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WorldReginfo - 545146f5-59f8-4f70-aa55-356176db2160 CONTENTS REPORT DESCRIPTIONS Reporting Scope: The entire China National Offshore Oil Corporation (CNOOC) group of companies. 02 CHAIRMAN’S LETTER 26 BUSINESS 46 MANAGEMENT 72 LOOKING AHEAD TO 2016 Reporting Period: 04 PRESIDENT’S LETTER 28 Oil & Gas Exploration 48 Technology Innovation and Development 48 Management of Scientific 74 MILESTONES 2015 1 January 2015 - 31 December 2015 06 MAIN ACHIEVEMENTS 28 Oil & Gas Exploration Research Projects 78 GLOSSARY 08 ABOUT US Principles of Preparation: 29 Development & 49 Establishment of Scientific Production Research Platform 81 AGENCY DIRECTORY To meet the needs of stakeholders and the general public, by disclosing key information on the Company 10 CORPORATE GOVERNANCE 30 Unconventional Natural 49 Technology Innovation 84 FEEDBACK in a true, objective, timely and comprehensive manner. Gas Achievements 12 Resumes of the Board 49 Transformation of Alternative Reference: Members 31 Engineering & Technical Services Technology Achievements China National Offshore Oil Corporation is hereinafter also referred to as CNOOC, the Company, the 14 Operation of the Board 31 Oilfield Services 51 Management Innovation Corporation, “we”, “our” or “us”. 16 Risk Management 32 Offshore Oil Engineering 52 “Quality and Benefit Year” 17 Resumes of other Senior Services Activity Data Used in the Report: Management Personnel 33 Professional Technical All disclosed financial data or information related to the Company is the final accounting data audited by 53 QHSE 20 PERFORMANCE Services 53 Quality Management third parties. Unless otherwise specified, all amounts are expressed in Renminbi (RMB). HIGHLIGHTS 34 Refining and Marketing 54 Occupational Health 20 Report of Independent Information Sources: 34 Refining and 54 Operational Safety Public Accountants Petrochemistry The Company’s official documents, statistical reports and our subsidiaries’ fulfilment of responsibilities. All 57 Environmental Protection 21 Income Statement 36 Marketing information has been reviewed by our management, supervision department and the various subsidiaries. 60 Informatization Progress 22 Balance Sheet 37 Natural Gas and Power 60 Enhancing Fundamental Language: 24 Cash Flows Statement Generation Capabilities This report is published in both Chinese and English. In case of discrepancies, the Chinese version shall 25 Notes to Annual 39 Financial Services 61 Promoting In-depth Financial Statements prevail. 42 Internationalization Integration of Informatization (excerpt) 42 Business Overseas and Industrialization Accessibility: 45 International Trade 61 Supporting Overseas This report is available in print and electronic formats. The digital version can be downloaded from Development the Company’s website at www.cnooc.com.cn. To obtain a print version of the report, please email 62 Human Resource Management [email protected]. 62 Employee Salary and Benefits 63 Career Development 63 Professional Expertise 64 Employee Training 66 Corporate Culture 66 Culture Promotion 68 Brand Promotion 68 Cultural & Sports Activities 69 Corporate Citizenship ABOUT THE COVER 69 Social Humanitarian “COSL Prospector” Drilling Platform Engagement 70 Integration into Community 71 V oluntary Services WorldReginfo - 545146f5-59f8-4f70-aa55-356176db2160 02 CHINA NATIONAL OFFSHORE OIL CORP. CHAIRMAN’S LETTER / 2015 ANNUAL REPORT 03 CHAIRMAN’S LETTER Significant breakthroughs had been achieved in overseas exploration. The Company’s overseas oil & gas types and layout became more diversified, with business covering over 30 nations and regions. Overseas asset is 37.2 percent of the Corporation’s total asset. With the value orientation of “innovative management, highlighting outcome”, it pushed forward integration with Nexen, and therefore effectively raised efficiency of overseas oil and gas field. CNOOC deepened innovation of institutional mechanism reform, accelerated the construction of modern enterprise system, and endeavored to build corporate governance structure which could match international top energy company. The Company achieved important results in industrial structure optimization, and greatly enhanced the Company’s development momentum and vitality. Through constant implementation of “Quality and Benefit Year” activity, the Company had noticeable results in lower costs and better outcomes, which played a crucial role in responding to lower oil price. In-depth reform on personnel system was conducted, including leadership training, selection and communication, implementing Youth Science and Technology Talent Project, with the aim to realize the Company’s talent strategic replacement. In 2016, the Company will continuously face the low oil price circumstance, slowed down global economic recovery, international financial crisis influence, complicated geopolitics relationship and increased external instable factors. We will keep clear mind, comprehensively check and handle the deep changes of internal and external environmental conditions, clear about industry new trend, seize the new opportunities of reform, and insist to focus on improvement of development quality and performance. In development motivation, we will transfer from scale and speed driving to quality and profit driving; in development ability, we will transfer from building resources barrier to raising market competitive ability; in development strategy, we will transfer from determining sales based on production under shortage economy to providing effective supply under surplus economy. There will be more emphasis on quality performance, pushing forward reform, and dedicating to establish an international top energy company with Chinese characteristics. 2016 is the opening year of China’s “13th Five-Year Plan”. The Company enters the important period of constructing international first class energy company with Chinese characteristics. In accordance with five development ideas “innovation, coordination, green, open, sharing”, we will constantly deepen “Quality and Benefit Year” activity, strengthen ability of developing quality benefit, further undertake reform innovation, push the company forward, therefore to realize sustainable development that has quality and benefit. We will fully apply the forward thinking of periodic law to positively cope with climate change, and to make efforts on green & low carbon development. We are going to deeply plough “the Dear all, Belt and Road Initiative”, trying to expand international cooperation space. We will continue to firmly establish the core First of all, I would like to take this opportunity, on behalf of the Board of Directors and all employees of CNOOC, to value principle of “safety first, environment utmost, people oriented and equipment intact”, to promote environmental express our heartfelt gratitude to all who have cared for and supported us all these years. protection work and realize intrinsic safety. We will push forward various reform measures, enhance enterprises’ vitality and competitiveness, and positively work on to realize the planning objective of the “13th Five-Year Plan”. Over the past year, operating revenue, total profit, net profit and tax fees payment of the Company were RMB 426.08 billion, 45.07 billion, 41.27 billion and 82.14 billion Yuan respectively. The Company’s total asset was RMB 1,162.38 billion Dear Friends, in the new year, let us hold hands together to start a new journey, undertake solid efforts on constructing Yuan at the year end. CNOOC’s comprehensive strength and social influence had been further enhanced, stepping into a international top energy company with Chinese characteristics, and ultimately make great contribution to global energy new stage. CNOOC’s ranking among Global Top 500 Enterprises in the Fortune magazine rose to the top 72 in 2015, 90 transformation. places higher compared to 5 years ago, when in 2011 it was ranked top 162. Throughout the year, CNOOC produced a total of 79.70 million tons of crude oil, and 25.0 billion cubic meters of natural gas, and particularly, a breakthrough of 100 Mtoe was made. The receiving capacity of LNG reached 27.8 million tons. It became the third largest LNG long term contract holder, continuously keeping pioneer place in the industry. The Company attached great importance to planning the international and domestic markets as a whole, continuously Chairman Yang Hua developing foreign cooperation in a further step, and improving its internationalized business management ability. April 21, 2016 WorldReginfo - 545146f5-59f8-4f70-aa55-356176db2160 04 CHINA NATIONAL OFFSHORE OIL CORP. PRESIDENT’S LETTER / 2015 ANNUAL REPORT 05 PRESIDENT’S LETTER domestic crude oil, and 14.4 billion cubic meters of natural gas (including 870 million cubic meters of CBM). At overseas, it produced 31.97 million tons of crude oil and 10.7 billion cubic meters of natural gas. Professional technology service competitiveness had been further enhanced and good outcomes were obtained in exploring the international market. The values of midstream and downstream increased, making contributions for balancing oil price fluctuation. Financial sector showed good performance and many financial enterprises’ profits set a new record. The Company’s key projects have been pushed forward, engineering efficiency was further enhanced, the management quality of major projects continued to be improved, and cooperation on international capacity and equipment manufacturing took place in a further step. Safety and environmental protection