CNOOC Annual Report 2007 WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 Contents
02 Company Profile
04 Letter from the president
07 Group Organization
09 OPERATION HIGHLIGHTS
21 harmonious development
22 1.Health, Safety and the Environment 27 2.Energy Conservation and Emission Reduction 31 3.Corporate Citizenship 34 4.Harmonious Communities
39 Business Review
40 1.Upstream 44 2.Mid and Downstream 52 3.Technical Services 58 4.Financial Services 62 5.Alternative Energy
65 Human Resources
70 Research and Development
75 management
80 management team
82 Major events
84 Company Honors
85 Affiliates WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Company Profile
China National Offshore Oil Corporation (CNOOC) In recent years, the Company has implemented is one of the largest state-owned oil companies, effective measures for corporate restructuring, capital and the largest offshore oil and gas producer in operation, overseas acquisition and expansion China. Established in 1982, the Company has its into mid and downstream businesses. We have headquarters in Beijing. It now has 53,000 employees experienced a boom period with improved overall and registered capital of RMB 94.9 billion. Born with competitiveness in conjunction with an outstanding China’s reform and open door policies, CNOOC has reputation as an efficient international oil company. grown up in its cooperation with foreign partners and is now a new force in the world oil industry. CNOOC continues its commitment to harmonious and inclusive development for its employees, CNOOC has maintained rapid growth and a reputation the Company, society at large and the natural for quality since its incorporation. It has evolved from an environment. During the Eleventh Five-year Plan upstream company into an integrated energy company, period, CNOOC will continue its focus on scientific possessing high performance core business and other growth, synergetic and cost efficient development, related businesses along the value chain. The Company cultivation of a strong workforce, and competitiveness is built upon synergetic business portfolios including: in Research and Development. Through sustainable upstream (oil and gas exploration, development, growth and innovation, the Company aims to become production and sales); mid and downstream (gas and a world-class international energy company. power, chemicals, refinery, fertilizers); technical services (oilfield services, offshore oil and gas engineering and CNOOC is the parent company of a group of subsidiaries and affiliates. “We”, “the Group” and “the Company” in this report all refer to construction, logistics services); financial services; and CNOOC. alternative energy. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
It is our priority to increase the capability for sustainable 4 5 letter from the president development in order to become a world-class energy company. To be specific, we will continue to strengthen our capacities in six key areas: strategic planning and management, continual improvement, technological innovation, resource integration, risk Dear friends, We are committed management and culture cultivation. 2007 was another outstanding year for our company. to scientifi c and We have maintained the momentum for efficiency The consistent application of the Scientific Concept and quality on the path of scientific development. harmonious of Development has improved the corporate structure During 2007, we strengthened the Company's overall development of the Company, increased the motivation of our staff, competitiveness and we are now moving swiftly and strengthened the unity of the whole company. towards becoming a world-class energy company, While employing the Scientifi c Concept of Development, with an extensive exploration and production portfolio, we have been dedicated to maintaining both internal and strong management performance, and innovative external harmony. In terms of the external environment, strategic operations. We are determined to remain competitive by means we will pursue a balance between the Company, the For the year of 2007, the Company realized a total of a higher level of harmonious development. We environment and wider society. As a responsible revenue of RMB 162 billion, with an increase of have established a synergetic business portfolio corporate citizen, we will initially concern ourselves Fu Chengyu, and have achieved harmonious development for the with the social responsibilities such as environmental 22.1%, and a total profit of RMB 56.5 billion, an CNOOC President increase of 15.2%. Total assets reached RMB whole company through: integration of upstream protection. Inside the Company, we have put an added 309 billion, and net assets were RMB 167.6 billion, and downstream businesses; comprehensive growth emphasis upon the harmony between our business increasing by 23.3% and 22.3% respectively over of the economy, technology and human resources; and our personnel, by establishing a relationship the previous year. Oil and gas production of the year and enhancement of both the core business and which allows employees and the Company to grow reached 40.47 million tons of oil equivalent. supplementary businesses. together. We have also fostered harmony between different business sectors of the Company by “Scientific and harmonious development”is an Putting people fi rst is both the starting point and fi nal balancing the development rate, economic revenue accurate summary of CNOOC's growth in 2007. It is destination of our development. After many years of and interest distribution. our target as well as our long-held belief. reform and development, we firmly believe that our staff is our most valuable resource; hence employees Scientific and harmonious development was the The Scientifi c Concept of Development has been the are the subject rather than object of reform. Therefore, theme for CNOOC in 2007; we will maintain our guiding principle for CNOOC for years. This means the cost of reform has been undertaken by the commitment to accomplishing this mission. putting people first, and aiming at comprehensive, Company while the benefi ts are shared by our people, coordinated and sustainable development. including retired employees. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Group Organization
Upstream CNOOC Ltd.
CNOOC Research Center
China BlueChemical Ltd.
China Offshore Oil & Gas Development & Utilization Company
CNOOC Gas & Power Ltd.
Mid and CNOOC Oil & Petrochemicals Co., Ltd.
downstream China National Chemical Construction Corp.
China National Chemical Supply & Sales (Group) Corp.
CNOOC-Shell Petrochemicals Co., Ltd.
China Oilfield Services Limited
CNOOC Technical Offshore Oil Engineering Co., Ltd.
services CNOOC Oil Base Group Ltd.
CNOOC Finance Co., Ltd.
Zhonghai Trust Co., Ltd.
Financial CNOOC Insurance Ltd.
services CNOOC Investment Co., Ltd.
Aegon-CNOOC Life Insurance Co., Ltd.
CNOOC Petrochemicals Import & Export Co., Ltd.
China Ocean Offshore Oilfields Service (Hong Kong) Ltd.
China Offshore Oil Press
CNOOC (Beijing) Energy Investment Co., Ltd.
Others CNOOC Bohai Corporation
CNOOC Nanhai West Corporation
CNOOC Nanhai East Corporation
CNOOC Donghai Corporation
CNOOC Enterprises Corporation WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
OPERATION HIGHLIGHTS
Sales Income （RMB billion） （RMB billion）
70.9 88.9 132.7 162.0 24.2 38.8 49.0 56.5
04 05 06 07 04 05 06 07 CAGR 31.7% CAGR 32.6%
Total assets Net assets （RMB billion） （RMB billion）
153.3 191.4 250.7 309.0 83.1 105.5 137.1 167.6
04 05 06 07 04 05 06 07 CAGR 26.3% CAGR 26.3%
CAGR: Compound Annual Growth Rate WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Financial Data Production Volume
10 2004 2005 2006 2007 2004 2005 2006 2007 11
Sales growth 31.7% 25.4% 48.9% 22.1% Oil & gas (million tons of oil equivalent) 36.48 39.00 40.33 40.47 Income growth 61.7% 60.1% 26.3% 15.2% Domestic (%) 83 86 86 85 Net profit growth 61.8% 62.3% 25.5% 15.1% Overseas (%) 17 14 14 15 Assets growth 27.9% 24.9% 31.0% 23.3% Petroleum liquids (million tons) 29.70 31.97 31.54 30.55 Return on equity 15.5% 20.3% 19.8% 18.1% Domestic (%) 83 87 88 88 Return on assets 18.2% 23.1% 22.4% 20.8% Overseas (%) 17 13 12 12 Gross margin 37.9% 47.5% 40.3% 36.8% Natural gas (billion cubic meters) 6.78 7.03 8.79 9.92 Debt to assets ratio 32.6% 31.3% 27.9% 26.2% Domestic (%) 81 82 79 75 Accumulated ratio of capital 21.3% 27.0% 30.0% 22.3% Overseas (%) 19 18 21 25
Mid & downstream (million tons) Urea 1.42 1.36 1.93 1.85 Methanol - - 0.27 0.71 Ethylene - - 0.65 0.83 Bitumen 1.53 1.56 1.77 1.47 Fuel oil 4.33 5.65 6.26 6.58 Electricity (billion kwhs) 2.76 2.66 3.52 5.24 LNG - - 0.75 2.98
Capital Expenditure (RMB billion) 2004 2005 2006 2007
Capital expenditure 32.39 32.65 63.10 49.23 Exploration & development 21.50 19.18 47.07 30.15 WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Sales 2004 2007 Payment to Government (2007) 12 （RMB million） 13
57.6% 41.2%
22.6% 42.9% 15,000
9.2% 6.9%
9.8% 7.0% 12,000 0.7% 2.0%
9,000
6,000 Income
3,000
85.7% 74.7%
6.7% 10.8% 0 5.4% 7.1% Income tax VAT Royalty Sales tax Employee Other tax Special oil Gov. share State-owned 1.1% 1.7% income tax gain levy oil capital gains 13,572 9,208 796 724 510 1,659 6,738 4,085 1,037 1.1% 5.7%
Assets Payment to Government （1982-2007） （RMB billion）
51.0% 49.4% 40 17.0% 22.3% 38.3 7.6% 9.8% 32.1 7.9% 7.5% 30
16.6% 11.0%
20 17.4
12.0
Exploration & production 10 5.2 6.7 Mid & downstream
Technical services
Logistics & alternative energy 0
Financial services WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
AUDITOR’S REPORT
ZhongRui YueHua Audit Zi [2008] No. 15514 Consolidated Income Statement
To China National Offshore Oil Corporation: Year ended 31 December 2007 RMB million 14 15 We have audited the accompanying consolidated financial statements of China National Offshore Oil Corp, which 2006 2007 comprise the consolidated balance sheet as at 31 December 2007, and the consolidated income statement and Revenue 132,665 162,040 consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other Less: Cost of sales 74,768 97,252 explanatory notes. Sales taxes 4,496 5,071 Selling distribution expenses 1,265 1,163 Management's Responsibility for the Financial Statements General & Administration expenses 4,840 5,686 Management is responsible for the preparation and fair presentation of these financial statements in accordance Finance cost,net 429 -1,325 with Chinese Accounting Standards for Business Enterprises and the Accounting Systems for Business Enterprises. Profit from operation activities 46,867 54,193 This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation Add: investment income 1,281 2,308 and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; subsidiary income 288 744 selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the non-operating income 947 107 circumstances. Less: non-operating expenses 344 879 Auditor's Responsibility Profit before tax 49,039 56,473 Less: Income tax 14,126 15,329 Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit Less: profit applicable to minority interests 10,939 13,559 in accordance with the Independent Auditing Standards of Chinese Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance Net profit 23,973 27,584 whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of China National Offshore Oil Corp. as of 31 December 2007, and of its financial performance and its cash flows for the year then ended in accordance with Chinese Accounting Standards for Business Enterprises and the Accounting Systems for Business Enterprises.
Zhongrui Yuehua Certified Public Accountants
Beijing, China
April 15, 2008 WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Consolidated Balance Sheet Consolidated Balance Sheet ( Continued )
31 December 2007 RMB million 31 December 2007 RMB million 16 17 2006 2007 2006 2007
Current Assets Liabilities and Equity Cash 42,579 61,092 Current Liabilities Short-term investment 26,080 17,331 Short-term debt 2,218 1,707 Notes receivable and accounts receivable 9,299 12,408 Notes payable and accounts payable 11,428 14,442 Advance payment and other receivable 4,967 5,648 Advance from others and other payables 6,927 9,256 Inventory 6,529 11,262 Salaries, wages and welfare payable 2,915 3,591 Deffered and prepaid expenses and other current assets 7,309 13,181 Taxes payable 4,534 6,662 Total Current Assets 96,763 120,922 Dividend payable 260 67 Other payable 1,133 3,357 Non-current Assets Accrued expenses 2,548 3,297 Fixed Assets and Offshore Oil & Gas Investment Long-term debt due within one year 541 1,327 Fixed assets 64,003 74,524 Other current liabilities 134 341 Less: accumulated depreciation 21,276 24,480 Total Current Liabilities 32,638 44,047 Less: provision for impairment of fixed assets 103 104 Non-current Liabilities Fixed assets, net 42,623 49,939 Long-term debt 15,218 19,184 Fixed assets-disposal 2 -0.3 Other long-term liabilities 17,847 14,076 Construction work in process 10,419 20,299 Deferred tax liabilities 4,251 3,709 Total fixed assets 53,044 70,237 37,316 36,969 Offshore oil & gas investments 166,900 191,604 69,954 81,017 Less:accumulated depreciation, depletion and amortisation 83,360 93,651 Total Liabilities
Total offshore oil & gas investments 83,540 97,953 Equity Paid-in capital 99,161 95,447 Total Fixed Assets and Offshore Oil & Gas Investment 136,585 168,190 Capital surplus 23,155 28,577
Long-term Investment 11,911 14,995 Profit surplus 16,625 19,384 Retained earning -607 27,919 Intangible, Deffered and Other Assets Currency translation differences -1,278 -3,739 Intangible assets 3,653 4,068 137,057 167,588 Deferred assets 228 435 Minority interest 43,666 60,434 Other long-term assets 1,441 351 Total Equity 180,723 228,022 Total Intangible, Deffered and Other Assets 5,322 4,854 Total Equity and Liabilities 250,677 309,038 Deffered Tax Assets 96 78 153,914 188,117
Total Assets 250,677 309,038 WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
NOTES ON FINANCIAL STATEMENTS
1. Accounting System
The China National Offshore Oil Corporation (herein after refer to as the Company) and its subsidiaries (not including those companies abroad and companies in finance industry) apply "Accounting Standards for Business Enterprises", Consolidated Cash Flow Statement "Accounting System for Business Enterprises" and supplementary stipulations issued by the Ministry of Finance of the People's Republic of China. Year ended 31 December 2007 RMB million 18 The companies which are registered abroad apply local Accounting Standards for Business Enterprises and will adjust 19 2007 accounting books according to Chinese "Accounting Standards for Business Enterprises" and "Accounting System for Cash Flows From Operation Activities Business Enterprises" in preparing financial statements. Cash received from sales of goods 167,260 Refund of other taxes and extras other than value added tax 1,226 Zhonghai Trust & Investment Co. Ltd. and CNOOC Finance Co., Ltd. implement "Accounting Standards for Business Other cash received relating to operating activities 6,382 Enterprises" and "Accounting System for Financial Enterprises". Subtotal of Cash Inflows 174,869 Cash paid for goods and services 80,599 2. Accounting Period Cash paid to and on behalf of employees 5,751 The accounting period of the Company is the calendar year from January 1 to December 31. Taxes paid 29,815 Other cash paid relating to operating activities 5,207 3. Functional Currency Subtotal of Cash Outflows 121,373 The functional currency of the Company and its subsidiaries, (not including 5 joint-venture companies under China Net Cash Flows from Operating Activities 53,496 Oilfield Service Ltd.) is RMB Yuan. The function currency of 5 joint-venture companies under China Oilfield Services Cash Flows From Investing Activities Ltd. is US dollars. The functional currency for those companies registered abroad is local currency. Cash received from return of investments 35,000 Cash received from distribution of dividends or profits and from bond interest income 1,824 4. Basis of Account Net cash received from disposal of fixed assets, intangible assets and other long-term assets 119 The accompanying financial statements have been prepared in accordance with the accrual base, historical Net cash received from disposal of subsidiary and other operating units 127 cost convention. Other cash received relating to investing activities 521 Subtotal of Cash Inflows 37,591 Cash paid to acquire fixed assets, intangible assets and other long-term assets 41,995 5. Accounting Treatment of Foreign Currency Transactions Cash paid to acquire equity and debt investments 35,145 Transactions denominated in foreign currencies of the Company and its subsidiaries (except Zhonghai Trust & Cash paid to acquire subsidiary and other operating units 104 Investment Co. Ltd. and CNOOC Finance Co., Ltd.) are translated into Renminbi (RMB) at the exchange rate quoted Other cash paid relating to investments 175 by the People's Bank of China on the first day of the month, and they adjusted the foreign accounts balance at the Subtotal of Cash Outflows 77,419 exchange rate at year end. The differences between the above two amounts are treated as exchange gains and Net Cash Flows from Investing Activities -39,828 losses. The exchange gains and losses belonging to any construction period are recorded into long-term prepaid Cash Flows From Financing Activities expense. When fixed assets reach the prearranged running conditions, the exchange gains and losses during the Proceeds from issuing shares and bonds 7,972 period of constructing are recorded into construction in progress. Besides the above situations, the exchange gains Proceeds from borrowings 19,273 and losses are recorded into financial expenses of the period in P/L account. Other proceeds relating to financing activities 62 Subtotal of Cash Inflows 27,307 Cash repayments of amounts borrowed 16,047 CNOOC Finance Co., Ltd. and Zhonghai Trust & Investment Co. Ltd. apply the method of divided accounts to calculate Cash payments for distribution of dividends or profits 7,075 different currencies which are the functional currency to record books when foreign currency transactions occur. Other cash payments relating to financing activities 109 6. Changes of the Consolidation Scope Subtotal of Cash Outflows 23,232 Net Cash Flows from Financing Activities 4,075 The consolidated scope of the Company is changed by adding one more company China National Chemical Supply & Effect of Foreign Exchange Rate Changes on Cash -376 Sales (Group) Corporation to the consolidated scope in the year 2007 financial statement. Net Increase in Cash and Cash Equivalents 17,366 7. Changes of the Accounting Policy Cash and cash equivalents at beginning of year 40,213 Cash and Cash Equivalents at end of year 57,579 The Company's subsidiaries, China Oilfield Services Ltd., Offshore Oil Engineering Co., Ltd. and China BlueChemical Ltd., which are listed companies, implemented the new "Accounting Standards for Business Enterprises" from January 1,2007, with the new accounting standards issued by Ministry of Finance of People's Republic of China on February 15,2006. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
20 harmonious development 21
CNOOC: A Multinational Responsible Body
During the International CEO Roundtable of Chinese and at the 6th China Entrepreneurs' Summit. Foreign Multinational Companies held on November 16th to 18th, 2007, CNOOC was ranked among the "Top 100 At the summit he commented that it has been a Chinese Enterprises with Utmost Core Competitiveness". prosperous time for Chinese enterprises in the thirty Mr. Fu Chengyu, president of CNOOC, attended the years after the reform and open door policies. While opening ceremony and delivered a speech on CNOOC's adopting modernized management concepts and experiences in sustainable development. commercial models, Chinese enterprises now show great concern about business ethics, social fairness, It is time for multinational enterprises to embody social social needs and community responsibility. CNOOC responsibility as well as business operation. During the is proud to be one of these Chinese enterprises. It is development process, CNOOC has strived to qualify CNOOC's firm belief that the value of an enterprise lies as an enterprise citizen in both China and the other ten in its relationship with the whole society. The community countries where it conducts business. This has been at large should benefit from commercial prosperity as achieved through the promotion of social employment, society as a whole is the foundation of business life. ecological environment protection and the fulfillment of community responsibilities. On the way to becoming a world-class energy company, CNOOC has actively shouldered its social responsibility On December 9th, 2007, Mr. Fu Chengyu received the and will continue to do so in the future! honor of "The Most Influential Business Leader of 2007" WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//1/Health, Safety and the Environment
CNOOC has built up a health, safety and environment During the year, CNOOC revised its document 2007. It made revisions to its Crisis Management Plan, 22 23 system (HSE) operating to international standards and on Health, Safety and Environment Management established construction standards for emergency assimilated it as part of the corporate culture. Mindful Concept, emphasizing continual improvement of centers in all subsidiary companies. The building of of environmental protection and employee welfare, safety development and social and environmental the centers was already on the agenda. Meanwhile, it pursues the harmonious development of people, concerns. This has been assimilated with the essence emergency procedures were put into practice in all units. the Company, society and the environment. The of the Scientific Concept of Development as well as Company is working hard to develop into a world-class "5 No Works" concept and contractors management. During the year, we undertook the statistical collection international energy company loved by employees, This document demonstrates CNOOC's greater efforts of greenhouse gas emissions of each CNOOC oil trusted by partners and welcomed by society . in the implementation of HSE management system, and gas field, analysed the data using internationally enhancing the risk control and management of authoritative statistical software and provided monthly In 2007, CNOOC continued with the improvement contractors as part of its social responsibility. results to all branches. Furthermore, the Company of HSE system and promoted its application in all audited the clean production sections in oilfield subsidiaries. The Company kept up safe production The Company issued regulations on HSE training onshore terminals, petrochemical and chemical and achieved production targets. Not one material for executive managers who have to take classes in subsidiaries. In May, the Company reported to the safety incident was recorded over the year. both the concepts of HSE and related management State Environmental Protection Administration its skills before taking office. CNOOC also set up its first implementation plan for environmental assessment in systematic HSE regulations for overseas projects, accordance with national standards. specifying the corresponding rules and standards, risk evaluation methods, personnel training, information On December 22nd, CNOOC won the People's Social communication, contingency plans, safety grading and Responsibility Award from www. people.com.cn. It was early warning systems. the first time for CNOOC to take part in the event, and only 20 enterprises were awarded the honor. CNOOC enhanced its crisis response capacity in
CNOOC at 3C Conference in Washington
In November, Mr. Zhou Shouwei, vice president of CNOOC, led a delegation to Washington to attend the 3C (Combat Climate Change) Conference. At the White House, Mr. Zhou outlined the countermeasures carried out by the Chinese government to reduce the influence of global climate change and emphasized the efforts made by CNOOC. 3C is an organization that aims to establish a global low carbon-emitting market framework until 2013. CNOOC gained membership of 3C in 2007. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
24 Contribution to Ozone Layer Protection 25
During the Meeting for the Total CFC/Halon Phase-out in China held on July China's First Oil Spillage Recovery Vessel 1st, 2007, China National Chemical Construction Corporation (CNCCC), a On December 18th, 2007, the construction of China's first marine oil spillage subsidiary of CNOOC, was granted the CFC/Halon Phase-out Contribution recovery vessel began in Shandong Province. This was invested in by CNOOC Oil Award, jointly awarded by the State Environmental Protection Administration, Base Group Limited. This vessel will provide supporting services to the Huizhou the United Nations Environment Programme and the World Bank. CNCCC refinery project. As a breakthrough in this field of China, the vessel will raise the was the first and only Chinese implementing agency to be given this honor Company's marine pollution emergency response capacity to a new level. since the launch of ozone layer protection projects.
Over 280 National Certified Safety Engineers
In 2007, safety supervisor training was held in all subsidiary units of CNOOC. Over 280 employees have now been granted the national certification of Safety Engineer, and 53 employees became national clean-production auditors. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//2/Energy Conservation and Emission Reduction
To meet the challenge of the global warming, China On December 19th, 2007, CNOOC issued the Energy 26 27 has made the strategic decision to construct an Conservation Evaluation Approach, associating energy energy-efficient and environment-friendly society. As a conservation and emission reduction with the overall significant initiative, CNOOC has taken on the social performance of its subsidiaries. responsibility of energy conservation and emission reduction, and regards it as an important opportunity Throughout the year, the Company spent RMB for its enhancement of competitiveness. 960 million to implement 103 projects for energy conservation and emission reduction, saving 116,000 2007 was CNOOC's year for saving energy. To fulfill tons of coal equivalent. the task, the Group set up specialized institutions and 12 regulations, and re-signed the responsibility In addition, CNOOC put much effort into the documents with major production units. It also started development of an energy-saving and environmentally auditing and planning energy consumption, and friendly business. Intense construction and research included energy assessments into project examination on wind energy, LNG cold energy, environmental procedures. The research on corresponding standards protection vessels, and water treatment were being was conducted and a monitoring center was prepared carried out. to be established soon.
Natural Gas Recycling in Lvda Oilfield
On March 31st, 2007, Lvda Oilfield successfully injected extra natural gas back into the earth. With the skid-mounted package, the equipment will be removed two years later. Then the saved natural gas can be used for power generation as an alternative to diesel fuel, at an annual saving of over RMB 120 million. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
28 29 While practicing energy conservation and emission reduction, we have realized that this policy could bring potential economic benefits and enhance Saving 400,000 Tons of Water Annually the competitiveness of our company. In day-to-day work, everybody regards In 2007, through technical innovation, China Offshore Bitumen Co., Ltd. energy conservation and emission reduction as one of their responsibilities. began to use recycled water as the cooling water for its two new sets of Success comes from small details. We are proud to make our contribution to the company. pumps, replacing the use of fresh water. This measure can save 400,000 tons of water every year. Yu Yanbing, from production department of Shanghai Branch of CNOOC (China) Ltd.
World's Largest PPC Project
On July 31st, China BlueChemical Co. started its carbon dioxide degradable plastics project (PPC) in Hainan Province. With an investment of RMB 152.2 million, it is the world's biggest project in this field. The projected annual production capacity is 3,000 tons of biodegradable plastics. Making full use of the carbon dioxide emissions, the project will play a significant role in the environmental protection of Hainan Province. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//3/Corporate Citizenship
As a leading energy enterprise, CNOOC regards it a duty 30 31 to make a contribution to the building of a harmonious society. It is our guiding principle to establish harmonious relationships between the Company and the people, between the Company and clients, and between the Company and the society as a whole. This functions as a solid foundation for our future development.
CNOOC has established the Charity and Commonwealth Committee to be responsible for the planning, management and supervision of funds, and has issued related operations and management regulations.
CNOOC actively participates in various charity events, including poverty relief programs, community construction and makes donations to victims of natural disasters. Between 2000 and 2007, our donations totaled RMB 291 million. In 2007, the Company contributed RMB 80.75 million to welfare activities.
Nima Herdsmen Moving into New Houses
In 2005, CNOOC invested RMB 4.5 million to the settlement project of 50 herdsmen families. In 2006 and 2007, the Company put in another RMB 13 million to construct 5 residential areas for 117 herdsmen families. The herdsmen, who had just received the keys, enthusiastically cleaned their new houses and bought new furniture and daily necessities, welcoming their new life with a fresh outlook. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Aid to Tibet Financial Support to Needy Students
In 2002, CNOOC initiated its aid to Nima County of Tibet. During the first phase of the program from 2002 to 2004, Following its RMB 10.86 million endowment to the Song Ching Ling Foundation in 2003, CNOOC donated 32 33 CNOOC invested RMB 60 million in the construction of major roads in the county and other projects including the another RMB 16.8 million in 2007 to the Foundation to help college students with financial difficulties. In installation of solar power generators in over 4,000 households. In the second phase from 2005 to 2007, CNOOC the following five years, the Foundation will grant RMB 3,000 to each of the 1,175 selected students in 36 invested RMB 46 million, focusing on promotion of the development of the local economy. The living environment colleges each year. The action caught public attention and well-known enterprises like BMW and Toyota also and quality of life for herdsmen have been greatly improved, and Nima County has been transformed into a donated to the Foundation. 2007 was also the 10th anniversary of 4 CNOOC Hope Schools: Tongshanzi prosperous area in Tibet. Village School and Xiaotangtougou Village School, Wafang Village School and Xunkou Village School in Hebei Province. Poverty Relief Program in Hainan Province CNOOC and its employees also participated in other public welfare activities, including the Mother Cellar CNOOC started a poverty relief project in Lingshui County, Baoting County and Wuzhishan City of Hainan Program, Lifeline Express, and the Beijing Sun Village. During the year, the Group also donated RMB 3 million to Province in 1995. In this process, we focused on the basic facilities construction in these rural areas, promotion of Yangjiaguo Village School in Hebei Province, RMB 6 million to the China Primary Health Care Foundation, and science and development of key industries. Between 2002 and 2006, CNOOC's contribution in Hainan Province RMB 10 million towards the construction of the Museum of Chinese Women and Children. amounted to RMB 40 million. From 2007 to 2010, CNOOC plans to contribute RMB 5 million each year on the poverty relief program in Hainan.
Saying Goodbye to Dark Low Huts
With the help of CNOOC, 86 households of Li people in Baoting County and Wuzhishan City, Hainan Province, have moved into new houses. 428 people have bid farewell to the old days when they cooked, raised animals, and slept in the same dark, low, damp huts.
The First College Student of CNOOC Hope Schools The Winter No Longer Cold
Yang Dabing, once a student of CNOOC Hope School in Wafang Village of Hebei On October 27th, extremely cold conditions hit the Inner Mongolia plateau. Before the arrival of the cold Province, was successful in gaining entrance to the China University of Mining and temperatures, the farmers and herdsmen of Xing'anmeng had moved into their new houses built by Tianye Plant Technology. He was the first college student in his village as well as the first from of China BlueChem. Limited by lack of resources, severe geographical conditions, frequent natural disasters and our four CNOOC Hope Schools. When his family was worried about the high tuition poor traffic, this area has long been economically underdeveloped. In two years, Tianye built up 83 new houses fees, CNOOC sent RMB 5,000 to them. with an investment of RMB 2.49 million to solve the housing problem for the local residents. Besides, the company contributed RMB 42,000 to the local students with financial difficulties. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//4/Harmonious Communities Community Construction
CNOOC has actively participated in the building of communities, and all its base companies take up the green coverage of the base has reached 34.45%. With the logical arrangement of large squares, community 34 35 responsibility to look after their employees, retirees and their families. Through improving the community centers and courtyards, a network of cultural activities has been established within the Zhanjiang base. facilities and environment, we aim at establishing a harmonious CNOOC community. Due to the continuous development of CNOOC business in the Pearl River Delta area, the oil community
In 2007, CNOOC Bohai Corporation put great efforts into community construction. Implementing market- in Nanhai East area has greatly expanded. CNOOC Nanhai East Corporation has actively extended to oriented operation and adopting company management systems, the company improved the administration the increasing staff members its logistic services such as community building and care for needy families. of Bohai base and its peripheral areas. Now the Bohai community has become both a modernized production In 2007, it further improved the working and living conditions of the oil communities in Guangzhou and base and a beautiful, functional and orderly living base. Shenzhen by renewing the living and working facilities and attaching related service systems.
Similarly, CNOOC Nanhai West Corporation regards it as an important task to build up an active base, so as to create a supportive background for production activities. It invested over RMB 100 million on rectification and maintenance projects in the base, including: power and water supply lines reconstruction, renovation of the meeting hall and the library, maintenance of single employee apartments, and forestation. At present,
“440” Hotline
Zhanjiang base has opened a hotline, 3900440, to provide various services to its employees. Beside the free services stated in the residential regulations, it provides domestic services, including the installation and maintenance of running water and electricity, and electrical appliance repair. The base is also responsible for the security of the residential areas. The hotline is directly connected with "110" of the local police station and "120" of the employees' hospital.
Taking Care of Retired Seniors
CNOOC Enterprises Corp. provides services for 660 retired people in the Beijing area. The company set up a 24-hour emergency number, as well as recruited a specialized nurse to take care of them. When somebody needs to go to hospital, the company sends a shuttle bus and assigns a company doctor. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Caring for Staff Corporate Culture
Caring for staff is our firm belief and constant practice. On March 8th, 2007, CNOOC was named as one of China's CNOOC puts much emphasis on building corporate culture in an increasingly complex environment. Along 36 37 "Best Employers in 2006" in CCTV's annual survey. with continuous business expansion, increasing numbers of operating areas, restructurings and assets acquisitions, and diversification of administration, we give full consideration to the cultivation of corporate In the last two years, the accommodation of single employees has become a major concern for CNOOC management. culture which has played an important role in guiding development, reforms and innovative activities. Keeping Most of the single employees had breakfast and dinners on the streets, and the living conditions and auxiliary facilities our objective of becoming a world-class energy company in mind, we strive to build a corporate culture that were not satisfactory. With the help of the Company, now the single employees live in comfortable apartments and have unifies our staff and coordinates value-creating activities. healthy and economical meals in dining halls.
"Blue Dream" Group Wedding for Employees In 2007, CNOOC launched the "Blue Dream" performance tour in Shanghai, On September 28th, COOEC held a collective wedding for 42 new couples. Shenzhen, Zhanjiang and Tianjin. The performance was divided into four Among the 5,500 employees of the company, almost 70% are below the age of parts, "Blue Years", "Blue Style", "Blue Love" and "Blue Dream". It fully 30. Due to their busy work, many young people had to postpone their weddings. displayed the 25 years' glorious achievements of CNOOC and reflected the To help solve the problem, the company organized this collective wedding committed, determined, and innovative spirit of CNOOC people. ceremony.
The Fifth CNOOC Entertainment Sports Meeting
On September 21st, the Fifth CNOOC Sports Meeting was held in Beijing. The sports meeting started in 2002, and has become an annual event since 2004. Every September, the Company invites Chinese and foreign partners who live in Beijing to join in the games and experience the family atmosphere. Through these sports meetings, we have deepened understanding with our friends and enhanced our friendships. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
38 Business Review 39
In 2007, with the implementation of the comprehensive In 2007 the downstream refining and sales sector business development strategy, a sustainable industrial developed smoothly towards the targets set by the structure began to take shape in CNOOC. Eleventh Five-year Plan. The Huizhou Refinery Project managed to fulfill its target in spite of market challenges. CNOOC Ltd. is working to build up international The excellent performance of the CNOOC-Shell competitiveness through accelerating the pace of Petrochemical Project laid a solid foundation for further overseas development; its overall goal is to achieve oil development of the petrochemical segment. and gas production equivalent to that of top international oil companies. The bitumen and fuel oil sector has maintained a stable growth; a marketing network and an auxiliary service In regard to the technical service sectors, COSL has system of oil products have been established. The set its goal to develop into a world-class oilfield services marketing of the Company will be further enhanced company. The company is working hard to become one with the assimilation of China National Chemical of the top three international oilfield services companies Supply & Sales (Group) Corp. The scale of the fertilizer by the year 2020. COOEC provides comprehensive segment has also increased. Through the purchase upstream and downstream construction services for of phosphorous, kalium and coal resources, and the energy companies. In order to enhance its international implementation of new projects, China BlueChemical competitiveness, COOEC is expanding its business Limited aims to develop into the biggest domestic abroad and aims to stand out among its international fertilizer producer and supplier in the near future. peers within eight to ten years. On November 8th, CNOOC finished the construction of The CNOOC Oil Base Group is going through business the first offshore wind power station in China, marking restructuring, moving from traditional technical services the Company's progress into renewable energies. to the development of both technology-based services and products. With its expanding scale and increasing profits, the financial services segment has grown rapidly in recent As a representative sunrise business of the Company, years and has become an important force in the the gas and power segment has experienced significant Company's sustainable development. rapid growth. It will become an important part of the Company's growth in the near future. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//1/Upstream Exploration and Production
CNOOC Limited is CNOOC's vehicle engaged in the exploration, development, production and marketing of oil 40 41 and gas. CNOOC Limited was listed on both the Hong Kong and New York Stock Exchanges in February 2001. (Stock Code in New York: CEO; Stock Code in Hong Kong: 0883. By the end of 2007, CNOOC held 64.95% of its shares.)
As one of the world's largest independent oil companies, CNOOC Limited has four major offshore production areas in China, namely, Bohai Bay, the Western South China Sea, the Eastern South China Sea and the East China Sea. In 2007, CNOOC Limited independently operated 58 drilling wells and operated 6 drilling wells in partnership with international companies.
In 2007, CNOOC Limited achieved exciting results in exploration with 12 commercial independent discoveries, the added geological reserves reaching a new peak in recent years. The company also completed appraisals for 10 oil and gas bearing structures.
Overcoming unfavorable factors such as the production delay caused by a typhoon at the Liuhua Oilfield in 2006, and a decrease in production on old oilfields, CNOOC Limited achieved net oil and gas production of 171 million barrels-of-oil-equivalent, with a year-on-year increase of 2.6%.
CNOOC Limited realized further expansion in overseas business in 2007 and has established its presence in over 10 countries.
In 2007, CNOOC Limited was ranked 395 on the "Forbes Global 2000", and 13 in "Asia's Fab 50 Companies" also released by the Forbes Magazine. It was granted the title of "The Most Shareholder-Friendly Company in 2007" by the Institutional Investor Magazine.
China's First Deepwater Semi-submersible Drilling Platform
On October 18th, CNOOC signed the construction contract for a The Reproduction of Liuhua 11-1 Oilfield deepwater semi-submersible drilling platform with Shanghai Waigaoqiao On June 27th, Liuhua 11-1 Oilfield restarted full scale production, adding 1.2 million tons of oil production and Shipbuilding Inc., a subsidiary of China State Shipbuilding Corporation. about RMB 4 billion to the Company. The Liuhua 11-1 Oilfield was forced to suspend production because This is China's first deepwater semi-sub drilling unit, with an operating of typhoon "Chan Chu" in May 2006, when parts of its production facilities were damaged. Technology depth of 3,000 meters and with the largest drilling depth at 12,000 meters; breakthroughs were achieved in the Company's independent repair of the oilfield's advanced facilities, and it is expected to be completed in 2011. The project is part of the national the oilfield restarted production one year ahead of schedule. long-term science and technology development plan. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
42 43 Bohai Oilfield plans to achieve the target of 30 million cubic meters of oil Completion of "HAI YANG SHI YOU 117" Vessel Hull and gas in 2010. To realize this goal, the Tianjin branch has been carrying out an intensive management model, defining clearly the responsibility of On April 30th, the "HAI YANG SHI YOU 117" vessel hull, the biggest floating production, storage and each employee and breaking down barriers between departments in order offloading (FPSO) vessel jointly invested in by CNOOC Limited and ConocoPhillips China Inc., was to improve efficiency. To help increase the reserve of the Bohai Oilfield, completed by Shanghai Waigaoqiao Shipbuilding Inc., a subsidiary of the China State Shipbuilding we are committed to prospecting more favorable exploration zones. Corporation. In 2008, it will operate in the Penglai 19-3 Oilfield. So far "HAI YANG SHI YOU 117" is the largest offshore engineering project contracted in China. The vessel has a length of 323 meters, a width of Wang Yingbin, Chief Engineer of Bohai Exploration and Development 63 meters, and a storage capacity of 2 million barrels of crude oil. Institute, CNOOC Model Worker
Smallest Offshore Oilfield in China
In 2007, Bozhong 34-5 Oilfield, the smallest offshore oilfield in China commenced production. To make the small reserve commercially recoverable, CNOOC Ltd. made substantial technological innovations. It made full use of the nearby offshore facilities and adopted the development model of "one submarine pipeline, one platform and one submarine cable", setting a leading example in the field of marginal oilfields development. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//2/Mid and Downstream Gas and Power
As a representative sunrise business of the Company, the gas and power segment has shown rapid growth. 44 45 In 2007, all the production indexes of CNOOC Gas & Power Limited showed record highs. The total assets First LNG Cold Energy Utilization Project in China of the company reached RMB 20.41 billion, and the total sales revenue reached RMB 7.19 billion, increasing 120% and 340% respectively over the previous year. Its overall profit was RMB 820 million, representing an On September 28th, the foundation stone of the first project in China that utilizes increase of 360%. cold energy from LNG in air separation was laid in Putian City, Fujian Province. Petrochemicals & Services Co., a subsidiary of CNOOC Oil Base Group, drafted In 2007, the company imported 2.98 million tons of LNG, with a year-by-year increase of 402%, generated a detailed development plan for the utilization of LNG cold energy which is a 5.24 billion kwhs of electricity, and transported 3.29 billion cubic meters of gas through pipelines. The LNG clean and environmentally friendly energy resource. trade progressed well and has made a good start in a challenging market environment. In 2007, it imported seven shiploads of LNG, signalling the beginning of LNG spot trading in China.
At the same time, 16 construction projects progressed smoothly. Encouraging progress was achieved in CNOOC's First Town Gas Project market development, including the provincial networks of pipelines, town gas, LNG distribution and CNG. On September 28th, Zhongshan city natural gas utilization project and CNG filling station, which is China's first urban gas project, commenced production. The project has brought great convenience to distant urban users. CNG is the main gas source in residential areas which are located away from natural gas transmission pipelines. It provides more secure and convenient gas to the local people and will promote the development of gas vehicles.
Guangdong LNG Project Progresses Well
By June 28th, 2007, the Guangdong LNG Project had been in smooth operation for one year. During the past year, Shenzhen Chengtoujiao LNG Receiving Terminal successively received 29 loads of cargo, totaling 1.71 million tons of LNG, from Australia's North West Shelf Venture. Through a gas trunk line of 385 kilometers, 1.68 million tons of gasified LNG were supplied to 5 city fuel users, namely, Shenzhen, Dongguan, Guangzhou, Foshan and Hong Kong, and 5 power plant users, including Huizhou, Qianwan, Zhujiang, Meishi and Dongbu. This project has eased the pressure for energy in the Pearl River Delta area and prompted the building of a more resource-saving and environmentally friendly society. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
46 47 We are strengthening project management to have better control of four particular aspects: safety, quality, scheduling and budgeting. Since the foundation ceremony in December, 2005, the project has operated smoothly. Facing the challenge of limited time, we are striving to complete the project as scheduled.
Dong Xiaoli, Executive Vice President of CNOOC Oil & Petrochemicals Refining Co., Ltd. and General Manager of Huizhou Refinery Project
Refining is an important link in the Company's industrial chain and value chain, playing a critical role in the process of developing into a world-class energy company. CNOOC aims to develop an internationally competitive refining segment which focuses upon the production of oil products, synthetic and organic raw materials, and upon the industrial upgrades, bringing benefits to both the Company and the local economy.
CNOOC Oil & Petrochemicals Co., a wholly owned subsidiary of CNOOC, is a vehicle of the Group's refining business.
Located at Daya Bay, Huizhou City of Guangdong province, the Huizhou Refinery Project is the first large-scale downstream project solely invested in by CNOOC. The Company invested around RMB 21.6 billion to build a plant with an annual capacity of 12 million tons. The project was designed to process high acid heavy offshore crude, and is the largest single train refinery in China and the first plant specially designed to process high acid heavy oil in the world. CNOOC plans to make full use of its unique resources and build the refinery project into a clean, intelligent and high value-added world-class refinery with international competitiveness. Now the construction of the project is in full swing and it is expected to be completed in 2008.
CSPC is a joint venture of CNOOC and the Royal Dutch/Shell Group of Companies, located at Daya Bay, Huizhou City of Guangdong province. With a total investment of USD 4.2 billion, it is the largest joint project in China. In 2007, CSPC produced 830,000 tons of ethylene, 460,000 tons of propylene and 2.4 million tons of high quality and value-added petrochemical products, with excellent HSE performance. The company achieved a sales income of RMB 23 billion and a net profit of RMB 2.3 billion. The total tax amounted to RMB 3.3 billion. CNOOC's First Independently Constructed Gas Station
In 2007, CNOOC gas stations were put into operation in Shanghai and Huizhou City, Guangdong province. Entrance into the oil products sales market is the last link for CNOOC to establish a value chain that integrates On September 26th, the Shihuaxi gas station in Huizhou was completed. This was the first gas station upstream and downstream businesses. In recent years, CNOOC has strived to set up complete downstream independently constructed and operated by CNOOC. The construction of gas stations in the Huizhou area sales channels in the Pearl River Delta, in the Yangtze River Delta and in Bohai Bay. In May, CNOOC Oil & is one of the projects attached to the 12 Mt/a Huizhou Refinery Project which will turn out 7 million tons of Petrochemicals Co., Ltd. was granted an oil products wholesale license and a crude oil sales license from the oil products per annum into the market upon completion in 2008. Ministry of Commerce. In addition, its sales subsidiary was granted an oil products wholesale license. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Bitumen and Fuel Oil
In 2007, China Offshore Oil & Gas Development & Utilization Company refined a total of 8.22 million tons of 48 49 crude and the import trade quantum reached 5.68 million tons, generating sales revenue of RMB 44.9 billion and a net income of RMB 1.04 billion.
Facing severe market competition, the company expedited the upgrading of products and increased efforts to expand its market share. The China Offshore Bitumen Co., Ltd produced CNOOC's first lubricant. The China Offshore Bitumen (Taizhou) Co., Ltd. boosted sales of No. 50 Hard Bitumen and Modified Bitumen, and began to export its No. 50 Hard Bitumen to Chad in Africa.
China Offshore Oil & Gas Development & Utilization Company developed its bitumen and fuel oil business adhering to a differentiation strategy. It plans to become the leading producer and supplier of heavy traffic bitumen, low sulfur fuel and naphthenic products in China.
Merger of China National Chemical Supply and Sales (Group) Corp.
In April 2007, following the decision of the State-owned Assets Supervision and Administration Commission of the State Council, China National Chemical Supply & Sales (Group) Corp. (China Chem Group) became a fully Start-up of Taizhou Petrochemical Company owned subsidiary of CNOOC. On September 8th, an atmospheric and vacuum distillation unit began operation
By the end of 2007, China Chem Group had total assets of RMB 3.096 billion and a staff of 837. in Taizhou Petrochemical Company, the former East China Fuel Chemical Limited. The China Offshore Oil & Gas Development & Utilization Company The company's business covers chemicals trade, storage and related services, and it is mainly engaged in raw acquired 67% of its shares on July 23rd, and CNOOC became its shareholding chemical materials and intermediates, natural rubber, synthetic materials, fine chemicals, steel, minerals and company. Together with China Offshore Bitumen (Taizhou) Co., Ltd., the two others. It is also involved in liquid chemicals, materials transportation, precious metals production, among others. companies have a crude oil processing capacity of 3.5 Mt/a in Taizhou.
The merger of China Chem Group strengthens CNOOC's marketing and trading system. The Company can further improve its mid and downstream businesses and enhance competitiveness. Crumb Rubber Modified Bitumen
In 2007, China Offshore Oil & Gas Development & Utilization Company's project on production and application of crumb rubber bitumen was awarded the first prize at the Science and Technology Progress Awards of CNOOC and has been included in the promotion programs of the National Development and Reform Commission and the Ministry of Communications. This technology is internationally recognized for its safe and effective handling of black pollution. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
50 In the past year, our hard work brought us the joy of success. We 51 established a highly efficient technology management system that integrated project management, target assessment and resource sharing. The system has become a powerful technological support for the company's development. I believe, with our unified efforts, we will build up China BlueChem into China's leading fertilizer producer with international competitiveness.
Zhaoliang, Chemical Electrical Director of China BlueChem, CNOOC Model Worker
Fertilizers
China BlueChemical Limited (China BlueChem) is one of China's biggest producers of nitrogen fertilizer and methanol and plans to develop into the leading fertilizer producer and supplier in China. On September 29th, 2006, China BlueChem was successfully listed at Hong Kong Stock Exchange (Stock Code: 3983.HK. By the end of 2007, CNOOC held 59.41% of its shares).
During 2007, the company produced 1.845 million tons of urea and 714,800 tons of methanols. It realized total sales of RMB 4.34 billion, increasing by 25.24% over the year before. Successful Soil Testing
On July 9th, over 100 farmers sat beside a sugar cane experimental field China BlueChem actively implemented the fertilizer direct sale and soil testing projects launched by the in Baimajing town, Hainan Province, listening to a lesson on scientific Ministry of Agriculture, to assist farmers to reduce costs and increase output. Through direct supply of fertilization methods. This was a promotion launched by China BlueChem fertilizers, CNOOC laid a solid foundation for the program which recommendates proper fertilizers to farmers for soil testing and recommendating proper fertilizers to farmers. Fudao BB according to the result of soil testing. In September, China BlueChem signed a joint venture contract with fertilizer was used on a local sugar cane experimental plot and reduced costs the State-owned Assets Supervision and Administration Commission of Jincheng Municipal Government, by at least 10%. Farmers who used BB fertilizer in rice fields reduced costs marking its entrance into the coal chemical field. With the combined efforts of China BlueChem and China by 18% and increased production by over 20%. National Chemical Construction Corporation (CNCCC), CNOOC successfully finished the acquisition of Hubei Dayukou Chemical Company, CNOOC's holding of shares increasing from 29.98% to 83%. Entrance into Coal Chemical Industry
On November 26th, CNOOC Jincheng Coal Chemical Limited was set up, with the intent of engaging in coal chemical production and development. It plans to build up a fertilizer project with an annual production of 600,000 tons of ammonia and 1 million tons of urea. With advantages of scale and coal gasification technology, this project is an environmentally friendly project encouraged by the government. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//3/Technical Services Oilfield Services
China Oilfield Services Limited (COSL) is the leading comprehensive oilfield services provider in offshore China In 2007, COSL undertook 110 research programs, submitted 48 patent applications and gained approval for 23, 52 53 with 30 years of experience. It was listed at Hong Kong Stock Exchange in 2002. (Stock Code in Hong Kong: among which 11 were invention patents. 2883; Stock Code in Shanghai: 601808. By the end of 2007, CNOOC held 54.74% of its shares.)
In 2007, COSL reached a record high sales income of RMB 9.24 billion and a net income of RMB 9.01 billion, each with a year-on-year increase of 42%. Its total profit was RMB 2.83 billion and net profit was RMB 2.24 billion, surging up 103% and 98% respectively.
For the third consecutive year COSL was selected by Standard & Poor's as one of the world's top 30 companies that possess the largest potential value for shareholders, and was admitted as a constituent stock of the Hang In April, 2007, we returned to China. Since the end of 2005, we had been Seng A＋H Index. In May 2007, it successfully issued RMB 1.5 billion in corporate bonds in the domestic A share engaged in the drilling market of Southeast Asia, implementing three overseas drilling contracts consecutively in 17 months, with 100% platform stock market. rental rate. Photographs of our operation were exhibited at the Myanmar State Historical Museum, and our team was ranked in the "CNOOC Top 10 During the year, COSL's investment increased to RMB 3.47 billion, an increase of 28% over 2006. Three teams". jack-up rigs, five onshore drilling rigs, one 8-streamer seismic vessel, and eighteen marine support vessels went into construction. Yang Yong, monitor of drilling team 1 on "Nanhai Ⅱ" of COSL
Return to Domestic Stock Market
On September 28th, COSL returned to A-shares with a warm response from the domestic stock market. Online frozen capital reached about RMB 1.7449 trillion, representing a record high online oversubscription of 370 times.
First Overseas Onshore Drilling Contract
In December 2007, COSL worked with a Libyan drilling company to secure a service contract for four onshore drilling rigs. As a result of the contract, COSL will provide two 7,000-meter and two 5,000-meter drilling rigs, as well as dozens of senior technical workers for the implementation and management of the rigs. This is COSL's first overseas onshore drilling contract. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Offshore Engineering and Construction
COOEC is the largest offshore engineering and construction company for designing, onshore fabrication and 54 55 offshore installation and maintenance for oil and gas exploration and production offshore China. (Stock Code In order to develop into a world-class energy engineering company, COOEC on the Shanghai Stock Exchange: 600583. By the end of 2007, CNOOC held 51.36% of its shares.) is committed to building a world-class management system. The company drafted regulations to further define the responsibility for each department In 2007, the total assets of COOEC rose by 59.45% to RMB 8.062 billion. Its net assets grew from RMB 3.01 and each person; in addition, the work procedures became clearer and billion to RMB 3.983 billion, with a surge of 33.37%. The company also had a remarkable performance in the more specific. stock market. By the end of 2007, the total market value of shares reached RMB 49.5 billion, an increase of Chen Fengling, from Department of Administration of Offshore Oil 80.26% over 2006, growing by 11.7 times in less than five years. In November, COOEC successfully issued Engineering (Qingdao) Co., Ltd corporate bonds of RMB 1.2 billion on the Shanghai Stock Exchange.
The company also made a significant breakthrough in the overseas market during the past year. It signed a Start-up of Qingdao Fabrication Yard Phase Ⅲ five-year cooperation agreement with Modec Company and the first batch of 3 FPSOs is under construction, further strengthening its leading position in China's deepwater field. Due to its excellent performance in the On April 18th, the foundation stone of phase III was laid at COOEC Qingdao repair of the Liuhua 11-1 Oilfield, the company acquired the Panyu Oilfield hose replacement project and the fabrication yard. This facility covers an area of 300,000 square meters and a entrance into the overseas deepwater market. It also undertook the construction of the Bohai wind power coastal line of 437 meters. Phase III consists of floating launch equipment, a project, marking a significant step in the alternative energy field. port for semi-submersible platforms, and supporting production workshops. The fabrication yard is expected to be completed in 2009, with a designed In 2007, COOEC undertook 9 mid and downstream projects and generated an income of RMB 261 million, steel processing capacity of 200,000 tons per year. accounting for 4.34% of its total income.
Floatover Installation of CNOOC's Largest Platform Block
On October 2nd, COOEC completed the floatover installation of the 9,200-ton Module A of the Bozhong 34-1 Oilfield, which is the largest and heaviest platform block independently constructed by CNOOC. In future, floatover installation technology will be widely applied in CNOOC's offshore oilfields development. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Logistic Services
CNOOC Oil Base Group Limited (Base Group) is the platform for CNOOC to provide logistic services. In 56 57 2007, the Base Group realized sales of RMB 14.6 billion and net profit of RMB 838 million, with respective 2007 was a crucial year for our air separation project which will be powered increase of 19% and 64%. Its total assets reached RMB 19 billion by the end of 2007. (The above numbers by Fujian LNG cold energy. The construction and equipment installation include those of Bohai Co., Nanhai East Co., Nanhai West Co., Donghai Co. and Enterprises Co.) progressed well throughout the year, and we concluded the safe closure of the 58-meter high cold box. I am proud of my committed team. After three years of restructuring, the formerly weak logistic company has turned into a competitive group with excellent management. The average annual growth rate of sales for the past three years was 20.7%, Wang Hongbing, Air Separation Project Manager of Petrochemicals and that of net profit was 50.8%. & Services Co., Base Group
The Base Group has undertaken more mid and downstream projects, among which the notable Fujian LNG cold energy utilization project started construction in September. It is the forerunner for CNOOC's energy conservation and emission reduction, as well as a leading example of cold energy utilization. Reconstruction of Bohai Port Area
With the completion of reconstruction in 2007, the Bohai port area has been In coming years, the environmental protection business will become an important sector for the Base Group. transformed into an internationalized and modernized oil base. The total Apart from the widely recognized oil spillage contingency operation, the company is researching cold energy investment of the project is nearly RMB 600 million. Now the port area is utilization, sewage treatment, offshore drilling cuttings recycling, and desalination. divided into three parts, including the central office area, the port storage area and the project supply area.
Managing 7 FPSOs
On October 15th, FPSO "Hai Yang Shi You 115" was completed at Qingdao. Together with "Hai Yang Shi You 116", the 100,000-ton FPSO delivered on September 12th, seven FPSOs are under the operation of Oil Products Services Co. of the Base Group. There are totally 15 FPSOs currently operating offshore from China. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//4/Financial Services CNOOC Finance Co., Ltd.
In 2007, the financial services segment of CNOOC CNOOC Finance Co., Ltd. (Finance Company) has provided financial services to members of CNOOC 58 59 realized rapid growth, and boosted gross profit to RMB since its establishment in 2002. At present, its registered capital is RMB 1.415 billion. 3.26 billion. With less than 1% of the staff and less than 1.5% of assets, it contributed to 5.7% of the total profit of In order to obtain maximum benefit for the Group, the Finance Company seized favorable market the Company. opportunities and reached notable performance levels in 2007. Fulfilling the tasks of risk control, cost reduction and value contribution, the company enhanced capital management for CNOOC. In 2007, CNOOC set up Finance Management Committee to initiate its internal financial management In 2007, the Finance Company achieved revenue of RMB 3.119 billion and a total profit of RMB 2.341 system reform. The Committee is responsible for the billion. It completed 72,000 accounting operations without any mistakes throughout the year. In addition, optimization of the Company's financial management it provided the member companies with preferential loans of RMB 13.575 billion, reducing RMB 296 system, the improvement of financial operating million in financing costs for the Group. efficiency and the enhancement of financial risk control, thus providing financial support to the Company's Moody and Standard & Poor's have raised the credit ratings of CNOOC Finance Co., which are at the development as a world-class energy company. same grade with China's sovereign rating.
I joined Finance Company about two years ago. With less than 70 employees, the company efficiently adopts advanced financial management Financing for CSPC methods to promote the rapid and quality development of CNOOC. In 2007, In 2007, the CSPC Nanhai Petrochemical Project won a consortium loan along with the Group's strengthening of financial integration and capital of RMB 22.28 billion in secondary financing. During this process, CNOOC management, the Finance Company shouldered a heavier responsibility. Finance submitted a notes financing service scheme that provided the best I am proud to see that our financial services have helped many member companies to improve their management efficiency and save costs. discount rate. At the same time, Zhonghai Trust Co. settled a 3-year low cost trust fund of RMB 3.4 billion for the CSPC and set several Chinese records Wang Heng, a supervisor in Comprehensive Management in related fields. Department of CNOOC Finance WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Zhonghai Trust Co., Ltd. AEGON-CNOOC Life Insurance Co., Ltd.
Zhonghai Trust Co., Ltd. (CNOOC Trust) is a non-bank financial institute, CNOOC holding 95% of its shares. The AEGON-CNOOC Life Insurance Co., Ltd. (CNOOC Life Insurance) is a joint venture established in May 2002. 60 61 CNOOC Trust is engaged in providing efficient, flexible one-stop financial services to the leading companies in CNOOC and Aegon jointly own the company, each holding 50 percent of the stakes. In 2007, the total premium China's energy, transportation and city infrastructure construction industries. The company also provides low-risk income of the company reached RMB 1.27 billion, representing a year-on-year increase of 155%. In June 2007, and stable investment services for large investment institutes as well as high-end private clients. the number of its effective insurance policies exceeded 100,000.
In June, the CNOOC Trust worked with the National Council for Social Security Fund in the implementation of a In January, CNOOC Life Insurance was listed in the "Top 10 Most Influential Insurance Companies in China", social security trust fund of RMB 5 billion for railway construction. followed by the title of "Best Service Insurance Company in Shanghai". In November, it was honored with the title of "Multinational Corporation in China with Utmost Core Competitiveness" at the International CEO Roundtable of In 2007, the company achieved revenue of RMB 812 million and a total profit of RMB 733 million; its entrusted Chinese and Foreign Multinational Corporations. It was also granted the Outstanding Education Award by LOMA assets throughout the year amounted to RMB 198 billion and created for investors a value of RMB 4.105 billion. for the third consecutive year.
CNOOC Investment Co., Ltd. CNOOC Insurance Limited
CNOOC Investment Co., Ltd. (CNOOC Investment) is a wholly owned subsidiary established in 2000. CNOOC Insurance Limited (CNOOC Insurance) was established in Hong Kong in 2000. Wholly owned by CNOOC, it is mainly engaged in property insurance, rather than life insurance. In 2007, CNOOC Investment achieved a cash revenue of RMB 62 million. As the financial investment management vehicle of the Company, it actively participated in the IPOs in the stock market, additional directional Being a risk management tool, CNOOC Insurance performed well by operating to standards. It has received investment and private equity investment in line with the Group's strategy. recognition from the international re-insurance market and the Hong Kong regulatory agency. At the end of 2007, the company ranked 14 among 127 non long-term insurance companies in Hong Kong. It also participated in the insurance of CNOOC. Its premium income in 2007 was HK$ 640 million and the profit after tax was HK$ 160 million.
In July, the Group injected HK$ 800 million into CNOOC Insurance, and the company's bearing capability grew to HK$ 1.2 billion at the end of 2007. China's First Energy Fund
On March 8th, 2007, the Zhonghai Fund Management Co., Ltd. issued the Zhonghai Energy Strategy Fund, China's first energy fund, raising almost RMB 10 billion on the very day. In July 2006, the Zhonghai Trust Co., Ltd. increased its shares in the Guolian Fund Management Co. to 46.923% and became the largest shareholder. The name of the latter was changed to Zhonghai Fund Management Co., Ltd. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
//5/Alternative Energy
In 2007 CNOOC's alternative energy sector 62 63 made new progress. CNOOC (Beijing) Energy First Offshore Wind Power Station
Investment Co., Ltd. was established to organize On November 8th, 2007, the first offshore and implement the Group's alternative energy wind power station in China began to development. supply electricity to an offshore oilfield. 70 kilometers offshore, it stands 57 meters high The Energy Investment Company has now set with big impellers of 70 meters in diameter. up the Eleventh Five-year Plan for wind power, The generator transmits power through the biomass energy, coal chemical and solar energy. subsea cable to the nearby Suizhong 36-1 Preliminary research has been conducted on wind oilfield platform. This wind power station can power, biomass energy, coal chemical, solar energy generate power 4.4 million kwhs per annum and CDM; about 4.8 million kwhs of wind power with a horsepower of 1,500 kw; by doing so, resource has been secured for future development. it reduces carbon dioxide emission of 3,500 tons and sulfur dioxide of 11 tons each year. At Though wind power plays a leading role in present, the wind power potential in offshore renewable energy development, the wind power China at the depth of less than 30 meters is industry in China still lingers at the starting stage estimated to be 490 million kwhs, an equivalent with its offshore wind power business yet to be to the installed capacity of 27 Three Gorges born. Seeing its own unique advantage of being Hydroelectric Stations. an offshore operator, CNOOC has put forward an ocean wind power development strategy, which is one of the Company's important measures to use clean energy and realize its sustainable growth.
In 2007, Bohai offshore wind power station was successfully grid-connected for power generation. By undertaking this project, CNOOC has thus started the offshore wind power business in China. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
64 Human 65 Resources
A competitive workforce is a strong force for the continuous growth of CNOOC. In 2007, CNOOC focused on the cultivation of senior technical talented personnel, which is part of the Company's plan of building "three teams" and a first-class workforce. We further improved the salary structure and insurance system so that our employees are motivated to contribute more to the development of the Company.
During the year, the core business sectors of exploration, development, drilling, engineering and refining launched expert recruitment process and chose 107 experts. On this basis, CNOOC started its 2007 annual recruitment process at Group level. The provision of two employment levels paved the way for ongoing career development for technical experts, and further stimulated the technological innovation of the staff.
CNOOC accelerated skill level assessments in 2007, with over 3,300 employees from 11 categories passing the assessment. Afterwards, CNOOC carried out technician and senior technician evaluations in nine categories, including: oil production workers, welders, and maintenance electricians among others. Qualifications were granted to 110 employees who performed well in the evaluations. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Expert Evaluation
September 19th witnessed the establishment of the In 2007, an unprecedented expert evaluation took place in CNOOC. The Group set up an expert evaluation 66 67 CNOOC Executive Management Institute. The main committee, which was responsible for choosing the first batch of 32 experts out of the 107 experts sent by the responsibility of the institute is to provide training to subsidiaries, for positions at the Group level. executives. Its mission is to improve the overall qualities of the senior management in CNOOC to meet the The expert panel based their judgments upon expertise, which was not to be influenced by considerations of demands of the enterprise in its future development, and types of degree, seniority, or age. Among the 107 experts, there were mature retiring technicians, along with foster future leaders. young experts who were only around 30 years old. Some of them had masters and doctoral degrees, and there were also self-taught experts without bachelor's degrees. Some came from subsidiaries of CNOOC, and others In 2007, the Company carried out high quality training were from shareholding companies such as the Tianye Plant. for its executives, technicians, and new employees. Each employee received an average of about 70 The expert evaluation played a pivotal role in the Group's technical innovation and in the cultivation of technical hours training, which is well above the national talented personnel. standard of 40 hours.
CNOOC has developed a comprehensive insurance A Technical Expert Without a Bachelor's Degree system, so as to ease the concerns of staff members. In 2002, Huo Chunliang started to work at Bohai Research Institute with only The Company offers full insurance coverage to all a diploma from a junior college. When CNOOC started the senior engineer employees including retirement, unemployment, medical evaluations in 2004, he did not even apply, thinking it was unlikely for him care, injury and maternity provision. for pass without a bachelor's degree. Xia Qinglong, now the Chief Geologist of the Tianjin branch of CNOOC (China) Ltd., persuaded him to have a try. Beyond his expectations, Huo Chunliang achieved the first place in the evaluations, and was elected as an expert of the company in 2007.
Preferring to Be a Technician Rather Than the Vice General Manager
Zhang Chongyi, Vice General Manager of the Marine Support and Transportation Service department of COSL, preferred his role as a technical expert. Selected as a technical expert by COSL in 2007, he restructured his career after deep consideration. Now he is the General Manager of a vessel construction project, focusing on technical innovation and personnel training. Under his guidance, 18 advanced multi-purpose marine support vessels are being constructed. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Technician Evaluation Top Ten Teams and Top Ten Monitors
On August 19th, CNOOC formally launched its 2007 technician and senior technician evaluations. Now we In 2007, CNOOC launched its first selection activity of Top Ten Teams and Top Ten Monitors. The selection 68 69 have over 20,000 skilled operators, which is more than half of the total number of employees. In order to process began in October 2006. Information about the candidates was released in the China Offshore Oil build up a high quality workforce, the Company established the occupational technique assessment in 2005 Press and on company internal website. All employees actively participated in the process. In November to carry out evaluation of technicians at various levels. 2007, the committee finally voted on the Top 10 lists. Fu Chengyu, President of CNOOC, commented that the winners set an outstanding example for all employees.
Lu Xue, CNOOC's Best Riveter
Lu Xue began working in 1990 and now he is a monitor in the structural workshop for COOEC. On October 20th, 2006, he won the gold medal for riveters in the second CNOOC Occupational Technique Competition. Afterwards he was selected as a senior technician by COOEC. In 2007, he became a technician at the Group level.
Zhou Shixiang, one of the Top 10 Monitors, CNOOC Model Worker
Zhou Shixiang is the monitor of the transportation repair team for the Logistics Co. of the CNOOC Base Group. For several decades, he has carried out his work faithfully. For him, a sense of responsibility is the most important element in being a person of integrity. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
70 Research and 71 Development
Following the Sixth Technology Meeting, the Company has made substantial progress in its overall research and development (R&D). During 2007, 32 research programs identified in the Eleventh Five-year Plan were set in motion.
Throughout the year the Group invested RMB 2.779 billion to undertake 256 research programs (including Group level and national level), and completed 70 of them. Two achievements were awarded the second prize of the National Award for Science and Technology Progress. The breakthrough in Deepwater Oil and Gas Exploration in the Northern South China Sea and other 16 programs received the Company's R & D Progress Prize. The Company submitted 222 patent applications and gained approval for 122.
CNOOC continued to expeditiously transfer its technological progress into operations. The Company built the first offshore wind power station in China. With breakthroughs in offshore facilities repairing technology, the Company restarted its production at the Liuhua Oilfield ahead of schedule. The Company also made significant exploration progress in the Yellow River Mouth Sag of Bohai Bay. The well group polymer- injection test was successfully carried out in several oilfields in Bohai Bay. In addition, the industrialization of crumb rubber modified asphalt was accomplished and the products have been put on the market. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
In 2007, CNOOC released 31 technical standards, progress in technology into actual operation and plan 72 73 with two of them winning the Chinese Standards implementation. Training and exchanges were held in Having been selected as one of CNOOC technological experts, I will receive from Innovation Contribution Award. We also undertook all subsidiaries to deepen employees' understanding the Company no less than 72 hours per year of knowledge updates, 40 hours research on LNG, energy conservation and emission of science and technology planning, project per year of full-time study and opportunities to attend domestic and international reduction, and others. management systems, patent and intellectual property academic conferences. I am excited about the future! issues, R&D statistics and standardization. Through The Company has strengthened its management of data analysis, we produced our first statistical analysis Yang Xiaogang, a technological expert of CNOOC, Chief Engineer of technological development. In 2007, we improved the report on R&D. COOEC Designing Co. technology assessment system with focuses on the capacity for independent innovation, the transfer of
National Awards Strategic Cooperation Agreements In 2007, two achievements of CNOOC, "Innovation in the Exploitation of In November, COOEC signed strategic cooperation agreements with nine Complicated Oilfields in Bohai Sea Area" and "Research and Application of Key prestigious universities, including Ocean University of China, Shanghai Jiao Tong Drilling Technologies of Offshore Extended-Reach Well with High Horizontal University and others, to strengthen research on key technologies, and to develop Displacement to Vertical Depth Ratio in China", were awarded the second prize personnel training and academic exchanges. of the National Award for Science and Technology Progress.
With its abundant oil and gas potentials, the deepwater area of the South China Sea will play a leading role in the sustainable development of Chinese energy industry. In order to accelerate our progress in deepwater oil and gas development, we are committed to making technological breakthroughs in deepwater oil and gas development. CNOOC is conducting research on deepwater oil and gas field engineering technologies and deepwater major equipment and supporting engineering technologies. At the same time, we are strengthening the construction of the Deepwater Engineering Laboratory and personnel training.
Zeng Hengyi, academician of the Chinese Academy of Engineering and CNOOC Deputy Chief Engineer WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
74 management 75
Modern Corporate System
CNOOC is committed to establishing a modern corporate system by 2008. Through public listing at home and overseas, and through the establishment of joint ventures and mergers and acquisitions, the Group has diversified shareholding of its subsidiaries and affiliates. In compliance with the requirements of Company Law, the listed subsidiaries have all established an effective shareholding system and operate under the standard management of the board of directors. For other subsidiaries, the Group authorizes a supervisory board to exercise the same function.
Comprehensive Budget Management
Since 2003, CNOOC and its subsidiaries have begun to introduce comprehensive budget management. In 2007, the Group finished the first phase of the comprehensive budget management system. On April 2nd, CNOOC signed an implementation project contract with Deloitte Consulting Ltd. and installed Hyperion performance management software to establish a scientific budgeting and management platform. The software was developed by Hyperion Software Group and is a leading enterprise performance management tool. At the end of August, CNOOC Gas & Power Limited and China BlueChem Limited became the first subsidiaries to use the on-line application. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Internal Control System
In 2007, CNOOC included risk management capacity as one of the core competencies for the Company’s 76 77 sustainable development. An internal control system should cover all aspects of corporate management. To establish a sound internal control system, we need to During the year, CNOOC Ltd. passed the SOX404 audit. Through the implementation of SOX404, the company prioritize the standardization of regulations and procedures in operations. carried out six large-scale internal control matrixes and improvements to the procedures. After conducting The managers must strictly follow the regulations and set an example for the comprehensive tests on over 4,000 points at least three or four times, the company successfully improved the staff, minimizing human errors in internal control. effectiveness of the internal control system. Meanwhile an accounting team has been established in compliance Wang Guang, General Manager of China Offshore Bitumen (Sichuan) with Hong Kong and American accounting standards. Co., Ltd.
On June 26th, CNOOC launched its Group level project on internal control optimization and risk management. The overall aim is to establish a risk management supporting system within 3 years, and assimilate it into our corporate culture. In 2007 CNOOC continued to develop the penalty and anti-corruption system, with the drafting and implementation of a series of regulations which involves the staff discipline, bidding and acquisitions, and overseas assets operation. Thus the management of all member companies can be regulated, and the responsibilities of each position are clearly defined. Signing on a New Regulation
In 2007 CNOOC finished the first revision of its Employee Discipline, and
instructed all employees to sign their names on the last page of the booklet and promise to follow the requirements. Enacted in 2005, this regulation aims to promote anti-corruption in employee behavior.
SOX404 Testing
In April 2007, CNOOC Ltd. passed a testing as regulated by the Sarbanes- Oxley Section 404, a regulation meant to strengthen internal controls in the listed companies in the U.S. Ernst & Young carried out the testing and highly commended the performance of the company. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
Information Construction
In 2007, CNOOC proposed the concept of "Digital CNOOC". We intend to build an efficient communication 78 79 capability, an advanced application system, and a comprehensive information sharing system in a highly The ERP system has changed work processes in the whole organization. integrated collaborative environment. With strong IT support, the Group will advance faster on its way to being a Take the financial module for example, the accountants no longer have to spend much time on hand typing data, so they can focus on financial world-class energy company. analyses and provide more valuable corporate advices. According to the IMA (Institute of Management Accountants), in the near future, accountants CNOOC started the ERP project in May 2005. The Company plans to establish its ERP system at an will play the role of business consultants, rather than merely recording the internationally advanced level, to be first-class in China and appropriate for CNOOC's operations. During the accounts. year the project went smoothly. After the establishment of the ERP system in the COOEC, CNOOC Oil & Gas Development & Utilization Company, China BlueChem, CNOOC headquarters and Zhonghai Trust Co., Ltd., Ji Linna, an end-user in COSL CNOOC went on to implement the system in other subsidiaries, including COSL, Gas & Power Co., Financial Company and Base Group. Completion of the First Disaster Recovery Center
The information construction helps CNOOC enhance its internal control by clearing traditional mindsets, On November 21st, 2007, the disaster recovery center of CNOOC came into minimizing human influence, and setting the standard as an efficient information and management platform for operation. This brought CNOOC to the forefront of the field in the Chinese oil modern enterprise administration. industry. The center provides corresponding recovery services (synchronous storage capacity) to ERP, OA, mail systems and IT services. In the case of an unexpected event, the center guarantees "zero loss" of data, and the recovery of the ERP system within two hours.
Within a short time, the CNOOC ERP Project Team has developed into an excellent professional team. The team members all possess multiple skills of technology, management and business. Of course, the success of the ERP Project Team is also a result of wholehearted support and efficient work of the managers at all levels and the key users from concerned subsidiaries. I am proud of them all, and believe that CNOOC, with its rapid development, promises an even brighter future.
Lowell Thomas Rowley, ERP Project Director WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
80 management team 81
Fu Chengyu Luo Han Zhou Shouwei Cao Xinghe President Vice President Vice President Vice President
Wu Zhenfang Wu Guangqi Lu Bo Wu Mengfei Vice President Chief Compliance Officer Assistant President Chief Financial Officer
Chen Lihua Zheng Changbo Liu Jian Chief Economist Assistant President Assistant President
Yang Hua Yuan Guangyu Wang Jiaxiang Assistant President Assistant President Assistant President WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
July 18 Guangdong Provincial Government signed a September 26 Shihuaxi gas station, the first gas 82 Major events framework agreement for natural gas cooperation with station designed and constructed independently by 83 CNOOC and SINOPEC. Based on the agreement, CNOOC, started trial operation. the three parties will promote the establishment of the September 28 China Oilfield Services Limited Guangdong Gas Pipeline Network Corporation. commenced A Share trading on Shanghai Stock July 28 CNOOC and Jiangsu Rongsheng Heavy Exchange. The move marked the successful return of January 22 Shanghai LNG project started construction Industry Corporation signed an agreement for the COSL to the domestic stock market. of Phase I, following the LNG projects in Guangdong construction of a deepwater pipe-laying crane barge. October 17 China BlueChemical Limited announced and Fujian. July 30 CNOOC Oil & Petrochemicals Co., Ltd. was completion of its 600,000-tonne methanol project, the February 2 China Oilfield Services Limited and granted a sales license for crude oil from the Ministry largest of its kind in China. Norwegian ADTH set up a joint venture company - of Commerce of the People's Republic of China. October 18 CNOOC signed a construction contract for Atlantis Deepwater Orient Limited. COSL and ADTH August 6 CNOOC signed a Production Sharing a deepwater semi-submersible rig, the first oversized each has a 50% stake in ADOL. Contract with Singapore Petroleum Company Limited deepwater semi-sub drilling unit in China. February 7 CNOOC (China) Ltd. received the title for block 26/18. November 19 COOEC issued corporate bonds worth of “National Advanced Mining Enterprise of Rational August 14 CNOOC signed two Production Sharing RMB 1.2 billion on the Shanghai Stock Exchange. Exploiting Mineral Resources” from the Ministry of Contracts with Newfield Exploration Company for Land and Resources of the People’s Republic of China. November 27 CNOOC Limited announced that Platform blocks 22/15 and 16/05. C of Phase II of Penglai 19-3 came on stream. February 12 CNOOC Ltd.’s Bozhong 34-5 Oilfield August 15 CNOOC signed a contract for a drilling started production. November 29 CNOOC and the People’s Government equipment package for the deepwater semi- of Fujian Province signed a Cooperation Agreement March 8 Zhonghai Fund Management Co., Ltd. submersible drilling platform with Norway Aker for Promoting the Construction of the Economic Zone issued Zhonghai Energy Strategy Fund, China’s May 14 China Oilfield Services Limited issued its Kvaerner MH. on the West Side of the Straits. first energy fund, and raised almost RMB 10 billion first corporate bonds, the first domestic bonds in the August 29 CNOOC Ltd. announced that its independent on the first day. Zhonghai Trust Co., Ltd. is the first CNOOC Group. December 8 China Cinda Asset Management oilfield Liuhua 11-1 in eastern South China Sea had shareholder of the company. Corporation (CCAMC) signed with CNOOC an agreement May 18 CNOOC Ltd. announced that Weizhou 11-1, restarted production. to transfer its stock rights in Dayukou Chemical Co., Ltd. March 19 CNOOC Ltd. announced that it had made an independent oilfield in the western South China September 15 CNOOC signed a strategic cooperation (Hubei) to the latter. a new discovery in Bozhong 28-2E, marking a new Sea, came on stream. agreement with China Ocean Shipping (Group) Company. stage in the company’s exploration in the Yellow December 13 CNOOC Energy Conservation and May 23 CNOOC Oil & Petrochemicals Co., Ltd. and its River Mouth Sag of Bohai Bay. September 19 CNOOC Executive Management Institute Emission Reduction Supervision Center was established. sales subsidiary were granted oil product wholesale was established. March 26 CNOOC set up a Finance Management licenses from the Ministry of Commerce of the December 25 CNOOC Ltd. announced that Jinzhou Committee to initiate its internal financial management People's Republic of China. September 24 CNOOC Ltd. announced that Phase II of 21-1 oil and gas field and Bozhong 34-1 oil field came system reform. Southeast Sumatra (SES) Gas Project started production, on stream. June 26 CSPC, a joint venture project with investments with its subsidiary CNOOC SES Ltd. as the operator. March 29 CNOOC signed a construction contract for from CNOOC and the Royal Dutch/Shell Group, won the Zhuhai project of natural gas liquefaction, the first a consortium loan of RMB 22.28 billion in secondary of its kind in China. financing. WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
84 Company Honors Affiliates 85
February Fu Chengyu, President of CNOOC was named one of China's "2006 Top Ten Talents in Finance". China National Offshore Oil Corporation CNOOC Bohai Corporation Fu Chengyu, President Li Zifa, General Manager NO. 25 Chaoyangmenbei Dajie, Dongcheng District No.688 Bohaishiyou Road, Tanggu District March CNOOC won the title of "2006 CCTV Best Employer of the Year". The theme for the 2006 annual Beijing 100010, P. R. China Tianjin 300452, P.R. China survey of employers was: "Seeking the most respected enterprises". Tel: 86 10 8452 1010 Tel: 86 22 2580 7313 Fax: 86 10 6460 2600 Fax: 86 22 2580 7332 www.cnooc.com.cn April CNOOC received the "National May Day Labor Award" from the All-China Federation of Labor. CNOOC Nanhai West Corporation CNOOC Limited Song Enlai, General Manager Fu Chengyu, Chairman & CEO P.O. Box 11, Potou District, Zhanjiang June CNOOC was awarded the title of "The Most Globally Competitive Chinese Company". Zhou Shouwei, President Guangdong province 524057, P.R. China 65/F, Bank of China Tower Tel: 86 759 3900 392 Garden Road, Hong Kong Fax: 86 759 3900 151 July CNOOC ranked 469 in Fortune Magazine's "2007 Top 500 Enterprises in the World". Tel: 852 2213 2500 Fax: 852 2525 9322 CNOOC Nanhai East Corporation www.cnoocltd.com November CNOOC was honored with the title of "The Chinese Enterprise with Utmost Core Competitiveness" at Tu Zhiming, General Manager No.168 Middle of Jiangnan Avenue China Oilfield Services Limited the International CEO Roundtable of Chinese and Foreign Multinational Corporations. Guangzhou 510240, P.R. China Fu Chengyu, Chairman Te l: 86 20 8426 2245 Yuan Guangyu, CEO & President Fax: 86 20 8442 0984 November CNOOC was awarded the prize of "The Enterprise with Excellent Achievement" by the State- NO. 25 Chaoyangmenbei Dajie, Dongcheng District Beijing 100010, P. R. China CNOOC Donghai Corporation owned Assets Supervision and Administration Commission (SASAC) of the State Council. Tel: 86 10 8452 2840 Fax: 86 10 8452 2133 Zheng Li, General Manager www.cosl.com.cn 24/F CNOOC Tower December CNOOC won the "People's Social Responsibility Award" at the 2007 "Harmonious China, Social No.583 Lingling Road Shanghai 200030, P.R. China Responsibility" summit forum sponsored by www.people.com.cn. Offshore Oil Engineering Co., Ltd. Tel: 86 21 6487 6285 Zhou Shouwei, Chairman Fax: 86 21 6487 6800 Jiang Xizhao, President December Winning the award for the third time, Fu Chengyu, President of CNOOC, was named "The Most P.O. Box 616, No. 1078 Danjiang Road CNOOC Enterprises Corporation Tanggu District Tianjin 300451, P.R. China Influential Business Leader in 2007" at the Sixth China Entrepreneurs' Summit. Tel: 86 22 6690 8018 Liu Wenbo, General Manager Fax: 86 22 6690 8000 Jingxin Tower www.cnoocengineering.com No.2, East 3rd Ring Road, Chaoyang District Beijing 100027, P.R. China Tel: 86 10 8452 5090 CNOOC Oil Base Group Limited Fax: 86 10 8452 5020 Cao Xinghe, Chairman Meng Liming, President CNOOC Gas & Power Limited No.25 Chaoyangmenbei Dajie, Dongcheng District Wu Zhenfang, Chairman Beijing 100010, P.R. China Liu Liming, President Tel: 86 10 8452 5000 P.O. Box 4705, Jingxin Tower Fax: 86 10 8452 5111 No.2, East 3rd Ring Road, Chaoyang District Beijing 100027, P.R. China Tel: 86 10 8452 1712 Fax: 86 10 8452 1091 www.cnoocgp.com WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29 CNOOC Annual Report 2007 CNOOC Annual Report 2007
China BlueChemical Limited CNOOC Finance Co., Ltd. China Ocean Offshore Oilfields Service (Hong Kong) Ltd. 86 Wu Mengfei, Chairman Luo Han, Chairman Cao Xinghe, Chairman 87 Yang Yexin, CEO & President Xie Weizhi, General Manager Xiang Qingsheng, General Manager Zhujiangnan Dajie, Dongfang No.25 Chaoyangmenbei Dajie, Dongcheng District Room 2507,25/F, harcourt House, 39 Gloucester Road Hainan province 572600, P.R. China Beijing 100010, P.R. China Wanchai,Hong Kong Tel: 86 898 2569 1710 Tel: 86 10 8452 1246 Tel: 852 2811 5216 Fax: 86 898 2552 3070 Fax: 86 10 8452 3878 Fax: 852 2564 0309
CNOOC Oil & Petrochemicals Co., Ltd. Zhonghai Trust Co., Ltd. CNOOC (Beijing) Energy Investment Co., Ltd. Wu Zhenfang, Chairman & President Luo Han, Chairman Zheng Changbo, Chairman & General Manager Anhui Plaza Chu Xiaoming, General Manager Ambassador Mansion, No.B21 Jiuxianqiao Road, Chaoyang District No.3 Anhui Avenue 7/F, No.15 Zhongshandong Road Beijing 100016, P. R. China Daya Bay Economic Development Zone, Huizhou Shanghai 200002, P.R. China Tel: 86 10 8452 5571 Guangdong province 516084, P.R. China Tel: 86 21 6355 5000 Fax: 86 10 8452 5500 Tel: 86 752 3685 123 Fax: 86 21 6355 1955 Fax: 86 752 3685 260 www.zhtrust.com
China Offshore Oil & Gas Development & Utilization Company CNOOC Insurance Ltd. Zheng Baoguo, General Manager Wu Mengfei, Chairman No.25 Chaoyangmenbei Dajie, Dongcheng District Wang Zhiliang, General Manager Beijing 100010, P.R. China Unit 1-3A, 38/F, No.148 Electric Road, North Point Tel: 86 10 8452 1682 Hong Kong Fax: 86 10 6460 2565 Tel: 852 2164 4807 Fax: 852 2164 4878 China National Chemical Construction Corp. CNOOC Investment Co., Ltd. Wang Hui, General Manager Building No.15, Sanqu, Anzhenxili Wu Mengfei, Chairman Beijing 100029, P.R. China Cheng Chi, General Manager Tel: 86 10 6442 9966 No.25 Chaoyangmenbei Dajie, Dongcheng District Fax: 86 10 6441 9698 Beijing 100010, P.R. China www.cnccc.com.cn Tel: 86 10 8452 1996 Fax: 86 10 8452 2059 China National Chemical Supply & Sales (Group) Corp. Zhou Dechun, General Manager Aegon-CNOOC Life Insurance Co., Ltd. No.4 District 7, Hepingli, Dongcheng District Wu Mengfei, Chairman Beijing 100013, P. R. China Peter Brudnak, General Manager Tel: 86 10 6423 8623 15/F, Pufa Building, No.588 Pudongnan Road Fax: 86 10 8425 0881 Shanghai 200120, P.R. China Tel: 86 21 3878 4868 CNOOC-Shell Petrochemicals Co., Ltd. Fax: 86 21 6888 0208 www.aegon-cnooc.com Wu Zhenfang, Chairman Wang Qiong, DCEO Daya Bay Petrochemicals Park, Huizhou CNOOC Research Center Guangdong province 516086, P.R. China Chen Wei, Director Tel: 86 752 3682 228 No.6 Dongzhimenwai Xiaojie, Dongcheng District Fax: 86 752 3681 188 Beijing 100027, P.R. China www.cnoocshell.com.cn Tel: 86 10 8452 2744 Fax: 86 10 6466 0095 WorldReginfo - 43009851-495f-4e19-a950-868bff4f6f29