diff --git "a/China/11.CNOOC_$124.70 B_Energy/2019/results.txt" "b/China/11.CNOOC_$124.70 B_Energy/2019/results.txt"
new file mode 100644--- /dev/null
+++ "b/China/11.CNOOC_$124.70 B_Energy/2019/results.txt"
@@ -0,0 +1,71463 @@
+303.1
+1,058
+960
+South America
+103,258
+87,918
+83,460
+Europe
+46,712
+48,183
+1,110
+39,872
+54,692
+49,814
+44,245
+27,896
+4,836
+North America (excluding Canada)**
+83,677
+76,838
+77,343
+Canada
+Subtotal
+682,583
+719,745
+330.5
+364.1
+390.4
+Western South China Sea
+136.9
+137.9
+127.4
+123.9
+123.0
+Bohai
+731.9
+643.3
+634.5
+663.1
+689.9
+China
+natural gas (mmcf/day)
+Net production of
+1,099,459
+932,137
+889,845
+56,998
+56,348
+Africa
+3,350
+141,545
+130,266
+120,563
+Eastern South China Sea
+89,958
+80,493
+75,606
+72,672
+72,006
+Western South China Sea
+477,904
+403,927
+392,413
+411,642
+405,682
+Bohai
+761,019
+626,791
+610,435
+615,122
+598,590
+141,166
+341.7
+190,525
+339
+4,297
+4,533
+4,846
+5,382
+Oceania
+45,640
+37,237
+28,997
+14,883
+17,427
+Asia (excluding China)
+338,440
+305,345
+279,409
+104,623
+83,993
+Overseas
+2,632
+1,206
+872
+543
+East China Sea
+314.3
+Eastern South China Sea
+157.8
+166,778
+155,070
+146,864
+Eastern South China Sea
+143,676
+138,972
+132,284
+135,007
+138,712
+Western South China Sea
+500,719
+426,913
+413,650
+432,285
+426,190
+Bohai
+884,346
+735,533
+717,784
+727,287
+715,219
+163,970
+China
+229,679
+3,453
+26,092
+23,909
+24,628
+25,195
+Oceania
+70,987
+65,280
+54,529
+43,752
+53,872
+Asia (excluding China)
+423,319
+401,804
+365,010
+161,561
+144,511
+Overseas
+10,271
+5,678
+5,072
+4,925
+East China Sea
+China
+Total net production (BOE/day)
+1,189.9
+154.4
+140.3
+157.8
+218.7
+Asia (excluding China)
+482.1
+546.6
+482.7
+308.6
+345.3
+Overseas
+45.8
+26.8
+25.2
+26.3
+18.7
+East China Sea
+234.9
+136.8
+151.4
+148.8
+140.0
+1,214.0
+Oceania
+101.1
+1,117.1
+971.7
+1,035.2
+Subtotal
+45.5
+50.7
+28.7
+Europe
+68.4
+117.5
+106.0
+Canada
+134.6
+112.7
+109.5
+49.7
+25.6
+North America (excluding Canada)**
+93.5
+111.2
+98.2
+101.1
+and liquids (barrels/day)
+Net production of crude
+2015
+Financial Summary
+2
+27 Corporate Governance Report
+Human Resources
+25
+Corporate Citizen
+24
+Company Information
+152
+Health, Safety and Environmental Protection
+23
+Glossary
+151
+Risk Factors
+19
+22222
+Notice of Annual General Meeting
+145
+System
+Producing Activities (Unaudited)
+Supplementary Information on Oil and Gas
+(Amounts expressed in millions of RMB)
+Risk Management and Internal Control
+Consolidated Statement of Profit or Loss and Other Comprehensive Income (Audited)
+Year ended 31 December
+2012
+(5,245)
+(3,701)
+(2,365)
+(601)
+(511)
+Interest income/(finance costs), net
+(153,981)
+(193,719)
+(207,354)
+(160,486)
+(150,337)
+Total expenses
+171,437
+274,634
+285,857
+247,627
+240,944
+Total revenues
+2015
+2014
+2013
+2011
+Share of profits/(losses) of
+18
+Research and Development
+51
+44
+67
+66
+28217
+Overview
+Business Overview
+Chairman's Statement
+Operating Summary
+Financial Summary
+2368 F
+9
+Content
+、、、,,
+As at 31 December 2015, the Group owned net proved reserves of approximately 4.32 billion BOE,
+and its average daily net production was 1,358,022 BOE (unless otherwise stated, all amounts of
+reserve and production in this report include our interests in equity method investees). The Group
+had total assets of approximately RMB664.4 billion.
+The Group's core operation areas are Bohai, Western South China Sea, Eastern South China Sea
+and East China Sea in offshore China. Overseas, the Group has oil and gas assets in Asia, Africa,
+North America, South America, Oceania and Europe.
+The Group is the largest producer of offshore crude oil and natural gas in China and one of the
+largest independent oil and gas exploration and production companies in the world. The Group
+mainly engages in exploration, development, production and sale of crude oil and natural gas.
+CNOOC Limited (the "Company", together with its subsidiaries, the "Group" or "we"), incorporated
+in the Hong Kong Special Administration Region ("Hong Kong") in August 1999, was listed on the
+New York Stock Exchange (code: CEO) and The Stock Exchange of Hong Kong Limited (code:
+00883) on 27 and 28 February 2001, respectively. The Company was admitted as a constituent
+stock of the Hang Seng Index in July 2001. The Company's American Depositary Receipts ("ADRS")
+was listed on the Toronto Stock Exchange (code: CNU) on 18 September 2013.
+Company Profile
+Annual Report 2015
+NYSE: CEO, SEHK: 00883, TSX: CNU
+61
+132
+10
+Directors and Senior Management
+17
+Notes to Consolidated Financial Statements
+71
+Sales and Marketing
+17
+Consolidated Statement of Changes in Equity
+Consolidated Statement of Cash Flows
+70
+Regional Overview
+12
+277%
+69
+and Production
+Consolidated Statement of Financial Position
+68
+Engineering Construction, Development
+11
+Other Comprehensive Income
+Consolidated Statement of Profit or Loss and
+Independent Auditors' Report
+Management's Discussion and Analysis
+Report of the Directors
+Exploration
+21,673
+associates and a joint venture
+(27)
+Non-current liabilities
+(84,380)
+(103,498)
+including equity method investees)
+(82,437)
+(70,216)
+Current liabilities
+664,362
+662,859
+621,473
+456,070
+384,264
+Total assets
+16,423
+16,491
+17,000
+973
+1,033
+Intangible assets
+28,413
+25,250
+(51,192)
+24,397
+(63,853)
+(179,751)
+2014
+2013
+2012
+2011
+Year ended 31 December
+Operating Summary
+Production
+CNOOC LIMITED Annual Report 2015
+386,041
+379,610
+341,620
+309,780
+262,856
+Equity
+(278,321)
+(283,249)
+(279,853)
+(146,290)
+(121,408)
+Total liabilities
+(193,941)
+(150,905)
+567
+24,017
+a joint venture
+3,116
+(22,314)
+(24,390)
+(26,481)
+(22,310)
+Income tax (expense)/credit
+17,130
+82,513
+80,851
+90,172
+92,565
+Profit before tax
+2,398
+2,684
+2,611
+2,392
+1,828
+Investment income
+1,903
+1,006
+895
+Profit for the year
+22,997
+70,255
+56,461
+Investments in associates/
+140,211
+454,141
+463,222
+419,102
+252,132
+220,567
+Property, plant and equipment
+140,708
+146,552
+170,894
+131,923
+Current assets
+2015
+2014
+2013
+2012
+2011
+As at 31 December
+Consolidated Statement of Financial Position (Audited)
+20,246
+60,199
+63,691
+Africa
+56,348
+56,998
+Canada
+284.8
+275.9
+233.2
+353.7
+178.7
+North America (excluding Canada)**
+166.6
+142.5
+155.4
+135.7
+133.7
+Africa
+90.8
+106.0
+92.0
+96.8
+110.7
+Oceania
+208.9
+199.4
+802.8
+240.6
+820.2
+Europe
+200.1
+200.4
+199.3
+200.7
+196.3
+Crude and liquids (million barrels)
+method investees
+Net proved reserves in equity
+4,016.0
+4,185.0
+4,138.7
+3,202.6
+2,921.1
+Total
+1.6
+1.8
+1.7
+South America
+103.8
+152.5
+170.6
+835.2
+Natural gas (bcf)
+207.5
+Asia (excluding China)
+1,191.8
+1,179.7
+1,165.9
+1,099.8
+Bohai
+2,324.3
+2,486.8
+2,442.3
+2,408.9
+2,274.8
+China
+(million BOE)
+Total net proved reserves
+6,992.9
+6,730.8
+6,323.3
+6,005.3
+5,627.4
+Subtotal
+8.8
+20.2
+971.8
+223.2
+Western South China Sea
+622.2
+1,691.7
+1,698.3
+1,696.4
+793.7
+646.3
+Overseas
+164.2
+172.7
+70.4
+70.7
+68.4
+East China Sea
+515.6
+523.5
+542.7
+550.0
+519.9
+Eastern South China Sea
+672.6
+598.7
+649.6
+586.7
+27.8
+442.0
+519.9
+In 2015, the steep downward adjustment of the global
+economy has continued unabated with little signs of
+recovery. International oil prices have continued to hover
+at low levels due to concerns over the prospects of global
+economic growth and oversupply of crude oil. With oil
+prices once again plummeting towards the end of the
+year, worldwide oil and gas industry is experiencing a "cold
+winter".
+We have proactively adjusted our approach and strategy for
+our future development, continued to focus on quality and
+efficiency, so as not only strive for survival, but also seek
+for future development. In 2015, the Company significantly
+reduced capital expenditures by 38% compared to 2014
+and achieved favorable results in different areas of business.
+First, we successfully achieved oil and gas production
+target for the year. Net oil and gas production reached
+495.7 million BOE, representing a 14.6% growth over the
+prior year. The seven new projects planned for 2015 also
+commenced production smoothly, many of which were
+ahead of schedule, demonstrating once again our strong
+capability in project management.
+Second, we maintained an intensive exploration program
+while lowering our exploration capital expenditures. With
+remarkable achievements in our oil and gas exploration,
+we have built a solid foundation for the Company's
+sustainable development. We once again achieved excellent
+results from our independent exploration offshore China,
+with new discoveries including mid-to-large discoveries
+such as Liuhua 20-2 and the successful appraisal of a
+number of mid-to-large size oil and gas structures such as
+Caofeidian 6-4. We also continued to maintain a relatively
+high exploration success rate and opened up new frontier
+areas for future exploration. Breakthroughs were also made
+in overseas exploration. We obtained new discoveries in
+Algeria and Nigeria, and successfully appraised three oil and
+gas structures including Libra in Brazil.
+The Company continued to benchmark against first-
+class international peers in terms of business performance
+and management criteria to improve the profitability
+of international business and continuously enhance its
+ability in operating overseas assets. Under the low oil
+price environment, we closely monitored and strictly
+CNOOC LIMITED Annual Report 2015
+Chairman's Statement
+controlled the decision-making and execution process of
+major overseas investment projects. We also conducted
+comprehensive analysis on costs and returns of these
+projects. At the same time, we adopted measures to further
+strengthen risk management of our overseas operations.
+In 2015, the Company continued to carry out the "Year
+of Quality and Efficiency" program. Ensuring stable and
+safe operations of oil and gas fields and increasing the
+production efficiency have been the paramount mission
+for the Company. We have stimulated the momentum
+of our operations through innovation in management
+and effectively reduced operating costs through market
+mechanism. Through innovation in technology, we have
+embarked on the path for future growth, and we have
+established a system to streamline our cost structure in the
+long-term, laying a solid foundation to deal with the risk of
+continuing low oil prices. During the year, the Company's
+all-in cost decreased to US$39.82 per BOE, representing
+a decline for the second consecutive year. The importance
+of quality and efficiency has been deeply embedded in the
+heart of every employee of the Company.
+Benefitting from the excellent corporate governance and
+healthy operations, the Company has been selected as
+one of the forerunners in the Platts 2015 “Top 250 Global
+Energy Company Ranking", ranking the fourth in the overall
+ranking chart and named the first place in the "oil and gas
+exploration and production" sector as well as in the "Asia/
+Pacific Rim" sector.
+In view of the solid financial condition of the Company, the
+Board has recommended a final dividend of HK$0.25 per
+share (tax inclusive) for the year of 2015.
+The downward cycle of oil prices has been deeper and
+longer than the industry's expectation. The supply and
+demand pattern of international oil and gas is undergoing
+profound transformation. Going forward, oil prices may
+continue to be at low levels. Accordingly, the Company
+may face an even more complicated and difficult operating
+environment.
+With the challenging external environment, both the
+management and staff are well prepared for the long-
+term confrontation with the "cold winter" and will pull our
+strengths together to manage through this difficult period.
+We will continue to adjust our operating strategies, intensify
+the activities for the "Year of Quality and Efficiency", make
+further room for growth through reform and innovation,
+and consolidate our results through improved systems and
+policies.
+We will maintain our prudent financial policies, be more
+stringent on investment decisions and strengthen cost
+control. We will also closely monitor our cash-flow
+management so as to maintain a more competitive financial
+condition.
+We will ensure a balance between short-term benefits
+and long-term development. In the area of exploration, we
+will prioritize exploration work offshore China, striking a
+balance between mature areas, rolling areas and frontier
+areas. Overseas, we will focus on high-quality blocks and
+conventional oil and gas exploration. At the same time,
+we will strengthen value-driven exploration philosophy to
+accumulate a strong resource base for future development.
+In the area of development and production, we will proceed
+cautiously with our investment decisions and place
+emphasis on returns. We will continue the development of
+our nearly 20 existing projects at a steady pace, ensuring
+the sustainable growth of the company.
+We will persist with green and sustainable development.
+We will continue to maintain the standards for safety and
+environmental protection, enhance our capability of risk
+management and emergency response, to ensure safe and
+reliable production operations. Meanwhile, we will actively
+develop clean energy and increase the supply of natural gas
+and its competitiveness in the market.
+In 2015, Mr. Wang Yilin resigned as Chairman of the
+Company, and Mr. Wang Jiaxiang retired as Non-Executive
+Director. On behalf of the Board of Directors, I wish to
+extend my appreciation to Mr. Wang Yilin and Mr. Wang
+Jiaxiang for their contributions to the Company.
+Despite the changing industry environment and the
+challenges resulting from low oil prices, I remain confident
+in the future of the Company. After steady growth in the
+past decades, CNOOC Limited is already equipped with a
+solid foundation to deal with external risks. The Company
+has a forward-looking vision and extensive experience to
+face periodic industry cycles. The enormous potential in
+Chinese energy industry and market has brought ample
+opportunities for future development of the Company.
+CNOOC Limited is committed to working hand in hand with
+all shareholders and welcome the arrival of spring.
+Yang Hua
+Chairman
+Hong Kong, 24 March 2016
+Dear Shareholders,
+CNOOC LIMITED Annual Report 2015
+Yang Hua Chairman
+6
+158
+188
+327
+112 ☐ 67
+Average realized price
+Crude oil (US$/barrel)
+Natural gas (US$/mcf)
+109.75
+5.15
+110.48
+5.77
+104.60
+5.78
+96.04
+6.44
+51.27
+6.39
+***
+Approximately 23%, 36%, 52%, 52% and 62%, respectively, of our net proved reserve estimates in 2011, 2012, 2013, 2014 and 2015 were
+made by the Company's internal evaluation staff and the remaining were made by the independent consultants. Our reserve data was prepared
+in accordance with the SEC's final rules on "Modernization of Oil and Gas Reporting", which became effective as of 1 January 2010.
+As Canada's proved reserves were over 15% of the Group's total proved reserves since the end of 2013, the Group's proved reserves and
+production data in Canada are disclosed separately for year 2013 and after. For year 2012 and before, Canada's numbers are included in North
+America (if applicable) and disclosed on a combined basis.
+Includes 749.9 million barrels of synthetic oil and 31.4 million barrels of bitumen in 2014; 815.3 million barrels of synthetic oil in 2015.
+CNOOC LIMITED Annual Report 2015
+5
+Chairman's Statement
+513.7
+7
+OVERVIEW
+2013
+2012
+2011
+Year ended 31 December
+Operating Summary
+CNOOC LIMITED Annual Report 2015
+4
+4,315.5
+4,478
+4,428
+3,492
+3,190
+Total*
+299.5
+293.0
+288.9
+289.3
+269.0
+Subtotal (million BOE)
+576.9
+537.3
+2014
+BUSINESS
+2015
+Reserve life (years)
+Reserve life (years) (including
+8 CNOOC LIMITED Annual Report 2015
+3065 050 1029
+BE
+GOLDEN EAG
+65
+111
+337
+187
+167
+Reserve replacement ratio (%)
+8.7
+10.4
+10.8
+10.2
+9.6
+8.4
+10.1
+10.5
+9.8
+9.3
+equity method investees)
+Others
+中國海洋石油有限公司
+Europe
+233.0
+1,087.6
+1,067.2
+1,000.4
+Bohai
+1,430.6
+1,691.6
+1,692.6
+1,665.7
+1,584.7
+China
+reserves (million barrels)
+Net proved crude and liquids
+Reserves at year end*
+2015
+2014
+2013
+2012
+2011
+Year ended 31 December
+Operating Summary
+3
+1,111.7
+CNOOC LIMITED Annual Report 2015
+908.3
+250.5
+1,348.2***
+1,367.8***
+515.0
+384.6
+Overseas
+16.1
+18.0
+19.8
+19.8
+17.7
+East China Sea
+357.0
+351.9
+357.0
+354.0
+316.1
+Eastern South China Sea
+149.3
+210.0
+228.3
+224.8
+Western South China Sea
+1,399.6***
+1,358,022
+1,127,967
+1,110
+1,058
+960
+South America
+110,842
+96,370
+88,241
+Europe
+58,115
+67,770
+57,534
+Canada
+76,915
+68,396
+62,496
+36,183
+9,096
+North America (excluding Canada)**
+83,677
+76,838
+77,343
+Total
+1,184,977
+859,730
+1,082,795
+935,615
+909,000
+Total (BOE/day)
+50,357
+47,640
+45,173
+46,767
+49,270
+Subtotal (BOE/day)
+24,588
+149.6
+23,510
+140.2
+22,758
+130.2
+23,020
+138.0
+136.5
+Natural gas (mmcf/day)
+25,704
+Crude and liquids (barrels/day)
+method investees
+Net production in equity
+1,307,664
+1,137,337
+888,848
+119.3
+Asia (excluding China)
+65.0
+Overseas
+889.0
+928.3
+305.9
+303.7
+East China Sea
+951.6
+1,029.6
+1,114.2
+1,175.7
+1,222.4
+Eastern South China Sea
+3,132.6
+2,318.1
+2,505.4
+2,384.9
+2,017.2
+Western South China Sea
+381.4
+480.8
+552.9
+1,487.9
+592.5
+1,546.3
+1,974.0
+195.0
+Canada
+275.2
+403.9
+349.6
+336.4
+171.4
+North America (excluding Canada)**
+389.2
+455.7
+386.0
+409.5
+467.8
+Oceania
+845.8
+861.2
+889.4
+800.4
+848.7
+Asia (excluding China)
+1,638.3
+1,847.7
+81.8
+596.2
+5,354.6
+239.5
+209.3
+175.0
+297.6
+150.1
+North America (excluding Canada)**
+166.6
+142.5
+155.4
+135.7
+133.7
+Africa
+14.5
+16.6
+15.9
+16.7
+19.0
+Oceania
+59.8
+47.4
+83.6
+Canada
+Bohai
+770.3
+815.3
+4,756.8
+4,475.6
+4,459.1
+4,139.5
+China
+gas reserves (bcf)
+Net proved natural
+2,830.2
+3,039.8
+3,060.4
+2,180.7
+1,969.3
+Subtotal
+1.6
+1.8
+1.7
+South America
+102.3
+149.1
+166.0
+Europe
+781.4
+ODE CNOOC LIMITED
+(128,948)
+Reserve replacement ratio (%,
+(6,433)
+(2,646)
+227,544
+150,618
+2014
+2015
+SPECIAL OIL GAIN LEVY
+6.
+(1,375)
+Oil and gas sales
+Less: Royalties
+Gross sales
+OIL AND GAS SALES
+5.
+The current year's revenue of approximately RMB14,692 million (2014: RMB25,055 million) was derived from sales by the
+E&P segment and the trading business segment to China Petroleum & Chemical Corporation. Sales to CNOOC Group
+refer to Note 30 (iii).
+Information about major customers
+(c)
+5,974
+PRC government's share of oil
+(2,901)
+146,597
+218,210
+- Fair value changes on other financial assets
+(2,684)
+(1,073)
+(873)
+2014
+2015
+- Net gain from available-for-sale financial assets
+Investment income:
+Interest income from bank deposits
+Crediting:
+The Group's profit before tax is arrived at after charging/(crediting):
+PROFIT BEFORE TAX
+7.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+91
+CNOOC LIMITED Annual Report 2015
+In 2006, a Special Oil Gain Levy ("SOG Levy") was imposed by the Ministry of Finance of the PRC ("MOF") at the progressive
+rates from 20% to 40% on the portion of the monthly weighted average sales price of the crude oil lifted in the PRC exceeding
+US$40 per barrel. The MOF has decided to increase the threshold of the SOG Levy to US$55 with effect from 1 November
+2011 and to further increase the threshold of the SOG Levy to US$65 with effect from 1 January 2015. Notwithstanding this
+adjustment, the SOG Levy continues to have five levels and is calculated and charged according to the progressive and valorem
+rates on the excess amounts. The SOG Levy paid can be claimed as a deductible expense for corporate income tax purposes
+and is calculated based on the actual volume of the crude oil entitled.
+463,222
+25,250
+155,434 454,141
+21,150 28,413
+7,828
+85
+47
+The following table presents certain non-current assets information for the Group's geographical information for the years
+ended 31 December 2015 and 2014.
+Geographical information (continued)
+(b)
+SEGMENT INFORMATION (continued)
+4.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+90 CNOOC LIMITED Annual Report 2015
+In presenting the Group's geographical information, revenues from external customers are based on the location of the
+Group's customers, and non-current assets are attributed to the segments based on the location of the Group's assets.
+73% (2014: 65%) of the Group's revenues are generated from PRC customers, and revenues generated from customers
+in other locations are individually less than 10%.
+The Group mainly engages in the exploration, development, production and sale of crude oil, natural gas and other
+petroleum products in offshore China. Activities outside the PRC are mainly conducted in Canada, the United States of
+America, United Kingdom, Nigeria, Argentina, Indonesia, Uganda, Iraq, Brazil and Australia etc.
+Geographical information
+Certain oil and gas produced by the E&P segment are sold via trading business segment. For the Group's chief operating decision maker's
+assessment of segment performance, these revenues are reclassified back to E&P segment.
+66,519 107,403
+794
+386
+16
+11
+66,122 106,593
+Capital expenditure
+(244,189) (264,412) 664,362 662,859
+(7,142) (145,475) (111,311) 233,453 216,546 (278,321) (283,249)
+PRC
+(2,398)
+2015
+Canada
+2015
+155,399
+24,098
+101,644
+783
+643
+105,383
+816
+694
+5,246
+7,087
+Other non-current assets
+3,317
+3,499
+Investments in associates/a joint venture
+206,144
+193,359
+Property, plant and equipment
+2014
+2015
+2014
+2015
+2014
+Consolidated
+Others
+2014
+(2,243)
+(2,398)
+Insurance compensation on disposal of property, plant and equipment
+(1,385)
+Less: Amount capitalised in property, plant and equipment (note 14)
+4,229
+5,068
+1
+76
+415
+3,813
+4,701
+(1,842)
+291
+Other borrowing costs
+Interest on other loans
+Interest on bank loans
+2014
+2015
+FINANCE COSTS
+8.
+(1,158)
+Total borrowing costs
+3,683
+2,387
+Other finance costs:
+Subtotal
+Wu Guangqi
+Li Fanrong
+Executive directors:
+2015
+Directors' remuneration
+(i)
+KEY MANAGEMENT PERSONNEL'S REMUNERATION
+9.
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
+activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2015
+92
+The effective interest rates used to determine the amount of related borrowing costs for capitalisation varied from 0.735% to
+7.875% (2014: from 0.64775% to 7.875%) per annum during the year ended at 31 December 2015.
+4,774
+6,118
+2,387
+2,435
+Unwinding of discount on provision for dismantlement (note 27)
+718
+Loss/(gain) on disposal of property, plant and equipment
+1,821
+1,629
+- Property, plant and equipment
+Depreciation, depletion and amortisation:
+8,751
+6,924
+Employee wages, salaries, allowances and social security costs
+65
+57
+400 10
+18
+47
+45
+ཐ།ཥཆི
+12
+- Other fees
+- Audit fee
+Auditors' remuneration
+Charging:
+(334)
+(560)
+- Intangible assets
+(2,684)
+- Less: Net amount capitalised
+57,212
+Research and development costs
+6,342
+5,034
+Repairs and maintenance
+2,249
+2,886
+1,741
+2,448
+508
+438
+- Plant and equipment
+- Office properties
+Operating lease rentals:
+58,286
+73,439
+(324)
+(160)
+1,398
+1,306
+72,293
+Non-executive directors:
+(364,056) (381,342)
+371,650 392,945
+171,437 274,634
+(242)
+(85)
+872
+502
+21,438 50,263
+223,741
+149,582
+Segment profit for the year
+Total revenue
+(85)
+242
+85
+171,437 274,634
+630
+485
+(12,339) (15,380)
+15,380
+(242)
+15,695
+54,846
+879
+(28,372) (31,180)
+INI
+(11,680)
+(9,973)
+Exploration expenses
+(11,802)
+(10,748)
+Taxes other than income tax
+(31,180)
+(28,372)
+Operating expenses
+of segment profit or loss
+Amounts included in the measure
+20,246 60,199
+(250)
+(2,376)
+4,620
+6,048
+983
+12,339
+Intersegment revenue*
+417
+(5.8)
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2015 89
+The following table presents the segment financial information for the Group for the years ended 31 December 2015 and
+2014.
+The Group is engaged worldwide in the upstream operating activities of the conventional oil and gas, shale oil and
+gas, oil sands and other unconventional oil and gas business. The Group reports the business through three operating
+and reporting segments: exploration and production ("E&P"), trading business and corporate. These segments are
+determined primarily because the Group's chief operating decision maker makes key operating decisions and assesses
+performance of the segment separately. The Group evaluates the performance of each segment based on segment profit
+or loss. The geographical information is separately disclosed in (b).
+(a) Segment results
+SEGMENT INFORMATION
+Uncertainties exist with respect to the interpretation of complex tax regulations (including those applicable to tax credits)
+and the amount and timing of future taxable income. Given the wide range of international business relationships and the
+long term nature and complexity of existing contractual agreements, differences arising between the actual results and
+the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and
+expense already recorded. The Group establishes provisions, based on best estimates, for possible consequences of
+audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on
+various factors, such as the Group's experience of previous tax audits and differing interpretations of tax regulations by
+the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues
+depending on the conditions prevailing in the respective group company's domicile.
+Taxes
+Dismantlement costs will be incurred by the Group at the end of the operating life of certain of the Group's facilities and
+properties. The ultimate dismantlement costs are uncertain and cost estimates can vary in response to many factors
+including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other
+production sites. The expected timing and amount of expenditure can also change, for example, in response to changes
+in reserves or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments
+to the provisions established which would affect future financial results.
+Dismantlement costs
+The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of
+value in use and fair value less costs of disposal. These calculations require the use of estimates and assumptions. It is
+reasonably possible that any unfavorable oil price assumption will impact the estimated life of the field and then require
+a material adjustment to the carrying value of tangible and intangible assets. The Group monitors internal and external
+indicators of impairment relating to its tangible and intangible assets.
+(e)
+(d)
+(c) Impairment indicators
+Significant accounting judgements, estimates and assumptions (continued)
+4.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+(10,770)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(a) Segment results (continued)
+33,777 65,643
+208,361
+137,243
+External revenue
+2014
+2015
+2014
+2015
+2014
+2015
+2014
+Consolidated
+Eliminations
+Corporate
+Trading business
+2015
+2014
+2015
+E&P
+(b)
+4. SEGMENT INFORMATION (continued)
+Segment liabilities
+(11,842)
+155
+(114)
+1,006
+1,903
+994
+2,020
+18
+(24,903)
+44
+3,080
+Income tax credit/(expense)
+(117)
+associates and a joint venture
+Share of (losses)/profits of
+(4,774)
+1,039 (6,118)
+1,073
+873
+(854)
+12
+2,703
+3,116
+(22,314)
+8,671
+3,336
+525,655
+533,565
+Segment assets
+(244,189) (264,412) 635,949 637,609
+28,413 25,250
+24,297
+368,648
+8,671 344,037
+3,336
+524,702
+532,765
+Others
+27,613
+953
+800
+a joint venture
+Investments in associates/
+Other segment information
+(6,613)
+(5,705)
+66
+(2,746) (4,120)
+(340)
+(3,651)
+(3,644)
+Selling and administrative expenses
+27
+(56)
+(4,147)
+(2,690)
+Impairment and provision
+59
+(484)
+(509)
+(417)
+(324)
+(72,665) (57,407)
+and amortisation
+Depreciation, depletion
+(11,525)
+(9,900)
+(862)
+73
+(1,733)
+Interest income
+(58,286)
+(73,439)
+22
+ม· 888
+12
+ទិន្និន
+659
+(2,997)
+(3) (3,369)
+(1)
+(2,813)
+(3,407)
+Finance costs
+(302)
+1,801
+1,028
+1
+125
+147
+(2,166)
+Wang Yilin (2)
+7.1
+Lv Bo(3)
+Tax credit from the government
+Effect of changes in tax rates
+Effect of different tax rates for overseas subsidiaries
+PRC statutory enterprise income tax rate
+%
+%
+2014
+2015
+25.0
+A reconciliation of the PRC statutory corporate income tax rate to the effective income tax rate of the Group is as follows:
+(3,116)
+Income tax (credit)/expense for the year
+(4,022)
+(8,378)
+(12,585)
+14,083
+3,501
+16,609
+22,314
+25.0
+CNOOC LIMITED Annual Report 2015
+98
+As at 31 December 2015, the Group's recognised tax losses amounted to RMB49,327 million (2014: RMB36,116
+million). Unrecognised tax losses, where recovery is not currently expected, amounted to RMB7,998 million (2014:
+RMB9,368 million). This includes RMB1,343 million(2014: RMB1,249 million) of unrecognised tax loss arising from
+Uganda which has no fixed expiry date. The remainder expires between 5 to 20 years.
+As at 31 December 2015, the Group's unrecognised deferred tax assets related to unused tax credits amounted to
+RMB5,790 million (2014: RMB5,149 million). This includes RMB4,664 million (2014: RMB4,404million) of unrecognised
+deferred tax assets related to unused tax credits from Nigeria which has no fixed expiry date. The remainder expires
+between 2024 and 2034.
+Other taxes
+The Company's PRC subsidiaries pay the following other taxes and dues:
+i.
+ii.
+Production taxes at the rate of 5% on independent production and production under production sharing contracts;
+Resource taxes (reduced tax rates may apply to specific products and fields) on the oil and gas sales revenue
+(excluding production taxes) derived by oil and gas fields under production sharing contracts signed after 1
+November 2011 and independent offshore oil and gas fields starting from 1 November 2011, which replaced the
+royalties for oil and gas fields, except for those under production sharing contracts signed before 1 November
+2011 which will be subject to related resource taxes requirement after the expiration of such production sharing
+contracts. The resource tax rate has been changed from 5% to 6% since 1 December 2014;
+iii.
+Export tariffs at the rate of 5% on the export value of petroleum oil;
+iv.
+Business tax at rates of 3% to 5% or value-added tax at the rate of 3% to 17% on other income;
+V.
+vi.
+vii.
+City construction tax at the rate of 1% or 7% on the actual paid production taxes, business tax and value-added
+tax;
+Educational surcharge at the rate of 3% on the actual paid production taxes, business tax and value-added tax;
+and
+Local educational surcharge at the rate of 2% on the actual paid production taxes, business tax and value-added
+tax.
+In addition, other taxes paid and payable by the Company's non-PRC subsidiaries include royalty as well as taxes levied
+on petroleum-related income, budgeted operating and capital expenditure.
+9,990
+2014
+2015
+Temporary differences in the current year
+Effect of changes in tax rates
+1
+1
+1
+5
+-
+| | | 3112
+-
+RMB9,000,001 to RMB9,500,000
+RMB8,500,001 to RMB9,000,000
+RMB7,500,001 to RMB8,000,000
+RMB7,000,001 to RMB7,500,000
+RMB6,000,001 to RMB6,500,000
+RMB5,500,001 to RMB6,000,000
+Nil to RMB5,500,000
+2014
+2015
+The remuneration of the five (2014: five) highest paid employees, who are not the directors, falls within the following bands:
+Number of employees
+Fees and salaries, allowances, and benefits in kind represent the gross amount (before applicable individual salary tax) paid/payable to individual
+employees.
+(1)
+1
+Income tax (continued)
+01
+CNOOC LIMITED Annual Report 2015
+Deferred tax
+on the estimated taxable profits for the year
+on the estimated taxable profits for the year
+Provision for overseas enterprise income tax
+Provision for PRC enterprise income tax
+Current tax
+An analysis of the tax (credit)/expense in the Group's consolidated statement of profit or loss and other comprehensive
+income is as follows:
+As of 31 December 2015, deferred tax liabilities related to undistributed earnings of the Company's overseas subsidiaries
+have not been provided since the timing of the reversal of the taxable temporary differences can be controlled by the
+Company and it is probable that the temporary differences would not reverse in the foreseeable future.
+Subsidiaries of the Group domiciled outside the PRC are subject to income tax at rates ranging from 10% to 56% (2014:
+10% to 62%). On 26 March 2015, the U.K. government decreased the combined income tax rate on North Sea oil and
+gas activities from 62% to 50% with effect from 1 January 2015.
+The Company's subsidiary in Mainland China, CNOOC China Limited, is a wholly-owned foreign enterprise. It is subject to
+corporate income tax at the rate of 25% under the prevailing tax rules and regulations. CNOOC Deepwater Development
+Limited, a wholly-owned subsidiary of CNOOC China Limited, is subject to corporate income tax at the rate of 15% for
+the three years ending 31 December 2017, after being assessed as a high new technology enterprise.
+The Company is regarded as a Chinese Resident Enterprise (as defined in the "Enterprise Income Tax Law of the People's
+Republic of China") by the State Administration of Taxation of the PRC. As a result, the Company is subject to the PRC
+corporate income tax at the rate of 25% starting from 1 January 2008. The corporate income tax which is subjected in
+Hong Kong is qualified as a foreign tax credit to offset the PRC corporate income tax starting from 1 January 2008.
+The Company and its subsidiaries are subject, on an entity basis, to income taxes on profits arising in or derived from the
+tax jurisdictions in which the entities of the Group are domiciled and operate. The Company is subject to profits tax at a
+rate of 16.5 % (2014: 16.5 %) on profits arising in or derived from Hong Kong.
+Income tax
+(i)
+TAX
+11.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+95
+5
+35
+(ii)
+11.
+2014
+At 1 January
+14,312
+Credit to the profit or loss
+(12,585)
+22,633
+(8,378)
+Changes in tax rates
+(4,022)
+2015
+Charge to equity
+(92)
+Exchange differences
+206
+149
+At 31 December
+(1,948)
+14,312
+Principal components of deferred tax balances are as follows:
+141
+Income tax (continued)
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(i)
+Yang Hua(2)
+(23.5)
+(11.5)
+(2.2)
+Tax reported in equity-accounted entities
+Tax losses previously not recognised
+Others
+Group's effective income tax rate
+(0.4)
+(0.1)
+(1.9)
+(3.3)
+(0.1)
+0.5
+(18.2)
+27.0
+96
+CNOOC LIMITED Annual Report 2015
+11.
+TAX (continued)
+2015
+2014
+Deferred tax assets
+Property, plant and equipment
+(26,596)
+(36,769)
+1,948
+(14,312)
+Net deferred tax assets/(liabilities)
+Of which
+- deferred tax assets
+- deferred tax liabilities
+13,575
+(11,627)
+5,877
+(20,189)
+As at 31 December 2015, the Group had approximately RMB57,325 million (2014: RMB45,484 million) of carry-
+forward tax losses, predominantly in North America, that would be available to offset against future taxable profits of
+the subsidiaries in which the tax losses arose. Most of the US and Canadian tax losses will expire in 9 to 20 years. The
+Uganda tax losses have no fixed expiry date.
+Deferred tax assets in respect of tax losses are recognised only to the extent of the anticipated future taxable profits
+arising from the reversal of existing taxable temporary differences.
+CNOOC LIMITED Annual Report 2015
+97
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+TAX (continued)
+(397)
+(i)
+(52)
+(116)
+476
+Provision for dismantlement
+9,891
+Losses available for offsetting against future taxable profit
+15,505
+8,302
+11,583
+Fair value of long term borrowings
+1,926
+1,750
+Others
+746
+822
+28,544
+22,457
+Deferred tax liabilities
+Property, plant and equipment
+(26,318)
+(36,256)
+Unrecognised gain for available-for-sale financial assets
+Fair value changes on other financial assets
+Others
+(226)
+40
+The movements of deferred tax liabilities net of deferred tax assets are as follows:
+40
+00000
+1,654
+- 148
+823
+70
+831
+78
+1,506
+Non-executive directors:
+Subtotal
+Wu Guangqi
+753
+Li Fanrong
+Executive directors:
+2014
+4,838
+234
+940
+753
+Wang Yilin (2)
+840
+Yang Hua(2)
+125
+Wang Tao (6)
+887
+Tse Hau Yin, Aloysius
+753
+Lawrence J. Lau
+887
+Chiu Sung Hong
+directors:
+Independent non-executive
+3,789
+Subtotal
+753
+Wang Jiaxiang (3)(5)
+690
+Zhang Jianwei(3) (4)
+753
+Lv Bo(3)
+753
+340
+3,324
+Total
+3,324
+470
+757
+117
+470
+1700
+RMB'000
+RMB'000
+contributions
+Pension
+scheme
+Total
+Performance
+related
+bonuses (1)
+RMB'000
+||||
+and benefits
+in kind (1)
+RMB'000
+Fees (1)
+RMB'000
+Salaries,
+allowances
+Independent non-executive
+Subtotal
+35
+Wang Jiaxiang (3)(5)
+117
+Kevin G. Lynch (6)
+757
+940
+3,324
+Subtotal
+763
+899
+763
+899
+||||
+763
+Kevin G. Lynch (6)
+899
+Tse Hau Yin, Aloysius
+763
+Lawrence J. Lau
+899
+Chiu Sung Hong
+directors:
+||||
+1,514
+234
+340
+628
+paid/payable
+during
+the year
+|||||
+Nil to RMB2,000,000
+2014
+Number of employees
+2015
+The bands of the remuneration of other key management personnel (excluding Directors) and the related number of
+members of other key management personnel (excluding Directors) are as follows:
+9
+9
+9
+9
+10
+∞ -
+1
+8
+8-
+Share options*
+Amount paid/payable during the year
+Pension scheme contributions
+Short term employee benefits
+2014
+1
+10
+10
+10
+1
+|||||
+1060-
+17
+18
+22
+24
+Amount paid/payable during the year
+Performance-related bonuses
+Basic salaries, allowances, and benefits in kind (1)
+Fees (1)
+2014
+2015
+During the year, none (2014: none) of the Directors, details of whose remuneration are disclosed in note 9(i) above, received
+an amount which falls within the category of the five highest paid employees. Details of the remuneration of the five (2014: five)
+highest paid employees, who are not the Directors, for the year are as follows:
+10. FIVE HIGHEST PAID EMPLOYEES
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2015
+94
+This item represents the fair value of share options measured according to the Group's accounting policy as set out in note 3. No other key
+management personnel exercised any share option in 2015 or 2014.
+2015
+Other key management personnel's (excluding Directors') remuneration
+Pension scheme contributions
+Save as disclosed above, there was no arrangement under which a director waived or agreed to waive any remuneration
+during the year. In 2015, the executive directors' remuneration shown above were for their services in connection with
+the management of the affairs of the Company. The other directors' remuneration shown above were for their services as
+directors of the Company.
+8,723
+- 148
+3,280
+628
+125
+887
+753
+887
+8,575
+Total
+3,280
+Subtotal
+3,789
+753
+690
+840
+753
+(ii)
+753
+CNOOC LIMITED Annual Report 2015
+93
+---
+On 17 November 2014, Mr. Zhang Jianwei resigned as a non-executive director of the Company.
+(6)
+Notes to Consolidated Financial Statements
+On 23 September 2015, Mr. Wang Jiaxiang retired as a non-executive director of the Company.
+(5)
+(4)
+On 1 January 2014, each of Mr. Lv Bo, Mr. Zhang Jianwei and Mr. Wang Jiaxiang was appointed as a non-executive director of the
+Company.
+On 19 May 2015, Mr. Yang Hua was appointed as Chairman of the Board and Chairman of the Nomination Committee of the Company
+and has no longer served as Vice-chairman of the Board. Mr. Wang Yilin resigned as Chairman of the Board, Chairman of the Nomination
+Committee and non-executive director of the Company.
+Fees, salaries, allowances, and benefits in kind represent the gross amount (before applicable individual salary tax) paid/payable to individual
+directors. All the executive directors have voluntarily waived their salaries, allowances, benefits in kind and performance related bonuses in
+2014.
+(3)
+On 1 March 2014, Mr. Kevin G. Lynch was appointed as an independent non-executive director of the Company and Mr. Wang Tao retired
+as an independent non-executive director of the Company.
+The Company has adopted the share option schemes for the grant of options to the Company's directors. The fair value
+of share options for the directors measured according to the Group's accounting policy as set out in note 3. No Directors
+exercised any share option in 2015 or 2014. No new share option was granted to Directors in respect of their services to
+the Group under the applicable share option schemes of the Company in 2015 or 2014. Further details of share option
+scheme and valuation techniques are set out in note 28.
+(1)
+Notes:
+31 December 2015
+Directors' remuneration (continued)
+(i)
+KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+9.
+(2)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+At 1 January 2014
+Accumulated amortisation:
+20,980
+13,805
+2,861
+1,527
+1,121
+1,191
+At 31 December 2015
+796
+67
+90
+(473)
+99
+69
+1,596
+(3,729)
+(508)
+(439)
+(1,382)
+(809)
+Exchange differences
+(996)
+(542)
+At 31 December 2014
+(1)
+(544)
+(1)
+(1,398)
+(370)
+(452)
+(68)
+Amortisation charge for the year
+(2,330)
+(874)
+Exchange differences
+(729)
+1,122
+(125)
+6
+7
+4
+Exchange differences
+Disposal
+19,330
+832
+12,962
+47
+1,737
+832
+1,556
+1,957
+1,118
+At 1 January 2014
+At 1 January 2015
+Cost:
+Total
+Additions
+(137)
+64
+1,964
+(467)
+Disposal
+368
+368
+Additions
+20,220
+13,009
+At 31 December 2014
+2,563
+1,964
+1,122
+At 1 January 2015
+20,220
+13,009
+2,563
+1,562
+1,562
+(542)
+CNOOC LIMITED Annual Report 2015
+(809)
+As at 31 December 2015 and 2014, substantially all the trade and accrued payables were aged within six months. The trade
+and accrued payables are non-interest-bearing.
+108
+CNOOC LIMITED Annual Report 2015
+Nominal
+value of
+ordinary shares
+issued and paid-up/
+registered capital
+Place of establishment
+Name of entity
+Particulars of the principal subsidiaries at the end of the reporting period are as follows:
+24. TRADE AND ACCRUED PAYABLES
+INVESTMENTS IN SUBSIDIARIES
+Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed
+in a business combination. Goodwill acquired through business combinations is held at the E&P segment.
+16.
+INTANGIBLE ASSETS (continued)
+15.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts are amortised on a straight-line basis over the life of the contracts which is
+less than 20 years. Other identifiable intangible assets are amortised on a straight-line basis over a period ranging from 3 to 5
+years.
+101
+The weighted average effective interest rates of the Group's bank deposits were 2.61% per annum (2014: 2.96% per annum),
+for the year ended 31 December 2015.
+CASH AND CASH EQUIVALENTS AND TIME DEPOSITS WITH MATURITY OVER THREE MONTHS
+22.
+Goodwill
+TRADE RECEIVABLES
+2015
+2014
+8,147
+8,291
+The Group's cash and cash equivalents mainly consist of current deposits and time deposits with maturity within seven days.
+The bank balances are deposited with creditworthy banks with no recent history of default.
+1,285
+(169)
+(170)
+9,263
+10,608
+23.
+The credit terms of the Group are generally within 30 days after the delivery of oil and gas. Payment in advance or collateral may
+be required from customers, depending on credit rating. Trade receivables are non-interest-bearing.
+As at 31 December 2015 and 2014, substantially all the trade receivables were aged within 30 days. All customers have a good
+repayment history and no receivables are past due.
+2,487
+16,423
+13,805
+979
+(46)
+(35)
+Exchange differences
+660
+137
+56
+467
+(60)
+Disposal
+(596)
+(283)
+(383)
+(44)
+Amortisation charge for the year
+(3,729)
+(1,382)
+(1,306)
+(41)
+(182)
+At 31 December 2015
+431
+638
+570
+At 31 December 2015
+16,491
+13,009
+1,181
+753
+968
+580
+At 31 December 2014
+Net book value:
+(4,557)
+(1,882)
+(1,096)
+(958)
+(621)
+(996)
+Software
+and others
+(4,317)
+seismic data
+usage rights
+Disposals and write-offs
+102
+Singapore
+CNOOC NWS Private Limited
+Petroleum exploration, development
+100%
+US$7,780,770
+Exchange differences
+Isle of Man
+and production in Indonesia
+100%
+US$1
+Malaysia
+CNOOC SES Ltd.
+Petroleum exploration, development
+Investment holding
+CNOOC Muturi Limited
+Deepwater and low-grade oil and
+gas fields exploitation in the PRC and
+exploration, development, production
+and sales of oil and gas in the oil and
+gas fields of South China Sea
+At 31 December 2015
+Oil and gas
+properties
+737,807
+5,175
+732,632
+936
+6
+930
+(28)
+Accumulated depreciation, depletion and amortisation
+(4,289)
+671
+107,229
+633,288
+4,526
+628,762
+Total
+Vehicles
+and office
+equipment
+and others
+107,900
+732,632
+100%
+CNOOC Southeast Asia Limited Bermuda
+Investment holding
+100%
+US$20,000,000,002
+CNOOC International Limited British Virgin Islands
+CNOOC Finance (2003) Limited British Virgin Islands
+CNOOC Finance (2011) Limited British Virgin Islands
+Sales and marketing of petroleum
+products outside the PRC
+100%
+SG$3 million
+US$1,000
+Singapore
+Offshore petroleum exploration,
+development, production and sales,
+and shale gas exploration in the PRC
+100%
+RMB20 billion
+Principal activities
+Percentage
+of equity
+attributable to
+the Group
+Tianjin, PRC
+Less: Provision for inventory obsolescence
+China Offshore Oil (Singapore)
+International Pte Ltd
+US$12,000
+100%
+US$1,000
+Development Limited
+100%
+RMB8.5 billion
+Zhuhai, PRC
+CNOOC Deepwater
+Indirectly held subsidiaries (¹):
+Bond issuance
+Bond issuance
+100%
+CNOOC Finance (2013) Limited British Virgin Islands
+Bond issuance
+100%
+US$1,000
+CNOOC Finance (2012) Limited British Virgin Islands
+Bond issuance
+100%
+US$1,000
+Marketing
+transportation
+and storage
+contracts
+5,175
+52,811
+Net book value:
+(355,141)
+(1,317)
+(353,824)
+At 31 December 2015
+(6,480)
+(39)
+At 31 December 2014
+(6,441)
+575
+217
+358
+Disposals and write-offs
+(72,293)
+(2,358)
+(2,358)
+Impairment
+Exchange differences
+(360)
+459,182
+463,222
+NWS Project
+Drilling rig
+contracts and
+Gas
+processing
+rights under
+INTANGIBLE ASSETS
+15.
+During the current year, the Group wrote off some shale oil and gas assets in North America and unproved properties in
+Canada. Approximately RMB1,400 million was included in the depreciation, depletion and amortisation charge of the year,
+and approximately RMB461 million was included in the disposal and write-offs which was classified as exploration expenses,
+respectively. The reason is that the leasehold contracts of these blocks were overdue, and the Group withdraw from these
+blocks by considering lower economy of the project and falling short of expectation of the exploration result.
+Impairment and provision recognised during the year included the impairment loss of approximately RMB2,358 million (2014:
+RMB4,114 million) to reduce the carrying amount of certain oil and gas properties to the recoverable amount. This impairment
+loss was mainly related to fields in China, North America and South America and Africa which was primarily due to the decline
+in crude oil price in near-term. The recoverable amount was calculated based on the assets value in use and was determined
+at the oil field(s) level.
+4,040
+Included in the current year's additions was an amount of approximately RMB1,385 million (2014: approximately RMB1,842
+million) in respect of interest capitalised in property, plant and equipment (note 8). Included also in the depreciation charge
+for the year was an amount of approximately RMB 3,465 million (2014: approximately RMB3,873 million) in respect of a
+depreciation charge on dismantlement cost capitalised in oil and gas properties.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2015
+100
+454,141
+3,979
+450,162
+At 31 December 2015
+14. PROPERTY, PLANT AND EQUIPMENT (continued)
+737,807
+(71,933)
+(274,585)
+Depreciation charge for the year
+(761)
+(213,425)
+At 1 January 2014
+and impairment:
+809,282
+5,296
+(56,812)
+803,986
+156
+21,495
+(3,234)
+(282)
+(2,952)
+53,058
+247
+21,651
+Depreciation charge for the year
+(400)
+Impairment
+(1,135)
+(273,450)
+At 1 January 2015
+(274,585)
+(1,135)
+(273,450)
+At 31 December 2014
+(214,186)
+(57,212)
+(50)
+Exchange differences
+977
+26
+951
+Disposals and write-offs
+(4,114)
+(4,114)
+(50)
+Oil in tanks
+4,100
+INVENTORIES AND SUPPLIES
+100%
+100 common shares
+without a par value
+103,000 preferred shares
+without a par value
+Canada
+CNOOC Canada Energy Ltd.
+Providing services of petroleum
+exploration and development in the
+Republic of Iraq
+100%
+US$1
+Oil sands exploration, development
+Petroleum exploration, development
+and production in Africa
+NGN10 million
+British Virgin Islands
+CNOOC Iraq Limited
+Production Nigeria Limited
+Nigeria
+CNOOC Exploration &
+Principal activities
+100%
+of equity
+attributable to
+the Group
+and production in Canada
+Uganda
+NGN30 million
+Petroleum exploration, development
+and production in the UK
+100%
+GBP98,009,131
+England and Wales
+Nexen Petroleum U.K. Limited
+and production in Canada
+CNOOC Uganda Ltd
+shares without a par value
+100%
+13,671,421,700 common
+Canada
+Nexen Energy ULC
+Petroleum exploration, development
+and production in Africa
+100%
+1 million Uganda Shilling
+Petroleum exploration, development
+100%
+Percentage
+Indirectly held subsidiaries (¹) (continued) :
+Profit for the year
+Other comprehensive income
+Total comprehensive income
+104
+CNOOC LIMITED Annual Report 2015
+2015
+2014
+None of the Group's associates are considered to be individually material. The following table illustrates the summarised
+financial information of the Group's associates in the consolidated financial statements:
+256
+74
+92
+330
+324
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+18. INVESTMENT IN A JOINT VENTURE
+Particulars of the joint venture at the end of the reporting period are as follows:
+232
+value of
+ordinary shares
+issued and paid-up/
+registered capital
+4,324
+2014
+Place of establishment
+Name of entity
+Nominal
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+16. INVESTMENTS IN SUBSIDIARIES (continued)
+Share of net assets
+Offshore petroleum exploration,
+development and production in
+Australia
+100%
+SG$2
+CNOOC LIMITED Annual Report 2015
+Petroleum exploration, development and
+production in Canada
+To give details of other associate would, in the opinion of the Directors, result in particulars of excessive length.
+The Group's investments in associates represent:
+2015
+and production in Indonesia
+Name of entity
+Nexen Petroleum Nigeria
+Limited
+OOGC America LLC
+INVESTMENTS IN ASSOCIATES
+The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results for the
+year or formed a substantial portion of the total assets of the Group. To give details of other subsidiaries would, in the opinion
+of the Directors, result in particulars of excessive length.
+CNOOC Finance (2015) U.S.A. LLC was incorporated on 23 March 2015 and CNOOC Finance (2015) Australia Pty Ltd
+was incorporated on 18 March 2015, for issuing guaranteed notes (note 26).
+The registered capital of CNOOC PETROLEUM BRASIL LTDA increased from R$1,646,000,000 to R$2,186,000,000 on
+11 February 2015.
+All subsidiaries are indirectly held through CNOOC International Limited, except CNOOC Deepwater Development
+Limited which is indirectly held through CNOOC China Limited.
+(3)
+(2)
+Particulars of the principal associates at the end of the reporting period are as follows:
+17.
+16.
+INVESTMENTS IN SUBSIDIARIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+103
+CNOOC LIMITED Annual Report 2015
+(1)
+Bond Issuance
+Place of
+establishment
+Shanghai Petroleum
+Corporation Limited
+22,691,705 common
+shares without a par value
+Canada
+Northern Cross (Yukon) Limited
+Provision of deposit, transfer, settlement, loan,
+discounting and other financing services to
+CNOOC and its member entities
+Corporation Limited
+31.8%
+RMB4 billion
+Name of associates
+Beijing, PRC
+Production, processing and technology
+consultation of oil, gas and relevant products
+in the PRC
+30%
+Principal activities
+Percentage
+of equity
+attributable to
+the Group
+RMB900 million
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Shanghai, PRC
+CNOOC Finance
+Nigeria
+100%
+Australia
+Canada
+Nexen Oil Sands Partnership
+and production in the USA
+100%
+US$15,830
+USA
+Nexen Petroleum Offshore
+U.S.A. Inc.
+N/A
+and production in Canada
+Petroleum exploration, development
+and production in the USA
+Petroleum exploration, development
+Petroleum exploration, development
+and production in Nigeria
+100%
+N/A
+USA
+Petroleum exploration, development
+US$1
+100%
+Brazil
+CNOOC Finance (2015)
+Australia Pty Ltd (3)
+Bond Issuance
+100%
+N/A
+USA
+CNOOC Finance (2015)
+U.S.A. LLC (3)
+without a par value
+CNOOC PETROLEUM
+Bond issuance
+100 common shares
+Canada
+CNOOC Nexen Finance
+(2014) ULC
+Petroleum exploration, development
+and production in Brazil
+BRASIL LTDA (2)
+100%
+R$2,186,000,000
+100%
+Place of establishment
+Bridas Corporation
+British Virgin Islands
+14
+13
+14
+13
+Non-current:
+Publicly traded investments
+Equity investment in MEG, at fair value¹)
+2014
+1,077
+Other equity investment classified at FVTPL, at fair value
+65
+134
+1,142
+3,092
+Non-publicly traded investments
+Private equity fund in Kerogen Energy Fund, at fair value 2)
+Private equity fund in Kerogen Energy Fund, at cost 2)
+2,958
+2,629
+2015
+Non-publicly traded investments
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+18. INVESTMENT IN A JOINT VENTURE (continued)
+Reconciliation of the summarised financial information of the joint venture to the carrying amount of the Group's investment in
+the joint venture is disclosed below:
+Share of net assets of a joint venture, excluding goodwill
+Goodwill on acquisition less cumulative impairment
+Carrying amount of investment in a joint venture
+2015
+Private equity funds, at fair value
+2014
+19,418
+1,732
+24,089
+21,150
+Dividend of US$5 million (equivalent to RMB32 million) was received from the joint venture in 2015 and no dividend was received
+from the joint venture in 2014.
+19. EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS/AVAILABLE-FOR-SALE FINANCIAL ASSETS
+(i) Equity investments/available-for-sale financial assets
+Current:
+22,252
+1,837
+Notes to Consolidated Financial Statements
+2,245
+5,337
+1)
+The corporate wealth management products will mature from 6 January 2016 to 14 December 2016 (2014: from
+8 January 2015 to 17 June 2015).
+2)
+The liquidity funds have no fixed maturity date and no coupon rate.
+The gains of the Group's other financial assets recognised in the profit or loss for the year was RMB2,398 million (realised
+gains on available-for-sale financial assets for 2014, recognised in profit or loss: RMB2,684 million).
+During the year, the fair value changes on the Group's equity investments recognised directly in other comprehensive
+expense amounted to RMB1,573 million (net loss on available-for-sale financial assets for 2014, recognised in other
+comprehensive expense: RMB2,301 million).
+None of the equity investments and other financial assets above is past due or impaired.
+Upon the application of IFRS/HKFRS 9 (2009) on 1 January 2015, the Group's other financial assets that were previously
+classified as available-for-sale financial assets have been classified as financial assets at FVTPL.
+CNOOC LIMITED Annual Report 2015
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+20.
+OTHER NON-CURRENT ASSETS
+Included in the other non-current assets were restricted deposits for future dismantlement. Pursuant to the Provisional
+Regulations on the Dismantlement of Offshore Oil and Gas Production Facilities of the People's Republic of China, the Group
+accrues dismantlement costs for all the oil and gas fields under production sharing contracts in the PRC, and makes monthly
+cash contributions to the specified dismantlement fund accounts supervised by the PRC government. The deposit cannot
+be withdrawn or utilised for any other purposes but the dismantlement of oil and gas production facilities in the future. As at
+31 December 2015, the balance of the specified dismantlement fund accounts was RMB6,570 million (31 December 2014:
+RMB3,981 million).
+21.
+107
+3,771
+54,017
+48,564
+5,453
+Upon the application of IFRS/HKFRS 9 (2009) on 1 January 2015, the Group's investments in certain equity securities that
+previously classified as available-for-sale investments under IAS/HKAS 39 are not held for trading, but held for medium or
+long-term strategic purpose. Therefore, those investments in equity securities are designated as at FVTOCI under IFRS/
+HKFRS 9 (2009) as the directors believe that this provides a more meaningful presentation than reflecting changes in fair
+value in profit or loss. Other equity investments are classified as FVTPL.
+1)
+2)
+MEG is principally engaged in the exploitation and production of oil sands. The investment in MEG is designated by
+the Group as at FVTOCI (as disclosed in note 2). As at 31 December 2015, the investment in MEG was stated at
+the quoted market price.
+Kerogen Energy Fund is principally engaged in the investment in the oil and gas industry. The equity investment
+in Kerogen Energy Fund is designated by the Group as at FVTOCI (as disclosed in note 2). The cost of this non-
+publicly traded equity investment represents an appropriate estimate of its fair value as at 1 January 2015 and 31
+December 2015, as insufficient more recent information is available to measure its fair value.
+106
+CNOOC LIMITED Annual Report 2015
+71,806
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(ii) Other financial assets/available-for-sale financial asset
+Current:
+Non-publicly traded investments, at fair value:
+Corporate wealth management products 1)
+Liquidity funds 2)
+2015
+2014
+64,002
+7,804
+19. EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS/AVAILABLE-FOR-SALE FINANCIAL ASSETS
+(continued)
+105
+CNOOC LIMITED Annual Report 2015
+1,548
+59,767
+52,835
+3,675
+3,463
+73,599
+65,381
+Current financial liabilities
+9,083
+(excluding trade and other payables)
+(1,290)
+Other current liabilities
+(3,906)
+(4,697)
+Total current liabilities
+(7,120)
+(5,987)
+(3,214)
+Non-current financial liabilities
+10,157
+5,615
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+US$102,325,582
+Percentage
+of equity
+attributable to
+the Group
+Summarised financial information of the joint venture is disclosed below:
+Principal activities
+50%
+Investment holding
+4,932
+Cash and cash equivalents
+Total current assets
+Non-current assets, excluding goodwill
+Goodwill
+Total assets
+2015
+2014
+4,542
+4,151
+Other current assets
+(4,719)
+(3,989)
+Other non-current liabilities
+288
+324
+Finance costs
+(799)
+(473)
+Profit before tax
+Income tax expense
+Interest income
+Profit after tax
+4,194
+2,762
+(900)
+(1,214)
+3,294
+1,548
+3,294
+Total comprehensive income
+(2,822)
+(3,535)
+Depreciation, depletion and amortisation
+(13,581)
+(13,105)
+Total non-current liabilities
+(18,300)
+(17,094)
+Total liabilities
+(25,420)
+(23,081)
+Net assets
+48,179
+42,300
+Net assets, excluding goodwill
+44,504
+38,837
+Revenue
+31,231
+32,265
+Materials and supplies
+60%
+Directly held subsidiaries:
+CNOOC LIMITED Annual Report 2015
+Number of shares
+Weighted average number of ordinary shares
+for the basic earnings per share calculation
+Effect of dilutive potential ordinary shares under
+the share option schemes
+44,647,455,984
+44,647,455,984
+87,318,520
+Weighted average number of ordinary shares
+for the purpose of diluted earnings per share
+44,684,819,053
+Earnings per share:
+Basic (RMB Yuan)
+Diluted (RMB Yuan)
+44,734,774,504
+60,199
+0.45
+0.45
+99
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+14. PROPERTY, PLANT AND EQUIPMENT
+Cost:
+At 1 January 2014
+Additions
+Disposals and write-offs
+Exchange differences
+At 31 December 2014
+CNOOC China Limited
+At 1 January 2015
+Additions
+1.35
+1.35
+20,246
+37,363,069
+Earnings
+12. DIVIDENDS
+Dividend per ordinary share:
+2015 interim dividend - HK$0.25(2014: interim
+dividend HK$0.25) per ordinary share
+2014 final dividend - HK$0.32 (2013: final dividend
+HK$0.32) per ordinary share
+Profit for the year attributable to ordinary equity holders for the basic
+and diluted earnings per share calculation
+ordinary share by the Board of Directors – not recognised as
+a liability as at the end of the year
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2015
+Final dividend proposed at HK$0.25 (2014: HK$0.32) per
+9,145
+2014
+2014
+2015
+EARNINGS PER SHARE
+13.
+Pursuant to the Enterprise Income Tax Law of the People's Republic of China and related laws and regulations, the Company
+is regarded as a Chinese Resident Enterprise, and thus is required to withhold corporate income tax at the rate of 10% when
+it distributes dividends to its non-resident enterprise (as defined in the "Enterprise Income Tax Law of the People's Republic of
+China") shareholders, with effect from the distribution of the 2008 final dividend. In respect of all shareholders whose names
+appear on the Company's register of members and who are not individuals (including HKSCC Nominees Limited, corporate
+nominees or trustees such as securities companies and banks, and other entities or organisations, which are all considered as
+non-resident enterprise shareholders), the Company will distribute the dividend after deducting corporate income tax of 10%.
+9,397
+11,370
+11,274
+8,846
+11,325
+Weighted average
+exercise price
+Weighted average
+Number of
+2014
+share options
+311,184,000
+Number of
+share options
+exercise price
+HK$
+10.17
+2015
+383,178,934
+HK$
+Exercisable at the end of the year
+1,035
+Exercised during the year
+9.75
+(1)
+the nominal value of a share of the Company on the date of grant;
+(2)
+the average closing price of the shares as stated in the HKSE's daily quotation sheets for the five trading days immediately
+preceding the date of grant; and
+the closing price of the shares as stated in the HKSE's daily quotation sheet on the date of grant.
+Outstanding at end of year
+The period within which the options must be exercised, as well as any minimum holding period or performance targets which
+apply to the options, will be specified by the Board of the Company at the time of grant. The exercise periods for options granted
+under the 2005 Share Option Scheme shall end not later than 10 years from the date of grant. No options may be granted under
+the 2005 Share Option Scheme after the date of the 10th anniversary of the adoption of the 2005 Share Option Scheme.
+The fair value of equity-settled share options granted was estimated as at the date of grant if any, using the Black-Scholes
+option pricing model, taking into account the terms and conditions upon which the options were granted.
+Details of the share options outstanding are as follows:
+Outstanding at the beginning of the year
+Granted during the year
+Forfeited during the year
+Expired during the year
+No new share option was granted during the year (2014: nil) and the Group recognised an equity-settled share option expense
+of nil (2014: nil) during the year.
+(20,522,000)
+RELATED PARTY TRANSACTIONS
+(51,445,000)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2015 115
+Comprehensive framework agreement with CNOOC in respect of a range of products and services
+As the Group is controlled by CNOOC, transactions with CNOOC, its subsidiaries and associates (the "CNOOC Group")
+are disclosed as related party transactions. The connected transactions or continuing connected transactions are defined
+in Chapter 14A of Listing Rules in respect of items listed below also constitute related party transactions. The Company has
+complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules for the continuing connected
+transactions listed below. The Company entered into a comprehensive framework agreement with CNOOC on 6 November
+2013 for the provision (1) by the Group to the CNOOC Group and (2) by the CNOOC Group to the Group, of a range of
+products and services which may be required and requested from time to time by either party and/or its associates in respect
+of the continuing connected transactions. The term of the comprehensive framework agreement is for a period of three years
+from 1 January 2014. The comprehensive framework agreement is substantially on the same terms as the terms contained
+in the comprehensive framework agreement entered into by the Company on 1 November 2010. The continuing connected
+transactions under such comprehensive framework agreement and the relevant annual caps for the three years from 1 January
+2014 were approved by the independent shareholders of the Company on 27 November 2013. The approved continuing
+connected transactions are as follows:
+As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a state-owned enterprise subject to the control of the
+State Council of the PRC. The State Council of the PRC directly and indirectly controls a significant number of state-owned
+entities and organisations.
+According to the 2005 Share Option Scheme, the consideration payable by a grantee for the grant of options will be HK$1.00.
+The exercise price for such options will be determined by the Board at its discretion at the date of grant, except that such price
+shall be at least the higher of:
+30.
+In accordance with the "Temporary Regulation for Safety Expense Financial Management of Higher Risk Industry" and the
+implementation guidance issued by the MOF of the PRC, the Group is required to accrue a safety fund for its oil and gas
+exploration and production activities within the PRC by appropriating a portion of its net profit to other reserves based on its
+annual production from offshore China. Such reserve is reduced for expenses incurred to improve the safety conditions of
+oil and gas production. When the safety fund is fully utilised, additional expenses incurred for safety production purposes are
+charged directly to the profit or loss for the year. As of 31 December 2015, the Group's safety fund reserve under the PRC
+regulations amounted to nil (2014: nil).
+As at 31 December 2015, the general reserve fund amounted to RMB10,000 million (2014: RMB10,000 million), representing
+50% (2014: 50%) of the total registered capital of CNOOC China Limited.
+Appropriation to the staff and workers' bonus and welfare fund, which is determined at the discretion of the board of directors
+of CNOOC China Limited, is expensed as incurred under IFRSS/HKFRSS. The staff and workers' bonus and welfare fund can
+only be used for special bonuses or collective welfare of employees.
+CNOOC China Limited is required to allocate at least 10% of its net profit as reported in accordance with the generally accepted
+accounting principles in the PRC ("PRC GAAP") to the general reserve fund until the balance of such fund reaches 50% of
+its registered capital. The general reserve fund can only be used, upon approval by the relevant authority, to offset against
+accumulated losses or to increase capital.
+According to the laws and regulations of the PRC and the articles of association of CNOOC China Limited, CNOOC China
+Limited is required to provide for certain statutory funds, namely, the general reserve fund and the staff and workers' bonus
+and welfare fund, which are appropriated from net profit (after making up for losses from previous years), but before dividend
+distribution.
+29. RESERVES
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+114 CNOOC LIMITED Annual Report 2015
+At the date of approval of these consolidated financial statements, the share options outstanding under these share option
+schemes represented approximately 0.59% of the Company's shares in issue as at that date (2014: 0.70%). The weighted
+average remaining contractual life of share options outstanding at the end of the year was 2.74 years (2014: 3.50 years). The
+exercise in full of the outstanding share options would, under the present capital structure of the Company, result in the issue
+of 262,592,000 additional ordinary shares of the Company and additional share capital of RMB 2,323,404,158.
+9.85
+(28,070,000)
+5.62
+(20,549,934)
+3.15
+262,592,000
+11.43
+10.56
+10.17
+262,592,000
+10.56
+311,184,000
+10.17
+No share options had been cancelled or modified during the years ended 31 December 2015 or 2014.
+311,184,000
+On 31 December 2005, the Company adopted a new share option scheme (the "2005 Share Option Scheme"). Under the
+2005 Share Option Scheme, the Board has the authority to grant options to subscribe for shares to the directors, officers and
+employees of the Company and its subsidiaries, and any other persons who in the sole discretion of the Board, have contributed
+or will contribute to the Group. Unless approved by the shareholders, the total number of shares issued and to be issued upon
+exercise of the options granted to each individual (including exercised and unexercised options) under the 2005 Share Option
+Scheme or any other share option scheme adopted by the Company, in any 12-month period, must not exceed 1% of the
+shares in issue of the Company.
+Pre-Global Offering Share Option Scheme (expired in 2011);
+Share option schemes (continued)
+43,081
+42,132
+949
+of RMB million
+Issued share
+capital equivalent
+44,647,455,984
+44,647,455,984
+44,647,455,984
+Number of shares
+As at 31 December 2015
+As at 31 December 2014
+reserve upon abolition of par value*
+Transfer from share premium and capital redemption
+Ordinary shares of HK$0.02 each as at 1 January 2014
+Issued and fully paid:
+SHARE CAPITAL
+28.
+2,435
+2,387
+151
+(500)
+50,063
+52,889
+43,081
+(560)
+49,503
+52,433
+(1)
+The amounts are included in the additions of oil and gas properties in note 14.
+(2)
+The discount rates used for calculating the provision for dismantlement are within the range of 4% to 5% (2014: 4% to 5%).
+(456)
+2005 Share Option Scheme
+The Hong Kong Companies Ordinance (Cap. 622), becoming effective on 3 March 2014, abolishes the concept of nominal value and requirements
+for authorised share capital.
+CNOOC LIMITED Annual Report 2015
+SHARE CAPITAL (continued)
+1,035
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+113
+CNOOC LIMITED Annual Report 2015
+On 31 December 2005, the Company terminated the 2002 Share Option Scheme. Upon termination of the 2002 Share Option
+Scheme, no further options may be granted under the 2002 Share Option Scheme, but in all other respects the provisions of the
+2002 Share Option Scheme shall remain in force. The outstanding options under the 2002 Share Option Scheme shall continue
+to be subject to the provisions of the 2002 Share Option Scheme. The exercise periods for all options under the 2002 Share
+Option Scheme have lapsed.
+The exercise periods for the options granted under the 2002 Share Option Scheme shall end not later than 10 years from the
+date of grant.
+the closing price of the shares as stated in the quotation sheet of the HKSE on the date of grant.
+the average closing price of the shares as stated in the quotation sheets of the Stock Exchange of Hong Kong Limited
+(the "HKSE") for the five trading days immediately preceding the date of grant; and
+(3)
+the nominal value of a share of the Company on the date of grant;
+(1)
+According to the 2002 Share Option Scheme, the consideration payable by a grantee for the grant of options will be HK$1.00.
+The exercise price for such options will be determined by the Board at its discretion at the date of grant, except that such price
+shall be not less than the higher of:
+Under the 2002 Share Option Scheme, the Board may, at its discretion, offer to grant to the directors and employees of the
+Company or any of its subsidiaries options to subscribe for shares of the Company. The maximum number of shares in respect
+of which options may be granted under the 2002 Share Option Scheme to any individual in any 12-month period up to the date
+of the latest grant shall not exceed 1% of the total issued share capital of the Company from time to time.
+In June 2002, the Company adopted a share option scheme (the "2002 Share Option Scheme") for the purpose of recognising
+the contribution that certain individuals had made to the Company and for attracting and retaining the best available personnel
+to the Company.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+28. SHARE CAPITAL (continued)
+Share option schemes
+The Company has adopted the share option schemes for the grant of options to the Company's directors, senior management
+and other eligible grantees.
+(1)
+30.
+112
+(2)
+(3)
+2002 Share Option Scheme (as defined below); and
+(4)
+2005 Share Option Scheme (as defined below).
+Under these share option schemes, the Remuneration Committee of the Board will from time to time propose for the Board's
+approval the grant of share options and the number of share options to be granted to the relevant grantees. The maximum
+aggregate number of shares (including those that could be subscribed for under the Pre-Global Offering Share Option Scheme,
+the 2001 Share Option Scheme, the 2002 Share Option Scheme and the 2005 Share Option Scheme) which may be issued
+upon exercise of all options granted shall not exceed 10% of the total issued share capital of the Company as at 31 December
+2005, being the date on which the shareholders of the Company approved the 2005 Share Option Scheme, excluding shares
+under options which have lapsed.
+2002 Share Option Scheme
+2001 Share Option Scheme (expired in 2011);
+RELATED PARTY TRANSACTIONS (continued)
+The following is a summary of significant related party transactions entered into in the ordinary course of business between the
+Group and its related parties during the year and the balances arising from related party transactions at the end of the year:
+Comprehensive framework agreement with CNOOC in respect of a range of products and services (continued)
+Provision of exploration, oil and gas development, oil and gas production as well as marketing, management and ancillary
+services by the CNOOC Group to the Group:
+Borrowings from CNOOC (note g)
+4,244
+4,504
+21,404
+21,164
+19,313
+- included in trade and accrued payables
+Amount due to other related parties
+240
+144
+- included in other payables and accrued liabilities
+Amount due to CNOOC
+2014
+2015
+Amounts due from other related parties
+Balances with the CNOOC Group
+RELATED PARTY TRANSACTIONS (continued)
+30.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+117
+CNOOC LIMITED Annual Report 2015
+19,462
+21,707
+2014
+2015
+474
+629
+2014
+(v)
+- included in trade receivables
+8,656
+10,098
+CNOOC LIMITED Annual Report 2015
+118
+Interest rates for the above time deposits and specified dismantlement fund accounts are at prevailing market rates.
+14,262
+11,986
+3,981
+6,570
+Specified dismantlement fund accounts (note 20)
+4,214
+6,067
+5,416
+Time deposits with maturity over three months
+Cash and cash equivalents
+2014
+2015
+The Group enters into extensive transactions covering sales of crude oil and natural gas, purchase of property, plant and
+equipment and other assets, receiving of services, and making deposits and borrowings with state-owned enterprises,
+other than the CNOOC Group, in the normal course of business on terms comparable to those with other non-state-
+owned enterprises. The purchases of property, plant and equipment and other assets, and receipt of services from these
+state-owned enterprises are individually not significant. The individually significant sales transactions with these state-
+owned enterprises are disclosed in note 35. In addition, the Group had certain of its cash in bank and time deposits with
+certain state-owned banks in the PRC as at 31 December 2015, as summarised below:
+(vii) Transactions and balances with other state-owned enterprises
+- included in other current assets
+517
+459
+9,173
+10,557
+(vi) Balance with a joint venture
+2015
+Amount due from a joint venture
+2015
+2014
+126
+91
+126
+91
+- included in other current assets
+Deposits in CNOOC Finance
+Deposits balances made by the Group
+(b)
+2015
+Provision of exploration, oil and gas development, oil and gas production as well as marketing,
+management and ancillary services by the CNOOC Group to the Group
+(i)
+30. RELATED PARTY TRANSACTIONS (continued)
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+116 CNOOC LIMITED Annual Report 2015
+(1,905)
+The continuing connected transactions referred to in paragraphs (3)(b) above provided by the Group to the CNOOC Group, on
+the basis of the above pricing principle, are at state-prescribed prices or local, national or international market prices and on
+normal commercial terms, which are subject to adjustment in accordance with movements in international oil prices as well as
+other factors such as the term of the sales agreement and the length of the relevant pipeline.
+The continuing connected transactions referred to in paragraph (1)(e) above provided by the CNOOC Group to the Group, on
+the basis of the above pricing principle, are at market prices on normal commercial terms which are calculated on a daily basis.
+The continuing connected transactions referred to in paragraphs (3)(a) above provided by the Group to the CNOOC Group, on
+the basis of the above pricing principle, are at state-prescribed prices or local, national or international market prices and on
+normal commercial terms.
+(!!!)
+(ii) where there is no state-prescribed price, market prices, including the local, national or international market prices; or
+when neither (i) nor (ii) is applicable, the costs of the CNOOC Group or the Group for providing the relevant service
+(including the cost of sourcing or purchasing from third parties) plus a margin of not more than 10%, before any applicable
+taxes.
+state-prescribed prices; or
+(i)
+For the continuing connected transactions referred to in paragraphs (1)(a) to (1)(d) above provided by CNOOC Group to the
+Group and paragraph (2) above provided by the Group to CNOOC Group, on the basis of the above pricing principle, such
+services must be charged in accordance with the following pricing mechanism and in the following sequential order:
+The continuing connected transactions described above are based on negotiations with the CNOOC Group on normal
+commercial terms, or on terms no less favourable than those available to the Group from independent third parties, under
+prevailing local market conditions, including considerations such as volume of sales, length of contracts, package of services,
+overall customer relationship and other market factors.
+Pricing principles
+b)
+a)
+Provision of exploration and support services
+b)
+Provision of oil and gas development and support services
+C)
+Provision of oil and gas production and support services
+2014
+d)
+e)
+FPSO vessel leases
+Provision of management, technical, facilities and ancillary services, including the supply of materials by the Group to the
+CNOOC Group; and
+Sales of petroleum and natural gas products by the Group to the CNOOC Group:
+a)
+Sales of petroleum and natural gas products (other than long-term sales of natural gas and liquefied natural gas)
+Long-term sales of natural gas and liquefied natural gas
+Provision of marketing, management and ancillary services
+(1)
+Provision of exploration and support services
+11,050
+Interest income from deposits in CNOOC Finance
+(a) Interest income received by the Group
+(iv) Transactions and Balances with CNOOC Finance Corporation Limited ("CNOOC Finance") (note f)
+165,271
+115,958
+157,290
+7,981
+10,557
+Long term sales of natural gas and liquefied natural gas (note e)
+105,401
+Sales of petroleum and natural gas products (other than long term sales
+of natural gas and liquefied natural gas) (note d)
+2014
+2015
+(iii) Sales of petroleum and natural gas products by the Group to the CNOOC Group
+The Group did not enter into any transactions in the above category for the years ended 31 December 2015 or 2014.
+Provision of management, technical, facilities and ancillary services, including the supply of materials
+by the Group to the CNOOC Group
+(ii)
+63,209
+- Inclusive of amounts capitalised under property, plant and equipment
+Provision of oil and gas development and support services
+4,158
+6,501
+22,733
+41,299
+Provision of oil and gas production and support services (note a)
+7,457
+8,384
+Provision of marketing, management and ancillary services (note b)
+FPSO vessel leases (note c)
+954
+915
+1,770
+1,257
+41,298
+8,688
+6
+28.
+(274)
+131,060
+1,035
+104,348
+105,383
+CNOOC LIMITED Annual Report 2015
+109
+Notes to Consolidated Financial Statements
+130,149
+31 December 2015
+26.
+LOANS AND BORROWINGS (continued)
+The detail of notes are as follows:
+Outstanding Principal Amount
+31 December
+31 December
+Issued by
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+911
+104,348
+104,348
+837
+1,805
+1,813
+2014
+2015
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Current
+26. LOANS AND BORROWINGS
+Other payables
+Provision for dismantlement (note 27)
+Special oil gain levy payable
+Royalties payable
+Advances from customers
+Accrued expenses
+(911)
+Accrued payroll and welfare payable
+25. OTHER PAYABLES AND ACCRUED LIABILITIES
+Maturity
+Coupon Rate
+2015
+USD million
+1,500
+CNOOC Finance (2012) Limited
+Due in 2042
+5.000%
+500
+500
+CNOOC Finance (2013) Limited
+Due in 2016
+1.125%
+750
+750
+CNOOC Finance (2013) Limited
+Due in 2018
+1.750%
+750
+750
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+1,500
+614
+3.875%
+CNOOC Finance (2012) Limited
+2014
+USD million
+CNOOC Finance (2003) Limited
+Due in 2033
+5.500%
+300
+300
+CNOOC Finance (2011) Limited
+Due in 2021
+4.25%
+1,500
+1,500
+CNOOC Finance (2011) Limited
+Due in 2041
+5.75%
+500
+500
+Due in 2022
+Due in 2023
+273
+1,188
+28,719
+930
+770
+160
+5,053
+4,866
+187
+4,866
+770
+4,866
+4,866
+160
+160
+187
+187
+within one year
+770
+33,585
+30,410
+770
+911
+130,149
+130,149
+911
+through to 2021
+annum with maturity
+LIBOR+0.23% to 0.38% per
+Total
+Notes
+Bank loan
+Total
+Notes
+Bank loan
+2014
+2015
+Effective interest rate and
+final maturity
+31,180
+70
+annum with maturity
+LIBOR+0.23% to 0.38% per
+Notes*
+For Tangguh LNG Project **
+Loans
+Total
+Notes
+Loans
+2014
+2015
+Effective interest rate and
+final maturity
+11,499
+13,534
+5,819
+8,630
+456
+560
+2,150
+424
+233
+67
+Notes
+164
+Total
+borrowings
+Non-current
+Notes*
+For Tangguh LNG Project **
+due within one year
+Loans and borrowings
+30,250
+30,250
+28,532
+28,532
+30,250
+30,250
+28,532
+28,532
+within one year****
+annum with maturity
+LIBOR+0.42% to 0.6% per
+General loans***
+Short-term loans and
+3.000%
+Provision for retirement benefits
+2,000
+911
+1,035
+Supplemental information with respect to the long term bank loans:
+Maximum
+amount
+outstanding
+For the year ended
+31 December
+Balance
+at year end
+(160)
+Weighted
+average
+interest rate
+at year end
+amount
+Weighted
+average
+outstanding
+interest rate
+during
+the year
+during the
+Average
+(187)
+1,195
+1,098
+After five years
+Amount due within one year shown under current liabilities
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2015
+2014
+187
+160
+201
+177
+211
+190
+211
+198
+211
+198
+77
+272
+during the
+year (1)
+year (2)
+2015
+New projects (1)
+Revision (1)
+2,000
+Deletions
+Unwinding of discount (2) (note 8)
+Exchange differences
+At 31 December
+Current portion of dismantlement included in other payables
+and accrued liabilities (note 25)
+At 31 December
+2015
+2014
+52,889
+5,874
+42,351
+5,180
+(11,018)
+6,287
+At 1 January
+After four years but within five years
+PROVISION FOR DISMANTLEMENT
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2014
+1,098
+1,195
+0.85%
+0.58%
+1,195
+2,255
+1,147
+0.72%
+1,725
+0.58%
+(1)
+The average amount outstanding is computed by averaging the outstanding principal balances as at 1 January and 31 December of each year.
+(2)
+The weighted average interest rate is computed by averaging the interest rates as at 1 January and 31 December of each year.
+There was no default of principal, interest or redemption terms of the loans and borrowings during the year.
+CNOOC LIMITED Annual Report 2015
+111
+Notes to Consolidated Financial Statements
+31 December 2015
+27.
+After three years but within four years
+Utilisation
+Within one year
+Matured in 2015
+5.2%
+126
+Nexen
+Due in 2017
+5.65%
+62
+62
+Nexen
+Due in 2019
+6.2%
+300
+300
+Nexen
+Due in 2028
+7.4%
+200
+Nexen
+200
+500
+4.875%
+After one year but within two years
+After two years but within three years
+Due in 2043
+4.250%
+500
+500
+CNOOC Nexen Finance (2014) ULC
+Due in 2017
+1.625%
+1,250
+1,250
+CNOOC Nexen Finance (2014) ULC
+Due in 2024
+4.250%
+2,250
+2,250
+CNOOC Nexen Finance (2014) ULC
+Due in 2044
+500
+Nexen
+19,457
+7.875%
+Due in 2020
+2.625%
+CNOOC Finance (2015) Australia Pty Ltd
+Due in 2045
+4.200%
+1,500
+300
+****
+All the notes issued mentioned above were fully and unconditionally guaranteed by the Company.
+In connection with the Tangguh LNG Project in Indonesia, the Company delivered a guarantee dated 29 October 2007, in favor of Mizuho Corporate
+Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks under a US$884 million commercial loan
+agreement. The Company guarantees the payment obligations of the trustee borrower under the subject loan agreement and is subject to a
+maximum cap of approximately US$164,888,000.
+A letter of credit agreement was signed between the Company and Talisman Energy Inc. ("Talisman") with execution of the agreement in respect of
+the sale of a 3.05691% interest of the Company in the Tangguh LNG Project to Talisman. Accordingly, Talisman has delivered valid and unexpired
+standby letters of credit to the Company (as the beneficiary) as a counter-guarantee to offset the exposure of the Company's guarantee for the
+aforesaid interest of 3.05691% in respect of the Tangguh LNG Project financing. The amount of the standby letters of credit was US$30 million.
+As at 31 December 2015, US$3,700 million bank loans (2014: US$3,750 million) were guaranteed by the Company.
+As at 31 December 2015, US$694 million shareholder loans (2014: US$694 million) of the Group were included in General loans. For details please
+refer to Note 30(v).
+CNOOC LIMITED Annual Report 2015
+26. LOANS AND BORROWINGS (continued)
+The maturities of the long term bank loans are as follows:
+Due in 2032
+Repayable:
+CNOOC Finance (2015) Australia Pty Ltd
+2,000
+110
+Due in 2025
+3.500%
+500
+Nexen
+500
+5.875%
+790
+790
+Nexen
+Due in 2037
+Due in 2035
+1,250
+1,250
+Nexen
+Due in 2039
+7.5%
+700
+700
+6.4%
+CNOOC Finance (2015) U.S.A. LLC
+China Petroleum & Chemical Corporation*
+Royal Dutch Shell plc
+PetroChina Company Limited*
+14,692
+25,055
+14,048
+16,724
+5,502
+Phillips 66 Co.
+4,554
+15,057
+6,917
+2014
+132
+A substantial portion of the Group's oil and gas sales to third-party customers is made to a small number of customers on credit.
+Details of the gross sales to these top five third party customers are as follows:
+ExxonMobil Corporation
+2015
+2014
+131
+115
+156
+2015
+541
+(296)
+(657)
+3
+131
+Items classified in Level 3 are generally economically hedged such that gains or losses on positions classified in Level 3 are often
+offset by gains or losses on positions classified in Level 1 or Level 2.
+CONCENTRATION OF CUSTOMERS
+6
+4,548
+127
+These transactions are with other state-owned enterprises.
+The Group's trade and accrued payables, other payables and accrued liabilities are all due for settlement within six
+months after the reporting date.
+The Group manages its liquidity risk by regularly monitoring its liquidity requirements and its compliance with debt
+covenants to ensure that it maintains sufficient cash and cash equivalents, readily realisable equity investments and other
+financial assets/available-for-sale financial assets, and adequate time deposits to meet its liquidity requirements in the
+short and long term. In addition, bank facilities have been put in place for contingency purposes.
+(v) Liquidity risk
+The interest rate risk is closely monitored by the Group's senior management. As at the end of 2015, the interest rates
+for 84.2% of the Group's debts were fixed. Apart from borrowing for Tangguh LNG Project, all of the Group's long term
+debts are fixed rate. The weighted average term of the Group's debt balance outstanding was approximately 9.02 years.
+The fixed interest rates can reduce the volatility of finance costs under uncertain environments and the Group's exposure
+to changes in interest rates is not expected to be material.
+(iv) Interest rate risk
+Senior management are closely monitoring the Group's net exposure to foreign currency risk. The depreciation of
+Renminbi against the US dollars may have the following impact on the Group. On one hand, since the benchmark oil and
+gas prices are usually in US dollars against Renminbi, the Group's oil and gas sales may increase due to the appreciation
+of the US dollars against Renminbi. On the other hand, the appreciation of the US dollars against Renminbi will also
+increase the Group's costs for imported equipment and materials, most of which are denominated in the US dollars.
+Management has assessed the Group's exposure to foreign currency risk by using a sensitivity analysis on the change
+in foreign exchange rate of the US dollars, to which the Group is mainly exposed to as at 31 December 2015 and 2014.
+Based on management's assessment, a 5% change in the foreign exchange rate of the US dollars at 31 December 2015
+would have impacted the profit for the year of the Group by 0.09% (2014: 0.06%) and the equity of the Group by 0.12%
+(2014: 0.50%). This analysis has been determined assuming that the change in foreign exchange rates had occurred at
+the end of the reporting period and had been applied to the foreign currency balances to which the Group has significant
+exposure with all other variables held constant. The analysis is performed on the same basis for 2014.
+Substantially all of the Group's oil and gas sales are denominated in Renminbi and United States dollars ("US dollars”).
+Starting from 21 July 2005, China reformed the exchange rate regime by moving into a managed floating exchange
+rate regime based on market supply and demand with reference to a basket of currencies. Renminbi would no longer
+be pegged to the US dollars. From 1 January 2015 to 31 December 2015 (the last working day in 2015), Renminbi
+has depreciated by approximately 5.77% against the US dollars. At 31 December 2015, approximately 89% (2014:
+79%) of the Group's cash and cash equivalents and time deposits with maturity over three months were denominated
+in Renminbi, and the remaining amounts were substantially denominated in US dollars and Hong Kong dollars. The
+Group also have exposures to currencies other than the US dollars, such as Canadian dollar and British Pounds as such
+exposures are considered insignificant.
+(iii) Currency risk
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+36.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+Fair value, end of year
+CNOOC LIMITED Annual Report 2015
+Since the Group makes reference to international oil prices to determine its realised oil price, fluctuations in international
+oil price would have a significant impact on the Group's sale revenue, profit, assets value and cashflow. In addition,
+certain of the Group's natural gas sales contracts contain price adjustment provisions. Any changes in international oil
+prices, inflation rate and domestic natural gas price policies may result in changes in natural gas prices, which will affect
+the Group's profitability. In North America, the majority of the Group's oil and gas production is sold under short-term
+contracts, exposing the Group to the risk of price movements. Other energy contracts the Group enters into also expose
+the Group to commodity price risk between the time the Group purchases and sells contracted volumes.
+126 CNOOC LIMITED Annual Report 2015
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
+The Group's principal financial instruments comprise bank loans, long term guaranteed notes, equity investments and other
+financial assets/available-for-sale financial assets, cash and short term deposits. The Group has various other financial assets
+and liabilities such as trade receivables, trade and accrued payables, which arise directly from its operations.
+The Group is exposed to credit risk, oil and gas price risk, currency risk, interest rate risk and liquidity risk.
+The Group's senior management oversees the management of these risks. The Group's senior management is supported by
+various departments that advise on financial risks and the appropriate financial risks governance framework for the Group.
+Those departments provide assurance to the Group's senior management that the Group's financial risk-taking activities are
+governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance
+with group policies and group risk appetite.
+14,429
+(i)
+The carrying amounts of the Group's cash and cash equivalents, time deposits, liquidity funds investments and corporate
+wealth management products, trade receivables and other receivables, and other current assets except for prepayments
+represent the Group's maximum exposure to credit risk in relation to its financial assets.
+The significant portion of the Group's trade receivables is related to the sale of oil and natural gas to third party customers.
+The Group performs ongoing credit evaluations of the customers' financial condition and collateral may be required
+from customers. The Group made an impairment allowance on doubtful receivables and actual losses have been within
+management's expectation.
+Concentrations of credit risk are managed by customer/counterparty and by geographical region. At 31 December
+2015, the Group has certain concentrations of credit risk as 7% (2014: 11%) and 10% (2014: 15%) of the Group's
+trade receivables were due from the Group's largest third-party customer and the five largest third-party customers,
+respectively.
+No other financial assets carry a significant exposure to credit risk.
+(ii)
+Oil and gas price risk
+Credit risk
+Exchange difference
+(23)
+Unrealised gains
+303
+Derivative financial assets - current
+5,453
+48,564
+Corporate wealth management products
+Liquidity funds
+13
+Private equity funds
+Available-for-sale financial assets - current
+Assets measured at fair value
+Level 3
+Level 2
+Level 1
+2014
+31 December
+5,453
+96
+Derivative financial liabilities - current
+| | |
+64,023
+8,946
+72,969
+1,142
+1,142
+14
+14
+Non-publicly traded investments - current
+Publicly traded investments - non current
+7
+7
+Derivative financial assets - current
+Equity investments
+7,804
+7,804
+Liabilities measured at fair value
+Settlements
+47
+54,333
+Realised gains
+Fair value, beginning of year
+Level 3 Reconciliation of derivative financial assets and liabilities, net
+A reconciliation of changes in the fair value of the derivatives classified as Level 3 for the year ended 31 December 2015 and
+2014 is provided below:
+No amounts have been transferred between the different levels of the fair value hierarchy for the year.
+For financial assets and liabilities arising from derivative contracts, inputs may be readily observable, market-corroborated
+or generally unobservable. The Group utilises valuation techniques that seek to maximise the use of observable inputs and
+minimise the use of unobservable inputs. To value longer term transactions and transactions in less active markets for which
+pricing information is not generally available, unobservable inputs may be used. In these instances, internally developed
+methodologies are used to determine fair value, which primarily includes extrapolation of observable future prices to similar
+locations, similar instruments or later time periods. Key inputs are forward price of the underlying commodity, which may be
+observable or unobservable, discount rate and foreign exchange rates. The derivatives are classified according to the above fair
+value hierarchy based on the amount of observable inputs used to value the instruments. For derivatives categorised within level
+3 of the fair value hierarchy, the significant unobservable inputs used in the fair value measurement includes the extrapolation of
+future price of commodity.
+Fair value hierarchy (continued)
+35.
+FINANCIAL INSTRUMENTS (continued)
+34.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+125
+160
+CNOOC LIMITED Annual Report 2015
+29
+(264)
+(316)
+Derivative financial liabilities - current
+Liabilities measured at fair value
+--
+3,092
+3,092
+3,092
+3,092
+Available-for-sale financial assets - non current
+Equity investment
+160
+48,624
+5,549
+(29)
+13
+48,564
+CNOOC LIMITED Annual Report 2015
+64,002
+Cash generated from operations
+(6,387)
+(9,851)
+Decrease in trade and accrued payables and other current liabilities
+(1,540)
+1,427
+7,471
+7,932
+Decrease in trade receivables and other current assets
+Decrease/(increase) in inventories and supplies
+143,138
+96,587
+Subtotal
+96,095
+46
+(789)
+2,115
+Loss/(gain) on disposal and write-off of property, plant and equipment
+Others
+58,286
+73,439
+Depreciation, depletion and amortisation
+4,120
+2,746
+Impairment and provision
+(2,684)
+(2,398)
+Investment income
+70
+(774)
+142,682
+CNOOC LIMITED Annual Report 2015
+(ii) Operating lease commitments
+As at 31 December 2015, the Group had unutilised banking facilities amounting to approximately RMB60,912 million
+(2014: RMB63,623 million).
+1,321
+1,612
+605
+2014
+2015
+Authorised, but not contracted for
+Contracted, but not provided for
+Capital commitments of a joint venture:
+The above table includes a commitment of approximately RMB2,688 million (2014: RMB5,870 million) contracted with the
+CNOOC Group.
+The capital commitments contracted, but not provided for, include the estimated payments to the Ministry of Land and Resources of the
+PRC for the next five years with respect to the Group's exploration and production licenses.
+120
+(1)
+39,630
+51,296
+91,112
+Authorised, but not contracted for
+Contracted, but not provided for (1)
+2014
+2015
+As at 31 December 2015, the Group had the following capital commitments, principally for the construction of property,
+plant and equipment:
+Capital commitments
+(i)
+COMMITMENTS AND CONTINGENCIES
+33.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+115,269
+(1,647)
+Share of profit of a joint venture
+(232)
+CNOOC Finance is a 31.8% owned associate of the Company and also a subsidiary of CNOOC. Under the renewed financial services framework
+agreement with CNOOC Finance dated 27 November 2013, CNOOC Finance continues to provide to the Group settlement, depository,
+discounting, loans and entrustment loans services. The renewal agreement is effective from 1 January 2014 to 31 December 2016. The depository
+services were exempted from independent shareholders' approval requirements under the Listing Rules. The maximum daily outstanding balance
+for deposits stated in CNOOC Finance (including accrued interest but excluding funds placed for the purpose of extending entrustment loans
+pursuant to the entrustment loan services) in 2015 was RMB22,000 million (2014: RMB22,000 million).
+It is the market practice for sales terms to be determined based on the estimated reserves and production profile of the relevant gas fields. The long
+term sales contracts usually last for 15 to 20 years.
+The sales include crude oil, condensate oil, liquefied petroleum gas, natural gas and liquefied natural gas to the CNOOC Group. Individual sales
+contracts were entered into from time to time between the Group and the CNOOC Group.
+CNOOC Energy Technology & Services Limited leased floating production, storage and offloading (FPSO) vessels to the Group for use in oil
+production operations.
+These include marketing, administration and management, management of oil and gas operations and integrated research services as well as
+other ancillary services relating to exploration, development, production and research activities of the Group. In addition, the CNOOC Group leased
+certain premises to the Group for use as office premises and staff quarters out of which they provided management services to certain properties.
+These represent the services for production operations, the provision of various facilities and ancillary services, such as provision of different types
+of materials, medical and employee welfare services, maintenance and repair of major equipment and supply of water, electricity and heat to the
+Group, some of which may not be available from independent third parties or available on comparable terms.
+g)
+f)
+e)
+d)
+c)
+b)
+64,002
+a)
+The amount due to the parent company and amounts due from/to related parties are unsecured, interest-free and are repayable
+on demand, unless otherwise disclosed.
+896
+2014
+1,263
+2015
+Accumulated investment
+(ix) Coalbed Methane Resources Exploration and Development Cooperation Agreement with China United
+Coalbed Methane Corporation Limited
+Key management personnel's remuneration is disclosed in note 9.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(viii) Key management personnel's remuneration
+30. RELATED PARTY TRANSACTIONS (continued)
+128
+Notes:
+CNOOC LIMITED Annual Report 2015
+119
+Notes to Consolidated Financial Statements
+(256)
+Share of profits of associates
+(1,049)
+143
+4,774
+6,118
+(1,073)
+(873)
+Exchange losses/(gains), net
+Finance costs
+Interest income
+Adjustments for:
+Profit before tax
+82,513
+17,130
+2014
+2015
+Reconciliation of profit before tax to cash generated from operations
+32. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
+During the year, the Group's pension costs charged to the consolidated statement of profit or loss and other comprehensive
+income amounted to RMB613 million (2014: RMB845 million).
+The Group provides retirement benefits for all local employees in overseas locations in accordance with relevant labour law, and
+provides employee benefits to expatriate staff in accordance with the relevant employment contracts.
+The Company is required to make contributions to a defined contribution mandatory provident fund at a rate of 5% of the
+salaries of all full-time employees in Hong Kong. The related pension costs are expensed as incurred.
+All the Group's full-time employees in the PRC are covered by a state-managed retirement benefit plan operated by the
+government of the PRC, and are entitled to an annual pension. The PRC government is responsible for the pension liabilities to
+these retired employees. The Group is required to make annual contributions to the state-managed retirement benefit plan at
+rates ranging from 11% to 22% of the employees' base salaries.
+RETIREMENT BENEFITS
+31.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+a.
+Office properties
+In September 2014, CNOOC provided CNOOC International Limited, a wholly-owned subsidiary of the Company a five-year uncommitted revolving
+loan facility for general purposes, with the principal amount of US$135 million of 0.95% per annum. As at 31 December 2015, the withdrawal
+amount of the loan was US$130 million (31 December 2014: US$130 million); In December 2014, CNOOC provided the Company a five-year
+uncommitted revolving loan facility for general purposes, with the principal amount of US$600 million of 0.95% per annum. As at 31 December
+2015, the withdrawal amount of the loan was US$564 million (31 December 2014: US$564 million).
+As at 31 December 2015, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+33.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+123
+CNOOC LIMITED Annual Report 2015
+The Company maintains insurance policies that provide coverage against property damage, third party pollution
+clean-up and well control losses. The Company has submitted claims to its insurers on these recent Long Lake
+losses and each claim is being investigated.
+On 15 January 2016, an explosion occurred at Nexen's Long Lake site near the hydrocracker unit. Two employees
+died as a result of the incident. Nexen informed the relevant regulatory authorities immediately and has been
+cooperating with the authorities investigating the incident. Reasonable estimates for the financial effect cannot be
+determined at this stage.
+The majority of leaked bitumen in the spill area has been safely removed. Further remediation and clean-up work is
+underway and will be carried out in compliance with applicable regulatory requirements. The total financial impact
+of this incident on the Group is still uncertain, and the Company has not made a complete provision for the incident
+in the consolidated financial statements.
+On 15 July 2015, an emulsion leak from a pipeline was discovered within Nexen's Long Lake operations,
+located in south of Fort McMurray, Alberta, Canada. The estimated size of the leak was 5,000 m³ over an area
+of approximately 21,900 m² mostly within a compacted pipeline corridor. There were no injuries as a result of
+this incident. The affected wells were suspended, and Nexen's emergency response plan was activated. The
+Company places great emphasis on operation safety and has taken measures to minimise the spill's impact
+on the environment and wildlife. Since the incident, the Company has been working together with relevant
+regulatory agencies in its conduct of clean-up and remediation work at the spill site. Nexen is cooperating with the
+investigation of regulatory agencies.
+As a Chinese Resident Enterprise, the Company may be liable to pay taxes on the deemed interest income for
+the funding provided to its overseas subsidiaries starting from 1 January 2008. The Company has prepared
+contemporaneous documentation in accordance with applicable PRC tax laws and regulations and is currently
+awaiting confirmation from its in-charge tax authority.
+The Company is of the view that the Company's obligations, if any, arising from the above mentioned accidents
+(including the Claim disclosed in the paragraph above) shall be determined in accordance with relevant laws and
+regulations, the PSC and related agreements, among others. Based on evaluations performed as of the date of the
+consolidated financial statements authorised for issuance, the Company believes that it is not possible to determine
+provisions, if any, for the Company's obligation determined in the future arising from the above mentioned
+accidents (including the Claim disclosed in the paragraph above) in the consolidated financial statements. The
+financial impact of such oil spill accidents on the Company is still uncertain, and the Company has not made any
+provision for the accidents in the consolidated financial statements.
+34.
+(b)
+(iii) Contingencies
+COMMITMENTS AND CONTINGENCIES
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+33.
+CNOOC LIMITED Annual Report 2015
+122
+The above table includes a commitment of approximately RMB4,075 million (2014: RMB4,311 million) to the
+CNOOC Group.
+8,782
+8,161
+4,458
+3,966
+1,863
+(a) Two oil spill accidents (the "Penglai 19-3 Oilfield Oil Spill Accidents") occurred on 4 June and 17 June 2011
+respectively at Platforms B and C of Penglai 19-3 oilfield, which is being operated under a production sharing
+contract (the "PSC") among CNOOC China Limited, a subsidiary of the Company, and two subsidiaries of
+ConocoPhillips, a U.S. based oil company, among which ConocoPhillips China Inc. (the "COPC") was the operator
+and responsible for the daily operations of the oilfield when the Penglai 19-3 Oilfield Oil Spill Accidents occurred.
+On 10 August 2015, the Company received a Notice Calling for Responses from the Qingdao Maritime Court
+of the People's Republic of China for a public interest action filed by China Biodiversity Conservation and Green
+Development Foundation (the "Plaintiff”) in relation to the Penglai 19-3 Oilfield Oil Spill Accidents (the "Claim"). The
+Claim is lodged against COPC and CNOOC China Limited (together, the "Defendants"). The Plaintiff requires the
+Defendants to: (1) restore the ecological environment in the Bohai Bay as damaged by the Penglai 19-3 Oilfield Oil
+Spill Accidents so that the environment will be brought back to its original condition before the accidents occurred;
+(2) if the Defendants fail to set up and implement a scientific plan to restore the ecological environment in the Bohai
+Bay within three months after a court judgment is granted in favor of the Plaintiff, establish a fund specifically for the
+restoration of the ecological environment in the Bohai Bay. Such fund shall be supervised by a professional public
+welfare foundation and the total amount of such fund shall be fixed based on the estimated costs for restoring the
+ecological environment in the Bohai Bay as determined by a professional institution; and (3) bear all litigation costs
+incurred by the Plaintiff in connection with the Claim. CNOOC China Limited has engaged PRC lawyers in relation
+to the Claim and is defending the Claim vigorously.
+COMMITMENTS AND CONTINGENCIES (continued)
+(iii) Contingencies (continued)
+The Group is subject to tax in numerous jurisdictions around the world. There are audits in progress and items under
+review. Difference in positions taken by taxation authorities over the interpretation and application of tax laws and
+regulations may increase our tax liability. Management has assessed the possible future outcome of matters that are
+currently under dispute. The Company believes that an adequate provision for future tax liability has been included in the
+consolidated financial statements based on available information.
+The Group leases certain of its office properties under operating lease arrangements. Leases for properties are
+negotiated for terms ranging from 5 months to 20 years.
+Corporate wealth management products
+Liquidity funds
+Other financial assets - current
+Assets measured at fair value
+Level 3
+Level 2
+Level 1
+2015
+31 December
+As at 31 December 2015 and 31 December 2014, the Group held the following financial instruments measured at fair value for
+each hierarchy respectively:
+Fair value hierarchy (continued)
+34. FINANCIAL INSTRUMENTS (continued)
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2015
+Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
+not based on observable market data (unobservable inputs), or where the observable data does not support the majority of the
+instruments fair value.
+Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
+observable for the asset or liability, either directly or indirectly. Instruments in this category include non-exchange traded
+derivatives such as over-the-counter physical forwards and options, including those that have prices similar to quoted market
+prices, private equity funds and corporate wealth management products. The Group obtains information from sources of
+independent price publications, over-the-counter broker quotes and the fund management's quotations as at the reporting
+date.
+The Group uses the following hierarchy that reflects the significance of the inputs used in making the fair value measurement:
+Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which
+transaction occur in sufficient frequency and volume to provide pricing information on an on-going basis.
+Fair value hierarchy
+The estimated fair value of the Group's long term guaranteed notes was approximately RMB133,629 million as at 31 December
+2015 (2014: RMB108,106 million), which was determined by reference to the market price as at 31 December 2015.
+The fair value of the Group's long term bank loans with floating interest rates approximated to the carrying amount as at 31
+December 2015 and 2014.
+The carrying amount of the Group's non-current non-publicly traded equity investments represents an appropriate estimate of
+their fair values, as insufficient more recent information is available to measure their fair values as at 31 December 2015.
+The carrying values of the Group's cash and cash equivalents, time deposits, trade receivables, other current assets, short-term
+loans, trade and accrued payables, other payables and accrued liabilities approximated to their fair values at the reporting date
+due to the short maturity of these instruments.
+For purposes of estimating the fair value of the derivative contracts, wherever possible, the Group utilises quoted market price
+and, if not available, estimates from third-party brokers. These brokers' estimates are corroborated with multiple sources and/
+or other observable market data utilising assumptions that market participants would use when pricing the assets or liabilities,
+including assumptions about risk and market liquidity.
+The Group enters into contracts to purchase and sell crude oil, natural gas and other energy commodities, and use derivative
+contracts, including futures, forwards, swaps and options for hedging and trading purposes (collectively derivative contracts).
+The Group also use derivatives to manage foreign currency risk for non-trading purposes. The total gains or losses in profit or
+loss for the year attributable to the realised and unrealised gains or losses relating to total derivative financial assets and liabilities
+that are included in "marketing revenues" is RMB 114 million (2014: RMB1,030 million).
+Fair value of financial instruments
+FINANCIAL INSTRUMENTS
+In addition to the matters mentioned above, the Group is dealing with a number of other lawsuits and arbitrations that
+arise in the ordinary course of business. While the results of these legal proceedings cannot be ascertained at this
+stage, the Company believes these proceedings are not expected to have a material effect on the consolidated financial
+statements.
+1,497
+774
+124
+1,687
+Operating lease commitments (continued)
+(ii)
+COMMITMENTS AND CONTINGENCIES (continued)
+33.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+121
+CNOOC LIMITED Annual Report 2015
+6,582
+4,723
+1,888
+a.
+1,717
+2,048
+1,337
+Later than two years and not later than five years
+888
+Later than one year and not later than two years
+1,758
+1,019
+No later than one year
+Commitments due:
+2014
+1,179
+2015
+Later than five years
+Office properties (continued)
+650
+Office properties commitments of a joint venture:
+2014
+The above table includes minimum lease payments of approximately RMB273 million (2014: RMB405 million) to the
+CNOOC Group.
+1,519
+2015
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+No later than one year
+As at 31 December 2015, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+The Group leases certain of its plant and equipment under operating lease arrangements for a term from 1 year to
+25 years.
+Plant and equipment
+b.
+34
+33
+25
+232
+Commitments due:
+123
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+Commitments due:
+2015
+No later than one year
+NO
+27
+2014
+18
+24
+34
+103
+31
+57,744
+2,277
+13,183
+21,295
+209
+Unproved oil and gas properties
+12.319
+1,405
+2
+4,867
+97,272
+43,964
+(13,572)
+35,489 538,022
+15,873
+196,301
+Accumulated depreciation,
+depletion and amortisation
+24,663
+(191,397)
+20,599
+383,162
+Asia
+Total
+(4,331)
+(1,092) (31,203)
+(5,968)
+Net capitalized costs
+251
+24,761
+25,012
+2014
+Consolidated entities
+Proved oil and gas properties
+North
+(excluding
+PRC
+PRC)
+Oceania
+Africa
+Canada
+(excluding
+Canada) America
+South
+Europe
+America
+(9,019)
+Proved oil and gas properties
+(204)
+Total
+251
+25,713
+25,964
+Unproved oil and gas properties
+5.395
+5,395
+Accumulated depreciation,
+depletion and amortisation
+(81)
+(5,840)
+(5,921)
+Net capitalized costs
+170
+25,268
+25,438
+138
+CNOOC LIMITED Annual Report 2015
+(1,637)
+America Europe
+Canada)
+Africa Canada
+Oceania
+(15,307)
+(273,836)
+Net capitalized costs
+204,084
+12,496
+1,187
+47,140
+101,436
+53,217
+(12,042)
+4,872
+2014
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+America
+(excluding
+South
+PRC
+PRC)
+36,055 460,487
+depletion and amortisation
+323,111
+7,537
+PRC
+PRC)
+Oceania
+Africa
+Canada
+Canada)
+America
+Europe
+Total
+Proved oil and gas properties
+19,508
+2,269
+53,136
+46,009
+27,139
+419
+29,053
+500,644
+Unproved oil and gas properties
+South
+(excluding
+America
+Asia
+(excluding
+(105)
+26,060
+(198)
+240
+440
+(1,475)
+(2,556) (2,136) (3,309)
+(1,775)
+3,409
+5,538
+19,735
+CNOOC LIMITED Annual Report 2015
+137
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(c) Capitalized costs
+2013
+Consolidated entities
+North
+(1,580)
+1,470
+2
+16,442
+39,395 416,079
+2013
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+America
+(excluding
+PRC
+PRC) Oceania
+4,737
+Africa Canada
+South
+America
+Europe
+Total
+Proved oil and gas properties
+1,888
+21,555
+23,443
+Unproved oil and gas properties
+7,537
+Canada)
+Accumulated depreciation,
+49,873
+46,567
+54,116
+29,886
+4,414
+17,075
+128,943
+Accumulated depreciation,
+depletion and amortisation
+(162,767)
+(8,971)
+96,298
+(951)
+(3,827)
+(7,152)
+(96)
+(6,733)
+(213,508)
+Net capitalized costs
+165,882
+12,007
+1,320
+(23,011)
+Result of operations
+19
+1
+31
+(1)
+བ་། |©#
+M
+514
+201
+509
+200
+9 2,015 6,993 815
+102
+ਗ।।।
+5
+239 275
+20
+119 815
+go
+18158
+22101
+20
+389
+89
+15
+846
+& 8
+Revisions of prior estimates
+Production
+Improved Recovery
+Discoveries and extensions
+'8'
+Purchase/Disposal) of reserves
+31 December 2013
+Discoveries and extensions
+199
+516
+199
+389
+15
+60 846
+1,431 5,361
+31 December 2015
+31 December 2014
+31 December 2013
+Interests in reserves
+Total consolidated and equity
+6
+Purchase/(Disposal) of reserves
+1
+Revisions of prior estimates
+(2)
+Production
+Improved Recovery
+Discoveries and extensions
+@
+1
+1
+Purchase/Disposal) of reserves
+31 December 2014
+Revisions of prior estimates
+Production
+Improved Recovery
+31 December 2015
+5
+1
+31 December 2012
+17
+2
+10
+47 861
+4,757
+2
+6
+11
+752
+1,692
+78680
+'ཏྠ 'སྨཱ8
+201
+56
+163 476 84 89 16 386 155 - 196 736 34 175 360 - - 2 - 166 23 230 6,323 736 34
+31 December 2014
+Revisions of prior estimates
+Production
+Improved Recovery
+Discoveries and extensions
+Purchase/(Disposal) of reserves
+31 December 2013
+(13)
+2,032 6.005 137 13
+22 (15)
+32
+INTI
+13
+Purchase/Disposal) of reserves
+456
+33
+750
+method investees:
+Enterprise's share of equity
+5,355
+1,431
+31 December 2015
+(250)
+Revisions of prior estimates
+(278)
+Production
+Improved Recovery
+Discoveries and extensions
+3310
+28671494107 №№9 15768
+6,731 750
+233
+143
+50
+RES
+20
+20
+2,258
+149 20
+2
+11
+ŏh
+404
+31
+N
+50
+520
+148 336 137
+3
+4
+Natural
+Natural
+Natural Synthetic
+Natural
+Natural
+Europe
+(excluding Canada) South America
+Canada
+Africa
+Oceania
+Asia (excluding PRC)
+Natural
+Natural
+PRC
+(mmbls)
+North America
+105
+412
+104
+ន
+102 353
+102 349
+Proved undeveloped reserves:
+6
+4
+1
+31 December 2015
+31 December 2014
+31 December 2013
+418
+method investees:
+Oil gas Oil gas Oil gas
+(bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls)
+gas oil Bitumen
+(bcf) (mmbls) (mmbls) (mmbls)
+122
+31
+41 524
+38
+116 114
+109 95
+៩៩
+855
+406
+20
+622 3,598
+31 December 2015
+487
+Oil gas Oil
+2.982 24
+31 December 2014
+22
+ន
+93139 589 4748 20456956528 90 1561284 3974 528 34
+୫
+31 December 2013
+Consolidated entities
+(bcf) (mmbls) (mmbls)
+gas oil Bitumen
+Natural Synthetic
+Total
+Natural
+Oil gas Oil gas Oil gas Oil
+(bcf) (mmbls) (bcf) (mmbls)
+(bcf) (mmbls)
+932
+Enterprise's share of equity
+88 8
+88
+133
+CNOOC LIMITED Annual Report 2015
+As the Group's proved reserves in Canada were over 15% of the Group's total proved reserves since the end of 2013, the Group's proved reserves
+and related information in Canada are disclosed separately from year 2013 and after. For year 2012 and prior years, Canada were included in North
+America if applicable and disclosed on a combined basis.
+9 2,215 7,570 815
+201 570 102
+275
+239
+815
+119
+200 577
+570
+199
+21
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+5
+67
+115
+16282
+1311
+67
+3
+537
+200
+200 534
+୫୧
+4
+9
+13413
+7
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(a)
+222
+18
+35
+12102915
+ខ ៦ ៩
+700 1337 24 415 8 183 59 196 209-86 13 2 - 123 26 1006 2349 209-
+31 December 2015
+31 December 2014
+31 December 2013
+Consolidated entities
+Natural
+Natural Synthetic
+gas oil Bitumen Oil gas Oil gas Oil gas Oil gas oil Bitumen
+(bcf) (mmbls) (mmbls) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (mmbls)
+Natural
+Total
+Europe
+South America
+North America
+(excluding Canada)
+Natural
+Canada
+Natural Synthetic
+Natural
+gas Oil
+(bcf) (mmbls)
+Oil gas
+Oil gas Oil gas Oil
+(mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls)
+Natural
+Natural
+Natural
+Africa
+Oceania
+Asia (excluding PRC)
+PRC
+Proved developed reserves:
+Reserve quantity information (continued)
+9
+18
+329
+225
+Director
+LI Fanrong
+109,722
+112,751
+66,641
+69,670
+43,081
+43,081
+109,722
+112,751
+(1,115)
+(4,949)
+TOTAL EQUITY
+130
+Reserves
+Equity attributable to owners of the parent
+EQUITY
+NET ASSETS
+NET CURRENT LIABILITIES
+15,072
+19,129
+Total current liabilities
+8,485
+10,675
+Amounts due to subsidiaries
+79
+118
+Other payables and accrued liabilities
+Issued capital
+6,508
+CNOOC LIMITED Annual Report 2015
+39.
+the Hong Kong Companies Ordinance**
+Transfer upon
+Total comprehensive income
+284
+284
+32,340
+32,340
+96,335
+69,888
+5,558
+(21,243)
+42,132
+Other comprehensive income
+WU Guangqi
+Director
+Profit for the year
+Total
+earnings
+reserves
+reserve
+Retained
+Other
+Cumulative
+translation
+reserve
+Share
+premium
+account
+and capital
+redemption
+A summary of the Company's reserves is as follows:
+STATEMENT OF FINANCIAL POSTION OF THE COMPANY (continued)
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+40.
+At 1 January 2014
+8,336
+Loans and borrowings
+CURRENT LIABILITIES
+31 December 2015
+Notes to Consolidated Financial Statements
+129
+CNOOC LIMITED Annual Report 2015
+Except for the matter mentioned in Note 33 (c), the Group has no other significant subsequent events needed to be disclosed
+in the consolidated financial statements.
+SUBSEQUENT EVENTS
+CNOOC NWS Private Limited, a wholly-owned subsidiary of the Group, together with the other joint venture partners and the
+operator of the NWS Project, signed a Deed of Cross Charge and an Extended Deed of Cross Charge whereby certain liabilities
+incurred or to be incurred, if any, by the Company in respect of the NWS Project are secured by its interest in the NWS Project.
+CHARGE OF ASSETS
+38.
+37.
+26.5%
+29.9%
+516,173
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+550,686
+386,041
+136,563
+164,645
+2014
+2015
+Gearing ratio
+Total capital
+Equity attributable to owners of the parent
+Interest-bearing debts
+The Group monitors capital on the basis of the debt to capital ratio, which is calculated as interest-bearing debts divided
+by total capital (equity attributable to owners of the parent plus interest-bearing debts).
+The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To
+maintain or adjust the capital structure, the Group may return capital to shareholders, raise new debt or issue new shares.
+No changes were made in the objectives, policies or processes for managing capital during the years end 31 December
+2015 and 2014.
+The primary objectives of the Group's capital management are to safeguard the Group's ability to continue as a going
+concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.
+(vi) Capital management
+379,610
+39. STATEMENT OF FINANCIAL POSTION OF THE COMPANY
+Information about the statement of financial position of the Company at the end of the reporting period is as follows:
+2015
+13,957
+14,180
+Total current assets
+1,607
+154
+Cash and cash equivalents
+14
+Equity investments
+13
+Available-for-sale financial assets
+3,446
+3,659
+Loans to a subsidiary
+8,861
+10,304
+Amounts due from subsidiaries
+30
+49
+110,837
+117,700
+110,837
+117,700
+Other current assets
+CURRENT ASSETS
+Total non-current assets
+Investments in subsidiaries
+Property, plant and equipment
+NON-CURRENT ASSETS
+2014
+2013 final dividend
+2014 interim dividend
+284
+32,340
+Oceania
+Asia (excluding PRC)
+PRC
+gas oil Bitumen
+(bcf) (mmbls) (mmbls)
+Oil gas Oil
+(bcf) (mmbls)
+(bcf) (mmbls)
+gas
+Oil
+gas oil Bitumen Oil gas oil Bitumen
+(bcf) (mmbls) (mmbls) (mmbls) (bcf) (mmbls) (mmbls) (mmbls)
+Natural Synthetic
+Total
+Europe
+Natural
+Natural
+Africa
+Natural Synthetic
+North America (excluding Canada)*
+Reserve quantity information (continued)
+Proved developed and undeveloped reserves:
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+(a)
+CNOOC LIMITED Annual Report 2015
+132
+The Company determines its net entitlement oil and gas reserves under production sharing contracts using the economic
+interest method.
+Pursuant to SEC Final Rule, the Group uses the average, first-day-of-the-month oil price during the 12-month period before the
+ending date of the period covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+The Group's net proved reserves consist of its interest in reserves, comprised of a 100% interest in its independent oil and gas
+properties and its participating interest in the properties covered under the production sharing contracts in the PRC, less (i)
+an adjustment for the Group's share of royalties payable by the Group to the PRC government and the Group's participating
+interest in share oil payable to the PRC government under the production sharing contracts, and less (ii) an adjustment
+for production allocable to foreign partners under the PRC production sharing contracts as reimbursement for exploration
+expenses attributable to the Group's participating interest, and plus the participating interest in the properties covered under
+the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host government
+and the domestic market obligation.
+The reserves estimators and auditors are required to be members of a professional society, such as China Petroleum Society
+(CPS), and are required to take the professional trainings and examinations as required by the professional society and us.
+The RMC delegates its daily operation to our Reserves Office, which is led by our Chief Reserve Supervisor. The Reserves Office
+is mainly responsible for supervising reserves estimates and auditing. It reports to the RMC periodically and is independent from
+operating divisions such as the exploration, development and production departments. Our Chief Reserve Supervisor has more
+than 30 years' experience in oil and gas industry.
+The RMC follows certain procedures to appoint our internal reserves estimators and reserves auditors, who are required to have
+undergraduate degrees and at least five years and ten years of experience related to reserves estimation, respectively.
+South America
+Canada*
+Natural
+Natural
+28
+N
+17
+8E&
+24 (128)
+Revisions of prior estimates
+(223)
+1,666 4,460
+Production
+Improved Recovery
+Discoveries and extensions
+Purchase/(Disposal) of reserves
+31 December 2012
+Consolidated entities
+(bcf) (mmbls)
+Oil
+gas
+gas Oil
+(bcf) (mmbls)
+(bcf) (mmbls)
+(bcf) (mmbls)
+(mmbls)
+Oil
+gas
+Oil
+gas
+Oil
+Natural Synthetic
+Natural
+Natural
+select our reserves estimators and auditors.
+196
+.•
+review our reserves policies;
+6,703
+6,703
+16,755
+16,755
+66,641
+82,042
+5,558
+(20,959)
+| | |
+66,641
+82,042*
+5,558
+(20,959)
+6,703
+2015 interim dividend
+Total comprehensive income
+Other comprehensive income
+Profit for the year
+At 1 January 2015
+At 31 December 2014
+(8,846)
+(8,846)
+(11,340)
+(11,340)
+(42,132)
+(42,132) -.
+abolition of par value under
+32,624
+2014 final dividend
+16,755
+23,458
+(11,267)
+•
+The RMC's main responsibilities are to:
+We established the Reserve Management Committee, or RMC, which is led by one of our Executive Vice Presidents and
+comprises the general managers of the relevant departments.
+We implemented rigorous internal control system that monitors the entire reserves estimation process and certain key metrics
+in order to ensure that the process and results of reserves estimates fully comply with the relevant SEC rules.
+For the years 2015, 2014 and 2013, approximately 62%, 52% and 52%, respectively, of our total proved reserves were
+evaluated by us, and the remaining were evaluated by independent third parties.
+Crude oil and natural gas reserve estimates are determined through analysis of geological and engineering data which appear,
+with reasonable certainty, to be economically producible in the future from known oil and natural gas reservoirs under existing
+economic and operating conditions. The reserve data that we disclosed were all based on the definitions and disclosure
+guidelines contained in the US Securities and Exchange Commission's final rules on "Modernization of oil and Gas Reporting"
+(the "SEC Final Rule").
+Reserve quantity information
+(a)
+The regional analysis presented below is on a continent basis, with separate disclosure for countries that contain 15% or more of the
+total proved reserve, in accordance with SEC and FASB requirements.
+The following disclosures are included in accordance with the FASB Accounting Standard Codification 932 "Extractive Activities-Oil
+and Gas (the "ASC 932").
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Gas Producing Activities (Unaudited)
+Supplementary Information on Oil and
+131
+CNOOC LIMITED Annual Report 2015
+The consolidated financial statements were approved and authorised for issue by the Board of Directors on 24 March 2016.
+APPROVAL OF THE FINANCIAL STATEMENTS
+The Hong Kong Companies Ordinance (Cap. 622), becoming effective on 3 March 2014, abolishes the concept of nominal value and requirements
+for authorised share capital.
+As at 31 December 2015, the distributable retained earnings of the Company amounted to approximately RMB78,368 million (2014: RMB82,042
+million).
+*
+69,670
+78,368*
+5,558
+(14,256)
+At 31 December 2015
+(9,162)
+(9,162)
+(11,267)
+review our proved reserves and other categories of reserves; and
+36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+619
+109
+554
+54
+(1,213)
+(1,232)
+(3)
+(1,210)
+(1,232)
+(1,489)
+(1,411)
+(49)
+(34)
+(123)
+(122)
+44
+(1,521)
+(1,465)
+(1,329)
+3,437
+3,160
+Total
+Europe
+South
+America
+(excluding
+Canada)
+Canada
+Africa
+Oceania
+America
+North
+(1,496)
+Enterprise's share of equity method investees:
+314
+(803)
+4,981
+9,723
+1,079
+7,258
+106,258
+Net sales to customers
+Total
+Europe
+America
+Canada)
+Canada
+Africa
+PRC) Oceania
+2,570
+PRC
+(excluding
+America
+Asia
+(excluding
+North
+2015
+Consolidated entities
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+Results of operations (continued)
+(b)
+61,446
+3,678
+(1,395)
+5,658
+South
+136 CNOOC LIMITED Annual Report 2015
+50,870
+Total result of operations for
+producing activities
+(5,063)
+12
+709
+2,948
+(1,984)
+(134)
+(1,559)
+(16,952)
+Income tax expense
+84,682
+8,741
+(175)
+4,949
+(22,023)
+(3,751)
+448
+2,113
+67,803
+(19,072)
+(19,072)
+Special oil gain levy
+(57,407)
+(7,413)
+(105)
+(1,385)
+(6,476)
+(8,143)
+(206)
+4,554
+Result of operations
+50,851
+554
+19
+C
+Result of operations
+Income tax expense
+22
+Special oil gain levy
+(78)
+and amortisation
+Depreciation, depletion
+(15)
+Accretion expense
+(1)
+Exploration expense
+(25)
+Taxes other than income tax
+(136)
+Operating expenses
+277
+Net sales to customers
+PRC
+Asia
+(excluding
+PRC)
+2014
+62,659
+3,678
+(163)
+5,658
+(803)
+2,570
+314
+4,435
+(4,686)
+103
+146,597
+Europe
+America
+Canada)
+Canada
+Africa
+PRC) Oceania
+PRC
+South
+(excluding
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees:
+Total
+2015
+3,409
+(300)
+(3,309)
+(2,136)
+(2,556)
+240
+(198)
+26,165
+Result of operations
+(1,030)
+4,801
+34
+2,133
+21,315
+1,405
+Net sales to customers
+3,244
+19
+Income tax expense
+(1,599)
+-----(1,475)
+(124)
+Special oil gain levy
+(1,876)
+(1,767)
+(109)
+and amortisation
+Depreciation, depletion
+(40)
+(34)
+200
+(6)
+(65)
+(6)
+(59)
+Exploration expense
+(1,299)
+(1,288)
+(11)
+Taxes other than income tax
+(1,763)
+(1,624)
+(139)
+Operating expenses
+3,444
+Accretion expense
+186
+(103)
+(764)
+(55)
+(119)
+(93)
+(1,882)
+Accretion expense
+(260)
+(1,271)
+(712)
+(885)
+(50)
+(937)
+(4,415)
+Exploration expense
+' ខ្លួន
+(362)
+(459)
+(131)
+(9,498)
+Taxes other than income tax
+(28,372)
+(2,785)
+(28)
+(1,044)
+(1,271) (4,278)
+(420)
+(2,562)
+(15,984)
+Operating expenses
+(250)
+(48)
+(10,748)
+(1,443)
+(8,722)
+Income tax expense
+22,345
+(1,392)
+(334)
+(5,442)
+(3,541)
+(2,742)
+343
+566
+34,887
+(59)
+(59)
+Special oil gain levy
+(72,665)
+(9,592)
+(147)
+(7,145)
+(3,163)
+(9,757)
+(135)
+(3,193)
+(39,533)
+and amortisation
+Depreciation, depletion
+(2,435)
+(284)
+(2)
+(9,973)
+12,760
+(28,993)
+and amortisation
+Depreciation, depletion
+(4,812)
+(3,327)
+(7,850)
+(199)
+(3,701)
+(27,992)
+and amortisation
+Depreciation, depletion
+(1,904)
+(207)
+(93)
+(122)
+(72)
+(98)
+(1,406)
+(17,120)
+(1,911)
+(238)
+(3,401)
+(112)
+(889)
+(29)
+(601)
+(9,939)
+Exploration expense
+(15,920)
+(15)
+(350)
+Accretion expense
+(76)
+(7,533)
+Special oil gain levy
+(386)
+(722)
+4,319
+589
+1,006
+48,116
+Result of operations
+(26,394)
+(5,352)
+57
+447
+(91)
+(3,931)
+(55,512)
+(252)
+(16,038)
+Income tax expense
+82,554
+8,707
+(174)
+(833)
+(631)
+8,250
+841
+2,240
+64,154
+(23,421)
+(23,421)
+(1,234)
+(556)
+(338)
+(14,585)
+2013
+Consolidated entities
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+Results of operations
+(b)
+159
+95
+159
+95
+203
+98
+97 167
+கஐ
+North
+98 203
+97
+CNOOC LIMITED Annual Report 2015
+134
+31 December 2015
+31 December 2014
+31 December 2013
+method investees:
+Enterprise's share of equity
+923 4,230 619
+1
+8
+2 1,206 3,816 524 31
+28
+167
+Asia
+(excluding
+America
+(excluding
+Taxes other than income tax
+(30,014)
+(2,413)
+(30)
+(1,022)
+(5,794)
+(1,288)
+(508)
+(2,998)
+(15,961)
+Operating expenses
+226,445
+20,771
+212
+8,845
+8,800
+18,905
+1,915
+9,539
+157,458
+Net sales to customers
+Total
+Europe
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+South
+(117)
+3,355
+56,160
+2013
+(16,212)
+Operating expenses
+218,210
+20,106
+205
+8,661
+10,555
+16,682
+1,753
+11,263
+148,985
+Net sales to customers
+Total
+(2,834)
+Europe
+Canada)
+Canada
+Africa
+PRC) Oceania
+PRC
+South
+(excluding
+(excluding
+America
+Asia
+North
+Consolidated entities
+2014
+America
+(556)
+(1,600)
+(6,177)
+(2,387)
+(285)
+(58)
+(146)
+(92)
+(1,803)
+Accretion expense
+(11,680)
+(896)
+(238)
+(808)
+(1,263)
+(1,637)
+(267)
+(1,626)
+(4,945)
+Exploration expense
+(11,802)
+(11)
+(455)
+(244)
+(656)
+(276)
+(10,157)
+Taxes other than income tax
+(31,180)
+(2,760)
+(35)
+(1,006)
+Results of operations (continued)
+154
+(b)
+31 December 2015
+(7)
+(43)
+Exploration expense
+(1,706)
+(1,677)
+(29)
+Taxes other than income tax
+(1,625)
+(1,495)
+(130)
+Operating expenses
+3,154
+2,870
+(50)
+284
+Total
+Europe
+South
+America
+America
+(excluding
+Canada)
+Canada
+Africa
+Oceania
+PRC)
+PRC
+(excluding
+Asia
+North
+Enterprise's share of equity method investees:
+Net sales to customers
+Accretion expense
+(16)
+(35)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+135
+CNOOC LIMITED Annual Report 2015
+54,241
+3,355
+(1,965)
+(386)
+(722)
+4,319
+69
+589
+1,006
+48,045
+Total result of operations for
+producing activities
+(1,919)
+(1,848)
+(71)
+Result of operations
+Income tax expense
+(1,919)
+(1,848)
+(71)
+Special oil gain levy
+(1,641)
+(1,504)
+(137)
+and amortisation
+Depreciation, depletion
+(51)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+209
+Total result of operations for
+producing activities
+3,478
+South
+America
+Europe
+Total
+Acquisition costs:
+- Proved
+- Unproved
+Exploration costs
+43
+Development costs*
+7
+Total costs incurred
+50
+50
+25
+1,457
+68
+1,464
+1,482
+1,532
+CNOOC LIMITED Annual Report 2015
+139
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(d)
+Costs incurred in oil and gas property acquisition, exploration and development (continued)
+2014
+Consolidated entities
+America
+(excluding
+Canada)
+Canada
+Africa
+PRC) Oceania
+895
+18,681
+Development costs*
+42,877
+3,272
+6,720
+8,755
+6,882
+17
+2,943
+71,466
+Total costs incurred
+55,911
+4,059
+29
+20
+21,285
+85,758
+23,912
+5,160
+48,712
+244,826
+2013
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+PRC
+North
+Asia
+(excluding
+America
+(excluding
+South
+11,208
+9,998
+12,286
+465
+6,158
+119,521
+2014
+Acquisition costs:
+- Proved
+-Unproved
+Exploration costs
+Development costs*
+Total costs incurred
+Acquisition costs:
+Enterprise's share of equity method investees
+North
+Asia
+America
+PRC
+(excluding
+PRC)
+(excluding
+Oceania
+Africa Canada
+Canada)
+South
+America
+Europe
+Total
+151
+267
+6,575
+72,564
+Total costs incurred
+PRC
+PRC) Oceania
+Africa
+Canada
+Canada) America Europe
+Total
+Acquisition costs:
+-Proved ---------
+- Unproved
+Exploration costs
+13,644
+1,515
+267
+138
+3,454
+2,260
+421
+724
+24,044
+Development costs*
+58,920
+5,060
+7,754
+8,239
+10,026
+44
+5,434
+95,477
+1,759
+1,563
+1,271
+1,897
+27,644
+90,802
+36,523
+6,263
+42,387
+218,243
+Accumulated depreciation,
+depletion and amortisation
+(230,943)
+(17,768)
+(1,253)
+(43,408)
+(14,774)
+(20,247)
+(831)
+(26,034)
+(355,258)
+Net capitalized costs
+191,358
+14,584
+1,169
+49,829
+105,188
+56,081
+5,529
+27,570 451,308
+2015
+2
+1,616
+13,006
+Unproved oil and gas properties
+(c) Capitalized costs (continued)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2015
+Consolidated entities
+North
+Asia
+(excluding
+America
+(excluding
+South
+PRC
+PRC)
+Oceania
+Africa
+Enterprise's share of equity method investees
+Canada
+America
+Europe
+Total
+Proved oil and gas properties
+409,295
+30,736
+2,420
+65,593
+29,160
+39,805
+97
+11,217
+588,323
+Canada)
+1,890
+North
+America
+Africa Canada
+Canada)
+South
+America
+Europe
+Total
+Acquisition costs:
+-Proved
+879
+29
+10,283
+35,773
+1,760
+453
+26,894
+76,071
+- Unproved
+25
+2,385
+39,959
+13,707
+4,552
+17,980
+78,608
+Exploration costs
+12,155
+733
+29
+PRC) Oceania
+PRC
+North
+America
+(excluding
+Asia
+(excluding
+(excluding
+South
+PRC
+PRC) Oceania
+Africa Canada
+Canada)
+America
+Europe
+Total
+Proved oil and gas properties
+2,129
+30,191
+32,320
+Asia
+(excluding
+Unproved oil and gas properties
+5,754
+Accumulated depreciation,
+depletion and amortisation
+(1,831)
+(7,693)
+(9,524)
+Net capitalized costs
+298
+28,252
+28,550
+(d)
+Costs incurred in oil and gas property acquisition, exploration and development
+2013
+Consolidated entities
+5,754
+2,041
+I
+152
+Standardised measure of
+49
+(38)
+45
+17,923
+17,885
+(8,412)
+(8,367)
+discounted future net cash flows
+7
+9,511
+9,518
+Total standardised measure of
+discounted future net cash flow
+284,662
+3,670
+4,403
+15,344
+31,611
+20,628
+9,814
+18,890
+389,022
+CNOOC LIMITED Annual Report 2015
+141
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+10% discount factor
+Future net cash flows
+(4,305)
+(4,305)
+North
+Asia
+(excluding
+America
+(excluding
+South
+Notes
+PRC
+PRC)
+Oceania
+Africa Canada
+Canada)
+America
+Europe
+(e)
+Total
+(1)
+560
+46,278
+46,838
+Future production costs
+(369)
+(19,688)
+(20,057)
+Future development costs
+(229)
+(4,362)
+(4,591)
+Future income taxes
+Future cash inflows
+Enterprise's share of equity method investees
+Standardised measure of discounted future net cash flows and changes therein (continued)
+Asia
+(30,077) (156,595)
+Future net cash flows
+10% discount factor
+445,318 18,363
+(163,945) (8,741)
+8,641
+(3,179)
+19,945 124,762
+58,461
+474
+19,721 695,685
+(6,585)
+(84,425)
+(33,260)
+(93)
+(4,584) (304,812)
+Standardised measure of
+discounted future net cash flows
+281,373
+9,622
+5,462
+13,360
+40,337
+25,201
+381
+15,137 390,873
+2014
+Enterprise's share of equity method investees
+North
+(49)
+(156)
+(14,126) (7,564)
+(13,704) (416,273)
+Notes
+PRC
+(excluding
+PRC)
+Oceania
+Africa Canada
+North
+America
+(excluding
+Canada)
+South
+America
+Europe
+Total
+Future cash inflows
+(1)
+Future production costs
+2014
+Consolidated entities
+Future development costs
+1,335,886 84,138 18,722
+(528,067) (36,129) (4,244)
+(273,362) (17,291) (2,708)
+(89,139) (12,355) (3,129)
+103,213
+(34,477)
+441,864 101,410
+1,000
+93,091 2,179,324
+(257,139)
+(20,692)
+(434)
+(29,589) (910,771)
+(34,665)
+(52,399)
+(22,101)
+(43)
+Future income taxes
+(722)
+2013
+18,890
+72
+46,590
+Total costs incurred
+32,242
+5,490
+54
+10,638
+2,926
+8,452
+1,183
+786
+61,771
+2015
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+America
+(excluding
+PRC
+PRC)
+Oceania
+Africa Canada
+Canada)
+South
+America
+Europe
+Total
+Acquisition costs:
+- Proved
+60
+7,216
+2,465
+9,469
+1,890
+2,042
+2015
+Consolidated entities
+North
+PRC
+Asia
+(excluding
+PRC)
+America
+(excluding
+South
+Oceania
+Africa Canada
+Canada) America
+Europe
+- Unproved
+Total
+Exploration costs
+9,516
+908
+54
+1,169
+461
+1,236
+1,123
+714
+15,181
+Development costs*
+22,726
+4,582
+- Unproved
+379,504
+Exploration costs
+Development costs*
+Future income taxes
+1,336,580 93,943 18,095
+(523,810) (46,834) (6,716)
+(259,636) (29,850) (2,269)
+(102,827) (5,504) (2,314)
+(24,996)
+99,648
+430,094 87,532
+(19,779) (247,762) (19,423)
+(36,699) (50,993) (15,946)
+(18,498)
+1,040
+(610)
+108,254 2,175,186
+(32,056) (896,990)
+(43) (14,911) (410,347)
+(12,252)
+(31)
+(36,709) (203,131)
+Future net cash flows
+10% discount factor
+450,307 11,755
+6,796 24,672
+(165,652) (8,085) (2,393) (9,328)
+106,343
+(74,732) (19,283)
+39,911
+356
+24,578 664,718
+(53)
+(5,688) (285,214)
+Standardised measure of
+discounted future net cash flows
+284,655
+3,670
+4,403
+15,344
+31,611 20,628
+303
+(2)
+Future development costs
+Future production costs
+(1)
+241
+Total costs incurred
+300
+The development costs include estimated future dismantlement costs of dismantling oil and gas properties.
+140
+CNOOC LIMITED Annual Report 2015
+33
+2,811
+92
+3,052
+2,844
+3,144
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e)
+Standardised measure of discounted future net cash flows and changes therein
+59
+Pursuant to FASB Topic 932, the average of first-day-of-the-month oil price during the 12-month period before the year end,
+were used to estimate annual future production from proved reserves to determine future cash inflows.
+Management believes that this information does not represent the fair market value of the oil and natural gas reserves or the
+present value of estimated cash flows since no economic value is attributed to potential reserves, the use of a 10% discount
+rate is arbitrary, and prices change constantly.
+Present value of estimated future net cash flows:
+2013
+Consolidated entities
+North
+Notes
+PRC
+Asia
+(excluding
+PRC)
+America
+(excluding South
+Oceania
+Africa Canada Canada) America Europe
+Total
+Future cash inflows
+Future development costs are estimated based upon constant price assumptions and the assumption of the continuation of
+existing economic, operating and regulatory conditions. Future income taxes are calculated by applying the year-end statutory
+rate to estimate future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties based upon existing
+laws and regulations. The discount was computed by the application of a 10% discount factor to the estimated future net cash
+flows.
+(excluding
+America
+Accretion of discount
+50,198
+19,828
+(2,595)
+17,233
+Purchase of properties
+(1,544)
+(1,544)
+Changes in timing and other
+(8,664)
+(4,307)
+(12,971)
+Standardised measure, end of year
+390,873
+10,225
+401,098
+2015
+Consolidated
+Equity share of
+and equity
+Consolidated
+equity method
+1,305
+share of equity
+48,893
+697
+(175,129)
+Net change in prices, net of royalties and production costs
+4,323
+8,750
+13,073
+Extensions discoveries and improved recovery,
+net of related future costs
+87,059
+652
+87,711
+Change in estimated future development costs
+Development costs incurred during the year
+Revisions in quantity estimates
+Net change in income taxes
+(62,501)
+(4,050)
+(66,551)
+105,782
+197
+105,979
+(6,620)
+(5,923)
+Total
+investee method investee
+Standardised measure, beginning of year
+545
+(37,244)
+50,466
+1,720
+52,186
+Net change in income taxes
+64,907
+1,040
+65,947
+Purchase of properties
+(2)
+Changes in timing and other
+(51,430)
+(2,070)
+(2)
+(53,500)
+Standardised measure, end of year
+176,004
+9,247
+185,251
+144 CNOOC LIMITED Annual Report 2015
+Notice of Annual General Meeting
+(37,789)
+68,584
+2,904
+65,680
+390,873
+10,225
+401,098
+Sales of production, net of royalties and production costs
+(107,455)
+(288)
+(107,743)
+(306,900)
+(5,484)
+(312,384)
+58
+Extensions discoveries and improved recovery,
+68,657
+904
+69,561
+Change in estimated future development costs
+Development costs incurred during the year
+Revisions in quantity estimates
+Accretion of discount
+38,995
+(247)
+38,748
+net of related future costs
+(175,187)
+Sales of production, net of royalties and production costs
+389,022
+(2)
+(3)
+Future net cash flows have been prepared taking into consideration estimated future dismantlement costs of dismantling oil and gas properties.
+Changes in the standardised measure of discounted future net cash flows:
+2013
+Consolidated
+Consolidated
+Equity share of
+equity method
+Total
+and equity
+share of equity
+investee method investee
+Standardised measure, beginning of year
+347,460
+9,539
+Sales of production, net of royalties and production costs
+(180,494)
+313
+356,999
+(180,181)
+Net change in prices, net of royalties and production costs
+51,408
+(2,624)
+48,784
+Future development costs include the estimated costs of drilling future development wells and building the production platforms.
+Future cash flows consist of the Group's 100% interest in the independent oil and gas properties and the Group's participating interest in the
+properties under production sharing contracts in the PRC less (i) an adjustment for the royalties payable to the PRC government and share oil
+payable to the PRC government under production sharing contracts and (ii) an adjustment for production allocable to foreign partners under the
+PRC production sharing contracts for exploration costs attributable to the Group's participating interest, and plus the participating interest in
+the properties covered under the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host
+government and the domestic market obligation.
+2,381 185,251
+10,023
+CNOOC LIMITED Annual Report 2015
+discounted future net cash flow
+Total standardised measure of
+(711)
+discounted future net cash flows
+Standardised measure of
+(11,801)
+(12,014)
+213
+10% discount factor
+Extensions discoveries and improved recovery,
+21,048
+(924)
+Future net cash flows
+(1)
+9,958
+9,247
+163,106
+7,737
+3,478
+(722)
+(4,666) 3,914
+21,972
+NOTICE IS HEREBY GIVEN that the Annual General
+Meeting (the "AGM") of the shareholders of CNOOC Limited
+(the "Company") will be held on 26 May 2016, at 3:30
+p.m. at Island Shangri-La Hotel Hong Kong, Pacific Place,
+Supreme Court Road, Central, Hong Kong, for the following
+purposes:
+net of related future costs
+53,261
+(41,592)
+Standardised measure, end of year
+379,504
+9,518
+389,022
+CNOOC LIMITED Annual Report 2015
+143
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e)
+Standardised measure of discounted future net cash flows and changes therein (continued)
+Consolidated
+2014
+Consolidated
+Equity share of
+equity method
+Total
+and equity
+share of equity
+investee method investee
+Standardised measure, beginning of year
+379,504
+9,518
+907
+(42,499)
+Changes in timing and other
+114,763
+Change in estimated future development costs
+Development costs incurred during the year
+Revisions in quantity estimates
+(82,414)
+(2,083)
+(84,497)
+70,077
+229
+70,306
+22,884
+53,261
+820
+Accretion of discount
+42,522
+1,269
+43,791
+Net change in income taxes
+(17,464)
+1,148
+(16,316)
+Purchase of properties
+114,763
+23,704
+A.
+Net change in prices, net of royalties and production costs
+1.
+Future cash inflows
+572
+82,011
+82,583
+Future production costs
+(1,225)
+│
+(30,695)
+(31,920)
+Future development costs
+(642)
+(12,330)
+(12,972)
+Future income taxes
+As ordinary business, to consider and, if thought
+fit, pass with or without amendments, the following
+ordinary resolutions:
+(13,641)
+Future net cash flows
+(1,295)
+25,345
+24,050
+10% discount factor
+Total
+Europe
+America
+Africa Canada Canada)
+South
+North
+America
+(excluding
+Africa Canada Canada)
+PRC) Oceania
+PRC
+Notes
+(excluding
+Asia
+Enterprise's share of equity method investees
+2015
+Standardised measure of discounted future net cash flows and changes therein (continued)
+271
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2015
+142
+2,381 176,004
+65
+3,914
+(4,666)
+South
+Notes
+PRC
+PRC) Oceania
+(e)
+(14,096)
+(13,825)
+Standardised measure of
+Future income taxes
+791,748 59,432 12,649
+(268,950) (28,572) (3,332)
+(184,967) (12,962) (2,442)
+(46,043) (4,769) (1,733)
+49,238 254,224 64,372
+(17,100) (192,827) (20,123)
+(26,992) (40,130) (26,609)
+(5,317)
+Europe
+442 36,157 1,268,262
+(312)
+Total
+(26,695) (557,911)
+(2,533) (296,635)
+(43)
+(4,296) (62,201)
+Future net cash flows
+Future development costs
+291,788
+13,129 5,142
+(127,971) (5,392) (1,664)
+5,146 15,950 17,640
+(5,868) (20,616) (13,726)
+87
+2,633 351,515
+(22)
+(252) (175,511)
+Standardised measure of
+discounted future net cash flows
+163,817
+7,737
+10% discount factor
+America
+Future production costs
+Future cash inflows
+discounted future net cash flows
+(1,024)
+11,249
+10,225
+Total standardised measure of
+discounted future net cash flow
+280,349
+9,622
+5,462 13,360
+40,337
+25,201
+(1)
+11,630
+401,098
+2015
+Consolidated entities
+North
+Asia
+(excluding
+America
+Notes
+PRC
+PRC) Oceania
+(excluding South
+Africa Canada Canada) America
+15,137
+Europe
+(13,641)
+Future cash inflows
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the Shareholders.
+To re-elect Mr. Chiu Sung Hong, who has
+already served the Company for more than
+nine years, as an Independent Non-executive
+Director of the Company:
+Chiu Sung Hong
+Born in 1947, Mr. Chiu received an LL.B. degree
+from the University of Sydney. He was admitted
+as a solicitor of the Supreme Court of New
+South Wales and the High Court of Australia. He
+has over 30 years' experience in legal practice
+and had been a director of a listed company in
+Australia. Mr. Chiu was the founding member of
+the Board of Trustees of the Australian Nursing
+Home Foundation and served as the General
+Secretary of the Australian Chinese Community
+Association of New South Wales. Mr. Chiu is
+also an Independent Non-executive Director
+of Tianda Pharmaceuticals Limited (formerly
+Yunnan Enterprises Holdings Limited, Tianda
+Holdings Limited) since April 2008, a company
+listed on The Stock Exchange of Hong Kong
+Limited. Mr. Chiu is also an Independent Non-
+executive Director of Bank of China (Australia)
+Limited (a wholly subsidiary of Bank of China
+Limited). Mr. Chiu was appointed as an
+Independent Non-executive Director of the
+Company with effect from 7 September 1999.
+146
+CNOOC LIMITED Annual Report 2015
+Notice of Annual General Meeting
+B.
+6.
+7.
+Mr. Chiu does not have any relationship with any
+other Director, senior management, substantial
+shareholder or controlling shareholder of the
+Company.
+Mr. Chiu has no other interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+Mr. Chiu has a formal letter of appointment with
+the Company. Mr. Chiu's emoluments comprise
+an annual director's fee of HK$1,120,000
+(before deduction of Hong Kong tax). The
+emolument of Mr. Chiu was determined by the
+Board with reference to perception of industry
+standards and prevailing market conditions. The
+Remuneration Committee will review the level
+of directors' remuneration from time to time
+and make recommendation to the Board for
+adjustments if necessary. Mr. Chiu is subject to
+the provisions of the letter of appointment and
+the retirement provisions in the Articles of the
+Association of the Company.
+-
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) · 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the Shareholders.
+To authorise the Board to fix the remuneration of
+each of the Directors.
+To re-appoint Deloitte Touche Tohmatsu as the
+independent auditors of the Company and its
+subsidiaries, and to authorize the Board to fix
+the remuneration of the independent auditors.
+As special business, to consider and, if thought fit,
+pass with or without amendments, the following
+resolutions as ordinary resolutions:
+"THAT:
+1.
+(a)
+the Company, subject to three months' notice
+of termination by either party. Mr. Lv is subject
+to the provisions of his service agreement and
+the retirement provisions in the Articles of the
+Association of the Company.
+5.
+Under the service agreement between the
+Company and Mr. Lv, the Company does not
+pay him any Director's fee. The Remuneration
+Committee will review the level of directors'
+emoluments and make recommendation to the
+Board for adjustments if necessary. Mr. Lv's
+appointment continued for a period of twelve
+months and would be renewed annually as
+determined by the Board or the shareholders of
+(11,823)
+2.
+3.
+To receive and consider the audited financial
+statements together with the Report of the
+Directors and Independent Auditors' Report
+thereon for the year ended 31 December 2015.
+To declare a final dividend for the year ended 31
+December 2015.
+To re-elect Mr. Li Fanrong as an Executive
+Director of the Company:
+Li Fanrong
+Born in 1963, Mr. Li is a professor-level senior
+engineer. He obtained a B.S. degree majoring
+in oil production from Yangtze University in
+China, and received an MBA degree from the
+Business School of Cardiff University in United
+Kingdom. Mr. Li has been working in the oil and
+gas industry in China over 30 years. He joined
+CNOOC in 1984, and worked as Petroleum
+Engineer, later as Offshore Platform Supervisor,
+Operation Manager of CNOOC/AMOCO
+Joint Operating Group, Managing Director
+of CNOOC/STATOIL Joint Operating Group,
+Chief Representative of Joint Management
+Committee in CACT Operators Group, General
+Manager of Development and Production
+Department of the Company and President of
+CNOOC China Limited Shenzhen Branch. He
+served as an Assistant President of CNOOC
+from January 2009 to April 2010 and worked
+as President of CNOOC Energy Technology &
+Services Limited from February 2009 to April
+2010. Mr. Li also served as Chairman and
+Director of CNOOC Southeast Asia Limited,
+being a subsidiary of the Company. He has
+served as Vice President of CNOOC since April
+2010. He was appointed as President of the
+Company with effect from 16 September 2010,
+and was appointed as Chief Executive Officer
+of the Company with effect from 23 November
+2011.He also serves as a Director of CNOOC
+China Limited and Chairman and Director
+of CNOOC International Limited, all being
+subsidiaries of the Company. He was appointed
+as the chairman of the board of Nexen Energy
+ULC with effect from 26 February 2013. Mr.
+Li was appointed as a Non-executive Director
+of the Company with effect from 24 May 2010
+and was re-designated from Non-executive
+Director to Executive Director with effect from 16
+September 2010.
+Save as aforesaid, Mr. Li does not have any
+relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+Mr. Li has no other interest in the Company's
+securities within the meaning of Part XV of the
+Securities and Futures Ordinance (Cap. 571)
+(the "SFO").
+subject to paragraph (b) below, the
+exercise by the Directors during the
+Relevant Period (as hereinafter defined)
+of all the powers of the Company to buy
+back shares in the capital of the Company
+on The Stock Exchange of Hong Kong
+Limited (the "Stock Exchange") or on any
+other exchange on which the shares of the
+Company may be listed and recognized
+by the Securities and Futures Commission
+Under the service agreement between the
+Company and Mr. Li, the Company does not
+pay him any Director's fee. The Remuneration
+Committee will review the level of directors'
+emolument and make recommendation to the
+Board for adjustments if necessary. Mr. Li's
+appointment continued for a period of twelve
+months and would be renewed annually as
+determined by the Board or the shareholders of
+the Company, subject to three months' notice
+of termination by either party. Mr. Li is subject
+to the provisions of his service agreement and
+the retirement provisions in the Articles of the
+Association of the Company.
+-
+Total
+CNOOC LIMITED Annual Report 2015 145
+Notice of Annual General Meeting
+4.
+To re-elect Mr. Lv Bo as a Non-executive
+Director of the Company:
+Lv Bo
+Born in 1962, Mr. Lv is a senior economist
+and received a Bachelor of Science degree in
+Management from China University of Mining
+and Technology and an MBA degree from China
+Europe International Business School. Since
+1985, he worked in the Ministry of Coal Industry,
+the Ministry of Energy and the Organization
+Department of the Communist Party of China
+Central Committee and served in a number of
+positions, including a Vice-Director-level official
+in the Personnel and Labor Department of the
+Ministry of Energy, Vice Director and Director
+of Economic and Technology Cadre Bureau of
+the Organization Department of the Communist
+Party of China Central Committee, Directors
+of the Fourth and Fifth Cadre Bureaus of the
+Organization Department of the Communist
+Party of China Central Committee. Mr. Lv joined
+CNOOC in 2002 and served as the Director of
+the Human Resources Department of CNOOC.
+In November 2006, Mr. Lv became the Assistant
+President of CNOOC. In April 2010, Mr. Lv was
+appointed as the Vice President of CNOOC.
+Since December 2012, he has also served
+as Chairman of the Board of CNOOC Energy
+Technology and Services Limited, a subsidiary
+of CNOOC. Mr. Lv was appointed as a Non-
+executive Director of the Company on 27
+November 2013, and such appointment took
+effect from 1 January 2014.
+Save as aforesaid, Mr. Lv does not have any
+relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+Mr. Lv has no other interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) — 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the Shareholders.
+2.
+Mr. Chiu has served as an Independent Non-
+executive Director of the Company for more
+than nine years. For the reasons set out in the
+"Explanatory Statement Relating to Proposed
+General Mandates to Issue Shares and Buy
+Back Shares and Proposed Re-election
+of Directors", the Board of the Company
+considers that Mr. Chiu remains independent
+for the purpose of the Listing Rules and the re-
+election of Mr. Chiu is in the best interests of the
+Company and shareholders as a whole.
+(c)
+any adjustment, after the date
+of grant or issue of any options,
+rights to subscribe for or convert
+any security into shares or other
+securities referred to above, in
+the price at which shares in the
+Company shall be subscribed,
+and/or in the number of shares.
+in the Company which shall be
+subscribed, on exercise of relevant
+rights under such options, warrants
+or other securities, such adjustment
+being made in accordance with, or
+as contemplated by, the terms of
+such options, rights to subscribe or
+other securities,
+shall not exceed 20% of the total number
+of issued shares of the Company as at the
+date of the passing of this resolution; and
+for the purposes of this resolution:
+"Relevant Period" means the period from
+the date of passing of this resolution until
+whichever is the earlier of:
+(i) the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+(30,786)
+"Rights Issue" means an offer of shares.
+open for a period fixed by the Directors
+made to holders of shares whose names
+appear on the register of members of
+the Company on a fixed record date in
+proportion to their then holdings of such
+shares (subject to such exclusions or
+other arrangements as the Directors may
+deem necessary or expedient in relation
+to fractional entitlements or having regard
+to any restrictions or obligations under
+the laws of, or the requirements of, any
+recognized regulatory body or any stock.
+exchange in or in any territory outside
+Hong Kong).”
+148
+(11,823)
+(1)
+Future income taxes
+(b)
+579
+74,356
+74,935
+Future production costs
+(928)
+(11,278)
+(10,703)
+(575)
+Future development costs
+(v)
+(d)
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting.
+the grant of options and the exercise
+of any option granted under any
+share option scheme or similar
+arrangement for the time being
+adopted by the Company and/or
+any of its subsidiaries;
+of Hong Kong and the Stock Exchange
+for this purpose ("Recognized Stock
+Exchange"), subject to and in accordance
+with all applicable laws, rules and
+regulations and the requirements of the
+Listing Rules, or of any other Recognized
+Stock Exchange and the Articles of the
+Company, be and is hereby generally and
+unconditionally approved;
+the aggregate number of shares of
+the Company which the Company is
+authorised to buy back pursuant to the
+approval in paragraph (a) above shall not
+exceed 10% of the total number of issued
+shares of the Company as at the date of
+the passing of this resolution; and
+for the purposes of this resolution:
+"Relevant Period" means the period from
+the date of the passing of this resolution
+until whichever is the earlier of:
+Asia
+(excluding
+"THAT:
+(a)
+the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+(iv) any scrip dividend or similar
+arrangement providing for the
+allotment of shares in lieu of
+the whole or part of a dividend
+on shares of the Company in
+accordance with the Articles of the
+Company; or
+subject to the following provisions of this
+resolution, the exercise by the Directors
+during the Relevant Period (as hereinafter
+defined) of all the powers of the Company
+to issue, allot and deal with additional
+shares in the capital of the Company and
+to make or grant offers, agreements,
+options and similar rights to subscribe
+for or convert any security into shares in
+the Company (including bonds, notes,
+warrants, debentures and securities
+convertible into shares of the Company)
+which would or might require the exercise
+of such powers be and is hereby generally
+and unconditionally approved;
+CNOOC LIMITED Annual Report 2015
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting."
+(29,858)
+an issue of shares pursuant to
+any specific authority granted by
+shareholders of the Company in
+general meeting, including upon the
+exercise of rights of subscription or
+conversion under the terms of any
+warrants issued by the Company
+or any bonds, notes, debentures or
+securities convertible into shares of
+the Company;
+(ii)
+147
+a Rights Issue (as hereinafter
+defined);
+Notice of Annual General Meeting
+(i)
+the aggregate number of shares of the
+Company allotted or agreed conditionally
+or unconditionally to be allotted (whether
+pursuant to an option or otherwise)
+and any options, warrants or rights to
+be issued or granted by the Directors
+pursuant to the approval in paragraph (a)
+above, otherwise than pursuant to:
+the approval in paragraph (a) above
+shall authorise the Directors during the
+Relevant Period to make or grant offers,
+agreements, options and similar rights
+to subscribe for or convert any security
+into shares in the Company (including
+bonds, notes, warrants, debentures and
+securities convertible into shares of the
+Company) which would or might require
+the exercise of such powers after the end
+of the Relevant Period;
+(b)
+Thousand cubic feet
+Mcf
+Wu Guangqi
+Li Fanrong
+Mmbbls
+Executive Directors
+Board of Directors:
+Company Information
+151
+CNOOC LIMITED Annual Report 2015
+Note: In calculating barrels-of-oil equivalent, or BOE, we have assumed
+that 6,000 cubic feet of natural gas equals one BOE, with the
+exception of natural gas from South America, Oceania, SES and
+Tangguh projects in Indonesia in Asia, and Yacheng 13-1/13-4
+gas fields in China, which we have used actual thermal unit for
+such conversion purpose.
+Million cubic feet
+Mmcf
+Mmboe
+Million barrels
+Million barrels-of-oil equivalent
+CEO & President
+Lawrence J. Lau
+Yang Hua
+Lv Bo
+Thousand barrels of equivalent
+Tse Hau Yin, Aloysius
+Chiu Sung Hong (Chairman)
+Remuneration Committee
+Kevin G. Lynch
+Lawrence J. Lau
+Yang Hua (Chairman)
+Nomination Committee
+Chiu Sung Hong
+Tse Hau Yin, Aloysius (Chairman and Financial Expert)
+Audit Committee
+Kevin G. Lynch
+Tse Hau Yin, Aloysius
+Lawrence J. Lau
+Chiu Sung Hong
+Independent Non-executive Directors
+Chairman
+Lv Bo
+Non-executive Directors
+Compliance Officer
+Other Members of the Senior Management
+Mboe
+With respect to resolution numbered B3, approval is being sought
+from shareholders for an extension of the general mandate
+granted to the Board to issue and allot shares by adding to it
+the number of shares purchased under the authority granted
+pursuant to resolution numbered B1.
+Mbbls
+The America Petroleum Institute's scale for specific gravity
+for liquid hydrocarbons, measured in degrees
+API
+Glossary
+150 CNOOC LIMITED Annual Report 2015
+In addition, the TSX requires that at each annual meeting of
+holders of listed securities, the board of directors of a listed issuer
+must permit security holders of each class or series to vote on
+the election of all directors to be elected by such class or series.
+Historically, the Company applied for and received a waiver of
+this requirement from the TSX on an annual basis. However,
+the TSX adopted an exemption from this requirement for Eligible
+International Interlisted Issuers in 2015. The Company qualifies
+as an Eligible International Interlisted Issuer. The Company has
+provided a notice to TSX pursuant to the requirement of TSX
+Company Manual for purposes of the director election process
+utilized by the Company in 2016 to rely on such exemption and
+anticipates providing similar such notices for each successive
+year.
+With respect to resolutions numbered A3 to A5, the Company is
+exempt from the requirements of the Toronto Stock Exchange
+(the "TSX") to adopt a majority voting policy requiring that each
+director must be elected by a majority of the votes cast with
+respect to his or her election at an uncontested meeting by virtue
+of the fact that the Company is majority controlled indirectly by
+CNOOC. The Company does not intend to adopt a majority
+voting policy at this time or for so long as CNOOC is the majority
+controlling shareholder, as majority approval of each such director
+is already assured.
+10
+10.
+Wildcat
+After AGM, if the resolution of final dividend was passed, the
+register of members of the Company will be closed from 13 June
+2016 (Monday) to 17 June 2016 (Friday) (both days inclusive),
+during which no transfer of shares in the Company will be
+registered. In order to qualify for the proposed final dividends,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 10 June 2016 (Friday).
+Pursuant to Rule 13.39(4) of the Listing Rules, voting for all the
+resolutions set out in the notice of the annual general meeting
+will be taken by poll, except where the chairman, in good faith,
+decides to allow a resolution which relates purely to a procedural
+or administrative matter to be voted on by a show of hands.
+With respect to resolution numbered B2, approval is being sought
+from shareholders for a general mandate to issue, allot and deal
+with shares to be given to the Board. The Board wish to state that
+they have no immediate plans to issue or allot any new shares of
+the Company. Approval is being sought from the shareholders
+as a general mandate for the purpose of Section 141 of the
+Companies Ordinance (Cap. 622 of the Laws of Hong Kong) and
+the Listing Rules.
+9.
+8.
+7.
+6.
+Yuan Guangyu
+Notice of Annual General Meeting
+The register of members of the Company will be closed from
+23 May 2016 (Monday) to 26 May 2016 (Thursday) (both days
+inclusive), during which no transfer of shares in the Company
+will be registered. In order to qualify for attending the meeting,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 20 May 2016 (Friday).
+A well drilled on any rock formation for the purpose of
+searching for petroleum accumulations in an area or
+rock formation that has no known reserves or previous
+discoveries
+Appraisal well
+An exploratory well drilled for the purpose of evaluating the
+commerciality of a geological trap in which petroleum has
+been discovered
+Barrels-of-oil-equivalent
+BOE
+Billion cubic feet
+Bcf
+Barrel
+Bbl
+VOLUME ACRONYMS
+For a given year, total additions to proved reserves divided
+by production during the year
+Reserve replacement ratio
+Production sharing contract
+PSC
+Estimates of oil, gas and NGL quantities thought to be
+recoverable from known reservoirs under existing economic
+and operating conditions
+Proved Reserves
+Liquefied Natural Gas
+LNG
+Floating, Production, Storage and Offloading vessel
+FPSO
+Oil and gas exploration, development, production and sales
+Upstream business
+Thousand barrels
+Zhu Weilin
+Beijing, China
+Chen Wei
+With respect to resolution numbered B1, approval is being sought
+from shareholders for a general mandate to buy back shares to
+be given to the Board. The Board wish to state that they have no
+immediate plans to buy back any existing shares. The Explanatory
+Statement containing the information necessary to enable the
+shareholders to make an informed decision on whether to vote
+for or against the resolution to approve the buy back by the
+Company of its own shares, as required by the Listing Rules, is
+set out in a separate letter from the Company.
+www.cnoocltd.com
+CNOOC LIMITED
+www.fsc.org
+responsible sources
+Paper from
+FSC FSC C006398
+MIX
+Printed by Asia One Printing Limited
+Where there are joint registered holders of any shares, any
+one of such persons may vote at the above meeting (or at any
+adjournment of it), either personally or by proxy, in respect of such
+shares as if he/she were solely entitled thereto but the vote of the
+senior holder who tenders a vote, whether in person or by proxy,
+will be accepted to the exclusion of the vote(s) of the other joint
+holders and, for this purpose, seniority shall be determined by the
+order in which the names stand in the register of members of the
+Company in respect of the relevant joint holding.
+Designed and produced by: Equity Financial Press Limited
+Website: www.cnoocltd.com
+Zip Code: 100010
+CNOOC Tower, No.25 Chaoyangmen Beidajie,
+Beijing Office:
+Fax: (852) 2525 9322
+Tel: (852) 2213 2500
+65/F, Bank of China Tower, 1 Garden Road, Hong Kong
+Registered Office:
+152 CNOOC LIMITED Annual Report 2015
+E-mail: mr@cnooc.com.cn
+Completion and return of the form of proxy will not preclude a
+shareholder from attending and voting at the meeting or any
+adjournment thereof if the shareholder so desires and, in such
+event, the relevant form of proxy shall be deemed to be revoked.
+Every member entitled to attend and vote at the above meeting
+(or at any adjournment thereof) is entitled to appoint one or more
+proxies to attend and vote on his behalf. A proxy need not be a
+shareholder of the Company.
+149
+Notice of Annual General Meeting
+3.
+"THAT subject to the passing of the resolutions
+numbered B1 and B2 as set out in the notice
+convening this meeting, the general mandate
+granted to the Board to issue, allot and deal
+with additional shares of the Company and to
+make or grant offers, agreements, options and
+similar rights to subscribe for or convert any
+security into shares in the Company pursuant to
+resolution numbered B2 set out in this notice be
+and is hereby extended by the addition to it of
+an amount representing the aggregate number
+of shares of the Company which are bought
+back by the Company pursuant to and since
+the granting to the Company of the general
+mandate to buy back shares in accordance with
+resolution numbered B1 set out in this notice,
+provided that such extended amount shall
+not exceed 10% of the total number of issued
+shares of the Company as at the date of the
+passing of this resolution."
+Hong Kong, 6 April 2016
+Registered office:
+65th Floor,
+Bank of China Tower,
+In order to be valid, the form of proxy duly completed and signed
+in accordance with the instructions printed thereon, together with
+the power of attorney or other authority (if any) under which it is
+signed, or a copy of such authority notarially certified, must be
+completed and returned to the Company's registered office at
+65th Floor, Bank of China Tower, 1 Garden Road, Hong Kong not
+less than 36 hours before the time appointed for the holding of the
+meeting or any adjournment thereof (as the case may be).
+1 Garden Road,
+By Order of the Board
+CNOOC Limited
+Li Jiewen
+Joint Company Secretary
+Notes:
+1.
+2.
+3.
+4.
+5.
+Hong Kong.
+Fax: (8610) 8452 1441
+Tel: (8610) 8452 6642
+Media/Public Relations:
+Bank of China
+Principal Bankers:
+Tsue Sik Yu, May
+Joint Company Secretary
+Li Jiewen
+Deputy Chief Geologist
+Chief Safety Official
+Deputy Chief Exploration Engineer
+Xie Yuhong
+Industrial and Commercial Bank of China
+Song Lisong
+Chief Financial Officer
+Zhong Hua
+Senior Vice President
+Zhang Guohua
+Executive Vice President
+Executive Vice President
+Executive Vice President
+Executive Vice President
+Deng Yunhua
+China Construction Bank
+Bank of China (Hong Kong) Limited
+Citi Bank, N.A.
+E-mail: huanghe@cnooc.com.cn
+Fax: (852) 2525 9322
+Tel: (852) 2213 2502
+Hong Kong
+Fax: (8610) 8452 1441
+E-mail: ir@cnooc.com.cn
+Tel: (8610) 8452 2973
+Investor Relations:
+Beijing
+TSX: CNU
+HKSE: 00883
+NYSE: CEO
+Symbol and stock code:
+United States of America
+4 New York Plaza, 13th Floor
+New York, NY 10004
+JPMorgan Chase Bank, N.A.
+ADS Depositary:
+Hong Kong
+183 Queen's Road East
+Wan Chai
+Hong Kong Share Registrar:
+Hong Kong Registrars Limited
+Shops 1712-1716, 17th Floor
+Hopewell Center
+Bank of America
+Chen Bi
+CNOOC LIMITED Annual Report 2015
+Major Exploration
+Areas
+(Net) (km²)
+OVERVIEW
+Indonesia
+Asia (excluding China) was the first overseas region that
+the Company entered into and has become one of its
+major overseas oil and gas producing areas. Currently,
+the Company holds oil and gas assets mainly in Indonesia
+and Iraq. As of the end of 2015, the reserves and daily
+production volume derived from Asia (excluding China)
+reached 208.9 million BOE and 70,987 BOE/day,
+respectively, representing approximately 4.8% and 5.2%
+of the Company's total reserves and daily production,
+respectively.
+Asia (excluding China)
+Overseas
+The typical water depth of the Company's operation area in
+the East China Sea region is approximately 90 meters. As
+of the end of 2015, approximately 3.8% of the Company's
+reserves and 0.9% of the Company's production were
+derived from East China Sea.
+East China Sea
+As of the end of 2015, the Company's asset portfolio in
+Indonesia consisted of three development and production
+blocks and a block under construction, among which, the
+Company acted as the operator for the Southeast Sumatra
+block, while the Madura Strait PSC was a joint operation
+block. In addition, the Company, as a non-operator, also
+holds working interests in the production sharing contracts
+in Malacca PSC.
+Benefitting from the contribution of a few new projects such
+as Liwan 3-1 gas field which commenced production in
+2014, the production output in Eastern South China Sea
+increased significantly.
+13
+CNOOC LIMITED Annual Report 2015
+In 2015, the Company made favourable results in rolling
+and expanding exploration in the North Slope of East Sag in
+Baiyun Trough. Two independent discoveries were made,
+namely Liuhua 20-2 and Liuhua 21-2, improving the overall
+efficiency of exploration and development in the region. In
+addition, two successful appraisals were made, namely
+Liuhua 28-2 and Lufeng 14-4.
+Eastern South China Sea is one of the Company's most
+important crude oil producing areas. Currently, the typical
+water depth of the Company's operation area in this region
+ranges from 100 to 300 meters. The crude oil produced is
+mostly of light to medium gravity. As of the end of 2015,
+the reserves and daily production volume in Eastern South
+China Sea reached 515.6 million BOE and 229,679 BOE/
+day, respectively, representing approximately 11.9%
+and 16.9% of the Company's total reserves and daily
+production, respectively.
+Eastern South China Sea
+For development, Dongfang 1-1 gas field phase I
+adjustment came on stream in 2015, Weizhou 12-2
+oilfield joint development project and Weizhou 11-4 North
+oilfield phrase II were announced to start production at the
+beginning of 2016.
+Business Overview
+The Company owns approximately 13.90% interest in the
+Tangguh LNG Project in Indonesia. In 2015, production
+volume of phase I of the Project remained stable. Currently,
+we are preparing for the development of the third LNG
+train of phase II, which is expected to be completed and
+commence production in 2019.
+Iraq
+The Company holds 63.75% participating interest in the
+technical service contract of Missan oilfields in Iraq and acts
+as the lead contractor of these oilfields.
+In 2015, the Akpo oilfield maintained stable production and
+its net production averaged approximately 64,000 barrels
+per day. The Egina project is currently at the construction
+stage, with construction of production facilities such as
+Christmas trees and FPSO undergoing.
+The Company owns 45% interest in the OML130 block in
+Nigeria. OML130 is a deepwater project comprised of four
+oilfields, namely, Akpo, Egina, Egina South and Preowei.
+Nigeria
+Africa is one of the relatively large oil and gas reserves
+and production base for the Company. The Company's
+assets in Africa are primarily located in Nigeria and Uganda.
+As of the end of 2015, the reserves and daily production
+volume derived from Africa reached 166.6 million BOE and
+83,677 BOE/day, respectively, representing approximately
+3.9% and 6.2% of the Company's total reserves and daily
+production, respectively.
+Africa
+The Company owns interests in four blocks which are still
+under exploration in Papua New Guinea and a joint research
+block in New Zealand.
+Other Regions in Oceania
+The Company also owns one exploration block in Australia,
+which is currently under appraisal.
+In 2015, the North West Shelf LNG Project generated stable
+production and achieved favorable economic returns.
+The Company owns 5.3% interest in the Australian North
+West Shelf LNG Project. The project has commenced
+production and is currently supplying gas to end-users
+including the Dapeng LNG Terminal in Guangdong, China.
+Australia
+Currently, the Company's oil and gas assets in Oceania
+are mainly located in Australia and Papua New Guinea.
+As of the end of 2015, the reserves and daily production
+volume derived from Oceania reached 90.8 million BOE and
+21,673 BOE/day, respectively, representing approximately
+2.1% and 1.6% of the Company's total reserves and daily
+production, respectively.
+Oceania
+study, and adopted effective measures to increase
+production volume of mature wells. The newly drilled
+wells also achieved expected production levels. In 2015,
+the production of Missan oilfields increased steadily and
+averaged approximately 28,000 barrels per day.
+In 2015, faced with the severe security conditions in Iraq,
+as well as declining production of mature oilfields and other
+difficulties, the Company coordinated the development
+and production operations, strengthened its oil reservoir
+In 2015, the Company made 5 new independent discoveries
+in Western South China Sea, namely Wushi 16-1 West,
+Wushi 17-5, Wushi 16-9, Lingshui 18-1 and Lingshui 18-
+2. Of which, Lingshui 18-2 is a new natural gas discovery
+obtained from the new layer of the central valley channels
+and was tested with high production capacity. Five
+successful appraisals were made, namely Wushi 16-9,
+Wushi 16-1 West, Weizhou 6-8, Wushi 17-5 and Lingshui
+25-1. Of which, Lingshui 25-1 was confirmed to be a
+mid-to-large sized natural gas structure after appraisal;
+Integration of exploration and development was promoted
+in Wushi Trough, with Wushi 16-9, Wushi 16-1 West and
+Wushi 17-5 being successfully appraised, enhancing the
+value of regional development.
+14 CNOOC LIMITED Annual Report 2015
+Western South China Sea is one of the most important
+natural gas production areas for the Company. Currently,
+the typical water depth of the Company's operation area in
+this region ranges from 40 to 120 meters. As of the end of
+2015, the reserves and daily production volume in Western
+South China Sea reached 672.6 million BOE and 143,676
+BOE/day, respectively, representing approximately 15.6%
+and 10.6% of the Company's total reserves and daily
+production, respectively.
+For development and production, new projects including
+Jinzhou 9-3 comprehensive adjustment, Qinhuangdao 32-6
+comprehensive adjustment, Kenli 10-1 oilfield, Bozhong
+28/34 oilfields comprehensive adjustment and Luda 10-1
+oilfield comprehensive adjustment commenced production
+during the year, adding impetus to the Company's
+production growth.
+comprehensive adjustment projects and new oil and gas
+Business Overview
+11
+CNOOC LIMITED Annual Report 2015
+Secondly, we strictly controlled the quality of geology
+and reservoirs designs and promoted the risk-resistance
+capacity of new projects. This will help us ensure that
+various development indicators are achieved for infill drilling,
+Firstly, we focused on return in feasibility study projects
+and significantly reduced development investments. We
+achieved this mainly by optimizing designs and investment.
+fields.
+In 2015, the Company's development and production
+faced tremendous pressure due to the continuous slump in
+international oil prices. Therefore, while ensuring production
+safety, the Company focused on enhancing efficiency
+and lowering costs in its development and production
+operations, and was able to achieve its annual development
+and production targets during the year.
+In 2015, the Company's net oil and gas production reached
+495.7 million BOE, representing an increase of 14.6%
+year over year and hit the high end of the production
+target of 475-495 million BOE. To date, new projects
+planned for 2015, Jinzhou 9-3 comprehensive adjustment,
+Bozhong 28/34 comprehensive adjustment, Kenli 10-1
+In 2015, the Company successfully completed its
+production target and reached the high end of the target
+set early this year. The Company carefully organized its
+operational resources and made smooth progress in
+engineering construction. There were more than 20 projects
+under construction in 2015. Currently, seven projects
+planned for 2015 came on stream.
+Engineering Construction, Development and
+Production
+In 2016, the Company will prioritize offshore China, and
+balance among mature areas, rolling areas and new areas.
+We will focus on high-quality blocks and conventional oil
+and gas exploration overseas. The Company will continue to
+maintain heavy exploration workload to ensure mid-to long-
+term sustainable development.
+1,441
+15,072
+oil field, Dongfang 1-1 phase I adjustment and Luda 10-1
+comprehensive adjustment, commenced production in
+the year; Weizhou 11-4N oilfield phase II and Weizhou
+12-2 oilfield joint development project were announced to
+commence production early 2016.
+Thirdly, we conducted special programs to lower operating
+expenses and established a long-term mechanism to solidify
+the achievements, which resulted in the successful control
+of operating costs. By utilizing market mechanisms, service
+and supply costs have also been lowered.
+Fourthly, the number of projects and production
+expenditures were effectively controlled through project
+screening, budget controls and process management.
+Meanwhile, through changes in the performance review
+system of business units, their motivation of cost control
+was strengthened.
+Looking forward to 2016, the workload of onshore
+construction and offshore installation will remain stable.
+A total of four new projects are expected to commence
+production, including Kenli 10-4 oilfield, Panyu 11-5 oilfield,
+Weizhou 6-9/6-10 oilfield comprehensive adjustment
+project and Enping 18-1 oilfield. Among them, Kenli 10-4
+oilfield already commenced production in January 2016. In
+addition, it is expected that nearly 20 new projects will be
+under construction in 2016 and support the Company's
+sustainable growth in the future.
+These new discoveries and successful appraisals further
+demonstrated Bohai's potential as a core production region
+for the Company.
+in Guantao Group in Southeast Ring of Dabozhong
+and contributed to the sustainable development of the
+Company. In addition, the Company also successfully
+appraised 13 oil and gas structures, including Caofeidian
+6-4, Bozhong 34-9, Luda 16-3, Luda16-3 South, Bozhong
+34-1 North, Bozhong 29-1, Qinhuangdao 27-3, Kenli 10-
+1, Caofeidian 6-1, Bozhong 26-3, Jinzhou 20-5, Bozhong
+26-3 and Bozhong 19-4. Among which, Caofeidian
+6-4, Luda 16-3/Luda 16-3 South and Bozhong 34-9
+structures were proved to be mid-to-large sized oilfields
+after appraisals. Bozhong 34-1 North represents the
+fruitful results that arose from the concept of integration of
+exploration and development, which helped enhance the
+value of regional development.
+Business Overview
+ne
+12 CNOOC LIMITED Annual Report 2015
+Bohai has rich oil and gas resources and has been
+one of the Company's primary areas for exploration
+and development. In 2015, the Company made seven
+successful discoveries in Bohai, namely Penglai 7-6,
+Luda 16-3, Caofeidian 6-1, Penglai 31-3 South, Bozhong
+29-4 West, Nanbao 35-2 South and West Bozhong 34-1
+North. Successful results were made in frontier exploration
+in Miaoxinan Uplift; light crude oil discovery was made
+Bohai is the most important crude oil producing area for the
+Company. The crude oil produced in this region is mainly
+heavy oil. As of the end of 2015, the reserve and daily
+production volume in Bohai were 971.8 million BOE and
+500,719 BOE/day, respectively, representing approximately
+22.5% and 36.9% of the Company's total reserves and
+daily production, respectively. The operation area in Bohai is
+mainly shallow water with a depth of 10 to 30 meters.
+Bohai
+Offshore China
+REGIONAL OVERVIEW
+Through the above key measures, the Company will
+prioritize return, strive to achieve its annual production target
+and lay a solid foundation for its long-term sustainable
+growth.
+Thirdly, we will strengthen the post evaluation of the ODP
+project, infill drilling and workover, establish scientific
+assessment criteria, and explore the potential to further
+reduce costs and enhance efficiency.
+Secondly, we will further develop the potential of mature
+oil fields and slow down its production decline. With oil
+reservoirs as the focus, we'll intensify the basic work of
+improving water injection and liquid production structures
+through the meticulous study of mature oil fields and
+reformation of management concepts.
+Firstly, we will drive the feasibility study for major early-stage
+projects to further lower cost and enhance efficiency. We
+will strictly control the quality of geological reservoir designs
+of early-stage projects and strengthen the study on the
+producing reserves and recoverable reserves.
+In 2016, the Company's development and production
+are expected to face a harsh external environment due to
+pressure from international oil prices. The Company will
+undertake its various tasks with emphasis on the following
+areas:
+Western South China Sea
+3,792
+Business Overview
+We plan to utilize the synergy of Usan and OML130 projects
+to establish an oil and gas production base in west Africa.
+The LNG sourced by the Company from the North West
+Shelf LNG Project in Australia and the Tangguh LNG Project
+in Indonesia is mainly based on long-term supply contracts
+and is sold to various customers in the Asia-Pacific region,
+including LNG Terminals in Dapeng, Guangdong and
+Putian, Fujian, China.
+The Company's natural gas sales prices are mainly
+determined by the Company's negotiations with its
+customers. The Company's natural gas sales agreements
+are generally long-term contracts, which normally include
+a periodic price adjustment mechanism. The Company's
+natural gas customers are primarily located in the
+Southeastern coast of China and mainly include Hong Kong
+Castle Peak Power Company Limited, CNOOC Gas and
+Power Group, China BlueChemical Ltd, etc.
+Sales of Natural Gas
+The world economy lost its growth momentum and varied
+for different areas in 2015. The diversity in monetary policies
+in different countries led to a strong US dollar. While the
+global demand for oil increased moderately, international
+oil prices continued to plummet affected by oversupply of
+crude oil, which was mainly driven by increased production
+of US shale oil as well as from OPEC member states.
+As a result, the Company's realized oil prices declined
+significantly. In 2015, the Company's average realized oil
+price was US$51.27/barrel, representing a decline of 46.6%
+year over year.
+The Company's crude oil sales prices are mainly determined
+by the prices of international benchmark crude oil of
+similar quality, with certain premiums or discounts subject
+to prevailing market conditions. Although the prices are
+quoted in U.S. dollars, customers in China usually pay by
+Renminbi. The Company currently sells three types of crude
+oil in China, namely, heavy crude, medium crude and light
+crude, which are benchmarked by Duri, Daqing, and Tapis,
+respectively, all of which are the benchmarking crude oil
+prices in the Far East. The Company's major customers in
+China are Sinopec, Petrochina and CNOOC. The crude oil
+produced overseas and sold in the international markets is
+benchmarked at the Brent and WTI oil prices.
+The Company sells its crude oil produced offshore China
+to the PRC market mainly through CNOOC China Limited,
+its wholly-owned subsidiary. The Company sells its crude
+oil produced overseas to international and domestic
+markets mainly through another wholly-owned subsidiary,
+China Offshore Oil (Singapore) International Pte Ltd. Nexen
+Energy ULC, a wholly-owned subsidiary of the Company,
+sells its crude oil and synthetic oil to international markets
+separately.
+In 2015, the Company's average realized natural gas price
+was US$6.39/mcf, representing a 0.8% decrease year over
+year, primarily due to two reasons: on one hand, production
+from new gas fields in offshore China commanded higher
+prices; on the other hand, realized gas price overseas
+decreased year over year as a result of significant decrease
+in natural gas prices in North America market, which offset
+the price increase in offshore China.
+Sales of Crude Oil
+The Company holds a license issued by the government
+of Iceland for carrying out oil exploration operations in
+the Norwegian Sea, Northeast Iceland. The project is at
+exploration and appraisal stage and completed offshore 2D
+seismic data acquisition and related appraisal work.
+Other Regions in Europe
+Business Overview
+CNOOC LIMITED Annual Report 2015
+16
+BAY
+SALES AND MARKETING
+In China, the current oversupply of natural gas will adversely
+affect the development, operation and income of the
+Company's natural gas business. To cope with the current
+shortage of natural gas demand from downstream users,
+the Company will coordinate related designs, approvals and
+gas price negotiations with downstream customers, with the
+aim of promoting a stable production of producing oil and
+gas fields and the development of oil and gas fields under
+construction.
+RESEARCH AND DEVELOPMENT
+In 2015, the Company continued to implement its
+"technology-driven" strategy through further reforms in
+the scientific and technological systems, coordinated
+research resources and promoted research and production
+works in an orderly and effective manner. During the year,
+the Company continued to streamline the positions of
+different research institutes and to identify their respective
+responsibilities. In addition, measures were taken to
+coordinate the functions and systems of different institutes.
+The Company also established an unconventional oil and
+gas research institute. Pilot platforms such as the platform
+for the development of high temperature and high pressure
+reservoirs were put into use, providing basic requirements
+and protection for the Company's independent
+technological innovations. Through such innovations, the
+Company was able to protect its increased reserves and
+production as well as to lower cost and enhance efficiency
+for its development projects. A series of research findings
+have been applied to increase production efficiency.
+In recognition of its achievements, a second prize was
+awarded to the Company for "Key Technological Application
+in Enhancing Oil Recovery of Offshore Heavy Polymer
+Flooding" from the National Technological Invention Award
+in 2015.
+As a company listed in Hong Kong, the U.S. and Canada,
+the Company will continue to strictly comply with all
+regulatory requirements, strengthen its risk management
+and internal control system, and maintain a high standard
+of corporate governance to ensure the Company's healthy
+development.
+In 2015, the Company continued to strengthen the
+organization construction of risk management and
+internal control, carried out the anti-fraud status
+investigation and assessment and improved the
+decision-making related policies. The management
+conclude that as of 31 December 2015, the
+Company' internal control over financial reporting was
+effective.
+With respect to internal control, the Company
+has chosen and adopted the internal control
+framework issued by COSO of the U.S., established
+an internal control system and mechanism over
+financial, operational and compliance controls and
+has conducted continuing review and evaluation
+of the internal control of the Company to ensure
+the timeliness, accuracy and completeness of all
+information reported.
+With respect to risk management, the Company has
+chosen and adopted the risk management framework
+issued by COSO ("Committee of Sponsoring
+Organizations of the Tread way Commission") of
+the U.S., established a risk management system
+covering design, implementation, monitoring,
+assessment and continuous improvement based on
+the ISO 31000:2009 "Risk Management-Principles
+and Guidelines". The Risk Management Committee
+established the overall targets and policies of the
+risk management system which are in line with
+the strategic objectives of the Company, and
+identified, analysed and assessed the overall risk of
+the Company, including the Company's key risks
+in making major decisions, important events and
+key business processes. The Risk Management
+Committee is also responsible for reviewing and
+approving the response plans to major risks, as
+well as following-up and periodically reviewing the
+implementation of such response plans, in order
+to make sure that sufficient attention, monitor and
+responses will be paid to all key risks of the Company.
+The Company's Risk Management Committee is
+directly managed by the Chief Executive Officer and
+has been authorized by the Board to be in charge with
+the organization and implementation of the overall risk
+management and internal control, on-going monitor of
+the risk management and internal control systems of
+the Company, and makes periodic reports to the Board
+regarding the status of the risk management and internal
+control systems of the Company.
+18 CNOOC LIMITED Annual Report 2015
+Since its establishment, the Company has treated risk
+management and internal control as a top priority. The
+Company recognizes that it is the duty and obligation of its
+management to establish and maintain a risk management
+and internal control system, which serves the Company's
+strategic objectives and meets the Company's business
+practice.
+RISK MANAGEMENT AND INTERNAL
+CONTROL SYSTEM
+Innovative Development of Key Technologies
+Following the successful well logging in Lingshui 18-1-1
+well, the Company made its first commercial discovery in
+Central Canyon Yinggehai in 2015 through technological
+innovation. Results from the mathematical modeling and
+physical modeling research of thermal recovery of heavy oil
+reservoirs offshore, which were developed in-house, were
+used in Nanbao 35-2 and Luda 27-2 oilfields. We have
+successfully developed the first comprehensive assessment
+system of log interpretation which helped reduce the cost
+of comprehensive assessment considerably. The Company
+developed for its own 7 series and 5 processing techniques
+for sand prevention, including the complete series of cased
+well and open well. The Company is at the forefront of
+technological development in the country.
+In addition, the Company undertook a number of national
+and CNOOC's science and technology projects such as
+the "Development of Large-scale Oil and Gas Fields and
+Coalbed Methane" and achieved know-how and new
+theories for geological explorations regarding the differences
+in oil and gas accumulation in active fault zones in Bohai
+as well as high-temperature and high-pressure natural gas
+accumulation. New exploration techniques were acquired,
+involving "low porosity, low permeability and low pressure"
+oil and gas reservoirs and deep oil and gas exploration
+as well as key developments of oil gas fields concerning
+improvements and comprehensive adjustments of maritime
+cluster well pattern and offshore heavy oil chemical flooding.
+In 2015, in order to provide key technological support for
+its sustainable development, the Company strengthened
+the management of technological projects and focused
+its efforts on areas such as exploration and development
+technology for deep water oil and gas fields, offshore heavy
+oil fields and fields with low porosity and permeability,
+onshore coalbed methane exploration technology,
+tapping technology of oil gas fields, offshore oil gas fields,
+development of high-temperature and high-pressure gas
+fields in South China Sea, etc.
+Major Scientific Project Development
+Business Overview
+17
+CNOOC LIMITED Annual Report 2015
+The United Kingdom is one of the Company's key overseas
+areas, as several key projects such as Buzzard and Golden
+Eagle have contributed considerably to the Company's
+production. In 2015, the net production of Buzzard oilfield
+averaged approximately 72,000 barrels per day. In the
+future, we will continue to intensify our efforts in the oil and
+gas development in the UK, and actively look for potential
+exploration and development blocks in order to achieve a
+stable and sustainable development in the region.
+In addition, Nexen Petroleum Nigeria Limited holds a 20%
+non-operating interest in Usan oilfield in the OML138.
+block in offshore Nigeria, together with a number of other
+discoveries and exploration targets. Nexen Petroleum
+Nigeria Limited made a new discovery in the area in 2015,
+namely Ukot South. Also, Nexen Petroleum Exploration
+& Production Nigeria Limited and Nexen Petroleum
+Deepwater Nigeria Limited hold an 18% non-operating
+interest in the OPL 223 and OML 139 PSC, respectively.
+The Company's asset portfolio in the North Sea consists of
+projects under production, development and exploration,
+mainly including: a 43.2% interest in the Buzzard oilfield, one
+of the largest oilfield in the North Sea, and a 36.5% interest
+in the Golden Eagle oilfield, making the Company the largest
+crude oil operator in the North Sea.
+The Company holds interests in several oil and gas
+fields such as Buzzard and Golden Eagle in the North
+Sea. As of the end of 2015, the Company's reserves
+and daily production volume derived from Europe
+reached 103.8 million BOE and 110,842 BOE/day,
+respectively, representing approximately 2.4% and 8.2%
+of the Company's total reserves and daily production,
+respectively.
+Canada is one of the world's major regions with rich oil
+sands resources, participation in oil sands development will
+be favorable to the sustainable growth of the Company. In
+Canada, the Company, through its subsidiary, Nexen, owns
+100% working interest in the oil sands project located at
+the Long Lake as well as three other oil sands leases in the
+Athabasca region in northeastern Alberta. We also hold a
+7.23% interest in the Syncrude project and a 25% interest
+in several other non-operated exploration and development
+leases.
+Canada
+In addition, the Company owns interest in two major deep-
+water developments, Stampede and Appomattox, and
+a number of other exploration blocks in the U.S. Gulf of
+Mexico, through its wholly-owned subsidiary, Nexen Energy
+ULC ("Nexen"). The Company also owns interests in several
+exploration blocks in offshore Alaska.
+In 2015, along with the increasing number of wells drilled,
+the net production of the Eagle Ford project continued to
+increase and averaged approximately 60,000 BOE/day. At
+the same time, upon the identification of the core region of
+the Powder River Basin for the Niobrara project, the project
+began to make contribution to the Company. Under the
+current low oil price environment, our operators have slowed
+down asset development, which will impact our near-term
+production due to natural decline.
+The Company currently holds 33.3% interest in two shale
+oil and gas projects in the U.S., namely the Eagle Ford and
+Niobrara shale oil and gas projects.
+The U.S.
+In 2015, the Company continued the development of
+the Long Lake project. Its net production averaged
+approximately 30,000 BOE/day. For the oil sands project in
+Canada, under the low oil price environment, the Company
+will leverage on its overall advantages, lower cost and
+enhance efficiency, and control the pace of investment
+to provide a solid resource safeguard for its long-term
+development.
+North America has become the biggest overseas reserves
+and production region of the Company. The Company
+holds interests in oil and gas assets in the U.S., Canada and
+Trinidad and Tobago, as well as part of the shares of MEG
+Energy Corporation in Canada. As of the end of 2015, the
+Company's reserves and daily production volume derived
+from North America reached 1,120.0 million BOE and
+135,030 BOE/day, respectively, representing approximately
+26.0% and 10.0% of the Company's total reserves and daily
+production, respectively.
+Apart from Nigeria and Uganda, the Company also owns
+interests in several blocks in Equatorial Guinea, the Republic
+of The Congo, Algeria and the Gabonese Republic. In 2015,
+the Company made a new discovery in REZ structure in
+Algeria.
+Other Regions in Africa
+In 2015, the FDP/PRR preparation for all oil and gas fields
+(excluding Kingfisher) in the reserved areas in the EA1
+and EA2 blocks, in accordance with the government's
+review requirements, were completed and submitted to the
+government of Uganda for the application of production
+licenses, and is currently awaiting government's approval.
+In 2015, the Company, as the operator of EA 3A, took
+great efforts to promote the development of the Kingfisher
+oilfield. The field is still under research at the preliminary
+development stage, and has currently completed the Pre-
+FEED of the crude oil pipeline.
+The Company owns one-third of the interest in each of EA
+1, EA 2 and EA 3A in Uganda. EA 1, EA 2 and EA 3A are
+located at Lake Albert Basin in Uganda, which is one of the
+most promising basins for oil and gas resources in Africa.
+Uganda
+North America
+In addition, the Company holds approximately 12.39% of
+the shares of MEG Energy Corporation in Canada, which is
+listed on the Toronto Stock Exchange. The Company also
+owns a 60% interest in Northern Cross (Yukon) Limited,
+which owns oil and gas exploration blocks in the Yukon
+Province in Canada.
+CNOOC LIMITED Annual Report 2015
+15
+Europe
+The Company also holds interests in several exploration and
+production blocks in Colombia.
+Other Regions in South America
+Brazil is one of the world's most important deepwater oil and
+gas development regions. The Company will fully leverage
+on the development opportunities of the Libra project in
+Brazil to seek a new growth point for production growth.
+In 2015, a successful appraisal was made in the Libra
+project, which further reinforced the confidence in
+exploration and appraisal in the block.
+The Company holds a 10% interest in the Libra PSC, a
+deepwater pre-salt project in Brazil. The oilfield is located in
+the Santos Basin, with a block area of about 1,550 km² and
+water depth of about 2,000 meters.
+Brazil
+In 2015, the Company made considerable efforts to
+maintain normal operations and production in the operating
+areas and endeavored to overcome the bottleneck of
+operational resources, coordinate resources and improve
+operational efficiency. The production of Bridas increased
+slightly to approximately 49,000 BOE/day. The downstream
+refinery maintains a high level of operation capacity and
+research on facilities upgrade and expansion is currently
+conducting.
+The Company holds a 50% interest in Bridas and makes
+joint management decisions. Bridas holds 40% interest
+in Pan American Energy ("PAE") in Argentina and 100%
+interest in AXION Refinery. Bridas engages in upstream
+oil and gas exploration and production activities as well
+as downstream refining activities in Argentina and other
+countries. The strength of upstream and downstream
+integration is gradually realized.
+Argentina
+In South America, the Company mainly holds a 50%
+interest in Bridas Corporation ("Bridas”) and a 10% interest
+in the PSC of the Libra oilfield in Brazil, among which, the
+Company's 50% interest in Bridas is accounted for by
+equity methods. As of the end of 2015, the Company's
+reserves and daily production volume derived from South
+America reached 299.4 million BOE and 49,884 BOE/day,
+respectively, representing approximately 6.9% and 3.7%
+of the Company's total reserves and daily production,
+respectively.
+South America
+The Company owns 12.5% interest in the 2C block and a
+12.75% interest in the 3A block in Trinidad and Tobago,
+respectively, of which the 2C block is in production. The
+engineering construction of phase III of the natural gas
+project progressed smoothly, and is expected to come on
+stream in the second half of 2016.
+Other Regions in North America
+Business Overview
+United Kingdom
+12,996
+415
+142
+Secondly, remarkable achievements were made in
+rolling and expanding exploration in the North Slope
+of East Sag in Baiyun Trough in Eastern South China
+Sea. Two discoveries of Liuhua 20-2 and Liuhua 21-2
+were made which significantly enhanced the overall
+efficiency of exploration and development in the
+region.
+Firstly, effectively completed the appraisal of three
+mid-to-large sized oil fields. The oil and gas structures
+of Caofeidian 6-4, Luda 16-3/Luda 16-3 South and
+Bozhong 34-9 in Bohai were successfully appraised,
+most of which being light oil.
+In 2015, the Company continued to implement a proactive
+exploration strategy in offshore China, resulting in successful
+achievements including the following:
+In offshore China, the exploration activities of the Company
+remained at a high level. In 2015, a total of approximately
+13.0 thousand kilometers of 2D Seismic Data was acquired
+independently; a total of approximately 16.5 thousand
+square kilometers of 3D Seismic Data was acquired
+independently and through PSC, and 123 exploration
+wells were drilled. In addition, the Company completed 19
+unconventional wells onshore China. 14 new discoveries
+were made and 20 oil and gas structures were successfully
+appraised. The success rate of independent exploration
+wells in offshore China is 45-67%.
+322,577
+Total
+Thirdly, breakthroughs were made in the expansion
+and new layer exploration in the central valley
+channels in Western South China Sea, with the
+discovery of Lingshui 18-1, and successful appraisal
+of the oil and gas structure of Lingshui 25-1.
+65,285
+7,674
+Europe
+795
+South America
+6,801
+North America
+Subtotal
+Fourthly, with existing production facilities, the rolling
+exploration in Bohai has led to remarkable results,
+with the successful appraisal of Bozhong 34-1N oil
+and gas structure. Aiming at high-abundance and
+high-quality reserves, the Company strengthened
+the integrated exploration and development in Wushi
+Trough in Western South China Sea, and successfully
+appraised a number of oil fields around Wushi 17-
+2, which enhanced the development efficiency of the
+region.
+Such achievements have further consolidated the position
+of offshore China as the core area of the Company and
+demonstrated the Company's unique strength in offshore
+China.
+For overseas exploration, the Company continued to
+focus on key areas and optimized its investment portfolio
+strategies for sustainable development. New discoveries
+included REZ in Algeria and Ukot South in Nigeria. In
+addition, three oil and gas structures were successfully
+appraised, including MAS and OGB in Algeria and Libra in
+Brazil, demonstrating the Company's favorable exploration
+progress overseas.
+2D (km)
+Seismic Data
+Successful Appraisal Wells
+PSC Independent
+PSC Independent
+Appraisal Independent
+Wildcat
+PSC
+Independent
+Wildcat Appraisal
+New Discoveries
+Exploration Wells
+The Company's major exploration activities in 2015 are set
+out in the table below:
+In 2015, the Company utilized technological innovation to
+break through bottlenecks in exploration. The Company
+also increased operational efficiency through technological
+innovations such as Single Trip Triple Large Coring.
+Breakthroughs were made in the sampling process of heavy
+oil in Bohai. The well logging and testing for high-pressure-
+high-temperature wells also made progress.
+Furthermore, the Company has enhanced its management
+through optimizing exploration portfolio and projects,
+improving management processes and operational
+organization and reinforcing on-site operation management,
+integration of development and exploration and overseas
+management. Specific measures carried out included:
+communicating actively with contractors to lower service
+prices; reinforcing the refined management of exploration
+wells and reducing costs by focusing on details; enhancing
+operational efficiency through technological innovation; and
+reinforcing the integration of exploration and development
+to enhance the overall benefits for the Company through
+effective control of exploration costs.
+Business Overview
+10 CNOOC LIMITED Annual Report 2015
+Overseas
+3D (km²)
+33,333
+5,797
+Business Overview
+9
+CNOOC LIMITED Annual Report 2015
+In 2015, the Company significantly reduced its capital
+expenditure. However, the Company still reached its
+production and business targets in spite of all difficulties.
+The Company managed to maintain appropriate exploration
+expenditures and intensive exploration activities, and
+achieved successful results. Seven new projects planned in
+early 2015 all came on stream. The high end of production
+target was met with a total volume of 495.7 million BOE. To
+ensure sustainable development in the future, the Company
+steadily pushed ahead the construction of more than 20
+projects. All in cost per BOE was US$39.82, representing a
+decline for the second consecutive year. The Company has
+maintained a healthy financial position with a net profit of
+RMB20.25 billion for the year. Meanwhile, health, safety and
+environmental protection performance remained stable.
+Looking forward to 2016, the recovery of the global
+economy is expected to remain weak; low international oil
+prices will prevail, and the external operating environment
+is likely to remain tough. In spite of this, the Company
+In 2015, the Company persisted with strategies formulated
+at the beginning of the year, which includes, maintaining
+prudent financial policy and investment decision; strengthening
+cost control and continuing to improve quality and
+efficiency; ensuring safe operation of producing projects;
+keeping sanctioned projects on schedule with stringent
+quality control.
+For this reason, the Company continued to implement the
+"Year of Quality and Efficiency" program and carried out
+effective measures to maintain healthy and sustainable
+development.
+remains confident and persistent. We will further strengthen
+our operating strategies under a low-oil-price environment,
+which include: maintaining prudent financial policy;
+continuing to lower costs and increase efficiency through
+technology and management innovation; ensuring safe
+operation and strict compliance with regulations; focusing
+on return by balancing short-term benefit and long-term
+development.
+In 2015, growth momentum of the world economy was
+sluggish. The downward pressure of the Chinese economy
+continued while international oil prices remained low. The
+Company and the entire oil and gas industry faced severe
+market situation and difficult business environment.
+In its PSC operations, China National Offshore Oil
+Corporation ("CNOOC"), the Company's controlling
+shareholder, has the exclusive right to explore and
+develop oil and natural gas in offshore China in
+cooperation with foreign partners through PSCs.
+CNOOC has transferred to the Company all of its
+rights and obligations under all the PSCs (except
+those relating to its management and regulatory
+function as a state-owned company), including new
+PSCs that will be signed in the future.
+approximately 73.8% of its net production in offshore
+China were derived from independent projects.
+In its independent operations, the Company has
+been adding more reserves and production mainly
+through independent exploration and development in
+offshore China. As of the end of 2015, approximately
+85.7% of the Company's net proved reserves and
+In offshore China, the Company engages in oil and natural
+gas exploration, development and production in Bohai,
+Western South China Sea, Eastern South China Sea and
+East China Sea, either independently or in cooperation
+with foreign partners through production sharing contracts
+("PSCS"). As of the end of 2015, approximately 53.9% of the
+Company's net proved reserves and approximately 65.2%
+of its net production were derived from offshore China.
+CNOOC Limited is an upstream company specializing in
+the exploration, development and production of oil and
+natural gas. It is the dominant oil and natural gas producer
+in offshore China and, in terms of reserves and production,
+is also one of the largest independent oil and natural gas
+exploration and production companies in the world. As of
+the end of 2015, the Company had net proved reserves of
+4.32 billion BOE (including approximately 0.3 billion BOE
+in its equity method investees). In 2015, the Company had
+total net oil and gas production of 1,358,022 BOE per
+day (including net oil and gas production of approximately
+50,357 BOE per day in its equity method investees).
+Li Fanrong CEO
+Overseas, following years of overseas development, the
+Company has essentially completed the layout of its global
+portfolio. Overseas assets account for over 50% of the
+Company's total assets. Currently, the Company holds
+interests in oil and natural gas blocks in Indonesia, Australia,
+Nigeria, Uganda, Argentina, the U.S., Canada, the United
+Kingdom, Brazil and various other countries.
+In 2016, the capital expenditure of the Company will be
+no more than RMB 60 billion. To maintain its competitive
+financial position, the Company will continue to strengthen
+cost controls and focus more on cash flow management.
+Our production target for 2016 is 470-485 million BOE
+with four new projects to come on stream. Meanwhile, the
+Company will maintain its high standards in health, safety
+and environmental protection.
+EXPLORATION
+In 2015, the Company ensured its exploration spending in
+its core area, offshore China, and prioritized mature areas
+and rolling areas, and made appropriate adjustment on
+the number of high cost wells such as deepwater wells;
+overseas, the Company collaborated with its partners to
+optimize exploration program and focused on areas with
+high success rates. During the year, breakthroughs were
+made in both offshore China and overseas exploration. Due
+to significant decrease in international oil prices, the reserve
+replacement ratio for the Company is 67% for 2015.
+Africa
+10,885
+Asia
+257,292
+Subtotal
+85,413
+East China Sea
+55,424
+Eastern South China Sea
+Offshore China
+43,068
+73,388
+Western South China Sea
+Bohai
+Areas
+The Company's major exploration areas as at the end of
+2015 are shown in the table below:
+Oceania
+PSC Independent
+PSC
+Offshore China
+Bohai
+12,996
+0
+41
+0
+14
+0
+0
+9
+55
+Subtotal
+0
+1,294
+0
+1,017
+59
+15,072
+1,441
+Overseas
+59 17 5
+55
+Total
+0
+0
+3,792
+0
+5
+0
+2
+0
+5
+8
+0
+0
+0
+4
+0
+0
+0
+4,014
+0
+5,368
+0
+2
+0
+2
+0
+1
+7
+20
+Eastern South China Sea
+0
+18 32 3 0 7 0 28 0 0 0 1.780
+Western South China Sea
+LE
+16
+3
+0
+2
+5
+1
+East China Sea
+444
+1,441
+7,984
+0
+6,611
+0
+7
+0
+5
+0
+15
+Business Overview
+We face currency risks and liquidity risks.
+Currency risks - The Company's oil and gas sales are
+substantially denominated in Renminbi and U.S. dollars. The
+depreciation of the Renminbi against the U.S. dollar may
+result in double effects. The appreciation of the U.S. dollar
+against the Renminbi may increase the Company's revenue
+in the sales of oil and gas, but it may increase our costs of
+equipment and import of raw materials in the meantime.
+Cases
+0
+Staff of the Company and
+direct contractors
+124
+68
+0.11
+0.01
+15
+0
+CORPORATE CITIZEN
+The Company has been pursuing good social responsibility
+and the development of harmony between enterprise and
+society, and between people and nature, and has regarded
+its social responsibility as an undeniable obligation. While
+being committed to achieving sustainable development and
+creating value for its shareholders, the Company strives to
+provide clean and reliable energy supply for society and
+meeting needs of stakeholders.
+Our social responsibilities are: to build CNOOC Limited into
+a driving force for sustainable energy supply, a leading force
+for clean, healthy and green energy development, and a
+motivating force for the mutual progress of stakeholders and
+society.
+In 2015, the Company continued to use the concepts
+mentioned above as guidelines and place great emphasis
+on the following three areas to fulfill its social responsibility:
+First, a driving force for sustainable energy
+supply
+0.02
+In 2015, the Company achieved significant progress in
+the areas of exploration, development and production,
+with stable growth in oil and gas reserves and production.
+In offshore China, 14 new discoveries were made and
+successful appraisals of 20 oil and gas structures were
+achieved. The Company achieved fruitful results in overseas
+exploration with new discoveries in Algeria and Nigeria, and
+the successful appraisal of three oil and gas structures. In
+addition, the Company overcame a number of difficulties to
+ensure stability in oil and gas production through promoting
+production of new oil and gas fields and new wells and
+successfully achieved its annual production target.
+3
+20
+Gross
+Man-hours
+(million)
+Number of
+Recordable
+Rate of
+Recordable
+Number
+of Lost
+Rate
+0.09
+Workdays
+Fatal
+Cases
+Cases
+Cases
+Cases
+44
+of Lost
+Workdays
+Company staff
+With sustainable growth in the Company's reserves and
+production volume, the Company has gradually increased
+its energy supply to China and the world, becoming a
+driving force for sustainable energy supply. We regard this
+as the most important aspect of the fulfillment of our social
+responsibility.
+The development and expansion of our natural gas business
+is one of the three major developmental strategies of the
+Company. In 2015, the Company continued to develop
+its conventional natural gas business. In Eastern South
+China Sea, China's first large-scale deepwater gas field,
+Liwan 3-1, came on stream in 2014. Currently, the project
+is supplying gas to our customers in Hainan province and
+Hong Kong. Looking ahead, we will continue to develop
+clean energy to create a better environment.
+25
+Business Overview
+Staff Development
+We focus on providing opportunities and career
+development path for the advancement and personal
+growth of our staffs. Based on different professional groups
+and job characteristics, the Company has built respective
+paths for promotions. In 2015, the title management system
+was further improved to strengthen appraisal work.
+For staff training, the Company offered a variety of training
+courses to ensure comprehensive coverage. In 2015, 61
+core training programs and projects involving approximately
+800 attendees and 5,700 days were completed for key
+professionals and positions.
+The Company continued to encourage professional
+skills certification and further increased the proportion of
+experienced professionals. In 2015, a total of approximately
+3,000 employees received certifications. Currently there
+are approximately 3,500 employees with titles of senior
+worker or above, and approximately 500 technicians and
+senior technicians, accounting for 55% and 7% of the total
+technical workforce, respectively.
+CNOOC LIMITED Annual Report 2015
+Cultivation of International Talents
+In 2015, through short-term and long-term exchange
+programs held in coordination with Nexen, involving
+professional areas such as exploration, development, oil
+reservoir, oil sand, shale gas, project engineering and
+management, cost control, procurement, planning, HSE,
+etc, which effectively facilitated business integration with
+Nexen and played a dominant role as an international talent
+cultivation base.
+In addition, through the overseas management training
+course, the development history, organizational structure,
+the scope of business and corporate culture of the
+Company were introduced to the senior management
+overseas. Together with site visits to the Company, this
+has deepened senior management's sense of belonging to
+the corporate culture of the Company, enhanced mutual
+understanding and promoted business exchange and
+integration.
+CNOOC LIMITED Annual Report 2015
+Corporate Governance Report
+GOVERNANCE STANDARDS
+The Company has always upheld and attained high
+standard of business ethics, for which its transparency and
+standard of governance have been recognized by the public
+and its shareholders. In 2015, the Company was awarded
+the "2015 Best CSR" and "2015 Best Investor Relations
+Company" by Corporate Governance Asia Magazine and
+the "2015 Corporate Governance awards - Platinum"
+by The Asset. High and strict standard of corporate
+governance enables the Company to operate steadily and
+efficiently and is in the long-term interests of the Company
+and its shareholders.
+The Company has always placed strong focus on the
+cultivation of international talents with an established
+system of strata training through a variety of ways to
+enhance international talent cultivation, promoting business
+integration within and outside the Company.
+Second, a leading force for clean, healthy and
+green energy development
+A comprehensive and effective social security system has
+also been built and a series of measures have been adopted
+to help employees maintain better work-life balances.
+Sufficient Safeguard of Employees' Rights
+The Company also strives to create an open, transparent
+and fair working environment. Adhering to the people-
+oriented spirit and staff caring concept, we place high
+emphasis on safeguarding the legal rights of our staff.
+Third, a motivating force for mutual progress
+with stakeholders and the society
+The Company continued to actively participate in poverty
+alleviation, disaster relief, education loan and other social
+welfare activities. The Company provided electricity at a
+reduced tariff for the people in Weizhou Island helping them
+to solve the long-term problem of insufficient electricity
+and high electricity bills. In Overseas, we provided CNOOC
+scholarships for students in Uganda to encourage students
+from all regions to attain better academic results. In Iraq,
+in view of the difficulties in using water and electricity, the
+Company installed pipes and cables connecting to the
+village to solve the problem of water and electricity shortage.
+We also helped a local elementary school in its renovation
+and refurbishment.
+24 CNOOC LIMITED Annual Report 2015
+Business Overview
+In 2015, our ships continued to participate in sea rescue
+work in various regions, totaling 44 times for emergency sea
+rescues and 60 times for the use of ships and aircrafts.
+In 2016, the Company will publish and upload on its
+website its "2015 Corporate Social Responsibility Report"
+to conclude and reflect upon its social responsibility
+performance in 2015.
+We offer employees with competitive compensation
+packages amongst industry peers and establish a salary
+growth mechanism, gradually implementing an allocation
+system that is consistent with the market. The Company's
+remuneration system, which fully takes field employees into
+account, is closely associated with employees' performance
+and contributions. A pay mechanism that links employee
+incomes with the Company's profits growth has also been
+adopted to ensure that our employees fully benefit from the
+growth and development of the Company.
+HUMAN RESOURCES
+In 2015, faced with the tough challenge of low oil price,
+the Company continued to motivate staff and inspire their
+creativity through improving institutional mechanisms
+systems, enhancing organizational efficiency, continuing to
+strengthen the teams' ability and to stimulate their talent. We
+had built up adequate human resources support amid the
+suppressed oil price environment.
+Labor Policy underpinned by Objectivity,
+Openness and Fairness
+The Company respects the basic human rights that all
+employees are legally entitled to, and also respects the
+values, identity and privacy of employees with different
+cultural background. In Mainland China, the Company is in
+strict compliance with "Labour Law of the People's Republic
+of China", "Labour Contract Law of the People's Republic
+of China" and other labor policies to safeguard all the
+legal rights and interests of our employees. Overseas, the
+Company abides by relevant local laws and regulations and
+diligently implements the relevant international conventions
+ratified by the Chinese government to ensure that we
+respect the legal rights of all our employees.
+The Company upholds the principle of objectivity, openness
+and fairness in the recruitment, training, promotion and
+compensation systems regardless of race, nationality,
+religion, gender, age, marital status and employees with
+special legal status.
+All employees entered into employment contracts with
+the Company based on the principles of equality and
+voluntariness.
+The Company adheres to gender equality in the workplace,
+and makes an active effort to increase the number of female
+employees and to offer training for management positions
+for women. In addition, the Company also organizes a
+variety of leisure activities for female employees through
+different means and encourages them to participate in a
+variety of activities.
+The Company strives to create an open, transparent and
+fair working environment. We adhere to the people-oriented
+spirit and staff caring concept, placing high emphasis
+on safeguarding the legal rights and rights of our staff.
+The Company has built a professional and highly efficient
+workforce capable of overcoming challenges, which has
+been essential to the success of the Company.
+Since its listing, the Company has endeavoured to maximize
+its shareholders' value. In 2015, the Company executed
+its corporate governance policies strictly and sought to
+comply with the relevant provisions in the "Corporate
+Governance Code and Corporate Governance Report” set
+out in Appendix 14 to the Listing Rules (the "CG Code"),
+ensuring that all decisions were made on the principles of
+trust and fairness and in an open and transparent manner so
+as to protect the interests of all shareholders. The Company
+values the importance of corporate governance and in light
+of the CG Code, the Company set out a summary of the
+Company's key corporate governance practices during
+2015 below.
+Scope
+Business Overview
+time, we expect that a growing share of our CO2 emissions
+will be subject to supervision and result in an increase in our
+costs. Furthermore, the public's continued and increased
+attention to climate changes, including activities organized
+by non-governmental and political organizations, is likely
+to lead to implementation of additional regulations on
+reducing greenhouse gas emissions. If we are unable to
+find economically viable and publicly acceptable solutions
+that could reduce our CO2 emissions for new and existing
+projects, we may experience additional costs, project
+delays, reduced production and reduced demand for
+hydrocarbons.
+Mergers, acquisitions and divestments may expose
+us to additional risks and uncertainties, and we may
+not be able to realize the anticipated benefits from
+acquisitions and divestments.
+Mergers and acquisitions may not succeed due to
+various reasons, such as difficulties in integrating activities
+and realising synergies, outcomes differing from key
+assumptions, host governments reacting or responding in a
+different manner from that envisaged, or liabilities and costs
+being underestimated. Any of these would reduce our ability
+to realise the anticipated benefits. We may not be able to
+successfully divest non-core assets at acceptable prices,
+resulting in increased pressure on our cash position. In the
+case of divestments, we may be held liable for past acts,
+or failures to act or perform responsibilities. We may also
+be subject to liabilities if a purchaser fails to fulfil all of its
+commitments. These risks may result in an increase in our
+costs and inability to achieve our business goals.
+The nature of our operations exposes us and the
+communities in which we work to a wide range of
+health, safety, security and environment risks.
+Every aspect of our daily operations exposes us to health,
+safety, security and environmental (HSSE) risks given the
+geographical area, operational diversity and technical
+complexity of our operations. Our operations include
+productions and transportations of oil and gas in difficult
+geographic or climate zones, as well as environmentally
+sensitive regions, such as Canada, the basins in Uganda
+or offshore, especially in deep water area. Our operations
+expose us and the areas in which we operate to a number
+of risks, including major process safety incidents, natural
+disasters, earthquakes, social unrest, health and safety
+lapses and crimes. If a major HSSE risk materialises,
+such as an explosion or hydrocarbon spill, this could
+result in casualties, environmental damage disruption of
+business activities and, depending on their cause and
+severity, material damage to our reputation, exclusion
+from bidding on mineral rights and eventually loss of our
+licence to operate. In certain circumstances, liabilities
+could be imposed without regard to our fault in the matter.
+Regulatory requirements for HSSE change constantly and
+may become more stringent over time. In the future, we
+may incur significant additional costs in complying with
+such requirements or bear liabilities such as fines, penalties,
+clean-up costs and third-party claims, as a result of breach
+of laws and regulations relating to HSSE matter. Our
+reputation may be adversely affected.
+We maintain various insurance policies for our operations
+against potential losses. However, our ability to insure
+against our risks is subject to the availability of relevant
+insurance products in the market. In addition, we cannot
+ensure you that our insurance coverage is sufficient to cover
+any losses that we may incur, or that we will be able to
+successfully claim our losses under our existing insurance
+policies on a timely basis, or at all. If any of our losses are
+not covered by our insurance coverage, or if the insurance
+compensation is less than our losses or the claim is not
+paid on a timely basis, our business, financial condition
+and results of operations could be materially and adversely
+affected.
+Business Overview
+Violations of anti-fraud, corruption and corporate
+governance laws may expose us to various risks.
+Laws and regulations of the host countries or regions in
+which we operate, such as laws on anti-corruption, anti-
+fraud and corporate governance, are constantly changing
+and strengthening, especially in the United States, United
+Kingdom, Canada and China. The compliance with these
+laws and regulations may increase our cost. If the Company,
+our employees, executives or directors fail to comply with
+any of such laws and regulations, it may expose us to
+prosecution or punishment, damage to our brand and
+reputations, the ability to obtain new resources and/or
+access to the capital markets, and it may even expose us to
+civil or criminal liabilities.
+We cannot predict the interpretation or implementation of
+government policies at the U.S. federal, state or local levels
+with respect to any current or future activities by CNOOC or
+its affiliates in countries or with individuals or entities that are
+the subject of U.S. sanctions. As a result of such activities by
+CNOOC, we could be prohibited from engaging in business
+activities in the U.S. or with U.S. individuals or entities, and
+U.S. transactions in our securities and distributions to U.S.
+individuals and entities with respect to our securities could
+also be prohibited. Pension or endowment funds of certain
+U.S. State and local governments or universities may sell
+our securities due to certain restrictions on investments in
+companies that engage in activities in sanctioned countries,
+such as Iran and Sudan. We may also be subject to
+20 CNOOC LIMITED Annual Report 2015
+Business Overview
+negative media or investor attention, which may distract
+management, consume internal resources and affect
+investors' perception of our company and investment in our
+company.
+As required by the Iran Threat Reduction and Syria Human
+Rights Act of 2012, which added a disclosure requirement
+to the Securities Exchange Act of 1934, we are providing
+certain information regarding our non-controlled affiliates'
+activities. To our knowledge, in 2015, China Oilfield Services
+Limited (COSL), one of our non-controlled affiliates,
+continued to provide certain drilling and other related
+services in Iran under renewed subcontracting agreements
+entered into in 2009, as it did in 2014. We cannot predict at
+this time whether U.S. sanctions will be imposed on any of
+our affiliates.
+Any failure to replace reserves and develop our
+proved undeveloped reserves could adversely affect
+our business and our financial position.
+The current or future activities of our controlling
+shareholder, CNOOC, or its affiliates in certain
+countries that are the subject of U.S. sanctions
+could result in negative media and investor attention
+and possible imposition of sanctions on CNOOC,
+which could materially and adversely affect our
+shareholders.
+Our exploration and development activities involve inherent
+risks, including the risk of not discovering commercially
+productive oil or gas reservoirs and that the wells we drill
+may not be able to commence production or may not be
+sufficiently productive to generate a return of our partial or
+full investments. In addition, approximately 55.0% of our
+proved reserves were undeveloped as of 31 December
+2015. Our future success depends on our ability to develop
+these reserves in a timely and cost-effective manner. There
+are various risks in developing reserves, mainly including
+construction, operational, geophysical, geological and
+regulatory risks.
+19
+It is expected that the CO2 emissions will increase as our
+production grows. CO2 emissions from flaring will increase
+as long as there are no gas gathering systems in place. Over
+RISK FACTORS
+Although we have established the risk management system
+to identify, analyze, evaluate and respond to risks, our
+business activities are subject to the following risks, which
+could have material effects on our strategy, operations,
+compliance and financial condition. We urge you to carefully
+consider the risks described below.
+Our business, cash flows and profits fluctuate with
+changes in oil and gas prices.
+Prices for crude oil, natural gas and oil products may
+fluctuate widely in response to relative changes in the supply
+and demand for oil and natural gas, market uncertainty and
+various other factors beyond our control, including, but not
+limited to overall economic conditions, political instability,
+armed conflict and acts of terrorism, economic conditions
+and actions by major oil-producing countries, the price and
+availability of other energy sources, domestic and foreign
+government regulations, natural disasters and weather
+conditions. Changes in oil and gas prices could have a
+material effect on our business, cash flows and earnings.
+Low oil and natural gas prices may adversely affect our
+business, revenue and earnings. Lower oil and natural gas
+prices may result in the write-off of higher cost reserves and
+other assets, reduction of the amount of oil and natural gas
+we can produce economically and termination of existing
+contracts that have become uneconomic. The prolonged
+slump in oil and natural gas prices may also impact our long-
+term investment strategy and operation capability for our
+projects.
+Our business and strategy may be substantially
+affected by complex macro economy, politically
+instability, war and terrorism and changes in policy
+and fiscal and tax regimes.
+CNOOC LIMITED Annual Report 2015
+Economic conditions, energy costs, geopolitical issues and
+the availability and cost of credit resulted in a severe and
+prolonged global economic downturn period. The complex
+economic outlook may materially and adversely affect our
+business and financial conditions.
+Our financial performance is subject to the tax and fiscal
+regime of host countries in which we operate. Any changes
+in the tax and fiscal regime in these countries may increase
+our tax burden and have an adverse effect on our financial
+performance. For example, in October 2015, Organization
+for Economic Co-operation and Development (OECD)
+published the "Base Erosion and Profit Shifting Project"
+(BEPS Project) final report with 15 action items, to enhance
+multilateral cooperation, pursuant to which the participating
+countries will amend their tax laws and tax treaties, and
+strengthen their supervision on the corporate tax planning
+and transfer pricing activities, which may cause risks to the
+Company on global transfer pricing activities.
+Oil and natural gas industry are very competitive.
+We compete in the PRC and international markets with
+national oil companies, major integrated oil and gas
+companies and various other independent oil and gas
+companies for access to oil and gas resources, products,
+alternative energy, customers, capital financing, technology
+and equipment, personnel and business opportunities.
+Competition may result in shortage of these resources or
+over-supply of oil and gas, which could increase our cost
+or reduce our earnings, and adversely impact our business,
+financial condition and results of operations. For example,
+the over-supply of natural gas in China may negatively
+impact our development, operation and revenue of natural
+gas projects.
+In addition to competition, as we need to obtain various
+approvals from governmental and other regulatory
+authorities in order to maintain our operations, we may
+face unfavorable results such as project delays and cost
+overruns, which may further impact the realization of our
+strategies and adversely impact our financial condition.
+Our ability to deliver competitive returns and pursue
+commercial opportunities depends in part on the
+robustness and the long-lasting accuracy of our price
+assumptions.
+We review the oil and natural gas price assumptions on
+a periodic basis when evaluating project decisions and
+business opportunities. We generally test projects and other
+business opportunities against a long-term price range.
+While we believe our current long-term price assumptions
+are prudent, if such assumptions proved to be incorrect,
+it could have a material adverse effect. For short-term
+planning purposes, we stress test the project feasibility
+against a wider range of prices.
+Rising climate change concerns could lead to
+additional regulatory measures that may result in
+project delays and higher costs.
+Some of the countries in which we operate may be
+considered politically and economically unstable. As a
+result, our financial condition and operating results could
+be adversely affected by associated international activities,
+domestic civil unrest and general strikes, political instability,
+war and acts of terrorism. Any changes in regime or
+social instability, or other political, economic or diplomatic
+developments, or changes in fiscal and tax regime are not
+within our control. Our operations, existing assets or future
+investments may be materially and adversely affected by
+these changes as well as potential trade and economic
+sanctions due to deteriorated relations between different
+countries.
+In 2015, the Company's OSHA (Occupation Safety and
+Health Administration) statistics on work safety maintained
+at a good level and performance is expected to continue to
+improve.
+The reliability of reserve estimates depends on a number
+of factors, including the quality and quantity of technical
+and economic data, the market prices of our oil and
+gas products, the production performance of reservoirs,
+extensive engineering judgments, comprehensive
+judgement of engineers and the fiscal and tax regime in the
+countries where we have operations or assets.
+If we fail to develop or gain access to appropriate
+technologies, or to deploy them effectively,
+the realization of our strategies as well as our
+competitiveness and ability to operate may be
+adversely affected.
+22 CNOOC LIMITED Annual Report 2015
+Business Overview
+HEALTH, SAFETY AND ENVIRONMENTAL
+PROTECTION ("HSE")
+The Company always places great emphasis on health,
+safety and environmental protection (HSE). "Safety and
+environmental protection come first, people oriented and
+well-equipped facilities" have been regarded as the core
+values of quality, health, safety and environmental protection
+(QHSE). To promote the culture of HSE, the Company
+strives to establish a comprehensive management
+system to improve employees' awareness of HSE during
+operations, to strengthen their ability to identify safety risks
+as well as improve their risk management skills.
+Since the end of 2014, the Work Safety Law of the People's
+Republic of China (as amended) and the Environmental
+Protection Law of the People's Republic of China
+(as amended) have imposed stricter supervision and
+management of work safety on enterprises, which brings
+about additional challenges for the Company in work safety,
+clean production and development. For this reason, the
+Company further reinforced its basic work of production
+safety through system improvement and management
+innovation. The Company's key responsibilities were
+effectively put in place and its safety culture was clearly
+demonstrated. All in all, the operation of the health, safety
+and environmental protection system remained stable.
+Offshore China, in view of new regulations recently
+implemented, the Company has carried out safety hazards
+investigations and employed third-party agencies to carry
+out safety and environmental compliance management and
+operational assessments in 2015 to identify management's
+weaknesses and to provide recommendations for
+improvement. We reinforced the system of QHSE work,
+adhered to the mode of system management, coordinated
+and prepared annual audit inspections, organized
+system reviews for the 7 units under the Company, and
+strengthened management reviews of highly specialized
+contractors by external experts. During the year, the
+Company carried out a review on 35 contract helicopters
+and 11 diving contractors in 12 helicopter bases to obtain
+detailed management findings and effectively avoid HSE
+risks. During the year, the Company also conducted special
+safety inspections of offshore oil and gas, dangerous
+chemicals and inflammable and explosive materials, and full
+coverage inspections of "Five No-drillings" to track potential
+problems and to remediate potential risks.
+Liquidity risks - Certain restrictions on dividend distribution
+imposed by the laws of the host countries in which we
+operate may adversely and materially affect our cash
+flows. For instance, as the dividend of our wholly owned
+subsidiaries in the PRC shall be distributed pursuant to the
+laws of the PRC and the articles and association, and we
+may face risks of not obtaining adequate cash flows from
+such subsidiaries. In addition, a ratings downgrade could
+potentially increase financing costs and adversely impact
+our ability to access financing, which could put pressure on
+the Company's liquidity.
+In 2015, the Company advocated the implementation of "China
+National Offshore Oil Safety Signs behavior" actions and enacted
+rules relating to safety signs behavior in three levels of daily
+working lives, including leaders, employees and organization
+in order to arouse the safety awareness of employees in their
+everyday life and to promote security management.
+In 2015, the Company continued to strengthen overseas
+HSE management and enacted individual management
+plans for all highlighted overseas projects. We have now
+finished all HSE management plans for branches in Iraq,
+Indonesia, Uganda and we continued to integrate the
+HSE management within Nexen, gradually improved the
+HSE management and facilitated the implementation
+of corporate management requirements effectively by
+the following measures: competing focused reviews,
+organizing joint exercises, enhancing communication, and
+strengthening incident management.
+The Company's emergency response system were
+undergoing serious testing. On 15 July 2015, an emulsion
+leak from a pipeline was discovered within Nexen's Long
+Lake operations, located in the south of Fort McMurray,
+Alberta, Canada. The estimated size of the leak was 5,000
+m³ over an area of approximately 21,900 m² mostly within
+a compacted pipeline corridor. There were no injuries due
+to this incident. The affected wells were suspended and
+Nexen's emergency response plan was activated. The
+Company places great emphasis on production safety and
+has taken measures to minimize the spill's impact to the
+environment and wildlife. Since the incident, the Company
+has been working together with relevant regulatory agencies
+in its conduct of clean-up and remediation work at the
+spill site. Nexen is cooperating with the investigation of the
+regulatory agencies.
+The majority of the released bitumen in the spill area has
+been safely removed. Further continued remediation
+and clean-up work is underway and will be carried out in
+compliance with applicable regulatory requirements.
+HSE regulatory standards were further enhanced with
+the help of information technology. Our Environmental
+Information System is able to monitor real-time pollutant
+emission while safety inspection systems are available for
+continuing investigation and management of safety risks.
+CNOOC LIMITED Annual Report 2015
+23
+Apart from this, the Company further strengthened its
+energy saving technological reforms to reinforce energy
+discharge management and achieved 129,000 tons of
+standard coal energy savings in 2015.
+Many of the factors, assumptions and variables involved in
+estimating reserves are beyond our control and may prove
+be incorrect over time. Consequently, the results of drilling,
+testing, production and changes in the price of oil and gas
+may require substantial upward or downward revisions to
+our initial reserve data.
+Key suppliers - we have strengthened our communication in
+business with our key suppliers in order to maintain a good
+working relationship. We have also established strategic
+partnerships through communications and a consensus
+in corporate cultures and win-win cooperation Further, we
+actively explore new suppliers to ensure adequacy and
+foster competition.
+If we depend heavily on key customers or suppliers,
+our business, results of operations and financial
+condition could be adversely affected.
+Technology and innovation are vital for us in meeting the
+global energy demands in a competitive environment. For
+example, we strive to rely on technologies and innovations
+to enhance our competiveness in the development of
+unconventional oil and gas resources, including oil sands,
+shale oil and gas and coalbed methane, and deep water
+exploration and development. In the context of an operating
+environment with stricter environmental compliance
+standards and requirements, although current knowledge
+recognise these newly developed technologies as safe to
+the environment, there still exists unknown or unpredictable
+elements that may have an impact on the environment. This
+may in turn harm our reputation and operation, increase
+our costs or even result in litigations and sanctions. We
+may face risks in failing to meet the required environmental
+standards if our technologies in unconventional oil and gas
+operations are not sophisticated.
+Breach of our cyber security or break down of our IT
+infrastructure could damage our operations and our
+reputation.
+Intentional attacks on our cyber system, negligent
+management of our cyber security and IT system
+management and other factors may cause damage or
+break down to our IT infrastructure, which may disrupt
+our operations, result in loss or misuse of data or sensitive
+information, cause injuries, environmental harm or damages
+in assets, violate laws or regulations and result in potential
+legal liability. These actions could result in significant costs
+or damage to our reputational.
+CNOOC largely controls us and we regularly enter into
+connected party transactions with CNOOC and its
+affiliates.
+Currently, CNOOC indirectly owns or controls 64.44% of
+our shares. As a result, CNOOC is able to control our board
+composition, or our Board, determine the time and amount
+in dividend payments, and controls us in various aspects.
+Under current PRC laws, CNOOC has the exclusive right to
+enter into PSCs with foreign enterprises for the petroleum
+resources exploitation in offshore China. Although CNOOC
+has undertaken to transfer all of its rights and obligations
+under any new PSCs to us (except for those relating to
+administrative functions as a state-owned company), our
+strategies, results of operations and financial position may
+be adversely affected in the event CNOOC takes actions
+that favour its own interests over ours.
+CNOOC LIMITED Annual Report 2015 21
+Key sales customers - if any of our key customers reduced
+their crude oil purchases from us significantly, our results of
+operation could be adversely affected. In order to reduce
+reliance on a single customer, we adopt measures including
+signing annual sales contracts, developing sales plans,
+and participating in market competition so as to maintain a
+stable cooperation with customers.
+Business Overview
+Oil and natural gas transportation may expose us to
+financial loss and reputation harm.
+Our oil and gas transportation involves marine, land and
+pipeline transportation, which are subject to hazards
+such as capsizing, collision, acts of piracy and damage
+or loss from severe weather conditions, explosions, oil
+and gas spills and leakages. These hazards could result
+in serious personal injury or loss of human life, significant
+damage to property and equipment, environmental
+pollution, impairment of operations, risk of financial loss
+and reputation harm. We may not be insured against all of
+these risks and uninsured losses and liabilities arising from
+these hazards could reduce the funds available to us for
+financing, exploration and investment, which may have a
+material adverse effect on our business, financial condition
+and results of operations.
+We face various risks with regard to our business and
+operations in North America.
+Transportation and export infrastructure in North America is
+limited, and without the construction of new transportation
+and export infrastructure, our oil and natural gas production
+capacity may be affected. In addition, we may be required to
+sell our products into the North American markets at lower
+prices than in other markets, which could materially and
+adversely affect our financial performance.
+Aboriginal people in Canada have claimed aboriginal title
+and rights to the lands and mineral resources in substantial
+portion of western Canada. As a result, negotiations with
+aboriginal people on surface activities are required and may
+result in timing uncertainties or delays of future development
+activities. Declaration by aboriginal people, if successful,
+I could have a significant adverse effect on our business in
+Canada.
+We may have limited control over our investments in
+joint ventures and our operations with partners.
+A portion of our operations are conducted in the forms
+of partnerships or in joint ventures in which we may have
+limited ability to influence and control their operation or
+future development. Our limited ability to influence and
+control the operation or future development of such joint
+ventures could materially and adversely affect the realization
+of our target returns on capital investment and lead to
+unexpected future costs.
+In addition, we regularly enter into connected transactions
+with CNOOC and its affiliates. Certain connected
+transactions require a review by the Hong Kong Stock
+Exchange and are subject to prior approvals by the
+independent shareholders. If these transactions are not
+approved, the Company may not be able to proceed as
+planned and it may adversely affect our business and
+financial condition.
+KEY CORPORATE GOVERNANCE PRINCIPLES
+AND THE COMPANY'S PRACTICES
+26
+DIRECTORS
+7
+0110
+O O O O
+CNOOC LIMITED Annual Report 2015
+27
+CNOOC LIMITED Annual Report 2015
+Corporate Governance Report
+Note 1: Mr. Wang Yilin resigned as Non-executive Director with effect
+from 19 May 2015.
+Note 2: Mr. Lv Bo appointed Mr. Yang Hua as his proxy to attend the
+Board meeting held on 19 November 2015 and to vote on his
+behalf.
+Note 3: Mr. Wang Jiaxiang retired as Non-executive Director with effect
+from 23 September 2015.
+The Joint Company Secretaries consulted
+the Directors on matters to be included in the
+agenda for regular Board meetings.
+7
+Dates of regular Board meetings have been
+scheduled at least two months before the
+meeting to provide sufficient notice to all
+Directors so that they can have an opportunity
+to attend. For non-regular Board meetings,
+reasonable advance notices have been given.
+Minutes of the meetings of the Board and
+Committees recorded sufficient details of
+the matters considered by the Board and
+Committees and decisions reached, including
+any concerns raised by Directors or dissenting
+views expressed. Draft and final versions
+of the minutes of the Board meetings and
+Committee meetings are sent to all Directors
+and all Committee members respectively within
+a reasonable time after the Board meetings and
+Committee meetings for their comments and
+records.
+Committees may, upon reasonable request,
+seek independent professional advice in
+appropriate circumstances at the Company's
+expense. The Board would resolve to provide
+separate independent professional advice to
+Directors to assist them in performing their
+duties to the Company at the Company's
+expense.
+If a substantial shareholder or a Director
+has a conflict of interest in a matter to be
+considered by the Board and such interest has
+been considered to be material by the Board,
+the matter will not be dealt with by a written
+resolution but a Board meeting will be convened
+for that matter. Independent Non-executive
+Directors who do not (and whose close
+associates also do not) have material interest
+in the transaction will be present at such Board
+meeting.
+The Company has arranged appropriate
+insurance cover in respect of legal action against
+its Directors.
+A.2 Chairman and Chief Executive
+Principle: "There are two key aspects of the
+management of every issuer - the management
+of the board and the day-to-day management of
+business. There should be a clear division of these
+responsibilities to ensure a balance of power and
+authority, so that power is not concentrated in any one
+individual."
+The roles of the Chairman and CEO of the
+Company are separate and are not performed
+by the same individual. Mr. Yang Hua serves as
+the Chairman of the Board and Mr. Li Fanrong
+serves as the CEO of the Company.
+The Chairman ensures all Directors are
+properly briefed on issues arising at Board
+meetings and is responsible for ensuring that
+Directors receive, in a timely manner, adequate
+information, which must be accurate, clear,
+complete and reliable.
+One of the important roles of the Chairman is to
+provide leadership for the Board. The Chairman
+ensures that the Board works effectively and
+performs its responsibilities, and that all key and
+appropriate issues are discussed by the Board
+in a timely manner. The Chairman delegates
+the responsibility of drawing up the agenda for
+each Board meeting and Committee meeting
+to the Joint Company Secretaries who will take
+into account, where appropriate, any matters
+proposed by the other Directors for inclusion
+in the agenda, and the Chairman is primarily
+responsible for approving the agenda.
+28
+A.
+Minutes of the meetings of the Board and
+Committees are kept by the Joint Company
+Secretaries and open for inspection at any
+reasonable time upon reasonable request by
+any Director.
+7
+The Chairman takes primary responsibility
+for ensuring that good corporate governance
+practices and procedures are established.
+2965
+7
+A.1 The Board
+The board should regularly review the contribution
+required from a director to perform his responsibilities
+to the issuer, and whether he is spending sufficient
+time performing them."
+The Board consisted of eight members,
+including two Executive Directors, two Non-
+executive Directors and four Independent Non-
+executive Directors, as of 31 December 2015.
+The list of Directors, their respective
+biographies, and their respective roles in the
+Committees and the management are set out
+on pages 44 to 50 and 152, respectively. The
+relevant information has also been disclosed on
+the Company's website.
+The Board and Committee members of the
+Company are dedicated, professional and
+accountable.
+The Company holds Board meetings at least
+four times a year at approximately quarterly
+intervals. Seven Board meetings were held
+in 2015. Members of the Board have also
+actively participated in the discussions on
+the business and operation of the Company,
+either in person or through other electronic
+means of communication such as emails, when
+necessary.
+There exists an open atmosphere for Directors
+to contribute alternative views. All decisions of
+the Board are made on the principles of trust
+and fairness in an open and transparent manner,
+so as to protect the interests of all shareholders.
+The Board has regularly reviewed the
+contribution required from a Director to
+perform his responsibilities to the Company,
+and whether he is spending sufficient time
+performing them in accordance with the CG
+Code.
+Attendance of full Board meetings held in 2015:
+No. of meetings attended
+(7 meetings in total)
+by Director by proxy
+Executive Directors
+Principle: "An issuer should be headed by an effective
+board which should assume responsibility for its
+leadership and control and be collectively responsible
+for promoting its success by directing and supervising
+its affairs. Directors should take decisions objectively
+in the best interests of the issuer.
+Wu Guangqi
+Non-executive Directors
+Wang Yilin (Note 1)
+Yang Hua (Chairman)
+Lv Bo (Note 2)
+Wang Jiaxiang (Note 3)
+Independent
+Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+7
+0
+7
+0
+Li Fanrong
+Lawrence J. Lau
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+1
+1
+0
+1
+1
+1
+1
+Independent Non-executive Directors
+Chiu Sung Hong
+Li Fanrong
+Wu Guangqi
+No. of meetings attended
+Wang Jiaxiang (Note 2)
+Yang Hua (Chairman)
+Lv Bo
+Non-executive Directors
+Wang Yilin (Note 1)
+Executive Directors
+Attendance at general meeting in 2015:
+Mr. Yang Hua, Chairman of the Board, together
+with Independent Non-executive Directors
+attended the Annual General Meeting held in
+2015 and responded to questions raised by the
+shareholders in order to develop a balanced
+understanding of the views of shareholders.
+During 2015, each Non-executive Director or
+Independent Non-executive Director attended
+or otherwise appointed an alternate to attend
+all regularly scheduled meetings of the Board
+and Committees on which such Non-executive
+Director or Independent Non-executive Director
+sat in, and reviewed the meeting materials
+distributed in advance for such meetings and
+shared their experience, skills and expertise
+with the Board or the relevant Committee. All of
+the Non-executive Directors and Independent
+Non-executive Directors of the Company made
+positive contributions to the development of
+the Company's strategy and policies through
+independent, constructive and informed
+comments. The Non-executive Directors and
+the Independent Non-executive Directors
+have been responsible for scrutinising our
+performance in achieving agreed corporate
+goals and objectives and monitoring our
+performance reporting.
+The Non-executive Directors and the
+Independent Non-executive Directors are
+invited to serve on the Audit, Remuneration and
+Nomination Committees of the Company.
+The Non-executive Directors and the
+Independent Non-executive Directors actively
+participate in Board meetings and Committees
+meetings to exercise their independent
+judgement on issues of strategy, policy,
+performance, accountability, resources, key
+appointments and standards of conduct of the
+Company. They are responsible for taking the
+lead where potential conflicts of interests arise.
+Corporate Governance Report
+(1 meeting in total)
+1
+33
+1
+The diverse backgrounds of the Board
+members ensure that they can fully represent
+the interests of all shareholders of the Company
+and to enhance the effectiveness of the Board
+and corporate governance.
+32 CNOOC LIMITED Annual Report 2015
+The Company has received annual
+confirmations from all of its Independent
+Non-executive Directors acknowledging full
+compliance with the relevant requirements
+in respect of their independence pursuant to
+Rule 3.13 of the Listing Rules. The Company is
+therefore of the view that all of the Independent
+Non-executive Directors are independent.
+CNOOC LIMITED Annual Report 2015
+29
+Corporate Governance Report
+A.4 & Appointments, re-election and removal &
+A.5 Nomination Committee
+Principle: "There should be a formal, considered and
+transparent procedure for the appointment of new
+directors. There should be plans in place for orderly
+succession for appointments. All directors should
+be subject to re-election at regular intervals. An
+issuer must explain the reasons for the resignation or
+removal of any director."
+The Nomination Committee comprises two
+Independent Non-executive Directors (Mr.
+Lawrence J. Lau and Mr. Kevin G. Lynch)
+and a Non-executive Director (Mr. Wang Yilin
+(whose resignation became effective on 19 May
+2015) and Mr. Yang Hua (whose appointment
+as a member of the Nomination Committee
+became effective on 19 May 2015)) with Mr.
+Yang Hua serves as the Chairman of the
+Nomination Committee. A list of members of
+the Nomination Committee is set out under the
+section headed "Company Information" on page
+152 of this annual report. With effect from 19
+May 2015, Mr. Yang Hua served as a member
+of the Nomination Committee, and Mr. Wang
+Yilin resigned as a member of the Nomination
+Committee on the same day.
+The role of the Nomination Committee is to
+determine the policy and establish proper
+procedures for the selection of the Company's
+leadership positions, upgrade the quality of
+Board members and perfect the Company's
+corporate governance structure.
+The main authorities and responsibilities
+of the Nomination Committee are to make
+recommendations to the Board for suitable
+candidates to serve as Directors and senior
+management of the Company for approval by
+the Board, to review the structure, size and
+composition of the Board (including the skills,
+knowledge and experience), and to evaluate the
+leadership abilities of Executive Directors, so as
+to ensure the competitiveness of the Company.
+When nominating a particular candidate
+for director, the Nomination Committee will
+consider (1) the breadth and depth of the
+management and/or leadership experience
+of the candidate; (2) financial literacy or other
+professional or business experience of the
+candidate that are relevant to the Company
+and its business; and (3) the experience or
+knowledge of the candidate in international
+operations. All candidates must be able to
+meet the standards set out in Rules 3.08 and
+3.09 of the Listing Rules. When nominating
+an Independent Non-executive Director who
+B.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2015
+For regular Board meetings and Committee
+meetings, the agenda and accompanying
+Board papers are sent in full to all Directors at
+least three days before the intended date of the
+Board meetings or Committee meetings.
+The Company's senior management regularly
+provides the Board and its Committees with
+adequate information in a timely manner to
+enable them to make informed decisions. Senior
+management also organises presentations to
+the Board conducted by professional advisers
+on specific transactions as appropriate.
+Principle: "Directors should be provided in a timely
+manner with appropriate information in the form and
+quality to enable them to make an informed decision
+and perform their duties and responsibilities."
+A.7 Supply of and access to information
+The Directors are required to inform the
+Company in case of any change in the
+number and nature of offices held in public
+companies or organizations and other significant
+commitments. Please refer to "Directors and
+Senior Management” on pages 44 to 50 for the
+biographies of the Directors.
+Note 2: Mr. Wang Jiaxiang retired as Non-executive Director with effect
+from 23 September 2015.
+from 19 May 2015.
+Note 1: Mr. Wang Yilin resigned as Non-executive Director with effect
+1
+In addition, the Company also provided
+regular updates to Directors in respect of
+continuing obligations of listed issuers and
+their directors as well as monthly updates
+on the business and operations of the
+Group.
+by committee
+The Company also recognizes the
+importance of continuous professional
+development of the Directors. Directors
+are encouraged to participate in
+continuous professional development
+to develop and refresh their knowledge
+and skills. During the year, the Company
+arranged a training conducted by its.
+external professional advisers on the
+updates on Listing Rules, applicable laws,
+rules and regulations relating to Directors'
+duties and responsibilities. The training
+covered a broad range of topics including
+disclosure of share interests of directors,
+new amendments to the CG Code, Hong
+Kong inside information disclosure and
+recent profit warning practice, 2015
+Report on Review of Disclosure in Issuer's
+Annual Report issued by the Hong Kong
+Stock Exchange and US Foreign Corrupt
+Practices Act.
+Selection criterion: Selection of candidates will
+be based on diversity of
+perspectives, including but
+not limited to, gender, age,
+cultural and educational
+background, professional
+experience, skills,
+knowledge and diversified
+vision.
+Corporate Governance Report
+31
+CNOOC LIMITED Annual Report 2015
+The Policy aims to continue
+to improve corporate
+governance and ensure the
+diversity on the Board.
+With a view to leading its
+leap-forward development,
+the Company sees
+increasing diversity at the
+Board level as an essential
+element in supporting the
+attainment of its strategic
+objectives and sustainable
+development. In designing
+the Board's composition,
+board diversity shall
+be considered from
+a number of aspects,
+including but not limited to,
+gender, age, cultural and
+educational background,
+professional experience,
+skills, knowledge and
+length of service. All
+Board appointments will
+be based on meritocracy,
+and candidates will
+be considered against
+objective criteria, having
+due regard to the benefits
+of diversity on the Board.
+Policy statement:
+Purpose:
+In accordance with Code Provision A.5.6 of the
+CG Code and to demonstrate the Company's
+continued commitment to high standards of
+corporate governance, the Board adopted
+a board diversity policy (the "Policy") on 20
+August 2013 prior to the implementation date
+as required by the Listing Rules. The Policy aims
+to continue to improve corporate governance
+and ensure the diversity of Board members. A
+summary of the Policy is set out below:
+During the year ended 31 December 2015, Mr.
+Yang Hua, an existing Non-executive Director,
+was appointed as Chairman of the Board
+and Chairman of the Nomination Committee
+with effect from 19 May 2015. Mr. Wang Yilin
+resigned as Chairman of the Board, Chairman of
+the Nomination Committee and Non-executive
+Director with effect on the same day. Mr. Wang
+Jiaxiang retired as Non-executive Director with
+effect from 23 September 2015. Other than the
+above, the Nomination Committee considered
+that any other change to the composition of the
+Board was not necessary. It will keep assessing
+whether any such change is required going
+forward and will recommend to the Board
+qualified candidates as Directors according
+to the nomination policy and procedure of the
+Nomination Committee.
+Evaluated and assessed the effectiveness
+of the Nomination Committee and the
+adequacy of the charter of the Nomination
+Committee and recommended the
+proposed changes to the charter to the
+Board (if necessary).
+Reviewed and monitored the training and
+continuous professional development of
+Directors and senior management and
+made recommendations to the Board in
+that regard; and
+Made recommendations to the Board on
+the re-election of Directors and reviewed
+succession planning for Directors,
+in particular the Chairman and CEO,
+according to the nomination procedure
+and process and criteria adopted by the
+Company;
+Identified individuals suitably qualified
+to become Board members and made
+recommendations to the Board on the
+selection of individuals nominated for
+directorships;
+Assessed the independence of
+Independent Non-executive Directors;
+The Nomination Committee is also
+responsible for evaluating the contributions
+and independence of incumbent Directors
+so as to determine whether they should be
+recommended for re-election. Based on such
+evaluation, the Nomination Committee will
+recommend to the Board candidates for re-
+election at general meetings and appropriate
+replacements (if necessary). The Board, based
+on the recommendations of the Nomination
+Committee, will propose to the shareholders the
+candidates for re-election at the relevant general
+meetings.
+Reviewed the structure, size and
+composition (including the skills,
+knowledge and experience) of the
+Board and its committees and made
+recommendations on any proposed
+changes to the Board to complement the
+Company's corporate strategy;
+The following is a summary of the work
+performed by the Nomination Committee under
+its charter during the year:
+All Directors, including those appointed for
+a specific term are subject to retirement by
+rotation once every three years and are subject
+to re-election in accordance with the Articles of
+Association of the Company (as amended and
+adopted by special resolution of the Company
+on 27 May 2009) (the "Articles") and the CG
+Code.
+Our Non-executive Directors are appointed for a
+term of one year. However, none of our existing
+Independent Non-executive Directors are
+appointed for a specific term, which constitutes
+a deviation from the CG Code. Further
+explanation is set out under the section headed
+"Compliance with the Corporate Governance
+Code" on page 42.
+Corporate Governance Report
+30 CNOOC LIMITED Annual Report 2015
+A Director appointed by the Board to fill a casual
+vacancy or as an addition shall hold office until
+the next extraordinary general meeting and/or
+annual general meeting (as appropriate).
+The Company believes that the active
+involvement of the Non-executive Directors and
+Independent Non-executive Directors in the
+management and decision making of the Board
+and its Committees strengthens the objectivity
+and independence of the Board.
+Since the adoption of the Policy in August 2013,
+the Board has observed the Policy and took into
+account the objectives set out in the Policy in
+reviewing its Board composition. In particular,
+in selecting the candidates for Independent
+Non-executive Director, not only the Board
+considered the knowledge, experience and
+industry-specific exposures of the candidates,
+the Board also took into account other factor
+such as cultural background and diversified
+I vision of the candidates. As a result, the
+Nomination Committee considered that there is
+sufficient diversity at the Board level.
+Certain Directors also attended trainings
+organized by the Company or external
+professional bodies on other regulatory
+updates as well as obligations of
+directors. In addition, Directors also
+read materials/publications which they
+thought appropriate and necessary for
+the fulfillment of their roles. The Directors
+provided their regular training records to
+the Company.
+Attendance of individual members at Nomination
+Committee meetings in 2015
+Directors
+and tailored induction on appointment
+for the purpose of giving an overview
+of the business and operations of the
+Group and appropriate briefings and
+trainings from the Company covering
+the statutory and regulatory obligations.
+of Directors, organizational structure,
+policies, procedures and codes of the
+Company and terms of reference of
+Committees. The senior management
+and the Joint Company Secretaries will
+also conduct subsequent briefings as
+and when necessary to ensure that the
+Directors are kept appraised of the latest
+developments relevant to the operations
+and business of the Company, and
+their responsibilities under statutes and
+common law, the Listing Rules, legal and
+other regulatory requirements as well as
+the Company's business and governance
+policies, so that they are able to discharge
+their responsibilities properly.
+All Directors newly appointed to the
+Board receive a comprehensive, formal
+Directors' training and professional
+development:
+The Company regularly updates its Directors
+with changes in laws and regulations relevant to
+their roles as Directors of the Company.
+•
+Principle: "Every director must always know his
+responsibilities as a director of an issuer and its
+conduct, business activities and development.
+Given the essential unitary nature of the board, non-
+executive directors have the same duties of care and
+skill and fiduciary duties as executive directors."
+A.6 Responsibilities of Directors
+Note 2: Mr. Yang Hua was appointed as Chairman of the Nomination
+Committee with effect from 19 May 2015.
+Note 1: Mr. Wang Yilin resigned as Non-executive Director with effect
+from 19 May 2015.
+0
+2
+has served the Company for more than nine
+years, the Board will propose shareholders'
+vote by way of a separate resolution on any
+decision to re-elect such Independent Non-
+executive Director and include in the circular
+and/or explanatory statement accompanying
+the notice of the relevant general meeting to
+shareholders the reasons why the Board still
+considers such Director as independent and
+shall be re-elected. Mr. Chiu Sung Hong who
+has served as an Independent Non-executive
+Director of the Company for over nine years, will
+retire from office and being eligible for re-election
+at the forthcoming annual general meeting of the
+Company to be held on 26 May 2016. Mr. Chiu
+has thorough understanding of the Company's
+operations and business. As an Independent
+Non-executive Director, Mr. Chiu has expressed
+objective views and given valuable independent
+guidance to the Company over the years. He
+is currently the chairman of the remuneration
+committee and a member of the audit
+committee, and has served as the chairman of
+the independent board committee in connection
+with the connected transactions entered into by
+the Company and its subsidiaries. Mr. Chiu has
+continued to demonstrate firm commitments
+to his role. Mr. Chiu has provided confirmation
+of his independence according to Rule 3.13 of
+the Listing Rules. The Board considers that Mr.
+Chiu remains independent for the purpose of the
+Listing Rules despite the fact that he has served
+the Board for over nine years. In accordance
+with Code Provision A.4.3 of the CG Code, the
+Company will include in the notice of the annual
+general meeting to be held in 2016 and the
+circular of the Company the reasons why the
+Board still considers Mr. Chiu as independent
+and shall be re-elected.
+Kevin G. Lynch
+2
+Lawrence J. Lau
+0
+1
+Yang Hua (Chairman) (Note 2)
+0
+1
+Wang Yilin (Note 1)
+by proxy
+member
+No. of meetings attended
+(2 meetings in total)
+The Independent Non-executive Directors of the
+Company are all professionals or scholars with
+backgrounds in the legal, economic, financial
+and investment fields. They have extensive
+experience and knowledge of corporate
+management and make significant contributions
+to the Company's strategic decisions.
+Members of the Audit Committee received
+materials from the Company's external
+auditors from time to time in order to
+keep abreast of changes in financial
+reporting principles and practices, as well
+as issues relating to financial reporting,
+risk management and internal controls
+relevant to the Company;
+The Executive Directors of the Company are
+all individuals with extensive experience in
+the Company's respective fields of operation.
+Both of them are familiar with the Company's
+businesses and have cooperated with leading
+global players in the oil and gas industry. Both
+Mr. Wu Guangqi and Mr. Li Fanrong have over
+30 years of experience in petroleum exploration
+and operation.
+Meanwhile, the Company has established
+a mechanism for rectifying internal control
+defects under which the leading officials
+of all units have clear responsibilities of
+rectifying internal control defects in their
+own units. Those responsibilities are
+also included in the internal performance
+indicators of the Company.
+The management has evaluated the
+design and operating effectiveness of its.
+internal control regarding the financial
+report as of 31 December 2015, and has
+not discovered any material weakness as
+a result of the evaluation. On the basis of
+such evaluation, the Directors consider
+that as of 31 December 2015, internal
+control system of the Company in relation
+to financial reporting was effective.
+internal control system and mechanism over
+financial, operational and compliance controls
+and has conducted continuing review and
+evaluation of the internal control of the Company
+to ensure the timeliness, accuracy and
+completeness of all information reported.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2015
+With respect to internal control, the Company
+has chosen and adopted the internal control
+framework issued by COSO, established an
+With respect to risk management, the Company
+has chosen and adopted the risk management
+framework issued by COSO in the United
+States of America ("COSO"), established a
+risk management system covering design,
+implementation, monitoring, assessment and
+continuous improvement based on the ISO
+31000:2009 "Risk Management - Principles and
+Guidelines". The Risk Management Committee
+established the overall targets and policies of the
+risk management system which are in line with
+the strategic objectives of the Company, and
+identified, analysed and assessed the overall
+risk of the Company, including the Company's
+key risks in making major decisions, important
+events and key business processes. The Risk
+Management Committee is also responsible for
+reviewing and approving the response plans
+to major risks, as well as periodically following-
+up and reviewing the implementation of such
+response plans, in order to make sure that
+sufficient attention, monitor and responses will
+be paid to all key risks of the Company. The
+risk management reports are submitted to the
+Board periodically.
+The Company's Risk Management Committee
+is directly managed by the Chief Executive
+Officer and has been authorized by the Board
+to be in charge with the organization and
+implementation of the overall risk management
+and internal control. The Risk Management
+Committee is responsible for establishing the
+risk management and internal control systems,
+implementing standardized organization,
+authorization, responsibilities, procedures
+and methods for the risk management and
+internal control systems. The Risk Management
+Committee is also responsible for ongoing
+monitoring of the risk management and internal
+control systems of the Company, and makes
+periodic reports to the Board regarding the
+status of the risk management and internal
+control systems of the Company. Such
+systems are designed to manage rather than
+eliminate the risk of failure to achieve business
+objectives, and can only provide reasonable
+and not absolute assurance against material
+misstatement or loss.
+response plan. The Company would review,
+among other things, adequacy of resources,
+staff qualifications and experience, training
+programmes and budget of our accounting,
+internal audit and financial reporting functions.
+The Directors regularly, and at least annually,
+receive reports from the management of the
+Company regarding the establishment, review
+and evaluation of the Company's financial,
+operational and compliance control, internal
+control and risk management. All major risks
+are reported to the Board. The Board will
+also evaluate the corresponding risks and the
+Principle: "The board is responsible for evaluating
+and determining the nature and extent of the
+risks it is willing to take in achieving the issuer's
+strategic objectives, and ensuring that the issuer
+establishes and maintains appropriate and effective
+risk management and internal control systems.
+The board should oversee management in the
+design, implementation and monitoring of the risk
+management and internal control systems, and
+management should provide a confirmation to the
+board on the effectiveness of these systems."
+C.2 Risk Management and internal controls
+The statement by the auditor of the Company
+regarding its reporting responsibilities on the
+financial statements of the Group is set out in
+the Independent Auditors' Report on page 66.
+The Directors are not aware of any material
+uncertainties relating to events or conditions that
+may cast significant doubt upon the Company's
+ability to continue as a going concern as referred
+to in Code Provision C.1.3 of the CG Code.
+The Company has also engaged independent
+technical consultant firms to conduct a review of
+its oil and gas business and discloses details of
+its oil and gas properties in its annual report (as
+set out on pages 132 to 144).
+The Company provides a balanced, clear and
+understandable assessment in its interim and
+annual reports, other financial disclosures
+required by the Listing Rules, reports to the
+regulators and information disclosed under
+statutory requirements to enable investors to
+appraise its development over the period and its
+financial position.
+manner.
+The Company regularly updates investors with
+progress of development and performance
+of the Company through formal channels
+such as annual reports, interim reports and
+announcements made through the Hong Kong
+Stock Exchange's website and the Company's
+website, as well as through press releases.
+The Company also issues quarterly operational
+statistics and announces its strategy at the
+beginning of the year to enhance transparency
+about its performance and to give details of the
+latest development of the Company in a timely
+Corporate Governance Report
+36
+35
+CNOOC LIMITED Annual Report 2015
+In response to Section 404 of the Sarbanes-
+Oxley Act promulgated by the U.S. Congress
+in 2002 to safeguard the interests of investors,
+increase the accuracy and effectiveness of
+financial reporting and financial information
+disclosure, the management has issued
+a statement on the responsibility and
+effectiveness of internal control based on
+financial reporting, and the auditors of the
+Company have also audited the effectiveness of
+internal control over financial reporting.
+The Company has established an open
+channel to handle and discuss internal
+reports concerning finance, internal
+control and embezzlement to ensure that
+all reports will receive sufficient attention
+and any significant internal control
+weaknesses or reports will directly reach
+the chairman of the Audit Committee.
+If necessary, the Directors will also engage
+professional independent consultants so
+that the Directors can gain an in-depth and
+comprehensive understanding and assessment
+of the relevant matters, in order to make well-
+grounded assessments.
+C.3 Audit Committee
+The Audit Committee consists of three
+Independent Non-executive Directors (Mr. Tse
+Hau Yin, Aloysius, Mr. Chiu Sung Hong and Mr.
+Lawrence J. Lau), with Mr. Tse Hau Yin, Aloysius
+as the Audit Committee financial expert for the
+purposes of U.S. securities laws and Chairman
+of the Audit Committee. A list of members of the
+Audit Committee is set out under the section
+headed "Company Information" on page 152 of
+this annual report.
+38 CNOOC LIMITED Annual Report 2015
+Reviewed the work performed by
+the Company's external auditors and
+their relationship with the Company's
+senior management, and made
+recommendations to the Board in relation
+to the appointment of external auditors, as
+well as the proposed auditors' fees;
+Conducted a review of the effectiveness
+of the Company's internal audit function
+to ensure co-ordination within the Group
+and between the Company's internal
+and external auditors, and to ensure that
+the internal audit function is adequately
+resourced and has appropriate standing
+within the Company, and made
+recommendations to the Board in relation
+to ways of improving the internal audit
+function;
+Made recommendations to senior
+management and the Board on the scope
+and quality of management's ongoing
+monitoring of risks and issues relevant to
+internal controls;
+Discussed with senior management of
+the Company the adequacy of resources,
+staff qualifications and experience,
+training programmes, and budget of the
+Company's accounting, internal audit and
+financial reporting functions to ensure
+that management has performed its duty
+to have effective risk management and
+internal control systems, both under the
+Listing Rules as well as under relevant
+U.S. requirements;
+Conducted a review of the effectiveness
+of the risk management and internal
+control systems of the Company and
+its subsidiaries, including financial,
+operational and compliance controls and
+made recommendations to the Board
+based on the review;
+In addition to formal meetings arranged
+by the Company, members of the Audit
+Committee were also given direct access
+to the external auditors and have frequent
+contacts with the external auditors to
+discuss issues from time to time;
+the applicable accounting
+standards relating to the audit of the
+Company's financial statements,
+including any recent changes;
+the Company's management
+discussion and analysis disclosures
+in the interim report and annual
+report of the Company; and
+the external auditors' engagement
+letter and general scope of their
+audit work, including planning and
+staffing of the audit;
+(ii)
+(i)
+The Audit Committee held formal
+meetings with the external auditors and
+senior management of the Company at
+least twice a year to discuss the following
+matters:
+Reviewed the Company's audited
+accounts and results announcements
+before they are tabled to the Board for
+approval, and discussed with senior
+management and the external auditors
+over such accounts;
+The following is a summary of the work
+performed by the Audit Committee under its
+charter during the year:
+The Audit Committee is also responsible for
+reviewing the Company's internal audit function,
+ensuring co-ordination within the Group and
+between the Company's internal and external
+auditors, and ensuring that the internal audit
+function is adequately resourced and has
+appropriate standing within the Company and to
+review and monitor its effectiveness.
+during the period. Also, the extent to which
+they have resulted in unforeseen outcomes or
+contingencies that have had, could have had, or
+may in the future have, a material impact on the
+Company's financial performance or condition;
+(e) and the effectiveness of the Company's
+processes for financial reporting and Listing Rule
+compliance.
+Corporate Governance Report
+37
+CNOOC LIMITED Annual Report 2015
+The Audit Committee is also responsible
+for overseeing and monitoring the risk
+management and internal control systems of
+the Company on an ongoing basis and review
+with our external auditors and management
+periodically, not less than annually, the scope,
+adequacy and effectiveness of the Company's
+corporate accounting and financial controls, risk
+management and internal control systems, and
+any related significant findings regarding risks
+or exposures and consider recommendations
+for improvement of such controls. The review
+should cover all material controls, including
+financial, operational and compliance controls.
+In conducting annual review, the Audit
+Committee should, in particular, consider the
+factors including (a) the changes, since the
+last annual review, in the nature and extent of
+significant risks, and the Company's ability to
+respond to changes in its business and the
+external environment; (b) the scope and quality
+of management's ongoing monitoring of risks
+and of the internal control systems, and where
+applicable, the work of its internal audit function
+and other assurance providers; (c) the extent
+and frequency of communication of monitoring
+results to the Board which enables it to assess
+control of the Company and the effectiveness
+of risk management; (d) significant control
+failings or weaknesses that have been identified
+The Audit Committee is also responsible
+for overseeing the operation of the internal
+monitoring systems so as to ensure that the
+Board is able to monitor the Company's overall
+financial position, to protect the Company's
+assets, and to prevent major errors or omissions
+resulting from financial reporting. The Audit
+Committee also meets at least twice a year with
+our external auditors.
+The Audit Committee meets at least twice
+a year and is responsible for reviewing the
+completeness, accuracy and fairness of
+the Company's accounts, evaluating the
+Company's auditing scope (both internal and
+external) and procedures as well as its risk
+management and internal control systems.
+The Audit Committee, together with senior
+management and the external auditors,
+review the accounting principles and practices
+adopted by the Group and discuss the risk
+management and internal control and financial
+reporting matters. The Board also assesses
+the effectiveness of risk management and
+internal control systems by considering reviews
+performed by the Audit Committee, senior
+management and both internal and external
+auditors.
+Principle: "The board should establish formal and
+transparent arrangements to consider how it will
+apply financial reporting, risk management and
+internal control principles and maintain an appropriate
+relationship with the issuer's auditors. The audit
+committee established under the Listing Rules should
+have clear terms of reference."
+The Non-executive Directors of the Company
+are all individuals with extensive experience
+in the parent company's respective fields of
+operation.
+Directors will also discuss and analyse the
+performance of the Group, the long term
+business model and corporate strategies of
+the Company for achieving the Company's
+objectives and generating or preserving value
+over the longer term. Please refer to the relevant
+section in Management's Discussion and
+Analysis on pages 61 to 65 for details.
+The Company has established a mechanism for
+reporting to the Board by providing a monthly
+management report in order to ensure that
+the Board fully understands the operating
+conditions and the relevant financial position
+of the Company. The Board is responsible for
+preparing accounts that give a true and fair view
+of the Group's financial position on a going-
+concern basis and other financial disclosures.
+Management provides the Board with the
+relevant information it needs to fulfill these
+responsibilities.
+The Company seeks to apply similar principles
+when determining the remuneration packages
+for senior management with reference to the
+Board's corporate goals and objectives. Other
+general staff and employees are rewarded on
+a performance-rated basis with other fringe
+benefits such as social insurance, pension funds
+and medical cover.
+No individual Director or senior management of
+the Company is permitted to determine his/her
+own remuneration.
+Details of the remuneration, as well as the share
+option benefits of Directors for the year ended
+31 December 2015, are set out on pages 93 to
+94 of this annual report.
+Changes in relevant markets, for example,
+supply/demand fluctuations and changes
+in competitive conditions.
+Responsibilities of the Directors and their
+individual contribution; and
+Business needs, company goals and
+objectives;
+The Company's emolument policy is to maintain
+fair and competitive packages with reference
+to industry standards and prevailing market
+conditions. The Remuneration Committee is
+mindful that levels of remuneration must be
+sufficient to attract and retain the Directors
+and senior management in order to run the
+Company successfully, but at the same
+time, the Company should avoid setting
+remunerations which are in excess of those
+necessary for this purpose. The Directors'
+emolument package may comprise the
+Director's fees, basic salaries and allowances,
+bonuses, share options and others. The
+following factors are considered in determining
+the Directors' remuneration package:
+The major responsibilities and authorities
+of the Remuneration Committee include
+making recommendations to the Board
+on the Company's policy and structure of
+the remuneration of Directors and senior
+management of the Company and on the
+establishment of a formal and transparent
+procedure for developing remuneration policy,
+determining and reviewing the service contracts
+and specific remuneration packages for all
+Executive Directors and senior management,
+such as benefits in kind, pension rights and
+compensation payments, including any
+compensation payable for loss or termination
+of their office or appointment, and making
+recommendations to the Board on the
+remuneration of Non-executive Directors and
+Independent Non-executive Directors.
+The Remuneration Committee comprises two
+Independent Non-executive Directors (Mr. Chiu
+Sung Hong and Mr. Tse Hau Yin, Aloysius) and
+one Non-executive Director (Mr. Lv Bo) with Mr.
+Chiu Sung Hong served as the Chairman of the
+Remuneration Committee. The Remuneration
+Committee is delegated with the authority of
+determining and approving salaries, bonuses,
+share option packages, performance appraisal
+systems and retirement plans for all Executive
+Directors and Senior Management. A list of
+members of the Remuneration Committee is set
+out in "Company Information" on page 152 of
+this annual report.
+Reviewed and approved the Company's
+audit and non-audit pre-approval policy to
+ensure auditors' independence;
+REMUNERATION OF DIRECTORS AND
+SENIOR MANAGEMENT AND BOARD
+EVALUATION
+Principle: "An issuer should disclose its directors'
+remuneration policy and other remuneration related
+matters. The procedure for setting policy on executive
+directors' remuneration and all directors' remuneration
+packages should be formal and transparent.
+Remuneration levels should be sufficient to attract
+and retain directors to run the company successfully
+without paying more than necessary. No director
+should be involved in deciding his own remuneration."
+B.1 The level and make-up of remuneration and
+disclosure
+Corporate Governance Report
+The Chairman encourages all Directors to make
+full and active contribution to the Board's affairs
+and takes the lead to ensure that the Board
+acts in the best interests of the Company. The
+Chairman encourages Directors with different
+views to voice their concerns, allows sufficient
+time for discussion of issues and ensures that
+Board decisions fairly reflect Board consensus.
+The Chairman holds meetings with the
+Independent Non-executive Directors and Non-
+executive Directors without the presence of the
+Executive Directors at least annually.
+The Chairman ensures that appropriate steps
+are taken to provide effective communication
+with shareholders and that their views are
+communicated to the Board as a whole.
+The Chairman promotes a culture of openness
+and debate by facilitating the effective
+contribution of Non-executive Directors and
+Independent Non-executive Directors in
+particular and ensuring constructive relations
+between Executive and Non-executive
+Directors.
+The CEO is responsible for conducting the
+Company's business and affairs consistent with
+the principles and directions established by
+the Board. The clear division of responsibilities
+between the Chairman and the CEO ensures
+a balance of power and authority, as well as
+efficient management and operation of the
+Company, which contribute to the success of
+the Company.
+A.3 Board composition
+Principle: "The board should have a balance of skills,
+experience and diversity of perspectives appropriate
+to the requirements of the issuer's business. It should
+ensure that changes to its composition can be
+managed without undue disruption. It should include a
+balanced composition of executive and non-executive
+directors (including independent non-executive
+directors) so that there is a strong independent
+element on the board, which can effectively exercise
+independent judgment. Non-executive directors
+should be of sufficient calibre and number for their
+views to carry weight."
+The Board, as representatives of the
+shareholders of the Company, is committed
+to the achievement of business success and
+the enhancement of long-term shareholder's
+value with the highest standards of integrity and
+ethics. The role of the Board is to direct, guide
+and oversee the conduct of the Company's
+business and to ensure that the interests of the
+shareholders are being served.
+As of 31 December 2015, the Board consisted
+of eight members: two of them were Executive
+Directors, two of them were Non-executive
+Directors and four of them were Independent
+Non-executive Directors. All Directors were
+identified by categories of Executive Directors,
+Non-executive Directors and Independent
+Non-executive Directors in all corporate
+communications that set out the names of
+the Directors of the Company. A list of the
+Directors identifying their roles and functions
+was maintained on the Company's website and
+on the Hong Kong Stock Exchange's website
+during the reporting period.
+Please refer to notes 9 to 10 to the financial
+statements on pages 93 to 95 of this annual
+report for details of Directors' remuneration
+and senior management's remuneration by
+band and the five highest paid individuals in the
+Company.
+Directors will discuss the operating budget for
+the next year and approve the operating budget
+at the end of each year and will review the
+execution of the operating budget for the whole
+year. Management will also provide sufficient
+explanations and information to the Board. All
+significant changes in the operating conditions
+and investment decisions will be discussed in
+sufficient details by the Board.
+The remuneration of Non-executive Directors
+and Independent Non-executive Directors
+recommended by the Remuneration Committee
+is determined by the Board where the vote of
+the Directors concerned will not be counted in
+relation to their remuneration.
+CNOOC LIMITED Annual Report 2015
+Principle: "The board should present a balanced, clear
+and comprehensible assessment of the company's
+performance, position and prospects."
+C.1 Financial reporting
+C. ACCOUNTABILITY AND AUDIT
+222
+0
+0
+by proxy
+member
+Lv Bo
+Tse Hau Yin, Aloysius
+Chiu Sung Hong (Chairman)
+Directors
+No. of meetings attended
+(2 meetings in total)
+by committee
+Attendance of individual members at Remuneration
+Committee meetings in 2015
+Evaluated and assessed the effectiveness
+of the Remuneration Committee
+and the adequacy of the charter of
+the Remuneration Committee and
+recommended the proposed changes to
+the charter to the Board (if necessary).
+Made recommendations to the Board on
+the remuneration of the Company's Non-
+executive Directors; and
+Assessed performance of Executive
+Directors and approved the terms of their
+service contracts;
+Made recommendations to the Board
+on the Company's policy and structure
+for Directors and senior management
+remuneration and on the establishment
+of a formal and transparent procedure for
+developing remuneration policy;
+Reviewed and approved the remuneration
+packages of the Company's individual
+Executive Directors and senior
+management of the Company;
+The following is a summary of the work
+performed by the Remuneration Committee
+under its charter during the year:
+The Remuneration Committee consults the
+Chairman and CEO about its proposal relating
+to the remuneration of other Executive Directors
+and have access to independent professional
+advice if necessary.
+The Remuneration Committee also administers
+the Company's share option schemes and all
+other employee equity-based compensation
+plans, with full authority to make all other
+determinations in the administration thereof, but
+subject to the limitations prescribed by laws and
+the rules of such plans and programs.
+Corporate Governance Report
+34
+The Board and each Director have separate and
+independent access to the Company's senior
+management and also the Joint Company
+Secretaries, who will provide full and prompt
+responses to queries raised by the Directors.
+All Directors are entitled to have access to the
+Board papers, minutes and related materials
+upon reasonable notice.
+40 CNOOC LIMITED Annual Report 2015
+Directors clearly understand delegation
+arrangements in place. The Company has
+entered into service agreements with the
+Executive Directors and Non-executive
+Directors and has formal letters of appointment
+for Independent Non-executive Directors
+setting out the key terms and conditions of their
+engagements and appointments.
+Directors and Senior Management
+1
+2
+4
+5
+8
+3
+6
+44 CNOOC LIMITED Annual Report 2015
+Executive Directors
+1
+Li Fanrong
+2 Wu Guangqi
+Non-executive Directors
+Yang Hua (Chairman)
+3
+4
+Lv Bo
+Independent Non-executive Directors
+5 Chiu Sung Hong
+6
+43
+Lawrence J. Lau
+CNOOC LIMITED Annual Report 2015
+The Company is incorporated under the laws of Hong Kong
+and the principal trading market for the ordinary shares of
+the Company is The Stock Exchange of Hong Kong Limited.
+In addition, because the Company's ordinary shares are
+registered with the United Sates Securities and Exchange
+Commission and are listed on the New York Stock
+Exchange (the "NYSE"), the Company is subject to certain
+corporate governance requirements of NYSE. However,
+many of the corporate governance rules in the NYSE
+Listed Company Manual (the “NYSE Standards”) do not
+apply to the Company as a “foreign private issuer” and the
+Company is permitted to follow its home country corporate
+governance practices in lieu of most corporate governance
+standards contained in the NYSE Standards. Section
+303A.11 of the NYSE Listed Company Manual requires
+NYSE listed foreign private issuers to describe the significant
+differences between their corporate governance practices
+and the corporate governance standards applicable to U.S.
+companies listed on the NYSE. The Company has posted a
+brief summary of such significant differences on its website,
+which may be accessed through the following web page:
+Pursuant to Rule 13.51(B) of the Listing Rules, there is no
+other change in the information of Directors of the Company
+except as disclosed in this annual report.
+CODE OF ETHICS
+The Board adopted a Code of Ethics in 2003 to provide
+guidelines to the senior management and Directors in
+legal and ethical matters as well as the sensitivity involved
+in reporting illegal and unethical matters. The Code of
+Ethics covers areas such as supervisory rules, insider
+dealing, market malpractices, conflict of interests, company
+opportunities, protection and proper use of the Company's
+assets as well as reporting requirements. As part of its
+continued efforts to improve its corporate governance
+standards, the Board conducted an annual review to the
+Code of Ethics since 2009, and the current version of the
+Code of Ethics was reviewed and adopted in August 2015.
+42 CNOOC LIMITED Annual Report 2015
+Corporate Governance Report
+The Company has provided all its Directors and senior
+officers with a copy of the Code of Ethics and requires them
+to comply with the Code of Ethics, so as to ensure the
+Company's operation is proper and lawful. The Company
+will take disciplinary actions towards any act which is in
+breach of the Code of Ethics. All the senior management
+members and Directors are required to familiarise
+themselves with and follow the Code of Ethics to ensure that
+the Company's operations are honest and legal. Violations
+of the rules will be penalized and serious breaches will result
+in dismissal.
+MODEL CODE FOR SECURITIES
+TRANSACTIONS BY DIRECTORS OF LISTED
+ISSUERS
+The Company has adopted the abovementioned Code
+of Ethics which has incorporated the Model Code for
+Securities Transactions by Directors of Listed Issuers (the
+"Model Code") as set out in Appendix 10 to the Listing
+Rules. The Company has made specific enquiries to all of
+the Directors, and all Directors have confirmed that they
+complied, during the year ended 31 December 2015, with
+the required standards set out in the Model Code.
+SERVICES AND REMUNERATION OF
+AUDITORS
+Deloitte Touche Tohmatsu, appointed as the independent
+auditors of the Company on 24 May 2013 (before 24 May
+2013, Ernst & Young was the independent auditors of the
+Company), was re-appointed and engaged as the Company
+and its subsidiaries' auditors ("Auditors") for the financial
+year ended 31 December 2015. Services provided by the
+auditors and fees charged by the auditors for the services
+for the year ended 31 December 2015 are as follows:
+Audit Fees
+The aggregate fees billed for professional services rendered
+by the Auditors for the audit of the Company's annual
+financial statements or services that are normally provided
+by the Auditors in connection with statutory and regulatory
+filings or engagements were RMB46.7 million for the
+financial year ended 31 December 2014 and RMB45.2
+million for the financial year ended 31 December 2015.
+Audit-related Fees
+The aggregate fees billed for assurance and related
+services by the Auditors that are reasonably related to
+the performance of the audit or review of the Company's
+financial statements and are not reported under "Audit
+Fees" were RMB8.7 million for the financial year ended 31
+December 2014 and RMB8.5 million for the financial year
+ended 31 December 2015.
+Tax Fees
+The aggregate fees billed for professional service rendered
+by the Auditors for tax compliance, tax advice and tax
+planning were RMB2.1 million for the financial year ended
+31 December 2014 and RMB0.6 million for the financial year
+ended 31 December 2015.
+All Other Fees
+The aggregate fees billed for professional service rendered
+by the Auditors for risk management advisory services, and
+information systems reviews were RMB7.0 million for the
+financial year ended 31 December 2014 and RMB2.5 million
+for the financial year ended 31 December 2015.
+There are no other fees payable to the Auditors for products
+and/or services provided by the Auditors, other than the
+services reported above, for the financial year ended
+31 December 2014 and for the financial year ended 31
+December 2015.
+STATEMENT ON CORPORATE GOVERNANCE
+AS REQUIRED BY SECTION 303A.11 OF THE
+NEW YORK STOCK EXCHANGE LISTED
+COMPANY MANUAL
+http://www.cnoocltd.com/encnoocltd/gsgz/socg
+CHANGES IN INFORMATION OF DIRECTORS
+7
+8 Kevin G. Lynch
+Lawrence J. Lau
+Born in 1944, Professor Lau graduated with a B.S. (with
+Great Distinction) in Physics from Stanford University
+in 1964, and received his M.A. and Ph.D. degrees in
+Economics from the University of California at Berkeley in
+1966 and 1969 respectively. He joined the faculty of the
+Department of Economics at Stanford University in 1966,
+becoming Professor of Economics in 1976, the first Kwoh-
+Ting Li Professor in Economic Development in 1992,
+and Kwoh-Ting Li Professor in Economic Development,
+Emeritus in 2006. From 2004 to 2010, Professor Lau
+served as Vice-chancellor (President) of The Chinese
+University of Hong Kong. From September 2010 to
+September 2014, Professor Lau served as Chairman of
+CIC International (Hong Kong) Co., Limited. Professor
+Lau specializes in economic development, economic
+growth, and the economies of East Asia, including that
+of China. He has authored, co-authored, or edited six
+books and published more than 170 articles and notes
+in professional journals. Professor Lau is a member of
+the 12th National Committee of the Chinese People's
+Political Consultative Conference and a Vice-Chairman of
+its Economics Subcommittee, the Vice-Chairman of the
+Advisory Committee of the Qianhai Shenzhen-Hong Kong
+Modern Service Industry Cooperation Zone of Shenzhen
+and a Director of the Chinese Association of Hong Kong
+and Macau Studies. Professor Lau also serves as a
+member of the Hong Kong Special Administrative Region
+Exchange Fund Advisory Committee and Chairman of its
+Governance Sub-Committee, and member of its Currency
+Board Sub-committee and Investment Sub-Committee. In
+addition, he also serves as a Member and Chairman of the
+Prize Recommendation Committee, LUI Che Woo Prize
+Company, as well as a Vice-Chairman of Our Hong Kong
+Foundation. He was appointed a Justice of the Peace in
+Hong Kong in July 2007. He currently serves as the Ralph
+and Claire Landau Professor of Economics at the Institute of
+Global Economics and Finance, The Chinese University of
+Hong Kong, an Independent Non-executive Director of AIA
+Group Limited and Hysan Development Company Limited,
+which are listed on the Hong Kong Stock Exchange, and
+an Independent Non-executive Director of Far EasTone
+Telecommunications Company Limited, Taipei, which is
+listed on the Taiwan Stock Exchange. Professor Lau was
+appointed as an Independent Non-executive Director of the
+Company with effect from 31 August 2005.
+Tse Hau Yin, Aloysius
+Born in 1948, Mr. Tse is a fellow of The Institute of Chartered
+Accountants in England and Wales, and the Hong Kong
+Institute of Certified Public Accountants ("HKICPA"). Mr.
+Tse is a past president and a former member of the Audit
+Committee of the HKICPA. He joined KPMG in 1976,
+became a partner in 1984 and retired in March 2003. Mr.
+Tse was a non-executive Chairman of KPMG's operations in
+the PRC and a member of the KPMG China advisory board
+from 1997 to 2000. Mr. Tse is currently an independent
+non-executive director of China Telecom Corporation
+Limited, Wing Hang Bank Limited (whose shares were
+delisted from The Stock Exchange of Hong Kong Limited
+with effect from 16 October 2014 and was renamed as
+OCBC Wing Hang Bank Limited), Daohe Global Group
+Limited (formerly known as Linmark Group Limited), SJM
+Holdings Limited, Sinofert Holdings Limited and China
+Huarong Asset Management Company, Limited, companies
+listed on The Stock Exchange of Hong Kong Limited.
+He was an independent non-executive director of China
+Construction Bank Corporation, which is listed on the HKSE
+Main Board from 2004 to 2010. Mr.Tse was appointed as
+an independent non-executive director of CCB International
+(Holdings) Limited, a wholly owned subsidiary of China
+Construction Bank Corporation in March 2013. Mr. Tse is
+also a member of the International Advisory Council of the
+People's Municipal Government of Wuhan. Mr. Tse was
+appointed as an Independent Non-executive Director of the
+Company with effect from 8 June 2005.
+Kevin G. Lynch
+Born in 1951, Mr. Lynch obtained a B.A. degree from
+Mount Allison University, a M.A. degree in Economics from
+the University of Manchester, and a doctorate degree in
+Economics from McMaster University. He also holds eight
+honorary degrees. Mr. Lynch was made a life Member of
+the Privy Council for Canada, and an Officer of the Order of
+Canada. He is the Vice Chairman of BMO Financial Group
+and also a distinguished former public servant with 33
+years of service with the Government of Canada. Mr. Lynch
+served as Deputy Minister of Industry of Canada from 1995
+to 2000, Deputy Minister of Finance of Canada from 2000 to
+2004, Executive Director at the International Monetary Fund
+from 2004 to 2006 and was appointed as Clerk of the Privy
+Council for Canada, Secretary to the Cabinet and Head
+of the Public Service from 2006 to 2009. Mr. Lynch is the
+Chancellor of the University of King's College, Past Chair of
+the Board of Governors of the University of Waterloo, Chair
+of the Canadian Ditchley Foundation, member and past
+Chair of the World Economic Forum's Global Policy Council
+on the Global Financial System and former Vice Chair of
+the Jobs and Prosperity Council of Ontario. He also serves
+on other boards including the Killam Trusts, Communitech,
+the Governor General's Rideau Hall Foundation and the
+Asia Pacific Foundation of Canada. Mr. Lynch is currently a
+director of Empire Company Limited (Sobey's) listed on the
+Toronto Stock Exchange, a director of Canadian National
+Railway Company listed on the Toronto Stock Exchange
+and New York Stock Exchange. Mr. Lynch was appointed
+as an Independent Non-executive Director of the Company
+on 27 November 2013, and such appointment took effect
+from 1 March 2014.
+CNOOC LIMITED Annual Report 2015
+47
+Directors and Senior Management
+OTHER MEMBERS OF SENIOR MANAGEMENT
+Yuan Guangyu
+Born in 1959, Mr. Yuan is an Executive Vice President of
+the Company, responsible for the drilling and completion.
+Mr. Yuan is a professor-level senior engineer. He graduated
+from East China Petroleum Institute (now China University of
+Petroleum) with a bachelor's degree in drilling engineering.
+He graduated from the EMBA program of China Europe
+International Business School in 2007 with an MBA degree.
+With over 30 years of experience in the oil and gas industry,
+Mr. Yuan joined CNOOC in 1982, having served as Deputy
+Manager of CNOOC Bohai Drilling Company, Deputy
+General Manager of CNOOC China Offshore Oil Northern
+Drilling Company, Deputy General Manager of Operational
+Department of CNOOC, General Manager of CNOOC
+China Offshore Oil Northern Drilling Company, President of
+CNOOC Services, and Chairman of the Board of Directors,
+Chief Executive Officer and President of China Oilfield
+Services Limited. Mr. Yuan also serves as the Director of
+CNOOC China Limited and CNOOC International Limited,
+both all being the subsidiaries of the Company. In November
+2006, Mr. Yuan was appointed as the Assistant President
+of CNOOC. In February 2009, Mr. Yuan was appointed as
+the Executive Vice President of the Company. In April 2013,
+Mr. Yuan was appointed as Director of Bohai Petroleum
+Administrative Bureau of CNOOC and General Manager of
+CNOOC China Limited Tianjian Branch.
+Zhu Weilin
+Born in 1956, Mr. Zhu is the Chief Geologist of CNOOC
+and Executive Vice President of the Company. Mr. Zhu
+is a professor-level senior engineer. He graduated from
+Tongji University with a Ph.D. degree. Mr. Zhu joined
+CNOOC in 1982. Prior to 1999, he conducted researches
+in CNOOC Research Center and served as the Deputy
+Manager of the Exploration Department, Manager of
+Science Management Department, and Deputy Chief
+Geologist and Chief Geologist of the Research Center.
+From 1999 to 2007, Mr. Zhu served as the Deputy
+Manager of Exploration Department of CNOOC, Deputy
+General Manager and General Manager of Exploration
+Department of the Company, General Manager of CNOOC
+China Limited Zhanjiang Branch and Vice President of
+the Company. Mr. Zhu also serves as the Director of
+CNOOC China Limited and CNOOC International Limited,
+the subsidiaries of the Company. Mr. Zhu has spent a
+long time in exploration research and management of oil
+and natural gas in offshore China. He was granted the
+Special Subsidies from the government, nominated as
+candidate for the "National Hundred, Thousand, and Ten
+Thousand Talent Project", named as an Excellent Science
+and Technology Worker of the Nation and awarded the
+Li Siguang Award for Geosciences, the highest tribute in
+geosciences awards level. In August 2007, Mr. Zhu was
+appointed as the Chief Geologist of CNOOC, Executive Vice
+President of the Company and the General Manager of the
+Exploration Department of the Company, responsible for the
+Company's oil and gas exploration operations. In July 2015,
+Mr. Zhu was appointed as the Chief Geologist of CNOOC
+and Executive Vice President of the Company.
+Zhao Liguo
+Born in 1953, Mr. Zhao is the General Counsel of the
+Company. He is a professor-level senior economist. He
+graduated from the Faculty of Law, Peking University in
+1983 with a bachelor of laws' degree. In 1988, he studied
+at the Law School of Niigata University in Japan for a
+year. Mr. Zhao joined CNOOC in 1983. He served as
+Head of Contract Division and Deputy General Manager of
+Contract Law Department, and General Manager of Legal
+Department of CNOOC. He also served as the General
+Counsel of CNOOC and the Company. Mr. Zhao was
+granted PRC lawyer qualification in 1987 and corporate
+counsel qualification in 1998. Mr. Zhao was appointed as
+the General Counsel of CNOOC with effect from June 2008.
+He was appointed as the General Counsel of the Company
+with effect from November 2009. In June 2015, Mr. Zhao
+retired as the General Counsel of the Company.
+Chen Bi
+Born in 1961, Mr. Chen is an Executive Vice President
+of the Company and is responsible for development,
+production and international affairs of the Company. Mr.
+Chen is a professor-level senior engineer. He graduated
+from the Southwest Petroleum Institution (now Southwest
+Petroleum University) and received a bachelor degree in
+oil production. He received a master degree of petroleum
+engineering from Edinburgh Heriot-Watt University in 1989
+and an MBA degree from Tsinghua University in 2001. Mr.
+Chen joined CNOOC in 1982 and has over 30 years of
+experience in the oil and natural gas industry. He served as
+the Deputy Manager of CNOOC Nanhai West Corporation
+Oil Production Company, Director of Production Section,
+Deputy General Manager of Development and Production
+Department of CNOOC, Deputy General Manager
+and General Manager of Development and Production
+Department of the Company, and General Manager of
+CNOOC China Limited Tianjin Branch. Mr. Chen also serves
+as the Director of CNOOC China Limited and CNOOC
+International Limited, both being the subsidiaries of the
+Company. In October 2005, Mr. Chen was appointed as
+Vice President of the Company and General Manager of
+CNOOC China Limited Tianjin Branch. In January 2009, Mr.
+Chen was appointed as the Executive Vice President of the
+Company.
+48 CNOOC LIMITED Annual Report 2015
+Directors and Senior Management
+Tse Hau Yin, Aloysius
+CNOOC LIMITED Annual Report 2015
+Born in 1947, Mr. Chiu received an LL.B. degree from the
+University of Sydney. He was admitted as a solicitor of the
+Supreme Court of New South Wales and the High Court
+of Australia. He has over 30 years' experience in legal
+practice and had been a director of a listed company in
+Australia. Mr. Chiu was the founding member of the Board
+of Trustees of the Australian Nursing Home Foundation and
+served as the General Secretary of the Australian Chinese
+Community Association of New South Wales. Mr. Chiu
+is also an Independent Non-executive Director of Tianda
+Pharmaceuticals Limited (formerly Yunnan Enterprises
+Holdings Limited, Tianda Holdings Limited) since April
+2008, a company listed on The Stock Exchange of Hong
+Kong Limited. Mr. Chiu is also an Independent Non-
+executive Director of Bank of China (Australia) Limited (a
+wholly subsidiary of Bank of China Limited). Mr. Chiu was
+appointed as an Independent Non-executive Director of the
+Company with effect from 7 September 1999.
+EXECUTIVE DIRECTORS
+Li Fanrong
+Born in 1963, Mr. Li is a professor-level senior engineer.
+He obtained a B.S. degree majoring in oil production from
+Yangtze University in China, and received an MBA degree
+from the Business School of Cardiff University in United
+Kingdom. Mr. Li has been working in the oil and gas industry
+in China over 30 years. He joined CNOOC in 1984, and
+worked as Petroleum Engineer, later as Offshore Platform
+Supervisor, Operation Manager of CNOOC/AMOCO
+Joint Operating Group, Managing Director of CNOOC/
+STATOIL Joint Operating Group, Chief Representative
+of Joint Management Committee in CACT Operators
+Group, General Manager of Development and Production
+Department of the Company and President of CNOOC
+China Limited Shenzhen Branch. He served as an Assistant
+President of CNOOC from January 2009 to April 2010
+and worked as President of CNOOC Energy Technology &
+Services Limited from February 2009 to April 2010. Mr, Li
+also served as Chairman and Director of CNOOC Southeast
+Asia Limited, being a subsidiary of the Company. He has
+served as Vice President of CNOOC since April 2010. He
+was appointed as President of the Company with effect
+from 16 September 2010, and was appointed as Chief
+Executive Officer of the Company with effect from 23
+November 2011. He also serves as a Director of CNOOC
+China Limited and Chairman and Director of CNOOC
+International Limited, all being subsidiaries of the Company.
+He was appointed as the chairman of the board of Nexen
+Energy ULC with effect from 26 February 2013. Mr. Li was
+appointed as a Non-executive Director of the Company with
+effect from 24 May 2010 and was re-designated from Non-
+executive Director to Executive Director with effect from 16
+September 2010.
+Wu Guangqi
+Born in 1957, Mr. Wu is a geologist, professor-level senior
+economist, Certified Senior Enterprise Risk Manager and
+Certified Internal Auditor and graduated with a B.S. degree
+from the Ocean University of China, majoring in Marine
+Geology. He also holds a master degree in Management
+from China University of Petroleum and a doctor degree
+in Management from Huazhong University of Science and
+Technology. Mr. Wu joined CNOOC in 1982. From 1994
+to 2001, he served as the Deputy General Manager of
+CNOOC Oil Technical Services Company, a subsidiary of
+CNOOC, the Director of the Administration Department of
+CNOOC and the Director of the Ideology Affairs Department
+of CNOOC successively. Mr. Wu was appointed as an
+Assistant President of CNOOC in 2003, and has been
+the Vice President of CNOOC since 2004. Mr. Wu also
+serves as the Vice Chairman of China Association of Risk
+Professionals, the Vice Chairman of China Association
+of Oceanic Engineering, the Director-General of National
+Energy Deepwater Oil & Gas Engineering Technology
+Research Centre Council and the Chairman of CNOOC
+Marine Environment and Ecology Protection Foundation.
+Mr. Wu served as an Independent Non-executive Director
+of China Yangtze Power Limited, a company listed on the
+Shanghai Stock Exchange, from May 2003 to July 2010. Mr.
+Wu has served as the Compliance Officer of the Company
+since 1 June 2005 and he also serves as a Director of
+CNOOC China Limited and CNOOC International Limited,
+all being the subsidiaries of the Company. Mr. Wu was
+appointed as an Executive Director of the Company with
+effect from 1 June 2005.
+NON-EXECUTIVE DIRECTORS
+Wang Yilin
+Born in 1956, Mr Wang is a professor-level senior engineer.
+He graduated from China University of Petroleum majoring
+in petroleum geology and exploration and received a
+doctorate degree. He has over 30 years of working
+experience in China's oil and gas industry. From June 1996
+to September 1999, Mr. Wang served as the deputy director
+and chief exploration geologist of Xinjiang Petroleum
+Administration Bureau. From September 1999 to May 2004,
+he served as the general manager of PetroChina Xinjiang
+Oilfield Company. From June 2001 to May 2004, he served
+as the senior executive of Xinjiang Petroleum Administration
+Bureau and the general manager of PetroChina Xinjiang
+Oilfield Company. From July to December 2003, he served
+as the Assistant to General Manager of China National
+Petroleum Corporation ("CNPC"). From December 2003
+to April 2011, he served as the Deputy General Manager
+of CNPC. From July 2004 to July 2007, he also served
+as the safety director of CNPC. From November 2005
+to April 2011, he served as a Director of PetroChina
+Company Limited, a company listed on the New York Stock
+Exchange, The Stock Exchange of Hong Kong Limited and
+Shanghai Stock Exchange respectively. Since 8 April 2011,
+Mr. Wang serves as Chairman of CNOOC. Mr. Wang was
+appointed as Chairman and Non-executive Director of the
+Company with effect from 15 April 2011. Mr. Wang resigned
+as Chairman of the Board, Chairman of the Nomination
+Committee and Non-executive Director of the Company
+with effect from 19 May 2015.
+Yang Hua
+Born in 1961, Mr. Yang is a professor-level senior economist
+and graduated from China University of Petroleum with a
+B.S. degree in petroleum engineering. He also received an
+MBA degree from the Sloan School of Management at MIT
+as a Sloan Fellow. Mr. Yang joined CNOOC in 1982 and
+has over 30 years of experience in petroleum exploration
+and production. From 1982 to 1992, Mr. Yang served
+in a number of positions in CNOOC Research Center
+including the Director of Field Development Department,
+the Manager of Reservoir Engineering Department and the
+Project Manager. Thereafter, Mr. Yang was mainly involved
+in international business, M&A, corporate finance and
+capital market operations. From 1993 to 1999, he served
+as the Deputy Chief Geologist, the Deputy Director and the
+Acting Director for Overseas Development Department of
+CNOOC and the Vice President of CNOOC International
+Limited. From 1999 to 2011, Mr. Yang served in a number
+CNOOC LIMITED Annual Report 2015
+45
+Directors and Senior Management
+of positions in the Company including Senior Vice President,
+Chief Financial Officer, Executive Vice President, President
+and Chief Executive Officer. Mr. Yang also served as an
+Assistant President of CNOOC from November 2006 to April
+2010 and as Vice President of CNOOC from April 2010 to
+August 2011. Mr. Yang served as Director and President of
+CNOOC from August 2011 to April 2015. He was appointed
+as Chairman of CNOOC in April 2015. In addition, he serves
+as Chairman and Director of CNOOC China Limited, being
+a subsidiary of the Company. He also served as Chairman,
+Director and President of CNOOC Southeast Asia Limited,
+General Manager of CNOOC China Limited and Chairman
+and Director of CNOOC International Limited, all being
+subsidiaries of the Company. He also served as Director
+of CNOOC Finance Corporation Limited, a subsidiary of
+CNOOC. Mr. Yang was appointed as an Executive Director
+of the Company with effect from 31 August 2005 and was
+the Vice Chairman of the Board of the Company from 16
+September 2010 to 19 May 2015, and was re-designated
+from an Executive Director to a Non-Executive Director
+of the Company with effect from 23 November 2011. Mr.
+Yang has been appointed as Chairman of the Board and
+Chairman of the Nomination Committee of the Company
+with effect from 19 May 2015.
+Lv Bo
+Born in 1962, Mr. Lv is a senior economist and received
+a Bachelor of Science degree in Management from China
+University of Mining and Technology and an MBA degree
+from China Europe International Business School. Since
+1985, he worked in the Ministry of Coal Industry, the
+Ministry of Energy and the Organization Department of
+the Communist Party of China Central Committee and
+served in a number of positions, including a Vice-Director-
+level official in the Personnel and Labor Department of the
+Ministry of Energy, Vice Director and Director of Economic
+and Technology Cadre Bureau of the Organization
+Department of the Communist Party of China Central
+Committee, Directors of the Fourth and Fifth Cadre Bureaus
+of the Organization Department of the Communist Party
+of China Central Committee. Mr. Lv joined CNOOC in
+2002 and served as the Director of the Human Resources
+Department of CNOOC. In November 2006, Mr. Lv became
+the Assistant President of CNOOC. In April 2010, Mr. Lv
+I was appointed as the Vice President of CNOOC. Since
+December 2012, he has also served as Chairman of the
+Board of CNOOC Energy Technology and Services Limited,
+a subsidiary of CNOOC. Mr. Lv was appointed as a Non-
+executive Director of the Company on 27 November 2013,
+and such appointment took effect from 1 January 2014.
+Wang Jiaxiang
+Born in 1955, Mr. Wang is a professor-level senior engineer.
+He graduated from China University of Petroleum, major
+in Drilling Engineering, and later received a Doctorate
+degree from Tianjin University in Management Science and
+Engineering. Mr. Wang joined CNOOC in 1982. He served
+as Production Section Director, Chief Engineer, Deputy
+Director and Director of the Drilling Department of CNOOC
+Bohai Corporation and Deputy General Manager of CNOOC
+Bohai Corporation. From 2001 to 2003, he served as the
+Deputy General Manager of CNOOC China Limited Tianjin
+Branch. From June 2003 to December 2003, he served as
+the Deputy General Manager of CNOOC Bohai Corporation.
+From December 2003 to April 2005, Mr. Wang served as
+the General Manager of CNOOC Bohai Corporation. In
+November 2004, he was appointed as the General Manager
+of CNOOC Oil Base Group Limited. In January 2007, Mr.
+Wang was appointed as the Assistant President of CNOOC.
+Since December 2007, he has also served as the General
+Manager of CNOOC Gas & Power Group. In January 2013,
+Mr. Wang was appointed as a Vice President of CNOOC.
+Mr. Wang was appointed as a Non-executive Director of the
+Company on 27 November 2013, and such appointment
+took effect from 1 January 2014. Mr. Wang Jiaxiang retired
+as a Non-executive Director of the Company with effect from
+23 September 2015.
+INDEPENDENT NON-EXECUTIVE DIRECTORS
+Chiu Sung Hong
+46
+With effect from 23 September 2015, Mr. Wang Jiaxiang
+retired as Non-executive Director.
+Directors and Senior Management
+During the year ended 31 December 2015, there was the
+following change in Directors.
+(i)
+The primary functions performed by the Board
+include:
+Corporate Governance Report
+39
+CNOOC LIMITED Annual Report 2015
+The day-to-day management is conducted
+by senior management and employees of the
+Company, under the direction of the CEO
+and the oversight of the Board. In addition
+to its general oversight of the management,
+the Board also performs a number of specific
+functions. The Company formalises the
+functions reserved to the Board and those
+delegated to management and reviews those
+arrangements periodically to ensure that they
+remain appropriate to the Company's needs.
+The Board is the ultimate decision-making
+body of the Company, other than those matters
+reserved to shareholders of the Company.
+The Board oversees and provides strategic
+guidance to senior management in order to
+enhance the long-term value of the Company
+for its shareholders. The Board delegates its
+management and administration functions to
+management and gives clear directions as to
+the powers of management at the same time,
+in particular, with respect to the circumstances
+where management should report back
+and obtain prior approval from the Board
+before making decisions or entering into any
+commitments on the Company's behalf.
+Principle: "An issuer should have a formal schedule of
+matters specifically reserved for board approval. The
+board should give clear directions to management
+on the matters that must be approved by it before
+decisions are made on the issuer's behalf.'
+0
+0
+O O O
+0
+D.1 Management functions
+DELEGATION BY THE BOARD
+4
+4
+4
+Lawrence J. Lau
+(Chairman and Financial Expert)
+Chiu Sung Hong
+by proxy
+member
+(ii)
+by committee
+Reviewing and approving long-term
+strategic plans and annual operating
+plans, and monitoring the implementation
+and execution of these plans;
+Reviewing and approving financial
+statements and reports, and overseeing
+the establishment and maintenance of
+controls, processes and procedures to
+ensure accuracy, integrity and clarity in
+financial and other disclosures.
+With effect from 19 May 2015, Mr. Yang Hua, an existing
+Non-executive Director, was appointed as Chairman of the
+Board and Chairman of the Nomination Committee, and Mr.
+Wang Yilin resigned as Chairman of the Board, Chairman of
+the Nomination Committee and Non-executive Director.
+The Board recognizes the importance of
+good and effective communication with all
+shareholders. With a policy of being transparent,
+strengthening investor relations, and providing
+consistent and stable returns to shareholders,
+the Company seeks to ensure transparency
+through establishing and maintaining different
+communication channels with shareholders.
+Principle: "The board should be responsible for
+maintaining an on-going dialogue with shareholders
+and in particular, use annual general meetings or other
+general meetings to communicate with them and
+encourage their participation."
+Effective communication
+COMMUNICATION WITH SHAREHOLDERS
+The Nomination Committee shall be responsible
+for reviewing and monitoring the training
+and continuous professional development of
+Directors and senior management and making
+recommendations to the Board in that regard.
+(iv) Reviewing the Company's compliance
+with the CG Code and disclosure in
+the Corporate Governance Report and
+making recommendations to the Board in
+that regard.
+Developing, reviewing and monitoring the
+Code of Ethics for Directors and Senior
+Officers ("Code of Ethics") and making
+recommendations to the Board in that
+regard; and
+Reviewing and monitoring the Company's
+policies and practices on compliance with
+legal and regulatory requirements and
+making recommendations to the Board in
+that regard;
+Developing and reviewing the
+Company's policies and practices on
+corporate governance and making
+recommendations to the Board;
+(iii)
+(i)
+The Audit Committee shall be responsible for
+performing the corporate governance duties set
+out below:
+The Board has delegated the responsibility
+for performing certain corporate governance
+related duties and functions to the Audit
+Committee and the Nomination Committee.
+E.1
+E.
+The Company has established an Audit
+Committee, a Remuneration Committee and a
+Nomination Committee (each a "Committee")
+and has established a specific written
+committee charter (the “Charter") which
+deal clearly with its authority and duties. The
+Charters of the Committees are published on
+the websites of the Hong Kong Stock Exchange
+and the Company. These Committees will
+report to the Board on their decisions and
+recommendations.
+Principle: "Board committees should be formed with
+specific written terms of reference which deal clearly
+with their authority and duties."
+D.2 & Board Committees & Corporate Governance
+D.3 Functions
+The Directors review such delegation
+arrangements periodically to ensure they remain
+appropriate to our needs.
+The Board and the senior management have
+respective responsibilities, accountabilities
+and contributions. The primary functions
+performed by the senior management are to
+conduct the daily business and implement
+the abovementioned affairs approved and
+delegated by the Board and other matters as the
+Board may from time to time request.
+Reviewing and approving significant
+financial and business transactions and
+other major corporate actions; and
+(4 meetings in total)
+Corporate Governance Report
+D.
+Mr. Zhong Hua (whose resignation became
+effective on 27 November 2015), Ms. Li Jiewen
+(whose appointment became effective on the
+same day) and Ms. Tsue Sik Yu, May are the
+Joint Company Secretaries of the Company.
+Their biographies are set out on pages 49 to
+50 of this report. The Nomination Committee
+of the Company has the responsibility to make
+recommendation for suitable candidates for the
+appointment of company secretary to the Board
+and the Board has the responsibility to approve
+their selection, appointment or dismissal by
+physical meeting of the Board.
+The Joint Company Secretaries will report to the
+Chairman of the Board and/or the CEO.
+Each of the Joint Company Secretaries
+has taken no less than 15 hours of relevant
+professional training every year.
+All Directors have access to the advice and
+services of the Joint Company Secretaries to
+ensure that Board procedures as well as all
+applicable rules and regulations are followed.
+SHAREHOLDERS' COMMUNICATION AND
+RIGHTS TO CONVENE AN EXTRAORDINARY
+GENERAL MEETING
+The procedures for shareholders to convene an
+Extraordinary General Meeting of the Company ("EGM")
+are governed by Article 60 of the Articles and sections
+566 to 568 of the Companies Ordinance (Cap. 622 of the
+Laws of Hong Kong). On the request of shareholders of the
+Company, representing at least 5% of the total voting rights
+of all shareholders having a right to vote at general meetings,
+the Directors are required to call a general meeting.
+CNOOC LIMITED Annual Report 2015
+41
+Corporate Governance Report
+Whilst giving the above request, shareholders are
+recommended to provide written explanation of the
+reasons and material implications relating to the proposed
+resolutions to enable all of the shareholders to properly
+consider and determine the proposed resolutions.
+Principle: "The company secretary plays an important
+role in supporting the board by ensuring good
+information flow within the board and that board policy
+and procedures are followed. The company secretary
+is responsible for advising the board through the
+chairman and/or the chief executive on governance
+matters and should also facilitate induction and
+professional development of directors."
+The Company will, upon receipt of a request referred to
+above, issue a notice of extraordinary general meeting of the
+proposed resolutions and (if applicable) circulars containing
+further information relating to the proposed resolutions in
+accordance with the Listing Rules.
+PROCEDURES FOR PUTTING FORWARD
+PROPOSALS AT GENERAL MEETINGS BY
+SHAREHOLDERS
+Shareholders are requested to follow sections 615 and
+616 of the Companies Ordinance (Cap. 622 of the laws of
+Hong Kong) if they wish to request the Company to give
+to other shareholders, who are entitled to receive notice
+of the annual general meeting, notice of a resolution that
+may properly be moved and is intended to be moved at the
+annual general meeting.
+Shareholders are requested to follow sections 580 to 583
+of the Companies Ordinance (Cap. 622 of the laws of Hong
+Kong) if they wish to request the Company to circulate to
+other shareholders, who are entitled to receive notice of
+a general meeting, a statement with respect to a matter
+mentioned in a proposed resolution or other business to be
+dealt with at the general meeting.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+For the year ended 31 December 2015, the Company has
+complied with the provisions of the CG Code as set out in
+Appendix 14 of the Listing Rules, except for the deviation
+from the code provision A.4.1 of the CG Code. The following
+summarises the requirement under the above-mentioned
+code provision A.4.1 and the reason for such deviation.
+CG Code Provision A.4.1
+Under CG Code provision A.4.1, non-executive directors
+should be appointed for a specific term and be subject to re-
+election.
+None of the existing Independent Non-executive Directors
+of the Company is appointed for a specific term. This
+constitutes a deviation from the CG Code provision A.4.1.
+However, all the Directors are subject to the retirement
+provisions under article 97 of the Articles ("Article 97").
+According to Article 97, one-third of the Directors for the
+time being must retire from the office by rotation at each
+annual general meeting. The Company has observed
+the need for good corporate governance practices. All
+Independent Non-executive Directors of the Company
+have retired from the office by rotation and have been re-
+elected in the past three years. The Company considers
+that sufficient measures have been taken to ensure that the
+Company's corporate governance practices are no less
+exacting than those in the CG Code.
+CHANGES IN DIRECTORS
+No. of meetings attended
+Further enquiries relating to the above or enquiries that
+Shareholders wish to be put to the Board may be addressed
+to the Joint Company Secretaries of the Company at 65/F,
+Bank of China Tower, 1 Garden Road, Hong Kong.
+Company Secretary
+The request must state the general nature of the business
+to be dealt with at the EGM and may include the text of a
+resolution that may properly be moved and is intended to be
+moved at the EGM, be authenticated by the shareholder(s)
+making the request, and sent to the Company in hard copy
+form or in electronic form. The Directors must call an EGM
+within 21 days after the date on which they become subject
+to the requirement and such EGM must be held on a date
+not more than 28 days after the date of the notice convening
+the meeting is given.
+F.
+Tse Hau Yin, Aloysius
+The results of the poll are published on the
+Hong Kong Stock Exchange's website and the
+Company's website.
+Independent
+Non-executive
+Directors
+meetings in 2015
+Attendance of individual members at Audit Committee
+The Audit Committee is provided with sufficient
+resources, including independent access to and
+advice from external auditors.
+Full minutes of the Audit Committee meetings
+are kept by the Joint Company Secretaries.
+Draft and final versions of minutes of the Audit
+Committee meetings are sent to all members
+of the Audit Committee for their comments and
+records respectively, in both cases within a
+reasonable time after the meetings.
+Reviewed the Company's business ethics
+and compliance policies, related reports
+and training programs as appropriate and
+performed certain corporate governance
+duties delegated by the Board set out
+in Board Committees & Corporate
+Governance Functions section on page
+40; and
+Reviewed the arrangements by which
+employees of the Company can use,
+in confidence, to raise concerns about
+possible improprieties in financial
+reporting, risk management and internal
+control or other matters and ensure that
+proper arrangements are in place for fair
+and independent investigation and for
+appropriate follow-up actions;
+Reported on its findings and suggestions
+to the Board following its review of
+different aspects of the Company's
+financial reporting and risk management
+and internal control systems, and made
+appropriate recommendations where
+necessary;
+Considered and approved the non-audit
+services provided by the external auditors
+during the year;
+Evaluated and assessed the effectiveness
+of the Audit Committee and the adequacy
+of the charter of the Audit Committee,
+and considered and recommended the
+proposed amendments to the charter
+which reflect the new requirements in
+relation to risk management and internal
+control systems as set out in the amended
+CG Code and presented to the Board for
+approval.
+Principle: "The issuer should ensure that shareholders
+are familiar with the detailed procedures for
+conducting a poll."
+The Company has a professionally-run investor
+relations department to serve as an important
+communication channel between the Company
+and its shareholders and other investors.
+A key element of effective communication
+with shareholders and investors is prompt and
+timely dissemination of information in relation
+to the Company. In addition to announcing its
+interim and annual results to shareholders and
+investors, the Company also publicises its major
+business developments and activities through
+press releases, announcements and the
+Company's website in accordance with relevant
+rules and regulations. Press conferences and
+analyst briefings are held from time to time on
+financial performance and major transactions.
+The general meetings also provide a useful
+forum for shareholders to exchange views
+with the Board. The Chairman of the Board,
+as well as Chairmen of the Audit Committee,
+Nomination Committee and Remuneration
+Committee, or in their absence, members of
+the respective Committees, and the external
+auditors of the Company, are available to
+answer questions from shareholders at annual
+general meetings and extraordinary general
+meetings of the Company.
+The Chairmen of the Board and all Committees,
+or in his absence, an alternate appointed by
+him will, whenever possible, propose separate
+resolutions for each substantially separate issue
+at general meetings of the Company.
+The Company's management ensures the
+external auditors attend the annual general
+meeting to answer questions about the conduct
+of the audit, the preparation and content of the
+auditors' report, the accounting policies and
+auditors' independence.
+The Board established a shareholders'
+communication policy and review it on a regular
+basis to ensure its effectiveness.
+E.2 Voting by Poll
+Corporate Governance Report
+In 2015, all votes of shareholders at the general
+meetings of the Company were taken by poll
+or otherwise in accordance with the Listing
+Rules. The Chairman of a meeting ensured that
+shareholders were familiar with the procedures
+of voting by poll at the general meetings of the
+Company.
+Report of the Directors
+RETIREMENT BENEFITS
+Please refer to note 31 to the consolidated financial
+statements on page 120 for details of the retirement benefits
+of the Group for the year ended 31 December 2015.
+MAJOR SUPPLIERS AND CUSTOMERS
+CHARITABLE DONATIONS
+Sales to the largest third party customer for the year ended
+31 December 2015 represented approximately 9% of the
+Group's total revenue. The total sales attributable to the five
+largest third party customers of the Group accounted for
+approximately 21% of the Group's total revenue for the year
+ended 31 December 2015.
+For the year ended 31 December 2015, except for
+the continuing connected transactions with its indirect
+controlling shareholder CNOOC and its associates, as
+disclosed in the section entitled "Connected Transactions"
+below, none of the Directors or their respective close
+associates or any shareholder of the Company (which to
+the knowledge of the Directors owns more than 5% of the
+Company's share capital) had any interests in the five largest
+suppliers or customers of the Group.
+Please refer to note 38 to the consolidated financial
+statements for details of the significant events after the
+reporting period of the Group.
+52 CNOOC LIMITED Annual Report 2015
+Purchases from the largest supplier of the Group for the
+year ended 31 December 2015 represented approximately
+15% of the Group's total purchases. The total purchases
+attributable to the five largest suppliers of the Group
+accounted for approximately 42% of the total purchases of
+the Group for the year ended 31 December 2015.
+The Board recommended a payment of a final dividend
+of HK$0.25 (tax inclusive) per share for the year ended
+31 December 2015, payable on 19 July 2016 to all
+shareholders on the register of members of the Company on
+17 June 2016 subject to shareholders' approval.
+Please refer to note 26 to the consolidated financial
+statements on pages 109 to 111 for details of the loans and
+borrowings of the Group as at 31 December 2015.
+DIVIDENDS
+Particulars of the Company's subsidiaries, associates and
+joint ventures as at 31 December 2015 are set out in notes
+16, 17 and 18 to the consolidated financial statements on
+pages 102 to 106.
+SUBSIDIARIES, ASSOCIATES AND JOINT
+VENTURES
+Please refer to the consolidated statement of changes in
+equity on page 69 and note 39 to the consolidated financial
+statements on pages 130 to 131 for movements in the
+reserves of the Group and the Company, respectively, for
+the year ended 31 December 2015.
+The distributable reserves of the Company as at 31
+December 2015 amounted to RMB78,368 million.
+RESERVES
+Please refer to note 14 to the consolidated financial
+statements on pages 100 to 101 for the movements in
+property, plant and equipment of the Group for the year
+ended 31 December 2015.
+PROPERTY, PLANT AND EQUIPMENT
+LOANS
+The donations by the Group for the year ended 31
+December 2015 amounted to RMB47 million.
+An interim dividend of HK$0.25 (tax inclusive) per share was
+declared on 26 August 2015, and paid to the shareholders
+of the Company on 13 October 2015.
+CONNECTED TRANSACTIONS
+CNOOC LIMITED Annual Report 2015
+1.
+Report of the Directors
+53
+Subsequent Event
+For the three years ended
+31 December 2016,
+RMB10,500 million,
+RMB11,600 million and
+RMB12,800 million,
+respectively
+RMB47,200 million,
+RMB49,600 million and
+RMB52,100 million,
+respectively
+31 December 2016,
+For the three years ended
+For the three years ended
+31 December 2016,
+RMB15,000 million,
+RMB16,100 million and
+RMB17,200 million,
+respectively
+Provision of oil
+and gas
+production and
+support services
+development and
+support services
+and gas
+Provision of oil
+(b)
+exploration and
+support services
+(a) Provision of
+Provision of exploration, oil and gas development, oil and
+gas production as well as marketing, management and
+ancillary services by CNOOC and/or its associates to the
+Group
+The Company entered into a comprehensive framework
+agreement on 6 November 2013 with CNOOC, controlling
+shareholder of the Company, for the provision (1) by the
+Group to CNOOC and/or its associates and (2) by CNOOC
+and/or its associates to the Group of a range of products
+and services which may be required and requested
+from time to time by either party and/or its associates in
+respect of the continuing connected transactions. The
+comprehensive framework agreement is substantially on the
+same terms as the terms contained in the comprehensive
+framework agreements entered into by the Company on 1
+November 2010. The term of the comprehensive framework
+agreement is for a period of three years from 1 January
+2014. The continuing connected transactions under the
+comprehensive framework agreement and the relevant
+annual caps for the three years from 1 January 2014
+were approved by the independent shareholders of the
+Company on 27 November 2013. The continuing connected
+transactions under the comprehensive framework
+agreement and the relevant annual caps are set out below:
+Categories of continuing Annual caps for 2014 to
+connected transactions 2016
+Comprehensive framework agreement with CNOOC in
+respect of the provision of a range of products and services
+in accordance with the relevant agreements (including
+pricing principles and guidelines set out therein)
+governing the transactions on terms that were fair and
+reasonable and in the interests of the Company and
+the shareholders as a whole.
+3.
+on normal commercial terms or better; and
+2.
+in the ordinary and usual course of its business;
+The Independent Non-executive Directors have confirmed
+that the following continuing connected transactions for the
+year ended 31 December 2015 to which any member of the
+Group was a party were entered into by the Group:
+A description of the likely future development in the
+Company's future business is provided in the Chairman's
+statement on pages 6 to 7 and Business Overview on pages
+8 to 26 of this annual report.
+The directors (the “Directors”) of the Company are pleased
+to present their report together with the audited financial
+statements of the Company for the year ended 31
+December 2015.
+A description of principal risks and uncertainties that the
+Group may be facing is provided in the Business Overview
+on pages 8 to 26 of this annual report.
+Li Jiewen
+Please refer to the biography of Mr. Zhong on page 49 for
+details.
+Zhong Hua
+JOINT COMPANY SECRETARIES
+Born in 1961, Mr. Xie is the Deputy Chief Geologist
+and General Manager of Exploration Department of the
+Company as well as a professor-level senior engineer.
+Mr. Xie obtained a Ph.D. Degree from China University of
+Geosciences in 2005. From 1982 to 1995, Mr. Xie served
+as an engineer of Research Institute and Exploration
+Department of CNOOC Naihai West Corporation.
+From 1995 to 1996, he served as the Deputy Manager
+of Exploration Department of CNOOC Naihai West
+Corporation. From 1996 to 1999, he served as Manager
+of Tepu Company of CNOOC Naihai West Corporation,
+Deputy Chief Earth Physicist and Manager of Exploration
+Department of Naihai West Corporation. From 2001 to
+2005, he was Deputy Chief Manager of CNOOC China
+Limited Zhanjiang Branch. From 2005 to 2013, he served
+as the Chief Manager of CNOOC China Limited Zhanjiang
+Branch. From 2013 to 2015, he was appointed as the
+Director of Naihai West Petroleum Administrative Bureau of
+CNOOC. From July 2015 to now, he has been serving as
+Deputy Chief Geologist of CNOOC, Deputy Chief Geologist
+and General Manager of Exploration Department of the
+Company.
+Xie Yuhong
+of Petroleum), majoring in Drilling Engineering. In 1999,
+he graduated with a master's degree of management
+from Department of Economic Management of School of
+Management, TianJin University. From 1982 to 1994, he
+served as Supervisor and Platform Manager for Bohai Oil
+Corporation, and a staff member of the offshore division
+of the Technology Safety Department and the head of
+the offshore safety division of the Technical Safety and
+Environmental Protection Department respectively. From
+1994 to 1999, Mr. Song served as Director of the Safety
+Production Division and head of the Safety Office of the
+HSE Department of CNOOC. From 1999 to 2001, he
+served as Vice Manager of the HSE Department of the
+Company. From 2001 to 2003, he served as Director of
+operational safety of the HSE Department of CNOOC.
+From 2003 to 2013, he served as the General Manager of
+the HSE Department of CNOOC and the Company. From
+March 2013 to now, he has been serving as the Deputy
+Chief Safety Official of CNOOC, the Chief Safety Official and
+General Manager of the QHSE Department of the Company.
+Directors and Senior Management
+49
+CNOOC LIMITED Annual Report 2015
+Born in 1965, Ms. Li Jiewen is currently the General
+Manager (Director) of the Investor Relations Department
+(Office for the Board of Directors) and the General Manager
+of the Controllers Department of the Company. Ms. Li is
+a senior economist and Certified Senior Enterprise Risk
+Manager and a member of CPA Australia. Ms. Li graduated
+from Shanghai Jiao Tong University with a bachelor's
+degree in Naval Architecture and Ocean Engineering in
+1987. She received a master's degree in Management from
+Zhejiang University in 2001. Ms. Li joined CNOOC in 1987
+and has been working in the oil and gas industry for over 28
+years. From 1987 to 1989, Ms. Li was a Structure Engineer
+in Nanhai East Oil Corporation of CNOOC. From 1989 to
+2004, she worked as the Structure Engineer, Budget and
+Planning Engineer, Budget Supervisor, Assistant Finance
+Manager of CACT Operators Group. From January 2004
+to October 2006, she served as the Finance Manager of
+CNOOC China Limited Shenzhen Branch. From October
+2006 to November 2010, Ms. Li was the Deputy General
+Manager of the Controllers Department of the Company.
+Ms. Li has been appointed as the General Manager of the
+Controllers Department of the Company in November 2010.
+Ms. Li has been also appointed as the General Manager
+(Director) of the Investor Relations Department (Office for the
+Board of Directors) of the Company since October 2015.
+Ms. Li is also the Director of Nexen Energy ULC, a subsidiary
+of the Company. Ms. Li was appointed as Joint Company
+Secretary of the Company with effect from 27 November
+2015.
+Born in 1957, Mr. Song is the Chief Safety Official
+and General Manager of the Quality, Health, Safety &
+Environmental Protection (QHSE) Department of the
+Company. He graduated in 1982 with a bachelor's
+degree from the Department of Petroleum Development
+of East China Petroleum Institute (now China University
+Born in 1963, Mr. Deng is an academician of the Chinese
+Academy of Engineering and the Deputy Chief Exploration
+Engineer of the Company. Mr. Deng graduated from the
+Scientific Research Institute of Petroleum Exploration
+and Development with a major in Petroleum Geology and
+Exploration and received a master's degree in Engineering
+in 1988. He was assistant geologist and then geologist in
+the Exploration Department of CNOOC Bohai Corporation
+Institute from 1988 to 1989; and served as the Team Leader
+of the Comprehensive Petroleum Geological Research
+Team, Project Manager, Deputy Principal of Geologist,
+Deputy Principal Geologist and Director of the Exploration
+Department and Deputy Chief Geologist in the CNOOC
+Bohai Corporation Institute. Mr. Deng became Vice Chief
+Geology Engineer and Deputy General Manager of CNOOC
+China Limited Tianjian Branch from 1999 to 2005. He
+was Deputy Director of CNOOC Research Center from
+2005 to 2006. He served as the Deputy Chief Exploration
+Engineer of the Company and the Deputy Director of
+CNOOC Research Center from 2006 to 2007. Mr. Deng was
+appointed Vice Chief Geology Engineer of CNOOC, Deputy
+Chief Exploration Engineer of the Company and Deputy
+Director of CNOOC Research Center from 2007 to 2009;
+and has been Vice Chief Geology Engineer of CNOOC,
+Deputy Chief Exploration Engineer of the Company and
+Deputy General Director of CNOOC Research Institute since
+2009.
+Deng Yunhua
+for over 30 years. From 1982 to 1999, Mr. Zhong served
+as Petroleum Engineer of China Offshore Oil Nanhai West
+Corporation ("COONWC"), Expro Northsea Staff in UK,
+Deputy Manager of Downhole Services Company of Oil
+Production Company of COONWC, Manager of Wei 10-3
+Oilfield, Oilfield Superintendent of CNOOC Indonesia
+Project, Supervisor of Ya 2-1-3 HTHP Well Testing Project,
+Deputy Manager of Drilling and Exploitation Institute,
+Manager of Science and Technology Development
+Department and Manager of Administration Department of
+COONWC. From September 1999 to October 2005, Mr.
+Zhong was General Manager of Administration Department
+and General Manager and Director of Development and
+Planning Department of the Company. From August 2005
+to September 2010, Mr. Zhong served as Vice President,
+Executive Vice President and Chief Financial Officer of
+China Oilfield Services Limited, a company listed on The
+Stock Exchange of Hong Kong Limited and Shanghai Stock
+Exchange, a subsidiary of CNOOC. On 16 September 2010,
+Mr. Zhong was appointed as Chief Financial Officer of the
+Company. From March 2012 to November 2015, Mr. Zhong
+served as Joint Company Secretary of the Company.
+Born in 1960, Mr. Zhong is Chief Financial Officer of the
+Company. Mr. Zhong is a professor-level senior economist
+and senior engineer and graduated from Southwest
+Petroleum Institute (now Southwest Petroleum University)
+with a bachelor's degree in Oil Exploitation. He received
+a master's degree in Petroleum Engineering from Heriot-
+Watt University in the United Kingdom. He joined CNOOC
+in 1982, and has been working in the oil and gas industry
+Zhong Hua
+Born in 1960, Mr. Zhang is a Senior Vice President of the
+Company and the General Manager of CNOOC China
+Limited Zhanjiang Branch. He is a professor-level senior
+engineer. He graduated from Shandong Oceanographic
+Institute (now Ocean University of China) with a bachelor
+degree. He studied in the Business Institute of University
+of Alberta in Canada in 2001. He joined CNOOC in 1982
+and served as Deputy Chief Geologist and Manager
+of Exploration Department of CNOOC Naihai West
+Corporation, a subsidiary of CNOOC, Chief Geologist of
+CNOOC Research Center, Assistant to General Manager
+of CNOOC China Limited and the General Manager of
+Exploration Department of the Company. In March 2003, he
+was appointed as Senior Vice President of the Company.
+In October 2005, Mr. Zhang was appointed as Senior Vice
+President of the Company and General Manager of CNOOC
+China Limited Shanghai Branch. In July 2009, he was
+appointed as Director of Donghai Petroleum Administrative
+Bureau of CNOOC. In July 2015, he was appointed as
+Director of Nanhaixibu Petroleum Administrative Bureau of
+CNOOC and General Manager of CNOOC China Limited
+Zhanjiang Branch.
+Born in 1958, Mr. Chen is the Worker's Director and an
+Assistant President of CNOOC, an Executive Vice President
+of the Company and the General Director of CNOOC
+Research Institute (formerly CNOOC Research Center). He
+is a professor-level senior engineer. He received his B.S.
+degree from East China Petroleum Institute (now China
+University of Petroleum) and MBA from Tsinghua University.
+He has over 30 years of experience in the oil and gas
+industry. Mr. Chen joined CNOOC in 1984 and previously
+served as the Deputy Manager for the Development
+Department, the Deputy Manager of the Overseas
+Research Department, the Manager of the Information
+Department, and the Deputy Director of CNOOC Research
+Center. He has also served as General Manager of Human
+Resources Department and General Manager of Science
+and Technology Development of CNOOC, and the Senior
+Vice President of the Company and General Manager
+of Administration Department of the Company. In July
+2003, Mr. Chen was appointed as the Director of CNOOC
+Research Center (later became President of CNOOC
+Research Institute). In February 2012, Mr. Chen was
+appointed as the Worker's Director of CNOOC. In March
+2013, Mr. Chen was appointed as the Assistant President of
+CNOOC and the Executive Vice President of the Company.
+Chen Wei
+Directors and Senior Management
+(d) Provision of
+Song Lisong
+Tsue Sik Yu, May
+Born in 1973, Ms. Tsue Sik Yu, May is the Joint Company
+Secretary of the Company. She graduated from Curtin
+University of Technology in Australia with a bachelor of
+commerce in accounting. Ms. Tsue furthered her education
+at The Hong Kong Polytechnic University in Master of
+Corporate Governance from 2004 to 2006. She is a fellow
+member of both the Institute of Chartered Secretaries and
+Administrators and the Hong Kong Institute of Chartered
+Secretaries since 2012 and became a member of Company
+Secretaries Panel and Advisor for Academy of Professional
+Certification in the same year. Furthermore, she is also a
+fellow member and certified risk trainer of the Institute of
+Crisis and Risk Management and an associate member of
+CPA Australia. From August 1998 to March 1999, Ms. Tsue
+worked in LG International (HK) Ltd. as a senior accounts
+clerk. Ms. Tsue joined China Ocean Oilfield Services (HK)
+Limited in 1999 as an accountant. She helped to manage
+the finance of the CNOOC Insurance Limited since 2000
+and became its employee in 2004 as a manager of finance
+department. She serves as company secretary of CNOOC
+Insurance Limited since March 2007. Ms. Tsue was
+appointed as Joint Company Secretary of the Company
+with effect from 25 November 2008.
+50
+Key Risks and Uncertainties
+Through specified communication methods, we looked
+into and sorted out the focuses and concerns of the
+stakeholders, and responded with corresponding
+actions and measures. We continued to strengthen
+the quality and effectiveness of information disclosure,
+comply with applicable laws and regulations and actively
+participate in public welfare activities, with the purpose of
+achieving mutual development and value sharing with our
+stakeholders. We have also formulated key indicators based
+on the focuses and concerns of different stakeholders to
+reflect our management performance on the above subject
+matters. Some of our key indicators include return on equity
+and payout ratio for shareholders and creditors; employee
+training frequency, turnover rate and OSHA statistics for
+employees and employee organizations; violations of laws
+and regulations and safety and environment performance
+concerned by the government; partners' feedback and
+contracts' execution capability for business partners and
+service providers; public opinion and corporate image
+concerned by the public; community evaluations for
+communities; response rate on enquiries for charities
+and NGOs; satisfactory reports for clients and etc. Going
+forward, we will endeavor to improve our current policies,
+strive to maximize our stakeholders' value and achieve a
+mutually beneficial outcome.
+The support and trust of our stakeholders is integral to the
+Company's growth and success. Our stakeholders include
+shareholders and creditors, employees and employee
+organizations, governments and regulatory authorities,
+business partners and service providers, the public and
+communities, charities and non-government organizations
+(NGOs) and clients. We place emphasis on communications
+with our stakeholders and have established an open and
+transparent communication channel for each category
+of stakeholders to understand their expectations and
+requests.
+Key Relationships with Stakeholders
+In accordance with the requirements of the laws, regulations
+and related policies in Hong Kong, PRC and relevant other
+jurisdictions in which the Company operates, the Company
+provides and maintains statutory benefits for its staff,
+including but not limited to pension schemes, mandatory
+provident fund, basic medical insurance, work injury
+insurance, etc. Further, the Group has been committed
+in complying relevant laws and regulations on work and
+occupational safety of employees of the Group.
+Report of the Directors
+51
+CNOOC LIMITED Annual Report 2015
+Compliance with Relevant Laws and Regulations
+For the year ended 31 December 2015, compliance
+procedures were in place to ensure adherence to applicable
+laws, rules and regulations, in particular those have
+significant impact on the Group. The Board and senior
+management within their respective duties in conjunction
+with internal and external professional advisors monitored
+the Group's policies and practices on compliance with legal
+and regulatory requirements. Changes in the applicable
+laws, rules and regulations which have significant impact
+on the Group were brought to the attention of relevant
+employees and relevant operation units from time to time.
+During the reporting period, the various work of the Board
+and senior management were in compliance with the
+relevant laws and regulations, the articles of association
+of the Company, charters of the board committees,
+internal policies and the relevant provisions of various
+internal control systems. Decision making process was
+legitimate and effective. Directors and senior management
+performed in a diligent and responsible manner and the
+resolutions of the general meetings and board meetings
+were implemented faithfully. Meanwhile, the Company has
+timely performed its disclosure obligations which were in
+strict compliance with the requirements of the listing rules
+or manuals of the Hong Kong Stock Exchange, New York
+Stock Exchange and Toronto Stock Exchange.
+Regarding the environmental issues that have material
+impacts on the Company's business performance and
+future development, please refer to the social responsibility
+report of 2015 prepared by the Company (the "2015 CSR
+report") to be available on the Company's website.
+For the year ended 31 December 2015, the Company
+has carried out the laws and regulations of the PRC on
+energy saving and reduction in emission, viewing energy
+saving and reduction in emission as important works
+for the transformation of the mode of development and
+optimization of the industrial structure. We keep on strictly
+carrying out energy-saving assessment and examination
+on new oilfield investment projects, ensuring this work can
+be integrated from the initial stage of projects. We also
+strengthen the efforts in technical reformation, which is
+the key to improve energy efficiency and reduce carbon
+emissions.
+information from EIA documents from all levels of the Group,
+information in relation to the report, statistics, monitoring
+and pre-warning system regarding pollutant emissions. The
+system enables us to achieve information management on
+environment.
+The Company's environmental protection management
+system emphasizes the management of the whole process.
+During the process of construction and production of
+oilfields, we place Environment Impact Assessment (EIA),
+compliance with set standards or targets on pollutant
+emissions, control on total discharge amount and reduction
+on emissions as our priorities. During the period of ODP
+(Overall Development Plan), EIA report will be drafted
+and its approval from the government is a necessity for
+the launch of a project. During the construction stage,
+environmental protection supervision and management
+are strictly performed and tightened in order to reduce
+the impact on natural and social environment. During the
+production stage, pollutant emission monitor program is
+carried out, which analyzes the scope and extent of impact
+of the production process on the environment such that
+relevant environmental measures could be adopted. The
+environmental protection information system covers all
+Environmental Policies and Performance
+During the process of oilfield development, the Company
+highly values the protection of natural and ecological
+environment and its comprehensive environmental
+protection measures ensure the Company to comply with
+the applicable laws and regulations on the environmental
+protection.
+A review of the business of the Group and analysis of the
+Group's performance using financial key performance
+indicators is provided in the Business Overview and
+Management's Discussion and Analysis section on pages 8
+to 26 and pages 61 to 65 of this annual report.
+Overview and Performance of the Year
+BUSINESS REVIEW
+Please refer to the financial summary on page 2 for a
+summary of the assets and liabilities of the Group as at 31
+December 2015 and the operating results of the Group for
+the year then ended.
+SUMMARY OF FINANCIAL INFORMATION AND
+OPERATING RESULTS
+The principal activity of the Company is investment holding
+of its subsidiaries. These subsidiaries are principally
+engaged in the exploration, development, production and
+sales of crude oil and natural gas and other petroleum
+products.
+PRINCIPAL ACTIVITIES
+Report of the Directors
+CNOOC LIMITED Annual Report 2015
+Prospects
+Zhang Guohua
+CNOOC LIMITED Annual Report 2015
+For the three years ended
+31 December 2016,
+RMB1,408 million,
+RMB1,875 million and
+RMB2,075 million,
+respectively
+date of
+exercise
+of share grant date
+Exercise period of
+Date of grant of
+during December
+of grantee
+during
+during
+As at 1 January
+Name of category
+price before the before the At exercise
+Exercise Immediately Immediately
+As at 31
+during
+2015
+the year
+the year
+per share
+per share
+per share
+HK$
+HK$
+HK$
+HK$
+options
+date
+options of options
+share options*
+share options
+2015
+the year
+the year
+Expired
+Forfeited
+Granted Exercised
+Company's shares
+2,835,000
+14.20
+14.828
+29 May 2008 to 29 May 2018
+29 May 2008
+1,857,000
+1,857,000
+7.43
+7.29
+25 May 2007 to 25 May 2017
+25 May 2007
+1,857,000
+1,857,000
+5.30
+5.56
+2,835,000
+per share
+27 May 2009
+9.93
+shares
+price of the
+Company's
+Weighted average
+Price of the
+Number of share options
+CNOOC LIMITED Annual Report 2015
+56
+12.22
+12.696
+20 May 2010 to 20 May 2020
+20 May 2010
+2,000,000
+2,000,000
+9.33
+27 May 2009 to 27 May 2019
+Other Employees**
+in aggregate
+24,850,000
+(24,850,000)
+The Directors of the Company during the year and up to the
+date of this annual report are:
+NAME OF DIRECTOR
+Save as disclosed in this annual report, there was no
+purchase, sale or redemption by the Company, or any of its
+subsidiaries, of its listed securities during the year ended 31
+December 2015.
+PURCHASE, SALE OR REDEMPTION OF
+LISTED SECURITIES
+Save as disclosed in this annual report, there was no equity-
+linked agreement entered into by the Company during the
+year ended 31 December 2015.
+EQUITY-LINKED AGREEMENT
+Report of the Directors
+58
+Report of the Directors
+57
+CNOOC LIMITED Annual Report 2015
+Except for share options granted under the Pre-Global Offering Share Option Scheme, all share options granted are subject to a vesting schedule pursuant to which one third of the options
+granted vest on the first, second and third anniversaries of the date of grant, respectively, such that the options granted are fully vested on the third anniversary of the date of grant.
+(20,522,000) (28,070,000) 262,592,000
+311,184,000
+Total
+Executive Directors
+12.22
+Li Fanrong
+Non-executive Directors
+As at 31 December 2015, apart from holding personal
+interests in options to subscribe for shares in the Company
+granted under the share option schemes of the Company as
+disclosed in this annual report, the interests of each Director
+and chief executive of the Company in the equity or debt
+securities of the Company or any associated corporations
+(within the meaning of the Securities and Futures Ordinance
+("SFO")) which were required (i) to be notified to the
+Company and the Hong Kong Stock Exchange pursuant to
+Divisions 7 and 8 of Part XV of the SFO (including interests
+and short positions which they are taken or deemed to have
+under such provisions of the SFO); (ii) pursuant to section
+352 of the SFO, to be entered in the register referred to
+therein; or (iii) pursuant to the Model Code for Securities
+Transactions by Directors of Listed Issuers (the "Model
+Code"), to be notified to the Company and the Hong Kong
+Stock Exchange are as follows:
+DIRECTORS' INTERESTS
+A. Jeremy Arnold, Admiral Timothy J. Keating, USN (Ret.),
+Alan O'Brien, Alan W. Brindley, Anita R. Koval, Archibald
+W. Kennedy, Bastiaan Spaargaren, Caroline Hoogsteyns,
+Cathleen A.L. Ward, Christine M. O'Connor, Colin T. O.
+Brewer, Corey D. Riley, Daniel J Dengis, Danny R. Carefoot,
+Darren C. Jones, Darren Craig Jones, David O. Tudor,
+Deanna L Zumwalt, EQ Management and Consultancy
+Limited, Eva A. Törzsök, Frances Ward, Gina A. Barber,
+Glenn R Christie, Grant W. Dreger, Gregg E. Radetsky, lan
+M. Smale, Ildiko G. B. Ugrai, Jacqueline J. Loke Mun-Tze,
+James T. Arnold, Jamie D. Doyle, Jerome A. van Zuijlen,
+Jessica Lanzillotta, John A. Pritchett, John F.M. Abbott,
+John Michael Killip, Joseph M. B'Oris, Karen Burgess,
+Katarzyna Kopaczewska, Kenneth J. Krieg, Kurt Rohner,
+Lawson A.W. Hunter, Lester C. Jager, Lewis T. Harvey,
+Marilyn J. Schonberner, Marjorie Allo, Paul Harris, Peter
+D. Addy, Quinn E. Wilson, Ray C. J. Riddoch, Rick C.
+Beingessner, Robert H. Henkhuzens, Robert N. Fennell,
+Ronald W. Bailey, Rosalind L. Bynoe, Roy L. Swystun, Sei
+Tange, SGG Management (Netherlands) B.V., Shakila Kaul,
+Shoji Sorimachi, Simon R. Perchard, Theresa A. Roessel,
+Tiara Ltd., Trevor L. Norman, Una M. Power, W. Mark
+Simpson, Wilhelmus G. Reiff, Yehuda Cohen
+Chen Bi, Chen Ming, Chen Yan, Chen Zhaoguang, Chen
+Zhiyong, Cheng Chi, Cui Hanyun, Deng Jinhui, Ding Fang,
+Duan Chenggang, Fang Zhi, Gong Shaobo, Han Mei, Hua
+Chenggang, Jing Fengjiang, Kuang Likun, Li Bo, Li Fanrong,
+Li Jiewen, Li Qijun, Li Rongguang, Lin Yaosheng, Liu Kuang,
+Liu Mingquan, Liu Song, Liu Xiangdong, Liu Xiaoxiang, Liu
+Zaisheng, Lu Yongfeng, Ma Qiangui, Mi Lijun, Pang Jian, Qiu
+Zongjie, Ren Qi, Shen Yiming, Sheng Jianbo, Shi Hesheng,
+Wang Xin, Wang Yaohui, Wang Zhizhong, Wu Guangqi,
+Wu Peikang, Xiang Hua, Xiao Zongwei, Xie Wensheng, Xie
+Yuhong, Yang Hua, Yuan Guangyu, Zhang Bing, Zhang
+Fengjiu, Zhang Guohua, Zhao Hong, Zhao Liguo, Zhao
+Shunqiang, CNOOC Limited, Zhong Hua, Zhou Hongbo,
+Zhu Weilin
+The list of directors who have served on the boards of
+the subsidiaries of the Company included in the annual
+consolidated financial statements for the financial year
+ended 31 December 2015 during the year and up to the
+date of this report is disclosed as following:
+In accordance with the Company's Articles of Association
+and pursuant to Appendix 14 to Listing Rules, Mr. Li
+Fanrong, Mr. Lv Bo and Mr. Chiu Sung Hong will retire at
+the forthcoming Annual General Meeting and, who being
+eligible, will offer themselves for re-election.
+Note 2: With effect from 23 September 2015, Mr. Wang Jiaxiang retired
+as Non-executive Director of the Company.
+Note 1: With effect from 19 May 2015, Mr. Wang Yilin resigned as
+Chairman of the Board and Non-executive Director of the
+Company.
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Lawrence J. Lau
+Independent Non-executive Directors
+Chiu Sung Hong
+Wang Jiaxiang (Note 2)
+Lv Bo
+Yang Hua (Chairman)
+Wang Yilin (Note 1)
+Wu Guangqi
+14 June 2006 to 14 June 2016
+12.696
+9.33
+25 May 2007
+39,202,000
+(1,374,000)
+40,576,000
+5.30
+5.56
+14 June 2006 to 14 June 2016
+14 June 2006
+33,630,000
+(1,310,000)
+34,940,000
+5.75
+5.62
+31 August 2005 to 31 August 2015
+31 August 2005
+25 May 2007 to 25 May 2017
+20 May 2010 to 20 May 2020
+7.29
+49,875,000
+9.93
+27 May 2009 to 27 May 2019
+27 May 2009
+20 May 2010
+66,980,000
+(8,361,000)
+75,341,000
+56,859,000
+(6,006,000)
+62,865,000
+14.20
+14.828
+29 May 2008 to 29 May 2018
+29 May 2008
+46,404,000
+(3,471,000)
+7.43
+14 June 2006
+1,770,000
+1,770,000
+(iv)
+2005 Share Option Scheme.
+4.
+2002 Share Option Scheme; and
+3.
+The aggregate annual volume of the
+transactions for the long term sales of natural
+gas and liquefied natural gas did not exceed
+RMB38,900 million.
+(b)
+2001 Share Option Scheme;
+2.
+Pre-Global Offering Share Option Scheme;
+1.
+The Company has adopted the following share option
+schemes for the grant of options to the Company's
+Directors, senior management and other eligible grantees:
+SHARE OPTION SCHEMES
+The aggregate annual volume of transactions
+for the sales of petroleum and natural gas
+products (other than long term sales of natural
+gas and liquefied natural gas) did not exceed
+RMB438,600 million.
+(a)
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed for
+the purpose of extending entrustment loans pursuant
+to the entrustment loan services) placed by the Group
+with CNOOC Finance did not exceed RMB22 billion.
+Sales of petroleum and natural gas products by the
+Group to CNOOC and/or its associates:
+The independent auditors of the Group have reviewed the
+continuing connected transactions referred to above and
+confirmed to the Board of Directors that the continuing
+connected transactions:
+2.
+Company's shares
+shares
+55
+CNOOC LIMITED Annual Report 2015
+Please refer to the note 28 to the consolidated financial
+statements on pages 113 to 114 for details regarding each
+of these share option schemes of the Company. Save as
+those disclosed in the annual report, no right to subscribe
+for equity or debt securities of the Company has been
+granted by the Company to, nor have any such rights been
+exercised by, any other person during the year ended 31
+December 2015.
+Under these share option schemes, the Remuneration
+Committee of the Board will from time to time propose
+for the Board's approval for grant of and the number of
+share options to be granted to the relevant grantees. The
+maximum aggregate number of shares (including those that
+could be subscribed for under the Pre-Global Offering Share
+Option Scheme, the 2001 Share Option Scheme, the 2002
+Share Option Scheme and the 2005 Share Option Scheme)
+which may be issued upon exercise of all options to be
+granted shall not exceed 10% of the total issued shares of
+the Company as at 31 December 2005, being the date on
+which the shareholders of the Company approved the 2005
+Share Option Scheme, excluding share options which have
+lapsed in accordance with the terms of the share option
+schemes.
+Please refer to note 28 to the consolidated financial
+statements on page 112 for details of movements in the
+Company's total issued shares for the year ended 31
+December 2015.
+SHARE CAPITAL
+Please also refer to note 30 to the consolidated financial
+statements on pages 115 to 119 for a summary of the
+related party transactions which include the Group's
+continuing connected transactions.
+have not exceeded the applicable caps.
+were entered into in accordance with the relevant
+agreements governing the transactions; and
+were in accordance with the pricing policies involving
+provision of goods or services by the Company as
+stated in the Company's financial statements;
+have received the approval of the Board;
+4.
+3.
+1.
+During the year ended 31 December 2015, the movements in the options granted under all of the above share option schemes were as follows:
+Report of the Directors
+The aggregate annual volume of transactions for the
+provision of management, technical, facilities and
+ancillary services, including the supply of materials by
+the Group to CNOOC and/or its associates did not
+exceed RMB100 million;
+The Independent Non-executive Directors have further
+confirmed that for the year ended 31 December 2015:
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed for
+the purpose of extending entrustment loans pursuant to
+the entrustment loan services) placed by the Group with
+CNOOC Finance should not exceed RMB22 billion for the
+period from 1 January 2014 to 31 December 2016.
+As the financial services framework agreement (as renewed
+on 20 August 2010) expired on 31 December 2013, the
+Company entered into a new renewal agreement with
+CNOOC Finance on 27 November 2013 to renew the
+financial services framework agreement for a term of
+another three years from 1 January 2014 to 31 December
+2016. The new renewal agreement is substantially on
+the same terms as the terms contained in the renewal
+agreement entered into by the Company on 20 August
+2010. The continuing connected transactions in respect of
+the depositary services under the new renewal agreement
+are exempted from independent shareholders' approval
+requirements, but subject to the annual reporting, annual
+review and announcement requirements.
+For the three years ended
+Long term sales of
+natural gas and
+liquefied natural gas
+and natural gas
+products (other
+than long term sales
+of natural gas and
+liquefied natural gas)
+Sales of petroleum
+(b)
+(a)
+to CNOOC and/or its associates
+Sales of petroleum and natural gas products by the Group
+For the three years ended
+31 December 2016,
+RMB100 million,
+RMB100 million and
+RMB100 million,
+respectively
+Provision of management,
+technical, facilities and
+ancillary services, including
+the supply of materials to
+CNOOC and/or its
+Associates
+Provision of management, technical, facilities and ancillary
+services, including the supply of materials by the Group to
+CNOOC and/or its associates
+For the three years ended
+31 December 2016,
+RMB1,450 million,
+RMB2, 180 million and
+RMB2,350 million,
+respectively
+(i)
+54 CNOOC LIMITED Annual Report 2015
+Provision of exploration, oil and gas development,
+oil and gas production as well as marketing,
+management and ancillary services by CNOOC and/or
+its associates to the Group:
+RMB346,700 million,
+RMB438,600 million and
+RMB504,400 million,
+respectively
+The aggregate annual volume of transactions for
+FPSO vessel leases did not exceed RMB2, 180
+million.
+The aggregate annual volume of transactions
+for the provision of marketing, management and
+ancillary services did not exceed RMB1,875
+million.
+The aggregate annual volume of transactions
+for the provision of oil and gas production and
+support services did not exceed RMB11,600
+million.
+The aggregate annual volume of transactions
+for the provision of oil and gas development and
+support services did not exceed RMB49,600
+million.
+The aggregate annual volume of transactions for
+the provision of exploration and support services
+did not exceed RMB16, 100 million.
+(d)
+On 14 October 2008, the Company entered into a financial
+services framework agreement with CNOOC Finance
+Corporation Limited, an associate of CNOOC ("CNOOC
+Finance"), pursuant to which CNOOC Finance provides
+the Group a range of financial services. On 20 August
+2010, the Company entered into a renewal agreement with
+CNOOC Finance to renew such financial services framework
+agreement.
+Financial services provided by CNOOC Finance Corporation
+Limited to the Group
+(c)
+RMB44,700 million,
+respectively
+RMB30,700 million,
+RMB38,900 million and
+31 December 2016,
+For the three years ended
+(b)
+(a)
+31 December 2016,
+(e) FPSO vessel leases
+Price of the
+Company's
+price of the
+29 May 2008 to 29 May 2018
+29 May 2008
+7.29
+25 May 2007 to 25 May 2017
+25 May 2007
+5.56
+14 June 2006 to 14 June 2016
+14 June 2006
+1,770,000
+1,857,000
+1,857,000
+1,857,000
+1,857,000
+1,770,000
+5.62
+31 August 2005 to 31 August 2015
+31 August 2005
+14.828
+(1,610,000)
+1,857,000
+27 May 2009
+5.75
+5.62
+31 August 2005 to 31 August 2015
+31 August 2005
+(1,610,000)
+1,610,000
+Yang Hua
+Non-executive Directors
+12.696
+20 May 2010 to 20 May 2020
+20 May 2010
+1,857,000
+1,857,000
+9.93
+27 May 2009 to 27 May 2019
+1,857,000
+Weighted average
+1,610,000
+Executive Directors
+the year
+the year
+2015
+during
+price before the before the At exercise
+Exercise Immediately Immediately
+As at 31
+Expired
+Forfeited
+during
+during
+during
+Name of category As at 1 January
+of grantee
+Granted Exercised
+Report of the Directors
+Number of share options
+the year
+Wu Guangqi
+the year
+Date of grant of
+per share
+per share
+per share
+HK$
+HK$
+HK$
+HK$
+per share
+options
+date
+options of options
+date of
+exercise
+of share grant date
+Exercise period of
+share options*
+share options
+December
+2015
+marketing,
+management and
+ancillary services
+For more details on Company's key relationships with
+stakeholders, please refer to the 2015 CSR report.
+774
+Please refer to pages 44 to 50 for information concerning
+the Directors and senior management of the Company.
+DIRECTORS' SERVICE CONTRACTS
+AND INTERESTS IN TRANSACTION,
+ARRANGEMENT AND CONTRACT OF
+SIGNIFICANCE
+No Director (including those to be re-elected) has an
+unexpired service contract with the Company which is
+not determinable by the Company within one year without
+payment of compensation (other than normal statutory
+obligations).
+Save as disclosed in this annual report, as at 31 December
+2015 or during the year, none of the Directors or entities
+connected with the Directors was materially interested,
+either directly or indirectly, in any transaction, arrangement
+or contract which is significant in relation to the business of
+the Group to which the Company or any of its subsidiaries
+was a party.
+DIRECTORS' PERMITTED INDEMNITY
+PROVISION
+Pursuant to the Company's Articles of Association, every
+Director or other officer of the Company shall be entitled to
+be indemnified out of the assets of the Company against all
+costs, charges, expenses, losses and liabilities which he/
+she may sustain or incur in or about the execution of the
+duties of his/her office or otherwise in relation thereto. The
+Company has arranged appropriate directors' and officers'
+liability insurance coverage for the Directors and officers of
+the Group during the year ended 31 December 2015.
+MANAGEMENT CONTRACTS
+Other than the service contracts of the Directors, the
+Company has not entered into any contract with any
+individual, firm or body corporate to manage or administer
+the whole or any substantial part of any business of the
+Company during the year.
+EMOLUMENTS OF THE DIRECTORS, SENIOR
+MANAGEMENT AND THE FIVE HIGHEST PAID
+INDIVIDUALS
+Please refer to notes 9 and 10 to the consolidated financial
+statements on pages 93 to 95 for details of the emoluments
+of the Directors, senior management and the five highest
+paid individuals of the Company.
+MATERIAL LEGAL PROCEEDINGS
+As at 31 December 2015, the Company was not involved in
+any material litigation or arbitration and no material litigation
+or arbitration were pending or threatened or made against
+the Company so far as the Company is aware.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+Except deviation from the CG Code provisions A.4.1, the
+Company has complied with the code provisions of the
+CG Code as set out in Appendix 14 of the Listing Rules
+throughout the year ended 31 December 2015.
+Please refer to the Corporate Governance Report on pages
+27 to 43 for details.
+AUDITORS
+Deloitte Touche Tohmatsu was appointed as the auditors
+of the Company for the year ended 31 December 2015
+and has audited the accompanying financial statements.
+A resolution to re-appoint Deloitte Touche Tohmatsu
+as auditors of the Company will be proposed at the
+forthcoming Annual General Meeting to be held on 26 May
+2016.
+SUFFICIENCY OF PUBLIC FLOAT
+As at the date of this report, the Directors confirmed
+that based on information that is publicly available to the
+Company and within the knowledge of the Directors, the
+Company had maintained sufficient amount of public float
+as required under the Listing Rules. As at the date of this
+report, based on publicly available information and within
+the Directors' knowledge, approximately 35.56% of the
+Company's total issued shares were held by the public.
+The total number of total issued shares of the Company
+is 44,647,455,984. The closing price of the share of the
+Company as at 31 December 2015 is HK$8.07 per share.
+THE COMPANY
+VOTING BY POLL
+DIRECTORS AND SENIOR MANAGEMENT OF
+59
+Approximate
+percentage of
+total issued
+shares
+0.003%
+Save as disclosed above, as at 31 December 2015, none of the Directors and chief executive of the Company was interested
+in the equity or debt securities of the Company or any associated corporations (within the meaning of the SFO) which were
+required (i) to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of
+the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO);
+(ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code, to
+be notified to the Company and the Hong Kong Stock Exchange. All the interests held by the Directors and chief executive
+represent long positions.
+SUBSTANTIAL SHAREHOLDERS' INTERESTS
+As at 31 December 2015, so far as was known to the Directors and chief executive of the Company, the persons, other than a
+Director or chief executive of the Company, who had an interest or a short position in the Shares and underlying Shares which
+would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO were as follows:
+Ordinary
+shares held
+Approximate
+percentage of
+total issued
+(i) CNOOC (BVI) Limited
+(ii) Overseas Oil & Gas Corporation, Ltd. ("OOGC")
+(iii) CNOOC
+28,772,727,268
+28,772,727,273
+28,772,727,273
+shares
+64.44%
+64.44%
+64.44%
+Note: CNOOC (BVI) Limited is a direct wholly owned subsidiary of OOGC, which is a direct wholly owned subsidiary of CNOOC. Accordingly, CNOOC
+(BVI) Limited's interests are recorded as the interests of OOGC and CNOOC.
+All the interests stated above represent long positions. As at 31 December 2015, save as disclosed above, the Directors and
+chief executive of the Company are not aware of any other person having interests or short positions (other than the Directors
+and chief executives of the Company) in the Shares and underlying Shares which would fall to be disclosed to the Company
+under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the
+nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member
+of the Group.
+CNOOC LIMITED Annual Report 2015
+Report of the Directors
+In 2015, all votes of shareholders were taken by poll in the
+annual general meeting and extraordinary general meetings
+of the Company. Pursuant to the Rule 13.39(4), all votes
+of shareholders will be taken by poll except where the
+chairman, in good faith, decides to allow a resolution which
+relates purely to a procedural or administrative matter to be
+voted on by a show of hands.
+By Order of the Board
+YANG Hua
+Chairman
+Hong Kong, 24 March 2016
+BUSINESS REVIEW
+For details, please refer to “Business Overview" on page 8 to
+26 of the annual report.
+FINANCIAL RESULTS
+Consolidated net profit
+Our consolidated net profit decreased 66.4% to
+RMB20,246 million (US$3,252.6 million) in 2015 from
+RMB60,199 million in 2014, primarily as a result of the
+decrease in profitability under the low international oil price
+environment.
+Revenues
+Our oil and gas sales, realized prices and sales volume in
+2015 are as follows:
+2015
+2014
+Change
+Change (%)
+Oil and gas sales (RMB million)
+146,597
+218,210
+(71,613)
+(32.8%)
+Crude and liquids
+128,929
+200,991
+Looking into 2016, the global economy still lacks the
+momentum for recovery; international oil prices will stay at a
+low level and the external operating environment will remain
+tough. Despite this, we are confident in the Company's
+future and will persevere through to further strengthen our
+operational strategies under a low oil price environment, and
+to promote the "Year of Quality and Efficiency" program in
+order to meet our production and operation targets.
+As at 31 December 2015, the Company's basic and
+diluted earnings per share were RMB0.45 and RMB0.45,
+respectively. The board of directors has recommended
+the payment of a final dividend of HK$0.25 per share (tax
+inclusive).
+The Company maintained a solid financial condition
+in 2015. Oil and gas sales were RMB146,597 million
+(US$23,551.6 million, with the exchange rates applicable
+for 2015 at 6.2245), representing a decrease of 32.8%
+over the previous year. Net profit was RMB20,246 million
+(US$3,252.6 million), representing a decrease of 66.4% over
+the previous year.
+Management's Discussion and Analysis
+60 CNOOC LIMITED Annual Report 2015
+Management's Discussion and Analysis
+The following discussion and analysis should be read
+in conjunction with the Chairman's Statement and the
+Business Overview section, as well as the Group's
+audited financial statements and the related notes.
+DEVELOPMENT STRATEGY
+As one of the largest independent oil and gas exploration
+and production companies, we mainly engage in the
+exploration, development, production and sales of oil and
+natural gas. The principal components of our strategy are as
+follows:
+Focus on reserve and production growth
+As an upstream company specializing in the exploration,
+development, production and sales of oil and natural gas,
+we consider reserve and production growth as our top
+priorities. We plan to increase our reserves and production
+through drill bits and value-driven acquisitions. We will
+continue to concentrate our independent exploration efforts
+on major operating areas, especially offshore China. In the
+meantime, we will continue to cooperate with our partners
+through production sharing contracts to lower capital
+requirements and exploration risks.
+We increase our production primarily through the
+development of proved undeveloped reserves. As of 31
+December 2015, approximately 55.0% of our proved
+reserves were classified as proved undeveloped, which
+provides a solid resource base for maintaining stable
+production in the future.
+Develop natural gas business
+We will continue to develop the natural gas market, and
+continue to explore and develop natural gas fields. In the
+event that we invest in businesses and geographic areas
+where we have limited experience and expertise, we
+plan to structure our investments in the form of alliances
+or partnerships with partners possessing the relevant
+experience and expertise.
+1,150,000
+Maintain a prudent financial policy
+Aiming to reduce operating cost, we plan to actively
+promote the regional development of oil and gas fields
+and apply cutting-edge offshore engineering, drilling and
+production technologies to our operations. In 2015, we
+emphasized the "Year of Quality and Efficiency" program,
+with efforts to control costs and increase efficiency.
+Operating expense per BOE lowered for the second
+consecutive year.
+Currently, we have a healthy financial position. Under low
+oil price environment, we attached more importance to
+cash flow management and continued to balance Capex,
+dividend payment and debt financing.
+2015 OVERVIEW
+In 2015, the global economy continued to adjust, the overall
+recovery had been weak. The US economy rebounded
+moderately while the economic recovery in the eurozone
+was slow; and emerging countries experienced a slowdown
+in economic growth. For China, the economy was resilient
+yet under a downward pressure. In 2015, China's GDP
+increased 6.9%, the first time in 25 years to achieve a GDP
+that falls below 7%.
+During 2015, due to market concerns over global economic
+prospects and excess in global supply of crude oil,
+international oil prices remained at a low level. In 2015, WTI
+crude oil price averaged US$48.68 per barrel, representing
+a decrease of 47.7% over the previous year; brent crude
+oil price averaged US$53.60 per barrel, representing a
+decrease of 46.1% year over year.
+In light of the harsh external environment, the Company
+intensified its "Year of Quality and Efficiency" program. While
+making efforts to improve cost efficiency, we also focused
+our efforts on developing a solid foundation for long term
+sustainable growth.
+During the year, the Company realized a net production of
+495.7 million BOE, representing an increase of 14.6% over
+the previous year, which was at the high-end of the annual
+production target. For exploration, the Company made
+breakthroughs domestically and overseas, consolidating
+our resources for sustainable development. New project
+construction progressed smoothly. All the seven new
+projects planned for 2015 have commenced production.
+HSE maintained a stable performance.
+CNOOC LIMITED Annual Report 2015
+61
+We will continue to maintain our prudent financial policy. As
+an essential part of our corporate culture, we continue to
+promote cost consciousness among both our management
+team and employees. Also, in our performance evaluation
+system, cost control has been one of the most important
+key performance indicators.
+Ordinary
+shares held
+Chiu Sung Hong
+Beneficial interest
+Share of profit of a joint venture
+Share of profits of associates
+2,684
+2,398
+7
+Investment income
+1,049
+(143)
+Exchange (losses)/gains, net
+(4,774)
+(6,118)
+8
+Finance costs
+1,073
+873
+7
+Interest income
+80,915
+17,456
+Non-operating income, net
+PROFIT BEFORE TAX
+256
+232
+(2,301)
+454
+7,979
+19
+60,199
+20,246
+EARNINGS PER SHARE ATTRIBUTABLE TO
+OWNERS OF THE PARENT
+TOTAL COMPREHENSIVE INCOME FOR THE YEAR
+ATTRIBUTABLE TO OWNERS OF THE PARENT
+OTHER COMPREHENSIVE INCOME/(EXPENSE)
+FOR THE YEAR, NET OF TAX
+Items that may be subsequently reclassified to profit or loss:
+Net loss on available-for-sale financial assets, net of tax
+Exchange differences on translation of foreign operations
+Share of other comprehensive income of associates
+Other items that will not be reclassified to profit or loss
+Fair value change on equity investments designated
+as at fair value through other comprehensive income
+Others
+PROFIT FROM OPERATING ACTIVITIES
+OTHER COMPREHENSIVE INCOME/(EXPENSE)
+Income tax credit/(expense)
+82,513
+(22,314)
+3,116
+11 (i)
+17,130
+7
+560
+761
+1,647
+PROFIT FOR THE YEAR ATTRIBUTABLE TO
+OWNERS OF THE PARENT
+(72,062)
+(193,719)
+(3,169)
+11 (ii)
+Taxes other than income tax
+(31,180)
+(28,372)
+Operating expenses
+EXPENSES
+274,634
+171,437
+6,161
+50,263
+21,422
+3,418
+34
+218,210
+146,597
+5
+2014
+Report of the Directors
+Name of Director
+Nature of interest
+(10,770)
+(11,842)
+Exploration expenses
+(9,900)
+(3,150)
+Others
+(6,613)
+(5,705)
+Selling and administrative expenses
+(47,912)
+(19,840)
+Crude oil and product purchases
+(4,120)
+(153,981)
+(2,746)
+Impairment and provision
+(19,072)
+(59)
+(58,286)
+(73,439)
+7 6
+Special oil gain levy
+Depreciation, depletion and amortisation
+(11,525)
+14
+(35.9%)
+Natural gas
+17,668
+CONTINGENCIES
+Please refer to Note 33 to the Consolidated Financial
+Statements of this annual report.
+China
+Development
+42,839
+Exploration
+12,012
+49,128
+13,718
+25,187
+9,515
+Subtotal
+54,851
+62,845
+34,702
+Overseas
+Development
+28,315
+33,403
+25,957
+Please refer to Note 37 to the Consolidated Financial
+Statements of this annual report.
+CHARGES ON ASSETS
+2015
+(RMB million)
+13,682
+(15.2%)
+(19,486)
+12,593
+(64.6%)
+Cash generated from operating activities
+The cash inflow from operating activities decreased 27.5%
+to RMB80,095 million (US$12,867.7 million) in 2015 from
+RMB110,508 million in 2014, primarily attributable to the
+decrease in oil and gas sales cash inflows caused by the
+decline in international oil price.
+Cash used in investing activities
+In 2015, our capital expenditure (excluding acquisition)
+decreased 29.3% to RMB67,674 million (US$10,872.2
+million) from 2014, because the Company reduced its
+capital expenditure on the basis improving quality and
+efficiency in response to the challenges of low oil prices. Our
+development expenditures in 2015 were primarily related to
+the capital expenditure of OML130 project, Iraq technical
+service contract project, deep-water Gulf of Mexico and
+U.S. shale oil and gas, as well as the expenses incurred for
+improving recovery factors of the oilfields in production. The
+Company had no significant acquisition during the year.
+In addition, our cash used in investing activities was also
+attributable to the purchase of other financial assets of
+RMB122,030 million (US$19,604.8 million) this year. Our
+cash generated from investing activities was mainly from
+the proceeds from the sales of other financial assets in the
+Exploration
+amount of RMB104,900 million (US$16,852.8 million), and
+the decrease in our time deposits with maturity over three
+months in the amount of RMB4,825 million (US$775.2
+million).
+In 2015, the increase in net cash inflow from financing
+activities was mainly due to the proceeds of bank
+borrowings of RMB20,541 million (US$3,300.0 million) and
+RMB23,184 million (US$3,800.0 million) from the issuance
+of guaranteed notes, partially offset by the cash outflow
+of the distribution of dividends of RMB20,419 million
+(US$3,280.4 million), and the repayment of bank loans of
+RMB24,127 million (US$3,876.1 million).
+At the end of 2015, our total interest-bearing outstanding
+debt was RMB164,645 million (US$26,451.1 million),
+compared to RMB136,563 million at the end of 2014. The
+increase in debt in 2015 was primarily attributable to the
+issuance of guaranteed notes of US$3.8 billion. Our gearing
+ratio, which is defined as interest-bearing debts divided by
+the sum of interest-bearing debts plus equity, was 29.9%,
+higher than that of 26.5% in 2014. The main reason for the
+increase was the increased scale of interest-bearing debts.
+64 CNOOC LIMITED Annual Report 2015
+Management's Discussion and Analysis
+Capital Expenditure
+The following table sets forth the Company's actual capital
+expenditure on an accrual basis for the periods indicated.
+Year ended 31 December
+2013
+2014
+Cash used in financing activities
+(90,177)
+6,216
+5,201
+The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair
+view in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board,
+Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong
+Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of
+consolidated financial statements that are free from material misstatement, whether due to fraud or error.
+AUDITOR'S RESPONSIBILITY
+Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our
+opinion solely to you, as a body, in accordance with Section 405 of the Hong Kong Companies Ordinance, and for no other
+purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We
+conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified
+Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to
+obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
+An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
+financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks
+of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
+assessments, the auditor considers internal control relevant to the entity's preparation of consolidated financial statements
+that give a true and fair view 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 the directors, as well
+as evaluating the overall presentation of the consolidated 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 the Group as at 31
+December 2015, and of its financial performance and cash flows for the year then ended in accordance with International
+Financial Reporting Standards and Hong Kong Financial Reporting Standards and have been properly prepared in compliance
+with the Hong Kong Companies Ordinance.
+Deloitte Touche Tohmatsu
+Certified Public Accountants
+Hong Kong
+24 March 2016
+66
+CNOOC LIMITED Annual Report 2015
+Consolidated Statement of Profit or Loss and other Comprehensive Income
+Year ended 31 December 2015
+(All amounts expressed in millions of Renminbi, except per share data)
+REVENUE
+Oil and gas sales
+Marketing revenues
+Other income
+DIRECTORS' RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
+We have audited the consolidated financial statements of CNOOC Limited (the "Company") and its subsidiaries (collectively
+referred to as the "Group") set out on pages 67 to 131, which comprise the consolidated statement of financial position
+as at 31 December 2015, and the consolidated statement of profit or loss and other comprehensive income, consolidated
+statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant
+accounting policies and other explanatory information.
+(Incorporated in Hong Kong with limited liability)
+TO THE SHAREHOLDERS OF CNOOC LIMITED
+Subtotal
+34,531
+42,858
+31,158
+Total
+89,383
+105,704
+65,860
+Note: Capitalized interests for 2013, 2014 and 2015 were RMB2,049
+million, RMB1,842 million and RMB1,385 million, respectively.
+9,455
+OTHERS
+As of 31 December 2015, the Company had 14,956
+employees in China, 5,131 employees overseas and 498
+contracted employees.
+Since 4 February 2001, the Company has adopted 4
+stock option plans that were applicable to directors, senior
+management members and other qualified beneficiaries
+and has granted options thereafter in accordance with each
+stock option plan.
+The Company has set up a recruitment system that is
+primarily market driven, and has adopted an appropriate
+remuneration structure.
+For more information on employees and human resources,
+please refer to "Human Resources" in "Business Overview"
+section of this annual report.
+CNOOC LIMITED Annual Report 2015
+65
+Independent Auditor's Report
+Deloitte
+德勤
+Employees
+74
+(27.5%)
+110,508
+Natural gas (US$/mcf)
+6.39
+6.44
+(0.05)
+(0.8%)
+Net production (million BOE)
+495.7
+432.5
+63.2
+14.6%
+China
+Overseas
+323.4
+269.1
+54.3
+172.3
+163.4
+8.9
+20.2%
+5.4%
+In 2015, our net production was 495.7 million BOE
+(including our interest in equity-accounted investees),
+representing an increase of 14.6% from 432.5 million BOE
+in 2014, benefitting from the commencement of production
+of new oil and gas fields in offshore China. The decrease
+in crude and liquids sales was primarily due to significantly
+lower realised oil prices in 2015, which was partially offset by
+the increase in sales volume.
+(46.6%)
+(44.77)
+96.04
+51.27
+17,219
+449
+2.6%
+Sales volume (million BOE)
+480.1
+415.6
+64.5
+15.5%
+Crude and liquids (million barrels)
+Operating expenses
+404.0
+63.4
+18.6%
+Natural gas (bcf)
+444
+435
+9
+2.1%
+Realized prices
+Crude and liquids (US$/barrel)
+340.6
+(30,413)
+Our operating expenses decreased 9.0% to RMB28,372
+million (US$4,558.1 million) in 2015 from RMB31, 180 million
+in 2014, and the operating expenses per BOE decreased
+20.9% to RMB59.4 (US$9.55) per BOE in 2015 from
+RMB75.1 (US$12.22) per BOE in 2014, attributable from
+effective cost control and large increase in production.
+Operating expenses per BOE offshore China decreased
+18.0% to RMB49.5 (US$7.96) per BOE in 2015 from
+RMB60.4 (US$9.83) per BOE in 2014. Overseas operating
+expenses per BOE decreased 21.4% to RMB80.2
+(US$12.88) per BOE in 2014 from RMB102.1 (US$16.61)
+per BOE in 2014.
+Management's Discussion and Analysis
+Our income tax credit changed 114.0% to RMB3, 116 million
+(US$500.6 million) in 2015, compared with income tax
+expense of RMB22,314 million in 2014, mainly because the
+UK government decreased the combined income tax rate
+on North Sea oil and gas activities from 62% to 50% and
+resulted in a one-time reversal of net deferred tax liability. In
+addition, the lower profitability of overseas operations due to
+decreased oil prices resulted in a further decline in income
+tax expense. The effective tax rate changed to (18.2%) in
+2015 from 27.0% in 2014.
+Capital Resources and Liquidity
+Overview
+Our primary source of cash during 2015 was cash flows
+from operating activities. We used cash primarily to fund
+capital expenditure and dividends. The changes are as
+follows:
+2015
+RMB million
+US$ million
+2014
+RMB million
+Change
+RMB million
+%
+Generated from operating activities
+80,095
+Used in investing activities
+(76,495)
+Used in financing activities
+(6,893)
+12,867.7
+(12,289.3)
+(1,107.4)
+Income tax expense
+Share of profits of associates/a joint venture
+Our share of profits of associates/a joint venture increased
+89.2% to RMB1,903 million (US$305.7 million) in 2015
+from RMB1,006 million in 2014, primarily attributable to the
+increase in profitability of joint venture resulting from local
+finance and tax benefit.
+Our investment income decreased 10.7% to RMB2,398
+million (US$385.3 million) in 2015 from RMB2,684 million in
+2014, primarily attributable to the decline in market rate of
+return on investment which was caused by the continuously
+decline interest rates promulgated by the People's Bank of
+China.
+Investment income
+Taxes other than income tax
+Our taxes other than income tax decreased 9.1% to
+RMB10,770 million (US$1,730.3million) in 2015 from
+RMB11,842 million in 2014. The decrease was mainly due
+to the decrease in oil and gas revenue.
+Exploration expenses
+Our exploration expenses decreased 14.1% to RMB9,900
+million (US$1,590.5 million) in 2015 from RMB11,525
+million in 2014, among which dry hole expense decreased
+16.7% to RMB4,740million (US$761.5 million) in 2015
+from RMB5,686 million in 2014, due to the decrease of
+exploration expenditure, less high-cost wells and less
+wells expenses which were written off according to
+subsequent reserve evaluation. Meanwhile, the seismic
+expense decreased as compared to 2014, resulting from
+the continuing efforts in lowering costs and enhancing
+efficiency under the circumstance of decreasing exploration
+expenditure budget.
+Depreciation, depletion and amortization
+Our depreciation, depletion and amortization increased
+26.0% to RMB73,439 million (US$11,798.4 million) in
+2015 from RMB58,286 million in 2014. Our average
+depreciation, depletion and amortization per BOE, excluding
+the dismantlement-related depreciation, depletion and
+amortization, increased 11.8% to RMB146.4 (US$23.53)
+per BOE in 2015 from RMB130.9 (US$21.30) per BOE in
+2014, primarily as a result of the increased proportion of
+production of new oil and gas fields and adjustment projects
+in offshore China and North Sea in UK in recent years,
+which were developed under the environment of increasing
+prices of raw materials and services over the past few
+years. Meanwhile, the commencement of production of new
+development wells of shale oil and gas in the U.S. further
+increased the amortization rate per BOE.
+The dismantlement-related depreciation, depletion and
+amortization costs decreased 10.3 % to RMB3,545 million
+(US$569.5 million) in 2015 from RMB3,951 million in
+2014. Our average dismantling costs per BOE decreased
+22.0% to RMB7.43 (US$1.19) per BOE in 2015 from RMB
+RMB9.52 (US$1.55) per BOE in 2014, primarily due to
+the decrease of the expected value of asset retirement
+obligations of producing oil and gas fields, which was
+estimated based on current services price. Under the
+environment of reducing capital expenditure in upstream
+industry, the service price of projects constructions and
+drilling wells decreased.
+Special Oil Gain Levy
+Our Special Oil Gain (SOG) Levy decreased 99.7% to
+RMB59 million (US$9.5 million) in 2015 from RMB19,072
+million in 2014, primarily as a result of our decreased
+realised oil price in offshore China and the Chinese
+government increased the threshold of the SOG levy to
+US$65 with effect from 1 January 2015.
+62 CNOOC LIMITED Annual Report 2015
+Impairment, provision and write off
+Selling and administrative expenses
+Our selling and administrative expenses decreased 13.7%
+to RMB5,705 million (US$916.5 million) in 2015 from
+RMB6,613 million in 2014. Our selling and administrative
+expenses per BOE decreased 24.9% to RMB 11.95 (US$
+1.92) per BOE in 2015 from RMB15.93 (US$ 2.59) per
+BOE in 2014. Such decreases were primarily due to lower
+expense resulting from the Company's partial marketing
+business restructuring and Company's vigorous efforts in
+lowering costs and enhancing efficiency in this year.
+Finance costs/Interest income
+Our finance costs increased 28.2% to RMB6, 118 million
+(US$982.9 million) in 2015 from RMB4,774 million in
+2014, primarily due to the increased interest expense from
+new issuance of guaranteed notes. Our interest income
+decreased 18.6% to RMB873 million (US$140.3 million) in
+2015 from RMB1,073 million in 2014, primarily due to the
+reduced deposit scale under the decling market interest rate
+environment.
+Exchange gains, net
+Our net exchange losses changed 113.6% to RMB143
+million (US$23.0 million) in 2015, compared with exchange
+gains RMB1,049 million in 2014, primarily as a result of the
+increase in exchange loss as a result of RMB, GBP and CAD
+fluctuation against the US dollars.
+CNOOC LIMITED Annual Report 2015
+63
+Management's Discussion and Analysis
+Our impairment and provision decreased 33.3% to
+RMB2,746 million (US$441.2million) in 2015 from RMB
+4,120 million in 2014. In 2015, certain oil and gas properties
+located in China, North America, South America and Africa
+were impaired, which was reflected by the impact of near
+term lower price. In addition, the Company wrote off some
+shale oil and gas assets in North America and certain
+unproved properties in Canada. Approximately RMB1,400
+million was included in the depreciation, depletion and
+amortization charge of the year, and approximately
+RMB461 million was included in the exploration expenses,
+respectively. The reason is that the leasehold contracts of
+these blocks were overdue, and the Company withdraw
+from these blocks by considering lower economy of the
+project and falling short of expectation of the exploration
+result. Please refer to Note 14 to the Consolidated Financial
+Statement of this annual report.
+Notes
+92
+(1,573)
+134
+24
+32,614
+52,192
+34
+316
+25
+13,534
+4,647
+31,180
+11,499
+Total current liabilities
+84,380
+103,498
+NET CURRENT ASSETS
+55,831
+37,210
+TOTAL ASSETS LESS CURRENT LIABILITIES
+8,311
+33,585
+26
+2232
+Time deposits with maturity over three months
+Cash and cash equivalents
+22
+23
+18,010
+22,835
+23
+11,867
+14,918
+Total current assets
+140,211
+140,708
+CURRENT LIABILITIES
+Loans and borrowings
+Trade and accrued payables
+Derivative financial liabilities
+Other payables and accrued liabilities
+Taxes payable
+579,982
+8,573
+559,361
+Loans and borrowings
+20,189
+1,751
+1,746
+193,941
+179,751
+386,041
+379,610
+11,627
+28
+43,081
+29
+342,960
+336,529
+386,041
+379,610
+19
+43,081
+11 (i)
+52,433
+49,503
+Provision for dismantlement
+Deferred tax liabilities
+Other non-current liabilities
+Total non-current liabilities
+NET ASSETS
+EQUITY
+Equity attributable to owners of the parent
+Issued capital
+Reserves
+TOTAL EQUITY
+LI Fanrong
+Director
+68 CNOOC LIMITED Annual Report 2015
+Wu Guangqi
+Director
+26
+131,060
+105,383
+27
+NON-CURRENT LIABILITIES
+7,415
+2015
+71,806
+Notes
+2015
+2014
+Property, plant and equipment
+14
+454,141
+463,222
+NON-CURRENT ASSETS
+Intangible assets
+16,423
+16,491
+Investments in associates
+17
+4,324
+4,100
+Investment in a joint venture
+15
+(All amounts expressed in millions of Renminbi)
+31 December 2015
+Consolidated Statement of Financial Position
+Other current assets
+(268)
+6,614
+(2,023)
+26,860
+58,176
+Basic (RMB Yuan)
+13
+Diluted (RMB Yuan)
+13
+33
+0.45
+1.35
+0.45
+1.35
+CNOOC LIMITED Annual Report 2015
+67
+18
+24,089
+Details of the dividends proposed and paid for the year are disclosed in note 12 to the consolidated financial statements.
+Available-for-sale financial assets
+21
+9,263
+10,608
+22
+21,829
+29,441
+34
+Equity investments
+7
+19, 34
+-
+54,030
+19,34
+14
+21,150
+19, 34
+Available-for-sale financial assets
+Derivative financial assets
+303
+CURRENT ASSETS
+19, 34
+5,337
+Inventories and supplies
+Equity investments
+19,34
+3,771
+Deferred tax assets
+11 (i)
+13,575
+Other financial assets
+Other non-current assets
+20
+7,828
+5,974
+Total non-current assets
+5,877
+Trade receivables
+524,151
+522,151
+CNOOC LIMITED Annual Report 2015
+After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment
+annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the
+purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
+the Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the
+combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.
+Business combinations and goodwill (continued)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+76
+75
+3.
+Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units)
+to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is
+less than the carrying amount, an impairment loss on goodwill is recognised. An impairment loss recognised for goodwill is not
+reversed in a subsequent period.
+Associates
+Subsidiaries
+Subsidiaries are all those entities over which the Group has power over the investee such that the Group is able to direct the
+relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its
+power over the investee to affect the amount of the investor's returns.
+Based on the Group's ownership percentage (considering its direct ownership as well as potentially exercisable or convertible
+shares) and other contractual rights, the Group has significant influence over its associates, rather than the power to control.
+The Group's investments in associates are stated in the consolidated statement of financial position at the Group's share of
+net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any
+dissimilar accounting policies that may exist. The Group's share of the post-acquisition results and reserves of associates
+is included in the consolidated statement of profit or loss and other comprehensive income and consolidated reserves,
+respectively. Unrealised gains and losses resulting from transactions between the Group and its associates are eliminated to the
+extent of the Group's investments in the associates, except where unrealised losses provide evidence of an impairment of the
+asset transferred. Goodwill arising from the acquisition of associates is included as part of the Group's investments in associates
+and is not individually tested for impairment.
+Joint arrangements
+Certain of the Group's activities are conducted through joint arrangements. Joint arrangements are classified as either a joint
+operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the
+arrangement.
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
+relevant activities require unanimous consent of the parties sharing control.
+Joint operations
+Some arrangements have been assessed by the Group as joint operations as both parties to the contract are responsible for the
+assets and obligations in proportion to their respective interest, whether or not the arrangement is structured through a separate
+vehicle. This evaluation applies to both the Group's interests in production sharing arrangements and certain joint operation.
+The Group entered into numerous production sharing arrangements or similar agreements in China and overseas countries. The
+Group's participating interest may vary in each arrangement. The Group, as one of the title owners under certain exploration
+and/or production licenses or permits, is required to bear exploration (with some exceptions in China), development and
+operating costs together with other co-owners based on each owner's participating interest. Once production occurs, a certain
+percentage of the annual production or revenue is first distributed to the local government, which, in most cases, with the nature
+of royalty and other taxes or expenses, and the rest of the annual production or revenue is allocated among the co-owners.
+The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance
+with the IFRSS/HKFRSS applicable to the particular assets, liabilities, revenues and expenses.
+Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation
+within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the
+operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based
+on the relative value of the operation disposed of and the portion of the cash-generating unit retained.
+Joint control
+7
+Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent
+consideration classified as an asset or liability is measured at subsequent reporting dates in accordance with IFRS/HKFRS 9
+(2009) or IAS/HKAS 39, with the corresponding gain or loss being recognised in profit or loss. Contingent consideration that is
+classified as equity is not remeasured and subsequent settlement is accounted for within equity.
+CNOOC LIMITED Annual Report 2015
+4
+Effective date is to be decided
+5
+Effective for annual periods beginning on or after 1 January 2019
+6
+Effective for annual periods beginning on or after 1 January 2017
+Effective for annual periods beginning on or after 1 January 2018
+74
+CNOOC LIMITED Annual Report 2015
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+Basis of preparation
+These consolidated financial statements have been prepared under the historical cost convention, except for as detailed in the
+accounting policies notes hereafter. These consolidated financial statements are presented in Renminbi ("RMB") and all values
+are rounded to the nearest million except when otherwise indicated.
+Basis of consolidation
+The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended
+31 December 2015.
+The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and
+continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared
+for the same reporting period as the parent company, using consistent accounting policies.
+The results of subsidiaries are included in the Company's statement of profit or loss and other comprehensive income to the
+extent of dividends received and receivable. The Company's interests in subsidiaries are stated at cost less any impairment
+losses.
+All intra-group balances, income and expenses and unrealised gains and losses and dividends resulting from intra-group
+transactions are eliminated in full.
+Business combinations and goodwill
+Business combinations are accounted for using the acquisition method. The consideration transferred is measured at
+acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities
+assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control
+of the acquiree. For each business combination, the Group elects whether it measures the non-controlling interests in the
+acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. All other components of non-
+controlling interests are measured at fair value. Acquisition related costs incurred are expensed and included in administrative
+expenses.
+When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
+designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition
+date. This includes the separation of embedded derivatives in host contracts by the acquiree.
+If the business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to
+fair value at the acquisition date through profit or loss.
+Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised
+for non-controlling interests and any fair value of the Group's previously held equity interests in the acquiree over the identifiable
+net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net
+assets of the business acquired, the difference is recognised in profit or loss as a gain on bargain purchase.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Property, plant and equipment
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories,
+deferred tax assets, financial assets and goodwill), the asset's recoverable amount is estimated. An asset's recoverable amount
+is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for
+an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or
+groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
+An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value
+in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
+market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or
+loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.
+CNOOC LIMITED Annual Report 2015
+77
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Impairment of non-financial assets other than goodwill (continued)
+An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised
+impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated.
+A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the
+estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that
+would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in
+prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.
+Effective for annual periods beginning on or after 1 January 2016
+Property, plant and equipment comprise oil and gas properties, and vehicles and office equipment and others.
+(a)
+Oil and gas properties
+For oil and gas properties, the successful efforts method of accounting is adopted. The Group capitalises the initial
+acquisition costs of oil and gas properties. Impairment of initial acquisition costs is recognised based on exploratory
+experience and management judgement and charged to profit and loss as exploration expenses. Upon discovery
+of commercial reserves, acquisition costs are transferred to proved properties. The costs of drilling and equipping
+successful exploratory wells, all development expenditures on construction, installation or completion of infrastructure
+facilities such as platforms, pipelines, processing plants and the drilling of development wells and the building of
+enhanced recovery facilities, including those renewals and betterments that extend the economic lives of the assets, and
+the related borrowing costs are capitalised. The costs of unsuccessful exploratory wells and all other exploration costs
+are expensed as incurred.
+The Group carries exploratory well costs as an asset when the well has found a sufficient quantity of reserves to justify
+its completion as a producing well and where the Group is making sufficient progress assessing the reserves and the
+economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expenses.
+Exploratory wells that discover potentially economic reserves in areas where major capital expenditure will be required
+before production would begin and when the major capital expenditure depends upon the successful completion of
+further exploratory work remain capitalised and are reviewed periodically for impairment.
+Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves.
+Common facilities that are built specifically to service production directly attributed to designated oil and gas properties
+are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis.
+Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the
+straight-line method over their estimated useful lives. Costs associated with significant development projects are not
+depreciated until commercial production commences and the reserves related to those costs are excluded from the
+calculation of depreciation.
+Capitalised acquisition costs of proved properties are depreciated on a unit-of-production method over the total proved
+reserves of the relevant oil and gas properties.
+(b) Vehicles, office equipment and others
+Vehicles, office equipment and others are stated at cost less accumulated depreciation and impairment losses. The
+straight-line method is adopted to depreciate the cost less any estimated residual value of these assets over their
+expected useful lives. The useful lives of vehicles, office equipment and other assets are in line with their beneficial
+periods.
+Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a
+recoverable basis among the parts and each part is depreciated separately.
+Residual values, useful lives and the depreciation method are reviewed and, adjusted if appropriate, at each reporting date.
+Any gains and losses on disposals of property, plant and equipment (calculated as the difference between the net disposal
+proceeds and the carrying amount of the asset) are recognised in profit or loss.
+78 CNOOC LIMITED Annual Report 2015
+Impairment of non-financial assets other than goodwill
+3.
+a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel
+of the entity (or of a parent of the entity).
+the entity is controlled or jointly controlled by a person identified in (a); and
+Joint arrangements (continued)
+Joint venture
+A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
+of the arrangement.
+The Group's investments in joint ventures are stated in the consolidated statement of financial position at the Group's share
+of net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any
+dissimilar accounting policies that may exist. The Group's share of the post-acquisition results and reserves of joint ventures
+is included in the consolidated statement of profit or loss and other comprehensive income and consolidated reserves,
+respectively. Where the profit sharing ratios is different to the Group's equity interest, the share of post-acquisition results of the
+joint ventures is determined based on the agreed profit sharing ratio. Unrealised gains and losses resulting from transactions
+between the Group and its joint ventures are eliminated to the extent of the Groups investments in the joint ventures, except
+where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of joint
+ventures is included as part of the Group's investments in joint ventures and is not individually tested for impairment.
+Related parties
+A party is considered to be related to the Group if:
+the party is a person or a close member of that person's family and that person
+(a)
+(i)
+has control or joint control of the Group;
+has significant influence over the Group; or
+is a member of the key management personnel of the Group or of a parent of the Group;
+the party is an entity where any of the following conditions applies:
+(i)
+the entity and the Group are members of the same group;
+one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the
+other entity);
+(iii)
+the entity and the Group are joint ventures of the same third party;
+(iv)
+one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
+(v)
+the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to
+the Group;
+(vi)
+(vii)
+3
+Loans and
+receivables
+2
+Financial assets at
+FVTPL
+Financial assets at
+FVTPL
+303
+Other financial assets: liquidity
+funds (Note 19)
+Available-for-sale
+investments
+Financial assets at
+FVTPL
+5,453
+5,453
+Other financial assets: corporate
+Available-for-sale
+Derivative Financial assets (Note
+34)
+investments
+48,564
+48,564
+wealth management products
+(Note 19)
+Trade receivables (Note 22)
+Loans and
+receivables
+Financial assets at
+amortised cost
+29,411
+29,411
+Time deposits with maturity over
+three months (Note 23)
+Loans and
+receivables
+Financial assets at
+FVTPL
+2,258
+Financial assets
+designated as at
+FVTOCI
+Available-for-sale
+investments
+New
+Original
+measurement
+category under
+IAS/HKAS 39
+measurement
+category under
+IFRS/HKFRS 9
+(2009)
+Original carrying
+New carrying
+amount
+under
+Publicly traded equity investments
+- MEG Energy Corporation
+("MEG") (Note 19)
+Available-for-sale
+investments
+Financial assets
+designated as at
+FVTOCI
+amount under
+IAS/HKAS 39
+IFRS/HKFRS 9
+(2009)
+2,958
+2,958
+Publicly traded equity investments
+- others (Note 19)
+Available-for-sale
+investments
+Financial assets at
+FVTPL
+134
+134
+Non-publicly traded equity
+investments (Note 19)
+Financial assets at
+amortised cost
+22,835
+22,835
+Cash and cash equivalent (Note 23)
+IFRS 9/HKFRS 9 (2014)
+IFRS 14/HKFRS 14
+IFRS 15/HKFRS 15
+IFRS 16
+Amendments to IFRS 11/HKFRS 11
+Amendments to IAS 1/HKAS 1
+Amendments to IAS 16/HKAS 16
+and IAS 38/HKAS 38
+Amendments to IFRSS/HKFRSS
+Amendments to IAS 27/HKAS 27
+Amendments to IFRS 10/HKFRS 10
+and IAS 28/HKAS 28
+Amendments to IAS 7
+Amendments to IAS 12
+1
+Financial Instruments¹
+Regulatory Deferral Accounts²
+Revenue from Contracts with Customers?
+Leases5
+Accounting for Acquisitions of Interests in Joint Operations³
+Disclosure Initiative³
+Clarification of Acceptable Methods of Depreciation and Amortisation³
+Annual Improvements to IFRSS/HKFRSS 2012-2014 Cycle³
+Equity Method in Separate Financial Statements³
+Sale or Contribution of Assets between an
+Investor and its Associate or Joint Venture4
+Disclosure Initiative6
+Recognition of Deferred Tax Assets for Unrealised Losses
+Effective for annual periods beginning on or after 1 January 2018, except for the 2009 version of IFRS/HKFRS 9, which the Group adopted in
+advance
+The Group has not applied the following new and revised IFRSS/HKFRSS, which may be relevant to the Group and have been
+issued but are not yet effective, in these consolidated financial statements:
+Effective for first annual IFRS/HKFRS financial statements beginning on or after 1 January 2016
+In relation to the equity investments (not held for trading), the Group has made an irrevocable election to present subsequent
+changes in their fair value in other comprehensive income under IFRS/HKFRS 9 (2009), which will not be reclassified to profit or
+loss on disposal or impairment of the relevant investments. Under IAS/HKAS 39, when an available-for-sales equity investment
+is disposed of or impaired, the cumulative gain or loss is reclassified from other comprehensive income to profit or loss. Should
+the Group have not early adopted IFRS/HKFRS 9 (2009), the Group's basic and diluted earnings per share would have been
+RMB0.41 yuan for the year ended 31 December 2015. There is no material impact on the basic and diluted earnings per share
+for the year ended 31 December 2014.
+Early adopted before mandatory effective dates (continued)
+Loans and
+receivables
+Financial assets at
+14,918
+14,918
+amortised cost
+Other non-current assets -
+dismantlement fund deposits
+(Note 20)
+Other current assets
+Loans and
+receivables
+Financial assets at
+amortised cost
+3,981
+3,981
+Financial assets at
+8,573
+8,573
+amortised cost
+CNOOC LIMITED Annual Report 2015
+73
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2.2
+CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)
+IFRS/HKFRS 9 (2009)-Financial Instruments (continued)
+2,258
+303
+The investment in non-publicly traded investments (not held for trading) of the Group's joint venture/associates previously
+classified as available-for-sale investments and measured at fair value at each reporting date or at cost less impairment
+under IAS/HKAS 39 have been designated as at FVTOCI.
+7,979
+6,614
+(1,365)
+7,979
+20,246
+20,246
+379,610
+11,325
+319,625
+6,497
+20,000
+(20,918)
+(1,365)
+43,081
+11,325*
+319,625*
+6,497*
+20,000*
+(20,918)*
+_*
+43,081
+(11,325)
+(8,846)
+(8,846)
+(11,340)
+(11,269)
+379,610
+20,246
+26,860
+58
+Additions in associates interest
+Capital expenditure
+CASH FLOWS FROM INVESTING ACTIVITIES
+Net cash flows from operating activities
+CASH FLOWS FROM OPERATING ACTIVITIES
+Cash generated from operations
+Income taxes paid
+2014
+2015
+Notes
+(All amounts expressed in millions of Renminbi)
+Year ended 31 December 2015
+Consolidated Statement of Cash Flows
+CNOOC LIMITED Annual Report 2015 69
+The Hong Kong Companies Ordinance (Cap. 622), becoming effective on 3 March 2014, abolishes the concept of nominal value and requirements for
+authorised share capital.
+These reserve accounts comprise the consolidated reserves of approximately RMB342,960 million (2014: RMB336,529 million) in the consolidated
+statement of financial position.
+386,041
+9,397*
+321,370*
+5,132*
+20,000*
+(12,939)*
+43,081
+9,397
+(9,397)
+(9,162)
+(9,162)
+(11,267)
+(11,325)
+(71)
+Decrease in time deposits with maturity
+At 31 December 2015
+2015 interim dividend
+42,132
+949
+Total
+dividend
+earnings
+final
+Retained
+Other
+reserves
+reserves
+reserve
+reserve
+capital
+(21,372)
+distributable
+Cumulative
+translation
+and capital
+redemption
+Issued
+Statutory
+and non-
+Attributable to owners of the parent
+Share premium
+Other comprehensive income/(expense), net of tax
+At 1 January 2014
+Profit for the year
+(All amounts expressed in millions of Renminbi)
+Year ended 31 December 2015
+Consolidated Statement of Changes in Equity
+The list below illustrates the classification and measurement of the financial assets under IAS/HKAS 39 and IFRS/HKFRS 9
+(2009) at 1 January 2015, the date of initial application.
+Proposed
+20,000
+8,974
+279,668
+2014 final dividend
+Total comprehensive income/(expense)
+Other comprehensive income/(expense), net of tax
+Profit for the year
+At 1 January 2015
+At 31 December 2014
+Proposed 2014 final dividend
+2014 interim dividend
+2013 final dividend
+(42,132)
+42,132
+Hong Kong Companies Ordinance ***
+Transfer upon abolition of par value under the
+454
+Total comprehensive income/(expense)
+58,176
+60,199
+(2,477)
+54%
+(2,023)
+(2,477)
+14
+454
+60,199
+60,199
+341,620
+11,269
+Proposed 2015 final dividend
+over three months
+11,325
+32
+Early adopted before mandatory effective dates
+The accounting policies adopted are consistent with those of the year ended 31 December 2014, except for the first time
+adoption of the amendments to IFRSS/HKFRSS effective for the Group's financial year beginning on 1 January 2015 (the
+"Amendments") and early adoption of IFRS/HKFRS 9 (2009) Financial Instruments. The adoption of the Amendments had no
+material impact on the accounting policies, the disclosures or the amounts recognised in the consolidated financial statements
+of the Group. Impact of early adoption of IFRS/HKFRS 9 (2009) Financial Instruments is described as below.
+The IASB has issued a number of new and revised IFRSS that are first effective for the current accounting year commencing
+1 January 2015 or later but available for early adoption. The equivalent new and revised HKFRSS consequently issued
+by the HKICPA have the same effective dates as those issued by the IASB and are in all material aspects identical to the
+pronouncements issued by the IASB.
+CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
+The provisions of the Hong Kong Companies Ordinance (Cap.622) regarding preparation of accounts and directors' report and
+audits became effective, and has been adopted by the Company for the financial year ended 31 December 2015. Further, the
+disclosure requirements set out in the Listing Rules regarding annual accounts have been amended with reference to the Hong
+Kong Companies Ordinance (Cap.622). Accordingly the presentation and disclosure of information in the consolidated financial
+statements for the financial year ended 31 December 2015 have been changed to comply with these new requirements.
+Comparative information in respect of the financial year ended 31 December 2014 are presented or disclosed in the
+consolidated financial statements based on the new requirements. Information previously required to be disclosed under the
+predecessor Hong Kong Companies Ordinance (Cap. 32) or Listing Rules but not under the Hong Kong Companies Ordinance
+(Cap.622) or amended Listing Rules are not disclosed in these consolidated financial statements.
+These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSS") issued
+by the International Accounting Standards Board (the "IASB"), Hong Kong Financial Reporting Standards ("HKFRSS”) issued by
+the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), the Rules Governing the Listing of Securities on The
+Stock Exchange of Hong Kong Limited (the “Listing Rules") and the Hong Kong Companies Ordinance (Cap. 622) which came
+into effect on 3 March 2014. A summary of the significant accounting policies adopted by the Group is set out below.
+STATEMENT OF COMPLIANCE
+In the opinion of the directors of the Company (the “Directors”), the parent and the ultimate holding company of the Company
+is China National Offshore Oil Corporation ("CNOOC"), a company established in the PRC.
+CNOOC Limited (the “Company”) was incorporated in the Hong Kong Special Administrative Region ("Hong Kong") of the
+People's Republic of China (the "PRC") on 20 August 1999 to hold the interests in certain entities thereby creating a group
+comprising the Company and its subsidiaries (hereinafter collectively referred to as the "Group"). During the year, the Group was
+principally engaged in the exploration, development, production and sale of crude oil, natural gas and other petroleum products.
+The registered office address of the Company is 65/F, Bank of China Tower, 1 Garden Road, Hong Kong.
+CORPORATE INFORMATION
+2.2
+2.1
+IFRS/HKFRS 9 (2009) - Financial Instruments
+1.
+31 December 2015
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2015
+70
+14,918
+11,867
+23
+CASH AND CASH EQUIVALENTS AT END OF YEAR
+(245)
+242
+845
+14,318
+14,918
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+In the current year, the Group has applied IFRS/HKFRS 9 (2009). The Group has chosen 1 January 2015 as its date of initial
+application (i.e. the date on which the Group has reassessed the classification of its financial assets in accordance with
+requirements of IFRS/HKFRS 9 (2009)). The classification is based on the facts and circumstances as at 1 January 2015.
+In accordance with transition provisions set out in IFRS/HKFRS 9 (2009), the Group has chosen not to restate comparative
+information and has provided additional disclosures in accordance with IFRS/HKFRS 7 Financial Instruments - Disclosures in
+these consolidated financial statements for the year ended 31 December 2015, and any difference between the measurement
+under IAS/HKAS 39 Financial Instruments: Recognition and Measurement and IFRS/HKFRS 9 (2009) as at 1 January 2015 is
+recognised in the opening retained earnings and other reserves at the date of initial application, if any. IFRS/HKFRS 9 (2009)
+does not apply to financial assets that have already been derecognised at date of initial application. Other than the changes
+in classification of certain financial assets, the changes in accounting policies had no material financial impact on the amounts
+recognised on the consolidated statement of financial position of the Group as at 1 January 2015.
+CNOOC LIMITED Annual Report 2015
+71
+(vi)
+(v) The investment in publicly traded investments (not held for trading) of the Group's joint venture/associates that were
+previously classified as available-for-sale investments and measured at fair value at each reporting date under IAS/HKAS
+39 have been designated as at FVTOCI; and
+IFRS/HKFRS 9 (2009)-Financial Instruments (continued)
+Early adopted before mandatory effective dates (continued)
+2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)
+Dividends received from associates
+CNOOC LIMITED Annual Report 2015
+72
+(iv) the Group's investment in liquidity funds of RMB5,453 million and corporate wealth management products of
+RMB48,564 million that were previously classified as available-for-sale investments and measured at fair value at each
+reporting date under IAS/HKAS 39 have been classified as FVTPL;
+the Group's equity investments of RMB 134 million previously classified as available-for-sale investments and measured
+at fair value at each reporting date under IAS/HKAS 39 have been classified as at FVTPL;
+the Group's non-publicly traded equity investments (not held for trading) of RMB 2,258 million previously classified as
+available-for-sale investments and measured at fair value at each reporting date or at cost less impairment under IAS/
+HKAS 39 have been designated as at FVTOCI. The carrying amounts of the investments previously measured at cost
+less impairment represent an appropriate estimate of their fair values as at 1 January 2015, as insufficient more recent
+information is available to measure their fair values;
+the Group's publicly traded equity investments (not held for trading) of RMB 2,958 million that were previously classified
+as available-for-sale investments and measured at fair value at each reporting date under IAS/HKAS 39 have been
+designated as at FVTOCI;
+(ii)
+(i)
+The initial application of IFRS/HKFRS 9 (2009) has affected the classification of financial assets of the Group, its joint venture/
+associates and the Group's other reserves and retained earnings as at 1 January 2015 as follows:
+The directors have reviewed and reassessed the Group's existing financial assets at 1 January 2015 based on the Group's
+business model for managing the financial assets and the contractual cash flow characteristics of the financial assets and
+concluded that the Group's financial assets, previously classified as "loans and receivables" under IAS/HKAS 39 are held within
+a business model whose objective is to hold these financial assets in order to collect contractual cash flows that are solely
+payments of principal and interest. In addition, the directors concluded that the Group's investments in certain equity securities
+that previously classified as available-for-sale investments under IAS/HKAS 39 are not held for trading, but held for medium or
+long-term strategic purpose. Therefore, those investments in equity securities are designated as at FVTOCI under IFRS/HKFRS
+9 (2009) as the directors believe that this provides a more meaningful presentation than reflecting changes in fair value in profit
+or loss. Other equity investments are classified as FVTPL.
+Investments in equity instruments are classified and measured as at FVTPL except when the equity investment is not held for
+trading and is designated by the Group as at fair value through other comprehensive income ("FVTOCI"). If the equity investment
+is designated as at FVTOCI, all gains and losses are recognised in other comprehensive income and are not subsequently
+reclassified to profit or loss, except for dividend income that is generally recognised in profit or loss in accordance with IAS/
+HKAS 18 Revenue.
+However, the Group may choose at initial recognition to designate a debt instrument that meets the amortised cost criteria
+as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch. Debt instruments that are subsequently
+measured at amortised cost are subject to impairment.
+As required by IFRS/HKFRS 9 (2009), debt instruments and hybrid contracts are subsequently measured at amortised cost only
+if (i) the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and (ii)
+the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
+interest on the principal amount outstanding (collectively referred to as the "amortised cost criteria"). If either of the two criteria
+is not met, the debt instruments are classified as at fair value through profit or loss ("FVTPL”).
+IFRS/HKFRS 9 (2009) introduces new classification and measurement requirements for financial assets that are within the
+scope of IAS/HKAS 39. Specifically, IFRS/HKFRS 9 (2009) requires all financial assets to be classified and subsequently
+measured at either amortised cost or fair value on the basis of the Group's business model for managing the financial assets
+and the contractual cash flow characteristics of the financial assets.
+IFRS/HKFRS 9 (2009)-Financial Instruments (continued)
+Early adopted before mandatory effective dates (continued)
+CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)
+2.2
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2015
+Notes to Consolidated Financial Statements
+(3,293)
+(19,486)
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(4,114)
+102,587
+financial assets
+Proceeds from sale of current available-for-sale
+(122,030)
+(236)
+Purchase of equity investments
+Purchase of other financial assets
+(105,718)
+Purchase of current available-for-sale financial assets
+2,331
+2,177
+Investment income received
+1,041
+812
+Interest received
+32
+Dividends received from a joint venture
+153
+164
+3,383
+4,825
+(95,673)
+(67,674)
+(9)
+110,508
+(32,174)
+142,682
+96,095
+(16,000)
+(6,893)
+Proceeds from sale of other financial assets
+104,900
+80,095
+544
+(20,216)
+Proceeds from disposal of property, plant and equipment
+(32,523)
+(24,127)
+12,789
+20,541
+(789)
+24,578
+23,184
+Cash and cash equivalents at beginning of year
+Effect of foreign exchange rate changes, net
+AND CASH EQUIVALENTS
+NET (DECREASE)/INCREASE IN CASH
+(20,419)
+Interest paid
+1,719
+Net cash flows used in investing activities
+Net cash flows used in financing activities
+(76,495)
+(90,177)
+(5,283)
+Repayment of bank loans
+Proceeds from issuance of guaranteed notes
+Repayment of guaranteed notes
+Proceeds from bank loans
+Dividends paid
+CASH FLOWS FROM FINANCING ACTIVITIES
+Oil and gas sales represent the invoiced value of sales of oil and gas attributable to the interests of the Group, net
+of royalties, obligations to governments and other mineral interest owners. Revenue from the sale of oil and gas is
+recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the
+customer. Revenue from the production of oil and gas in which the Group has a joint interest with other producers is
+recognised based on the Group's working interest and the terms of the relevant production sharing contracts. Differences
+between production sold and the Group's share of production are not significant.
+when the deferred tax assets relating to the deductible temporary differences arise from the initial recognition of an
+asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
+accounting profit nor taxable profit or loss; and
+•
+Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any
+unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit and taxable temporary
+differences will be available against which the deductible temporary differences, the carryforward of unused tax credits and
+unused tax losses can be utilised, except:
+in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the
+temporary differences will not reverse in the foreseeable future.
+when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
+combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
+•
+Deferred tax liabilities are recognised for all taxable temporary differences, except:
+Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
+or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
+substantially enacted, by the reporting date, in the countries where the Group operates and generates taxable income.
+Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the reporting date between the
+tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
+As at 31 December 2015, deferred tax liabilities related to undistributed earnings of certain of the Company's subsidiaries have
+not been recognised, since the timing of the reversal of the taxable temporary difference can be controlled by the Company and
+it is probable that the temporary difference would not reverse in the foreseeable future.
+in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
+will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be
+utilised.
+Notes to Consolidated Financial Statements
+85
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Income tax (continued)
+The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
+probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
+deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient
+taxable profit and taxable temporary differences will be available to allow all or part of the deferred tax asset to be utilised.
+Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
+realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
+reporting date.
+Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
+current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
+Revenue recognition
+Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be
+measured reliably, on the following bases:
+Income tax comprises current and deferred tax. Income tax is recognised in the consolidated statement of profit or loss and
+other comprehensive income, either as an expense as it relates to operating activities or as a component of the applicable
+categories of other comprehensive income or expense.
+(a)
+Oil and gas sales
+CNOOC LIMITED Annual Report 2015
+3.
+General
+Dismantlement liability is recognised when the Group has a present legal or constructive obligation as a result of the past
+events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of
+the amount of the obligation can be made. A corresponding amount equivalent to the provision is also recognised as part
+of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of dismantlement,
+discounted to its present value using a current pre-tax rate that reflects, where appropriate, the risks specific to the
+liability. Changes in the estimated timing of dismantlement or dismantlement cost estimates are dealt with prospectively
+by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The
+unwinding of the discount on the dismantlement provision is included as a finance cost.
+Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation
+process.
+Financial liabilities including trade and other payables and interest-bearing loans and borrowings are initially stated at fair
+value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest
+method. The related interest expense is recognised within "Finance costs" in profit or loss.
+Oil and gas lifted and sold by the Group above or below the Group's participating interests in the production sharing
+contracts results in overlifts and underlifts. The Group records these transactions in accordance with the entitlement
+method under which overlifts are recorded as liabilities and underlifts are recorded as assets at year-end oil prices.
+Settlement will be in kind or in cash when the liftings are equalised or in cash when production ceases.
+Financial guarantee contracts
+A financial guarantee contract is recognised initially at its fair value including transaction costs that are directly attributable
+to the issue of the guarantee. Subsequent to initial recognition, the liability is measured at the higher of the best estimate of
+the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative
+amortisation.
+Derecognition of financial liabilities
+A financial liability is derecognised when the obligation under the liability is discharged, cancelled, or expires.
+When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
+existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability
+and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.
+Offsetting of financial instruments
+Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position, if and
+only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
+basis, or to realise the assets and settle the liabilities simultaneously.
+Inventories and supplies
+Income tax
+Inventories primarily consist of oil and supplies, including items for repairs and maintenance of oil and gas properties. Inventories
+are stated at the lower of cost and net realisable value. Costs of inventories and supplies represent purchase or production cost
+of goods and are determined on a weighted average basis.
+Cash and cash equivalents comprise cash at banks and on hand and short term deposits with an original maturity of three
+months or less.
+Provisions
+(a)
+A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is
+probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be
+made of the amount of the obligation. When the effect of discounting is material, the amount recognised for a provision
+is the present value at the reporting date of the future expenditures expected to be required to settle the obligation. The
+increase in the discounted present value amount arising from the passage of time is included in "Finance costs" in profit
+or loss.
+CNOOC LIMITED Annual Report 2015
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Provisions (continued)
+(b)
+Dismantlement liability
+Cash and cash equivalents
+The Group has entered into gas sale contracts with customers, which contain take-or-pay clauses. Under these
+contracts, the Group makes a long term supply commitment in return for a commitment from the buyer to pay for
+minimum quantities, whether or not it takes delivery. These commitments contain protective (force majeure) and
+adjustment provisions. If a buyer has a right to get a "make up" delivery at a later date, revenue recognition is deferred. If
+no such option exists according to the contract terms, revenue is recognised when the take-or-pay penalty is triggered.
+Foreign currencies
+Marketing revenues
+87
+Notes to Consolidated Financial Statements
+31 December 2015
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Foreign currencies (continued)
+The functional currencies of certain entities within the Group are currencies other than RMB. As at the end of the reporting
+period, the assets and liabilities of these entities are translated into the presentation currency of the Group at the exchange rates
+ruling at the reporting date, and their statement of profit or loss and other comprehensive income are translated into RMB at
+the weighted average exchange rates for the year. The resulting exchange differences are included in the cumulative translation
+reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular
+foreign operation is recognised in profit or loss.
+Operating leases
+Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as
+operating leases. Where the Group is the lessee, rentals payable under operating leases are charged to profit or loss on the
+straight-line basis over the lease terms.
+Prepaid land lease payments under operating leases in China are initially stated at cost and subsequently amortised on the
+straight-line basis over the lease terms.
+Contingencies
+A contingent liability is disclosed when the existence of an obligation will only be confirmed by future events or when the amount
+of the obligation cannot be measured reliably.
+CNOOC LIMITED Annual Report 2015
+A contingent asset is not recognised in the financial statements, but is disclosed when an inflow of economic benefits is
+probable.
+The preparation of the consolidated financial statements in accordance with IFRSS and HKFRSS requires management to make
+estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial
+statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are
+continuously evaluated and are based on management's experience and other factors, including expectations of future events
+that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
+In the process of applying the Group's accounting policies, the Directors have made the following judgements, estimates and
+assumptions, which have the most significant effect on the amounts recognised in the consolidated financial statements.
+(a)
+Reserve base
+Oil and gas properties are depreciated on a unit-of-production basis at a rate calculated by reference to proved reserves.
+Commercial reserves are determined using estimates of oil in place, recovery factors and future oil prices, the latter having
+an impact on the proportion of the gross reserves which are attributable to the host government under the terms of the
+production sharing contracts. The level of estimated commercial reserves is also a key determinant in assessing whether
+the carrying value of any of the Group's oil and gas properties has been impaired.
+Pursuant to the oil and gas reserve estimation requirements under US Securities and Exchange Commission's rules, the
+Group uses the average, first-day-of-the-month oil price during the 12-month period before the ending date of the period
+covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+(b) Carrying value of oil and gas properties
+The calculation of the unit-of-production rate for oil and gas properties amortisation could be impacted to the extent
+that actual production in the future is different from current forecast production based on proved reserves. This would
+generally result from significant changes in any of the factors or assumptions used in estimating reserves. These factors
+could include changes in proved reserves, the effect on proved reserves of differences between actual commodity prices
+and commodity price assumptions and unforeseen operational issues.
+88
+CNOOC LIMITED Annual Report 2015
+Financial liabilities at amortised cost (including interest-bearing loans and borrowings)
+Significant accounting judgements, estimates and assumptions
+(b)
+These consolidated financial statements are presented in Renminbi ("RMB"). Each entity in the Group maintains its books and
+records in its own functional currency. Foreign currency transactions recorded by the entities of the Group are initially recorded
+using their respective exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in
+foreign currencies are retranslated at the exchange rates ruling at the end of the reporting period. All differences arising on
+settlement or translation of monetary items are taken to profit or loss. Non-monetary items that are measured in terms of
+historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary
+items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was
+determined. The gain or loss arising on retranslation of a non-monetary item is treated consistently with the recognition of the
+gain or loss on change in fair value of the item.
+Borrowing costs
+Marketing revenues principally represent the sales of oil and gas purchased from the foreign partners under the
+production sharing contracts and revenues from the trading of oil and gas through the Company's subsidiaries. The
+cost of the oil and gas sold is included in "Crude oil and product purchases" in the consolidated statement of profit or
+loss and other comprehensive income. In addition, the Group's marketing activities in North America involves entering
+into contracts to purchase and sell crude oil, natural gas and other energy commodities, and use derivative contracts,
+including futures, forwards, swaps and options for hedging and trading purposes (collectively derivative contracts). Any
+change in the fair value is also included in marketing revenue.
+(c)
+Other income
+Other income mainly represents project management fees charged to foreign partners, handling fees charged to
+customers and gains from disposal of oil and gas properties and is recognised when the services have been rendered
+or the properties have been disposed of. Reimbursement of insurance claims is recognised when the compensation
+becomes receivable.
+86
+CNOOC LIMITED Annual Report 2015
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Revenue recognition (continued)
+(d) Dividend income
+Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing
+costs directly relating to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial
+period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other
+borrowing costs are expensed in the period in which they are incurred.
+Dividend income is recognised when the Group's right to receive payment is established.
+Interest income is recognised as it accrues using the effective interest method.
+The Group presents taxes collected from customers in the consolidated statement of profit or loss and other comprehensive
+income on a net basis.
+Share-based payment transactions
+Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby
+employees render services as consideration for equity instruments ("equity-settled transactions").
+The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are
+granted. The fair value is determined by using the Black-Scholes option pricing model, further details of which are given in note
+28.
+The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
+the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at
+the end of the each reporting period until the vesting date reflects the extent to which the vesting period has expired and the
+Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to profit or loss for a
+period represents the movement in the cumulative expense recognised as at the beginning and end of that period.
+No expense is recognised for awards that do not ultimately vest for the Group.
+No equity-settled award was cancelled or modified during the years ended 31 December 2015 and 2014.
+The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.
+Retirement and termination benefits
+The Group participates in defined contribution plans in accordance with local laws and regulations for full-time employees in
+the PRC and other countries in which it operates. The Group's contributions to these defined contribution plans are charged to
+profit or loss in the year to which they relate.
+(e) Interest income
+When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
+evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor
+retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise
+the transferred asset to the extent of the Group's continuing involvement. In that case, the Group also recognises an associated
+liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the
+Group has retained.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(b)
+Loans and receivables
+(c)
+(d)
+Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
+an active market. After initial measurement, such assets are subsequently carried at amortised cost using the effective
+interest method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or
+premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. Gains and losses
+are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the
+amortisation process.
+Held-to-maturity investments
+Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity
+when the Group has the positive intention and ability to hold them to maturity. Held-to-maturity investments are
+subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment.
+Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
+an integral part of the effective interest rate. Gains and losses are recognised in profit or loss when the investments are
+derecognised or impaired, as well as through the amortisation process.
+Available-for-sale financial assets
+Available-for-sale financial assets are non-derivative financial assets in listed and unlisted equity investments and debt
+securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor
+designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held
+for a long period of time and which may be sold in response to needs for liquidity or in response to changes in market
+conditions.
+After initial recognition, available-for-sale financial assets are measured at fair value, with unrealised gains or losses
+recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is
+derecognised, at which time the cumulative gain or loss is recognised in profit or loss, or until the investment is determined
+to be impaired, at which time the cumulative loss is reclassified from the available-for-sale investment revaluation reserve
+to profit or loss. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as
+interest income and dividend income, respectively and are recognised in profit or loss in accordance with the policies set
+out for "Revenue recognition" below.
+When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of
+reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the
+range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any
+impairment losses.
+Financial assets at fair value through profit or loss are financial assets designated upon initial recognition at fair value
+through profit or loss and financial assets classified as held-for-trading. Financial assets at fair value through profit and
+loss are carried in the statement of financial position at fair value with net changes in fair value recognised in profit or loss
+in the period. These net fair value changes do not include any dividends or interest earned on these financial assets, which
+are recognised in accordance with the policies set out for "Revenue recognition" below.
+CNOOC LIMITED Annual Report 2015
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Financial assets (continued)
+Classification and subsequent measurement on and after 1 January 2015
+All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on
+the classification of the financial assets.
+(a)
+Financial assets at amortised cost
+Debt instruments and hybrid contracts that meet the following conditions are subsequently measured at amortised cost
+less impairment loss:
+(b)
+•
+the asset is held within a business model whose objective is to hold assets in order to collect contractual cash
+flows; and
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+.
+(a) Financial assets at fair value through profit or loss
+Financial assets (continued)
+Derecognition of financial assets (continued)
+3.
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+The intangible assets of the Group comprise software, gas processing rights of the NWS Project, marketing transportation
+and storage contracts, drilling rig contracts and seismic data usage rights. Intangible assets with finite lives are carried at
+cost, less accumulated amortisation and accumulated impairment losses. The cost of intangible assets acquired in a business
+combination is the fair value as at the date of acquisition. Intangible assets with finite lives except for gas processing rights, are
+amortised on the straight-line basis over the useful economic life and assessed for impairment whenever there is an indication
+that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a
+finite useful life are reviewed at least at each financial year end.
+The intangible assets regarding software have been amortised on the straight-line basis over their respective useful lives. The
+intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts and drilling rig contracts are amortised over the life of the contracts on the
+straight-line basis. The intangible assets related to the seismic data usage rights are amortised over the estimated useful life of
+the seismic data.
+Major maintenance and repairs
+Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul
+costs. Where an asset or part of an asset that was separately depreciated and is replaced, and it is probable that future
+economic benefits associated with the item will flow to the Group, the replacement expenditure is capitalised. Where part of the
+asset was not separately considered as a component, the replacement value is used to estimate the carrying amount of the
+replaced assets which is immediately written off. All other maintenance costs are expensed as incurred.
+Research and development costs
+All research costs are expensed as incurred.
+Expenditure (other than that relating to oil and gas properties discussed above) incurred on projects to develop new products
+is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so
+that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
+future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure
+during the development. Product development expenditure which does not meet these criteria is expensed when incurred.
+Classification and subsequent measurement prior to 1 January 2015 (continued)
+The subsequent measurement of financial assets depends on their classifications as follows:
+Financial assets
+Financial assets within the scope of IAS 39/HKAS 39 are classified as financial assets at fair value through profit or loss, loans
+and receivables, held-to-maturity investments, and available-for-sale financial assets, as appropriate. The Group determines the
+classification of its financial assets at initial recognition. When financial assets are recognised initially, they are measured at fair
+value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss.
+Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention
+in the marketplace (regular way purchases or sales) are recognised on the trade date, that is, the date that the Group commits
+to purchase or sell the asset.
+The Group's financial assets include cash and bank balances, trade and other receivables, equity and debt investments, and
+derivative financial instruments.
+CNOOC LIMITED Annual Report 2015
+79
+80
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Classification and subsequent measurement prior to 1 January 2015
+the contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal
+and interest on the principal amount outstanding.
+Intangible assets (other than goodwill)
+The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
+income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
+(including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and
+other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to
+the net carrying amount on initial recognition. Interest income for debt instruments measured subsequently at amortised
+cost is recognised in profit or loss in accordance with the policies set out for "Revenue Recognition" below.
+The Group assesses at each reporting date whether there is any objective evidence that a financial asset, other than those at
+FVTPL and FVTOCI, or a group of financial assets may be impaired.
+(a)
+(b)
+(c)
+Assets carried at amortised cost
+If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried
+at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying
+amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred)
+discounted at the financial asset's original effective interest rate (the effective interest rate computed at initial recognition).
+The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of
+the impairment loss is recognised in profit or loss.
+If, in a subsequent year, the amount of the estimated impairment loss increases or decreases and the decrease can be
+related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss
+is increased or reduced either directly or by adjusting the allowance account. Any subsequent reversal of an impairment
+loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed amortised cost at the
+reversal date.
+In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as
+the probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological,
+market, economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect
+all of the amounts due under the original terms of an invoice.
+Assets carried at cost
+Prior to 1 January 2015, if there is objective evidence that an impairment loss has incurred on an unquoted equity
+instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is
+measured as the difference between the asset's carrying amount and the present value of estimated future cash flows
+discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not
+reversed.
+Available-for-sale financial assets
+Impairment of financial assets
+Prior to 1 January 2015, if an available-for-sale asset is impaired, an amount comprising the difference between its cost
+(net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised
+in profit or loss, is removed from other comprehensive income and recognised in profit or loss.
+Derecognition of financial assets
+A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised
+when:
+(i) The contractual rights to receive cash flows from the asset have expired; or
+(ii)
+the Group has transferred its rights to receive cash flows from the asset, or the Group retains the contractual rights to
+receive the cash flows from the asset, but has assumed an obligation to pay the received cash flows in full without material
+delay to a third party under a “pass-through" arrangement; and either (a) has transferred substantially all the risks and
+rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has
+no control of the asset.
+CNOOC LIMITED Annual Report 2015
+83
+84
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+All other financial assets are subsequently measured at fair value.
+Prior to 1 January 2015, equity investments are impaired if there is a significant or prolonged decline in fair value of the
+investment below its cost or where other objective evidence of impairment exists. Impairment of debt instruments is
+assessed based on the same criteria as assets carried at amortised cost. Impairment losses on equity instruments are not
+reversed through profit or loss; increases in their fair value after impairments are recognised directly in equity. Impairment
+losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instruments can be
+objectively related to an event occurring after the impairment loss was recognised in profit or loss.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Notes to Consolidated Financial Statements
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Financial assets at FVTPL
+3.
+Investments in equity instruments are classified as at FVTPL, unless the Group designates such investment that is not
+held for trading as at FVTOCI on initial recognition.
+A financial asset is held for trading if it has been acquired principally for the purpose of selling it in the near term or it is a
+derivative that is not designated and effective as a hedging instrument.
+Debt instruments that do not meet the amortised cost criteria (see (a) above) are measured at FVTPL. In addition, debt
+instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt
+instrument may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces
+a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the
+gains and losses on them on different bases. The Group has not designated any debt instrument as at FVTPL on initial
+application of IFRS/HKFRS 9 (2009) and during the year.
+Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising
+on remeasurement recognised in profit or loss.
+CNOOC LIMITED Annual Report 2015 81
+Notes to Consolidated Financial Statements
+31 December 2015
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Financial assets (continued)
+3.
+82 CNOOC LIMITED Annual Report 2015
+Classification and subsequent measurement on and after 1 January 2015 (continued)
+For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.
+Such techniques may include using recent arm's length market transactions; reference to the current fair value of another
+instrument that is substantially the same; a discounted cash flow analysis or other valuation models.
+An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 34.
+Fair value
+Dividends on these investments in equity instruments are recognised in profit or loss when the Group's right to receive
+the dividends is established in accordance with HKAS/IAS 18 Revenue, unless the dividends clearly represent a recovery
+of part of the cost of the investment.
+The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to
+quoted market prices or dealer price quotations, without any deduction for transaction costs.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they
+are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive
+income and accumulated in the other reserves. The cumulative gain or loss will not be reclassified to profit or loss on
+disposal of the investments.
+On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate
+investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held
+for trading.
+Financial assets at FVTOCI
+(c)
+The Group has designated certain investments in equity instruments (publicly traded or non-publicly traded) that are not
+held for trading as at FVTOCI on initial application of IFRS/HKFRS 9 (2009).
+889,845
+Subtotal
+929
+926
+1,110
+1,058
+960
+South America
+95,750
+98,672
+136.8
+87,918
+83,460
+Europe
+932,137
+40,304
+46,712
+48,183
+39,872
+Canada
+46,785
+48,078
+103,258
+57,711
+China
+1,060,509
+151.4
+54,692
+Eastern South China Sea
+273.5
+273.9
+314.3
+341.7
+330.5
+Western South China Sea
+149.3
+1,099,459
+134.3
+137.9
+Bohai
+721.4
+648.7
+731.9
+643.3
+634.5
+natural gas (mmcf/day)
+Net production of
+1,042,842
+136.9
+127.4
+Overseas
+44,245
+1,206
+872
+East China Sea
+173,192
+182,848
+190,525
+141,166
+141,545
+Eastern South China Sea
+96,543
+98,351
+89,958
+80,493
+75,606
+Western South China Sea
+433,591
+455,002
+477,904
+403,927
+392,413
+Bohai
+234.9
+706,955
+2,632
+49,814
+3,177
+279,409
+North America (excluding Canada)**
+73,625
+80,297
+83,677
+76,838
+77,343
+Africa
+3,691
+4,278
+3,350
+4,297
+4,533
+Oceania
+57,395
+48,577
+45,640
+37,237
+28,997
+Asia (excluding China)
+335,887
+321,131
+338,440
+305,345
+3,629
+185.9
+717,784
+East China Sea
+5,072
+East China Sea
+212,895
+213,835
+229,679
+163,970
+166,778
+Eastern South China Sea
+142,870
+144,835
+5,678
+143,676
+132,284
+Western South China Sea
+458,473
+477,380
+500,719
+426,913
+413,650
+Bohai
+827,941
+848,322
+138,972
+10,271
+12,273
+13,016
+76,838
+77,343
+Africa
+22,598
+26,107
+21,673
+26,092
+23,909
+Oceania
+82,958
+75,780
+70,987
+65,280
+54,529
+Asia (excluding China)
+412,832
+405,320
+423,319
+401,804
+365,010
+Overseas
+688
+Others
+884,346
+735,533
+739,378
+China
+93.5
+111.2
+98.2
+Oceania
+141.4
+150.2
+140.0
+154.4
+140.3
+Asia (excluding China)
+432.8
+472.5
+482.1
+546.6
+482.7
+Overseas
+4.1
+Others
+56.3
+54.6
+45.8
+26.8
+25.2
+111.4
+238.2
+96.5
+109.5
+Total net production (BOE/day)
+1,154.2
+1,121.2
+1,214.0
+1,189.9
+1,117.1
+Subtotal
+25.8
+34.8
+45.5
+50.7
+28.7
+Europe
+38.7
+48.9
+68.4
+117.5
+106.0
+Canada
+130.3
+127.3
+134.6
+112.7
+North America (excluding Canada)**
+761,019
+The Group is the largest producer of offshore crude oil and natural gas in China and one of the
+largest independent oil and gas exploration and production companies in the world. The Group
+mainly engages in exploration, development, production and sale of crude oil and natural gas.
+610,435
+146,490
+Total expenses
+(207,354)
+(193,719)
+(153,981)
+(148,902)
+186,390
+(149,340)
+(Finance costs)/interest income, net
+(2,365)
+(3,701)
+171,437
+(5,245)
+(4,391)
+Share of profits/(losses) of
+associates and a joint venture
+895
+1,006
+1,903
+(76)
+855
+Investment income
+2,611
+(5,345)
+274,634
+285,857
+Total revenues
+141
+18
+Risk Factors
+147
+Glossary
+2222
+Health, Safety and Environmental Protection
+148
+Company Information
+23
+Corporate Citizen
+23
+Human Resources
+25
+Corporate Governance Report
+Financial Summary
+(All amounts expressed in millions of RMB)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income (Audited)
+Year ended 31 December
+2013
+2014
+2015
+2016
+2017
+2,684
+System
+2,398
+2,409
+140,708
+140,211
+122,045
+Property, plant and equipment
+419,102
+463,222
+454,141
+432,465
+138,838
+395,868
+Investments in associates and
+146,552
+a joint venture
+25,250
+28,413
+29,995
+29,146
+Intangible assets
+17,000
+16,491
+16,423
+83,677
+16,644
+24,397
+Current assets
+2017
+2016
+Profit/(loss) before tax
+80,851
+82,513
+17,130
+(5,275)
+36,357
+Income tax (expense)/credit
+(24,390)
+(22,314)
+3,116
+5,912
+(11,680)
+Profit for the year
+56,461
+60,199
+20,246
+637
+24,677
+Consolidated Statement of Financial Position (Audited)
+As at 31 December
+2013
+2014
+2015
+2,774
+Risk Management and Internal Control
+128
+NGAWN
+(188,220)
+(193,941)
+(179,751)
+(150,905)
+Non-current liabilities
+(61,412)
+(67,090)
+(84,380)
+(103,498)
+(128,948)
+(175,832)
+Current liabilities
+637,681
+664,362
+662,859
+621,473
+.....
+....
+(N
+JODE CNOOC LIMITED
+中國海洋石油有限公司
+NYSE: CEO, SEHK: 00883, TSX: CNU
+617,219
+Total liabilities
+(279,853)
+(283,249)
+China
+and liquids (barrels/day)
+Net production of crude
+2017
+2016
+2015
+2014
+2013
+Year ended 31 December
+Operating Summary
+Production
+...
+CNOOC LIMITED Annual Report 2017
+2
+379,975
+382,371
+386,041
+379,610
+341,620
+Equity
+(237,244)
+(255,310)
+(278,321)
+2017
+Annual Report
+CNOOC Limited (the "Company", together with its subsidiaries, the "Group" or "we"), incorporated
+in the Hong Kong Special Administration Region ("Hong Kong") in August 1999, was listed on the
+New York Stock Exchange (code: CEO) and The Stock Exchange of Hong Kong Limited (code:
+00883) on 27 and 28 February 2001, respectively. The Company was admitted as a constituent
+stock of the Hang Seng Index in July 2001. The Company's American Depositary Receipts ("ADRS")
+was listed on the Toronto Stock Exchange (code: CNU) on 18 September 2013.
+The Group's core operation areas are Bohai, Western South China Sea, Eastern South China Sea
+and East China Sea in offshore China. Overseas, the Group has oil and gas assets in Asia, Africa,
+North America, South America, Oceania and Europe.
+Engineering Construction, Development and
+44
+52
+61
+66
+71
+Directors and Senior Management
+Report of the Directors
+Management's Discussion and Analysis
+Independent Auditors' Report
+Consolidated Statement of Profit or Loss and
+Other Comprehensive Income
+Consolidated Statement of Financial Position
+Consolidated Statement of Changes in Equity
+Consolidated Statement of Cash Flows
+Notes to Consolidated Financial Statements
+Supplementary Information on Oil and Gas
+Producing Activities (Unaudited)
+Notice of Annual General Meeting
+Production
+73
+2677
+Regional Overview
+74
+Sales and Marketing
+75
+Research and Development
+Exploration
+626,791
+10
+Business Overview
+As at 31 December 2017, the Group owned net proved reserves of approximately 4.84 billion BOE,
+and its average daily net production was 1,288,128 BOE (unless otherwise stated, all amounts of
+reserve and production in this report include our interests in equity method investees). The Group
+had total assets of approximately RMB617.2 billion.
+Company Profile
+.
+.
+.
+•
+.
+•
+.
+.
+•
+•
+•
+•
+•
+Content
+9
+2368 F
+11
+Financial Summary
+Operating Summary
+Chairman's Statement
+Overview
+80,297
+Total assets
+North America (excluding Canada)**
+152.5
+170.6
+Europe
+908.3
+300.5
+835.2
+820.2
+802.8
+Canada
+352.3
+103.8
+318.6
+275.9
+233.2
+North America (excluding Canada)
+136.9
+138.0
+166.6
+142.5
+155.4
+Africa
+69.0
+284.8
+81.8
+89.2
+South America
+576.9
+537.3
+519.9
+Natural gas (bcf)
+244.8
+195.3
+200.1
+200.4
+199.3
+Crude and liquids (million barrels)
+method investees
+Net proved reserves in equity
+4,474.1
+3,583.4
+4,016.0
+4,185.0
+4,138.7
+Total
+79.7
+1.5
+1.6
+1.8
+1.7
+77.4
+574.0
+90.8
+92.0
+672.6
+598.7
+649.6
+Western South China Sea
+1,101.4
+950.2
+971.8
+1,191.8
+1,179.7
+Bohai
+818.8
+2,613.3
+2,324.3
+2,486.8
+2,442.3
+China
+(million BOE)
+Total net proved reserves
+7,543.3
+7,486.1
+6,992.9
+6,730.8
+2,420.7
+844.1
+Eastern South China Sea
+542.7
+Oceania
+225.4
+245.0
+208.9
+199.4
+240.6
+Asia (excluding China)
+1,860.8
+1,162.7
+1,691.7
+1,698.3
+1,696.4
+Overseas
+134.2
+146.2
+164.2
+172.7
+70.4
+East China Sea
+533.7
+505.5
+515.6
+523.5
+106.0
+706.8
+Subtotal (million BOE)
+288.9
+6
+With a prudent development strategy, excellent performance
+and outstanding level of corporate governance, the Company
+continues to be recognized by the capital market. Recently,
+CNOOC Limited has been included as a constituent stock
+of the Hang Seng China Enterprises Index by the Hang
+Seng Indexes Company Limited. In the end of 2017, the
+Company's market capitalization reached over HK$500
+billion.
+During the year, the Company exceeded its oil and gas
+production target, five new projects came on stream
+as planned, and over 20 projects have been under
+construction. We also made significant gains in oil and gas
+reserves, reaching new heights in 2017. The Company's oil
+and gas sales revenue amounted to RMB151.9 billion and
+net profit reached RMB24.7 billion, representing a significant
+year-on-year increase. The Company has adhered to the
+goal of enhancing quality and efficiency of the business and
+achieved costs reduction for the fourth consecutive year.
+As an upstream company focused on oil and gas
+exploration, development and production, our profitability
+was adversely affected by the persistently low oil prices in
+the past several years. However, leveraging on our high level
+of corporate governance and continuous enhancement of
+quality and efficiency, we achieved excellent results in 2017.
+Yang Hua Chairman
+Looking back at CNOOC Limited's history, each of our
+milestones was achieved through the dedication and hard
+work of our employees. These milestones are a reflection of
+our culture and commitment to the "Spirit of Daqing Model”,
+a spirit that quietly leads all our employees to stride forward
+and encourage us to reach new heights.
+As the leader of CNOOC Limited, I recognize the
+expectation and trust that shareholders and employees
+have placed on me on the great mission to lead the
+Company to future success.
+Striding forward
+I would like to take this once a year opportunity to draw your
+attention to some key highlights that the Company achieved
+in 2017 and provide an outline of our future plans.
+Under this improved external environment, our employees
+were both passionate and committed to step onto a
+new journey. I believe that our striving and hard-working
+employees are the best illustration of the Company's spirit of
+persistent determination to succeed.
+CNOOC LIMITED Annual Report 2017
+It has been an extraordinary year 2017 for CNOOC Limited.
+This year the oil market gradually stabilized and international
+oil prices started to rebound after being volatile for a long
+time. The oil and gas industry began to show signs of
+recovery.
+Chairman's Statement
+5
+CNOOC LIMITED Annual Report 2017
+tot
+MRC1938
+Approximately 52%, 52%, 62%, 60% and 65%, respectively, of our net proved reserve estimates in 2013, 2014, 2015, 2016 and 2017 were
+made by the Company's internal evaluation staff and the remaining were made by the independent consultants. Our reserve data was prepared
+in accordance with the SEC's final rules on "Modernization of Oil and Gas Reporting", which became effective as of 1 January 2010.
+Includes 736.4 million barrels of synthetic oil and 33.8 million barrels of bitumen in 2013; 749.9 million barrels of synthetic oil and 31.4 million barrels
+of bitumen in 2014; 815.3 million barrels of synthetic oil in 2015; 300.5 million barrels of synthetic oil in 2016; 785.9 million barrels of synthetic oil
+and 118.4 million barrels of bitumen in 2017.
+Natural gas (US$/mcf)
+5.84
+52.65
+5.46
+Dear Shareholders,
+Chairman's Statement
+Delivering strong shareholder returns is a key priority
+for CNOOC Limited. We strive to continuously reward
+our shareholders by sharing our development results
+while taking into account the importance of long-term
+development. With the Company's sound financial position,
+the Board of Directors was pleased to recommend a final
+dividend of HK$0.30 (tax inclusive) per share for the year.
+No journey can be a completely smooth sail. No one's
+dream can come true in an easy way. On our journey to new
+heights, I call upon all our employees to carry forward the
+"Spirit of Daqing Model" and bring out its potential to drive
+the Company's continued growth.
+15,070
+CNOOC LIMITED Annual Report 2017
+8
+BUSINESS
+OVERVIEW
+7
+CNOOC LIMITED Annual Report 2017
+Hong Kong, 29 March 2018
+Yang Hua
+Chairman
+Friends, 2018 marks the 40th anniversary of China's
+reform and opening up. Looking to the past as we ponder
+the future, we see a promising picture, which is set to be
+another extraordinary journey. In pursuit of continued value
+creation, CNOOC Limited will certainly live up to market
+expectations!
+From April 2017, I have been re-designated from Executive
+Director and Chief Executive Officer of the Company to
+Non-executive Director. The Chief Executive Officer position
+was succeeded by Mr. Yuan Guangyu, and Mr. Xu Keqiang
+was appointed as the Executive Director and President
+of the Company. I would like to take this opportunity to
+congratulate Mr. Yuan and to welcome Mr. Xu.
+Fifth, we will continue to develop our talents. In order
+to succeed in the future, the Company must rely on
+management and technology talents with global vision
+and strategic thinking, international talents with top-tier
+management capabilities, and technical personnel
+with strong professionalism and innovative thinking.
+Our employees are our most valuable asset, and
+we will continue to optimize our talent structure and
+create healthy working environment that will allow
+them to thrive.
+Fourth, we will continue to develop our business in line
+with market-driven strategy. We will actively adapt to
+the increasing industry competition, further enhance
+our understanding on market needs, so that the
+Company's development model fits in the needs of
+the market and customers.
+Third, we will adhere to the green and low carbon strategy.
+We will proactively adapt to the new requirements of the
+"Beautiful China" initiative and the trend of low-carbon
+development in the global energy industry, and strive to
+build world-class low-carbon management capabilities
+and low-carbon competitiveness, and actively develop
+natural gas business.
+Second, we will progress our international
+development strategy. We will focus on enhancing
+the integration of our global resources, increasing
+the profitability of overseas assets and improving
+overseas business management systems. CNOOC
+Limited has set a firm goal to forge ahead with
+internationalization as the Company's development
+starts with its cooperation with foreign companies.
+First, we will continue to promote innovation-driven
+development. As we enter a new era, we will strive
+to achieve quality growth through innovation and
+efficiency enhancement. We will focus on making
+breakthroughs in the key technologies for oil and
+gas exploration. We will put more efforts in achieving
+innovation in management and business model,
+promoting quality and efficiency, and continuing to
+deepen internal reforms and inspiring vitality and
+growth potential.
+CNOOC Limited has made great strides since its
+establishment. In the years to come we will continue to grow
+and responsibly supply energy to the world, while meeting
+shareholders expectations, making our employees proud
+of our achievements and gaining respect from our peers.
+To achieve this, we aspire to aim high, have our feet firmly
+on the ground, and diligently execute our yearly plan and
+implement the following key strategies:
+A Pragmatic Pioneer
+Going forward, CNOOC Limited strives to be the driving
+force for sustainable energy supply and will work relentlessly
+to create a broader future for our industry.
+Overseas exploration also recorded significant success. The
+Company has further optimized its portfolio in strategic core
+areas overseas, with notable projects spanning from Nigeria
+to the UK North Sea and from the Gulf of Mexico to Brazil.
+Most worth noting is the continuous exploration success
+in the Stabroek block offshore Guyana, which has become
+one of the Company's most successful overseas exploration
+projects.
+In 2017, exploration results in offshore China were
+remarkable. The Company made 17 new discoveries and
+completed several successful appraisals of mid-to-large
+size oilfields, laying a solid reserve foundation for future
+development. The Company also stepped up its efforts in
+natural gas exploration. During the year, breakthroughs
+were achieved in high temperature and ultra-high pressure
+natural gas exploration in South China Sea, as well as
+deep-formation natural gas exploration in Bohai. These
+advancements will help control air pollution in China and
+contribute to the low-carbon development trend of the
+global energy industry.
+When CNOOC Limited went public in 2001, the Company's
+production volume was only 260,000 BOE per day, with
+a reserve base of 1.79 billion barrels. At the end of 2017,
+production reached 1.29 million BOE per day, with total
+reserve of 4.84 billion barrels, and with diversified oil and
+gas assets located worldwide. These fully demonstrate
+the considerable efforts that CNOOC Limited has made in
+meeting global energy demand.
+The energy industry was still confronted by many
+uncertainties in 2017. Use of alternative energy, low carbon
+solutions and global climate control bring enormous
+challenges to the oil industry. The Company has always
+been committed to contributing to the development of
+sustainable energy solution, in particular, providing safe and
+reliable clean energy.
+A Stable Oil and Gas Supplier
+41.40
+6.39
+51.27
+96.04
+6.44
+10.1
+10.5
+Reserve life (years)
+Others
+2017
+2016
+2015
+2014
+2013
+Year ended 31 December
+Operating Summary
+CNOOC LIMITED Annual Report 2017
+4
+4,840.8
+3,877.6
+4,315.5
+4,478.0
+4,427.6
+Total*
+366.7
+294.2
+299.5
+293.0
+8.4
+6,323.3
+7.8
+Reserve life (years) (including
+104.60
+5.78
+Crude oil (US$/barrel)
+Average realized price
+305
+8
+67
+112
+327
+including equity method investees)
+Reserve replacement ratio (%,
+297
+6
+CO
+65
+111
+337
+Reserve replacement ratio (%)
+10.3
+8.1
+8.7
+10.4
+10.8
+equity method investees)
+9.9
+Subtotal
+4.8
+6.9
+210.0
+228.3
+Western South China Sea
+1,050.4
+903.8
+908.3
+1,111.7
+1,087.6
+Bohai
+1,627.3
+149.3
+1,445.7
+1,691.6
+1,692.6
+China
+reserves (million barrels)
+Net proved crude and liquids
+Reserves at year end*
+2017
+2016
+2015
+2014
+1,430.6
+168.3
+196.5
+Eastern South China Sea
+69.9
+77.3
+59.8
+47.4
+83.6
+Asia (excluding China)
+1,571.9**
+870.2**
+1,399.6**
+1,348.2**
+1,367.8**
+Overseas
+8.5
+10.6
+16.1
+18.0
+19.8
+East China Sea
+371.9
+363.1
+357.0
+351.9
+357.0
+2013
+Year ended 31 December
+Operating Summary
+3
+929
+926
+1,110
+1,058
+960
+South America
+100,046
+104,473
+110,842
+96,370
+88,241
+Europe
+64,167
+48,448
+58,115
+67,770
+57,534
+Canada
+68,507
+69,290
+76,915
+68,396
+62,496
+Total
+Oceania
+1,082,795
+1,307,664
+CNOOC LIMITED Annual Report 2017
+47,355
+1,288,128
+1,302,922
+49,280
+50,357
+1,358,022
+1,184,977
+1,127,967
+Total (BOE/day)
+47,640
+45,173
+Subtotal (BOE/day)
+22,144
+146.4
+22,592
+155.0
+24,588
+149.6
+23,510
+140.2
+130.2
+Natural gas (mmcf/day)
+22,758
+Crude and liquids (barrels/day)
+method investees
+Net production in equity
+1,240,773
+1,253,643
+1,137,337
+73,625
+15.9
+14.5
+1,632.6
+1,642.4
+1,638.3
+1,974.0
+1,847.7
+Overseas
+754.4
+813.3
+889.0
+928.3
+Asia (excluding China)
+303.1
+970.5
+854.9
+951.6
+1,029.6
+1,114.2
+Eastern South China Sea
+3,880.1
+3,896.8
+3,132.6
+2,318.1
+East China Sea
+889.4
+861.2
+845.8
+8.8
+20.2
+27.8
+Europe
+24.2
+119.3
+233.0
+195.0
+Canada
+421.5
+349.6
+275.2
+403.9
+349.6
+North America (excluding Canada)
+297.2
+333.5
+389.2
+455.7
+386.0
+Oceania
+885.0
+952.4
+2,505.4
+Western South China Sea
+305.7
+278.7
+149.1
+166.0
+Europe
+904.3
+300.5
+815.3
+781.4
+770.3
+Canada
+282.1
+260.3
+239.5
+209.3
+175.0
+North America (excluding Canada)
+136.9
+138.0
+166.6
+142.5
+155.4
+Africa
+10.7
+12.0
+102.3
+16.6
+80.6
+South America
+381.4
+480.8
+552.9
+Bohai
+5,910.7
+5,843.7
+5,354.6
+4,756.8
+4,475.6
+China
+gas reserves (bcf)
+Net proved natural
+3,199.3
+2,315.9
+2,830.2
+3,039.8
+3,060.4
+Subtotal
+79.7
+1.5
+1.6
+1.8
+1.7
+88.4
+162,027 174,853 95,552
+3,680 3,451
+8,502
+10
+98
+Information about major customers
+(c)
+7,422
+9,248
+98
+141
+731
+605
+6,593
+29,995
+432,465
+395,868
+29,146
+26,544
+154,439
+138,289
+25,466
+103,173
+Other non-current assets
+The current year's revenue of approximately RMB15,488 million (2016: RMB9,659 million) was derived from sales by the
+E&P segment and the trading business segment to China Petroleum & Chemical Corporation. Sales to CNOOC Group
+are included in Note 29 (iii).
+Investments in associates and a joint venture
+CNOOC LIMITED Annual Report 2017
+Notes to Consolidated Financial Statements
+(110)
+Insurance compensation on disposal of property, plant and equipment
+(2,774)
+(2,409)
+- Fair value changes on other financial assets
+Investment income:
+(901)
+(653)
+2016
+2017
+Interest income from bank deposits
+Crediting:
+The Group's profit/(loss) before tax is arrived at after charging/(crediting):
+PROFIT/(LOSS) BEFORE TAX
+6.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+91
+Property, plant and equipment
+2016
+2017
+421
+52,790 49,122
+Capital expenditure
+(947) (124,794) (138,352) 191,092 215,328 (237,244) (255,310)
+(2,375)
+(301,167) (331,339)
+Segment liabilities
+617,219 637,681
+368,820 372,068 (213,624) (234,435)
+1,898
+3,588
+458,435 498,150
+Segment assets
+588,073 607,686
+29,995
+29,146
+29,258
+342,810 (213,624) (234,435)
+395
+53,211
+49,517
+Certain oil and gas produced by the E&P segment are sold via the trading business segment. For the Group's chief operating decision
+maker's assessment of segment performance, these revenues are reclassified back to E&P segment.
+2016
+2017
+2016
+Consolidated
+Others
+Canada
+2017
+2016
+2017
+(520)
+PRC
+In presenting the Group's geographical information, revenues from external customers are based on the location of the
+Group's customers, and non-current assets are attributed to the segments based on the location of the Group's assets.
+65% (2016: 70%) of the Group's revenues are generated from PRC customers, and revenues generated from customers
+in other locations are individually less than 10%.
+The Group mainly engages in the exploration, development, production and sale of crude oil, natural gas and other
+petroleum products in offshore China. Activities outside the PRC are mainly conducted in Canada, the United States of
+America, the United Kingdom, Nigeria, Argentina, Indonesia, Uganda, Iraq, Brazil and Australia etc.
+(b) Geographical information
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+SEGMENT INFORMATION (continued)
+5.
+CNOOC LIMITED Annual Report 2017
+90
+The following table presents certain non-current assets information for the Group's geographical information for the years
+ended 31 December 2017 and 2016.
+Charging:
+Auditors' remuneration:
+- Audit fee
+217
+5,249
+5,207
+169
+Interest on bank loans
+Interest on other loans
+Other borrowing costs
+2016
+2017
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+7. FINANCE COSTS
+92 CNOOC LIMITED Annual Report 2017
+78
+116
+Loss on disposal of property, plant and equipment
+1,424
+1,739
+Research and development costs
+4,052
+4,800
+18
+25
+Total borrowing costs
+5,394
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+93
+CNOOC LIMITED Annual Report 2017
+The effective interest rates used to determine the amount of related borrowing costs for capitalisation varied from 0.95% to
+7.875% (2016: from 0.7566% to 7.875%) per annum during the year ended at 31 December 2017.
+6,246
+5,044
+Repairs and maintenance
+2,185
+Unwinding of discount on provision for dismantlement (note 26)
+Other finance costs:
+4,061
+2,899
+(1,430)
+(2,495)
+Less: Amount capitalised in property, plant and equipment (note 13)
+5,491
+2,145
+1,898 340,329
+2,232
+1,747
+212
+10,768
+8,639
+- Others
+- Trade receivables
+- Property, plant and equipment
+Impairment and provision:
+6,403
+6,517
+Employee wages, salaries, allowances and social security costs
+53
+56
+5
+51
+47
+76
+- Other fees
+1,439
+279
+(36)
+9,130
+1,560
+485
+639
+- Plant and equipment
+- Office properties
+Operating lease rentals:
+68,907
+61,257
+2,199
+(416)
+854
+(399)
+68,303
+60,802
+- Less: Net amount capitalised
+- Intangible assets
+- Property, plant and equipment
+Depreciation, depletion and amortisation:
+12,171
+1,020
+8. KEY MANAGEMENT PERSONNEL'S REMUNERATION
+3,588
+737
+497,413
+43,618
+114,935
+142,429
+External Revenue
+2016
+Consolidated
+2017
+2016
+2017
+2016
+Eliminations
+Corporate
+2017
+2016
+Trading business
+2017
+2016
+2017
+E&P
+The following table presents the segment financial information for the Group for the years ended 31 December 2017 and
+2016.
+30,986
+The Group is engaged worldwide in the upstream operating activities of the conventional oil and gas, shale oil and gas,
+oil sands and other unconventional oil and gas business. The Group reports the business through three operating and
+reporting segments: E&P, trading business and corporate. These segments are operating segments whose financial
+information are reviewed by the Group's chief operating decision maker when making decisions regarding allocating
+resources and assessing performance. The geographical information is separately disclosed in (b).
+343
+186,390 146,490
+(84)
+682
+427
+20,310
+28,881
+125,611
+157,166
+Total revenue
+(113)
+(84)
+113
+84
+(10,676)
+(14,737)
+10,676
+14,737
+Intersegment Revenue*
+569
+121,325
+151,888
+(925)
+Uncertainties exist with respect to the interpretation of complex tax regulations (including those applicable to tax credits)
+and the amount and timing of future taxable income. Given the wide range of international business relationships and the
+long term nature and complexity of existing contractual agreements, differences arising between the actual results and
+the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and
+expense already recorded. The Group establishes provisions, based on best estimates, for possible consequences of
+audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on
+various factors, such as the Group's experience of previous tax audits and differing interpretations of tax regulations by
+the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues
+depending on the conditions prevailing in the respective group company's domicile.
+Taxes
+Dismantlement costs will be incurred by the Group at the end of the operating life of certain of the Group's facilities and
+properties. The ultimate dismantlement costs are uncertain and cost estimates can vary in response to many factors
+including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other
+production sites. The expected timing and amount of expenditure can also change, for example, in response to changes
+in reserves or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments
+to the provisions established which would affect future financial results.
+Dismantlement costs
+The sensitivity analysis for the impairment testing involves estimates and judgments to consider numerous assumptions
+comprehensively. Those assumptions interact on each other and interrelate with each other complexly and do not have
+fixed patterns along with the changes in price. Accordingly, the Company believes that the preparation of the sensitivity
+analysis for the impairment testing will be impracticable. Changes in assumptions could affect impairment charges and
+reversals in the consolidated statement of profit or loss and other comprehensive income, and the carrying amounts of
+assets in the consolidated statement of financial position.
+Actual cash flows are likely to be different from those estimated or forecast since anticipated events frequently do not
+occur as expected and unforeseen events may arise. The Company's results of operations could be materially and
+adversely affected for the period in which future impairment charges are incurred.
+Changes in the key assumptions used, which could be significant, include updates to future pricing estimates, updates to
+future production estimates to align with the Company's anticipated drilling plan, changes in the Company's capital costs
+and operating expense assumptions, and discount rate. There is a significant degree of uncertainty with the assumptions
+used to estimate future cash flows due to various risk factors. The complex economic outlook may also materially and
+adversely affect the Company's key assumptions. Changes in economic conditions can also affect the discount rates
+applied in assessments of impairment.
+The calculations of the recoverable amount of assets require the use of estimates and assumptions. The key
+assumptions include, but are not limited to, future oil and gas prices, future production estimates, estimated future capital
+expenditures, estimated future operating expenses and the discount rate.
+The Company makes an assessment whenever events or changes in circumstances indicate that the carrying amount
+of an asset may not be recoverable, or when there is any indication that an impairment loss previously recognised for an
+asset in prior years may no longer exist or may have decreased. In any event, the Company would make an estimate of
+the asset's recoverable amount, which is calculated at the higher of the asset's value in use and its fair value less costs
+of disposal. The Company recognises an impairment loss only if the carrying amount of an asset exceeds its recoverable
+amount. The Company charges an impairment loss to the profit or loss in the period in which it arises. A reversal of an
+impairment loss is credited to the profit or loss in the period in which it arises.
+CNOOC LIMITED Annual Report 2017
+(e)
+(d)
+(c)
+Significant accounting judgements, estimates and assumptions (continued)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2017
+89
+Notes to Consolidated Financial Statements
+31 December 2017
+(1,190)
+(2,398)
+(3,226)
+124,648
+156,304
+2016
+2017
+Segment results
+(113)
+(a)
+5.
+Oil and gas sales
+PRC government's share of oil
+Less: Royalties
+Gross sales
+OIL AND GAS SALES
+4.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+SEGMENT INFORMATION
+186,390 146,490
+Segment profit/(loss) for the year
+23,863
+1,322
+(4,183) 1,242
+(3,011)
+(1)
+(3,384)
+(3,274)
+Finance costs
+901
+653
+(1,122)
+(1,233)
+1,805
+1,571
+1
+217
+315
+Interest income
+(5,044)
+(6,246)
+Share of (losses)/profits of
+associates and a joint venture
+655
+457,780
+Others
+Investments in associates and
+a joint venture
+Other segment information
+5,912
+(11,680)
+2,125
+(24) (441)
+(6,861) (6,493)
+(76)
+(13)
+943
+13
+3,811
+(11,236)
+Income tax (expense)/credit
+(63)
+(88)
+855
+28,491
+30
+(1,307)
+(6,896) (7,393)
+Exploration expenses
+(40)
+(7,169) (6,901)
+Taxes other than income tax
+(24,282) (23,220)
+Operating expenses
+of segment profit or loss
+Amounts included in the measure
+637
+24,677
+(30,374)
+30,701 (6,385)
+6,391
+656
+808
+(346)
+15
+GII
+-
+9 (24,282) (23,211)
+(296) (1,654)
+(9,130) (12,171)
+31
+9
+(61,257) (68,907)
+40
+67
+(470)
+28
+(67) (144) (423)
+(9,161) (12,180)
+(4,966) (4,920) (269)
+Selling and administrative expenses
+Impairment and provision
+(60,834) (68,333)
+and amortisation
+Depreciation, depletion
+34 (6,881) (7,359)
+(7,210) (6,941)
+¥8
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
+activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company.
+Recoverable amount of oil and gas properties
+2017
+2,983
+4,390
+7,547
+11,472
+2016
+2017
+Temporary differences in the current year
+Effect of changes in tax rates
+Deferred tax
+on the estimated taxable profits for the year
+on the estimated taxable profits for the year
+Provision for overseas enterprise income tax
+Provision for PRC enterprise income tax
+Current tax
+An analysis of the tax expense/(credit) in the Group's consolidated statement of profit or loss and other comprehensive
+income is as follows:
+As of 31 December 2017, deferred tax liabilities related to undistributed earnings of the Company's overseas subsidiaries
+have not been provided since the timing of the reversal of the taxable temporary differences can be controlled by the
+Company and it is probable that the temporary differences would not reverse in the foreseeable future.
+Subsidiaries of the Group domiciled outside the PRC are subject to income tax at rates ranging from 10% to 50% (2016:
+10% to 50%). The U.S. government enacted comprehensive tax legislation in December 2017 that took effect as of 1
+January 2018. A one-time non-cash deferred tax charge was recorded due to the impact of the reduction of U.S. federal
+corporate income tax rate from 35% to 21%. The U.K. government decreased the combined income tax rate on North
+Sea oil and gas activities from 50% to 40% with effect from 1 January 2016.
+The Company's subsidiary in Mainland China, CNOOC China Limited, is a wholly-owned foreign enterprise. It is subject to
+corporate income tax at the rate of 25% under the prevailing tax rules and regulations. CNOOC Deepwater Development
+Limited, a wholly-owned subsidiary of CNOOC China Limited, is subject to corporate income tax at the rate of 15% for
+the three years ended 31 December 2017, after being assessed as a high and new technology enterprise. The company
+is in the process of re-applying to be assessed as a high and new technology enterprise from 2018 to 2020.
+The Company is regarded as a Chinese Resident Enterprise (as defined in the "Enterprise Income Tax Law of the People's
+Republic of China") by the State Administration of Taxation of the PRC. As a result, the Company is subject to the PRC
+corporate income tax at the rate of 25% starting from 1 January 2008. The corporate income tax which is subjected in
+Hong Kong is qualified as a foreign tax credit to offset the PRC corporate income tax starting from 1 January 2008.
+(7,558)
+The Company and its subsidiaries are subject, on an entity basis, to income taxes on profits arising in or derived from the
+tax jurisdictions in which the entities of the Group are domiciled and operate. The Company is subject to profits tax at a
+rate of 16.5% (2016: 16.5%) on profits arising in or derived from Hong Kong.
+(14,595)
+(1,847)
+35.0
+9.4
+34.8
+(1.6)
+25.0
+25.0
+Effect of changes in tax rates
+Effect of different tax rates for overseas subsidiaries
+PRC statutory enterprise income tax rate
+%
+%
+2016
+2017
+A reconciliation of the PRC statutory corporate income tax rate to the effective income tax rate of the Group is as follows:
+(5,912)
+11,680
+Income tax expense/(credit) for the year
+3,376
+Income tax
+(i)
+TAX
+The remuneration of the five (2016: five) highest paid employees, falls within the following bands:
+(1) Salaries, allowances, and benefits in kind represent the gross amount (before applicable individual salary tax) paid/payable to individual employees.
+38
+41
+1
+1
+14
+19
+23
+21
+2016
+2017
+Amount paid/payable during the year
+Pension scheme contributions
+Performance-related bonuses
+Basic salaries, allowances, and benefits in kind (1)
+During the year, none (2016: none) of the Directors, details of whose remuneration are disclosed in note 8(i) above, received
+an amount which falls within the category of the five highest paid employees. Details of the remuneration of the five (2016: five)
+highest paid employees, for the year are as follows:
+Number of employees
+2017
+2016
+RMB5,500,001-RMB6,000,000
+10.
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+5
+5
+1
+ITTTTT
+1
+1
+Tax credit from the government
+- 31
+CNOOC LIMITED Annual Report 2017
+96
+RMB10,000,001 to RMB10,500,000
+RMB9,000,001-RMB9,500,000
+RMB8,000,001-RMB8,500,000
+RMB7,500,001-RMB8,000,000
+RMB7,000,001-RMB7,500,000
+RMB6,000,001-RMB6,500,000
+1
+Tax reported in equity-accounted entities
+Tax losses previously not recognised
+Others
+35,527
+36,459
+1,389
+1,178
+Others
+1,969
+1,771
+Fair value of long term borrowings
+21,163
+16,529
+Losses available for offsetting against future taxable profit
+9,325
+9,669
+Provision for dismantlement
+1,681
+7,312
+Property, plant and equipment
+Deferred tax liabilities
+Property, plant and equipment
+Fair value changes on other financial assets
+Others
+Net deferred tax assets
+(i) Directors' remuneration
+As at 31 December 2017, the Group's recognised deferred tax assets on tax losses amounted to RMB75,018 million
+(2016: RMB68,061 million). Unrecognised tax losses, where recovery is not currently expected, amounted to RMB12,605
+million (2016: RMB14,227 million). This includes RMB3,181 million (2016: RMB3,207 million) of unrecognised tax loss
+arising from Uganda which has no fixed expiry date. The remainder expires between 5 to 20 years.
+Deferred tax assets in respect of tax losses are recognised only to the extent of the anticipated future taxable profits or
+reversal of existing taxable temporary differences.
+As at 31 December 2017, the Group had approximately RMB87,623 million (2016: RMB82,288 million) of carry-
+forward tax losses, predominantly in North America, that would be available to offset against future taxable profits of the
+subsidiaries in which the tax losses arose. Most of the US and Canadian tax losses will expire in 8 to 20 years.
+24,844
+25,509
+(3,303)
+- deferred tax liabilities
+19,174
+Deferred tax assets
+22,206
+(14,253)
+(351)
+(139)
+(232)
+(16,208)
+(13,670)
+- deferred tax assets
+Of which
+(16,353)
+FIVE HIGHEST PAID EMPLOYEES
+2016
+Principal components of deferred tax balances are as follows:
+10.
+TAX (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+97
+CNOOC LIMITED Annual Report 2017
+112.1
+32.1
+2.7
+2.2
+5.3
+1.0
+(0.2)
+8.3
+(2.7)
+Group's effective income tax rate
+(i)
+Income tax (continued)
+The movements of deferred tax liabilities net of deferred tax assets are as follows:
+2017
+(19,174)
+(22,206)
+At 31 December
+(558)
+1,143
+Exchange differences
+(226)
+7
+2017
+Charge to equity
+3,376
+Changes in tax rates
+(1,948)
+(14,595)
+(7,558)
+Credit to the profit or loss
+(19,174)
+At 1 January
+2016
+(1,847)
+9.
+(5,670)
+31 December 2017
+Non-executive directors:
+Subtotal
+Yuan Guagnyu(2)(5)
+Li Fanrong (5)
+Yang Hua(4)(5)
+Executive directors:
+2016
+4,780
+228
+617
+343
+3,592
+Total
+3,592
+3,592
+Subtotal
+824
+824
+972
+Liu Jian(6)
+972
+Wu Guangqi(7)(8)
+Subtotal
+92
+'S !
+847
+129
+532
+186
+605
+59
+454
+92
+242
+70
+78
+94
+| | |
+| | |
+Independent non-executive
+Lv Bo(8)
+||||
+||||
+824
+402
+786
+134
+94
+455
+162
+146
+| = 197
+scheme paid/payable
+contributions during the year
+RMB'000
+RMB'000
+related
+bonuses (1)
+RMB'000
+and benefits
+in kind(¹)
+RMB'000
+Fees (1)
+RMB'000
+Total
+Pension
+Performance
+Executive directors:
+Yuan Guangyu(2)(5)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+|-343
+617
+228
+1,188
+Kevin G. Lynch
+972
+Tse Hau Yin, Aloysius
+824
+Lawrence J. Lau
+972
+Chiu Sung Hong
+directors:
+22
+III
+Independent non-executive
+Subtotal
+Wu Guangqi (7)(8)
+Liu Jian(6)
+Yang Hua(4)(5)
+Non-executive directors:
+Subtotal
+Xu Keqiang (3)
+| | |
+92
+Salaries,
+allowances
+59
+Amount paid/payable during the year
+Pension scheme contributions
+Short term employee benefits
+2017
+Other key management personnel's (excluding Directors') remuneration
+(ii)
+Save as disclosed above, there was no arrangement under which a director waived or agreed to waive any remuneration
+during the year. In 2017, the executive directors' remuneration shown above were for their services in connection with
+the management of the affairs of the Company. The other directors' remuneration shown above were for their services as
+directors of the Company.
+The Company has adopted the share option schemes for the grant of options to the Company's directors. The fair value
+of share options for the directors measured according to the Group's accounting policy as set out in note 3. No Directors
+exercised any share option in 2017 or 2016. No new share option was granted to Directors in respect of their services to
+the Group under the applicable share option schemes of the Company in 2017 or 2016. Further details of share option
+scheme and valuation techniques are set out in note 27.
+On 20 December 2016, Mr. Wu Guangqi was appointed as a member of the Remuneration Committee of the Company. Mr. Lv Bo resigned
+as a Non-executive Director and a member of the Remuneration Committee of the Company.
+On 15 June 2016, Mr. Wu Guangqi was re-designated as a Non-executive Director of the Company and resigned as the Compliance Officer
+of the Company.
+On 20 December 2016, Mr. Liu Jian was appointed as the Vice Chairman and a Non-executive Director of the Company.
+On 15 June 2016, Mr. Yang Hua was re-designated as an Executive Director and appointed as the Chief Executive Officer of the Company.
+Mr. Yuan Guangyu was appointed as an Executive Director and the President of the Company. Mr. Li Fanrong resigned as an Executive
+Director, the Chief Executive Officer and the President of the Company.
+On 18 April 2017, Mr. Yang Hua was re-designated as a Non-executive Director of the Company. Mr. Yang Hua resigned as the Chief
+Executive Officer of the Company and he remains as the Chairman of the Board.
+On 18 April 2017, Mr. Xu Keqiang was appointed as an Executive Director and the President of the Company.
+On 18 April 2017, Mr. Yuan Guangyu was appointed as the Chief Executive Officer of the Company. Mr. Yuan Guangyu resigned as the
+President of the Company.
+Fees, salaries, allowances, benefits in kind and performance related bonuses represent the gross amount (before applicable individual salary
+tax) paid/payable to individual directors.
+(8)
+Share options*
+(7)
+2016
+7
+454
+95
+This item represents the fair value of share options measured according to the Group's accounting policy as set out in note 3. No other key
+management personnel exercised any share option in 2017 or 2016.
+10
+12
+10
+12
+2016
+Number of employees
+2017
+Nil to RMB2,000,000
+The bands of the remuneration of other key management personnel (excluding Directors) and the related number of
+members of other key management personnel (excluding Directors) are as follows:
+8
+1
+10
+8
+1
+1
+6
+(6)
+CNOOC LIMITED Annual Report 2017
+(4)
+812
+957
+||||
+812
+Kevin G. Lynch
+957
+Tse Hau Yin, Aloysius
+812
+Lawrence J. Lau
+957
+Chiu Sung Hong
+directors:
+605
+59
+454
+(5)
+605
+957
+812
+Notes to Consolidated Financial Statements
+3,538
+(3)
+Subtotal
+(1)
+(2)
+Notes:
+Directors' remuneration (continued)
+(i)
+8.
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+94
+4,990
+188
+986
+278
+3,538
+Total
+3,538
+CNOOC LIMITED Annual Report 2017
+CNOOC Canada Energy Ltd.
+Percentage
+issued and paid-up/
+registered capital
+of equity
+attributable to
+the Group
+Principal activities
+Indirectly held subsidiaries (continued)(1):
+Canada
+CNOOC Uganda Ltd
+100%
+Oil sands exploration, development
+without a par value 103,000
+preferred shares without a
+and production in Canada
+par value
+Uganda
+1 million Uganda Shilling
+100 common shares
+value of
+ordinary shares
+104
+Place of
+establishment
+Offshore petroleum exploration,
+development and production in
+Australia
+CNOOC Exploration &
+Nigeria
+Production Nigeria Limited
+CNOOC Iraq Limited
+British Virgin Islands
+NGN10 million
+100%
+Nominal
+Petroleum exploration, development
+and production in Africa
+100%
+Providing services of petroleum
+exploration and development in the
+Republic of Iraq
+CNOOC LIMITED Annual Report 2017
+15. INVESTMENTS IN SUBSIDIARIES (continued)
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Name of entity
+US$1
+100%
+Nexen Petroleum U.K. Limited
+Nexen Energy ULC
+USA
+US$15,830
+100%
+and production in the USA
+Nexen Oil Sands Partnership
+Canada
+N/A
+100%
+Petroleum exploration, development
+Petroleum exploration, development
+Petroleum exploration, development
+Petroleum exploration, development
+and production in Canada
+CNOOC PETROLEUM BRASIL
+LTDA (2)
+Brazil
+100%
+R$2,965,600,000
+100%
+Nexen Petroleum Offshore
+U.S.A. Inc.
+Petroleum exploration, development
+and production in Africa
+and production in the USA
+N/A
+Canada
+13,671,421,700 common
+100%
+Petroleum exploration, development
+shares without a par value
+and production in Canada
+England and Wales
+GBP98,009,131
+100%
+Petroleum exploration, development
+and production in the UK
+Nexen Petroleum Nigeria
+Limited
+Nigeria
+OOGC America LLC
+USA
+NGN30 million
+and production in Nigeria
+100%
+100%
+US$1,000
+Singapore
+Percentage
+of equity
+attributable to
+the Group
+Name of entity
+Principal activities
+Directly held subsidiaries:
+CNOOC China Limited
+Tianjin, PRC
+RMB20 billion
+100%
+Offshore petroleum exploration,
+development, production and sales,
+and shale gas exploration in the PRC
+China Offshore Oil (Singapore)
+International Pte Ltd
+Singapore
+SG$3 million
+100%
+Sales and marketing of petroleum
+products outside the PRC
+CNOOC International Limited
+CNOOC Finance (2003) Limited
+CNOOC Finance (2011) Limited
+Nominal
+value of
+ordinary shares
+issued and paid-up/
+registered capital
+British Virgin Islands
+British Virgin Islands
+British Virgin Islands
+Place of
+establishment
+INVESTMENTS IN SUBSIDIARIES
+245
+466
+13,892
+15,070
+Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed
+in a business combination.
+According to the accounting policies as set out in note 3, goodwill is acquired in the acquisition of Nexen Inc., and from the
+acquisition date, allocated to the entire E&P assets, which are the groups of cash-generating units that are expected to benefit
+from the synergies of the acquisition.
+Impairment is determined by assessing the recoverable amount of the entire E&P assets to which the goodwill relates. Where
+the recoverable amount of the entire E&P assets is less than the carrying amount of the assets and the goodwill together, an
+impairment loss on goodwill is recognised.
+In assessing value in use of E&P segment, the key assumptions include, but are not limited to, future commodity prices, future
+production estimates, estimated future capital expenditures, estimated future operating expenses and the discount rate. The
+discount rate used for value in use is derived from the Company's WACC and is adjusted, where applicable, to take into account
+any specific risks relating to the country where the asset is located as well as the asset specific characteristics, such as specific
+tax treatments, cash flow profiles and economic life. However, actual results could differ from those estimates.
+CNOOC LIMITED Annual Report 2017
+103
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+14.
+15.
+INTANGIBLE ASSETS (continued)
+The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts are amortised on a straight-line basis over the life of the contracts which is
+less than 20 years. Other identifiable intangible assets are amortised on a straight-line basis over a period ranging from 3 to 5
+years.
+Particulars of the principal subsidiaries at the end of the reporting period are as follows:
+SG$2
+US$20,000,000,002
+Investment holding
+US$12,000
+100%
+CNOOC SES Ltd.
+Malaysia
+US$1
+100%
+Deepwater and low-grade oil and
+gas fields exploitation in the PRC and
+exploration, development, production
+and sales of oil and gas in the oil and
+gas fields of South China Sea
+Investment holding
+Petroleum exploration, development
+and production in Indonesia
+CNOOC Muturi Limited
+Isle of Man
+US$7,780,770
+100%
+Petroleum exploration, development
+and production in Indonesia
+CNOOC NWS Private Limited
+Bermuda
+100%
+CNOOC Southeast Asia Limited
+RMB20.3 billion
+100%
+Bond issuance
+US$1,000
+100%
+Bond issuance
+CNOOC Finance (2012) Limited
+British Virgin Islands
+US$1,000
+100%
+Bond issuance
+CNOOC Finance (2013) Limited
+Indirectly held subsidiaries(¹):
+British Virgin Islands
+US$1,000
+100%
+Bond issuance
+CNOOC Deepwater
+Development Limited
+Zhuhai, PRC
+100%
+Petroleum exploration, development
+and production in Brazil
+Current assets
+Canada
+1,226
+Income tax expense
+(1,109)
+(160)
+Profit after tax
+1,106
+1,066
+2,215
+Total comprehensive income
+1,066
+Dividend of US$36 million (equivalent to RMB243 million) was received from the joint venture in 2017 and no dividend was
+received from the joint venture in 2016.
+18. EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS
+(i) Equity investments
+Current:
+Non-publicly traded investments,
+Private equity funds classified at FVTOCI
+1,106
+Profit before tax
+(704)
+(550)
+66,992
+Current liabilities
+(6,630)
+(6,866)
+Non-current liabilities
+(18,486)
+(16,727)
+Revenue
+29,879
+28,371
+Depreciation, depletion and amortisation
+(3,742)
+(3,988)
+Interest income
+313
+388
+Finance costs
+2017
+2016
+14
+15
+CNOOC LIMITED Annual Report 2017
+107
+108
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+18.
+EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS (continued)
+(ii) Other financial assets
+Current:
+2017
+2016
+Non-publicly traded investments classified at FVTPL:
+Corporate wealth management products (1)
+Money market funds (2)
+66,229
+8,115
+467
+46,958
+5,931
+Kerogen Energy Fund is principally engaged in the investment in the oil and gas industry. The equity investment in Kerogen Energy Fund is
+designated by the Group as at FVTOCI. The cost of this non-publicly traded equity investment represents an appropriate estimate of its fair
+value as at 1 January 2017 and 31 December 2017, as sufficient information is not available recently to measure its fair value.
+63,660
+(2)
+(1)
+14
+15
+Non-current:
+Publicly traded investments
+Equity investment in MEG Energy Corporation ("MEG") classified at FVTOCI(¹)
+Other equity investment classified at FVTPL
+766
+1,356
+15
+35
+781
+1,391
+Non-publicly traded investments
+Private equity fund in Kerogen Energy Fund classified at FVTOCI(2)
+2,759
+2,875
+3,540
+4,266
+MEG is principally engaged in the exploitation and production of oil sands. The investment in MEG is designated by the Group as at FVTOCI.
+As at 31 December 2017, the investment in MEG was stated at the quoted market price.
+9,201
+11,614
+Non-current assets
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+16.
+INVESTMENTS IN ASSOCIATES
+Particulars of the principal associates at the end of the reporting period are as follows:
+Place of
+establishment
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Percentage
+of equity
+attributable to
+the Group
+Principal activities
+17.
+Name of associates
+Shanghai Petroleum
+Corporation Limited
+Shanghai, PRC
+RMB900 million
+30%
+Production, processing and technology
+consultation of oil, gas and relevant products
+in the PRC
+CNOOC Finance
+Notes to Consolidated Financial Statements
+Beijing, PRC
+105
+The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results for the
+year or formed a substantial portion of the total assets of the Group. To give details of other subsidiaries would, in the opinion
+of the Directors, result in particulars of excessive length.
+100 common shares
+without a par value
+100%
+Bond issuance
+CNOOC Finance (2015) U.S.A.
+LLC
+USA
+N/A
+100%
+Bond Issuance
+CNOOC Finance (2015)
+Australia Pty Ltd
+Australia
+US$1
+100%
+Bond Issuance
+(1)
+(2)
+All subsidiaries are indirectly held through CNOOC International Limited, except CNOOC Deepwater Development Limited which is indirectly held
+through CNOOC China Limited.
+The registered capital of CNOOC PETROLEUM BRASIL LTDA increased from R$2,436,000,000 to R$2,965,600,000 on 20 June 2017.
+CNOOC LIMITED Annual Report 2017
+CNOOC Nexen Finance (2014)
+ULC
+RMB4 billion
+Corporation Limited
+INVESTMENT IN A JOINT VENTURE
+Particulars of the joint venture at the end of the reporting period are as follows:
+Name of entity
+Bridas Corporation
+Place of establishment
+British Virgin Islands
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+US$102,325,582
+Percentage
+of equity
+attributable
+to the Group
+Principal activities
+50%
+Investment holding
+106 CNOOC LIMITED Annual Report 2017
+17. INVESTMENT IN A JOINT VENTURE (continued)
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Summarised financial information of the joint venture is disclosed below:
+2017
+2016
+Dividend of RMB116 million was received from the associates in 2017 (2016: RMB135 million).
+31.8%
+Total comprehensive income/(expense)
+338
+Provision of deposit, transfer, settlement, loan,
+discounting and other financing services to
+CNOOC and its member entities
+To give details of other associate would, in the opinion of the Directors, result in particulars of excessive length.
+The Group's investments in associates represent:
+2017
+2016
+Share of net assets
+4,067
+3,695
+None of the Group's associates are considered to be individually material. The following table illustrates the summarised
+financial information of the Group's associates in the consolidated financial statements:
+Profit/(loss) for the year
+Other comprehensive income/(expense)
+2017
+2016
+302
+(609)
+36
+(127)
+(736)
+16,644
+1,443
+692
+867,626
+5,700
+873,326
+867,626
+5,700
+873,326
+48,937
+25,908
+99
+(2,577)
+(914)
+(3,491)
+Exchange differences
+(24,985)
+(148)
+(25,133)
+49,036
+205
+25,703
+(6,402)
+Oil and gas
+properties
+Vehicles
+and office
+equipment
+and others
+Total
+Cost:
+At 1 January 2016
+Additions
+Disposals and write-offs
+Exchange differences
+At 31 December 2016
+At 1 January 2017
+Additions
+Disposals and write-offs
+803,986
+5,296
+809,282
+44,302
+236
+44,538
+(6,365)
+(37)
+At 31 December 2017
+889,001
+4,737
+893,738
+At 31 December 2016
+(439,123)
+(1,738)
+(440,861)
+At 1 January 2017
+(439,123)
+(1,738)
+(440,861)
+Depreciation charge for the year
+(60,442)
+(360)
+(60,802)
+Impairment
+(8,639)
+(8,639)
+Disposals and write-offs
+1,185
+(10,215)
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(58)
+Exchange differences
+Accumulated depreciation, depletion and
+amortisation and impairment:
+At 1 January 2016
+(353,824)
+(1,317)
+(355,141)
+Depreciation charge for the year
+(67,906)
+(397)
+(68,303)
+Impairment
+(10,768)
+(10,768)
+Disposals and write-offs
+3,532
+34
+3,566
+(10,157)
+Notes to Consolidated Financial Statements
+13. PROPERTY, PLANT AND EQUIPMENT
+CNOOC LIMITED Annual Report 2017
+V.
+vi.
+City construction tax at the rates of 1% or 7% on the production tax, business tax and VAT paid;
+Educational surcharge at the rate of 3% on the production tax, business tax and VAT paid; and
+vii. Local educational surcharge at the rate of 2% on the production tax, business tax and VAT paid.
+In addition, other taxes paid and payable by the Company's non-PRC subsidiaries include royalty as well as taxes levied
+on petroleum-related income, budgeted operating and capital expenditure.
+(iii) Special Oil Gain Levy
+In 2006, a Special Oil Gain Levy ("SOG Levy") was imposed by the Ministry of Finance of the PRC ("MOF") at the
+progressive rates from 20% to 40% on the portion of the monthly weighted average sales price of the crude oil lifted in the
+PRC exceeding US$40 per barrel. The MOF has decided to increase the threshold of the SOG Levy to US$65 with effect
+from 1 January 2015. Notwithstanding this adjustment, the SOG Levy continues to have five levels and is calculated and
+charged according to the progressive and valorem rates on the excess amounts. The SOG Levy paid can be claimed as
+a deductible expense for corporate income tax purposes and is calculated based on the actual volume of the crude oil
+entitled.
+CNOOC LIMITED Annual Report 2017
+99
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+11.
+EARNINGS PER SHARE
+2017
+2016
+Export tariff at the rate of 5% on the export value of petroleum oil;
+Earnings
+iv.
+The VAT payable is calculated using the taxable sales amount multiplied by the applicable tax rate less relevant
+deductible input VAT;
+74,344
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+10.
+TAX (continued)
+(i)
+Income tax (continued)
+At 31 December 2017, the Group's unrecognised deferred tax assets related to unused tax credits amounted to
+RMB4,990 million (2016: RMB5,761 million). This includes RMB4,587 million (2016: RMB4,807 million) of unrecognised
+deferred tax assets related to unused tax credits from Nigeria which has no fixed expiry date. The remainder expires
+between 2026 and 2036.
+The realisability of the deferred tax assets recognised mainly depends on whether sufficient future profits or taxable
+temporary differences will be available in the future. In case where the actual future taxable profits generated are less than
+expected, or change in facts and circumstances which result in revision of future taxable profits estimation, the balance
+of deferred tax assets may be significantly revised.
+(ii)
+Other taxes
+The Company's PRC subsidiaries pay the following other taxes and dues:
+i.
+Production tax at the rate of 5% on production under production sharing contracts;
+ii.
+iii.
+VAT at the rates from 13% to 17% on taxable sales under independent oil and gas fields since 1 May 2016
+according to "Provisional Regulations on VAT of the PRC" and relevant detailed rules according to the "Circular
+on Certain Policies on the Pilot Program of the Collection of VAT in Lieu of Business Tax” (Cai Shui [2016] No.39),
+which replaced the production tax at the rate of 5% on production under independent oil and gas fields before 1
+May 2016. According to "Notice on Simplifying the Relevant Policies on Value-added Tax Rates" (Cai Shui [2017]
+No.37), with effect from 1 July 2017, the 13% VAT rate shall be removed and gas sales shall be subject to the 11%
+tax rate.
+VAT at the rates from 3% to 17% on other income since 1 May 2016, which were subject to the business tax at
+rates of 3% to 5% or VAT at the rates of 3% to 17% before 1 May 2016.
+Resource tax (reduced tax rates may apply to specific products and fields) on the oil and gas sales revenue
+(excluding production tax) derived by oil and gas fields under production sharing contracts signed after 1 November
+2011 and independent offshore oil and gas fields starting from 1 November 2011, which replaced the royalties
+for oil and gas fields, except for those under production sharing contracts signed before 1 November 2011 which
+will be subject to related resource tax requirement after the expiration of such production sharing contracts. The
+resource tax rate was changed from 5% to 6% since 1 December 2014;
+258
+Profit for the purpose of basic and diluted earnings per share calculation
+637
+2017 final dividend proposed at HK$0.30 (2016: final dividend proposed
+at HK$0.23) per ordinary share by the Board of Directors - not
+recognised as a liability as at the end of the year
+44,659,140,488
+0.55
+0.01
+0.55
+0.01
+2017
+2016
+7,601
+4,673
+8,847
+9,571
+10,830
+9,096
+Pursuant to the Enterprise Income Tax Law of the People's Republic of China and related laws and regulations, the Company
+is regarded as a Chinese Resident Enterprise, and thus is required to withhold corporate income tax at the rate of 10% when
+it distributes dividends to its non-resident enterprise (as defined in the "Enterprise Income Tax Law of the People's Republic of
+China") shareholders, with effect from the distribution of the 2008 final dividend. In respect of all shareholders whose names
+appear on the Company's register of members and who are not individuals (including HKSCC Nominees Limited, corporate
+nominees or trustees such as securities companies and banks, and other entities or organisations, which are all considered as
+non-resident enterprise shareholders), the Company will distribute the dividend after deducting corporate income tax of 10%.
+100
+HK$0.25) per ordinary share
+24,677
+2016 final dividend - HK$0.23 (2015: final dividend
+2017 interim dividend - HK$0.20 (2016: interim
+Number of shares
+Number of ordinary shares for the purpose of
+basic earnings per share calculation
+Effect of dilutive potential ordinary shares under
+the share option schemes
+44,647,455,984 44,647,455,984
+4,101,969
+11,684,504
+Weighted average number of ordinary
+shares for the purpose of diluted earnings per share
+44,651,557,953
+Earnings per share:
+Basic (RMB Yuan)
+Diluted (RMB Yuan)
+12.
+DIVIDENDS
+Dividend per ordinary share:
+dividend HK$0.12) per ordinary share
+Exchange differences
+10,932
+57
+(958)
+(1,096)
+(1,882)
+(4,557)
+Amortisation charge for the year
+(51)
+(326)
+(135)
+(508)
+(1,020)
+Disposal
+386
+386
+Exchange differences
+(57)
+(80)
+(81)
+(621)
+(42)
+At 1 January 2016
+19,263
+%'$®
+2,738
+14,748
+206
+206
+(54)
+(199)
+(1,915)
+(93)
+(57)
+(856)
+(1,123)
+At 31 December 2017
+1,199
+1,484
+2,688
+13,892
+Accumulated amortisation:
+(43)
+(260)
+(729)
+Exchange differences
+43
+34
+76
+44
+197
+At 31 December 2017
+(732)
+(1,239)
+(2,222)
+(4,193)
+Net book value:
+At 31 December 2016
+At 31 December 2017
+544
+341
+319
+1,915
+At 31 December 2016
+199
+1,662
+(1,364)
+(1,312)
+(2,046)
+(5,451)
+At 1 January 2017
+(729)
+(1,364)
+(1,312)
+(2,046)
+(5,451)
+Amortisation charge for the year
+(46)
+(332)
+(57)
+(419)
+(854)
+Disposal
+54
+14,748
+(74)
+(1,662)
+Included in the current year's additions was an amount of approximately RMB2,495 million (2016: approximately RMB1,430
+million) in respect of interest capitalised in property, plant and equipment (note 7). Included also in the depreciation charge for
+the year was an amount of approximately RMB636 million (2016: approximately RMB1,609 million) in respect of a depreciation
+charge on dismantlement cost capitalised in oil and gas properties.
+Impairment and provision recognised during the year included the impairment loss to reduce the carrying amount of certain oil
+and gas properties to the recoverable amount. In 2017, the impairment loss was mainly related to fields in China, Africa and
+North America which was primarily due to the revision of the oil and gas price forecast and revision of reserves. In 2016, the
+impairment loss was mainly related to fields in North America, Europe and Africa primarily due to the revision of the oil price
+forecast and an adjustment in operating plan for oil sand assets in Canada.
+For both years, the recoverable amount was calculated based on the assets' value in use and was determined at the
+cash-generating unit level. The Company identifies a field or the group of fields that could generate cash inflows independently
+as a cash-generating unit. The principal parameters used in determining the recoverable amount of the Group's assets include
+estimates of proved and unproved reserves, future commodity prices that come from the price forecast of respected and
+independent institutions, combined with internal analysis and judgment of the international market environment, as well as best
+estimates of drilling and development costs.
+The discount rate is derived from the Company's weighted average cost of capital ("WACC") and is adjusted, where
+applicable, to take into account any specific risks relating to the country where the asset is located as well as the asset specific
+characteristics, such as specific tax treatments, cash flow profiles and economic life. The discount rate used for value in use
+calculations is 8%-12% in 2017 after tax (2016: 8%-11% after tax). A derived pre-tax discount rate would be in the range of 8%-
+15% (2016: 9%-11% pre-tax).
+For 2016, included in impairment was RMB7,358 million recognised on the Long Lake project, due to the revision of the oil
+price forecast and adjustments to operating plans caused by the pipeline rupture and the explosion accident. Specifically,
+the operating plan was changed to defer the timing of when to bring the Long Lake upgrader back online, to make the timing
+concurrent with the most recent expectation of when sufficient feedstock will be produced from Long Lake assets to maximise
+the utilisation and cash generating potential of the upgrader. The Company also updated the yield assumptions based on
+the most recent operating performance of the upgrader. The asset was written down to an estimated recoverable amount
+of RMB33,902 million in June 2016. As at 31 December 2017, the future operating plan of Long Lake assets is still under
+assessment by management, which may significantly impact the recoverable amount of the oil sands properties of Long Lake
+assets in the future.
+During 2017, the Group wrote off certain oil and gas assets in the North America mainly due to the expiration of lease contracts.
+Approximately RMB71 million was included in the exploration expenses, and approximately RMB1,588 million was included in
+the depreciation, depletion and amortisation charge, respectively.
+102
+CNOOC LIMITED Annual Report 2017
+14.
+INTANGIBLE ASSETS
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Gas
+processing
+rights under
+Drilling rig
+contracts and
+Marketing
+transportation
+PROPERTY, PLANT AND EQUIPMENT (continued)
+seismic data
+13.
+31 December 2017
+10,989
+At 31 December 2017
+(496,087)
+(1,783)
+(497,870)
+Net book value:
+At 31 December 2016
+428,503
+3,962
+432,465
+At 31 December 2017
+392,914
+2,954
+395,868
+CNOOC LIMITED Annual Report 2017
+101
+Notes to Consolidated Financial Statements
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Exchange differences
+and storage
+usage rights
+104
+67
+943
+1,305
+At 31 December 2016
+1,273
+1,705
+1,631
+2,738
+14,748
+22,095
+At 1 January 2017
+1,273
+1,705
+1,631
+Additions
+Disposal
+109
+NWS Project
+82
+(387)
+contracts
+Software
+and others
+Goodwill
+Total
+Cost:
+At 1 January 2016
+1,191
+1,596
+1,527
+2,861
+13,805
+20,980
+Additions
+197
+197
+Disposal
+(387)
+Exchange differences
+52,889
+22,095
+The corporate wealth management products will mature from 8 January 2018 to 6 November 2018 (2016: from 10 January 2017 to 5
+December 2017).
+CNOOC LIMITED Annual Report 2017
+The weighted average effective interest rates of the Group's bank deposits were 2.23% per annum, for the year ended 31
+December 2017 (2016: 2.95% per annum).
+The Group's cash and cash equivalents mainly consist of current deposits and time deposits with maturity within seven days.
+The bank balances are deposited with creditworthy banks with no recent history of default.
+CASH AND CASH EQUIVALENTS AND TIME DEPOSITS WITH MATURITY OVER THREE MONTHS
+All customers have good credit quality with good repayment history and no significant receivables are past due. As at 31
+December 2017 and 31 December 2016, the age of substantially all the trade receivables was within one year.
+The credit terms of the Group are generally within 30 days after the delivery of oil and gas. Payment in advance or collateral may
+be required from customers, depending on credit rating. Trade receivables are non-interest bearing.
+22.
+21. TRADE RECEIVABLES
+8,709
+7,354
+(173)
+(464)
+1,594
+1,540
+7,288
+(1)
+2016
+6,278
+(2)
+The money market funds can be redeemed at any time.
+During the year, the fair value changes on the Group's equity investments recognised directly in other comprehensive
+expense amounted to RMB542 million (2016: RMB461 million).
+None of the equity investments and other financial assets above is past due or impaired.
+19. OTHER NON-CURRENT ASSETS
+The gains of the Group's other financial assets recognised in the profit or loss for the year was RMB2,409 million (2016:
+RMB2,774 million).
+20.
+INVENTORIES AND SUPPLIES
+Materials and supplies
+Oil in tanks
+Less: Provision for inventory obsolescence
+2017
+Included in the other non-current assets were restricted deposits for future dismantlement. Pursuant to the Provisional
+Regulations on the Dismantlement of Offshore Oil and Gas Production Facilities of the People's Republic of China, the Group
+accrues dismantlement costs for all the oil and gas fields under production sharing contracts in the PRC, and makes monthly
+cash contributions to the specified dismantlement fund accounts supervised by the PRC government. The deposit cannot
+be withdrawn or utilised for any other purposes but the dismantlement of oil and gas production facilities in the future. As of
+31 December 2017, the balance of the specified dismantlement fund accounts was RMB7,555 million (31 December 2016:
+RMB6,088 million).
+1,500
+5.500%
+CNOOC Finance (2011) Limited
+Due in 2021
+4.25%
+300
+1,500
+300
+Due in 2041
+1,500
+500
+500
+CNOOC Finance (2012) Limited
+Due in 2022
+3.875%
+Due in 2033
+1,500
+CNOOC Finance (2012) Limited
+5.75%
+CNOOC Finance (2003) Limited
+31 December
+2016
+129,713
+130,798
+CNOOC LIMITED Annual Report 2017
+109
+110
+Due in 2042
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+USD million
+25.
+The details of notes are as follows:
+Outstanding Principal Amount
+31 December
+Issued by
+Maturity
+Coupon Rate
+2017
+USD million
+LOANS AND BORROWINGS (continued)
+Notes to Consolidated Financial Statements
+500
+500
+4.875%
+500
+500
+Nexen
+Matured in 2017
+5.65%
+62
+Nexen
+Due in 2019
+6.2%
+300
+300
+Nexen
+Due in 2028
+7.4%
+200
+200
+Due in 2044
+2,250
+2,250
+4.25%
+500
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+CNOOC Nexen Finance (2014) ULC
+CNOOC Nexen Finance (2014) ULC
+CNOOC Nexen Finance (2014) ULC
+Due in 2018
+1.750%
+750
+750
+Due in 2023
+3.000%
+5.000%
+2,000
+Due in 2043
+4.250%
+1,085
+500
+Matured in 2017
+1.625%
+1,250
+Due in 2024
+2,000
+118,358
+78
+1,279
+10,361
+10,361
+Loans and borrowings
+due within one year
+For Tangguh LNG Project *
+**
+Notes*
+Non-current
+LIBOR+0.19% to 0.335% per
+annum with maturity
+within one year
+CNOOC LIMITED Annual Report 2017
+212
+212
+215
+215
+4,901
+8,779
+8,779
+10,361
+10,361
+14,866
+Effective interest rate and
+final maturity
+2017
+2016
+Loans
+Notes
+Total
+Loans
+4,901
+Notes
+Short-term loans and
+borrowings
+General loans****
+LIBOR+0.35% to 0.75% per
+annum with maturity
+within one year
+8,779
+8,779
+Total
+9,102
+9,102
+212
+LIBOR+0.19% to 0.335% per
+annum with maturity
+through to 2021
+502
+502
+758
+Nexen
+758
+For Tangguh LNG III Project *
+For Tangguh LNG Project **
+LIBOR+1.37% to 3.45% per
+through 2021 to 2029
+777
+777
+327
+Notes*
+117,079
+117,079
+327
+129,713 129,713
+annum with maturity
+117,079
+Total
+Loans
+4,901
+5,113
+215
+9,102
+9,317
+8,991
+4,901
+13,892
+Notes
+10,576
+19,678
+Effective interest rate and
+2017
+2016
+final maturity
+Loans
+Notes
+Total
+9,102
+Due in 2032
+7.5%
+500
+Current portion of dismantlement included in other payables
+and accrued liabilities (note 24)
+At 31 December
+(1)
+112
+No new share option was granted during the year (2016: nil) and the Group recognised an equity-settled share option expense
+of nil (2016: nil) during the year.
+The period within which the options must be exercised, as well as any minimum holding period or performance targets which
+apply to the options, will be specified by the Board of the Company at the time of grant. The exercise periods for options granted
+under the 2005 Share Option Scheme shall end not later than 10 years from the date of grant. No options may be granted under
+the 2005 Share Option Scheme after the date of the 10th anniversary of the adoption of the 2005 Share Option Scheme.
+the closing price of the shares as stated in the HKSE's daily quotation sheet on the date of grant.
+(3)
+the average closing price of the shares as stated in the HKSE's daily quotation sheets for the five trading days immediately
+preceding the date of grant; and
+(2)
+the nominal value of a share of the Company on the date of grant;
+(1)
+According to the 2005 Share Option Scheme, the consideration payable by a grantee for the grant of options will be HK$1.00.
+The exercise price for such options will be determined by the Board at its discretion at the date of grant, except that such price
+shall be at least the higher of:
+On 31 December 2005, the Company adopted a new share option scheme (the "2005 Share Option Scheme"). Under the
+2005 Share Option Scheme, the Board has the authority to grant options to subscribe for shares to the directors, officers and
+employees of the Company and its subsidiaries, and any other persons who in the sole discretion of the Board, have contributed
+or will contribute to the Group. Unless approved by the shareholders, the total number of shares issued and to be issued upon
+exercise of the options granted to each individual (including exercised and unexercised options) under the 2005 Share Option
+Scheme or any other share option scheme adopted by the Company, in any 12-month period, must not exceed 1% of the
+shares in issue of the Company.
+2005 Share Option Scheme
+Under these share option schemes, the Remuneration Committee of the Board will from time to time propose for the Board's
+approval the grant of share options and the number of share options to be granted to the relevant grantees. The maximum
+aggregate number of shares (including those that could be subscribed for under the Pre-Global Offering Share Option Scheme,
+the 2001 Share Option Scheme, the 2002 Share Option Scheme and the 2005 Share Option Scheme) which may be issued
+upon exercise of all options granted shall not exceed 10% of the total issued share capital of the Company as at 31 December
+2005, being the date on which the shareholders of the Company approved the 2005 Share Option Scheme, excluding shares
+under options which have lapsed.
+At 31 December
+Exchange differences
+Unwinding of discount (2) (note 7)
+Deletions
+1,491
+1,300
+(1)
+2.52%
+1.74%
+1.29%
+The average amount outstanding is computed by averaging the outstanding principal balances as at 1 January and 31 December of each year.
+1,491
+1,369
+1,396
+2.13%
+2005 Share Option Scheme (as defined below).
+1,199
+The weighted average interest rate is computed by averaging the interest rates as at 1 January and 31 December of each year.
+There was no default of principal, interest or redemption terms of the loans and borrowings during the year.
+26.
+PROVISION FOR DISMANTLEMENT
+At 1 January
+New projects (1)
+Revision (1)
+Utilisation
+(2)
+(4)
+2002 Share Option Scheme (expired in 2015); and
+(3)
+52,893
+(462)
+(1,180)
+50,888
+54,073
+(252)
+(185)
+2,185
+50,426
+2,145
+(398)
+1,395
+(2,072)
+50,063
+50,888
+1,244
+421
+(440)
+2016
+2017
+(2)
+The amounts are included in the additions of oil and gas properties in note 13.
+(33)
+2016
+The discount rates used for calculating the provision for dismantlement are within the range of 4% to 5% (2016: 4% to 5%).
+111
+2001 Share Option Scheme (expired in 2011);
+(2)
+(1) Pre-Global Offering Share Option Scheme (expired in 2011);
+The Company has adopted the share option schemes for the grant of options to the Company's directors, senior management
+and other eligible grantees.
+43,081
+44,647,455,984
+Share option schemes
+and as at 31 December 2017
+CNOOC LIMITED Annual Report 2017
+as at 1 January 2016, as at 31 December 2016
+Issued and fully paid:
+capital equivalent
+of RMB million
+Issued share
+Number of shares
+27. SHARE CAPITAL
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+Ordinary shares with no par value
+2017
+year (2)
+year (1)
+Due in 2020
+2.625%
+1,500
+1,500
+CNOOC Finance (2015) Australia Pty Ltd
+Due in 2045
+4.200%
+300
+CNOOC Finance (2015) Australia Pty Ltd
+300
+In connection with the Tangguh LNG Project in Indonesia, the Company delivered a guarantee dated 29 October 2007, in favor of Mizuho Corporate
+Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks under a US$884 million commercial loan
+agreement. The Company guarantees the payment obligations of the trustee borrower under the subject loan agreement and is subject to a
+maximum cap of approximately US$135,163,308.28.
+A letter of credit agreement was signed between the Company and Talisman Energy Inc. ("Talisman") with execution of the agreement in respect of
+the sale of a 3.05691% interest of the Company in the Tangguh LNG Project to Talisman. Accordingly, Talisman has delivered valid and unexpired
+standby letters of credit to the Company (as the beneficiary) as a counter-guarantee to offset the exposure of the Company's guarantee for the
+aforesaid interest of 3.05691% in respect of the Tangguh LNG Project financing. The amount of the standby letters of credit was US$30 million. In
+February 2017, the standby letters of credit were withdrawn as the Company transferred the 3.05691% guarantee obligations to BP Corporation
+North America Inc..
+In connection with the financing for the third LNG process train of Tangguh LNG Project in Indonesia, the Company delivered two guarantees
+dated 3 August 2016, in favor of Mizuho Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks
+and Indonesian local commercial banks under two commercial loan agreements with aggregate loan amount of US$2,145 million. The Company
+guarantees the payment obligations of the trustee borrower under the subject loan agreements and is subject to an aggregate maximum cap of
+approximately US$573 million.
+As at 31 December 2017, US$650 million bank loans (2016: US$800 million) were guaranteed by the Company.
+As at 31 December 2017, US$694 million shareholder loans (2016: US$694 million) of the Group were included in general loans. For details please
+refer to Note 29(v).
+CNOOC LIMITED Annual Report 2017
+25. LOANS AND BORROWINGS (continued)
+The maturities of the long term bank loans are as follows:
+All the notes issued mentioned above were fully and unconditionally guaranteed by the Company.
+Repayable:
+2,000
+3.500%
+500
+Nexen
+Due in 2035
+5.875%
+790
+790
+Nexen
+Due in 2037
+2,000
+6.4%
+1,250
+Nexen
+Due in 2039
+14,106
+700
+700
+CNOOC Finance (2015) U.S.A. LLC
+Due in 2025
+1,250
+7.875%
+Within one year
+After three years but within four years
+1,279
+1,085
+Supplemental information with respect to the long term bank loans:
+Maximum
+amount
+outstanding
+Average
+Weighted
+For the year ended
+(215)
+31 December
+Weighted
+average
+interest rate
+at year end
+amount
+average
+outstanding
+interest rate
+during
+the year
+during the
+during the
+Balance
+at year end
+After one year but within two years
+After two years but within three years
+(212)
+1,491
+After four years but within five years
+After five years
+Amount due within one year shown under current liabilities
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2017
+2016
+212
+215
+1,300
+212
+212
+225
+108
+225
+61
+97
+686
+313
+225
+8,251
+CNOOC Finance (2011) Limited
+462
+Notes:
+The amount due to the parent company and amounts due from/to related parties are unsecured, interest-free and are
+repayable on demand, unless otherwise disclosed.
+1,647
+1,940
+Accumulated investment
+2016
+2017
+(ix) Coalbed Methane Resources Exploration and Development Cooperation Agreement with China United
+Coalbed Methane Corporation Limited
+Key management personnel's remuneration is disclosed in note 8.
+(viii) Key management personnel's remuneration
+Interest rates for the above time deposits and specified dismantlement fund accounts are at prevailing market rates.
+12,808
+11,392
+6,088
+7,555
+108
+13
+(a)
+(b)
+(c)
+(d)
+All the Group's full-time employees in the PRC are covered by a state-managed retirement benefit plan operated by the
+government of the PRC, and are entitled to an annual pension. The PRC government is responsible for the pension liabilities to
+these retired employees. The Group is required to make annual contributions to the state-managed retirement benefit plan at
+rates ranging from 11% to 22% of the employees' base salaries.
+RETIREMENT BENEFITS
+30.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+117
+CNOOC LIMITED Annual Report 2017
+6,612
+In September 2014, CNOOC provided CNOOC International Limited, a wholly-owned subsidiary of the Company a five-year uncommitted revolving
+loan facility for general purposes, with the principal amount of US$135 million of 0.95% per annum. As at 31 December 2017, the withdrawal
+amount of the loan was US$130 million (31 December 2016: US$130 million); In December 2014, CNOOC provided the Company a five-year
+uncommitted revolving loan facility for general purposes, with the principal amount of US$600 million of 0.95% per annum. As at 31 December
+2017, the withdrawal amount of the loan was US$564 million (31 December 2016: US$564 million).
+It is the market practice for sales terms to be determined based on the estimated reserves and production profile of the relevant gas fields. The long
+term sales contracts usually last for 5 to 20 years.
+The sales include crude oil, condensate oil, liquefied petroleum gas, natural gas and liquefied natural gas to the CNOOC Group. Individual sales
+contracts were entered into from time to time between the Group and the CNOOC Group.
+CNOOC Energy Technology & Services Limited leased FPSO vessels to the Group for use in oil production operations.
+These include marketing, administration and management, management of oil and gas operations and integrated research services as well as
+other ancillary services relating to exploration, development, production and research activities of the Group. In addition, the CNOOC Group leased
+certain premises to the Group for use as office premises and staff quarters out of which they provided management services to certain properties.
+These represent the services for production operations, the provision of various facilities and ancillary services, such as provision of different types
+of materials, medical and employee welfare services, maintenance and repair of major equipment and supply of water, electricity and heat to the
+Group, some of which may not be available from independent third parties or available on comparable terms.
+(6)
+(f)
+(ǝ)
+CNOOC Finance is a 31.8% owned associate of the Company and also a subsidiary of CNOOC. Under the financial services framework agreement
+with CNOOC Finance dated 1 December 2016, CNOOC Finance continues to provide to the Group settlement, depository, discounting, loans and
+entrustment loans services. The agreement is effective from 1 January 2017 to 31 December 2019. The depository services were exempted from
+independent shareholders' approval requirements under the Listing Rules. The Group's maximum daily outstanding balance for deposits stated in
+CNOOC Finance (including accrued interest but excluding funds placed for the purpose of extending entrustment loans pursuant to the entrustment
+loan services) in 2017 was RMB19,500 million (2016: RMB22,000 million).
+3,824
+2016
+2017
+– included in trade receivables
+Amounts due from other related parties
+Borrowings from CNOOC (note g)
+4,811
+4,532
+15,306
+16,844
+15,091
+12,401
+16,651
+Amounts due to other related parties
+215
+193
+- included in other payables and accrued liabilities
+Amount due to CNOOC
+2016
+2017
+19,437
+- included in trade and accrued payables
+The Company is required to make contributions to a defined contribution mandatory provident fund at a rate of 5% of the
+salaries of all full-time employees in Hong Kong. The related pension costs are expensed as incurred.
+13,090
+513
+Specified dismantlement fund accounts (note 19)
+Time deposits with maturity over three months
+Cash and cash equivalents
+The Group enters into extensive transactions covering sales of crude oil and natural gas, purchase of property, plant
+and equipment and other assets, receiving of services, and making deposits with state-owned enterprises, other than
+the CNOOC Group, in the normal course of business on terms comparable to those with other non-state-owned
+enterprises. The purchases of property, plant and equipment and other assets, and receipt of services from these state
+owned enterprises are individually not significant. The individually significant sales transactions with these state-owned
+enterprises are disclosed in note 34. In addition, the Group had certain of its cash in bank and time deposits with certain
+state-owned banks in the PRC as at 31 December 2017, as summarised below:
+(vii) Transactions and balances with other state-owned enterprises
+29. RELATED PARTY TRANSACTIONS (continued)
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+135
+– included in other current assets
+126
+2017
+116 CNOOC LIMITED Annual Report 2017
+- included in other current assets
+Amount due from a joint venture
+(vi) Balance with a joint venture
+13,263
+12,914
+173
+2016
+19,465
+The Group provides retirement benefits for all local employees in overseas locations in accordance with relevant labour law, and
+provides employee benefits to expatriate staff in accordance with the relevant employment contracts.
+31. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
+Dividend
+Interest
+payable
+Loans and
+borrowings
+CNOOC LIMITED Annual Report 2017
+118
+At 31 December 2017
+Dividends declared
+Finance costs
+Foreign exchange translation
+Financing cash flows
+At 1 January 2017
+Reconciliation of liabilities arising from financing activities
+The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash
+changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in
+the Group's consolidated statement of cash flows as cash flows from financing activities.
+82,137
+110,625
+2,491
+782
+7,199
+(Note 25)
+(Note 24)
+payable
+Total
+133,431
+1,181
+132,250
+16,500
+16,500
+5,394
+(8,912)
+(52)
+1,464
+51
+5,040
+(8,911)
+(31,271)
+(16,448)
+(5,154)
+(9,669)
+151,720
+1,244
+150,476
+354
+(2,820)
+(1,073)
+81,544
+(302)
+790
+(356)
+6,246
+5,044
+(901)
+(653)
+Share of (profits)/losses of associates
+609
+Exchange (gains)/losses, net
+Interest income
+Adjustments for:
+Profit/(loss) before tax
+(5,275)
+36,357
+2016
+2017
+Reconciliation of profit/(loss) before tax to cash generated from operations
+Finance costs
+During the year, the Group's pension costs charged to the consolidated statement of profit or loss and other comprehensive
+income amounted to RMB651 million (2016: RMB695 million).
+Share of profit of a joint venture
+(533)
+109,452
+Cash generated from operations
+Increase in trade and accrued payables and other payables
+Decrease in inventories and supplies
+Increase in trade receivables and other current assets
+Subtotal
+2,304
+1,937
+(553)
+Loss on disposal and write-off of property, plant and equipment
+61,257
+Depreciation, depletion and amortisation
+12,171
+9,130
+Impairment and provision
+(2,774)
+(2,409)
+Investment income
+68,907
+2016
+922
+564
+(37,170,000)
+7.29
+(35,104,000)
+11.30
+(37,893,000)
+12.43
+(22,506,000)
+10.56
+262,592,000
+11.40
+187,529,000
+HK$
+Weighted average
+exercise price
+Number of
+share options
+Weighted average
+exercise price
+HK$
+share options
+Number of
+5.56
+129,919,000
+12.34
+187,529,000
+31 December 2017
+Notes to Consolidated Financial Statements
+113
+CNOOC LIMITED Annual Report 2017
+In accordance with the "Temporary Regulation for Safety Expense Financial Management of Higher Risk Industry" and the
+implementation guidance issued by the MOF of the PRC, the Group is required to accrue a safety fund for its oil and gas
+exploration and production activities within the PRC by appropriating a portion of its net profit to other reserves based on its
+annual production from offshore China. Such reserve is reduced for expenses incurred to improve the safety conditions of
+oil and gas production. When the safety fund is fully utilised, additional expenses incurred for safety production purposes are
+charged directly to the profit or loss for the year. As of 31 December 2017, the Group's safety fund reserve under the PRC
+regulations amounted to nil (2016: nil).
+As at 31 December 2017, the general reserve fund amounted to RMB60,000 million (2016: RMB10,000 million).
+Appropriation to the staff and workers' bonus and welfare fund, which is determined at the discretion of the board of directors
+of CNOOC China Limited, is expensed as incurred under IFRSS/HKFRSS. The staff and workers' bonus and welfare fund can
+only be used for special bonuses or collective welfare of employees.
+The general reserve fund, which is determined at the discretion of the board of directors of CNOOC China Limited, can only be
+used, upon approval by the relevant authority, to offset against accumulated losses or to increase capital.
+2016
+According to the laws and regulations of the PRC and the articles of association of CNOOC China Limited, CNOOC China
+Limited is required to provide for certain statutory funds, namely, the general reserve fund and the staff and workers' bonus
+and welfare fund, which are appropriated from net profit (after making up for losses from previous years), but before dividend
+distribution.
+28.
+At the date of approval of these consolidated financial statements for issuance, the share options outstanding under these
+share option schemes represented approximately 0.29% of the Company's shares in issue as at that date (2016: 0.42%). The
+weighted average remaining contractual life of share options outstanding at the end of the year was 1.52 years (2016: 2.11
+years). The exercise in full of the outstanding share options would, under the present capital structure of the Company, result
+in the issue of 129,919,000 (2016: 187,529,000) additional ordinary shares of the Company and additional share capital of
+RMB1,339,702,913 (2016: RMB1,912,814,087).
+No share options had been cancelled or modified during the years ended 31 December 2017 and 2016.
+11.40
+187,529,000
+12.34
+129,919,000
+11.40
+RESERVES
+2017
+Exercisable at the end of the year
+Outstanding at end of year
+Other payables
+25. LOANS AND BORROWINGS
+Current
+2017
+2016
+1,490
+1,509
+630
+Provision for dismantlement (note 26)
+683
+449
+3,096
+3,272
+55
+75
+240
+1,180
+2017
+381
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Royalties payable
+Accrued expenses
+Exercised during the year
+Expired during the year
+Forfeited during the year
+Granted during the year
+Outstanding at the beginning of the year
+Details of the share options outstanding are as follows:
+The fair value of equity-settled share options granted was estimated as at the date of grant if any, using the Black-Scholes
+option pricing model, taking into account the terms and conditions upon which the options were granted.
+Share option scheme (continued)
+Advances from customers
+27. SHARE CAPITAL (continued)
+23.
+TRADE AND ACCRUED PAYABLES
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+As at 31 December 2017 and 2016, substantially all the trade and accrued payables were aged within six months. The trade
+and accrued payables are non-interest-bearing.
+24.
+OTHER PAYABLES AND ACCRUED LIABILITIES
+Accrued payroll and welfare payable
+Provision for retirement benefits
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+29.
+Special oil gain levy payable
+As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a state-owned enterprise subject to the control of the
+State Council of the PRC. The State Council of the PRC directly and indirectly controls a significant number of state-owned
+entities and organisations.
+9,837
+Long term sales of natural gas and liquefied natural gas (note e)
+109,518
+Sales of petroleum and natural gas products (other than long-term sales
+of natural gas and liquefied natural gas) (note d)
+2016
+2017
+The Group did not enter into any transactions in the above category for the years ended 31 December 2017 and 2016.
+(iii) Sales of petroleum and natural gas products by the Group to the CNOOC Group
+Provision of management, technical, facilities and ancillary services, including the supply of materials
+by the Group to the CNOOC Group
+88,682
+8,663
+(ii)
+33,956
+1,551
+1,383
+994
+1,450
+7,250
+8,894
+Provision of oil and gas production and support services (note a)
+Provision of marketing, management and ancillary services (note b)
+FPSO vessel leases (note c)
+28,366
+14,214
+119,355
+CNOOC LIMITED Annual Report 2017
+360
+RELATED PARTY TRANSACTIONS
+2016
+2017
+Balances with the CNOOC Group
+Deposits in CNOOC Finance
+Deposits balances made by the Group
+(b)
+97,345
+Interest income from deposits in CNOOC Finance
+Interest income received by the Group
+(iv)
+Transactions and balances with CNOOC Finance Corporation Limited ("CNOOC Finance") (note f)
+29. RELATED PARTY TRANSACTIONS (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+115
+(v)
+16,317
+(a)
+3,392
+On the basis of the above basic pricing principle, each type of products or services must be charged in accordance with the
+following pricing mechanism and in the following sequential order:
+The basic pricing principle for the continuing connected transactions between the Group and the CNOOC Group is based on
+arm's length negotiations, on normal commercial terms or better and with reference to the prevailing local market conditions
+(including the volume of sales, length of contracts, the volume of services, overall customer relationship and other market
+factors).
+Pricing principles
+Sales of petroleum and natural gas products (other than long-term sales of natural gas and liquefied natural gas)
+b) Long-term sales of natural gas and liquefied natural gas
+a)
+Sales of petroleum and natural gas products by the Group to the CNOOC Group:
+Provision of management, technical, facilities and ancillary services, including the supply of materials by the Group to the
+CNOOC Group; and
+Floating production, storage and offloading ("FPSO") vessel leases
+(a)
+Provision of marketing, management and ancillary services
+(၁
+(3)
+b) Provision of oil and gas development and support services
+a) Provision of exploration and support services
+Provision of exploration, oil and gas development, oil and gas production as well as marketing, management and ancillary
+services by the CNOOC Group to the Group:
+2,364
+Comprehensive framework agreement with CNOOC in respect of a range of products and services
+As the Group is controlled by CNOOC, transactions with CNOOC, its subsidiaries and associates (the “CNOOC Group") are
+disclosed as related party transactions. The connected transactions or continuing connected transactions defined in Chapter
+14A of the Listing Rules in respect of items listed below also constitute related party transactions. The Company has complied
+with the disclosure requirements in accordance with Chapter 14A of the Listing Rules for continuing connected transactions
+listed below. The Company entered into a comprehensive framework agreement with CNOOC on 15 November 2016 for
+the provision (1) by the Group to the CNOOC Group and (2) by the CNOOC Group to the Group, of a range of products and
+services which may be required and requested from time to time by either party and/or its associates in respect of the continuing
+connected transactions. The term of the comprehensive framework agreement is for a period of three years from 1 January
+2017. The continuing connected transactions under the comprehensive framework agreement and the relevant annual caps for
+the three years from 1 January 2017 were approved by the independent shareholders of the Company on 1 December 2016.
+The approved continuing connected transactions are as follows:
+(1)
+d)
+government-prescribed prices; or
+Provision of oil and gas production and support services
+(b) where there is no government-prescribed price, in accordance with market prices, including the local, national or
+international market prices.
+- Inclusive of amounts capitalised under property, plant and equipment
+Provision of oil and gas development and support services
+Provision of exploration and support services
+2016
+5,912
+Provision of exploration, oil and gas development, oil and gas production as well as marketing,
+management and ancillary services by the CNOOC Group to the Group
+(i)
+The following is a summary of significant related party transactions entered into in the ordinary course of business between the
+Group and its related parties during the year and the balances arising from related party transactions at the end of the year:
+The continuing connected transactions referred to in paragraph (2) above provided by the Group to the CNOOC Group, on
+the basis of the above pricing principle, are determined through arm's length negotiation between both parties with reference
+market price.
+2017
+The continuing connected transactions referred to in paragraph (1)(e), on the basis of the above pricing principle, are
+unanimously determined with the CNOOC Group which provides the FPSO vessel leases after arm's length negotiation in
+accordance with normal commercial terms.
+The continuing connected transactions referred to in paragraph (1)(a)-(1)(b) above provided by the CNOOC Group to the Group
+and (3)(a)-(3)(b) above provided by the Group to the CNOOC Group, on the basis of the above pricing principle, are based on
+market prices (as defined in the comprehensive framework agreement).
+The continuing connected transactions referred to in paragraph (1)(c)-(1)(d) above provided by the CNOOC Group to the Group,
+on the basis of the above pricing principle, are based on government-prescribed price or market prices.
+114
+CNOOC LIMITED Annual Report 2017
+4,357
+29. RELATED PARTY TRANSACTIONS (continued)
+Pricing principles (continued)
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Royal Dutch Shell PLC
+Phillips 66
+BP p.l.c.
+PetroChina Company Limited*
+China Petroleum & Chemical Corporation*
+A substantial portion of the Group's oil and gas commodities sales to third-party customers is made to a small number of
+customers on credit. Details of the gross sales to these top five third party customers are as follows:
+CONCENTRATION OF CUSTOMERS
+For financial assets and liabilities arising from derivative contracts, inputs may be readily observable, market-corroborated
+or generally unobservable. The Group utilises valuation techniques that seek to maximise the use of observable inputs and
+minimise the use of unobservable inputs. To value longer term transactions and transactions in less active markets for which
+pricing information is not generally available, unobservable inputs may be used.
+47,401
+Liabilities measured at fair value
+Derivative financial liabilities - current
+(426)
+(426)
+No amounts have been transferred between the different levels of the fair value hierarchy for the year.
+34.
+11,957
+These transactions are with other state-owned enterprises.
+2017
+2016
+15,488
+9,659
+3,661
+6,923
+3,108
+2,843
+2,631
+N/A
+7,322
+N/A
+2,627
+EOG Resources, Inc.
+54,723
+31 December
+1,391
+8,115
+8,115
+2,660
+Derivative financial assets - current
+Equity investments
+Non-publicly traded investments - current
+Publicly traded investments – non current
+14
+14
+781
+781
+75,139
+8,896
+66,243
+Liabilities measured at fair value
+Derivative financial liabilities - current
+2016
+Level 1
+15
+15
+Non-publicly traded investments - current
+Publicly traded investments - non current
+428
+428
+Derivative financial assets - current
+Equity investments
+1,391
+5,931
+46,958
+5,931
+Corporate wealth management products
+Money market funds
+Other financial assets - current
+Assets measured at fair value
+Level 3
+Level 2
+46,958
+CNOOC LIMITED Annual Report 2017
+2017
+124
+Interest-bearing debts
+Equity attributable to owners of the parent
+Total capital
+Gearing ratio
+2016
+132,250
+150,476
+379,975
+382,371
+512,225
+532,847
+25.8%
+28.2%
+36.
+The Group monitors capital on the basis of the debt to capital ratio, which is calculated as interest-bearing debts divided
+by total capital (equity attributable to owners of the parent plus interest-bearing debts).
+37.
+CNOOC NWS Private Limited, a wholly-owned subsidiary of the Group, together with the other joint venture partners and the
+operator of the NWS Project, signed a Deed of Cross Charge and an Extended Deed of Cross Charge whereby certain liabilities
+incurred or to be incurred, if any, by the Company in respect of the NWS Project are secured by its interest in the NWS Project.
+SUBSEQUENT EVENTS
+The Group has no significant subsequent events needed to be disclosed in the consolidated financial statements.
+CNOOC LIMITED Annual Report 2017 125
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+38. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
+Information about the statement of financial position of the Company at the end of the reporting period is as follows:
+2017
+2016
+NON-CURRENT ASSETS
+66,229
+Property, plant and equipment
+CHARGE OF ASSETS
+123
+The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To
+maintain or adjust the capital structure, the Group may return capital to shareholders, raise new debt or issue new shares.
+No changes were made in the objectives, policies or processes for managing capital during the years end 31 December
+2017 and 2016.
+(vi) Capital management
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+35.
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
+The Group's principal financial instruments comprise bank loans, long term guaranteed notes, equity investment and other
+financial assets, cash and short term deposits. The Group has various other financial assets and liabilities such as trade
+receivables, trade and accrued payables, which arise directly from its operations.
+The Group is exposed to credit risk, oil and gas price risk, currency risk, interest rate risk and liquidity risk.
+The Group's senior management oversees the management of these risks. The Group's senior management is supported by
+various departments that advise on financial risks and the appropriate financial risks governance framework for the Group.
+Those departments provide assurance to the Group's senior management that the Group's financial risk-taking activities are
+governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance
+with group policies and group risk appetite.
+(i)
+(ii)
+Credit risk
+The carrying amounts of the Group's cash and cash equivalents, time deposits, money market funds and corporate
+wealth management products, trade receivables and other receivables, and other current assets except for prepayments
+represent the Group's maximum exposure to credit risk in relation to its financial assets.
+The significant portion of the Group's trade receivables is related to the sale of oil and natural gas to third party customers.
+The Group performs ongoing credit evaluations of the customers' financial condition and collateral may be required
+from customers. The Group made an impairment allowance on doubtful receivables and actual losses have been within
+management's expectation.
+Concentrations of credit risk are managed by customer/counterparty and by geographical region. At 31 December
+2017,
+the Group has certain concentrations of credit risk as 0.16% (2016: 1%) and 7.63% (2016: 5%) of the Group's
+trade receivables were due from the Group's largest third-party customer and the five largest third-party customers,
+respectively.
+The primary objectives of the Group's capital management are to safeguard the Group's ability to continue as a going
+concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.
+No other financial assets carry a significant exposure to credit risk.
+Since the Group makes reference to international oil prices to determine its realised oil price, fluctuations in international
+oil price would have a significant impact on the Group's sales revenue, profit, assets value and cashflow. In addition,
+certain of the Group's natural gas sales contracts contain price adjustment provisions. Any changes in international oil
+prices, inflation rate and domestic natural gas price policies may result in changes in natural gas prices, which will affect
+the Group's profitability. In North America, the majority of the Group's oil and gas production is sold under short-term
+contracts, exposing the Group to the risk of price movements. Other energy contracts the Group enters into also expose
+the Group to oil and gas price risk between the time the Group purchases and sells contracted volumes.
+(iii) Currency risk
+Substantially all of the Group's oil and gas sales are denominated in Renminbi and United States dollars ("US dollars").
+Starting from 21 July 2005, China reformed the exchange rate regime by moving into a managed floating exchange
+rate regime based on market supply and demand with reference to a basket of currencies. Renminbi would no longer
+be pegged to the US dollars. From 1 January 2017 to 31 December 2017 (the last working day in 2017), Renminbi
+has appreciated by approximately 6.16% (2016: depreciated by approximately 6.39%) against the US dollars. At 31
+December 2017, approximately 82% (2016: 88%) of the Group's cash and cash equivalents and time deposits with
+maturity over three months were denominated in Renminbi, and the remaining amounts were substantially denominated
+in US dollars and Hong Kong dollars. The Group also has exposures to currencies other than the US dollars, such as
+Canadian dollar and British Pounds as such exposures are considered insignificant.
+Management has assessed the Group's exposure to foreign currency risk by using a sensitivity analysis on the change
+in foreign exchange rate of the US dollars, to which the Group is mainly exposed to as at 31 December 2017 and 2016.
+Based on management's assessment at 31 December 2017, a 5% strengthening/weakening of RMB against US dollars
+would have increased/decreased the profit for the year of the Group by 0.06% (2016: 6.63%) and the equity of the Group
+by 0.31% (2016: 0.46%). This analysis has been determined assuming that the change in foreign exchange rates had
+occurred at the end of the reporting period and had been applied to the foreign currency balances to which the Group
+has significant exposure with all other variables held constant. The analysis is performed on the same basis for 2016.
+CNOOC LIMITED Annual Report 2017
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+35. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+(iii) Currency risk (continued)
+Senior management is closely monitoring the Group's net exposure to foreign currency risk. The appreciation of Renminbi
+against the US dollars may have the following impact on the Group. On one hand, since the benchmark oil and gas prices
+are usually in US dollars against Renminbi, the Group's oil and gas sales may decrease due to the depreciation of the US
+dollars against Renminbi. On the other hand, the depreciation of the US dollars against Renminbi will also decrease the
+Group's costs for imported equipment and materials, most of which are denominated in the US dollars. In addition, the
+debt repayment by the Group will decrease since all of the Group's interest-bearing debts are also denominated in the
+US dollars.
+(iv) Interest rate risk
+The interest rate risk is closely monitored by the Group's senior management. As at the end of 2017, the interest rates
+for 95.5% of the Group's debts were fixed. Apart from borrowing for Tangguh LNG Project, all of the Group's long term
+debts are fixed rate. The weighted average term of the Group's debt balance outstanding was approximately 9.35 years.
+The fixed interest rates can reduce the volatility of finance costs under uncertain environments and the Group's exposure
+to changes in interest rates is not expected to be material.
+(v) Liquidity risk
+The Group manages its liquidity risk by regularly monitoring its liquidity requirements and its compliance with debt
+covenants to ensure that it maintains sufficient cash and cash equivalents, and readily realisable equity investments and
+other financial assets, and adequate time deposits to meet its liquidity requirements in the short and long term. In addition,
+bank facilities have been put in place for contingency purposes.
+The Group's trade and accrued payables, other payables and accrued liabilities are all due for settlement within six
+months after the reporting date.
+Oil and gas price risk
+66,229
+COMMITMENTS AND CONTINGENCIES (continued)
+Other financial assets - current
+1,048
+896
+Later than two years and not later than five years
+Later than five years
+1,274
+1,534
+1,774
+1,963
+5,726
+5,710
+CNOOC LIMITED Annual Report 2017
+119
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Later than one year and not later than two years
+32.
+Operating lease commitments (continued)
+Office properties (continued)
+a.
+The above table includes minimum lease payments of approximately RMB1,218 million (2016: RMB639 million) to
+the CNOOC Group.
+Office properties commitments of a joint venture:
+Commitments due:
+No later than one year
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+2017
+2016
+18
+25
+12
+17
+(ii)
+16
+1,317
+No later than one year
+Investments in subsidiaries
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+32.
+COMMITMENTS AND CONTINGENCIES
+(i)
+Capital commitments
+As at 31 December 2017, the Group had the following capital commitments, principally for the construction of property,
+plant and equipment:
+2017
+2016
+Contracted, but not provided for (1)
+46,704
+46,515
+(1)
+The capital commitments contracted, but not provided for, include the estimated payments to the Ministry of Land and Resources of the
+PRC for the next five years with respect to the Group's exploration and production licenses.
+1,630
+The above table includes a commitment of approximately RMB4,030 million (2016: RMB2,482 million) contracted with the
+CNOOC Group.
+2017
+2016
+691
+360
+Contracted, but not provided for
+As at 31 December 2017, the Group had unutilised banking facilities amounting to approximately RMB53,749 million
+(2016: RMB60,697 million).
+(ii) Operating lease commitments
+a.
+Office properties
+The Group leases certain of its office properties under operating lease arrangements. Leases for properties are
+negotiated for terms ranging from 6 months to 20 years.
+As at 31 December 2017, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+2017
+2016
+Commitments due:
+Capital commitments of a joint venture:
+Corporate wealth management products
+Money market funds
+23
+69
+CNOOC LIMITED Annual Report 2017
+121
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+33.
+FINANCIAL INSTRUMENTS
+Fair value of financial instruments
+The Group enters into contracts to purchase and sell crude oil, natural gas and other energy commodities, and use derivative
+contracts, including futures, forwards, swaps and options for hedging and trading purposes (collectively derivative contracts).
+The Group also uses derivatives to manage foreign currency risk for non-trading purposes.
+For purposes of estimating the fair value of the derivative contracts, wherever possible, the Group utilises quoted market price
+and, if not available, estimates from third-party brokers. These brokers' estimates are corroborated with multiple sources and/
+or other observable market data utilising assumptions that market participants would use when pricing the assets or liabilities,
+including assumptions about risk and market liquidity.
+The carrying values of the Group's cash and cash equivalents, time deposits, trade receivables, other current assets, short-term
+loans, trade and accrued payables, other payables and accrued liabilities approximated to their fair values at the reporting date
+due to the short maturity of these instruments.
+The carrying amount of the Group's non-current non-publicly traded equity investments represents an appropriate estimate of
+their fair values, as sufficient information is not available recently to measure their fair values as at 31 December 2017 and 2016.
+The fair value of the Group's long term bank loans with floating interest rates approximated to the carrying amount as at 31
+December 2017 and 2016.
+The estimated fair value of the Group's long term guaranteed notes was approximately RMB128,315 million as at 31 December
+2017 (2016: RMB140,135 million), which was determined by reference to the market price as at 31 December 2017.
+Fair value hierarchy
+In addition to the matters mentioned above, the Group is dealing with a number of other lawsuits and arbitrations that
+arise in the ordinary course of business. While the results of these legal proceedings cannot be ascertained at this
+stage, the Company believes these proceedings are not expected to have a material effect on the consolidated financial
+statements.
+The Group uses the following hierarchy that reflects the significance of the inputs used in making the fair value measurement:
+Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which
+transaction occur in sufficient frequency and volume to provide pricing information on an on-going basis.
+Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
+not based on observable market data (unobservable inputs), or where the observable data does not support the majority of the
+instruments fair value.
+122
+CNOOC LIMITED Annual Report 2017
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+FINANCIAL INSTRUMENTS (continued)
+33.
+Fair value hierarchy (continued)
+As at 31 December 2017 and 31 December 2016, the Group held the following financial instruments measured at fair value for
+each hierarchy respectively:
+31 December
+2017
+Level 1
+Level 2
+Level 3
+Assets measured at fair value
+Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
+observable for the asset or liability, either directly or indirectly. Instruments in this category include non-exchange traded
+derivatives such as over-the-counter physical forwards and options, including those that have prices similar to quoted market
+prices, private equity funds and corporate wealth management products. The Group obtains information from sources of
+independent price publications, over-the-counter broker quotes and the fund management's quotations as at the reporting
+date.
+51
+The Group is subject to tax in numerous jurisdictions around the world. There are audits in progress and items under
+review. Difference in positions taken by taxation authorities over the interpretation and application of tax laws and
+regulations may increase the Group's tax liability. Management has assessed the possible future outcome of matters that
+are currently under dispute. The Company believes that an adequate provision for future tax liability has been included in
+the consolidated financial statements based on available information.
+The Company is of the view that there was no material financial impact of the Penglai 19-3 Oilfield Oil Spill Accidents
+on the Company.
+119
+b.
+Plant and equipment
+The Group leases certain of its plant and equipment under operating lease arrangements for a term from 1 year to
+25 years.
+As at 31 December 2017, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+Commitments due:
+No later than one year
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+2017
+2016
+1,272
+1,378
+875
+734
+As a Chinese Resident Enterprise, the Company may be liable to pay taxes on the deemed interest income for
+the funding provided to its overseas subsidiaries starting from 1 January 2008. The Company has prepared
+contemporaneous documentation in accordance with applicable PRC tax laws and regulations and is currently
+awaiting confirmation from its in-charge tax authority.
+1,616
+3,406
+3,878
+7,169
+7,306
+The above table includes a commitment of approximately RMB3,366 million (2016: RMB3,211 million) to the
+CNOOC Group.
+120
+CNOOC LIMITED Annual Report 2017
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+32.
+COMMITMENTS AND CONTINGENCIES (continued)
+(iii) Contingencies
+(a)
+(b)
+Two oil spill accidents (the "Penglai 19-3 Oilfield Oil Spill Accidents") occurred on 4 June and 17 June 2011
+respectively at Platforms B and C of the Penglai 19-3 oilfield, which is being operated under a production sharing
+contract (the "PSC") among CNOOC China Limited, a subsidiary of the Company, and two subsidiaries of
+ConocoPhillips, a U.S. based oil company, among which ConocoPhillips China Inc. (the "COPC") was the operator
+and responsible for the daily operations of the oilfield when the Penglai 19-3 Oilfield Oil Spill Accidents occurred.
+On 10 August 2015, the Company received a Notice Calling for Responses from the Qingdao Maritime Court of
+the People's Republic of China (the "Qingdao Maritime Court") for a public interest action filed by China Biodiversity
+Conservation and Green Development Foundation (the "Plaintiff") in relation to the Penglai 19-3 Oilfield Oil Spill
+Accidents (the "Lawsuit"). The Lawsuit is lodged against COPC and CNOOC China Limited. On 2 February 2018,
+CNOOC China Limited received a ruling dated 28 December 2017 issued by Qingdao Maritime Court (the "Ruling”).
+Pursuant to the Marine Environment Protection Law of the People's Republic of China amended in 2016, Qingdao
+Maritime Court ruled that the Plaintiff was not an appropriate entity to file the Lawsuit, and rejected it. As none of the
+parties to the Lawsuit appealed within the time limit, the Ruling came into effect. Therefore, CNOOC China Limited
+bears no liability for the Lawsuit.
+1,316
+Total non-current assets
+26
+Other current assets
+Profit for the year
+38,099
+38,099
+Other comprehensive income
+(11,464)
+(11,464)
+122,816
+Total comprehensive income
+38,099
+26,635
+2016 final dividend
+(8,913)
+(8,913)
+2017 interim dividend
+(11,464)
+121,571
+5,558
+(4,313)
+9,943
+57,356
+67,299
+2015 final dividend
+(9,540)
+(9,540)
+2016 interim dividend
+(4,613)
+(4,613)
+Balance at 31 December 2016
+(4,313)
+5,558
+121,571*
+122,816
+Balance at 1 January 2017
+(7,587)
+(7,587)
+(15,777)
+5,558
+We implemented rigorous internal control system that monitors the entire reserves estimation process and certain key metrics
+in order to ensure that the process and results of reserves estimates fully comply with the relevant SEC rules.
+We established the Reserve Management Committee (the "RMC"), which is led by one of our Executive Vice Presidents and
+comprises the general managers of the relevant departments.
+The RMC's main responsibilities are to:
+•
+review our reserves policies;
+review our proved reserves and other categories of reserves; and
+•
+select our reserves estimators and auditors.
+The RMC follows certain procedures to appoint our internal reserves estimators and reserves auditors, who are required to have
+undergraduate degrees and at least five years and ten years of experience related to reserves estimation, respectively.
+The reserves estimators and auditors are required to be members of a professional society, such as China Petroleum Society
+(CPS), and are required to take the professional trainings and examinations as required by the professional society and us.
+The RMC delegates its daily operation to our Reserves Office, which is led by our Chief Reserve Supervisor. The Reserves Office
+is mainly responsible for supervising reserves estimates and auditing. It reports to the RMC periodically and is independent from
+operating divisions such as the exploration, development and production departments. Our Chief Reserve Supervisor has more
+than 35 years' experience in oil and gas industry.
+The Group's net proved reserves consist of its interest in reserves, comprised of a 100% interest in its independent oil and gas
+properties and its participating interest in the properties covered under the production sharing contracts in the PRC, less (i)
+an adjustment for the Group's share of royalties payable by the Group to the PRC government and the Group's participating
+interest in share oil payable to the PRC government under the production sharing contracts, and less (ii) an adjustment
+for production allocable to foreign partners under the PRC production sharing contracts as reimbursement for exploration
+expenses attributable to the Group's participating interest, and plus the participating interest in the properties covered under
+the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host government
+and the domestic market obligation.
+Pursuant to SEC Final Rule, the Group uses the average, first-day-of-the-month oil price during the 12-month period before the
+ending date of the period covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+The Company determines its net entitlement oil and gas reserves under production sharing contracts using the economic interest
+method.
+CNOOC LIMITED Annual Report 2017
+CURRENT ASSETS
+For the years 2017, 2016 and 2015, approximately 65%, 60% and 62%, respectively, of our total proved reserves were
+evaluated by us, and the remaining were evaluated by independent third parties.
+Total comprehensive income
+Crude oil and natural gas reserve estimates are determined through analysis of geological and engineering data which appear,
+with reasonable certainty, to be economically producible in the future from known oil and natural gas reservoirs under existing
+economic and operating conditions. The reserve data that we disclosed were all based on the definitions and disclosure
+guidelines contained in the US Securities and Exchange Commission's final rules on "Modernization of oil and Gas Reporting"
+(the "SEC Final Rule").
+(a)
+143,170*
+132,951
+As at 31 December 2017, the distributable retained earnings of the Company amounted to approximately RMB143,170 million (2016: RMB121,571
+million).
+39.
+APPROVAL OF THE FINANCIAL STATEMENTS
+The consolidated financial statements were approved and authorised for issue by the Board of Directors on 29 March 2018.
+CNOOC LIMITED Annual Report 2017
+127
+128
+Supplementary Information on Oil and
+Gas Producing Activities (Unaudited)
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+The following disclosures are included in accordance with the FASB Accounting Standard Codification 932 "Extractive Activities-Oil
+and Gas (the "ASC 932").
+The regional analysis presented below is on a continent basis, with separate disclosure for countries that contain 15% or more of the
+total proved reserve, in accordance with SEC and FASB requirements.
+Reserve quantity information
+9,943
+Balance at 31 December 2017
+Other comprehensive income
+73,106
+Total current assets
+CURRENT LIABILITIES
+Loans and borrowings
+3,682
+3,909
+Other payables and accrued liabilities
+87
+91
+Amounts due to subsidiaries
+10,742
+11,403
+Total current liabilities
+14,511
+15,403
+68
+NET CURRENT ASSETS
+142
+15
+Amounts due from subsidiaries
+9,943
+Loans to a subsidiary
+Equity investments
+Other financial assets
+Cash and cash equivalents
+117,437
+125,670
+117,437
+125,670
+42
+13,146
+41
+13,761
+56,891
+41,745
+14
+2,871
+58,595
+55,630
+40,227
+STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
+A summary of the Company's reserves is as follows:
+Cumulative
+translation
+reserve
+Other
+reserves
+earnings
+Total
+Balance at 1 January 2016
+(14,256)
+5,558
+78,368
+69,670
+Profit for the year
+57,356
+57,356
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+38.
+Retained
+176,032
+176,032
+165,897
+165,897
+NET ASSETS
+EQUITY
+Equity attributable to owners of the parent
+Issued capital
+TOTAL EQUITY
+Reserves
+126 CNOOC LIMITED Annual Report 2017
+XU Keqiang
+Director
+43,081
+43,081
+132,951
+122,816
+YUAN Guangyu
+Director
+1,115
+7,216
+58,679
+17,597
+102,896
+54,087
+14,968
+(27,226)
+Net capitalised costs
+(440,864)
+(36,083)
+(936)
+(27,733)
+429,481
+(1,472) (58,331)
+172,923
+2016
+34,667
+North
+(266,002) (23,081)
+36,796
+2,129
+Proved oil and gas properties
+Total
+Europe
+America
+Canada)
+Africa Canada
+Oceania
+PRC)
+PRC
+South
+America
+(excluding
+Asia
+(excluding
+Enterprise's share of equity method investees
+depletion and amortisation
+Net capitalised costs
+255,439
+Europe
+South
+America
+Canada)
+Africa Canada
+Oceania
+(excluding
+America
+Total
+Asia
+(excluding
+PRC)
+North
+2016
+Consolidated entities
+28,550
+28,252
+298
+(9,524)
+Unproved oil and gas properties
+PRC
+Accumulated depreciation,
+Proved oil and gas properties
+36,318
+49,524
+7,619
+38,649
+115,875
+28,404
+2
+1,731
+425,290
+13,635
+614,906
+4,156
+533
+47,763
+14,247
+84,014
+2,585
+Unproved oil and gas properties
+5,645
+Canada
+Accumulated depreciation,
+Net capitalised costs
+(492,505)
+(40,350)
+(942)
+(31,835)
+(27,894)
+(64,047)
+(1,480)
+(26,786)
+(299,171)
+depletion and amortisation
+Accumulated depreciation,
+656,177
+40,089 234,164
+7,917
+34,471
+160,185
+12,950
+957
+50,884
+America
+South
+(excluding
+Canada)
+(7,693)
+Africa
+PRC) Oceania
+PRC
+103,637
+America
+North
+Enterprise's share of equity method investees
+2017
+11,325 397,836
+8,891
+57,367
+95,277
+Asia
+(excluding
+30,690
+2
+1,195
+North
+America
+Asia
+(excluding
+2017
+Consolidated entities
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+(c) Capitalised costs (continued)
+CNOOC LIMITED Annual Report 2017
+(excluding
+134
+30,002
+158
+Net capitalised costs
+(12,281)
+(10,310)
+(1,971)
+depletion and amortisation
+30,160
+5,645
+South
+PRC)
+16,163
+Unproved oil and gas properties
+11,586
+1,916
+54,731
+19,534
+84,241
+PRC
+2,435
+443,193
+Proved oil and gas properties
+Total
+Europe
+Canada) America
+Africa Canada
+Oceania
+38,541
+(1,831)
+oil Bitumen
+Accumulated depreciation,
+1,431
+5,355
+60
+846
+446
+'༄
+15
+20
+119
+15
+815
+275
+2
+102
+9 2,015 6.993 815
+Improved Recovery
+Discoveries and extensions
+Purchase/(Disposal) of reserves
+31 December 2015
+1,692 4,757 47 861 17 456 143 -- 233 750 31 209 404 - - 2 - 149 20 2,258 6,731
+267 1,491
+10
+1 2 1 0 0
+(250)
+(626)
+ER
+15
+99
+ਤੂੰ 6 ।
+G
+750
+750
+31
+1,576
+8
+75
+Revisions of prior estimates
+Production
+Revisions of prior estimates
+(70)
+(8)
+(514)
+7 2,015 7,486 301
+31-00312
+112 250
+'ཡྻུ8
+31 December 2017
+1,627
+THE I
+137
+5,911 70 885 11 297 137
+162 10 37 68
+78
+EN
+81
+11 171
+260 350
+1
+119 (170)
+31 December 2016
+1,446
+446
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+Production
+Revisions of prior estimates
+(271) (237)
+52
+33
+12
+333
+(101)
+(8)
+(514)
+301
+5,844 77 952
+Production
+Improved Recovery
+Discoveries and extensions
+2015
+27,570 451,308
+5,529
+56,081
+105,188
+49,829
+1,169
+14,584
+191,358
+Net capitalised costs
+(355,258)
+(26,034)
+(831)
+(20,247)
+(14,774)
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+America
+5,754
+5,754
+Unproved oil and gas properties
+32,320
+30,191
+2,129
+Proved oil and gas properties
+(43,408)
+Total
+South
+America
+Canada)
+Canada
+Africa
+PRC) Oceania
+PRC
+(excluding
+Europe
+(1,253)
+(17,768)
+(230,943)
+409,295
+Proved oil and gas properties
+Total
+Europe
+America
+Canada)
+Canada
+30,736
+Africa
+Europe
+Total
+Natural Synthetic
+gas
+Europe
+(bcf) (mmbbls) (mmbls)
+Consolidated entities
+31 December 2014
+Purchase/Disposal) of reserves
+South America
+Natural
+Natural
+gas Oil gas Oil
+(bcf) (mmbbls) (bcf) (mmbbls)
+depletion and amortisation
+2,420
+29,160
+depletion and amortisation
+Accumulated depreciation,
+218,243
+42,387
+6,263
+36,523
+90,802
+65,593
+27,644
+1,616
+13,006
+Unproved oil and gas properties
+588,323
+11,217
+97
+39,805
+2
+Total
+North
+America
+2,159
+North
+America
+(excluding
+Canada) America
+Canada
+Africa
+PRC) Oceania
+PRC
+Asia
+(excluding
+Enterprise's share of equity method investees
+2017
+52,733
+1,680
+2,195
+8,585
+2,417
+9,509
+7
+South
+Europe
+Total
+59
+2,822
+Management believes that this information does not represent the fair market value of the oil and natural gas reserves or the
+present value of estimated cash flows since no economic value is attributed to potential reserves, the use of a 10% discount
+rate is arbitrary, and prices change constantly.
+Future development costs are estimated based upon constant price assumptions and the assumption of the continuation of
+existing economic, operating and regulatory conditions. Future income taxes are calculated by applying the year-end statutory
+rate to estimate future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties based upon existing
+laws and regulations. The discount was computed by the application of a 10% discount factor to the estimated future net cash
+flows.
+Pursuant to FASB Topic 932, the average of first-day-of-the-month oil price during the 12-month period before the year end,
+were used to estimate annual future production from proved reserves to determine future cash inflows.
+Standardised measure of discounted future net cash flows and changes therein
+(e)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+136 CNOOC LIMITED Annual Report 2017
+4,047
+The development costs include estimated future dismantlement costs of dismantling offshore oil and gas properties.
+2
+II IN
+Total costs incurred
+Acquisition costs:
+-Proved
+-Unproved
+Exploration costs
+Development costs*
+2,883
+2,881
+59
+2,824
+2 -
+24,293
+Total costs incurred
+42,169
+Acquisition costs: .......
+Total
+Europe
+South
+(excluding
+Canada Canada) America
+Africa
+Oceania
+-Unproved
+(excluding
+PRC)
+America
+Asia
+North
+2017
+Consolidated entities
+2,065
+2,055
+1,833
+PRC
+Present value of estimated future net cash flows:
+Exploration costs
+46
+913
+1,052
+8,310
+2,353
+9,180
+-
+4,001
+7,933
+16,360
+10,564
+767
+1,143
+275
+64
+329
+7
+Development costs*
+1,833
+2015
+Consolidated entities
+PRC
+10% discount factor
+(924)
+Future net cash flows
+Future income taxes
+Future development costs
+Future production costs
+Future cash inflows
+Enterprise's share of equity method investees
+2015
+176,004
+2,381
+65
+(4,666) 3,914
+(722)
+3,478
+213
+Asia
+(excluding
+North
+America
+(excluding South
+(10,703)
+(575)
+(30,786)
+(29,858)
+(928)
+74,935
+74,356
+7,737
+579
+Europe
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+Notes
+Total
+163,817
+discounted future net cash flows
+Standardised measure of
+(2,533)
+(26,695) (557,911)
+36,157 1,268,262
+442
+(312)
+791,748 59,432 12,649
+49,238 254,224 64,372
+(268,950) (28,572) (3,332) (17,100) (192,827) (20,123)
+(184,967) (12,962) (2,442) (26,992) (40,130) (26,609)
+(46,043) (4,769) (1,733)
+Future income taxes
+(2)
+(296,635)
+Future development costs
+(1)
+Future cash inflows
+Total
+Europe
+North
+America
+(excluding South
+Africa Canada Canada) America
+Oceania
+Asia
+(excluding
+PRC)
+Future production costs
+Notes
+(5,317)
+(4,296)
+(175,511)
+(252)
+(22)
+351,515
+2,633
+87
+17,640
+(43)
+5,146 15,950
+(5,868)
+(20,616) (13,726)
+(5,392)
+(127,971)
+10% discount factor
+5,142
+291,788 13,129
+Future net cash flows
+(62,201)
+(1,664)
+Proved oil and gas properties
+232
+10-..
+8,452
+2,926
+10,638
+54
+5,490
+32,242
+Total costs incurred
+46,590
+72
+60
+7,216
+2,465
+9,469
+4,582
+22,726
+1,183
+786
+88
+61,771
+Africa Canada Canada) America
+South
+(excluding
+24 786 118 282
+Enterprise's share of equity method investees
+' ' ཚི*། 8
+300
+Development costs*
+241
+PRC)
+PRC
+Asia
+(excluding
+Total costs incurred
+- Unproved
+Exploration costs
+Development costs*
+Acquisition costs:
+-Proved
+2015
+Oceania
+15,181
+714
+1,123
+Costs incurred in oil and gas property acquisition, exploration and development
+(d)
+26,390
+26,369
+21
+Net capitalised costs
+(13,739)
+Acquisition costs:
+(11,601)
+depletion and amortisation
+Accumulated depreciation,
+4,743
+4,743
+Unproved oil and gas properties
+35,386
+33,227
+(2,138)
+Europe
+-Proved
+North
+1,236
+461
+1,169
+54
+908
+9,516
+Exploration costs
+2015
+Consolidated entities
+- Unproved
+Europe
+South
+America
+(excluding
+Canada Canada) America
+Africa
+PRC) Oceania
+PRC
+Asia
+(excluding
+Total
+222
+Total
+92
+48,864
+843
+1,807
+7,118
+1,913
+12,926
+37
+3,557
+20,663
+Total costs incurred
+39,513
+538
+219
+6,476
+1,610
+2016
+Acquisition costs:
+-Proved
+- Unproved
+Exploration costs
+Development costs*
+10
+Total
+Europe
+America
+Canada)
+Africa Canada
+PRC) Oceania
+12,701
+PRC
+(excluding
+(excluding
+America
+Asia
+North
+Enterprise's share of equity method investees
+Total costs incurred
+South
+3,549
+14,420
+Development costs*
+PRC
+(excluding
+Asia
+North
+2016
+Consolidated entities
+Costs incurred in oil and gas property acquisition, exploration and development (continued)
+(d)
+PRC)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+135
+CNOOC LIMITED Annual Report 2017
+3,144
+2,844
+3,052
+2,811
+31 December 2017
+33
+Oceania
+America
+(excluding
+Canada Canada)
+9,351
+305
+1,588
+642
+303
+225
+37
+Africa
+8
+Exploration costs
+- Unproved
+-Proved --------
+Acquisition costs:
+Total
+Europe
+South
+America
+6,243
+421
+16282
+80
+(17,863)
+(142)
+(1,363)
+(33,737)
+amortisation, and impairment
+Depreciation, depletion and
+(2,144)
+(249)
+(82)
+(124)
+(164)
+(1,525)
+Accretion expense
+(6,896)
+(1,303)
+(3,851)
+(5,889)
+(23)
+(6,605)
+(536)
+(11,913)
+Income tax expense
+41,870
+3,213
+(169)
+(1,711)
+(223)
+(3,113)
+513
+5,310
+47,654
+(55)
+(55)
+Special oil gain levy
+(69,473)
+(9,827)
+(154)
+(714)
+(83)
+Operating expenses
+151,888
+12,784
+100
+6,277
+4,750
+9,722
+1,283
+9,085
+107,887
+Net sales to customers
+Total
+Europe
+South
+America
+Canada)
+(14,882)
+(2,401)
+(462)
+(1,033)
+(11)
+(3,737)
+Exploration expense
+(7,169)
+(12)
+(282)
+(13)
+(818)
+(406)
+(6,297)
+Taxes other than income tax
+(24,281)
+(1,402)
+(23)
+(1,021)
+(3,057)
+(159)
+341
+1,070 (1,075)
+4
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Reserve quantity information (continued)
+Proved developed and undeveloped reserves:
+PRC
+Asia (excluding PRC) Oceania
+Africa
+Canada
+North America (excluding Canada)
+Natural
+Natural
+Natural
+Natural
+Natural Synthetic
+Natural Synthetic
+(a)
+(113)
+(1,281)
+(1,394)
+(71)
+Special oil gain levy
+(1,462)
+(1,330)
+(132)
+amortisation, and impairment
+Depreciation, depletion and
+Oil
+(61)
+Accretion expense
+(6)
+(6)
+Exploration expense
+(459)
+(448)
+Taxes other than income tax
+(53)
+(mmbbls)
+gas Oil gas Oil gas
+(bcf) (mmbls)
+(bcf) (mmbbls)
+Oil
+PRC
+North
+Enterprise's share of equity method investees:
+2017
+28,377
+1,983
+(165)
+Asia
+(excluding
+PRC)
+(2,786)
+(9,486)
+359
+4,774
+35,741
+Result of operations
+(13,493)
+(1,230)
+(2,043)
+Canada
+America
+South
+(bcf) (mmbls)
+gas Oil
+(bcf) (mmbbls)
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+Oil
+Operating expenses
+3,033
+2,840
+(excluding
+193
+Total
+Europe
+America
+Canada)
+Canada
+Africa
+Oceania
+Net sales to customers
+Africa
+PRC) Oceania
+PRC
+240
+440
+(2,697)
+(3,146)
+(3,534)
+(734)
+3,409
+19,094
+2015
+Enterprise's share of equity method investees:
+North
+Asia
+(excluding
+America
+PRC
+PRC) Oceania
+(198)
+25,574
+(11,278)
+Result of operations
+(2,883)
+(4,551)
+(5,667)
+(768)
+(1,392)
+19,986
+Income tax expense
+Africa
+(8,584)
+(103)
+186
+1,405
+2,133
+34
+4,801
+(892)
+(764)
+Canada
+(excluding
+Canada)
+South
+(34)
+(40)
+Depreciation, depletion and
+amortisation, and impairment
+Special oil gain levy
+(109)
+(1,767)
+(1,876)
+Accretion expense
+'
+Income tax expense
+19
+Result of operations
+(105)
+(1,475)
+Total result of operations for
+producing activities
+25,649
+(124)
+343
+(65)
+(59)
+America
+Europe
+Total
+Net sales to customers
+200
+3,244
+3,444
+(6)
+Operating expenses
+(1,624)
+(1,763)
+Taxes other than income tax
+(11)
+(1,288)
+(1,299)
+Exploration expense
+(139)
+I
+566
+(59)
+(1,580)
+19
+(1,599)
+(1,475)
+17,514
+3,409
+(2,209)
+(3,534)
+(2,697) (3,146)
+240
+(198)
+(4,278)
+(1,044)
+(28)
+(2,785)
+CNOOC LIMITED Annual Report 2017
+131
+132
+CNOOC LIMITED Annual Report 2017
+(excluding
+America
+Asia
+(excluding
+North
+2017
+Consolidated entities
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+(28,372)
+Results of operations (continued)
+4,810
+65
+(1,449)
+(8,220) (2,552)
+(3,731)
+291
+25
+(b)
+Taxes other than income tax
+(9,498)
+(131)
+(9,973)
+(2)
+(284)
+(2,435)
+Depreciation, depletion and
+amortisation, and impairment
+(40,082)
+(1,443)
+(3,193)
+(9,898)
+(4,173)
+(7,370)
+(581) (9,592)
+(75,024)
+Special oil gain levy
+(59)
+(135)
+34,338
+(10,748)
+' ខ្លួន
+(459)
+(250)
+(362)
+Exploration expense
+(4,415)
+(937)
+(50)
+(48)
+(885)
+(1,271)
+(260)
+Accretion expense
+(1,882)
+(93)
+(119)
+(55)
+(712)
+.
+I
+(278)
+(8)
+"
+E
+244
+701
+245
+707
+20
+.
+201 570 102
+196 567 81
+324
+701
+88
+916
+1
+34
+140
+8888
+200
+577
+ܙ ܣ ܚ
+33
+5 35
+1618
+195
+2,215 7,570 815
+567
+195
+574
+8888-
+49 140
+34
+23
+(8)
+30
+570
+2,211 8,060 301
+118
+gas oil Bitumen
+(bcf) (mmbls) (mmbls)
+809 1,757 40 439 10 273 53 -- 119 197 - 85 166 2 - 94 8 1,092 2,763 197-
+Consolidated entities
+31 December 2015
+31 December 2016
+815 1,623 51 618
+10 268
+41
+31 December 2017
+Enterprise's share of equity
+156
+ཆི། །
+88
+219
+211
+Natural Synthetic
+Natural
+Natural
+gas Oil gas Oil
+(bcf) (mmbls) (bcf) (mmbbls)
+Total
+Europe
+CNOOC LIMITED Annual Report 2017
+129
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(a)
+Reserve quantity information (continued)
+Proved developed reserves:
+5 2.540 8.250 786
+PRC
+(mmbbls)
+Natural
+Oil gas Oil
+(bcf) (mmbbls)
+Asia(excluding PRC)
+Natural
+Natural
+Natural
+gas Oil gas Oil gas Oil
+(bcf) (mmbbls) (bcf) (mmbbls) (bcf) (mmbbls)
+Africa
+Canada
+Natural Synthetic
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+North America
+(excluding Canada) South America
+Natural
+Oil gas Oil
+(bcf) (mmbls)
+Oceania
+199
+21
+(9)
+Discoveries and extensions
+Improved Recovery
+Production
+Revisions of prior estimates
+31 December 2016
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+Production
+Revisions of prior estimates
+31 December 2017
+1
+3
+Total consolidated and equity
+152
+(2)
+Purchase/Disposal of reserves
+31 December 2015
+Revisions of prior estimates
+Production
+1428
+(7)
+EN
+232 318 162 10
+' g 'g
+88
+786
+1
+5 2,295 7,543 786
+118
+Enterprise's share of equity
+method investees:
+31 December 2014
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+123
+6
+-
+I
+24 786
+118
+282
+421
+|||
+200 534
+200 537
+297 137
+احت
+1
+(9)
+(53)
+67
+13115
+67
+7
+3
+81
+11
+301
+1
+6
+Interests in reserves
+31 December 2015
+1,431 5,361 60 846
+31 December 2016
+1,446 5,850
+260
+31 December 2017
+872
+15 389
+119
+239
+77
+952
+12 333
+1.628 5.916 70 885
+815
+7
+1,086 2,734 156
+America
+(excluding
+South
+PRC
+PRC) Oceania
+Africa Canada
+Canada)
+America
+Europe
+Total
+Net sales to customers
+106,258
+7,258
+1,079
+9,723
+Asia
+(excluding
+North
+2015
+Consolidated entities
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+5
+1,113 4,875 644 72
+95
+159
+93
+136
+୫୫
+4,981
+95 159
+111
+168
+111
+168
+(b)
+Results of operations
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+136
+4,435
+103
+12,760
+28,039
+1,983
+(443)
+(9,486) (2,043) (2,786)
+359
+4,774
+35,681
+CNOOC LIMITED Annual Report 2017
+Total result of operations for
+producing activities
+(338)
+(278)
+(60)
+11
+11
+Income tax expense
+(349)
+Result of operations
+78
+133
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+146,597
+Operating expenses
+(15,984)
+(2,562)
+(420)
+(1,271)
+PRC) Oceania
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+PRC
+(excluding
+America
+Asia
+(excluding
+North
+Consolidated entities
+2015
+(c) Capitalised costs
+South
+I
+929 4,752 145
+72 159 143
+3,598
+20
+406
+31 December 2016
+631
+4,221
+26 334
+31 December 2017
+734
+4,336
+35
+327
+×
+Enterprise's share of equity
+method investees:
+622
+31 December 2015
+Consolidated entities
+Natural
+Oil gas Oil gas Oil gas Oil gas Oil
+(mmbbls) (bcf) (mmbbls) (bcf) (mmbbls) (bcf) (mmbbls) (bcf) (mmbbls)
+893 1,574 35 558 8 230 37 24 142 46 123 273 184 5 1,182 2669 142 46
+method investees:
+31 December 2015
+1
+6
+31 December 2016
+31 December 2017
+31 December 2015
+1
+Proved undeveloped reserves:
+PRC
+Natural
+Asia(excluding PRC)
+Natural
+Oceania
+Africa
+Natural
+6
+31 December 2016
+31 December 2017
+130
+116
+114
+619
+88
+66 97
+68 100
+58
+(bcf) (mmbbls) (mmbbls)
+145
+112
+154
+109
+8
+1
+923 4,230 619
+173 131
+644
+777
+gas oil Bitumen
+Total
+Natural Synthetic
+CNOOC LIMITED Annual Report 2017
+5 22
+ཎྜསྟྲ
+104
+412
+105 418
+គឺ
+Oil gas Oil gas Oil gas Oil
+(bcf) (mmbbls) (bcf) (mmbbls) (bcf) (mmbls)
+133 533
+North America
+Canada
+Natural Synthetic
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+(excluding Canada) South America
+Europe
+Natural
+Natural
+Natural
+133 539
+(11,823)
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+21,972
+(134)
+(114)
+(1,535)
+Accretion expense
+(508)
+(2,395)
+(182)
+(117)
+(37)
+(3,499)
+Exploration expense
+(234)
+(239)
+(384)
+(139)
+(5,885)
+Taxes other than income tax
+(71)
+(815)
+ཥྭསྱེདྡཱ8°
+121,324
+(6,097)
+(11,006)
+(11,651)
+(190)
+(4,020)
+(35,327)
+amortisation, and impairment
+Depreciation, depletion and
+(2,186)
+(329)
+(7,394)
+(647)
+(6,899)
+(18)
+(23,211)
+(1,814)
+(19)
+10,419
+(10,783)
+(2,974)
+(503)
+Asia
+North
+Consolidated entities
+2016
+Results of operations (continued)
+(b)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+CNOOC LIMITED Annual Report 2017
+138
+241,904
+7,324
+3,363
+18,648
+5,606
+17,070
+3,209
+America
+(1,168)
+(excluding
+South
+(2,214)
+(13,704)
+Operating expenses
+4,792
+2,935
+8,358
+1,285
+6,186
+87,276
+Net sales to customers
+Total
+Europe
+America
+Canada Canada)
+Africa
+PRC) Oceania
+PRC
+(excluding
+(79,101)
+Special oil gain levy
+27,326
+(24)
+(16)
+Accretion expense
+(206)
+(196)
+(10)
+Exploration expense
+(471)
+(461)
+(10)
+Taxes other than income tax
+(1,277)
+(1,193)
+(84)
+Operating expenses
+3,092
+2,905
+Depreciation, depletion and
+187
+amortisation, and impairment
+Special oil gain levy
+(1,994)
+Oil
+(11,823)
+(39)
+20,445
+Total result of operations for
+producing activities
+Result of operations
+(1,004)
+(955)
+9
+(49)
+9
+Income tax expense
+(1,013)
+(955)
+60
+.
+(2,127)
+(133)
+Net sales to customers
+Total
+Europe
+3,281
+3,237
+(10)
+2,268
+3,380
+1,345
+(125)
+18
+(6,832)
+Income tax expense
+2,533
+(3,172)
+(484)
+(4,820)
+(5,076) (11,600)
+416
+(57)
+Result of operations
+20,494
+(39)
+291
+America
+Canada)
+Africa Canada
+PRC) Oceania
+South
+(excluding
+America
+Asia
+(excluding
+10,677
+North
+2016
+5,814
+65
+99
+(494)
+(2,552)
+(8,220)
+(3,731)
+Enterprise's share of equity method investees:
+176,007
+PRC
+Standardised measure of
+(68,627)
+(2,091)
+(86)
+(1,371)
+(60,468) (4,611)
+Future income taxes
+(8,267) (225,685)
+(43)
+(7,202) (21,364)
+(17,687)
+(160,725) (8,222) (2,175)
+Future development costs
+(7,606) (458,765)
+(220)
+23,410 1,156,597
+327
+90,596 75,151
+(69,337) (18,499)
+Future net cash flows
+(9,273)
+321,854 14,981
+7,666
+9,228
+182,509
+discounted future net cash flows
+Standardised measure of
+(179,895)
+196
+(9,727) (20,380)
+(3,718)
+(1,165)
+(5,753)
+(139,345)
+10% discount factor
+403,520
+5,446
+(22)
+35,288
+14,057
+4,250
+(2,757)
+(35,825)
+(315,248)
+10,023
+3,914
+(4,666)
+(722)
+3,478
+7,737
+163,106
+Total standardised measure of
+discounted future net cash flow
+9,247
+9,958
+(711)
+discounted future net cash flows
+Standardised measure of
+(11,801)
+discounted future net cash flows
+21,048
+(12,014)
+2,381
+185,251
+CNOOC LIMITED Annual Report 2017
+137
+Future production costs
+34,626
+10,553
+63,639
+858,295
+(1)
+Future cash inflows
+Total
+3,085
+Europe
+PRC) Oceania
+PRC
+Notes
+Asia
+(excluding
+Standardised measure of discounted future net cash flows and changes therein (continued)
+(e)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+North
+America
+(excluding South
+Africa Canada Canada) America
+3,948
+2016
+Consolidated entities
+14,908
+America
+Asia
+(excluding
+North
+Consolidated entities
+2017
+5,642 233,496
+9,552
+14,908
+4,330
+3,948
+3,085
+9,228
+182,803
+Total standardised measure of
+discounted future net cash flow
+9,871
+9,577
+294
+(excluding South
+Notes
+PRC
+PRC) Oceania
+(3,290)
+(349) (204,227)
+7,673 446,131
+4,330
+6,653
+33,860 37,017
+(28,254) (18,369)
+21,930
+(4,860)
+318,008 16,691 4,299
+(142,001) (6,014) (1,090)
+discounted future net cash flows
+10% discount factor
+24,917 299,553 97,944 27,183 30,636 1,396,726
+(1,394) (222,849) (42,432) (12,435) (11,422) (631,885)
+(1,593) (42,844) (18,495) (5,938) (7,685) (240,480)
+(2,157) (3,856) (78,230)
+856,256 50,074 10,163
+(316,050) (22,714) (2,589)
+(157,966) (4,134) (1,825)
+(64,232) (6,535) (1,450)
+Future income taxes
+Future development costs
+(1)
+Future cash inflows
+Total
+Africa Canada Canada) America Europe
+Future net cash flows
+Standardised measure of
+Future production costs
+(11,412)
+1,801
+(1)
+Future cash inflows
+Total
+Europe
+Canada) America
+Africa Canada
+PRC) Oceania
+68,573
+Notes
+North
+America
+Asia
+(excluding
+Enterprise's share of equity method investees
+(25)
+(11,298)
+5,642
+223,625
+2016
+(excluding South
+70,374
+PRC
+(1,074)
+20,989
+180
+Future production costs
+21,169
+6.
+10% discount factor
+(11,292)
+(11,292)
+Future net cash flows
+114
+(9,660)
+(9,113)
+(27,179)
+(547)
+(28,253)
+Future income taxes
+Future development costs
+Notice of Annual General Meeting
+(d)
+the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+3.
+"Relevant Period" means the period from
+the date of passing of this resolution until
+whichever is the earlier of:
+(i)
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting.
+CNOOC LIMITED Annual Report 2017
+for the purposes of this resolution:
+"Rights Issue" means an offer of shares
+open for a period fixed by the Directors
+made to holders of shares whose names
+appear on the register of members of
+the Company on a fixed record date in
+proportion to their then holdings of such
+shares (subject to such exclusions or
+other arrangements as the Directors may
+deem necessary or expedient in relation
+to fractional entitlements or having regard
+to any restrictions or obligations under
+the laws of, or the requirements of, any
+recognized regulatory body or any stock
+exchange in or in any territory outside
+Hong Kong).”
+a Rights Issue (as hereinafter
+defined);
+any adjustment, after the date
+of grant or issue of any options,
+rights to subscribe for or convert
+any security into shares or other
+securities referred to above, in
+the price at which shares in the
+Company shall be subscribed,
+and/or in the number of shares.
+in the Company which shall be
+subscribed, on exercise of relevant
+rights under such options, warrants
+or other securities, such adjustment
+being made in accordance with, or
+as contemplated by, the terms of
+such options, rights to subscribe or
+other securities,
+the approval in paragraph (a) above
+shall authorise the Directors during the
+Relevant Period to make or grant offers,
+agreements, options and similar rights
+to subscribe for or convert any security
+into shares in the Company (including
+bonds, notes, warrants, debentures and
+securities convertible into shares of the
+Company) which would or might require
+the exercise of such powers after the end
+of the Relevant Period;
+any scrip dividend or similar
+arrangement providing for the
+allotment of shares in lieu of
+the whole or part of a dividend
+on shares of the Company in
+accordance with the Articles of the
+Company; or
+the grant of options and the exercise
+of any option granted under any
+share option scheme or similar
+arrangement for the time being
+adopted by the Company and/or
+any of its subsidiaries;
+an issue of shares pursuant to
+any specific authority granted by
+shareholders of the Company in
+general meeting, including upon the
+exercise of rights of subscription or
+conversion under the terms of any
+warrants issued by the Company
+or any bonds, notes, debentures or
+securities convertible into shares of
+the Company;
+(v)
+(iv)
+(iii)
+(i)
+above, otherwise than pursuant to:
+"THAT subject to the passing of the
+resolutions numbered B1 and B2 as
+set out in the notice convening this
+meeting, the general mandate granted
+to the Board to issue, allot and deal with
+additional shares of the Company and
+to make or grant offers, agreements,
+options and similar rights to subscribe
+for or convert any security into shares
+in the Company pursuant to resolution
+numbered B2 set out in this notice be and
+is hereby extended by the addition to it
+of an amount representing the aggregate
+number of shares of the Company
+which are bought back by the Company
+pursuant to and since the granting to the
+Company of the general mandate to buy
+pursuant to the approval in paragraph (a)
+the aggregate number of shares of the
+Company allotted or agreed conditionally
+or unconditionally to be allotted (whether
+pursuant to an option or otherwise)
+and any options, warrants or rights to
+be issued or granted by the Directors
+shall not exceed 20% of the total number
+of issued shares of the Company as at the
+date of the passing of this resolution; and
+back shares in accordance with resolution
+numbered B1 set out in this notice,
+provided that such extended amount shall
+not exceed 10% of the total number of
+issued shares of the Company as at the
+date of the passing of this resolution."
+Notice of Annual General Meeting
+Registered office:
+65th Floor,
+After AGM, if the resolution of final dividend was passed, the
+register of members of the Company will be closed from 11 June
+2018 (Monday) to 15 June 2018 (Friday) (both days inclusive),
+during which no transfer of shares in the Company will be
+registered. In order to qualify for the proposed final dividends,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 8 June 2018 (Friday).
+10.
+subject to the following provisions of this
+resolution, the exercise by the Directors
+during the Relevant Period (as hereinafter
+defined) of all the powers of the Company
+to issue, allot and deal with additional
+shares in the capital of the Company and
+to make or grant offers, agreements,
+options and similar rights to subscribe
+for or convert any security into shares in
+the Company (including bonds, notes,
+warrants, debentures and securities
+convertible into shares of the Company)
+which would or might require the exercise
+of such powers be and is hereby generally
+and unconditionally approved;
+The register of members of the Company will be closed from
+28 May 2018 (Monday) to 31 May 2018 (Thursday) (both days
+inclusive), during which no transfer of shares in the Company
+will be registered. In order to qualify for attending the meeting,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 25 May 2018 (Friday).
+Pursuant to Rule 13.39(4) of the Listing Rules, voting for all the
+resolutions set out in the notice of the AGM will be taken by poll,
+except where the chairman, in good faith, decides to allow a
+resolution which relates purely to a procedural or administrative
+matter to be voted on by a show of hands.
+With respect to resolution numbered B3, approval is being sought
+from shareholders for an extension of the general mandate
+granted to the Board to issue and allot shares by adding to it
+the number of shares purchased under the authority granted
+pursuant to resolution numbered B1.
+With respect to resolution numbered B2, approval is being sought
+from shareholders for a general mandate to issue, allot and deal
+with shares to be given to the Board. The Board wish to state that
+they have no immediate plans to issue or allot any new shares of
+the Company. Approval is being sought from the shareholders
+as a general mandate for the purpose of Section 141 of the
+Companies Ordinance (Cap. 622 of the Laws of Hong Kong) and
+the Listing Rules.
+With respect to resolution numbered B1, approval is being sought
+from shareholders for a general mandate to buy back shares to
+be given to the Board. The Board wish to state that they have no
+immediate plans to buy back any existing shares. The Explanatory
+Statement containing the information necessary to enable the
+shareholders to make an informed decision on whether to vote
+for or against the resolution to approve the buy back by the
+Company of its own shares, as required by the Listing Rules, is
+set out in a separate letter from the Company.
+9.
+8.
+7.
+6.
+5.
+Hong Kong, 12 April 2018
+145
+Where there are joint registered holders of any shares, any
+one of such persons may vote at the above meeting (or at any
+adjournment of it), either personally or by proxy, in respect of such
+shares as if he/she were solely entitled thereto but the vote of the
+senior holder who tenders a vote, whether in person or by proxy,
+will be accepted to the exclusion of the vote(s) of the other joint
+holders and, for this purpose, seniority shall be determined by the
+order in which the names stand in the register of members of the
+Company in respect of the relevant joint holding.
+Completion and return of the form of proxy will not preclude a
+shareholder from attending and voting at the meeting or any
+adjournment thereof if the shareholder so desires and, in such
+event, the relevant form of proxy shall be deemed to be revoked.
+In order to be valid, the form of proxy duly completed and signed
+in accordance with the instructions printed thereon, together with
+the power of attorney or other authority (if any) under which it is
+signed, or a copy of such authority notarially certified, must be
+completed and returned to the Company's registered office at
+65th Floor, Bank of China Tower, 1 Garden Road, Hong Kong not
+less than 36 hours before the time appointed for the holding of the
+meeting or any adjournment thereof (as the case may be).
+Every member entitled to attend and vote at the above meeting
+(or at any adjournment thereof) is entitled to appoint one or more
+proxies to attend and vote on his behalf. A proxy need not be a
+shareholder of the Company.
+Joint Company Secretary
+CNOOC Limited
+Li Jiewen
+By Order of the Board
+4.
+3.
+2.
+1.
+Notes:
+Bank of China Tower,
+1 Garden Road,
+Hong Kong.
+CNOOC LIMITED Annual Report 2017
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting."
+Mr. Wu has no other interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+(b)
+Born in 1948, Mr. Tse is a fellow of The Institute
+of Chartered Accountants in England and
+Wales, and the Hong Kong Institute of Certified
+Public Accountants ("HKICPA"). Mr. Tse is a
+past president and a former member of the
+Audit Committee of the HKICPA. He joined
+KPMG in 1976, became a partner in 1984 and
+retired in March 2003. Mr. Tse was a non-
+executive Chairman of KPMG's operations in
+the PRC and a member of the KPMG China
+advisory board from 1997 to 2000. Mr. Tse is
+currently an independent non-executive director
+of China Telecom Corporation Limited, SJM
+Holdings Limited, Sinofert Holdings Limited
+and China Huarong Asset Management
+Company, Limited, companies listed on The
+Tse Hau Yin, Aloysius
+To re-elect Mr. Tse Hau Yin, Aloysius, who has
+already served the Company for more than
+nine years, as an Independent Non-executive
+Director of the Company:
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the Shareholders.
+Under the service agreement between the
+Company and Mr. Wu, the Company does not
+pay him any Director's fee. The Remuneration
+Committee will review the level of directors'
+emoluments and make recommendation to the
+Board for adjustments if necessary. Mr. Wu's
+appointment continued for a period of twelve
+months and would be renewed annually as
+determined by the Board or the shareholders of
+the Company, subject to three months' notice
+of termination by either party. Mr. Wu is subject
+to the provisions of his service agreement and
+the retirement provisions in the Articles of the
+Association of the Company.
+Save as aforesaid, Mr. Wu does not have any
+relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+5.
+Born in 1957, Mr. Wu is a geologist, professor-
+level senior economist, Certified Senior
+Enterprise Risk Manager and Certified Internal
+Auditor and graduated with a B.S. degree
+from the Ocean University of China, majoring
+in Marine Geology. He also holds a master
+degree in Management from China University of
+Petroleum and a doctor degree in Management
+from Huazhong University of Science and
+Technology. Mr. Wu joined CNOOC in 1982.
+From 1994 to 2001, he served as the Deputy
+General Manager of CNOOC Oil Technical
+Services Company, a subsidiary of CNOOC,
+the Director of the Administration Department
+of CNOOC and the Director of the Ideology
+Affairs Department of CNOOC successively.
+Mr. Wu was appointed as an Assistant
+President of CNOOC in 2003, and has been
+the Vice President of CNOOC since 2004. Mr.
+Wu also serves as the Chairman of CNOOC
+Marine Environment and Ecology Protection
+Foundation, and served as the Vice Chairman
+of China Association of Risk Professionals, the
+Vice Chairman of China Association of Oceanic
+Engineering, the Director-General of National
+Energy Deepwater Oil & Gas Engineering
+Technology Research Centre Council. Mr.
+Wu served as an Independent Non-executive
+Director of China Yangtze Power Limited,
+a company listed on the Shanghai Stock
+Exchange, from May 2003 to July 2010. Mr.
+Wu has served as the Compliance Officer of
+the Company from 1 June 2005 to 15 June
+2016 and since 1 June 2005 he also serves as
+a Director of CNOOC International Limited and
+served as a Director of CNOOC China Limited,
+all being the subsidiaries of the Company. Mr.
+Wu was appointed as an Executive Director of
+the Company with effect from 1 June 2005. Mr.
+Wu has been re-designated from an Executive
+Director to a Non-executive Director of the
+O Company with effect from 15 June 2016.
+Wu Guangqi
+To re-elect Mr. Wu Guangqi as a Non-executive
+Director of the Company:
+-
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the Shareholders.
+4.
+Notice of Annual General Meeting
+141
+CNOOC LIMITED Annual Report 2017
+Under the service agreement between the
+Company and Mr. Yang, the Company does not
+pay him any Director's fee. The Remuneration
+Committee will review the level of directors'
+emolument and make recommendation to the
+Board for adjustments if necessary. Mr. Yang's
+appointment continued for a period of twelve
+months and would be renewed annually as
+determined by the Board or the shareholders of
+the Company, subject to three months' notice of
+termination by either party. Mr. Yang is subject
+to the provisions of his service agreement and
+the retirement provisions in the Articles of the
+Association of the Company.
+Mr. Yang has no other interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+Save as aforesaid, Mr. Yang does not have
+any relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+He was appointed as Chairman of CNOOC
+in April 2015. From 15 June 2016 to 18 April
+2017, he was appointed as the Chairman and
+a Director of Nexen Energy ULC, a subsidiary
+of the Company. He also served as Chairman,
+Director and President of CNOOC Southeast
+Asia Limited, Chairman, Director and General
+Manager of CNOOC China Limited and
+Chairman and Director of CNOOC International
+Limited, all being subsidiaries of the Company.
+He also served as Director of CNOOC Finance
+Corporation Limited, a subsidiary of CNOOC.
+Mr. Yang was appointed as an Executive
+Director of the Company with effect from 31
+August 2005 and was the Vice Chairman of
+the Board of the Company from 16 September
+2010 to 19 May 2015, and was re-designated
+from an Executive Director to a Non-Executive
+Director of the Company with effect from 23
+November 2011. Mr. Yang was appointed as
+Chairman of the Board and Chairman of the
+Nomination Committee of the Company with
+effect from 19 May 2015. From 15 June 2016
+to 18 April 2017, Mr. Yang was re-designated
+from a Non-executive Director to an Executive
+Director and served as the Chief Executive
+Officer of the Company. Mr. Yang was re-
+designated from an Executive Director to a Non-
+Executive with effect from 18 April 2017.
+Born in 1961, Mr. Yang is a professor-level
+senior economist and graduated from China
+University of Petroleum with a B.S. degree
+in petroleum engineering. He also received
+an MBA degree from the Sloan School of
+Management at MIT as a Sloan Fellow. Mr.
+Yang joined CNOOC in 1982 and has over 30
+years of experience in petroleum exploration
+and production. From 1982 to 1992, Mr. Yang
+served in a number of positions in CNOOC
+Research Center including the Director of
+Field Development Department, the Manager
+of Reservoir Engineering Department and
+the Project Manager. Thereafter, Mr. Yang
+Iwas mainly involved in international business,
+M&A, corporate finance and capital market
+operations. From 1993 to 1999, he served
+as the Deputy Chief Geologist, the Deputy
+Director and the Acting Director for Overseas
+Development Department of CNOOC and the
+Vice President of CNOOC International Limited.
+From 1999 to 2011, Mr. Yang served in a
+number of positions in the Company including
+Senior Vice President, Chief Financial Officer,
+Executive Vice President, President and Chief
+Executive Officer. Mr. Yang also served as an
+Assistant President of CNOOC from November
+2006 to April 2010 and as Vice President of
+CNOOC from April 2010 to August 2011.
+Mr. Yang served as Director and President
+of CNOOC from August 2011 to April 2015.
+Yang Hua
+To re-elect Mr. Yang Hua as a Non-executive
+Director of the Company:
+To declare a final dividend for the year ended 31
+December 2017.
+To receive and consider the audited financial
+statements together with the Report of the
+Directors and Independent Auditors' Report
+thereon for the year ended 31 December 2017.
+With respect to resolutions numbered A3 to A5, the Company is
+exempt from the requirements of the Toronto Stock Exchange
+(the "TSX") to adopt a majority voting policy requiring that each
+director must be elected by a majority of the votes cast with
+respect to his or her election at an uncontested meeting by virtue
+of the fact that the Company is majority controlled indirectly by
+CNOOC. The Company does not intend to adopt a majority
+voting policy at this time or for so long as CNOOC is the majority
+controlling shareholder, as majority approval of each such director
+is already assured.
+3.
+142
+the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+CNOOC LIMITED Annual Report 2017
+Stock Exchange of Hong Kong Limited. From
+2004 to 2010, he was an independent non-
+executive director of China Construction Bank
+Corporation, which is listed on the HKSE Main
+Board. From 2005 to 2016, Mr. Tse was also
+an independent non-executive director of
+Daohe Global Group Limited (formerly known
+as Linmark Group Limited), which is listed on
+the HKSE Main Board, Mr. Tse is currently
+an independent non-executive director of
+CCB International (Holdings) Limited, a wholly
+owned subsidiary of China Construction Bank
+Corporation and OCBC Wing Hang Bank
+Limited (formerly named as Wing Hang Bank
+Limited whose shares were delisted from The
+Stock Exchange of Hong Kong Limited with
+effect from 16 October 2014). Mr. Tse is also a
+member of the International Advisory Council of
+the People's Municipal Government of Wuhan.
+Mr. Tse was appointed as an Independent Non-
+executive Director of the Company with effect
+from 8 June 2005.
+(a)
+"THAT:
+2.
+(i)
+"Relevant Period" means the period from
+the date of the passing of this resolution
+until whichever is the earlier of:
+for the purposes of this resolution:
+Notice of Annual General Meeting
+143
+CNOOC LIMITED Annual Report 2017
+the aggregate number of shares of
+the Company which the Company is
+authorised to buy back pursuant to the
+approval in paragraph (a) above shall not
+exceed 10% of the total number of issued
+shares of the Company as at the date of
+the passing of this resolution; and
+subject to paragraph (b) below, the
+exercise by the Directors during the
+Relevant Period (as hereinafter defined)
+of all the powers of the Company to buy
+back shares in the capital of the Company
+on The Stock Exchange of Hong Kong
+Limited (the "Stock Exchange") or on any
+other exchange on which the shares of the
+Company may be listed and recognized
+by the Securities and Futures Commission
+of Hong Kong and the Stock Exchange
+for this purpose ("Recognized Stock
+Exchange"), subject to and in accordance
+with all applicable laws, rules and
+regulations and the requirements of the
+Listing Rules, or of any other Recognized
+Stock Exchange and the Articles of the
+Company, be and is hereby generally and
+unconditionally approved;
+(b)
+(a)
+"THAT:
+1.
+As special business, to consider and, if thought fit,
+pass with or without amendments, the following
+resolutions as ordinary resolutions:
+To re-appoint Deloitte Touche Tohmatsu as the
+independent auditors of the Company and its
+subsidiaries, and to authorize the Board to fix
+the remuneration of the independent auditors.
+To authorise the Board to fix the remuneration of
+each of the Directors.
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the Shareholders.
+and make recommendation to the Board for
+adjustments if necessary. Mr. Tse is subject to
+the provisions of the letter of appointment and
+the retirement provisions in the Articles of the
+Association of the Company.
+7.
+6.
+B.
+Mr. Tse has a formal letter of appointment with
+the Company. Mr. Tse's emoluments comprise
+an annual director's fee of HK$1,120,000
+(before deduction of Hong Kong tax). The
+emolument of Mr. Tse was determined by the
+Board with reference to perception of industry
+standards and prevailing market conditions. The
+Remuneration Committee will review the level
+of directors' remuneration from time to time
+Mr. Tse has no other interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+Mr. Tse does not have any relationship with any
+other Director, senior management, substantial
+shareholder or controlling shareholder of the
+Company.
+Mr. Tse has served as an Independent Non-
+executive Director of the Company for more
+than nine years. For the reasons set out in the
+"Explanatory Statement Relating to Proposed
+General Mandates to Issue Shares and Buy
+Back Shares and Proposed Re-election
+of Directors", the Board of the Company
+considers that Mr. Tse remains independent
+for the purpose of the Listing Rules and the re-
+election of Mr. Tse is in the best interests of the
+Company and shareholders as a whole.
+Notice of Annual General Meeting
+In addition, the Company is exempt from the TSX requirements
+that at each annual meeting of holders of listed securities, the
+board of directors of a listed issuer must permit security holders
+of each class or series to vote on the election of all directors to
+be elected by such class or series. The Company is exempt
+from each such requirement by virtue of qualifying as an "Eligible
+International Interlisted Issuer" for purposes of the TSX Company
+Manual.
+(Executive Vice President)
+146
+Industrial and Commercial Bank of China
+Bank of China
+Principal Bankers:
+Tsue Sik Yu, May
+Li Jiewen
+Joint Company Secretary
+(Deputy Chief Exploration Engineer)
+(Vice President)
+(Senior Vice President)
+(Chief Financial Officer)
+(Executive Vice President)
+Liu Zaisheng
+Deng Yunhua
+Xie Weizhi
+Zhang Guohua
+Cao Xinjian
+Xie Yuhong
+Other Members of the Senior Management
+Wu Guangqi
+Tse Hau Yin, Aloysius
+Chiu Sung Hong (Chairman)
+Remuneration Committee
+Kevin G. Lynch
+Lawrence J. Lau
+Yang Hua (Chairman)
+Nomination Committee
+Lawrence J. Lau
+Chiu Sung Hong
+Tse Hau Yin, Aloysius (Chairman and Financial Expert)
+China Construction Bank
+Audit Committee
+Bank of China (Hong Kong) Limited
+Bank of America
+2.
+...
+CNOOC LIMITED Annual Report 2017
+Website: www.cnoocltd.com
+Zip Code: 100010
+Beijing, China
+CNOOC Tower, No.25 Chaoyangmen Beidajie,
+Beijing Office:
+Fax: (852) 2525 9322
+65/F, Bank of China Tower, 1 Garden Road, Hong Kong
+Tel: (852) 2213 2500
+Registered Office:
+Fax: (8610) 8452 1441
+E-mail: mr@cnooc.com.cn
+Tel: (8610) 8452 3404
+Media/Public Relations:
+Investor Relations:
+Tel: (8610) 8452 2973
+Fax: (8610) 8452 1441
+E-mail: ir@cnooc.com.cn
+TSX: CNU
+HKSE: 00883
+NYSE: CEO
+Symbol and stock code:
+United States of America
+4 New York Plaza, 13th Floor
+New York, NY 10004
+JPMorgan Chase Bank, N.A.
+ADS Depositary:
+Hong Kong
+183 Queen's Road East
+Wan Chai
+Hong Kong Registrars Limited
+Shops 1712-1716, 17th Floor
+Hopewell Center
+Hong Kong Share Registrar:
+Citi Bank, N.A.
+Kevin G. Lynch
+Tse Hau Yin, Aloysius
+Lawrence J. Lau
+BOE
+Billion cubic feet
+Bcf
+Barrel
+Bbl
+VOLUME ACRONYMS
+For a given year, total additions to proved reserves divided
+by production during the year
+Reserve replacement ratio
+Production sharing contract
+PSC
+Estimates of oil, gas and NGL quantities thought to be
+recoverable from known reservoirs under existing economic
+and operating conditions
+Proved Reserves
+Liquefied Natural Gas
+LNG
+Floating, Production, Storage and Offloading vessel
+FPSO
+Oil and gas exploration, development, production and sales
+Upstream business
+An exploratory well drilled for the purpose of evaluating the
+commerciality of a geological trap in which petroleum has
+been discovered
+Appraisal well
+A well drilled on any rock formation for the purpose of
+searching for petroleum accumulations in an area or
+rock formation that has no known reserves or previous
+discoveries
+Wildcat
+The America Petroleum Institute's scale for specific gravity
+for liquid hydrocarbons, measured in degrees
+ΑΡΙ
+Glossary
+...
+CNOOC LIMITED Annual Report 2017
+Barrels-of-oil-equivalent
+Mbbls
+Thousand barrels
+Mboe
+Chiu Sung Hong
+Independent Non-executive Directors
+(Vice Chairman)
+(Chairman)
+Wu Guangqi
+Liu Jian
+Yang Hua
+Non-executive Directors
+(President)
+(CEO)
+Xu Keqiang
+Yuan Guangyu
+Executive Directors
+The Company has provided a notice to the TSX pursuant to the
+requirements of the TSX Company Manual indicating its intention
+to rely on such exemption in respect of the Company's 2017
+AGM and anticipates providing similar such notices for each
+successive year.
+Board of Directors:
+148
+147
+CNOOC LIMITED Annual Report 2017
+Note: In calculating barrels-of-oil equivalent, or BOE, we have assumed
+that 6,000 cubic feet of natural gas equals one BOE, with the
+exception of natural gas from South America, Oceania, SES and
+Tangguh projects in Indonesia in Asia, and Yacheng 13-1/13-4
+gas fields in China, which we have used actual thermal unit for
+such conversion purpose.
+Million cubic feet
+Mmcf
+Million barrels
+Mmbbls
+Million barrels-of-oil equivalent
+Mmboe
+Thousand cubic feet
+Mcf
+Thousand barrels of equivalent
+Company Information
+1.
+144
+A.
+38,995
+Accretion of discount
+Revisions in quantity estimates
+Development costs incurred during the year
+Change in estimated future development costs
+69,561
+904
+68,657
+net of related future costs
+Extensions discoveries and improved recovery,
+(312,384)
+(5,484)
+(306,900)
+Net change in prices, net of royalties and production costs
+(107,743)
+(288)
+(107,455)
+Sales of production, net of royalties and production costs
+401,098
+10,225
+390,873
+Standardised measure, beginning of year
+investee method investee
+Total
+share of equity
+equity method
+Consolidated
+(247)
+and equity
+38,748
+2,904
+Standardised measure of discounted future net cash flows and changes therein (continued)
+(e)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+139
+CNOOC LIMITED Annual Report 2017
+185,251
+9,247
+176,004
+Standardised measure, end of year
+(53,500)
+(2,070)
+(51,430)
+Changes in timing and other
+Purchase/(disposal) of properties
+65,947
+1,040
+64,907
+Net change in income taxes
+52,186
+1,720
+50,466
+(37,244)
+545
+(37,789)
+68,584
+65,680
+Equity share of
+Consolidated
+2015
+(11,342)
+Future development costs
+(36,457)
+(35,472)
+92,545
+90,964
+1,581 -----
+(985)
+Future production costs
+(1)
+Future cash inflows
+Total
+Europe
+America
+South
+North
+America
+(excluding
+Canada)
+Africa Canada
+Oceania
+(excluding
+PRC)
+PRC
+Notes
+Asia
+Enterprise's share of equity method investees
+2017
+Standardised measure of discounted future net cash flows and changes therein (continued)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e)
+As ordinary business, to consider and, if thought
+fit, pass with or without amendments, the following
+ordinary resolutions:
+(11,342)
+Future income taxes
+(15,446)
+(15,446)
+Changes in the standardised measure of discounted future net cash flows:
+Future net cash flows have been prepared taking into consideration estimated future dismantlement costs of dismantling offshore oil and gas
+properties.
+Future development costs include the estimated costs of drilling future development wells and building the production platforms.
+(3)
+(2)
+(1) Future cash flows consist of the Group's 100% interest in the independent oil and gas properties and the Group's participating interest in the
+properties under production sharing contracts in the PRC less (i) an adjustment for the royalties payable to the PRC government and share oil
+payable to the PRC government under production sharing contracts and (ii) an adjustment for production allocable to foreign partners under the
+PRC production sharing contracts for exploration costs attributable to the Group's participating interest, and plus the participating interest in
+the properties covered under the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host
+government and the domestic market obligation.
+7,324 255,246
+16,473
+18,648
+5,606
+17,070
+3,209
+10,677
+Consolidated
+176,239
+Total standardised measure of
+13,342
+13,110
+232
+discounted future net cash flows
+Standardised measure of
+(15,958)
+(15,594)
+29,300
+28,704
+596
+(364)
+10% discount factor
+Future net cash flows
+discounted future net cash flow
+2016
+Sales of production, net of royalties and production costs
+Consolidated
+Development costs incurred during the year
+Change in estimated future development costs
+32,971
+1,322
+31,649
+net of related future costs
+Extensions discoveries and improved recovery,
+20,237
+1,458
+18,779
+Net change in prices, net of royalties and production costs
+(120,854)
+(458)
+(120,396)
+233,497
+9,872
+223,625
+Standardised measure, beginning of year
+investee method investee
+Total
+share of equity
+equity method
+Consolidated
+and equity
+Consolidated
+Equity share of
+2017
+233,497
+9,872
+Revisions in quantity estimates
+Accretion of discount
+Net change in income taxes
+Purchase/(disposal) of properties
+Equity share of
+NOTICE IS HEREBY GIVEN that the Annual General
+Meeting (the "AGM") of the shareholders of CNOOC Limited
+(the "Company") will be held on 31 May 2018, at 3:00
+p.m. at Island Shangri-La Hotel Hong Kong, Pacific Place,
+Supreme Court Road, Central, Hong Kong, for the following
+purposes:
+Notice of Annual General Meeting
+CNOOC LIMITED Annual Report 2017
+255,245
+13,341
+241,904
+Standardised measure, end of year
+(3,125)
+(2,804)
+(321)
+Changes in timing and other
+5,394
+5,069
+223,625
+325
+(2,201)
+(7,348)
+26,253
+1,415
+24,838
+67,436
+(133)
+67,569
+42,350
+1,584
+40,766
+(39,365)
+(1,783)
+(37,582)
+(9,549)
+42,156
+140
+(25,703)
+(2,363)
+287
+(2,076)
+21,650
+1,560
+23,210
+(11,590)
+571
+(11,019)
+15
+15
+44,313
+(2,157)
+(91,754)
+(581)
+(91,173)
+Sales of production, net of royalties and production costs
+185,251
+9,247
+176,004
+Standardised measure, beginning of year
+equity method
+investee method investee
+40,943
+Total
+(2,029)
+Development costs incurred during the year
+Change in estimated future development costs
+28,951
+451
+29,402
+Purchase/(disposal) of properties
+44,152
+Revisions in quantity estimates
+Accretion of discount
+45,101
+Net change in income taxes
+Standardised measure, end of year
+39,369
+1,574
+Net change in prices, net of royalties and production costs
+net of related future costs
+Extensions discoveries and improved recovery,
+and equity
+share of equity
+(27,732)
+Changes in timing and other
+949
+FSC FSC™ C006398
+CNOOC LIMITED
+www.fsc.org
+responsible sources
+Paper from
+Designed and produced by: Equity Financial Press Limited
+MIX
+Printed by Asia One Printing Limited
+www.cnoocltd.com
+. .
+7
+38
+2
+17
+7
+7
+58
+56
+Total
+3,163
+0
+2,248
+0
+6
+0
+2
+0
+7
+5
+0
+0
+Overseas
+1,711
+9,352
+0
+Business Overview
+2,169
+4,874
+CNOOC LIMITED Annual Report 2017
+Western South China Sea
+12
+For development and production, Penglai 19-9
+comprehensive adjustment project commenced production
+during the year. Penglai 19-3 oilfield 1/3/8/9 comprehensive
+These new discoveries and successful appraisals further
+demonstrated Bohai's potential as a core production region
+for the Company.
+Bohai has rich oil and gas resources and has been one
+of the Company's primary areas for exploration and
+development. In 2017, the Company made nine successful
+discoveries in Bohai, namely Bozhong 19-6, Bozhong 29-
+6, Bozhong 29-6 South, Bozhong 13-1 South, Penglai 19-
+1, Bozhong 29-1 East, Bozhong 26-3 West, Kenli 3-2 South
+and Kenli 4-1. The Company also successfully appraised
+eight oil and gas structures, including Bozhong 36-1/36-
+2, Bozhong 19-6, Bozhong 29-6 South, Bozhong 26-
+3, Longkou 7-6, Kenli 6-4/6-5, Bozhong 29-1 and Luda
+27-2 South. Among these, three mid-to-large size oilfields,
+namely Bozhong 36-1, Kenli 6-4/5/6 and Longkou 7-6,
+were successfully appraised, laying reserve foundations
+for the sustainable development of Bohai. The newly
+discovered Bozhong 19-6 marks a significant breakthrough
+in the natural gas exploration in deep formation in Bohai.
+The rolling exploration in Bohai also made some remarkable
+achievements.
+Bohai is the most important crude oil producing area for the
+Company. The crude oil produced in this region is mainly
+heavy oil. As of the end of 2017, the reserve and daily
+production volume in Bohai were 1,101.4 million BOE and
+458,473 BOE/day, respectively, representing approximately
+22.8% of the Company's total reserves and 35.6% of its
+daily production. The operational area in Bohai is mainly
+shallow water with a depth of 10 to 30 meters.
+Bohai
+Offshore China
+REGIONAL OVERVIEW
+In 2018, the Company will promote the construction of
+key projects, optimize development plans of producing
+fields, strengthen comprehensive management and lower
+the decline to ensure base production level. It will arrange
+infill drillings based on economic evaluation and increase
+the contribution to production. Meanwhile, it will continue
+to intensify quality and efficiency enhancement and
+consolidate its cost competitiveness.
+9,352
+Looking forward to 2018, the workload of onshore
+construction and offshore installations will increase. A total
+of five new projects are expected to commence production,
+including Weizhou 6-13 oilfield, Penglai 19-3 oilfield
+1/3/8/9 comprehensive adjustment project, Dongfang
+13-2 gas fields and Wenchang 9-2/9-3/10-3 gas fields in
+offshore China, and Stampede oilfield of U.S. in the Gulf of
+Mexico. Among these, the Stampede oilfield commenced
+production in February 2018 and the Weizhou 6-13 oilfield
+commenced production in March 2018. It is expected that
+more than 20 new projects will be under construction in
+2018, supporting the Company's future sustainable growth.
+Thirdly, we actively implemented infill drillings to
+contribute to production.
+Secondly, we strictly controlled the operating cost
+of existing fields and encouraged conservation to
+improve efficiency, and further lowered the all-in cost
+per BOE.
+Firstly, we ensured base production level and laid
+solid foundation for future production profile of oilfields
+through refined management.
+In 2017, the Company's development and production
+were driven by intensive and streamline management with
+emphasis on cost savings and efficiency enhancement,
+technology-driven strategy and sustainable development.
+Achievements in these areas included the following:
+Business Overview
+11
+CNOOC LIMITED Annual Report 2017
+In 2017, while ensuring safety, the Company achieved its
+development and production targets for the year through
+consistently maintaining high operational efficiency, refined
+adjustment of liquid structures, optimizing water injection
+and lower the decline of oilfields. The Company's net oil
+and gas production reached 470.2 million BOE, fulfilling
+the production target of 450-460 million BOE set at the
+beginning of the year. The five new projects planned
+for 2017, namely Penglai 19-9 oilfield comprehensive
+adjustment, Enping 23-1 oilfields, Weizhou 12-2 oilfield
+phase II, BD gas field and the Hangingstone project, all
+came on stream during the year.
+In 2017, the Company successfully met its operational
+targets, with oil and gas production exceeding the target
+set early in the year. The Company carefully organized
+its operational resources and made smooth progress in
+engineering construction.
+Engineering Construction, Development and
+Production
+In 2018, the Company will continue to follow a value-
+driven exploration philosophy and target mid-to-large
+size oil and gas discoveries offshore China. It will make
+efforts on both oil and gas exploration and strengthen gas
+exploration activities. It will strengthen exploration in new
+areas to support the Company's sustainable development.
+Overseas, the Company will focus on strategic core areas,
+actively obtain quality blocks, continue to target mid-to-large
+size discoveries, and expand reserve base.
+Fourthly, we strengthened technology-driven
+development, breaking technology bottlenecks, and
+promoted heavy oil thermal recovery in Bohai.
+adjustment project is expected to commence production
+in 2018. Currently a number of new projects are under
+construction, including Luda 16-3 oilfield, Caofeidian 6-4
+oilfield and Qinhuangdao 33-1 South oilfield.
+The Company's major exploration areas as of the end of
+2017 are shown in the table below:
+Western South China Sea is one of the Company's most
+important natural gas production areas. Currently, the
+typical water depth of the Company's operational area in the
+region ranges from 40 to 120 meters. As of the end of 2017,
+the reserves and daily production volume in Western South
+China Sea reached 844.1 million BOE and 142,870 BOE/
+day, respectively, representing approximately 17.4% of the
+Company's total reserves and 11.1% of its daily production.
+In 2017, the Akpo oilfield maintained stable production, with
+net production reaching approximately 56,000 barrels per
+day. The Egina project is in the engineering construction
+stage. During the year, the Preowei-3 well was successfully
+appraised.
+The Company also holds a 20% non-operating interest in
+Usan oilfield in the OML138 block in offshore Nigeria, and an
+18% non-operating interest in the OPL 223 and OML 139
+PSC respectively.
+We will countinue to utilize the synergy of Usan and OML130
+projects to establish an oil and gas production base in west
+Africa.
+Uganda
+The Company owns one-third of the interest in each of EA
+1, EA 2 and EA 3A in Uganda. EA 1, EA 2 and EA 3A are
+located at the Lake Albert Basin, one of the most promising
+basins for oil and gas resources in Africa.
+In 2017, the Company, as the operator of EA 3A, completed
+the front end engineering design (FEED) for ground
+construction and drilling.
+In 2017, development and production licenses for eight
+oilfields in the EA1 and EA2 blocks were issued by the
+government and the FEED initiated. The intergovernmental
+agreement (IGA) for an oil pipeline was signed and the FEED
+was completed.
+Other Regions in Africa
+Apart from Nigeria and Uganda, the Company owns
+interests in several blocks in the Republic of the Congo,
+Algeria and the Gabonese Republic. In 2017, the Company
+also obtained a 65% operating interest in AGC Profond
+block in offshore Senegal and Guinea-Bissau.
+North America
+North America has become the Company's largest
+overseas reserves and production region. The Company
+holds interests in oil and gas assets in the U.S., Canada
+and Trinidad and Tobago, as well as shares in MEG
+Energy Corporation in Canada. As of the end of 2017, the
+Company's reserves and daily production volume in North
+America reached 1,260.6 million BOE and 132,675 BOE/
+day, respectively, representing approximately 26.0% of the
+Company's total reserves and 10.3% of its daily production.
+The U.S.
+The Company currently holds an average of 27% and 12%
+interests in the Eagle Ford and Niobrara shale oil and gas
+projects in the U.S. respectively.
+In 2017, net production of the Eagle Ford project remained
+stable and averaged 53,000 BOE/day.
+The Company owns a 45% interest in the OML130 block
+in Nigeria. OML130 is a deepwater project comprising four
+oilfields, namely Akpo, Egina, Egina South and Preowei.
+14
+...
+Business Overview
+Additionally, the Company owns interests in two major
+deepwater development projects, Stampede and
+Appomattox, and a number of other exploration blocks in
+the US Gulf of Mexico through its wholly-owned subsidiary,
+Nexen Energy ULC ("Nexen"). Among these, Stampede
+commenced production in February 2018.
+Canada
+Canada is one of the world's richest place of oil sands
+resources, and participation in the country's oil sands
+development will make a major contribution to the
+Company's sustainable growth. Through its Nexen
+subsidiary, the Company owns a 100% working interest
+in the oil sands project located at Long Lake, as well as
+three other oil sands leases in the Athabasca region of
+northeastern Alberta. In 2017, the production of Long Lake
+project ramp up to approximately 40,000 BOE/day.
+The Company holds a 25% interest in the Hangingstone oil
+sands project. The project commenced production in 2017.
+We also hold a 7.23% interest in the Syncrude project and
+non-operating interests in several other exploration and
+development leases.
+The Company holds a 100% interest in two exploration
+blocks in offshore Newfoundland.
+In addition, the Company holds approximately 12.39% of
+shares in the MEG Energy Corporation, a listed company on
+the Toronto Stock Exchange.
+Other Regions in North America
+The Company owns 12.5% interest in the 2C block and a
+17.12% interest in the 3A block in Trinidad and Tobago,
+respectively, of which the 2C block is in production. Phase
+Ill of the natural gas project yielded stable production
+and achieved favorable economic returns. The Company
+also owns a 100% exploration interest in the deepwater
+exploration block 1 and block 4 of the CINTURON
+PLEGADO PERDIDO in Mexico respectively.
+South America
+In South America, the Company's major holdings consist
+of a 50% interest in the Bridas Corporation ("Bridas") and
+a 10% interest in the PSC for the Libra oilfield in Brazil.
+The Company's 50% interest in Bridas is accounted for
+by equity methods. As of the end of 2017, the Company's
+reserves and daily production volume derived from South
+America reached 444.8 million BOE and 46,770 BOE/
+day, respectively, representing approximately 9.2% of the
+Company's total reserves and 3.6% of its daily production.
+Argentina
+The Company holds a 50% interest in Bridas and makes
+joint management decisions. Bridas holds a 40% interest
+CNOOC LIMITED Annual Report 2017
+Nigeria
+Africa is a relatively large oil and gas reserve and production
+base for the Company. The Company's assets in Africa
+are primarily located in Nigeria and Uganda. As of the
+end of 2017, reserves and daily production volume in
+Africa reached 136.9 million BOE and 73,625 BOE/day,
+respectively, representing approximately 2.8% of the
+Company's total reserves and 5.7% of its daily production.
+Africa
+In 2017, the Company made six successful discoveries
+in Western South China Sea, namely Weizhou 11-2 East,
+Weizhou 11-12, Wenchang 9-3 South, Wenchang 19-
+9, Wushi 22-8, Wushi 23-5/23-5 South. Four successful
+appraisals were made, namely Weizhou 11-12, Wushi 16-1
+West, Wushi 22-8, Wushi 23-5/23-5 South. Among these,
+the mid-to-large size oil and gas fields Wushi 16-1 West
+and Wushi 23-5 were successfully appraised, which will
+greatly promote the Phase II development of Wushi oilfields.
+Breakthroughs were made in high temperature and ultra-
+high pressure natural gas exploration, which proved the
+exploration potential of Ledong 10 area in Yinggehai Basin.
+The concept of integrated exploration and development was
+further developed in the Weixinan oilfields and many new
+discoveries were obtained.
+For development and production, Weizhou 12-2 oilfield
+Phase II commenced production during the year. Weizhou
+6-13 oilfield commenced production in March 2018.
+Dongfang 13-2 gas fields and Wenchang 9-2/9-3/10-3
+gas fields are planned to commence production in 2018.
+Wenchang 13-2 comprehensive adjustment and other new
+projects are under construction.
+Eastern South China Sea
+Eastern South China Sea is the Company's another
+important crude oil producing area. Currently, the typical
+water depth of the Company's operational area in the region
+ranges from 100 to 300 meters. The crude oil produced is
+mostly of light to medium gravity. As of the end of 2017,
+reserves and daily production volume in Eastern South
+China Sea reached 533.7 million BOE and 212,895 BOE/
+day, respectively, representing approximately 11.0% of the
+Company's total reserves and 16.5% of its daily production.
+In 2017, new discoveries of Lufeng 14-8 and Lufeng 8-1
+South were made in Pearl River Mouth basin, significantly
+increased the reserve scale of Lufeng area. Two oil and
+gas structures, namely Lufeng 8-1 and Lufeng 14-8, were
+successfully appraised.
+For development and production, Enping 23-1 oilfields
+commenced production during the year. Currently, Huizhou
+32-5 comprehensive adjustment and other new projects are
+under construction.
+East China Sea
+The typical water depth of the Company's operational area
+in the East China Sea region is approximately 90 meters. As
+of the end of 2017, reserves and daily production volume
+in the region represented approximately 2.8% and 1.0%
+of the Company's total reserves and daily production,
+respectively.
+Others
+In 2017, integrated model of "exploration, development,
+production and sale" was successfully implemented in 8/9
+Area of Shanxi Linxing Block. Drilling, testing, construction
+and startup of tight gas project was completed within the
+same year and achieved first production.
+OVERSEAS
+Asia (excluding China)
+Asia (excluding China) was the first overseas region entered
+into by the Company, and it has become one of its major
+overseas oil and gas producing areas. Currently, the
+Company holds oil and gas assets mainly in Indonesia and
+Iraq. As of the end of 2017, reserves and daily production
+volume derived from Asia (excluding China) reached 225.4
+million BOE and 82,958 BOE/day, respectively, representing
+approximately 4.7% of the Company's total reserves and
+6.4% of its daily production.
+Indonesia
+At the end of 2017, the Company's asset portfolio in
+Indonesia consisted of four development and production
+blocks. Among these, the Company acted as the operator
+for the Southeast Sumatra block, the Madura Strait PSC
+was a joint operation block, in which the BD gas field
+commenced production in 2017, and other gas fields were
+under appraisal and construction. The Company, as a non-
+operator, also holds working interests in the production
+sharing contracts of Malacca PSC.
+The Company owns an interest of approximately 13.90% in
+the Tangguh LNG Project in Indonesia. In 2017, production
+volume of Phase I of the Project remained stable. Currently,
+construction of the third LNG train of Phase II is in progress
+as planned, and is expected to reach completion and
+commence production in 2020.
+Iraq
+The Company owns interests in four blocks which are still
+under exploration in Papua New Guinea.
+Other Regions in Oceania
+The Company also owns one exploration block in Australia
+which is currently under appraisal.
+In 2017, the North West Shelf LNG Project generated stable
+production and achieved favorable economic returns.
+The Company owns a 5.3% interest in the Australian North
+West Shelf LNG Project. The project has commenced
+production and is currently supplying gas to end-users
+including the Dapeng LNG Terminal in Guangdong, China.
+Australia
+2,169
+Currently, the Company's oil and gas assets in Oceania are
+mainly located in Australia and Papua New Guinea. As of the
+end of 2017, reserves and daily production volume derived
+from Oceania reached 69.0 million BOE and 22,598 BOE/
+day, respectively, representing approximately 1.4% of the
+Company's total reserves and 1.8% of its daily production.
+In 2017, the Company continuously drilled development
+wells and adopted production enhancement measures of
+Missian project, resulting in a steady increase in daily net
+production to approximately 42,000 barrels per day.
+technical service contract of Missan oilfields in Iraq and acts
+as the oilfields' lead contractor.
+Business Overview
+13
+CNOOC LIMITED Annual Report 2017
+The Company holds a 63.75% participating interest in the
+Oceania
+2,248
+7
+38
+Secondly, key breakthroughs were achieved in deep
+formation natural gas exploration in Bohai. New
+discovery Bozhong 19-6 is expected to be the largest
+gas discovery in Bohai Basin in history.
+Thirdly, breakthroughs were achieved in natural gas
+exploration with high temperature and ultra-high
+pressure in South China Sea, proving the exploration
+potential of Ledong 10 area in Yinggehai Basin.
+CNOOC LIMITED Annual Report 2017
+Business Overview
+Fourthly, new discoveries of Lufeng 14-8 and Lufeng
+8-1 South were made in Pearl River Mouth Basin,
+significantly increased the reserve scale of Lufeng
+area.
+Overseas, the Company drilled 12 exploration wells
+and acquired approximately 3,163 square kilometers of
+3D seismic data. During its overseas explorations, the
+Company made two new discoveries and successfully
+appraised two oil and gas structures. Major achievements
+include the following:
+Firstly, successive new discoveries were made in
+Stabroek block in Guyana, which became one of the
+Company's most successful overseas exploration
+projects.
+Secondly, Libra project in Brazil was successfully
+appraised, with reserve in line with expectation.
+Thirdly, following the significant discovery of Owowo,
+the Preowei-3 well in Nigeria was successfully
+appraised, and reserve scale substantially increased.
+In 2017, the Company focused on its overseas strategic
+layout and obtained new quality projects in Senegal and
+Brazil.
+The Company's major exploration activities in 2017 are set
+out in the table below:
+Exploration Wells
+New Discoveries
+Firstly, we effectively completed the appraisal of four
+mid-to-large size oilfields, including Bozhong 36-1,
+Kenli 6-4/5/6, Longkou 7-6 and Wushi 16-1 West/
+Wushi 23-5.
+Wildcat
+PSC
+Wildcat
+Appraisal Independent
+EXPLORATION
+In 2018, the Company's capital expenditure is anticipated
+to reach RMB 70-80 billion. To maintain its competitive
+financial position, the Company will continue to stress
+efficiency, enhance investment return, strengthen cost
+controls and focus on cash flow management. Our
+production target for 2018 is 470-480 million BOE, with
+five new projects to commence production. Meanwhile, the
+Company will maintain its high standards of health, safety
+and environmental protection.
+Looking forward to 2018, the global economy will continue
+its slow recovery. Despite a recovery in international oil
+prices, the external operating environment is filled with
+uncertainties. To this end, the Company remains confident
+of its prospects. We will further strengthen our operating
+strategies, which mainly includes: steadily increase the
+Company's oil and gas reserve and production levels,
+continue to reinforce quality and efficiency enhancement,
+strengthen innovation and technology-driven philosophy,
+maintain prudent financial policy and investment decision-
+making, and pursue a green, healthy and environment-
+friendly development model.
+In 2017, the Company achieved its production and business
+targets despite being faced with a variety of challenges.
+The Company managed to maintain appropriate exploration
+expenditures and carry out an intensive exploration
+program, and obtained successful results while continuing
+to control total capital expenditure. 19 new discoveries were
+made and 16 successful appraisals of oil and gas structures
+were achieved. Five new projects planned in early 2017
+all came on stream. The production target was met with a
+net production volume of 470.2 million BOE. To ensure its
+continuing sustainable development, the Company pushed
+ahead steadily with the construction of new projects. All-
+in cost per BOE was US$32.54. The Company maintained
+a healthy financial position with a net profit of RMB24.7
+billion for the year. Meanwhile, its performance in the areas
+of health, safety and environmental protection remained
+stable.
+Business Overview
+10
+9
+CNOOC LIMITED Annual Report 2017
+In 2017, the Company persisted with the operating
+strategies it formulated at the beginning of the year,
+which include balancing short-term and mid-to-long term
+development; maintaining a prudent financial policy and
+improving capital efficiency; and optimising the assets
+portfolio and focusing more on assets return.
+In 2017, the recovery of the global economy remained
+stable on the whole. The U.S. economy recovery
+momentum was strong. The Eurozone economy continued
+to improve, and emerging markets saw rapid overall
+economic growth. International oil prices surged upward
+following initial decline. The entire oil and gas industry,
+as well as oil and gas companies still faced an uncertain
+operating environment.
+Independent
+Appraisal
+After years of hard work, we have established our presence
+in more than 20 countries and regions. Our overseas assets
+account for over 50% of the Company's total assets. With
+its diversified portfolio of high-quality assets, the Company
+is an active participant in a number of world-class oil and
+gas projects and is regarded as a leading industry player.
+Currently, the Company holds interests in oil and natural
+gas blocks in Indonesia, Australia, Nigeria, Uganda,
+Argentina, the U.S., Canada, the United Kingdom, Brazil,
+Guyana and various other countries. As of the end of 2017,
+approximately 46.0% of the Company's net proved reserves
+and approximately 35.6% of its net production were derived
+from overseas.
+In 2017, the Company continued to follow a value-
+driven exploration strategy in offshore China, resulting
+in outstanding achievement. Meanwhile, the Company
+intensified natural gas exploration and achieved
+breakthroughs in various fields. Notable achievements
+include:
+Total
+Areas
+Major Exploration
+Areas
+(Net) (km²)
+Bohai
+43,068
+Western South China Sea
+73,388
+Offshore China
+Eastern South China Sea
+55,424
+East China Sea
+85,413
+Subtotal
+257,292
+In offshore China, the Company's exploration activities
+remained at a high level. A total 116 exploration wells were
+drilled, two of which were drilled through PSC. A total of
+4,417 kilometers of 2D seismic data and 11,063 square
+kilometers of 3D seismic data were acquired independently
+and through PSC. The Company made 17 new discoveries
+and successfully appraised 14 oil and gas structures
+in offshore China. The success rate for independent
+exploration wells in offshore China was 48-61%.
+Asia (excluding China)
+Africa
+9,016
+Oceania
+25,140
+Overseas
+North America
+7,276
+South America
+7,860
+Europe
+Subtotal
+13,285
+68,247
+325,539
+5,670
+1
+In its PSC operations, China National Offshore Oil
+Corporation ("CNOOC"), the Company's controlling
+shareholder, has the exclusive right to explore and
+develop oil and natural gas in offshore China in
+cooperation with foreign partners through PSCs.
+CNOOC has transferred to the Company all its rights
+and obligations in regard to the PSCs (except those
+relating to its management and regulatory function as
+a state-owned company), including new PSCs that will
+be signed in the future.
+In offshore China, the Company engages in oil and natural
+gas exploration, development and production in Bohai,
+Western and Eastern South China Sea, and the East China
+Sea, either independently or in cooperation with foreign
+partners through production sharing contracts ("PSCs"). As
+of the end of 2017, approximately 54.0% of the Company's
+net proved reserves and approximately 64.4% of its net
+production were derived from offshore China.
+6
+0
+In 2017, the Company continued to reinforce the integration
+of exploration and development and enhance the ability
+and shorten the cycle of reserve monetization. For offshore
+China, it further prioritized investment in mature areas
+while continuing to explore frontier areas. For overseas
+exploration, with its foothold on existing core projects,
+the Company sought to maintain a "rolling" pattern of
+development. It continued to maintain a reasonable
+proportion of exploration investment in total capital
+expenditure and to ensure mid-to-long term sustainable
+development with a relatively high level of exploration
+activity. In 2017, the reserve replacement ratio for the
+Company was 305%. Reserve life as the end of 2017 was
+back to over ten years.
+0
+0
+0
+3,131
+1,028
+East China Sea
+2
+1
+0
+0
+0
+0
+0
+0
+0
+0
+1,934
+0
+Subtotal
+56
+58
+2
+0
+17
+0
+0
+In its independent operations, the Company has been
+adding to its reserves and production mainly through
+independent exploration and development in offshore
+China. At the end of 2017, approximately 84.1% of the
+Company's net proved reserves and approximately
+76.0% of its net production in offshore China were
+derived from independent projects.
+0
+16
+CNOOC Limited is an upstream company specializing in oil
+and natural gas exploration, development and production.
+It is the dominant oil and natural gas producer in offshore
+China, and in terms of reserves and production, is one of
+the largest independent oil and natural gas exploration and
+production companies in the world. As of the end of 2017,
+the Company had net proved reserves of approximately
+4.84 billion BOE (including approximately 0.37 billion BOE
+in its equity method investees). In 2017, the Company
+achieved a total net oil and gas production of 1,288,128
+BOE per day (including net oil and gas production of
+approximately 47,355 BOE per day in its equity method
+investees).
+Yuan Guangyu CEO
+OVERVIEW
+in Pan American Energy ("PAE”) in Argentina and a 100%
+interest in AXION Refinery. In December 2017, Bridas
+exchanged the 10% interest in PAE held by BP with the 50%
+interest in AXION. After the settlement of the upstream and
+downstream asset swap, Bridas holds 50% interest in PAE
+and AXION respectively.
+PSC Independent
+Successful Appraisal Wells
+PSC Independent
+Seismic Data
+2D (km)
+3D (km²)
+PSC Independent
+PSC
+Offshore China
+Bohai
+12
+22 38 1 0 9 0 28 0 0 0 742 0
+16
+7
+1
+0
+2
+0
+3
+1
+2,248
+2,169
+3,545
+683
+Western South China Sea
+Eastern South China Sea
+Under the low oil price environment in 2017, the Company
+sought to strike a balance between production and return,
+enhanced its operating efficiency, optimized operating plans and
+created innovative development plans. Daily net production for
+Bridas averaged approximately 46,000 BOE/day.
+18
+The Company holds a 10% interest in Libra PSC, a
+deepwater pre-salt project in Brazil. The oilfield is located in
+the Santos Basin, with a block area of about 1,550 square
+kilometers and a water depth of approximately 2,000
+meters.
+In 2017, the Company continued to implement its
+"technology-driven" strategy, focused on strengthening the
+management of key research and development projects,
+continued to improve its systems and mechanisms of
+technological innovation, and promoted construction
+of research and development platform. It continued
+to implement systems for research collaboration
+and strengthened joint project developments of core
+technologies of different research institutes of the Company.
+The Company actively carried out the "Quality and Efficiency
+Year 4.0" program. Through technological innovation,
+the Company was able to establish a solid foundation for
+reserve and production growth. A series of research findings
+have been applied to increase production efficiency.
+Major Scientific and Technological Project
+Development
+In 2017, the Company focused on core business needs and
+continued to carry out critical core technological projects
+such as deepwater oil and gas fields, offshore heavy oil
+fields and fields with low porosity and permeability. It made
+a number of technological achievements including fracture
+system and hydrocarbon accumulation control research
+in the western Bohai, and key technologies for oil and gas
+geology and exploration in the deepwater areas in the
+epicontinental region of the Pearl River Mouth Basin. These
+notable developments have provided vital technical support
+for the sustainable development of the Company.
+Construction of Scientific and Technological
+Innovative System
+The Company established platforms for research and
+development which include an offshore low-permeability
+reservoir exploration and development laboratory and an
+unconventional oil and gas exploration and development
+laboratory. The “Key technologies in drilling and completion
+of wells in South China Sea under high temperature and
+high pressure and their industrial application" project won
+first prize at the National Science and Technology Progress
+Awards. The Company also led the drafting of "ISO18647,
+Petroleum and Natural Gas Industries – Modular Drilling Rigs
+for Offshore Fixed Platforms, an International Standard",
+which has since been formally published.
+RISK MANAGEMENT AND INTERNAL
+CONTROL SYSTEM
+Since its establishment, the Company has treated risk
+management and internal control as a top priority. The
+Company recognizes that it is the duty and obligation of its
+management to establish and maintain a risk management
+and internal control system, which serves the Company's
+strategic objectives and meets the Company's business
+practice.
+The Company's Risk Management Committee is
+directly managed by the Chief Executive Officer and
+has been authorized by the Board to be in charge with
+the organization and implementation of the overall risk
+management and internal control, on-going monitoring
+of the risk management and internal control systems of
+the Company, and making periodic reports to the Board
+regarding the status of the risk management and internal
+control systems of the Company.
+With respect to risk management, the Company has
+chosen and adopted the risk management framework
+issued by COSO ("Committee of Sponsoring
+Organizations of the Tread way Commission") of
+the U.S., established a risk management system
+covering design, implementation, monitoring,
+assessment and continuous improvement based on
+the ISO 31000:2009 "Risk Management-Principles
+and Guidelines". The Risk Management Committee
+established the overall targets and policies of the
+risk management system which are in line with
+the strategic objectives of the Company, and
+identified, analysed and assessed the overall risk of
+the Company, including the Company's key risks
+in making major decisions, important events and
+key business processes. The Risk Management
+Committee is also responsible for reviewing and
+approving the response plans to major risks, as
+well as following-up and periodically reviewing the
+implementation of such response plans, in order
+to make sure that sufficient attention, monitor and
+responses will be paid to all key risks of the Company.
+With respect to internal control, the Company
+has chosen and adopted the internal control
+framework issued by COSO of the U.S., established
+an internal control system and mechanism over
+financial, operational and compliance controls and
+has conducted continuing review and evaluation
+of the internal control of the Company to ensure
+the timeliness, accuracy and completeness of all
+information reported.
+The Board considered that as of 31 December 2017,
+the Company's risk management system and the
+Company's internal control over financial reporting
+were effective.
+As a company listed in Hong Kong, the U.S. and Canada,
+the Company will continue to strictly comply with all
+regulatory requirements, strengthen its risk management
+and internal control systems, and maintain a high standard
+of corporate governance to ensure the Company's healthy
+development.
+CNOOC LIMITED Annual Report 2017 17
+RESEARCH AND DEVELOPMENT
+Business Overview
+Although we have established the risk management system
+to identify, analyze, evaluate and respond to risks, our
+business activities may subject to the following risks, which
+could have material effects on our strategy, operations,
+compliance and financial condition. We urge you to carefully
+consider the risks described below.
+Our business, cash flows and profits fluctuate with
+volatility in oil and gas prices.
+Prices for crude oil, natural gas and oil products may
+fluctuate widely in response to relative changes in the supply
+and demand for oil and natural gas, market uncertainty and
+various other factors beyond our control, including, but not
+limited to overall economic conditions, political instability,
+armed conflict and acts of terrorism, economic conditions
+and actions by major oil-producing countries, the price and
+availability of other energy sources, domestic and foreign
+government regulations, natural disasters and weather
+conditions. Changes in oil and gas prices could have a
+material effect on our business, cash flows and earnings.
+Despite the mild recovery of international oil prices, low oil
+and natural gas prices may adversely affect our business,
+revenue and earnings. Lower oil and natural gas prices
+may result in the write-off of higher cost reserves and other
+assets, reduction of the amount of oil and natural gas we
+can produce economically and termination of existing
+contracts that have become uneconomic. The prolonged
+slump in oil and natural gas prices may also impact our long-
+term investment strategy and operation capability for our
+projects.
+Our business and strategy may be substantially
+affected by complex macro economy, politically
+instability, war and terrorism and changes in policy
+and fiscal and tax regimes.
+Our financial performance is affected by the tax and fiscal
+regimes of host countries in which we operate. Any changes
+in these regimes may result in increased costs, including the
+potential for additional or double taxation being imposed
+on our company in some circumstances. For example, the
+Organization for Economic Co-operation and Development
+(OECD)'s "Base Erosion and Profit Shifting Project" (BEPS
+Project) was initiated in 2015 to enhance multilateral
+cooperation and strengthen supervision on global corporate
+taxation and transfer pricing activities. Numerous countries
+have responded to the BEPS Project by implementing tax
+law changes and amending tax treaties at a rapid pace.
+Most recently, the U.S. has promulgated a significant tax
+reform with effect from 1 January 2018.
+Oil and natural gas industry are very competitive.
+We compete in the PRC and international markets with
+national oil companies, major integrated oil and gas
+companies and various other independent oil and gas
+companies for access to oil and gas resources, products,
+alternative energy, customers, capital financing, technology
+and equipment, personnel and business opportunities.
+Competition may result in shortage of these resources or
+over-supply of oil and gas, which could increase our cost
+or reduce our earnings, and adversely impact our business,
+financial condition and results of operations.
+In addition to competition, as we need to obtain various
+approvals from governmental and other regulatory
+authorities in order to maintain our operations, we may
+face unfavorable results such as project delays and cost
+overruns, which may further impact the realization of our
+strategies and adversely impact our financial condition.
+Our ability to deliver competitive returns and pursue
+commercial opportunities depends in part on the
+robustness and the long-lasting accuracy of our price
+assumptions.
+We review the oil and natural gas price assumptions on
+a periodic basis when evaluating project decisions and
+business opportunities. We generally test projects and other
+business opportunities against a long-term price range.
+While we believe our current long-term price assumptions
+are prudent, if such assumptions proved to be incorrect,
+it could have a material adverse effect. For short-term
+planning purposes, we stress test the project feasibility
+against a wider range of prices.
+CNOOC LIMITED Annual Report 2017
+...
+Brazil
+RISK FACTORS
+Business Overview
+Despite the global economy has been recovering, some
+of the countries in which we operate may be considered
+politically and economically unstable. As a result, our
+financial condition and operating results could be adversely
+affected by associated international activities, domestic civil
+unrest and general strikes, political instability, war and acts
+of terrorism. Any changes in regime or social instability, or
+other political, economic or diplomatic developments, or
+changes in fiscal and tax regime are not within our control.
+Our operations, existing assets or future investments may
+be materially and adversely affected by these changes
+as well as potential trade and economic sanctions due to
+deteriorated relations between different countries.
+CNOOC LIMITED Annual Report 2017
+Ten appraisal wells have been drilled as of the end of
+2017 under the Libra project. In November 2017, the Libra
+Consortium declared the commerciality of the northwest
+area and named it as the Mero field, which includes 4
+production units of Mero 1, Mero 2, Mero 3 and Mero 4.
+Extended well test has been implemented to test Mero
+2 and Mero 3 and started production. Final Investment
+Decision (FID) of Mero 1 has been approved and it has
+entered the construction phase.
+...
+Brazil is one of the world's most important deepwater oil and
+gas development regions. The Company will fully leverage
+on the development opportunities of the Libra project to
+seek new drivers for production growth.
+The Company additionally holds a 100% interest in the 592
+block and a 20% interest in the ACF Oeste block.
+Guyana
+CNOOC LIMITED Annual Report 2017
+15
+16
+Business Overview
+Other Regions in South America
+The Company also holds interests in several exploration and
+production blocks in Colombia.
+Europe
+The Company's holds interests in several oil and gas
+fields such as Buzzard and Golden Eagle in the North
+Sea. As of the end of 2017, the Company's reserves and
+daily production volume derived from Europe reached
+89.2 million BOE and 100,046 BOE/day, respectively,
+representing approximately 1.8% of the Company's total
+reserves and 7.8% of its daily production.
+United Kingdom
+The Company holds a 25% interest in Stabroek block in
+offshore Guyana. Seven exploration discoveries have been
+made in the block. In 2017, the Liza and Payara reservoirs
+were successfully appraised and two new discoveries,
+namely Snoek and Turbot, were obtained, which further
+confirmed the reserve scale. FID was approved for Liza
+oilfield Phase I and production is planned to commence in
+2020.
+The United Kingdom is one of the Company's key overseas
+development areas, with key projects such as Buzzard and
+Golden Eagle substantially contributing to the Company's
+production. In 2017, the Buzzard oilfield's net production
+averaged approximately 63,000 barrels/day. We will
+continue to intensify our oil and gas development efforts in
+the UK, and actively seek out exploration and development
+blocks with potential in order to achieve stable and
+sustainable development in the region.
+The Company's asset portfolio in the North Sea includes
+projects under production, development and exploration,
+mainly including: 43.2% interest in the Buzzard oilfield, one
+of the largest oilfields in the North Sea, and a 36.5% interest
+in the Golden Eagle oilfield. These make the Company the
+largest crude oil operator in the North Sea.
+In 2017, stable and positive economic performance in
+China, the impact from the clean winter heating policy in
+northern China, as well as the policy of changing fuel from
+coal to gas, resulted in natural gas demand growth in China,
+which drove sales volume growth of high-priced natural
+gas. In addition, based on market condition, the Company
+gradually adjusted sale prices for natural gas users in certain
+areas through negotiation. In 2017, the Company's average
+realized natural gas price was US$5.84/mcf, representing a
+7.0% year-on-year increase.
+The Company's natural gas sales prices are mainly
+determined by negotiation with customers. Its natural
+gas sales agreements are generally long-term contracts,
+and they normally include a periodic price adjustment
+mechanism. The Company's natural gas customers are
+primarily located in the southeastern coast of China and
+include Hong Kong Castle Peak Power Company Limited,
+CNOOC Gas and Power Group, China BlueChemical Ltd,
+and others.
+Sales of LNG sourced by the Company from the North West
+Shelf LNG Project in Australia and the Tangguh LNG Project
+in Indonesia are mainly based on long-term supply contracts
+with various customers in the Asia-Pacific region, including
+LNG Terminals in Dapeng, Guangdong and Putian, Fujian,
+China.
+In 2017, as a result of the increase in international oil prices,
+the Company's realized oil prices picked up. In 2017, the
+Company's average realized oil price was US$52.65/barrel,
+representing a year-on-year increase of 27.2%.
+Beginning in 2017, the benchmark price for crude oil is
+Dated Brent. The Company's major customers in China
+are Sinopec, PetroChina and CNOOC. Crude oil produced
+overseas and sold on international markets is benchmarked
+at the Brent and WTI prices.
+Sales of Natural Gas
+The Company sells crude oil produced in offshore China
+to the PRC market mainly through CNOOC China Limited,
+its wholly-owned subsidiary. The Company sells crude oil
+produced overseas to international and domestic markets
+mainly through another wholly-owned subsidiary, China
+Offshore Oil (Singapore) International Pte Ltd. Nexen
+Energy ULC, a wholly-owned subsidiary of the Company,
+sells its crude oil and synthetic oil to international markets
+separately.
+Sales of Crude Oil
+SALES AND MARKETING
+The Company holds a license issued by the government
+of Iceland for undertaking oil exploration operations in the
+Norwegian Sea, northeast Iceland. In addition, the Company
+holds several frontier exploration licenses offshore Ireland.
+Other Regions in Europe
+The Company's crude oil sales prices are mainly determined
+by the prices of international benchmark crude oil of
+similar quality, with certain premiums or discounts subject
+to prevailing market conditions. Although the prices are
+quoted in US dollars, customers in China usually pay by
+Renminbi. The Company currently sells three types of crude
+oil in China: heavy crude, medium crude and light crude.
+The diverse backgrounds of the Board
+members ensure that they can fully represent
+the interests of all shareholders of the Company
+and to enhance the effectiveness of the Board
+and corporate governance.
+The Company has received annual
+confirmations from all of its Independent
+Non-executive Directors acknowledging full
+compliance with the relevant requirements
+in respect of their independence pursuant to
+Rule 3.13 of the Listing Rules. The Company is
+therefore of the view that all of the Independent
+Non-executive Directors are independent.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2017 27
+The Company believes that the active
+involvement of the Non-executive Directors and
+Independent Non-executive Directors in the
+management and decision making of the Board
+and its Committees strengthens the objectivity
+and independence of the Board.
+The Independent Non-executive Directors of the
+Company are all professionals or scholars with
+backgrounds in the legal, economic, financial
+and investment fields. They have extensive
+experience and knowledge of corporate
+management and make significant contributions
+to the Company's strategic decisions.
+The Non-executive Directors of the Company
+are all individuals with extensive experience
+in the parent company's respective fields of
+operation.
+The Executive Directors of the Company are
+all individuals with extensive experience in
+the Company's respective fields of operation.
+Both of them are familiar with the Company's
+businesses and have cooperated with leading
+global players in the oil and gas industry. Mr.
+Yuan Guangyu has over 30 years of experience
+in the oil and gas industry and Mr. Xu Keqiang
+has over 20 years of experience in the oil and
+gas industry.
+As of 31 December 2017, the Board consisted
+of nine members: two of them were Executive
+Directors, three of them were Non-executive
+Directors and four of them were Independent
+Non-executive Directors. All Directors were
+identified by categories of Executive Directors,
+Non-executive Directors and Independent
+Non-executive Directors in all corporate
+communications that set out the names of the
+Directors of the Company. A list of the Directors
+identifying their updated roles and functions
+was maintained on the Company's website and
+on the Hong Kong Stock Exchange's website
+during the reporting period.
+The Chairman promotes a culture of openness
+and debate by facilitating the effective
+contribution of Non-executive Directors and
+Independent Non-executive Directors in
+particular and ensuring constructive relations
+between Executive and Non-executive
+Directors.
+Principle: "The board should have a balance of skills,
+experience and diversity of perspectives appropriate
+to the requirements of the issuer's business. It should
+ensure that changes to its composition can be
+managed without undue disruption. It should include a
+balanced composition of executive and non-executive
+directors (including independent non-executive
+directors) so that there is a strong independent
+element on the board, which can effectively exercise
+independent judgment. Non-executive directors
+should be of sufficient calibre and number for their
+views to carry weight."
+A.3 Board composition
+The CEO is responsible for conducting the
+Company's business and affairs consistent with
+the principles and directions established by the
+Board.
+The Chairman ensures that appropriate steps
+are taken to provide effective communication
+with shareholders and that their views are
+communicated to the Board as a whole.
+The Chairman holds meetings with the
+Independent Non-executive Directors and Non-
+executive Directors without the presence of the
+Executive Directors at least annually.
+The Chairman encourages all Directors to make
+full and active contribution to the Board's affairs
+and takes the lead to ensure that the Board
+acts in the best interests of the Company. The
+Chairman encourages Directors with different
+views to voice their concerns, allows sufficient
+time for discussion of issues and ensures that
+Board decisions fairly reflect Board consensus.
+The Chairman takes primary responsibility
+for ensuring that good corporate governance
+practices and procedures are established.
+A.4 & Appointments, re-election and removal &
+A.5 Nomination Committee
+appropriate issues are discussed by the Board
+in a timely manner. The Chairman delegates
+the responsibility of drawing up the agenda for
+each Board meeting and Committee meeting
+to the Joint Company Secretaries who will take
+into account, where appropriate, any matters
+proposed by the other Directors for inclusion
+in the agenda, and the Chairman is primarily
+responsible for approving the agenda.
+The Board, as representatives of the
+shareholders of the Company, is committed
+to the achievement of business success and
+the enhancement of long-term shareholder's
+value with the highest standards of integrity and
+ethics. The role of the Board is to direct, guide
+and oversee the conduct of the Company's
+business and to ensure that the interests of the
+shareholders are being served.
+CNOOC LIMITED Annual Report 2017
+CNOOC LIMITED Annual Report 2017 19
+When nominating a particular candidate
+for Director, the Nomination Committee will
+consider (1) the breadth and depth of the
+management and/or leadership experience
+of the candidate; (2) financial literacy or other
+professional or business experience of the
+candidate that are relevant to the Company
+and its business; and (3) the experience or
+knowledge of the candidate in international
+operations. All candidates must be able to
+meet the standards set out in Rules 3.08 and
+3.09 of the Listing Rules. When nominating an
+Independent Non-executive Director who has
+served the Company for more than nine years,
+the Board will propose shareholders' vote by
+way of a separate resolution on any decision
+to re-elect such Independent Non-executive
+Director and include in the circular and/or
+explanatory statement accompanying the notice
+of the relevant general meeting to shareholders
+the reasons why the Board still considers such
+Director as independent and shall be re-elected.
+Mr. Tse Hau Yin Aloysius who has served as
+an Independent Non-executive Director of the
+Company for over nine years, will retire from
+office and being eligible for re-election at the
+forthcoming annual general meeting of the
+Company to be held on 31 May 2018. Mr. Tse
+has thorough understanding of the Company's
+operations and business. As an Independent
+Non-executive Director, Mr. Tse has expressed
+objective views and given valuable independent
+guidance to the Company over the years. He
+is currently a member of the audit committee
+and the remuneration committee, and has
+served as a member of the independent board
+committee in connection with the connected
+transactions entered into by the Company
+and its subsidiaries. Mr. Tse has continued
+to demonstrate firm commitments to his role.
+Mr. Tse always places great importance on
+high standards of corporate governance, and
+regularly monitors communications between the
+Company and its external auditors to ensure the
+high quality of the Company's financial reports
+and relevant disclosure. Mr. Tse has provided
+confirmation of his independence according
+to Rule 3.13 of the Listing Rules. The Board
+considers that Mr. Tse remains independent
+for the purpose of the Listing Rules despite the
+fact that he has served the Board for over nine
+years. In accordance with Code Provision A.4.3
+of the CG Code, the Company will include in
+the notice and the circular of the annual general
+meeting of the Company to be held in 2018 the
+reasons why the Board still considers Mr. Tse as
+independent and shall be re-elected.
+Corporate Governance Report
+productive oil or gas reservoirs and that the wells we drill
+may not be able to commence production or may not be
+sufficiently productive to generate a return of our partial or
+full investments. In addition, approximately 57.6% of our
+proved reserves were undeveloped as of 31 December
+2017. Our future success depends on our ability to develop
+these reserves in a timely and cost-effective manner. There
+are various risks in developing reserves, mainly including
+construction, operational, geophysical, geological and
+regulatory risks.
+Our exploration and development activities involve inherent
+risks, including the risk of not discovering commercially
+Any failure to replace reserves and develop our
+proved undeveloped reserves could adversely affect
+our business and our financial position.
+As required by the Iran Threat Reduction and Syria Human
+Rights Act of 2012, which added a disclosure requirement
+to the Securities Exchange Act of 1934, we are providing
+certain information regarding our non-controlled affiliates'
+activities. To our knowledge, in 2017, China Oilfield Services
+Limited (COSL), one of our non-controlled affiliates,
+provided certain drilling and other related services in Iran.
+We cannot predict at this time whether U.S. sanctions will
+be imposed on any of our affiliates.
+We cannot predict the interpretation or implementation of
+government policies at the U.S. federal, state or local levels
+with respect to any current or future activities by CNOOC or
+its affiliates in countries or with individuals or entities that are
+the subject of U.S. sanctions. As a result of such activities by
+CNOOC, we could be prohibited from engaging in business
+activities in the U.S. or with U.S. individuals or entities, and
+U.S. transactions in our securities and distributions to U.S.
+individuals and entities with respect to our securities could
+also be prohibited. Pension or endowment funds of certain
+U.S. State and local governments or universities may sell
+our securities due to certain restrictions on investments in
+companies that engage in activities in sanctioned countries,
+such as Iran and Sudan. We may also be subject to
+negative media or investor attention, which may distract
+management, consume internal resources and affect
+investors' perception of our company and investment in our
+company.
+The current or future activities of our controlling
+shareholder, CNOOC, or its affiliates in certain
+countries that are the subject of U.S. sanctions
+could result in negative media and investor attention
+and possible imposition of sanctions on CNOOC,
+which could materially and adversely affect our
+shareholders.
+Violations of anti-fraud, anti-corruption and corporate
+governance laws may expose us to various risks.
+Laws and regulations of the host countries or regions in
+which we operate, such as laws on anti-corruption, anti-
+fraud and corporate governance, are constantly changing
+and strengthening, especially in the U.S., United Kingdom,
+Canada, Australia, Guyana and China. The compliance with
+these laws and regulations may increase our cost. If the
+Company, our directors, executives or employees fail to
+comply with any of such laws and regulations, it may expose
+us to prosecution or punishment, damage to our brand
+and reputations, the ability to obtain new resources and/or
+access to the capital markets, and it may even expose us to
+civil or criminal liabilities.
+Business Overview
+28
+We maintain various insurance policies for our operations
+against potential losses. However, our ability to insure
+against our risks is subject to the availability of relevant
+insurance products in the market. In addition, we cannot
+ensure you that our insurance coverage is sufficient to cover
+any losses that we may incur, or that we will be able to
+successfully claim our losses under our existing insurance
+policies on a timely basis, or at all. If any of our losses are
+not covered by our insurance coverage, or if the insurance
+compensation is less than our losses or the claim is not
+paid on a timely basis, our business, financial condition
+and results of operations could be materially and adversely
+affected.
+Mergers and acquisitions may not succeed due to
+various reasons, such as difficulties in integrating activities
+and realising synergies, outcomes differing from key
+assumptions, host governments reacting or responding in a
+different manner from that envisaged, or liabilities and costs
+being underestimated. Any of these would reduce our ability
+to realise the anticipated benefits. We may not be able to
+successfully divest non-core assets at acceptable prices,
+resulting in increased pressure on our cash position. In the
+case of divestments, we may be held liable for past acts,
+or failures to act or perform responsibilities. We may also
+be subject to liabilities if a purchaser fails to fulfil all of its
+commitments. These risks may result in an increase in our
+costs and inability to achieve our business goals.
+Mergers, acquisitions and divestments may expose
+us to additional risks and uncertainties, and we may
+not be able to realize the anticipated benefits from
+acquisitions and divestments.
+It is expected that the CO2 emissions will increase as our
+production grows. CO2 emissions from flaring will increase
+as long as there are no proven and reliable gas gathering
+systems in place. With the coming into force of the Paris
+Agreement and the continuing growth of public's awareness
+of climate change problems, the carbon emission policies
+of different countries are gradually enacted. The company
+will be supervised by relevant agencies and organizations in
+the future, if we are unable to find economically viable and
+publicly acceptable solutions that could reduce our CO2
+emissions for new and existing projects, we may experience
+additional costs, project delays, reduced production and
+reduced demand for the Company's products.
+Rising climate change concerns could lead to
+additional regulatory measures that may result in
+project delays and higher costs.
+Business Overview
+Principle: "There should be a formal, considered and
+transparent procedure for the appointment of new
+directors. There should be plans in place for orderly
+succession for appointments. All directors should
+be subject to re-election at regular intervals. An
+issuer must explain the reasons for the resignation or
+removal of any director."
+The Nomination Committee comprises two
+Independent Non-executive Directors (Mr.
+Lawrence J. Lau and Mr. Kevin G. Lynch) and
+one Non-executive Director (Mr. Yang Hua,
+whose re-designation from Executive Director
+to Non-executive Director became effective on
+18 April 2017), with Mr. Yang Hua serving as
+the Chairman of the Nomination Committee. A
+list of members of the Nomination Committee
+is set out under the section headed “Company
+Information" on page 148 of this annual report.
+The role of the Nomination Committee is to
+determine the policy and establish proper
+procedures for the selection of the Company's
+leadership positions, upgrade the quality of
+Board members and perfect the Company's
+corporate governance structure.
+The main authorities and responsibilities
+of the Nomination Committee are to make
+recommendations to the Board for suitable
+candidates to serve as Directors and senior
+management of the Company for approval by
+the Board, to review the structure, size and
+composition of the Board (including the skills,
+knowledge and experience), and to evaluate the
+leadership abilities of Executive Directors, so as
+to ensure the competitiveness of the Company.
+The nature of our operations exposes us and the
+communities in which we work to a wide range of
+health, safety, security and environment risks.
+Every aspect of our daily operations exposes us to health,
+safety, security and environmental (HSSE) risks given the
+geographical area, operational diversity and technical
+complexity of our operations. Our operations include
+productions and transportations of oil and gas in difficult
+geographic or climate zones, as well as environmentally
+sensitive regions, such as Canada, the basins in Uganda
+or offshore, especially in deep water area. Our operations
+expose us and the areas in which we operate to a number
+of risks, including major process safety incidents, natural
+disasters, earthquakes, social unrest, health and safety
+lapses and crimes. If a major HSSE risk materialises,
+such as an explosion or hydrocarbon spill, this could
+result in casualties, environmental damage disruption of
+business activities and, depending on their cause and
+severity, material damage to our reputation, exclusion
+from bidding on mineral rights and eventually loss of our
+licence to operate. In certain circumstances, liabilities
+could be imposed without regard to our fault in the matter.
+Regulatory requirements for HSSE change constantly and
+may become more stringent over time. In the future, we
+may incur significant additional costs in complying with
+such requirements or bear liabilities such as fines, penalties,
+clean-up costs and third-party claims, as a result of breach
+of laws and regulations relating to HSSE matter.
+...
+Independent
+26
+4
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+The reliability of reserve estimates depends on a number
+of factors, including the quality and quantity of technical
+and economic data, the market prices of our oil and
+gas products, the production performance of reservoirs,
+extensive engineering judgments, comprehensive
+judgement of engineers and the fiscal and tax regime in the
+countries where we have operations or assets.
+Non-executive Directors
+Yang Hua (Chairman) (Note 3)
+Liu Jian (Vice Chairman) (Note 4)
+Wu Guangqi
+No. of meetings attended
+(Four meetings in total)
+by Director by proxy
+Executive Directors
+Yuan Guangyu (Note 1)
+Xu Keqiang (Note 2)
+Attendance of full Board meetings held in 2017
+The Board has regularly reviewed the
+contribution required from a Director to
+perform his responsibilities to the Company,
+and whether he is spending sufficient time
+performing them in accordance with the CG
+Code.
+0
+There exists an open atmosphere for Directors
+to contribute alternative views. All decisions of
+the Board are made on the principles of trust
+and fairness in an open and transparent manner,
+so as to protect the interests of all shareholders.
+The Board and Committee members of the
+Company are dedicated, professional and
+accountable.
+The list of Directors, their respective
+biographies, and their respective roles in the
+Committees and the management are set out
+on pages 44 to 51 and 148 of this annual report,
+respectively. The relevant information has also
+been disclosed on the Company's website.
+The Board consisted of nine members, including
+two Executive Directors, three Non-executive
+Directors and four Independent Non-executive
+Directors, as of 31 December 2017.
+The board should regularly review the contribution
+required from a director to perform his responsibilities
+to the issuer, and whether he is spending sufficient
+time performing them."
+Principle: "An issuer should be headed by an effective
+board which should assume responsibility for its
+leadership and control and be collectively responsible
+for promoting its success by directing and supervising
+its affairs. Directors should take decisions objectively
+in the best interests of the issuer.
+A.1 The Board
+DIRECTORS
+A.
+KEY CORPORATE GOVERNANCE PRINCIPLES
+AND THE COMPANY'S PRACTICES
+The Company holds Board meetings at least
+four times a year at approximately quarterly
+intervals. Four Board meetings were held
+in 2017. Members of the Board have also
+actively participated in the discussions on
+the business and operation of the Company,
+either in person or through other electronic
+means of communication such as emails, when
+necessary.
+0
+010
++3
+One of the important roles of the Chairman is to
+provide leadership for the Board. The Chairman
+ensures that the Board works effectively and
+performs its responsibilities, and that all key and
+The Chairman ensures all Directors are
+properly briefed on issues arising at Board
+meetings and is responsible for ensuring that
+Directors receive, in a timely manner, adequate
+information, which must be accurate, clear,
+complete and reliable.
+Within the reporting period, prior to 18 April
+2017, Mr. Yang Hua served both as the
+Chairman of the Board and as the CEO of the
+Company as he is familiar with the culture and
+operations of the Company and has extensive
+experience in the oil and gas industry. The
+Directors consider that vesting two roles in
+the same individual enables the Company to
+make and implement decisions promptly and
+efficiently and will not impair the balance of
+power and authority between the Directors and
+the management of the Company. With effect
+from 18 April 2017, Mr. Yang Hua resigned as
+the CEO of the Company and he remains as the
+Chairman of the Board. Mr. Yuan Guangyu, an
+existing Executive Director, has been appointed
+as the CEO of the Company. As such, since
+18 April 2017, the roles of the Chairman of the
+Board and CEO of the Company are separate
+and are not performed by the same individual.
+A.2 Chairman and Chief Executive
+Principle: "There are two key aspects of the
+management of every issuer the management
+of the board and the day-to-day management of
+business. There should be a clear division of these
+responsibilities to ensure a balance of power and
+authority, so that power is not concentrated in any one
+individual."
+-
+The Company has arranged appropriate
+insurance cover in respect of legal action against
+its Directors.
+If a substantial shareholder or a Director
+has a conflict of interest in a matter to be
+considered by the Board and such interest has
+been considered to be material by the Board,
+the matter will not be dealt with by a written
+resolution but a Board meeting will be convened
+for that matter. Independent Non-executive
+Directors who do not (and whose close
+associates also do not) have material interest
+in the transaction will be present at such Board
+meeting.
+Committees may, upon reasonable request,
+seek independent professional advice in
+appropriate circumstances at the Company's
+expense. The Board would resolve to provide
+separate independent professional advice to
+Directors to assist them in performing their
+duties to the Company at the Company's
+expense.
+Minutes of the meetings of the Board and
+Committees recorded sufficient details of
+the matters considered by the Board and
+Committees and decisions reached, including
+any concerns raised by Directors or dissenting
+views expressed. Draft and final versions
+of the minutes of the Board meetings and
+Committee meetings are sent to all Directors
+and all Committee members respectively within
+a reasonable time after the Board meetings and
+Committee meetings for their comments and
+records.
+Minutes of the meetings of the Board and
+Committees are kept by the Joint Company
+Secretaries and open for inspection at any
+reasonable time upon reasonable request by
+any Director.
+Dates of regular Board meetings have been
+scheduled at least two months before the
+meeting to provide sufficient notice to all
+Directors so that they can have an opportunity
+to attend. For non-regular Board meetings,
+reasonable advance notices have been given.
+The Joint Company Secretaries consulted
+the Directors on matters to be included in the
+agenda for regular Board meetings.
+Note 4: Mr. Liu Jian appointed Mr. Yang Hua as his proxy to attend the
+Board meeting held on 26 May 2017 and to vote on his behalf.
+Note 3: With effect from 18 April 2017, Mr. Yang Hua was re-
+designated from an Executive Director to a Non-executive
+Director of the Company and resigned as the Chief Executive
+Officer of the Company. He remains as the Chairman of the
+Board.
+Note 2: With effect from 18 April 2017, Mr. Xu Keqiang was appointed
+as an Executive Director and the President of the Company.
+Note 1: With effect from 18 April 2017, Mr. Yuan Guangyu was
+appointed as the Chief Executive Officer of the Company and
+resigned as the President of the Company.
+Corporate Governance Report
+25
+CNOOC LIMITED Annual Report 2017
+44
+434
+CNOOC LIMITED Annual Report 2017
+Many of the factors, assumptions and variables involved in
+estimating reserves are beyond our control and may prove
+be incorrect over time. Consequently, the results of drilling,
+testing, production and changes in the price of oil and gas
+may require substantial upward or downward revisions to
+our initial reserve data.
+The Company continued to improve its implementation of
+safety management. It organized a series of activities with
+the theme of "Last centimeter for safety management",
+fostered the development of a safety culture. Mr. Yang
+Hua, Chairman of the Company, wrote a letter titled "YOUR
+SAFETY, WE CARE” to employees. The Company's
+management recorded a promotional video talking about
+safety, and taught safety classes in order to strengthen
+safety leadership. Employees at base-level units actively
+participated in HSE knowledge quiz, essay competition and
+safety video making.
+Technology and innovation are vital for us in meeting the
+global energy demands in a competitive environment
+and challenges from exploration and development. For
+example, we strive to rely on technologies and innovations
+to enhance our competiveness in the development of
+unconventional oil and gas resources, including heavy oil, oil
+sands, shale oil and gas and coalbed methane, and deep
+water exploration and development, offshore enhanced
+oil recovery. In the context of an operating environment
+with stricter environmental compliance standards and
+requirements, although current knowledge recognise these
+newly developed technologies as safe to the environment,
+there still exists unknown or unpredictable elements that
+Imay have an impact on the environment. This may in turn
+harm our reputation and operation, increase our costs or
+even result in litigations and sanctions.
+The Company believes that its employees are the driving
+force for its development and the foundation for the
+continuous growth of its values. The Company values
+employees, cares for their needs, strives to create a
+good working environment, and assists them in career
+development.
+HUMAN RESOURCES
+In 2018, the Company will publish on its website the "2017
+Environmental, Society and Governance Report", which
+will provide a full review of the Company's corporate social
+responsibility activities in 2017.
+Our social responsibilities are: to build CNOOC Limited into
+a driving force for sustainable energy supply, a leading force
+for clean, healthy and green energy development, and a
+motivating force for the mutual progress of stakeholders and
+society.
+The Company is a strong advocator of social responsibility
+and the development of a harmonious relationship between
+enterprise and society and people and nature. It regards
+its social responsibilities as a fundamental obligation. While
+being committed to achieving sustainable development and
+creating value for its shareholders, the Company also strives
+to provide clean and reliable energy to society and to meet
+the needs of stakeholders.
+CORPORATE CITIZEN
+2
+0.03
+17
+Labor Policy underpinned by Objectivity,
+Openness and Fairness
+0.08
+109
+Staff of the Company and
+direct contractors
+0
+0.03
+6
+0.06
+12
+41
+Cases
+48
+Cases
+The Company respects the basic human rights of all
+employees according to law, and respects the values,
+identity and privacy of employees with different cultural
+backgrounds.
+The Company complies with the employment principles
+of diversification and anti-discrimination, and makes
+no discriminatory provisions contravening the principle
+of fairness in staff recruitment. A core provision of the
+Company's system of recruitment, training, promotion and
+remuneration is an insistence on the equal treatment of
+employees of different races, nationalities, beliefs, genders,
+age, marital status and those protected by special laws.
+GOVERNANCE STANDARDS
+Corporate Governance Report
+...
+CNOOC LIMITED Annual Report 2017
+In 2017, the Company followed up and evaluated the
+effectiveness of revised overseas human resources
+management measures. Problems were subsequently
+analysed and measures were improved to satisfy the
+different needs of human resources management for
+overseas business. We continued to implement programs
+for international talent selection, training and assessment.
+Short and long term talent exchange program was carried
+out with Nexen to facilitate integration.
+The Company's strong focus on cultivating international
+talents is manifested in its established system of strata
+training which promotes business integration both inside
+and outside the Company.
+Cultivation of International Talents
+The Company continued to encourage professional skill
+certifications and further increased the proportion of
+experienced professionals. In 2017, a total of approximately
+2,346 employees received certifications. Currently there
+are approximately 4,377 employees with titles of senior
+worker or above, and approximately 848 technicians and
+senior technicians, respectively accounting for 72.51% and
+14.05% of the total technical workforce.
+For staff training, the Company offered a variety of staff
+training courses to ensure comprehensive development
+coverage. In 2017, a total of approximately 205,000
+attendees participated in Company training. 44 core
+training programs and projects were completed for key
+professionals and positions, with approximately 2,100
+attendees.
+In China, the Company operates in full compliance with the
+"Labor Law of the People's Republic of China", the "Labor
+Contract Law of the People's Republic of China" and other
+policies and regulations which safeguard the legal rights and
+interests of its employees. Overseas, the Company abides
+all relevant laws and regulations and implements the relevant
+international conventions ratified by the Chinese government
+to ensure respect of all our employees' legal rights.
+The Company has always attached great importance
+to providing employees with opportunities for self-
+development. Taking into account the different professional
+groups employed by the Company and their diverse
+characteristics, the Company has established three teams -
+management (M series), technology (T series) and skill (W
+series) under which employees are provided suitable
+career development paths.
+The Company also fulfils its obligations to overseas
+employees, providing them with a safe and comfortable
+working environment as well as a wide range of benefits.
+To aid employees in maintaining a healthy work-life balance,
+the Company provides (and encourages employees to take)
+paid annual and family visit leave. For employees stationed
+far from home, the Company also provides one-off settling
+subsidies and comprehensive allowances.
+A comprehensive and effective social security system has
+also been built, and many types of social and supplementary
+insurance are provided to employees on a timely basis.
+In addition to making contributions for the five basic
+social insurances (pension, medical, work-related injury,
+unemployment and maternity), the Company also provides
+supplementary personal accident insurance, commercial
+supplementary medical insurance and supplementary
+medical insurance for children. The Company has also
+established annuity and housing subsidy programs for
+employees.
+We offer employees industry-competitive compensation
+packages, and have established a salary growth mechanism
+and allocation system. The Company's remuneration
+system, which fully takes field employees into account,
+is closely associated with employee performance and
+contribution. A peg mechanism that links employee incomes
+with the Company's profits growth has also been adopted
+to ensure that our employees fully benefit from the growth
+and development of the Company.
+Sufficient Safeguard of Employees' Rights
+The Company strives to create an open, transparent and
+fair work environment. In keeping with its "people-oriented"
+spirit and "staff caring" concept, it places great emphasis on
+safeguarding the legal rights of staff members.
+Business Overview
+24
+CNOOC LIMITED Annual Report 2017 23
+All the employment contracts are based on the principles
+of equality and voluntariness. The Company strictly
+complies with labor laws and regulations, opposes any
+form of inhumane treatment, and is in compliance with the
+regulations regarding salaries, overtime hours and statutory
+benefits requirements of all its places of operation.
+Staff Development
+Cases
+Cases
+Cases
+We face currency risks and liquidity risks.
+Currency risks - The Company's oil and gas sales are
+substantially denominated in Renminbi and U.S. dollars. The
+appreciation of the Renminbi against the U.S. dollar may
+result in double effects. The depreciation of the U.S. dollar
+against the Renminbi may decrease the Company's revenue
+in the sales of oil and gas, but it may decrease our costs of
+equipment and import of raw materials in the meantime. -
+Key suppliers - we have strengthened our communication in
+business with our key suppliers in order to maintain a good
+working relationship. We have also established strategic
+partnerships through communications and a consensus in
+corporate cultures and win-win cooperation. Further, we
+actively explore new suppliers to ensure adequacy and
+foster competition.
+Key sales customers - if any of our key customers reduced
+their crude oil purchases from us significantly, our results of
+operation could be adversely affected. In order to reduce
+reliance on a single customer, we adopt measures including
+signing annual sales contracts, developing sales plans,
+and participating in market competition so as to maintain a
+stable cooperation with customers.
+If we depend heavily on key customers or suppliers,
+our business, results of operations and financial
+condition could be adversely affected.
+We may have limited control over our investments in
+joint ventures and our operations with partners.
+A portion of our operations are conducted in the form of
+partnerships or in joint ventures in which we may have
+limited capability to influence and control their operation
+or future development. Our limited ability to influence and
+control the operation or future development of such joint
+ventures could materially and adversely affect the realization
+of our target returns on capital investment and lead to
+unexpected future costs.
+The First Nation in Canada have claimed aboriginal title and
+rights to the lands and mineral resources in a substantial
+portion of western Canada. As a result, negotiations with
+aboriginal people on surface activities are required and may
+result in timing uncertainties or delays of future development
+activities. Declaration by aboriginal people, if successful,
+could have a significant adverse effect on our business in
+Canada.
+capacity may be affected. In addition, we may be required to
+sell our products into the North American markets at lower
+prices than in other markets, which could materially and
+adversely affect our financial performance.
+Transportation and export infrastructure in North America is
+limited, and without the construction of new transportation
+and export infrastructure, our oil and natural gas production
+We face various risks with regard to our business and
+operations in North America.
+CNOOC LIMITED Annual Report 2017
+Our oil and gas transportation involves marine, land and
+pipeline transportation, which are subject to hazards
+such as capsizing, collision, acts of piracy and damage
+or loss from severe weather conditions, explosions, oil
+and gas spills and leakages. These hazards could result
+in serious personal injury or loss of human life, significant
+damage to property and equipment, environmental
+pollution, impairment of operations, risk of financial loss and
+reputation harm. We may not be able to arrange insurance
+coverage for all of these risks and uninsured losses and
+liabilities arising from these hazards could reduce the funds
+available to us for financing, exploration and investment,
+which may have a material adverse effect on our business,
+financial condition and results of operations.
+In addition, we regularly enter into connected transactions
+with CNOOC and its affiliates. Certain connected
+transactions require a review by the Hong Kong Stock
+Exchange and are subject to prior approvals by the
+independent shareholders. If these transactions are not
+approved, the Company may not be able to proceed with
+these transactions as planned and it may adversely affect
+our business and financial condition.
+Currently, CNOOC indirectly owns or controls 64.44% of
+our shares. As a result, CNOOC is able to control our board
+composition, or our Board, determine the timing and amount
+of dividend payments, and controls us in various aspects.
+Under current PRC laws, CNOOC has the exclusive right to
+enter into PSCs with foreign enterprises for the petroleum
+resources exploitation in offshore China. Although CNOOC
+has undertaken to transfer all of its rights and obligations
+under any new PSCs that it enters into to us (except for
+those relating to administrative functions as a state-owned
+company), our strategies, results of operations and financial
+position may be adversely affected in the event CNOOC
+takes actions that favour its own interests over ours.
+CNOOC largely controls us and we regularly enter into
+connected party transactions with CNOOC and its
+affiliates.
+information, cause injuries, environmental harm or damages
+in assets, violate laws or regulations and result in potential
+legal liability. These actions could result in significant costs
+or damage to our reputational.
+Business Overview
+CNOOC LIMITED Annual Report 2017
+20
+Intentional attacks on our cyber system, negligent
+management of our cyber security and IT system
+management and other factors may cause damage or
+break down to our IT infrastructure, which may disrupt
+our operations, result in loss or misuse of data or sensitive
+Breach of our cyber security or break down of our IT
+infrastructure could damage our operations and our
+reputation.
+Oil and natural gas transportation may expose us to
+financial loss and reputation harm.
+21
+Business Overview
+Liquidity risks - Certain restrictions on dividend distribution
+imposed by the laws of the host countries in which we
+operate may adversely and materially affect our cash
+flows. For instance, the dividend of our wholly owned
+subsidiaries in the PRC shall be distributed pursuant to the
+laws of the PRC and the articles and association, and we
+may face risks of not obtaining adequate cash flows from
+such subsidiaries. In addition, a ratings downgrade could
+potentially increase financing costs and adversely impact
+our ability to access financing, which could put pressure on
+the Company's liquidity.
+(million)
+Fatal
+Rate
+of Lost
+Workdays
+Number
+of Lost
+Workdays
+Rate of
+Recordable
+Gross Number of
+Man-hours Recordable
+Company staff
+Scope
+During 2017, the Company maintained its good
+performance in safety management and upheld consistently
+high HSE standards. OSHA (Occupation Safety and Health
+Administration) statistics for the year are shown below.
+the impact of carbon emissions on fixed assets investment
+projects.
+In 2017, the Company acted in compliance with the
+climate compact advocated by the Paris Agreement.
+With the objective of reducing carbon emissions and
+energy consumption, the Company continued to push for
+cost reductions and efficiency improvement campaign,
+organized carbon investigation on domestic units, improved
+its carbon emissions management rules and systems,
+actively participated in the establishment of national low
+carbon-emission standards, and conducted assessments of
+Business Overview
+CNOOC LIMITED Annual Report 2017
+22
+The Company kept a close eye on the impacts of
+international political and social changes on its overseas
+operations. By combining its overseas safety management
+and good industry practices, the Company established and
+improved its overseas security management mechanism
+and information collection channel, further clarified its
+requirements for security management of overseas projects,
+obtained the security updates of overseas staff in a timely
+manner, and provided strong support of the security of its
+overseas operations.
+In Overseas, the Company continued to strengthen HSE
+supervision and management functions for its overseas
+operations. It improved the safety leadership of overseas
+management as well as their ability to set a good example
+through their own conduct, arranged HSE audits of its
+project companies in the United Kingdom and Indonesia,
+and organized joint emergency drills, publicity and training
+aimed at improving the safety culture among employees. All
+these initiatives significantly contributed to a strong overseas
+HSE performance.
+In China, the Company further extended its safety
+management risk control to front-line operation by
+organizing examinations on working permit to ensure
+that all operations are under control and effectively avoid
+operational risks. On drilling rigs, it vigorously rectified
+security risks and conducted special inspections to identify
+the risks relating to high falling objects and falls from height.
+These measures generally improved the safety management
+of drilling rigs.
+The Company improved its safety performance, actively
+conducted international benchmarking, and built a HSE
+management system framework which is in line with
+international principles of industry risk management and
+continuous improvement and with distinct characteristics
+of CNOOC Limited. As the first PRC member of the Oil
+Companies International Marine Forum (OCIMF), the
+Company actively participated marine safety management
+activities organized by OCIMF, developed the Maritime
+Safety Management Measures, launched a marine
+management information system, and strove to improve its
+marine safety management and control abilities.
+In 2017, as the Company continued to improve its HSE
+internal control system, it adjusted the HSE management
+of its construction projects in accordance with new
+government regulatory requirements. It continued to
+supervise and encourage the implementation of various
+management requirements by adopting management
+audits and reviews to control HSE risks. The Company
+successively organized management audits to Nexen UK
+and the Shenzhen and Zhanjiang branches, completed
+special audits on high-risk contractors in relation to diving
+and helicopters, organized a three-month safety production
+inspection, and urged the prompt rectification to the
+problems identified.
+As always, the Company takes safety as top priority in
+its works. "Safety and environmental protection come
+first, people oriented and well-equipped facilities" have
+been regarded as the core values of health, safety and
+environmental protection (HSE). The Company constantly
+improves the systematic management of HSE work and
+nourishes a safety culture with characteristics of the
+Company, striving to provide a safe working environment
+for the Company and contractors and establishing first class
+management capability in safe production.
+HEALTH, SAFETY AND ENVIRONMENTAL
+PROTECTION ("HSE")
+If we fail to develop or gain access to appropriate
+technologies, or to deploy them effectively,
+the realization of our strategies as well as our
+competitiveness and ability to operate may be
+adversely affected.
+...
+Since its listing, the Company has endeavoured to maximize
+its shareholders' value. In 2017, the Company executed
+its corporate governance policies strictly and sought to
+comply with the relevant provisions in the "Corporate
+Governance Code and Corporate Governance Report" set
+out in Appendix 14 to the Listing Rules (the “CG Code"),
+ensuring that all decisions were made on the principles of
+trust and fairness and in an open and transparent manner so
+as to protect the interests of all shareholders. The Company
+values the importance of corporate governance and in light
+of the CG Code, the Company set out a summary of the
+Company's key corporate governance practices during
+2017 below.
+The Company has always upheld and attained high
+standard of business ethics, for which its transparency and
+standard of governance have been recognized by the public
+and its shareholders. In 2017, the Company was awarded
+the "Best Investor Relations Company (China)" and "Asia's
+Best CEO (Investor Relations (China))" by "Asian Excellence
+Award" organized by Corporate Governance Asia magazine
+and "2017 China Securities Golden Bauhinia Awards - Best
+Board Secretary of Listed Companies" by Ta Kung Wen
+Wei Media Group. High and strict standard of corporate
+governance enables the Company to operate steadily and
+efficiently and is in the long-term interests of the Company
+and its shareholders.
+The Company has established procedures for
+identifying, handling and disseminating inside
+information in compliance with the Securities
+and Futures Ordinance (Chapter 571 of the
+Laws of Hong Kong), including the issue of
+an inside information disclosure policy, the
+requirement for the employees of the Company
+to read and comply with such policy and the
+annual review and update (if necessary) of
+such inside information disclosure policy, pre-
+clearance on dealing in Company's securities
+by Directors and designated members of the
+management, notification of regular blackout
+period and securities dealing restrictions to
+relevant Directors and employees, identification
+of project by code name and dissemination of
+information to stated purpose and on a need-
+to-know base have been implemented by the
+Company to guard against possible mishandling
+of inside information within the Group.
+Note 3: With effect from 18 April 2017, Mr. Yang Hua was re-designated
+from an Executive Director to a Non-executive Director of the
+Company and resigned as the Chief Executive Officer of the
+Company. He remains as the Chairman of the Board.
+Note 2: With effect from 18 April 2017, Mr. Xu Keqiang was appointed
+as an Executive Director and the President of the Company.
+Note 1: With effect from 18 April 2017, Mr. Yuan Guangyu was
+appointed as the Chief Executive Officer of the Company and
+resigned as the President of the Company.
+1
+1
+1
+1
+1
+0
+1
+1
+1
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Lawrence J. Lau
+Independent Non-executive Directors
+Chiu Sung Hong
+Non-executive Directors
+Yang Hua (Chairman) (Note 3)
+Liu Jian (Vice Chairman)
+Wu Guangqi
+No. of meetings attended
+(1 meeting in total)
+Executive Directors
+Yuan Guangyu (Note 1)
+Xu Keqiang (Note 2)
+Attendance at general meetings in 2017:
+Mr. Yang Hua, Chairman of the Board, together
+with the Independent Non-executive Directors
+attended the General Meetings held in 2017
+and responded to questions raised by the
+shareholders in order to develop a balanced
+understanding of the views of shareholders.
+Director or Independent Non-executive Director
+sat in, and reviewed the meeting materials
+distributed in advance for such meetings and
+shared their experience, skills and expertise
+with the Board or the relevant Committees.
+All of the Non-executive Directors and
+Independent Non-executive Directors of the
+Company made positive contributions to the
+development of the Company's strategy and
+policies through independent, constructive
+and informed comments. The Non-executive
+Directors and the Independent Non-executive
+Directors have been responsible for scrutinising
+our performance in achieving agreed corporate
+goals and objectives and monitoring our
+performance reporting.
+CNOOC LIMITED Annual Report 2017
+31
+32
+Corporate Governance Report
+Details of the remuneration, as well as the share
+option benefits of Directors for the year ended
+31 December 2017, are set out on pages 94 to
+95 of this annual report.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2017
+Changes in relevant markets, for example,
+supply/demand fluctuations and changes
+in competitive conditions.
+Responsibilities of the Directors and their
+individual contribution; and
+Business needs, company goals and
+objectives;
+The Company's emolument policy is to maintain
+fair and competitive packages with reference
+to industry standards and prevailing market
+conditions. The Remuneration Committee is
+mindful that levels of remuneration must be
+sufficient to attract and retain the Directors
+and senior management in order to run the
+Company successfully, but at the same
+time, the Company should avoid setting
+remunerations which are in excess of those
+necessary for this purpose. The Directors'
+emolument package may comprise the
+Director's fees, basic salaries and allowances,
+bonuses, share options and others. The
+following factors are considered in determining
+the Directors' remuneration package:
+The major responsibilities and authorities
+of the Remuneration Committee include
+making recommendations to the Board
+on the Company's policy and structure of
+the remuneration of Directors and senior
+management of the Company and on the
+establishment of a formal and transparent
+procedure for developing remuneration
+policy, determining and reviewing the
+service contracts and specific remuneration
+packages for all Executive Directors and
+senior management, such as benefits in kind,
+pension rights and compensation payments,
+including any compensation payable for loss
+or termination of their office or appointment,
+reviewing and approving the compensation
+arrangements relating to dismissal or removal
+of Directors for misconduct to ensure
+consistency with contractual terms, and
+making recommendations to the Board on the
+remuneration of Non-executive Directors and
+Independent Non-executive Directors.
+Remuneration Committee is delegated with the
+authority of determining and approving salaries,
+bonuses, share option packages, performance
+appraisal systems and retirement plans for all
+Executive Directors and senior management. A
+list of members of the Remuneration Committee
+is set out in "Company Information" on page 148
+of this annual report.
+The Remuneration Committee comprises two
+Independent Non-executive Directors (Mr. Chiu
+Sung Hong and Mr. Tse Hau Yin, Aloysius), and
+one Non-executive Director (Mr. Wu Guangqi),
+with Mr. Chiu Sung Hong serving as the
+Chairman of the Remuneration Committee. The
+""
+Principle: "An issuer should disclose its directors'
+remuneration policy and other remuneration related
+matters. The procedure for setting policy on executive
+directors' remuneration and all directors' remuneration
+packages should be formal and transparent.
+Remuneration levels should be sufficient to attract
+and retain directors to run the company successfully
+without paying more than necessary. No director
+should be involved in deciding his own remuneration.'
+B.1 The level and make-up of remuneration and
+disclosure
+REMUNERATION OF DIRECTORS AND
+SENIOR MANAGEMENT AND BOARD
+EVALUATION
+The Board and each Director have separate and
+independent access to the Company's senior
+management and also the Joint Company
+Secretaries, who will provide full and prompt
+responses to queries raised by the Directors.
+All Directors are entitled to have access to the
+Board papers, minutes and related materials
+upon reasonable notice.
+For regular Board meetings and Committee
+meetings, the agenda and accompanying
+Board papers are sent in full to all Directors at
+least three days before the intended date of the
+Board meetings or Committee meetings.
+The Company's senior management regularly
+provides the Board and its Committees with
+adequate information in a timely manner to
+enable them to make informed decisions. Senior
+management also organises presentations to
+the Board conducted by professional advisers
+on specific transactions as appropriate.
+Principle: "Directors should be provided in a timely
+manner with appropriate information in the form and
+quality to enable them to make an informed decision
+and perform their duties and responsibilities."
+B.
+A.7 Supply of and access to information
+The Directors are required to inform the
+Company in case of any change in the
+number and nature of offices held in public
+companies or organizations and other significant
+commitments. Please refer to "Directors and
+Senior Management" on pages 44 to 51 for the
+biographies of the Directors.
+During 2017, each Non-executive Director or
+Independent Non-executive Director attended
+or otherwise appointed an alternate to attend
+all regularly scheduled meetings of the Board
+and Committees on which such Non-executive
+No individual Director or any of his/her
+associates or senior management of the
+Company is permitted to determine his/her own
+remuneration.
+The Non-executive Directors and the
+Independent Non-executive Directors are
+invited to serve on the Audit, Remuneration and
+Nomination Committees of the Company.
+In addition, the Company also provided
+regular updates to Directors in respect of
+continuing obligations of listed issuers and
+their directors as well as monthly updates
+on the business and operations of the
+Group.
+designation of Executive Directors and Non-
+executive Directors (as the case maybe) during
+the reporting period were appropriate and that
+there is sufficient diversity at the Board level.
+Since the adoption of the Policy in August
+2013, the Board has observed the Policy and
+took into account the objectives set out in
+the Policy in reviewing its Board composition.
+In particular, in selecting the candidates for
+Non-executive Director, not only the Board
+considered the knowledge, experience and
+industry-specific exposures of the candidates,
+the Board also took into account other factor
+such as cultural background and diversified
+vision of the candidates. In selecting candidates
+for Executive Director, the Board will consider
+knowledge and exposures in the oil and gas
+industry, leadership and management skills
+and experience and length of service in the
+industry. As a result, the Nomination Committee
+considered that the appointment and re-
+Selection criterion: Selection of candidates will
+be based on diversity of
+perspectives, including but
+not limited to, gender, age,
+cultural and educational
+background, professional
+experience, skills,
+knowledge and diversified
+vision.
+With a view to leading its
+leap-forward development,
+the Company sees.
+increasing diversity at the
+Board level as an essential
+element in supporting the
+attainment of its strategic
+objectives and sustainable
+development. In designing
+the Board's composition,
+board diversity shall
+be considered from
+a number of aspects,
+including but not limited to,
+gender, age, cultural and
+educational background,
+professional experience,
+skills, knowledge and
+length of service. All
+Board appointments will
+be based on meritocracy,
+and candidates will
+be considered against
+objective criteria, having
+due regard to the benefits
+of diversity on the Board.
+The Policy aims to continue
+to improve corporate
+governance and ensure the
+diversity on the Board.
+Policy statement:
+Purpose:
+Corporate Governance Report
+29
+CNOOC LIMITED Annual Report 2017
+In accordance with Code Provision A.5.6 of the
+CG Code and to demonstrate the Company's
+continued commitment to high standards of
+corporate governance, the Board adopted
+a board diversity policy (the "Policy") on 20
+August 2013 prior to the implementation date
+as required by the Listing Rules. The Policy aims
+to continue to improve corporate governance
+and ensure the diversity of Board members. A
+summary of the Policy is set out below:
+During the year ended 31 December 2017, Mr.
+Yang Hua, the Chairman of the Board and the
+Chairman of the Nomination Committee, was
+re-designated from an Executive Director to
+a Non-executive Director and resigned as the
+CEO with effect from 18 April 2017. Mr. Yuan
+Guangyu, was appointed as the CEO of the
+Company and resigned as the President of the
+Company with effect from 18 April 2017. Mr.
+Xu Keqiang was appointed as an Executive
+Director and the President of the Company
+with effect from 18 April 2017. Other than the
+above, the Nomination Committee considered
+that any other change to the composition of the
+Board was not necessary. It will keep assessing
+whether any such change is required going
+forward and will recommend to the Board
+qualified candidates as Directors according
+to the nomination policy and procedure of the
+Nomination Committee.
+Reviewed and monitored the training and
+continuous professional development of
+Directors and senior management and
+made recommendations to the Board in
+that regard; and
+Made recommendations to the Board on
+the re-election of Directors and reviewed
+succession planning for Directors,
+in particular the Chairman and CEO,
+according to the nomination procedure
+and process and criteria adopted by the
+Company;
+Identified individuals suitably qualified
+to become Board members and made
+recommendations to the Board on the
+selection of individuals nominated for
+directorships;
+Assessed the independence of
+Independent Non-executive Directors;
+Reviewed the structure, size and
+composition (including the skills,
+knowledge and experience) of the
+Board and its committees and made
+recommendations on any proposed
+changes to the Board to complement the
+Company's corporate strategy;
+The following is a summary of the work
+performed by the Nomination Committee under
+its charter during the year:
+All Directors, including those appointed for
+a specific term are subject to retirement by
+rotation once every three years and are subject
+to re-election in accordance with the Articles of
+Association of the Company (as amended and
+adopted by special resolution of the Company
+on 27 May 2009) (the "Articles") and the CG
+Code.
+Our Non-executive Directors are appointed for a
+term of one year. However, none of our existing
+Independent Non-executive Directors are
+appointed for a specific term, which constitutes
+a deviation from the CG Code. Further
+explanation is set out under the section headed
+"Compliance with the Corporate Governance
+Code" on page 41.
+A Director appointed by the Board to fill a casual
+vacancy or as an addition shall hold office until
+the next extraordinary general meeting and/or
+annual general meeting (as appropriate).
+Attendance of individual members at Nomination
+Committee meetings in 2017
+The Non-executive Directors and the
+Independent Non-executive Directors actively
+participate in Board meetings and Committees
+meetings to exercise their independent
+judgement on issues of strategy, policy,
+performance, accountability, resources, key
+appointments and standards of conduct of the
+Company. They are responsible for taking the
+lead where potential conflicts of interests arise.
+Directors
+No. of meeting attended
+(1 meeting in total)
+Certain Directors also attended trainings
+organized by the Company or external
+professional bodies on other regulatory
+updates as well as obligations of
+directors. In addition, Directors also
+read materials/publications which they
+thought appropriate and necessary for
+the fulfillment of their roles. The Directors
+provided their regular training records to
+the Company.
+The Company also recognizes the
+importance of continuous professional
+development of the Directors. Directors
+are encouraged to participate in
+continuous professional development
+to develop and refresh their knowledge
+and skills. During the year, the Company
+arranged trainings conducted by its
+external professional advisers on the
+updates on Listing Rules, applicable laws,
+rules and regulations relating to Directors'
+duties and responsibilities. The trainings
+covered a broad range of topics including
+latest trends of corporate governance in
+the US and HK, case study on market
+misconduct, review of major compliance
+events of the Company, base erosion
+and profit shifting and Extractive Sector
+Transparency Measures Act.
+•
+Corporate Governance Report
+...
+CNOOC LIMITED Annual Report 2017
+30
+their responsibilities properly.
+All Directors newly appointed to the
+Board receive a comprehensive, formal
+and tailored induction on appointment
+for the purpose of giving an overview
+of the business and operations of the
+Group and appropriate briefings and
+trainings from the Company covering
+the statutory and regulatory obligations
+of Directors, organizational structure,
+policies, procedures and codes of the
+Company and terms of reference of
+Committees. The senior management
+and the Joint Company Secretaries will
+also conduct subsequent briefings as
+and when necessary to ensure that the
+Directors are kept appraised of the latest
+developments relevant to the operations
+and business of the Company, and
+their responsibilities under statutes and
+common law, the Listing Rules, legal and
+other regulatory requirements as well as
+the Company's business and governance
+policies, so that they are able to discharge
+Directors' training and professional
+development:
+The Company regularly updates its Directors
+with changes in laws and regulations relevant to
+their roles as Directors of the Company.
+Principle: "Every director must always know his
+responsibilities as a director of an issuer and its
+conduct, business activities and development.
+Given the essential unitary nature of the board, non-
+executive directors have the same duties of care and
+skill and fiduciary duties as executive directors.'
+0
+O O O
+0
+A.6 Responsibilities of Directors
+1
+1
+by proxy
+member
+by committee
+Yang Hua (Chairman)
+Lawrence J. Lau
+Kevin G. Lynch
+The Nomination Committee is also
+responsible for evaluating the contributions
+and independence of incumbent Directors
+so as to determine whether they should be
+recommended for re-election. Based on such
+evaluation, the Nomination Committee will
+recommend to the Board candidates for re-
+election at general meetings and appropriate
+replacements (if necessary). The Board, based
+on the recommendations of the Nomination
+Committee, will propose to the shareholders the
+candidates for re-election at the relevant general
+meetings.
+The Company seeks to apply similar principles
+when determining the remuneration packages
+for senior management with reference to the
+Board's corporate goals and objectives. Other
+general staff and employees are rewarded on
+a performance-rated basis with other fringe
+benefits such as social insurance, pension funds
+and medical cover.
+The remuneration of Non-executive Directors
+and Independent Non-executive Directors
+recommended by the Remuneration Committee
+is determined by the Board where the vote of
+the Directors concerned will not be counted in
+relation to their remuneration.
+Reviewed the Company's audited
+accounts, annual results announcements,
+unaudited interim accounts and interim
+results announcements before they are
+tabled to the Board for approval, and
+discussed with senior management and
+the external auditors over such accounts;
+The following is a summary of the work
+performed by the Audit Committee under its
+charter during the year:
+The Audit Committee is also responsible for
+reviewing the Company's internal audit function,
+ensuring co-ordination within the Group and
+between the Company's internal and external
+auditors, and ensuring that the internal audit
+function is adequately resourced and has
+appropriate standing within the Company and to
+review and monitor its effectiveness.
+contingencies that have had, could have had, or
+may in the future have, a material impact on the
+Company's financial performance or condition;
+and (e) the effectiveness of the Company's
+processes for financial reporting and Listing Rule
+compliance.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2017
+The Audit Committee is responsible for
+overseeing and monitoring the risk management
+and internal control systems of the Company
+on an ongoing basis and reviewing with our
+external auditors and management periodically,
+not less than annually, the scope, adequacy
+and effectiveness of the Company's corporate
+accounting and financial controls, risk
+management and internal control systems, and
+any related significant findings regarding risks
+or exposures and consider recommendations
+for improvement of such controls. The review
+should cover all material aspects, including
+strategic, financial, operational and compliance
+controls. In conducting annual review, the Audit
+Committee should, in particular, consider the
+factors including (a) the changes, since the
+last annual review, in the nature and extent of
+significant risks, and the Company's ability to
+respond to changes in its business and the
+external environment; (b) the scope and quality
+of management's ongoing monitoring of risks
+and of the internal control systems, and where
+applicable, the work of its internal audit function
+and other assurance providers; (c) the extent
+and frequency of communication of monitoring
+results to the Board and the Audit Committee
+which enables them to assess the effectiveness
+of the risk management and internal control
+systems of the Company; (d) significant control
+failings or weaknesses that have been identified
+during the period. Also, the extent to which
+they have resulted in unforeseen outcomes or
+The Audit Committee is also responsible for
+overseeing the operation of the internal control
+system so as to ensure that the Board is able
+to monitor the Company's overall financial
+position, to protect the Company's assets, and
+to prevent major errors or omissions in financial
+reporting. The Audit Committee also meets at
+least twice a year with our external auditors.
+the Company's accounts, evaluating the
+Company's auditing scope (both internal
+and external) and procedures as well as
+the effectiveness of the Company's risk
+management and internal control systems.
+The Audit Committee, together with senior
+management and the external auditors,
+review the accounting principles and practices
+adopted by the Group and discuss the risk
+management and internal control and financial
+reporting matters. The Board also assesses
+the effectiveness of risk management and
+internal control systems based on the reviews
+by the Risk Management Committee, senior
+management, internal audit function and
+external auditors.
+The Audit Committee meets at least twice
+a year and is responsible for reviewing the
+completeness, accuracy and fairness of
+The Audit Committee consists of three
+Independent Non-executive Directors (Mr. Tse
+Hau Yin, Aloysius, Mr. Chiu Sung Hong and Mr.
+Lawrence J. Lau), with Mr. Tse Hau Yin, Aloysius
+as the Audit Committee financial expert for the
+purposes of U.S. securities laws and Chairman
+of the Audit Committee. A list of members of the
+Audit Committee is set out under the section
+headed "Company Information" on page 148 of
+this annual report.
+Principle: "The board should establish formal and
+transparent arrangements to consider how it will
+apply financial reporting, risk management and
+internal control principles and maintain an appropriate
+relationship with the issuer's auditors. The audit
+committee established under the Listing Rules should
+have clear terms of reference."
+C.3 Audit Committee
+The management evaluated the design and
+operating effectiveness of the Company's
+risk management system and the Company's
+internal control over financial reporting for 2017
+and did not discover any material weakness
+from the evaluation. As a result, the Board
+considered that as of 31 December 2017,
+the Company's risk management system and
+the Company's internal control over financial
+reporting were effective.
+The management reported the above works to
+the Audit Committee for the purpose of assisting
+the Audit Committee to review the effectiveness
+of the risk management and internal control
+systems.
+Reports from external auditors on internal
+control and relevant financial reporting matters
+were presented to and reviewed by the Audit
+Committee.
+Board to monitor the effectiveness of the risk
+management and internal control systems.
+After completion of an internal audit, analysis,
+appraisals, recommendations related to the
+activities inspected were formulated. The
+internal audit function reported to the Audit
+Committee and the Board about internal audit
+findings, internal audit recommendation and the
+management responses. In addition, the internal
+audit function maintained a regular dialogue with
+the Company's external auditors so that both
+are aware of the significant factors which may
+affect their respective scope of work.
+•
+Corporate Governance Report
+36
+35
+The Audit Committee held formal
+meetings with the external auditors and
+senior management of the Company at
+least twice a year to discuss the matters
+including:
+CNOOC LIMITED Annual Report 2017
+(i)
+the external auditors' engagement
+letter and general scope of their
+audit work, including planning and
+staffing of the audit;
+Considered and approved the non-audit
+services provided by the external auditors
+during the year;
+Members of the Audit Committee received
+materials from the Company's external
+auditors from time to time in order to
+keep abreast of changes in financial
+reporting principles and practices, as well
+as issues relating to financial reporting,
+risk management and internal controls
+relevant to the Company;
+Reviewed and approved the Company's
+audit and non-audit pre-approval policy to
+ensure auditors' independence;
+Reviewed the work performed by
+the Company's external auditors and
+their relationship with the Company's
+senior management, and made
+recommendations to the Board in relation
+to the appointment of external auditors, as
+well as the proposed auditors' fees;
+On the basis of the aforesaid review, the
+Audit Committee was not aware of any
+significant issues that would have an
+adverse impact on the effectiveness and
+adequacy of the risk management and
+internal control systems of the Company;
+(vi) make recommendations to the
+Board and the senior management
+on the scope and quality of
+management's ongoing monitoring
+of risks and issues relevant to
+internal control.
+Corporate Governance Report
+38
+37
+CNOOC LIMITED Annual Report 2017
+consider the major investigation
+findings on risk management
+and internal control systems and
+management's response to these
+findings; and
+(v)
+(iv) review of the effectiveness of
+the internal audit function of the
+Company to ensure coordination
+within the Group and between the
+Company's internal and external
+auditors and to ensure that the
+internal audit function is adequately
+resourced and has appropriate
+standing within the Company;
+review the adequacy of resources,
+staff qualifications and experience,
+training programmes and budget of
+the Company's accounting, financial
+reporting functions and internal
+audit functions to ensure that the
+management had performed its
+duty;
+review on whether the management
+has established effective risk
+management and internal control
+systems pursuant to the Listing
+Rules as well as under relevant
+US requirements and to evaluate
+the scope and quality of the
+management's works on the risk
+management system, internal
+control system and internal audit;
+review of reports submitted by
+and discussions with the Risk
+Management Committee and other
+senior management concerned
+regarding major risks identified,
+changes in the nature and extent
+of major risks since the last annual
+review, measures and response
+plans to manage risks identified,
+and the ability of the Company to
+respond to such changes in its.
+business operation, etc.;
+(i)
+On behalf of the Board, conducted
+a review of the effectiveness of the
+Company's risk management and internal
+control systems for the year ended 31
+December 2017. The annual review
+included works such as:
+In addition to formal meetings arranged
+by the Company, members of the Audit
+Committee were also given direct access
+to the external auditors, have frequent
+contacts with the external auditors to
+discuss issues from time to time;
+the applicable accounting
+standards relating to the audit of the
+Company's financial statements,
+including any recent changes;
+the Company's management
+discussion and analysis disclosures
+in the annual report of the Company;
+and
+(ii)
+Please refer to notes 8 to 9 to the financial
+statements on pages 94 to 96 of this annual
+report for details of Directors' remuneration
+and senior management's remuneration by
+band and the five highest paid individuals in the
+Company.
+During the reporting period, the Company's
+internal audit function provided independent
+assurance as to the adequacy and effectiveness
+of the Company's risk management and
+internal control systems. The financial condition,
+operational control and compliance control of
+the Company were examined by the internal
+audit function according to the audit plan
+approved by the Audit Committee. Different
+audit areas were assigned according to risk
+priority. The internal audit function assisted the
+The Company has maintained an open
+channel to handle and discuss internal reports
+concerning finance, internal control and fraud
+to ensure that all reports will receive sufficient
+attention and any significant internal control
+weakness or reports will directly reach to the
+chairman of the Audit Committee.
+The Company has established a mechanism for
+reporting to the Board by providing a monthly
+management report in order to ensure that
+the Board fully understands the operating
+conditions and the relevant financial position
+of the Company. The Board is responsible for
+preparing accounts that give a true and fair view
+of the Group's financial position on a going-
+concern basis and other financial disclosures.
+Management provides the Board with the
+relevant information it needs to fulfill these
+responsibilities.
+Principle: "The board should present a balanced, clear
+and comprehensible assessment of the company's
+performance, position and prospects."
+by proxy
+C.1 Financial reporting
+ACCOUNTABILITY AND AUDIT
+333
+C.
+Chiu Sung Hong (Chairman)
+Tse Hau Yin, Aloysius
+Wu Guangqi
+by committee
+member
+No. of meetings attended
+(3 meetings in total)
+Directors
+Attendance of individual members at Remuneration
+Committee meetings in 2017
+Evaluated and assessed the effectiveness
+of the Remuneration Committee
+and the adequacy of the charter of
+the Remuneration Committee and
+recommended the proposed changes to
+the charter to the Board (if necessary).
+Made recommendations to the Board on
+the remuneration of the Company's Non-
+executive Directors; and
+Assessed performance of Executive
+Directors and approved the terms of their
+service contracts;
+Made recommendations to the Board
+on the Company's policy and structure
+for Directors and senior management
+remuneration and on the establishment
+of a formal and transparent procedure for
+developing remuneration policy;
+Reviewed and approved the remuneration
+packages of the newly appointed Director
+and senior management;
+Reviewed and approved the remuneration
+packages of the Company's individual
+Executive Directors and senior
+management of the Company;
+The following is a summary of the work
+performed by the Remuneration Committee
+under its charter during the year:
+The Remuneration Committee consults the
+Chairman and CEO about its proposal relating
+to the remuneration of other Executive Directors
+and have access to independent professional
+advice if necessary.
+The Remuneration Committee also administers
+the Company's share option schemes and all
+other employee equity-based compensation
+plans, with full authority to make all other
+determinations in the administration thereof, but
+subject to the limitations prescribed by laws and
+the rules of such plans and programs.
+Directors will discuss the operating budget for
+the next year and approve the operating budget
+at the end of each year and will review the
+execution of the operating budget for the whole
+year. Management will also provide sufficient
+The Company has established a mechanism
+for remediating internal control deficiency
+under which the management of each level
+are assigned with clear responsibilities relating
+to remediating internal control deficiency in
+accordance with their respective levels. Those
+responsibilities are also included in the internal
+performance indicators of the Company.
+CNOOC LIMITED Annual Report 2017
+34
+Whistleblowing policy and system have been
+established for employees and those who deal
+with the Company to raise concerns about
+possible improprieties in any matter relating to
+the Company.
+With respect to internal control, the Company
+has chosen and adopted the internal control
+framework issued by COSO, established an
+internal control system and mechanism over
+financial, operational and compliance controls
+and has conducted continuing review and
+evaluation of the internal control system of the
+Company to ensure the timeliness, accuracy
+and completeness of all information reported.
+With respect to risk management, the Company
+has chosen and adopted the risk management
+framework issued by COSO in the United
+States of America ("COSO"), established a
+risk management system covering design,
+implementation, monitoring, assessment and
+continuous improvement based on the ISO
+31000:2009 "Risk Management - Principles and
+Guidelines". The Risk Management Committee
+established the overall targets and policies of the
+risk management system which are in line with
+the strategic objectives of the Company, and
+identified, analysed and assessed the overall
+risk of the Company, including the Company's
+key risks in making major decisions, important
+events and key business processes. The Risk
+Management Committee is also responsible for
+reviewing and approving the response plans
+to major risks, as well as periodically following-
+up and reviewing the implementation of such
+response plans, in order to make sure that
+sufficient attention, monitor and responses will
+be paid to all key risks of the Company. The risk
+management reports are submitted to the Audit
+Committee and the Board periodically.
+The Company's Risk Management Committee
+is directly managed by the CEO of the
+Company and has been authorized by the
+Board to be in charge with the organization and
+implementation of the overall risk management
+and internal control. The Risk Management
+Committee is responsible for establishing the
+risk management and internal control systems,
+implementing standardized organization,
+authorization, responsibilities, procedures
+and methods for the risk management and
+internal control systems. The Risk Management
+Committee is also responsible for ongoing
+monitoring of the risk management and internal
+control systems of the Company, and makes
+periodic reports to the Audit Committee and
+the Board regarding the status of the risk
+management and internal control systems of the
+Company.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2017
+The Audit Committee is delegated by the Board
+to oversee the risk management and internal
+control systems and the internal audit function
+of the Company on an on-going basis (at least
+annually). For work completed by the Audit
+Committee on the Company's risk management
+and internal control systems, please refer to the
+section headed "C.3 Audit Committee" below.
+The Board regularly, and at least annually,
+receives reports from the management of the
+Company regarding the establishment, review
+and evaluation of the Company's strategic,
+financial, operational and compliance control,
+risk management and internal control systems.
+All major risks are reported to the Board. The
+Board will also evaluate the corresponding risks
+and the response plan.
+The Board acknowledges that it is its
+responsibilities to ensure that the Company
+establishes and maintains appropriate and
+effective risk management and internal control
+systems and review their effectiveness. Such
+systems are designed to manage rather than
+eliminate risks of failure to achieve business
+objectives, and can only provide reasonable,
+but not absolute, assurance against material
+misstatement or loss.
+C.2 Risk management and internal control
+Principle: "The board is responsible for evaluating
+and determining the nature and extent of the
+risks it is willing to take in achieving the issuer's
+strategic objectives, and ensuring that the issuer
+establishes and maintains appropriate and effective
+risk management and internal control systems.
+The board should oversee management in the
+design, implementation and monitoring of the risk
+management and internal control systems, and
+management should provide a confirmation to the
+board on the effectiveness of these systems."
+The statement by the auditor of the Company
+regarding its reporting responsibilities on the
+financial statements of the Group is set out in
+the Independent Auditors' Report on page 66.
+The Directors are not aware of any material
+uncertainties relating to events or conditions that
+may cast significant doubt upon the Company's
+ability to continue as a going concern as referred
+to in Code Provision C.1.3 of the CG Code.
+its oil and gas properties in its annual report (as
+set out on pages 128 to 140).
+The Company has also engaged independent
+technical consultant firms to conduct a review of
+its oil and gas business and discloses details of
+The Company provides a balanced, clear and
+understandable assessment in its interim and
+annual reports, other financial disclosures
+required by the Listing Rules, reports to the
+regulators and information disclosed under
+statutory requirements to enable investors to
+appraise its development over the period and its
+financial position.
+The Company regularly updates investors with
+progress of development and performance
+of the Company through formal channels
+such as annual reports, interim reports and
+announcements made through the Hong Kong
+Stock Exchange's website and the Company's
+website, as well as through press releases.
+The Company also issues quarterly operational
+statistics and announces its strategy at the
+beginning of the year to enhance transparency
+about its performance and to give details of the
+latest development of the Company in a timely
+manner.
+In response to Section 404 of the Sarbanes-
+Oxley Act promulgated by the U.S. Congress
+in 2002 to safeguard the interests of investors,
+increase the accuracy and effectiveness of
+financial reporting and financial information
+disclosure, the management has issued
+a statement on the responsibility and
+effectiveness of internal control based on
+financial reporting, and the auditors of the
+Company have also audited the effectiveness of
+internal control over financial reporting.
+If necessary, the Directors will also engage
+professional independent consultants so
+that the Directors can gain an in-depth and
+comprehensive understanding and assessment
+of the relevant matters, in order to make well-
+grounded assessments.
+Directors will also discuss and analyse the
+performance of the Group, the long term
+business model and corporate strategies of
+the Company for achieving the Company's
+objectives and generating or preserving value
+over the longer term. Please refer to the relevant
+section in Management's Discussion and
+Analysis on pages 61 to 65 for details.
+explanations and information to the Board. All
+significant changes in the operating conditions
+and investment decisions will be discussed in
+sufficient details by the Board.
+Corporate Governance Report
+33
+Corporate Governance Report
+Evaluated and assessed the effectiveness
+of the Nomination Committee and the
+adequacy of the charter of the Nomination
+Committee and recommended the
+proposed changes to the charter to the
+Board (if necessary).
+0
+CNOOC LIMITED Annual Report 2017
+The Board is the ultimate decision-making
+body of the Company, other than those matters
+reserved to shareholders of the Company.
+The Board oversees and provides strategic
+guidance to senior management in order to
+enhance the long-term value of the Company
+Principle: "An issuer should have a formal schedule of
+matters specifically reserved for board approval. The
+board should give clear directions to management
+on the matters that must be approved by it before
+decisions are made on the issuer's behalf."
+0
+0
+O o O
+D.1 Management functions
+DELEGATION BY THE BOARD
+D.
+4
+4
+4
+(Chairman and Financial Expert)
+Chiu Sung Hong
+Lawrence J. Lau
+by proxy
+Reviewed the arrangements by which
+employees of the Company can use,
+in confidence, to raise concerns about
+possible improprieties in financial
+reporting, risk management and internal
+control or other matters and ensure that
+proper arrangements are in place for fair
+and independent investigation and for
+appropriate follow-up actions;
+Reported on its findings and suggestions
+to the Board following its review of
+different aspects of the Company's
+financial reporting and risk management
+and internal control systems and made
+appropriate recommendations where
+necessary;
+Reviewed the Company's business ethics
+and compliance policies, related reports
+and training programs as appropriate and
+performed certain corporate governance
+duties delegated by the Board set out
+in Board Committees & Corporate
+Governance Functions section on page
+39; and
+Tse Hau Yin, Aloysius
+Full minutes of the Audit Committee meetings
+are kept by the Joint Company Secretaries.
+Draft and final versions of minutes of the Audit
+Committee meetings are sent to all members
+of the Audit Committee for their comments and
+records respectively, in both cases within a
+reasonable time after the meetings.
+The Audit Committee is provided with sufficient
+resources, including independent access to and
+advice from external auditors.
+Evaluated and assessed the effectiveness
+of the Audit Committee and the adequacy
+of the charter of the Audit Committee,
+and considered and recommended the
+proposed amendments to the charter and
+presented to the Board for approval.
+Independent
+Non-executive
+Directors
+No. of meetings attended
+(4 meetings in total)
+by committee
+member
+Attendance of individual members at Audit Committee
+meetings in 2017
+7
+44 CNOOC LIMITED Annual Report 2017
+3
+5
+Non-executive Directors
+3 Yang Hua (Chairman)
+4
+Liu Jian (Vice Chairman)
+5 Wu Guangqi
+41
+6 Chiu Sung Hong
+7
+Lawrence J. Lau
+8
+Tse Hau Yin, Aloysius
+9 Kevin G. Lynch
+Directors and Senior Management
+9
+Independent Non-executive Directors
+Xu Keqiang
+All Other Fees
+Yuan Guangyu
+Audit-related Fees
+The aggregate fees billed for assurance and related
+services by the Auditors that are reasonably related to
+the performance of the audit or review of the Company's
+financial statements and are not reported under "Audit
+Fees❞ were RMB 6.0 million for the financial year ended 31
+December 2016 and RMB 4.5 million for the financial year
+ended 31 December 2017.
+Tax Fees
+The aggregate fees billed for professional service rendered
+by the Auditors for tax compliance, tax advice and tax
+planning were RMB 0 for the financial year ended 31
+December 2016 and RMB 0 for the financial year ended 31
+December 2017.
+CNOOC LIMITED Annual Report 2017
+EXECUTIVE DIRECTORS
+The aggregate fees billed for professional service rendered
+by the Auditors for risk management advisory services, and
+information systems reviews were RMB 0 for the financial
+year ended 31 December 2016 and RMB 250,000 for the
+financial year ended 31 December 2017.
+There are no other fees payable to the Auditors for products
+and/or services provided by the Auditors, other than the
+services reported above, for the financial year ended
+31 December 2016 and for the financial year ended 31
+December 2017.
+2
+STATEMENT ON CORPORATE GOVERNANCE
+AS REQUIRED BY SECTION 303A.11 OF THE
+NEW YORK STOCK EXCHANGE LISTED
+COMPANY MANUAL
+http://www.cnoocltd.com/encnoocltd/gsgz/socg
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2017
+43
+Directors and Senior Management
+Executive Directors
+8 2 1 4 6 C
+1
+The Company is incorporated under the laws of Hong
+Kong and the principal trading market for the ordinary
+shares of the Company is the HKSE. In addition, because
+the Company's ordinary shares are registered with the
+United Sates Securities and Exchange Commission and
+are listed on the New York Stock Exchange (the "NYSE"),
+the Company is subject to certain corporate governance
+requirements of NYSE. However, many of the corporate
+governance rules in the NYSE Listed Company Manual
+(the "NYSE Standards") do not apply to the Company as
+a "foreign private issuer" and the Company is permitted to
+follow its home country corporate governance practices in
+lieu of most corporate governance standards contained in
+the NYSE Standards. Section 303A.11 of the NYSE Listed
+Company Manual requires NYSE listed foreign private
+issuers to describe the significant differences between
+their corporate governance practices and the corporate
+governance standards applicable to U.S. domestic
+companies listed on the NYSE. The Company has posted a
+brief summary of such significant differences on its website,
+which may be accessed through the following web page:
+Yuan Guangyu
+Shanghai Stock Exchange, from May 2003 to July 2010. Mr.
+Wu has served as the Compliance Officer of the Company
+from 1 June 2005 to 15 June 2016 and since 1 June
+2005 he also serves as a Director of CNOOC International
+Limited and served as a Director of CNOOC China Limited,
+all being the subsidiaries of the Company. Mr. Wu was
+appointed as an Executive Director of the Company with
+effect from 1 June 2005. Mr. Wu has been re-designated
+from an Executive Director to a Non-executive Director of
+the Company with effect from 15 June 2016.
+Xu Keqiang
+Born in 1948, Mr. Tse is a fellow of The Institute of Chartered
+Accountants in England and Wales, and the Hong Kong
+Institute of Certified Public Accountants ("HKICPA"). Mr.
+Tse is a past president and a former member of the Audit
+Committee of the HKICPA. He joined KPMG in 1976,
+became a partner in 1984 and retired in March 2003. Mr.
+Tse was a non-executive Chairman of KPMG's operations in
+the PRC and a member of the KPMG China advisory board
+from 1997 to 2000. Mr. Tse is currently an independent
+non-executive director of China Telecom Corporation
+Limited, SJM Holdings Limited, Sinofert Holdings Limited
+and China Huarong Asset Management Company, Limited,
+companies listed on The Stock Exchange of Hong Kong
+Limited. From 2004 to 2010, he was an independent non-
+executive director of China Construction Bank Corporation,
+I which is listed on the HKSE Main Board. From 2005 to
+2016, Mr. Tse was also an independent non-executive
+director of Daohe Global Group Limited (formerly known as
+Linmark Group Limited), which is listed on the HKSE Main
+Board, Mr. Tse is currently an independent non-executive
+director of CCB International (Holdings) Limited, a wholly
+owned subsidiary of China Construction Bank Corporation
+and OCBC Wing Hang Bank Limited (formerly named as
+Wing Hang Bank Limited whose shares were delisted from
+The Stock Exchange of Hong Kong Limited with effect
+from 16 October 2014). Mr. Tse is also a member of the
+International Advisory Council of the People's Municipal
+Government of Wuhan. Mr. Tse was appointed as an
+Independent Non-executive Director of the Company with
+effect from 8 June 2005.
+Kevin G. Lynch
+Born in 1951, Mr. Lynch obtained a B.A. degree from
+Mount Allison University, a M.A. degree in Economics from
+the University of Manchester, and a doctorate degree in
+Economics from McMaster University. He also holds 11
+honorary degrees. Mr. Lynch was made a life Member of
+the Privy Council for Canada, and an Officer of the Order of
+Canada. He is the Vice Chairman of BMO Financial Group
+and also a distinguished former public servant with 33
+years of service with the Government of Canada. Mr. Lynch
+served as Deputy Minister of Industry of Canada from 1995
+to 2000, Deputy Minister of Finance of Canada from 2000 to
+2004, Executive Director at the International Monetary Fund
+from 2004 to 2006 and was appointed as Clerk of the Privy
+Council for Canada, Secretary to the Cabinet and Head
+of the Public Service from 2006 to 2009. Mr. Lynch is the
+Chancellor of the University of King's College, Senior Fellow
+of Massey College, former Chair of the Board of Governors
+of the University of Waterloo, former Chair of the Canadian
+Ditchley Foundation, and past Chair of the World Economic
+Forum's Global Policy Council on the Global Financial
+System. He also serves on other boards including the Killam
+Trusts, Communitech, the Governor General's Rideau Hall
+Foundation, the Asia Pacific Foundation of Canada. Mr.
+Lynch is currently a director of Canadian National Railway
+Company listed on the Toronto Stock Exchange and New
+York Stock Exchange, and a director and chairman of the
+Board of Directors of SNC Lavalin Group Inc. listed on the
+Toronto Stock Exchange. Mr. Lynch was appointed as an
+Independent Non-executive Director of the Company on 27
+November 2013, and such appointment took effect from 1
+March 2014.
+OTHER MEMBERS OF SENIOR MANAGEMENT
+Chen Wei
+Born in 1958, Mr. Chen is an Executive Vice President, the
+General Counsel and Compliance Officer of the Company.
+He is a professor-level senior engineer. He received his
+B.S. degree from East China Petroleum Institute (now
+China University of Petroleum) and MBA degree from
+Tsinghua University. He has over 30 years of experience
+in the oil and gas industry. Mr. Chen joined CNOOC in
+1984 and previously served as the Deputy Manager for
+the Development Department of CNOOC Exploration
+and Development Research Center, the Deputy Manager
+of the Overseas Research Department, the Manager of
+the Information Department, and the Deputy Director of
+CNOOC Research Center. He has also served as General
+Manager of Human Resources Department and General
+Manager of Science and Technology Development
+Department of CNOOC, and a Senior Vice President of
+the Company and General Manager of Administration
+CNOOC LIMITED Annual Report 2017
+47
+Tse Hau Yin, Aloysius
+48
+Department of the Company. In July 2003, Mr. Chen was
+appointed as the Director of CNOOC Research Center
+(later became President of CNOOC Research Institute).
+In February 2012, Mr. Chen was appointed as the
+Worker's Director of CNOOC. In March 2013, Mr. Chen
+was appointed as the Assistant President of CNOOC and
+the Executive Vice President of the Company. In May
+2016, Mr. Chen was appointed as the General Counsel of
+CNOOC, the General Counsel and Compliance Officer of
+the Company. In March 2018, Mr. Chen retired as Executive
+Vice President, the General Counsel and Compliance Officer
+of the Company.
+Xie Yuhong
+Born in 1961, Mr. Xie is an Executive Vice President
+and General Manager of Exploration Department of the
+Company as well as a professor-level senior engineer.
+Mr. Xie obtained a Ph.D. degree from China University of
+Geosciences in 2005. From 1982 to 1995, Mr. Xie served
+as an engineer of Research Institute and Exploration
+Department of CNOOC Naihai West Corporation.
+From 1995 to 1996, he served as the Deputy Manager
+of Exploration Department of CNOOC Naihai West
+Corporation. From 1996 to 1999, he served as Manager
+of Tepu Company of CNOOC Naihai West Corporation,
+Deputy Chief Earth Physicist and Manager of Exploration
+Department of Naihai West Corporation. From 2001 to
+2005, he was Deputy Chief Manager of CNOOC China
+Limited Zhanjiang Branch. From 2005 to 2013, he served
+as the Chief Manager of CNOOC China Limited Zhanjiang
+Branch. From 2013 to 2015, he was appointed as the
+Director of Naihai West Petroleum Administrative Bureau of
+CNOOC. In July 2015, he was appointed as Deputy Chief
+Geologist of CNOOC, Deputy Chief Geologist and General
+Manager of Exploration Department of the Company. In
+May 2016, he was appointed as the Chief Geologist of
+CNOOC, an Executive Vice President and General Manager
+of Exploration Department of the Company.
+Li Yong
+Born in 1963, Mr. Li is an Executive Vice President of the
+Company and General Manager of CNOOC China Limited
+Tianjin Branch. He is a senior engineer. He received his
+B.S. degree from Southwest Petroleum University, master
+of Petroleum Economics from Scuola E Mattei of Italy
+and MBA from Peking University. He has over 30 years
+of experience in the oil and gas industry. Mr. Li joined
+CNOOC in 1984 and previously served as Comprehensive
+Technology Manager and Drilling Manager of Exploration
+Department of CNOOC, Director of Drilling Office of
+Exploration and Development Department of the Company.
+In April 2003, he was appointed as Deputy General Manager
+of Tianjin Branch of CNOOC (China) Limited. In October
+2005, he was appointed as Executive Vice President and
+Chief Operating Officer of COSL. In April 2009, he was
+appointed as Executive Director and President of COSL.
+In September 2010, he served as Executive Director,
+Chief Executive Officer and President of COSL. From June
+2016 to August 2017, he served as Assistant President of
+CNOOC, Executive Vice President of the Company, Director
+of CNOOC Bohai Petroleum Administration Bureau and
+General Manager of CNOOC China Limited Tianjin Branch.
+Cao Xinjian
+Born in 1966, Mr. Cao is an Executive Vice President and
+the General Manager of CNOOC China Limited Tianjin
+Branch as well as a professor-level senior economist. Mr.
+Cao obtained a master degree of Business Administration
+from the University of Wales in 2003. From 1989 to 1999,
+Mr. Cao served as a geological delegate of the Contract
+Area of CNOOC Donghai Company & Caltex and the deputy
+manager of Exploration Department of CNOOC Donghai
+Company. From 1999 to 2004, he served as Exploration
+Manager of Exploration Department, Assistant Manager,
+Acting Manager and Manager of Human Resources
+Department of CNOOC China Limited Shanghai Branch.
+From 2004 to 2006, he served as Deputy Director of the
+CNOOC Talent Work Leading Group's Office. From 2006
+to 2013 he served as Deputy General Manager of CNOOC
+China Limited Shanghai Branch. From 2009 to 2013, he
+also served as Deputy Director of Donghai Petroleum
+Administration Bureau of CNOOC. From 2013 to 2017, he
+served as Deputy General Manager and General Manager
+of Human Resources Department of CNOOC and the
+Company. From March 2017, he has served as the Director
+of Bohai Petroleum Administration Bureau of CNOOC and
+General Manager of CNOOC China Limited Tianjin Branch.
+From August 2017, he was appointed as an Executive Vice
+President of the Company. In September 2017, he was
+appointed as Assistant President of CNOOC.
+Directors and Senior Management
+Born in 1959, Mr. Yuan is a professor-level senior engineer.
+He graduated from China University of Petroleum with a
+bachelor's degree in drilling engineering. He graduated from
+the EMBA program of China Europe International Business
+School in 2007 with an MBA degree. Mr. Yuan joined China
+National Offshore Oil Corporation ("CNOOC”) in 1982 and
+has over 30 years of experience in the oil and gas industry.
+From February 1993 to October 2001, Mr. Yuan served
+as Deputy Manager of CNOOC Bohai Drilling Company,
+Deputy General Manager of CNOOC China Offshore Oil
+Northern Drilling Company, Deputy General Manager of
+the Operational Department of CNOOC, General Manager
+of CNOOC China Offshore Oil Northern Drilling Company.
+From October 2001 to January 2009, Mr. Yuan served as
+General Manager and President of CNOOC Services, and
+Vice Chairman of the Board of Directors, Chief Executive
+Officer and President of China Oilfield Services Limited (a
+company listed on The Stock Exchange of Hong Kong
+Limited and Shanghai Stock Exchange). From November
+2006 to May 2016, Mr. Yuan served as the Assistant
+President of CNOOC. Since July 2016, Mr. Yuan was
+appointed as the Vice President of CNOOC. In January
+2009, Mr. Yuan was appointed as the Executive Vice
+President of the Company. In April 2013, Mr. Yuan was
+appointed as Director of Bohai Petroleum Administrative
+Bureau of CNOOC and General Manager of CNOOC China
+Limited Tianjian Branch, a subsidiary of the Company. Mr.
+Yuan also serves as the Director and General Manager
+of CNOOC China Limited and the Director of CNOOC
+International Limited, both subsidiaries of the Company.
+From 15 June 2016 to 5 May 2017, he was appointed as the
+Chairman of CNOOC International Limited. From 15 June
+2016 to 18 April 2017, Mr. Yuan served as President of the
+Company and Mr. Yuan was appointed as an Executive
+Director of the Company with effect from 15 June 2016. Mr.
+Yuan was appointed as the Chief Executive Officer of the
+Company with effect from 18 April 2017.
+Sub-Committee, and member of its Currency Board Sub-
+committee and Investment Sub-Committee, and a member
+of the Hong Kong Trade Development Council (HKTDC)
+Belt and Road Committee. In addition, he also serves as the
+Chairman of the Board of Directors of the Chinese University
+of Hong Kong (Shenzhen) Advanced Finance Institute, aka
+Shenzhen Finance Institute, a member and Chairman of
+the Prize Recommendation Committee of the LUI Che Woo
+Prize Company, as well as a Vice-Chairman of Our Hong
+Kong Foundation. He was appointed a Justice of the Peace
+in Hong Kong in July 2007. He currently serves as the Ralph
+and Claire Landau Professor of Economics at the Lau Chor
+Tak Institute of Global Economics and Finance, The Chinese
+University of Hong Kong, an Independent Non-executive
+Director of AIA Group Limited and Hysan Development
+Company Limited, both listed on the Hong Kong Stock
+Exchange, and an Independent Non-executive Director of
+Far EasTone Telecommunications Company Limited, Taipei,
+which is listed on the Taiwan Stock Exchange. Professor
+Lau was appointed as an Independent Non-executive
+Director of the Company with effect from 31 August 2005.
+46 CNOOC LIMITED Annual Report 2017
+Born in 1971, Mr. Xu is a professor-level senior engineer.
+He graduated from Northwest University with a Bachelor
+of Science degree in Oil and Gas Geology. He received
+a master's degree in Coalfield Oil and Gas Geology from
+Northwest University in 1996. Mr. Xu joined China National
+Petroleum Corporation in 1996 and served different
+positions. From April 2003 to April 2005, he served
+as Deputy General Manager of Sinopetro Investment
+Company Ltd. From April 2005 to September 2008, he
+served as Deputy General Manager of CNPC International
+(Kazakhstan) Ltd. and concurrently General Manager
+of CNPC Ai-Dan Munai Joint Stock Company. From
+September 2008 to March 2014, he served as Deputy
+General Manager of CNPC International (Kazakhstan) Ltd.
+and concurrently General Manager of Joint Stock Company
+CNPC International Aktobe Petroleum. From March 2014 to
+March 2017, he served as General Manager of PetroChina
+Tuha Oilfield Company, and Director of Tuha Petroleum
+Exploration & Development Headquarters. In March 2017,
+Mr. Xu was appointed as a Vice President of CNOOC.
+In April 2017, Mr. Xu was appointed as the Chairman of
+Nexen Energy ULC, a subsidiary of the Company. He
+was appointed as the Chairman of CNOOC International
+Limited and as a Director of CNOOC China Limited, both
+subsidiaries of the Company, with effect from May 2017.
+Mr. Xu was appointed as an Executive Director and the
+President of the Company with effect from 18 April 2017.
+NON-EXECUTIVE DIRECTORS
+Yang Hua
+Born in 1961, Mr. Yang is a professor-level senior economist
+and graduated from China University of Petroleum with a
+B.S. degree in petroleum engineering. He also received an
+MBA degree from the Sloan School of Management at MIT
+as a Sloan Fellow. Mr. Yang joined CNOOC in 1982 and
+has over 30 years of experience in petroleum exploration
+and production. From 1982 to 1992, Mr. Yang served
+in a number of positions in CNOOC Research Center
+including the Director of Field Development Department,
+the Manager of Reservoir Engineering Department and the
+Project Manager. Thereafter, Mr. Yang was mainly involved
+in international business, M&A, corporate finance and
+capital market operations. From 1993 to 1999, he served
+as the Deputy Chief Geologist, the Deputy Director and the
+Acting Director for Overseas Development Department of
+CNOOC and the Vice President of CNOOC International
+Limited. From 1999 to 2011, Mr. Yang served in a number
+of positions in the Company including Senior Vice President,
+Chief Financial Officer, Executive Vice President, President
+and Chief Executive Officer. Mr. Yang also served as an
+Assistant President of CNOOC from November 2006 to
+April 2010 and as Vice President of CNOOC from April
+2010 to August 2011. Mr. Yang served as Director and
+President of CNOOC from August 2011 to April 2015.
+He was appointed as Chairman of CNOOC in April 2015.
+From 15 June 2016 to 18 April 2017, he was appointed
+as the Chairman and a Director of Nexen Energy ULC, a
+subsidiary of the Company. He also served as Chairman,
+Director and President of CNOOC Southeast Asia Limited,
+Chairman, Director and General Manager of CNOOC China
+Limited and Chairman and Director of CNOOC International
+Limited, all being subsidiaries of the Company. He also
+served as Director of CNOOC Finance Corporation Limited,
+a subsidiary of CNOOC. Mr. Yang was appointed as an
+Executive Director of the Company with effect from 31
+August 2005 and was the Vice Chairman of the Board of
+the Company from 16 September 2010 to 19 May 2015,
+and was re-designated from an Executive Director to a
+Non-Executive Director of the Company with effect from 23
+November 2011. Mr. Yang was appointed as Chairman of
+the Board and Chairman of the Nomination Committee of
+the Company with effect from 19 May 2015. From 15 June
+2016 to 18 April 2017, Mr. Yang was re-designated from a
+Non-executive Director to an Executive Director and served
+as the Chief Executive Officer of the Company. Mr. Yang
+was re-designated from an Executive Director to a Non-
+Executive with effect from 18 April 2017.
+CNOOC LIMITED Annual Report 2017
+45
+Directors and Senior Management
+Directors and Senior Management
+Liu Jian
+Wu Guangqi
+Born in 1957, Mr. Wu is a geologist, professor-level senior
+economist, Certified Senior Enterprise Risk Manager and
+Certified Internal Auditor and graduated with a B.S. degree
+from the Ocean University of China, majoring in Marine
+Geology. He also holds a master degree in Management
+from China University of Petroleum and a doctor degree
+in Management from Huazhong University of Science and
+Technology. Mr. Wu joined CNOOC in 1982. From 1994
+to 2001, he served as the Deputy General Manager of
+CNOOC Oil Technical Services Company, a subsidiary of
+CNOOC, the Director of the Administration Department of
+CNOOC and the Director of the Ideology Affairs Department
+of CNOOC successively. Mr. Wu was appointed as an
+Assistant President of CNOOC in 2003, and has been the
+Vice President of CNOOC since 2004. Mr. Wu also serves
+as the Chairman of CNOOC Marine Environment and
+Ecology Protection Foundation, and served as the Vice
+Chairman of China Association of Risk Professionals, the
+Vice Chairman of China Association of Oceanic Engineering,
+the Director-General of National Energy Deepwater Oil &
+Gas Engineering Technology Research Centre Council.
+Mr. Wu served as an Independent Non-executive Director
+of China Yangtze Power Limited, a company listed on the
+The aggregate fees billed for professional services rendered
+by the Auditors for the audit of the Company's annual
+financial statements or services that are normally provided
+by the Auditors in connection with statutory and regulatory
+filings or engagements were RMB 46.7 million for the
+financial year ended 31 December 2016 and RMB 50.9
+million for the financial year ended 31 December 2017.
+INDEPENDENT NON-EXECUTIVE DIRECTORS
+Chiu Sung Hong
+Born in 1947, Mr. Chiu received an LL.B. degree from the
+University of Sydney. He was admitted as a solicitor of the
+Supreme Court of New South Wales and the High Court
+of Australia. He has over 30 years' experience in legal
+practice and had been a director of a listed company in
+Australia. Mr. Chiu was the founding member of the Board
+of Trustees of the Australian Nursing Home Foundation and
+served as the General Secretary of the Australian Chinese
+Community Association of New South Wales. Mr. Chiu.
+is also an Independent Non-executive Director of Tianda
+Pharmaceuticals Limited (formerly Yunnan Enterprises
+Holdings Limited, Tianda Holdings Limited) since April
+2008, a company listed on The Stock Exchange of Hong
+Kong Limited. Mr. Chiu is also an Independent Non-
+executive Director of Bank of China (Australia) Limited (a
+wholly subsidiary of Bank of China Limited). Mr. Chiu was
+appointed as an Independent Non-executive Director of the
+Company with effect from 7 September 1999.
+Lawrence J. Lau
+Born in 1944, Professor Lau graduated with a B.S. (with
+Great Distinction) in Physics from Stanford University
+in 1964, and received his M.A. and Ph.D. degrees in
+Economics from the University of California at Berkeley in
+1966 and 1969 respectively. He joined the faculty of the
+Department of Economics at Stanford University in 1966,
+becoming Professor of Economics in 1976, the first Kwoh-
+Ting Li Professor in Economic Development in 1992,
+and Kwoh-Ting Li Professor in Economic Development,
+Emeritus in 2006. From 2004 to 2010, Professor Lau
+served as the Vice-chancellor (President) of The Chinese
+University of Hong Kong. From September 2010 to
+September 2014, Professor Lau served as Chairman of
+CIC International (Hong Kong) Co., Limited. From March
+2008 to February 2018, Professor Lau served as a member
+of the 11th and 12th National Committee of the Chinese
+People's Political Consultative Conference (and a Vice-
+Chairman of its Economics Subcommittee). Professor Lau
+specializes in economic development, economic growth,
+and the economies of East Asia, including that of China.
+He has authored, co-authored, or edited twelve books
+and published 190 articles and notes in professional
+journals. Professor Lau serves as a member of the Hong
+Kong Special Administrative Region Exchange Fund
+Advisory Committee and Chairman of its Governance
+Born in 1958, Mr. Liu is a professor-level senior engineer.
+He graduated from Huazhong University of Science and
+Technology with a Bachelor degree and he received his
+MBA degree from Tianjin University. Mr. Liu first joined
+CNOOC in 1982 and has over 35 years of experience in the
+oil and gas industry. He served as the manager of CNOOC
+Bohai Corporation Oil Production Company, a subsidiary of
+CNOOC, Deputy General Manager of the Tianjin Branch and
+the General Manager of the Zhanjiang Branch of CNOOC
+China Limited, a subsidiary of the Company. From 2003 to
+2009, Mr. Liu served as Senior Vice President and General
+Manager of the Development and Production Department
+and Executive Vice President of the Company, primarily
+responsible for the offshore oil and gas fields development
+and production of the Company. Mr. Liu served as an
+Assistant President of CNOOC from November 2006 to April
+2010 and as a Vice President of CNOOC from April 2010 to
+August 2015. In August 2015, Mr. Liu was appointed as the
+President of CNOOC. Mr. Liu also served as the director of
+CNOOC China Limited, CNOOC International Limited and
+CNOOC Southeast Asia Limited, all being subsidiaries of the
+Company. Besides, Mr. Liu served as the Chief Executive
+Officer, Vice Chairman and Chairman of China Oilfield
+Services Limited (a company listed on The Stock Exchange
+of Hong Kong Limited and Shanghai Stock Exchange) from
+March 2009 to December 2016 and Chairman of Offshore
+Oil Engineering Co. Ltd. (a company listed on the Shanghai
+Stock Exchange) from December 2010 to November 2016.
+He was appointed as Chairman and Director of CNOOC
+China Limited, a subsidiary of the Company, with effect
+from 28 February 2017. Mr. Liu was appointed as the Vice
+Chairman and a Non-executive Director of the Company
+with effect from 20 December 2016.
+Audit Fees
+CG Code Provision A.4.1
+SERVICES AND REMUNERATION OF
+AUDITORS
+40
+Corporate Governance Report
+E.
+E.1
+The Nomination Committee shall be responsible
+for reviewing and monitoring the training
+and continuous professional development of
+Directors and senior management and making
+recommendations to the Board in that regard.
+COMMUNICATION WITH SHAREHOLDERS
+Effective communication
+Principle: "The board should be responsible for
+maintaining an on-going dialogue with shareholders
+and in particular, use annual general meetings or other
+general meetings to communicate with them and
+encourage their participation."
+The Board recognizes the importance of
+good and effective communication with all
+shareholders. With a policy of being transparent,
+strengthening investor relations, and providing
+consistent and stable returns to shareholders,
+the Company seeks to ensure transparency
+through establishing and maintaining different
+communication channels with shareholders.
+The Company has a professionally-run investor
+relations department to serve as an important
+communication channel between the Company
+and its shareholders and other investors.
+A key element of effective communication
+with shareholders and investors is prompt and
+timely dissemination of information in relation
+to the Company. In addition to announcing its
+interim and annual results to shareholders and
+investors, the Company also publicises its major
+business developments and activities through
+press releases, announcements and the
+Company's website in accordance with relevant
+rules and regulations. Press conferences and
+analyst briefings are held from time to time on
+financial performance and major transactions.
+The general meetings also provide a useful
+forum for shareholders to exchange views
+with the Board. The Chairman of the Board,
+as well as Chairmen of the Audit Committee,
+Nomination Committee and Remuneration
+Committee, or in their absence, members of
+the respective Committees, and the external
+auditors of the Company, are available to
+answer questions from shareholders at annual
+general meetings and extraordinary general
+meetings of the Company.
+The Chairmen of the Board and all Committees,
+or in his absence, an alternate appointed by
+him will, whenever possible, propose separate
+resolutions for each substantially separate issue
+at general meetings of the Company.
+The Company's management ensures the
+external auditors attend the annual general
+meeting to answer questions about the conduct
+of the audit, the preparation and content of the
+auditors' report, the accounting policies and
+auditors' independence.
+The Board established a shareholders'
+communication policy and review it on a regular
+basis to ensure its effectiveness.
+E.2 Voting by Poll
+F.
+39
+CNOOC LIMITED Annual Report 2017
+(iv) Reviewing the Company's compliance
+with the CG Code and disclosure in
+the Corporate Governance Report and
+making recommendations to the Board in
+that regard.
+Developing, reviewing and monitoring the
+Code of Ethics for Directors and Senior
+Officers ("Code of Ethics") and making
+recommendations to the Board in that
+regard; and
+(iv)
+Reviewing and approving long-term
+strategic plans and annual operating
+plans, and monitoring the implementation
+and execution of these plans;
+Reviewing and approving significant
+financial and business transactions and
+other major corporate actions;
+Reviewing and approving financial
+statements and reports, and overseeing
+the establishment and maintenance of
+controls, processes and procedures to
+ensure accuracy, integrity and clarity in
+financial and other disclosures; and
+Overall responsibility for the Company's
+ESG strategy and reporting, evaluating
+and determining the Company's ESG-
+related risks, and ensuring appropriate
+and effective ESG risk management and
+internal control systems are in place.
+The Board and the senior management have
+respective responsibilities, accountabilities
+and contributions. The primary functions
+performed by the senior management are to
+conduct the daily business and implement
+the abovementioned affairs approved and
+delegated by the Board and other matters as the
+Board may from time to time request.
+The Directors review such delegation
+arrangements periodically to ensure they remain
+appropriate to our needs.
+Directors clearly understand delegation
+arrangements in place. The Company has
+entered into service agreements with the
+Executive Directors and Non-executive
+Directors and has formal letters of appointment
+for Independent Non-executive Directors
+setting out the key terms and conditions of their
+engagements and appointments.
+Principle: "The issuer should ensure that shareholders
+are familiar with the detailed procedures for
+conducting a poll."
+D.2 and D.3 Board Committees & Corporate
+Governance and Functions
+33
+The Company has established an Audit
+Committee, a Remuneration Committee and a
+Nomination Committee (each a "Committee")
+and has established a specific written
+committee charter (the “Charter") for each of the
+Committees which deals clearly with its authority
+and duties. The Charters of the Committees are
+published on the websites of the Hong Kong
+Stock Exchange and the Company. These
+Committees will report to the Board on their
+decisions and recommendations.
+The Board has delegated the responsibility
+for performing certain corporate governance
+related duties and functions to the Audit
+Committee and the Nomination Committee.
+The Audit Committee shall be responsible for
+performing the corporate governance duties set
+out below:
+(i)
+(iii)
+Developing and reviewing the
+Company's policies and practices on
+corporate governance and making
+recommendations to the Board;
+Reviewing and monitoring the Company's
+policies and practices on compliance with
+legal and regulatory requirements and
+making recommendations to the Board in
+that regard;
+Principle: "Board committees should be formed with
+specific written terms of reference which deal clearly
+with their authority and duties.'
+In 2017, all votes of shareholders at the annual
+general meeting of the Company were taken by
+poll or otherwise in accordance with the Listing
+Rules. The Chairman of a meeting ensured that
+shareholders were familiar with the procedures
+of voting by poll at the general meetings of the
+Company.
+The results of the poll are published on the
+Hong Kong Stock Exchange's website and the
+Company's website.
+Company Secretary
+CNOOC LIMITED Annual Report 2017
+The primary functions performed by the Board
+include:
+42
+Corporate Governance Report
+separate and are not performed by the same individual and
+there has been no deviation from Code Provision A.2.1 since
+18 April 2017.
+Xie Weizhi
+Under CG Code provision A.4.1, non-executive directors
+should be appointed for a specific term and be subject to re-
+election.
+None of the existing Independent Non-executive Directors
+of the Company is appointed for a specific term. This
+constitutes a deviation from the CG Code provision A.4.1.
+However, all the Directors are subject to the retirement
+provisions under article 97 of the Articles ("Article 97").
+According to Article 97, one-third of the Directors for the
+time being must retire from the office by rotation at each
+annual general meeting. The Company has observed
+the need for good corporate governance practices. All
+Independent Non-executive Directors of the Company
+have retired from the office by rotation and have been re-
+elected in the past three years. The Company considers
+that sufficient measures have been taken to ensure that the
+Company's corporate governance practices are no less
+exacting than those in the CG Code.
+With effect from 18 April 2017, Mr. Yang Hua resigned as
+the CEO of the Company and he remains as the Chairman
+of the Board. At the same time, Mr. Yuan Guangyu, an
+existing Executive Director, has been appointed as the
+CEO. As such, the roles of the Chairman and the CEO are
+CHANGES IN DIRECTORS
+With effect from 18 April 2017, (i) Mr Yang Hua was re-
+designated from an Executive Director to a Non-executive
+Director and resigned as the CEO of the Company and
+remains as the Chairman of the Board and the Chairman
+of the Nomination Committee; (ii) Mr. Yuan Guangyu was
+appointed as the CEO of the Company and resigned as
+the President of the Company; and (iii) Mr. Xu Keqiang was
+appointed as an Executive Director and the President of the
+Company.
+CHANGES IN INFORMATION OF DIRECTORS
+Pursuant to Rule 13.51(B) of the Listing Rules, there is no
+other change in the information of Directors of the Company
+except as disclosed in this annual report.
+CODE OF ETHICS
+The Board adopted a Code of Ethics in 2003 to provide
+guidelines to the senior management and Directors in
+legal and ethical matters as well as the sensitivity involved
+in reporting illegal and unethical matters. The Code of
+Ethics covers areas such as supervisory rules, insider
+dealing, market malpractices, conflict of interests, company
+opportunities, protection and proper use of the Company's
+assets as well as reporting requirements. As part of its
+continued efforts to improve its corporate governance
+standards, the Board conducted an annual review to the
+Code of Ethics since 2009, and the current version of the
+Code of Ethics was reviewed and adopted in August 2017.
+The Company has provided all its Directors and senior
+officers with a copy of the Code of Ethics and requires them
+to comply with the Code of Ethics, so as to ensure the
+Company's operation is proper and lawful. The Company
+will take disciplinary actions towards any act which is in
+breach of the Code of Ethics. All the senior management
+members and Directors are required to familiarise
+themselves with and follow the Code of Ethics to ensure that
+the Company's operations are honest and legal. Violations
+of the rules will be penalized and serious breaches will result
+in dismissal.
+MODEL CODE FOR SECURITIES
+TRANSACTIONS BY DIRECTORS OF LISTED
+ISSUERS
+The Company has adopted the abovementioned Code
+of Ethics which has incorporated the Model Code for
+Securities Transactions by Directors of Listed Issuers (the
+"Model Code") as set out in Appendix 10 to the Listing
+Rules. All Directors have confirmed that they complied,
+during the year ended 31 December 2017, with the
+Company's Code of Ethics and the required standards set
+out in the Model Code.
+During the year ended 31 December 2017, there was the
+following change in Directors.
+Deloitte Touche Tohmatsu, appointed as the independent
+auditors of the Company on 24 May 2013, was re-
+appointed and engaged as the Company and its
+subsidiaries' auditors ("Auditors") for the financial year
+ended 31 December 2017. Services provided by the
+auditors and fees charged by the auditors for the services
+for the year ended 31 December 2017 are as follows:
+Within the reporting period, prior to 18 April 2017, Mr. Yang
+Hua had assumed both the roles of the Chairman and the
+CEO of the Company as he is familiar with the culture and
+operations of the Company and has extensive experience in
+the oil and gas industry. The Directors consider that vesting
+two roles in the same individual enables the Company to
+make and implement decisions promptly and efficiently
+and will not impair the balance of power and authority
+between the Board and the management of the Company.
+The Company has established board committees
+(namely, Audit Committee, Remuneration Committee and
+Nomination Committee), whose members mainly comprise
+of Independent non-executive Directors and are responsible
+for important corporate governance functions. In particular,
+the Audit Committee of the Company is responsible for
+overseeing and monitoring the risk management and
+internal control systems of the Company, to support the
+Board in discharging its responsibilities and to ensure the
+adequacy and effectiveness of the Company's corporate
+accounting and financial controls, risk management and
+internal control systems. The four Independent Non-
+executive Directors who possess balance of skills and
+experience appropriate to the business of the Company
+also contribute valuable independent views to the Board.
+The Directors consider that although Mr. Yang Hua served
+as both the Chairman and CEO of the Company, there are
+sufficient checks and balances at the Board level.
+CG Code Provision A.2.1
+Principle: "The company secretary plays an important
+role in supporting the board by ensuring good
+information flow within the board and that board policy
+and procedures are followed. The company secretary
+is responsible for advising the board through the
+chairman and/or the chief executive on governance
+matters and should also facilitate induction and
+professional development of directors.'
+Ms. Li Jiewen and Ms. Tsue Sik Yu, May are the
+Joint Company Secretaries of the Company.
+Their biographies are set out on pages 50 to
+51 of this report. The Nomination Committee
+of the Company has the responsibility to make
+recommendation for suitable candidates for the
+appointment of company secretary to the Board
+and the Board has the responsibility to approve
+their selection, appointment or dismissal by
+physical meeting of the Board.
+The Joint Company Secretaries will report to the
+Chairman of the Board and/or the CEO.
+Each of the Joint Company Secretaries
+has taken no less than 15 hours of relevant
+professional training every year.
+CNOOC LIMITED Annual Report 2017
+Corporate Governance Report
+All Directors have access to the advice and
+services of the Joint Company Secretaries to
+ensure that Board procedures as well as all
+applicable rules and regulations are followed.
+SHAREHOLDERS' COMMUNICATION AND
+RIGHTS TO CONVENE AN EXTRAORDINARY
+GENERAL MEETING
+Under CG Code provision A.2.1, the roles of Chairman
+and Chief Executive Officer should be separate and not be
+performed by the same individual.
+The procedures for shareholders to convene an
+Extraordinary General Meeting of the Company ("EGM")
+are governed by Article 60 of the Articles and sections
+566 to 568 of the Companies Ordinance (Cap. 622 of the
+Laws of Hong Kong). On the request of shareholders of the
+Company, representing at least 5% of the total voting rights
+of all shareholders having a right to vote at general meetings,
+the Directors are required to call a general meeting.
+Whilst giving the above request, shareholders are
+recommended to provide written explanation of the
+reasons and material implications relating to the proposed
+resolutions to enable all of the shareholders to properly
+consider and determine the proposed resolutions.
+The Company will, upon receipt of a request referred to
+above, issue a notice of extraordinary general meeting of the
+proposed resolutions and (if applicable) circulars containing
+further information relating to the proposed resolutions in
+accordance with the Listing Rules.
+Further enquiries relating to the above or enquiries that
+Shareholders wish to be put to the Board may be addressed
+to the Joint Company Secretaries of the Company at 65/F,
+Bank of China Tower, 1 Garden Road, Hong Kong.
+PROCEDURES FOR PUTTING FORWARD
+PROPOSALS AT GENERAL MEETINGS BY
+SHAREHOLDERS
+Shareholders are requested to follow sections 615 and
+616 of the Companies Ordinance (Cap. 622 of the laws of
+Hong Kong) if they wish to request the Company to give
+to other shareholders, who are entitled to receive notice
+of the annual general meeting, notice of a resolution that
+may properly be moved and is intended to be moved at the
+annual general meeting.
+Shareholders are requested to follow sections 580 to 583
+of the Companies Ordinance (Cap. 622 of the laws of Hong
+Kong) if they wish to request the Company to circulate to
+other shareholders, who are entitled to receive notice of
+a general meeting, a statement with respect to a matter
+mentioned in a proposed resolution or other business to be
+dealt with at the general meeting.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+For the year ended 31 December 2017, the Company has
+complied with the provisions of the CG Code as set out in
+Appendix 14 of the Listing Rules, except for the deviation
+from the code provisions A.2.1 and A.4.1 of the CG Code.
+The following summarises the requirement under the above-
+mentioned code provisions A.2.1 and A.4.1 and the reason
+for such deviation.
+The request must state the general nature of the business
+to be dealt with at the EGM and may include the text of a
+resolution that may properly be moved and is intended to be
+moved at the EGM, be authenticated by the shareholder(s)
+making the request, and sent to the Company in hard copy
+form or in electronic form. The Directors must call an EGM
+within 21 days after the date on which they become subject
+to the requirement and such EGM must be held on a date
+not more than 28 days after the date of the notice convening
+the meeting is given.
+Born in 1964, Mr. Xie is the Chief Financial Officer of the
+Company. Mr. Xie is a Senior Accountant. He graduated
+from Guanghua School of management of Peking University
+with a master's degree in Business Administration. Mr.
+Xie joined CNOOC in 1986. Mr. Xie served as Deputy
+Manager of Finance Department of CNOOC Nanhai
+West Corporation, Deputy Manager and Manager of
+Controllers' Department and General Manager of Finance
+Department of CNOOC. From January 2002 to February
+2011, Mr. Xie served as General Manager of CNOOC
+Finance Corporation Ltd. From February 2011 to May
+2016, Mr. Xie served as Assistant President of CHINALCO,
+Executive Director of CHINALCO Finance Company Limited,
+President of CHINALCO Offshore Holding Company,
+Vice President & CFO of CHALCO, President of CHALCO
+(Hong Kong), Chairman of CHINALCO Finance Company
+Limited, Controller General & Director of Audit Department
+CHINALCO. From May 2016, Mr. Xie was appointed as
+General Manager of Finance Department of CNOOC. From
+August 2017, Mr. Xie was appointed as the Chief Financial
+Officer of the Company.
+(i)
+The day-to-day management is conducted
+by senior management and employees of the
+Company, under the direction of the CEO
+and the oversight of the Board. In addition
+to its general oversight of the management,
+the Board also performs a number of specific
+functions. The Company formalises the
+functions reserved to the Board and those
+delegated to management and reviews those
+arrangements periodically to ensure that they
+remain appropriate to the Company's needs.
+for its shareholders. The Board delegates its
+management and administration functions to
+management and gives clear directions as to
+the powers of management at the same time,
+in particular, with respect to the circumstances
+where management should report back
+and obtain prior approval from the Board
+before making decisions or entering into any
+commitments on the Company's behalf.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2017
+(ii)
+LOANS
+Please refer to note 37 to the consolidated financial
+statements for details of the significant events after the
+reporting period of the Group.
+Subsequent Event
+A description of the likely future development in the
+Company's future business is provided in the Chairman's
+statement on pages 6 to 7 and Business Overview on pages
+8 to 24 of this annual report.
+Prospects
+A description of principal risks and uncertainties that the
+Group may be facing is provided in the Business Overview
+on pages 8 to 24 of this annual report.
+Key Risks and Uncertainties
+For more details on Company's key relationships with
+stakeholders, please refer to the 2017 ESG report.
+The support and trust of our stakeholders is integral to
+the Company's growth and success. Our stakeholders
+include shareholders and creditors, employees and
+employee organizations, governments and regulatory
+authorities, business partners and service providers, the
+public and communities, charities and non-government
+organizations (NGOs), and clients. We place emphasis
+on communications with our stakeholders and have
+established an open and transparent communication
+channel for each category of stakeholders to understand
+their expectations and requests.
+Key Relationships with Stakeholders
+In accordance with the requirements of the laws, regulations
+and related policies in Hong Kong, PRC and relevant
+other jurisdictions in which the Group operates, the Group
+provides and maintains statutory benefits for its staff,
+including but not limited to pension schemes, mandatory
+provident fund, basic medical insurance, work injury
+insurance, etc. Further, the Group has been committed
+in complying relevant laws and regulations on work and
+occupational safety of employees of the Group.
+Report of the Directors
+CNOOC LIMITED Annual Report 2017
+For the year ended 31 December 2017, compliance
+procedures were in place to ensure adherence to applicable
+laws, rules and regulations which have significant impact on
+the Group. The Board and senior management within their
+respective duties in conjunction with internal and external
+professional advisors monitored the Group's policies
+and practices on compliance with legal and regulatory
+requirements. Changes in the applicable laws, rules and
+regulations which have significant impact on the Group (if
+any) were brought to the attention of relevant employees
+and relevant operation units from time to time. During
+the reporting period, various works of the Board and
+senior management were in compliance with the relevant
+applicable laws and regulations, the articles of association
+of the Company, charters of the board committees,
+internal policies and the relevant provisions of various
+internal control systems. Decision-making process was
+legitimate and effective. Directors and senior management
+performed in a diligent and responsible manner and the
+resolutions of the general meetings and board meetings
+were implemented faithfully. Meanwhile, the Company has
+timely performed its disclosure obligations which were in
+strict compliance with the requirements of the listing rules
+or manuals of the Hong Kong Stock Exchange, New York
+Stock Exchange and Toronto Stock Exchange.
+Compliance with Relevant Laws and Regulations
+Regarding the environmental issues that have material
+impacts on the Company's business performance and
+future development, please refer to the environmental, social
+and governance report of 2017 prepared by the Company
+(the "2017 ESG report") to be available on the Company's
+website.
+For the year ended 31 December 2017, the Company
+has carried out the laws and regulations of the PRC on
+energy saving and reduction in emission, viewing energy
+saving and reduction in emission as important works
+for the transformation of the mode of development and
+optimization of the industrial structure. We kept on strictly
+carrying out energy-saving assessment and examination
+on new oilfield investment projects, ensuring this work can
+be integrated from the initial stage of projects. We also
+strengthened the efforts in technical reformation, which is
+the key to improve energy efficiency and reduce carbon
+emissions.
+Through specified communication methods, we looked
+into and sorted out the focuses and concerns of the
+stakeholders, and responded with corresponding
+actions and measures. We continued to strengthen
+the quality and effectiveness of information disclosure,
+comply with applicable laws and regulations and actively
+participate in public welfare activities, with the purpose of
+achieving mutual development and value sharing with our
+stakeholders. We have also formulated key indicators based
+on the focuses and concerns of different stakeholders to
+reflect our management performance on various subject
+matters. Some of our key indicators include return on equity
+and payout ratio for shareholders and creditors; employee
+training frequency, turnover rate and OSHA statistics for
+employees and employee organizations; violations of laws
+and regulations and safety and environment performance
+concerned by the government; partners' feedback and
+contracts' execution capability for business partners and
+service providers; public opinion and corporate image
+concerned by the public; community evaluations for
+communities; response rate on enquiries for charities and
+NGOs; satisfactory reports for clients; etc. Going forward,
+we will endeavor to improve our current policies, strive to
+maximize our stakeholders' value and achieve a mutually
+beneficial outcome.
+Please refer to note 25 to the consolidated financial
+statements on pages 109 to 111 of this annual report for
+details of the loans and borrowings of the Group as at 31
+December 2017.
+Please refer to note 13 to the consolidated financial
+statements on pages 101 to 102 of this annual report for the
+movements in property, plant and equipment of the Group
+for the year ended 31 December 2017.
+RESERVES
+CHARITABLE DONATIONS
+For the year ended 31 December 2017, except for
+the continuing connected transactions with its indirect
+controlling shareholder CNOOC and its associates, as
+disclosed in the section entitled "Connected Transactions"
+below, none of the Directors or their respective close
+associates or any shareholder of the Company (which to
+the knowledge of the Directors owns more than 5% of the
+Company's share capital) had any interests in the five largest
+suppliers or customers of the Group.
+Sales to the largest third party customer for the year ended
+31 December 2017 represented approximately 8% of the
+Group's total revenue. The total sales attributable to the five
+largest third party customers of the Group accounted for
+approximately 19% of the Group's total revenue for the year
+ended 31 December 2017.
+Purchases from the largest supplier of the Group for the
+year ended 31 December 2017 represented approximately
+16% of the Group's total purchases. The total purchases
+attributable to the five largest suppliers of the Group
+accounted for approximately 52% of the total purchases of
+the Group for the year ended 31 December 2017.
+MAJOR SUPPLIERS AND CUSTOMERS
+Please refer to note 30 to the consolidated financial
+statements on page 118 of this annual report for details of
+the retirement benefits of the Group for the year ended 31
+December 2017.
+RETIREMENT BENEFITS
+The Board recommended a payment of a final dividend
+of HK$0.30 (tax inclusive) per share for the year ended
+31 December 2017, payable on 10 July 2018 to all
+shareholders on the register of members of the Company on
+15 June 2018 subject to shareholders' approval.
+An interim dividend of HK$0.20 (tax inclusive) per share was
+declared on 24 August 2017, and paid to the shareholders
+of the Company on 12 October 2017.
+DIVIDENDS
+Report of the Directors
+53
+CNOOC LIMITED Annual Report 2017
+Particulars of the Company's subsidiaries, associates and
+joint ventures as at 31 December 2017 are set out in notes
+15, 16 and 17 to the consolidated financial statements on
+pages 104 to 107 of this annual report.
+SUBSIDIARIES, ASSOCIATES AND JOINT
+VENTURES
+Please refer to the consolidated statement of changes in
+equity on page 73 and note 38 to the consolidated financial
+statements on pages 126 to 127 of this annual report for
+movements in the reserves of the Group and the Company,
+respectively, for the year ended 31 December 2017.
+The distributable reserves of the Company as at 31
+December 2017 amounted to RMB143,170 million.
+PROPERTY, PLANT AND EQUIPMENT
+of the production process on the environment such that
+relevant environmental protection measures could be
+adopted. The environmental protection information system
+covers all information from EIA documents from all levels of
+the Group, information in relation to the report, statistics,
+monitoring and pre-warning system regarding pollutant
+emissions. The system enables us to achieve information
+management on environmental related matters.
+Environmental Policies and Performance
+During the process of oilfield development, the Company
+highly values the protection of natural and ecological
+environment and its comprehensive environmental
+protection measures ensure the Company to comply with
+the applicable laws and regulations on environmental
+protection.
+Qiu Zongjie
+Born in 1962, Mr. Liu is a Vice President of the Company
+and Director of Beijing Research Center of CNOOC China
+Limited, General Manager of CNOOC China Limited
+Beijing Branch, Director of CNOOC Energy Technology
+Development Research Institute and General Manager
+of CNOOC Energy Technology Development Research
+Institute Company Limited. Mr. Liu graduated from
+Southwest Petroleum Institute (now Southwest Petroleum
+University) with a bachelor's degree. From 1983 to 1994, he
+served as Deputy Manager of District Research First Team
+of Exploration and Development Department Research
+Institute of Nanhai East Oil Corporation of CNOOC. From
+1994 to 1997, he served as Principal of Seismic Engineer
+and Principal of Geologist of Exploration and Development
+Department of Nanhai East Oil Corporation of CNOOC.
+From 1997 to 1999, he served as Deputy Manager of
+Exploration and Development Department of Nanhai East
+Oil Corporation of CNOOC. From 1997 to 2001, he served
+as Deputy Director of Scientific and Technology Research
+Institute of Nanhai East Oil Corporation of CNOOC. From
+2001 to 2004, he served as Director of Nanhai East Institute
+of the Research Center of CNOOC China Limited. From
+2004 to 2009, he served as Manager, Assistant to General
+Manager, Deputy General Manager and Acting General
+Manager of Technology Department of CNOOC China
+Limited Shenzhen Branch respectively. From 2009 to 2016,
+he served as General Manager of CNOOC China Limited
+Shenzhen Branch and Director of Nanhai East Petroleum
+Administrative Bureau of CNOOC and General Manager
+of CNOOC Deepwater Development Limited respectively.
+From April to November 2016, he served as Director
+of Beijing Research Center of CNOOC China Limited,
+General Manager of CNOOC China Limited Beijing Branch,
+and General Director of CNOOC Energy Technology
+Development Research Institute and General Manager
+of CNOOC Energy Technology Development Research
+Institute Company Limited. In February 2017, Mr. Liu was
+appointed as a Vice President of the Company.
+Liu Zaisheng
+the Chief Safety Official and General Manager of the QHSE
+Department of the Company. From September 2016 to
+now, he has been serving as the Deputy Chief Safety Official
+of CNOOC and the Chief Safety Official of the Company. In
+April 2017, Mr. Song retired as the Chief Safety Official of the
+Company.
+Directors and Senior Management
+50
+49
+CNOOC LIMITED Annual Report 2017
+Born in 1957, Mr. Song is the Chief Safety Official of the
+Company. He is a professor-level senior engineer. He
+graduated in 1982 with a bachelor's degree from the
+Department of Petroleum Development of East China
+Petroleum Institute (now China University of Petroleum),
+majoring in Drilling Engineering. In 1999, he graduated with
+a master's degree in management from Department of
+Economic Management of School of Management, TianJin
+University. From 1982 to 1994, he served as Supervisor
+and Platform Manager for Bohai Oil Corporation, and a staff
+member of the offshore division of the Technology Safety
+Department and the head of the offshore safety division
+of the Technical Safety and Environmental Protection
+Department respectively. From 1994 to 1999, Mr. Song
+served as Director of the Safety Production Division
+and head of the Safety Office of the HSE Department of
+CNOOC. From 1999 to 2001, he served as Deputy Manager
+of the HSE Department of the Company. From 2001 to
+2003, he served as Director of operational safety of the HSE
+Department of CNOOC. From 2003 to 2013, he served as
+the General Manager of the HSE Department of CNOOC
+and the Company. From March 2013 to September 2016,
+he served as the Deputy Chief Safety Official of CNOOC,
+Song Lisong
+Born in 1963, Mr. Deng is an academician of the Chinese
+Academy of Engineering and the Deputy Chief Exploration
+Engineer of the Company. Mr. Deng graduated from the
+Scientific Research Institute of Petroleum Exploration
+and Development with a major in Petroleum Geology and
+Exploration and received a master's degree in Engineering
+in 1988. He was assistant geologist and then geologist in
+the Exploration Department of CNOOC Bohai Corporation
+Institute from 1988 to 1989; and served as the Team Leader
+of the Comprehensive Petroleum Geological Research
+Team, Project Manager, Deputy Principal of Geologist,
+Deputy Principal Geologist and Director of the Exploration
+Department and Deputy Chief Geologist in the CNOOC
+Bohai Corporation Institute from 1989 to 1999. Mr. Deng
+became Deputy Chief Geology Engineer and Deputy
+General Manager of CNOOC China Limited Tianjian Branch
+from 1999 to 2005. He was Deputy Director of CNOOC
+Research Center from 2005 to 2006. He served as the
+Deputy Chief Exploration Engineer of the Company and
+the Deputy Director of CNOOC Research Center from
+2006 to 2007. Mr. Deng served as Deputy Chief Geology
+Engineer of CNOOC, Deputy Chief Exploration Engineer of
+the Company and Deputy Director of CNOOC Research
+Center from 2007 to 2009; and Deputy Chief Geology
+Engineer of CNOOC, Deputy Chief Exploration Engineer
+of the Company and Deputy General Director of CNOOC
+Research Institute from 2009 to 2015. In November 2015,
+he was appointed as the Deputy Chief Geology Engineer
+of CNOOC, Deputy Chief Exploration Engineer of the
+Company and Deputy Director of Beijing Research Center of
+CNOOC China Limited.
+Deng Yunhua
+Born in 1960, Mr. Zhong is Chief Financial Officer of the
+Company. Mr. Zhong is a professor-level senior economist
+and senior engineer and graduated from Southwest
+Petroleum Institute (now Southwest Petroleum University)
+with a bachelor's degree in Oil Exploitation. He received
+a master's degree in Petroleum Engineering from Heriot-
+Watt University in the United Kingdom. He joined CNOOC
+in 1982, and has been working in the oil and gas industry
+for over 30 years. From 1982 to 1999, Mr. Zhong served
+as Petroleum Engineer of China Offshore Oil Nanhai West
+Corporation ("COONWC"), Expro Northsea Staff in UK,
+Deputy Manager of Downhole Services Company of Oil
+Production Company of COONWC, Manager of Wei 10-3
+Oilfield, Oilfield Superintendent of CNOOC Indonesia
+Project, Supervisor of Ya 2-1-3 HTHP Well Testing Project,
+Deputy Manager of Drilling and Exploitation Institute,
+Manager of Science and Technology Development
+Department and Manager of Administration Department of
+COONWC. From September 1999 to October 2005, Mr.
+Zhong was General Manager of Administration Department
+and General Manager and Director of Development and
+Planning Department of the Company. From August 2005
+to September 2010, Mr. Zhong served as Vice President,
+Executive Vice President and Chief Financial Officer of
+China Oilfield Services Limited, a company listed on The
+Stock Exchange of Hong Kong Limited and Shanghai Stock
+Exchange, a subsidiary of CNOOC. On 16 September 2010,
+Mr. Zhong was appointed as Chief Financial Officer of the
+Company. From March 2012 to November 2015, Mr. Zhong
+served as Joint Company Secretary of the Company. In
+August 2017, Mr. Zhong ceased to serve as Chief Financial
+Officer of the Company.
+Zhong Hua
+Born in 1960, Mr. Zhang is a Senior Vice President of the
+Company and the General Manager of CNOOC China
+Limited Zhanjiang Branch. He is a professor-level senior
+engineer. He graduated from Shandong Oceanographic
+Institute (now Ocean University of China) with a bachelor
+degree. He studied in the Business Institute of University
+of Alberta in Canada in 2001. He joined CNOOC in 1982
+and served as Deputy Chief Geologist and Manager
+of Exploration Department of CNOOC Naihai West
+Corporation, a subsidiary of CNOOC, Chief Geologist of
+CNOOC Research Center, Assistant to General Manager
+of CNOOC China Limited and the General Manager of
+Exploration Department of the Company. In March 2003, he
+was appointed as Senior Vice President of the Company.
+In October 2005, Mr. Zhang was appointed as Senior Vice
+President of the Company and General Manager of CNOOC
+China Limited Shanghai Branch. In July 2009, he was
+appointed as Director of Donghai Petroleum Administrative
+Bureau of CNOOC. In July 2015, he was appointed as
+Director of Nanhai West Petroleum Administrative Bureau
+of CNOOC and General Manager of CNOOC China Limited
+Zhanjiang Branch.
+Zhang Guohua
+Directors and Senior Management
+Born in 1958, Mr. Qiu is a Vice President and General
+Manager of Development and Production Department
+of the Company. He graduated from China University of
+Petroleum with a master's degree. From 1982 to 1993,
+he served as Cadre and Deputy Manager of Oil Testing
+Company of CNOOC Nanhai West Corporation Oil
+Production Company. From 1993 to 1999, he served as
+Manager of Weizhou 11-4 oilfield, head of the operation
+division, Principal Engineer, Deputy Manager, Manager
+(and Manager of Oilfield Development Department) of
+CNOOC Nanhai West Corporation Oil Production Company
+respectively. From 1999 to 2001, he served as Manager
+of Petroleum Production Department of CNOOC Nanhai
+West Corporation. From 2001 to 2005, he served as Deputy
+General Manager of CNOOC China Limited Zhanjiang
+Branch. From 2005 to 2007, he served as Deputy General
+Manager of CNOOC China Limited Shenzhen Branch.
+From 2007 to 2016, he served as General Manager
+of Development and Production Department of the
+Company. In February 2017, Mr. Qiu was appointed as
+Vice President and General Manager of Development and
+Production Department of the Company. In May 2017,
+he was appointed as Vice President, Chief Safety Official,
+and General Manager of Development and Production
+Department of the Company. In March 2018, Mr. Qiu
+retired as Vice President, Chief Safety Official and General
+Manager of Development and Production Department of the
+Company.
+JOINT COMPANY SECRETARIES
+Li Jiewen
+Born in 1965, Ms. Li Jiewen is the Joint Company Secretary
+and the General Manager (Director) of the Investor Relations
+Department (Office for the Board of Directors). Ms. Li is
+a senior economist and Certified Senior Enterprise Risk
+Manager and a member of CPA Australia. Ms. Li graduated
+from Shanghai Jiao Tong University with a bachelor's
+degree in Naval Architecture and Ocean Engineering in
+1987. She received a master's degree in Management
+from Zhejiang University in 2001. Ms. Li joined CNOOC in
+1987 and has been working in the oil and gas industry for
+over 30 years. From 1987 to 1989, Ms. Li was a Assistant
+Engineer in Nanhai East Oil Corporation of CNOOC. From
+1990 to 2003, she worked as the Assistant Engineer,
+A review of the business of the Group and analysis of the
+Group's performance using financial key performance
+indicators is provided in the Business Overview and
+Management's Discussion and Analysis section on pages 8
+to 24 and pages 61 to 65 of this annual report.
+Overview and Performance of the Year
+BUSINESS REVIEW
+Please refer to the financial summary on page 2 of this
+annual report for a summary of the assets and liabilities
+of the Group as at 31 December 2017 and the operating
+results of the Group for the year then ended.
+SUMMARY OF FINANCIAL INFORMATION AND
+OPERATING RESULTS
+The principal activity of the Company is investment holding
+of its subsidiaries. These subsidiaries are principally
+engaged in the exploration, development, production and
+sales of crude oil, natural gas and other petroleum.
+PRINCIPAL ACTIVITIES
+The directors (the “Directors”) of the Company are pleased
+to present their report together with the audited financial
+statements of the Company for the year ended 31
+December 2017.
+The Company's environmental protection management
+system emphasizes the management of the whole process.
+During the process of construction and production of
+oilfields, we place Environment Impact Assessment (EIA),
+compliance with set standards or targets on pollutant
+emissions, control on total discharge amount and reduction
+on emissions as our priorities. During the pre-feasibility study
+phase, the environmental risk pre-assessment report will
+be conducted to identify the environmental sensitive areas
+for protecting marine ecosystem. During the ODP (Overall
+Development Plan) stage, it is a necessity to prepare and
+submit the EIA to the government for approval in advance
+of a project to be set up. During the construction stage,
+environmental protection supervision and management
+are strictly performed and tightened in order to reduce
+the impact on natural and social environment. During the
+production stage, pollutant emission monitor program is
+carried out, which analyzes the scope and extent of impact
+Report of the Directors
+51
+CNOOC LIMITED Annual Report 2017
+Directors and Senior Management
+Born in 1973, Ms. Tsue Sik Yu, May is the Joint Company
+Secretary of the Company. She graduated from Curtin
+University of Technology in Australia with a bachelor of
+commerce in accounting. Ms. Tsue furthered her education
+at The Hong Kong Polytechnic University in Master of
+Corporate Governance from 2004 to 2006, and MBA
+from The University of Hong Kong from 2014 to 2016.
+She is a fellow member of both the Institute of Chartered
+Secretaries and Administrators and the Hong Kong Institute
+of Chartered Secretaries since 2012 and became a member
+of Company Secretaries Panel and Advisor for Academy of
+Professional Certification in the same year, and became a
+member of ACCA since 2016. She is also a fellow member
+and certified risk trainer of the Institute of Crisis and Risk
+Management and an associate member of CPA Australia.
+Furthermore, she was granted a Practitioner's Endorsement
+(PE) 2017/2018 under The Hong Kong Institute of Chartered
+Secretaries and accredited a General Mediator under
+Hong Kong Mediation Accreditation Association Limited
+(HKMAAL) since August 2017. From August 1998 to March
+1999, Ms. Tsue worked in LG International (HK) Ltd. as a
+senior accounts clerk. Ms. Tsue joined China Ocean Oilfield
+Services (HK) Limited in 1999 as an accountant. She helped
+to manage the finance of the CNOOC Insurance Limited
+since 2000 and became its employee in 2004 as a manager
+of finance department. She serves as company secretary
+of CNOOC Insurance Limited since March 2007. Ms. Tsue
+was appointed as Joint Company Secretary of the Company
+with effect from 25 November 2008.
+Tsue Sik Yu, May
+Budget and Planning Engineer, Budget Supervisor,
+Assistant Finance Manager of CACT (CNOOC-AGIP-
+Chevron-Texaco) Operators Group. From February 2004
+to October 2006, she served as the Finance Manager of
+CNOOC China Limited Shenzhen Branch. From October
+2006 to November 2010, Ms. Li was the Deputy General
+Manager of the Controllers Department of the Company.
+Ms. Li served as the General Manager of the Controllers
+Department of the Company from November 2010 to June.
+2016. Ms. Li also served as the Director of Nexen Energy
+ULC, a subsidiary of the Company. Ms. Li has been also
+appointed as the General Manager (Director) of the Investor
+Relations Department (Office for the Board of Directors) of
+the Company since October 2015. Ms. Li was appointed
+as Joint Company Secretary of the Company with effective
+from 27 November 2015.
+...
+CNOOC LIMITED Annual Report 2017
+52
+The donations by the Group for the year ended 31
+December 2017 amounted to RMB26.51 million.
+The Independent Non-executive Directors have confirmed
+that the following continuing connected transactions for the
+year ended 31 December 2017 to which any member of the
+Group was a party were entered into by the Group:
+1.
+financial statements;
+The aggregate annual volume of transactions for
+the provision of exploration and support services
+did not exceed RMB9,969 million.
+(a)
+(ii)
+Report of the Directors
+56
+CNOOC LIMITED Annual Report 2017 55
+Provision of exploration, oil and gas development,
+oil and gas production as well as marketing,
+management and ancillary services by CNOOC and/or
+its associates to the Group:
+(i)
+The Independent Non-executive Directors have further
+confirmed that for the year ended 31 December 2017:
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed for
+the purpose of extending entrustment loans pursuant to
+the entrustment loan services) placed by the Group with
+CNOOC Finance should not exceed RMB19.5 billion for the
+period from 1 January 2017 to 31 December 2019.
+On 1 December 2016, the Company entered into a
+financial services framework agreement ("Financial Services
+Framework Agreement") with CNOOC Finance Corporation
+Limited ("CNOOC Finance"), an associate of CNOOC,
+pursuant to which CNOOC Finance provides a range of
+financial services as may be required and requested by
+the Group, for a term of three years from 1 January 2017
+to 31 December 2019. Apart from the duration of the
+Financial Services Framework Agreement, more details
+about the pricing policy for the depositary services and
+update of the address and relevant dates, the Financial
+Services Framework Agreement is substantially on the
+same terms as the terms contained in the financial services
+framework agreement (as renewed on 20 August 2010
+and 27 November 2013) entered into by the Company on
+14 October 2008. The continuing connected transactions
+in respect of the depositary services under the Financial
+Services Framework Agreement are exempted from
+independent shareholders' approval requirement, but
+subject to the annual reporting, annual review and
+announcement requirements.
+Financial services provided by CNOOC Finance Corporation
+Limited to the Group
+For the three years ended
+31 December 2019,
+RMB25,654 million,
+RMB33,386 million and
+RMB43,649 million,
+respectively
+31 December 2019,
+RMB263,893 million,
+RMB314,371 million and
+RMB437,773 million,
+respectively
+For the three years ended
+Long term sales of
+natural gas and
+liquefied natural gas
+3.
+than long term sales
+of natural gas and
+liquefied natural gas)
+were entered into in accordance with the relevant
+agreements governing the transactions; and
+The aggregate annual volume of transactions
+for the provision of oil and gas production and
+support services did not exceed RMB12,625
+million.
+(a)
+2002 Share Option Scheme (expired in 2015); and
+3.
+Sales of petroleum and natural gas products by the
+Group to CNOOC and/or its associates:
+2001 Share Option Scheme (expired in 2011);
+2.
+Pre-Global Offering Share Option Scheme (expired in
+2011);
+1.
+The Company has adopted the following share option
+schemes for the grant of options to the Company's
+Directors, senior management and other eligible grantees:
+SHARE OPTION SCHEMES
+SHARE CAPITAL
+Please also refer to note 29 to the consolidated financial
+statements on pages 114 to 117 of this annual report for a
+summary of the related party transactions which include the
+Group's continuing connected transactions.
+have not exceeded the applicable caps.
+4.
+The aggregate annual volume of transactions for the
+provision of management, technical, facilities and
+ancillary services, including the supply of materials by
+the Group to CNOOC and/or its associates did not
+exceed RMB100 million;
+(e) The aggregate annual volume of transactions for
+FPSO vessel leases did not exceed RMB2,880
+million.
+(d) The aggregate annual volume of transactions
+for the provision of marketing, management and
+ancillary services did not exceed RMB1,620
+million.
+The aggregate annual volume of transactions
+for the provision of oil and gas development and
+support services did not exceed RMB31,670
+million.
+Sales of petroleum
+and natural gas
+products (other
+(b)
+(a)
+Provision of oil
+(b)
+Provision of
+exploration and
+support services
+(a)
+Provision of exploration, oil and gas development, oil and
+gas production as well as marketing, management and
+ancillary services by CNOOC and/or its associates to the
+Group
+Annual caps for 2017 to
+2019
+Categories of continuing
+connected transactions
+Report of the Directors
+...
+54 CNOOC LIMITED Annual Report 2017
+The Company entered into a comprehensive framework
+agreement on 15 November 2016 with CNOOC, controlling
+shareholder of the Company, for the provision (1) by the
+Group to CNOOC and/or its associates and (2) by CNOOC
+and/or its associates to the Group of a range of products
+and services which may be required and requested
+from time to time by either party and/or its associates in
+respect of the continuing connected transactions. The
+comprehensive framework agreement is substantially on the
+same terms as the terms contained in the comprehensive
+framework agreements entered into by the Company on
+6 November 2013, with more details about the pricing
+principles. The term of the comprehensive framework
+agreement is for a period of three years from 1 January
+2017. The continuing connected transactions under the
+comprehensive framework agreement and the relevant
+annual caps for the three years from 1 January 2017
+were approved by the independent shareholders of the
+Company on 1 December 2016. The continuing connected
+transactions under the comprehensive framework
+agreement and the relevant annual caps are set out below:
+Comprehensive framework agreement with CNOOC in
+respect of the provision of a range of products and services
+in accordance with the relevant agreements (including
+pricing principles and guidelines set out therein)
+governing the transactions on terms that were fair and
+reasonable and in the interests of the shareholders of
+the Company as a whole.
+on normal commercial terms or better; and
+in the ordinary and usual course of its business;
+3.
+2.
+(c)
+(d)
+and gas
+development and
+support services
+to CNOOC and/or its associates
+Sales of petroleum and natural gas products by the Group
+For the three years ended
+31 December 2019,
+RMB100 million,
+RMB100 million and
+RMB100 million,
+respectively
+Provision of management,
+technical, facilities and
+ancillary services, including
+the supply of materials to
+CNOOC and/or its
+Associates
+Provision of management, technical, facilities and ancillary
+services, including the supply of materials by the Group to
+CNOOC and/or its associates
+For the three years ended
+31 December 2019,
+RMB2,880 million,
+RMB3,120 million and
+RMB3,360 million,
+respectively
+For the three years ended
+31 December 2019,
+RMB1,620 million,
+RMB1,786 million and
+RMB1,970 million,
+respectively
+For the three years ended
+31 December 2019,
+RMB12,625 million,
+RMB14,678 million and
+RMB16,877 million,
+respectively
+CONNECTED TRANSACTIONS
+31 December 2019,
+RMB31,670 million,
+RMB38,289 million and
+RMB43,745 million,
+respectively
+31 December 2019,
+RMB9,969 million,
+RMB10,579 million and
+RMB11,590 million,
+respectively
+For the three years ended
+FPSO vessel leases
+(e)
+management and
+ancillary services
+marketing,
+Provision of
+Provision of oil
+and gas
+production and
+support services
+For the three years ended
+Please refer to note 27 to the consolidated financial
+statements on page 112 of this annual report for details of
+movements in the Company's total issued shares for the
+year ended 31 December 2017.
+4.
+0
+9.93
+27 May 2009 to 27 May 2019
+27 May 2009
+2,835,000
+2,835,000
+14.20
+14.828
+29 May 2008 to 29 May 2018
+29 May 2008
+1,857,000
+1,857,000
+7.43
+7.29
+25 May 2007 to 25 May 2017
+25 May 2007
+0
+(1,857,000)
+1,857,000
+Yang Hua**
+Non-executive Directors
+12.22
+9.33
+2,000,000
+2,000,000
+20 May 2010
+9.93
+27 May 2009 to 27 May 2019
+27 May 2009
+1,857,000
+1,857,000
+14.20
+14.828
+29 May 2008 to 29 May 2018
+29 May 2008
+1,857,000
+12.696
+1,857,000
+7.29
+25 May 2007 to 25 May 2017
+25 May 2007
+(iv)
+(1,857,000)
+1,857,000
+Wu Guangqi
+12.22
+12.696
+20 May 2010 to 20 May 2020
+7.43
+9.33
+20 May 2010 to 20 May 2020
+9.93
+the year the year
+2017
+were in accordance with the pricing policies for the
+transactions involving the provision of goods or
+services by the Group as stated in the Company's
+during
+during
+during
+during
+As at 1 January
+Name of category
+of grantee
+Expired
+Forfeited
+Granted Exercised
+Number of share options
+Price of the
+Company's
+During the year ended 31 December 2017, the movements in the options granted under all of the above share option schemes were as follows:
+Company's shares
+shares
+closing price of the
+Weighted average
+CNOOC LIMITED Annual Report 2017
+Please refer to the note 27 to the consolidated financial
+statements on pages 112 to 113 of this annual report for
+details regarding each of these share option schemes of
+the Company. Save as those disclosed in the annual report,
+no right to subscribe for equity or debt securities of the
+Company has been granted by the Company to, nor have
+any such rights been exercised by, any other person during
+the year ended 31 December 2017.
+the year
+the year
+As at 31
+December
+2017
+Exercise Immediately Immediately
+27 May 2009 to 27 May 2019
+27 May 2009
+20 May 2010
+1,857,000
+1,899,000
+1,899,000
+1,857,000
+Yuan Guangyu**
+Executive Director
+per share
+per share
+HK$
+9.33
+HK$
+HK$
+per share
+options
+date
+options of options
+date of
+exercise
+of share grant date
+Exercise period of
+share options*
+Date of grant of
+share options
+price before the before the At exercise
+HK$
+per share
+1,857,000
+1,857,000
+20 May 2010
+Lawrence J. Lau
+Independent Non-executive Directors
+Chiu Sung Hong
+Wu Guangqi
+Liu Jian (Vice Chairman)
+Yang Hua (Chairman) (Note 3)
+Under these share option schemes, the Remuneration
+Committee of the Board will from time to time propose
+for the Board's approval for grant of and the number of
+share options to be granted to the relevant grantees. The
+maximum aggregate number of shares (including those that
+could be subscribed for under the Pre-Global Offering Share
+Option Scheme, the 2001 Share Option Scheme, the 2002
+Share Option Scheme and the 2005 Share Option Scheme)
+which may be issued upon exercise of all options to be
+granted shall not exceed 10% of the total issued shares of
+the Company as at 31 December 2005, being the date on
+which the shareholders of the Company approved the 2005
+Share Option Scheme, excluding share options which have
+lapsed in accordance with the terms of the share option
+schemes.
+Xu Keqiang (Note 2)
+Yuan Guangyu (Note 1)
+Executive Directors
+The Directors of the Company during the year and up to the
+date of this annual report are:
+NAME OF DIRECTOR
+Save as disclosed in this annual report, there was no
+purchase, sale or redemption by the Company, or any of its
+subsidiaries, of its listed securities during the year ended 31
+December 2017.
+PURCHASE, SALE OR REDEMPTION OF
+LISTED SECURITIES
+Save as disclosed in this annual report, there was no equity-
+linked agreement entered into by the Company during the
+year ended 31 December 2017.
+EQUITY-LINKED AGREEMENT
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Note 1: With effect from 18 April 2017, Mr. Yuan Guangyu was
+appointed as the Chief Executive Officer of the Company and
+resigned as the President of the Company.
+Note 2: With effect from 18 April 2017, Mr. Xu Keqiang was appointed
+as an Executive Director and the President of the Company.
+(b)
+The aggregate annual volume of transactions
+for the sales of petroleum and natural gas
+products (other than long term sales of natural
+gas and liquefied natural gas) did not exceed
+RMB263,893 million.
+The aggregate annual volume of the
+transactions for the long term sales of natural
+gas and liquefied natural gas did not exceed
+RMB25,654 million.
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed for
+the purpose of extending entrustment loans pursuant
+to the entrustment loan services) placed by the Group
+with CNOOC Finance did not exceed RMB19.5 billion.
+The independent auditors of the Group have reviewed the
+continuing connected transactions referred to above and
+confirmed to the Board of Directors that the continuing
+connected transactions:
+1.
+2.
+Report of the Directors
+have received the approval of the Board;
+CNOOC LIMITED Annual Report 2017
+58
+Alan O'Brien, Anita R. Koval, Ariel D. Schneider, Ashley
+S. Lewis, Baptiste Aubry, Bastiaan Spaargaren, Brent
+C. Tilford, Chrisilios Kyriakou, Christine M. O'Connor,
+Colin T. O. Brewer, Colleen V. Johnson, Corey D. Riley,
+David O. Tudor, Ekaterina Alexeyevna Kovalgina, Dedde
+Zeelenberg, Elsina T. Kromhout, Gina A. Barber, Graham
+S. Larson, Graham Charles Clague, lan M. Smale, James
+C.P. Waithman, James G. Doran, Jamie D. Doyle, Jerome
+A. van Zuijlen, John A. Pritchett, John F.M. Abbott, Juan
+Dagniau, Katarzyna Kopaczewska, Kenneth J. Krieg,
+Kimberly D. Woima, Kurt Rohner, Lawson A.W. Hunter,
+Lester C. Jager, Marie L. Jersak, Marilyn J. Schonberner,
+Marjorie Allo, Masaki Ogihara, Paul Harris, Quinn E. Wilson,
+R. Jeffrey Pendrel, Ray C. J. Riddoch, Rick L. Sumrall,
+Robert H. Henkhuzens, Rosalind L. C. Bynoe, Ryan A.
+Rueve, Simon R. Perchard, Theresa A. Roessel, Tiara Ltd.,
+Timothy J. Keating, USN (Ret.), Admiral, Tina O'Connor,
+TMF Management Limited, Trevor L. Norman, Wilhelmus G.
+Rieff, Yu Liang
+Cao Xinjian, Chen Ming, Chen Wei, Chen Zhaoguang,
+Cui Hanyun, Deng Jinhui, Ding Fang, Duan Chenggang,
+Fang Zhi, Gong Jiuhe, Gong Shaobo, Han Mei, Huang
+Chunlin, Jing Fengjiang, Kuang Likun, Leng Haoyu, Li Bo,
+Li Yong, Lin Yaosheng, Ling Fuhai, Liu Huan, Liu Jian, Liu
+Mingquan, Liu Song, Liu Xiangdong, Liu Xiaoxiang, Liu
+Yongjie, Liu Zaisheng, Lu Yongfeng, Ma Liwu, Ma Qiangui,
+Pang Jian, Qiu Zongjie, Ren Qi, Shen Yiming, Sheng Jianbo,
+Shi Hesheng, Tao Weixiang, Wang Shoushan, Wang Xin,
+Wang Yaohui, Wang Ying, Wang Zhizhong, Wu Guangqi,
+Wu Peikang, Xiang Hua, Xiao Zongwei, Xie Wensheng, Xie
+Yuhong, Xing Weiqi, Xu Keqiang, Yang Hua, Yu Jin, You
+Xuegang, Yuan Guangyu, Yue Jianghe, Zhang Bing, Zhang
+Fengjiu, Zhang Guohua, Zhao Shunqiang, CNOOC Limited,
+Zhong Hua, Zhou Hongbo
+The list of directors who have served on the boards of
+the subsidiaries of the Company included in the annual
+consolidated financial statements for the financial year
+ended 31 December 2017 during the year and up to the
+date of this report is as follows:
+In accordance with the Company's Articles of Association
+and pursuant to Appendix 14 to Listing Rules, Mr. Yang
+Hua, Mr. Wu Guangqi and Mr. Tse Hau Yin, Aloysius will
+retire at the forthcoming Annual General Meeting and, who
+being eligible, will offer themselves for re-election.
+Note 3: With effect from 18 April 2017, Mr. Yang Hua was re-
+designated from an Executive Director to a Non-executive
+Director of the Company and resigned as the Chief Executive
+Officer of the Company. He remains as the Chairman of the
+Board.
+...
+Report of the Directors
+Non-executive Directors
+CNOOC LIMITED Annual Report 2017
+(7,272,000)
+44,823,000
+(6,660,000)
+38,226,000
+7.43
+7.29
+25 May 2007 to 25 May 2017
+53,357,000
+25 May 2007
+(31,390,000)
+57
+in aggregate
+Other Employees
+12.22
+12.696
+20 May 2010 to 20 May 2020
+0
+(8,574,000)
+31,390,000
+29 May 2008
+31,566,000
+37,551,000
+44,783,000
+With effect from 18 April 2017, Mr. Yang Hua was re-designated from an Executive Director to a Non-executive Director of the Company and resigned as the Chief Executive Officer of the
+Company. He remains as the Chairman of the Board. Mr. Yuan Guangyu was appointed as the Chief Executive Officer of the Company and resigned as the President of the Company.
+Except for share options granted under the Pre-Global Offering Share Option Scheme, all share options granted are subject to a vesting schedule pursuant to which one third of the options
+granted vest on the first, second and third anniversaries of the date of grant, respectively, such that the options granted are fully vested on the third anniversary of the date of grant.
+(22,506,000) (35,104,000) 129,919,000
+187,529,000
+Total
+12.22
+12.696
+2005 Share Option Scheme.
+20 May 2010
+9.33
+9.93
+27 May 2009 to 27 May 2019
+27 May 2009
+14.20
+14.828
+20 May 2010 to 20 May 2020
+29 May 2008 to 29 May 2018
+For more information on employees and human resources,
+please refer to "Human Resources" in "Business Overview"
+section of this annual report.
+CHARGES ON ASSETS
+China
+Development
+9,515
+Exploration
+The Company has set up a recruitment system that is
+primarily market driven, and has adopted an appropriate
+remuneration structure.
+15,048
+6,205
+16,762
+7,978
+25,187
+Since 4 February 2001, the Company has adopted 4
+stock option plans that were applicable to directors, senior
+management members and other qualified beneficiaries
+and has granted options thereafter in accordance with each
+stock option plan.
+Year ended 31 December
+2016
+(RMB million)
+2015
+The following table sets forth the Company's actual capital
+expenditure on an accrual basis for the periods indicated.
+Capital Expenditure
+Management's Discussion and Analysis
+...
+At the end of 2017, our total interest-bearing outstanding
+debt was RMB132,250 million (US$19,565.9 million),
+compared to RMB150,476 million at the end of 2016. The
+decrease in debt in 2017 was primarily attributable to the
+repayment of financial notes and impact of changes in
+the exchange rate of the US dollar and RMB. Our gearing
+ratio, which is defined as interest-bearing debts divided by
+the sum of interest-bearing debts plus equity, was 25.8%,
+lower than that of 28.2% in 2016. The main reason was the
+decreased scale of interest-bearing debts.
+In 2017, the increase in net cash outflow from financing
+activities was mainly due to the repayment of bank loans
+of RMB13,052 million (US$1,931.0 million), repayment of
+financial notes of RMB8,869 million (US$1,312.1 million)
+and the cash outflow of the distribution of dividends of
+RMB16,448 million (US$2,433.4 million), partially offset by
+the proceeds of bank loans of RMB12,252 million (US$
+1,821.6 million).
+Cash used in financing activities
+In addition, our cash used in investing activities was also
+attributable to the purchase of other financial assets of
+RMB122,267 million (US$18,089.0 million) this year. Our
+cash generated from investing activities was mainly from
+the proceeds from the sales of other financial assets in the
+amount of RMB101,396 million (US$15,001.2 million), and
+the decrease in our time deposits with maturity over three
+months in the amount of RMB1,450 million (US$214.5
+million).
+2017
+CNOOC LIMITED Annual Report 2017
+See note 13 to the consolidated
+financial statements for information.
+We identified the determination of
+the recoverable amount of the oil and
+gas properties as a key audit matter
+due to the significant judgements
+involved in management's impairment
+assessment, such as determination
+of estimated future oil and gas
+prices, future production estimates,
+estimated future capital expenditures
+and operating expenses and discount
+rates.
+We identified the determination
+of the recoverable amount of the
+oil sands properties of Long Lake
+assets as a key audit matter due to
+the uncertainty of the related future
+operating plan.
+Determination of the recoverable
+amount of the oil sands
+properties of Long Lake assets
+as impacted by the uncertainty of
+the related future operating plan
+How our audit addressed the key audit matter
+Our procedures in relation to the realisability of deferred tax assets, particularly for
+those components which are making significant losses in recent years, included:
+Evaluating management's assessment on the realisability of the deferred tax
+assets by checking whether the key assumptions used to estimate future
+taxable profits were consistent with those used in management's impairment
+assessment on the recoverable amount of the oil and gas properties and those
+considered in the Group's business plans, where appropriate.
+Together with our internal tax specialists, assessing whether the periods over
+which the deferred tax assets are expected to be realised and other relevant
+factors considered by management in its assessment were supported by
+applicable tax regulations.
+Our procedures in relation to the determination of the recoverable amount of the oil
+sands properties of Long Lake assets included:
+Discussing with management to understand the development of the future
+operating plan for Long Lake assets and assessing management's current
+assumptions that the upgrader will be returned in service by considering
+the expenditures, technology and workforce required to resume the related
+operations.
+Evaluating the estimates used in determination of the recoverable amount of the
+oil sands properties.
+Involving our internal valuation specialists to evaluate management's calculation
+of the recoverable amount, including the reasonableness of the discount rates
+used by management.
+Assessing the impact of the future operating plan on the determination of the
+recoverable amount of the oil sands properties by considering the outcomes of
+different possible scenarios.
+68
+CNOOC LIMITED Annual Report 2017
+...
+See note 10 to the consolidated
+financial statements for information.
+We identified the realisability of
+deferred tax assets as a key audit
+matter due to significant judgements
+required in management assessment
+to estimate the future taxable profits
+and the periods over which the
+deferred tax assets are expected to
+be realised.
+Realisability of deferred tax assets
+See note 3 and note 13 to the
+consolidated financial statements for
+information.
+How our audit addressed the key audit matter
+Our procedures in relation to the determination of the recoverable amount of oil
+and gas properties included:
+Examining the methodology used in management's determination of the
+recoverable amount of oil and gas properties.
+Assessing the key assumptions and estimations used in the discounted
+cash flows in management's determination of the recoverable amount,
+including:
+Checking the estimated oil and gas prices by comparing with
+forecasted prices derived from third party oil price forecasts and
+existing gas contracts.
+27,480
+Assessing the production estimates, estimated capital expenditures
+and operating expenses by comparing with the prior year estimates,
+and with corresponding data from the reserve reports prepared by the
+reserve engineers.
+Involving our internal valuation specialists to evaluate management's
+calculation of the recoverable amount, including the reasonableness of the
+discount rates used by management.
+CNOOC LIMITED Annual Report 2017
+67
+Independent Auditor's Report
+KEY AUDIT MATTERS (continued)
+Key audit matter
+Evaluating the competence and objectivity of the reserve engineers
+and performing procedures to assess the reliability of data provided to
+external experts.
+Subtotal
+24,976
+21,253
+2016
+2017
+Change
+Our oil and gas sales, realized prices and sales volume in
+2017 are as follows:
+Revenues
+Our consolidated net profit increased significantly to
+RMB24,677 million (US$3,650.9 million) in 2017 from
+RMB637 million in 2016, primarily as a result of the
+increase in profitability due to higher international oil price
+environment, as well as the combined effects of increased
+reserve and reduced costs as a result of adoption of efficient
+measures by the Company.
+Consolidated net profit
+FINANCIAL RESULTS
+For details, please refer to “Business Overview" on page 8 to
+24 of the annual report.
+BUSINESS REVIEW
+operating environment is likely to remain challenging. To this
+end, the Company remains confident of its prospects going
+forward. We will further strengthen our operating strategies
+to meet our production and operational targets.
+Looking to 2018, the global economy will continue its slow
+recovery, and international oil prices will still be subject to
+many uncertainties amid a general rebound. The external
+As at 31 December 2017, the Company's basic and
+diluted earnings per share were RMB0.55 and RMB0.55,
+respectively. The board of directors has recommended
+the payment of a final dividend of HK$0.30 per share (tax
+inclusive).
+Amount
+The Company maintained a solid financial condition
+in 2017. Oil and gas sales were RMB151,888 million
+(US$22,471.3 million, with the exchange rates applicable
+for 2017 at 6.7592), representing an increase of 25.2%
+over the previous year. Net profit was RMB24,677 million
+(US$3,650.9 million), representing a significant increase over
+the previous year.
+Management's Discussion and Analysis
+61
+CNOOC LIMITED Annual Report 2017
+The U.S. government enacted comprehensive tax legislation
+in December 2017 and it took effect as of 1 January 2018.
+A one-time non cash deferred tax charge of RMB3,376
+million was recorded in 2017 for the impact of the reduction
+of federal corporate income tax rate from 35% to 21%. This
+tax rate reduction is expected to have positive impact to
+earnings in the longer term.
+International oil prices surged upward following a period of
+fluctuation and decline in the first half of 2017. Entering the
+second half of the year, as a result of major oil producers'
+effective implementation of their obligations under a
+production cut agreement, and an improvement in the
+demand for crude oil driven by global economic growth
+and geopolitical tensions in the Middle East, international
+oil prices fluctuated and picked up. In late November 2017,
+OPEC agreed to extend the production cut agreement to
+the end of 2018, meeting market expectations. In 2017,
+the Brent crude oil price averaged US$54.75 per barrel,
+representing a year-on-year increase of 21.3%.
+In 2017, the global economy continued its steady recovery.
+In the U.S., economic recovery momentum was strong, and
+the Federal Reserve raised interest rates three times during
+the year. The Eurozone economy also continued to improve.
+Emerging economies generally recorded rapid growth,
+but still faced adjustment and transformation pressures.
+In 2017, the Chinese economy was steady and moved
+in the right direction on the whole, with GDP growing by
+approximately 6.9%.
+2017 OVERVIEW
+In 2017, we continued our efforts to lower costs and
+enhance efficiency through innovation in technology
+and management. All-in cost decreased for the fourth
+consecutive year. Under low oil price environment, we
+attached more importance to cash flow management and
+maintained a healthy financial position.
+We will continue to maintain our prudent financial policy. As
+an essential part of our corporate culture, we continue to
+promote cost consciousness among both our management
+team and employees. Also, in our performance evaluation
+system, cost control has been one of the most important
+key performance indicators.
+Maintain a prudent financial policy
+We will continue to develop the natural gas market, and
+continue to explore and develop natural gas fields. In the
+event that we invest in businesses and geographic areas
+where we have limited experience and expertise, we
+plan to structure our investments in the form of alliances
+or partnerships with partners possessing the relevant
+experience and expertise.
+Develop natural gas business
+We increase our production primarily through the
+development of proved undeveloped reserves. As of 31
+December 2017, approximately 57.6% of our proved
+reserves were classified as proved undeveloped, which
+provides a solid resource base for maintaining stable
+production in the future.
+In 2017, the Company realized a net production of 470.2
+million BOE, representing a decrease of 1.4% over the
+previous year, which exceeded the annual production
+target. In terms of exploration, the Company made
+breakthroughs domestically and overseas, consolidating its
+resources base for sustainable development. New project
+construction progressed smoothly. All five new projects
+planned for 2017 have commenced production. HSE
+maintained a stable performance.
+As an upstream company specializing in the exploration,
+development, production and sales of oil and natural gas,
+we consider reserve and production growth as our top
+priorities. We plan to increase our reserves and production
+through drill bits and value-driven acquisitions. We will
+continue to concentrate our independent exploration efforts
+on major operating areas, especially offshore China. In the
+meantime, we will continue to cooperate with our partners
+through production sharing contracts to lower capital
+requirements and exploration risks.
+(%)
+151,888
+2.7%
+11.0
+410.5
+421.5
+Natural gas (bcf)
+(1.9%)
+(7.5)
+387.6
+380.1
+Crude and liquids (million barrels)
+(1.3%)
+(5.9)
+458.3
+Oil and gas sales (RMB million)
+452.4
+11.8%
+1,755
+14,877
+16,632
+Natural gas
+27.1%
+28,808
+106,448
+135,256
+Crude and liquids
+25.2%
+30,563
+121,325
+Sales volume (million BOE)*
+Realized prices
+Focus on reserve and production growth
+DEVELOPMENT STRATEGY
+64.44%
+64.44%
+shares
+28,772,727,273
+28,772,727,273
+28,772,727,268
+(ii) Overseas Oil & Gas Corporation, Ltd. ("OOGC")
+(iii) CNOOC
+(i) CNOOC (BVI) Limited
+Approximate
+percentage of
+total issued
+Ordinary
+shares held
+As at 31 December 2017, so far as was known to the Directors and chief executive of the Company, the persons, other than a
+Director or chief executive of the Company, who had an interest or a short position in the Shares and underlying Shares which
+would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO were as follows:
+SUBSTANTIAL SHAREHOLDERS' INTERESTS
+Save as disclosed above, as at 31 December 2017, none of the Directors and chief executive of the Company was interested
+in the equity or debt securities of the Company or any associated corporations (within the meaning of the SFO) which were
+required (i) to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of
+the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO);
+(ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code, to
+be notified to the Company and the Hong Kong Stock Exchange. All the interests held by the Directors and chief executive
+represent long positions.
+64.44%
+0.000%
+0.003%
+Approximate
+percentage of
+total issued
+shares
+Ordinary
+shares held
+Beneficial interest
+Beneficial interest
+Nature of interest
+Lawrence J. Lau
+Chiu Sung Hong
+Name of Director
+As at 31 December 2017, apart from holding personal interests in options to subscribe for shares in the Company granted
+under the share option schemes of the Company as disclosed in this annual report, the interests of each Director and chief
+executive of the Company in the equity or debt securities of the Company or any associated corporations (within the meaning
+of the Securities and Futures Ordinance ("SFO")) which were required (i) to be notified to the Company and the Hong Kong
+Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are
+taken or deemed to have under such provisions of the SFO); (ii) pursuant to section 352 of the SFO, to be entered in the register
+referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model
+Code"), to be notified to the Company and the Hong Kong Stock Exchange are as follows:
+DIRECTORS' INTERESTS
+Report of the Directors
+34,702
+1,150,000
+200,000
+As one of the largest independent oil and gas exploration
+and production companies, we mainly engage in the
+exploration, development, production and sales of oil and
+natural gas. The principal components of our strategy are as
+follows:
+Note: CNOOC (BVI) Limited is a direct wholly-owned subsidiary of OOGC, which is a direct wholly-owned subsidiary of CNOOC. Accordingly, CNOOC
+(BVI) Limited's interests are recorded as the interests of OOGC and CNOOC.
+CNOOC LIMITED Annual Report 2017 59
+The following discussion and analysis should be read
+in conjunction with the Chairman's Statement and the
+Business Overview section, as well as the Group's audited
+financial statements and the related notes.
+Management's Discussion and Analysis
+CNOOC LIMITED Annual Report 2017
+Hong Kong, 29 March 2018
+By Order of the Board
+YANG Hua
+Chairman
+In 2017, all votes of shareholders were taken by poll in the
+annual general meeting and extraordinary general meetings
+of the Company. Pursuant to the Rule 13.39(4), all votes
+of shareholders will be taken by poll except where the
+chairman, in good faith, decides to allow a resolution which
+relates purely to a procedural or administrative matter to be
+voted on by a show of hands.
+VOTING BY POLL
+As at the date of this report, the Directors confirmed
+that based on information that is publicly available to the
+Company and within the knowledge of the Directors, the
+Company had maintained sufficient amount of public float
+as required under the Listing Rules. As at the date of this
+report, based on publicly available information and within
+the Directors' knowledge, approximately 35.56% of the
+Company's total issued shares were held by the public.
+The total number of total issued shares of the Company
+is 44,647,455,984. The closing price of the share of the
+Company as at 29 December 2017 is HK$11.22 per share.
+SUFFICIENCY OF PUBLIC FLOAT
+Deloitte Touche Tohmatsu was appointed as the auditors
+of the Company for the year ended 31 December 2017
+and has audited the accompanying financial statements.
+A resolution to re-appoint Deloitte Touche Tohmatsu
+as auditors of the Company will be proposed at the
+forthcoming Annual General Meeting to be held on 31 May
+2018.
+Please refer to the Corporate Governance Report on pages
+25 to 43 of this annual report for details.
+AUDITORS
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+As at 31 December 2017, the Company was not involved in
+any material litigation or arbitration and no material litigation
+or arbitration were pending or threatened or made against
+the Company so far as the Company is aware.
+All the interests stated above represent long positions. As at 31 December 2017, save as disclosed above, the Directors and
+chief executive of the Company are not aware of any other person having interests or short positions (other than the Directors
+and chief executives of the Company) in the Shares and underlying Shares which would fall to be disclosed to the Company
+under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the
+nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member
+of the Group.
+MATERIAL LEGAL PROCEEDINGS
+EMOLUMENTS OF THE DIRECTORS, SENIOR
+MANAGEMENT AND THE FIVE HIGHEST PAID
+INDIVIDUALS
+Other than the service contracts of the Directors, the
+Company has not entered into any contract with any
+individual, firm or body corporate to manage or administer
+the whole or any substantial part of any business of the
+Company during the year.
+MANAGEMENT CONTRACTS
+Pursuant to the Company's Articles of Association, every
+Director or other officer of the Company shall be entitled to
+be indemnified out of the assets of the Company against all
+costs, charges, expenses, losses and liabilities which he/
+she may sustain or incur in or about the execution of the
+duties of his/her office or otherwise in relation thereto. The
+Company has arranged appropriate directors' and officers'
+liability insurance coverage for the Directors and officers of
+the Group during the year ended 31 December 2017.
+DIRECTORS' PERMITTED INDEMNITY
+PROVISION
+Save as disclosed in this annual report, as at 31 December
+2017 or during the year, none of the Directors or entities
+connected with the Directors was materially interested,
+either directly or indirectly, in any transaction, arrangement
+or contract which is significant in relation to the business of
+the Group to which the Company or any of its subsidiaries
+was a party.
+No Director (including those to be re-elected) has an
+unexpired service contract with the Company which is
+not determinable by the Company within one year without
+payment of compensation (other than normal statutory
+obligations).
+DIRECTORS' SERVICE CONTRACTS
+AND INTERESTS IN TRANSACTION,
+ARRANGEMENT AND CONTRACT OF
+SIGNIFICANCE
+Please refer to pages 44 to 51 of this annual report
+for information concerning the Directors and senior
+management of the Company.
+THE COMPANY
+DIRECTORS AND SENIOR MANAGEMENT OF
+Report of the Directors
+60
+Please refer to notes 8 and 9 to the consolidated financial
+statements on pages 94 to 96 of this annual report
+for details of the emoluments of the Directors, senior
+management and the five highest paid individuals of the
+Company.
+Crude and liquids (US$/barrel)
+Except deviation from the CG Code provisions A.2.1 and
+A.4.1, the Company has complied with the code provisions
+of the CG Code as set out in Appendix 14 of the Listing
+Rules throughout the year ended 31 December 2017.
+41.40
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
+as at 31 December 2017, and of its consolidated financial performance and its consolidated cash flows for the year then ended
+in accordance with International Financial Reporting Standards ("IFRSS") issued by the International Accounting Standards
+Board ("IASB") and Hong Kong Financial Reporting Standards ("HKFRSS") issued by the Hong Kong Institute of Certified Public
+Accountants ("HKICPA") and have been properly prepared in compliance with the Hong Kong Companies Ordinance.
+We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAS") issued by the HKICPA. Our
+responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated
+Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics
+for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code.
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
+KEY AUDIT MATTERS
+Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
+consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
+consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
+on these matters.
+66 CNOOC LIMITED Annual Report 2017
+...
+Independent Auditor's Report
+KEY AUDIT MATTERS (continued)
+Key audit matter
+Determination of the recoverable
+amount of the oil and gas
+properties
+In 2017, our capital expenditure payment (excluding
+acquisition) decreased 7.0% to RMB47,734 million
+(US$7,062.1 million) from 2016. Our development
+expenditures in 2017 were primarily related to the capital
+expenditure of OML130 project, deep-water Gulf of Mexico
+and shale oil and gas in U.S., as well as the expenses
+incurred for improving recovery factors of the oil and gas
+fields in production. The Company had no significant
+expenditure incurred for acquisition during the year.
+Cash used in investing activities
+Cash generated from operating activities
+The cash inflow from operating activities increased 30.0%
+to RMB94,734 million (US$14,015.6 million) in 2017 from
+RMB72,863 million in 2016, primarily attributable to the
+increase in oil and gas sales cash inflows caused by the
+increase in international oil price partially offset by the
+increase in the income tax expense for the current period.
+24,740
+(27.7%)
+(43,240)
+(4,626.4)
+(31,271)
+Used in financing activities
+130.4%
+(36,458)
+(27,953)
+(9,529.4)
+(64,411)
+Used in investing activities
+30.0%
+21,871
+72,863
+11,969
+14,015.6
+Overseas
+25,957
+OPINION
+TO THE SHAREHOLDERS OF CNOOC LIMITED
+(Incorporated in Hong Kong with limited liability)
+德勤
+Deloitte.
+Independent Auditor's Report
+....
+65
+CNOOC LIMITED Annual Report 2017
+As of 31 December 2017, the Company had 14,783
+employees in China, 4,019 employees overseas and 228
+contracted employees.
+Employees
+OTHERS
+Note: Capitalized interests for 2015, 2016 and 2017 were RMB1,385
+million, RMB1,430 million and RMB2,495 million, respectively.
+We have audited the consolidated financial statements of CNOOC Limited (the "Company") and its subsidiaries (collectively
+referred to as "the Group") set out on pages 71 to 127, which comprise the consolidated statement of financial position
+as at 31 December 2017, and the consolidated statement of profit or loss and other comprehensive income, consolidated
+statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the
+consolidated financial statements, including a summary of significant accounting policies.
+Development
+CONTINGENCIES
+Please refer to Note 32 to the Consolidated Financial
+Statements of this annual report.
+49,716
+48,733
+52.65
+65,860
+Total
+31,158
+Subtotal
+21,891
+3,085
+2,964
+5,201
+Exploration
+24,516
+Please refer to Note 36 to the Consolidated Financial
+Statements of this annual report.
+94,734
+BASIS FOR OPINION
+%
+11.25
+27.2%
+Natural gas (US$/mcf)
+5.84
+5.46
+Generated from operating activities
+0.38
+7.0%
+Taxes other than income tax
+Our operating expenses increased 4.6% to RMB24,282 million
+(US$3,592.4 million) in 2017 from RMB23,211 million in 2016,
+the operating expenses per BOE increased 6.0% to RMB53.6
+(US$7.93) per BOE in 2017 from RMB50.6 (US$7.62) per
+BOE in 2016. Operating expenses per BOE offshore China
+increased 11.6% to RMB49.2 (US$7.29) per BOE in 2017 from
+RMB44.1 (US$ 6.65) per BOE in 2016, mainly attributable to
+the increase in workload as the result of the Company adopting
+optimisation measures to increase production efficiency, as
+well as prices of refined oil, chemicals and other materials
+rose with oil price. Overseas operating expenses per BOE
+decreased 2.7% to RMB62.4 (US$9.23) per BOE in 2017 from
+RMB64.1 (US$9.66) per BOE in 2016.
+Operating expenses
+Management's Discussion and Analysis
+CNOOC LIMITED Annual Report 2017
+62
+Net production (million BOE)
+due to higher realised oil prices in 2017. The increase in
+natural gas sales was primarily due to the gradual release
+of production capacity of high-priced gas fields arising from
+natural gas demand growth in China, which pulled up the
+gas price and sales volume simultaneously.
+Excluding our interest in equity-accounted investees.
+Overseas
+China
+1.0%
+1.6
+165.8
+167.4
+(2.7%)
+(8.3)
+311.1
+302.8
+(1.4%)
+(6.7)
+476.9
+In 2017, our net production was 470.2 million BOE
+(including our interest in equity-accounted investees),
+representing an decrease of 1.4% from 476.9 million BOE in
+2016. The increase in crude and liquids sales was primarily
+Our taxes other than income tax increased 3.9% to
+RMB7,210 million (US$1,066.7 million) in 2017 from
+RMB6,941 million in 2016, mainly due to the increase in oil
+and gas sales.
+470.2
+Our depreciation, depletion and amortisation, excluding
+the dismantlement-related depreciation, depletion and
+amortization, decreased 9.6% to RMB60,874 million
+(US$9,006.1 million) in 2017 from RMB67,338 million in
+2016. Our average depreciation, depletion and amortization
+per BOE, excluding the dismantlement-related depreciation,
+depletion and amortization, decreased 8.4% to RMB134.4
+(US$19.89) per BOE in 2017 from RMB146.8 (US$22.12)
+per BOE in 2016, primarily due to the increase of reserve
+in producing oil and gas fields by taking effective measures
+to improve production performance and recovery rate as
+well as the decrease in amortization rate resulting from the
+recognized impairment of oil and gas assets in 2016.
+Selling and administrative expenses
+Our selling and administrative expenses increased 5.7%
+to RMB6,861 million (US$1,015.1million) in 2017 from
+RMB6,493 million in 2016. Our selling and administrative
+expenses per BOE increased 7.1% to RMB15.15 (US$2.24)
+per BOE in 2017 from RMB14.15 (US$2.13) per BOE in
+2016, due to the increase in transportation costs in Canada
+resulting from increased production and sales volume.
+The dismantlement-related depreciation, depletion and
+amortization costs decreased 75.6% to RMB383 million
+(US$56.6 million) in 2017 from RMB1,569 million in 2016.
+Our average dismantling costs per BOE decreased 75.1%
+to RMB0.85 (US$0.13) per BOE in 2017 from RMB3.42
+(US$0.52) per BOE in 2016, primarily due to the decrease of
+the present value of asset retirement obligations brought by
+the increase of interest rate in the China market.
+Depreciation, depletion and amortization
+Our depreciation, depletion and amortization decreased
+11.1% to RMB 61,257 million (US$9,062.8 million) in 2017
+from RMB68,907 million in 2016.
+Our exploration expenses decreased 6.5% to RMB6,881
+million (US$1,018.0 million) in 2017 from RMB7,359 million
+in 2016, mainly because of less costs of uncertain wells from
+previous years being written off according to subsequent
+reserve evaluation as well as the decrease in write-off of
+expired leases in North American.
+Finance costs/Interest income
+Our finance costs decreased 19.2% to RMB5,044 million
+(US$746.2 million) in 2017 from RMB6,246 million in 2016,
+primarily due to the increased capitalized interest cost
+arising from the increase in the scale of oil and gas assets
+under construction. Our interest income decreased 27.5%
+to RMB653 million (US$96.6 million) in 2017 from RMB901
+million in 2016, primarily due to the decreased proportion of
+deposits with higher interest rates.
+Exchange gains/losses, net
+Our net exchange gains changed to RMB356 million
+(US$52.7 million) in 2017, while accounted net exchange
+losses of RMB790 million in 2016, primarily as a result of
+the increase in exchange gains arising from RMB fluctuation
+against the US dollars and Hong Kong dollars.
+Investment income
+Our investment income decreased 13.2% to RMB2,409
+million (US$356.4 million) in 2017 from RMB2,774 million in
+2016, primarily attributable to the decreased proportion of
+corporate wealth management products with higher interest
+rates.
+CNOOC LIMITED Annual Report 2017 63
+64
+Management's Discussion and Analysis
+Our impairment and provision decreased 25.0% to
+RMB9, 130 million (US$1,350.8 million) in 2017 from
+RMB12,171 million in 2016, mainly due to the decrease of
+oil and gas assets impairment. The impairment loss of oil
+and gas assets recognized in 2017 mainly related to oil and
+gas fields located in China, Africa and North America, and
+it was primarily due to the revision of the oil and gas price
+forecast and revision of reserve. In 2016, certain oil and
+gas properties located in North America, Europe and Africa
+were impaired, which was reflected by the revision of the oil
+price forecast and the adjustment in operating plan for the
+oil sand assets in Canada. Please refer to Note 13 to the
+Consolidated Financial Statement of this annual report.
+Share of profits/losses of associates and a joint
+venture
+Our share of profits of associates and a joint venture
+changed to RMB855 million (US$126.5 million) in 2017,
+while in 2016 we shared losses of RMB76 million, primarily
+attributable to losses from the sale of shares of Northern
+Cross (Yukon) Limited located in Canada in 2016.
+Income tax expense/credit
+Exploration expenses
+Our income tax expense changed to RMB11,680 million
+(US$1,728.0 million) in 2017, while accounted income tax
+credit of RMB5,912 million in 2016, mainly because income
+tax expense increased as Company's profitability increased
+in 2017, in addition, the U.S. government decreased the
+federal corporate income tax rate from 35% to 21% and
+resulted in a one-time write-off of net deferred tax asset and
+increased income tax expense.
+Capital Resources and Liquidity
+Overview
+Our primary source of cash during 2017 was cash flows from operating activities. We used cash primarily to fund capital
+expenditure and dividends. The changes are as follows:
+2017
+RMB million
+US$ million
+2016
+RMB million RMB million
+Change
+Impairment and provision
+2017
+Other income
+Notes
+REVENUE
+Year ended 31 December 2017
+(All amounts expressed in millions of Renminbi, except per share data)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+...
+CNOOC LIMITED Annual Report 2017
+29 March 2018
+Hong Kong
+Certified Public Accountants
+Deloitte Touche Tohmatsu
+From the matters communicated with those charged with governance, we determine those matters that were of most
+significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
+We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or
+when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because
+the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
+communication.
+We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
+regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
+to bear on our independence, and where applicable, related safeguards.
+We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
+audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
+within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction,
+supervision and performance of the group audit. We remain solely responsible for our audit opinion.
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
+disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
+manner that achieves fair presentation.
+concern.
+Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
+on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
+to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such
+disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
+date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
+(continued)
+Independent Auditor's Report
+70
+CNOOC LIMITED Annual Report 2017 69
+Oil and gas sales
+Marketing revenues
+The engagement partner on the audit resulting in the independent auditor's report is Li Kin Fai.
+71
+Details of the dividends proposed and paid for the year are disclosed in note 12 to the consolidated financial statements.
+Derivative financial assets
+Equity investments
+13
+16
+3467
+395,868
+Trade receivables
+432,465
+15,070
+16,644
+4,067
+3,695
+2016
+17
+14
+Obtain an understanding of internal control relevant to the audit 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 Group's internal
+control.
+Inventories and supplies
+Total non-current assets
+CNOOC LIMITED Annual Report 2017
+72
+Consolidated Statement of Financial Position
+31 December 2017
+(All amounts expressed in millions of Renminbi)
+Notes
+CURRENT ASSETS
+2017
+NON-CURRENT ASSETS
+Property, plant and equipment
+Intangible assets
+Investments in associates
+Investment in a joint venture
+Equity investments
+Deferred tax assets
+Other non-current assets
+2016
+4
+Share of profits/(losses) of associates
+121,325
+OWNERS OF THE PARENT
+PROFIT FOR THE YEAR ATTRIBUTABLE TO
+(5,275)
+5,912
+(11,680)
+10(i)
+36,357
+6
+574
+78
+533
+553
+(609)
+302
+(2,412)
+901
+(6,246)
+(790)
+2,774
+653
+(5,044)
+356
+2,409
+166
+19
+Income tax (expense)/credit
+OTHER COMPREHENSIVE (EXPENSE)/INCOME
+Items that may be subsequently reclassified to profit or loss
+Exchange differences on translation of foreign operations
+Share of other comprehensive income/(expense) of associates
+Other items that will not be reclassified to profit or loss
+Fair value change on equity investments designated
+as at fair value through other comprehensive income
+Others
+OTHER COMPREHENSIVE (EXPENSE)/INCOME
+FOR THE YEAR, NET OF TAX
+TOTAL COMPREHENSIVE INCOME FOR THE YEAR
+ATTRIBUTABLE TO OWNERS OF THE PARENT
+25,079
+0.55
+11
+11
+Diluted (RMB Yuan)
+Basic (RMB Yuan)
+10,483
+14,104
+9,846
+(10,573)
+PROFIT/(LOSS) BEFORE TAX
+12
+(461)
+(542)
+18(ii)
+(127)
+10,422
+(10,121)
+36
+637
+24,677
+EARNINGS PER SHARE ATTRIBUTABLE TO
+OWNERS OF THE PARENT
+54
+151,888
+Non-operating income, net
+Investment income
+(61,257)
+6
+Depreciation, depletion and amortisation
+(7,359)
+(6,881)
+Exploration expenses
+(6,941)
+(7,210)
+10(ii)
+Taxes other than income tax
+(23,211)
+(24,282)
+Operating expenses
+EXPENSES
+146,490
+186,390
+4,855
+20,310
+28,907
+5,595
+(68,907)
+Special oil gain levy
+10(iii)
+(55)
+Exchange gains/(losses), net
+Finance costs
+37,050
+Interest income
+PROFIT/(LOSS) FROM OPERATING ACTIVITIES
+(148,902)
+(149,340)
+(4,802)
+(6,021)
+Share of profit of a joint venture
+Others
+(6,861)
+Selling and administrative expenses
+(19,018)
+(27,643)
+Crude oil and product purchases
+(12,171)
+(9,130)
+6,13
+Impairment and provision
+(6,493)
+26,300
+7,422
+3,540
+Capital expenditure
+(47,734)
+(51,347)
+Additions to investments in associates
+(161)
+(221)
+Decrease in time deposits with maturity over three months
+1,450
+1,180
+Dividends received from an associate
+116
+135
+Dividends received from a joint venture
+243
+Interest received
+666
+1,010
+Investment income received
+1,821
+Purchase of other financial assets
+(122,267)
+CASH FLOWS FROM INVESTING ACTIVITIES
+Purchase of equity investments
+72,863
+(9,274)
+70,000*
+4,104*
+264,598*
+10,830*
+379,975
+These reserve accounts constitute the consolidated reserves of approximately RMB336,894 million (2016: RMB339,290 million) in the consolidated
+statement of financial position.
+During the year ended 31 December 2017, CNOOC China Limited (the "CNOOC China"), the Company's wholly-owned subsidiary, appropriated
+RMB50,000 million of the general reserve fund.
+CNOOC LIMITED Annual Report 2017
+73
+Consolidated Statement of Cash Flows
+Year ended 31 December 2017
+(All amounts expressed in millions of Renminbi)
+CASH FLOWS FROM OPERATING ACTIVITIES
+Cash generated from operations
+Income taxes paid
+Net cash flows from operating activities
+Notes
+2017
+2016
+31
+110,625
+82,137
+(15,891)
+94,734
+(12,638)*
+(51)
+Proceeds from sale of other financial assets
+(23,412)
+(16,448)
+(14,153)
+(5,154)
+(5,102)
+(31,271)
+(43,240)
+(948)
+13,735
+1,670
+11,867
+(215)
+198
+CASH AND CASH EQUIVALENTS AT END OF YEAR
+22
+12,572
+13,735
+74
+CNOOC LIMITED Annual Report 2017
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(13,052)
+2,013
+(62,900)
+(63)
+4,293
+(4,866)
+101,396
+81,675
+Proceeds from disposal of property, plant and equipment
+110
+532
+Proceeds from disposal of an associate
+33
+Net cash flows used in investing activities
+(64,411)
+(27,953)
+CASH FLOWS FROM FINANCING ACTIVITIES
+Repayment of guaranteed notes
+Proceeds from bank loans
+Repayment of bank loans
+Dividends paid
+Interest paid
+Net cash flows used in financing activities
+NET (DECREASE)/INCREASE IN CASH
+AND CASH EQUIVALENTS
+Cash and cash equivalents at beginning of year
+Effect of foreign exchange rate changes, net
+(8,869)
+12,252
+1.
+43,081
+(50,000)
+43,081
+Balance at 1 January 2016
+Total
+Proposed
+final dividend
+Retained
+earnings
+Other
+reserves
+reserves
+distributable
+translation
+reserve
+capital
+Issued
+non-
+Cumulative
+Statutory and
+Attributable to owners of the parent
+(All amounts expressed in millions of Renminbi)
+Year ended 31 December 2017
+Independent Auditor's Report
+OTHER INFORMATION
+The directors of the Company are responsible for the other information. The other information comprises the information
+included in the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
+assurance conclusion thereon.
+(12,939)
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
+in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
+knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we
+conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
+to report in this regard.
+20,000
+321,370
+(4,613)
+2016 interim dividend
+(9,540)
+(9,397)
+(143)
+2015 final dividend
+10,483
+637
+(576)
+10,422
+Total comprehensive income/(expense)
+9,846
+(576)
+10,422
+net of income tax
+Other comprehensive income/(expense),
+637
+637
+Profit for the year
+386,041
+9,397
+5,132
+Balance at 31 December 2017
+RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE
+CONSOLIDATED FINANCIAL STATEMENTS
+In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as
+a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
+unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
+from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to
+you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do
+not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance
+is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAS will always detect a
+material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
+in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
+consolidated financial statements.
+Other comprehensive expense,
+net of income tax
+Total comprehensive (expense)/income
+(10,121)
+(10,121)
+(452)
+(10,573)
+(452)
+24,677
+14,104
+2016 final dividend
+Consolidated Statement of Changes in Equity
+(9,096)
+(8,913)
+2017 interim dividend
+(7,587)
+(7,587)
+Proposed 2017 final dividend
+(10,830)
+10,830
+Appropriation to reserve**
+50,000
+24,677
+The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true
+and fair view in accordance with IFRSS issued by the IASB, HKFRSS issued by the HKICPA and the Hong Kong Companies
+Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated
+financial statements that are free from material misstatement, whether due to fraud or error.
+24,677
+382,371
+As part of an audit in accordance with HKSAS, we exercise professional judgment and maintain professional skepticism
+throughout the audit. We also:
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
+error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
+appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
+higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
+or the override of internal control.
+(4,613)
+2016 final dividend
+(9,096)
+9,096
+Balance at 31 December 2016
+43,081
+(2,517)*
+20,000*
+4,556*
+308,155*
+9,096*
+382,371
+Balance at 1 January 2017
+43,081
+(2,517)
+20,000
+4,556
+308,155
+9,096
+Profit for the year
+2.1
+2.2
+CORPORATE INFORMATION
+EQUITY
+NET ASSETS
+Total non-current liabilities
+Other non-current liabilities
+Deferred tax liabilities
+Provision for dismantlement
+Loans and borrowings
+NON-CURRENT LIABILITIES
+570,591
+555,807
+TOTAL ASSETS LESS CURRENT LIABILITIES
+54,955
+77,426
+NET CURRENT ASSETS
+67,090
+61,412
+Total current liabilities
+6,775
+6,701
+14,866
+14,106
+Equity attributable to owners of the parent
+Issued capital
+24
+Reserves
+YUAN Guangyu
+Director
+28
+27
+28
+382,371
+379,975
+188,220
+175,832
+1,326
+1,278
+5,670
+3,303
+10(i)
+50,426
+52,893
+28
+26
+130,798
+118,358
+25
+XU Keqiang
+Director
+CNOOC LIMITED Annual Report 2017
+TOTAL EQUITY
+43,081
+336,894
+426
+25,345
+52,889
+74,344
+18, 33
+Other financial assets
+15
+14
+18, 33
+428
+33
+23,289
+8,709
+7,354
+20,787
+20
+23
+21
+515,636
+478,381
+24,844
+25,509
+9,248
+19
+4,266
+Other current assets
+33
+8,387
+Time deposits with maturity over three months
+26,713
+19,678
+13,892
+25
+2232
+Other payables and accrued liabilities
+Taxes payable
+Derivative financial liabilities
+Trade and accrued payables
+Loans and borrowings
+CURRENT LIABILITIES
+122,045
+138,838
+Total current assets
+13,735
+12,572
+22
+16,830
+15,380
+22
+22
+Cash and cash equivalents
+6,150
+43,081
+339,290
+379,975
+382,371
+Applying IFRS 9/HKFRS 9 Financial Instruments with
+IFRS 4/HKFRS 4 Insurance Contracts¹
+Prepayment Features with Negative Compensation²
+Sale or Contribution of Assets between an Investor and its
+Associate or Joint Venture³
+Plan Amendment, Curtailment or Settlement²
+Long-term Interests in Associates and Joint Ventures²
+As part of the Annual Improvements to IFRS Standards/
+HKFRSS 2014-2016 Cycle¹
+Transfers of Investment Property¹
+Annual Improvements to IFRS Standards/HKFRs 2015-2017 Cycle²
+Effective for annual periods beginning on or after 1 January 2018, except for the 2009 version of IFRS 9/HKFRS 9, which the Group adopted in
+advance
+2.
+Effective for annual periods beginning on or after 1 January 2019
+3.
+Effective for annual periods beginning on or after a date to be determined
+4.
+Effective for annual periods beginning on or after 1 January 2021
+CNOOC LIMITED Annual Report 2017
+75
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2.2
+CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)
+Classification and Measurement of Share-based Payment Transactions¹
+IFRS 15/HKFRS 15 Revenue from Contracts with Customers
+Uncertainty over Income Tax Treatments²
+Insurance Contracts4
+CNOOC Limited (the “Company”) was incorporated in the Hong Kong Special Administrative Region ("Hong Kong") of the
+People's Republic of China (the "PRC") on 20 August 1999 to hold the interests in certain entities thereby creating a group
+comprising the Company and its subsidiaries (hereinafter collectively referred to as the "Group"). During the year, the Group was
+principally engaged in the exploration, development, production and sale of crude oil, natural gas and other petroleum products.
+The registered office address of the Company is 65/F, Bank of China Tower, 1 Garden Road, Hong Kong.
+In the opinion of the directors of the Company (the “Directors”), the parent and the ultimate holding company of the Company is
+China National Offshore Oil Corporation ("CNOOC"), a company established in the PRC. In November 2017, CNOOC changed
+its registered company name which is registered in Chinese pursuant to relevant laws and regulations of China to “
+油集團有限公司”
+STATEMENT OF COMPLIANCE
+These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSS") issued
+by the International Accounting Standards Board (the "IASB"), Hong Kong Financial Reporting Standards ("HKFRSS") issued by
+the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), the Rules Governing the Listing of Securities on The
+Stock Exchange of Hong Kong Limited (the “Listing Rules") and the Hong Kong Companies Ordinance (Cap. 622). A summary
+of the significant accounting policies adopted by the Group is set out below.
+CHANGES IN ACCOUNTING POLICY AND DISCLOSURES
+The IASB has issued a number of new and revised IFRSS that are first effective for the current accounting year commencing
+1 January 2017 or later but available for early adoption. The equivalent new and revised HKFRSS consequently issued
+by the HKICPA have the same effective dates as those issued by the IASB and are in all material aspects identical to the
+pronouncements issued by the IASB.
+The accounting policies adopted are consistent with those of the year ended 31 December 2016, except for the first time
+adoption of the amendments to IFRSS/HKFRSS effective for the Group's financial year beginning on 1 January 2017. The
+adoption of the amendments had no material impact on the accounting policies, the disclosures or the amounts recognised in
+the consolidated financial statements of the Group.
+The Group has not applied the following new and revised IFRSS/HKFRSS, which may be relevant to the Group and have been
+issued but are not yet effective, in these consolidated financial statements:
+IFRS 9/HKFRS 9
+IFRS 15/HKFRS 15
+IFRS 16/HKFRS 16
+IFRS 17/HKFRS 17
+IFRIC 22/HK(IFRIC)-Int 22
+IFRIC 23/HK(IFRIC)-Int 23
+Amendments to IFRS 2/HKFRS 2
+Amendments to IFRS 4/HKFRS 4
+Amendments to IFRS 9/HKFRS 9
+Amendments to IFRS 10/HKFRS 10
+and IAS 28/HKAS 28
+Amendments to IAS 19
+Amendments to IAS 28/HKAS 28
+Amendments to IAS 28/HKAS 28
+Amendments to IAS 40/HKAS 40
+Amendments to IFRSS/HKFRSS
+1.
+Financial Instruments¹
+Revenue from Contracts with Customers and the related Amendments¹
+Leases²
+Foreign Currency Transactions and Advance Consideration1
+IFRS 15/HKFRS 15 Revenue from Contracts with Customers provides a single model for accounting for revenue arising from
+contracts with customers, focusing on the identification and satisfaction of performance obligations, and is effective for annual
+periods beginning on or after 1 January 2018. IFRS 15/HKFRS 15 will supersede IAS 18/HKAS 18 Revenue.
+The Company expects to adopt the new revenue standard as of 1 January 2018 using the modified retrospective transition
+method. Based on our assessment, the Company does not expect the implementation of the standard to have a material effect
+on its consolidated financial statements.
+IFRS 16/HKFRS 16 Leases
+Associates
+Based on the Group's ownership percentage (considering its direct ownership as well as potentially exercisable or convertible
+shares) and other contractual rights, the Group has significant influence over its associates, rather than the power to control.
+The Group's investments in associates are stated in the consolidated statement of financial position at the Group's share of
+net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any
+dissimilar accounting policies that may exist. Under the equity method, an investment in an associate is initially recognised in the
+consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss
+and other comprehensive income of the associate. Unrealised gains and losses resulting from transactions between the Group
+and its associates are eliminated to the extent of the Group's investments in the associates, except where unrealised losses
+provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associates is included as
+part of the Group's investments in associates and is not individually tested for impairment.
+CNOOC LIMITED Annual Report 2017
+77
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Joint arrangements
+Certain of the Group's activities are conducted through joint arrangements. Joint arrangements are classified as either a joint
+operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the
+arrangement.
+Joint control
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
+relevant activities require unanimous consent of the parties sharing control.
+Joint operations
+Some arrangements have been assessed by the Group as joint operations as both parties to the contract are responsible for the
+assets and obligations in proportion to their respective interest, whether or not the arrangement is structured through a separate
+vehicle. This evaluation applies to both the Group's interests in production sharing arrangements and certain joint operation.
+The Group entered into numerous production sharing arrangements or similar agreements in China and overseas countries. The
+Group's participating interest may vary in each arrangement. The Group, as one of the title owners under certain exploration
+and/or production licenses or permits, is required to bear exploration (with some exceptions in China), development and
+operating costs together with other co-owners based on each owner's participating interest. Once production occurs, a certain
+percentage of the annual production or revenue is first distributed to the local government, which, in most cases, with the nature
+of royalty and other taxes or expenses, and the rest of the annual production or revenue is allocated among the co-owners.
+The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance
+with the IFRSS/HKFRSS applicable to the particular assets, liabilities, revenues and expenses.
+Joint venture
+A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
+of the arrangement.
+The Group's investments in joint ventures are stated in the consolidated statement of financial position at the Group's share
+of net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any
+dissimilar accounting policies that may exist. Under the equity method, an investment in a joint venture is initially recognised in
+the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or
+loss and other comprehensive income of the joint venture. Where the profit sharing ratios are different to the Group's equity
+interest, the share of post-acquisition results of the joint ventures is determined based on the agreed profit sharing ratio.
+Unrealised gains and losses resulting from transactions between the Group and its joint ventures are eliminated to the extent of
+the Group's investments in the joint ventures, except where unrealised losses provide evidence of an impairment of the asset
+transferred. Goodwill arising from the acquisition of joint ventures is included as part of the Group's investments in joint ventures
+and is not individually tested for impairment.
+78 CNOOC LIMITED Annual Report 2017
+Subsidiaries are all those entities over which the Group has power over the investee such that the Group is able to direct the
+relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its
+power over the investee to affect the amount of the investor's returns.
+Subsidiaries
+Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation
+within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the
+operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based
+on the relative value of the operation disposed of and the portion of the cash-generating unit retained.
+After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment
+annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the
+purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of
+the Group's cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the
+combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.
+Impairment is determined by assessing the recoverable amount of the exploration and production ("E&P") segment, using value
+in use, to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units)
+is less than the carrying amount, an impairment loss on goodwill is recognised. An impairment loss recognised for goodwill is
+not reversed in a subsequent period.
+IFRS 16/HKFRS 16, which upon the effective date will supersede IAS 17/HKAS 17 Leases, introduces a single lessee
+accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months,
+unless the underlying asset is of low value. Specifically, under IFRS 16/HKFRS 16, a lessee is required to recognise a right-
+of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make
+lease payments. Accordingly, a lessee should recognise depreciation of the right-of-use asset and interest on the lease liability,
+and also classify cash payments of the lease liability into a principal portion and an interest portion and present them in the
+consolidated statement of cash flows. Also, the right-of-use asset and the lease liability are initially measured on a present value
+basis. The measurement includes non-cancellable lease payments and also includes payments to be made in optional periods
+if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.
+This accounting treatment is significantly different from the lessee accounting for leases that are classified as operating leases
+under IAS 17/HKAS 17.
+In respect of the lessor accounting, IFRS 16/HKFRS 16 substantially carries forward the lessor accounting requirements in IAS
+17/HKAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for
+these two types of leases differently.
+The Group is in the process of assessing the impact of application of IFRS 16/HKFRS 16. For the moment, it is not practicable
+to provide a reasonable estimate of the effect of the application of IFRS 16/HKFRS 16 until the Group completes a detail review.
+The Group anticipates that the application of other new and revised IFRSS/HKFRSS that have been issued but are not yet
+effective will have no material effect on the Group's consolidated financial statements.
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+Basis of preparation
+These consolidated financial statements have been prepared under the historical cost convention, except for as detailed in the
+accounting policies notes hereafter. These consolidated financial statements are presented in Renminbi ("RMB") and all values
+are rounded to the nearest million except when otherwise indicated.
+Basis of consolidation
+The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended
+31 December 2017.
+18, 33
+10(i)
+The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and
+continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared
+for the same reporting period as the parent company, using consistent accounting policies.
+All intra-group balances, income and expenses and unrealised gains and losses and dividends resulting from intra-group
+transactions are eliminated in full.
+76 CNOOC LIMITED Annual Report 2017
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Business combinations and goodwill
+Business combinations are accounted for using the acquisition method. The consideration transferred is measured at
+acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities
+assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for
+control of the acquiree. For each business combination, the Group elects whether it measures the non-controlling interests in
+the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. All other components of
+non-controlling interests are measured at fair value. Acquisition related costs incurred are included in profit or loss.
+When the Group acquires a business, it assesses the financial assets acquired and liabilities assumed for appropriate
+classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as
+at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
+If the business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to
+fair value at the acquisition date through profit or loss.
+Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent
+consideration classified as an asset or liability is measured at subsequent reporting dates in accordance with IFRS 9/HKFRS 9
+(2009) or IAS 39/HKAS 39, with the corresponding gain or loss being recognised in profit or loss. Contingent consideration that
+is classified as equity is not remeasured and subsequent settlement is accounted for within equity.
+Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised
+for non-controlling interests and any fair value of the Group's previously held equity interests in the acquiree over the identifiable
+net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net
+assets of the business acquired, the difference is recognised in profit or loss as a gain on bargain purchase.
+The results of subsidiaries are included in the Company's statement of profit or loss and other comprehensive income to the
+extent of dividends received and receivable. The Company's interests in subsidiaries are stated at cost less any impairment
+losses.
+183
+0.01
+0.01
+0.55
+General
+Financial assets at amortised cost
+(a)
+All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on
+the classification of the financial assets.
+Financial assets
+Expenditure (other than that relating to oil and gas properties discussed above) incurred on projects to develop new products
+is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so
+that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
+future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure
+during the development. Product development expenditure which does not meet these criteria is expensed when incurred.
+All research costs are expensed as incurred.
+Research and development costs
+Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul
+costs. Where an asset or part of an asset that was separately depreciated and is replaced, and it is probable that future
+economic benefits associated with the item will flow to the Group, the replacement expenditure is capitalised. Where part of the
+asset was not separately considered as a component, the replacement value is used to estimate the carrying amount of the
+replaced assets which is immediately written off. All other maintenance costs are expensed as incurred.
+Major maintenance and repairs
+The intangible assets regarding software have been amortised on the straight-line basis over their respective useful lives. The
+intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts and drilling rig contracts are amortised over the life of the contracts on the
+straight-line basis. The intangible assets related to the seismic data usage rights are amortised over the estimated useful life of
+the seismic data.
+Debt instruments and hybrid contracts that meet the following conditions are subsequently measured at amortised cost
+less impairment loss:
+The intangible assets of the Group comprise software, gas processing rights of the NWS Project, marketing transportation
+and storage contracts, drilling rig contracts and seismic data usage rights. Intangible assets with finite lives are carried at
+cost, less accumulated amortisation and accumulated impairment losses. The cost of intangible assets acquired in a business
+combination is the fair value as at the date of acquisition. Intangible assets with finite lives except for gas processing rights, are
+amortised on the straight-line basis over the useful economic life and assessed for impairment whenever there is an indication
+that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a
+finite useful life are reviewed at least at each financial year end.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+80 CNOOC LIMITED Annual Report 2017
+Any gains and losses on disposals of property, plant and equipment (calculated as the difference between the net disposal
+proceeds and the carrying amount of the asset) are recognised in profit or loss.
+Residual values, useful lives and the depreciation method are reviewed and, adjusted if appropriate, at each reporting date.
+Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a
+recoverable basis among the parts and each part is depreciated separately.
+Vehicles, office equipment and others are stated at cost less accumulated depreciation and impairment losses. The
+straight-line method is adopted to depreciate the cost less any estimated residual value of these assets over their
+expected useful lives. The useful lives of vehicles, office equipment and other assets are in line with their beneficial
+periods.
+Vehicles, office equipment and others
+(b)
+Capitalised acquisition costs of proved properties are depreciated on a unit-of-production method over the total proved
+reserves of the relevant oil and gas properties.
+Intangible assets (other than goodwill)
+Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves.
+Common facilities that are built specifically to service production directly attributed to designated oil and gas properties
+are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis.
+Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the
+straight-line method over their estimated useful lives. Costs associated with significant development projects are not
+depreciated until commercial production commences and the reserves related to those costs are excluded from the
+calculation of depreciation.
+•
+the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of
+principal and interest on the principal amount outstanding.
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+82 CNOOC LIMITED Annual Report 2017
+An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 33.
+For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.
+Such techniques may include using recent arm's length market transactions; reference to the current fair value of another
+instrument that is substantially the same; a discounted cash flow analysis or other valuation models.
+The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to
+quoted market prices or dealer price quotations, without any deduction for transaction costs.
+Fair value
+Dividends on these investments in equity instruments are recognised in profit or loss when the Group's right to receive the
+dividends is established in accordance with IAS 18/HKAS 18 Revenue, unless the dividends clearly represent a recovery
+of part of the cost of the investment.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they
+are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive
+income and accumulated in the other reserves. The cumulative gain or loss will not be reclassified to profit or loss on
+disposal of the investments.
+On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate
+investments in equity instruments as at FVTOCI. The Group has investments in certain equity instruments (publicly traded
+or non-publicly traded), the purpose of which are not held for trading, but held for medium or long-term strategic purpose.
+Therefore, those investments in equity securities are designated as at FVTOCI.
+Financial assets at fair value through other comprehensive income (FVTOCI)
+Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising
+on remeasurement recognised in profit or loss.
+the asset is held within a business model whose objective is to hold assets in order to collect contractual cash
+flows; and
+Debt instruments that do not meet the amortised cost criteria (see (a) above) are measured at FVTPL. In addition, debt
+instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt
+instrument may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces
+a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains
+and losses on them on different bases.
+Investments in equity instruments are classified as at FVTPL, unless the Group designates such investment that is not
+held for trading as at FVTOCI on initial recognition.
+(c)
+(b) Financial assets at fair value through profit or loss (FVTPL)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Financial assets (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2017 81
+The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest
+income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
+(including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and
+other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to
+the net carrying amount on initial recognition. Interest income for debt instruments measured subsequently at amortised
+cost is recognised in profit or loss in accordance with the policies set out for "Revenue Recognition" below.
+All other financial assets are subsequently measured at fair value.
+A financial asset is held for trading if it has been acquired principally for the purpose of selling it in the near term or it is a
+derivative that is not designated and effective as a hedging instrument.
+3.
+The Group carries exploratory well costs as an asset when the well has found a sufficient quantity of reserves to justify
+its completion as a producing well and where the Group is making sufficient progress assessing the reserves and the
+economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expenses.
+Exploratory wells that discover potentially economic reserves in areas where major capital expenditure will be required
+before production would begin and when the major capital expenditure depends upon the successful completion of
+further exploratory work remain capitalised and are reviewed periodically for impairment.
+Oil and gas properties
+(b)
+is a member of the key management personnel of the Group or of a parent of the Group;
+has significant influence over the Group; or
+(ii)
+has control or joint control of the Group;
+(i)
+the party is a person or a close member of that person's family and that person
+(a)
+A party is considered to be related to the Group if:
+Related parties
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+the party is an entity where any of the following conditions applies:
+3.
+Significant accounting judgements, estimates and assumptions
+The preparation of the consolidated financial statements in accordance with IFRSS and HKFRSS requires management to make
+estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial
+statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are
+continuously evaluated and are based on management's experience and other factors, including expectations of future events
+that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
+In the process of applying the Group's accounting policies, the Directors have made the following judgements, estimates and
+assumptions, which have the most significant effect on the amounts recognised in the consolidated financial statements.
+(a)
+(b)
+Reserve base
+Oil and gas properties are depreciated on a unit-of-production basis at a rate calculated by reference to proved reserves.
+Commercial reserves are determined using estimates of oil in place, recovery factors and future oil prices, the latter having
+an impact on the proportion of the gross reserves which are attributable to the host government under the terms of the
+production sharing contracts. The level of estimated commercial reserves is also a key determinant in assessing whether
+the carrying value of any of the Group's oil and gas properties has been impaired.
+Pursuant to the oil and gas reserve estimation requirements under US Securities and Exchange Commission's rules, the
+Group uses the average, first-day-of-the-month oil price during the 12-month period before the ending date of the period
+covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+Carrying value of oil and gas properties
+The calculation of the unit-of-production rate for oil and gas properties amortisation could be impacted to the extent
+that actual production in the future is different from current forecast production based on proved reserves. This would
+generally result from significant changes in any of the factors or assumptions used in estimating reserves. These factors
+could include changes in proved reserves, the effect on proved reserves of differences between actual oil and gas prices
+and oil and gas price assumptions and unforeseen operational issues.
+88
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+For oil and gas properties, the successful efforts method of accounting is adopted. The Group capitalises the initial
+acquisition costs of oil and gas properties. Impairment of initial acquisition costs is recognised based on exploratory
+experience and management judgement and charged to profit and loss as exploration expenses. Upon discovery
+of commercial reserves, acquisition costs are transferred to proved properties. The costs of drilling and equipping
+successful exploratory wells, all development expenditures on construction, installation or completion of infrastructure
+facilities such as platforms, pipelines, processing plants and the drilling of development wells and the building of
+enhanced recovery facilities, including those renewals and betterments that extend the economic lives of the assets, and
+the related borrowing costs are capitalised. The costs of unsuccessful exploratory wells and all other exploration costs
+are expensed as incurred.
+(i)
+(ii)
+(a)
+Property, plant and equipment comprise oil and gas properties, and vehicles and office equipment and others.
+Property, plant and equipment
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+79
+A contingent asset is not recognised in the financial statements, but is disclosed when an inflow of economic benefits is
+probable.
+CNOOC LIMITED Annual Report 2017
+the entity and the Group are members of the same group;
+An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised
+impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated.
+A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the
+estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that
+would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in
+prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.
+Impairment of non-financial assets other than goodwill
+a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel
+of the entity (or of a parent of the entity).
+the entity is controlled or jointly controlled by a person identified in (a); and
+the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to
+the Group;
+(vii)
+(vi)
+(v)
+one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
+(iv)
+the entity and the Group are joint ventures of the same third party;
+one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the
+other entity);
+Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories,
+deferred tax assets, financial assets and goodwill), the asset's recoverable amount is estimated. An asset's recoverable amount
+is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for
+an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or
+groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
+An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value
+in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
+market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or
+loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Impairment of financial assets
+The Group assesses at each reporting date whether there is any objective evidence that a financial asset, other than those at
+FVTPL and FVTOCI, or a group of financial assets may be impaired.
+(e) Interest income
+Dividend income is recognised when the Group's right to receive payment is established.
+Dividend income
+(d)
+Other income mainly represents project management fees charged to foreign partners, handling fees charged to
+customers, the sales of diluents to third parties and gains from disposal of oil and gas properties and is recognised
+when the services have been rendered or the properties have been disposed of. Reimbursement of insurance claims is
+recognised when the compensation becomes receivable.
+Other income
+(c)
+Marketing revenues principally represent the sales of oil and gas from the foreign partners under the production sharing
+contracts and revenues from the trading of oil and gas through the Company's subsidiaries. The cost of the oil and
+gas sold is included in "Crude oil and product purchases" in the consolidated statement of profit or loss and other
+comprehensive income. In addition, the Group's marketing activities in North America involves entering into contracts to
+purchase and sell crude oil, natural gas and other energy commodities, and use derivative contracts, including futures,
+forwards, swaps and options for hedging and trading purposes (collectively derivative contracts). Any change in the fair
+value is also included in marketing revenue.
+Marketing revenues
+The Group has entered into gas sale contracts with customers, which contain take-or-pay clauses. Under these
+contracts, the Group makes a long term supply commitment in return for a commitment from the buyer to pay for
+minimum quantities, whether or not it takes delivery. These commitments contain protective (force majeure) and
+adjustment provisions. If a buyer has a right to get a "make up" delivery at a later date, revenue recognition is deferred. If
+no such option exists according to the contract terms, revenue is recognised when the take-or-pay penalty is triggered.
+Oil and gas lifted and sold by the Group above or below the Group's participating interests in the production sharing
+contracts results in overlifts and underlifts. The Group records these transactions in accordance with the entitlement
+method under which overlifts are recorded as liabilities and underlifts are recorded as assets at year-end oil prices.
+Settlement will be in kind or in cash when the liftings are equalised or in cash when production ceases.
+Oil and gas sales represent the invoiced value of sales of oil and gas attributable to the interests of the Group, net
+of royalties, obligations to governments and other mineral interest owners. Revenue from the sale of oil and gas is
+recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the
+customer. Revenue from the production of oil and gas in which the Group has a joint interest with other producers is
+recognised based on the Group's working interest and the terms of the relevant production sharing contracts. Differences
+between production sold and the Group's share of production are not significant.
+(b)
+Oil and gas sales
+(a)
+Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be
+measured reliably, on the following bases:
+Revenue recognition
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2017 85
+Interest income is recognised as it accrues using the effective interest method.
+The Group presents taxes collected from customers in the consolidated statement of profit or loss and other comprehensive
+income on a net basis.
+86 CNOOC LIMITED Annual Report 2017
+3.
+Prepaid land lease payments under operating leases in China are initially stated at cost and subsequently amortised on the
+straight-line basis over the lease terms.
+Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as
+operating leases. Where the Group is the lessee, rentals payable under operating leases are charged to profit or loss on the
+straight-line basis over the lease terms.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Operating leases
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2017 87
+The functional currencies of certain entities within the Group are currencies other than RMB. As at the end of the reporting
+period, the assets and liabilities of these entities are translated into the presentation currency of the Group at the exchange rates
+ruling at the reporting date, and their statement of profit or loss and other comprehensive income are translated into RMB at
+the weighted average exchange rates for the year. The resulting exchange differences are included in the cumulative translation
+reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular
+foreign operation is recognised in profit or loss.
+These consolidated financial statements are presented in RMB. Each entity in the Group maintains its books and records in
+its own functional currency. Foreign currency transactions recorded by the entities of the Group are initially recorded using
+their respective exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign
+currencies are retranslated at the exchange rates ruling at the end of the reporting period. All differences arising on settlement
+or translation of monetary items are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a
+foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured
+at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The
+gain or loss arising on retranslation of a non-monetary item is treated consistently with the recognition of the gain or loss on
+change in fair value of the item.
+Foreign currencies
+Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
+current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
+Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing
+costs directly relating to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial
+period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other
+borrowing costs are expensed in the period in which they are incurred.
+The Group participates in defined contribution plans in accordance with local laws and regulations for full-time employees in
+the PRC and other countries in which it operates. The Group's contributions to these defined contribution plans are charged to
+profit or loss in the year to which they relate.
+Retirement and termination benefits
+The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.
+No equity-settled award was cancelled or modified during the years ended 31 December 2017 and 2016.
+No expense is recognised for awards that do not ultimately vest for the Group.
+The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
+the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at
+the end of the each reporting period until the vesting date reflects the extent to which the vesting period has expired and the
+Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to profit or loss for a
+period represents the movement in the cumulative expense recognised as at the beginning and end of that period.
+The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are
+granted. The fair value is determined by using the Black-Scholes option pricing model, further details of which are given in note
+27.
+Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby
+employees render services as consideration for equity instruments ("equity-settled transactions").
+Share-based payment transactions
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Borrowing costs
+The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
+probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
+deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient
+taxable profit and taxable temporary differences will be available to allow all or part of the deferred tax asset to be utilised.
+Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
+realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
+reporting date.
+in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
+will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be
+utilised.
+• when the deferred tax assets relating to the deductible temporary differences arise from the initial recognition of an
+asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
+accounting profit nor taxable profit or loss; and
+Derecognition of financial liabilities
+A financial guarantee contract is recognised initially at its fair value including transaction costs that are directly attributable
+to the issue of the guarantee. Subsequent to initial recognition, the liability is measured at the higher of the best estimate of
+the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative
+amortisation.
+Financial guarantee contracts
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2017
+Notes to Consolidated Financial Statements
+84
+83
+CNOOC LIMITED Annual Report 2017
+Financial liabilities are derecognised when the obligations under the liabilities are discharged, cancelled, or have expired.
+Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation
+process.
+Financial liabilities at amortised cost (including interest-bearing loans and borrowings)
+When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
+evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor
+retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise
+the transferred asset to the extent of the Group's continuing involvement. In that case, the Group also recognises an associated
+liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the
+Group has retained.
+the Group has transferred its rights to receive cash flows from the asset, or the Group retains the contractual rights to
+receive the cash flows from the asset, but has assumed an obligation to pay the received cash flows in full without material
+delay to a third party under a "pass-through" arrangement; and either (a) has transferred substantially all the risks and
+rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has
+no control of the asset.
+(ii)
+The contractual rights to receive cash flows from the asset have expired; or
+(i)
+A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised
+when:
+Derecognition of financial assets
+If, in a subsequent year, the amount of the estimated impairment loss decreases and the decrease can be related objectively to
+an event occurring after the impairment was recognised, the previously recognised impairment loss is reduced either directly or
+by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent
+that the carrying value of the asset does not exceed amortised cost at the reversal date.
+If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the
+amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated
+future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective
+interest rate (the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly
+or through the use of an allowance account. The amount of the impairment loss is recognised in profit or loss.
+In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the
+probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological, market,
+economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all of the
+amounts due under the original terms of an invoice.
+Financial liabilities including trade and accrued payables, other payables and accrued liabilities, and interest-bearing loans
+and borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at
+amortised cost, using the effective interest method. The related interest expense is recognised in profit or loss.
+CNOOC LIMITED Annual Report 2017
+When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
+existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability
+and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.
+Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position, if and
+only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
+basis, or to realise the assets and settle the liabilities simultaneously.
+Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any
+unused tax losses to the extent that it is probable that taxable profit and taxable temporary differences will be available against
+which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised,
+except:
+in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the
+temporary differences will not reverse in the foreseeable future.
+when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
+combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
+•
+•
+Deferred tax liabilities are recognised for all taxable temporary differences, except:
+Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the reporting date between the
+tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
+Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
+or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
+substantially enacted, by the reporting date, in the countries where the Group operates and generates taxable income.
+Income tax comprises current and deferred tax. Income tax is recognised in the consolidated statement of profit or loss and
+other comprehensive income, either as an expense as it relates to operating activities or as a component of the applicable
+categories of other comprehensive income or expense.
+Income tax
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Offsetting of financial instruments
+3.
+CNOOC LIMITED Annual Report 2017
+Dismantlement liability is recognised when the Group has a present legal or constructive obligation as a result of the past
+events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of
+the amount of the obligation can be made. A corresponding amount equivalent to the provision is also recognised as part
+of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of dismantlement,
+discounted to its present value using a current pre-tax rate that reflects, where appropriate, the risks specific to the
+liability. Changes in the estimated timing of dismantlement or dismantlement cost estimates are dealt with prospectively
+by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The
+unwinding of the discount on the dismantlement provision is included as a finance cost.
+Dismantlement liability
+A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is
+probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be
+made of the amount of the obligation. When the effect of discounting is material, the amount recognised for a provision
+is the present value at the reporting date of the future expenditures expected to be required to settle the obligation. The
+increase in the discounted present value amount arising from the passage of time is included in profit or loss.
+(b)
+(a)
+Provisions
+Cash and cash equivalents comprise cash at banks and on hand and short term deposits with an original maturity of three
+months or less.
+Cash and cash equivalents
+Inventories primarily consist of oil and supplies, including items for repairs and maintenance of oil and gas properties. Inventories
+are stated at the lower of cost and net realisable value. Costs of inventories and supplies represent purchase or production cost
+of goods and are determined on a weighted average basis.
+Inventories and supplies
+Notes to Consolidated Financial Statements
+31 December 2017
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Contingencies
+A contingent liability is disclosed when the existence of an obligation will only be confirmed by future events or when the amount
+of the obligation cannot be measured reliably.
+209.3
+908.3
+884.4
+Europe
+152.5
+103.8
+81.8
+89.2
+112.3
+South America
+1.8
+1.6
+1.5
+79.7
+79.5
+Total
+4,185.0
+4,016.0
+3,583.4
+4,474.1
+4,590.0
+Net proved reserves in equity
+300.5
+method investees
+835.2
+Canada
+245.0
+225.4
+203.3
+Oceania
+106.0
+90.8
+77.4
+69.0
+63.6
+Africa
+142.5
+166.6
+138.0
+136.9
+113.7
+North America (excluding Canada)
+275.9
+284.8
+318.6
+352.3
+328.6
+820.2
+208.9
+Crude and liquids (million barrels)
+200.1
+2015
+2016
+2017
+2018
+Others
+Reserve life (years)
+Reserve life (years) (including
+305.7
+278.7
+381.4
+480.8
+Bohai
+5,910.7
+5,843.7
+5,354.6
+4,756.8
+China
+gas reserves (bcf)
+Net proved natural
+3,298.3
+3,199.3
+2014
+200.4
+Year ended 31 December
+4 CNOOC LIMITED Annual Report 2018
+195.3
+244.8
+258.1
+Natural gas (bcf)
+537.3
+576.9
+574.0
+706.8
+661.5
+Subtotal (million BOE)
+293.0
+299.5
+294.2
+366.7
+372.2
+Total**
+4,478.0
+4,315.5
+3,877.6
+4,840.8
+4,962.1
+Operating Summary
+2,315.9
+199.4
+1,785.4
+845.8
+952.4
+885.0
+841.6
+Oceania
+455.7
+389.2
+333.5
+297.2
+279.5
+North America (excluding Canada)
+403.9
+275.2
+349.6
+421.5
+390.9
+Canada
+233.0
+119.3
+24.2
+0.2
+861.2
+Europe
+Asia (excluding China)
+1,632.6
+2,318.1
+3,132.6
+3,896.8
+3,880.1
+3,715.6
+Eastern South China Sea
+1,029.6
+951.6
+854.9
+970.5
+903.7
+East China Sea
+928.3
+889.0
+813.3
+754.4
+735.1
+Overseas
+1,974.0
+1,638.3
+1,642.4
+1,519.0
+Asia (excluding China)
+20.2
+6.9
+818.8
+844.1
+845.8
+Eastern South China Sea
+523.5
+515.6
+505.5
+533.7
+6,107.8
+753.4
+599.2
+East China Sea
+172.7
+164.2
+146.2
+134.2
+130.0
+Overseas
+1,698.3
+1,691.7
+1,162.7
+1,860.8
+672.6
+8.8
+598.7
+1,229.7
+4.8
+6.7
+Subtotal
+6,730.8
+6,992.9
+7,486.1
+7,543.3
+7,626.8
+Total net proved reserves
+(million BOE)
+China
+2,486.8
+2,324.3
+2,420.7
+2,613.3
+2,804.6
+Bohai
+1,191.8
+971.8
+950.2
+1,101.4
+Western South China Sea
+2,830.2
+3,039.8
+Subtotal
+1,184,977
+1,358,022
+1,302,922
+1,288,128
+58,080
+1,301,438
+CNOOC LIMITED Annual Report 2018
+3
+Operating Summary
+Year ended 31 December
+2014
+2015
+2016
+2017
+2018
+Reserves at year end**
+Net proved crude and liquids
+reserves (million barrels)
+China
+1,691.6
+1,430.6
+1,445.7
+Total (BOE/day)
+1,627.3
+47,355
+50,357
+1,110
+926
+929
+3,066
+Total
+1,137,337
+1,307,664
+1,253,643
+260.3
+1,243,357
+Net production in equity
+method investees
+Crude and liquids (barrels/day)
+Natural gas (mmcf/day)
+23,510
+140.2
+24,588
+149.6
+22,592
+155.0
+22,144
+146.4
+28,159
+173.7
+Subtotal (BOE/day)
+47,640
+49,280
+1,058
+Bohai
+908.3
+1,571.9
+1,515.1
+Asia (excluding China)
+47.4
+59.8
+77.3
+69.9
+54.1
+Oceania
+16.6
+14.5
+12.0
+10.7
+8.8
+Africa
+142.5
+166.6
+138.0
+136.9
+113.7
+North America (excluding Canada)
+870.2
+1,111.7
+1,399.6
+Overseas***
+903.8
+1,050.4
+1,783.2
+1,104.1
+Western South China Sea
+210.0
+149.3
+168.3
+196.5
+223.0
+Eastern South China Sea
+351.9
+357.0
+363.1
+371.9
+448.6
+East China Sea
+18.0
+16.1
+10.6
+8.5
+7.5
+1,348.2
+South America
+76,615
+100,046
+1,278.9
+Total net production (BOE/day)
+China
+735,533
+884,346
+848,322
+827,941*
+845,171*
+Bohai
+426,913
+500,719
+477,380
+458,473
+460,822
+Western South China Sea
+138,972
+143,676
+144,835
+142,870
+154,248
+Eastern South China Sea
+1,154.2
+163,970
+1,121.2
+1,189.9
+79.5
+79.7
+1.5
+1.6
+1.8
+South America
+111.2
+88.4
+80.6
+102.3
+149.1
+Europe
+884.4
+904.3
+300.5
+815.3
+781.4
+Canada
+263.4
+282.1
+Subtotal
+1,214.0
+229,679
+213,835
+212,895
+76,838
+83,677
+80,297
+73,625
+59,844
+North America (excluding Canada)
+68,396
+76,915
+69,290
+68,507
+74,184
+Canada
+67,770
+58,115
+48,448
+64,167
+69,783
+Europe
+96,370
+110,842
+104,473
+Africa
+26,034
+22,598
+26,107
+216,877
+East China Sea
+5,678
+10,271
+12,273
+13,016
+11,580
+Overseas
+401,804
+423,319
+239.5
+405,320
+398,187
+Asia (excluding China)
+65,280
+70,987
+75,780
+82,958
+88,662
+Oceania
+26,092
+21,673
+412,832
+1,240,773
+ODE CNOOC LIMITED
+25.8
+148 Company Information
+2
+Financial Summary
+(All amounts expressed in millions of RMB)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income (Audited)
+Year ended 31 December
+2014
+2015
+2016
+2017
+2018
+147 Glossary
+Total revenues
+171,437
+146,490
+Total expenses
+(193,719)
+(153,981)
+(148,902)
+186,390
+(149,340)
+226,963
+(146,724)
+(Finance costs)/interest income, net
+(3,701)
+274,634
+(5,245)
+141 Notice of Annual General Meeting
+Notes to Consolidated Financial Statements
+128 Supplementary Information on Oil and Gas
+126
+297
+10.5
+10.3
+16
+10.1
+9.9
+7.8
+8.4
+10.1
+Producing Activities (Unaudited)
+65
+Reserve replacement ratio (%)
+8.7
+10.4
+equity method investees)
+Consolidated Statement of Profit or Loss and
+Other Comprehensive Income
+Consolidated Statement of Financial Position
+73 Consolidated Statement of Changes in Equity
+Consolidated Statement of Cash Flows
+2275
+74
+111
+8.1
+(5,345)
+(4,241)
+60,199
+20,246
+637
+24,677
+52,688
+Consolidated Statement of Financial Position (Audited)
+As at 31 December
+2014
+2015
+2016
+Profit for the year
+2017
+Current assets
+140,708
+140,211
+122,045
+138,838
+Property, plant and equipment
+463,222
+454,141
+432,465
+395,868
+2018
+(4,391)
+(22,489)
+5,912
+Share of profits/(losses) of
+associates and a joint venture
+1,006
+1,903
+(76)
+855
+(5,187)
+Investment income
+2,684
+2,398
+(11,680)
+2,774
+3,685
+Profit/(loss) before tax
+82,513
+17,130
+(5,275)
+36,357
+75,177
+Income tax (expense)/credit
+17.6
+3,116
+2,409
+190,082
+407,337
+Reserve replacement ratio (%,
+112
+18
+19
+Risk Management and Internal Control System
+Risk Factors
+Health, Safety and Environmental Protection
+25
+Corporate Citizen
+25
+Human Resources
+28
+Corporate Governance Report
+Research and Development
+47
+54
+Report of the Directors
+63
+Management's Discussion and Analysis
+67
+Independent Auditors' Report
+71
+8 CNOOC LIMITED Annual Report 2018
+After years of hard work, we have established our presence
+in more than 20 countries and regions. Our overseas assets
+account for over 50% of the Company's total assets. With
+its diversified portfolio of high-quality assets, the Company
+is an active participant in a number of world-class oil and
+gas projects and is regarded as a leading industry player.
+In its PSC operations, China National Offshore Oil
+Corporation ("CNOOC"), the Company's controlling
+shareholder, has the exclusive right to explore and develop
+oil and natural gas in offshore China in cooperation with
+foreign partners through PSCs. CNOOC has transferred
+to the Company all its rights and obligations in regard to
+the PSCs (except those relating to its management and
+regulatory function as a state-owned company), including
+new PSCs that will be signed in the future.
+Directors and Senior Management
+In its independent operations, the Company has been
+adding to its reserves and production mainly through
+independent exploration and development in offshore
+China. At the end of 2018, approximately 85% of the
+Company's net proved reserves and approximately 78%
+of its net production in offshore China were derived from
+independent projects.
+Sales and Marketing
+Engineering Construction, Development and Production
+中國海洋石油有限公司
+NYSE: CEO, SEHK: 00883, TSX: CNU
+2018
+ANNUAL REPORT
+Company Profile
+CNOOC Limited (the "Company", together with its subsidiaries, the "Group" or "we"), incorporated
+in the Hong Kong Special Administration Region ("Hong Kong") in August 1999, was listed on the
+New York Stock Exchange (code: CEO) and The Stock Exchange of Hong Kong Limited (code:
+00883) on 27 and 28 February 2001, respectively. The Company was admitted as a constituent
+stock of the Hang Seng Index in July 2001. The Company's American Depositary Receipts ("ADRS")
+was listed on the Toronto Stock Exchange (code: CNU) on 18 September 2013.
+The Group is the largest producer of offshore crude oil and natural gas in China and one of the
+largest independent oil and gas exploration and production companies in the world. The Group
+mainly engages in exploration, development, production and sale of crude oil and natural gas.
+The Group's core operation areas are Bohai, Western South China Sea, Eastern South China Sea
+and East China Sea in offshore China. Overseas, the Group has oil and gas assets in Asia, Africa,
+North America, South America, Oceania and Europe.
+As at 31 December 2018, the Group owned net proved reserves of approximately 4.96 billion BOE,
+and its average daily net production was 1,301,438 BOE (unless otherwise stated, all amounts of
+reserve and production in this report include our interests in equity method investees). The Group
+had total assets of approximately RMB678.8 billion.
+Content
+Regional Overview
+236 8 8 TO222224
+Operating Summary
+Chairman's Statement
+Business Overview
+Overview
+10
+Exploration
+11
+13
+17
+18
+Financial Summary
+including equity method investees)
+In offshore China, the Company engages in oil and natural
+gas exploration, development and production in Bohai,
+Western and Eastern South China Sea, and the East China
+Sea, either independently or in cooperation with foreign
+partners through production sharing contracts ("PSCs"). As
+of the end of 2018, approximately 56.5% of the Company's
+net proved reserves and approximately 64.9% of its net
+production were derived from offshore China.
+OVERVIEW
+Chairman's
+Statement
+Chairman
+Yang Hua
+5
+CNOOC LIMITED Annual Report 2018
+Includes other production from onshore China, which was approximately 688 BOE/day in 2017 and 1,644 BOE/day in 2018, respectively.
+Approximately 52%, 62%, 60%, 65% and 69%, respectively, of our net proved reserve estimates in 2014, 2015, 2016, 2017 and 2018 were
+made by the Company's internal evaluation staff and the remaining were made by the independent third party consultants. Our reserve data was
+prepared in accordance with the SEC's final rules on "Modernization of Oil and Gas Reporting", which became effective as of 1 January 2010.
+Includes 749.9 million barrels of synthetic oil and 31.4 million barrels of bitumen in 2014; 815.3 million barrels of synthetic oil in 2015; 300.5 million
+barrels of synthetic oil in 2016; 785.9 million barrels of synthetic oil and 118.4 million barrels of bitumen in 2017; 796.3 million barrels of synthetic
+oil and 88.1 million barrels of bitumen in 2018.
+6.41
+67.22
+5.84
+52.65
+"❝ Looking ahead, CNOOC Limited
+5.46
+51.27
+6.39
+96.04
+6.44
+Natural gas (US$/mcf)
+Crude oil (US$/barrel)
+Average realized price
+126
+305
+8
+67
+20
+41.40
+CNOOC Limited is an upstream company specializing in oil
+and natural gas exploration, development and production.
+It is the dominant oil and natural gas producer in offshore
+China, and in terms of reserves and production, is one of
+the largest independent oil and natural gas exploration and
+production companies in the world. As of the end of 2018,
+the Company had net proved reserves of approximately
+4.96 billion BOE (including approximately 0.37 billion BOE
+in its equity method investees). In 2018, the Company
+achieved a total net oil and gas production of 1,301,438
+BOE per day (including net oil and gas production of
+approximately 58,080 BOE per day in its equity method
+investees).
+will continue to adhere to low-
+carbon development strategies:
+vigorously develop our natural
+gas business and actively explore
+opportunities of renewable energy
+such as offshore wind power.
+"
+Yuan Guangyu
+CEO
+BUSINESS
+OVERVIEW
+7
+CNOOC LIMITED Annual Report 2018
+Hong Kong, 21 March 2019
+Yang Hua
+Chairman
+Only those who are dedicated can go far, and only those
+who have an inquisitive mind can innovate. When the new
+dawn emerges from the eastern horizon, CNOOC Limited
+has already set sail on a new journey, leading the way
+to overcome difficulties, meet challenges, and chart the
+brightest passage for the future of the Company.
+In 2018, Mr. Liu Jian resigned as the Vice Chairman and a
+Non-executive Director of the Company. Mr. Wu Guangqi
+resigned as a Non-executive Director and Mr. Wang
+Dongjin was appointed as the Vice Chairman and a Non-
+executive Director of the Company. On behalf of the Board
+of Directors, I would like to express my gratitude to Mr.
+Liu and Mr. Wu for their contributions to the Company's
+development during their tenure and welcome Mr. Wang to
+the Board of Directors.
+At the same time, CNOOC Limited will always make
+health, safety and environmental protection its top priority
+and actively fulfil its social responsibilities. As the scale of
+production continues to increase, our occupational safety
+record maintained at a high level while ensuring production
+safety remains an important part of our corporate culture.
+Moreover, we have always been a responsible corporate
+citizen and have endeavoured to giving back to the society
+with solid actions as demonstrated by our strong presence
+in many areas, including medical care, marine rescue and
+marine development. In 2018, CNOOC Limited ranked sixth
+in Forbes' Global 2000 list of the World's Best Employers. It
+is the only energy company and the only Chinese company
+among the top 10 entries, reflecting a wide recognition of
+the Company by our employees and the society.
+Looking ahead, CNOOC Limited will continue to adhere
+to low-carbon development strategies: vigorously develop
+our natural gas business and actively explore opportunities
+of renewable energy such as offshore wind power. This is
+not only a new requirement of the construction of "Beautiful
+China", but is also an integral part of CNOOC Limited's
+development strategy. As we have entered the digital era,
+ensuring a successful digital transformation is an important
+requirement for each and every enterprise. Applying new
+technologies such as big data, cloud computing, and
+artificial intelligence to cultivate new kinetic energy will help
+to break bottlenecks that we have not been able to crack
+for many years. We will work hard to turn challenges into
+opportunities and turn every incoming storm into a driving
+force to propel us forward.
+Applying new technologies such
+as big data, cloud computing, and
+artificial intelligence to cultivate
+new kinetic energy will help to
+break bottlenecks that we have not
+been able to crack for many years.
+We used to be proud of being an offshore "special economic
+zone". Today, we are at a critical moment as we are facing
+more challenges when we ascend on our path towards
+the further development of the Company. We have faced
+many challenges during the course of our development
+over the past three decades and we have dealt with them
+by maintaining high quality development and resolving
+problems with effective reforms. We will continue to do so in
+the future.
+Chairman's Statement
+CNOOC LIMITED Annual Report 2018
+6
+It's our responsibility and inherent dynamics to provide
+energy for the development of society. It has been our
+primary goal to expand reserves and production. Our net
+production jumped from less than 300,000 BOE per day
+when we were listed in 2001 to approximately 1.3 million
+BOE per day in 2018. Net proved reserves increased
+from 1.8 billion BOE to 4.96 billion BOE and total assets
+increased from RMB44.3 billion to RMB678.8 billion. The
+Company's scope of operation and scale of assets also
+expanded steadily, and our overall strength resulted in
+healthy growth across the oil price cycles.
+History nurtures those who are determined, progressive,
+and committed to fight against adversity. China National
+Offshore Oil Corporation, our parent company, was
+established and has flourished during the period of China's
+Reform and Opening. As a sustainable energy supplier and
+shareholder value creator, CNOOC Limited inherited the
+powerful traits of its parent company to forge forward.
+In 2018, CNOOC Limited's profitability further enhanced.
+The Company's oil and gas sales revenue amounted to
+RMB185.9 billion, with the net profit reaching RMB52.7
+billion. In order to share our remarkable results with our
+shareholders, the Board of Directors recommended the
+payment of a final dividend of HK$0.40 (tax inclusive) per
+share for 2018.
+The past year for CNOOC Limited was both a period of
+pioneering and innovative development and a year of
+growth and prosperity. In 2018, we successfully achieved
+our production targets, with our net oil and gas production
+reaching 475 million barrels of oil equivalent (BOE). In terms
+of exploration, 17 commercial discoveries were made and
+17 successful appraisals of oil and gas structures were
+achieved. In offshore China, multiple high-quality mid-
+to-large size oil and gas fields, including Bozhong 19-6
+and Bozhong 29-6, were successfully appraised. Going
+forward, Bozhong 19-6 gas field is expected to play an
+important role in ensuring a clean energy supply in the
+Bohai Rim Region. In overseas, 12 discoveries in total were
+made in the Stabroek block in Guyana. CNOOC Limited's
+reserve replacement ratio reached 126% and its reserve life
+improved to 10.5 years in 2018. These further strengthened
+the Company's resource foundation for sustainable
+development in the future.
+The global economy faced strong headwinds during
+2018, with international oil prices fluctuating and falling
+sharply after a rebound. However, facing a variety of
+uncertainties, CNOOC Limited continued to focus on its
+own development, expanded its oil and gas reserves and
+production at a steady pace, strengthened its cost control
+and achieved remarkable results.
+History cruises through magnificent waves, the tide of times
+surges endlessly. The year of 2018 was an exceptional
+twelve months for CNOOC Limited, and we are ready to
+seize key opportunities in 2019.
+Dear shareholders,
+The rapid pace of our growth over the years has won
+numerous acclaims. We will, however, continue to ensure
+that the increase in production volume would not affect
+our pursuit of high quality development. As a daring and
+pioneering Company, CNOOC Limited launched the
+"Year of Quality and Efficiency" program in early 2014,
+which focuses on cost control through technological and
+management innovation. Five years later, with the support
+of all the employees, our efforts from the programme
+have yielded positive results. In 2018, we achieved cost
+reduction for the fifth consecutive year, with all-in cost of
+US$30.39 per BOE. Looking forward, we are confident
+and ready to take on bigger challenges. We will continue to
+promote the long-term mechanism of quality and efficiency
+enhancement, strengthen our core competitiveness, and
+facilitate the collaborative and simultaneous promotion of
+quality and scale to accomplish synergetic development.
+"High Quality Development", "Winning the Blue Sky Defense
+Battle" and "Stabilizing Bohai's Production at 30 million
+tons for Another Decade", etc. are just some popular
+slogans in 2018 of the Company you may have aware. We
+are committed to defining our own future and embarking
+on the road to success through continuous hard work. In
+order to accomplish its core missions, CNOOC Limited
+will continue to explore mid-to-large size oil and gas fields
+and make efforts on both oil and gas exploration, aiming at
+making bigger and more discoveries in China and overseas.
+We will also adhere to green and low-carbon concepts to
+ensure the development of new oil and gas fields, deepen
+our reforms and innovation and continue to improve our
+operation efficiency.
+Investments in associates and
+(22,314)
+25,250
+North America (excluding Canada)
+49,814
+54,692
+48,078
+46,785
+53,120
+Canada
+48,183
+46,712
+40,304
+57,711
+64,026
+Europe
+87,918
+103,258
+98,672
+95,750
+73,678
+South America
+1,058
+1,110
+926
+929
+3,066
+Subtotal
+932,137
+1,099,459
+1,060,509
+1,042,842
+59,844
+1,022,589
+73,625
+83,677
+182,848
+173,192
+159,312
+East China Sea
+1,206
+2,632
+3,177
+3,629
+3,347
+Overseas
+305,345
+338,440
+321,131
+335,887
+317,224
+Asia (excluding China)
+37,237
+45,640
+48,577
+57,395
+59,240
+Oceania
+4,297
+3,350
+4,278
+3,691
+4,251
+Africa
+76,838
+80,297
+Net production of
+natural gas (mmcf/day)
+China
+453.9
+Asia (excluding China)
+154.4
+140.0
+150.2
+141.4
+164.2
+Oceania
+111.2
+93.5
+111.4
+96.5
+111.1
+North America (excluding Canada)
+112.7
+134.6
+127.3
+130.3
+126.4
+Canada
+117.5
+68.4
+48.9
+38.7
+34.5
+Europe
+50.7
+45.5
+34.8
+432.8
+472.5
+482.1
+546.6
+643.3
+731.9
+648.7
+721.4*
+825.0
+Bohai
+137.9
+136.9
+134.3
+149.3
+165.0
+Western South China Sea
+341.7
+314.3
+190,525
+273.9
+265.2
+Eastern South China Sea
+136.8
+234.9
+185.9
+238.2
+345.4
+East China Sea
+26.8
+45.8
+54.6
+56.3
+49.4
+Overseas
+273.5
+a joint venture
+141,166
+109,381
+(191,172)
+Total liabilities
+(283,249)
+(278,321)
+(255,310)
+(237,244)
+(261,414)
+Equity
+379,610
+386,041
+(175,832)
+382,371
+417,365
+CNOOC LIMITED Annual Report 2018
+23 2
+AYANG SE
+Production
+Operating Summary
+2014
+2015
+2016
+2017
+379,975
+(188,220)
+(193,941)
+(179,751)
+28,413
+29,995
+29,146
+24,701
+Intangible assets
+16,491
+16,423
+16,644
+15,070
+15,717
+Total assets
+662,859
+664,362
+637,681
+617,219
+678,779
+Current liabilities
+(103,498)
+(84,380)
+(67,090)
+(61,412)
+(70,242)
+Non-current liabilities
+Year ended 31 December
+Eastern South China Sea
+Western South China Sea
+and liquids (barrels/day)
+2018
+Net production of crude
+China
+626,791
+761,019
+739,378
+706,955
+Bohai
+403,927
+705,366
+455,002
+433,591
+433,325
+Western South China Sea
+80,493
+89,958
+477,904
+98,351
+96,543
+(b)
+(a)
+In the process of applying the Group's accounting policies, the Directors have made the following judgements, estimates and
+assumptions, which have the most significant effect on the amounts recognised in the consolidated financial statements:
+Significant accounting judgements, estimates and assumptions
+Reserve base
+A contingent asset is not recognised in the financial statements, but is disclosed when an inflow of economic benefits is
+probable.
+The preparation of the consolidated financial statements in accordance with IFRSS and HKFRSS requires management to make
+estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial
+statements and the reported amounts of revenues and expenses during the reporting period. Estimates and judgements are
+continuously evaluated and are based on management's experience and other factors, including expectations of future events
+that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.
+Oil and gas properties are depreciated on a unit-of-production basis at a rate calculated by reference to proved reserves.
+Commercial reserves are determined using estimates of oil in place, recovery factors and future oil prices, the latter having
+an impact on the proportion of the gross reserves which are attributable to the host government under the terms of the
+production sharing contracts. The level of estimated commercial reserves is also a key determinant in assessing whether
+the carrying value of any of the Group's oil and gas properties has been impaired.
+Retirement and termination benefits
+Carrying value of oil and gas properties
+The calculation of the unit-of-production rate for oil and gas properties amortisation could be impacted to the extent
+that actual production in the future is different from current forecast production based on proved reserves. This would
+generally result from significant changes in any of the factors or assumptions used in estimating reserves. These factors
+could include changes in proved reserves, the effect on proved reserves of differences between actual oil and gas prices
+and oil and gas price assumptions and unforeseen operational issues.
+90
+CNOOC LIMITED Annual Report 2018
+3.
+Notes to Consolidated Financial Statements
+A contingent liability is disclosed when the existence of an obligation will only be confirmed by future events or when the amount
+of the obligation cannot be measured reliably.
+824
+Pursuant to the oil and gas reserve estimation requirements under US Securities and Exchange Commission's rules, the
+Group uses the average, first-day-of-the-month oil price during the 12-month period before the ending date of the period
+covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+Contingencies
+Prepaid land lease payments under operating leases in China are initially stated at cost and subsequently amortised on the
+straight-line basis over the lease terms.
+Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as
+operating leases. Where the Group is the lessee, rentals payable under operating leases are charged to profit or loss on the
+straight-line basis over the lease terms.
+Other revenue mainly represents project management fees charged to foreign partners, handling fees charged to
+customers, the sales of diluents to third party and gains from disposal of oil and gas properties and is recognised
+when the services have been rendered or the properties have been disposed of. Reimbursement of insurance claims is
+recognised when the compensation becomes receivable.
+(d)
+Dividend income
+Borrowing costs
+(e)
+Interest income
+Interest income is recognised as it accrues using the effective interest method.
+Other revenue
+The Group presents taxes collected from customers in the consolidated statement of profit or loss and other comprehensive
+income on a net basis.
+Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby
+employees render services as consideration for equity instruments ("equity-settled transactions").
+The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are
+granted. The fair value is determined by using the Black-Scholes option pricing model, further details of which are given in note
+28.
+The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
+the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at
+the end of the each reporting period until the vesting date reflects the extent to which the vesting period has expired and the
+Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to profit or loss for a
+period represents the movement in the cumulative expense recognised as at the beginning and end of that period.
+No expense is recognised for awards that do not ultimately vest for the Group.
+No equity-settled award was cancelled or modified during the years ended 31 December 2018 and 2017.
+The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.
+Share-based payment transactions
+(c)
+Marketing revenues principally represent the sales of oil and gas from the foreign partners under the production sharing
+contracts and revenues from the trading of oil and gas through the Company's subsidiaries. The cost of the oil and
+gas sold is included in "Crude oil and product purchases" in the consolidated statement of profit or loss and other
+comprehensive income. In addition, the Group's marketing activities in North America involves entering into contracts to
+purchase and sell crude oil, natural gas and other energy commodities, and use derivative contracts, including futures,
+forwards, swaps and options for hedging and trading purposes (collectively derivative contracts). Any change in the fair
+value is also included in marketing revenues.
+Revenue recognition prior to 1 January 2018 (continued)
+(b) Marketing revenues
+Operating leases
+The functional currencies of certain entities within the Group are currencies other than RMB. As at the end of the reporting
+period, the assets and liabilities of these entities are translated into the presentation currency of the Group at the exchange rates
+ruling at the reporting date, and their statement of profit or loss and other comprehensive income are translated into RMB at
+the weighted average exchange rates for the year. The resulting exchange differences are included in the cumulative translation
+reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that particular
+foreign operation is recognised in profit or loss.
+These consolidated financial statements are presented in RMB. Each entity in the Group maintains its books and records in
+its own functional currency. Foreign currency transactions recorded by the entities of the Group are initially recorded using
+their respective exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign
+currencies are retranslated at the exchange rates ruling at the end of the reporting period. All differences arising on settlement
+or translation of monetary items are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a
+foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured
+at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. The
+gain or loss arising on retranslation of a non-monetary item is treated consistently with the recognition of the gain or loss on
+change in fair value of the item.
+Foreign currencies
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+89
+CNOOC LIMITED Annual Report 2018
+Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing
+costs directly relating to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial
+period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other
+borrowing costs are expensed in the period in which they are incurred.
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Revenue (continued)
+The Group participates in defined contribution plans in accordance with local laws and regulations for full-time employees in
+the PRC and other countries in which it operates. The Group's contributions to these defined contribution plans are charged to
+profit or loss in the year to which they relate.
+Dividend income is recognised when the Group's right to receive payment is established.
+(9,072) (7,169)
+Nil to RMB2,000,000
+Consolidated
+Eliminations
+Corporate
+Trading business
+2018
+2017
+E&P
+2018
+(b)
+The following table presents the segment financial information of the Group for the years ended 31 December 2018 and 2017.
+Segment results (continued)
+(a)
+SEGMENT INFORMATION (continued)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+5.
+CNOOC LIMITED Annual Report 2018
+2017
+2018
+2017
+2018
+000
+28,881
+35,805
+190,728 157,166
+Total revenue
+180
+176
+92
+(14,737)
+52,610 43,618
+(16,805)
+173,923 142,429
+16,805 14,737
+Intersegment revenue*
+External revenue
+2017
+2018
+2017
+430
+The Group is engaged worldwide in the upstream operating activities of the conventional oil and gas, shale oil and gas,
+oil sands and other unconventional oil and gas business. The Group reports the business through three operating and
+reporting segments: E&P, trading business and corporate. The division of these operating segments is made because the
+Group's chief operating decision makers make decisions on resource allocation and performance evaluation by reviewing
+the financial information of these operating segments. The geographical information is separately disclosed in (b).
+(a) Segment results
+SEGMENT INFORMATION
+OIL AND GAS SALES AND MARKETING REVENUES
+4.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+91
+CNOOC LIMITED Annual Report 2018
+2018
+Uncertainties exist with respect to the interpretation of complex tax regulations (including those applicable to tax credits)
+and the amount and timing of future taxable income. Given the wide range of international business relationships and the
+long term nature and complexity of existing contractual agreements, differences arising between the actual results and
+the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and
+expense already recorded. The Group establishes provisions, based on best estimates, for possible consequences of
+audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on
+various factors, such as the Group's experience of previous tax audits and differing interpretations of tax regulations by
+the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues
+depending on the conditions prevailing in the respective group company's domicile.
+Dismantlement costs will be incurred by the Group at the end of the operating life of certain of the Group's facilities and
+properties. The ultimate dismantlement costs are uncertain and cost estimates can vary in response to many factors
+including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other
+production sites. The expected timing and amount of expenditure can also change, for example, in response to changes
+in reserves or changes in laws and regulations or their interpretation. As a result, there could be significant adjustments
+to the provisions established which would affect future financial results.
+Dismantlement costs
+In the calculations of the recoverable amount of the oil and gas properties in a joint venture, the Group uses the approach
+above.
+The sensitivity analysis for the impairment testing involves estimates and judgments to consider numerous assumptions
+comprehensively. Those assumptions interact on each other and interrelate with each other complexly and do not have
+fixed patterns along with the changes in price. Accordingly, the Group believes that the preparation of the sensitivity
+analysis for the impairment testing will be impracticable. Changes in assumptions could affect impairment charges and
+reversals in the consolidated statement of profit or loss and other comprehensive income, and the carrying amounts of
+assets in the consolidated statement of financial position.
+Actual cash flows are likely to be different from those estimated or forecast since anticipated events frequently do not
+occur as expected and unforeseen events may arise. The Group's results of operations could be materially and adversely
+affected for the period in which future impairment charges are incurred.
+Changes in the key assumptions used, which could be significant, include updates to future pricing estimates, updates
+to future production estimates to align with the Group's anticipated drilling plan, changes in the Group's capital costs
+and operating expense assumptions, and discount rate. There is a significant degree of uncertainty with the assumptions
+used to estimate future cash flows due to various risk factors. The complex economic outlook may also materially and
+adversely affect the Group's key assumptions. Changes in economic conditions can also affect the discount rates applied
+in assessments of impairment.
+The calculations of the recoverable amount of assets require the use of estimates and assumptions. The key
+assumptions include, but are not limited to, future oil and gas prices, future production estimates, estimated future capital
+expenditures, estimated future operating expenses and the discount rate.
+Taxes
+606
+2017
+Less: Royalties
+5.
+Marketing revenues principally represent the sales of oil and gas belonging to the foreign partners under the production sharing
+contracts and revenues from the trading of oil and gas through the Company's subsidiaries, which is recognised at a point
+in time when oil and gas has been delivered to the customer, which is when the customer obtains the control of oil and gas,
+and the Group has present right to payment and collection of the consideration is probable. The cost of the oil and gas sold is
+included in "Crude oil and product purchases" in the consolidated statement of profit or loss and other comprehensive income.
+The payment is typically due within 30 days after the delivery of oil and gas. For contracts where the period between payment
+and transfer of the associated goods is less than one year, the Group applies the practical expedient of not adjusting the
+transaction price for any significant financing component.
+Oil and gas sales represent the sales of oil and gas, net of royalties and obligations to government and other mineral interest
+owners. Revenue from the sales of oil and gas is recognised at a point in time when oil and gas has been delivered to the
+customer, which is when the customer obtains the control of oil and gas, and the Group has present right to payment and
+collection of the consideration is probable.
+28,907
+35,830
+151,888
+185,872
+Gross sales
+(1,190)
+(3,226)
+(4,215)
+156,304
+191,281
+Marketing revenues
+Oil and gas sales
+PRC government's share of oil
+(1,194)
+The Group makes an assessment whenever events or changes in circumstances indicate that the carrying amount of an
+asset may not be recoverable, or when there is any indication that an impairment loss previously recognised for an asset
+in prior years may no longer exist or may have decreased. In any event, the Group would make an estimate of the asset's
+recoverable amount, which is calculated at the higher of the asset's value in use and its fair value less costs of disposal.
+The Group recognises an impairment loss only if the carrying amount of an asset exceeds its recoverable amount. The
+Group charges an impairment loss to the profit or loss in the period in which it arises. A reversal of an impairment loss is
+credited to the profit or loss in the period in which it arises.
+ཙྪིཝ།
+226,963
+(567)
+(61,257)
+(50,640)
+67
+17 16
+31
+(7)
+76
+(423)
+(301)
+555
+(9,161)
+(560)
+Impairment and provision
+(60,834)
+(9,130)
+Selling and administrative
+expenses
+(5,216)
+(7,286)
+28
+28
+42
+(1,654)
+(1,816)
+(269)
+(50,360)
+53=
+(3,923)
+Finance costs
+315
+476
+Interest income
+(296)
+(4,966)
+(3,274)
+and amortisation
+Depreciation, depletion
+(6,881)
+(6,385) 52,688 24,677
+6,391 (7,735)
+4,581
+808
+1,894
+23,863
+53,948
+Amounts included in the measure
+Segment profit for the year
+(84) 226,963
+(176)
+427
+(84)
+(176)
+84
+186,390
+25.0
+343
+of segment profit or loss
+(24,268)
+(12,924)
+15
+(9,127) (7,210)
+(24,251) (24,282)
+718
+15
+66
+Operating expenses
+'+་
+17
+|||
+(6,896)
+(12,990)
+Exploration expenses
+Taxes other than income tax
+(24,282)
+(55)
+(e)
+(d)
+(c)
+RMB9,000,001 - RMB9,500,000
+RMB10,000,001 - RMB10,500,000
+RMB10,500,001 - RMB11,000,000
+Number of employees
+2018
+2017
+1
+2TT
+1
+1
+1
+1
+-
+1
+|||
+1
+1
+5
+RMB8,500,001 - RMB9,000,000
+RMB8,000,001 - RMB8,500,000
+RMB7,500,001 - RMB8,000,000
+RMB7,000,001 - RMB7,500,000
+Performance-related bonuses
+Pension scheme contributions
+Amount paid/payable during the year
+2018
+2017
+21
+21
+5
+18
+1
+1
+40
+41
+(1) Salaries, allowances, and benefits in kind represent the gross amount (before applicable individual salary tax) paid/payable to individual employees.
+The remuneration of the five (2017: five) highest paid employees, falls within the following bands:
+RMB6,000,001 - RMB6,500,000
+RMB6,500,001 - RMB7,000,000
+19
+CNOOC LIMITED Annual Report 2018
+97
+Notes to Consolidated Financial Statements
+4,390
+Deferred tax
+Temporary differences in the current year
+Effect of changes in tax rates
+Income tax expense for the year
+22,489
+(686)
+(7,558)
+5,043
+3,376
+A reconciliation of the PRC statutory corporate income tax rate to the effective income tax rate of the Group is as follows:
+2018
+%
+2017
+%
+PRC statutory enterprise income tax rate
+25.0
+11,680
+Salaries, allowances, and benefits in kind (1)
+11,472
+on the estimated taxable profits for the year
+Provision for overseas enterprise income tax
+on the estimated taxable profits for the year
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+10.
+TAX
+(i)
+Income tax
+The Company and its subsidiaries are subject, on an entity basis, to income taxes on profits arising in or derived from the
+tax jurisdictions in which the entities of the Group are domiciled and operate. The Company is subject to profits tax at a
+rate of 16.5% (2017: 16.5%) on profits arising in or derived from Hong Kong.
+18,132
+The Company is regarded as a Chinese Resident Enterprise (as defined in the "Enterprise Income Tax Law of the People's
+Republic of China") by the State Administration of Taxation of the PRC. As a result, the Company is subject to the PRC
+corporate income tax at the rate of 25% starting from 1 January 2008. The corporate income tax which is subjected in
+Hong Kong is qualified as a foreign tax credit to offset the PRC corporate income tax starting from 1 January 2008.
+Subsidiaries of the Group domiciled outside the PRC are subject to income tax at rates ranging from 10% to 50% (2017:
+10% to 50%).
+As of 31 December 2018, deferred tax liabilities related to undistributed earnings of the Company's overseas subsidiaries
+have not been provided since the timing of the reversal of the taxable temporary differences can be controlled by the
+Company and it is probable that the temporary differences would not reverse in the foreseeable future.
+An analysis of the tax expense in the Group's consolidated statement of profit or loss and other comprehensive income
+is as follows:
+Current tax
+Provision for PRC enterprise income tax
+2018
+2017
+The Company's subsidiary in Mainland China, CNOOC China, is a wholly-owned foreign enterprise. It is subject to
+corporate income tax at the rate of 25% under the prevailing tax rules and regulations. CNOOC Deepwater Development
+Limited, a wholly-owned subsidiary of CNOOC China, is subject to corporate income tax at the rate of 15% from 2018 to
+2020 (2017: 15%), after being reassessed as a high and new technology enterprise.
+During the year, none (2017: none) of the Directors, details of whose remuneration are disclosed in note 8(i) above, received
+an amount which falls within the category of the five highest paid employees. Details of the remuneration of the five (2017: five)
+highest paid employees, for the year are as follows:
+12
+9
+9.4
+Effect of changes in tax rates
+(1.6)
+|||
+||||
+972
+824
+Tax credit from the government
+3,592
+3,592
+343
+617
+228
+4,780
+Notes:
+(1)
+3,592
+(2)
+(0.8)
+Tax reported in equity-accounted entities in China
+Significant accounting judgements, estimates and assumptions (continued)
+Recoverable amount of oil and gas properties
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+CNOOC LIMITED Annual Report 2018
+98
+32.1
+(2.7)
+29.9
+2.2
+(0.9)
+Others
+(0.2)
+Tax losses previously not recognised
+(0.2)
+(0.2)
+Group's effective income tax rate
+(6,861)
+Fees, salaries, allowances, benefits in kind and performance related bonuses represent the gross amount (before applicable individual salary
+tax) paid/payable to individual directors.
+(3)
+Short term employee benefits
+Pension scheme contributions
+Amount paid/payable during the year
+9
+9
+1
+1
+10
+2017
+10
+7.0
+9.
+FIVE HIGHEST PAID EMPLOYEES
+Number of employees
+2018
+2017
+9
+12
+The bands of the remuneration of other key management personnel (excluding Directors) and the related number of
+members of other key management personnel (excluding Directors) are as follows:
+On 27 April 2018, Mr. Wang Dongjin was appointed as a Non-executive Director and a member of the Remuneration Committee of the
+Company. Mr. Wu Guangqi resigned as a Non-executive Director and a member of the Remuneration Committee of the Company.
+2018
+KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+On 16 August 2018, Mr. Liu Jian resigned as the Vice Chairman and a Non-executive Director of the Company.
+(4)
+On 5 December 2018, Mr. Wang Dongjin, a Non-executive Director, was appointed as the Vice Chairman of the Company.
+(5)
+On 18 April 2017, Mr. Yuan Guangyu was appointed as the Chief Executive Officer of the Company and resigned as the President of the
+Company.
+(6)
+On 18 April 2017, Mr. Xu Keqiang was appointed as an Executive Director and the President of the Company.
+(ii) Other key management personnel's (excluding Directors') remuneration
+(7)
+The Company has adopted the share option schemes for the grant of options to the Company's directors. The fair value
+of share options for the directors is measured according to the Group's accounting policies as set out in note 3. No
+Directors exercised any share option in 2018 or 2017. No new share option was granted to Directors in respect of their
+services to the Group under the applicable share option schemes of the Company in 2018 or 2017. Further details of
+share option scheme and valuation techniques are set out in note 28.
+Save as disclosed above, there was no arrangement under which a director waived or agreed to waive any remuneration
+during the year. In 2018 and 2017, the executive directors' remuneration shown above were for their services in
+connection with the management of the affairs of the Company. The other directors' remuneration shown above were for
+their services as directors of the Company.
+CNOOC LIMITED Annual Report 2018
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+8.
+On 18 April 2017, Mr. Yang Hua was re-designated as a Non-executive Director of the Company and resigned as the Chief Executive Officer
+of the Company. He remains as the Chairman of the Board.
+1,385
+186,390
+(1,068)
+169
+5,207
+21
+5,280
+2017
+2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+Interest on bank loans
+Interest on other loans
+FINANCE COSTS
+7.
+CNOOC LIMITED Annual Report 2018
+94
+116
+78
+Loss on disposal of property, plant and equipment
+1,739
+2,311
+Research and development costs
+4,800
+4,595
+Repairs and maintenance
+2,199
+2,220
+14
+18
+Other borrowing costs
+Total borrowing costs
+Subtotal
+Xu Keqiang (6)
+(5)
+Yuan Guangyu
+Executive directors:
+2018
+(i) Directors' remuneration
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
+activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company.
+KEY MANAGEMENT PERSONNEL'S REMUNERATION
+8.
+During the year ended 31 December 2018, the effective interest rates used to determine the amount of related borrowing costs
+for capitalisation varied from 0.95% to 7.875% (2017: from 0.95% to 7.875%) per annum.
+1,560
+5,044
+2,145
+2,560
+Unwinding of discount on provision for dismantlement (note 27)
+Other finance costs:
+2,899
+2,477
+(2,495)
+(2,838)
+Less: Amount capitalised in property, plant and equipment (note 13)
+5,394
+5,315
+5,037
+Non-executive directors:
+Yang Hua (7)
+1,563
+657
+56
+59
+55
+51
+7
+52
+- Other fees
+- Audit fee
+Auditors' remuneration:
+Charging:
+(110)
+(611)
+Insurance compensation on disposal of property, plant and equipment
+(2,409)
+(3,685)
+- Fair value changes on other financial assets
+(653)
+(796)
+2017
+2018
+Investment income:
+Interest income from bank deposits
+Crediting:
+Employee wages, salaries, allowances and social security costs
+8,284
+6,517
+Impairment and provision:
+- Plant and equipment
+Office properties
+Operating lease rentals:
+61,257
+50,640
+(399)
+854
+60,802
+50,631
+374
+(365)
+9,130
+567
+639
+279
+212
+-
+8,639
+- Less: Net amount capitalised
+- Intangible assets
+- Property, plant and equipment
+Depreciation, depletion and amortisation:
+- Others
+- Trade receivables
+125
+- Property, plant and equipment
+442
+The Group's profit before tax is arrived at after (crediting)/charging:
+Wang Dongjin (2)(4)
+Wu Guangqi (2)
+Performance
+and benefits
+Salaries,
+allowances
+I
+Fees (1)
+RMB'000
+Total
+Subtotal
+Kevin G. Lynch
+Tse Hau Yin, Aloysius
+Lawrence J. Lau
+Chiu Sung Hong
+Independent non-executive directors:
+Subtotal
+(2)
+Wu Guangqi
+Liu Jian (3)
+Non-executive directors:
+Yang Hua (7)
+Subtotal
+Yuan Guangyu (5)
+Xu Keqiang (6)
+Executive directors:
+2017
+96
+(i) Directors' remuneration (continued)
+Total
+Pension paid/payable
+scheme
+during
+the year
+972
+| | |
+824
+972
+824
+972
+| | |
+| | |
+1,188
+228
+617
+8. KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+343
+786
+134
+94
+162
+146
+455
+197
+RMB'000
+RMB'000
+related
+bonuses (1) contributions
+RMB'000
+in kind (1)
+RMB'000
+西理世聰
+402
+Liu Jian (3)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+467
+231
+920
+143
+546
+231
+RMB'000
+RMB'000
+the year
+Total
+paid/payable
+during
+Pension
+scheme
+contributions
+Performance
+related
+bonuses (1)
+RMB'000
+in kind (1)
+RMB'000
+Fees (1)
+RMB'000
+and benefits
+Salaries,
+allowances
+Total
+Subtotal
+Kevin G. Lynch
+Tse Hau Yin, Aloysius
+Lawrence J. Lau
+Independent non-executive directors:
+Chiu Sung Hong
+Subtotal
+143
+841
+462
+1,013
+95
+CNOOC LIMITED Annual Report 2018
+5,257
+286
+1,013
+462
+3,496
+3,496
+3,496
+802
+946
+31 December 2018
+802
+|
+||||
+||||
+802
+946
+802
+946
+I
+||||
+1,761
+286
+946
+1,571
+Effect of different tax rates for overseas subsidiaries
+Geographical information
+2018
+2017
+2018
+2017
+2018
+2017
+2018
+Consolidated
+Others
+2017
+Canada
+The following table presents certain non-current assets information for the Group's geographical information for the years
+ended 31 December 2018 and 2017.
+In presenting the Group's geographical information, revenues from external customers are based on the location of the
+Group's customers, and non-current assets are attributed to the segments based on the location of the Group's assets.
+68% (2017: 65%) of the Group's revenues are generated from PRC customers, and revenues generated from customers
+in other locations are individually less than 10%.
+The Group mainly engages in the exploration, development, production and sale of crude oil and natural gas in offshore
+China, Canada, the United States of America, the United Kingdom, Nigeria, Argentina, Indonesia, Uganda, Iraq, Brazil,
+Guyana and Australia etc.
+Certain oil and gas produced by the E&P segment are sold via the trading business segment. For the Group's chief operating decision
+maker's assessment of segment performance, these revenues are reclassified back to E&P segment.
+70,469 53,211
+421
+542
+52,790
+Capital expenditure
+PRC
+Property, plant and equipment
+167,800
+Investments in associates and a joint venture
+PROFIT BEFORE TAX
+6.
+The current year's revenue of approximately RMB15,841 million (2017: RMB11,957 million) was derived from sales by
+the E&P segment and the trading business segment to PetroChina Company Limited. Sales from the CNOOC Group are
+included in Note 30 (iii).
+Information about major customers
+(c)
+SEGMENT INFORMATION (continued)
+5.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+93
+CNOOC LIMITED Annual Report 2018
+95,552 147,151 138,289 407,337 395,868
+20,754 25,466 24,701 29,146
+79
+141
+9,482 9,248
+605
+636
+8,502
+8,767
+Other non-current assets
+92,386
+162,027
+3,680
+3,947
+(301,167) (2,125) (2,375) (138,232) (124,794) 210,256 191,092 (261,414) (237,244)
+(331,313)
+69,927
+678,779 617,219
+1,074
+Segment liabilities
+(5,187)
+943
+(5,185)
+1 3
+(11,236)
+(23,559)
+Income tax expense
+1
+(441)
+(88)
+and (loss)/profit attributable to
+Share of profits of associates
+(5,044)
+1,242 (5,037)
+1,068
+(2,181) (3,011)
+(1)
+653
+796
+(1,233)
+a joint venture
+(22,489)
+855
+Other segment information:
+(232,829) (213,624)
+425,330 368,820
+3,588
+3,154
+458,435
+483,124
+(11,680)
+340,329 (232,829) (213,624) 654,078 588,073
+29,146
+24,701
+Segment assets
+24,040
+401,290
+Investments in associates and
+28,491
+661
+Others
+a joint venture
+655
+457,780
+3,154
+3,588
+482,463
+The registered capital of CNOOC PETROLEUM BRASIL LTDA increased from R$2,965,600,000 to R$3,565,600,000 on 23 November 2018.
+All subsidiaries are indirectly held through CNOOC International Limited, except CNOOC Deepwater Development Limited which is indirectly held
+through CNOOC China.
+Nexen Energy ULC changed its name to CNOOC Petroleum North America ULC on 31 December 2018.
+Nexen Energy Services U.S.A. Inc. merged into OOGC America LLC and the surviving entity, OOGC America LLC. was named CNOOC Energy
+U.S.A. LLC on 31 December 2018.
+16.
+(4)
+Nexen Oil Sands Partnership changed its name to CNOOC Oil Sands Canada on 31 December 2018.
+(5)
+The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results for the
+year or formed a substantial portion of the total assets of the Group. To give details of other subsidiaries would, in the opinion
+of the Directors, result in particulars of excessive length.
+Petroleum and natural gas exploration,
+development and production in
+Indonesia
+Particulars of the principal associates at the end of the reporting period are as follows:
+Place of
+establishment
+Name of associates
+Shanghai Petroleum
+Corporation Limited
+Shanghai, PRC
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Percentage
+of equity
+attributable to
+the Group
+Principal activities
+(3)
+INVESTMENTS IN ASSOCIATES
+CNOOC Muturi Limited
+(2)
+15.
+Particulars of the principal subsidiaries at the end of the reporting period are as follows: (continued)
+Name of entity
+Place of
+establishment
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Percentage
+of equity
+attributable to
+the Group
+Principal activities
+Indirectly held subsidiaries (continued) (1):
+CNOOC Exploration &
+Nigeria
+Production Nigeria Limited
+CNOOC Iraq Limited
+British Virgin Islands
+NGN10 million
+100%
+US$1
+100%
+Petroleum and natural gas exploration,
+development and production in Africa
+Providing services of petroleum
+and natural gas exploration and
+development in the Republic of Iraq
+Oil sands exploration, development
+and production in Canada
+CNOOC Canada Energy Ltd.
+Canada
+100 common shares without
+a par value
+103,000 preferred shares
+without a par value
+100%
+CNOOC Uganda Ltd
+Uganda
+INVESTMENTS IN SUBSIDIARIES (continued)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+15.
+100%
+US$1
+Malaysia
+CNOOC SES Ltd.
+Investment holding
+100%
+US$12,000
+Isle of Man
+CNOOC Southeast Asia Limited
+Deepwater and low-grade oil and
+gas fields exploitation in the PRC and
+exploration, development, production
+and sales of oil and gas in the oil and
+gas fields of South China Sea
+100%
+RMB20.3 billion
+1 million Uganda Shilling
+Zhuhai, PRC
+Indirectly held subsidiaries (¹):
+Bond issuance
+100%
+US$7,780,770
+100%
+Petroleum and natural gas exploration,
+development and production in
+Indonesia
+CNOOC NWS Private Limited
+Singapore
+SG$2
+100%
+Offshore petroleum and natural
+gas exploration, development and
+production in Australia
+104 CNOOC LIMITED Annual Report 2018
+CNOOC Deepwater
+Development Limited
+100%
+Petroleum and natural gas exploration,
+development and production in Africa
+CNOOC Petroleum North
+America ULC (2)
+Brazil
+R$3,565,600,000
+100%
+Petroleum and natural gas exploration,
+development and production in Brazil
+CNOOC Nexen Finance (2014) ULC
+Canada
+100 common shares without
+100%
+Bond issuance
+a par value
+CNOOC Finance (2015) U.S.A. LLC
+USA
+CNOOC PETROLEUM BRASIL
+LTDA (5)
+CNOOC Finance (2015)
+Australia Pty Ltd
+N/A
+100%
+Bond Issuance
+US$1
+100%
+Bond Issuance
+CNOOC LIMITED Annual Report 2018
+105
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+INVESTMENTS IN SUBSIDIARIES (continued)
+Australia
+(1)
+Petroleum and natural gas exploration,
+development and production in
+Canada
+N/A
+Canada
+13,671,421,700 common
+shares without a par value
+100%
+Petroleum and natural gas exploration,
+development and production in
+Canada
+Nexen Petroleum U.K. Limited
+England and Wales
+GBP98,009,131
+100%
+Petroleum and natural gas exploration,
+development and production in the UK
+Nexen Petroleum Nigeria Limited
+Nigeria
+NGN30 million
+100%
+100%
+CNOOC Energy U.S.A. LLC (3)
+USA
+N/A
+100%
+Petroleum and natural gas exploration,
+development and production in the
+USA
+Nexen Petroleum Offshore
+U.S.A. Inc.
+USA
+US$15,830
+100%
+Petroleum and natural gas exploration,
+development and production in the
+USA
+CNOOC Oil Sands Canada (4)
+Canada
+Petroleum and natural gas exploration,
+development and production in Nigeria
+Bermuda
+1,199
+British Virgin Islands
+1,484
+1,199
+At 31 December 2017
+(1,123)
+(856)
+(57)
+(93)
+(43)
+(74)
+Exchange differences
+(1,915)
+2,688
+(199)
+(1,662)
+Disposal
+206
+206
+Additions
+22,095
+14,748
+2,738
+1,631
+1,705
+1,273
+(54)
+13,892
+19,263
+At 1 January 2018
+20,345
+14,592
+2,987
+1,507
+879
+700
+46
+73
+(79)
+(29)
+(50)
+282
+282
+19,263
+13,892
+2,688
+258
+||||
+1,259
+60
+At 31 December 2018
+Exchange differences
+Disposal
+Additions
+RMB900 million
+At 1 January 2017
+Accumulated amortisation:
+Cost:
+Goodwill
+At 31 December 2018
+1,535
+(10,680)
+(53)
+(10,627)
+Exchange differences
+38
+1,497
+Disposals and write-offs
+(5,790)
+(5,790)
+Impairment
+(561,246)
+(497,870)
+(50,631)
+(50,239)
+Depreciation charge for the year
+(1,783)
+(496,087)
+At 1 January 2018
+(497,870)
+(1,783)
+(496,087)
+At 31 December 2017
+1,443
+10,989
+57
+(392)
+(2,190)
+(563,436)
+Net book value:
+Software
+and others
+Marketing
+transportation
+and storage
+contracts
+Drilling rig
+contracts and
+seismic data
+usage rights
+NWS Project
+Gas
+processing
+rights under
+14. INTANGIBLE ASSETS
+During 2018, the Group wrote off certain oil and gas assets in the North America mainly due to the expiration of lease contracts.
+Approximately RMB444 million was included in the exploration expenses.
+In June 2016, the book value of the Long Lake assets was written down to an estimated recoverable amount of RMB33,902
+million. While the future operating plan of Long Lake assets is under assessment by management, there had not been any
+impairment of such assets as at 31 December 2018.
+The discount rate is derived from the Company's weighted average cost of capital ("WACC") and is adjusted, where
+applicable, to take into account any specific risks relating to the country where the asset is located as well as the asset specific
+characteristics, such as specific tax treatments, cash flow profiles and economic life. The discount rate used for value in use
+calculations was 8% in 2018 after tax (2017: 8%-12% after tax). A derived pre-tax discount rate would be 9% (2017: 8%-15%
+pre-tax).
+13. PROPERTY, PLANT AND EQUIPMENT (continued)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+102
+For both years, the recoverable amount was calculated based on the assets' value in use and was determined at the cash-
+generating unit level. The Company identifies a field or a group of fields that could generate cash inflows independently as
+a cash-generating unit. The principal parameters used in determining the recoverable amount of the Group's assets include
+estimates of proved and unproved reserves, future commodity prices that come from the price forecast of respected and
+independent institutions, combined with internal analysis and judgment of the international market environment, as well as best
+estimates of drilling and development costs.
+Impairment and provision recognised during the year included the impairment loss to reduce the carrying amount of certain oil
+and gas properties to the recoverable amount. In 2018, an impairment loss of RMB5,387 million related to certain exploration
+and evaluation assets in North America was recognised as exploration expenses in profit or loss, primarily triggered by the
+uncertainty of future development. In 2017, the impairment loss was mainly related to fields in China, Africa and North America
+primarily due to the revision of the oil and gas price forecast and revision of reserves.
+Included in the current year's additions was an amount of approximately RMB2,838 million (2017: approximately RMB2,495
+million) in respect of interest capitalised in property, plant and equipment (note 7). Included also in the depreciation charge for
+the year was an amount of approximately RMB1,298 million (2017: approximately RMB636 million) in respect of a depreciation
+charge on dismantlement cost capitalised in oil and gas properties.
+407,337
+2,707
+404,630
+395,868
+2,954
+392,914
+At 31 December 2018
+At 31 December 2017
+Total
+US$1,000
+At 1 January 2017
+(1,364)
+Principal activities
+Percentage
+of equity
+attributable to
+the Group
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Place of
+establishment
+Particulars of the principal subsidiaries at the end of the reporting period are as follows:
+INVESTMENTS IN SUBSIDIARIES
+The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts are amortised on a straight-line basis over the life of the contracts which is
+less than 20 years. Other identifiable intangible assets are amortised on a straight-line basis over a period ranging from 3 to 5
+years.
+In assessing value in use of E&P segment, the key assumptions include, but are not limited to, future commodity prices, future
+production estimates, estimated future capital expenditures, estimated future operating expenses and the discount rate. The
+discount rate used for value in use is derived from the Company's WACC and is adjusted, where applicable, to take into account
+any specific risks relating to the country where the asset is located as well as the asset specific characteristics, such as specific
+tax treatments, cash flow profiles and economic life. However, actual results could differ from those estimates.
+INTANGIBLE ASSETS (continued)
+15.
+14.
+Name of entity
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+103
+CNOOC LIMITED Annual Report 2018
+Impairment is determined by assessing the recoverable amount of the entire E&P assets to which the goodwill relates. Where
+the recoverable amount of the entire E&P assets is less than the carrying amount of the assets and the goodwill together, an
+impairment loss on goodwill is recognised.
+According to the accounting policies as set out in note 3, goodwill is acquired in the acquisition of Nexen Inc., and from the
+acquisition date, allocated to the entire E&P assets, which are the groups of cash-generating units that are expected to benefit
+from the synergies of the acquisition.
+Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed
+in a business combination.
+15,717
+14,592
+494
+208
+15,070
+31 December 2018
+Directly held subsidiaries:
+CNOOC China Limited
+Tianjin, PRC
+CNOOC Finance (2013) Limited
+Bond issuance
+100%
+US$1,000
+British Virgin Islands
+CNOOC Finance (2012) Limited
+Bond issuance
+100%
+US$1,000
+Bond issuance
+100%
+US$1,000
+Investment holding
+100%
+US$20,000,000,002
+British Virgin Islands
+British Virgin Islands
+British Virgin Islands
+CNOOC Finance (2011) Limited
+Sales and marketing of petroleum and
+natural gas products outside the PRC
+100%
+SG$3 million
+Singapore
+China Offshore Oil (Singapore)
+International Pte Ltd
+CNOOC International Limited
+CNOOC Finance (2003) Limited
+Offshore petroleum and natural gas
+exploration, development, production
+and sales, and shale gas exploration in
+the PRC
+100%
+RMB20 billion
+13,892
+(729)
+466
+423
+(2,222)
+(1,239)
+(732)
+At 31 December 2017
+197
+44
+76
+34
+43
+Exchange differences
+1,915
+(4,193)
+199
+1,662
+Disposal
+(854)
+(419)
+(57)
+(332)
+(46)
+Amortisation charge for the year
+(5,451)
+(2,046)
+(1,312)
+54
+At 1 January 2018
+(732)
+(1,239)
+467
+At 31 December 2018
+At 31 December 2017
+Net book value:
+(4,628)
+(2,493)
+(1,299)
+(836)
+At 31 December 2018
+(140)
+(39)
+(62)
+(39)
+Exchange differences
+79
+29
+50
+Disposal
+(374)
+(261)
+(48)
+(65)
+Amortisation charge for the year
+(4,193)
+(2,222)
+245
+30.0%
+1,484
+CNOOC Finance
+Corporation Limited
+EARNINGS PER SHARE
+Earnings:
+Profit for the purpose of basic and diluted earnings
+per share calculation
+Number of shares:
+2018
+2017
+52,688
+24,677
+Number of ordinary shares for the purpose of
+basic earnings per share calculation
+Effect of dilutive potential ordinary shares under
+the share option schemes
+44,647,455,984
+8,566,982
+44,647,455,984
+4,101,969
+Weighted average number of ordinary shares
+for the purpose of diluted earnings per share
+44,656,022,966
+44,651,557,953
+Earnings per share:
+Basic (RMB Yuan)
+11.
+Diluted (RMB Yuan)
+In 2006, a Special Oil Gain Levy ("SOG Levy") was imposed by the Ministry of Finance of the PRC ("MOF") at the
+progressive rates from 20% to 40% on the portion of the monthly weighted average sales price of the crude oil lifted in the
+PRC exceeding US$40 per barrel. The MOF has decided to increase the threshold of the SOG Levy to US$65 with effect
+from 1 January 2015. Notwithstanding this adjustment, the SOG Levy continues to have five levels and is calculated and
+charged according to the progressive and valorem rates on the excess amounts. The SOG Levy paid can be claimed as
+a deductible expense for corporate income tax purposes and is calculated based on the actual volume of the crude oil
+entitled.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+iii.
+Value added tax ("VAT") at the rates from 13% to 17% on taxable sales under independent oil and gas fields before
+1 July 2017. According to "Notice on Simplifying the Relevant Policies on Value-added Tax Rates" (Cai Shui [2017]
+No.37), with effect from 1 July 2017, the VAT rate of 13% had been removed and gas sales had been subject to
+the VAT rate of 11%. VAT rates of 17% and 11% have been adjusted to 16% and 10% respectively since 1 May
+2018 according to "Notice on Adjustment on Value-added Tax Rates" (Cai Shui [2018] No.32).
+The VAT payable is calculated using the taxable sales amount multiplied by the applicable tax rate less relevant
+deductible input VAT;
+Resource tax at the rate of 6% (reduced tax rates may apply to specific products and fields) on the oil and gas sales
+revenue (excluding production tax) derived by oil and gas fields under production sharing contracts signed after 1
+November 2011 and independent offshore oil and gas fields, except for those under production sharing contracts
+signed before 1 November 2011 which will be subject to related resource tax requirement after the expiration of
+such production sharing contracts;
+iv.
+Export tariff at the rate of 5% on the export value of petroleum oil;
+V.
+City construction tax at the rates of 1% or 7% on the production tax and VAT paid;
+vi.
+Educational surcharge at the rate of 3% on the production tax and VAT paid; and
+vii.
+Local educational surcharge at the rate of 2% on the production tax and VAT paid.
+In addition, other taxes paid and payable by the Company's non-PRC subsidiaries include royalty as well as taxes levied
+on petroleum-related income, budgeted operating and capital expenditure.
+100
+CNOOC LIMITED Annual Report 2018
+10.
+TAX (continued)
+Notes to Consolidated Financial Statements
+31 December 2018
+(iii) Special Oil Gain Levy
+ii.
+12.
+Dividend per ordinary share:
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+13.
+PROPERTY, PLANT AND EQUIPMENT
+Oil and gas
+properties
+Vehicles
+and office
+equipment
+and others
+Total
+Cost:
+At 1 January 2017
+Additions
+867,626
+5,700
+873,326
+48,937
+99
+49,036
+Disposals and write-offs
+(2,577)
+(914)
+(3,491)
+Exchange differences
+31 December 2018
+DIVIDENDS
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+2018 interim dividend - HK$0.30 (2017: interim
+dividend HK$0.20) per ordinary share
+2017 final dividend - HK$0.30 (2016: final dividend HK$0.23)
+per ordinary share
+2018 final dividend proposed at HK$0.40 (2017: final dividend proposed
+at HK$0.30) per ordinary share by the Board of Directors-not
+recognised as a liability as at the end of the year
+1.18
+0.55
+1.18
+0.55
+2018
+2017
+11,890
+7,601
+11,633
+8,847
+15,221
+10,830
+Pursuant to the Enterprise Income Tax Law of the People's Republic of China and related laws and regulations, the Company
+is regarded as a Chinese Resident Enterprise, and thus is required to withhold corporate income tax at the rate of 10% when
+it distributes dividends to its non-resident enterprise (as defined in the "Enterprise Income Tax Law of the People's Republic of
+China") shareholders, with effect from the distribution of the 2008 final dividend. In respect of all shareholders whose names
+appear on the Company's register of members and who are not individuals (including HKSCC Nominees Limited, corporate
+nominees or trustees such as securities companies and banks, and other entities or organisations, which are all considered as
+non-resident enterprise shareholders), the Company will distribute the dividend after deducting corporate income tax of 10%.
+101
+Production tax at the rate of 5% on production under production sharing contracts;
+i.
+The Company's PRC subsidiaries pay the following other taxes and dues:
+(190)
+(1,152)
+(24,234)
+2017
+(19,174)
+(7,558)
+3,376
+7
+1,143
+(22,206)
+Principal components of deferred tax balances are as follows:
+2018
+2017
+Deferred tax assets
+Property, plant and equipment
+5,280
+7,312
+Provision for dismantlement
+11,087
+9,669
+(686)
+Losses available for offsetting against future taxable profit
+(22,206)
+At 31 December 2017
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+TAX (continued)
+10.
+(i)
+Income tax (continued)
+The movements of deferred tax liabilities net of deferred tax assets are as follows:
+At 31 December 2017
+Credit to the profit or loss
+Changes in tax rates
+Charge to other comprehensive income
+Exchange differences
+At 31 December 2018
+At 31 December 2016
+Credit to the profit or loss
+Changes in tax rates
+Charge to other comprehensive income
+Exchange differences
+2018
+18,565
+16,529
+Fair value of long term borrowings
+25,509
+(3,178)
+(3,303)
+CNOOC LIMITED Annual Report 2018
+99
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+TAX (continued)
+10.
+(i)
+(ii)
+Income tax (continued)
+As at 31 December 2018, the Group had approximately RMB97,614 million (2017: RMB87,623 million) of carry-
+forward tax losses, predominantly in North America, that would be available to offset against future taxable profits of the
+subsidiaries in which the tax losses arose. Most of the US and Canadian tax losses will expire in 6 to 20 years.
+Deferred tax assets in respect of tax losses are recognised only to the extent of the anticipated future taxable profits or
+reversal of existing taxable temporary differences.
+As at 31 December 2018, the Group's recognised deferred tax assets on tax losses amounted to RMB83,158 million
+(2017: RMB75,018 million). Unrecognised tax losses, where recovery is not currently expected, amounted to RMB14,456
+million (2017: RMB12,605 million). This includes RMB7,876 million (2017: RMB3,181 million) of unrecognised tax loss
+arising from Uganda which has no fixed expiry date. The remainder expires between 1 to 20 years.
+At 31 December 2018, the Group's unrecognised deferred tax assets related to unused tax credits amounted
+to RMB10,944 million (2017: RMB4,990 million). This includes RMB10,696 million (2017: RMB4,587 million) of
+unrecognised deferred tax assets related to unused tax credits from Nigeria which has no fixed expiry date. The remainder
+expires between 2026 and 2037.
+The realisability of the deferred tax assets recognised mainly depends on whether sufficient future profits or taxable
+temporary differences will be available in the future. In case where the actual future taxable profits generated are less than
+expected, or change in facts and circumstances which result in revision of future taxable profits estimation, the balance
+of deferred tax assets may be significantly revised.
+Other taxes
+27,412
+22,206
+24,234
+(14,253)
+1,770
+1,771
+Others
+1,997
+1,178
+38,699
+36,459
+Deferred tax liabilities
+Property, plant and equipment
+(24,985)
+Fair value changes on other financial assets
+Others
+Of which
+- deferred tax assets
+- deferred tax liabilities
+(14,076)
+(13,670)
+(232)
+(389)
+(351)
+(14,465)
+Net deferred tax assets
+(148)
+(25,133)
+At 31 December 2017
+(18,486)
+(11,783)
+(6,630)
+(6,851)
+63,660
+47,116
+11,614
+12,054
+2017
+2018
+Total comprehensive (expense)/income
+(Loss)/profit after tax
+Income tax credit/(expense)
+(Loss)/profit before tax
+Finance costs
+Interest income
+Depreciation, depletion and amortisation
+Revenue
+Non-current liabilities
+18,661
+Current liabilities
+29,879
+(3,742)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+107
+CNOOC LIMITED Annual Report 2018
+Dividend of US$20 million (equivalent to RMB132 million) was received from the joint venture in 2018 and US$36 million
+(equivalent to RMB243 million) was received from the joint venture in 2017.
+The loss attributable to a joint venture recognised during the period was primarily attributable to the impairment at BC ENERGY
+INVESTMENTS CORP. in Argentina, which was triggered by the significant depreciation of the currency of peso and the
+significant interest rate increase in Argentina.
+1,106
+(11,186)
+1,106
+(11,186)
+(1,109)
+6,630
+2,215
+(17,816)
+(550)
+(518)
+313
+95
+(3,446)
+Non-current assets
+Current assets
+Summarised financial information of the joint venture is disclosed below:
+2017
+2018
+106 CNOOC LIMITED Annual Report 2018
+Dividend of RMB162 million was received from the associates in 2018 (2017: RMB116 million).
+Total comprehensive income
+Other comprehensive income
+Profit for the year
+None of the Group's associates are considered to be individually material. The following table illustrates the summarised
+financial information of the Group's associates in the consolidated financial statements:
+4,067
+4,433
+Share of net assets
+2017
+2018
+The Group's investments in associates represent:
+To give details of other associates would, in the opinion of the Directors, result in particulars of excessive length.
+Provision of deposit, transfer, settlement,
+loan, discounting and other financing
+services to CNOOC and its member
+entities
+31.8%
+RMB4 billion
+Beijing, PRC
+406
+302
+16
+36
+Bridas Corporation changed its name to BC ENERGY INVESTMENTS CORP. on 23 March 2018.
+(1)
+US$102,325,582
+British Virgin Islands
+BC ENERGY INVESTMENTS
+CORP (1)
+Name of entity
+Investment holding
+50%
+Principal activities
+18. EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS
+Percentage
+of equity
+attributable to
+the Group
+establishment
+Place of
+Particulars of the joint venture at the end of the reporting period are as follows:
+17. INVESTMENT IN A JOINT VENTURE
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+338
+422
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Production, processing and technology
+consultation of oil, gas and relevant
+products in the PRC
+(i)
+Current:
+965,876
+4,897
+970,773
+Accumulated depreciation, depletion and
+amortisation and impairment:
+At 1 January 2017
+(439,123)
+(1,738)
+(440,861)
+Depreciation charge for the year
+(60,442)
+(360)
+Impairment
+(8,639)
+(60,802)
+(8,639)
+Disposals and write-offs
+1,185
+10,932
+108 CNOOC LIMITED Annual Report 2018
+At 31 December 2018
+During the year, the fair value changes on the Group's equity investments recognised directly in other comprehensive
+income amounted to RMB278 million (2017: other comprehensive expense RMB542 million).
+21,858
+21,743
+889,001
+4,737
+893,738
+At 1 January 2018
+889,001
+4,737
+893,738
+Additions
+57,619
+86
+57,705
+Acquisitions
+264
+264
+Disposals and write-offs
+(2,751)
+(41)
+(2,792)
+Exchange differences
+115
+The gains of the Group's other financial assets recognised in the profit or loss for the year was RMB3,685 million (2017:
+RMB2,409 million).
+The money market funds can be redeemed at any time.
+(2)
+2,759
+2,938
+Private equity fund in Kerogen Energy Fund classified at FVTOCI (4)
+Non-publicly traded investments
+781
+15
+766
+14
+14
+1,110
+-
+1,110
+Equity investment in MEG Energy Corporation ("MEG") classified at FVTOCI (2)
+Other equity investment classified at FVTPL (3)
+Publicly traded investments
+Non-current:
+2017
+2018
+Private equity funds classified at FVTOCI (1)
+Non-publicly traded investments,
+4,048
+3,540
+(1)
+In the current year, as the investment recovery period expired, the Group disposed of the equity investment in private equity funds in GEMS
+O&G II. A cumulative loss on disposal of RMB14 million has been recognised in retained earnings directly.
+The corporate wealth management products will mature from 8 January 2019 to 20 November 2019 (2017: from 8 January 2018 to 6
+November 2018).
+74,344
+125,283
+66,229
+8,115
+19,366
+105,917
+2017
+2018
+Corporate wealth management products (1)
+Money market funds (2)
+Equity investments
+(1)
+Current:
+Other financial assets
+(ii)
+Kerogen Energy Fund is principally engaged in the investment in the oil and gas industry. The equity investment in Kerogen Energy Fund is
+designated by the Group as at FVTOCI. The cost of this non-publicly traded equity investment represents an appropriate estimate of its fair
+value as at 1 January 2018 and 31 December 2018, as sufficient information is not available recently to measure its fair value.
+(4)
+In the current year, the Group disposed of other equity investment classified at FVTPL at a consideration of RMB17 million, a gain on
+disposal of RMB2 million has been recognised in the profit or loss.
+(3)
+MEG is principally engaged in the exploitation and production of oil sands. The investment in MEG is designated by the Group as at FVTOCI.
+As at 31 December 2018, the investment in MEG was stated at the quoted market price.
+(2)
+Non-publicly traded investments classified at FVTPL:
+Exchange differences
+Revision (1)
+CNOOC LIMITED Annual Report 2018
+(၁
+b) Provision of oil and gas development and support services
+a) Provision of exploration and support services
+Provision of exploration, oil and gas development, oil and gas production as well as marketing, management and ancillary
+services by the CNOOC Group to the Group:
+(3)
+(1)
+Comprehensive framework agreement with CNOOC in respect of a range of products and services
+As the Group is controlled by CNOOC, transactions with CNOOC, its subsidiaries and associates (the “CNOOC Group") are
+disclosed as related party transactions. The connected transactions or continuing connected transactions defined in Chapter
+14A of the Listing Rules in respect of items listed below also constitute related party transactions. The Company has complied
+with the disclosure requirements in accordance with Chapter 14A of the Listing Rules for continuing connected transactions
+listed below. The Company entered into a comprehensive framework agreement with CNOOC on 15 November 2016 for
+the provision (1) by the Group to the CNOOC Group and (2) by the CNOOC Group to the Group, of a range of products and
+services which may be required and requested from time to time by either party and/or its associates in respect of the continuing
+connected transactions. The term of the comprehensive framework agreement is for a period of three years from 1 January
+2017. The continuing connected transactions under the comprehensive framework agreement and the relevant annual caps for
+the three years from 1 January 2017 were approved by the independent shareholders of the Company on 1 December 2016.
+The approved continuing connected transactions are as follows:
+Provision of oil and gas production and support services
+(4,090)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+RELATED PARTY TRANSACTIONS
+30.
+CNOOC LIMITED Annual Report 2018
+114
+As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a state-owned enterprise subject to the control of the
+State Council of the PRC. The State Council of the PRC directly and indirectly controls a significant number of state-owned
+entities and organisations.
+In accordance with the "Temporary Regulation for Safety Expense Financial Management of Higher Risk Industry" and the
+implementation guidance issued by the MOF of the PRC, the Group is required to accrue a safety fund for its oil and gas
+exploration and production activities within the PRC by appropriating a portion of its net profit to other reserves based on its
+annual production from offshore China. Such reserve is reduced for expenses incurred to improve the safety conditions of
+oil and gas production. When the safety fund is fully utilised, additional expenses incurred for safety production purposes are
+charged directly to the profit or loss for the year. As of 31 December 2018, the Group's safety fund reserve under the PRC
+regulations amounted to nil (2017: nil).
+d) Provision of marketing, management and ancillary services
+Provision of management, technical, facilities and ancillary services, including the supply of materials by the Group to the
+CNOOC Group; and
+30.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+115
+CNOOC LIMITED Annual Report 2018
+where there is no government-prescribed price, in accordance with market prices, including the local, national or
+international market prices.
+e) Floating production, storage and offloading ("FPSO") vessel leases
+government-prescribed prices; or
+(a)
+On the basis of the above basic pricing principle, each type of products or services must be charged in accordance with the
+following pricing mechanism and in the following sequential order:
+The basic pricing principle for the continuing connected transactions between the Group and the CNOOC Group is based on
+arm's length negotiations, on normal commercial terms or better and with reference to the prevailing local market conditions
+(including the volume of sales, length of contracts, the volume of services, overall customer relationship and other market
+factors).
+Pricing principles
+Sales of petroleum and natural gas products (other than long-term sales of natural gas and liquefied natural gas)
+b) Long-term sales of natural gas and liquefied natural gas
+a)
+Sales of petroleum and natural gas products by the Group to the CNOOC Group:
+(b)
+RELATED PARTY TRANSACTIONS (continued)
+As at 31 December 2018, the general reserve fund amounted to RMB60,000 million (2017: RMB60,000 million).
+The general reserve fund, which is determined at the discretion of the board of directors of CNOOC China, can only be used,
+upon approval by the relevant authority, to offset against accumulated losses or to increase capital.
+Expired during the year
+12.43
+(22,506,000)
+(26,732,000)
+Forfeited during the year
+11.40
+187,529,000
+Exercised during the year
+12.34
+Granted during the year
+Outstanding at the beginning of the year
+price HK$
+exercise
+Number of
+share options
+price HK$
+share options
+129,919,000
+Appropriation to the staff and workers' bonus and welfare fund, which is determined at the discretion of the board of directors
+of CNOOC China, is expensed as incurred under IFRSS/HKFRSS. The staff and workers' bonus and welfare fund can only be
+used for special bonuses or collective welfare of employees.
+(35,280,000)
+(35,104,000)
+According to the laws and regulations of the PRC and the articles of association of CNOOC China, CNOOC China is required to
+provide for certain statutory funds, namely, the general reserve fund and the staff and workers' bonus and welfare fund, which
+are appropriated from net profit (after making up for losses from previous years), but before dividend distribution.
+RESERVES
+At the date of approval of these consolidated financial statements for issuance, the share options outstanding under these
+share option schemes represented approximately 0.15% of the Company's shares in issue as at that date (2017: 0.29%). The
+weighted average remaining contractual life of share options outstanding at the end of the year was 0.93 years (2017: 1.52
+years). The exercise in full of the outstanding share options would, under the present capital structure of the Company, result
+in the issue of 67,907,000 (2017: 129,919,000) additional ordinary shares of the Company and additional share capital of
+RMB680,525,151 (2017: RMB1,339,702,913).
+No share options had been cancelled or modified during the years ended 31 December 2018 and 2017.
+29.
+12.34
+129,919,000
+14.83
+11.44
+12.34
+129,919,000
+11.44
+67,907,000
+Exercisable at the end of the year
+Outstanding at end of year
+7.29
+67,907,000
+exercise
+Pricing principles (continued)
+The continuing connected transactions referred to in paragraph (1)(c)-(1)(d) above provided by the CNOOC Group to the Group,
+on the basis of the above pricing principle, are based on government-prescribed price or market prices.
+23,052
+2017
+2018
+360
+391
+2017
+2018
+19,465
+Balances with the CNOOC Group
+Deposits in CNOOC Finance
+Deposits balances made by the Group
+(b)
+Interest income from deposits in CNOOC Finance
+(a) Interest income received by the Group
+(iv) Transactions and balances with CNOOC Finance Corporation Limited ("CNOOC Finance") (note f)
+30. RELATED PARTY TRANSACTIONS (continued)
+(v)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2018
+Amount due to CNOOC
+1,500
+1,500
+CNOOC Finance (2015) Australia Pty Ltd
+Due in 2045
+4.200%
+300
+4,760
+2017
+16,844
+16,651
+19,641
+- included in trade and accrued payables
+Amounts due to other related parties
+193
+147
+- included in other payables and accrued liabilities
+19,788
+The continuing connected transactions referred to in paragraph (1)(a)-(1)(b) above provided by the CNOOC Group to the Group
+and (3)(a)-(3)(b) above provided by the Group to the CNOOC Group, on the basis of the above pricing principle, are determined
+through arm's length negotiations based on market prices (as defined in the comprehensive framework agreement).
+Notes to Consolidated Financial Statements
+116
+Provision of oil and gas production and support services (note a)
+Provision of marketing, management and ancillary services (note b)
+FPSO vessel leases (note c)
+16,317
+24,043
+3,392
+3,803
+- Inclusive of amounts capitalised under property, plant and equipment
+Provision of oil and gas development and support services
+5,912
+9,284
+7,378
+2017
+2018
+Provision of exploration, oil and gas development, oil and gas production as well as marketing,
+management and ancillary services by the CNOOC Group to the Group
+(i)
+The following is a summary of significant related party transactions entered into in the ordinary course of business between the
+Group and its related parties during the year and the balances arising from related party transactions at the end of the year:
+The continuing connected transactions referred to in paragraph (2) above provided by the Group to the CNOOC Group, on
+the basis of the above pricing principle, are determined through arm's length negotiation between both parties with reference
+market price.
+The continuing connected transactions referred to in paragraph (1)(e), on the basis of the above pricing principle, are
+unanimously determined with the CNOOC Group which provides the FPSO vessel leases after arm's length negotiation in
+accordance with normal commercial terms.
+Provision of exploration and support services
+CNOOC LIMITED Annual Report 2018
+8,894
+1,450
+119,355
+147,046
+109,518
+9,837
+15,316
+Long term sales of natural gas and liquefied natural gas (note e)
+131,730
+Sales of petroleum and natural gas products (other than long-term sales
+of natural gas and liquefied natural gas) (note d)
+1,373
+2017
+The Group did not enter into any transactions in the above category for the years ended 31 December 2018 and 2017.
+(iii) Sales of petroleum and natural gas products by the Group to the CNOOC Group
+Provision of management, technical, facilities and ancillary services, including the supply of materials
+by the Group to the CNOOC Group
+(ii)
+33,956
+43,291
+1,383
+1,213
+2018
+Number of
+average
+average
+222
+212
+150
+212
+138
+108
+156
+212
+61
+686
+2,146
+1,491
+(223)
+(212)
+1,923
+1,279
+1,257
+Supplemental information with respect to the long term bank loans:
+223
+2018
+CNOOC LIMITED Annual Report 2018
+111
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+26.
+LOANS AND BORROWINGS (continued)
+2017
+The maturities of the long term bank loans are as follows:
+Within one year
+After one year but within two years
+After two years but within three years
+After three years but within four years
+After four years but within five years
+After five years
+Amount due within one year shown under current liabilities
+Repayable:
+As at 31 December 2018, US$694 million shareholder loans (2017: US$694 million) of the Group were included in general loans. For details please
+refer to Note 30(v).
+Maximum
+For the year ended
+31 December
+1,819
+3.19%
+1,396
+2.13%
+(2)
+The weighted average interest rate is computed by averaging the interest rates as at 1 January and 31 December of each year.
+There was no default of principal, interest or redemption terms of the loans and borrowings during the year.
+The average amount outstanding is computed by averaging the outstanding principal balances as at 1 January and 31 December of each year.
+27.
+2018
+2017
+At 1 January
+New projects (1)
+54,073
+3,465
+50,888
+1,244
+PROVISION FOR DISMANTLEMENT
+amount
+outstanding
+2,146
+1,491
+(1)
+Balance
+at year end
+Weighted
+average
+interest rate
+at year end
+Average
+amount
+Weighted
+average
+outstanding
+2,146
+1,491
+interest rate
+during the
+during the
+year(1)
+year(2)
+2018
+2017
+3.86%
+2.52%
+during
+the year
+As at 31 December 2018, none of the bank loans (2017: US$650 million) were guaranteed by the Company.
+In connection with the financing for the third LNG process train of Tangguh LNG Project in Indonesia, the Company delivered two guarantees
+dated 3 August 2016, in favor of Mizuho Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks
+and Indonesian local commercial banks under two commercial loan agreements with aggregate loan amount of US$2,145 million. The Company
+guarantees the payment obligations of the trustee borrower under the subject loan agreements and is subject to an aggregate maximum cap of
+approximately US$573 million.
+In connection with the Tangguh LNG Project in Indonesia, the Company delivered a guarantee dated 29 October 2007, in favor of Mizuho Corporate
+Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks under a US$884 million commercial loan
+agreement. The Company guarantees the payment obligations of the trustee borrower under the subject loan agreement and is subject to a
+maximum cap of US$135,163,308.28.
+On 31 December 2005, the Company adopted a new share option scheme (the "2005 Share Option Scheme"). Under the
+2005 Share Option Scheme, the Board has the authority to grant options to subscribe for shares to the directors, officers and
+employees of the Group, and any other persons who in the sole discretion of the Board, have contributed or will contribute
+to the Group. Unless approved by the shareholders, the total number of shares issued and to be issued upon exercise of the
+options granted to each individual (including exercised and unexercised options) under the 2005 Share Option Scheme or any
+other share option scheme adopted by the Company, in any 12-month period, must not exceed 1% of the shares in issue of
+the Company.
+2005 Share Option Scheme
+Under these share option schemes, the Remuneration Committee of the Board will from time to time propose for the Board's
+approval the grant of share options and the number of share options to be granted to the relevant grantees. The maximum
+aggregate number of shares (including those that could be subscribed for under the Pre-Global Offering Share Option Scheme,
+the 2001 Share Option Scheme, the 2002 Share Option Scheme and the 2005 Share Option Scheme) which may be issued
+upon exercise of all options granted shall not exceed 10% of the total issued share capital of the Company as at 31 December
+2005, being the date on which the shareholders of the Company approved the 2005 Share Option Scheme, excluding shares
+under options which have lapsed.
+2005 Share Option Scheme (as defined below).
+(4)
+2002 Share Option Scheme (expired in 2015); and
+(3)
+According to the 2005 Share Option Scheme, the consideration payable by a grantee for the grant of options will be HK$1.00.
+The exercise price for such options will be determined by the Board at its discretion at the date of grant, except that such price
+shall be at least the higher of:
+2001 Share Option Scheme (expired in 2011);
+Pre-Global Offering Share Option Scheme (expired in 2011);
+(1)
+The Company has adopted the share option schemes for the grant of options to the Company's directors, senior management
+and other eligible grantees.
+Share option schemes
+43,081
+44,647,455,984
+Issued share
+capital equivalent
+of RMB million
+(2)
+Number of shares
+(1)
+(2)
+Weighted
+Weighted
+2017
+2018
+Details of the share options outstanding are as follows:
+The fair value of equity-settled share options granted was estimated as at the date of grant if any, using the Black-Scholes
+option pricing model, taking into account the terms and conditions upon which the options were granted.
+28. SHARE CAPITAL (continued)
+the nominal value of a share of the Company on the date of grant;
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018 113
+No new share option was granted during the year (2017: nil) and the Group recognised an equity-settled share option expense
+of nil (2017: nil) during the year.
+The period within which the options must be exercised, as well as any minimum holding period or performance targets which
+apply to the options, will be specified by the Board of the Company at the time of grant. The exercise periods for options granted
+under the 2005 Share Option Scheme shall end not later than 10 years from the date of grant. No options may be granted under
+the 2005 Share Option Scheme after the date of the 10th anniversary of the adoption of the 2005 Share Option Scheme.
+the closing price of the shares as stated in the HKSE's daily quotation sheet on the date of grant.
+the average closing price of the shares as stated in the daily quotation sheets of The Stock Exchange of Hong Kong
+Limited for the five trading days immediately preceding the date of grant; and
+(3)
+31 December 2018
+Ordinary shares with no par value as at 1 January 2017,
+as at 31 December 2017 and as at 31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+2,145
+2,560
+Unwinding of discount (2) (note 7)
+(440)
+(1,337)
+Utilisation
+421
+Exchange differences
+300
+Due in 2023
+3.75%
+450
+Due in 2028
+4.375%
+1,000
+All the notes issued mentioned above were fully and unconditionally guaranteed by the Company.
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2015) U.S.A. LLC
+163
+(185)
+At 31 December
+Notes to Consolidated Financial Statements
+Issued and fully paid:
+28. SHARE CAPITAL
+CNOOC LIMITED Annual Report 2018
+112
+The discount rates used for calculating the provision for dismantlement is 5% (2017: 4% to 5%).
+(2)
+The amounts are included in the additions of oil and gas properties in note 13.
+(1)
+52,893
+54,159
+At 31 December
+(1,180)
+(675)
+Current portion of provision for dismantlement included in other payables
+and accrued liabilities (note 25)
+54,073
+54,834
+2.625%
+Due in 2020
+11.33
+2,000
+(873)
+2,909
+2018
+- Current
+At 31 December
+Recognised revenue in current period
+At 1 January
+2,036
+CONTRACT LIABILITIES
+24.
+23. TRADE AND ACCRUED PAYABLES
+The weighted average effective interest rate of the Group's bank deposits was 2.83% per annum, for the year ended 31
+December 2018 (2017: 2.23% per annum).
+The Group's cash and cash equivalents mainly consist of current deposits and time deposits with maturity within seven days.
+The bank balances are deposited with creditworthy banks.
+CASH AND CASH EQUIVALENTS AND TIME DEPOSITS WITH MATURITY OVER THREE MONTHS
+All customers have good credit quality with good repayment history and no significant receivables are past due. As at 31
+December 2018 and 31 December 2017, the age of substantially all the trade receivables was within one year.
+The credit terms of the Group are generally within 30 days after the delivery of oil and gas. Payment in advance or collateral may
+be required from customers, depending on credit rating. Trade receivables are non-interest bearing.
+As at 31 December 2018 and 2017, substantially all the trade and accrued payables were aged within six months. The trade
+and accrued payables are non-interest-bearing.
+22.
+2,036
+CNOOC LIMITED Annual Report 2018
+2018
+Current
+LOANS AND BORROWINGS
+26.
+Other payables
+Provision for dismantlement (note 27)
+Royalties payable
+Under the natural gas sale contracts, which contain take-or-pay clauses, the Group recorded the payments received from
+customers for natural gas not yet taken as contract liabilities.
+Special oil gain levy payable
+Accrued expenses
+Accrued payroll and welfare payable
+25. OTHER PAYABLES AND ACCRUED LIABILITIES
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+109
+Advances from customers
+2017
+7,354
+(464)
+Borrowings from CNOOC (note g)
+Amounts due from other related parties
+- included in trade receivables
+14,058
+12,401
+- included in other current assets
+1,434
+4,532
+513
+12,914
+(vi)
+Balance with a joint venture
+Amount due from a joint venture
+- included in other current assets
+2018
+2017
+15,492
+5,852
+Notes to Consolidated Financial Statements
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(601)
+1,540
+1,499
+6,278
+4,954
+2017
+2018
+31 December 2018
+TRADE RECEIVABLES
+Less: Provision for inventory obsolescence
+Oil in tanks
+Materials and supplies
+INVENTORIES AND SUPPLIES
+20.
+Included in the other non-current assets were restricted deposits for future dismantlement. Pursuant to the Provisional
+Regulations on the Dismantlement of Offshore Oil and Gas Production Facilities of the People's Republic of China, the Group
+accrues dismantlement costs for all the oil and gas fields under production sharing contracts in the PRC, and makes monthly
+cash contributions to the specified dismantlement fund accounts supervised by the PRC government. The deposit cannot
+be withdrawn or utilised for any other purposes but the dismantlement of oil and gas production facilities in the future. As of
+31 December 2018, the balance of the specified dismantlement fund accounts was RMB8,100 million (31 December 2017:
+RMB7,555 million).
+19. OTHER NON-CURRENT ASSETS
+21.
+1,996
+2,120
+747
+7,042
+2,059
+4,983
+5,113
+4,901
+212
+2,282
+8,991
+2,059
+4,901
+4,901
+2,059
+2,059
+Notes*
+212
+212
+223
+223
+4,901
+Non-current
+2,000
+305
+305
+annum with maturity
+through to 2021
+LIBOR+0.19% to 0.335% per
+For Tangguh LNG Project**
+Total
+13,892
+Notes
+Total
+Notes
+Loans
+final maturity
+2017
+2018
+Effective interest rate and
+Loans
+223
+within one year
+annum with maturity
+Notes
+Loans
+2017
+2018
+Effective interest rate and
+final maturity
+14,106
+12,777
+Total
+7,199
+1,180
+675
+75
+55
+55
+615
+3,096
+8,689
+Loans
+Notes
+Total
+LIBOR+0.19% to 0.335% per
+For Tangguh LNG Project**
+due within one year
+Loans and borrowings
+8,779
+8,779
+4,760
+4,760
+8,779
+8,779
+502
+4,760
+4,760
+annum with maturity
+within one year
+LIBOR+0.60% to 0.75% per
+General loans****
+Short-term loans and borrowings
+137
+126
+381
+The Group enters into extensive transactions covering sales of crude oil and natural gas, purchase of property, plant
+and equipment and other assets, receiving of services, and making deposits with state-owned enterprises, other than
+the CNOOC Group, in the normal course of business on terms comparable to those with other non-state-owned
+enterprises. The purchases of property, plant and equipment and other assets, and receipt of services from these state
+owned enterprises are individually not significant. The individually significant sales transactions with these state-owned
+enterprises are disclosed in note 35. In addition, the Group had certain of its cash in bank and time deposits with certain
+state-owned banks in the PRC as at 31 December 2018, as summarised below:
+3.875%
+1,500
+1,500
+CNOOC Finance (2012) Limited
+Due in 2042
+5.000%
+500
+Due in 2022
+500
+Matured in 2018
+1.750%
+750
+CNOOC Finance (2013) Limited
+Due in 2023
+3.000%
+2,000
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+CNOOC Nexen Finance (2014) ULC
+CNOOC Nexen Finance (2014) ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2015) Australia Pty Ltd
+CNOOC Finance (2012) Limited
+500
+31 December
+2017
+USD million
+USD million
+CNOOC Finance (2003) Limited
+Due in 2033
+5.500%
+300
+500
+300
+Due in 2021
+4.25%
+1,500
+1,500
+CNOOC Finance (2011) Limited
+Due in 2041
+5.75%
+CNOOC Finance (2011) Limited
+2018
+Due in 2043
+500
+500
+Due in 2035
+5.875%
+790
+790
+Due in 2037
+6.4%
+500
+1,250
+Due in 2039
+7.5%
+700
+700
+Due in 2025
+(vii) Transactions and balances with other state-owned enterprises
+3.500%
+1,250
+4.250%
+7.875%
+200
+500
+Due in 2024
+4.25%
+2,250
+2,250
+Due in 2044
+4.875%
+Due in 2032
+500
+Due in 2019
+6.2%
+300
+300
+Due in 2028
+7.4%
+200
+500
+Coupon Rate
+2,000
+31 December
+11,392
+(viii) Key management personnel's remuneration
+Key management personnel's remuneration is disclosed in note 8.
+(ix) Coalbed Methane Resources Exploration and Development Cooperation Agreement with China United
+Coalbed Methane Corporation Limited (note h).
+Notes:
+Accumulated investment
+2018
+11,015
+2,346
+1,940
+The amount due to the parent company and amounts due from/to related parties are unsecured, interest-free and are
+repayable on demand, unless otherwise disclosed.
+a)
+b)
+c)
+d)
+e)
+2017
+7,555
+8,100
+13
+CNOOC LIMITED Annual Report 2018
+117
+Maturity
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+30.
+RELATED PARTY TRANSACTIONS (continued)
+(vii) Transactions and balances with other state-owned enterprises (continued)
+2018
+2017
+Cash and cash equivalents
+Time deposits with maturity over three months
+Specified dismantlement fund accounts (note 19)
+2,688
+3,824
+227
+f)
+g)
+Interest rates for the above time deposits and specified dismantlement fund accounts are at prevailing market rates.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+117,079
+117,079
+1,923
+130,556
+132,479
+117,079
+118,358
+130,556
+110
+26. LOANS AND BORROWINGS (continued)
+The details of notes are as follows:
+Issued by
+Notes to Consolidated Financial Statements
+31 December 2018
+These represent the services for production operations, the provision of various facilities and ancillary services, such as provision of different types
+of materials, medical and employee welfare services, maintenance and repair of major equipment and supply of water, electricity and heat to the
+Group, some of which may not be available from independent third parties or available on comparable terms.
+Outstanding Principal Amount
+CNOOC LIMITED Annual Report 2018
+130,556
+1,279
+777
+These include marketing, administration and management, management of oil and gas operations and integrated research services as well as
+other ancillary services relating to exploration, development, production and research activities of the Group. In addition, the CNOOC Group leased
+certain premises to the Group for use as office premises and staff quarters out of which they provided management services to certain properties.
+CNOOC Energy Technology & Services Limited leased FPSO vessels to the Group for use in oil production operations.
+Notes*
+The sales include crude oil, condensate oil, liquefied petroleum gas, natural gas and liquefied natural gas to the CNOOC Group. Individual sales
+contracts were entered into from time to time between the Group and the CNOOC Group.
+It is the market practice for sales terms to be determined based on the estimated reserves and production profile of the relevant gas fields. The long
+term sales contracts usually last for 5 to 20 years.
+CNOOC Finance is a 31.8% owned associate of the Company and also a subsidiary of CNOOC. The financial services provided by CNOOC Finance
+to the Group also constitute continuing connected transactions defined in Chapter 14A of the Listing Rules and the Company has complied with the
+disclosure requirements in accordance with Chapter 14A of the Listing Rules for the continuing connected transactions. Under the financial services
+framework agreement with CNOOC Finance dated 1 December 2016, CNOOC Finance continues to provide to the Group settlement, depository,
+discounting, loans and entrustment loans services. The agreement is effective from 1 January 2017 to 31 December 2019. The depository services
+were exempted from independent shareholders' approval requirements under the Listing Rules. On 23 August 2018, the Board approved to
+revise the maximum daily outstanding balance of deposits placed by the Group with CNOOC Finance for the period from 23 August 2018 to 31
+December 2019 to RMB23,500 million. The Group's actual maximum daily outstanding balance for deposits stated in CNOOC Finance (including
+accrued interest but excluding funds placed for the purpose of extending entrustment loans pursuant to the entrustment loan services) in 2018 was
+RMB23,500 million (2017: RMB19,500 million).
+In September 2014, CNOOC provided CNOOC International Limited, a wholly-owned subsidiary of the Company a five-year uncommitted revolving
+loan facility for general purposes, with the principal amount of US$135 million of 0.95% per annum. As at 31 December 2018, the withdrawal
+amount of the loan was US$130 million (31 December 2017: US$130 million); In December 2014, CNOOC provided the Company a five-year
+uncommitted revolving loan facility for general purposes, with the principal amount of US$600 million of 0.95% per annum. As at 31 December
+2018, the withdrawal amount of the loan was US$564 million (31 December 2017: US$564 million).
+China United Coalbed Methane Corporation Limited is a subsidiary of CNOOC.
+118
+h)
+For Tangguh LNG III Project***
+LIBOR+1.37% to 3.45% per
+annum with maturity
+from 2021 to 2029
+1,618
+1,618
+777
+502
+At 1 January 2018
+At 31 December 2017
+132,250
+16,500
+1,181
+133,431
+(5,154)
+132,250
+5,901
+133,431
+Financing cash flows
+1,300
+(5,147)
+Foreign exchange translation
+16,500
+(23,523)
+445
+1,181
+Dividends declared
+(16,448)
+2,495
+(27,370)
+(31,271)
+Foreign exchange translation
+(8,911)
+51
+(52)
+(8,912)
+Finance costs
+354
+4,690
+5,044
+Unwinding of discount on provision
+for dismantlement (note 27)
+(2,145)
+(2,145)
+Amount capitalised in property,
+plant and equipment (note 13)
+2,495
+6,346
+2017
+70
+COMMITMENTS AND CONTINGENCIES
+(i)
+Capital commitments
+As at 31 December 2018, the Group had the following capital commitments, principally for the construction of property,
+plant and equipment:
+2018
+2017
+Contracted, but not provided for (1)
+55,538
+46,704
+(1)
+The capital commitments contracted, but not provided for, include the estimated payments to the Ministry of Natural Resources of the PRC
+for the next five years with respect to the Group's exploration and production licenses.
+The above table includes a commitment of approximately RMB10,309 million (2017: RMB4,030 million) contracted with
+the CNOOC Group.
+Capital commitments of a joint venture:
+2018
+Contracted, but not provided for
+(9,669)
+590
+33.
+Finance costs
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+120 CNOOC LIMITED Annual Report 2018
+4,967
+5,037
+Unwinding of discount on provision
+for dismantlement (note 27)
+(2,560)
+(2,560)
+Amount capitalised in property,
+plant and equipment (note 13)
+2,838
+2,838
+Dividends declared
+23,078
+23,078
+At 31 December 2018
+139,521
+1,279
+140,800
+Notes to Consolidated Financial Statements
+Financing cash flows
+31.
+1,244
+36,357
+(796)
+(653)
+5,037
+5,044
+141
+(356)
+(406)
+(302)
+Loss/(profit) attributable to a joint venture
+5,593
+(553)
+Investment income
+(3,685)
+(2,409)
+Impairment for property, plant and equipment
+5,790
+75,177
+8,639
+Share of profits of associates
+Finance costs
+691
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+32.
+RETIREMENT BENEFITS
+All the Group's full-time employees in the PRC are covered by a state-managed retirement benefit plan operated by the
+government of the PRC, and are entitled to an annual pension. The PRC government is responsible for the pension liabilities to
+these retired employees. The Group is required to make annual contributions to the state-managed retirement benefit plan at
+rates ranging from 11% to 22% of the employees' base salaries.
+The Company is required to make contributions to a defined contribution mandatory provident fund at a rate of 5% of the
+salaries of all full-time employees in Hong Kong. The related pension costs are expensed as incurred.
+The Group provides retirement benefits for all local employees in overseas locations in accordance with relevant labour law, and
+provides employee benefits to expatriate staff in accordance with the relevant employment contracts.
+During the year, the Group's pension costs charged to the consolidated statement of profit or loss and other comprehensive
+income amounted to RMB688 million (2017: RMB651 million).
+NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
+Reconciliation of profit before tax to cash generated from operations
+2018
+2017
+Profit before tax
+Adjustments for:
+Interest income
+Exchange losses/(gains), net
+151,720
+Provision for other assets
+491
+119
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+32.
+NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
+Reconciliation of liabilities arising from financing activities
+The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash
+changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in
+the Group's consolidated statement of cash flows as cash flows from financing activities.
+Loans and
+borrowings
+Interest
+payable
+Dividend
+(Note 26)
+(Note 25)
+payable
+Total
+At 1 January 2017
+150,476
+CNOOC LIMITED Annual Report 2018
+442
+110,625
+Cash generated from operations
+Depreciation, depletion and amortisation
+50,640
+61,257
+Loss on disposal and write-off of property, plant and equipment
+668
+1,937
+Subtotal
+138,601
+109,452
+Increase in trade receivables and other current assets
+(988)
+Decrease in inventories and supplies
+1,720
+(1,073)
+1,464
+Increase in trade and accrued payables, contract liabilities and
+other payables and accrued liabilities
+21
+782
+139,354
+As at 31 December 2018, the Group had unutilised banking facilities amounting to approximately RMB55,289 million
+(2017: RMB53,749 million).
+Commitments due:
+a.
+10,742
+Amounts due to subsidiaries
+87
+287
+Other payables and accrued liabilities
+3,682
+3,867
+Loans and borrowings
+CURRENT LIABILITIES
+Total current assets
+73,106
+74,764
+142
+1,786
+Cash and cash equivalents
+2,871
+11,113
+Other financial assets
+14
+Total current liabilities
+4,154
+14,511
+NET CURRENT ASSETS
+XU Keqiang
+Director
+CNOOC LIMITED Annual Report 2018
+126
+YUAN Guangyu
+Director
+176,032
+193,707
+132,951
+150,626
+43,081
+Equity investments
+43,081
+193,707
+58,595
+70,610
+TOTAL EQUITY
+Reserves
+Issued capital
+Equity attributable to owners of the parent
+EQUITY
+NET ASSETS
+176,032
+39.
+56,891
+Loans to a subsidiary
+Notes to Consolidated Financial Statements
+125
+CNOOC LIMITED Annual Report 2018
+25.8%
+25.1%
+512,225
+556,886
+379,975
+417,365
+132,250
+139,521
+2017
+2018
+Gearing ratio
+Total capital
+Equity attributable to owners of the parent
+Interest-bearing debts
+The Group monitors capital on the basis of the debt to capital ratio, which is calculated as interest-bearing debts divided
+by total capital (equity attributable to owners of the parent plus interest-bearing debts).
+The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To
+maintain or adjust the capital structure, the Group may return capital to shareholders, raise new debt or issue new
+shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31
+December 2018 and 2017.
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+37.
+CHARGES ON ASSETS
+13,146
+5,650
+Amounts due from subsidiaries
+42
+46
+Other current assets
+CURRENT ASSETS
+117,437
+123,097
+56,169
+117,437
+Total non-current assets
+Property, plant and equipment
+Investments in subsidiaries
+NON-CURRENT ASSETS
+2017
+2018
+Information about the statement of financial position of the Company at the end of the reporting period is as follows:
+The Group has no significant subsequent events needed to be disclosed in the consolidated financial statements.
+STATEMENT OF FINANCIAL POSITION OF THE COMPANY
+39.
+CNOOC NWS Private Limited, a wholly-owned subsidiary of the Group, together with the other joint venture partners and the
+operator of the NWS Project, signed a Deed of Cross Charge and an Extended Deed of Cross Charge whereby certain liabilities
+incurred or to be incurred, if any, by the Company in respect of the NWS Project are secured by its interest in the NWS Project.
+123,097
+The primary objectives of the Group's capital management are to safeguard the Group's ability to continue as a going
+concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.
+Notes to Consolidated Financial Statements
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+The consolidated financial statements were approved and authorised for issue by the Board of Directors on 21 March 2019.
+40. APPROVAL OF THE FINANCIAL STATEMENTS
+As at 31 December 2018, the distributable retained earnings of the Company amounted to approximately RMB151,539 million (2017: RMB143,170
+million).
+150,626
+151,539*
+5,558
+(6,471)
+Balance at 31 December 2018
+(14)
+(14)
+instruments at FVTOCI
+Disposal of investments in equity
+(11,785)
+(11,785)
+2018 interim dividend
+(11,293)
+(11,293)
+2017 final dividend
+40,767
+CNOOC LIMITED Annual Report 2018 127
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+128 CNOOC LIMITED Annual Report 2018
+The Company determines its net entitlement oil and gas reserves under production sharing contracts using the economic interest
+method.
+Pursuant to SEC Final Rule, the Group uses the average, first-day-of-the-month oil price during the 12-month period before the
+ending date of the period covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+The Group's net proved reserves consist of its interest in reserves, comprised of a 100% interest in its independent oil and gas
+properties and its participating interest in the properties covered under the production sharing contracts in the PRC, less (i)
+an adjustment for the Group's share of royalties payable by the Group to the PRC government and the Group's participating
+interest in share oil payable to the PRC government under the production sharing contracts, and less (ii) an adjustment
+for production allocable to foreign partners under the PRC production sharing contracts as reimbursement for exploration
+expenses attributable to the Group's participating interest, and plus the participating interest in the properties covered under
+the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host government
+and the domestic market obligation.
+The reserves estimators and auditors are required to be members of a professional society, such as China Petroleum Society
+(CPS), and are required to take the professional trainings and examinations as required by the professional society and us.
+The RMC delegates its daily operation to our Reserves Office, which is led by our Chief Reserve Supervisor. The Reserves Office
+is mainly responsible for supervising reserves estimates and auditing. It reports to the RMC periodically and is independent from
+operating divisions such as the exploration, development and production departments. Our Chief Reserve Supervisor has more
+than 35 years' experience in oil and gas industry.
+The RMC follows certain procedures to appoint our internal reserves estimators and reserves auditors, who are required to have
+undergraduate degrees and at least five years and ten years of experience related to reserves estimation, respectively.
+select our reserves estimators and auditors.
+•
+review our proved reserves and other categories of reserves; and
+31,461
+review our reserves policies;
+The RMC's main responsibilities are to:
+We established the Reserve Management Committee (the "RMC"), which is led by one of our Executive Vice Presidents and
+comprises the general managers of the relevant departments.
+We implemented rigorous internal control system that monitors the entire reserves estimation process and certain key metrics
+in order to ensure that the process and results of reserves estimates fully comply with the relevant SEC rules.
+For the years 2018, 2017 and 2016, approximately 69%, 65% and 60%, respectively, of our total proved reserves were
+evaluated by us, and the remaining were evaluated by independent third parties.
+Crude oil and natural gas reserve estimates are determined through analysis of geological and engineering data which appear,
+with reasonable certainty, to be economically producible in the future from known oil and natural gas reservoirs under existing
+economic and operating conditions. The reserve data that we disclosed were all based on the definitions and disclosure
+guidelines contained in the US Securities and Exchange Commission's final rules on "Modernization of oil and Gas Reporting"
+(the "SEC Final Rule").
+Reserve quantity information
+(a)
+The regional analysis presented below is on a continent basis, with separate disclosure for countries that contain 15% or more of the
+total proved reserve, in accordance with SEC and FASB requirements.
+The following disclosures are included in accordance with the FASB Accounting Standard Codification 932 "Extractive Activities-Oil
+and Gas (the "ASC 932").
+•
+31 December 2018
+9,306
+9,306
+Total comprehensive (expense)/income
+(11,464)
+(11,464)
+Other comprehensive expense
+38,099
+38,099
+Profit for the year
+122,816
+121,571
+5,558
+(4,313)
+Balance at 1 January 2017
+Total
+Retained
+earnings
+Other
+reserves
+reserve
+Cumulative
+translation
+A summary of the Company's reserves is as follows:
+STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
+(11,464)
+38,099
+26,635
+2016 final dividend
+9,306
+Other comprehensive income
+31,461
+31,461
+Profit for the year
+132,951
+143,170
+5,558
+(15,777)
+Total comprehensive income
+Balance at 1 January 2018
+143,170*
+5,558
+(15,777)
+Balance at 31 December 2017
+(7,587)
+(7,587)
+2017 interim dividend
+(8,913)
+(8,913)
+132,951
+(ii) Operating lease commitments
+(vi) Capital management
+The Group manages its liquidity risk by regularly monitoring its liquidity requirements and its compliance with debt
+covenants to ensure that it maintains sufficient cash and cash equivalents, and readily realisable equity investments and
+other financial assets, and adequate time deposits to meet its liquidity requirements in the short and long term. In addition,
+bank facilities have been put in place for contingency purposes.
+7,169
+7,317
+3,406
+3,061
+1,616
+1,760
+875
+1,117
+1,272
+1,379
+2017
+2018
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+No later than one year
+As at 31 December 2018, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+The Group leases certain of its plant and equipment under operating lease arrangements for a term from 1 year to
+25 years.
+Plant and equipment
+b.
+69
+The above table includes a commitment of approximately RMB5, 195 million (2017: RMB3,366 million) to the
+CNOOC Group.
+(iii) Contingencies
+As a Chinese Resident Enterprise, the Company may be liable to pay taxes on the deemed interest income for the funding
+provided to its overseas subsidiaries starting from 1 January 2008. The Company has prepared contemporaneous
+documentation in accordance with applicable PRC tax laws and regulations and is currently awaiting confirmation from
+its local tax authority.
+The Group is subject to tax in numerous jurisdictions around the world. There are audits in progress and items under
+review. Difference in positions taken by taxation authorities over the interpretation and application of tax laws and
+regulations may increase the Group's tax liability. Management of the Company has assessed the possible future
+outcome of matters that are currently under dispute. Management of the Company believes that an adequate provision
+for future tax liability has been included in the consolidated financial statements based on available information.
+Level 2
+Level 1
+2018
+31 December
+As at 31 December 2018 and 31 December 2017, the Group held the following financial instruments measured at fair value for
+each hierarchy respectively:
+Level 3: fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are
+not based on observable market data (unobservable inputs), or where the observable data does not support the majority of the
+instruments fair value.
+Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
+observable for the asset or liability, either directly or indirectly. Instruments in this category include private equity funds and
+corporate wealth management products. The Group obtains information from sources of independent price publications, over-
+the-counter broker quotes and the fund management's quotations as at the reporting date.
+The Group uses the following hierarchy that reflects the significance of the inputs used in making the fair value measurement:
+Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which
+transaction occur in sufficient frequency and volume to provide pricing information on an on-going basis.
+Fair value hierarchy
+99
+The estimated fair value of the Group's long term guaranteed notes was approximately RMB134,583 million as at 31 December
+2018 (2017: RMB128,315 million), which was determined by reference to the market price as at 31 December 2018.
+The carrying values of the Group's cash and cash equivalents, time deposits with maturity more than three months, trade
+receivables, other current assets, short-term loans and borrowings, trade and accrued payables, other payables and accrued
+liabilities approximated to their fair values at the reporting date due to the short maturity of these instruments.
+Fair value of financial instruments
+34. FINANCIAL INSTRUMENTS
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+122
+In addition to the matters mentioned above, the Group is dealing with a number of lawsuits and arbitrations that arise
+in the ordinary course of business. While the results of these legal proceedings cannot be ascertained at this stage,
+management of the Company believes these proceedings are not expected to have a material effect on the consolidated
+financial statements.
+The carrying amount of the Group's non-current non-publicly traded equity investments represents an appropriate estimate of
+their fair values, as sufficient information is not available recently to measure their fair values as at 31 December 2018 and 2017.
+The fair value of the Group's long term bank loans with floating interest rates approximated to the carrying amount as at 31
+December 2018 and 2017.
+Level 3
+139
+12
+The above table includes minimum lease payments of approximately RMB898 million (2017: RMB1,218 million) to
+the CNOOC Group.
+5,726
+9,055
+1,774
+4,260
+1,274
+2,106
+1,048
+927
+1,630
+1,762
+2017
+2018
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+No later than one year
+Commitments due:
+As at 31 December 2018, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+The Group leases certain of its office properties under operating lease arrangements. Leases for properties are
+negotiated for terms ranging from 6 months to 20 years.
+Office properties
+CNOOC LIMITED Annual Report 2018
+121
+Notes to Consolidated Financial Statements
+31 December 2018
+18
+NONO
+23
+63
+228
+32
+20
+24
+2017
+16
+2018
+Later than one year and not later than two years
+No later than one year
+Commitments due:
+Office properties commitments of a joint venture:
+a. Office properties (continued)
+(ii) Operating lease commitments (continued)
+COMMITMENTS AND CONTINGENCIES (continued)
+33.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Later than two years and not later than five years
+Later than five years
+The Group's trade and accrued payables, other payables and accrued liabilities are all due for settlement within six
+months after the reporting date.
+Assets measured at fair value
+Corporate wealth management products
+Money market funds
+The Group's principal financial instruments comprise bank loans, long term guaranteed notes, equity investments and other
+financial assets, cash and short term deposits. The Group has various other financial assets and liabilities such as trade
+receivables, other receivables, trade and accrued payables, which arise directly from its operations.
+2,627
+N/A
+N/A
+2,970
+3,108
+3,232
+2,631
+4,440
+15,488
+13,329
+11,957
+15,841
+2017
+2018
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
+36.
+These transactions are with other state-owned enterprises.
+Royal Dutch Shell PLC
+The Group is exposed to credit risk, oil and gas price risk, currency risk, interest rate risk and liquidity risk.
+The Group's senior management oversees the management of these risks. The Group's senior management is supported by
+various departments that advise on financial risks and the appropriate financial risks governance framework for the Group.
+Those departments provide assurance to the Group's senior management that the Group's financial risk-taking activities are
+governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance
+with group policies and group risk appetite.
+(i)
+(ii)
+Liquidity risk
+The interest rate risk is closely monitored by the Group's senior management. As at the end of 2018, the interest rates
+for 98.41% of the Group's debts were fixed. Apart from borrowing for Tangguh LNG Project, all of the Group's long term
+debts are fixed rate. The weighted average term of the Group's debt balance outstanding was approximately 8.98 years.
+The fixed interest rates can reduce the volatility of finance costs under uncertain environments and the Group's exposure
+to changes in interest rates is not expected to be material.
+(v)
+(iv) Interest rate risk
+Senior management is closely monitoring the Group's net exposure to foreign currency risk. The depreciation of RMB
+against the US dollars may have the following impact on the Group. On one hand, since the benchmark oil and gas prices
+are usually in US dollars against RMB, the Group's oil and gas sales may increase due to the appreciation of the US
+dollars against RMB. On the other hand, the appreciation of the US dollars against RMB will also increase the Group's
+costs for imported equipment and materials, most of which are denominated in the US dollars.
+Management has assessed the Group's exposure to foreign currency risk by using a sensitivity analysis on the change
+in foreign exchange rate of the US dollars, to which the Group is mainly exposed to as at 31 December 2018 and 2017.
+Based on management's assessment at 31 December 2018, a 5% strengthening/weakening of RMB against US dollars
+would have increased/decreased the profit for the year of the Group by 0.15% (2017: 0.06%) and the equity of the Group
+by 0.25% (2017: 0.31%). This analysis has been determined assuming that the change in foreign exchange rates had
+occurred at the end of the reporting period and had been applied to the foreign currency balances to which the Group
+has significant exposure with all other variables held constant. The analysis is performed on the same basis for 2017.
+Substantially all of the Group's oil and gas sales are denominated in RMB and United States dollars ("US dollars").
+Starting from 21 July 2005, China reformed the exchange rate regime by moving into a managed floating exchange rate
+regime based on market supply and demand with reference to a basket of currencies. RMB would no longer be pegged
+to the US dollars. From 1 January 2018 to 29 December 2018 (the last working day in 2018), RMB has depreciated
+by approximately 4.79% (2017: appreciated by approximately 6.16%) against the US dollars. At 31 December 2018,
+approximately 84% (2017: 82%) of the Group's cash and cash equivalents and time deposits with maturity over three
+months were denominated in RMB, and the remaining amounts were substantially denominated in US dollars and Hong
+Kong dollars. The Group also has exposures to currencies other than the US dollars, such as Canadian dollars and British
+Pounds as such exposures are considered insignificant.
+(iii) Currency risk
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+China National Chemical Corporation*
+36.
+31 December 2018
+Notes to Consolidated Financial Statements
+124 CNOOC LIMITED Annual Report 2018
+Since the Group makes reference to international oil prices to determine its realised oil price, fluctuations in international oil
+price would have a significant impact on the Group's sales revenue, profit, assets value and cashflow. In addition, certain
+of the Group's natural gas sales contracts contain price adjustment provisions. Any changes in international oil prices,
+inflation rate and domestic natural gas pricing policies may result in changes in natural gas prices, which will affect the
+Group's profitability.
+Oil and gas price risk
+Concentrations of credit risk are managed by counterparty and by geographical region. At 31 December 2018, the
+Group has certain concentrations of credit risk as 0.06% (2017: 0.16%) and 0.07% (2017: 7.63%) of the Group's
+trade receivables were due from the Group's largest third-party customer and the five largest third-party customers,
+respectively.
+In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination
+of credit limits and credit approvals. Before accepting any new counterparties, the Group uses an internal credit scoring
+system to assess the potential counterparty's credit quality and defines credit limits by counterparty. Limits and scoring
+attributed to counterparties are reviewed twice a year. Other monitoring procedures are in place to ensure that follow-
+up action is taken to recover overdue debts. In addition, the Group performs impairment assessment under ECL model
+upon application of IFRS 9/HKFRS 9 (2017: incurred loss model) on trade receivables and other receivables individually or
+based on provision matrix. In this regard, the Directors of the Company consider that the Group's credit risk is significantly
+reduced.
+As at 31 December 2018, the carrying amounts of the Group's cash and cash equivalents, time deposits with maturity
+more than three months, trade receivables and other receivables (approximately RMB4,941 million included in other
+current assets) represent the Group's maximum exposure to credit risk in relation to its financial assets. The Group does
+not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.
+Credit risk and management assessment
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Other financial assets - current
+BP p.l.c.
+China Petroleum & Chemical Corporation*
+Other financial assets - current
+Assets measured at fair value
+Level 3
+Level 2
+Level 1
+2017
+31 December
+105,917
+20,476
+126,393
+1,110
+1,110
+Non-publicly traded investments - current
+Publicly traded investments - non-current
+Equity investments
+II
+19,366
+19,366
+105,917
+105,917
+Corporate wealth management products
+Money market funds
+66,229
+66,229
+8,115
+PetroChina Company Limited*
+A substantial portion of the Group's oil and gas commodities sales to third-party customers is made to a small number of
+customers on credit. Details of the gross sales to these top five third party customers are as follows:
+CONCENTRATION OF CUSTOMERS
+35.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+123
+CNOOC LIMITED Annual Report 2018
+Phillips 66
+No amounts have been transferred between the different levels of the fair value hierarchy for the year.
+8,896
+75,139
+781
+781
+14
+14
+Non-publicly traded investments - current
+Publicly traded investments - non-current
+Equity investments
+8,115
+66,243
+38. SUBSEQUENT EVENTS
+PRC) Oceania
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+204,706
+33,519
+9,471
+35,502
+77,824
+27,835
+2
+1,645
+18,908
+Accumulated depreciation,
+Unproved oil and gas properties
+20,402
+3,856
+64,875
+50,554
+101,050
+2,558
+46,634
+471,242
+Proved oil and gas properties
+761,171
+Total
+depletion and amortization
+(36,000)
+North
+Enterprise's share of equity method investees
+2018
+404,631
+8,269
+12,239
+63,213
+91,593
+50,066
+(324,046)
+868
+166,104
+Net capitalized costs
+(561,246)
+(45,652)
+(1,088)
+(37,164)
+(36,785)
+(78,819)
+(1,692)
+12,279
+Europe
+Canada) America
+Canada
+Unproved oil and gas properties
+35,386
+33,227
+2,159
+Proved oil and gas properties
+Total
+Europe
+South
+(excluding
+Canada Canada) America
+4,743
+Africa
+PRC
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees
+2017
+397,836
+11,325
+8,891
+PRC) Oceania
+4,743
+Accumulated depreciation,
+depletion and amortization
+Africa
+(a)
+PRC)
+PRC
+South
+North
+America
+(excluding
+(excluding
+Asia
+2018
+Consolidated entities
+(c) Capitalized costs (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+134 CNOOC LIMITED Annual Report 2018
+26,390
+26,369
+21
+Net capitalized costs
+(13,739)
+(11,601)
+(2,138)
+Asia
+(excluding
+America
+(excluding
+South
+Acquisition costs:
+-Proved
+2016
+48,864
+843
+1,807
+7,118
+1,913
+12,926
+37
+- Unproved
+Exploration costs
+Development costs*
+3,557
+Total costs incurred
+39,513
+538
+219
+6,476
+1,610
+12,701
+3,549
+14,420
+20,663
+Total costs incurred
+Enterprise's share of equity method investees
+North
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+135
+CNOOC LIMITED Annual Report 2018
+2,065
+2,055
+1,833
+232
+10
+10:22
+TIOT
+Total
+Europe
+Canada) America
+Canada
+Africa
+PRC) Oceania
+PRC
+South
+(excluding
+America
+Asia
+(excluding
+Development costs*
+57,367
+9,351
+1,588
+Net capitalized costs
+(16,056)
+(13,956)
+(2,100)
+depletion and amortization
+Accumulated depreciation,
+4,675
+4,675
+Unproved oil and gas properties
+59
+42,820
+2,159
+Proved oil and gas properties
+Total
+Europe
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+40,661
+31,380
+31,439
+(d)
+642
+303
+225
+37
+8
+6,243
+Exploration costs
+- Unproved
+-Proved ........
+Acquisition costs:
+Total
+Europe
+Canada) America
+Africa Canada
+PRC) Oceania
+PRC
+South
+North
+America
+(excluding
+Asia
+(excluding
+2016
+Consolidated entities
+Costs incurred in oil and gas property acquisition, exploration and development
+305
+31 December 2018
+95,277
+957
+CNOOC LIMITED Annual Report 2018
+50,217
+4,416
+(11,185)
+2,114
+(5,297)
+619
+516
+1,401
+133
+57,633
+(11,238)
+(11,191)
+(47)
+Result of operations
+Income tax expense
+(47)
+(11,238)
+(11,191)
+I
+Total result of operations for
+producing activities
+I
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+614,906
+4,156
+533
+47,763
+14,247
+84,014
+2,585
+36,318
+425,290
+31 December 2018
+Proved oil and gas properties
+South
+North
+America
+(excluding
+Canada) America Europe
+Africa Canada
+PRC) Oceania
+PRC
+Asia
+(excluding
+Consolidated entities
+2016
+(c) Capitalized costs
+Total
+(12,009)
+(11,877)
+(78)
+(13)
+Taxes other than income tax
+(101)
+Operating expenses
+208
+Net sales to customers
+PRC
+2018
+61,455
+Exploration expense
+4,416
+2,114
+(5,297)
+619
+516
+1,401
+57,680
+Result of operations
+(22,437)
+(3,022)
+6
+Accretion expense
+Depreciation, depletion and
+amortization, and impairment
+(69)
+(22)
+(22)
+(1,333)
+(1,320)
+(1,655)
+(1,554)
+3,859
+3,651
+Total
+Europe
+America
+South
+America
+(excluding
+Canada)
+Africa Canada
+Oceania
+North
+Enterprise's share of equity method investees:
+Asia
+(excluding
+PRC)
+Special oil gain levy
+(132)
+Unproved oil and gas properties
+13,635
+1,731
+2
+443,193
+Proved oil and gas properties
+Total
+Canada) America Europe
+Canada
+Africa
+PRC) Oceania
+PRC
+South
+38,541
+(excluding
+Asia
+(excluding
+2017
+Consolidated entities
+30,160
+30,002
+158
+Net capitalized costs
+(12,281)
+(10,310)
+(1,971)
+North
+America
+2,435
+Unproved oil and gas properties
+16,163
+12,950
+160,185
+Net capitalized costs
+(40,350) (492,505)
+(942)
+(31,835)
+(27,894)
+(64,047)
+(1,480)
+(26,786)
+(299,171)
+depletion and amortization
+Accumulated depreciation,
+11,586 656,177
+40,089 234,164
+7,917
+34,471
+1,916
+54,731
+84,241 19,534
+30,690 103,637
+2
+1,195
+depletion and amortization
+50,884
+Accumulated depreciation,
+5,645
+14,968
+172,923
+Net capitalized costs
+(440,864)
+(36,083)
+(936)
+(27,733)
+(27,226)
+(58,331)
+1,115
+(1,472)
+(266,002)
+depletion and amortization
+Accumulated depreciation,
+255,439
+49,524
+7,619
+38,649
+115,875
+28,404
+(23,081)
+54,087
+102,896
+58,679
+Unproved oil and gas properties
+36,796
+34,667
+2,129
+Proved oil and gas properties
+Total
+Europe
+South
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+(excluding
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees
+2016
+429,481
+17,597
+7,216
+5,645
+203
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Costs incurred in oil and gas property acquisition, exploration and development (continued)
+Notes
+2017
+Consolidated entities
+Standardised measure of discounted future net cash flows and changes therein (continued)
+(e)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+137
+CNOOC LIMITED Annual Report 2018
+PRC
+233,496
+9,552
+14,908
+4,330
+3,948
+3,085
+9,228
+182,803
+Total standardised measure of
+discounted future net cash flow
+9,871
+5,642
+9,577
+Asia
+(excluding
+PRC) Oceania
+Europe
+(142,001)
+10% discount factor
+446,131
+7,673
+6,653
+37,017
+33,860
+4,299 21,930
+318,008 16,691
+North
+America
+(excluding South
+Africa Canada Canada) America
+Future net cash flows
+(5,938) (7,685) (240,480)
+24,917 299,553 97,944 27,183 30,636 1,396,726
+(1,394) (222,849) (42,432) (12,435) (11,422) (631,885)
+(1,593) (42,844) (18,495)
+856,256 50,074 10,163
+(316,050) (22,714) (2,589)
+(157,966) (4,134) (1,825)
+(64,232) (6,535) (1,450)
+Future income taxes
+Future development costs
+Future production costs
+(1)
+Future cash inflows
+Total
+(2,157) (3,856) (78,230)
+2244
+discounted future net cash flows
+Standardised measure of
+Europe
+South
+America
+Africa Canada Canada)
+Oceania
+(excluding
+America
+Asia
+(excluding
+PRC)
+PRC
+Notes
+Total
+North
+2016
+223,625
+5,642
+(25)
+25
+4,330 14,908
+3,948
+3,085
+9,228
+Enterprise's share of equity method investees
+1,801
+68,573
+70,374
+10% discount factor
+Future net cash flows
+Future income taxes
+Future development costs
+Future production costs
+Future cash inflows
+(11,298)
+(11,412)
+114
+21,169
+20,989
+180
+က
+(11,292)
+(11,292)
+(9,660)
+(9,113)
+(547)
+(28,253)
+(27,179)
+(1,074)
+(6,014)
+(1,090) (4,860)
+(28,254)
+(18,369)
+13,110
+13,342
+Total standardised measure of
+discounted future net cash flow
+176,239
+10,677
+3,209
+17,070
+5,606
+232
+18,648
+7,324
+255,246
+2018
+Consolidated entities
+North
+Asia
+(excluding
+America
+(excluding
+South
+Notes
+16,473
+discounted future net cash flows
+Standardised measure of
+(15,958)
+Africa Canada
+Canada)
+America
+Europe
+Total
+1,581
+90,964
+92,545
+(985)
+(35,472)
+(36,457)
+(11,342)
+(11,342)
+(15,446)
+(15,446)
+က
+596
+(364)
+28,704
+29,300
+(15,594)
+PRC
+182,509
+PRC) Oceania
+Total
+Future net cash flows
+Future income taxes
+Future development costs
+Future production costs
+Future cash inflows
+2017
+241,904
+7,324
+3,363
+10% discount factor
+18,648
+17,070
+3,209
+10,677
+176,007
+discounted future net cash flows
+Standardised measure of
+(204,227)
+(349)
+(3,290)
+5,606
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+Future cash inflows
+Future production costs
+Future development costs
+Future income taxes
+1,265,804 56,121 10,388 53,962 339,668 125,898 38,104 53,669 1,943,614
+(435,664) (23,068) (2,576) (10,929) (227,445) (51,544) (14,271) (18,333) (783,830)
+(233,501) (3,990) (1,792) (8,373) (43,197) (15,186) (6,539) (8,939) (321,517)
+(118,666) (9,665) (1,507) (4,895)
+(5,537) (1,616) (9,882) (151,768)
+Future net cash flows
+10% discount factor
+477,973 19,398 4,513 29,765 69,026
+(174,025) (7,780) (1,044) (4,375) (52,665)
+53,631
+15,678 16,515 686,499
+(20,690) (6,481) (3,364) (270,424)
+Standardised measure of
+discounted future net cash flows
+303,948
+11,618
+3,469
+25,390
+16,361
+32,941
+9,197 13,151 416,075
+138
+CNOOC LIMITED Annual Report 2018
+Notes
+South
+(excluding
+America
+Africa Canada Canada) America Europe
+(d)
+discounted future net cash flows
+(179,895)
+2,881
+2,824
+2,822
+5959
+| | |
+N
+2
+IIIN
+Total costs incurred
+2,883
+Unproved
+Exploration costs
+Development costs*
+Total
+Europe
+South
+America
+(excluding
+Canada)
+Canada
+Africa
+PRC) Oceania
+PRC
+America
+Acquisition costs: ...
+Asia
+(excluding
+2018
+North
+181
+10,075
+Exploration costs
+264
+264
+-Unproved
+Acquistion costs:
+Total
+Europe
+Consolidated entities
+America
+Canada
+Africa
+PRC) Oceania
+PRC
+South
+(excluding
+(excluding
+America
+Asia
+Canada)
+North
+Enterprise's share of equity method investees
+2017
+46
+7,933
+Exploration costs
+- Unproved
+Acquisition costs:
+Total
+Europe
+America
+Canada)
+329
+Canada
+Oceania
+PRC)
+PRC
+South
+America
+(excluding
+(excluding
+Asia
+North
+2017
+Consolidated entities
+Africa
+64
+275
+1,143
+52,733
+1,680
+2,195
+8,585
+2,417
+9,509
+7
+4,047
+24,293
+Total costs incurred
+42,169
+913
+1,052
+8,310
+2,353
+9,180
+4,001
+16,360
+Development costs*
+10,564
+767
+1
+357
+246
+178
+(2,175)
+(160,725) (8,222)
+(2)
+Future development costs
+10,553
+(2,757)
+858,295 63,639
+(315,248) (35,825)
+Future production costs
+(1)
+Future cash inflows
+34,626
+90,596
+75,151
+(9,273) (69,337) (18,499)
+(17,687) (7,202) (21,364)
+Total
+North
+America
+(excluding South
+Africa Canada Canada) America
+Asia
+(excluding
+PRC) Oceania
+PRC
+Notes
+2016
+Consolidated entities
+Present value of estimated future net cash flows:
+Management believes that this information does not represent the fair market value of the oil and natural gas reserves or the
+present value of estimated cash flows since no economic value is attributed to potential reserves, the use of a 10% discount
+rate is arbitrary, and prices change constantly.
+Future development costs are estimated based upon constant price assumptions and the assumption of the continuation of
+existing economic, operating and regulatory conditions. Future income taxes are calculated by applying the year-end statutory
+rate to estimate future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties based upon existing
+laws and regulations. The discount was computed by the application of a 10% discount factor to the estimated future net cash
+flows.
+Pursuant to FASB Topic 932, the average of first-day-of-the-month oil price during the 12-month period before the year end,
+were used to estimate annual future production from proved reserves to determine future cash inflows.
+Europe
+327
+(220)
+23,410
+1,156,597
+196
+403,520
+(22) 5,446
+14,057 35,288
+(9,727) (20,380)
+(3,718)
+(1,165)
+(5,753)
+(139,345)
+10% discount factor
+7,666
+4,250
+321,854 14,981
+Future net cash flows
+(2,091) (68,627)
+(86)
+(1,371)
+(60,468) (4,611)
+Future income taxes
+(8,267) (225,685)
+(43)
+(7,606) (458,765)
+(e) Standardised measure of discounted future net cash flows and changes therein
+Standardised measure of
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CNOOC LIMITED Annual Report 2018
+3,325
+7,295
+709
+8,620
+1
+6,339
+36,876
+Total costs incurred
+51,193
+707
+176
+7,117
+463
+8,263
+6,158
+26,801
+Development costs*
+12,415
+531
+846
+2,215
+63,872
+2018
+Acquisition costs:
+-Proved
+136
+The development costs include estimated future dismantlement costs of dismantling offshore oil and gas properties.
+2,487
+2,487
+32
+2,455
+32
+2,455
+Total
+Europe
+South
+America
+America
+(excluding
+Canada)
+Canada
+Africa
+Oceania
+Asia
+(excluding
+PRC)
+PRC
+North
+Enterprise's share of equity method investees
+Total costs incurred
+Development costs*
+Exploration costs
+- Unproved
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+(137)
+Oceania
+(621)
+31 December 2018
+31 December 2017
+31 December 2016
+Consolidated entities
+Natural Synthetic
+Total
+North America
+(excluding Canada) South America
+Natural
+Natural
+Natural
+Oil gas Oil gas Oil gas Oil
+gas oil Bitumen
+(bcf) (mmbbls) (bcf) (mmbbls) (bcf) (mmbls) (bcf) (mmbls) (mmbls)
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+gas Oil
+(bcf) (mmbls)
+& & ୬
+gas Oil gas Oil gas
+Oil
+(bcf) (mmbls) (bcf) (mmbbls) (bcf) (mmbbls)
+Oil
+Natural Synthetic
+Natural
+Natural
+Natural
+Natural
+Europe
+Canada
+Africa
+(mmbbls)
+Oceania
+∞ ∞
+៩ ន ៩
+(excluding PRC)
+PRC
+North America
+Asia
+136 491
+135 486
+Proved undeveloped reserves:
+5
+31 December 2018
++38
+SES
+៥ ៦
+៩ ៩
+8 ន
+31 December 2017
+31 December 2016
+method investees:
+Enterprise's share of equity
+753
+815 1,623 51 618 10 268 41 --- 156 - 88 219 1 - 81 7 1,086 2,734 156 -
+20
+Asia
+(excluding PRC)
+PRC
+Proved developed reserves:
+661
+56
+258
+657
+58
+258
+5
+1
+31 December 2018
+Total consolidated and equity
+Revisions of prior estimates
+Production
+2
+36
+3=
+(10)
+11
+36
+11
+245 707
+R
+Interests in reserves
+31 December 2016
+1,446 5,850 77 952
+Reserve quantity information (continued)
+(a)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+129
+CNOOC LIMITED Annual Report 2018
+112
+Improved Recovery
+Discoveries and extensions
+Purchase/(Disposal) of reserves
+88
+31 December 2018
+118
+31 December 2017
+7 2,211 8,060 301
+196 567 81
+350
+260
+333 138
+12
+Oceania
+Africa
+Canada
+(excluding Canada) South America
+122
+171
+122
+168
+111
+168
+111
+93 136
+93 136
+171
+31 December 2018
+31 December 2016
+method investees:
+Enterprise's share of equity
+1,135 5,013 660 88
+4
+13
+116 78
+88 120
+660
+31 December 2017
+130 CNOOC LIMITED Annual Report 2018
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2018
+4,792
+2,935
+8,358
+1,285
+6,186
+87,276
+Net sales to customers
+Total
+Europe
+Canada) America
+Africa Canada
+PRC) Oceania
+PRC
+South
+North
+America
+(excluding
+(excluding
+Asia
+2016
+Consolidated entities
+Results of operations
+(b)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+5
+701
+78
+159
+(bcf) (mmbbls) (mmbbls)
+gas oil Bitumen
+Oil gas Oil gas Oil gas Oil
+(bcf) (mmbbls) (bcf) (mmbbls) (bcf) (mmbls)
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+Natural Synthetic
+Natural
+Natural
+Natural
+Natural Synthetic
+Consolidated entities
+Natural
+gas Oil
+gas Oil
+(bcf) (mmbls) (bcf) (mmbbls)
+(mmbbls)
+gas Oil
+gas Oil
+Oil
+Natural
+Natural
+Natural
+Total
+Europe
+(bcf) (mmbbls) (bcf) (mmbls)
+31 December 2016
+31 December 2017
+734
+72
+644
+xx
+128
+28
+1,113 4,875 644 72
+631 4221 26 334 2 66 97 - 145 173 131 929 4,752 145
+58
+11
+20
+100
+68
+221
+310
+327
+22
+29
+882 4,564
+31 December 2018
+35
+4,336
+143
+Operating expenses
+701
+E
+77
+5,844
+1,446
+31 December 2016
+162
+(170)
+119
+Revisions of prior estimates
+Production
+952
+Improved Recovery
+167897 :: 203 972 ;
+5,355 60 846 15 389 167 - 119 815 - 239 275 -- 2 - 102 9 2015 6,993 815
+Purchase/Disposal) of reserves
+LIEN
+4
+7 2,015 7,486 301
+81
+260 350
+301
+Discoveries and extensions
+(514)
+52
+Purchase/(Disposal) of reserves
+1,783 6,108 54 842
+31 December 2018
+4
+Revisions of prior estimates
+Improved Recovery
+Production
+213 519
+1,627 5,911 70 885 11 297
+Discoveries and extensions
+Purchase/(Disposal) of reserves
+12
+88
+3
+31 December 2017
+(262)
+(258)
+325
+Revisions of prior estimates
+Production
+Improved Recovery
+༔ ༔ 'རྨུ°
+Discoveries and extensions
+'
+11 171
+14
+(514)
+Natural
+Natural Synthetic
+Natural Synthetic
+Natural
+Natural
+Natural
+Natural
+Oil gas
+(mmbbls) (bcf) (mmbbls)
+Total
+Europe
+Natural
+South America
+Canada*
+Africa
+Oceania
+Asia (excluding PRC)
+PRC
+g '€
+Reserve quantity information (continued)
+Proved developed and undeveloped reserves:
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+North America (excluding Canada)
+Natural Synthetic
+Oil
+gas
+(101)
+1,431
+31 December 2015
+Consolidated entities
+(bcf) (mmbls) (mmbls)
+(bcf) (mmbbls)
+oil Bitumen
+gas
+Oil
+gas Oil gas
+(bcf) (mmbbls)
+(bcf) (mmbbls) (mmbbls) (mmbls)
+Oil
+gas oil Bitumen
+Oil
+gas oil Bitumen
+(bcf) (mmbbls) (mmbbls) (mmbls)
+Oil
+gas
+(bcf) (mmbbls)
+(bcf) (mmbbls)
+(bcf) (mmbls)
+gas Oil
+Oil
+Enterprise's share of equity
+method investees:
+31 December 2015
+Purchase/(Disposal) of reserves
+(14)
+3
+33
+31
+I
+1583
+200 577
+570
+199
+88
+gg
+7 2,414 7,627 796
+111
+79
+ཥྛ•,
+253 570
+13165
+11
+1,880
+E-
+90
+5
+(8)
+11825%
+(8)
+23
+1
+23
+34
+140
+49
+88
+GE
+(1) (11)
+(8)
+8 34
+140
+49
+195 574
+I
+80
+567
+195
+(57)
+35
+796
+244
+96
+263
+6
+1
+114
+20
+280
+1 22
+37
+6
+31 December 2017
+24
+Revisions of prior estimates
+Improved Recovery
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+31 December 2016
+Revisions of prior estimates
+Production
+Improved Recovery
+6
+1
+Discoveries and extensions
+Production
+786
+88
+E
+88
+ஜ்
+14148
++
+25
+5 2,295
+88
+80
+282
+118
+118
+7,543 786
+80
+158 330 123
+'g 'g
+9
+(420)
+ ཿསྨཱ 'ཡྻུ
+15'EN
+13
+N
+83
+(13,704)
+(
+(503)
+(6)
+(6)
+Exploration expense
+(459)
+(448)
+(11)
+Taxes other than income tax
+(1,394)
+(1,281)
+Accretion expense
+(113)
+3,033
+2,840
+193
+Net sales to customers
+Total
+Europe
+South
+America
+Canada)
+Canada
+Operating expenses
+Africa
+(53)
+Depreciation, depletion and
+(9,486)
+359
+4,774
+35,681
+Total result of operations for
+producing activities
+(338)
+(278)
+(60)
+Result of operations
+(61)
+Income tax expense
+(349)
+(278)
+11
+(71)
+Special oil gain levy
+(1,462)
+(1,330)
+(132)
+amortization, and impairment
+11
+PRC) Oceania
+PRC
+(excluding
+41,870
+3,213
+(169)
+(1,711)
+(3,113)
+(9,827)
+513
+5,310
+47,654
+Income tax expense
+(55)
+Special oil gain levy
+(69,473)
+(6,605)
+(23)
+(5,889)
+(3,851)
+(17,863)
+(142)
+(1,363)
+(55)
+(11,913)
+(536)
+(154)
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees:
+2017
+28,377
+1,983
+(165)
+(2,786)
+(2,043)
+(9,486)
+359
+4,774
+35,741
+Result of operations
+(13,493)
+(1,230)
+4
+(1,075)
+1,070
+341
+(2,043) (2,786)
+(443)
+1,983
+28,039
+amortization, and impairment
+Depreciation, depletion and
+(2,560)
+(244)
+(2)
+(93)
+(150)
+(133)
+(3)
+(25,805)
+(1,935)
+(12,990)
+(514)
+(346)
+(849)
+(5,660)
+(441)
+(1)
+(125)
+(5,054)
+Accretion expense
+(7,648)
+(199)
+(6,919)
+(221)
+(1,292)
+(19,227)
+Income tax expense
+83,892
+7,438
+(197)
+2,251
+(7,177)
+1,240
+737
+2,693
+76,907
+(2,599)
+(2,599)
+Special oil gain levy
+(50,491)
+(3,389)
+(91)
+(3,721)
+(2,719)
+Exploration expense
+(33,737)
+(9,072)
+(89)
+134,993
+Net sales to customers
+Total
+Europe
+Canada) America
+Africa Canada
+Oceania
+PRC)
+PRC
+12,567
+South
+PRC
+Asia
+2018
+Consolidated entities
+Results of operations (continued)
+(b)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+132 CNOOC LIMITED Annual Report 2018
+North
+America
+(excluding
+1,567
+10,025
+4,690
+(438)
+(155)
+(359)
+(192)
+(7,823)
+Taxes other than income tax
+(24,268)
+(1,327)
+(198)
+(1,221)
+(3,183)
+(933)
+(438)
+(2,098)
+(14,870)
+Operating expenses
+185,872
+(2,214)
+12,928
+529
+8,573
+(16)
+amortization, and impairment
+(excluding
+(2,144)
+(2,552)
+(8,220)
+(1,168)
+(2,974)
+(815)
+Taxes other than income tax
+(5,885)
+(139)
+(384)
+(494)
+(239)
+Exploration expense
+(3,499)
+(37)
+(117)
+(182)
+(2,395)
+(508)
+Accretion expense
+(1,535)
+(234)
+99
+65
+5,814
+(1,193)
+(84)
+Operating expenses
+3,092
+2,905
+187
+Net sales to customers
+Total
+Europe
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+South
+(excluding
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees:
+2016
+(114)
+(1,277)
+(134)
+10,419
+(4,820)
+(484)
+(3,172)
+2,533
+Income tax expense
+(6,832)
+18
+(125)
+1,345
+(5,076) (11,600)
+3,380
+(10)
+3,237
+3,281
+Result of operations
+20,494
+(39)
+291
+(3,731)
+Depreciation, depletion and
+2,268
+416
+(57)
+27,326
+121,324
+(19)
+(1,814)
+(23,211)
+(18)
+(6,899)
+(647)
+(7,394)
+(329)
+(2,186)
+Depreciation, depletion and
+amortization, and impairment
+(35,327)
+(4,020)
+(190)
+(11,651)
+(11,006)
+(6,097)
+(10,783)
+(79,101)
+Special oil gain levy
+(71)
+Taxes other than income tax
+ཥྭ@ དྡཱ®°
+(461)
+(159)
+(6,297)
+Taxes other than income tax
+(1,021)
+(1,033) (3,057)
+(462)
+(2,401)
+(14,882)
+Operating expenses
+(406)
+6,277
+9,722
+1,283
+9,085
+107,887
+Net sales to customers
+Total
+America Europe
+South
+America
+(excluding
+Canada Canada)
+4,750
+(282)
+Exploration expense
+(3,737)
+(6,896)
+(249)
+(10)
+(1,303)
+(7,169)
+(12)
+(24,281)
+(1,402)
+(23)
+151,888
+12,784
+88'ཀྵུ '
+(82)
+(124)
+(164)
+(1,525)
+Accretion expense
+(223)
+(714)
+(818)
+(83)
+Africa
+PRC) Oceania
+(13)
+Special oil gain levy
+20,445
+(49)
+Exploration expense
+Total result of operations for
+producing activities
+Result of operations
+9
+60
+Income tax expense
+(2,127)
+(1,994)
+(133)
+amortization, and impairment
+Depreciation, depletion and
+(24)
+(16)
+Accretion expense
+(206)
+(196)
+(471)
+PRC
+(10)
+(39)
+(955)
+425
+(1,013)
+Asia
+(excluding
+North
+Consolidated entities
+2017
+Results of operations (continued)
+(b)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+131
+CNOOC LIMITED Annual Report 2018
+31 December 2018
+65
+(1,449)
+(2,552)
+(3,731) (8,220)
+291
+24
+(1,004)
+4,810
+(955)
+9
+Net change in prices, net of royalties and production costs
+(120,854)
+(458)
+(120,396)
+9,872
+233,497
+Standardised measure, beginning of year
+223,625
+Sales of production, net of royalties and production costs
+18,779
+(11,590)
+20,237
+Extensions discoveries and improved recovery,
+net of related future costs
+31,649
+1,322
+32,971
+Change in estimated future development costs
+Development costs incurred during the year
+Revisions in quantity estimates
+investee method investee
+Accretion of discount
+1,458
+Total
+Purchase of properties
+Equity share of
+equity method
+(37,582)
+571
+(11,019)
+15
+Changes in timing and other
+44,313
+(2,157)
+15
+42,156
+Standardised measure, end of year
+223,625
+and equity
+share of equity
+9,872
+CNOOC LIMITED Annual Report 2018
+139
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e)
+Standardised measure of discounted future net cash flows and changes therein (continued)
+2017
+Consolidated
+Consolidated
+233,497
+(1,783)
+216,250
+40,766
+Consolidated
+and equity
+Consolidated
+equity method
+share of equity
+Total
+investee method investee
+Standardised measure, beginning of year
+241,904
+13,341
+Equity share of
+255,245
+(152,494)
+(872)
+(153,366)
+210,479
+5,771
+Extensions discoveries and improved recovery,
+net of related future costs
+65,730
+1,743
+Net change in income taxes
+Sales of production, net of royalties and production costs
+Net change in prices, net of royalties and production costs
+(39,365)
+2018
+13,341
+1,584
+42,350
+67,569
+(133)
+67,436
+24,838
+1,415
+26,253
+Net change in income taxes
+(7,348)
+255,245
+(2,201)
+Purchase of properties
+325
+5,069
+5,394
+Changes in timing and other
+(321)
+(2,804)
+(3,125)
+Standardised measure, end of year
+241,904
+(9,549)
+23,210
+Notes
+21,650
+(39,352)
+(39,634)
+Future development costs
+(174)
+(12,577)
+(12,751)
+Future income taxes
+(14,202)
+(14,202)
+Future net cash flows
+(282)
+10% discount factor
+53
+36
+50,203
+50,256
+(27,336)
+(27,300)
+Standardised measure of
+discounted future net cash flows
+89
+22,867
+580
+22,956
+Future production costs
+116,334
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e) Standardised measure of discounted future net cash flows and changes therein (continued)
+2018
+Enterprise's share of equity method investees
+Asia
+North
+America
+67,473
+PRC
+(excluding
+PRC)
+116,843
+(excluding
+Oceania
+Africa
+Canada
+Canada)
+America
+Europe
+Total
+Future cash inflows
+(1)
+509
+South
+Total standardised measure of
+discounted future net cash flow
+304,037
+Net change in prices, net of royalties and production costs
+(25,703)
+(2,029)
+(27,732)
+Extensions discoveries and improved recovery,
+net of related future costs
+44,152
+949
+45,101
+Change in estimated future development costs
+(91,754)
+28,951
+29,402
+Development costs incurred during the year
+Revisions in quantity estimates
+Accretion of discount
+39,369
+1,574
+40,943
+(2,363)
+287
+(2,076)
+451
+(581)
+(91,173)
+Sales of production, net of royalties and production costs
+11,618
+3,469
+25,390
+16,361 32,941
+32,064
+13,151 439,031
+(1) Future cash flows consist of the Group's 100% interest in the independent oil and gas properties and the Group's participating interest in the
+properties under production sharing contracts in the PRC less (i) an adjustment for the royalties payable to the PRC government and share oil
+payable to the PRC government under production sharing contracts and (ii) an adjustment for production allocable to foreign partners under the
+PRC production sharing contracts for exploration costs attributable to the Group's participating interest, and plus the participating interest in
+the properties covered under the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host
+government and the domestic market obligation.
+(2)
+(3)
+Future development costs include the estimated costs of drilling future development wells and building the production platforms.
+Future net cash flows have been prepared taking into consideration estimated future dismantlement costs of dismantling offshore oil platforms and
+gas properties.
+Changes in the standardised measure of discounted future net cash flows:
+2016
+Consolidated
+Equity share of
+Consolidated
+equity method
+Total
+and equity
+share of equity
+investee method investee
+Standardised measure, beginning of year
+176,004
+9,247
+185,251
+1,560
+Change in estimated future development costs
+CNOOC LIMITED Annual Report 2018
+Revisions in quantity estimates
+Barrel
+Bcf
+Billion cubic feet
+BOE
+Barrels-of-oil-equivalent
+Mbbls
+Thousand barrels
+Mboe
+Thousand barrels of equivalent
+Mcf
+Thousand cubic feet
+Mmboe
+Million barrels-of-oil equivalent
+Mmbbls
+Bbl
+Million barrels
+Million cubic feet
+Note: In calculating barrels-of-oil equivalent, or BOE, we have assumed
+that 6,000 cubic feet of natural gas equals one BOE, with
+the exception of natural gas from South America, Oceania,
+SES, Madura and Tangguh projects in Indonesia in Asia, and
+Wenchang 9-2/9-3/10-3 and Yacheng 13-1/13-4 gas fields
+in China, which we have used actual thermal unit for such
+conversion purpose.
+CNOOC LIMITED Annual Report 2018
+147
+Company Information
+Board of Directors:
+Executive Directors
+Yuan Guangyu
+Xu Keqiang
+(CEO)
+(President)
+Non-executive Directors
+Yang Hua
+(Chairman)
+Mmcf
+Wang Dongjin (Vice Chairman)
+VOLUME ACRONYMS
+Reserve replacement ratio
+Completion and return of the form of proxy will not preclude a
+shareholder from attending and voting at the meeting or any
+adjournment thereof if the shareholder so desires and, in such
+event, the relevant form of proxy shall be deemed to be revoked.
+Where there are joint registered holders of any shares, any
+one of such persons may vote at the above meeting (or at any
+adjournment of it), either personally or by proxy, in respect of such
+shares as if he/she were solely entitled thereto but the vote of the
+senior holder who tenders a vote, whether in person or by proxy,
+will be accepted to the exclusion of the vote(s) of the other joint
+holders and, for this purpose, seniority shall be determined by the
+order in which the names stand in the register of members of the
+Company in respect of the relevant joint holding.
+With respect to resolution numbered B1, approval is being sought
+from shareholders for a general mandate to buy back shares to
+be given to the Board. The Board wish to state that they have no
+immediate plans to buy back any existing shares. The Explanatory
+Statement containing the information necessary to enable the
+shareholders to make an informed decision on whether to vote
+for or against the resolution to approve the buy back by the
+Company of its own shares, as required by the Listing Rules, is
+set out in a separate letter from the Company.
+With respect to resolution numbered B2, approval is being sought
+from shareholders for a general mandate to issue, allot and deal
+with shares to be given to the Board. The Board wish to state that
+they have no immediate plans to issue or allot any new shares of
+the Company. Approval is being sought from the shareholders
+as a general mandate for the purpose of Section 141 of the
+Companies Ordinance (Cap. 622 of the Laws of Hong Kong) and
+the Listing Rules.
+With respect to resolution numbered B3, approval is being sought
+from shareholders for an extension of the general mandate
+granted to the Board to issue and allot shares by adding to it
+the number of shares purchased under the authority granted
+pursuant to resolution numbered B1.
+Pursuant to Rule 13.39(4) of the Listing Rules, voting for all the
+resolutions set out in the notice of the AGM will be taken by poll,
+except where the chairman, in good faith, decides to allow a
+resolution which relates purely to a procedural or administrative
+matter to be voted on by a show of hands.
+9.
+10.
+The register of members of the Company will be closed from
+20 May 2019 (Monday) to 23 May 2019 (Thursday) (both days
+inclusive), during which no transfer of shares in the Company
+will be registered. In order to qualify for attending the meeting,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 17 May 2019 (Friday).
+After AGM, if the resolution of final dividend was passed, the
+register of members of the Company will be closed from 10 June
+2019 (Monday) to 14 June 2019 (Friday) (both days inclusive),
+during which no transfer of shares in the Company will be
+registered. In order to qualify for the proposed final dividends,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 6 June 2019 (Thursday).
+With respect to resolutions numbered A3 to A5, the Company
+is exempt from the requirement of the Toronto Stock Exchange
+(the "TSX") to adopt a majority voting policy requiring that each
+director must be elected by a majority of the votes cast with
+respect to his or her election at an uncontested meeting by virtue
+of the fact that the Company is majority controlled indirectly by
+CNOOC. The Company does not intend to adopt a majority
+voting policy at this time or for so long as CNOOC is the majority
+controlling shareholder, as majority approval of each such director
+is already assured.
+In addition, the Company is exempt from the TSX requirement
+that at each annual meeting of holders of listed securities, the
+board of directors of a listed issuer must permit security holders
+of each class or series to vote on the election of all directors to
+be elected by such class or series. The Company is exempt
+from each such requirement by virtue of qualifying as an "Eligible
+International Interlisted Issuer" for purposes of the TSX Company
+Manual.
+The Company has provided a notice to the TSX pursuant to the
+requirements of the TSX Company Manual indicating its intention
+to rely on such exemption in respect of the Company's 2018
+AGM and anticipates providing similar such notices for each
+successive year.
+146 CNOOC LIMITED Annual Report 2018
+For a given year, total additions to proved reserves divided
+by production during the year
+Glossary
+The America Petroleum Institute's scale for specific gravity
+for liquid hydrocarbons, measured in degrees
+Wildcat
+A well drilled on any rock formation for the purpose of
+searching for petroleum accumulations in an area or
+rock formation that has no known reserves or previous
+discoveries
+Appraisal well
+Upstream business
+Oil and gas exploration, development, production and sales
+FPSO
+Floating, Production, Storage and Offloading vessel
+LNG
+Liquefied Natural Gas
+Proved Reserves
+Estimates of oil, gas and NGL quantities thought to be
+recoverable from known reservoirs under existing economic
+and operating conditions
+PSC
+Production sharing contract
+API
+Independent Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+Bank of China (Hong Kong) Limited
+Citi Bank, N.A.
+Bank of America
+Hong Kong Share Registrar:
+Hong Kong Registrars Limited
+Shops 1712-1716, 17th Floor
+Hopewell Center
+183 Queen's Road East
+Wan Chai
+Hong Kong
+ADS Depositary:
+JPMorgan Chase Bank, N.A.
+383 Madison Ave, Floor 11
+New York, NY 10179
+United States of America
+Symbol and stock code:
+NYSE: CEO
+HKSE: 00883
+China Construction Bank
+TSX: CNU
+Tel: (8610) 8452 2973
+Fax: (8610) 8452 1441
+E-mail: ir@cnooc.com.cn
+Media/Public Relations:
+Tel: (8610) 8452 3404
+Fax: (8610) 8452 1441
+E-mail: mr@cnooc.com.cn
+Registered Office:
+65/F, Bank of China Tower, 1 Garden Road, Hong Kong
+Tel: (852) 2213 2500
+Fax: (852) 2525 9322
+Beijing Office:
+CNOOC Tower, No.25 Chaoyangmen Beidajie,
+Beijing, China
+Zip Code: 100010
+Website: www.cnoocltd.com
+148
+CNOOC LIMITED Annual Report 2018
+Investor Relations:
+Industrial and Commercial Bank of China
+Bank of China
+Principal Bankers:
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Audit Committee
+Tse Hau Yin, Aloysius (Chairman and Financial Expert)
+Chiu Sung Hong
+Lawrence J. Lau
+Nomination Committee
+Yang Hua (Chairman)
+Lawrence J. Lau
+Kevin G. Lynch
+Remuneration Committee
+Chiu Sung Hong (Chairman)
+Tse Hau Yin, Aloysius
+Wang Dongjin
+Other Members of the Senior Management
+Xie Yuhong
+Cao Xinjian
+Tsue Sik Yu, May
+Wu Xiaonan
+Joint Company Secretary
+(General Counsel, Compliance Officer)
+(Deputy Chief Exploration Engineer)
+(Vice President)
+(Senior Vice President)
+8.
+Wu Xiaonan
+Deng Yunhua
+Zhang Guohua
+(Chief Financial Officer)
+Xie Weizhi
+(Executive Vice President)
+(Executive Vice President)
+Liu Zaisheng
+7.
+6.
+5.
+To receive and consider the audited financial
+statements together with the Report of the
+Directors and Independent Auditors' Report
+thereon for the year ended 31 December 2018.
+To declare a final dividend for the year ended 31
+December 2018.
+To re-elect Mr. Wang Dongjin as a Non-
+executive Director of the Company:
+Wang Dongjin
+Born in 1962, Mr. Wang is a professor-level
+senior engineer and received a Bachelor of
+Science degree in Petroleum Drilling from
+Development Department of China University of
+Petroleum and a Doctor of Science degree in
+Petroleum Engineering Management from China
+University of Petroleum-Beijing in 2012. From
+July 1995 to December 1997, he was appointed
+as Deputy Director-General of Jiangsu
+Petroleum Exploration Bureau. From December
+1997 to October 2002, he was appointed as
+Vice President of China National Oil & Gas
+Exploration and Development Corporation
+("CNODC"). From December 2000 to October
+2002, he also served as President of CNPC
+International (Kazakhstan) Ltd. and President of
+Aktobe Munai Gas Corp. From October 2002
+to September 2008, he served as President
+of CNODC. From January 2004 to September
+2008, he was appointed as Assistant President
+of China National Petroleum Corporation
+("CNPC") and Vice Chairman of CNODC. From
+September 2008 to March 2018, he served
+as Vice President of CNPC. From May 2011
+to May 2014, he was concurrently appointed
+as Director of PetroChina Company Limited
+("PetroChina"). From July 2013 to March 2018,
+he was concurrently appointed as President of
+PetroChina. From May 2014 to March 2018,
+he served as Vice Chairman of PetroChina.
+In March 2018, Mr. Wang was appointed
+as a Director of China National Offshore Oil
+Corporation ("CNOOC"). In October 2018, Mr.
+Wang was appointed as President of CNOOC.
+On 27 April 2018, Mr. Wang was appointed
+as a Non-executive Director and a member of
+the Remuneration Committee of the Company.
+Wang has been appointed as the Vice Chairman
+of the Company with effect from 5 December
+2018.
+Save as aforesaid, Mr. Wang does not have
+any relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+Mr. Wang has no interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+Under the service agreement between the
+Company and Mr. Wang, the Company
+does not pay him any Director's fee. The
+Remuneration Committee will review the
+level of directors' emoluments and make
+recommendation to the Board for adjustments if
+necessary. Mr. Wang's appointment continued
+for a period of twelve months and would be
+renewed annually as determined by the Board
+or the shareholders of the Company, subject
+to three months' notice of termination by either
+party. Mr. Wang is subject to the provisions
+of his service agreement and the retirement
+provisions in the Articles of the Association of
+the Company.
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) - 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the shareholders of
+the Company.
+CNOOC LIMITED Annual Report 2018
+141
+Notice of Annual General Meeting
+4.
+3.
+To re-elect Mr. Xu Keqiang as an Executive
+Director of the Company:
+Born in 1971, Mr. Xu is a professor-level
+senior engineer. He graduated from Northwest
+University with a Bachelor of Science degree in
+Oil and Gas Geology. He received a master's
+degree in Coalfield Oil and Gas Geology from
+Northwest University in 1996. Mr. Xu joined
+CNPC in 1996 and served different positions.
+From April 2003 to April 2005, he served
+as Deputy General Manager of Sinopetro
+Investment Company Ltd. From April 2005 to
+September 2008, he served as Deputy General
+Manager of CNPC International (Kazakhstan)
+Ltd. and concurrently General Manager of
+CNPC Ai-Dan Munai Joint Stock Company.
+From September 2008 to March 2014, he
+served as Deputy General Manager of CNPC
+International (Kazakhstan) Ltd. and concurrently
+General Manager of Joint Stock Company
+CNPC International Aktobe Petroleum. From
+March 2014 to March 2017, he served as
+General Manager of PetroChina Tuha Oilfield
+Company, and Director of Tuha Petroleum
+Exploration & Development Headquarters. In
+March 2017, Mr. Xu was appointed as a Vice
+President of CNOOC. From April 2017 to June
+2018, Mr. Xu served as the Chairman of Nexen
+Energy ULC, a subsidiary of the Company.
+From May 2017 to June 2018, he served as
+the Chairman of a subsidiary of the Company,
+CNOOC International Limited. In May 2017,
+Mr. Xu was appointed as a Director of CNOOC
+China Limited, a subsidiary of the Company. Mr.
+Xu was appointed as the General Manager of
+CNOOC China Limited with effect from 21 May
+2018. Mr. Xu was appointed as an Executive
+Director and the President of the Company with
+effect from 18 April 2017.
+Save as aforesaid, Mr. Xu does not have any
+relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+Mr. Xu has no interest in the Company's
+securities within the meaning of Part XV of the
+Securities and Future Ordinance (Cap. 571) (the
+"SFO").
+5.
+Under the service agreement between the
+Company and Mr. Xu, the Company does not
+pay him any Director's fee. The Remuneration
+Committee will review the level of directors'
+emolument and make recommendation to the
+Board for adjustments if necessary. Mr. Xu's
+appointment continued for a period of twelve
+months and would be renewed annually as
+determined by the Board or the shareholders of
+the Company, subject to three months' notice
+of termination by either party. Mr. Xu is subject
+to the provisions of his service agreement and
+the retirement provisions in the Articles of the
+Association of the Company.
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) 13.51(2)(v) of the Rules
+Governing the Listing of Securities on The Stock
+Exchange of Hong Kong Limited (the "Listing
+Rules"), nor are there any other matters to be
+brought to the attention of the shareholders of
+the Company.
+To re-elect Mr. Chiu Sung Hong, who has
+already served the Company for more than
+nine years, as an Independent Non-executive
+Director of the Company:
+Chiu Sung Hong
+Born in 1947, Mr. Chiu received an LL.B. degree
+from the University of Sydney. He was admitted
+as a solicitor of the Supreme Court of New
+South Wales and the High Court of Australia. He
+has over 30 years' experience in legal practice
+and had been a director of a listed company in
+Australia. Mr. Chiu was the founding member of
+the Board of Trustees of the Australian Nursing
+Home Foundation and a senior research fellow
+of Centre for Law & Globalization of Renmin
+University of China since 2016. He also served
+as the General Secretary of the Australian
+Chinese Community Association of New South
+Wales. Mr. Chiu is also an independent non-
+executive director of Tianda Pharmaceuticals
+Limited (formerly Yunnan Enterprises Holdings
+Limited, Tianda Holdings Limited) since April
+2008, a company listed on The Stock Exchange
+of Hong Kong Limited. Mr. Chiu is also an
+independent non-executive director of Bank of
+China (Australia) Limited (a wholly subsidiary of
+Bank of China Limited). Mr. Chiu was appointed
+as an Independent Non-executive Director of
+the Company with effect from 7 September
+1999.
+142
+Notice of Annual General Meeting
+Mr. Chiu has served as an Independent Non-
+executive Director of the Company for more
+than nine years. For the reasons set out in the
+"Explanatory Statement Relating to Proposed
+General Mandates to Issue Shares and Buy
+Back Shares and Proposed Re-election of
+Directors", the Board considers that Mr. Chiu
+remains independent for the purpose of the
+Listing Rules and the re-election of Mr. Chiu
+is in the best interests of the Company and
+shareholders as a whole.
+Mr. Chiu does not have any relationship with any
+other Director, senior management, substantial
+shareholder or controlling shareholder of the
+Company.
+Save as disclosed in the 2018 annual report of
+the Company, Mr. Chiu has no other interest in
+the Company's securities within the meaning of
+Part XV of the SFO.
+Xu Keqiang
+2.
+1.
+As ordinary business, to consider and, if thought
+fit, pass with or without amendments, the following
+ordinary resolutions:
+Accretion of discount
+(73,551)
+(1,754)
+(75,305)
+50,833
+2,552
+53,385
+38,365
+850
+39,215
+30,145
+2,142
+32,287
+Net change in income taxes
+(51,384)
+941
+(50,443)
+A.
+NOTICE IS HEREBY GIVEN that the Annual General
+Meeting (the "AGM") of the shareholders of CNOOC Limited
+(the "Company") will be held on 23 May 2019, at 3:00 p.m.
+at Island Shangri-La Hotel Hong Kong, Pacific Place,
+Supreme Court Road, Central, Hong Kong, for the following
+purposes:
+Notice of Annual General Meeting
+140 CNOOC LIMITED Annual Report 2018
+439,031
+22,956
+Mr. Chiu has a formal letter of appointment with
+the Company. Mr. Chiu's emoluments comprise
+an annual director's fee of HK$1,120,00
+(before deduction of Hong Kong tax). The
+emolument of Mr. Chiu was determined by the
+Board with reference to perception of industry
+standards and prevailing market conditions. The
+Remuneration Committee will review the level
+of directors' remuneration from time to time
+and make recommendation to the Board for
+adjustments if necessary. Mr. Chiu is subject to
+the provisions of the letter of appointment and
+the retirement provisions in the Articles of the
+Association of the Company.
+416,075
+54,290
+(1,758)
+56,048
+Changes in timing and other
+-
+Purchase of properties
+Standardised measure, end of year
+Development costs incurred during the year
+-
+B.
+shall not exceed 20% of the total number
+of issued shares of the Company as at
+the date of the passing of this resolution;
+and that this resolution shall be limited by
+the applicable rules and requirements of
+the Stock Exchange as amended from
+time to time, including the restrictions
+for using the Share Issue Mandate to
+issue (i) securities convertible into new
+Shares for cash consideration, if the initial
+conversion price of such convertible
+securities is lower than the Benchmarked
+Price (as hereinafter defined) of the Shares
+at the time of the relevant placing; and
+(ii) warrants, options or similar rights to
+subscribe for new Shares or securities
+convertible into new Shares for cash
+consideration.
+144
+CNOOC LIMITED Annual Report 2018
+Notice of Annual General Meeting
+(d)
+for the purposes of this resolution:
+"Relevant Period" means the period from
+the date of passing of this resolution until
+whichever is the earlier of:
+(i)
+(ii)
+the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting.
+"Benchmarked Price" means the higher
+of (a) the closing price on the date of
+the relevant placing agreement or other
+agreement involving the proposed issue
+of securities under the general mandate
+to be approved under this resolution;
+and (b) the average closing price in the
+5 trading days immediately prior to the
+earlier of: (i) the date of announcement of
+the placing or the proposed transaction or
+arrangement involving the proposed issue
+of securities under the general mandate
+to be approved under this resolution; (ii)
+the date of the placing agreement or other
+agreement involving the proposed issue
+of securities under the general mandate
+to be approved under this resolution;
+and (iii) the date on which the placing or
+subscription price is fixed.
+"Rights Issue" means an offer of shares
+open for a period fixed by the Directors
+made to holders of shares whose names
+appear on the register of members of
+the Company on a fixed record date in
+proportion to their then holdings of such
+shares (subject to such exclusions or
+other arrangements as the Directors may
+deem necessary or expedient in relation
+to fractional entitlements or having regard
+to any restrictions or obligations under
+the laws of, or the requirements of, any
+recognized regulatory body or any stock
+exchange in or in any territory outside
+Hong Kong).”
+3.
+any adjustment, after the date
+of grant or issue of any options,
+rights to subscribe for or convert
+any security into shares or other
+securities referred to above, in
+the price at which shares in the
+Company shall be subscribed,
+and/or in the number of shares
+in the Company which shall be
+subscribed, on exercise of relevant
+rights under such options, warrants
+or other securities, such adjustment
+being made in accordance with, or
+as contemplated by, the terms of
+such options, rights to subscribe or
+other securities,
+"THAT subject to the passing of the resolutions
+numbered B1 and B2 as set out in the notice
+convening this meeting, the general mandate
+granted to the Board to issue, allot and deal
+with additional shares of the Company and to
+make or grant offers, agreements, options and
+similar rights to subscribe for or convert any
+security into shares in the Company pursuant to
+resolution numbered B2 set out in this notice be
+and is hereby extended by the addition to it of
+an amount representing the aggregate number
+of shares of the Company which are bought
+back by the Company pursuant to and since
+the granting to the Company of the general
+mandate to buy back shares in accordance with
+resolution numbered B1 set out in this notice,
+provided that such extended amount shall
+not exceed 10% of the total number of issued
+shares of the Company as at the date of the
+passing of this resolution."
+Registered office:
+65th Floor,
+Bank of China Tower,
+1 Garden Road,
+Hong Kong.
+Notes:
+1.
+2.
+By Order of the Board
+CNOOC Limited
+Wu Xiaonan
+Joint Company Secretary
+Every member entitled to attend and vote at the above meeting
+(or at any adjournment thereof) is entitled to appoint one or more
+proxies to attend and vote on his behalf. A proxy need not be a
+shareholder of the Company.
+In order to be valid, the form of proxy duly completed and signed
+in accordance with the instructions printed thereon, together with
+the power of attorney or other authority (if any) under which it is
+signed, or a copy of such authority notarially certified, must be
+completed and returned to the Company's registered office at
+65th Floor, Bank of China Tower, 1 Garden Road, Hong Kong not
+less than 36 hours before the time appointed for the holding of the
+meeting or any adjournment thereof (as the case may be).
+CNOOC LIMITED Annual Report 2018
+145
+Notice of Annual General Meeting
+3.
+4.
+Hong Kong, 4 April 2019
+any scrip dividend or similar
+arrangement providing for the
+allotment of shares in lieu of
+the whole or part of a dividend
+on shares of the Company in
+accordance with the Articles of the
+Association of the Company; or
+the grant of options and the exercise
+of any option granted under any
+share option scheme or similar
+arrangement for the time being
+adopted by the Company and/or
+any of its subsidiaries;
+(v)
+As special business, to consider and, if thought fit,
+pass with or without amendments, the following
+resolutions as ordinary resolutions:
+1. "THAT:
+(a)
+(b)
+subject to paragraph (b) below, the
+exercise by the Directors during the
+Relevant Period (as hereinafter defined)
+of all the powers of the Company to buy
+back shares in the capital of the Company
+on the Stock Exchange or on any other
+exchange on which the shares of the
+Company may be listed and recognized
+by the Securities and Futures Commission
+of Hong Kong and the Stock Exchange
+for this purpose ("Recognized Stock
+Exchange"), subject to and in accordance
+with all applicable laws, rules and
+regulations and the requirements of the
+Listing Rules, or of any other Recognized
+Stock Exchange and the Articles of the
+Association of the Company, be and
+is hereby generally and unconditionally
+approved;
+the aggregate number of shares of
+the Company which the Company is
+authorised to buy back pursuant to the
+approval in paragraph (a) above shall not
+exceed 10% of the total number of issued
+shares of the Company as at the date of
+the passing of this resolution; and
+(c) for the purposes of this resolution:
+"Relevant Period" means the period from
+the date of the passing of this resolution
+until whichever is the earlier of:
+(i)
+6.
+To authorise the Board to fix the remuneration of
+each of the Directors.
+(li)
+7.
+To re-appoint Deloitte Touche Tohmatsu as the
+independent auditors of the Company and its
+subsidiaries, and to authorise the Board to fix
+the remuneration of the independent auditors.
+the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting."
+CNOOC LIMITED Annual Report 2018
+(iv)
+an issue of shares pursuant to
+any specific authority granted by
+shareholders of the Company in
+general meeting, including upon the
+exercise of rights of subscription or
+conversion under the terms of any
+warrants issued by the Company
+or any bonds, notes, debentures or
+securities convertible into shares of
+the Company;
+a Rights Issue (as hereinafter
+defined);
+(il)
+(i)
+the aggregate number of shares of the
+Company allotted or agreed conditionally
+or unconditionally to be allotted (whether
+pursuant to an option or otherwise)
+and any options, warrants or rights to
+be issued or granted by the Directors
+pursuant to the approval in paragraph (a)
+above, otherwise than pursuant to:
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the shareholders of
+the Company.
+(c)
+subject to the following provisions of this
+resolution, the exercise by the Directors
+during the Relevant Period (as hereinafter
+defined) of all the powers of the Company
+to issue, allot and deal with additional
+shares in the capital of the Company and
+to make or grant offers, agreements,
+options and similar rights to subscribe
+for or convert any security into shares in
+the Company (including bonds, notes,
+warrants, debentures and securities
+convertible into shares of the Company)
+which would or might require the exercise
+of such powers be and is hereby generally
+and unconditionally approved;
+(a)
+"THAT:
+2.
+Notice of Annual General Meeting
+143
+(b) the approval in paragraph (a) above
+shall authorise the Directors during the
+Relevant Period to make or grant offers,
+agreements, options and similar rights
+to subscribe for or convert any security
+into shares in the Company (including
+bonds, notes, warrants, debentures and
+securities convertible into shares of the
+Company) which would or might require
+the exercise of such powers after the end
+of the Relevant Period;
+An exploratory well drilled for the purpose of evaluating the
+commerciality of a geological trap in which petroleum has
+been discovered
+Designed and produced by: Equity Financial Press Limited
+MIX
+FSC FSC C006398
+responsible sources
+Paper from
+www.fsc.org
+CNOOC LIMITED
+www.cnoocltd.com
+Printed by Asia One Printing Limited
+10
+252,092
+Asia (excluding China)
+5,670
+Africa
+8,509
+Oceania
+6,925
+Overseas
+North America
+South America
+8,436
+Europe
+Subtotal
+4,114
+Subtotal
+51,379
+East China Sea
+6,865
+Eastern South China Sea
+Offshore China
+72,778
+Western South China Sea
+42,794
+Bohai
+Major Exploration
+Areas
+(Net) (km²)
+Areas
+The Company's major exploration areas as of the end of
+2018 are shown in the table below:
+has been significantly improved. In addition, the Company
+continued to maintain a reasonable proportion of exploration
+investment and a relatively high level of exploration activities
+so as to ensure mid-to-long term sustainable development.
+In 2018, the reserve replacement ratio for the Company was
+126%, and the reserve life further increased to 10.5 years.
+H
+GOLDEN EAGL
+85,141
+40,519
+In 2018, the Company continued to follow a value-driven
+exploration strategy in offshore China, resulting in outstanding
+achievement. Notable achievements include the following:
+Total
+20
+Eastern South China Sea
+22 58 0 1 6 0 48 0 0 0 776 0
+Wildcat Appraisal Wildcat
+50
+PSC
+PSC Independent
+3D (km²)
+Seismic Data
+Successful Appraisal Wells
+2D (km)
+PSC Independent
+PSC Independent
+Appraisal Independent
+PSC
+Independent
+292,611
+New Discoveries
+Offshore China
+Bohai
+The Company's major exploration activities in 2018 are set
+out in the table below:
+Secondly, the Company focused on its overseas
+strategic planning and obtained three new blocks in
+Brazil and the UK North Sea, which further optimized
+its overseas exploration assets.
+First, five more new discoveries were made in
+Stabroek block in Guyana. A total of 12 discoveries
+were made in the block.
+Overseas, the Company drilled 8 exploration wells, made
+five new discoveries and successfully appraised one oil and
+gas structure. Major achievements include the following:
+Fourthly, progress was made in risk exploration
+in new areas. The Songnan Baodao Sag in the
+Qiongdongnan Basin and the Yangjiang Sag in the
+Pearl River Mouth Basin have opened up new areas
+for reserve growth.
+Thirdly, the rolling exploration in the Bohai and Beibu
+Gulf areas continue to improve. Proved crude oil
+geological reserves will contribute to our production
+capacity in 2019.
+into a mid-sized oilfield. The new discoveries of Enping
+10-2 and Enping 15-2 confirmed the exploration
+potential of the northern belt of Enping Sag, and are
+expected to be jointly developed with Enping 15-1 to
+create a mid-sized oilfield.
+Business Overview
+CNOOC LIMITED Annual Report 2018
+Secondly, exploration breakthroughs were achieved
+in the South China Sea. The newly discovered Lufeng
+12-3 is the largest commercial PSC discovery in
+recent years, and has the potential to be developed
+First, four mid-to-large sized oil and gas fields, namely
+Bozhong 19-6, Bozhong 29-6, Bozhong 13-1 South
+and Ledong 10-1, were successfully appraised.
+GOLDEN LADNE
+In offshore China, the Company's exploration activities
+remained at a high level. A total of 166 exploration wells
+were drilled, 10 of which were drilled through PSC. A total
+of 11,534 kilometers of 2D seismic data and 14,653 square
+kilometers of 3D seismic data were acquired independently
+and through PSC. The Company made 12 new discoveries
+and successfully appraised 16 oil and gas structures
+in offshore China. The success rate for independent
+exploration wells in offshore China was 53-63%.
+Exploration Wells
+In 2018, the Company devoted greater effort in its oil and
+gas exploration, and amount of its exploration activities
+reached a record high. Adhering to value-driven and
+business exploration and anchoring on its exploration and
+discoveries of mid-to-large sized oil and gas fields, several
+major discoveries were made. This continuously maintained
+a good development momentum of oil and gas exploration.
+Various exploration breakthroughs were achieved in new
+frontier areas in offshore China, and a strategic core
+exploration area was gradually formed on both sides
+of the Atlantic Ocean. Our management capability and
+technological innovation capability have been further
+enhanced, and the efficiency of exploration operations
+Looking forward to 2019, the global economy will continue
+its slow recovery. The movement of international oil prices
+and the external environment are filled with uncertainties. To
+this end, the Company remains confident of its prospects.
+We will further strengthen our operating strategies, which
+mainly include: steadily increasing oil and gas reserve and
+production levels, promoting high-quality development,
+improving core business enhancement with digital
+transformation, maintaining prudent financial policy and
+investment decision-making, and pursuing a green, low-
+carbon and environmentally-friendly development model.
+In 2019, the Company's capital expenditure is anticipated
+to reach RMB70-80 billion, and our production target is
+480-490 million BOE with six new projects to commence
+production. Our target for the reserve replacement ratio
+is 120%. Meanwhile, the Company will maintain its high
+standards of health, safety and environmental protection.
+South America
+In South America, the Company holds a 50% interest in BC
+ENERGY INVESTMENTS CORP. ("BC") and a 10% interest
+in the PSC for the Libra oilfield in Brazil. The Company's
+50% interest in BC is accounted for by equity methods.
+As of the end of 2018, the Company's reserves and daily
+production volume derived from South America reached
+450.3 million BOE and 59,640 BOE/day, respectively,
+representing approximately 9.1% of the Company's total
+reserves and 4.6% of its daily production.
+CNOOC LIMITED Annual Report 2018
+15
+Business Overview
+Argentina
+The Company holds a 50% interest in BC which it makes
+joint management decisions. BC holds a 50% interest in Pan
+American Energy Group ("PAEG") in Argentina.
+In 2018, the Company strived to enhance its operating
+efficiency, optimize operating plans and create innovative
+development plans. Daily net production for BC averaged
+approximately 57,000 BOE/day.
+Brazil
+The Company holds a 10% interest in Libra PSC, a
+deepwater pre-salt project in Brazil. The oilfield is located in
+the Santos Basin, with a block area of about 1,550 square
+kilometers and a water depth of approximately 2,000
+meters.
+The Mero oilfield in the northwest area includes 4 production
+units of Mero 1, Mero 2, Mero 3 and Mero 4. The daily
+net production of the extended well trial project in Mero 2
+and Mero 3 in 2018 reached approximately 2,200 BOE/
+day. As for development, the operator Petróleo Brasileiro
+S.A. ("Petrobras") has submitted an overall development
+proposal for the Libra project southwest block to the Brazil
+government on behalf of its partners, and entered into a
+joint development agreement on cross boundary structures
+outside the contract blocks.
+Brazil is one of the world's most important deepwater oil and
+gas development regions. The Company will fully leverage
+on the development opportunities of the Libra project to
+seek new drivers for production growth.
+The Company also holds a 100% interest in the 592 block in
+offshore Brazil and a 20% interest in the ACF Oeste block.
+Additionally, a 30% interest in the Pau Brasil block was
+obtained by the Company in 2018.
+The Company owns 12.5% interest in the 2C block and a
+17.12% interest in the 3A block in Trinidad and Tobago,
+respectively, of which the 2C block is in production. Phase
+Ill of the natural gas project in 2C block yielded stable
+production and achieved favorable economic returns.
+The Company also owns a 100% exploration interest
+in the deepwater exploration block 1 and block 4 of the
+CINTURON PLEGADO PERDIDO in Mexico respectively.
+Guyana
+In 2018, the Liza reservoir in the block was further
+successfully appraised. Five new successful discoveries,
+including Ranger, Pacora, Longtail, Hammerhead and
+Pluma, were made, which has further expanded the scale of
+reserve.
+Other Regions in South America
+The Company also holds interests in several exploration and
+production blocks in Colombia.
+Europe
+The Company holds interests in oil and gas fields such as
+Buzzard and Golden Eagle in the U.K. North Sea. As of the
+end of 2018, the Company's reserves and daily production
+volume derived from Europe reached 112.3 million BOE and
+76,615 BOE/day, respectively, representing approximately
+2.3% of the Company's total reserves and 5.9% of its daily
+production.
+United Kingdom
+The Company's asset portfolio in the North Sea includes
+projects under production, development and exploration,
+mainly comprising: 43.2% interest in the Buzzard oilfield,
+one of the largest oilfields in the North Sea, and a 36.5%
+interest in the Golden Eagle oilfield. These make the
+Company the largest crude oil operator in the North Sea.
+The United Kingdom is one of the Company's key
+overseas development areas, with key projects such as
+Buzzard and Golden Eagle contributing substantially to
+the Company's production. In 2018, the Buzzard oilfield's
+daily net production reached approximately 50,000 BOE/
+day. As for development, the final investment decision on
+Buzzard oilfield Phase II was made in 2018 and the oilfield is
+expected to commence production in 2020.
+Furthermore, the Company holds interests in three blocks in
+the United Kingdom, and has obtained a 30% interest in the
+P2414 block and P2415 block in West of Shetland Basin in
+2018.
+Other Regions in Europe
+The Company holds a 50% interest in the FEL 3/18 block, a
+80% interest in LO 16/23 block and exploration interests in
+other five blocks in offshore Ireland.
+SALES AND MARKETING
+Sales of Crude Oil
+The Company holds a 25% interest in the Stabroek
+block in offshore Guyana. In 2018, the Liza oilfield Phase
+I construction was in good progress and is expected to
+commence production in 2020. The Field Development
+Proposal (FDP) design of Liza oilfield Phase II was finished
+and pending for government approval. The final investment
+decision is planned to be made in 2019.
+EXPLORATION
+Other Regions in North America
+In 2018, the Company made the final investment decision
+on the Long Lake Southwest (LLSW) oil sands project and
+the KIA production resumption project. Both projects are
+expected to commence production in 2020.
+10
+Business Overview
+In 2018, the Akpo oilfield maintained stable production,
+with daily net production reaching approximately 46,000
+barrels per day. The Egina oilfield commenced production in
+January 2019 and its production increased steadily. In 2018,
+the Preowei oilfield development plan was completed and
+submitted to the government for approval.
+9
+CNOOC LIMITED Annual Report 2018
+In 2018, the Company achieved its production and
+business targets despite having faced with a number
+of challenges. The Company adhered to a value-driven
+exploration philosophy, targeted mid-to-large sized oil and
+gas discoveries with enhanced efforts in exploration. 17
+new discoveries were made and 17 successful appraisals
+of oil and gas structures were achieved. Weizhou 6-13
+oilfield and Penglai 19-3 oilfield 1/3/8/9 comprehensive
+adjustment project in offshore China as well as Stampede
+oilfield in the U.S. Gulf of Mexico came on stream during the
+year. The production target was met with a net production
+of 475.0 million BOE. To ensure its continuing sustainable
+development, the Company pushed ahead steadily with the
+construction of new projects. Notwithstanding the pressure
+of rebounding oil prices and rising costs, all-in cost per
+BOE decreased for five consecutive years to US$30.39.
+The Company maintained a healthy financial position with
+net profit of RMB52.7 billion for the year. Meanwhile, its
+performance in the areas of health, safety and environmental
+protection remained stable.
+policy and investment decision-making, and pursuing
+a green, healthy and environment-friendly development
+model.
+Under the complex and ever-changing external environment,
+the Company focused on its own development and adhered
+to the operating strategies determined at the beginning of the
+year, which included: steadily increasing the Company's oil
+and gas reserve and production levels, reinforcing quality
+and efficiency enhancement, strengthening innovation and
+technology-driven philosophy, maintaining prudent financial
+In 2018, the global economy continued its moderate growth
+momentum. The U.S. economy remained relatively robust,
+while slower growth was recorded in the Eurozone and
+other economies to different extents. The global demand for
+oil has grown steadily. The international oil price fell deeply
+after having reached higher grounds but on average, the oil
+price surged upward extensively during the year. Numerous
+major geopolitical incidents occurred during the year,
+imposing great impact on international oil prices.
+Currently, the Company holds interests in oil and natural
+gas blocks in Indonesia, Australia, Nigeria, Uganda,
+Argentina, the U.S., Canada, the United Kingdom, Brazil,
+Guyana and various other countries. As of the end of 2018,
+approximately 43.5% of the Company's net proved reserves
+and approximately 34.9% of its net production were derived
+from overseas.
+HAI YANG SHI YOU
+海洋石油 115
+СПО ОС
+The Company also holds a 20% non-operating interest in
+Usan oilfield in the OML138 block in offshore Nigeria, and an
+18% non-operating interest in the OPL 223 and OML 139
+PSC respectively. In 2018, the daily net production of Usan
+oilfield was approximately 13,000 BOE/day.
+In addition, the Company holds approximately 12.39% of
+shares in MEG Energy Corporation, a company listed on the
+Toronto Stock Exchange.
+We will continue to further integrate the OML130, OML 138,
+OML 139 and OPL 223 projects to establish an oil and gas
+production base in west Africa centered in Nigeria.
+The Company owns one-third of the interest in each of EA
+1, EA 2 and EA 3A in Uganda. EA 1, EA 2 and EA 3A are
+located at the Lake Albert Basin, one of the most promising
+basins for oil and gas resources in onshore Africa.
+In 2018, the front end engineering design (FEED) for drilling
+in EA 3A block was fully completed. The tender process
+and tender evaluation process for engineering procurement
+and construction (EPC) firms was basically completed as
+well. The Phase II of FEED was completed in EA 1 and EA 2
+blocks. The Company was actively initiating the negotiation
+for crude oil pipeline for the project.
+Other Regions in Africa
+Apart from Nigeria and Uganda, the Company owns
+interests in several blocks in Senegal, Republic of the
+Congo, Algeria and the Gabonese Republic.
+North America
+North America has become the Company's largest
+overseas reserves and production region. The Company
+holds interests in oil and gas assets in the U.S., Canada
+and Trinidad and Tobago, as well as shares in MEG
+Energy Corporation in Canada. As of the end of 2018, the
+Company's reserves and daily production volume in North
+America reached 1,213.0 million BOE and 143,967 BOE/
+day, respectively, representing 24.4% of the Company's
+total reserves and 11.1% of its daily production.
+The U.S.
+Currently, the Company owns interests in two onshore shale
+oil and gas projects in the U.S. and two offshore deepwater
+development projects in the Gulf of Mexico.
+The onshore shale oil and gas projects are Eagle Ford and
+Niobrara. CNOOC holds 27% and 12% interests in the
+two projects respectively. In 2018, the daily net production
+of the Eagle Ford project remained stable, which was
+approximately 54,000 BOE/day.
+The Company owns interests in two major deepwater
+development projects, Stampede and Appomattox, and
+numbers of other exploration blocks in the Gulf of Mexico.
+Among these, Stampede commenced production in
+February 2018. Appomattox is currently undergoing pipeline
+installation and offshore test and is expected to commence
+production in the second half of 2019.
+Canada
+Canada is one of the world's richest places of oil sands
+resources, and participation in the country's oil sands
+development will make a major contribution to the
+Company's sustainable growth. The Company owns a
+100% working interest in Long Lake oil sands project, as
+well as three other oil sands projects in the Athabasca region
+of north eastern Alberta. In 2018, the daily net production
+of Long Lake project ramped up to approximately 42,000
+BOE/day.
+The Company holds a 7.23% interest in the Syncrude
+project and its daily net production in 2018 was
+approximately 17,000 BOE/day. The Company also holds
+a 25% interest in the Hangingstone oil sands project and
+non-operating interests in several other exploration and
+development leases.
+The Company holds a 100% interest in two exploration
+blocks in offshore Newfoundland.
+Uganda
+10
+2
+3
+In 2018, Lingshui 17-2, the first independent deepwater
+gas field in offshore China, entered the construction stage,
+which will promote the development of deepwater natural
+gas resources in South China Sea and become an important
+growth point for the Company's natural gas production in
+the future.
+For development and production, Weizhou 6-13 oilfield
+commenced production during the year. In addition,
+Wenchang 13-2 oilfield comprehensive adjustment project
+is expected to start production in 2019.
+In 2018, the Company made two successful discoveries in
+Western South China Sea, namely Wushi 23-5 North and
+Weizhou 10-3 East. The discovery in Wushi 23-5 North has
+expanded new formations and will boost the development of
+Wushi oilfields. The Company also achieved six successful
+appraisals, namely Ledong 10-1, Weizhou 11-2 East, Wushi
+16-1, Weizhou 11-12, Wushi 16-1 West and Wenchang
+19-9. The successful appraisal of Ledong 10-1 obtained
+significant progress in the high temperature and ultra-high
+pressure sector, making Ledong area the new battlefield of
+continuous reserves expansion.
+Western South China Sea is one of the Company's
+important natural gas production areas. Currently, the
+typical water depth of the Company's operational area in the
+region ranges from 40 to 120 meters. As of the end of 2018,
+the reserves and daily production volume in Western South
+China Sea reached 845.8 million BOE and 154,248 BOE/
+day, respectively, representing approximately 17.0% of the
+Company's total reserves and 11.9% of its daily production.
+Western South China Sea
+For development and production, the Company launched
+a major technology campaign in 2018 to ensure stable
+production of Bohai oilfield of 30 million tons for another
+10 years. Penglai 19-3 oilfield 1/3/8/9 comprehensive
+adjustment project commenced production during the year.
+Bozhong 34-9 oilfield and Caofeidian 11-1/11-6 oilfields
+comprehensive adjustment project are expected to come
+on stream in 2019. More new projects in Bohai are under
+construction, which will strongly support the Company's
+future production growth.
+With rich oil and gas resources, Bohai is one of the
+Company's primary areas for exploration and development.
+In 2018, the Company made six successful discoveries
+in Bohai, namely Luda 10-6, Luda 4-3, Luda 6-2 South,
+Bozhong 13-2, Longkou 19-1 North and Kenli 5-1. The
+Company also successfully appraised five oil and gas
+structures, including Bozhong 19-6, Bozhong 29-6,
+Bozhong 13-1 South, Kenli 4-1 and Longkou 7-6. Material
+progress has been made in the appraisal of Bozhong 19-6
+gas field, proving that Bozhong 19-6 is a large gas field
+with proved in-place volume of condensate more than 100
+million cubic meters and nature gas more than 100 billion
+cubic meters. Bozhong 29-6 oilfield is expected to become
+a hundred-million-ton class oilfield. These new discoveries
+and successful appraisals further demonstrated Bohai's
+potential as the core region for the Company.
+Bohai is the most important crude oil producing area for the
+Company. The crude oil produced in this region is mainly
+heavy oil. The operational area in Bohai is mainly shallow
+water with a depth of 10 to 30 meters. As of the end of
+2018, the reserve and daily production volume in Bohai were
+1,229.7 million BOE and 460,822 BOE/day, respectively,
+representing approximately 24.8% of the Company's total
+reserves and 35.4% of its daily production.
+Bohai
+Offshore China
+REGIONAL OVERVIEW
+Business Overview
+In addition, the Company will continue to optimize
+the development plan of producing oil and gas
+fields to control natural decline and guarantee
+base production level. Implementation of new
+development wells will be accelerated to commence
+production as soon as possible. It will also continue
+to optimize the infill drilling program to ensure the
+record high workload be achieved. Meanwhile, the
+Company will pursue technological innovation in its
+production measures to achieve great stimulation
+effects.
+In 2019, a total of six new projects are expected
+to commence production, including Bozhong 34-9
+oilfield, Caofeidian 11-1/11-6 oilfield comprehensive
+adjustment project, Wenchang 13-2 oilfield
+comprehensive adjustment project and Huizhou
+32-5 oilfield comprehensive adjustment/Huizhou
+33-1 oilfield joint development project in offshore
+China as well as Egina oilfield in Nigeria and
+Appomattox project in the U.S. Gulf of Mexico.
+Among them, Huizhou 32-5 oilfield comprehensive
+adjustment/Huizhou 33-1 oilfield joint development
+project and Egina oilfield have commenced
+production in January 2019.
+Eastern South China Sea
+Fourthly, we devoted great efforts in
+promoting the "Year of Water Injection"
+program of Bohai oilfield in order to further tap
+the potential of producing oilfields.
+Secondly, we strictly controlled costs,
+encouraged conservation and improved
+efficiency, and all-in cost per BOE decreased
+for five consecutive years.
+First, we ensured base production level and
+laid a solid foundation for production profile of
+existing oilfields through refined management.
+In 2018, the Company's development and
+production were driven by intensive and streamline
+management with emphasis on cost savings and
+efficiency enhancement, technology-driven strategy
+and sustainable development. Achievements mainly
+include:
+"
+model.
+remains confident of its prospects. We
+will further strengthen our operating
+strategies, which mainly include: steadily
+increasing oil and gas reserve and
+production levels, promoting high-quality
+development, improving core business
+enhancement with digital transformation,
+maintaining prudent financial policy
+and investment decision-making, and
+pursuing a green, low-carbon and
+environmentally-friendly development
+"" Looking forward to 2019, the Company
+11
+CNOOC LIMITED Annual Report 2018
+In 2018, the Company's net oil and gas production reached
+475.0 million BOE, representing a slight increase year-on-
+year, fulfilling the production target set at the beginning
+of the year. Weizhou 6-13 oilfield and Penglai 19-3 oilfield
+1/3/8/9 comprehensive adjustment project in offshore China
+as well as Stampede oilfield in the U.S. Gulf of Mexico came
+on stream during the year.
+In 2018, the Company successfully met its operational
+targets, with oil and gas production in line with expectations.
+The Company carefully organized its operational resources
+and made smooth progress in engineering construction.
+More than 20 projects were under construction throughout
+the year.
+Engineering Construction, Development and
+Production
+In 2019, the Company will continue to follow a value-driven
+exploration philosophy and target mid-to-large size oil and
+gas discoveries in offshore China. It will make efforts on
+both oil and gas exploration and strengthen gas exploration
+activities. It will strengthen exploration in new area and
+frontier area and adhere to optimal exploration investment
+to support sustainable development of the Company.
+Overseas, the Company will also develop proactive planning
+to accelerate the progress of the existing projects, promptly
+acquire high-quality new projects and continuously expand
+the scope of exploration.
+835
+Thirdly, we coordinated and adjusted the
+workload of infill drillings, which reached to a
+record high.
+13,818
+Eastern South China Sea is the Company's another
+important crude oil and natural gas producing area.
+Currently, the typical water depth of the Company's
+operational area in the region ranges from 100 to 1,500
+meters. The crude oil produced is mostly of light to medium
+gravity. As of the end of 2018, reserves and daily production
+volume in Eastern South China Sea reached 599.2 million
+BOE and 216,877 BOE/day, respectively, representing
+12.1% of the Company's total reserves and 16.7% of its
+daily production.
+For development and production, Huizhou 32-5 oilfield
+comprehensive adjustment/Huizhou 33-1 oilfield joint
+development project commenced production in January
+2019. New projects such as Liuhua 16-2/20-2 oilfield joint
+development are currently under construction.
+14
+The Company owns a 45% interest in the OML130 block
+in Nigeria. The OML130 block is a deepwater project
+comprising four oilfields, namely Akpo, Egina, Egina South
+and Preowei.
+Nigeria
+Africa is a relatively large oil and gas reserve and production
+base for the Company. The Company's assets in Africa
+are primarily located in Nigeria and Uganda. As of the
+end of 2018, reserves and daily production volume in
+Africa reached 113.7 million BOE and 59,844 BOE/day,
+respectively, representing approximately 2.3% of the
+Company's total reserves and 4.6% of its daily production.
+Africa
+The Company owns interests in three blocks which are still
+under exploration in Papua New Guinea.
+Other Regions in Oceania
+In 2018, the North West Shelf LNG Project maintained
+stable production and achieved favorable economic returns.
+The Company owns a 5.3% interest in the Australian North
+West Shelf LNG Project. The project has commenced
+production and is currently supplying gas to end-users
+including the Dapeng LNG Terminal in Guangdong, China.
+Australia
+Currently, the Company's oil and gas assets in Oceania are
+mainly located in Australia and Papua New Guinea. As of the
+end of 2018, reserves and daily production volume derived
+from Oceania reached 63.6 million BOE and 26,034 BOE/
+day, respectively, representing approximately 1.3% of the
+Company's total reserves and 2.0% of its daily production.
+Oceania
+In 2018, the Company continuously drilled development
+wells and devoted more efforts in production enhancement
+measures of Missian oilfields, resulting in a steady increase
+in daily net production of the project to approximately
+49,000 barrels per day. The investment of the project over
+the past years was fully recovered and the Company started
+to recover foregone remuneration. The gross production
+target of 250,000 barrels per day was achieved as of the
+end of 2018.
+The Company holds a 63.75% participating interest in the
+technical service contract of Missan oilfields in Iraq and acts
+as the oilfields' lead contractor.
+In 2018, new discoveries of Lufeng 12-3, Enping 10-2,
+Enping 15-2 and Enping 20-4 were made in Pearl River
+Mouth Basin. Lufeng 12-3 oilfield has been the largest
+commercial PSC discovery in recent years and is expected
+to be developed to a mid-sized oilfield. The discoveries
+of Enping 10-2 and Enping 15-2 proved the exploration
+potential of the northern belt of Enping Sag and are
+expected to be jointly developed with Enping 15-1 to a
+mid-sized oilfield. Furthermore, five oil and gas structures,
+namely Lufeng 14-8, Lufeng 14-4, Lufeng 22-1, Enping
+18-1 and Xijiang 34-3, were successfully appraised.
+Iraq
+The Company owns an interest of approximately 13.90% in
+the Tangguh LNG Project in Indonesia. In 2018, production
+volume of Phase I of the Project remained stable with a daily
+net production of approximately 22,000 BOE/day. Currently,
+construction of the third LNG train of Phase II is in progress
+as planned, and is expected to reach completion and
+commence production in 2020.
+At the end of 2018, the Company's asset portfolio
+in Indonesia comprises mainly two development and
+producing blocks, namely Madura Strait and Tangguh.
+Among these, the Madura Strait PSC was a joint operation
+block, in which the production of BD gas field maintained
+stable, and other gas fields were under appraisal and
+construction.
+Indonesia
+Asia (excluding China) was the first overseas region entered
+into by the Company, and it has become one of the major
+overseas oil and gas producing areas of the Company.
+Currently, the Company holds oil and gas assets mainly
+in Indonesia and Iraq. As of the end of 2018, reserves
+and daily production volume derived from Asia (excluding
+China) reached 203.3 million BOE and 88,662 BOE/day,
+respectively, representing 4.1% of the Company's total
+reserves and 6.8% of its daily production.
+Asia (excluding China)
+OVERSEAS
+The Company responded to the global trend of low carbon
+development of energy industry. Taking advantage of
+offshore operation strength, the Company has actively
+explored the opportunities of renewable clean energy
+development. In January 2019, the Company participated in
+an offshore wind power project in Jiangsu province.
+Others
+In 2018, the Company continued with the regional
+development of certain gas fields in the East China Sea,
+which would help the Company optimize the energy
+structure, target on both oil and gas exploration, devote
+more effort in natural gas development and achieve "stable
+oil production and increased gas production".
+The typical water depth of the Company's operational area
+in the East China Sea region is approximately 90 meters. As
+of the end of 2018, reserves and daily production volume in
+the region represented 2.6% and 1.0% of the Company's
+total reserves and daily production, respectively.
+East China Sea
+Business Overview
+13
+CNOOC LIMITED Annual Report 2018
+In 2018, the Company has withdrawn from the Southeast
+Sumatra block due to the expiration of the contract. The
+working interest in Malacca PSC was transferred and is
+pending for government approval and settlement.
+4
+2,199
+4
+0
+914
+0
+2,518
+0
+0
+0
+0
+0
+2
+4
+East China Sea
+0
+7,088
+Subtotal
+0
+0
+19
+0
+2
+1
+24
+16
+Western South China Sea
+835
+5,040
+2,199
+3,744
+The Company sells crude oil produced in offshore China
+to the PRC market mainly through CNOOC China Limited,
+its wholly owned subsidiary. The Company sells crude oil
+produced overseas to international and domestic markets
+4
+3,073
+9,335
+62
+5
+71
+6
+11
+7
+11
+94
+62
+Total
+0
+0
+0
+0
+2
+0
+94
+5
+2
+6
+0
+0
+Overseas
+835
+13,818
+2,199
+9,335
+2
+71
+1
+11
+5
+0
+CNOOC LIMITED Annual Report 2018 17
+The Company's crude oil sales prices are mainly determined
+by the prices of international benchmark crude oil of
+similar quality, with certain premiums or discounts subject
+to prevailing market conditions. Although the prices are
+quoted in US dollars, customers in China usually paid by
+Renminbi. The Company currently sells three types of crude
+oil in China: heavy crude, medium crude and light crude.
+The benchmark price for crude oil is Brent. The Company's
+major customers in China are CNOOC, PetroChina and
+Sinopec. Crude oil produced overseas is benchmarked at
+the Brent and WTI prices and sold on international markets.
+Business Overview
+18
+CNOOC LIMITED Annual Report 2018
+The Company's Risk Management Committee is
+directly managed by the Chief Executive Officer and
+has been authorized by the Board to be in charge with
+the organization and implementation of the overall risk
+management and internal control, on-going monitoring
+of the risk management and internal control systems of
+the Company, and making periodic reports to the Board
+Since its establishment, the Company has treated risk
+management and internal control as a top priority. The
+Company recognizes that it is the duty and obligation of its
+management to establish and maintain a risk management
+and internal control system, which serves the Company's
+strategic objectives and meets the Company's business
+practice.
+RISK MANAGEMENT AND INTERNAL
+CONTROL SYSTEM
+Development of Major Technological Innovation
+The Company's research and development platform
+construction project progressed smoothly. The heavy oil fire
+flooding experimental platform and the offshore multi-source
+multi-thermal fluid heavy oil thermal recovery experimental
+platform, with comprehensive simulation experimental
+capabilities such as simulations for thermal recovery and
+displacement, effectively support the research of major
+scientific and technological projects. Major progresses
+have also been made in "Pre-stack seismic inversion and
+oil and gas identification driven by rock physics", "Key
+technologies and industrial applications of marine complex
+rock formations and deepwater drilling fluids", and "Real-
+time optimization of reservoir production and intelligent
+control technology and industrial applications".
+In 2018, the Company focused on core business needs
+and continued to carry out critical core technology such
+as development of deepwater oil and gas fields, offshore
+heavy oil fields and fields with low porosity and permeability.
+A number of technological achievements were made,
+including metamorphic rock reservoir evaluation technology,
+recovery enhancement technology by controlling injection
+and production and technologies of accelerating and
+facilitating medium and deep drilling. These notable
+developments have provided vital technical support for the
+sustainable development of the Company.
+Major Scientific and Technological Project
+Development
+projects, strengthened the fundamental forward-looking
+technological research, set up platforms for research and
+strived to ensure reserve and production growth with
+efficiency enhancement. Our capabilities of innovation
+continued to be enhanced with the new progress being
+made in core technological research. The Company
+also actively promoted its digital transformation, and
+commenced the research and development in this aspect.
+Business Overview
+RESEARCH AND DEVELOPMENT
+The economy in China was stable in 2018 and the supply
+tension of natural gas was eased. Driven by the clean winter
+heating and changing fuel from coal to gas policy in northern
+China, the demand for natural gas continued to grow. Prior
+to the winter, the upstream gas suppliers have reserved
+sufficient resources to meet the gas demand in northern
+China during winter. Based on the market condition, the
+Company gradually adjusted the sale prices for natural
+gas in northern China through negotiation. In addition, the
+production of gas field with higher prices increased. In 2018,
+the Company's average realized natural gas price was
+US$6.41/mcf, representing a 9.8% year-on-year increase.
+Sales of LNG sourced by the Company from the North West
+Shelf LNG Project in Australia and the Tangguh LNG Project
+in Indonesia are mainly based on long-term supply contracts
+with various customers in the Asia-Pacific region, including
+Guangdong Dapeng LNG Terminal and Fujian Putian LNG
+Terminal in China.
+The Company's natural gas sales prices are mainly
+determined by negotiation with customers. Its natural
+gas sales agreements are generally long-term contracts,
+and their contract terms normally include a price review
+mechanism. The Company's natural gas customers
+are primarily located in the southeastern coast of China
+and include CNOOC Gas and Power Group, China
+BlueChemical Ltd, Hong Kong Castle Peak Power
+Company Limited and others.
+Sales of Natural Gas
+In 2018, as a result of the increase in international oil
+prices, the Company's realized oil prices picked up. The
+Company's average realized oil price was US$67.22/barrel,
+representing a year-on-year increase of 27.7%.
+CNOOC LIMITED Annual Report 2018
+In 2018, the Company proactively implemented its
+"innovation-driven" strategy, deepened the reform of
+the technology system, increased the investment in
+science and technology research, established major
+mainly through another wholly-owned subsidiary, China
+Offshore Oil (Singapore) International Pte Ltd.
+0.08
+44
+111
+Staff of the Company and
+direct contractors
+1
+16
+10
+0.08
+22
+40
+Fatal
+Cases
+0.05
+0.04
+In 2019, the Company will publish on its website the "2018
+Environmental, Society and Governance Report", which
+will provide a full review of the Company's corporate social
+responsibility activities in 2018.
+CORPORATE CITIZEN
+As a strong advocator of social responsibility and the
+development of a harmonious relationship between
+enterprise and society and people and nature, the Company
+regards its social responsibilities as a fundamental
+obligation. While being committed to achieving sustainable
+development and creating value for its shareholders, the
+Company also strives to provide clean and reliable energy to
+the society and to meet the needs of stakeholders.
+Our social responsibilities are: to build CNOOC Limited into
+a driving force for sustainable energy supply, a leading force
+for clean, healthy and green energy development, and a
+motivating force for the mutual progress of stakeholders and
+society.
+Cases
+HUMAN RESOURCES
+The Company believes that its employees are the driving
+force for its development and the foundation for the
+continuous growth of its corporate values. The Company
+values employees, cares for their needs, strives to create a
+good working environment, and assists them in their career
+development. In 2018, CNOOC Limited ranked sixth in
+Forbes' Global 2000 list of the World's Best Employers. It
+is the only energy company and the only Chinese company
+among the top 10 entries.
+Caring for Employees
+CNOOC Limited regards its employees as the most
+valuable assets and wealth. The Company always adheres
+to the people-oriented development concept, attaches
+great importance to the rights and interests of employees,
+constantly improves various labour systems to creates
+a good growing environment for employees and helps
+them grow in a healthy atmosphere. At the same time, the
+Company also cares about the physical and mental health
+of its employees, and strives to bring about benefit to the all
+the staff such that the employees progress along with the
+Company.
+Labour Policy underpinned by Objectivity,
+Openness and Fairness
+The Company complies with the employment principles
+of diversification and anti-discrimination, and insists on
+the equal treatment of employees of different races,
+nationalities, beliefs, genders, age, marital status and those
+protected by special laws in staff recruitment. The Company
+strives to cultivate a respectful, open and inclusive corporate
+culture and cherish the diverse talents of employees by
+providing fair opportunities in recruitment, promotion,
+training and career development and so on.
+CNOOC LIMITED Annual Report 2018
+25
+2
+Cases
+of Lost
+Workdays
+Cases
+With respect to internal control, the Company has
+chosen and adopted the internal control framework
+issued by COSO of the U.S., established an internal
+control system and mechanism over financial,
+operational and compliance controls and has
+conducted continuing review and evaluation of the
+internal control of the Company in order to ensure
+the timeliness, accuracy and completeness of all
+information reported.
+With respect to risk management, the Company
+has chosen and adopted the risk management
+framework issued by COSO (namely, the "Committee
+of Sponsoring Organizations of the Tread way
+Commission") of the U.S., established a risk
+management system covering design, implementation,
+monitoring, assessment and continuous improvement
+based on the ISO 31000:2009 "Risk Management-
+Principles and Guidelines". The Risk Management
+Committee of the Company shall establish the overall
+targets and strategies of the risk management system
+which are in line with the strategic objectives of the
+Company, and identified, analysed and assessed
+the overall risks of the Company, including the
+Company's key risks in making major decisions,
+important events and key business processes. The
+Risk Management Committee is also responsible for
+reviewing and approving the response plans to major
+risks, as well as following up and periodically reviewing
+the implementation of such response plans, in order
+to make sure that sufficient attention, monitoring
+and responses will be afforded to all key risks of the
+Company.
+regarding the status of the risk management and internal
+control systems of the Company.
+Business Overview
+Our auditor that issues the audit reports to be included in
+our annual report filed with the SEC, as a firm registered
+with the PCAOB, is required by the laws of the United
+States to undergo regular inspections by the PCAOB to
+assess its compliance with the laws of the United States and
+professional standards.
+Because we have substantial operations within China and,
+without the approval of PRC authorities, the PCAOB is
+currently unable to conduct inspections of the work of our
+auditor as it relates to those operations, our auditor is not
+currently inspected by the PCAOB. Therefore, it is unlikely
+for the PCAOB to evaluate the effectiveness of our auditor's
+audit procedures or quality control procedures as compared
+to auditors outside of China that are subject to the PCAOB
+inspections.
+Furthermore, on 7 December 2018, the PCAOB published a
+list of companies, including us, whose auditors are located
+in jurisdictions where there are obstacles to the PCAOB
+inspections. However, it remains unclear what further
+actions the SEC and the PCAOB will take to address the
+problem.
+HEALTH, SAFETY AND ENVIRONMENTAL
+PROTECTION ("HSE")
+As always, the Company takes "Safety and environmental
+protection come first, people oriented and well-equipped
+facilities" as top priority in its works, which have been
+regarded as the core values of HSE. The Company
+constantly improves the systematic management of HSE
+and promotes the cultivation of safety culture by focusing
+on "people, execution and intervention" in order to provide a
+safe working environment for the Company and contractors
+and establish first class management capability in safe
+production.
+In 2018, the Company further standardized the systematic
+management of safe production. The Company completed
+the HSE management system framework with its own
+characteristics on the basis of summarizing the previous
+management experience. The Company has selected some
+affiliated units to carry out the pilot scheme and further
+improve such management system. With key focus placed
+on the "implementation of safe production responsibility
+system for all employees" across the overall work for the
+year, the requirements of "one enterprise with one standard,
+one post with one checklist" were effectively performed.
+In 2018, the Company further improved the supervising
+review of its HSE system, improved the effectiveness of the
+review, strengthened special operations, special processes
+and special audits during exceptional periods, and improved
+risk assessment and prevention. The Company also closely
+monitored key areas such as operation permits, underwater
+operations, atmospheric storage and hazardous chemicals,
+strengthened the management and control measures, as
+well as improved management and control capability.
+The Company has further strengthened the building of
+safety leadership, adhering to the substantial measures,
+significant identification and appropriate implementation
+to further promote the cultivation of a safety culture,
+and promote the continuous improvement of safety
+management. During the year, the Company issued the
+"Implementation Opinions on Promoting the Cultivation
+of Safety Culture", the Company's senior executives
+took the lead in practicing the safety measures and
+conducted on-site special inspections and safety lectures
+for the subordinate units during the "Safe Production
+Month". Each affiliated unit took the opportunities of "Safe
+Production Month", "Quality Month", "Environment Day" and
+"Energy Saving Week" and so on to carry out a series of
+promotional and educational activities to enhance the safety
+awareness and safety skills of the employees. Thus, a good
+atmosphere for high quality development of the Company
+was created.
+CNOOC LIMITED Annual Report 2018
+Business Overview
+Overseas, the Company continued to improve the HSE
+management system, enhanced the supervision and
+management functions on its overseas business, organized
+the HSE due diligence investigation before withdrawing
+from the Indonesia SES oilfield project, conducted safety
+emergency and security inspection and research on
+its business in Mexico; and conducted special safety
+inspection for completion operations in the Misan oilfields
+in Iraq. At the same time, the Company organized self-
+inspection work on safe production for its overseas
+business, and the completion rate of improving various
+types of safety hazards discovered during the inspection
+reached 98%.
+In 2018, the Company held an eco-environmental protection
+work conference to map out a clear direction of its eco-
+environmental protection work, formulate and implement
+a green development action plan, actively coordinate
+the classification of main function areas, promote the
+environmental impact assessment, carry out environmental
+risk investigation, progressively eliminate hidden dangers as
+well as improve supervision and inspection. The Company
+has also fully explored the potential of energy conservation,
+promoted the implementation of technological improvement
+projects and developed green factories to continuously
+enhance energy efficiency.
+During 2018, the Company maintained its good
+performance in safety management and upheld consistently
+high HSE standards. OSHA (Occupational Safety and
+Health Administration) statistics for the year are shown
+below.
+Scope
+Company staff
+Gross
+Man-hours
+Number of
+Recordable
+Rate of
+Recordable
+Number
+of Lost
+Workdays
+Rate
+26
+(million)
+Cases
+Business Overview
+All the employment contracts are based on the principles
+of equality and voluntariness. The Company strictly
+complies with labor laws and regulations, opposes any
+form of inhumane treatment, and is in compliance with the
+regulations regarding salaries, overtime hours and statutory
+benefits requirements of all its places of operation and
+prohibits any compulsory labour.
+CNOOC Limited respects the diverse cultures of different
+countries and their local customs and advocates mutual
+understanding between employees with different national,
+geographical and cultural backgrounds. The Company
+also strives to promote the harmonious and friendly
+communication and integrated development between local
+and foreign employees in order to build a vibrant working
+environment.
+The list of Directors, their respective
+biographies, and their respective roles in the
+Committees and the management are set out
+on pages 47 to 53 and 148 of this annual report,
+respectively. The relevant information has also
+been disclosed on the Company's website.
+CNOOC LIMITED Annual Report 2018
+The Board and Committee members of the
+Company are dedicated, professional and
+accountable.
+The Company holds Board meetings at least
+four times a year at approximately quarterly
+intervals. Six Board meetings were held
+in 2018. Members of the Board have also
+actively participated in the discussions on
+the business and operation of the Company,
+either in person or through other electronic
+means of communication such as emails, when
+necessary.
+There exists an open atmosphere for Directors
+to contribute alternative views. All decisions of
+the Board are made on the principles of trust
+and fairness in an open and transparent manner,
+so as to protect the interests of all shareholders.
+The Board has regularly reviewed the
+contribution required from a Director to
+perform his responsibilities to the Company,
+and whether he is spending sufficient time
+performing them in accordance with the CG
+Code.
+Attendance of full Board meetings held in 2018
+Executive Directors
+Yuan Guangyu
+Xu Keqiang
+Non-executive Directors
+Yang Hua (Chairman)
+Wang Dongjin
+(Vice Chairman) (Note 1)
+Liu Jian (Note 2)
+Wu Guangqi (Note 3)
+Independent
+No. of meetings attended
+(Four meetings in total)
+by Director
+The Board consisted of eight members,
+including two Executive Directors, two Non-
+executive Directors and four Independent Non-
+executive Directors, as of 31 December 2018.
+Non-executive Directors
+Chiu Sung Hong
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+99
+by proxy
+0
+0
+6
+0
+oo o
+oooo
+432
+9999
+0
+Note 1: With effect from 27 April 2018, Mr. Wang Dongjin was
+appointed as a Non-executive Director and a member of the
+Remuneration Committee of the Company, and was appointed
+as the Vice Chairman of the Company with effect from 5
+December 2018.
+Lawrence J. Lau
+CNOOC Limited adheres to the principle of gender
+equality in employment by increasing the number of female
+employees and conducting training and educational
+activities for female taking up management roles. In
+addition, the Company also enriches the leisure life of female
+employees and encourages them to participate in various
+activities. As of the end of 2018, the Company had a total
+of 2,846 female employees, representing 16% of the total
+workforce, of which female employees in mid-level and
+senior management positions represent 18%.
+The board should regularly review the contribution
+required from a director to perform his responsibilities
+to the issuer, and whether he is spending sufficient
+time performing them."
+A.1 The Board
+The Board considered that as of 31 December 2018,
+the Company's risk management system and the
+Company's internal control over financial reporting
+were effective.
+Sufficient Safeguard on Employees' Rights
+In China, the Company strictly complies with the "Labor Law
+of the People's Republic of China", the "Labor Contract Law
+of the People's Republic of China" and other policies and
+regulations which safeguard the legal rights and interests
+of its employees. Overseas, the Company abides by all
+relevant laws and regulations and implements the relevant
+international conventions ratified by the Chinese government
+to ensure respect for all our employees' legal rights.
+The Company strives to create an open, transparent and
+fair work environment. In keeping with its "people-oriented"
+spirit and "staff caring" concept, it places great emphasis on
+safeguarding the legal rights of staff members.
+We offer employees competitive compensation packages,
+and have established a salary increment and allocation
+system. The Company's remuneration system implements
+multi-level incentive schemes closely associated with
+employee performance and contribution, particularly for
+technological experts and frontline staff. A mechanism that
+links employee incomes with the Company's profit growth
+has also been adopted to ensure that our employees
+can fully benefit from the growth and development of the
+Company.
+A comprehensive and effective social security system has
+also been built, and many types of social and supplementary
+insurance are provided to employees on a timely basis.
+In addition to making contributions for the five basic
+social insurances (pension, medical, work-related injury,
+unemployment and maternity), the Company also provides
+supplementary personal accident insurance, commercial
+supplementary medical insurance and supplementary
+medical insurance for children. The Company has also
+established annuity and housing subsidy programs for
+employees.
+The Company has established labor unions at all levels in
+accordance with the "Trade Union Law of the People's
+Republic of China", which protect the legitimate rights of the
+employees, oversee the Company's performance of duties
+and obligations, supervise its various business activities
+related to the interests of the employees, and communicate
+with the management on behalf of employees. Depending
+on the actual situation, the Company follows the
+management systems such as the "Detailed Rules for
+Management of Labor Contract" which is implemented
+across the Company. At the same time, it maintains close
+communication with the legal department and labor unions
+to jointly protect the legitimate rights of employees.
+Overseas, CNOOC Limited comprehensively protects
+the legitimate rights of foreign employees by strictly
+complying with the local employment regulations, providing
+foreign employees with vacations, social insurance and
+other benefits. The Company also encourages foreign
+employees to develop together with the Company by
+creating remuneration adjustment mechanism and incentive
+mechanism according to the practical situations of the
+respective localities. Development opportunities such as job
+exchange, on-the-job training and overseas positions are
+offered and the Company will provide necessary vocational
+skills trainings and ability improvement trainings to its foreign
+employees.
+Staff Development
+CNOOC has always attached great importance to providing
+employees with opportunities for self-development. Taking
+into account the different professional groups employed and
+their diverse characteristics, the Company has established
+three teams management (M series), technology (T
+series) and skill (W series) - under which employees are
+provided suitable career development paths. In order to
+further enhance the core competitiveness of the Company,
+promote the coordination and development of teams of
+talent at all levels and comprehensively improve the overall
+quality and capabilities of the teams of talent, the Company
+has formulated the "13th Five-Year" talent development
+plan.
+CNOOC LIMITED Annual Report 2018
+FMT
+In 2018, the Company completed a total of 57 key training
+projects, with more than 2,400 attendances and more
+than 300 course developers and internal lecturers. It
+also completed training courses for the development of
+research and production directors, underground operations
+supervision, QHSE projects and other topics.
+Principle: "An issuer should be headed by an effective
+board which should assume responsibility for its
+leadership and control and be collectively responsible
+for promoting its success by directing and supervising
+its affairs. Directors should take decisions objectively
+in the best interests of the issuer.
+Meanwhile, the Company continued to encourage
+professional skill certifications and further increased the
+proportion of experienced professionals. In 2018, a total
+of approximately 2,000 employees received certifications.
+Currently there are approximately 4,585 employees with
+titles of senior worker or above, and approximately 963
+technicians and senior technicians, respectively accounting
+for 76% and 16% of the total technical workforce.
+The Company's strong focus on cultivating international
+talents is manifested in its established system of strata
+training which promotes business integration both inside
+and outside the Company.
+In 2018, the Company followed up and evaluated the
+implementations of revised overseas human resources
+management measures. Problems were subsequently
+analysed and measures were promptly taken to satisfy
+the different needs of human resources management
+for overseas business. We continued to implement
+programs for international talent selection and training
+by implementing a target-oriented training program of
+"International Leading and Core Talents". Meanwhile, the
+Company also sought cooperation with local and foreign
+universities on talent cultivation.
+CNOOC LIMITED Annual Report 2018
+27
+28
+Corporate Governance Report
+GOVERNANCE STANDARDS
+The Company has always upheld and attained high
+standard of business ethics, for which its transparency and
+standard of governance have been recognized by the public
+and its shareholders. In 2018, the Company was awarded
+as the "Best Investor Relations Company (China)" and
+"Asia's Best CEO (Investor Relations (China))" by Corporate
+Governance Asia Magazine, "Top 100 Global Energy
+Leaders" by Thomson Reuters, "2018 China Securities
+Golden Bauhinia Awards - Best Listed Companies" and
+"Best CEO of Listed Companies" by Ta Kung Wen Wei
+Media Group and "Corporate Awards Platinum" by The
+Asset. High and strict standard of corporate governance
+enables the Company to operate steadily and efficiently
+and is in the long-term interests of the Company and its
+shareholders.
+-
+Since its listing, the Company has endeavoured to maximize
+its shareholders' value. In 2018, the Company executed
+its corporate governance policies strictly and sought to
+comply with the relevant provisions in the "Corporate
+Governance Code and Corporate Governance Report" set
+out in Appendix 14 to the Listing Rules (the "CG Code"),
+ensuring that all decisions were made on the principles of
+trust and fairness and in an open and transparent manner so
+as to protect the interests of all shareholders. The Company
+values the importance of corporate governance and in light
+of the CG Code, the Company set out a summary of the
+Company's key corporate governance practices during
+2018 below.
+KEY CORPORATE GOVERNANCE PRINCIPLES
+AND THE COMPANY'S PRACTICES
+A.
+DIRECTORS
+Cultivation of International Talents
+As a company listed in Hong Kong, the U.S. and Canada,
+the Company will continue to strictly comply with all
+regulatory requirements, strengthen its risk management
+and internal control systems, and maintain a high standard
+of corporate governance to ensure the Company's more
+healthy development.
+Prices for crude oil, natural gas and oil products may
+fluctuate widely in response to relative changes in the
+supply and demand for crude oil and natural gas, market
+uncertainty and various other factors beyond our control,
+including, but not limited to overall economic conditions,
+political instability, armed conflict and acts of terrorism,
+economic conditions and actions by major oil-producing
+countries, the price and availability of other energy sources,
+domestic and foreign government regulations, natural
+disasters and weather conditions. Changes in oil and gas
+prices could have a material effect on our business, cash
+flows and earnings.
+Although we have established the risk management system
+to identify, analyze, evaluate and respond to risks, our
+business activities may subject to the following risks, which
+could have material effects on our strategy, operations,
+compliance and financial condition. We urge you to carefully
+consider the risks described below.
+The reliability of reserve estimates depends on a number
+of factors, including the quality and quantity of technical
+and economic data, the market prices of our oil and
+gas products, the production performance of reservoirs,
+extensive engineering judgments, comprehensive
+judgement of engineers and the fiscal and tax regime in the
+countries where we have operations or assets.
+Many of the factors, assumptions and variables involved in
+estimating reserves are beyond our control and may prove
+be incorrect over time. Consequently, the results of drilling,
+testing, production and changes in the price of oil and gas
+may require substantial upward or downward revisions to
+our initial reserve data.
+If we fail to develop or gain access to appropriate
+technologies, or to deploy them effectively,
+the realization of our strategies as well as our
+competitiveness and ability to operate may be
+adversely affected.
+Technology and innovation are vital for us in meeting the
+global energy demands in a competitive environment and
+challenges from exploration and development. For example,
+we strive to rely on technologies and innovations to enhance
+our competiveness in the development of unconventional oil
+and gas resources, including heavy oil, oil sands, shale oil
+and gas and coalbed methane, and deep water exploration
+and development, offshore enhanced oil recovery. In the
+context of an operating environment with more stringent
+environmental compliance standards and requirements,
+CNOOC LIMITED Annual Report 2018
+Business Overview
+although current knowledge recognise these newly
+developed technologies as safe to the environment, there
+still exists unknown or unpredictable elements that may
+have an impact on the environment. This may in turn harm
+our reputation and operation, increase our costs or even
+result in litigations and sanctions.
+Breach of our cyber security or break down of our IT
+infrastructure could damage our operations and our
+reputation.
+Intentional attacks on our cyber system, negligent
+management of our cyber security and IT system
+management and other factors may cause damage or
+break down to our IT infrastructure, which may disrupt
+our operations, result in loss or misuse of data or sensitive
+information, cause injuries, environmental harm or damage
+in assets, violate laws or regulations and result in potential
+legal liability. These actions could result in increased costs or
+damage to our reputation.
+CNOOC largely controls us and we regularly enter into
+connected party transactions with CNOOC and its
+affiliates.
+Currently, CNOOC indirectly owns or controls 64.44%
+of our shares. As a result, CNOOC is able to control our
+board composition, or our Board, determine the timing
+and amount of dividend payments, and controls us in
+various aspects. In addition, under current PRC laws,
+CNOOC has the exclusive right to enter into PSCs with
+foreign enterprises for the petroleum resources exploitation
+in offshore China. Although CNOOC has undertaken to
+transfer all of its rights and obligations (except for those
+relating to administrative functions as a state-owned
+company) under any new PSCs that it enters into to us, our
+strategies, results of operations and financial position may
+be adversely affected in the event CNOOC takes actions
+that favour its own interests over ours.
+In addition, we regularly enter into connected transactions
+with CNOOC and its affiliates. Certain connected
+transactions require a review by the Hong Kong Stock
+Exchange and are subject to prior approvals by the
+independent shareholders. If these transactions are not
+approved, the Company may not be able to proceed with
+these transactions as planned and it may adversely affect
+our business and financial condition.
+Oil and natural gas transportation may expose us to
+financial loss and reputation harm.
+Our oil and gas transportation involves marine, land and
+pipeline transportation, which are subject to hazards
+such as capsizing, collision, acts of piracy and damage
+or loss from severe weather conditions, explosions, oil
+and gas spills and leakages. These hazards could result
+in serious personal injury or loss of human life, significant
+damage to property and equipment, environmental
+pollution, impairment of operations, risk of financial loss and
+reputation harm. We may not be able to arrange insurance
+coverage for all of these risks and uninsured losses and
+liabilities arising from these hazards could reduce the funds
+available to us for financing, exploration and investment,
+which may have a material adverse effect on our business,
+financial condition and results of operations.
+We face various risks with regard to our business and
+operations in North America.
+Transportation and export infrastructure in North America is
+limited, and without the construction of new transportation
+and export infrastructure, our oil and natural gas production
+capacity may be affected. In addition, we may be required to
+sell our products into the North American markets at lower
+prices than in other markets, which could materially and
+adversely affect our financial performance.
+First Nation in Canada have claimed aboriginal title and
+rights to the lands and mineral resources in a substantial
+portion of western Canada. As a result, negotiations with
+aboriginal people on surface activities are required and may
+result in timing uncertainties or delays of future development
+activities. Declaration by the First Nation, if successful, could
+have a significant adverse effect on our business in Canada.
+We may have limited control over our investments in
+joint ventures and our operations with partners.
+A portion of our operations are conducted in the form of
+partnerships or in joint ventures in which we may have
+limited capability to influence and control their operation
+or future development. Our limited ability to influence and
+control the operation or future development of such joint
+ventures could materially and adversely affect the realization
+of our target returns on capital investment and lead to
+unexpected future costs.
+-
+If we depend heavily on key customers or suppliers,
+our business, results of operations and financial
+condition could be adversely affected.
+Key sales customers if any of our key customers reduced
+their crude oil or natural gas purchases from us significantly,
+our results of operation could be adversely affected. In
+order to reduce reliance on a single customer, in crude oil
+sales, we adopt measures including signing annual sales
+contracts, developing sales plans, and participating in
+market competition so as to maintain a stable cooperation
+with customers. In natural gas sales, we adopt measures
+including signing long-term GSA with take or pay clause so
+as to minimize the risk of impact on our financial condition.
+Key suppliers - we have strengthened our communication in
+business with our key suppliers in order to maintain a good
+working relationship. We have also established strategic
+partnerships through communications and reached a
+consensus on corporate cultures and win-win cooperation.
+Further, we actively explore new suppliers to ensure
+adequacy and foster competition of supplies.
+CNOOC LIMITED Annual Report 2018
+23
+24
+Business Overview
+We face currency risks and liquidity risks.
+Currency risks - The Company's oil and gas sales are
+substantially denominated in Renminbi and U.S. dollars. The
+appreciation of the Renminbi against the U.S. dollar may
+result in double effects, that it may decrease the Company's
+revenue in the sales of oil and gas and, decrease our costs
+of equipment and import of raw materials in the meantime.
+RISK FACTORS
+The audit reports to be included in our annual report
+filed with the SEC have been prepared by our auditor
+whose work is not inspected by the U.S. Public
+Company Accounting Oversight Board (the "PCAOB")
+and, as such, it is unlikely for the PCAOB to evaluate
+the effectiveness of our auditor's audit procedures
+and quality control procedures.
+Our exploration and development activities involve inherent
+risks, including the risk of not discovering commercially
+productive oil or gas reservoirs and that the wells we drill
+may not be able to commence production or may not be
+sufficiently productive to generate a return of our partial or
+full investments. In addition, approximately 58.0% of our
+proved reserves were undeveloped as of 31 December
+2018. Our future success depends on our ability to develop
+these reserves in a timely and cost-effective manner. There
+are various risks in developing reserves, mainly including
+construction, operational, geophysical, geological and
+regulatory risks.
+Any failure to replace reserves and develop our
+proved undeveloped reserves could adversely affect
+our business and our financial position.
+Liquidity risks Certain restrictions on dividend distribution
+imposed by the laws of the host countries in which we
+operate may adversely and materially affect our cash flows.
+For instance, the dividend of our wholly owned subsidiaries
+in the PRC shall be distributed pursuant to the laws of
+the PRC and the articles and association, and we may
+face risks of not obtaining adequate cash flows from such
+subsidiaries.
+U.S. government at federal, state or local levels imposes
+extensive economic sanctions against certain geographical
+areas and their populations or against designated
+governments, organizations, individuals and entities
+wherever located. In 2018, U.S. government fully re-
+imposed economic sanctions against Iran that were waived
+or lifted pursuant to the Joint Comprehensive Plan of Action
+with Iran. Such changes add uncertainty to the interpretation
+or implementation of U.S. government with respect to
+current or future activities by CNOOC or its affiliates any)
+in countries or with individuals or entities that are the subject
+of U.S. primary and secondary sanctions. If there are any
+sanctions imposed on CNOOC by the U.S. government,
+we could be prohibited from engaging in business activities
+in the U.S. or with U.S. individuals or entities, and U.S.
+transactions in our securities and distributions to U.S.
+individuals and entities with respect to our securities could
+also be prohibited. Pension or endowment funds of certain
+U.S. state and local governments or universities may sell
+our securities due to certain restrictions on investments in
+companies that engage in activities in sanctioned countries,
+such as Iran and Sudan. We may also be subject to
+negative media or investor attention, which may distract
+management, consume internal resources and affect
+investors' perception of our Company and investment in our
+Company.
+As required by the Iran Threat Reduction and Syria Human
+Rights Act of 2012, which added a disclosure requirement
+to the Securities Exchange Act of 1934, we are providing
+certain information regarding our non-controlled affiliates'
+activities. To our knowledge, in 2018, China Oilfield Services
+Limited (COSL), one of our non-controlled affiliates,
+provided certain drilling services in Iran. We cannot predict
+at this time whether U.S. sanctions will be imposed on any
+of our affiliates.
+Our business, cash flows and profits fluctuate with
+volatility in oil and gas prices.
+Oil and gas prices are volatile. A downward trend in oil and
+gas prices which lasts for a long period, may adversely affect
+our business, revenue and profits, and may also result in
+write-off of higher cost reserves and other assets, reduction
+of the amount of oil and natural gas we can produce
+economically and termination of existing contracts that
+have become uneconomic. The prolonged slump in oil and
+natural gas prices may also impact our long-term investment
+strategy and operation capability for our projects.
+Our business and strategy may be substantially
+affected by complex macro economy, politically
+instability, war and terrorism and changes in policy
+and fiscal and tax regimes.
+Despite the global economy has been recovering, some
+of the countries in which we operate may be considered
+politically and economically unstable. As a result, our
+financial condition and operating results could be adversely
+affected by associated international activities, domestic civil
+unrest and general strikes, political instability, war and acts
+of terrorism. Any changes in regime or social instability, or
+other political, economic or diplomatic developments, or
+changes in fiscal and tax regime are not within our control.
+Our operations, existing assets or future investments may
+be materially and adversely affected by these changes. In
+addition, our operations and assets may also be subject to
+potential trade and economic sanctions due to deteriorated
+relations between different countries.
+Our financial performance is affected by the tax and fiscal
+regimes of host countries in which we operate. Any changes
+in these regimes may result in increased costs, including the
+potential for additional or double taxation being imposed
+on our Company in some circumstances. For example, the
+Organization for Economic Co-operation and Development
+(OECD)'s "Base Erosion and Profit Shifting Project" (BEPS
+Project) was initiated to enhance multilateral cooperation
+and strengthen supervision on global corporate taxation
+and transfer pricing activities. Numerous countries have
+responded to the BEPS Project by implementing tax law
+changes and amending tax treaties at a rapid pace.
+CNOOC LIMITED Annual Report 2018
+Business Overview
+Oil and natural gas industry are very competitive.
+We compete in the PRC and international markets with
+national oil companies, major integrated oil and gas
+companies and various other independent oil and gas
+companies for access to oil and gas resources, products,
+alternative energy, customers, capital financing, technology
+and equipment, personnel and business opportunities.
+Competition may result in shortage of these resources or
+over-supply of oil and gas, which could increase our cost
+or reduce our earnings, and adversely impact our business,
+financial condition and results of operations.
+In addition to competition, as we need to obtain various
+approvals from governmental and other regulatory
+authorities in order to maintain our operations, we may
+face unfavorable results such as project delays and cost
+overruns, which may further impact the realization of our
+strategies and materially and adversely impact our financial
+condition.
+Our ability to deliver competitive returns and pursue
+commercial opportunities depends in part on the
+robustness and the long-lasting accuracy of our price
+assumptions.
+We review the oil and natural gas price assumptions on
+a periodic basis when evaluating project decisions and
+business opportunities. We generally test projects and other
+business opportunities against a long-term price range.
+While we believe our current long-term price assumptions
+are prudent, if such assumptions proved to be incorrect, it
+could have a material adverse effect on our Company. For
+short-term planning purposes, we stress test the project
+feasibility against a wider range of prices.
+Rising climate change concerns could lead to
+additional regulatory measures that may result in
+higher costs.
+It is expected that the CO2 emissions will increase as our
+production grows. CO2 emissions from flaring will increase
+if there are no proven and reliable gas gathering systems in
+place. With the coming into force of the Paris Agreement
+and the continuing growth of public's awareness of climate
+change problems, the carbon emission policies of different
+countries are gradually enacted. The Company will be
+supervised by relevant agencies and organizations in the
+future. If we are unable to find economically viable and
+publicly acceptable solutions that could reduce our CO2
+emissions for new and existing projects, we may experience
+additional costs, and our reputation may be affected.
+Mergers, acquisitions and divestments may expose
+us to additional risks and uncertainties, and we may
+not be able to realize the anticipated benefits from
+mergers, acquisitions and divestments.
+19
+and realising synergies, outcomes differing from key
+assumptions, host governments reacting or responding
+in a different manner from that envisaged, or liabilities and
+costs being underestimated. Any of these would reduce
+our ability to realise the anticipated benefits. We may not be
+able to successfully divest non-core assets at acceptable
+prices, resulting in increased pressure on our cash position.
+In the case of divestments, we may be held liable for past
+acts, or failures to act or perform responsibilities, we may
+also be subject to liabilities if a purchaser fails to fulfil its
+commitments. These risks may result in an increase in our
+costs and inability to achieve our business goals.
+Violations of anti-fraud, anti-corruption and corporate
+governance laws may expose us to various risks.
+Laws and regulations of the host countries or regions in
+which we operate, such as laws on anti-corruption, anti-
+fraud and corporate governance, are constantly changing
+and strengthening, especially in the United States, United
+Kingdom, Canada, Australia, Guyana and China. The
+compliance with these laws and regulations may increase
+our cost. If the Company, our directors, executives or
+employees fail to comply with any of such laws and
+regulations, it may expose us to prosecution or punishment,
+damage to our brand and reputations, the ability to obtain
+new resources and/or access to the capital markets, and it
+may even expose us to civil or criminal liabilities.
+Mergers and acquisitions may not succeed due to
+various reasons, such as difficulties in integrating activities
+and results of operations could be materially and adversely
+affected.
+Business Overview
+22
+Intellian
+44
+The activities of our controlling shareholder, CNOOC,
+or its affiliates in certain countries that are the
+subject of U.S. sanctions could result in negative
+media and investor attention and possible sanctions
+imposed on CNOOC, which could adversely affect our
+shareholders.
+to our fault in the matter. Regulatory requirements for HSSE
+in different countries where we operate change constantly
+and may become more stringent over time. In the future,
+we may incur significant additional costs in complying with
+such requirements or bear liabilities such as fines, penalties,
+clean-up costs and third-party claims, as a result of breach
+of HSSE-related laws and regulations.
+technical complexity of our operations. Our operations
+include productions and transportations of oil and gas in
+environmentally sensitive regions and politically unstable
+areas, such as the basins in Uganda, Iraq, as well as
+offshore fields far away from land, especially deep-water
+fields. Our operations expose us and the areas in which
+we operate to a number of risks, including potential major
+process safety incidents, natural disasters, social unrest,
+health and safety lapses and destruction by third party
+external forces, such as platform destruction caused by
+typhoon and sea ice, and oil spills and gas leaks caused
+by external force damage suffered by submarine pipelines.
+If a major HSSE risk materialises, such as an explosion
+or hydrocarbon spill, this could result in casualties,
+environmental damage, disruption of business activities,
+depending on their cause and severity, material damage
+to our reputation, exclusion from bidding on mineral rights
+and eventually loss of our licence to operate. In certain
+circumstances, liabilities could be imposed without regard
+Business Overview
+CNOOC LIMITED Annual Report 2018
+20
+We maintain various insurance policies for our operations
+against potential losses. However, our ability to insure
+against our risks is subject to the availability of relevant
+insurance products in the market. In addition, we cannot
+ensure you that our insurance coverage is sufficient enough
+to cover any losses that we may incur, or that we will be able
+to successfully claim our losses under our existing insurance
+policies on a timely basis, or at all. If any of our losses are
+not covered by our insurance coverage, or if the insurance
+compensation is less than our losses or the claim is not
+paid on a timely basis, our business, financial condition
+The nature of our operations exposes us and the
+communities in which we operate to a wide range of
+health, safety, security and environment risks.
+Every aspect of our daily operations exposes us to
+health, safety, security and environment ("HSSE") risks
+given the geographical area, operational diversity and
+The Chairman takes primary responsibility
+for ensuring that good corporate governance
+practices and procedures are established.
+The Chairman encourages all Directors to make
+full and active contribution to the Board's affairs
+and takes the lead to ensure that the Board
+acts in the best interests of the Company. The
+Chairman encourages Directors with different
+views to voice their concerns, allows sufficient
+time for discussion of issues and ensures that
+Board decisions fairly reflect Board consensus.
+The Chairman holds meetings with the
+Independent Non-executive Directors and Non-
+executive Directors without the presence of the
+Executive Directors at least annually.
+The Chairman ensures that appropriate steps
+are taken to provide effective communication
+with shareholders and that their views are
+communicated to the Board as a whole.
+CNOOC LIMITED Annual Report 2018
+30
+Corporate Governance Report
+The Chairman promotes a culture of openness
+and debate by facilitating the effective
+contribution of Non-executive Directors and
+Independent Non-executive Directors in
+particular and ensuring constructive relations
+between Executive and Non-executive
+Directors.
+The CEO is responsible for conducting the
+Company's business and affairs consistent with
+the principles and directions established by the
+Board.
+One of the important roles of the Chairman is to
+provide leadership for the Board. The Chairman
+ensures that the Board works effectively and
+performs its responsibilities, and that all key and
+appropriate issues are discussed by the Board
+in a timely manner. The Chairman delegates
+the responsibility of drawing up the agenda for
+each Board meeting and Committee meeting
+to the Joint Company Secretaries who will take
+into account, where appropriate, any matters
+proposed by the other Directors for inclusion
+in the agenda, and the Chairman is primarily
+responsible for approving the agenda.
+29
+A.3 Board composition
+Committees may, upon reasonable request,
+seek independent professional advice in
+appropriate circumstances at the Company's
+expense. The Board would resolve to provide
+separate independent professional advice to
+Directors to assist them in performing their
+duties to the Company at the Company's
+expense.
+Principle: "There are two key aspects of the
+management of every issuer the management
+of the board and the day-to-day management of
+business. There should be a clear division of these
+responsibilities to ensure a balance of power and
+authority, so that power is not concentrated in any one
+individual."
+=
+A.2 Chairman and Chief Executive
+The Company has arranged appropriate
+insurance cover in respect of legal action against
+its Directors.
+If a substantial shareholder or a Director
+has a conflict of interest in a matter to be
+considered by the Board and such interest has
+been considered to be material by the Board,
+the matter will not be dealt with by a written
+resolution but a Board meeting will be convened
+for that matter. Independent Non-executive
+Directors who do not (and whose close
+associates also do not) have material interest
+in the transaction will be present at such Board
+meeting.
+Principle: "The board should have a balance of skills,
+experience and diversity of perspectives appropriate
+to the requirements of the issuer's business. It should
+ensure that changes to its composition can be
+managed without undue disruption. It should include a
+balanced composition of executive and non-executive
+directors (including independent non-executive
+directors) so that there is a strong independent
+element on the board, which can effectively exercise
+independent judgment. Non-executive directors
+should be of sufficient calibre and number for their
+views to carry weight."
+Minutes of the meetings of the Board and
+Committees recorded sufficient details of
+the matters considered by the Board and
+Committees and decisions reached, including
+any concerns raised by Directors or dissenting
+views expressed. Draft and final versions
+of the minutes of the Board meetings and
+Committee meetings are sent to all Directors
+and all Committee members respectively within
+a reasonable time after the Board meetings and
+Committee meetings for their comments and
+records.
+Minutes of the meetings of the Board and
+Committees are kept by the Joint Company
+Secretaries and open for inspection at any
+reasonable time upon reasonable request by
+any Director.
+Dates of regular Board meetings have been
+scheduled at least two months before the
+meeting to provide sufficient notice to all
+Directors so that they can have an opportunity
+to attend. For non-regular Board meetings,
+reasonable advance notices have been given.
+The Joint Company Secretaries consulted
+the Directors on matters to be included in the
+agenda for regular Board meetings.
+Note 3: With effect from 27 April 2018, Mr. Wu Guangqi resigned as
+a Non-executive Director and a member of the Remuneration
+Committee of the Company.
+Note 2: With effect from 16 August 2018, Mr. Liu Jian resigned as the
+Vice Chairman and a Non-executive Director of the Company.
+Corporate Governance Report
+The Chairman ensures all Directors are
+properly briefed on issues arising at Board
+meetings and is responsible for ensuring that
+Directors receive, in a timely manner, adequate
+information, which must be accurate, clear,
+complete and reliable.
+The Board, as representatives of the
+shareholders of the Company, is committed
+to the achievement of business success and
+the enhancement of long-term shareholder's
+value with the highest standards of integrity and
+ethics. The role of the Board is to direct, guide
+and oversee the conduct of the Company's
+business and to ensure that the interests of the
+shareholders are being served.
+The Company has received annual
+confirmations from all of its Independent
+Non-executive Directors acknowledging full
+compliance with the relevant requirements
+in respect of their independence pursuant to
+Rule 3.13 of the Listing Rules. The Company is
+therefore of the view that all of the Independent
+Non-executive Directors are independent.
+The Executive Directors of the Company are
+all individuals with extensive experience in
+the Company's respective fields of operation.
+Both of them are familiar with the Company's
+businesses and have cooperated with leading
+global players in the oil and gas industry. Mr.
+Yuan Guangyu has over 30 years of experience
+in the oil and gas industry and Mr. Xu Keqiang
+has over 20 years of experience in the oil and
+gas industry.
+Assessed the independence of
+Independent Non-executive Directors;
+Reviewed the structure, size and
+composition (including the skills,
+knowledge and experience) of the
+Board and its committees and made
+recommendations on any proposed
+changes to the Board to complement the
+Company's corporate strategy;
+The following is a summary of the work
+performed by the Nomination Committee under
+its charter during the year:
+All Directors, including those appointed for
+a specific term are subject to retirement by
+rotation once every three years and are subject
+to re-election in accordance with the Articles of
+Association of the Company (as amended and
+adopted by special resolution of the Company
+on 27 May 2009) (the "Articles") and the CG
+Code.
+Our Non-executive Directors are appointed for a
+term of one year. However, none of our existing
+Independent Non-executive Directors are
+appointed for a specific term, which constitutes
+a deviation from the CG Code. Further
+explanation is set out under the section headed
+"Compliance with the Corporate Governance
+Code" on page 44.
+A Director appointed by the Board to fill a casual
+vacancy or as an addition shall hold office until
+the next extraordinary general meeting and/or
+annual general meeting (as appropriate).
+The Nomination Committee is also
+responsible for evaluating the contributions
+and independence of incumbent Directors
+so as to determine whether they should be
+recommended for re-election. Based on such
+evaluation, the Nomination Committee will
+recommend to the Board candidates for re-
+election at general meetings and appropriate
+replacements (if necessary). The Board, based
+on the recommendations of the Nomination
+Committee, will propose to the shareholders the
+candidates for re-election at the relevant general
+meetings.
+for over nine years. In accordance with Code
+Provision A.4.3 of the CG Code, the Company
+will include in the notice and the circular of the
+annual general meeting of the Company to be
+held in 2019 the reasons why the Board still
+considers Mr. Chiu as independent and shall be
+re-elected.
+Corporate Governance Report
+32
+31
+CNOOC LIMITED Annual Report 2018
+When nominating an Independent Non-
+executive Director who has served the
+Company for more than nine years, the Board
+will propose shareholders' vote by way of a
+separate resolution on any decision to re-elect
+such Independent Non-executive Director
+and include in the circular and/or explanatory
+statement accompanying the notice of the
+relevant general meeting to shareholders the
+reasons why the Board still considers such
+Director as independent and shall be re-
+elected. Mr. Chiu Sung Hong who has served
+as an Independent Non-executive Director of
+the Company for over nine years, will retire
+from office and being eligible for re-election
+at the forthcoming annual general meeting
+of the Company to be held on 23 May 2019.
+Mr. Chiu has thorough understanding of the
+Company's operations and business. As an
+Independent Non-executive Director, Mr. Chiu
+has always contributed objectively in advising
+the Board and the senior management,
+expressing objective views, and giving valuable
+independent guidance to the Company in his
+capacity as Independent Non-executive Director
+over the years. He is currently the chairman of
+the Remuneration Committee and a member
+of the Audit Committee, and served as a
+chairman of the independent board committee
+several times in connection with the connected
+transactions entered into by the Company and
+its subsidiaries. Mr. Chiu has been continuously
+demonstrating firm commitments to his role.
+Mr. Chiu always places great importance on
+high standards of corporate governance. Due
+to his legal background and experience, Mr.
+Chiu is able to provide valuable and useful
+advices and guidance to the Company in areas
+such as legal compliance, employment issues,
+commercial laws and etc.. Mr. Chiu has never
+been engaged in any executive management of
+the Group. Mr. Chiu has provided confirmation
+of their independence according to Rule
+3.13 of the Listing Rules. The Board, with the
+recommendation of the Nomination Committee
+of the Company, considers that Mr. Chiu remain
+independent for the purpose of the Listing Rules
+despite the fact that he has served the Board
+suitable candidates from Board members (if any)
+for consideration by the Nomination Committee
+prior to its meeting. For filling a casual vacancy,
+the Nomination Committee shall make
+recommendations for the Board's consideration
+and approval. For proposing candidates to
+stand for election and re-election at a general
+meeting, the Nomination Committee shall make
+nominations to the Board for its consideration
+and recommendation.
+When nominating a particular candidate
+for Director, the Nomination Committee will
+consider (1) integrity and character; (2) the
+breadth and depth of the management and/
+or leadership experience of the candidate;
+(3) financial literacy or other professional or
+business experience of the candidate that are
+relevant to the Company and its business; (4)
+the experience or knowledge of the candidate
+that are relevant to the Company's business
+and corporate strategy and in international
+operations; (5) commitment in respect of
+available time; (6) diversity including gender,
+age, cultural, educational background, ethnicity,
+skills, knowledge, experience, etc; and (7)
+independence criteria as required under the
+Listing Rules for candidates for independent
+non-executive Directors. All candidates must be
+able to meet the standards set out in Rules 3.08
+and 3.09 of the Listing Rules.
+With respect to nomination for new directors
+and re-election of directors, the Company
+follows a considered and transparent
+nomination policy and the Nomination
+Committee adheres to such policy for
+nomination of Directors. The nomination of
+Directors was made in accordance with the
+nomination policy and the objective criteria
+(including gender, age, cultural, educational
+background and relevant or professional
+experience, ethnicity, skills, knowledge, etc.),
+with due regard for the benefits of diversity,
+as set out under the board diversity policy of
+the Company. Under the nomination policy
+for Directors of the Company, the Nomination
+Committee shall nominate suitable candidates
+to the Board for it to consider and make
+recommendations to shareholders for election
+and re-election of Directors.
+The main authorities and responsibilities
+of the Nomination Committee are to make
+recommendations to the Board for suitable
+candidates to serve as Directors and senior
+management of the Company for approval by
+the Board, to review the structure, size and
+composition of the Board (including the skills,
+knowledge and experience), and to evaluate the
+leadership abilities of Executive Directors, so as
+to ensure the competitiveness of the Company.
+Corporate Governance Report
+The role of the Nomination Committee is to
+determine the policy and establish proper
+procedures for the selection of the Company's
+leadership positions, upgrade the quality of
+Board members and perfect the Company's
+corporate governance structure.
+The Nomination Committee comprises two
+Independent Non-executive Directors (Mr.
+Lawrence J. Lau and Mr. Kevin G. Lynch) and
+one Non-executive Director (Mr. Yang Hua), with
+Mr. Yang Hua serving as the Chairman of the
+Nomination Committee. A list of members of
+the Nomination Committee is set out under the
+section headed "Company Information" on page
+148 of this annual report.
+Principle: "There should be a formal, considered and
+transparent procedure for the appointment of new
+directors. There should be plans in place for orderly
+succession for appointments. All directors should
+be subject to re-election at regular intervals. An
+issuer must explain the reasons for the resignation or
+removal of any director."
+A.4 & Appointments, re-election and removal &
+A.5 Nomination Committee
+The diverse backgrounds of the Board
+members ensure that they can fully represent
+the interests of all shareholders of the Company
+and to enhance the effectiveness of the Board
+and corporate governance.
+The Company believes that the active
+involvement of the Non-executive Directors and
+Independent Non-executive Directors in the
+management and decision making of the Board
+and its Committees strengthens the objectivity
+and independence of the Board.
+The Independent Non-executive Directors of the
+Company are all professionals or scholars with
+backgrounds in the legal, economic, financial
+and investment fields. They have extensive
+experience and knowledge of corporate
+management and make significant contributions
+to the Company's strategic decisions.
+The Non-executive Directors of the Company
+are all individuals with extensive experience
+in the parent company's respective fields of
+operation.
+CNOOC LIMITED Annual Report 2018
+As of 31 December 2018, the Board consisted
+of eight members: two of them were Executive
+Directors, two of them were Non-executive
+Directors and four of them were Independent
+Non-executive Directors. All Directors were
+identified by categories of Executive Directors,
+Non-executive Directors and Independent
+Non-executive Directors in all corporate
+communications that set out the names of the
+Directors of the Company. A list of the Directors
+identifying their updated roles and functions
+was maintained on the Company's website and
+on the Hong Kong Stock Exchange's website
+during the reporting period.
+The Nomination Committee considers the
+personal profile and credentials of the proposed
+candidates and may request candidates to
+provide additional information and documents
+if it considers necessary, and assesses the
+proposed candidates or incumbent candidates
+on criteria set out above. The Nomination
+Committee may also invite nominations of
+No. of meetings attended
+(Two meetings in total)
+by committee
+member
+by proxy
+Reviewed and monitored the training and
+continuous professional development of
+Directors and senior management and
+made recommendations to the Board in
+that regard; and
+2217
+Oooo
+Chiu Sung Hong (Chairman)
+Tse Hau Yin, Aloysius
+Wang Dongjin (Note 1)
+Wu Guangqi (Note 2)
+Directors
+Attendance of individual members at Remuneration
+Committee meetings in 2018
+Evaluated and assessed the effectiveness
+of the Remuneration Committee
+and the adequacy of the charter of
+the Remuneration Committee and
+recommended the proposed changes to
+the charter to the Board (if necessary).
+Made recommendations to the Board on
+the remuneration of the Company's Non-
+executive Directors; and
+Assessed performance of Executive
+Directors and approved the terms of their
+service contracts;
+Made recommendations to the Board
+on the Company's policy and structure
+for Directors and senior management
+remuneration and on the establishment
+of a formal and transparent procedure for
+developing remuneration policy;
+Reviewed and approved the remuneration
+packages of the newly appointed Director
+and senior management;
+Reviewed and approved the remuneration
+packages of the Company's individual
+Executive Directors and senior
+management of the Company;
+The following is a summary of the work
+performed by the Remuneration Committee
+under its charter during the year:
+The Remuneration Committee consults the
+Chairman and CEO about its proposal relating
+to the remuneration of other Executive Directors
+and have access to independent professional
+advice if necessary.
+The Remuneration Committee also administers
+the Company's share option schemes and all
+other employee equity-based compensation
+plans, with full authority to make all other
+determinations in the administration thereof, but
+subject to the limitations prescribed by laws and
+the rules of such plans and programs.
+The remuneration of Non-executive Directors
+and Independent Non-executive Directors
+recommended by the Remuneration
+Committee is determined by the Board and no
+Directors participated in determining their own
+remuneration.
+Please refer to notes 8 to 9 to the financial
+statements on pages 95 to 97 of this annual
+report for details of Directors' remuneration
+and senior management's remuneration by
+band and the five highest paid individuals in the
+Company.
+The Company seeks to apply similar principles
+when determining the remuneration packages
+for senior management with reference to the
+Board's corporate goals and objectives. Other
+general staff and employees are rewarded on
+a performance-rated basis with other fringe
+benefits such as social insurance, pension funds
+and medical cover.
+No individual Director or any of his/her
+associates or senior management of the
+Company is permitted to determine his/her own
+remuneration.
+Details of the remuneration, as well as the share
+option benefits of Directors for the year ended
+31 December 2018, are set out on pages 95 to
+97 of this annual report.
+Changes in relevant markets, for example,
+supply/demand fluctuations and changes
+in competitive conditions.
+Responsibilities of the Directors and their
+individual contribution; and
+Business needs, company goals and
+objectives;
+Corporate Governance Report
+35
+CNOOC LIMITED Annual Report 2018
+The Company's emolument policy is to maintain
+fair and competitive packages with reference
+to industry standards and prevailing market
+conditions. The Remuneration Committee is
+mindful that levels of remuneration must be
+sufficient to attract and retain the Directors
+and senior management in order to run the
+Company successfully, but at the same
+time, the Company should avoid setting
+remunerations which are in excess of those
+necessary for this purpose. The Directors'
+emolument package may comprise the
+Director's fees, basic salaries and allowances,
+bonuses, share options and others. The
+following factors are considered in determining
+the Directors' remuneration package:
+The major responsibilities and authorities
+of the Remuneration Committee include
+making recommendations to the Board
+on the Company's policy and structure of
+the remuneration of Directors and senior
+management of the Company and on the
+establishment of a formal and transparent
+procedure for developing remuneration
+policy, determining and reviewing the
+service contracts and specific remuneration
+packages for all Executive Directors and
+senior management, such as benefits in kind,
+pension rights and compensation payments,
+including any compensation payable for loss
+or termination of their office or appointment,
+reviewing and approving the compensation
+arrangements relating to dismissal or removal
+of Directors for misconduct to ensure
+consistency with contractual terms, and
+making recommendations to the Board on the
+remuneration of Non-executive Directors and
+Independent Non-executive Directors.
+The Remuneration Committee comprises two
+Independent Non-executive Directors (Mr. Chiu
+Sung Hong and Mr. Tse Hau Yin, Aloysius), and
+one Non-executive Director (Mr. Wu Guangqi,
+who resigned as a member of the Remuneration
+Committee with effect from 27 April 2018 and
+Mr. Wang Dougjin was appointed as a member
+of the Remuneration Committee on the same
+date), with Mr. Chiu Sung Hong serving as the
+Chairman of the Remuneration Committee. The
+Remuneration Committee is delegated with the
+authority of determining and approving salaries,
+bonuses, share option packages, performance
+appraisal systems and retirement plans for all
+Executive Directors and senior management. A
+list of members of the Remuneration Committee
+is set out in "Company Information" on page 148
+of this annual report.
+Principle: "An issuer should disclose its directors'
+remuneration policy and other remuneration related
+matters. The procedure for setting policy on executive
+directors' remuneration and all directors' remuneration
+packages should be formal and transparent.
+Remuneration levels should be sufficient to attract
+and retain directors to run the company successfully
+without paying more than necessary. No director
+should be involved in deciding his own remuneration."
+Note 1: With effect from 27 April 2018, Mr. Wang Dongjin was
+appointed as a Non-executive Director and a member of the
+Remuneration Committee of the Company.
+Note 2: With effect from 27 April 2018, Mr. Wu Guangqi resigned as
+a Non-executive Director and a member of the Remuneration
+Committee of the Company.
+36
+CNOOC LIMITED Annual Report 2018
+CNOOC LIMITED Annual Report 2018
+The Company has established procedures for
+identifying, handling and disseminating inside
+information in compliance with the Securities
+and Futures Ordinance (Chapter 571 of the
+Laws of Hong Kong), including the issue of
+an inside information disclosure policy, the
+annual review and update (if necessary) of
+such inside information disclosure guide, pre-
+clearance on dealing in Company's securities
+by Directors and designated members of the
+management, notification of regular blackout
+period and securities dealing restrictions to
+relevant Directors and employees, identification
+of project by code name and dissemination of
+information to stated purpose and on a need-
+to-know base have been implemented by the
+Company to guard against possible mishandling
+of inside information within the Group.
+With respect to internal control, the Company
+has chosen and adopted the internal control
+framework issued by COSO, established an
+internal control system and mechanism over
+financial, operational and compliance controls
+and has conducted continuing review and
+evaluation of the internal control system of the
+Company to ensure the timeliness, accuracy
+and completeness of all information reported.
+With respect to risk management, the Company
+has chosen and adopted the risk management
+framework issued by COSO in the United
+States of America ("COSO"), established a
+risk management system covering design,
+implementation, monitoring, assessment and
+continuous improvement based on the ISO
+31000:2009 "Risk Management - Principles and
+Guidelines". The Risk Management Committee
+established the overall targets and policies of the
+risk management system which are in line with
+the strategic objectives of the Company, and
+identified, analysed and assessed the overall
+risk of the Company, including the Company's
+key risks in making major decisions, important
+events and key business processes. The Risk
+Management Committee is also responsible for
+reviewing and approving the response plans
+to major risks, as well as periodically following-
+up and reviewing the implementation of such
+response plans, in order to make sure that
+sufficient attention, monitor and responses will
+be paid to all key risks of the Company. The risk
+management reports are submitted to the Audit
+Committee and the Board periodically.
+The Company's Risk Management Committee
+is directly managed by the CEO of the
+Company and has been authorized by the
+Board to be in charge with the organization and
+implementation of the overall risk management
+and internal control. The Risk Management
+Committee is responsible for establishing the
+risk management and internal control systems,
+implementing standardized organization,
+authorization, responsibilities, procedures
+and methods for the risk management and
+internal control systems. The Risk Management
+Committee is also responsible for ongoing
+monitoring of the risk management and internal
+control systems of the Company, and makes
+periodic reports to the Audit Committee and
+the Board regarding the status of the risk
+management and internal control systems of the
+Company.
+The Audit Committee is delegated by the Board
+to oversee the risk management and internal
+control systems and the internal audit function
+of the Company on an on-going basis (at least
+annually). For work completed by the Audit
+Committee on the Company's risk management
+and internal control systems, please refer to the
+section headed "C.3 Audit Committee" below.
+The Board regularly, and at least annually,
+receives reports from the management of the
+Company regarding the establishment, review
+and evaluation of the Company's strategic,
+financial, operational and compliance control,
+risk management and internal control systems.
+All major risks are reported to the Board. The
+Board will also evaluate the corresponding risks
+and the response plan.
+The Board acknowledges that it is its
+responsibilities to ensure that the Company
+establishes and maintains appropriate and
+effective risk management and internal control
+systems and review their effectiveness. Such
+systems are designed to manage rather than
+eliminate risks of failure to achieve business
+objectives, and can only provide reasonable,
+but not absolute, assurance against material
+misstatement or loss.
+Corporate Governance Report
+38
+37
+CNOOC LIMITED Annual Report 2018
+Principle: "The board is responsible for evaluating
+and determining the nature and extent of the
+risks it is willing to take in achieving the issuer's
+strategic objectives, and ensuring that the issuer
+establishes and maintains appropriate and effective
+risk management and internal control systems.
+The board should oversee management in the
+design, implementation and monitoring of the risk
+management and internal control systems, and
+management should provide a confirmation to the
+board on the effectiveness of these systems."
+C.2 Risk management and internal control
+B.1 The level and make-up of remuneration and
+disclosure
+The statement by the auditor of the Company
+regarding its reporting responsibilities on the
+financial statements of the Group is set out in
+the Independent Auditors' Report on page 67.
+The Company has also engaged independent
+technical consultant firms to conduct a review of
+its oil and gas business and discloses details of
+its oil and gas properties in its annual report (as
+set out on pages 128 to 140).
+The Company provides a balanced, clear and
+understandable assessment in its interim and
+annual reports, other financial disclosures
+required by the Listing Rules, reports to the
+regulators and information disclosed under
+statutory requirements to enable investors to
+appraise its development over the period and its
+financial position.
+manner.
+The Company regularly updates investors with
+progress of development and performance
+of the Company through formal channels
+such as annual reports, interim reports and
+announcements made through the Hong Kong
+Stock Exchange's website and the Company's
+website, as well as through press releases.
+The Company also issues quarterly operational
+statistics and announces its strategy at the
+beginning of the year to enhance transparency
+about its performance and to give details of the
+latest development of the Company in a timely
+In response to Section 404 of the Sarbanes-
+Oxley Act promulgated by the U.S. Congress
+in 2002 to safeguard the interests of investors,
+increase the accuracy and effectiveness of
+financial reporting and financial information
+disclosure, the management has issued
+a statement on the responsibility and
+effectiveness of internal control based on
+financial reporting, and the auditors of the
+Company have also audited the effectiveness of
+internal control over financial reporting.
+If necessary, the Directors will also engage
+professional independent consultants so
+that the Directors can gain an in-depth and
+comprehensive understanding and assessment
+of the relevant matters, in order to make well-
+grounded assessments.
+Directors also discuss and analyse the
+performance of the Group, the long term
+business model and corporate strategies of
+the Company for achieving the Company's
+objectives and generating or preserving value
+over the longer term. Please refer to the relevant
+section in Management's Discussion and
+Analysis on pages 63 to 66 for details.
+Directors discuss the operating budget for the
+next year and approve the operating budget
+at the end of each year and will review the
+execution of the operating budget for the whole
+year. Management will also provide sufficient
+explanations and information to the Board. All
+significant changes in the operating conditions
+and investment decisions will be discussed in
+sufficient details by the Board.
+The Company has established a mechanism for
+reporting to the Board by providing a monthly
+management report in order to ensure that
+the Board fully understands the operating
+conditions and the relevant financial position
+of the Company. The Board is responsible for
+preparing accounts that give a true and fair view
+of the Group's financial position on a going-
+concern basis and other financial disclosures.
+Management provides the Board with the
+relevant information it needs to fulfill these
+responsibilities.
+Principle: "The board should present a balanced, clear
+and comprehensible assessment of the company's
+performance, position and prospects."
+C.1 Financial reporting
+ACCOUNTABILITY AND AUDIT
+C.
+Corporate Governance Report
+The Directors are not aware of any material
+uncertainties relating to events or conditions that
+may cast significant doubt upon the Company's
+ability to continue as a going concern as referred
+to in Code Provision C.1.3 of the CG Code.
+Identified individuals suitably qualified
+to become Board members and made
+recommendations to the Board on the
+selection of individuals nominated for
+directorships;
+REMUNERATION OF DIRECTORS AND
+SENIOR MANAGEMENT AND BOARD
+EVALUATION
+For regular Board meetings and Committee
+meetings, the agenda and accompanying
+Board papers are sent in full to all Directors at
+least three days before the intended date of the
+Board meetings or Committee meetings.
+In addition, the Company also provided
+regular updates to Directors in respect of
+continuing obligations of listed issuers and
+their directors as well as monthly updates
+on the business and operations of the
+Group.
+Certain Directors also attended trainings
+organized by the Company or external
+professional bodies on other regulatory
+updates as well as obligations of
+directors. In addition, Directors also
+read materials/publications which they
+thought appropriate and necessary for
+the fulfillment of their roles. The Directors
+provided their regular training records to
+the Company.
+The Company also recognizes the
+importance of continuous professional
+development of the Directors. Directors
+are encouraged to participate in
+continuous professional development
+to develop and refresh their knowledge
+and skills. During the year, the Company
+arranged trainings conducted by its
+external professional advisers on
+Navigating oil and gas through the
+energy transition. The trainings covered
+a broad range of topics including latest
+trends of Energy demand and industry
+development. In addition, the Directors
+read materials prepared by the external
+advisers of the Company on topics such
+as case studies on inside information and
+insider dealing. Directors also attended
+various e-training launched by the
+Hong Kong Stock Exchange on topics
+such as corporate governance update
+2018, appointment of independent
+non-executive directors, independent
+non-executive directors' role, directors'
+attendance at meetings and dividend
+policy, etc.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2018 33
+All Directors newly appointed to the
+Board receive a comprehensive, formal
+and tailored induction on appointment
+for the purpose of giving an overview
+of the business and operations of the
+Group and appropriate briefings and
+trainings from the Company covering
+the statutory and regulatory obligations
+of Directors, organizational structure,
+policies, procedures and codes of the
+Company and terms of reference of
+Committees. The senior management
+and the Joint Company Secretaries will
+also conduct subsequent briefings as
+and when necessary to ensure that the
+Directors are kept appraised of the latest
+developments relevant to the operations
+and business of the Company, and
+their responsibilities under statutes and
+common law, the Listing Rules, legal and
+other regulatory requirements as well as
+the Company's business and governance
+policies, so that they are able to discharge
+their responsibilities properly.
+Directors' training and professional
+development:
+The Company regularly updates its Directors
+with changes in laws and regulations relevant to
+their roles as Directors of the Company.
+Principle: "Every director must always know his
+responsibilities as a director of an issuer and its
+conduct, business activities and development.
+Given the essential unitary nature of the board, non-
+executive directors have the same duties of care and
+skill and fiduciary duties as executive directors."
+333
+000
+by proxy
+A.6 Responsibilities of Directors
+member
+No. of meeting attended
+(Three meetings in total)
+by committee
+Yang Hua (Chairman)
+Lawrence J. Lau
+Kevin G. Lynch
+Directors
+Attendance of individual members at Nomination
+Committee meetings in 2018
+Since the adoption of the Policy in August 2013, the
+Board has observed the Policy and took into account
+the objectives set out in the Policy in reviewing its Board
+composition. In particular, in selecting the candidates for
+Non-executive Director, not only the Board considered the
+knowledge, experience and industry-specific exposures
+of the candidates, the Board also took into account other
+factor such as cultural background and diversified vision
+of the candidates. In selecting candidates for Executive
+Director, the Board will consider knowledge and exposures
+in the oil and gas industry, leadership and management
+skills and experience and length of service in the industry.
+As a result, the Nomination Committee considered that the
+appointment of Non-executive Director and Vice Chairman
+(as the case maybe) during the reporting period were
+appropriate and that there is sufficient diversity at the Board
+level.
+Selection criterion: Selection of candidates will
+be based on diversity of
+perspectives, including but
+not limited to, gender, age,
+cultural and educational
+background, professional
+experience, skills,
+knowledge and diversified
+vision.
+With a view to leading its
+leap-forward development,
+the Company sees
+increasing diversity at the
+Board level as an essential
+element in supporting the
+attainment of its strategic
+objectives and sustainable
+development. In designing
+the Board's composition,
+board diversity shall
+be considered from
+a number of aspects,
+including but not limited to,
+gender, age, cultural and
+educational background,
+professional experience,
+skills, knowledge and
+length of service. All
+Board appointments will
+be based on meritocracy,
+and candidates will
+be considered against
+objective criteria, having
+due regard to the benefits
+of diversity on the Board.
+The Policy aims to continue
+to improve corporate
+governance and ensure the
+diversity on the Board.
+Policy statement:
+Purpose:
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2018
+To demonstrate the Company's continued
+commitment to high standards of corporate
+governance, the Board adopted a board
+diversity policy (the "Policy") on 20 August
+2013. The Policy aims to continue to improve
+corporate governance and ensure the diversity
+of Board members. A summary of the Policy is
+set out below:
+During the year ended 31 December 2018,
+Mr. Wang Dongjin was appointed as a Non-
+executive Director and a member of the
+Remuneration Committee of the Company with
+effect from 27 April 2018, and was appointed as
+the Vice Chairman of the Company with effect
+from 5 December 2018. Mr. Liu Jian resigned
+as the Vice Chairman and a Non-executive
+Director of the Company with effect from 16
+August 2018. Mr. Wu Guangqi resigned as a
+Non-executive Director and a member of the
+Remuneration Committee of the Company
+with effect from 27 April 2018. Other than the
+above, the Nomination Committee considered
+that any other change to the composition of the
+Board was not necessary. It will keep assessing
+whether any such change is required going
+forward and will recommend to the Board
+qualified candidates as Directors according
+to the nomination policy and procedure of the
+Nomination Committee.
+Evaluated and assessed the effectiveness
+of the Nomination Committee and the
+adequacy of the charter of the Nomination
+Committee and recommended the
+proposed changes to the charter to the
+Board (if necessary).
+The Non-executive Directors and the
+Independent Non-executive Directors actively
+participate in Board meetings and Committees
+meetings to exercise their independent
+judgement on issues of strategy, policy,
+performance, accountability, resources, key
+appointments and standards of conduct of the
+Company. They are responsible for taking the
+lead where potential conflicts of interests arise.
+The Non-executive Directors and the
+Independent Non-executive Directors are
+invited to serve on the Audit, Remuneration and
+Nomination Committees of the Company.
+During 2018, each Non-executive Director or
+Independent Non-executive Director attended
+or otherwise appointed an alternate to attend
+all regularly scheduled meetings of the Board
+and Committees on which such Non-executive
+Director or Independent Non-executive Director
+sat in, and reviewed the meeting materials
+distributed in advance for such meetings and
+shared their experience, skills and expertise
+with the Board or the relevant Committees.
+All of the Non-executive Directors and
+Independent Non-executive Directors of the
+Company made positive contributions to the
+development of the Company's strategy and
+policies through independent, constructive
+and informed comments. The Non-executive
+Directors and the Independent Non-executive
+Directors have been responsible for scrutinising
+our performance in achieving agreed corporate
+goals and objectives and monitoring our
+performance reporting.
+Mr. Yang Hua, Chairman of the Board, together
+with the Independent Non-executive Directors
+and Non-executive Directors attended the
+General Meetings held in 2018 and responded
+to questions raised by the shareholders in order
+to develop a balanced understanding of the
+views of shareholders.
+The Company's senior management regularly
+provides the Board and its Committees with
+adequate information in a timely manner to
+enable them to make informed decisions. Senior
+management also organises presentations to
+the Board conducted by professional advisers
+on specific transactions as appropriate.
+Principle: "Directors should be provided in a timely
+manner with appropriate information in the form and
+quality to enable them to make an informed decision
+and perform their duties and responsibilities."
+B.
+A.7 Supply of and access to information
+The Directors are required to inform the
+Company in case of any change in the
+number and nature of offices held in public
+companies or organizations and other significant
+commitments. Please refer to "Directors and
+Senior Management" on pages 47 to 53 for the
+biographies of the Directors.
+Note 3: With effect from 27 April 2018, Mr. Wu Guangqi resigned as
+a Non-executive Director and a member of the Remuneration
+Committee of the Company.
+Note 2: With effect from 16 August 2018, Mr. Liu Jian resigned as the
+Vice Chairman and a Non-executive Director of the Company.
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2018
+34
+Note 1: With effect from 27 April 2018, Mr. Wang Dongjin was
+appointed as a Non-executive Director and a member of the
+Remuneration Committee of the Company, and was also
+appointed as the Vice Chairman of the Company. with effect
+from 5 December 2018.
+1
+1
+1
+The Board and each Director have separate and
+independent access to the Company's senior
+management and also the Joint Company
+Secretaries, who will provide full and prompt
+responses to queries raised by the Directors.
+All Directors are entitled to have access to the
+Board papers, minutes and related materials
+upon reasonable notice.
+1
+1
+1
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Lawrence J. Lau
+Independent Non-executive Directors
+Chiu Sung Hong
+Wu Guangqi (Note 3)
+Wang Dongjin (Vice Chairman) (Note 1)
+Liu Jian (Note 2)
+No. of meetings attended
+(One meeting in total)
+Yang Hua (Chairman)
+Non-executive Directors
+Xu Keqiang
+Executive Directors
+Yuan Guangyu
+Directors
+Attendance at general meetings in 2018:
+1110
+Made recommendations to the Board on
+the re-election of Directors and reviewed
+succession planning for Directors,
+in particular the Chairman and CEO,
+according to the nomination procedure
+and process and criteria adopted by the
+Company;
+D.3
+Born in 1961, Mr. Yang is a professor-level senior economist
+and graduated from China University of Petroleum with a
+B.S. degree in petroleum engineering. He also received an
+MBA degree from the Sloan School of Management at MIT
+as a Sloan Fellow. Mr. Yang joined CNOOC in 1982 and
+has over 30 years of experience in petroleum exploration
+and production. From 1982 to 1992, Mr. Yang served
+in a number of positions in CNOOC Research Center
+including the Director of Field Development Department,
+the Manager of Reservoir Engineering Department and the
+Project Manager. Thereafter, Mr. Yang was mainly involved
+in international business, M&A, corporate finance and
+capital market operations. From 1993 to 1999, he served
+as the Deputy Chief Geologist, the Deputy Director and the
+Acting Director for Overseas Development Department of
+CNOOC and the Vice President of CNOOC International
+Limited. From 1999 to 2011, Mr. Yang served in a number
+of positions in the Company including Senior Vice President,
+Chief Financial Officer, Executive Vice President, President
+and Chief Executive Officer. Mr. Yang also served as an
+Assistant President of CNOOC from November 2006 to
+April 2010 and as Vice President of CNOOC from April
+2010 to August 2011. Mr. Yang served as Director and
+President of CNOOC from August 2011 to April 2015.
+He was appointed as Chairman of CNOOC in April 2015.
+From 15 June 2016 to 18 April 2017, he was appointed
+as the Chairman and a Director of Nexen Energy ULC, a
+subsidiary of the Company. He also served as Chairman,
+Director and President of CNOOC Southeast Asia Limited,
+Chairman, Director and General Manager of CNOOC China
+Limited and Chairman and Director of CNOOC International
+Limited, all being subsidiaries of the Company. He also
+served as Director of CNOOC Finance Corporation Limited,
+a subsidiary of CNOOC. Mr. Yang was appointed as an
+Executive Director of the Company with effect from 31
+August 2005 and was the Vice Chairman of the Board of
+the Company from 16 September 2010 to 19 May 2015,
+and was re-designated from an Executive Director to a
+Reviewing and approving long-term
+strategic plans and annual operating
+plans, and monitoring the implementation
+and execution of these plans;
+(i)
+The primary functions performed by the Board
+include:
+The day-to-day management is conducted
+by senior management and employees of the
+Company, under the direction of the CEO
+and the oversight of the Board. In addition
+to its general oversight of the management,
+the Board also performs a number of specific
+functions. The Company formalises the
+functions reserved to the Board and those
+delegated to management and reviews those
+arrangements periodically to ensure that they
+remain appropriate to the Company's needs.
+The Board is the ultimate decision-making
+body of the Company, other than those matters
+reserved to shareholders of the Company.
+The Board oversees and provides strategic
+guidance to senior management in order to
+enhance the long-term value of the Company
+for its shareholders. The Board delegates its
+management and administration functions to
+management and gives clear directions as to
+the powers of management at the same time,
+in particular, with respect to the circumstances
+where management should report back
+and obtain prior approval from the Board
+before making decisions or entering into any
+commitments on the Company's behalf.
+Principle: "An issuer should have a formal schedule of
+matters specifically reserved for board approval. The
+board should give clear directions to management
+on the matters that must be approved by it before
+decisions are made on the issuer's behalf."
+D.1 Management functions
+D. DELEGATION BY THE BOARD
+Corporate Governance Report
+CNOOC LIMITED Annual Report 2018 41
+O O O
+0
+0
+by proxy
+444
+(Chairman and Financial Expert)
+Chiu Sung Hong
+Lawrence J. Lau
+member
+No. of meetings attended
+(Four meetings in total)
+by committee
+Tse Hau Yin, Aloysius
+Independent
+Non-executive
+Directors
+Attendance of individual members at Audit Committee
+meetings in 2018
+Reviewing and approving significant
+financial and business transactions and
+other major corporate actions;
+Reviewing and approving financial
+statements and reports, and overseeing
+the establishment and maintenance of
+controls, processes and procedures to
+ensure accuracy, integrity and clarity in
+financial and other disclosures; and
+(iv) Overall responsibility for the Company's
+ESG strategy and reporting, evaluating
+and determining the Company's ESG-
+related risks, and ensuring appropriate
+and effective ESG risk management and
+internal control systems are in place.
+The Board and the senior management have
+respective responsibilities, accountabilities
+and contributions. The primary functions
+performed by the senior management are to
+conduct the daily business and implement
+the abovementioned affairs approved and
+delegated by the Board and other matters as the
+Board may from time to time request.
+The Board recognizes the importance of
+good and effective communication with all
+shareholders. With a policy of being transparent,
+strengthening investor relations, and providing
+consistent and stable returns to shareholders,
+the Company seeks to ensure transparency
+through establishing and maintaining different
+communication channels with shareholders.
+Principle: "The board should be responsible for
+maintaining an on-going dialogue with shareholders
+and in particular, use annual general meetings or other
+general meetings to communicate with them and
+encourage their participation."
+E.1 Effective communication
+COMMUNICATION WITH SHAREHOLDERS
+The Nomination Committee shall be responsible
+for reviewing and monitoring the training
+and continuous professional development of
+Directors and senior management and making
+recommendations to the Board in that regard.
+(iv) Reviewing the Company's compliance
+with the CG Code and disclosure in
+the Corporate Governance Report and
+making recommendations to the Board in
+that regard.
+Developing, reviewing and monitoring the
+Code of Ethics for Directors and Senior
+Officers ("Code of Ethics") and making
+recommendations to the Board in that
+regard; and
+Reviewing and monitoring the Company's
+policies and practices on compliance with
+legal and regulatory requirements and
+making recommendations to the Board in
+that regard;
+(iii)
+(ii)
+The Audit Committee is provided with sufficient
+resources, including independent access to and
+advice from external auditors.
+E.
+42 CNOOC LIMITED Annual Report 2018
+Developing and reviewing the
+Company's policies and practices on
+corporate governance and making
+recommendations to the Board;
+(i)
+The Audit Committee shall be responsible for
+performing the corporate governance duties set
+out below:
+The Board has delegated the responsibility
+for performing certain corporate governance
+related duties and functions to the Audit
+Committee and the Nomination Committee.
+The Company has established an Audit
+Committee, a Remuneration Committee and a
+Nomination Committee (each a "Committee")
+and has established a specific written
+committee charter (the "Charter") for each of the
+Committees which deals clearly with its authority
+and duties. The Charters of the Committees are
+published on the websites of the Hong Kong
+Stock Exchange and the Company. These
+Committees will report to the Board on their
+decisions and recommendations.
+Corporate Governance and Functions
+Principle: "Board committees should be formed with
+specific written terms of reference which deal clearly
+with their authority and duties."
+D.2 & Board Committees &
+Directors clearly understand delegation
+arrangements in place. The Company has
+entered into service agreements with the
+Executive Directors and Non-executive
+Directors and has formal letters of appointment
+for Independent Non-executive Directors
+setting out the key terms and conditions of their
+engagements and appointments.
+The Directors review such delegation
+arrangements periodically to ensure they remain
+appropriate to our needs.
+Corporate Governance Report
+Full minutes of the Audit Committee meetings
+are kept by the Joint Company Secretaries.
+Draft and final versions of minutes of the Audit
+Committee meetings are sent to all members
+of the Audit Committee for their comments and
+records respectively, in both cases within a
+reasonable time after the meetings.
+Evaluated and assessed the effectiveness
+of the Audit Committee and the adequacy
+of the charter of the Audit Committee,
+and considered and recommended the
+proposed amendments to the charter and
+presented to the Board for approval.
+Reviewed the Company's business ethics
+and compliance policies, related reports
+and training programs as appropriate and
+performed certain corporate governance
+duties delegated by the Board set out
+in Board Committees & Corporate
+Governance Functions section on page
+42; and
+The Audit Committee held formal
+meetings with the external auditors and
+senior management of the Company at
+least twice a year to discuss the matters
+including:
+40 CNOOC LIMITED Annual Report 2018
+Reviewed the Company's audited
+accounts, annual results announcements,
+unaudited interim accounts and interim
+results announcements before they are
+tabled to the Board for approval, and
+discussed with senior management and
+the external auditors over such accounts;
+The following is a summary of the work
+performed by the Audit Committee under its
+charter during the year:
+The Audit Committee is also responsible for
+reviewing the Company's internal audit function,
+ensuring co-ordination within the Group and
+between the Company's internal and external
+auditors, and ensuring that the internal audit
+function is adequately resourced and has
+appropriate standing within the Company and to
+review and monitor its effectiveness.
+The Audit Committee is responsible for
+overseeing and monitoring the risk management
+and internal control systems of the Company
+on an ongoing basis and reviewing with our
+external auditors and management periodically,
+not less than annually, the scope, adequacy
+and effectiveness of the Company's corporate
+accounting and financial controls, risk
+management and internal control systems, and
+any related significant findings regarding risks
+or exposures and consider recommendations
+for improvement of such controls. The review
+should cover all material aspects, including
+strategic, financial, operational and compliance
+controls. In conducting annual review, the
+Audit Committee in particular, consider the
+factors including (a) the changes, since the
+last annual review, in the nature and extent of
+significant risks, and the Company's ability to
+respond to changes in its business and the
+external environment; (b) the scope and quality
+of management's ongoing monitoring of risks
+and of the internal control systems, and where
+applicable, the work of its internal audit function
+and other assurance providers; (c) the extent
+and frequency of communication of monitoring
+results to the Board and the Audit Committee
+which enables them to assess the effectiveness
+of the risk management and internal control
+systems of the Company; (d) significant control
+failings or weaknesses that have been identified
+during the period. Also, the extent to which
+they have resulted in unforeseen outcomes or
+contingencies that have had, could have had, or
+may in the future have, a material impact on the
+Company's financial performance or condition;
+and (e) the effectiveness of the Company's
+processes for financial reporting and Listing Rule
+compliance.
+Corporate Governance Report
+39
+CNOOC LIMITED Annual Report 2018
+The Audit Committee is also responsible for
+overseeing the operation of the internal control
+system so as to ensure that the Board is able
+to monitor the Company's overall financial
+position, to protect the Company's assets, and
+to prevent major errors or omissions in financial
+reporting. The Audit Committee also meets at
+least twice a year with our external auditors.
+(i)
+The Audit Committee meets at least twice
+a year and is responsible for reviewing the
+completeness, accuracy and fairness of
+the Company's accounts, evaluating the
+Company's auditing scope (both internal
+and external) and procedures as well as
+the effectiveness of the Company's risk
+management and internal control systems.
+The Audit Committee, together with senior
+management and the external auditors,
+review the accounting principles and practices
+adopted by the Group and discuss the risk
+management and internal control and financial
+reporting matters. The Board also assesses
+the effectiveness of risk management and
+internal control systems based on the reviews
+by the Risk Management Committee, senior
+management, internal audit function and
+external auditors.
+Principle: "The board should establish formal and
+transparent arrangements to consider how it will
+apply financial reporting, risk management and
+internal control principles and maintain an appropriate
+relationship with the issuer's auditors. The audit
+committee established under the Listing Rules should
+have clear terms of reference."
+C.3 Audit Committee
+The management evaluated the design and
+operating effectiveness of the Company's
+risk management system and the Company's
+internal control over financial reporting for 2018
+and did not discover any material weakness
+from the evaluation. As a result, the Board
+considered that as of 31 December 2018,
+the Company's risk management system and
+the Company's internal control over financial
+reporting were effective.
+The management reported the above works to
+the Audit Committee for the purpose of assisting
+the Audit Committee to review the effectiveness
+of the risk management and internal control
+systems.
+Reports from external auditors on internal
+control and relevant financial reporting matters
+were presented to and reviewed by the Audit
+Committee.
+During the reporting period, the Company's
+internal audit function provided independent
+assurance as to the adequacy and effectiveness
+of the Company's risk management and
+internal control systems. The financial condition,
+operational control and compliance control of
+the Company were examined by the internal
+audit function according to the audit plan
+approved by the Audit Committee. Different
+audit areas were assigned according to risk
+priority. The internal audit function assisted the
+Board to monitor the effectiveness of the risk
+management and internal control systems.
+After completion of an internal audit, analysis,
+appraisals, recommendations related to the
+activities inspected were formulated. The
+internal audit function reported to the Audit
+Committee and the Board about internal audit
+findings, internal audit recommendation and the
+management responses. In addition, the internal
+audit function maintained a regular dialogue with
+the Company's external auditors so that both
+are aware of the significant factors which may
+affect their respective scope of work.
+The Company has established a mechanism
+for remediating internal control deficiency
+under which the management of each level
+are assigned with clear responsibilities relating
+to remediating internal control deficiency in
+accordance with their respective levels. Those
+responsibilities are also included in the internal
+performance indicators of the Company.
+The Company has maintained an open
+channel to handle and discuss internal reports
+concerning finance, internal control and fraud
+to ensure that all reports will receive sufficient
+attention and any significant internal control
+weakness or reports will directly reach to the
+chairman of the Audit Committee.
+Whistleblowing policy and system have been
+established for employees and those who deal
+with the Company to raise concerns about
+possible improprieties in any matter relating to
+the Company.
+Corporate Governance Report
+The Audit Committee consists of three
+Independent Non-executive Directors (Mr. Tse
+Hau Yin, Aloysius, Mr. Chiu Sung Hong and Mr.
+Lawrence J. Lau), with Mr. Tse Hau Yin, Aloysius
+as the Audit Committee financial expert for the
+purposes of U.S. securities laws and Chairman
+of the Audit Committee. A list of members of the
+Audit Committee is set out under the section
+headed "Company Information" on page 148 of
+this annual report.
+The Company has a professionally-run investor
+relations department to serve as an important
+communication channel between the Company
+and its shareholders and other investors.
+(!!!)
+the Company's management
+discussion and analysis disclosures
+in the annual report of the Company;
+and
+Reported on its findings and suggestions
+to the Board following its review of
+different aspects of the Company's
+financial reporting and risk management
+and internal control systems and made
+appropriate recommendations where
+necessary;
+Reviewed the arrangements by which
+employees of the Company can use,
+in confidence, to raise concerns about
+possible improprieties in financial
+reporting, risk management and internal
+control or other matters and ensure that
+proper arrangements are in place for fair
+and independent investigation and for
+appropriate follow-up actions;
+Considered and approved the non-audit
+services provided by the external auditors
+during the year;
+Members of the Audit Committee received
+materials from the Company's external
+auditors from time to time in order to
+keep abreast of changes in financial
+reporting principles and practices, as well
+as issues relating to financial reporting,
+risk management and internal controls
+relevant to the Company;
+Reviewed and approved the Company's
+audit and non-audit pre-approval policy to
+ensure auditors' independence;
+Reviewed the work performed by
+the Company's external auditors and
+their relationship with the Company's
+senior management, and made
+recommendations to the Board in relation
+to the appointment of external auditors, as
+well as the proposed auditors' fees;
+On the basis of the aforesaid review, the
+Audit Committee was not aware of any
+significant issues that would have an
+adverse impact on the effectiveness and
+adequacy of the risk management and
+internal control systems of the Company;
+make recommendations to the
+Board and the senior management
+on the scope and quality of
+management's ongoing monitoring
+of risks and issues relevant to
+internal control.
+consider the major investigation
+findings on risk management
+and internal control systems and
+management's response to these
+findings; and
+review of the effectiveness of
+the internal audit function of the
+Company to ensure coordination
+within the Group and between the
+Company's internal and external
+auditors and to ensure that the
+internal audit function is adequately
+resourced and has appropriate
+standing within the Company;
+the external auditors' engagement
+letter and general scope of their
+audit work, including planning and
+staffing of the audit;
+review the adequacy of resources,
+staff qualifications and experience,
+training programmes and budget of
+the Company's accounting, financial
+reporting functions and internal
+audit functions to ensure that the
+management had performed its
+duty;
+(v)
+(iv)
+Corporate Governance Report
+review on whether the management
+has established effective risk
+management and internal control
+systems pursuant to the Listing
+Rules as well as under relevant
+US requirements and to evaluate
+the scope and quality of the
+management's works on the risk
+management system, internal
+control system and internal audit;
+review of reports submitted by
+and discussions with the Risk.
+Management Committee and other
+senior management concerned
+regarding major risks identified,
+changes in the nature and extent
+of major risks since the last annual
+review, measures and response
+plans to manage risks identified,
+and the ability of the Company to
+respond to such changes in its
+business operation, etc.;
+(ii)
+(i)
+On behalf of the Board, conducted
+a review of the effectiveness of the
+Company's risk management and internal
+control systems for the year ended 31
+December 2018. The annual review
+included works such as:
+In addition to formal meetings arranged
+by the Company, members of the Audit
+Committee were also given direct access
+to the external auditors, have frequent
+contacts with the external auditors to
+discuss issues from time to time;
+the applicable accounting
+standards relating to the audit of the
+Company's financial statements,
+including any recent changes.
+(vi)
+A key element of effective communication
+with shareholders and investors is prompt and
+timely dissemination of information in relation
+to the Company. In addition to announcing its
+interim and annual results to shareholders and
+investors, the Company also publicises its major
+business developments and activities through
+press releases, announcements and the
+Company's website in accordance with relevant
+rules and regulations. Press conferences and
+analyst briefings are held from time to time on
+financial performance and major transactions.
+48 CNOOC LIMITED Annual Report 2018
+The Chairmen of the Board and all Committees,
+or in his absence, an alternate appointed by
+him will, whenever possible, propose separate
+resolutions for each substantially separate issue
+at general meetings of the Company.
+4
+Xu Keqiang
+2
+Yuan Guangyu
+1
+Executive Directors
+20
+Directors and Senior Management
+5
+8
+1
+46 CNOOC LIMITED Annual Report 2018
+The Company is incorporated under the laws of Hong
+Kong and the principal trading market for the ordinary
+shares of the Company is the HKSE. In addition, because
+the Company's ordinary shares are registered with the
+United Sates Securities and Exchange Commission and
+are listed on the New York Stock Exchange (the "NYSE"),
+the Company is subject to certain corporate governance
+requirements of NYSE. However, many of the corporate
+governance rules in the NYSE Listed Company Manual
+(the "NYSE Standards") do not apply to the Company as
+a "foreign private issuer" and the Company is permitted to
+follow its home country corporate governance practices in
+lieu of most corporate governance standards contained in
+the NYSE Standards. Section 303A.11 of the NYSE Listed
+Company Manual requires NYSE listed foreign private
+issuers to describe the significant differences between
+their corporate governance practices and the corporate
+governance standards applicable to U.S. domestic
+companies listed on the NYSE. The Company has posted a
+brief summary of such significant differences on its website,
+which may be accessed through the following web page:
+STATEMENT ON CORPORATE GOVERNANCE
+AS REQUIRED BY SECTION 303A.11 OF THE
+NEW YORK STOCK EXCHANGE LISTED
+COMPANY MANUAL
+The payment of any future dividends will be determined
+by the Board, subject to requirements of applicable laws
+and the Articles of Association of the Company and
+shareholders' approval for all dividends other than interim
+dividends, based upon, among other things, our future
+earnings, capital requirements, financial conditions, future
+prospects and other factors which our Board may consider
+relevant. Our ability to pay dividends will also depend
+on the cash flows determined by the dividends, if any,
+received by us from our subsidiaries, associates and joint
+ventures. Holders of our shares will be entitled to receive
+such dividends declared by our Board and approved by
+the shareholders (if necessary) pro rata according to the
+amounts paid up or credited as paid up on the shares.
+DIVIDEND DISTRIBUTION POLICY
+Corporate Governance Report
+45
+CNOOC LIMITED Annual Report 2018
+There are no other fees payable to the Auditors for products
+and/or services provided by the Auditors, other than the
+services reported above, for the financial year ended
+31 December 2017 and for the financial year ended 31
+December 2018.
+The aggregate fees billed for professional service rendered
+by the Auditors for risk management advisory services, and
+information systems reviews were RMB250,000 for the
+financial year ended 31 December 2017 and RMB250,000
+for the financial year ended 31 December 2018.
+All Other Fees
+http://www.cnoocltd.com/encnoocltd/gsgz/socg
+The aggregate fees billed for professional service rendered
+by the Auditors for tax compliance, tax advice and tax
+planning were RMBO for the financial year ended 31
+December 2017 and RMBO for the financial year ended 31
+December 2018.
+2
+6
+The general meetings also provide a useful
+forum for shareholders to exchange views
+with the Board. The Chairman of the Board,
+as well as Chairmen of the Audit Committee,
+Nomination Committee and Remuneration
+Committee, or in their absence, members of
+the respective Committees, and the external
+auditors of the Company, are available to
+answer questions from shareholders at annual
+general meetings and extraordinary general
+meetings of the Company.
+Yang Hua
+NON-EXECUTIVE DIRECTORS
+General Manager of CNPC International (Kazakhstan)
+Ltd. and concurrently General Manager of Joint Stock
+Company CNPC International Aktobe Petroleum. From
+March 2014 to March 2017, he served as General Manager
+of PetroChina Tuha Oilfield Company, and Director of Tuha
+Petroleum Exploration & Development Headquarters. In
+March 2017, Mr. Xu was appointed as a Vice President of
+CNOOC. From April 2017 to June 2018, Mr. Xu served as
+the Chairman of Nexen Energy ULC, a subsidiary of the
+Company. In between May 2017 and June 2018, he served
+as the Chairman of a subsidiary of the Company-CNOOC
+International Limited. In May 2017, Mr. Xu was appointed
+as a Director of CNOOC China Limited, a subsidiary of the
+Company. Mr. Xu was appointed as the General Manager of
+CNOOC China Limited with effect from 21 May 2018. Mr. Xu
+was appointed as an Executive Director and the President of
+the Company with effect from 18 April 2017.
+Born in 1971, Mr. Xu is a professor-level senior engineer.
+He graduated from Northwest University with a Bachelor
+of Science degree in Oil and Gas Geology. He received
+a master's degree in Coalfield Oil and Gas Geology from
+Northwest University in 1996. Mr. Xu joined China National
+Petroleum Corporation in 1996 and served different
+positions. From April 2003 to April 2005, he served
+as Deputy General Manager of Sinopetro Investment
+Company Ltd. From April 2005 to September 2008, he
+served as Deputy General Manager of CNPC International
+(Kazakhstan) Ltd. and concurrently General Manager
+of CNPC Ai-Dan Munai Joint Stock Company. From
+September 2008 to March 2014, he served as Deputy
+Xu Keqiang
+Born in 1959, Mr. Yuan is a professor-level senior engineer.
+He graduated from China University of Petroleum with a
+bachelor's degree in drilling engineering. He graduated
+from the EMBA program of China Europe International
+Business School in 2007 with an MBA degree. Mr. Yuan
+joined China National Offshore Oil Corporation ("CNOOC")
+in 1982 and has over 30 years of experience in the oil and
+gas industry. From February 1993 to October 2001, Mr.
+Yuan served as Deputy Manager of CNOOC Bohai Drilling
+Company, Deputy General Manager of CNOOC China
+Offshore Oil Northern Drilling Company, Deputy General
+Manager of the Operational Department of CNOOC,
+General Manager of CNOOC China Offshore Oil Northern
+Drilling Company. From October 2001 to January 2009,
+Mr. Yuan served as General Manager and President of
+CNOOC Services, and Vice Chairman of the Board of
+Directors, Chief Executive Officer and President of China
+Oilfield Services Limited (a company listed on The Stock
+Exchange of Hong Kong Limited and Shanghai Stock
+Exchange). From November 2006 to May 2016, Mr. Yuan
+served as the Assistant President of CNOOC. Since July
+2016, Mr. Yuan was appointed as the Vice President of
+CNOOC. In January 2009, Mr. Yuan was appointed as the
+Executive Vice President of the Company. From 25 April
+2013 to 15 June 2016, Mr. Yuan was appointed as Director
+of Bohai Petroleum Administrative Bureau of CNOOC and
+General Manager of CNOOC China Limited Tianjin Branch,
+a subsidiary of the Company. He served as a Director of
+CNOOC International Limited, a subsidiary of the Company,
+from 31 July 2009 to 5 May 2017 and as the Chairman of
+such company from 15 June 2016 to 5 May 2017. Since
+31 March 2009, Mr. Yuan served as a Director of CNOOC
+China Limited, a subsidiary of the Company, and as the
+General Manager of such company from 15 June 2016 to
+21 May 2018, then he was appointed as the Chairman of
+such company on 21 May 2018. From 15 June 2016 to 18
+April 2017, Mr. Yuan served as President of the Company
+and Mr. Yuan was appointed as an Executive Director of
+the Company with effect from 15 June 2016. Mr. Yuan was
+appointed as the Chief Executive Officer of the Company
+with effect from 18 April 2017.
+Yuan Guangyu
+EXECUTIVE DIRECTORS
+Directors and Senior Management
+3
+47
+8 Kevin G. Lynch
+Tse Hau Yin, Aloysius
+7
+Lawrence J. Lau
+6
+5 Chiu Sung Hong
+Independent Non-executive Directors
+4 Wang Dongjin (Vice Chairman)
+3 Yang Hua (Chairman)
+Non-executive Directors
+CNOOC LIMITED Annual Report 2018
+Tax Fees
+7
+Audit-related Fees
+The Company will, upon receipt of a request referred to
+above, issue a notice of extraordinary general meeting of the
+proposed resolutions and (if applicable) circulars containing
+further information relating to the proposed resolutions in
+accordance with the Listing Rules.
+Whilst giving the above request, shareholders are
+recommended to provide written explanation of the
+reasons and material implications relating to the proposed
+resolutions to enable all of the shareholders to properly
+consider and determine the proposed resolutions.
+The request must state the general nature of the business
+to be dealt with at the EGM and may include the text of a
+resolution that may properly be moved and is intended to be
+moved at the EGM, be authenticated by the shareholder(s)
+making the request, and sent to the Company in hard copy
+form or in electronic form. The Directors must call an EGM
+within 21 days after the date on which they become subject
+to the requirement and such EGM must be held on a date
+not more than 28 days after the date of the notice convening
+the meeting is given.
+The procedures for shareholders to convene an
+Extraordinary General Meeting of the Company ("EGM")
+are governed by Article 60 of the Articles and sections
+566 to 568 of the Companies Ordinance (Cap. 622 of the
+Laws of Hong Kong). On the request of shareholders of the
+Company, representing at least 5% of the total voting rights
+of all shareholders having a right to vote at general meetings,
+the Directors are required to call a general meeting.
+SHAREHOLDERS' COMMUNICATION AND
+RIGHTS TO CONVENE AN EXTRAORDINARY
+GENERAL MEETING
+All Directors have access to the advice and
+services of the Joint Company Secretaries to
+ensure that Board procedures as well as all
+applicable rules and regulations are followed.
+Each of the Joint Company Secretaries
+has taken no less than 15 hours of relevant
+professional training every year.
+The Joint Company Secretaries will report to the
+Chairman of the Board and/or the CEO.
+Ms. Wu Xiaonan (who was appointed as the
+joint company secretary on 19 November
+2018) and Ms. Tsue Sik Yu, May are the Joint
+Company Secretaries of the Company. Ms.
+Li Jiewen resigned as the Joint Company
+Secretary of the Company on 19 November
+2018. Their biographies are set out on page
+53 of this report. The Nomination Committee
+of the Company has the responsibility to make
+recommendation for suitable candidates for the
+appointment of company secretary to the Board
+and the Board has the responsibility to approve
+their selection, appointment or dismissal by
+physical meeting of the Board.
+44
+CNOOC LIMITED Annual Report 2018
+43
+Principle: "The company secretary plays an important
+role in supporting the board by ensuring good
+information flow within the board and that board policy
+and procedures are followed. The company secretary
+is responsible for advising the board through the
+chairman and/or the chief executive on governance
+matters and should also facilitate induction and
+professional development of directors."
+Company Secretary
+The results of the poll are published on the
+Hong Kong Stock Exchange's website and the
+Company's website.
+In 2018, all votes of shareholders at the annual
+general meeting of the Company were taken by
+poll or otherwise in accordance with the Listing
+Rules. The Chairman of a meeting ensured that
+shareholders were familiar with the procedures
+of voting by poll at the general meetings of the
+Company.
+Principle: "The issuer should ensure that shareholders
+are familiar with the detailed procedures for
+conducting a poll."
+F.
+E.2 Voting by Poll
+The Company's management ensures the
+external auditors attend the annual general
+meeting to answer questions about the conduct
+of the audit, the preparation and content of the
+auditors' report, the accounting policies and
+auditors' independence.
+The aggregate fees billed for assurance and related
+services by the Auditors that are reasonably related to
+the performance of the audit or review of the Company's
+financial statements and are not reported under "Audit
+Fees" were RMB4.5 million for the financial year ended 31
+December 2017 and RMB6.8 million for the financial year
+ended 31 December 2018.
+The Board established a shareholders'
+communication policy and review it on a regular
+basis to ensure its effectiveness.
+CNOOC LIMITED Annual Report 2018
+Further enquiries relating to the above or enquiries that
+Shareholders wish to be put to the Board may be addressed
+to the Joint Company Secretaries of the Company at 65/F,
+Bank of China Tower, 1 Garden Road, Hong Kong.
+Corporate Governance Report
+PROCEDURES FOR PUTTING FORWARD
+PROPOSALS AT GENERAL MEETINGS BY
+SHAREHOLDERS
+The aggregate fees billed for professional services rendered
+by the Auditors for the audit of the Company's annual
+financial statements or services that are normally provided
+by the Auditors in connection with statutory and regulatory
+filings or engagements were RMB50.9 million for the
+financial year ended 31 December 2017 and RMB51.8
+million for the financial year ended 31 December 2018.
+Audit Fees
+SERVICES AND REMUNERATION OF
+AUDITORS
+The Company has adopted the abovementioned Code
+of Ethics which has incorporated the Model Code for
+Securities Transactions by Directors of Listed Issuers (the
+"Model Code") as set out in Appendix 10 to the Listing
+Rules. All Directors have confirmed that they complied,
+during the year ended 31 December 2018, with the
+Company's Code of Ethics and the required standards set
+out in the Model Code.
+MODEL CODE FOR SECURITIES
+TRANSACTIONS BY DIRECTORS OF LISTED
+ISSUERS
+The Company has provided all its Directors and senior
+officers with a copy of the Code of Ethics and requires them
+to comply with the Code of Ethics, so as to ensure the
+Company's operation is proper and lawful. The Company
+will take disciplinary actions towards any act which is in
+breach of the Code of Ethics. All the senior management
+members and Directors are required to familiarise
+themselves with and follow the Code of Ethics to ensure that
+the Company's operations are honest and legal. Violations
+of the rules will be penalized and serious breaches will result
+in dismissal.
+The Board adopted a Code of Ethics in 2003 to provide
+guidelines to the senior management and Directors in
+legal and ethical matters as well as the sensitivity involved
+in reporting illegal and unethical matters. The Code of
+Ethics covers areas such as supervisory rules, insider
+dealing, market malpractices, conflict of interests, company
+opportunities, protection and proper use of the Company's
+assets as well as reporting requirements. As part of its
+continued efforts to improve its corporate governance
+standards, the Board conducted an annual review to the
+Code of Ethics since 2009, and the current version of the
+Code of Ethics was reviewed and adopted in August 2018.
+CODE OF ETHICS
+Pursuant to Rule 13.51 (B) of the Listing Rules, there is no
+other change in the information of Directors of the Company
+except as disclosed in this annual report.
+CHANGES IN INFORMATION OF DIRECTORS
+With effect from 27 April 2018, Mr. Wang Dongjin was
+appointed as a Non-executive Director and a member of
+the Remuneration Committee of the Company, and was
+appointed as the Vice Chairman of the Company with effect
+from 5 December 2018.With effect from 16 August 2018,
+Mr. Liu Jian resigned as the Vice Chairman and a Non-
+executive Director of the Company. With effect from 27
+April 2018, Mr. Wu Guangqi resigned as a Non-executive
+Director and a member of the Remuneration Committee of
+the Company.
+Deloitte Touche Tohmatsu, appointed as the independent
+auditors of the Company on 24 May 2013, was re-
+appointed and engaged as the Company and its
+subsidiaries' auditors ("Auditors") for the financial year
+ended 31 December 2018. Services provided by the
+auditors and fees charged by the auditors for the services
+for the year ended 31 December 2018 are as follows:
+Shareholders are requested to follow sections 615 and
+616 of the Companies Ordinance (Cap. 622 of the laws of
+Hong Kong) if they wish to request the Company to give
+to other shareholders, who are entitled to receive notice
+of the annual general meeting, notice of a resolution that
+may properly be moved and is intended to be moved at the
+annual general meeting.
+CHANGES IN DIRECTORS
+Corporate Governance Report
+None of the existing Independent Non-executive Directors
+of the Company is appointed for a specific term. This
+constitutes a deviation from the CG Code provision A.4.1.
+However, all the Directors are subject to the retirement
+provisions under article 97 of the Articles ("Article 97").
+According to Article 97, one-third of the Directors for the
+time being must retire from the office by rotation at each
+annual general meeting. The Company has observed
+the need for good corporate governance practices. All
+Independent Non-executive Directors of the Company
+have retired from the office by rotation and have been re-
+elected in the past three years. The Company considers
+that sufficient measures have been taken to ensure that the
+Company's corporate governance practices are no less
+exacting than those in the CG Code.
+Under CG Code provision A.4.1, non-executive directors
+should be appointed for a specific term and be subject to re-
+election.
+CG Code Provision A.4.1
+For the year ended 31 December 2018, the Company has
+complied with the provisions of the CG Code as set out in
+Appendix 14 of the Listing Rules, except for the deviation
+from the code provision A.4.1 of the CG Code. The following
+summarises the requirement under the above-mentioned
+code provision A.4.1 and the reason for such deviation.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+During the year ended 31 December 2018, there was the
+following change in Directors.
+Shareholders are requested to follow sections 580 to 583
+of the Companies Ordinance (Cap. 622 of the laws of Hong
+Kong) if they wish to request the Company to circulate to
+other shareholders, who are entitled to receive notice of
+a general meeting, a statement with respect to a matter
+mentioned in a proposed resolution or other business to be
+dealt with at the general meeting.
+For the three years ended
+31 December 2019,
+RMB2,880 million,
+RMB3, 120 million and
+RMB3,360 million,
+respectively
+For the three years ended
+31 December 2019,
+RMB1,620 million,
+RMB1,786 million and
+RMB1,970 million,
+respectively
+(e) FPSO vessel leases
+marketing,
+management and
+ancillary services
+Report of the Directors
+(d)
+Provision of management, technical, facilities and ancillary
+services, including the supply of materials by the Group to
+CNOOC and/or its associates
+CNOOC LIMITED Annual Report 2018
+56
+Provision of
+Provision of management,
+technical, facilities and
+ancillary services, including
+the supply of materials to
+CNOOC and/or its
+Associates
+respectively
+Sales of petroleum and natural gas products by the Group
+to CNOOC and/or its associates
+(a)
+(b)
+Sales of petroleum
+and natural gas
+products (other
+than long term sales
+of natural gas and
+liquefied natural gas)
+Long term sales of
+natural gas and
+liquefied natural gas
+For the three years ended
+Services Framework Agreement is substantially on the
+same terms as the terms contained in the financial services
+framework agreement (as renewed on 20 August 2010
+and 27 November 2013) entered into by the Company on
+14 October 2008. The continuing connected transactions
+in respect of the depositary services under the Financial
+Services Framework Agreement are exempted from
+independent shareholders' approval requirement, but
+subject to the annual reporting, annual review and
+announcement requirements. In August 2018, the Board
+expected that the existing annual cap for the depositary
+services under the Financial Services Framework Agreement
+for its remaining term will not fully satisfy the demands of
+business of the Group and resolved to revise the annual cap
+for the depositary services for the period from 23 August
+2018 to 31 December 2019.
+31 December 2019,
+RMB263,893 million,
+RMB314,371 million and
+RMB437,773 million,
+respectively
+For the three years ended
+For the three years ended
+31 December 2019,
+RMB100 million,
+RMB100 million and
+RMB100 million,
+respectively
+RMB16,877 million,
+The Independent Non-executive Directors have confirmed
+that the following continuing connected transactions for the
+year ended 31 December 2018 to which any member of the
+Group was a party were entered into by the Group:
+RMB12,625 million,
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed for
+the purpose of extending entrustment loans pursuant to
+the entrustment loan services) placed by the Group with
+CNOOC Finance shall not exceed RMB19.5 billion for the
+period from 1 January 2017 to 22 August 2018 and should
+not exceed RMB23.5 billion for the period from 23 August
+2018 to 31 December 2019.
+(a)
+The donations by the Group for the year ended 31
+December 2018 amounted to RMB23 million.
+CONNECTED TRANSACTIONS
+(b)
+Provision of oil
+and gas
+1.
+in the ordinary and usual course of its business;
+2.
+on normal commercial terms or better; and
+RMB14,678 million and
+3.
+development and
+support services
+(c)
+Provision of oil
+and gas
+production and
+support services
+For the three years ended
+31 December 2019,
+RMB9,969 million,
+RMB10,579 million and
+RMB11,590 million,
+respectively
+For the three years ended
+31 December 2019,
+RMB31,670 million,
+RMB38,289 million and
+RMB43,745 million,
+respectively
+For the three years ended
+31 December 2019,
+in accordance with the relevant agreements (including
+pricing principles and guidelines set out therein)
+governing the transactions on terms that were fair and
+reasonable and in the interests of the shareholders of
+the Company as a whole.
+The Independent Non-executive Directors have further
+confirmed that for the year ended 31 December 2018:
+4.
+Provision of exploration, oil and gas development,
+oil and gas production as well as marketing,
+management and ancillary services by CNOOC and/or
+its associates to the Group:
+2.
+3.
+4.
+have received the approval of the Board;
+were in accordance with the pricing policies for the
+transactions involving the provision of goods or
+services by the Group as stated in the Company's
+financial statements;
+were entered into in accordance with the relevant
+agreements governing the transactions; and
+have not exceeded the applicable caps.
+Please also refer to note 30 to the consolidated financial
+statements on pages 115 to 118 of this annual report for a
+summary of the related party transactions which include the
+Group's continuing connected transactions.
+SHARE CAPITAL
+Please refer to note 28 to the consolidated financial
+statements on page 113 of this annual report for details of
+movements in the Company's total issued shares for the
+year ended 31 December 2018.
+SHARE OPTION SCHEMES
+1.
+The Company has adopted the following share option
+schemes for the grant of options to the Company's
+Directors, senior management and other eligible grantees:
+Pre-Global Offering Share Option Scheme (expired in
+2011);
+2.
+2001 Share Option Scheme (expired in 2011);
+3.
+2002 Share Option Scheme (expired in 2015); and
+CHARITABLE DONATIONS
+2005 Share Option Scheme.
+Under these share option schemes, the Remuneration
+Committee of the Board will from time to time propose
+for the Board's approval for grant of and the number of
+share options to be granted to the relevant grantees. The
+maximum aggregate number of shares (including those that
+could be subscribed for under the Pre-Global Offering Share
+Option Scheme, the 2001 Share Option Scheme, the 2002
+Share Option Scheme and the 2005 Share Option Scheme)
+which may be issued upon exercise of all options to be
+granted shall not exceed 10% of the total issued shares of
+the Company as at 31 December 2005, being the date on
+which the shareholders of the Company approved the 2005
+Share Option Scheme, excluding share options which have
+lapsed in accordance with the terms of the share option
+schemes.
+Please refer to the note 28 to the consolidated financial
+statements on pages 113 to 114 of this annual report for
+details regarding each of these share option schemes of
+the Company. Save as those disclosed in the annual report,
+no right to subscribe for equity or debt securities of the
+Company has been granted by the Company to, nor have
+any such rights been exercised by, any other person during
+the year ended 31 December 2018.
+58
+CNOOC LIMITED Annual Report 2018
+1.
+(i)
+The independent auditors of the Group have reviewed the
+continuing connected transactions referred to above and
+confirmed to the Board of Directors that the continuing
+connected transactions:
+(b) The aggregate annual volume of the transactions
+for the long term sales of natural gas and liquefied
+natural gas did not exceed RMB33,386 million.
+(a)
+31 December 2019,
+RMB25,654 million,
+RMB33,386 million and
+RMB43,649 million,
+(b)
+respectively
+Financial services provided by CNOOC Finance Corporation
+Limited to the Group
+On 1 December 2016, the Company entered into a
+financial services framework agreement ("Financial Services
+Framework Agreement") with CNOOC Finance Corporation
+Limited ("CNOOC Finance"), an associate of CNOOC,
+pursuant to which CNOOC Finance provides a range of
+financial services as may be required and requested by
+the Group, for a term of three years from 1 January 2017
+to 31 December 2019. Apart from the duration of the
+Financial Services Framework Agreement, more details
+about the pricing policy for the depositary services and
+update of the address and relevant dates, the Financial
+(c)
+(d)
+(e)
+The aggregate annual volume of transactions for
+the provision of exploration and support services
+did not exceed RMB10,579 million.
+The aggregate annual volume of transactions
+for the provision of oil and gas development and
+support services did not exceed RMB38,289
+million.
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed for
+the purpose of extending entrustment loans pursuant
+to the entrustment loan services) placed by the Group
+with CNOOC Finance did not exceed RMB19.5 billion
+for the period from 1 January 2018 to 22 August 2018
+and did not exceed RMB23.5 billion for the period
+from 23 August 2018 to 31 December 2018.
+The aggregate annual volume of transactions
+for the provision of oil and gas production and
+support services did not exceed RMB14,678
+million.
+The aggregate annual volume of transactions for
+FPSO vessel leases did not exceed RMB3, 120
+million.
+CNOOC LIMITED Annual Report 2018
+57
+Report of the Directors
+(ii)
+The aggregate annual volume of transactions for the
+provision of management, technical, facilities and
+ancillary services, including the supply of materials by
+the Group to CNOOC and/or its associates did not
+exceed RMB100 million;
+Sales of petroleum and natural gas products by the
+Group to CNOOC and/or its associates:
+(iii)
+(a)
+(iv)
+The aggregate annual volume of transactions
+for the sales of petroleum and natural gas
+products (other than long term sales of natural
+gas and liquefied natural gas) did not exceed
+RMB314,371 million.
+The aggregate annual volume of transactions
+for the provision of marketing, management and
+ancillary services did not exceed RMB1,786
+million.
+Provision of
+exploration and
+support services
+Please refer to the financial summary on page 2 of this
+annual report for a summary of the assets and liabilities
+of the Group as at 31 December 2018 and the operating
+results of the Group for the year then ended.
+Annual caps for 2017 to
+2019
+Born in 1962, Mr. Wang is a professor-level senior engineer
+and received a Bachelor of Science degree in Petroleum
+Drilling from Development Department of China University
+of Petroleum and a Doctor of Science degree in Petroleum
+Engineering Management from China University of
+Petroleum-Beijing in 2012. From July 1995 to December
+1997, he was appointed as Deputy Director-General of
+Jiangsu Petroleum Exploration Bureau. From December
+1997 to October 2002, he was appointed as Vice President
+of China National Oil & Gas Exploration and Development
+Corporation ("CNODC"). From December 2000 to October
+2002, he also served as President of CNPC International
+(Kazakhstan) Ltd. and President of Aktobe Munai Gas
+Corp. From October 2002 to September 2008, he served
+as President of CNODC. From January 2004 to September
+2008, he was appointed as Assistant President of China
+National Petroleum Corporation ("CNPC") and Vice
+Chairman of CNODC. From September 2008 to March
+2018, he served as Vice President of CNPC. From May
+2011 to May 2014, he was concurrently appointed as
+Director of PetroChina Company Limited ("PetroChina").
+From July 2013 to March 2018, he was concurrently
+appointed as President of PetroChina. From May 2014 to
+March 2018, he served as Vice Chairman of PetroChina.
+In March 2018, Mr. Wang was appointed as a Director of
+CNOOC. In October 2018, Mr. Wang was appointed as
+President of CNOOC. On 27 April 2018, Mr. Wang was
+appointed as a Non-executive Director and a member of the
+Remuneration Committee of the Company. Mr. Wang has
+been appointed as the Vice Chairman of the Company with
+effect from 5 December 2018.
+Wang Dongjin
+Non-executive Director of the Company with effect from 23
+November 2011. Mr. Yang was appointed as Chairman of
+the Board and Chairman of the Nomination Committee of
+the Company with effect from 19 May 2015. From 15 June
+2016 to 18 April 2017, Mr. Yang was re-designated from a
+Non-executive Director to an Executive Director and served
+as the Chief Executive Officer of the Company. Mr. Yang
+was re-designated from an Executive Director to a Non-
+executive Director with effect from 18 April 2017.
+Directors and Senior Management
+52
+Directors and Senior Management
+Zhang Guohua
+Born in 1960, Mr. Zhang is a Senior Vice President of the
+Company and the General Manager of CNOOC China
+Limited Zhanjiang Branch. He is a professor-level senior
+engineer. He graduated from Shandong Oceanographic
+Institute (now Ocean University of China) with a bachelor
+degree. He studied in the Business Institute of University
+of Alberta in Canada in 2001. He joined CNOOC in 1982
+and served as Deputy Chief Geologist and Manager
+of Exploration Department of CNOOC Naihai West
+Corporation, a subsidiary of CNOOC, Chief Geologist of
+CNOOC Research Center, Assistant to General Manager
+of CNOOC China Limited and the General Manager of
+Exploration Department of the Company. In March 2003, he
+was appointed as Senior Vice President of the Company.
+In October 2005, Mr. Zhang was appointed as Senior Vice
+President of the Company and General Manager of CNOOC
+China Limited Shanghai Branch. In July 2009, he was
+appointed as Director of Donghai Petroleum Administrative
+Bureau of CNOOC. In July 2015, he was appointed as
+Director of Nanhai West Petroleum Administrative Bureau
+of CNOOC and General Manager of CNOOC China Limited
+Zhanjiang Branch.
+Deng Yunhua
+Born in 1963, Mr. Deng is an academician of the Chinese
+Academy of Engineering and the Deputy Chief Exploration
+Engineer of the Company. Mr. Deng graduated from the
+Scientific Research Institute of Petroleum Exploration
+and Development with a major in Petroleum Geology and
+Exploration and received a master's degree in Engineering
+in 1988. He was assistant geologist and then geologist in
+the Exploration Department of CNOOC Bohai Corporation
+Institute from 1988 to 1989; and served as the Team Leader
+of the Comprehensive Petroleum Geological Research
+Team, Project Manager, Deputy Principal of Geologist,
+Deputy Principal Geologist and Director of the Exploration
+Department and Deputy Chief Geologist in the CNOOC
+Bohai Corporation Institute from 1989 to 1999. Mr. Deng
+became Deputy Chief Geology Engineer and Deputy
+General Manager of CNOOC China Limited Tianjian Branch
+from 1999 to 2005. He was Deputy Director of CNOOC
+Research Center from 2005 to 2006. He served as the
+Deputy Chief Exploration Engineer of the Company and
+the Deputy Director of CNOOC Research Center from
+2006 to 2007. Mr. Deng served as Deputy Chief Geology
+Engineer of CNOOC, Deputy Chief Exploration Engineer of
+the Company and Deputy Director of CNOOC Research
+Center from 2007 to 2009; and Deputy Chief Geology
+Engineer of CNOOC, Deputy Chief Exploration Engineer
+of the Company and Deputy General Director of CNOOC
+Research Institute from 2009 to 2015. In November 2015,
+he was appointed as the Deputy Chief Geology Engineer
+of CNOOC, Deputy Chief Exploration Engineer of the
+Company and Deputy Director of Beijing Research Center of
+CNOOC China Limited.
+Liu Zaisheng
+Born in 1962, Mr. Liu is a Vice President of the Company
+and Director of Beijing Research Center of CNOOC China
+Limited, General Manager of CNOOC China Limited
+Beijing Branch, Director of CNOOC Energy Technology
+Development Research Institute and General Manager
+of CNOOC Energy Technology Development Research
+Institute Company Limited. Mr. Liu graduated from
+Southwest Petroleum Institute (now Southwest Petroleum
+University) with a bachelor's degree. From 1983 to 1994, he
+served as Deputy Manager of District Research First Team
+of Exploration and Development Department Research
+Institute of Nanhai East Oil Corporation of CNOOC. From
+1994 to 1997, he served as Principal of Seismic Engineer
+and Principal of Geologist of Exploration and Development
+Department of Nanhai East Oil Corporation of CNOOC.
+From 1997 to 1999, he served as Deputy Manager of
+Exploration and Development Department of Nanhai East
+Oil Corporation of CNOOC. From 1997 to 2001, he served
+as Deputy Director of Scientific and Technology Research
+Institute of Nanhai East Oil Corporation of CNOOC. From
+2001 to 2004, he served as Director of Nanhai East Institute
+of the Research Center of CNOOC China Limited. From
+2004 to 2009, he served as Manager, Assistant to General
+Manager, Deputy General Manager and Acting General
+Manager of Technology Department of CNOOC China
+Limited Shenzhen Branch respectively. From 2009 to 2016,
+he served as General Manager of CNOOC China Limited
+Shenzhen Branch and Director of Nanhai East Petroleum
+Administrative Bureau of CNOOC and General Manager
+of CNOOC Deepwater Development Limited respectively.
+From April to November 2016, he served as Director
+of Beijing Research Center of CNOOC China Limited,
+General Manager of CNOOC China Limited Beijing Branch,
+and General Director of CNOOC Energy Technology
+Development Research Institute and General Manager
+of CNOOC Energy Technology Development Research
+Institute Company Limited. In February 2017, Mr. Liu was
+appointed as a Vice President of the Company.
+Wu Xiaonan
+Born in 1967, Ms. Wu Xiaonan is the General Counsel, the
+Compliance Officer and Joint Company Secretary of the
+Company. Ms. Wu is an Enterprise Legal Adviser (
+*) and Certified Senior Enterprise Risk Manager
+(*). Ms. Wu received a bachelor of
+laws degree from China University of Political Science and
+Law in 1990. Ms. Wu has been working in the oil and gas
+industry for over 19 years. From September 1999 to June
+2002, Ms. Wu successively worked in the Regulatory and
+Legislative Division of the Legal Department of CNOOC and
+the Company. From June 2002 to February 2012, Ms. Wu
+served as the Manager of the Regulatory and Legislative
+Division of the Legal Department of the Company. From
+February 2012 to May 2016, she served as the Deputy
+General Manager of the Legal Department of the Company
+and was promoted as the General Manager of the Legal
+Department of the Company in May 2016. In August 2018,
+Ms. Wu was appointed as the Vice General Counsel of
+CNOOC and the General Counsel and the Compliance
+Officer of the Company. In September 2018, Ms. Wu was
+appointed as the Director of the Legal Support Center
+of CNOOC. Ms. Wu was appointed as a Joint Company
+Secretary of the Company with effect from 19 November
+2018.
+CNOOC LIMITED Annual Report 2018
+Directors and Senior Management
+JOINT COMPANY SECRETARIES
+Wu Xiaonan
+Please refer to the biography of Ms. Wu on page 52 for
+details.
+Li Jiewen
+Born in 1965, Ms. Li Jiewen was the Joint Company
+Secretary and the General Manager (Director) of the
+Investor Relations Department (Office for the Board of
+Directors). Ms. Li is a senior economist and Certified Senior
+Enterprise Risk Manager and a member of CPA Australia.
+Ms. Li graduated from Shanghai Jiao Tong University
+with a bachelor's degree in Naval Architecture and Ocean
+Engineering in 1987. She received a master's degree in
+Management from Zhejiang University in 2001. Ms. Li joined
+CNOOC in 1987 and has been working in the oil and gas
+industry for over 30 years. From 1987 to 1989, Ms. Li
+was an Assistant Engineer in Nanhai East Oil Corporation
+of CNOOC. From 1990 to 2003, she worked as the
+Assistant Engineer, Budget and Planning Engineer, Budget
+Supervisor, Assistant Finance Manager of CACT (CNOOC-
+AGIPChevron-Texaco) Operators Group. From February
+2004 to October 2006, she served as the Finance Manager
+of CNOOC China Limited Shenzhen Branch. From October
+2006 to November 2010, Ms. Li was the Deputy General
+Manager of the Controllers Department of the Company.
+Ms. Li served as the General Manager of the Controllers
+Department of the Company from November 2010 to June
+2016. Ms. Li also served as the Director of Nexen Energy
+ULC, a subsidiary of the Company. Ms. Li has been also
+appointed as the General Manager (Director) of the Investor
+Relations Department (Office for the Board of Directors)
+of the Company since October 2015. From 27 November
+2015 to 19 November 2018, Ms. Li Jiewen served as a Joint
+Company Secretary of the Company.
+Tsue Sik Yu, May
+Born in 1973, Ms. Tsue Sik Yu, May is the Joint Company
+Secretary of the Company. She graduated from Curtin
+University of Technology in Australia with a bachelor
+of commerce in accounting. Ms. Tsue furthered her
+education at The Hong Kong Polytechnic University in
+Master of Corporate Governance from 2004 to 2006,
+and MBA from The University of Hong Kong from 2014
+to 2016. She is a fellow member of both the Institute of
+Chartered Secretaries and Administrators and the Hong
+Kong Institute of Chartered Secretaries since 2012 and
+became a member of Company Secretaries Panel and
+Advisor for Academy of Professional Certification in the
+same year, and became a member of ACCA since 2016.
+She is also a fellow member and certified risk trainer of the
+Institute of Crisis and Risk Management and an associate
+member of CPA Australia. Furthermore, she was granted
+a Practitioner's Endorsement (PE) since 2017/2018 under
+The Hong Kong Institute of Chartered Secretaries and
+accredited a General Mediator under Hong Kong Mediation
+Accreditation Association Limited (HKMAAL) since August
+2017. From August 1998 to March 1999, Ms. Tsue worked
+in LG International (HK) Ltd. as a senior accounts clerk. Ms.
+Tsue joined China Ocean Oilfield Services (HK) Limited in
+1999 as an accountant. She helped to manage the finance
+of the CNOOC Insurance Limited since 2000 and became
+its employee in 2004 as a manager of finance department.
+She serves as company secretary of CNOOC Insurance
+Limited since March 2007. Ms. Tsue gained The Chartered
+Governance Professional (CGP) qualification of The Institute
+of Chartered Secretaries and Administrators and The Hong
+Kong Institute of Chartered Secretaries on 30 September
+2018. She volunteered on Hong Kong Management
+Association (HKMA) of Panel of Adjudicators on 2018 HKMA
+Best Annual Reports Awards. Ms. Tsue was appointed as a
+Joint Company Secretary of the Company with effect from
+25 November 2008.
+Liu Jian
+Born in 1958, Mr. Liu is a professor-level senior engineer.
+He graduated from Huazhong University of Science and
+Technology with a Bachelor degree and he received his
+MBA degree from Tianjin University. Mr. Liu first joined
+CNOOC in 1982 and has over 35 years of experience in the
+oil and gas industry. He served as the manager of CNOOC
+Bohai Corporation Oil Production Company, a subsidiary of
+CNOOC, Deputy General Manager of the Tianjin Branch and
+the General Manager of the Zhanjiang Branch of CNOOC
+China Limited, a subsidiary of the Company. From 2003 to
+2009, Mr. Liu served as Senior Vice President and General
+Manager of the Development and Production Department
+and Executive Vice President of the Company, primarily
+responsible for the offshore oil and gas fields development
+and production of the Company. Mr. Liu served as an
+Assistant President of CNOOC from November 2006 to April
+2010 and as a Vice President of CNOOC from April 2010
+to August 2015. In August 2015, Mr. Liu was appointed
+as the President of CNOOC. Mr. Liu also served as the
+Director of CNOOC China Limited, CNOOC International
+Limited and CNOOC Southeast Asia Limited, all being
+subsidiaries of the Company. Besides, Mr. Liu served as
+the Chief Executive Officer, Vice Chairman and Chairman
+of China Oilfield Services Limited (a company listed on
+The Stock Exchange of Hong Kong Limited and Shanghai
+Stock Exchange) from March 2009 to December 2016 and
+Chairman of Offshore Oil Engineering Co. Ltd. (a company
+listed on the Shanghai Stock Exchange) from December
+2010 to November 2016. During February 2017 and May
+2018, Mr. Liu served as Chairman and Director of CNOOC
+China Limited, a subsidiary of the Company. Mr. Liu served
+as the Vice Chairman and a Non-executive Director of the
+Company from 20 December 2016 to 16 August 2018.
+Wu Guangqi
+Born in 1964, Mr. Xie is the Chief Financial Officer of the
+Company. Mr. Xie is a Senior Accountant. He graduated
+from Guanghua School of Management of Peking University
+with a master's degree in Business Administration. Mr.
+Xie joined CNOOC in 1986. Mr. Xie served as Deputy
+Manager of Finance Department of CNOOC Nanhai West
+Corporation, Deputy Manager and Manager of Controllers'
+Department and General Manager of Treasury Department
+of CNOOC. From January 2002 to February 2011, Mr. Xie
+served as General Manager of CNOOC Finance Corporation
+Ltd. From February 2011 to May 2016, Mr. Xie served
+as Assistant President of CHINALCO, Executive Director
+of CHINALCO Finance Company Limited, President of
+CHINALCO Offshore Holding Company, Vice President
+& CFO of CHALCO, President of CHALCO (Hong Kong),
+Chairman of CHINALCO Finance Company Limited, General
+Auditor & Director of Audit Department CHINALCO. From
+2016 to 2017, Mr. Xie was appointed as General Manager
+of Finance Department of CNOOC. From August 2017,
+Mr. Xie was appointed as the Chief Financial Officer of the
+Company.
+Xie Weizhi
+Born in 1966, Mr. Cao is an Executive Vice President and
+the General Manager of CNOOC China Limited Tianjin
+Branch as well as a professor-level senior economist. Mr.
+Cao obtained a master degree of Business Administration
+from the University of Wales in 2003. From 1989 to 1999,
+Mr. Cao served as a geological delegate of the Contract
+Area of CNOOC Donghai Company & Caltex and the deputy
+manager of Exploration Department of CNOOC Donghai
+Company. From 1999 to 2004, he served as Exploration
+Manager of Exploration Department, Assistant Manager,
+Acting Manager and Manager of Human Resources
+Department of CNOOC China Limited Shanghai Branch.
+From 2004 to 2006, he served as Deputy Director of the
+CNOOC Talent Work Leading Group's Office. From 2006
+to 2013 he served as Deputy General Manager of CNOOC
+China Limited Shanghai Branch. From 2009 to 2013, he
+also served as Deputy Director of Donghai Petroleum
+Administration Bureau of CNOOC. From 2013 to 2017, he
+served as Deputy General Manager and General Manager
+of Human Resources Department of CNOOC and the
+Company. From March 2017, he has served as the Director
+of Bohai Petroleum Administration Bureau of CNOOC and
+General Manager of CNOOC China Limited Tianjin Branch.
+From August 2017, he was appointed as an Executive Vice
+President of the Company. In September 2017, he was
+appointed as Assistant President of CNOOC.
+Cao Xinjian
+Born in 1961, Mr. Xie is an Executive Vice President
+and General Manager of Exploration Department of the
+Company as well as a professor-level senior engineer.
+Mr. Xie obtained a Ph.D. degree from China University of
+Geosciences in 2005. From 1982 to 1995, Mr. Xie served
+as an engineer of Research Institute and Exploration
+Department of CNOOC Naihai West Corporation.
+From 1995 to 1996, he served as the Deputy Manager
+of Exploration Department of CNOOC Naihai West
+Corporation. From 1996 to 1999, he served as Manager
+of Tepu Company of CNOOC Naihai West Corporation,
+Deputy Chief Earth Physicist and Manager of Exploration
+Department of Naihai West Corporation. From 2001 to
+2005, he was Deputy Chief Manager of CNOOC China
+Limited Zhanjiang Branch. From 2005 to 2013, he served
+as the Chief Manager of CNOOC China Limited Zhanjiang
+Branch. From 2013 to 2015, he was appointed as the
+Director of Naihai West Petroleum Administrative Bureau of
+CNOOC. In July 2015, he was appointed as Deputy Chief
+Geologist of CNOOC, Deputy Chief Geologist and General
+Manager of Exploration Department of the Company. From
+2016 to 2018, he was appointed as the Chief Geologist of
+CNOOC, an Executive Vice President and General Manager
+of Exploration Department of the Company. In May 2018,
+he was appointed as the Chief Geologist of CNOOC, an
+Executive Vice President and the Chief Safety Official of the
+Company.
+Xie Yuhong
+OTHER MEMBERS OF SENIOR MANAGEMENT
+33 years of service with the Government of Canada. Mr.
+Lynch served as Deputy Minister of Industry of Canada
+from 1995 to 2000, Deputy Minister of Finance of Canada
+from 2000 to 2004, Executive Director at the International
+Monetary Fund from 2004 to 2006 and was appointed
+as Clerk of the Privy Council for Canada, Secretary to the
+Cabinet and Head of the Public Service from 2006 to 2009.
+Mr. Lynch is the Senior Fellow of Massey College, former
+Chancellor of the University of King's College, former Chair
+of the Board of Governors of the University of Waterloo,
+former Chair of the Canadian Ditchley Foundation, and
+past Chair of the World Economic Forum's Global Policy
+Council on the Global Financial System. He also serves on
+other boards including the Killam Trusts, Communitech, the
+Governor General's Rideau Hall Foundation, the Asia Pacific
+Foundation of Canada. Mr. Lynch is currently a director of
+Canadian National Railway Company listed on the Toronto
+Stock Exchange and New York Stock Exchange, and a
+director and chairman of the Board of Directors of SNC
+Lavalin Group Inc. listed on the Toronto Stock Exchange.
+Mr. Lynch was appointed as an Independent Non-executive
+Director of the Company on 27 November 2013, and such
+appointment took effect from 1 March 2014.
+CNOOC LIMITED Annual Report 2018
+50
+Born in 1951, Mr. Lynch obtained a B.A. degree from
+Mount Allison University, a M.A. degree in Economics from
+the University of Manchester, and a doctorate degree in
+Economics from McMaster University. He also holds 11
+honorary degrees. Mr. Lynch was made a life Member of
+the Privy Council for Canada, and an Officer of the Order
+of Canada. He is the Vice Chairman of BMO Financial
+Group and also a distinguished former public servant with
+CNOOC LIMITED Annual Report 2018
+Kevin G. Lynch
+Tse Hau Yin, Aloysius
+member and Chairman of the Prize Recommendation
+Committee of the LUI Che Woo Prize Company, as well as
+a Vice-Chairman of Our Hong Kong Foundation. He was
+appointed a Justice of the Peace in Hong Kong in July
+2007. He currently serves as the Ralph and Claire Landau
+Professor of Economics at the Lau Chor Tak Institute of
+Global Economics and Finance, The Chinese University
+of Hong Kong, an independent non-executive director
+of AIA Group Limited, Hysan Development Company
+Limited and Semiconductor Manufacturing International
+Corporation, all listed on the Hong Kong Stock Exchange,
+and an independent non-executive director of Far EasTone
+Telecommunications Company Limited, Taipei, which is
+listed on the Taiwan Stock Exchange. Professor Lau was
+appointed as an Independent Non-executive Director of the
+Company with effect from 31 August 2005.
+Born in 1944, Professor Lau graduated with a B.S. (with
+Great Distinction) in Physics from Stanford University
+in 1964, and received his M.A. and Ph.D. degrees in
+Economics from the University of California at Berkeley
+in 1966 and 1969 respectively. He joined the faculty of
+the Department of Economics at Stanford University in
+1966, becoming Professor of Economics in 1976, the first
+KwohTing Li Professor in Economic Development in 1992,
+and Kwoh-Ting Li Professor in Economic Development,
+Emeritus in 2006. From 2004 to 2010, Professor Lau
+served as the Vice-chancellor (President) of The Chinese
+University of Hong Kong. From September 2010 to
+September 2014, Professor Lau served as Chairman of
+CIC International (Hong Kong) Co., Limited. From March
+2008 to February 2018, Professor Lau served as a member
+of the 11th and 12th National Committee of the Chinese
+People's Political Consultative Conference (and a Vice
+Chairman of its Economics Subcommittee). Professor
+Lau specializes in economic development, economic
+growth, and the economies of East Asia, including that of
+China. He has authored, co-authored, or edited thirteen
+books, including The China-U.S. Trade War and Future
+Economic Relations, and published 190 articles and
+notes in professional journals. Professor Lau serves as a
+member of the Hong Kong Special Administrative Region
+Exchange Fund Advisory Committee and Chairman of its
+Governance Sub-Committee, and member of its Currency
+Board Subcommittee and Investment Sub-Committee, and
+a member of the Hong Kong Trade Development Council
+(HKTDC) Belt and Road Committee. In addition, he also
+serves as the Chairman of the Board of Directors of the
+Chinese University of Hong Kong (Shenzhen) Advanced
+Finance Institute, aka Shenzhen Finance Institute, a
+Lawrence J. Lau
+Born in 1947, Mr. Chiu received an LL.B. degree from the
+University of Sydney. He was admitted as a solicitor of the
+Supreme Court of New South Wales and the High Court
+of Australia. He has over 30 years' experience in legal
+practice and had been a director of a listed company in
+Australia. Mr. Chiu was the founding member of the Board
+of Trustees of the Australian Nursing Home Foundation and
+a senior research fellow of Centre for Law & Globalization
+of Renmin University of China since 2016. He also served
+as the General Secretary of the Australian Chinese
+Community Association of New South Wales. Mr. Chiu
+is also an independent non-executive director of Tianda
+Pharmaceuticals Limited (formerly Yunnan Enterprises
+Holdings Limited, Tianda Holdings Limited) since April
+2008, a company listed on The Stock Exchange of Hong
+Kong Limited. Mr. Chiu is also an independent non-
+executive director of Bank of China (Australia) Limited (a
+wholly subsidiary of Bank of China Limited). Mr. Chiu was
+appointed as an Independent Non-executive Director of the
+Company with effect from 7 September 1999.
+Chiu Sung Hong
+INDEPENDENT NON-EXECUTIVE DIRECTORS
+Directors and Senior Management
+49
+CNOOC LIMITED Annual Report 2018
+Born in 1957, Mr. Wu is a geologist, professor-level senior
+economist, Certified Senior Enterprise Risk Manager and
+Certified Internal Auditor and graduated with a B.S. degree
+from the Ocean University of China, majoring in Marine
+Geology. He also holds a master degree in Management
+from China University of Petroleum and a doctor degree
+in Management from Huazhong University of Science and
+Technology. Mr. Wu joined CNOOC in 1982. From 1994
+to 2001, he served as the Deputy General Manager of
+CNOOC Oil Technical Services Company, a subsidiary of
+CNOOC, the Director of the Administration Department of
+CNOOC and the Director of the Ideology Affairs Department
+of CNOOC successively. Mr. Wu was appointed as an
+Assistant President of CNOOC in 2003, and has been the
+Vice President of CNOOC since 2004. Mr. Wu also serves
+as the Chairman of CNOOC Marine Environment and
+Ecology Protection Foundation, and served as the Vice
+Chairman of China Association of Risk Professionals, the
+Vice Chairman of China Association of Oceanic Engineering,
+the Director-General of National Energy Deepwater Oil &
+Gas Engineering Technology Research Centre Council.
+Mr. Wu served as an Independent Non-executive Director
+of China Yangtze Power Limited, a company listed on
+the Shanghai Stock Exchange, from May 2003 to July
+2010. Mr. Wu has served as the Compliance Officer of
+the Company from 1 June 2005 to 15 June 2016. Since
+June 2005 to August 2018, he served as a Director of
+CNOOC International Limited and once as a Director of
+CNOOC China Limited, all being the subsidiaries of the
+Company. Mr. Wu was appointed as an Executive Director
+of the Company with effect from 1 June 2005. Mr. Wu has
+been re-designated from an Executive Director to a Non-
+executive Director of the Company with effect from 15 June
+2016. Mr. Wu resigned as a Non-executive Director and a
+member of the Remuneration Committee of the Company
+with effect from 27 April 2018.
+Born in 1948, Mr. Tse is a fellow of The Institute of Chartered
+Accountants in England and Wales, and the Hong Kong
+Institute of Certified Public Accountants ("HKICPA"). Mr.
+Tse is a past president and a former member of the Audit
+Committee of the HKICPA. He joined KPMG in 1976,
+became a partner in 1984 and retired in March 2003. Mr.
+Tse was a non-executive Chairman of KPMG's operations in
+the PRC and a member of the KPMG China advisory board
+from 1997 to 2000. Mr. Tse is currently an independent
+non-executive director of China Telecom Corporation
+Limited, SJM Holdings Limited, Sinofert Holdings Limited
+and China Huarong Asset Management Company, Limited,
+companies listed on The Stock Exchange of Hong Kong
+Limited. From 2004 to 2010, he was an independent non-
+executive director of China Construction Bank Corporation,
+which is listed on the HKSE Main Board. From 2005 to
+2016, Mr. Tse was also an independent non-executive
+director of Daohe Global Group Limited (formerly known as
+Linmark Group Limited), which is listed on the HKSE Main
+Board, Mr. Tse is currently an independent non-executive
+director of CCB International (Holdings) Limited, a wholly
+owned subsidiary of China Construction Bank Corporation
+and OCBC Wing Hang Bank Limited (formerly named as
+Wing Hang Bank Limited whose shares were delisted from
+The Stock Exchange of Hong Kong Limited with effect
+from 16 October 2014). Mr. Tse is also a member of the
+International Advisory Council of the People's Municipal
+Government of Wuhan. Mr. Tse was appointed as an
+Independent Non-executive Director of the Company with
+effect from 8 June 2005.
+Provision of exploration, oil and gas development, oil and
+gas production as well as marketing, management and
+ancillary services by CNOOC and/or its associates to the
+Group
+53
+Report of the Directors
+Please refer to note 26 to the consolidated financial
+statements on pages 110 to 112 of this annual report for
+details of the loans and borrowings of the Group as at 31
+December 2018.
+PROPERTY, PLANT AND EQUIPMENT
+Please refer to note 13 to the consolidated financial
+statements on pages 102 to 103 of this annual report for the
+movements in property, plant and equipment of the Group
+for the year ended 31 December 2018.
+RESERVES
+The distributable reserves of the Company as at 31
+December 2018 amounted to RMB151,539 million.
+Please refer to the consolidated statement of changes in
+equity on page 73 and note 39 to the consolidated financial
+statements on pages 126 to 127 of this annual report for
+movements in the reserves of the Group and the Company,
+respectively, for the year ended 31 December 2018.
+SUBSIDIARIES, ASSOCIATES AND JOINT
+VENTURES
+Particulars of the Company's subsidiaries, associates and
+joint ventures as at 31 December 2018 are set out in notes
+15, 16 and 17 to the consolidated financial statements on
+pages 104 to 107 of this annual report.
+DIVIDENDS
+An interim dividend of HK$0.30 (tax inclusive) per share was
+declared on 23 August 2018, and paid to the shareholders
+of the Company on 16 October 2018.
+The Board recommended a payment of a final dividend
+of HK$0.40 (tax inclusive) per share for the year ended
+31 December 2018, payable on 10 July 2019 to all
+shareholders on the register of members of the Company on
+14 June 2019 subject to shareholders' approval.
+CNOOC LIMITED Annual Report 2018
+55
+Report of the Directors
+RETIREMENT BENEFITS
+Please refer to note 31 to the consolidated financial
+statements on page 119 of this annual report for details of
+the retirement benefits of the Group for the year ended 31
+December 2018.
+MAJOR SUPPLIERS AND CUSTOMERS
+Purchases from the largest supplier of the Group for the
+year ended 31 December 2018 represented approximately
+16% of the Group's total purchases. The total purchases
+attributable to the five largest suppliers of the Group
+accounted for approximately 47% of the total purchases of
+the Group for the year ended 31 December 2018.
+Sales to the largest third party customer for the year ended
+31 December 2018 represented approximately 7% of the
+Group's total revenue. The total sales attributable to the five
+largest third party customers of the Group accounted for
+approximately 17% of the Group's total revenue for the year
+ended 31 December 2018.
+For the year ended 31 December 2018, except for
+the continuing connected transactions with its indirect
+controlling shareholder CNOOC and its associates, as
+disclosed in the section entitled "Connected Transactions"
+below, none of the Directors or their respective close
+associates or any shareholder of the Company (which to
+the knowledge of the Directors owns more than 5% of the
+Company's share capital) had any interests in the five largest
+suppliers or customers of the Group.
+Comprehensive framework agreement with CNOOC in
+respect of the provision of a range of products and services
+The Company entered into a comprehensive framework
+agreement on 15 November 2016 with CNOOC, controlling
+shareholder of the Company, for the provision (1) by the
+Group to CNOOC and/or its associates and (2) by CNOOC
+and/or its associates to the Group, of a range of products
+and services which may be required and requested
+from time to time by either party and/or its associates in
+respect of the continuing connected transactions. The
+comprehensive framework agreement is substantially on the
+same terms as the terms contained in the comprehensive
+framework agreements entered into by the Company on
+6 November 2013, with more details about the pricing
+principles. The term of the comprehensive framework
+agreement is for a period of three years from 1 January
+2017. The continuing connected transactions under the
+comprehensive framework agreement and the relevant
+annual caps for the three years from 1 January 2017
+were approved by the independent shareholders of the
+Company on 1 December 2016. The continuing connected
+transactions under the comprehensive framework
+agreement and the relevant annual caps are set out below:
+Categories of continuing
+connected transactions
+LOANS
+Please refer to note 38 to the consolidated financial
+statements for details of the significant events after the
+reporting period of the Group.
+Subsequent Event
+A description of the likely future development in the
+Company's future business is provided in the Chairman's
+statement on pages 6 to 7 and Business Overview on pages
+8 to 27 of this annual report.
+The directors (the "Directors") of the Company are pleased
+to present their report together with the audited financial
+statements of the Company for the year ended 31
+December 2018.
+PRINCIPAL ACTIVITIES
+The principal activity of the Company is investment holding
+of its subsidiaries. These subsidiaries are principally
+engaged in the exploration, development, production and
+sales of crude oil and natural gas.
+SUMMARY OF FINANCIAL INFORMATION AND
+OPERATING RESULTS
+BUSINESS REVIEW
+Overview and Performance of the Year
+A review of the business of the Group and analysis of the
+Group's performance using financial key performance
+indicators is provided in the Business Overview and
+Management's Discussion and Analysis section on pages 8
+to 27 and pages 63 to 66 of this annual report.
+Environmental Policies and Performance
+During the process of oilfield exploitation, the Company
+highly values the protection of natural and ecological
+environment and its comprehensive environmental
+protection measures ensure the Company to comply with
+the applicable laws and regulations on environmental
+protection.
+The Company's environmental protection management
+system emphasizes the management of the whole process,
+and we place Environment Impact Assessment (EIA),
+compliance with set standards or targets on pollutant
+emissions, control on total discharge amount and reduction
+on emissions as our priorities. During the pre-feasibility study
+phase, the environmental risk pre-assessment report will
+be conducted to identify the environmental sensitive areas
+for protecting marine ecosystem. During the ODP (Overall
+Development Plan) stage, it is a necessity to prepare and
+submit the EIA to the government for approval in advance
+of a project to be set up. During the construction stage,
+environmental protection supervision and management
+are strictly performed and tightened in order to reduce
+the impact on natural and social environment. During the
+production stage, pollutant emission monitor program is
+carried out, which analyzes the scope and extent of impact
+of the production process on the environment such that
+relevant environmental protection measures could be
+adopted. The environmental protection information system
+covers all information from EIA documents from all levels
+of the Group, and information in relation to the report,
+statistics, monitoring and pre-warning system regarding
+pollutant emissions. The system enables us to achieve
+information management on environmental related matters.
+54
+For the year ended 31 December 2018, the Company
+has carried out the laws and regulations of the PRC on
+energy saving and reduction in emission, viewing energy
+saving and reduction in emission as important works
+for the transformation of the mode of development and
+optimization of the industrial structure. We kept on strictly
+carrying out energy-saving assessment and examination
+on new oilfield investment projects, ensuring this work can
+be integrated from the initial stage of projects. We also
+strengthened the efforts in technical reformation, which is
+the key to improve energy efficiency and reduce carbon
+emissions.
+Compliance with Relevant Laws and Regulations
+For the year ended 31 December 2018, compliance
+procedures were in place to ensure adherence to applicable
+laws, rules and regulations which have significant impact on
+the Group. The Board and senior management within their
+respective duties in conjunction with internal and external
+professional advisors monitored the Group's policies
+and practices on compliance with legal and regulatory
+requirements. Changes in the applicable laws, rules and
+regulations which have significant impact on the Group (if
+any) were brought to the attention of relevant employees
+and relevant operation units from time to time. During
+the reporting period, various works of the Board and
+senior management were in compliance with the relevant
+applicable laws and regulations, the articles of association
+of the Company, charters of the board committees,
+internal policies and the relevant provisions of various
+internal control systems. Decision-making process was
+legitimate and effective. Directors and senior management
+performed in a diligent and responsible manner and the
+resolutions of the general meetings and board meetings
+were implemented faithfully. Meanwhile, the Company has
+timely performed its disclosure obligations which were in
+strict compliance with the requirements of the listing rules
+or manuals of the Hong Kong Stock Exchange, New York
+Stock Exchange and Toronto Stock Exchange.
+CNOOC LIMITED Annual Report 2018
+Report of the Directors
+In accordance with the requirements of the laws, regulations
+and related policies in Hong Kong, PRC and relevant
+other jurisdictions in which the Group operates, the Group
+provides and maintains statutory benefits for its staff,
+including but not limited to pension schemes, mandatory
+provident fund, basic medical insurance, work injury
+insurance, etc. Further, the Group has been committed
+in complying relevant laws and regulations on work and
+occupational safety of employees of the Group.
+Key Relationships with Stakeholders
+The support and trust of our stakeholders is integral to
+the Company's growth and success. Our stakeholders
+include shareholders and creditors, employees and
+employee organizations, governments and regulatory
+authorities, business partners and service providers, the
+public and communities, charities and non-government
+organizations (NGOs), and clients. We place emphasis
+on communications with our stakeholders and have
+established an open and transparent communication
+channel for each category of stakeholders to understand
+their expectations and requests.
+Through specified communication methods, we looked
+into and sorted out the focuses and concerns of the
+stakeholders, and responded with corresponding
+actions and measures. We continued to strengthen
+the quality and effectiveness of information disclosure,
+comply with applicable laws and regulations and actively
+participate in public welfare activities, with the purpose of
+achieving mutual development and value sharing with our
+stakeholders. We have also formulated key indicators based
+on the focuses and concerns of different stakeholders to
+reflect our management performance on various subject
+matters. Some of our key indicators include return on
+equity and payout ratio for shareholders and creditors;
+employee training frequency, turnover rate and OSHA
+statistics for employees and employee organizations; data
+for emissions, use of resources, environment and natural
+resources and safety environment performance; partners'
+feedback and contracts' execution capability for business
+partners and service providers; public opinion and corporate
+image concerned by the public; community evaluations for
+communities; response rate on enquiries for charities and
+NGOS; satisfactory reports for clients; etc. Going forward,
+we will endeavor to improve our current policies, strive to
+maximize our stakeholders' value and achieve a mutually
+beneficial outcome.
+For more details on Company's key relationships with
+stakeholders, please refer to the 2018 ESG report.
+Key Risks and Uncertainties
+A description of principal risks and uncertainties that the
+Group may be facing is provided in the Business Overview
+on pages 8 to 27 of this annual report.
+Prospects
+Regarding the environmental issues that have material
+impacts on the Company's business performance and
+future development, please refer to the environmental, social
+and governance report of 2018 prepared by the Company
+(the "2018 ESG report") to be available on the Company's
+website.
+Directors and Senior Management
+51
+CNOOC LIMITED Annual Report 2018
+2018
+Exchange losses/gains, net
+Our finance costs were RMB5,037 million (US$760.9
+million) in 2018 and in line with RMB5,044 million in 2017.
+Our interest income increased 21.9% to RMB796 million
+(US$120.2 million) in 2018 from RMB653 million in 2017,
+primarily due to the higher proportion of long-term deposits
+in China.
+Finance costs/Interest income
+Our selling and administrative expenses increased 6.2%
+to RMB7,286 million (US$1,100.6 million) in 2018 from
+RMB6,861 million in 2017. Our selling and administrative
+expenses per BOE increased 5.9% to RMB16.05 (US$2.43)
+per BOE in 2018 from RMB15.15 (US$2.24) per BOE in
+2017, due to the increase of scientific research expenses,
+arising from the active implementation of the "innovation-
+driven" strategy, the reform of science and technology
+system, which increase in the technological investment.
+Selling and administrative expenses
+Our impairment and provision decreased 93.8% to RMB567
+million (US$85.6 million) in 2018 from RMB9, 130 million
+in 2017. The vast majority of impairment and provision in
+2018 was related to raw material inventory provision, while
+RMB8,639 million of oil and gas assets impairment was
+recognized in 2017.
+Impairment and provision
+Our depreciation, depletion and amortization, excluding
+the dismantlement-related depreciation, depletion and
+amortization, decreased 18.9% to RMB49,347million
+(US$7,454.1 million) in 2018 from RMB60,874 million in
+2017. Our average depreciation, depletion and amortization
+per BOE, excluding the dismantlement-related depreciation,
+depletion and amortization, decreased 19.1% to RMB108.7
+(US$16.42) per BOE in 2018 from RMB134.4 (US$19.89)
+per BOE in 2017, primarily due to the increase of reserve
+by optimizing the development plan of producing oil and
+gas fields to control natural decline and improve production
+performance.
+The dismantlement-related depreciation, depletion and
+amortization costs increased 237.6% to RMB1,293 million
+(US$195.4 million) in 2018 from RMB383 million in 2017.
+Our average dismantling costs per BOE increased 235.3%
+to RMB2.85 (US$0.43) per BOE in 2018 from RMB0.85
+(US$0.13) per BOE in 2017, primarily due to the increase
+of the present value of asset retirement obligations brought
+by the decrease of US bond interest rate in the international
+market.
+Management's Discussion and Analysis
+CNOOC LIMITED Annual Report 2018
+64
+Depreciation, depletion and amortization
+Our total depreciation, depletion and amortization
+decreased 17.3% to RMB50,640 million (US$7,649.4
+million) in 2018 from RMB61,257 million in 2017.
+Our exploration expenses increased 87.8% to RMB12,924
+million (US$1,952.2 million) in 2018 from RMB6,881 million
+in 2017, mainly because of impairment provision RMB5,387
+million related to certain exploration and evaluation assets
+in North America, resulting from its further development
+uncertainty. Please refer to Note 13 to the Consolidated
+Financial Statement of this annual report.
+Exploration expenses
+Our taxes other than income tax increased 26.6% to
+RMB9, 127 million (US$1,378.7 million) in 2018 from
+RMB7,210 million in 2017, mainly due to the increase in oil
+and gas sales.
+Taxes other than income tax
+Our operating expenses decreased 0.1% to RMB24,251
+million (US$3,663.2 million) in 2018 from RMB24,282 million
+in 2017, the operating expenses per BOE decreased 0.4%
+to RMB53.4 (US$8.07) per BOE in 2018 from RMB53.6
+(US$7.93) per BOE in 2017. Operating expenses per BOE
+offshore China decreased 2.0% to RMB48.2 (US$7.28) per
+BOE in 2018 from RMB49.2 (US$7.29) per BOE in 2017.
+Overseas operating expenses per BOE increased 3.4%
+to RMB64.5 (US$9.74) per BOE in 2018 from RMB62.4
+(US$9.23) per BOE in 2017. Through refined management,
+strict costs control and enhancing conservation, our
+operating expenses per BOE remained stable.
+Operating expenses
+In 2018, our net production was 475.0 million BOE (including
+our interest in equity-accounted investees), representing
+an increase of 1.0% from 470.2 million BOE in 2017. The
+increase in crude and liquids sales was primarily due to higher
+international oil price in 2018. The increase in natural gas sales
+was primarily due to the gradual release of production capacity
+of high-priced gas fields arising from natural gas demand
+growth in China, which pulled up the gas price and sales volume
+simultaneously.
+Excluding our interest in equity-accounted investees.
+(0.8%)
+(1.4)
+Our net exchange losses changed to RMB141 million
+(US$21.3 million) in 2018, while there was net exchange
+gains of RMB356 million in 2017, primarily arising from RMB
+fluctuation against the US dollars and Hong Kong dollars.
+Investment income
+Our investment income increased 53.0% to RMB3,685
+million (US$556.6 million) in 2018 from RMB2,409 million in
+2017, primarily attributable to the higher interest rates and
+increased average stock of corporate wealth management
+products.
+Share of losses/profits of associates and a joint
+venture
+47.3%
+30.8%
+29,149
+(30,450)
+(64,411)
+94,734
+18,713.2
+(14,329.2)
+(94,861)
+123,883
+%
+RMB million
+Change
+167.4
+2017
+RMB million
+RMB million
+2018
+Used in financing activities
+Used in investing activities
+Generated from operating activities
+Our primary source of cash during 2018 was cash flows
+from operating activities. We used cash primarily to fund
+capital expenditure and dividends. The changes are as
+follows:
+Overview
+Capital Resources and Liquidity
+Our income tax expense increased 92.5% to RMB22,489
+million (US$3,397.1 million) in 2018 from RMB11,680 million
+in 2017, mainly because our overall profitability increased in
+2018.
+Income tax expense
+Our share of losses of associates and a joint venture
+changed to RMB5, 187 million (US$783.5 million) in 2018,
+while in 2017 our shared profits was RMB855 million, mainly
+due to depreciation of the value of the assets in Argentina
+owned by the joint venture, BC ENERGY INVESTMENTS
+CORP., as a result of the huge depreciation of the Argentina
+peso against the U.S. dollar and the sharp increase of
+interest rate.
+US$ million
+166.0
+Overseas
+2.0%
+372.9
+Crude and liquids (million barrels)
+0.2%
+1.0
+452.4
+453.4
+Sales volume (million BOE)*
+19.8%
+3,301
+16,632
+19,933
+380.1
+Natural gas
+30,683
+135,256
+165,939
+Crude and liquids
+22.4%
+33,984
+151,888
+185,872
+Oil and gas sales (RMB million)
+During the year ended 31 December 2018, the movements in the options granted under all of the above share option schemes were as follows:
+Price of the
+22.7%
+(27,370)
+(7.2)
+Natural gas (bcf)
+6.2
+302.8
+309.0
+China
+1.0%
+4.8
+470.2
+475.0
+Net production (million BOE)
+9.8%
+0.57
+(1.9%)
+5.84
+Natural gas (US$/mcf)
+27.7%
+14.57
+52.65
+67.22
+Crude and liquids (US$/barrel)
+Realized prices
+11.5%
+48.4
+421.5
+469.9
+6.41
+(4,134.4)
+(31,271)
+3,901
+CNOOC LIMITED Annual Report 2018
+Involving our internal valuation specialists to assess the reasonableness of the
+discount rates used by management.
+Evaluating the competence and objectivity of the internal and external
+reserve specialists and performing procedures to assess the reliability of
+data provided to the external reserve specialists.
+Assessing the future production estimates, estimated future capital
+expenditures and estimated future operating expenses by comparing with
+prior year estimates, and with corresponding data from reserve reports
+prepared by the Group's internal and external reserve specialists.
+Checking the estimated future oil and gas prices by comparing with
+forecasted prices derived from third party and the Group's internal oil and
+gas prices forecasts.
+Assessing the key assumptions and estimations used in the DCF in
+management's determination of the recoverable amount, including:
+Examining the methodology used in management's determination of the
+recoverable amount of oil and gas properties.
+Our procedures in relation to the determination of the recoverable amount of oil and
+gas properties included:
+How our audit addressed the key audit matter
+See notes 3 and 13 to the consolidated
+financial statements for information.
+We identified the determination of
+the recoverable amount of the oil and
+gas properties, where an indication of
+impairment exists, as a key audit matter.
+The Group used the discounted cash
+flow model ("DCF”) to estimate the
+recoverable amounts, which requires
+management to make significant
+estimates and assumptions related to
+estimated future oil and gas prices,
+future production estimates, estimated
+future capital expenditures, estimated
+future operating expenses and the
+discount rates applied. Changes in these
+assumptions could have a significant
+impact on the amount of any impairment
+charge.
+67
+Determination of the recoverable
+amount of the oil and gas properties
+Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
+financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
+statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
+KEY AUDIT MATTERS
+We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAS") issued by the HKICPA. Our responsibilities
+under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
+section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants
+("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence
+we have obtained is sufficient and appropriate to provide a basis for our opinion.
+BASIS FOR OPINION
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
+as at 31 December 2018, and of its consolidated financial performance and its consolidated cash flows for the year then ended
+in accordance with International Financial Reporting Standards ("IFRSS") issued by the International Accounting Standards Board
+("IASB") and Hong Kong Financial Reporting Standards ("HKFRSS") issued by the Hong Kong Institute of Certified Public Accountants
+("HKICPA") and have been properly prepared in compliance with the Companies Ordinance (Chapter 622 of the Laws of Hong Kong)
+(the "Companies Ordinance").
+We have audited the consolidated financial statements of CNOOC Limited (the "Company") and its subsidiaries (collectively referred
+to as "the Group") set out on pages 71 to 127, which comprise the consolidated statement of financial position as at 31 December
+2018, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity
+and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a
+summary of significant accounting policies.
+OPINION
+TO THE SHAREHOLDERS OF CNOOC LIMITED
+(Incorporated in Hong Kong with limited liability)
+德勤
+Independent Auditor's Report
+DeloitteⓇ
+Key audit matter
+CNOOC LIMITED Annual Report 2018
+68
+Independent Auditor's Report
+Testing whether the updated estimation of oil and gas reserves was included
+appropriately in the Group's consideration in impairment testing and
+depreciation, depletion and amortisation charges.
+Comparing the Group's oil and gas reserves volumes at 31 December 2018
+and 2017 and performing corroborating inquires of the reserve specialists and
+management as to the reason for any significant changes.
+.
+CNOOC LIMITED Annual Report 2018
+reserves.
+Evaluating the competence and objectivity of the reserve specialists to consider
+whether they are appropriately qualified to carry out the estimation of oil and gas
+Evaluating whether the methodology adopted by the Group's internal and
+external reserve specialists to estimate oil and gas reserves was consistent with
+recognised industry standards.
+Our procedures in relation to the estimation of oil and gas reserves included:
+Involving our internal valuation specialists to assess the reasonableness of the
+discount rate used by management.
+Evaluating the competence and objectivity of the internal and external
+reserve specialists and performing procedures to assess the reliability of
+data provided to the external reserve specialists.
+Assessing the future production estimates, estimated future capital
+expenditures and estimated future operating expenses by comparing
+with corresponding data from the reserve reports prepared by the reserve
+specialists.
+88
+Checking the estimated future oil prices by comparing with forecasted
+prices derived from third party and the Group's internal oil prices
+forecasts.
+Examining the methodology used in management's determination of the
+recoverable amount of the investment.
+Our procedures in relation to the determination of the recoverable amount of the
+investment in a joint venture, BC ENERGY INVESTMENTS CORP., included:
+How our audit addressed the key audit matter
+See notes 3 and 13 to the consolidated
+financial statements for information.
+We identified the estimation of oil and
+gas reserves that has a significant impact
+on the consolidated financial statements,
+particularly impairment testing and
+depreciation, depletion and amortisation
+charges as a key audit matter due to the
+uncertainty in assessing quantities.
+The estimation of oil and gas
+reserves has a significant impact
+on the consolidated financial
+statements, particularly impairment
+testing and depreciation, depletion
+and amortisation charges
+See notes 3 and 17 to the consolidated
+financial statements for information.
+We identified the determination of the
+recoverable amount of the investment
+in a joint venture, BC ENERGY
+INVESTMENTS CORP., where an
+indication of impairment exists, as a key
+audit matter. The Group used the DCF
+to estimate the recoverable amount,
+which requires management to make
+significant estimates and assumptions
+applicable to the calculation of the
+Group's share of DCF expected to be
+generated from the operations of the
+joint venture, such as determination
+of estimated future oil prices, future
+production estimates, estimated
+future capital expenditures, estimated
+future operating expenses and the
+discount rate applied. Changes in these
+assumptions could have a significant
+impact on the amount of any impairment
+charge.
+Determination of the recoverable
+amount of the investment in a joint
+venture, BC ENERGY INVESTMENTS
+CORP.
+Key audit matter
+KEY AUDIT MATTERS (continued)
+Assessing the key assumptions and estimations used in the DCF in
+management's determination of the recoverable amount, including:
+Company's
+66
+CONTINGENCIES
+9,995
+7,978
+6,205
+26,212
+16,762
+15,048
+Development
+Exploration
+2018
+2017
+(RMB million)
+Year ended 31 December
+2016
+China
+Subtotal
+The following table sets forth the Company's actual capital
+expenditure on an accrual basis for the periods indicated.
+At the end of 2018, our total interest-bearing outstanding
+debt was RMB139,521 million (US$21,075.4 million),
+compared to RMB132,250 million at the end of 2017. The
+increase in debt in 2018 was primarily attributable to the
+issuance of guaranteed notes and impact of changes in
+the exchange rate of the US dollar and RMB. Our gearing
+ratio, which is defined as interest-bearing debts divided by
+the sum of interest-bearing debts plus equity, was 25.1%,
+lower than that of 25.8% in 2017. The main reason was the
+increased scale of equity.
+In 2018, the net cash outflow from financing activities was
+mainly due to the repayment of bank loans of RMB5,888
+million (US$889.4 million), repayment of guaranteed notes
+of RMB4,976 million (US$750.0 million) and the payment
+of dividends of RMB23,523 million (US$3,553.3 million),
+partially offset by the issuance of guaranteed notes of
+RMB9,952 million (US$1,450.0 million) and the proceeds of
+bank loans of RMB2,212 million (US$334.1 million).
+Cash used in financing activities
+In addition, our cash used in investing activities was
+also attributable to the purchase of corporate wealth
+management products and money market funds of
+RMB178,100 million (US$26,902.9 million). Our cash
+generated from investing activities was mainly from the
+proceeds from the sales of corporate wealth management
+products and money market funds in the amount of
+RMB127,903 million (US$19,320.4 million), and the
+decrease in our time deposits with maturity over three
+months in the amount of RMB1,620 million (US$244.7
+million).
+In 2018, our capital expenditure payment increased 5.6%
+to RMB50,411 million (US$7,614.8 million) from 2017. Our
+development expenditures in 2018 were primarily related to
+the capital expenditure of OML130 project, Iraq technical
+service contract project, deep-water Gulf of Mexico and
+shale oil and gas in U.S., as well as the expenses incurred
+for improving recovery factors of the oil and gas fields in
+producing. The Company had no significant acquisition
+during the year.
+Cash used in investing activities
+Cash generated from operating activities
+The cash inflow from operating activities increased 30.8%
+to RMB123,883 million (US$18,713.2 million) in 2018 from
+RMB94,734 million in 2017, primarily attributable to the
+increase in oil and gas sales cash inflows caused by the
+increase of international oil price for the current period.
+Management's Discussion and Analysis
+65
+CNOOC LIMITED Annual Report 2018
+(12.5%)
+Capital Expenditure
+Please refer to Note 33 to the Consolidated Financial
+Statements of this annual report.
+21,253
+36,207
+Please refer to Note 37 to the Consolidated Financial
+Statements of this annual report.
+CHARGES ON ASSETS
+For more information on employees and human resources,
+please refer to "Human Resources" in "Business Overview"
+section of this annual report.
+The Company has set up a recruitment system that is
+primarily market driven, and has adopted an appropriate
+remuneration structure.
+Since 4 February 2001, the Company has adopted 4
+stock option plans that were applicable to directors, senior
+management members and other qualified beneficiaries
+and has granted options thereafter to directors, senior
+management members and other qualified beneficiaries in
+accordance with each stock option plan.
+As of 31 December 2018, the Company had 14,965
+employees in China, 3,138 employees overseas and 209
+contracted employees.
+Employees
+OTHERS
+Note: Capitalized interests for 2016, 2017 and 2018 were RMB1,430
+million, RMB2,495 million and RMB2,838 million, respectively.
+62,102
+49,716
+24,740
+48,733
+25,895
+24,976
+27,480
+Subtotal
+2,331
+3,085
+2,964
+23,564
+21,891
+Development 24,516
+Exploration
+Overseas
+Total
+Weighted average
+Number of share options
+shares
+Save as disclosed above, as at 31 December 2018, none of the Directors and chief executive of the Company was interested
+in the equity or debt securities of the Company or any associated corporations (within the meaning of the SFO) which were
+required (i) to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of
+the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO);
+(ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the Model Code, to
+be notified to the Company and the Hong Kong Stock Exchange. All the interests held by the Directors and chief executive
+represent long positions.
+SUBSTANTIAL SHAREHOLDERS' INTERESTS
+As at 31 December 2018, so far as was known to the Directors and chief executive of the Company, the persons, other than a
+Director or chief executive of the Company, who had an interest or a short position in the Shares and underlying Shares which
+would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO were as follows:
+(i)
+CNOOC (BVI) Limited
+(ii)
+Overseas Oil & Gas Corporation, Ltd. ("OOGC")
+(iii)
+CNOOC
+Ordinary
+shares held
+28,772,727,268
+0.000%
+28,772,727,273
+Approximate
+percentage of
+total issued
+shares
+64.44%
+64.44%
+64.44%
+Note: CNOOC (BVI) Limited is a direct wholly-owned subsidiary of OOGC, which is a direct wholly-owned subsidiary of CNOOC. Accordingly, CNOOC
+(BVI) Limited's interests are recorded as the interests of OOGC and CNOOC.
+All the interests stated above represent long positions. As at 31 December 2018, save as disclosed above, the Directors and
+chief executive of the Company are not aware of any other person having interests or short positions (other than the Directors
+and chief executives of the Company) in the Shares and underlying Shares which would fall to be disclosed to the Company
+under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10% or more of the
+nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member
+of the Group.
+CNOOC LIMITED Annual Report 2018
+61
+62
+Report of the Directors
+28,772,727,273
+DIRECTORS AND SENIOR MANAGEMENT OF
+0.003%
+Approximate
+percentage of
+total issued
+Yang Hua (Chairman)
+Wang Dongjin (Vice Chairman) (Note 1)
+Liu Jian (Vice Chairman) (Note 2)
+Wu Guangqi (Note 3)
+Independent Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+Tse Hau Yin, Aloysius
+Kevin G. Lynch
+Note 1: With effect from 27 April 2018, Mr. Wang Dongjin was
+appointed as a Non-executive Director and a member of the
+Remuneration Committee of the Company. and was appointed
+as the Vice Chairman of the Company with effect from 5
+December 2018.
+Note 2: With effect from 16 August 2018, Mr. Liu Jian resigned as the
+Vice Chairman of the Company and a Non-executive Director of
+the Company.
+Note 3: With effect from 27 April 2018, Mr. Wu Guangqi resigned as
+a Non-executive Director and a member of the Remuneration
+Committee of the Company.
+In accordance with the Company's Articles of Association
+and pursuant to Appendix 14 to Listing Rules, Mr, Wang
+Dongjin, Mr. Xu Keqiang and Mr. Chiu Sung Hong will retire
+at the forthcoming Annual General Meeting and, who being
+eligible, will offer themselves for re-election.
+The list of directors who have served on the boards of
+the subsidiaries of the Company included in the annual
+consolidated financial statements for the financial year
+ended 31 December 2018 during the year and up to the
+date of this report is as follows:
+shares
+Cao Xinjian, Chen Ming, Chen Wei, Cui Hanyun, Duan
+Chenggang, Fang Zhi, Gao Dongsheng, Gen Jie, Huang
+Chunlin, Han Mei, Jing Fengjiang, Jiang Qing, Liang Yu,
+Ling Fuhai, Liu Jian, Liu Mingquan, Liu Song, Liu Xiaoxiang,
+Liu Yongjie, Lu Yongfeng, Pang Jian, Shen Yiming, Shi
+Hesheng, Wang Shoushan, Wang Xin, Wang Yaohui,
+Wang Yufan, Wu Guangqi, Xiao Zongwei, Xie Weizhi, Xie
+Wensheng, Xie Yuhong, Xu Keqiang, Yu Jin, Zhang Fuya,
+You Xuegang, Yuan Guangyu, Zhao Shunqiang, CNOOC
+Limited, Zhong Hua
+DIRECTORS' INTERESTS
+As at 31 December 2018, apart from holding personal
+interests in options to subscribe for shares in the Company
+granted under the share option schemes of the Company as
+disclosed in this annual report, the interests of each Director
+and chief executive of the Company in the equity or debt
+securities of the Company or any associated corporations
+(within the meaning of the Securities and Futures Ordinance
+("SFO")) which were required (i) to be notified to the
+Company and the Hong Kong Stock Exchange pursuant to
+Divisions 7 and 8 of Part XV of the SFO (including interests
+and short positions which they are taken or deemed to have
+under such provisions of the SFO); (ii) pursuant to section
+352 of the SFO, to be entered in the register referred to
+therein; or (iii) pursuant to the Model Code for Securities
+Transactions by Directors of Listed Issuers (the "Model
+Code"), to be notified to the Company and the Hong Kong
+Stock Exchange are as follows:
+60
+CNOOC LIMITED Annual Report 2018
+Report of the Directors
+Name of Director
+Chiu Sung Hong
+Lawrence J. Lau
+Nature of interest
+Beneficial interest
+Beneficial interest
+Ordinary
+shares held
+1,150,000
+200,000
+Alan O'Brien, Ariel D. Schneider, Bill D. Stiles, Brent C.
+Tilford, Colleen V. Johnson, David O. Tudor, Graham
+Charles Clague, Heather M. Osecki, lan M. Smale, James
+C.P. Waithman, Jamie D. Doyle, Jerome A. van Zuijlen, John
+F. M. Abbott, Lawson A.W. Hunter, Lester C. Jager, Marilyn
+J. Schonberner, Paul Harris, Quinn E. Wilson, Ray C. J.
+Riddoch, Tiara Ltd., TMF Management Limited
+Non-executive Directors
+THE COMPANY
+DIRECTORS' SERVICE CONTRACTS
+AND INTERESTS IN TRANSACTION,
+ARRANGEMENT AND CONTRACT OF
+SIGNIFICANCE
+Develop natural gas business
+We will continue to develop the natural gas market, and
+continue to explore and develop natural gas fields. In the
+event that we invest in businesses and geographic areas
+where we have limited experience and expertise, we
+plan to structure our investments in the form of alliances
+or partnerships with partners possessing the relevant
+experience and expertise.
+The Company adopts the low-carbon development concept
+and proactively expands the natural gas business. In 2018,
+Bozhong 19-6 gas field was successfully appraised and
+proved to contain proved in-place volume of condensate
+over 100 million cubic meters and natural gas over 100 billion
+cubic meters. In addition, Lingshui 17-2 gas field, the first
+self-operated major deep-water natural gas field discovery in
+offshore China, entered into its development and construction
+stage. The project is expected to effectively promote the
+development of deep-water natural gas in the South China
+Sea and will be an important growth driver for natural gas
+production of the Company in the future.
+Maintain a prudent financial policy
+We will continue to maintain our prudent financial policy. As
+an essential part of our corporate culture, we continue to
+promote cost consciousness among both our management
+team and employees. Also, in our performance evaluation
+system, cost control has been one of the most important
+key performance indicators.
+In 2018, we continued our efforts to lower costs and
+enhance efficiency through innovation in technology and
+management. All-in cost decreased for the fifth consecutive
+year. Under the environment of oil price fluctuations, we
+attached more importance to cash flow management and
+maintained a healthy financial position.
+2018 OVERVIEW
+In 2018, the momentum of world economic growth slowed
+down, and challenges and variables continued to increase.
+As tax cuts and fiscal expansion stimulated demand, the
+US economy expanded rapidly. The Eurozone economy
+also continued to improve, with its growth slowing down.
+In 2018, the Chinese economy was steady and moved
+in the right direction on the whole, with GDP growing by
+approximately 6.6%.
+International oil prices fluctuated and fell sharply after a
+rebound in 2018. In the beginning of the year, as a result
+of OPEC's effective implementation of their obligations
+under a production cut agreement and US sanctions on
+Iran and other countries, international oil prices fluctuated
+and eventually picked up, reaching the year's record high
+in October. Thereafter, with concerns about the lacking
+of supply and demand, international oil prices began to
+fall, and the sharp drop in global stock markets further
+exacerbated the decline in oil prices. In 2018, the WTI crude
+oil price averaged US$64.95 per barrel, representing a year-
+on-year increase of 27.9%, while the Brent crude oil price
+averaged at US$71.69 per barrel, representing a year-on-
+year increase of 30.9%.
+In 2018, the Company realized a net production of 475
+million BOE, which achieved the annual production target.
+In terms of exploration, the Company made breakthroughs
+domestically and overseas, consolidating its resources base
+for sustainable development. Key projects both in China and
+overseas progressed smoothly. The performance of HSE
+maintained stable.
+We increase our production primarily through the
+development of proved undeveloped reserves. As of 31
+December 2018, approximately 58.0% of our proved
+reserves were classified as proved undeveloped, which
+provides a solid resource base for maintaining increasing
+production in the future.
+The Company maintained a solid financial condition in 2018.
+Oil and gas sales were RMB185,872 million (US$28,076.9
+million, with the exchange rates applicable for 2018 at
+US$1=RMB6.6201), representing an increase of 22.4%
+over the previous year. Net profit was RMB52,688 million
+(US$7,958.8 million), representing a significant increase over
+the previous year.
+CNOOC LIMITED Annual Report 2018
+63
+Management's Discussion and Analysis
+Looking ahead to 2019, the growth of the global economy
+is under pressure, and international oil prices will still be
+subject to many uncertainties amid a general rebound. The
+external operating environment is likely to remain challenging.
+To this end, the Company further strengthened its operating
+strategies, which mainly include: steadily increasing oil and
+gas reserve and production levels, promoting high-quality
+development, improving core business enhancement with
+digital transformation, maintaining prudent financial policy
+and investment decision-making, and pursuing a green, low-
+carbon and environmentally-friendly development model.
+The Company will remain confident and calmly deal with the
+challenges to meet its production and operational targets.
+BUSINESS REVIEW
+For details, please refer to "Business Overview" on page 8 to
+27 of the annual report.
+FINANCIAL RESULTS
+Consolidated net profit
+Our consolidated net profit increased 113.5% to
+RMB52,688 million (US$7,958.8million) in 2018 from
+RMB24,677 million in 2017, primarily as a result of the
+increase in profitability under the higher international oil price
+environment, at the same time, the cost control through
+taking efficient measures brings about the increase in
+profitability.
+Revenues
+Our oil and gas sales, realized prices and sales volume in
+2018 are as follows:
+Change
+Amount
+Please refer to pages 47 to 53 of this annual report
+for information concerning the Directors and senior
+management of the Company.
+As an upstream company specializing in the exploration,
+development, production and sales of oil and natural gas,
+we consider reserve and production growth as our top
+priorities. We plan to increase our reserves and production
+through drill bits and value-driven acquisitions. We will
+continue to concentrate our independent exploration efforts
+on major operating areas, especially offshore China. In the
+meantime, we will continue to cooperate with our partners
+through production sharing contracts to lower capital
+requirements and exploration risks.
+As one of the largest independent oil and gas exploration
+and production companies, we mainly engage in the
+exploration, development, production and sales of oil and
+natural gas. The principal components of our strategy are as
+follows:
+No Director (including those to be re-elected) has an
+unexpired service contract with the Company which is
+not determinable by the Company within one year without
+payment of compensation (other than normal statutory
+obligations).
+Save as disclosed in this annual report, as at 31 December
+2018 or during the year, none of the Directors or entities
+connected with the Directors was materially interested,
+either directly or indirectly, in any transaction, arrangement
+or contract which is significant in relation to the business of
+the Group to which the Company or any of its subsidiaries
+was a party.
+DIRECTORS' PERMITTED INDEMNITY
+PROVISION
+Pursuant to the Company's Articles of Association, every
+Director or other officer of the Company shall be entitled to
+be indemnified out of the assets of the Company against all
+costs, charges, expenses, losses and liabilities which he/
+she may sustain or incur in or about the execution of the
+duties of his/her office or otherwise in relation thereto. The
+Company has arranged appropriate directors' and officers'
+liability insurance coverage for the Directors and officers of
+the Group during the year ended 31 December 2018.
+MANAGEMENT CONTRACTS
+Other than the service contracts of the Directors, the
+Company has not entered into any contract with any
+individual, firm or body corporate to manage or administer
+the whole or any substantial part of any business of the
+Company during the year.
+EMOLUMENTS OF THE DIRECTORS, SENIOR
+MANAGEMENT AND THE FIVE HIGHEST PAID
+INDIVIDUALS
+Please refer to notes 8 and 9 to the consolidated financial
+statements on pages 95 to 97 of this annual report
+for details of the emoluments of the Directors, senior
+management and the five highest paid individuals of the
+Company.
+MATERIAL LEGAL PROCEEDINGS
+As at 31 December 2018, the Company was not involved in
+any material litigation or arbitration and no material litigation
+or arbitration were pending or threatened or made against
+the Company so far as the Company is aware.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+Focus on reserve and production growth
+Except deviation from the CG Code provision A.4.1, the
+Company has complied with the code provisions of the
+CG Code as set out in Appendix 14 of the Listing Rules
+throughout the year ended 31 December 2018.
+AUDITORS
+Deloitte Touche Tohmatsu was appointed as the auditors
+of the Company for the year ended 31 December 2018
+and has audited the accompanying financial statements.
+A resolution to re-appoint Deloitte Touche Tohmatsu
+as auditors of the Company will be proposed at the
+forthcoming Annual General Meeting to be held on 23 May
+2019.
+SUFFICIENCY OF PUBLIC FLOAT
+As at the date of this report, the Directors confirmed
+that based on information that is publicly available to the
+Company and within the knowledge of the Directors, the
+Company had maintained sufficient amount of public float
+as required under the Listing Rules. As at the date of this
+report, based on publicly available information and within
+the Directors' knowledge, approximately 35.56% of the
+Company's total issued shares were held by the public.
+The total number of total issued shares of the Company
+is 44,647,455,984. The closing price of the share of the
+Company as at 31 December 2018 is HK$12.10 per share.
+VOTING BY POLL
+In 2018, all votes of shareholders were taken by poll in the
+annual general meeting and extraordinary general meetings
+of the Company. Pursuant to the Rule 13.39(4), all votes
+of shareholders will be taken by poll except where the
+chairman, in good faith, decides to allow a resolution which
+relates purely to a procedural or administrative matter to be
+voted on by a show of hands.
+By Order of the Board
+YANG Hua
+Chairman
+Hong Kong, 21 March 2019
+CNOOC LIMITED Annual Report 2018
+Management's Discussion and Analysis
+The following discussion and analysis should be read
+in conjunction with the Chairman's Statement and the
+Business Overview section, as well as the Group's audited
+financial statements and the related notes.
+DEVELOPMENT STRATEGY
+Please refer to the Corporate Governance Report on pages
+28 to 46 of this annual report for details.
+Xu Keqiang
+Yuan Guangyu
+Executive Directors
+date
+options
+HK$
+HK$
+HK$
+HK$
+per share
+per share
+per share
+per share
+Executive Director
+of options
+Yuan Guangyu
+1,899,000
+1,857,000
+1,899,000
+27 May 2009
+27 May 2009 to 27 May 2019
+9.93
+9.33
+20 May 2010
+20 May 2010 to 20 May 2020
+12.696
+12.22
+Non-executive Director
+1,857,000
+Yang Hua
+options
+exercise
+closing price of the
+Company's shares
+Exercise
+Immediately
+Immediately
+Name of category
+As at
+1 January
+Granted
+during
+during
+Exercised Forfeited
+during
+Expired
+during
+of grantee
+date of
+2018
+the year
+the year
+the year
+As at 31
+December
+2018
+price of
+before the
+before the At exercise
+Date of grant of
+share options
+Exercise period of
+share options*
+share
+grant date
+the year
+1,857,000
+(1,857,000)
+0
+46,640,000
+(13,532,000)
+33,108,000
+27 May 2009
+20 May 2010
+27 May 2009 to 27 May 2019
+20 May 2010 to 20 May 2020
+9.93
+9.33
+12.696
+12.22
+Total
+129,919,000
+26,208,000
+(26,732,000) (35,280,000) 67,907,000
+Except for share options granted under the Pre-Global Offering Share Option Scheme, all share options granted are subject to a vesting schedule pursuant to which one third of the options
+granted vest on the first, second and third anniversaries of the date of grant, respectively, such that the options granted are fully vested on the third anniversary of the date of grant.
+With effect from 27 April 2018, Mr. Wu Guangqi resigned as a Non-executive Director and a member of the Remuneration Committee of the Company. Information on Mr. Wu's share options
+outstanding at the beginning of the reporting period is included in the category of "Other Employees."
+CNOOC LIMITED Annual Report 2018
+59
+Report of the Directors
+EQUITY-LINKED AGREEMENT
+Save as disclosed in this annual report, there was no equity-
+linked agreement entered into by the Company during the
+year ended 31 December 2018.
+PURCHASE, SALE OR REDEMPTION OF
+LISTED SECURITIES
+Save as disclosed in this annual report, there was no
+purchase, sale or redemption by the Company, or any of its
+subsidiaries, of its listed securities during the year ended 31
+December 2018.
+NAME OF DIRECTOR
+The Directors of the Company during the year and up to the
+date of this annual report are:
+Report of the Directors
+(13,200,000)
+39,408,000
+14.20
+29 May 2008
+29 May 2008 to 29 May 2018
+14.828
+%
+14.20
+2,835,000
+2,835,000
+27 May 2009
+27 May 2009 to 27 May 2019
+9.93
+9.33
+2,000,000
+2,000,000
+20 May 2010
+20 May 2010 to 20 May 2020
+12.696
+12.22
+Other Employees
+in aggregate**
+33,423,000
+(33,423,000)
+0
+29 May 2008
+29 May 2008 to 29 May 2018
+14.828
+2017
+As at 31 December 2018, the Company's basic and diluted
+earnings per share were RMB1.18 and RMB1.18, respectively.
+The board of directors has recommended the payment of a
+final dividend of HK$0.40 per share (tax inclusive).
+9,952
+78
+77,426
+119,840
+NET CURRENT ASSETS
+61,412
+70,242
+Total current liabilities
+6,701
+15,701
+TOTAL ASSETS LESS CURRENT LIABILITIES
+14,106
+25
+2,036
+24
+26,713
+32,686
+23
+13,892
+7,042
+12,777
+26
+608,537
+NON-CURRENT LIABILITIES
+27
+118,358
+132,479
+26
+XU Keqiang
+Director
+CNOOC LIMITED Annual Report 2018
+72
+YUAN Guangyu
+Director
+555,807
+TOTAL EQUITY
+Equity attributable to owners of the parent
+Issued capital
+EQUITY
+NET ASSETS
+Total non-current liabilities
+Other non-current liabilities
+Deferred tax liabilities
+Provision for dismantlement
+Loans and borrowings
+Reserves
+54,159
+2222
+Contract liabilities
+14
+18, 34
+20,787
+21,686
+21
+7,354
+5,852
+20
+Other financial assets
+22
+488,697
+9,248
+9,482
+19
+25,509
+27,412
+10(i)
+3,540
+478,381
+Other payables and accrued liabilities
+Taxes payable
+18, 34
+74,344
+Trade and accrued payables
+Loans and borrowings
+CURRENT LIABILITIES
+138,838
+190,082
+CNOOC LIMITED Annual Report 2018
+12,572
+14,432
+125,283
+22
+13,760
+22
+22
+Cash and cash equivalents
+Time deposits with maturity over three months
+8,387
+9,069
+Other current assets
+15,380
+4,048
+52,893
+3,178
+(10,830)
+2017 final dividend
+(7,587)
+(7,587)
+2017 interim dividend
+(8,913)
+(9,096)
+183
+10,830
+2016 final dividend
+24,677
+(452)
+(10,121)
+Total comprehensive (expense)/income
+(10,573)
+(452)
+(10,121)
+Other comprehensive expense, net of tax
+14,104
+24,677
+Appropriation to reserve**
+(50,000)
+10,830
+263,380
+4,104
+70,000
+(12,638)
+43,081
+Balance at 1 January 2018
+(1,218)
+50,000
+(1,218)
+379,975
+10,830*
+264,598*
+4,104*
+70,000*
+(12,638)*
+43,081
+Balance at 31 December 2017
+Impact of adopting IFRS 15/HKFRS 15
+10(i)
+24,677
+382,371
+(All amounts expressed in millions of Renminbi)
+Year ended 31 December 2018
+Consolidated Statement of Changes in Equity
+379,975
+417,365
+336,894
+43,081
+43,081
+374,284
+Attributable to owners of the parent
+29
+22
+379,975
+417,365
+175,832
+191,172
+1,278
+1,356
+3,303
+28
+Profit for the year
+Statutory
+and non-
+9,096
+308,155
+4,556
+20,000
+(2,517)
+43,081
+Balance at 1 January 2017
+Total
+Cumulative
+Proposed
+final dividend
+reserves
+reserves
+reserve
+capital
+Other
+distributable
+translation
+Issued
+Retained
+earnings
+18, 34
+25,079
+20,268
+(6,881)
+(12,924)
+Exploration expenses
+(7,210)
+(9,127)
+10(ii)
+Taxes other than income tax
+(24,282)
+Depreciation, depletion and amortisation
+(24,251)
+EXPENSES
+186,390
+226,963
+5,595
+28,907
+151,888
+185,872
+35,830
+5,261
+4
+Operating expenses
+4
+6
+(61,257)
+(146,724)
+(6,021)
+(5,772)
+(6,861)
+(7,286)
+Others
+Selling and administrative expenses
+(27,643)
+(50,640)
+(33,558)
+(9,130)
+(567)
+6, 13
+Impairment and provision
+(55)
+(2,599)
+10(iii)
+Special oil gain levy
+Crude oil and product purchases
+(149,340)
+Other revenue
+Oil and gas sales
+Independent Auditor's Report
+69
+CNOOC LIMITED Annual Report 2018
+Obtain an understanding of internal control relevant to the audit 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 Group's internal control.
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
+design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
+to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
+resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
+control.
+•
+As part of an audit in accordance with HKSAS, we exercise professional judgment and maintain professional skepticism throughout
+the audit. We also:
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
+material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to you, as a
+body, in accordance with section 405 of the Companies Ordinance, and for no other purpose. We do not assume responsibility
+towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance,
+but is not a guarantee that an audit conducted in accordance with HKSAS will always detect a material misstatement when it exists.
+Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
+expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
+In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a
+going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
+the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
+The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view
+in accordance with IFRSS issued by the IASB, HKFRSS issued by the HKICPA and the Companies Ordinance, and for such internal
+control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from
+material misstatement, whether due to fraud or error.
+RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED
+FINANCIAL STATEMENTS
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so,
+consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained
+in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a
+material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
+assurance conclusion thereon.
+The directors of the Company are responsible for the other information. The other information comprises the information included in
+the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
+OTHER INFORMATION
+Independent Auditor's Report
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+Marketing revenues
+•
+Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
+the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
+attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are
+inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
+report. However, future events or conditions may cause the Group to cease to continue as a going concern.
+Revenue recognised from contracts with customers
+2017
+2018
+Notes
+REVENUE
+Year ended 31 December 2018
+(All amounts expressed in millions of Renminbi, except per share data)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+CNOOC LIMITED Annual Report 2018
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors.
+70
+Certified Public Accountants
+Hong Kong
+Deloitte Touche Tohmatsu
+The engagement partner on the audit resulting in the independent auditor's report is Lam Kwok Yan.
+From the matters communicated with those charged with governance, we determine those matters that were of most significance
+in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
+matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
+circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
+so would reasonably be expected to outweigh the public interest benefits of such communication.
+We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
+independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our
+independence, and where applicable, related safeguards.
+We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
+and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
+Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
+performance of the group audit. We remain solely responsible for our audit opinion.
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and
+whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair
+presentation.
+21 March 2019
+PROFIT FROM OPERATING ACTIVITIES
+Interest income
+Finance costs
+NON-CURRENT ASSETS
+(All amounts expressed in millions of Renminbi)
+31 December 2018
+Consolidated Statement of Financial Position
+71
+CNOOC LIMITED Annual Report 2018
+Details of the dividends proposed and paid for the year are disclosed in note 12 to the consolidated financial statements.
+0.55
+Property, plant and equipment
+Intangible assets
+1.18
+1.18
+11
+11
+Diluted (RMB Yuan)
+EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE PARENT
+Basic (RMB Yuan)
+14,104
+61,700
+TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE
+TO OWNERS OF THE PARENT
+(10,573)
+0.55
+9,012
+Investments in associates
+Investment in a joint venture
+Other non-current assets
+17
+4,067
+4,433
+16
+15,070
+15,717
+14
+395,868
+Equity investments
+Deferred tax assets
+407,337
+2017
+2018
+Notes
+Equity investments
+Trade receivables
+Inventories and supplies
+CURRENT ASSETS
+Total non-current assets
+13
+OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR THE YEAR,
+NET OF TAX
+54
+(542)
+Other income, net
+553
+(5,593)
+302
+2,409
+356
+653
+(5,044)
+796
+(5,037)
+(141)
+3,685
+406
+822
+667
+17
+(Loss)/profit attributable to a joint venture
+16
+Share of profits of associates
+Investment income
+37,050
+80,239
+Exchange (losses)/gains, net
+19
+78
+PROFIT BEFORE TAX
+6
+278
+80
+18(ii)
+Fair value change on equity investments designated as at fair value
+through other comprehensive income/(expense)
+Others
+Other items that will not be reclassified to profit or loss
+(10,121)
+36
+8,638
+16
+Share of other comprehensive income of associates
+Exchange differences on translation of foreign operations
+Items that may be subsequently reclassified to profit or loss
+OTHER COMPREHENSIVE INCOME/(EXPENSE)
+24,677
+52,688
+PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT
+(11,680)
+(22,489)
+10(i)
+Income tax expense
+36,357
+75,177
+378,757
+Profit for the year
+Total current assets
+52,688
+As reported
+(i) IFRS 15/HKFRS 15 Revenue from Contracts with Customers (continued)
+Summary of effects arising from initial application of IFRS 15/HKFRS 15 (continued)
+CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+2.2
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+Amounts without
+application of
+76
+(206)
+61,700
+attributable to owners of the parent
+Total comprehensive income for the year
+52,482
+(206)
+52,688
+of the parent
+61,494
+Profit for the year attributable to owners
+Adjustments
+(ii)
+Other payables and accrued liabilities
+(2,036)
+2,036
+Contract liabilities
+32,552
+(134)
+32,686
+Trade and accrued payables
+IFRS 15/HKFRS 15
+CURRENT LIABILITIES
+21,246
+(440)
+27,412
+21,686
+Deferred tax assets
+NON-CURRENT ASSETS
+Trade receivables
+CURRENT ASSETS
+27,410
+12,777
+(22,390)
+(22,489)
+378,757
+3,304
+1
+(1,218)
+379,975
+3,303
+NET ASSETS
+Deferred tax liabilities
+The following tables summarise the impacts of applying IFRS 15/HKFRS 15 on the Group's consolidated statement of
+financial position as at 31 December 2018 and its consolidated statement of profit or loss and other comprehensive
+income and its consolidated statement of cash flows for the current year for each of the line items affected. Line items
+that were not affected by the changes have not been included.
+NON-CURRENT LIABILITIES
+(91)
+6,701
+11,197
+2,909
+2,909
+(2,909)
+14,106
+Other payables and accrued liabilities
+Taxes payable
+Contract liabilities
+6,610
+99
+Amounts without
+application of
+Adjustments
+Income tax expense
+74,872
+(305)
+75,177
+Profit before tax
+(50,642)
+(50,640)
+- Depreciation, depletion and amortisation
+As reported
+(24,219)
+(24,251)
+- Operating expenses
+Expenses
+185,537
+(335)
+185,872
+Revenue - Oil and gas sales
+IFRS 15/HKFRS 15
+32
+25,518
+2,036
+Taxes payable
+Uncertainty over Income Tax Treatments¹
+Insurance Contracts³
+Amendments to IAS 19/HKAS 19
+Amendments to IAS 28/HKAS 28
+Amendments to IFRSS/HKFRSS
+IAS 8/HKAS 8
+Amendments to IAS 1/HKAS 1 and
+IFRIC 23/HK(IFRIC)-Int 23
+Amendments to IFRS 3/HKFRS 3
+Amendments to IFRS 9/HKFRS 9
+Amendments to IFRS 10/HKFRS 10
+and IAS 28/HKAS 28
+IFRS 17/HKFRS 17
+Leases1
+Definition of a Business4
+IFRS 16/HKFRS 16
+The application of IFRS 9/HKFRS 9 does not have any material impact on the consolidated financial statements of the
+Group.
+(ii) IFRS 9/HKFRS 9 Financial Instruments (continued)
+CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+52,688
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018 77
+The Group has not applied the following new and amendments to IFRSS/HKFRSS, which may be relevant to the Group and have
+been issued but are not yet effective, in the consolidated financial statements:
+Accounting policies resulting from application of IFRS 9/HKFRS 9 are disclosed in note 3.
+Prepayment Features with Negative Compensation¹
+Definition of Material5
+The Group anticipates that the application of other new and amendments to IFRSS/HKFRSS that have been issued but are not
+yet effective will have no material effect on the Group's consolidated financial statements.
+The Group elects the practical expedient to apply IFRS 16/HKFRS 16 to contracts that were previously identified as leases
+applying IAS 17/HKAS 17 and IFRIC 4/HK(IFRIC)-Int 4 Determining whether an arrangement contains a lease and not apply this
+standard to contracts that were not previously identified as containing a lease applying IAS 17/HKAS 17 and IFRIC 4/HK(IFRIC)-
+Int 4. Therefore, the Group does not reassess whether the contracts are, or contain a lease which already existed prior to the
+date of initial application. Furthermore, the Group elects the modified retrospective approach for the application of IFRS 16/
+HKFRS 16 as lessee and will recognise the cumulative effect of initial application to opening retained earnings without restating
+comparative information. Based on Directors' assessment, the Group does not expect the implementation of the standard to
+have a material effect on its consolidated financial statements.
+In respect of the lessor accounting, IFRS 16/HKFRS 16 substantially carries forward the lessor accounting requirements in IAS
+17/HKAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for
+these two types of leases differently.
+IFRS 16/HKFRS 16, which upon the effective date will supersede IAS 17/HKAS 17 Leases, introduces a single lessee
+accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months,
+unless the underlying asset is of low value. Specifically, under IFRS 16/HKFRS 16, a lessee is required to recognise a right-
+of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make
+lease payments. Accordingly, a lessee should recognise depreciation of the right-of-use asset and interest on the lease liability,
+and also classify cash payments of the lease liability into a principal portion and an interest portion and present them in the
+consolidated statement of cash flows. Also, the right-of-use asset and the lease liability are initially measured on a present value
+basis. The measurement includes non-cancellable lease payments and also includes payments to be made in optional periods
+if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.
+This accounting treatment is significantly different from the lessee accounting for leases that are classified as operating leases
+under IAS 17/HKAS 17.
+IFRS 16/HKFRS 16 Leases
+Effective for annual periods beginning on or after 1 January 2020
+5.
+Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first annual period
+beginning on or after 1 January 2020
+Sale or Contribution of Assets between an Investor and its
+Associate or Joint Venture²
+4.
+3.
+Effective for annual periods beginning on or after a date to be determined
+2.
+Effective for annual periods beginning on or after 1 January 2019
+1.
+Annual Improvements to IFRSS/HKFRSS 2015-2017 Cycle¹
+Long-term Interests in Associates and Joint Ventures¹
+Plan Amendment, Curtailment or Settlement¹
+Effective for annual periods beginning on or after 1 January 2021
+14,813
+The Group has applied IFRS 9/HKFRS 9 in accordance with the transition provisions set out in IFRS 9/HKFRS 9, i.e.
+applying the relevant requirements (other than those early adopted by the Group in previous year) retrospectively to
+instruments that have not been derecognised as at 1 January 2018 (the date of initial application) and not applying the
+requirements to instruments that have already been derecognised as at 1 January 2018. The difference between carrying
+amounts as at 31 December 2017 and the carrying amounts as at 1 January 2018 is recognised in the opening retained
+earnings, without restating comparative information.
+IFRS 9/HKFRS 9 Financial Instruments
+OPERATING ACTIVITES
+IFRS 15/HKFRS 15
+Adjustments
+As reported
+application of
+Amounts without
+417,159
+(206)
+Profit before tax
+417,365
+1
+3,178
+NET ASSETS
+Deferred tax liabilities
+NON-CURRENT LIABILITIES
+15,598
+(103)
+15,701
+3,179
+In the current year, the Group has applied expected credit losses ("ECL") model for financial assets in accordance with
+IFRS 9/HKFRS 9 Financial Instruments and the related consequential amendments to other IFRSS/HKFRSS.
+75,177
+74,872
+139,354
+139,354
+(116)
+(137)
+21
+Cash generated from operations
+contract liabilities and other payables
+and accrued liabilities
+Increase in trade and accrued payables,
+(305)
+(548)
+(988)
+current assets
+Increase in trade receivables and other
+50,642
+2
+50,640
+and amortisation
+Adjustment for depreciation, depletion
+440
+25,509 9 25,
+2.2
+(1,317)
+162
+Dividends received from associates
+1,450
+1,620
+Decrease in time deposits with maturity over three months
+(161)
+(64)
+Additions to investments in associates
+116
+(47,734)
+Capital expenditure
+94,734
+123,883
+110,625
+(15,891)
+139,354
+(15,471)
+2
+32
+2017
+(264)
+(50,411)
+2018
+Dividends received from a joint venture
+243
+590
+Proceeds from disposal of property, plant and equipment
+17
+Proceeds from sale of equity investments
+101,396
+127,903
+Proceeds from sale of other financial assets
+(51)
+132
+(122,267)
+Purchase of equity investments
+Purchase of other financial assets
+1,821
+2,721
+Investment income received
+666
+872
+Interest received
+(178,100)
+(39)
+110
+Notes
+CASH FLOWS FROM INVESTING ACTIVITIES
+Proposed 2018 final dividend
+(11,785)
+(11,785)
+2018 interim dividend
+(11,293)
+(10,830)
+(463)
+2017 final dividend
+15,221
+61,700
+374
+8,638
+Total comprehensive income
+9,012
+374
+8,638
+Other comprehensive income, net of tax
+19,470
+52,688
+Acquisition of oil and gas properties
+Disposal of investments in equity instruments
+(14)
+Net cash flows from operating activities
+CASH FLOWS FROM OPERATING ACTIVITIES
+Cash generated from operations
+Income taxes paid
+(All amounts expressed in millions of Renminbi)
+Year ended 31 December 2018
+Consolidated Statement of Cash Flows
+73
+CNOOC LIMITED Annual Report 2018
+During the year ended 31 December 2017, CNOOC China Limited (the "CNOOC China"), the Company's wholly-owned subsidiary, appropriated
+RMB50,000 million of the general reserve fund.
+at FVTOCI
+These reserve accounts constitute the consolidated reserves of approximately RMB374,284 million (2017: RMB336,894 million) in the consolidated
+statement of financial position.
+15,221*
+288,585*
+4,478*
+70,000*
+(4,000)*
+43,081
+Balance at 31 December 2018
+(14)
+417,365
+Net cash flows used in investing activities
+(15,221)
+(64,411)
+CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+2.2
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+75
+CNOOC LIMITED Annual Report 2018
+Information about the Group's performance obligations and the accounting policies resulting from application of IFRS 15/
+HKFRS 15 are disclosed in notes 4 and 3 respectively.
+(i)
+The Group has entered into natural gas sale contracts with customers, which contain take-or-pay clauses. Under these
+contracts, the Group makes a long term supply commitment in return for a commitment from the customer to pay for
+minimum quantities, whether or not the customer takes delivery. Payments received from customers for natural gas not
+yet taken are recorded as contract liabilities.
+The Group's major sources of revenues are revenues from oil and gas sales and marketing revenues.
+The Group has applied IFRS 15/HKFRS 15 retrospectively with the cumulative effect of initially applying this standard
+recognised at the date of initial application, 1 January 2018. Any difference as at the date of initial application has been
+recognised as an adjustment to the opening retained earnings and comparative information has not been restated.
+Furthermore, in accordance with the transition provisions in IFRS 15/HKFRS 15, the Group has elected to apply the
+standard retrospectively only to contracts that were not completed at 1 January 2018. Accordingly, certain comparative
+information may not be comparable as comparative information was prepared under IAS 18/HKAS 18 Revenue and the
+related interpretations.
+The Group has applied IFRS 15/HKFRS 15 for the first time in the current year. IFRS 15/HKFRS 15 superseded IAS 18/
+HKAS 18 Revenue, IAS 11/HKAS 11 Construction Contracts and the related interpretations.
+IFRS 15/HKFRS 15 Revenue from Contracts with Customers
+(i)
+The accounting policies adopted are consistent with those of the year ended 31 December 2017, except for the first time
+adoption of the new and amendments to IFRSS/HKFRSS effective for the Group's financial year beginning on 1 January 2018.
+Except as described below, the application of the new and amendments to IFRSS/HKFRSS in the current year has had no
+material impact on the accounting policies, the disclosures or the amounts recognised in the consolidated financial statements
+of the Group.
+The IASB has issued a number of new and amendments to IFRSS that are first effective for the current accounting year
+commencing 1 January 2018 or later but available for early adoption. The equivalent new and amendments to HKFRSS
+consequently issued by the HKICPA have the same effective dates as those issued by the IASB and are in all material aspects
+identical to the pronouncements issued by the IASB.
+2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
+The major change identified is the accounting for revenues relating to oil and gas sales in which the Group has an interest
+with joint operation partners. Oil and gas lifted and sold by the Group above or below the Group's participating interests in
+the production sharing contracts results in overlifts and underlifts. From 1 January 2018, the Group has ceased recording
+these transactions in accordance with the entitlement method. The Group recognises revenues when sales are made to
+customers.
+These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSS") issued
+by the International Accounting Standards Board (the "IASB"), Hong Kong Financial Reporting Standards ("HKFRSS”) issued by
+the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), the Rules Governing the Listing of Securities on The
+Stock Exchange of Hong Kong Limited (the “Listing Rules") and the Companies Ordinance (Cap. 622 of the Laws of Hong Kong)
+(the "Companies Ordinance"). A summary of the significant accounting policies adopted by the Group is set out below.
+IFRS 15/HKFRS 15 Revenue from Contracts with Customers (continued)
+Summary of effects arising from initial application of IFRS 15/HKFRS 15
+Retained earnings:
+20,787
+(94,861)
+CURRENT LIABILITIES
+NON-CURRENT ASSETS
+Deferred tax assets
+Trade receivables
+CURRENT ASSETS
+at 1 January 2018
+Remeasurements
+The following table summarises the impact of transition to IFRS 15/HKFRS 15 on retained earnings as at 1 January 2018.
+Reclassification
+Carrying amounts
+Carrying amounts
+previously reported
+The following adjustments were made to the amounts recognised in the consolidated statement of financial position at 1
+January 2018. Line items that were not affected by the changes have not been included.
+(1,218)
+(1,218)
+Impact of IFRS
+15/HKFRS 15
+application at
+1 January 2018
+Impact at 1 January 2018
+The impact of overlifts or underlifts, net of tax
+at 31 December 2017
+STATEMENT OF COMPLIANCE
+under IFRS
+15/HKFRS 15
+The registered office address of the Company is 65/F, Bank of China Tower, 1 Garden Road, Hong Kong.
+(5,888)
+12,252
+2,212
+(8,869)
+(4,976)
+CNOOC LIMITED Annual Report 2018
+74
+CASH AND CASH EQUIVALENTS AT END OF YEAR
+(13,052)
+Effect of foreign exchange rate changes, net
+Net cash flows used in financing activities
+Dividends paid
+Repayment of bank loans
+Proceeds from bank loans
+Repayment of guaranteed notes
+CASH FLOWS FROM FINANCING ACTIVITIES
+In the opinion of the directors of the Company (the “Directors”), the parent and the ultimate holding company of the Company
+is China National Offshore Oil Corporation ("CNOOC"), a company established in the PRC.
+Proceeds from issuance of guaranteed notes
+NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
+Cash and cash equivalents at beginning of year
+(23,523)
+Interest paid
+(5,147)
+2.1
+(16,448)
+CNOOC Limited (the "Company") was incorporated in the Hong Kong Special Administrative Region ("Hong Kong") of the
+People's Republic of China (the "PRC") on 20 August 1999 to hold the interests in certain entities thereby creating a group
+comprising the Company and its subsidiaries (hereinafter collectively referred to as the "Group"). During the year, the Group was
+principally engaged in the exploration, development, production and sale of crude oil and natural gas.
+1.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+CORPORATE INFORMATION
+Notes to Consolidated Financial Statements
+12,572
+14,432
+22
+31 December 2018
+22
+(215)
+208
+(5,154)
+13,735
+(948)
+1,652
+12,572
+(31,271)
+(27,370)
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(a)
+Property, plant and equipment
+Property, plant and equipment comprise oil and gas properties, and vehicles and office equipment and others.
+Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves.
+Common facilities that are built specifically to service production directly attributed to designated oil and gas properties
+are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis.
+Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the
+straight-line method over their estimated useful lives. Costs associated with significant development projects are not
+depreciated until commercial production commences and the reserves related to those costs are excluded from the
+calculation of depreciation.
+Oil and gas properties
+For oil and gas properties, the successful efforts method of accounting is adopted. The Group capitalises the initial
+acquisition costs of oil and gas properties. Impairment of initial acquisition costs is recognised based on exploratory
+experience and management judgement and charged to profit and loss as exploration expenses. Upon discovery of
+commercial reserves, acquisition costs are transferred to prove properties. The costs of drilling and equipping successful
+exploratory wells, all development expenditures on construction, installation or completion of infrastructure facilities
+such as platforms, pipelines, processing plants and the drilling of development wells and the building of enhanced
+recovery facilities, including those renewals and betterments that extend the economic lives of the assets, and the related
+borrowing costs are capitalised. The costs of unsuccessful exploratory wells and all other exploration costs are expensed
+as incurred.
+The Group carries exploratory well costs as an asset when the well has found a sufficient quantity of reserves to justify
+its completion as a producing well and where the Group is making sufficient progress assessing the reserves and the
+economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expenses.
+Exploratory wells that discover potentially economic reserves in areas where major capital expenditure will be required
+before production would begin and when the major capital expenditure depends upon the successful completion of
+further exploratory work remain capitalised and are reviewed periodically for impairment.
+Capitalised acquisition costs of proved properties are depreciated on a unit-of-production method over the total proved
+reserves of the relevant oil and gas properties.
+81
+(vii)
+An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised
+impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated.
+A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the
+estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that
+would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in
+prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.
+(ii)
+one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the
+other entity);
+(b)
+the entity and the Group are joint ventures of the same third party;
+the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to
+the Group;
+(iv)
+CNOOC LIMITED Annual Report 2018
+one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
+(vi)
+the entity is controlled or jointly controlled by a person identified in (a);
+a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel
+of the entity (or of a parent of the entity); and
+(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the
+Company or to the parent of the Company.
+Impairment of non-financial assets other than goodwill
+Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories,
+deferred tax assets, financial assets and goodwill), the asset's recoverable amount is estimated. An asset's recoverable amount
+is the higher of the asset's or cash-generating unit's value in use and its fair value less costs of disposal, and is determined for
+an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or
+groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
+An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value
+in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
+market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or
+loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.
+(v)
+Vehicles, office equipment and others
+Financial assets are initially measured at fair value except for trade receivables arising from contracts with customers which are
+initially measured in accordance with IFRS 15/HKFRS 15 since 1 January 2018. All recognised financial assets are subsequently
+measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
+Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a
+recoverable basis among the parts and each part is depreciated separately.
+(b)
+Financial assets at amortised cost
+Debt instruments and hybrid contracts that meet the following conditions are subsequently measured at amortised cost
+less impairment loss:
+•
+the asset is held within a business model whose objective is to hold assets in order to collect contractual cash
+flows; and
+the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of
+principal and interest on the principal amount outstanding.
+(a)
+All other financial assets are subsequently measured at fair value.
+Financial assets at fair value through other comprehensive income (FVTOCI)
+On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate
+investments in equity instruments as at FVTOCI. The Group has investments in certain equity instruments (publicly traded
+or non-publicly traded), the purpose of which are not held for trading, but held for medium or long-term strategic purpose.
+Therefore, those investments in equity instruments are designated as at FVTOCI.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently,
+they are measured at fair value with gains or losses arising from changes in fair value recognised in other comprehensive
+income and accumulated in other reserves. The cumulative gain or loss will not be reclassified to profit or loss on disposal
+of the investments.
+Dividends from these investments in equity instruments are recognised in profit or loss when the Group's right to receive
+the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.
+the entity and the Group are members of the same group;
+CNOOC LIMITED Annual Report 2018
+The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and
+of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that
+accurately discounts estimated future cash receipts and payments (including all fees and points paid or received that form
+an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected
+life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
+recognition.
+Vehicles, office equipment and others are stated at cost less accumulated depreciation and impairment losses. The
+straight-line method is adopted to depreciate the cost less any estimated residual value of these assets over their
+expected useful lives. The useful lives of vehicles, office equipment and other assets are in line with their beneficial
+periods.
+Financial assets
+All research costs are expensed as incurred.
+Residual values, useful lives and the depreciation method are reviewed and, adjusted if appropriate, at each reporting date.
+Any gains and losses on disposals of property, plant and equipment (calculated as the difference between the net disposal
+proceeds and the carrying amount of the asset) are recognised in profit or loss.
+Intangible assets other than goodwill
+The intangible assets of the Group comprise software and others, gas processing rights under NWS Project, marketing
+transportation and storage contracts, drilling rig contracts and seismic data usage rights. Intangible assets with finite lives are
+carried at cost, less accumulated amortisation and accumulated impairment losses. The cost of intangible assets acquired in a
+business combination is the fair value as at the date of acquisition. Intangible assets with finite lives except for gas processing
+rights, are amortised on the straight-line basis over the useful economic life and assessed for impairment whenever there is
+an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible
+asset with a finite useful life are reviewed at least at each financial year end.
+82 CNOOC LIMITED Annual Report 2018
+3.
+Notes to Consolidated Financial Statements
+Expenditure (other than that relating to oil and gas properties discussed above) incurred on projects to develop new products
+is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset so
+that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate
+future economic benefits, the availability of resources to complete the project and the ability to measure reliably the expenditure
+during the development. Product development expenditure which does not meet these criteria is expensed when incurred.
+31 December 2018
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Intangible assets other than goodwill (continued)
+The intangible assets regarding software have been amortised on the straight-line basis over their respective useful lives. The
+intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts and drilling rig contracts are amortised over the life of the contracts on the
+straight-line basis. The intangible assets related to the seismic data usage rights are amortised over the estimated useful life of
+the seismic data.
+Major maintenance and repairs
+Expenditure on major maintenance refits and repairs comprises the costs of replacement assets or parts of assets and overhaul
+costs. Where an asset or part of an asset that is separately depreciated and is replaced, and it is probable that future economic
+benefits associated with the item will flow to the Group, the replacement expenditure is capitalised. Where part of the asset
+is not separately considered as a component, the replacement value is used to estimate the carrying amount of the replaced
+assets which is immediately written off. All other maintenance costs are expensed as incurred.
+Research and development costs
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(i)
+79
+the party is an entity where any of the following conditions applies:
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or group of cash-
+generating units) that is expected to benefit from the synergies of the combination, which represent the lowest level at which the
+goodwill is monitored for internal management purposes and not larger than an operating segment.
+After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment
+annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For goodwill
+arising on an acquisition in a reporting period, the cash-generating unit (or group of cash-generating units) to which goodwill has
+been allocated is tested for impairment before the end of that reporting period.
+Goodwill is initially measured at cost, being the excess of the aggregate of the purchase consideration, the amount recognised
+for non-controlling interests and any fair value of the Group's previously held equity interests in the acquiree over the identifiable
+net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net
+assets of the business acquired, the difference is recognised in profit or loss as a gain on bargain purchase.
+Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent
+consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is
+accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured to fair value at
+subsequent reporting dates, with the corresponding gain or loss being recognised in profit or loss.
+If the business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to
+fair value at the acquisition date through profit or loss or other comprehensive income, as appropriate.
+When the Group acquires a business, it assesses the financial assets acquired and financial liabilities assumed for appropriate
+classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as
+at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
+Business combinations, other than business combinations under common control, are accounted for using the acquisition
+method. The consideration transferred is measured at acquisition date fair value which is the sum of the acquisition date
+fair values of assets transferred by the Group, liabilities assumed by the Group from the former owners of the acquiree and
+the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group
+elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the
+acquiree's identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition
+related costs incurred are included in profit or loss.
+Business combinations and goodwill
+All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group
+transactions are eliminated in full.
+The results of subsidiaries are included in the Company's statement of profit or loss and other comprehensive income to the
+extent of dividends received and receivable. The Company's interests in subsidiaries are stated at cost less any impairment
+losses.
+The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and
+continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared
+for the same reporting period as the parent company, using consistent accounting policies.
+The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended
+31 December 2018.
+83
+an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;
+significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the credit
+default swap prices for the debtor;
+existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a significant
+decrease in the debtor's ability to meet its debt obligations;
+an actual or expected significant deterioration in the operating results of the debtor;
+an actual or expected significant adverse change in the regulatory, economic, or technological environment of the debtor
+that results in a significant decrease in the debtor's ability to meet its debt obligations.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+84
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+Basis of preparation
+These consolidated financial statements have been prepared under the historical cost convention, except for as detailed in the
+accounting policies notes hereafter. These consolidated financial statements are presented in Renminbi ("RMB") and all values
+are rounded to the nearest million except when otherwise indicated.
+Basis of consolidation
+Notes to Consolidated Financial Statements
+(b)
+Business combinations and goodwill (continued)
+Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation
+within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the
+operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based
+on the relative value of the operation disposed of and the portion of the cash-generating unit (or group of cash-generating units)
+retained.
+is a member of the key management personnel of the Group or of a parent of the Group;
+has significant influence over the Group; or
+has control or joint control of the Group;
+(i)
+(a)
+the party is a person or a close member of that person's family and that person
+A party is considered to be related to the Group if:
+Related parties
+The Group's investments in joint ventures are stated in the consolidated statement of financial position at the Group's share
+of net assets under the equity method of accounting, less any impairment losses. Necessary adjustments are made to bring
+into line any dissimilar accounting policies that may exist. Under the equity method, an investment in a joint venture is initially
+recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of
+the profit or loss and other comprehensive income of the joint venture. Where the profit sharing ratios are different to the Group's
+equity interest, the share of post-acquisition results of the joint ventures is determined based on the agreed profit sharing ratio.
+Unrealised gains and losses resulting from transactions between the Group and its joint ventures are eliminated to the extent of
+the Group's investments in the joint ventures, except where unrealised losses provide evidence of an impairment of the asset
+transferred. Goodwill arising from the acquisition of joint ventures is included as part of the Group's investments in joint ventures
+and is not individually tested for impairment.
+Joint venture (continued)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+80
+Subsidiaries
+Subsidiaries are all those entities over which the Group has power over the investee such that the Group is able to direct the
+relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its
+power over the investee to affect the amount of the investor's returns.
+Associates
+Based on the Group's ownership percentage (considering its direct ownership as well as potentially exercisable or convertible
+shares) and other contractual terms, the Group has significant influence over its associates, rather than the power to control.
+The Group's investments in associates are stated in the consolidated statement of financial position at the Group's share of net
+assets under the equity method of accounting, less any impairment losses. Necessary adjustments are made to bring into line
+any dissimilar accounting policies that may exist. Under the equity method, an investment in an associate is initially recognised
+in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit
+or loss and other comprehensive income of the associate. Unrealised gains and losses resulting from transactions between the
+Group and its associates are eliminated to the extent of the Group's investments in the associates, except where unrealised
+losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associates is included
+as part of the Group's investments in associates and is not individually tested for impairment.
+Joint arrangements
+Certain of the Group's activities are conducted through joint arrangements. Joint arrangements are classified as either a joint
+operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the
+arrangement.
+Impairment is determined by assessing the recoverable amount of the exploration and production ("E&P") segment, using value
+in use, to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-generating
+units) is less than the carrying amount, an impairment loss on goodwill is recognised. An impairment loss recognised for goodwill
+is not reversed in a subsequent period.
+Joint control
+Joint operations
+Some arrangements have been assessed by the Group as joint operations as both parties to the contract are responsible for the
+assets and obligations in proportion to their respective interest, whether or not the arrangement is structured through a separate
+vehicle. This evaluation applies to both the Group's interests in production sharing arrangements and certain joint operation.
+The Group entered into numerous production sharing arrangements or similar agreements in China and overseas countries. The
+Group's participating interest may vary in each arrangement. The Group, as one of the title owners under certain exploration
+and/or production licenses or permits, is required to bear exploration (with some exceptions in China), development and
+operating costs together with other co-owners based on each owner's participating interest. Once production occurs, a certain
+percentage of the annual production or revenue is first distributed to the local government, which, in most cases, with the nature
+of royalty and other taxes or expenses, and the rest of the annual production or revenue is allocated among the co-owners.
+The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance
+with the IFRSS/HKFRSS applicable to the particular assets, liabilities, revenues and expenses.
+Joint venture
+A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
+of the arrangement.
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
+relevant activities require unanimous consent of the parties sharing control.
+Notes to Consolidated Financial Statements
+Provisions
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+•
+•
+Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any
+unused tax losses to the extent that it is probable that taxable profit and taxable temporary differences will be available against
+which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised,
+except:
+in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the
+temporary differences will not reverse in the foreseeable future.
+when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
+combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
+•
+•
+Deferred tax liabilities are recognised for all taxable temporary differences, except:
+Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
+or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
+substantially enacted, by the reporting date, in the countries where the Group operates and generates taxable income.
+Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the reporting date between the
+tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
+Income tax comprises current and deferred tax. Income tax is recognised in the consolidated statement of profit or loss and
+other comprehensive income, either as an expense as it relates to operating activities or as a component of the applicable
+categories of other comprehensive income or expense.
+Income tax
+Dismantlement liability is recognised when the Group has a present legal or constructive obligation as a result of the past
+events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of
+the amount of the obligation can be made. A corresponding amount equivalent to the provision is also recognised as part
+of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of dismantlement,
+discounted to its present value using a current pre-tax rate that reflects, where appropriate, the risks specific to the
+liability. Changes in the estimated timing of dismantlement or dismantlement cost estimates are dealt with prospectively
+by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The
+unwinding of the discount on the dismantlement provision is included as a finance cost.
+Dismantlement liability
+A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is
+probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be
+made of the amount of the obligation. When the effect of discounting is material, the amount recognised for a provision
+is the present value at the reporting date of the future expenditures expected to be required to settle the obligation. The
+increase in the discounted present value amount arising from the passage of time is included in profit or loss.
+General
+(b)
+(a)
+Derecognition of financial liabilities
+Financial liabilities are derecognised when the obligations under the liabilities are discharged, cancelled, or have expired.
+When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
+existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability
+and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.
+Offsetting of financial instruments
+Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position, if and
+only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
+basis, or to realise the assets and settle the liabilities simultaneously.
+Inventories and supplies
+when the deferred tax assets relating to the deductible temporary differences arise from the initial recognition of an
+asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
+accounting profit nor taxable profit or loss; and
+Inventories primarily consist of oil and supplies, including items for repairs and maintenance of oil and gas properties. Inventories
+are stated at the lower of cost and net realisable value. Costs of inventories and supplies represent purchase or production cost
+of goods and are determined on a weighted average basis.
+Cash and cash equivalents comprise cash at banks and on hand and short term deposits with an original maturity of three
+months or less.
+CNOOC LIMITED Annual Report 2018
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Cash and cash equivalents
+Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process.
+in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
+will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be
+utilised.
+CNOOC LIMITED Annual Report 2018
+•
+CNOOC LIMITED Annual Report 2018
+88
+The Group has entered into gas sale contracts with customers, which contain take-or-pay clauses. Under these
+contracts, the Group makes a long term supply commitment in return for a commitment from the buyer to pay for
+minimum quantities, whether or not it takes delivery. These commitments contain protective (force majeure) and
+adjustment provisions. If a buyer has a right to get a "make up" delivery at a later date, revenue recognition is deferred. If
+no such option exists according to the contract terms, revenue is recognised when the take-or-pay penalty is triggered.
+Oil and gas lifted and sold by the Group above or below the Group's participating interests in the production sharing
+contracts results in overlifts and underlifts. The Group records these transactions in accordance with the entitlement
+method under which overlifts are recorded as liabilities and underlifts are recorded as assets at year-end oil prices.
+Settlement will be in kind or in cash when the liftings are equalised or in cash when production ceases.
+Oil and gas sales represent the invoiced value of sales of oil and gas attributable to the interests of the Group, net
+of royalties, obligations to governments and other mineral interest owners. Revenue from the sale of oil and gas is
+recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the
+customer. Revenue from the production of oil and gas in which the Group has a joint interest with other producers is
+recognised based on the Group's working interest and the terms of the relevant production sharing contracts. Differences
+between production sold and the Group's share of production are not significant.
+(a) Oil and gas sales
+Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be
+measured reliably, on the following bases:
+Revenue recognition prior to 1 January 2018
+A contract liability represents the Group's obligation to transfer goods or services to a customer for which the Group has
+received consideration (or an amount of consideration is due) from the customer.
+Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.
+the Group's performance does not create an asset with an alternative use to the Group and the Group has an enforceable
+right to payment for performance completed to date.
+(3)
+the Group's performance creates and enhances an asset that the customer controls as the Group performs; or
+(2)
+the customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group
+performs;
+(1)
+87
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
+probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
+deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient
+taxable profit and taxable temporary differences will be available to allow all or part of the deferred tax asset to be utilised.
+Income tax (continued)
+Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
+current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
+Revenue
+Revenue from contracts with customers on and after 1 January 2018
+Under IFRS 15/HKFRS 15, the Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when "control"
+of the goods or services underlying the particular obligation is transferred to the customer.
+A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct
+goods or services that are substantially the same.
+Control is transferred over time and revenue is recognised over time by reference to the progress towards complete satisfaction
+of the relevant performance obligation if any one of the following criteria is met:
+Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
+realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
+reporting date.
+Financial liabilities including trade and accrued payables, other payables and accrued liabilities, and interest-bearing loans
+and borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at
+amortised cost, using the effective interest method.
+Financial liabilities at amortised cost (including interest-bearing loans and borrowings)
+When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it
+evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor
+retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise
+the transferred asset to the extent of the Group's continuing involvement. In that case, the Group also recognises an associated
+liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the
+Group has retained.
+For internal credit risk management, the Group considers an event of default occurs when information developed internally or
+obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking
+into account any collaterals held by the Group).
+Definition of default
+The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in
+credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit risk
+before the amount becomes past due.
+Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly
+since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and
+supportable information that demonstrates otherwise.
+Impairment of financial assets on and after 1 January 2018 (continued)
+Significant increase in credit risk (continued)
+Impairment of financial assets (continued)
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2018
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2018
+In particular, the following information is taken into account when assessing whether credit risk has increased significantly:
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a default
+occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at
+the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that
+is reasonable and supportable, including historical experience and forward-looking information that is available without undue
+cost or effort.
+Significant increase in credit risk
+For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant
+increase in credit risk since initial recognition, in which case the Group recognises lifetime ECL. The assessment of whether
+lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial
+recognition.
+The Group always recognises lifetime ECL for trade receivables without significant financing component.
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Financial assets (continued)
+(c)
+Financial assets at fair value through profit or loss (FVTPL)
+Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as at FVTOCI
+are measured at FVTPL.
+Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising
+on remeasurement recognised in profit or loss.
+Credit-impaired financial assets
+Fair value
+For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.
+Such techniques may include using recent arm's length market transactions; reference to the current fair value of another
+instrument that is substantially the same; a discounted cash flow analysis or other valuation models.
+An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 34.
+Impairment of financial assets
+Impairment of financial assets on and after 1 January 2018
+The Group recognises a loss allowance for ECL on financial assets which are subject to impairment under IFRS 9/HKFRS 9
+(including cash and cash equivalents, time deposits with maturity over three months, trade receivables and other receivables).
+The amount of ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
+Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant instrument.
+In contrast, 12-month ECL ("12m ECL") represents the portion of lifetime ECL that is expected to result from default events
+that are possible within 12 months after the reporting date. Assessment is done based on the Group's historical credit loss
+experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the
+current conditions at the reporting date as well as the forecast of future conditions.
+The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to
+quoted market prices or dealer price quotations, without any deduction for transaction costs.
+A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future
+cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data
+about the following events:
+•
+significant financial difficulty of the issuer or the borrower;
+Notes to Consolidated Financial Statements
+31 December 2018
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Impairment of financial assets (continued)
+86
+Impairment of financial assets prior to 1 January 2018 (continued)
+If, in a subsequent year, the amount of the estimated impairment loss decreases and the decrease can be related objectively to
+an event occurring after the impairment was recognised, the previously recognised impairment loss is reduced either directly or
+by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent
+that the carrying value of the asset does not exceed amortised cost at the reversal date.
+Derecognition of financial assets
+A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised
+when:
+•
+The contractual rights to receive cash flows from the asset have expired; or
+the Group has transferred its rights to receive cash flows from the asset, or the Group retains the contractual rights to
+receive the cash flows from the asset, but has assumed an obligation to pay the received cash flows in full without material
+delay to a third party under a "pass-through" arrangement; and either (a) has transferred substantially all the risks and
+rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has
+no control of the asset.
+If there is objective evidence that an impairment loss on financial assets measured at amortised cost has been incurred, the
+amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated
+future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective
+interest rate (the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly
+or through the use of an allowance account. The amount of the impairment loss is recognised in profit or loss.
+31 December 2018
+85
+In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the
+probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological, market,
+economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all of the
+amounts due under the original terms of an invoice.
+•
+a breach of contract, such as a default or past due event;
+•
+•
+the lenders of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having
+granted to the borrower a concession that the lenders would not otherwise consider;
+it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
+CNOOC LIMITED Annual Report 2018
+the disappearance of an active market for that financial asset because of financial difficulties.
+The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty
+and there is no realistic prospect of recovery. Financial assets written off may still be subject to enforcement activities under the
+Group's recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition event.
+Any subsequent recoveries are recognised in profit or loss.
+Measurement and recognition of ECL
+The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a
+default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical
+data adjusted by forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is
+determined with the respective risks of default occurring as the weights.
+Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the contract
+and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial recognition.
+Except for investments in debt instruments that are measured at FVTOCI, the Group recognises an impairment gain or loss in
+profit or loss for all financial instruments by adjusting their carrying amount, with the exception of trade receivables and other
+receivables where the corresponding adjustment is recognised through a loss allowance account. For investments in debt
+instruments that are measured at FVTOCI, the loss allowance is recognised in OCI and accumulated in the FVTOCI reserve
+without reducing the carrying amount of these debt instruments.
+Impairment of financial assets prior to 1 January 2018
+The Group assesses at each reporting date whether there is any objective evidence that a financial asset, other than those at
+FVTPL and FVTOCI, or a group of financial assets may be impaired.
+Write-off policy
+•
+•
+908.3
+366.7
+372.2
+376.7
+Total*
+4,315.5
+3,877.6
+4,840.8
+4,962.1
+5,184.6
+4
+294.2
+CNOOC LIMITED Annual Report 2019
+seas
+Operating Summary
+Year ended 31 December
+2015
+2016
+2017
+2018
+2019
+Others
+Reserve life (years)
+www.
+Reserve life (years) (including
+299.5
+620.3
+1.5
+79.7
+79.5
+145.0
+Total
+4,016.0
+3,583.4
+4,474.1
+4,590.0
+4,807.9
+Subtotal (million BOE)
+Net proved reserves in equity
+method investees
+200.1
+195.3
+244.8
+258.1
+269.8
+Natural gas (bcf)
+576.9
+574.0
+706.8
+661.5
+Crude and liquids (million barrels)
+equity method investees)
+8.4
+7.8
+67.22
+63.34
+5.84
+6.41
+6.27
+***
+Natural gas (US$/mcf)
+Approximately 62%, 60%, 65%, 69% and 66%, respectively, of our net proved reserve estimates in 2015, 2016, 2017, 2018 and 2019 were
+based on the Company's internal evaluation and the remaining were made by independent third-party consultants. Our reserve data was
+prepared in accordance with the SEC's final rules on "Modernization of Oil and Gas Reporting", which became effective as of 1 January 2010.
+Includes 815.3 million barrels of synthetic oil in 2015; 300.5 million barrels of synthetic oil in 2016; 785.9 million barrels of synthetic oil and
+118.4 million barrels of bitumen in 2017; 796.3 million barrels of synthetic oil and 88.1 million barrels of bitumen in 2018; 779.6 million barrels of
+synthetic oil and 153.6 million barrels of bitumen in 2019.
+Includes 7.7 billion cubic feet of coalbed methane.
+wwwwww
+52.65
+CNOOC LIMITED Annual Report 2019
+**********
+い
+vase
+Chairman's
+Statement
+Wang Dongjin
+Chairman
+Dear shareholders,
+The world is now experiencing unprecedented changes
+that have not been seen for centuries. In 2019, the global
+economic growth was weak with a significant increase
+in instability and risks. The energy industry entered into a
+period of deep corrections. Oil supply and demand are still
+unbalanced, and international oil prices hovered at a low
+level. Brent crude oil price recorded a significant decline
+year-over-year, and the petroleum and petrochemical
+industries continued to face escalating risks and increasing
+challenges.
+Faced with these challenges, we focused on long-term
+growth. In early 2019, we set medium- to long-term
+goals to increase oil and gas reserves and production,
+bringing the Company back on track of production growth.
+During the year, CNOOC Limited adhered to the high-
+quality development philosophy and exerted excellent
+organisational and management capabilities in business
+operation. A number of the Company's operation indicators
+reached a record level since listing, delivering satisfactory
+results to the shareholders.
+Focusing on oil and gas exploration, development and
+production, the growth of reserves and production has
+always been our primary goal. In 2019, CNOOC Limited
+continued to strengthen its exploration and development
+efforts, and the workload reached a record high. A total
+of 23 commercial discoveries were made, and 30 oil
+and gas bearing structures were successfully appraised.
+The appraisal of Bozhong 19-6 condensate gas fields in
+offshore China continued to achieve remarkable results,
+with newly-added proved in-place volume of nearly 200
+million cubic metres of oil equivalent. Additionally, five new
+discoveries were made in Stabroek block of Guyana, in
+which recoverable resources have been accumulated to
+more than 8.0 billion BOE. The annual reserve replacement
+ratio reached 144%, and the reserve life remained stable
+at a level above 10 years, which further consolidated the
+resource foundation for future development. Net production
+for the year reached a record-breaking 506.5 million BOE.
+At the same time, we continued to optimise our investment
+management. Capital expenditure budget implemented
+well within the years, which fully supported our exploration
+and development activities.
+5
+41.40
+5.46
+51.27
+6.39
+Crude oil (US$/barrel)
+9.9
+10.1
+9.9
+8.7
+8.1
+10.3
+10.5
+10.2
+Reserve replacement ratio (%)
+65
+CO
+6
+297
+126
+145
+Reserve replacement ratio (%)
+(including equity method investees)
+67
+8
+305
+126
+144
+Average realised price
+1.6
+Parallel to growing reserves and production, the Company
+also attaches great importance to cost control. With the
+advancement of long-term mechanisms for quality and
+efficiency enhancement, the idea of emphasising on
+economic benefits has been ingrained within the Company.
+In 2019, all-in cost was US$29.78 per BOE, representing
+a six-year consecutive decline and we maintained our cost
+competitiveness; operating cost decreased to US$7.39 per
+BOE, representing the best performance in recent years.
+South America
+112.3
+7,827.1
+Total net proved reserves
+(million BOE)
+China
+2,324.3
+2,420.7
+2,613.3
+2,804.6
+2,964.3
+Bohai
+7,626.8
+971.8
+1,101.4
+1,229.7
+1,347.1
+Western South China Sea
+672.6
+818.8
+844.1
+845.8
+828.7
+Eastern South China Sea
+950.2
+515.6
+7,543.3
+6,992.9
+333.5
+297.2
+279.5
+260.5
+North America (excluding Canada)
+275.2
+349.6
+421.5
+390.9
+405.3
+7,486.1
+Canada
+24.2
+0.2
+-
+Europe
+8.8
+6.9
+4.8
+6.7
+4.4
+Subtotal
+119.3
+505.5
+533.7
+599.2
+Africa
+166.6
+138.0
+136.9
+113.7
+83.6
+North America (excluding Canada)
+284.8
+318.6
+352.3
+59.6
+328.6
+Canada
+835.2
+300.5
+908.3
+884.4
+933.2
+Europe
+103.8
+81.8
+89.2
+317.3
+63.6
+69.0
+77.4
+633.9
+East China Sea
+164.2
+146.2
+134.2
+130.0
+143.2
+Onshore
+11.4***
+Overseas
+1,691.7
+1,162.7
+1,860.8
+1,785.4
+1,843.6
+Asia (excluding China)
+208.9
+245.0
+225.4
+203.3
+196.6
+Oceania
+90.8
+108.3
+In 2019, CNOOC Limited's production growth and effective
+cost control led to better profitability with revenues and
+net profit rising significantly, despite more than 10%
+drop in international oil prices. Oil and gas sales reached
+RMB197.17 billion, and net profit reached RMB61.05
+billion.
+While achieving outstanding results, we continued to
+reward our shareholders. The Board of Directors has
+recommended the payment of a final dividend of HK$0.45
+per share (tax inclusive) for 2019.
+6
+(148,902)
+(153,981)
+Total expenses
+233,199
+227,711
+186,390
+146,490
+171,437
+Total revenues
+2019
+(149,340)
+2018*
+2016
+2015
+Consolidated Statement of Profit or Loss and Other Comprehensive Income (Audited)
+Year ended 31 December
+(All amounts expressed in millions of RMB)
+Financial Summary
+www
+168 Company Information
+167 Glossary
+159 Notice of Annual General Meeting
+Gas Producing Activities (Unaudited)
+2017
+80 Notes to Consolidated Financial Statements
+145 Supplementary Information on Oil and
+(147,544)
+(Finance costs)/interest income, net
+36,357
+(5,275)
+17,130
+Profit/(loss) before tax
+4,632
+3,685
+2,409
+2,774
+2,398
+Investment income
+(149,004)
+1,002
+855
+(76)
+1,903
+associates and a joint venture
+Share of profits/(losses) of
+(4,798)
+(4,364)
+(4,391)
+(5,345)
+(5,245)
+(5,187)
+Consolidated Statement of Financial Position
+Consolidated Statement of Changes in Equity
+Consolidated Statement of Cash Flows
+and Other Comprehensive Income
+Consolidated Statement of Profit or Loss
+Engineering Construction, Development
+Overview
+Exploration
+Business Overview
+Operating Summary
+Chairman's Statement
+Financial Summary
+하하
+13
+120
+8
+8
+and Production
+236
+As of 31 December 2019, the Group owned net proved reserves of
+approximately 5.18 billion BOE, and its average daily net production
+was 1,387,564 BOE (unless otherwise stated, all amounts of reserve
+and production in this annual report include reserve and production
+accounted for by equity method). The Group had total assets of
+approximately RMB757.7 billion.
+The Group's core operation areas are Bohai, the Western South China
+Sea, the Eastern South China Sea and the East China Sea in offshore
+China. The Group has oil and gas assets in Asia, Africa, North America,
+South America, Oceania and Europe.
+gas.
+The Group is the largest producer of offshore crude oil and natural gas
+in China and one of the largest independent oil and gas exploration
+and production companies in the world. The Group mainly engages in
+exploration, development, production and sale of crude oil and natural
+CNOOC Limited (the "Company" or "CNOOC Limited", together with
+its subsidiaries, the "Group" or "we"), incorporated in the Hong Kong
+Special Administration Region ("Hong Kong") in August 1999, was listed
+on the New York Stock Exchange (code: CEO) and The Stock Exchange
+of Hong Kong Limited (code: 00883) on 27 and 28 February 2001,
+respectively. The Company was admitted as a constituent stock of the
+Hang Seng Index in July 2001. The Company's American Depositary
+Receipts ("ADRS") were listed on the Toronto Stock Exchange (code:
+CNU) on 18 September 2013.
+Company Profile
+ANNUAL REPORT
+2019
+NYSE: CEO, SEHK: 00883, TSX: CNU
+中國海洋石油有限公司
+Content
+Overview by Region
+Sales and Marketing
+Research and Scientific Development
+79
+7878
+76
+72 Independent Auditor's Report
+Management's Discussion and Analysis
+67
+Report of the Directors
+57
+Directors and Senior Management
+50
+Corporate Governance Report
+29
+Human Resources
+26
+26
+25
+20
+20
+19
+18
+Corporate Citizen
+Health, Safety and Environmental Protection
+Risk Management and Internal Control System
+Risk Factors
+75,157
+85,649
+Income tax credit/(expense)
+3,116
+For independent operations, the Company has been
+increasing its reserves and production mainly through
+independent exploration and development in China. As of
+the end of 2019, approximately 88% of the Company's
+net proved reserves and approximately 79% of its net
+production in China were derived from independent oil and
+gas fields.
+For PSC operations, China National Offshore Oil
+Corporation ("CNOOC"), the Company's controlling
+shareholder, has the exclusive right to enter into PSCs
+with foreign oil companies to cooperate in the exploration,
+development and production of petroleum resources
+(including crude oil and natural gas) in offshore China which
+are open to foreign cooperation. CNOOC has transferred to
+the Company all its rights and obligations under the PSCs
+(except those relating to its management and regulatory
+functions as a state-owned company), including new PSCs
+that will be signed in the future.
+In overseas, after years of hard work, we own assets in
+more than 20 countries and regions. Our overseas assets
+account for approximately 55% of the Company's assets.
+With its diversified portfolio of high-quality assets, the
+www.
+419,910
+379,975
+382,371
+386,041
+Equity
+(309,505)
+CNOOC LIMITED Annual Report 2019
+(266,471)
+(255,310)
+(278,321)
+Total liabilities
+(218,256)
+(192,314)
+(175,832)
+(188,220)
+(193,941)
+Non-current liabilities
+(91,249)
+(237,244)
+In China, the Company engages in oil and natural gas
+exploration, development and production in Bohai, Western
+South China Sea, Eastern South China Sea and East
+China Sea, either independently or through cooperation
+with foreign partners under production sharing contracts
+("PSCS"). As of the end of 2019, approximately 57.2% of
+the Company's net proved reserves and approximately
+64.5% of its net production were derived from China.
+CNOOC Limited is an upstream company specialising in oil
+and natural gas exploration, development and production.
+It is the dominant oil and natural gas producer in offshore
+China, and in terms of reserves and production, one of the
+largest independent oil and natural gas exploration and
+production companies in the world. As of the end of 2019,
+the Company had net proved reserves of approximately
+5.18 billion BOE (including approximately 0.38 billion BOE
+in its equity method investees). In 2019, the Company
+achieved a net production of 1,387,564 BOE/day (including
+net production of approximately 56,824 BOE/day in its
+equity method investees).
+OVERVIEW
+CNOOC LIMITED Annual Report 2019
+***********
+Chairman's Statement
+Following the trend of low-carbon development in the
+global energy industry, CNOOC Limited has stepped up
+its efforts in the development of clean energy, and actively
+promoted the development and construction of key natural
+gas projects. Among them, Lingshui 17-2 gas fields have
+fully entered the development phase, while Bozhong
+19-6 condensate gas field pilot development project will
+commence production in 2020. The establishment of
+CNOOC Renewable Energy Co. Ltd. marks our entering
+into the renewable and clean offshore wind power business.
+The acquisition of CUCBM will enable us to fully exploit our
+advantages in oil and gas development technology and
+management, and integrate the development of offshore
+and onshore, conventional and unconventional oil and gas
+development to further expand the Company's growth
+potential.
+In 2019, the Company made satisfactory progress in its
+overseas development. We continued to promote resource
+integration and strengthen our management capabilities.
+After years of unremitting efforts, CNOOC Limited has
+preliminarily established a global oil and gas asset portfolio
+management framework and further bolstered the
+management capabilities of our global business.
+Technological innovation is the cornerstone of CNOOC
+Limited's future development. In 2019, we continued
+to pursue innovative development, and achieved new
+breakthroughs in multiple key scientific and technological
+projects. The Company won the "First Prize" of China's
+National Science and Technology Progress Award for its
+"Theory and major discoveries for large-scale integrated
+condensate gas field exploration in the deep layer of Bohai
+Bay Basin" project. This will serve as a strong technical
+foundation for realising the potential of resources in Bohai
+and supporting the Company's medium- to long-term
+sustainable development. CNOOC Limited has also made
+great efforts in promoting digital and smart transformation,
+with progresses in the construction of smart oilfields,
+unmanned offshore platforms and onshore power
+utilisation, etc.
+While focusing on oil and gas exploration and development,
+CNOOC Limited has always put safety and environmental
+protection first. We continued to promote a culture of safety
+and stepped up the implementation of responsibilities on
+safety production for all employees. We also strengthened
+our emergency response capabilities and maintained
+a sound record of safety and environmental protection
+throughout the year.
+In 2019, CNOOC Limited's corporate governance and
+operational capabilities were once again recognised by the
+market. The Company ranked 126th in Forbes' Global 2000
+List, up 32 places from 2018. Meanwhile, we were also
+honoured as, among others, one of the "Best Investment
+Value Award for Listed Companies" in the China Securities
+Golden Bauhinia Award and the "Most Honored Company"
+by Institutional Investor.
+Our past achievements motivate us to move forward. In
+2020, we will continue to enhance our efforts in exploration
+and development, strengthen the exploration in new areas
+and frontiers, consolidate our resources base, supporting
+future sustainable growth.
+We will continue to strengthen cost management, hold tight
+to quality and efficiency enhancement, adopt cost control
+through the entire life cycle of oil and gas exploration,
+development and production, and continue to maintain our
+cost competitive advantages.
+Talents are the core competitiveness of the Company's
+future development. We will vigorously expand a pool of
+high-quality management personnel, specialised technical
+professionals and international talents to lay a solid base for
+the Company's sustainable development.
+In the new year, we will strive for continued improvement
+in safety and environmental protection management,
+and implement a series of safety production policies and
+measures to ensure safety production.
+In 2019, Mr. Yang Hua resigned as the Chairman of the
+Board and Non-executive Director of the Company, Mr.
+Yuan Guangyu retired from the roles of Chief Executive
+Officer and Executive Director, and Mr. Xu Keqiang was
+appointed as the Chief Executive Officer. On behalf of
+the Board, I would like to thank Mr. Yang Hua and Mr.
+Yuan Guangyu for their contributions to the Company's
+development, and extend my congratulations to Mr. Xu
+Keqiang.
+When you are reading this report, the world is combating
+the COVID-19 pandemic. China and global economies are
+facing further headwinds during the pandemic. International
+oil price also plunged and is expected to hover at a low
+level in the near future. Despite market uncertainty, I would
+like to assure all our shareholders that CNOOC Limited
+is making every effort to carry out its business thanks to
+the Chinese government's strong and effective responses
+in dealing with the pandemic. We will closely monitor
+changes in the external environment and the movement
+of international oil prices, implement more stringent
+cost controls and more prudent investment decisions,
+strengthen cash flow management, overcome the impact
+of the pandemic and maintain the Company's long-term
+sustainable development.
+As we stand at a new starting point and embark on our
+new journey, we will forge ahead despite all obstacles,
+make every effort to promote the development to be
+a world-class energy company and bring high-quality
+development to a new level.
+Wang Dongjin
+Chairman
+Hong Kong, 25 March
+2020
+www
+CNOOC LIMITED Annual Report 2019
+BUSINESS
+OVERVIEW
+Xu Keqiang
+CEO
+8
+(74,157)
+389.2
+(61,412)
+(84,380)
+191,151
+138,838
+122,045
+140,211
+Current assets
+2019
+2018*
+2017
+2016
+2015
+205,945
+As of 31 December
+61,045
+52,675
+24,677
+637
+20,246
+Profit for the year
+(24,604)
+(22,482)
+(11,680)
+5,912
+Consolidated Statement of Financial Position (Audited)
+Property, plant and equipment
+454,141
+432,465
+Current liabilities
+757,731
+686,381
+617,219
+637,681
+664,362
+Total assets
+16,306
+16,073
+15,070
+16,644
+16,423
+Intangible assets
+45,490
+24,701
+29,146
+29,995
+28,413
+a joint venture
+Investments in associates and
+440,554
+413,383
+395,868
+(67,090)
+ODE CNOOC LIMITED
+Oceania
+841.6
+75.6
+Overseas
+482.1
+472.5
+432.8
+453.9
+388.7
+Asia (excluding China)
+140.0
+150.2
+9.9
+141.4
+145.7
+Oceania
+93.5
+111.4
+96.5
+111.1
+93.0
+North America (excluding Canada)
+134.6
+127.3
+164.2
+130.3
+4.1
+44.9
+136.9
+134.3
+149.3
+165.0
+158.3
+Western South China Sea
+314.3
+273.9
+273.5
+265.2
+Onshore
+318.2
+234.9
+185.9
+238.2
+345.4
+390.9
+East China Sea
+45.8
+54.6
+56.3
+49.4
+Eastern South China Sea
+126.4
+137.1
+Canada
+458,473
+460,822
+462,564
+Western South China Sea
+143,676
+144,835
+142,870
+154,248
+164,352
+Eastern South China Sea
+477,380
+229,679
+212,895
+216,877
+242,026
+East China Sea
+10,271
+12,273
+13,016
+11,580
+11,389
+Onshore
+213,835
+500,719
+Bohai
+892,928
+68.4
+48.9
+38.7
+34.5
+4.1
+Europe
+45.5
+34.8
+25.8
+17.6
+8.9
+Subtotal
+1,214.0
+1,121.2
+1,154.2
+1,288.8
+1,376.6
+Total net production (BOE/day)
+China
+884,346
+848,322
+827,941
+845,171
+Bohai
+688
+987.9
+721.4
+98,351
+96,543
+109,381
+109,906
+Eastern South China Sea
+190,525
+182,848
+173,192
+159,312
+176,884
+89,958
+East China Sea
+3,177
+3,629
+3,347
+3,902
+Overseas
+338,440
+321,131
+335,887
+317,224
+368,886
+2,632
+Asia (excluding China)
+Western South China Sea
+433,325
+CNOOC LIMITED Annual Report 2019
+seas
+Operating Summary
+Year ended 31 December
+2015
+2016
+2017
+2018
+2019
+Production
+436,173
+Net production of crude and
+China
+761,019
+739,378
+706,955
+705,366
+726,866
+Bohai
+477,904
+455,002
+433,591
+liquids (barrels/day)
+45,640
+48,577
+57,395
+103,258
+98,672
+95,750
+73,678
+62,544
+South America
+1,110
+926
+929
+3,066
+Europe
+3,937
+1,099,459
+1,060,509
+1,042,842
+1,022,589
+1,095,751
+Net production of natural
+gas (mmcf/day)
+China
+731.9
+648.7
+Subtotal
+69,947
+64,026
+57,711
+59,240
+45,020
+Oceania
+3,350
+4,278
+3,691
+4,251
+3,764
+Africa
+83,677
+80,297
+73,625
+59,844
+120,925
+North America (excluding Canada)
+54,692
+48,078
+46,785
+53,120
+62,749
+Canada
+46,712
+40,304
+834.8
+1,644
+12,596
+Overseas
+83.6
+North America (excluding Canada)
+239.5
+260.3
+282.1
+263.4
+249.8
+Canada
+815.3
+300.5
+113.7
+904.3
+933.2
+Europe
+102.3
+80.6
+88.4
+111.2
+107.5
+South America
+1.6
+1.5
+884.4
+79.7
+136.9
+166.6
+8.5
+7.5
+14.1
+Overseas**
+1,399.6
+870.2
+1,571.9
+1,515.1
+1,583.8
+Asia (excluding China)
+138.0
+59.8
+69.9
+54.1
+56.1
+Oceania
+14.5
+12.0
+10.7
+8.8
+8.6
+Africa
+77.3
+79.5
+145.0
+Subtotal
+854.9
+970.5
+903.7
+800.1
+East China Sea
+889.0
+813.3
+754.4
+735.1
+774.9
+951.6
+Onshore
+Overseas
+1,638.3
+1,642.4
+1,632.6
+1,519.0
+1,468.8
+Asia (excluding China)
+845.8
+952.4
+885.0
+68.3***
+Eastern South China Sea
+3,602.8
+3,715.6
+2,830.2
+2,315.9
+3,199.3
+3,298.3
+3,483.5
+Net proved natural
+gas reserves (bcf)
+China
+5,354.6
+5,843.7
+5,910.7
+6,107.8
+6,358.4
+Bohai
+381.4
+278.7
+305.7
+753.4
+1,112.3
+Western South China Sea
+3,132.6
+3,896.8
+3,880.1
+10.6
+16.1
+East China Sea
+500.5
+74,184
+85,595
+Canada
+58,115
+48,448
+64,167
+69,783
+70,627
+Europe
+110,842
+68,507
+104,473
+76,615
+64,027
+South America
+1,110
+926
+929
+3,066
+3,937
+Total
+1,307,664
+100,046
+69,290
+76,915
+North America (excluding Canada)
+423,319
+405,320
+412,832
+398,187
+437,812
+Asia (excluding China)
+70,987
+75,780
+82,958
+88,662
+70,715
+Oceania
+21,673
+26,107
+22,598
+26,034
+21,987
+Africa
+83,677
+80,297
+73,625
+59,844
+120,925
+1,253,643
+798.7
+1,240,773
+1,330,740
+China
+1,430.6
+1,445.7
+1,627.3
+1,783.2
+Bohai
+448,226
+903.8
+1,050.4
+1,104.1
+reserves (million barrels)
+1,899.7
+1,161.7
+149.3
+168.3
+196.5
+223.0
+223.4
+Eastern South China Sea
+357.0
+363.1
+371.9
+448.6
+Western South China Sea
+2019
+2018
+2017
+Net production in equity
+method investees
+Crude and liquids (barrels/day)
+24,588
+Natural gas (mmcf/day)
+149.6
+Subtotal (BOE/day)
+50,357
+Total (BOE/day)
+1,358,022
+22,592
+155.0
+49,280
+1,302,922
+22,144
+146.4
+47,355
+1,288,128
+28,159
+173.7
+58,080
+1,301,438
+29,039
+161.3
+56,824
+1,387,564
+CNOOC LIMITED Annual Report 2019
+3
+Operating Summary
+Year ended 31 December
+Reserves at year end*
+Net proved crude and liquids
+2015
+2016
+1,243,357
+2
+Certain comparative financial data as at and for the year ended 31 December 2018 have been restated as a result of the acquisition of China United
+Coalbed Methane Corporation Limited ("CUCBM"), please refer to note 4 to the consolidated financial statements of this annual report for details.
+•
+Definition of default
+The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in
+credit risk and revises them as appropriate to ensure that the criteria are capable of identifying significant increase in credit
+risk before the amount becomes past due.
+Irrespective of the outcome of the above assessment, the Group presumes that the credit risk has increased significantly
+since initial recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and
+supportable information that demonstrates otherwise.
+an actual or expected significant adverse change in the regulatory, economic, or technological environment of the
+debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.
+an actual or expected significant deterioration in the operating results of the debtor;
+existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a
+significant decrease in the debtor's ability to meet its debt obligations;
+significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread, the
+credit default swap prices for the debtor;
+an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit rating;
+•
+•
+•
+•
+In particular, the following information is taken into account when assessing whether credit risk has increased significantly:
+Impairment of financial assets (continued)
+Significant increase in credit risk (continued)
+For internal credit risk management, the Group considers an event of default occurs when information developed internally
+or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without
+taking into account any collaterals held by the Group).
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Notes to Consolidated Financial Statements
+くく
+***
+seas
+ecce
+se
+CNOOC LIMITED Annual Report 2019
+90
+In assessing whether the credit risk has increased significantly since initial recognition, the Group compares the risk of a
+default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial
+instrument as at the date of initial recognition. In making this assessment, the Group considers both quantitative and
+qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is
+available without undue cost or effort.
+Significant increase in credit risk
+For all other instruments, the Group measures the loss allowance equal to 12m ECL, unless when there has been a significant
+increase in credit risk since initial recognition, in which case the Group recognises lifetime ECL. The assessment of whether
+lifetime ECL should be recognised is based on significant increases in the likelihood or risk of a default occurring since initial
+recognition.
+The Group always recognises lifetime ECL for trade receivables without significant financing component.
+Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant
+instrument. In contrast, 12-month ECL ("12m ECL") represents the portion of lifetime ECL that is expected to result from
+default events that are possible within 12 months after the reporting date. Assessment is done based on the Group's historical
+credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment
+of both the current conditions at the reporting date as well as the forecast of future conditions.
+The Group performs impairment assessment under expected credit loss ("ECL") model on financial assets (including cash and
+cash equivalents, time deposits with maturity over three months, trade receivables, other receivables and debt investment),
+which are subject to impairment under IFRS 9/HKFRS 9. The amount of ECL is updated at each reporting date to reflect
+changes in credit risk since initial recognition.
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Credit-impaired financial assets
+A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated future
+cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data
+about the following events:
+•
+When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through
+arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has
+neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the
+Group continues to recognise the transferred asset to the extent of the Group's continuing involvement. In that case, the
+Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that
+reflects the rights and obligations that the Group has retained.
+the Group has transferred its rights to receive cash flows from the asset, or the Group retains the contractual rights
+to receive the cash flows from the asset, but has assumed an obligation to pay the received cash flows in full without
+material delay to a third party under a "pass-through" arrangement; and either (a) has transferred substantially all the
+risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the
+asset, but has no control of the asset.
+The contractual rights to receive cash flows from the asset have expired; or
+(ii)
+(i)
+A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised
+when:
+Derecognition of financial assets
+The Group recognises an impairment gain or loss in profit or loss for all financial instruments by adjusting their carrying
+amount, with the exception of trade receivables and other receivables where the corresponding adjustment is recognised
+through a loss allowance account.
+Generally, the ECL is the difference between all contractual cash flows that are due to the Group in accordance with the
+contract and all the cash flows that the Group expects to receive, discounted at the effective interest rate determined at initial
+recognition.
+The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a
+default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical
+data adjusted by forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount that is
+determined with the respective risks of default occurring as the weights.
+Measurement and recognition of ECL
+The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty
+and there is no realistic prospect of recovery. Financial assets written off may still be subject to enforcement activities under
+the Group's recovery procedures, taking into account legal advice where appropriate. A write-off constitutes a derecognition
+event. Any subsequent recoveries are recognised in profit or loss.
+Impairment of financial assets (continued)
+Write-off policy
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+•
+significant financial difficulty of the issuer or the borrower;
+•
+a breach of contract, such as a default or past due event;
+the lenders of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having
+granted to the borrower a concession that the lenders would not otherwise consider;
+it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
+Impairment of financial assets
+•
+•
+the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
+CNOOC LIMITED Annual Report 2019
+91
+92
+3.
+the disappearance of an active market for that financial asset because of financial difficulties; or
+An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 37.
+For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.
+Such techniques may include using recent arm's length market transactions; reference to the current fair value of another
+instrument that is substantially the same; a discounted cash flow analysis or other valuation models.
+The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to
+quoted market prices or dealer price quotations, without any deduction for transaction costs.
+see
+seas
+ecce
+•
+the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the
+related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at the date
+of reassessment.
+the lease payments change due to changes in market rental rates following a market rent review or expected payment
+under a guaranteed residual value, in which cases the related lease liability is remeasured by discounting the revised
+lease payments using the initial discount rate.
+The Group presents lease liabilities as a separate line item on the consolidated statement of financial position.
+CNOOC LIMITED Annual Report 2019
+97
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Leases on and after 1 January 2019 (continued)
+Lease modifications
+The Group accounts for a lease modification as a separate lease if:
+•
+se
+CNOOC LIMITED Annual Report 2019
+98
+The functional currencies of certain entities within the Group are currencies other than RMB. As at the end of the reporting
+period, the assets and liabilities of these entities are translated into the presentation currency of the Group at the exchange
+rates ruling at the reporting date, and their statement of profit or loss and other comprehensive income are translated into
+RMB at the weighted average exchange rates for the year. The resulting exchange differences are included in the cumulative
+translation reserve. On disposal of a foreign operation, the deferred cumulative amount recognised in equity relating to that
+particular foreign operation is recognised in profit or loss.
+These consolidated financial statements are presented in RMB. Each entity in the Group maintains its books and records in
+its own functional currency. Foreign currency transactions recorded by the entities of the Group are initially recorded using
+their respective exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign
+currencies are retranslated at the exchange rates ruling at the end of the reporting period. All differences arising on settlement
+or translation of monetary items are taken to profit or loss. Non-monetary items that are measured in terms of historical cost
+in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items
+measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was
+determined. The gain or loss arising on retranslation of a non-monetary item is treated consistently with the recognition of the
+gain or loss on change in fair value of the item.
+Foreign currencies
+***
+Prepaid land lease payments under operating leases in China are initially stated at cost and subsequently amortised on the
+straight-line basis over the lease terms.
+Leases prior to 1 January 2019
+The Group accounts for the remeasurement of lease liabilities by making corresponding adjustments to the relevant right-
+of-use asset. When the modified contract contains a lease component and one or more additional lease or non-lease
+components, the Group allocates the consideration in the modified contract to each lease component on the basis of the
+relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.
+For a lease modification that is not accounted for as a separate lease, the Group remeasures the lease liability based on the
+lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date
+of the modification.
+the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase in
+scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.
+.
+the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
+Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as
+operating leases. Where the Group is the lessee, rentals payable under operating leases are charged to profit or loss on the
+straight-line basis over the lease terms.
+Financial liabilities at amortised cost (including interest-bearing loans and borrowings)
+くく
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Fair value
+Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising
+on remeasurement recognised in profit or loss.
+Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as at
+FVTOCI are measured at FVTPL.
+Financial assets at fair value through profit or loss (FVTPL)
+(c)
+Financial assets (continued)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+89
+CNOOC LIMITED Annual Report 2019
+Dividends from these investments in equity instruments are recognised in profit or loss when the Group's right to receive
+the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently,
+they are measured at fair value with gains or losses arising from changes in fair value recognised in other comprehensive
+income and accumulated in other reserves. The cumulative gain or loss will not be reclassified to profit or loss on
+disposal of the investments.
+On initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate
+investments in equity instruments as at FVTOCI. The Group has investments in certain equity instruments (publicly
+traded or non-publicly traded), the purpose of which are not held for trading, but held for medium or long-term strategic
+purpose. Therefore, those investments in equity instruments are designated as at FVTOCI.
+Financial assets at fair value through other comprehensive income (FVTOCI)
+The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and
+of allocating interest income and interest expense over the relevant period. The effective interest rate is the rate that
+accurately discounts estimated future cash receipts and payments (including all fees and points paid or received that
+form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the
+expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the net carrying amount
+on initial recognition.
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Research and development costs
+All research costs are expensed as incurred.
+Expenditure (other than that relating to oil and gas properties discussed above) incurred on projects to develop new products
+is capitalised and deferred only when the Group can demonstrate the technical feasibility of completing the intangible asset
+so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will
+generate future economic benefits, the availability of resources to complete the project and the ability to measure reliably the
+expenditure during the development. Product development expenditure which does not meet these criteria is expensed when
+incurred.
+Financial assets
+Financial assets are initially measured at fair value except for trade receivables arising from contracts with customers which
+are initially measured in accordance with IFRS 15/HKFRS 15. All recognised financial assets are subsequently measured in
+their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
+Notes to Consolidated Financial Statements
+(a)
+Financial assets at amortised cost
+Debt instruments that meet the following conditions are subsequently measured at amortised cost less impairment loss:
+.
+the asset is held within a business model whose objective is to hold assets in order to collect contractual cash
+flows; and
+the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of
+principal and interest on the principal amount outstanding.
+All other financial assets are subsequently measured at fair value.
+(b)
+Financial liabilities including trade and accrued payables, other payables, and interest-bearing loans and borrowings are
+initially stated at fair value including directly attributable transaction costs and are subsequently measured at amortised cost,
+using the effective interest method.
+see
+CNOOC LIMITED Annual Report 2019
+the amount of the initial measurement of the lease liability;
+•
+The cost of right-of-use asset includes:
+Right-of-use assets
+The Group applies the short-term lease recognition exemption to leases that have a lease term of 12 months or less from the
+commencement date and do not contain a purchase option. It also applies the recognition exemption for lease of low-value
+assets. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line
+basis or another systematic basis over the lease term.
+Short-term leases and leases of low-value assets
+As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the Group reasonably
+expects that the effects on the consolidated financial statements would not differ materially from individual leases within the
+portfolio.
+Non-lease components are separated from lease component on the basis of their relative stand-alone prices.
+For a contract that contains a lease component and one or more additional lease or non-lease components, the Group
+allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease
+component and the aggregate stand-alone price of the non-lease components.
+For contracts entered into or modified or arising from business combinations, the Group assesses whether a contract is or
+contains a lease based on the definition under IFRS 16/HKFRS 16 at inception, modification date or acquisition date, as
+appropriate. Such contract will not be reassessed unless the terms and conditions of the contract are subsequently changed.
+The Group as a lessee (upon application of IFRS 16/HKFRS 16 in accordance with transitions in note 2)
+Allocation of consideration to components of a contract
+A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
+in exchange for consideration.
+Definition of a lease (upon application of IFRS 16/HKFRS 16 in accordance with transitions in note 2)
+Leases on and after 1 January 2019
+Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing
+costs directly relating to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial
+period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other
+borrowing costs are expensed in the period in which they are incurred.
+Borrowing costs
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+the Group's performance does not create an asset with an alternative use to the Group and the Group has an
+enforceable right to payment for performance completed to date.
+Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.
+A contract liability represents the Group's obligation to transfer goods or services to a customer for which the Group has
+received consideration (or an amount of consideration is due) from the customer.
+Share-based payment transactions
+Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby
+employees render services as consideration for equity instruments ("equity-settled transactions").
+The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they
+are granted. The fair value is determined by using the Black-Scholes option pricing model, further details of which are given in
+note 31.
+•
+The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
+in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled
+transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has
+expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The charge or credit to
+profit or loss for a period represents the movement in the cumulative expense recognised as at the beginning and end of that
+period.
+The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.
+Retirement and termination benefits
+The Group participates in defined contribution plans in accordance with local laws and regulations for full-time employees in
+the PRC and other countries in which it operates. The Group's contributions to these defined contribution plans are charged
+to profit or loss in the year to which they relate.
+CNOOC LIMITED Annual Report 2019 95
+Notes to Consolidated Financial Statements
+31 December 2019
+No expense is recognised for awards that do not ultimately vest for the Group.
+•
+any lease payments made at or before the commencement date, less any lease incentives received;
+any initial direct costs incurred by the Group; and
+After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
+Variable lease payments that reflect changes in market rental rates are initially measured using the market rental rates as
+at the commencement date. Variable lease payments that do not depend on an index or a rate are not included in the
+measurement of lease liabilities and right-of-use assets, and are recognised as expense in the period in which the event or
+condition that triggers the payment occurs.
+payments of penalties for terminating a lease, if the lease term reflects the Group exercising an option to terminate the
+lease.
+•
+the exercise price of a purchase option if the Group is reasonably certain to exercise the option; and
+•
+amounts expected to be payable by the Group under residual value guarantees;
+•
+variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
+commencement date;
+•
+fixed payments (including in-substance fixed payments) less any lease incentives receivable;
+Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation
+process.
+The lease payments include:
+At the commencement date of a lease, the Group recognises and measures the lease liability at the present value of lease
+payments that are unpaid at that date. In calculating the present value of lease payments, the Group uses the incremental
+borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable.
+Lease liabilities
+The Group presents right-of-use assets as a separate line item on the consolidated statement of financial position.
+Right-of-use assets in which the Group is reasonably certain to obtain ownership of the underlying leased assets at the end
+of the lease term are depreciated from commencement date to the end of the useful life. Otherwise, right-of-use assets are
+depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
+an estimate of costs to be incurred by the Group in dismantling and removing the underlying assets, restoring the site
+on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the
+lease, unless those costs are incurred to produce inventories.
+96
+CNOOC LIMITED Annual Report 2019
+se
+ecce
+seas
+•
+see
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Leases on and after 1 January 2019 (continued)
+Right-of-use assets (continued)
+***
+the Group's performance creates or enhances an asset that the customer controls as the Group performs; or
+•
+the customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group
+performs;
+93
+CNOOC LIMITED Annual Report 2019
+Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from
+or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or
+substantially enacted, by the reporting date, in the countries where the Group operates and generates taxable income.
+Income tax comprises current and deferred tax. Income tax is recognised in the consolidated statement of profit or loss and
+other comprehensive income, either as an expense as it relates to operating activities or as a component of the applicable
+categories of other comprehensive income or expense.
+Income tax
+Dismantlement liability is recognised when the Group has a present legal or constructive obligation as a result of the
+past events, and it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate
+of the amount of the obligation can be made. A corresponding amount equivalent to the provision is also recognised
+as part of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of
+dismantlement, discounted to its present value using a current pre-tax rate that reflects, where appropriate, the risks
+specific to the liability. Changes in the estimated timing of dismantlement or dismantlement cost estimates are dealt
+with prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and
+equipment. The unwinding of the discount on the dismantlement provision is included as a finance cost.
+Dismantlement liability
+A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it
+is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate
+can be made of the amount of the obligation. When the effect of discounting is material, the amount recognised for
+a provision is the present value at the reporting date of the future expenditures expected to be required to settle the
+obligation. The increase in the discounted present value amount arising from the passage of time is included in profit or
+loss.
+General
+(b)
+(a)
+Provisions
+Cash and cash equivalents comprise cash at banks and on hand and short term deposits with an original maturity of three
+months or less.
+Cash and cash equivalents
+Inventories primarily consist of oil and supplies, including items for repairs and maintenance of oil and gas properties.
+Inventories are stated at the lower of cost and net realisable value. Costs of inventories and supplies represent purchase or
+production cost of goods and are determined on a weighted average basis.
+Inventories and supplies
+Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position, if and
+only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
+basis, or to realise the assets and settle the liabilities simultaneously.
+•
+se
+ecce
+seas
+see
+eve
+Notes to Consolidated Financial Statements
+***
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Derecognition of financial liabilities
+Financial liabilities are derecognised when the obligations under the liabilities are discharged, cancelled, or have expired.
+When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
+of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original
+liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit
+or loss.
+Offsetting of financial instruments
+Notes to Consolidated Financial Statements
+31 December 2019
+The Group remeasures lease liabilities (and makes a corresponding adjustment to the related right-of-use assets) whenever:
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+•
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Control is transferred over time and revenue is recognised over time by reference to the progress towards complete
+satisfaction of the relevant performance obligation if any one of the following criteria is met:
+A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of distinct
+goods or services that are substantially the same.
+Revenue
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+くく
+***
+see
+seas
+ecce
+se
+.se
+The Group recognises revenue when (or as) a performance obligation is satisfied, i.e. when "control" of the goods or services
+underlying the particular obligation is transferred to the customer.
+94
+CNOOC LIMITED Annual Report 2019
+Deferred tax liabilities are recognised for all taxable temporary differences, except:
+Income tax (continued)
+•
+when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a
+business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
+and
+in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the
+temporary differences will not reverse in the foreseeable future.
+Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any
+unused tax losses to the extent that it is probable that taxable profit and taxable temporary differences will be available against
+which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised,
+except:
+.
+when the deferred tax assets relating to the deductible temporary differences arise from the initial recognition of an
+asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
+accounting profit nor taxable profit or loss; and
+In assessing any uncertainty over income tax treatments, the Group considers whether it is probable that the relevant tax
+authority will accept the uncertain tax treatment used, or proposed to be use by individual group entities in their income
+tax filings. If it is probable, the current and deferred taxes are determined consistently with the tax treatment in the income
+tax filings. If it is not probable that the relevant taxation authority will accept an uncertain tax treatment, the effect of each
+uncertainty is reflected by using either the most likely amount or the expected value.
+•
+Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against
+current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
+Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the reporting date between
+the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
+The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
+probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
+deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that sufficient
+taxable profit and taxable temporary differences will be available to allow all or part of the deferred tax asset to be utilised.
+Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
+realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
+reporting date.
+in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
+will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be
+utilised.
+661
+20,447
+25,043
+Investments in associates
+Other segment information
+(22,482)
+(24,604)
+(5,187)
+1,002
+1,074
+and a joint venture
+Income tax expense
+(7)
+971 (5,185)
+31
+(23,552)
+(21,551)
+31
+to a joint venture
+and profit/(loss) attributable
+Share of profits of associates
+(5,162)
+24,040
+(5,865)
+(3,046)
+45,490
+432,894 425,330 (243,548)
+Others
+(266,471)
+(309,505)
+232,259 210,256
+(138,232)
+(152,870)
+(2,125)
+(4,535)
+(384,359) (336,370)
+Segment liabilities
+686,381
+757,731
+(232,829)
+1,068
+3,154
+6,347
+490,726
+562,038
+Segment assets
+661,680
+401,290 (243,548) (232,829) 712,241
+407,851
+3,154
+6,347
+490,065
+541,591
+24,701
+826
+Interest income
+(2,238)
+(7)
+71
+(301)
+(478)
+11
+(659)
+(2,094)
+Impairment and provision
+(9,086)
+(57,213)
+amortisation
+Depreciation, depletion and
+(13,135)
+(12,342)
+66
+(13,201)
+(12,342)
+Exploration expenses
+(9,141)
+(9,156)
+(24,388)
+(24,735)
+17
+|པ
+Capital expenditure
+11
+(2,181)
+(57,699)
+(2,094)
+=
+(2)
+(4,451) (4,048)
+Finance costs
+798
+1,067
+(1,068)
+(800)
+1,385
+1,104
+3
+4
+478
+759
+(7,429)
+(8,062)
+42
+18
+(296) (1,757) (1,816)
+(199)
+(5,359)
+(6,124)
+expenses
+Selling and administrative
+(666)
+(50,838)
+76
+(9,094)
+487
+payable
+during
+Total paid/
+RMB'000
+contributions
+scheme
+Pension
+RMB'000
+bonuses(1)
+in kind(¹)
+RMB'000
+the year
+Fees(1)
+RMB'000
+and benefits
+Performance
+Salaries,
+allowances
+Non-executive directors:
+Yang Hua
+Subtotal
+Xu Keqiang
+Yuan Guangyu
+Executive directors:
+2018
+related
+(i) Directors' remuneration (continued)
+RMB'000
+143
+Tse Hau Yin, Aloysius
+802
+Lawrence J. Lau
+946
+Chiu Sung Hong
+executive directors:
+Independent non-
+Subtotal
+Wu Guangqi (8)
+546
+Liu Jian (9)
+1,761
+286
+1,013
+462
+841
+143
+467
+231
+920
+Wang Dongjin (8)(10)
+9. KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+| | | |
+543
+Qiu Zhi Zhong (2)
+1,029
+Tse Hau Yin, Aloysius
+835
+Lawrence J. Lau
+985
+Chiu Sung Hong
+| | | |
+_...
+Independent non-
+Subtotal
+Yang Hua (4)
+(6)
+Wang Dongjin
+directors:
+Non-executive
+Subtotal
+2,650
+executive directors:
+| | | |
+985
+835
+Notes to Consolidated Financial Statements
+***
+see
+seas
+ecce
+se
+CNOOC LIMITED Annual Report 2019
+106
+6,336
+314
+1,904
+432
+3,686
+3,686
+3,686
+Subtotal
+Total
+294
+294
+Kevin G. Lynch (3)
+543
+1,029
+946
+Kevin G. Lynch
+802
+||||
+2018
+Number of employees
+2019
+RMB2,000,001 to RMB2,500,000
+Nil to RMB2,000,000
+The bands of the remuneration of other key management personnel (excluding Directors) and the related number of
+members of other key management personnel (excluding Directors) are as follows:
+10
+14
+1
+1
+4
+9
+Amount paid/payable during the year
+Pension scheme contributions
+Short term employee benefits
+2018
+2019
+Other key management personnel's (excluding Directors') remuneration
+(ii)
+Save as disclosed above, there was no arrangement under which a director waived or agreed to waive any
+remuneration during the year. In 2019 and 2018, the executive directors' remuneration shown above were for their
+services in connection with the management of the affairs of the Company. The other directors' remuneration shown
+above were for their services as directors of the Company.
+The Company has adopted the share option schemes for the grant of options to the Company's directors. The fair
+value of share options for the directors is measured according to the Group's accounting policies as set out in note 3.
+No Directors exercised any share option in 2019 or 2018. No new share option was granted to Directors in respect of
+their services to the Group under the applicable share option schemes of the Company in 2019 or 2018. Further details
+of share option scheme and valuation techniques are set out in note 31.
+13
+9
+3
+7
+se
+.se
+108 CNOOC LIMITED Annual Report 2019
+(1) Salaries, allowances, and benefits in kind represent the gross amount (before applicable individual salary tax) paid/payable to individual
+employees.
+40
+47
+1
+2
+18
+18
+21
+27
+2018
+2019
+Amount paid/payable during the year
+Pension scheme contributions
+Performance-related bonuses
+Salaries, allowances, and benefits in kind (1)
+During the year, none (2018: none) of the Directors, details of whose remuneration are disclosed in note 9(i) above, received
+an amount which falls within the category of the five highest paid employees. Details of the remuneration of the five (2018: five)
+highest paid employees, for the year are as follows:
+10. FIVE HIGHEST PAID EMPLOYEES
+9
+(i)
+314
+Directors' remuneration (continued)
+9.
+(1)
+Notes:
+5,257
+286
+1,013
+462
+3,496
+Total
+3,496
+(2)
+3,496
+802
+946
+802
+946
+| | | |
+||||
+| | | |
+││││
+| | | |
+Subtotal
+(3)
+(4)
+Fees, salaries, allowances, benefits in kind and performance related bonuses represent the gross amount (before applicable individual
+salary tax) paid/payable to individual directors.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+107
+CNOOC LIMITED Annual Report 2019
+cave
+On 5 December 2018, Mr. Wang Dongjin, a Non-executive Director, was appointed as the Vice Chairman of the Company.
+On 16 August 2018, Mr. Liu Jian resigned as the Vice Chairman and a Non-executive Director of the Company.
+On 27 April 2018, Mr. Wang Dongjin was appointed as a Non-executive Director and a member of the Remuneration Committee of the
+Company. Mr. Wu Guangqi resigned as a Non-executive Director and a member of the Remuneration Committee of the Company.
+On 19 November 2019, Mr. Xu Keqiang, Executive Director and the then President of the Company, was appointed as the Chief
+Executive Officer of the Company.
+(10)
+(9)
+(8)
+(7)
+On 18 November 2019, Mr. Wang Dongjin was appointed as the Chairman of the Board and the Chairman of the Nomination Committee
+of the Company, and on longer served as Vice Chairman of the Board.
+(6)
+On 2 September 2019, Mr. Yuan Guangyu resigned as an Executive Director and the Chief Executive Officer of the Company.
+(5)
+On 2 September 2019, Mr. Yang Hua resigned as a Non-executive Director, the Chairman of the Board and the Chairman of the
+Nomination Committee of the Company.
+On 7 May 2019, Mr. Kevin G. Lynch resigned as an Independent Non-executive Director and a member of the Nomination Committee of
+the Company.
+On 7 May 2019, Mr. Qiu Zhi Zhong was appointed as an Independent Non-executive Director and a member of the Nomination
+Committee of the Company.
+KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+1,904
+-43
+432
+1,313
+1,337
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+くく
+***
+eve
+see
+seas
+ecce
+7. PROFIT BEFORE TAX
+se
+CNOOC LIMITED Annual Report 2019
+104
+The current year's revenue of approximately RMB19,126 million (2018: RMB13,329 million) was derived from sales by
+the E&P segment and the trading business segment to China Petroleum & Chemical Corporation. Sales to CNOOC, its
+subsidiaries (excluding the Group) and associates (the "CNOOC Group") are included in note 33(iii).
+Information about major customers
+(c)
+9,542
+9,721
+24,701
+45,490
+.se
+The Group's profit before tax is arrived at after (crediting)/charging:
+2019
+2018
+(restated)
+59
+64
+7
+10
+52
+54
+- Other fees
+- Audit fee
+Auditors' remuneration:
+Charging:
+(611)
+(436)
+Insurance compensation on disposal of property, plant and equipment
+(3,685)
+(4,603)
+- Fair value changes on other financial assets
+(798)
+(1,067)
+Investment income:
+Interest income from bank deposits
+Crediting:
+20,754
+79
+Employee wages, salaries, allowances and social security costs
+40,841
+41
+405
+2018
+(restated)
+2019
+Consolidated
+Others
+Canada
+PRC
+The following table presents certain non-current assets information for the Group's geographical information for the
+years ended 31 December 2019 and 2018.
+In presenting the Group's geographical information, revenues from external customers are based on the location of
+the Group's customers, and non-current assets are attributed to the segments based on the location of the Group's
+assets. 66% (2018: 68%) of the Group's revenues are generated from PRC customers, and revenues generated from
+customers in other locations are individually less than 10%.
+The Group mainly engages in the exploration, development, production and sale of crude oil and natural gas in offshore
+China, Canada, the United States of America, the United Kingdom, Nigeria, Argentina, Indonesia, Uganda, Iraq, Brazil,
+Guyana, Russia and Australia etc.
+2019
+(b) Geographical information
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+103
+CNOOC LIMITED Annual Report 2019
+Certain oil and gas produced by the E&P segment are sold via the trading business segment. For the Group's chief operating decision
+maker's assessment of segment performance, these revenues are reclassified back to E&P segment.
+71,325
+85,488
+542
+6. SEGMENT INFORMATION (continued)
+2018
+(restated)
+2019
+2018
+(restated)
+8,827
+9,275
+Other non-current assets
+3,947
+4,649
+and a joint venture
+Investments in associates
+413,383
+440,554
+9,179
+147,151
+150,902
+2,716
+92,386
+92,537
+689
+5,774
+Right-of-use assets
+173,846
+197,115
+equipment
+Property, plant and
+2018
+(restated)
+2019
+636
+70,783
+7,943
+Impairment and provision:
+5,162
+5,865
+2,560
+2,794
+Unwinding of discount on provision for dismantlement (note 30)
+Other finance costs:
+2,602
+3,071
+(2,838)
+During the year ended 31 December 2019, the effective interest rates used to determine the amount of related borrowing
+costs for capitalisation varied from 0.7% to 7.875% (2018: from 0.95% to 7.875%) per annum.
+(3,048)
+5,440
+6,119
+Total borrowing costs
+21
+26
+Other borrowing costs
+348
+139
+5,280
+(restated)
+Less: Amount capitalised in property, plant and equipment (note 14)
+9.
+KEY MANAGEMENT PERSONNEL'S REMUNERATION
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
+activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company.
+128
+186
+870
+1,034
+175
+Yuan Guangyu (5)
+257
+Xu Keqiang (7)
+RMB'000
+RMB'000
+payable
+during
+the year
+scheme
+contributions
+related
+bonuses (1)
+RMB'000
+and benefits
+in kind(¹)
+RMB'000
+Fees (1)
+RMB'000
+Pension
+Performance
+Total paid/
+Salaries,
+allowances
+Executive directors:
+2019
+(i) Directors' remuneration
+114
+5,631
+8,406
+2018
+Interest on lease liabilities
+50,838
+57,699
+(377)
+405
+1,359
+365
+1,113
+50,810
+54,862
+- Net amount capitalised
+- Intangible assets
+Lease rentals:
+- Right-of-use assets
+Depreciation, depletion and amortisation:
+666
+2,094
+470
+22
+196
+2,072
+- Others
+- Property, plant and equipment
+- Property, plant and equipment
+- Office properties
+- Plant and equipment
+444
+Interest on bank loans
+Interest on other loans
+8. FINANCE COSTS
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+105
+CNOOC LIMITED Annual Report 2019
+77
+(92)
+(Gain)/loss on disposal of property, plant and equipment
+2,350
+1,632
+Research and development costs
+4,596
+5,415
+Repairs and maintenance
+2,231
+724
+1,563
+280
+668
+2019
+85,001
+(50,558)
+(4,432)
+Amounts restated
+Impact of business
+combination under
+common control
+previously reported
+Amounts
+combination.
+Total Equity
+Total liabilities
+Total assets
+as at 31 December 2018
+Consolidated statement of financial position
+Profit for the year
+Profit before tax
+Revenue
+31 December 2018
+other comprehensive income for the year ended
+Consolidated statement of profit or loss and
+The consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2018 and the
+consolidated statement of financial position as at 31 December 2018 as previously reported by the Group and the restated
+amounts presented in the consolidated financial statements of the Group are set out below:
+Since the Group and CUCBM are under common control of CNOOC, the Group's acquisition of CUCBM has been accounted
+for as a combination of entities under common control. Accordingly, the assets and liabilities of CUCBM have been accounted
+for at historical amounts and consolidated financial statements of the Group prior to the acquisition are combined with
+the financial statements of CUCBM. The consideration for the acquisition is accounted for as an equity transaction in the
+consolidated statement of changes in equity.
+On 1 August 2019, CNOOC China Limited ("CNOOC China"), a wholly-owned subsidiary of the Company, entered into
+an equity transfer agreement with CNOOC, pursuant to which, CNOOC China shall acquire the 100% equity interest in
+China United Coalbed Methane Corporation Limited ("CUCBM”) held by CNOOC at a total consideration of approximately
+RMB5.335 billion, which was settled in cash by CNOOC China. The acquisition was completed on 11 October 2019 and
+CUCBM becomes an indirect wholly-owned subsidiary of the Company.
+On 7 June 2019, the Company and CEPR Limited ("CEPR"), a wholly-owned subsidiary of the Company, entered into a share
+purchase agreement with Joint Stock Company Novatek ("JSC Novatek") and Ekropromstroy Limited Liability Company
+("Ekropromstroy"), a wholly-owned subsidiary of JSC Novatek, pursuant to which, CEPR shall acquire a 10% equity interest
+in Arctic LNG 2 LLC held by Ekropromstroy. The acquisition was completed on 19 July 2019. The Company has the ability to
+participate in the financial and operating policy decisions through the voting power of its share ownership interest at general
+meetings of shareholders, which is the decision-making institution of Arctic LNG 2 LLC. It is therefore determined that the
+Company has significant influence, and recognised Arctic LNG 2 LLC as an associate and accounted for its participation
+interest using the equity method. The total consideration comprises a cash consideration of USD903 million which has been
+paid, a deferred consideration of USD820 million over 2020 and a series of contingent payments, which are capped at USD
+920 million, based on the date on which the LNG facility train 1 achieves operational start-up and future oil prices.
+ACQUISITION AND OTHER VENTURE
+4.
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+226,963
+Notes to Consolidated Financial Statements
+748
+(20)
+OIL AND GAS SALES AND MARKETING REVENUES
+5.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+102
+101
+CNOOC LIMITED Annual Report 2019
+For the periods presented, all significant transactions and balances between the Group and CUCBM have been eliminated on
+419,910
+2,545
+266,471
+5,057
+686,381
+7,602
+417,365
+261,414
+678,779
+(62)
+52,675
+(13)
+52,688
+75,157
+227,711
+2019
+くく
+eve
+Recoverable amount of oil and gas properties
+The calculation of the unit-of-production rate for oil and gas properties depreciation could be impacted to the extent
+that actual production in the future is different from current forecast production based on proved reserves. This would
+generally result from significant changes in any of the factors or assumptions used in estimating reserves. These factors
+could include changes in proved reserves, the effect on proved reserves of differences between actual oil and gas
+prices and oil and gas price assumptions and unforeseen operational issues.
+Carrying value of oil and gas properties
+Pursuant to the oil and gas reserve estimation requirements under US Securities and Exchange Commission's rules,
+the Group uses the average, first-day-of-the-month oil price during the 12-month period before the ending date of the
+period covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+Oil and gas properties are depreciated on a unit-of-production basis at a rate calculated by reference to proved
+reserves. Commercial reserves are determined using estimates of oil in place, recovery factors and future oil prices, the
+latter having an impact on the proportion of the gross reserves which are attributable to the host government under
+the terms of the production sharing contracts. The level of estimated commercial reserves is also a key determinant in
+assessing whether the carrying value of any of the Group's oil and gas properties has been impaired.
+Reserve base
+(c)
+(b)
+(a)
+In the process of applying the Group's accounting policies, the Directors have made the following judgements, estimates and
+assumptions, which have the most significant effect on the amounts recognised in the consolidated financial statements.
+The preparation of the consolidated financial statements in accordance with IFRSS and HKFRSS requires management to
+make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated
+financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and
+judgements are continuously evaluated and are based on management's experience and other factors, including expectations
+of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these
+estimates.
+Significant accounting judgements, estimates and assumptions
+A contingent asset is not recognised in the financial statements, but is disclosed when an inflow of economic benefits is
+probable.
+A contingent liability is disclosed when the existence of an obligation will only be confirmed by future events or when the
+amount of the obligation cannot be measured reliably.
+Contingencies
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+くく
+***
+see
+seas
+ecce
+The Group makes an assessment whenever events or changes in circumstances indicate that the carrying amount of an
+asset may not be recoverable, or when there is any indication that an impairment loss previously recognised for an asset
+in prior years may no longer exist or may have decreased. In any event, the Group would make an estimate of the asset's
+recoverable amount, which is calculated at the higher of the asset's value in use and its fair value less costs of disposal.
+The Group recognises an impairment loss only if the carrying amount of an asset exceeds its recoverable amount. The
+Group charges an impairment loss to the profit or loss in the period in which it arises. A reversal of an impairment loss is
+credited to the profit or loss in the period in which it arises.
+***
+CNOOC LIMITED Annual Report 2019
+Notes to Consolidated Financial Statements
+see
+seas
+ecce
+se
+.se
+CNOOC LIMITED Annual Report 2019
+100
+Uncertainties exist with respect to the interpretation of complex tax regulations (including those applicable to tax credits)
+and the amount and timing of future taxable income. Given the wide range of international business relationships and
+the long term nature and complexity of existing contractual agreements, differences arising between the actual results
+and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income
+and expense already recorded. The Group establishes provisions, based on best estimates, for possible consequences
+of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based
+on various factors, such as the Group's experience of previous tax audits and differing interpretations of tax regulations
+by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of
+issues depending on the conditions prevailing in the respective group company's domicile.
+Taxes
+Dismantlement costs will be incurred by the Group at the end of the operating life of certain of the Group's facilities
+and properties. The ultimate dismantlement costs are uncertain and cost estimates can vary in response to many
+factors including changes to relevant legal requirements, the emergence of new restoration techniques or experience
+at other production sites. The expected timing and amount of expenditure can also change, for example, in response
+to changes in reserves or changes in laws and regulations or their interpretation. As a result, there could be significant
+adjustments to the provisions established which would affect future financial results.
+Dismantlement costs
+In the calculations of the recoverable amount of the oil and gas properties in a joint venture, the Group uses the
+approach above.
+The sensitivity analysis for the impairment testing involves estimates and judgments to consider numerous assumptions
+comprehensively. Those assumptions interact on each other and interrelate with each other complexly and do not have
+fixed patterns along with the changes in price. Accordingly, the Group believes that the preparation of the sensitivity
+analysis for the impairment testing will be impracticable. Changes in assumptions could affect impairment charges and
+reversals in the consolidated statement of profit or loss and other comprehensive income, and the carrying amounts of
+assets in the consolidated statement of financial position.
+Actual cash flows are likely to be different from those estimated or forecast since anticipated events frequently do
+not occur as expected and unforeseen events may arise. The Group's results of operations could be materially and
+adversely affected for the period in which future impairment charges are incurred.
+Changes in the key assumptions used, which could be significant, include updates to future pricing estimates, updates
+to future production estimates to align with the Group's anticipated drilling plan, changes in the Group's capital costs
+and operating expense assumptions, and discount rate. There is a significant degree of uncertainty with the assumptions
+used to estimate future cash flows due to various risk factors. The complex economic outlook may also materially and
+adversely affect the Group's key assumptions. Changes in economic conditions can also affect the discount rates
+applied in assessments of impairment.
+The calculations of the recoverable amount of assets require the use of estimates and assumptions. The key assumptions
+include, but are not limited to, future oil and gas prices, future production estimates, estimated future capital
+expenditures, estimated future operating expenses and the discount rate.
+(e)
+(d)
+(c)
+Significant accounting judgements, estimates and assumptions (continued)
+Recoverable amount of oil and gas properties (continued)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+99
+2018
+75,177
+Gross sales
+201,910
+Total revenue
+(176)
+(84)
+176
+84
+(16,805)
+(22,256)
+16,805
+22,256
+191,476
+Intersegment Revenue*
+430
+452
+52,610
+53,093
+174,671
+179,654
+External Revenue
+2018
+(restated)
+(restated)
+(restated)
+233,199 227,711
+(restated)
+30,837
+536
+Taxes other than income tax
+19
+(24,405)
+(24,754)
+Operating expenses
+of segment profit or loss
+Amounts included in the measure
+52,675
+(7,735) 61,045
+8
+35,805
+4,581
+1,894
+1,517
+53,935
+60,296
+Segment profit/(loss) for the year
+227,711
+233,199
+(176)
+(84)
+(restated)
+(776)
+(restated)
+606
+2018
+CNOOC LIMITED Annual Report 2019
+The Group is engaged worldwide in the upstream operating activities of the conventional oil and gas, shale oil and gas,
+oil sands and other unconventional oil and gas business. The Group reports the business through three operating and
+reporting segments: E&P, trading business and corporate. The division of these operating segments is made because
+the Group's chief operating decision makers make decisions on resource allocation and performance evaluation by
+reviewing the financial information of these operating segments. The geographical information is separately disclosed in
+(b).
+(a) Segment results
+SEGMENT INFORMATION
+6.
+The payment is typically due within 30 days after the delivery of oil and gas. For contracts where the period between payment
+and transfer of the associated goods is less than one year, the Group applies the practical expedient of not adjusting the
+transaction price for any significant financing component.
+Marketing revenues principally represent the sales of oil and gas belonging to the foreign partners under the production
+sharing contracts and revenues from the trading of oil and gas through the Company's subsidiaries, which is recognised at a
+point in time when oil and gas has been delivered to the customer, which is when the customer obtains the control of oil and
+gas, and the Group has present right to payment and collection of the consideration is probable. The cost of the oil and gas
+sold is included in "Crude oil and product purchases" in the consolidated statement of profit or loss and other comprehensive
+income.
+Oil and gas sales represent the sales of oil and gas, net of royalties and obligations to government and other mineral interest
+owners. Revenue from the sales of oil and gas is recognised at a point in time when oil and gas has been delivered to the
+customer, which is when the customer obtains the control of oil and gas, and the Group has present right to payment and
+collection of the consideration is probable.
+Marketing revenues
+Oil and gas sales
+Less: Royalties
+30,867
+186,557
+197,173
+(1,194)
+(1,030)
+PRC government's share of oil
+(4,215)
+191,966
+202,635
+2019
+.se
+se
+35,830
+ecce
+2019
+2018
+2019
+2018
+2019
+2018
+Consolidated
+Eliminations
+Corporate
+Trading business
+2019
+The following table presents the segment financial information of the Group for the years ended 31 December 2019 and
+2018.
+seas
+E&P
+eve
+***
+くく
+see
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+6. SEGMENT INFORMATION (continued)
+(a) Segment results (continued)
+Notes to Consolidated Financial Statements
+71
+15
+14
+11
+31
+Exchange differences
+(38)
+(38)
+Disposals and write-offs
+739
+10,008
+754
+123
+At 31 December 2019
+---
+752
+864
+922
+877
+10,780
+Accumulated depreciation,
+depletion and amortisation
+and impairment:
+At 1 January 2019
+(169)
+Depreciation charge for the year
+(712)
+576
+7,365
+40
+14. PROPERTY, PLANT AND EQUIPMENT (continued)
+907
+(152)
+In June 2016, the book value of the Long Lake assets was written down to an estimated recoverable amount of RMB33,902
+million. While the future operating plan of Long Lake assets is under assessment by management, there had not been any
+further impairment of such assets during the year ended 31 December 2019.
+The discount rate is derived from the Company's weighted average cost of capital ("WACC") and is adjusted, where
+applicable, to take into account any specific risks relating to the country where the asset is located as well as the asset
+specific characteristics, such as specific tax treatments, cash flow profiles and economic life. The discount rate used for value
+in use calculations was 8% in 2019 after tax (2018: 8%). A derived pre-tax discount rate would be 8%-10% (2018: 9%).
+For both years, the recoverable amount was calculated based on the assets' value in use and was determined at the cash-
+generating unit level. The Company identifies a field or a group of fields that could generate cash inflows independently as
+a cash-generating unit. The principal parameters used in determining the recoverable amount of the Group's assets include
+estimates of proved and unproved reserves, future commodity prices that come from the price forecast of respected and
+independent institutions, combined with internal analysis and judgment of the international market environment, as well as
+best estimates of drilling and development costs.
+Impairment and provision recognised during the year included the impairment loss to reduce the carrying amount of certain oil
+and gas properties to the recoverable amount. In 2019, impairment losses of RMB513 million and RMB1,559 million related
+to oil and gas properties in China and North America were recognised as impairment and provision in profit or loss, primarily
+triggered by reserve decrease. In 2018, an impairment loss of RMB5,387 million related to certain exploration and evaluation
+assets in North America was recognised as exploration expenses in profit or loss, primarily triggered by the uncertainty of
+future development.
+Included in the current year's additions was an amount of approximately RMB3,048 million (2018: approximately RMB2,838
+million) in respect of interest capitalised in property, plant and equipment (note 8). Included also in the depreciation charge
+for the year was an amount of approximately RMB1,199 million (2018: approximately RMB1,298 million) in respect of a
+depreciation charge on dismantlement cost capitalised in oil and gas properties.
+CNOOC LIMITED Annual Report 2019
+115
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+15.
+116
+RIGHT-OF-USE ASSETS
+ま
+Building
+and
+FPSO
+structures
+Equipment
+Pipelines
+Leasehold
+lands
+Total
+Cost:
+At 1 January 2019
+7,334
+739
+274
+Additions
+(88)
+(240)
+(422)
+(15)
+(20)
+(13)
+(48)
+At 31 December 2019
+(904)
+(249)
+(1,374)
+(2,714)
+(5,241)
+Net book value:
+At 31 December 2018 (restated)
+423
+42
+At 31 December 2019
+376
+312
+208
+538
+14,592
+16,073
+282
+157
+660
+14,831
+16,306
+Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed
+in a business combination. Goodwill acquired through business combinations is held at the E&P segment.
+According to the accounting policies as set out in note 3, goodwill is acquired in the acquisition of Nexen Inc., and from
+the acquisition date, allocated to the entire E&P assets, which are the groups of cash-generating units that are expected to
+benefit from the synergies of the acquisition.
+Impairment is determined by assessing the recoverable amount of the entire E&P assets to which the goodwill relates. Where
+the recoverable amount of the entire E&P assets is less than the carrying amount of the assets and the goodwill together, an
+impairment loss on goodwill is recognised.
+Exchange differences
+27
+27
+Disposal
+Amortisation charge for the year
+(30)
+(48)
+(262)
+(405)
+Disposal
+50
+29
+79
+Exchange differences
+(62)
+(40)
+(141)
+At 31 December 2018 (restated)
+CNOOC LIMITED Annual Report 2019 117
+(836)
+(1,299)
+(2,501)
+(4,855)
+At 1 January 2019
+(836)
+(219)
+(1,299)
+(2,501)
+(4,855)
+Amortisation charge for the year
+(30)
+(55)
+(227)
+(365)
+(219)
+(4,388)
+118
+31 December 2019
+100%
+Bond issuance
+CNOOC Finance (2012) Limited
+British Virgin Islands
+US$1,000
+100%
+Bond issuance
+CNOOC Finance (2013) Limited
+British Virgin Islands
+US$1,000
+100%
+Bond issuance
+CEPR Limited (2)
+Hong Kong, PRC
+EUR1,000
+100%
+Investment holding
+Indirectly held subsidiaries(³):
+CNOOC Deepwater Development
+Limited (1)(4)
+Zhuhai, PRC
+RMB20.78 billion
+100%
+China United Coalbed Methane
+Corporation Limited
+Beijing, PRC
+RMB1.311 billion
+100%
+CNOOC LIMITED Annual Report 2019
+Deepwater and low-grade oil and gas fields exploitation
+in the PRC and exploration, development, production
+and sales of oil and gas in the oil and gas fields of
+South China Sea
+Coalbed methane exploration and sales, Coalbed
+methane surface exploration, gas mineral prospecting,
+shallow gas development and utilisation in the coalbed
+methane fields in the PRC
+se
+US$1,000
+British Virgin Islands
+CNOOC Finance (2011) Limited
+Bond issuance
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+16.
+17.
+INTANGIBLE ASSETS (continued)
+In assessing value in use of E&P segment, the key assumptions include, but are not limited to, future commodity prices, future
+production estimates, estimated future capital expenditures, estimated future operating expenses and the discount rate. The
+discount rate used for value in use is derived from the Company's WACC and is adjusted, where applicable, to take into
+account any specific risks relating to the country where the asset is located as well as the asset specific characteristics, such as
+specific tax treatments, cash flow profiles and economic life. However, actual results could differ from those estimates.
+The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts are amortised on a straight-line basis over the life of the contracts which is
+less than 20 years. Other identifiable intangible assets are amortised on a straight-line basis over a period ranging from 3 to 5
+years.
+INVESTMENTS IN SUBSIDIARIES
+Particulars of the principal subsidiaries at the end of the reporting period are as follows:
+Place of
+establishment
+Nominal value
+of ordinary shares
+issued and paid-up/
+registered capital
+Percentage
+of equity
+attributable
+to the Group
+Principal activities
+Name of entity
+Directly held subsidiaries:
+CNOOC China Limited (1)
+Tianjin, PRC
+Notes to Consolidated Financial Statements
+RMB20 billion
+Offshore petroleum and natural gas exploration,
+development, production and sales, and shale gas
+exploration in the PRC
+China Offshore Oil (Singapore)
+International Pte Ltd
+CNOOC International Limited
+Singapore
+SG$3 million
+100%
+Sales and marketing of petroleum and natural gas
+products outside the PRC
+British Virgin Islands
+US$20,000,000,002
+100%
+Investment holding
+CNOOC Finance (2003) Limited
+British Virgin Islands
+US$1,000
+100%
+100%
+(2,228)
+(1,239)
+(189)
+included in the measurement
+of lease liabilities
+280
+443
+1
+443
+281
+For both years, the Group leases various FPSO and offices for its operations. Lease contracts are entered into for fixed term
+of 13 months to 171 months, but may have extension options. Certain leases of pipelines were accounted for as finance
+leases during the year ended 31 December 2018 and carried interest ranged from 6.35% to 11%. Lease terms are negotiated
+on an individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing
+the length of the non-cancellable period, the Group applies the definition of a contract and determines the period for which
+the contract is enforceable.
+During the current period, the Group recognised right-of-use assets of approximately RMB12 million for leases with the
+CNOOC Group.
+Variable lease payments
+Leases of FPSO are either with only fixed lease payments or contain variable lease payment that are based on production
+volume and minimum annual lease payment that are fixed over the lease term. The fixed and variable lease payments paid to
+relevant FPSO lessors for the year ended 31 December 2019 amounted to RMB1,016 million and RMB280 million.
+The overall financial effect of using variable payment terms is that higher rental costs are incurred by FPSO with higher
+production volume. Variable rent expenses are expected to continue to represent a similar proportion of production volume in
+future years.
+CNOOC LIMITED Annual Report 2019
+.se
+se
+ecce
+seas
+16.
+INTANGIBLE ASSETS
+Cost:
+see
+eve
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Gas processing
+Marketing
+transportation
+Variable lease payments not
+initial application of IFRS 16/
+HKFRS 16
+12 months of the date of
+lease terms end within
+(33)
+(23)
+(1,359)
+Impairment
+Disposals and write-offs
+Exchange differences
+At 31 December 2019
+(712)
+(169)
+(422)
+(187)
+(111)
+(1,601)
+Net book value:
+rights under
+At 1 January 2019
+7,334
+739
+274
+755
+666
+9,768
+6,653
+583
+442
+735
+766
+9,179
+Expense relating to short-term
+leases and other leases with
+At 31 December 2019
+Exploration
+and storage
+Software
+Exchange differences
+At 31 December 2019
+Accumulated amortisation:
+1,280
+1280
+ཧཱུྃ།' ' '
+1,507
+3,039
+14,592
+20,928
+1,507
+3,039
+14,592
+20,928
+Disposal
+348
+'ས།
+(27)
+(27)
+24
+14
+239
+298
+53
+531
+1,531
+3,374
+14,831
+21,547
+At 1 January 2018 (restated)
+348
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Additions
+1,259
+NWS Project
+rights
+contracts
+and others
+Goodwill
+Total
+At 1 January 2018 (restated)
+1,199
+531
+1,484
+2,712
+13,892
+19,818
+Additions
+531
+309
+Disposal
+(50)
+(29)
+(79)
+Exchange differences
+60
+73
+47
+700
+880
+At 31 December 2018 (restated)
+1,259
+531
+At 1 January 2019
+309
+Notes to Consolidated Financial Statements
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+***
+1,770
+Others
+687
+2,008
+39,940
+38,752
+Deferred tax liabilities
+1,472
+Property, plant and equipment
+Net deferred tax assets
+Of which
+- deferred tax assets
+- deferred tax liabilities
+(17,313)
+(14,078)
+(2)
+Fair value changes on other financial assets
+Others
+Fair value of long term borrowings
+18,565
+19,367
+2018
+(restated)
+(22,232)
+(712)
+(190)
+(1,151)
+(24,285)
+Principal components of deferred tax balances are as follows:
+2019
+2018
+(restated)
+Deferred tax assets
+Property, plant and equipment
+5,996
+5,322
+Provision for dismantlement
+12,418
+11,087
+Losses available for offsetting against future taxable profit
+(235)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(389)
+(14,467)
+i.
+Production tax at the rate of 5% on production under production sharing contracts;
+ii.
+iii.
+Value added tax ("VAT") at the rates from 11% to 17% on taxable sales under independent oil and gas fields
+before 1 May 2018. VAT rates of 17% and 11% have been adjusted to 16% and 10% respectively since 1 May
+2018 according to "Notice on Adjustment on Value-added Tax Rates" (Cai Shui [2018] No.32). VAT rates of
+16% and 10% have been adjusted to 13% and 9% respectively since 1 April 2019 according to "Announcement
+on Policies for Deepening the VAT Reform” (Announcement [2019] No. 39 of the Ministry of Finance, the State
+Taxation Administration and the General Administration of Customs).
+The VAT payable is calculated using the taxable sales amount multiplied by the applicable tax rate less relevant
+deductible input VAT;
+Resource tax at the rate of 6% (reduced tax rates may apply to specific products and fields) on the oil and gas
+sales revenue (excluding production tax) derived by oil and gas fields under production sharing contracts signed
+after 1 November 2011 and independent offshore oil and gas fields, except for those under production sharing
+contracts signed before 1 November 2011 which will be subject to related resource tax requirement after the
+expiration of such production sharing contracts;
+The Company's PRC subsidiaries pay the following other taxes and dues:
+iv.
+V.
+Educational surcharge at the rate of 3% on the production tax and VAT paid; and
+Local educational surcharge at the rate of 2% on the production tax and VAT paid.
+vi.
+In addition, other taxes paid and payable by the Company's non-PRC subsidiaries include royalty as well as taxes levied
+on petroleum-related income, budgeted operating and capital expenditure.
+112
+CNOOC LIMITED Annual Report 2019
+City construction tax at the rates of 1% or 7% on the production tax and VAT paid;
+Other taxes
+The realisability of the deferred tax assets recognised mainly depends on whether sufficient future profits or taxable
+temporary differences will be available in the future. In case where the actual future taxable profits generated are less
+than expected, or change in facts and circumstances which result in revision of future taxable profits estimation, the
+balance of deferred tax assets may be significantly revised.
+At 31 December 2019, the Group's unrecognised deferred tax assets related to unused tax credits amounted
+to RMB10,220 million (2018: RMB10,944 million). This includes RMB9,949 million (2018: RMB10,696 million) of
+unrecognised deferred tax assets related to unused tax credits from Nigeria which has no fixed expiry date. The
+remainder expires between 2028 and 2039.
+22,390
+24,285
+(3,602)
+27,465
+(3,180)
+As at 31 December 2019, the Group had approximately RMB95,794 million (2018: RMB97,614 million) of carry-
+forward tax losses, predominantly in North America, that would be available to offset against future taxable profits of the
+subsidiaries in which the tax losses arose. Most of the US and Canadian tax losses will expire in 5 to 19 years.
+Deferred tax assets in respect of tax losses are recognised only to the extent of the anticipated future taxable profits or
+reversal of existing taxable temporary differences.
+CNOOC LIMITED Annual Report 2019
+111
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+11. TAX (continued)
+(i)
+(ii)
+Income tax (continued)
+As at 31 December 2019, the Group's recognised deferred tax assets on tax losses amounted to RMB89,268
+million (2018: RMB83,158 million). Unrecognised tax losses, where recovery is not currently expected, amounted
+to RMB6,526 million (2018: RMB14,456 million). This includes RMB3,398 million (2018: RMB7,876 million) of
+unrecognised tax loss arising from Uganda which has no fixed expiry date. The remainder expires between 1 to 7 years.
+(17,550)
+31 December 2019
+Notes to Consolidated Financial Statements
+***
+22,482
+A reconciliation of the PRC statutory corporate income tax rate to the effective income tax rate of the Group is as
+follows:
+PRC statutory enterprise income tax rate
+Effect of different tax rates for overseas subsidiaries
+Effect of changes in tax rates
+Tax credit from the government
+Tax reported in equity-accounted entities within China
+24,604
+Tax losses previously not recognised
+Group's effective income tax rate
+The movements of deferred tax liabilities net of deferred tax assets are as follows:
+At 31 December 2018
+Credit to the profit or loss
+Changes in tax rates
+Charge to equity
+Exchange differences
+Others
+Income tax expense for the year
+2,501
+Effect of changes in tax rates
+11. TAX (continued)
+(i)
+Income tax (continued)
+An analysis of the tax expense in the Group's consolidated statement of profit or loss and other comprehensive income is
+as follows:
+Current tax
+2019
+2018
+(restated)
+Provision for PRC enterprise income tax on the estimated taxable
+profits for the year
+19,054
+18,151
+Provision for overseas enterprise income tax on the estimated taxable
+profits for the year
+3,179
+5,043
+Deferred tax
+Temporary differences in the current year
+(130)
+(712)
+At 31 December 2019
+110 CNOOC LIMITED Annual Report 2019
+.se
+2019
+2,501
+(111)
+(365)
+(22,390)
+ecce
+seas
+11. TAX (continued)
+(i)
+Income tax (continued)
+At 31 December 2017
+Credit to the profit or loss
+Changes in tax rates
+Charge to equity
+Exchange differences
+At 31 December 2018
+see
+eve
+(130)
+se
+(24,285)
+se
+2018
+(restated)
+%
+%
+25.0
+25.0
+2.6
+7.0
+2.9
+(2.6)
+(0.8)
+(0.1)
+(0.2)
+(0.2)
+0.9
+(0.9)
+28.7
+29.9
+2019
+ecce
+seas
+see
+(50,401)
+(409)
+(498,687)
+(50,810)
+Impairment
+(5,861)
+(5,861)
+Disposals and write-offs
+Depreciation charge for the year
+1,497
+1,535
+Exchange differences
+(10,616)
+(52)
+(10,668)
+At 31 December 2018 (restated)
+(562,144)
+38
+(1,924)
+(496,763)
+At 1 January 2018 (restated)
+Acquisitions
+5,619
+5,619
+Disposals and write-offs
+(9,270)
+(313)
+(9,583)
+Exchange differences
+8,463
+36
+8,499
+At 31 December 2019
+1,055,940
+5,702
+1,061,642
+Accumulated depreciation, depletion and
+amortisation and impairment:
+(2,347)
+(564,491)
+At 1 January 2019 (restated)
+(562,144)
+Net book value:
+At 31 December 2018 (restated)
+410,461
+2,922
+413,383
+At 31 December 2019
+437,352
+3,202
+440,554
+114
+CNOOC LIMITED Annual Report 2019
+Notes to Consolidated Financial Statements
+se
+ecce
+seas
+see
+eve
+(621,088)
+79,233
+(2,500)
+At 31 December 2019
+(2,347)
+(564,491)
+Depreciation charge for the year
+(54,451)
+(411)
+(54,862)
+Impairment
+(2,072)
+(2,072)
+Disposals and write-offs
+4,312
+278
+4,590
+Exchange differences
+(4,233)
+(20)
+(4,253)
+(618,588)
+くく
+710
+Additions
+Weighted average number of ordinary shares for the purpose of diluted
+earnings per share
+44,651,110,742
+44,656,022,966
+Earnings per share:
+Basic (RMB Yuan)
+Diluted (RMB Yuan)
+13.
+8,566,982
+DIVIDENDS
+1.18
+1.37
+1.18
+2019
+2018
+Dividend per ordinary share:
+2019 interim dividend - HK$0.33 (2018: interim dividend HK$0.30) per ordinary share
+2018 final dividend - HK$0.40 (2017: final dividend HK$0.30) per ordinary share
+2019 final dividend proposed at HK$0.45 per ordinary share by the Board of Directors
+- not recognised as a liability as at the end of the year
+1.37
+3,654,758
+Effect of dilutive potential ordinary shares under the share
+option schemes
+44,647,455,984
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+11. TAX (continued)
+12.
+(iii) Special Oil Gain Levy
+In 2006, a Special Oil Gain Levy ("SOG Levy") was imposed by the Ministry of Finance of the PRC ("MOF") at the
+progressive rates from 20% to 40% on the portion of the monthly weighted average sales price of the crude oil lifted
+in the PRC exceeding US$40 per barrel. The MOF has decided to increase the threshold of the SOG Levy to US$65
+with effect from 1 January 2015. Notwithstanding this adjustment, the SOG Levy continues to have five levels and is
+calculated and charged according to the progressive and ad valorem rates on the excess amounts. The SOG Levy
+paid can be claimed as a deductible expense for corporate income tax purposes and is calculated based on the actual
+volume of the crude oil entitled.
+EARNINGS PER SHARE
+Earnings:
+2019
+2018
+(restated)
+Profit for the purpose of basic and diluted earnings per share calculation
+Number of shares:
+61,045
+52,675
+Number of ordinary shares for the purpose of basic earnings per share
+calculation
+44,647,455,984
+13,260
+11,890
+15,713
+11,633
+264
+Disposals and write-offs
+(2,751)
+(41)
+(2,792)
+Exchange differences
+21,719
+128
+21,847
+At 31 December 2018 (restated)
+972,605
+5,269
+977,874
+At 1 January 2019 (restated)
+972,605
+5,269
+977,874
+264
+78,523
+Acquisitions
+5,062
+120
+18,055
+15,713
+Pursuant to the Enterprise Income Tax Law of the People's Republic of China and related laws and regulations, the Company
+is regarded as a Chinese Resident Enterprise, and thus is required to withhold corporate income tax at the rate of 10% when
+it distributes dividends to its non-resident enterprise (as defined in the "Enterprise Income Tax Law of the People's Republic of
+China") shareholders, with effect from the distribution of the 2008 final dividend. In respect of all shareholders whose names
+appear on the Company's register of members and who are not individuals (including HKSCC Nominees Limited, corporate
+nominees or trustees such as securities companies and banks, and other entities or organisations, which are all considered as
+non-resident enterprise shareholders), the Company will distribute the dividend after deducting corporate income tax of 10%.
+CNOOC LIMITED Annual Report 2019
+113
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+14.
+PROPERTY, PLANT AND EQUIPMENT
+Oil and gas
+properties
+Vehicles
+and office
+equipment
+and others
+Total
+Cost:
+At 1 January 2018 (restated)
+Additions
+895,141
+58,232
+900,203
+58,352
+25,992
+109
+As at 31 December 2019, deferred tax liabilities related to undistributed earnings of the Company's overseas
+subsidiaries have not been provided since the timing of the reversal of the taxable temporary differences can be
+controlled by the Company and it is probable that the temporary differences would not reverse in the foreseeable future.
+seas
+see
+eve
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+10. FIVE HIGHEST PAID EMPLOYEES (continued)
+The remuneration of the five (2018: five) highest paid employees, falls within the following bands:
+RMB6,500,001 - RMB7,000,000
+RMB7,500,001 - RMB8,000,000
+RMB8,000,001 - RMB8,500,000
+RMB8,500,001 - RMB9,000,000
+RMB10,000,001 - RMB10,500,000
+RMB10,500,001 - RMB11,000,000
+RMB12,500,001 - RMB13,000,000
+11.
+TAX
+(i)
+Income tax
+Number of employees
+2019
+2018
+2115
+21
+1
+1
+5
+The Company and its subsidiaries are subject, on an entity basis, to income taxes on profits arising in or derived from
+the tax jurisdictions in which the entities of the Group are domiciled and operate. The Company is subject to profits tax
+at a rate of 16.5% (2018: 16.5%) on profits arising in or derived from Hong Kong.
+The Company is regarded as a Chinese Resident Enterprise (as defined in the "Enterprise Income Tax Law of the
+People's Republic of China") by the State Administration of Taxation of the PRC. As a result, the Company is subject
+to the PRC corporate income tax at the rate of 25% starting from 1 January 2008. The corporate income tax which
+is subjected in Hong Kong is qualified as a foreign tax credit to offset the PRC corporate income tax starting from 1
+January 2008.
+The Company's subsidiary in Mainland China, CNOOC China, is a wholly-owned foreign enterprise. It is subject
+to corporate income tax at the rate of 25% under the prevailing tax rules and regulations. CNOOC Deepwater
+Development Limited, a wholly-owned subsidiary of CNOOC China, is subject to corporate income tax at the rate of
+15% from 2018 to 2020, after being reassessed as a high and new technology enterprise.
+ecce
+CNOOC LIMITED Annual Report 2019
+31 December 2019
+Subsidiaries of the Group domiciled outside the PRC are subject to income tax at rates ranging from 10% to 50% (2018:
+10% to 50%). The province income tax rate of Alberta, Canada reduced from 12% to 11% on 1 July 2019, and will
+decrease by one percentage point on 1 January of each year until it reaches 8% on 1 January 2022.
+735
+735
+maturity in 2020
+1,000
+1,000
+Notes*
+3,685
+132,467
+132,467
+132,467
+130,556
+130,556
+136,152
+CNOOC Finance (2003) Limited
+130,556
+133,479
+The details of notes are as follows:
+Outstanding Principal Amount
+31 December
+Issued by
+Maturity
+Coupon Rate
+2019
+31 December
+2018
+USD million
+USD million
+Due in 2033
+2,923
+ecce
+5.500%
+500
+500
+CNOOC Finance (2013) Limited
+Due in 2029
+2.875%
+1,000
+CNOOC Finance (2013) Limited
+CNOOC Finance (2014) ULC
+CNOOC Finance (2014) ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2015) Australia Pty Ltd
+CNOOC Finance (2015) Australia Pty Ltd
+Due in 2049
+3.300%
+500
+4.250%
+Due in 2024
+2,250
+2,250
+Due in 2044
+4.875%
+500
+500
+Matured in 2019
+6.2%
+300
+Due in 2028
+7.4%
+4.25%
+Due in 2043
+CNOOC Finance (2013) Limited
+2,000
+300
+300
+CNOOC Finance (2011) Limited
+CNOOC Finance (2011) Limited
+Due in 2021
+4.25%
+1,500
+1,500
+Due in 2041
+5.75%
+500
+500
+CNOOC Finance (2012) Limited
+Due in 2022
+3.875%
+1,500
+1,500
+CNOOC Finance (2012) Limited
+Due in 2042
+5.000%
+500
+500
+CNOOC Finance (2013) Limited
+Due in 2023
+3.000%
+2,000
+General loans of CUCBM***** 4.275% per annum with
+For Arctic LNG 2 Project**** EURIBOR+0.7% to 0.76% per
+annum with maturity in 2026
+Total
+1,618
+1,749
+1,749
+226
+226
+223
+223
+10,459
+10,459
+2,059
+2,059
+226
+10,459
+10,685
+1,972
+2,059
+4,031
+2,131
+.se
+10,459
+CNOOC LIMITED Annual Report 2019
+one year
+annum with maturity within
+one year
+1,905
+1,905
+4,960
+4,960
+1,905
+1,905
+4,960
+4,960
+General loans of CUCBM
+3.75% to 4.125% per
+annum with maturity
+within one year
+For Tangguh LNG Project** LIBOR+0.19% to 0.335% per
+annum with maturity within
+Notes*
+124
+12,590
+6,932
+2,059
+Notes
+Total
+Loans
+2018 (restated)
+Notes
+200
+For Tangguh LNG Project**
+LIBOR+0.19% to 0.335% per
+annum with maturity through
+to 2021
+84
+84
+305
+305
+For Tangguh LNG III
+Project***
+LIBOR+1.37% to 3.45% per
+annum with maturity from
+2021 to 2029
+2,866
+2,866
+Loans
+Effective interest rate
+and final maturity
+2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+8,991
+se
+ecce
+seas
+see
+28. LOANS AND BORROWINGS (continued)
+Non-current
+eve
+1,618
+***
+Notes to Consolidated Financial Statements
+2005 Share Option Scheme (as defined below).
+se
+CNOOC LIMITED Annual Report 2019
+128
+On 31 December 2005, the Company adopted a new share option scheme (the "2005 Share Option Scheme"). The
+purpose of the 2005 Share Option Scheme is to provide incentive and/or reward to eligible persons for their contribution
+to, and continuing efforts to promote the interests of the Company. Under the 2005 Share Option Scheme, the Board has
+the authority to grant options to subscribe for shares to the directors, officers and employees of the Group, and any other
+persons who in the sole discretion of the Board, have contributed or will contribute to the Group. Unless approved by the
+shareholders, the total number of shares issued and to be issued upon exercise of the options granted to each individual
+(including exercised and unexercised options) under the 2005 Share Option Scheme or any other share option scheme
+adopted by the Company, in any 12-month period, must not exceed 1% of the shares in issue of the Company.
+2005 Share Option Scheme
+31 December 2019
+くく
+200
+Due in 2032
+Due in 2035
+7.875%
+Less: Discount to present value
+Total lease liabilities
+PROVISION FOR DISMANTLEMENT
+At 1 January
+New projects (1)
+Revision (1)
+Utilisation
+Deletion
+Unwinding of discount (2) (note 8)
+Exchange differences
+At 31 December
+Current portion of provision for dismantlement included
+in other payables and accrued liabilities (note 27)
+At 31 December
+(1)
+The amounts are included in the additions of oil and gas properties in note 14.
+(2) The discount rates used for calculating the provision for dismantlement is 3.50%-4.25% (2018: 5%).
+31/12/2019
+1,732
+1,266
+3,091
+Within a period of more than one year but not more than two years
+Within a period of more than two years but not more than five years
+Within a period of more than five years
+4,536
+Within one year
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+the
+(2)
+year
+3.43%
+3.76%
+(2)
+The weighted average interest rate is computed by averaging the interest rates as at 1 January and 31 December of each year.
+There was no default of principal, interest or redemption terms of the loans and borrowings during the year.
+126 CNOOC LIMITED Annual Report 2019
+.se
+se
+ecce
+seas
+30.
+29. LEASE LIABILITIES
+see
+eve
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+Lease liabilities payable:
+during
+10,625
+8,487
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31.
+SHARE CAPITAL
+Number of
+shares
+ま
+Issued share
+capital equivalent
+of RMB million
+Issued and fully paid:
+Ordinary shares with no par value as at 1 January 2018,
+as at 31 December 2018 and as at 31 December 2019
+Share option schemes
+44,647,455,984
+43,081
+The Company has adopted the share option schemes for the grant of options to the Company's directors, senior
+management and other eligible grantees.
+(1) Pre-Global Offering Share Option Scheme (expired in 2011);
+(2)
+2001 Share Option Scheme (expired in 2011);
+(3)
+2002 Share Option Scheme (expired in 2015); and
+(4)
+Notes to Consolidated Financial Statements
+(2,138)
+127
+54,204
+2019
+2018
+(restated)
+54,878
+54,114
+3,309
+3,468
+5,117
+(4,090)
+(1,141)
+(1,337)
+(15)
+2,794
+2,560
+660
+163
+65,602
+54,878
+(1,439)
+(674)
+64,163
+CNOOC LIMITED Annual Report 2019
+during
+the year
+(1)
+interest rate
+average
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2015) U.S.A. LLC
+Due in 2023
+3.75%
+450
+450
+Due in 2028
+4.375%
+1,000
+1,000
+All the notes issued mentioned above were fully and unconditionally guaranteed by the Company.
+CNOOC LIMITED Annual Report 2019
+125
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+28.
+LOANS AND BORROWINGS (continued)
+Non-current (continued)
+***
+****
+*****
+300
+In connection with the Tangguh LNG Project in Indonesia, the Company delivered a guarantee dated 29 October 2007, in favor of Mizuho
+Corporate Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks under a US$884 million
+commercial loan agreement. The Company guarantees the payment obligations of the trustee borrower under the subject loan agreement and is
+subject to a maximum cap of US$135,163,308.28.
+300
+Due in 2045
+500
+500
+5.875%
+790
+790
+Due in 2037
+6.4%
+1,250
+1,250
+Due in 2039
+7.5%
+700
+700
+Due in 2025
+3.500%
+2,000
+2,000
+Due in 2020
+2.625%
+1,500
+1,500
+4.200%
+In connection with the financing for the third LNG process train of Tangguh LNG Project in Indonesia, the Company delivered two guarantees
+dated 3 August 2016, in favor of Mizuho Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks
+and Indonesian local commercial banks under two commercial loan agreements with aggregate loan amount of US$2,145 million. The Company
+guarantees the payment obligations of the trustee borrower under the subject loan agreements and is subject to an aggregate maximum cap of
+approximately US$573 million.
+As at 31 December 2019, US$378 million of the bank loans (2018: none) were guaranteed by the Company.
+As at 31 December 2019, US$0 million shareholder loans (2018: US$694 million) of the Group were included in general loans. For details please
+refer to note 33(v).
+(226)
+(1,972)
+3,685
+2,923
+For the year ended
+31 December
+Balance at
+year end
+Weighted
+average
+interest rate
+at year end
+2019
+2018 (restated)
+3,911
+4,895
+(1)
+2.70%
+4.17%
+4,403
+4,402
+The average amount outstanding is computed by averaging the outstanding principal balances as at 1 January and 31 December of each year.
+3,911
+4,895
+Maximum
+amount
+outstanding
+during
+the year
+Average
+amount
+outstanding
+Weighted
+4,895
+3,911
+1,257
+2,640
+The general loans of CUCBM has been prepaid during 2019.
+The maturities of the long term loans are as follows:
+Repayable:
+Within one year
+After one year but within two years
+After two years but within three years
+After three years but within four years
+After four years but within five years
+After five years
+Amount due within one year shown under current liabilities
+Supplemental information with respect to the long term loans:
+2019
+LIBOR+0.60% to 3.915% per
+2018
+226
+1,972
+204
+1,222
+244
+150
+277
+138
+320
+156
+(restated)
+due within one year
+Under these share option schemes, the Remuneration Committee of the Board will from time to time propose for the Board's
+approval the grant of share options and the number of share options to be granted to the relevant grantees. The maximum
+aggregate number of shares (including those that could be subscribed for under the Pre-Global Offering Share Option
+Scheme, the 2001 Share Option Scheme, the 2002 Share Option Scheme and the 2005 Share Option Scheme) which may
+be issued upon exercise of all options granted shall not exceed 10% of the total issued share capital of the Company as at
+31 December 2005, being the date on which the shareholders of the Company approved the 2005 Share Option Scheme,
+excluding shares under options which have lapsed.
+and borrowings
+General loans****
+Interest income
+Depreciation, depletion and amortisation
+Revenue
+Non-current liabilities
+Current liabilities
+Non-current assets
+Current assets
+Summarised financial information of the joint venture is disclosed below:
+US$102,325,582
+Investment holding
+50%
+Percentage of
+equity
+attributable
+to the Group Principal activities
+British Virgin Islands
+BC ENERGY INVESTMENTS CORP.
+Nominal value of ordinary
+shares issued and paid-up/
+registered capital
+Place of
+establishment
+Name of entity
+Particulars of the joint venture at the end of the reporting period are as follows:
+INVESTMENT IN A JOINT VENTURE
+Dividend of RMB231 million was received from the associates in 2019 (2018: RMB162 million).
+Total comprehensive income
+Finance costs
+Other comprehensive income
+Profit/(loss) before tax
+Profit/(loss) after tax
+(875)
+(17,816)
+1,961
+(518)
+(822)
+95
+18,661
+(3,446)
+140
+(3,195)
+18,178
+(11,783)
+(10,589)
+(6,851)
+(7,616)
+47,116
+49,417
+12,054
+10,742
+2018
+2019
+Total comprehensive income/(expense)
+Income tax (expense)/credit
+6,630
+Profit for the year
+484
+.se
+CNOOC LIMITED Annual Report 2019
+120
+To give details of other associates would, in the opinion of the Directors, result in particulars of excessive length.
+Interest in Jiangsu Shuangchuang Renewable Energy Development Corporation Limited ("Jiangsu Shuangchuang") held by CNOOC China was
+updated to 47% and the registered capital of Jiangsu Shuangchuang increased from 100 million to 960 million on 30 October 2019.
+(2)
+Registered as a limited liability company under the PRC Law.
+(1)
+Exploration and development of natural gas and
+production and marketing of liquefied natural gas in
+Russia
+10%
+RUB15,975,910,000
+Russian Federation
+New energy technology research and development,
+technical consulting, technical services; wind power;
+technical services for power system and facilities;
+power engineering and construction (operated with
+qualification certificates); generator set installation,
+commissioning and maintenance
+Provision of deposit, transfer, settlement, loan,
+discounting and other financing services to CNOOC
+and its member entities
+Production, processing and technology consultation of
+oil, gas and relevant products in the PRC
+Arctic LNG 2 LLC
+47%
+RMB960 million
+Jiangsu, PRC
+Jiangsu Shuangchuang Renewable
+Energy Development Corporation
+Limited (1)(2)
+31.8%
+se
+422
+ecce
+19.
+16
+25
+406
+459
+2018
+2019
+None of the Group's associates are considered to be individually material. The following table illustrates the summarised
+financial information of the Group's associates in the consolidated financial statements:
+4,433
+24,513
+2018
+2019
+Share of net assets
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+***
+eve
+The Group's investments in associates represent:
+INVESTMENTS IN ASSOCIATES (continued)
+18.
+see
+seas
+RMB4 billion
+1,086
+1,086
+Oil in tanks
+Materials and supplies
+INVENTORIES AND SUPPLIES
+22.
+Included in the other non-current assets were restricted deposits for future dismantlement. Pursuant to the Provisional
+Regulations on the Dismantlement of Offshore Oil and Gas Production Facilities of the People's Republic of China, the Group
+accrues dismantlement costs for all the oil and gas fields under production sharing contracts in the PRC, and makes monthly
+cash contributions to the specified dismantlement fund accounts supervised by the PRC government. The deposit cannot
+be withdrawn or utilised for any other purposes but the dismantlement of oil and gas production facilities in the future. As at
+31 December 2019, the balance of the specified dismantlement fund accounts was RMB8,860 million (31 December 2018:
+RMB8, 100 million).
+OTHER NON-CURRENT ASSETS
+21.
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+くく
+***
+eve
+see
+seas
+ecce
+se
+.se
+CNOOC LIMITED Annual Report 2019
+122
+During the year, the fair value changes on the Group's equity investments recognised directly in other comprehensive
+expense amounted to RMB1, 167 million (2018: other comprehensive income RMB278 million).
+The gains of the Group's other financial assets recognised in the profit or loss for the year was RMB4,603 million (2018:
+RMB3,685 million).
+Less: Provision for inventory obsolescence
+The corporate wealth management products will mature from 8 January, 2020 to 14 October 2020 (2018: from 8 January 2019 to 20
+November 2019).
+2019
+5,758
+123
+Notes to Consolidated Financial Statements
+Loans and borrowings
+CNOOC LIMITED Annual Report 2019
+As at 31 December 2019 and 2018, substantially all the trade and accrued payables were aged within six months. The trade
+and accrued payables are non-interest-bearing.
+TRADE AND ACCRUED PAYABLES
+25.
+The weighted average effective interest rate of the Group's bank deposits was 2.71% per annum, for the year ended 31
+December 2019 (2018: 2.83% per annum).
+The Group's cash and cash equivalents mainly consist of current deposits and time deposits with maturity within seven days.
+The bank balances are deposited with creditworthy banks.
+CASH AND CASH EQUIVALENTS AND TIME DEPOSITS WITH MATURITY OVER THREE MONTHS
+All customers have good credit quality with good repayment history and no significant receivables are past due. As at 31
+December 2019 and 31 December 2018, the age of substantially all the trade receivables was within one year.
+The credit terms of the Group are generally within 30 days after the delivery of oil and gas. Payment in advance or collateral
+may be required from customers, depending on credit rating. Trade receivables are non-interest bearing.
+24.
+23. TRADE RECEIVABLES
+5,853
+6,314
+(601)
+(927)
+1,499
+1,483
+4,955
+2018
+(restated)
+(11,186)
+(2)
+(1)
+1,110
+1,127
+1,110
+1,127
+2018
+(restated)
+2019
+classified at FVTOCI(1)
+Equity investment in MEG Energy Corporation ("MEG”)
+Publicly traded investments
+Non-current:
+(ii)
+(i) Equity investments
+EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS
+20.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+121
+CNOOC LIMITED Annual Report 2019
+Dividend of US$25 million (equivalent to RMB172 million) was received from the joint venture in 2019 and US$20 million
+(equivalent to RMB132 million) was received from the joint venture in 2018.
+(11,186)
+Non-publicly traded investments
+The money market funds can be redeemed at any time.
+Private equity fund in Kerogen Energy Fund classified at FVTOCI(2)
+Other equity investments classified at FVTOCI
+31
+125,283
+114,513
+105,917
+107,853
+19,366
+6,660
+2018
+2019
+Non-publicly traded investments classified at FVTPL:
+Corporate wealth management products (2)
+Money market funds (1)
+Publicly traded investments classified at FVTPL:
+Current:
+Other financial assets
+Kerogen Energy Fund is principally engaged in the investment in the oil and gas industry. The equity investment in Kerogen Energy Fund is
+designated by the Group as at FVTOCI.
+(2)
+MEG is principally engaged in the exploitation and production of oil sands. The investment in MEG is designated by the Group as at
+FVTOCI. As at 31 December 2019, the investment in MEG was stated at the quoted market price.
+(1)
+4,066
+2,936
+2,956
+2,938
+18
+1,778
+Beijing, PRC
+1,809
+30.0%
+100%
+US$12,000
+Bermuda
+CNOOC Southeast Asia Limited
+Principal activities
+Percentage
+of equity
+attributable
+to the Group
+Nominal value
+of ordinary shares
+issued and paid-up/
+registered capital
+Place of
+establishment
+Name of entity
+Particulars of the principal subsidiaries at the end of the reporting period are as follows: (continued)
+INVESTMENTS IN SUBSIDIARIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+***
+eve
+see
+17.
+seas
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Investment holding
+26.
+CNOOC SES Ltd.
+US$1
+British Virgin Islands
+CNOOC Iraq Limited
+Petroleum and natural gas exploration, development
+and production in Africa
+100%
+NGN10 million
+Nigeria
+CNOOC Exploration & Production
+Nigeria Limited
+development and production in Australia
+Offshore petroleum and natural gas exploration,
+100%
+SG$2
+Singapore
+CNOOC NWS Private Limited
+and production in Indonesia
+Petroleum and natural gas exploration, development
+100%
+US$7,780,770
+Isle of Man
+CNOOC Muturi Limited
+Petroleum and natural gas exploration, development
+and production in Indonesia
+100%
+Malaysia
+US$1
+CONTRACT LIABILITIES
+- Current
+327
+615
+81
+55
+1,439
+674
+5,720
+9,679
+9,976
+20,901
+14,084
+2019
+Effective interest rate
+and final maturity
+Loans
+Notes
+Total
+Loans
+2018 (restated)
+Notes
+CNOOC Finance Corporation Limited (1)
+Short-term loans
+Total
+747
+Contract Liabilities
+1,527
+2,128
+2019
+2018
+2,231
+2,036
+2,231
+2,036
+Under the natural gas sale contracts, which contain take-or-pay clauses, the Group recorded the payments received from
+customers for natural gas not yet taken as contract liabilities.
+The amount of RMB477 million contract liability at the beginning of the year has been recognised as revenue for the year
+ended 31 December 2019.
+27.
+Accrued payroll and welfare payable
+Accrued expenses
+Special oil gain levy payable
+Royalties payable
+Provision for dismantlement (note 30)
+Deferred consideration to Arctic LNG 2 LLC
+Other payables
+28.
+LOANS AND BORROWINGS
+Current
+2019
+2018
+(restated)
+2,017
+100%
+OTHER PAYABLES AND ACCRUED LIABILITIES
+CNOOC Canada Energy Ltd.
+(1)
+INVESTMENTS IN SUBSIDIARIES (continued)
+18.
+17.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+119
+CNOOC LIMITED Annual Report 2019
+Bond Issuance
+100%
+US$1
+Bond Issuance
+100%
+N/A
+Australia
+USA
+without a par value
+Bond issuance
+100%
+100 common shares
+Registered as a wholly foreign owned enterprise under the PRC law.
+(2)
+CEPR Limited was incorporated on 31 May 2019.
+(3)
+Shanghai, PRC
+RMB900 million
+Shanghai Petroleum Corporation Limited (1)
+Principal activities
+Providing services of petroleum and natural gas
+exploration and development in the Republic of Iraq
+Percentage
+of equity
+attributable
+to the Group
+Nominal value of
+ordinary shares issued
+and paid-up/registered
+capital
+Place of
+establishment
+Name of associates
+Particulars of the principal associates at the end of the reporting period are as follows:
+Canada
+INVESTMENTS IN ASSOCIATES
+(8)
+CNOOC Nexen Finance (2014) ULC changed its name to CNOOC Finance (2014) ULC on 25 June 2019.
+The registered capital of CNOOC PETROLEUM BRASIL LTDA increased from R$3,565,600,000 to R$6,778,134,300 on 26 December 2019.
+(7)
+Nexen Petroleum Offshore U.S.A. Inc. changed its name to CNOOC Petroleum Offshore U.S.A. Inc. on 1 January 2019.
+(6)
+Nexen Petroleum U.K. Limited changed its name to CNOOC Petroleum Europe Limited on 14 January 2019.
+(5)
+(4)
+All subsidiaries are indirectly held through CNOOC International Limited, except CNOOC Deepwater Development Limited and China United
+Coalbed Methane Corporation Limited which are indirectly held through CNOOC China.
+The above table lists the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results
+for the year or formed a substantial portion of the total assets of the Group. To give details of other subsidiaries would, in the
+opinion of the Directors, result in particulars of excessive length.
+Petroleum and natural gas exploration, development
+and production in Brazil
+The registered capital of CNOOC Deepwater Development Limited increased from 20.3 billion to 20.78 billion on 26 December 2019.
+R$6,778,134,300
+100%
+NGN30 million
+Nigeria
+Nexen Petroleum Nigeria Limited
+100%
+GBP98,009,131
+England and Wales
+CNOOC Petroleum Europe Limited (5)
+shares without a par value
+13,671,421,700 common
+Canada
+CNOOC Petroleum North America ULC
+100%
+1 million Uganda Shilling
+Uganda
+CNOOC Uganda Ltd
+100%
+shares without a par value
+Oil sands exploration, development and production in
+Canada
+Canada
+100 common shares without
+a par value 103,000 preferred
+CNOOC Energy U.S.A. LLC
+USA
+100%
+100%
+CNOOC Finance (2015) Australia Pty Ltd
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2014) ULC(8)
+Brazil
+CNOOC PETROLEUM BRASIL LTDA
+N/A
+Petroleum and natural gas exploration, development
+and production in Canada
+Petroleum and natural gas exploration, development
+and production in the USA
+Petroleum and natural gas exploration, development
+and production in the USA
+Petroleum and natural gas exploration, development
+and production in Nigeria
+Petroleum and natural gas exploration, development
+and production in the UK
+Petroleum and natural gas exploration, development
+and production in Canada
+100%
+Petroleum and natural gas exploration, development
+and production in Africa
+100%
+N/A
+Canada
+CNOOC Oil Sands Canada
+US$15,830
+USA
+100%
+CNOOC Petroleum Offshore U.S.A. Inc. (6)
+Reconciliation of liabilities arising from financing activities
+payable
+Total
+The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash
+changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified
+in the Group's consolidated statement of cash flows as cash flows from financing activities.
+Finance costs
+Foreign exchange translation
+Unwinding of discount on provision
+for dismantlement (note 30)
+Amount capitalised in property,
+134,869
+At 1 January 2018 (restated)
+Financing cash flows
+CNOOC LIMITED Annual Report 2019
+Dividend
+(Note 29)
+(Note 28)
+1,185
+payable
+Interest
+Lease
+Liabilities
+Loans and
+borrowings
+Reconciliation of liabilities arising from financing activities (continued)
+35.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+135
+(Note 27)
+NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
+142,470
+1,717
+(1,451)
+(5,998)
+140,082
+4,037
+Financing cash flows
+152,891
+1,282
+9,139
+142,470
+At 1 January 2019
+143,752
+1,282
+At 31 December 2018 (restated)
+23,144
+136,054
+23,144
+2,838
+2,838
+plant and equipment (note 14)
+(2,560)
+(2,560)
+5,162
+5,083
+79
+6,250
+445
+5,805
+(27,136)
+(23,589)
+(5,264)
+Dividends declared
+145,979
+85,649
+301
+5,865
+(798)
+(1,067)
+Share of profits of associates
+Exchange losses, net
+Finance costs
+Interest income
+Adjustments for:
+Profit before tax
+75,157
+2018
+(restated)
+2019
+Reconciliation of profit before tax to cash generated from operations
+5,162
+35. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
+The Group provides retirement benefits for all local employees in overseas locations in accordance with relevant labour law,
+and provides employee benefits to expatriate staff in accordance with the relevant employment contracts.
+The Company is required to make contributions to a defined contribution mandatory provident fund at a rate of 5% of the
+salaries of all full-time employees in Hong Kong. The related pension costs are expensed as incurred.
+All the Group's full-time employees in the PRC are covered by a state-managed retirement benefit plan operated by the
+government of the PRC, and are entitled to an annual pension. The PRC government is responsible for the pension liabilities
+to these retired employees. The Group is required to make annual contributions to the state-managed retirement benefit plan
+at rates ranging from 11% to 22% of the employees' base salaries.
+RETIREMENT BENEFITS
+34.
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+くく
+***
+see
+seas
+(28,973)
+ecce
+During the year, the Group's pension costs charged to the consolidated statement of profit or loss and other comprehensive
+income amounted to RMB1,075 million (2018: RMB695 million).
+213
+141
+(459)
+1,439
+Increase in trade and accrued payables, contract liabilities and
+other payables and accrued liabilities
+1,720
+(1,304)
+(Increase)/decrease in inventories and supplies
+(940)
+(3,213)
+Increase in trade receivables and other current assets
+139,001
+149,057
+Subtotal
+668
+4,238
+Loss on disposal and write-off of property, plant and equipment
+470
+50,838
+57,699
+Depreciation, depletion and amortisation
+22
+Provision for other assets
+5,861
+2,072
+Impairment for property, plant and equipment
+(3,685)
+(4,632)
+Investment income
+5,593
+(543)
+(Profit)/loss attributable to a joint venture
+(406)
+Cash generated from operations
+(32,385)
+Notes to Consolidated Financial Statements
+687
+CNOOC LIMITED Annual Report 2019
+63
+32
+20
+24
+223
+139
+2018
+Later than five years
+Later than one year and not later than two years
+Later than two years and not later than five years
+No later than one year
+Commitments due:
+Office properties commitments of a joint venture:
+The above table includes minimum lease payments of approximately RMB898 million to the CNOOC Group in
+2018.
+9,055
+4,260
+2,106
+927
+1,762
+2018
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+No later than one year
+Commitments due:
+As at 31 December 2018, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+The Group leases certain of its office properties under operating lease arrangements. Leases for properties are
+negotiated for terms ranging from 6 months to 20 years.
+Office properties
+(a)
+The Group has applied IFRS 16/HKFRS 16 for the first time in the current year. IFRS 16/HKFRS 16 superseded IAS17/
+HKAS 17 and the related interpretations. For details please refer to note 2 and 29.
+Operating lease commitments
+137
+(ii)
+31 December 2019
+36.
+se
+se
+CNOOC LIMITED Annual Report 2019
+138
+The fair value of the Group's long term bank loans with floating interest rates approximated to the carrying amount as at 31
+December 2019 and 2018.
+The carrying values of the Group's cash and cash equivalents, time deposits with maturity more than three months, trade
+receivables, other current assets, short-term loans and borrowings, trade and accrued payables, other payables and accrued
+liabilities approximated to their fair values at the reporting date due to the short maturity of these instruments.
+Fair value of financial instruments
+37. FINANCIAL INSTRUMENTS
+In addition to the matters mentioned above, the Group is dealing with a number of lawsuits and arbitrations that
+arise in the ordinary course of business. While the results of these legal proceedings cannot be ascertained at this
+stage, management of the Company believes these proceedings are not expected to have a material effect on the
+consolidated financial statements.
+The Group is subject to tax in numerous jurisdictions around the world. There are audits in progress and items under
+review. Difference in positions taken by taxation authorities over the interpretation and application of tax laws and
+regulations may increase the Group's tax liability. Management of the Company has assessed the possible future
+outcome of matters that are currently under dispute. Management of the Company believes that an adequate provision
+for future tax liability has been included in the consolidated financial statements based on available information.
+As a Chinese Resident Enterprise, the Company may be liable to pay taxes on the deemed interest income for
+the funding provided to its overseas subsidiaries starting from 1 January 2008. The Company has prepared
+contemporaneous documentation in accordance with applicable PRC tax laws and regulations and is currently awaiting
+confirmation from its local tax authority.
+(iii) Contingencies
+The above table includes a commitment of approximately RMB5, 195 million to the CNOOC Group in 2018.
+7,317
+3,061
+1,760
+1,117
+1,379
+2018
+Later than one year and not later than two years
+Later than two years and not later than five years
+Later than five years
+No later than one year
+Commitments due:
+As at 31 December 2018, the Group had total minimum lease payments under non-cancellable operating leases
+falling due as follows:
+The Group leases certain of its plant and equipment under operating lease arrangements for a term from 1 year
+to 25 years.
+Plant and equipment
+(b)
+Operating lease commitments (continued)
+(ii)
+COMMITMENTS AND CONTINGENCIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+New lease entered
+As at 31 December 2019, the Group had unutilised banking facilities amounting to approximately RMB54,948 million
+(2018: RMB55,289 million).
+590
+158,554
+1,325
+8,487
+148,742
+At 31 December 2019
+29,000
+29,000
+Dividends declared
+3,048
+3,048
+plant and equipment (note 14)
+Amount capitalised in property,
+348
+(2,794)
+(2,794)
+348
+Interest on lease liabilities (note 8)
+for dismantlement (note 30)
+Unwinding of discount on provision
+5,865
+5,439
+348
+78
+Finance costs
+1,894
+(27)
+(236)
+2,157
+Foreign exchange translation
+687
+36.
+Contracted, but not provided for
+COMMITMENTS AND CONTINGENCIES
+Capital commitments
+344
+2018
+2019
+Capital commitments of a joint venture:
+Capital commitments (continued)
+(i)
+COMMITMENTS AND CONTINGENCIES (continued)
+36.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+くく
+***
+eve
+see
+seas
+ecce
+se
+CNOOC LIMITED Annual Report 2019
+136
+The above table includes a commitment of approximately RMB10,528 million (2018: RMB10,309 million) contracted
+with the CNOOC Group.
+The capital commitments contracted, but not provided for, include the estimated payments to the Ministry of Natural Resources of the
+PRC for the next five years with respect to the Group's exploration and production licenses.
+(1)
+55,538
+64,542
+Contracted, but not provided for (1)
+2018
+2019
+As at 31 December 2019, the Group had the following capital commitments, principally for the construction of property,
+plant and equipment:
+(i)
+.se
+As at 31 December 2019, the general reserve fund amounted to RMB57,504 million (2018: RMB60,000 million).
+In September 2014, CNOOC provided CNOOC International Limited, a wholly-owned subsidiary of the Company a five-year uncommitted
+revolving loan facility for general purposes, with the principal amount of US$135 million of 0.95% per annum. As at 31 December 2019,
+the withdrawal amount of the loan was nil (31 December 2018: US$130 million); In December 2014, CNOOC provided the Company a
+five-year uncommitted revolving loan facility for general purposes, with the principal amount of US$600 million of 0.95% per annum. As at
+31 December 2019, the withdrawal amount of the loan was nil (31 December 2018: US$564 million). The Company has paid the above
+loans off in 2019.
+e)
+Provision of marketing, management and ancillary services
+d)
+Provision of oil and gas production and support services
+c)
+Provision of oil and gas development and support services
+b)
+a) Provision of exploration and support services
+Comprehensive framework agreement with CNOOC in respect of a range of products and services (continued)
+Provision of exploration, oil and gas development, oil and gas production as well as marketing, management and
+ancillary services by the CNOOC Group to the Group:
+(1)
+33. RELATED PARTY TRANSACTIONS (continued)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+FPSO vessel leases
+くく
+eve
+see
+seas
+ecce
+se
+130 CNOOC LIMITED Annual Report 2019
+Comprehensive framework agreement with CNOOC in respect of a range of products and services
+As the Group is controlled by CNOOC, transactions with the CNOOC Group are disclosed as related party transactions.
+The connected transactions or continuing connected transactions defined in Chapter 14A of the Listing Rules in respect of
+items listed below also constitute related party transactions. The Company has complied with the disclosure requirements in
+accordance with Chapter 14A of the Listing Rules for continuing connected transactions listed below. The Company entered
+into a comprehensive framework agreement with CNOOC on 15 November 2016 for the provision (1) by the Group to the
+CNOOC Group and (2) by the CNOOC Group to the Group, of a range of products and services which may be required
+and requested from time to time by either party and/or its associates in respect of the continuing connected transactions.
+The term of the comprehensive framework agreement is for a period of three years from 1 January 2017. The continuing
+connected transactions under the comprehensive framework agreement and the relevant annual caps for the three years
+from 1 January 2017 were approved by the independent shareholders of the Company on 1 December 2016. The approved
+continuing connected transactions are as follows:
+As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a state-owned enterprise subject to the control
+of the State Council of the PRC. The State Council of the PRC directly and indirectly controls a significant number of state-
+owned entities and organisations.
+RELATED PARTY TRANSACTIONS
+33.
+In accordance with the "Temporary Regulation for Safety Expense Financial Management of Higher Risk Industry" and the
+implementation guidance issued by the MOF of the PRC, the Group is required to accrue a safety fund for its oil and gas
+exploration and production activities within the PRC by appropriating a portion of its net profit to other reserves based on its
+annual production from offshore China. Such reserve is reduced for expenses incurred to improve the safety conditions of
+oil and gas production. When the safety fund is fully utilised, additional expenses incurred for safety production purposes are
+charged directly to the profit or loss for the year. As of 31 December 2019, the Group's safety fund reserve under the PRC
+regulations amounted to nil (2018: nil).
+Appropriation to the staff and workers' bonus and welfare fund, which is determined at the discretion of the board of directors
+of CNOOC China, is expensed as incurred under IFRS standards/HKFRSs. The staff and workers' bonus and welfare fund
+can only be used for special bonuses or collective welfare of employees.
+The general reserve fund, which is determined at the discretion of the board of directors of CNOOC China, can only be used,
+upon approval by the relevant authority, to offset against accumulated losses or to increase capital.
+***
+Provision of management, technical, facilities and ancillary services, including the supply of materials by the Group to
+the CNOOC Group; and
+(3)
+Sales of petroleum and natural gas products by the Group to the CNOOC Group:
+2018
+2019
+CNOOC LIMITED Annual Report 2019
+Provision of exploration, oil and gas development, oil and gas production as well as marketing, management
+and ancillary services by the CNOOC Group to the Group
+(i)
+The following is a summary of significant related party transactions entered into in the ordinary course of business between
+the Group and its related parties during the year and the balances arising from related party transactions at the end of the
+year:
+The continuing connected transactions referred to in paragraph (2) above provided by the Group to the CNOOC Group, on
+the basis of the above pricing principle, are determined through arm's length negotiation between both parties with reference
+to market price.
+The continuing connected transactions referred to in paragraph (1)(e), on the basis of the above pricing principle, are
+unanimously determined with the CNOOC Group which provides the FPSO vessel leases after arm's length negotiation in
+accordance with normal commercial terms.
+Pricing principles (continued)
+ま
+RELATED PARTY TRANSACTIONS (continued)
+33.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+131
+CNOOC LIMITED Annual Report 2019
+The continuing connected transactions referred to in paragraph (1)(c)-(1)(d) above provided by the CNOOC Group to the
+Group, on the basis of the above pricing principle, are based on government-prescribed price or market prices.
+The continuing connected transactions referred to in paragraph (1)(a)-(1)(b) above provided by the CNOOC Group to the
+Group and (3)(a)-(3)(b) above provided by the Group to the CNOOC Group, on the basis of the above pricing principle,
+are determined through arm's length negotiations based on market prices (as defined in the comprehensive framework
+agreement).
+where there is no government-prescribed price, in accordance with market prices, including the local, national or
+international market prices.
+government-prescribed prices; or
+(b)
+(a)
+On the basis of the above basic pricing principle, each type of products or services must be charged in accordance with the
+following pricing mechanism and in the following sequential order:
+The basic pricing principle for the continuing connected transactions between the Group and the CNOOC Group is based on
+arm's length negotiations, on normal commercial terms or better and with reference to the prevailing local market conditions
+(including the volume of sales, length of contracts, the volume of services, overall customer relationship and other market
+factors).
+Pricing principles
+Sales of petroleum and natural gas products (other than long-term sales of natural gas and liquefied natural gas)
+Long-term sales of natural gas and liquefied natural gas
+b)
+a)
+According to the laws and regulations of the PRC and the articles of association of CNOOC China, CNOOC China is required
+to provide for certain statutory funds, namely, the general reserve fund and the staff and workers' bonus and welfare fund,
+which are appropriated from net profit (after making up for losses from previous years), but before dividend distribution.
+RESERVES
+At the date of approval of these consolidated financial statements for issuance, the share options outstanding under these
+share option schemes represented approximately 0.06% of the Company's shares in issue as at that date (2018: 0.15%).
+The weighted average remaining contractual life of share options outstanding at the end of the year was 0.39 years (2018:
+0.93 years). The exercise in full of the outstanding share options would, under the present capital structure of the Company,
+result in the issue of 27,030,000 (2018: 67,907,000) additional ordinary shares of the Company and additional share capital of
+RMB308,176,111 (2018: RMB680,525,151).
+32.
+Outstanding at the beginning of the year
+average
+exercise price
+HK$
+Number of
+share options
+Weighted
+Weighted
+average
+exercise price
+HK$
+Number of
+share options
+2018
+2019
+Details of the share options outstanding are as follows:
+The fair value of equity-settled share options granted was estimated as at the date of grant if any, using the Black-Scholes
+option pricing model, taking into account the terms and conditions upon which the options were granted.
+No new share option was granted during the year (2018: nil) and the Group recognised an equity-settled share option
+expense of nil (2018: nil) during the year.
+The period within which the options must be exercised, as well as any minimum holding period or performance targets which
+apply to the options, will be specified by the Board of the Company at the time of grant. The exercise periods for options
+granted under the 2005 Share Option Scheme shall end no later than 10 years from the date of grant. No options may be
+granted under the 2005 Share Option Scheme after the date of the 10th anniversary of the adoption of the 2005 Share Option
+Scheme.
+the closing price of the shares as stated in the HKSE's daily quotation sheet on the date of grant.
+the average closing price of the shares as stated in the daily quotation sheets of The Stock Exchange of Hong Kong
+Limited for the five trading days immediately preceding the date of grant; and
+(3)
+(2)
+the nominal value of a share of the Company on the date of grant;
+(1)
+According to the 2005 Share Option Scheme, the consideration payable by a grantee for the grant of options will be HK$1.00.
+The exercise price for such options will be determined by the Board at its discretion at the date of grant, except that such
+price shall be at least the higher of:
+2005 Share Option Scheme (continued)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+くく
+***
+see
+SHARE CAPITAL (continued)
+31.
+seas
+ecce
+67,907,000
+(restated)
+11.44
+12.34
+SHARE CAPITAL (continued)
+31.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+129
+CNOOC LIMITED Annual Report 2019
+No share options had been cancelled or modified during the years ended 31 December 2019 and 2018.
+11.44
+67,907,000
+12.70
+11.44
+67,907,000
+12.70
+27,030,000
+27,030,000
+14.83
+(35,280,000)
+9.93
+(30,900,000)
+11.33
+(26,732,000)
+12.70
+(9,977,000)
+Exercisable at the end of the year
+Outstanding at the end of the year
+Exercised during the year
+Expired during the year
+Forfeited during the year
+Granted during the year
+129,919,000
+Provision of exploration and support services
+(ii)
+7,378
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Notes to Consolidated Financial Statements
+134
+133
+CNOOC LIMITED Annual Report 2019
+137
+77
+2018
+2019
+Amount due from a joint venture
+included in other current assets
+Balance with a joint venture
+(vi)
+15,210
+15,300
+1,153
+512
+-included in other current assets
+14,057
+14,788
+- included in trade receivables
+Amounts due from other related parties
+Borrowings from CNOOC (note g)
+4,760
+19,775
+25,648
+10,284
+- included in lease liabilities
+19,628
+33.
+20,318
+RELATED PARTY TRANSACTIONS (continued)
+The Group enters into extensive transactions covering sales of crude oil and natural gas, purchase of property, plant
+and equipment and other assets, receiving of services, and making deposits with state-owned enterprises, other than
+the CNOOC Group, in the normal course of business on terms comparable to those with other non-state-owned
+enterprises. The purchases of property, plant and equipment and other assets, and receipt of services from these state
+owned enterprises are individually not significant. The individually significant sales transactions with these state-owned
+enterprises are disclosed in note 38. In addition, the Group had certain of its cash in bank and time deposits with
+certain state-owned banks in the PRC as at 31 December 2019, as summarised below:
+CNOOC Finance is a 31.8% owned associate of the Company and also a subsidiary of CNOOC. The financial services provided by
+CNOOC Finance to the Group also constitute continuing connected transactions defined in Chapter 14A of the Listing Rules and
+the Company has complied with the disclosure requirements in accordance with Chapter 14A of the Listing Rules for the continuing
+connected transactions. Under the financial services framework agreement with CNOOC Finance dated 1 December 2016, CNOOC
+Finance continues to provide to the Group settlement, depository, discounting, loans and entrustment loans services. The agreement is
+effective from 1 January 2017 to 31 December 2019. The depository services were exempted from independent shareholders' approval
+requirements under the Listing Rules. On 23 August 2018, the Board approved to revise the maximum daily outstanding balance of
+deposits placed by the Group with CNOOC Finance for the period from 23 August 2018 to 31 December 2019 to RMB23,500 million.
+The Group's actual maximum daily outstanding balance for deposits stated in CNOOC Finance (including accrued interest but excluding
+funds placed for the purpose of extending entrustment loans pursuant to the entrustment loan services) in 2019 was RMB23,500 million
+(2018: RMB23,500 million).
+It is the market practice for sales terms to be determined based on the estimated reserves and production profile of the relevant gas
+fields. The long term sales contracts usually last for 5 to 20 years.
+The sales include crude oil, condensate oil, liquefied petroleum gas, natural gas and liquefied natural gas to the CNOOC Group. Individual
+sales contracts were entered into from time to time between the Group and the CNOOC Group.
+CNOOC Energy Technology & Services Limited leased FPSO vessels to the Group for use in oil production operations.
+These include marketing, administration and management, management of oil and gas operations and integrated research services
+as well as other ancillary services relating to exploration, development, production and research activities of the Group. In addition,
+the CNOOC Group leased certain premises to the Group for use as office premises and staff quarters out of which they provided
+management services to certain properties.
+These represent the services for production operations, the provision of various facilities and ancillary services, such as provision of
+different types of materials, medical and employee welfare services, maintenance and repair of major equipment and supply of water,
+electricity and heat to the Group, some of which may not be available from independent third parties or available on comparable terms.
+g)
+f)
+e)
+d)
+c)
+b)
+a)
+Notes:
+Key management personnel's remuneration is disclosed in note 9.
+(viii) Key management personnel's remuneration
+Interest rates for the above time deposits and specified dismantlement fund accounts are at prevailing market rates.
+11,015
+31,210
+8,100
+8,860
+227
+221
+2,688
+22,129
+2018
+2019
+Time deposits with maturity over three months
+Specified dismantlement fund accounts (note 21)
+Cash and cash equivalents
+(vii) Transactions and balances with other state-owned enterprises
+- included in trade and accrued payables
+5,327
+147
+132
+147,191
+Amounts due to other related parties
+15,461
+15,425
+131,730
+132,222
+Sales of petroleum and natural gas products (other than long-term
+sales of natural gas and liquefied natural gas) (note d)
+Long term sales of natural gas and liquefied natural gas (note e)
+2018
+(restated)
+2019
+Sales of petroleum and natural gas products by the Group to the CNOOC Group
+(iii)
+The Group did not enter into any transactions in the above category for the years ended 31 December 2019 and 2018.
+Provision of management, technical, facilities and ancillary services, including the supply of materials by
+the Group to the CNOOC Group
+For the right-of-use assets recognised during this period from the lease agreements with CNOOC Group please refer to note 15.
+43,396
+53,918
+1,213
+1,236
+1,460
+1,261
+9,284
+9,414
+Provision of oil and gas production and support services (note a)
+Provision of marketing, management and ancillary services (note b)
+FPSO vessel leases (note c) *
+24,061
+31,723
+3,803
+6,369
+- Inclusive of amounts capitalised under property, plant and equipment
+Provision of oil and gas development and support services
+CNOOC LIMITED Annual Report 2019
+se
+147,647
+seas
+3
+- included in other payables and accrued liabilities
+Amount due to CNOOC
+2018
+(restated)
+2019
+23,052
+23,380
+2018
+2019
+ecce
+333
+2018
+2019
+Balances with the CNOOC Group
+391
+Deposits in CNOOC Finance
+see
+eve
+(v)
+***
+くく
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+(iv) Transactions and balances with CNOOC Finance Corporation Limited ("CNOOC Finance") (note f)
+(a) Interest income received by the Group
+Interest income from deposits in CNOOC Finance
+(b)
+Deposits balances made by the Group
+33. RELATED PARTY TRANSACTIONS (continued)
+***
+Notes to Consolidated Financial Statements
+くく
+eve
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+37.
+seas
+ecce
+see
+FINANCIAL INSTRUMENTS (continued)
+Publicly traded investments - non current*
+The estimated fair value of the Group's long term guaranteed notes was approximately RMB154,407 million as at 31
+December 2019 (2018: RMB134,583 million), which was determined by reference to the market price as at 31 December
+2019.
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(a)
+Reserve quantity information (continued)
+Proved developed reserves:
+ecce
+Asia
+North America
+PRC
+(excluding PRC)
+Oceania
+Africa
+Canada
+Natural
+Natural
+Natural
+Oil gas Oil gas Oil gas Oil
+(mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls)
+Natural
+gas Oil
+(bcf) (mmbls)
+Natural Synthetic
+(excluding Canada) South America
+Natural
+Natural
+Natural
+gas oil Bitumen Oil gas Oil gas Oil gas Oil
+gas oil Bitumen
+(bcf) (mmbls) (mmbls) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (mmbls)
+Europe
+Total
+Natural Synthetic
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+Consolidated entities
+seas
+CNOOC LIMITED Annual Report 2019
+614
+270
+20
+620
+31 December 2018
+31 December 2019
+1,901
+6,365
+56
+799
+9
+260
+84
+780
+154
+250
+405
+414 614
+108
+4
+2,820
+8,447 780
+154
+se
+31 December 2017
+31 December 2018
+902
+6
+133 533
+133 539
+31 December 2018
+3
+31 December 2019
+1
+6
+139
+445
+140 452
+58
+Proved undeveloped reserves:
+Asia
+PRC
+(excluding PRC)
+Oceania
+Africa
+Natural
+Natural
+Natural
+Natural
+Oil gas Oil gas Oil gas Oil gas Oil
+(mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls) (bcf) (mmbls)
+North America
+1
+31 December 2017
+method investees:
+Enterprise's share of equity
+1,544 25 531
+102
+136
+883 574 535 559 8 230 24 12 5 12 276 4 5 1182 20839 14245
+143
+31 December 2019
+910
+1,730
+30
+473
+8 241
+269
+80
+95
+166 278
+118
+-
+கஐக
+98
+1,279 2,614 136
+26
+97
+1 1,317 2,723 122
+95
+122
+(excluding Canada) South America
+2
+(11)
+=
+3
+1 268
+26
+ਹ ।੪।
+சு
+(1)
+108
+4 2,550
+7,827 780 154
+Enterprise's share of equity
+method investees:
+31 December 2016
+7
+I
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+Production
+Revisions of prior estimates
+31 December 2017
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+''ਦ
+1
+22 69 67
+030
+111
+7 2,414 7.627 796
+90
+88
+88
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+175
+639
+Improved Recovery
+Production
+Revisions of prior estimates
+31 December 2019
+1,900
+6,358
+56
+799
+9
+260
+84
+(17)
+405 145
+09
+780 154 250
+-
+6
+195
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+Production
+Revisions of prior estimates
+31 December 2019
+Total consolidated and equity
+Interests in reserves
+31 December 2017
+(2)
+(2)
+(10)
+(19)
+60
+661
+258
+657
+258
+20
+46
+20
+46
+(10)
+1
+31 December 2018
+Revisions of prior estimates
+Production
+567
+195
+574
+49
+140
+49
+140
+8
+34
+8
+34
+1
+1
+1
+23
+(8)
+(52)
+(8)
+(1)
+(11)
+244
+701
+245
+11
+23
+Europe
+Natural
+Natural
+(11,913)
+(536)
+(154)
+341
+1,070
+(1,075)
+4
+(1,230)
+(13,493)
+Result of operations
+35,741
+4,774
+359
+(9,486)
+(2,043)
+(2,786)
+(165)
+1,983
+28,377
+2017
+Enterprise's share of equity method investees:
+North
+PRC
+Income tax expense
+Asia
+(excluding
+PRC)
+41,870
+(169)
+(82)
+(249)
+(2,144)
+Depreciation, depletion and
+amortization, and impairment
+(33,737)
+(1,363)
+(142)
+(17,863)
+(3,851)
+(5,889)
+(23)
+(6,605)
+(69,473)
+Special oil gain levy
+(55)
+(55)
+47,654
+5,310
+513
+(9,827)
+(3,113)
+(1,711)
+3,213
+America
+Oceania
+Africa
+(71)
+(278)
+(349)
+Income tax expense
+11
+11
+Result of operations
+(60)
+(278)
+(338)
+Total result of operations
+for producing activities
+35,681
+4,774
+359
+(9,486) (2,043) (2,786)
+(443)
+1,983
+28,039
+148
+CNOOC LIMITED Annual Report 2019
+.se
+se
+Special oil gain levy
+(1,462)
+(1,330)
+(132)
+Canada
+(excluding
+Canada)
+South
+America
+Europe
+Total
+Net sales to customers
+193
+2,840
+3,033
+Operating expenses
+(113)
+(124)
+(1,281)
+Taxes other than income tax
+(11)
+(448)
+(459)
+Exploration expense
+(6)
+Accretion expense
+(53)
+(61)
+Depreciation, depletion and
+amortization, and impairment
+(1,394)
+(164)
+(1,525)
+Accretion expense
+989 4,628
+26
+326
+20
+4
+657
+58
+84
+127
+119
+11
+4
+1,233 5,105 657 58
+Enterprise's share of equity
+method investees:
+31 December 2017
+31 December 2018
+31 December 2019
+130
+169
+130
+169
+CNOOC LIMITED Annual Report 2019
+31 December 2019
+%
+1,113 4,875 644 72
+5
+Natural
+Canada
+Natural Synthetic
+gas
+oil Bitumen
+(bcf) (mmbls) (mmbls) (mmbls)
+Oil gas Oil gas Oil gas Oil
+(bcf) (mmbls)
+(bcf) (mmbls)
+(bcf) (mmbls)
+Total
+Natural Synthetic
+gas oil Bitumen
+(bcf) (mmbls) (mmbls)
+Consolidated entities
+31 December 2017
+734
+147
+4,336
+327
+2
+68 100
+31 December 2018
+8=
+644
+72
+19
+159
+143
+78
+35
+79
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(462)
+(1,033)
+(3,057)
+(1,021)
+(23)
+(1,402)
+(24,281)
+Taxes other than income tax
+(6,297)
+(159)
+(406)
+(13)
+(282)
+(12)
+(7,169)
+Exploration expense
+(3,737)
+(83)
+(818)
+(714)
+(223)
+(1,303)
+(6,896)
+(2,401)
+(14,882)
+Operating expenses
+151,888
+(b)
+Results of operations
+2017
+Consolidated entities
+Asia
+North
+America
+(excluding
+(excluding South
+PRC
+PRC) Oceania
+Africa
+31 December 2019
+Canada
+Europe
+Total
+Net sales to customers
+107,887
+9,085
+1,283
+9,722
+4,750
+6,277
+100
+12,784
+Canada) America
+391
+23
+263
+Total capital
+Gearing ratio
+40.
+CHARGES ON ASSETS
+41.
+2019
+2018
+(restated)
+148,742
+8,487
+448,226
+142,470
+419,910
+605,455
+562,380
+26.0%
+25.3%
+CNOOC NWS Private Limited, a wholly-owned subsidiary of the Group, together with the other joint venture partners and
+the operator of the NWS Project, signed a Deed of Cross Charge and an Extended Deed of Cross Charge whereby certain
+liabilities incurred or to be incurred, if any, by the Company in respect of the NWS Project are secured by its interest in the
+NWS Project.
+SUBSEQUENT EVENTS
+The Group has no significant subsequent events needed to be disclosed in the consolidated financial statements.
+142
+CNOOC LIMITED Annual Report 2019
+se
+ecce
+seas
+Total Equity
+see
+Lease liability
+The Group monitors capital on the basis of the debt to capital ratio, which is calculated as interest-bearing debts
+divided by total capital (equity attributable to owners of the parent plus interest-bearing debts).
+Oil and gas price risk
+Since the Group makes reference to international oil prices to determine its realised oil price, fluctuations in international
+oil price would have a significant impact on the Group's sales revenue, profit, assets value and cashflow. In addition,
+certain of the Group's natural gas sales contracts contain price adjustment provisions. Any changes in international oil
+prices, inflation rate and domestic natural gas pricing policies may result in changes in natural gas prices, which will
+affect the Group's profitability.
+Currency risk
+Substantially all of the Group's oil and gas sales are denominated in RMB and United States dollars ("US dollars").
+Starting from 21 July 2005, China reformed the exchange rate regime by moving into a managed floating exchange rate
+regime based on market supply and demand with reference to a basket of currencies. RMB would no longer be pegged
+to the US dollars. From 1 January 2019 to 31 December 2019, RMB has depreciated by approximately 1.62% (2018:
+depreciated by approximately 4.79%) against the US dollars. At 31 December 2019, approximately 52% (2018: 84%) of
+the Group's cash and cash equivalents and time deposits with maturity over three months were denominated in RMB,
+and the remaining amounts were substantially denominated in US dollars and Hong Kong dollars. The Group also has
+exposures to currencies other than the US dollars, such as Canadian dollars and British Pounds as such exposures are
+considered insignificant.
+Management has assessed the Group's exposure to foreign currency risk by using a sensitivity analysis on the change
+in foreign exchange rate of the US dollars, to which the Group is mainly exposed to as at 31 December 2019 and
+2018. Based on management's assessment at 31 December 2019, a 5% strengthening/weakening of RMB against US
+dollars would have increased/decreased the profit for the year of the Group by 0.04% (2018: 0.15%) and the equity of
+the Group by 0.47% (2018: 0.25%). This analysis has been determined assuming that the change in foreign exchange
+rates had occurred at the end of the reporting period and had been applied to the foreign currency balances to which
+the Group has significant exposure with all other variables held constant. The analysis is performed on the same basis
+for 2018.
+Senior management is closely monitoring the Group's net exposure to foreign currency risk. The depreciation of RMB
+against the US dollars may have the following impact on the Group. On one hand, since the benchmark oil and gas
+prices are usually in US dollars against RMB, the Group's oil and gas sales may increase due to the appreciation of
+the US dollars against RMB. On the other hand, the appreciation of the US dollars against RMB will also increase the
+Group's costs for imported equipment and materials, most of which are denominated in the US dollars.
+CNOOC LIMITED Annual Report 2019
+141
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+39.
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+(iv) Interest rate risk
+(v)
+(vi)
+The interest rate risk is closely monitored by the Group's senior management. As at the end of 2019, the interest rates
+for 96% of the Group's debts were fixed. Apart from borrowing for Tangguh LNG Project and Arctic LNG Project, all
+of the Group's long term debts are fixed rate. The weighted average term of the Group's debt balance outstanding
+was approximately 8.89 years. The fixed interest rates can reduce the volatility of finance costs under uncertain
+environments and the Group's exposure to changes in interest rates is not expected to be material.
+Liquidity risk
+The Group manages its liquidity risk by regularly monitoring its liquidity requirements and its compliance with debt
+covenants to ensure that it maintains sufficient cash and cash equivalents, and readily realisable equity investments
+and other financial assets, and adequate time deposits to meet its liquidity requirements in the short and long term. In
+addition, bank facilities have been put in place for contingency purposes.
+The Group's trade and accrued payables, other payables and accrued liabilities are all due for settlement within six
+months after the reporting date.
+Capital management
+The primary objectives of the Group's capital management are to safeguard the Group's ability to continue as a going
+concern and to maintain healthy capital ratios in order to support its business and maximise shareholders' value.
+The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To
+maintain or adjust the capital structure, the Group may return capital to shareholders, raise new debt or issue new
+shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31
+December 2019 and 2018.
+Interest-bearing debts
+***
+くく
+Notes to Consolidated Financial Statements
+11,113
+19,379
+1,786
+37,470
+74,764
+CURRENT LIABILITIES
+Loans and borrowings
+3,867
+Lease liabilities
+7
+Other payables and accrued liabilities
+440
+287
+Total current liabilities
+447
+4,154
+NET CURRENT ASSETS
+37,023
+70,610
+214,527
+193,707
+NET ASSETS
+EQUITY
+2,354
+56,169
+4,649
+46
+5,650
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+42. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
+Information about the statement of financial position of the Company at the end of the reporting period is as follows:
+2019
+2018
+NON-CURRENT ASSETS
+Property, plant and equipment
+Investments in subsidiaries
+Right-of-use assets
+Total non-current assets
+Concentrations of credit risk are managed by counterparty and by geographical region. At 31 December 2019, the
+Group has certain concentrations of credit risk as 1.89% (2018: 0.06%) and 5.83% (2018: 0.07%) of the Group's
+trade receivables were due from the Group's largest third-party customer and the five largest third-party customers,
+respectively.
+CURRENT ASSETS
+Amounts due from subsidiaries
+Loans to a subsidiary
+Other financial assets
+Cash and cash equivalents
+Total current assets
+177,497
+7
+123,097
+177,504
+123,097
+3
+11,085
+Other current assets
+In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination
+of credit limits and credit approvals. Before accepting any new counterparties, the Group uses an internal credit scoring
+system to assess the potential counterparty's credit quality and defines credit limits by counterparty. Limits and scoring
+attributed to counterparties are reviewed twice a year. Other monitoring procedures are in place to ensure that follow-
+up action is taken to recover overdue debts. In addition, the Group performs impairment assessment under ECL
+model upon application of IFRS 9/HKFRS 9 on trade receivables individually or based on provision matrix, and other
+receivables individually. In this regard, the Directors of the Company consider that the Group's credit risk is significantly
+reduced.
+Credit risk and management assessment (continued)
+(iii)
+7,787
+107,853
+1,809
+Assets measured at fair value
+Other financial assets - current
+Corporate wealth management products
+Money market funds
+Equity investments
+Non-publicly traded investments - non current
+Publicly traded investments – non current*
+31 December
+2018
+Level 1
+Level 2
+Level 3
+105,917
+19,366
+105,917
+19,366
+18
+1,110
+1,110
+126,411
+20,476
+105,917
+| |
+117,449
+1,127
+1,127
+1,809
+Fair value hierarchy
+The Group uses the following hierarchy that reflects the significance of the inputs used in making the fair value measurement:
+Level 1:
+Level 2:
+Level 3:
+quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those in which
+transaction occur in sufficient frequency and volume to provide pricing information on an on-going basis.
+fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
+observable for the asset or liability, either directly or indirectly. The Group obtains information from sources of
+independent price publications, over-the-counter broker quotes and the fund management's quotations as at the
+reporting date.
+fair value measurements are those derived from valuation techniques that include inputs for the asset or liability
+that are not based on observable market data (unobservable inputs), or where the observable data does not
+support the majority of the instruments fair value.
+As at 31 December 2019 and 31 December 2018, the Group held the following financial instruments measured at fair value
+for each hierarchy respectively:
+31 December
+2019
+18
+Level 1
+Level 3
+Assets measured at fair value
+Other financial assets - current
+Corporate wealth management products
+Money market funds
+107,853
+107,853
+6,660
+6,660
+Equity investments
+Non-publicly traded investments - non current
+1,809
+Level 2
+Equity attributable to owners of the parent
+18
+CNOOC LIMITED Annual Report 2019
+3,029
+853
+2,808
+2,928
+The Group's principal financial instruments comprise bank loans, long term guaranteed notes, equity investments and other
+financial assets, cash and short term deposits. The Group has various other financial assets and liabilities such as trade
+receivables, other receivables, trade and accrued payables, which arise directly from its operations.
+The Group is exposed to credit risk, oil and gas price risk, currency risk, interest rate risk and liquidity risk.
+The Group's senior management oversees the management of these risks. The Group's senior management is supported by
+various departments that advise on financial risks and the appropriate financial risks governance framework for the Group.
+Those departments provide assurance to the Group's senior management that the Group's financial risk-taking activities are
+governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance
+with group policies and group risk appetite.
+(i)
+Credit risk and management assessment
+As at 31 December 2019, the carrying amounts of the Group's cash and cash equivalents, time deposits with maturity
+more than three months, trade receivables and other receivables (approximately RMB6,586 million included in other
+current assets) represent the Group's maximum exposure to credit risk in relation to its financial assets. The Group
+does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.
+140
+CNOOC LIMITED Annual Report 2019
+se
+ecce
+seas
+see
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+39. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+(i)
+(ii)
+4,440
+5,197
+15,841
+6,964
+139
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+37.
+FINANCIAL INSTRUMENTS (continued)
+38.
+Fair value hierarchy (continued)
+Financial assets classified within Level 3 are made up of Kerogen Energy Fund invested by the Group. Significant
+unobservable inputs are used to determine the fair value of the financial assets. As observable prices are not available, the
+fair value of the financial assets is derived by using valuation techniques, mainly including embedded terms of the instrument,
+bid offer price as well as valuations based on net asset value using the discounted cash-flow of each project or asset, having
+applied an appropriate risk factor for the stage of development of the project. The significant unobservable inputs used in the
+fair value measurement include net asset value, price to net asset value.
+No amounts have been transferred between the different levels of the fair value hierarchy for the year.
+CONCENTRATION OF CUSTOMERS
+All gains and losses included in other comprehensive income related to financial assets at fair value through other comprehensive income held at
+the end of the reporting period are reported as fair value change on equity investments designated as at fair value through other comprehensive
+income.
+A substantial portion of the Group's oil and gas commodities sales to third-party customers is made to a small number of
+customers on credit. Details of the gross sales to these top five third party customers are as follows:
+PetroChina Company Limited*
+Phillips 66
+PTT Public Company Limited
+Marathon Petroleum Corporation
+These transactions are with other state-owned enterprises.
+39.
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
+2019
+2018
+19,126
+13,329
+China Petroleum & Chemical Corporation*
+Fair value of financial instruments (continued)
+Issued capital
+TOTAL EQUITY
+44
+1,446 5.844
+52
+77 952
+12 333 138
+50
+301
+260 350
+1
+81
+7 2.015
+7,486 301
+31........-31.
+32
+112 250
+162
+10
+37 68
+78
+14
+232 318 162
+158 21 6 11 5 10 15 17 2 9 19 Red Hea
+I
+(mb) 65 mm 25 m (5 mb 635 mbi 35 mil en 65 mb 25 (mmbls) (55 mm 25 mm
+10
+Natural Synthetic
+Natural
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(a)
+Reserve quantity information (continued)
+Proved developed and undeveloped reserves:
+Consolidated entities
+31 December 2016
+Purchase/(Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+Production
+Revisions of prior estimates
+PRC
+Asia (excluding PRC)
+Oceania
+Africa
+Natural
+Natural
+Natural
+Natural
+Canada
+Natural Synthetic
+North America
+(excluding Canada) South America
+Natural
+Europe
+Natural
+Total
+31 December 2017
+1,627
+5,911
+=8
+5
+5
+(27)
+(350)
+(470)
+38
+5
+211 (20) 4 (14)
+14
+(17)
+31 December 2018
+1,783
+6,108
+54
+842
+9
+280
+114
+796
+90
+88
+888
+1
+(1)
+213519 28 510 8
+12528
+9t
+R
+70
+885
+11
+297
+137
+24 786
+90
+118 282 421
+80
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+88
+88
+118
+Purchase/Disposal) of reserves
+Discoveries and extensions
+Improved Recovery
+Production
+(257)
+Revisions of prior estimates
+(305)
+200 (21)
+(60)
+17
+E
+5 2,295 7,543 786
+146
+145
+CNOOC LIMITED Annual Report 2019
+Other comprehensive income, net of tax
+9,306
+-
+132,951
+31,461
+9,306
+Total comprehensive income
+9,306
+2017 final dividend
+2018 interim dividend
+Disposal of investments in equity
+31,461
+40,767
+(11,293)
+(11,293)
+(11,785)
+(11,785)
+instruments at FVTOCI
+(14)
+(14)
+Balance at 31 December 2018
+(6,471)
+5,558
+31,461
+Profit for the year
+143,170
+5,558
+XU Keqiang
+Director
+HU Guangjie
+Director
+43,081
+43,081
+150,626
+214,527
+193,707
+CNOOC LIMITED Annual Report 2019
+143
+Notes to Consolidated Financial Statements
+151,539*
+31 December 2019
+42.
+STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
+A summary of the Company's reserves is as follows:
+Cumulative
+translation
+reserve
+Other
+reserves
+Retained
+earnings
+Total
+equity
+Balance at 1 January 2018
+(15,777)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Reserves
+150,626
+(6,471)
+CNOOC LIMITED Annual Report 2019
+.se
+se
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+The following disclosures are included in accordance with the FASB Accounting Standard Codification 932 "Extractive Activities-Oil
+and Gas (the "ASC 932").
+The regional analysis presented below is on a continent basis, with separate disclosure for countries that contain 15% or more of
+the total proved reserve, in accordance with SEC and FASB requirements.
+(a)
+Reserve quantity information
+Crude oil and natural gas reserve estimates are determined through analysis of geological and engineering data which appear,
+with reasonable certainty, to be economically producible in the future from known oil and natural gas reservoirs under existing
+economic and operating conditions. The reserve data that we disclosed were all based on the definitions and disclosure
+guidelines contained in the US Securities and Exchange Commission's final rules on "Modernization of oil and Gas Reporting"
+(the "SEC Final Rule").
+For the years 2019, 2018 and 2017, approximately 66%, 69% and 65%, respectively, of our total proved reserves were
+evaluated by us, and the remaining were evaluated by independent third parties.
+We implemented rigorous internal control system that monitors the entire reserves estimation process and certain key metrics
+in order to ensure that the process and results of reserves estimates fully comply with the relevant SEC rules.
+We established the Reserve Management Committee, or RMC, which is led by one of our Executive Vice Presidents and
+comprises the general managers of the relevant departments.
+The RMC's main responsibilities are to:
+•
+review our reserves policies;
+review our proved reserves and other categories of reserves; and
+select our reserves estimators and auditors.
+The RMC follows certain procedures to appoint our internal reserves estimators and reserves auditors, who are required to
+have undergraduate degrees and at least five years and ten years of experience related to reserves estimation, respectively.
+The reserves estimators and auditors are required to be members of a professional society, such as China Petroleum Society
+(CPS), and are required to take the professional trainings and examinations as required by the professional society and us.
+The RMC delegates its daily operation to our Reserves Office, which is led by our Chief Reserve Supervisor. The Reserves
+Office is mainly responsible for supervising reserves estimates and auditing. It reports to the RMC periodically and is
+independent from operating divisions such as the exploration, development and production departments. Our Chief Reserve
+Supervisor has 25 years' experience in oil and gas industry.
+The Group's net proved reserves consist of its interest in reserves, comprised of a 100% interest in its independent oil and
+gas properties and its participating interest in the properties covered under the production sharing contracts in the PRC, less (i)
+an adjustment for the Group's share of royalties payable by the Group to the PRC government and the Group's participating
+interest in share oil payable to the PRC government under the production sharing contracts, and less (ii) an adjustment
+for production allocable to foreign partners under the PRC production sharing contracts as reimbursement for exploration
+expenses attributable to the Group's participating interest, and plus the participating interest in the properties covered under
+the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host government
+and the domestic market obligation.
+Pursuant to SEC Final Rule, the Group uses the average, first-day-of-the-month oil price during the 12-month period before
+the ending date of the period covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+The Company determines its net entitlement oil and gas reserves under production sharing contracts using the economic
+interest method.
+ecce
+144
+The consolidated financial statements were approved and authorised for issue by the Board of Directors on 25 March 2020.
+43. APPROVAL OF THE FINANCIAL STATEMENTS
+As at 31 December 2019, the distributable retained earnings of the Company amounted to approximately RMB168,031 million (2018:
+RMB151,539 million).
+5,558
+151,539
+150,626
+Profit for the year
+45,492
+45,492
+Other comprehensive income, net of tax
+4,328
+4,328
+Total comprehensive income
+4,328
+Balance at 1 January 2019
+45,492
+2018 final dividend
+(15,710)
+(15,710)
+2019 interim dividend
+(13,290)
+(13,290)
+Balance at 31 December 2019
+(2,143)
+5,558
+168,031*
+171,446
+49,820
+171,446
+(985)
+(b)
+(20,690)
+(6,481)
+(3,364)
+(270,424)
+Standardised measure of
+discounted future net cash flows
+303,948
+11,618
+(52,665)
+3,469
+16,361
+32,941
+9,197
+13,151
+416,075
+ecce
+Future cash inflows
+Future production costs
+25,390
+(4,375)
+(1,044)
+(7,780)
+(9,665)
+(1,507)
+(4,895)
+(5,537)
+(1,616) (9,882)
+(151,768)
+Future net cash flows
+(3)
+477,973
+19,398
+4,513
+29,765
+69,026
+53,631
+15,678
+16,515
+686,499
+10% discount factor
+(174,025)
+Future development costs
+(118,666)
+Future income taxes
+10% discount factor
+116,843
+(39,352)
+(39,634)
+(12,577)
+(12,751)
+(14,202)
+(14,202)
+50,203
+116,334
+50,256
+(27,300)
+22,867
+22,956
+Total standardised measure of
+discounted future net cash flow
+304,037
+11,618
+3,469
+(27,336)
+Total
+Europe
+Canada) America
+Standardised measure of
+discounted future net cash flows
+Notes
+PRC
+1
+509
+C
+Asia
+(excluding
+PRC)
+(282)
+(174)
+58
+89
+2018
+Enterprise's share of equity method investees
+North
+America
+(excluding South
+Oceania
+Africa Canada
+Future net cash flows
+25,390
+Future income taxes
+(6,539) (8,939)
+10% discount factor
+(364)
+(15,594)
+(15,958)
+Standardised measure of
+discounted future net cash flows
+232
+13,110
+29,300
+13,342
+discounted future net cash flow
+176,239
+10,677
+3,209
+17,070
+5,606
+18,648
+16,473
+Total standardised measure of
+28,704
+596
+(3)
+America
+Europe
+Total
+Future cash inflows
+1
+1,581
+90,964
+92,545
+Future production costs
+(35,472)
+(36,457)
+Future development costs
+(2)
+(11,342)
+(11,342)
+Future income taxes
+(15,446)
+(15,446)
+Future net cash flows
+7,324
+(321,517)
+255,246
+CNOOC LIMITED Annual Report 2019
+10,388
+53,962
+339,668
+Future production costs
+(435,664)
+(23,068)
+(2,576)
+(10,929)
+56,121
+(227,445)
+Future development costs
+(2)
+(233,501)
+(3,990)
+(1,792)
+(8,373)
+(43,197)
+(15,186)
+125,898 38,104 53,669 1,943,614
+(51,544) (14,271) (18,333) (783,830)
+1,265,804
+(1)
+Future cash inflows
+.se
+se
+seas
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e) Standardised measure of discounted future net cash flows and changes therein (continued)
+2018
+Consolidated entities
+North
+Asia
+Notes
+PRC
+(excluding
+PRC)
+Oceania
+Africa
+America
+(excluding
+Canada Canada) America
+South
+Europe
+Total
+154
+Canada)
+16,361
+32,064
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees
+2018
+404,631
+8,269
+12,239
+PRC
+63,213
+50,066
+868
+12,279
+166,104
+Net capitalized costs
+(45,652) (561,246)
+(1,088)
+(37,164)
+91,593
+PRC) Oceania
+Africa
+Canada
+31,439
+31,380
+59
+Net capitalized costs
+(16,056)
+(13,956)
+(2,100)
+depletion and amortization
+Accumulated depreciation,
+4,675
+42,820
+40,661
+4,675
+Unproved oil and gas properties
+2,159
+Proved oil and gas properties
+Total
+Europe
+South
+America
+(excluding
+Canada)
+(36,785)
+CNOOC LIMITED Annual Report 2019
+(78,819)
+(36,000)
+Canada)
+Canada
+Africa
+PRC) Oceania
+PRC
+South
+(excluding
+America
+America
+Asia
+(excluding
+2018
+Consolidated entities
+26,390
+26,369
+21
+Net capitalized costs
+(13,739)
+(11,601)
+4,743
+North
+Europe
+Total
+Proved oil and gas properties
+(324,046)
+depletion and amortization
+Accumulated depreciation,
+20,402 761,171
+33,519 204,706
+9,471
+35,502
+77,824
+27,835
+2
+1,645
+18,908
+Unproved oil and gas properties
+3,856
+64,875
+50,554
+101,050
+2,558
+46,634
+471,242
+(1,692)
+32,941
+151
+31 December 2019
+(1)
+1,271,208
+67,935
+9,746
+37,014 337,576
+98,597
+61,932
+9,564 437,352
+Future cash inflows
+23,837
+91,825
+40,723
+769
+12,572
+194,850
+Net capitalized costs
+(48,299) (618,588)
+(1,204)
+63,212
+Total
+Europe
+South
+13,151
+439,031
+CNOOC LIMITED Annual Report 2019
+155
+156
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(e)
+Standardised measure of discounted future net cash flows and changes therein (continued)
+2019
+Consolidated entities
+North
+Asia
+(excluding
+Notes
+PRC
+PRC) Oceania
+Africa
+America
+(excluding
+Canada Canada) America
+(43,677)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+(39,509)
+(1,830)
+Proved oil and gas properties
+Total
+Canada) America Europe
+Canada
+Africa
+Oceania
+PRC)
+PRC
+520,332
+South
+(excluding
+Asia
+North
+Consolidated entities
+2019
+152
+(c) Capitalized costs (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+America
+(excluding
+52,968
+2,597
+109,525
+(42,497)
+(348,621)
+depletion and amortization
+Accumulated depreciation,
+214,064
+33,886
+13,189
+31,749
+85,849
+24,149
+2
+2,101
+23,139
+Unproved oil and gas properties
+841,876
+23,977
+11,852
+75,140
+45,485
+(92,951)
+4,743
+Africa Canada
+PRC
+Acquisition costs:
+ecce
+63,872
+707
+3,325
+7,295
+709
+8,620
+- Proved
+- Unproved
+Exploration costs
+Development costs*
+1
+36,876
+Total costs incurred
+51,193
+176
+2,215
+7,117
+463
+8,263
+6,339
+Total costs incurred
+2018
+Enterprise's share of equity method investees
+North
+2019
+Consolidated entities
+2,487
+2,487
+2,455
+2,455
+32
+32
+Total
+Europe
+South
+America
+(excluding
+Canada)
+Canada
+Africa
+Oceania
+America
+Asia
+(excluding
+PRC)
+PRC
+North
+6,158
+Asia
+(excluding
+26,801
+12,415
+PRC
+Asia
+North
+2018
+Consolidated entities
+Costs incurred in oil and gas property acquisition, exploration and development (continued)
+(d)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+(excluding
+PRC)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+***
+2,883
+2-...-2 2,881
+59
+2,824
+2,822
+2
+59
+CNOOC LIMITED Annual Report 2019
+seas
+America
+(excluding
+South
+Oceania
+531
+846
+178
+246
+357
+1
+181
+10,075
+Exploration costs
+264
+264
+- Unproved
+-Proved .....
+Acquisition costs:
+Total
+Europe
+America
+Canada)
+Africa Canada
+Development costs*
+Total costs incurred
+America
+South
+92
+Total costs incurred
+Development costs*
+Exploration costs
+-Unproved
+- Proved
+Acquisition costs:
+Total
+92
+Europe
+America
+(excluding
+Canada)
+Africa Canada
+Oceania
+PRC)
+PRC
+Asia
+(excluding
+North
+Enterprise's share of equity method investees
+South
+America
+The development costs include estimated future dismantlement costs of dismantling offshore oil and gas properties.
+19,075
+19,075
+Present value of estimated future net cash flows:
+Management believes that this information does not represent the fair market value of the oil and natural gas reserves or the
+present value of estimated cash flows since no economic value is attributed to potential reserves, the use of a 10% discount
+rate is arbitrary, and prices change constantly.
+Future development costs are estimated based upon constant price assumptions and the assumption of the continuation of
+existing economic, operating and regulatory conditions. Future income taxes are calculated by applying the year-end statutory
+rate to estimate future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties based upon
+existing laws and regulations. The discount was computed by the application of a 10% discount factor to the estimated future
+net cash flows.
+Pursuant to FASB Topic 932, the average of first-day-of-the-month oil price during the 12-month period before the year end,
+were used to estimate annual future production from proved reserves to determine future cash inflows.
+Standardised measure of discounted future net cash flows and changes therein
+(e)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+153
+CNOOC LIMITED Annual Report 2019
+23,139
+20,565
+2,482
+3,812
+1,490
+2,230
+252
+252
+2019
+(excluding
+98,578
+11,656
+87
+14,974
+Exploration costs
+10,804
+5,619
+5,185
+- Unproved
+833
+1
+833
+Acquisition costs:
+Total
+Europe
+Canada) America
+Canada
+Africa
+PRC) Oceania
+PRC
+-Proved
+121
+291
+112
+6,354
+4,028
+3,341
+1
+6,368
+62,563
+Total costs incurred
+68,698
+2,802
+4,845
+6,242
+3,737
+3,220
+6,281
+41,571
+Development costs*
+18,243
+1,465
+1,192
+4,267
+PRC) Oceania
+Development costs*
+- Unproved
+(2,589)
+(1,394) (222,849)
+(42,432)
+(12,435)
+(11,422)
+(631,885)
+Future development costs
+(2)
+(22,714)
+(157,966)
+(1,825)
+(1,593)
+(42,844)
+(18,495)
+(5,938)
+(7,685) (240,480)
+Future income taxes
+(64,232)
+(4,134)
+(316,050)
+Future production costs
+1,396,726
+Notes
+PRC
+PRC) Oceania
+Africa
+Canada
+North
+America
+(excluding
+Canada) America
+South
+Europe
+Total
+Future cash inflows
+(1)
+856,256
+50,074
+10,163
+24,917
+299,553
+97,944
+27,183
+30,636
+(6,535)
+(excluding
+(1,450)
+(3,856)
+discounted future net cash flows
+176,007
+10,677
+3,209
+17,070
+5,606
+18,648
+3,363
+Standardised measure of
+7,324
+2017
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+America
+(excluding
+South
+Notes
+241,904
+(204,227)
+(349)
+(3,290)
+(78,230)
+Future net cash flows
+318,008
+16,691
+4,299
+21,930
+33,860
+37,017
+6,653
+seas
+7,673
+446,131
+10% discount factor
+(142,001)
+(6,014)
+(1,090)
+(4,860)
+(28,254)
+(18,369)
+(2,157)
+Exploration costs
+2019
+North
+24,293
+Total costs incurred
+42,169
+10,564
+9163
+913
+1,052
+8,310
+4,047
+2,353
+4,001
+16,360
+Development costs*
+767
+1,143
+275
+64
+329
+9,180
+7
+9,509
+2,417
+- Proved
+Acquisition costs:
+Total
+Europe
+South
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+(excluding
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees
+2017
+52,733
+1,680
+2,195
+8,585
+7
+Enterprise's share of equity method investees
+46
+Exploration costs
+Accumulated depreciation,
+27,192
+20,565
+6,627
+Unproved oil and gas properties
+44,079
+41,827
+2,252
+depletion and amortization
+Proved oil and gas properties
+Europe
+South
+America
+(excluding
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+America
+Asia
+(excluding
+Total
+(2,122)
+(15,804)
+(17,926)
+- Unproved
+- Proved ........
+Acquisition costs:
+Total
+Europe
+Africa Canada Canada) America
+PRC) Oceania
+PRC
+South
+North
+America
+(excluding
+Asia
+(excluding
+2017
+Consolidated entities
+Costs incurred in oil and gas property acquisition, exploration and development
+(d)
+53,345
+20,565
+32,650
+130
+Net capitalized costs
+7,933
+35,386
+33,227
+(2,138) -----
+(1)
+774
+105,608
+106,382
+Future production costs
+(318)
+(31,515)
+(31,833)
+Future cash inflows
+Future development costs
+(240)
+(13,541)
+(13,781)
+Future income taxes
+(10,974)
+(10,974)
+Future net cash flows
+215
+(2)
+Total
+Europe
+Canada) America
+11,926
+3,288
+17,466
+19,365
+29,613
+15,663
+11,814
+442,529
+2019
+Enterprise's share of equity method investees
+North
+Asia
+(excluding
+America
+(excluding
+South
+Notes
+PRC
+PRC) Oceania
+Africa Canada
+31
+333,394
+49,578
+(28,372)
+Future net cash flows have been prepared taking into consideration estimated future dismantlement costs of dismantling offshore oil platforms
+and gas properties.
+CNOOC LIMITED Annual Report 2019
+.se
+se
+seas
+(e)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2019
+Future development costs include the estimated costs of drilling future development wells and building the production platforms.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Standardised measure of discounted future net cash flows and changes therein (continued)
+Changes in the standardised measure of discounted future net cash flows:
+Equity
+share of
+Consolidated
+and equity
+share of
+Consolidated
+equity
+method
+equity
+method
+2017
+Future cash flows consist of the Group's 100% interest in the independent oil and gas properties and the Group's participating interest in the
+properties under production sharing contracts in the PRC less (i) an adjustment for the royalties payable to the PRC government and share oil
+payable to the PRC government under production sharing contracts and (ii) an adjustment for production allocable to foreign partners under the
+PRC production sharing contracts for exploration costs attributable to the Group's participating interest, and plus the participating interest in
+the properties covered under the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host
+government and the domestic market obligation.
+463,982
+11,814
+(28,341)
+10% discount factor
+Standardised measure of
+discounted future net cash flows
+246
+Total standardised measure of
+discounted future net cash flow
+(1)
+(2)
+(3)
+21,206
+21,452
+333,640
+11,926
+3,288
+17,466
+19,365
+29,613
+36,869
+49,794
+Total
+discounted future net cash flows
+(300,424)
+1,567
+12,567
+134,993
+Net sales to customers
+Total
+Europe
+Canada Canada) America
+Africa
+10,025
+PRC) Oceania
+South
+America
+(excluding
+Asia
+(excluding
+North
+2018
+Consolidated entities
+46,503
+1,930,511
+Future production costs
+PRC
+4,690
+8,573
+529
+(89)
+(438)
+(155)
+(359)
+(192)
+(7,823)
+Taxes other than income tax
+(24,268)
+(1,327)
+(198)
+(1,221)
+(3,183)
+(933)
+(438)
+(2,098)
+(14,870)
+Operating expenses
+185,872
+12,928
+(406,482)
+Standardised measure of
+(27,631)
+(10,012)
+Future net cash flows
+529,962
+19,178
+4,204
+19,619
+85,646
+45,222
+24,107
+(137,454)
+15,015 742,952
+(196,568)
+(7,252)
+(916)
+(2,153)
+(66,281)
+(15,609)
+(8,444)
+(3,201)
+10% discount factor
+(8,998)
+(2,052)
+(4)
+(205,623)
+(41,739)
+(22,611)
+(13,542)
+(730,235)
+Future development costs
+(2)
+(218,067) (12,807)
+(1,565)
+(7,383)
+(46,306)
+(11,633)
+(13,163)
+(8,949)
+(319,873)
+Future income taxes
+(116,697)
+(8,320)
+(1,383)
+(2,595)
+(16)
+investee
+Standardised measure, beginning of year
+Equity
+share of
+Consolidated
+and equity
+share of
+Consolidated
+equity
+method
+equity
+method
+Total
+2019
+investee
+Standardised measure, beginning of year
+416,075
+22,956
+439,031
+Sales of production, net of royalties and production costs
+(163,282)
+(7,604)
+(170,886)
+investee
+Standardised measure of discounted future net cash flows and changes therein (continued)
+(e)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+30,145
+2,142
+32,287
+(51,384)
+941
+(50,443)
+56,048
+(1,758)
+54,290
+Standardised measure, end of year
+416,075
+22,956
+439,031
+ecce
+CNOOC LIMITED Annual Report 2019
+157
+158
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+31 December 2019
+Net change in prices, net of royalties and production costs
+39,215
+(2,633)
+(3,190)
+14,050
+Purchase of properties
+2,789
+2,789
+Changes in timing and other
+(5,822)
+(8,976)
+(14,797)
+1,881
+Results of operations (continued)
+442,529
+21,452
+463,982
+CNOOC LIMITED Annual Report 2019
+se
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+Standardised measure, end of year
+12,169
+55,321
+2,991
+Extensions discoveries and improved recovery,
+net of related future costs
+69,736
+2,388
+72,125
+Change in estimated future development costs
+Development costs incurred during the year
+Revisions in quantity estimates
+Accretion of discount
+Net change in income taxes
+(16,430)
+(7,787)
+(24,217)
+34,193
+16,201
+50,394
+43,404
+(42)
+43,363
+52,330
+(557)
+investee
+850
+53,385
+40,766
+1,584
+42,350
+67,569
+(133)
+67,436
+24,838
+1,415
+(39,365)
+26,253
+(7,348)
+(2,201)
+(9,549)
+Purchase of properties
+325
+5,069
+5,394
+Changes in timing and other
+Net change in income taxes
+(1,783)
+(37,582)
+Accretion of discount
+223,625
+9,872
+233,497
+Sales of production, net of royalties and production costs
+(120,396)
+(458)
+(120,854)
+Net change in prices, net of royalties and production costs
+18,779
+1,458
+20,237
+Extensions discoveries and improved recovery,
+net of related future costs
+31,649
+1,322
+32,971
+Change in estimated future development costs
+Development costs incurred during the year
+Revisions in quantity estimates
+(321)
+38,365
+(2,804)
+Standardised measure, end of year
+216,250
+Extensions discoveries and improved recovery,
+net of related future costs
+65,730
+1,743
+67,473
+Purchase of properties
+Change in estimated future development costs
+5,771
+Development costs incurred during the year
+Accretion of discount
+Net change in income taxes
+Changes in timing and other
+(73,551)
+(1,754)
+(75,305)
+50,833
+2,552
+Revisions in quantity estimates
+210,479
+(153,366)
+(872)
+241,904
+13,341
+255,245
+2018
+Consolidated
+method
+Total
+investee
+Equity
+share of
+equity
+Consolidated
+and equity
+share of
+equity
+method
+investee
+Standardised measure, beginning of year
+241,904
+13,341
+255,245
+Sales of production, net of royalties and production costs
+Net change in prices, net of royalties and production costs
+(152,494)
+(3,125)
+(9,072)
+Exploration expense
+(5,054)
+9,159
+198
+Net sales to customers
+Total
+Europe
+America
+Canada)
+Africa Canada
+9,357
+PRC) Oceania
+South
+(excluding
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees:
+2019
+64,010
+PRC
+Operating expenses
+(106)
+(753)
+44
+(7)
+Income tax expense
+51
+Result of operations
+(1,619)
+(21)::: (1,598)
+amortization, and impairment
+Special oil gain levy
+Depreciation, depletion and
+(81)
+(72)
+Accretion expense
+(141)
+(141)
+Exploration expense
+(976)
+(11)
+Taxes other than income tax
+(859)
+2,754
+5,619
+(127)
+(751)
+78,627
+(894)
+(894)
+Special oil gain levy
+(59,285)
+(1,962)
+(99)
+(6,706)
+1,890
+(2,324)
+(178)
+(6,733)
+(27,921)
+amortization, and impairment
+Depreciation, depletion and
+(2,795)
+(256)
+(13)
+(13,362)
+549
+2,886
+(1,197)
+1,053
+384
+1,135
+58,971
+Result of operations
+(23,999)
+(2,393)
+15
+342
+446
+(1,833)
+(165)
+(755)
+(19,656)
+Income tax expense
+88,009
+5,147
+(142)
+249
+591
+(112)
+5,670
+(7)
+160,185
+Net capitalized costs
+(40,350) (492,505)
+(942)
+(31,835)
+(27,894)
+(64,047)
+(1,480)
+12,950
+(26,786)
+depletion and amortization
+Accumulated depreciation,
+40,089 234,164
+7,917
+34,471
+103,637
+30,690
+2
+(299,171)
+957
+50,884
+95,277
+Proved oil and gas properties
+Unproved oil and gas properties
+Accumulated depreciation,
+depletion and amortization
+2,159
+Total
+Europe
+America
+Canada)
+Africa Canada
+PRC) Oceania
+PRC
+South
+(excluding
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees
+2017
+11,325 397,836
+8,891
+57,367
+1,195
+I
+16,163
+656,177
+ecce
+(c) Capitalized costs
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+seas
+se
+CNOOC LIMITED Annual Report 2019
+2017
+150
+2,754
+5,492
+1,135 384 1,053 (751) 591
+59,015
+for producing activities
+Total result of operations
+5,663
+5,619
+69,673
+Consolidated entities
+Asia
+(excluding
+11,586
+1,916
+54,731
+19,534
+84,241
+2,435
+38,541
+443,193
+Proved oil and gas properties
+Total
+Europe
+South
+America
+Canada)
+Canada
+Africa
+Oceania
+PRC)
+PRC
+North
+America
+(excluding
+Unproved oil and gas properties
+(151)
+(225)
+(2,032)
+America
+Asia
+(excluding
+North
+Enterprise's share of equity method investees:
+2018
+ecce
+61,455
+4,416
+(excluding
+6
+(5,297)
+619
+516
+1,401
+57,680
+Result of operations
+(22,437)
+(3,022)
+2,114
+South
+PRC
+PRC)
+(1,320)
+(1,655)
+(1,554)
+3,859
+3,651
+| | | |
+Exploration expense
+(13)
+Taxes other than income tax
+(101)
+Operating expenses
+208
+Net sales to customers
+Total
+America Europe
+Canada)
+Canada
+Africa
+Oceania
+203
+(1,333)
+(137)
+(621)
+(7,648)
+(25,805)
+amortization, and impairment
+Depreciation, depletion and
+(2,560)
+(244)
+(93)
+(150)
+(199)
+(133)
+Accretion expense
+(12,990)
+(514)
+(346)
+(849)
+(5,660)
+(441)
+(125)
+(1,935)
+(6,919)
+(2,719)
+(3,721)
+(221)
+(1,292)
+(19,227)
+Income tax expense
+83,892
+7,438
+(197)
+2,251
+(7,177)
+1,240
+737
+2,693
+76,907
+(2,599)
+(2,599)
+Special oil gain levy
+(50,491)
+(3,389)
+(91)
+1,880
+(22)
+(22)
+Accretion expense
+(1,426)
+(3,062)
+(1,718)
+(517)
+(1,044)
+(15,606)
+Operating expenses
+197,173
+(178)
+9,950
+9,080
+7,117
+20,016
+1,389
+9,728
+139,386
+Net sales to customers
+Total
+507
+(1,203)
+(24,754)
+Taxes other than income tax
+Accretion expense
+(12,342)
+(1,337)
+(292)
+(198)
+(2,666)
+(1,311)
+(3)
+(55)
+(6,480)
+Exploration expense
+(9,094)
+(45)
+(67)
+(389)
+(111)
+(514)
+(142)
+(7,826)
+Europe
+America
+Canada)
+Canada
+for producing activities
+Total result of operations
+(11,238)
+(11,191)
+(47)
+Result of operations
+Income tax expense
+(11,238)
+(11,191)
+47
+Special oil gain levy
+(12,009)
+(11,877)
+(132)
+amortization, and impairment
+Depreciation, depletion and
+(78)
+(69)
+(9)
+57,633
+2017
+Consolidated entities
+1,401
+2,114
+Africa
+PRC) Oceania
+PRC
+South
+America
+(excluding
+Asia
+(excluding
+North
+Consolidated entities
+2019
+Results of operations (continued)
+(b)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2019
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+149
+CNOOC LIMITED Annual Report 2019
+50,217
+4,416
+(11,185)
+516619 (5,297)
+Asia
+Nomination Committee
+sex
+(ii)
+a Rights Issue (as hereinafter
+defined);
+an issue of shares pursuant to
+any specific authority granted by
+shareholders of the Company in
+general meeting, including upon the
+exercise of rights of subscription or
+conversion under the terms of any
+warrants issued by the Company
+or any bonds, notes, debentures or
+securities convertible into shares of
+the Company;
+the grant of options and the
+exercise of any option granted
+under any share option scheme
+or similar arrangement for the time
+being adopted by the Company
+and/or any of its subsidiaries;
+(iv) any scrip dividend or similar
+arrangement providing for the
+allotment of shares in lieu of
+the whole or part of a dividend
+on shares of the Company in
+accordance with the Articles; or
+(i)
+(d)
+any adjustment, after the date
+of grant or issue of any options,
+rights to subscribe for or convert
+any security into shares or other
+securities referred to above, in
+the price at which shares in the
+Company shall be subscribed,
+and/or in the number of shares.
+in the Company which shall be
+subscribed, on exercise of relevant
+rights under such options, warrants
+or other securities, such adjustment
+being made in accordance with, or
+as contemplated by, the terms of
+such options, rights to subscribe or
+other securities,
+shall not exceed 20% of the total number
+of issued shares of the Company as at
+the date of the passing of this resolution;
+and that this resolution shall be limited by
+the applicable rules and requirements of
+the Stock Exchange as amended from
+time to time, including the restrictions for
+using the approval in paragraph (a) above
+to issue (i) securities convertible into new
+shares for cash consideration, if the initial
+conversion price of such convertible
+securities is lower than the Benchmarked
+Price (as hereinafter defined) of the
+Shares at the time of the relevant placing;
+and (ii) warrants, options or similar rights
+to subscribe for new shares or securities
+convertible into new shares for cash
+consideration.
+for the purposes of this resolution:
+"Relevant Period" means the period.
+from the date of passing of this resolution
+until whichever is the earlier of:
+(i)
+(ii)
+(v)
+the aggregate number of shares of the
+Company allotted or agreed conditionally
+or unconditionally to be allotted (whether
+pursuant to an option or otherwise)
+and any options, warrants or rights to
+be issued or granted by the Directors
+pursuant to the approval in paragraph (a)
+above, otherwise than pursuant to:
+the approval in paragraph (a) above
+shall authorise the Directors during the
+Relevant Period to make or grant offers,
+agreements, options and similar rights
+to subscribe for or convert any security
+into shares in the Company (including
+bonds, notes, warrants, debentures and
+securities convertible into shares of the
+Company) which would or might require
+the exercise of such powers after the end
+of the Relevant Period;
+(c)
+"THAT:
+(a)
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting."
+1.
+"THAT:
+(a)
+subject to paragraph (b) below, the
+exercise by the Directors during the
+Relevant Period (as hereinafter defined)
+of all the powers of the Company to
+buy back shares in the capital of the
+Company on the Stock Exchange or
+on any other exchange on which the
+shares of the Company may be listed and
+recognised by the Securities and Futures
+Commission of Hong Kong and the Stock
+Exchange for this purpose ("Recognised
+subject to the following provisions of this
+resolution, the exercise by the Directors
+during the Relevant Period (as hereinafter
+defined) of all the powers of the Company
+to issue, allot and deal with additional
+shares in the capital of the Company and
+to make or grant offers, agreements,
+options and similar rights to subscribe
+for or convert any security into shares in
+the Company (including bonds, notes,
+warrants, debentures and securities
+convertible into shares of the Company)
+which would or might require the exercise
+of such powers be and is hereby generally
+and unconditionally approved;
+162
+CNOOC LIMITED Annual Report 2019
+sex
+seas
+ase
+Notice of Annual General Meeting
+(b)
+the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+the date on which the authority
+given under this resolution is
+revoked or varied by an ordinary
+resolution of the shareholders of the
+Company in general meeting.
+www
+ves
+•
+seas
+ase
+Notice of Annual General Meeting
+Notes:
+1.
+2.
+3.
+4.
+5.
+Every member entitled to attend and vote at the above meeting
+(or at any adjournment thereof) is entitled to appoint one or more
+proxies to attend and vote on his behalf. A proxy need not be a
+shareholder of the Company.
+In order to be valid, the form of proxy duly completed and signed
+in accordance with the instructions printed thereon, together
+with the power of attorney or other authority (if any) under which
+it is signed, or a copy of such authority notarially certified, must
+be completed and returned to the Company's registrar, Hong
+Kong Registrars Limited, at 17M Floor, Hopewell Centre, 183
+Queen's Road East, Wan Chai, Hong Kong, not less than 36
+hours before the time fixed for the holding of the meeting or any
+adjournment thereof (as the case may be).
+Completion and return of the form of proxy will not preclude a
+shareholder from attending and voting at the meeting or any
+adjournment thereof if the shareholder so desires and, in such
+event, the relevant form of proxy shall be deemed to be revoked.
+Where there are joint registered holders of any shares, any
+one of such persons may vote at the above meeting (or at any
+adjournment of it), either personally or by proxy, in respect of
+such shares as if he/she were solely entitled thereto but the
+vote of the senior holder who tenders a vote, whether in person
+or by proxy, will be accepted to the exclusion of the vote(s) of
+the other joint holders and, for this purpose, seniority shall be
+determined by the order in which the names stand in the register
+of members of the Company in respect of the relevant joint
+holding.
+6.
+sex
+2.
+CNOOC LIMITED Annual Report 2019
+Bank of China Tower, 1 Garden Road,
+Hong Kong.
+CNOOC LIMITED Annual Report 2019
+163
+9000
+sex
+cav
+Notice of Annual General Meeting
+se
+"Benchmarked Price" means the higher
+of (a) the closing price on the date of
+the relevant placing agreement or other
+agreement involving the proposed issue
+of securities under the general mandate
+to be approved under this resolution;
+and (b) the average closing price in the
+5 trading days immediately prior to the
+earlier of: (i) the date of announcement of
+the placing or the proposed transaction
+or arrangement involving the proposed
+issue of securities under the general
+mandate to be approved under this
+resolution; (ii) the date of the placing
+agreement or other agreement involving
+the proposed issue of securities under the
+general mandate to be approved under
+this resolution; and (iii) the date on which
+the placing or subscription price is fixed.
+"Rights Issue" means an offer of shares
+open for a period fixed by the Directors
+made to holders of shares whose names
+appear on the register of members of
+the Company on a fixed record date in
+proportion to their then holdings of such
+shares (subject to such exclusions or
+other arrangements as the Directors may
+deem necessary or expedient in relation
+to fractional entitlements or having regard
+to any restrictions or obligations under
+the laws of, or the requirements of, any
+recognised regulatory body or any stock
+exchange in or in any territory outside
+Hong Kong).”
+3.
+"THAT subject to the passing of the resolutions
+numbered B1 and B2 as set out in the notice
+convening this meeting, the general mandate
+granted to the Board to issue, allot and deal
+with additional shares of the Company and to
+make or grant offers, agreements, options and
+similar rights to subscribe for or convert any
+security into shares in the Company pursuant
+to resolution numbered B2 as set out in this
+notice be and is hereby extended by the
+addition to it of an amount representing the
+aggregate number of shares of the Company
+which are bought back by the Company
+pursuant to and since the granting to the
+Company of the general mandate to buy back
+shares in accordance with resolution numbered
+B1 as set out in this notice, provided that such
+extended amount shall not exceed 10% of the
+total number of issued shares of the Company
+as at the date of the passing of this resolution."
+By Order of the Board
+Hong Kong, 8 April 2020
+Registered office:
+65th Floor,
+CNOOC Limited
+Wu Xiaonan
+Joint Company Secretary
+164
+7.
+(i) the conclusion of the next annual
+general meeting of the Company
+following the passing of this
+resolution; and
+the aggregate number of shares of
+the Company which the Company is
+authorised to buy back pursuant to the
+approval in paragraph (a) above shall not
+exceed 10% of the total number of issued
+shares of the Company as at the date of
+the passing of this resolution; and
+159
+ves
+www
+160
+A
+Notice of Annual General Meeting
+CNOOC LIMITED Annual Report 2019
+4.
+sease
+To re-elect Mr. Lawrence J. Lau ("Mr. Lau"),
+who has already served the Company for
+more than nine years, as an Independent Non-
+executive Director of the Company:
+Lawrence J. Lau
+Born in 1944, Professor Lau graduated with
+a B.S. (with Great Distinction) in Physics from
+Stanford University in 1964, and received his
+M.A. and Ph.D. degrees in Economics from
+the University of California at Berkeley in 1966
+and 1969, respectively. He joined the faculty
+of the Department of Economics at Stanford
+University in 1966, becoming Professor of
+Economics in 1976, the first Kwoh-Ting Li
+Professor in Economic Development in 1992,
+and Kwoh-Ting Li Professor in Economic
+Development, Emeritus in 2006. From 2004
+to 2010, Professor Lau served as the Vice-
+chancellor (President) of The Chinese University
+of Hong Kong. From September 2010 to
+September 2014, Professor Lau served as
+Chairman of CIC International (Hong Kong) Co.,
+Limited. From March 2008 to February 2018,
+Professor Lau served as a member of the 11th
+and 12th National Committee of the Chinese
+People's Political Consultative Conference
+(and a Vice Chairman of its Economics
+Subcommittee). Professor Lau specialises in
+economic development, economic growth,
+and the economies of East Asia, including
+that of China. He has authored, co-authored,
+or edited thirteen books, including The
+China-U.S. Trade War and Future Economic
+Relations, and published more than 200
+articles and notes in professional journals.
+Professor Lau serves as a member of the
+Hong Kong Special Administrative Region
+Exchange Fund Advisory Committee Currency
+Board Subcommittee, and a member of the
+Hong Kong Trade Development Council
+(HKTDC) Belt and Road and Greater Bay Area
+Committee. In addition, he also serves as the
+Chairman of the Board of Directors of The
+Chinese University of Hong Kong (Shenzhen)
+Advanced Finance Institute, aka Shenzhen
+Finance Institute, a member and Chairman of
+the Prize Recommendation Committee of the
+LUI Che Woo Prize Company, as well as a
+Vice-Chairman of Our Hong Kong Foundation.
+He was appointed a Justice of the Peace in
+Hong Kong in July 2007 and awarded the
+Gold Bauhinia Star in 2011 by the Government
+of the Hong Kong Special Administrative
+Region. He currently serves as the Ralph and
+Claire Landau Professor of Economics at the
+Lau Chor Tak Institute of Global Economics
+and Finance, the Chinese University of Hong
+Kong, an independent non-executive director
+of AIA Group Limited, Hysan Development
+Company Limited (until 13 May 2020) and
+Semiconductor Manufacturing International
+Corporation, all listed on the Hong Kong
+Stock Exchange (the “Stock Exchange"),
+and an independent non-executive director of
+Far EasTone Telecommunications Company
+Limited, Taipei, which is listed on the Taiwan
+Stock Exchange. Professor Lau was appointed
+as an Independent Non-executive Director of
+the Company with effect from 31 August 2005.
+Mr. Lau has served as an Independent Non-
+executive Director of the Company for more
+than nine years. For the reasons set out in the
+section entitled "Explanatory Statement Relating
+to the Proposed General Mandates to Issue
+Shares and Buy Back Shares and Proposed
+Re-election of Directors" in the circular of
+the Company dated 8 April 2020, the Board
+considers that Mr. Lau remains independent for
+the purpose of the “Listing Rules" and the re-
+election of Mr. Lau is in the best interests of the
+Company and its shareholders as a whole.
+se
+seas
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) to 13.51(2)(v) of the Rules
+Governing the Listing of Securities on The
+Stock Exchange of Hong Kong Limited (the
+"Listing Rules"), nor are there any other
+matters to be brought to the attention of the
+shareholders of the Company.
+If re-elected, Mr. Hu's appointment shall
+continue for a period of 36 months and would
+be renewed every 36 months as determined by
+the Board or the shareholders of the Company,
+subject to one month's notice of termination by
+either party. Mr. Hu is subject to the provisions
+of his service agreement and the retirement
+provisions in the Articles of Association of
+the Company (the "Articles"). The Company
+does not pay him any Director's fee. The
+Remuneration Committee of the Company
+will review the level of Directors' emoluments
+and make recommendation to the Board for
+adjustments if necessary.
+wwwwwwww
+Notice of Annual General Meeting
+NOTICE IS HEREBY GIVEN that the Annual General
+Meeting (the "AGM") of the shareholders of CNOOC
+Limited (the "Company") will be held on 21 May 2020, at
+3:00 p.m. at Island Shangri-La Hotel Hong Kong, Pacific
+Place, Supreme Court Road, Central, Hong Kong, for the
+following purposes:
+A.
+As ordinary business, to consider and, if thought
+fit, pass with or without amendments, the following
+ordinary resolutions:
+1.
+2.
+3.
+To receive and consider the audited financial
+statements together with the Report of the
+Directors and Independent Auditor's Report
+thereon for the year ended 31 December 2019.
+To declare a final dividend for the year ended
+31 December 2019.
+To re-elect Mr. Hu Guangjie ("Mr. Hu") as an
+Executive Director of the Company:
+Hu Guangjie
+Born in 1973, Mr. Hu is a professor-level senior
+engineer. He received a Bachelor of Science
+degree in Petroleum Engineering (Reservoir
+Engineering) from Chengdu University of
+Technology and a Master's degree in Oil and
+Gas Field Development Engineering from China
+University of Petroleum (Huadong). He served
+in a number of positions in China Petrochemical
+Corporation ("Sinopec Group”), including Vice
+Manager of Northwest Oil Field Company,
+a subsidiary of China Petroleum & Chemical
+Corporation ("Sinopec Corp."), Vice General
+Manager of Northwest Oil Field Company,
+Executive Vice Director General of Northwest
+Petroleum Bureau, Executive Vice General
+Manager of Northwest Oil Field Company,
+Director General of Northwest Petroleum
+Bureau, General Manager of Northwest Oil
+Field Company, General Manager of Northwest
+Petroleum Bureau Co., Ltd., Executive Vice
+Director of Oilfield Exploration & Production
+Department of Sinopec Corp., Director of
+Oilfield Exploration & Production Department,
+General Manager of Oilfield Exploration &
+Production Department. In March 2020, Mr. Hu
+was appointed as Vice President of CNOOC.
+Mr. Hu has been appointed as an Executive
+Director and the President of the Company with
+effect from 20 March 2020.
+Save as aforesaid, Mr. Hu does not have any
+relationship with any other Director, senior
+management, substantial shareholder or
+controlling shareholder of the Company.
+Mr. Hu has no other interest in the Company's
+securities within the meaning of Part XV of the
+Securities and Futures Ordinance (Chapter 571
+of the Laws of Hong Kong) (the "SFO").
+Mr. Lau does not have any relationship with any
+other Director, senior management, substantial
+shareholder or controlling shareholder of the
+Company.
+Save as disclosed in the 2019 annual report of
+the Company, Mr. Lau has no other interest in
+the Company's securities within the meaning of
+Part XV of the "SFO".
+sex
+CNOOC LIMITED Annual Report 2019
+161
+Notice of Annual General Meeting
+B.
+sease
+6.
+7.
+If re-elected, Mr. Tse's appointment shall
+continue for a period of 36 months and would
+be renewed every 36 months as determined by
+the Board or the shareholders of the Company,
+subject to one month's notice of termination by
+either party. Mr. Tse is subject to the provisions
+of his service agreement and the retirement
+provisions in the Articles. Mr. Tse's emoluments
+comprise an annual Director's fee of
+HK$1,170,000 (before deduction of Hong Kong
+tax). The emolument of Mr. Tse was determined
+by the Board with reference to perception
+of industry standards and prevailing market
+conditions. The Remuneration Committee of
+the Company will review the level of Directors'
+emoluments and make recommendation to the
+Board for adjustments if necessary.
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) to 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the shareholders of
+the Company.
+To authorise the Board to fix the remuneration
+of each of the Directors.
+To re-appoint Deloitte Touche Tohmatsu as the
+independent auditors of the Company and its
+subsidiaries, and to authorise the Board to fix
+the remuneration of the independent auditors.
+As special business, to consider and, if thought fit,
+pass with or without amendments, the following
+resolutions as ordinary resolutions:
+(b)
+(c)
+Stock Exchange"), subject to and in
+accordance with all applicable laws, rules
+and regulations and the requirements
+of the Listing Rules, or of any other
+Recognised Stock Exchange and the
+Articles, be and is hereby generally and
+unconditionally approved;
+ves
+for the purposes of this resolution:
+"Relevant Period" means the period
+from the date of the passing of this
+resolution until whichever is the earlier of:
+www
+Mr. Tse does not have any relationship with any
+other Director, senior management, substantial
+shareholder or controlling shareholder of the
+Company.
+cav
+CNOOC LIMITED Annual Report 2019
+h
+sex
+seas
+see
+Notice of Annual General Meeting
+5.
+If re-elected, Mr. Lau's appointment shall
+continue for a period of 36 months and would
+be renewed every 36 months as determined by
+the Board or the shareholders of the Company,
+subject to one month's notice of termination by
+either party. Mr. Lau is subject to the provisions
+of his service agreement and the retirement
+provisions in the Articles. Mr. Lau's emoluments
+comprise an annual Director's fee of
+HK$950,000 (before deduction of Hong Kong
+tax). The emolument of Mr. Lau was determined
+by the Board with reference to perception
+of industry standards and prevailing market
+conditions. The Remuneration Committee of
+the Company will review the level of Directors'
+emoluments and make recommendation to the
+Board for adjustments if necessary.
+There is no other information required to be
+disclosed pursuant to any of the requirements
+of Rule 13.51(2)(h) to 13.51(2)(v) of the Listing
+Rules, nor are there any other matters to be
+brought to the attention of the shareholders of
+the Company.
+To re-elect Mr. Tse Hau Yin, Aloysius ("Mr.
+Tse"), who has already served the Company for
+more than nine years, as an Independent Non-
+executive Director of the Company:
+Tse Hau Yin, Aloysius
+Born in 1948, Mr. Tse is a fellow of The Institute
+of Chartered Accountants in England and
+Wales, and the Hong Kong Institute of Certified
+Public Accountants ("HKICPA"). Mr. Tse is a
+past president and a former member of the
+Audit Committee of the HKICPA. He joined
+KPMG in 1976, became a partner in 1984 and
+retired in March 2003. Mr. Tse was a non-
+executive Chairman of KPMG's operations in
+the PRC and a member of the KPMG China
+advisory board from 1997 to 2000. Mr. Tse
+is currently an independent non-executive
+director of China Telecom Corporation Limited,
+SJM Holdings Limited, Sinofert Holdings
+Limited and China Huarong Asset Management
+Company, Limited, companies listed on the
+Stock Exchange. From 2004 to 2010, he
+I was an independent non-executive director
+of China Construction Bank Corporation,
+which is listed on the Main Board of the Stock
+Exchange. From 2005 to 2016, Mr. Tse was
+also an independent non-executive director of
+Daohe Global Group Limited (formerly known as
+Linmark Group Limited), which is listed on the
+Main Board of the Stock Exchange. Mr. Tse is
+currently an independent non-executive director
+of CCB International (Holdings) Limited, a
+wholly owned subsidiary of China Construction
+Bank Corporation and OCBC Wing Hang
+Bank Limited (formerly named as Wing Hang
+Bank Limited whose shares were delisted
+from the Stock Exchange with effect from 16
+October 2014). Mr. Tse is also a member of the
+International Advisory Council of the People's
+Municipal Government of Wuhan. Mr. Tse was
+appointed as an Independent Non-executive
+Director of the Company with effect from 8
+June 2005.
+Mr. Tse has served as an Independent Non-
+executive Director of the Company for more
+than nine years. For the reasons set out in the
+section entitled "Explanatory Statement Relating
+to the Proposed General Mandates to Issue
+Shares and Buy Back Shares and Proposed
+Re-election of Directors" in the circular of
+the Company dated 8 April 2020, the Board
+considers that Mr. Tse remains independent
+for the purpose of the Listing Rules and the re-
+election of Mr. Tse is in the best interests of the
+Company and its shareholders as a whole.
+Mr. Tse has no interest in the Company's
+securities within the meaning of Part XV of the
+SFO.
+8.
+With respect to resolution numbered B1, approval is being
+sought from shareholders for a general mandate to buy back
+shares to be given to the Board. The Board wish to state that
+they have no immediate plans to buy back any existing shares.
+The Explanatory Statement containing the information necessary
+to enable the shareholders to make an informed decision on
+whether to vote for or against the resolution to approve the buy-
+back by the Company of its own shares, as required by the
+Listing Rules, is set out in a separate letter from the Company.
+With respect to resolution numbered B2, approval is being
+sought from shareholders for a general mandate to issue, allot
+and deal with shares to be given to the Board. The Board wish
+to state that they have no immediate plans to issue or allot any
+new shares of the Company. Approval is being sought from the
+shareholders as a general mandate for the purpose of Section
+141 of the Companies Ordinance (Cap. 622 of the Laws of
+Hong Kong) and the Listing Rules.
+Wang Dongjin (Chairman)
+Lawrence J. Lau
+Qiu Zhi Zhong
+Remuneration Committee
+Chiu Sung Hong (Chairman)
+Tse Hau Yin, Aloysius
+Wang Dongjin
+Other Members of the Senior Management
+Xie Yuhong (Executive Vice President)
+Cao Xinjian (Executive Vice President)
+Xia Qinglong (Executive Vice President)
+Xie Weizhi (Chief Financial Officer)
+Deng Yunhua (Deputy Chief Exploration Engineer)
+Yang Yun (Vice President)
+Duan Chengang (Vice President)
+Wu Xiaonan (General Counsel, Compliance Officer)
+Lawrence J. Lau
+Joint Company Secretaries
+Chiu Sung Hong
+Audit Committee
+BOE, we have assumed
+gas equals one BOE, with
+9.
+CNOOC LIMITED
+Annual Report 2019 167
+Company Information
+se
+Board of Directors:
+Executive Directors
+Xu Keqiang (CEO)
+Hu Guangjie (President)
+Non-executive Director
+Wang Dongjin (Chairman)
+Independent Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+Tse Hau Yin, Aloysius
+Qiu Zhi Zhong
+Tse Hau Yin, Aloysius (Chairman and Financial Expert)
+production during the year
+Wu Xiaonan
+Principal Banks:
+Bank of China
+65/F, Bank of China Tower
+1 Garden Road
+Hong Kong
+Tel: (852) 2213 2500
+Fax: (852) 2525 9322
+Beijing Office:
+No.25 Chaoyangmen Beidajie
+Dongcheng District
+Beijing
+China
+Zip Code: 100010
+Website: www.cnoocltd.com
+cav
+sex
+168
+CNOOC LIMITED Annual Report 2019
+ease
+Registered Office:
+Tsue Sik Yu, May
+Fax: (8610) 8452 1441
+E-mail: mr@cnooc.com.cn
+Investor Relations:
+Tel: (8610) 8452 2973
+Fax: (8610) 8452 1441
+E-mail: ir@cnooc.com.cn
+Industrial and Commercial Bank of China
+China Construction Bank
+Bank of China (Hong Kong) Limited
+Citi Bank, N.A.
+Bank of America
+Hong Kong Share Registrar:
+Hong Kong Registrars Limited
+Shops 1712-1716, 17th Floor
+Hopewell Centre
+183 Queen's Road East
+Wan Chai
+Hong Kong
+ADS Depositary:
+JPMorgan Chase Bank, N.A.
+Floor 11, 383 Madison Ave
+New York, NY 10179
+United States of America
+Stock codes:
+NYSE: CEO
+HKSE: 00883
+TSX: CNU
+Media/Public Relations:
+Tel: (8610) 8452 3404
+by
+the exception of natural gas from
+South America, Oceania,
+SES, Madura and Tangguh projects in Indonesia in Asia, and
+Dongfang 13-2, Wenchang 9-2/9-3/10-3 and Yacheng 13-
+1/13-4 gas fields in China, which we hav
+ave 
+used the actual
+thermal unit for conversion.
+proved
+166
+CNOOC LIMIT
+MITED
+Annual
+Report
+6
+case
+The Company whas provided a a. notice to the TSX pursuant to the
+requirements of the TSX Company Manual indicating its intention
+to rely on such exemption in respect of the Company's 2019
+AGM and anticipates providing similar such notices for each
+successive e year.
+<<<
+seep
+Glossary
+ACRONYMS OF UNITS OF MEASUREMENT
+ΑΡΙ
+rese
+eserves divided
+Wildcat
+A well
+drilled on any rock formation for the purpose of
+searching for petroleum accumulations, including a well
+drilled to obtain geological and geophysical parametres
+**
+addition, the Company is exempt from the TSX requirement
+at each annua meeting of holders of listed securities, the
+board of directors of a listed issuer must permit security holders
+of each class or series to vote on the election of all directors to
+be elected by such class or series. The Company is exempt
+from each such requirement by virtue of qualifying a
+I 
+as an "Eligible
+International Interlisted Issuer" for purposes of the TSX Company
+Manual.
+that
+In
+With respect to resolution numbered B3, approval is being
+sought from shareholders for an extension of the general
+mandate granted to the Board to issue and allot shares by
+adding to it the number of shares purchased under the authority
+granted pursuant to resolution numbered B1.
+Pursuant to Rule 13.39(4) of the Listing Rules, voting for all the
+resolutions set out in the notice of the AGM will be taken by poll,
+except where the chairman, in good faith, decides to allow a
+resolution which relates purely to a procedural or administrative
+matter to be voted on by a show of hands.
+The register of members of the Company will be closed from
+18 May 2020 (Monday) to 21 May 2020 (Thursday) (both days
+inclusive), during which no transfer of shares in the Company
+will be registered. In order to qualify for attending the meeting,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 15 May 2020 (Friday).
+After the AGM, if the resolution of final dividend was passed,
+the register of members of the Company will be closed from
+8 June 2020 (Monday) to 12 June 2020 (Friday) (both days
+inclusive), during which no transfer of shares in the Company will
+be registered. In order to qualify for the proposed final dividend,
+members are reminded to ensure that all instrument of transfer
+of shares accompanied by the relevant share certificate(s) must
+be lodged with the Company's registrar, Hong Kong Registrars
+Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183
+Queen's Road East, Wanchai, Hong Kong for registration not
+later than 4:30 p.m. on 5 June 2020 (Friday).
+www
+ves
+ave
+CNOOC LIMITED Annual Report 2019
+165
+Notice of Annual General Meeting
+10.
+With respect to res
+resolutions numbered A3 to
+A5, the Company
+is exempt from the requirement of the Toronto Stock Exchange
+(the "TSX") to adopt a majority voting policy requiring that
+each director must be elected by a majority of the votes O cast
+with respect to his or her election at an uncontested meeting
+by virtue
+of the fact that the Company is majority controlled
+indirectly by China National Offshore Oil Corporation ("CNOOC").
+The Company does not intend to adopt a majority voting policy
+at this time or for SO long as CNOOC is the majority controlling
+shareholder, as majority approval of feach such director is already
+assure
+sured.
+Appraisal well
+An exploratory well drilled for the purpose of evaluating the
+commerciality of a geological trap in which petroleum has
+been discovered
+The American Petroleum Institute's scale to specify gravity
+for liquid I hydrocarbons, measured in degrees
+Oil and gas exploration, development, production and sales
+Mcf
+Upstream business
+Mmboe
+Million barrels of oil
+equivalent
+Mmbbls
+Million barrels
+Mmcf
+Million cubic feet
+Note:
+In calculating barrels of oil equivalent, or
+that
+6,000 cubic feet of natural
+Reserve replacement ratio
+For
+a given year, total additions to
+equivalent
+of oil
+Thousand cubic feet
+Mboe
+FPSO
+Floating production, Storage and Offloading vessel
+LNG
+Thousand barrels
+Proved Reserves
+Based on geological and engineering date, estimates
+of oil or natural gas quantities reasonably thought to be
+recoverable from known oil and gas reservoirs under
+existing economic, operating conditions and regulations in
+future years
+PSC
+Liquefied Natural Gas
+Bbl
+Barrel
+Bcf
+Billion cubic feet
+BOE
+Barrel of oil equivalent
+Mbbls
+Thousand barrels
+Production sharing contract
+•
+www.cnoocltd.com
+Designed and produced by: Equity Financial Press Limited
+Printed by Asia One Printing Limited
+MIX
+FSC FSC™ C006398
+responsible sources
+Paper from
+www.fsc.org
+CNOOC LIMITED
+In 2019, the Company acquired a 10% equity interest in
+the Arctic LNG 2 LLC in Russia and the acquisition was
+completed. Through this acquisition, the Company can
+increase the proportion of natural gas production, which
+is in line with its low-carbon and environmental-friendly
+development model.
+China Sea
+30
+14
+4
+0
+7
+0
+3
+0
+984
+3,735
+9,286
+457
+Western South
+China Sea
+Eastern South
+20
+0
+0
+3D (km²)
+PSC Independent
+PSC
+50
+Offshore China
+Bohai
+28
+74
+0
+1
+8
+0
+53
+1
+0
+1,623
+45
+1
+0
+0
+Subtotal
+79
+140
+5
+1
+17
+0
+75
+1
+5,278
+3,735
+23,777
+457
+Overseas
+2,699
+0
+1,263
+0
+2
+0
+14
+0
+3,031
+0
+10,169
+2D (km)
+PSC Independent PSC Independent
+0
+1
+7
+0
+0
+0
+0
+5
+East China Sea
+3
+Appraisal Independent
+Appraisal
+In 2019, the Company adhered to the value-driven
+exploration philosophy and continued to strengthen its
+oil and gas exploration efforts, and the workload reached
+a record high. In offshore China, focusing on exploration
+of mid-to-large sized oil and gas fields, several major
+discoveries were made. A number of breakthroughs were
+achieved with enhanced effort in exploration in new areas
+and frontiers. Risk exploration and rolling exploration
+achieved remarkable results as well. Overseas, the
+Company accelerated the progress of existing projects,
+actively acquired high-quality new projects and continued
+to expand and optimise the layout of oversea exploration
+assets. In 2019, the Company's reserve replacement ratio
+reached 144%, and the reserve life remained stable at a
+level above 10 years.
+The Company's major exploration areas as of the end of
+2019 are shown in the table below:
+Areas
+Major Exploration
+Areas
+(Net) (km²)
+10
+CNOOC LIMITED Annual Report 2019
+Bohai
+40,331
+Western South China Sea
+72,142
+Offshore China
+Eastern South China Sea
+51,379
+East China Sea
+84,577
+EXPLORATION
+Subtotal
+In early 2020, affected by the outbreak of the COVID-19
+pandemic, demand for commodities decreased. In early
+March, international oil prices fell sharply. Looking ahead in
+2020, with trade frictions, financial turmoil and the elevation
+of geopolitical tensions, etc., the downward risks of the
+global economy is expected to increase and international
+oil prices movement continue to be uncertain. To this
+end, the Company will closely monitor changes in the
+external environment and the movement of international
+oil prices. We will adjust our operation strategy in a timely
+manner, implement more stringent cost controls, maintain
+prudent investment decisions and strengthen cash flow
+management in an effort to ensure the Company's steady
+operation.
+Business Overview
+seas
+www.
+CNOOC LIMITED Annual Report 2019
+18
+The Company sells crude oil produced in offshore China in
+domestic market mainly through CNOOC China Limited,
+its wholly-owned subsidiary. The Company sells crude oil
+produced overseas in international and domestic markets
+mainly through China Offshore Oil (Singapore) International
+Pte Ltd, its wholly-owned subsidiary, and CNOOC
+Marketing Canada and CNOOC Marketing U.S.A. Inc
+under CNOOC International Limited, another wholly-owned
+subsidiary.
+Sales of Crude Oil
+SALES AND MARKETING
+chood
+Company is an active participant in a number of world-
+class oil and gas projects and has become a leading
+industry player. Currently, the Company holds interests
+in oil and gas assets in Indonesia, Australia, Nigeria, Iraq,
+Uganda, Argentina, the U.S., Canada, the U.K., Brazil,
+Guyana, Russia and various other countries. As of the
+end of 2019, approximately 42.8% of the Company's
+net proved reserves and approximately 35.5% of its net
+production were derived from overseas.
+In 2019, international trade disputes continued and global
+economic growth slowed down. The economic growth
+momentum of the U.S. has gradually weakened. The
+Eurozone was trapped by negative interest rates. The
+growth of emerging economies was weakened. The overall
+economy of China generally remained stable with increased
+downward pressure. The supply and demand imbalance in
+the international oil market was prevalent and international
+oil prices continued to fluctuate at a low level. The average
+price of Brent crude oil in 2019 has dropped significantly by
+approximately 10.6% year-over-year.
+Facing the complex and ever-changing external environment,
+the Company focused on its own development and adhered
+to the operating strategies determined at the beginning
+of the year, which included: steadily increase oil and gas
+reserves and production levels; promote high-quality
+development of the Company; digital transformation helps
+improve core businesses; maintain prudent financial policies
+and investment decision-making; and pursue a green, low-
+carbon, and environment-friendly development model.
+In 2019, the Company successfully achieved its various
+production and operation targets despite having faced
+with a number of challenges. The Company enhanced
+efforts in exploration, strengthened the value-driven
+exploration philosophy, focusing on exploration of mid-
+to-large sized oil and gas fields in China, and at the same
+time actively deployed overseas exploration. 23 new
+discoveries were made and 30 successful appraisals of
+oil and gas bearing structures were achieved throughout
+the year. Meanwhile, the Company also pushed ahead
+steadily with the construction of new projects. Huizhou
+32-5 oilfield comprehensive adjustment/Huizhou 33-1
+oilfield joint development project, Caofeidian 11-1/11-
+6 comprehensive adjustment project and Bozhong 34-9
+oilfield in offshore China as well as Egina oilfield in Nigeria
+and Appomattox project in the U.S. Gulf of Mexico came
+on stream sequentially. More than 20 projects were
+under construction throughout the year to support future
+Sustainable development. The Company has completed the
+acquisition of 100% equity interest in CUCBM, which will
+CNOOC LIMITED Annual Report 2019
+9
+enable the Company to capitalise on its strengths in oil and
+gas exploration technology and management to coordinate
+the development of offshore and onshore, conventional and
+unconventional oil and gas businesses to further expand
+the development potential of the Company. The Company
+exceeded the annual oil and gas production target with a
+net production of 506.5 million BOE. The completion rate of
+capital expenditure for the whole year reached its best level
+in history. All-in cost decreased for the sixth consecutive
+year to US$29.78/BOE. The Company maintained a healthy
+financial position and realised a net profit of RMB61.05
+billion for the year. Meanwhile, its performance in the areas
+of health, safety and environmental protection remained
+stable.
+248,429
+Asia (excluding China)
+1,006
+Firstly, the appraisal of Bozhong 19-6 condensate
+gas fields in Bohai achieved remarkable successes,
+adding proved in-place volume of nearly 200
+million cubic metres of oil equivalent, and further
+strengthened the resource base for providing low-
+carbon and safe energy supply for Bohai Rim Region.
+Secondly, three mid-to-large sized oil and gas
+bearing structures, namely Kenli 6-1, Luda 25-1
+and Enping 20-4, were discovered and successfully
+appraised, which expanded the reserve base.
+Thirdly, breakthroughs were made in new areas and
+frontiers. Various buried hill structures in Western
+South China Sea and Bohai demonstrated promising
+exploration prospects.
+Fourthly, exploration and development integration
+was promoted and the newly added proved in-place
+volume from rolling exploration equalled to a mid-
+to-large sized oil and gas field, which accelerated
+conversion from reserve to production.
+Overseas, the Company drilled a total of 14 exploration
+wells, made six new discoveries and successfully appraised
+two oil and gas bearing structures. Major achievements
+include:
+Firstly, five more new discoveries were made in the
+Stabroek block of Guyana. As of the end of 2019, a
+total of 15 discoveries have been made in the block.
+Currently, the recoverable resources were further
+expanded to more than 8.0 billion BOE.
+Secondly, Glengorm condensate gas field discovered
+in the North Sea of the U.K. represents the largest
+oil and gas discovery in the area in the past decade.
+Further expansion in the exploration results is
+expected in the future.
+Thirdly, the Company focused on its overseas
+strategic planning and obtained two new blocks in
+Mauritania and Gabon, which further expanded its
+scope of overseas exploration.
+Other Regions in Europe
+Exploration Wells
+New Discoveries
+Successful Appraisal Wells
+Seismic Data
+Independent
+Wildcat
+PSC
+In 2019, the Company continued to follow a value-driven
+exploration philosophy in offshore China and highlighted
+the scale of discovery and efficiency of reserve, which led
+to outstanding results. Notable achievements include:
+total of 9,013 kilometres of 2D seismic data and 24,234
+square kilometres of 3D seismic data were acquired
+independently and under PSCs. The Company made 17
+new discoveries and successfully appraised 28 oil and gas
+bearing structures in offshore China. The success rate for
+independent exploration wells in offshore China was 43%-
+67%.
+Business Overview
+seas
+Africa
+21,402
+Oceania
+1,919
+Overseas
+North America
+6,319
+Wildcat
+South America
+Europe
+1,591
+Subtotal
+40,618
+Total
+289,047
+In offshore China, the Company's exploration activities
+exceeded the target set at the beginning of the year, and
+the activities in independent exploration wells and the
+acquisition of 3D seismic data reached a record high.
+Throughout the year, a total of 225 exploration wells
+were drilled, six of which were drilled under PSCs. A
+8,381
+1
+The Company's major exploration activities in 2019 are set out in the table below:
+3
+We will continue to further integrate the OML130, OML138,
+OML139 and OPL223 projects to establish an oil and gas
+production base in West Africa centred in Nigeria.
+Uganda
+The Company owns one-third interest in each of EA 1,
+EA 2 and EA 3A blocks in Uganda. EA 1, EA 2 and EA 3A
+blocks are located at the Lake Albert Basin in Uganda,
+which is one of the most promising basins in terms of oil
+and gas resources in onshore Africa.
+In 2019, the Company effectively promoted the optimisation
+of the project development plan. In the future, the Company
+will adhere to the win-win cooperation philosophy and
+continue to actively cooperate with project partners and the
+Ugandan government.
+Other Regions in Africa
+Apart from Nigeria and Uganda, the Company also owns
+interests in several blocks in Senegal, the Republic of the
+Congo, Algeria and the Gabonese Republic.
+wwwwww
+CNOOC LIMITED Annual Report 2019
+15
+Business Overview
+North America
+North America has become the Company's largest
+overseas oil and gas reserves and production region.
+The Company holds interests in oil and gas blocks in the
+U.S., Canada, Mexico and Trinidad and Tobago in North
+America. As of the end of 2019, the Company's reserves
+and production in North America reached 1,250.5 million
+BOE and 156,222 BOE/day, respectively, representing
+approximately 24.1% of the Company's total reserves and
+approximately 11.3% of its production.
+The U.S.
+Currently, the Company owns interests in two onshore
+shale oil and gas projects in the U.S. and two offshore
+deepwater projects in the Gulf of Mexico.
+The onshore shale oil and gas projects in the U.S. are Eagle
+Ford and Rokies (formerly Niobrara). CNOOC Limited holds
+27% and 12% interests in the two projects, respectively.
+In 2019, the daily net production of Eagle Ford project
+remained stable at approximately 55,000 BOE.
+In addition, the Company also holds a 20% non-operating
+interest in Usan oilfield in the OML138 block in offshore
+Nigeria, and an 18% non-operating interest in the OPL223
+and OML139 PSC, respectively.
+The Company owns interests in two important deepwater
+projects, namely Stampede and Appomattox, and a number
+of other exploration blocks in the U.S. Gulf of Mexico. In
+2019, the production of Stampede project remained stable
+with a daily net production of approximately 7,000 BOE.
+Appomattox project commenced production in May 2019
+with steady production growth and its daily net production
+was approximately 5,100 BOE.
+In 2019, Akpo oilfield maintained stable production, with
+daily net production reaching approximately 44,000 BOE.
+Egina oilfield commenced production in January 2019, with
+daily net production reaching approximately 68,000 BOE.
+Egina oilfield production growth was faster than planned
+and reached its peak production of 200,000 BOE/day in
+May 2019.
+Nigeria
+As of the end of 2019, the Company's asset portfolio
+in Indonesia comprised mainly two development and
+production blocks, namely the Madura Strait and Tangguh.
+Among them, the Madura Strait block is a joint operation
+block, in which the production of BD gas field remained
+stable, and other gas fields are under appraisal and
+construction.
+The Company owns approximately 13.9% interest in the
+Tangguh LNG Project in Indonesia. In 2019, production
+of the first phase of the project remained stable with a
+daily net production of approximately 21,000 BOE. The
+construction of the third LNG production line in the second
+phase is in progress as planned, and is expected to reach
+completion and commence production in 2021.
+In 2019, the transfer of the operating interest in the
+Malacca block was completed.
+Iraq
+The Company owns a 63.75% participating interest in
+the technical service contract of Misan oilfields in Iraq and
+acts as the lead contractor for the technical service of the
+oilfields.
+In 2019, the Company continued to drill development
+wells in Misan oilfields, and the production of the project
+has steadily increased. Affected by the contract recovery
+model, the daily net production slightly decreased to
+approximately 42,000 BOE.
+Oceania
+Currently, the Company's oil and gas assets in Oceania
+are mainly located in Australia and Papua New Guinea.
+As of the end of 2019, reserves and production derived
+from Oceania reached 59.6 million BOE and 21,987 BOE/
+day, respectively, representing approximately 1.2% of the
+Company's total reserves and approximately 1.6% of its
+production.
+Australia
+The Company owns a 5.3% interest in the North West
+Shelf LNG Project ("NWS Project") in Australia. The project
+has commenced production and is currently supplying
+gas to end-users including the Dapeng LNG Terminal in
+Guangdong, China.
+In 2019, NWS Project maintained stable production and
+achieved favourable economic returns.
+Other Regions in Oceania
+The Company owns interests in three blocks which are still
+under exploration in Papua New Guinea.
+Africa
+Africa is one of the regions where the Company has
+a relatively large oil and gas reserve and production.
+The Company's assets in Africa are primarily located in
+Nigeria and Uganda. As of the end of 2019, reserves and
+production in Africa reached 83.6 million BOE and 120,925
+BOE/day, respectively, representing approximately 1.6% of
+the Company's total reserves and approximately 8.7% of
+its production.
+The Company owns a 45% interest in the OML130 block
+in Nigeria. The OML130 block is a deepwater block
+comprising four oilfields, namely Akpo, Egina, Egina South
+and Preowei.
+Canada
+Canada is one of the world's major enrichment areas for oil
+sands. The Company owns 100% working interest in Long
+Lake and three other oil sands projects in the Athabasca
+region of northeastern Alberta. In 2019, overcoming the
+impact of production limitation by the government, the
+Company devoted greater management effort in Long
+Lake project, ramping up the daily net production to
+approximately 45,000 BOE, which was a record high.
+The steam/oil ratio (SOR) was further improved and the
+economic returns were enhanced significantly.
+The Company holds a 7.23% interest in the Syncrude
+project and its daily net production in 2019 was
+approximately 19,000 BOE. The Company also holds a
+25% interest in the Hangingstone oil sands project and
+non-operator interests under several other exploration and
+development licences.
+The final investment decision for the Phase II of Liza oilfield
+has been made and the oilfield is expected to commence
+production in 2022. The field development design proposal
+of Payara oilfield has been completed and is currently
+awaiting government approval and final investment
+decision.
+In 2019, the Stabroek block was further appraised successfully.
+Five new successful discoveries, including Haimara, Tilapia,
+Yellowtail, Tripletail and Mako, were made. Currently, a
+total of 16 new discoveries have been made in the block
+and the recoverable resources have been further expanded
+to more than 8.0 billion BOE.
+Argentina
+CNOOC Limited holds a 50% interest in BC and makes
+joint decisions on its management. BC holds a 50%
+interest in Pan American Energy Group in Argentina.
+In 2019, the Company optimised its operation plans and
+carried out innovative development plans. The daily net
+production of BC reached approximately 55,000 BOE.
+Other Regions in South America
+The Company also holds interests in several exploration
+and production blocks in Colombia.
+Europe
+The Company holds interests in oil and gas fields such as
+Buzzard and Golden Eagle in the U.K. North Sea, owns
+various exploration blocks in offshore Ireland and holds a
+10% equity interest in Arctic LNG 2 LLC in Russia. Among
+them, the Company's 10% interest in the Arctic LNG 2
+LLC is accounted for by equity method. As of the end of
+2019, the Company's reserves and production derived
+from Europe reached 108.3 million BOE and 64,027 BOE/
+day, respectively, representing approximately 2.1% of the
+Company's total reserves and approximately 4.6% of its
+production.
+The U.K.
+The U.K. is one of the Company's key overseas development
+areas. The Company's asset portfolio in the North Sea
+includes projects under production, development and
+exploration, which mainly include: holding a 43.2% interest
+in the Buzzard oilfield, one of the largest oilfields in the
+North Sea, and a 36.5% interest in the Golden Eagle
+oilfield.
+Buzzard and Golden Eagle oilfields are making considerable
+contributions to the Company's production. In 2019,
+the Buzzard oilfield's daily net production reached
+approximately 46,000 BOE.
+In 2019, the Company made a new discovery Glengorm
+in the U.K. North Sea, which represents the largest oil
+and gas discovery in the area in the last decade. Further
+expansion in the exploration results is expected in the
+future, which will facilitate the stable and sustainable growth
+of reserves and production in the region.
+Russia
+7
+The Phase I of Liza oilfield commenced production ahead
+of schedule in December 2019, and is expected to achieve
+a peak production of 120,000 BOE/day after few months
+of production.
+The Company holds a 25% interest in the Stabroek block
+in offshore Guyana. The Stabroek block covers an area of
+approximately 26,800 square kilometres and a water depth
+of approximately 1,600 to 1,900 metres.
+Guyana
+The Company also holds 100% interest in the 592 block in
+offshore Brazil, a 20% interest in the ACF Oeste block and
+a 30% interest in the Pau Brasil block.
+The Company holds 100% exploration interest in two
+exploration blocks in offshore East Canada. The drilling of
+one wildcat is expected to be completed in 2020.
+In addition, the Company holds approximately 9.585% of
+shares in MEG Energy Corporation, a listed company in
+Canada.
+Other Regions in North America
+The Company owns a 12.5% interest in the 2C block and
+a 17.12% interest in the 3A block in Trinidad and Tobago,
+respectively, of which the 2C block is in production with
+stable production and favourable economic returns.
+The Company also owns 100% exploration operator
+interest in block 1 and a 70% exploration operator interest
+in block 4 of the Cinturon Plegado Perdido deepwater
+exploration blocks in Mexico, respectively. The drilling of
+two wildcats in block 1 and block 4 are planned to be
+completed in 2020.
+South America
+South America is one of the Company's important
+sources of future reserve and production growth. The
+Company holds interests in oil and gas blocks in Brazil,
+Guyana and Colombia, as well as a 50% interest in BC
+ENERGY INVESTMENTS CORP. ("BC") in Argentina. The
+Company's 50% interest in BC is accounted for by equity
+method. As of the end of 2019, the Company's reserves
+and production derived from South America reached
+519.5 million BOE and 59,368 BOE/day, respectively,
+representing approximately 10.0% of the Company's total
+reserves and approximately 4.3% of its production.
+Indonesia
+Brazil
+The Mero oilfield in the northwest area of the block includes
+four production units, namely Mero 1, Mero 2, Mero 3
+and Mero 4. The daily net production of the extended well
+trial project in 2019 remained stable. The final investment
+decisions for Mero 1 and Mero 2 oilfields have been made
+and the projects are expected to commence production
+CNOOC LIMITED Annual Report 2019
+17
+Business Overview
+in 2021 and 2023, respectively. The development plan of
+Mero 3 has been completed.
+In 2019, the Company successfully won the bid for a 5%
+interest in Búzios Surplus project in Brazil, which represents
+another big step in the development of the deepwater
+pre-salt region in Brazil with the world's largest growth
+potential. Currently, negotiations on relevant agreements
+for the project are in progress.
+In the future, the Company will fully leverage on the development
+opportunities of the Libra project and Búzios Surplus
+project to seek new drivers for production growth.
+Brazil is one of the world's most important deepwater oil
+and gas development regions. The Company holds a 10%
+interest in Libra PSC, a deepwater pre-salt project in Brazil.
+The oilfield is located in the Santos Basin, with a block
+area of approximately 1,550 square kilometres and a water
+depth of approximately 2,000 metres.
+overseas oil and gas producing areas of the Company.
+Currently, the Company owns oil and gas assets mainly in
+Indonesia and Iraq. As of the end of 2019, reserves and
+production derived from Asia (excluding China) reached
+196.6 million BOE and 70,715 BOE/day, respectively,
+representing approximately 3.8% of the Company's total
+reserves and approximately 5.1% of its production.
+Others
+seas
+457
+CNOOC LIMITED Annual Report 2019
+11
+In 2020, the Company will continue to devote greater efforts
+in its oil and gas exploration, strengthen the value-driven
+exploration philosophy, ensure sustainable development
+in exploration, improve exploration efficiency and reduce
+exploration cost. In offshore China, the Company will target
+mid-to-large sized oil and gas fields and enhance efforts
+in exploration in new areas and frontiers. Overseas, the
+- Company will strive to obtain high-quality blocks around oil
+and gas exploration hotspots.
+www
+www
+Engineering Construction, Development
+and Production
+In 2019, the Company successfully fulfilled its
+development and operational tasks, with oil and gas
+production exceeding targets set at the beginning
+of the year. Key projects progressed steadily.
+In 2019, the Company achieved a net oil and gas
+production of approximately 506.5 million BOE,
+exceeding the production target of 480-490 million
+BOE set at the beginning of the year and reached
+a record high. Currently, among the new projects
+planned to come on stream in 2019, Huizhou 32-5
+oilfield comprehensive adjustment/Huizhou 33-1
+oilfield joint development project, Caofeidian 11-
+1/11-6 comprehensive adjustment project and
+Bozhong 34-9 oilfield in offshore China as well as
+Egina oilfield in Nigeria and Appomattox project
+in the U.S. Gulf of Mexico all came on stream.
+More than 20 projects were under construction
+throughout the year. The development and
+construction of key projects progressed smoothly.
+Among them, Lingshui 17-2 gas fields have fully
+entered the development and construction stage,
+the construction progress for Liuhua 16-2/Liuhua
+20-2 oilfield joint development project accelerated
+significantly, and the construction of Bozhong 19-6
+condensate gas field pilot development project
+achieved positive progress as well.
+In 2019, the Company continued to focus on the
+increase of oil and gas production, promoted
+construction acceleration and efficiency, strictly
+controlled operating costs and drove sustainable
+development with technology innovations. The main
+measures include:
+Firstly, the Company strengthened production
+organisation, and actively promoted acceleration
+and efficiency in construction. Works such
+as coordination between development and
+production as well as resource supply were
+carried out in advance to effectively unleash
+the potential of production, operation and
+management, and brought development wells
+on stream ahead of schedule that noticeably
+shortened the cycle of production capacity
+construction.
+23,777
+3,735
+4
+75
+Business Overview
+1
+5
+0
+3
+0
+0
+Secondly, the Company strengthened
+preliminary research to lay a solid foundation
+for development of oil and gas fields.
+Through various technological innovations,
+it efficiently and economically leveraged the
+development of heavy oilfields in Bohai; the
+0
+Total
+82
+141
+12
+4
+18
+5
+0
+Business Overview
+5,278
+Thirdly, based on oil reservoir research, the Company
+explored the potential of producing oil and gas fields.
+With increased investment, both the workloads and
+production contribution of infill drillings reached
+record highs; further progress was made in the
+"Year of Water Injection" programme to significantly
+reduce the decline rate and enhance the recovery;
+the application of new oilfield process and new
+chemical flooding was promoted, and the workload
+of production increase activities reached a record
+high.
+Eastern South China Sea is the Company's another
+important crude oil and natural gas producing area. The
+typical operating water depth in the region ranges from 100
+to 1,500 metres. The crude oil produced here is mostly of
+light to medium gravity. As of the end of 2019, the reserves
+and production in Eastern South China Sea reached
+633.9 million BOE and 242,026 BOE/day, respectively,
+representing approximately 12.2% of the Company's total
+reserves and approximately 17.4% of its production.
+In 2019, the Company made seven new discoveries in
+Eastern South China Sea, namely Enping 20-5, Panyu 10-
+1, Panyu 19-1, Xijiang 24-6, Xijiang 24-7, Lufeng 7-10
+and Lufeng 9-4. Furthermore, two oil and gas bearing
+structures, namely Enping 20-5 and Enping 20-4, were
+successfully appraised. The successful appraisal of Enping
+20-5 and Enping 20-4 and the continued discovery of
+reserves from explorations of surrounding areas proved
+that the Yangjiang Sag already has the reserve foundation
+of a mid-to-large sized oilfields.
+As for development and production, Huizhou 32-5 oilfield
+comprehensive adjustment/Huizhou 33-1 oilfield joint
+development project commenced production in January
+2019. Liuhua 16-2/Liuhua 20-2 oilfield joint development
+project and Liuhua 29-1 gas field development project are
+expected to come on stream in 2020.
+East China Sea
+The typical operating water depth in the East China
+Sea region is approximately 90 metres. As of the end of
+2019, reserves and production in the region represented
+approximately 2.8% and approximately 0.9% of the
+Company's total reserves and production, respectively.
+In 2019, the Company continued to promote innovation
+and refined management in the East China Sea, explored
+and improved the unmanned management system and
+achieved safe and efficient operation of unmanned offshore
+platforms, which significantly reduced production costs.
+In October 2019, the Company completed the acquisition
+of 100% equity interest in CUCBM. Currently, CUCBM
+mainly engaged in the exploration, development, production
+and foreign cooperation of onshore unconventional
+natural gas resources in China. CUCBM has completed
+the construction of two major production bases in the
+Qinshui Basin and the eastern edge of the Erdos Basin. In
+the future, the Company will capitalise on the strengths in
+technology and management of oil and gas development
+to coordinate the development of offshore and onshore,
+conventional and unconventional oil and gas businesses.
+As of the end of 2019, reserves and production of onshore
+China represented approximately 0.2% and approximately
+0.9% of the Company's total reserves and production,
+respectively.
+Eastern South China Sea
+The Company owns a 50% interest in the FEL 3/18 block,
+a 80% interest in the FEL 3/19 block and exploration
+interests in five other blocks in offshore Ireland.
+OVERSEAS
+Asia (excluding China)
+Asia (excluding China) is the first overseas region entered
+into by the Company, and has become one of the major
+14
+breakthrough in deep water jacket structure model
+provided alternative development methods for deep
+water oil and gas fields of 300-metre water depth;
+and promoted standardised design of offshore
+engineering.
+www.
+CNOOC LIMITED Annual Report 2019
+Following the general trend of low-carbon development in
+the global energy industry, CNOOC Limited has actively
+explored the development of renewable clean energy of
+offshore wind power by leveraging on its rich offshore
+engineering resources and production experience. In
+2019, the Company established CNOOC Renewable
+Energy Co., Ltd., which is committed to the development
+of offshore wind power business. The construction of the
+first offshore wind power project was officially commenced,
+and the installation of offshore booster station and the main
+construction of the onshore centralised control centre were
+completed. By the end of 2020, full-capacity generating
+units will be connected to the grid for power generation.
+In December 2019, the drilling of development wells of
+Lingshui 17-2, the first large-sized deepwater independent
+gas field in offshore China, officially commenced and fully
+entered the development stage. It created the world's
+first development model of deepwater 10,000-ton of oil
+equivalent semi-submersible platform. The field will provide
+stable gas supply of more than 3 billion cubic metres
+to Guangdong, Hong Kong and Hainan every year after
+commissioning.
+Onshore
+In 2019, the Company made two successful discoveries
+in Western South China Sea, namely Weizhou 11-1
+Central and Weizhou 11-2 South. The Company also
+achieved eight successful appraisals, namely Weizhou
+12-1, Weizhou 11-1, Weizhou 11-2 East, Ledong 10-1,
+Lingshui 25-1 West, Wushi 16-1, Wushi 16-1 West and
+Wenchang 19-6. Among them, Ledong 10-1 is expected
+to become a mid-to-large sized gas field. In addition, the
+Company obtained high-volume natural gas in the tests of
+Mesozoic granite buried hills, which represented a major
+breakthrough in deepwater exploration in the eastern area
+of the Qiongdongnan Basin.
+In 2020, we will continue to promote construction
+acceleration and efficiency, and strengthen the progress
+control of development projects and strive to bring new
+projects on stream ahead of schedule; carry out the "Year
+of Water Injection" programme, and lower the natural
+decline rate to ensure basic production; optimise the
+planning for infill drilling wells to enhance recovery rate
+of oilfields and increase new production contribution.
+Meanwhile, the Company will continue to explore and test
+the thermal recovery technology on heavy oil to drive the
+effective utilisation of heavy oil reserves.
+In 2020, a total of ten new projects are planned to come on
+stream, including Penglai 19-3 oilfield block 4 adjustment/
+Penglai 19-9 oilfield phase II, Qinhuangdao 33-1 South
+oilfield phase I, Bozhong 19-6 gas field pilot development
+project, Luda 16-3/21-2 joint development project, Nanbao
+35-2 oilfield S1 area, Jinzhou 25-1 oilfield 6/11 area, Liuhua
+29-1 gas field development project and Liuhua 16-2/Liuhua
+20-2 oilfield joint development project in offshore China,
+Liza oilfield phase 1 in Guyana and Buzzard oilfield phase
+Il in the U.K.. Among them, Liza oilfield Phase I in Guyana
+has already come on stream earlier than scheduled in
+December 2019.
+Further, the Company will actively promote the appraisal
+and construction of new projects. It is expected that more
+than 20 projects will be under construction throughout the
+year, which will lay a solid foundation for mid- and long-
+term growth in production.
+OVERVIEW BY REGION
+Offshore China
+Bohai is the most important crude oil producing area for
+the Company. The crude oil produced in this region is
+mainly heavy oil. The operational area in Bohai is mainly
+shallow water with a depth of approximately 10 to 30
+metres. As of the end of 2019, the reserve and production
+in Bohai reached 1,347.1 million BOE and 462,564 BOE/
+day, respectively, representing approximately 26.0% of the
+Company's total reserves and approximately 33.3% of its
+production.
+With rich oil and gas resources, Bohai has been one of the
+Company's core areas for exploration and development.
+In 2019, the Company made eight successful discoveries
+in Bohai, namely Luda 19-2, Luda 25-1, Luda 27-1, Kenli
+6-1, Kenli 10-1 North, Caofeidian 2-2, Suizhong 36-1 North
+and Jinzhou 31-2 South. In addition, the Company also
+successfully appraised 17 oil and gas bearing structures,
+including Bozhong 19-6, Bozhong 29-6, Bozhong 13-
+2, Bozhong 22-1, Bozhong 26-3 North, Bozhong 29-4,
+Bozhong 34-9, Kenli 6-1, Kenli 10-1 North, Luda 25-1,
+Luda 4-3, Luda 29-1, Jinzhou 31-2 South, Suizhong 36-1
+North, Longkou 13-2, Caofeidian 21-1 and Caofeidian 1-2.
+Bohai
+For development and production, on the basis of ensuring
+the stable production of 30 million tons of Bohai oilfields
+for another ten years, the major scientific and technological
+breakthroughs in Bohai oilfields have achieved initial
+results, which has provided a safeguard for the Company
+to achieve its medium-to long-term production growth
+targets. Among the new projects that were planned to
+commence production in 2019, Caofeidian 11-1/11-6
+oilfield comprehensive adjustment project and Bozhong
+34-9 oilfield came on stream. In 2020, it is expected that
+Luda 16-3/21-2 joint development project, Jinzhou 25-1
+oilfield 6/11 area, Penglai 19-3 oilfield block 4 adjustment/
+Penglai 19-9 oilfield phase II, Bozhong 19-6 condensate
+gas field pilot development project, Qinhuangdao 33-1
+South oilfield phase I and Nanbao 35-2 oilfield S-1 area will
+commence production.
+CNOOC LIMITED Annual Report 2019
+13
+Business Overview
+Western South China Sea
+Western South China Sea is one of the Company's
+important crude oil and natural gas production areas. The
+typical operating water depth in the region ranges from 40
+to 1,500 metres. The crude oil produced here is mostly of
+light to medium gravity. As of the end of 2019, the reserves
+and production in Western South China Sea reached
+828.7 million BOE and 164,352 BOE/day, respectively,
+representing approximately 16.0% of the Company's total
+reserves and approximately 11.8% of its production.
+In 2019, we continued to appraise Bozhong 19-6
+condensate gas fields and added proved in-place volume
+of nearly 200 million cubic metres of oil equivalent, bringing
+the total proved in-place volume to more than 300 million
+cubic metres of oil equivalent. Through cluster exploration,
+Kenli 6-1 oil bearing structure was efficiently appraised,
+with proved in-place volume exceeding 50 million tons of oil
+equivalent. It is expected to be developed as the first large-
+sized oilfield in the Laibei low uplift in Bohai. In addition,
+Luda 25-1 oil and gas bearing structure obtained a high-
+volume oil flow and is expected to be constructed as a
+mid-sized oilfield.
+Fourthly, the Company strictly controlled costs
+and enhanced efficiency, and the operating cost
+decreased to the lowest level in recent years.
+In offshore China, we promoted unmanned and
+depopulated wellhead platforms and onshore power
+supply mode; overseas, the asset structure was
+optimised to strengthen cost advantage.
+for overseas projects to ensure the compliant, safe and
+smooth operation of overseas projects.
+Rate of
+Recordable
+CNOOC Limited actively implemented the Green Development
+Action Plan, promoted environmental protection
+management in key areas. Guided by the Green.
+Development Action Plan, CNOOC Limited implemented
+the green and low-carbon development strategy, actively
+cultivated and established green factories and green
+manufacturing integration projects. CNOOC Deepwater
+Development Limited and CNOOC China Limited Zhanjiang
+(Hainan) Branch Dongfang Operations Co., were rated
+as national green factories by the Ministry of Industry
+and Information Technology; and the Dongying Terminal
+of Tianjin Branch and Zhanjiang Branch were named as
+"Green Factory" model enterprises in the petroleum and
+petrochemical industry.
+In 2019, the Company once again maintained a good
+performance in safety management and adhered to
+consistently high HSE standards. OSHA (Occupational
+Safety and Health Administration) statistics for the year are
+set out below.
+Scope
+Total
+Man-hours
+(million)
+Number of
+Recordable
+Fatalities
+Cases
+Cases
+Cases
+Rate of Lost
+Workday
+Cases
+16
+Staff of the Company
+Staff of the Company and
+41
+The Company paid great attention to the safety risk
+of overseas operations, and shared global security
+warning information in a time manner; strengthened
+the safety supervision and management of overseas
+projects, improved the security training and
+management of dispatched employees, strengthened
+the key responsibilities of overseas operation safety, and
+conducted the security management audit of contractors
+Number of
+Lost Workday
+CNOOC Limited continued to promote the cultivation
+of safety culture featuring “People-oriented, Execution
+and Intervention", conducted research and diagnosis of
+safety culture cultivation, and organised and mobilised its
+employees to actively participate in safety culture activities
+such as the "My Opinion on Safety" essay writing activity
+and the "Safety and Environmental Protection TikTok"
+micro-video shooting activity, and received positive
+feedbacks. To promote the continuous enhancement of
+safety leadership, the Company continued to hold the
+"Safety Lessons" event by safety management personnel.
+Furthermore, First Nation in Canada have aboriginal land
+claims, including claims to certain mineral resources,
+in a substantial portion of western Canada. As a result,
+negotiations with First Nations prior to commencing
+future projects (including surface activities necessary
+to conduct mineral extraction) are prudent. Failure to
+successfully complete a negotiation with affected First
+Nations may result in timing uncertainties or delays of future
+development activities.
+Business Overview
+0.08
+financing, exploration and investment, which may have a
+material adverse effect on our business, financial condition
+and results of operations.
+We face various risks with regard to our business and
+operations in Canada.
+Transportation and export infrastructure in Canada is
+limited, and without the construction of new transportation
+and export infrastructure, realisation of our full oil and
+natural gas production capability may be affected. In
+addition, we may be required to sell our products into
+the North American markets at lower prices than in other
+(global) markets, which could materially and adversely
+affect our financial performance.
+We may have limited control over our investments in
+joint ventures and our joint operations with partners.
+A portion of our operations are conducted in the form of
+partnership or joint venture over which we may have limited
+capability to influence and control their operation or future
+development. Our limited ability to influence and control
+the operation or future development of such joint ventures
+could materially and adversely affect the realisation of our
+target returns on capital investment and lead to unexpected
+future costs.
+If we depend heavily on key customers or suppliers,
+our business, results of operations and financial
+condition could be adversely affected.
+Key sales customers - If any of our key customers reduces
+its crude oil or natural gas purchases from us significantly,
+our results of operation could be adversely affected. In
+crude oil sales, we adopt measures including confirming the
+annual sales plan and participating in market competition
+so as to maintain a stable cooperation with customers and
+to reduce reliance on a single customer. In natural gas
+sales, we adopt measures including signing long-term GSA
+with take-or-pay clause so as to minimise the risk of impact
+on our financial condition.
+Key suppliers - We have strengthened our communication
+in business with our key suppliers in order to maintain
+a good working relationship. We have also established
+strategic partnerships through communications and
+Wells" and commenced regular well control inspections to
+enhance the management capability of well control.
+reached a consensus in corporate cultures and win-
+win cooperation. Furthermore, we actively explore
+new suppliers to ensure supply adequacy and foster
+competition.
+Liquidity risks - Certain restrictions on dividend distribution
+imposed by the laws of the host countries in which we
+operate may adversely and materially affect our cash flows.
+For instance, the dividend of our wholly-owned subsidiaries
+in the PRC shall be distributed pursuant to the laws of the
+PRC and the articles and association of such subsidiaries,
+and we may face risks of not obtaining adequate cash
+flows from such subsidiaries.
+HEALTH, SAFETY AND ENVIRONMENTAL
+PROTECTION ("HSE")
+As always, the Company adheres to the core HSE values of
+"Safety First, Environment Paramount, People-oriented and
+Equipment Integrated". Focusing on "improving the system,
+consolidating the foundation, and enhancing the safety
+production responsibility system for all employees", the
+Company constantly improves the systematic management
+of HSE, and strives to provide a safe working environment
+for the Company and its contractors and establish first-
+class management capability in safe production.
+In 2019, the Company further improved the management
+framework of the HSE system, identified ten core elements
+and 70 specific management requirements to lead its
+subsidiaries to adhere to a safety management orientation
+based on risks and continuous improvements. By including
+the implementation of the safe production responsibility
+system into performance review for supervision, the
+Company guided its subsidiaries to establish a responsibility
+system based on job risks.
+During the year, the Company continued to strengthen
+major investigations, checks and controls, formulated and
+adopted corresponding control measures for works such as
+major projects under construction, underground operation
+safety, high-risk well control and production facilities and
+typhoon prevention, etc. The Company strengthened
+the well control safety management, improved the well
+control management mechanism of the Company and its
+subsidiaries, formulated and revised policies such as the
+"Management Measures for Engineering Incidents in Drilling
+wwwwww
+CNOOC LIMITED Annual Report 2019
+25
+We face currency risks and liquidity risks.
+Currency risks - The Company's oil and gas sales are
+substantially denominated in Renminbi and the U.S. dollar.
+The depreciation of Renminbi against the U.S. dollar may
+have double effects. The appreciation of the U.S. dollar
+against Renminbi may increase the Company's revenue
+from the sales of oil and gas, but may increase our import
+costs of equipment and raw materials in the meantime.
+5
+In 2019, the Company implemented major talent projects
+and vigorously cultivated strategic high-level talents. The
+development channel for technology series was opened
+up and the first selection of senior technical experts of
+the Company was organised. Meanwhile, the Company
+vigorously promoted professional skill certifications and
+increased the proportion of highly skilled personnel. In
+2019, the total number of appraisals reached 2,600.
+Currently, there are 4,374 employees with titles of senior
+worker or above, accounting for approximately 74% of the
+total technical workforce, and 846 technicians and senior
+technicians, accounting for approximately 14% of the total
+technical workforce.
+0
+Sufficient Safeguard on Employees' Rights
+CNOOC Limited strives to create an open, transparent,
+equal and diverse work environment, adheres to the
+“people-oriented” “employee caring” concepts, and places
+great emphasis on safeguarding the legitimate rights of
+employees.
+We offer employees competitive compensation packages
+in the industry, established a salary increment mechanism,
+and gradually established a distribution system that
+matches market mechanism. The Company's remuneration
+system deploys multi-level and precise incentives closely
+associated with work quality and value contribution and
+further tilts to technological experts and frontline staff
+to match employee incomes with the Company's profit
+growth and enable employees to share the results of the
+Company's development.
+CNOOC LIMITED Annual Report 2019
+27
+Business Overview
+A comprehensive and effective social security system
+has also been built, and various social and multi-level
+supplementary insurances are provided to employees
+on a timely basis. In addition to making contributions for
+the five basic social insurances (pension, medical, work-
+related injury, unemployment and maternity), the Company
+also provides employees with supplementary insurances
+such as personal injury insurance, critical illness insurance,
+commercial supplementary medical insurance and
+supplementary medical insurance for children. CNOOC
+Limited has also established annuity and housing subsidy
+programmes for employees.
+At the same time, the Company respects and supports
+employees' freedom of association, assembly and joining
+trade union organisations under the laws. The Company
+has established labour unions at all levels in accordance
+with the Trade Union Law of the People's Republic of China
+to protect the legitimate rights of the employees, oversee
+the Company's performance of duties and obligations,
+supervise the Company's various business activities related
+to the interests of the employees, and communicate with
+the management on behalf of employees. Based on the
+actual situation, the Company follows the management
+policies such as the Labour Contract Management Rules
+and organised the implementation within the Company. At
+the same time, it maintains close communication with the
+legal departments and labour unions to jointly protect the
+legitimate rights of employees.
+Overseas, CNOOC Limited comprehensively protects the
+legitimate rights of local employees, strictly complies with
+local employment regulations, provides employees with
+vacation, social insurance and other benefits in accordance
+with local labour laws and regulations. The Company
+also encourages local employees to develop together
+with the Company by creating remuneration adjustment
+mechanisms and incentive mechanisms that correspond
+to the practical situations of the respective localities. The
+Company provides necessary occupational skill trainings
+and skill enhancement trainings to local employees as well
+as development opportunities such as job exchanges, on-
+the-job trainings and overseas positions. The Company
+encourages cultural integration and actively participates
+in local community construction and activities, and
+encourages local employees to participate in competitions
+and cultural activities organised by the Company
+headquarter.
+All employees signed employment contracts with the
+Company based on the principles of equality and
+voluntariness. The Company strictly complies with labour
+laws and regulations, opposes any form of inhumane
+treatment, abides by the regulations of its places of
+operation on salaries, overtime hours and statutory benefits
+and prohibits any forced labour.
+Staff Development
+training resources is optimised and intensified trainings for
+key professions and positions are carried out.
+The Company constantly promotes the implementation of
+diversified talent development strategies. The employee
+trainings were comprehensive with a total of 188,200
+attendances throughout the year. The Company organised
+key personnel and outstanding talents of different ranks,
+functions, and business fields to attend key trainings
+including "Young Talents Training Camp", "Drilling and
+Completion Experts Training Course”, “Equipment and
+Facilities Digitalisation Training Course" and "Information
+Frontier Technology Training Course". Talents reserve
+and cultivation were implemented while promoting the
+Company's business development. Meanwhile, the
+Company continued to strengthen the construction on
+the content and resources and promotion of the online
+platform, created contents of various topics such as digital
+knowledge, health, safety and environmental protection,
+well control, etc., and used the platform to carry out various
+forms of training activities such as learning, talent selection
+and competition.
+Business Overview
+Cultivation of International Talents
+The Company's strong focus on cultivating international
+talents is manifested in its established training system by
+hierarchy and level and intensified training of international
+talents through various means, which strengthen the
+establishment of an international talent team.
+The Company continues to promote the training program
+of "International Leading Talents and Professional Talents",
+and actively selects and cultivates core talents for
+international businesses and high-potential talents for its
+future development. The third batch of international leading
+talents selected in 2019 comprised 11 personnel. The
+second batch of international professional talents selected
+comprised 61 personnel for whom mixed online and offline
+trainings were organised.
+28
+*********
+CNOOC Limited adheres to the common growth of employees
+and the Company, attaches importance to employee
+development, builds a multi-level training system for
+employees and continues to empower employees as
+needed. Diversified talent development strategies are
+continuously promoted and implemented. Allocation of
+0.02
+16% of the total workforce, and 14% employees in mid-
+level and senior management positions were female.
+The Company complies with the employment principles of
+diversity and anti-discrimination, and insists on the equal
+treatment of employees of different races, nationalities,
+beliefs, genders, ages, marital status and those protected
+by special laws in employee recruitment, training,
+promotion and remuneration system. The Company strives
+to provide equal opportunities for employees in all aspects,
+actively cultivate a respectful, open and inclusive corporate
+culture and cherish the diverse talents of employees.
+direct contractors
+143
+46
+0.07
+20
+0.03
+1
+CORPORATE CITIZEN
+CNOOC Limited adheres to the principle of gender equality
+in employment, actively increases the number of female
+employees and conducts training and educational activities
+for women in management roles. In addition, the Company
+also enriches the leisure life of female employees in various
+ways and encourages them to participate in various
+activities. As of the end of 2019, the Company had a total
+of 2,960 female employees, representing approximately
+The Company strongly advocates social responsibility
+and the harmonious development between enterprise and
+society, and between people and nature. The Company
+regards fulfilling social responsibilities as a fundamental
+obligation. While committed to the sustainable growth
+of the Company and creating value for its shareholders,
+the Company also strives to provide clean and reliable
+energy to the society and to pay attention to the needs of
+stakeholders.
+In 2020, the Company will publish on its website the "2019
+Environmental, Society and Governance Report", which will
+provide a systematic review of the Company's activities to
+fulfill its corporate social responsibility in 2019.
+HUMAN RESOURCES
+The Company always believes that its employees are the
+driving force for its development and the foundation for
+the continuous growth of its corporate values. CNOOC
+Limited regards its employees as the core competitiveness
+for the Company's development. The Company always
+adheres to the people-oriented development concept,
+constantly improves various employment policies, attaches
+great importance to the rights and interests of employees,
+creates a good environment for employees' development
+and helps them grow in a healthy atmosphere.
+Objective, Open and Equal Employment Policy
+CNOOC Limited strictly complies with relevant applicable
+domestic and international laws and regulations, and
+continues to improve the Company's internal employment
+management policy. In China, CNOOC Limited strictly
+complies with international conventions approved by
+the Chinese government such as the Discrimination
+(Employment and Occupation) Convention and policies
+and regulations such as the Labour Law of the People's
+26
+CNOOC LIMITED Annual Report 2019
+seas
+Republic of China and the Labour Contract Law of
+the People's Republic of China, and established the
+employment and labour contract management policy
+to safeguard various legitimate rights and interests of
+our employees. Overseas, CNOOC Limited abides by
+relevant laws and regulations and diligently implements
+relevant international conventions participated by the
+Chinese government, and established overseas employee
+management policy to ensure that the legitimate rights of
+all employees are respected.
+Our social responsibility philosophy is: to build CNOOC
+Limited into a driving force for sustainable energy supply,
+a leading force for clean, healthy and green development,
+and a facilitating force for the mutual progress of
+stakeholders and society.
+sse
+Our ability to deliver competitive returns and pursue
+commercial opportunities depends in part on the
+robustness and the long-lasting accuracy of our price
+predictions.
+24
+With respect to risk management, the Company has
+chosen and adopted the risk management framework
+issued by COSO (namely, the Committee of Sponsoring
+Organizations of the Treadway Commission) of the
+U.S., established a risk management system covering
+design, implementation, monitoring, assessment and
+continuous improvement based on the ISO 31000
+Risk Management Guidelines. The Risk Management
+Committee of the Company established the overall
+targets and strategies of the risk management system
+which are in line with the strategic objectives of the
+Company, and identified, analysed and assessed
+the overall risks of the Company, including the
+Company's key risks in making major decisions,
+important events and key business processes. The
+Risk Management Committee is also responsible for
+reviewing and approving the response plans to major
+risks, as well as following up and periodically reviewing
+the implementation of such response plans, in order
+to make sure that sufficient attention, monitoring
+and responses will be afforded to all key risks of the
+Company.
+With respect to internal control, the Company has
+chosen and adopted the internal control framework
+issued by COSO of the U.S., established an internal
+control system and mechanism over financial,
+operational and compliance controls and has
+conducted continuing review and evaluation of the
+internal control of the Company in order to ensure
+the timeliness, accuracy and completeness of all
+information reported.
+The Board considered that as of 31 December 2019,
+the Company's risk management system and the
+Company's internal control over financial reporting
+were effective.
+As a company listed in Hong Kong, the U.S. and Canada,
+the Company will continue to strictly comply with all
+regulatory requirements, improve its risk management
+and internal control system and maintain a high standard
+of corporate governance to ensure the Company's more
+healthy development.
+RISK FACTORS
+Although we have established the risk management
+system to identify, analyse, evaluate and respond to risks,
+our business activities may be subject to the following
+risks, which could have material effects on our strategies,
+operations, compliance and financial condition. We urge
+you to carefully consider the risks described below.
+20
+********ve
+CNOOC LIMITED Annual Report 2019
+www.
+********
+Business Overview
+Our business, cash flows and profits fluctuate with
+volatility in oil and gas prices.
+Prices for crude oil, natural gas and oil products may
+fluctuate widely in response to relative changes in the
+supply and demand for crude oil and natural gas, market
+uncertainty and various other factors beyond our control,
+including but not limited to overall economic conditions,
+political instability, armed conflict and acts of terrorism,
+economic conditions and actions of major oil-producing
+countries, the prices and accessibility of other energy
+sources, domestic and foreign government regulations,
+natural disasters, weather conditions and major public
+health emergencies (e.g., the novel coronavirus (COVID-19)
+outbreak at the beginning of 2020). Changes in oil and gas
+prices could have a material effect on our business, cash
+flows and earnings.
+Oil and gas prices are volatile. A downward trend in oil
+and gas prices which lasts for a long period may adversely
+affect our business, revenue and profits, and may also
+result in write-off of higher-cost reserves and other assets,
+reduction in the amount of oil and natural gas we can
+produce economically and termination of existing contracts
+that have become uneconomic. The prolonged slump in oil
+and gas prices may also impact our long-term investment
+strategies and operation capability for our projects.
+Our business and strategies may be substantially affected
+by complex macro economy, political instability, war and
+terrorism and changes in policies, laws and fiscal and tax
+regimes.
+The Company's Risk Management Committee is directly
+managed by the Chief Executive Officer of the Company
+and has been authorised to be in charge with the
+organisation and implementation of the overall risk
+management and internal control, on-going monitoring
+of the risk management and internal control system of
+the Company, and making periodic reports to the Board
+regarding the status of the risk management and internal
+control system of the Company.
+Since its establishment, the Company has treated risk
+management and internal control as a top priority. The
+Company realises that it is the duty and obligation of its
+management to establish and maintain a risk management
+and internal control system which serves the Company's
+strategic objectives and meets the Company's business
+practice.
+RISK MANAGEMENT AND INTERNAL
+CONTROL SYSTEM
+Business Overview
+Business Overview
+The Company's crude oil sales prices are mainly determined
+by reference to the prices of international benchmark crude oil
+of similar quality, with certain premiums or discounts subject
+to the prevailing market conditions. Although the prices are
+denominated in the U.S. dollar, customers in China settle in
+Renminbi. The Company currently sells three types of crude
+oil in China, i.e., heavy crude oil, medium crude oil and light
+crude oil. The benchmark oil price is Brent. The Company's
+major customers in China are CNOOC, CNPC and Sinopec
+Group. Crude oil produced overseas is benchmarked at the
+Brent, Dubai, Oman and WTI prices and regularly updated
+official oil prices of national oil companies in oil producing
+countries and sold in international markets.
+In 2019, the Company's realised oil prices dropped as
+a result of the decrease in international oil prices. The
+Company's average realised oil price was US$63.34/barrel,
+representing a year-on-year decrease of approximately
+5.8%, less than the decrease of the Brent oil price. The
+discount rate of the Company's realised crude oil price to
+the Brent benchmark oil price narrowed, which was mainly
+due to: on the one hand, the demand for low-sulfur heavy
+crude oil increased and the tightened supply of heavy
+crude oil drove the increase of price of heavy crude oil; on
+the other hand, the change in the structure of overseas
+production increased the average selling price of oversea
+crude oil.
+Sales of Natural Gas
+The Company's natural gas sales prices are mainly
+determined through negotiation with customers. Generally,
+natural gas sales agreements are long-term contracts,
+and the contract terms normally include a price review
+mechanism. The Company's natural gas customers are
+primarily located in the southeast coastal areas of China,
+and the major customers include CNOOC Gas and Power
+Group, China BlueChemical Ltd, Hong Kong Castle Peak
+Power Company Limited, etc.
+Sales of LNG from NWS Project in Australia and the
+Tangguh LNG Project in Indonesia are mainly based on
+long-term supply contracts to various customers in the
+Asia-Pacific region, including the Dapeng LNG Terminal in
+Guangdong Province and the LNG terminal in Putian, Fujian
+Province in China.
+In 2019, the Company's average realised natural gas price
+was US$6.27/mcf, representing a year-on-year decrease of
+approximately 2.2%, which was mainly due to the decrease of
+natural gas price denominated in USD in China as a result of
+Renminbi depreciation, as well as the decreases of Tangguh
+spot market prices and NYMEX prices in the U.S. market.
+In China, thanks to policy support, the consumption of
+natural gas based on metre reading has maintained rapid
+growth. However, due to the initial effects of increased
+Although the global economy has been recovering, some
+of the countries in which we operate may be considered
+politically and economically unstable. As a result, our
+financial condition and operating results could be adversely
+affected by associated international actions, domestic civil
+unrest and general strikes, political instability, war and acts
+of terrorism. Any changes in regime or social instability, or
+domestic exploration and development efforts, coupled
+In 2019, the Company proactively implemented its "innovation-
+driven" strategy and further increased the investment
+in science and technology. The Company also devoted
+greater efforts to the development of major scientific and
+technological breakthroughs in science and technology
+projects and strived to ensure reserve and production
+growth with the help of technological innovation. The
+Company promoted the building of scientific research
+platforms and made new progress in core technological
+research projects. The Company accelerated the
+construction of smart oilfields and promoted cost reduction
+and efficiency enhancement through digital transformation.
+Researches on natural gas hydrate, geothermal energy
+and ocean energy technologies were actively carried out to
+facilitate the Company's sustainable development.
+Major Scientific and Technological Project
+Development
+In 2019, the Company focused on the core business needs
+and continued to research on critical core technologies
+such as the development of deepwater oil and gas fields,
+offshore heavy oil, oil and gas fields with high temperature
+and high pressure and fields with low porosity and
+permeability. Breakthroughs were made in key technologies
+such as high water content and high recovery oilfield water
+injection tapping technology, medium and deep formation
+exploration and development technology and integrated
+technology for injection and production of heavy oil thermal
+recovery jet pump, which would provide technological
+support for reserve and production growth. The Company
+won the "First Prize" of China's National Science and
+Technology Progress Award in 2019 for its "Theory and
+major discoveries for large-scale integrated condensate
+gas field exploration in the deep layer of Bohai Bay Basin"
+project.
+Progress of Major Technological Innovation
+In 2019, new progress was made in the building of
+scientific research platforms, and experimental researches
+such as heavy oil chemical flooding and natural gas hydrate
+production simulation were commenced. Significant
+progress has also been made in projects such as "Marine
+natural gas hydrate test recovery technology and process",
+"Research on and application of unconventional oil and
+gas seismic exploration and development technology"
+and "Research on completeness detection and plugging
+technology for offshore gas wells".
+wwwww
+CNOOC LIMITED Annual Report 2019
+19
+with the rapid growth of imported LNG and imported
+pipeline natural gas, the overall supply of the natural gas
+market was relatively abundant and the supply and demand
+were generally balanced. Based on market conditions,
+the Company raised certain contract prices during peak
+demand season through negotiations.
+GA
+22
+Business Overview
+CNOOC LIMITED Annual Report 2019
+23
+Business Overview
+sell our securities due to certain restrictions on investments
+in companies that engage in activities in sanctioned
+countries, such as Iran and Sudan. We may also be subject
+to negative media or investor attention, which may distract
+management, consume internal resources and affect
+investors' perception of our Company and investment in
+our Company.
+Any failure to replace reserves and develop our
+proved undeveloped reserves could adversely affect
+our business and our financial position.
+Our exploration and development activities involve inherent
+risks, including the risk of failing to discover commercially
+productive oil or gas reservoirs and that the wells we drill
+may not be able to commence production or may not be
+sufficiently productive to generate a return of our partial or
+full investments. In addition, approximately 57.2% of our
+proved reserves were undeveloped as of 31 December
+2019. Our future success depends on our ability to develop
+these reserves in a timely and cost-effective manner. There
+are various risks in developing reserves, mainly including
+construction, operational, geophysical, geological and
+regulatory risks.
+The reliability of reserve estimates depends on a number
+of factors, including the quality and quantity of technical
+and economic data, the market prices of our oil and
+gas products, the production dynamics of oil reservoirs,
+extensive engineering judgments, comprehensive
+judgement of engineers and the fiscal and tax regimes in
+the countries where we have operations or assets.
+Many of the factors, assumptions and variables involved
+in estimating reserves are beyond our control and may be
+proved to be incorrect over time. Consequently, the results
+of drilling, testing, production and changes in the price of
+oil and gas may require substantial upward or downward
+revisions to our initial reserve data.
+Different levels of the U.S. government - federal, state
+or local impose economic sanctions of varying severity
+against certain geographical areas and their populations or
+against designated governments, organisations, individuals
+and entities wherever located. Our controlling shareholder,
+CNOOC, non-controlling affiliates and the Group currently
+do not carry out any sanctioned activities in the countries
+that are the subject of comprehensive U.S. sanctions (Iran,
+Cuba, North Korea, Syria and the Crimea region). However,
+it is impossible to predict whether the operation or business
+of the Company or its affiliates or the countries or regions
+in which the Company or its affiliates have operations or
+business will become the subject of such U.S. sanctions
+in the future due to changes in the U.S. sanctions regime.
+For example, in July 2019, one of our wholly-owned
+subsidiaries acquired 10% equity interest in Arctic LNG 2
+LLC held by Ekropromstroy Limited Liability Company, and
+Arctic LNG 2 LLC is a limited liability company incorporated
+in the Russian Federation engaging in developing the
+second large onshore conventional natural gas project led
+by Joint Stock Company Novatek on the Gydan Peninsula
+in Russia. If there is any change in the U.S. sanctions
+regime targeting Russia or any other country where we
+engage in business, our ability to continue that business, or
+to conduct business with U.S. persons might be affected.
+We could be prohibited from engaging in business activities
+in the U.S. or with U.S. individuals or entities, and U.S.-
+related transactions in our securities and distributions to
+U.S. individuals and entities with respect to our securities
+could also be prohibited. Pension or endowment funds of
+certain U.S. state and local governments or universities may
+If we fail to develop or gain access to appropriate
+technologies, or to deploy them effectively,
+the realisation of our strategies as well as our
+competitiveness and ability to operate may be
+adversely affected.
+environment. This may in turn harm our reputation and
+operation, increase our costs or even result in litigations
+and sanctions.
+Breach of our cyber security or break down of our IT
+infrastructure could damage our operations and our
+reputation.
+Malicious attacks on our cyber system, negligence in
+management of our cyber security and IT system and
+other factors may cause damage or breakdown to our IT
+infrastructure, which may disrupt our operations, result
+in loss or misuse of data or sensitive information, cause
+injuries, environmental harm or damages in assets, violate
+laws or regulations and result in potential legal liability.
+These actions could result in significant increase in costs or
+damage to our reputation.
+CNOOC largely controls us and we regularly enter
+into connected transactions with CNOOC and its
+affiliates.
+Currently, CNOOC indirectly owns or controls approximately
+64.44% of our shares. As a result, CNOOC is able to
+control our Board composition or our Board, determine
+the timing and amount of our dividend payments, and
+control us in various aspects. Under current PRC laws,
+CNOOC has the exclusive right to enter into PSCs with
+foreign enterprises for petroleum resources exploitation
+in offshore China. Although CNOOC has undertaken to
+transfer all of its rights and obligations (except for those
+relating to administrative functions as a state-owned
+company) under any new PSCs that it enters into to us, our
+strategies, results of operations and financial position may
+be adversely affected in the event CNOOC takes actions
+that favour its own interests over ours.
+In addition, we regularly enter into connected transactions
+with CNOOC and its affiliates. Certain connected
+transactions require a review by the Hong Kong Stock
+Exchange and are subject to prior approvals by our
+independent shareholders. If these transactions are not
+approved, the Company may not be able to proceed with
+these transactions as planned and it may adversely affect
+our business and financial condition.
+Oil and natural gas transportation may expose us to
+financial loss and reputational harm.
+Our oil and gas transportation involves marine, land and
+pipeline transportation, which are subject to hazards such
+as capsizing, collision, acts of piracy and damage or loss
+from severe weather conditions, explosions and oil and gas
+spills and leakages. These hazards could result in serious
+personal injury or loss of human life, significant damage to
+property and equipment, environmental pollution, operating
+loss, risk of financial loss and reputational harm. We may
+not be able to arrange insurance coverage for all of these
+risks and uninsured losses and liabilities arising from
+these hazards could reduce the funds available to us for
+Technology and innovation are vital for us in meeting the
+global energy demands in a competitive environment and
+exploration and development challenges. For example, we
+strive to rely on technologies and innovations to enhance
+our competiveness in the development of unconventional oil
+and gas resources, including heavy oil, oil sands, shale oil
+and gas and coalbed methane, and deep water exploration
+and development, offshore enhanced oil recovery. In
+an operating environment with stricter environmental
+protection standards and requirements, although current
+knowledge recognise these newly developed technologies
+as safe to the environment, there still exist unknown or
+unpredictable elements that may have an impact on the
+CNOOC LIMITED Annual Report 2019
+-
+Violations of anti-fraud, anti-corruption and corporate
+governance laws may expose us to various risks.
+Laws and regulations of the host countries or regions.
+in which we operate, such as laws on anti-corruption,
+anti-fraud and corporate governance, are constantly
+changing and becoming more comprehensive, especially
+in the U.S., the U.K., Canada, Australia, Guyana and
+China. The compliance with these laws and regulations
+may increase our cost. If the Company, our Directors,
+executives or employees fail to comply with any of such
+laws and regulations, it may expose us to prosecution or
+punishment, damage to our reputation and image, and our
+ability to obtain new resources and/or access to the capital
+markets, and it may even expose us to civil or criminal
+liabilities.
+other political, economic or diplomatic developments, or
+changes in policies, laws, fiscal and tax regimes are not
+within our control. Our operations, existing assets or future
+investments may be materially and adversely affected by
+these changes as well as potential trade and economic
+sanctions due to deteriorated relations between different
+countries.
+For example, in the wake of the U.K.'s exit from the
+European Union on 31 January 2020 (“Brexit”), it is
+unclear how Brexit would affect the fiscal, monetary and
+regulatory landscape within the United Kingdom, the
+European Union and globally before further negotiations are
+concluded. Furthermore, new laws and regulations relating
+to data privacy, including the European Union General
+Data Protection Regulation and recent legislation and
+regulations adopted in various jurisdictions, pose complex
+compliance challenges and may result in increased costs.
+The ongoing oil and gas system reform in China may have
+certain impacts on the Company's business in China. In
+terms of foreign investment access policies, the Foreign
+Investment Law, the Regulation on Implementing the
+Foreign Investment Law and the Special Management
+Measures (Negative List) for Foreign Investment Access
+(2019 Edition) have been promulgated and implemented.
+Among them, the Special Management Measures
+(Negative List) for Foreign Investment Access (2019)
+Edition) no longer restricts foreign investment to enter the
+oil and gas exploration and production industry in China
+through joint venture and cooperation only. At the end of
+2019, China's ministry of natural resources management
+published the Opinions on Several Matters Concerning
+Promoting Reform of Mineral Resources Administration
+(for Trial Implementation), which imposed challenges for
+the Company to obtain and retain business in the oil and
+gas fields in the future. The above law and regulations and
+the ongoing oil and gas system reform in China may have
+certain impacts on the Company's existing business model.
+Our financial performance is affected by the tax and
+fiscal regimes of host countries in which we operate.
+Any changes in these regimes may result in increased
+costs, including imposing additional or double taxation
+on our company in some circumstances. For example,
+in November 2019, the Nigerian President assented to
+the Deep Offshore and Inland Basin Production Sharing
+Contract (Amendment) Bill 2019 following its passage
+by the National Assembly of Nigeria. Furthermore, the
+Organisation for Economic Co-operation and Development
+(OECD) initiated the "Base Erosion and Profit Shifting
+Project" (BEPS Project) to enhance multilateral cooperation
+and strengthen supervision on global corporate taxation
+and transfer pricing activities. Numerous countries have
+responded to the BEPS Project by implementing tax law
+changes and amending tax treaties at a rapid pace.
+Oil and gas industry is highly competitive.
+We compete in the PRC and other countries in which we
+operate with national oil companies, major integrated oil
+and gas companies and various other independent oil
+and gas companies for access to oil and gas resources,
+products, alternative energy, customers, capital financing,
+technology and equipment, talents and business
+opportunities. Competition may result in shortage of these
+resources or over-supply of oil and gas, which could
+increase our cost or reduce our earnings, and adversely
+impact our business, financial condition and results of
+operations.
+In addition to competition, as we need to obtain various
+approvals from governmental and other regulatory
+authorities in order to maintain our operations, we may
+face unfavourable results such as project delays and cost
+overruns, which may further impact the realisation of our
+strategies and adversely impact our financial condition.
+We review the oil and natural gas price predictions on
+a periodic basis when evaluating project decisions and
+business opportunities. We generally assess projects
+and other business opportunities based on a long-term
+price range. While we believe our current long-term price
+predictions are prudent, if such predictions proved to be
+incorrect, it could have a material adverse effect on us.
+For short-term planning purposes, we assess the project
+feasibility by using a wider price range.
+Rising climate change concerns could lead to
+additional regulatory measures that may result in
+higher costs.
+It is expected that the CO2 emissions will increase as our
+production grows. CO2 emissions from combustion will
+continue to increase without a mature and reliable gas
+collection system in place. With the coming into force of the
+Paris Agreement and the continuing growth of the public's
+awareness of climate change problems, the carbon
+emission policies of different countries have been enacted
+one after another. The Company expects to be supervised
+by relevant agencies and organisations in the future. If
+we are unable to find economically viable and publicly
+acceptable solutions that could reduce our CO2 emissions
+from our new and existing projects, we may experience
+additional costs, and our reputation may be adversely
+affected.
+Potential changes in the U.S. sanctions regime could
+result in negative media and investor attention and
+possible sanctions imposed on the Company due to
+the Company's or its affiliates' activities in certain
+countries or regions, which could materially and
+adversely affect our shareholders.
+Mergers, acquisitions and disposals may expose us
+to additional risks and uncertainties, and we may
+not be able to realise the anticipated benefits from
+acquisitions and disposals.
+CNOOC LIMITED Annual Report 2019
+www.
+Business Overview
+and realising synergies, outcomes differing from key
+assumptions, host countries' governments reacting or
+responding in a different manner from that envisaged, or
+liabilities and costs being underestimated. Any of these
+reasons would reduce our ability to realise the anticipated
+benefits. We may not be able to successfully dispose of
+non-core assets at acceptable prices, resulting in increased
+pressure on our cash position. In the case of asset
+disposals, we may be held liable for past acts, or failures
+to act or perform obligations, we may also be subject to
+liabilities if a purchaser fails to fulfill its commitments. These
+risks may result in an increase in our costs and inability to
+achieve our business goals.
+The nature of our operations exposes us and the
+communities in which we operate to a wide range of
+health, safety, security and environment risks.
+Every aspect of our daily operations exposes us to health,
+safety, security and environment (HSSE) risks given the
+geographical area, operational diversity and technical
+complexity of our operations. Part of our oil and gas
+operations are located in environmentally sensitive regions
+or politically unstable regions, such as Iraq, Nigeria, etc.;
+or operating in offshore environment, especially in new
+deepwater areas such as Mexico, etc. Our operations
+expose us and the areas in which we operate to a number
+of risks, including major process safety incidents, natural
+disasters, social unrest, personal health and safety
+mistakes and potential consequences from unforeseeable
+external destruction, for instance, typhoons, sea ice, etc.
+may damage platform structure, and submarine pipelines
+may lead to oil spills and gas leaks due to damage from
+external force. If a major HSSE risk materialises, such as an
+explosion or hydrocarbon spill, it could result in casualties,
+environmental damage, disruption to business activities and
+material impact on our reputation, exclusion from bidding
+and eventually loss of our licence to operate. In certain
+circumstances, liabilities imposed may be disproportionate
+to our fault in the matter. Regulatory regimes for HSSE
+in host countries in which we operate change constantly
+and may become more stringent over time. In the future,
+we may incur significant additional costs in complying with
+such requirements or bear liabilities such as fines, penalties,
+clean-up costs and third-party claims, as a result of breach
+of laws and regulations relating to HSSE matter.
+We maintain various insurance policies for our operations
+against potential losses. However, our ability to insure
+against our risks is subject to the availability of relevant
+insurance products in the market. In addition, we cannot
+asure you that our insurance coverage is sufficient enough
+to cover all losses that we may incur, or that we will be
+able to successfully claim our losses under our existing
+insurance policies on a timely basis, or at all. If any of our
+losses are not covered by our insurance coverage, or if
+the insurance compensation is less than our losses or the
+claim is not paid on a timely basis, our business, financial
+condition and results of operations could be materially and
+adversely affected.
+Mergers and acquisitions may not succeed due to
+various reasons, such as difficulties in integrating activities
+RESEARCH AND SCIENTIFIC DEVELOPMENT
+www.
+CNOOC LIMITED Annual Report 2019
+Qiu Zhi Zhong (Note 4)
+33
+CNOOC LIMITED Annual Report 2019
+wwwwww
+When nominating an Independent Non-
+executive Director who has served the
+Company for more than nine years, the Board
+will propose shareholders' vote by way of a
+separate resolution on any decision to re-elect
+such Independent Non-executive Director
+and include in the circular and/or explanatory
+statement accompanying the notice of the
+relevant general meeting to shareholders
+the reasons why the Board still considers
+such Director as independent and shall be
+re-elected. Mr. Lawrence J. Lau and Mr.
+Tse Hau Yin, Aloysius who have served as
+Independent Non-executive Directors of the
+Company for over nine years, will retire from
+office and being eligible for re-election at the
+forthcoming annual general meeting of the
+Company to be held on 21 May 2020. Mr. Lau
+has thorough understanding of the Company's
+operations and business. As an Independent
+Non-executive Director, Mr. Lau has always
+contributed objectively in advising the Board and
+the senior management, expressing objective
+views, and giving valuable independent
+guidance to the Company in his capacity as
+Independent Non-executive Director over the
+years. He is currently a member of the Audit
+Committee and the Nomination Committee,
+and served as a member of the independent
+board committee numerous times in connection
+with the connected transactions entered into
+by the Company and its connected persons.
+Mr. Lau has been continuously demonstrating
+firm commitments to his role. Mr. Lau always
+places great importance on high standards of
+corporate governance. Due to his extensive
+knowledge in economics, his experience in
+advising organisations and governmental
+bodies on economic development, economic
+growth and trade development, and his
+experience in serving as an independent non-
+executive director of a few listed companies,
+Mr. Lau is able to provide valuable and useful
+advices and guidance to the Company in areas
+such as economic development, compliance,
+etc. Mr. Lau has never been engaged in any
+executive management of the Group. Mr. Lau
+has provided confirmation of his independence
+according to Rule 3.13 of the Listing Rules.
+The Board, with the recommendation of the
+Nomination Committee of the Company,
+considers that, given the independence
+confirmation provided by Mr. Lau and the
+and approval. For proposing candidates to
+stand for election and re-election at a general
+meeting, the Nomination Committee shall make
+nominations to the Board for its consideration
+and recommendation.
+recommendations for the Board's consideration
+The Nomination Committee considers the
+personal profile and credentials of the proposed
+candidates and may request candidates to
+provide additional information and documents
+if it considers necessary, and assesses the
+proposed candidates or incumbent candidates
+on criteria set out above. The Nomination
+Committee may also invite nominations of
+suitable candidates from Board members (if any)
+for consideration by the Nomination Committee
+prior to its meeting. For filling a casual vacancy,
+the Nomination Committee shall make
+When nominating a particular candidate
+for Director, the Nomination Committee will
+consider (1) integrity and character; (2) the
+breadth and depth of the management and/
+or leadership experience of the candidate;
+(3) financial literacy or other professional or
+business experience of the candidate that are
+relevant to the Company and its business; (4)
+the experience or knowledge of the candidate
+that are relevant to the Company's business
+and corporate strategy and in international
+operations; (5) commitment in respect of
+available time; (6) diversity including gender,
+age, cultural, educational background, ethnicity,
+skills, knowledge, experience, etc; and (7)
+independence criteria as required under the
+Listing Rules for candidates for Independent
+Non-executive Directors. All candidates must
+be able to meet the standards set out in Rules
+3.08 and 3.09 of the Listing Rules.
+With respect to nomination for new directors
+and re-election of directors, the Company
+follows a considered and transparent
+nomination policy and the Nomination.
+Committee adheres to such policy for
+nomination of Directors. The nomination of
+Directors was made in accordance with the
+nomination policy and the objective criteria
+(including gender, age, cultural, educational
+background and relevant or professional
+experience, ethnicity, skills, knowledge, etc.),
+with due regard for the benefits of diversity,
+as set out under the board diversity policy of
+the Company. Under the nomination policy
+for Directors of the Company, the Nomination
+Committee shall nominate suitable candidates
+to the Board for it to consider and make
+recommendations to shareholders for election
+and re-election of Directors.
+composition of the Board (including the skills,
+knowledge and experience), and to evaluate the
+leadership abilities of Executive Directors, so as
+to ensure the competitiveness of the Company.
+Corporate Governance Report
+34
+www.
+32
+The main authorities and responsibilities
+of the Nomination Committee are to make
+recommendations to the Board for suitable
+candidates to serve as Directors and senior
+management of the Company for approval by
+the Board, to review the structure, size and
+The role of the Nomination Committee is to
+determine the policy and establish proper
+procedures for the selection of the Company's
+leadership positions, upgrade the quality of
+Board members and perfect the Company's
+corporate governance structure.
+Prior to 7 May 2019, the Nomination Committee
+comprised two Independent Non-executive
+Directors (Mr. Lawrence J. Lau and Mr. Kevin
+G. Lynch) and one Non-executive Director
+(Mr. Yang Hua), with Mr. Yang Hua served as
+the Chairman of the Nomination Committee.
+From 7 May 2019 to 2 September 2019,
+the Nomination Committee comprised two
+Independent Non-executive Directors (Mr.
+Lawrence J. Lau and Mr. Qiu Zhi Zhong) and
+one Non-executive Director (Mr. Yang Hua),
+with Mr. Yang Hua serving as the Chairman
+of the Nomination Committee. With effect
+from 2 September 2019, Mr. Yang Hua
+resigned as the Chairman of the Nomination
+Committee. Mr. Wang Dongjin as the then
+Vice Chairman of the Board assumed the
+duties and responsibilities of the Chairman of
+the Nomination Committee as a transitional
+arrangement. With effect from 18 November
+2019, Mr. Wang Dongjin was appointed as the
+Chairman of the Board and the Chairman of the
+Nomination Committee. Since 18 November
+2019, the Nomination Committee comprised
+two Independent Non-executive Directors
+(Mr. Lawrence J. Lau and Mr. Qiu Zhi Zhong)
+and one Non-executive Director (Mr. Wang
+Dongjin), with Mr. Wang Dongjin served as the
+Chairman of the Nomination Committee. A list
+of members of the Nomination Committee as
+of the date of this annual report is set out under
+the section headed “Company Information" on
+page 168 of this annual report.
+Principle: "There should be a formal, considered and
+transparent procedure for the appointment of new
+directors. There should be plans in place for orderly
+succession for appointments. All directors should
+be subject to re-election at regular intervals. An
+issuer must explain the reasons for the resignation or
+removal of any director."
+A.4 & Appointments, re-election and removal &
+A.5 Nomination Committee
+The Company has received annual confirmations
+from all of its Independent Non-executive
+Directors acknowledging full compliance with
+the relevant requirements in respect of their
+independence pursuant to Rule 3.13 of the
+Listing Rules. The Company is therefore of the
+view that all of the Independent Non-executive
+Directors are independent.
+The diverse backgrounds of the Board
+members ensure that they can fully represent
+the interests of all shareholders of the Company
+and to enhance the effectiveness of the Board
+and corporate governance.
+The Company believes that the active involvement
+of the Non-executive Directors and Independent
+Non-executive Directors in the management
+and decision making of the Board and its
+Committees strengthens the objectivity and
+independence of the Board.
+The Independent Non-executive Directors of the
+Company are all professionals or scholars with
+backgrounds in the legal, economic, financial
+and investment fields. They have extensive
+experience and knowledge of corporate
+management and make significant contributions
+to the Company's strategic decisions.
+The Non-executive Director of the Company
+has extensive experience in the parent
+company's respective fields of operation.
+The Executive Director of the Company, Mr.
+Xu Keqiang, has extensive experience in the
+Company's respective fields of operation. He
+is familiar with the Company's businesses and
+has cooperated with leading global players in
+the oil and gas industry. Mr. Xu Keqiang has
+over 20 years of experience in the oil and gas
+industry.
+CNOOC LIMITED Annual Report 2019
+Corporate Governance Report
+independent nature of Mr. Lau's role and duties
+in the past years, Mr. Lau remains independent
+for the purpose of the Listing Rules despite the
+fact that he has served the Board for over nine
+years. In accordance with Code Provision A.4.3
+of the CG Code, the Company will include in
+the circular of the annual general meeting of
+the Company to be held in 2020 the reasons
+why the Board still considers Mr. Lau as
+independent and shall be re-elected. Mr. Tse
+has thorough understanding of the Company's
+operations and business. Mr. Tse has always
+contributed objectively in advising and giving
+independent guidance to the Company in
+his capacity as Independent Non-executive
+Director over the years. He is currently the
+chairman of the Audit Committee and a
+member of the Remuneration Committee, and
+has served as a member of the independent
+board committee numerous times in connection
+with the connected transactions entered into
+by the Company and its connected persons.
+Mr. Tse has been continuously demonstrating
+firm commitments to his role. Mr. Tse always
+places great importance on high standards of
+corporate governance, and regularly monitors
+communications between the Company and
+its external auditors to ensure the high quality
+of the Company's financial reports and relevant
+disclosure. Due to his extensive knowledge
+and qualifications in accounting and financial
+reporting, and his experience in serving as an
+independent non-executive director of a few
+listed companies, Mr. Tse is able to provide
+valuable and useful advice and guidance to
+the Company in areas such as accounting,
+financing reporting, etc. Mr. Tse has never
+been engaged in any executive management of
+the Group. Mr. Tse has provided confirmation
+of his independence according to Rule 3.13
+of the Listing Rules. The Board, with the
+recommendation of the Nomination Committee
+of the Company, considers that, given the
+independence confirmation provided by Mr. Tse
+and the independent nature of Mr. Tse's role
+and duties in the past years, Mr. Tse remains
+independent for the purpose of the Listing Rules
+despite the fact that he has served the Board
+for over nine years. In accordance with Code
+Provision A.4.3 of the CG Code, the Company
+will include in the circular of the annual general
+meeting of the Company to be held in 2020 the
+reasons why the Board still considers Mr. Tse as
+independent and shall be re-elected.
+The Nomination Committee is also
+responsible for evaluating the contributions
+and independence of incumbent Directors
+35
+CNOOC LIMITED Annual Report 2019
+wwwwww
+Since the adoption of the Policy in August
+2013, the Board has observed the Policy and
+took into account the objectives set out in
+the Policy in reviewing its Board composition.
+In particular, in selecting the candidates for
+Non-executive Director, not only the Board
+considered the knowledge, experience and
+industry-specific exposures of the candidates,
+the Board also took into account other factor
+such as cultural background and diversified
+vision of the candidates. In selecting candidates
+for Executive Director, the Board will consider
+knowledge and exposures in the oil and
+gas industry, leadership and management
+skills and experience and length of service
+in the industry. As a result, the Nomination
+Committee considered that the appointments
+of Independent Non-executive Director, the
+Chairman of the Board and the Chairman of the
+Nomination Committee of the Company (as the
+case maybe) during the reporting period were
+appropriate and that there is sufficient diversity
+at the Board level.
+Selection of candidates will be
+based on diversity of perspectives,
+including but not limited to, gender,
+age, cultural and educational
+background, professional
+experience, skills, knowledge and
+diversified vision.
+Selection
+criterion:
+Policy With a view to leading its leap-
+statement: forward development, the
+Company sees increasing
+diversity at the Board level as an
+essential element in supporting
+the attainment of its strategic
+objectives and sustainable
+development. In designing the
+Board's composition, board
+diversity shall be considered from
+a number of aspects, including but
+not limited to, gender, age, cultural
+and educational background,
+professional experience, skills,
+knowledge and length of service.
+All Board appointments will
+be based on meritocracy, and
+candidates will be considered
+against objective criteria, having
+due regard to the benefits of
+diversity on the Board.
+The Policy aims to continue to
+improve corporate governance and
+ensure the diversity on the Board.
+Purpose:
+To demonstrate the Company's continued
+commitment to high standards of corporate
+governance, the Board adopted a board
+diversity policy (the "Policy") on 20 August
+2013. The Policy aims to continue to improve
+corporate governance and ensure the diversity
+of Board members. A summary of the Policy is
+set out below:
+During the year ended 31 December 2019, Mr.
+Kevin G. Lynch resigned as an Independent
+Non-executive Director and a member of
+the Nomination Committee of the Company
+with effect from 7 May 2019, and Mr. Qiu
+Zhi Zhong was appointed as an Independent
+Non-executive Director and a member of the
+Nomination Committee of the Company with
+effect from 7 May 2019. Mr. Yang Hua resigned
+as a Non-executive Director, the Chairman of
+the Board and the Chairman of the Nomination
+Committee of the Company with effect from
+2 September 2019. Mr. Yuan Guangyu
+resigned as an Executive Director and the Chief
+Executive Officer of the Company with effect
+from 2 September 2019. Mr. Wang Dongjin
+was appointed as the Chairman of the Board
+and the Chairman of the Nomination Committee
+of the Company with effect from 18 November
+2019. Mr. Xu Keqiang was appointed as the
+Chief Executive Officer of the Company with
+effect from 19 November 2019. Other than the
+above, the Nomination Committee considered
+that any other change to the composition of the
+Board was not necessary. It will keep assessing
+whether any such change is required going
+forward and will recommend to the Board
+qualified candidates as Directors according
+to the nomination policy and procedure of the
+Nomination Committee.
+Evaluated and assessed the effectiveness
+of the Nomination Committee and the
+adequacy of the charter of the Nomination
+Committee and recommended the
+proposed changes to the charter to the
+Board (if necessary).
+Reviewed and monitored the training and
+continuous professional development of
+Directors and senior management and
+made recommendations to the Board in
+that regard; and
+in particular the Chairman and CEO,
+according to the nomination procedure
+and process and criteria adopted by the
+Company;
+Corporate Governance Report
+seas
+www.
+CNOOC LIMITED Annual Report 2019
+Made recommendations to the Board on
+the re-election of Directors and reviewed
+succession planning for Directors,
+Identified individuals suitably qualified
+to become Board members and made
+recommendations to the Board on the
+selection of individuals nominated for
+directorships;
+Assessed the independence of
+Independent Non-executive Directors;
+Reviewed the structure, size and
+composition (including the skills,
+knowledge and experience) of the
+Board and its committees and made
+recommendations on any proposed
+changes to the Board to complement the
+Company's corporate strategy;
+The following is a summary of the work
+performed by the Nomination Committee under
+its charter during the year:
+All Directors, including those appointed for
+a specific term are subject to retirement by
+rotation once every three years and are subject
+to re-election in accordance with the Articles of
+Association of the Company (as amended and
+adopted by special resolution of the Company
+on 27 May 2009) (the "Articles") and the CG
+Code.
+Our Non-executive Directors are appointed
+for a term of one year. However, none of our
+existing Independent Non-executive Directors
+are appointed for a specific term, which
+constitutes a deviation from the CG Code.
+Further explanation is set out under the section
+headed "Compliance with the Corporate
+Governance Code" on page 66.
+A Director appointed by the Board to fill a
+casual vacancy or as an addition shall hold
+office until the next extraordinary general
+meeting and/or annual general meeting (as
+appropriate).
+so as to determine whether they should be
+recommended for re-election. Based on such
+evaluation, the Nomination Committee will
+recommend to the Board candidates for re-
+election at general meetings and appropriate
+replacements (if necessary). The Board, based
+on the recommendations of the Nomination
+Committee, will propose to the shareholders
+the candidates for re-election at the relevant
+general meetings.
+As of 31 December 2019, the Board consisted
+of six members: one of them was Executive
+Director, one of them was Non-executive
+Director and four of them were Independent
+Non-executive Directors. All Directors were
+identified by categories of Executive Director(s),
+Non-executive Director(s) and Independent
+Non-executive Directors in all corporate
+communications that set out the names of the
+Directors of the Company. A list of the Directors
+identifying their updated roles and functions
+was maintained on the Company's website and
+on the Hong Kong Stock Exchange's website
+during the reporting period.
+Corporate Governance Report
+31
+CNOOC LIMITED Annual Report 2019
+Note 3: With effect from 2 September 2019, Mr. Yang Hua resigned as
+a Non-executive director, the Chairman of the Board and the
+Chairman of the Nomination Committee of the Company.
+Note 2: With effect from 18 November 2019, Mr. Wang Dongjin was
+appointed as the Chairman of the Board and the Chairman of
+the Nomination Committee of the Company.
+Note 1: Mr. Yuan Guangyu appointed Mr. Xu Keqiang as his proxy to
+attend the four Board meetings held on 29 August 2019 and
+to vote on his behalf. With effect from 2 September 2019, Mr.
+Yuan Guangyu resigned as an Executive Director and the Chief
+Executive Officer of the Company.
+0
+1
+1
+8
+0
+0
+0
+OOOTO
+100%
+Note 4: With effect from 7 May 2019, Mr. Qiu Zhi Zhong was
+appointed as an Independent Non-executive Director and a
+member of the Nomination Committee of the Company. Mr.
+Qiu Zhi Zhong appointed Mr. Chiu Sung Hong as his proxy to
+attend the Board meeting held on 14 May 2019 and to vote
+on his behalf.
+Kevin G. Lynch (Note 5)
+GOVERNANCE STANDARDS
+The Company has always upheld and attained high
+standard of business ethics, for which its transparency
+and standard of governance have been recognised by the
+public and its shareholders. In 2019, the Company was
+honoured, among others, as the "Most Honored Company
+(Oil & Gas)", "Best Corporate Governance" and "Best IR
+Programs" in Institutional Investor's 2019 All-Asia Executive
+Team Awards, "Gold Award", "Best Environmental
+Stewardship Initiative” and “Best Social Responsibility
+Highly Commended Initiative" in the 2019 ESG Corporate
+Awards by The Asset, "2019 China Securities Golden
+Bauhinia Awards - Best Investment Value Award for Listed
+Companies" hosted by Ta Kung Wen Wei Media Group,
+"Best Investor Relations Company (China)", "Asia's Best
+CEO (Investor Relations)" and "Asia's Best CFO (Investor
+Relations)" in the "Asian Excellence Award" hosted by
+Corporate Governance Asia. High and strict standard of
+corporate governance enables the Company to operate
+steadily and efficiently and is in the long-term interests of
+the Company and its shareholders.
+Since its listing, the Company has endeavoured to
+maximise its shareholders' value. In 2019, the Company
+executed its corporate governance policies strictly and
+sought to comply with the relevant provisions in the
+"Corporate Governance Code and Corporate Governance
+Report" set out in Appendix 14 to the Listing Rules (the
+"CG Code"), ensuring that all decisions were made on
+the principles of trust and fairness and in an open and
+transparent manner so as to protect the interests of all
+shareholders. The Company values the importance of
+corporate governance and in light of the CG Code, the
+Company set out a summary of the Company's key
+corporate governance practices during 2019 below.
+KEY CORPORATE GOVERNANCE PRINCIPLES
+AND THE COMPANY'S PRACTICES
+A.
+DIRECTORS
+A.1 The Board
+Principle: "An issuer should be headed by an effective
+board which should assume responsibility for its
+leadership and control and be collectively responsible
+for promoting its success by directing and supervising
+its affairs. Directors should take decisions objectively
+in the best interests of the issuer.
+The board should regularly review the contribution
+required from a director to perform his responsibilities
+to the issuer, and whether he is spending sufficient
+time performing them."
+The Board consisted of six members, including
+one Executive Director, one Non-executive
+Director and four Independent Non-executive
+Directors, as of 31 December 2019.
+The list of Directors, their respective biographies,
+and their respective roles in the Committees
+and the management are set out on pages
+50 to 56 and 168 of this annual report,
+respectively. The relevant information has also
+been disclosed on the Company's website.
+The Board and Committee members of the
+Company are dedicated, professional and
+accountable.
+Corporate Governance Report
+Corporate Governance Report
+Note 5: With effect from 7 May 2019, Mr. Kevin G. Lynch resigned as
+an Independent Non-executive Director and a member of the
+Nomination Committee of the Company.
+The Joint Company Secretaries consulted the
+Directors on matters to be included in the
+agenda for regular Board meetings.
+wwwwww
+The Board, as representatives of the shareholders
+of the Company, is committed to the achievement
+of business success and the enhancement of
+long-term shareholder's value with the highest
+standards of integrity and ethics. The role of
+the Board is to direct, guide and oversee the
+conduct of the Company's business and to
+ensure that the interests of the shareholders are
+being served.
+Principle: "The board should have a balance of skills,
+experience and diversity of perspectives appropriate
+to the requirements of the issuer's business. It
+should ensure that changes to its composition can
+be managed without undue disruption. It should
+include a balanced composition of executive and
+non-executive directors (including independent
+non-executive directors) so that there is a strong
+independent element on the board, which can
+effectively exercise independent judgment. Non-
+executive directors should be of sufficient calibre and
+number for their views to carry weight."
+A.3 Board composition
+The CEO is responsible for conducting the
+Company's business and affairs consistent with
+the principles and directions established by the
+Board.
+The Chairman promotes a culture of openness
+and debate by facilitating the effective
+contribution of Non-executive Directors and
+Independent Non-executive Directors in
+particular and ensuring constructive relations
+between Executive and Non-executive
+Directors.
+The Chairman ensures that appropriate steps
+are taken to provide effective communication
+with shareholders and that their views are
+communicated to the Board as a whole.
+The Chairman holds meetings with the Independent
+Non-executive Directors without the presence
+of other Directors at least annually.
+The Chairman encourages all Directors to make
+full and active contribution to the Board's affairs
+and takes the lead to ensure that the Board
+acts in the best interests of the Company. The
+Chairman encourages Directors with different
+views to voice their concerns, allows sufficient
+time for discussion of issues and ensures that
+Board decisions fairly reflect Board consensus.
+The Chairman takes primary responsibility
+for ensuring that good corporate governance
+practices and procedures are established.
+One of the important roles of the Chairman is to
+provide leadership for the Board. The Chairman
+ensures that the Board works effectively and
+performs its responsibilities, and that all key and
+appropriate issues are discussed by the Board
+in a timely manner. The Chairman delegates
+the responsibility of drawing up the agenda for
+each Board meeting and Committee meeting
+to the Joint Company Secretaries who will take
+into account, where appropriate, any matters
+proposed by the other Directors for inclusion
+in the agenda, and the Chairman is primarily
+responsible for approving the agenda.
+The Chairman ensures all Directors are properly
+briefed on issues arising at Board meetings
+and is responsible for ensuring that Directors
+receive, in a timely manner, adequate
+information, which must be accurate, clear,
+complete and reliable.
+.
+Prior to 2 September 2019, Mr. Yang Hua served
+as the Chairman of the Board, and Mr. Yuan
+Guangyu served as the Chief Executive Officer
+of the Company. With effect from 2 September
+2019, Mr. Yang Hua resigned as the Chairman
+of the Board, and Mr. Yuan Guangyu resigned
+as the Chief Executive Officer of the Company.
+From 2 September 2019 to 18 November
+2019, Mr. Wang Dongjin, the then Vice
+Chairman of the Board, assumed the duties
+and responsibilities of the Chairman of the
+Board as a transitional arrangement. With
+effect from 18 November 2019, Mr. Wang
+Dongjin was appointed as the Chairman of the
+Board, and no longer serves as Vice Chairman
+of the Board. From 2 September 2019 to 19
+November 2019, Mr. Xu Keqiang, the President
+of the Company, assumed the duties and
+responsibilities of the Chief Executive Officer
+of the Company as a transitional arrangement.
+With effect from 19 November 2019, Mr. Xu
+Keqiang was appointed as the Chief Executive
+Officer of the Company. During the reporting
+period, the roles of the Chairman of the Board
+and the Chief Executive Officer of the Company
+were separate and were not performed by the
+same individual.
+A.2 Chairman and Chief Executive
+The Company holds Board meetings at least
+four times a year at approximately quarterly
+intervals. Ten Board meetings were held
+in 2019. Members of the Board have also
+actively participated in the discussions on
+the business and operation of the Company,
+either in person or through other electronic
+means of communication such as emails, when
+necessary.
+Corporate Governance Report
+www.
+CNOOC LIMITED Annual Report 2019
+30
+The Company has arranged appropriate insurance
+cover in respect of legal action against its
+Directors.
+If a substantial shareholder or a Director
+has a conflict of interest in a matter to be
+considered by the Board and such interest
+has been considered to be material by the
+Board, the matter will not be dealt with by a
+written resolution but a Board meeting will be
+convened for that matter. Independent Non-
+executive Directors who do not (and whose
+close associates also do not) have material
+interest in the transaction will be present at
+such Board meeting.
+Committees may, upon reasonable request,
+seek independent professional advice in
+appropriate circumstances at the Company's
+expense. The Board would resolve to provide
+separate independent professional advice to
+Directors to assist them in performing their
+duties to the Company at the Company's
+expense.
+Minutes of the meetings of the Board and
+Committees recorded sufficient details of
+the matters considered by the Board and
+Committees and decisions reached, including
+any concerns raised by Directors or dissenting
+views expressed. Draft and final versions
+of the minutes of the Board meetings and
+Committee meetings are sent to all Directors
+and all Committee members respectively within
+a reasonable time after the Board meetings and
+Committee meetings for their comments and
+records.
+Minutes of the meetings of the Board and
+Committees are kept by the Joint Company
+Secretaries and open for inspection at any
+reasonable time upon reasonable request by
+any Director.
+Dates of regular Board meetings have been
+scheduled at least two months before the
+meeting to provide sufficient notice to all
+Directors so that they can have an opportunity
+to attend. For non-regular Board meetings,
+reasonable advance notices have been given.
+Principle: "There are two key aspects of the
+management of every issuer - the management
+of the board and the day-to-day management of
+business. There should be a clear division of these
+responsibilities to ensure a balance of power and
+authority, so that power is not concentrated in any
+one individual."
+Attendance of individual members at Nomination
+Committee meetings in 2019
+There exists an open atmosphere for Directors
+to contribute alternative views. All decisions
+of the Board are made on the principles of
+trust and fairness in an open and transparent
+manner, so as to protect the interests of all
+shareholders.
+Wang Dongjin (Chairman) (Note 1)
+Yuan Guangyu (Note 1)
+Non-executive Directors
+Wang Dongjin (Chairman) (Note 2)
+10
+0
+Yang Hua (Note 3)
+8
+0
+Independent
+Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+Xu Keqiang
+The major responsibilities and authorities
+of the Remuneration Committee include
+making recommendations to the Board
+on the Company's policy and structure of
+the remuneration of Directors and senior
+management of the Company and on the
+establishment of a formal and transparent
+procedure for developing remuneration
+policy, determining and reviewing the
+service contracts and specific remuneration
+packages for all Executive Directors and
+senior management, such as benefits in kind,
+pension rights and compensation payments,
+including any compensation payable for loss
+or termination of their office or appointment,
+reviewing and approving the compensation
+arrangements relating to dismissal or removal
+of Directors for misconduct to ensure
+consistency with contractual terms, and
+making recommendations to the Board on the
+remuneration of Non-executive Directors and
+Independent Non-executive Directors.
+Principle: "An issuer should disclose its directors'
+remuneration policy and other remuneration related
+matters. The procedure for setting policy on
+executive directors' remuneration and all directors'
+remuneration packages should be formal and
+transparent. Remuneration levels should be sufficient
+to attract and retain directors to run the company
+successfully without paying more than necessary.
+No director should be involved in deciding his own
+remuneration."
+B.1 The level and make-up of remuneration and
+disclosure
+REMUNERATION OF DIRECTORS AND
+SENIOR MANAGEMENT AND BOARD
+EVALUATION
+B.
+Corporate Governance Report
+37
+CNOOC LIMITED Annual Report 2019
+wwwwww
+The Board and each Director have separate and
+independent access to the Company's senior
+management and also the Joint Company
+Secretaries, who will provide full and prompt
+responses to queries raised by the Directors.
+All Directors are entitled to have access to the
+Board papers, minutes and related materials
+upon reasonable notice.
+For regular Board meetings and Committee
+meetings, the agenda and accompanying
+Board papers are sent in full to all Directors at
+least three days before the intended date of the
+Board meetings or Committee meetings.
+The Company's senior management regularly
+provides the Board and its Committees with
+adequate information in a timely manner to
+enable them to make informed decisions. Senior
+management also organises presentations to
+the Board conducted by professional advisers
+on specific transactions as appropriate.
+A.7 Supply of and access to information
+Principle: "Directors should be provided in a timely
+manner with appropriate information in the form and
+quality to enable them to make an informed decision
+and perform their duties and responsibilities."
+The Remuneration Committee comprises two
+Independent Non-executive Directors (Mr. Chiu
+Sung Hong and Mr. Tse Hau Yin, Aloysius), and
+one Non-executive Director (Mr. Wang Dougjin),
+with Mr. Chiu Sung Hong serving as the
+Chairman of the Remuneration Committee. The
+Remuneration Committee is delegated with the
+authority of determining and approving salaries,
+bonuses, share option packages, performance
+appraisal systems and retirement plans for all
+Executive Directors and senior management. A
+list of members of the Remuneration Committee
+is set out in "Company Information" on page
+168 of this annual report.
+The Directors are required to inform the
+Company in case of any change in the
+number and nature of offices held in public
+companies or organisations and other
+significant commitments. Please refer to
+"Directors and Senior Management" on pages
+50 to 56 for the biographies of the Directors.
+Executive Directors
+4
+Directors
+.
+to industry standards and prevailing market
+conditions. The Remuneration Committee is
+mindful that levels of remuneration must be
+sufficient to attract and retain the Directors
+and senior management in order to run the
+Company successfully, but at the same
+time, the Company should avoid setting
+remunerations which are in excess of those
+necessary for this purpose. The Directors'
+emolument package may comprise the
+Director's fees, basic salaries and allowances,
+bonuses, share options and others. The
+following factors are considered in determining
+the Directors' remuneration package:
+Business needs, company goals and
+objectives;
+Responsibilities of the Directors and their
+individual contribution; and
+The Company's emolument policy is to maintain
+fair and competitive packages with reference
+Changes in relevant markets, for example,
+supply/demand fluctuations and changes
+in competitive conditions.
+Details of the remuneration, as well as the share
+option benefits of Directors for the year ended
+31 December 2019, are set out on pages 106
+to 108 of this annual report.
+No individual Director or any of his/her
+associates or senior management of the
+Company is permitted to determine his/her own
+remuneration.
+The Company seeks to apply similar principles
+when determining the remuneration packages
+for senior management with reference to the
+Board's corporate goals and objectives. Other
+general staff and employees are rewarded on
+a performance-rated basis with other fringe
+benefits such as social insurance, pension
+funds and medical cover.
+Please refer to notes 9 to 10 to the consolidated
+financial statements on pages 106 to 109
+of this annual report for details of Directors'
+remuneration and senior management's
+remuneration by band and the five highest paid
+individuals in the Company.
+The remuneration of Non-executive Directors
+and Independent Non-executive Directors
+recommended by the Remuneration
+Committee is determined by the Board and no
+Directors participated in determining their own
+remuneration.
+4
+38
+www.
+Tse Hau Yin, Aloysius
+The Board has regularly reviewed the contribution
+required from a Director to perform his
+responsibilities to the Company, and whether
+he is spending sufficient time performing them
+in accordance with the CG Code.
+wwwwww
+CNOOC LIMITED Annual Report 2019
+29
+Corporate Governance Report
+Attendance of individual Directors at full Board
+meetings held in 2019
+No. of meetings attended
+(Ten meetings in total)
+by Director by proxy
+PO
+10
+0
+CNOOC LIMITED Annual Report 2019
+Note 4: With effect from 7 May 2019, Mr. Qiu Zhi Zhong was
+appointed as an Independent Non-executive Director and a
+member of the Nomination Committee of the Company. With
+effect from the same date, Mr. Kevin G. Lynch resigned as
+an Independent Non-executive Director and a member of the
+Nomination Committee of the Company.
+*********
+Note 2: With effect from 18 November 2019, Mr. Wang Dongjin was
+appointed as the Chairman of the Board and the Chairman
+of the Nomination Committee of the Company. Mr. Wang
+Dongjin appointed Mr. Xu Keqiang to act as the Chairman
+of the Extraordinary General Meeting held on 21 November
+2019.
+relevant to the operations and business
+of the Company, and their responsibilities
+under statutes and common law, the
+Listing Rules, legal and other regulatory
+requirements as well as the Company's
+business and governance policies, so
+that they are able to discharge their
+responsibilities properly.
+All Directors newly appointed to the
+Board receive a comprehensive, formal
+and tailored induction on appointment for
+the purpose of giving an overview of the
+business and operations of the Group
+and appropriate briefings and trainings
+from the Company covering the statutory
+and regulatory obligations of Directors,
+organisational structure, policies,
+procedures and codes of the Company
+and terms of reference of Committees.
+The senior management and the Joint
+Company Secretaries will also conduct
+subsequent briefings as and when
+necessary to ensure that the Directors are
+kept appraised of the latest developments
+Directors' training and professional
+development
+The Company regularly updates its Directors
+with changes in laws and regulations relevant
+to their roles as Directors of the Company.
+"
+Principle: "Every director must always know his
+responsibilities as a director of an issuer and its
+conduct, business activities and development.
+Given the essential unitary nature of the board, non-
+executive directors have the same duties of care and
+skill and fiduciary duties as executive directors.
+A.6 Responsibilities of Directors
+Note 3: With effect from 7 May 2019, Mr. Qiu Zhi Zhong was
+appointed as an Independent Non-executive Director and a
+member of the Nomination Committee of the Company. With
+effect from the same date, Mr. Kevin G. Lynch resigned as
+an Independent Non-executive Director and a member of the
+Nomination Committee of the Company.
+Note 2: With effect from 2 September 2019, Mr. Yang Hua resigned as
+a Non-executive Director, the Chairman of the Board and the
+Chairman of the Nomination Committee of the Company.
+Note 1: With effect from 18 November 2019, Mr. Wang Dongjin was
+appointed as the Chairman of the Board and the Chairman of
+the Nomination Committee of the Company.
+0
+1
+The Company also recognises the
+importance of continuous professional
+development of the Directors. Directors
+are encouraged to participate in
+continuous professional development
+to develop and refresh their knowledge
+and skills. During the year, the Company
+arranged trainings conducted by its
+external professional advisers on
+updates and new amendments to the
+Listing Rules. The trainings covered a
+broad range of topics including latest
+development on corporate governance
+and studies on recent regulatory cases.
+In addition, the Company also arranged
+on-site visit and research activities for the
+Independent Non-executive Directors on
+offshore wind power project and offshore
+platform operations.
+0
+0
+0
+1
+1
+0
+ooooo
+member by proxy
+No. of meeting attended
+(One meeting in total)
+by committee
+Kevin G. Lynch (Note 3)
+Qiu Zhi Zhong (Note 3)
+Lawrence J. Lau
+Note 3: With effect from 2 September 2019, Mr. Yang Hua resigned as
+a Non-executive Director, the Chairman of the Board and the
+Chairman of the Nomination Committee of the Company.
+Yang Hua (Note 2)
+0
+Certain Directors also attended trainings
+organised by the Company or external
+professional bodies on other regulatory
+updates as well as obligations of
+directors. In addition, Directors also
+read materials/publications which they
+thought appropriate and necessary for
+the fulfillment of their roles. The Directors
+provided their regular training records to
+the Company.
+0
+The Non-executive Directors and the
+Independent Non-executive Directors actively
+participate in Board meetings and Committees
+meetings to exercise their independent
+judgement on issues of strategy, policy,
+performance, accountability, resources, key
+appointments and standards of conduct of the
+Company. They are responsible for taking the
+lead where potential conflicts of interests arise.
+2
+In addition, the Company also provided
+regular updates to Directors in respect
+of continuing obligations of listed issuers
+and their directors as well as monthly
+updates on the business and operations
+of the Group.
+Note 1: With effect from 2 September 2019, Mr. Yuan Guangyu
+resigned as an Executive Director and the Chief Executive
+Officer of the Company.
+10
+21
+2
+No. of meetings attended
+(Two meetings in total)
+Kevin G. Lynch (Note 4)
+Tse Hau Yin, Aloysius
+Qiu Zhi Zhong (Note 4)
+Lawrence J. Lau
+Non-executive Directors
+Chiu Sung Hong
+Independent
+Wang Dongjin (Chairman) (Note 2)
+Yang Hua (Note 3)
+22220
+Corporate Governance Report
+Yuan Guangyu (Note 1)
+Xu Keqiang
+Executive Directors
+Directors
+Attendance of individual Directors at general
+meetings in 2019:
+Mr. Yang Hua, the then Chairman of the Board,
+together with the Independent Non-executive
+Directors and Non-executive Directors
+attended the General Meetings held in 2019
+and responded to questions raised by the
+shareholders in order to develop a balanced
+understanding of the views of shareholders.
+During 2019, each Non-executive Director or
+Independent Non-executive Director attended
+or otherwise appointed an alternate to attend
+all regularly scheduled meetings of the Board
+and Committees on which such Non-executive
+Director or Independent Non-executive Director
+sat in, and reviewed the meeting materials
+distributed in advance for such meetings and
+shared their experience, skills and expertise
+with the Board or the relevant Committees.
+All of the Non-executive Directors and
+Independent Non-executive Directors of the
+Company made positive contributions to the
+development of the Company's strategy and
+policies through independent, constructive
+and informed comments. The Non-executive
+Directors and the Independent Non-executive
+Directors have been responsible for scrutinising
+our performance in achieving agreed corporate
+goals and objectives and monitoring our
+performance reporting.
+The Non-executive Directors and the
+Independent Non-executive Directors are
+invited to serve on the Audit, Remuneration and
+Nomination Committees of the Company.
+v > a
+www.
+36
+CNOOC LIMITED Annual Report 2019
+Non-executive Directors
+Principle: "The board should be responsible for
+maintaining an on-going dialogue with shareholders
+and in particular, use annual general meetings or
+other general meetings to communicate with them
+and encourage their participation."
+E.1 Effective communication
+In 2019, all votes of shareholders at the general
+meetings of the Company were taken by poll or
+otherwise in accordance with the Listing Rules.
+The Chairmen of the meetings ensured that
+shareholders were familiar with the procedures
+of voting by poll at the general meetings of the
+Company.
+E.
+Corporate Governance Report
+46
+45
+COMMUNICATION WITH SHAREHOLDERS
+The Board recognises the importance of
+good and effective communication with
+all shareholders. With a policy of being
+transparent, strengthening investor relations
+and providing consistent and stable returns
+to shareholders, the Company seeks to
+ensure transparency through establishing and
+maintaining different communication channels
+with shareholders.
+.
+A key element of effective communication
+with shareholders and investors is prompt and
+timely dissemination of information in relation
+to the Company. In addition to announcing
+its interim and annual results to shareholders
+and investors, the Company also publicises
+its major business developments and activities
+through press releases, announcements
+and the Company's website in accordance
+with relevant rules and regulations. Press
+conferences and analyst briefings are held from
+time to time on financial performance and major
+transactions.
+The general meetings also provide a useful
+forum for shareholders to exchange views
+with the Board. The Chairman of the Board,
+as well as Chairmen of the Audit Committee,
+Nomination Committee and Remuneration
+Committee, or in their absence, members of
+the respective Committees, and the external
+auditors of the Company, are available to
+answer questions from shareholders at annual
+general meetings and extraordinary general
+meetings of the Company.
+The Chairman of each of the Board and all
+Committees, or in his absence, an alternate
+appointed by him will, whenever possible,
+propose separate resolutions for each
+substantially separate issue at general meetings
+of the Company.
+The Company's management ensures the
+external auditors attend the annual general
+meeting to answer questions about the conduct
+of the audit, the preparation and content of the
+auditors' report, the accounting policies and
+auditors' independence.
+The Board established a shareholders'
+communication policy and review it on a regular
+basis to ensure its effectiveness.
+E.2 Voting by Poll
+F.
+CNOOC LIMITED Annual Report 2019
+Principle: "The issuer should ensure that shareholders
+are familiar with the detailed procedures for
+conducting a poll."
+The Company has a professionally-run investor
+relations department to serve as an important
+communication channel between the Company
+and its shareholders and other investors.
+wwwwww
+Corporate Governance and Functions
+(iv) Reviewing the Company's compliance
+with the CG Code and disclosure in
+the Corporate Governance Report and
+making recommendations to the Board in
+that regard.
+Reviewing and approving long-term
+strategic plans and annual operating
+plans, and monitoring the implementation
+and execution of these plans;
+The results of the poll are published on the
+Hong Kong Stock Exchange's website and the
+Company's website.
+Reviewing and approving significant
+financial and business transactions and
+other major corporate actions;
+Reviewing and approving financial
+statements and reports, and overseeing
+the establishment and maintenance of
+controls, processes and procedures to
+ensure accuracy, integrity and clarity in
+financial and other disclosures; and
+Overall responsibility for the Company's
+ESG strategy and reporting, evaluating
+and determining the Company's ESG-
+related risks, and ensuring appropriate
+and effective ESG risk management and
+internal control systems are in place.
+The Board and the senior management have
+respective responsibilities, accountabilities
+and contributions. The primary functions
+performed by the senior management are to
+conduct the daily business and implement
+the abovementioned affairs approved and
+delegated by the Board and other matters as
+the Board may from time to time request.
+The Directors review such delegation
+arrangements periodically to ensure they remain
+appropriate to our needs.
+Directors clearly understand delegation
+arrangements in place. The Company has
+entered into service agreements with the
+Executive Directors and Non-executive
+Directors and has formal letters of appointment
+for Independent Non-executive Directors
+setting out the key terms and conditions of their
+engagements and appointments. In November
+2019, the Board approved the revised service
+agreement templates for Executive Directors,
+Non-executive Directors and Independent
+Non-executive Directors, respectively, which
+I will be used as the templates for the service
+agreements to be entered into by the Executive
+Directors, Non-executive Directors and
+Independent Non-executive Directors in 2020.
+D.2 & Board Committees &
+The Nomination Committee shall be responsible
+for reviewing and monitoring the training
+and continuous professional development of
+Directors and senior management and making
+recommendations to the Board in that regard.
+D.3
+The Company has established an Audit
+Committee, a Remuneration Committee and a
+Nomination Committee (each a "Committee")
+and has established a specific written
+committee charter (the "Charter") for each
+of the Committees which deals clearly with
+its authority and duties. The Charters of the
+Committees are published on the websites
+of the Hong Kong Stock Exchange and the
+Company. These Committees will report to the
+Board on their decisions and recommendations.
+The Board has delegated the responsibility
+for performing certain corporate governance
+related duties and functions to the Audit
+Committee and the Nomination Committee.
+The Audit Committee shall be responsible for
+performing the corporate governance duties set
+out below:
+(i)
+(ii)
+(iii)
+Developing and reviewing the
+Company's policies and practices on
+corporate governance and making
+recommendations to the Board;
+Reviewing and monitoring the Company's
+policies and practices on compliance with
+legal and regulatory requirements and
+making recommendations to the Board in
+that regard;
+Developing, reviewing and monitoring the
+Code of Ethics for Directors and Senior
+Officers ("Code of Ethics") and making
+recommendations to the Board in that
+regard; and
+Principle: "Board committees should be formed with
+specific written terms of reference which deal clearly
+with their authority and duties."
+Company Secretary
+CHANGES IN DIRECTORS
+Ms. Wu Xiaonan and Ms. Tsue Sik Yu, May are
+the Joint Company Secretaries of the Company.
+Their biographies are set out on page 56 of
+this annual report. The Nomination Committee
+of the Company has the responsibility to make
+recommendation for suitable candidates for
+the appointment of company secretary to the
+Board and the Board has the responsibility
+to approve their selection, appointment or
+dismissal by physical meeting of the Board.
+Corporate Governance Report
+As set out in the section headed "Appointments, re-
+election and removal & Nomination Committee" above,
+from 2 September 2019 to 18 November 2019, Mr. Wang
+Dongjin, the then Vice Chairman of the Board, assumed
+the duties and responsibilities of the Chairman of the
+Nomination Committee of the Company as a transitional
+arrangement. This constitutes a temporary deviation from
+the CG Code provision A.5.1. The Company re-complied
+with such CG Code provision when Mr. Wang Dongjin was
+appointed as the Chairman of the Board and the Chairman
+of the Nomination Committee of the Company with effect
+from 18 November 2019. The Company considers such a
+one-off and temporary deviation would not undermine the
+effectiveness of its corporate governance practices.
+During the year ended 31 December 2019, there was the
+following change in Directors.
+With effect from 7 May 2019, (i) Mr. Kevin G. Lynch
+resigned as an Independent Non-executive Director and
+a member of the Nomination Committee of the Company,
+and (ii) Mr. Qiu Zhi Zhong was appointed as an Independent
+Non-executive Director and a member of the Nomination
+Committee of the Company. With effect from 2 September
+2019, (i) Mr. Yang Hua resigned as a Non-executive
+Director, the Chairman of the Board and the Chairman of
+the Nomination Committee of the Company, and (ii) Mr.
+Yuan Guangyu resigned as an Executive Director and the
+Chief Executive Officer of the Company. With effect from
+18 November 2019, Mr. Wang Dongjin was appointed
+as the Chairman of the board and the Chairman of the
+Nomination Committee of the Company. With effect from
+19 November 2019, Mr. Xu Keqiang was appointed as the
+Chief Executive Officer of the Company.
+CHANGES IN INFORMATION OF DIRECTORS
+Pursuant to Rule 13.51(B) of the Listing Rules, there is
+no other change in the information of Directors of the
+Company except as disclosed in this annual report.
+CODE OF ETHICS
+The Board adopted a Code of Ethics in 2003 to provide
+guidelines to the senior management and Directors in
+legal and ethical matters as well as the sensitivity involved
+in reporting illegal and unethical matters. The Code of
+Ethics covers areas such as supervisory rules, insider
+dealing, market malpractices, conflict of interests, company
+opportunities, protection and proper use of the Company's
+assets as well as reporting requirements. As part of its
+continued efforts to improve its corporate governance
+standards, the Board conducted an annual review to the
+Code of Ethics since 2009, and the current version of the
+Code of Ethics was reviewed and adopted in August 2019.
+The Company has provided all its Directors and senior
+officers with a copy of the Code of Ethics and requires
+them to comply with the Code of Ethics, so as to ensure
+the Company's operation is proper and lawful. The
+Company will take disciplinary actions towards any act
+which is in breach of the Code of Ethics. All the senior
+management members and Directors are required to
+familiarise themselves with and follow the Code of Ethics
+to ensure that the Company's operations are honest and
+legal. Violations of the rules will be penalised and serious
+breaches will result in dismissal.
+47
+MODEL CODE FOR SECURITIES
+TRANSACTIONS BY DIRECTORS OF LISTED
+ISSUERS
+SERVICES AND REMUNERATION OF
+AUDITORS
+Deloitte Touche Tohmatsu, appointed as the independent
+auditors of the Company on 24 May 2013, was re-
+appointed and engaged as the Company and its
+subsidiaries' auditors ("Auditors") for the financial year
+ended 31 December 2019. Services provided by the
+Auditors and fees charged by the Auditors for the services
+for the year ended 31 December 2019 are as follows:
+Audit Fees
+The aggregate fees billed for professional services rendered
+by the Auditors for the audit of the Company's annual
+financial statements or services that are normally provided
+by the Auditors in connection with statutory and regulatory
+filings or engagements were RMB51.8 million for the
+financial year ended 31 December 2018 and RMB54.1
+million for the financial year ended 31 December 2019.
+Audit-related Fees
+The aggregate fees billed for assurance and related
+services by the Auditors that are reasonably related to
+the performance of the audit or review of the Company's
+financial statements and are not reported under "Audit
+Fees” were RMB6.8 million for the financial year ended 31
+December 2018 and RMB8.2 million for the financial year
+ended 31 December 2019.
+CNOOC LIMITED Annual Report 2019
+www.
+(iv)
+The Company has adopted the abovementioned Code
+of Ethics which has incorporated the Model Code for
+Securities Transactions by Directors of Listed Issuers (the
+"Model Code") as set out in Appendix 10 to the Listing
+Rules. All Directors have confirmed that they complied,
+during the year ended 31 December 2019, with the
+Company's Code of Ethics and the required standards set
+out in the Model Code.
+Principle: "The company secretary plays an important
+role in supporting the board by ensuring good
+information flow within the board and that board
+policy and procedures are followed. The company
+secretary is responsible for advising the board
+through the chairman and/or the chief executive
+on governance matters and should also facilitate
+induction and professional development of directors."
+CNOOC LIMITED Annual Report 2019
+CG Code Provision A.5.1
+The Joint Company Secretaries will report to
+the Chairman of the Board and/or the CEO.
+Each of the Joint Company Secretaries
+has taken no less than 15 hours of relevant
+professional training every year.
+CNOOC LIMITED Annual Report 2019
+www.
+Corporate Governance Report
+All Directors have access to the advice and
+services of the Joint Company Secretaries to
+ensure that Board procedures as well as all
+applicable rules and regulations are followed.
+SHAREHOLDERS' COMMUNICATION AND
+RIGHTS TO CONVENE AN EXTRAORDINARY
+GENERAL MEETING
+The procedures for shareholders to convene an
+Extraordinary General Meeting of the Company ("EGM")
+are governed by Article 60 of the Articles and sections
+566 to 568 of the Companies Ordinance (Cap. 622 of the
+Laws of Hong Kong). On the request of shareholders of
+the Company, representing at least 5% of the total voting
+rights of all shareholders having a right to vote at general
+meetings, the Directors are required to call a general
+meeting.
+The request must state the general nature of the business
+to be dealt with at the EGM and may include the text
+of a resolution that may properly be moved and is
+intended to be moved at the EGM, be authenticated by
+the shareholder(s) making the request, and sent to the
+Company in hard copy form or in electronic form. The
+Directors must call an EGM within 21 days after the date on
+which they become subject to the requirement and such
+EGM must be held on a date not more than 28 days after
+the date of the notice convening the meeting is given.
+Under CG Code provision A.5.1, issuers should establish
+a nomination committee which is chaired by the chairman
+of the board or an independent non-executive director
+and comprises a majority of independent non-executive
+directors.
+Whilst giving the above request, shareholders are
+recommended to provide written explanation of the
+reasons and material implications relating to the proposed
+resolutions to enable all of the shareholders to properly
+consider and determine the proposed resolutions.
+Further enquiries relating to the above or enquiries
+that Shareholders wish to be put to the Board may be
+addressed to the Joint Company Secretaries of the
+Company at 65/F, Bank of China Tower, 1 Garden Road,
+Hong Kong.
+PROCEDURES FOR PUTTING FORWARD
+PROPOSALS AT GENERAL MEETINGS BY
+SHAREHOLDERS
+Shareholders are requested to follow sections 615 and
+616 of the Companies Ordinance (Cap. 622 of the Laws
+of Hong Kong) if they wish to request the Company to give
+to other shareholders, who are entitled to receive notice
+of the annual general meeting, notice of a resolution that
+may properly be moved and is intended to be moved at the
+annual general meeting.
+Shareholders are requested to follow sections 580 to
+583 of the Companies Ordinance (Cap. 622 of the Laws
+of Hong Kong) if they wish to request the Company to
+circulate to other shareholders, who are entitled to receive
+notice of a general meeting, a statement with respect
+to a matter mentioned in a proposed resolution or other
+business to be dealt with at the general meeting.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+For the year ended 31 December 2019, the Company has
+complied with the provisions of the CG Code as set out in
+Appendix 14 to the Listing Rules, except for the deviation
+from the code provision A.4.1 and the temporary deviation
+from the code provision A.5.1 of the CG Code. The
+following summarises the requirements under the above-
+mentioned code provisions A.4.1 and A.5.1 and the reason
+for such deviations.
+CG Code Provision A.4.1
+Under CG Code provision A.4.1, non-executive directors
+should be appointed for a specific term and be subject to
+re-election.
+None of the existing Independent Non-executive Directors
+of the Company is appointed for a specific term. This
+constitutes a deviation from the CG Code provision A.4.1.
+However, all the Directors are subject to the retirement
+provisions under article 97 of the Articles ("Article 97").
+According to Article 97, one-third of the Directors for the
+time being must retire from the office by rotation at each
+annual general meeting. The Company has observed
+the need for good corporate governance practices. All
+Independent Non-executive Directors of the Company
+have retired from the office by rotation and have been re-
+elected in the past three years. The Company considers
+that sufficient measures have been taken to ensure that
+the Company's corporate governance practices are no
+less exacting than those in the CG Code. In November
+2019, the Board approved the revised service agreement
+templates for Executive Directors, Non-executive
+Directors and Independent Non-executive Directors,
+respectively, among which the service agreement template
+for Independent Non-executive Directors has a term of
+36 months. Such template will be used for the service
+agreements to be entered into by the Independent Non-
+executive Directors in 2020. After the Independent Non-
+executive Directors enter into such service agreements, the
+Company will be in compliance with CG Code provision
+A.4.1.
+The Company will, upon receipt of a request referred to
+above, issue a notice of extraordinary general meeting
+of the proposed resolutions and (if applicable) circulars
+containing further information relating to the proposed
+resolutions in accordance with the Listing Rules.
+(ii)
+Reviewed the work performed by
+the Company's external auditors and
+their relationship with the Company's
+senior management, and made
+recommendations to the Board in relation
+to the appointment of external auditors, as
+well as the proposed auditors' fees;
+The primary functions performed by the Board
+include:
+manner.
+The Company provides a balanced, clear and
+understandable assessment in its interim and
+annual reports, other financial disclosures
+required by the Listing Rules, reports to the
+regulators and information disclosed under
+statutory requirements to enable investors to
+appraise its development over the period and
+its financial position.
+The Company has also engaged independent
+technical consultant firms to conduct a review
+of its oil and gas business and discloses details
+of its oil and gas properties in its annual report
+(as set out on pages 145 to 158 of this annual
+report).
+The statement by the auditor of the Company
+regarding its reporting responsibilities on the
+financial statements of the Group is set out in
+the Independent Auditor's Report on page 72
+of this annual report.
+C.2 Risk management and internal control
+Principle: "The board is responsible for evaluating
+and determining the nature and extent of the
+risks it is willing to take in achieving the issuer's
+strategic objectives, and ensuring that the issuer
+establishes and maintains appropriate and effective
+risk management and internal control systems.
+The board should oversee management in the
+design, implementation and monitoring of the risk
+management and internal control systems, and
+management should provide a confirmation to the
+board on the effectiveness of these systems."
+The Board acknowledges that it is its
+responsibilities to ensure that the Company
+establishes and maintains appropriate and
+effective risk management and internal control
+systems and review their effectiveness. Such
+systems are designed to manage rather than
+eliminate risks of failure to achieve business
+objectives, and can only provide reasonable,
+but not absolute, assurance against material
+misstatement or loss.
+The Board regularly, and at least annually,
+receives reports from the management of the
+Company regarding the establishment, review
+and evaluation of the Company's strategic,
+financial, operational and compliance control,
+risk management and internal control systems.
+All major risks are reported to the Board. The
+Board will also evaluate the corresponding risks
+and the response plan.
+The Audit Committee is delegated by the Board
+to oversee the risk management and internal
+control systems and the internal audit function
+of the Company on an on-going basis (at least
+annually). For work completed by the Audit
+Committee on the Company's risk management
+and internal control systems, please refer to the
+section headed "C.3 Audit Committee" below.
+The Company's Risk Management Committee
+is directly managed by the CEO of the
+Company and has been authorised by the
+Board to be in charge with the organisation and
+implementation of the overall risk management
+and internal control. The Risk Management
+Committee is responsible for establishing the
+risk management and internal control systems,
+implementing standardised organisation,
+authorisation, responsibilities, procedures
+and methods for the risk management and
+internal control systems. The Risk Management
+Committee is also responsible for ongoing
+40
+********ve
+CNOOC LIMITED Annual Report 2019
+www.
+Corporate Governance Report
+The Company regularly updates investors with
+progress of development and performance
+of the Company through formal channels
+such as annual reports, interim reports and
+announcements made through the Hong Kong
+Stock Exchange's website and the Company's
+website, as well as through press releases.
+The Company also issues quarterly operational
+statistics and announces its strategy at the
+beginning of the year to enhance transparency
+about its performance and to give details of the
+latest development of the Company in a timely
+monitoring of the risk management and internal
+control systems of the Company, and makes
+periodic reports to the Audit Committee and
+the Board regarding the status of the risk
+management and internal control systems of
+the Company.
+With respect to internal control, the Company
+has chosen and adopted the internal control
+framework issued by COSO, established an
+internal control system and mechanism over
+financial, operational and compliance controls
+and has conducted continuing review and
+evaluation of the internal control system of the
+Company to ensure the timeliness, accuracy
+and completeness of all information reported.
+The Company has established procedures for
+identifying, handling and disseminating inside
+information in compliance with the Securities
+and Futures Ordinance (Chapter 571 of the
+Laws of Hong Kong), including the issue of
+an inside information disclosure policy, the
+annual review and update (if necessary) of
+such inside information disclosure policy, pre-
+clearance on dealing in Company's securities
+by Directors and designated members of the
+management, notification of regular blackout
+period and securities dealing restrictions to
+relevant Directors and employees, identification
+of project by code name and dissemination
+of information to stated purpose and on a
+need-to-know base have been implemented
+by the Company to guard against possible
+mishandling of inside information within the
+Group.
+Whistleblowing policy and system have been
+established for employees and those who deal
+with the Company to raise concerns about
+possible improprieties in any matter relating to
+the Company.
+The Company has maintained an open
+channel to handle and discuss internal reports
+concerning finance, internal control and fraud
+to ensure that all reports will receive sufficient
+attention and any significant internal control
+weakness or reports will directly reach to the
+Chairman of the Audit Committee.
+The Company has established a mechanism
+for remediating internal control deficiency
+under which the management of each level
+are assigned with clear responsibilities relating
+to remediating internal control deficiency in
+accordance with their respective levels. Those
+responsibilities are also included in the internal
+performance indicators of the Company.
+During the reporting period, the Company's
+internal audit function provided independent
+assurance as to the adequacy and effectiveness
+of the Company's risk management and
+internal control systems. The financial condition,
+operational control and compliance control of
+the Company were examined by the internal
+audit function according to the audit plan
+approved by the Audit Committee. Different
+audit areas were assigned according to risk
+priority. The internal audit function assisted the
+Board to monitor the effectiveness of the risk
+management and internal control systems.
+After completion of an internal audit, analysis,
+appraisals, recommendations related to the
+activities inspected were formulated. The
+internal audit function reported to the Audit
+Committee and the Board about internal audit
+findings, internal audit recommendation and
+the management responses. In addition, the
+internal audit function maintained a regular
+dialogue with the Company's external auditors
+so that both are aware of the significant factors
+which may affect their respective scope of
+work.
+Reports from external auditors on internal
+control and relevant financial reporting matters
+were presented to and reviewed by the Audit
+Committee.
+CNOOC LIMITED Annual Report 2019
+41
+Corporate Governance Report
+The management reported the above works to
+the Audit Committee for the purpose of assisting
+the Audit Committee to review the effectiveness
+of the risk management and internal control
+systems.
+The management evaluated the design and
+operating effectiveness of the Company's
+risk management system and the Company's
+internal control over financial reporting for 2019
+and did not discover any material weakness
+from the evaluation. As a result, the Board
+considered that as of 31 December 2019,
+the Company's risk management system and
+the Company's internal control over financial
+reporting were effective.
+C.3 Audit Committee
+With respect to risk management, the Company
+has chosen and adopted the risk management
+framework issued by COSO in the United
+States of America ("COSO"), established a
+risk management system covering design,
+implementation, monitoring, assessment and
+continuous improvement based on the ISO
+31000 Risk Management Guidelines. The Risk
+Management Committee established the overall
+targets and policies of the risk management
+system which are in line with the strategic
+objectives of the Company, and identified,
+analysed and assessed the overall risk of the
+Company, including the Company's key risks in
+making major decisions, important events and
+key business processes. The Risk Management
+Committee is also responsible for reviewing and
+approving the response plans to major risks, as
+well as periodically following up and reviewing
+the implementation of such response plans,
+in order to make sure that sufficient attention,
+monitor and responses will be paid to all key
+risks of the Company. The risk management
+reports are submitted to the Audit Committee
+and the Board periodically.
+Principle: "The board should establish formal and
+transparent arrangements to consider how it will
+apply financial reporting, risk management and
+internal control principles and maintain an appropriate
+relationship with the issuer's auditors. The audit
+committee established under the Listing Rules should
+have clear terms of reference."
+In response to Section 404 of the Sarbanes-
+Oxley Act promulgated by the U.S. Congress
+in 2002 to safeguard the interests of investors,
+increase the accuracy and effectiveness of
+financial reporting and financial information
+disclosure, the management has issued
+a statement on the responsibility and
+effectiveness of internal control based on
+financial reporting, and the auditors of the
+Company have also audited the effectiveness
+of internal control over financial reporting.
+39
+Corporate Governance Report
+The Remuneration Committee also administers
+the Company's share option schemes and all
+other employee equity-based compensation
+plans, with full authority to make all other
+determinations in the administration thereof,
+but subject to the limitations prescribed by laws
+and the rules of such plans and programs.
+The Remuneration Committee consults the
+Chairman and CEO about its proposal relating
+to the remuneration of other Executive Directors
+and have access to independent professional
+advice if necessary.
+The following is a summary of the work
+performed by the Remuneration Committee
+under its charter during the year:
+Reviewed and approved the remuneration
+packages of the Company's individual
+Executive Directors and senior
+management of the Company;
+Reviewed and approved the remuneration
+packages of the newly appointed
+Directors and senior management;
+Made recommendations to the Board
+on the Company's policy and structure
+for Directors and senior management
+remuneration and on the establishment
+of a formal and transparent procedure for
+developing remuneration policy;
+Assessed performance of Executive
+Directors and approved the revised terms
+of their service contracts;
+Made recommendations to the Board on
+the remuneration of the Company's Non-
+executive Directors; and
+Evaluated and assessed the effectiveness
+of the Remuneration Committee
+and the adequacy of the charter of
+the Remuneration Committee and
+recommended the proposed changes to
+the charter to the Board (if necessary).
+Attendance of individual members at Remuneration
+Committee meetings in 2019
+Directors
+Chiu Sung Hong (Chairman)
+Tse Hau Yin, Aloysius
+Wang Dongjin
+C.
+Corporate Governance Report
+No. of meetings attended
+(Two meetings in total)
+by committee
+222
+ACCOUNTABILITY AND AUDIT
+C.1 Financial reporting
+by proxy
+0
+0
+0
+Principle: "The board should present a balanced,
+clear and comprehensible assessment of the
+company's performance, position and prospects."
+The Company has established a mechanism for
+reporting to the Board by providing a monthly
+management report in order to ensure that
+the Board fully understands the operating
+conditions and the relevant financial position
+of the Company. The Board is responsible
+for preparing accounts that give a true and
+fair view of the Group's financial position on
+a going-concern basis and other financial
+disclosures. Management provides the Board
+with the relevant information it needs to fulfill
+these responsibilities.
+Directors discuss the operating budget for the
+next year and approve the operating budget
+at the end of each year and will review the
+execution of the operating budget for the whole
+year. Management will also provide sufficient
+explanations and information to the Board. All
+significant changes in the operating conditions
+and investment decisions will be discussed in
+sufficient details by the Board.
+Directors also discuss and analyse the
+performance of the Group, the long-term
+business model and corporate strategies of
+the Company for achieving the Company's
+objectives and generating or preserving value
+over the longer term. Please refer to the
+relevant section in Management's Discussion
+and Analysis on pages 67 to 71 of this annual
+report for details.
+If necessary, the Directors will also engage
+professional independent consultants so
+that the Directors can gain an in-depth and
+comprehensive understanding and assessment
+of the relevant matters, in order to make well-
+grounded assessments.
+wwwwww
+CNOOC LIMITED Annual Report 2019
+member
+(i)
+The Audit Committee consists of three
+Independent Non-executive Directors (Mr.
+Tse Hau Yin, Aloysius, Mr. Chiu Sung Hong
+and Mr. Lawrence J. Lau), with Mr. Tse Hau
+Yin, Aloysius as the Audit Committee financial
+expert for the purposes of U.S. securities laws
+and the Chairman of the Audit Committee.
+A list of members of the Audit Committee is
+set out under the section headed "Company
+Information" on page 168 of this annual report.
+•
+Reviewed the arrangements by which
+employees of the Company can use,
+in confidence, to raise concerns about
+possible improprieties in financial
+reporting, risk management and internal
+control or other matters and ensure that
+proper arrangements are in place for fair
+and independent investigation and for
+appropriate follow-up actions;
+Reported on its findings and suggestions
+to the Board following its review of
+different aspects of the Company's
+financial reporting and risk management
+and internal control systems and made
+appropriate recommendations where
+necessary;
+Reviewed the Company's business ethics
+and compliance policies, related reports
+and training programs as appropriate and
+performed certain corporate governance
+duties delegated by the Board set out
+in Board Committees & Corporate
+Governance Functions section on page
+45 of this annual report; and
+Evaluated and assessed the effectiveness
+of the Audit Committee and the adequacy
+of the charter of the Audit Committee,
+and considered and recommended the
+proposed amendments to the charter
+and presented to the Board for approval.
+Full minutes of the Audit Committee meetings
+are kept by the Joint Company Secretaries.
+Draft and final versions of minutes of the Audit
+Committee meetings are sent to all members
+of the Audit Committee for their comments and
+records respectively, in both cases within a
+reasonable time after the meetings.
+The Audit Committee is provided with sufficient
+resources, including independent access to
+and advice from external auditors.
+Attendance of individual members at Audit Committee
+meetings in 2019
+Independent
+Non-executive Directors
+Tse Hau Yin, Aloysius
+(Chairman and Financial
+Expert)
+Chiu Sung Hong
+Lawrence J. Lau
+D.
+No. of meetings attended
+(Four meetings in total)
+by committee
+Considered and approved the non-audit
+services provided by the external auditors
+during the year;
+member
+D.1 Management functions
+by proxy
+4
+0
+4
+4
+○ ○
+Principle: "An issuer should have a formal schedule of
+matters specifically reserved for board approval. The
+board should give clear directions to management
+on the matters that must be approved by it before
+decisions are made on the issuer's behalf."
+The Board is the ultimate decision-making
+body of the Company, other than those matters
+reserved to shareholders of the Company.
+The Board oversees and provides strategic
+guidance to senior management in order to
+enhance the long-term value of the Company
+for its shareholders. The Board delegates its
+management and administration functions to
+management and gives clear directions as to
+the powers of management at the same time,
+in particular, with respect to the circumstances
+where management should report back
+and obtain prior approval from the Board
+before making decisions or entering into any
+commitments on the Company's behalf.
+The day-to-day management is conducted
+by senior management and employees of the
+Company, under the direction of the CEO
+and the oversight of the Board. In addition
+to its general oversight of the management,
+the Board also performs a number of specific
+functions. The Company formalises the
+functions reserved to the Board and those
+delegated to management and reviews those
+arrangements periodically to ensure that they
+remain appropriate to the Company's needs.
+44
+CNOOC LIMITED Annual Report 2019
+www.
+Corporate Governance Report
+DELEGATION BY THE BOARD
+The Audit Committee meets at least twice
+a year and is responsible for reviewing the
+completeness, accuracy and fairness of
+the Company's accounts, evaluating the
+Company's auditing scope (both internal
+and external) and procedures as well as
+the effectiveness of the Company's risk
+management and internal control systems.
+The Audit Committee, together with senior
+management and the external auditors,
+review the accounting principles and practices
+adopted by the Group and discuss the risk
+management and internal control and financial
+reporting matters. The Board also assesses
+the effectiveness of risk management and
+internal control systems based on the reviews
+by the Risk Management Committee, senior
+management, internal audit function and
+external auditors.
+Members of the Audit Committee
+received materials from the Company's
+external auditors from time to time
+in order to keep abreast of changes
+in financial reporting principles and
+practices, as well as issues relating to
+financial reporting, risk management and
+internal controls relevant to the Company;
+Corporate Governance Report
+The Audit Committee is also responsible for
+overseeing the operation of the internal control
+system so as to ensure that the Board is able
+to monitor the Company's overall financial
+position, to protect the Company's assets, and
+to prevent major errors or omissions in financial
+reporting. The Audit Committee also meets at
+least twice a year with our external auditors.
+The Audit Committee is responsible for
+overseeing and monitoring the risk management
+and internal control systems of the Company
+on an ongoing basis and reviewing with our
+external auditors and management periodically,
+not less than annually, the scope, adequacy
+and effectiveness of the Company's corporate
+accounting and financial controls, risk
+management and internal control systems, and
+any related significant findings regarding risks
+or exposures and consider recommendations
+for improvement of such controls. The review
+should cover all material aspects, including
+strategic, financial, operational and compliance
+controls. In conducting annual review, the
+Audit Committee in particular, considers the
+factors including (a) the changes, since the
+last annual review, in the nature and extent of
+significant risks, and the Company's ability to
+respond to changes in its business and the
+external environment; (b) the scope and quality
+of management's ongoing monitoring of risks
+and of the internal control systems, and where
+applicable, the work of its internal audit function
+and other assurance providers; (c) the extent
+and frequency of communication of monitoring
+results to the Board and the Audit Committee
+which enables them to assess the effectiveness
+of the risk management and internal control
+systems of the Company; (d) significant control
+failings or weaknesses that have been identified
+during the period. Also, the extent to which
+they have resulted in unforeseen outcomes or
+contingencies that have had, could have had,
+or may in the future have, a material impact
+on the Company's financial performance or
+condition; and (e) the effectiveness of the
+Company's processes for financial reporting
+and Listing Rule compliance.
+The Audit Committee is also responsible for
+reviewing the Company's internal audit function,
+ensuring co-ordination within the Group and
+between the Company's internal and external
+auditors, and ensuring that the internal audit
+function is adequately resourced and has
+appropriate standing within the Company and
+to review and monitor its effectiveness.
+42
+CNOOC LIMITED Annual Report 2019
+www.
+Corporate Governance Report
+a
+The following is summary of the work
+performed by the Audit Committee under its
+charter during the year:
+Reviewed the Company's audited
+accounts, annual results announcements,
+unaudited interim accounts and interim
+results announcements before they were
+tabled to the Board for approval, and
+discussed with senior management and
+the external auditors over such accounts;
+The Audit Committee held formal
+meetings with the external auditors and
+senior management of the Company at
+least twice a year to discuss the matters
+including:
+(i)
+the external auditors' engagement
+letter and general scope of their
+audit work, including planning and
+staffing of the audit;
+the Company's management
+discussion and analysis disclosures
+in the annual report of the
+Company; and
+Reviewed and approved the Company's
+audit and non-audit pre-approval policy
+to ensure auditors' independence;
+the applicable accounting
+standards relating to the audit of the
+Company's financial statements,
+including any recent changes;
+On behalf of the Board, conducted
+a review of the effectiveness of the
+Company's risk management and internal
+control systems for the year ended 31
+December 2019. The annual review
+included works such as:
+(i)
+review of reports submitted by
+and discussions with the Risk
+Management Committee and other
+senior management concerned
+regarding major risks identified,
+changes in the nature and extent
+of major risks since the last annual
+review, measures and response
+plans to manage risks identified,
+and the ability of the Company to
+respond to such changes in its
+business operation, etc.;
+(!!!)
+(iv)
+(v)
+(vi)
+review on whether the management
+has established effective risk
+management and internal control
+systems pursuant to the Listing
+Rules as well as under relevant
+US requirements and to evaluate
+the scope and quality of the
+management's works on the risk
+management system, internal
+control system and internal audit;
+review the adequacy of resources,
+staff qualifications and experience,
+training programmes and budget of
+the Company's accounting, financial
+reporting functions and internal
+audit functions to ensure that the
+management had performed its
+duty;
+review of the effectiveness of
+the internal audit function of the
+Company to ensure coordination
+within the Group and between the
+Company's internal and external
+auditors and to ensure that the
+internal audit function is adequately
+resourced and has appropriate
+standing within the Company;
+consider the major investigation
+findings on risk management
+and internal control systems and
+management's response to these
+findings; and
+make recommendations to the
+Board and the senior management
+on the scope and quality of
+management's ongoing monitoring
+of risks and issues relevant to
+internal control.
+On the basis of the aforesaid review, the
+Audit Committee was not aware of any
+significant issues that would have an
+adverse impact on the effectiveness and
+adequacy of the risk management and
+internal control systems of the Company;
+CNOOC LIMITED Annual Report 2019
+43
+In addition to formal meetings arranged
+by the Company, members of the Audit
+Committee were also given direct access
+to the external auditors, have frequent
+contacts with the external auditors to
+discuss issues from time to time;
+The Directors are not aware of any material
+uncertainties relating to events or conditions
+that may cast significant doubt upon the
+Company's ability to continue as a going
+concern as referred to in Code Provision C.1.3
+of the CG Code.
+48
+Please refer to the consolidated statement of changes in
+equity on page 78 and note 42 to the consolidated financial
+statements on pages 143 to 144 of this annual report for
+movements in the reserves of the Group and the Company,
+respectively, for the year ended 31 December 2019.
+Born in 1961, Mr. Xie is an Executive Vice President and
+the Chief Safety Official of the Company as well as a
+professor-level senior engineer. Mr. Xie obtained a Ph.D.
+degree from China University of Geosciences in 2005.
+From 1982 to 1995, Mr. Xie served as an engineer of
+Research Institute and Exploration Department of CNOOC
+Naihai West Corporation. From 1995 to 1996, he served as
+the Deputy Manager of Exploration Department of CNOOC
+Naihai West Corporation. From 1996 to 1999, he served
+as Manager of Tepu Company of CNOOC Naihai West
+Corporation, Deputy Chief Earth Physicist and Manager of
+Exploration Department of Naihai West Corporation. From
+2001 to 2005, he was Deputy Chief Manager of CNOOC
+China Limited Zhanjiang Branch. From 2005 to 2013, he
+served as the Chief Manager of CNOOC China Limited
+Zhanjiang Branch. From 2013 to 2015, he was appointed
+as the Director of Naihai West Petroleum Administrative
+Bureau of CNOOC. In July 2015, he was appointed as
+Deputy Chief Geologist of CNOOC, Deputy Chief Geologist
+and General Manager of Exploration Department of the
+Company. From 2016 to 2018, he was appointed as the
+Chief Geologist of CNOOC, an Executive Vice President
+and General Manager of Exploration Department of the
+Company. In May 2018, he was appointed as the Chief
+Geologist of CNOOC, an Executive Vice President and the
+Chief Safety Official of the Company.
+Cao Xinjian
+Born in 1966, Mr. Cao is an Executive Vice President and
+the General Manager of CNOOC China Limited Tianjin
+Branch as well as a professor-level senior economist. Mr.
+Cao obtained a master degree of Business Administration
+from the University of Wales in 2003. From 1989 to 1999,
+Mr. Cao served as a geological delegate of the Contract
+Area of CNOOC Donghai Company & Caltex and the
+deputy manager of Exploration Department of CNOOC
+Donghai Company. From 1999 to 2004, he served as
+Exploration Manager of Exploration Department, Assistant
+Manager, Acting Manager and Manager of Human
+Resources Department of CNOOC China Limited Shanghai
+Branch. From 2004 to 2006, he served as Deputy Director
+of the CNOOC Talent Work Leading Group's Office. From
+2006 to 2013 he served as Deputy General Manager of
+CNOOC China Limited Shanghai Branch. From 2009
+to 2013, he also served as Deputy Director of Donghai
+Petroleum Administration Bureau of CNOOC. From 2013 to
+2017, he served as Deputy General Manager and General
+Manager of Human Resources Department of CNOOC
+and the Company. From March 2017, he has served as
+the Director of Bohai Petroleum Administration Bureau of
+CNOOC and General Manager of CNOOC China Limited
+Tianjin Branch. From August 2017, he was appointed as
+an Executive Vice President of the Company. In September
+2017, he was appointed as Assistant President of CNOOC.
+wwwwww
+CNOOC LIMITED Annual Report 2019
+53
+Xie Yuhong
+54
+Xia Qinglong
+Xie Weizhi
+Born in 1964, Mr. Xie is the Chief Financial Officer of the
+Company. Mr. Xie is a Senior Accountant. He graduated
+from Guanghua School of Management of Peking University
+with a master's degree in Business Administration. Mr.
+Xie joined CNOOC in 1986. Mr. Xie served as Deputy
+Manager of Finance Department of CNOOC Nanhai West
+Corporation, Deputy Manager and Manager of Controllers'
+Department and General Manager of Treasury Department
+of CNOOC. From January 2002 to February 2011, Mr.
+Xie served as General Manager of CNOOC Finance
+Corporation Ltd. From February 2011 to May 2016, Mr.
+Xie served as Assistant President of CHINALCO, Executive
+Director of CHINALCO Finance Company Limited,
+President of CHINALCO Offshore Holding Company,
+Vice President & CFO of CHALCO, President of CHALCO
+(Hong Kong), Chairman of CHINALCO Finance Company
+Limited, General Auditor & Director of Audit Department
+CHINALCO. From 2016 to 2017, Mr. Xie was appointed as
+General Manager of Finance Department of CNOOC. From
+August 2017, Mr. Xie was appointed as the Chief Financial
+Officer of the Company.
+Zhang Guohua
+Born in 1960, Mr. Zhang is a Senior Vice President of the
+Company and the General Manager of CNOOC China
+Limited Zhanjiang Branch. He is a professor-level senior
+engineer. He graduated from Shandong Oceanographic
+Institute (now Ocean University of China) with a bachelor
+degree. He studied in the Business Institute of University
+of Alberta in Canada in 2001. He joined CNOOC in 1982
+and served as Deputy Chief Geologist and Manager
+of Exploration Department of CNOOC Naihai West
+Corporation, a subsidiary of CNOOC, Chief Geologist of
+CNOOC Research Center, Assistant to General Manager
+of CNOOC China Limited and the General Manager
+of Exploration Department of the Company. In March
+2003, he was appointed as Senior Vice President of the
+Company. In October 2005, Mr. Zhang was appointed
+as Senior Vice President of the Company and General
+Manager of CNOOC China Limited Shanghai Branch.
+In July 2009, he was appointed as Director of Donghai
+Petroleum Administrative Bureau of CNOOC. From July
+2015 to December 2019, he was appointed as Director of
+Nanhai West Petroleum Administrative Bureau of CNOOC
+and General Manager of CNOOC China Limited Zhanjiang
+Branch. From 20 March 2020, Mr. Zhang resigned as
+Senior Vice President of the Company.
+Deng Yunhua
+Born in 1963, Mr. Deng is an academician of the Chinese
+Academy of Engineering and the Deputy Chief Exploration
+Engineer of the Company. Mr. Deng graduated from the
+Scientific Research Institute of Petroleum Exploration
+and Development with a major in Petroleum Geology and
+Exploration and received a master's degree in Engineering
+in 1988. He was assistant geologist and then geologist in
+the Exploration Department of CNOOC Bohai Corporation
+Institute from 1988 to 1989; and served as the Team
+Leader of the Comprehensive Petroleum Geological
+Research Team, Project Manager, Deputy Principal of
+Geologist, Deputy Principal Geologist and Director of the
+Exploration Department and Deputy Chief Geologist in the
+CNOOC Bohai Corporation Institute from 1989 to 1999.
+Mr. Deng became Deputy Chief Geology Engineer and
+Deputy General Manager of CNOOC China Limited Tianjian
+Branch from 1999 to 2005. He was Deputy Director of
+CNOOC Research Center from 2005 to 2006. He served
+as the Deputy Chief Exploration Engineer of the Company
+and the Deputy Director of CNOOC Research Center from
+2006 to 2007. Mr. Deng served as Deputy Chief Geology
+Engineer of CNOOC, Deputy Chief Exploration Engineer of
+the Company and Deputy Director of CNOOC Research
+Center from 2007 to 2009; and Deputy Chief Geology
+Engineer of CNOOC, Deputy Chief Exploration Engineer
+of the Company and Deputy General Director of CNOOC
+Research Institute from 2009 to 2015. In November 2015,
+he was appointed as the Deputy Chief Geology Engineer
+of CNOOC, Deputy Chief Exploration Engineer of the
+Company and Deputy Director of Beijing Research Center
+of CNOOC China Limited.
+Directors and Senior Management
+OTHER MEMBERS OF SENIOR MANAGEMENT
+Born in 1951, Mr. Lynch obtained a B.A. degree from
+Mount Allison University, a M.A. degree in Economics from
+the University of Manchester, and a doctorate degree in
+Economics from McMaster University. He also holds 11
+honorary degrees. Mr. Lynch was made a life Member of
+the Privy Council for Canada, and an Officer of the Order of
+O Canada. He is the Vice Chairman of BMO Financial Group
+and also a distinguished former public servant with 33
+years of service with the Government of Canada. Mr. Lynch
+served as Deputy Minister of Industry of Canada from 1995
+to 2000, Deputy Minister of Finance of Canada from 2000
+to 2004, Executive Director at the International Monetary
+Fund from 2004 to 2006 and was appointed as Clerk of
+the Privy Council for Canada, Secretary to the Cabinet and
+Head of the Public Service from 2006 to 2009. Mr. Lynch is
+the Senior Fellow of Massey College, former Chancellor of
+the University of King's College, former Chair of the Board
+of Governors of the University of Waterloo, former Chair
+of the Canadian Ditchley Foundation, and past Chair of
+the World Economic Forum's Global Policy Council on the
+Global Financial System. He also serves on other boards
+including the Killam Trusts, Communitech, the Governor
+General's Rideau Hall Foundation, the Asia Pacific
+Foundation of Canada. Mr. Lynch is currently a director of
+Canadian National Railway Company listed on the Toronto
+Stock Exchange and New York Stock Exchange, and a
+director and chairman of the Board of Directors of SNC
+Lavalin Group Inc. listed on the Toronto Stock Exchange.
+Mr. Lynch was appointed as an Independent Non-
+executive Director of the Company on 27 November 2013,
+and such appointment took effect from 1 March 2014.
+On 7 May 2019, Mr. Kevin G. Lynch has resigned as an
+Independent Non-executive Director and a member of the
+nomination committee.
+Kevin G. Lynch
+Chiu Sung Hong
+Born in 1947, Mr. Chiu received an LL.B. degree from the
+University of Sydney. He was admitted as a solicitor of the
+Supreme Court of New South Wales and the High Court
+of Australia. He has over 30 years' experience in legal
+practice and had been a director of a listed company in
+Australia. Mr. Chiu was the founding member of the Board
+of Trustees of the Australian Nursing Home Foundation and
+a senior research fellow of Centre for Law & Globalization
+of Renmin University of China since 2016. He also served
+as the General Secretary of the Australian Chinese
+Community Association of New South Wales. Mr. Chiu
+is also an Independent Non-executive Director of Tianda
+Pharmaceuticals Limited (formerly Yunnan Enterprises
+Holdings Limited, Tianda Holdings Limited) since April
+2008, a company listed on The Stock Exchange of Hong
+Kong Limited. Mr. Chiu is also an Independent Non-
+executive Director of Bank of China (Australia) Limited (a
+wholly subsidiary of Bank of China Limited). Mr. Chiu was
+appointed as an Independent Non-executive Director of the
+Company with effect from 7 September 1999.
+wwwwww
+CNOOC LIMITED Annual Report 2019
+51
+Directors and Senior Management
+Lawrence J. Lau
+Born in 1944, Professor Lau graduated with a B.S. (with
+Great Distinction) in Physics from Stanford University
+in 1964, and received his M.A. and Ph.D. degrees in
+Economics from the University of California at Berkeley
+in 1966 and 1969 respectively. He joined the faculty of
+the Department of Economics at Stanford University in
+1966, becoming Professor of Economics in 1976, the first
+KwohTing Li Professor in Economic Development in 1992,
+and Kwoh-Ting Li Professor in Economic Development,
+Emeritus in 2006. From 2004 to 2010, Professor Lau
+served as the Vice-chancellor (President) of The Chinese
+University of Hong Kong. From September 2010 to
+September 2014, Professor Lau served as Chairman of
+CIC International (Hong Kong) Co., Limited. From March
+2008 to February 2018, Professor Lau served as a member
+of the 11th and 12th National Committee of the Chinese
+People's Political Consultative Conference (and a Vice
+Chairman of its Economics Subcommittee). Professor
+Lau specializes in economic development, economic
+growth, and the economies of East Asia, including that of
+China. He has authored, co-authored, or edited thirteen
+books, including The China-U.S. Trade War and Future
+Economic Relations, and published more than 200 articles
+and notes in professional journals. Professor Lau serves
+as a member of the Hong Kong Special Administrative
+Region Exchange Fund Advisory Committee Currency
+Board Subcommittee, and a member of the Hong Kong
+Trade Development Council (HKTDC) Belt and Road and
+Greater Bay Area Committee. In addition, he also serves
+as the Chairman of the Board of Directors of the Chinese
+University of Hong Kong (Shenzhen) Advanced Finance
+Institute, aka Shenzhen Finance Institute, a member and
+Chairman of the Prize Recommendation Committee of the
+LUI Che Woo Prize Company, as well as a Vice-Chairman
+of Our Hong Kong Foundation. He was appointed a Justice
+of the Peace in Hong Kong in July 2007 and awarded the
+Gold Bauhinia Star in 2011 by the Government of the Hong
+Kong Special Administrative Region. He currently serves
+as the Ralph and Claire Landau Professor of Economics
+at the Lau ChorTak Institute of Global Economics and
+Finance, The Chinese University of Hong Kong, an
+independent non-executive director of AIA Group Limited,
+Hysan Development Company Limited (until 13 May
+2020) and Semiconductor Manufacturing International
+Corporation, all listed on the Hong Kong Stock Exchange,
+and an independent non-executive director of Far EasTone
+Telecommunications Company Limited, Taipei, which is
+listed on the Taiwan Stock Exchange. Professor Lau was
+appointed as an Independent Non-executive Director of the
+Company with effect from 31 August 2005.
+Tse Hau Yin, Aloysius
+Born in 1948, Mr. Tse is a fellow of The Institute of
+Chartered Accountants in England and Wales, and the
+Hong Kong Institute of Certified Public Accountants
+("HKICPA"). Mr. Tse is a past president and a former
+member of the Audit Committee of the HKICPA. He joined
+KPMG in 1976, became a partner in 1984 and retired
+in March 2003. Mr. Tse was a non-executive Chairman
+of KPMG's operations in the PRC and a member of the
+KPMG China advisory board from 1997 to 2000. Mr.
+Tse is currently an independent non-executive director
+of China Telecom Corporation Limited, SJM Holdings
+Limited, Sinofert Holdings Limited and China Huarong
+Asset Management Company, Limited, companies listed
+on The Stock Exchange of Hong Kong Limited. From 2004
+to 2010, he was an independent non-executive director
+of China Construction Bank Corporation, which is listed
+on the HKSE Main Board. From 2005 to 2016, Mr. Tse
+was also an independent non-executive director of Daohe
+Global Group Limited (formerly known as Linmark Group
+Limited), which is listed on the HKSE Main Board, Mr.
+Tse is currently an independent non-executive director
+of CCB International (Holdings) Limited, a wholly owned
+subsidiary of China Construction Bank Corporation and
+OCBC Wing Hang Bank Limited (formerly named as Wing
+Hang Bank Limited whose shares were delisted from
+The Stock Exchange of Hong Kong Limited with effect
+from 16 October 2014). Mr. Tse is also a member of the
+International Advisory Council of the People's Municipal
+Government of Wuhan. Mr. Tse was appointed as an
+Independent Non-executive Director of the Company with
+effect from 8 June 2005.
+Qiu Zhi Zhong
+Born in 1955, Mr. Qiu obtained a Bachelor of Science
+degree in Computer Science from New York University and
+a Bachelor of Engineering degree in Electrical Engineering
+from Cooper Union for the Advancement of Science
+and Art in 1983, a Master of Science degree in Electrical
+Power Engineering from Ohio State University in 1985,
+and a Master of Business Administration from Harvard
+Business School in 1990. Mr. Qiu is the Senior Advisor
+to MacAndrews & Forbes Incorporated. He also serves
+as the Honorary Consul of Republic of Rwanda in Hong
+Kong. From 1991 to 2002, Mr. Qiu served as the Chairman
+of Greater China Region and a Managing Director of
+Credit Suisse First Boston. From 2002 to 2006, Mr. Qiu
+established and served as the Managing Director of Quartz
+Capital. From 2004 to 2014, he served as the Chairman of
+the DragonTech Ventures Fund and DragonTech Ventures
+Management Limited. From 2006 to 2009, he served as
+52
+CNOOC LIMITED Annual Report 2019
+www.
+Directors and Senior Management
+the Executive Chairman of China and Vice Chairman of Asia
+of ABN AMRO Bank N.V., and during this period he also
+served as the Chairman of ABN AMRO (China) Co. Ltd. and
+the Chairman of ABN AMRO Leasing (China) Co. Ltd. From
+2009 to March 2013, he served as a Managing Director,
+the Vice Chairman of Asia Pacific and Chairman of Greater
+China of Barclays Capital. From 2013 to 2016, he served
+as the Chairman of Meridian Capital (Asia) Limited. In 1994
+and 1995, Mr. Qiu was named as one of the world's "50
+Most Wanted in Finance" and "World's 50 Derivatives
+Superstars" respectively by the Global Finance magazine.
+Mr. Qiu was appointed as an Independent Non-executive
+Director and a member of the Nomination Committee of
+the Company with effect from 7 May, 2019.
+CNOOC LIMITED Annual Report 2019
+INDEPENDENT NON-EXECUTIVE DIRECTORS
+www.
+Liu Zaisheng
+Report of the Directors
+The directors (the "Directors") of the Company are pleased
+to present their report together with the audited financial
+statements of the Company for the year ended 31
+December 2019.
+PRINCIPAL ACTIVITIES
+The principal activity of the Company is investment holding
+of its subsidiaries. These subsidiaries are principally
+engaged in the exploration, development, production and
+sales of crude oil and natural gas.
+SUMMARY OF FINANCIAL INFORMATION AND
+OPERATING RESULTS
+Please refer to the financial summary on page 2 of this
+annual report for a summary of the assets and liabilities
+of the Group as of 31 December 2019 and the operating
+results of the Group for the year then ended.
+BUSINESS REVIEW
+www.
+Overview and Performance of the Year
+Environmental Policies and Performance
+During the process of oilfield exploitation, the Company
+highly values the protection of natural and ecological
+environment, helps the nation to resolutely win the fight
+against pollution, and its comprehensive environmental
+protection measures ensure the Company to comply with
+the applicable laws and regulations on environmental
+protection.
+The Company's environmental protection management
+system emphasises the management of the whole
+process, and we place Environment Impact Assessment
+(EIA), compliance with set standards or targets on pollutant
+emissions, control on total discharge amount and reduction
+on emissions as our priorities. During the pre-feasibility
+study phase, the environmental risk pre-assessment
+report will be conducted to identify the environmental
+sensitive areas for protecting marine ecosystem. During
+the ODP (Overall Development Plan)/basic design stage,
+it is a necessity to prepare and submit the EIA to the
+government for approval in advance of a project to be set
+up. During the construction stage, environmental protection
+supervision and management are strictly performed and
+tightened in order to reduce the impact on natural and
+social environment. During the production stage, pollutant
+discharge is controlled and emission concentration
+is reduced, and environmental protection measures
+are adopted to achieve "increased production without
+increasing pollution" or "increased production with reduced
+pollution". The environmental protection information system
+covers all information from EIA documents from all levels
+of the Group, and information in relation to the report,
+statistics, monitoring and pre-warning system regarding
+pollutant emissions. The system enables us to achieve
+information management on environmental related matters.
+For the year ended 31 December 2019, the Company
+has carried out the laws and regulations of the PRC on
+energy saving and reduction in emission, viewing energy
+saving and reduction in emission as important works
+for the transformation of the mode of development and
+optimisation of the industrial structure. We kept on strictly
+carrying out energy-saving assessment and examination
+on new oilfield investment projects, ensuring this work can
+be integrated from the initial stage of projects. We also
+strengthened the efforts in technical reformation, which is
+the key to improve energy efficiency and reduce carbon
+emissions.
+Regarding the environmental issues that have material
+impacts on the Company's business performance and
+future development, please refer to the environmental,
+social and governance report of 2019 prepared by the
+Company (the “2019 ESG report") to be available on the
+Company's website.
+SUBSIDIARIES, ASSOCIATES AND JOINT
+VENTURES
+A review of the business of the Group and analysis of the
+Group's performance using financial key performance
+indicators is provided in the Business Overview and
+Management's Discussion and Analysis section on pages 8
+to 28 and pages 67 to 71 of this annual report.
+CNOOC LIMITED Annual Report 2019
+56
+Born in 1973, Ms. Tsue Sik Yu, May is the Joint Company
+Secretary of the Company. She graduated from Curtin
+University of Technology in Australia with a bachelor
+of commerce in accounting. Ms. Tsue furthered her
+education at The Hong Kong Polytechnic University in
+Master of Corporate Governance from 2004 to 2006,
+and MBA from The University of Hong Kong from 2014
+to 2016. She is a fellow member of both the Institute of
+Chartered Secretaries and Administrators and the Hong
+Kong Institute of Chartered Secretaries since 2012 and
+became a member of Company Secretaries Panel and
+Advisor for Academy of Professional Certification in the
+same year, and became a member of ACCA since 2016.
+She is also a fellow member and certified risk trainer of the
+Institute of Crisis and Risk Management and an associate
+member of CPA Australia. Furthermore, she was granted
+a Practitioner's Endorsement (PE) since 2017/2018 under
+The Hong Kong Institute of Chartered Secretaries and
+accredited a General Mediator under Hong Kong Mediation
+Accreditation Association Limited (HKMAAL) since August
+2017. From August 1998 to March 1999, Ms. Tsue worked
+in LG International (HK) Ltd. as a senior accounts clerk. Ms.
+Tsue joined China Ocean Oilfield Services (HK) Limited in
+1999 as an accountant. She helped to manage the finance
+of the CNOOC Insurance Limited since 2000 and became
+its employee in 2004 as a manager of finance department.
+She serves as company secretary of CNOOC Insurance
+Limited since March 2007. Ms. Tsue gained The Chartered
+Governance Professional (CGP) qualification of The Institute
+of Chartered Secretaries and Administrators and The Hong
+Kong Institute of Chartered Secretaries on 30 September
+2018. She volunteered on Hong Kong Management
+Association (HKMA) of Panel of Adjudicators HKMA
+Best Annual Reports Awards since 2018. Ms. Tsue was
+appointed as a Joint Company Secretary of the Company
+with effect from 25 November 2008.
+Born in 1962, Mr. Liu is a Vice President of the Company
+and Director of Beijing Research Center of CNOOC China
+Limited, General Manager of CNOOC China Limited
+Beijing Branch, Director of CNOOC Energy Technology
+Development Research Institute and General Manager
+of CNOOC Energy Technology Development Research
+Institute Company Limited. Mr. Liu graduated from
+Southwest Petroleum Institute (now Southwest Petroleum
+University) with a bachelor's degree. From 1983 to 1994, he
+served as Deputy Manager of District Research First Team
+of Exploration and Development Department Research
+Institute of Nanhai East Oil Corporation of CNOOC. From
+1994 to 1997, he served as Principal of Seismic Engineer
+and Principal of Geologist of Exploration and Development
+Department of Nanhai East Oil Corporation of CNOOC.
+From 1997 to 1999, he served as Deputy Manager of
+Exploration and Development Department of Nanhai
+East Oil Corporation of CNOOC. From 1997 to 2001, he
+served as Deputy Director of Scientific and Technology
+Research Institute of Nanhai East Oil Corporation of
+CNOOC. From 2001 to 2004, he served as Director of
+Nanhai East Institute of the Research Center of CNOOC
+China Limited. From 2004 to 2009, he served as Manager,
+Assistant to General Manager, Deputy General Manager
+and Acting General Manager of Technology Department
+of CNOOC China Limited Shenzhen Branch respectively.
+From 2009 to 2016, he served as General Manager of
+CNOOC China Limited Shenzhen Branch and Director of
+Nanhai East Petroleum Administrative Bureau of CNOOC
+and General Manager of CNOOC Deepwater Development
+Limited respectively. From April to November 2016, he
+served as Director of Beijing Research Center of CNOOC
+China Limited, General Manager of CNOOC China Limited
+Beijing Branch, and General Director of CNOOC Energy
+Technology Development Research Institute and General
+Manager of CNOOC Energy Technology Development
+Research Institute Company Limited. In February 2017, Mr.
+Liu was appointed as a Vice President of the Company. On
+20 March 2020, Mr. Liu resigned as Vice President of the
+Company.
+Yang Yun
+Born in 1964, Mr. Yang is a professor-level senior engineer.
+He graduated from Southwest Petroleum Institute with
+a bachelor of engineering degree in oil exploration
+engineering department and graduated from School of
+Economics and Management of Tsinghua University with an
+MBA degree in business administration. From September
+1985 to December 1999, Mr. Yang successively serviced
+as assistant engineer, engineer and deputy officer of the
+craft room of oil production plant of Qinghai Petroleum
+Management Bureau, engineer and deputy head of the
+operation department of Nanhai West Oil Corporation, a
+section level officer and chief engineer of the production
+office of Nanhai West Oil Corporation and the manager of
+development and production department of CNOOC. From
+December 1999 to June 2007, he served as production
+manager of the production department of the Company.
+From June 2007 to May 2011, he served as the deputy
+general manager of CNOOC (China) Limited Shenzhen
+Branch and the deputy director of CNOOC Nanhai East
+Petroleum Administration Bureau. From May 2011 to July
+2015, he served as the executive vice president of Offshore
+Oil Engineering Co., Ltd.. From July 2015 to December
+2019, he served as the director of CNOOC Donghai
+Petroleum Administration Bureau, general manager of
+CNOOC (China) Limited Shanghai Branch and chairman of
+CNOOC Rongfeng Energy Co., Ltd.. He was appointed as
+the general manager of CNOOC (China) Limited Zhanjiang
+Branch in December 2019 and was appointed as a Vice
+President of the Company on 20 March 2020.
+wwwwww
+CNOOC LIMITED Annual Report 2019
+55
+********
+Directors and Senior Management
+Duan Chenggang
+Born in 1963, Mr. Duan is a professor-level senior engineer.
+He graduated from Southwest Petroleum Institute with a
+bachelor degree of engineering in petroleum geological
+exploration and graduated from China University of
+Petroleum with a mater degree of management in
+management science and engineering. From August
+1984 to May 2001, Mr. Duan successively served as an
+engineer of the exploration department and the science
+and technology research center, the chief engineer, deputy
+director of science and technology research center, deputy
+manager of exploration and development department
+of CNOOC Nanhai East Corporation. He served as
+the chief representative of the Chinese side of the joint
+management committee of the contract area, Assistant to
+General Manager and Deputy General Manager of CNOOC
+(China) Limited Shenzhen Branch from May 2001 to June
+2007, Executive Vice President and President of CNOOC
+Southeast Asia Co., Ltd. from June 2007 to August 2012,
+General Manager of CNOOC Iraq Limited from August
+2012 to February 2016. In February 2016, he served as
+Director of CNOOC Nahai East Petroleum Administration
+Bureau and General Manager of CNOOC (China) Limited
+Shenzhen Branch. He was appointed as a Vice President
+of the Company on 20 March, 2020.
+Wu Xiaonan
+Born in 1967, Ms. Wu Xiaonan is the General Counsel
+and the Compliance Officer of the Company. Ms. Wu
+is an Enterprise Legal Adviser (*) and
+Certified Senior Enterprise Risk Manager (¾¾^*
+). Ms. Wu received a bachelor of laws degree
+from China University of Political Science and Law in 1990.
+Ms. Wu has been working in the oil and gas industry for
+over 19 years. From September 1999 to June 2002, Ms.
+Wu successively worked in the Regulatory and Legislative
+Division of the Legal Department of China National Offshore
+Oil Corporation ("CNOOC") and the Company. From June
+2002 to February 2012, Ms. Wu served as the Manager
+of the Regulatory and Legislative Division of the Legal
+Department of the Company. From February 2012 to May
+2016, she served as the Deputy General Manager of the
+Legal Department of the Company and was promoted
+as the General Manager of the Legal Department of the
+Company in May 2016. In August 2018, Ms. Wu was
+appointed as the Vice General Counsel of CNOOC and
+the General Counsel and the Compliance Officer of the
+Company. In September 2018, Ms. Wu was appointed as
+the Director of the Legal Support Center of CNOOC. Ms.
+Wu was appointed as a Joint Company Secretary of the
+Company with effect from 19 November 2018.
+JOINT COMPANY SECRETARIES
+Wu Xiaonan
+Please refer to the biography of Ms. Wu on page 56 of this
+annual report for details.
+Tsue Sik Yu, May
+Directors and Senior Management
+From 1999 to 2011, Mr. Yang served in a number of
+positions in the Company including Senior Vice President,
+Chief Financial Officer, Executive Vice President, President
+and Chief Executive Officer. Mr. Yang also served as an
+Assistant President of CNOOC from November 2006 to
+April 2010 and as Vice President of CNOOC from April
+2010 to August 2011. Mr. Yang served as Director and
+President of CNOOC from August 2011 to April 2015.
+From April 2015 to September 2019 Mr. Yang served as
+Chairman of CNOOC. From 15 June 2016 to 18 April 2017,
+he was appointed as the Chairman and a Director of Nexen
+Energy ULC, a subsidiary of the Company. He also served
+as Chairman, Director and President of CNOOC Southeast
+Asia Limited, Chairman, Director and General Manager
+of CNOOC China Limited and Chairman and Director of
+CNOOC International Limited, all being subsidiaries of the
+Company. He also served as Director of CNOOC Finance
+Corporation Limited, a subsidiary of CNOOC. Mr. Yang was
+appointed as an Executive Director of the Company with
+effect from 31 August 2005 and was the Vice Chairman
+of the Board of the Company from 16 September 2010 to
+19 May 2015, and was re-designated from an Executive
+Director to a Non-executive Director of the Company with
+effect from 23 November 2011. From 19 May 2015 to 2
+September 2019, Mr. Yang served as Chairman of the
+Board and Chairman of the Nomination Committee of
+the Company. From 15 June 2016 to 18 April 2017, Mr.
+Yang was re-designated from a Non-executive Director to
+an Executive Director and served as the Chief Executive
+Officer of the Company. Mr. Yang was re-designated as a
+Non-executive Director of the Company from 18 April 2017
+to 2 September 2019.
+Born in 1964, Mr. Xia is a professor-level senior engineer.
+He graduated from Geophysical Exploration Department
+of Chengdu Institute of Geology with a bachelor's degree
+in engineering. He graduated from Institute of Geology and
+Geophysics, Chinese Academy of Sciences with a PhD
+degree of science in solid earth geophysics. From August
+1986 to November 2005, Mr. Xia successively served as
+assistant engineer and engineer of the Computation Centre
+of Bohai Oil Corporation, project manager of Bohai Oil
+Research Institute, an officer, chief of geophysics, deputy
+chief engineer (geophysical prospect) and exploration chief
+of the exploration department of Bohai Oil Corporation,
+Chief engineer (exploration) of Bohai Research Institute
+CNOOC Research Institute and the manager of at the
+Technology Department of CNOOC (China) Limited Tianjin
+Branch. He served as chief geologist, deputy general
+manager and executive deputy general manager of
+CNOOC (China) Limited Tianjin Branch from November
+2005 to May 2016, deputy director and executive deputy
+director of CNOOC Bohai Petroleum Administrative Bureau
+from April 2013 to May 2016, and successively served
+as Chief Executive Officer and President, Chairman of
+BlueChemical Ltd. from May 2016 to December 2019. He
+serves as Chairman of the Board of CNOOC International
+Limited since December 2019 and was appointed as an
+Executive Vice President of the Company on 20 March
+2020.
+Born in 1961, Mr. Yang is a professor-level senior
+economist and graduated from China University of
+Petroleum with a B.S. degree in petroleum engineering.
+He also received an MBA degree from the Sloan School
+of Management at MIT as a Sloan Fellow. Mr. Yang joined
+CNOOC in 1982 and has over 30 years of experience
+in petroleum exploration and production. From 1982
+to 1992, Mr. Yang served in a number of positions in
+CNOOC Research Center including the Director of Field
+Development Department, the Manager of Reservoir
+Engineering Department and the Project Manager.
+Thereafter, Mr. Yang was mainly involved in international
+business, M&A, corporate finance and capital market
+operations. From 1993 to 1999, he served as the Deputy
+Chief Geologist, the Deputy Director and the Acting
+Director for Overseas Development Department of CNOOC
+Corporate Governance Report
+Compliance with Relevant Laws and Regulations
+For the year ended 31 December 2019, compliance
+procedures were in place to ensure adherence to
+applicable laws, rules and regulations which have significant
+impact on the Group. The Board and senior management
+within their respective duties in conjunction with internal
+and external professional advisors monitored the Group's
+policies and practices on compliance with legal and
+regulatory requirements. Changes in the applicable laws,
+rules and regulations which have significant impact on the
+Group (if any) were brought to the attention of relevant
+employees and relevant operation units from time to time.
+During the reporting period, various works of the Board and
+senior management were in compliance with the relevant
+applicable laws and regulations, the articles of association
+of the Company, charters of the board committees,
+internal policies and the relevant provisions of various
+internal control systems. Decision-making process was
+legitimate and effective. Directors and senior management
+performed in a diligent and responsible manner and the
+resolutions of the general meetings and board meetings
+were implemented faithfully. Meanwhile, the Company has
+timely performed its disclosure obligations which were in
+strict compliance with the requirements of the listing rules
+or manuals of the Hong Kong Stock Exchange, the New
+York Stock Exchange and the Toronto Stock Exchange.
+wwwwww
+www.
+CNOOC LIMITED Annual Report 2019
+57
+Report of the Directors
+In accordance with the requirements of the laws,
+regulations and related policies in Hong Kong, PRC and
+relevant other jurisdictions in which the Group operates,
+the Group provides and maintains statutory benefits for
+its staff, including but not limited to pension schemes,
+mandatory provident fund, basic medical insurance,
+work injury insurance, etc. Further, the Group has been
+committed in complying relevant laws and regulations on
+work and occupational safety of employees of the Group.
+Key Relationships with Stakeholders
+The support and trust of our stakeholders is integral to
+the Company's growth and success. Our stakeholders
+include shareholders and creditors, employees and
+employee organisations, governments and regulatory
+authorities, business partners and service providers, the
+public and communities, charities and non-government
+organisations (NGOs), and clients. We place emphasis
+on communications with our stakeholders and have
+established an open and transparent communication
+channel for each category of stakeholders to understand
+their expectations and requests.
+Through specified communication methods, we looked
+into and sorted out the focuses and concerns of the
+stakeholders, and responded with corresponding
+actions and measures. We continued to strengthen
+the quality and effectiveness of information disclosure,
+comply with applicable laws and regulations and actively
+participate in public welfare activities, with the purpose
+of achieving mutual development and value sharing
+with our stakeholders. We have also formulated key
+indicators based on the focuses and concerns of different
+stakeholders to reflect our management performance on
+various subject matters. Some of our key indicators include
+return on equity and payout ratio for shareholders and
+creditors; employee training frequency, turnover rate and
+OSHA statistics for employees and employee organisations;
+data for emissions, use of resources, environment and
+natural resources and safety environment performance;
+partners' feedback and contracts' execution capability for
+business partners and service providers; public opinion
+and corporate image concerned by the public; community
+evaluations for communities; participation in charities' and
+NGOs' relevant activities and client satisfaction surveys and
+feedbacks; etc. Going forward, we will endeavor to improve
+our current policies, strive to maximise our stakeholders'
+value and achieve a mutually beneficial outcome.
+For more details on Company's key relationships with
+stakeholders, please refer to the 2019 ESG report.
+Key Risks and Uncertainties
+A description of principal risks and uncertainties that the
+Group may be facing is provided in the Business Overview
+on pages 8 to 28 of this annual report.
+Prospects
+A description of the likely future development in the
+Company's future business is provided in the Chairman's
+statement on pages 6 to 7 and Business Overview on
+pages 8 to 28 of this annual report.
+Subsequent Event
+Please refer to note 41 to the consolidated financial
+statements for details of the significant events after the
+reporting period of the Group.
+LOANS
+Please refer to note 28 to the consolidated financial
+statements on pages 124 to 126 of this annual report for
+details of the loans and borrowings of the Group as of 31
+December 2019.
+PROPERTY, PLANT AND EQUIPMENT
+and the Vice President of CNOOC International Limited.
+RESERVES
+The distributable reserves of the Company as of 31
+December 2019 amounted to RMB168,031 million.
+CNOOC LIMITED Annual Report 2019
+*********
+58
+Particulars of the Company's subsidiaries, associates and
+joint ventures as of 31 December 2019 are set out in notes
+17, 18 and 19 to the consolidated financial statements on
+pages 118 to 121 of this annual report.
+Tax Fees
+The aggregate fees billed for professional service rendered
+by the Auditors for tax compliance, tax advice and tax
+planning were RMBO for the financial year ended 31
+December 2018 and RMB2,066,231 for the financial year
+ended 31 December 2019.
+Please refer to note 14 to the consolidated financial
+statements on pages 114 to 115 of this annual report for
+the movements in property, plant and equipment of the
+Group for the year ended 31 December 2019.
+The aggregate fees billed for professional service rendered
+by the Auditors for risk management advisory services, and
+information systems reviews were RMB250,000 for the
+financial year ended 31 December 2018 and RMB250,000
+for the financial year ended 31 December 2019.
+http://www.cnoocltd.com/encnoocltd/gsgz/socg
+wwwwww
+CNOOC LIMITED Annual Report 2019
+49
+********s
+Directors and Senior Management
+EXECUTIVE DIRECTORS
+Xu Keqiang
+Born in 1971, Mr. Xu is a professor-level senior engineer.
+He graduated from Northwest University with a Bachelor
+of Science degree in Oil and Gas Geology. He received
+a master's degree in Coalfield Oil and Gas Geology from
+Northwest University in 1996. Mr. Xu joined China National
+Petroleum Corporation in 1996 and served different
+positions. From April 2003 to April 2005, he served
+as Deputy General Manager of Sinopetro Investment
+Company Ltd. From April 2005 to September 2008, he
+served as Deputy General Manager of CNPC International
+(Kazakhstan) Ltd. and concurrently General Manager
+of CNPC Ai-Dan Munai Joint Stock Company. From
+September 2008 to March 2014, he served as Deputy
+General Manager of CNPC International (Kazakhstan)
+Ltd. and concurrently General Manager of Joint Stock
+Company CNPC International Aktobe Petroleum. From
+March 2014 to March 2017, he served as General Manager
+of PetroChina Tuha Oilfield Company, and Director of Tuha
+Petroleum Exploration & Development Headquarters. From
+March 2017 to February 2020, Mr. Xu served as a Vice
+President of CNOOC. From 25 February 2020, Mr. Xu has
+been appointed as a Director of CNOOC. From April 2017
+to June 2018, Mr. Xu served as the Chairman of Nexen
+Energy ULC, a subsidiary of the Company. In between
+May 2017 and June 2018, he served as the Chairman
+of a subsidiary of the Company-CNOOC International
+Limited. In May 2017, Mr. Xu was appointed as a Director
+of CNOOC China Limited, a subsidiary of the Company.
+Mr. Xu was appointed as the General Manager of CNOOC
+China Limited with effect from 21 May 2018. Mr. Xu was
+appointed as an Executive Director of the Company with
+effect from 18 April 2017, and was appointed as the
+President of the Company from April 2017 to March 2020.
+He has been appointed as the Chief Executive Officer of
+the Company with effect from 19 November 2019.
+Hu Guangjie
+The Company is incorporated under the laws of Hong
+Kong and the principal trading market for the ordinary
+shares of the Company is the HKSE. In addition, because
+the Company's ordinary shares are registered with the
+United Sates Securities and Exchange Commission and
+are listed on the New York Stock Exchange (the "NYSE"),
+the Company is subject to certain corporate governance
+requirements of NYSE. However, many of the corporate
+governance rules in the NYSE Listed Company Manual
+(the "NYSE Standards") do not apply to the Company as
+a "foreign private issuer" and the Company is permitted to
+follow its home country corporate governance practices in
+lieu of most corporate governance standards contained in
+the NYSE Standards. Section 303A.11 of the NYSE Listed
+Company Manual requires NYSE listed foreign private
+issuers to describe the significant differences between
+their corporate governance practices and the corporate
+governance standards applicable to U.S. domestic
+companies listed on the NYSE. The Company has posted a
+brief summary of such significant differences on its website,
+which may be accessed through the following web page:
+Born in July 1973, Mr. Hu is a professor-level senior
+engineer. He received a Bachelor of Science degree
+in Petroleum Engineering (Reservoir Engineering) from
+Chengdu University of Technology and a Master's degree
+in Oil and Gas Field Development Engineering from China
+University of Petroleum (Huadong). He served in a number
+of positions in China Petrochemical Corporation ("Sinopec
+Group"), including Vice Manager of Northwest Oil Field
+Company, a subsidiary of China Petroleum & Chemical
+Corporation ("Sinopec Corp."), Vice General Manager of
+Northwest Oil Field Company, Executive Vice Director
+O General of Northwest Petroleum Bureau, Executive Vice
+Yuan Guangyu
+Born in 1959, Mr. Yuan is a professor-level senior engineer.
+He graduated from China University of Petroleum with a
+bachelor's degree in drilling engineering. He graduated
+from the EMBA program of China Europe International
+Business School in 2007 with an MBA degree. Mr. Yuan
+joined China National Offshore Oil Corporation ("CNOOC")
+in 1982 and has over 30 years of experience in the oil and
+gas industry. From February 1993 to October 2001, Mr.
+Yuan served as Deputy Manager of CNOOC Bohai Drilling
+Company, Deputy General Manager of CNOOC China.
+Offshore Oil Northern Drilling Company, Deputy General
+Manager of the Operational Department of CNOOC,
+General Manager of CNOOC China Offshore Oil Northern
+Drilling Company. From October 2001 to January 2009, Mr.
+Yuan served as General Manager and President of CNOOC
+Services, and Vice Chairman of the Board of Directors,
+Chief Executive Officer and President of China Oilfield
+Services Limited (a company listed on The Stock Exchange
+of Hong Kong Limited and Shanghai Stock Exchange).
+From November 2006 to May 2016, Mr. Yuan served as
+the Assistant President of CNOOC. From July 2016 to
+July 2019, Mr. Yuan was appointed as the Vice President
+of CNOOC. From January 2009 to June 2016, Mr. Yuan
+served as the Executive Vice President of the Company.
+From April 2013 to June 2016, Mr. Yuan served as Director
+of Bohai Petroleum Administrative Bureau of CNOOC and
+General Manager of CNOOC China Limited Tianjin Branch,
+a subsidiary of the Company. He served as a Director of
+CNOOC International Limited, a subsidiary of the Company,
+from 31 July 2009 to 5 May 2017 and as the Chairman of
+such company from 15 June 2016 to 5 May 2017. Since
+31 March 2009, Mr. Yuan served as a Director of CNOOC
+China Limited, a subsidiary of the Company, and as the
+General Manager of such company from 15 June 2016 to
+21 May 2018, then he was appointed as the Chairman of
+such company on 21 May 2018. From 15 June 2016 to 18
+April 2017, Mr. Yuan served as President of the Company
+and Mr. Yuan served as an Executive Director of the
+Company from 15 June 2016 to 2 September 2019. Mr.
+Yuan served as the Chief Executive Officer of the Company
+from 18 April 2017 to 2 September 2019.
+50
+CNOOC LIMITED Annual Report 2019
+www.
+Directors and Senior Management
+NON-EXECUTIVE DIRECTORS
+Wang Dongjin
+All Other Fees
+Yang Hua
+General Manager of Northwest Oil Field Company, Director
+General of Northwest Petroleum Bureau, General Manager
+of Northwest Oil Field Company, General Manager of
+Northwest Petroleum Bureau Co., Ltd., Executive Vice
+Director of Oilfield Exploration & Production Department of
+Sinopec Corp., Director of Oilfield Exploration & Production
+Department, General Manager of Oilfield Exploration &
+Production Department. In March 2020, Mr. Hu was
+appointed as Vice President of CNOOC. Mr. Hu has been
+appointed as Executive Director and the President of the
+Company with effect from 20 March 2020.
+STATEMENT OF SIGNIFICANT DIFFERENCES
+IN CORPORATE GOVERNANCE PRACTICES
+FOR PURPOSES OF SECTION 303A.11 OF
+THE NEW YORK STOCK EXCHANGE LISTED
+COMPANY MANUAL
+Born in 1962, Mr. Wang is a professor-level senior engineer
+and received a Bachelor of Science degree in Petroleum
+Drilling from Development Department of China University
+of Petroleum and a Doctor of Science degree in Petroleum
+Engineering Management from China University of
+Petroleum-Beijing in 2012. From July 1995 to December
+1997, he was appointed as Deputy Director-General of
+Jiangsu Petroleum Exploration Bureau. From December
+1997 to October 2002, he was appointed as Vice President
+of China National Oil & Gas Exploration and Development
+Corporation ("CNODC"). From December 2000 to October
+2002, he also served as President of CNPC International
+(Kazakhstan) Ltd. and President of AktobeMunai Gas Corp.
+From October 2002 to September 2008, he served as
+President of CNODC. From January 2004 to September
+2008, he was appointed as Assistant President of China
+National Petroleum Corporation ("CNPC") and Vice
+Chairman of CNODC. From September 2008 to March
+2018, he served as Vice President of CNPC. From May
+2011 to May 2014, he was concurrently appointed as
+Director of PetroChina Company Limited ("PetroChina").
+From July 2013 to March 2018, he was concurrently
+appointed as President of PetroChina. From May 2014 to
+March 2018, he served as Vice Chairman of PetroChina.
+In March 2018, Mr. Wang was appointed as a Director of
+CNOOC. From October 2018 to October 2019, Mr. Wang
+was appointed as President of CNOOC. In October 2019,
+Mr. Wang was appointed as Chairman of CNOOC. On 27
+April 2018, Mr. Wang was appointed as a Non-executive
+Director and a member of the Remuneration Committee
+of the Company. From 5 December 2018 to 18 November
+2019, Mr. Wang was appointed as the Vice Chairman of
+the Company. Mr. Wang has been appointed as Chairman
+of the Board and Chairman of the Nomination Committee
+of the Company with effect from 18 November 2019.
+DIVIDEND DISTRIBUTION POLICY
+There are no other fees payable to the Auditors for
+products and/or services provided by the Auditors, other
+than the services reported above, for the financial year
+ended 31 December 2018 and for the financial year ended
+31 December 2019.
+The payment of any future dividends will be determined
+by the Board, subject to requirements of applicable laws
+and the Articles of Association of the Company and
+shareholders' approval for all dividends other than interim
+dividends, based upon, among other things, our future
+earnings, capital requirements, financial conditions, future
+prospects and other factors which our Board may consider
+relevant. Our ability to pay dividends will also depend
+on the cash flows determined by the dividends, if any,
+received by us from our subsidiaries, associates and joint
+ventures. Holders of our shares will be entitled to receive
+such dividends declared by our Board and approved by
+the shareholders (if necessary) pro rata according to the
+amounts paid up or credited as paid up on the shares.
+Save as disclosed in this annual report, as of 31 December
+2019 or during the year, none of the Directors or entities
+connected with the Directors was materially interested,
+either directly or indirectly, in any transaction, arrangement
+or contract which is significant in relation to the business of
+the Group to which the Company or any of its subsidiaries
+was a party.
+SUBSTANTIAL SHAREHOLDERS' INTERESTS
+Save as disclosed above, as of 31 December 2019, none of the Directors and chief executive of the Company was
+interested in the equity or debt securities of the Company or any associated corporations (within the meaning of the SFO)
+which were required (i) to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of
+Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions
+of the SFO); (ii) pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) pursuant to the
+Model Code, to be notified to the Company and the Hong Kong Stock Exchange. All the interests held by the Directors and
+chief executive represent long positions.
+1,150,000
+200,000
+Approximate
+percentage of
+total issued shares
+0.003%
+0.000%
+Ordinary
+shares held
+Beneficial interest
+Beneficial interest
+Nature of interest
+Lawrence J. Lau
+As of 31 December 2019, so far as was known to the Directors and chief executive of the Company, the persons, other than
+a Director or chief executive of the Company, who had an interest or a short position in the Shares and underlying Shares
+which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO were as
+follows:
+Name of Director
+Chiu Sung Hong
+As of 31 December 2019, apart from holding personal interests in options to subscribe for shares in the Company granted
+under the share option schemes of the Company as disclosed in this annual report, the interests of each Director and
+chief executive of the Company in the equity or debt securities of the Company or any associated corporations (within the
+meaning of the Securities and Futures Ordinance ("SFO")) which were required (i) to be notified to the Company and the
+Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions
+which they are taken or deemed to have under such provisions of the SFO); (ii) pursuant to section 352 of the SFO, to be
+entered in the register referred to therein; or (iii) pursuant to the Model Code for Securities Transactions by Directors of Listed
+Issuers (the "Model Code"), to be notified to the Company and the Hong Kong Stock Exchange are as follows:
+DIRECTORS' INTERESTS
+Report of the Directors.
+www.
+CNOOC LIMITED Annual Report 2019
+64
+Alan O'Brien, Ariel D. Schneider, Ashley S. Lewis, Bastiaan
+Spaargaren, Bill D. Stiles, Brent C. Tilford, Christine M.
+O'Connor, Colleen V. Johnson, Colin T.O. Brewer, David
+O. Tudor, Eduardo Riccetto, Graham Charles Clague,
+Graham S. Larson, Heather M. Osecki, Howie A. Thomas,
+Hui Max Liu, lan M. Smale, J. Kirk Bailey, J. Sebastiaan
+Donner, James C.P. Waithman, Jamie D. Doyle, Jerome A.
+van Zuijlen, John F. M. Abbott, Keith Henderson, Kenneth
+J. Krieg, Lawson A.W. Hunter, Lester C. Jager, Marie L.
+Jersak, Oliver George Webster, Quinn E. Wilson, R. Jeffrey
+Pendrel, Ray C. J. Riddoch, Rick L. Sumrall, Robert H.
+Henkhuzens, Rosalind L. C. Bynoe, Ryan A. Rueve, Simon
+R. Perchard, Siti Strijbosch, Tiara Ltd., Timothy J. Keating,
+USN (Ret.), Admiral, Tina R. Mares, TMF Management
+Limited, Todd R. Nicol, Trevor L. Norman
+Cao Xinjian, Chen Ming, Chen Zhaoguang, Cui Hanyun,
+Dai Weihua, Duan Chenggang, Fang Zhi, Gao Dongsheng,
+Geng Jie, Guo Benguang, Han Mei, Huang Chunlin, Jiang
+Qing, Jing Fengjiang, Ke Lvxiong, Kuang Likun, Kuang
+Xiaobing, Leng Haoyu, Li Bo, Liang Yu, Ling Fuhai, Liu Bo,
+Liu Huan, Liu Mingquan, Liu Xiangdong, Liu Xiaoxiang, Liu
+Xiaofei, Liu Yongjie, Liu Yongjie, Liu Zongzhao, Lu Feng, Lv
+Yongfeng, Luan Xiangdong, Luo Yong, Ma Jin, Ma Liwu,
+Mei Yaolun, Pan Yuguang, Qiu Zongjie, Shen Yiming, Shi
+Hesheng, Tao Weixiang, Tian Wenxue, Wang Shoushan,
+Wang Yaohui, Wang Yufan, Wu Peikang, Xiao Zongwei, Xie
+Min, Xie Weizhi, Xie Wensheng, Xie Yuhong, Xu Keqiang,
+Yang Xiaoyue, Yang Yun, Yu Jin, Zhang Fuya, You
+Xuegang, Yuan Guangyu, Yue Jianghe, Zhang Bing, Zhang
+Guohua, Zhao Shunqiang, Zhou Hongbo, Zhou Zhenhua,
+Zi Shilong, CNOOC Limited
+Pursuant to the Company's Articles of Association, every
+Director or other officer of the Company shall be entitled to
+be indemnified out of the assets of the Company against
+all costs, charges, expenses, losses and liabilities which
+he/she may sustain or incur in or about the execution of the
+duties of his/her office or otherwise in relation thereto. The
+Company has arranged appropriate directors' and officers'
+liability insurance coverage for the Directors and officers of
+the Group during the year ended 31 December 2019.
+DIRECTORS' PERMITTED INDEMNITY
+PROVISION
+Ordinary
+shares held
+The list of directors who have served on the boards of
+the subsidiaries of the Company included in the annual
+consolidated financial statements for the financial year
+ended 31 December 2019 during the year and up to the
+date of this report is as follows:
+No Director (including those to be re-elected) has an
+unexpired service contract with the Company which is
+not determinable by the Company within one year without
+payment of compensation (other than normal statutory
+obligations).
+DIRECTORS' SERVICE CONTRACTS
+AND INTERESTS IN TRANSACTION,
+ARRANGEMENT AND CONTRACT OF
+SIGNIFICANCE
+Please refer to pages 50 to 56 of this annual report
+for information concerning the Directors and senior
+management of the Company.
+DIRECTORS AND SENIOR MANAGEMENT OF
+THE COMPANY
+Report of the Directors:
+ま
+66
+********
+28,772,727,268
+65
+wwwwww
+All the interests stated above represent long positions. As of 31 December 2019, save as disclosed above, the Directors
+and chief executive of the Company are not aware of any other person having interests or short positions (other than the
+Directors and chief executives of the Company) in the Shares and underlying Shares which would fall to be disclosed to the
+Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who is, directly or indirectly, interested in 10%
+or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of
+any other member of the Group.
+Note: CNOOC (BVI) Limited is a direct wholly-owned subsidiary of OOGC, which is a direct wholly-owned subsidiary of CNOOC. Accordingly,
+CNOOC (BVI) Limited's interests are recorded as the interests of OOGC and CNOOC.
+64.44%
+64.44%
+64.44%
+28,772,727,273
+28,772,727,273
+Overseas Oil & Gas Corporation, Ltd. ("OOGC")
+CNOOC
+CNOOC (BVI) Limited
+CNOOC LIMITED Annual Report 2019
+Approximate
+percentage of
+total issued shares
+In accordance with the Company's Articles of Association
+and pursuant to Appendix 14 to Listing Rules, Mr. Hu
+Guangjie, Mr. Lawrence J. Lau and Mr. Tse Hau Yin,
+Aloysius will retire at the forthcoming Annual General
+Meeting and, who being eligible, will offer themselves for
+re-election.
+Note 6: With effect from 7 May 2019, Mr. Qiu Zhi Zhong was
+appointed as an Independent Non-executive Director and a
+member of the Nomination Committee of the Company.
+Report of the Directors
+63
+CNOOC LIMITED Annual Report 2019
+With effect from 2 September 2019, Mr. Yuan Guangyu resigned as an Executive Director and the Chief Executive Officer of the Company, and Mr. Yang Hua resigned as a Non-executive
+director, the Chairman of the Board and the Chairman of the Nomination Committee of the Company. Information on Mr. Yuan's and Mr. Yang's share options outstanding at the beginning
+of the reporting period is included in the category of "Other Employees.
+Except for share options granted under the Pre-Global Offering Share Option Scheme, all share options granted are subject to a vesting schedule pursuant to which one third of the options
+granted vest on the first, second and third anniversaries of the date of grant, respectively, such that the options granted are fully vested on the third anniversary of the date of grant.
+27,030,000
+(9,977,000) (30,900,000)
+12.22
+12.696
+20 May 2010 to 20 May 2020
+9.33
+9.93
+27 May 2009 to 27 May 2019
+27 May 2009
+20 May 2010
+27,030,000
+(9,977,000)
+(30,900,000)
+Total
+67,907,000
+Report of the Directors:
+Note 7: With effect from 7 May 2019, Mr. Kevin G. Lynch resigned as
+an Independent Non-executive Director and a member of the
+Nomination Committee of the Company.
+EQUITY-LINKED AGREEMENT
+PURCHASE, SALE OR REDEMPTION OF
+LISTED SECURITIES
+Note 5: With effect from 2 September 2019, Mr. Yang Hua resigned as
+a Non-executive Director, the Chairman of the Board and the
+Chairman of the Nomination Committee of the Company.
+Note 4: With effect from 18 November 2019, Mr. Wang Dongjin was
+appointed as Chairman of the Board and the Chairman of the
+Nomination Committee of the Company, and no longer serves
+as Vice Chairman of the Board.
+Note 3: With effect from 2 September 2019, Mr. Yuan Guangyu
+resigned as an Executive Director and the Chief Executive
+Officer of the Company.
+Note 2: With effect from 20 March 2020, Mr.Hu Guangjie was
+appointed as an Executive Director and the President of the
+Company.
+Note 1: With effect from 19 November 2019, Mr. Xu Keqiang,
+Executive Director and the then President of the Company,
+was appointed as the Chief Executive Officer of the Company.
+With effect from 20 March 2020, Mr. Xu Keqiang resigned as
+the President of the Company.
+Kevin G. Lynch (Note 7)
+Qiu Zhi Zhong (Note 6)
+Tse Hau Yin, Aloysius
+Independent Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau
+Yang Hua (Note 5)
+MANAGEMENT CONTRACTS
+Non-executive Directors
+Yuan Guangyu (Note 3)
+Hu Guangjie (Note 2)
+Xu Keqiang (Note 1)
+Executive Directors
+The Directors of the Company during the year and up to
+the date of this annual report are:
+NAME OF DIRECTOR
+Save as disclosed in this annual report, there was no
+purchase, sale or redemption by the Company, or any of
+its subsidiaries, of its listed securities during the year ended
+31 December 2019.
+Save as disclosed in this annual report, there was no
+equity-linked agreement entered into by the Company
+during the year ended 31 December 2019.
+Other than the service contracts of the Directors, the
+Company has not entered into any contract with any
+individual, firm or body corporate to manage or administer
+the whole or any substantial part of any business of the
+Company during the year.
+Natural gas (bcf)
+Please refer to notes 9 and 10 to the consolidated financial
+statements on pages 106 to 109 of this annual report
+for details of the emoluments of the Directors, senior
+management and the five highest paid individuals of the
+Company.
+29.3
+372.9
+402.2
+(million barrels)
+Crude and liquids
+7.0%
+31.8
+456.0
+487.8
+Sales volume (million BOE)*
+5.1%
+1,060
+9,556 5.8%
+Oil and gas sales (RMB million) 197,173 186,557 10,616 5.7%
+Crude and liquids
+175,495 165,939
+Natural gas
+21,678 20,618
+%
+2018 Amount
+2019
+Change
+Our oil and gas sales, realised prices and sales volume in
+2019 are as follows:
+7.8%
+Revenues
+37,007,000
+485.6
+www.
+CNOOC LIMITED Annual Report 2019
+68
+Our operating expenses increased by 1.4% to RMB24,735
+million (US$3,590.1 million) in 2019 from RMB24,388
+million in 2018. The operating expenses per BOE
+decreased by 4.7% to RMB50.9 (US$7.39) per BOE in
+2019 from RMB53.4 (US$8.07) per BOE in 2018. Among
+them, operating expenses per BOE in offshore China
+decreased by 0.6% to RMB47.9 (US$6.95) per BOE in
+2019 from RMB48.2 (US$7.29) per BOE in 2018. Overseas
+operating expenses per BOE decreased by 11.5% to
+RMB57.1 (US$8.29) per BOE in 2019 from RMB64.5
+(US$9.74) per BOE in 2018. Through strict costs control
+and efficiency improvement, our operating expenses per
+BOE decreased compared with those in last year.
+Operating expenses
+In 2019, the increase in crude and liquids sales was
+primarily due to higher sales volume and the depreciation
+of Renminbi against the U.S. dollar. The increase in natural
+gas sales was primarily due to higher sales volume.
+Excluding our interest in equity-accounted investees.
+(0.14) (2.2%)
+6.41
+6.27
+Natural gas (US$/mcf)
+(3.88) (5.8%)
+67.22
+63.34
+(US$/barrel)
+Crude and liquids
+Realised prices
+3.4%
+16.3
+501.9
+Our consolidated net profit increased by 15.9% to
+RMB61,045 million (US$8,860.3 million) in 2019 from
+RMB52,675 million in 2018, primarily as a result of the
+increase in sales volume, the increase in profitability as the
+Company has taken effective measures to strictly control
+cost and the depreciation of Renminbi against the U.S.
+dollar.
+Consolidated net profit
+Comparative data for the year ended 31 December 2018
+have been restated as a result of the acquisition of CUCBM
+in this section, please refer to note 4 to the consolidated
+financial statements of this annual report.
+DEVELOPMENT STRATEGY
+The following discussion and analysis should be read
+in conjunction with the Chairman's Statement and the
+Business Overview sections, as well as the Group's audited
+financial statements and the related notes.
+Management's Discussion and Analysis
+www.
+CNOOC LIMITED Annual Report 2019
+Hong Kong, 25 March 2020
+Chairman
+By Order of the Board
+WANG Dongjin
+In 2019, all votes of shareholders were taken by poll in the
+annual general meeting and extraordinary general meeting
+of the Company. Pursuant to the Rule 13.39(4), all votes
+of shareholders will be taken by poll except where the
+chairman, in good faith, decides to allow a resolution which
+relates purely to a procedural or administrative matter to be
+voted on by a show of hands.
+VOTING BY POLL
+As of the date of this report, the Directors confirmed
+that based on information that is publicly available to the
+Company and within the knowledge of the Directors, the
+Company had maintained sufficient amount of public
+float as required under the Listing Rules. As of the date
+of this report, based on publicly available information and
+within the Directors' knowledge, approximately 35.56%
+of the Company's total issued shares were held by the
+public. The total number of issued shares of the Company
+is 44,647,455,984. The closing price of the share of the
+Company as of 31 December 2019 is HK$12.96 per share.
+SUFFICIENCY OF PUBLIC FLOAT
+Deloitte Touche Tohmatsu was appointed as the auditors
+of the Company for the year ended 31 December 2019
+and has audited the accompanying financial statements.
+A resolution to re-appoint Deloitte Touche Tohmatsu
+as auditors of the Company will be proposed at the
+forthcoming Annual General Meeting to be held on 21 May
+2020.
+AUDITORS
+Please refer to the Corporate Governance Report on pages
+29 to 49 of this annual report for details.
+Except deviations from the CG Code provisions A.4.1 and
+the temporary deviation from the code provision A.5.1, the
+Company has complied with the code provisions of the
+CG Code as set out in Appendix 14 to the Listing Rules
+throughout the year ended 31 December 2019.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+As of 31 December 2019, the Company was not involved
+in any material litigation or arbitration and no material
+litigation or arbitration were pending or threatened or made
+against the Company so far as the Company is aware.
+MATERIAL LEGAL PROCEEDINGS
+As one of the largest independent oil and gas exploration
+and production companies, we mainly engage in the
+exploration, development, production and sales of oil and
+natural gas. The principal components of our strategy are as
+follows:
+Focus on reserve and production growth
+As an upstream company specialising in the exploration,
+development, production and sale of oil and natural gas,
+we strive to increase our reserves and production, through
+exploration, development and value-driven acquisitions. In
+China, we will continue to concentrate on our independent
+exploration efforts in major operating areas, while continuing
+to cooperate with our partners through production sharing
+contracts to lower capital expenditures and exploration
+risks. Overseas, we will strive to acquire more high-quality
+exploration blocks and improve exploration efficiency.
+We increase our production primarily through the
+development of proved undeveloped reserves. As of 31
+December 2019, approximately 57.2% of our proved
+reserves were classified as proved undeveloped reserves,
+which provide a solid resource base for the Company's
+continued production growth in the future.
+FINANCIAL RESULTS
+For details, please refer to the "Business Overview" section
+on page 8 to 28 of this annual report.
+BUSINESS REVIEW
+Looking forward to 2020, the global economy would
+inevitably face greater pressure. The COVID-19
+pandemic has increased the instability of the global
+economy, international oil prices have fallen sharply and
+their movements in the future remained uncertain. The
+external operating environment of the Company remains
+challenging. We will continue to exert confidence and
+remain calm, continue to focus on our own development,
+implement more stringent cost control and more prudent
+investment decisions, strengthen cash flow management,
+and maintain the Company's long-term sustainable
+development.
+As of 31 December 2019, the Company's basic and
+diluted earnings per share were RMB1.37 and RMB1.37,
+respectively. The Board of Directors has recommended
+the payment of a final dividend of HK$0.45 per share (tax
+inclusive).
+The Company maintained a sound financial position
+in 2019. Despite the sharp decline in international oil
+prices, our oil and gas sales and net profit increased
+thanks to production growth and effective cost control.
+Among them, oil and gas sales were RMB197,173 million
+(US$28,618.5 million, with the exchange rate applicable
+for 2019 at US$1=RMB6.8897), representing an increase
+of approximately 5.7% year over year. Net profit was
+RMB61,045 million (US$8,860.3 million), representing a
+significant increase of approximately 15.9% year over year.
+In 2019, the Company made breakthroughs in both
+domestic and overseas exploration and consolidated the
+resource foundation for sustainable development. The
+Company realised a net production of 506.5 million BOE,
+representing a year-on-year increase of approximately
+6.6%, which exceeded the annual production target. The
+development and construction of key projects both in China
+and overseas progressed smoothly. The performance of
+HSE remained stable.
+Management's Discussion and Analysis
+********
+EMOLUMENTS OF THE DIRECTORS, SENIOR
+MANAGEMENT AND THE FIVE HIGHEST PAID
+INDIVIDUALS
+67
+wwwwww
+In 2019, international oil prices recorded early gains before
+moving downward, and generally remained at a mid-to-low
+level. At the beginning of the year, international oil prices
+fluctuated and rose against the backdrop of production
+cuts and geopolitical tensions in major oil-producing
+countries. Since then, as international trade disputes
+intensified, the market was concerned that slower global
+economic growth would drag down crude oil demand, and
+international oil prices fluctuated and dropped. At the end
+of the year, international oil prices rebounded as a result of
+boosted market confidence thanks to further production
+cuts of major oil-producing countries and the conclusion
+of the phase one trade agreement between China and the
+U.S.. Throughout the year, the WTI crude oil price averaged
+at US$57.02 per barrel, representing a year-on-year
+decrease of approximately 12.2%, while the Brent crude
+oil price averaged at US$64.16 per barrel, representing a
+year-on-year decrease of approximately 10.6%.
+In 2019, the global economic growth further slowed
+down. The economic growth momentum of the U.S.
+gradually weakened, and monetary policies turned loose.
+The economic growth in Europe slowed down whereas
+the emerging economies experienced sluggish economic
+growth. The overall economy of China generally remained
+within a reasonable range amidst increasing downward
+pressure, with an annual GDP growth rate of 6.1%.
+2019 OVERVIEW
+We also attached great importance to cash flow
+management and maintained a healthy financial position.
+We will continue to maintain our prudent financial policy. As
+an essential part of our corporate culture, we will continue
+to raise cost awareness among all of our employees. At
+the same time, in our performance evaluation system,
+cost control has been one of the most important key
+performance indicators. In 2019, we continued to tap the
+potential of technological innovation and management
+innovation to lower costs and enhance efficiency. All-in cost
+per BOE decreased for the sixth consecutive year and our
+cost competitiveness was maintained.
+Maintain a prudent financial policy
+The Company adopts the low-carbon development
+concept and actively expands the natural gas business.
+We will continue to develop the natural gas market, and
+strengthen exploration and development activities in natural
+Igas fields. In the future, the proportion of natural gas in
+production and reserves will gradually increase as major
+projects such as Bozhong 19-6 condensate gas fields in
+Bohai, the large deepwater gas fields Lingshui 17-2 in the
+Western South China Sea and the Arctic LNG 2 in Russia
+commence production.
+Develop natural gas business
+CNOOC LIMITED Annual Report 2019
+30,900,000
+Wang Dongjin (Chairman) (Note 4)
+Other Employees
+Report of the Directors
+www.
+CNOOC LIMITED Annual Report 2019
+********
+60
+The Company expected to continue the continuing
+connected transactions contemplated under such
+comprehensive framework agreement after 31 December
+2019. Therefore, the Company entered into a new
+comprehensive framework agreement with CNOOC on
+1 November 2019. The term of the new comprehensive
+framework agreement is for a period of three years from
+1 January 2020. The new comprehensive framework
+agreement is substantially on the same terms as the terms
+contained in the comprehensive framework agreement
+entered into by the Company on 15 November 2016, with
+more details about the pricing policies. The continuing
+connected transactions under the new comprehensive
+framework agreement and the relevant annual caps for
+the three years from 1 January 2020 were approved by
+the independent shareholders of the Company on 21
+November 2019. For details of such relevant annual caps,
+please refer to the announcement of the Company dated
+1 November 2019, the circular of the Company dated 6
+November 2019 and the poll results announcement of the
+Extraordinary General Meeting held on 21 November 2019.
+For the three years ended
+31 December 2019,
+RMB25,654 million,
+RMB33,386 million and
+RMB43,649 million,
+respectively
+in aggregate**
+and RMB437,773
+million, respectively
+(b) Long-term sales of
+natural gas and
+liquefied natural gas
+(a) Sales of petroleum and
+natural gas products
+(other than long-term
+sales of natural gas
+and liquefied natural
+gas)
+Sales of petroleum and natural gas products by the Group to
+CNOOC and/or its associates
+ended 31 December
+2019, RMB100 million,
+RMB100 million and
+RMB100 million,
+respectively
+For the three years
+Provision of management,
+technical, facilities and
+ancillary services, including
+the supply of materials
+to CNOOC and/or its
+Associates
+Provision of management, technical, facilities and ancillary
+services, including the supply of materials by the Group to
+CNOOC and/or its associates
+For the three years ended
+31 December 2019,
+RMB263,893 million,
+RMB314,371 million
+On 1 December 2016, the Company entered into a
+financial services framework agreement ("Financial Services
+Framework Agreement") with CNOOC Finance Corporation
+Limited ("CNOOC Finance"), an associate of CNOOC,
+pursuant to which CNOOC Finance provided a range of
+financial services as may be required and requested by
+the Group, for a term of three years from 1 January 2017
+to 31 December 2019. Apart from the duration of the
+Financial Services Framework Agreement, more details
+about the pricing policy for the depositary services and
+update of the address and relevant dates, the Financial
+Services Framework Agreement is substantially on the
+same terms as the terms contained in the financial services
+framework agreement (as renewed on 20 August 2010
+and 27 November 2013) entered into by the Company on
+14 October 2008. The continuing connected transactions
+in respect of the depositary services under the Financial
+Services Framework Agreement are exempted from
+independent shareholders' approval requirement, but
+subject to the annual reporting, annual review and
+announcement requirements. In August 2018, the Board
+expected that the existing cap for the depositary services
+under the Financial Services Framework Agreement for
+its remaining term would not fully satisfy the demands of
+business of the Group and resolved to revise the cap for
+the depositary services for the period from 23 August 2018
+to 31 December 2019.
+The maximum daily outstanding balance of deposits
+(including accrued interest)(excluding funds placed for
+the purpose of extending entrustment loans pursuant to
+the entrustment loan services) placed by the Group with
+CNOOC Finance shall not exceed RMB19.5 billion for the
+period from 1 January 2017 to 22 August 2018 and should
+not exceed RMB23.5 billion for the period from 23 August
+2018 to 31 December 2019.
+The Company expected to continue the continuing
+connected transactions contemplated under the Financial
+Services Framework Agreement after 31 December 2019.
+Therefore, on 21 November 2019, the Company entered
+into a new financial services framework agreement with
+CNOOC Finance pursuant to which CNOOC Finance
+would continue to provide a range of financial services
+as may be required and requested by the Company, for
+a term of another three years from 1 January 2020 to 31
+December 2022. The new financial services framework
+agreement is substantially on the same terms as the terms
+wwwwww
+The aggregate annual volume of transactions for the
+provision of management, technical, facilities and
+ancillary services, including the supply of materials by
+the Group to CNOOC and/or its associates did not
+exceed RMB100 million;
+The aggregate annual volume of transactions
+for FPSO vessel leases did not exceed
+RMB3,360 million.
+The aggregate annual volume of transactions
+for the provision of marketing, management and
+ancillary services did not exceed RMB1,970
+million.
+The aggregate annual volume of transactions
+for the provision of oil and gas production and
+support services did not exceed RMB16,877
+million.
+The aggregate annual volume of transactions
+for the provision of oil and gas development and
+support services did not exceed RMB43,745
+million.
+The aggregate annual volume of transactions
+for the provision of exploration and support
+services did not exceed RMB11,590 million.
+(e)
+(d)
+(c)
+(b)
+(a)
+Provision of exploration, oil and gas development,
+oil and gas production as well as marketing,
+management and ancillary services by CNOOC and/
+or its associates to the Group:
+(i)
+The Independent Non-executive Directors have further
+confirmed that for the year ended 31 December 2019:
+The continuing connected transactions in respect of
+the depositary services under the new financial services
+framework agreement are exempted from independent
+shareholders' approval requirement, but subject to annual
+reporting, annual review and announcement requirements.
+The maximum daily outstanding balance of deposits
+and interest (excluding funds placed for the purpose of
+extending entrustment loans pursuant to the entrustment
+loan services) placed by the Group with CNOOC Finance
+should not exceed RMB23.5 billion for the period from 1
+January 2020 to 31 December 2022.
+contained in the Financial Services Framework Agreement.
+For the three years ended
+31 December 2019,
+RMB2,880 million,
+RMB3, 120 million and
+RMB3,360 million,
+respectively
+CNOOC LIMITED Annual Report 2019
+For the three years ended
+31 December 2019,
+RMB1,620 million,
+RMB1,786 million and
+RMB1,970 million,
+respectively
+For the three years ended
+31 December 2019,
+RMB31,670 million,
+RMB38,289 million and
+RMB43,745 million,
+respectively
+1.
+The Independent Non-executive Directors have confirmed
+that the following continuing connected transactions for the
+year ended 31 December 2019 to which any member of
+the Group was a party were entered into by the Group:
+On 1 August 2019, CNOOC China Limited ("CNOOC
+China"), a direct wholly-owned subsidiary of the Company,
+entered into an equity transfer agreement with CNOOC,
+pursuant to which CNOOC China would acquire 100%
+equity interest in China United Coalbed Methane
+Corporation Limited ("CUCBM") held by CNOOC at a total
+consideration of approximately RMB5.335 billion. CNOOC
+is the controlling shareholder of the Company and held
+100% equity interest in CUCBM as at the date of the
+abovementioned equity transfer agreement. The completion
+took place on 11 October 2019 in accordance with
+relevant provisions under the equity transfer agreement.
+The registration of the change in equity interest has been
+completed and CUCBM becomes an indirect wholly-owned
+subsidiary of the Company.
+CONNECTED TRANSACTIONS
+The donations by the Group for the year ended 31
+December 2019 amounted to RMB64 million.
+CHARITABLE DONATIONS
+For the year ended 31 December 2019, except for
+the continuing connected transactions with its indirect
+controlling shareholder CNOOC and its associates, as
+disclosed in the section entitled "Connected Transactions"
+below, none of the Directors or their respective close
+associates or any shareholder of the Company (which to
+the knowledge of the Directors owns more than 5% of
+the Company's share capital) had any interests in the five
+largest suppliers or customers of the Group.
+in the ordinary and usual course of its business;
+Sales to the largest third party customer for the year ended
+31 December 2019 represented approximately 8% of the
+Group's total revenue. The total sales attributable to the
+five largest third party customers of the Group accounted
+for approximately 16% of the Group's total revenue for the
+year ended 31 December 2019.
+MAJOR SUPPLIERS AND CUSTOMERS
+Please refer to note 34 to the consolidated financial
+statements on page 135 of this annual report for details of
+the retirement benefits of the Group for the year ended 31
+December 2019.
+RETIREMENT BENEFITS
+The Board recommended a payment of a final dividend
+of HK$0.45 (tax inclusive) per share for the year ended
+31 December 2019, payable on 10 July 2020 to all
+shareholders on the register of members of the Company
+on 12 June 2020 subject to shareholders' approval.
+An interim dividend of HK$0.33 (tax inclusive) per share
+I was declared on 29 August 2019, and paid to the
+shareholders of the Company on 16 October 2019.
+DIVIDENDS
+Report of the Directors.
+Purchases from the largest supplier of the Group for the
+year ended 31 December 2019 represented approximately
+21% of the Group's total purchases. The total purchases
+attributable to the five largest suppliers of the Group
+accounted for approximately 54% of the total purchases of
+the Group for the year ended 31 December 2019.
+2.
+on normal commercial terms or better; and
+3.
+For the three years ended
+31 December 2019,
+RMB9,969 million,
+RMB10,579 million and
+RMB11,590 million,
+respectively
+(e) FPSO vessel leases
+(d) Provision of marketing,
+management and
+ancillary services
+Provision of oil and
+gas production and
+support services
+(c)
+(b) Provision of oil and gas
+development and
+support services
+(a) Provision of exploration
+and support services
+Provision of exploration, oil and gas development, oil and
+gas production as well as marketing, management and
+ancillary services by CNOOC and/or its associates to the
+Group
+Annual caps for 2017
+to 2019
+Categories of continuing
+connected transactions
+Report of the Directors:
+59
+CNOOC LIMITED Annual Report 2019
+wwwwww
+The Company entered into a comprehensive framework
+agreement on 15 November 2016 with CNOOC,
+controlling shareholder of the Company, for the provision
+(1) by the Group to CNOOC and/or its associates and
+(2) by CNOOC and/or its associates to the Group, of a
+range of products and services which may be required
+and requested from time to time by either party and/
+or its associates in respect of the continuing connected
+transactions. The comprehensive framework agreement
+is substantially on the same terms as the terms contained
+in the comprehensive framework agreements entered into
+by the Company on 6 November 2013, with more details
+about the pricing principles. The term of the comprehensive
+framework agreement is for a period of three years from
+1 January 2017. The continuing connected transactions
+under the comprehensive framework agreement and the
+relevant annual caps for the three years from 1 January
+2017 were approved by the independent shareholders
+of the Company on 1 December 2016. The continuing
+connected transactions under the comprehensive
+framework agreement and the relevant annual caps are set
+out below:
+Comprehensive framework agreement with CNOOC in
+respect of the provision of a range of products and services
+in accordance with the relevant agreements
+(including pricing principles and guidelines set out
+therein) governing the transactions on terms that
+were fair and reasonable and in the interests of the
+shareholders of the Company as a whole.
+For the three years ended
+31 December 2019,
+RMB12,625 million,
+RMB14,678 million and
+RMB16,877 million,
+respectively
+61
+Financial services provided by CNOOC Finance Corporation
+Limited to the Group
+Report of the Directors:
+the year
+the year
+the year
+the year
+2019
+before the At exercise
+before the
+2019
+Exercise price
+Expired
+during 31 December
+during
+during
+during
+1 January
+Name or category
+of grantee
+Forfeited
+As of
+Date of grant of
+share options
+Exercise period of
+share options*
+of share
+Directors
+********
+per share
+per share
+per share
+per share
+HK$
+HK$
+HK$
+HK$
+options
+date
+of options
+options
+date of
+exercise
+********
+Exercised
+Granted
+grant date
+Immediately
+have not exceeded the applicable caps.
+were entered into in accordance with the relevant
+agreements governing the transactions; and
+were in accordance with the pricing policies for the
+transactions involving the provision of goods or
+services by the Group as stated in the Company's
+financial statements;
+have received the approval of the Board;
+4.
+3.
+2.
+1.
+The independent auditors of the Group have reviewed the
+continuing connected transactions referred to above and
+confirmed to the Board that the continuing connected
+transactions:
+The maximum daily outstanding balance of deposits
+(including accrued interest) (excluding funds placed
+for the purpose of extending entrustment loans
+pursuant to the entrustment loan services) placed
+by the Group with CNOOC Finance did not exceed
+RMB23.5 billion.
+The aggregate annual volume of the
+transactions for the long-term sales of natural
+gas and liquefied natural gas did not exceed
+RMB43,649 million.
+The aggregate annual volume of transactions
+for the sales of petroleum and natural gas
+products (other than long-term sales of natural
+gas and liquefied natural gas) did not exceed
+RMB437,773 million.
+(b)
+(a)
+Sales of petroleum and natural gas products by the
+Group to CNOOC and/or its associates:
+(iv)
+As of
+Please also refer to note 33 to the consolidated financial
+statements on pages 130 to 134 of this annual report for
+a summary of the related party transactions which include
+the Group's continuing connected transactions.
+SHARE CAPITAL
+2001 Share Option Scheme (expired in 2011);
+SHARE OPTION SCHEMES
+Please refer to note 31 to the consolidated financial
+statements on page 128 of this annual report for details of
+movements in the Company's total issued shares for the
+year ended 31 December 2019.
+Weighted average closing price
+of the Company's shares
+Immediately
+Price of the
+Company's shares
+Number of share options
+www.
+CNOOC LIMITED Annual Report 2019
+62
+Please refer to note 31 to the consolidated financial
+statements on pages 128 to 130 of this annual report for
+details regarding each of these share option schemes
+of the Company. Save as those disclosed in the annual
+report, no right to subscribe for equity or debt securities of
+the Company has been granted by the Company to, nor
+have any such rights been exercised by, any other person
+during the year ended 31 December 2019.
+During t the year ended 31 December 2019, the movements in the options granted under all of the above share option schemes were as follows:
+2005 Share Option Scheme.
+4.
+3.
+The Company has adopted the following share option
+schemes for the grant of options to the Company's
+Directors, senior management and other eligible grantees:
+2002 Share Option Scheme (expired in 2015); and
+2.
+Pre-Global Offering Share Option Scheme (expired in
+2011);
+Under these share option schemes, the Remuneration
+Committee of the Board will from time to time propose
+for the Board's approval for grant of and the number of
+share options to be granted to the relevant grantees. The
+maximum aggregate number of shares (including those
+that could be subscribed for under the Pre-Global Offering
+Share Option Scheme, the 2001 Share Option Scheme,
+the 2002 Share Option Scheme and the 2005 Share
+Option Scheme) which may be issued upon exercise of all
+options to be granted shall not exceed 10% of the total
+issued shares of the Company as of 31 December 2005,
+being the date on which the shareholders of the Company
+approved the 2005 Share Option Scheme, excluding share
+options which have lapsed in accordance with the terms of
+the share option schemes.
+1.
+62,618
+62,618
+2018 final dividend
+(15,710)
+(15,221)
+(15,710)
+61,045
+(489)
+(1,275)
+61,045
+Total comprehensive income
+1,573
+1,573
+(1,275)
+2,848
+Other comprehensive income, net of tax
+61,045
+2019 interim dividend
+61,045
+Profit for the year
+2,848
+(13,290)
+(5,302)
+(13,290)
+se
+.se
+78 CNOOC LIMITED Annual Report 2019
+These reserve accounts constitute the consolidated reserves of approximately RMB405,106 million (2018: RMB376,819 million) in the consolidated
+statement of financial position.
+39
+448,187
+18,055*
+317,678*
+525*
+(13,290)
+70,000*
+43,081
+Balance at 31 December 2019
+29
+(5,331)
+(5,331)
+Acquisition of a subsidiary under common control
+18,055
+Details of the dividends proposed and paid for the year are disclosed in note 13 to the consolidated financial statements.
+Proposed 2019 final dividend
+(1,152)*
+448,226
+1.18
+Exploration expenses
+TO THE SHAREHOLDERS OF CNOOC LIMITED
+(Incorporated in Hong Kong with limited liability)
+OPINION
+德勤
+We have audited the consolidated financial statements of CNOOC Limited (the "Company") and its subsidiaries (collectively referred
+to as "the Group") set out on pages 76 to 144, which comprise the consolidated statement of financial position as at 31 December
+2019, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in
+equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements,
+including a summary of significant accounting policies.
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
+as at 31 December 2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended
+in accordance with International Financial Reporting Standards ("IFRSS") issued by the International Accounting Standards
+Board ("IASB") and Hong Kong Financial Reporting Standards ("HKFRSS") issued by the Hong Kong Institute of Certified Public
+Accountants ("HKICPA") and have been properly prepared in compliance with the Companies Ordinance (Chapter 622 of the Laws
+of Hong Kong) (the "Companies Ordinance").
+BASIS FOR OPINION
+We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAS") issued by the HKICPA. Our
+responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated
+Financial Statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics
+for Professional Accountants ("the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We
+believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
+KEY AUDIT MATTERS
+Deloitte
+Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
+financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
+statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
+se
+seas
+see
+Independent Auditor's Report
+KEY AUDIT MATTERS (continued)
+Key audit matter
+Impairment and provision; Depreciation, depletion and
+amortisation-The estimation of oil and gas reserves
+has a significant impact on the consolidated financial
+statements, particularly oil and gas properties'
+impairment testing and depreciation, depletion and
+amortisation charges - Refer to notes 3 and 14 to the
+consolidated financial statements
+The estimation of oil and gas reserves has a significant impact
+on the consolidated financial statements, particularly oil and
+gas properties' impairment testing and depreciation, depletion
+and amortisation charges. For the year ended 31 December
+2019, oil and gas properties' impairment and provision,
+depreciation, depletion and amortisation of RMB2,072 million
+and RMB54,451 million respectively were recognised.
+72 CNOOC LIMITED Annual Report 2019
+Independent Auditor's Report
+71
+CNOOC LIMITED Annual Report 2019
+Total
+49,716
+62,102
+78,578
+Note: Capitalised interests for 2017, 2018 and 2019 were RMB2,495
+million, RMB2,838 million and RMB3,048 million, respectively.
+CNOOC LIMITED Annual Report 2019
+Management's Discussion and Analysis
+OTHERS
+Employees
+As of 31 December 2019, the Company had 15,569
+employees in China, 2,856 employees overseas and 278
+contracted employees.
+Since 4 February 2001, the Company has adopted four
+share option schemes that were applicable to Directors,
+senior management and other eligible grantees, and has
+granted options thereunder to the Company's Directors,
+senior management and other eligible grantees in
+accordance with each share option scheme.
+The Company has set up a market-oriented recruitment
+structure and has adopted a more appropriate
+remuneration structure.
+For more information on employees and human resources,
+please refer to "Human Resources" in the "Business
+Overview" section of this annual report.
+CHARGES ON ASSETS
+Please refer to note 40 to the Consolidated Financial
+Statements of this annual report.
+CONTINGENCIES
+Please refer to note 36 to the Consolidated Financial
+Statements of this annual report.
+wwwwww
+We identified the estimation of oil and gas reserves as a key
+audit matter because of the significant judgments made by
+the management in assessing quantities of reserves. This
+required extensive audit effort and a high degree of auditor
+judgment, when performing audit procedures to evaluate the
+reasonableness of the management's assessment.
+How our audit addressed the key audit matter
+Our procedures related to the estimation of oil and gas reserves
+included the following, among others:
+We tested the effectiveness of controls over reserves
+estimation and review process.
+74 CNOOC LIMITED Annual Report 2019
+.se
+se
+seas
+see
+Independent Auditor's Report
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
+Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
+the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
+attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are
+inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's
+report. However, future events or conditions may cause the Group to cease to continue as a going concern.
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
+and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
+fair presentation.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
+Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
+performance of the group audit. We remain solely responsible for our audit opinion.
+We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
+and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
+We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
+regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear
+on our independence, and where applicable, related safeguards.
+From the matters communicated with those charged with governance, we determine those matters that were of most significance
+in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
+matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
+circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing
+so would reasonably be expected to outweigh the public interest benefits of such communication.
+The engagement partner on the audit resulting in the independent auditor's report is Lam Kwok Yan.
+ecce
+Deloitte Touche Tohmatsu
+Certified Public Accountants
+Hong Kong
+25 March 2020
+CNOOC LIMITED Annual Report 2019 75
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors.
+27,799
+Obtain an understanding of internal control relevant to the audit 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 Group's internal control.
+•
+We evaluated whether the methodology adopted by the
+Group's internal and external reserve specialists to estimate
+oil and gas reserves was consistent with recognised
+industry standards.
+We evaluated the competence and objectivity of the reserve
+specialists to assess whether they were appropriately
+qualified to carry out the estimation of oil and gas reserves.
+We compared the Group's oil and gas reserves volumes
+at 31 December 2019 to that at 31 December 2018, and
+performed corroborative inquires of the reserve specialists
+and the management as to the reason for any significant
+changes.
+We tested whether the updated estimation of oil and
+gas reserves was included appropriately in the Group's
+consideration in oil and gas properties' impairment testing
+and depreciation, depletion and amortisation charges.
+ecce
+CNOOC LIMITED Annual Report 2019 73
+Independent Auditor's Report
+OTHER INFORMATION
+The directors of the Company are responsible for the other information. The other information comprises the information included in
+the annual report, but does not include the consolidated financial statements and our auditor's report thereon.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
+assurance conclusion thereon.
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing
+so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
+obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude
+that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this
+regard.
+RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED
+FINANCIAL STATEMENTS
+The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair
+view in accordance with IFRSS issued by the IASB, HKFRSS issued by the HKICPA and the Companies Ordinance, and for such
+internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free
+from material misstatement, whether due to fraud or error.
+In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a
+going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
+the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
+material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion solely to you, as a
+body, in accordance with section 405 of the Companies Ordinance, and for no other purpose. We do not assume responsibility
+towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance,
+but is not a guarantee that an audit conducted in accordance with HKSAS will always detect a material misstatement when it exists.
+Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
+expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
+As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional skepticism throughout
+the audit. We also:
+•
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
+design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
+to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
+one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
+internal control.
+25,895
+24,976
+Subtotal
+70
+Management's Discussion and Analysis
+Capital Resources and Liquidity
+Overview
+Our primary source of cash during 2019 was cash flows from operating activities. We used cash primarily to fund capital
+expenditure and dividends. The changes are as follows:
+2019
+2018
+Change
+RMB million US$ million
+RMB million
+RMB million
+%
+Generated from operating
+activities
+123,521
+17,928.4
+124,398
+(877)
+(0.7%)
+69
+Used in investing activities
+CNOOC LIMITED Annual Report 2019
+419,910
+Our exploration expenses decreased by 6.0% to
+RMB12,342 million (US$1,791.4 million) in 2019 from
+RMB13,135 million in 2018, mainly because of the
+combined impact of higher exploration expenses due to
+increased effort in oil and gas exploration this year and
+impairment provision related to certain exploration and
+evaluation assets in North America last year.
+Depreciation, depletion and amortisation
+Our total depreciation, depletion and amortisation increased
+by 13.5% to RMB57,699 million (US$8,374.7 million) in
+2019 from RMB50,838 million in 2018.
+Among them, the dismantlement-related depreciation,
+depletion and amortisation costs decreased by 3.1%
+to RMB1,254 million (US$182.0 million) in 2019 from
+RMB1,294 million in 2018. Our dismantling costs per BOE
+decreased by 9.2% to RMB2.58 (US$0.37) per BOE in
+2019 from RMB2.84 (US$0.43) per BOE in 2018, primarily
+due to the decrease in the present value of asset retirement
+obligations brought by the increased interest rate of U.S.
+dollar bonds in the international market.
+Our depreciation, depletion and amortisation, excluding
+the dismantlement-related depreciation, depletion and
+amortisation, increased by 13.9% to RMB56,445 million
+(US$8,192.7 million) in 2019 from RMB49,544 million in
+2018. Our depreciation, depletion and amortisation per
+BOE, excluding the dismantlement-related depreciation,
+depletion and amortisation, increased by 7.1% to
+RMB116.2 (US$16.87) per BOE in 2019 from RMB108.5
+(US$16.40) per BOE in 2018, primarily as a result of the
+change in proportional distribution of production.
+Impairment and provision
+Our impairment and provision increased by 214.4% to
+RMB2,094 million (US$303.9 million) in 2019 from RMB666
+million in 2018, mainly due to the impairment of certain oil
+and gas properties located in North America and China
+because of the decrease of reserve. Please refer to note
+14 to the consolidated financial statements of this annual
+report.
+Selling and administrative expenses
+Our selling and administrative expenses increased by 8.5%
+to RMB8,062 million (US$1,170.1 million) in 2019 from
+RMB7,429 million in 2018. Our selling and administrative
+expenses per BOE increased by 2.0% to RMB16.60
+(US$2.41) per BOE in 2019 from RMB16.28 (US$2.46)
+per BOE in 2018, mainly due to the increase of scientific
+research expenses, arising from the active implementation
+of the "innovation-driven" strategy, which increased the
+science and technology investment.
+Finance costs/Interest income
+Our finance costs increased by 13.6% to RMB5,865
+million (US$851.3 million) in 2019 from RMB5, 162 million
+in 2018, primarily due to the increase in interest expenses
+from new issuance of guaranteed notes and recognition of
+lease liabilities. Our interest income increased by 33.7% to
+RMB1,067 million (US$154.9 million) in 2019 from RMB798
+million in 2018, primarily due to the Company's increase in
+deposit.
+Exchange losses, net
+Our net exchange losses increased by 51.1% to RMB213
+million (US$30.9 million) in 2019 from RMB141 million in
+2018, primarily due to the exchange rate fluctuation of
+Renminbi against the U.S. dollar and Hong Kong dollar.
+Investment income
+Our investment income increased by 25.7% to RMB4,632
+million (US$672.3 million) in 2019 from RMB3,685 million
+in 2018, primarily attributable to the increased average
+amount of corporate wealth management products.
+Share of profits/losses of associates and a joint
+venture
+Our share of profits of associates and a joint venture was
+RMB1,002 million (US$145.4 million) in 2019, while in 2018
+our shared losses were RMB5, 187 million, mainly due to
+depreciation of the value of the assets in Argentina owned
+by the joint venture, BC ENERGY INVESTMENTS CORP. in
+2018, as a result of the huge depreciation of the Argentina
+peso against the U.S. dollar and the sharp increase of
+interest rate.
+Income tax expense
+Our income tax expense increased by 9.4% to RMB24,604
+million (US$3,571.1 million) in 2019 from RMB22,482
+million in 2018, mainly because of the increase in our
+overall profitability and the impact of change of the province
+income tax rate of Alberta, Canada. Please refer to note
+11 to the consolidated financial statements of this annual
+report.
+wwwwww
+Management's Discussion and Analysis
+(67,457)
+(95,452)
+16,762
+26,212
+35,659
+7,978
+9,995
+15,120
+24,740
+36,207
+50,779
+Subtotal
+Overseas
+Development
+21,891
+23,564
+24,253
+Exploration
+3,085
+2,331
+3,546
+Development
+Exploration
+(9,791.0)
+China
+Year ended 31 December
+2017
+2018
+(RMB million)
+27,995
+(29.3%)
+Used in financing activities
+(37,691)
+(5,470.7)
+(27,108)
+(10,583)
+39.0%
+Cash generated from operating activities
+The cash inflow from operating activities decreased by 0.7%
+to RMB123,521 million (US$17,928.4 million) in 2019 from
+RMB124,398 million in 2018, primarily attributable to the
+combined impact of the increase in oil and gas sales and
+the change of working capital.
+Cash used in investing activities
+In 2019, our capital expenditure payment increased by
+30.2% to RMB66,395 million (US$9,636.8 million) from
+2018. Our development expenditures in 2019 were
+primarily related to the capital expenditure of Iraq technical
+service contract project, Lingshui 17-2 project in China,
+projects of Guyana and shale oil and gas in the U.S.,
+as well as the expenses incurred for improving recovery
+factors of the oil and gas fields in producing. Our cash
+outflow from the acquisition of oil and gas properties was
+RMB5,619 million (US$815.6 million) and our cash outflow
+from increased investments in associates was RMB7,707
+million (US$1,118.6 million).
+In addition, our cash used in investing activities was
+also attributable to the purchase of corporate wealth
+management products and money market funds of
+RMB187,805 million (US$27,258.8 million) this year.
+Our cash generated from investing activities was mainly
+from the proceeds from the sales of corporate wealth
+management products and money market funds in the
+amount of RMB197,952 million (US$28,731.6 million), and
+the increase in our time deposits with maturity over three
+months in the amount of RMB3,095 million (US$449.2
+million).
+Cash used in financing activities
+In 2019, the increase in net cash outflow from financing
+activities was mainly due to the repayment of bank loans
+of RMB8,206 million (US$1,191.1 million), repayment of
+guaranteed notes of RMB2,067 million (US$300.0 million)
+and the cash outflow of the distribution of dividends of
+RMB28,973 million (US$4,205.3 million), partially offset by
+the issuance of guaranteed notes of RMB10,464 million
+(US$1,500.0 million) and the proceeds of bank loans of
+RMB3,846 million (US$558.2 million).
+At the end of 2019, our total interest-bearing outstanding
+debts were RMB157,229 million (US$22,820.9 million),
+compared to RMB142,470 million at the end of 2018. The
+increase in debts in 2019 was primarily attributable to the
+issuance of guaranteed notes, recognised lease liabilities
+in the statement of financial position after the adoption of
+IFRS 16 Leases and impact of changes in the exchange
+rate between the U.S. dollar and Renminbi. Our gearing
+ratio, which is defined as interest-bearing debts divided by
+the sum of interest-bearing debts plus equity, was 26.0%,
+higher than that of 25.3% in 2018. The main reason was
+the lease liabilities recognised in the statement of financial
+position after the adoption of IFRS 16 Leases.
+Capital Expenditure
+The following table sets forth the Company's actual capital
+expenditure for the periods indicated.
+2019
+10
+(18,055)
+15,221
+Notes
+(All amounts expressed in millions of Renminbi, except per share data)
+76 CNOOC LIMITED Annual Report 2019
+se
+seas
+sees
+Consolidated Statement of Financial Position
+31 December 2019
+(All amounts expressed in millions of Renminbi)
+NON-CURRENT ASSETS
+ecce
+Notes
+2019
+2018
+(restated)
+Property, plant and equipment
+Right-of-use assets
+14
+440,554
+413,383
+15
+2019
+9,179
+2018
+(restated)
+Revenue recognised from contracts with customers
+Exploration expenses
+(9,141)
+(9,156)
+11(ii)
+Taxes other than income tax
+(24,388)
+(24,735)
+Operating expenses
+EXPENSES
+227,711
+233,199
+5,324
+35,830
+186,557
+197,173
+30,867
+5,159
+55
+Other revenue
+Marketing revenues
+Oil and gas sales
+REVENUE
+Intangible assets
+16
+16,306
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+495,230
+Total non-current assets
+CURRENT ASSETS
+Inventories and supplies
+Trade receivables
+Other financial assets
+Other current assets
+Time deposits with maturity over three months
+Cash and cash equivalents
+Total current assets
+CURRENT LIABILITIES
+Loans and borrowings
+Trade and accrued payables
+Lease liabilities
+Contract liabilities
+Other payables and accrued liabilities
+Taxes payable
+Total current liabilities
+551,786
+9,542
+9,721
+21
+16,073
+Investments in associates
+18
+24,513
+4,433
+Investment in a joint venture
+19
+20,977
+20,268
+(12,342)
+Debt investment
+Deferred tax assets
+Other non-current assets
+1,608
+20, 37
+2,936
+4,066
+11(i)
+25,992
+27,465
+Equity investments
+(13,135)
+Depreciation, depletion and amortisation
+7
+419,900
+2,848
+25
+Share of other comprehensive income of associates
+Exchange differences on translation of foreign operations
+Items that may be subsequently reclassified to profit or loss
+OTHER COMPREHENSIVE INCOME/(EXPENSE)
+52,675
+61,045
+PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT
+(22,482)
+(24,604)
+11(i)
+Income tax expense
+75,157
+85,649
+7
+PROFIT BEFORE TAX
+997
+831
+8,638
+16
+Other items that will not be reclassified to profit or loss
+Fair value change on equity investments designated as at fair value
+through other comprehensive income
+20(ii)
+1.37
+1.18
+1.37
+22
+12
+Diluted (RMB Yuan)
+12
+EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE PARENT
+Basic (RMB Yuan)
+61,687
+Other income, net
+62,618
+9,012
+1,573
+NET OF TAX
+OTHER COMPREHENSIVE INCOME FOR THE YEAR,
+80
+(133)
+Others
+278
+(1,167)
+TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO
+OWNERS OF THE PARENT
+NET CURRENT ASSETS
+(5,593)
+406
+(5,790)
+(4,982)
+Others
+(7,429)
+(8,062)
+Selling and administrative expenses
+(33,558)
+(29,040)
+Crude oil and product purchases
+(666)
+(2,094)
+7, 14
+Impairment and provision
+(2,599)
+(894)
+11(iii)
+Special oil gain levy
+(50,838)
+(57,699)
+(149,004)
+(147,544)
+PROFIT FROM OPERATING ACTIVITIES
+84,195
+459
+3,685
+4,632
+1 80 99
+19
+18
+7
+Profit/(loss) attributable to a joint venture
+Share of profits of associates
+543
+Investment income
+(213)
+Exchange losses, net
+798
+(5,162)
+1,067
+(5,865)
+8
+Finance costs
+7
+Interest income
+80,167
+(141)
+TOTAL ASSETS LESS CURRENT LIABILITIES
+Year ended 31 December 2019
+Loans and borrowings
+Impact of business combination under common control
+2,634
+(38)
+2,596
+2,596
+Balance at 1 January 2018 (restated)
+43,081
+(12,638)
+70,000
+6,738
+263,342
+10,830
+381,353
+381,353
+Profit for the year (restated)
+52,675
+52,675
+52,675
+Other comprehensive income, net of tax
+378,757
+8,638
+378,757
+263,380
+Other
+Retained
+final
+controlling
+Total
+capital
+reserve
+reserves
+reserves
+earnings
+dividend
+Total
+interests
+equity
+Balance at 1 January 2018 (originally stated)
+43,081
+(12,638)
+70,000
+4,104
+10,830
+9,012
+9,012
+Total comprehensive income (restated)
+10
+419,900
+15,221*
+288,467*
+7,131*
+70,000*
+(4,000)*
+43,081
+(38)
+10
+(67)
+19
+(14)
+(14)
+(14)
+Balance at 31 December 2018 (restated)
+Others
+Disposal of investments in equity instruments at FVTOCI
+NON-CURRENT LIABILITIES
+419,910
+Balance at 1 January 2019
+43,081
+(4,000)
+8,638
+374
+52.675
+61,687
+61,687
+2017 final dividend
+(463)
+(10,830)
+(11,293)
+distributable
+(11,293)
+(11,785)
+(11,785)
+(11,785)
+Proposed 2018 final dividend
+(15,221)
+15,221
+288,467
+7,131
+70,000
+2018 interim dividend
+translation
+374
+Non-
+9,790
+24
+16,855
+13,760
+24
+33,679
+14,995
+205,945
+191,151
+28
+12,590
+8,991
+25
+40,146
+33,307
+27
+22N
+29
+1,425
+125,283
+114,513
+20, 37
+21,979
+Provision for dismantlement
+Deferred tax liabilities
+Lease Liabilities
+Issued
+Other non-current liabilities
+Total non-current liabilities
+NET ASSETS
+EQUITY
+Equity attributable to owners of the parent
+Issued capital
+26
+Reserves
+TOTAL EQUITY
+XU Keqiang
+Director
+22
+22
+6,314
+5,853
+23
+24,794
+Non-controlling interests
+2,231
+9,281
+Statutory
+1,451
+218,256
+192,314
+448,226
+419,910
+31
+32
+43,081
+376,819
+10
+448,226
+7,277
+419,910
+77
+Consolidated Statement of Changes in Equity
+Year ended 31 December 2019
+(All amounts expressed in millions of Renminbi)
+Attributable to owners of the parent
+2,036
+Proposed
+Cumulative
+and non-
+CNOOC LIMITED Annual Report 2019
+3,180
+43,081
+405,106
+39
+11(i)
+20,901
+14,084
+13,956
+3,602
+91,249
+74,157
+114,696
+116,994
+666,482
+612,224
+15,739
+28
+HU Guangjie
+Director
+54,204
+7,062
+64,163
+133,479
+30
+22
+29
+136,152
+The Group has applied IFRS 16/HKFRS 16 retrospectively with the cumulative effect recognised at the date of initial
+application, 1 January 2019. Any difference at the date of initial application is recognised in the opening retained
+earnings and comparative information has not been restated.
+relied on the assessment of whether leases are onerous by applying IAS 37/HKAS 37 Provisions, Contingent
+Liabilities and Contingent Assets as an alternative of impairment review;
+80
+CNOOC LIMITED Annual Report 2019
+se
+ecce
+As a lessee
+seas
+くく
+***
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+2.2.1 IFRS 16/HKFRS 16 Leases (continued)
+As a lessee (continued)
+When applying the modified retrospective approach under IFRS 16/HKFRS 16 at transition, the Group applied the
+following practical expedients to leases previously classified as operating leases under IAS 17/HKAS 17, on lease-by-
+lease basis, to the extent relevant to the respective lease contracts:
+i.
+ii.
+For contracts entered into or modified or arising from business combinations, the Group assesses whether a contract is
+or contains a lease based on the definition at inception, modification date or acquisition date, as appropriate.
+see
+A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of
+time in exchange for consideration.
+24
+The Group has applied IFRS 16/HKFRS 16 for the first time in the current year. IFRS 16/HKFRS 16 superseded IAS 17/
+HKAS 17 Leases ("IAS 17/HKAS 17") and the related interpretations.
+elected not to recognise right-of-use assets and lease liabilities for leases with lease term ends within 12 months
+of the date of initial application;
+33,679
+14,995
+CNOOC LIMITED Annual Report 2019
+79
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+1.
+Definition of a lease
+2.1
+CNOOC Limited (the "Company") was incorporated in the Hong Kong Special Administrative Region ("Hong Kong") of the
+People's Republic of China (the "PRC") on 20 August 1999 to hold the interests in certain entities thereby creating a group
+comprising the Company and its subsidiaries (hereinafter collectively referred to as the "Group"). During the year, the Group
+was principally engaged in the exploration, development, production and sale of crude oil and natural gas.
+The registered office address of the Company is 65/F, Bank of China Tower, 1 Garden Road, Hong Kong.
+In the opinion of the directors of the Company (the "Directors"), the parent and the ultimate holding company of the Company is
+China National Offshore Oil Corporation ("CNOOC"), a company established in the PRC.
+STATEMENT OF COMPLIANCE
+These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSS") issued
+by the International Accounting Standards Board (the "IASB"), Hong Kong Financial Reporting Standards ("HKFRSS") issued
+by the Hong Kong Institute of Certified Public Accountants (the "HKICPA”), the Rules Governing the Listing of Securities on
+The Stock Exchange of Hong Kong Limited (the “Listing Rules") and the Companies Ordinance (Cap. 622 of the Laws of
+Hong Kong) (the "Companies Ordinance"). A summary of the significant accounting policies adopted by the Group is set out
+below.
+2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
+The IASB has issued a number of new and amendments to IFRS standards that are first effective for the current accounting
+year commencing 1 January 2019 or later but available for early adoption. The equivalent new and amendments to HKFRSS
+consequently issued by the HKICPA have the same effective dates as those issued by the IASB and are in all material aspects
+identical to the pronouncements issued by the IASB.
+The accounting policies adopted are consistent with those of the year ended 31 December 2018, except for the first time
+adoption of the new and amendments to IFRS standards/HKFRSS effective for the Group's financial year beginning on
+1 January 2019. Except as described below, the application of the new and amendments to IFRS standards/HKFRSS in
+the current year has had no material impact on the accounting policies, the disclosures or the amounts recognised in the
+consolidated financial statements of the Group.
+2.2.1 IFRS 16/HKFRS 16 Leases
+CORPORATE INFORMATION
+iii.
+Floating production, storage and offloading ("FPSO") vessels
+iv.
+766
+9,139
+3,614
+5,525
+9,139
+CNOOC LIMITED Annual Report 2019
+81
+Notes to Consolidated Financial Statements
+31 December 2019
+Total lease liabilities
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2.2.1 IFRS 16/HKFRS 16 Leases (continued)
+As a lessee (continued)
+The carrying amount of right-of-use assets as at 1 January 2019 comprises the following:
+At 1 January
+2019
+By class:
+Pipeline
+Buildings and structures
+208
+2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+excluded initial direct costs from measuring the right-of-use assets at the date of initial application;
+Non-current
+Lease liabilities as at 1 January 2019
+V.
+applied a single discount rate to a portfolio of leases with a similar remaining terms for similar class of underlying
+assets in similar economic environment. Specifically, the Group applies different discount rates to certain
+domestic and overseas leases on a portfolio basis; and
+used hindsight based on facts and circumstances as at date of initial application in determining the lease term for
+the Group's leases with extension and termination options.
+On transition, the Group has made the following adjustments upon application of IFRS 16/HKFRS 16:
+The Group recognised additional lease liabilities of RMB8,373 million upon application of IFRS 16/HKFRS 16 and right-
+of-use assets at amounts equal to the related lease liabilities by applying IFRS 16/HKFRS 16.C8(b)(ii) transition, adjusted
+by accrued lease payments and any reclassification of property, plant and equipment, leasehold lands at 1 January
+2019.
+When recognising the lease liabilities for leases previously classified as operating leases, the Group has applied
+incremental borrowing rates of the relevant group entities at the date of initial application. The lessee's incremental
+borrowing rates ranged from 3.3%-5.16%.
+At 1 January
+2019
+Operating lease commitments disclosed as at 31 December 2018
+16,372
+Analysed as: Current
+Lease liabilities discounted at relevant incremental borrowing rates
+Add:
+Less:
+Lease liabilities resulting from lease modifications of existing leases
+Recognition exemption - short-term leases
+Exclusion of non-lease components
+2,359
+(768)
+(6,444)
+Lease liabilities relating to operating leases recognised upon application of IFRS 16/HKFRS 16
+8,373
+Add: Obligations under finance leases recognised as at 31 December 2018
+13,226
+311
+Consolidated Statement of Cash Flows
+18,373
+14,995
+(264)
+Capital expenditure
+(66,395)
+(51,002)
+Additions to investments in associates
+(7,707)
+(64)
+(Increase)/decrease in time deposits with maturity over three months
+(3,095)
+(5,619)
+1,620
+231
+162
+Dividends received from a joint venture
+172
+132
+Interest received
+923
+872
+Investment income received
+Dividends received from associates
+3,822
+Acquisition of oil and gas properties
+124,398
+ecce
+seas
+S
+***
+Leasehold lands
+Year ended 31 December 2019
+(All amounts expressed in millions of Renminbi)
+CASH FLOWS FROM OPERATING ACTIVITIES
+Cash generated from operations
+CASH FLOWS FROM INVESTING ACTIVITIES
+Income taxes paid
+Notes
+2019
+2018
+(restated)
+35
+145,979
+140,082
+(22,458)
+(15,684)
+123,521
+Net cash flows from operating activities
+2,721
+Purchase of other financial assets
+(187,805)
+Effect of foreign exchange rate changes, net
+CASH AND CASH EQUIVALENTS AT END OF YEAR
+Total cash outflow for leases amounted to RMB2,453 million.
+10,464
+9,952
+(2,067)
+(4,976)
+(1,451)
+3,846
+Cash and cash equivalents at beginning of year
+2,874
+(6,133)
+(28,973)
+(23,589)
+(5,998)
+(5,264)
+(5,335)
+29
+28
+(37,691)
+(27,108)
+(8,206)
+NET INCREASE IN CASH AND CASH EQUIVALENTS
+Net cash flows used in financing activities
+Acquisition of a subsidiary under common control
+Others
+(178,100)
+Purchase of equity investments
+(39)
+Proceeds from sale of other financial assets
+197,952
+127,903
+Proceeds from sale of equity investments
+Proceeds from disposal of property, plant and equipment
+64
+17
+590
+Net cash flows used in investing activities
+(67,457)
+(95,452)
+CASH FLOWS FROM FINANCING ACTIVITIES
+Proceeds from issuance of guaranteed notes
+Repayment of guaranteed notes
+Repayments of lease liabilities
+Proceeds from bank loans
+Repayment of bank loans
+Dividends paid
+Interest paid
+1,838
+12,949
+Equipment
+5.
+7,334
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Joint arrangements (continued)
+Joint venture
+A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets
+of the arrangement.
+The Group's investments in joint ventures are stated in the consolidated statement of financial position at the Group's share
+of net assets under the equity method of accounting, less any impairment losses. Necessary adjustments are made to bring
+into line any dissimilar accounting policies that may exist. Under the equity method, an investment in a joint venture is initially
+recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share
+of the profit or loss and other comprehensive income of the joint venture. Where the profit sharing ratios are different to the
+Group's equity interest, the share of post-acquisition results of the joint ventures is determined based on the agreed profit
+sharing ratio. Unrealised gains and losses resulting from transactions between the Group and its joint ventures are eliminated
+to the extent of the Group's investments in the joint ventures, except where unrealised losses provide evidence of an
+impairment of the asset transferred. Goodwill arising from the acquisition of joint ventures is included as part of the Group's
+investments in joint ventures and is not individually tested for impairment.
+Related parties
+A party is considered to be related to the Group if:
+(a)
+the party is a person or a close member of that person's family and that person:
+(i)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+has control or joint control of the Group;
+has significant influence over the Group; or
+is a member of the key management personnel of the Group or of a parent of the Group.
+(b)
+the party is an entity where any of the following conditions applies:
+(i)
+the entity and the Group are members of the same group;
+(ii)
+one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the
+other entity);
+the entity and the Group are joint ventures of the same third party;
+(iv)
+(ii)
+31 December 2019
+Notes to Consolidated Financial Statements
+85
+se
+ecce
+seas
+see
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Subsidiaries
+Subsidiaries are all those entities over which the Group has power over the investee such that the Group is able to direct the
+relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its
+power over the investee to affect the amount of the investor's returns.
+Associates
+Based on the Group's ownership percentage (considering its direct ownership as well as potentially exercisable or convertible
+shares) and other contractual terms, the Group has significant influence over its associates, rather than the power to control.
+The Group's investments in associates are stated in the consolidated statement of financial position at the Group's share of
+net assets under the equity method of accounting, less any impairment losses. Necessary adjustments are made to bring
+into line any dissimilar accounting policies that may exist. Under the equity method, an investment in an associate is initially
+recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share
+of the profit or loss and other comprehensive income of the associate. Unrealised gains and losses resulting from transactions
+between the Group and its associates are eliminated to the extent of the Group's investments in the associates, except where
+unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associates
+is included as part of the Group's investments in associates and is not individually tested for impairment.
+Joint arrangements
+Certain of the Group's activities are conducted through joint arrangements. Joint arrangements are classified as either a joint
+operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to
+the arrangement.
+Joint control
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
+relevant activities require unanimous consent of the parties sharing control.
+Joint operations
+Some arrangements have been assessed by the Group as joint operations as both parties to the contract are responsible for
+the assets and obligations in proportion to their respective interest, whether or not the arrangement is structured through a
+separate vehicle. This evaluation applies to both the Group's interests in production sharing arrangements and certain joint
+operation.
+The Group entered into numerous production sharing arrangements or similar agreements in China and overseas
+countries. The Group's participating interest may vary in each arrangement. The Group, as one of the title owners under
+certain exploration and/or production licenses or permits, is required to bear exploration (with some exceptions in China),
+development and operating costs together with other co-owners based on each owner's participating interest. Once
+production occurs, a certain percentage of the annual production or revenue is first distributed to the local government,
+which, in most cases, with the nature of royalty and other taxes or expenses, and the rest of the annual production or revenue
+is allocated among the co-owners.
+The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance
+with the IFRS standards/HKFRSS applicable to the particular assets, liabilities, revenues and expenses.
+CNOOC LIMITED Annual Report 2019
+one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
+(v)
+the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related
+to the Group;
+(vi)
+87
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Property, plant and equipment (continued)
+(a)
+(b)
+Oil and gas properties (continued)
+Capitalised acquisition costs of proved properties are depreciated on a unit-of-production method over the total proved
+reserves of the relevant oil and gas properties.
+Vehicles, office equipment and others
+Vehicles, office equipment and others are stated at cost less accumulated depreciation and impairment losses. The
+straight-line method is adopted to depreciate the cost less any estimated residual value of these assets over their
+expected useful lives. The useful lives of vehicles, office equipment and other assets are in line with their beneficial
+periods.
+Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a
+recoverable basis among the parts and each part is depreciated separately.
+Residual values, useful lives and the depreciation method are reviewed and, adjusted if appropriate, at each reporting date.
+Any gains and losses on disposals of property, plant and equipment (calculated as the difference between the net disposal
+proceeds and the carrying amount of the asset) are recognised in profit or loss.
+Intangible assets other than goodwill
+The intangible assets of the Group comprise software and others, gas processing rights under NWS Project, marketing
+transportation and storage contracts, exploration rights. Intangible assets with finite lives are carried at cost, less accumulated
+amortisation and accumulated impairment losses. The cost of intangible assets acquired in a business combination is the fair
+value as at the date of acquisition. Intangible assets with finite lives except for gas processing rights, are amortised on the
+straight-line basis over the useful economic life and assessed for impairment whenever there is an indication that the intangible
+asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are
+reviewed at least at each financial year end.
+The intangible assets regarding software have been amortised on the straight-line basis over their respective useful lives. The
+intangible asset regarding the gas processing rights has been amortised upon the commercial production of the liquefied
+natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible assets regarding
+the marketing transportation and storage contracts and drilling rig contracts are amortised over the life of the contracts on the
+straight-line basis. The intangible assets related to the exploration rights are amortised over the estimated useful life.
+Major maintenance and repairs
+Expenditure on major maintenance refits and repairs comprises the costs of replacement assets or parts of assets and
+overhaul costs. Where an asset or part of an asset that is separately depreciated and is replaced, and it is probable that future
+economic benefits associated with the item will flow to the Group, the replacement expenditure is capitalised. Where part of
+the asset is not separately considered as a component, the replacement value is used to estimate the carrying amount of the
+replaced assets which is immediately written off. All other maintenance costs are expensed as incurred.
+88
+CNOOC LIMITED Annual Report 2019
+.se
+se
+CNOOC LIMITED Annual Report 2019
+.se
+Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves.
+Common facilities that are built specifically to service production directly attributed to designated oil and gas properties
+are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis.
+Common facilities that are not built specifically to service identified oil and gas properties are depreciated using the
+straight-line method over their estimated useful lives. Costs associated with significant development projects are not
+depreciated until commercial production commences and the reserves related to those costs are excluded from the
+calculation of depreciation.
+For oil and gas properties, the successful efforts method of accounting is adopted. The Group capitalises the initial
+acquisition costs of oil and gas properties. Impairment of initial acquisition costs is recognised based on exploratory
+experience and management judgement and charged to profit and loss as exploration expenses. Upon discovery
+of commercial reserves, acquisition costs are transferred to prove properties. The costs of drilling and equipping
+successful exploratory wells, all development expenditures on construction, installation or completion of infrastructure
+facilities such as platforms, pipelines, processing plants and the drilling of development wells and the building of
+enhanced recovery facilities, including those renewals and betterments that extend the economic lives of the assets,
+and the related borrowing costs are capitalised. The costs of unsuccessful exploratory wells and all other exploration
+costs are expensed as incurred.
+the entity is controlled or jointly controlled by a person identified in (a);
+(vii)
+a person identified in (a)(i) has significant influence over the entity or is a member of the key management
+personnel of the entity (or of a parent of the entity); and
+(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the
+Company or to the parent of the Company.
+86
+CNOOC LIMITED Annual Report 2019
+se
+ecce
+seas
+eve
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Impairment of non-financial assets other than goodwill
+Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories,
+deferred tax assets and goodwill), the asset's recoverable amount is estimated. An asset's recoverable amount is the higher
+of the asset's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset
+does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the
+recoverable amount is determined for the cash-generating unit to which the asset belongs.
+An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value
+in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
+market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to profit or
+loss in the period in which it arises in those expense categories consistent with the function of the impaired asset.
+An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised
+impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated.
+A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the
+estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that
+would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in
+prior years. A reversal of such an impairment loss is credited to profit or loss in the period in which it arises.
+Property, plant and equipment
+Property, plant and equipment comprise oil and gas properties, and vehicles and office equipment and others.
+(a)
+Oil and gas properties
+The Group carries exploratory well costs as an asset when the well has found a sufficient quantity of reserves to
+justify its completion as a producing well and where the Group is making sufficient progress assessing the reserves
+and the economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged
+to expenses. Exploratory wells that discover potentially economic reserves in areas where major capital expenditure
+will be required before production would begin and when the major capital expenditure depends upon the successful
+completion of further exploratory work remain capitalised and are reviewed periodically for impairment.
+Total right-of-use assets
+CNOOC LIMITED Annual Report 2019
+Impairment is determined by assessing the recoverable amount of the exploration and production ("E&P") segment, using
+value in use, to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-
+generating units) is less than the carrying amount, an impairment loss on goodwill is recognised. An impairment loss
+recognised for goodwill is not reversed in a subsequent period.
+9,542
+(666)
+8,876
+(3,614)
+(14,084)
+128
+(13,956)
+(1,451)
+(5,525)
+664
+(5,525)
+**
+(787)
+Payments for leasehold lands included in other non-current assets were recategorised as right-of-use assets.
+Note: For the purpose of reporting cash flows for the year ended 31 December 2019, movements in working capital have been computed
+based on opening statement of financial position as at 1 January 2019 as disclosed above.
+82
+CNOOC LIMITED Annual Report 2019
+.se
+se
+ecce
+seas
+2.2
+see
+In relation to assets previously under finance leases, the Group recategorised the carrying amounts of the relevant assets which were still
+under lease as at 1 January 2019 amounting to RMB755 million as right-of-use assets.
+412,628
+9,768
+9,768
+*/**
+755
+739
+666
+274
+9,768
+The following adjustments were made to the amounts recognised in the consolidated statement of financial position at
+1 January 2019. Line items that were not affected by the changes have not been included.
+Carrying
+amounts at
+31 December
+2018 (restated)
+Adjustments
+Carrying
+amounts under
+IFRS 16/
+HKFRS 16 at
+1 January 2019
+Non-current Assets
+Property, plant and equipment
+Right-of-use assets
+Other non-current assets
+Current Liabilities
+Lease liabilities
+Other payables and accrued liabilities
+Non-current Liabilities
+Lease liabilities
+Other non-current liabilities
+413,383
+(755)
+***
+くく
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Basis of preparation
+These consolidated financial statements have been prepared under the historical cost convention, except for as detailed in the
+accounting policies notes hereafter. These consolidated financial statements are presented in Renminbi ("RMB") and all values
+are rounded to the nearest million except when otherwise indicated.
+Basis of consolidation
+The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended
+31 December 2019.
+The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control,
+and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are
+prepared for the same reporting period as the parent company, using consistent accounting policies.
+CNOOC LIMITED Annual Report 2019
+83
+84
+Notes to Consolidated Financial Statements
+31 December 2019
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+3.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
+Basis of consolidation (continued)
+The results of subsidiaries are included in the Company's statement of profit or loss and other comprehensive income to the
+extent of dividends received and receivable. The Company's interests in subsidiaries are stated at cost less any impairment
+losses.
+All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group
+transactions are eliminated in full.
+Business combinations and goodwill
+Business combinations, other than business combinations under common control, are accounted for using the acquisition
+method. The consideration transferred is measured at acquisition date fair value which is the sum of the acquisition date
+fair values of assets transferred by the Group, liabilities assumed by the Group from the former owners of the acquiree and
+the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group
+elects whether it measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the
+acquiree's identifiable net assets. Acquisition-related costs incurred are included in profit or loss.
+If the business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to
+fair value at the acquisition date through profit or loss or other comprehensive income, as appropriate.
+Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent
+consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is
+accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured to fair value at
+subsequent reporting dates, with the corresponding gain or loss being recognised in profit or loss.
+Goodwill is initially measured at cost, being the excess of the aggregate of the purchase consideration, the amount
+recognised for non-controlling interests and any fair value of the Group's previously held equity interests in the acquiree over
+the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than
+the fair value of the net assets of the business acquired, the difference is recognised in profit or loss as a gain on bargain
+purchase.
+After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for
+impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be
+impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit (or group of cash-generating
+units) to which goodwill has been allocated is tested for impairment before the end of that reporting period.
+For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or group of cash-
+generating units) that is expected to benefit from the synergies of the combination, which represent the lowest level at which
+the goodwill is monitored for internal management purposes and not larger than an operating segment.
+SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation
+within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the
+operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based
+on the relative value of the operation disposed of and the portion of the cash-generating unit (or group of cash-generating
+units) retained.
+3.
+Effective for annual periods beginning on or after 1 January 2020
+CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+2.2.2 IFRIC 23/HK(IFRIC)-Int 23 Uncertainty over Income Tax Treatments
+IFRIC 23/HK(IFRIC)-Int 23 sets out how to determine the accounting tax position when there is uncertainty over income
+tax treatments. The interpretation requires the Group to determine whether uncertain tax positions are assessed
+separately or as a group and assess whether it is probable that a tax authority will accept an uncertain tax treatment used,
+or proposed to be used, by individual group entities in their respective income tax filings. If it is probable, the current
+and deferred taxes are determined consistently with the tax treatment in the income tax filings. If it is not probable that
+the relevant taxation authority will accept an uncertain tax treatment, the effect of each uncertainty is reflected by using
+either the most likely amount or the expected value.
+The Group applied this interpretation retrospectively with the cumulative effect of initially applying the interpretation
+recognised at the date of initial application, 1 January 2019, without restating comparatives. The application of this
+interpretation in the current period has had no material impact on the consolidated financial statements of the Group.
+The Group has not applied the following new and amendments to IFRS standards/HKFRSS, which may be relevant to
+the Group and have been issued but are not yet effective, in these consolidated financial statements:
+IFRS 17/HKFRS 17
+Amendments to IFRS 3/HKFRS 3
+Amendments to IFRS 10/HKFRS 10 and IAS 28/HKAS 28
+Amendments to IAS 1
+Amendments to IAS 1/HKAS 1 and IAS 8/HKAS 8
+Insurance Contracts¹
+Definition of a Business²
+Sale or Contribution of Assets between an Investor
+and its Associate or Joint Venture³
+Classification of Liabilities as Current or Non-current5
+Definition of Material4
+Interest Rate Benchmark Reform4
+Amendments to IFRS 9/HKFRS 9,
+IAS 39/HKAS 39 and IFRS 7/HKFRS 7
+1.
+Effective for annual periods beginning on or after 1 January 2021
+2.
+Effective for business combinations and asset acquisitions for which the acquisition date is on or after the beginning of the first annual
+period beginning on or after 1 January 2020
+Effective for annual periods beginning on or after a date to be determined
+3.
+4.
+Effective for annual periods beginning on or after 1 January 2022
+see
+(3,614)
+598,383
+Reserve life (years)
+(including equity method investees)
+10.2
+10.2
+10.0
+10.0
+10.0
+Reserve replacement ratio (%)
+145
+138
+164
+184
+182
+Reserve replacement ratio (%)
+(including equity method investees)
+144
+136
+9.7
+9.7
+9.7
+9.8
+Total*
+5,184.6
+5,372.7
+5,727.6
+6,238.6
+6,784.2
+CNOOC LIMITED Annual Report 2023
+7
+162
+OPERATING SUMMARY
+2019
+2020
+2021
+2022
+2023
+Others
+Reserve life (years)
+9.9
+Year ended 31 December
+381.7
+182
+Average realised price
+403.0
+376.5
+400.9
+390.9
+Eastern South China Sea
+674.5
+643.5
+498.2
+441.7
+318.2
+Western South China Sea
+190.1
+179.8
+168.4
+148.5
+158.3
+1,747.1
+428.5
+East China Sea
+44.9
+57.4
+Crude oil (US$/barrel)
+Natural gas (US$/mcf)
+63.34
+6.27
+40.96
+6.17
+67.89
+6.95
+96.59
+8.58
+77.96
+7.98
+180
+Approximately 66%, 62%, 74%, 89% and 94%, respectively, of our net proved reserve estimates in 2019, 2020, 2021, 2022 and
+2023 were based on the Company's internal evaluation and the remaining were made by independent third-party consultants.
+The Company referred to the SEC's final rules on "Modernization of Oil and Gas Reporting" to evaluate reserves.
+8 CNOOC LIMITED Annual Report 2023
+A
+104.7
+75.6
+Onshore
+155.2
+79.9
+68.6
+In calculating barrels of oil equivalent, or BOE, we have assumed that 6,000 cubic feet of natural gas equals one BOE, with the
+exception of the natural gas projects selling on thermal unit, which we have used the actual thermal unit for conversion.
+1,554.5
+378.5
+371.6
+326.9
+315.5
+284.2
+264.0
+Oceania
+59.6
+42.0
+39.6
+38.7
+27.6
+Africa
+83.6
+77.5
+52.7
+88.3
+104.2
+North America (excluding Canada)
+196.6
+Asia (excluding China)
+2,353.6
+2,262.8
+681.7
+892.6
+East China Sea
+143.2
+151.3
+155.2
+194.1
+192.8
+317.3
+Onshore
+77.4
+84.9
+97.2
+133.2
+Overseas
+1,843.6
+1,892.7
+2,066.2
+11.4
+372.3
+197.0
+231.4
+6,402.6
+Net proved reserves in equity
+method investees
+Crude and liquids (million barrels)
+269.8
+271.0
+275.2
+270.0
+270.8
+Natural gas (bcf)
+620.3
+583.6
+563.5
+629.3
+643.2
+Subtotal (million BOE)
+376.7
+776.0
+646.7
+5,860.1
+5,355.3
+5,001.2
+200.4
+Canada
+933.2
+890.7
+884.2
+919.3
+931.8
+Europe
+234.3
+108.3
+South America
+145.0
+286.6
+66.1
+473.9
+54.3
+49.5
+Total
+4,807.9
+72.0
+1,299.7
+1,153.1
+987.9
+(217,257)
+(210,642)
+(212,493)
+(218,256)
+Non-current liabilities
+(123,939)
+(113,391)
+(93,951)
+(74,852)
+(91,249)
+Current liabilities
+1,005,598
+929,031
+786,569
+721,275
+757,731
+Total assets
+(213,783)
+Total liabilities
+(309,505)
+(287,345)
+Production
+2023
+2022
+2021
+2020
+2019
+Year ended 31 December
+OPERATING SUMMARY
+16,769
+5
+667,876
+481,976
+433,930
+448,226
+Equity
+(337,722)
+(330,648)
+(304,593)
+CNOOC LIMITED Annual Report 2023
+Net production of crude and liquids
+16,600
+15,129
+2022
+2021
+2020
+2019
+As of 31 December
+Consolidated Statement of Financial Position (Audited)
+124,090
+141,677
+70,307
+24,956
+61,045
+Profit for the year
+(48,884)
+(53,093)
+(25,514)
+(9,951)
+(24,604)
+2023
+Current assets
+205,935
+163,391
+16,306
+Intangible assets
+51,252
+48,927
+41,540
+42,366
+45,490
+joint venture
+14,864
+Investments in associates and a
+532,719
+465,451
+446,668
+440,554
+Property, plant and equipment
+250,275
+264,679
+207,982
+592,920
+(barrels/day)
+China
+726,866
+84,804
+66,671
+62,532
+55,471
+69,947
+Canada
+55,718
+58,786
+61,157
+67,244
+62,749
+North America (excluding Canada)
+54,301
+71,834
+85,078
+90,750
+120,925
+Europe
+62,544
+53,300
+42,624
+Bohai
+China
+(mmcf/day)
+Net production of natural gas
+1,421,053
+1,311,836
+1,211,111
+1,116,721
+Africa
+1,095,751
+147,546
+89,861
+34,082
+19,842
+3,937
+South America
+30,013
+41,430
+Subtotal
+5,074
+5,015
+4,684
+East China Sea
+303,808
+104,369
+98,853
+108,793
+110,247
+109,906
+Western South China Sea
+3,902
+568,170
+494,019
+452,625
+436,173
+Bohai
+981,748
+921,130
+851,389
+775,161
+527,760
+665.1
+5,377
+6,014
+5,131
+3,764
+Oceania
+61,849
+57,109
+69,566
+49,822
+45,020
+5,493
+Asia (excluding China)
+390,706
+359,723
+341,560
+368,886
+Overseas
+119
+Onshore
+5,283
+439,305
+592.9
+633.9
+Eastern South China Sea
+88,458
+80,192
+77,674
+74,076
+Canada
+70,627
+55,492
+62,532
+66,671
+84,804
+Europe
+64,027
+54,518
+43,232
+42,403
+30,510
+South America
+85,595
+North America (excluding Canada)
+57,586
+75,647
+467,874
+523,967
+Asia (excluding China)
+70,715
+77,017
+97,114
+82,842
+95,725
+3,937
+Oceania
+32,673
+30,516
+32,281
+32,454
+Africa
+120,925
+90,750
+96,859
+21,987
+444,526
+19,842
+90,355
+2019
+2020
+2021
+2022
+2023
+Reserves at year end*
+Net proved crude and liquids
+reserves (million barrels)
+China
+1,899.7
+1,952.6
+2,094.5
+2,280.4
+2,667.3
+Bohai
+1,161.7
+1,236.9
+Year ended 31 December
+OPERATING SUMMARY
+29,612
+152.7
+55,927
+1,857,619
+30,428
+151.1
+56,457
+1,709,175
+148,813
+Total
+1,330,740
+1,389,543
+1,516,208
+1,652,718
+1,801,692
+Net production in equity method
+investees
+34,082
+Crude and liquids (barrels/day)
+Subtotal (BOE/day)
+Total (BOE/day)
+6
+CNOOC LIMITED Annual Report 2023
+29,039
+161.3
+56,824
+1,387,564
+28,335
+147.0
+53,658
+1,443,201
+28,295
+145.5
+53,353
+1,569,560
+Natural gas (mmcf/day)
+418,750
+437,812
+Overseas
+19.7
+North America (excluding Canada)
+137.1
+127.3
+114.2
+113.3
+110.1
+Canada
+4.1
+0.1
+Europe
+8.9
+7.3
+3.6
+5.8
+3.0
+South America
+22.9
+70.7
+Africa
+139.7
+298.8
+Overseas
+388.7
+427.3
+474.4
+427.8
+469.1
+Asia (excluding China)
+2.8
+145.7
+154.1
+143.9
+189.5
+Oceania
+93.0
+140.5
+131.8
+139.1
+152.1
+7.1
+Subtotal
+1,376.6
+Eastern South China Sea
+242,026
+273,719
+305,828
+355,669
+375,232
+East China Sea
+11,389
+221,573
+14,948
+19,327
+31,154
+Onshore
+12,596
+17,442
+31,331
+41,376
+49,919
+16,927
+1,313.7
+210,739
+187,311
+1,580.4
+1,774.1
+1,982.3
+2,216.2
+Total net production (BOE/day)**
+China
+892,928
+970,793
+195,511
+Bohai
+477,374
+1,071,681
+522,084
+1,184,844
+1,277,725
+557,734
+599,847
+Western South China Sea
+164,352
+462,564
+Income tax expense
+1,476.4
+Western South China Sea
+1,468.8
+1,093.1
+1,331.4
+1,179.2
+1,010.1
+Asia (excluding China)
+798.7
+714.6
+736.2
+614.1
+555.0
+Oceania
+260.5
+185.5
+173.3
+171.0
+119.8
+Overseas
+799.1
+583.4
+509.5
+3,557.2
+3,728.0
+3,586.0
+Eastern South China Sea
+800.1
+732.9
+782.1
+929.6
+Africa
+1,074.8
+774.9
+820.2
+832.1
+1,077.2
+1,079.8
+Onshore
+68.3
+464.3
+East China Sea
+3,603.9
+9.5
+15.7
+2,964.3
+3,108.5
+3,289.1
+3,597.3
+4,048.9
+Bohai
+1,347.1
+1,443.9
+1,536.9
+1,721.1
+1,968.4
+Western South China Sea
+828.7
+843.0
+847.0
+903.1
+861.9
+China
+(million BOE)**
+Total net proved reserves
+9,190.3
+North America (excluding Canada)
+405.3
+190.9
+322.3
+321.2
+249.9
+Canada
+Europe
+10.2
+4.4
+South America
+2.7
+87.5
+Subtotal
+7,827.1
+7,956.4
+8,351.2
+1.2
+61.4
+8,965.3
+0.5
+69.3
+2.1
+3,602.8
+Western South China Sea
+1,640.5
+Asia (excluding China)
+56.1
+199.1
+183.8
+174.4
+164.8
+Oceania
+8.6
+5.7
+5.6
+5.2
+4.1
+Africa
+83.6
+77.5
+51.1
+86.6
+2,174.2
+2,053.1
+12.9
+14.6
+223.4
+230.4
+229.5
+262.5
+246.0
+Eastern South China Sea
+500.5
+470.7
+101.6
+534.8
+713.5
+East China Sea
+14.1
+14.6
+Overseas
+1,583.8
+1,696.4
+16.5
+1,829.2
+526.8
+North America (excluding Canada)
+249.8
+165.2
+3,483.5
+3,649.0
+3,923.8
+4,333.4
+4,841.5
+Net proved natural gas reserves
+(bcf)
+China
+Subtotal
+6,358.4
+7,019.8
+7,786.2
+8,180.2
+Bohai
+1,112.3
+1,242.0
+1,338.8
+1,467.9
+6,863.3
+1,695.0
+763.7
+458.3
+180.6
+177.8
+158.7
+Canada
+933.2
+890.7
+884.2
+919.3
+635.7
+931.8
+107.5
+71.6
+65.6
+54.1
+49.4
+South America
+145.0
+286.6
+Europe
+172,974
+194,770
+95,821
+CNOOC Limited
+中國海油
+中國海洋石油有限公司
+Chief Executive Officer of the Company
+English Name of the Company
+Abbreviation of Chinese Name of the Company
+Chinese Name of the Company
+The basic information of CNOOC Limited:
+As of 31 December 2023, the Company owned net proved reserves of approximately 6.78 billion BOE, and its average
+daily net production was 1,857,619 BOE (unless otherwise stated, all amounts of reserve and production in this annual
+report include reserve and production accounted for by equity method). The Company had total assets of approximately
+RMB1,005.6 billion.
+The Company's core operation areas are Bohai, the Western South China Sea, the Eastern South China Sea and the
+East China Sea in offshore China. The Company has oil and gas assets in Asia, Africa, North America, South America,
+Oceania and Europe.
+The Company is the largest producer of offshore crude oil and natural gas in China and one of the largest independent oil
+and gas exploration and production companies in the world. The Company mainly engages in exploration, development,
+production and sale of crude oil and natural gas.
+CNOOC Limited, incorporated in the Hong Kong Special Administration Region ("Hong Kong") in August 1999, was listed
+on The Stock Exchange of Hong Kong Limited ("HKSE") (stock code: 00883) on 28 February 2001. The Company was
+admitted as a constituent stock of the Hang Seng Index in July 2001. On 21 April 2022, the Company's RMB shares
+("A shares") were listed on the main board of the Shanghai Stock Exchange ("SSE") (stock code: 600938). On 19 June
+2023, the Company launched RMB counter for trading of Hong Kong shares (stock code: 80883) on HKSE.
+COMPANY PROFILE
+172 Company Information
+167 Supplementary Information on Oil and
+Gas Producing Activities (Unaudited)
+102 Financial Report
+Independent Auditor's Report
+Management's Discussion and Analysis
+Report of the Directors
+Directors and Senior Management
+97
+91
+78
+Zhou Xinhuai
+Secretary to the Board of the Company (Acting Deputy):
+Name
+Contact address
+China Securities Journal, Shanghai Securities News,
+Securities Times, Securities Daily
+The annual report of the Company is available at
+Designated stock exchange website for the annual
+report
+The Company's designated press media for A shares
+information disclosure
+Changes in the places for information disclosure and reference:
+COMPANY PROFILE
+2 CNOOC LIMITED Annual Report 2023
+ir@cnooc.com.cn
+www.cnoocltd.com
+65/F, Bank of China Tower, 1 Garden Road, Hong Kong
+999077
+65/F, Bank of China Tower, 1 Garden Road, Hong Kong
+No. 25 Chaoyangmen Beidajie, Dongcheng District, Beijing
+100010
+68
+Postal code for overseas office of the Company
+Website of the Company
+E-mail
+243,084
+206,911
+176,884
+Eastern South China Sea
+Postal code for domestic office of the Company
+Overseas office of the Company
+Registered address of the Company
+Domestic office of the Company
+Place of registration, office address and contact information:
+No. 25 Chaoyangmen Beidajie, Dongcheng District, Beijing
+(8610) 8452 0883
+ir@cnooc.com.cn
+Xu Yugao
+E-mail
+Telephone
+288,504
+37 Corporate Governance Report
+Compliance Management System
+Risk Factors
+Risk Management, Internal Control and
+Chairman's Statement
+9
+Operating Summary
+6
+Financial Summary
+5
+Company Profile
+2
+CONTENT
+Totals presented in this report may not add correctly due to rounding of numbers.
+Consequently, all of the forward-looking statements made in this presentation are qualified by these cautionary statements.
+The Company cannot assure that the results or developments anticipated will be realised or, even if substantially realised,
+that they will have the expected effect on the Company, its business or operations.
+11
+No appropriation of funds on a non-operating basis by the Company's controlling shareholder or its related parties has
+occurred. The Company did not provide external guarantees in violation of the stipulated decision-making procedures.
+This presentation includes forward looking information, including statements regarding the likely future developments in
+the business of the Company and its subsidiaries, such as expected future events, business prospects or financial results.
+The words "expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, "should", "believe",
+"plans", "intends" and similar expressions are intended to identify such forward-looking statements. These statements are
+based on assumptions and analyses made by the Company as of this date in light of its experience and its perception
+of historical trends, current conditions and expected future developments, as well as other factors that the Company
+currently believes are appropriate under the circumstances. However, whether actual results and developments will
+meet the current expectations and predictions of the Company is uncertain. Actual results, performance and financial
+condition may differ materially from the Company's expectations, as a result of salient factors including but not limited
+to those associated with macro-political and economic factors, fluctuations in crude oil and natural gas prices, the highly
+competitive nature of the oil and natural gas industry, climate change and environment policies, the Company's price
+forecast, mergers, acquisitions and divestments activities, HSSE and insurance policies and changes in anti-corruption,
+anti-fraud, anti-money laundering and corporate governance laws.
+The financial statements of the Company have been prepared in accordance with the Chinese Accounting Standards
+for Business Enterprises and the International Financial Reporting Standards ("IFRSS")/Hong Kong Financial Reporting
+Standards ("HKFRSS"), respectively, and have been audited by Ernst & Young Hua Ming LLP and Ernst & Young accounting
+firms respectively and issued standard unqualified audit reports. Mr. Zhou Xinhuai, Chief Executive Officer and President,
+Ms. Wang Xin, Chief Financial Officer and Manager of Financial Department of the Company, warrant the truthfulness,
+accuracy and completeness of the financial report set out in this annual report.
+The annual report has been considered and approved at the 2nd meeting of the Board of the Company in 2024. Ms.
+Wen Dongfen, our Non-executive Director, was unable to attend such meeting of the Board of the Company due to other
+business arrangements, and has appointed in writing Mr. Wang Dongjin, the Chairman and Non-executive Director, to
+attend the meeting and exercise voting rights on her behalf.
+The Board of Directors (the "Board" or "Board of Directors"), directors and senior management of CNOOC Limited (the
+"Company" or "CNOOC Limited") warrant the truthfulness, accuracy and completeness of the information contained
+herein and there are no material omissions from, or misrepresentation or misleading statements, and jointly and severally
+assume full responsibility for this annual report.
+IMPORTANT NOTICE
+ANNUAL REPORT
+2023
+SEHK: 00883 (HKD counter) and 80883 (RMB counter)
+SSE: 600938
+中国海洋石油有限公司
+CNOOC Limited
+VOOC
+T
+In overall consideration of factors such as the future earnings, capital requirements, financial position, future prospect
+and cash flow of the Company, the Board proposes to distribute the final dividend for the year ended 31 December,
+2023 in the amount of HK$0.66 per share (tax inclusive) to all the shareholders. Together with the interim dividend of
+HK$0.59 per share (tax inclusive) already paid, the total final dividend and interim dividend for 2023 is HK$1.25 per
+share (tax inclusive). If there is any change in the total number of issued shares of the Company from the date of this
+annual report to the date of equity registration for the implementation of the 2023 final dividend, the Company intends
+to maintain the amount of dividend per share unchanged and adjust the total amount of profit distribution accordingly,
+and will disclose the details of the adjustment separately. Dividends payable shall be denominated and declared in
+HKD, among which, dividend for A shares will be paid in RMB, applying an exchange rate which equals to the average
+central parity rate between HKD and RMB announced by the People's Bank of China in the week before the Annual
+General Meeting declared the dividend; dividend for Hong Kong shares will be paid in HKD. The Company's final share
+distribution plan for 2023 has been approved by the 2nd meeting of the Board of the Company in 2024, and is subject
+to the approval by the shareholders in the 2023 annual general meeting of the Company.
+www.sse.com.cn
+Business Overview
+15
+31
+30
+Risk Management and Internal Control
+30
+28
+Human Resources
+Corporate Citizenship
+Health, Safety and Environmental Protection
+248.3
+Research and Scientific Development
+Sales and Marketing
+11
+Overview by Region
+Engineering Construction, Development
+Exploration
+Overview
+28
+22222233
+25
+24
+24
+18
+17
+47
+and Production
+www.hkexnews.hk
+Low Carbon Development
+Hong Kong shares: 65/F, Bank of China Tower, 1 Garden
+Road, Hong Kong
+Mboe
+Mcf
+Mmboe
+Mmbbls
+Mmcf
+CONVERSION
+A well drilled on any rock formation for the purpose of searching for petroleum accumulations,
+including a well drilled to obtain geological and geophysical parametres
+An exploratory well drilled for the purpose of evaluating the commerciality of a geological
+trap in which petroleum has been discovered
+Wildcat and appraisal wells
+Oil and gas exploration, development, production and sales
+Based on geological and engineering data, estimates of oil or natural gas quantities
+reasonably thought to be recoverable from known oil and gas reservoirs under existing
+economic, operating conditions and regulations in future years
+For a given year, total additions to proved reserves divided by production during the year
+A geophysical exploration method based on the difference in elasticity and density of
+underground medium to generate wave impedance, which is received and processed to
+reflect and infer the attribute and state of underground rock strata
+The geological reserves that have been proved economically recoverable by appraisal
+drilling during the Reservoir Appraisal phase. The volumes are estimated with a high level
+of confidence
+Oil and gas resources that cannot be obtained for natural industrial output using traditional
+development technologies, which can be economically exploited, continuously or quasi-
+continuously accumulated, only through the use of novel technologies which improve
+reservoir permeability or fluid viscosity, including tight oil and gas, shale oil and gas, coalbed
+methane, and natural gas hydrates
+Barrel
+Billion cubic feet
+Barrel of oil equivalent
+Thousand barrels
+Thousand barrels of oil equivalent
+Mbbls
+Thousand cubic feet
+BOE
+Bbl
+Level 16, Ernst & Young Tower E3, Oriental Plaza
+No.1 East Chang An Ave, Dongcheng District, Beijing
+Zhong Li, Zhao Yizhi
+Ernst & Young
+27/F, One Taikoo Place 979 King's Road Quarry Bay,
+Hong Kong
+Cheong Ming Yik
+CNOOC LIMITED Annual Report 2023
+3
+COMPANY PROFILE
+DEFINITION OF TERMS
+Wildcat well
+Appraisal well
+Exploration wells
+Upstream business
+Proved reserves
+Reserve replacement ratio
+Seismic
+Proved in-place volume
+Unconventional oil and gas
+GLOSSARY
+Bcf
+Million barrels of oil equivalent
+Million barrels
+Million cubic feet
+(3,047)
+(549)
+Share of profits/(losses) of
+associates and a joint venture
+1,002
+(632)
+346
+1,911
+1,931
+Investment income
+4,632
+2,978
+2,850
+2,058
+3,084
+Profit before tax
+85,649
+34,907
+A shares: 12/F, No. 25 Chaoyangmen Beidajie, Dongcheng
+District, Beijing
+(4,678)
+(4,717)
+(4,798)
+(Finance costs)/interest income, net
+For crude oil, 1 tonne is about 7.21 barrels
+For natural gas, 1 cubic meter is about 35.26 cubic feet
+4 CNOOC LIMITED Annual Report 2023
+FINANCIAL SUMMARY
+(All amounts expressed in millions of RMB)
+Consolidated Statement of Profit or Loss and Other Comprehensive Income (Audited)
+Year ended 31 December
+2019
+2020
+Total revenues
+Ernst & Young Hua Ming LLP
+233,199
+2021
+246,111
+2022
+422,230
+2023
+416,609
+Total expenses
+(149,004)
+(118,983)
+(150,132)
+(228,905)
+(248,840)
+155,372
+600938
+188.0
+The Stock Exchange of Hong Kong Limited
+Shanghai Stock Exchange
+00883 (HKD counter) and 80883 (RMB counter)
+Name of signing accountant:
+Office address:
+Overseas:
+Office address:
+Domestic:
+Name of signing accountants:
+中國海油
+Accounting firm employed by the Company:
+Stock Code:
+Stock Abbreviation:
+A shares:
+Stock Code:
+Hong Kong shares:
+Stock exchange where the shares are listed, stock abbreviation and stock code:
+Non-controlling interests
+shareholders of the company
+666,586
+597,182
+11.6
+1,290
+24,938
+7.4
+Total equity
+667,876
+598,383
+Equity attributable to equity
+1,201
+2.1
+330,648
+337,722
+31 December
+31 December
+Items
+2023
+2022
+Change (%)
+Current assets
+250,275
+264,679
+(5.4)
+Non-current assets
+755,323
+664,352
+13.7
+Total assets
+1,005,598
+929,031
+8.2
+Current liabilities
+123,939
+113,391
+9.3
+Non-current liabilities
+213,783
+217,257
+(1.6)
+Total liabilities
+11.6
+The Company's financial position continued to maintain
+solid. As of 31 December 2023, our total assets and total
+liabilities reached RMB1,005,598 million and RMB337,722
+million, respectively. In particular:
+Current assets amounted to RMB250,275 million, a
+decrease of 5.4% from RMB264,679 million at the end of
+2022, mainly due to the decrease in other financial assets.
+94
+At the end of 2023, our total interest-bearing debt was
+RMB120,177 million, compared to RMB134,396 million at
+the end of 2022. The decrease in debt in 2023 was primarily
+attributable to the repayment of bonds and changes in the
+exchange rate between the Renminbi and U.S. dollar in
+this year. Our gearing ratio, which is defined as interest-
+bearing debts divided by the sum of interest-bearing debts
+plus equity, was 15.2%, a significant decrease from 18.3%
+in 2022, mainly due to the repayment of bonds and the
+increase in the owner's equity in 2023.
+Net cash inflows from operating activities
+The net cash flows from operating activities increased by
+2.0% to RMB209,743 million in 2023 from RMB205,574
+million in 2022, primarily attributable to the Company's
+ongoing efforts in profitable growth of reserves and
+production.
+CNOOC LIMITED Annual Report 2023
+95
+96
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+Capital Expenditure
+The following table sets forth the Company's actual capital
+expenditure for the periods indicated:
+Year ended 31 December
+2021
+2022
+2023
+(RMB million)
+China
+Development
+48,450
+57,612
+74,240
+Exploration
+14,898
+17,807
+17,468
+Subtotal
+63,348
+75,419
+91,708
+Overseas
+Net cash outflows from financing activities
+In 2023, the net cash outflows in financing activities was
+mainly due to the repayment of bonds of RMB17,351
+million and dividend payment of RMB58,249 million.
+In addition, our cash used in investing activities was
+also attributable to the purchase of corporate wealth
+management products and structured deposits of
+RMB44,641 million this year. Our cash generated from
+investing activities was mainly from the returns on due
+corporate wealth management products and structured
+deposits in the amount of RMB89,006 million, and our
+time deposits with maturity over three months increased
+by RMB8, 194 million.
+Net cash outflows from investing activities
+In 2023, our capital expenditure payment increased by
+48.5% to RMB120,875 million from RMB81,373 million
+in 2022. Our development expenditures in 2023 were
+primarily related to the oil and gas fields development
+projects in offshore China, as well as projects in Guyana
+and Brazil, and the expenditure incurred for improving
+recovery factors of the oil and gas fields in producing.
+(19,266) 29.7
+CNOOC LIMITED Annual Report 2023
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+Non-current assets amounted to RMB755,323 million, an
+increase of 13.7% from RMB664,352 million at the end of
+2022, mainly due to the increase in property, plant and
+equipment and other non-current assets.
+Current liabilities amounted to RMB123,939 million, an
+increase of 9.3% from RMB113,391 million at the end of
+2022, mainly due to the increase in taxes payable.
+Non-current liabilities amounted to RMB213,783 million, a
+decrease of 1.6% from RMB217,257 million at the end of
+2022, mainly due to the decrease in loans and borrowings.
+CAPITAL RESOURCES AND LIQUIDITY
+Overview
+Our primary source of cash during 2023 was cash flows
+from operating activities. We used cash primarily to fund
+capital expenditure and dividends. The changes are as
+follows:
+2023
+2022
+Change
+RMB
+RMB
+Unit: million Currency: RMB
+RMB
+million
+2.0
+Generated from
+operating activities
+209,743
+205,574
+4,169
+Used in investing
+activities
+(78,095) (98,473)
+20,378
+(20.7)
+Used in financing
+activities
+(84,228) (64,962)
+million million
+Assets, liabilities and equity
+Our income tax expense decreased by 7.9% to RMB48,884
+million in 2023 from RMB53,093 million in 2022, mainly
+due to the impact of decrease of the international oil
+prices, which led to the decline in the Company's overall
+profit before tax.
+Income tax expense
+90
+CNOOC LIMITED Annual Report 2023
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+The following discussion and analysis should be read along
+with the Chairman's Statement and the Business Overview
+sections, as well as the Company and its subsidiaries'
+audited financial statements and the related notes.
+DEVELOPMENT STRATEGY
+As the largest offshore crude oil and natural gas producer
+in China and one of the largest independent oil and gas
+exploration and production companies in the world, we
+mainly engage in the exploration, development, production
+and sales of crude oil and natural gas. The Company's
+development strategy mainly covers the following three
+aspects.
+Focus on reserves and production growth
+As an upstream company specialising in the exploration,
+development, production and sale of oil and natural
+gas, the Company focuses on the continuous increase
+of reserves and production, which is regarded as the
+cornerstone of development. The Company keeps its focus
+on profitability, and expands reserves and production
+through exploration, development, production and value-
+driven acquisitions. In terms of exploration, the Company
+will adhere to the strategy of stabilising oil and increasing
+gas, and weighting more on gas to stablise the exploration
+in Bohai, accelerate exploration in the South China Sea,
+expand exploration in the East China Sea, explore in the
+Yellow Sea, strengthen overseas exploration and promote
+unconventional exploration. In terms of development and
+production, to achieve profitable production growth,
+the Company actively promotes the construction of key
+projects and maintains a stable and increasing production
+in producing oil and gas fields.
+Develop natural gas business
+The Company implements the low-carbon development
+concept and expands the natural gas business actively.
+While solidly promoting offshore gas exploration and
+development, the Company has increased its efforts in
+onshore unconventional gas exploration and development.
+The Company will build South China Sea trillion-cubic-
+meters-level gas fields with the support of "Shenhai-1",
+the first proprietary deep-water large-scale integrated
+natural gas field in the South China; develop the trillion-
+cubic-meters-level gas fields in Bohai Sea centered on the
+Bozhong 19-6 large condensate gas field; and develop its
+onshore trillion-cubic-meters-level gas fields by CUCBM as
+a platform. By 2025, it is expected that the percentage of
+natural gas in the Company's gross output will be further
+improved.
+Maintain prudent financial policies
+The Company upholds our prudent financial policies.
+Thanks to years of sustained efforts to increase reserves
+and production and improve quality and efficiency, the
+Company's profitability continued to increase. In 2023,
+the Company continued to maintain a cost competitive
+advantage, with the all-in cost at US$28.83 per BOE.
+The Company also put more emphasis on to cash flow
+management and maintains a healthy financial position. In
+2023, the Company's free cash flow was RMB88.9 billion
+and the gearing ratio was 15.2% as at the end of the year.
+In the future, the Company will consider cost control as
+one of the key indicators in the performance appraisal and
+evaluation system, and will continue to control costs in
+order to further consolidate its competitive cost structure.
+CORE COMPETITIVENESS
+Abundant oil and gas resources with leading
+production growth capacity in the industry
+The Company has abundant resources. As of the end
+of 2023, the Company had net proved reserves of
+approximately 6.78 billion BOE. In 2023, the reserve
+replacement ratio reached 180% and the reserve life
+remained above 10 years for seven consecutive years,
+further consolidating the reserve base. During the year,
+the Company's net production reached 678.0 million BOE,
+an increase of 8.7% year-on-year, leading the peers in the
+industry in terms of production growth.
+Leading exploration and development
+activities in offshore China with obvious
+advantages in regional development
+The oil and gas exploration in offshore China is overally in
+a relatively early stage, indicating a huge growth potential
+of reserve and production. The Company is the dominant
+producer of oil and natural gas in offshore China with
+extensive experiences in exploration and development
+and has become an expert on China's offshore basins.
+Present, the Company has a high exploration success
+rate in offshore China, with over 150 oil and gas fields
+in production. The Company has established offshore
+production facilities and subsea piping systems in offshore
+China which could provide strong support to regional
+exploration and exploitation in the future.
+CNOOC LIMITED Annual Report 2023
+91
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+In possession of a complete set of technical
+system for offshore oil and gas exploration
+and exploitation
+The Company has established a complete technology
+system for offshore oil and gas exploration, development
+and production. Breakthroughs have been made for
+ultradeepwater oil and gas field development engineering
+in water depth of over 1,500 meters. The Company has
+made positive progress in key technical fields such as
+exploration in medium to deep strata, enhanced water
+flooding and other production stimulation measures,
+effective development of large-scale thermal recovery of
+heavy oil, enhanced recovery rate in producing oil and gas
+fields, and subsea production system, which all provide
+strong support to the long-term sustainable development
+of offshore oil and gas business.
+Effective cost control and healthy financial
+performance
+The Company has a complete cost control system and
+industry-leading profitability per BOE. Over the years, the
+Company has maintained a sound ability to generate cash
+flow, and its financial condition remained sound and stable
+with a low gearing ratio and a strong financing capability.
+In possession of a diverse asset structure
+The Company possesses oil and gas assets worldwide.
+It has a diverse asset structure and strong capacity of
+globalised operation and management. It holds interests
+in many world-class oil and gas projects such as Stabroek
+in Guyana and Buzios, Mero in Brazil, and owns assets
+in more than 20 countries and regions around the world.
+Steady progress towards green and low-
+carbon development
+Upholding the green and low-carbon development concept,
+the Company effectively leverages its overall strengths to
+actively expand its presence in the new energy sector. It
+prioritizes the development of offshore renewable energy
+projects while also pursuing selected opportunities in
+onshore new energy ventures. Furthermore, the Company
+is dedicated to promoting the integration of new energy
+with oil and gas development, with a particular focus on
+the robust development of offshore wind power. In line with
+its commitment to both immediate priorities and long-term
+objectives, the Company steadily advances the growth of
+zero-carbon and carbon-negative industries.
+2023 OVERVIEW
+In 2023, geopolitical conflicts persisted and global economic
+growth momentum was insufficient. The performance of
+developed economies is divergent, with the US economy
+remaining resilient and European growth weak; The overall
+performance of emerging economies was stable. China's
+economy continued to recover, with a year-on-year
+increase of 5.2%. According to statistics from the IMF,
+the global economic growth rate was 3.1%. Influenced
+by factors such as economic growth expectations, market
+supply and demand, financial markets, and geopolitical
+issues, international oil prices experienced volatility and
+a downward trend in the first half of the year, followed
+by a rise and subsequent decline in the second half of
+the year. In 2023, the average price of Brent crude oil
+was US$82.2 per barrel, representing a decrease of
+approximately 17.0% year over year.
+In 2023, the oil and gas industry in China continued its
+high-quality development. Oil and gas producers in China
+consistently increased their efforts in exploration and
+development. Crude oil production witnessed continuous
+growth for six consecutive years, while natural gas
+production growth surpassed 10 billion cubic meters
+for the seventh consecutive year. These achievements
+have provided a solid foundation for social and economic
+development.
+Hong Kong, 21 March 2024
+By Order of the Board
+WANG Dongjin
+Chairman
+In 2023, all votes of shareholders were taken by poll in the
+annual general meeting of the Company. Pursuant to the
+Rule 13.39 (4) of the Listing Rules of Stock Exchange, all
+votes of shareholders will be taken by poll except where
+the chairman, in good faith, decides to allow a resolution
+which relates purely to a procedural or administrative
+matter to be voted on by a show of hands.
+VOTING BY POLL
+REPORT OF THE DIRECTORS
+All the interests stated above represent long positions.
+As of 31 December 2023, save as disclosed above,
+the Directors and chief executive of the Company are
+not aware of any other person having interests or short
+positions (other than the Directors and chief executives
+of the Company) in the shares and underlying shares
+which would fall to be disclosed to the Company under
+the provisions of Divisions 2 and 3 of Part XV of the SFO
+or which would be required to be recorded in the register
+of members required to be kept under Section 336 of the
+SFO, or who is, directly or indirectly, interested in 10%
+or more of the nominal value of any class of share capital
+carrying rights to vote in all circumstances at general
+meetings of any other member of the Company and its
+subsidiaries.
+DIRECTORS AND SENIOR MANAGEMENT
+OF THE COMPANY
+Please refer to pages 68 to 77 of this annual report
+for information concerning the Directors and senior
+management of the Company.
+DIRECTORS' SERVICE CONTRACTS
+AND INTERESTS IN TRANSACTION,
+ARRANGEMENT AND CONTRACT OF
+SIGNIFICANCE
+No Director (including those to be re-elected) has an
+unexpired service contract with the Company which is
+not determinable by the Company within one year without
+payment of compensation (other than normal statutory
+obligations).
+Save as disclosed in this annual report, as of 31 December
+2023 or during 2023, none of the Directors or entities
+connected with the Directors was materially interested,
+either directly or indirectly, in any transaction, arrangement
+or contract which is significant in relation to the business of
+the Company and its subsidiaries to which the Company
+or any of its subsidiaries was a party.
+DIRECTORS' PERMITTED INDEMNITY
+PROVISION
+Pursuant to the Articles, every Director or other officer
+of the Company shall be entitled to be indemnified out
+of the assets of the Company against all costs, charges,
+expenses, losses and liabilities which he/she may sustain
+or incur in or about the execution of the duties of his/
+her office or otherwise in relation thereto. The Company
+has arranged appropriate Directors and officers Liability
+Insurance coverage for the Directors and officers of the
+Company and its subsidiaries during the year ended 31
+December 2023.
+MANAGEMENT CONTRACTS
+Other than the service contracts of the Directors, the
+Company has not entered into any contract with any
+individual, firm or body corporate to manage or administer
+the whole or any substantial part of any business of the
+Company during the year.
+EMOLUMENTS OF THE DIRECTORS,
+SENIOR MANAGEMENT AND THE FIVE
+HIGHEST PAID INDIVIDUALS
+Please refer to notes 8 and 9 to the consolidated financial
+statements on pages 130 to 133 of this annual report
+for details of the emoluments of the Directors, senior
+management and the five highest paid individuals of the
+Company.
+Facing a complex external environment, we remained
+steadfast in increasing reserves and production. Both
+proved reserves and net production have reached new
+highs. We also continued to advance technological
+innovation, steadily promoted green development, and
+persistently implemented measures to enhance quality,
+reduce costs, and increase efficiency. As a result, the
+quality of development has steadily improved.
+MATERIAL LEGAL PROCEEDINGS
+CNOOC LIMITED Annual Report 2023
+89
+REPORT OF THE DIRECTORS
+DAILY WORK OF THE BOARD
+During the report period, the Board of the Company
+conscientiously and diligently performed its duties as
+the directors, implement the resolutions adopted at the
+shareholders' general meeting and implement all matters
+as authorized by the shareholders' general meeting
+in accordance with the applicable laws, regulations,
+regulatory rules and the Articles of Association. Please
+refer to the Corporate Governance Report on pages 37 to
+67 of this annual report for the convening of meetings of
+the Board and each special committee of the Company,
+attendance by Directors, major tasks and performance of
+duties during the year 2023.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+The Company has complied with all code provisions in
+the "Corporate Governance Code" as set out in Part II of
+former Appendix 14 to the Listing Rules of Stock Exchange
+throughout the year ended 31 December 2023.
+Please refer to the Corporate Governance Report on pages
+37 to 67 of this annual report for details.
+AUDITORS
+On 31 May 2023, upon approval by the shareholders at
+the annual general meeting, the Company re-appointed
+Ernst & Young and Ernst & Young Hua Ming LLP (Special
+General Partnership) as the independent auditors of
+the Company and its subsidiaries for the year of 2023,
+responsible for the reporting in Hong Kong and mainland
+China respectively. The auditors have conducted audit
+work for the Company for three consecutive years. The
+certified public accountants who will sign the audit report
+of the Company are Cheong Ming Yik, Zhong Li and Zhao
+Yizhi. Each of the aforesaid certified public accountants
+has provided audit services to the Company for three
+years, three years and three years, respectively. Ernst &
+Young and Ernst & Young Hua Ming LLP (Special General
+Partnership) have audited the financial statements of the
+Company and its subsidiaries for the year ended 31
+December 2023.
+A resolution to appoint the auditors of the Company and
+its subsidiaries for the year 2024, and to authorise the
+Board to fix their remuneration will be proposed at the
+forthcoming Annual General Meeting in 2024.
+SUFFICIENCY OF PUBLIC FLOAT
+As of the date of this report, the Directors confirmed
+that based on information that is publicly available to the
+Company and within the knowledge of the Directors, the
+Company had maintained sufficient amount of public float
+as required under the Listing Rules of Stock Exchange and
+the Listing Rules of SSE.
+As of 31 December 2023, the Company was not involved in
+any material litigation or arbitration and no material litigation
+or arbitration were pending or threatened or made against
+the Company so far as the Company is aware.
+Development
+In order to provide more investment flexibility to
+shareholders and potential investors, the Company has
+actively applied for the launch of a RMB counter on the
+Hong Kong Stock Exchange, and has become one of the
+first batch of listed companies to include the "HKD-RMB
+Dual Counter Model" on 19 June 2023.
+BUSINESS REVIEW
+(18.63) (19.3)
+Natural gas (US$/mcf)
+7.98
+8.58
+(0.60) (7.0)
+Excluding our interest in equity-accounted investees.
+Operating expenses
+Our total amounts of operating expenses increased by
+10.3% to RMB34,802 million in 2023 from RMB31,566
+million in 2022, mainly due to the increase of total costs
+expenses as a result of the increase of production. Due
+to the Company's insistence on enhancing quality and
+efficiency to reduce costs in 2023, the operating expenses
+per BOE has been well controlled, and our operating
+expenses per BOE increased by 2.1% to RMB53.2(US$7.54)
+per BOE in 2023 from RMB52.1 (US$7.74) per BOE in
+2022. China operating expenses per BOE increased
+by 2.9% to RMB46.7(US$6.63) per BOE in 2023 from
+RMB45.4(US$6.75) per BOE in 2022. Overseas operating
+expenses per BOE was RMB68.9 (US$9.77) per BOE in
+2023, and was basically steady with RMB68.9 (US$10.24)
+per BOE in 2022.
+Taxes other than income tax
+Our taxes other than income tax increased by 29.6% to
+RMB24,331 million in 2023 from RMB18,778 million in
+2022, mainly due to the recognisation of the proceeds from
+assignment of mining rights under the newly promulgated
+regulations this year.
+Exploration expenses
+Exploration expenses of the Company decreased by 2.4%
+to RMB13,716 million in 2023 from RMB14,058 million
+in 2022, mainly due to the Company's ongoing efforts in
+reserves and production growth and maintaining the high
+exploration intensity.
+Depreciation, depletion and amortisation
+Our total amount of depreciation, depletion and
+amortisation increased by 9.7% to RMB68,947 million in
+2023 from RMB62,852 million in 2022, mainly due to the
+increase of depreciation, depletion and amortization as a
+results of the increase of production.
+The total amount of dismantlement provision-related
+depreciation, depletion and amortisation increased by
+12.2% to RMB3,851 million in 2023 from RMB3,432 million
+in 2022. Our dismantling cost per BOE increased by 2.1%
+to RMB5.85 (US$0.83) per BOE in 2023 from RMB5.73
+(US$0.85) per BOE in 2022.
+CNOOC LIMITED Annual Report 2023 93
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+The amount of depreciation, depletion and amortisation
+(excluding the dismantling costs) increased by 9.6% to
+RMB65,096 million in 2023 from RMB59,420 million in
+2022, mainly due to the increase of total costs expenses
+as a result of the increase of production. Our amount of
+depreciation, depletion and amortisation per BOE (excluding
+the dismantling costs) was RMB99.1 (US$14.06) per BOE
+in 2023, essentially equivalent to RMB98.7 (US$14.67)
+per BOE in 2022.
+Impairment and provision
+Our impairment and provision increased by RMB2,846
+million to RMB3,523 million in 2023 from RMB677 million in
+2022, primarily due to the impact of impairment allowance
+on oil and gas assets in North America.
+Selling and administrative expenses
+Our selling and administrative expenses increased by 4.6%
+to RMB10,952 million in 2023 from RMB10,468 million in
+2022, due to the increase of related costs as a result of
+our higher of oil and gas sales volume. Our selling and
+administrative expenses per BOE decreased by 5.2% to
+RMB16.14 (US$2.29) per BOE in 2023 from RMB17.02
+(US$2.53) per BOE in 2022.
+Interest income
+Our interest income increased by 61.2% to RMB4,805
+million in 2023 from RMB2,980 million in 2022, primarily
+due to the higher interest income as a result of the increase
+in interest rates for deposits in U.S.dollars and the increase
+in the size of time deposits.
+Exchange gains/losses, net
+Our net exchange loss was RMB297 million in 2023, with a
+change of RMB315 million compared to the exchange gain
+of RMB18 million in 2022, primarily arising from Renminbi
+exchange rate fluctuation against the Hong Kong dollar
+and U.S. dollar.
+Investment income
+Our investment income increased by 49.9% to RMB3,084
+million in 2023 from RMB2,058 million in 2022, mainly
+due to the increase of overall revenue as a result of the
+optimization of structure of the investment products and
+the changes in market interest rates.
+96.59
+77.96
+Crude and liquids (US$/barrel)
+Realised prices
+For details, please refer to the "Business Overview" section
+of this annual report.
+92 CNOOC LIMITED Annual Report 2023
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+FINANCIAL RESULTS
+Net profit attributable to shareholders of the
+Company
+Our net profit attributable to shareholders of the Company
+decreased by 12.6% to RMB123,843 million in 2023 from
+RMB141,700 million in 2022, primarily as a result of the
+increase reserves and production, enhancing quality and
+efficiency to reduce costs, which effectively resisted the
+adverse impact of the decline in international oil prices.
+Operating Revenues
+The Company's operating revenues decreased by 1.3%
+to RMB416,609 million in 2023 from RMB422,230 million
+in 2022, mainly due to the increase of oil and gas sales
+volume and marketing sales volume and the decrease of
+international oil price. Oil and gas sales revenue, oil and gas
+prices and sales volume year-on-year data are as follows:
+%
+Oil and gas sales (RMB million)
+Crude and liquids
+Natural gas
+2023 2022 Amount
+327,867 352,956 (25,089)
+(7.1)
+282,447 311,035 (28,588)
+The basic earnings per share and diluted earnings per
+share of the Company during the year ended 31 December
+2023 was RMB2.60 and RMB2.60 respectively. The Board
+of Directors has recommended the payment of a final
+dividend of HK$0.66 per share (tax inclusive).
+(9.2)
+8.3
+Sales volume (million BOE)*
+653.2 603.6 49.6
+8.2
+Crude and liquids (million barrels)
+514.5 478.7
+35.8
+7.5
+Natural gas (bcf)
+807.4
+726.2
+81.2
+11.2
+45,420 41,921 3,499
+21,088
+KEY AUDIT MATTERS (continued)
+33,904
+979 King's Road
+香港鰂魚涌英皇道979號
+太古坊一座27樓
+Tel電話:+852 28469888
+Fax +852 2868 4432
+ey.com
+Quarry Bay, Hong Kong
+To the shareholders of CNOOC Limited
+(Incorporated in Hong Kong with limited liability)
+OPINION
+We have audited the consolidated financial statements of CNOOC Limited (the "Company") and its subsidiaries (the "Group")
+set out on pages 102 to 166, which comprise the consolidated statement of financial position as at 31 December 2023, and
+the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
+and the consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements,
+including material accounting policy information.
+In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group
+as at 31 December 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended
+in accordance with International Financial Reporting Standards ("IFRSS") issued by the International Accounting Standards
+Board ("IASB") and Hong Kong Financial Reporting Standards ("HKFRSS") issued by the Hong Kong Institute of Certified Public
+Accountants ("HKICPA") and have been properly prepared in compliance with the Hong Kong Companies Ordinance.
+BASIS FOR OPINION
+We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAS") issued by the HKICPA. Our
+responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated
+financial statements section of our report. We are independent of the Group in accordance with the HKICPA's Code of Ethics
+for Professional Accountants (the "Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code.
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
+KEY AUDIT MATTERS
+Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated
+financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
+statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For
+each matter below, our description of how our audit addressed the matter is provided in that context.
+We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the consolidated financial statements
+section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures
+designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The
+results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our
+audit opinion on the accompanying consolidated financial statements.
+27/F, One Taikoo Place
+CNOOC LIMITED Annual Report 2023
+98
+EY安永
+Key audit matter
+The estimation of oil and gas reserves
+At 31 December 2023, the carrying amount of the Group's
+oil and gas properties was RMB584,309 million, and
+depreciation, depletion and amortisation expense was
+RMB66,581 million for the year ended 31 December 2023. Oil
+and gas properties are depreciated on a unit-of-production
+basis at a rate calculated by reference to the proved reserves.
+Commercial reserves are determined using estimates of oil
+in place, future oil price and recovery factors. The level of
+estimated commercial reserves is also a key determinant in
+assessing whether the carrying value of any of the Group's oil
+and gas properties has been impaired. Relevant disclosures
+are included in Note 3 and Note 13 to the consolidated
+financial statements.
+Management made significant judgements when assessing
+quantities of reserves. Hence, we consider the estimation of
+oil and gas reserves as a key audit matter.
+How our audit addressed the key audit matter
+We obtained an understanding, evaluated the design and tested
+the operating effectiveness of internal controls that address the
+risks of material misstatement relating to the reserve estimation
+process.
+We evaluated the competency and objectivity of the Group's
+internal and external reserve specialists. We evaluated whether
+the methodology adopted by the Group's internal and external
+reserve specialists to estimate oil and gas reserves and selection
+of related estimates were consistent with the recognised industry
+standards.
+We compared the Group's oil and gas reserves volumes at 31
+December 2023 to that at 31 December 2022, and performed
+corroborative inquiries of the reserve specialists and the
+management on the reasons for any significant changes.
+We tested whether the updated estimation of oil and gas reserves
+was included appropriately in the Group's consideration in oil and
+gas properties' impairment testing and depreciation, depletion
+and amortisation charges in accordance with the Group's
+accounting policy.
+We also assessed the adequacy of the Group's disclosures
+included in Note 3 and Note 13 to the consolidated financial
+statements regarding the estimation of oil and gas reserves.
+CNOOC LIMITED Annual Report 2023
+22,289
+97
+安永會計師事務所
+Independent Auditor's Report
+EY安永
+Exploration
+Ernst & Young
+3,156
+2,649
+2,301
+Subtotal
+24,244
+Total
+87,592
+100,357
+127,913
+Note: Capitalised interests for 2021, 2022 and 2023 were
+RMB2,086 million, RMB1,991 million and RMB2,840
+million, respectively.
+OTHERS
+Employees
+36,205
+The Company has set up a market-oriented recruitment
+structure and has adopted an appropriate remuneration
+structure.
+CNOOC LIMITED Annual Report 2023
+As of 31 December 2023, the Company had 19,511
+employees in China, 2,275 employees overseas and 207
+contracted employees.
+For the principal risks that the Company may face in its
+future operations, please refer to the Risk Management
+and Internal Control section of this report.
+For other information on the Company's business strategy
+and development objectives for 2024, please refer to the
+"2024 Business Strategy" published on the website of
+the Hong Kong Stock Exchange (www.hkexnews.hk) and
+"Announcement on Business Strategy of CNOOC Limited
+for 2024" (Announcement No.: 2024-001) published on
+the website of the Shanghai Stock Exchange (www.sse.
+com.cn) by the Company on 25 January 2024, and the
+disclosure under the section of the Chairman's Statement
+in this report.
+In 2024, we will insist on increasing oil and gas reserves
+and production and promoting independent innovation in
+science and technology. Moreover, we will push forward
+the green transformation, implement quality and efficiency
+improvement actions and further enhance our value creation
+capacity to bring greater returns to our shareholders.
+For the full year, capital expenditure is expected to be
+RMB125-135 billion, production is targeted at 700-720
+million BOE, and reserve replacement ratio will be no less
+than 130%. At the same time, the Company will maintain
+a sound health, safety and environmental performance.
+Oil and gas will continue to play a significant part in the
+structure of the world's energy demand for a long time.
+The ongoing recovery and positive trajectory of China's
+economy supports the demand for oil and gas. The
+offshore oil and gas serves as a significant growth driver
+for oil and gas production in China, offering substantial
+opportunities for the development of the Company.
+Looking ahead to 2024, despite the negative impact of
+geopolitical uncertainties, the global economic growth is
+expected to maintain muted growth, with a gradual decline
+in inflation levels and the lower risk of an economic hard
+landing. As China's economy remains on a long-term
+upward trend, China will still be the largest driver of global
+growth.
+Please refer to note 35 to the Consolidated Financial
+Statements of this annual report.
+CONTINGENCIES
+Please refer to note 39 to the Consolidated Financial
+Statements of this annual report.
+CHARGES ON ASSETS
+For more information on employees and human resources,
+please refer to "Human Resources" in the "Business
+Overview" section of this annual report.
+OUTLOOK FOR 2024
+Independent Auditor's Report
+28,562
+29,885
+12,680
+Other non-current assets
+10(i)
+20
+40,442
+755,323
+19(ii), 36
+4,232
+6,026
+Total non-current assets
+664,352
+CURRENT ASSETS
+Deferred tax assets
+Inventories and supplies
+Other non-current financial assets
+1,075
+34578
+19(i), 36
+21
+Intangible assets
+Investments in associates
+Investment in a joint venture
+Debt investment
+Equity investments
+592,920
+532,719
+886
+12,039
+16,769
+16,600
+28,910
+27,942
+22,342
+20,985
+8,221
+5,975
+10,465
+6,451
+Contract liabilities
+Trade receivables
+Total current assets
+250,275
+264,679
+CURRENT LIABILITIES
+Loans and borrowings
+Trade and accrued payables
+Lease liabilities
+Right-of-use assets
+85,633
+Other payables and accrued liabilities
+Taxes payable
+Total current liabilities
+NET CURRENT ASSETS
+TOTAL ASSETS LESS CURRENT LIABILITIES
+104
+CNOOC LIMITED Annual Report 2023
+27
+21,894
+Derivative financial instruments
+6,239
+133,439
+35,754
+22
+37,052
+37,992
+Other financial assets
+19(ii), 36
+44,304
+88,209
+Derivative financial instruments
+23
+43
+Other current assets
+11,863
+10,822
+Time deposits with maturity over three months but within one year
+Cash and cash equivalents
+22
+23
+17,123
+30
+Property, plant and equipment
+Consolidated Statement of Financial Position
+2022
+598,383
+667,876
+217,257
+213,783
+10,238
+9,781
+10,271
+10,845
+10(i)
+87,042
+97,091
+29
+6,561
+7,858
+28
+103,145
+88,208
+Issued capital
+Reserves
+35
+30
+24
+Zhou Xinhuai
+Director
+Director
+Wang Dongjin
+598,383
+667,876
+TOTAL EQUITY
+1,201
+27
+1,290
+597,182
+666,586
+Equity attributable to equity shareholders of the Company
+522,002
+591,406
+31
+75,180
+75,180
+Non-controlling interests
+NON-CURRENT ASSETS
+EQUITY
+Total non-current liabilities
+1,691
+1,383
+25
+12
+1,873
+2,217
+28
+59,789
+61,382
+3.03
+Details of the dividends proposed and paid for the year are disclosed in note 12 to the consolidated financial statements.
+CNOOC LIMITED Annual Report 2023 103
+Consolidated Statement of Financial Position
+31 December 2023
+(All amounts expressed in millions of Renminbi)
+Notes
+2023
+26
+11,908
+10,676
+25
+Other non-current liabilities
+Deferred tax liabilities
+Provision for dismantlement
+Loans and borrowings
+Lease liabilities
+NON-CURRENT LIABILITIES
+2022
+2023
+Notes
+NET ASSETS
+(All amounts expressed in millions of Renminbi)
+881,659
+151,288
+126,336
+113,391
+123,939
+16,513
+25,130
+32
+31 December 2023
+22,817
+32,099
+Consolidated Statement of Changes in Equity
+Acquisition of oil and gas properties
+Capital expenditure
+(13,381)
+(120,875)
+(81,373)
+Additions to investments in associates
+(1,966)
+(462)
+(Increase)/decrease in time deposits with maturity over three
+months
+(8,194)
+1,473
+Dividends received from associates
+231
+CASH FLOWS FROM INVESTING ACTIVITIES
+291
+138
+45
+Interest received
+5,402
+2,753
+Investment income received
+2,780
+Purchase of other financial assets
+(44,641)
+Proceeds from sale of other financial assets
+89,006
+Proceeds from disposal of property, plant and equipment
+24
+2,763
+(111,936)
+101,261
+93
+Dividends received from a joint venture
+Net cash flows used in investing activities
+Net cash flows from operating activities
+209,743
+75,180
+3,095*
+70,000*
+2,966*
+486,854*
+28,491*
+666,586
+1,290
+667,876
+Dividend to non-controlling
+interests of subsidiaries
+Capital contributions from
+non-controlling interests of
+subsidiaries
+These reserve accounts constitute the consolidated reserves of approximately RMB591,406 million (2022: RMB522,002 million) in the consolidated
+statement of financial position.
+205,574
+106
+Consolidated Statement of Cash Flows
+Year ended 31 December 2023
+(All amounts expressed in millions of Renminbi)
+Notes
+2023
+2022
+CASH FLOWS FROM OPERATING ACTIVITIES
+Cash generated from operations
+34
+255,187
+256,575
+Income taxes paid
+(45,444)
+(51,001)
+CNOOC LIMITED Annual Report 2023
+(78,095)
+(98,473)
+CASH FLOWS FROM FINANCING ACTIVITIES
+(1,336)
+(77,378)
+(5,043)
+CNOOC LIMITED Annual Report 2023
+107
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+1.
+2.1
+2.2
+CORPORATE INFORMATION
+CNOOC Limited (the "Company") was incorporated in the Hong Kong Special Administrative Region ("Hong Kong") of
+the People's Republic of China (the "PRC") on 20 August 1999 to hold the interests in certain entities thereby creating a
+group comprising the Company and its subsidiaries. During the year, the Company and its subsidiaries were principally
+engaged in the exploration, development, production and sale of crude oil and natural gas.
+The registered office address of the Company is 65/F, Bank of China Tower, 1 Garden Road, Hong Kong.
+In the opinion of the directors of the Company (the "Directors"), the ultimate holding company of the Company is China
+National Offshore Oil Corporation ("CNOOC Group"), a company established in the PRC.
+STATEMENT OF COMPLIANCE
+850
+These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSS")
+issued by the International Accounting Standards Board (the "IASB"), Hong Kong Financial Reporting Standards ("HKFRSS")
+issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA"), the Rules Governing the Listing of
+Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules of Stock Exchange") and the Hong Kong
+Companies Ordinance (Cap. 622 of the Laws of Hong Kong). A summary of the material accounting policies adopted by
+the Company and its subsidiaries is set out below.
+The IASB has issued a number of new and amendments to IFRSS that are first effective for the current accounting year
+commencing 1 January 2023 or later but available for early adoption. The equivalent new and amendments to HKFRSS
+consequently issued by the HKICPA have the same effective dates as those issued by the IASB and are in all material
+aspects identical to the pronouncements issued by the IASB.
+The accounting policies adopted are consistent with those of the year ended 31 December 2022, except for the first time
+adoption of the new and amendments to IFRSS/HKFRSS effective for and relevant to the Company and its subsidiaries'
+financial year beginning on 1 January 2023 as follows:
+Amendments to IAS 1/HKAS 1 and
+IFRS/HKFRS Practice Statement 2
+Amendments to IAS 8/HKAS 8
+Amendments to IAS 12/HKAS 12
+Amendments to IAS 12/HKAS 12
+Disclosure of Accounting Policies
+Definition of Accounting Estimates
+Deferred Tax related to Assets and Liabilities arising from a
+Single Transaction
+International Tax Reform - Pillar Two Model Rules
+The application of Amendments to IAS 12/HKAS 12 Deferred Tax related to Assets and Liabilities arising from a Single
+Transaction, did not have any impact on the overall deferred tax balances presented in the consolidated statement of
+financial position as the related deferred tax balances qualified for offsetting under IAS 12/HKAS 12. Upon the application
+of the amendments, the Company and its subsidiaries determined the temporary differences arising from lease and
+dismantlement obligations, which have been reflected in the reconciliation disclosed in note 10(i) to the consolidated
+financial statements. Except for the above, the application of the new and amendments to IFRSS/HKFRSS in the current
+year has had no material impact on the accounting policies, the disclosures or the amounts recognised in the consolidated
+financial statements of the Company and its subsidiaries.
+108
+CNOOC LIMITED Annual Report 2023
+CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
+(623)
+(11,244)
+(2,446)
+(17,351)
+(3,460)
+170
+85,633
+Proceeds from issue of shares
+32,099
+Share repurchase
+Repayment of guaranteed notes
+Repayments of lease liabilities
+Proceeds from bank loans
+Repayment of bank loans
+Dividends paid
+Interest paid
+Others
+Net cash flows used in financing activities
+NET INCREASE IN CASH AND CASH EQUIVALENTS
+Cash and cash equivalents at beginning of year
+Effect of foreign exchange rate changes, net
+CASH AND CASH EQUIVALENTS AT END OF YEAR
+(352)
+(58,249)
+133,439
+23
+23
+2,062
+386
+41,432
+Balance at 31 December 2023
+85,633
+47,420
+(64,962)
+(84,228)
+159
+111
+(5,097)
+42,139
+8
+Others
+111
+net of tax
+17,945
+1,484
+19,429
+19,429
+Total comprehensive income/
+(expense)
+17,945
+1,484
+141,700
+161,129
+(23)
+161,106
+Special dividend
+Other comprehensive income,
+(47,372)
+(47,372)
+2022 interim dividend
+(28,967)
+(28,967)
+(28,967)
+Proposed 2022 final dividend
+(31,610)
+31,610
+Issue of shares, net of
+32,099
+32,099
+3.03
+transaction costs
+Capital contributions from
+(47,372)
+141,677
+(23)
+141,700
+Year ended 31 December 2023
+(All amounts expressed in millions of Renminbi)
+Attributable to equity shareholders of the Company
+Cumulative
+Statutory
+and non-
+Proposed
+Non-
+Issued translation distributable
+Other
+Retained
+final
+controlling
+capital
+reserves
+reserves
+reserves
+earnings
+141,700
+Profit/(loss) for the year
+481,976
+1,064
+480,912
+384,363
+non-controlling interests of
+subsidiaries
+1,180
+(17,712)
+43,081
+Balance at 1 January 2022
+interests Total equity
+Total
+dividend
+70,000
+CNOOC LIMITED Annual Report 2023 105
+Transfer of fair value reserve
+69
+Profit for the year
+123,843
+123,843
+247
+124,090
+Other comprehensive income,
+net of tax
+2,863
+172
+3,035
+3,035
+Total comprehensive income
+2,863
+172
+598,383
+123,843
+247
+127,125
+2022 final dividend
+(204) (31,610)
+(31,814)
+(31,814)
+2023 interim dividend
+(25,669)
+(25,669)
+(25,669)
+Proposed 2023 final dividend
+(28,491) 28,491
+(268)
+(268)
+126,878
+1,201
+597,182
+31,610*
+159
+159
+69
+upon the disposal of equity
+investments
+115
+Share repurchase
+(115)
+(623)
+(623)
+(623)
+Others
+4
+4
+1
+5
+Balance at 31 December 2022
+75,180
+417,375*
+2,785*
+70,000*
+232*
+75,180
+Balance at 1 January 2023
+I
+598,383
+597,182
+31,610*
+417,375*
+2,785*
+70,000*
+232*
+1,201
+2.60
+2.60
+815,640
+Diluted (RMB Yuan)
+(31,566)
+(34,802)
+Taxes other than income tax
+Operating expenses
+EXPENSES
+422,230
+416,609
+8,841
+10(ii), (iv)
+352,956
+60,433
+327,867
++4
+2022
+2023
+Notes
+Other revenue
+Marketing revenues
+Oil and gas sales
+79,308
+9,434
+Revenue recognised from contracts with customers
+(24,331)
+Exploration expenses
+11
+(74)
+6
+Expected credit (losses)/reversal
+(677)
+(3,523)
+6, 13
+Impairment and provision recognised, net
+(18,778)
+(24,214)
+10(iii)
+Special oil gain levy
+(62,852)
+(68,947)
+6
+Depreciation, depletion and amortisation
+(14,058)
+(13,716)
+(9,517)
+Crude oil and product purchases
+REVENUE
+Year ended 31 December 2023
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
+As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism
+throughout the audit. We also:
+EY**
+Independent Auditor's Report
+99
+CNOOC LIMITED Annual Report 2023
+Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
+from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Our
+report is made solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance, and for no
+other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
+Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAS
+will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
+if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on
+the basis of these consolidated financial statements.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
+The directors of the Company are assisted by the Audit Committee in discharging their responsibilities for overseeing the
+Group's financial reporting process.
+•
+In preparing the consolidated financial statements, the directors of the Company are responsible for assessing the Group's
+ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
+basis of accounting unless the directors of the Company either intend to liquidate the Group or to cease operations or have
+no realistic alternative but to do so.
+RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS
+In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
+in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
+knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we
+conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
+to report in this regard.
+Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
+assurance conclusion thereon.
+The directors of the Company are responsible for the other information. The other information comprises the information included
+in the Annual Report, other than the consolidated financial statements and our auditor's report thereon.
+OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
+EY安永
+Independent Auditor's Report
+11
+11
+The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true
+and fair view in accordance with IFRSS issued by the IASB, HKFRSS issued by the HKICPA and the Hong Kong Companies
+Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated
+financial statements that are free from material misstatement, whether due to fraud or error.
+(All amounts expressed in millions of Renminbi, except per share data)
+Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
+error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
+appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
+higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
+or the override of internal control.
+Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit
+evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
+on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required
+to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such
+disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
+date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+101
+CNOOC LIMITED Annual Report 2023
+21 March 2024
+Hong Kong
+Certified Public Accountants
+Ernst & Young
+The engagement partner on the audit resulting in this independent auditor's report is Cheong Ming Yik.
+Obtain an understanding of internal control relevant to the audit 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 Group's internal control.
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
+disclosures made by the directors.
+From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the
+audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these
+matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
+circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
+doing so would reasonably be expected to outweigh the public interest benefits of such communication.
+EY安永
+CNOOC LIMITED Annual Report 2023
+100
+We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding
+independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on
+our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
+We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and
+significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
+Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
+the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
+and performance of the group audit. We remain solely responsible for our audit opinion.
+Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
+and whether the consolidated financial statements represent the underlying transactions and events in a manner that
+achieves fair presentation.
+concern.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
+(73,950)
+Independent Auditor's Report
+Selling and administrative expenses
+Others
+2
+(33)
+17,945
+2,863
+152
+2022
+2023
+Notes
+Items that may be subsequently reclassified to profit or loss
+Exchange differences on translation of foreign operations
+Share of other comprehensive income of associates
+Cash flow hedge reserves
+Other items that will not be reclassified to profit or loss
+Fair value change on equity investments designated as
+OTHER COMPREHENSIVE INCOME/(EXPENSE)
+Year ended 31 December 2023
+Consolidated Statement of Profit or Loss and Other Comprehensive Income
+102 CNOOC LIMITED Annual Report 2023
+141,677
+124,090
+141,700
+(23)
+123,843
+247
+Equity shareholders of the Company
+Non-controlling interests
+(All amounts expressed in millions of Renminbi, except per share data)
+Attributable to:
+19(i)
+1,331
+EQUITY SHAREHOLDERS OF THE COMPANY
+Basic (RMB Yuan)
+(57,383)
+EARNINGS PER SHARE ATTRIBUTABLE TO
+161,106
+127,125
+(23)
+161,129
+126,878
+247
+(200)
+238
+161,106
+19,429
+3,035
+Equity shareholders of the Company
+Non-controlling interests
+Attributable to:
+TOTAL COMPREHENSIVE INCOME FOR THE YEAR
+at fair value through other comprehensive (expense)/income
+Change on remeasurement of defined benefit plan
+Share of other comprehensive income of associates
+15
+151
+127,125
+141,677
+OTHER COMPREHENSIVE INCOME FOR THE YEAR,
+NET OF TAX
+PROFIT FOR THE YEAR
+Investment income
+Exchange (losses)/gains, net
+2,980
+4,805
+(5,354)
+7
+6
+19
+193,325
+6
+167,769
+PROFIT FROM OPERATING ACTIVITIES
+(228,905)
+(248,840)
+(8,920)
+(9,028)
+124,090
+(10,468)
+(10,952)
+Interest income
+(297)
+3,084
+Finance costs
+Share of profits of associates
+(48,884)
+10(i)
+(6,027)
+18
+(53,093)
+Income tax expense
+194,770
+172,974
+PROFIT BEFORE TAX
+505
+1,036
+6
+17
+1,248
+Profit attributable to a joint venture
+2,058
+663
+850
+1,081
+= ∞
+Other income, net
+18
+Notes to Consolidated Financial Statements
+The Company and its subsidiaries entered into numerous production sharing arrangements or similar agreements in China
+and overseas countries. The Company and its subsidiaries' participating interest may vary in each arrangement. The
+Company and its subsidiaries, as one of the title owners under certain exploration and/or production licenses or permits,
+are required to bear exploration (with some exceptions in China), development and operating costs together with other
+co-owners based on each owner's participating interest. Once production occurs, a certain percentage of the annual
+production or revenue is first distributed to the local government, which, in most cases, with the nature of royalty and
+other taxes or expenses, and the rest of the annual production or revenue is allocated among the co-owners.
+The Company and its subsidiaries account for the assets, liabilities, revenues and expenses relating to its interest in a joint
+operation in accordance with the IFRSS/HKFRSS applicable to the particular assets, liabilities, revenues and expenses.
+Joint venture
+The Company and its subsidiaries' investments in joint ventures are stated in the consolidated statement of financial
+position at the Company and its subsidiaries' share of net assets under the equity method of accounting, less any
+impairment losses. Necessary adjustments are made to bring into line any dissimilar accounting policies that may exist.
+Under the equity method, an investment in a joint venture is initially recognised in the consolidated statement of financial
+position at cost and adjusted thereafter to recognise the Company and its subsidiaries' share of the profit or loss and
+other comprehensive income of the joint venture. Where the profit sharing ratios are different to the Company and its
+subsidiaries' equity interest, the share of post-acquisition results of the joint ventures is determined based on the agreed
+profit sharing ratio. Unrealised gains and losses resulting from transactions between the Company and its subsidiaries
+and its joint ventures are eliminated to the extent of the Company and its subsidiaries' investments in the joint ventures,
+except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the
+acquisition of joint ventures is included as part of the Company and its subsidiaries' investments in joint ventures and is
+not individually tested for impairment.
+CNOOC LIMITED Annual Report 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Some arrangements have been assessed by the Company and its subsidiaries as joint operations as both parties to
+the contract are responsible for the assets and obligations in proportion to their respective interest, whether or not the
+arrangement is structured through a separate vehicle. This evaluation applies to both the Company and its subsidiaries'
+interests in production sharing arrangements and certain joint operations.
+31 December 2023
+A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
+net assets of the arrangement.
+Joint operations
+3.
+Joint control
+Certain of the Company and its subsidiaries' activities are conducted through joint arrangements. Joint arrangements
+are classified as either a joint operation or joint venture, based on the rights and obligations arising from the contractual
+obligations between the parties to the arrangement.
+Joint arrangements
+The Company and its subsidiaries' investments in associates are stated in the consolidated statement of financial position
+at the Company and its subsidiaries' share of net assets under the equity method of accounting, less any impairment
+losses. Necessary adjustments are made to bring into line any dissimilar accounting policies that may exist. Under the
+equity method, an investment in an associate is initially recognised in the consolidated statement of financial position
+at cost and adjusted thereafter to recognise the Company and its subsidiaries' share of the profit or loss and other
+comprehensive income of the associate. Unrealised gains and losses resulting from transactions between the Company
+and its subsidiaries and its associates are eliminated to the extent of the Company and its subsidiaries' investments in the
+associates, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising
+from the acquisition of associates is included as part of the Company and its subsidiaries' investments in associates and
+is not individually tested for impairment.
+Associates (continued)
+MATERIAL ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+112
+3. MATERIAL ACCOUNTING POLICIES (continued)
+CNOOC LIMITED Annual Report 2023
+111
+Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about
+the relevant activities require unanimous consent of the parties sharing control.
+Related parties
+the entity is a post-employment benefit plan for the benefit of employees of either the Company and its
+subsidiaries or an entity related to the Company and its subsidiaries;
+(a)
+An assessment is made at the end of each reporting period as to whether there is any indication that previously recognised
+impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is
+estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a
+change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the
+carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been
+recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period in
+which it arises.
+Based on the Company and its subsidiaries' ownership percentage (considering its direct ownership as well as potentially
+exercisable or convertible shares) and other contractual terms, the Company and its subsidiaries have significant influence
+over its associates, rather than the power to control.
+An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing
+value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
+reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss
+is charged to profit or loss in the period in which it arises in those expense categories consistent with the function of the
+impaired asset.
+Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories,
+deferred tax assets and goodwill), the asset's recoverable amount is estimated. An asset's recoverable amount is the
+higher of the asset's value in use and its fair value less costs of disposal, and is determined for an individual asset, unless
+the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in
+which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.
+Impairment of non-financial assets other than goodwill
+(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to
+the Company and its subsidiaries or to the parent of the Company.
+a person identified in (a)(i) has significant influence over the entity or is a member of the key management
+personnel of the entity (or of a parent of the entity); and
+(vii)
+the entity is controlled or jointly controlled by a person identified in (a);
+(vi)
+(v)
+one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
+A party is considered to be related to the Company and its subsidiaries if:
+(iv)
+one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of
+the other entity);
+(ii)
+the entity and the Company and its subsidiaries are members of the same group;
+(i)
+the party is an entity where any of the following conditions applies:
+is a member of the key management personnel of the Company and its subsidiaries or of a parent of the
+Company.
+(iii)
+has significant influence over the Company; or
+(ii)
+has control or joint control of the Company;
+(i)
+the party is a person or a close member of that person's family and that person:
+the entity and the Company are joint ventures of the same third party;
+Associates
+1 Effective for annual periods beginning on or after 1 January 2024
+Effective for annual periods beginning on or after 1 January 2025
+Subsidiaries
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023 109
+As a consequence of the 2020 Amendments and 2022 Amendments, Hong Kong Interpretation 5 Presentation
+of Financial Statements - Classification by the Borrower of a Term Loan that Contains a Repayment on Demand
+Clause was revised to align the corresponding wording with no change in conclusion
+No mandatory effective date yet determined but available for adoption
+4
+3
+2
+(the "2022 Amendments") 1,4
+Supplier Finance Arrangements¹
+Lack of Exchangeability²
+Non-current Liabilities with Covenants
+(the "2020 Amendments") 1,4
+Classification of Liabilities as Current or Non-current
+Lease Liability in a Sale and Leaseback'
+Sale or Contribution of Assets between an Investor and its
+Associate or Joint Venture³
+Amendments to IAS 7/HKAS 7 and IFRS 7/HKFRS 7
+Amendments to IAS 21/HKAS 21
+Amendments to IAS 1/HKAS 1
+Amendments to IAS 1/HKAS 1
+Amendments to IFRS 16/HKFRS 16
+IAS 28/HKAS 28
+Amendments to IFRS 10/HKFRS 10 and
+The Company and its subsidiaries have not applied the following amendments to IFRSS/HKFRSS issued but are not
+yet effective which may be relevant to the Company and its subsidiaries, in these consolidated financial statements.
+Management is assessing the impact of these amendments to standards and will adopt the relevant amendments in the
+subsequent periods as required:
+ISSUED BUT NOT YET EFFECTIVE IFRSS/HKFRSS
+2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
+CNOOC LIMITED Annual Report 2023
+3.
+MATERIAL ACCOUNTING POLICIES
+Basis of preparation
+These consolidated financial statements have been prepared under the historical cost convention, except for as disclosed
+in the accounting policies notes hereafter. These consolidated financial statements are presented in Renminbi ("RMB")
+and all values are rounded to the nearest million except when otherwise indicated.
+Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation
+within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount
+of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is
+measured based on the relative value of the operation disposed of and the portion of the cash-generating unit (or group
+of cash-generating units) retained.
+Impairment is determined by assessing the recoverable amount of the exploration and production ("E&P") segment, using
+value in use, to which the goodwill relates. Where the recoverable amount of the cash-generating unit (or group of cash-
+generating units) is less than the carrying amount, an impairment loss on goodwill is recognised. An impairment loss
+recognised for goodwill is not reversed in a subsequent period.
+For the purposes of impairment testing, goodwill is allocated to each of the Company and its subsidiaries' cash-generating
+units (or group of cash-generating units) that is expected to benefit from the synergies of the combination, which represent
+the lowest level at which the goodwill is monitored for internal management purposes and not larger than an operating
+segment.
+After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for
+impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be
+impaired. For goodwill arising on an acquisition in a reporting period, the cash-generating unit (or group of cash-generating
+units) to which goodwill has been allocated is tested for impairment before the end of that reporting period.
+Goodwill is initially measured at cost, being the excess of the aggregate of the purchase consideration, the amount
+recognised for non-controlling interests and any fair value of the Company or its subsidiaries' previously held equity
+interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration
+and other items is lower than the fair value of the net assets of the business acquired, the difference is recognised in
+profit or loss as a gain on bargain purchase.
+Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent
+consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement
+is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured to fair
+value at subsequent reporting dates, with the corresponding gain or loss being recognised in profit or loss.
+Business combinations or asset acquisitions (continued)
+Business combinations (continued)
+MATERIAL ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+Subsidiaries are all those entities over which the Company and its subsidiaries have power over the investee such that
+the Company and its subsidiaries are able to direct the relevant activities, has exposure or rights to variable returns
+from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the
+investor's returns.
+CNOOC LIMITED Annual Report 2023
+If the business combination is achieved in stages, the Company or its subsidiaries' previously held equity interest in the
+acquiree is remeasured to fair value at the acquisition date through profit or loss or other comprehensive income, as
+appropriate.
+Business combinations, other than business combinations under common control, are accounted for using the acquisition
+method. The consideration transferred is measured at fair value which is calculated as the sum of the acquisition-date fair
+values of the assets transferred by the Company or its subsidiaries, liabilities assumed by the Company or its subsidiaries
+from the former owners of the acquiree and the equity interests issued by the Company or its subsidiaries in exchange
+for control of the acquiree. For each business combination, the Company or its subsidiaries elect whether it measures
+the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable
+net assets. Acquisition-related costs are recognised in profit or loss as incurred.
+Business combinations
+When the Company or its subsidiaries acquire a group of assets and liabilities that do not constitute a business, the
+Company or its subsidiaries identify and recognise the individual identifiable assets acquired and liabilities assumed by
+allocating the purchase price first to financial assets/financial liabilities at the respective fair values, the remaining balance
+of the purchase price is then allocated to the other identifiable assets and liabilities on the basis of their relative fair values
+at the date of purchase. Such a transaction does not give rise to goodwill or bargain purchase gain.
+Asset acquisitions
+The Company and its subsidiaries can elect to apply an optional concentration test, on a transaction-by-transaction basis,
+that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The concentration
+test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset
+or group of similar identifiable assets. The gross assets under assessment exclude cash and cash equivalents, deferred
+tax assets, and goodwill resulting from the effects of deferred tax liabilities. If the concentration test is met, the set of
+activities and assets is determined not to be a business and no further assessment is needed.
+Optional concentration test
+Business combinations or asset acquisitions
+All intra-group balances, income and expenses, unrealised gains and losses and dividends resulting from intra-group
+transactions are eliminated in full.
+The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Company or its
+subsidiaries obtain control, and continue to be consolidated until the date that such control ceases. The financial statements
+of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
+The results of subsidiaries are included in the Company's statement of profit or loss and other comprehensive income
+to the extent of dividends received and receivable. The Company's interests in subsidiaries are stated at cost less any
+impairment losses.
+The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year
+ended 31 December 2023.
+Basis of consolidation
+110
+113
+CNOOC LIMITED Annual Report 2023
+31 December 2023
+For internal credit risk management, the Company and its subsidiaries consider an event of default occurs when information
+developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the
+Company and its subsidiaries, in full (without taking into account any collaterals held by the Company and its subsidiaries).
+Definition of default
+The Company and its subsidiaries regularly monitor the effectiveness of the criteria used to identify whether there has been
+a significant increase in credit risk and revises them as appropriate to ensure that the criteria are capable of identifying
+significant increase in credit risk before the amount becomes past due.
+Irrespective of the outcome of the above assessment, the Company and its subsidiaries presume that the credit risk has
+increased significantly since initial recognition when contractual payments are more than 30 days past due, unless the
+Company and its subsidiaries have reasonable and supportable information that demonstrates otherwise.
+an actual or expected significant adverse change in the regulatory, economic, or technological environment of the
+debtor that results in a significant decrease in the debtor's ability to meet its debt obligations.
+an actual or expected significant deterioration in the operating results of the debtor;
+existing or forecast adverse changes in business, financial or economic conditions that are expected to cause a
+significant decrease in the debtor's ability to meet its debt obligations;
+significant deterioration in external market indicators of credit risk, e.g. a significant increase in the credit spread,
+the credit default swap prices for the debtor;
+an actual or expected significant deterioration in the financial instrument's external (if available) or internal credit
+rating;
+•
+In particular, the following information is taken into account when assessing whether credit risk has increased significantly:
+In assessing whether the credit risk has increased significantly since initial recognition, the Company and its subsidiaries
+compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default
+occurring on the financial instrument as at the date of initial recognition. In making this assessment, the Company and its
+subsidiaries consider both quantitative and qualitative information that is reasonable and supportable, including historical
+experience and forward-looking information that is available without undue cost or effort.
+Significant increase in credit risk
+For all other instruments, the Company and its subsidiaries measure the loss allowance equal to 12m ECL, unless when
+there has been a significant increase in credit risk since initial recognition, in which case the Company and its subsidiaries
+recognise lifetime ECL. The assessment of whether lifetime ECL should be recognised is based on significant increases
+in the likelihood or risk of a default occurring since initial recognition.
+Lifetime ECL represents the ECL that will result from all possible default events over the expected life of the relevant
+instrument. In contrast, 12-month ECL ("12m ECL") represents the portion of lifetime ECL that is expected to result from
+default events that are possible within 12 months after the reporting date. Assessment is done based on the Company
+and its subsidiaries' historical credit loss experience, adjusted for factors that are specific to the debtors, general economic
+conditions and an assessment of both the current conditions at the reporting date as well as the forecast of future conditions.
+The Company and its subsidiaries always recognise lifetime ECL for trade receivables without significant financing
+component.
+The Company and its subsidiaries perform impairment assessment under expected credit loss ("ECL") model on financial
+assets (including cash and cash equivalents, time deposits with maturity over three months, trade receivables, other
+receivables and debt investment), which are subject to impairment assessment under IFRS 9/HKFRS 9. The amount of
+ECL is updated at each reporting date to reflect changes in credit risk since initial recognition.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+MATERIAL ACCOUNTING POLICIES (continued)
+Impairment of financial assets
+3.
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+116
+An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 36.
+For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques.
+Such techniques may include using recent arm's length market transactions; reference to the current fair value of another
+instrument that is substantially the same; a discounted cash flow analysis or other valuation models.
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+117
+Notes to Consolidated Financial Statements
+31 December 2023
+CNOOC LIMITED Annual Report 2023
+118
+(ii) the Company and its subsidiaries have transferred its rights to receive cash flows from the asset, or the Company and
+its subsidiaries retain the contractual rights to receive the cash flows from the asset, but has assumed an obligation
+to pay the received cash flows in full without material delay to a third party under a "pass-through" arrangement;
+and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor
+retained substantially all the risks and rewards of the asset, but has no control of the asset.
+(i) The contractual rights to receive cash flows from the asset have expired; or
+A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised
+when:
+Derecognition of financial assets
+The Company and its subsidiaries recognise an impairment gain or loss in profit or loss for all financial instruments by
+adjusting their carrying amount, with the exception of trade receivables and other receivables where the corresponding
+adjustment is recognised through a loss allowance account.
+Generally, the ECL is the difference between all contractual cash flows that are due to the Company and its subsidiaries in
+accordance with the contract and all the cash flows that the Company and its subsidiaries expect to receive, discounted
+at the effective interest rate determined at initial recognition.
+The measurement of ECL is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there
+is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on
+historical data and forward-looking information. Estimation of ECL reflects an unbiased and probability-weighted amount
+that is determined with the respective risks of default occurring as the weights.
+Measurement and recognition of ECL
+The Company and its subsidiaries write off a financial asset when there is information indicating that the counterparty is
+in severe financial difficulty and there is no realistic prospect of recovery. Financial assets written off may still be subject
+to enforcement activities under the Company and its subsidiaries' recovery procedures, taking into account legal advice
+where appropriate. A write-off constitutes a derecognition event. Any subsequent recoveries are recognised in profit or loss.
+Write-off policy
+The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference
+to quoted market prices or dealer price quotations, without any deduction for transaction costs.
+the purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
+•
+it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
+the lenders of the borrower, for economic or contractual reasons relating to the borrower's financial difficulty, having
+granted to the borrower a concession that the lenders would not otherwise consider;
+•
+•
+a breach of contract, such as a default or past due event;
+•
+significant financial difficulty of the issuer or the borrower;
+Impairment of financial assets (continued)
+Credit-impaired financial assets
+MATERIAL ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+the disappearance of an active market for that financial asset because of financial difficulties; or
+Notes to Consolidated Financial Statements
+Fair value
+Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI or designated as at
+FVTOCI are measured at FVTPL.
+Expenditure on major maintenance refits and repairs comprises the costs of replacement assets or parts of assets and
+overhaul costs. Where an asset or part of an asset that is separately depreciated and is replaced, and it is probable
+that future economic benefits associated with the item will flow to the Company and its subsidiaries, the replacement
+expenditure is capitalised. Where part of the asset is not separately considered as a component, the replacement value
+is used to estimate the carrying amount of the replaced assets which is immediately written off. All other maintenance
+costs are expensed as incurred.
+Major maintenance and repairs
+The intangible assets regarding software have been amortised on the straight-line basis over their respective useful lives.
+The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the
+liquefied natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible
+assets regarding the marketing transportation and storage contracts and drilling rig contracts are amortised over the life
+of the contracts on the straight-line basis. The intangible assets related to the exploration rights are amortised over the
+estimated useful life.
+The intangible assets of the Company and its subsidiaries comprise software and others, the rights to use gas processing
+facilities under NWS project, marketing transportation and storage contracts, and exploration rights. Intangible assets with
+finite lives are carried at cost, less accumulated amortisation and accumulated impairment losses. The cost of intangible
+assets acquired in a business combination is the fair value as at the date of acquisition. Intangible assets with finite lives
+except for gas processing rights, are amortised on the straight-line basis over the useful economic life and assessed
+for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and
+the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.
+Intangible assets other than goodwill
+3. MATERIAL ACCOUNTING POLICIES (continued)
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+114 CNOOC LIMITED Annual Report 2023
+Any gains and losses on disposals of property, plant and equipment (calculated as the difference between the net
+disposal proceeds and the carrying amount of the asset) are recognised in profit or loss.
+Residual values, useful lives and the depreciation method are reviewed and, adjusted if appropriate, at each reporting
+date.
+Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated
+on a recoverable basis among the parts and each part is depreciated separately.
+Vehicles, office equipment and others are stated at cost less accumulated depreciation and impairment losses. The
+straight-line method is adopted to depreciate the cost less any estimated residual value of these assets over their
+expected useful lives. The useful lives of vehicles, office equipment and other assets are in line with their beneficial
+periods.
+Vehicles, office equipment and others
+(b)
+Capitalised acquisition costs of proved properties are depreciated on a unit-of-production method over the total
+proved reserves of the relevant oil and gas properties.
+Producing oil and gas properties are depreciated on a unit-of-production basis over the proved developed reserves.
+Common facilities that are built specifically to service production directly attributed to designated oil and gas properties
+are depreciated based on the proved developed reserves of the respective oil and gas properties on a pro-rata basis.
+Common facilities that are not built specifically to service identified oil and gas properties are depreciated using
+the straight-line method over their estimated useful lives. Costs associated with significant development projects
+are not depreciated until commercial production commences and the reserves related to those costs are excluded
+from the calculation of depreciation.
+The Company and its subsidiaries carry exploratory well costs as an asset when the well has found a sufficient
+quantity of reserves to justify its completion as a producing well and where the Company and its subsidiaries are
+making sufficient progress assessing the reserves and the economic and operating viability of the project. Exploratory
+well costs not meeting these criteria are charged to expenses. Exploratory wells that discover potentially economic
+reserves in areas where major capital expenditure will be required before production would begin and when the
+major capital expenditure depends upon the successful completion of further exploratory work remain capitalised
+and are reviewed periodically for impairment.
+For oil and gas properties, the successful efforts method of accounting is adopted. The Company and its subsidiaries
+capitalise the initial acquisition costs of oil and gas properties. Impairment of initial acquisition costs is recognised
+based on exploratory experience and management judgement and charged to profit and loss. Upon discovery of
+commercial reserves, acquisition costs are transferred to proved properties. The costs of drilling and equipping
+successful exploratory wells, all development expenditures on construction, installation or completion of infrastructure
+facilities such as platforms, pipelines, processing plants and the drilling of development wells and the building of
+enhanced recovery facilities, including those renewals and betterments that extend the economic lives of the assets,
+and the related borrowing costs are capitalised. The costs of unsuccessful exploratory wells and all other exploration
+costs are expensed as incurred.
+Oil and gas properties
+(a)
+Property, plant and equipment comprise oil and gas properties, and vehicles and office equipment and others.
+Property, plant and equipment
+3. MATERIAL ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Research and development costs
+All research costs are expensed as incurred.
+Expenditure (other than that relating to oil and gas properties discussed above) incurred on projects to develop new
+products is capitalised and deferred only when the Company and its subsidiaries can demonstrate the technical feasibility
+of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to
+use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the
+project and the ability to measure reliably the expenditure during the development. Product development expenditure
+I which does not meet these criteria is expensed when incurred.
+Financial assets
+Financial assets at fair value through profit or loss (FVTPL)
+(d)
+For debt investments at fair value through other comprehensive income, interest income, foreign exchange revaluation
+and impairment losses or reversals are recognised in profit or loss and computed in the same manner as for financial
+assets measured at amortised cost. The remaining fair value changes are recognised in other comprehensive income.
+Upon derecognition, the cumulative fair value change recognised in other comprehensive income is recycled to
+profit or loss.
+the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
+interest on the principal amount outstanding.
+the financial asset is held within a business model whose objective is achieved by both selling and collecting
+contractual cash flows; and
+Financial assets at fair value through other comprehensive income (FVTOCI) (debt instruments)
+Financial assets that meet the following conditions are subsequently measured at fair value through other comprehensive
+income:
+Dividends from these investments in equity instruments are recognised in profit or loss when the Company and its
+subsidiaries' right to receive the dividends is established, unless the dividends clearly represent a recovery of part
+of the cost of the investment.
+Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently,
+they are measured at fair value with gains or losses arising from changes in fair value recognised in other
+comprehensive income and accumulated in other reserves. The cumulative gain or loss will not be reclassified to
+profit or loss on disposal of the investments.
+Financial assets at fair value through other comprehensive income (FVTOCI) (equity investments)
+On initial recognition, the Company and its subsidiaries can make an irrevocable election (on an instrument-by-
+instrument basis) to designate investments in equity instruments as at FVTOCI. The Company and its subsidiaries
+have investments in certain equity instruments (publicly traded or non-publicly traded), the purpose of which are
+I not held for trading, but held for medium or long-term strategic purpose. Therefore, those investments in equity
+instruments are designated as at FVTOCI.
+(c)
+(b)
+Financial assets (continued)
+Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses
+arising on remeasurement recognised in profit or loss.
+3. MATERIAL ACCOUNTING POLICIES (continued)
+31 December 2023
+Notes to Consolidated Financial Statements
+115
+CNOOC LIMITED Annual Report 2023
+The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability
+and of allocating interest income and interest expense over the relevant period. The effective interest rate is the
+rate that accurately discounts estimated future cash receipts and payments (including all fees and points paid or
+received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
+through the expected life of the financial asset or financial liability, or, where appropriate, a shorter period, to the
+net carrying amount on initial recognition.
+All other financial assets are subsequently measured at fair value.
+the contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of
+principal and interest on the principal amount outstanding.
+the asset is held within a business model whose objective is to hold assets in order to collect contractual
+cash flows; and
+Debt instruments that meet the following conditions are subsequently measured at amortised cost less impairment
+loss:
+Financial assets at amortised cost
+(a)
+Financial assets are initially measured at fair value except for trade receivables arising from contracts with customers which
+are initially measured in accordance with IFRS 15/HKFRS 15. All recognised financial assets are subsequently measured
+in their entirety at either amortised cost or fair value, depending on the classification of the financial assets.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+A financial asset is credit-impaired when one or more events of default that have a detrimental impact on the estimated
+future cash flows of that financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable
+data about the following events:
+These consolidated financial statements are presented in RMB. The Company and each of its subsidiaries maintain its
+books and records in its own functional currency. Foreign currency transactions are initially recorded using the Company
+and each of its subsidiaries' respective exchange rates ruling at the dates of the transactions. Monetary assets and
+liabilities denominated in foreign currencies are retranslated at the exchange rates ruling at the end of the reporting period.
+All differences arising on settlement or translation of monetary items are taken to profit or loss. Non-monetary items that
+are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the
+initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
+rates at the date when the fair value was determined. The gain or loss arising on retranslation of a non-monetary item is
+treated consistently with the recognition of the gain or loss on change in fair value of the item.
+3. MATERIAL ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+124
+123
+CNOOC LIMITED Annual Report 2023
+Variable lease payments that reflect changes in market rental rates are initially measured using the market rental rates as
+at the commencement date. Variable lease payments that do not depend on an index or a rate are not included in the
+measurement of lease liabilities and right-of-use assets, and are recognised as expense in the period in which the event
+or condition that triggers the payment occurs.
+payments of penalties for terminating a lease, if the lease term reflects the Company and its subsidiaries exercising
+an option to terminate the lease.
+the exercise price of a purchase option if the Company and its subsidiaries are reasonably certain to exercise the
+option; and
+amounts expected to be payable by the Company and its subsidiaries under residual value guarantees;
+variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
+commencement date;
+•
+•
+fixed payments (including in-substance fixed payments) less any lease incentives receivable;
+•
+The lease payments include:
+At the commencement date of a lease, the Company and its subsidiaries recognise and measure the lease liability at
+the present value of lease payments that are unpaid at that date. In calculating the present value of lease payments, the
+Company and its subsidiaries use the incremental borrowing rate at the lease commencement date if the interest rate
+implicit in the lease is not readily determinable.
+Lease liabilities
+Right-of-use assets in which the Company and its subsidiaries are reasonably certain to obtain ownership of the underlying
+leased assets at the end of the lease term are depreciated from commencement date to the end of the useful life. Otherwise,
+right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
+The Company and its subsidiaries present right-of-use assets as a separate line item on the consolidated statement of
+financial position.
+an estimate of costs to be incurred by the Company and its subsidiaries in dismantling and removing the underlying
+assets, restoring the site on which it is located or restoring the underlying asset to the condition required by the
+terms and conditions of the lease, unless those costs are incurred to produce inventories.
+•
+any initial direct costs incurred by the Company and its subsidiaries; and
+Leases (continued)
+•
+Lease liabilities (continued)
+The Company and its subsidiaries remeasure lease liabilities (and make a corresponding adjustment to the related right-
+of-use assets) whenever:
+The preparation of the consolidated financial statements in accordance with IFRSS and HKFRSS requires management
+to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
+consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
+Estimates and judgements are continuously evaluated and are based on management's experience and other factors,
+including expectations of future events that are believed to be reasonable under the circumstances. However, actual
+outcomes can differ from these estimates.
+Significant accounting judgements, estimates and assumptions
+A contingent asset is not recognised in the consolidated financial statements, but is disclosed when an inflow of economic
+benefits is probable.
+A contingent liability is disclosed when the existence of an obligation will only be confirmed by future events or when the
+amount of the obligation cannot be measured reliably.
+Contingencies
+3. MATERIAL ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+The functional currencies of the Company and certain subsidiaries are currencies other than RMB. As at the end of the
+reporting period, the assets and liabilities of these entities are translated into the presentation currency of the Company
+and its subsidiaries at the exchange rates ruling at the reporting date, and their statement of profit or loss and other
+comprehensive income are translated into RMB at the exchange rates at the dates of the transaction. The resulting
+exchange differences are included in the cumulative translation reserves. On disposal of a foreign operation, the deferred
+cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss.
+Foreign currencies
+The Company and its subsidiaries account for the remeasurement of lease liabilities by making corresponding adjustments
+to the relevant right-of-use asset. When the modified contract contains a lease component and one or more additional
+lease or non-lease components, the Company and its subsidiaries allocate the consideration in the modified contract to
+each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-
+alone price of the non-lease components.
+the consideration for the leases increases by an amount commensurate with the stand-alone price for the increase
+in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular
+contract.
+the modification increases the scope of the lease by adding the right to use one or more underlying assets; and
+•
+The Company and its subsidiaries account for a lease modification as a separate lease if:
+Lease modifications
+The Company and its subsidiaries present lease liabilities as a separate line item on the consolidated statement of financial
+position.
+the lease payments change due to changes in market rental rates following a market rent review or expected
+payment under a guaranteed residual value, in which cases the related lease liability is remeasured by discounting
+the revised lease payments using the initial discount rate.
+the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case
+the related lease liability is remeasured by discounting the revised lease payments using a revised discount rate at
+the date of reassessment.
+•
+.
+After the commencement date, lease liabilities are adjusted by interest accretion and lease payments.
+Especially, the Company and its subsidiaries have business and operations in various jurisdictions. If the jurisdictions
+in which the Company and its subsidiaries operate encounter geopolitical conflicts, political and economic instability
+or other situations, associated international actions, or changes in policies, laws fiscal and tax regimes, which are not
+within the Company and its subsidiaries' control, the Company and its subsidiaries' operations, existing assets or future
+investments may be materially affected by these changes as well as trade and economic sanctions due to deteriorated
+relations among different countries.
+any lease payments made at or before the commencement date, less any lease incentives received;
+•
+Selling and administrative expenses
+(8,438)
+(8,294)
+(358)
+Interest income
+2,676
+468
+ཙྪོཙྪི,ཅུ ཝེ,
+(160)
+(133)
+(69)
+11
+58 '
+195
+91 (34,802) (31,566)
+68
+(24,331) (18,778)
+(13,716) (14,058)
+(41)
+(644)
+(514)
+360
+374
+(666)
+the amount of the initial measurement of the lease liability;
+(3,577)
+(62,680)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+4,189
+2,159
+2,933
+3,351
+(4,944)
+(1,940)
+124,090 141,677
+Amounts included in the measure of
+segment profit or loss
+Operating expenses
+(34,997)
+(31,657)
+Taxes other than income tax
+(24,037)
+(18,617)
+(161)
+Exploration expenses
+(13,716)
+(14,058)
+Depreciation, depletion and
+amortisation
+(68,622)
+Impairment and provision
+(68,947)
+In the process of applying the Company and its subsidiaries' accounting policies, the Directors have made the following
+judgements, estimates and assumptions, which have the most significant effect on the amounts recognised in the
+consolidated financial statements.
+Reserve base
+Consolidated
+Eliminations
+2023
+2022
+2023
+2022
+Corporate
+Trading business
+2023
+2022
+2023
+E&P
+The following table presents the segment financial information of the Company and its subsidiaries for the years
+ended 31 December 2023 and 2022:
+Segment results (continued)
+(a)
+SEGMENT INFORMATION (continued)
+5.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+127
+CNOOC LIMITED Annual Report 2023
+The Company and its subsidiaries are engaged worldwide in the upstream operating activities of the conventional
+oil and gas, shale oil and gas, oil sands and other unconventional oil and gas business. The Company and its
+subsidiaries report the business through three operating and reporting segments, including E&P, trading business
+and corporate. The division of these operating segments is made because the Company's chief operating decision
+makers make decisions on resource allocation and performance evaluation by reviewing the financial information of
+these operating segments. The geographical information is separately disclosed in (b).
+(a) Segment results
+SEGMENT INFORMATION
+2022
+The payment is typically due within 30 days after the delivery of oil and gas. For contracts where the period between
+payment and transfer of the associated goods is less than one year, the Company and its subsidiaries apply the practical
+expedient of not adjusting the transaction price for any significant financing component.
+2023
+External revenue
+138,107
+121,912
+Segment profit for the year
+422,230
+(857) 416,609
+(2,400)
+1,287
+700
+60,475
+361,325 79,308
+339,001
+Total revenue
+(857)
+(2,400)
+857
+203
+(259,655)
+416,609 422,230
+430
+497
+92,751 101,670 323,361 320,130
+259,655 (244,053)
+246,250
+Intersegment revenue*
+2022
+(a)
+Marketing revenues principally represent the sales of oil and gas belonging to the foreign partners under the production
+sharing contracts and revenues from the trading of oil and gas through the Company's subsidiaries, which is recognised
+at a point in time when oil and gas has been delivered to the customer, which is when the customer obtains the control
+of oil and gas, and the Company and its subsidiaries have present right to payment and collection of the consideration is
+probable. The cost of the oil and gas sold is included in "Crude oil and product purchases" in the consolidated statement
+of profit or loss and other comprehensive income.
+60,433
+Dismantlement costs
+In the calculations of the recoverable amount of the oil and gas properties in a joint venture and the recoverable
+amount of investments in associates of which the investee engaged in oil and gas exploration and development
+business, the Company and its subsidiaries use the same approach above.
+The sensitivity analysis for the impairment testing involves estimates and judgments to consider numerous assumptions
+comprehensively. Those assumptions interact on each other and interrelate with each other complexly and do not
+have fixed patterns along with the changes in price. Accordingly, the Company and its subsidiaries believe that the
+preparation of the sensitivity analysis for the impairment testing will be impracticable. Changes in assumptions could
+affect impairment charges and reversals in the consolidated statement of profit or loss and other comprehensive
+income, and the carrying amounts of assets in the consolidated statement of financial position.
+Actual cash flows are likely to be different from those estimated or forecast since anticipated events frequently do
+not occur as expected and unforeseen events may arise. The Company and its subsidiaries' results of operations
+could be materially and adversely affected for the period in which future impairment charges are incurred.
+Changes in the key assumptions used, which could be significant, include updates to future pricing estimates,
+updates to future production estimates to align with the Company and its subsidiaries' anticipated drilling plan,
+changes in the Company and its subsidiaries' capital costs and operating expense assumptions, and discount
+rate. There is a significant degree of uncertainty with the assumptions used to estimate future cash flows due to
+various risk factors. The complex economic outlook may also materially and adversely affect the Company and
+its subsidiaries' key assumptions. Changes in economic conditions can also affect the discount rates applied in
+assessments of impairment.
+The calculations of the recoverable amount of assets require the use of estimates and assumptions. The key
+assumptions include, but are not limited to, future oil and gas prices, future production estimates, estimated future
+capital expenditures, estimated future operating expenses and the discount rate.
+(e)
+(d)
+(c)
+Significant accounting judgements, estimates and assumptions (continued)
+Recoverable amount of oil and gas properties (continued)
+3. MATERIAL ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+125
+CNOOC LIMITED Annual Report 2023
+The Company and its subsidiaries make an assessment whenever events or changes in circumstances indicate
+that the carrying amount of an asset may not be recoverable, or when there is any indication that an impairment
+loss previously recognised for an asset in prior years may no longer exist or may have decreased. In any event,
+the Company and its subsidiaries would make an estimate of the asset's recoverable amount, which is calculated
+at the higher of the asset's value in use and its fair value less costs of disposal. The Company and its subsidiaries
+recognise an impairment loss only if the carrying amount of an asset exceeds its recoverable amount. The Company
+and its subsidiaries charge an impairment loss to the profit or loss in the period in which it arises. A reversal of an
+impairment loss is credited to the profit or loss in the period in which it arises.
+Recoverable amount of oil and gas properties
+The calculation of the unit-of-production rate for oil and gas properties depreciation could be impacted to the extent
+that actual production in the future is different from current forecast production based on proved reserves. This
+would generally result from significant changes in any of the factors or assumptions used in estimating reserves.
+These factors could include changes in proved reserves, the effect on proved reserves of differences between actual
+oil and gas prices and oil and gas price assumptions and unforeseen operational issues.
+(c)
+(b) Carrying value of oil and gas properties
+Pursuant to the oil and gas reserve estimation requirements under US Securities and Exchange Commission's rules,
+the Company and its subsidiaries use the average, first-day-of-the-month oil price during the 12-month period before
+the ending date of the period covered by the consolidated financial statements to estimate its proved crude and
+liquids reserves and natural gas reserves.
+Oil and gas properties are depreciated on a unit-of-production basis at a rate calculated by reference to proved
+reserves. Commercial reserves are determined using estimates of oil in place, future oil price and recovery factors.
+Future oil price has impacts on the proportion of the gross reserves which are attributable to the host government
+under the terms of the production sharing contracts. The level of estimated commercial reserves is also a key
+determinant in assessing whether the carrying value of any of the Company and its subsidiaries' oil and gas
+properties has been impaired.
+Dismantlement costs will be incurred by the Company and its subsidiaries at the end of the operating life of certain
+of the Company and its subsidiaries' facilities and properties. The ultimate dismantlement costs are uncertain
+and cost estimates can vary in response to many factors including changes to relevant legal requirements, the
+emergence of new restoration techniques or experience at other production sites. The expected timing and amount
+of expenditure can also change, for example, in response to changes in reserves or changes in laws and regulations
+or their interpretation. As a result, there could be significant adjustments to the provisions established which would
+affect future financial results.
+Oil and gas sales represent the sales of oil and gas, net of royalties and obligations to government and other mineral
+interest owners. Revenue from the sales of oil and gas is recognised at a point in time when oil and gas has been delivered
+to the customer, which is when the customer obtains the control of oil and gas, and the Company and its subsidiaries
+have present right to payment and collection of the consideration is probable.
+Taxes
+126
+79,308
+352,956
+327,867
+(1,623)
+(1,262)
+(9,995)
+(4,921)
+364,574
+334,050
+2022
+2023
+Marketing revenues
+Oil and gas sales
+PRC government's share of oil
+Less: Royalties
+Gross sales
+5.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+OIL AND GAS SALES AND MARKETING REVENUES
+4.
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+Uncertainties exist with respect to the interpretation of complex tax regulations (including those applicable to
+tax credits) and the amount and timing of future taxable income. Given the wide range of international business
+relationships and the long-term nature and complexity of existing contractual agreements, differences arising between
+the actual results and the assumptions made, or future changes to such assumptions, could necessitate future
+adjustments to tax income and expense already recorded. The Company and its subsidiaries establish provisions,
+based on best estimates, for possible consequences of audits by the tax authorities of the respective countries
+in which it operates. The amount of such provisions is based on various factors, such as the Company and its
+subsidiaries' experience of previous tax audits and differing interpretations of tax regulations by the taxable entity
+and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending
+on the conditions prevailing in the respective entities' domicile.
+(62,852)
+For a lease modification that is not accounted for as a separate lease, the Company and its subsidiaries remeasure the
+lease liability based on the lease term of the modified lease by discounting the revised lease payments using a revised
+discount rate at the effective date of the modification.
+(3,597)
+For defined benefit plans, the Company and its subsidiaries attribute the welfare obligations arising from the defined
+benefit plans to the period when employees provide services according to the formula determined by the expected
+cumulative welfare unit method, and recognise in profit and loss or relevant costs. Service costs and net interests on net
+defined benefit liabilities or assets are recognised in profit and loss. Remeasurements arising from net defined benefit
+liabilities or assets are recognised in other comprehensive income. Remeasurements are not reclassified to profit or loss
+in subsequent periods.
+The Company and its subsidiaries participate in defined contribution plans in accordance with local laws and regulations for
+full-time employees in the PRC and other countries in which it operates. The Company and its subsidiaries' contributions
+to these defined contribution plans are charged to profit or loss in the year to which they relate.
+Retirement and termination benefits
+MATERIAL ACCOUNTING POLICIES (continued)
+3.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+121
+CNOOC LIMITED Annual Report 2023
+A contract liability represents the Company and its subsidiaries' obligation to transfer goods or services to a customer
+for which the Company and its subsidiaries have received consideration (or an amount of consideration is due) from the
+customer.
+Otherwise, revenue is recognised at a point in time when the customer obtains control of the distinct good or service.
+the Company and its subsidiaries' performance does not create an asset with an alternative use to the Company
+and its subsidiaries and the Company and its subsidiaries have an enforceable right to payment for performance
+completed to date.
+the Company and its subsidiaries' performance creates or enhances an asset that the customer controls as the
+Company and its subsidiaries perform; or
+the customer simultaneously receives and consumes the benefits provided by the Company and its subsidiaries'
+performance as the Company and its subsidiaries perform;
+Control is transferred over time and revenue is recognised over time by reference to the progress towards complete
+satisfaction of the relevant performance obligation if any one of the following criteria is met:
+A performance obligation represents a good or service (or a bundle of goods or services) that is distinct or a series of
+distinct goods or services that are substantially the same.
+The Company and its subsidiaries recognise revenue when (or as) a performance obligation is satisfied, i.e. when "control"
+of the goods or services underlying the particular obligation is transferred to the customer.
+Revenue Recognition
+In assessing any uncertainty over income tax treatments, the Company and its subsidiaries consider whether it is probable
+that the relevant tax authority will accept the uncertain tax treatment used, or proposed to be used by individual group
+entities in their income tax filings. If it is probable, the current and deferred taxes are determined consistently with the
+tax treatment in the income tax filings. If it is not probable that the relevant taxation authority will accept an uncertain
+tax treatment, the effect of each uncertainty is reflected by using either the most likely amount or the expected value.
+Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
+against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
+Borrowing costs
+Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset
+is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
+at the reporting date.
+Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
+Borrowing costs directly relating to the acquisition, construction or production of a qualifying asset that necessarily takes
+a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective
+assets. All other borrowing costs are expensed in the period in which they are incurred.
+Definition of a lease
+890
+734
+43,391
+280
+41,872 51,252 48,927
+193 40,442 12,680
+128 CNOOC LIMITED Annual Report 2023
+31 December 2023
+The cost of right-of-use asset includes:
+Right-of-use assets
+Leases (continued)
+3. MATERIAL ACCOUNTING POLICIES (continued)
+Notes to Consolidated Financial Statements
+122 CNOOC LIMITED Annual Report 2023
+The Company and its subsidiaries apply the short-term lease recognition exemption to leases that have a lease term of
+12 months or less from the commencement date and do not contain a purchase option. It also applies the recognition
+exemption for lease of low-value assets. Lease payments on short-term leases and leases of low-value assets are
+recognised as expense on a straight-line basis or another systematic basis over the lease term.
+Short-term leases and leases of low-value assets
+As a practical expedient, leases with similar characteristics are accounted on a portfolio basis when the Company and its
+subsidiaries reasonably expect that the effects on the consolidated financial statements would not differ materially from
+individual leases within the portfolio.
+Non-lease components are separated from lease component on the basis of their relative stand-alone prices.
+For a contract that contains a lease component and one or more additional lease or non-lease components, the Company
+and its subsidiaries allocate the consideration in the contract to each lease component on the basis of the relative stand-
+alone price of the lease component and the aggregate stand-alone price of the non-lease components.
+Allocation of consideration to components of a contract
+The Company and its subsidiaries as a lessee
+For contracts entered into or modified or arising from business combinations, the Company and its subsidiaries assess
+whether a contract is or contains a lease based on the definition under IFRS 16/HKFRS 16 at inception, modification
+date or acquisition date, as appropriate. Such contract will not be reassessed unless the terms and conditions of the
+contract are subsequently changed.
+A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period
+of time in exchange for consideration.
+Leases
+11,753
+The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
+longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
+Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is
+probable that sufficient taxable profit and taxable temporary differences will be available to allow all or part of the deferred
+tax asset to be utilised.
+•
+119
+CNOOC LIMITED Annual Report 2023
+Cash and cash equivalents comprise cash at banks and on hand and short-term deposits with an original maturity of
+three months or less.
+Cash and cash equivalents
+Inventories primarily consist of oil and supplies, including items for repairs and maintenance of oil and gas properties.
+Inventories are stated at the lower of cost and net realisable value. Costs of inventories and supplies represent purchase
+or production cost of goods and are determined on a weighted average basis.
+Inventories and supplies
+Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position, if
+and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle
+on a net basis, or to realise the assets and settle the liabilities simultaneously.
+Offsetting of financial instruments
+For non-substantial modifications of financial liabilities that do not result in derecognition, the carrying amount of the
+relevant financial liabilities is calculated at the present value of the modified contractual cash flows discounted at the
+financial liabilities' original effective interest rate. Transaction costs or fees incurred are adjusted to the carrying amount
+of the modified financial liabilities and are amortised over the remaining term. Any adjustment to the carrying amount of
+the financial liability is recognised in profit or loss at the date of modification.
+When the contractual terms of financial liability are modified, the revised terms would result in a substantial modification
+from the original terms, after taking into account all relevant facts and circumstances including qualitative factors, such
+modification is accounted for as derecognition of the original financial liability and the recognition of new financial liability.
+The difference between the carrying amount of financial liability derecognised and the fair value of consideration paid or
+payable, including any liabilities assumed is recognised in profit or loss.
+The Company and its subsidiaries derecognise financial liabilities when, and only when the Company and its subsidiaries'
+obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability
+derecognised and the consideration paid and payable is recognised in profit of loss.
+Derecognition of financial liabilities
+Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation
+process.
+Financial liabilities including trade payables, other payables, and interest-bearing loans and borrowings are initially stated
+at fair value including directly attributable transaction costs and are subsequently measured at amortised cost, using the
+effective interest method.
+Financial liabilities at amortised cost (including trade and other payables, interest-bearing loans
+and borrowings)
+When the Company and its subsidiaries have transferred its rights to receive cash flows from an asset or has entered
+into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of
+the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred
+control of the asset, the Company and its subsidiaries continue to recognise the transferred asset to the extent of the
+Company and its subsidiaries' continuing involvement. In that case, the Company and its subsidiaries also recognise an
+associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and
+obligations that the Company and its subsidiaries have retained.
+Derecognition of financial assets (continued)
+3. MATERIAL ACCOUNTING POLICIES (continued)
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+(20)
+Notes to Consolidated Financial Statements
+when the deferred tax assets relating to the deductible temporary differences arise from the initial recognition of an
+asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither
+the accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible temporary
+differences; and
+31 December 2023
+3. MATERIAL ACCOUNTING POLICIES (continued)
+Income tax (continued)
+3. MATERIAL ACCOUNTING POLICIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+120 CNOOC LIMITED Annual Report 2023
+Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any
+unused tax losses to the extent that it is probable that taxable profit and taxable temporary differences will be available
+against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can
+be utilised, except:
+in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests
+in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable
+that the temporary differences will not reverse in the foreseeable future.
+when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a
+business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
+loss and does not give rise to equal taxable and deductible temporary differences; and
+Deferred tax liabilities are recognised for all taxable temporary differences, except:
+Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the reporting date between
+the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
+Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
+from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are
+enacted or substantially enacted, by the reporting date, in the countries where the Company and its subsidiaries operate
+and generate taxable income.
+Income tax comprises current and deferred tax. Income tax is recognised in the consolidated statement of profit or loss
+and other comprehensive income, either as an expense as it relates to operating activities or as a component of the
+applicable categories of other comprehensive income or expense.
+Income tax
+Dismantlement liability is recognised when the Company or its subsidiaries have a present legal or constructive
+obligation as a result of the past events, and it is probable that an outflow of resources will be required to settle the
+obligation, and a reliable estimate of the amount of the obligation can be made. A corresponding amount equivalent
+to the provision is also recognised as part of the cost of the related property, plant and equipment. The amount
+recognised is the estimated cost of dismantlement, discounted to its present value using a current pre-tax rate
+that reflects, where appropriate, the risks specific to the liability. Changes in the estimated timing of dismantlement
+or dismantlement cost estimates are dealt with prospectively by recording an adjustment to the provision, and a
+corresponding adjustment to property, plant and equipment. The unwinding of the discount on the dismantlement
+provision is included as a finance cost.
+Dismantlement liability
+A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event
+and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable
+estimate can be made of the amount of the obligation. When the effect of discounting is material, the amount
+recognised for a provision is the present value at the reporting date of the future expenditures expected to be
+required to settle the obligation. The increase in the discounted present value amount arising from the passage of
+time is included in profit or loss.
+General
+(b)
+(a)
+Provisions
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+39,272
+in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in
+joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences
+will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can
+be utilised.
+7,055
+237
+1,674
+Income tax expense
+(44,993)
+(52,397)
+(832)
+(376)
+(3,227)
+(331)
+168
+189
+1,931
+1,911
+11
+(48,884)
+(53,093)
+Other segment information
+Investments in associates and
+a joint venture
+23,894
+23,397
+120
+27,358
+a joint venture
+(6,027)
+(666)
+Other non-current assets
+(426)
+(2,254)
+(2,159)
+98
+411
+(10,952)
+(10,468)
+3,445
+2,347
+(1,554)
+4,805
+2,980
+Finance costs
+(5,430)
+(3,800)
+(1,675) (2,363)
+1,798
+147
+(5,354)
+Share of profits of associates and
+25,530
+1,811
+51,252
+The Company and its subsidiaries mainly engage in the exploration, development, production and sale of crude
+oil and natural gas in China, Indonesia, Iraq, Russia, Canada, the United States of America, the United Kingdom,
+Nigeria, Uganda, Argentina, Brazil, Guyana, Australia and Singapore, etc.
+In presenting the Company and its subsidiaries' geographical information, revenues from external customers are
+based on the location of the Company and its subsidiaries' customers, and non-current assets are attributed to the
+segments based on the location of the Company and its subsidiaries' assets. 62% (2022: 64%) of the Company
+and its subsidiaries' revenues are generated from PRC customers, and revenues generated from customers in other
+locations are individually less than 10%.
+The following table presents certain non-current assets information for the Company and its subsidiaries' geographical
+information for the years ended 31 December 2023 and 2022.
+PRC
+2023
+Canada
+Others
+2022
+2023
+333,881
+Geographical information
+Right-of-use assets
+286,551
+7,088
+83,344
+600
+2022
+84,997
+659
+2023
+175,695
+2,339
+Consolidated
+2022 2023 2022
+161,171 592,920 532,719
+2,718 12,039 10,465
+Investments in associates and
+a joint venture
+7,861
+9,100
+Certain oil and gas produced by the E&P segment are sold via the trading business segment. For the Company's chief operating
+decision maker's assessment of segment performance, these revenues are reclassified back to E&P segment.
+Property, plant and equipment
+Others
+48,927
+(b)
+571,584 530,445 43,284
+34,702
+Segment assets
+595,478 553,842 43,284
+Segment liabilities
+Capital expenditure
+137,010
+(342,231) (339,134) (31,936)
+102,753
+34,702
+276
+565,631 546,570
+(178,846) (188,591)
+538,273 521,040 (198,795)
+(198,795)
+215,291
+(206,083) 954,346 880,104
+(206,083) 1,005,598 929,031
+224,702 (337,722) (330,648)
+10
+6
+327
+(27,625)
+137,347 103,035
+Total paid/
+related
+bonuses(1)
+RMB'000
+and benefits
+in kind(¹)
+RMB'000
+Independent non-executive directors:
+Performance
+Salaries,
+allowances
+Chiu Sung Hong
+payable
+during the
+Fees(¹)
+RMB'000
+year(2)
+RMB'000
+Lawrence J. Lau(4)
+799
+288
+679
+1,021
+967
+510
+1,478
+1,988
+I
+1,008
+Subtotal
+222
+Wen Dongfen
+(1,991)
+Li Yong(4)
+356
+5,119
+(2,840)
+2,423
+3,128
+5,263
+2,931
+2,899
+5,354
+6,027
+Xu Keqiang
+During the year ended 31 December 2023, the effective interest rates used to determine the amount of related borrowing
+costs for capitalisation varied from 1.08% to 7.875% (2022: from 1.08% to 7.875%) per annum.
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling
+the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of the Company.
+(i)
+Directors' remuneration
+2023
+Executive directors:
+Zhou Xinhuai(7)
+Xia Qinglong(4)
+Subtotal
+Non-executive directors:
+Wang Dongjin
+KEY MANAGEMENT PERSONNEL'S REMUNERATION
+Tse Hau Yin, Aloysius (4)
+Qiu Zhi Zhong (10)
+Qiu Zhi Zhong
+KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+(i) Directors' remuneration (continued)
+2022
+Executive directors:
+Zhou Xinhuai (8)(10)
+Xia Qinglong
+Subtotal
+Non-executive directors:
+Wang Dongjin (9)
+Li Yong(10)
+8.
+Xu Keqiang (10)(11)
+Subtotal
+Independent non-executive directors:
+Chiu Sung Hong
+Lawrence J. Lau (10)
+Tse Hau Yin, Aloysius
+Lin Boqiang (13)
+Subtotal
+48
+Notes:
+Total
+Wen Dongfen (12)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+855
+Lin Boqiang(5)
+855
+Li Shuk Yin Edwina (6)
+614
+| || | ||
+||||||
+1,008
+356
+439
+855
+855
+614
+Subtotal
+4,127
+4,127
+Total
+4,127
+510
+1,478
+6,115
+130
+CNOOC LIMITED Annual Report 2023
+439
+19
+(4,805)
+342
+4,353
+376
+- Other fees
+17
+70
+62
+14
+12
+84
+74
+Employee wages, salaries, allowances and social security costs
+11,276
+- Audit fee
+11,566
+- Property, plant and equipment
+- Provision/(Reversal) of expected credit losses, net
+- Others
+3,374
+568
+74
+(11)
+149
+109
+3,597
+Impairment and provision:
+666
+Auditors' remuneration:
+(337)
+(1)
+(4)
+- Others
+(2,058)
+(3,080)
+(2,980)
+- Fair value changes on other financial assets
+Investment income:
+Interest income from bank deposits
+Crediting:
+Charging:
+2022
+The Company and its subsidiaries' profit before tax is arrived at after (crediting)/charging:
+PROFIT BEFORE TAX
+6.
+The current year's revenue of approximately RMB32,735 million (2022: RMB20,663 million) was derived from sales by
+the E&P segment and the trading business segment to China Petroleum & Chemical Corporation. Sales to CNOOC
+Group, its subsidiaries (excluding the Company and its subsidiaries) and associates are included in note 32(ii).
+(c) Information about major customers
+5. SEGMENT INFORMATION (continued)
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+(3,084)
+(2,058)
+Insurance compensation on disposal of property, plant and equipment
+2023
+Depreciation, depletion and amortisation:
+- Property, plant and equipment
+- Right-of-use assets
+65
+136
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+129
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+7.
+FINANCE COSTS
+3,472
+8.
+Interest on other loans
+Interest on lease liabilities
+Other borrowing costs
+Total borrowing costs
+Less: Amount capitalised (note 13)
+Other finance costs:
+Unwinding of discount on provision for dismantlement (note 29)
+2023
+606
+4,141
+2022
+Interest on bank loans
+4,136
+5,552
+6,706
+- Intangible assets
+- Net amount capitalised
+Lease payments not included in the measurement of lease liabilities:
+- Office properties
+- Plant and equipment
+Repairs and maintenance
+Research and development costs
+Loss on disposal of property, plant and equipment
+67,075
+2,400
+60,368
+1,391
+849
+1,311
+(1,377)
+(218)
+68,947
+62,852
+134
+560
+337
+357
+471
+917
+497
+(2)
+(i)
+Salaries,
+allowances
+and benefits
+11.
+(iv) Proceeds from the assignment of mining rights
+According to the Measures for Collection of Proceeds from the Assignment of Mining Rights ( *\
+), jointly issued by the Ministry of Finance, the Ministry of Natural Resources and the State Administration
+of Taxation on 24 March 2023, starting from 1 May 2023, the proceeds from the assignment of mining rights
+("assignment proceeds") should be paid by the Company, which explore and mine mineral resources in the PRC
+domain and jurisdictional waters, based on the respective rates from 0.3% to 0.8% on sales revenue of different
+mineral resources type (i.e. oil, gas and coalbed methane, etc.). The unpaid assignment proceeds from 1 July 2017 to
+30 April 2023 should be paid in a full lump payment or evenly over six years, in accordance with the rates stipulated
+and the oil and gas sales income during the unpaid period. The Company has accrued a one-time provision for the
+expense of assignment proceeds starting from 1 July 2017.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+TAX (continued)
+10.
+CNOOC LIMITED Annual Report 2023
+136
+A Special Oil Gain Levy ("SOG Levy") was imposed at a five-level progressive rates from 20% to 40% on the portion
+of the monthly weighted average sales price of the crude oil lifted in the PRC exceeding US$65 per barrel. The SOG
+Levy paid can be claimed as a deductible expense for corporate income tax purposes and is calculated based on
+the actual volume of the crude oil entitled.
+(iii) Special Oil Gain Levy
+EARNINGS PER SHARE
+In addition, other taxes paid and payable by the Company's non-PRC subsidiaries include royalty as well as taxes
+levied on petroleum-related income, budgeted operating and capital expenditure.
+Educational surcharge at the rate of 3% on the production tax and VAT paid; and
+V.
+City construction tax at the rates of 1% or 7% on the production tax and VAT paid;
+Resource tax at the rate of 6% (reduced tax rates may apply to specific products and fields) on the oil and
+gas sales revenue derived by oil and gas fields under production sharing contracts signed after 1 November
+2011 and independent offshore oil and gas fields, except for those under production sharing contracts signed
+before 1 November 2011 which will be subject to related resource tax requirement after the expiration of such
+production sharing contracts;
+The VAT payable is calculated using the taxable sales amount multiplied by the applicable tax rate less relevant
+deductible input VAT;
+Value added tax ("VAT") at the rates of 9% or 13% on taxable sales under independent oil and gas fields.
+iv.
+iii.
+ii.
+Production tax at the rate of 5% on production under production sharing contracts;
+i.
+vi. Local educational surcharge at the rate of 2% on the production tax and VAT paid.
+The Company's PRC subsidiaries pay the following other taxes and dues:
+12.
+Profit for the purpose of basic and diluted earnings per share
+calculation
+32,361
+2022 final dividend - HK$0.75 (2021: special dividend HK$1.18) per
+ordinary share
+29,376
+25,736
+2023 interim dividend - HK$0.59 (2022: interim dividend HK$0.70) per
+ordinary share
+Dividend per ordinary share:
+2022
+2023
+DIVIDENDS
+The Company had no potentially dilutive ordinary shares in issue during the years ended 31 December 2023 and 2022.
+3.03
+Earnings:
+3.03
+Diluted (RMB Yuan)
+Basic (RMB Yuan)
+Earnings per share:
+46,697,155,252
+47,566,763,984
+Weighted average number of ordinary shares for the purpose of basic
+earnings per share and diluted earnings per share
+Number of shares:
+141,700
+123,843
+2022
+2023
+2.60
+2.60
+48,002
+Other taxes
+Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Company and its
+subsidiaries operates, the Company is still in the process of assessing the potential exposure to Pillar Two income
+taxes. Based on the current assessment, the Pillar Two effective tax rates in most of the jurisdictions in which the
+Company and its subsidiaries operates are above 15%.
+(1,916)
+(1,573)
+Others
+(1,407)
+(1,548)
+Right-of-use assets
+(6,052)
+(7,770)
+Dismantlement assets
+(29,127)
+(38,172)
+(49,063)
+Property, plant and equipment (excluding dismantlement assets)
+58,116
+66,780
+1,097
+1,499
+Others
+1,418
+1,538
+Lease liabilities
+1,227
+1,173
+Fair value of long-term borrowings
+Deferred tax liabilities
+(ii)
+(38,502)
+Net deferred tax assets
+The realisability of the deferred tax assets recognised mainly depends on whether sufficient future profits or taxable
+temporary differences will be available in the future. In case where the actual future taxable profits generated are
+less than expected, or change in facts and circumstances which result in revision of future taxable profits estimation,
+the balance of deferred tax assets may be significantly revised.
+As at 31 December 2023, the Company and its subsidiaries' unrecognised deferred tax assets related to unused
+tax credits amounted to RMB1,744 million (31 December 2022: RMB2, 149million), which are subject to time limits
+in accordance with tax regulations in different countries.
+Income tax (continued)
+(i)
+10. TAX (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+135
+CNOOC LIMITED Annual Report 2023
+As at 31 December 2023, the Company and its subsidiaries' recognised deferred tax assets on tax losses amounted
+to RMB70,798 million (31 December 2022: RMB85,445million). Unrecognised tax losses, where recovery is not
+currently expected, amounted to RMB16,332 million (2022: RMB5,473million). These unrecognised tax losses are
+subject to time limits in accordance with tax regulations in different countries.
+According to Amendments to IAS 12/HKAS 12 Deferred Tax related to Assets and Liabilities arising from a Single
+Transaction, the Company and its subsidiaries restated the opening balance of principal components of deferred tax.
+Deferred tax assets in respect of tax losses are recognised only to the extent of the anticipated future taxable profits
+or reversal of existing taxable temporary differences.
+As at 31 December 2023, deferred tax liabilities related to undistributed earnings of the Company's overseas
+subsidiaries have not been provided since the timing of the reversal of the taxable temporary differences can be
+controlled by the Company and it is probable that the temporary differences would not reverse in the foreseeable
+future.
+(10,271)
+29,885
+19,614
+2022
+28,562
+(10,845)
+17,717
+2023
+- deferred tax liabilities
+(3)
+Of which
+As at 31 December 2023, the Company and its subsidiaries had approximately RMB87,130 million (31 December
+2022: RMB90,918 million) of carryforward tax losses, predominantly in North America, that would be available to
+offset against future taxable profits of the subsidiaries in which the tax losses arose. The relevant tax losses will
+expire in 2026 and beyond.
+18,352
+Pursuant to the Enterprise Income Tax Law of the People's Republic of China and related laws and regulations, the
+Company is regarded as a Chinese Resident Enterprise, and thus is required to withhold corporate income tax at the
+rate of 10% when it distributes dividends to its non-resident enterprise (as defined in the "Enterprise Income Tax Law
+of the People's Republic of China") shareholders, with effect from the distribution of the 2008 final dividend. In respect
+of all shareholders whose names appear on the Company's register of members and who are not individuals (including
+HKSCC Nominees Limited, corporate nominees or trustees such as securities companies and banks, and other entities or
+organisations, which are all considered as non-resident enterprise shareholders), the Company will distribute the dividend
+after deducting corporate income tax of 10%.
+137
+(3,357)
+Impairment
+(67,075)
+(494)
+(66,581)
+Depreciation charge for the year
+(789,538)
+(2,894)
+(786,644)
+At 1 January 2023
+(789,538)
+(17)
+(2,894)
+At 31 December 2022
+(27,788)
+(52)
+(27,736)
+Exchange differences
+1,958
+134
+1,824
+Disposals and write-offs
+(60,368)
+(568)
+(568)
+(786,644)
+Impairment
+(3,374)
+2,725
+CNOOC LIMITED Annual Report 2023
+138
+The discount rate is derived from the Company's weighted average cost of capital ("WACC") and is adjusted, where
+applicable, to take into account any specific risks relating to the country where the asset is located as well as the asset
+specific characteristics, such as specific tax treatments, cash flow profiles and economic life. The discount rate used for
+value in use calculations was 8% in 2023 after tax. A derived pre-tax discount rate of 9% was used.
+During the reporting period, the recoverable amount was calculated based on the assets' value in use and was determined
+at the cash-generating unit level. The Company identifies a field or a group of fields that could generate cash inflows
+independently as a cash-generating unit. The principal parameters used in determining the recoverable amount of the
+Company and its subsidiaries' assets include estimates of proved and unproved reserves, future commodity prices that
+come from the price forecast of respected and independent institutions, combined with internal analysis and judgment of
+the international market environment, as well as best estimates of drilling and development costs.
+Impairment and provision recognised during the year included the impairment loss to reduce the carrying amount of
+certain oil and gas properties to the recoverable amount. In 2023, impairment losses of RMB3,357 million related to oil
+and gas properties in North America were recognised as impairment and provision in profit or loss, caused by the change
+of reserve assessment and the uncertainty in future development plans.
+Included in the current year's additions was an amount of approximately RMB2,840 million (2022: approximately RMB1,991
+million) in respect of interest capitalised in property, plant and equipment. Included also in the depreciation charge for
+the year was an amount of approximately RMB4,034 million (2022: approximately RMB3,444 million) in respect of a
+depreciation charge on dismantlement cost capitalised in oil and gas properties.
+592,920
+8,611
+532,719
+8,088
+584,309
+Disposals and write-offs
+524,631
+At 31 December 2022
+Net book value:
+(862,855)
+(3,283)
+(859,572)
+At 31 December 2023
+2,857
+(5,725)
+(10)
+(5,715)
+Exchange differences
+132
+At 31 December 2023
+CNOOC LIMITED Annual Report 2023
+(403)
+Depreciation charge for the year
+(7,423)
+46,639
+13,321
+13,321
+1,168,223
+101,536
+9,154
+1,867
+99,669
+1,159,069
+At 1 January 2023
+Additions
+At 31 December 2022
+Disposals and write-offs
+Exchange differences
+Acquisition
+(152)
+Additions
+Cost:
+Total
+and others
+office equipment
+Oil and gas
+properties
+Vehicles and
+PROPERTY, PLANT AND EQUIPMENT
+13.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+At 1 January 2022
+(59,965)
+113
+1,311,275
+(702,772)
+(2,573)
+(700,199)
+At 1 January 2022
+amortisation and impairment:
+Accumulated depreciation, depletion and
+1,455,775
+11,894
+1,443,881
+At 31 December 2023
+(9,602)
+10,461
+(7,575)
+46,752
+20
+Exchange differences
+(1,237)
+(8,365)
+Disposals and write-offs
+1,322,257
+132,659
+2,129
+130,530
+10,982
+1,311,275
+1,322,257
+10,982
+10,441
+15,167
+- deferred tax assets
+21,508
+RMB2,000,001 to RMB2,500,000
+Nil to RMB2,000,000
+Losses available for offsetting against future taxable profit
+16
+13
+2
+2
+14
+11
+2022
+2023
+132
+Amount paid/payable during the year
+Short-term employee benefits
+(ii) Other key management personnel's (excluding Directors') remuneration
+Save as disclosed above, there was no arrangement under which a director waived or agreed to waive any
+remuneration during the year. In 2023 and 2022, the executive directors' remuneration shown above were for their
+services in connection with the management of the affairs of the Company. The other directors' remuneration shown
+above were for their services as directors of the Company.
+Appointed as an Independent Non-executive Director and a member of the Strategy and Sustainability Committee of the Company
+in 2022.
+(13)
+(12) Appointed as a member of the Audit Committee of the Company in 2022.
+Resigned as CEO of the Company, and re-designated from Executive Director to Non-executive Director of the Company in 2022.
+(11)
+(10) Appointed as members of the Strategy and Sustainability Committee of the Company in 2022.
+Appointed as Chairman of the Strategy and Sustainability Committee of the Company in 2022.
+(9)
+Pension scheme contributions
+Appointed as an Executive Director and CEO of the Company in 2022.
+CNOOC LIMITED Annual Report 2023
+2022
+(1) Salaries, allowances, and benefits in kind represent the gross amount (before applicable individual salary tax) paid/payable to individual
+employees.
+24
+27
+1
+2
+14
+14
+9
+11
+2022
+2023
+Number of employees
+2023
+Amount paid/payable during the year
+Performance-related bonuses
+Salaries, allowances, and benefits in kind(¹)
+During the year, none (2022: none) of the Directors, details of whose remuneration are disclosed in note 8(i) above,
+received an amount which falls within the category of the five highest paid employees. Details of the remuneration of the
+five (2022: five) highest paid employees, for the year are as follows:
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+FIVE HIGHEST PAID EMPLOYEES
+9.
+10
+9
+9
+1
+9
+Pension scheme contributions
+The remuneration of the five (2022: five) highest paid employees, falls within the following bands:
+(8)
+Directors' remuneration (continued)
+Notes (continued):
+816
+962
+962
+492
+422
+70
+TIRIR
+70 422 492
+1,886
+1,194
+692
+816
+1,542
+554
+344
+206
+138
+year(3)
+RMB'000
+payable
+during the
+Total paid/
+RMB'000
+Performance
+related
+bonuses(1)
+in kind(¹)
+RMB'000
+Fees(1)
+RMB'000
+988
+(7) Acted as the President of the Company in 2023.
+1,005
+816
+KEY MANAGEMENT PERSONNEL'S REMUNERATION (continued)
+8.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023 131
+Appointed as an Independent Non-executive Director, the Chairman of the Audit Committee, and a member of the Remuneration
+Committee of the Company in 2023.
+(6)
+Appointed as a member of the Nomination Committee of the Company in 2023.
+(5)
+Cease to hold office in 2023.
+1,005
+(4)
+Total paid/payable remuneration to Mr. Zhou Xinhuai and Mr. Xia Qinglong during the year of 2023 did not include the social insurance
+(including pension scheme contributions), enterprise annuity, and housing provident fund paid by the Company (RMB245,000 to Mr.
+Zhou Xinhuai and RMB122,000 to Mr. Xia Qinglong). There were no pension scheme contributions paid/payable to other Directors
+in 2023.
+Fees, salaries, allowances, benefits in kind and performance related bonuses represent the gross amount (before applicable individual
+salary tax) paid/payable to individual directors.
+6,181
+1,616
+762
+3,803
+3,803
+3,803
+204
+204
+816
+Total paid/payable remuneration to Mr. Xu Keqiang, Mr. Zhou Xinhuai and Mr. Xia Qinglong during the year of 2022 did not include
+the incentive income for the 2019 to 2021 granted in 2022, and social insurance (including pension scheme contributions), enterprise
+annuity, and housing provident fund paid by the Company (RMB782,000 to Mr. Xu Keqiang, RMB147,000 to Mr. Zhou Xinhuai and
+RMB495,000 to Mr. Xia Qinglong). There were no pension scheme contributions paid/payable to other Directors in 2022.
+Number of employees
+2023
+The bands of the remuneration of other key management personnel (excluding Directors) and the related number
+of members of other key management personnel (excluding Directors) are as follows:
+RMB3,500,001 - RMB4,000,000
+RMB4,500,001 - RMB5,000,000
+21,677
+19,614
+Charge to equity
+Credit to the profit or loss
+Opening balance
+2022
+2023
+The movements of deferred tax assets net of deferred tax liabilities are as follows:
+27.3
+28.3
+0.5
+(2,247)
+2.2
+1.3
+(0.1)
+0.6
+1.3
+25.0
+25.0
+%
+%
+2022
+2023
+Effective income tax rate
+(0.1)
+Others
+2022
+(74)
+24,352
+Provision for dismantlement
+14,514
+23,051
+Property, plant and equipment
+Deferred tax assets
+2022 (restated)
+2023
+Principal components of deferred tax balances are as follows:
+(i) Income tax (continued)
+TAX (continued)
+(4,202)
+10.
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+134
+19,614
+17,717
+2,184
+424
+Closing balance
+Exchange differences
+(45)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Tax reported in equity-accounted entities within China
+(0.1)
+Effect of different tax rates for subsidiaries
+2
+Effect of changes in tax rates
+10.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+133
+CNOOC LIMITED Annual Report 2023
+Principal subsidiaries of the Company domiciled outside the PRC are subject to income tax at rates ranging from
+10% to 82% (2022: 10% to 82%).
+The Company's subsidiary in Mainland China, CNOOC China Limited, is a wholly foreign owned enterprise. It is
+subject to corporate income tax at the rate of 25% under the prevailing tax rules and regulations. CNOOC Deepwater
+Development Limited, a wholly-owned subsidiary of CNOOC China Limited, is subject to corporate income tax at
+the rate of 15% from 2021 to 2023, after being reassessed as a high and new technology enterprise. The company
+is in the process of re-applying to be assessed as a high and new technology enterprise from 2024 to 2026.
+The Company is regarded as a Chinese Resident Enterprise (as defined in the "Enterprise Income Tax Law of
+the People's Republic of China") by the State Administration of Taxation of the PRC. As a result, the Company is
+subject to the PRC corporate income tax at the rate of 25% starting from 1 January 2008. The corporate income
+tax which is subjected in Hong Kong is qualified as a foreign tax credit to offset the PRC corporate income tax
+starting from 1 January 2008.
+The Company and its subsidiaries are subject, on an entity basis, to income taxes on profits arising in or derived
+from the tax jurisdictions in which the Company and its subsidiaries are domiciled and operate. The Company is
+subject to profits tax at a rate of 16.5% (2022: 16.5%) on profits arising in or derived from Hong Kong.
+5
+LO
+5
+1
+1
+1
+1
+1
+Income tax
+(i)
+10. TAX
+-
+RMB5,500,001 - RMB6,000,000
+RMB7,000,001 - RMB7,500,000
+RMB8,000,001 RMB8,500,000
+RMB5,000,001 - RMB5,500,000
+TAX (continued)
+21.
+Provision for overseas enterprise income tax on the estimated
+Temporary differences in the current year
+11,427
+10,993
+taxable profits for the year
+Income tax expense for the year
+37,464
+35,644
+Provision for PRC enterprise income tax on the estimated taxable
+profits for the year
+Current tax
+2022
+2023
+An analysis of the tax expense in the Company and its subsidiaries' consolidated statement of profit or loss and
+other comprehensive income is as follows:
+2,418
+2,842
+(171)
+1,360
+48,884
+53,093
+A reconciliation of the PRC statutory corporate income tax rate to the effective income tax rate of the Company
+and its subsidiaries are as follows:
+Income tax (continued)
+PRC statutory enterprise income tax rate
+(i)
+Deferred tax
+Effect of changes in tax rates
+INVENTORIES AND SUPPLIES
+As at 31 December 2023, the balance of the time deposits with maturity over one year was RMB28,853 million (31
+December 2022: RMB2,400 million).
+Pursuant to the Provisional Regulations on the Dismantlement of Offshore Oil and Gas Production Facilities of the People's
+Republic of China, the Company and its subsidiaries accrue dismantlement costs for all the oil and gas fields under
+production sharing contracts in the PRC, and makes monthly cash contributions to the specified dismantlement fund
+accounts supervised by the PRC government. The deposit cannot be withdrawn or utilised for any other purposes but
+the dismantlement of oil and gas production facilities in the future. As at 31 December 2023, the balance of the specified
+dismantlement fund accounts was RMB9,039 million (31 December 2022: RMB8,360 million).
+The corporate wealth management products and structured deposits will mature from 5 January 2024 to 5 November 2024 (2022:
+from 4 January 2023 to 6 December 2023).
+The gains of the Company and its subsidiaries' other financial assets recognised in the profit or loss for the year
+was RMB3,080 million (2022: RMB2,058 million).
+CNOOC LIMITED Annual Report 2023
+145
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+OTHER NON-CURRENT ASSETS
+Included in the other non-current assets were mainly time deposits with maturity over one year and restricted deposits
+for future dismantlement.
+21.
+20.
+(2)
+(1)
+94,235
+48,536
+88,209
+44,304
+84,209
+40,216
+Non-publicly traded investments classified at FVTPL
+Corporate wealth management products and structured
+deposits (2)
+4,000
+4,088
+Money market funds
+Publicly traded investments classified at FVTPL
+Materials and supplies
+Current:
+The corporate wealth management products will mature on 2 June 2025 (2022: from 5 November 2024 to 2 June 2025).
+Oil in tanks
+Trade receivables
+22.
+6,026
+Over three years
+Within one year
+Over one year but within two years
+Over two years but within three years
+Over three years
+2023
+Expected credit
+loss allowance
+Proportion of
+accrual (%)
+37,032
+50
+0.14
+6
+1
+16.67
+76
+11
+Less: Provision for inventory obsolescence
+14.47
+Over one year but within two years
+Within one year
+The aging of trade receivable and related expected credit loss allowance is analysed as follows:
+6,239
+6,451
+(579)
+(658)
+2,207
+2,813
+4,611
+4,296
+2022
+2023
+TRADE RECEIVABLES
+Over two years but within three years
+4,232
+production in Canada
+4,232
+Leases of FPSO are either with only fixed lease payments or contain variable lease payment that are based on production
+volume and minimum annual lease payment that are fixed over the lease term. The fixed and variable lease payments paid
+to relevant FPSO lessors for the year ended 31 December 2023 amounted to RMB1,147 million and RMB313 million.
+(2022: RMB1,038 million and RMB357 million.).
+The overall financial effect of using variable payment terms is that higher rental costs are incurred by FPSO with higher
+production volume. Variable rent expenses are expected to continue to represent a similar proportion of production
+volume in future years.
+Total cash outflow for leases in 2023 was RMB3,931 million (2022: RMB3,363 million).
+15.
+INTANGIBLE ASSETS
+Gas
+processing
+rights under
+Marketing
+transportation
+Variable lease payments
+NWS Project
+and storage
+contracts
+Software
+and others
+Goodwill
+Total
+Cost:
+At 1 January 2022
+1,170
+Exploration
+rights
+RIGHT-OF-USE ASSETS (continued)
+14.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+313
+5,515
+1,687
+2,233
+621
+1,983
+12,039
+86
+35
+13
+134
+24
+337
+For both years, the Company and its subsidiaries lease various FPSO and offices for its operations. Lease contracts are
+entered into for fixed term of 2 years to 15 years, but may have extension options. Lease terms are negotiated on an
+individual basis and contain a wide range of different terms and conditions. In determining the lease term and assessing
+the length of the non-cancellable period, the Company and its subsidiaries apply the definition of a contract and determine
+the period for which the contract is enforceable.
+During the current period, the Company and its subsidiaries recognised right-of-use assets of approximately RMB3,689
+million for leases with the CNOOC Group and/or its Associates.
+CNOOC LIMITED Annual Report 2023
+139
+Notes to Consolidated Financial Statements
+31 December 2023
+531
+Variable lease payments not included in
+the measurement of lease liabilities
+1,399
+13,557
+At 1 January 2023
+2,073
+531
+649
+4,124
+14,809
+22,186
+Additions
+22,186
+195
+754
+Disposal
+(1,296)
+(1,296)
+Exchange differences
+36
+11
+6
+559
+14,809
+4,124
+649
+20,274
+Additions
+767
+456
+615
+1,838
+Disposal
+(1,306)
+(149)
+(1,455)
+Exchange differences
+136
+100
+41
+1,252
+1,529
+At 31 December 2022
+2,073
+531
+3,617
+252
+Expense relating to short-term leases
+10,465
+(3,123)
+Depreciation charge for the year
+(694)
+(436)
+(123)
+(88)
+(50)
+(1,391)
+(193)
+Disposals and write-offs
+118
+184
+Exchange differences
+(47)
+(22)
+(4)
+(24)
+(97)
+66
+(268)
+(107)
+(412)
+CNOOC Petroleum North America ULC
+Canada
+13,671,421,700
+common shares
+without a par value
+100%
+Petroleum and natural gas
+3
+16
+80
+At 31 December 2023
+8,862
+3,328
+3,013
+1,101
+2,277
+18,581
+Accumulated depreciation, depletion and
+amortisation and impairment:
+At 1 January 2022
+(2,143)
+At 31 December 2022
+At 31 December 2023
+(2,818)
+(234)
+(8)
+(2)
+(5)
+(27)
+At 31 December 2023
+(3,347)
+(1,641)
+(780)
+(12)
+(480)
+(6,542)
+Net book value:
+At 31 December 2022
+5,641
+1,294
+830
+694
+2,006
+(294)
+Exchange differences
+312
+22
+(380)
+(243)
+(4,427)
+At 1 January 2023
+(2,818)
+(752)
+(234)
+(380)
+(243)
+(4,427)
+Depreciation charge for the year
+(807)
+(903)
+(544)
+(95)
+(51)
+(2,400)
+Disposals and write-offs
+290
+(752)
+305
+At 31 December 2023
+2,304
+Arctic LNG 2 LLC
+Place of
+establishment
+Beijing, PRC
+CNOOC Finance Corporation Limited (1)
+Name of associates
+Percentage
+of equity
+attributable to
+the Company
+Nominal value of
+ordinary shares
+issued and paid-up/
+Particulars of the principal associates at the end of the reporting period are as follows:
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+registered capital
+31 December 2023
+INVESTMENTS IN ASSOCIATES
+17.
+142 CNOOC LIMITED Annual Report 2023
+All subsidiaries are indirectly held through CNOOC International Limited.
+(3)
+Registered as a wholly-foreign-owned enterprise under the PRC law.
+(2)
+The above table lists the subsidiaries of the Company which principally affected the results for the year or formed a substantial portion of
+the total assets of the Company and its subsidiaries.
+Notes to Consolidated Financial Statements
+and its
+subsidiaries
+RMB4 billion
+31.8%
+850
+Profit for the year
+2022
+2023
+None of the Company and its subsidiaries' associates are considered to be individually material. The following table
+illustrates the Company and its subsidiaries' share of the profits and other comprehensive income of its associates in
+the consolidated financial statements:
+2022
+27,942
+28,910
+2023
+Share of net assets
+To give details of other associates would, in the opinion of the Directors, result in particulars of excessive length.
+The Company and its subsidiaries' investments in associates represent:
+Registered as a limited liability company under the PRC Law.
+(1)
+Exploration and development of natural gas
+and production and marketing of liquefied
+natural gas in Russia
+10%
+RUB15,976 million
+Russian Federation
+loan, discounting and other financing
+services to CNOOC Group and its
+member entities
+Provision of deposit, transfer, settlement,
+Principal activities
+exploration, development and
+production in Guyana
+663
+(1)
+100%
+exploration, development and
+Petroleum and natural gas
+100%
+USA
+CNOOC Energy U.S.A. LLC
+GBP98,009,131
+England and Wales
+CNOOC Petroleum Europe Limited
+production in the UK
+par value
+103,000 preferred
+and production in Canada
+without a par value
+Oil sands exploration, development
+100%
+100 common shares
+Canada
+CNOOC Canada Energy Ltd.
+shares without a
+US$6,059,355,296
+100%
+Petroleum and natural gas
+US$200,100
+Barbados
+CNOOC Petroleum Guyana Limited
+production in Brazil
+exploration, development and
+Petroleum and natural gas
+100%
+R$7,830,661,300
+Brazil
+CNOOC PETROLEUM BRASIL LTDA
+production in the USA
+exploration, development and
+Petroleum and natural gas
+100%
+US$15,830
+USA
+CNOOC Petroleum Offshore U.S.A. Inc.
+production in the USA
+exploration, development and
+Petroleum and natural gas
+Other comprehensive income
+167
+Total comprehensive income
+(119)
+(81)
+(24)
+(224)
+At 31 December 2022
+(1,910)
+(338)
+(165)
+Exchange differences
+(3,173)
+At 1 January 2023
+(1,910)
+(338)
+(165)
+(3,173)
+(5,586)
+Amortisation charge for
+the year
+(5,586)
+1,359
+53
+1,306
+531
+660
+3,393
+15,061
+21,949
+Accumulated amortisation:
+At 1 January 2022
+(968)
+(309)
+(1,365)
+(2,768)
+(5,410)
+Amortisation charge for the year
+(823)
+(29)
+(25)
+(434)
+(1,311)
+Disposal
+(238)
+(30)
+(31)
+(550)
+US$102,325,582
+British Virgin Islands
+Place of
+establishment
+BC ENERGY INVESTMENTS CORP.
+Name of entity
+Percentage
+of equity
+attributable to
+the Company
+and its
+subsidiaries
+ordinary shares
+issued and paid-up/
+registered capital
+Nominal value of
+Particulars of the joint venture at the end of the reporting period are as follows:
+INVESTMENT IN A JOINT VENTURE
+18.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+143
+CNOOC LIMITED Annual Report 2023
+Dividend of RMB231 million was received from the associates in 2023 (2022: RMB291 million).
+663
+1,017
+Summarised financial information of the joint venture is disclosed below:
+production in Africa
+14,809
+484
+(849)
+Disposal
+1,296
+1,296
+Exchange differences
+(34)
+(3)
+(4)
+(41)
+At 31 December 2023
+(2,182)
+(368)
+(199)
+(2,431)
+(5,180)
+Net book value:
+At 31 December 2022
+163
+193
+951
+6,026
+exploration, development and
+100%
+1,074
+2,249
+14,892
+Additions
+668
+1,297
+2,027
+11
+1,064
+28
+Disposals and write-offs
+(312)
+(29)
+(81)
+(422)
+Exchange differences
+47
+14
+4,031
+2,046
+8,459
+At 1 January 2023
+130
+3,004
+Disposals and write-offs
+(143)
+(172)
+(315)
+Exchange differences
+179
+74
+18
+78
+349
+At 31 December 2022
+8,459
+2,046
+1,064
+1,074
+2,249
+14,892
+148 CNOOC LIMITED Annual Report 2023
+345
+The amount of loans and borrowings included interest payable.
+103,145
+2,801
+2,439
+2,439
+from 2025 to 2029
+SOFR+1.80% to 3.88% per annum
+For Tangguh LNG III Project(3)
+Total
+Notes
+2,801
+Loans
+Notes
+Loans
+final maturity
+Effective interest rate and
+2022
+2023
+Non-current(¹)
+22,817
+Total
+For Arctic LNG 2 Project(4)
+EURIBOR+1.2% per annum with
+maturity in 2026
+88,208 11,287 91,858
+76,912
+11,296
+91,858
+91,858
+76,912
+76,912
+Notes (2)
+2,622
+2,622
+2,648
+2,648
+with maturity from 2025 to 2033
+LPR-1.05% to LPR-0.8% per annum
+General loans
+5,864
+5,864
+6,209
+6,209
+(1)
+18,044
+1,194
+Additions
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+144
+Dividend of US$20 million (equivalent to RMB138 million) was received from the joint venture in 2023 and US$7 million
+(equivalent to RMB45 million) was received from the joint venture in 2022.
+2,496
+2,162
+2,496
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2,162
+828
+3,640
+1,334
+(784)
+147
+22,507
+(3,539)
+239
+404
+(5,195)
+(1,144)
+19.
+EQUITY INVESTMENTS AND OTHER FINANCIAL ASSETS
+(i) Equity investments
+2022
+2023
+Non-publicly traded investments classified at FVTPL
+Corporate wealth management products(1)
+Non-current:
+Other financial assets
+(ii)
+During the year, the fair value changes on the Company and its subsidiaries' equity investments recognised directly in
+other comprehensive expense amounted to RMB200 million (2022: other comprehensive income RMB1,331 million).
+Kerogen Energy Fund is principally engaged in the investment in the oil and gas industry. The equity investment in Kerogen Energy
+Fund is designated by the Company and its subsidiaries as at FVTOCI.
+(1)
+1,075
+886
+23
+19
+1,052
+867
+Private equity fund in Kerogen Energy Fund classified at FVTOCI (1)
+Other equity investments designated at FVTOCI
+Non-publicly traded investments
+2022
+2023
+20,515
+1,335
+(14,866)
+(6,992)
+14. RIGHT-OF-USE ASSETS
+Cost:
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+FPSO
+Building and
+structures
+Equipment
+exploration, development and
+Pipelines
+Total
+At 1 January 2022
+7,088
+950
+701
+996
+2,119
+11,854
+Leasehold
+lands
+Current assets
+Non-current assets
+Current liabilities
+(8,302)
+53,381
+54,321
+10,447
+12,995
+2022
+2023
+Investment holding
+50%
+Principal activities
+Total comprehensive income
+Profit after tax
+Income tax credit/(expense)
+Profit before tax
+Finance costs
+Interest income
+Depreciation, depletion and amortisation
+Revenue
+Non-current liabilities
+(14,330)
+4,773
+16,846 21,894
+5,048
+100.00
+16,600
+At 31 December 2023
+122
+163
+461
+962
+15,061
+37,128
+16,769
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+15.
+16.
+INTANGIBLE ASSETS (continued)
+Goodwill represents the excess of the purchase price over the estimated fair value of the assets acquired and liabilities
+assumed in a business combination. Goodwill acquired through business combinations is held at the E&P segment.
+According to the accounting policies as set out in note 3, goodwill is acquired in the acquisition of Nexen Inc., and from
+the acquisition date, allocated to the entire E&P assets, which are the groups of cash-generating units that are expected
+to benefit from the synergies of the acquisition.
+Impairment is determined by assessing the recoverable amount of the entire E&P assets to which the goodwill relates.
+Where the recoverable amount of the entire E&P assets is less than the carrying amount of the assets and the goodwill
+together, an impairment loss on goodwill is recognised.
+140 CNOOC LIMITED Annual Report 2023
+76
+0.20
+Trade receivables
+CASH AND CASH EQUIVALENTS AND TIME DEPOSITS WITH MATURITY OVER THREE MONTHS
+23.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+146
+The credit terms of the Company and its subsidiaries are generally within 30 days after the delivery of oil and gas. Payment
+in advance or collateral may be required from customers, depending on credit rating. Trade receivables are non-interest
+bearing. Substantially all customers have good credit quality with good repayment history and no significant receivables
+are past due.
+0.26
+100
+38,092
+100.00
+100
+100
+2
+77
+37,913
+Proportion of
+accrual (%)
+2022
+Expected credit
+loss allowance
+In assessing value in use of E&P segment, the key assumptions include, but are not limited to, future commodity prices,
+future production estimates, estimated future capital expenditures, estimated future operating expenses and the discount
+rate. The discount rate used for value in use is derived from the Company's WACC and is adjusted, where applicable,
+to take into account any specific risks relating to the country where the asset is located as well as the asset specific
+characteristics, such as specific tax treatments, cash flow profiles and economic life. However, actual results could differ
+from those estimates.
+The Company and its subsidiaries' cash and cash equivalents mainly consist of current deposits and time deposits with
+maturity within seven days. The bank balances are deposited with creditworthy banks.
+The intangible asset regarding the gas processing rights has been amortised upon the commercial production of the
+liquefied natural gas on a unit-of-production basis over the total proved reserves of the relevant asset. The intangible
+assets regarding the marketing transportation and storage contracts are amortised on a straight-line basis over the life of
+the contracts which is less than 20 years. Other identifiable intangible assets are amortised on a straight-line basis over
+a period ranging from 3 to 5 years.
+Particulars of the principal subsidiaries at the end of the reporting period are as follows (¹):
+Investment holding
+CNOOC LIMITED Annual Report 2023
+141
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+16.
+INVESTMENTS IN SUBSIDIARIES (continued)
+100%
+Particulars of the principal subsidiaries at the end of the reporting period are as follows(1): (continued)
+Place of
+establishment
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Percentage
+of equity
+attributable to
+the Company
+and its
+subsidiaries
+Principal activities
+Indirectly held subsidiaries (3):
+CNOOC Exploration & Production Nigeria Limited Nigeria
+NGN10 million
+Name of entity
+US$24 billion
+British Virgin Islands
+Sales and trading of petroleum
+and natural gas
+Name of entity
+Directly held subsidiaries:
+Place of
+establishment
+Nominal value of
+ordinary shares
+issued and paid-up/
+registered capital
+Percentage
+of equity
+attributable to
+the Company
+and its
+subsidiaries
+Principal activities
+CNOOC China Limited (2)
+Tianjin, PRC
+RMB48 billion
+100%
+CNOOC International Trading Co., Ltd(2)
+Hainan, PRC
+CNOOC International Limited
+Offshore petroleum and natural
+gas exploration, development,
+production and sales, and shale
+gas exploration in the PRC
+RMB400 million
+100%
+INVESTMENTS IN SUBSIDIARIES
+The weighted average effective interest rate of the Company and its subsidiaries' bank deposits was 2.86% per annum,
+for the year ended 31 December 2023 (2022: 2.40% per annum).
+24. TRADE AND ACCRUED PAYABLES
+Amounts due to suppliers and partners
+Amounts due to third party trader
+General loans
+For Arctic LNG 2 Project(4)
+For Tangguh LNG III Project(3)
+within one year
+Loans and borrowings due
+4,303
+4,303
+4,365
+SOFR+1.80% to 3.88% per annum
+with maturity within one year
+EURIBOR+1.2% per annum with
+maturity within one year
+LPR-1.05% to LPR-0.8% per annum
+with maturity within one year
+4,365
+4,303
+4,365
+4,365
+1.08% to 2.05% per annum
+Short-term loans and borrowings
+General loans
+Total
+Notes
+Loans
+4,303
+507
+507
+419
+18,514
+470 18,044
+17,529
+683 16,846
+18,044
+18,044
+16,846
+16,846
+Notes(2)
+3
+3
+83
+83
+48
+48
+93
+9
+93
+419
+Total
+Notes
+Loans
+Effective interest rate and
+final maturity
+OTHER PAYABLES AND ACCRUED LIABILITIES
+26.
+The amount of RMB1,676 million contract liability at the beginning of the year has been recognised as revenue for the
+year ended 31 December 2023 (2022: RMB1,615 million).
+Under the natural gas sale contracts, which contain take-or-pay clauses, the Company and its subsidiaries recorded the
+payments received from customers for natural gas not yet taken as contract liabilities.
+1,691
+2022
+2023
+1,383
+Contract liabilities
+CONTRACT LIABILITIES
+25.
+As at 31 December 2023 and 2022, substantially all the trade and accrued payables were aged within six months. The
+trade and accrued payables are non-interest bearing.
+59,789
+14
+61,382
+3,934
+55,855
+59,017
+2,365
+2022
+2023
+Accrued payroll and welfare payable
+Petroleum and natural gas
+Provision for dismantlement (note 29)
+2023
+2022
+2023
+Current(¹)
+LOANS AND BORROWINGS
+27.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+147
+CNOOC LIMITED Annual Report 2023
+10,676
+11,908
+7,368
+8,045
+1,062
+1,552
+2,246
+2,311
+2022
+Other payables
+14
+27.
+8,434
+Long-term sales of natural gas and liquefied natural gas (note (e))
+209,596
+liquefied natural gas) (note (d))
+(other than long-term sales of natural gas and
+Sales of petroleum and natural gas products
+2022
+2023
+(ii) Sales of petroleum and natural gas products and green power products by the Company and
+its subsidiaries to CNOOC Group and/or its Associates*
+For the right-of-use assets recognised during this period from the lease agreements with CNOOC Group and/or its Associates please
+refer to note 14.
+77,606
+91,897
+705
+27,516
+742
+2,222
+3,695
+Provision of sales, management and ancillary services (note (b))
+15,153
+16,469
+(including new energy business) (note (a))
+Provision of production and support services
+47,127
+57,764
+(including new energy business)
+7,017
+7,605
+FPSO vessel leases (note (c))*
+12,399
+234,837
+26,787
+261,624
+29
+- included in trade and accrued payables, other payables and
+accrued liabilities
+2022
+2023
+Amount due to CNOOC Group
+(iv) Balances with CNOOC Group and/or its Associates
+RELATED PARTY TRANSACTIONS (continued)
+32.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+154 CNOOC LIMITED Annual Report 2023
+237,112
+2022
+22,308
+Deposits in CNOOC Finance
+2023
+Deposits balances made by the Company and its subsidiaries
+(b)
+402
+351
+2022
+2023
+Interest income from deposits in CNOOC Finance
+(a) Interest income received by the Company and its subsidiaries
+(iii) Transactions and Balances with CNOOC Finance Corporation Limited ("CNOOC Finance")
+(note (f))
+The Company and its subsidiaries' sales to CNOOC Group and/or its Associates accounted for 57% of revenue.
+21,979
+246
+13,227
+plant and equipment
+(၁)
+(b) Provision of development and support services (including new energy business);
+(a) Provision of exploration and support services;
+Provision of exploration, development, production as well as sales, management and ancillary services by CNOOC
+Group and/or its Associates to the Company and its subsidiaries:
+(1)
+Comprehensive framework agreement with CNOOC Group in respect of a range of products and
+services (continued)
+RELATED PARTY TRANSACTIONS (continued)
+32.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+152 CNOOC LIMITED Annual Report 2023
+Provision of production and support services (including new energy business);
+As the Company and its subsidiaries are controlled by CNOOC Group, transactions with CNOOC Group and its Associates
+(Associate has the meaning ascribed in Chapter 14A of the Listing Rules of Stock Exchange.) are disclosed as related
+party transactions. The connected transactions or continuing connected transactions defined in Chapter 14A of the Listing
+Rules of Stock Exchange in respect of items listed below also constitute related party transactions. The Company has
+complied with the relevant disclosure requirements of the China Securities Regulatory Commission, the Hong Kong Stock
+Exchange and the SSE in respect of the continuing connected transactions listed below. The Company entered into a
+comprehensive framework agreement with CNOOC Group on 2 November 2022 for the provision (1) by the Company and
+its subsidiaries to CNOOC Group and/or its Associates and (2) by CNOOC Group and/or its Associates to the Company
+and its subsidiaries, of a range of products and services which may be required and requested from time to time by
+either party and/or its associates in respect of the continuing connected transactions. The term of the comprehensive
+framework agreement is for a period of three years from 1 January 2023. The continuing connected transactions under
+the comprehensive framework agreement and the relevant annual caps for the three years from 1 January 2023 were
+approved by the independent shareholders of the Company on 29 November 2022. The approved continuing connected
+transactions are as follows:
+As disclosed in note 1, the Company is a subsidiary of CNOOC Group, which is a state-owned enterprise subject to the
+control of the State Council of the PRC. The State Council of the PRC directly and indirectly controls a significant number
+of state-owned entities and organisations.
+RELATED PARTY TRANSACTIONS
+In accordance with the "Administrative Measures for the Accrual and Use of Expenses for Work Safety" issued by the
+Ministry of Finance and the Ministry of Emergency Management of the PRC, the Company and its subsidiaries are required
+to accrue a safety fund for their oil and gas exploration and production activities within the PRC based on their annual
+production from offshore China to improve the safety conditions of oil and gas production. When the safety fund is fully
+utilised, additional expenses incurred for safety production purposes are charged directly to the profit or loss for the year.
+As at 31 December 2023, the general reserve fund amounted to RMB58,069 million (31 December 2022: RMB58,069
+million).
+Appropriation to the staff and workers' bonus and welfare fund, which is determined at the discretion of the board of
+directors of CNOOC China, is expensed as incurred under IFRS standards/HKFRSs. The staff and workers' bonus and
+welfare fund can only be used for special bonuses or collective welfare of employees.
+The general reserve fund, which is determined at the discretion of the board of directors of CNOOC China, can only be
+used, upon approval by the relevant authority, to offset against accumulated losses or to increase capital.
+According to the laws and regulations of the PRC and the articles of association of CNOOC China, CNOOC China is
+required to provide for certain statutory funds, namely, the general reserve fund and the staff and workers' bonus and
+welfare fund, which are appropriated from net profit (after making up for losses from previous years), but before dividend
+distribution.
+32.
+RESERVES
+31.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Comprehensive framework agreement with CNOOC Group in respect of a range of products and
+services
+Provision of development and support services
+(d) Provision of sales, management and ancillary services; and
+Sales of petroleum and natural gas products and green power products by the Company and its subsidiaries to
+CNOOC Group and/or its Associates:
+- Inclusive of amount capitalised under property,
+Provision of exploration and support services
+2022
+2023
+(i) Provision of exploration, development, production as well as sales, management and ancillary
+services by CNOOC Group and/or its Associates to the Company and its subsidiaries
+Except as disclosed in other notes to the consolidated financial statements, the following is a summary of significant
+related party transactions entered into in the ordinary course of business between the Company and its subsidiaries and
+its related parties during the period and the balances arising from related party transactions at the end of the period:
+RELATED PARTY TRANSACTIONS (continued)
+32.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023 153
+(e) Floating production, storage and offloading ("FPSO") vessel leases.
+The continuing connected transactions referred to in paragraph (2)(c) provided by the Company and its subsidiaries to
+CNOOC Group and/or its Associates on the basis of the above pricing principle, are traded fairly through listing, bidding,
+bilateral negotiation, rolling matchmaking, etc.
+The continuing connected transactions referred to in paragraph (1)(c)-(1)(d) above provided by CNOOC Group and/or its
+Associates to the Company and its subsidiaries, on the basis of the above pricing principle, are based on government-
+prescribed price or market prices.
+The continuing connected transactions referred to in paragraph (1)(a)-(1)(b) above provided by CNOOC Group and/or its
+Associates to the Company and its subsidiaries and (2)(a)-(2)(b) above provided by the Company and its subsidiaries to
+CNOOC Group and/or its Associates, on the basis of the above pricing principle, are determined through arm's length
+negotiations based on market prices (as defined in the comprehensive framework agreement).
+(b) where there is no government-prescribed price, in accordance with market prices, including the local, national or
+international market prices.
+government-prescribed price; or
+(a)
+On the basis of the above basic pricing principle, each type of products or services must be charged in accordance with
+the following pricing mechanism and in the following sequential order:
+The basic pricing principle for the continuing connected transactions between the Company and its subsidiaries and
+CNOOC Group and/or its Associates is based on arm's length negotiations, on normal commercial terms or better and
+with reference to the prevailing local market conditions (including the volume of sales, the term of contracts, the volume
+of services, overall customer relationship and other market factors).
+Pricing principles
+Sales of green power products.
+(c)
+(b) Long-term sales of natural gas and liquefied natural gas; and
+(a) Sales of petroleum and natural gas products (other than long-term sales of natural gas and liquefied natural
+gas);
+The continuing connected transactions referred to in paragraph (1)(e) on the basis of the above pricing principle, are
+unanimously determined with CNOOC Group and/or its Associates which provides the FPSO vessel leases after arm's
+length negotiation in accordance with normal commercial terms.
+Amounts due to its Associates
+- included in trade and accrued payables, contract liabilities,
+other payables and accrued liabilities
+- included in lease liabilities
+Adjustments for:
+Profit before tax
+194,770
+172,974
+2022
+2023
+Reconciliation of profit before tax to cash generated from operations
+NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
+34.
+During the year, the Company and its subsidiaries' pension costs charged to the consolidated statement of profit or loss
+and other comprehensive income amounted to RMB1,340 million (2022: RMB1,161 million).
+The Company and its subsidiaries provide retirement benefits for all local employees in overseas locations in accordance
+with relevant labour law, and provide employee benefits to expatriate staff in accordance with the relevant employment
+contracts.
+The Company is required to make contributions to a defined contribution mandatory provident fund at a rate of 5% of the
+salaries of all full-time employees in Hong Kong. The related pension costs are expensed as incurred.
+Interest income
+All the Company and its subsidiaries' full-time employees in the PRC are covered by a state-managed retirement benefit plan
+operated by the government of the PRC, and are entitled to an annual pension. The PRC government is responsible for the
+pension liabilities to these retired employees. The Company and its subsidiaries are required to make annual contributions
+to the state-managed retirement benefit plan at rates ranging from 14% to 16% of the employees' base salaries.
+33.
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023
+156
+Borrowings from CNOOC Group and/or its Associates mainly represent a three-year uncommitted revolving loan facility provided from
+CNOOC Group to the Company for general purposes, with the principal amount of RMB4,300 million of 1.08% per annum. Finance
+costs for the year ended 31 December 2023 was RMB44 million. The Loan was drawn in full in 2021.
+During the period, the Company and its subsidiaries' actual maximum daily outstanding balance for deposits and interest stated in
+CNOOC Finance (excluding funds placed for the purpose of extending entrustment loans pursuant to the entrustment loan services)
+did not exceed RMB22,000 million (2022: RMB23,500 million). The Company and its subsidiaries' actual maximum daily loan balance
+obtained from CNOOC Finance (including accrued interest) did not exceed RMB50,000 million, and the Company and its subsidiaries'
+actual service fees charged by CNOOC Finance for providing other financial services (excluding settlement services) did not exceed
+RMB20 million.
+Under the financial services framework agreement with CNOOC Finance dated 22 December 2022, CNOOC Finance continues to
+provide to the Company and its subsidiaries settlement, depository, discounting, loans and entrustment loans services, etc. The
+agreement is effective from 1 January 2023 to 31 December 2025. The depository services and the secured loans services were not
+required for independent shareholders' approval requirements under the Listing Rules of Stock Exchange, China Securities Regulatory
+Commission and the SSE. On 22 December 2022, the Board approved to maintain the maximum daily outstanding balance of deposits
+and interest (excluding funds placed for the purpose of extending entrustment loans pursuant to the entrustment loan services), the
+maximum daily loan balance (including accrued interest) and actual service fees charged by CNOOC Finance for providing other
+financial services (excluding settlement services) with the amount of RMB22,000 million, RMB50,000 million and RMB20 million
+respectively for the period from 1 January 2023 to 31 December 2025.
+CNOOC Finance is a 31.8% owned associate of the Company and also a subsidiary of CNOOC Group. Pursuant to Chapter 14A
+of the Listing Rules of the Stock Exchange, CNOOC Finance is a connected person of the Company, and pursuant to rule 6.3.3 of
+the Listing Rules of SSE. It constitutes a related legal person of the Company. The financial services provided by CNOOC Finance
+to the Company and its subsidiaries constitute continuing connected transactions. The Company has complied with the relevant
+disclosure requirements of the China Securities Regulatory Commission, the Hong Kong Stock Exchange and the SSE in respect of
+these continuing connected transactions.
+It is the market practice for sales terms to be determined based on the estimated reserves and production profile of the relevant gas
+fields. The long-term sales contracts usually last for 3 to 25 years.
+The sales include crude oil, natural gas, condensate oil, liquefied petroleum gas to CNOOC Group and/or its Associates. Individual
+sales contracts were entered into from time to time between certain subsidiaries of the Company and CNOOC Group and/or its
+Associates.
+CNOOC Energy Technology & Services Limited leased FPSO vessels to the Company and its subsidiaries for use in oil production
+operations.
+RETIREMENT BENEFITS
+These include sales, administration and management, management of oil and gas operations and integrated research services as well
+as other ancillary services relating to exploration, development, production and research activities of the Company and its subsidiaries.
+In addition, CNOOC Group and/or its Associates leased certain premises to certain subsidiaries of the Company for use as office
+premises and staff quarters out of which they provided management services to certain properties.
+Finance costs
+Share of profits of associates
+Increase in trade receivables and other current assets
+262,772
+246,765
+Subtotal
+5,424
+5,412
+Loss on disposal and write-off of property, plant and equipment
+62,852
+68,947
+Depreciation, depletion and amortisation
+666
+3,597
+Exchange losses/(gains), net
+Impairment and provision
+(3,080)
+Investment income
+(1,248)
+(1,081)
+Profit attributable to a joint venture
+(663)
+(850)
+(18)
+297
+6,027
+(2,980)
+(4,805)
+5,354
+(2,058)
+These represent the services for production operations, the provision of various facilities and ancillary services.
+(g)
+(f)
+190
+171
+2022
+2023
+- included in trade receivables and other current assets
+Amount due from a joint venture and associates
+Balance with a joint venture and associates
+(v)
+21,188
+21,622
+647
+1,041
+(vi) Transactions and balances with other state-owned enterprises
+- included in other current assets
+20,581
+- included in trade receivables
+Amounts due from its Associates
+5,154
+5,185
+Borrowings from CNOOC Group and/or its Associates (note (g))
+39,763
+38,345
+5,146
+6,885
+34,371
+31,431
+20,541
+The Company and its subsidiaries enter into extensive transactions covering sales of crude oil and natural gas,
+purchase of property, plant and equipment and other assets, receiving of services, and making deposits with state-
+owned enterprises, other than CNOOC Group and/or its Associates, in the normal course of business on terms
+comparable to those with non-state-owned enterprises. The purchases of property, plant and equipment and other
+assets, and receipt of services from these state-owned enterprises are individually not significant. The individually
+significant sales transactions with these state-owned enterprises are disclosed in note 37. In addition, the Company
+and its subsidiaries have certain of its cash in bank and time deposits with certain state-owned banks in the PRC
+as at 31 December 2023, as summarised below:
+Cash and cash equivalents
+Specified dismantlement fund accounts,
+(e)
+(c)
+(b)
+(a)
+Notes:
+Key management personnel's remuneration is disclosed in note 8.
+(vii) Key management personnel's remuneration
+RELATED PARTY TRANSACTIONS (continued)
+32.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+155
+CNOOC LIMITED Annual Report 2023
+Interest rates for the above time deposits and specified dismantlement fund accounts are at prevailing market rates.
+55,888
+90,656
+8,360
+9,039
+20,264
+18,930
+27,264
+62,687
+2022
+2023
+included in other non-current assets (note 20)
+Time deposits with maturity over three months
+Notes to Consolidated Financial Statements
+151
+CNOOC LIMITED Annual Report 2023
+There is no change in the share capital and number of shares during the year ended 31 December 2023.
+3.500%
+450
+3.750%
+300
+300
+4.200%
+696
+690
+7.500%
+1,195
+1,195
+6.400%
+2,000
+732
+5.875%
+431
+404
+7.875%
+As at 31 December 2023, EUR790 million of the bank loans for Arctic LNG 2 Project (31 December 2022: EUR790 million) were guaranteed
+by the Company.
+In connection with the financing for the third LNG process train of Tangguh LNG Project in Indonesia, the Company delivered two guarantees
+dated 3 August 2016, in favor of Mizuho Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial
+banks and Indonesian local commercial banks under two commercial loan agreements with aggregate loan amount of US$2,145 million. The
+Company guarantees the payment obligations of the trustee borrower under the subject loan agreements and is subject to an aggregate
+maximum cap of approximately US$573 million.
+All the notes issued mentioned above were fully and unconditionally guaranteed by the Company.
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Petroleum North America ULC
+CNOOC Finance (2015) Australia Pty Ltd
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2015) U.S.A. LLC
+CNOOC Finance (2015) U.S.A. LLC
+Due in 2028
+Due in 2025
+Matured in 2023
+Due in 2045
+728
+Due in 2039
+2,000
+1,000
+669
+After five years
+After four years but within five years
+After three years but within four years
+641
+6,849
+503
+610
+470
+683
+After two years but within three years
+After one year but within two years
+4.375%
+Within one year
+2022
+2023
+The maturities of the long-term loans are as follows:
+Non-current(1) (continued)
+LOANS AND BORROWINGS (continued)
+27.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+149
+CNOOC LIMITED Annual Report 2023
+1,000
+Repayable:
+Due in 2037
+Due in 2035
+Due in 2032
+500
+5.750%
+300
+300
+5.500%
+Due in 2043
+Due in 2033
+Due in 2041
+Due in 2042
+CNOOC Finance (2003) Limited
+CNOOC Finance (2011) Limited
+CNOOC Finance (2012) Limited
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+CNOOC Finance (2013) Limited
+CNOOC Finance (2014) ULC
+CNOOC Finance (2014) ULC
+USD million
+USD million
+31 December
+2022
+2023
+500
+Coupon Rate
+Issued by
+31 December
+Outstanding Principal Amount
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+(4)
+(3)
+The details of notes are as follows:
+(2)
+Non-current(¹) (continued)
+LOANS AND BORROWINGS (continued)
+Maturity
+5.000%
+500
+500
+160
+160
+7.400%
+Due in 2028
+CNOOC Petroleum North America ULC
+500
+500
+4.875%
+Due in 2044
+2,250
+2,250
+4.250%
+Due in 2024
+500
+500
+3.300%
+Due in 2049
+1,000
+1,000
+2.875%
+Due in 2029
+500
+500
+4.250%
+2,000
+3.000%
+Matured in 2023
+6,535
+(215)
+850
+2,318
+87,042
+97,091
+At 31 December
+(1,062)
+(1,552)
+Current portion of provision for dismantlement included in other payables
+and accrued liabilities (note 26)
+88,104
+98,643
+At 31 December
+1,030
+799
+Exchange differences
+(1)
+2,899
+Unwinding of discount (2) (note 7)
+(31)
+(130)
+Deletion
+(710)
+(349)
+Utilisation
+4,743
+550
+Revision(1)
+513
+Acquisitions (1)
+2,931
+3,471
+The amounts are included in the additions of oil and gas properties in note 13.
+30.
+During the year ended 31 December 2022, the Company repurchased and cancelled 70,692,000 of its own shares with an aggregate
+cash payment of HK$693 million listed on HKSE, equivalent to approximately RMB623 million. Such buy-backs were financed out of the
+Company's distributable profits, as a result, the payment was reduced from the Company's "Retained earnings".
+According to the "Approval of the Initial Public Offering of Shares of CNOOC Limited" Zheng Jian Xu Ke No. [2022] 632, the China Securities
+Regulatory Commission (the "CSRC") approved initial public offering of RMB ordinary shares ("A-share offering") of the Company. The price
+of the Company's A-share offering was RMB10.80 per ordinary share, and after exercising the over allotment option, the final number of
+shares issued was 2,990 million. The raised funds have been verified by Ernst & Young Hua Ming LLP and capital verification reports (Ernst &
+Young Hua Ming (2022) Yan Zi No. 60157570_A02 & 60157570_A03) were issued. The total amount of the final funds raised in this offering
+was RMB32,292 million. After deducting the issuance expenses of RMB193 million, the net amount of funds raised was RMB32,099 million.
+(2)
+(1)
+44,576,763,984
+2,990,000,000
+75,180
+47,566,763,984
+75,180
+47,566,763,984
+(70,692,000)
+32,099
+2,990,000,000
+(2) The discount rates used for calculating the provision for dismantlement is 3.0%-4.75% (2022: 3.0%-4.0%).
+43,081
+Issued share
+capital equivalent
+of RMB million
+Number of shares
+Shares listed on SSE
+Of which: Shares listed on HKSE
+As at 31 December 2023
+As at 31 December 2022 and at 1 January 2023
+Repurchase of own shares and cancelled (2)
+Shares newly issued in 2022(1)
+As at 1 January 2022
+Ordinary shares with no par value
+Issued and fully paid:
+SHARE CAPITAL
+44,647,455,984
+6,738
+76,189
+88,104
+2023
+LEASE LIABILITIES
+28.
+There was no default of principal, interest or redemption terms of the loans and borrowings during the year.
+The weighted average interest rate is computed by averaging the interest rates as of 1 January and 31 December of each year.
+(1)
+2.10%
+3.73%
+4.86%
+2.60%
+11,979
+11,757
+2022
+Weighted average
+interest rate
+during the year (1)
+2022
+year end
+Balance at
+year end
+2023
+For the year ended 31 December
+Supplemental information with respect to the long-term loans:
+11,287
+11,296
+(470)
+(683)
+Amount due within one year shown under current liabilities
+11,757
+11,979
+2,909
+Weighted average
+interest rate at
+Lease liabilities payable:
+Within one year
+2,617
+New projects (1)
+At 1 January
+2022
+2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+PROVISION FOR DISMANTLEMENT
+29.
+CNOOC LIMITED Annual Report 2023
+150
+The incremental borrowing rates applied to lease liabilities range from 3.3% to 5.16% (2022: from 3.3% to 5.16%).
+10,075
+(994)
+(2,218)
+Total lease liabilities
+Less: Discount to present value
+9,428
+12,293
+2,713
+3,807
+3,117
+3,816
+1,612
+2,053
+Within a period of more than one year but not more than two years
+Within a period of more than two years but not more than five years
+Within a period of more than five years
+1,986
+699
+(8,686)
+(d)
+(361)
+5,263
+-
+497
+4,766
+Finance costs (note 7)
+3,219
+614
+601
+2,004
+Foreign exchange translation
+Dividends declared
+4,003
+New lease entered
+(84,339)
+(58,249)
+(3,460)
+(22,630)
+Financing cash flows
+134,396
+8,434
+125,962
+At 1 January 2023
+4,003
+57,751
+57,751
+At 31 December 2023
+Increase in inventories and supplies
+CNOOC LIMITED Annual Report 2023
+158
+As at 31 December 2023, the Company and its subsidiaries had unutilized facilities amounting to approximately
+RMB53,884 million (31 December 2022: RMB67,671 million).
+92
+219
+2022
+2023
+Contracted, but not provided for
+Capital commitments of a joint venture:
+As at 31 December 2023, the above table includes a commitment of approximately RMB14,382 million (31 December
+2022: RMB16,967 million) contracted with CNOOC Group and/or its Associates.
+(1) The capital commitments contracted, but not provided for, include the estimated payments to the Ministry of Natural Resources of
+the PRC for the next five years with respect to the Company and its subsidiaries' exploration and production licenses.
+2022
+58,346
+45,099
+2023
+Contracted, but not provided for (1)
+As at 31 December 2023, the Company and its subsidiaries had the following capital commitments, principally for
+the construction of property, plant and equipment:
+Capital commitments
+(i)
+COMMITMENTS AND CONTINGENCIES
+120,293
+116
+10,075
+134,396
+8,434
+110,102
+At 31 December 2022
+payable
+Dividend
+Lease
+liabilities
+borrowings
+Loans and
+The table below details changes in the Company and its subsidiaries' liabilities arising from financing activities, including
+both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future
+cash flows will be, classified in the Company and its subsidiaries' consolidated statement of cash flows as cash flows
+from financing activities.
+35.
+Reconciliation of liabilities arising from financing activities
+NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
+34.
+31 December 2023
+Notes to Consolidated Financial Statements
+157
+CNOOC LIMITED Annual Report 2023
+256,575
+255,187
+Cash generated from operations
+3,134
+8,998
+other payables and accrued liabilities
+Increase in trade and accrued payables, contract liabilities and
+125,962
+(645)
+Total
+(note 27)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+At 1 January 2022
+(note 28)
+Dividends declared
+5,119
+376
+4,743
+Finance costs (note 7)
+11,519
+1,039
+710
+9,770
+76,339
+Foreign exchange translation
+2,874
+128,222
+6,920
+135,142
+2,874
+(16,773)
+Financing cash flows
+(77,378)
+(96,597)
+New lease entered
+(2,446)
+76,339
+2,667
+31 December 2023
+8,180
+1,010
+1,242
+13
+སྐྱེ|-༔B +
+25
+(22)
+2
+392
+705
+87
+13
+431
+Revisions of prior estimates
+(129) (171)
+(638)
+(358)
+Production
+14
+48
+Improved recovery
+126
+266
+759
+746
+269
+48
+36
+(24)
+270
+Discoveries and extensions
+637
+270
+626
+269
+31 December 2023
+31 December 2022
+method investees
+Enterprise's share of equity
+227
+24
+45
+14
+(24)
+(7)
+2
+S|s+ B+
+705
+9,190
+3,910
+227
+248
+517
+45
+(24)
+(809)
+(488)
+(24)
+11
+Discoveries and extensions
+3
+142
+68
+5
+142
+63
+Improved recovery
+4
+18
+1,004
+430
+4
+18
+30
+189
+974
+241
+629
+46
+96
+33
+97
+13
+(1)
+Purchase/(Disposal) of reserves
+144
+740
+740
+Production
+(336)
+(567)
+(118)
+Purchase/(Disposal) of reserves
+204
+716
+8,965
+3,414
+204
+716
+1,179
+1,134
+7,786
+2,280
+31 December 2022
+74
+25
+(36)
+235
+74
+(36)
+(59)
+16
+205
+219
+Revisions of prior estimates
+(18)
+(724)
+(454)
+(18)
+(156)
+146
+271
+17,143
+2,434
+Since the Company and its subsidiaries make reference to international oil prices to determine its realised oil
+price, fluctuations in international oil price would have a significant impact on the Company and its subsidiaries'
+sales revenue, profit, assets value and cash-flow. In addition, certain of the Company and its subsidiaries' natural
+gas sales contracts contain price adjustment provisions. Any changes in international oil prices, inflation rate and
+domestic natural gas pricing policies may result in changes in natural gas prices, which will affect the Company
+and its subsidiaries' profitability.
+(iii) Currency risk
+Substantially all of the Company and its subsidiaries' oil and gas sales are denominated in RMB and United States
+dollars ("US dollars"). Starting from 21 July 2005, China reformed the exchange rate regime by moving into a managed
+floating exchange rate regime based on market supply and demand with reference to a basket of currencies. RMB
+would no longer be pegged to the US dollars. From 1 January 2023 to 31 December 2023, RMB has depreciated
+by approximately 1.67% (2022: depreciated by approximately 8.46%) against the US dollars. At 31 December 2023,
+approximately 86% (31 December 2022: 69%) of the Company and its subsidiaries' cash and cash equivalents and
+time deposits with maturity over three months but within one year were denominated in RMB, and the remaining
+amounts were substantially denominated in US dollars and Hong Kong dollars. The Company and its subsidiaries
+also have exposures to currencies other than the US dollars, such as Canadian dollars and British Pounds as such
+exposures are considered insignificant.
+Management has assessed the Company and its subsidiaries' exposure to foreign currency risk by using a sensitivity
+analysis on the change in foreign exchange rate of the US dollars, to which the Company and its subsidiaries are
+mainly exposed to as at 31 December 2023 and 2022. Based on management's assessment at 31 December 2023,
+a 5% strengthening/weakening of RMB against US dollars would have increased/decreased the profit for the year
+of the Company and its subsidiaries by 0.15% (31 December 2022: 0.01%) and the equity of the Company and its
+subsidiaries by 0.13% (31 December 2022: 0.73%). This analysis has been determined assuming that the change
+in foreign exchange rates had occurred at the end of the reporting period and had been applied to the foreign
+currency balances to which the Company and its subsidiaries have significant exposure with all other variables held
+constant. The analysis is performed on the same basis for 2022.
+162 CNOOC LIMITED Annual Report 2023
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+38.
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+(iii) Currency risk (continued)
+Senior management is closely monitoring the Company and its subsidiaries' net exposure to foreign currency risk.
+The depreciation of RMB against the US dollars may have the following impact on the Company and its subsidiaries.
+On one hand, since the benchmark oil and gas prices are usually in US dollars against RMB, the Company and its
+subsidiaries' oil and gas sales may increase due to the appreciation of the US dollars against RMB. On the other
+hand, the appreciation of the US dollars against RMB will also increase the Company and its subsidiaries' costs for
+imported equipment and materials, most of which are denominated in the US dollars.
+(iv) Interest rate risk
+The interest rate risk is closely monitored by the Company and its subsidiaries' senior management. As at the end
+of 2023, the interest rates for 88.76% (2022: 90.34%) of the Company and its subsidiaries' debts were fixed. The
+weighted average term of the Company and its subsidiaries' debt balance outstanding was approximately 7.97
+(2022: 7.73) years. The fixed interest rates can reduce the volatility of finance costs under uncertain environments
+and the Company and its subsidiaries' exposure to changes in interest rates is not expected to be material.
+(v) Liquidity risk
+The Company and its subsidiaries manage its liquidity risk by regularly monitoring its liquidity requirements and its
+compliance with debt covenants to ensure that it maintains sufficient cash and cash equivalents, other financial
+assets, and adequate time deposits to meet its liquidity requirements in the short and long term. In addition, bank
+facilities have been put in place for contingency purposes.
+The financial liabilities held by the Company and its subsidiaries are analysed according to the maturity period of
+the undiscounted remaining contractual obligations as follows:
+31 December 2023
+Within
+1 year
+1 to 2
+years
+2 to 5
+years
+Above
+5 years
+Total
+Short-term borrowings
+4,388
+4,388
+Long-term borrowings
+(ii) Oil and gas price risk
+In order to minimise the credit risk, the management of the Company and its subsidiaries have delegated a team
+responsible for determination of credit limits and credit approvals. Before accepting any new counterparties, the
+Company and its subsidiaries use an internal credit scoring system to assess the potential counterparty's credit quality
+and define credit limits by counterparty. Limits and scoring attributed to counterparties are reviewed annually. Other
+monitoring procedures are in place to ensure that follow-up action is taken to recover overdue debts. In addition, the
+Company and its subsidiaries perform impairment assessment under ECL model upon application of IFRS 9/HKFRS
+9 on trade receivables individually or based on provision matrix, and other receivables individually. In this regard,
+the Directors of the Company consider that the Company and its subsidiaries' credit risk is significantly reduced.
+Concentrations of credit risk are managed by counterparty and by geographical region. At 31 December 2023, the
+Company and its subsidiaries have certain concentrations of credit risk as 2.35% (31 December 2022: 4.07%) and
+11.73% (31 December 2022: 8.19%) of the Company and its subsidiaries' trade receivables were due from the
+Company and its subsidiaries' largest third-party customer and the five largest third-party customers, respectively.
+As at 31 December 2023, the carrying amounts of the Company and its subsidiaries' cash and cash equivalents,
+time deposits with maturity more than three months, trade receivables, other receivables (approximately RMB5,256
+million included in other current assets) and debt investment represent the Company and its subsidiaries' maximum
+exposure to credit risk in relation to its financial assets. The Company and its subsidiaries do not hold any collateral
+or other credit enhancements to cover its credit risks associated with its financial assets.
+Credit risk and management assessment
+Zhonghai (Dongying) Petrochemical Co., Ltd.
+PetroChina Company Limited*
+Suncor Energy Inc.
+These transactions are with other state-owned enterprises.
+38.
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
+2023
+2022
+32,735
+20,663
+12,320
+12,496
+11,694
+1,297
+12,538
+4,873
+8,255
+5,209
+The Company and its subsidiaries' principal financial instruments comprise bank loans, long-term guaranteed notes,
+debt investment, equity investments and other financial assets, cash and short-term deposits, etc. The Company and
+its subsidiaries have various other financial assets and liabilities such as trade receivables, other receivables, trade and
+accrued payables, which arise directly from its operations.
+The Company and its subsidiaries are exposed to credit risk, oil and gas price risk, currency risk, interest rate risk and
+liquidity risk.
+The Company's senior management oversees the management of these risks. The Company's senior management is
+supported by various departments that advise on financial risks and the appropriate financial risks governance framework
+for the Company and its subsidiaries. Those departments provide assurance to the Company's senior management that
+the Company and its subsidiaries' financial risk-taking activities are governed by appropriate policies and procedures
+and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite.
+CNOOC LIMITED Annual Report 2023 161
+Notes to Consolidated Financial Statements
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+38.
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+(i)
+11,301
+1,185
+9,089
+2,451
+1 year
+1 to 2
+years
+2 to 5
+years
+Above
+5 years
+Total
+Short-term borrowings
+4,350
+4,350
+Long-term borrowings
+879
+893
+8,650
+Within
+3,086
+Trade and accrued payables
+59,789
+59,789
+Other payables
+7,143
+7,143
+Notes
+22,414
+19,418
+23,184
+85,553
+150,569
+Long-term payables
+13,508
+2,878
+31 December 2022
+81,916
+14,022
+Trade and accrued payables
+61,382
+61,382
+Other payables
+8,416
+8,416
+Notes
+20,638
+17,396
+8,351
+75,602
+130,779
+237,911
+Long-term payables
+3,712
+2,863
+56
+Lease liabilities
+2,617
+2,053
+3,816
+3,807
+6,631
+12,293
+Total
+98,738
+24,346
+32,911
+-
+3,040
+To fully reflect the Company's oil and gas producing activities, the Company makes the following disclosures in accordance
+with the FASB Accounting Standard Codification 932 "Extractive Activities-Oil and Gas" (the "ASC 932) for the assessment and
+disclosure of oil and gas reserves in order to provide standardized measures and variations of the estimated proven reserves
+of oil and gas and the discounted projected future net cash flows of the Company and its equity investors.
+40
+Total non-current liabilities
+Lease liabilities
+NON-CURRENT LIABILITIES
+NET CURRENT ASSETS
+Total current liabilities
+Other payables and accrued liabilities
+Taxes payable
+Lease liabilities
+Loans and borrowings
+CURRENT LIABILITIES
+64,368
+60,620
+Total current assets
+17,032
+11,313
+Cash and cash equivalents
+16,902
+6,496
+Time deposits with maturity over three months but within one year
+26,489
+34,231
+Loans to subsidiaries
+3,945
+8,580
+Amounts due from subsidiaries
+CURRENT ASSETS
+Total non-current assets
+NET ASSETS
+EQUITY
+Equity attributable to equity shareholders of the Company
+Issued capital
+Reserves
+31 December 2023
+Notes to Consolidated Financial Statements
+165
+CNOOC LIMITED Annual Report 2023
+273,358
+274,539
+198,178
+75,180
+75,180
+199,359
+273,358
+274,539
+12
+12
+213,343
+60,015
+4,353
+4,371
+44
+28
+9
+6
+6
+4,303
+4,328
+Zhou Xinhuai
+Director
+Director
+Wang Dongjin
+TOTAL EQUITY
+56,249
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+218,302
+18
+Lease liability
+Loans and borrowings
+The Company and its subsidiaries monitor capital on the basis of the debt to capital ratio, which is calculated as
+interest-bearing debts divided by total capital (total equity plus interest-bearing debts).
+The Company and its subsidiaries manage its capital structure and make adjustments to it in light of changes in
+economic conditions. To maintain or adjust the capital structure, the Company and its subsidiaries may return
+capital to shareholders, raise new debts or issue new shares. No changes were made in the objectives, policies or
+processes for managing capital during the years ended 31 December 2023 and 2022.
+The primary objectives of the Company and its subsidiaries' capital management are to safeguard the Company
+and its subsidiaries' ability to continue as a going concern and to maintain healthy capital ratios in order to support
+its business and maximise shareholders' value.
+(vi) Capital management
+FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
+38.
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+163
+CNOOC LIMITED Annual Report 2023
+251,704
+92,957
+37,829
+24,357
+96,561
+Total
+9,428
+2,713
+3,117
+1,612
+1,986
+Lease liabilities
+6,917
+Zhejiang Petrochemical Co., Ltd.
+Total Equity
+Total capital
+Gearing ratio
+39.
+213,337
+218,284
+2022
+2023
+Right-of-use assets
+NON-CURRENT ASSETS
+Investments in subsidiaries
+Information about the statement of financial position of the Company at the end of the reporting period is as follows:
+41. STATEMENT OF FINANCIAL POSITION OF THE COMPANY
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+164 CNOOC LIMITED Annual Report 2023
+The Company and its subsidiaries have no significant subsequent events needed to be disclosed in the consolidated
+financial statements.
+6
+SUBSEQUENT EVENTS
+18.3%
+15.2%
+732,779
+788,053
+8,434
+598,383
+667,876
+10,075
+125,962
+110,102
+2022
+2023
+40.
+CHARGES ON ASSETS
+CNOOC NWS Private Limited, a wholly-owned subsidiary of the Company, together with the other joint venture partners
+and the operator of the NWS Project, signed a Deed of Cross Charge and an Extended Deed of Cross Charge whereby
+certain liabilities incurred or to be incurred, if any, by the Company in respect of the NWS Project are secured by its
+interest in the NWS Project.
+41.
+STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)
+A summary of the Company's reserves is as follows:
+Reserve quantity information (continued)
+(1)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+167
+1,605
+CNOOC LIMITED Annual Report 2023
+The reserves estimators and auditors are required to be members of a professional society, such as China Petroleum Society
+(CPS), and are required to take the professional trainings and examinations as required by the professional society or us.
+The RMC delegates its daily operation to our Reserves Office. The Reserves Office is mainly responsible for supervising
+reserves estimates and auditing. It reports to the RMC periodically and is independent from operating divisions such
+as the exploration, development and production departments. Our Chief Reserve Supervisor has more than 30 years'
+experience in oil and gas industry.
+The RMC follows certain procedures to appoint our internal reserves estimators and reserves auditors, who are required to
+have undergraduate degrees and at least five years and ten years of experience related to reserves estimation, respectively.
+review our proved reserves and other categories of reserves; and
+select our reserves estimators and auditors.
+• review our reserves policies;
+We established the Reserve Management Committee (the "RMC"), which comprises the general managers of the
+relevant departments and is led by the Company's management in charge of reserves as the director. The RMC's main
+responsibilities are to:
+For the years 2023, 2022 and 2021, approximately 94%, 89% and 74%, respectively, of our total proved reserves were
+evaluated by us, and the remaining were evaluated by independent third parties.
+Crude oil and natural gas reserve estimates are determined through analysis of geological and engineering data which
+appear, with reasonable certainty, to be economically producible in the future from known oil and natural gas reservoirs
+under existing economic and operating conditions. The Company referred to the SEC's final rules on "Modernization of
+Oil and Gas Reporting", which became effective as of 1 January 2010 to evaluate reserves. We implemented rigorous
+internal control system that monitors the entire reserves estimation process and certain key metrics.
+Reserve quantity information
+(1)
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+CNOOC LIMITED Annual Report 2023
+166
+The consolidated financial statements were approved and authorised for issue by the Board of Directors on 21 March 2024.
+43. APPROVAL OF THE FINANCIAL STATEMENTS
+Certain comparative amounts have been reclassified to conform with the current year's presentation, and those
+reclassifications are not significant.
+COMPARATIVE AMOUNTS
+As at 31 December 2023, the distributable retained earnings of the Company amounted to approximately RMB189,148 million (31 December
+2022: RMB191,874 million).
+42.
+The Company's net proved reserves consist of its interest in reserves, comprised of a 100% interest in its independent oil
+and gas properties and its participating interest in the properties covered under the production sharing contracts in the
+PRC, less (i) an adjustment for the Company's share of royalties payable by the Company to the PRC government and
+the Company's participating interest in share oil payable to the PRC government under the production sharing contracts,
+and less (ii) an adjustment for production allocable to foreign partners under the PRC production sharing contracts as
+reimbursement for exploration expenses attributable to the Company's participating interest, and plus the participating
+interest in the properties covered under the production sharing contracts in oversea countries, less adjustments, if any,
+of share oil attributable to the host government and the domestic market obligation.
+The Company uses the average, first-day-of-the-month oil price during the 12-month period before the ending date of
+the period covered by the consolidated financial statements to estimate its proved oil and gas reserves.
+The Company determines its net entitlement oil and gas reserves under production sharing contracts using the economic
+interest method.
+Proved developed and undeveloped reserves:
+740
+1,331
+945
+7,020
+2,095
+31 December 2021
+Consolidated entities
+(mmbls)
+(bcf) (mmbls)
+Bitumen
+oil
+Natural Synthetic
+gas
+Oil
+(mmbls)
+199,359
+Bitumen
+(mmbls)
+(bcf)
+(mmbls)
+(bcf)
+(mmbls)
+gas
+Oil
+gas
+Oil
+Natural Synthetic
+Natural
+Total
+Oversea
+PRC
+oil
+(mmbls)
+189,148*
+5,564
+4,647
+2022 interim dividend
+(47,372)
+(47,372)
+Special dividend
+85,015
+61,378
+23,637
+Total comprehensive income
+23,637
+23,637
+Other comprehensive income, net of tax
+61,378
+61,378
+(28,967)
+Profit for the year
+207,458
+5,564
+(22,897)
+Balance at 1 January 2022
+reserves
+earnings
+reserves
+reserve
+Total
+Retained
+Other
+translation
+Cumulative
+190,125
+144
+(28,967)
+(623)
+Balance at 31 December 2023
+(25,669)
+(25,669)
+2023 interim dividend
+(31,814)
+(31,814)
+2022 final dividend
+58,664
+54,757
+3,907
+Total comprehensive income
+3,907
+3,907
+Other
+Other comprehensive income, net of tax
+54,757
+Profit for the year
+198,178
+191,874*
+5,564
+740
+Balance at 1 January 2023
+198,178
+191,874*
+5,564
+740
+Balance at 31 December 2022
+(623)
+54,757
+China Petroleum & Chemical Corporation*
+Interests in reserves
+CONCENTRATION OF CUSTOMERS
+31 December 2023
+Notes to Consolidated Financial Statements
+CNOOC LIMITED Annual Report 2023 159
+fair value measurements are those derived from valuation techniques that include inputs for the asset
+or liability that are not based on observable market data (unobservable inputs), or where the observable
+data does not support the majority of the instruments fair value.
+fair value measurements are those derived from inputs other than quoted prices included within Level 1
+that are observable for the asset or liability, either directly or indirectly. The Company and its subsidiaries
+obtain information from sources of independent price publications, over-the-counter broker quotes and
+the fund management's quotations as at the reporting date.
+quoted prices (unadjusted) in active markets for identical assets or liabilities. Active markets are those
+in which transaction occurs in sufficient frequency and volume to provide pricing information on an on-
+going basis.
+Level 3:
+Level 2:
+Level 1:
+The Company and its subsidiaries use the following hierarchy that reflects the significance of the inputs used in making
+the fair value measurement:
+Fair value hierarchy
+The estimated fair value of the Company and its subsidiaries' long-term guaranteed notes was approximately RMB89,614
+Imillion as at 31 December 2023 (31 December 2022: RMB101,266 million), which was determined by reference to the
+market price as at 31 December 2023.
+The fair value of the Company and its subsidiaries' long-term bank loans with floating interest rates approximated to the
+carrying amount as at 31 December 2023 and 2022.
+The carrying values of the Company and its subsidiaries' cash and cash equivalents, time deposits with maturity more than
+three months, trade receivables excluding receivables financing, other current assets, short-term loans and borrowings,
+trade and accrued payables, and other payables and accrued liabilities approximated to their fair values at the reporting
+date due to the short maturity of these instruments.
+Fair value of financial instruments
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+36.
+FINANCIAL INSTRUMENTS (continued)
+Fair value hierarchy (continued)
+40,216
+40,216
+and structured deposits
+Corporate wealth management products
+Other financial assets - current
+666
+666
+FINANCIAL INSTRUMENTS
+Receivables financing
+Level 2
+Level 1
+2023
+31 December
+Trade receivables
+Assets measured at fair value
+As at 31 December 2023 and 31 December 2022, the Company and its subsidiaries held the following financial instruments
+measured at fair value for each hierarchy respectively:
+Level 3
+Publicly traded money market funds
+36.
+The Company and its subsidiaries are subject to tax in numerous jurisdictions around the world. There are audits
+in progress and items under review. Difference in positions taken by taxation authorities over the interpretation and
+application of tax laws and regulations may increase the Company and its subsidiaries' tax liability. Management of
+the Company has assessed the possible future outcome of matters that are currently under dispute. Management
+of the Company believes that an adequate provision for future tax liability has been included in the consolidated
+financial statements based on available information.
+1,647
+1,512
+8,186
+2,668
+31 December 2023
+716
+9,595
+3,684
+204
+716
+1,805
+1,403
+7,789
+2,281
+31 December 2022
+705
+227
+4,180
+9,834
+As a Chinese Resident Enterprise, the Company may be liable to pay taxes on the deemed interest income for
+the funding provided to its overseas subsidiaries starting from 1 January 2008. The Company has prepared
+contemporaneous documentation in accordance with applicable PRC tax laws and regulations and is currently
+awaiting confirmation from its local tax authority.
+(ii) Contingencies
+COMMITMENTS AND CONTINGENCIES (continued)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Notes to Consolidated Financial Statements
+35.
+In addition to the matters mentioned above, the Company or its subsidiaries are dealing with a number of lawsuits
+and arbitrations that arise in the ordinary course of business. While the results of these legal proceedings cannot
+be ascertained at this stage, management of the Company believes these proceedings are not expected to have
+a material effect on the consolidated financial statements.
+Total consolidated and equity
+643
+CNOOC LIMITED Annual Report 2023
+168
+227
+204
+273
+705
+A substantial portion of the Company and its subsidiaries' oil and gas commodities sales to third-party customers is made
+to a small number of customers on credit. Details of the gross sales to these top five third party customers are as follows:
+4,088
+29
+Other financial assets - non current
+31 December 2023
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+36.
+37.
+FINANCIAL INSTRUMENTS (continued)
+Fair value hierarchy (continued)
+Financial assets classified within Level 3 are primarily made up of Kerogen Energy Fund invested by a wholly-owned
+subsidiary of the Company. Significant unobservable inputs are used by the Company and its subsidiaries to determine the
+fair value of these financial assets. As observable prices are not available, the fair value of the financial assets is derived
+by using valuation techniques, mainly including embedded terms of the instrument, bid offer price as well as valuations
+based on net asset value using the discounted cash-flow of each project or asset, having applied an appropriate risk
+factor for the stage of development of the project. The significant unobservable in puts used in the fair value measurement
+include net asset value, price to net asset value.
+No amounts have been transferred between the different levels of the fair value hierarchy for the year.
+non current
+Non-publicly traded investments -
+Equity investments*
+- 6,026 -
+6,026
+Corporate wealth management products
+Other financial assets - non current
+| I
+CNOOC LIMITED Annual Report 2023
+160
+All gains and losses included in other comprehensive income related to financial assets at FVTOCI held at the end of the reporting period
+are reported as fair value change on equity investments designated as at FVTOCI.
+32
+4,088
+Derivative financial instruments
+Futures
+1,075
+- 1,075
+30
+30
+4,000
+96,786
+91,681
+1,075
+Liabilities measured at fair value
+Derivative financial instruments
+Futures
+32
+32
+32
+4,030
+4,000
+Notes to Consolidated Financial Statements
+84,209
+25
+Derivative financial instruments
+Futures
+Liabilities measured at fair value
+4,131
+50,131
+43
+886
+25
+Futures
+non current
+Non-publicly traded investments -
+Equity investments*
+4,232
+Publicly traded money market funds
+Corporate wealth management products
+4,232
+Derivative financial instruments
+25
+43
+-- 886
+84,209
+and structured deposits
+25
+Other financial assets - current
+1,446
+1,446
+Receivables financing
+Trade receivables
+Assets measured at fair value
+Corporate wealth management products
+Level 2
+Level 1
+2022
+31 December
+886
+45,114
+Level 3
+(303,040)
+Revisions in quantity estimates
+77,653
+108,020
+Development costs incurred during the year
+(95,478)
+(70,662)
+138,060
+180,248
+and development costs
+Extensions, discoveries and improved recovery, net of future production
+369,842
+(139,860)
+Net change in prices, net of royalties and production costs
+129,677
+Change in estimated future development costs
+61,458
+171
+Net change in income taxes
+(270,826)
+COMPANY INFORMATION
+CNOOC LIMITED Annual Report 2023
+829,686
+882,133
+Standardised measure, at the end of year
+25,380
+Accretion of discount
+24,116
+8,572
+(96,165)
+15,700
+66,217
+109,650
+Changes in timing and other
+Purchase of oil and gas properties
+23,956
+Sales of production, net of royalties and production costs
+890,724
+829,686
+638,904
+cash flows
+discounted future net
+Standardised measure of
+(583,728)
+(264,266)
+(319,462)
+243,229
+(567,728)
+(351,850)
+10% discount factor
+1,413,414
+522,690
+Board of Directors:
+1,449,862
+459,108
+(215,878)
+882,133
+571,262
+258,424
+Standardised measure, at the beginning of year
+2022
+2023
+Standardised measure of consolidated entities (RMB million)
+Standardised measure of discounted future net cash flows and changes therein (continued)
+Present value of estimated future net cash flows:
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+(2)
+170 CNOOC LIMITED Annual Report 2023
+Future net cash flows have been prepared taking into consideration estimated future dismantlement costs of dismantling offshore oil platforms
+and gas properties.
+Future development costs include the estimated costs of drilling future development wells and building the production platforms.
+Future cash flows consist of the Company's 100% interest in the independent oil and gas properties and the Company's participating
+interest in the properties under the production sharing contracts in the PRC, less (i) an adjustment for the royalties payable to the PRC
+government and the Company's participating interest in share oil payable to the PRC government under the production sharing contracts,
+and less (ii) an adjustment for production allocable to foreign partners under the PRC production sharing contracts as reimbursement for
+exploration expenses attributable to the Company's participating interest, and plus the participating interest in the properties covered under
+the production sharing contracts in oversea countries, less adjustments, if any, of share oil attributable to the host government and the
+domestic market obligation.
+(3)
+(2)
+(1)
+829,686
+519,614
+Non-executive Directors
+Industrial and Commercial Bank of China
+Wen Dongfen
+Tel: (8610) 8452 6641
+Fax: (8610) 8452 1441
+E-mail: mr@cnooc.com.cn
+Media/Public Relations:
+Fax: (8610) 8452 1441
+E-mail: ir@cnooc.com.cn
+Tel: (8610) 8452 0883
+Investor Relations:
+HKSE: 00883 (HKD counter) and 80883 (RMB counter)
+Shanghai Stock Exchange: 600938
+Stock codes:
+Registered Office:
+Pudong New Area, Shanghai
+Limited, Shanghai Branch
+China Securities Depository and
+Clearing Corporation
+A Share Registrar:
+Hong Kong
+Wan Chai
+183 Queen's Road East
+Shops 1712-1716, 17th Floor
+Hopewell Centre
+No. 188, Yanggao South Road,
+65/F, Bank of China Tower
+1 Garden Road
+Hong Kong, China
+Paper | Supporting
+responsible forestry
+FSC™ C008061
+MIX
+www.fsc.org
+FSC
+√
+www.cnoocltd.com
+CNOOC LIMITED
+CNOOC LIMITED Annual Report 2023
+172
+Website: www.cnoocltd.com
+Zip Code: 100010
+Beijing
+China
+Dongcheng District
+No.25 Chaoyangmen Beidajie
+Beijing Office:
+Fax: (852) 2525 9322
+Tel: (852) 2213 2500
+Hong Kong Registrars Limited
+Hong Kong Share Registrar:
+Bank of America
+Citi Bank, N.A.
+Chiu Sung Hong (Chairman)
+Remuneration Committee
+Lin Boqiang
+Qiu Zhi Zhong
+Wang Dongjin (Chairman)
+Nomination Committee
+Wen Dongfen
+Chiu Sung Hong
+Li Shuk Yin Edwina (Chairman and Financial Expert)
+Audit Committee
+Li Shuk Yin Edwina
+Lin Boqiang
+Qiu Zhi Zhong
+Chiu Sung Hong
+Independent Non-executive Directors
+Zhou Xinhuai (CEO and President)
+Executive Directors
+Li Shuk Yin Edwina
+Wang Dongjin (Chairman)
+Strategy And Sustainability Committee
+Zhou Xinhuai
+Bank of China (Hong Kong) Limited
+China Construction Bank
+990,754
+Bank of China
+Principal Banks:
+Tsue Sik Yu, May
+Xu Yugao
+Joint Company Secretaries
+Wang Xin (Chief Financial Officer)
+Xu Changgui (Deputy Chief Exploration Engineer)
+Yan Hongtao (Vice President)
+Xu Yugao (General Counsel, Compliance Officer &
+Secretary to the Board)
+Sun Fujie (Vice President)
+Cao Xinjian (Executive Vice President)
+Other Members of the Senior Management
+Lin Boqiang
+Qiu Zhi Zhong
+Wang Dongjin (Chairman)
+Future cash flows
+3,462,065
+(123,465)
+376
+143
+36
+1
+31 December 2023
+1
+31 December 2022
+method investees
+Enterprise's share of equity
+96
+107
+5,364
+2,226
+96
+88
+130
+5,122
+1,818
+880
+6
+145
+388
+144
+Oil
+gas
+(bcf)
+(mmbls)
+(bcf)
+(mmbls)
+Oil
+gas
+Oil
+Synthetic
+107
+Natural
+Natural
+Natural
+Total
+Oversea
+PRC
+Proved undeveloped reserves:
+394
+145
+379
+Synthetic
+Bitumen
+789
+4,575
+Oil
+gas
+Oil
+gas
+Oil
+Synthetic
+Natural
+Synthetic
+Natural
+Natural
+Total
+Oversea
+PRC
+Proved developed reserves:
+Reserve quantity information (continued)
+(1)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+31 December 2023
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+Bitumen
+Oil
+gas
+Oil
+1,595
+31 December 2023
+88
+130
+971
+554
+4,151
+1,265
+31 December 2022
+631
+Consolidated entities
+(mmbls)
+(bcf)
+(mmbls)
+(mmbls)
+(mmbls)
+(bcf)
+(mmbls)
+(bcf)
+(mmbls)
+Bitumen
+(mmbls)
+Oil
+gas
+Oil
+(1)
+Future cash inflows
+Total
+Oversea
+PRC
+Total
+Oversea
+PRC
+Notes
+Consolidated entities
+2022
+2023
+Present value of estimated future net cash flows:
+Management believes that this information does not represent the fair market value of the oil and natural gas reserves or
+the present value of estimated future cash flows since no economic value is attributed to potential reserves, the use of
+a 10% discount rate is arbitrary, and prices change constantly.
+Future development costs are estimated based upon constant price assumptions and the assumption of the continuation
+of existing economic, operating and regulatory conditions. Future income taxes are calculated by applying the year-end
+statutory rate to estimate future pre-tax cash flows after provision for the tax cost of the oil and natural gas properties
+based upon existing laws and regulations. The discount was computed by the application of a 10% discount factor to
+the estimated future net cash flows.
+The average of first-day-of-the-month oil price during the 12-month period before the year end were used to estimate
+annual future production from proved reserves to determine future cash inflows.
+Standardised measure of discounted future net cash flows and changes therein
+(2)
+(All amounts expressed in millions of Renminbi unless otherwise stated)
+2,295,064
+1,167,001
+2,162,624
+1,309,079
+(228,230)
+(332,236)
+(88,482)
+(243,754)
+Future income taxes
+(403,457)
+(171,751)
+(231,706)
+(429,890)
+31 December 2023
+(185,554)
+(2)
+Future development costs
+(1,303,137)
+(491,174)
+(811,963)
+(433,858) (1,250,078)
+(816,220)
+Future production costs
+3,471,703
+(244,336)
+Supplementary Information on Oil and Gas Producing Activities (Unaudited)
+169
+CNOOC LIMITED Annual Report 2023
+599
+221
+115
+586
+208
+223
+612
+3,605
+1,072
+13330
+31 December 2023
+3,635
+1,016
+31 December 2022
+Consolidated entities
+Bitumen
+(mmbls)
+(mmbls)
+(bcf)
+(mmbls) (mmbls)
+(mmbls)
+580
+(351,695)
+1,596
+586
+:
+249
+125
+250
+126
+249
+2225
+249
+125
+3,844
+250
+225
+31 December 2023
+method investees
+Enterprise's share of equity
+130
+599
+3,826
+1,684
+115
+126
+31 December 2022
+17
+678
+BUSINESS OVERVIEW
+CNOOC LIMITED Annual Report 2023
+14
+2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
+28.83
+о
+12.5
+25.0
+37.5
+50.0
+All-in cost (US$/BOE)
+EXPLORATION
+Effective cost control
+2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
+0
+Proposed final dividend of 0.66
+HK$/share (tax inclusive)
+HK$/share (tax inclusive)
+1.25
+Annual Dividend
+175
+350
+525
+700
+Net production (million boe)
+2023
+In 2023, in searching for large and medium-sized oil and
+gas fields, we adopted an exploration strategy of targeting
+both oil and gas and weighting more on gas. We have been
+exploring new areas and new types while concentrating on
+large-scale discoveries and efficient reserves to consolidate
+the resource foundation of the Company. In China, we
+have steadily progressed deep-water/ultra deep-water
+and deep-play/ultra deep-play exploration, promoted the
+in-depth integration of exploration and development, and
+discovered multiple 100-million-ton oilfields and the first
+deep-play 100-billion-cubic-meter gas field of coalbed
+methane. Overseas, we actively expanded exploration into
+new areas. We made new progress in the mid-to-deep
+play exploration of the Stabroek block in Guyana, further
+enhancing the exploration potential of the block.
+In 2023, the Company's reserve replacement ratio
+maintained at a high level of 180%. With net production
+continuously hitting record high, our reserve life remained
+above 10 years for seven consecutive years, providing
+a solid resource foundation for our future sustainable
+development.
+The Company has vast areas of exploration blocks in our
+core regions in offshore China and holds rights to many
+exploration blocks in Africa, South America, North America
+and Europe. The Company's major exploration areas as
+of the end of 2023 are shown in the table below:
+2,429
+North America
+Overseas
+Oceania
+17,899
+Africa
+Asia (excluding China)
+215,900
+Subtotal
+7,510
+Onshore
+84,577
+East China Sea
+37,989
+Eastern South China Sea
+56,566
+Western South China Sea
+29,258
+Bohai
+(km²)
+Areas (Net)
+Exploration
+Major
+Areas
+China
+Sustained production growth
+Decreased by 5.1% YoY
+US$/BOE
+28.83
+By pushing ahead scientific and technological self-reliance
+and implemented of scientific and technological innovation,
+we contributed scientific and technological strength to
+the high-quality development of oil and gas businesses.
+China's first 500-meter deepwater subsea production
+system operated stably, with production exceeding 100
+million cubic meters of natural gas. At the same time, we
+actively constructed a new pattern of business empowered
+by digital intelligence. The "Shenhai-1" intelligent gas
+field with remote-control production capacity improved
+production efficiency by roughly 3%. The Liuhua Oilfield,
+Enping Oilfield and Baiyun Gasfield can now run under
+the "Typhoon Production Mode". Unmanned offshore
+platforms increased steadily.
+operation, providing solid support for production growth.
+At the same time, our engineering construction capacity
+has significantly increased through our comprehensive
+application of engineering standardization. We promoted
+"New, Excellent and Faster” drilling and completion mode
+and speed and efficiency enhancement system. With over
+40 projects under construction throughout the year, we are
+well-positioned to support future sustainable development.
+We persisted in facilitating production growth, stabilising
+production of existing oil fields and accelerating the
+development of new oil fields, with net oil and gas
+production achieved 678.0 million BOE, hitting another
+record high. We continued to improve the efficiency of oilfield
+development, steadily reduced the natural decline rate in
+producing oil fields while maintaining a high production
+rate. We accelerated the construction of production
+capacity. Several new projects, such as the Bozhong 19-6
+condensate gas field Phase I development project and the
+Payara project in Guyana, have been successfully put into
+we have made 9 new discoveries and have successfully
+appraised 22 oil and gas-bearing structures, with a
+reserve replacement ratio of 180%, and the reserve life
+remained above 10 years for the seventh consecutive
+years. We made various strategic discoveries of large
+oil and gas fields, successfully appraised 100-million-
+ton oilfields including Bozhong 26-6 and Kaiping South,
+and successfully discovered 100-million-ton oilfields of
+Qinhuangdao 27-3, Lancetfish in Guyana and Shenfu
+deep-play coalbed methane 100-billion-cubic-meter gas
+field. Meanwhile, the breakthrough was also made in
+regional exploration strategy.
+BUSINESS OVERVIEW
+11
+CNOOC LIMITED Annual Report 2023
+In 2023, we have been firmly intensifying our efforts in
+exploration and reserve growth. Our oil and gas resource
+base continued to be consolidated, and our net proved
+reserves reached a new high. With the guiding principle
+of searching for mid-to-large-sized oil and gas fields, we
+insisted on value-driven exploration, and strengthened
+exploration and research in key areas. During the year,
+We have a diversified and high-quality portfolio overseas.
+We hold interests in a number of world-class oil and gas
+projects and have become a leading player in the industry.
+Our assets are located in more than 20 countries and
+regions around the world, including Indonesia, Australia,
+Nigeria, Iraq, Uganda, Argentina, the U.S., Canada, the
+U.K., Brazil, Guyana, and the United Arab Emirates. As of
+the end of 2023, overseas oil and gas assets accounted for
+approximately 44.6% of the total oil and gas assets of the
+Company, and overseas net proved reserves and overseas
+net production accounted for approximately 40.3% and
+approximately 31.2%, respectively.
+In China, CNOOC Limited engages in oil and natural
+gas exploration, development and production in Bohai,
+Western South China Sea, Eastern South China Sea, East
+China Sea and onshore, either Independent or through
+PSC. As of the end of 2023, approximately 59.7% of the
+Company's net proved reserves and approximately 68.8%
+of net production were from China.
+CNOOC Limited is an upstream company specialising in oil
+and natural gas exploration, development and production,
+and remains the dominant oil and natural gas producer
+in offshore China. In terms of reserves and production,
+it is one of the largest independent oil and natural gas
+exploration and production companies in the world. As of
+the end of 2023, the Company had net proved reserves
+of approximately 6.78 billion BOE (including approximately
+0.38 billion BOE in its equity method investees). In 2023,
+the Company achieved a net production of 1,857,619
+BOE/day (including a net production of 55,927 BOE/day
+in its equity method investees).
+OVERVIEW
+BUSINESS
+OVERVIEW
+CEO and President
+Zhou Xinhuai
+CNOOC LIMITED Annual Report 2023
+10
+Hong Kong, 21 March 2024
+Wang Dongjin
+Chairman
+Headwinds are no stranger to sailors, and hardships are no
+stranger to pacesetters. In the year of 2024, we will accelerate
+the pace of building a world-class energy company and
+strive to create greater value for our shareholders.
+Looking ahead to 2024, CNOOC Limited will focus on
+increasing reserves and production, targeting both oil and
+gas with a greater emphasis on gas exploration, so as to
+achieve steady growth. We will strengthen our research
+and innovation capabilities, promote digital and intelligent
+transformation to empower the development of our oil and
+gas business. Furthermore, we will reinforce our efforts
+to conserve energy and reduce carbon emissions, and
+actively improve the distribution of new energy and new
+business to drive green development. We will continuously
+enhance quality and efficiency, and tap the potential for
+cost reduction in order to continuously strengthen our value
+creation capability.
+While maintaining a robust development of our business,
+we have consistently adhered to high standards of safety
+management and our operations maintained safe and stable
+throughout the year. We uphold the concept of "harmonious
+development of economy, environment and society" and
+actively fulfill our social responsibilities. Our corporate image
+has been improving and brand value continues to grow.
+By implementing quality and efficiency enhancement
+initiatives, we have witnessed steady improvement of our high
+quality development. The Company achieved an operating
+revenues of RMB416.6 billion and net profits attributable to
+equity shareholders of the Company of RMB123.8 billion,
+maintaining a strong profitability despite lower international
+oil prices. We have reinforced our research in key indicators
+and precisely implemented measures to reduce costs and
+enhance efficiency. Our all-in cost was US$28.83 per BOE,
+further strengthening our cost competitiveness. To share
+the accomplishment with our shareholders, the Board of
+Directors has recommended the payment of a final dividend
+of HK$0.66 per share (tax inclusive) for 2023.
+We steadily implemented green development initiatives,
+facilitated the integration of new energy business with oil and
+gas operation, and gradually promoted the development
+of zero-carbon and negative-carbon sectors. During the
+year, we completed the construction of the Bohai oilfields
+onshore power project. The world's first semi-submersible
+"Double Hundred" deep-sea floating wind power project
+started operation. China's first offshore CCS demonstration
+project was officially launched. Our efforts to manage energy
+consumption and carbon intensity continued to improve
+through measures such as flare gas recycling, green
+electricity substitution and waste heat recovery.
+We advanced technological innovation, continuously
+enhanced our capability to tackle key technological
+challenges, and made significant progress in our digital
+transformation. China's first domestically-made subsea
+production system, which can operate in a water depth
+of 500 meters, has produced over a hundred million cubic
+meters of gas. "Shenhai-1" has become the world's first
+super-large deepwater platform with capabilities of remote
+control operation. Liuhua oil field has realised remote
+production operation through typhoon automatic control
+mode for the first time.
+12
+South America
+CNOOC LIMITED Annual Report 2023
+We actively carried out energy conservation and carbon
+emission reduction, steadily promoted new energy
+business, and developed carbon-zero and carbon-negative
+industries to facilitate green and low-carbon development.
+The annual consumption of green electricity has reduced
+carbon emissions by over 440,000 tons, and offshore oil
+and gas fields have achieved full recovery and utilization of
+flare gas with a capacity of over 50,000 cubic meters per
+day. The world's first semi-submersible "double-hundred"
+deep-sea floating wind power project, “Haiyou Guanlan",
+with a water depth of over 100 meters and an offshore
+distance of over 100 kilometers, has successfully started
+power generation, and has supplied over 14 million kWh of
+green electricity. China's first offshore CCS demonstration
+project was officially put into operation, and the CCS/
+CCUS cluster research and demonstration project in Daya
+Bay has been steadily promoted.
+All-in Cost
+and returns to shareholders
+Maintaining strong profitability Effectively covering investment
+billion RMB
+209.7
+billion RMB
+123.8
+ratio of 180%
+Reserve replacement
+million BOE
+6,784
+Net Proved
+Reserves
+increased by 8.7% YoY
+million BOE
+678
+Net Operating
+Cash Flow
+Net Profit Attributable
+To Shareholders
+Net Production
+BUSINESS OVERVIEW
+13
+CNOOC LIMITED Annual Report 2023
+On 19 June 2023, the Company launched RMB counter for
+trading of Hong Kong shares (stock code: 80883) on the
+HKSE to provide more investment flexibility to shareholders
+and potential investors and to enhance the liquidity and
+depth of the offshore RMB market.
+In 2023, the Company remained committed to ensuring
+both development and safety and placed continuous
+emphasis on production safety, thereby safeguarding our
+high-quality development.
+and the net profit attributable to equity shareholders of
+the Company amounted to RMB123.8 billion, maintaining
+high profitability despite the falling oil prices. The Company
+strengthened cost control and continued to consolidate
+cost competitive advantage, with all-in cost of US$28.83
+per BOE. The Company continued to promote engineering
+standardization, accelerated the construction of production
+capacity and project approvals. Our capital expenditure
+for the year amounted to RMB129.6 billion.
+We firmly promoted quality and efficiency enhancement
+to help improve the core competitiveness. In 2023, we
+achieved oil and gas sales revenue of RMB327.9 billion
+BUSINESS OVERVIEW
+8,044
+Europe
+133
+4
+7
+7
+6
+29
+129
+73
+Total
+2
+4
+-
+3
+5
+2
+Overseas
+14,038
+69
+7
+4
+1
+129
+71
+Subtotal
+149
+4
+69
+6
+2
+CNOOC LIMITED Annual Report 2023
+In terms of development and production, Bozhong
+28-2 South oilfield secondary adjustment development
+project, Bozhong 19-6 condensate gas field phase I
+development project and Penglai 19-3 oilfield 5/10 zone
+development project have all been put into production in
+2023. Among them, Bozhong 19-6 condensate gas field
+phase I development project is the first 100 billion-cubic-
+meter condensate gas field in Bohai Bay to be put into
+production relying on the Bozhong-Kenli oilfields onshore
+power project, which will provide Beijing-Tianjin-Hebei and
+Bohai Rim regions with a more stable and reliable supply
+of clean energy and strongly promote the green and low-
+carbon development of the Company.
+Bohai is also an important source of growth for the
+Company's natural gas reserves and production. Currently,
+Bohai has over 500 billion cubic meters of proved in-place
+volume of natural gas. In the future, we will focus on
+shallow water deep/ultra-deep play exploration and solidly
+push forward the exploration project for the trillion-cubic-
+meter gas area in Bohai.
+In 2023, we successfully re-appraised Bozhong 26-6,
+adding over 40 million cubic meters of oil and gas proved
+in-place volume, with a total proved in-place volume
+exceeding 200 million cubic meters, and confirmed it
+the largest metamorphic buried hill oilfield in the world.
+Significant discoveries continued to be made in shallow
+strata exploration in Bohai, with Qinhuangdao 27-3
+contributing new proved in-place volume of over 100
+million tons.
+With rich oil and gas resources, Bohai is one of the
+Company's core areas for exploration and development. In
+2023, the Company successfully made two discoveries in
+Bohai, namely Qinhuangdao 27-3 and Bozhong 26-2 North.
+In addition, the Company also successfully appraised 9 oil
+and gas bearing structures, including Qinhuangdao 27-3,
+Bozhong 26-6, Bozhong 19-2, Bozhong 34-1 West, Luda
+16-3 South, Jinzhou 14-6, Longkou 25-1, Caofeidian 28-1
+and Caofeidian 23-6.
+Bohai is the largest crude oil production site in China and
+also the most important crude oil producing area for the
+Company. The crude oil produced in this region is mainly
+heavy oil. The operational area in Bohai is mainly shallow
+water with a depth of approximately 10 to 30 meters.
+As of the end of 2023, the reserves and production in
+Bohai reached 1,968.4 million BOE and 599,847 BOE/
+day, respectively, representing approximately 29.0% of
+the Company's total reserves and approximately 32.3%
+of its production.
+Bohai
+Cooperation projects: We cooperate with partners through
+product sharing contracts ("PSCs") in oil and gas resources
+(including crude oil and natural gas) exploitations. China
+National Offshore Oil Corporation ("CNOOC Group"), our
+controlling shareholder, has the exclusive right to enter
+into PSCs with foreign contractors to cooperate in the
+exploration, development and production of oil and gas
+resources in offshore China where acreage is open to
+foreign cooperation. CNOOC Group has transferred to the
+Company all its rights and obligations under the existing
+and future PSCs (except those rights and obligations
+related to the management and supervision that should
+be implemented by a State Corporation).
+Independent operations: We have been increasing our
+reserves and production mainly through independent
+exploration and development. As of the end of 2023,
+approximately 85.7% of our net proved reserves and
+approximately 86.2% of our net production in China were
+from our self-operated oil and gas fields.
+In China, we conduct oil and gas exploration and
+development primarily through independent operations
+and cooperation projects.
+China
+OVERVIEW BY REGION
+The Company has set a net production target of 700-
+720 million BOE for 2024. Various major new projects
+are scheduled to come on stream throughout the year,
+including Bozhong 19-2 oilfield development project,
+"Shenhai-1" phase II project, Huizhou 26-6 oilfield
+development project, Shenfu deep-play coalbed methane
+exploration and development demonstration project in
+China and overseas projects including Mero3 project
+in Brazil. In the upcoming three years, the scheduled
+commencement of production of various high-quality new
+projects in China and overseas will lay a solid foundation
+for the Company's production growth.
+Looking ahead to 2024, we will actively promote the
+construction of key projects, focus on quality management
+and progress control of drilling and completion, and further
+improve production and efficiency. Meanwhile, we will
+continue to ensure steady and increased production in
+producing oil and gas fields, optimize adjustment well
+deployment and increase production per well. We will
+conduct solid and refined research on oil and gas reservoirs
+to reduce the natural decline rate, strictly control project
+costs and strengthen post-project evaluation management.
+BUSINESS OVERVIEW
+CNOOC LIMITED Annual Report 2023
+Fourthly, the driving role of technological innovation was
+given full play to effectively drive the production growth
+and efficiency enhancement of oil and gas fields. We
+accelerated the implementation of production capacity of
+heavy oil thermal recovery, promoted the steady growth
+of production from fractured wells in low-permeability
+reservoirs, which contributed more than one million tons of
+production. We made progress in the construction of smart
+oil and gas fields and oilfield typhoon production mode.
+Thirdly, we have accelerated the promotion and
+application of "New, Excellent and Faster" drilling and
+completions mode and engineering standardization,
+which enabled us to achieve remarkable results in
+improving the quality, speed and efficiency of engineering
+construction, development and production. We promoted
+the application of the new, excellent and faster mode to
+shorten the project development cycle, bring forward the
+contribution of production and improve the economic
+benefits of the project. We summarized the experience
+of fields development, shifted from individualization to
+standardization of engineering projects, and unified and
+optimized the design, procurement and construction of
+offshore platforms from the source, so as to promote the
+efficiency of the new project.
+Secondly, we have efficiently organized engineering project
+operations, strengthened the overall coordination of
+resources, accelerated the construction of new oil and gas
+fields and promoted the effective conversion of reserves
+to production. As a result, we were able to achieve new
+highs in production capacity construction, smoothly launch
+new projects, and advance the production of key projects
+with the goal of “shortening the project construction cycle,
+accelerating the construction of production capacity, and
+enhancing the overall development efficiency".
+Firstly, we have actively promoted the development
+level and ensured steady and increased production in
+producing oil and gas fields. The main measures include
+rolling exploration to increase reserves and solidify the
+reserve foundation, improving oil recovery through tapping
+reservoir potential. Fine water flooding, oil stabilization
+and water-cut control have achieved remarkable results,
+and the natural decline rate of offshore oil fields reached
+the best level in history. We also implemented fine
+management, optimized shutdown maintenance plans
+and steadily increased production efficiency.
+In 2023, the Company accelerated the construction of new
+oil fields, continued to maintain the steady and increased
+production in producing oil fields, refined production
+management and strengthened technological research
+capabilities. The main measures include:
+In 2023, various new projects successfully commenced
+production during the year, including Bozhong 19-6
+condensate gas field phase I development project, Lufeng
+12-3 oilfield development project and Enping 18-6 oilfield
+development project in offshore China, as well as Payara
+project in Guyana and the Buzios5 project in Brazil. More
+than 40 projects were under construction throughout
+the year, and the development and construction of key
+projects progressed smoothly.
+The Company has further accelerated the construction of
+production capacity, promoted the application of “New,
+Excellent and Faster” drilling and completion mode and
+engineering standardization. We tapped the potential and
+ensured the stable and growing production of producing
+oil and gas fields. At the same time, the Company has
+efficiently promoted the construction of new oil and gas
+fields, and a number of key projects have come on stream
+ahead of schedule. In 2023, the Company achieved a net
+oil and gas production of approximately 678 million BOE,
+exceeding the production target of 650 to 660 million
+BOE set at the beginning of the year, with a year-on-year
+growth of 8.7% and achieved a rapid production growth
+for several consecutive years, thereby further increasing
+oil and gas production.
+ENGINEERING CONSTRUCTION,
+DEVELOPMENT AND PRODUCTION
+In 2024, we will continue to target the discovery of mid-
+to-large sized oil and gas fields, further consolidating
+the foundation of reserves and production growth, and
+promote medium and long-term sustainable development
+through high-quality exploration. We will persist in targeting
+both oil and gas and weighting more on gas exploration.
+We will intensify exploration in Bohai, accelerate efforts in
+the South China Sea, expand exploration in the East China
+Sea, explore opportunities in Yellow Sea and strengthen
+overseas exploration and promote the exploration
+of unconventional resources. We will also continue to
+advance natural gas exploration in China, with a particular
+focus on the three trillion-cubic-meter gas zones in the
+South China Sea, Bohai, and onshore areas.
+BUSINESS OVERVIEW
+14,038
+CHAIRMAN'S STATEMENT
+CO
+CO
+PSC
+Independent
+Seismic Data
+New Discoveries Successful Appraisal Wells
+Exploration Wells
+The Company's major exploration activities in 2023 are set out in the table below:
+Overseas, we drilled 10 exploration wells, mainly in Guyana,
+Gabon and Indonesia. The Lancetfish 100-million-ton
+discovery was made in the Stabroek block in Guyana. As
+of the end of 2023, the operator of the Stabroek block has
+announced more than 30 oil and gas discoveries, with the
+total recoverable resources in the block of approximately
+11 billion BOE.
+Onshore China, we stepped up unconventional natural gas
+exploration, drilled 127 exploration wells, and acquired 200
+square kilometers 3D seismic data and 475 kilometers 2D
+seismic data. The Shenfu deep-play coalbed methane gas
+field was discovered in Ordos Basin, adding proved in-
+place volume of over 100 billion cubic meters. In addition,
+we accelerated the strategic layout of resource, and the
+coalbed methane business was successfully expanded
+to Xinjiang.
+Thirdly, the integrated exploration strategy deployment.
+We accelerated the in-depth integration of exploration and
+exploitation, and achieved remarkable results in integrated
+rolling exploration. The newly discovered Xijiang 24-2
+achieved rapid production, and the successfully appraised
+Huizhou 25-11 made significant reserve increase.
+Depression in South China Sea and deep-water and deep-
+play oil and gas in Songnan-Baodao sag in South China
+Sea, further expanding new exploration areas for reserves
+and production growth.
+Secondly, the strategic breakthroughs in new plays/types.
+We continued to explore in new areas, new fields, and new
+types, and made new breakthroughs in ultra deep-play
+natural gas in Bozhong Sag in Bohai, deep-water natural
+gas in Baiyun Sag in South China Sea, deep-play in Zhuyi
+Bozhong 26-6, and first 100-million-ton oilfield in the
+deep-water and deep-play of the South China Sea -
+Kaiping South. We successfully discovered a 100-million-
+ton oilfield in the shallow-play of Bohai Qinhuangdao
+27-3, China's first 100-billion-cubic-meter gas field in the
+deep-play coalbed onshore - Shenfu Deep-play Coalbed
+Methane, and a 100-million-ton oilfield in ultra deep-water
+and deep-play in Guyana - Lancetfish, further consolidating
+our reserve foundation.
+-
+Firstly, the strategic discoveries of large oil and gas fields.
+We increased risk exploration efforts and actively expanded
+exploration in mature areas, successfully appraised the
+world's largest metamorphic oilfield in buried hills of Bohai
+In 2023, the main exploration achievements in offshore
+China are:
+In offshore China, the exploration workload remained at a
+high level, and a total of 205 exploration wells were drilled.
+A total of 14,038 square kilometers of 3-Dimensional
+(3D) seismic data were acquired through independent
+operations. The Company made 7 new discoveries and
+successfully appraised 21 oil and gas bearing structures
+in offshore China.
+BUSINESS OVERVIEW
+16
+15
+CNOOC LIMITED Annual Report 2023
+H
+244,405
+Total
+28,505
+Subtotal
+2D (km)
+6
+3D (km²)
+Appraisal Wildcat
+East China Sea
+5,384
+11
+1
+2
+1
+42
+17
+Western South China Sea
+5,621
+9
+4
+19
+22
+Eastern South China Sea
+2,884
+26 62 - 22-45
+Offshore China
+Bohai
+PSC
+50
+Independent
+PSC
+Independent
+Independent PSC
+Appraisal Independent PSC
+Wildcat
+9
+CNOOC LIMITED Annual Report 2023
+We adhered to the integration of exploration and
+exploitation, continued to promote application of engineering
+standardization, and accelerated the pace of reserves-to-
+production conversion. We actively pushed forward the
+construction of major projects, and a number of key projects
+were successfully brought on stream during the year.
+Through fine waterflooding, oil stabilization and water-cut
+control, we maintained stable production from producing
+oilfields and further refined the development of oilfields. The
+net production of oil and gas reached 678 million BOE,
+hitting a record high for the fifth consecutive year. Bohai
+remained the largest crude oil production base in China.
+18
+Wang Dongjin
+Chairman
+CHAIRMAN'S
+STATEMENT
+CNOOC LIMITED Annual Report 2023
+Dear shareholders,
+In the year of 2023, global economy was faced with
+heightened downward pressure, and the average
+international oil prices dropped significantly. In spite of the
+challenging external environment, CNOOC Limited pursued
+high-quality development effectively, achieved record-high
+reserves and production, and maintained a high level
+of profitability. We remain committed to high-standard
+corporate governance and actively rewarding shareholders.
+Our efforts were well received by the capital market and
+our share prices recorded new highs. On behalf of the
+Board, I would like to express my sincere gratitude to all
+shareholders for your trust and support to the Company.
+During the past year, we maintained a value-oriented
+approach and implementing effective measures, sustaining
+the growth momentum in oil and gas exploration. We made
+a total of 9 new discoveries, the net proved reserves reached
+the best level in history and the reserve life remained over
+10 years for the seventh consecutive year. In China, we
+successfully discovered several oil and gas fields with proved
+in-place volume over 100 million tons respectively, and
+discovered China's first large deep-play coalbed methane
+field with proved in-place volume of over 100 billion cubic
+meters. Overseas, one more oil field with proved in-place
+volume over 100 million tons was discovered in Guyana.
+We have further strengthened natural gas exploration, so
+as to lay a solid foundation for the development of three
+trillion-cubic-meter gas areas in the South China Sea, Bohai,
+and onshore China.
+KKKKKK
+We continued to strengthen the audit and inspection of key
+operating processes, conducted special supervision and
+inspection of key points of time and key engineering projects;
+implemented closed-loop management of safety audit and
+inspection, and established a long-term mechanism for
+supervision, inspection and follow-up rectification. We also
+focused on the special rectification of offshore oil risks,
+attached importance to special rectification of ship safety,
+continued to conduct safety management audits on diving
+contractors and helicopter management companies with
+high standards, and conducted safety technology audits
+on helicopters to enhance the risk-resistant ability.
+CNOOC LIMITED Annual Report 2023
+25
+BUSINESS OVERVIEW
+We continued to shape a robust safety culture featuring
+"People Orientation, Implementation and Intervention". We
+intensified education on the necessity and tasks of safety
+and environmental protection through various activities
+such as "workshop safety seminar”, “pre-work meeting"
+and "case-based lecture". We organized the evaluation
+and commendation work in QHSE field to create a good
+atmosphere for safe production. We also guided our
+employees to continuously improve safety awareness
+and skills.
+We paid great attention to the safety risks of overseas
+operations, and continued to increase our investment
+in manpower, material and financial resources, actively
+explored the innovative practice of overseas public safety
+management at different levels of system and mechanism,
+and constructed an overseas public safety management
+system to ensure the effectiveness of the overseas
+public safety management system, the deployment of
+emergency resources and the behaviors of personnel.
+We have achieved significant results in preventing major
+overseas public safety risks, ensuring the personal safety
+of expatriate employees and promoting the compliant, safe
+and stable operation of our overseas projects.
+Fully protect the life and health of employees
+We upheld the core value of "people orientation" and
+strictly complied with the Occupational Disease Prevention
+and Control Law of the People's Republic of China and
+the relevant laws and regulations on occupational health
+in the countries and regions where we operate to improve
+the top-level design of health management. We have
+taken the construction of healthy enterprises and regional
+health service centres as an entry point, implemented the
+systematic management of occupational health, promoted
+the use of occupational health information system, actively
+promoted the safety management of onboard catering,
+continued to strengthen the work on employee mental
+health, and comprehensively conducted regular testing
+of occupational disease hazards and occupational health
+monitoring, thus making significant progress in the
+"comprehensive healthcare" work of the Company.
+In 2023, CNOOC Limited adhered to high HSE. OSHA (Occupational Safety and Health Administration) statistics for the
+year are set out below.
+Scope
+Total
+Man-hours
+(million)
+Personnel
+Injury
+Recordable
+Rate of
+Number of
+Rate of
+Cases
+Cases
+Lost Workday Lost Workday
+Cases
+Cases
+Fatalities
+Staff of the Company
+45.18
+2
+0.04
+Number of
+Personnel
+Injury
+Recordable
+In 2023, we actively built a new pattern of safety
+development and strengthened the red line awareness and
+bottom-line thinking. Adhering to the problem-oriented,
+target-oriented and result-oriented approaches, we have
+deepened source governance, systematic governance,
+precise governance and comprehensive governance, and
+coordinated the improvement and expansion of basic
+capacity for safety and environmental protection at the
+grass-roots level. We differentiated the implementation
+of special safety rectification in offshore oil and
+hazardous chemicals, prioritized the safety management
+of contractors and large mobile facilities and other key
+tasks and challenging areas, classified and managed the
+safety risks in a scientific, effective and accurate manner,
+and further improved the dynamic hierarchical control
+mechanism of risks.
+HEALTH, SAFETY AND ENVIRONMENTAL
+PROTECTION ("HSE")
+As always, CNOOC Limited adheres to the core HSE
+values of "Safety First, Environment Paramount, People-
+oriented and Equipment Intact". The Company continuously
+improves the management of the HSE system and strives
+to provide a safe working environment for its employees
+and contractors, to maintain a relatively stable performance
+of production safety and build a first-class safety risk
+management and control system.
+BUSINESS OVERVIEW
+RESEARCH AND SCIENTIFIC
+DEVELOPMENT
+In 2023, the Company vigorously implemented the scientific
+and technological innovation, with the annual research
+and development investment increasing by 4% year-on-
+year. The Company intensified scientific and technological
+research around the key technologies for oil and gas
+exploration and development, accelerated the efforts
+in digital transformation of fundamental management,
+and significantly improved independent technological
+innovation capability.
+Deepen geological understanding to achieve
+exploration breakthroughs in various aspects
+The Company carried out innovative research on key
+reservoir-forming conditions of buried hills in the Archean,
+and effectively guided the discovery of Bozhong 26-6,
+China's first integrated light oil field of over 100 million
+tons in recent 10 years in Bohai. Deepwater exploration
+research supported the discovery of large sized oil and
+gas reservoirs in Kaiping 18-1.
+Enhance development capabilities to release
+production potential at a faster pace
+In 2023, the Company innovated and achieved various
+technical achievements, including mobile heating injector
+for offshore heavy oil thermal recovery and low-permeable
+fracture. Luda 5-2 North oilfield, the first offshore ultra-
+extra-heavy oilfield developed by thermal recovery, was
+fully put into operation, with daily production of more than
+1,100 tons of crude oil. The annual thermal recovery output
+from the oilfields in Bohai exceeded 850,000 tons. In the
+field of low permeability oilfield development, we have
+completed the largest scale low permeability facturing
+operation and successfully achieved oil production
+increase in Weizhou 12-2 oilfield.
+Strengthen independent innovation to
+facilitate technology-driven development
+As of the end of 2023, China's first 500-meter deep-
+water domestically developed subsea production system
+had been operating steadily for 15 months in southern
+block of Ledong 22-1 gas field, with a total production
+volume of over 100 million cubic meters of natural gas.
+The main body construction of Asia's first cylinder-type
+FPSO "Haiyang Shiyou 122" floating production and
+storage device independently designed and constructed
+in China was completed, which fills numerous technology
+gaps in the domestic marine engineering industry and
+will effectively promote the development of deep-water
+oil and gas fields.
+-
+Accelerate digital transformation and support
+high-quality development
+In 2023, Qinhuangdao 32-6 oil field phase II, the first offshore
+smart oil field in China, was successfully implemented and
+put into operation, with 90% of its core business achieving
+digital operation. "Shenhai-1" has become the world's
+first super-large deepwater Semi submersible production
+and storage oil platform with capability of remote control
+production, which is crucial to the full-scale construction
+of the ultra-deepwater smart gas field. Liuhua oilfield,
+Enping oilfield and Baiyun gas field activated the "Typhoon
+Production Mode" to remotely monitor and control the
+safety production of offshore oil and gas fields through
+the onshore control center in real time, which contributed
+more than RMB300 million.
+LOW CARBON DEVELOPMENT
+Safety risk control capabilities continued to
+improve
+In 2023, CNOOC Limited accelerated green and low-carbon
+transformation, promoted the integrated development of
+new energy and offshore oil and gas production, and
+actively explored the construction of a safe, stable and
+efficient new energy system.
+production with great efforts in energy saving
+and carbon reduction
+In 2023, the Bohai onshore power project, distributed
+in three regions of Hebei, Shandong, and Liaoning,
+was fully completed. This is the world's largest onshore
+power project of AC transmission at the highest voltage
+for offshore oilfields application base in offshore oilfields.
+The project covers 45 oil fields and 180 facilities, with a
+total scale of 980 megawatts, covering 75% of offshore
+facilities in Bohai, and is expected to have an annual
+carbon reduction capacity of 1 million tons.
+The Company continued to increase its efforts in green
+electricity substitution, completing the substitution of 500
+million kWh of green electricity throughout the year, and
+has reduced carbon emissions by over 440,000 tons.
+The Company has steadily promoted the recovery and
+utilization of flare gas, achieving full recovery and reuse
+of flare gas above 50,000 m³/day two years ahead of
+schedule, and established a key technical field for the
+recovery of flare gas in offshore oil and gas fields. We are
+actively building a low-carbon brand, and the Company's
+energy consumption and carbon intensity control continues
+to improve, with a number of units selected as national
+green factories.
+24 CNOOC LIMITED Annual Report 2023
+BUSINESS OVERVIEW
+Steady progress in key projects to help build
+a green industrial chain
+We vigorously promoted the integrated development of
+new energy and offshore oil and gas production. China's
+first deep-sea floating wind power platform, "Haiyou
+Guanlan", was successfully connected to the Wenchang
+oilfields' grid, delivering green power to offshore oil and
+gas fields. Upon commencement of operation, the average
+annual power generation could reach 22 million kWh,
+saving nearly 10 million cubic meters of natural gas per
+year and reducing carbon dioxide emissions by 22,000
+tons per year, contributing to the active exploration of
+China's wind power development from shallow waters to
+far-reaching waters.
+The development of 600,000-kilowatt Hainan CZ7 Offshore
+Wind Power Demonstration Project Phase I, the Company's
+first large-scale offshore wind power demonstration
+project, and the 300,000-kilowatt offshore wind power
+project in Jinshan, Shanghai, which was developed with
+equity participation, is being pushed forward in an orderly
+manner. In addition, the onshore photovoltaic business is
+progressing steadily, and we have launched 10 photovoltaic
+construction projects in oil and gas terminals, seven of
+which have already been put into operation, and achieved
+terminal photovoltaic coverage rate of 70% by the end of
+2023. The first onshore centralized photovoltaic project
+- the "Husbandry-Photovoltaic-Hybrid" project in Hezuo
+City, South Gansu, has been successfully connected to
+the grid for power generation, which has generated over
+11 million kWh of green electricity as of the end of 2023.
+Cultivating and promoting zero-carbon and
+low-carbon industries in a steady and orderly
+manner
+We are steadily developing new CCS/CCUS business
+and doing research on CCS/CCUS carbon reduction
+technologies suitable for offshore oil and gas development.
+The Enping 15-1 oilfield CCS demonstration project,
+China's first offshore carbon dioxide sequestration in
+saline aquifer project, and the Ledong 15-1 gasfield CCS
+demonstration project, the first project using membrane
+separation and decarbonization technology of the
+Company, were formally put into operation. Bozhong 19-
+6/25-1 project, the first offshore CO2 flooding and CCS
+project, has basically completed its program design, and
+the first offshore 10-million-tonne cluster demonstration
+project carried out in an orderly manner.
+Remarkable results in green oil and gas
+2
+0
+Staff of the Company and
+Management of Hazardous Waste Transfer ((
+) and other relevant provisions,
+key pollutant discharging units temporarily stored
+domestic garbage, general industrial solid waste,
+hazardous waste and other waste, and then passed
+them to disposal entities with corresponding
+qualifications after sorting.
+Environmental Impact Assessment of Construction
+Projects and Other Administrative Licenses for
+Environmental Protection
+During the reporting period, the key pollutant
+discharging units strictly implemented "three-
+simultaneous" system under which environmental
+protection facilities and main works are designed,
+constructed and put into operation at the same time.
+We carried out environmental impact assessment
+and environmental completion acceptance
+for construction projects in accordance with
+requirements. The key pollutant discharging units
+have applied for and possessed environmental
+protection administrative licenses such as Pollutant
+Discharge License and Radiation Safety License
+based on the actual operation situation, and
+have completed formalities such as registration of
+hazardous waste management plans and registration
+of pollutant discharge from stationary sources in
+accordance with the relevant regulations.
+Environmental Emergency Response Plans and
+Environmental Self-Monitoring Plans
+During the reporting period, the key pollutant
+discharging units have formulated environmental
+emergency response plans and have completed
+the necessary filing in accordance with the relevant
+requirements of the Management Measures for
+Environmental Emergencies, formulated self-
+monitoring plans in accordance with the relevant
+requirements of Self-monitoring Technical Guide
+for Emission Units and the characteristics of the
+industry, and carried out self-monitoring activities
+in accordance with the requirements of the plans.
+CNOOC LIMITED Annual Report 2023 27
+BUSINESS OVERVIEW
+(4)
+Administrative Penalties Caused by Environmental
+Issues During the Reporting Period
+During the reporting period, the key pollutant
+discharging units of the Company were not subject to
+any administrative penalties regarding environmental
+protection due to environmental issues.
+PRC on the Prevention and Control of Environmental
+Pollution by Solid Waste («+#\R## & A
+), the Measures for the
+During the reporting period, subsidiaries other than
+the key pollutant discharging units of the Company
+pushed forward environmental protection and
+fulfilled environmental protection responsibilities in
+accordance with the unified requirements of the
+Company, identified potential problems related
+to environmental protection in a timely manner,
+maintained environmental pollution control facilities
+and minimized the impact from production and
+operation activities on the environment. For details of
+the environmental administrative penalties imposed
+on other subsidiaries of the Company, please
+refer to the information published on the websites
+of the government's competent ecological and
+environmental authorities.
+We are committed to extracting natural resources in a safe,
+efficient, and environmentally-friendly manner, to providing
+society with clean, reliable and stable energy, to meeting
+peoples reasonable energy demand and thereby achieving
+sustainable development of the Company. The economy,
+environment, and society form three cornerstones for us
+to develop energy resources and generate value. Along
+Iwith the steady growth of our business and economic
+contributions, we will press ahead on the road of
+environmental protection and social progress, so as to
+drive the sustainable development of the Company.
+While pursuing production growth, CNOOC Limited will
+actively respond to climate change, practise the concept
+of green and low-carbon development, and transform itself
+into a green and low-carbon enterprise. The philosophy of
+our social responsibility could be summarized as follows: to
+become a leading force in increase of oil and gas reserve
+and production; a driving force for green and low-carbon
+development; and the backbone in building a harmonious
+society.
+In 2023, CNOOC Limited invested a total of RMB158.00
+million in external donations and public welfare projects,
+including RMB157.74 million in cash and RMB0.40 million
+in supplies. During the year, the Company adhered to
+the concept of “implementing policies based on local
+conditions, providing targeted assistance, consolidating
+achievements and promoting revitalization" to promote
+the development of rural revitalization. We implemented
+33 assistance projects throughout the year around
+the "five major projects" of developing industries with
+special characteristics and advantages, improving rural
+infrastructure, strengthening the protection of people's
+livelihoods, upgrading the level of education and
+employment, and transforming the value of ecological
+resources, thereby making every effort to consolidate and
+expand the effective connection of achievements in poverty
+alleviation with rural revitalization. Overseas, guided
+by the concept of win-win cooperation, the Company
+has implemented over 50 charitable and public welfare
+projects in infrastructure construction, community medical
+assistance, community education, employment promotion,
+poverty alleviation, cultural integration, etc., contributing
+to the sustainable development of environment, economy
+and society of the countries where we operate.
+We have published on our website a "2023 Environmental,
+Social and Governance Report" that provides a systematic
+review of the Company's activities to fulfill its corporate
+social responsibility in 2023.
+HUMAN RESOURCES
+CNOOC Limited always believes that its employees are the
+driving force for its development and the foundation for the
+continuous growth of its corporate values. We regard our
+employees as the core competitiveness of the Company's
+development. We always adhere to the people-oriented
+development concept, constantly improve employment
+policies, attach great importance to the rights and interests
+of employees, and create a good environment for their
+development.
+Objective, Open and Equal Employment
+Policy
+In accordance with the principles of diversity and anti-
+discrimination in employment, the CNOOC Limited insists
+on treating employees equally in the recruitment process,
+training, promotion and remuneration systems regardless
+of race, nationality, religion, gender, age, marital status or
+whether subject to special statutory protections, strives to
+provide employees with equal opportunities in all aspects,
+creates a respectful, open and inclusive corporate culture
+and values the diverse talents of its employees.
+The Company adheres to the principle of gender equality
+in employment, actively increases the number of female
+employees and carries out cultivation and education
+activities for female management. As of the end of 2023,
+28
+CORPORATE CITIZENSHIP
+0.04
+(3)
+In addition, some key pollutant discharging units used
+domestic sewage as gardening water in factories in
+accordance with the standard of gardening water
+stipulated in the Reuse of Urban Recycling Water
+Water Quality Standard for Urban Miscellaneous
+Use(《城市污水再生利用城市雜用水水質》)(GB/
+T18920-2020). In accordance with the Law of the
+201.42
+10
+0.05
+5
+0.02
+0
+direct contractors
+ENVIRONMENTAL INFORMATION
+Environmental protection information of the
+principal subsidiaries on the watch list of key
+pollutant discharging units published by the
+environmental protection authority
+(1) Key Pollutant Discharge Information of Key Pollutant
+Discharging Units
+During the reporting period, a total of 7 affiliated
+entities of the Company were listed as key pollutant
+discharging units by the local competent ecological
+and environmental protection authorities, which were
+(2)
+based in Tianjin, Huludao, Beihai, Chengmai, Sanya
+and Dongfang, respectively.
+The key pollutant discharging units are equipped
+with stable and effective pollution prevention and
+control facilities in normal condition. In particular, in
+terms of wastewater treatment, they are equipped
+26 CNOOC LIMITED Annual Report 2023
+BUSINESS OVERVIEW
+with production wastewater treatment system, and
+the wastewater meets the standard of discharge
+after treatment or meets the standard of reuse, and
+then it is used for road spraying and gardening on
+the operation sites. In terms of waste gas treatment,
+waste gas treatment facilities are set up based on
+the pollutants generated, mainly including waste gas
+denitration facilities and VOCs recovery and treatment
+facilities, and the waste gas will be treated to meet
+relevant standards before being discharged. In terms
+of solid waste management, they are equipped with
+standardized solid waste storage facilities, and the
+corresponding qualified entities are engaged to
+conduct the compliance processing and disposal.
+There are a total of 5 wastewater discharge outlets in
+key pollutant discharging units, including production
+wastewater discharge outlets and domestic
+wastewater discharge outlets. The discharge
+standards implemented are mainly the Integrated
+Wastewater Discharge Standard (A
+) (DB12/356-2018) and the Integrated
+Wastewater Discharge Standard (5
+) (DB21/1627-2008); there are a total of 56
+waste gas emission outlets, including heat medium
+boilers, direct-fired furnaces, steam boilers and other
+emission outlets, and the implemented standards
+include the Comprehensive Emission Standard for
+Air Pollutants from Boilers (《鍋爐大氣污染物綜合排
+X) (GB13271-2014), the Emission Standard
+of Air Pollutants for Thermal Power Plants ((X
+★¤¯)) (GB13223-2011), the
+Integrated Emission Standard of Air Pollutants
+((5)) (GB16297-1996) and
+Emission Standards of Air Pollutants for the Onshore
+Oil and Gas Extraction Industry (
+開採工業大氣污染物排放標準》)(GB39728-2020).
+During the reporting period, the major pollutants
+discharged by key pollutant discharging units include:
+COD emissions of 48.85 tonnes, ammonia nitrogen
+emissions of 2.09 tonnes, SO2 emissions of 20.14
+tonnes, NOx emissions of 141.58 tonnes and soot
+emissions of 0.2 tonnes, all of which are within the
+total permitted pollutant discharge limit for 2023.
+Among the main pollutants discharged by key
+pollutant discharging units during the reporting
+period, water pollutants mainly include COD and
+ammonia nitrogen, etc., and air pollutants mainly
+include soot, SO2, NOx and VOCs. In addition, solid
+waste generated by key pollutant discharging units
+mainly includes domestic garbage, general industrial
+solid waste, and hazardous waste.
+23
+In 2023, the Company increased its exploration and
+development efforts in offshore China, and the production
+and sales volume continued to increase, with natural gas
+sales volume reaching 807.4 bcf, representing a year-on-
+year increase of 11.2%. The Company's average realised
+natural gas price was US$7.98/mcf, representing a year-
+on-year decrease of approximately 7.0%, mainly because.
+the impacts of the Russia-Ukraine conflicts on international
+natural gas prices has gradually diminished, leading to a
+relief of supply tensions and a subsequent return of gas
+prices to a reasonable level.
+LNG produced from the NWS Project in Australia and the
+Tangguh LNG Project in Indonesia are under long-term
+supply contracts and are sold to various customers in the
+Asia-Pacific region, including the Dapeng LNG Terminal
+in Guangdong Province and the LNG terminal in Putian,
+Fujian Province in China.
+As of the end of 2023, the Company's asset portfolio in
+Indonesia comprises mainly two oil and gas development
+and production blocks, namely the Madura Strait and
+Tangguh.
+Among them, the Madura Strait block is a joint operation
+block. As of the end of 2023, the Company had built a
+gas production base in the Madura Strait with an annual
+capacity of 3.13 billion cubic meters, became the largest
+gas supplier in East Java. In addition, the development of
+the MDK and MBF gas fields is also in preparation.
+The Company owns approximately 13.9% interest in the
+Tangguh LNG project in Indonesia. In 2023, phase I project
+achieved stable production. The first stage of phase II
+project, which is the third LNG production train of the
+Tangguh project, has been put into production, which has
+become the largest LNG production center in Indonesia,
+and the development plan for second stage of phase II
+project has been approved and is currently at the FEED
+design stage. The Company will work with its partners
+to promote the development of the Tangguh project as
+planned.
+Iraq
+The Company owns a 63.75% participating interest in the
+technical service contract of Missan oilfields in Iraq and
+acts as the lead contractor.
+In 2023, favourable progress was made in stabilizing the
+production of Missan oilfields. The Company continuously
+adjusted and optimized the production enhancement
+project program, resulting in a sustained steady gross
+production of 300,000 BOE per day. Average daily net
+production was increased to approximately 32,000 BOE
+due to increased cost recovery and the contract model.
+United Arab Emirates
+The Company indirectly holds 4% interest in each of the
+two oilfield contract areas, namely the Lower Zakum
+Shallow Water Oilfield and Umm Shaif & Nasr Oilfield in Abu
+Dhabi. In 2023, the projects maintained stable production
+with an average daily net production of approximately
+29,000 BOE.
+Oceania
+Currently, the Company's oil and gas assets in Oceania
+are mainly located in Australia. As of the end of 2023, the
+reserves and production from Oceania reached 27.6 million
+BOE and 32,454 BOE/day, respectively, representing
+approximately 0.4% of the Company's total reserves and
+approximately 1.7% of its production.
+20
+CNOOC LIMITED Annual Report 2023
+BUSINESS OVERVIEW
+Australia
+The Company owns a 5.3% interest in the North West
+Shelf LNG Project in Australia. The producing project
+supplies gas to the end-users including the Dapeng
+LNG Regasification Terminal in Guangdong, China and
+implements sales of the incremental gas and spot LNG
+independently.
+In 2023, the NWS project operation remained stable,
+with the daily net production of approximately 32,000
+barrels. The incremental gas production exceeded target
+and generated favourable economic returns.
+Other Regions in Oceania
+In 2023, the Company exited one exploration block in
+Papua New Guinea when due.
+Africa
+Africa is an important source of oil and gas for the
+Company overseas. The Company's assets in Africa are
+primarily located in Nigeria and Uganda. As of the end
+of 2023, the reserves and production in Africa reached
+104.2 million BOE and 57,586 BOE/day, respectively,
+representing approximately 1.5% of the Company's total
+reserves and approximately 3.1% of its production.
+Nigeria
+The Company owns a 45% interest in the PML2/3/4
+and PPL261 blocks (Original OML130 block) in Nigeria.
+Such block is a deepwater block covering four oilfields,
+namely Akpo, Egina, Egina South and Preowei. In 2023,
+the original OML 130 block contract was extended and
+the block was renamed as PML2/3/4 and PPL261 blocks.
+In 2023, the production of Akpo oilfield and Egina oilfield has
+decreased due to natural decline. The daily net productions
+of Akpo oilfield and Egina oilfield were approximately
+27,000 barrels and 25,000 barrels respectively.
+Indonesia
+Asia (excluding China) is the first overseas region the
+Company entered into. Currently, the Company owns oil
+and gas assets mainly in Indonesia, Iraq and the United
+Arab Emirates. As of the end of 2023, the reserves and
+production in Asia (excluding China) reached 264.0 million
+BOE and 95,725 BOE/day, respectively, representing
+approximately 3.9% of the Company's total reserves and
+approximately 5.2% of its production.
+Asia (excluding China)
+Overseas
+BUSINESS OVERVIEW
+In 2023, the Company completed the construction of
+onshore power project for Bohai oilfields to promote
+the green and low-carbon development of oil and gas
+fields in Bohai. This is the world's largest onshore power
+application base for offshore oilfield with the highest
+voltage of AC power transmission, with a total capacity
+of 980 megawatts, covering 75% of the existing Bohai
+facilities, and expected to reduce carbon emission by 1
+million tons per year.
+In the future, Bohai will still be one of the main sources
+of production growth for the Company. In 2024, Bozhong
+19-6 Gas Field 13-2 Block 5 Well Site Development
+Project, Suizhong 36-2 Oilfied 36-2 Block Development
+Project and Bozhong 19-2 Oilfield Development Project
+will be put into production.
+Western South China Sea
+Western South China Sea is one of the Company's
+important crude oil and natural gas production areas.
+The typical operating water depth in the region ranges
+from 40 to 1,500 meters. The crude oil produced here is
+mostly light or medium. As of the end of 2023, the reserves
+and production in Western South China Sea reached
+861.9 million BOE and 221,573 BOE/day, respectively,
+representing approximately 12.7% of the Company's total
+reserves and approximately 11.9% of its production.
+The Company made a new discovery in Western South
+China Sea, namely Wenchang 15-1 North, in 2023. 8 oil
+and gas bearing structures were successfully appraised,
+namely Wushi 16-5, Weizhou 6-3, Weizhou 11-6, Weizhou
+11-10, Wenchang 19-3, Dongfang 11-2, Ledong 16-2 and
+Yacheng 13-10. The Company made breakthroughs in mid
+deep-play exploration in Songnan-baodao Sag, opening
+a new exploration frontier in this area.
+Currently, proved in-place volume of natural gas of
+Western South China Sea has reached nearly one trillion
+cubic meters. In the future, the Company will focus on
+deep-water deep-play and deep-water ultra-shallow-play
+exploration, and solidly push forward the construction of
+the trillion-cubic-meter gas area in the South China Sea.
+In 2024, Shenhai-1 Phase II Natural Gas Development
+Project and Wushi 23-5 Oilfields Development Project are
+expected to come on stream.
+Eastern South China Sea
+Eastern South China Sea is another important crude oil
+and natural gas producing area of the Company. The
+typical operating water depth in the region ranges from 100
+to 1,500 meters. The crude oil produced here is mostly
+light or medium. As of the end of 2023, the reserves
+and production in Eastern South China Sea reached
+892.6 million BOE and 375,232 BOE/day, respectively,
+representing approximately 13.2% of the Company's total
+reserves and approximately 20.2% of its production.
+In 2023, the Company made four new discoveries in
+Eastern South China Sea, namely Huizhou 26-6 North,
+Panyu 10-6, Kaiping 18-1 and Xijiang 24-2. In addition, four
+oil and gas bearing structures were successfully appraised,
+namely Huizhou 26-6 North, Panyu 10-6, Kaiping 18-1
+and Huizhou 25-11. We continued to conduct deep-water
+and deep-play exploration in the Eastern South China Sea,
+and Kaiping 18-1 made Kaiping South formation the first
+deep-water and deep-play 100-million-ton grade oilfield
+discovery in the South China Sea. In addition, mid-to-
+large sized oil and gas fields discoveries were made in
+the deeper layers of Huizhou Sag and Panyu Sag, namely
+Huizhou 26-6 North and Panyu 10-6, respectively.
+In addition, the Company holds a 20% non-operating
+interest in the OML138 block offshore Nigeria, and an
+18% non-operating interest in the OML139/154 Blocks.
+In 2023, Enping 18-6 oilfield development project, Lufeng
+12-3 oilfield development project and Lufeng oilfields phase
+Il development project had all been put into production. In
+2024, Enping 21-4 Oilfield Development Project, Liuhua
+11-1/4-1 Oilfield Secondary Development Project and
+Huizhou 26-6 Oilfield Development Project are expected
+to come on stream.
+The typical operating water depth in the East China Sea
+region is approximately 90 meters. As of the end of 2023,
+the reserves and production in the region represented
+approximately 2.9% of the Company's total reserves and
+approximately 1.7% of its production.
+In 2023, the Company optimized the adjustment well
+deployment in the East China Sea, and implemented
+equipment and facility upgrade and renovation. Meanwhile,
+the construction of offshore smart oil and gas fields made
+positive progress.
+CNOOC LIMITED Annual Report 2023
+19
+BUSINESS OVERVIEW
+Onshore China
+We mainly engaged in the exploration, development
+and production of unconventional natural gas resources
+onshore China. We have established three major production
+bases, namely Shenfu, Linxing and Panhe in the Qinshui
+Basin and the eastern edge of the Ordos Basin. As of the
+end of 2023, the reserves and production onshore China
+represented approximately 2.0% of the Company's total
+reserves and approximately 2.7% of its production.
+In 2023, the Company made China's first major discovery
+of 100-billion-cubic-meter deep coalbed methane gas
+field
+in the Shenfu area of the Ordos Basin and successfully
+appraised the gas field, demonstrating promising
+exploration prospects for deep coalbed methane in the
+eastern edge of this basin. We have accelerated the
+strategic resource layout, successfully expanded our
+coalbed methane business to Xinjiang, and obtained new
+onshore unconventional oil and gas resources.
+Currently, proved in-place volume of natural gas has
+exceeded 400 billion cubic meters onshore China. In the
+future, we will actively promote the exploration of tight gas
+and deep coalbed methane in order to effectively push
+forward the exploration and construction of the onshore
+trillion-cubic-meter gas areas.
+In 2023, the Company carried out technological research
+around internal tapping of gas reservoirs, fracturing of
+low-permeability gas reservoir, etc., implemented refined
+management and multiple measures mainly based on
+dewatering gas recovery and extraction and depressurizing
+exploitation, to increase unconventional natural gas
+production. Onshore China has become one of the
+important sources of natural gas production growth for
+the company.
+In 2024, demonstration projects of Linxing deep-play
+coalbed methane exploration and development, as well
+as Shenfu deep-play coalbed methane exploration and
+development, are expected to be put into production.
+East China Sea
+The Company will deepen our regional integration to
+establish an oil and gas production base in West Africa
+centred around Nigeria.
+Uganda
+The Company owns a 28.3333% interest in each of EA
+1, EA 2 and EA 3A blocks in Uganda. These blocks are
+located at the Lake Albert Basin in Uganda, which is
+one of the most promising basins in terms of oil and gas
+resources onshore Africa.
+The Stabroek block in offshore Guyana is located in
+northeastern Guyana with a water depth of 1,600 to
+2,000 meters. It is one of the world's largest exploration
+discoveries in recent years and CNOOC Limited holds a
+25% interest in the block.
+In 2023, the discovery of Lancetfish was made in the
+Stabroek block through ultra-deep-water and deep-play
+exploration. Currently, a total of over 30 new discoveries
+have been made in the block and the total recoverable
+resources in the block amounted to approximately 11
+billion BOE as disclosed by the operator.
+The Phase I and Phase II of the Liza oilfield in the block
+has been put into production. As of the end of 2023,
+these two phases of the project were producing steadily
+above the designed peak daily production, with a daily
+net production of approximately 81,000 BOE. The Payara
+project in this block has been put into production in 2023.
+In the future, Guyana will remain as one of the Company's
+main sources of reserve and production growth.
+Argentina
+CNOOC Limited holds a 50% equity interest in BC and
+makes joint decisions on its management. BC holds a 50%
+equity interest in Pan American Energy Group.
+In 2023, BC's overall production was stable with better-
+than-expected development performance and net
+production of approximately 55,000 BOE per day.
+22 CNOOC LIMITED Annual Report 2023
+BUSINESS OVERVIEW
+Other Regions in South America
+The Company also holds rolling exploration rights in
+Boqueron block in Colombia.
+Europe
+Guyana
+In Europe, CNOOC Limited holds interests in oil and gas
+fields such as Buzzard and Golden Eagle in the U.K. North
+Sea, and holds a 10% equity interest in Arctic LNG 2
+LLC in Russia. As of the end of 2023, the reserves and
+production in Europe reached 49.5 million BOE and 30,510
+BOE/day, respectively, representing approximately 0.7%
+of the Company's total reserves and approximately 1.6%
+of its production.
+The Company's asset portfolio in the U.K. North Sea
+comprises producing projects and exploration projects,
+which mainly include a 43.21% interest in the Buzzard
+oilfield, one of the largest oilfields in the North Sea, and a
+36.5% interest in the Golden Eagle oilfield. The Company
+also holds 41.9%, 80.4%, and 79.3% interests in Scott,
+Telford, and Rochelle oilfields of STaR production blocks,
+respectively.
+In 2023, Buzzard oilfield maintained stable production with
+an average daily net production of approximately 22,000
+BOE. The Company also holds a 66.67% drilling operation
+interest in P2215 exploration block in the U.K. North Sea.
+Other Regions Of Europe
+The Company owns a 10% interest in Arctic LNG 2 LLC
+in Russia. The project is in the Gydan Peninsula in the
+Arctic region of Russia.
+SALES AND MARKETING
+Sales of Crude Oil
+The Company sells the crude oil produced in offshore
+China in its domestic market mainly through CNOOC
+International Trading Co., Ltd., its wholly-owned subsidiary.
+The Company sells the crude oil produced overseas in
+international and domestic markets mainly through CNOOC
+International Trading Co., Ltd. and CNOOC International
+Limited.
+The Company's crude oil sales prices are mainly determined
+by reference to the prices of international benchmark crude
+oil of similar quality, with certain premiums or discounts
+subject to the prevailing market conditions. Although
+the prices are denominated in U.S. dollar, customers in
+China settle with Renminbi. The Company currently sells
+three types of crude oil in China, i.e., heavy crude oil,
+medium crude oil and light crude oil. The sale prices are
+benchmarked against Brent oil price. The Company's major
+customers in China are CNOOC Group, CNPC, Sinopec
+Group and some local private refineries. Overseas crude
+oil sold in international markets is benchmarked against the
+Brent, Dubai, Oman and WTI prices and regularly updated
+official oil prices of the host countries.
+In 2023, the Company achieved crude and liquids sales
+volume of 514.5 million barrels, an increase of 7.5% year-
+on-year and average realised oil price was US$77.96
+per barrel, representing a year-on-year decrease of
+approximately 19.3%, basically in line with international
+oil prices.
+The Company's natural gas sales prices are mainly
+determined through negotiation with customers. Generally,
+natural gas sales agreements are long-term contracts,
+and the contract terms normally include a price review
+mechanism. The Company's natural gas customers are
+primarily located in the southeast coastal areas of China,
+and the major customers include CNOOC Gas and Power
+Group, China BlueChemical Ltd, Hong Kong Castle Peak
+Power Company Limited, etc.
+The U.K.
+CNOOC LIMITED Annual Report 2023
+The Company also holds a 100% interest in ES-M-592
+block in offshore Brazil, a 20% interest in the ACF Oeste
+block and a 30% interest in the Pau Brasil block.
+The Buzios oilfield is the world's largest producing
+deepwater oilfield. The Buzios oilfield consists of 11
+development units, and units 1, 2, 3 and 4 have been already
+in production with a daily net production of approximately
+43,000 BOE. Buzios5 commenced production in 2023 and
+achieved its peak production target within five months,
+setting a record for the fastest construction of a large-scale
+ultra-deepwater pre-salt oilfield. The Company will work
+closely with its partners to facilitate project construction.
+In 2023, the well site construction of Kingfisher project
+was completed and is now undergoing the pipeline laying
+operation. The infrastructure construction of Tilenga project
+is currently underway. The Company will continue to work
+actively with its partners and the local government to
+facilitate commencement of operation of the projects.
+Other Regions in Africa
+Apart from Nigeria and Uganda, the Company also owns
+interests in exploration blocks in countries and regions
+such as Gabon, Congo-Brazzaville and the Senegal-
+Guinea-Bissau Joint Economic Zone.
+North America
+North America is one of the Company's major overseas oil
+and gas reserves regions. The Company holds interests
+in oil and gas blocks in the U.S., Canada, Mexico and
+Trinidad and Tobago in North America. As of the end
+of 2023, the reserves and production in North America
+reached 1,132.2 million BOE and 158,880 BOE/day,
+respectively, representing approximately 16.7% of the
+Company's total reserves and approximately 8.6% of its
+production.
+The U.S.
+The Company holds 26.0% and 12.6% interests in Eagle
+Ford and Rockies, respectively, which are two onshore
+shale oil and gas projects in the U.S. Productions from
+the Eagle Ford and Rockies projects increased in 2023
+and the daily net production from the Eagle Ford project
+was 35,000 BOE.
+The Company owns 25% and 21% interests in two
+important deepwater projects, namely Stampede and
+Appomattox, respectively, in the U.S. Gulf of Mexico.
+In 2023, the daily net production of Appomattox project
+reached approximately 19,000 BOE. In addition, the
+Company also owns interests in several other exploration
+blocks in the U.S. Gulf of Mexico.
+Canada
+Canada is one of the areas rich in oil sands resources in the
+world. The Company owns 100% working interest in Long
+Lake and three other oil sands projects in the Athabasca
+region of northeastern Alberta in Canada.
+In 2023, production of the Long Lake project was better
+than expected, with daily net production increased
+I significantly to approximately 61,000 BOE as a result of
+more effective adjustment wells workloads and the rapid
+ramping up of Long Lake Southwest.
+Libra block and Buzios oilfield have become new drivers
+for the growth of overseas oil and gas production of the
+Company, bringing new momentum to the Company's
+production growth.
+CNOOC LIMITED Annual Report 2023
+BUSINESS OVERVIEW
+The Company holds a 7.23% interest in the Syncrude
+project and its daily net production in 2023 was
+approximately 19,000 BOE. The Company also holds a
+25% interest in the Hangingstone oil sands project and
+non-operating interests under several other exploration
+and development licenses.
+Long Lake NW Project will commence production in 2024,
+bringing new production growth to the region.
+Other Regions in North America
+The Company owns a 12.5% interest in the 2C block in
+Trinidad and Tobago, which is a producing asset with
+stable output and favourable economic returns in 2023.
+In addition, the Company also owns 100% operating
+interest in block 1 and a 40% operating interest in block
+4 of the Cinturon Plegado Perdido deepwater exploration
+blocks in Mexico, respectively.
+South America
+South America has become the region with the largest
+overseas oil and gas production of the Company and is a
+significant source of production growth for the Company.
+The Company holds interests in oil and gas blocks in
+Brazil, Guyana and Colombia in South America, as well
+as a 50% interest in BC ENERGY INVESTMENTS CORP.
+("BC") in Argentina. As of the end of 2023, the reserves
+and production in South America reached 1,155.9 million
+BOE and 203,632 BOE/day, respectively, representing
+approximately 17.0% of the Company's total reserves and
+approximately 11.0% of its production.
+Brazil
+Brazil deepwater area is one of the world's most important
+oil and gas development regions. CNOOC Limited holds
+a 10% interest in Libra block and a 7.34% interest in
+Buzios project in Brazil, respectively, both of which are in
+the Santos Basin.
+The deepwater pre-salt Libra project in Brazil is divided
+into west, east and central zones, of which the west zone
+was commercially discovered in 2017 and named the
+Mero oilfield. The Mero oilfield consists of four phases,
+namely Mero 1, Mero 2, Mero 3 and Mero 4. Mero 1
+project is a producing oilfield, with a daily net production
+of approximately 14,000 BOE. Currently, Mero 2 has
+successfully commenced production, and is expected to
+achieve peak production by mid-2024. The final investment
+decisions for Mero 3 and Mero 4 oilfields have been made,
+and Mero 3 is expected to commence production in 2024.
+21
+Sales of Natural Gas
+CNOOC LIMITED Annual Report 2023
+Since its listing in Hong Kong, the Company has used its
+endeavour to maximise its shareholders' value. In 2023,
+the Company executed its corporate governance policies
+strictly and sought to comply with the relevant provisions
+in the "Corporate Governance Code" set out in Part II of
+former Appendix 14 to the Listing Rules of Stock Exchange
+(the "CG Code"), unless otherwise specified, references
+in this Report to the CG Code or Corporate Governance
+Principles refer to the CG Code as currently in force in 2023
+and the Corporate Governance Principles set forth therein,
+ensuring that all decisions were made on the principles of
+trust and fairness and in an open and transparent manner
+so as to protect the interests of all shareholders. At the
+same time, as a Company listed on the main board of
+the Shanghai Stock Exchange ("SSE"), the Company also
+attaches great importance to the domestic regulatory rules
+prescribed by China Securities Regulatory Commission
+("CSRC") and the SSE governing the operation standards
+of listed companies. In accordance with the relevant
+provisions of the Notice of the Office of the State Council
+on the Forwarding the Opinions on the Pilot Programmes
+of Innovative Enterprises Issuing Stocks or Depositary
+Receipts in Mainland China, the Company adheres to at all
+times the principles of making arrangements for protecting
+the rights and interests of investors that are generally no less
+favourable than those required by laws within the PRC, and
+of maintaining a sound and effective corporate governance
+structure and supervising and procuring directors and
+senior management to perform their duties faithfully and
+diligently, with the aim of protecting the legal interests
+of the investors. The Company values the importance of
+corporate governance and in light of the relevant regulatory
+rules stipulated by The Stock Exchange of Hong Kong
+Limited ("HKSE"), CSRC and SSE, the Company sets
+out a summary of its key corporate governance practices
+during 2023 below.
+Risk of climate change and environmental policy changes
+With the coming into force of the Paris Agreement and
+the continuing growth of the public's awareness of climate
+change issues, the carbon emission policies of different
+countries are gradually enacted, China has also put forward
+the time table of "Carbon peak and Carbon neutrality”.
+The acceleration of the energy transition process poses
+a challenge to the oil and gas industry. It is expected that
+the CO2 emissions will increase as our production grows.
+Failing to find economic and publicly acceptable solutions
+to reduce carbon emissions from existing and newly-added
+projects will make it difficult to meet the current national
+requirements for setting emission reduction standards,
+strictly implementing the renewable energy proportion plan,
+levying high carbon taxes, and enacting strict regulatory
+bills and other relevant measures, which may result in
+additional costs and reputational damage, as well as higher
+operating costs for the Company in the event of intensified
+competition in the energy supply market.
+The ongoing oil and gas system reform in China may have
+certain impacts on the Company's business in China. For
+example, at present, China's foreign investment access
+policies no longer restrict foreign investment to participate
+in the oil and gas exploration and development business
+in China through joint venture and cooperation only. As
+at July 2023, the Ministry of Natural Resources published
+the Opinions of the Ministry of Natural Resources on
+Several Matters Concerning Promoting Reform of Mineral
+Resources Administration, which basically continues the
+original reforms relating to the assignment and withdrawal
+of mining rights released in 2019. In the future, the
+Company may face competition and challenges from a
+variety of competitors in the industry to obtain and retain
+exploration rights in oil and gas fields. In addition, with
+the continuous introduction of the latest electricity trading
+policies in China, the fluctuation of market-based power
+prices bring uncertainty to the Company's revenue from
+new energy projects.
+Risk of industry policy changes
+RISK MANAGEMENT AND INTERNAL CONTROL
+CNOOC LIMITED Annual Report 2023 31
+The Arctic LNG 2 LLC and its project in Russia, in which
+the company has a 10% interest, have been somewhat
+adversely affected by sanctions stemming from the
+Russia-Ukraine military conflict. In addition, other overseas
+projects of the Company are not affected by the Russia-
+Ukraine military conflict, and the production and operation
+situation is normal.
+The international political and economic situation is
+complex and changeable. The Russia-Ukraine conflict,
+the Israeli-Palestinian conflict and the sanctions on Russia
+imposed by the U.S., Europe and Japan have accelerated
+the profound changes in the world landscape and triggered
+violent shocks in the international energy market. As many
+countries including the U.S. and Russia will hold general
+elections in 2024, some of the countries in which we
+operate may be exposed to unstable politics and economy.
+As a result, our financial condition and operating results
+could be adversely affected by associated international
+actions, domestic civil unrest and general strikes, political
+instability, war and acts of terrorism. Any changes in
+regime or social instability, or other political, economic or
+diplomatic changes, or changes in policies, laws, fiscal
+and tax regimes are not within our control. Our operations,
+existing assets or future investments may be materially and
+adversely affected by these changes as well as trade and
+economic sanctions due to deteriorated relations among
+different countries.
+Risk of changing international, political and economic
+factors
+The industry in which the Company operates is closely
+linked to the macro economy. The growth of the global
+economy and trade has further slowed down. Economic
+recovery varies widely among countries due to multiple
+factors such as geopolitical conflicts and tightening of global
+monetary policies. Geopolitics, trade frictions and other
+factors have exerted negative impact on the global flow
+of goods, people and capital, and posed unprecedented
+challenges to the global supply chain. Macro economy
+changes will affect the supply and downstream demand
+for oil and gas, which will adversely affect the Company's
+performance.
+Macro economy risk
+Macro economy and policy risk
+Although we have established the risk management
+system to identify, analyze, evaluate and respond to
+risks, our business activities may subject to the following
+risks, which could have material effects on our strategies,
+operations, compliance and financial condition. We urge
+you to carefully consider the risks described below.
+RISK FACTORS
+As a company listed in Hong Kong and Shanghai, the
+Company will continue to strictly comply with all regulatory
+requirements, strengthen its risk management, internal
+control and compliance management system and maintain
+a high standard of corporate governance to ensure the
+Company's healthier development.
+The Board considered that as of 31 December 2023,
+the Company's risk management system and the
+Company's internal control over financial reporting
+were effective.
+Our offshore operating platforms, exploration and
+development activities and land-based terminal production
+activities will generate risks of waste gas, wastewater,
+solid wastes, noise and oil spillage. If they are not properly
+handled, they may fail to meet the standard of discharge
+or the disposal process is not in compliance, polluting the
+marine ecological environment, damaging our reputation
+and operations and increase the costs of restoring the
+ecological environment and compensation, and even
+expose us to lawsuits and penalties.
+Relying on the existing framework of risk management
+and internal control system, the Company refined and
+clarified the compliance responsibilities of the Board,
+the management and the executives, established
+strict internal prevention and management system,
+strengthen the construction and effective operation
+of the compliance management system, compliance
+training and cultural promotion and implementation,
+so as to regulate all employees to perform their duties
+properly. The Company maintained the mechanism
+of "Commitment to Compliance" signed by all
+employees to enhance their awareness of integrity
+and compliance responsibility, and established a
+unified domestic and overseas compliance complaint
+channel (https://www.cnoocltd.com/complaint), and
+conducted investigations timely.
+Market risk
+Volatility in oil and gas prices may impact our business,
+cash flows and profits fluctuate. Oil and gas prices are
+volatile. A downward trend in oil and gas prices which
+lasts for a long period may adversely affect our business,
+revenue and profits, and may also result in write-off of
+higher cost reserves and other assets, reduction in the
+amount of oil and natural gas we can produce economically
+and termination of existing contracts that have become
+uneconomic. The prolonged slump in oil and gas prices
+may also impact our long-term investment strategies.
+Due to the special nature of the oil and gas industry, a
+portion of our operations are conducted in the form of
+partnerships or in joint operation, we may have limited
+capability to influence and control their operation or future
+development. Our limited ability to influence and control
+the operation or future development of such joint ventures
+could materially and adversely affect the realization of
+our target returns on capital investment and lead to
+unexpected future costs.
+Risk of limited control over our investments in joint ventures
+and our joint operation with partners
+Part of the Company's oil and gas assets are acquired
+through mergers and acquisitions. In mergers and
+acquisitions practice, mergers and acquisitions may not
+succeed due to various reasons, such as difficulties in
+integrating activities and realizing synergies, outcomes
+differing from key assumptions, host countries' governments
+reacting or responding in a different manner from that
+envisaged, or liabilities and costs being underestimated.
+Any of these reasons would reduce our ability to realize the
+anticipated benefits. We may not be able to successfully
+dispose of non-core assets at acceptable prices, resulting
+in increased pressure on our cash position. In the case
+of asset disposals, we may be held liable for past acts,
+or failures to act or perform obligations, we may also
+be subject to liabilities if a purchaser fails to fulfill its
+commitments. These risks may result in an increase in our
+costs and inability to achieve our business goals.
+Risk that the anticipated benefits from mergers and
+acquisitions and disposals may not be realized
+The Company, as an oil and gas exploration and
+development enterprise, will makes forward-looking
+judgments on oil and gas prices when evaluating oil and
+gas projects or related business opportunities, while
+economic returns of projects normally depend to some
+extent on the Company's robustness and accuracy of
+price predictions. The Company will review the oil and
+natural gas price predictions on a periodic basis. Although
+we believe our current forward-looking predictions on
+long-term price range are prudent, if such predictions
+are deviated in the future, it could have a material and
+adverse effect on us.
+Risk of deviation between forward-looking judgments of
+oil and gas prices and the actuality
+Our oil and gas transportation involves marine, land and
+pipeline transportation, which are subject to hazards such
+as capsizing, collision, acts of piracy and damage or loss
+from severe weather conditions, explosions and oil and gas
+spills and leakages. These hazards could result in serious
+personal injury or loss of human life, significant damage to
+property and equipment, environmental pollution, operating
+loss, risk of financial loss and reputational harm. We may
+not be able to arrange insurance coverage for all of these
+risk and uninsured losses and liabilities arising from these
+hazards may have a material and adverse effect on our
+business, financial condition and results of operations.
+Given the geographical area, operational diversity and
+technical complexity of our operations every aspect
+of our daily operations exposes us to potential health,
+safety, security and environment (HSSE) risk. Part of our
+operations are located in environmentally sensitive regions
+or politically unstable regions, and part of our business are
+operated in offshore environment, especially in new deep
+water area such as Mexico, etc. Our operations expose
+us and the communities in which we operate to a number
+of risks, including probable major safety incidents, and
+natural disasters, social unrest, personal health and safety
+mistakes and potential consequences from unforeseeable
+external destruction, for instance, typhoons, sea ice, etc.
+may damage platform structure, and submarine pipelines
+may lead to oil spills and gas leaks due to damage from
+external force. If a major HSSE risk materialises, it could
+result in casualties, environmental damage, disruption to
+business activities and material impact on our reputation,
+exclusion from bidding or eventually loss of our licence to
+operate. At the same time, regulatory regimes for HSSE
+in the countries in which we operate may become more
+stringent over time. In the future, we may incur significant
+costs, such as fines, penalties, clean-up costs and third-
+party claims, as a result of breach of laws and regulations
+relating to HSSE matter.
+HSSE risk
+Business risk
+RISK MANAGEMENT AND INTERNAL CONTROL
+CNOOC LIMITED Annual Report 2023
+32
+At the same time, environmental protection supervision in
+energy sector is becoming increasingly strict, and the world
+is actively promoting the transition and transformation to
+low-carbon and clean energy. The new energy industry will
+develop rapidly. The green and low-carbon transformation
+may lead to increasing demand for alternative energy,
+which in turn will lead to increasing competition in the
+energy supply market, which may adversely affect the
+operations and performance of the Company.
+Risk arising from increasing market competition
+The new round of scientific and technological revolution
+and industrial transformation has had a profound impact on
+the development of the energy industry. We compete in the
+PRC and other countries in which we operate with national
+oil companies, major integrated oil and gas companies and
+various other independent oil and gas companies for access
+to oil and gas resources, products, alternative energy,
+customers, capital financing, technology and equipment,
+talents and business opportunities. Competition may result
+in shortage of these resources or over-supply of oil and
+gas, which could increase our cost or reduce our earnings,
+and adversely impact our business, financial condition and
+results of operations.
+Risk arising from volatility in oil and gas prices
+Prices for crude oil, natural gas and oil products may
+fluctuate widely in response to relative changes in the
+supply and demand for crude oil and natural gas, market
+uncertainty and various other factors beyond our control,
+such as macroeconomic conditions, oil policies of OPEC
+and major oil exporting countries, geopolitics, economic
+conditions and actions related to major oil-producing
+countries, the prices and accessibility of other energy
+sources, natural disasters, weather conditions and major
+global public health emergencies, etc.
+RISK MANAGEMENT AND INTERNAL CONTROL
+CNOOC LIMITED Annual Report 2023
+30
+the Company had a total of 3,732 female employees,
+accounting for 17% of its total workforce and 17% of its
+senior and middle management.
+BUSINESS OVERVIEW
+CORPORATE GOVERNANCE REPORT
+KEY CORPORATE GOVERNANCE
+PRINCIPLES AND THE COMPANY'S
+PRACTICES
+A.
+CORPORATE PURPOSE, STRATEGY AND
+GOVERNANCE
+A.1 Corporate strategy, business model and culture
+Principle: "An issuer should be headed by an
+effective board which should assume responsibility
+for its leadership and control and be collectively
+responsible for promoting its success by directing
+and supervising its affairs. Directors should take
+decisions objectively in the best interests of the
+issuer.'
+The Company mainly engages in the exploration,
+development, production and sales of crude
+oil and natural gas and is the largest producer
+of offshore crude oil and natural gas in China
+and one of the largest independent oil and gas
+exploration and production companies in the
+world.
+The Company has been striving to become a
+first-class energy supplier, a superior
+value creator and a pioneer of high-quality
+development. The development strategies of
+the Company include: focusing on increasing oil
+and gas reserves and production, and expanding
+on a continuous basis reserves and production
+through exploration and development as well
+as value-driven acquisitions; practicing the
+concept of the low-carbon development, and
+proactively expanding its natural gas business.
+It also adheres to the prudent financial policy
+and maintains its cost competitiveness and
+healthy financial condition.
+In China, the Company engages in oil and
+natural gas exploration, development and
+production in Bohai, Western South China
+Sea, Eastern South China Sea, East China Sea
+and onshore China independently or through
+cooperation projects. Overseas, the Company
+has a diversified and high-quality portfolio.
+We hold interests in a number of world-class
+projects in which the assets are located in
+more than 20 countries and regions around
+the world.
+The Company extracts natural resources in
+a safe, efficient, and environmentally friendly
+manner, and provides the society with
+clean, reliable and stable energy so as to
+inject inexhaustible energy to fuel economic
+development. The Company regards meeting
+society's needs for energy as the cornerstone to
+ensure sustainable development. The Company
+pursues green and low-carbon development
+strategy, actively reduces the impacts of oil
+and gas exploration and development activities
+on the environment, and steadily promotes
+the development of new energy business and
+green technology. The Company cultivates a
+corporate culture of "patriotism, commitment,
+hardworking and innovation" as the core values,
+and actively fulfills its social responsibilities.
+The Board and its Strategy and Sustainability
+Committee regularly review the Company's
+development objectives, development strategy
+and medium and long-term development plans,
+to ensure that the Company's vision, values
+and strategies are aligned with the corporate
+culture.
+Going forward, the Company will steadily
+promote the reserves and production growth,
+encourage technological innovation and green
+and low-carbon development, intensify the
+enhancement of quality and reduction of costs,
+continuously improve efficiency and value
+creation capability so as to generate better
+returns to shareholders.
+38
+CNOOC LIMITED Annual Report 2023
+All employees sign employment contracts with the
+Company based on the principles of equality and
+voluntariness. The Company strictly complies with labour
+laws and regulations, opposes any form of inhumane
+treatment, abides by the regulations on salaries, overtime
+hours and statutory benefits promulgated by jurisdictions
+where the business is operated and prohibits any forced
+labour.
+Fully protect the rights and interests of
+employees
+CNOOC Limited strives to create an open, transparent,
+equal and diverse environment, adheres to the concept of
+putting people first and caring for employees, and attaches
+importance to and effectively safeguards the legitimate
+rights and interests of employees.
+At the same time, the Company respects and supports the
+freedom of association, assembly and union membership
+enjoyed by its employees under the laws. The Company
+has established trade union organisations at all levels in
+accordance with the Trade Union Law of the People's
+Republic of China to protect the legitimate rights and
+interests of the employees. In addition, the Company
+maintains close communication with the legal department
+and trade union organisations to jointly protect the
+legitimate rights and interests of employees.
+With respect to internal control, the Company
+has established an internal control system and
+mechanism for financial, operational and compliance
+monitoring in accordance with the internal control
+framework formulated by the COSO of the United
+States, and has conducted continuing review and
+evaluation of the internal control system of the
+Company according to the provisions of the Basic
+Standard for Enterprise Internal Control and the
+supporting guidelines jointly formulated by Five
+Ministries including the Ministry of Finance of the
+PRC, in order to ensure safety, compliance and
+the timeliness, accuracy and completeness of all
+information reported.
+With respect to risk management, the Company
+has chosen and adopted the ISO 31000:2018/
+GBT24353-2022 Risk Management Guideline,
+meanwhile has taken Guidelines for Comprehensive
+Risk Management of Central Companies by the
+State-owned Assets Supervision and Administration
+Commission (SASAC) and the risk management
+framework issued by COSO (namely, the Committee
+of Sponsoring Organizations of the Treadway
+Commission) of the U.S. as an important reference,
+established a risk management system covering
+design, implementation, monitoring, assessment and
+continuous improvement. The RMICC Committee of
+the Company shall establish the overall targets and
+strategies of the risk management system which are
+in line with the strategic objectives of the Company,
+and identified, analysed and assessed the overall
+risks of the Company, including the Company's key
+risks in making major decisions, important events
+and key business processes. The RMICC Committee
+is also responsible for reviewing and approving the
+response plans to major risks, as well as following up
+and periodically reviewing the implementation of such
+response plans and the handling of major compliance
+incidents, in order to ensure that sufficient attention,
+monitoring and responses will be afforded to all key
+risks and compliance incidents of the Company.
+The Board ensures that the Company establishes and
+maintains appropriate and effective risk management and
+internal control systems, strengthens the construction of
+compliance system on this basis, and regularly reviews
+their effectiveness. Such systems are designed to
+manage the risks a company may face in achieving its
+business objectives. The Board receives a report on risk
+management and internal control systems from executives
+twice a year. All major risks are reported to the Board
+which also evaluates the risks and their response plan.
+Appropriate and effective risk management and internal
+control system can help the company reasonably reduce
+the possible loss caused by the occurrence of risks.
+the Company's Risk Management, Internal Control and
+Compliance Management Committee (RMICC Committee)
+is authorised by the Board to organise and carry out the
+Company's overall risk management and internal control.
+Its responsibilities include developing risk management
+and internal control systems, standardizing institutional
+framework, authorisation, responsibilities, processes and
+methods for the systems, continuously monitoring the
+operation of the systems, and regularly reporting the
+construction and compliance management of the systems
+to the Audit Committee and the Board.
+Since its establishment, the Company has treated risk
+management, internal control and compliance management
+system as a top priority. The Company recognizes that it
+is the duty and obligation of its management to establish
+and maintain a risk management, internal control and
+compliance management system which serves the
+Company's strategic objectives and meets the Company's
+business practice.
+RISK MANAGEMENT, INTERNAL
+CONTROL AND COMPLIANCE
+MANAGEMENT SYSTEM
+RISK MANAGEMENT AND INTERNAL CONTROL
+29
+CNOOC LIMITED Annual Report 2023
+CNOOC LIMITED Annual Report 2023
+Cultivation of International Talents
+The Company continues to increase efforts in the selection
+and training of experts. In 2023, the Company expanded
+its team of senior technical experts. At the same time,
+the Company accelerated the reform of talent evaluation
+mechanism, continued to optimize the vocational skill
+rating system, further promoted the reform of offshore
+operation supervision, and accelerated the growth of our
+young technical backbone.
+The Company actively promotes the university-enterprise
+joint talent cultivation mechanism. On one hand, CNOOC
+Limited helps young talents in universities to grow. On
+the other hand, CNOOC Limited actively joins strategic
+cooperation with China University of Petroleum (Beijing),
+China University of Petroleum (Huadong), Shanghai Jiao
+Tong University, etc. At the same time, we train young
+scientific and technological innovative talents, uphold the
+spirit of scientists, and improve their creative thinking and
+practical abilities.
+CNOOC Limited adheres to the development concept
+of common growth of employees and the Company,
+improves the training system, optimizes employee growth
+and development system, and opens channels for talent
+development to provide opportunities for each employee
+to become the backbone of the Company's high-quality
+development.
+Staff development
+operations, provides employees with vacation, social
+insurance and other benefits in accordance with local
+labour laws and regulations, and establishes remuneration
+adjustment mechanisms and incentive mechanisms that
+correspond to the practical situations of the respective
+localities to encourage local employees to develop
+together with the Company. It also provides necessary
+occupational skill trainings and skill enhancement trainings
+to local employees, champions cultural integration, and
+actively participates in the construction and activities of
+local communities.
+Overseas, CNOOC Limited fully protects the legitimate
+rights and interests of local employees, strictly complies
+with the employment regulations in the location of
+The Company continues to strengthen the training of
+international talents, focuses on the key and difficult
+problems in the development of overseas business, and
+establishes a systematic training system and a hierarchical
+and interconnected international talent reserve mechanism.
+In 2023, over 100 business cadres were selected to
+participate in international talent training course.
+33
+The Company strives to provide employees with competitive
+remuneration packages as compared to the rest of the
+industry, establishes a salary increment mechanism,
+and gradually establishes a distribution mechanism that
+matches market practice. The Company implements
+multi-level and precise incentive mechanism for salary
+distribution that further tilts towards technical experts and
+front-line workers and is closely linked to work quality and
+value contribution, so as to align employee income with
+the Company's profit growth and share the Company's
+development results with its employees. A comprehensive
+and effective social security system has also been built, and
+various social and multi-level supplementary insurances
+are provided to employees on a timely basis.
+Risk of related party transactions
+CNOOC LIMITED Annual Report 2023
+34
+Furthermore, First Nations in Canada have aboriginal land
+claims, in a substantial portion of western Canada. As a
+result, negotiations with First Nations prior to commencing
+future projects are prudent. Failure to successfully negotiate
+with affected First Nations may result in timing uncertainties
+or delays of future development activities.
+Risks to business and operations in Canada
+Transportation and export infrastructure in Canada is
+limited, and without the construction of new transportation
+and export infrastructure, realization of our full oil and
+natural gas production capability may be affected. In
+addition, we may be required to sell our products into
+the North American markets at lower prices than in
+other (international) markets, which could materially and
+adversely affect our financial performance.
+Network security and IT infrastructure damage risk
+Malicious attacks on our cyber system, negligence in the
+management of our cyber security and IT system and
+other factors may cause damage or breakdown to our IT
+infrastructure, which may disrupt our operations, result
+in loss or misuse of data or sensitive information, cause
+injuries, environmental harm or damages in assets, violate
+laws or regulations and result in potential legal liability.
+These actions could result in significant increase in costs
+or damage to our reputation.
+Technology development and deployment risk
+Technology and innovation are vital for us to enhance the
+Company's competitiveness in a competitive environment
+and exploration and development challenges. For example,
+we strive to rely on technologies and innovations to
+realize our strategy and enhance our competiveness and
+operation capacity in the development of unconventional
+oil and gas resources, including heavy oil, oil sands, shale
+oil and gas and coalbed methane, deep water exploration
+and development, and offshore enhanced oil recovery.
+If our core technology reserves are insufficient, it may
+have a negative impact on the Company's reserves and
+production targets and cost control targets.
+By the end of 2023, approximately 47.5% of our proved
+reserves were undeveloped. There are various risk in
+developing reserves, mainly including construction,
+operational, geophysical, geological and regulatory risk.
+Failure to develop these reserves in a timely and cost-
+effective manner could adversely affect the Company's
+results. The reliability of reserve estimates depends on
+a number of factors, including the quality and quantity
+of technical and economic data, the market prices of
+our oil and gas products, the production dynamics
+of oil reservoirs, extensive engineering judgments,
+comprehensive judgement of engineers and the fiscal and
+tax regimes in the countries where we have operations or
+assets. The factors, assumptions and variables involved
+in estimating reserves are beyond our control and may
+be proved to be incorrect over time. That may result in
+volatility of our initial reserve data.
+Risk from irrealizable undeveloped reserves
+During the reporting period, procurement from the
+Company's major suppliers accounted for a relatively high
+proportion. The Company, as an exploration, development
+and production of oil and gas enterprise, is principally
+engaged in the exploration and development with services
+procurement as its main procurement. We maintain a
+good working relationship with our major suppliers, and
+actively explore new suppliers to ensure supply adequacy
+and foster competition. However, if the major suppliers
+fail to continue to provide services to the Company due
+to accidental factors, and the Company fails to find
+suitable alternative suppliers, its operating activities may
+be disrupted and the performance would be adversely
+affected.
+The risk of high supplier concentration
+During the reporting period, sales to major customers of
+the Company accounted for a relatively high proportion. If
+any of our major customers reduces its crude oil or natural
+gas purchases from us significantly, and the Company fails
+to find alternative customers in time, our results would be
+adversely affected.
+The risk of high concentration of customers
+RISK MANAGEMENT AND INTERNAL CONTROL
+36
+CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+GOVERNANCE STANDARDS
+RISK MANAGEMENT AND INTERNAL CONTROL
+Financial risk
+Exchange rate risk
+The Company's oil and gas sales are substantially
+denominated in Renminbi and U.S. dollars. The depreciation
+of Renminbi against U.S. dollar may have double effects.
+The appreciation of U.S. dollar against Renminbi may
+increase the Company's revenue from the sales of oil and
+gas, but may increase our import costs for equipment and
+raw materials. The Company may have exchange rate
+risk in the case of inconsistency between revenue and
+cost scale. When there may be a capital gap in overseas
+capital expenditure, the Company needs to remit overseas
+payment by converting domestic RMB into USD, and the
+exchange rate fluctuation of RMB against USD brings
+certain exchange rate risks.
+Different levels of the U.S. government federal, state
+or local government may impose economic sanctions of
+varying severity against certain countries or regions and
+their residents or designated governments, individuals, and
+entities. It is impossible to predict whether the business
+of the Company or its affiliates, the countries/regions
+where the business is conducted or its partners will be
+affected by the U.S. sanctions regime in the future due
+to changes in the U.S. sanctions regime. If this happens,
+the Company may not be able to continue to carry out
+relevant business, or it may not be able to continue to carry
+out business in the affected countries or regions or with
+the affected partners, thus affecting investors' perception
+of the Company and investment in the Company, and
+harming the Company's opportunity or ability to obtain
+new business.
+-
+The risk of sanctions
+Laws and regulations related to privacy and data protection
+are generally becoming more stringent. Some countries and
+jurisdictions where we operate in or have access to data
+have data security, data privacy or data protection laws
+and regulations, such as Personal Information Protection
+Law of the People's Republic of China, the European Union
+General Data Protection Regulation (GDPR) and Personal
+Data (Privacy) Ordinance (Chapter 486 of the Laws of Hong
+Kong). As a company with operations in various countries
+and regions, we are subject to privacy and data security
+laws in numerous jurisdictions as a result of having access
+to and processing confidential, personal or sensitive data
+in the course of our business. Therefore, compliance with
+the various data privacy regulations around the world
+may require significant expenditures. In addition, failure to
+comply with current and future laws and regulations could
+result in government enforcement actions (including the
+imposition of significant penalties), criminal and civil liability
+for us and our officers and directors, private litigation and/
+or adverse publicity that negatively affects our business.
+Risk of violating laws and regulations related to data
+security
+RISK MANAGEMENT AND INTERNAL CONTROL
+35
+CNOOC LIMITED Annual Report 2023
+The Company has always upheld and attained high
+standard of business ethics, for which its transparency
+and standards of governance have been recognised by
+the public and its shareholders. In 2023, the Company
+was honoured, among others, as "Best Listed Company"
+of China Securities Golden Bauhinia Awards hosted by Ta
+Kung Wen Wei Media Group, the Asset ESG Corporate
+Award "Gold Award", the "Hong Kong Stock Golden
+Bull Award" hosted by China Securities Journal, the
+"Most Respectable Company", "Best Investor Relations
+Company", "Best Company Board of Directors" and other
+awards hosted by the “Institutional Investor" Magazine. A
+strict and high standard of corporate governance enables
+the Company to operate steadily and efficiently and is in the
+long-term interests of the Company and its shareholders.
+Continue to improve the risk management-oriented internal
+control system. Focus on the modernization of corporate
+governance system and governance capacity, strengthen
+the construction of compliance system, and ensure that
+all risks are effectively addressed.
+Legal risks
+By the end of 2023, CNOOC Group directly and indirectly
+owns or controls approximately 62.04% of the issued
+shares (percentage in the total shares of both Hong Kong
+shares and A shares). As a result, CNOOC Group can
+have an impact on the election of our Board members,
+our dividend payments and other decisions. Under current
+PRC laws, CNOOC Group has the exclusive right to
+enter into PSCs with foreign enterprises for petroleum
+resources exploitation in offshore China. Although CNOOC
+Group has undertaken to transfer all of its rights and
+obligations (except for those relating to administrative
+functions as a state-owned company) under any new PSCs
+that it enters into to us (save for certain exceptions), our
+strategies, results of operations and financial position may
+be adversely affected in the event CNOOC Group takes
+actions that favor its own interests over ours.
+Risk caused by the actual controller's influence on the
+Company
+Management risk
+We regularly enter into connected transactions with
+CNOOC Group and its affiliates. Certain connected
+transactions require a review by the regulatory authorities
+of the place where the shares are listed and are subject to
+prior approvals by our independent shareholders. If these
+transactions are not approved, the Company may not be
+able to proceed with these transactions as planned.
+The company integrates environmental, social and
+governance (ESG) risk management into normal risk
+management, and includes at least six ESG risks,
+including climate change, emissions and waste, renewable
+energy, supply chain, privacy and data security, and
+controversial development, into risk sources of major risks
+of the company, and regularly evaluates and develops
+corresponding countermeasures. Taking HSSE risk as an
+example, we will further strengthen the implementation
+of production safety responsibilities, strengthen the
+inspection and special improvement of the system, focus
+on well control and contractor safety management in
+the production process, and strive to achieve intrinsic
+safety. As required by the Rules Governing the Listing of
+Securities on The Stock Exchange of Hong Kong Limited
+(the "Listing Rules of Stock Exchange"), more ESG risk
+identification and response can be found in the Company's
+Environmental, Social and Governance Report.
+Certain restrictions on dividend distribution imposed by the
+laws of the countries in which we operate may adversely and
+materially affect our cash flows. For instance, subsidiaries
+established in countries and regions with foreign exchange
+control to remit funds overseas shall satisfy the regulatory
+requirements of local laws and regulations, and face the
+risk of policy changes at any time, which may cause the
+Company' failure to recover the cash income of subsidiaries
+in a timely manner.
+The risk of foreign exchange control
+Risk of violating anti-corruption, fraud, money laundering
+and corporate governance and other laws and regulations
+Laws and regulations of the host countries or regions in
+which we operate, such as laws on anti-corruption, anti-
+fraud, anti-money laundering and corporate governance, are
+constantly changing and becoming more comprehensive.
+If the Company, our directors, executives or employees
+fail to comply with any of such laws and regulations, it
+may expose us to prosecution or punishment, damage to
+our reputation and image, and our ability to obtain new
+resources, and it may even expose us to civil or criminal
+liabilities.
+Overall risk response measures:
+The Company is a company incorporated under the Hong
+Kong Companies Ordinance. Pursuant to the Notice of the
+Office of the State Council on the Forwarding the Opinions
+on the Pilot Programmes of Innovative Enterprises Issuing
+Stocks or Depositary Receipts in Mainland China, the
+company law and other laws and regulations stipulated
+by its place of incorporation outside China may apply
+to the shareholding structure, corporate governance,
+operational regulations and other matters of a pilot red-
+chip enterprise. The corporate governance system of the
+Company is currently subject to the Hong Kong Companies
+Ordinance and its Articles of Association which vary to
+a certain extent with the corporate governance model
+currently applicable to domestic A-share listed companies
+registered in China in terms of, amongst others, profit
+distribution mechanism, decision-making procedures for
+material matters and distribution of residual assets. For
+specific details, please refer to the section titled "III. Major
+Difference Between the Corporate Legal System Prevailing
+at the Place of Incorporation and Articles of Association
+and the Company Law and Other Laws and Regulations
+of the PRC" under "Chapter 9 Corporate Governance
+Structure" of the Prospectus of CNOOC Limited for Initial
+Public Offering of RMB Ordinary Shares (A-shares) dated
+11 April 2022 of the Company.
+The company strives to build a risk management system
+matching the world-class energy companies. We will make
+overall management of major risks, respond to them at
+different levels, and strive to identify, prevent, handle and
+report them in a timely manner. Carry out risk monitoring
+and early warning in important business areas, and
+conduct dynamic research and judgment and disposal.
+A whole-process risk management mechanism of "pre-
+prevention, in-process control and post-evaluation" has
+been established.
+CNOOC LIMITED Annual Report 2023 37
+CNOOC LIMITED Annual Report 2023 45
+All Directors newly appointed to the
+Board receive a comprehensive, formal
+and tailored induction on appointment
+for the purpose of giving an overview
+of the business and operations of the
+Company and its subsidiaries and
+appropriate briefings and trainings from
+the Company covering the statutory
+and regulatory obligations of Directors,
+organisational structure, policies,
+procedures and codes of the Company
+and terms of reference of Committees.
+The senior management and the Joint
+Company Secretaries/Board Secretary
+will also conduct subsequent briefings
+as and when necessary to ensure that the
+Directors are kept appraised of the latest
+developments relevant to the operations
+and business of the Company, and
+their responsibilities under laws and
+regulations, the Listing Rules of Stock
+Exchange, the Rules Governing the
+Listing of Stocks on SSE ("Listing Rules of
+SSE"), and other regulatory requirements
+as well as the Company's business and
+governance policies, so that they are
+able to discharge their responsibilities
+properly.
+The Company regularly updates its Directors
+with changes in laws and regulations relevant
+to their roles as Directors of the Company.
+Directors' training and professional development
+Principle: "Every director must always know his
+responsibilities as a director of an issuer and its
+conduct, business activities and development.
+Given the essential unitary nature of the board, non-
+executive directors have the same duties of care
+and skill and fiduciary duties as executive directors."
+C.1 Responsibilities of Directors
+DIRECTORS' RESPONSIBILITIES,
+DELEGATION AND BOARD
+PROCEEDINGS
+C.
+Note 3: Appointed as a member of the Nomination Committee
+during the reporting period. Please see "Changes in
+Directors" on page 66.
+Note 2: Ceased to hold office during the reporting period. Please
+see "Changes in Directors" on page 66.
+Note 1: Mr. Wang Dongjin appointed Mr. Lawrence J. Lau to
+act as his proxy to host and attend the meeting of the
+Nomination Committee held on 28 March 2023 and to
+vote on his behalf.
+0
+0
+0
+1
+4253
+member by proxy
+CORPORATE GOVERNANCE REPORT
+The Company also recognises the
+importance of continuous professional
+development of the Directors. Directors
+are encouraged to participate in
+continuous professional development
+to develop and refresh their knowledge
+and skills. During the reporting period,
+the Company arranged for the Directors
+a specialised training on the Measures
+for the Administration of Independent
+Directors of Listed Companies provided
+by the SSE as well as a training on
+the comprehensive implementation of
+the A-share registration-based system
+reform and international anti-corruption
+compliance conducted by external
+consultants.
+Lawrence J. Lau (Note 1)
+In addition, the Company also provided
+regular updates to Directors in respect
+of continuing obligations of listed issuers
+and their directors, monthly reports on
+the business and operations of the
+Company and its subsidiaries, as well
+as public opinion monitoring report on
+every business day.
+A, B
+Chiu Sung Hong
+executive Directors
+Independent Non-
+A, B
+A, B
+Xu Keqiang (Note 2)
+A, B
+Tse Hau Yin, Aloysius
+(Note 1)
+Li Yong (Note 1)
+A
+A, B
+Activities
+Continuous
+Professional
+Development
+Type of
+Wen Dongfen
+Executive Directors
+Zhou Xinhuai
+Xia Qinglong (Note 1)
+Non-executive Directors
+Wang Dongjin (Chairman)
+The Company Secretary of the Company
+is responsible for maintaining records of
+the Directors' participation in continuous
+professional development. Based on the
+records maintained by the Company, our
+Directors participated in the following
+continuous professional development
+activities during 2023:
+A, B
+Certain Directors also attended trainings
+organised by the Company or external
+professional bodies on other regulatory
+updates as well as obligations of
+directors. In addition, Directors also
+read materials/publications which they
+thought appropriate and necessary for
+the fulfillment of their roles. The Directors
+provided their regular training records to
+the Company.
+The Policy aims to continue to
+improve corporate governance
+and ensure the diversity on the
+Board.
+No. of meeting attended
+(Five meetings in total)
+by committee
+The Chairman takes primary responsibility
+for ensuring that good corporate governance
+practices and procedures are established.
+The Chairman encourages all Directors to make
+full and active contribution to the Board's affairs
+and takes the lead to ensure that the Board
+acts in the best interests of the Company. The
+Chairman encourages Directors with different
+views to voice their concerns, allows sufficient
+time for discussion of issues and ensures that
+Board decisions fairly reflect Board consensus.
+CNOOC LIMITED Annual Report 2023 47
+CORPORATE GOVERNANCE REPORT
+The Chairman ensures that appropriate steps
+are taken to provide effective communication
+with shareholders and that their views are
+communicated to the Board as a whole.
+The Chairman promotes a culture of openness
+and debate by facilitating the effective
+contribution of Non-executive Directors and
+Independent Non-executive Directors in
+particular and ensuring constructive relations
+between Executive, Non-executive and
+Independent Non-executive Directors.
+The CEO is responsible for conducting the
+Company's business and affairs consistent
+with the principles and directions established
+by the Board.
+C.3 Management functions
+Principle: "An issuer should have a formal schedule of
+matters specifically reserved for board approval. The
+board should give clear directions to management
+on the matters that must be approved by it before
+decisions are made on the issuer's behalf."
+The Board is the ultimate decision-making
+body of the Company, other than those matters
+reserved to shareholders of the Company.
+The Board oversees and provides strategic
+guidance to senior management in order to
+enhance the long-term value of the Company
+for its shareholders. The Board delegates its
+management and administration functions to
+management, makes the Board Authorization
+Management Measures and a list of relevant
+authorizations, and gives clear directions as
+to the powers of management, in particular,
+with respect to the circumstances where
+management should report back and obtain
+prior approval from the Board before making
+decisions or entering into any commitments on
+the Company's behalf.
+The day-to-day management is conducted
+by senior management and employees of the
+Company, under the direction of the CEO
+and the oversight of the Board. In addition
+to its general oversight of the management,
+the Board also performs a number of specific
+functions. The Company formalises the
+functions reserved to the Board and those
+delegated to management and reviews those
+arrangements periodically to ensure that they
+remain appropriate to the Company's needs.
+The primary functions performed by the Board
+include:
+(ii)
+Reviewing and approving long-term
+strategic plans and annual operating
+plans, and monitoring the implementation
+and execution of these plans;
+Reviewing and approving significant
+financial and business transactions and
+other major corporate actions;
+Reviewing and approving financial
+statements and reports, and overseeing
+the establishment and maintenance of
+controls, processes and procedures to
+ensure accuracy, integrity and clarity in
+financial and other disclosures;
+(iv) Overall responsibility for the Company's
+ESG strategy and reporting, evaluating
+and determining the Company's ESG-
+related risks, and ensuring appropriate
+and effective ESG risk management and
+internal control systems are in place;
+(v) Determining the appointment or dismissal
+of senior management, determining the
+performance assessment results of
+senior management, and reasonably
+control the remuneration level of senior
+management; and
+(vi) Other functions of the Board as stipulated
+in the Articles of Association.
+The Board and the senior management have
+respective responsibilities, accountabilities
+and contributions. The primary functions
+performed by the senior management are to
+conduct the daily business and implement
+the abovementioned affairs approved and
+delegated by the Board and other matters as
+the Board may from time to time request.
+The Directors review such delegation
+arrangements periodically to ensure they
+remain appropriate to our needs.
+One of the important roles of the Chairman is to
+provide leadership for the Board. The Chairman
+ensures that the Board works effectively and
+performs its responsibilities, and that all key and
+appropriate issues are discussed by the Board
+in a timely manner. The Chairman delegates
+the responsibility of drawing up the agenda for
+each Board meeting and Committee meeting
+to the Joint Company Secretaries who will take
+into account, where appropriate, any matters
+proposed by the other Directors for inclusion
+in the agenda, and the Chairman is primarily
+responsible for approving the agenda.
+Qiu Zhi Zhong
+The Chairman ensures all Directors are
+properly briefed on issues arising at Board
+meetings and is responsible for ensuring that
+Directors receive, in a timely manner, adequate
+information, which must be accurate, clear,
+complete and reliable.
+The Directors are required to inform the
+Company in case of any change in the number
+and nature of offices held in public companies
+or organisations and other significant
+commitments. Please refer to "Directors and
+Senior Management" on pages 68 to 77 for
+the biographies of the Directors.
+Lin Boqiang
+Li Shuk Yin Edwina
+(Note 3)
+BA
+A
+A, B
+A, B
+A, B
+A: Attend briefings and/or training courses
+B:
+Study articles, journals, newspapers
+and/or other materials
+Note 1: Ceased to hold office during the
+reporting period. Please see "Changes
+in Directors" on page 66.
+Note 2: Ceased to hold office in February 2024.
+Please see "Changes in Directors" on
+page 66.
+Note 3: Appointed as a Director during the
+reporting period. Please see "Changes
+in Directors" on page 66.
+46 CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+The Non-executive Directors and the
+Independent Non-executive Directors actively
+participate in Board meetings and Committees
+meetings to exercise their independent
+judgement on issues of strategy, policy,
+performance, accountability, resources, key
+appointments and standards of conduct of
+the Company. They are responsible for taking
+the lead where potential conflicts of interests
+arise.
+The Non-executive Directors and the
+Independent Non-executive Directors are
+invited to serve on the Audit, Remuneration
+and Nomination Committee and the Strategy
+and Sustainability Committee of the Company.
+During 2023, each Non-executive Director or
+Independent Non-executive Director attended
+or otherwise appointed an alternate to attend
+all regularly scheduled meetings of the Board
+and Committees in which such Non-executive
+Director or Independent Non-executive
+Director sat and reviewed the meeting
+materials distributed in advance for such
+meetings and shared their experience, skills
+and expertise with the Board or the relevant
+Committees. All of the Non-executive Directors
+and Independent Non-executive Directors of
+the Company made positive contributions to
+the development of the Company's strategy
+and policies through independent, constructive
+and informed comments. The Non-executive
+Directors and the Independent Non-executive
+Directors have been responsible for scrutinising
+our performance in achieving agreed corporate
+goals and objectives and monitoring our
+performance reporting.
+Mr. Wang Dongjin, the Chairman of the Board,
+together with other incumbent Directors
+(except the Directors who were unable to
+attend due to other duties) attended the annual
+general meeting held in 2023 and responded to
+questions raised by the shareholders in order
+to develop a balanced understanding of the
+views of shareholders.
+C.2 Chairman and Chief Executive
+Principle: "There are two key aspects of the
+management of every issuer - the management
+of the board and the day-to-day management of
+business. There should be a clear division of these
+responsibilities to ensure a balance of power and
+authority, so that power is not concentrated in any
+one individual."
+Lin Boqiang (Note 3)
+CORPORATE GOVERNANCE REPORT
+Lawrence J. Lau (Note 2)
+The Executive Directors of the Company are
+individuals with extensive experience in the
+Company's respective fields of operation.
+Both of them are familiar with the Company's
+businesses and have cooperated with leading
+global players in the oil and gas industry.
+•
+•
+CORPORATE GOVERNANCE REPORT
+39
+CNOOC LIMITED Annual Report 2023
+As of 31 December 2023, the Board consisted
+of eight members: one of them was an Executive
+Director, three of them were Non-executive
+Directors and four of them were Independent
+Non-executive Directors. All Directors were
+identified by categories of Executive Director(s),
+Non-executive Director(s) and Independent
+Non-executive Director(s) in all corporate
+communications that set out the names of
+the Directors of the Company. A list of the
+Directors identifying their updated roles and
+functions was maintained on the Company's
+website and on the websites of HKSE and SSE,
+respectively, during the reporting period.
+The Board, as representatives of the
+shareholders of the Company, is committed to
+the achievement of business success and the
+enhancement of long-term shareholder's value
+with the highest standards of integrity and
+ethics. The role of the Board is to direct, guide
+and oversee the conduct of the Company's
+business and to ensure that the interests of
+the shareholders are being served.
+Board composition, succession and evaluation
+Principle: "The board should have a balance of
+skills, experience and diversity of perspectives
+appropriate to the requirements of the issuer's
+business, and should ensure that the directors
+devote sufficient time and make contributions to
+the issuer that are commensurate with their role and
+board responsibilities. It should ensure that changes
+to its composition can be managed without undue
+disruption. It should include a balanced composition
+of executive and non-executive directors (including
+independent non-executive directors) so that there is
+a strong independent element on the board, which
+can effectively exercise independent judgment. Non-
+executive directors should be of sufficient calibre and
+number for their views to carry weight."
+BOARD COMPOSITION AND
+NOMINATION
+B.1
+B.
+The Nomination Committee shall be responsible
+for reviewing and monitoring the training
+and continuous professional development of
+Directors and senior management and making
+recommendations to the Board in that regard.
+(iv) Reviewing the Company's compliance
+with the CG Code and disclosure in
+the Corporate Governance Report and
+making recommendations to the Board
+in that regard.
+Developing, reviewing and monitoring the
+Code of Ethics for Directors and Senior
+Officers ("Code of Ethics") and making
+recommendations to the Board in that
+regard; and
+Reviewing and monitoring the Company's
+policies and practices on compliance
+with legal and regulatory requirements
+and making recommendations to the
+Board in that regard;
+(ii)
+(i) Developing and reviewing the
+Company's policies and practices on
+corporate governance and making
+recommendations to the Board;
+The Audit Committee shall be responsible for
+performing the corporate governance duties
+set out below:
+The Non-executive Directors of the Company
+are all individuals with extensive experience
+in the parent company's respective fields of
+operation.
+The Board has delegated the responsibility
+for performing certain corporate governance
+related duties and functions to the Audit
+Committee and the Nomination Committee.
+The Independent Non-executive Directors of
+the Company are all professionals or scholars
+with backgrounds in the legal, economic,
+financial or investment fields. They have
+extensive experience and knowledge of
+corporate management and make significant
+contributions to the Company's strategic
+decisions.
+The Company believes that the active
+involvement of the Non-executive Directors and
+Independent Non-executive Directors in the
+management and decision making of the Board
+and its Committees strengthens the objectivity
+and independence of the Board.
+With a view to leading its
+high quality development, the
+Company sees increasing
+diversity at the Board level as an
+essential element in supporting
+the attainment of its strategic
+objectives and sustainable
+development. In designing the
+Board's composition, board
+diversity shall be considered from
+a number of aspects, including
+but not limited to, gender,
+age, cultural and educational
+background, professional
+experience, skills, knowledge
+and length of service. All Board
+appointments will be based on
+meritocracy, and candidates will
+be considered against objective
+criteria, having due regard to the
+benefits of diversity on the Board.
+will
+Selection of candidates
+be based on diversity of
+perspectives, including but not
+limited to, gender, age, cultural
+and educational background,
+professional experience, skills,
+knowledge and diversified vision.
+40 CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+Since the adoption of the Policy in August
+2013, the Board has regularly observed the
+Policy and took into account the objectives
+set out in the Policy in reviewing its Board
+composition. In particular, in selecting the
+candidates for Independent Non-executive
+Director, not only the Board considered the
+knowledge, professional experience and
+industry-specific exposures of the candidates,
+the Board also took into account other factors
+such as cultural background and diversified
+vision of the candidates. As a result, the
+Nomination Committee considered that the
+appointments of Independent Non-executive
+Directors of the Company (as the case maybe)
+during the reporting period were appropriate
+and that there is sufficient diversity at the Board
+level. In addition, in accordance with the Listing
+Rules of Stock Exchange which states that the
+HKSE will not consider diversity to be achieved
+for a single gender board, and in this regard,
+gender diversity is achieved at the Board level
+with two female Directors.
+The Board has reviewed the implementation
+and effectiveness of the Company's policy on
+board diversity in 2023.
+In accordance with the principles of diversity
+and anti-discrimination in employment, the
+Company insists on treating employees
+equally in the recruitment, training, promotion
+and remuneration systems regardless of
+race, nationality, faith, gender, age, marital
+status or whether subject to special statutory
+protections, strives to provide employees with
+equal opportunities in all aspects, and creates a
+respectful, open and tolerant corporate culture
+and values the diverse talents of its employees.
+The Company will continue to uphold the
+principle of gender equality in employment by
+ensuring that both the number and quality of
+female staff in the workplace remain relatively
+stable and actively maintaining a steady
+increase in the number of female employees.
+As of the end of 2023, the Company had a total
+of 3,732 female employees, representing 17%
+of the total number of employees in 2023. The
+Company also pays attention to the education
+training and career development made available
+to female managers and through which the
+percentage of female managers at the middle
+to senior levels has been increased from 14% in
+2020 to 17% in 2023. In addition, the Company
+also adopts a range of measures to enrich the
+life of the female employees after work and
+to encourage them to participate in various
+activities.
+The Board and/or its committees have also
+reviewed the following key features and/or
+mechanisms of the Board and governance
+structure of the Company and accordingly
+are of the view that the relevant features
+and mechanism are adequate to ensure that
+independent views and input are available to
+the Board:
+As at 31 December 2023, four out of
+the eight directors are Independent Non-
+executive Directors which is half of the
+total Board members and also exceeds
+the requirement that Independent Non-
+executive Directors shall make up at least
+one third of the Board as stipulated under
+the Listing Rules of Stock Exchange.
+CNOOC LIMITED Annual Report 2023
+41
+CORPORATE GOVERNANCE REPORT
+Half of the Board members are
+Independent Non-executive Directors
+to ensure that independent advice is
+delivered and taken into account at
+Board meetings and during the decision-
+making processes of the Board.
+The Nomination Committee will assess
+the independence of a candidate before
+the appointment of a new Independent
+Non-executive Director.
+The Company has policy and procedures
+in place to avoid any potential conflict
+of interests and not to undermine the
+objectivity and integrity of the Board for
+decisions making. Under the Policy, if
+a substantial shareholder or a Director
+has a conflict of interest in a matter to
+be considered by the Board which the
+Board has determined to be material,
+the matter should be dealt with by a
+physical Board meeting rather than a
+written resolution. The Independent Non-
+executive Directors who do not have a
+material interest in the transaction will be
+present at such Board meeting.
+Purpose:
+To demonstrate the Company's continued
+commitment to high standards of corporate
+governance, the Board adopted a board
+diversity policy (the "Policy") on 20 August
+2013. The Policy aims to continue to improve
+corporate governance and ensure the diversity
+of Board members. A summary of the Policy
+is set out below:
+The diverse backgrounds of the Board
+members ensure that they can fully represent
+the interests of all shareholders of the Company
+and to enhance the effectiveness of the Board
+and corporate governance.
+A list of the Directors, their respective biographies
+and their positions on various committees of
+the Board and in the management are set forth
+in pages 68 to 77 and 172 respectively of this
+annual report, which are also available on the
+Company's website.
+Qiu Zhi Zhong
+Principle: "The board is responsible for performing
+the corporate governance duties. It may delegate
+the responsibility to a committee or committees."
+CORPORATE GOVERNANCE REPORT
+When nominating an Independent Non-
+executive Director for re-election, the Board
+will propose shareholders' vote by way of a
+separate resolution and include in the circular
+and/or explanatory statement accompanying
+the notice of the relevant general meeting
+to shareholders the reasons why the Board
+considers such Director shall be re-elected. If
+an Independent Non-executive Director who
+has been proposed for re-election has already
+served the Company for more than nine years,
+the reasons why the Board considers such
+Director still independent and should be re-
+elected as stated in the above circular and
+explanatory statements, include the factors
+considered, the process and the discussion
+of the Board in arriving at such determination.
+The
+Nomination Committee is also
+responsible for evaluating the contributions
+and independence of incumbent Directors
+so as to determine whether they should be
+recommended for re-election. Based on such
+evaluation, the Nomination Committee will
+recommend to the Board candidates for re-
+election at general meetings and appropriate
+replacements (if necessary). The Board, based
+on the recommendations of the Nomination
+Committee, will propose to the shareholders
+the candidates for re-election at the relevant
+general meetings.
+A Director appointed by the Board to fill a
+casual vacancy or as an addition shall hold
+office until the next annual general meeting.
+The Non-executive Directors and Independent
+Non-executive Directors are appointed for a
+term of 36 months.
+All Directors are subject to retirement by
+rotation once every three years and are subject
+to re-election in accordance with the Articles
+of Association of the Company and the CG
+Code.
+In 2023, the nomination committee convened
+five meetings, and three of which were
+conducted by way of written resolutions
+and two of which were in form of physical
+meeting. The following is a summary of the
+work performed by the Nomination Committee
+under its charter during 2023:
+Reviewed the structure, size and
+composition (including the skills,
+knowledge and experience) of the
+Board and its committees and made
+recommendations on any proposed
+changes to the Board to complement
+the Company's corporate strategy;
+Assessed the independence of
+Independent Non-executive Directors;
+Identified individuals suitably qualified
+to become Board members and made
+recommendations to the Board on the
+selection of individuals nominated for
+directorships;
+Recommended suitable candidates for
+senior management positions of the
+Company;
+Made recommendations to the Board on
+the re-election of Directors and reviewed
+succession planning for Directors,
+in particular the Chairman and CEO,
+according to the nomination procedure
+and process and criteria adopted by the
+Company;
+44 CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+Reviewed and monitored the training and
+continuous professional development of
+Directors and senior management and
+made recommendations to the Board in
+that regard; and
+Evaluated and assessed the effectiveness
+of the Nomination Committee and
+the adequacy of the charter of the
+Nomination Committee, and considered
+and proposed the amendments to the
+charter and presented to the Board for
+approval.
+Attendance of individual members at Nomination
+Committee meetings in 2023
+Directors
+Wang Dongjin (Chairman)
+(Note 1)
+The Nomination Committee considers the
+personal profile and credentials of the proposed
+candidates and may request candidates to
+provide additional information and documents
+if it considers necessary, and assesses the
+proposed candidates or incumbent candidates
+on criteria set out above. The Nomination
+Committee may also invite nominations of
+suitable candidates from Board members
+(if any) for consideration by the Nomination
+Committee prior to its meeting. For filling a
+casual vacancy, the Nomination Committee
+shall make recommendations for the Board's
+consideration and approval. For proposing
+candidates to stand for election and re-
+election at a general meeting, the Nomination
+Committee shall make nominations to the Board
+for its consideration and recommendation.
+A.2 Corporate Governance Functions
+Selection
+criterion:
+CNOOC LIMITED Annual Report 2023
+48
+The Board and Committees may, upon
+reasonable request, seek independent
+professional advice in appropriate
+circumstances at the Company's
+expense and ensure independent views
+and input are available to the Board. The
+Board would resolve to provide separate
+independent professional advice to
+Directors to assist them in performing
+their duties to the Company at the
+Company's expense.
+The Chairman holds meetings with the
+Independent Non-executive Directors
+without the presence of other Directors
+at least annually.
+The Board and each Director have
+separate and independent access to
+the Company's senior management and
+also the Joint Company Secretaries, who
+will provide full and prompt responses
+to queries raised by the Directors. All
+Directors are entitled to have access
+to the Board documents, minutes and
+related materials upon reasonable notice.
+The Board's view on the independence
+assessment of the Independent Non-executive
+Directors:
+In accordance with the Measures for the
+Administration of Independent Directors
+of Listed Companies, the Self-regulatory
+Guidelines for Listed Companies No. 1 -
+Standardized Operation of SSE, the Listing
+Rules of Stock Exchange and other relevant
+regulations, the Board conducted an
+independence assessment of the Independent
+Non-executive Directors:
+The Company has received annual independence
+confirmation from all Independent Non-executive
+Directors serving during the reporting period,
+confirming that they have fully complied with the
+relevant independence requirements in accordance
+with Rule 3.13 of the applicable Listing Rules of
+Stock Exchange. After the Nomination Committee
+of the Company reviewed the resumes, employment
+status and other information of the Independent
+Non-executive Directors and evaluated their
+independence, the Board believes that all Independent
+Non-executive Directors meeting the applicable
+independence requirements, and that there does
+not exist any circumstances which influence the
+independence of the Independent Non-executive
+Directors or prohibiting any of the Independent Non-
+executive Directors from serving as an Independent
+Non-executive Director of the Company pursuant
+to the applicable domestic and overseas regulatory
+rules.
+42 CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+B.2 Appointments, re-election and removal and
+B.3 Nomination Committee
+Principle: "There should be a formal, considered and
+transparent procedure for the appointment of new
+directors. There should be plans in place for orderly
+succession for appointments. All directors should
+be subject to re-election at regular intervals. An
+issuer must explain the reasons for the resignation
+or removal of any director. In carrying out its
+responsibilities, the nomination committee should
+give adequate consideration to the Principles under
+B.1 and B.2."
+•
+•
+As at 31 December 2023, the Nomination
+Committee comprised two Independent
+Non-executive Directors (Mr. Qiu Zhi Zhong
+and Mr. Lin Boqiang) and the Non-executive
+Director and Chairman of the Board (Mr. Wang
+Dongjin), with Mr. Wang Dongjin serving as the
+Chairman of the Nomination Committee. A list
+of members of the Nomination Committee as
+of the date of publication of this annual report
+is set out under the section headed "Company
+Information" on page 172 of this annual report.
+The role of the Nomination Committee is to
+determine the policy and establish proper
+procedures for the selection of the Company's
+leadership positions, upgrade the quality of
+Board members and perfect the Company's
+corporate governance structure.
+The main authorities and responsibilities
+of the Nomination Committee are to make
+recommendations to the Board for suitable
+candidates to serve as Directors and senior
+management of the Company for approval by
+the Board, to review the structure, size and
+composition of the Board (including the skills,
+knowledge and experience), and to evaluate
+the leadership abilities of Executive Directors,
+so as to ensure the competitiveness of the
+Company.
+With respect to nomination for new directors and
+re-election of directors, the Company follows
+a considered and transparent nomination
+policy and the Nomination Committee adheres
+to such policy for nomination of Directors.
+The nomination of Directors was made in
+accordance with the nomination policy and
+the objective criteria (including gender, age,
+cultural, educational background and relevant
+or professional experience, ethnicity, skills,
+knowledge, etc.), with due regard for the
+benefits of diversity, as set out under the
+board diversity policy of the Company. Under
+the nomination policy for Directors of the
+Company, the Nomination Committee shall
+nominate suitable candidates to the Board for
+it to consider and make recommendations to
+shareholders for election and re-election of
+Directors.
+When nominating a particular candidate for
+Director, the Nomination Committee will
+consider (1) integrity and character; (2) the
+breadth and depth of the management and/
+or leadership experience of the candidate;
+(3) financial literacy or other professional or
+business experience of the candidate that are
+relevant to the Company and its business; (4)
+the experience or knowledge of the candidate
+that are relevant to the Company's business
+and corporate strategy and in international
+operations; (5) commitment in respect of
+available time; (6) diversity including gender,
+age, cultural, educational background,
+ethnicity, skills, knowledge, experience, etc.;
+and (7) applicable independence criteria for
+candidates for Independent Non-executive
+Directors. All candidates must be able to meet
+the standards set out in Rules 3.08 and 3.09
+of the Listing Rules of Stock Exchange and the
+qualification requirements of directors under
+the applicable rules of SSE.
+43
+CNOOC LIMITED Annual Report 2023
+Policy
+statement:
+Number of Attendance
+(Nine meetings in total)
+MANAGEMENT
+D.1 Financial reporting
+Principle: "The board should present a balanced,
+clear and comprehensible assessment of the
+company's performance, position and prospects."
+The Company has established a mechanism for
+reporting to the Board by providing a monthly
+management report in order to ensure that
+the Board fully understands the operating
+conditions and the relevant financial position
+of the Company. The Board is responsible
+for preparing accounts that give a true and
+fair view of the Company and its subsidiaries'
+financial position on a going-concern basis
+and other financial disclosures. Management
+provides the Board with the relevant information
+it needs to fulfill these responsibilities.
+52 CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+Directors discuss the operating budget for the
+next year and approve the operating budget
+at the end of each year and will review the
+execution of the operating budget for the whole
+year. Management will also provide sufficient
+explanations and information to the Board. All
+significant changes in the operating conditions
+and investment decisions will be discussed in
+sufficient details by the Board.
+Directors also discuss and analyse the
+performance of the Company and its
+subsidiaries, the long-term business model
+and corporate strategies of the Company
+for achieving the Company's objectives and
+generating or preserving value over the longer
+term. Please refer to the relevant section in
+Management's Discussion and Analysis on
+pages 91 to 96 of this annual report for details.
+If necessary, the Directors will also engage
+professional independent consultants so
+that the Directors can gain an in-depth and
+comprehensive understanding and assessment
+of the relevant matters, in order to make well-
+grounded assessments.
+The management has evaluated the
+effectiveness of the Company's internal control
+over financial reporting in accordance with the
+provisions of the Basic Standard for Enterprise
+Internal Control and the supporting guidelines
+and the internal control framework formulated
+by the COSO, and the auditor of the Company
+have also audited the effectiveness of internal
+control over financial reporting.
+The Company regularly updates investors with
+progress of development and performance
+of the Company through formal channels
+such as annual reports, interim reports and
+announcements made through the websites
+of HKSE, SSE and the Company, as well as
+through press releases. The Company also
+issues quarterly reports and announces its
+strategy at the beginning of the year to enhance
+transparency about its performance and to
+give details of the latest development of the
+Company in a timely manner.
+AUDIT, INTERNAL CONTROL AND RISK
+The Company provides a balanced, clear and
+understandable assessment of the Company's
+performance in its interim and annual reports,
+other financial disclosures required by the
+Listing Rules of Stock Exchange, the Listing
+Rules of SSE, the reports to the regulators
+and information disclosed under statutory
+requirements.
+The Directors are not aware of any material
+uncertainties relating to events or conditions
+that may cast significant doubt upon the
+Company's ability to continue as a going
+concern.
+The statement by the auditor of the Company
+regarding its reporting responsibilities on the
+financial statements of the Company and its
+subsidiaries is set out in the Independent
+Auditor's Report on pages 97 to 101 of this
+annual report.
+D.2 Risk management and internal control
+Principle: "The board is responsible for evaluating
+and determining the nature and extent of the
+risks it is willing to take in achieving the issuer's
+strategic objectives, and ensuring that the issuer
+establishes and maintains appropriate and effective
+risk management and internal control systems. Such
+risks would include, amongst others, material risks
+relating to ESG (please refer to the ESG Reporting
+Guide in Appendix C2 to the Listing Rules of Stock
+Exchange for further information). The board should
+oversee management in the design, implementation
+and monitoring of the risk management and internal
+control systems, and management should provide
+a confirmation to the board on the effectiveness of
+these systems."
+CNOOC LIMITED Annual Report 2023 53
+CORPORATE GOVERNANCE REPORT
+•
+The Board acknowledges that it has
+responsibilities to ensure that the Company
+establishes and maintains appropriate and
+effective risk management, internal control
+and compliance management systems and
+review their effectiveness. Such systems are
+designed to manage rather than eliminate risks
+of failure to achieve business objectives, and
+can only provide reasonable, but not absolute,
+assurance against material misstatement or
+loss.
+The Board regularly, and at least annually,
+receives reports from the management of the
+Company regarding the establishment, review
+and evaluation of the Company's strategic,
+financial, operational and compliance control,
+and also the risk management, internal control
+and compliance management systems. All
+major risks and compliance events are reported
+to the Board. The Board will also evaluate the
+corresponding risks, the response plan and the
+handling of the compliance events.
+The Audit Committee is delegated by the
+Board to oversee the risk management, internal
+control and compliance management systems
+and the internal audit function of the Company
+on an on-going basis (at least annually). For
+work completed by the Audit Committee on
+the Company's risk management and internal
+control systems, please refer to the section
+headed "D.3 Audit Committee" below.
+The Company has also engaged independent
+technical consultant firms to conduct a review
+of its oil and gas business and discloses details
+of its oil and gas properties in its annual report
+(as set out on page 167 to 171 of this annual
+report).
+All Directors have access to the advice and
+services of the Joint Company Secretaries to
+ensure that Board procedures as well as all
+applicable rules and regulations are followed.
+Each of the Joint Company Secretaries has
+taken no less than 15 hours of relevant
+professional training every year.
+The Joint Company Secretaries will report to
+the Chairman of the Board and/or the CEO.
+No. of meetings attended
+(Two meetings in total)
+By committee
+Lin Boqiang
+Qiu Zhi Zhong
+Lawrence J. Lau (Note 2)
+Zhou Xinhuai (Note 4)
+Xu Keqiang (Note 3)
+Li Yong (Note 2)
+(Note 1)
+Wang Dongjin (Chairman)
+Executive
+Attendance of individual Directors at the meeting
+convened by Strategy and Sustainability Committee
+in 2023
+CORPORATE GOVERNANCE REPORT
+49
+CNOOC LIMITED Annual Report 2023
+The main responsibilities of the Strategy and
+Sustainability Committee are to conduct
+study on the long-term development strategy,
+major business plans and investment
+decisions, sustainable development and other
+related matters of the Company, and make
+recommendations to the Board. In 2023,
+the Strategy and Sustainability Committee
+convened two meetings through on-site and
+communications methods, and conducted
+reviews on the work done in relation to health,
+safety and environment (HSE) in 2022, the
+Environmental, Social and Governance (ESG)
+report, development strategy and also the
+annual plan and budget of the Company
+pursuant to its charter.
+For details on the major responsibilities and
+authority of the Nomination Committee, an
+overview of its work performed in 2023 and
+the attendance rate of each member of the
+Nomination Committee, please refer to "B.2
+Appointments, re-election and removal and
+B.3 Nomination Committee” on pages 43 to
+45 of this Annual Report.
+For details on the major responsibilities and
+authority of the Remuneration Committee, an
+overview of its work performed in 2023 and
+the attendance rate of each member of the
+Remuneration Committee, please refer to "E.1
+The level and make-up of remuneration and
+disclosure" on pages 60 to 62 of this Annual
+Report.
+For details on the major responsibilities and
+authority of the Audit Committee, an overview of
+its work performed in 2023 and the attendance
+rate of each member of the Audit Committee,
+please refer to "D.3 Audit Committee” on pages
+56 to 60 of this Annual Report.
+The Company has established the Audit
+Committee, the Remuneration Committee,
+the Nomination Committee and the Strategy
+and Sustainability Committee (each a
+"Committee”) and has established a specific
+written committee charter (the "Charter") for
+each of the Committees which deals clearly
+with its authority and duties. The Charters
+of the Committees have been published on
+the websites of the HKSE, the SSE and/or
+the Company in accordance with the relevant
+regulatory requirements. These Committees
+will report to the Board on their decisions and
+recommendations.
+•
+Principle: "Board committees should be formed with
+specific written terms of reference which deal clearly
+with their authority and duties."
+C.4 Board committees and performance of duties
+during the year
+Directors clearly understand delegation
+arrangements in place. The Company has
+entered into service agreements with the
+Executive Directors, Non-executive Directors
+and Independent Non-executive Directors
+setting out the key terms and conditions of
+their engagements.
+CORPORATE GOVERNANCE REPORT
+Failure to attend
+The Risk Management, Internal Control and
+Compliance Management Committee (RMICC
+Committee) of the Company has been
+authorised by the Board to be in charge with
+the organisation and implementation of the
+overall risk management and internal control.
+The RMICC Committee is responsible for
+establishing the risk management and internal
+control systems, implementing standardised
+organisation, authorisation, responsibilities,
+procedures and methods for the risk
+management and internal control systems.
+The RMICC Committee is also responsible for
+ongoing monitoring of the risk management and
+internal control systems of the Company, and
+makes periodic reports to the Audit Committee
+and the Board regarding the status of the risk
+management and internal control systems and
+compliance control of the Company.
+member By proxy
+With respect to risk management (including
+the ESG risks), the Company has chosen and
+adopted the ISO 31000: 2018/GBT24353-
+2022 Risk Management Guidelines, and has
+taken the Guidelines for Comprehensive Risk
+Management of Central Companies issued
+by the State-owned Assets Supervision and
+Administration Commission (SASAC) of the
+PRC and the risk management framework
+developed by the Committee of Sponsoring
+Organisations of the Treadway Commission
+(COSO) as an important reference, established
+a risk management system covering design,
+implementation, monitoring, assessment
+and continuous improvement. The RMICC
+Committee established the overall targets
+and policies of the risk management system
+which are in line with the strategic objectives
+of the Company, and identified, analysed and
+assessed the overall risk of the Company,
+including the Company's key risks in making
+major decisions, important events and key
+business processes. Additionally, the ESG risk
+management was also integrated into the routine
+risk management practice and accordingly at
+least six types of ESG risks, including those
+associated with climate change, emission
+and waste, renewable energy, supply chain,
+privacy and data security and controversial
+development, were listed as the source of
+risks under the major risks of the Company.
+The RMICC Committee therefore conducted
+regular assessment and kept track with the
+above risks on a continuous basis in order
+to promptly address such risks. The RMICC
+Committee is also responsible for the response
+plans to major risks, as well as periodically
+following up and reviewing the implementation
+of such response plans, and the handling of
+compliance events, in order to make sure that
+sufficient attention, monitoring and responses
+will be paid to all key risks and compliance
+events of the Company. The risk management
+reports are submitted to the Audit Committee
+and the Board periodically.
+CNOOC LIMITED Annual Report 2023
+(i)
+(ii)
+the external auditors' engagement
+letter and general scope of their
+audit work, including planning and
+staffing of the audit;
+the Company's management
+discussion and analysis disclosures
+in the annual report of the Company;
+and
+the
+applicable accounting
+standards relating to the audit of the
+Company's financial statements,
+including any recent changes;
+CNOOC LIMITED Annual Report 2023
+57
+CORPORATE GOVERNANCE REPORT
+On behalf of the Board, conducted
+a review of the effectiveness of the
+Company's risk management, internal
+control and compliance management
+systems for the year ended 31 December
+2023. The annual review included works
+such as:
+The Audit Committee held formal
+meetings with the external auditors and
+senior management of the Company at
+least twice a year to discuss the matters
+including:
+(i)
+review of reports submitted by
+and discussions with the RMICC
+Committee and other senior
+management concerned regarding
+major risks identified, changes in
+the nature and extent of major
+risks since the last annual review,
+measures and response plans to
+manage risks identified, and the
+ability of the Company to respond
+to such changes in its business
+operation, etc;
+review on whether the management
+has established effective risk
+management, internal control and
+compliance management systems
+pursuant to the Listing Rules of
+Stock Exchange as well as under
+relevant requirements and to
+evaluate the scope and quality of
+the management's works on the
+risk management system, internal
+control system and internal audit;
+review the adequacy of resources,
+staff qualifications and experience
+of the Company's accounting,
+financial reporting functions and
+internal audit functions as well as
+whether the trainings received by
+the employees and the relevant
+budget are sufficient to ensure that
+the management had performed its
+duty;
+(iv) review of the effectiveness of
+the internal audit function of the
+Company to ensure coordination
+within the Company and its
+subsidiaries and between the
+Company's internal and external
+auditors and to ensure that the
+internal audit function is adequately
+resourced and has appropriate
+standing within the Company;
+(v)
+(vi)
+consider the major investigation
+findings on risk management,
+internal control and compliance
+management systems and
+management's response to these
+findings; and
+make recommendations to the
+Board and the senior management
+on the scope and quality of
+management's ongoing monitoring
+of risks and issues relevant to
+internal control.
+On the basis of the aforesaid review,
+the Audit Committee was not aware of
+any significant issues that would have
+an adverse impact on the effectiveness
+and adequacy of the risk management,
+internal control and compliance
+management systems of the Company.
+Reviewed the work performed by
+the Company's external auditors. In
+2023, in accordance with relevant
+regulations such as the Measures
+for Administration of Selection
+and Engagement of Accounting
+Firms by State-Owned Enterprises
+and Listed Companies and the
+Audit Committee Charter of the
+Company, the Audit Committee of
+the Company performed its duties
+of supervising the external auditors
+as stated below:
+(i)
+(ii)
+Reviewed the Company's audited
+accounts, annual results announcements,
+unaudited interim accounts and interim
+results announcements, and quarterly
+reports, before they were tabled to the
+Board for approval, and discussed with
+senior management and the external
+auditors over such accounts;
+In 2023, the Audit Committee convened five
+meetings, and one of which were conducted
+by way of written resolutions and four of which
+were in form of physical meeting. The following
+is a summary of the work performed by the
+Audit Committee under its charter in 2023:
+Audit Committee's performance of duties
+during the year
+CORPORATE GOVERNANCE REPORT
+With respect to internal control, the Company
+has established an internal control system
+and mechanism for financial, operational and
+compliance monitoring in accordance with the
+provisions of the Basic Standard for Enterprise
+Internal Control and the supporting guidelines
+jointly formulated by five ministries, including
+Ministry of Finance of the PRC and the internal
+control framework formulated by the COSO,
+and has conducted continuing review and
+evaluation of the internal control system of
+the Company, in order to ensure safety and
+compliance of such system and mechanism
+and the timeliness, accuracy and completeness
+of all information reported.
+The Company has established procedures
+for identifying, handling and disseminating
+inside information pursuant to the Securities
+and Futures Ordinance (Chapter 571 of the
+Laws of Hong Kong), the Securities Law of
+the People's Republic of China, the Listing
+Rules of SSE and other laws, regulations and
+regulatory documents, including the inside
+information disclosure policy, pre-approved
+management procedure on Directors and
+senior management in dealing in Company's
+securities, notification of regular blackout
+period and securities dealing restrictions to
+Directors and employees, identification of
+projects by code name and disclosure of
+project information to relevant personnel on
+the need-to-know basis as a precondition
+to guard against possible mishandling of
+inside information within the Company and its
+subsidiaries.
+Whistleblowing policy and system have been
+established for employees and those who deal
+with the Company to raise concerns about
+possible improprieties in any matter relating
+to the Company.
+The Company has maintained an open
+channel to handle and discuss internal reports
+concerning finance, internal control and fraud
+to ensure that all reports will receive sufficient
+attention and any significant internal control
+weakness or reports will directly reach to the
+Chairman of the Audit Committee.
+The Company has established a mechanism
+for remediating internal control deficiency
+under which the management of each level
+are assigned with clear responsibilities relating
+to remediating internal control deficiency in
+accordance with their respective levels. Those
+responsibilities are also included in the internal
+performance indicators of the Company.
+The Company has formulated the Compliance
+Manual for Entities and Employees, the Policy
+for Compliance Management and other
+policies, which stipulates basic compliance
+requirements in anti-corruption, anti-fraud,
+anti-money laundering, anti-monopoly and
+other aspects. The Company has established
+a unified domestic and overseas compliance
+complaint channel (https://www.cnoocltd.
+com/complaint), which provides the complaint
+channels for employees and those who deal
+with the Company (e.g. customers and
+suppliers) to raise concerns, in confidence, with
+the Company about possible improprieties.
+During the reporting period, the Company's
+internal audit function provided independent
+assurance as to the adequacy and effectiveness
+of the Company's risk management and
+internal control systems. The financial condition
+and operational control of the Company
+were examined by the internal audit function
+according to the audit plan approved by the
+Audit Committee. Different audit areas were
+assigned according to risk priority. The internal
+audit function assisted the Board to monitor
+the effectiveness of the risk management and
+internal control systems. After completion
+of an internal audit, analysis, appraisals,
+recommendations related to the activities
+inspected were formulated. The internal audit
+function reported to the Audit Committee and
+the Board about internal audit findings, internal
+audit recommendation and the management
+responses. In addition, the internal audit
+function maintained a regular dialogue with
+the Company's external auditors so that both
+are aware of the significant factors which may
+affect their respective scope of work.
+CNOOC LIMITED Annual Report 2023
+55
+CORPORATE GOVERNANCE REPORT
+Reports from external auditors on internal
+control and relevant financial reporting matters
+were presented to and reviewed by the Audit
+Committee.
+The management reported the above works
+to the Audit Committee for the purpose of
+assisting the Audit Committee to review the
+effectiveness of the risk management and
+internal control systems.
+The management evaluated the design and
+operating effectiveness of the Company's
+risk management (including the ESG risks)
+system and the Company's internal control
+over financial reporting for 2023 and did not
+discover any material weakness from the
+evaluation. As a result, the Board considered
+that as of 31 December 2023, the Company's
+risk management system and the Company's
+internal control over financial reporting were
+effective and adequate.
+D.3 Audit Committee
+Principle: "The board should establish formal
+and transparent arrangements to consider how
+it will apply financial reporting, risk management
+and internal control principles and maintain an
+appropriate relationship with the issuer's auditors.
+The audit committee established under the Listing
+Rules of Stock Exchange should have clear terms
+of reference."
+•
+As at 31 December 2023, the Audit Committee
+consists of two Independent Non-executive
+Directors (Ms. Li Shuk Yin Edwina and Mr. Chiu
+Sung Hong) and a Non-executive Director (Ms.
+Wen Dongfen), with Ms. Li Shuk Yin Edwina as
+the Audit Committee financial expert pursuant
+to relevant laws, regulations and regulatory
+documents and the Chairman of the Audit
+Committee. A list of members of the Audit
+Committee is set out under the section headed
+"Company Information" on page 172 of this
+annual report.
+The Audit Committee meets at least twice
+a year and is responsible for reviewing the
+completeness, accuracy and fairness of
+the Company's accounts, evaluating the
+Company's auditing scope (both internal
+and external) and procedures as well as
+the effectiveness of the Company's risk
+management and internal control systems.
+The Audit Committee, together with senior
+management and the external auditors,
+review the accounting principles and practices
+adopted by the Company and its subsidiaries
+and discuss the risk management and internal
+control and financial reporting matters. The
+Board also assesses the effectiveness of risk
+management and internal control systems
+based on the reviews by the RMICC Committee,
+senior management, internal audit function and
+external auditors.
+The Audit Committee is also responsible for
+overseeing the operation of the internal control
+system so as to ensure that the Board is able
+to monitor the Company's overall financial
+position, to protect the Company's assets,
+and to prevent major errors or omissions in
+financial reporting. The Audit Committee also
+meets at least twice a year with our external
+auditors.
+56
+CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+The Audit Committee is responsible for
+overseeing and monitoring the risk management,
+internal control and compliance management
+systems of the Company on an ongoing basis
+and reviewing with our external auditors and
+management periodically, not less than annually,
+the scope, adequacy and effectiveness of the
+Company's corporate accounting and financial
+controls, risk management, internal control and
+compliance management systems, and any
+related significant findings regarding risks or
+exposures and consider recommendations
+for improvement of such controls. The review
+should cover all material aspects, including
+strategic, financial, operational and compliance
+controls. In conducting annual review, the
+Audit Committee in particular, considers the
+factors including (a) the changes, since the
+last annual review, in the nature and extent
+of significant risks, and the Company's ability
+to respond to changes in its business and
+the external environment; (b) the scope and
+quality of management's ongoing monitoring
+of risk management, internal control and
+compliance management systems, and
+where applicable, the work of its internal audit
+function and other assurance providers; (c)
+the extent and frequency of communication of
+monitoring results to the Board and the Audit
+Committee which enables them to assess the
+effectiveness of the risk management, internal
+control and compliance management systems
+of the Company; (d) significant control failings
+or weaknesses that have been identified
+during the period. Also, the extent to which
+they have resulted in unforeseen outcomes or
+contingencies that have had, could have had,
+or may in the future have, a material impact
+on the Company's financial performance or
+condition; and (e) the effectiveness of the
+Company's financial reporting practice and the
+compliance with the procedures as prescribed
+under the Listing Rule of Stock Exchange and
+Listing Rules of SSE.
+The Audit Committee is also responsible
+for reviewing the Company's internal audit
+function, ensuring co-ordination within the
+Company and its subsidiaries and between
+the Company's internal and external auditors,
+and ensuring that the internal audit function
+is adequately resourced and has appropriate
+standing within the Company and to review
+and monitor its effectiveness.
+54
+1
+Reviewed and approved
+the Company's audit and
+non-audit pre-approval
+policy to ensure auditors'
+independence;
+TOOTOO O
+Wen Dongfen
+Independent Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau (Note 1)
+Tse Hau Yin, Aloysius (Note 1)
+Qiu Zhi Zhong
+Lin Boqiang
+Li Shuk Yin Edwina (Note 3)
+666
+9
+9
+Xu Keqiang (Note 2)
+9
+0
+Note 1: Ceased to hold office during the reporting period. Please
+see "Changes in Directors" on page 66.
+Note 2: Ceased to hold office in February 2024. Please see
+"Changes in Directors" on page 66.
+Note 3: Appointed as a Director the reporting period. Please see
+"Changes in Directors" on page 66.
+No
+은은 은은
+No
+No
+2 2 2 2 2
+0
+0
+933966
+Li Yong (Note 1)
+Wang Dongjin (Chairman)
+Non-executive Directors
+Executive Directors
+Zhou Xinhuai (CEO and President)
+Xia Qinglong (Note 1)
+Number of
+attendance
+in person for
+during the
+year
+two consecutive
+meetings or not
+Absence
+By director
+By proxy
+9
+4
+58 CNOOC LIMITED Annual Report 2023
+The Company's senior management regularly
+provides the Board and its Committees with
+adequate information to enable them to make
+informed decisions. Senior management also
+organises presentations to the Board conducted
+by professional advisers on specific transactions as
+appropriate.
+은은
+No
+No
+0
+O O
+0
+9
+0
+4
+0
+o o o o
+9
+9
+0
+122-122
+1
+0
+Note 1: Mr. Wang Dongjin appointed Mr. Li Yong to act as his
+proxy to host and attend the meeting of the Strategy and
+Sustainability Committee held on 28 March 2023 and to
+vote on his behalf.
+Note 2: Ceased to hold office during the reporting period. Please
+see "Changes in Directors" on page 66.
+Note 3: Ceased to hold office in February 2024. Please see
+"Changes in Directors" on page 66.
+Note 4: Mr. Zhou Xinhuai appointed Mr. Xu Keqiang to act as
+his proxy to attend the meeting of the Strategy and
+Sustainability Committee held on 23 October 2023 and
+to vote on his behalf.
+C.5 Conduct of board proceedings and supply of
+and access to information
+Principle: "The issuer should ensure directors can
+participate in board proceedings in a meaningful
+and effective manner. Directors should be provided
+in a timely manner with appropriate information in
+the form and quality to enable them to make an
+informed decision and perform their duties and
+responsibilities".
+666
+The Board and Committee members of the
+Company are dedicated, professional and
+accountable.
+The Company holds Board meetings at least
+four times a year at approximately quarterly
+intervals. Members of the Board have also
+actively participated in the discussions on
+the business and operation of the Company,
+either in person or through other electronic
+means of communication such as emails, when
+necessary.
+There exists an open atmosphere for Directors
+to contribute alternative views. All decisions
+of the Board are made on the principles of
+trust and fairness in an open and transparent
+manner, so as to protect the interests of all
+shareholders.
+The Board has regularly reviewed the
+contribution required from a Director to
+perform his responsibilities to the Company,
+and whether he is spending sufficient time
+performing them in accordance with the CG
+Code.
+In 2023, the Board convened nine meetings in
+total, and five of which were conducted by way
+of written resolutions and four of which were in
+form of a combination of physical meeting and video
+teleconferencing. The Directors were present either
+in person or via video or teleconferencing. All relevant
+resolutions were adopted upon consideration.
+50 CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+Attendance of individual Directors at full Board meetings held in 2023:
+Board Meetings
+The Nomination Committee of the Company
+has the responsibility to make recommendation
+for suitable candidates for the appointment
+of Company Secretary to the Board and the
+Board has the responsibility to approve their
+selection, appointment or dismissal by physical
+meeting of the Board. Mr. Xu Yugao and Ms.
+Tsue Sik Yu, May are the Joint Company
+Secretaries of the Company. Mr. Xu Yugao
+obtained the "Certificate of Pre-appointment
+Training for Board Secretary" issued by the
+SSE in April 2023 and has formally assumed
+his office since 28 April 2023. Their biographies
+are set out on page 76 of this annual report.
+Minutes of the meetings of the Board and Committees
+recorded sufficient details of the matters considered
+by the Board and Committees and decisions reached,
+including any concerns raised by Directors or
+dissenting views expressed. Draft and final versions
+of the minutes of the Board meeting and Committee
+meetings are sent to all Directors and all Committee
+members respectively within a reasonable time after
+the Board meetings and Committee meetings for
+their comments and records.
+For regular Board meetings and Committee meetings,
+the agenda and accompanying Board documents
+are sent in full to all Directors at least three days
+before the intended date of the Board meetings or
+Committee meetings.
+The Company has arranged appropriate insurance
+cover in respect of legal action against its Directors.
+During the reporting period, none of the Directors
+raised any objection to matters reviewed by the
+Board.
+C.6 Company Secretary
+Principle: "The company secretary plays an important
+role in supporting the board by ensuring good
+information flow within the board and that board
+policy and procedures are followed. The company
+secretary is responsible for advising the board
+through the chairman and/or the chief executive
+on governance matters and should also facilitate
+induction and professional development of directors."
+CORPORATE GOVERNANCE REPORT
+D.
+CNOOC LIMITED Annual Report 2023
+No
+No
+No
+0
+No
+0
+0
+0
+No
+No
+93306
+ooo oo
+9
+0
+9
+0
+6
+0
+oooo
+0
+0
+O O O O O O
+0
+The Joint Company Secretaries consulted the
+Directors on matters to be included in the agenda
+for regular Board meetings.
+Dates of regular Board meetings have been scheduled
+at least two months before the meeting to provide
+sufficient notice to all Directors so that they can
+have an opportunity to attend. For non-regular Board
+meetings, reasonable advance notices have been
+given.
+51
+Minutes of the meetings of the Board and Committees
+are kept by the Joint Company Secretaries and
+open for inspection at any reasonable time upon
+reasonable request by any Director.
+Reviewed and approved or recommended
+the remuneration packages of the
+newly appointed Directors and senior
+management;
+senior
+Reviewed and approved the remuneration
+packages of the Company's individual
+Executive Directors and
+management of the Company;
+CORPORATE GOVERNANCE REPORT
+The remuneration of Non-executive Directors
+and Independent Non-executive Directors
+recommended by the Remuneration Committee
+is determined by the Board.
+Please refer to pages 130 to 132 of this annual
+report for details of changes in remuneration of the
+incumbent Directors, Directors who ceased to hold
+office during the reporting period and the senior
+management.
+The Company seeks to apply similar principles
+when determining the remuneration packages for
+senior management with reference to the Board's
+corporate goals and objectives. Other general staff
+and employees are rewarded on a performance-rated
+basis with other fringe benefits such as employment
+injury insurance, pension funds, medical insurance
+and other social insurance.
+The Remuneration Committee consults the
+Chairman and CEO about its proposal relating
+to the remuneration of other Executive Directors
+and have access to independent professional
+advice if necessary.
+In 2023, the Remuneration Committee convened
+five meetings, and two of which was conducted
+by way of written resolutions and three of which
+were in form of physical meeting. The following
+is a summary of the work performed by the
+Remuneration Committee under its charter
+during the year:
+CNOOC LIMITED Annual Report 2023
+CNOOC LIMITED Annual Report 2023
+Made recommendations to the Board
+on the Company's policy and structure
+for Directors and senior management
+remuneration and on the establishment
+of a formal and transparent procedure
+for developing remuneration policy;
+Chiu Sung Hong
+Lawrence J. Lau (Note 2)
+Wen Dongfen
+No. of meetings attended
+(Five meetings in total)
+by committee
+member by proxy
+3
+0
+2525
+0
+O O O O
+0
+61
+Note 1: Appointed as the Chairman of the Audit Committee during
+the reporting period. Please see "Changes in Directors"
+on page 66.
+E. REMUNERATION
+E.1 The level and make-up of remuneration
+and disclosure
+Principle: "An issuer should have a formal and
+transparent policy on directors' remuneration and
+other remuneration related matters. The procedure
+for setting policy on executive directors' remuneration
+and all directors' remuneration packages should be
+formal and transparent. Remuneration levels should
+be sufficient to attract and retain directors to run
+the company successfully without paying more than
+necessary. No director should be involved in deciding
+his own remuneration."
+As at 31 December 2023, The Remuneration
+Committee comprises two Independent Non-
+executive Directors (Mr. Chiu Sung Hong
+and Ms. Li Shuk Yin Edwina), with Mr. Chiu
+Sung Hong serving as the Chairman of the
+Remuneration Committee. The Remuneration
+Committee is delegated with the authority of
+determining and approving salaries, bonuses,
+share option packages, performance appraisal
+systems and retirement plans for all Executive
+Directors and senior management. A list of
+members of the Remuneration Committee is
+set out in "Company Information" on page 172
+of this annual report.
+CORPORATE GOVERNANCE REPORT
+The major responsibilities and authorities
+of the Remuneration Committee include
+making recommendations to the Board
+on the Company's policy and structure of
+the remuneration of Directors and senior
+management of the Company and on the
+establishment of a formal and transparent
+procedure for developing remuneration policy,
+determining and reviewing the service contracts
+and specific remuneration packages for all
+Executive Directors and senior management
+under the Board's authorization, such as benefits
+in kind, pension rights and compensation
+payments, including any compensation
+payable for loss or termination of their office
+or appointment, reviewing and approving
+the compensation arrangements relating to
+dismissal or removal of Directors for misconduct
+to ensure consistency with contractual terms,
+and making recommendations to the Board on
+the remuneration of Non-executive Directors
+and Independent Non-executive Directors.
+The Remuneration Committee also makes
+recommendations to the Board regarding
+whether proposed share schemes and any
+other equity-based compensation plans should
+be approved by the Board and submitted to the
+Company's shareholders for their approval and
+regarding the grant of any options or other equity-
+based compensation under such schemes or
+plans. The Remuneration Committee shall also
+administer the Company's share scheme and
+all other equity-based compensation plans, with
+full authority to make all other determinations in
+the administration thereof, but subject to the
+limitations prescribed by laws and the rules in
+such plans and programmes.
+The Company's emolument policy is to maintain
+fair and competitive packages with reference
+to industry standards and prevailing market
+conditions. The Remuneration Committee is
+mindful that levels of remuneration must be
+sufficient to attract and retain the Directors
+and senior management in order to run the
+Company successfully, but at the same
+time, the Company should avoid setting
+remunerations which are in excess of those
+necessary for this purpose. The Directors'
+emolument package may comprise the
+Director's fees, basic salaries and allowances,
+bonuses, share options and others. The
+remuneration of Independent Non-executive
+Directors only includes cash, and the Company
+does not grant equity-based remuneration with
+performance-related elements to Independent
+Non-executive Directors to avoid bias in
+their decision-making and compromise their
+objectivity and independence. The following
+factors are considered in determining the
+Directors' remuneration package:
+Business needs, company goals and
+objectives;
+Responsibilities of the Directors and their
+individual contribution; and
+Changes in relevant markets, for example,
+supply/demand fluctuations and changes
+in competitive conditions.
+Details of the remuneration of Directors for the year
+ended 31 December 2023, are set out on pages
+130 to 132 of this annual report.
+No individual Director or senior management of the
+Company is permitted to determine his/her own
+remuneration.
+Note 2: Ceased to hold office during the reporting period. Please
+see "Changes in Directors" on page 66.
+Assessed performance of Executive
+Directors and reviewed the service
+agreement templates for Executive
+Directors, Non-executive Directors and
+Independent Non-executive Directors (as
+applicable);
+The Company will, upon receipt of a request referred to
+above, issue a notice of extraordinary general meeting
+of the proposed resolutions and (if applicable) circulars/
+documents for the general meeting containing further
+information relating to the proposed resolutions in
+accordance with the Listing Rules of Stock Exchange
+and the Listing Rules of SSE.
+Evaluated and assessed the effectiveness
+of the Remuneration Committee and
+the adequacy of the charter of the
+Remuneration Committee, and considered
+and proposed the amendments to the
+charter and presented to the Board for
+approval.
+In 2023, the Company held its general meetings
+via video and on-site conference, and gave
+sufficient notices to shareholders in advance of
+the meetings. All votes of shareholders at the
+general meetings of the Company were taken
+by poll in accordance with the Listing Rules of
+Stock Exchange and the Listing Rules of SSE.
+The Chairmen of the meetings ensured that
+shareholders were familiar with the procedures
+of voting by poll at the general meetings of the
+Company.
+The results of the poll are published on the
+HKSE's website, the SSE's website and the
+Company's website.
+SHAREHOLDERS' COMMUNICATION
+AND RIGHTS TO CONVENE AN
+EXTRAORDINARY GENERAL MEETING
+an
+The procedures for shareholders to convene
+extraordinary general meeting of the Company ("EGM") are
+governed by Articles 60 to 64 of the Articles and sections
+566 to 568 of the Companies Ordinance (Cap. 622 of
+the Laws of Hong Kong). On the request of shareholders
+of the Company, representing at least 5% of the total
+voting rights of all shareholders having a right to vote
+at general meetings, the Directors are required to call a
+general meeting.
+The request must state the general nature of the business
+to be dealt with at the EGM and may include the text of a
+resolution that may properly be moved and is intended to be
+moved at the EGM, be authenticated by the shareholder(s)
+making the request, and sent to the Company in hard
+copy form or in electronic form. The Directors must call an
+EGM within 21 days after the date on which they become
+subject to the requirement and such EGM must be held
+on a date not more than 28 days after the date of the
+notice convening the meeting is given.
+Whilst giving the above request, shareholders are
+recommended to provide written explanation of the
+reasons and material implications relating to the proposed
+resolutions to enable all of the shareholders to properly
+consider and determine the proposed resolutions.
+(Note 2)
+Further enquiries relating to the above or enquiries that
+shareholders wish to be put to the Board may be addressed
+to the Joint Company Secretaries of the Company at 65/F,
+Bank of China Tower, 1 Garden Road, Hong Kong.
+PROCEDURES FOR PUTTING FORWARD
+PROPOSALS AT GENERAL MEETINGS BY
+SHAREHOLDERS
+Shareholders are requested to follow sections 615 and
+616 of the Companies Ordinance (Cap. 622 of the Laws
+of Hong Kong) if they wish to request the Company to give
+to other shareholders, who are entitled to receive notice
+of the annual general meeting, notice of a resolution that
+may properly be moved and is intended to be moved at
+the annual general meeting.
+Shareholders are requested to follow sections 580 to
+583 of the Companies Ordinance (Cap. 622 of the Laws
+of Hong Kong) if they wish to request the Company to
+circulate to other shareholders, who are entitled to receive
+notice of a general meeting, a statement with respect to
+a matter mentioned in a proposed resolution or other
+business to be dealt with at the general meeting.
+64
+CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+SUMMARY OF GENERAL MEETINGS
+Sessions and
+No. of Meeting
+Date
+Annual General Meeting
+31 May 2023
+Designated websites on
+which poll results were
+published
+The HKSE's website
+(http://www.hkexnews.hk)
+The SSE's website
+(http://www.sse.com.cn)
+The Company's website
+(https://www.cnoocltd.com/
+Annual Performance of Duties by Independent
+Non-executive Directors
+In 2023, the Independent Non-executive Directors, on
+the basis of objectivity, fairness and independence, paid
+attention to the production and operation, business
+development and corporate governance of the Company,
+attended the general meetings, Board meetings and the
+committees meetings of the Company, actively performed
+their duties and make significant contributions to protect
+the interests of shareholders, regulate the operation of
+and enhance the value of the Company.
+As of the date of this annual report, the independence of
+the Independent Non-executive Directors complies with
+the requirements of applicable regulatory rules and there
+are no circumstances which affect such independence.
+In 2023, the Company convened a total of one general
+meeting, reviewing a total of 11 proposals; the Board
+convened a total of 9 meetings, reviewing a total of 48
+proposals; and the committees of the Board convened a
+total of 17 meetings, reviewing a total of 38 proposals.
+Please refer to "C.1 Responsibilities of Directors", "C.4
+Board committees and performance of duties during the
+year" and "C.5 Conduct of board proceedings and supply
+of and access to information" for information regarding the
+participation of the Independent Non-executive Directors
+in the general meetings, Board meetings and committees
+meetings as well as the summaries of the works performed
+by the Board committees.
+Disclosure
+date of poll
+results
+31 May 2023
+Principle: "The issuer should ensure that shareholders
+are given sufficient notice of shareholders meetings
+and are familiar with the detailed procedures for
+conducting a poll, and should arrange to address
+questions from shareholders in the shareholders
+meetings."
+Made recommendations to the Board
+on the remuneration of the Company's
+Non-executive Directors; and
+F.2 Shareholders meetings
+63
+Attendance of individual members at Remuneration
+Committee meetings in 2023
+Directors
+Chiu Sung Hong (Chairman)
+Li Shuk Yin Edwina (Note 1)
+Tse Hau Yin, Aloysius
+(Note 2)
+Li Yong (Note 2)
+No. of meetings attended
+(Five meetings in total)
+by committee
+member by proxy
+52
+35
+0
+0
+0
+0
+Note 1: Appointed as a member of the Remuneration Committee
+during the reporting period. Please see "Changes in
+Directors" on page 66.
+Note 2: Ceased to hold office during the reporting period. Please
+see "Changes in Directors" on page 66.
+62
+CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+F.
+SHAREHOLDERS ENGAGEMENT
+F.1 Effective communication
+Principle: "The board should be responsible for
+maintaining an on-going dialogue with shareholders
+and in particular, use annual general meetings or
+other general meetings to communicate with them
+and encourage their participation."
+The Board recognises the importance of
+good and effective communication with all
+shareholders. With a policy of being transparent,
+strengthening investor relations and providing
+consistent and stable returns to shareholders,
+the Company has formulated a shareholders'
+communication policy and also seeks to
+ensure transparency through establishing and
+maintaining different communication channels
+with shareholders.
+The Company has a professionally-run
+investor relations department to serve as an
+important communication channel between
+the Company and its shareholders and other
+investors. The Company has set up dedicated
+telephone number and E-mail address, the
+details of which are contained in the section
+titled "corporate information" in this annual
+report, to enable active responses to the
+shareholders and investors' inquiries through
+a variety of ways, and to timely feedback to
+the management of reasonable suggestions.
+The shareholders can also directly put forward
+their opinions and suggestions to the directors
+and the management of the Company at the
+general meetings, results briefings and the
+performance release conferences.
+A key element of effective communication
+with shareholders and investors is prompt and
+timely dissemination of information in relation
+to the Company. In addition to announcing its
+interim, annual and other periodic results to
+shareholders and investors, the Company also
+publicises its major business developments
+and activities through press releases,
+announcements and the Company's website
+on the basis of compliance with relevant laws,
+regulations and regulatory documents. Press
+conferences and analyst briefings are held from
+time to time on financial performance and major
+transactions.
+The general meetings also provide a useful
+forum for shareholders to exchange views
+with the Board. The Chairman of the Board,
+as well as Chairmen of the Audit Committee,
+Nomination Committee and Remuneration
+Committee, or in their absence, members of
+the respective Committees, are available to
+answer questions from shareholders at annual
+general meetings and extraordinary general
+meetings of the Company.
+The Chairman of each of the Board and all
+Committees, or in his absence, an alternate
+appointed by him will, whenever possible,
+propose separate resolutions for each
+substantially separate issue at general meetings
+of the Company.
+The Company's management ensures the
+external auditors attend the annual general
+meeting to answer questions about the conduct
+of the audit, the preparation and content of the
+auditors' report, the accounting policies and
+auditors' independence.
+The Company reviews its shareholders'
+communication policy on an annual basis
+to ensure its effectiveness. After the review
+of the implementation and effectiveness of
+the shareholders' communication policy, the
+Company is of the view that the policy is
+effective in providing channels for shareholders
+to communicate their views on various matters
+affecting the Company and for the Company
+to solicit and understand the views of the
+shareholders.
+CNOOC LIMITED Annual Report 2023
+CORPORATE GOVERNANCE REPORT
+Tse Hau Yin, Aloysius
+60
+Li Shuk Yin Edwina
+(Chairman and Financial
+The aggregate fees billed for assurance and related
+services by the Auditors that are reasonably related to
+the performance of the audit or review of the Company's
+financial statements and are not reported under "Audit
+Fees❞ were nil for the financial years ended 31 December
+2022 and 31 December 2023.
+Audit-related Fees
+The aggregate fees billed for professional services rendered
+by the Auditors for the audit of the Company's annual
+financial statements or services that are normally provided
+by the Auditors in connection with statutory and regulatory
+filings or engagements were RMB61.51 million for the
+financial year ended 31 December 2022 and RMB69.71
+million for the financial year ended 31 December 2023.
+Audit Fees
+CORPORATE GOVERNANCE REPORT
+CNOOC LIMITED Annual Report 2023
+66
+Tax Fees
+Services provided by the auditors, i.e. Ernst & Young and
+Ernst & Young Hua Ming LLP, and fees charged by the
+Auditors for the services for the financial years of 2022
+and 2023 are as follows:
+The Company has adopted the abovementioned Code of
+Ethics which has incorporated the provisions for Securities
+Transactions by Directors of Listed Issuers (the "Model
+Code") as set out in Appendix C3 to the Listing Rules
+of Stock Exchange, the Securities Law of the People's
+Republic of China and the Listing Rules of SSE. All Directors
+have confirmed that they complied, during the year ended
+31 December 2023, with the required standards set out
+in the Company's Code of Ethics.
+PROVISIONS FOR SECURITIES
+TRANSACTIONS BY DIRECTORS
+The Company has provided all its Directors and senior
+officers with a copy of the Code of Ethics and requires
+them to comply with the Code of Ethics, so as to ensure
+the Company's operation is proper and lawful. The
+Company will take disciplinary actions towards any act
+which is in breach of the Code of Ethics. All the senior
+management members and Directors are required to
+familiarise themselves with and follow the Code of Ethics
+to ensure that the Company's operations are honest and
+legal. Violations of the rules will be penalised and serious
+breaches will result in dismissal.
+The Board adopted a Code of Ethics in 2003 to provide
+guidelines to the senior management and Directors in legal
+and ethical matters as well as the sensitivity involved in
+reporting illegal and unethical matters. The Code of Ethics
+covers areas such as supervisory rules, insider dealing,
+market malpractices, conflict of interests, company
+opportunities, protection and proper use of the Company's
+assets as well as reporting requirements. As part of its
+continued efforts to improve its corporate governance
+standards, the Board conducted an annual review to the
+Code of Ethics since 2009, and the current version of the
+Code of Ethics was reviewed and adopted in August 2023.
+CODE OF ETHICS
+Pursuant to Rule 13.51 (B) of the Listing Rules of Stock
+Exchange, there is no other change in the information
+of Directors of the Company except as disclosed in this
+annual report.
+CHANGES IN INFORMATION OF
+DIRECTORS
+SERVICES AND REMUNERATION OF
+AUDITORS
+With effect from 23 February 2024, Mr. Xu Keqiang
+resigned as a Non-executive Director and a member of the
+Strategy and Sustainability Committee of the Company.
+The aggregate fees billed for professional service rendered
+by the Auditors for tax compliance, tax advice and tax
+planning were RMB9.31 million for the financial year ended
+31 December 2022 and RMB10.33 million for the financial
+year ended 31 December 2023.
+There are no other fees payable to the Auditors for
+products and/or services provided by the Auditors, other
+than the services reported above, for the financial year
+ended 31 December 2022 and for the financial year ended
+31 December 2023.
+Expert) (Note 1)
+4. Lin Boqiang
+7. Li Shuk Yin Edwina
+3. Wen Dongfen
+6. Qiu Zhi Zhong
+2. Zhou Xinhuai
+5. Chiu Sung Hong
+The aggregate fees billed for professional service rendered
+by the Auditors for risk management advisory services and
+information systems reviews were RMB2.98 million for the
+financial year ended 31 December 2022 and RMB3.48
+million for the financial year ended 31 December 2023.
+1. Wang Dongjin
+7651234
+DIRECTORS AND SENIOR MANAGEMENT
+67
+CNOOC LIMITED Annual Report 2023
+In accordance with relevant regulatory requirements and
+the Articles of Association, the Company has improved its
+dividend distribution policy based on its actual conditions.
+On 26 October 2021, the Company held an extraordinary
+general meeting to review and adopt the Profits Distribution
+Policy and Company's Shareholders' Dividend Return Plan
+for the Three Years after the Initial Public Offering and
+Listing of Renminbi Ordinary Shares (RMB Shares) on
+the Main Board of Shanghai Stock Exchange. To ensure
+shareholders' return, subject to the approval by the general
+meeting on the proposed dividends for each year, from
+2022 to 2024, the expected annual payout ratio of the
+Company will be no less than 40%. From 2022 to 2024,
+the annual absolute dividend is expected to be no less than
+HK$0.70/share (tax inclusive) regardless of the operational
+results of the Company. During the reporting period, the
+Company strictly complies with the profit distribution
+policy. The Independent Non-executive Directors of the
+Company have performed their duties conscientiously and
+diligently, reviewed the dividend distribution matters and
+played their due roles.
+The Company has always attached importance to
+shareholder returns and paid dividends twice a year.
+The payment of any future dividends will be subject to
+requirements of applicable laws and the Articles and
+shareholders' approval or decided by the Board as
+authorized by the shareholders. In the long run, decisions
+on payment of dividends are based upon, among other
+things, our future earnings, capital requirements, financial
+conditions, future prospects and other factors which our
+Board may consider relevant. Our ability to pay dividends
+will also depend on the cash flows determined by the
+dividends, if any, received by us from our subsidiaries,
+associates and joint ventures. Holders of our shares
+will be entitled to receive such dividends declared by
+the Company through appropriate procedures pro rata
+according to the amounts paid up or credited as paid up
+on the shares.
+DISTRIBUTION POLICY
+68 CNOOC LIMITED Annual Report 2023
+Mr. Lawrence J. Lau and Mr. Tse Hau Yin, Aloysius retired
+by rotation at the 2022 annual general meeting of the
+Company in accordance with the articles of association of
+the Company and did not offer themselves for re-election.
+Accordingly, Mr. Lawrence J. Lau retired as an Independent
+Non-executive Director and a member of each of the Audit
+Committee, the Nomination Committee and the Strategy
+and Sustainability Committee of the Company, and Mr.
+Tse Hau Yin, Aloysius retired as an Independent Non-
+executive Director, the chairman of the Audit Committee
+and a member of the Remuneration Committee of the
+Company, in each case with effect from the conclusion
+of the annual general meeting of the Company held on
+31 May 2023. Ms. Li Shuk Yin Edwina was appointed as
+an Independent Non-executive Director, the chairman of
+the Audit Committee and a member of the Remuneration
+Committee of the Company and Mr. Lin Boqiang, an
+Independent Non-executive Director of the Company, was
+appointed as a member of the Nomination Committee
+of the Company, in each case with effect from 31 May
+2023. With effect from 30 June 2023, Mr. Xia Qinglong
+resigned as an Executive Director and the President of the
+Company, and Mr. Zhou Xinhuai, an Executive Director and
+the Chief Executive Officer of the Company, also acted as
+the President of the Company on the same day. With effect
+from 18 December 2023, Mr. Li Yong resigned as a Non-
+executive Director and the Vice Chairman of the Board,
+and a member of the Remuneration Committee and the
+Strategy and Sustainability Committee of the Company.
+All Other Fees
+CHANGES IN DIRECTORS
+Met with the Company's
+external auditors and senior
+management to discuss the
+planning and staffing of the
+audit before the annual audit
+commenced.
+Audit Committee conducted
+a strict review and assessment of
+the independence and objectivity,
+professional capabilities and business
+quality control capabilities, and is of
+the view that the external auditors
+demonstrated decent professional
+ethics, business quality, quality control
+standards and professional capabilities,
+and are able to maintain independence
+and objectivity in the audit procedures
+and express their views in a fair manner.
+Reviewed the arrangements by which
+employees of the Company can use, in
+confidence and anonymously, to raise
+concerns about possible improprieties
+in financial reporting, risk management
+and internal control or other matters
+and ensure that proper arrangements
+are in place for fair and independent
+investigation and for appropriate follow-
+up actions;
+Reported on its findings and suggestions
+to the Board following its review of
+different aspects of the Company's
+financial reporting and risk management
+and internal control systems and made
+appropriate recommendations where
+necessary;
+Reviewed the Company's business ethics
+and compliance policies and related
+reports as appropriate and performed
+certain corporate governance duties
+delegated by the Board set out in "A.2
+Corporate Governance Functions" of this
+annual report; and
+Full minutes of the Audit Committee meetings
+are kept by the Joint Company Secretaries.
+Draft and final versions of minutes of the Audit
+Committee meetings are sent to all members
+of the Audit Committee for their comments
+and records respectively, in both cases within
+a reasonable time after the meetings.
+Held separate and periodical
+meetings with the Company's
+external auditors, and had
+frequent contacts with the
+external auditors to discuss
+issues from time to time; and
+The Audit Committee is provided with sufficient
+resources, including independent access to
+and advice from external auditors.
+CNOOC LIMITED Annual Report 2023
+59
+CORPORATE GOVERNANCE REPORT
+Attendance of individual members at Audit Committee
+meetings in 2023
+During the year ended 31 December 2023, there were the
+following changes in Directors:
+Independent Non-
+executive Directors
+During the period, the Audit Committee
+standardised its operation, performed its duties
+according to law and exercised due diligence
+in accordance with the relevant regulatory
+rules, the Articles of Association and the Audit
+Committee Charter.
+Members of the
+Committee received materials
+from the Company's external
+auditors from time to time
+in order to keep abreast of
+changes in financial reporting
+principles and practices,
+as well as issues relating
+to financial reporting, risk.
+management and internal
+controls relevant to the
+Company;
+Evaluated and assessed the effectiveness
+of the Audit Committee and the adequacy
+of the charter of the Audit Committee,
+and considered and proposed the
+amendments to the charter and presented
+to the Board for approval.
+In 2023, the Independent Non-executive Directors of the
+Company devoted full time and energy in performing
+their duties in strict accordance with laws, regulations,
+regulatory rules and the provisions of the Articles of
+Association, participated in the decision-making of the
+Board and the special committees in good faith; diligently,
+independently and objectively and earnestly safeguarded
+the legal rights and interests of the Company and its
+shareholders, especially small and medium shareholders.
+Audit
+CNOOC LIMITED Annual Report 2023
+For the year ended 31 December 2023, the Company has
+complied with all provisions in the "Corporate Governance
+Code" as set out in Part II of former Appendix 14 to the
+Listing Rules of Stock Exchange.
+COMPLIANCE WITH THE CORPORATE
+GOVERNANCE CODE
+In the course of daily work, all Independent Non-executive
+Directors actively familiarized themselves with the conditions
+and latest regulations and policies of the Company by
+means of video/telephone conference, communication
+with the senior management, correspondence and on-site
+research, and provided professional advice or suggestions
+to the Board in terms of decision-making, corporate
+governance and business development of the Company.
+A total of 11 resolutions were proposed
+and duly passed at the meeting, and
+no resolutions were voted against. For
+details, please refer to the Company's
+announcement published on the HKSE's
+website, the SSE's website and the
+Company's website.
+CORPORATE GOVERNANCE REPORT
+Resolutions
+The
+(iii)
+(iv)
+(v)
+(vi)
+Reviewed the work performed
+by the Company's external
+auditors and their relationship
+with the Company's senior
+management, and made
+recommendations to the
+Board in relation to the re-
+appointment of the external
+auditors, as well as the
+proposed auditors' fees;
+Considered and approved the
+non-audit services provided
+by the external auditors
+during 2023;
+CORPORATE GOVERNANCE REPORT
+65
+Born in 1970, Mr. Yan Hongtao is a senior engineer and
+graduated from China University of Petroleum (Beijing) with
+a master's degree in petroleum storage and transportation.
+Mr. Yan has served as Deputy General Manager of the
+Company's Development and Production Department,
+Deputy Director of the CNOOC Eastern South China Sea
+Petroleum Administrative Bureau, Deputy General Manager
+of the CNOOC (China) Limited Shenzhen Branch, a
+subsidiary of the Company, and Deputy General Manager,
+General Manager, Deputy Safety Director and General
+Manager of Development and Production Department
+of the Company. Mr. Yan served as General Manager
+of CNOOC (China) Limited Tianjin Branch from January
+2022. Mr. Yan was appointed as a Vice President of the
+Company on April 2022.
+Born in 1964, Mr. Ke is a professor-level senior engineer.
+He graduated from Zhongnan University of Economics and
+Law, with a Master's degree. Mr. Ke successively served
+as Chief Engineer, Deputy General Manager of Oilfield
+Production Department of CNOOC Nanhai West Company
+Oil Production branch, Operation Manager of Production
+Department of CNOOC Nanhai West Company, Operation
+Manager of Production Department, Manager of Production
+Department, Deputy General Manager, Executive Deputy
+General Manager of CNOOC (China) Limited Zhanjiang
+Branch, Deputy Director, Executive Deputy Director of
+Nanhai West Petroleum Administration Bureau of CNOOC,
+Executive Vice General Manager of CNOOC Gas & Power
+Group Ltd. From March 2018 to December 2019, he
+served as Deputy Safety Officer & General Manager of
+Development and Production Department in CNOOC
+Ltd. From December 2019 to March 2021, he served as
+General Manager of CNOOC (China) Limited Shanghai
+Branch. Since March 2021, he has been the General
+Manager of CNOOC (China) Limited Zhanjiang Branch. Mr.
+Ke was appointed as a Vice President of the Company
+with effect from June 2021. From November 2023, Mr.
+Ke ceased to serve as Vice President and the General
+Manager of CNOOC (China) Limited Zhanjiang Branch.
+Yan Hongtao
+Yang Yun
+DIRECTORS AND SENIOR MANAGEMENT
+Xu Changgui
+Ke lvxiong
+76 CNOOC LIMITED Annual Report 2023
+Limited (COSL), the Policy Research Manager of the
+Development Research Office of CNOOC Group, CFO
+of CNOOC Oil Base Group Co., Ltd., Vice President and
+CFO of CNOOC Energy Technology & Services Limited.
+From August 2013 to May 2016, he served as General
+Manager of the Legal Department of CNOOC Group and
+the Company. From May 2016 to July 2018, he served as
+Director of the Policy Research Office of CNOOC Group.
+From July 2018 to June 2020, he served as President
+of CNOOC Group Institute for Executive Development.
+Since June 2020, he has been serving as the General
+Manager of International Cooperation Department and
+Director of Foreign Affairs Department of CNOOC Group
+and the Company. Since April 2021, he has been serving
+as the Deputy General Legal Officer of CNOOC. Since
+May 2021, he has been serving as the Deputy General
+Counsel of CNOOC Group, the General Counsel and the
+Chief Compliance Officer of the Company. Mr. Xu has
+been appointed as a Joint Company Secretary, Secretary
+to the Board and Domestic Representative for Information
+Disclosure of the Company with effect from December
+2022. Mr. Xu was appointed as the Chief Compliance
+Officer of CNOOC Group in May 2023.
+Xie Weizhi
+Xu Yugao
+DIRECTORS AND SENIOR MANAGEMENT
+CNOOC LIMITED Annual Report 2023 75
+Born in 1965. Mr. Sun is a professor-level senior engineer.
+He graduated from China University of Petroleum (Beijing)
+with a Doctor Degree of Engineering in Oil and Gas Field
+Development. From July 1988 to April 1998, he serviced
+as Engineer of Development Office, Deputy Director of
+1st Development Office, Deputy Director of Development
+Office and Deputy Chief Engineer and Deputy Director
+of Research Institute of CNOOC Bohai Company. From
+April 1998 to July 1999, he served as Chief Engineer of
+Development Department of CNOOC Bohai Company.
+From July 1999 to January 2002, he served as Deputy
+Chief Geologist of Tianjin Branch of CNOOC China Limited.
+From January 2002 to December 2011, he served as
+Chief Development Engineer, Chief Development and
+Design Engineer and Manager of Development and Design
+Department, Chief Development and Design Engineer of
+CNOOC Research Center, and Chief Development and
+Design Engineer of CNOOC Research Institute. From
+December 2011 to December 2013, he served as Chief
+Engineer of Development, Deputy General Manager and
+Chief Engineer of Development of Development and
+Production Department of the Company. From December
+2013 to February 2017, he served as General Manager
+of Science and Technology Development Department of
+CNOOC Group and the Company. From February 2017 to
+December 2020, he served as Executive Deputy Director of
+CNOOC Group Consulting Center. Mr. Sun was appointed
+as a Vice President of the Company with effect from
+December 2020.
+Sun Fujie
+Born in 1964, Mr. Xie is a Senior Accountant. He graduated
+from Guanghua School of Management of Peking University
+with a master's degree in Business Administration. Mr. Xie
+joined CNOOC Group in 1986. Mr. Xie served as Deputy
+Manager of Finance Department of CNOOC Nanhai West
+Corporation, Deputy Manager and Manager of Controllers'
+Department and General Manager of Treasury Department
+of CNOOC. From January 2002 to February 2011, Mr.
+Xie served as General Manager of CNOOC Finance
+Corporation Ltd. From February 2011 to May 2016, Mr.
+Xie served as Assistant President of CHINALCO, Executive
+Director of CHINALCO Finance Company Limited,
+President of CHINALCO Offshore Holding Company,
+Vice President & CFO of CHALCO, President of CHALCO
+(Hong Kong), Chairman of CHINALCO Finance Company
+Limited, General Auditor & Director of Audit Department
+CHINALCO. From 2016 to 2017, Mr. Xie was appointed
+as General Manager of Finance Department of CNOOC
+Group. From August 2017 to August 2023, Mr. Xie served
+as the Chief Financial Officer of the Company.
+Born in 1964, Mr. Yang is a professor-level senior engineer.
+He graduated from Southwest Petroleum Institute with a
+bachelor of engineering degree in oil exploration engineering
+department and graduated from School of Economics
+and Management of Tsinghua University with an MBA
+degree in business administration. From September 1985
+to December 1999, Mr. Yang successively serviced as
+assistant engineer, engineer and deputy officer of the
+craft room of oil production plant of Qinghai Petroleum
+Management Bureau, engineer and deputy head of the
+operation department of Nanhai West Oil Corporation, a
+section level officer and chief engineer of the production
+office of Nanhai West Oil Corporation and the manager of
+development and production department of CNOOC. From
+December 1999 to June 2007, he served as production
+manager of the production department of the Company.
+From June 2007 to May 2011, he served as the deputy
+general manager of CNOOC (China) Limited Shenzhen
+Branch and the deputy director of CNOOC Nanhai East
+Petroleum Administration Bureau. From May 2011 to July
+2015, he served as the executive vice president of Offshore
+Oil Engineering Co., Ltd.. From July 2015 to December
+2019, he served as the director of CNOOC Donghai
+Petroleum Administration Bureau, general manager of
+CNOOC (China) Limited Shanghai Branch and chairman of
+CNOOC Rongfeng Energy Co., Ltd.. He was appointed as
+the general manager of CNOOC (China) Limited Zhanjiang
+Branch in December 2019 and was appointed as a Vice
+President of the Company on 20 March 2020. From
+October 2020 to March 2021, he concurrently served as
+the general manager of CNOOC China Limited Hainan
+Branch. In May 2021, he was appointed as the Chief Safety
+Officer & General Manager of New Energy Department of
+the Company. Mr. Yang was appointed as an Executive
+Vice President of the Company with effect from June
+2021. Starting from November 2023, Mr. Yang ceased
+to serve as the Executive Vice President, the Chief Safety
+Officer & General Manager of New Energy Department of
+the Company.
+Born in 1971, Mr. Xu Changgui is a professor-level
+senior engineer. He graduated from China University of
+Geosciences (Beijing) and obtained a Ph.D. degree. From
+June 1998 to May 2014, Mr. Xu successively served
+various positions at Bohai Oil Research Institute and
+CNOOC (China) Limited Tianjin Branch. From June 2014
+to April 2020, he served as the Chief Geologist of Bohai
+Oil Research Institute and as the manager of Exploration
+Department of CNOOC Bohai Petroleum Administration
+Bureau (CNOOC (China) Limited Tianjin Branch). From
+April 2020 to May 2021, he served as the Deputy General
+Manager and the Chief Geologist of CNOOC (China) Limited
+Zhanjiang Branch and the Deputy General Manager and
+the Chief Geologist of Hainan Energy Co., Ltd. Meanwhile,
+from October 2020 to May 2021, he also served as the
+Deputy General Manager and the Chief Geologist of
+CNOOC (China) Limited Hainan Branch. From May 2021
+to September 2022, he served as the General Manager
+of the Exploration Department of the Company. Mr. Xu
+I was appointed as the Deputy Chief Exploration Engineer
+of the Company on October 27, 2022.
+Born in 1969, Mr. Xu is a doctor of Tsinghua University and
+a professor-level senior economist. Mr. Xu was an assistant
+researcher (lecturer) of the 21st Century Development
+Research Institute of Tsinghua University, He served as
+staff and strategic project manager of Strategic Planning
+Department of China Oilfield Services
+Wang Xin
+During the process of oilfield exploitation, the Company
+highly values the protection of natural and ecological
+environment, helps the nation to resolutely win the fight
+against pollution, and its comprehensive environmental
+protection measures ensure the Company to comply with
+the applicable laws and regulations on environmental
+protection.
+JOINT COMPANY SECRETARIES
+DIRECTORS AND SENIOR MANAGEMENT
+78 CNOOC LIMITED Annual Report 2023
+For the year ended 31 December 2023, aligning the
+national targets of peak carbon dioxide emissions and
+carbon neutrality, the Company formulated the 14th Five-
+Year Energy Conservation and Reduction Action Plan for
+Peak Carbon Dioxide Emissions and Carbon Neutrality and
+continued to promote energy conservation and carbon
+reduction. We kept on strictly carrying out energy-saving
+assessment and examination on oil & gas field investment
+projects and carbon emission, and ensuring this work can
+be integrated from the initial stage of projects. We also
+strengthened the efforts in technical reformation, which is
+the key to conserve energy and reduce carbon emissions.
+The Company's environmental protection management
+system emphasises the management principles of
+environmental protection throughout the whole process,
+and we place Environment Impact Assessment (EIA),
+compliance with set standards or targets on pollutant
+emissions, control on total discharge amount and reduction
+on emissions as our priorities. During the pre-feasibility
+study phase, the environmental risk pre-assessment report
+will be prepared to identify environmental risks and avoid
+environmentally sensitive sea areas for protecting marine
+ecosystem. During the feasibility study/basic design phase,
+an environmental impact assessment will be conducted
+to comprehensively evaluate the environmental impact
+in the construction phase of the project, the Company
+take necessary environmental protection measures, and
+enhance fishery resource protection and marine ecosystem
+restoration in order to obtain the local government's
+approval before the construction phase of the project.
+During the construction phase, environmental protection
+supervision and management are strictly performed and
+tightened in order to reduce the impact on natural and
+social environment. During the production phase, pollutant
+discharge is controlled and emission concentration is
+reduced, and environmental protection measures are
+adopted to strive to achieve “increased production without
+increasing pollution" or "increased production with reduced
+pollution” for production projects, and build green oil fields.
+At the stage of abandonment projects, the environmental
+protection program for abandonment (or dismantling) as
+well as the disposal program are prepared as required, and
+the special fund for environmental protection is withdrawn
+from the abandonment expenses to restore the marine
+ecological environment.
+ENVIRONMENTAL POLICIES AND
+PERFORMANCE
+A review of the business of the Company and its subsidiaries
+and analysis of the Company and its subsidiaries'
+performance using financial key performance indicators
+is provided in the Business Overview and Management's
+Discussion and Analysis section on pages 11 to 29 and
+pages 91 to 96 of this annual report.
+OVERVIEW AND PERFORMANCE OF THE
+YEAR
+BUSINESS REVIEW
+Please refer to the financial summary on page 5 of this
+annual report for a summary of the assets and liabilities
+of the Company and its subsidiaries as of 31 December
+2023 and the operating results of the Company and its
+subsidiaries for the year then ended.
+Born in 1975, Ms. Wang is a senior economist. In 2005,
+she received a Master of Economics degree in finance from
+Central University of Finance and Economics. From July
+1998 to October 1999, Ms. Wang served as the Finance
+and Risk Manager of the Treasury Department of CNOOC
+Limited. From October 1999 to November 2009, she
+worked as a debt management officer, a financing and risk
+management officer and a financing and risk management
+manager in the Financial Department of CNOOC China
+Limited. From November 2009 to October 2015, she
+served as the Vice President of CNOOC Southeast Asia
+Limited. From October 2015 to June 2016, she served
+as the Vice President and the Chief Financial Officer of
+CNOOC International Limited. Since June 2016, Ms. Wang
+has been serving as the General Manager of the Controllers
+Department of CNOOC Limited. Ms. Wang was appointed
+as the Chief Financial Officer of the Company on August
+2023.
+SUMMARY OF FINANCIAL INFORMATION
+AND OPERATING RESULTS
+PRINCIPAL ACTIVITIES
+The board of directors (the "Board") of the Company are
+pleased to present their report together with the audited
+financial statements of the Company for the year ended
+31 December 2023.
+REPORT OF THE DIRECTORS
+77
+CNOOC LIMITED Annual Report 2023
+Born in 1973, Ms. Tsue Sik Yu, May is the Joint Company
+Secretary of the Company. She graduated from Curtin
+University of Technology in Australia with a bachelor of
+commerce in accounting. Ms. Tsue furthered her education
+at The Hong Kong Polytechnic University in Master of
+Corporate Governance from 2004 to 2006, and MBA from
+The University of Hong Kong from 2014 to 2016. She is a
+fellow member of both The Chartered Governance Institute
+and The Hong Kong Chartered Governance Institute since
+2012 and became a member of Company Secretaries Panel
+and Advisor for Academy of Professional Certification in the
+same year, and became a member of FCCA since 2020.
+She is also a fellow member and certified risk trainer of the
+Institute of Crisis and Risk Management and an associate
+member of CPA Australia. Furthermore, she was granted
+a Practitioner's Endorsement (PE) since 2017/2018 under
+The Hong Kong Chartered Governance Institute and
+accredited a General Mediator under Hong Kong Mediation
+Accreditation Association Limited (HKMAAL) since August
+2017. From August 1998 to March 1999, Ms. Tsue worked
+in LG International (HK) Ltd. as a senior accounts clerk.
+Ms. Tsue joined China Ocean Oilfield Services (HK) Limited
+in 1999 as an accountant. She helped to manage the
+finance of the CNOOC Insurance Limited since 2000 and
+became its employee from 2004 to 2023 as a manager of
+finance department. She serves as company secretary of
+CNOOC Insurance Limited since March 2007. Ms. Tsue
+gained The Chartered Governance Professional (CGP)
+qualification of The Institute of Chartered Secretaries and
+Administrators and The Hong Kong Chartered Governance
+Institute on 30 September 2018. She volunteered on
+Hong Kong Management Association (HKMA) of Panel of
+Adjudicators HKMA Best Annual Reports Awards since
+2018. She volunteered on The Hong Kong Chartered
+Governance Institute of Committee member of Professional
+Development Council (PDC) since 2021 and Committee
+member of Company Secretaries Panel (CSP) since 2017.
+Ms. Tsue was appointed as a Joint Company Secretary of
+the Company with effect from 25 November 2008.
+Tsue Sik Yu, May
+Please refer to the biography of Mr. Xu as aboved.
+Xu Yugao
+The principal activity of the Company is investment holding
+of its subsidiaries. These subsidiaries are principally
+engaged in the exploration, development, production and
+sales of crude oil and natural gas.
+74 CNOOC LIMITED Annual Report 2023
+Born in 1944, Professor Lau graduated with a B.S. (with
+Great Distinction) in Physics from Stanford University
+in 1964, and received his M.A. and Ph.D. degrees in
+Economics from the University of California at Berkeley
+in 1966 and 1969 respectively. He joined the faculty of
+the Department of Economics at Stanford University in
+1966, becoming Professor of Economics in 1976, the first
+Kwoh-Ting Li Professor in Economic Development in 1992,
+and Kwoh-Ting Li Professor in Economic Development,
+Emeritus in 2006. From 2004 to 2010, Professor Lau
+served as the Vice-chancellor (President) of The Chinese
+University of Hong Kong. From September 2010 to
+September 2014, Professor Lau served as Chairman of
+CIC International (Hong Kong) Co., Limited. Professor Lau
+was a member of the 11th and 12th National Committees
+of the Chinese People's Political Consultative Conference
+from 2008 to 2012 and from 2013 to 2018 respectively,
+a Vice-Chairman of the Sub-committee of Population,
+Resources and Environment from 2010 to 2013, and a
+Vice-Chairman of the Sub-committee of Economics from
+2013 to 2018. Professor Lau specializes in economic
+Cao Xinjian
+Xia Qinglong
+DIRECTORS AND SENIOR MANAGEMENT
+CNOOC LIMITED Annual Report 2023
+70
+Born in 1970, Mr. Zhou is a professor-level senior engineer.
+He graduated from Chengdu University of Technology
+with a Master's degree in Coalfield Oil and Gas Geology
+and Exploration. In 2008, he received a Ph.D. degree in
+Energy Geological Engineering from China University of
+Geosciences. Mr. Zhou has worked with CNOOC Group
+since 1996 holding several positions. From August 2003
+to April 2014, he was the project manager and geological
+chief engineer of the Technology Department of the
+CNOOC (China) Limited Tianjin Branch, a subsidiary of
+the Company. He served as the Chief Geological Engineer
+of Bohai Oil Research Institute of CNOOC Bohai Petroleum
+Administrative Bureau, and as the manager of Exploration
+Department of CNOOC Bohai Petroleum Administrative
+Bureau and the manager of Exploration Department of
+CNOOC (China) Limited Tianjin Branch from April 2014
+to March 2017. Mr. Zhou served as the Chief Geologist
+at CNOOC East China Sea Petroleum Administrative
+Bureau and the Chief Geologist at CNOOC (China) Limited
+Shanghai Branch, a subsidiary of the Company from March
+2017 to October 2019. He also worked as the General
+Manager of the Exploration Division of the Company from
+October 2019 to March 2021. He served as the General
+Manager of CNOOC (China) Limited Hainan Branch, a
+subsidiary of the Company, and Chairman and General
+Manager of Hainan Energy Co., Ltd., from March 2021
+to March 2022. He has served as the Deputy General
+Manager of the CNOOC Group from March 2022. He has
+been a Director of OOGC and CNOOC (BVI) since April
+2022. He has been the Chairman of the Board of CNOOC
+(China) Limited since October 2022, and was appointed
+as the General Manager of this company since June 2023.
+Mr. Zhou was appointed as an Executive Director and
+the Chief Executive Officer of the Company with effect
+from 28 April 2022, was appointed as a member of the
+Strategy and Sustainability Committee of the Company on
+25 August 2022, and also acts as the President of the
+Company with effect from 30 June 2023.
+Zhou Xinhuai
+EXECUTIVE DIRECTORS
+Born in 1964, Ms. Wen is a professor-level senior
+accountant. She received a Bachelor of Economics
+Degree in Business Management from Shanxi Finance
+and Economics College. She served as Deputy Director
+of Financial Planning Department of China Petrochemical
+Corporation ("Sinopec Group"), Deputy Director of
+Financial Department of Sinopec Group and Director
+of Financial Department of Sinopec Group. From May
+2012 to December 2015, she also served as Chairwoman
+of Shengjun International Investment Limited. From
+December 2015 to July 2016, she served as Financial
+Director and Director of Financial Department of China
+Petroleum & Chemical Corporation. Since July 2016, she
+has been serving as Chief Accountant of CNOOC Group.
+From August 2016 to August 2017, she also served as
+Chairwoman of CNOOC International Financial Leasing
+Co., LTD. From August 2016 to February 2018, she also
+served as Chairwoman of CNOOC Finance Corporation
+Limited and CNOOC Insurance Limited. From August 2016
+to May 2018, she also served as Chairwoman of Zhonghai
+Trust Co., Ltd. Since March 2020, Ms. Wen was appointed
+as a Director of OOGC and CNOOC (BVI). Ms. Wen was
+appointed as the Non-executive Director of the Company
+with effect from 27 April 2020. Ms. Wen was appointed as
+a member of the Audit Committee of the Company with
+effect from 28 April 2022.
+Born in 1964, Mr. Xia is a professor-level senior engineer.
+He graduated from Geophysical Exploration Department
+of Chengdu Institute of Geology with a bachelor's degree
+in engineering. He graduated from Institute of Geology
+and Geophysics, Chinese Academy of Sciences with a
+PhD degree of science in solid earth geophysics. From
+August 1986 to November 2005, Mr. Xia successively
+served different positions at Bohai Oil Research Institute
+and CNOOC (China) Limited Tianjin Branch. He served as
+Chief Geologist, Deputy General Manager and Executive
+Deputy General Manager of CNOOC (China) Limited
+Tianjin Branch from November 2005 to May 2016, Deputy
+Director and Executive Deputy Director of CNOOC Bohai
+Petroleum Administrative Bureau from April 2013 to
+May 2016, and successively served as Chief Executive
+Officer and President of China BlueChemical Ltd. ("China
+BlueChem"), a company listed on the Stock Exchange
+of Hong Kong Limited, from June 2016 to March 2018.
+He was also the Executive Director of China BlueChem
+from July 2016 to December 2019. From March 2018 to
+December 2019, he served as the Chairman of the Board
+of China BlueChem. He served as Chairman of the Board
+of CNOOC International Limited from December 2019 to
+March 2022. Mr. Xia Qinglong also serves as the Director
+of CNOOC (China) Limited starting from March 2020, and
+he has been appointed as the General Manager of CNOOC
+(China) Limited from June 2021. Mr.Xia no longer serves as
+the Director and the General Manager of CNOOC (China)
+Limited from June 2023. From August 2021 to June 2023,
+Mr. Xia served as a Director of OOGC. He served as the
+Executive Vice President of the Company from March 2020
+to May 2021, and he was appointed as the President of
+the Company with effect from 21 May 2021. Mr. Xia was
+appointed as the Executive Director of the Company on
+3 August 2021. Mr. Xia resigned as the President and the
+Executive Director of the Company on June 30, 2023.
+Wen Dongfen
+69
+CNOOC LIMITED Annual Report 2023
+Born in 1971, Mr. Xu is a professor-level senior engineer.
+He graduated from Northwest University with a Bachelor
+of Science degree in Oil and Gas Geology. He received
+a master's degree in Coalfield Oil and Gas Geology from
+Northwest University in 1996. Mr. Xu joined China National
+Petroleum Corporation in 1996 and served different
+positions. From April 2003 to April 2005, he served
+as Deputy General Manager of Sinopetro Investment
+Company Ltd. From April 2005 to September 2008, he
+served as Deputy General Manager of CNPC International
+(Kazakhstan) Ltd. and concurrently General Manager
+of CNPC Ai-Dan Munai Joint Stock Company. From
+September 2008 to March 2014, he served as Deputy
+General Manager of CNPC International (Kazakhstan)
+Ltd. and concurrently General Manager of Joint Stock
+Company CNPC International Aktobe Petroleum. From
+March 2014 to March 2017, he served as General Manager
+of PetroChina Tuha Oilfield Company, and Director of
+Tuha Petroleum Exploration & Development Headquarters.
+From March 2017 to February 2020, Mr. Xu served as a
+Vice President of CNOOC Group. From February 2020
+to January 2024, Mr. Xu served as a Director of CNOOC
+Group. From April 2017 to June 2018, Mr. Xu served
+as the Chairman of Nexen Energy ULC, a subsidiary of
+the Company. In between May 2017 and June 2018, he
+served as the Chairman and a Director of a subsidiary of
+the Company-CNOOC International Limited. From May
+2017 to October 2022, Mr. Xu served as a Director of
+CNOOC China Limited, a subsidiary of the Company. From
+May 2018 to April 2020, Mr. Xu served as the General
+Manager of CNOOC China Limited. From November 2019
+to April 2022, Mr. Xu has been appointed as a Director
+of OOGC, and as a Director of CNOOC (BVI). Mr. Xu
+was appointed as the Executive Director of the Company
+with effect from 18 April 2017, and was appointed as the
+President of the Company from April 2017 to March 2020.
+He was appointed as the Chief Executive Officer of the
+Company with effect from 19 November 2019. Mr. Xu has
+resigned as the CEO of the Company, and he has been
+re-designated from Executive Director to Non-executive
+Director of the Company from 28 April 2022. Mr. Xu was
+appointed as a member of the Strategy and Sustainability
+Committee of the Company on 25 August 2022. From
+February 23, 2024, Mr. Xu resigned as the Non-executive
+Director and a member of the Strategy and Sustainability
+Committee of the Company.
+Xu Keqiang
+Born in 1962, Mr. Wang is a professor-level senior engineer
+and received a Bachelor of Science degree in Petroleum
+Drilling from Development Department of China University
+of Petroleum in 1982 and a Doctor of Science degree in
+Petroleum Engineering Management from China University
+of Petroleum-Beijing in 2012. From July 1995 to December
+1997, he was appointed as Deputy Director-General of
+Jiangsu Petroleum Exploration Bureau. From December
+1997 to October 2002, he was appointed as Vice President
+of China National Oil & Gas Exploration and Development
+Corporation ("CNODC"). From December 2000 to October
+2002, he also served as President of CNPC International
+(Kazakhstan) Ltd. and President of AktobeMunai Gas Corp.
+From October 2002 to September 2008, he served as
+President of CNODC. From January 2004 to September
+2008, he was appointed as Assistant President of China
+National Petroleum Corporation ("CNPC") and Vice
+Chairman of CNODC. From September 2008 to March
+2018, he served as Vice President of CNPC. From May 2011
+to May 2014, he was concurrently appointed as Director
+of PetroChina Company Limited ("PetroChina”). From July
+2013 to March 2018, he was concurrently appointed as
+President of PetroChina. From May 2014 to March 2018,
+he served as Vice Chairman of PetroChina. In March 2018,
+Mr. Wang was appointed as a Director of CNOOC Group.
+From October 2018 to October 2019, Mr. Wang was
+appointed as President of CNOOC Group. Since March
+2019, Mr. Wang has served as a Director of Overseas
+Oil & Gas Corporation, Ltd. (OOGC) and CNOOC (BVI)
+Limited (CNOOC (BVI)). In October 2019, Mr. Wang was
+appointed as Chairman of CNOOC Group. From November
+2019, Mr. Wang was appointed as the Chairman and the
+President of OOGC, and as the Chairman of CNOOC (BVI).
+On 27 April 2018, Mr. Wang was appointed as the Non-
+executive Director of the Company. From 27 April 2018
+to 29 September 2020, Mr. Wang Dongjin served as a
+member of the Remuneration Committee of the Company.
+From 5 December 2018 to 18 November 2019, Mr. Wang
+was appointed as the Vice Chairman of the Company.
+Mr. Wang was appointed as the Chairman of the Board
+and the Chairman of the Nomination Committee of the
+Company on 18 November 2019, and was appointed as
+the Chairman of the Strategy and Sustainability Committee
+of the Company on 25 August 2022.
+Wang Dongjin
+Born in 1966, Mr. Cao is an Executive Vice President of
+the Company and a professor-level senior economist. Mr.
+Cao obtained a master degree of Business Administration
+from the University of Wales in 2003. From June 1989 to
+September 1999, Mr. Cao served as a geological delegate
+of the Contract Area of CNOOC Donghai Company &
+Caltex and the deputy manager of Exploration Department
+of CNOOC Donghai Company. From September 1999
+to February 2004, he served as Exploration Manager
+of Exploration Department, Assistant Manager, Acting
+Manager and Manager of Human Resources Department
+of CNOOC China Limited Shanghai Branch. From February
+2004 to October 2006, he served as Deputy Director of the
+CNOOC Group Talent Work Leading Group's Office. From
+October 2006 to April 2013 he served as Deputy General
+Manager of CNOOC China Limited Shanghai Branch.
+From July 2009 to April 2013, he also served as Deputy
+Director of Donghai Petroleum Administration Bureau
+of CNOOC. From April 2013 to March 2017, he served
+as Deputy General Manager and General Manager of
+Human Resources Department of CNOOC Group and the
+Company. From March 2017 to February 2020, he served
+as the Director of Bohai Petroleum Administration Bureau
+of CNOOC. From March 2017 to December 2021, he has
+served as General Manager of CNOOC China Limited
+Tianjin Branch. From August 2017, he was appointed as
+an Executive Vice President of the Company. In September
+2017, he was appointed as Assistant President of CNOOC
+Group. Since April 2023, he has served as the Director of
+Overseas Oil & Gas Corporation, Ltd. and CNOOC China
+Limited. Mr. Cao was appointed as the Safety Director of
+the Company with effect from November 30, 2023.
+DIRECTORS AND SENIOR MANAGEMENT
+DIRECTORS AND SENIOR MANAGEMENT
+INDEPENDENT NON-EXECUTIVE
+DIRECTORS
+NON-EXECUTIVE DIRECTORS
+Born in 1947, Mr. Chiu received an LL.B. degree from
+the University of Sydney. He was admitted as a solicitor
+of the Supreme Court of New South Wales and the High
+Court of Australia. He has over 30 years' experience in
+legal practice and had been a director of a listed company
+in Australia. Mr. Chiu was the founding member of the
+Board of Trustees of the Australian Nursing Home
+Foundation and a senior research fellow of Centre for
+Law & Globalization of Renmin University of China since
+2016. He also served as the General Secretary of the
+Australian Chinese Community Association of New South
+Wales. Mr. Chiu is also an Independent Non-executive
+Director of Tianda Pharmaceuticals Limited (formerly
+Yunnan Enterprises Holdings Limited, Tianda Holdings
+Limited) since April 2008, a company listed on The Stock
+Exchange of Hong Kong Limited. Mr. Chiu is also an
+Independent Non-executive Director of Bank of China.
+(Australia) Limited (a wholly subsidiary of Bank of China
+Limited). Mr. Chiu was appointed as the Independent
+Non-executive Director of the Company with effect from 7
+September 1999, and he also serves as the Chairman of
+the Remuneration Committee and a member of the Audit
+Committee of our Company.
+Chiu Sung Hong
+OTHER MEMBERS OF SENIOR
+Born in 1962, Ms. Li Shuk Yin Edwina is a fellow member
+of the Institute of Chartered Accountants in England
+and Wales and the Hong Kong Institute of Certified
+Public Accountants. Ms. Li holds a bachelor's degree in
+Accountancy Studies (with honors) from the University of
+Exeter in the United Kingdom, a postgraduate diploma
+in Enterprise Risk Management from the School of
+Professional and Continuing Education of The University
+of Hong Kong, a master's degree in Risk Management
+from the Glasgow Caledonian University in the United
+Kingdom, and a master's degree of Social Sciences in the
+field of Sustainability Leadership and Governance from The
+University of Hong Kong. Ms. Li had worked for KPMG
+since 1994 and served as the partner in charge of the
+Financial Services Assurance team of KPMG China before
+her retirement in March 2018. Prior to joining KPMG, she
+worked at a large multinational accounting firm in London,
+the United Kingdom and became a Chartered Accountant,
+then she served as the financial manager at a real estate
+group and a financial services group, respectively. Ms.
+Li is currently an independent non-executive director of
+China CITIC Bank (International) Co., Ltd. and a director
+of Elite Beam Limited. She is also an independent non-
+executive director of Bank of Zhengzhou Co., Ltd. (a
+company also listed on the Shenzhen Stock Exchange)
+and China Everbright Environment Group Limited and
+an External Supervisor of PICC Property and Casualty
+Company Limited, companies listed on HKEX. Ms. Li
+has significant experience in accounting, capital market,
+market entrance, regulatory compliance related internal
+control and risk management in Hong Kong and mainland
+China. Ms. Li was appointed as the Independent Non-
+executive Director, the Chairman of the Audit Committee
+and a member of the Remuneration Committee of the
+Company on 31 May 2023.
+Li Shuk Yin Edwina
+DIRECTORS AND SENIOR MANAGEMENT
+73
+CNOOC LIMITED Annual Report 2023
+Born in 1957, Mr. Lin has a Ph.D in economics from the
+University of California, United States of America. Mr. Lin
+was the economist (energy) of Asian Development Bank. He
+is currently a "Changjiang Scholar" distinguished professor
+of School of Management of Xiamen University, dean of
+China Institute for Studies in Energy Policy and a doctoral
+tutor of Xiamen University. Mr. Lin is the chief editor of
+Energy Economics, an international energy economics
+journal. Meanwhile, Mr. Lin is a member of the National
+Energy Consultation Committee under the National Energy
+Commission, a member of the Energy Price Consultation
+Committee under the National Development and Reform
+Commission, a special economic analyst for China Xinhua
+News Agency, a special observer of China National Radio,
+and an executive member of the Energy Leader Committee
+of the World Economic Forum based in Davos. Mr. Lin
+served as an independent non-executive director of
+China Oilfield Services Limited and PetroChina Company
+Limited, both of which are listed on the SSE and The Stock
+Exchange of Hong Kong Limited, in the past three years.
+Mr. Lin was appointed as the Independent Non-executive
+Director and a member of the Strategy and Sustainability
+Committee of the Company on 30 September 2022, and
+appointed as a member of the Nomination Committee of
+the Company on 31 May 2023.
+Lin Boqiang
+MANAGEMENT
+Qiu Zhi Zhong
+Born in 1955, Mr. Qiu obtained his Bachelor of Science
+degree in Computer Science from New York University
+and his Bachelor of Engineering degree in Electrical
+Engineering from The Cooper Union for the Advancement
+of Science and Art in 1983; his Master of Science degree
+in Electrical Power Engineering from Ohio State University
+in 1985; and his Master of Business Administration from
+Harvard Business School in 1990. Mr. Qiu has served as
+an independent non-executive director and chairman of the
+nomination committee of Sinochem Energy Co., Ltd since
+November 2020. From 2013 to 2016, Mr. Qiu served as the
+Chairman of Meridian Capital (Asia) Limited. From 2009 to
+March 2013, he served as a Managing Director, the Vice
+Chairman of Asia Pacific and Chairman of Greater China
+of Barclays Capital. From 2006 to 2009, he served as the
+Executive Chairman of China and Vice Chairman of Asia
+of ABN AMRO Bank N.V., and during the period he also
+served as the Chairman of ABN AMRO (China) Co. Ltd.
+and the Chairman of ABN AMRO Leasing (China) Co. Ltd.
+In 2002, Mr. Qiu founded and served as the Chairman of
+Quartz Capital Limited. During the period, he also served
+as the Chairman of the DragonTech Ventures Fund and
+DragonTech Ventures Management Limited, a subsidiary,
+from 2004 to 2014. From 1991 to 2002, Mr. Qiu served
+as the Chairman of Greater China Region and a Managing
+Director of Credit Suisse First Boston. Since 2010, Mr. Qiu
+has also served as the Honorary Consul of Republic of
+Rwanda to Hong Kong. In 1994 and 1995, Mr. Qiu was
+named as one of the world's "50 Most Wanted in Finance"
+and "World's 50 Derivatives Superstars" respectively by
+the Global Finance magazine in the United States. Mr.
+Qiu was appointed as the Independent Non-executive
+Director and a member of the Nomination Committee
+of the Company with effect from 7 May 2019, and was
+appointed as a member of the Strategy and Sustainability
+Committee of the Company on 25 August 2022.
+CNOOC LIMITED Annual Report 2023 71
+DIRECTORS AND SENIOR MANAGEMENT
+development, economic growth, and the economies
+of East Asia, including that of China. He has authored,
+co-authored, or edited seventeen books, including The
+China-U.S. Trade War and Future Economic Relations, and
+published more than 210 articles and notes in professional
+journals. Professor Lau serves as a member of the Hong
+Kong Special Administrative Region Exchange Fund
+Advisory Committee Currency Board Subcommittee, a
+Non-official Member of the Candidate Eligibility Review
+Committee of the Hong Kong SAR and a Non-official
+Member of the Board of Directors of the Hong Kong
+Investment Corporation Limited of the HKSAR, the
+Chairman of the Board of Directors of the Chinese
+University of Hong Kong (Shenzhen) Advanced Finance
+Institute, aka Shenzhen Finance Institute, and he used
+to be the Vice-Chairman of Our Hong Kong Foundation,
+and now serves as a member of this foundation. He was
+appointed a Justice of the Peace in Hong Kong in July
+2007 and awarded the Gold Bauhinia Star in 2011 by
+the Government of the Hong Kong Special Administrative
+Region. He currently serves as the Ralph and Claire Landau
+Professor of Economics at the Lau ChorTak Institute of
+Global Economics and Finance, the Chinese University
+of Hong Kong, an independent nonexecutive director of
+AIA Group Limited and Semiconductor Manufacturing
+International Corporation, and served as an independent
+non-executive director from December 2014 to May
+2020 of Hysan Development Company Limited, all listed
+on the Hong Kong Stock Exchange. He also serves as
+an independent non-executive director of Far EasTone
+Telecommunications Company Limited, Taipei, which is
+listed on the Taiwan Stock Exchange. Professor Lau was
+appointed as an Independent Non-executive Director
+of the Company with effect from 31 August 2005. He
+also serves as a member of the Audit Committee and
+the Nomination Committee of the Company. Professor
+Lau was appointed as a member of the Strategy and
+Sustainability Committee of the Company on 25 August
+2022. Since 31 May 2023, Professor Lau no longer serves
+as the Independent Non-executive Director and a member
+of the Audit Committee, the Nomination Committee and
+the Strategy and Sustainability Committee of the Company.
+Lawrence J. Lau
+Born in 1948, Mr. Tse is a fellow of The Institute of Chartered
+Accountants in England and Wales, and the Hong Kong
+Institute of Certified Public Accountants ("HKICPA"). Mr.
+Tse is a past President and a former member of the
+Audit Committee of the HKICPA. He joined KPMG in
+1976, became a partner in 1984 and retired in March
+2003. Mr. Tse was a Non-executive Chairman of KPMG's
+operations in the PRC and a member of the KPMG China
+advisory board from 1997 to 2000. Mr. Tse is currently
+an Independent Non-executive Director of SJM Holdings
+Limited and Sinofert Holdings Limited, companies listed
+on The Stock Exchange of Hong Kong Limited (HKSE).
+From 2004 to 2010, he was an Independent Non-executive
+Director of China Construction Bank Corporation, which
+is listed on the HKSE Main Board, and he also was an
+Independent Non-executive Director of CCB International
+(Holdings) Limited, a wholly owned subsidiary of China
+Construction Bank Corporation. From 2005 to 2016, Mr.
+Tse was also an Independent Non-executive Director of
+Daohe Global Group Limited (formerly known as Linmark
+Group Limited), which is listed on the HKSE Main Board.
+From November 2004 to June 2021, Mr. Tse was an
+Independent Non-executive Director of OCBC Bank
+(Hong Kong) Limited (formerly named as Wing Hang Bank
+Limited and OCBC Wing Hang Bank Limited whose shares
+were delisted from The Stock Exchange of Hong Kong
+Limited with effect from 16 October 2014). Mr. Tse was
+an Independent Non-executive Director from September
+2005 to January 2023 of China Telecom Corporation
+Limited, which is listed on the HKSE Main Board. Mr.
+Tse was an Independent Non-executive Director from
+March 2015 to December 2023 of China CITIC Financial
+Asset Management Co., Ltd. (formerly known as China
+Huarong Asset Management Co., Limited which is listed
+on the HKSE Main Board. Mr. Tse is a member of the
+International Advisory Council of the People's Municipal
+Government of Wuhan. Mr. Xie was appointed as the
+Independent Non-executive Director of the company
+on June 8, 2005, and also served as the chairman of
+the Company's Audit Committee and a member of the
+Remuneration Committee. Mr. Xie no longer serves as
+the Independent Non-executive Director, the Chairman of
+the Audit committee, and a member of the Remuneration
+Committee of the Company from May 31, 2023.
+72 CNOOC LIMITED Annual Report 2023
+DIRECTORS AND SENIOR MANAGEMENT
+Tse Hau Yin, Aloysius
+The distributable reserves of the Company as of 31
+December 2023 amounted to RMB189,148 million.
+LOANS
+Please refer to note 27 to the consolidated financial
+statements on pages 148 to 150 of this annual report for
+details of the loans and borrowings of the Company and
+its subsidiaries as of 31 December 2023.
+PROPERTY, PLANT AND EQUIPMENT
+Please refer to note 13 to the consolidated financial
+statements on page 138 of this annual report for the
+movements in property, plant and equipment of the
+Company and its subsidiaries for the year ended 31
+December 2023.
+RESERVES
+Please refer to note 40 to the consolidated financial
+statements for details of the significant events after the
+reporting period of the Company and its subsidiaries.
+An interim dividend of HK$0.59 per share (tax inclusive) was
+declared on 17 August 2023, and paid to the shareholders
+of the Company on 18 October 2023.
+SUBSIDIARIES, ASSOCIATES AND JOINT
+VENTURES
+Particulars of the Company's subsidiaries, associates and
+joint ventures as of 31 December 2023 are set out in notes
+16, 17 and 18 to the consolidated financial statements on
+pages 141 to 144 of this annual report.
+DIVIDENDS
+The net profit attributable to ordinary shareholders of the
+Company under the 2023 consolidated financial statements
+is RMB123,843 million. In overall consideration of the factors
+such as the future earnings, capital requirements, financial
+position, future prospect and cash flow of the Company,
+the Board proposes to distribute the final dividend for the
+year ended 31 December 2023 in the amount of HK$0.66
+per share (tax inclusive) to all the shareholders. Based
+on the Company's total share capital of 47,566,763,984
+shares as of 31 December 2023, the total final dividend
+for 2023 is HK$31,394 million (tax inclusive), together with
+the interim dividend of HK$0.59 per share (tax inclusive)
+already paid, the total of final dividend and interim dividend
+for 2023 are HK$1.25 per share (tax inclusive), and the
+total dividend payment amount is HK$59,458 million (tax
+inclusive), accounting for approximately 44% of net profit
+attributable to ordinary shareholders of the Company under
+the 2023 consolidated financial statements. During this
+profit distribution, the Company will not distribute bonus
+shares or convert capital reserve into share capital. The
+dividends will be denominated and declared in HKD. The
+dividends on A shares will be paid in RMB calculated
+using the average central parity rate between HKD and
+RMB announced by the People's Bank of China for the
+week immediately preceding the date of the declaration
+of dividend by the Annual General Meeting; dividend for
+Hong Kong shares will be paid in HKD.
+In the event of any change in the total issued shares
+of the Company from the date of announcement to
+the registration date for the final dividend of 2023, the
+Company intends to maintain the same amount of dividend
+payable per share and adjust the total distribution amount
+accordingly, and disclose the details of the adjustment
+separately. The Company's final share distribution plan for
+2023 has been approved by the 2nd meeting of the Board
+of the Company in 2024, and is subject to the approval
+by the shareholders in the 2023 annual general meeting
+of the Company.
+CNOOC LIMITED Annual Report 2023
+REPORT OF THE DIRECTORS
+SUBSEQUENT EVENT
+Please refer to the consolidated statement of changes
+in equity on page 106 and the statement of changes in
+equity on page 166 of this annual report for movements in
+the reserves of the Company and its subsidiaries, and the
+Company, respectively, for the year ended 31 December
+2023.
+A description of the likely future development in the
+Company and its subsidiaries' future business is provided in
+the Chairman's statement and Management's Discussion
+and Analysis on pages 9 to 10 and pages 91 to 96 of
+this annual report.
+The support and trust of our stakeholders is integral to
+the Company's growth and success. The stakeholders
+of the Company and its subsidiaries include shareholders
+and creditors, employees and employee organisations,
+governments and regulatory authorities, business partners
+and service providers, the public and communities,
+charities and non-government organisations (NGOs),
+and clients. The Company and its subsidiaries place
+emphasis on communications with our stakeholders and
+have established an open and transparent communication
+channel for each category of stakeholders to understand
+their expectations and requests.
+A description of principal risks and uncertainties that the
+Company and its subsidiaries may be facing is provided
+in the Risk Management and Internal Control on pages
+30 to 36 of this annual report.
+MAJOR SUPPLIERS AND CUSTOMERS
+REPORT OF THE DIRECTORS
+During the reporting period, the main environmental
+information of major subsidiaries falling into the scope
+of key pollutant discharging entities announced by
+competent environmental protection authorities is set
+out under Health, Safety and Environmental Protection
+("HSE") section from pages 25 to 28 of this annual report;
+Regarding the environmental issues that have material
+impacts on the Company's business performance and
+future development, please refer to the environmental,
+social and governance report of 2023 prepared by the
+Company (the "2023 ESG report") issued concurrently
+with this annual report.
+COMPLIANCE WITH RELEVANT LAWS
+AND REGULATIONS
+For the year ended 31 December 2023, compliance
+procedures were in place to ensure adherence to applicable
+laws, regulations and rules which have significant impact
+on the Company and its subsidiaries. The Board and senior
+management within their respective duties in conjunction
+with internal and external professional advisors monitored
+the Company and its subsidiaries' policies and practices
+on compliance with legal and regulatory requirements.
+Changes in the applicable laws, regulations and rules
+which have significant impact on the Company and its
+subsidiaries (if any) were brought to the attention of
+relevant employees and relevant operation units from time
+to time. During the reporting period, various works of the
+Board and senior management were in compliance with
+the relevant applicable laws, regulations and rules, the
+Articles, and charters of the board committees. Decision-
+making process was legitimate and effective. Directors and
+senior management performed in a diligent and responsible
+manner and the resolutions of the general meetings and
+board meetings were implemented faithfully. Meanwhile, the
+Company has timely performed its disclosure obligations
+which were in strict compliance with the requirements of
+the Listing Rules of Stock Exchange and the Listing Rules
+of SSE and relevant applicable securities laws, regulations
+and rules.
+In accordance with the requirements of the laws, regulations
+and related policies in Hong Kong, PRC and relevant other
+jurisdictions in which the Company and its subsidiaries
+operates, the Company and its subsidiaries provides and
+maintains statutory benefits for its staff, including but
+not limited to pension schemes, mandatory provident
+fund, basic medical insurance, work injury insurance,
+etc. Further, the Company and its subsidiaries have been
+committed in complying with relevant laws and regulations
+on work and occupational safety of employees of the
+Company and its subsidiaries.
+PROSPECTS
+KEY RELATIONSHIPS WITH
+Through specified communication methods, the
+Company and its subsidiaries looked into and sorted
+out the focuses and concerns of the stakeholders, and
+responded with corresponding actions and measures. The
+Company and its subsidiaries continued to strengthen
+the quality and effectiveness of information disclosure,
+comply with applicable laws and regulations and actively
+participate in public welfare activities, with the purpose of
+achieving mutual development and value sharing with our
+stakeholders. We have also formulated key indicators based
+on the focuses and concerns of different stakeholders to
+reflect our management performance on various subject
+matters. Some of our key indicators include return on
+equity and payout ratio for shareholders and creditors;
+employee training frequency, turnover rate and OSHA
+statistics for employees and employee organisations; data
+for emissions, use of resources, environment and natural
+resources and safety environment performance; public
+opinion and corporate image concerned by the public;
+community evaluations for communities; participation in
+charities' and NGOs' relevant activities; etc. Going forward,
+the Company and its subsidiaries will endeavor to improve
+the current policies, strive to maximise our stakeholders'
+value and achieve a mutually beneficial outcome.
+CNOOC LIMITED Annual Report 2023
+79
+80
+REPORT OF THE DIRECTORS
+For more details on the Company and its subsidiaries' key
+relationships with stakeholders, please refer to the 2023
+ESG report of the Company.
+KEY RISKS AND UNCERTAINTIES
+STAKEHOLDERS
+Purchases from the largest supplier of the Company
+and its subsidiaries for the year ended 31 December
+2023 represented approximately 18% of the Company
+and its subsidiaries' total purchases. The total purchases
+attributable to the five largest suppliers of the Company
+and its subsidiaries amounted to RMB108,413 million,
+accounting for approximately 55% of the total purchases
+of the Company and its subsidiaries for the year ended
+31 December 2023; and amongst the total purchases
+attributable to the five largest suppliers, purchases
+attributable to related parties were RMB85,112 million,
+accounting for approximately 43% of the total purchases
+of the Company and its subsidiaries for the year ended
+31 December 2023.
+The maximum daily outstanding balance of deposits
+and interest (excluding funds placed for the purpose
+of extending entrustment loans pursuant to the
+entrustment loan services) placed by the Company
+and its subsidiaries with CNOOC Finance did not
+exceed RMB22.0 billion. The secured loans obtained
+from CNOOC Finance and the accrued interest were
+0.
+For the year ended 31 December 2023, except for
+the continuing connected transactions with its indirect
+controlling shareholder China National Offshore Oil
+Corporation ("CNOOC Group") and its associates, as
+disclosed in the section entitled "Related/Connected
+Transactions" below, none of the Directors or their
+respective close associates or any shareholder of the
+Company (which to the knowledge of the Directors owns
+more than 5% of the Company's share capital) had any
+interests in the five largest suppliers or customers of the
+Company and its subsidiaries.
+826.86
+173.14
+11-1 oil fields onshore power
+application construction project
+Luda 6-2 oil field development
+Replenishment of working capital
+500.00
+9,199.09
+Total
+32,099.09
+500.00
+9,175.34
+28,037.51
+23.75
+4,061.58
+CNOOC LIMITED Annual Report 2023
+85
+REPORT OF THE DIRECTORS
+1,000.00
+NAME OF DIRECTOR
+Executive Directors
+Zhou Xinhuai (CEO and President)
+Xia Qinglong (Note 1)
+Non-executive Directors
+Wang Dongjin (Chairman)
+Li Yong (Note 1)
+Xu Keqiang (Note 2)
+Wen Dongfen
+Independent Non-executive Directors
+Chiu Sung Hong
+Lawrence J. Lau (Note 1)
+Tse Hau Yin, Aloysius (Note 1)
+Qiu Zhi Zhong
+Lin Boqiang
+The Directors of the Company during 2023 and up to the
+date of this report are:
+Qinhuangdao 32-6/Caofeidian
+1,000.00
+1,000.00
+Unutilized
+proceeds as of
+31 December
+2023
+Expected
+timetable for use
+of the unutilized
+(RMB million) proceeds
+(RMB million)
+Payara oil field development in
+5,200.00
+5,200.00
+Guyana
+Liuhua11-1/4-1 oil field secondary
+6,500.00
+3,356.02
+3,143.98
+development
+Liza oil filed phase II in Guyana
+2,200.00
+2,200.00
+Lufeng oil fields development
+3,500.00
+2,931.30
+568.70
+Lingshui 17-2 gas field
+3,000.00
+2,847.99
+152.01
+Expected to be
+used up by 31
+development
+December 2026
+Lufeng 12-3 oil field development
+Li Shuk Yin Edwina (Note 3)
+Utilized
+proceeds as of
+31 December
+Note 1: Ceased to hold office during the reporting period. Please
+see "Changes in Directors" on page 66.
+Note 3: Appointed as a Director during the reporting period.
+Please see "Changes in Directors" on page 66.
+(1) Ceased to hold office during the reporting period. Please see "Changes in Directors" on page 66.
+Save as disclosed above, as at 31 December 2023, none of the Directors and chief executive of the Company who are
+currently in office or resigned from office during the reporting period was interested in the equity or debt securities of
+the Company or any associated corporations (within the meaning of the SFO) which were required (i) to be notified to
+the Company and the HKSE pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions
+which they were taken or deemed to have under such provisions of the SFO); (ii) pursuant to section 352 of the SFO,
+to be entered in the register referred to therein; (iii) pursuant to the Model Code, to be notified to the Company and
+the HKSE; or (iv) to be disclosed pursuant to applicable provisions of the CSRC and SSE. All the interests held by the
+Directors and chief executive represent long positions. During the reporting period, no changes were made to the number
+of ordinary Hong Kong shares held by the Directors, and no ordinary A shares were held by the Directors.
+SUBSTANTIAL SHAREHOLDERS' INTERESTS
+As of 31 December 2023, so far as was known to the Directors and chief executive of the Company, the persons, other
+than a Director or chief executive of the Company, who had an interest or a short position in the shares and underlying
+shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the
+SFO were as follows:
+Approximate
+percentage of
+total issued
+Hong Kong
+shares
+Ordinary A
+shares held
+Approximate
+percentage of
+total issued A
+shares
+Approximate
+percentage of
+total issued
+shares
+64.55%
+60.49%
+Ordinary Hong
+Kong shares
+held
+0.000%
+(i) CNOOC (BVI) Limited (1)
+(ii) Overseas Oil & Gas
+Corporation, Ltd. ("OOGC")
+28,772,727,273
+64.55%
+(iii) CNOOC Group
+29,508,353,273
+66.20%
+Note:
+60.49%
+62.04%
+(1) CNOOC (BVI) Limited is a direct wholly-owned subsidiary of OOGC, which is a direct wholly-owned subsidiary of CNOOC Group.
+Accordingly, CNOOC (BVI) Limited's interests are recorded as the interests of OOGC and CNOOC Group.
+88
+CNOOC LIMITED Annual Report 2023
+28,772,727,268
+0.003%
+shares
+percentage of
+total issued
+In accordance with the Articles and pursuant to Appendix
+C1 to Listing Rules, the Company will give sufficient notice
+on the Board candidates who will retire from the office by
+rotation at the forthcoming Annual General Meeting and
+who, being eligible, will offer themselves for re-election.
+In 2023, the list of directors who have served on the
+boards of the subsidiaries of the Company included in the
+annual consolidated financial statements for the financial
+year ended 31 December 2023 is as follows:
+86
+CNOOC LIMITED Annual Report 2023
+REPORT OF THE DIRECTORS
+Cai Wenjie, Cao Shujie, Cao Xinjian, Chen Geng, Chen
+Liguo, Chen Rong, Chen Yan, Dai Tong, Dai Yi, Dai Zhaohui,
+Shan Huanhua, Duan Yu, Fang Dianyong, Gao Hui, Gao
+Song, Gu Yan, Guo Haojie, Guo Yihong, He Qunhui, Hou
+Yanbo, Hu Senlin, Hu Weijie, Hu Weiyan, Huang Min, Huang
+Xiaosheng, Huang Yehua, Jin Qingyong, Jin Weigan, Kang
+Siwei, Ke Lvxiong, Li Chunsheng, Li Feng, Li Haibo, Li
+Jie, Li Mao, Li Yungui, Li Zhanwang, Liu Bo, Liu Daping,
+Liu Mingquan, Liu Shujie, Liu Xiangdong, Liu Xiaoxiang,
+Liu Yongjie, Liu Yongjie, Lu Baoshan, Luo Xinzeng, Ma
+Hongwei, Ma Jin, Ma Liwu, Ma Peixin, Ma Qiang, Mao
+Xingquan, Mei Yaolun, Pan Xiaodong, Pan Yiyong, Pang
+Jian, Peng Wenxu, Qu Bozhi, Ruan Haojin, Sang Yi, Shao
+Dan, Shi Chenggang, Sun Qiang, Tang Guangrong, Tian
+Lixin, Wan Xiaoxun, Wang Benwu, Wang Baogui, Wang
+Chao, Wang Chen, Wang Guodong, Wang Jimei, Wang
+Jianzhong, Wang Kui, Wang Shoushan, Wang Wei, Wang
+Xin (male), Wang Xin (female), Wang Yu, Wang Yufan,
+Wang Zhizhong, Wu Zixian, Xiao Maolin, Xiao Zongwei, Xie
+Min, Xie Weizhi, Xie Wensheng, Xu Haidong, Xu Yugao,
+Yan Jun, Yan Hongtao, Yang Chenghua, Yang Jinghong,
+Yang Li, Yu Yi, Yu Feng, Zhang Chunsheng, Zhang
+Hongjie, Zhang Linqiang, Zhang Shude, Zhang Wenzhong,
+Zhao Chunming, Zhao Jianchen, Zhao Xiaoyun, Zheng
+Yonggang, Zhou Xinhuai, Zhu Yuming, CNOOC Limited.
+Admiral Timothy J., Alan O'Brien, Allo Marjorie, Ariel D.
+Schneider, Ashanti Regalado, Aubry Baptiste, Christine
+Mary O'Connor, Colin T.O. Brewer, Colleen V. Johnson,
+Curtis Steiert, Fernando Aguilar, Hanbin Zhang, Heather
+M. Osecki, Jerome A. van Zuijlen, Jerome van Zuijlen,
+Keating USN (Ret.), Kenneth J. Krieg, Kimberly D. Woima,
+Luiza Branga, Rick L. Sumrall, Robert Shepherd, Rosalind
+L. Bynoe, Sebastiaan Donner, Simon Perchard, Tilak
+Nithiyeswaran, Tina R. Mares, Trevor L. Norman.
+DIRECTORS' INTERESTS
+As of 31 December 2023, the interests of each Director,
+senior management and chief executive of the Company
+who are currently in office or resigned from office during
+the reporting period in the equity or debt securities of
+the Company or any associated corporations (within the
+meaning of the Securities and Futures Ordinance ("SFO"))
+which were required (i) to be notified to the Company and
+the HKSE pursuant to Divisions 7 and 8 of Part XV of the
+SFO (including interests and short positions which they
+are taken or deemed to have under such provisions of
+the SFO); (ii) pursuant to section 352 of the SFO, to be
+entered in the register referred to therein; (iii) pursuant to
+the Model Code for Securities Transactions by Directors
+of Listed Issuers (the "Model Code"), to be notified to the
+Company and the HKSE; or (iv) to be disclosed pursuant to
+applicable provisions of the CSRC and SSE are as follows:
+CNOOC LIMITED Annual Report 2023
+87
+REPORT OF THE DIRECTORS
+Approximate
+Name of Director
+Nature of
+interest
+Ordinary Hong
+Kong shares
+held
+percentage of
+total issued
+Hong Kong
+shares
+Ordinary A
+shares held
+Chiu Sung Hong
+Lawrence J. Lau(1)
+Beneficial interest
+Beneficial interest
+1,650,000
+0.004%
+400,000
+0.000%
+Note:
+Approximate
+percentage of
+total issued A
+shares
+Approximate
+Note 2: Ceased to hold office in February 2024. Please see
+"Changes in Directors" on page 66.
+The Company completed the initial public offering of RMB
+shares on the SSE (stock code: 600938) on 21 April
+2022. The final total gross proceeds from such issuance
+were RMB32,292 million, and the net proceeds were
+RMB32,099 million after deducting the offering expenses
+of RMB193 million. The net proceeds will be utilised based
+on the proposed projects described in the announcement
+dated 22 June 2022 of the Company, mainly for oil & gas
+development projects and replenishment of the working
+capital. Proceeds are applied to the following projects:
+ISSUANCE OF RMB SHARES
+investment
+amount
+Note 1: The Company adopts fixed daily rent or floating rent for
+all of its FPSO vessels leases. According to HKFRS 16
+Leases, (i) the Group is required to recognise a right-
+of-use asset and a lease liability for the fixed daily rent
+under the FPSO vessels leases and the Company will
+set annual caps based on the total value of right-of-use
+assets relating to the fixed daily rent under the FPSO
+vessels leases; and (ii) the floating rent under the FPSO
+vessels leases will be recognised as expenses incurred
+by the Group, and the Company will set the annual caps
+for floating rent which are determined with reference to
+the estimated annual maximum amount of floating rent
+payable by the Group in respect of the FPSO vessels
+leases for each of the three years ending 31 December
+2025.
+Sales of petroleum, natural gas products and green power products by
+the Company and its subsidiaries to CNOOC Group and/or its associates
+Sales of petroleum and
+natural gas products
+(other than long-term sales
+of natural gas and liquefied
+natural gas)
+(b) Long-term sales of natural
+gas and liquefied natural
+gas
+(c) Sales of green power products
+For the three years ending 31
+December 2025, RMB298,356
+million, RMB315,545 million
+and RMB328,725 million,
+respectively
+For the three years ending 31
+December2025, RMB38,382
+million, RMB46,347 million
+and RMB61,719 million,
+respectively
+For the three years ending 31
+December 2025, nil, RMB220
+million and RMB220 million,
+respectively
+82
+CNOOC LIMITED Annual Report 2023
+REPORT OF THE DIRECTORS
+Financial services provided by CNOOC Finance Corporation
+Limited to the Company and its subsidiaries
+RMB429 million and RMB391
+million, respectively (1)
+On 22 December 2022, the Company entered into a
+financial services framework agreement ("Financial
+Services Framework Agreement") with CNOOC Finance
+Corporation Limited ("CNOOC Finance"), an associate
+of CNOOC Group, pursuant to which CNOOC Finance
+provided a range of services as may be required and
+requested from time to time by the Company and its
+subsidiaries, for a term of three years starting from 1
+January 2023. The services include settlement services,
+depository services, discounting services, loans services
+and entrustment loans services, etc. The Financial Services
+Framework Agreement is substantially on the same terms
+as the terms contained in the financial services framework
+agreement entered into by the Company on 21 November
+2019. The continuing connected transactions in respect
+of the depositary services and the secured loan services
+under the Financial Services Framework Agreement are
+exempted from independent shareholders' approval
+requirement, but subject to the annual reporting, annual
+review and announcement requirements. The annual caps
+for each type of the financial services during the term of
+the Financial Services Framework Agreement are set out
+below:
+Types of Transactions
+(a) Maximum daily outstanding
+balance of deposits and
+interest (excluding funds
+placed for the purpose of
+extending entrustment loans
+pursuant to the entrustment
+loans services) placed by the
+Group with CNOOC Finance
+(b) Maximum daily loan balance
+(including accrued interest)
+obtained by the Group from
+CNOOC Finance (1)
+(c) Total service fees charged
+by CNOOC Finance for
+providing other financial
+services (excluding
+settlement services) to the
+Group (2)
+For the three years ending 31
+December 2025, RMB22,000
+million, RMB22,000 million,
+and RMB22,000 million
+respectively
+For the three years ending 31
+December 2025, RMB50,000
+million, RMB50,000 million,
+and RMB50,000 million
+respectively
+For the three years ending 31
+December 2025, RMB20
+million, RMB20 million, and
+RMB20 million respectively
+Note 1: In respect of secured loans services, for each of the
+three years ending 31 December 2025, each of the loan
+amount and the collateral assets amount shall not exceed
+RMB22,000 million, and the accrued interest shall not
+exceed RMB770 million.
+Note 2: The settlement services provided by CNOOC Finance
+to the Group do not charge service fees or other fees.
+The Independent Non-executive Directors have further
+confirmed that for the year ended 31 December 2023:
+(i)
+Annual cap for
+2023, 2024 and 2025
+caps are RMB471 million,
+For the three years ending
+31 December 2025, (i) in
+respect of fixed daily rent,
+the annual caps for the total
+value of right-of-use asset
+are RMB634 million, RMB613
+million and RMB637 million,
+respectively; and (ii) in respect
+of floating rent, the annual
+For the three years ending 31
+December 2025, RMB6,202
+million, RMB6,627 million and
+RMB6,880 million, respectively
+CHARITABLE DONATIONS
+The donations by the Company and its subsidiaries for the
+year ended 31 December 2023 amounted to RMB158.14
+million.
+RELATED/CONNECTED TRANSACTIONS
+Continuing connected transactions
+The Independent Non-executive Directors have confirmed
+that the following continuing connected transactions for
+the year ended 31 December 2023 to which any member
+of the Company and its subsidiaries was a party were
+entered into by the Company and its subsidiaries:
+1.
+2.
+3.
+in the ordinary and usual course of its business;
+on normal commercial terms or better; and
+in accordance with the relevant agreements
+(including pricing principles and guidelines set out
+therein) governing the transactions on terms that
+were fair and reasonable and in the interests of the
+shareholders of the Company as a whole.
+Comprehensive framework agreement with CNOOC Group
+in respect of the provision of a range of products and
+services
+The Company entered into a comprehensive framework
+agreement on 2 November 2022 with CNOOC Group for
+the provision (1) by the Company and its subsidiaries to
+CNOOC Group and/or its associates and (2) by CNOOC
+Group and/or its associates to the Company and its
+subsidiaries, of a range of products and services which
+may be required and requested from time to time by either
+party and/or its associates in respect of the continuing
+connected transactions. Except for adjustment of certain
+pricing policies and adjustment of classification of certain
+Continuing Connected Transactions due to the new energy
+business, the comprehensive framework agreement is
+substantially on the same terms as the terms contained
+in the comprehensive framework agreements entered
+into by the Company on 1 November 2019. The term of
+the comprehensive framework agreement is for a period
+of three years from 1 January 2023. The continuing
+connected transactions under the comprehensive
+framework agreement and the relevant annual caps for
+the three years from 1 January 2023 were approved by
+the independent shareholders of the Company on 29
+November 2022. The continuing connected transactions
+under the comprehensive framework agreement and the
+relevant annual caps are set out below:
+CNOOC LIMITED Annual Report 2023
+81
+REPORT OF THE DIRECTORS
+Categories of continuing
+connected transactions
+Annual caps for
+2023 to 2025
+Provision of exploration, development, production as well as sales,
+management and ancillary services by CNOOC Group and/or its
+associates to the Company and its subsidiaries
+(a) Provision of exploration and
+support services
+(b) Provision of development and
+support services (including
+new energy business)
+(c) Provision of production and
+support services (including
+new energy business)
+(d) Provision of sales,
+management and ancillary
+services
+(e) FPSO vessel leases
+For the three years ending 31
+December 2025, RMB13,959
+million, RMB14,152 million
+and RMB13,978 million,
+respectively
+For the three years ending 31
+December 2025, RMB73,715
+million, RMB66,145 million
+and RMB64,249 million,
+respectively
+For the three years ending 31
+December 2025, RMB20,116
+million, RMB21,715 million
+and RMB22,866 million,
+respectively
+Provision of exploration, development, production as
+well as sales, management and ancillary services by
+CNOOC Group and/or its associates to the Company
+and its subsidiaries:
+(a)
+(b)
+(c)
+Issuer
+Maturity Date
+Coupon Rate
+(USD)
+(USD)
+Repurchased Percentage of
+Repurchase
+Outstanding
+Amount as at
+31 December
+2023
+(USD)
+CPNA
+CPNA
+15 March 2032
+10 March 2035
+CPNA
+30 July 2039
+7.875%
+5.875%
+7.500%
+431,456,000
+732,246,000
+696,000,000
+27,824,000
+4,000,000
+5,800,000
+6.45%
+0.55%
+403,632,000
+728,246,000
+0.83%
+690,200,000
+84
+CNOOC LIMITED Annual Report 2023
+REPORT OF THE DIRECTORS
+None of the above bonds was listed on the HKSE or SSE.
+Save as disclosed in this annual report, there was no
+purchase, sale or redemption by the Company, or any
+of its subsidiaries, of its listed securities during the year
+ended 31 December 2023.
+Committed
+Face Amount
+The total sales to the five largest customers of the
+Company and its subsidiaries were RMB255,152 million,
+representing approximately 61% of the total sales of
+the Company and its subsidiaries for the year ended 31
+December 2023; and amongst the total sales to the five
+largest customers, sales to related parties amounted to
+RMB222,417 million, accounting for approximately 53%
+of the total sales of the Company and its subsidiaries for
+the year ended 31 December 2023. Sales to the largest
+third party customer for the year ended 31 December
+2023 amounted to RMB32,735 million, representing
+approximately 8% of the Group's total revenue. The total
+sales attributable to the five largest third party customers
+of the Company and its subsidiaries were RMB76,305
+million, accounting for approximately 18% of the Company
+and its subsidiaries' total revenue for the year ended 31
+December 2023.
+Face Amount
+PURCHASE, SALE OR REDEMPTION OF
+LISTED SECURITIES
+(d)
+(e)
+The aggregate annual volume of transactions
+for the provision of exploration and support
+services did not exceed RMB13.959 billion.
+The aggregate annual volume of transactions
+for the provision of development and support
+services (including new energy business) did
+not exceed RMB73.715 billion.
+The aggregate annual volume of transactions
+for the provision of production and support
+services (including new energy business) did
+not exceed RMB20.116 billion.
+The aggregate annual volume of transactions
+for the provision of sales, management and
+ancillary services did not exceed RMB6.202
+billion.
+The aggregate annual volume of transactions for
+FPSO vessel leases did not exceed RMB1.105
+billion.
+CNOOC LIMITED Annual Report 2023
+83
+REPORT OF THE DIRECTORS
+(ii)
+Sales of petroleum, natural gas products and green
+power products by the Company and its subsidiaries
+to CNOOC Group and/or its associates:
+(a) The aggregate sales of petroleum and natural
+gas products (other than long-term sales of
+natural gas and liquefied natural gas) did not
+exceed RMB298.356 billion.
+(b) The aggregate long-term sales of natural
+gas and liquefied natural gas did not exceed
+RMB38.382 billion.
+The aggregate sales of green power products
+is RMBO.
+The independent auditors of the Company and its
+subsidiaries have reviewed the continuing connected
+transactions referred to above and confirmed to the Board
+that the continuing connected transactions:
+1.
+2.
+3.
+4.
+have received the approval of the Board;
+were in accordance with the pricing policies for
+the transactions involving the provision of goods
+or services by the Company and its subsidiaries as
+stated in the Company's financial statements;
+were entered into in accordance with the relevant
+agreements governing the transactions; and
+have not exceeded the applicable caps.
+Please also refer to note 32 to the consolidated financial
+statements of this annual report for a summary of the
+related party transactions which include the Company
+and its subsidiaries' continuing connected transactions.
+Such related party transactions constitute connected
+transactions (including continuing connected transactions)
+as defined under Chapter 14A of the Listing Rules of
+Stock Exchange and the Rules Governing the Listing
+of Stocks on the SSE, and the Company has complied
+with the applicable requirements of Chapter 14A of the
+Listing Rules of Stock Exchange, the Listing Rules of
+SSE and relevant guidelines in relation to the connected
+transactions (including continuing connected transactions)
+for the year ended 31 December 2023.
+SHARE CAPITAL
+Please refer to note 30 to the consolidated financial
+statements on page 151 of this annual report for details
+of movements in the Company's total issued shares for
+the year ended 31 December 2023.
+EQUITY-LINKED AGREEMENT
+Save as disclosed in this annual report, there was no
+equity-linked agreement entered into by the Company
+during the year ended 31 December 2023.
+Between January and December 2023, CNOOC Petroleum
+North America ULC ("CPNA", an indirect wholly-owned
+subsidiary of the Company) repurchased and cancelled
+the following bonds issued by it as issuer in the over-the-
+counter market:
+2023
+(RMB million)