Company Announcements

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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 2021

 

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 2021. This announcement, containing the full text of the 2021 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 2021 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 2021 Annual Report of Sinopec Corp. will be delivered to the shareholders of H shares of Sinopec Corp. in April 2022.

 

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,

25 March 2022

 

As of the date of this announcement, directors of the Company are: Ma Yongsheng^*, Zhao Dong^*, Yu Baocai^#,
Ling Yiqun^#, Li Yonglin^#, Liu Hongbin^#, Cai Hongbin⁺, Ng, Kar Ling Johnny⁺, Shi Dan⁺ and Bi Mingjian⁺.

 

#       Executive Director

*       Non-executive Director

+       Independent Non-executive Director

CONTENTS

 

2	Company Profile
3	Principal Financial Data and Indicators
7	Chairman's Address
10	Business Review and Prospects
17	Management's Discussion and Analysis
28	Corporate Governance
47	Environment and Social Responsibilities
48	Significant Events
55	Connected Transactions
57	Report of the Board of Directors
65	Report of the Board of Supervisors
67	Changes in Share Capital and Shareholdings  of Principal Shareholders
69	Bond General Information
72	Principal Wholly-owned and  Controlled Subsidiaries
73	Financial Statements
211	Corporate Information
212	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 25 March 2022 and unless required by regulatory authorities, the Company undertakes no obligation to update these statements.

COMPANY PROFILE

 

IMPORTANT NOTICE: THE BOARD OF DIRECTORS, THE BOARD OF SUPERVISORS, DIRECTORS, 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.

 

ALL DIRECTORS ATTENDED THE 7TH MEETING OF THE EIGHTH SESSION OF THE BOARD. MR. MA YONGSHENG, CHAIRMAN OF THE BOARD, MR. YU BAOCAI, PRESIDENT, MS. SHOU DONGHUA, CHIEF FINANCIAL OFFICER AND HEAD OF THE FINACIAL 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 2021.

 

THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2021 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 KPMG HUAZHEN LLP AND KPMG RESPECTIVELY. BOTH FIRMS HAVE ISSUED STANDARD UNQUALIFIED AUDITOR'S REPORT.

 

AS APPROVED AT THE 7TH MEETING OF THE EIGHTH SESSION OF THE BOARD OF DIRECTORS OF SINOPEC CORP., THE BOARD PROPOSED A FINAL CASH DIVIDEND OF RMB0.31 (TAX INCLUSIVE) PER SHARE FOR 2021, COMBINING WITH THE INTERIM DIVIDEND OF RMB0.16 (TAX INCLUSIVE) PER SHARE, THE TOTAL CASH DIVIDEND FOR 2021WILL BE RMB0.47 (TAX INCLUSIVE) PER SHARE. THE DIVIDEND PROPOSAL IS SUBJECT TO THE SHAREHOLDERS' APPROVAL AT THE ANNUAL GENERAL MEETING FOR THE YEAR 2021.

 

COMPANY PROFILE

Sinopec H shares were listed in Hong Kong, New York and London exchanges on October 18 and 19, 2000, respectively, and A shares were listed in the Shanghai Stock Exchange on August 8, 2001.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; hydrogen energy business and related services such as hydrogen production, storage, transportation and sales; battery charging and swaping, solar energy, wind energy and other new energy business and related services。

 

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

Sinopec Finance Co.: Sinopec Finance Co., Ltd.

Century Bright: Sinopec Century Bright Capital Investment, Ltd.

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 = 7.22 barrels in 2021, 1 tonne = 7.20 barrels in 2020, 1 tonne = 7.21 barrels in 2019;

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
	2021	2020 After adjustment	2020 Before adjustment	Change	2019 After adjustment	2019 Before adjustment
Items	RMB million	RMB million	RMB million	(%)	RMB million	RMB million
Operating income	2,740,884	2,104,724	2,105,984	30.2	2,957,868	2,959,799
Operating profit	112,414	50,803	50,331	121.3	90,273	90,134
Profit before taxation	108,348	48,441	47,969	123.7	90,250	90,111
Net profit attributable to equity shareholders of the Company	71,208	33,271	32,924	114.0	57,643	57,619
Net profit/(loss) attributable to equity shareholders of the Company excluding  extraordinary gains and losses	72,220	(1,565)	(1,565)	-	54,280	54,280
Net cash flow from operating activities	225,174	168,520	167,518	33.6	154,380	153,619

 

	2021
	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
	RMB million	RMB million	RMB million	RMB million	RMB million
Operating income	576,559	684,214	740,918	739,193	2,740,884
Net profit attributable to equity shareholders of the Company	18,160	21,266	20,603	11,179	71,208
Net profit attributable to equity shareholders of the Company  excluding extraordinary gains and losses	17,674	20,746	20,300	13,500	72,220
Net cash flow from operating activities	(15,188)	63,535	68,397	108,430	225,174

 

	For the year ended 31 December
	2021	2020 After adjustment	2020 Before adjustment	Change	2019 After adjustment	2019 Before adjustment
Items	RMB million	RMB million	RMB million	(%)	RMB million	RMB million
Total assets	1,889,255	1,738,896	1,733,805	8.6	1,765,702	1,760,286
Total liabilities	973,214	850,176	849,929	14.5	882,554	881,912
Total equity attributable to equity shareholders of the Company	775,102	747,294	742,463	3.7	744,738	739,965
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
	2021	2020 After adjustment	2020 Before adjustment	Change	2019 After adjustment	2019 Before adjustment
Items	RMB Yuan	RMB Yuan	RMB Yuan	(%)	RMB Yuan	RMB Yuan
Basic earnings per share	0.588	0.275	0.272	113.8	0.476	0.476
Diluted earnings per share	0.588	0.275	0.272	113.8	0.476	0.476
Basic earnings per share (excluding extraordinary gains and losses)	0.597	(0.013)	(0.013)	-	0.448	0.448
Weighted average return on net assets (%)	9.35	4.46	4.44	4.89	7.85	7.90
				percentage
				points
Weighted average return (excluding extraordinary gains and losses)	9.49	(0.21)	(0.21)	9.70	7.39	7.44
on net assets (%)				percentage
				points
Net cash flow from operating activities per share	1.860	1.392	1.384	33.6	1.275	1.269

 

	For the year ended 31 December
	2021	2020 After adjustment	2020 Before adjustment	Change	2019 After adjustment	2019 Before adjustment
Items	RMB Yuan	RMB Yuan	RMB Yuan	(%)	RMB Yuan	RMB Yuan
Net assets attributable to equity shareholders of the Company per share	6.402	6.172	6.132	3.7	6.151	6.112
Liabilities to assets ratio (%)	51.51	48.89	49.02	2.62	49.98	50.10
				percentage
				points

 

(3)  Extraordinary items and corresponding amounts

 

	For the year ended 31 December
	(Income)/expenses
	2021	2020	2019
Items	RMB million	RMB million	RMB million
Net (gain)/loss on disposal of non-current assets	(665)	(973)	1,318
Donations	165	301	209
Government grants	(3,085)	(8,605)	(6,857)
Gain on holding and disposal of various investments	(259)	(37,520)	(410)
Other non-operating expenses, net	4,720	2,992	634
Net (loss)/profit acquired through business combination under common control  during the reporting period	101	(472)	(139)
Subtotal	977	(44,277)	(5,245)
Tax effect	(72)	6,736	1,757
Total	905	(37,541)	(3,488)
Attributable to: Equity shareholders of the Company	1,012	(34,836)	(3,363)
Minority interests	(107)	(2,705)	(125)

 

(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	1,525	767	(758)	-
Derivative financial instruments	157	1,350	1,193	(14,873)
Cash flow hedging	7,545	13,798	6,253	10,690
Financial assets held for trading	1	-	(1)	99
Receivables financing	8,735	5,939	(2,796)	-
Total	17,963	21,854	3,891	(4,084)

 

(5)  Significant changes of items in the financial statements

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

 

	As of 31 December		Increase/(decrease)
	2021	2020	Amount	Percentage
Items	RMB million	RMB million	RMB million	(%)	Reasons for change
Operating income	2,740,884	2,104,724	636,160	30.2	A result of sharp increase in the price and sales volume of refining products
Operating costs	2,216,551	1,685,674	530,877	31.5	Increase in procurement cost of raw materials due to the rising prices of commodities including crude oil
Investment income	6,032	47,486	(41,454)	(87.3)	Lump-sum income from the restruction of PipeChina was recognised in 2020
Gains/(Losses) from changes in fair value	3,341	(1,253)	4,594	-	Impact of changes in variable gains and losses on hedged derivatives
Impairment losses	(13,165)	(26,087)	12,922	(49.5)	Decrease in allowance for diminution in value of inventories
Operating profit	112,414	50,803	61,611	121.3	Increase in demand and gross margins of main products
Profit before taxation	108,348	48,441	59,907	123.7	Expansion of operation and increase in the level of gross profit
Income tax expense	23,318	6,344	16,974	267.6	Increase in profit for the year
Net profit	85,030	42,097	42,933	102.0	Increase in operating profit
Cash flow hedges	19,018	7,073	11,945	168.9	Increase in effective portion of cash flow hedges
Derivative financial assets	18,371	12,528	5,843	46.6	Unrealised profit increased from crude oil hedging
Derivative financial liabilities	3,223	4,826	(1,603)	(33.2)
Receivables financing	5,939	8,735	(2,796)	(32.0)	Improvement in fund efficiency and increase of bills turnover
Inventories	207,433	152,191	55,242	36.3	Increase in the prices of crude oil, refined oil products and the cost of inventory
Short-term loans	27,366	20,756	6,610	31.8	Increase in loan of holding subsidiaries.
Accounts payable	203,919	151,514	52,405	34.6	Increase in procurement cost due to increase in the price of crude oil and refined oil
Other payables	114,701	85,012	29,689	34.9	Increase in derivative commodity margins
Net cash flow from operating activities	225,174	168,520	56,654	33.6	Increase in cash income from net profit due to higher gross profit
Net cash received from disposal of subsidiaries and other business entities	5,205	49,869	(44,664)	(89.6)	Mainly due to the cash consideration received from the restruction of PipeChina in 2020
Net cash flow from investing activities	(145,198)	(102,650)	(42,548)	41.4	Mainly because of the cash consideration received from the restruction of PipeChina in 2020
Net cash flow from financing activities	(57,942)	(37,510)	(20,432)	54.5	Increase in actual cash dividend paid for 2021

 

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

 

Unit: RMB million

 

	For the year ended 31 December
Items	2021	2020	2019	2018	2017
Revenue	2,740,884	2,104,724	2,957,868	2,879,192	2,347,726
Operating profit	94,628	13,669	86,516	82,884	72,396
Profit before taxation	109,169	48,615	90,161	99,658	87,544
Profit attributable to shareholders of the Company	71,975	33,443	57,517	61,920	51,821
Basic earnings per share (RMB)	0.594	0.276	0.475	0.511	0.428
Diluted earnings per share (RMB)	0.594	0.276	0.475	0.511	0.428
Return on capital employed (%)	11.29	6.22	8.94	9.21	8.27
Return on net assets (%)	9.30	4.48	7.73	8.57	7.08
Net cash generated from operating activities per share (RMB)	1.860	1.392	1.275	1.455	1.579

 

Unit: RMB million

 

	As of 31 December
Items	2021	2020	2019	2018	2017
Non-current assets	1,331,231	1,283,236	1,318,258	1,097,045	1,074,985
Net current liabilities	83,256	67,335	133,166	63,514	52,466
Non-current liabilities	332,901	328,199	303,014	170,803	163,387
Non-controlling interests	140,892	141,377	138,359	139,922	127,510
Total equity attributable to shareholders of the Company	774,182	746,325	743,719	722,806	731,622
Net assets per share (RMB)	6.394	6.164	6.143	5.970	6.043
Adjusted net assets per share (RMB)	6.225	5.954	5.993	5.787	5.913

 

3    MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER CASs AND IFRS PLEASE REFER TO PAGE 204 OF THE REPORT.

 

 

CHAIRMAN'S ADDRESS

 

Dear Shareholders and Friends:

 

First, I would like to express my sincere gratitude to our shareholders and directors for their valued trust and support in nominating me as Chairman of the Company. I am honored to take on this mission and the responsibilities of the role. Together with the Board, we will fulfill our duties with diligence, promote high-quality development of the Company, and continuously improve our corporate value.

 

In 2021, confronted with the impacts of the Covid-19 pandemic as well as the complex and challenging macroeconomic environment, the Board of Directors fully evaluated market conditions both domestically and internationally, adhered to the goal of pursuing progress while maintaining stability, dedicated the Company to vigorously implementing its world-leading development strategy, and focused on promoting high-quality development. At the same time, the management led the entire staff with great dedication in order to accomplish all of the Company's targets and tasks, getting off to a good start of the 14th Five-Year Plan.

 

Operating results for 2021 achieved a 10-year record high. Over the past year, the Company has taken full advantage of its integrated businesses, made every effort to optimize operations, expanded sales and markets, and reduced costs and expenses, resulting in a substantial increase in operating performance. In accordance with International Financial Reporting Standards, our revenue increased by 30.2% from the previous year to RMB2.74 trillion, operating profit increased by 592.3% to RMB94.628 billion, and profits attributable to shareholders of the Company increased by 115.2% to RMB71.975 billion. Net cash flow from operating activities amounted to RMB225.174 billion, reaching a historical high. The ratio of liabilities to assets at the end of the year was 51.56%, representing a solid financial position. In view of the Company's profitability, shareholder return, and future development needs, the Board of Directors recommended the payment of a final dividend of RMB0.31 per share. Taking into account the interim dividend of RMB0.16 per share, the total dividend for the year was RMB0.47 per share, with a dividend payout ratio of 80%.

 

Corporate governance has continued to evolve. During the year, the Company elected new members to the Board of Directors and the Board of Supervisors and made appointments to senior management, enhancing diversity on the board level. All independent directors fulfilled their duties with diligence and offered strategic advice for reform and development. The Company optimized a number of corporate governance practices and laid a solid foundation for its compliance management system. By deepening reforms and strengthening management, the Company put the SOE Reform 3-year action plan into effect and implemented the benchmarking programme of improving management, enhanced the effectiveness of its internal controls, and upgraded its corporate management performance. Taking advantage of its Party-building activities, the Company further enhanced its supervision mechanisms, motivating staff to increase productivity and pursue career development. In addition, we placed great emphasis on shareholder returns, improved communications with stakeholders, and strengthened environmental, social, and governance measures and disclosures in an effort to consistently increase corporate transparency. Continuing connected transactions of the Company for the next three years gained support and approval by shareholders, ensuring greater production and operational stability.

 

Research and development initiatives achieved fruitful results. We have vigorously implemented an innovation-driven strategy, deepened reform of our R&D mechanisms, built new R&D institutions and technology incubators, and accelerated the deployment of cutting-edge technologies in key areas, including oil & gas exploration and production, chemical new materials, new energy, and green and low-carbon development. As a result, a number of our major R&D projects achieved breakthroughs, and the Company's comprehensive patent advantages continued to rank at the forefront of domestic enterprises, providing vital support for quality development of the Company.

 

The Company has steadily improved the overall quality of its development. We have strengthened scientific and technological innovation, optimized production and operations, accelerated transformation and development, and upgraded the quality and efficiency of the industrial chain. In upstream, we accelerated our efforts in oil and gas exploration, and we achieved major breakthroughs in continental facies shale oilfields exploration. The domestic oil and gas reserve replacement rate reached 154%, while natural gas production grew by 11.9% over the previous year, thereby increasing reserves, stabilizing oil production, increasing gas output, and improving efficiency. In refining, throughput and major products have seen significant growth as a result of the Company's ongoing structural adjustment, including initiatives to shift from oil products to chemicals and specialty products, as well as efforts to construct world-class refining and chemical production clusters. In the chemicals segment, we optimized our raw material and product mix, achieving ongoing increases in production of high-value-added products. In the marketing and distribution segment, we strove to integrate and coordinate production and sales to increase market share, leading to steady growth of domestic sales of refined oil products. We have also achieved rapid development of our non-fuel businesses, as the Company accelerated its development into a comprehensive provider of gasoline, natural gas, hydrogen, power, and energy services. The Company accelerated the pace of its low-carbon transition, deployed projects for hydrogen energy, photovoltaic power stations, and battery charging and swapping, and actively developed biodegradable materials, medical and healthcare materials, and other new businesses. E-commerce platforms such as EPEC, Easy Joy and Chememall have also advanced rapidly.

 

The Company also effectively fulfilled its corporate social responsibilities over the past year. As a Lead member of the United Nations Global Compact, the Company actively responded to climate change by implementing a green and low-carbon development strategy. It has been awarded the title of China Low-Carbon Model for eleven consecutive years. The Company diligently promoted the construction of its health, safety, and environment management system and carried out a three-year campaign to address production safety. We have also strengthened pollution prevention and control to better ensure ecological wellbeing and biodiversity. We implemented multiple measures to support the rural revitalization plan and proactively rendered assistance in flooded areas, as well as undertaking domestic disaster relief and post-disaster reconstruction. As a sponsor of the Beijing Winter Olympics and Paralympics, the Company was committed to providing the best services and disseminating the Olympic spirit. The Company actively and consistently participated in various social welfare initiatives, such as the Warm Stations Program and Drivers' Home Program. We have always valued the physical and psychological health of all our staff, strictly following all mandated measures for pandemic control to safeguard health management. Moreover, the Company has been well recognized for supporting the fight against the pandemic in its business operating locations, and promoting local economic development and environmental protection.

 

We attribute our hard-won achievements in 2021 to the efforts and dedication of the Company's Board of Directors, the Board of Supervisors, the management, and all staff, as well as the valued support of our shareholders and the community. On behalf of the Board of Directors, the management, and our staff, I thank our shareholders and the community for their continued interest in and support of Sinopec Corp. Due to new working arrangements, Mr. Zhang Yuzhuo ended his term as the Chairman of the Company. During his tenure, he was devoted to his duties and played a vital role in improving corporate governance and promoting sustainable development of the Company. On behalf of the Board of Directors, I would like to extend my sincere gratitude to him.

 

Looking ahead, in light of the country's carbon peak and carbon neutrality goals, resource and environmental constraints will have a profound impact on the development of the energy and chemical industries. The energy industry has entered a phase of transition requiring qualitative changes and a deepening structural adjustment, which will pose serious challenges to the Company's high-quality development. Considering the current stage of its development, as well as the existing opportunities and challenges, the Company will continue to optimize its 14th Five-Year Plan and Vision 2035, and will set out a clear path towards sustainable development through actionable goals and principles:

 

Focus on promoting corporate governance. Through further improvements in its corporate governance system and enhancements to governance efficiency, the Company will ensure that it can achieve superior operating standards. To fulfill the goals of strengthening internal controls, reducing risk, and promoting compliance, we will work on the integration of risk control, internal control, and compliance management, and we will minimize risk in all aspects of our operations, including safety in production, environmental protection, and operations management. We will deepen our corporate reform to maintain the vitality of operating systems and mechanisms. In addition, the Company will elevate corporate management performance to new levels by benchmarking world-class management practices. The Company will further improve its Party-building efforts to promote high-quality development.

 

Focus on implementing an innovation-driven strategy. The Company will strive to nurture a wellspring of self-developed new technologies, promote research and development of advanced oil and gas exploration technologies, and enhance innovation and breakthroughs in high-end chemicals, new materials, modern coal chemical technology, and new energy products, as well as in key, generic and advanced technologies. The Company will turn those technological achievements into its competitive business advantages to support its transformation and upgrading.

 

Focus on improving energy supply capacity. The Company will redouble its efforts in exploration, especially in shale oil and shale gas. It will continue to implement integrated development of natural gas production, supply, storage, and sales. It will continue to develop its hydrogen energy business at a reliable pace, while building out photovoltaic power stations according to local conditions, thereby expanding the scope of its energy and resources. In addition, the Company will strengthen its international trade capability, coordinate the allocation of global resources, and further explore the build-out of a successful multi-energy supply system.

 

Focus on enhancing the quality and upgrading of the petrochemical industry. Adhering to the goal of excelling in the refining business and strengthening its chemicals business, the Company will speed up the development of initiatives to shift from oil products to chemicals and specialty products, upgrade the chemicals business to concentrate on mid-to-high-end products, advance construction of world-class, large-scale, intelligent, integrated refining and chemical production clusters, and strengthen the resilience of its industrial chain. Following the general trend in transportation energy, the Company will accelerate its transformation to a comprehensive provider of gasoline, natural gas, hydrogen, power, and energy services. Furthermore, the Company will commit to implementing the digital transition and intelligent manufacturing of its traditional businesses, and further develop e-commerce platforms to expand momentum of new business growth.

 

Focus on boosting green and low-carbon competitiveness. By coordinating its environmental goals with production development, the Company will base its emission reduction targets on scientifically achievable approaches, and continue to optimize its industrial and energy structure. It will enhance its energy efficiency with the aim of establishing an industry benchmark. The Company will establish its green and low-carbon initiatives and help advance the circular development system, thereby promoting resource utilization that is efficient, intensive, and recyclable. It will also accelerate research and innovation in green and low-carbon technologies such as carbon capture, utilization, and storage to take the initiative in innovative development.

 

With the challenges of the ongoing global pandemic, geopolitical tensions, and high spot prices of commodity, the recovery of the world economy is still subject to significant uncertainties. The international environment faced by the Company has grown more complex. Nevertheless, China's economy is expected to maintain steady growth, with strong resilience, great potential, and risk resistance capabilities. Domestic economic fundamentals will remain strong in the long term. The stable and healthy domestic economic environment will create great opportunities for the Company's future development.

 

In 2022, the Company will continue to adhere to the principle of pursuing progress while maintaining stability. In complete, accurate and comprehensive implementation of China's new development philosophy, the Company will integrate the new development philosophy with its existing businesses by high quality to further enhance its corporate governance, production and operations, transformation and development, technological innovation, management reform, risk control, and Party building, making every effort to achieve its goal of becoming a world-leading company. In its upstream businesses, the Company will make greater efforts to increase reserves with higher efficiency, upgrade production in an economical way, and reduce costs and fees, while expanding its resource channels and improving its energy supply capacity. In refining, the Company will strive to adjust its structure to reduce costs and improve supply capacity. In the chemicals business, the Company will accelerate advanced capacity construction to extend its high-end industrial chain and develop new growth engines. In the marketing and distribution segment, it will further take advantage of its marketing network to provide customers with comprehensive, high-quality services. Moreover, the Company will actively and steadily deploy new energy businesses such as hydrogen energy and photovoltaic stations to strengthen its green and low-carbon competitiveness. Capital expenditures will be RMB198 billion in 2022, mainly for investments in high-quality exploration and production; natural gas systems including production, supply, storage, and sales; adjustments in the structure of the refining business; construction of refining and chemical production clusters; high-end materials projects; and integrated energy service stations for gasoline, natural gas, hydrogen, power, and services, as well as new energy businesses. The Company will endeavor to consolidate and enhance its business competitiveness to achieve a healthier and more sustainable growth.

 

When the path ahead is tortuous, the only way forward is trailblazing. I cherish the strong belief that under the leadership of the Board of Directors and through the combined efforts of the management and staff, as well as the strong support of our shareholders and the community, Sinopec Corp. will be able to take full advantage of its strengths in the industry, its technologies, and its talents to forge a distinctive path to high-quality growth, creating greater value for our shareholders and society at large and providing cleaner energy for a better life.

 

 

BUSINESS REVIEW AND PROSPECTS

BUSINESS REVIEW

 

In 2021, the COVID-19 pandemic continued and the world economic recovery was weak. China achieved remarkable results in pandemic prevention and control, and its economy continued to grow. The annual gross domestic product (GDP) increased by 8.1% year on year. International oil prices fluctuated with upward trend, the domestic demand for refined oil products recovered, the demand for natural gas increased rapidly, and the demand for chemical products remained stable.

 

Following market conditions, the Company optimized the whole business chain, expanded market, increased sales volume, and significantly improved the profits of our core businesses. The net profit attributable to the shareholders of the company reached the best level in the same period for nearly a decade.

 

1    MARKET REVIEW

 

(1)  Crude Oil & Natural Gas Market

In 2021, international crude oil prices fluctuated with upward trend. The spot price of Platts Brent for the year averaged USD70.7 per barrel, up by 69.7% year on year. In the context of energy transition, the domestic natural gas demand grew rapidly. Based on statistics by NDRC, the domestic apparent consumption of natural gas reached 372.6 billion cubic meters, up by 12.7% year on year.

 

(2)  Refined Oil Products Market

In 2021, the domestic refined oil products market demand picked up. According to NDRC statistics, the apparent consumption of refined oil products (including gasoline, diesel and kerosene) was 340 million tonnes, up by 3.2% from the previous year. Among them, gasoline, diesel and kerosene increased by 5.7%, 0.5% and 5.7%, respectively. According to the change of international crude oil prices, there were 21 price adjustments domestically for refined oil products throughout the year with 15 increases and 6 decreases.

 

(3)  Chemical Products Market

In 2021, the domestic demand for chemicals maintained stable. Based on our statistics, the domestic apparent consumption of ethylene equivalent decreased by 1.7% from the previous year, and the apparent consumption of synthetic resin, synthetic fiber and synthetic rubber decreased by 0.3%, increased by 0.3% and decreased by 4.5%,, respectively. Domestic prices of chemical products increased year on year.

 

 

 

2    PRODUCTION & OPERATION REVIEW

 

(1)  Exploration and Production

In 2021, the Company seized the opportunity of rising oil prices to promote oil and gas exploration and development in major target basins, continuously scaled up profitable capacity, and made new breakthroughs in increasing reserves, maintaining oil production, increasing gas output, and improving efficiency. In exploration, we strengthened risk exploration and trap pre-exploration in new areas, and made a number of new oil and gas discoveries, including major breakthroughs in continental facies shale oilfields exploration in Bohai Bay Basin, North Jiangsu Basin and Sichuan Basin. In crude oil development, we accelerated building of production capacity in Shunbei and Tahe, and strengthened fine development in mature fields. In natural gas development, we sped up capacity building of Weirong, Yongchuan South and Nanchuan fields, strengthened fine development of Puguang, Yuanba and other fields, and deepened the development of Fuling shale gas field. In the meantime, we signed medium and long-term LNG agreements to increase overseas natural gas supply. We developed new natural gas market reaching more quality end users with sales volume and market share rising constantly. The Company's production of oil and gas equivalent reached 479.74 million barrels including 249.60 million barrels of domestic crude which kept flat year on year, and 1,199.4 billion cubic feet of natural gas which increased by 11.9% year on year.

 

Summary of Operations for the Exploration and Production Segment

 

				Change from
	2021	2020	2019	2020 to 2021(%)
Oil and gas production (mmboe)	479.74	459.02	458.92	4.5
Crude oil production (mmbbls)	279.76	280.22	284.22	(0.2)
China	249.60	249.52	249.43	0.0
Overseas	30.16	30.70	34.79	(1.8)
Natural gas production (bcf)	1,199.44	1,072.33	1,047.78	11.9

 

Summary of Reserves of Crude Oil and Natural Gas

 

	Crude oil reserves (mmbbls)
Items	31 December 2021	31 December 2020
Proved reserves	1,749	1,542
Proved developed reserves	1,578	1,389
China	1,291	1,130
Consolidated companies	1,291	1,130
Shengli	961	821
Others	330	309
Overseas	287	259
Consolidated companies	24	15
Equity accounted entities	263	244
Proved undeveloped reserves	171	153
China	125	102
Consolidated companies	125	102
Shengli	17	16
Others	108	86
Overseas	46	51
Consolidated companies	0	5
Equity accounted entities	46	46

 

	Natural gas reserves (bcf)
Items	31 December 2021	31 December 2020
Proved reserves	8,456	8,191
Proved developed reserves	6,740	6,365
China	6,734	6,357
Consolidated companies	6,734	6,357
Puguang	1,582	1,675
Fuling	1,529	1,491
Others	3,623	3,191
Overseas	6	8
Consolidated companies	0	0
Equity accounted entities	6	8
Proved undeveloped reserves	1,716	1,826
China	1,715	1,824
Consolidated companies	1,715	1,824
Fuling	99	119
Others	1,616	1,705
Overseas	1	2
Consolidated companies	0	0
Equity accounted entities	1	2

 

Exploration and Production Activities

 

	Wells drilled (as of 31 December)
	2021				2020
	Exploratory		Development		Exploratory		Development
	Productive	Dry	Productive	Dry	Productive	Dry	Productive	Dry
China	363	129	1,828	4	383	136	2,015	3
Consolidated companies	363	129	1,828	4	383	136	2,015	3
Shengli	170	58	944	2	204	64	1,080	2
Others	193	71	884	2	179	72	935	1
Overseas	2	1	114	0	2	0	100	0
Consolidated companies	0	0	2	0	0	0	4	0
Equity accounted entities	2	1	112	0	2	0	96	0
Total	365	130	1,942	4	385	136	2,115	3

 

	Wells drilling (as of 31 December)
	2021				2020
	Gross		Net		Gross		Net
	Exploratory	Development	Exploratory	Development	Exploratory	Development	Exploratory	Development
China	108	201	108	201	92	212	92	212
Consolidated companies	108	201	108	201	92	212	92	212
Shengli	33	55	33	55	29	52	29	52
Others	75	146	75	146	63	160	63	160
Overseas	0	123	0	62	2	0	2	0
Consolidated companies	0	3	0	1	0	0	0	0
Equity accounted entities	0	120	0	61	2	0	2	0
Total	108	324	108	263	94	212	94	212

 

	Oil productive wells (as of 31 December)
	2021		2020
	Gross	Net	Gross	Net
China	53,851	53,851	53,240	53,240
Consolidated companies	53,851	53,851	53,240	53,240
Shengli	34,991	34,991	34,572	34,572
Others	18,860	18,860	18,668	18,668
Overseas	5,534	2,372	7,055	2,752
Consolidated companies	30	11	28	10
Equity accounted entities	5,504	2,361	7,027	2,742
Total	59,385	56,223	60,295	55,992

 

	Natural gas productive wells (as of 31 December)
	2021		2020
Region	Gross	Net	Gross	Net
China	7,539	7,489	6,976	6,928
Consolidated companies	7,539	7,489	6,976	6,928
Puguang	79	79	67	67
Fuling	779	779	632	632
Others	6,681	6,631	6,277	6,229
Total	7,539	7,489	6,976	6,928

 

Unit: Square kilometers

 

	Area under license (as of 31 December)
	2021	2020
Acreage with exploration licenses	390,023	436,864
China	390,023	436,864
Acreage with development licenses	42,391	39,195
China	36,480	33,965
Overseas	5,911	5,230

 

(2)  Refining

In 2021, the Company seized the favorable opportunity of recovery and rising oil prices, insisted on integration and optimisation of production and marketing, focused on expanding scale and adjusting structure, and maximized the overall profits along the value chain. Guided by the market demand, we expedited adjustment to increase the yield of chemicals feedstock and refining specialities. We vigorously increased production of gasoline and light chemical feedstock, continued to expand marketing and sales of special products such as low-sulfur bunker fuel, and maintained high utilization rate. The Company optimized resource allocation and achieved significant cost reduction in procurement. We accelerated building up advanced production capacity and promoted structural adjustments. Six hydrogen purification units and filling facilities were built throughout the year. In 2021, the Company processed 255 million tonnes of crude oil, up by 7.8%, yielding 146 million tonnes of refined oil products, with a year-on-year increase of 3.3%. Among them, gasoline output was 65.21 million tonnes, increased by 12.6%, and light chemical feedstock was 45.41 million tonnes, up by 12.9%.

 

Summary of Operations for the Refining Segment                                                                                                                                    Unit: million tonnes

 

				Change from
	2021	2020	2019	2020 to 2021 (%)
Refinery throughput	255.28	236.91	248.52	7.8
Gasoline, diesel and kerosene production	146.21	141.50	159.99	3.3
Gasoline	65.21	57.91	62.77	12.6
Diesel	59.85	63.21	66.06	(5.3)
Kerosene	21.15	20.38	31.16	3.8
Light chemical feedstock production	45.41	40.22	39.78	12.9
Light product yield (%)	73.83	74.34	76.38	(0.51) percentage points
Refinery yield (%)	94.65	94.77	94.98	(0.12) percentage points

 

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

 

(3)  Marketing and Distribution

In 2021, domestic consumption of refined oil products recovered. The company gave full play to the advantages of integration and marketing network to continuously improve quality and scale in operation. We innovated marketing approaches, implemented precision marketing strategies, and expanded sales. Our network layout for end-users were further optimized, and an internet operation center was established, with online and offline businesses constantly integrated. We actively promoted the construction of comprehensive service stations including oil, gas, hydrogen, electricity and non-fuel businesses and accelerated building up new energy service networks. Total annual sales volume of refined oil products was 221 million tonnes, of which total domestic sales volume amounted to 171 million tonnes, up by 2.0% year on year.

 

Summary of Operations for the Marketing and Distribution Segment

 

				Change from
	2021	2020	2019	2020 to 2021 (%)
Total sales volume of oil products (million tonnes)*	220.79	217.91	254.95	1.3
Total domestic sales volume of oil products (million tonnes)	171.31	167.99	184.45	2.0
Retail sales (million tonnes)	114.30	113.19	122.54	1.0
Direct sales and distribution (million tonnes)	57.01	54.80	61.91	4.0
Annual average throughput per station (tonne/station)	3,720	3,686	3,992	0.9

 

	31 December 2021	31 December 2020	31 December 2019	Change from the end of the previous year to the end of the reporting period (%)
Total number of service stations under the Sinopec brand	30,725	30,713	30,702	0.04
Number of company-operated stations	30,725	30,707	30,696	0.06

 

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

 

(4)  Chemicals

In 2021, the Company adhered to "basic plus high-end", accelerated the construction of advanced production capacity, strengthened structural adjustment, extended the industrial chain and cultivated growth points. We continuously diversified raw materials, optimized structure and maintenance scheduling of facilities, and maintained high-profitable units' utilization rates. We further integrated process of production, marketing, research and application, strengthened R&D efforts for high-end products and new materials, and increased output of high value-added products such as metallocene polyolefin and carbon fiber. The production ratio of synthetic resin, synthetic rubber, synthetic fiber and fine chemicals with added value were increased by 1.0, 3.5, 1.6 and 3.0 percentage points respectively. The annual ethylene output was 13.38 million tonnes, representing a year-on-year increase of 10.9%. At the same time, we vigorously developed strategic customers and continuously improved the service level. The total operating volume of chemical products in 2021 was 81.6 million tonnes, realizing full production and sales.

 

Summary of Operations for the Chemicals Segment                                                                                                                                                                    Unit: thousand tonnes

 

				Change from
	2021	2020	2019	2020 to 2021 (%)
Ethylene	13,380	12,060	12,493	10.9
Synthetic resin	18,999	17,370	17,244	9.4
Synthetic rubber	1,252	1,067	1,047	17.3
Synthetic fiber monomer and polymer	9,201	9,057	10,029	1.6
Synthetic fiber	1,357	1,313	1,289	3.4

 

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

 

(5)  Research and Development

In 2021, the Company deepened the reform of science and technology system and mechanism, increased science and technology investment, promoted key core technology research, and achieved fruitful results, giving full play to the leading role of science and technology in industrial development. In upstream, new progress was made in exploration theory and breakthrough was achieved in key technology for exploration and development of Sichuan Basin and Shunbei area. In refining, the world's first industrial test of full distillates crude oil catalytic cracking technology was completed. The industrial application of MFP technology, which produces more propylene and low-sulfur fuel, realized a breakthrough. We also successfully developed and produced needle coke products. In chemicals, we took the lead in completing the industrial test of direct cracking of crude oil to ethylene in China, and we successfully developed 15 new lightweight products for green and environment-friendly vehicles, such as carbon fiber reinforced epoxy resin composites. Breakthroughs were made in the development of hydrogenated styrenic thermal-plastic elastomer. In 2021, the Company had 8,045 patent applications at home and abroad, among which 4,868 were granted. We won 1 first prize and 5 second prizes of National Scientific and Technological Progress Award and 1 second prize of National Technological Invention Award for 2020. We also obtained 1 gold, 4 silver and 11 excellence awards for Chinese patents.

 

(6)  Health and Safety

In 2021, the Company comprehensively promoted HSE management system and continuously strengthened management. We focused on employees' health, safety and security management, enhanced pandemic prevention and control mechanism, and improved emergency response capacity, so as to maintain occupational, physical and mental health of employees at home and abroad. We implemented production safety responsibility among all employees, popularized prevention mechanisms of safety risk controlling and hidden risks shooting. We promoted the pilot project of "Industrial Internet plus Safe Production", carried out special actions including a 3-year rectification program for production safety, and "A Hundred Days without Accidents" activity. The Company witnessed overall stable and safe production in 2021.

 

(7)  Capital Expenditures

In 2021, focusing on investment quality and return, the Company continued to optimize investment management. The capital expenditures for the whole year were RMB167.9 billion. Capital expenditures of the exploration and production segment were RMB68.1 billion, mainly used for crude production capacity construction in Shunbei Oilfield, natural gas production capacity construction in Western Sichuan, Fuling and Weirong, storage and transmission facilities of Tianjin LNG Phase II and Qingdao LNG Phase III, and the CCUS Project in Shengli Oilfield. The capital expenditures of the refining segment were RMB22.5 billion, mainly used for the expansion of Zhenhai refinery and structural adjustment of Anqing and Yangzi refineries. The capital expenditures of the marketing and distribution segment were RMB21.9 billion, mainly used for service stations, integrated energy stations and logistics facilities. The capital expenditures of the chemicals segment were RMB51.6 billion, mainly used for Zhenhai, Sinopec-SK, Hainan, Tianjin Nangang, Gulei ethylene projects, AGCC project, Jiujiang Aromatics project, Shanghai large-tow carbon fiber project, Yizheng PTA project, Guizhou PGA project, and Qilu CCUS project. The capital expenditures for corporate and others were RMB3.8 billion, mainly for R&D facilities and information technology projects.

 

BUSINESS PROSPECTS

 

(1)  Market Prospects

Looking forward to 2022, the world economic growth is expected to maintain the recovery. China's economy is expected to achieve stable growth, and the long-term positive fundamentals will remain unchanged. It is expected that the market demand for refined oil products will continue to recover, and that for natural gas and petrochemical products will continue to grow. Oil prices may face greater volatility risks due to geopolitical situation, changes in global supply and demand, inventory levels, and carbon peaking and neutrality targets.

 

(2)  Production & Operation

In 2022, guided by the development strategy of building a world-leading company, the Company will focus on optimization of production and operation, transition and development, technology innovation, reform and management, and risk prevention and control to march toward its targets firmly. The following are specific measures:

 

Exploration and production segment:
The Company will enhance risk exploration and trap pre-exploration efforts, strengthen profitable development, and speed up the construction of natural gas production, supply, storage and marketing system, so as to achieve better results in oil production stabilization, gas production increase, cost reduction and efficiency improvement. In terms of crude oil development, the Company will scale up the production in Shunbei and Tahe oilfields, accelerate the construction of the national demonstration zone of continental facies shale oilfields in Jiyang, and refine the development of mature oilfields, so as to achieve steady crude oil production growth and a significant decrease in the break-even point. In terms of natural gas development, the Company will accelerate the capacity building of Dongsheng and Western Sichuan gas fields, further expand and tap the potential of Puguang, Yuanba gas fields, and deepen the development adjustment of Fuling gas field. At the same time, more efforts will be made in taking a diversified approach to expand resource channels, cultivate high-quality and efficient end-user markets, and maintain the good momentum of natural gas development. The planned annual production of crude oil is 281.20 million barrels, of which 31.28 million barrels will come from overseas and that of natural gas is 1,256.7 billion cubic feet.

 

Refining segment: The Company will prioritize structural adjustment and cost reduction, speed up the construction of world-class refining and chemical bases, and promote the systemic improvement of the refining value chain. Oriented by profitability, the Company will make appropriate arrangement for facilities utilization and production scheduling, flexibly adjust the yield of refined oil products and diesel-gasoline ratio; dynamically optimize the allocation of crude oil resources to reduce procurement costs; accelerate the shift from refined oil products to chemicals, increase the production of chemical raw materials, improve the self-sufficient rate of chemical feedstocks; speed up the shift from refined oil products to special products, expand the market of special products such as low-sulfur bunker fuel, lubricating grease, base oil, needle coke, etc., and improve profitability. The annual plan for crude oil throughput is 258 million tonnes and that for refined oil products production is 147 million tonnes.

 

Marketing segment: Giving full play to integrated advantages, the Company will make every effort to expand the market, improve efficiency, and consolidate its position in the market. The Company plans to improve the market monitoring system, implement well-targeted marketing strategies, increase both retailing sales volume and efficiency; implement network development strategies by different regions and levels, continue to optimize network layout, enhance network integrity, stability and competitiveness; strengthen the development of Sinopec-brand products, improve the quality and profitability of non-fuel business; promote gas and hydrogen refueling, power charging and battery swapping, build integrated energy stations covering gasoline, diesel, gas, hydrogen, electricity and non-fuel services; and accelerate the construction of carbon-neutral gas stations. The annual domestic sales volume of refined oil products is planned to be 174 million tonnes.

 

Chemicals segment: Adhering to "basic + high-end", the Company will promote the building of advanced capacity, speed up the deployment of large-scale ethylene plants, promote the upgrading and appropriate extension of the aromatics industry chain, continuously enhance market competitiveness; diversify raw materials, enhance the cost advantage; dynamically optimize and adjust the utilization, continue to promote facilities' operation efficiency; stay market-oriented, vigorously develop new materials and applications with high added value and advanced technology. Meanwhile, we will optimize the mechanism to respond to market need rapidly, strengthen refined management, and improve service quality and efficiency. The planned annual ethylene production is 15.25 million tonnes.

 

Technological development: Following the innovation-driven strategy, the Company aims to make breakthroughs in core technologies, promote the mechanism reform of the technological system, accelerate the intelligent application and digital transformation to build a technology-leading company. Specific focuses include technological breakthroughs in oil and gas exploration and production with the emphases on oil production stabilization, gas production increase, cost reduction, and efficiency improvement, oil and gas reserves and production increase; coordinated development of integration of refining and chemical technologies, refined oil products structure optimization, clean, efficient and low-carbon utilization of resources; key raw materials and high-end new materials development, coordination of the development and application of technologies such as safety and environmental protection; energy conservation and emission reduction, and intelligent optimization; forward-looking and basic research on such areas as green and low-carbon, new energy, and new materials to support industrial transition and upgrading.

 

Capital expenditures: In 2022, the Company's planned capital expenditures are RMB198 billion, of which, RMB81.5 billion will be for the exploration and production segment, including the construction of crude oil production capacity in Shunbei and Tahe oilfields, and natural gas production capacity in Western Sichuan, Dongsheng and Zhongjiang and construction of storage and transmission facilities such as Longkou LNG. Capital expenditures for the refining segment will be RMB20.4 billion, mainly for the construction of Anqing, Yangzi refinery structural adjustment projects and Zhenhai refinery Phase II. Capital expenditures for the marketing and distribution segment will be RMB23.7 billion, mainly used for the construction of service stations, integrated energy stations and logistics facilities. The capital expenditures of the chemicals segment will be RMB66.1 billion, which will be mainly used for Hainan and Tianjin Nangang ethylene projects, Jiujiang Aromatics project, Shanghai large-tow carbon fiber project, Yizheng PTA project, Guizhou PGA project, Zhenhai Refinery Phase II. Capital expenditures for corporate and others are planned to be RMB6.3 billion, which will be mainly used 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 2021, the Company's revenue was RMB2,740.9 billion, increased by 30.2% compared with that of 2020. That was mainly due to the good momentum of Chinese economy, increase of international crude oil price, recovery of domestic refined oil products demand and increase of chemical products prices. The Company sized the opportunity of demand recovery, optimised operation and production, promoted structural adjustment and transition and upgrading, and realised RMB94.6 billion operating profit, up by 592.3% year on year.

 

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

 

	Year ended 31 December
	2021	2020	Change (%)
	RMB million	RMB million
Revenue	2,740,884	2,104,724	30.2
Revenue from primary business	2,679,500	2,048,654	30.8
Other operating revenues	61,384	56,070	9.5
Operating expenses	(2,646,256)	(2,091,055)	26.6
Purchased crude oil, products and operating supplies and expenses	(2,076,665)	(1,589,821)	30.6
Selling, general and administrative expenses	(54,978)	(53,668)	2.4
Depreciation, depletion and amortisation	(115,680)	(107,461)	7.6
Exploration expenses, including dry holes	(12,382)	(9,716)	27.4
Personnel expenses	(103,492)	(87,525)	18.2
Taxes other than income tax	(259,032)	(235,018)	10.2
Other operating expenses, net	(21,716)	(5,780)	275.7
Operating profit	94,628	13,669	592.3
Net finance costs	(9,010)	(9,510)	(5.3)
Investment income and share of profits less losses from associates and joint ventures	23,551	44,456	(47.0)
Profit before taxation	109,169	48,615	124.6
Income tax expense	(23,318)	(6,344)	267.6
Profit for the year	85,851	42,271	103.1
Attributable to:
Shareholders of the Company	71,975	33,443	115.2
Non-controlling interests	13,876	8,828	57.2

 

(1)  Revenue

In 2021, the Company's revenue from primary business was RMB2,679.5 billion, representing an increase of 30.8% over 2020. This was mainly due to the price and sales volume increase in refined oil products and chemical products.

 

The following table sets forth the external sales volume, average realised prices and respective rates of change of the Company's major products in 2021 and 2020:

 

				Average realised price
	Sales volume (thousand tonnes)			(RMB/tonne, RMB/thousand cubic meters)
	Year ended 31 December			Year ended 31 December
	2021	2020	Change (%)	2021	2020	Change (%)
Crude oil	7,162	7,422	(3.5)	3,049	2,029	50.3
Natural gas (million cubic meters)	29,953	26,280	14.0	1,606	1,352	18.8
Gasoline	90,836	86,193	5.4	7,731	6,300	22.7
Diesel	78,335	77,280	1.4	5,891	4,789	23.0
Kerosene	21,270	20,828	2.1	3,772	2,635	43.1
Basic chemical feedstock	36,173	36,683	(1.4)	5,486	3,636	50.9
Monomer and polymer for synthetic fibre	6,955	9,691	(28.2)	6,537	4,297	52.1
Synthetic resin	17,923	17,112	4.7	8,325	7,148	16.5
Synthetic fibre	1,457	1,402	3.9	7,521	6,381	17.9
Synthetic rubber	1,286	1,361	(5.5)	11,099	7,982	39.1
Chemical fertiliser	976	1,177	(17.1)	2,807	1,955	43.6

 

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 2021, the turnover from crude oil, natural gas and other upstream products sold externally amounted to RMB156.0 billion, representing an increase of 49.3% over 2020. The change was mainly due to increases in crude oil and natural gas prices, and the increase of natural gas sales volume.

 

In 2021, 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 RMB1,535.5 billion (accounting for 56.0% of the Company's revenue), representing an increase of 30.6% over 2020, mainly due to the increase in prices and volume of refined oil products. The sales revenue of gasoline, diesel and kerosene was RMB1,243.9 billion, representing an increase of 28.5% over 2020, and accounting for 81.0% of the total sales revenue of petroleum products. Turnover of other refined petroleum products was RMB291.6 billion, representing an increase of 49.0% compared with that of 2020, accounting for 19.0% of the total sales revenue of petroleum products.

 

The Company's external sales revenue of chemical products was RMB424.8 billion, representing an increase of 31.8% over 2020, accounting for 15.5% of the Company's total revenue. This was mainly due to the increase in price and sales volume of chemical products.

 

(2)  Operating expenses

In 2021, the Company's operating expenses was RMB2,646.3 billion, increased by 26.6% compared with that of 2020. The operating expenses mainly consisted of the following:

 

Purchased crude oil, products and operating supplies and expenses was RMB2,076.7 billion, representing an increase of 30.6% over the same period of 2020, accounting for 78.5% of the total operating expenses, of which:

 

Crude oil purchasing expenses was RMB689.5 billion, representing an increase of 43.9% over the same period of 2020. Crude oil purchased externally used for processing in 2021 was 212.55 million tonnes (excluding the volume processed for third parties), representing an increase of 7.9% over the same period of 2020. The average cost of crude oil purchased externally was RMB3,244 per tonne, representing an increase by 33.3% over 2020.

 

The Company's other purchasing expenses was RMB1,387.2 billion, representing an increase of 24.9% over the same period of 2020. This was mainly attributable to the sharp increase in international bulk raw material prices and purchasing volume increase.

 

Selling, general and administrative expenses was RMB55.0 billion, representing an increase of 2.4% over 2020.

 

Depreciation, depletion and amortisation was RMB115.7 billion, representing an increase of 7.6% over the same period of 2020. That was mainly because that the proved reserve decreased resulting from the decrease of international crude oil prices and appreciation of RMB exchange rate in 2020, thus the depletion ratio of oil and gas assets increased, which led to the depreciation and depletion increased.

 

Exploration expenses was RMB12.4 billion, representing an increase of 27.4% compared with 2020. That was mainly due to increased investment in exploration and development to improve the quality of oil and gas assets.

 

Personnel expenses was RMB103.5 billion, representing an increase of 18.2% over 2020. That was due to the government's preferential policy on social insurance during the COVID-19 pandemic in 2020, which was cancelled in 2021, as well as a year-on-year increase in performance-related bonus as a reward for the significant improvement in operating profit.

 

Taxes other than income tax was RMB259.0 billion, representing an increase of 10.2% over the same period of 2020. That was mainly due to the increase of consumption tax resulting from the increase of production volume in gasoline and diesel.

 

Other operating expense, net was RMB21.7 billion, representing an increase of RMB275.7% over the same period of 2020. That was mainly due to impact of the loss on disposal of property, plant, equipment and other non-current assets.

 

(3)  Operating profit was RMB94.6 billion, representing an increase of 592.3% over the same period of 2020. That was mainly because that with the increase of international crude oil prices and steady improvement of market demand, the Company increased its processing volume and sales volumes which led to an increase in the gross profit margin of petrochemical products and significant improvement of the Company's operating results.

 

(4)  Profit before taxation was RMB109.2 billion, representing an increase of 124.6% compared with 2020.

 

(5)  Income tax expense was RMB23.3 billion, representing an increase of 267.6% year on year. That was mainly due to the taxable income increase as a result of good profit the Company achieved in 2021.

 

(6)  Profit attributable to non-controlling shareholders was RMB13.9 billion, representing an increase of RMB5.0 billion and 57.2% over the same period of 2020. That was mainly due to the improvement in the profits of our non-wholly owned subsidiaries.

 

(7)  Profit attributable to shareholders of the Company was RMB72.0 billion, representing a year-on-year increase of 115.2%.

 

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
	2021	2020	2021	2020	2021	2020
	RMB million	RMB million	(%)	(%)	(%)	(%)
Exploration and Production Segment
External sales*	162,700	110,242	3.4	3.2	5.9	5.2
Inter-segment sales	87,298	57,513	1.8	1.7
Operating revenues	249,998	167,755	5.2	4.9
Refining Segment
External sales*	173,109	117,847	3.6	3.4	6.3	5.6
Inter-segment sales	1,212,455	826,219	24.9	23.7
Operating revenues	1,385,564	944,066	28.5	27.1
Marketing and Distribution Segment
External sales*	1,404,469	1,097,352	29.0	31.6	51.2	52.1
Inter-segment sales	7,075	4,854	0.1	0.1
Operating revenues	1,411,544	1,102,206	29.1	31.7
Chemicals Segment
External sales*	435,261	330,927	9.0	9.5	16.0	15.2
Inter-segment sales	70,242	40,702	1.4	1.2
Operating revenues	505,503	371,629	10.4	10.7
Corporate and Others
External sales*	565,345	460,210	11.7	13.2	20.6	21.9
Inter-segment sales	732,356	430,073	15.1	12.4
Operating revenues	1,297,701	890,283	26.8	25.6
Operating revenue before elimination of inter-segment sales	4,850,310	3,475,939	100.0	100.0
Elimination of inter-segment sales	(2,109,426)	(1,371,215)
Revenue	2,740,884	2,104,724			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 2021 compared to 2020.

 

	Year ended 31 December
	2021	2020	Change
	RMB million	RMB million	(%)
Exploration and Production Segment
Operating revenues	249,998	167,755	49.0
Operating expenses	245,313	184,231	33.2
Operating profit/(loss)	4,685	(16,476)	-
Refining Segment
Operating revenues	1,385,564	944,066	46.8
Operating expenses	1,320,285	949,591	39.0
Operating profit/(loss)	65,279	(5,525)	-
Marketing and Distribution Segment
Operating revenues	1,411,544	1,102,206	28.1
Operating expenses	1,390,340	1,081,378	28.6
Operating profit	21,204	20,828	1.8
Chemicals Segment
Operating revenues	505,503	371,629	36.0
Operating expenses	494,397	360,811	37.0
Operating profit	11,106	10,818	2.7
Corporate and Others
Operating revenues	1,297,701	890,283	45.8
Operating expenses	1,300,926	890,676	46.1
Operating loss	(3,225)	(393)	-
Elimination of inter-segment profit/(loss)	(4,421)	4,417	-

 

(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 2021, the operating revenues of this segment was RMB250.0 billion, representing an increase of 49.0% over 2020. This was mainly attributed to the increase of realised price in crude oil and natural gas, as well as the sales volume of natural gas increase.

 

In 2021, the segment sold 34.09 million tonnes of crude oil, representing a decrease of 1.2% over 2020. Natural gas sales volume was 30.8 billion cubic meters (bcm), representing an increase of 11.1% over 2020. Regasified LNG sales volume was 19.1 bcm, representing an increase of 22.3% over 2020. LNG sales volume was 6.18 million tonnes, representing an increase of 0.1% over 2020. Average realised prices of crude oil, natural gas, Regasified LNG, and LNG were RMB2,932 per tonne, RMB1,605 per thousand cubic meters, RMB2,119 per thousand cubic meters, and RMB3,909 per tonne, respectively, representing an increase of 54.2%, 18.0%, 19.4%, and 53.7% respectively over 2020.

 

In 2021, the operating expenses of this segment was RMB245.3 billion, representing an increase of 33.2% over 2020. That was mainly due to the following:

 

Procurement cost of LNG increased by RMB45.0 billion year on year; Depreciation, depletion and amortisation increased by RMB6.6 billion year on year, as a result of the increase of depletion ratio; Resource Tax and special oil income levy increased by RMB3.9 billion year on year; Exploration expense increased by RMB2.7 billion year on year; Impairment decreased by RMB6.0 billion year on year;

 

In 2021, the oil and gas lifting cost was RMB776.94 per tonne, representing a year on year increase of 6.5%, mainly attributable to the increase in the cost of purchased material, fuels, and power as the international commodities prices increased, and the increase of personnel expenses.

 

In 2021, the operating profit of the exploration and production segment was RMB4.7 billion, representing an increase of RMB21.2 billion over the same period of 2020, which was mainly attributable to the fact that the segment promoted high-quality exploration and profitable development, focused on reducing cost, enhanced integrated operation of production, supply, storage and sales.

 

(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 were sold internally to the marketing and distribution segment of the Company; part of the chemical feedstock was sold to the chemicals segment of the Company; and other refined petroleum products were sold externally to both domestic and overseas customers.

 

In 2021, the operating revenues of this segment was RMB1,385.6 billion, representing an increase of 46.8% over 2020. This was mainly attributed to the demand recovery and the increases of refined oil products prices and sales volume.

 

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 2021 and 2020.

 

	Sales Volume (thousand tonnes)			Average realised price (RMB/tonne)
	Year ended 31 December			Year ended 31 December
	2021	2020	Change (%)	2021	2020	Change (%)
Gasoline	63,827	56,259	13.5	7,208	5,813	24.0
Diesel	58,807	61,167	(3.9)	5,563	4,354	27.8
Kerosene	17,313	17,309	0.0	3,734	2,673	39.7
Chemical feedstock	45,234	39,872	13.5	3,989	2,596	53.7
Other refined petroleum products	68,783	65,353	5.3	5,061	3,004	68.5

 

In 2021, sales revenue of gasoline was RMB460.1 billion, representing an increase of 40.7% over 2020.

 

The sales revenue of diesel was RMB327.1 billion, representing an increase of 22.8% over 2020.

 

The sales revenue of kerosene was RMB64.6 billion, representing an increase of 39.7% over 2020.

 

The sales revenue of chemical feedstock was RMB180.4 billion, representing an increase of 74.3% over 2020.

 

The sales revenue of refined petroleum products other than gasoline, diesel, kerosene and chemical feedstock was RMB348.1 billion, representing an increase of 77.3% over 2020.

 

In 2021, the segment's operating expenses was RMB1,320.3 billion, representing an increase of 39.0% over 2020. This was mainly attributed to the increase in procurement cost of crude oil, and the increase of taxes and surcharges related to sales revenue year on year.

 

In 2021, the average processing cost for crude oil was RMB3,329 per tonne, representing a increase of 35.6% over 2020. Total crude oil processed was 263.85 million tonnes (excluding volume processed for third parties), representing an increase of 7.3% over 2020. The total cost of crude oil processed was RMB878.4 billion, representing an increase of 45.5% over 2020.

 

In 2021, refining margin was RMB532 per tonne, representing an increase of RMB292 per tonne compared with that of the same period of 2020. This was mainly attributed to the increase in demand for refined oil products and chemical raw materials,and substantial improvement in gross margin of refined oil products and naphtha, as well as the significant inventory gains of crude oil and refined products.

 

In 2021, the refining unit 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 RMB213 per tonne, representing an increase of 17.5% over 2020, which was mainly attributed to the increased expense of safety, environment protection, and maintenance year on year.

 

In 2021, the operating revenue of the segment totaled RMB65.3 billion, representing an increase of RMB70.8 billion compared with that of 2020. This was mainly due to the fact that the segment seized the opportunity of market recovery to increase the utilisation rates of facilities and made efforts to optimise the product slate. The inventory gains of crude oil and refined products increased, and the refining margin improved significantly.

 

(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 2021, the operating revenues of this segment was RMB1,411.5 billion, up by 28.1% year-on-year. This was mainly attributed to the recovery of market demand and thus the increase in the sales volume and price of refined oil products. The sales revenues of gasoline totaled RMB702.5 billion, up by 27.9% year-on-year; the sales revenues of diesel was RMB462.8 billion, up by 22.7% year-on-year; the sales revenues of kerosene was RMB80.3 billion, up by 46.4% 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 2021 and 2020, 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
	2021	2020	Change (%)	2021	2020	Change (%)
Gasoline	90,873	86,216	5.4	7,730	6,370	21.4
Retail	64,325	61,446	4.7	8,223	6,940	18.5
Direct sales and distribution	26,548	24,770	7.2	6,537	4,955	31.9
Diesel	78,566	77,507	1.4	5,890	4,865	21.1
Retail	33,644	36,757	(8.5)	6,537	5,351	22.2
Direct sales and distribution	44,923	40,750	10.2	5,406	4,426	22.1
Kerosene	21,296	20,828	2.2	3,772	2,634	43.2
Fuel oil	25,847	23,331	10.8	3,437	2,536	35.6

 

In 2021, the operating expenses of the segment were RMB1,390.3 billion, up by 28.6% year-on-year. This was mainly due to the increase of sales volumes and prices of refined oil products, and thus the increase of procurement costs.

 

In 2021, the segment's marketing expense (defined as the operating expenses less the purchase costs, taxes other than income tax, depreciation and amortization, divided by sales volume) was RMB197.66 per tonne, up by 4.11% year on year.

 

In 2021, the operating revenues of non-fuel business was RMB35.4 billion, up by RMB1.5 billion year-on-year and the profit of non-fuel business was RMB4.1 billion, up by RMB0.4 billion. This was mainly because the Company vigorously promoted company-owned and actively explored emerging business models to maintain the increase of volume and profit of non-fuel business.

 

In 2021, the segment seized the favorable opportunity of market recovery, brought synergy advantages of industrial chain into full play, coordinated internal and external resources, expanded market and increased sales, and continuously expand business volume. Operating profit was RMB21.2 billion, representing an increase of RMB0.4 billion or 1.8% year on year.

 

(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 2021, the operating revenues of this segment was RMB505.5 billion, up by 36.0% year-on-year. This was mainly due to the steady growth of domestic economy, and the fact that the demand for chemical products still maintained a high level, and the product prices increased year on year.

 

In 2021, 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 RMB478.6 billion, up by 34.9%, accounting for 94.7% 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 2021 and 2020.

 

	Sales Volume (Thousand tonnes)			Average realised price (RMB/tonne)
	Year ended 31 December			Year ended 31 December
	2021	2020	Change (%)	2021	2020	Change (%)
Basic organic chemicals	48,059	47,109	2.0	5,311	3,569	48.8
Synthetic fibre monomer and polymer	7,010	9,743	(28.1)	6,580	4,302	53.0
Synthetic resin	17,924	17,124	4.7	8,325	7,150	16.4
Synthetic fibre	1,457	1,403	3.8	7,521	6,407	17.4
Synthetic rubber	1,289	1,364	(5.5)	11,104	7,986	39.0
Chemical fertiliser	981	1,181	(16.9)	2,797	1,950	43.4

 

In 2021, the operating expenses of the chemicals segment was RMB494.4 billion, representing an increase of 37.0% over 2020, mainly because of the increase in the price of externally procured raw materials as a result of crude oil price increase.

 

In 2021, the Company seized the favorable opportunities of economy recovery and high realised prices of chemical products, continuously optimised the structures of feedstock, product and facilities, and achieved growing profits with increased margins of petrochemicals. The operating profit of this segment was RMB11.1 billion, representing an increase of 2.7% over 2020.

 

(5)  Corporate and Others

The business activities of corporate and others mainly consist of import and export business activities of the Company's subsidiaries, R&D activities of the Company, and managerial activities of headquarters.

 

In 2021, the operating revenue generated from corporate and others was approximately RMB1,297.7 billion, representing an increase of 45.8% over 2020. This was mainly attributed to the great increase in the trading prices of crude oil and refined oil products.

 

In 2021, the operating expenses of corporate and others was RMB1,300.9 billion, representing an increase of 46.1% over 2020.

 

In 2021, the operating loss from corporate and others was RMB3.2 billion, representing an increase in loss of RMB2.8 billion over the same period of 2020. This was mainly attributed to the expansion of R&D investment scale which led to increase in R&D expenses and the increase of personnel expenses.

 

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 the short-term and long-term debts.

 

(1)  Assets, liabilities and equity

 

Unit: RMB million

 

	As of 31 December 2021	As of 31 December 2020	Change
Total assets	1,889,255	1,738,896	150,359
Current assets	558,024	455,660	102,364
Non-current assets	1,331,231	1,283,236	47,995
Total liabilities	974,181	851,194	122,987
Current liabilities	641,280	522,995	118,285
Non-current liabilities	332,901	328,199	4,702
Total equity attributable to shareholders of the Company	774,182	746,325	27,857
Share capital	121,071	121,071	-
Reserves	653,111	625,254	27,857
Non-controlling interests	140,892	141,377	(485)
Total equity	915,074	887,702	27,372

 

As of 31 December 2021, the Company's total assets was RMB1,889.3 billion, representing an increase of RMB150.4 billion compared with that of the end of 2020, of which:

 

Current assets was RMB558.0 billion, representing an increase of RMB102.4 billion compared with that of the end of 2020, mainly because the cash and cash equivalents and time deposit increased by RMB33.9 billion, and crude oil and refined oil product inventories increased by RMB55.2 billion as a result of international crude oil price increase.

 

Non-current assets was RMB1,331.2 billion, representing an increase of RMB48.0 billion as compared with that of the end of 2020. This was mainly due to the net value of property plant and equipment increased by RMB5.3 billion, construction in progress increased by RMB30.4 billion equity of associates and joint ventures increased by RMB20.8 billion because of the increased profit in these companies.

 

The Company's total liabilities was RMB974.2 billion, representing an increase of RMB123.0 billion compared with that of the end of 2020, of which:

 

Current liabilities was RMB641.3 billion, representing an increase of RMB118.3 billion as compared with that of the end of 2020. This was mainly due to the fact that the short-term debts increased by RMB11.5 billion, accounts payable and bills payable and liabilities from contracts increased by RMB53.7 billion as a result of raw materials price escalation and operation scale expansion, other payables increased by RMB60.6 billion, and contract liabilities decreased RMB1.6 billion.

 

Non-current liabilities was RMB332.9 billion, representing an increase of RMB4.7 billion compared with that of the end of 2020.

 

Total equity attributable to owners of the Company was RMB774.2 billion, representing an increase of RMB27.9 billion compared with that of the end of 2020.

 

(2)  Cash Flow

The following table sets forth the major items in the consolidated cash flow statements for 2021 and 2020.

 

Unit: RMB million

 

Major items of cash flows	Year ended 31 December
	2021	2020
Net cash generated from operating activities	225,174	168,520
Net cash used in investing activities	(145,198)	(102,650)
Net cash used in financing activities	(57,942)	(37,510)

 

In 2021, the net cash generated from operating activities of the Company was RMB225.2 billion, representing an increase of RMB56.7 billion over 2020. This was mainly due to the increase of RMB60.6 billion in profit before taxation.

 

In 2021, the net cash used in investing activities was RMB145.2 billion, representing an increase of RMB42.5 billion over 2020, of which: income from sales of investment and gains from investing in associates and joint ventures decreased by RMB44.8 billion, capital expenditure increased by RMB9.6 billion, exploratory wells expenditure increased by RMB3.6 billion, purchasing investment and associates and joint ventures investments decreased by RMB1.1 billion, and cash outflow from changes in time deposit with maturities over three months decreased by RMB13.2 billion.

 

In 2021, the net cash used in the Company's financing activities was RMB57.9 billion, representing an increase of cash outflow by RMB20.4 billion over 2020. This was mainly due to an increase of RMB3.2 billion in investments from non-controlling shareholders,, increase of RMB3.6 billion in cash paid for dividends, decrease of RMB3.2 billion in dividends allocated to non-controlling shareholders by subsidiaries, and increase of RMB7.1 billion in acquisition of non-controlling equity interests, and increase in repayment for lease liabilities of RMB4.1 billion.

 

At the end of 2021, the cash and cash equivalents was RMB108.6 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 2021 the expenditures for R&D was RMB21.1 billion, of which expense was RMB11.5 billion, and capitalised cost was RMB9.6 billion.

 

Environmental expenditures refer to the normal routine pollutant discharge fees paid by the Company, excluding capitalised cost of pollutant treatment properties. In 2021, the Company paid environmental expenditures of RMB11.0 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	1	-	-	-	-	Self-owned fund
Stock	1	-	-	-	-
Derivative financial instruments	157	1,350	(14,873)	-	-	Self-owned fund
Cash flow hedges	7,545	13,798	694	15,659	-	Self-owned fund
Other equity instruments investment	1,525	767	-	(6)	-	Self-owned fund
Total	9,228	15,915	(14,179)	15,653	-

 

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 204 of this report.

 

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

 

	Year ended 31 December
	2021	2020
	RMB million	RMB million
Operating income
Exploration and Production Segment	249,998	167,755
Refining Segment	1,385,564	944,066
Marketing and Distribution Segment	1,411,544	1,102,206
Chemicals Segment	505,503	371,629
Corporate and Others	1,297,701	890,283
Elimination of inter-segment sales	(2,109,426)	(1,371,215)
Consolidated operating income	2,740,884	2,104,724
Operating profit/(loss)
Exploration and Production Segment	613	(20,570)
Refining Segment	65,360	(6,526)
Marketing and Distribution Segment	23,102	19,634
Chemicals Segment	11,361	9,592
Corporate and Others	9,521	(2,048)
Elimination of inter-segment sales	(4,421)	4,417
Financial expenses, investment income, losses from changes in fair value,  other income and asset disposal gains/(losses)	6,878	46,304
Consolidated operating profit	112,414	50,803
Net profit attributable to equity shareholders of the Company	71,208	33,271

 

Operating profit: In 2021, the operating profit of the Company was RMB112.4 billion, representing an increase of RMB62.1 billion as compared with that of 2020.

 

Net profit: In 2021, the net profit attributable to the equity shareholders of the Company was RMB71.2 billion, representing an increase of RMB37.9 billion or 114.02% compared with 2020.

 

(2)  Financial data prepared under CASs

 

	As of 31	As of 31
	December 2021	December 2020	Change
	RMB million	RMB million
Total assets	1,889,255	1,738,896	150,359
Non-current liabilities	331,934	327,181	4,753
Shareholder's equity	916,041	888,720	27,321

 

Change analysis:

 

At the end of 2021, the Company's total assets was RMB1,889.3 billion, representing an increase of RMB150.4 billion compared with that of the end of 2020, mainly because inventory increased by RMB55.2 billion, cash at bank and on hand increased by RMB37.6 billion, long-term equity investment increased by RMB20.8 billion, and construction in progress increased by RMB30.4 billion.

 

At the end of 2021, the Company's non-current liabilities was RMB331.9 billion, representing an increase of RMB4.8 billion compared with that of the end of 2020.

 

At the end of 2021, the shareholders' equity of the Company was RMB916.0 billion, representing an increase of RMB27.3 billion compared with that of the end of 2020.

 

(3)  The results of the principal operations by segments

 

Segments	Operation income RMB million	Operation cost RMB million	Gross profit margin* (%)	Increase of operation income on a year-on-year basis (%)	Increase of operation cost on a year-on- year basis (%)	Increase/ (decrease) of gross profit margin on a year-on-year basis (%)
Exploration and Production	249,998	206,332	12.9	49.0	37.3	7.0
Refining	1,385,564	1,061,650	6.0	46.8	50.8	4.0
Marketing and Distribution	1,411,544	1,317,918	6.4	28.1	29.4	(0.9)
Chemicals	505,503	466,971	6.9	36.0	38.8	(2.0)
Corporate and Others	1,297,701	1,268,685	2.2	45.8	45.1	0.4
Elimination of inter-segment sales	(2,109,426)	(2,105,005)	N/A	N/A	N/A	N/A
Total	2,740,884	2,216,551	9.7	30.2	31.5	0.9

 

*:     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

For details, please refer to Note 3(26) to the financial statements prepared in accordance with CASs and Note 1 to the financial statement prepared in accordance with IFRS.

 

 

CORPORATE GOVERNANCE

 

1    IMPROVEMENTS IN CORPORATE GOVERNANCE DURING THE REPORTING PERIOD

During the reporting period, the Company complied with the Articles of Association as well as domestic and overseas laws and regulations, adhered to the standard operation, continuously improved the corporate governance and promoted the corporate quality. The Company further improved its corporate governance structure by completing the re-election of the Board of Directors and Board of Supervisors, which improved the diversity of the Board; adjusting the members of special committees of the Board, renaming the Social Responsibility Management Committee as the Sustainable Development Committee; and appointing the Senior Management. The Independent Non-executive Directors of Sinopec Corp. conscientiously fulfilled their duties, actively attended the board meetings and meetings of special committees of the Board, reviewed and considered proposals with due care, and offered advice and suggestions on the Company's reforms and development. The Company strengthened the edifice of the fundamental system of corporate governance and laid a solid foundation by revising management regulations of Information Disclosure and Investor Relations, the Terms of Reference of the Independent Non-Executive Directors, the Nomination Committee and the Sustainable Development Committee according to the latest regulatory requirements and work practice. The Company endeavoured to improve the effectiveness of internal control policy, and the edifice of internal control system had reached a new level. The Company continuously improve the quality of information disclosure and enhance transparency by paying more attention to the information disclosure about ESG, appointing an independent third party to verify the sustainable development report, and providing more information voluntarily. As a result, the Company obtained an A-level rating of Shanghai Stock Exchange in the assessment of information disclosure. The Company focused on communication with investors, maintained positive interaction with investors despite of the adverse impact of the Covid-19 pandemic, resulting in new enhancements of investor relations. The Company continuously improved the quality of Party building to stimulate the enthusiasm of the staff for work, and enhanced the discipline inspection and supervision to maintain the effective implementation of the deployments of the Board all of which achieve the high-quality development of the Company.

 

During the reporting period, there was 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. had no objection to any of the supervised matters. None of Sinopec Corp., the Board, the Directors, the Supervisors, the Senior Management, the controlling shareholder or de facto controllers of Sinopec Corp. were under the investigation by the CSRC or received any regulatory sanction or public condemnation by the CSRC, the Hong Kong Securities and Futures Commission, or 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 2020 Annual General Meeting on 25 May 2021 in Beijing, China, and 2021 First Extraordinary General Meeting on 20 October 2021 in Beijing, China in accordance with the procedures of noticing, convening and holding pursuant to the relevant laws and regulations and the Articles of Association. For details of the general meetings, please refer to the poll results announcements published on 26 May and 21 October 2021 respectively on China Securities Journal, Shanghai Securities News, Securities Times and the website of Shanghai Stock Exchange, as well as those published on 25 May and 20 October 2021 respectively on the website of Hong Kong Stock Exchange.

 

3    EQUITY INTERESTS OF DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT

As of December 31, 2021, 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. (held as interest of spouse).

 

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) would fall to be disclosed to the Sinopec Corp. and the Hong Kong Stock Exchange under the Divisions 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 Company under the Hong Kong Listing Rules.

 

4    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 controlling shareholder of the Company exercised shareholder's rights through the general meeting according to applicable laws and didn't overstep the authority of the general meeting or directly or indirectly interfere with the Company's operating decisions and operating activities. The Company has a well-integrated independent business and independent operating capabilities. During the reporting period, the Company did not identify the controlling shareholder taking advantage of its special position to misappropriate and damage the interests of the Company or the other shareholders.

 

5    COMPETITION BETWEEN SINOPEC CORP. AND ITS CONTROLLING SHAREHOLDER

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

 

6    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.

 

7    MANAGEMENT CONTROL OF SUBSIDIARIES

The Company implements standardized control over different types of subsidiaries in accordance with laws and regulations, the Articles of Association and the internal control system. During the Reporting Period, the Company did not purchase subsidiaries that met material criteria.

 

8    SENIOR MANAGEMENT APPRAISAL AND INCENTIVE SCHEMES

Sinopec Corp. has established and is continuously improving its fair and transparent set of performance appraisal standards, incentive and restrictive mechanisms for Directors, Supervisors and other Senior Management. Sinopec Corp. has implemented incentive policies including the Measures of Sinopec Corp. for the Management of Performance Evaluations.

 

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 of the Corporate Governance Code set out in Appendix 14 of the Hong Kong Listing Rules 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 Board of the Company held its meetings 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 2021, Sinopec Corp. held seven 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 2021 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 the potential risks that might arise from the adequate performance of their duties.

 

A.2 Chairman and President

a.   Mr. Ma Yongsheng serves as Chairman of the Board and Mr. Yu Baocai 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 respective 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. The 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 ten members, among whom are four Executive Directors and six Non-executive Directors. Among the Non-executive Directors, there are four Independent Non-executive Directors, accounting for two-fifths 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 2022 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 terms of office of any Independent Non-executive Director cannot exceed six years. In May 2021, Mr. Zhang Yuzhuo, Mr. Ma Yongsheng, Mr. Zhao Dong, Mr. Yu Baocai, Mr. Ling Yiqun, Mr. Li Yonglin, Mr. Liu Hongbin, Mr. Cai Hongbin, Mr. Ng, Kar Ling Johnny, Ms. Shi Dan, and Mr. Bi Mingjian, nominated by the Board of Directors as the candidates for the eighth session of the Board based on the actual needs of the Company, were elected by the general meeting of shareholders as Directors of the Company; Mr. Ma Yongsheng was elected by the Board of Directors as Chairman of the Board of Directors of Sinopec Corp on 29 November 2021. For details about the tenure of each Director, please refer to the section "Directors, Supervisors, Senior Management and Employees".

 

Mr. Bi was a Director of China International Capital Corporation Limited ("CICC") before his retirement in February 2020. China International Capital Corporation Limited provided financial advisory services to China Petrochemical Corporation (being the controlling shareholder of the Company) and its subsidiaries during the period from 1 January 2019 to the date of this report. However, the Board is of the view that Mr. Bi satisfies the independence requirements for Independent Non-executive Directors, taking into account the following factors:

 

(1)  Mr. Bi was not a relationship holder of the Company or China Petrochemical Corporation in CICC throughout his service in CICC;

 

(2)  Other than being a consultant ending in March 2022, which is of honorary nature, Mr. Bi does not involve in the management or operation of CICC, and Mr. Bi has not had any engagement with CICC, nor holds any position in CICC after his retirement;

 

(3)  Mr. Bi holds no share in the Company or China Petrochemical Corporation as at the date of this report;

 

(4)  Mr. Bi holds 1,501,451 shares in CICC, representing 0.03% of the total issued shares of CICC as at the date of this report, which constitutes a minimal part of the share capital of CICC and is immaterial in the context of independence, and Mr. Bi does not have any other economic interest in or in association with CICC;

 

(5)  Mr. Bi has not involved or participated in, and will not involve or participate in, any transaction (if any) between the Company (or its controlling shareholder, or their respective subsidiaries or core connected persons) and CICC in his capacity as a consultant of CICC; and

 

(6)  Mr. Bi has met all requirements under Rule 3.13 (other than Rule 3.13(3)) of the Hong Kong Listing Rules ("Listing Rules") and there are no other matters that would potentially compromise Mr. Bi's compliance with the independence criterion as set out in Rule 3.13.

 

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 Independent Non-executive Director, Ms. Shi Dan, who serves as the chairman, and the Chairman of the Board, Mr. Ma Yongsheng, and Mr. Ng, Kar Ling Johnny, who serve as members. The principal responsibilities of Nomination Committee are to provide suggestions to the Board on Board's size and composition, the selecting standards and 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 established 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. Currently, the Board has achieved diversity in terms of gender, culture, educational backgrounds, professional specialties, etc. 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, finance, and industry and energy economy, which are conductive to strategic planning and 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 Nomination Committee are included in the budget of Sinopec Corp.

 

d.   During the reporting period, the Nomination Committee held two meetings (please refer to "Meetings Held by the Board Committees" under the section "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 affairs of Sinopec Corp.

 

c.   Each of the Directors confirmed that he/she has complied with the Model Code for Securities Transactions by Directors of Listed Issuers during the reporting period. Meanwhile, 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 documents for reference for meetings of the Board and Board committees are distributed prior to the meetings to allow 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 advice from professional consultants when necessary.

 

B   Remuneration and Appraisal Committee

a.   Remuneration and Appraisal Committee ("Remuneration Committee") consists of Independent Non-executive Director, Mr. Bi Mingjian, who serves as the Chairman, and the Chairman of the Board, Mr. Ma Yongsheng and the 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 2021.

 

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 consultant members and can require such members to provide advice. 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. shall 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 2021 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, capital market updates, and securities regulatory developments every month to ensure that the Directors can learn about the latest developments of the Company and regulatory changes 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 Directors, Mr. Cai Hongbin, Ms. Shi Dan, and Mr. Bi Mingjian, who serve as members.

 

b.   During the reporting period, the Audit Committee held five 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 consultant members and can request such members 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 including online reporting, reporting by letters, appeals and complaint mailbox, etc. to employees to report behaviour 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 under 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 Sustainable Development Committee (formerly known as Social Responsibility Management Committee). The Strategy Committee is responsible for overseeing long-term development strategies and significant investment decisions of the Company. The Strategy Committee consists of eight Directors, including the Chairman of the Board, Mr. Ma Yongsheng, who serves as Chairman, Executive Directors, Mr. Yu Baocai, Mr. Ling Yiqun, Mr. Li Yonglin, Mr. Liu Hongbin, and Independent Non-executive Directors, Mr. Cai Hongbin, Ms. Shi Dan, and Mr. Bi Mingjian, who serve as members. The Sustainable Development Committee (formerly known as Social Responsibility Management Committee) is responsible for preparing policies, governance, strategies and plans for sustainable development of the Company, which consists of four Directors, including the Chairman of the Board, Mr. Ma Yongsheng, who serves as Chairman, the Non-executive Director, Mr. Zhao Dong, the Executive Director, Mr. Li Yonglin, and the Independent Non-executive Director, Mr. Cai Hongbin, who serve as members.

 

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

 

E   Investor Relations

a.   Sinopec Corp. attach considerable significance 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. The Board Secretariat of Sinopec Corp. is 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, etc.

 

b.   During the reporting period, separate resolutions were proposed for each substantially separate issue at the general meeting of shareholders. All resolutions were voted by poll in protection of the interest 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 (or the director who performs the duties of Chairman) of the Board hosted the annual general meeting for the year 2020 and the First Extraordinary General Meeting for the year 2021. Several members of the Board of Directors, the Board of Supervisors, and senior management attended the meetings and conducted in-depth communication 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 in the "Investor Centre" column 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 for 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. has established a special organisation for communication with shareholders and publishes relevant contact details to facilitate shareholders to make enquiries in accordance with Articles of Association.

 

(2)  Auditors

The appointment of KPMG Huazhen LLP and KPMG as Sinopec Corp.'s external auditors for 2021 and the authorisation of the Board to determine their remuneration were approved at Sinopec Corp.'s Annual General Meeting for the Year 2020 on 25 May 2021. The audit fee for 2021 is RMB41.69 million (including audit fee of internal control), which was approved at the 7th Meeting of the Eighth Session of the Board. The annual financial statements of the year ended 31 December 2021 have been audited by KPMG Huazhen LLP and KPMG. The Chinese certified public accountants signing the report are Yang Jie and He Shu from KPMG Huazhen LLP.During the reporting period, KPMG Huazhen LLP and KPMG and their affiliates firms provided non-audit service, such as tax consulting and due diligence investigation to the Company, and the fee charged was RMB8.11 million. PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian LLP (collectively, the "Former Auditors") served respectively as the external auditors of the Company for the year 2013 to 2020 and retired as the external auditors of the Company as resolved by shareholders at the annual general meeting for the year 2020. Each of the Former Auditors has no objections to the retirement, and has confirmed that there are no matters in relation to their retirement which should be brought to the attention of the shareholders of the Company. The Board is not aware of any matters in relation to the change in Auditors that need to be brought to the attention of the shareholders of the Company.

 

(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 67 to page 68; for information about meetings of the Board, please refer to page 57 to page 58; for information about meetings held by Board Committees, please refer to page 59; for information about tenure of Non-executive Directors, please refer to page 38; for information about equity interests of Directors, Supervisors and other senior management, please refer to page 28; for information about the biographies and annual remuneration of Directors, Supervisors and other senior management, please refer to page 35 to page 43.

 

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

The Company did not implement any share incentive scheme during the reporting period.

 

11  INTRODUCTION OF DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT

 

(1)  Directors

Ma Yongsheng, aged 60, Chairman of the Board of Sinopec Corp. Mr. Ma is a professor level senior engineer with a Ph.D. degree. Mr. Ma is a member of the 13th National Committee of Chinese People's Political Consultative Conference ("CPPCC") and an academician of the Chinese Academy of Engineering. 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.; in May 2008, he was appointed as Deputy Director General of Exploration and Production Department of Sinopec Corp. (Director General Level); 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 October 2018, he was appointed as President of Sinopec Corp; in April 2019, he was appointed as Director, President and Vice Secretary of the Leading Party Member Group of China Petrochemical Corporation; in November 2021, he was appointed as Chairman and Secretary of the Leading Party Member Group of China Petrochemical Corporation. Mr. Ma was elected as Director of Sinopec Corp. in February 2016, and was elected as the Chairman of the Board of Sinopec Corp. in November 2021.

 

Zhao Dong, aged 51, Director 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.; in May 2021, he was elected as Director of Sinopec Corp.

 

Yu Baocai, aged 57, Director and 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 September 2020, he was appointed as Senior Vice President of Sinopec Corp. Mr. Yu was elected as Director of Sinopec Corp. in October 2018, and was appointed as President of Sinopec Corp. in November 2021.

 

Ling Yiqun, aged 59, Director and Senior Vice President of Sinopec Corp. Mr. Ling is a professor level senior engineer with a Ph.D. degree. From August 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.

 

Li Yonglin, aged 55, Director and Senior Vice President of Sinopec Corp. Mr. Li is a professor level senior engineer with a Ph.D. degree. Mr. Li is a member of the 13th National Committee of CPPCC. He was appointed as Vice General Manager of Sinopec Maoming Company in March 2003; in July 2009, he was appointed as Chief of Preparatory Group for the Beihai Refining Off-Site Reconstruction Project; in November 2011, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Beihai Refining & Chemical Co., Ltd.; in March 2015, he was appointed as Vice Director General of Refining Division of Sinopec Corp. (Director General Level); in December 2016 he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Tianjin Petrochemical Company, General Manager of Sinopec Tianjin Company and Vice Chairman of SINOPEC SABIC Tianjin Petrochemical Co., Ltd.; in October 2019, he was appointed as Secretary of CPC Committee of Sinopec Tianjin Petrochemical Company and Corporate Representative of Sinopec Tianjin Company; in July 2020, he was appointed as Assistant to the President of China Petrochemical Corporation, concurrently serving as General Manager of Human Resources Department and Head of Organizational Department of the Leading Party Member Group; in November 2020, he was appointed as a member of Leading Party Member Group and Vice President of China Petrochemical Corporation.; in May 2021, he was elected as Director of Sinopec Corp. and was appointed as Senior Vice President of Sinopec Corp.

 

Liu Hongbin, aged 59, 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, Head of enterprise Coordination in Heilongjiang Province, 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.

 

Cai Hongbin, aged 54, 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 61, Independent Director of Sinopec Corp. Mr. Ng currently is a practicing Certified Public Accountant in Hong Kong, a practicing auditor and 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.

 

Shi Dan, aged 60, Independent Director of Sinopec Corp. Ms. Shi is the legal representative and Chairman of China Industrial Economics Society, a member of Expert Advisory Committee of the National Energy Commission and a member of National Expert Committee on Climate Change and enjoys special government subsidies from the State Council. Ms. Shi obtained bachelor's degree in engineering, master's degree in economics, master's degree of development economics and Ph.D. degree in management from Changchun University of Technology, Renmin University of China, Australian National University and Huazhong University of Science and Technology respectively. In October 1993, Ms. Shi was appointed as Research Fellow and Assistant to the Dean of the Institute of Industrial Economics of Chinese Academy of Social Sciences; in August 2010, Ms. Shi was appointed as a Research Fellow and Deputy Dean of National Academy of Economic Strategy, Chinese Academy of Social Sciences; in November 2013, she was appointed as a Research Fellow and Secretary of CPC Committee (Deputy Dean) of the Institute of Industrial Economics of Chinese Academy of Social Sciences; in November 2017, she served as External Director of China Energy Investment Corporation Limited. In March 2019, she was appointed as Dean of Institute of Industrial Economics of Chinese Academy of Social Sciences. In May 2021, she was elected as Independent Director of Sinopec Corp.

 

Bi Mingjian, aged 66, Independent Director of Sinopec Corp. Mr. Bi obtained the certificate of diploma majoring in English from East China Normal University in 1982 and master's degree in business administration from George Mason University in the United States of America in 1993 respectively. Mr. Bi served as a cadre at Shanghai Subei Haifeng Farm from April 1977 to April 1979; he studied at the External Training Program of the Cadre School of the Ministry of State Farms and Land Reclamation, and subsequently he studied at a farm in Saskatchewan Province of Canada from April 1979 to November 1980; he served as a cadre at the Foreign Affairs Bureau of the Ministry of State Farms and Land Reclamation from November 1980 to December 1983; he served as Deputy Division Chief of the State Farms and Land Reclamation Bureau of the Ministry of Agriculture from January 1984 to December 1985; he served as Operation Officer of the World Bank Representative Office in China from December 1985 to June 1988; he served as Deputy Director of the project office of China Rural Trust and Investment Corporation from June 1988 to October 1988; he served as Project Economist and Advisor of the World Bank from October 1988 to January 1994; he served as a cadre at People's Construction Bank of China from January 1994 to July 1995; he served as Deputy Chief Executive Officer, member and Deputy Chairman of the Management Committee, Co-Chief Operating Officer and Co-Head of the Investment Banking Department of China International Capital Corporation Limited ("CICC") from August 1995 to February 2006; he served as a Senior Advisor to CICC from March 2006 to November 2012; he served as a Managing Partner of HOPU Investment Management Co., Ltd. from November 2012 to March 2015; he served as a non-executive director for China Investment Securities Co., Ltd. (currently known as China CICC Wealth Management Securities Company Limited) from March 2017 to January 2020; from March 2015 to December 2019, he served as Chief Executive Officer and Chairman of Management Committee of CICC; from May 2015 to February 2020, he served as Executive Director of CICC. In May 2021, he was elected as Independent Director of Sinopec Corp.

 

LIST OF MEMBERS OF THE BOARD

 

					Remuneration
					paid by	Whether
					in 2021	paid by	Equity interests in Sinopec Corp.
			Position in		(RMB1,000,	the holding	(as at 31 December)
Name	Gender	Age	Sinopec Corp.	Tenure	before tax)	Company	2021	2020
Ma Yongsheng	Male	60	Board Director, President	2016.02-2024.05	715.3	No	0	0
Zhao Dong	Male	51	Board Director	2021.05-2024.05	-	Yes	0	0
Yu Baocai	Male	57	Board Director, President	2018.10-2024.05	441.8	No	0	0
Ling Yiqun	Male	59	Board Director,	2018.05-2024.05	-	Yes	13,000	13,000
			Senior Vice President
Li Yonglin	Male	55	Board Director,	2021.05-2024.05	-	Yes	0	0
			Senior Vice President
Liu Hongbin	Male	59	Board Director,	2020.05-2024.05	-	Yes	0	0
			Senior Vice President
Cai Hongbin	Male	54	Independent Director	2018.05-2024.05	416.7	No	0	0
Ng, Kar Ling Johnny	Male	61	Independent Director	2018.05-2024.05	416.7	No	0	0
Shi Dan	Female	60	Independent Director	2021.05-2024.05	300.0	No	0	0
Bi Mingjian	Male	66	Independent Director	2021.05-2024.05	300.0	No	0	0

 

LIST OF FORMER MEMBERS OF THE BOARD

 

					Remuneration
					paid by	Whether
					in 2021	paid by	Equity interests in Sinopec Corp.
			Position in		(RMB1,000,	the holding	(as at 31 December)
Name	Gender	Age	Sinopec Corp.	Tenure	before tax)	Company	2021	2020
Zhang Yuzhuo	Male	60	Former Chairman	2020.03-2021.08	-	Yes	0	0
Zhang Shaofeng	Male	50	Former Director	2020.09-2021.05	-	Yes	0	0
Tang Min	Male	68	Former Independent	2015.05-2021.05	116.7	No	0	0
			Director

 

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

 

(2)  Supervisors

Zhang Shaofeng, aged 50, Chairman of Board of Supervisors 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 China National Petroleum Corporation ("CNPC"); in July 2017, he was appointed as General Manager of Finance Department of CNPC (PetroChina Company Limited); in December 2017, he was appointed as General Manager of Finance Department of CNPC (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.; in May 2021, he was elected as Chairman of Board of Supervisors of Sinopec Corp.

 

Jiang Zhenying, aged 57,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.

 

Zhang Zhiguo, aged 59, Supervisor of Sinopec Corp. Mr. Zhang is a professor level senior administration engineer with a master's degree. In September 2009, he was appointed as Deputy Director General of Corporate Office of China Petrochemical Corporation (Sinopec President's office); in March 2015, he was appointed as Secretary of CPC Committee of Sinopec Management Institute (Sinopec Communist Party School); in December 2018, he was appointed as Director General of the Office of Leading Party Member Group Inspection Work of China Petrochemical Corporation; in December 2019, he was appointed as Director General of the General Management Department and Director of Leading Party Member Group Office of China Petrochemical Corporation. In May 2021, he was elected as Supervisor of Sinopec Corp.

 

Yin Zhaolin, aged 56, Supervisor of Sinopec Corp. Mr. Yin is a professor level senior engineer with a master's degree in engineering. In April 2010, he was appointed as Deputy General Manager of Sinopec Maoming Company; in January 2017, he was appointed as Executive Deputy General Manager of Sinopec Maoming Company (administrated as a General Manager of a Level-I Large-scale Enterprise); in April 2017, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Maoming Petrochemical Company and General Manager of Sinopec Maoming Company; in July 2017, he was appointed to serve a temporary position as a member of the Standing Committee of the CPC Maoming Municipal Committee; in October 2020, he was appointed as Executive Director and Secretary of CPC Committee of the Sinopec Maoming Petrochemical Company and the representative of the Sinopec Maoming Company, head of Maoming-Zhanjiang Integration Leading Group. In May 2021, he was elected as Supervisor of Sinopec Corp.

 

Guo Hongjin, aged 56, Supervisor of Sinopec Corp. Mr. Guo is a professor level senior engineer with a Ph.D. degree. In July 2013, he was appointed as Deputy General Manager of Sinopec Shengli Oilfield Company; in March 2018, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Shengli Petroleum Administrative Bureau Co., Ltd. and General Manager of Sinopec Shengli Oilfield Company; in December 2018, he was appointed as Executive Director, General Manager and Deputy Secretary of CPC Committee of Sinopec Jianghan Petroleum Administrative Bureau Co., Ltd. and General Manager of Sinopec Jianghan Oilfield Company; in July 2019, he was appointed as Executive Director and Secretary of CPC Committee of Sinopec Jianghan Petroleum Administrative Bureau Co., Ltd. and the representative of Sinopec Jianghan Oilfield Company; in April 2020, he was appointed as General Manager of the Petroleum Exploration & Development Department of Sinopec Corp. In May 2021, he was elected as Supervisor of Sinopec Corp.

 

Li Defang, aged 60, 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 Informatisation 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 60, 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 58, 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 2021	Company or	in Sinopec Corp.
			Position in		(RMB1,000,	their related	(as of 31 December)
Name	Gender	Age	Sinopec Corp.	Tenure	before tax)	entities	2021	2020
Zhang Shaofeng	Male	50	Chairman of the	2021.05-2024.05	-	Yes	0	0
			Board of Supervisors
Jiang Zhenying	Male	57	Supervisor	2018.05-2024.05	-	Yes	0	0
Zhang Zhiguo	Male	59	Supervisor	2021.05-2024.05	-	Yes	0	0
Yin Zhaolin	Male	56	Supervisor	2021.05-2024.05	-	Yes	0	0
Guo Hongjin	Male	56	Supervisor	2021.05-2024.05	403.2	No	0	0
Li Defang	Male	60	Employee Representative Supervisor	2020.05-2024.05	298.4	No	40,000	40,000
Lv Dapeng	Male	60	Employee representative Supervisor	2021.01-2024.05	417.2	No	0	0
Chen Yaohuan	Male	58	Employee Representative Supervisor	2021.01-2024.05	1,165.4	No	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		(RMB1,000,	their related	(as of 31 December)
Name	Gender	Age	Sinopec Corp.	Tenure	before tax)	entities	2021	2020
Zhao Dong	Male	51	Former Chairman of the Board of supervisor	2017.06-2021.05	-	Yes	0	0
Zou Huiping	Male	61	Supervisor	2006.05-2021.01	0	No	0	0
Sun Huanquan	Male	57	Employee Representative Supervisor	2020.05-2021.01	-	Yes	0	0
Yu Renming	Male	58	Employee Representative Supervisor	2010.12-2021.01	-	Yes	0	0

 

(3)  Other Members of Senior Management

Chen Ge, aged 59, 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.; in July 2020, he was appointed concurrently as General counsel.

 

Yu Xizhi, aged 59, 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 52, Chief Financial Officer and General Manager of Finance Department 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. and General Manager of Finance Department.

 

Zhao Rifeng, aged 59, 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 55, 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 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 2012, he was appointed as Secretary to the Board of Directors of Sinopec Corp.; 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 2021	Company or	Equity interests in Sinopec Corp.
			Position in	(RMB1,000,	their related	(as of 31 December)
Name	Gender	Age	Sinopec Corp.	before tax)	entities	2021	2020
Chen Ge	Male	59	Senior Vice President	1,586.7	No	0	0
Yu Xizhi	Male	59	Vice President	1,411.0	No	0	0
Shou Donghua	Female	52	Chief Financial Officer	1,292.4	No	0	0
Zhao Rifeng	Male	59	Vice President	1,451.9	No	0	0
Huang Wensheng	Male	55	Vice President, Board Secretary	1,407.9	No	0	0

 

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

 

On 1 January 2021, Mr. Yu Renming, Mr. Sun Huanquan resigned as Employee's Representative Supervisors of Sinopec Corp. due to change of working arrangement. Mr. Lv Dapeng and Mr. Chen Yaohuan were elected as the employee's representative supervisors of the seventh session of the Board of Supervisors of Sinopec Corp. through democratic procedure, for a term commencing from 11 January 2021 to the date when the term of the seventh session of the board of supervisors of the Company expires.

 

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

 

On 25 May 2021, the members of the Eighth Session of the Board of Directors and the Board of Supervisors (non-Employee-

Representative Supervisors) were elected at the 2020 general meeting of shareholders. The Chairman of the Board was elected and the senior management appointed at the 1st meeting of the Eighth session of Board held at the same date.The Chairman of the Board of Supervisors was elected at The 1st meeting of the Eighth Session of the Board of Supervisors.The changes of the Directors, Supervisors and other senior management are as follows:

 

Board of Directors: Mr. Zhang Yuzhuo was elected as Non-executive Director and Chairman of the Board. Mr. Ma Yongsheng was elected as Executive Director and President; Mr. Zhao Dong was elected as Non-executive Director; Mr. Yu Baocai, Mr Ling Yiqun, Mr. Li Yonglin, Mr. Liu Hongbin were elected as Executive Directors and Senior Vice President. Mr. Cai Hongbin and Mr. Ng Kar Ling Johnny, Ms. Shi Dan, Mr. Bi Mingjian were elected as Independent Non-executive Directors. Mr. Tang Min was no longer the Independent Non-executive Directors of the Board.

 

Board of Supervisors: Mr. Zhang Shaofeng was elected as the Chairman of Board of Supervisors. Mr. Jiang Zhenying, Mr. Zhang Zhiguo, Mr. Yin Zhaolin, Mr. Guo Hongjin were elected as Supervisors. Mr. Li Defang, Mr. Lv Dapeng, Mr. Chen Yaohuan were elected as Employee Representative Supervisors.

 

Other Senior Management: Mr. Chen Ge was elected as Senior Vice President. Mr. Yu Xizhi, Mr. Zhao Rifeng, Mr. Huang Wensheng were elected as Vice Presidents. Ms. Shou Donghua was appointed as Chief Financial Officer. Mr. Huang Wensheng was elected as Secretary to the Board.

 

On 2 August 2021, Mr. Zhang Yuzhuo resigned as Chairman of the Board, Non-executive Director and Chairman of each of the Strategy Committee, Nomination Committee and Sustainable Development Committee (Social Responsibility Management Committee)of the Board of Sinopec Corp. due to change of working arrangement.

 

On 29 November 2021, Mr. Ma Yongsheng was appointed as Chairman of the Board, Chairman of each of the Strategy Committee, Nomination Committee and Sustainable Development Committee (formerly, the Social Responsibility Management Committee) of the Board of Sinopec Corp. resigned as President and became a non-executive director.

 

On 29 November 2021, Mr. Yu Baocai was appointed as President of Sinopec Corp.

13 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 managers during the reporting period.

 

14 CONTRACTUAL INTERESTS OF DIRECTORS AND SUPERVISORS

As of 31 December 2021 or any time during the reporting period, no Director or Supervisor of the Company entered into any agreement with Sinopec Corp., its controlling shareholder, any subsidiary or related subsidiary which shall substantially benefit such Director or Supervisor.

 

15 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 terminable by the Company within one year without compensation (except for statutory compensation).

 

16 REMUNERATION OF DIRECTORS, SUPERVISORS, AND THE SENIOR MANAGEMENT

During this reporting period, a total of 16 Directors, Supervisors and other senior managers received remuneration from Sinopec Corp. with a total amount of RMB12.1413 million.

 

17 THE COMPANY'S EMPLOYEES

As at 31 December 2021, the Company has a total of 385,691 employees. There are a total of 280,216 retired employees to be reimbursed by Sinopec Corp. Sinopec Marketing Co. Limited, the principal subsidiaries of Sinopec Corp., has 122,232 employees.

 

THE BREAKDOWN OF NUMBER OF EMPLOYEES BY OPERATION SEGMENTS IS 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)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TECHNOLOGY PERSONNEL EDUCATION STRUCTURE: (INCLUDING PHD, MASTER'S DEGREE, UNDERGRADUATE OR BELOW)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TECHNOLOGY PERSONNEL AGE STRUCTURE

 

 

 

18 CHANGES OF CORE TECHNICAL TEAM OR KEY TECHNICIANS

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

 

19 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 2021, the Company has a total of 280,216 retired employees. All of them participated in the basic pension schemes administered by provincial governments (or those of autonomous regions or municipalities). Government-administered pension schemes are responsible for the payments of basic pensions.

 

20 REMUNERATION POLICY

Based on a relatively unified 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.

 

21  TRAINING PROGRAMS

In 2021, the Company strengthened coordination for training programs, took innovative approaches to establish high quality training system, and conducted training programs for all types of talents. The training for management staff became more systematic, with the 8-level echelon training system being constantly improved, covering new employees up to top management staff of subsidiaries, with an emphasis on middle-aged and young management staff training programs. The technician, skilled worker and specialist training proved more practically effective, with programmes focusing on oil and gas exploration specialists' versatile knowledge and advanced study, high-end synthetic material specialists' research and study, "future scientist" creativity upgrading, state craftsman forging and upgrading. The programmes enhanced post exposure, basic skill training and contingent skill training. The international talent training was further strengthened, focusing on overseas project teams, with training projects covering overseas project managers, international trade managers, refining and chemical international talents. The headquarters trained 5,122 key talents of various types. In addition, the Company strengthened online training by rendering it more intelligent and tailor-made, and participants have spent over 50 million hours on the online training program during the year of 2021.

 

ENVIRONMENT AND SOCIAL RESPONSIBILITIES

 

1    Work Conducted in Ecological Protection, Pollution Prevention and Environmental Responsibilities Implementation in the Reporting Period

In the reporting period, the Company targeted to build a world-leading clean energy and chemical company, stuck to green and clean development strategy, persistently carried out "green enterprise action", deepened the campaign of pollution prevention, kept environment risk from occurring, thus no substantial or sudden environmental incident happened. The COD and sulphur dioxide emissions decreased by 2.1% and 4.2% respectively, and the solid waste was 100% properly treated.

 

2    Measures taken to Mitigate Carbon Emission and its Effect in the Reporting Period

In the reporting period, the Company, guided by the carbon peak and carbon neutrality targets, advanced the "energy efficiency upgrading plan" in depth, persistently intensified carbon assets management, thus the energy saving and carbon reduction has been further improved. In 2021, the Company decreased its greenhouse gas emission by 2.38 million ton carbon dioxide equivalent, recycled 1.52 million tons of carbon dioxide, used 0.31 million tons of carbon dioxide for EOR, recycled 717 million cubic meters of methane which is equivalent to 10.75 million tons of carbon dioxide in terms of greenhouse gas emission.

 

3    Environmental Protection Solutions of Companies and Their Subsidiaries as Major Pollutant Discharging Companies Identified By Environmental Protection Departments

 

(1)  Pollutant discharge information

In the reporting period, certain subsidiaries of Sinopec Corp. listed as major pollutant discharge units announced by national or local ecological and environmental authorities have disclosed environmental information in accordance with the requirements of the national list of fixed pollution source emission permit classification management and acquired their pollutant discharge license as required by the relevant authorities and local government. The details of such information was published on national pollutant discharge license management information platform (http://permit.mee.gov.cn/permitExt/defaults/default-index!getInformation.action) and the local government website.

 

(2)  Construction and operation of pollution prevention facilities

In the reporting period, the Company 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.

 

(3)  Environmental influence evaluation for construction projects and other administrative permit for environmental protection

In the reporting period, the Company standardized environmental protection management for construction projects, enforced whole process construction and operation management, with measures of the "simultaneous three" implemented, all new projects have acquired approval for environmental evaluation from government.

 

(4)  Contingent scheme for sudden environmental incident

In the reporting period, the Company complied with the requirements for environmental incident contingent scheme by the State, promulgated "contingent scheme for sudden environmental incidents", and persistently improved its contingent scheme against sudden environmental incidents of enterprises and severe pollution weather.

 

(5)  Scheme for environment self-monitoring

In the reporting period, the Company improved its self-monitoring scheme in accordance with the industry guideline, enforced the new requirements for sewage, flue gas and noise monitoring, and disclosed the monitor information as required.

 

(6)  Administrative penalties due to environmental problems in the reporting period

In the reporting period, no penalty for significant environmental protection incident was imposed on the Company. The subsidiaries' administrative penalties have been disclosed in the website required by environment departments of local government.

 

(7)  Other environmental information to be disclosed

In the reporting period, for subsidiaries not listed as major pollution units, the Company has acquired related permissions from national and local government, and enforces environmental protection measures. The above mentioned subsidiaries are not obliged to disclose in accordance with the requirements of national and local ecological environment authorities.

 

4    Expand the achievements in poverty-alleviation and rural revitalization

In the reporting period, the Company focused its rural revitalisation efforts on the 8 counties designated for its assistance, the poverty of which has already been alleviated. The Company recognised industry, education and consumption as three main fields of work, and strengthened the linkage between the outcome of poverty alleviation and rural revitalization.

 

On 1 March 2021, Sinopec Corp. became the first to publish its 14th-five-year plan to support rural revitalization, mapped out its education and consumption support enforcement plans respectively, including the vision to be realized in the 14th-five-year period, the planed fund and major projects, which ensured the all-round support work. In 2021, the Company accumulatively dispatched 349 village teams and 925 village cadres to undertake 610 village-level support projects, invested and introduced to-be-paid and non-to-be-paid funds of RMB580 million in total, trained over 30,000 entry-level personnel and supported local consumption by RMB950 million.

 

5    Support the Winter Olympic and Paralympic Games Beijing 2022

As an official sponsor for Winter Olympic and Paralympic Games Beijing 2022, Sinopec Corp. proactively implemented its concept of "clean energy, serve the Winter Olympic Games", dedicated itself to service, supply and promotion for the Olympic Games. The Company facilitated the construction of oil and hydrogen energy stations, used the hydrogen it produced to fuel the Olympic torches, and supplied clean energy for the Games. Meanwhile, the Company developed and manufactured the carbon fibre synthetic material used in the coat of the "flying upward" torch, which has promoted the Company's brand concept of "cleaner energy, better life".

 

 

 

SIGNIFICANT EVENTS

 

1    MAJOR PROJECTS

 

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

Zhenhai Refining & Chemical expansion project (phase 1) consists of 4,000,000 tpa crude oil modification project for old refinery and 1,200,000 tpa ethylene project. The project was approved in June 2018, ethylene and relevant projects started at the end of October 2018. The mechanical completion was finished in June 2021. The Company's self-owned fund accounts for 30% of the project investment, bank loan is the main source of the remaining 70%. As of 31 December 2021, the aggregate amount invested was RMB23 billion.

 

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

Zhenhai Refining & Chemical expansion project (phase 2) consists of building 11,000,000 tpa refinery project and 600,000 tpa propane dehydrogenatin and downstream projects. The project is expected to begin in March 2022 and mechanical completion is expected to be finished in June 2024. The Company's self-owned fund accounts for 30% of the project investment, bank loan is the main source of the remaining funds. As of 31 December 2021, the aggregate amount invested was RMB2.1 billion.

 

(3)  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 1,200,000 tpa ethylene project and downstream processing units. The project began in May 2021 and mechanical completion is expected to be finished 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 funds. As of 31 December 2021, the aggregate amount invested was RMB3.0 billion.

 

(4)  Wuhan de-bottleneck project

Wuhan de-bottleneck project expands the original an 800,000 tpa-to-1,100,000 tpa ethylene capacity expansion project. The project started at the end of October 2018 and mechanical completion was finished in June.2021. It's put into operation in Sep. 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 funds. As of 31 December 2021, the aggregate amount invested was RMB3.9 billion.

 

(5)  Hainan 1,000,000 tpa ethylene and refining expansion project

Hainan Ethylene and Refining Expansion project mainly consists 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 Jun. 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 funds. As of 31 December 2021, the aggregate amount invested was RMB15.6 billion.

 

(6)  Yifzheng PTA project

Yizheng 3 million tpa PTA project mainly consists of oxidation, purification units and auxiliary units. The project started in July 2021 and the mechanical completion is expected to be finished in Aug. 2023. The Company's self-owned fund accounts for 30% of the project investment, bank loan is the main source of the remaining funds. As of 31 December 2021, the aggregate amount invested was RMB0.65 billion.

 

(7)  Weirong shale gas project (phases 1 & 2)

Guided by the principle of "overall deployment, stage-wise implementation and fully consideration", the building of first phase of production capacity, which is 1 billion cubic meters per year, unfolded comprehensively since August 2018. The phase-one 1 billion-cubic-meter capacity was built up in December 2020. It is expected to complete phase-two 2 billion-cubic-meter capacity 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 funds. As of 31 December 2021, the aggregate amount invested was RMB6.3 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 capacity will reach 11 million tons per year after phase 2 is completed. The project started in January 2019 and is expected to 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 funds. As of 31 December 2021, the aggregate amount invested was RMB3.0 billion.

 

(9)  Longkou LNG project

Longkou LNG project mainly consists of a wharf, terminal and power plant warm drainage and water Intake. The first phase designed LNG capacity is 6 million tons per year. One LNG berth with 0.266 million cubic meter capacity will be modified and four 0.22 million cubic meter capacity storage tanks will be newly built up. The project started in Nov. 2021 and is expected to put into operation in Nov. 2024. The Company's self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining funds. As of 31 December 2021, the aggregate amount invested was RMB1.4 billion.

 

2    PURCHASE OF EQUITY AND NON-EQUITY ASSETS

On 26 March 2021, Sinopec Corp. and Sinopec Group Asset Management Co., Ltd. ("Asset Company") entered into acquisition agreements to purchase the equity interest in Cangzhou Toray and the polypropylene and utilities assets, Sinopec Corp. and Orient Petrochemical entered into agreement to purchase equipment and related assets. On the same day, Overseas Investment Company of Sinopec Corp. and Century Bright Company entered into agreement to purchase equity interest in Hainan Refining and Chemical, Beihai Refining & Chemical of Sinopec Corp. and Beihai Petrochemical entered into agreement to purchase the non-equity assets including the pier operation platform. As of 1 July 2021, conditions precedent for closing in above agreements have been met, the ownership, obligations, responsibilities and risks of targeted assets have been transferred to Sinopec Corp. or its subsidiaries.

 

On 29 November 2021, Sinopec Corp. and Assets Company entered into the agreement on purchasing the equity assets, non-equity assets and liabilities of the production and operating business held by the Assets Company, Sinopec Yizheng Chemical Fibre Company Limited and Assets Company entered into the agreement on purchasing the equity assets, non-equity assets and liabilities of the production and operating business held by the Assets Company, Sinopec Corp. and Sinopec Beijing Yanshan Petrochemical Co., Ltd. entered into the agreement on purchasing the non-equity assets and liabilities of the production and operating business held by Sinopec Beijing Yanshan Petrochemical Co., Ltd. As of 1 December 2021, the ownership, obligations, responsibilities and risks of targeted assets have been transferred to Sinopec Corp. or its subsidiaries.

 

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 29 March 2021, 2 July 2021, 30 November 2021 and 2 December 2021, on the website of Hong Kong Stock Exchange on 28 March 2021, 1 July 2021, 29 November 2021 and 1 December 2021.

 

3.   THE TRANSACTIONS WITH CHINA OIL & GAS PIPELINE NETWORK CORPORATION (PIPECHINA)

On 28 January 2021, the Board approved the continuing related party transaction cap in relation to refined oil pipeline transportation between Marketing Company and PipeChina for the period from 1 October 2020 to 31 December 2021. The aggregate amount of the continuing related party transaction of the Company from 1 January 2021 to 31 December 2021 was RMB5.93 billion.

 

4    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) 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 has Sinopec Corp. made any profit forecast in relation to any asset or project.

 

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*1

Transaction date (date of signing)

Period of guarantee

Type

Principal debt condition

guaranty

Whether completed or not

Whether overdue or not

Amount of overdue guarantee

Counter- guaranteed

Whether guaranteed for connected parties yes or no)*2

Sinopec Corp.

The listed company itself

Zhongtian Hechuang Energy Co., Ltd

5,746

May-16

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

Joint and several liability guarantee

Normal performance

-

No

No

-

No

No

Sinopec Corp.

The listed company itself

Zhong An United Coal Chemical Co., Ltd.

5,680

Apr-18

April 2018-December 2031

Joint and several liability guarantee

Normal performance

-

No

No

-

No

No

Sinopec Corp.

The listed company itself

Russian Amur Natural Gas Chemical Integrated LLC

3,264*4

Dec-21

December 2021-December 2035 (the mature date is estimated)

Joint and several liability guarantee

Normal performance

-

No

No

-

No

No

Sinopec Corp.

The listed company itself

Russian Amur Natural Gas Chemical Integrated LLC

173

Jan-21

January 2021-June 2026 (the mature date is estimated)

Joint and several liability guarantee

Normal performance

-

No

No

-

No

No

Total amount of guarantees provided during the reporting period*4

3,437

Total amount of guarantees outstanding at the end of reporting period*4 (A)

14,863

Guarantees by the Company to the controlled subsidiaries

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

0

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

11,157

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

Total amount of guarantees (A+B)

26,020

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

3.36

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

0

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

9,117

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

0

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

9,117

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

None

Statement of guarantee status

 

* 1:   Guarantee amount refers to the actual amount of guarantee liability that the company may undertake during the reporting period within the approved guarantee limit.

 

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

 

* 3:   Excluding the interest corresponding to the loan principal agreed in the guarantee contract, export credit premium and other expenses

 

* 4:   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.

 

For the details of the guarantees provided by Sinopec Corp. for Zhongtian Hechuang Energy Co., Lt, Zhong An United Coal Chemical Co., Ltd., and Russian Amur Natural Gas Chemical Integrated LLC in the above table, please refer to the Company's respective documents dated December 29, 2015, March 26, 2018, And April 16, 2020 26 January 2021 A notice disclosed on the website of the Shanghai Stock Exchange on 16 December 2021 and a circular dated 7 January 2016, a circular dated 23 March 2018, and a notice dated 15 December 2021, respectively disclosed on the website of the Hong Kong Stock Exchange.

 

6.   SPECIFIC STATEMENTS AND INDEPENDENT OPINIONS FROM INDEPENDENT NON-EXECUTIVE DIRECTORS REGARDING OUTSTANDING EXTERNAL GUARANTEES PROVIDED BY THE COMPANY DURING AND BY THE END OF 2021:

We, as independent directors of Sinopec Corp., hereby make the following statements after conducting a thorough check of external guarantees provided by the Company accumulated up to and during 2021 in accordance with the requirements of the domestic regulatory authorities:

The external guarantees prior to 2021 had been disclosed in previous annual report. The aggregate balance of outstanding external guarantees provided by Sinopec Corp. for the year 2021 was RMB26 billion, accounting for approximately 3.36% of the Company's net assets. The total amount of guarantees provided during the reporting period was RMB3.4 billion, accounting for approximately 0.44% of the Company's net assets. In accordance with the Articles of Association of the Company and the relevant laws and regulations and securities regulatory authorities on external guarantees, we hereby present the following opinions:

In the reporting period, Sinopec Corp. strictly complied with the approval requirements by regulatory authorities and stock exchanges  at home and abroad. There was no violation of decision-making procedures for offering external guarantees, no misconduct impairing the company's and minority shareholders' interest, thus no witness of possible significant risks. 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 fail to perform any effective judgments of the courts or fail to repay any substantial amount of debt due.

 

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 trust, 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.

 

(2)  ENTRUSTED LOAN

unit：RMB million

 

Class	Origin	Transaction amount	Undue amount	Overdue
Working capital loan	Self-owned fund	(467)	154	0
Project construction loan	Self-owned fund	(42)	2,690	0

 

(3)  OTHER LOAN

unit：RMB million

 

Class	Origin	Transaction amount	Undue amount	Overdue
Project construction loan	Self-owned fund	3,060	3,060	0

 

(4)  OTHER FINANCING AND DERIVATIVE INVESTMENT

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

 

13  BUSINESS WITH SINOPEC FINANCE CO., LTD. (Sinopec Finance) AND SINOPEC CENTURY BRIGHT CAPITAL INVESTMENT, LTD. (Century Bright)

 

(1)  DEPOSIT

 

unit: RMB million

 

					Transaction amount
Related party	Related party relationship	Daily Cap   RMB80 billion by Sinopec Finance and Century Bright	Interest rate range	Balance at beginning	Total deposit	Total withdrawn	Balance in the end
Sinopec Finance	Sinopec Group 51%; Sinopec Corp.49%		current：0.35%-1.725%；time deposit: 1.35%-7.4%	23,953	9,385	9,480	15,708
Century Bright	Sinopec Group 100%		current：0%-0.25%；time deposit: 0.08%-1.23%	29,464	197,800	176,800	45,974

 

Note 1:   generally, the deposit interest rate at Sinopec Finance and Century Bright is no lower than that of the same type of deposits for the same period from major commercial banks

 

Note 2:   the current period's occurrence is on a time deposit basis.

 

(2)  LOAN

 

unit: RMB million

 

					Transaction amount
Related party	Related party relationship	Daily Cap	Interest rate range	Balance at beginning	Total loan	Total withdrawn	Balance in the end
Century Bright	Sinopec Group 100%	127,920	0.56%-4.25%	6,614	151,233	154,648	3,199
Sinopec Finance	Sinopec Group 51%; Sinopec Corp. 49%	13,364	1.08%-5.23%	10,428	32,305	29,369	13,364

 

Note:      generally, the loan interest rate at Sinopec Finance and Century Bright is no higher than that of the same type of deposits for the same period from major commercial banks.

 

(3)  CREDIT OR OTHER FINANCIAL BUSINESS

 

unit: RMB million

 

Related party	Related party relationship	Business nature	Total amount	Transaction amount
Sinopec Finance	Sinopec Group 51%;	Credit	9,494	23,590
	Sinopec Corp. 49%	Discounted bills	-	7,194

 

Note:      the occurred amount includes the newly issued bills and discounts in the year

 

In order to regulate related party transactions between the Company and Sinopec Finance Co., Ltd. (Sinopec Corp.'s domestic settlement center, hereinafter referred 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, ensuring the Company's discretion to use and control its deposits with the Finance Company. At the same time, as the controlling shareholder of the Finance Company, China Petrochemical Corporation undertook that in case of an emergency when the Finance Company has difficulty in making payments, China Petrochemical Corporation would increase the capital of the Finance Company to meet the need for the purpose of making payment.

 

In order to regulate related party transactions between the Company and Sinopec Century Bright Capital Investment, Ltd. (Sinopec Corp.'s overseas settlement center, hereinafter referred at 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 support 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 restrictions on Century Bright Company regarding the provision of 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 are in strict compliance with 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  INFLUENCE ON THE INDUSTRY FROM NEWLY-ENFORCED LAW, ADMINISTRATIVE RULES, REGULATIONS AND INDUSTRY POLICIES

In 2021, the NPC Standing Committee promulgated the Safety Production Law (revised in 2021) to strengthen the supervision on safety production. The State Council promulgated Sewage Permission Management Rules which set up a system to take sewage permit as core to monitor stationary pollution source. The NDRC promulgated Natural Gas Pipe Transportation Price Management Regulation and Natural Gas Pipe Transportation Pricing Cost Supervision Regulation (provisional) which specifies the trans-province natural gas pipe transportation pricing principle, method, procedures, cost structure and review method etc in detail.

 

In addition, governmental departments promulgated relevant carbon peak and carbon neutrality guidelines which stress on the need to curb high energy consumption and high emission projects, and promote green transformation and high quality development.

 

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 the agreements on continuing connected transactions.

 

On 27 August 2021, Sinopec Corp. and China Petrochemical Corporation entered into the sixth supplemental agreement on continuing connected transactions. The resolution relating to continuing connected transactions for the three years from 2022 to 2024 was approved at the first extraordinary general meeting of Sinopec Corp. for the year of 2021 held on 20 October 2021. For details of the above continuing connected transactions, please refer to relevant announcements published on 30 August 2021 in China Securities Journal, Shanghai Securities News and Securities Times and on 29 August 2021 on the website of the Shanghai Stock Exchange and the website of the Hong Kong Stock Exchange. 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 SHANGHAI LISTING RULES

Pursuant to the Hong Kong Listing Rules and the Shanghai Listing Rules, 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 2021 of the Company is in compliance with the relevant requirements of the Hong Kong Listing Rules and the Shanghai Listing Rules. 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 RMB382.445 billion. Among which, purchases expenses amounted to RMB259.882 billion, representing 9.35% 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 RMB246.211 billion, purchases of auxiliary and community services of RMB1.730 billion, payment of property rent of RMB565 million, payment of land use right of RMB10.831 billion, other lease payment RMB159 million, and the interest expenses amounted to RMB386 million. The sales income amounted to RMB122.563 billion, representing 4.25% of the total amount of this type of transaction for the reporting period, including RMB121.676 billion for sales of products and services, RMB165 million for agency commission income, and RMB722 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.

 

The pricing principles for the continuing connected transactions are as follows:

 

(a)  The government-prescribed price, if any, 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 30 August 2021 in China Securities Journal, Shanghai Securities News and Securities Times and on 29 August 2021 on the website of the Shanghai Stock Exchange and the website of the Hong Kong Stock Exchange.

 

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.

 

Related party 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 were approved at the 2nd meeting of the eighth 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 2 "purchase of equity and non-equity assets" and item 3 "The transactions with China Oil & Gas Pipeline Network Corporation" of the 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*	10,645	(848)	9,797	9,670	21,012	30,682
Other related parties	Associates and joint ventures	11,328	(4,185)	7,143	6,087	(2,494)	3,593
Total		21,973	(5,033)	16,940	15,757	18,518	34,275
Reason for provision of funds between related parties		Loans and other accounts receivable and payable
Impacts on the Company		No material negative impact

 

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

 

REPORT OF THE BOARD OF DIRECTORS

 

The Board is pleased to present the report of the Board of Directors for the year ended 31 December 2021 for the shareholders' review.

 

1    MEETINGS OF THE BOARD

During this reporting period, Sinopec Corp. held seven (7) Board meetings. The details are as follows:

 

(1)  The 20th meeting of the seventh session of the Board was held by written proposals on 28 January 2021, whereby the proposals in relation to the following matters were approved:(i) the continuing connected transactions with China Oil & Gas Pipeline Network Corporation for the year 2020-2021; (ii) Information Disclosure Management Regulation; (iii) Investor Relations Management Regulation; (iv) the Internal Control Manual (2021).

 

(2)  The 21st meeting of the seventh session of the Board was held by on-site meeting and via video conference on 26 March 2021, whereby the proposals in relation to the following matters were approved: (i) the development strategy of Sinopec Corp. (ii) the Work Report of the seventh session of the Board; (iii) the Work Report of the seventh session of the Senior Management; (iv) financial results and business performance of the Company for the year 2020; (v) provision for impairment for the year 2020; (vi) the continuing connected transactions for the year 2020; (vii) profit distribution plan for the year 2020; (viii) audit costs for the year 2020; (ix) to authorize the Board to determine the interim profit distribution plan of Sinopec Corp. for the year 2021; (x) to authorize the Board to determine the 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) change in the accounting firm; (xiii) Internal control assessment report of Sinopec Corp. for the year 2020; (xiv) Financial Statements of Sinopec Corp. for the year 2020; (xv) Annual Report of the Company for the year 2020; (xvi) Form 20F of the Company for the year 2020; (xvii) Acquisition of relevant assets and equities of the Sinopec Group; (xviii) investment and construction of 11 million tonnes/year refinery and high-end synthetic new materials project; (xix) the report of Sustainable Development of Sinopec Corp. for the year 2020; (xx) granting to the Board a general mandate to issue new domestic shares and/or overseas-listed foreign shares of Sinopec Corp.; (xxi) the re-election of the Board of Directors; (xxii) the re-election of the Board of Supervisors; (xxiii) Service Contract for the Directors of the eighth session of the Board (including remuneration clauses) and Supervisors of the eighth session of the Board of Supervisors (including remuneration clauses); (xxiv) Notice of 2020 Annual General Meeting.

 

(3)  The 22th meeting of the seventh session of the Board was held by way of written resolution on 28 April 2021, whereby the proposals in relation to the following matters were approved: (i) the first quarterly report for the three months ended 31 March 2021; (ii) transformation and upgrading of refining business and improvement of ethylene business for Maoming Branch.

 

(4)  The 1st meeting of the eighth session of the Board was held by on-site meeting and via video conference on 25 May 2021, whereby the proposals in relation to the following matters were approved: (i) election of the Chairman of the eighth session of the Board; (ii) to rename the Social Responsibility Management Committee and revise the Term of Reference of Social Responsibility Management Committee; (iii) the revision of the terms of reference of the Nomination Committee; (iv) composition of the special committees of the eighth session of the Board; (v) the appointment of President of Sinopec Corp.; (vi) the appointment of Senior Vice President, Vice President, Chief Financial Officer of Sinopec Corp.; (vii) the appointment of the Secretary to the Board of Sinopec Corp., the Authorized Representative of the Hong Kong Stock Exchange and the Authorized Representative of the Shanghai Stock Exchange.

 

(5)  The 2nd meeting of the eighth session of the Board was held by on-site meeting on 27 August 2021, 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 2021 and the work arrangements for the second half of the year 2021; (ii) amendments to the Article of Association; (iii) profit distribution plan for the first half of the year 2021; (iv) the report of Risk Assessment for Capital Deposits at Finance Company and Century Bright Company; (v) the financial statements for the first half of the year 2021; (vi) interim report for the six months ended 30 June 2021; (vii) the continuing connected transactions for the year 2022 to 2024; (viii) establishment of a joint venture by Shanghai Petrochemical and Baling Petrochemical; (ix) investment and construction of 1.5 million tonnes/year ethylene project for Zhenhai Refinery & Chemical Branch; (x) Notice of 2021 First Extraordinary General Meeting.

 

(6)  The 3rd meeting of the eighth session of the Board was held by written resolution on 28 October 2021, whereby the proposal in relation to the third quarterly report for three months ended 30 September 2021 was approved.

 

(7)  The 4th meeting of the eighth session of the Board was held by way of written resolution on 29 November 2021, whereby the proposals in relation to the following matters were approved: (i) the election of the Chairman of the Board; (ii) adjustment of the composition of the board special committees; (iii) the appointment of President of Sinopec Corp.; (iv) acquisition of relevant assets and equities of Sinopec Group; (v) the Terms of Reference of the Independent Non-Executive Directors.

 

For details of each meeting, please refer to the announcements published in 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 TO THE GENERAL MEETINGS

 

(1)  Attendance to the board meetings and general meetings during the reporting period by the Directors of the eighth session of the Board

 

Director titles	Name	Board meeting					General meeting
		No. of meetings held	On-site attendance	Meetings attended by communication	Meetings attend by proxy	Absent	No. of meetings held	Actual attendance
Chairman	Ma Yongsheng	7	3	4	0	0	2	2
Director	Zhao Dong	4	1	2	1	0	1	1
Director	Yu Baocai	7	2	4	1	0	2	2
Director	Ling Yiqun	7	3	4	0	0	2	0
Director	Li Yonglin	4	2	2	0	0	1	0
Director	Liu Hongbin	7	2	4	1	0	2	0
Independent Director	Cai Hongbin	7	2	4	1	0	2	0
Independent Director	Ng, Kar Ling Johnny	7	3	4	0	0	2	0
Independent Director	Shi Dan	4	2	2	0	0	1	0
Independent Director	Bi Mingjian	4	2	2	0	0	1	0

 

(2)  Attendance to the board meetings and general meetings during the reporting period by the former Directors of the eighth session of the Board

 

Director titles	Name	Board meeting					General meeting
		No. of meetings held	On-site attendance	Meetings attend by communication	Meetings attend by proxy	Absent	No. of meetings held	Actual attendance
Former Chairman	Zhang Yuzhuo	4	2	2	0	0	1	1
Former Director	Zhang Shaofeng	3	1	2	0	0	1	0
Former Independent Director	Tang Min	3	1	2	0	0	1	0

 

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

Note 2: Mr. Zhang Yuzhuo resigned as the Chairman, Director of the Board on 2 August 2021.

 

(3)  Attendance to the general meetings by the Independent Director

During the reporting period, none of the Independent Directors had attended the general meetings of shareholders in person due to Covid-19 pandemic or official duties.

 

4    MEETINGS HELD BY THE BOARD COMMITTEES

During the reporting period, the Board committees held ten (10) meetings, among which the Audit Committee held five (5) meetings, the Strategy Committee held one (1) meeting, the Remuneration and Appraisal Committee held one (1) meeting, the Sustainable Development Committee (formerly known as Social Responsibility Management Committee) held one (1) meeting, and the Nomination Committee held two (2) meetings. All members of each committee had attended the relevant meetings. Details of those meetings are as follows:

 

(1)  The 14th meeting of the seventh session of the Audit Committee was held by way of written resolution on 28 January 2021, whereby the proposal in relation to the Internal Control Manual (2021) was approved.

 

(2)  The 15th meeting of the seventh session of the Audit Committee was held by on-site meeting and via video conference on 25 March 2021, whereby the proposals in relation to the following matters were approved: (i) Financial results and business performance of the Company for the year 2020; (ii) Financial statements of Sinopec Corp. for the year 2020; (iii) Annual Report of the Company for the year 2020; (iv) Form 20F of the Company for the year 2020; (v) change in the accounting firm; (vi) Internal control assessment report of Sinopec Corp. for the year 2020; (vii) Report on audit work for 2020 and audit work arrangement for 2021.

 

(3)  The 16th meeting of the seventh session of the Audit Committee was held by way of written resolution on 28 April 2021, whereby the proposal in relation to the first quarterly report for the three months ended 31 March 2021 was approved.

 

(4)  The 1st meeting of the eighth session of the Audit Committee was held by on site meeting on 25 August 2021, whereby the proposals in relation to the following matters were approved: (i) Notes on financial results and business performance for the first half of the year 2021; (ii) Financial statements for the first half of the year 2021;(iii) Interim report for the six months ended 30 June 2021; (iv) Proposal in relation to the continuing connected transactions for the year 2022 to2024; (v) Report on the main audit work for the first half of 2021 and the overall arrangement of audit work for the second half of 2021.

 

(5)  The 2nd meeting of the eighth session of the Audit Committee was held by way of written resolution on 28 October 2021, whereby the proposal in relation to the third quarterly report for the three months ended 30 September 2021 was approved.

 

(6)  The 7th meeting of the seventh session of the Strategy Committee was held by way of written resolution on 25 March 2021, whereby the proposals in relation to the following matters were approved:(i) the development strategy of Sinopec Corp.; (ii) the investments plan of 2021 of Sinopec Corp.

 

(7)  The 3rd meeting of the seventh session of the Remuneration and Appraisal Committee was held by way of written resolution on 25 March 2021 whereby the proposal in relation to implementation of the rules of the remuneration of directors, supervisors and senior management for 2020 and the remuneration of the Board of Directors and the Board of Supervisors of the eighth session of the Board was approved.

 

(8)  The 3rd meeting of the seventh session of the Social Responsibility Management Committee was held by way of written resolution on 25 March 2021, whereby the proposals in relation to the following matters were approved:(i) Report of Sustainable Development of Sinopec Corp. for the year 2020; (ii) Report on the environmental protection work of Sinopec Corp. for the year 2020 and the plan of 2021; (iii) Report on the anti-corruption compliance work of Sinopec Corp. for the year 2020 and the plan of 2021.

 

(9)  The 8th meeting of the seventh board of the Nomination Committee was held by way of written resolution on 25 March 2021, whereby the proposal in relation to the re-election of the Board of Directors was approved.

 

(10)  The 1st meeting of the eighth session of the Nomination Committee was held by on site meeting and via video conference on 25 May 2021, whereby the proposals in relation to the following matters were approved:(i) the appointment of President of Sinopec Corp.; (ii) the appointment of Senior Vice President, Vice President, Chief Financial Officer of Sinopec Corp.; (iii) the appointment of the Secretary to the Board of Directors of Sinopec Corp..

 

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

 

6    PERFORMANCE OF THE DIRECTORS' DUTIES

During the reporting period, the Directors of Sinopec Corp. fulfilled their duties diligently in accordance with the Articles of Association, actively attended Board meetings and meetings of the Board committees (please refer to the Report of the Board of Directors in this annual report for their attendance of the meeting), reviewed the relevant documents with due care. They utilised their professional expertise to provide suggestions on decision-making of the Company of significant events. The Directors maintained timely and effective communication with the management, external auditors and internal audit department, and promoted scientific decision-making by offering advice on the Company's development strategy, and operations and reform. The Independent Directors of Sinopec Corp. fulfilled their duties in good faith as required by Terms of Reference of the Independent Directors, put forward specific requirements on auditing, participated in the replacement of external auditor and other significant events, issued their independent opinions on matters such as appointment of senior management, connected transactions and profit distribution plan, and protected the legitimate interests of the minority shareholders' interests. All directors had no objection to the Company's resolutions, and every director's suggestions to the Company were accepted.

 

Pursuant to requirements of securities regulatory authority of China, Independent 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 issued a special opinion as follows: "The President Mr. Yu Baocai, Senior Vice President Mr. Ling Yiqun, Mr. Li Yonglin and Mr. Liu Hongbin, each of whom concurrently held position as senior management of China Petrochemical Corporation, have obtained the exemptions for holding concurrent position from CSRC in accordance with the applicable rules. In 2021, Mr. Yu Baocai, Mr. Ling Yiqun, Mr. Li Yonglin and Mr. Liu Hongbin strictly abided by the provisions of laws and regulations, the Articles of Association and the service contract, conscientiously fulfilled their duties of loyalty and diligence, devoted sufficient time and energy to organize production, operation and management in accordance with the decision and deployment of the Board, and earnestly implemented the decisions of the Board. They protected the interests of the Company and its shareholders effectively and had not violated the legitimate interests of Sinopec Corp. and its shareholders due to holding aforesaid concurrent positions in China Petrochemical Corporation."

 

7    BUSINESS PERFORMANCE

The financial results of the Company for the year ended 31 December 2021, which were prepared in accordance with IFRS and the financial position as at that date and the accompanying analysis are set out from page 143 to page 203 in this annual report. A fair review of the Company's business, a discussion 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 sections "Chairman's Address", "Business Review and Prospects", "Management's Discussion and Analysis" and "Significant Events" of this annual report. All of the above discussions constitute parts of the report of the Board of Directors.

 

8    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 allowed 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, taking into account the advice from the minority shareholders. Meanwhile, the Independent Directors will issue independent opinions.

 

Proposals for dividend distribution

At the 7th meeting of the eighth session of the Board, the Board approved the proposal to distribute a final cash dividend of RMB0.31 (tax inclusive) per share for 2021. Taking into account the distributed interim dividend of RMB0.16 (tax inclusive) per share for the first half of 2021, the total dividend for the whole year is RMB0.47 (tax inclusive) per share.

 

The final cash dividend will be distributed on or before Thursday, 23 June 2022 to all shareholders whose names appear on the register of members of Sinopec Corp. on the record date of Thursday, 9 June 2022. 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 Wednesday, 1 June 2022 for registration. The H shares register and transfer of members of Sinopec Corp. will be closed from Thursday, 2 June 2022 to Thursday, 9 June 2022 (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 Programmes in RMB and to the overseas shareholders in Hong Kong Dollar. The exchange rate for the dividend calculated 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 and distribution of such dividend.

 

In accordance with the Enterprise Income Tax Law of the People's Republic of China and its implementation regulations which came into effect on 1 January 2008, 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 the 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. On such 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 H shares are residents of Hong Kong, Macau or countries which had an agreed tax rate of 10% for cash dividends or bonus shares by way of capitalisation from retained earnings with China under the relevant tax agreement, Sinopec Corp. should withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. If the individual holders of H Shares are residents of countries which had an agreed tax rate of less than 10% with China under 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 H Shares wish to reclaim the extra amount withheld due to the application of 10% tax rate, Sinopec Corp. would apply for the relevant agreed preferential tax treatment pursuant to the relevant tax agreement provided that the relevant shareholders submit the evidence required by the notice of the tax agreement to the share register of H Shares of Sinopec Corp. in a timely manner. Sinopec Corp. will assist with the tax refund after the approval of the competent tax authority. If the individual holders of H Shares are residents of 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 agreements. If the individual holders of H Shares are residents of countries which had an agreed tax rate of 20% with China, or which had 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 dividends of 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:

 

	2021	2020	2019
Cash dividends (RMB/Share, tax inclusive)	0.47	0.20	0.31
Total amount of cash dividends (RMB billion, tax inclusive)	569.03	242.14	375.33
Net profits attributed to the shareholders of the listed company shown in the  consolidated statement for the dividend year (RMB billion)	712.08	332.71	576.43
Ratio of the dividends to the net profit attributed to the shareholders of  the listed company in the consolidated statement (%)	79.9	72.8	65.1

 

Note: The final cash dividend for 2021 is subject to the approval at the 2021 annual general meeting.

 

The aggregate cash dividend declared by Sinopec Corp. during three years from 2019 to 2021 is RMB0.98 per share, and the total dividend payment from 2019 to 2021 as a percentage of average net profit attributed to the shareholders of the listed company in the three years is 220%.

 

9    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 2021, 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 2021. The internal control system of Sinopec Corp. related to the financial statements is sound and effective.

 

2021 Internal Control Assessment Report of Sinopec Corp. was reviewed and approved at the 7th meeting of the eighth session of the Board on 25 March 2022, 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.

 

10  DURING THe 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 section "Environment and Social Responsibilities" in this annual report as well as the 2021 Sustainability Report of Sinopec Corp.

 

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

 

12  MAJOR SUPPLIERS AND CUSTOMERS

During the reporting period, the total value of the purchasing from the top five crude oil suppliers of the Company accounted for 31% 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 12% of the total value of the crude oil purchasing by the Company.

 

The total revenue from the five largest customers of the Company in 2021 was RMB216,201 million, accounting for 7.89% of the total revenue of the Company, of which the sales value to the connected party Sinopec Group among the five largest customers was RMB73,186 million, accounting for 2.67% 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.

 

13  BANK LOANS AND OTHER BORROWINGS

Details of bank loans and other borrowings of the Company as of 31 December 2021 are set out in Note 30 to the financial statements prepared in accordance with IFRS in this annual report.

 

14  FIXED ASSETS

During the 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.

 

15  RESERVES

During the 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.

 

16  DONATIONS

During the reporting period, the amount of charity donations made by the Company amounted to RMB165 million.

 

17  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.

 

18  REPURCHASE, SALES AND REDEMPTION OF SHARES

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

 

19  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 "Corporate Governance" of this annual report.

 

20  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.

 

21  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.

 

22  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.

 

23  EQUITY-LINKED AGREEMENTS

As of 31 December 2021, the Company has not entered into any equity-linked agreement.

 

24  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.

 

25  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 refined 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.

 

26  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. China achieved remarkable results in pandemic prevention and control, and its economy continued to grow. World economic recovery was weak, and with significant imbalance situation. The development of economy is increasingly constrained by climate change and environmental issues. 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, 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 the exploration and development licenses of crude oil and natural gas; 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 the right of managing and using of imported crude oil; 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 continues spread of COVID-19 pandemic, 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, toxicity, harm 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 rules in 2021, developed negative investment lists, and conducted rigorous feasibility study and risk evaluation 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 changes in international geopolitics, spread of COVID-19, uncertainty of economic recovery, 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. We establish an emergency response mechanism in relation to network security operation and information system, build an information platform of network security risk management and control, and devote 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

Ma Yongsheng

Chairman

 

Beijing, China, 25 March 2022

 

 

REPORT OF THE BOARD OF SUPERVISORS

 

Dear Shareholders:

 

In 2021, 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 the reporting period, the Board of Supervisors held five (5) meetings in total, and mainly reviewed and approved the proposals in relation to the Company's annual report, financial statements, sustainable development report, internal control assessment report and working report of the Board of Supervisors etc.

 

On 26 March 2021, the 12th meeting of the seventh session of the Board of Supervisors was held, and the proposals in relation to Annual Report of Sinopec Corp. for 2020, the Financial Statements of Sinopec Corp. for 2020, Sustainable Development Report of Sinopec Corp. for 2020, Internal Control Assessment Report of Sinopec Corp. for 2020, Work Report of the Board of Supervisors of Sinopec Corp. for 2020, Work Report of the 7th Session of Board of Supervisors of Sinopec Corp., and Work Plan of the Board of Supervisors of Sinopec Corp. for 2021, were reviewed and approved at the meeting.

 

On 28 April 2021, the 13th 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 the three months ended 31 March 2021 was reviewed and approved at the meeting.

 

On 25 May 2021, the 1st meeting of the eighth session of the Board of Supervisors was held, on which Mr. Zhang Shaofeng was elected as Chairman of the eighth session of the Board of Supervisors.

 

On 27 August 2021, the 2nd meeting of the eighth session of the Board of Supervisors was held, the Interim Financial Statements of Sinopec Corp. for 2021, the Interim Report of Sinopec Corp. for 2021 for 2021 and the proposal of continuing connected transactions for 2022 to 2024, were reviewed and approved at the meeting.

 

On 28 October 2021, the 3rd meeting of the eighth session of the Board of Supervisors was held, and the Third Quarterly Report of Sinopec Corp. for the three months ended 31 September 2021 was reviewed and approved at the meeting.

 

In addition, the Company organised the supervisors to attend the general meetings of shareholders and meetings of the Board. The Company 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, the Board of Supervisors and all the supervisors conclude that in 2021, although the COVID-19 pandemic accelerates unprecedented change in a century and the external situation tends to be more complicated and severe, China is establishing its new development pattern, with all industries restructuring and deep adjustment. Energy development has entered into a phase of transformative and qualitative change. The Company conscientiously implements the decision-making and deployment of the board of directors to improve performance, coordinates energy supply, scores new achievements in scientific and technological innovation and promotes all work as a whole to maintain the steady advance of business operations, and achieves the best business performance in the company's history. The Board of Supervisors had no objection to the supervised issues during the 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 business 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 2021 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 was effective. No material defects of internal control were found.

 

Fourthly, the consideration for assets transactions made by Sinopec Corp. was fair and reasonable, neither insider trading, damage to shareholders' interest nor losses of corporate assets were 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 behavior detrimental to the interests of Sinopec Corp. or its shareholders was discovered.

 

In 2022, 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.

 

 

 

 

 

 

 

Zhang Shaofeng

Chairman of the Board of Supervisors

 

25 March 2022

 

 

CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERS

 

1    CHANGES IN THE SHARE CAPITAL

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

 

2    NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS

As of 31 December 2021, the total number of shareholders of Sinopec Corp. was 517,592 including 512,026 holders of A shares and 5,566 holders of H shares. As of 28 February 2022, the total number of shareholders of Sinopec Corp. was 527,563. 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 2021 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	25,386,207,159	926,751	unknown
中國證券金融股份有限公司	A Share	1.92	2,325,374,407	(283,937,650)	0
香港中央結算有限公司	A Share	0.87	1,054,953,821	213,881,539	0
中國人壽保險股份有限公司－傳統－普通保險產品－005L－CT001滬	A Share	0.69	834,160,431	19,554,400	0
中央匯金資產管理有限責任公司	A Share	0.26	315,223,600	(6,814,300)	0
國信證券股份有限公司	A Share	0.17	202,363,585	183,178,790	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	0.09	113,436,276	13,846,100	0
全國社保基金一一三組合	A Share	0.09	110,044,157	110,044,157	0
中國人壽保險股份有限公司－分紅－個人分紅－005L－FH002滬	A Share	0.08	98,655,327	(717,014,841)	0

 

Note 1:   As compared with the number of shares held as of 31 December 2020.

 

Note 2:   Sinopec Century Bright Capital Investment Limited, an overseas wholly-owned subsidiary of China Petrochemical Corporation, held 623,454,000 H shares, accounting for 0.52% of the total issued share capital of Sinopec Corp. Those shareholdings were 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 除中國人壽保險股份有限公司－分紅－個人分紅－005L－FH002 滬and中國人壽保險股份有限公司－傳統－普通保險產品－005L－CT001滬which 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 2021

 

Name of shareholders	Status of shareholders	Number of shares interested	% of Sinopec Corp.'s issued voting shares (H Share)
BlackRock, Inc.	Interest of corporation controlled by	2,029,241,960(L)	7.95(L)
	the substantial shareholder
Citigroup Inc.	Person having a security interest in shares	11,307,899(L)	0.04(L)
	Interest of corporation controlled by	68,263,244(L)	0.27(L)
	the substantial shareholder	66,210,083(S)	0.26(S)
	Approved lending agent	1,704,518,264(L)	6.68(L)

 

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

 

3    ISSUANCE AND LISTING OF SECURITIES

 

(1)  Issuance of securities during the reporting period

There was no issuance of securities of the Company during the reporting period.

 

(2)  Existing employee shares

There was no existing employee shares of the Company during the reporting period.

 

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. Ma Yongsheng. 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 as of the end of the reporting period

 

	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	1,095,463,711	13.54%

 

(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 623,454,000 H shares held by Sinopec Century Bright Capital Investment Ltd. (overseas wholly-owned subsidiary of China Petrochemical Corporation) through HKSCC Nominees Limited.

 

 

BOND GENERAL INFORMATION

 

1.   Corporate Bond

 

Bond name	Sinopec Corp. 2012 Corporate bond
Abbreviation	12石化02
Code	122150
Issuance date	1 June 2012
Interest commencement date	1 June 2012
Maturity date	1 June 2022
Amount issued (RMB billion)	7
Outstanding balance (RMB billion)	7
Interest rate (%)	4.90
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 instalment of interest.
Investor Qualification Arrangement	12石化02 was publicly offered to qualified investors in accordance with Administration of the Issuance and Trading of Corporate Bonds.
Applicable trading mechanism	Floor trading at Shanghai Stock Exchange, in line with pledge repurchase requirement
Risk of suspension for listed trading,  and countermeasures	N/A
Listing exchange	Shanghai Stock Exchange
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, China Lianhe Credit Rating Co., Ltd. tracked and provided credit rating for 12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 have been published through media designated by regulators within six months commencing from the disclosure of annual report for 2020.
Special terms for Issuer or investor  option or investor protection,  whether triggered or executed	No special terms for Issuer or investor option or investor protection, thus not applicable
Guarantee, repayment scheme and  other related events during the  reporting period	China Petrochemical Corporation bears non-irrevocable joint liability guarantee. Interest is paid as usual during the reporting period without triggering any guarantee.
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 actively 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).

 

2.             Interbank Bond Market Debt Financing Instrument of Non-financial Enterprises

 

Bond name	The first medium-term notes in 2020	The second medium-term notes in 2020	The third medium-term notes in 2020	The first medium-term notes in 2021	The second medium-term notes in 2021	The third medium-term notes in 2021	The first green medium-term notes in 2021
Abbreviation	20中石化MTN001	20中石化MTN002	20中石化MTN003	21中石化MTN001	21中石化MTN002	21中石化MTN003	21中石化GN001
code	102000568	102000569	102001109	102101386	102101480	102101489	132100172
Issuance date	2020/3/31	2020/3/31	2020/5/27	2021/7/23	2021/8/5	2021/8/5	2021/12/27
Interest commencement date	2020/4/1	2020/4/1	2020/5/28	2021/7/27	2021/8/6	2021/8/9	2021/12/28
Maturity date	2023/4/1	2023/4/1	2023/5/28	2026/7/27	2024/8/6	2023/8/9	2024/12/28
Amount issued (RMB billion)	5	5	10	5	2	2	2.55
Outstanding balance (RMB billion)	5	5	10	5	2	2	2.55
Interest rate (%)	2.7	2.7	2.2	3.2	2.95	2.8	2.5
Principal and interest repayment	Interest is paid once a year. The principal will be paid at maturity with last instalment of interest.
Investor Qualification Arrangement	Nationwide inter-bank bond market institutional investors
Applicable trading mechanism	Circulated and transferred in nationwide inter-bank bond market
Risk of suspension for listed trading  (if any), and countermeasures	Not applicable
Trading market	Nationwide inter-bank bond market
Use of proceeds	Proceeds from the above-mentioned corporate bonds have been used for their designated purpose as disclosed in the corporate bond prospectus. All the proceeds have been completely used till now.
Credit rating	During the reporting period, United Credit Ratings Co., Ltd. issued the continuing credit rating report on May 21. The long-term credit rating of Sinopec Corp. remained AAA with its outlook being stable.
Special terms for Issuer or investor  option or investor protection,  whether triggered or executed	Not applicable
Guarantee, repayment scheme and  other related events during  the reporting period	No guarantee. Interest is paid as usual during the reporting period without triggering any guarantee.
Convening of corporate bond holders'  meeting	Not applicable
Performance of corporate bonds trustee	Corporate bonds trustee has performed its duties in accordance with regulatory requirements

 

Note:     Please refer to the website of Shanghai Stock Exchange (http://www.sse.com.cn), China Money Network (WWW) for the name, office address, name, contact person and telephone number of the intermediary institutions providing services for the issuance and maturity of the debt financing instruments of the above-mentioned corporate bonds and non-financial enterprises in the interbank market. Chinamoney.com.cn) and other websites disclosed the relevant contents of the prospectus and other documents.

 

Principal accounting data and financial indicators for the two years ended 31 December 2021

 

Principal data	31 Dec. 2021	31 Dec. 2020	Change	Reasons for change
Current ratio	0.87	0.87	0
Quick ratio	0.55	0.58	(0.03)	Increase in current liabilities
Liability-to-asset ratio (%)	51.51	48.89	2.62 percentage points	Increase in liabilities
Loan repayment rate (%)	100	100	0

 

	2021	2020	Change	Reasons for change
Net profit/(loss) attributable to equity shareholders of  the Company excluding extraordinary gains and losses  (RMB million)	72,220	(1,565)	73,785	Increase in total profit
Net profit of the Company excluding extraordinary gains  and losses (RMB million)	85,935	4,556	81,379	Increase in total profit
EBITDA to total debt ratio	1.41	1.14	0.27	Increase in total profit
EBITDA to interest coverage ratio	15.12	9.89	5.23	Increase in total profit
Interest coverage ratio	8.28	4.05	4.23	Increase in total profit
Cash interest coverage ratio	43.56	24.65	18.91	Increase in net cash flow
Interest payment rate (%)	100	100	0

 

Note:     Liability-to-asset ratio indicates the ratio of total liabilities to total assets

 

During the reporting period, the Company paid in full and on time the interest accrued for the other bonds and debt financing instruments. As at 31 December 2021, the standby credit line provided by several domestic financial institutions to the Company was RMB441.6 billion in total, facilitating the Company to get such amount of unsecured loans. The Company has fulfilled all the relevant undertakings in the corporate bond prospectus 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, 3 years, 5 years, 10 years and 30 years. The 3-year notes principal totaled USD750 million, with an annual interest rate of 1.250% and had been repaid and delisted; the 5-year notes principal totaled USD1 billion, with an annual interest rate of 1.875% and had been repaid and delisted; the 10-year notes principal totaled USD1.25 billion, with an annual interest rate of 3.125%; and the 30-year notes principal totaled USD500 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 5 years, 10 years and 30 years.

 

 

PRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIES

 

On 31 December 2021, 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	31,713	12,460	1,429		Investment in exploration, production and
Exploration and Production Limited							sale of petroleum and natural gas
Sinopec Great Wall Energy & Chemical	22,761	100	30,655	14,187	3,714		Coal chemical industry investment
Company Limited							management, production and
							sale of coal chemical products
Sinopec Yangzi Petrochemical	15,651	100	36,602	22,482	1,945		Manufacturing of intermediate petrochemical
Company Limited							products and petroleum products
Sinopec Yizheng Chemical Fibre	4,000	100	9,100	4,330	(1,290)		Production and sale of polyester chips and
Limited Liability Company							polyester fibres
Sinopec Lubricant Company Limited	3,374	100	9,311	4,789	141		Production and sale of refined petroleum
							products, lubricant base oil,
							and petrochemical materials
Sinopec Qingdao Petrochemical	1,595	100	5,319	1,370	873		Manufacturing of intermediate petrochemical
Company Limited							products and petroleum products
Sinopec Chemical Sales Company	1,000	100	22,423	5,476	1,547		Marketing and distribution of
Limited							petrochemical products
China International United Petroleum	5,000	100	229,548	44,082	6,268		Trading of crude oil and
and Chemical Company Limited							petrochemical products
Sinopec Overseas Investment	3,009	100	23,019	13,467	(27)		Overseas investment holding
Holding Limited	Million USD
Sinopec Catalyst Company Limited	1,500	100	11,330	6,317	715		Production and sale of catalyst products
China Petrochemical International	1,400	100	21,113	4,270	603		Trading of petrochemical products
Company Limited
Sinopec Beihai Refining and Chemical	5,294	99	19,396	13,461	2,729		Import and processing of crude oil, production,
Limited Liability Company							storage and sale of petroleum products and
							petrochemical products
Sinopec Qingdao Refining and	5,000	85	23,807	13,357	3,711		Manufacturing of intermediate petrochemical
Chemical Company Limited							products and petroleum products
Sinopec Hainan Refining and	9,606	100	40,040	23,265	4,097		Manufacturing of intermediate petrochemical
Chemical Company Limited							products and petroleum products
Sinopec Marketing Co., Limited	28,403	70	486,036	233,117	18,582		Marketing and distribution of refined
							petroleum products
Sinopec Shanghai SECCO Petrochemical	500	68	17,468	10,616	2,817		Production and sale of petrochemical products
Company Limited
Sinopec-SK(Wuhan) Petrochemical	7,193	59	27,441	11,807	1,606		Production, sale, research and development of
Company Limited							petroleum, petrochemical, ethylene and
							downstream by-products
Sinopec Kantons Holdings Limited	248	60	12,956	12,590	871		Oil jetty and nature gas pipeline
	Million HKD
Sinopec Shanghai Gaoqiao Petroleum	10,000	55	37,561	18,214	3,536		Manufacturing of intermediate petrochemical
and Chemical Limited							products and petroleum products
Sinopec Shanghai Petrochemical	10,824	50	47,039	30,395	2,004		Manufacturing of synthetic fibres, resin
Company Limited							and plastics, intermediate petrochemical
							products and petroleum products
Fujian Petrochemical Company Limited	10,492	50	14,672	13,830	951		Manufacturing of plastics, intermediate
							petrochemical products and
							petroleum products

 

Note  1:  All above subsidiaries except Fujian Petrochemical Company Limited are audited by KPMG Huazhen LLP or KPMG.

 

            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.