECHNICIANS

During the reporting period, there are no significant changes of core technical team or key technicians.

 

9    EMPLOYEE BENEFITS SCHEME

Details of the Company's employee benefits scheme are set out in Note 40 of the financial statements prepared under IFRS of this annual report. As at 31 December 2020, the Company has a total of 259,639 retired employees. All of them participated in the basic pension schemes administered by provincial (autonomous region or municipalities) governments. Government-administered pension schemes are responsible for the payments of basic pensions.

 

10  REMUNERATION POLICY

Based on a relatively united basic remuneration system, Sinopec Corp. has established its remuneration distribution system based on the value of positions, performance & contribution, with an aim to improve employee capabilities, and constantly improve employee performance evaluation and incentive & discipline mechanisms.

 

11  TRAINING PROGRAMS

In 2020, the Company made great efforts to conduct training programs, continuously improved the training system for all types of employees and continuously improved the level of intelligence and precision of the training programs. To speed up training for strategic, industry-leading and innovative professional talents, the Company launched training courses such as advanced seminar on innovative development for refining and chemical specialists, training projects for experts on the whole-process of refining, training courses on the integration of research and application of high-end materials and training project on upgrading innovation competitiveness. With a focus on forging a team of talents with knowledge, skill and innovation, the Company lays emphasis on craftsman spirit education and launched training projects such as the Sinopec Craftsman Forging project. The Company made explorations in establishing a matrix-type international talent training system, and launched training projects for overseas project managers and international business talents. In 2020, the training has covered 3,084 multiple types of talents. In addition, the Company strengthened online training which was attended by 680,000 times and participants have spent 13.86 million hours on the online training program.

 

 

PRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIES

 

On 31 December, 2020, details of the principal wholly-owned and controlled subsidiaries of the Company were as follows:

 

Name of Company

Registered

Capital

RMB million

Percentage

of

shares held

by Sinopec

Corp.

(%)

Total Assets

RMB million

Net Assets

RMB million

Net Profit/

(Net Loss)

RMB million

 

Principal Activities

Sinopec International Petroleum

8,250

100

31,571

12,826

1,160

 

Investment in exploration, production and

 Exploration and Production Limited

 

 

 

 

 

 

 sale of petroleum and natural gas

Sinopec Great Wall Energy & Chemical

22,761

100

30,490

10,453

(3,777)

 

Coal chemical industry investment

 Company Limited

 

 

 

 

 

 

 management, production and sale of coal

 

 

 

 

 

 

 

 chemical products

Sinopec Yangzi Petrochemical

15,651

100

32,966

20,843

26

 

Manufacturing of intermediate petrochemical

 Company Limited

 

 

 

 

 

 

 products and petroleum products

Sinopec Yizheng Chemical Fibre

4,000

100

8,483

5,742

5

 

Production and sale of polyester chips and

 Limited Liability Company

 

 

 

 

 

 

 polyester fibres

Sinopec Lubricant Company Limited

3,374

100

9,011

4,450

617

 

Production and sale of refined petroleum

 

 

 

 

 

 

 

 products, lubricant base oil, and

 

 

 

 

 

 

 

 petrochemical materials

Sinopec Qingdao Petrochemical

1,595

100

3,138

567

(120)

 

Manufacturing of intermediate petrochemical

 Company Limited

 

 

 

 

 

 

 products and petroleum products

Sinopec Chemical Sales Company

1,000

100

19,065

3,947

1,084

 

Marketing and distribution of

 Limited

 

 

 

 

 

 

 petrochemical products

China International United Petroleum

5,000

100

147,791

37,346

6,671

 

Trading of crude oil and

 and Chemical Company Limited

 

 

 

 

 

 

 petrochemical products

Sinopec Overseas Investment

1,662

100

17,462

8,234

(4,338)

 

Overseas investment holding

 Holding Limited

million USD

 

 

 

 

 

 

Sinopec Catalyst Company Limited

1,500

100

10,921

5,665

664

 

Production and sale of catalyst products

China Petrochemical International

1,400

100

19,803

3,618

(617)

 

Trading of petrochemical products

 Company Limited

 

 

 

 

 

 

 

Sinopec Beihai Refining and Chemical

5,294

98.98

15,335

11,474

637

 

Import and processing of crude oil, production,

 Limited Liability Company

 

 

 

 

 

 

 storage and sale of petroleum products and

 petrochemical products

 

 

 

 

 

 

 petrochemical products

Sinopec Qingdao Refining and

5,000

85

17,565

10,122

(221)

 

Manufacturing of intermediate petrochemical

 Chemical Company Limited

 

 

 

 

 

 

 products and petroleum products

Sinopec Hainan Refining and

9,606

75

30,651

19,540

1,183

 

Manufacturing of intermediate petrochemical

 Chemical Company Limited

 

 

 

 

 

 

 products and petroleum products

Sinopec Marketing Co., Limited

28,403

70.42

495,923

234,691

22,415

 

Marketing and distribution of refined

 

 

 

 

 

 

 

 petroleum products

Sinopec Shanghai SECCO

7,801

67.60

22,608

18,272

2,132

 

Production and sale of petrochemical products

 Petrochemical Company Limited

 

 

 

 

 

 

 

Sinopec-SK (Wuhan) Petrochemical

7,193

59

25,826

10,940

(920)

 

Production, sale, research and development of

 Company Limited

 

 

 

 

 

 

 petroleum, petrochemical, ethylene and

 

 

 

 

 

 

 

 downstream by-products

Sinopec Kantons Holdings Limited

248

60.33

13,479

12,385

2,047

 

Oil jetty and nature gas pipeline

 

million HKD

 

 

 

 

 

 

Sinopec Shanghai Gaoqiao Petroleum

10,000

55

34,277

15,176

902

 

Manufacturing of intermediate petrochemical

 and Chemical Limited

 

 

 

 

 

 

 products and petroleum products

Sinopec Shanghai Petrochemical

10,824

50.44

44,749

29,355

639

 

Manufacturing of synthetic fibres, resin

 Company Limited

 

 

 

 

 

 

 and plastics, intermediate petrochemical

 

 

 

 

 

 

 

 products and petroleum products

Fujian Petrochemical Company Limited

10,492

50

14,150

12,999

243

 

Manufacturing of plastics, intermediate

 

 

 

 

 

 

 

 petrochemical products and

 

 

 

 

 

 

 

 petroleum products

Zhongke (Guangdong) Refining and

6,397

90.3

45,315

19,682

423

 

Crude oil processing and petroleum products

 Chemical Company Limited

 

 

 

 

 

 

 manufacturing

Sinopec Baling Petrochemical Co. Ltd.

3,000

55

11,368

4,740

257

 

Crude oil processing and petroleum products

 

 

 

 

 

 

 

 manufacturing

 

Note  1:  All above subsidiaries except Fujian Petrochemical Company Limited are audited by PricewaterhouseCoopers Zhong Tian LLP or PricewaterhouseCoopers in 2020. KPMG Huazhen LLP served the exception.

 

            2: The above indicated total assets and net profit has been prepared in accordance with CASs. Except for Sinopec Kantons Holdings Limited and Sinopec Overseas Investment Holdings Ltd., which are incorporated in Bermuda and Hong Kong SAR, respectively, all of the above wholly-owned and non-wholly-owned subsidiaries are incorporated in the PRC. All of the above wholly-owned and controlling subsidiaries are limited liability companies except for Sinopec Shanghai Petrochemical Company Limited, Sinopec Marketing Co., Limited and Sinopec Kantons Holdings Limited. The Board of Directors considered that it would be redundant to disclose the particulars of all subsidiaries of Sinopec Corp. and, therefore, only those which have material impact on the results or assets of Sinopec Corp. are set out above.

 

REPORT OF THE PRC AUDITOR

 

 

 

PwC ZT Shen Zi (2021) No. 10001

 

To the Shareholders of China Petroleum & Chemical Corporation,

 

OPINION

 

What we have audited

 

We have audited the accompanying financial statements of China Petroleum & Chemical Corporation (hereinafter "Sinopec Corp."), which comprise:

 

   the consolidated and company balance sheets as at 31 December 2020;

 

   the consolidated and company income statements for the year then ended;

 

   the consolidated and company cash flow statements for the year then ended;

 

   the consolidated and company statements of changes in shareholders' equity for the year then ended; and

 

   notes to the financial statements.

 

Our opinion

 

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company's financial position of Sinopec Corp. as at 31 December 2020, and their financial performance and cash flows for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises ("CASs").

 

BASIS FOR OPINION

 

We conducted our audit in accordance with China Standards on Auditing ("CSAs"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

 

We are independent of Sinopec Corp. in accordance with the Code of Ethics for Professional Accountants of the Chinese Institute of Certified Public Accountants ("CICPA Code"), and we have fulfilled our other ethical responsibilities in accordance with the CICPA Code.

 

 

 

 

 

KEY AUDIT MATTERS

 

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

The key audit matter identified in our audit is "Recoverability of the carrying amount of fixed assets relating to oil and gas producing activities".

 

Key Audit Matter

How our audit addressed the Key Audit Matter

 

 

Recoverability of the carrying amount of fixed assets relating to oil and gas producing activities

 

Refer to Note 13 "Fixed assets" and Note 56 "Principal accounting estimates and judgements" to the financial statements.

 

Low crude oil prices gave rise to possible indication that the carrying amount of fixed assets relating to oil and gas producing activities as at 31 December 2020 might be impaired. The Group has adopted value in use as the respective recoverable amounts of fixed assets relating to oil and gas producing activities, which involved key estimations or assumptions including:

 

-    Future crude oil prices;

 

-    Future production profiles;

 

-    Future cost profiles; and

 

-    Discount rates.

 

Because of the significance of the carrying amount of fixed assets relating to oil and gas producing activities as at 31 December 2020, together with the use of significant estimations or assumptions in determining their respective value in use, we had placed our audit emphasis on this matter.

 

 

In auditing the respective value in use calculations of fixed assets relating to oil and gas producing activities, we performed the following key procedures on the relevant discounted cash flow projections prepared by management:

 

   Obtained an understanding of the management's internal control and assessment process of impairment of fixed assets relating to oil and gas producing activities and assessed the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors such as complexity, subjectivity, changes and susceptibility to management bias or fraud.

 

   Evaluated and tested the key controls in respect of the preparation of the discounted cash flow projections of fixed assets relating to oil and gas producing activities.

 

   Assessed the methodology adopted in the discounted cash flow projections, tested mathematical accuracy of the projections, and the completeness, accuracy, and relevance of underlying data used in the projections.

 

   Compared estimates of future crude oil prices adopted by the Group against a range of published crude oil price forecasts.

 

   Compared the future production profiles against the oil and gas reserve estimation report approved by the management. Evaluated the competence, capability and objectivity of the management's experts engaged in estimating the oil and gas reserves. Assessed key estimations or assumptions used in the reserve estimation, by reference to historical data, management plans and/or relevant external data.

 

   Compared the future cost profiles against historical costs and relevant budgets of the Group.

 

   Tested selected other key data inputs, such as natural gas prices and production profiles in the projections by reference to historical data and/or relevant budgets of the Group.

 

   Used professionals with specialized skill and knowledge to assist in the evaluation of the appropriateness of discount rates adopted by the management.

 

   Evaluated the sensitivity analyses prepared by the Group, and assessed the potential impacts of a range of possible outcomes.

 

Based on our work, we found the key assumptions and input data adopted were supported by the evidence we obtained.

 

OTHER INFORMATION

 

Management of Sinopec Corp. is responsible for the other information. The other information comprises all of the information included in 2020 annual report of Sinopec Corp. other than the financial statements and our auditor's report thereon.

 

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

 

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

 

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

 

Management of Sinopec Corp. is responsible for the preparation and fair presentation of these financial statements in accordance with the CASs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing these financial statements, management is responsible for assessing Sinopec Corp.'s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intend to liquidate Sinopec Corp. or to cease operations, or have no realistic alternative but to do so.

 

Those charged with governance are responsible for overseeing Sinopec Corp.'s financial reporting process.

 

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

 

Our objectives are to obtain reasonable assurance about whether these financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

 

   Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

   Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

 

   Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

   Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Sinopec Corp.'s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in these financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause Sinopec Corp. to cease to continue as a going concern.

 

   Evaluate the overall presentation (including the disclosures), structure and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

   Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Sinopec Corp. to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

 

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (CONT'D)

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

 

 

 

 

PricewaterhouseCoopers Zhong Tian LLP

Signing CPA

Zhao Jianrong

Shanghai, the People's Republic of China

 

(Engagement Partner)

 

 

 

 

Signing CPA

Hu Yang

26 March 2021

 

 

 

 

(A)    FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES CONSOLIDATED BALANCE SHEET

               As at 31 December 2020

 

Notes

At 31 December

2020

At 31 December

2019

 

 

 

 

RMB million

RMB million

Assets

 

 

 

Current assets

 

 

 

Cash at bank and on hand

5

184,412

128,052

Financial assets held for trading

 

1

3,319

Derivative financial assets

6

12,528

837

Accounts receivable

7

35,587

54,375

Receivables financing

8

8,735

8,661

Prepayments

9

4,862

5,063

Other receivables

10

33,602

24,190

Inventories

11

151,895

194,142

Other current assets

 

23,773

28,671

Total current assets

 

455,395

447,310

Non-current assets

 

 

 

Long-term equity investments

12

188,342

152,204

Other equity instrument investments

 

1,525

1,521

Fixed assets

13

589,285

625,706

Construction in progress

14

124,765

173,872

Right-of-use assets

15

189,583

198,051

Intangible assets

16

114,066

109,039

Goodwill

17

8,620

8,697

Long-term deferred expenses

18

9,535

8,935

Deferred tax assets

19

25,054

17,616

Other non-current assets

20

27,635

17,335

Total non-current assets

 

1,278,410

1,312,976

Total assets

 

1,733,805

1,760,286

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Short-term loans

22

20,756

31,196

Derivative financial liabilities

6

4,826

2,729

Bills payable

23

10,394

11,834

Accounts payable

24

151,262

188,189

Contract liabilities

25

126,160

126,833

Employee benefits payable

26

7,081

4,807

Taxes payable

27

76,843

69,524

Other payables

28

84,600

75,376

Non-current liabilities due within one year

29

22,493

69,490

Other current liabilities

30

17,775

-

Total current liabilities

 

522,190

579,978

Non-current liabilities

 

 

 

Long-term loans

31

45,459

39,677

Debentures payable

32

38,356

19,157

Lease liabilities

33

172,306

177,674

Provisions

34

45,552

43,163

Deferred tax liabilities

19

8,124

6,809

Other non-current liabilities

35

17,942

15,454

Total non-current liabilities

 

327,739

301,934

Total liabilities

 

849,929

881,912

Shareholders' equity

 

 

 

Share capital

36

121,071

121,071

Capital reserve

37

122,558

122,864

Other comprehensive income

38

1,038

(321)

Specific reserve

 

1,941

1,741

Surplus reserves

39

209,280

207,423

Retained earnings

 

286,575

287,187

Total equity attributable to shareholders of the Company

 

742,463

739,965

Minority interests

 

141,413

138,409

Total shareholders' equity

 

883,876

878,374

Total liabilities and shareholders' equity

 

1,733,805

1,760,286

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

The accompanying notes form part of these financial statements.

 

BALANCE SHEET

As at 31 December 2020

 

 

Notes

At 31 December

At 31 December

 

 

2020

2019

 

 

RMB million

RMB million

Assets

 

 

 

Current assets

 

 

 

Cash at bank and on hand

 

99,188

54,072

Derivative financial assets

 

7,776

940

Accounts receivable

7

21,763

21,544

Receivables financing

 

707

207

Prepayments

9

2,626

2,665

Other receivables

10

37,938

78,872

Inventories

 

39,034

49,116

Other current assets

 

14,048

25,149

Total current assets

 

223,080

232,565

Non-current assets

 

 

 

Long-term equity investments

12

343,356

304,687

Other equity instrument investments

 

428

395

Fixed assets

13

283,695

291,547

Construction in progress

14

59,880

60,493

Right-of-use assets

15

108,737

112,832

Intangible assets

 

8,779

8,809

Long-term deferred expenses

 

2,499

2,630

Deferred tax assets

 

12,661

7,315

Other non-current assets

 

26,828

2,490

Total non-current assets

 

846,863

791,198

Total assets

 

1,069,943

1,023,763

Liabilities and shareholders' equity

 

 

 

Current liabilities

 

 

 

Short-term loans

 

20,669

19,919

Derivative financial liabilities

 

362

157

Bills payable

 

6,061

4,766

Accounts payable

 

65,779

75,352

Contract liabilities

 

5,840

5,112

Employee benefits payable

 

1,673

1,214

Taxes payable

 

43,500

43,025

Other payables

 

188,568

118,064

Non-current liabilities due within one year

 

12,026

59,596

Other current liabilities

 

439

-

Total current liabilities

 

344,917

327,205

Non-current liabilities

 

 

 

Long-term loans

 

30,413

12,680

Debentures payable

 

26,977

7,000

Lease liabilities

 

105,691

107,783

Provisions

 

36,089

34,514

Other non-current liabilities

 

3,581

4,471

Total non-current liabilities

 

202,751

166,448

Total liabilities

 

547,668

493,653

Shareholders' equity

 

 

 

Share capital

 

121,071

121,071

Capital reserve

 

68,976

68,841

Other comprehensive income

 

5,910

1,181

Specific reserve

 

1,189

949

Surplus reserves

 

209,280

207,423

Retained earnings

 

115,849

130,645

Total shareholders' equity

 

522,275

530,110

Total liabilities and shareholders' equity

 

1,069,943

1,023,763

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

The accompanying notes form part of these financial statements.

 

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2020

 

 

Notes

2020

2019

 

 

RMB million

RMB million

Operating income

40

2,105,984

2,959,799

Less:   Operating costs

40

1,688,398

2,479,356

Taxes and surcharges

41

234,947

244,517

Selling and distribution expenses

 

64,438

63,586

General and administrative expenses

 

66,291

63,038

Research and development expenses

44

10,086

9,450

Financial expenses

42

9,506

10,048

Exploration expenses, including dry holes

45

9,716

10,510

Add:   Other income

46

7,513

5,995

Investment income

47

47,486

12,628

Losses from changes in fair value

48

(1,253)

(3,511)

Credit impairment losses

 

(2,066)

(1,264)

Impairment losses

49

(26,018)

(1,779)

Asset disposal losses

 

2,067

(1,229)

Operating profit

 

50,331

90,134

Add: Non-operating income

50

2,370

2,601

Less: Non-operating expenses

51

4,732

2,624

Profit before taxation

 

47,969

90,111

Less: Income tax expense

52

6,219

17,939

Net profit

 

41,750

72,172

Including: net profit of acquiree before bussiness combination under common control

 

119

50

Classification by going concern:

 

 

 

Continuous operating net profit

 

41,750

72,172

Termination of net profit

 

-

-

Classification by ownership:

 

 

 

Equity shareholders of the Company

 

32,924

57,619

Minority interests

 

8,826

14,553

Basic earnings per share

64

0.272

0.476

Diluted earnings per share

64

0.272

0.476

Other comprehensive income

38

 

 

Items that may not be reclassified subsequently to profit or loss

 

 

 

Changes in fair value of other equity instrument investments

 

(22)

(31)

Items that may be reclassified subsequently to profit or loss

 

 

 

Other comprehensive income that can be converted into profit or loss under the equity method

 

(2,441)

(810)

Fair value hedges

 

162

-

Cash flow hedges

 

7,073

4,941

Foreign currency translation differences

 

(4,457)

1,480

Total other comprehensive income

 

315

5,580

Total comprehensive income

 

42,065

77,752

Attributable to:

 

 

 

Equity shareholders of the Company

 

34,318

63,034

Minority interests

 

7,747

14,718

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

 

 

 

The accompanying notes form part of these financial statements.

 

INCOME STATEMENT

For the year ended 31 December 2020

 

 

Notes

2020

2019

 

 

RMB million

RMB million

Operating income

40

770,321

1,021,272

Less:   Operating costs

40

584,315

799,566

Taxes and surcharges

 

148,350

161,820

Selling and distribution expenses

 

3,256

3,420

General and administrative expenses

 

29,868

28,302

Research and development expenses

 

9,098

8,597

Financial expenses

 

8,749

7,628

Exploration expenses, including dry holes

 

8,297

9,417

Add:   Other income

 

4,922

3,497

Investment income

47

43,356

28,062

Gains/(losses) from changes in fair value

 

350

(278)

Credit impairment losses

 

71

132

Impairment losses

 

(16,374)

(534)

Asset disposal gains

 

261

6,407

Operating profit

 

10,974

39,808

Add: Non-operating income

 

900

665

Less: Non-operating expenses

 

1,319

1,135

Profit before taxation

 

10,555

39,338

Less: Income tax (credit)/expense

 

(8,017)

1,886

Net profit

 

18,572

37,452

Classification by going concern:

 

 

 

Continuous operating net profit

 

18,572

37,452

Termination of net profit

 

-

-

Other comprehensive income

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

Other comprehensive income that can be converted into profit or loss under the equity method

 

(182)

201

Cash flow hedges

 

4,948

1,384

Total other comprehensive income

 

4,766

1,585

Total comprehensive income

 

23,338

39,037

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes form part of these financial statements.

 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2020

 

 

Notes

2020

2019

 

 

RMB million

RMB million

Cash flows from operating activities:

 

 

 

Cash received from sale of goods and rendering of services

 

2,297,159

3,171,968

Refund of taxes and levies

 

2,985

2,053

Other cash received relating to operating activities

 

212,828

98,464

Sub-total of cash inflows

 

2,512,972

3,272,485

Cash paid for goods and services

 

(1,754,016)

(2,591,739)

Cash paid to and for employees

 

(83,772)

(84,283)

Payments of taxes and levies

 

(282,162)

(318,091)

Other cash paid relating to operating activities

 

(225,504)

(124,753)

Sub-total of cash outflows

 

(2,345,454)

(3,118,866)

Net cash flow from operating activities

54(a)

167,518

153,619

Cash flows from investing activities:

 

 

 

Cash received from disposal of investments

 

11,651

35,996

Cash received from returns on investments

 

11,510

10,272

Net cash received from disposal of fixed assets, intangible assets and other long-term assets

 

2,656

709

Net cash received from disposal of subsidiaries and other business entities

54(d)

49,869

-

Other cash received relating to investing activities

 

58,669

97,804

Sub-total of cash inflows

 

134,355

144,781

Cash paid for acquisition of fixed assets, intangible assets and other long-term assets

 

(131,189)

(141,554)

Cash paid for acquisition of investments

 

(12,740)

(16,334)

Net cash paid for the acquisition of subsidiaries and other business entities

 

(340)

(1,031)

Other cash paid relating to investing activities

 

(92,289)

(106,913)

Sub-total of cash outflows

 

(236,558)

(265,832)

Net cash flow from investing activities

 

(102,203)

(121,051)

Cash flows from financing activities:

 

 

 

Cash received from capital contributions

 

4,219

3,919

Including: Cash received from minority shareholders' capital contributions to subsidiaries

 

4,219

3,919

Cash received from borrowings

 

558,680

602,467

Other cash received relating to financing activities

 

514

320

Sub-total of cash inflows

 

563,413

606,706

Cash repayments of borrowings

 

(540,015)

(614,108)

Cash paid for dividends, profits distribution or interest

 

(43,144)

(59,615)

Including: Subsidiaries' cash payments for distribution of dividends or profits to
 minority shareholders

 

(4,157)

(7,357)

Other cash paid relating to financing activities

54(e)

(17,209)

(17,187)

Sub-total of cash outflows

 

(600,368)

(690,910)

Net cash flow from financing activities

 

(36,955)

(84,204)

Effects of changes in foreign exchange rate

 

(1,239)

147

Net increase/(decrease) in cash and cash equivalents

54(b)

27,121

(51,489)

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes form part of these financial statements.

 

CASH FLOW STATEMENT

For the year ended 31 December 2020

 

 

Notes

2020

2019

 

 

RMB million

RMB million

Cash flows from operating activities:

 

 

 

Cash received from sale of goods and rendering of services

 

862,093

1,162,870

Refund of taxes and levies

 

2,796

1,769

Other cash received relating to operating activities

 

9,407

6,239

Sub-total of cash inflows

 

874,296

1,170,878

Cash paid for goods and services

 

(606,295)

(842,996)

Cash paid to and for employees

 

(44,139)

(45,524)

Payments of taxes and levies

 

(164,635)

(209,863)

Other cash paid relating to operating activities

 

(19,239)

(18,719)

Sub-total of cash outflows

 

(834,308)

(1,117,102)

Net cash flow from operating activities

 

39,988

53,776

Cash flows from investing activities:

 

 

 

Cash received from disposal of investments

 

12,157

23,584

Cash received from returns on investments

 

18,805

31,385

Net cash received from disposal of fixed assets, intangible assets and other long-term assets

 

6,579

690

Other cash received relating to investing activities

 

78,751

42,037

Sub-total of cash inflows

 

116,292

97,696

Cash paid for acquisition of fixed assets, intangible assets and other long-term assets

 

(59,216)

(64,100)

Cash paid for acquisition of investments

 

(41,066)

(16,884)

Other cash paid relating to investing activities

 

(66,408)

(53,138)

Sub-total of cash outflows

 

(166,690)

(134,122)

Net cash flow from investing activities

 

(50,398)

(36,426)

Cash flows from financing activities:

 

 

 

Cash received from borrowings

 

195,770

109,579

Other cash received relating to financing activities

 

70,516

91,865

Sub-total of cash inflows

 

266,286

201,444

Cash repayments of borrowings

 

(199,727)

(106,920)

Cash paid for dividends or interest

 

(36,973)

(50,230)

Other cash paid relating to financing activities

 

(7,074)

(104,780)

Sub-total of cash outflows

 

(243,774)

(261,930)

Net cash flow from financing activities

 

22,512

(60,486)

Effects of changes in foreign exchange rate

 

(5)

-

Net increase/(decrease) in cash and cash equivalents

 

12,097

(43,136)

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

 

 

  

 

The accompanying notes form part of these financial statements.

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

 

 

Share

capital

Capital

reserve

Other

comprehensive

income

Specific

reserve

Surplus

reserves

Retained

earnings

Total

shareholders'

 equity

attributable

to equity

shareholders of

the Company

Minority

interests

Total

shareholders'

equity

 

RMB million

RMB million

RMB million

RMB million

RMB million

RMB million

RMB million

RMB million

RMB million

Balance at 31 December 2018

121,071

119,192

(6,774)

1,706

203,678

279,482

718,355

139,304

857,659

Adjustment for bussiness combination of entities under
 common control (Note 58)

-

735

-

-

-

58

793

670

1,463

Balance at 1 January 2019

121,071

119,927

(6,774)

1,706

203,678

279,540

719,148

139,974

859,122

Change for the year

 

 

 

 

 

 

 

 

 

1.    Net profit

-

-

-

-

-

57,619

57,619

14,553

72,172

2.    Other comprehensive income (Note 38)

-

-

5,415

-

-

-

5,415

165

5,580

Total comprehensive income

-

-

5,415

-

-

57,619

63,034

14,718

77,752

Amounts transferred to initial carrying amount of hedged items

-

-

1,038

-

-

-

1,038

55

1,093

Transactions with owners, recorded directly in shareholders' equity:

 

 

 

 

 

 

 

 

 

3.    Appropriations of profits:

 

 

 

 

 

 

 

 

 

- Appropriations for surplus reserves

-

-

-

-

3,745

(3,745)

-

-

-

- Distributions to shareholders (Note 53)

-

-

-

-

-

(46,008)

(46,008)

-

(46,008)

4.    Contributions to subsidiaries from minority interests

-

-

-

-

-

-

-

5,495

5,495

5.    Transaction with minority interests

-

2,933

-

-

-

-

2,933

(2,933)

-

6.    Distributions to minority interests

-

-

-

-

-

-

-

(18,989)

(18,989)

Total transactions with owners, recorded directly in shareholders' equity

-

2,933

-

-

3,745

(49,753)

(43,075)

(16,427)

(59,502)

7.    Net increase in specific reserve for the year

-

-

-

35

-

-

35

34

69

8.    Others

-

4

-

-

-

(219)

(215)

55

(160)

Balance at 31 December 2019

121,071

122,864

(321)

1,741

207,423

287,187

739,965

138,409

878,374

Balance at 1 January 2020

121,071

122,864

(321)

1,741

207,423

287,187

739,965

138,409

878,374

Change for the year

 

 

 

 

 

 

 

 

 

1.    Net profit

-

-

-

-

-

32,924

32,924

8,826

41,750

2.    Other comprehensive income (Note 38)

-

-

1,406

-

-

(12)

1,394

(1,079)

315

Total comprehensive income

-

-

1,406

-

-

32,912

34,318

7,747

42,065

Amounts transferred to initial carrying amount of hedged items

-

-

(47)

-

-

-

(47)

48

1

Transactions with owners, recorded directly in shareholders' equity:

 

 

 

 

 

 

 

 

 

3.    Appropriations of profits:

 

 

 

 

 

 

 

 

 

- Appropriations for surplus reserves

-

-

-

-

1,857

(1,857)

-

-

-

- Distributions to shareholders (Note 53)

-

-

-

-

-

(31,479)

(31,479)

-

(31,479)

4.    Contributions to subsidiaries from minority interests

-

-

-

-

-

-

-

3,325

3,325

5.    Transaction with minority interests

-

(138)

-

-

-

-

(138)

13

(125)

6.    Distributions to minority interests

-

-

-

-

-

-

-

(6,726)

(6,726)

7.    Adjustment for bussiness combination of entities under common control

-

(972)

-

-

-

-

(972)

972

-

Total transactions with owners, recorded directly in shareholders' equity

-

(1,110)

-

-

1,857

(33,336)

(32,589)

(2,416)

(35,005)

8.    Net increase in specific reserve for the year

-

-

-

200

-

-

200

37

237

9.    Others

-

804

-

-

-

(188)

616

(2,412)

(1,796)

Balance at 31 December 2020

121,071

122,558

1,038

1,941

209,280

286,575

742,463

141,413

883,876

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes form part of these financial statements.

 

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

 

 

Share

capital

Capital

reserve

Other

comprehensive

income

Specific

reserve

Surplus

reserves

Retained

earnings

Total

shareholders'

equity

 

RMB million

RMB million

RMB million

RMB million

RMB million

RMB million

RMB million

Balance at 1 January 2019

121,071

68,795

(485)

989

203,678

143,148

537,196

Change for the year

 

 

 

 

 

 

 

1.    Net profit

-

-

-

-

-

37,452

37,452

2.    Other comprehensive income

-

-

1,585

-

-

-

1,585

Total comprehensive income

-

-

1,585

-

-

37,452

39,037

Amounts transferred to initial carrying amount of hedged items

-

-

81

-

-

-

81

Transactions with owners, recorded directly in shareholders' equity:

 

 

 

 

 

 

 

3.    Appropriations of profits:

 

 

 

 

 

 

 

Appropriations for surplus reserves

-

-

-

-

3,745

(3,745)

-

Distributions to shareholders (Note 53)

-

-

-

-

-

(46,008)

(46,008)

Total transactions with owners, recorded directly in shareholders' equity

-

-

-

-

3,745

(49,753)

(46,008)

4.    Net increase in specific reserve for the year

-

-

-

(40)

-

-

(40)

5.    Others

-

46

-

-

-

(202)

(156)

Balance at 31 December 2019

121,071

68,841

1,181

949

207,423

130,645

530,110

Balance at 1 January 2020

121,071

68,841

1,181

949

207,423

130,645

530,110

Change for the year

 

 

 

 

 

 

 

1.    Net profit

-

-

-

-

-

18,572

18,572

2.    Other comprehensive income

-

-

4,766

-

-

-

4,766

Total comprehensive income

-

-

4,766

-

-

18,572

23,338

Amounts transferred to initial carrying amount of hedged items

-

-

(37)

-

-

-

(37)

Transactions with owners, recorded directly in shareholders' equity:

 

 

 

 

 

 

 

3.    Appropriations of profits:

 

 

 

 

 

 

 

Appropriations for surplus reserves

-

-

-

-

1,857

(1,857)

-

Distributions to shareholders (Note 53)

-

-

-

-

-

(31,479)

(31,479)

Total transactions with owners, recorded directly in shareholders' equity

-

-

-

-

1,857

(33,336)

(31,479)

4.    Net increase in specific reserve for the year

-

-

-

240

-

-

240

5.    Others

-

135

-

-

-

(32)

103

Balance at 31 December 2020

121,071

68,976

5,910

1,189

209,280

115,849

522,275

 

These financial statements have been approved for issue by the board of directors on 26 March 2021.

 

 

 

 

 

Zhang Yuzhuo

Ma Yongsheng

Shou Donghua

Chairman

President

Chief Financial Officer

(Leagal representative)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes form part of these financial statements.

 

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020

 

1    STATUS OF THE COMPANY

 

China Petroleum & Chemical Corporation (the "Company") was established on 25 February 2000 as a joint stock limited company. The company is registered in Beijing, the People's Republic of China, and the headquarter is located in Beijing, the People's Republic of China. The approval date of the financial report is 26 March 2021.

 

According to the State Council's approval to the "Preliminary Plan for the Reorganisation of China Petrochemical Corporation" (the "Reorganisation"), the Company was established by China Petrochemical Corporation, which transferred its core businesses together with the related assets and liabilities at 30 September 1999 to the Company. Such assets and liabilities had been valued jointly by China United Assets Appraisal Corporation, Beijing Zhong Zheng Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa International Properties Valuation Corporation. The net asset value was determined at RMB 98,249,084,000. The valuation was reviewed and approved by the Ministry of Finance (the "MOF") (Cai Ping Zi [2000] No. 20 "Comments on the Review of the Valuation Regarding the Formation of a Joint Stock Limited Company by China Petrochemical Corporation").

 

In addition, pursuant to the notice Cai Guan Zi [2000] No. 34 "Reply to the Issue Regarding Management of State-Owned Equity by China Petroleum and Chemical Corporation" issued by the MOF, 68.8 billion domestic state-owned shares with a par value of RMB 1.00 each were issued to Sinopec Group Company, the amount of which is equivalent to 70% of the above net asset value transferred from Sinopec Group Company to the Company in connection with the Reorganisation.

 

Pursuant to the notice Guo Jing Mao Qi Gai [2000] No. 154 "Reply on the Formation of China Petroleum and Chemical Corporation", the Company obtained the approval from the State Economic and Trade Commission on 21 February 2000 for the formation of a joint stock limited company.

 

The Company took over the exploration, development and production of crude oil and natural gas, refining, chemicals and related sales and marketing business of Sinopec Group Company after the establishment of the Company.

 

The Company and its subsidiaries (the "Group") engage in the oil and gas and chemical operations and businesses, including:

 

(1)       the exploration, development and production of crude oil and natural gas;

 

(2)       the refining, transportation, storage and marketing of crude oil and petroleum product; and

 

(3)       the production and sale of chemical.

 

Details of the Company's principal subsidiaries are set out in Note 57.

 

2    BASIS OF PREPARATION

 

(1)  Statement of compliance of China Accounting Standards for Business Enterprises ("CASs")

The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises - Basic Standards, specific standards and relevant regulations (hereafter referred as CASs collectively) issued by the MOF on or after 15 February 2006. These financial statements also comply with the disclosure requirements of "Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares, No.15: General Requirements for Financial Reports" issued by the China Securities Regulatory Commission ("CSRC"). These financial statements present truly and completely the consolidated and company financial position as at 31 December 2020, and the consolidated and company financial performance and the consolidated and company cash flows for the year ended 31 December 2020.

 

These financial statements are prepared on a basis of going concern.

 

(2)  Accounting period

The accounting year of the Group is from 1 January to 31 December.

 

(3)  Measurement basis

The financial statements of the Group have been prepared under the historical cost convention, except for the assets and liabilities set out below:

 

-    Financial assets held for trading (see Note 3(11))

 

-    Other equity instrument investments (see Note 3(11))

 

-    Derivative financial instruments (see Note 3(11))

 

-    Receivables financing (see Note 3(11))

 

(4)  Functional currency and presentation currency

The functional currency of the Company's and most of its subsidiaries are Renminbi. The Company and its subsidiaries determine their functional currency according to the main economic environment in where they operate. The Group's consolidated financial statements are presented in Renminbi. Some of subsidiaries use other currency as the functional currency. The Company translates the financial statements of subsidiaries from their respective functional currencies into Renminbi (see Note 3(2)) if the subsidiaries' functional currencies are not Renminbi.

 

3    SIGNIFICANT ACCOUNTING POLICIES

 

The Group determines specific accounting policies and accounting estimates based on the characteristics of production and operational activities, mainly reflected in the accounting for allowance for financial assets (Note 3(11)), valuation of inventories (Note 3(4)), depreciation of fixed assets and depletion of oil and gas properties (Note 3(7), (8)), measurement of provisions (Note 3(16)), etc.

 

Principal accounting estimates and judgements of the Group are set out in Note 56.

 

(1)  Accounting treatment of business combination involving entities under common control and not under common control

 

(a)  Business combination involving entities under common control

A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The assets and liabilities that the acquirer receives in the acquisition are accounted for at the acquiree's carrying amount on the acquisition date. The difference between the carrying amount of the acquired net assets and the carrying amount of the consideration paid for the acquisition (or the total nominal value of shares issued) is recognised in the share premium of capital reserve, or the retained earnings in case of any shortfall in the share premium of capital reserve. Any costs directly attributable to the combination shall be recognised in profit or loss for the current period when occurred. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised in the initial cost of the securities. The combination date is the date on which the acquirer effectively obtains control of the acquiree.

 

(b)  Business combination involving entities not under common control

A business combination involving entities or businesses not under common control is a business combination in which all of the combining entities or businesses are not ultimately controlled by the same party or parties both before and after the business combination. Difference between the consideration paid by the Group as the acquirer, comprises of the aggregate of the fair value at the acquisition date of assets given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree, and the Group's interest in the fair value of the identifiable net assets of the acquiree, is recognised as goodwill (Note 3(10)) if it is an excess, otherwise in the profit or loss. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised in the initial cost of the securities. Any other expense directly attributable to the business combination is recognised in the profit or loss for the year. The difference between the fair value and the book value of the assets given is recognised in profit or loss. The acquiree's identifiable assets, liabilities and contingent liabilities, if satisfying the recognition criteria, are recognised by the Group at their fair value at the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.

 

(c)  Method for preparation of consolidated financial statements

The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the Company and its subsidiaries. Control means an entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

 

Where the Company combines a subsidiary during the reporting period through a business combination involving entities under common control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at the beginning of the earliest comparative year presented or, if later, at the date that common control was established. Therefore the opening balances and the comparative figures of the consolidated financial statements are restated. In the preparation of the consolidated financial statements, the subsidiary's assets, liabilities and results of operations are included in the consolidated balance sheet and the consolidated income statement, respectively, based on their carrying amounts in the subsidiary's financial statements, from the date that common control was established.

 

Where the Company acquires a subsidiary during the reporting year through a business combination involving entities not under common control, the identifiable assets, liabilities and results of operations of the subsidiaries are consolidated into consolidated financial statements from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date.

 

Where the Company acquired a minority interest from a subsidiary's minority shareholders, the difference between the investment cost and the newly acquired interest into the subsidiary's identifiable net assets at the acquisition date is adjusted to the capital reserve (capital surplus) in the consolidated balance sheet. Where the Company partially disposed an investment of a subsidiary that do not result in a loss of control, the difference between the proceeds and the corresponding share of the interest into the subsidiary is adjusted to the capital reserve (capital surplus) in the consolidated balance sheet. If the credit balance of capital reserve (capital surplus) is insufficient, any excess is adjusted to retained profits.

 

In a business combination involving entities not under common control achieved in stages, the Group remeasures its previously held equity interest in the acquiree on the acquisition date. The difference between the fair value and the net book value is recognised as investment income for the year. If other comprehensive income was recognised regarding the equity interest previously held in the acquiree before the acquisition date, the relevant other comprehensive income is transferred to investment income in the period in which the acquisition occurs.

 

3    SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(1)  Accounting treatment of business combination involving entities under common control and not under common control (Continued)

 

(c)  Method for preparation of consolidated financial statements (Continued)

Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the Group derecognises assets, liabilities, minority interests and other equity items related to the subsidiary. The remaining equity investment is remeasured to fair value at the date in which control is lost. The sum of consideration received from disposal of equity investment and the fair value of the remaining equity investment, net of the fair value of the Group's previous share of the subsidiary's identifiable net assets recorded from the acquisition date, is recognised in investment income in the period in which control is lost. Other comprehensive income related to the previous equity investment in the subsidiary, is transferred to investment income when control is lost. Other comprehensive income related to the equity investment of the original subsidiary shall be converted into the current investment income in the event of loss of control.

 

Minority interest is presented separately in the consolidated balance sheet within shareholders' equity. Net profit or loss attributable to minority shareholders is presented separately in the consolidated income statement below the net profit line item.

 

The excess of the loss attributable to the minority interests during the period over the minority interests' share of the equity at the beginning of the reporting period is deducted from minority interests.

 

Where the accounting policies and accounting period adopted by the subsidiaries are different from those adopted by the Company, adjustments are made to the subsidiaries' financial statements according to the Company's accounting policies and accounting period. Intra-group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment.

 

The unrealised profit or loss arising from the sale of assets by the Company to its subsidiaries is eliminated in full against the net profit attributed to shareholders; the unrealised profit or loss from the sale of assets by subsidiaries to the Company is eliminated according to the distribution ratio between shareholders of the parent company and minority interests. For sale of assets that occurred between subsidiaries, the unrealised gains and losses is eliminated according to the distribution ratio for its subsidiaries seller between net profit attributable to shareholders of the parent company and minority interests.

 

(2)  Transactions in foreign currencies and translation of financial statements in foreign currencies

Foreign currency transactions are, on initial recognition, translated into Renminbi at the spot exchange rates quoted by the People's Bank of China ("PBOC rates") at the transaction dates.

 

Foreign currency monetary items are translated at the PBOC rates at the balance sheet date. Exchange differences, except for those directly related to the acquisition, construction or production of qualified assets, are recognised as income or expenses in the income statement. Non-monetary items denominated in foreign currency measured at historical cost are not translated. Non-monetary items denominated in foreign currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. The difference between the translated amount and the original currency amount is recognised as other comprehensive income, if it is classified as other equity instrument investments; or charged to the income statement if it is measured at fair value through profit or loss.

 

The assets and liabilities of foreign operation are translated into Renminbi at the spot exchange rates at the balance sheet date. The equity items, excluding "Retained earnings", are translated into Renminbi at the spot exchange rates at the transaction dates. The income and expenses of foreign operation are translated into Renminbi at the spot exchange rates or an exchange rate that approximates the spot exchange rates on the transaction dates. The resulting exchange differences are separately presented as other comprehensive income in the balance sheet within equity. Upon disposal of a foreign operation, the cumulative amount of the exchange differences recognised in which relate to that foreign operation is transferred to profit or loss in the year in which the disposal occurs.

 

(3)  Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, short-term and highly liquid investments which are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.

 

(4)  Inventories

Inventories are initially measured at cost. Cost includes the cost of purchase and processing, and other expenditures incurred in bringing the inventories to their present location and condition. The cost of inventories is mainly calculated using the weighted average method. In addition to the cost of purchase of raw material, work in progress and finished goods include direct labour and an appropriate allocation of manufacturing overhead costs.

 

At the balance sheet date, inventories are stated at the lower of cost and net realisable value.

 

Any excess of the cost over the net realisable value of each item of inventories is recognised as a provision for diminution in the value of inventories. Net realisable value is the estimated selling price in the normal course of business less the estimated costs of completion and the estimated costs necessary to make the sale and relevant taxes. The net realisable value of materials held for use in the production is measured based on the net realisable value of the finished goods in which they will be incorporated. The net realisable value of the quantity of inventory held to satisfy sales or service contracts is measured based on the contract price. If the quantities held by the Group are more than the quantities of inventories specified in sales contracts, the net realisable value of the excess portion of inventories is measured based on general selling prices.

 

3    SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(4)  Inventories (Continued)

Inventories include raw materials, work in progress, semi-finished goods, finished goods and reusable materials. Reusable materials include low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets. Reusable materials are amortised in full when received for use. The amounts of the amortisation are included in the cost of the related assets or profit or loss.

 

Inventories are recorded by perpetual method.

 

(5)  Long-term equity investments

 

(a)  Investment in subsidiaries

In the Company's separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method. Except for cash dividends or profits distributions declared but not yet distributed that have been included in the price or consideration paid in obtaining the investments, the Company recognises its share of the cash dividends or profit distributions declared by the investee as investment income irrespective of whether these represent the net profit realised by the investee before or after the investment. Investments in subsidiaries are stated at cost less impairment losses (see Note 3(12)) in the balance sheet. At initial recognition, such investments are measured as follows:

 

The initial investment cost of a long-term equity investment obtained through a business combination involving entities under common control is the Company's share of the carrying amount of the subsidiary's equity at the combination date. The difference between the initial investment cost and the carrying amounts of the consideration given is adjusted to share premium in capital reserve. If the balance of the share premium is insufficient, any excess is adjusted to retained earnings.

 

For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial investment cost comprises the aggregate of the fair values of assets transferred, liabilities incurred or assumed, and equity securities issued by the Company, in exchange for control of the acquiree. For a long-term equity investment obtained through a business combination not involving enterprises under common control, if it is achieved in stages, the initial cost comprises the carrying value of previously-held equity investment in the acquiree immediately before the acquisition date, and the additional investment cost at the acquisition date.

 

An investment in a subsidiary acquired otherwise than through a business combination is initially recognised at actual purchase cost if the Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by investors.

 

(b)  Investment in joint ventures and associates

A joint venture is an incorporated entity over which the Group, based on legal form, contractual terms and other facts and circumstances, has joint control with the other parties to the joint venture and rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the Group and the parties sharing control.

 

An associate is the investee that the Group has significant influence on their financial and operating policies. Significant influence represents the right to participate in the financial and operating policy decisions of the investee but is not control or joint control over the establishment of these policies. The Group generally considers the following circumstances in determining whether it can exercise significant influence over the investee: whether there is representative appointed to the board of directors or equivalent governing body of the investee; whether to participate in the investee's policy-making process; whether there are significant transactions with the investees; whether there is management personnel sent to the investee; whether to provide critical technical information to the investee.

 

An investment in a joint ventures or an associate is accounted for using the equity method, unless the investment is classified as held for sale.

 

The initial cost of investment in joint ventures and associates is stated at the consideration paid except for cash dividends or profits distributions declared but unpaid at the time of acquisition and therefore included in the consideration paid should be deducted if the investment is made in cash. Under the circumstances that the long-term investment is obtained through non-monetary asset exchange, the initial cost of the investment is stated at the fair value of the assets exchanged if the transaction has commercial substance, the difference between the fair value of the assets exchanged and its carrying amount is charged to profit or loss; or stated at the carrying amount of the assets exchanged if the transaction lacks commercial substance.

 

The Group's accounting treatments when adopting the equity method include:

 

Where the initial investment cost of a long-term equity investment exceeds the Group's interest in the fair value of the investee's identifiable net assets at the date of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is less than the Group's interest in the fair value of the investee's identifiable net assets at the time of acquisition, the investment is initially recognised at the investor's share of the fair value of the investee's identifiable net assets, and the difference is charged to profit or loss.

 

3    SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(5)  Long-term equity investments (Continued)

 

(b)  Investment in joint ventures and associates (Continued)

After the acquisition of the investment, the Group recognises its share of the investee's net profits or losses and other comprehensive income as investment income or losses and other comprehensive income, and adjusts the carrying amount of the investment accordingly. Once the investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the Group.

 

The Group recognises its share of the investee's net profits or losses after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair values of the investee's net identifiable assets at the time of acquisition. Under the equity accounting method, unrealised profits and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group's interest in the associates or joint ventures. Unrealised losses resulting from transactions between the Group and its associates or joint ventures are fully recognised in the event that there is an evidence of impairment.

 

The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that is in substance forms part of the Group's net investment in the associate or the joint venture is reduced to zero, except to the extent that the Group has an obligation to assume additional losses. However, if the Group has incurred obligations for additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standard on contingencies, the Group continues recognising the investment losses and the provision. Where net profits are subsequently made by the associate or joint venture, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.

 

The Group adjusts the carrying amount of the long-term equity investment for changes in owners' equity of the investee other than those arising from net profits or losses and other comprehensive income, and recognises the corresponding adjustment in capital reserve.

 

(c)  The impairment assessment method and provision accrual on investment

The impairment assessment and provision accrual on investments in subsidiaries, associates and joint ventures are stated in Note 3(12).

 

(6)  Leases

A lease is a contract that a lessor transfers the right to use an identified asset for a period of time to a lessee in exchange for consideration.

 

(a)  As Lessee

The Group recognises a right-of-use asset at the commencement date, and recognises the lease liability at the present value of the lease payments that are not paid at that date. The lease payments include fixed payments, the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease term reflects the Group exercising that option, etc. Variable payments that are based on a percentage of sales are not included in the lease payments, and should be recognised in profit or loss when incurred. Lease liabilities to be paid within one year (including one year) from balance sheet date is presented in non-current liabilities due within one year.

 

Right-of-use assets of the Group mainly comprise land. Right-of-use assets are measured at cost which comprises the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the lessee, less any lease incentives received. The Group depreciates the right-of-use assets over the shorter of the asset's useful life and the lease term on a straight-line basis. When the recoverable amount of a right-of-use asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount.

 

Payments associated with short-term leases with lease terms within 12 months and leases for which the underlying assets are individually of low value when it is new are recognised on a straight-line basis over the lease term as an expense in profit or loss or as cost of relevant assets, instead of recognising right-of-use assets and lease liabilities.

 

A lessee shall account for a lease modification as a separate lease if both: (1) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and (2) the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

 

For a lease modification that is not accounted for as a separate lease, except for the practical expedient which applies only to rent concessions occurring as a direct consequence of the COVID-19 pandemic, the group determine the lease term of the modified lease at the effective date of the modification, and remeasure the lease liability by discounting the revised lease payments using a revised discount rate. The group decrease the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease for lease modifications that decrease the scope or shorten the term of the lease, and shall recognise in profit or loss any gain or loss relating to the partial or full termination of the lease. The group make a corresponding adjustment to the right-of-use asset for all other lease modifications.

 

(b)  As Lessor

A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a lease other than a finance lease.

 

When the Group leases self-owned plants and buildings, equipment and machinery, lease income from an operating lease is recognised on a straight-line basis over the period of the lease. The Group recognises variable lease income which is based on a certain percentage of sales as rental income when occurred.

 

3    SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

(7)  Fixed assets and construction in progress

Fixed assets represent the tangible assets held by the Group using in the production of goods, rendering of services and for operation and administrative purposes with useful life over one year.

 

Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(12)). Construction in progress is stated in the balance sheet at cost less impairment losses (see Note 3(12)).

 

The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing costs (see Note 3(19)), and any other costs directly attributable to bringing the asset to working condition for its intended use. According to legal or contractual obligations, costs of dismantling and removing the items and restoring the site on which the related assets located are included in the initial cost.

 

Construction in progress is transferred to fixed assets when the asset is ready for its intended use. No depreciation is provided against construction in progress.

 

Where the individual component parts of an item of fixed asset have different useful lives or provide benefits to the Group in different patterns thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset.

 

The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed assets are recognised in profit or loss as incurred.

 

The Group terminates the recognition of an item of fixed asset when it is in a state of disposal or it is estimated that it is unable to generate any economic benefits through use or disposal. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal.

 

Other than oil and gas properties, the cost of fixed assets less residual value and accumulated impairment losses is depreciated using the straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale. The estimated useful lives and the estimated rate of residual values adopted for respective classes of fixed assets are as follows:

 

 

Estimated

Estimated rate

 

useful life

of residual value

Plants and buildings

12-50 years

3%

Equipment, machinery and others

4-30 years

3%

 

Useful lives, residual values and depreciation methods are reviewed at least each year end.

 

(8)  Oil and gas properties

Oil and gas properties include the mineral interests in properties, wells and related support equipment arising from oil and gas exploration and production activities.