June 5, 2007 China and Chemical (H) (0386.HK) June 5, 2007

COMPANY UPDATE China Petroleum and Chemical (H) (0386.HK) Sell Product pricing reform stalled; potential downstream earnings risk

What's changed Investment Profile: China Petroleum and Chemical Our recent meeting with the NDRC suggests that the much anticipated Low High product pricing reform has been deferred indefinitely. While the NDRC’s Growth Growth Returns * Returns * longer term goal is still toward reform and pricing liberalization, it is in a Multiple Multiple near-term quandary over how to manage domestic gasoline and diesel Volatility Volatility prices. According to the NDRC, the cost-plus pricing mechanism (crude Percentile 20th 40th 60th 80th 100th cost + processing cost + some fixed margin) conceptualized early this year 0386.HK Asia Pacific Energy Peer Group Average is not being enforced due to a number of issues including 1) concerns over * Returns = Return on Capital For a complete description of the investment profile measures please refer to potential negative public opinion over price hikes; 2) difficulty determining the disclosure section of this document. appropriate crude oil price given different grades of crude used by different refineries. As such the NDRC has reverted to the former Key data Current Price (HK$) 8.78 mechanism of gradual price adjustment, which we think presents a 12 month price target (HK$) 6.35 potential risk to domestic refining margins if crude oil prices remain high. Market cap (HK$ mn / US$ mn) 761,247.4 / 97,533.9 Foreign ownership (%) --

Implications 12/06 12/07E 12/08E 12/09E EPS (Rmb) 0.62 0.71 0.75 0.68 We believe the market remains overly optimistic about domestic product EPS growth (%) 30.0 14.4 5.0 (9.5) pricing reform. We believe the strong refining margins in 1Q07 EPS (diluted) (Rmb) 0.62 0.71 0.75 0.68 EPS (basic, pre-ex) (Rmb 0.62 0.71 0.75 0.68 (US$5.95/bbl) are unsustainable and due to a temporary pull back in crude P/E (X) 13.8 12.1 11.5 12.7 P/B (X) 2.8 2.4 2.0 1.8 oil prices. We expect a significant correction in 2Q07 refining margins. EV/EBITDA (X) 5.0 6.9 6.8 7.0 While we are not changing our earnings estimates at the moment, we Dividend yield (%) 1.7 2.1 2.2 2.0 ROE (%) 22.1 21.3 18.9 14.9 believe there could be downside risks to our near-term earnings estimates for ’s refining and marketing business. Price performance chart Valuation 9 60 8 55 At 7.5X 2008E EV/DACF, Sinopec is currently trading at a premium to CNOOC (6.5X), PetroChina (6.8X) and the supermajors (6.7X). The stock is 7 50 also at the high end of its historical trading range based on various 6 45 measures. Our 12-month share price target is HK$6.35 based on our DCF 5 40 analysis, implying 28% downside potential. 4 35 3 30 Jun-06 Sep-06 Dec-06 Mar-07 Key risks The key upside risks are 1) product price reform and 2) additional China Petroleum and Chemical (H) (L) MSCI China (R) significant upstream discoveries. Share price performance (%) 3 month 6 month 12 month Absolute 54.9 34.5 97.3 INVESTMENT LIST MEMBERSHIP Rel. to MSCI China 29.9 6.6 20.3 Asia Pacific Sell List Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 6/05/2007 close.

Coverage View: Neutral China: Oil

Kelvin Koh, CFA The Goldman Sachs Group, Inc. does and seeks to do business with +852-2978-1218 | [email protected] Goldman Sachs (Asia) L.L.C. companies covered in its research reports. As a result, investors should Chris Shiu, CFA be aware that the firm may have a conflict of interest that could affect +86(10)6627-3462 | [email protected] Beijing Gao Hua Securities Company Limited the objectivity of this report. Investors should consider this report as Eric Jia only a single factor in making their investment decision. Customers in +86(10)6627-3126 | [email protected] Beijing Gao Hua Securities Company Limited the US can receive independent, third-party research on companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.independentresearch.gs.com or call 1-866-727-7000. For Reg AC certification, see the text preceding the disclosures. For other important disclosures go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not required to take the NASD/NYSE analyst exam. The Goldman Sachs Group, Inc. Global Investment Research Goldman Sachs Global Investment Research 1 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

China Petroleum and Chemical (H): Summary financials

Profit model (Rmb mn) 12/06 12/07E 12/08E 12/09E Balance sheet (Rmb mn) 12/06 12/07E 12/08E 12/09E

Total revenue 1,076,402.0 1,021,053.3 1,026,593.9 1,074,135.2 Cash & equivalents 8,088.0 8,179.6 10,452.9 12,244.3 Cost of goods sold (903,189.9) (833,646.7) (833,425.4) (882,165.2) Accounts receivable 24,347.0 28,396.7 28,550.8 29,873.0 SG&A (53,820.1) (51,052.7) (51,329.7) (53,706.8) Inventory 93,436.0 111,896.3 112,503.4 117,713.4 R&D (1,700.0) (1,700.0) (1,700.0) (1,700.0) Other current assets 19,596.0 24,119.2 24,246.7 25,340.1 Other operating profit/(expense) 363.0 363.0 363.0 363.0 Total current assets 145,467.0 172,591.8 175,753.8 185,170.9 EBITDA 118,055.0 135,016.9 140,501.8 136,926.3 Net PP&E 366,475.0 449,598.5 520,445.4 580,047.1 Depreciation & amortization (34,235.0) (37,908.8) (44,961.0) (48,579.7) Net intangibles 0.0 0.0 0.0 0.0 EBIT 83,820.0 97,108.2 95,540.8 88,346.6 Total investments 14,199.0 18,849.0 19,919.0 20,869.0 Interest income 555.0 263.1 298.5 359.5 Other long-term assets 85,649.0 77,304.0 76,337.3 73,206.9 Interest expense (7,437.0) (8,104.5) (9,364.5) (10,204.5) Total assets 611,790.0 718,343.3 792,455.4 859,293.9 Income/(loss) from uncons. subs. 947.0 900.0 820.0 700.0 Others 1,038.0 1,100.0 250.0 250.0 Accounts payable 52,125.0 64,340.3 64,512.7 67,500.3 Pretax profits 78,923.0 91,266.7 87,544.9 79,451.6 Short-term debt 58,760.0 58,760.0 58,760.0 58,760.0 Income tax (23,515.0) (27,836.4) (21,010.8) (19,068.4) Other current liabilities 99,917.0 103,134.2 100,897.9 104,432.8 Minorities (1,496.0) (1,750.0) (1,750.0) (1,750.0) Total current liabilities 210,802.0 226,234.6 224,170.7 230,693.1 Long-term debt 109,065.0 145,765.0 165,765.0 175,765.0 Net income pre-preferred dividends 53,912.0 61,680.4 64,784.1 58,633.2 Other long-term liabilities 7,134.0 7,134.0 7,134.0 7,134.0 Preferred dividends 0.0 0.0 0.0 0.0 Total long-term liabilities 116,199.0 152,899.0 172,899.0 182,899.0 Net income (pre-exceptionals) 53,912.0 61,680.4 64,784.1 58,633.2 Total liabilities 327,001.0 379,133.6 397,069.7 413,592.1 Post-tax exceptionals 0.0 0.0 0.0 0.0 Net income 53,912.0 61,680.4 64,784.1 58,633.2 Common stock & premium 104,774.0 104,774.0 104,774.0 104,774.0 Other common equity 158,071.0 210,741.6 265,167.7 313,733.8 EPS (basic, pre-except) (Rmb) 0.62 0.71 0.75 0.68 Total common equity 262,845.0 315,515.6 369,941.7 418,507.8 EPS (basic, post-except) (Rmb) 0.62 0.71 0.75 0.68 Minority interest 21,944.0 23,694.0 25,444.0 27,194.0 EPS (diluted, post-except) (Rmb) 0.62 0.71 0.75 0.68 DPS (Rmb) 0.15 0.18 0.19 0.17 Total liabilities & equity 611,790.0 718,343.2 792,455.4 859,293.9 Dividend payout ratio (%) 24.1 25.0 25.0 25.0 Free cash flow yield (%) (2.9) (3.7) (1.2) (0.0) BVPS (Rmb) 3.03 3.64 4.27 4.83

Growth & margins (%) 12/06 12/07E 12/08E 12/09E Ratios 12/06 12/07E 12/08E 12/09E Sales growth 29.3 (5.1) 0.5 4.6 ROE (%) 22.1 21.3 18.9 14.9 EBITDA growth 18.2 14.4 4.1 (2.5) ROA (%) 9.3 9.3 8.6 7.1 EBIT growth 22.8 15.9 (1.6) (7.5) ROACE (%) 14.3 14.1 12.8 10.6 Net income growth 30.0 14.4 5.0 (9.5) Inventory days 37.0 45.0 49.1 47.6 EPS growth 30.0 14.4 5.0 (9.5) Receivables days 7.8 9.4 10.1 9.9 Gross margin 16.1 18.4 18.8 17.9 Payable days 21.4 25.5 28.2 27.3 EBITDA margin 11.0 13.2 13.7 12.7 Net debt/equity (%) 60.8 62.2 57.9 53.1 EBIT margin 7.8 9.5 9.3 8.2 Interest cover - EBIT (X) 12.2 12.4 10.5 9.0

Valuation 12/06 12/07E 12/08E 12/09E Cash flow statement (Rmb mn) 12/06 12/07E 12/08E 12/09E Net income pre-preferred dividends 53,912.0 61,680.4 64,784.1 58,633.2 P/E (analyst) (X) 13.8 12.1 11.5 12.7 D&A add-back 34,235.0 37,908.8 44,961.0 48,579.7 P/B (X) 2.8 2.4 2.0 1.8 Minorities interests add-back 1,496.0 1,750.0 1,750.0 1,750.0 EV/EBITDA (X) 5.0 6.9 6.8 7.0 Net inc/(dec) working capital (700.0) (11,600.6) (2,952.6) (1,103.2) Dividend yield (%) 1.7 2.1 2.2 2.0 Other operating cash flow 6,907.0 3,491.5 4,380.0 4,410.0 Cash flow from operations 95,850.0 93,230.0 112,922.5 112,269.8

Capital expenditures (78,565.0) (112,126.1) (114,841.1) (105,051.1) Acquisitions (25,542.0) (3,500.0) 0.0 0.0 Divestitures 717.0 0.0 0.0 0.0 Others 0.0 0.0 0.0 0.0 Cash flow from investments (103,390.0) (115,626.1) (114,841.1) (105,051.1)

Dividends paid (common & pref) (11,271.0) (14,212.7) (15,808.1) (15,427.2) Inc/(dec) in debt 12,276.0 25,000.0 20,000.0 10,000.0 Common stock issuance (repurchase) 0.0 0.0 0.0 0.0 Other financing cash flows 187.0 11,700.0 0.0 0.0 Cash flow from financing 1,192.0 22,487.3 4,191.9 (5,427.2) Total cash flow (6,348.0) 91.2 2,273.3 1,791.5 Note: Last actual year may include reported and estimated data. Source: Company data, Goldman Sachs Research estimates.

Analyst Contributors

Kelvin Koh, CFA [email protected]

Chris Shiu, CFA [email protected]

Eric Jia [email protected]

Goldman Sachs Global Investment Research 2 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

Exhibit 1: Domestic gasoline price vs Singapore import-parity price

(US $/bbl) Gasoline (#95) 100

90 Chinese ex-refinery prices

80 Singapore import parity prices Brent, Dubai and Minas average prices 70

60

50

40

30

20

10

0 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

Source: Company data, Datastream, Goldman Sachs Research estimates.

Exhibit 2: Domestic diesel price vs Singapore import-parity price

(US $/bbl) Diesel (#0) (gas oil) 100

90 Chinese ex-refinery prices Singapore import parity prices 80 Brent, Dubai and Minas average prices 70

60

50

40

30

20

10

0 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07

Source: Company data, Datastream, Goldman Sachs Research estimates.

Goldman Sachs Global Investment Research 3 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

06EV/proved 2007E 3.7 64 17.9 1.4 2.8 2 15.0 2.7 1.73.8 (24)3.6 (5) 312.1 20.65.0 46.61.6 23 22.13.0 23 5.3 7 6.1 47 17.3 4.2 21.6 18.7 18.7 3.1 2.5 1.1 NA 1.4 70.8 6 35.6 2.0 5.4 2.74.4 NA (16)3.4 (15)3.0 5 51 17.7 6.8 12.4 1.7 23.5 NA 1.6 NA 0.52.11.8 59 (20)6.7 11 (4) 8.1 2.6 3.5 5.6 NA NA 2.1 NA NA 58 31.3 3.3 NA 2.4 14 11.5 NA 12.7 13.7 13.5 15.9 15.6 15.1 13.914.3 12.715.6 14.1 12.1 10.3 16.7 13.8 10.1 16.4 10.0 18.913.5 17.813.5 12.4 17.0 13.4 11.7 13.3 12.9 13.0 13.3 17.2 16.817.3 16.5 17.1 16.6 16.4 16.7 15.8 20.3 21.520.0 21.4 18.7 17.0 18.011.2 17.114.6 19.3 9.719.3 13.614.2 10.6 17.6 13.4 13.7 15.3 13.3 12.8 11.3

12.5 8.1 6.8 6.6 12.9 11.3 12.2 17.2 16.8 16.5 2.7 40 23.5 2.5 7.9 6.7 6.6 10.9 9.8 9.6 13.5 13.7 13.5 3.6 2 20.6 4.2 6.5 5.9 5.5 10.3 9.7 9.17.3 6.8 14.3 5.9 14.1 13.8 9.8 2.1 8.8 7.9 23 14.4 13.6 18.7 13.4 2.0 2.8 9 4.6 NA 216,353 7.7 6.9 5.9 9.6 8.7 7.6 GS Price Mkt cap EV/DACF (X) (X) P/E CROCI(%) Yield Net Debt/ Reserves EV/PV-10 March (i.e., FY2008E appears as 2007E). BP Buy 68.36 221,678 7.9 6.7 6.3 11.7 9.6 9.1 CVX Neutral 83.13 179,940 7.4 6.7 6.1 10.9 9.8 9.3 COPOXY Neutral 79.41 Buy 134,238 6.0 58.38 5.8 49,034 5.5 7.2 9.0 5.9 8.9 5.2 8.3 13.4 10.3 9.1 PBR Neutral 111.94 116,884 7.1 6.8 NA 9.9 9.4 9.6 XOM Neutral 84.22 482,496 8.8 8.3 7.9 12.6 12.2 11.5 MRO Buy 128.37 44,643 7.0 5.9 5.5 10.3 9.0 8.5 .MI Buy 26.12 130,447 6.5 6.1 5.8 9.9 9.7 9.6 Ticker Ticker rating5 Jun (US$mn) 2009E 2008E 2007E 2009E 2008E 2007E 2007E 2008E 2009E (%)(%) Equity US$/boe 2006 PTT.BK Neutral 270 22,995 6.9 6.1 5.7 10.1 9.2 9.1 LUKOY Neutral 76.60 63,346 7.4 7.0 6.3 9.1 8.9 8.2 REP.MC Neutral 27.20 44,810 6.4 6.3 6.2 12.1 12.6 12.6 RELI.BO Buy* 1,745 60,336 19.5 13.1 10.0 22.9 17.3 13.7 10.4 13.3 14.5 0.7 40 53.9 NA RDSa.ASTOTF.PA Neutral Neutral 76.52 244,742 56.02 174,795 6.6 7.9 6.7 7.3 6.6 7.0 10.0 10.0 10.3 9.8 9.9 9.6 0883.HK0857.HK Buy Neutral0386.HK 8.05 10.72 Sell 43,875 246,039 8.1 7.2 8.78 6.5 6.8 97,596 5.4 6.6 8.6 12.9 13.1 7.5 10.1 12.0 12.2 7.7 8.7 12.1 11.3 SIBN.RTS Neutral 3.90 18,491 4.3 4.1 4.2 5.8 6.0 6.2 ONGC.BO Buy 900 47,798 5.8 5.3 4.8 8.9 8.6 8.1 SNGSG.RTS Buy 1.11 28,691 3.7 3.6 2.7 11.4 7.8 6.2 ROSNG.RTS Sell 8.05 85,325 15.0 13.6 10.5 21.7 20.1 14.6 GAZPPE.RTS Buy 9.50 600028.SS Sell 14.49 164,225 13.0 11.4 11.7 20.0 18.6 20.6 13.3 12.8 11.3 1.3 58 48.1 5.0 Global integrated oil companies: Valuation analysis, 2007E-2009E oil companies: Valuation integrated Global

Reliance (Rs) (a) Reliance (Rs) Emerging marketoils median Sinopec 'A' share (Rmb) share 'A' Sinopec Chevron (US$) Chevron International majors BP plc (US$) Exxon Mobil (US$) Mobil Exxon (US$) Shell Dutch Royal (EUR) SA Total International majors median Regional majors (US$) ConocoPhillips ENI (EUR) (US$) Occidental (EUR) YPF (US$) Marathon Regional majorsmedian Russian/Lat Amoils (US$) (US$) Russian median Asian oils CNOOC (HK$) (a) (Rs) ONGC (HK$) PetroChina PTT (Bt) (HK$) share 'H' Sinopec Surgutneftegaz (US$) Surgutneftegaz (US$) Lukoil (US$) Neft Gazprom (US$) Exhibit 3: (a) For fiscal year ending the following *This stock is on our regional Conviction Buy List. Company Goldman Research Datastream, estimates.Source: data, Sachs

Goldman Sachs Global Investment Research 4 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

Reg AC

We, Kelvin Koh, CFA and Chris Shiu, CFA, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Investment profile

The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the region's coverage universe. The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows: Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

Quantum

Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures

Coverage group(s) of stocks by primary analyst(s)

Kelvin Koh, CFA: Asia Pacific Chemicals, Asia Pacific Energy, Japan Energy. Chris Shiu, CFA: Asia Chemicals, Asia Energy, Asia Pacific Chemicals, Asia Pacific Energy, Japan Energy. Asia Chemicals: Sinofert Holdings. Asia Energy: CNPC (Hong Kong), Rayong Refinery, Singapore Petroleum. Asia Pacific Chemicals: Cheil Industries, Far Eastern Textile, Formosa Chemicals & Fibre, Formosa Plastics, Hanwha Chemical, Honam Petrochemical, Kingboard Laminates Holdings, LG Chem, LG Petrochemical, Nan Ya Plastics, Sinopec Shanghai Petrochemical (H), Sinopec Yizheng Chemical Fibre (H), Titan Chemicals. Asia Pacific Energy: Aban Offshore, , Cairn Ltd., , China Petroleum & Chemical (A), China Petroleum and Chemical (ADS), China Petroleum and Chemical (H), CNOOC, CNOOC (ADR), Formosa Petrochemical Corp., Gas Authority of India, Great Offshore, GS Holdings, , Indian Oil Corp., Oil & Gas Development Co. Ltd., Oil & Gas Development Co. Ltd. (GDS), Oil & Natural Gas Corp., PetroChina, PetroChina (ADR), PTT Public Company, PTTEP, , Reliance Industries (GDR), Reliance Petroleum, S-Oil Corp., SK Corp., Thai Oil. Japan Energy: AOC Holdings, Cosmo Oil, Idemitsu Kosan, INPEX Holdings, Nippon Mining Holdings, Nippon Oil, Showa Shell Sekiyu K.K, TonenGeneral Sekiyu K.K..

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of Goldman Sachs and referred to in this research. Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be aggregated under US securities law) as of the second most recent month end: ENI (€26.12), Corp. ($58.38), PetroChina (HK$10.72) and Reliance Industries (Rs1,739.80) Goldman Sachs beneficially owned 5% or more of common equity (excluding positions managed by affiliates and business units not required to be aggregated under US securities law) as of the second most recent month end: China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78) and Repsol YPF (€27.20) Goldman Sachs has received compensation for investment banking services in the past 12 months: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), CNOOC (HK$8.05), ConocoPhillips ($79.41), ENI (€26.12), Gazprom ($9.52), Gazprom Neft ($3.90), Corp. ($128.37), PetroChina (HK$10.72), Petroleo Brasileiro S.A. (ADR) ($111.94), Repsol YPF (€27.20), Rosneft ($8.05) and Royal Dutch Shell plc (A) (€28.28)

Goldman Sachs Global Investment Research 5 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), CNOOC (HK$8.05), ConocoPhillips ($79.41), ENI (€26.12), Exxon Mobil Corp. ($84.22), Gazprom ($9.52), Gazprom Neft ($3.90), LUKOIL (ADR) ($76.60), Marathon Oil Corp. ($128.37), Occidental Petroleum Corp. ($58.38), Oil & Natural Gas Corp. (Rs900.45), PetroChina (HK$10.72), Petroleo Brasileiro S.A. (ADR) ($111.94), PTT Public Company (Bt266.00), Reliance Industries (Rs1,739.80), Repsol YPF (€27.20), Rosneft ($8.05), Royal Dutch Shell plc (A) (€28.28), Surgutneftegaz (Ord) ($1.11) and TOTAL SA (€56.13) Goldman Sachs has received compensation for non-investment banking services during the past 12 months: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), ConocoPhillips ($79.41), ENI (€26.12), Exxon Mobil Corp. ($84.22), Gazprom ($9.52), LUKOIL (ADR) ($76.60), Marathon Oil Corp. ($128.37), Occidental Petroleum Corp. ($58.38), PetroChina (HK$10.72), Petroleo Brasileiro S.A. (ADR) ($111.94), Reliance Industries (Rs1,739.80), Repsol YPF (€27.20), Royal Dutch Shell plc (A) (€28.28) and TOTAL SA (€56.13) Goldman Sachs had an investment banking services client relationship during the past 12 months with: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), CNOOC (HK$8.05), ConocoPhillips ($79.41), ENI (€26.12), Exxon Mobil Corp. ($84.22), Gazprom ($9.52), Gazprom Neft ($3.90), LUKOIL (ADR) ($76.60), Marathon Oil Corp. ($128.37), PetroChina (HK$10.72), Petroleo Brasileiro S.A. (ADR) ($111.94), PTT Public Company (Bt266.00), Reliance Industries (Rs1,739.80), Repsol YPF (€27.20), Rosneft ($8.05), Royal Dutch Shell plc (A) (€28.28) and TOTAL SA (€56.13) Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), CNOOC (HK$8.05), ConocoPhillips ($79.41), ENI (€26.12), Exxon Mobil Corp. ($84.22), Gazprom ($9.52), Gazprom Neft ($3.90), LUKOIL (ADR) ($76.60), Marathon Oil Corp. ($128.37), Occidental Petroleum Corp. ($58.38), PetroChina (HK$10.72), Petroleo Brasileiro S.A. (ADR) ($111.94), PTT Public Company (Bt266.00), Reliance Industries (Rs1,739.80), Repsol YPF (€27.20), Royal Dutch Shell plc (A) (€28.28) and TOTAL SA (€56.13) Goldman Sachs had a non-securities services client relationship during the past 12 months with: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), CNOOC (HK$8.05), ConocoPhillips ($79.41), ENI (€26.12), Exxon Mobil Corp. ($84.22), Gazprom ($9.52), Gazprom Neft ($3.90), LUKOIL (ADR) ($76.60), Marathon Oil Corp. ($128.37), Occidental Petroleum Corp. ($58.38), PetroChina (HK$10.72), Petroleo Brasileiro S.A. (ADR) ($111.94), PTT Public Company (Bt266.00), Reliance Industries (Rs1,739.80), Repsol YPF (€27.20), Royal Dutch Shell plc (A) (€28.28) and TOTAL SA (€56.13) Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: BP plc (ADS) ($68.36), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78) and ConocoPhillips ($79.41) A director and/or employee of Goldman Sachs is a director: BP plc (ADS) ($68.36) A director of the covered company is a director of Goldman Sachs: Exxon Mobil Corp. ($84.22) Goldman Sachs makes a market in the securities: BP plc (ADS) ($68.36), Chevron Corp. ($83.13), China Petroleum & Chemical (A) (Rmb14.49), China Petroleum and Chemical (ADS) ($110.10), China Petroleum and Chemical (H) (HK$8.78), CNOOC (HK$8.05), ConocoPhillips ($79.41), Exxon Mobil Corp. ($84.22), Marathon Oil Corp. ($128.37), Occidental Petroleum Corp. ($58.38), PetroChina (HK$10.72) and Royal Dutch Shell plc (A) (€28.28) Goldman Sachs is a specialist in the relevant securities and will at any given time have an inventory position, "long" or "short," and may be on the opposite side of orders executed on the relevant exchange: BP plc (ADS) ($68.36), CNOOC (HK$8.05), Occidental Petroleum Corp. ($58.38), Petroleo Brasileiro S.A. (ADR) ($111.94) and Royal Dutch Shell plc (A) (€28.28)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships Buy Hold Sell Buy Hold Sell Global 28% 59% 13% 41% 34% 31% As of April 1, 2007, Goldman Sachs Global Investment Research had investment ratings on 2,590 equity securities. Prior to June 26, 2006, Goldman Sachs utilized a relative rating system of Outperform, In-Line and Underperform, which, for the purposes of the above disclosure required by NASD/NYSE rules, equated to Buy, Hold and Sell. As of June 26, 2006, Goldman Sachs assigns stocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure. See 'Ratings, Coverage groups and views and related definitions' below.

Goldman Sachs Global Investment Research 6 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

Price target and rating history chart(s)

China Petroleum and Chemical (H) (0386.HK) Currency: Hong Kong Dollar Goldman Sachs rating and stock price target history 8 60

7 50 6 40 5.80 5 3.65 3.65 4 5.85 3.55 3.80 3.15 30 4 4.35 4.10 3 20 3.32 2 10 Mar 31 Jul 21 Jan 2 Jun 26 Dec 21 OP IL OP IL N S M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M 2004 2005 2006 2007 Index Price Stock Price Stock Source: Goldman Sachs Investment Research for ratings and price targets; Reuters for daily closing prices as of 04/01/07. Rating Covered by Kelvin Koh, CFA, as of Feb 1, 2006 Price target Not covered by current analyst Price target at removal New rating system as of 6/26/06 MSCI China; pricing by FactSet

The price targets shown should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as well as developments relating to the company, its industry and financial markets. Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co- managed public offerings in prior periods; directorships; market making and/or specialist role. The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their households from owning securities of any company in the analyst's area of coverage. Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs website at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. Canada: Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research in Canada if and to the extent it relates to equity securities of Canadian issuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel expenses for such visits. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (India) Securities Private Limited; Japan: See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities Finance Company. Korea: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. Russia: Research reports distributed in the Russian Federation are not advertising as defined in Russian law, but are information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning of the Russian Law on Appraisal. Singapore: Further information on the covered companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). United Kingdom: Persons who would be categorized as private customers in the United Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request. European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC is available at http://www.gs.com/client_services/global_investment_research/europeanpolicy.html

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return. Return potential represents the price differential between the current share price and the price target expected during the time horizon associated with the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in each report adding or reiterating an Investment List membership. Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment outlook on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the

Goldman Sachs Global Investment Research 7 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation. Not Rated (NR). The investment rating and target price, if any, have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

Ratings, coverage views and related definitions prior to June 26, 2006

Our rating system requires that analysts rank order the stocks in their coverage groups and assign one of three investment ratings (see definitions below) within a ratings distribution guideline of no more than 25% of the stocks should be rated Outperform and no fewer than 10% rated Underperform. The analyst assigns one of three coverage views (see definitions below), which represents the analyst's investment outlook on the coverage group relative to the group's historical fundamentals and valuation. Each coverage group, listing all stocks covered in that group, is available by primary analyst, stock and coverage group at http://www.gs.com/research/hedge.html. Definitions Outperform (OP). We expect this stock to outperform the median total return for the analyst's coverage universe over the next 12 months. In-Line (IL). We expect this stock to perform in line with the median total return for the analyst's coverage universe over the next 12 months. Underperform (U). We expect this stock to underperform the median total return for the analyst's coverage universe over the next 12 months. Coverage views: Attractive (A). The investment outlook over the following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook over the following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment outlook over the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation. Current Investment List (CIL). We expect stocks on this list to provide an absolute total return of approximately 15%-20% over the next 12 months. We only assign this designation to stocks rated Outperform. We require a 12-month price target for stocks with this designation. Each stock on the CIL will automatically come off the list after 90 days unless renewed by the covering analyst and the relevant Regional Investment Review Committee.

Global product; distributing entities

The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and pursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs JBWere Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Canada by Goldman Sachs Canada Inc. regarding Canadian equities and by Goldman Sachs & Co. (all other research); in Germany by Goldman Sachs & Co. oHG; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs JBWere (NZ) Limited on behalf of Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of America by Goldman, Sachs & Co. Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom and European Union. European Union: Goldman Sachs International, authorised and regulated by the Financial Services Authority, has approved this research in connection with its distribution in the European Union and United Kingdom; Goldman, Sachs & Co. oHG, regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht, may also be distributing research in Germany.

General disclosures in addition to specific disclosures required by certain jurisdictions

This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than some industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgment. Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, our proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research. We and our affiliates, officers, directors, and employees, excluding equity analysts, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives (including options and warrants) thereof of covered companies referred to in this research. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of the investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Current options disclosure documents are available from Goldman Sachs sales representatives or at

Goldman Sachs Global Investment Research 8 June 5, 2007 China Petroleum and Chemical (H) (0386.HK)

http://theocc.com/publications/risks/riskstoc.pdf. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Our research is disseminated primarily electronically, and, in some cases, in printed form. Electronic research is simultaneously available to all clients. Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, One New York Plaza, New York, NY 10004. Copyright 2007 The Goldman Sachs Group, Inc. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.

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