diff --git "a/China/15.Sinopec_$104.55 B_Energy/2019/results.txt" "b/China/15.Sinopec_$104.55 B_Energy/2019/results.txt"
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@@ -0,0 +1,48051 @@
+RMB million
+Net current liabilities
+Non-current liabilities
+Non-controlling interests
+Total equity attributable to owners of the Company
+Net assets per share (RMB)
+Adjusted net assets per share (RMB)
+As of 31 December
+2017
+1,066,455
+2016
+1,086,348
+2015
+2014
+1,113,611
+1,094,035
+2013
+1,012,703
+Non-current assets
+Items
+Unit: RMB million
+1.305
+8.26
+7.30
+5.23
+6.06
+8.03
+Return on net assets (%)
+7.06
+50,397
+6.56
+7.84
+11.62
+Net cash generated from operating activities per share (RMB)
+1.577
+1.772
+1.371
+1.267
+4.81
+Return on capital employed (%)
+73,282
+242,892
+4.860
+3 MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER ASBE AND IFRS PLEASE REFER TO PAGE 206 OF
+THE REPORT.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+5
+Principal Financial Data and Indicators
+Changes in Share Capital and
+Shareholdings of Principal Shareholders
+CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERS
+1
+CHANGES IN THE SHARE CAPITAL
+There is no change on the number and nature of shares of Sinopec Corp. during the reporting period
+2 NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS
+As of 31 December 2017, the total number of shareholders of Sinopec Corp. was 508,659 including 502,590 holders of domestic A shares and 6,069
+holders of overseas H shares. As of 28 February 2018, the total number of shareholders of Sinopec Corp. was 496,137. Sinopec Corp. has complied
+with requirement for minimum public float under the Hong Kong Listing Rules.
+(1) Shareholdings of top ten shareholders
+The shareholdings of top ten shareholders as of 31 December 2017 are listed as below:
+4.969
+4.899
+5.033
+5.585
+5.517
+197,440
+163,168
+181,831
+196,275
+201,540
+189,485
+126,770
+129,175
+120,241
+726,120
+710,994
+676,197
+54,348
+595,255
+54,691
+571,087
+5.997
+5.868
+5.873
+5.808
+111,964
+0.536
+0.399
+0.269
+Debentures payable
+31,370
+54,985
+(23,615)
+Financial expenses
+1,560
+6,611
+(5,051)
+(35.7) Mainly due to the decrease of crude oil trade deposit and internal
+borrowings received from the Sichuan-to-East China Pipeline Co.
+The Company dispatched an executive to the Board of SIBUR in
+2017 and it is able to exercise significant influence in SIBUR. So the
+Company turned the available for-sale financial assets to long term
+equity investment.
+Mainly due to increase in profit as well as the impact of timing of tax
+payment.
+(42.9) Parts of debentures payable are converted to non-current liabilities due
+within one year.
+(76.4) Mainly due to increase in profit, sufficient capital reserve and increase
+in interest revenue
+Income of investment
+19,060
+30,779
+36.0
+19,054
+52,886
+71,940
+Increase/(decrease)
+Amount Percentage
+(%)
+Reasons for change
+18,205
+36.2
+Mainly due to the increase in crude oil price and refined oil products
+export.
+Other receivables
+(11,719)
+16,467
+(9,129)
+Available-for-sale financial assets
+1,676
+11,408
+(9,732)
+(85.3)
+Taxes payable
+25,596
+(38.1) Mainly due to the income from restructuring of pipeline assets in 2016
+and the impact of equity acquisition of Shanghai SECCO in 2017.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+2 FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS
+95,444
+Profit attributable to owners of the Company
+51,244
+46,672
+32,512
+46,639
+66,348
+65,818
+Basic earnings per share (RMB)
+0.385
+0.269
+0.399
+0.571
+Diluted earnings per share (RMB)
+0.423
+0.385
+0.423
+Unit: Share
+56,411
+86,697
+Unit: RMB million
+Items
+Turnover and other operating revenues
+Operating profit
+Profit before taxation
+2017
+2,360,193
+80,151
+For the year ended 31 December
+2016
+1,930,911
+2014
+2,827,566
+2013
+2,881,928
+71,470
+77,193
+56,822
+73,439
+96,763
+2015
+2,020,375
+2016
+RMB million
+50,289
+Number of
+Name of shareholders
+Shares of other listed companies directly
+held by China Petrochemical Corporation
+Number of Shareholding
+Shares Held Percentage
+Name of Company
+Sinopec Engineering
+(Group) Co. Ltd
+Sinopec Oilfield Service
+2,907,856,000
+65.67%
+Corporation
+9,224,327,662
+65.22%
+Sinopec Oilfield Equipment
+Corporation
+351,351,000
+58.74%
+China Merchants Energy
+Shipping Co., Ltd
+912,886,426
+17.23%
+(2) Other than HKSCC Nominees Limited,
+there was no other legal person
+shareholder holding 10% or more of the
+total issued share capital of Sinopec
+Corp.
+(3) Basic information of the de facto
+controller
+It provides well-drilling services, well-
+logging services, downhole operation
+services, services in connection with
+manufacturing and maintenance of
+production equipment, engineering
+construction, utility services including
+water and power and social services.
+The controlling shareholder of
+Sinopec Corp. is China Petrochemical
+Corporation. Established in July 1998,
+China Petrochemical Corporation is a
+state-authorised investment organisation
+and a state-owned enterprise. The
+legal representative is Mr. Wang Yupu.
+Through re-organisation in 2000, China
+Petrochemical Corporation injected its
+principal petroleum and petrochemical
+businesses into Sinopec Corp. and
+retained certain petrochemical facilities.
+(1) Controlling shareholder
+There was no change in the controlling
+shareholder and the de facto controller of
+Sinopec Corp. during the reporting period.
+0.02(S)
+1.82(L)
+0.89(S)
+0.07(L)
+0.00(L)
+3.86(L)
+5.01(L)
+China Petrochemical Corporation is the
+de facto controller of Sinopec Corp.
+CO
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+3 ISSUANCE AND LISTING OF SECURITIES
+(1) Issuance of securities in reporting
+period
+There is no issuance of shares of Sinopec
+Corp. during the reporting period
+(2) Existing employee shares
+As at the end of the reporting period,
+there were no employee shares.
+4 CHANGES IN THE CONTROLLING
+SHAREHOLDERS AND THE DE FACTO
+CONTROLLER
+6
+8.94(L)
+(4) Diagram of the equity and controlling
+relationship between Sinopec Corp. and
+its de facto controller
+China Petrochemical
+Corporation
+We actively fulfilled our social responsibilities,
+and green and low-carbon development strategy.
+We successfully concluded the Clear Water,
+Blue Sky environmental project while smoothly
+implemented the Efficiency Doubling Plan.
+Our major pollutant emissions were lower
+than government criterias. Meanwhile, we
+made further achievements in our partnership
+assistance and targeted poverty alleviation
+programs. For the period of 2016 through
+2017, we donated an aggregate amount of RMB
+284 million to these causes. The Company
+actively participated in social and philanthropic
+activities. The Lifeline Express hospital train
+has provided free cataract surgeries for more
+than 40,000 impoverished people and is widely
+acclaimed throughout the country.
+Over the past three years, the Company's
+turnover and total assets have grown steadily.
+Our businesses have expanded rapidly, and our
+overall performance has continued to improve.
+In accordance with IFRS, the Company's total
+assets increased by 9.9% and our shareholders'
+equity increased by 22.4% compared with 2014.
+In addition, we delivered good returns to our
+shareholders, with total dividends declared for
+the three-year period amounting to RMB 108.8
+billion.
+These achievements are the product of the
+joint efforts of the Board, the management and
+the entire staff, reflecting their hard work and
+their determination to reform. The support of
+our shareholders and the wider community
+has also been indispensable. In accordance
+with regulatory requirements, the terms of
+office of the current Board of Directors and the
+Supervisory Committee will soon expire. Mr.
+Jiang Xiaoming and Mr. Andrew Y. Yan will step
+down as directors. They have demonstrated
+dedication and diligence throughout their terms
+of office and have made outstanding contribution
+to the Company's decision-making, standardised
+operations, reforms and development. On behalf
+of the Board, I would also like to express my
+heartfelt gratitude to all independent directors
+and supervisors for their hard work and
+contribution.
+In 2018, the global economy will continue to
+recover. While China's economic development
+model will shift from high-speed growth to high-
+quality development, domestic demand for
+oil and chemical products will remain robust.
+This year is an important link between the
+preceding and the following for carrying out the
+Company's 13th Five-year Development Plan.
+In view of the new requirements in the new
+era, the Company will adhere to an underlying
+principle of progressing at a steady pace and
+under a new development model that makes
+quality and efficiency our top priorities. We
+will deepen supply-side structural reforms and
+enhance our corporate governance with China's
+characteristics. We will also strive diligently
+to improve our production and operational
+standards, reinforce our management and
+ensure the Company's sustainable development.
+In our upstream operations, we will pursue
+opportunities for high-efficiency exploration and
+cost-effective development, maintain the stability
+of our oil output, increase our gas supplies and
+reduce costs. At the same time, we will optimize
+our resource structure and drive the rapid
+development of the natural-gas business. In the
+refining, we will further optimize structure and
+implement a lean management model, optimise
+refining layout, and increase concentration ratio.
+We will continue to revamp our refining projects
+and upgrade our refined oil products. In the oil
+products marketing business, we will coordinate
+efforts to enhance market development and
+efficiency and expand our domestic and overseas
+businesses. In addition, we will strengthen our
+network and logistics system, accelerate the
+development of our non-fuel operations, and
+intensify efforts to boost our sales volume and
+profitability. In the chemicals business, we will
+improve quality and profitability and focus on
+transformation and development. We emphasise
+on the high end of our value chain, with more
+attention on the development of fine chemicals,
+bio-chemicals and new materials. In 2018, the
+capital expenditure of the Company will be RMB
+117 billion.
+Looking ahead, the petroleum and chemical
+sectors are set to undergo significant and
+profound transformation. China's economy will
+see remarkable progress in its move towards
+high-quality development. Both opportunities
+and challenges lie ahead of us. It is our
+mission to build Sinopec Corp. into a world-
+class energy and chemical company and to
+drive its sustainable growth. We will adjust to
+overall market trends, adapt as our development
+warrants, and optimize our strategies and
+planning. In addition, we will adhere to our
+corporate strategy of reform, management,
+innovation and development, stressing the
+importance of quality development in our core
+businesses and accelerating the development
+of new businesses. We will strengthen efforts
+to make reforms that improve the Company's
+quality, efficiency and dynamism, and that
+enable sustainable and high-quality development.
+The Board has nominated an exceptional
+group of new members to join it. They include
+outstanding managers and leading experts
+in the academic, macro-economic, corporate
+management and petrochemical fields. Drawing
+on their far-ranging professional backgrounds
+and extensive work experience, they will share
+their insights with and add vitality to the Board,
+thus enhancing the Board's decision-making
+capabilities. The new session of the Board will
+help the Company keep pace with overall market
+trends through their comprehensive view of
+our businesses and their pragmatic approach
+to market developments. We will redouble our
+efforts to develop Sinopec Corp. into a world-
+class energy and chemical company and to
+build a better community, delivering superior
+operating results to our shareholders and giving
+back to society and our employees.
+Dai Houliang
+Vice Chairman & President
+Beijing, China
+23 March 2018
+CHINA PETROLEUM & CHEMICAL CORPORATION
+Annual Report 2017
+9
+solid resource foundation for promoting natural
+gas consumption in the Yangtze River Economic
+Belt. Moreover, we made continuous efforts to
+drive development of four world-class regional
+refining centers, sharpening our competitive
+edge. We took a market-driven approach to our
+refining and chemicals operations, vigorously
+promoting structural adjustments and increasing
+the production of high-value-added products
+to develop these businesses into our profit
+growth drivers. We actively coped with market
+competition, leading to steady growth in the
+sales volume of our refined oil products and
+the sustained rapid development of our non-
+fuel operations. We achieved record-breaking
+performance in various key operating indicators
+of the chemicals segment. As we continued to
+deepen our reform programs, the Company
+brought in new investors for the Sichuan-to-
+East China Pipeline Co., and introduced RMB
+22.8 billion. The mixed-ownership reform of
+Sinopec Marketing Company went smoothly,
+and we successfully introduced a flattened
+organisation structure in upstream enterprises.
+With an emphasis on innovation, we enhanced
+our mechanisms for commecializing scientific
+and technological achievements and focused
+on the development of core technologies in
+our key businesses. Technological innovations
+have become a pillar of our development.
+The Company won eight National Technology
+Invention Awards and five National Science
+and Technology Progress Awards, remaining
+a leading domestic company in the number
+of invention patents granted. Moreover, we
+capitalised on the opportunities created by the
+Belt and Road Initiative by investing in refining
+and chemical projects, and increasing our trade
+volumes.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+8
+Board's Statement
+71.32% *
+Sinopec Corp.
+Inclusive of 553,150,000 H shares held by
+Sinopec Century Bright Capital Investment
+Ltd. (overseas wholly-owned subsidiary of
+China Petrochemical Corporation) through
+HKSCC Nominees Limited.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+7
+ShareholShare anders
+BOARD'S STATEMENT
+*.
+Mr. Dai Houliang, Vice Chairman & President
+On behalf of the Board of Directors, I would
+like to express my sincere gratitude to our
+shareholders and the wider community for their
+interest and support.
+In 2017, international oil prices fluctuated and
+showed upward movement in the midst of a
+complex and changeable global political and
+economic environment. Domestic demand for
+natural gas and chemicals remained robust as
+the Chinese economy maintained its steady
+growth. Competition in the domestic refined oil
+market was fierce. As it made major decisions,
+the Board of Directors (the "Board") focused on
+steady and firm improvement, and adhered to
+its overarching strategies of promoting value.
+oriented growth, innovation-driven development,
+integrated resource allocation, openness
+to cooperation, and green and low-carbon
+development. With an emphasis on delivering
+returns to shareholders, we continued to focus
+on supply-side structural reform and stepped up
+our efforts to enhance the Company's efficiency,
+profitability and corporate governance.
+Over the past year, under the leadership of
+our management, the entire staff focused on
+optimisation, cost reduction, market expansion,
+structural adjustment, reform, foundation
+building, and risk management. As a result, our
+operating results were better than expected, and
+we met all performance targets for the year. In
+our upstream business, we emphasized high-
+efficiency exploration activities and cost-effective
+development. Our crude oil reserve replacement
+ratio reached 116%. At the same time, we
+worked hard to ensure a stable gas supply for
+the winter season, with gas production and sales
+volume hitting record highs. Taking advantage
+of our integrated value chain, which extends
+from refining to marketing and distribution,
+we actively responded to competitive market
+conditions. We achieved satisfactory results and
+further strengthened our competitive advantage.
+In our chemical operations, we adopted a
+customer-focused approach and enhanced the
+adjustments in our product and feedstock mix.
+Both the sales volume and profitability of the
+chemicals segment reached record highs.
+In accordance with IFRS, the Company's
+turnover and other operating revenues reached
+RMB 2.36 trillion in 2017, up by 22.2% from
+the previous year. Profit attributable to equity
+shareholders of the Company was RMB 51.244
+billion. Basic earnings per share were RMB
+0.423, up by 9.9% from year on year. Taking
+into account the Company's profitability,
+cash position, shareholder return and future
+business development, the Board proposed a
+final dividend of RMB 0.40 per share, which
+combined with the interim dividend of RMB 0.10
+per share, brought the full-year dividend to RMB
+0.50 per share, up by 100.8% from the previous
+year.
+During the three years of the sixth session of
+the Board, the global economy recovered slowly,
+and China's economy entered a "new normal"
+phase. International oil prices fluctuated at
+low levels, with heavy repercussions for the
+upstream sector. At the same time, competition
+in the refined oil market intensified, with the
+government introducing a series of far-reaching
+policies in the oil and petrochemical industries.
+In the face of a complex and challenging
+operating environment, the Board emphasised on
+its principles of innovation, coordination, green
+development, openness and shared growth.
+We formulated our five major development
+strategies, 13th Five-Year Development Plan
+and Three-Year Rolling Development Program,
+taking advantage of our integrated value chain
+to accelerate the Company's transformation and
+structural adjustments, eventually we achieved
+excellent operating performance. At the same
+time, we made outstanding progress in our
+corporate governance, corporate development,
+reforms and adjustments, and technological
+innovation, as well as in the fulfillment of our
+social responsibilities.
+Over the past three years, we consistently
+enhanced the composition and operation of the
+Board and the Supervisory Committee. The effort
+of confirming the role of the Chinese Communist
+Party in the Company's corporate governance
+facilitated a better corporate governance
+mechanism featuring scientific decision-making
+and effective implementation and supervision.
+We focused on improving product quality,
+enhancing our efficiency and upgrading our
+businesses, thus driving the Company's
+sustainable development. In our upstream
+business, we implemented a low-cost strategy to
+address the challenge of low oil prices, focused
+on high-efficiency exploration and development,
+and enlarged our proved reserves to lay a
+stronger foundation for sustainable development.
+We also developed our natural gas business as
+a new driver for profit growth. We built up the
+production capacity of the Fuling shale gas field
+to 10 billion cubic meters per year, laying a
+Dear Shareholders and Friends:
+Approximate percentage
+of Sinopec Corp.'s issued
+share capital (H Share) (%)
+984,349,338(L)
+1,278,173,372(L)
+20,400(L)
+A Share
+0.33
+400,982,945
+39,831,541
+0
+中央匯金資產管理有限責任公司
+A Share
+0.27
+322,037,900
+0
+長江證券股份有限公司
+A Share
+0.07
+88,458,695
+17,261,400
+HKSCC Nominees Limited
+0
+Unknown
+153,819
+1,470,304,825
+HKSCC Nominees Limited²
+China Petrochemical Corporation
+State-owned Share
+Percentage of
+Shareholders shareholdings %
+Total number of
+shares held
+85,792,671,101
+Changes of shares subject to
+shareholding pledges or lock-up
+70.86
+中國工商銀行-上證50交易型開放式指數證券投資基金
+0
+H Share
+20.96
+25,379,806,872
+中國證券金融股份有限公司
+A Share
+2.75
+3,331,730,143
+0
+A Share
+0.07
+80,551,930
+We are not aware of any connected relationship or acting in concert among or between the above-mentioned shareholders.
+(2) Information disclosed by the shareholders of H shares in accordance with the Securities and Futures Ordinance (SFO)
+Name of shareholders
+BlackRock, Inc.
+JPMorgan Chase & Co.
+Schroders Plc.
+Status of shareholders
+Interest of corporation controlled by the
+substantial shareholder
+Statement on the connected relationship or acting in concert among the above-mentioned shareholders:
+Beneficial owner
+Trustee (exclusive of passive trustee)
+Custodian corporation/approved lending agent
+Investment manager
+(L): Long position, (S): Short position
+Number of shares
+interests held or
+regarded as held (H Share)
+2,280,210,944(L)
+4,080,000(S)
+463,731,470(L)
+226,733,320(S)
+17,001,962(L)
+Investment manager
+Nature of
+Note 2: Sinopec Century Bright Capital Investment Limited, an overseas wholly-owned subsidiary of China Petrochemical Corporation, holds 553,150,000 H shares,
+accounting for 0.46% of the total issued share capital of Sinopec Crop. Those shareholdings are included in the total number of the shares held by HKSCC
+Nominees Limited.
+0
+2,693,300
+交通銀行股份有限公司-滙豐晉信大盤股票型
+證券投資基金
+A Share
+0.06
+68,970,054
+23,033,290
+Note 1: As compared with the number of shares held as of 31 December 2016.
+國泰君安證券股份有限公司
+0.05
+全國社保基金一一五組合
+A Share
+0.04
+54,884,077
+54,190,722
+(76,251,129)
+54,190,722
+200 000
+A Share
+68,494
+Accounts receivable
+RMB million
+32,281
+45,582
+29,713
+53.4
+28,901
+190,935
+214,543
+(11.0)
+165,740
+For the year of 2017
+Items
+Operating income
+First
+Quarter
+RMB million
+Second
+Third
+10.1
+46,416
+51,119
+56,093
+2016
+RMB million
+Change
+2015
+%
+RMB million
+2,360,193
+1,930,911
+Fourth
+22.2
+86,965
+77,389
+12.4
+51,553
+86,573
+79,877
+8.4
+2,020,375
+RMB million
+Quarter
+Quarter
+8,864
+45,582
+47,571
+50,346
+79,742
+190,935
+As of 31 December
+2017
+Items
+Total assets
+Total liabilities
+RMB million
+1,595,504
+741,434
+2016
+RMB million
+Change
+10,619
+9,559
+16,540
+13,276
+Net cash flow from operating activities
+Total
+RMB million
+RMB million
+RMB million
+RMB million
+582,185
+Net profit attributable to equity shareholders of the Company
+Net profit attributable to equity shareholders of the Company
+Quarter
+16,633
+579,118
+615,238
+2,360,193
+11,281
+12,746
+51,119
+excluding extraordinary gains and losses
+583,652
+10,459
+Net cash flow from operating activities
+Net profit attributable to equity shareholders of the Company excluding
+extraordinary gains and losses
+Net profit attributable to equity shareholders of the Company
+29
+Significant Events
+40
+Connected Transactions
+43
+Corporate Governance
+50
+Report of the Board of Directors
+60
+Report of the Board of Supervisors
+62
+Directors, Supervisors, Senior
+Management and Employees
+78
+Principal Wholly-owned and
+Management's Discussion and Analysis
+19
+Business Review and Prospects
+11
+Slope SINOPEC
+2017
+Annual Report and Accounts
+(STOCK CODE
+A Share: 600028; H Share: 00386; ADR : SNP)
+中国石油化工股份有限公司
+SINOPEC CORP.
+Controlled Subsidiaries
+CONTENTS
+6
+Company Profile
+Principal Financial Data and Indicators
+Changes in Share Capital and Shareholdings
+of Principal Shareholders
+8
+Board's Statement
+23
+79
+Financial Statements
+213
+CSRC: China Securities Regulatory Commission.
+Hong Kong Stock Exchange: The Stock Exchange of Hong Kong Limited
+Hong Kong Listing Rules: Listing Rules of the Hong Kong Stock Exchange
+CONVERSION:
+For domestic production of crude oil, 1 tonne = 7.1 barrels;
+For overseas production of crude oil: 2017, 1 tonne = 7.21 barrels; 2016, 1 tonne = 7.20 barrels; 2015, 1 tonne = 7.21 barrels;
+For production of natural gas, 1 cubic meter = 35.31 cubic feet;
+Refinery throughput is converted at 1 tonne = 7.35 barrels.
+RMC: Oil and Natural Gas Reserves Management Committee of the Company;
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+1 FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH ASBE
+(1) Principal financial data
+For the year ended 31 December
+2017
+Items
+Operating income
+Operating profit
+Profit before taxation
+PRINCIPAL FINANCIAL DATA AND INDICATORS
+2015
+Sichuan-to-East China Pipeline Co.: Sinopec Sichuan-to-East China Natural Gas Pipeline Co., Ltd;
+Sinopec group: China Petrochemical Corporation and its subsidiaries;
+Corporate Information
+214
+Documents for Inspection
+This annual report includes forward-looking statements. All statements,
+other than statements of historical facts, that address activities, events or
+developments that the Company expects or anticipates will or may occur
+in the future (including but not limited to projections, targets, reserve
+and other estimates and business plans) are forward-looking statements.
+The Company's actual results or developments may differ materially
+from those indicated by these forward-looking statements as a result
+of various factors and uncertainties. The Company makes the forward-
+looking statements referred to herein as at 23 March 2018 and unless
+required by regulatory authorities, the Company undertakes no obligation
+to update these statements.
+2
+Company Profile
+COMPANY PROFILE
+Shanghai SECCO: Shanghai SECCO Petrochemical Company Limited;
+IMPORTANT NOTICE: THE BOARD OF DIRECTORS, THE BOARD OF SUPERVISORS, DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF
+SINOPEC CORP. WARRANT THAT THERE ARE NO FALSE REPRESENTATIONS, MISLEADING STATEMENTS OR MATERIAL OMISSIONS IN THIS
+ANNUAL REPORT, AND JOINTLY AND SEVERALLY ACCEPT FULL RESPONSIBILITY FOR THE AUTHENTICITY, ACCURACY AND COMPLETENESS
+OF THE INFORMATION CONTAINED IN THIS ANNUAL REPORT. THERE IS NO OCCUPANCY OF NON-OPERATING FUNDS BY THE CONTROLLING
+SHAREHOLDERS OF SINOPEC CORP. MR. JIAO FANGZHENG AND MR. MA YONGSHENG, DIRECTORS, MR. FAN GANG, INDEPENDENT NON-
+EXECUTIVE DIRECTOR, DID NOT ATTEND THE SEVENTEENTH MEETING OF THE SIXTH SESSION OF THE BOARD DUE TO OFFICIAL DUTIES. MR.
+JIAO FANGZHENG AUTHORISED MR. DAI HOULIANG, VICE CHAIRMAN AND PRESIDENT, MR. MA YONGSHENG AUTHORISED MR. LI YUNPENG,
+DIRECTOR, AND MR. FAN GANG AUTHORISED MR. TANG MIN, INDEPENDENT NON-EXECUTIVE DIRECTOR, TO VOTE ON THEIR BEHALVES IN
+RESPECT OF THE RESOLUTIONS PUT FORWARD AT THE MEETING. MR. DAI HOULIANG, VICE CHAIRMAN AND PRESIDENT, MR. WANG DEHUA,
+CHIEF FINANCIAL OFFICER AND HEAD OF THE FINACIAL DEPARTMENT OF SINOPEC CORP. WARRANT THE AUTHENTICITY AND COMPLETENESS
+OF THE FINANCIAL STATEMENTS CONTAINED IN THIS ANNUAL REPORT. THE AUDIT COMMITTEE OF SINOPEC CORP. HAS REVIEWED THE
+ANNUAL RESULTS OF SINOPEC CORP. FOR THE YEAR ENDED 31 DECEMBER 2017.
+AS APPROVED BY THE 17TH MEETING OF THE SIXTH SESSION OF THE BOARD OF DIRECTORS OF SINOPEC CORP., THE BOARD PROPOSED A
+FINAL CASH DIVIDEND OF RMB 0.40 (TAX INCLUSIVE) PER SHARE FOR 2017, COMBINING WITH THE INTERIM CASH DIVIDEND OF RMB 0.10 (TAX
+INCLUSIVE) PER SHARE, THE TOTAL CASH DIVIDEND FOR 2017 WILL BE RMB 0.50 (TAX INCLUSIVE) PER SHARE. THE DIVIDEND PROPOSAL IS
+SUBJECT TO THE SHAREHOLDERS' APPROVAL AT THE ANNUAL GENERAL MEETING FOR THE YEAR 2017.
+COMPANY PROFILE
+Sinopec Corp. is one of the largest integrated energy and chemical companies in China. Its principal operations include the exploration and production,
+pipeline transportation and sale of petroleum and natural gas; the production, sale, storage and transportation of refinery products, petrochemical
+products, coal chemical products, synthetic fibre, and other chemical products; the import and export, including an import and export agency
+business, of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research,
+development and application of technologies and information.
+DEFINITIONS:
+In this report, unless the context otherwise requires, the following terms shall have the meaning set out below:
+Sinopec Corp.: China Petroleum & Chemical Corporation;
+Company: Sinopec Corp. and its subsidiaries;
+China Petrochemical Corporation: our controlling shareholder, China Petrochemical Corporation;
+THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2017 OF THE COMPANY PREPARED IN ACCORDANCE WITH THE PRC
+ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (ASBE) AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) HAVE BEEN
+AUDITED BY PRICEWATERHOUSECOOPERS ZHONG TIAN LLP AND PRICEWATERHOUSECOOPERS RESPECTIVELY. BOTH FIRMS HAVE ISSUED
+STANDARD UNQUALIFIED AUDITOR'S REPORT.
+%
+RMB million
+1,498,609
+2015
+RMB million
+665
+112
+(3,987)
+(5,002)
+(518)
+(20,562)
+(943)
+(3,941)
+690
+1,367
+(86)
+(6,512)
+976
+(5,536)
+(22,164)
+5,578
+387
+(134)
+(4,915)
+1,060
+2016
+RMB million
+1,489
+133
+1,518
+152
+(4,783)
+(148)
+RMB million
+2017
+Principal Financial Data and Indicators
+PRINCIPAL FINANCIAL DATA AND INDICATORS (CONTINUED)
+(3) Extraordinary items and corresponding amounts
+Items
+Net loss on disposal of non-current assets
+Donations
+Government grants
+Gain on holding and disposal of various investments
+(16,586)
+Investment income on loss of control and remeasuring interests in pipeline company
+Other non-operating expenses, net
+Gain on business combination under the same control
+Subtotal
+Tax effect
+Total
+Attributable to: Equity shareholders of the Company
+Minority interests
+(4) Items measured by fair values
+For the year ended 31 December
+(Income)/expenses
+Gain on remeasurement of interests in Shanghai SECCO
+(3,855)
+(5,537)
+1
+(16,703)
+117
+51,196
+51,196
+(3,448)
+49,235
+52,683
+The table below sets forth reasons for those changes where the fluctuation was more than 30% during the reporting period:
+Unit: RMB million
+2,407
+Influence
+of the year
+41
+(1,105)
+(1,486)
+196
+(2,354)
+As of 31 December
+2017
+Items
+on the profit
+4
+(1,617)
+(836)
+(3,380)
+(475)
+Items
+Available-for-sale financial assets
+Derivative financial instruments
+Cash flow hedging
+Financial assets at fair value through profit and loss
+Total
+(4,024)
+(5) Significant changes of items in the financial statements
+End of
+the year
+Changes
+262
+178
+(84)
+314
+(522)
+Beginning of
+the year
+Board's Statement
+Principal Financial Data and Indicators
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+RMB
+%
+2015
+RMB
+Basic earnings per share
+0.422
+0.383
+10.2
+0.267
+Diluted earnings per share
+0.422
+0.383
+10.2
+0.267
+Basic earnings per share (excluding extraordinary gains and losses)
+Weighted average return on net assets (%)
+0.376
+RMB
+Items
+Change
+2016
+6.5
+1,447,268
+666,084
+11.3
+657,703
+Total equity attributable to equity shareholders of the Company
+Total number of shares (1,000 shares)
+727,244
+0.245
+712,232
+677,538
+121,071,210
+121,071,210
+121,071,210
+(2) Principal financial indicators
+For the year ended 31 December
+2017
+2.1
+53.5
+0.239
+7.14
+RMB
+2016
+RMB
+Change
+2015
+%
+RMB
+Net assets attributable to equity shareholders of the Company per share
+Liabilities to assets ratio (%)
+Items
+6.007
+2.1
+5.606
+46.47
+44.45
+2.02
+percentage
+45.44
+points
+5.883
+3
+2017
+1.371
+6.68
+0.46
+5.07
+percentage
+points
+Weighted average return (excluding extraordinary gains and losses)
+on net assets (%)
+6.37
+As of 31 December
+4.33
+4.52
+percentage
+points
+Net cash flow from operating activities per share
+1.577
+1.772
+(11.0)
+2.04
+中国石化
+中国石化
+The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the Company and its
+subsidiaries. Control means an entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
+to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial
+statements from the date that control commences until the date that control ceases.
+(6) Fixed assets and construction in progress
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+94
+94
+The impairment assessment and provision accrual on investments in subsidiaries, associates and joint ventures are stated in Note 3(11).
+Fixed assets represent the tangible assets held by the Group using in the production of goods, rendering of services and for operation and
+administrative purposes with useful life over one year.
+(c) The impairment assessment method and provision accrual on investment
+The Group recognises its share of the investee's net profits or losses after making appropriate adjustments to align the accounting policies
+or accounting periods with those of the Group based on the fair values of the investee's net identifiable assets at the time of acquisition.
+Under the equity accounting method, unrealised profits and losses resulting from transactions between the Group and its associates or joint
+ventures are eliminated to the extent of the Group's interest in the associates or joint ventures. Unrealised losses resulting from transactions
+between the Group and its associates or joint ventures are fully recognised in the event that there is an evidence of impairment.
+Where the initial investment cost of a long-term equity investment exceeds the Group's interest in the fair value of the investee's identifiable
+net assets at the date of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is
+less than the Group's interest in the fair value of the investee's identifiable net assets at the time of acquisition, the investment is initially
+recognised at the investor's share of the fair value of the investee's identifiable net assets, and the difference is charged to profit or loss.
+After the acquisition of the investment, the Group recognises its share of the investee's net profits or losses and other comprehensive income
+as investment income or losses and other comprehensive income, and adjusts the carrying amount of the investment accordingly. Once the
+investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the
+Group.
+The Group's accounting treatments when adopting the equity method include:
+The initial cost of investment in joint ventures and associates is stated at the consideration paid except for cash dividends or profits
+distributions declared but unpaid at the time of acquisition and therefore included in the consideration paid should be deducted if the
+investment is made in cash. Under the circumstances that the long-term investment is obtained through non-monetary asset exchange, the
+initial cost of the investment is stated at the fair value of the assets exchanged if the transaction has commercial substance, the difference
+between the fair value of the assets exchanged and its carrying amount is charged to profit or loss; or stated at the carrying amount of the
+assets exchanged if the transaction lacks commercial substance.
+An investment in a joint ventures or an associate is accounted for using the equity method, unless the investment is classified as held for
+sale.
+An associate is the investee that the Group has significant influence on their financial and operating policies. Significant influence represents
+the right to participate in the financial and operating policy decisions of the investee but is not control or joint control over the establishment
+of these policies. The Group generally considers the following circumstances in determining whether it can exercise significant influence
+over the investee: whether there is representative appointed to the board of directors or equivalent governing body of the investee; whether
+to participate in the investee's policy-making process; whether there are significant transactions with the investees; whether there is
+management personnel sent to the investee; whether to provide critical technical information to the investee.
+A joint venture is an incorporated entity over which the Group, based on legal form, contractual terms and other facts and circumstances,
+has joint control with the other parties to the joint venture and rights to the net assets of the joint venture. Joint control is the contractually
+agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of
+the Group and the parties sharing control.
+(b) Investment in joint ventures and associates
+The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment and
+any long-term interest that is in substance forms part of the Group's net investment in the associate or the joint ventures is reduced to
+zero, except to the extent that the Group has an obligation to assume additional losses. However, if the Group has incurred obligations for
+additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standard on contingencies,
+the Group continues recognising the investment losses and the provision. Where net profits are subsequently made by the associate or joint
+venture, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
+The Group adjusts the carrying amount of the long-term equity investment for changes in owners' equity of the investee other than those
+arising from net profits or losses and other comprehensive income, and recognises the corresponding adjustment in capital reserve.
+(5) Long-term equity investments (Continued)
+Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(11)). Construction in
+progress is stated in the balance sheet at cost less impairment losses (see Note 3(11)).
+Construction in progress is transferred to fixed assets when the asset is ready for its intended use. No depreciation is provided against
+construction in progress.
+Financial Statements (PRC)
+Financial Statements (PRC)
+95
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes produced and reserves.
+The Group estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into consideration
+the anticipated method of dismantlement required in accordance with the industry practices. These estimated future dismantlement costs are
+discounted at credit-adjusted risk-free rate and are capitalised as oil and gas properties, which are subsequently amortised as part of the costs
+of the oil and gas properties.
+The acquisition cost of mineral interest is capitalised as oil and gas properties. Costs of development wells and related support equipment are
+capitalised. The cost of exploratory wells is initially capitalised as construction in progress pending determination of whether the well has found
+proved reserves. Exploratory well costs are charged to expenses upon the determination that the well has not found proved reserves. However,
+in the absence of a determination of the discovery of proved reserves, exploratory well costs are not carried as an asset for more than one
+year following completion of drilling. If, after one year has passed, a determination of the discovery of proved reserves cannot be made, the
+exploratory well costs are impaired and charged to expense. All other exploration costs, including geological and geophysical costs, are charged
+to profit or loss in the year as incurred.
+Oil and gas properties include the mineral interests in properties, wells and related support equipment arising from oil and gas exploration and
+production activities.
+The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset
+to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing
+costs (see Note 3(18)), and any other costs directly attributable to bringing the asset to working condition for its intended use. According to legal
+or contractual obligations, costs of dismantling and removing the items and restoring the site on which the related assets located are included in
+the initial cost.
+3%
+(7) Oil and gas properties
+Useful lives, residual values and depreciation methods are reviewed at least each year end.
+Equipment, machinery and others
+Plants and buildings
+Other than oil and gas properties, the cost of fixed assets less residual value and accumulated impairment losses is depreciated using the
+straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale. The estimated useful lives and the
+estimated rate of residual values adopted for respective classes of fixed assets are as follows:
+The Group terminates the recognition of an item of fixed asset when it is in a state of disposal or it is estimated that it is unable to generate
+any economic benefits through use or disposal. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined
+as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of
+retirement or disposal.
+The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the
+recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed
+assets are recognised in profit or loss as incurred.
+Where the individual component parts of an item of fixed asset have different useful lives or provide benefits to the Group in different patterns
+thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset.
+Estimated Estimated rate
+useful life of residual value
+12.50 years
+3%
+4.30 years
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+The assets and liabilities of foreign operation are translated into Renminbi at the spot exchange rates at the balance sheet date. The equity
+items, excluding “Retained earnings", are translated into Renminbi at the spot exchange rates at the transaction dates. The income and
+expenses of foreign operation are translated into Renminbi at the spot exchange rates or an exchange rate that approximates the spot exchange
+rates on the transaction dates. The resulting exchange differences are separately presented as other comprehensive income in the balance sheet
+within equity. Upon disposal of a foreign operation, the cumulative amount of the exchange differences recognised in which relate to that foreign
+operation is transferred to profit or loss in the year in which the disposal occurs.
+Foreign currency monetary items are translated at the PBOC rates at the balance sheet date. Exchange differences, except for those directly
+related to the acquisition, construction or production of qualified assets, are recognised as income or expenses in the income statement. Non-
+monetary items denominated in foreign currency measured at historical cost are not translated. Non-monetary items denominated in foreign
+currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. The difference
+between the translated amount and the original currency amount is recognised as other comprehensive income, if it is classified as available-for-
+sale financial assets; or charged to the income statement if it is measured at fair value through profit or loss.
+(2) Transactions in foreign currencies and translation of financial statements in foreign currencies
+Foreign currency transactions are, on initial recognition, translated into Renminbi at the spot exchange rates quoted by the People's Bank of
+China ("PBOC rates") at the transaction dates.
+The unrealised profit or loss arising from the sale of assets by the Company to its subsidiaries is eliminated in full against the net profit
+attributed to shareholders; the unrealised profit or loss from the sale of assets by subsidiaries to the Company is eliminated according to the
+distribution ratio between shareholders of the parent company and minority interests. For sale of assets that occurred between subsidiaries,
+the unrealised gains and losses is eliminated according to the distribution ratio for its subsidiaries seller between net profit attributable to
+shareholders of the parent company and minority interests.
+Where the accounting policies and accounting period adopted by the subsidiaries are different from those adopted by the Company,
+adjustments are made to the subsidiaries' financial statements according to the Company's accounting policies and accounting period. Intra-
+group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated in preparing the
+consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised
+gains but only to the extent that there is no evidence of impairment.
+The excess of the loss attributable to the minority interests during the period over the minority interests' share of the equity at the beginning
+of the reporting period is deducted from minority interests.
+Minority interest is presented separately in the consolidated balance sheet within shareholders' equity. Net profit or loss attributable to
+minority shareholders is presented separately in the consolidated income statement below the net profit line item.
+In a business combination involving entities not under common control achieved in stages, the Group remeasures its previously held equity
+interest in the acquiree on the acquisition date. The difference between the fair value and the net book value is recognised as investment
+income for the year. If other comprehensive income was recognised regarding the equity interest previously held in the acquiree before the
+acquisition date, the relevant other comprehensive income is transferred to investment income in the period in which the acquisition occurs.
+Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the Group
+derecognises assets, liabilities, minority interests and other equity items related to the subsidiary. The remaining equity investment is
+remeasured to fair value at the date in which control is lost. The sum of consideration received from disposal of equity investment and the
+fair value of the remaining equity investment, net of the fair value of the Group's previous share of the subsidiary's identifiable net assets
+recorded from the acquisition date, is recognised in investment income in the period in which control is lost. Other comprehensive income
+related to the previous equity investment in the subsidiary, is transferred to investment income when control is lost. Other comprehensive
+income related to the equity investment of the orginal subsidiary shall be converted into the current investment income in the event of loss of
+control.
+(3) Cash and cash equivalents
+(c) Method for preparation of consolidated financial statements (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+91
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Where the Company acquired a minority interest from a subsidiary's minority shareholders, the difference between the investment cost and
+the newly acquired interest into the subsidiary's identifiable net assets at the acquisition date is adjusted to the capital reserve (capital
+surplus) in the consolidated balance sheet. Where the Company partially disposed an investment of a subsidiary that do not result in a loss
+of control, the difference between the proceeds and the corresponding share of the interest into the subsidiary is adjusted to the capital
+reserve (capital surplus) in the consolidated balance sheet. If the credit balance of capital reserve (capital surplus) is insufficient, any excess
+is adjusted to retained profits.
+(1) Accounting treatment of business combination involving entities under common control and not under common control (Continued)
+Cash and cash equivalents comprise cash on hand, demand deposits, short-term and highly liquid investments which are readily convertible into
+known amounts of cash and are subject to an insignificant risk of change in value.
+92
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Financial Statements (PRC)
+Financial Statements (PRC)
+93
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+An investment in a subsidiary acquired otherwise than through a business combination is initially recognised at actual purchase cost if the
+Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity
+securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by investors.
+For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial
+investment cost comprises the aggregate of the fair values of assets transferred, liabilities incurred or assumed, and equity securities issued
+by the Company, in exchange for control of the acquiree. For a long-term equity investment obtained through a business combination not
+involving enterprises under common control, if it is achieved in stages, the initial cost comprises the carrying value of previously-held equity
+investment in the acquiree immediately before the acquisition date, and the additional investment cost at the acquisition date.
+The initial investment cost of a long-term equity investment obtained through a business combination involving entities under common
+control is the Company's share of the carrying amount of the subsidiary's equity at the combination date. The difference between the initial
+investment cost and the carrying amounts of the consideration given is adjusted to share premium in capital reserve. If the balance of the
+share premium is insufficient, any excess is adjusted to retained earnings.
+In the Company's separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method.
+Except for cash dividends or profits distributions declared but not yet distributed that have been included in the price or consideration paid
+in obtaining the investments, the Company recognises its share of the cash dividends or profit distributions declared by the investee as
+investment income irrespective of whether these represent the net profit realised by the investee before or after the investment. Investments
+in subsidiaries are stated at cost less impairment losses (see Note 3(11)) in the balance sheet. At initial recognition, such investments are
+measured as follows:
+(a) Investment in subsidiaries
+(5) Long-term equity investments
+Inventories are recorded by perpetual method.
+Inventories include raw materials, work in progress, semi-finished goods, finished goods and reusable materials. Reusable materials include
+low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets.
+Reusable materials are amortised in full when received for use. The amounts of the amortisation are included in the cost of the related assets or
+profit or loss.
+Any excess of the cost over the net realisable value of each item of inventories is recognised as a provision for diminution in the value of
+inventories. Net realisable value is the estimated selling price in the normal course of business less the estimated costs of completion and the
+estimated costs necessary to make the sale and relevant taxes. The net realisable value of materials held for use in the production is measured
+based on the net realisable value of the finished goods in which they will be incorporated. The net realisable value of the quantity of inventory
+held to satisfy sales or service contracts is measured based on the contract price. If the quantities held by the Group are more than the
+quantities of inventories specified in sales contracts, the net realisable value of the excess portion of inventories is measured based on general
+selling prices.
+At the balance sheet date, inventories are stated at the lower of cost and net realisable value.
+Inventories are initially measured at cost. Cost includes the cost of purchase and processing, and other expenditures incurred in bringing the
+inventories to their present location and condition. The cost of inventories is calculated using the weighted average method. In addition to the
+cost of purchase of raw material, work in progress and finished goods include direct labour and an appropriate allocation of manufacturing
+overhead costs.
+(4) Inventories
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(8) Intangible assets
+(d) Hedge accounting (Continued)
+Fair value hedges
+(10) Financial Instruments (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+98
+When a hedging instrument expires or is sold, terminated or exercised, or the hedge no longer meets the criteria for hedge accounting,
+the Group will discontinue the hedge accounting treatments prospectively. In this case, the gain or loss on the hedging instrument that
+remains recognised directly in shareholders' equity from the period when the hedge was effective shall not be reclassified into profit or
+loss and is recognised in accordance with the above policy when the forecast transaction occurs. If the forecast transaction is no longer
+expected to occur, the gain or loss on the hedging instrument that remains recognised directly in shareholders' equity from the period
+when the hedge was effective shall be reclassified into profit or loss immediately.
+A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm
+commitment, or an identified portion of such an asset, liability or unrecognised firm commitment.
+For cash flow hedges, other than those covered by the preceding two policy statements, the associated gain or loss is removed from
+shareholders' equity and recognised in profit or loss in the same period or periods during which the hedged forecast transaction affects
+profit or loss.
+the cumulative change in present value of the expected future cash flows on the hedged item from inception of the hedge.
+The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.
+If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, the associated gain or loss is removed
+from shareholders' equity, included in the initial cost of the non-financial asset, and recognised in profit or loss in the same year during
+which the non-financial asset affects profit or loss. However, if the Group expects that all or a portion of a net loss recognised directly in
+shareholders' equity will not be recovered in future accounting periods, it reclassifies the amount that is not expected to be recovered into
+profit or loss.
+the cumulative gain or loss on the hedging instrument from inception of the hedge;
+A cash flow hedge is a hedge of the exposure to variability in cash flows. The portion of the gain or loss on the hedging instrument that
+is determined to be an effective hedge is recognised directly in shareholders' equity as a separate component. That effective portion is
+adjusted to the lesser of the following (in absolute amounts):
+Cash flow hedges
+The hedge is assessed by the Group for effectiveness on an ongoing basis and determined to have been highly effective throughout the
+accounting periods for which the hedging relationship was designated. The Group uses a ratio analysis to assess the subsequent effectiveness
+of a cash flow hedge, and uses a regression analysis to assess the subsequent effectiveness of a fair value hedge.
+A hedging instrument is a designated derivative whose changes in fair value or cash flows are expected to offset changes in the fair value or
+cash flows of the hedged item.
+Hedged items are the items that expose the Group to risks of changes in fair value or future cash flows and that are designated as being
+hedged. The Group's hedged items include fixed-rate borrowings that expose the Group to risk of changes in fair values, floating rate
+borrowings that expose the Group to risk of variability in cash flows, and a forecast transaction that is settled with a fixed amount of foreign
+currency and expose the Group to foreign currency risk, and a forecast transaction that is settled with an undetermined future market price
+and exposes the Group to risk of variability in cash flows, etc.
+Hedge accounting is a method which recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument
+and the hedged item in the same accounting period(s).
+If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gain
+or loss is removed from equity and recognised in profit or loss in the same period during which the financial asset or financial liability
+affects profit or loss. However, if the Group expects that all or a portion of a net loss recognised directly in shareholders' equity will not
+be recovered in future accounting periods, it reclassifies the amount that is not expected to be recovered into profit or loss.
+The gain or loss from remeasuring the hedging instrument at fair value is recognised in profit or loss. The gain or loss on the hedged
+item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised in profit or loss.
+When a hedging instrument expires or is sold, terminated or exercised, or no longer meets the criteria for hedge accounting, the Group
+discontinues prospectively the hedge accounting treatments. If the hedged item is a financial instrument measured at amortised cost, any
+adjustment to the carrying amount of the hedged item is amortised to profit or loss from the adjustment date to the maturity date using
+the recalculated effective interest rate at the adjustment date.
+Hedge of net investment in foreign operation
+Financial Statements (PRC)
+99
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+(vi) a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
+(v) significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and the cost of
+investment may not be recoverable; and
+(iv) due to the significant financial difficulty of the debtor, financial assets is unable to be traded in active market;
+(iii) it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
+(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
+(i) significant financial difficulty of the debtor;
+Objective evidences of impairment include but not limited to:
+The carrying amount of financial assets (except those financial assets stated at fair value with changes in the fair values charged to profit or
+loss) are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists,
+impairment loss is provided.
+(a) Impairment of financial assets
+Where the obligations for financial liabilities are completely or partially discharged, the entire or parts of financial liabilities are derecognised.
+(11) Impairment of financial assets and non-financial long-term assets
+the sum of the consideration received and any cumulative gain or loss that had been recognised directly in equity.
+the carrying amounts; and
+On derecognition of a financial asset, the difference between the following amounts is recognised in profit or loss:
+The Group derecognises a financial asset when the contractual right to receive cash flows from the financial asset expires, or where the Group
+transfers substantially all risks and rewards of ownership of the financial asset, or where the Group neither transfers nor retains substantially
+all risks and rewards of ownership of the financial asset but the Group gives up the control of a financial asset.
+(e) Derecognition of financial assets and financial liabilities
+A hedge of a net investment in a foreign operation is a hedge of the exposure to foreign exchange risk associated with a net investment
+in a foreign operation. The portion of the gain or loss on a hedging instrument that is determined to be an effective hedge is recognised
+directly in equity as a separate component until the disposal of the foreign operation, at which time the cumulative gain or loss
+recognised directly in equity is recognised in profit or loss. The ineffective portion is recognised immediately in profit or loss.
+(d) Hedge accounting
+Where the Company acquires a subsidiary during the reporting year through a business combination involving entities not under common
+control, the identifiable assets, liabilities and results of operations of the subsidiaries are consolidated into consolidated financial statements
+from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date.
+(10) Financial Instruments (Continued)
+for the year ended 31 December 2017
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+96
+Held-to-maturity investment includes non-derivative financial assets with fixed or determinable recoverable amount and fixed maturity that
+the Group has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are
+measured at amortised cost using the effective interest method.
+Loans and Receivables are non-derivative financial assets with fixed or determinable recoverable amount and with no quoted price in
+active market. After the initial recognition, loans and receivables are measured at amortised cost using the effective interest rate method.
+Held-to-maturity investment
+Loans and Receivables
+A financial asset or financial liability is classified as at fair value through profit or loss if it is acquired or incurred principally for the
+purpose of selling or repurchasing in the near term or if it is a derivative, unless the derivative is a designated and effective hedging
+instrument, or a financial guarantee contract, or a derivative that is linked to and must be settled by delivery of an unquoted equity
+instrument (without a quoted price from an active market) whose fair value cannot be reliably measured. These financial instruments
+are initially measured at fair value with subsequently changes in fair value recognised in profit or loss. Subsequent to initial recognition,
+financial assets and financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognised
+in profit or loss.
+Financial asset or financial liability with change in fair value recognised through profit or loss
+Financial assets and financial liabilities are initially recognised at fair value. For financial asset or financial liability of which the change in its
+fair value is recognised in profit or loss, the relevant transaction cost is recognised in profit or loss. The transaction costs for other financial
+assets or financial liabilities are included in the initially recognised amount. Subsequent to initial recognition financial assets and liabilities
+are measured as follows:
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+The Group classifies financial assets and liabilities into different categories at initial recognition based on the purpose of acquiring assets
+and assuming liabilities: financial assets and financial liabilities at fair value through profit or loss, loans and receivables, held-to-maturity
+investments, available-for-sale financial assets and other financial liabilities.
+(a) Classification, recognition and measurement of financial instruments
+Financial instruments of the Group include cash and cash equivalents, bond investments, equity securities other than long-term equity
+investments, receivables, derivative financial instruments, payables, loans, bonds payable, and share capital, financial asset with change in fair
+value recognised through profit or loss, etc.
+(10) Financial Instruments
+Goodwill is not amortised and is stated at cost less accumulated impairment losses (see Note 3(11)). On disposal of an asset group or a set of
+asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal.
+The initial cost of goodwill represents the excess of cost of acquisition over the acquirer's interest in the fair value of the identifiable net assets
+of the acquiree under the business combination involving entities not under common control.
+(9) Goodwill
+Useful lives and amortisation methods are reviewed at least each year end.
+Intangible assets, where the estimated useful life is finite, are stated in the balance sheet at cost less accumulated amortisation and provision
+for impairment losses (see Note 3(11)). For an intangible asset with finite useful life, its cost less estimated residual value and accumulated
+impairment losses is amortised on a straight-line basis over the expected useful lives, unless the intangible assets are classified as held for sale.
+An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the year over which
+the asset is expected to generate economic benefits for the Group.
+The Group recognises a financial asset or a financial liability on its balance sheet when the Group enters into and becomes a party to the
+underlining contract of the financial instrument.
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(10) Financial Instruments (Continued)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+97
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+If no active market exists for a financial instrument, a valuation technique is used to establish the fair value. Valuation techniques include
+using arm's length market transactions between knowledge, and willing parties; reference to the current fair value of other instrument that is
+substantially the same; discounted cash flows and option pricing model. The Group calibrates the valuation technique and tests it for validity
+periodically.
+If there is an active market for a financial asset or financial liability, the quoted price in the active market is used to establish the fair value
+of the financial asset or financial liability.
+(c) Determination of fair value
+the Group intends to settle the financial assets and liabilities on a net basis, or to realise the assets and settle the liabilities
+simultaneously.
+the Group has a legally enforceable right to set off financial assets against financial liabilities; and
+In the balance sheet, financial assets and liabilities are not offset unless all the following conditions are met:
+Except for the other financial liabilities described above, subsequent to initial recognition, other financial liabilities are measured at
+amortised cost using the effective interest method.
+Other financial liabilities include the liabilities arising from financial guarantee contracts. Financial guarantees are contracts that require
+the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the holder) for a loss the holder
+incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Where the Group
+issues a financial guarantee, subsequent to initial recognition, the guarantee is measured at the higher of the amount initially recognised
+less accumulated amortisation and the amount of a provision determined in accordance with the principles of contingencies (see Note
+3(15)).
+Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities.
+Other financial liabilities
+Available-for-sale financial assets whose fair value cannot be measured reliably are measured at cost subsequent to initial recognition.
+Other than the above equity instrument investments whose fair values cannot be measured reliably, other available-for-sale financial assets
+are initially stated at fair values. The gains or losses arising from changes in the fair value are directly recognised in equity, except for
+the impairment losses and exchange differences from monetary financial assets denominated in foreign currencies, which are recognised
+in profit or loss. The cumulative gains and losses previously recognised in equity are transferred to profit or loss when the available-for-
+sale financial assets are derecognised. Dividend income from these equity instruments is recognised in profit or loss when the investee
+declares the dividends. Interest on available-for-sale debt instrument investments calculated using the effective interest rate method is
+recognised in profit or loss (see Note 3(16) (c)).
+Available-for-sale financial assets include non-derivative financial assets that are designated as available for sales and other financial
+assets which do not fall into any of the above categories.
+-
+(a) Classification, recognition and measurement of financial instruments (Continued)
+Available-for-sale financial assets
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+Where the Company combines a subsidiary during the reporting period through a business combination involving entities under common
+control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at
+the beginning of the earliest comparative year presented or, if later, at the date that common control was established. Therefore the opening
+balances and the comparative figures of the consolidated financial statements are restated. In the preparation of the consolidated financial
+statements, the subsidiary's assets, liabilities and results of operations are included in the consolidated balance sheet and the consolidated
+income statement, respectively, based on their carrying amounts in the subsidiary's financial statements, from the date that common control
+was established.
+(b) Disclosure of financial assets and financial liabilities
+(c) Method for preparation of consolidated financial statements
+- Basic
+(1) Statement of compliance of China Accounting Standards for Business Enterprises ("ASBE")
+2 BASIS OF PREPARATION
+Details of the Company's principal subsidiaries are set out in Note 56.
+(3) the production and sale of chemical.
+(2) the refining, transportation, storage and marketing of crude oil and petroleum product; and
+(1) the exploration, development and production of crude oil and natural gas;
+The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises
+Standards, specific standards and relevant regulations (hereafter referred as ASBE collectively) issued by the MOF on or after 15 February
+2006. These financial statements also comply with the disclosure requirements of "Regulation on the Preparation of Information Disclosures of
+Companies Issuing Public Shares, No.15: General Requirements for Financial Reports" issued by the China Securities Regulatory Commission
+("CSRC"). These financial statements present truly and completely the consolidated and company financial position as at 31 December 2017,
+and the consolidated and company financial performance and the consolidated and company cash flows for the year then ended.
+The Company and its subsidiaries (the "Group") engage in the oil and gas and chemical operations and businesses, including:
+According to the State Council's approval to the "Preliminary Plan for the Reorganisation of China Petrochemical Corporation" (the "Reorganisation"),
+the Company was established by China Petrochemical Corporation ("Sinopec Group Company"), which transferred its core businesses together with
+the related assets and liabilities at 30 September 1999 to the Company. Such assets and liabilities had been valued jointly by China United Assets
+Appraisal Corporation, Beijing Zhong Zheng Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa International Properties Valuation
+Corporation. The net asset value was determined at RMB 98,249,084,000. The valuation was reviewed and approved by the Ministry of Finance (the
+"MOF") (Cai Ping Zi [2000] No. 20 "Comments on the Review of the Valuation Regarding the Formation of a Joint Stock Limited Company by China
+Petrochemical Corporation").
+China Petroleum & Chemical Corporation (the "Company") was established on 25 February 2000 as a joint stock limited company. The company is
+registered in Beijing, the People's Republic of China, and the headquarter is located in Beijing, the People's Republic of China. The approval date of
+the financial report is 23 March 2018.
+1 STATUS OF THE COMPANY
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS
+Financial Statements (PRC)
+90
+In addition, pursuant to the notice Cai Guan Zi [2000] No. 34 "Reply to the Issue Regarding Management of State-Owned Equity by China Petroleum
+and Chemical Corporation" issued by the MOF, 68.8 billion domestic state-owned shares with a par value of RMB 1.00 each were issued to Sinopec
+Group Company, the amount of which is equivalent to 70% of the above net asset value transferred from Sinopec Group Company to the Company
+in connection with the Reorganisation.
+These financial statements are prepared on a basis of going concern.
+Pursuant to the notice Guo Jing Mao Qi Gai [2000] No. 154 "Reply on the Formation of China Petroleum and Chemical Corporation", the Company
+obtained the approval from the State Economic and Trade Commission on 21 February 2000 for the formation of a joint stock limited company.
+The Company took over the exploration, development and production of crude oil and natural gas, refining, chemicals and related sales and
+marketing business of Sinopec Group Company after the establishment of the Company.
+The accounting year of the Group is from 1 January to 31 December.
+(2) Accounting period
+A business combination involving entities or businesses not under common control is a business combination in which all of the combining
+entities or businesses are not ultimately controlled by the same party or parties both before and after the business combination. Difference
+between the consideration paid by the Group as the acquirer, comprises of the aggregate of the fair value at the acquisition date of assets
+given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree, and the Group's
+interest in the fair value of the identifiable net assets of the acquiree, is recognised as goodwill (Note 3(9)) if it is an excess, otherwise in the
+profit or loss. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised
+in the initial cost of the securities. Any other expense directly attributable to the business combination is recognised in the profit or loss
+for the year. The difference between the fair value and the book value of the assets given is recognised in profit or loss. The acquiree's
+identifiable assets, liabilities and contingent liabilities, if satisfying the recognition criteria, are recognised by the Group at their fair value at
+the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
+(b) Business combination involving entities not under common control
+A business combination involving entities or businesses under common control is a business combination in which all of the combining
+entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that
+control is not transitory. The assets and liabilities that the acquirer receives in the acquisition are accounted for at the acquiree's carrying
+amount on the acquisition date. The difference between the carrying amount of the acquired net assets and the carrying amount of the
+consideration paid for the acquisition (or the total nominal value of shares issued) is recognised in the share premium of capital reserve, or
+the retained earnings in case of any shortfall in the share premium of capital reserve. Any costs directly attributable to the combination shall
+be recognised in profit or loss for the current period when occurred. The expense incurred for equity securities and debt securities issued as
+the consideration of the combination is recognised in the initial cost of the securities. The combination date is the date on which the acquirer
+effectively obtains control of the acquiree.
+(a) Business combination involving entities under common control
+Principal accounting estimates and judgements of the Group are set out in Note 55.
+The Group determines specific accounting policies and accounting estimates based on the characteristics of production and operational activities,
+mainly reflected in the accounting for allowance for accounts receivable (Note 3(11)), valuation of inventories (Note 3(4)), depreciation of fixed
+assets and depletion of oil and gas properties (Note 3(6), (7)), measurement of provisions (Note 3(15)), ect.
+3 SIGNIFICANT ACCOUNTING POLICIES
+(1) Accounting treatment of business combination involving entities under common control and not under common control
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+The functional currency of the Company's and most of its subsidiaries are Renminbi. The Group's consolidated financial statements are
+presented in Renminbi. The Company and its subsidiaries determine their functional currency according to the main economic environment in
+where they operate. Some of subsidiaries use other currency as the functional currency. The Company translates the financial statements of
+subsidiaries from their respective functional currencies into Renminbi (see Note 3(2)) if the subsidiaries' functional currencies are not Renminbi.
+(4) Functional currency and presentation currency
+Derivative financial instruments (see Note 3(10))
+Available-for-sale financial assets (see Note 3(10))
+The financial statements of the Group have been prepared under the historical cost convention, except for the assets and liabilities set out below:
+Financial asset and financial liability with change in fair value recognised through profit or loss (see Note 3(10))
+for the year ended 31 December 2017
+(3) Measurement basis
+33,142
+RMB
+million
+million
+30,905
+million
+Amounts due from subsidiaries
+RMB
+million
+RMB
+8 ACCOUNTS RECEIVABLE
+2016
+At 31 December
+At 31 December
+2017
+At 31 December
+2016
+At 31 December
+2017
+The Company
+The Group
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+Amounts due from Sinopec Group Company and fellow subsidiaries
+Amounts due from associates and joint ventures
+RMB
+7,941
+38,560
+1,417
+50,289
+683
+612
+68,494
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+37,756
+50,972
+69,106
+1,720
+3,383
+6,398
+39,994
+Ageing analysis on accounts receivable is as follows:
+Total
+Less: Allowance for doubtful accounts
+Amounts due from others
+2,036
+2,051
+4,580
+4,962
+1,662
+56,203
+At 31 December 2017, the Group's outstanding endorsed or discounted bills (with recourse) amounted to RMB 10,441 million (2016: RMB 7,523
+million).
+47,514
+165,004
+7 BILLS RECEIVABLE
+7.8023
+15,256
+6.5342
+2,336
+16
+21,843
+32,117
+102,424
+117,490
+75
+126
+15
+122
+0.8945
+10,406
+6.9370
+1,499
+87
+82
+0.8359
+98
+24,561
+6.5342
+78
+Bills receivable represents mainly the bills of acceptance issued by banks for sales of goods and products.
+2,619
+5
+18,181
+The changes in the financial assets at fair value through profit or loss for the year ended 31 December 2017 amounted to RMB 196 million (2016:nil),
+which has been recorded in gain from changes in fair value.
+The financial assets are the structured deposit with financial institutions and cannot be readily convertible to known amounts of cash, which are
+presented as current assets since they are expected to be expired within 12 months from the end of the reporting period.
+2016
+RMB million
+51,196
+51,196
+RMB million
+At 31 December
+At 31 December
+2017
+Total
+Structural deposits
+6.9370
+Current assets
+At 31 December 2017, structured deposits included in cash at bank and on hand with financial institutions of the Group amounted to RMB 65,250
+million (2016: RMB 75,000 million).
+At 31 December 2017, time deposits with financial institutions of the Group amounted to RMB 51,786 million (2016: RMB 18,029 million).
+Deposits at related parties represent deposits placed at Sinopec Finance Company Limited and Sinopec Century Bright Capital Investment Limited.
+Deposits interest is calculated based on market rate.
+142,497
+40,073
+147
+37,609
+15
+34
+7.3068
+6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
+228
+38,332
+to total
+Between one and two years
+The Company
+683
+94.2
+404
+21.3
+48
+49.8
+231
+%
+At 31 December 2017
+to accounts
+receivable
+balance
+68640
+100.0
+50,972
+612
+100.0
+69,106
+0.9
+429
+80.8
+Allowance
+% RMB million
+426
+Percentage
+of allowance
+98.8
+37,331
+% RMB million
+% RMB million
+RMB million
+accounts
+receivable
+Amount
+receivable
+balance
+Allowance
+Percentage
+receivable
+accounts
+to accounts
+to total
+to accounts
+to total
+of allowance
+Percentage
+Percentage
+At 31 December 2016
+Amount
+Within one year
+0.8
+0.4
+Amount
+to total
+to accounts
+3,760
+Percentage
+of allowance
+Percentage
+At 31 December 2016
+of allowance
+Percentage
+accounts
+receivable
+Percentage
+The Group
+Total
+Over three years
+Between two and three years
+Between one and two years
+Within one year
+Total
+Over three years
+Between two and three years
+At 31 December 2017
+527
+Allowance
+RMB million
+225
+50.6
+44
+0.1
+87
+0.9
+464
+19.9
+142
+receivable
+balance
+1.0
+97.8
+49,854
+98.1
+67,777
+accounts
+receivable
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Amount
+RMB million
+%
+% RMB million
+715
+91,855
+Others
+10
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(16) Revenue recognition (Continued)
+(b) Revenues from rendering services
+The Group determines the revenue from the rendering of services according to the fair value of the received or to-be received price of the
+party that receives the services as stipulated in the contract or agreement.
+At the balance sheet date, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue from
+rendering of services is recognised in the income statement by reference to the stage of completion of the transaction based on the
+proportion of services performed to date to the total services to be performed.
+When the outcome of rendering the services cannot be estimated reliably, revenues are recognised only to the extent that the costs incurred
+are expected to be recoverable. If the costs of rendering of services are not expected to be recoverable, the costs are recognised in profit or
+loss when incurred, and revenues are not recognised.
+(c) Interest income
+Interest income is recognised on a time proportion basis with reference to the principal outstanding and the applicable effective interest rate.
+(17) Government grants
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Government grants are the gratuitous monetary assets or non-monetary assets that the Group receives from the government, excluding capital
+injection by the government as an investor. Special funds such as investment grants allocated by the government, if clearly defined in official
+documents as part of "capital reserve" are dealt with as capital contributions, and not regarded as government grants.
+Government grants received in relation to assets are recorded as deferred income, and recognised evenly in profit or loss over the assets'
+useful lives. Government grants received in relation to revenue are recorded as deferred income, and recognised as income in future periods as
+compensation when the associated future expenses or losses arise; or directly recognised as income in the current period as compensation for
+past expenses or losses.
+(18) Borrowing costs
+Borrowing costs incurred on borrowings for the acquisition, construction or production of qualified assets are capitalised into the cost of the
+related assets.
+Except for the above, other borrowing costs are recognised as financial expenses in the income statement when incurred.
+(19) Repairs and maintenance expenses
+Repairs and maintenance (including overhauling expenses) expenses are recognised in profit or loss when incurred.
+(20) Environmental expenditures
+Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations is expensed as incurred.
+Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable and the costs can
+be reliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with
+respect to accrued liabilities and other potential exposures.
+(21) Research and development costs
+Government grants are recognised when there is reasonable assurance that the grants will be received and the Group is able to comply with
+the conditions attaching to them. Government grants in the form of monetary assets are recorded based on the amount received or receivable,
+whereas non-monetary assets are measured at fair value.
+Research costs and development costs that cannot meet the capitalisation crateria are recognised in profit or loss when incurred.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+the Group does not retain the management rights, which is normally associated with owner, on goods sold and has no control over the
+goods sold.
+Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable
+in respect of previous years.
+At the balance sheet date, current tax assets and liabilities are offset if the Group has a legally enforceable right to set them off and also intends
+either to settle on a net basis or to realize the asset and settle the liability simultaneously.
+Deferred tax assets and liabilities are recognised based on deductible temporary differences and taxable temporary differences respectively.
+Temporary difference is the difference between the carrying amounts of assets and liabilities and their tax bases. Unused tax losses and unused
+tax credits able to be utilised in subsequent years are treated as temporary differences. Deferred tax assets are recognised to the extent that it
+is probable that future taxable income will be available to offset the deductible temporary differences.
+Temporary differences arise in a transaction, which is not a business combination, and at the time of transaction, does not affect accounting
+profit or taxable profit (or unused tax losses), will not result in deferred tax. Temporary differences arising from the initial recognition of goodwill
+will not result in deferred tax.
+At the balance sheet date, the amounts of deferred tax recognised is measured based on the expected manner of recovery or settlement of the
+carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is recovered or the
+liability is settled in accordance with tax laws.
+The carrying amount of deferred tax assets is reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset
+against the benefit of deferred tax asset, the carrying amount of the deferred tax assets is written down. Any such write-down should be
+subsequently reversed where it becomes probable that sufficient taxable income will be available.
+At the balance sheet date, deferred tax assets and liabilities are offset if all the following conditions are met:
+the taxable entity has a legally enforceable right to offset current tax assets and current tax liabilities; and
+they relate to income taxes levied by the same tax authority on either:
+Revenue from the sales of goods is measured at fair value of the considerations received or receivable under the sales contract or agreement.
+38,023
+the same taxable entity; or
+different taxable entities which either to intend to settle the current tax liabilities and assets on a net basis, or to realise the assets and
+settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to
+be settled or recovered.
+(15) Provisions
+Provisions are recognised when the Group has a present obligation as a result of a contingent event, it is probable that an outflow of economic
+benefits will be required to settle the obligations and a reliable estimate can be made. Where the effect of time value of money is material,
+provisions are determined by discounting the expected future cash flows.
+Provisions for future dismantlement costs are initially recognised based on the present value of the future costs expected to be incurred in
+respect of the Group's expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities.
+Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest
+costs, is reflected as an adjustment to the provision of oil and gas properties.
+(16) Revenue recognition
+Revenue is the gross inflow of economic benefits arising in the course of the Group's normal activities when the inflows result in increase in
+shareholder's equity, other than increase relating to contributions from shareholders. Revenue is recognised in profit or loss when it is probable
+that the economic benefits will flow to the Group, the revenue and costs can be measured reliably and the following respective conditions are
+met.
+(a) Revenues from sales of goods
+Revenue from the sales of goods is recognised when all of the general conditions stated above and following conditions are satisfied:
+the significant risks and rewards of ownership and title have been transferred to buyers; and
+-
+Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to business combinations and items recognised
+directly in equity (including other comprehensive income).
+(22) Operating leases
+(23) Dividends
+engage in business activities from which it may earn revenues and incur expenses;
+whose operating results are regularly reviewed by the Group's management to make decisions about resource to be allocated to the segment
+and assess its performance; and
+for which financial information regarding financial position, results of operations and cash flows are available.
+Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting, and segment
+accounting policies are consistent with those for the consolidated financial statements.
+104 Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(26) Changes in significant accounting policies
+Reportable segments are identified based on operating segments which are determined based on the structure of the Group's internal
+organisation, management requirements and internal reporting system. An operating segment is a component of the Group that meets the
+following respective conditions:
+MOF issued "No.42 Accounting Standards for Business Enterprises - non-current assets held for sale, disposition and discontinuing operation",
+revised "No.16 Accounting Standards for Business Enterprises-government grants" and Cai Kuai [2017] No. 30 “Announcement of the revision
+of general enterprise financial statements format." The group has adopted the above guidelines to prepare financial statements of 2017. The
+impact to the group's financial statements is presented as below:
+The profits and losses of 2017 of disposing of fixed assets
+and intangible assets are included in the asset disposal
+income project. The comparative financial statements of
+2016 have been adjusted accordingly.
+Subject
+Asset disposal income
+Non-operating income
+Non-operating expenses
+Amount (RMB million)
+year of 2016
+1,487
+Less 258
+Less 1,745
+4 TAXATION
+Major types of tax applicable to the Group are income tax, consumption tax, resources tax, value added tax, city construction tax, education
+surcharge and local education surcharge.
+The reason of change
+Operating lease payments are charged as expenses on a straight-line basis over the period of the respective leases.
+(25) Segment reporting
+(k) close family members of key management personnel of the Company's holding company; and
+Dividends and distributions of profits proposed in the profit appropriation plan which will be authorised and declared after the balance sheet
+date, are not recognised as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends
+are recognised as a liability in the period in which they are declared.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+103
+Financial Statements (PRC)
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(24) Related parties
+(I) an entity which is under control, joint control of principle individual investor, key management personnel or close family members of such
+individuals.
+If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties
+are subject to common control, joint control from another party, they are considered to be related parties. Related parties may be individuals or
+enterprises. Where enterprises are subject to state control but are otherwise unrelated, they are not related parties. Related parties of the Group
+and the Company include, but not limited to:
+(b) the subsidiaries of the Company;
+(c) the parties that are subject to common control with the Company;
+(d) investors that have joint control or exercise significant influence over the Group;
+(e) enterprises or individuals if a party has control, joint control over both the enterprises or individuals and the Group;
+(f) joint ventures of the Group, including subsidiaries of the joint ventures;
+(g) associates of the Group, including subsidiaries of the associates;
+(h) principle individual investors of the Group and close family members of such individuals;
+(i) key management personnel of the Group, and close family members of such individuals;
+(j) key management personnel of the Company's holding company;
+(a) the holding company of the Company;
+(14) Income tax
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+The Group
+5 CASH AT BANK AND ON HAND
+for the year ended 31 December 2017
+Financial Statements (PRC)
+106
+Financial Statements (PRC)
+105
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Pursuant to the 'Circular on the Overall Promotion of Pilot Program of Levying VAT in place of Business Tax'(Cai Shui [2016] 36) jointly issued by
+the Ministry of Finance and the State Administration of Taxation, revenue from modern service of the subsidiaries of the Group, are subject to VAT
+from 1 May 2016, and the applicable tax rate is 6%. Before 1 May 2016, revenue from modern service of the subsidiaries of the Group, are subject
+to the business tax with a tax rate of 3% to 5%.
+Cash on hand
+1,495.20
+1,711.52
+1,948.64
+2,105.20
+1,411.20
+2,109.76
+(RMB/Ton)
+13 January 2015
+Effective from
+Jet fuel oil
+1,218.00
+Lubricant oil
+Fuel oil
+Renminbi
+Renminbi
+14
+million
+RMB
+Exchange
+rates
+currency
+million
+RMB
+million
+Exchange
+rates
+million
+Original
+Cash at bank
+Original
+currency
+At 31 December 2016
+Total
+Others
+US Dollars
+EUR
+Renminbi
+Deposits at related parities
+Consumption tax was levied based on sales quantities of taxable products, tax rate of products is presented as below:
+Hong Kong Dollars
+US Dollars
+At 31 December 2017
+Solvent oil
+Naphtha
+Diesel
+If the recoverable amount of an asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount. The
+amount by which the carrying amount is reduced is recognised as an impairment loss in profit or loss. A provision for impairment loss of
+the asset is recognised accordingly. Impairment losses related to an asset unit or a set of asset units first reduce the carrying amount of any
+goodwill allocated to the asset unit or set of asset units, and then reduce the carrying amount of the other assets in the asset unit or set of
+asset units on a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair
+value less costs to sell (if determinable), the present value of expected future cash flows (if determinable) and zero.
+Impairment losses for assets are not reversed.
+(12) Long-term deferred expenses
+Long-term deferred expenses are amortised on a straight-line basis over their beneficial periods.
+(13) Employee benefits
+Employee benefits are all forms of considerations and compensation given in exchange for services rendered by employees, including short term
+compensation, post-employment benefits, termination benefits and other long term employee benefits.
+(a) Short term compensation
+Short term compensation includes salaries, bonuses, allowances and subsidies, employee benefits, medical insurance premiums, work-
+related injury insurance premium, maternity insurance premium, contributions to housing fund, unions and education fund and short-term
+absence with payment etc. When an employee has rendered service to the Group during an accounting period, the Group shall recognise the
+short term compensation actually incurred as a liability and charge to the cost of an asset or to profit or loss in the same period, and non-
+monetary benefits are valued with the fair value.
+(b) Post-employment benefits
+Fair value less costs to sell of an asset is based on its selling price in an arm's length transaction less any direct costs attributable to
+the disposal. Present value of expected future cash flows is the estimation of future cash flows to be generated from the use of and upon
+disposal of the asset, discounted at an appropriate pre-tax discount rate over the asset's remaining useful life.
+The Group classifies post-employment benefits into either Defined Contribution Plan (DC plan) or Defined Benefit Plan (DB plan). DC plan
+means the Group only contributes a fixed amount to an independent fund and no longer bears other payment obligation; DB plan is post-
+employment benefits other than DC plan. In this reporting period, the post-employment benefits of the Group primarily comprise basic
+pension insurance and unemployment insurance and both of them are DC plans.
+Employees of the Group participate in the social insurance system established and managed by local labor and social security department.
+The Group makes basic pension insurance to the local social insurance agencies every month, at the applicable benchmarks and rates
+stipulated by the government for the benefits of its employees. After the employees retire, the local labor and social security department has
+obligations to pay them the basic pension. When an employee has rendered service to the Group during an accounting period, the Group
+shall recognise the accrued amount according to the above social security provisions as a liability and charge to the cost of an asset or to
+profit or loss in the same period.
+(c) Termination benefits
+When the Group terminates the employment relationship with employees before the employment contracts expire, or provides compensation
+as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided is recognised in profit
+or loss under the conditions of both the Group has a formal plan for the termination of employment or has made an offer to employees for
+voluntary redundancy, which will be implemented shortly; and the Group is not allowed to withdraw from termination plan or redundancy
+offer unilaterally.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+101
+Financial Statements (PRC)
+102
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Basic pension insurance
+The recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows generated by the
+asset (or asset unit, set of asset units).
+An asset unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets
+or groups of assets. An asset unit comprises related assets that generate associated cash inflows. In identifying an asset unit, the Group
+primarily considers whether the asset unit is able to generate cash inflows independently as well as the management style of production and
+operational activities, and the decision for the use or disposal of asset.
+Assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
+The recoverable amounts of goodwill and intangible assets with uncertain useful lives are estimated annually no matter there are any
+indications of impairment. Goodwill is tested for impairment together with related asset units or groups of asset units.
+Gasoline
+Products
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(11) Impairment of financial assets and non-financial long-term assets (Continued)
+(a) Impairment of financial assets (Continued)
+Receivables and held-to-maturity investments
+Receivables are assessed for impairment on the combination of an individual basis and the aging analysis.
+Held-to-maturity investments are assessed for impairment on an individual basis.
+Where impairment is assessed on an individual basis, an impairment loss in respect of a receivable or held-to-maturity investment is
+calculated as the excess of its carrying amount over the present value of the estimated future cash flows (exclusive of future credit losses
+that have not been incurred) discounted at the original effective interest rate. All impairment losses are recognised in profit or loss.
+Impairment loss on receivables and held-to-maturity investments is reversed in profit or loss if evidence suggests that the financial assets'
+carrying amounts have increased and the reason for the increase is objectively as a result of an event occurred after the recognition of the
+impairment loss. The reversed carrying amount shall not exceed the amortised cost if the financial assets had no impairment recognised.
+Available-for-sale financial assets
+Available-for-sale financial assets are assessed for impairment on an individual basis. Objective evidence of impairment for equity
+instruments classified as available-for-sale includes information about significant but not temporary decline in the fair value of the equity
+investment instrument below its cost. The Group assesses equity instruments classified as available-for-sale separately at the end of
+each reporting period, it will be considered as impaired if the fair value of the equity instrument at reporting date is less than its initial
+investment cost over 50% (including 50%) or the duration of the fair value below its initial investment cost is more than one (including
+one) year, if the fair value of the equity instrument at reporting date is less than its initial investment cost over 20% (including 20%) but
+below 50%, other related factors such as price volatility will be taken into consideration to assess if it is impaired.
+When available-for-sale financial assets measured at fair value are impaired, despite not being derecognised, the cumulative losses
+resulted from the decrease in fair value which had previously been recognised directly in shareholders' equity, are reversed and charged
+to profit or loss.
+When available-for-sale financial assets measured at cost are impaired, the differences between the book value and the discounted present
+value with the market return of similar financial assets are charged to profit or loss.
+Impairment loss of available-for-sale debt instrument is reversed, if the reason for the subsequent increase in fair value is objectively as
+a result of an event occurred after the recognition of the impairment loss. Impairment loss for available-for-sale equity instrument is not
+reversed through profit or loss. Impairment loss for available-for-sale financial assets measured by the cost cannot be reversed in the
+following period.
+100 Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(11) Impairment of financial assets and non-financial long-term assets (Continued)
+(b) Impairment of other non-financial long-term assets
+Internal and external sources of information are reviewed at each balance sheet date for indications that the following assets, including fixed
+assets, construction in progress, goodwill, intangible assets and investments in subsidiaries, associates and joint ventures may be impaired.
+92,711
+%
+98.7
+58
+receivable
+balance
+2.4
+11
+13.1
+4
+3,465
+100.0
+11
+Total amount (RMB million)
+Percentage to the total balance of prepayments
+84
+At 31 December
+2017
+1,472
+29.9%
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+2016
+1,354
+35.8%
+109
+At 31 December
+Financial Statements (PRC)
+At 31 December
+2017
+RMB million
+3,766
+99
+At 31 December
+206
+3.8
+1.8
+100.0
+Between one and two years
+Between two and three years
+Over three years
+Total
+At 31 December 2017 and 2016, the total amounts of the top five prepayments of the Group are set out below:
+4,227
+95.3
+3,306
+95.4
+101
+2.3
+3
+1
+62
+1.8
+25
+0.6
+-
+13
+0.4
+80
+4,433
+1.0
+Within one year
+126
+RMB million
+At 31 December 2017 and 2016, the total amounts of the top five other receivables of the Group are set out below:
+1,124
+100.0
+41,313
+1,162
+100.0
+24.5
+1,122
+11.1
+Total amount (RMB million)
+4,573
+1,159
+18.9
+9,219
+48,655
+1
+12.7
+5,237
+0.1
+2
+5.3
+12.6
+At 31 December
+2016
+RMB million
+Ageing
+At 31 December
+At 31 December
+2017
+The Company
+The Group
+Ageing analysis of prepayments is as follows:
+Total
+Less: Allowance for doubtful accounts
+Amounts to others
+Amounts to associates and joint ventures
+Amounts to Sinopec Group Company and fellow subsidiaries
+Percentage to the total balance of other receivables
+Amounts to subsidiaries
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+108
+During the year ended 31 December 2017 and 2016, the Group and the Company had no individually significant write-off or recovery of doubtful
+debts which had been fully or substantially provided for in prior years.
+During the year ended 31 December 2017 and 2016, the Group and the Company had no individually significant other receivables been fully or
+substantially provided allowance for doubtful accounts.
+Allowance for doubtful accounts
+Within one year
+41.7%
+At 31 December
+2016
+11,226
+2017
+7,672
+Within one year
+42.7%
+10 PREPAYMENTS
+% RMB million
+RMB million
+% RMB million
+Amount prepayments
+Allowance
+balance
+Amount prepayments
+Allowance
+balance
+RMB million
+% RMB million
+%
+allowance to
+prepayments
+RMB million
+%
+Within one year
+Between one and two years
+Between two and three years
+Over three years
+Total
+4,605
+93.5
+3,465
+91.7
+% RMB million
+173
+Percentage
+to total
+to total
+63
+24
+4,737
+4,926
+3,550
+3,780
+568
+4,433
+364
+3,465
+25
+4,901
+prepayments
+31
+3,749
+4,429
+11
+3,454
+The Group
+At 31 December 2017
+Percentage
+At 31 December 2016
+Percentage of
+allowance to
+Percentage of
+4
+3.5
+14
+8.1
+5.7
+1.4
+56.3
+31
+The Company
+At 31 December 2017
+Percentage
+At 31 December 2016
+Percentage of
+allowance to
+516
+Percentage
+prepayments
+Amount prepayments
+Allowance
+balance
+to total
+Amount prepayments
+Percentage of
+allowance to
+prepayments
+Allowance
+balance
+RMB million
+to total
+18
+1
+12
+211
+5.6
+85
+1.7
+4
+4.7
+72
+1.9
+63
+1.3
+4,926
+100.0
+:30
+7
+11.1
+32
+0.8
+25
+3,780
+100.0
+16980
+2,570
+Allowance
+RMB million
+1
+2,740
+1,608
+14,085
+12,509
+3,986
+4,841
+459
+164
+147
+8,019
+1,793
+4,985
+2016
+RMB million
+The Company
+At 31 December
+2017
+RMB million
+At 31 December
+46,900
+At 31 December
+2016
+RMB million
+2017
+At 31 December
+The Group
+9 OTHER RECEIVABLES
+35,370
+for the year ended 31 December 2017
+17,953
+48,655
+Total
+Over three years
+Between two and three years
+Between one and two years
+Within one year
+RMB million
+Ageing analysis of other receivables is as follows:
+Total
+Less: Allowance for doubtful accounts
+26,945
+Amounts due from others
+Amounts due from subsidiaries
+40,189
+47,493
+25,596
+1,124
+1,162
+1,349
+1,486
+16,467
+41,313
+Amounts due from Sinopec Group Company and fellow subsidiaries
+Amounts due from associates and joint ventures
+Within one year
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+101
+0.4
+137
+20.4
+10
+0.1
+49
+18.8
+29
+73.7
+0.4
+31.9
+114
+0.9
+357
+12.7
+17
+0.4
+134
+%
+154
+Financial Statements (PRC)
+131
+104
+107
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+During the year ended 31 December 2017 and 2016, the Group and the Company had no individually significant write-off or recovery of doubtful
+debts which had been fully or substantially provided for in prior years.
+During the year ended 31 December 2017 and 2016, the Group and the Company had no individually significant accounts receivable been fully or
+substantially provided allowance for doubtful accounts.
+29.4%
+14,967
+At 31 December
+2016
+2017
+17,920
+25.9%
+At 31 December
+0.3
+Allowance for doubtful accounts
+Total amount (RMB million)
+At 31 December 2017 and 2016, the total amounts of the top five accounts receivable of the Group are set out below:
+228
+100.0
+38.560
+147
+100.0
+37,756
+79.4
+Percentage to the total balance of accounts receivable
+Between one and two years
+Between two and three years
+Over three years
+Amount
+Percentage
+of allowance
+Percentage
+Percentage
+At 31 December 2017
+The Company
+1,349
+2210
+to total
+other
+receivables
+67.0
+6.2
+0.2
+1656
+%
+1,247
+13
+32
+57
+26990
+5.1
+100.0
+Allowance
+balance
+1
+26.6
+12,920
+69.6
+28,763
+-
+49.2
+23,946
+to other
+receivables
+balance
+to other
+receivables
+of allowance
+At 31 December 2016
+Allowance
+RMB million
+%
+receivables
+Amount
+RMB million
+%
+% RMB million
+RMB million
+to total
+other
+Percentage
+6.9
+0.9
+2.0
+At 31 December 2016
+Allowance
+RMB million
+%
+receivables
+Amount
+RMB million
+%
+% RMB million
+84.7
+RMB million
+15,191
+509
+balance
+Percentage
+2016
+RMB million
+3,043
+to other
+receivables
+to total
+other
+receivables
+Amount
+of allowance
+Percentage
+Percentage
+At 31 December 2017
+The Group
+Total
+to total
+other
+Percentage
+of allowance
+to other
+receivables
+balance
+433
+90.2
+22060
+26,945
+1,486
+1,860
+74.7
+1,360
+254
+10.2
+44
+24,316
+515
+16.1
+82
+2.4
+2.8
+8410
+220
+100.0
+17,953
+10.1
+1,820
+6.6
+Allowance
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+36
+19
+142
+40
+45
+33
+104
+30
+Interest expense
+(857)
+(929)
+(71)
+(173)
+(142)
+(113)
+(1,382)
+(1,216)
+(223)
+(245)
+130
+Profit before taxation
+208
+16,337
+RMB million
+RMB million
+YASREF
+2017
+RMB million
+Sinopec SABIC Tianjin
+2016
+RMB million
+2017
+2016
+RMB million
+RMB million
+Turnover
+49,356
+41,764
+21,020
+17,323
+12,520
+9,658
+61,587
+41,286
+22,286
+Interest income
+6,977
+6,476
+4,565
+At 31 December 2017 and 2016, the Group had no significant overdue short-term loan.
+At 31 December 2017, the Group's interest rates on short-term loans were from interest 0.70% to 6.09% (2016: from interest 0.68% to 6.19%).
+The majority of the above loans are by credit.
+30,374
+21
+4.7995
+4
+20
+54,701
+4.8831
+4
+5
+7.3068
+1
+7.8023
+1,969
+0.8945
+13,577
+6.9370
+1,957
+2,202
+1,903
+23 BILLS PAYABLE
+Bills payable primarily represented bank accepted bills for the purchase of material, goods and products. Bills payable were due within one year.
+At 31 December 2017 and 2016, the Group had no overdue unpaid bills.
+24 ACCOUNTS PAYABLE
+At 31 December 2017 and 2016, the Group had no individually significant accounts payable aged over one year.
+2,606
+1,697
+2,411
+548
+28
+5,113
+3,184
+Tax expense
+(1,699)
+RMB million
+(1,574)
+(648)
+(553)
+(518)
+57
+Financial Statements (PRC)
+119
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+At 31 December 2017 and 2016, the Group had no individually significant advances from customers aged over one year.
+25 ADVANCES FROM CUSTOMERS
+(1,151)
+0.8359
+RMB million
+RMB million
+(36,509)
+(44,032)
+(4,142)
+(5,369)
+Net assets
+16,451
+13,683
+16,021
+15,384
+8,100
+6,931
+13,505
+13,454
+12,557
+11,497
+Net assets attributable to owners
+of the company
+16,451
+13,683
+(2,179)
+16,021
+(2,758)
+(974)
+(49)
+(35,619)
+(43,028)
+(4,101)
+(5,337)
+Other non-current liabilities
+(236)
+(252)
+(19)
+(10)
+(2,686)
+(2,130)
+(890)
+(1,004)
+(41)
+(32)
+Total non-current liabilities
+(13,890)
+(20,237)
+(1,502)
+15,384
+7,818
+6,690
+6,409
+6,154
+3,831
+4,021
+5,064
+5,045
+6,279
+5,749
+Summarised income statement
+Year ended 31 December
+FREP
+BASF-YPC
+Taihu
+2017
+2016
+2017
+2016
+2017
+2016
+6,842
+8,226
+Carrying Amounts
+743
+13,505
+13,454
+12,557
+11,497
+Net assets attributable to
+minority interests
+282
+241
+Share of net assets from joint ventures
+RMB million
+8,226
+6,409
+6,154
+3,831
+3,278
+5.064
+5,045
+6,279
+5,749
+Others (iii)
+6,842
+(72)
+2,277
+6.5342
+Other receivables
+612
+1
+(21)
+(100)
+49
+683
+8
+Included: Accounts receivable
+Allowance for doubtful accounts
+RMB million
+RMB million
+RMB million
+RMB million
+2017
+(decrease)
+for the year
+31 December
+Balance at
+9
+increase/
+1,349
+(74)
+436
+920
+11
+Inventories
+2,123
+(11)
+(39)
+(174)
+284
+2,063
+25
+(8)
+2
+31
+10
+Prepayments
+1,486
+(4)
+(18)
+233
+Other
+Written off
+Written back
+for the year
+Deferred tax liabilities
+Deferred tax assets
+The consolidated elimination amount between deferred tax assets and liabilities are as follows:
+(229)
+(15,086)
+(264)
+(10,805)
+14,639
+19,470
+Deferred tax assets/(liabilities)
+133
+180
+Others
+(563)
+260
+227
+117
+Intangible assets
+Available-for-sale securities
+2.477
+2,325
+Deferred tax assets and liabilities after the consolidated elimination adjustments are as follows:
+At 31 December
+2017
+RMB million
+4,339
+4,339
+At 31 December
+2016
+Provision for
+the year
+RMB million
+Balance at
+1 January
+2017
+RMB million
+Note
+At 31 December 2017, impairment losses of the Group are analysed as follows:
+21 DETAILS OF IMPAIRMENT LOSSES
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+118 Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Other non-current assets mainly represent prepayments for construction projects and purchases of equipment.
+(13)
+20 OTHER NON-CURRENT ASSETS
+At 31 December 2017, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB 20,821 million
+(2016: RMB 19,194 million), of which RMB 5,938 million (2016: RMB 3,833 million) was incurred for the year ended 31 December 2017, because
+it was not probable that the related tax benefit will be realised. These deductible losses carried forward of RMB 2,508 million, RMB 4,462 million,
+RMB 4,080 million, RMB 3,833 million and RMB 5,938 million will expire in 2018, 2019, 2020, 2021, 2022 and after, respectively.
+7,214
+7,661
+At 31 December
+2016
+RMB million
+2017
+RMB million
+15,131
+6,466
+At 31 December
+Deferred tax liabilities
+Deferred tax assets
+7,425
+7,425
+RMB million
+Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax
+assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable
+that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the
+tax losses result from identifiable causes which are unlikely to recur. During the year ended 31 December 2017, write-down of deferred tax assets
+amounted to RMB 26 million (2016: RMB 811 million) (Note 50).
+19,668
+(190)
+1,155
+Exchange
+rates
+million
+currency
+Original
+At 31 December 2016
+At 31 December 2017
+Total
+-Singapore Dollar loans
+-Euro loans
+-HK Dollar loans
+-US Dollar loans
+-Renminbi loans
+fellow subsidiaries
+Short-term loans from Sinopec Group Company and
+-Renminbi loans
+Short-term other loans
+-US Dollar loans
+-Renminbi loans
+Short-term bank loans
+RMB
+The Group's short-term loans represent:
+million
+Exchange
+rates
+3,010
+2,858
+1,706
+18,430
+23,297
+299
+299
+1,013
+6.9370
+146
+7,420
+6.5342
+1,136
+10,931
+23,685
+11,944
+31,105
+million
+RMB
+Original
+currency
+million
+22 SHORT-TERM LOANS
+The reasons for recognising impairment losses are set out in the respective notes of respective assets.
+89,603
+(60)
+252
+1,693
+15
+Construction in progress
+74,135
+(91)
+(372)
+19,836
+54,762
+14
+Fixed assets
+1,614
+(42)
+(2)
+936
+722
+13
+Long-term equity investments
+(105)
+1,780
+Intangible assets
+16
+(244)
+(664)
+(187)
+21,978
+49
+(11)
+17
+43
+68,720
+Total
+2
+Others
+198
+7,663
+17
+Goodwill
+886
+14
+(1)
+19
+854
+7,861
+(242)
+(14,615)
+(1,492)
+(19,985)
+associates
+RMB million
+245,921
+15,496
+14,691
+RMB million
+(7,657)
+Total
+RMB million
+268,451
+3,743
+434
+183
+4,360
+4,804
+970
+5,774
+(120)
+(120)
+(2,190)
+(145)
+(2,335)
+RMB million
+(375)
+losses
+Investments in Investments in Investments in
+(5,199)
+(2,755)
+(7,954)
+(607)
+(607)
+(902)
+(387)
+(1,289)
+(6,195)
+(6,195)
+28
+40
+68
+52,272
+80,429
+(892)
+(1,614)
+(892)
+131,087
+subsidiaries joint ventures
+RMB million
+Provision for
+impairment
+(375)
+3,722
+(3,722)
+Percentage of
+equity/voting
+right directly
+or indirectly
+held by the
+Company
+1.Joint ventures
+Fujian Refining & Petrochemical Company PRC
+Limited ("FREP")
+PRC
+Gu Yuefeng
+Manufacturing
+14,758
+50.00%
+refining oil
+products
+BASF-YPC Company Limited ("BASF-YPC") PRC
+PRC
+Wang Jingyi
+Manufacturing
+12,547
+40.00%
+and distribution
+of petrochemical
+products
+Registered
+Capital RMB
+million
+Principal
+activities
+Legal
+representative
+Register
+location
+253,011
+14,822
+15,579
+(198)
+(7,855)
+(198)
+275,557
+For the year 2017, the Group and the Company had no individually significant long-term investment impairment.
+Details of the Company's principal subsidiaries are set out in Note 56.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+111
+Financial Statements (PRC)
+6
+112
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+13 LONG-TERM EQUITY INVESTMENTS (Continued)
+Principal joint ventures and associates of the Group are as fllows:
+(a) Principal joint ventures and associates
+Principal
+place of
+Name of investees
+business
+Financial Statements (PRC)
+Taihu Limited ("Taihu")
+(6)
+255
+187,848
+1,155
+186,693
+157,431
+920
+156,511
+Provision for diminution in value of inventories is mainly against spare parts and consumables. For the year ended 31 December 2017, the provision
+for diminution in value of inventories of the Group was primarily due to the costs of spare parts and consumables of the refining segment and
+chemical segment were higher than their net realisable value.
+Provision for impairment losses:
+At 31 December
+2017
+RMB million
+At 31 December
+2016
+RMB million
+Equity securities, listed and at quoted market price
+Other investment, unlisted and at cost
+178
+1,544
+1,722
+Less: Impairment loss for investments
+46
+262
+11,175
+11,437
+29
+Total
+1,676
+11,408
+1,838
+Other investment, unlisted and at cost, represents the Group's interests in privately owned enterprises which are mainly engaged in oil and natural
+gas activities and chemical production.
+2,651
+84,448
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+11 INVENTORIES
+The Group
+Raw materials
+Work in progress
+Finished goods
+Spare parts and consumables
+Less: Provision for diminution in value of inventories
+Total
+At 31 December
+2017
+RMB million
+At 31 December
+2016
+RMB million
+85,975
+75,680
+14,774
+14,141
+65,772
+The impairment losses relating to investments for the year ended 31 December 2017 amounted to 17 million (2016: nil).
+110
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Movement of provision for impairment
+Balance at 31 December 2017
+Investments in
+joint ventures
+RMB million
+50,696
+2,437
+Investments in
+associates
+RMB million
+Provision for
+impairment
+losses
+RMB million
+(722)
+Total
+RMB million
+66,838
+116,812
+11,129
+13,566
+10,615
+5,910
+16,525
+798
+Investments transferred to subsidiaries
+Disposals for the year
+Dividends declared
+Change of other comprehensive loss under the equity method
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+13 LONG-TERM EQUITY INVESTMENTS
+The Group
+Balance at 1 January 2017
+Additions for the year
+Share of profits less losses under the equity method
+Change of other comprehensive income under the equity method
+Other equity movement under the equity method
+1,053
+Dividends declared
+Reclassification
+Investments transferred to subsidiaries
+Other movements
+Movement of provision for impairment
+Balance at 31 December 2017
+The Company
+Balance at 1 January 2017
+Additions for the year
+Share of profits less losses under the equity method
+Disposals for the year
+(955)
+Russia
+NA
+5,335
+4,852
+2,462
+1,616
+10,816
+6,826
+2,709
+1,886
+Total current assets
+16,785
+18,441
+7,135
+6,246
+4,814
+2,781
+15,732
+8,085
+9,233
+5,520
+10,269
+Non-current assets
+11,013
+3,634
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+Current assets
+Cash and cash equivalents
+5,772
+8,172
+1,800
+1,394
+2,352
+1,165
+4,916
+1,259
+6,524
+Other current assets
+19,740
+21,903
+12,075
+(1,616)
+(11,864)
+(6,466)
+(4,546)
+(2,657)
+Total current liabilities
+(6,184)
+(6,424)
+(2,215)
+(2,890)
+(1,934)
+(1,950)
+(17,271)
+(7,653)
+(5,782)
+(2,657)
+Non-current liabilities
+Non-current financial liabilities(ii)
+(13,654)
+(1,914)
+(2,107)
+(1,982)
+(4,643)
+13,530
+7,978
+8,279
+51,553
+57,054
+13,248
+14,003
+Current liabilities
+Current financial liabilities (i)
+RMB million
+(1,135)
+(233)
+(783)
+(20)
+(334)
+(5,407)
+(1,187)
+(1,236)
+Other current liabilities
+(5,049)
+(1,781)
+Cyprus
+RMB million
+2017
+PRC
+Quan Kai
+Sinopec Finance Company Limited
+("Sinopec Finance")
+PRC
+PRC
+Zhao Dong
+Operation of natural
+gas pipelines and
+auxiliary facilities
+Provision of non-
+banking financial
+services
+200
+50.00%
+18,000
+49.00%
+PAO SIBUR Holding ("SIBUR")
+Russia
+Russia
+NA
+Proccessing
+21,784 million
+10.00%
+natural gas and
+PRC
+RUB
+Sinopec Sichuan to East China Gas
+Pipeline Co., Ltd. ("Pipeline Ltd")
+and distribution
+of petrochemical
+products
+Crude oil and natural 25,000 USD
+gas extraction
+49.00%
+Yanbu Aramco Sinopec Refining
+Company Ltd. ("YASREF”)
+Sinopec SABIC Tianjin Petrochemical
+Saudi Arabia
+Saudi Arabia
+NA
+Petroleum refining
+1,560 million
+37.50%
+PRC
+PRC
+and processing
+Manufacturing
+USD
+9,796
+50.00%
+Company Limited ("Sinopec SABIC
+Tianjin")
+UWAIDH AL-
+HARETHI
+2.Associates
+manufacturing
+petrochemical
+products
+Zhongtian Synergetic Energy
+At 31
+December
+BASF-YPC
+At 31
+December
+Taihu
+YASREF
+Sinopec SABIC Tianjin
+At 31
+December
+At 31
+December
+At 31
+December
+2017
+2016
+2017
+2016
+2017
+2016
+At 31
+December
+2017
+At 31
+December
+At 31
+December
+At 31
+December
+2016
+FREP
+At 31
+December
+Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal joint ventures:
+(b) Major financial information of principal joint ventures
+13 LONG-TERM EQUITY INVESTMENTS (CONTINUED)
+PRC
+PRC
+Peng Yi
+Mining coal and
+17,516
+38.75%
+Company Limited ("Zhongtian
+Synergetic Energy")
+manufacturing
+of coal-chemical
+products
+2016
+Caspian Investments Resources
+The Republic of British Virgin
+Kazakhstan Islands
+NA
+Crude oil and natural 10,000 USD
+50.00%
+gas extraction
+Except that SIBUR is a public joint stock company, other joint ventures and associates above are limited companies.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+Ltd. ("CIR")
+(50)
+(9,928)
+Balance at 31 December 2017
+14,150
+Pipeline Ltd (vi)
+2017
+Sinopec Finance
+2016
+2017
+2016
+SIBUR (v)
+2017
+Zhongtian Synergetic Energy
+CIR
+2017
+RMB million
+RMB million
+Turnover
+RMB million
+RMB million
+5,644
+191
+3,542
+2,442
+52,496
+RMB million
+3,569
+2016
+RMB million
+2017
+2016
+RMB million
+RMB million
+RMB million
+Year ended 31 December
+3,576
+6,207
+7,151
+Net assets attributable to
+minority interests
+571
+Share of net assets from associates
+24,090
+22,800
+12.128
+11,496
+9,676
+Summarised income statement
+6,829
+3,104
+3,576
+Carrying Amounts
+24,090
+22,800
+12,128
+11,496
+9,676
+6,829
+6,734
+3,104
+6,734
+17,378
+2,563
+Profit/(loss) for the year
+753
+748
+960
+48
+(305)
+(1,759)
+Share of other comprehensive
+(loss)/income from associates (iv)
+(121)
+(86)
+(26)
+26
+(167)
+The share of profit and other comprehensive income for the year ended 31 December 2017 in all individually immaterial associates accounted
+for using equity method in aggregate was RMB 3,182 million (2016: RMB 2,869 million) and RMB 569 million (2016: other comprehensive loss
+RMB 384 million) respectively. As at 31 December 2017, the carrying amount of all individually immaterial associates for using equity method in
+aggregate was RMB 23,899 million (2016: RMB 21,510 million).
+Note:
+(iv) Including foreign currency translation differences.
+(v) Sinopec is able to exercise significant influence in SIBUR since Sinopec has a member in SIBUR's Board of Director and has a member in SIBUR's Management
+Board.
+(vi) The summarised income statement for the year 2016 of Pipeline Ltd presents the operating results from the date when the Group lost control to 31 December
+2016.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+14 FIXED ASSETS
+The Group
+Plants and
+buildings
+RMB million
+331
+2,205
+1,272
+221
+Other comprehensive (loss)/income
+Total comprehensive income/(loss)
+Dividends declared by associates
+2,543
+51
+1,536
+1.526
+9,601
+123
+(610)
+(3,518)
+(246)
+Share of profit/(loss) from associates
+(175)
+(334)
+662
+2,543
+51
+1,290
+1,351
+9,341
+123
+(944)
+(2,856)
+23
+(260)
+Cost:
+17,623
+23,461
+for the year ended 31 December 2017
+13 LONG-TERM EQUITY INVESTMENTS (Continued)
+(c) Major financial information of principal associates
+Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal associates:
+Pipeline Ltd
+At 31
+December
+At 31
+December
+2017
+RMB million
+2016
+RMB million
+Sinopec Finance
+At 31
+December
+2017
+RMB million
+At 31
+December
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+2016
+RMB million
+Zhongtian Synergetic Energy
+At 31
+December
+At 31
+December
+CIR
+At 31
+December
+HP
+At 31
+December
+2016
+2017
+2017
+2016
+RMB million
+RMB million
+SIBUR (v)
+At 31
+December
+2017
+RMB million
+RMB million
+Financial Statements (PRC)
+Financial Statements (PRC)
+joint ventures
+2,639
+2,451
+1,366
+783
+541
+895
+227
+31
+1,917
+1,201
+114
+Share of other comprehensive
+12
+875
+(208)
+243
+The share of profit and other comprehensive income for the year ended 31 December 2017 in all individually immaterial joint ventures accounted
+for using equity method in aggregate was RMB 3,925 million (2016: RMB 2,061 million) and RMB 994 million (2016: other comprehensive loss
+RMB 934 million) respectively. As at 31 December 2017, the carrying amount of all individually immaterial joint ventures accounted for using
+equity method in aggregate was RMB 21,552 million (2016: RMB 22,885 million).
+Note:
+(i) Excluding accounts payable, other payables.
+(ii) Excluding provisions.
+(iii) Other reflects the excess of fair value of the consideration transferred over the Group's share of net fair value of the investee's identifiable assets acquired and
+liabilities as of the transaction date.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+113
+income/(loss) from joint ventures (iv)
+96,761
+RMB million
+11,317
+(3,176)
+(3,350)
+(6)
+(88)
+(61,771)
+(31,494)
+(32,137)
+(170)
+(883)
+Net assets
+48,180
+Non-current liabilities
+45,600
+23,461
+97,332
+17,623
+17,378
+6,207
+7,151
+Net assets attributable to owners
+of the Company
+48,180
+45,600
+24,751
+24,751
+Current assets
+Non-current assets
+(928)
+(8,078)
+11,835
+161,187
+149,457
+20,719
+8,232
+7,292
+5,612
+5,120
+40,972
+42,124
+17,782
+(908)
+16,478
+51,553
+50,301
+1,673
+3,842
+Current liabilities
+(933)
+(5,009)
+(154,212)
+(142,386)
+(20,554)
+(10,668)
+158,938
+Share of net profit from
+Balance at 1 January 2017
+Transferred from construction in progress
+1,618
+52
+43,305
+(75)
+21,397
+23
+Transferred from subsidiaries
+31
+688
+(470)
+(282)
+614,246
+66,320
+255,451
+719
+(752)
+(230)
+Balance at 31 December 2017
+22,402
+(1,487)
+379,137
+(5,428)
+271,849
+(7,145)
+673,388
+Provision for impairment losses:
+Balance at 1 January 2017
+1,623
+Additions for the year
+Decreases for the year
+361
+337,394
+Transferred to subsidiaries
+540,499
+982
+15,609
+443,485
+400
+1,031,570
+1,428
+19,636
+37,505
+(46)
+(160)
+809
+867
+(652)
+(503)
+(1,155)
+21,401
+Decreases for the year
+(1,911)
+Balance at 31 December 2017
+49,022
+555,133
+(6,728)
+456,939
+(9,121)
+1,061,094
+Accumulated depreciation:
+Balance at 1 January 2017
+Additions for the year
+Reclassifications
+(482)
+47,586
+46
+2,260
+206
+58
+26,727
+7,556
+44,304
+373,020
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+115
+Financial Statements (PRC)
+116
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+14 FIXED ASSETS (Continued)
+The additions to oil and gas properties of the Group and the Company for the year ended 31 December 2017 included RMB 1,627 million (2016:
+RMB 3,420 million) (Note 32) and RMB 982 million (2016: RMB 2,939 million), respectively of the estimated dismantlement costs for site
+restoration.
+Impairment losses on fixed assets for the year ended 31 December 2017 primarily represent impairment losses recognised in the exploration and
+production ("E&P") segment of RMB 12,611 million (2016: RMB 10,594 million) on fixed assets, for the chemicals segment of RMB 4,779 million
+(2016: RMB 2,840 million) of fixed assets and for the refining segment of RMB 1,836 million (2016: RMB 1,245 million) of fixed assets. The primary
+factors resulting in the E&P segment impairment loss were downward revision of oil and gas reserve due to price change and high operating and
+development cost for certain oil fields. The carrying values of these E&P properties were written down to recoverable amounts which were determined
+based on the present values of the expected future cash flows of the assets using a pre-tax discount rate 10.47% (2016: 10.47%). Further future
+downward revisions to the Group's oil price outlook would lead to further impairments which, in aggregate, are likely to be material. It is estimated
+that a general decrease of 5% in oil price, with all other variables held constant, would result in additional impairment loss in Group's fixed assets
+relating to oil and gas producing activities by approximately RMB 3,145 million. It is estimated that a general increase of 5% in operating cost,
+with all other variables held constant, would result in additional impairment in Group's fixed assets relating to oil and gas producing activities by
+approximately RMB 2,659 million. It is estimated that a general increase of 5% in discount rate, with all other variables held constant, would result
+in additional impairment loss in Group's fixed assets relating to oil and gas producing activities by approximately RMB 461 million. The assets in
+the refining segment were written down due to the suspension of operations of certain production facilities, while the assets in the chemical segment
+were written down because of evidence indicates the economic performance of certain production facilities are worse than expected and due to the
+suspension of operations of certain production facilities.
+172,080
+At 31 December 2017 and 2016, the Group and the Company had no individually significant fixed assets which were pledged.
+At 31 December 2017 and 2016, the Group and the Company had no individually significant fully depreciated fixed assets which were still in use.
+15 CONSTRUCTION IN PROGRESS
+Cost:
+Balance at 1 January 2017
+Additions for the year
+Disposals for the year
+Dry hole costs written off
+Transferred to fixed assets
+Reclassification to other assets
+Exchange adjustments
+11,264
+At 31 December 2017 and 2016, the Group and the Company had no individually significant fixed assets which were temporarily idle or pending for
+disposal.
+15,954
+329,814
+141,725
+176,378
+6,042
+13,959
+Reclassifications
+Transferred from subsidiaries
+16
+19
+35
+Transferred to subsidiaries
+(165)
+(27)
+(192)
+163,266
+Decreases for the year
+Balance at 31 December 2017
+1,797
+(12)
+34,271
+(164)
+21,824
+(214)
+57,892
+Net book value:
+Balance at 31 December 2017
+24,823
+Balance at 31 December 2016
+24,562
+(38)
+Additions for the year
+Transferred to subsidiaries
+Reclassifications
+(199)
+(2,912)
+120,013
+667,657
+940,312
+1,727,982
+45,243
+404,919
+463,023
+Additions for the year
+4,075
+(2,573)
+55,057
+913,185
+105,717
+Reclassifications
+(122)
+(77)
+199
+Decreases for the year
+(771)
+(1,488)
+(11,466)
+Exchange adjustments
+(57)
+46,585
+(1,952)
+(140)
+723
+Reclassifications
+Decreases for the year
+Exchange adjustments
+Balance at 31 December 2017
+Accumulated depreciation:
+Balance at 1 January 2017
+114,920
+854
+650,685
+1,627
+6,789
+19,881
+(673)
+(19,736)
+(50)
+(1,913)
+Oil
+and gas
+properties
+RMB million
+Equipment,
+machinery
+and others
+RMB million
+Total
+RMB million
+1,658,541
+14,464
+81,275
+(23,386)
+892,936
+11,983
+54,605
+(1,737)
+Transferred from subsidiaries
+(95)
+48,368
+74,135
+Net book value:
+Balance at 31 December 2017
+67,813
+171,840
+411,121
+650,774
+Balance at 31 December 2016
+66,348
+215,124
+409,122
+30,945
+690,594
+Plants and
+buildings
+Oil
+and gas
+properties
+Equipment
+RMB million
+RMB million
+machinery
+and others
+RMB million
+Total
+RMB million
+Cost:
+Balance at 1 January 2017
+Additions for the year
+Transferred from construction in progress
+The company
+Balance at 31 December 2017
+39,358
+Balance at 31 December 2017
+456,459
+498,246
+(13,725)
+(2,104)
+1,003,073
+Provision for impairment losses:
+Balance at 1 January 2017
+3,329
+30,642
+20,791
+54,762
+Additions for the year
+554
+3,832
+8,832
+19,836
+Reclassifications
+Decreases for the year
+(51)
+(12)
+(295)
+(358)
+Exchange adjustments
+(104)
+(1)
+(105)
+10,450
+300
+12 AVAILABLE-FOR-SALE FINANCIAL ASSETS
+155
+(3,491)
+Decreases for the year
+24,752
+898
+11,837
+190
+1,075
+10,752
+Additions for the year
+117,900
+4,013
+36,908
+4,134
+4,378
+68,467
+Balance at 1 January 2017
+Cost:
+Total
+RMB million
+Others
+RMB million
+rights
+RMB million
+RMB million
+RMB million
+technology
+(293)
+Patents
+(479)
+(249)
+9,545
+448
+4,338
+515
+162
+4,082
+Additions for the year
+32,023
+2,596
+9,892
+2,259
+3,261
+14,015
+Balance at 1 January 2017
+Accumulated amortisation:
+138,008
+4,662
+48,613
+3,845
+5,160
+75,728
+Balance at 31 December 2017
+(4,644)
+(132)
+Decreases for the year
+Operation
+Land use
+rights
+RMB million
+10%
+1,329
+1,205
+124
+13,865
+Wen 23 gas storage project (first-stage)
+self-financing
+670
+Bank loans &
+68%
+2,365
+(2,538)
+4,903
+15,475
+Guangxi LNG Project
+self-financing
+25
+Bank loans &
+20%
+6,990
+3,716
+3,274
+34,667
+Bank loans &
+Non-patent
+1
+Tianjin LNG Project
+The Group
+16 INTANGIBLE ASSETS
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+construction project (first-stage)
+self-financing
+gas (SNG) export pipeline
+Bank loans &
+15%
+1,692
+1,041
+651
+11,589
+Xinjiang coal-based substitute natural
+self-financing
+148
+Bank loans &
+78%
+3,154
+(5,059)
+8,213
+13,639
+self-financing
+(1,119)
+(255)
+(24)
+Long-term deferred expenses primarily represent prepaid rental expenses over one year and catalysts expenditures.
+18 LONG-TERM DEFERRED EXPENSES
+Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross
+margin based on the gross margin achieved in the period immediately before the budget period and management's expectation on the future trend
+of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period
+immediately before the budget period.
+Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the
+above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial
+budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 10.8% to 11.4% (2016: 10.4% to
+11.0%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss
+was recognised.
+6,353
+8,634
+212
+167
+941
+879
+2,541
+petrochemical products
+Trading of petrochemical
+products
+4,043
+4,043
+petroleum products
+Production and sale of
+petrochemical products and
+Manufacturing of intermediate
+1,157
+1,004
+Other units without individual significant goodwill
+Total
+Sinopec (Hong Kong) Limited
+Shanghai SECCO Petrochemical Company Limited ("Shanghai SECCO")
+(Note 53)
+Manufacturing of intermediate
+petrochemical products and
+petroleum products
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Sinopec Zhenhai Refining and Chemical Branch ("Sinopec Zhenhai")
+117
+Financial Statements (PRC)
+27
+1,375
+165
+Tax value of losses carried forward
+Fixed assets
+Cash flow hedges
+391
+1,925
+87
+RMB million
+2016
+RMB million
+2017
+At 31 December At 31 December
+Deferred tax liabilities
+At 31 December
+2016
+RMB million
+Deferred tax assets
+At 31 December
+2017
+RMB million
+381
+Accruals
+Receivables and inventories
+Deferred tax assets and liabilities before the consolidated elimination adjustments are as follows:
+19 DEFERRED TAX ASSETS AND LIABILITIES
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Sinopec Beijing Yanshan Petrochemical Branch ("Sinopec Yanshan")
+2016
+RMB million
+RMB million
+Decreases for the year
+45
+1
+23
+21
+Additions for the year
+854
+16
+120
+24
+483
+211
+Balance at 1 January 2017
+Provision for impairment losses:
+39,996
+2,870
+14,206
+2,774
+3,168
+16,978
+Balance at 31 December 2017
+(1,572)
+(174)
+(8)
+(1)
+(4)
+(13)
+2017
+At 31 December
+At 31 December
+Principal activities
+Goodwill is allocated to the following Group's cash-generating units:
+Name of investees
+Amortisation of the intangible assets of the Group charged for the year ended 31 December 2017 is RMB 4,468 million (2016: RMB 4,299 million).
+85,023
+97,126
+1,510
+634
+1,401
+1,775
+Zhongke Refine Integration Project
+34,268
+26,896
+58,526
+54,241
+Balance at 31 December 2016
+Balance at 31 December 2017
+Net book value:
+886
+17
+139
+24
+482
+224
+Balance at 31 December 2017
+1,047
+1,851
+2017
+RMB million
+17 GOODWILL
+RMB million
+605
+1,893
+1,144
+1,958
+3,414
+4,902
+5,278
+Profit for the year
+(783)
+(1,279)
+56
+Balance at 1 January 2017
+Additions for the year
+Decreases for the year
+Balance at 31 December 2017
+84
+Net book value:
+3,834
+Other comprehensive income/(loss)
+2,401
+3,834
+731
+51
+3,744
+1,169
+1,958
+3,414
+4,902
+5,278
+Total comprehensive income
+647
+(554)
+1,851
+25
+2,401
+Balance at 31 December 2017
+Balance at 31 December 2016
+At 31 December 2017, major construction projects of the Group are as follows:
+31 December
+Source of
+funding
+Percentage of
+Completion
+Balance at
+31 December
+2017
+RMB million
+RMB million
+Net change
+for the year
+2017
+RMB million
+(46)
+Balance at
+1 January
+Budgeted
+amount
+Project name
+Accumulated
+interest
+capitalised at
+50,046
+49,277
+118,645
+129,581
+(165)
+47
+412
+1,693
+252
+The Group
+RMB million
+The Company
+RMB million
+131,274
+49,689
+85,552
+45,701
+(376)
+Dividends from joint ventures
+(6,876)
+(81,275)
+(37,505)
+(7,773)
+(859)
+(101)
+120,425
+50,459
+(6,567)
+413
+1,780
+1,250
+1,109
+Share of other comprehensive loss in associates and joint ventures
+575
+(72)
+503
+(1,893)
+313
+(1,580)
+Changes in fair value of available-for-sale financial assets recongnised during the year
+Less: Total amounts transferred to profit or loss from
+(57)
+(57)
+other comprehensive income during the year
+Subtotal
+Share of other comprehensive income in associates and joint ventures
+Subtotal
+Translation difference in foreign currency statements
+Subtotal
+Other comprehensive income
+(57)
+(57)
+1,053
+other comprehensive income during the year
+Subtotal
+(1,074)
+3
+4
+1,053
+(13)
+45
+119,557
+Capital reserve represents mainly: (a) the difference between the total amount of the par value of shares issued and the amount of the net assets
+transferred from Sinopec Group Company in connection with the Reorganisation; (b) share premiums derived from issuances of H shares and
+A shares by the Company and excess of cash paid by investors over their proportionate shares in share capital, the proportionate shares of
+unexercised portion of the Bond with Warrants at the expiration date, and the amount transferred from the proportionate liability component and
+the derivative component of the converted portion of the 2011 Convertible Bonds; (c) difference between consideration paid for the combination of
+entities under common control and the transactions with minority interests over the carrying amount of the net assets acquired.
+36 OTHER COMPREHENSIVE INCOME
+The Group
+(a) Each item of other comprehensive income and the influence of the income tax and the process of change to profit or loss
+2017
+Before-tax
+amount
+(1)
+Net-of-tax
+Tax effect
+RMB million
+amount
+RMB million
+Cash flow hedges:
+Effective portion of changes in fair value of hedging instruments recognised
+during the year
+Less/(Add): Adjustments of amounts transferred to initial carrying amount of hedged items
+Total amounts transferred to profit or loss from
+4,298
+(1,314)
+240
+RMB million
+Subtotal
+1,053
+(3,792)
+2,479
+(465)
+2,014
+Changes in fair value of available-for-sale financial assets recongnised during the year
+Less: Total amounts transferred to profit or loss from
+(17)
+(7)
+(24)
+45
+Subtotal
+45
+45
+(24)
+(7)
+other comprehensive income during the year
+Other comprehensive income
+Subtotal
+Translation difference in foreign currency statements
+Subtotal
+45
+(5,164)
+1,115
+(6,279)
+(3,792)
+(3,792)
+(3,792)
+(4,689)
+313
+(4,376)
+2016
+Before-tax
+amount
+RMB million
+Tax effect
+RMB million
+Net-of-tax
+amount
+RMB million
+Cash flow hedges:
+Effective portion of changes in fair value of hedging instruments
+recognised during the year
+(Add)/Less: Adjustments of amounts transferred to initial carrying amount of hedged items
+Total amounts transferred to profit or loss from
+(3,813)
+(13)
+652
+2
+(3,161)
+(11)
+other comprehensive income during the year
+1,053
+(17)
+Long-term loans due within one year
+4,298
+Total
+Operating costs
+2016
+The Company
+2017
+RMB million
+2016
+Income from other operations
+RMB million
+RMB million
+2,300,470
+RMB million
+1,880,190
+59,723
+2,360,193
+The Group
+2017
+Income from principal operations
+39 OPERATING INCOME AND OPERATING COSTS
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+Balance at 31 December 2017
+79,640
+3,042
+82,682
+surplus reserves
+RMB million
+117,000
+Total
+RMB million
+196,640
+3,042
+117,000
+199,682
+The PRC Company Law and Articles of Association of the Company have set out the following profit appropriation plans:
+(a) 10% of the net profit is transferred to the statutory surplus reserve. In the event that the reserve balance reaches 50% of the registered capital,
+no transfer is needed;
+(b) After the transfer to the statutory surplus reserve, a transfer to discretionary surplus reserve can be made upon the passing of a resolution at the
+shareholders' meeting.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+125
+Financial Statements (PRC)
+Financial Statements (PRC)
+1,890,398
+50,721
+1,930,911
+1,492,165
+18,274
+18,155
+13,811
+13,695
+4,841
+3,871
+5,459
+2,449
+235,292
+232,006
+The applicable tax rate of the taxes and surcharges are set out in Note 4.
+41 FINANCIAL EXPENSES
+The Group
+2017
+Interest expenses incurred
+2016
+RMB million
+193,836
+Appropriation
+RMB million
+192,907
+Other taxes
+824,100
+33,378
+857,478
+696,211
+29,967
+726,178
+513,514
+633,114
+The income from principal operations mainly represents revenue from sales of crude oil, natural gas, refined petroleum products and chemical
+products. The income from other operations mainly represents revenue from sale of materials, service, rental income and others. Operating costs
+primarily represent the products cost related to the principal operations. The Group's segmental information is set out in Note 59.
+40 TAXES AND SURCHARGES
+The Group
+2017
+Consumption tax
+City construction tax
+Education surcharge
+Resources tax
+Total
+119,525
+Balance at 1 January 2017
+Statutory
+surplus reserve
+RMB million
+Equity Attributable to shareholders of the company
+Minority interests
+Total other
+comprehensive
+income
+Changes in fair
+value of
+available-for-sale
+financial assets
+Translation
+difference in
+foreign currency
+37 SPECIFIC RESERVE
+Cash flow hedges
+RMB Million
+statements
+RMB Million
+Subtotal
+RMB Million
+RMB Million
+RMB Million
+114
+RMB Million
+31 December 2017
+(4,161)
+(6,557)
+2,396
+4,298
+4,298
+6,805
+(472)
+6,333
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+36 OTHER COMPREHENSIVE INCOME (Continued)
+The Group (Continued)
+(b) Reconciliation of other comprehensive income
+31 December 2015
+Changes in 2016
+31 December 2016
+Changes in 2017
+The share of other
+comprehensive
+income which
+being reclassified
+to profit and
+loss in the future
+under equity
+method
+RMB Million
+(838)
+(703)
+(7,984)
+(1,169)
+(895)
+(4,376)
+(479)
+(4,413)
+(2,783)
+(7,196)
+According to relevant PRC regulations, the Group is required to transfer an amount to specific reserve for the safety production fund based on the
+turnover of certain refining and chemicals products or based on the production volume of crude oil and natural gas. The movements of specific
+reserve are as follows:
+Balance at 1 January 2017
+Provision for the year
+Utilisation for the year
+Balance at 31 December 2017
+38 SURPLUS RESERVES
+Movements in surplus reserves are as follows:
+The Group
+RMB million
+765
+3,280
+(3,157)
+888
+(3,481)
+The Group
+Discretionary
+(2,479)
+57
+(9,153)
+(17)
+1,970
+2,703
+7,052
+(719)
+6,333
+97
+1,132
+2,000
+(932)
+(1,888)
+(2,820)
+680
+(3,481)
+(40)
+(1,642)
+(510)
+Balance at 31 December 2017
+2016
+Transaction with minority interests
+Between two and five years
+Between one and two years
+The maturity analysis of the Group's long-term loans is as follows:
+67,754
+43,320
+(2,014)
+Total
+and fellow subsidiaries
+Long-term loans from Sinopec Group Company
+Less: Current portion
+December 2017 with maturities
+through 2022
+44,922
+After five years
+45,334
+- Renminbi loans
+and fellow subsidiaries
+17,689
+(8,795)
+24,434
+(1,402)
+Long-term loans from Sinopec Group Company
+Long-term bank loans
+Less: Current portion
+426
+6.9370
+61
+Interest rates ranging from interest
+free to 4.99% per annum at 31
+192
+Total
+(150)
+44,772
+2016
+At 31 December
+At 31 December
+2017
+RMB million
+The Group
+31 DEBENTURES PAYABLE
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+122
+Financial Statements (PRC)
+121
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Long-term loans are primarily unsecured, and carried at amortised costs.
+62,461
+1,779
+2,694
+56,725
+48,238
+3,957
+16,822
+RMB million
+RMB million
+2016
+At 31 December
+At 31 December
+2017
+62,461
+67,754
+RMB million
+6.5342
+Interest rates ranging from interest
+1.55% to 4.29% per annum at 31
+December 2017 with maturities
+through 2031
+6.9370
+6,532
+6.5342
+1,000
+29,500
+16,000
+8,945
+3,416
+150
+2,014
+150
+2,014
+22,532
+- US Dollar debentures
+6.5342
+1,379
+23
+8,753
+6
+6.9370
+42
+1,402
+8,795
+- US Dollar loans
+Long-term loans from Sinopec Group Company and
+fellow subsidiaries
+- Renminbi loans
+Renminbi debentures
+29
+29,500
+733
+- US Dollar loans
+26,058
+25,644
+RMB
+million
+rates
+Exchange
+currency
+million
+RMB
+million
+Exchange
+rates
+currency
+million
+Original
+Original
+Others
+At 31 December 2016
+Interest rates ranging from interest
+1.08% to 4.66% per annum at 31
+December 2017 with maturities
+through 2030
+Long-term bank loans
+- Renminbi loans
+Interest rate and final maturity
+The Group's long-term loans represent:
+30 LONG-TERM LOANS
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+At 31 December 2017 and 2016, the Group had no significant overdue long-term loan.
+38,972
+26,681
+Non-current liabilities due within one year
+527
+At 31 December 2017
+Short-term corporate bonds (i)
+Debentures payable:
+- Corporate Bonds (ii)
+Less: Current portion
+25,513
+25,513
+95,558
+95,558
+RMB million
+RMB million
+Debentures payable due within one year
+At 31 December
+At 31 December
+2017
+Total
+95,557,771,046 domestic listed A shares (2016: 95,557,771,046) of RMB 1.00 each
+25,513,438,600 overseas listed H shares (2016: 25,513,438,600) of RMB 1.00 each
+Registered, issued and fully paid:
+121,071
+The Group
+120
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+26 EMPLOYEE BENEFITS PAYABLE
+At 31 December 2017 and 2016, the Group's employee benefits payable primarily represented wages payable and social insurance payables.
+27 TAXES PAYABLE
+The Group
+At 31 December
+2017
+At 31 December
+2016
+RMB million
+RMB million
+34 SHARE CAPITAL
+8,899
+121,071
+Pursuant to the resolutions passed at an Extraordinary General Meeting held on 25 July 2000 and approvals from relevant government authorities,
+the Company is authorised to increase its share capital to a maximum of 88.3 billion shares with a par value of RMB 1.00 each and offer not more
+than 19.5 billion shares with a par value of RMB 1.00 each to investors outside the PRC. Sinopec Group Company is authorised to offer not more
+than 3.5 billion shares of its shareholdings in the Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors
+outside the PRC would be converted into H shares.
+Balance at 1 January 2017
+RMB million
+The movements in capital reserve of the Group are as follows:
+35 CAPITAL RESERVE
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+124
+Financial Statements (PRC)
+123
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+There were no changes in the management's approach to capital management of the Group during the year. Neither the Company nor any of its
+subsidiaries is subject to externally imposed capital requirements.
+The Company was established on 25 February 2000 with a registered capital of 68.8 billion domestic state-owned shares with a par value of RMB 1.00
+each. Such shares were issued to Sinopec Group Company in consideration for the assets and liabilities transferred to the Company (Note 1).
+The schedule of the contractual maturities of loans and commitments are disclosed in Notes 30 and 57, respectively.
+Capital management
+All A shares and H shares rank pari passu in all material aspects.
+During the year ended 31 December 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB 1.00 each, as a result of
+exercise of conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a result of exercise
+of conversion by the holders of the 2011 Convertible Bonds.
+In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus issues of 2 shares
+converted from the retained earnings, and 1 share transferred from capital reserves for every 10 existing shares.
+On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the Placing") with a par value of RMB 1.00 each at the Placing Price
+of HKD 8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD 24,042,227,300.00 and the aggregate net
+proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD 23,970,100,618.00.
+During the year ended 31 December 2012, the Company issued 117,724,450 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2011, the Company issued 34,662 listed A shares with a par value of RMB 1.00 each, as a result of conversion
+by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a result of exercise of
+188,292 warrants entitled to the Bonds with Warrants.
+In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to natural
+persons and institutional investors in the PRC.
+In October 2000, the Company issued 15,102,439,000 H shares with a par value of RMB 1.00 each, representing 12,521,864,000 H shares and
+25,805,750 American Depositary Shares ("ADSS", each representing 100 H shares), at prices of HKD 1.59 per H share and USD 20.645 per ADS,
+respectively, by way of a global initial public offering to Hong Kong and overseas investors. As part of the global initial public offering, 1,678,049,000
+state-owned ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong Kong and
+overseas investors.
+Management optimises the structure of the Group's capital, which comprises of equity and debts and bonds. In order to maintain or adjust the
+capital structure of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce
+debt, or adjust the proportion of short-term and long-term loans and bonds. Management monitors capital on the basis of the debt-to-capital ratio,
+which is calculated by dividing long-term loans (excluding current portion) and debentures payable, by the total of equity attributable to owners of
+the Company and long-term loans (excluding current portion) and debentures payable, and liability-to-asset ratio, which is calculated by dividing
+total liabilities by total assets. Management's strategy is to make appropriate adjustments according to the Group's operating and investment needs
+and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group at a range considered
+reasonable. As at 31 December 2017, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 12.0% (2016: 14.2%) and 46.5%
+(2016: 44.5%), respectively.
+8,668
+39,623
+29,682
+(467)
+1,501
+1,627
+36,918
+The Group
+RMB million
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Other non-current liabilities primarily represent long-term payables, special payables and deferred income.
+33 OTHER NON-CURRENT LIABILITIES
+Balance at 31 December 2017
+Exchange adjustments
+Utilised for the year
+Accretion expenses
+(172)
+Provision for the year
+Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has established certain standardised
+measures for the dismantlement of its retired oil and gas properties by making reference to the industry practices and is thereafter constructively
+obligated to take dismantlement measures of its retired oil and gas properties. Movement of provision of the Group's obligations for the
+dismantlement of its retired oil and gas properties is as follows:
+32 PROVISIONS
+(ii) These corporate bonds are carried at amortised cost, including USD denominated corporate bonds of RMB 17,902 million, and RMB denominated corporate bonds
+of RMB 36,000 million (2016: USD denominated corporate bonds of RMB 18,985 million, and RMB denominated corporate bonds of RMB 65,500 million). At 31
+December 2017, corporate bonds of RMB 17,902 million (2016: RMB 18,985 million) are guaranteed by Sinopec Group Company.
+(i) The company issued 182-day corporate bonds of face value RMB 6 billion to corporate investors in the PRC debenture market on 12 September 2016 at par value of
+RMB 100. The effective cost of the 182-day corporate bonds is 2.54% per annum. The short-term bonds were due on 14 March 2017 and have been fully paid by the
+Group at maturity.
+54,985
+(29,500)
+(22,532)
+31,370
+84,485
+53,902
+6,000
+Note:
+Total
+Balance at 1 January 2017
+39,407
+Less: Capitalised interest expenses
+4
+13,015
+6,051
+175
+196
+10,228
+71,940
+8,289
+52,886
+Value-added tax payable
+Consumption tax
+Income tax
+Mineral resources compensation fee
+Other taxes
+Total
+28 OTHER PAYABLES
+At 31 December 2017 and 2016, the Group's other payables primarily represented payables for constructions.
+At 31 December 2017 and 2016, the Group had no individually significant other payables aged over three years.
+29 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR
+The Group's non-current liabilities due within one year represent:
+Long-term bank loans
+- Renminbi loans
+At 31 December 2017
+Original
+currency
+million
+At 31 December 2016
+Original
+Exchange
+rates
+RMB
+million
+currency
+million
+Exchange
+rates
+RMB
+million
+Others
+Net interest expenses
+The Group
+Interest income
+(1,394)
+83
+(793)
+(2,757)
+(5,939)
+1,569
+1,936
+299
+19,969
+79,877
+86,573
+RMB million
+RMB million
+2016
+2017
+20,707
+21,643
+(613)
+(453)
+1,485
+Pursuant to the shareholders' approval at the Annual General Meeting on 18 May 2016, a final dividend of RMB 0.06 per share totaling RMB 7,264
+million of the year ended 31 December 2015 was declared.
+Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 26 August 2016, the directors authorised
+to declare the interim dividends for the year ended 31 December 2016 of RMB 0.079 per share totaling RMB 9,565 million.
+Pursuant to the shareholders' approval at the Annual General Meeting on 28 June 2017, a final dividend of RMB 0.17 per share totaling RMB
+20,582 million of the year ended 31 December 2016 was declared.
+Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 25 August 2017, the directors authorised
+to declare the interim dividends for the year ended 31 December 2017 of RMB 0.10 per share totaling RMB 12,107 million.
+Accretion expenses (Note 32)
+Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 23 March 2018, the directors authorised
+to declare the final dividends during the year ended 31 December 2017 of RMB 0.40 per share totaling RMB 48,428 million. Dividends declared
+after the balance sheet date are not recognised as a liability at the balance sheet date.
+(a) Dividends of ordinary shares declared after the balance sheet date
+51 DIVIDENDS
+(ii) It is mainly due to the foreign operation in the Republic of Angola ("Angola") calculated the assessable income in accordance with the relevant income tax rules and
+regulations of Angola, and taxed at 50% of the assessable income as determined.
+(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the
+relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of
+15% through the year 2020.
+20,707
+16,279
+228
+(72)
+811
+26
+958
+(834)
+228
+128
+(72)
+16,279
+21,313
+Tax effect of utilisation of previously unrecognised tax losses and temporary differences
+Effect of income taxes at foreign operations (ii)
+Tax effect of preferential tax rate (i)
+Tax effect of non-taxable income
+Tax effect of non-deductible expenses
+Expected income tax expense at a tax rate of 25%
+Profit before taxation
+Tax effect of tax losses not recognised
+Reconciliation between actual income tax expense and accounting profit at applicable tax rates is as follows:
+Under-provision for income tax in respect of preceding year
+Deferred taxation
+Provision for income tax for the year
+The Group
+50 INCOME TAX EXPENSE
+Total
+Others
+Total
+Write-down of deferred tax assets
+Adjustment for under provision for income tax in respect of preceding years
+Actual income tax expense
+Note:
+26,668
+RMB million
+RMB million
+2016
+2017
+2,218
+1,709
+1,933
+1,468
+133
+152
+152
+89
+RMB million
+RMB million
+2016
+2017
+(10,317)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+52 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT
+(22,549)
+(31,151)
+160
+(11,364)
+(28,903)
+126
+(2,553)
+(5,610)
+63,762
+1,719
+(30,779)
+(19,060)
+4,336
+676
+216
+13
+1,528
+(4,707)
+81,691
+190,935
+214,543
+Financial Statements (PRC)
+129
+10
+124,458
+124,468
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+14
+113,204
+113,218
+2016
+RMB million
+2017
+RMB million
+55,535
+68,933
+(11,250)
+124,468
+124,468
+RMB million
+113,218
+RMB million
+2016
+2017
+1,518
+7,467
+6,876
+8,833
+Increase in operating payables
+Increase in operating receivables
+Safety fund reserve
+Increase in inventories
+Decrease in deferred tax liabilities
+(Increase)/decrease in deferred tax assets
+Investment income
+Financial expenses
+Fair value loss
+Net loss on disposal of non-current assets
+Dry hole costs written off
+Amortisation of intangible assets and long-term deferred expenses
+Depreciation of fixed assets
+Impairment losses on assets
+Net profit
+Add:
+(a) Reconciliation of net profit to cash flows from operating activities:
+The Group
+Net cash flow from operating activities
+Fines, penalties and compensation
+Donations
+(b) Net change in cash:
+Less: Cash at the beginning of the year
+9,161
+99,592
+106,149
+17,076
+21,791
+59,170
+70,294
+RMB million
+RMB million
+2016
+2017
+Cash at the end of the year
+- Demand deposits
+- Cash on hand
+Cash at bank and on hand
+(c) The analysis of cash held by the Group is as follows:
+Net (decrease)/increase of cash
+Cash balance at the end of the year
+The Group
+(b) Dividends of ordinary shares declared during the year
+for the year ended 31 December 2017
+RMB million
+2016
+2017
+The Group
+45 GAIN FROM CHANGES IN FAIR VALUE
+Total
+Others
+RMB million
+Intangible assets (Note 16)
+Fixed assets (Note 14)
+Long-term equity investment (Note 13)
+Inventories (Note 11)
+Receivables (Note 8,9,10)
+The Group
+44 IMPAIRMENT LOSSES
+for the year ended 31 December 2017
+Construction in Progress (Note 15)
+110
+231
+423
+Changes in fair value of financial assets and financial liabilities at fair value through loss, net
+Unrealised gains from ineffective portion cash flow hedges, net
+2016
+RMB million
+RMB million
+2017
+17,076
+21,791
+6
+215
+11
+19
+1,486
+252
+14,921
+19,836
+1
+936
+420
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+1,626,905
+2,036,470
+63,867
+The interest rates per annum at which borrowing costs were capitalised during the year ended 31 December 2017 by the Group ranged from 2.37%
+to 4.41% (2016: 2.65% to 4.82%).
+6,611
+1,560
+Total
+610
+(332)
+Net foreign exchange (gain)/loss
+(3,218)
+(5,254)
+1,057
+1,501
+8,162
+49 NON-OPERATING EXPENSES
+859
+9,021
+2016
+RMB million
+RMB million
+6,368
+723
+42 CLASSIFICATION OF EXPENSES BY NATURE
+(157)
+The operation costs, selling and distribution expenses, general and administrative expenses and exploration expenses (including dry holes) in
+consolidated income statement classified by nature are as follows:
+Personnel expenses
+64,566
+11.035
+11,089
+108,425
+115,310
+63,887
+1,379,691
+2016
+RMB million
+2017
+RMB million
+1,770,651
+74,854
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+126
+Exploration expenses include geological and geophysical expenses and written-off of unsuccessful dry hole costs.
+43 EXPLORATION EXPENSES
+Total
+Other expenses
+Exploration expenses (including dry holes)
+Depreciation, depletion and amortization
+Purchased crude oil, products and operating supplies and expenses
+(160)
+5,645
+11
+47 OTHER INCOME
+43,519
+1,576
+1,262
+38,058
+30,779
+19,060
+Total
+79
+89
+Others
+3,941
+Gain on remeasurement of interests in Shanghai SECCO (Note53)
+20,562
+20,562
+interests in the Pipeline Ltd (Note 13(vi)).
+(135)
+(88)
+Other income are mainly the government grants related to the business activities.
+293
+48 NON-OPERATING INCOME
+Government grants
+103
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+127
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+719
+4,706
+1,317
+890
+3,987
+427
+RMB million
+RMB million
+2016
+2017
+Total
+Others
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+(916)
+for the year ended 31 December 2017
+355
+Income from investment of subsidiaries accounted for
+RMB million
+RMB million
+RMB million
+RMB million
+2016
+2017
+2016
+The Company
+The Group
+2017
+(216)
+(13)
+(67)
+41
+46 INVESTMENT INCOME
+Others
+(Losses)/gains from ineffective portion of cash flow hedge
+Investment income on loss of control and remeasuring
+under cost method
+Income from investment accounted for under equity method
+Total
+16,525
+(752)
+Investment income from holding/disposal of financial assets and
+liabilities and derivative financial instruments at fair value through
+profit or loss
+4
+13
+173
+Investment (loss)/income from disposal of long-term
+available-for-sale financial assets
+Investment income from holding/disposal of
+199
+(21)
+11
+(26)
+equity investments
+3,749
+17,769
+31,118
+5,774
+9,306
+(6)
+202,806
+275,570
+257,122
+344,878
+At 31 December 2017 and 2016, the capital commitments of the Group are as follows:
+At 31 December
+2017
+RMB million
+Note:
+Authorised and contracted for (i)
+Authorised but not contracted for
+Total
+120,386
+57,997
+116,379
+31,720
+178,383
+148,099
+These capital commitments relate to oil and gas exploration and development, refining and petrochemical production capacity expansion projects,
+the construction of service stations and oil depots and investment commitments.
+At 31 December
+2016
+RMB million
+12,980
+14,917
+13,217
+Between two and three years
+Between three and four years
+Between four and five years
+After five years
+Total
+Capital commitments
+At 31 December
+2017
+At 31 December
+2016
+RMB million
+RMB million
+11,114
+11,492
+14,228
+10,730
+13,966
+10,552
+10,428
+(i) The investment commitments of the Group is RMB 3,364 million (2016: RMB 4,173 million).
+Between three and four years
+Pursuant to certain of the joint venture agreements entered into by the Group, the Group is obliged to purchase products from the joint ventures
+based on market prices.
+Total
+28
+882
+1,258
+1,327
+12262
+24
+25
+867
+The implementation of commitments in previous year and the Group's commitments did not have material discrepancy.
+138
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+58 CONTINGENT LIABILITIES
+Between four and five years
+After five years
+28
+25
+32
+Exploration and production licenses
+Exploration licenses for exploration activities are registered with the Ministry of Land and Resources. The maximum term of the Group's exploration
+licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term.
+The Group is obligated to make progressive annual minimum exploration investment relating to the exploration blocks in respect of which the license
+is issued. The Ministry of Land and Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant
+authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum
+term of the production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group's
+production license is renewable upon application by the Group 30 days prior to expiration.
+The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Land and Resources annually
+and recognised in profit and loss. Payments incurred were approximately RMB 308 million for the year ended 31 December 2017 (2016: RMB 333
+million).
+Estimated future annual payments of the Group are as follows:
+At 31 December
+2017
+At 31 December
+2016
+Commitments to joint ventures
+RMB million
+Within one year
+Between one and two years
+205
+83
+263
+123
+Between two and three years
+Between one and two years
+RMB million
+Within one year
+7,211
+The Group lease land and buildings, service stations and other equipment through non-cancellable operating leases. These operating leases do not
+contain provisions for contingent lease rentals. None of the rental agreements contains escalation provisions that may require higher future rental
+payments.
+726
+2,733
+1,558
+Comprehensive income/
+(loss) attributable to
+minority interests
+9,033
+9,028
+(38)
+(3,279)
+3,081
+2.966
+1,378
+1,256
+433
+20
+349
+879
+2.513
+2,513
+1,046
+860
+726
+2,733
+1,558
+Total comprehensive
+income/(loss)
+26,983
+27,385
+396
+(2,481)
+6.152
+5,988
+2,757
+1,146
+449
+957
+545
+968
+505
+1,639
+2.976
+3,636
+Note:
+(ii) The summarised consolidated statement of comprehensive income and cash flow of Shanghai SECCO presents the results from the acquisition date to 31 December
+2017.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+137
+Financial Statements (PRC)
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+57 COMMITMENTS
+Operating lease commitments
+617
+(558)
+7,078
+2.576
+Dividends paid to minority
+interests
+9,544
+4,932
+1,344
+563
+25
+At 31 December 2017 and 2016, the future minimum lease payments of the Group under operating leases are as follows:
+625
+70
+51
+Net cash generated from/
+(used in) operating activities
+51,038
+50,840
+2,758
+70
+235
+2016
+5,969
+6,584
+6,653
+(vi)
+10,816
+20,824
+(v)
+27,201
+21,210
+(iv)
+1,333
+7,716
+(iii)
+118,242
+165,993
+(ii)
+194,179
+244,211
+(i)
+2016
+RMB million
+(vii)
+8,015
+10,474
+(vii)
+Net loans obtained from/(repaid to) related parties
+Net deposits placed with related parties
+5,279
+(xi)
+(7,441)
+(ix)
+996
+554
+(x)
+RMB million
+209
+(ix)
+129
+127
+(viii)
+456
+626
+(vii)
+449
+510
+807
+The Group
+2017
+Note
+Interest expense
+BASF-YPC
+FREP
+Joint ventures of the Group:
+Zhongtian Synergetic Energy
+CIR
+SIBUR
+Sinopec Finance
+Pipeline Ltd
+Associates of the Group:
+Sinopec Petroleum Storage and Reserve Limited
+Taihu
+Sinopec Century Bright Capital Investment Limited
+Sinopec Assets Management Corporation
+Sinopec Zhongyuan Petroleum Exploration Bureau
+Sinopec Shengli Petroleum Administration Bureau
+Sinopec Finance (Note)
+Related parties under common control of a parent company with the Company:
+(2) Related parties not having the ability to exercise control over the Group
+Sinopec Group Company is an enterprise controlled by the PRC government. Sinopec Group Company directly and indirectly holds 71.32%
+shareholding of the Company.
+RMB 274,867 million
+Wang Yupu
+Sinopec Engineering Incorporation
+(21,770)
+YASREF
+Note: Sinopec Finance is under common control of a parent company with the Company and is also the associate of the Group.
+Interest income
+Agency commission income
+Other operating lease charges
+Operating lease charges for buildings
+Operating lease charges for land
+Ancillary and social services
+Production related services
+Exploration and development services
+Transportation and storage
+Sinopec SABIC Tianjin
+Purchases
+(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were
+carried out in the ordinary course of business, are as follows:
+54 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+132
+Financial Statements (PRC)
+131
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Sales of goods
+(24,877)
+The amounts set out in the table above in respect of the year ended 31 December 2017 and 2016 represent the relevant costs and income as
+determined by the corresponding contracts with the related parties.
+Included in the transactions disclosed above, for the year ended 31 December 2017 are: a) purchases by the Group from Sinopec Group
+Company and fellow subsidiaries amounting to RMB 128,350 million (2016: RMB 114,526 million) comprising purchases of products and
+services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB 112,619
+million (2016: RMB 96,023 million), ancillary and social services provided by Sinopec Group Company and fellow subsidiaries of RMB 6,652
+million (2016: RMB 6,584 million), operating lease charges for land and buildings paid by the Group of RMB 8,015 million and 510 million
+(2016: RMB 10,474 million and RMB 449 million), respectively and interest expenses of RMB 554 million (2016: RMB 996 million); and b) sales
+by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB 60,045 million (2016: RMB 56,251 million), comprising
+RMB 59,213 million (2016: RMB 56,010 million) for sales of goods, RMB 807 million (2016: RMB 209 million) for interest income and RMB 25
+million (2016: RMB 32 million) for agency commission income.
+12,827
+5,411
+33
+10,953
+12,884
+25
+40,073
+47,514
+RMB million
+189
+RMB million
+19
+RMB million
+2016
+2017
+Long-term loans (including current portion) (Note)
+Short-term loans
+Other non-current liabilities
+Other payables
+Advances from customers
+33
+Accounts payable
+570
+20,385
+As at and for the year ended 31 December 2017 and 2016, no individually significant impairment losses for bad and doubtful debts were
+recorded in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates and joint ventures.
+Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term
+loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated
+with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 22 and Note 30.
+Note: The long-term borrowings mainly include an interest-free loan with a maturity period of 20 years amounting to RMB 35,560 million from the Sinopec Group
+Company through the Sinopec Finance. This borrowing is a special arrangement to reduce financing costs and improve liquidity of the Company during its initial
+global offering in 2000.
+44,922
+45,334
+18,430
+23,297
+9,998
+10,165
+20,726
+19,430
+178
+1,969
+2,763
+13
+12
+104
+19,416
+22,806
+3
+43
+18,111
+State-owned
+Other non-current assets
+Other receivables
+•
+(a) The Company has entered into a non-exclusive "Agreement for Mutual Provision of Products and Ancillary Services" ("Mutual Provision
+Agreement") with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the
+Group with certain ancillary production services, construction services, information advisory services, supply services and other services and
+products. While each of Sinopec Group Company and the Company is permitted to terminate the Mutual Provision Agreement upon at least
+six months' notice, Sinopec Group Company has agreed not to terminate the agreement if the Group is unable to obtain comparable services
+from a third party. The pricing policy for these services and products provided by Sinopec Group Company to the Group is as follows:
+In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec
+Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell
+certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2017.
+The terms of these agreements are summarised as follows:
+(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were
+carried out in the ordinary course of business, are as follows: (Continued)
+54 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+(xi) The Group obtained or repaid loans from or to Sinopec Group Company and fellow subsidiaries.
+the government-prescribed price;
+(x) Interest expense represents interest charges on the loans and advances obtained from Sinopec Group Company and fellow subsidiaries.
+(viii) Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities
+owned by Sinopec Group Company.
+(vii) Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land, buildings and equipment.
+(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation,
+accommodation, canteens, property maintenance and management services.
+(v) Production related services represent ancillary services rendered in relation to the Group's operations such as equipment repair and general maintenance,
+insurance premium, technical research, communications, firefighting, security, product quality testing and analysis, information technology, design and engineering,
+construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management and
+environmental protection.
+(iii) Transportation and storage represents the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.
+(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well
+measurement services.
+(ii) Purchases represent the purchase of material and utility supplies directly related to the Group's operations such as the procurement of raw and ancillary materials
+and related services, supply of water, electricity and gas.
+(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
+Note:
+As at 31 December 2017 and 2016, there was no guarantee given to banks by the Group in respect of banking facilities to Sinopec Group
+Company and fellow subsidiaries, associates and joint ventures, except for the disclosure set out in Note 58(b). Guarantees given to banks by the
+Group in respect of banking facilities to associates and joint ventures are disclosed in Note 58(b).
+(ix) Interest income represents interest received from deposits placed with Sinopec Finance and Sinopec Century Bright Capital Investment Limited, finance companies
+controlled by Sinopec Group Company. The applicable interest rate is determined in accordance with the prevailing saving deposit rate.
+Prepayments and other current assets
+•
+⋅
+Accounts receivable
+Cash and cash equivalents
+At 31 December
+At 31 December
+Other related companies
+The ultimate holding company
+At 31 December At 31 December
+2017
+2016
+RMB million
+(4) Balances with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
+The balances with the Group's related parties at 31 December 2017 and 2016 are as follows:
+54 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2017
+where there is no government-prescribed price, the government-guidance price;
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+133
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+(d) The Company has entered into agreements with Sinopec Group Company effective from 1 January 2000 under which the Group has been
+granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group Company.
+(e) The Company has entered into a service station franchise agreement with Sinopec Group Company effective from 1 January 2000 under
+which its service stations and retail stores would exclusively sell the refined products supplied by the Group.
+(c) The Company has entered into a number of lease agreements with Sinopec Group Company to lease certain lands and buildings effective
+on 1 January 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively. The Company and Sinopec Group
+Company can renegotiate the rental amount every three years for land. The Company and Sinopec Group Company can renegotiate the rental
+amount for buildings every year. However such amount cannot exceed the market price as determined by an independent third party.
+(b) The Company has entered into a non-exclusive "Agreement for Provision of Cultural and Educational, Health Care and Community Services"
+with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the Group with certain
+cultural, educational, health care and community services on the same pricing terms and termination conditions as agreed to in the above
+Mutual Provision Agreement.
+where none of the above is applicable, the price to be agreed between the parties, which shall be based on a reasonable cost incurred in
+providing such services plus a profit margin not exceeding 6%.
+•
+where there is neither a government-prescribed price nor a government-guidance price, the market price; or
+Financial Statements (PRC)
+Exploration, production, storage and transportation (including pipeline transportation), sales
+and utilisation of crude oil and natural gas; refining; wholesale and retail of gasoline, kerosene
+and diesel; production, sales, storage and transportation of petrochemical and other chemical
+products; industrial investment and investment management; exploration, construction, installation
+and maintenance of petroleum and petrochemical constructions and equipments; manufacturing
+electrical equipment; research, development, application and consulting services of information
+technology and alternative energy products; import & export of goods and technology.
+Ultimate holding company
+No. 22, Chaoyangmen North Street, Chaoyang District, Beijing
+Registered capital
+Bills receivable
+Accounts and other receivables
+Inventories
+Prepayments
+Other current assets
+Fair value
+at the
+Acquisition Date
+5,653
+641
+Book value
+at the
+Acquisition Date
+Book value
+At December 31
+2016
+Cash and cash equivalents
+5,653
+641
+621
+558
+558
+251
+1,702
+1,558
+1,643
+1,349
+2,343
+1,349
+2,541
+20,270
+million
+Income of the
+of the
+of the
+Basis of acquiree from acquiree from acquiree from
+determination the acquisition the acquisition the acquisition the acquisition
+Acquisition on the acquisition
+date to
+date to
+date to
+date to
+date
+end of year
+end of year
+Acquirer gaining
+RMB 5,222 RMB 726
+actual control
+million
+the acquiree
+from
+end of year
+end of year
+RMB 1,639
+RMB 7,205
+million
+million
+17,729
+over acquiree
+Purchase consideration
+- Cash consideration for the purchase of 50% equity interest acquired
+- Acquisition-date fair value of the 50% equity interest held before the acquisition
+Total purchase consideration
+Less: Net assets acquired
+Goodwill (Note 17)
+Details of the net assets acquired are as follows:
+Shanghai SECCO
+RMB million
+10,135
+10,135
+Details of combination cost and goodwill are as follows:
+date
+26/10/2017
+354
+791
+19
+Other non-current assets
+7
+Total non-current assets
+12,883
+5,887
+6,582
+Total assets
+Accounts and other payables
+12
+Bills payable
+Employee benefits payable
+Taxes payable
+Total current liabilities
+Deferred tax liabilities
+23,547
+16,437
+12,180
+(2,115)
+(2,115)
+Advances from customers
+761
+11
+168
+386
+Total current assets
+10,664
+10,550
+5,598
+Fixed assets
+9,587
+4,860
+5,665
+Deferred tax assets
+Construction in progress
+229
+117
+Intangible assets
+2,937
+662
+613
+Long-term deferred expenses
+117
+117
+231
+(5) Key management personnel emoluments
+Cash
+Share of
+acquired
+equity
+50%
+(1,786)
+(1,984)
+(4,032)
+(4,032)
+(538)
+(1,438)
+(1,438)
+(99)
+(376)
+Net assets acquired
+(383)
+(96)
+(383)
+(35)
+(936)
+139
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+The segments were determined primarily because the Group manages its exploration and production, refining, marketing and distribution,
+chemicals, and corporate and others businesses separately. The reportable segments are each managed separately because they manufacture and/
+or distribute distinct products with different production processes and due to their distinct operating and gross margin characteristics.
+(v) Corporate and others - which largely comprise the trading activities of the import and export companies of the Group and research and
+development undertaken by other subsidiaries.
+(iv) Chemicals which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products to external
+customers.
+(iii) Marketing and distribution which owns and operates oil depots and service stations in the PRC, and distributes and sells refined petroleum
+products (mainly gasoline and diesel) in the PRC through wholesale and retail sales networks.
+(96)
+(ii) Refining ― which processes and purifies crude oil, which is sourced from the exploration and production segment of the Group and external
+suppliers, and manufactures and sells petroleum products to the chemicals and marketing and distribution segments of the Group and external
+customers.
+17,729
+10,196
+Authorised representative
+Types of legal entity
+Relationship with the Group
+Principal activities
+Registered address
+China Petrochemical Corporation
+9111000010169286X1
+:
+Unified social credit identifier
+The name of the company
+12,405
+(1) Related parties having the ability to exercise control over the Group
+As Sinopec Group Company controls both the Group and SAMC, the non-cash transaction described above between Sinopec and SAMC has been
+accounted as business combination under common. Accordingly, the assets and liabilities of Gaoqiao Branch of SAMC have been accounted for
+at historical cost, and the consolidated financial statements of the Group prior to these acquisitions have been restated to include the results of
+operation and the assets and liabilities of Gaoqiao Branch of SAMC on a combined basis.
+Pursuant to the resolution passed at the Directors' meeting on 29 October 2015, the Company entered into the JV Agreement with Sinopec
+Assets Management Corporation ("SAMC") in relation to the formation of the Gaoqiao Petrochemical Co., Ltd. According to the JV Agreement,
+the Company and SAMC jointly set up Gaoqiao Petrochemical Co., Ltd. for RMB 100 million in cash in 2016. Subsequently, the Company
+subscribed capital contribution with the net assets of Gaoqiao Branch of the Company and SAMC subscribed capital contribution with the net
+assets of Gaoqiao Branch of SAMC. The capital contribution was completed on 1 June 2016, after which the Company held 55% of Gaoqiao
+Petrochemical Co., Ltd.'s voting rights and became the parent company of Gaoqiao Petrochemical Co., Ltd.
+(b) Business combination involving entities under common control
+53 BUSINESS COMBAINATION (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+As of Acquisition Date, a gain of RMB 3,941 million was recognised as a result of remeasuring the 50% equity interest held before the
+Transaction to its fair value, which is included in investment income (Note 46) in the Group's consolidated income statement for the year ended
+31 December 2017.
+The goodwill is attributable to the high profitability of the acquired business and synergy to be achieved post the Transaction among Shanghai
+SECCO and the Group's existing petrochemical operations located in eastern China.
+54 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
+Acquisition
+method
+(i) Exploration and production ― which explores and develops oil fields, produces crude oil and natural gas and sells such products to the refining
+segment of the Group and external customers.
+Segment information is presented in respect of the Group's operating segments. The format is based on the Group's management and internal
+reporting structure.
+Financial Statements (PRC)
+130
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+53 BUSINESS COMBAINATION
+(a) Business combination involving entities not under common control
+Business combination under different control in this year
+On 26 October 2017, a subsidiary of the Company, Gaoqiao Petrochemical Co., Ltd., purchased 50% equity interest in Shanghai SECCO from
+BP Chemicals East China Investment Limited with a cash consideration of RMB 10,135 million ("the Transaction"). Before the Transaction, the
+Company and one of its subsidiaries held 30% and 20% equity interest in Shanghai SECCO, respectively. After the Transaction, the Company,
+together with its subsidiaries, hold 100% equity interest of Shanghai SECCO, which became a subsidiary of the Company.
+Joint ventures
+Associates (i)
+Shanghai SECCO is principally engaged in the production and sale of petrochemical products including acrylonitrile, polystyrene, polyethylene,
+Net profits
+Operating
+cash flow
+Net cash
+flow of
+Acquiree
+Shanghai
+Time of
+acquisition
+26/10/2017
+SECCO
+Cost of
+acquisition
+RMB 10,135
+million
+etc.
+In a manner consistent with the way in which information is reported internally to the Group's chief operating decision maker for the purposes of
+resource allocation and performance assessment, the Group has identified the following five reportable segments. No operating segments have been
+aggregated to form the following reportable segments.
+Others
+At 31 December
+59 SEGMENT REPORTING
+The Group is a defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course of business.
+Management has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other proceedings and believes that any
+resulting liabilities will not have a material adverse effect on the financial position, operating results or cash flows of the Group.
+Legal contingencies
+The Group paid normal routine pollutant discharge fees of approximately RMB 7,851 million for the year ended 31 December 2017 (2016: RMB 6,358
+million).
+Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial
+position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement
+of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable
+uncertainties which affect the Group's ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and
+extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development areas,
+whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of alternative remediation strategies, (iv) changes.
+in environmental remediation requirements, and (v) the identification of new remediation sites. The amount of such future cost is indeterminable
+due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be
+required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot reasonably be estimated at
+present, and could be material.
+Environmental contingencies
+The Group monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss will occur, and recognises any
+such losses under guarantees when those losses are reliably estimable. At 31 December 2017 and 2016, it was not probable that the Group will
+be required to make payments under the guarantees. Thus no liabilities have been accrued for a loss related to the Group's obligation under these
+guarantee arrangements.
+(i) The group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy by banks amount to RMB
+17,050 million. As at 31 December 2017, the amount withdrawn by Zhongtian Synergetic Energy from banks and guaranteed by the group
+was RMB 13,520 million.
+24,192
+Total
+22,872
+11,545
+13,520
+9,732
+658
+940
+RMB million
+RMB million
+2016
+2017
+At 31 December
+10,669
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
+Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensations are as follows:
+Short-term employee benefits
+Retirement scheme contributions
+Total
+1,489
+1,636
+11,602
+1,352
+1,196
+926
+992
+14,876
+19,866
+Current liabilities
+18,116
+121,260
+156,494
+Current assets
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+19,555
+RMB million
+(212,620)
+(7,118)
+114
+616
+5,934
+8,944
+17,292
+12,437
+(47,106)
+(56,126)
+(liabilities)/assets
+(168,366)
+Net current
+(3,975)
+(4,174)
+(2,891)
+(2,351)
+(812)
+(376)
+(8,942)
+(10,922)
+(824)
+(7,521)
+(1,155)
+RMB million
+RMB million
+December
+At 31
+At 31
+Fujian Petrochemical
+Shanghai Petrochemical
+At 31
+At 31
+December
+December
+At 31
+SIPL
+At 31
+December
+2017
+December
+2016
+December
+December
+At 31
+Marketing Company
+At 31
+Shanghai
+Summarised consolidated balance sheet
+Set out below are the summarised financial information which the amount before inter-company eliminations for each subsidiary that has minority
+interests that are material to the Group.
+Summarised financial information on subsidiaries with material minority interests
+56 PRINCIPAL SUBSIDIARIES (Continued)
+2017
+RMB million
+December
+SECCO
+RMB million
+RMB million
+RMB million
+2016
+2017
+2017
+2016
+2017
+2016
+Sinopec Kantons
+At 31
+December
+2017
+2017
+2016
+December
+December
+At 31
+Zhonghan Wuhan
+At 31
+At 31
+December
+December
+At 31
+2016
+for the year ended 31 December 2017
+(1,539)
+(2,339)
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+2017
+2017
+2016
+Zhonghan Wuhan
+SECCO (ii)
+Sinopec Kantons
+2017
+2016
+Fujian Petrochemical
+2017
+2016
+2016
+Shanghai Petrochemical
+2017
+RMB million
+Turnover
+6,152
+(4,604)
+1,075
+26.461
+27,517
+Profit/(loss) for the year
+11,703
+16,139
+(a) The Company has been advised by its PRC lawyers that, except for liabilities constituting or arising out of or relating to the business assumed
+by the Company in the Reorganisation, no other liabilities were assumed by the Company, and the Company is not jointly and severally liable for
+other debts and obligations incurred by Sinopec Group Company prior to the Reorganisation.
+RMB million
+5,222
+1,498
+4,968
+6,068
+77,894
+92,014
+4,016
+6,136
+1,050,294
+1,221,530
+1,512
+7,428
+2016
+SIPL
+(146)
+(39,322)
+(1,460) (28,523)
+(1,774)
+Non-current liabilities
+14,686
+13,598
+12,797
+13,228
+(150)
+13,089
+9,925
+19,248
+19,743
+40,067
+34,769
+246,514
+253,455
+Non-current assets
+(6,032)
+7,845
+2017
+(681)
+(2,430)
+Marketing Company
+2017
+Year ended 31 December
+Shanghai
+Summarised consolidated statement of comprehensive income and cash flow
+14,686
+13,598
+11.057
+10.127
+10,659
+(721)
+7,124
+19,098
+19,597
+745
+6,246
+245,054
+215,681
+Net non-current assets
+(1,740)
+(3,101)
+9.244
+2,757
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+136
+2017
+million
+million
+up capital
+Principal activities
+(d) Subsidiaries acquired through business combination not under common control:
+Sinopec Zhanjiang Dongxing Petrochemical
+Trading of crude oil and petroleum products
+Gaoqiao Petrochemical Company Limited (Note 53)
+Sinopec Qingdao Petrochemical Company Limited
+Company Limited
+the Group
+(c) Subsidiaries acquired through business combination
+Sinopec Hainan Refining and Chemical
+Sinopec Qingdao Refining and Chemical
+Company Limited
+Sinopec Beihai Refining and Chemical Limited
+Liability Company
+Sinopec Overseas Investment Holding Limited ("SOIH")
+Sinopec Chemical Sales Company Limited
+Sinopec Great Wall Energy & Chemical
+Company Limited
+Sinopec International Petroleum Exploration and
+Production Limited ("SIPL")
+(b) Subsidiaries established by the Group:
+Fujian Petrochemical Company Limited
+("Fujian Petrochemical") (i)
+Sinopec Kantons Holdings Limited ("Sinopec Kantons")
+Sinopec Shanghai Petrochemical Company Limited
+("Shanghai Petrochemical")
+("Marketing Company")
+Sinopec Marketing Company Limited
+Sinopec-SK(Wuhan) Petrochemical Company Limited
+("Zhonghan Wuhan")
+Liability Company
+2017
+RMB million
+RMB 12,000
+RMB 12,000
+100.00
+RMB 15,651
+RMB 13,203
+225
+100.00
+RMB 1,562
+RMB 1,500
+%
+Production and sale of catalyst products
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Pipeline storage and transportation of crude oil
+100.00
+RMB 4,585
+RMB 3,000
+Trading of crude oil and petrochemical products
+27
+100.00
+RMB 1,856
+RMB 1,400
+Trading of petrochemical products
+4,072
+100.00
+Sinopec Yizheng Chemical Fibre Limited
+Sinopec Pipeline Storage & Transportation
+Company Limited
+(b) Impairment for assets
+Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment
+expense and future dismantlement costs. Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based
+on volumes produced and reserves.
+Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration
+the anticipated method of dismantlement required in accordance with industry practices in the similar geographic area, including estimation
+of economic life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are
+capitalised as oil and gas properties with equivalent amounts recognised as provisions for dismantlement costs.
+Engineering estimates of the Group's oil and gas reserves are inherently imprecise and represent only approximate amounts because of the
+subjective judgements involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have
+to be met before estimated oil and gas reserves can be designated as "proved". Proved and proved developed reserves estimates are updated
+at least annually and take into account recent production and technical information about each field. In addition, as prices and cost levels
+change from year to year, the estimate of proved and proved developed reserves also changes. This change is considered a change in estimate
+for accounting purposes and is reflected on a prospective basis in related depreciation rates. Oil and gas reserves have a direct impact on
+the assessment of the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved reserves
+estimates are revised downwards, earnings could be affected by changes in depreciation expense or an immediate write-down of the property's
+carrying amount.
+The accounting for the exploration and production segment's oil and gas activities is subject to accounting rules that are unique to the oil and
+gas industry. The Group has used the successful efforts method to account for oil and gas business activities. The successful efforts method
+reflects the volatility that is inherent in exploring for mineral resources in that costs of unsuccessful exploratory efforts are charged to expense.
+These costs primarily include dry hole costs, seismic costs and other exploratory costs.
+(a) Oil and gas properties and reserves
+The selection of critical accounting policies, the judgements and other uncertainties affecting application of those policies and the sensitivity of
+reported results to changes in conditions and assumptions are factors to be considered when reviewing the financial statements. The significant
+accounting policies are set forth in Note 3. The Group believes the following critical accounting policies involve the most significant judgements and
+estimates used in the preparation of the financial statements.
+The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the
+preparation of the financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions
+that it believes to be reasonable and which form the basis for making judgements about matters that are not readily apparent from other sources.
+On an on-going basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions
+change.
+55 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS
+If circumstances indicate that the net book value of a long-lived asset may not be recoverable, the asset may be considered "impaired", and
+an impairment loss may be recognised in accordance with "ASBE 8 - Impairment of Assets". The carrying amounts of long-lived assets are
+reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for
+impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a
+decline has occurred, the carrying amount is reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The
+recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows. It is difficult to precisely
+estimate the fair value because quoted market prices for the Group's assets or cash-generating units are not readily available. In determining
+the value of expected future cash flows, expected cash flows generated by the asset or the cash-generating unit are discounted to their present
+value, which requires significant judgement relating to sales volume, selling price, amount of operating costs and discount rate. The Group uses
+all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based
+on reasonable and supportable assumptions and projections of sales volume, selling price, amount of operating costs and discount rate.
+for the year ended 31 December 2017
+6,147
+5,768
+499
+5,648
+5,344
+424
+2016
+RMB thousand
+RMB thousand
+2017
+134 Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Sinopec Lubricant Company Limited
+(c) Depreciation
+(d) Allowances for doubtful accounts
+Sinopec Yangzi Petrochemical Company Limited
+Sinopec Catalyst Company Limited
+(a) Subsidiaries acquired through group restructuring:
+China Petrochemical International Company Limited
+China International United Petroleum and Chemical
+Company Limited
+Full name of enterprise
+31 December
+Minority
+Interests at
+Percentage
+of equity
+interest/
+voting right
+held by
+31 December
+Actual
+investment at
+Fixed assets are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual
+value. Management reviews the estimated useful lives of the assets at least annually in order to determine the amount of depreciation expense
+to be recorded during any reporting year. The useful lives are based on the Group's historical experience with similar assets and taking into
+account anticipated technological changes. The depreciation expense for future years is adjusted if there are significant changes from previous
+estimates.
+Registered
+capital/paid-
+56 PRINCIPAL SUBSIDIARIES
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017 135
+If the costs of inventories become higher than their net realisable values, an allowance for diminution in value of inventories is recognised.
+Net realisable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the
+estimated costs necessary to make the sale. Management bases the estimates on all available information, including the current market prices of
+the finished goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were
+to be higher than estimated, the actual allowance for diminution in value of inventories would be higher than estimated.
+(e) Allowance for diminution in value of inventories
+Management estimates impairment losses for bad and doubtful debts resulting from the inability of the Group's customers to make the required
+payments. Management bases the estimates on the ageing of the accounts receivable balance, customer credit-worthiness, and historical write-
+off experience. If the financial condition of the customers were to deteriorate, actual write-offs would be higher than estimated.
+The Company's principal subsidiaries have been consolidated into the Group's financial statements for the year ended 31 December 2017. The
+following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the Group:
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Production and sale of refined petroleum products,
+lubricant base oil, and petrochemical materials
+Production and sale of polyester chips and polyester
+fibres
+RMB 3,374
+100.00
+RMB 7,233
+RMB 1,595
+Manufacturing of intermediate petrochemical
+products and petroleum products
+2,153
+75.00
+RMB 2,990
+RMB 3,986
+products and petroleum products
+Manufacturing of intermediate petrochemical
+ethylene and downstream byproducts
+3,941
+65.00
+RMB 4,076
+RMB 6,270
+Production, sale, research and development of
+products and petroleum products
+1,527
+85.00
+under common control:
+RMB 4,250
+Manufacturing of intermediate petrochemical
+RMB 4,804
+(i) The Group consolidated the financial statements of the entity because it is exposed to, or has rights to, variable returns from its involvement with the entity and has
+the ability to affect those return through its power over the entity.
+Note:
+Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and Hong Kong, respectively, all of the above principal subsidiaries are
+incorporated and operate their businesses principally in the PRC.
+The minority interests of subsidiaries which the Group holds 100% of equity interests at the end of the year are the minority interests of their subsidiaries.
+*
+("Shanghai SECCO") (Note 53)
+5,989
+67.60
+RMB 7,801
+RMB 10,000
+RMB 7,801
+75.00
+RMB 3,225
+RMB 4,397
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Production and sale of petrochemical products
+Shanghai SECCO Petrochemical Company Limited
+Company Limited
+products and petroleum products
+5,400
+55.00
+1,297
+RMB 3,374
+RMB 5,000
+98
+RMB 6,898
+Manufacturing of plastics, intermediate petrochemical
+products and petroleum products
+14,275
+50.49
+RMB 5,820
+RMB 10,814
+3,788
+60.34
+HKD 3,952
+RMB 3,737
+HKD 248
+70.42
+RMB 20,000
+RMB 28,403
+Marketing and distribution of refined petroleum
+products
+100.00
+RMB 6,713
+RMB 4,000
+56
+100.00
+63,006
+Manufacturing of intermediate petrochemical
+50.00
+Investment in exploration, production and sale of
+petroleum and natural gas
+Investment holding
+98.98
+RMB 5,240
+RMB 5,294
+49
+100.00
+RMB 22,759
+RMB 22,761
+68
+100.00
+4,930
+RMB 1,165
+Marketing and distribution of petrochemical products
+Coal chemical industry investment management,
+production and sale of coal chemical products
+Import and processing of crude oil, production,
+storage and sale of petroleum products and
+petrochemical products
+54
+100.00
+USD 1,638
+USD 1,638
+15,215
+100.00
+RMB 8,000
+RMB 8,000
+RMB 1,000
+Manufacturing of synthetic fibres, resin and plastics,
+intermediate petrochemical products and petroleum
+products
+(b) At 31 December 2017 and 2016, guarantees by the Group in respect of facilities granted to the parties below are as follows:
+Financial Statements (International)
+Depreciation, depletion and amortisation
+Corporate and others
+Chemicals
+Marketing and distribution
+Refining
+Exploration and production
+Capital expenditure
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+Exploration and production
+59 SEGMENT REPORTING (Continued)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+141
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+666,084
+741,434
+15,453
+for the year ended 31 December 2017
+Refining
+Marketing and distribution
+Chemicals
+23,028
+18,493
+21,539
+14,347
+21,075
+32,187
+31,344
+RMB million
+RMB million
+2016
+2017
+(2) Geographical information
+Corporate and others
+Chemicals
+Marketing and distribution
+Refining
+Exploration and production
+Impairment losses on long-lived assets
+Corporate and others
+20,583
+16,136
+16,440
+Total liabilities
+35,207
+132,922
+163,680
+82,170
+101,429
+95,883
+99,367
+1,498,609
+1,595,504
+7,214
+36,745
+29,511
+15,131
+142,497
+116,812
+131,087
+165,004
+1,195,341
+1,254,771
+95,263
+170,045
+31,989
+8,849
+117,756
+Total segment liabilities
+Other unallocated liabilities
+Other non-current liabilities
+7,661
+6,466
+Deferred tax liabilities
+54,985
+31,370
+Debentures payable
+62,461
+67,754
+Long-term loans
+38,972
+26,681
+Non-current liabilities due within one year
+30,374
+54,701
+Short-term loans
+440,042
+517,439
+97,078
+2,398
+2,580
+99,384
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+At 31 December 2017, the Group has standby credit facilities with several PRC financial institutions which provide the Group to borrow up to RMB
+361,852 million (2016: RMB 256,375 million) on an unsecured basis, at a weighted average interest rate of 3.40% (2016: 3.57%). At 31 December
+2017, the Group's outstanding borrowings under these facilities were RMB 56,567 million (2016: RMB 36,933 million) and were included in loans.
+Liquidity risk is the risk that the Group encounters short fall of capital when meeting its obligation of financial liabilities. The Group's approach to
+managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal
+and stressed capital conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group prepares monthly
+cash flow budget to ensure that they will always have sufficient liquidity to meet its financial obligation as they fall due. The Group arranges and
+negotiates financing with financial institutions and maintains a certain level of standby credit facilities to reduce the liquidity risk.
+Liquidity risk
+The carrying amounts of cash at bank, trade accounts and bills receivables, derivative financial instruments, financial assets at fair value through
+profit or loss and other receivables, represent the Group's maximum exposure to credit risk in relation to financial assets.
+Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations,
+and arises principally from the Group's deposits placed with financial institutions (including structured deposit) and receivables from customers.
+To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial institution in the PRC with
+acceptable credit ratings. The majority of the Group's accounts receivable relates to sales of petroleum and chemical products to related parties
+and third parties operating in the petroleum and chemical industries. No single customer accounted for greater than 10% of total accounts
+receivable at 31 December 2017, except for the amounts due from Sinopec Group Company and fellow subsidiaries. The Group performs ongoing
+credit evaluations of its customers' financial condition and generally does not require collateral on accounts receivable. The Group maintains an
+impairment loss for doubtful accounts and actual losses have been within management's expectations.
+Credit risk
+The Group's risk management policies are established to identify and analyse the risks faced by the Group, and set appropriate risk limits and
+controls to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
+conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and
+constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular
+and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group's audit committee.
+The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework, and developing
+and monitoring the Group's risk management policies.
+market risk;
+credit risk;
+liquidity risk;
+The Group has exposure to the following risks from its uses of financial instruments:
+Financial assets of the Group include cash at bank, financial assets at fair value through profit and loss, equity investments other than long-term
+equity investment, accounts receivable, bills receivable, available-for-sale financial assets, derivative financial instruments and other receivables.
+Financial liabilities of the Group include short-term and long-term loans, accounts payable, bills payable, debentures payable, employee benefits
+payable, derivative financial instruments and other payables.
+Overview
+60 FINANCIAL INSTRUMENTS
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+1,046,096
+45,887
+143
+1,000,209
+Financial Statements (PRC)
+Financial Statements (PRC)
+Short-term loans
+RMB million
+five years
+RMB million
+five years
+More than
+More than
+two years
+but less than
+one year
+but less than
+two years
+RMB million
+Within
+one year or
+on demand
+RMB million
+At 31 December 2017
+More than
+Total
+contractual
+undiscounted
+cash flow
+RMB million
+RMB million
+amount
+Carrying
+The following table sets out the remaining contractual maturities at the balance sheet date of the Group's financial liabilities, which are based on
+contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on prevailing rates at the
+balance sheet date) and the earliest date the Group would be required to repay:
+Liquidity risk (Continued)
+60 FINANCIAL INSTRUMENTS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+144
+144,371
+RMB million
+At 31 December
+21,258
+211
+2,898
+267
+1,894
+13,556
+108,425
+115,310
+2,093
+1,723
+12,654
+12,873
+14,540
+15,463
+17,209
+18,408
+61,929
+66,843
+76,456
+16,425
+2016
+675
+11,605
+1.655
+979,329
+48,572
+1,027,901
+RMB million
+2017
+At 31 December
+1,930,911
+2,360,193
+290,726
+332,479
+1,488,117
+152,068
+1,758,365
+269,349
+2016
+RMB million
+2017
+RMB million
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+142
+Non-current assets
+Mainland China
+Others
+Others
+Mainland China
+Singapore
+External sales
+The following tables set out information about the geographical information of the Group's external sales and the Group's non-current assets,
+excluding financial instruments and deferred tax assets. In presenting information on the basis of geographical segments, segment revenue is
+based on the geographical location of customers, and segment assets are based on the geographical location of the assets.
+4,922
+Non-current liabilities due within one year
+158,472
+309,727
+(1,445,955)
+738,469
+973,411
+320,367
+440,303
+418,102
+533,108
+322,903
+(1,168,732)
+423,429
+49,615
+284,289
+373,814
+1,030,853
+1,027,373
+3,480
+1,191,902
+3,962
+1,195,864
+850,300
+1,006,749
+38,614
+2,300,470
+1,880,190
+10,533
+By segment
+Operating (loss)/profit
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+59 SEGMENT REPORTING (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+1,930,911
+2,360,193
+50,721
+59,723
+1,478
+1,439
+12,211
+14,314
+22,004
+28,333
+5,486
+5,104
+9,542
+747,317
+874,271
+102,983
+132,478
+Inter-segment sales
+Marketing and distribution
+External sales
+Inter-segment sales
+External sales
+Refining
+Inter-segment sales
+External sales
+Exploration and production
+Income from principal operations
+Reportable information on the Group's operating segments is as follows:
+Assets and liabilities dedicated to a particular segment's operations are included in that segment's total assets and liabilities. Segment assets
+include all tangible and intangible assets, except for cash at bank and on hand, long-term equity investments, deferred tax assets and other
+unallocated assets. Segment liabilities exclude short-term loans, short-term debentures payable, non-current liabilities due within one year, long-
+term loans, debentures payable, deferred tax liabilities, other non-current liabilities and other unallocated liabilities.
+The Group's chief operating decision maker evaluates the performance and allocates resources to its operating segments on an operating profit
+basis, without considering the effects of finance costs or investment income. Inter-segment transfer pricing is based on the market price or cost
+plus an appropriate margin, as specified by the Group's policy.
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities
+59 SEGMENT REPORTING (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+140
+149
+Chemicals
+Exploration and production
+External sales
+Corporate and others
+106,397
+146,972
+58,954
+77,804
+69,168
+RMB million
+2016
+2017
+RMB million
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Consolidated income from other operations
+Consolidated operating income
+Corporate and others
+Marketing and distribution
+Chemicals
+Refining
+Exploration and production
+Income from other operations
+Consolidated income from principal operations
+Elimination of inter-segment sales
+Inter-segment sales
+External sales
+Inter-segment sales
+Refining
+Marketing and distribution
+Chemicals
+(1,560)
+30,779
+19,060
+1,717
+43
+5,815
+13,648
+2,928
+2,951
+1,071
+1,017
+19,248
+1,401
+54,924
+66,640
+1,581
+(1,655)
+2,912
+(3,160)
+(6,611)
+20,769
+(13)
+(1,518)
+260,903
+273,123
+402,476
+343,404
+2016
+RMB million
+RMB million
+2017
+At 31 December
+At 31 December
+79,877
+86,573
+2,218
+1,709
+4,706
+1,317
+77,389
+86,965
+4.356
+(1,487)
+(216)
+292,328
+22,796
+32,011
+Segment assets
+Assets
+Profit before taxation
+Less: Non-operating expenses
+Add: Non-operating income
+Operating profit
+Other income
+Asset disposal income
+Loss from changes in fair value
+Financial expenses
+Total segment investment income
+Corporate and others
+Chemicals
+Marketing and distribution
+Exploration and production
+Refining
+Investment income
+Total segment operating profit
+Elimination
+Corporate and others
+Exploration and production
+Refining
+32,385
+Marketing and distribution
+Chemicals
+Total segment assets
+55,808
+64,047
+(58,531)
+(47,399)
+2016
+RMB million
+RMB million
+2017
+Corporate and others
+Chemicals
+Marketing and distribution
+Refining
+Exploration and production
+Segment liabilities
+Liabilities
+Total assets
+Other unallocated assets
+Deferred tax assets
+Long-term equity investments
+Cash at bank and on hand
+Corporate and others
+54,701
+47,443
+55,451
+(20,562)
+Investment income on loss of control and remeasuring interests in the Pipeline Ltd (Note 13(vi))
+Gain on remeasurement of interests in the Shanghai SECCO (Note 53(a))
+(518)
+(148)
+Gain on holding and disposal of various investments
+(3,987)
+(4,783)
+Government grants
+(3,941)
+133
+Donations
+1,489
+1,518
+Net loss on disposal of non-current assets
+Extraordinary (gains)/losses for the year:
+RMB million
+RMB million
+2016
+152
+Other non-operating loss, net
+690
+1,367
+Financial Statements (PRC)
+148
+Financial Statements (PRC)
+147
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+(16,703)
+117
+1
+Minority interests
+(5,537)
+Equity shareholders of the Company
+Attributable to:
+5,578
+(16,586)
+976
+(5,536)
+Total
+Tax effect
+(22,164)
+(6,512)
+(86)
+Net gains of combination under common control from 1 January 2017 to the consolidation date
+2017
+Pursuant to "Explanatory Announcement No.1 on Information Disclosure for Companies Offering Their Securities to the Public- Extraordinary Gain
+and Loss" (2008), the extraordinary gains and losses of the Group are as follows:
+61 EXTRAORDINARY GAINS AND LOSSES
+Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values
+at 31 December 2017 and 2016.
+733
+291
+733
+29
+262
+Total
+RMB million
+Level 3
+RMB million
+RMB million
+RMB million
+Level 2
+Level 1
+2,665
+1,388
+1,277
+1,388
+1,277
+51,900
+51,196
+183
+2,586
+2,586
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+1,886
+1,886
+762
+Other unquoted equity investments are individually and in the aggregate not material to the Group's financial position or results of operations.
+There are no listed market prices for such interests in the PRC and, accordingly, a reasonable estimate of fair value could not be made without
+incurring excessive costs. The Group intends to hold these unquoted equity investments for long term purpose.
+The Group has not developed an internal valuation model necessary to make the estimate of the fair value of loans from Sinopec Group Company
+and fellow subsidiaries as it is not considered practicable to estimate their fair value because the cost of obtaining discount and borrowing rates
+for comparable borrowings would be excessive based on the Reorganisation of the Group, its existing capital structure and the terms of the
+borrowings.
+2016
+RMB million
+110,969
+109,308
+79,738
+78,040
+At 31 December
+At 31 December
+2017
+RMB million
+Carrying amount
+Fair value
+(ii) Fair values of financial instruments carried at other than fair value
+The fair values of the Group's financial instruments carried at other than fair value (other than long-term indebtedness and investments in
+unquoted equity securities) approximate their carrying amounts due to the short-term maturity of these instruments. The fair values of long-term
+indebtedness are estimated by discounting future cash flows using current market interest rates offered to the Group for debt with substantially
+the same characteristic and maturities range from 1.79% to 4.90% (2016: 1.06% to 4.90%). The following table presents the carrying amount
+and fair value of the Group's long-term indebtedness other than loans from Sinopec Group Company and fellow subsidiaries at 31 December
+2017 and 2016:
+Fair values (Continued)
+60 FINANCIAL INSTRUMENTS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+146
+Management of the uses discounted cash flow model with inputted interest rate and commodity index, which were influenced by historical
+fluctuation and the probability of market fluctuation, to evaluate the fair value of the structural deposits classified as Level 3 financial assets.
+During the years ended 31 December 2017 and 2016, there was no transfer among instruments in Level 1, Level 2, Level 3.
+4,472
+4,472
+1,024
+262
+for the year ended 31 December 2017
+62 BASIC AND DILUTED EARNINGS PER SHARE
+(i) Basic earnings per share
+To the Shareholders of China Petroleum & Chemical Corporation
+(incorporated in the People's Republic of China with limited liability)
+Independent Auditor's Report
+pwc
+REPORT OF THE INTERNATIONAL AUDITOR
+•
+•
+•
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+0.245
+0.245
+4.33
+0.376
+0.376
+6.37
+Net profit deducted extraordinary gains and
+losses attributable to the Company's ordinary
+equity shareholders
+0.383
+0.383
+per share
+(RMB/Share)
+6.68
+OPINION
+0.422
+What we have audited
+•
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+55,451
+T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com
+PricewaterhouseCoopers, 22/F, Prince's Building, Central, Hong Kong
+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 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.
+Independence
+We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
+We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAS") issued by the Hong Kong Institute of Certified Public
+Accountants ("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.
+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
+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") as issued by the International Accounting Standard Board and have been properly prepared in compliance with the
+disclosure requirements of the Hong Kong Companies Ordinance.
+Our opinion
+the notes to the consolidated financial statements, which include a summary of significant accounting policies.
+the consolidated statement of cash flows for the year then ended; and
+the consolidated statement of changes in equity for the year then ended;
+the consolidated statement of comprehensive income for the year then ended;
+the consolidated income statement for the year then ended;
+the consolidated balance sheet as at 31 December 2017;
+羅兵咸永道
+521
+0.422
+ordinary equity shareholders
+Weighted average number of the ordinary shares issued at 31 December (million)
+Weighted average number of the ordinary shares issued at 31 December (diluted) (million)
+The calculation of the weighted average number of ordinary shares (diluted) is as follows:
+Net profit attributable to equity shareholders of the Company (diluted) (RMB million)
+Weighted average number of outstanding ordinary shares of the Company (diluted) (million)
+Diluted earnings per share (RMB/share)
+Diluted earnings per share is calculated by the net profit attributable to equity shareholders of the Company (diluted) and the weighted average
+number of ordinary shares of the Company (diluted):
+121,071
+121,071
+121,071
+121,071
+2016
+2017
+(ii) Diluted earnings per share
+Weighted average number of outstanding ordinary shares of the Company at 1 January (million)
+Weighted average number of outstanding ordinary shares of the Company at 31 December (million)
+The calculation of the weighted average number of ordinary shares is as follows:
+121,071
+0.383
+46,416
+2016
+2017
+51,119
+121,071
+0.422
+Weighted average number of outstanding ordinary shares of the Company (million)
+Basic earnings per share (RMB/share)
+Net profit attributable to equity shareholders of the Company (RMB million)
+Basic earnings per share is calculated by the net profit attributable to equity shareholders of the Company and the weighted average number of
+outstanding ordinary shares of the Company:
+63 RETURN ON NET ASSETS AND EARNINGS PER SHARE
+7.14
+2017
+51,117
+121,071
+0.422
+46,413
+Net profit attributable to the Company's
+earnings
+Diluted
+earnings
+per share
+(%) (RMB/Share)
+Basic
+Weighted
+average
+return on
+net assets
+Diluted
+earnings
+Basic
+earnings
+per share
+per share
+(RMB/Share) (RMB/Share)
+(%)
+Weighted
+average
+return on
+net assets
+2016
+2017
+In accordance with "Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares No.9 - Calculation and Disclosure
+of the Return on Net Assets and Earnings Per Share" (2010 revised) issued by the CSRC and relevant accounting standards, the Group's return on
+net assets and earnings per share are calculated as follows:
+121,071
+2016
+121,071
+121,071
+121,071
+2017
+0.383
+121,071
+2016
+526
+The consolidated financial statements of China Petroleum & Chemical Corporation (the "Company") and its subsidiaries (the "Group") set out on pages
+152 to 205, which comprise:
+343
+62,461
+6,030
+6,030
+6,000
+39,934
+39,934
+38,972
+30,708
+64,566
+30,708
+Accounts payable
+Bills payable
+Non-current liabilities due within one year
+Short-term debentures payable
+Long-term loans
+Short-term loans
+Debentures payable
+RMB million
+five years
+five years
+30,374
+900
+4,652
+54,985
+79,248
+79,248
+2,006
+2,006
+2,006
+Total
+Other payables and employee benefits payable
+Dividends payable
+174,301
+174,301
+174,301
+5,828
+5,828
+5,828
+1,752
+22,785
+57,262
+16,069
+24,717
+1,932
+65,503
+RMB million
+More than
+More than
+two years
+but less than
+At 31 December 2016
+More than
+one year
+but less than
+two years
+RMB million
+6,462
+6,462
+Bills payable
+2,906
+14,337
+22,285
+1,250
+1,250
+31,370
+Debentures payable
+49,038
+17,666
+1,003
+70,613
+67,754
+Long-term loans
+27,261
+183
+26,681
+27,261
+6,462
+79,248
+Accounts payable
+200,073
+one year or
+on demand
+RMB million
+cash flow
+RMB million
+RMB million
+amount
+Carrying undiscounted
+Within
+Total
+contractual
+17,243
+71,323
+18,916
+92,012
+390,355
+6,843
+6,843
+92,012
+497,837
+485,896
+92,012
+Other payables and employee benefits payable
+Total
+6,843
+Dividends payable
+200,073
+200,073
+454,175
+39,122
+340,887
+Derivative financial assets
+Derivative financial instruments:
+Listed
+Available-for-sale financial assets:
+- Structural deposits
+Financial assets at fair value through profit and loss
+Assets
+The Group
+At 31 December 2017
+Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.
+Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which
+all significant inputs are directly or indirectly based on observable market data.
+•
+⋅
+Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments.
+•
+The following table presents the carrying value of financial instruments measured at fair value at the balance sheet date across the three levels
+of the fair value hierarchy. With the fair value of each financial instrument categorised in its entirely based on the lowest level of input that is
+significant to that fair value measurement. The levels are defined as follows:
+(i) Financial instruments carried at fair value
+Fair values
+60 FINANCIAL INSTRUMENTS (Continued)
+Liabilities
+for the year ended 31 December 2017
+Derivative financial instruments:
+At 31 December 2016
+51,196
+468,124
+178
+178
+51,196
+Total
+RMB million
+Level 3
+RMB million
+RMB million
+RMB million
+Level 1
+- Derivative financial liabilities
+Derivative financial instruments:
+Liabilities
+- Derivative financial assets
+Derivative financial instruments:
+- Listed
+Available-for-sale financial assets:
+Assets
+The Group
+Derivative financial liabilities
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Level 2
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+A 5 percent strengthening/weakening of Renminbi against the following currencies at 31 December 2017 and 2016 would have increased/
+decreased net profit for the year of the Group by the amounts shown below. This analysis has been determined assuming that the change in
+foreign exchange rates had occurred at the balance sheet date and had been applied to the foreign currency balances to which the Group has
+significant exposure as stated above, and that all other variables, in particular interest rates, remain constant. The analysis is performed on the
+Isame basis for 2016.
+USD 126
+At 31 December
+2016
+million
+USD 204
+2017
+million
+At 31 December
+Gross exposure arising from loans and borrowings
+US Dollars
+The Group
+Included in short-term and long-term debts are the following amounts denominated in a currency other than the functional currency of the entity
+to which they relate:
+Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured.
+The Group's currency risk exposure primarily relates to short-term and long-term debts denominated in US Dollars and the Group enters into
+foreign exchange contracts to manage currency risk exposure.
+(a) Currency risk
+Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is
+to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
+Market risk
+Management believes that the Group's current cash on hand, expected cash flows from operations and available standby credit facilities from
+financial institutions will be sufficient to meet the Group's short-term and long-term capital requirements.
+Financial Statements (PRC)
+73,331
+29,369
+for the year ended 31 December 2017
+60 FINANCIAL INSTRUMENTS (Continued)
+24,537
+(a) Currency risk (Continued)
+At 31 December 2017, the Group had certain commodity contracts of crude oil, refined oil products and chemical products designated as
+qualified cash flow hedges and economic hedges. At 31 December 2017, the net fair value of such derivative hedging financial instruments is
+derivative financial assets of RMB 515 million (2016: RMB 312 million) recognised in other receivables and derivative financial liabilities of RMB
+2,624 million (2016: RMB 4,336 million) recognised in other payables.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Market risk (Continued)
+145
+(c) Commodity price risk
+At 31 December 2017, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held
+constant, would decrease/increase the Group's net profit for the year by approximately RMB 450 million (2016: decrease/increase RMB 327
+million). This sensitivity analysis has been determined assuming that the change in interest rates had occurred at the balance sheet date and the
+change was applied to the Group's loans outstanding at that date with exposure to cash flow interest rate risk. The analysis is performed on the
+same basis for 2016.
+The Group's interest rate risk exposure arises primarily from its short-term and long-term loans. Loans carrying interest at variable interest rates
+and at fixed interest rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The interest rates and
+terms of repayment of short-term and long-term loans of the Group are disclosed in Note 22 and Note 30, respectively.
+(b) Interest rate risk
+Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in
+the functional currency of respective entity of the Group.
+33
+The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products
+and chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the
+Group. The Group uses derivative financial instruments, including commodity futures and swaps, to manage a portion of such risk.
+50
+The Group
+At 31 December
+2017
+At 31 December
+2016
+At 31 December 2017, it is estimated that a general increase/decrease of USD 10 per barrel in basic price of derivative financial instruments,
+with all other variables held constant, would impact the fair value of derivative financial instruments which would decrease/increase the Group's
+profit for the year by approximately RMB 4,049 million (2016: decrease/increase RMB 634 million), and decrease/increase the Group's other
+comprehensive income by approximately RMB 701 million (2016: decrease/increase RMB 4,007 million). This sensitivity analysis has been
+determined assuming that the change in prices had occurred at the balance sheet date and the change was applied to the Group's derivative
+financial instruments at that date with exposure to commodity price risk. The analysis is performed on the same basis for 2016.
+million
+million
+US Dollars
+120,241
+126,770
+710,994
+726,120
+589,923
+39,958
+605,049
+121,071
+121,071
+831,235
+39,298
+17,620
+181,831
+163,168
+17,426
+33
+852,890
+154 Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+831,235
+Share
+Capital
+Share
+to
+Total equity
+attributable
+Total comprehensive income for the year
+Other comprehensive income (Note 14)
+852,890
+Profit for the year
+for the year ended 31 December 2017
+(Amounts in million)
+CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+The notes on pages 159 to 205 form part of these consolidated financial statements.
+Chief Financial Officer
+Wang Dehua
+Vice Chairman, President
+Dai Houliang
+Balance at 1 January 2016
+7,661
+279,247
+13,015
+579,446
+50,397
+1,016,058
+72,674
+44,772
+-------
+Total current liabilities
+Income tax payable
+31
+Accrued expenses and other payables
+5,828
+6,462
+Net current liabilities
+30
+174,301
+200,073
+30
+25,311
+surplus
+Trade accounts payable
+18,580
+Bills payable
+Total assets less current liabilities
+Non-current liabilities
+Long-term debts
+55,804
+43,320
+2222
+73,282
+1,013,066
+485,543
+6,051
+224,544
+Approved and authorised for issue by the board of directors on 23 March 2018.
+Total equity
+Non-controlling interests
+Total equity attributable to shareholders of the Company
+Reserves
+Share capital
+Equity
+Total non-current liabilities
+Other long-term liabilities
+Provisions
+Loans from Sinopec Group Company and fellow subsidiaries
+Deferred tax liabilities
+6,466
+Statutory Discretionary
+surplus
+46,672
+Non-
+that do not result in a loss of control
+Total changes in ownership interests in subsidiaries
+Transaction with non-controlling interests
+not result in a loss of control:
+Changes in ownership interests in subsidiaries that do
+(2,137)
+(2,137)
+Total contributions by and distributions to owners
+Total transactions with owners
+Branch of SAMC (Note 35)
+Profit distribution to SAMC (Note 35)
+Distributions to non-controlling interests
+Interim dividend for 2016 (Note 13)
+Appropriation (Note (a))
+Final dividend for 2015 (Note 13).
+Contributions by and distributions to owners:
+Transactions with owners, recorded directly in equity:
+65,777
+Distribution to SAMC in the Acquisition of Gaoqiao
+Others
+Balance at 31 December 2016
+(7,264)
+(4,048)
+(19,013)
+29
+(16,876)
+2,137
+(2,137)
+(86)
+(39)
+(47)
+(47)
+(6,146)
+(6,146)
+(9,565)
+(9,565)
+(9,565)
+(7,264)
+(7,264)
+12.053
+53,724
+7,052
+6,333
+RMB
+RMB
+RMB
+RMB
+RMB
+equity
+Total
+controlling
+interests
+Company
+of the
+Retained
+earnings
+Other
+reserves
+reserve
+reserve
+premium
+reserve
+capital
+RMB
+shareholders
+RMB
+RMB
+(719)
+7,052
+-7.052
+59,444
+12,772
+46.672
+46,672
+788,161
+111,964
+676,197
+281,076
+(6,781)
+79.640 117,000
+55,850
+28,341
+121,071
+RMB
+RMB
+Loans from Sinopec Group Company and fellow subsidiaries
+12,053
+55,338
+70,418
+RMB
+RMB
+2016
+2017
+Year ended 31 December
+Note
+59,444
+The notes on pages 159 to 205 form part of these consolidated financial statements.
+Total comprehensive income for the year
+Non-controlling interests
+Shareholders of the Company
+Attributable to:
+Total other comprehensive income
+Total items that may be reclassified subsequently to profit or loss
+Foreign currency translation differences
+Total comprehensive income for the year
+14
+(1,580)
+(57)
+2,014
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+65,777
+66,042
+18,279
+53,724
+47,763
+65,777
+66,042
+6,333
+(4,376)
+6,333
+(4,376)
+4,298
+(3,792)
+45
+1,053
+(24)
+Share of other comprehensive income of associates and joint ventures
+153
+Available-for-sale securities
+(net of tax and after reclassification adjustments):
+Non-controlling interests
+46,672
+51,244
+Shareholders of the Company
+Attributable to:
+59,444
+70,418
+19,174
+Profit for the year
+(16,279)
+10
+Tax expense
+80,151
+86,697
+(23,061)
+Profit before taxation
+(20,707)
+12,772
+Profit for the year
+70,418
+Items that may be reclassified subsequently to profit or loss
+Other comprehensive income:
+Profit for the year
+(Amounts in million)
+CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
+for the year ended 31 December 2017
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+152
+The notes on pages 159 to 205 form part of these consolidated financial statements. Details of dividends payable to shareholders of the Company
+attributable to the profit for the year are set out in Note 13.
+0.385
+0.423
+0.385
+0.423
+Diluted
+Basic
+15
+Earnings per share:
+59,444
+Cash flow hedges
+Financial Statements (International)
+Financial Statements (International)
+CONSOLIDATED BALANCE SHEET
+Inventories
+Bills receivable
+Trade accounts receivable
+Financial assets at fair value through profit or loss
+18,029
+51,786
+Time deposits with financial institutions
+Prepaid expenses and other current assets
+124,468
+Cash and cash equivalents
+1,086,348
+1,066,455
+70,145
+81,982
+54,241
+58,526
+113,218
+22222
+24
+51,196
+29
+Short-term debts.
+Current liabilities
+412,261
+529,049
+Total current assets
+49,767
+41,455
+27
+156,511
+186,693
+26
+13,197
+16,207
+50,289
+68,494
+25
+7,214
+15,131
+11,408
+1,676
+Lease prepayments
+Deferred tax assets
+Available-for-sale financial assets
+Interest in joint ventures
+Interest in associates
+Goodwill
+Construction in progress
+Property, plant and equipment, net
+Non-current assets
+RMB
+2016
+RMB
+31 December
+31 December
+2017
+Note
+(Amounts in million)
+As at 31 December 2017
+Long-term prepayments and other assets
+56,239
+Total non-current assets
+16
+50,696
+51,361
+66,116
+79,726
+6,353
+8,634
+129,581
+118,645
+690,594
+650,774
+678222222
+23
+21
+20
+19
+18
+17
+Current assets
+(30)
+Dividends paid by the Company
+263
+(32,689)
+343
+946
+506,097
+(569,091)
+524,843
+(536,380)
+(66,217)
+(145,323)
+(16,876)
+4,028
+2,331
+3,669
+600
+48,820
+(17,896)
+(82,577)
+440
+8,506
+(7,539)
+(6,553)
+(5,535)
+for the year ended 31 December 2017
+NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
+Financial Statements (International)
+Financial Statements (International)
+157
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+124,468
+256
+(353)
+113,218
+68,933
+124,468
+55,279
+(10,897)
+(93,047)
+(56,509)
+(155)
+(6,967)
+1,313
+(Amounts in million)
+33,516
+(1,288)
+Finance lease payment
+Distributions by subsidiaries to non-controlling interests
+Interest paid
+Contributions to subsidiaries from non-controlling interests
+Repayments of bank and other loans
+Proceeds from bank and other loans
+Financing activities
+Net cash used in investing activities
+Net cash used in financing activities
+Investment and dividend income received
+Increase in time deposits with maturities over three months
+Proceeds from disposal of property, plant, equipment and other non-current assets
+Proceeds from disposal of investments and investments in associates
+Purchase of investments, investments in associates and investments in joint ventures
+Payment for acquisition of subsidiary, net of cash acquired
+Exploratory wells expenditure
+Capital expenditure
+Investing activities
+Decrease in time deposits with maturities over three months
+Interest received
+Net (decrease)/increase in cash and cash equivalents
+Cash and cash equivalents at 1 January
+Effect of foreign currency exchange rate changes
+(16,389)
+(57,627)
+(7,380)
+(7,407)
+(65,467)
+(63,541)
+214,543
+190,935
+(a)
+RMB
+RMB
+2016
+2017
+Year ended 31 December
+Note
+The notes on pages 159 to 205 form part of these consolidated financial statements.
+Cash and cash equivalents at 31 December
+4,809
+Net cash generated from operating activities
+(a) Reconciliation from profit before taxation to net cash generated from operating activities
+2016
+The notes on pages 159 to 205 form part of these consolidated financial statements.
+214,543
+190,935
+(23,236)
+(20,030)
+237,779
+210,965
+158
+81,089
+(11,364)
+(28,903)
+(22,549)
+(31,151)
+Net cash generated from operating activities
+Income tax paid
+Accounts payable and other current liabilities
+59,210
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
+for the year ended 31 December 2017
+1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION
+9,306
+Financial Statements (International)
+159
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+The Group has not early adopted any new standard or interpretation that is not yet effective for the current accounting period.
+There have been no significant changes to the accounting policies applied in these financial statements for the periods presented as a result of
+these developments.
+Amendments to IAS 12, 'Income taxes', the IASB has issued amendments to IAS 12, 'Income taxes'. These amendments on the recognition
+of deferred tax assets for unrealised losses clarify how to account for deferred tax assets related to debt instruments measured at fair value.
+Amendments to IAS 12 are effective for annual periods beginning on 1 January 2017.
+Amendments to IAS 7, 'Statement of cash flows', the IASB has issued an amendment to IAS 7 introducing an additional disclosure that will
+enable users of financial statements to evaluate changes in liabilities arising from financing activities. The amendment is part of the IASB's
+Disclosure Initiative, which continues to explore how financial statement disclosure can be improved. Amendments to IAS 7 are effective for
+annual periods beginning on 1 January 2017.
+The following relevant IFRS, amendments to exisiting IFRS and interpretation of IFRS have been published and are mandatory for the year
+beginning on 1 January 2017 and have been adopted by the Group in current accounting period:
+(a) New and amended standards and interpretations adopted by the Group
+The accompanying consolidated financial statements have been prepared in accordance with all applicable IFRS as issued by the International
+Accounting Standards Board ("IASB"). IFRS includes International Accounting Standards ("IAS") and related interpretations ("IFRIC"). These
+consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock
+Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted by the Group are set out in Note 2.
+Basis of preparation
+As part of the Reorganisation, certain of Sinopec Group Company's core oil and gas and chemical operations and businesses together with the
+related assets and liabilities were transferred to the Company. On 25 February 2000, in consideration for Sinopec Group Company transferring such
+oil and gas and chemical operations and businesses and the related assets and liabilities to the Company, the Company issued 68.8 billion domestic
+state-owned ordinary shares with a par value of RMB 1.00 each to Sinopec Group Company. The shares issued to Sinopec Group Company on 25
+February 2000 represented the entire registered and issued share capital of the Company on that date. The oil and gas and chemical operations and
+businesses transferred to the Company were related to (i) the exploration, development and production of crude oil and natural gas, (ii) the refining,
+transportation, storage and marketing of crude oil and petroleum products, and (iii) the production and sales of chemicals.
+The Company was established in the PRC on 25 February 2000 as a joint stock limited company as part of the reorganisation (the "Reorganisation")
+of China Petrochemical Corporation ("Sinopec Group Company"), the ultimate holding company of the Group and a ministry-level enterprise under
+the direct supervision of the State Council of the PRC. Prior to the incorporation of the Company, the oil and gas and chemical operations of the
+Group were carried on by oil administration bureaux, petrochemical and refining production enterprises and sales and marketing companies of
+Sinopec Group Company.
+Organisation
+China Petroleum & Chemical Corporation (the "Company") is an energy and chemical company that, through its subsidiaries (hereinafter collectively
+referred to as the "Group"), engages in oil and gas and chemical operations in the People's Republic of China (the "PRC"). Oil and gas operations
+consist of exploring for, developing and producing crude oil and natural gas; transporting crude oil and natural gas by pipelines; refining crude oil
+into finished petroleum products; and marketing crude oil, natural gas and refined petroleum products. Chemical operations include the manufacture
+and marketing of a wide range of chemicals for industrial uses.
+Principal activities
+Inventories
+Year ended 31 December
+2017
+Accounts receivable and other current assets
+190,603
+7,467
+6,876
+108,425
+115,310
+80,151
+86,697
+Gain on dilution and remeasurement of interests in the Pipeline Ltd
+(16,525)
+Investment income
+Dry hole costs written off
+Depreciation, depletion and amortisation
+Adjustments for:
+Profit before taxation
+Operating activities
+RMB
+RMB
+Share of profits from associates and joint ventures
+(9,306)
+(262)
+(263)
+211,809
+17,076
+21,791
+1,528
+1,518
+86
+(1,547)
+(Gain)/loss on foreign currency exchange rate changes and derivative financial instruments
+Loss on disposal of property, plant, equipment and other non-currents assets, net
+Impairment losses on assets
+9,219
+7,146
+Interest expense
+(3,218)
+(5,254)
+Interest income
+(3,941)
+Gain on remeasurement of interests in the Shanghai SECCO (Note 35)
+(20,562)
+Net charges from:
+(30)
+(Amounts in million)
+CONSOLIDATED STATEMENT OF CASH FLOWS
+to
+attributable
+Total equity
+Note:
+Balance at 31 December 2017
+Others
+Total transactions with owners
+Share
+that do not result in a loss of control
+Transaction with non-controlling interests
+do not result in a loss of control:
+Changes in ownership interests in subsidiaries that
+Total contributions by and distributions to owners
+Distributions to non-controlling interests
+Appropriation (Note (a))
+Interim dividend for 2017 (Note 13)
+Total changes in ownership interests in subsidiaries
+Capital
+Share
+surplus
+Company
+earnings
+reserves
+reserve
+reserve
+premium
+RMB
+RMB
+RMB
+reserve
+capital
+Total
+Non-
+controlling
+of the
+Retained
+Other
+shareholders
+Statutory Discretionary
+surplus
+Final dividend for 2016 (Note 13).
+interests
+Contributions by and distributions to owners:
+Total comprehensive income for the year
+125
+9
+116
+(153)
+153
+116
+(22,828)
+121,071
+(3,785)
+(16,876)
+(2,167)
+233
+263
+(30)
+(30)
+233
+(19,043)
+26,290
+55,850
+79,640 117,000
+Other comprehensive income (Note 14)
+Profit for the year
+Balance at 1 January 2017
+(Amounts in million)
+for the year ended 31 December 2017
+CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
+156
+Financial Statements (International)
+Financial Statements (International)
+155
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+The notes on pages 159 to 205 form part of these consolidated financial statements.
+831,235
+120,241
+710,994
+310,719
+424
+Transactions with owners, recorded directly in equity:
+for the year ended 31 December 2017
+equity
+RMB
+(44,479)
+(11,777)
+(32,702)
+(35,731)
+3,042
+(13)
+711
+121,071
+724
+(13)
+711
+724
+(13)
+(13)
+(45,190)
+(12,501)
+(13)
+49
+26,326
+(107)
+27
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+The notes on pages 159 to 205 form part of these consolidated financial statements.
+(e) The application of the share premium account is governed by Sections 167 and 168 of the PRC Company Law.
+(d) The capital reserve represents (i) the difference between the total amount of the par value of shares issued and the amount of the net assets transferred from Sinopec
+Group Company in connection with the Reorganisation (Note1); and (ii) the difference between the considerations paid over or received the amount of the net assets of
+entities and related operations acquired from or sold to Sinopec Group Company and non-controlling interests.
+(c) As at 31 December 2017, the amount of retained earnings available for distribution was RMB 177,049 million (2016: RMB 182,440 million), being the amount
+determined in accordance with ASBE. According to the Articles of Association of the Company, the amount of retained earnings available for distribution to shareholders
+of the Company is lower of the amount determined in accordance with the accounting policies complying with ASBE and the amount determined in accordance with the
+accounting policies complying with International Financial Reporting Standards ("IFRS”).
+(b) The usage of the discretionary surplus reserve is similar to that of statutory surplus reserve.
+During the year ended 31 December 2017, the Company transferred RMB 3,042 million (2016: nil) to the statutory surplus reserve, being 10% of the current year's net
+profit determined in accordance with the accounting policies complying with ASBE to this reserve.
+(a) According to the PRC Company Law and the Articles of Association of the Company, the Company is required to transfer 10% of its net profit determined in accordance
+with the accounting policies complying with Accounting Standards for Business Enterprises ("ASBE"), adopted by the Group to statutory surplus reserve. In the event
+that the reserve balance reaches 50% of the registered capital, no transfer is required. The transfer to this reserve must be made before distribution of a dividend to
+shareholders. Statutory surplus reserve can be used to make good previous years' losses, if any, and may be converted into share capital by issuing of new shares to
+shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is
+not less than 25% of the registered capital.
+852,890
+126,770
+726,120
+326,125
+(2,934)
+117,000
+82,682
+55,850
+92
+(32,689)
+RMB
+(35,731)
+(12,501)
+51,244
+831,235
+120,241
+710,994
+310,719
+424
+117,000
+51,244
+79,640
+26,290
+121,071
+RMB
+RMB
+RMB
+RMB
+RMB
+55,850
+19,174
+70,418
+-- (3,481)
+(12,501)
+(3,042)
+3,042
+(12,107)
+(12,107)
+(12,107)
+(20,582)
+(20,582)
+(20,582)
+66,042
+18,279
+47,763
+51.244
+(3,481)
+(4,376)
+(895)
+(3,481)
+3,042
+16,525
+150
+Share of profits less losses from associates and joint ventures
+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. We report our opinion solely to you, as a body, 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
+REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+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 and the disclosure requirements of 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.
+RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS
+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.
+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.
+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 all of the information included in the annual
+report other than the consolidated financial statements and our auditor's report thereon.
+OTHER INFORMATION
+Based on our work, we found the key assumptions and input data adopted
+were supported by the evidence we gathered and consistent with our
+expectations.
+Evaluated the sensitivity analyses prepared by the Group, and assessed
+the potential impacts of a range of possible outcomes.
+• Assessed the methodology adopted in, and tested mathematical
+accuracy of, the discounted cash flow projections.
+• Tested selected other key data inputs, such as natural gas prices and
+production profiles in the projections by reference to historical data
+and/or relevant budgets of the Group.
+• Independently estimated a range of discount rates, and found that the
+discount rates adopted by management were within the range.
+Compared estimates of future crude oil prices adopted by the Group
+against a range of reputable published crude oil price forecasts.
+Compared the future production profiles against the oil and gas
+reserve estimation report approved by the management. Evaluated
+the competence, capability and objectivity of the management's
+experts engaged in estimating the oil and gas reserves. Assessed key
+estimations or assumptions used in the reserve estimation, by reference
+to historical data, management plans and/or reputable external data.
+Compared the future cost profiles against historical costs or relevant
+budgets of the Group.
+• Evaluated and tested the key controls, relating to the preparation of
+the discounted cash flow projections of property, plant and equipment
+related to oil and gas producing activities.
+In auditing the respective values in use calculations of property, plant and
+equipment related to oil and gas producing activities, we have performed
+the following key procedures on the relevant discounted cash flow
+projections prepared by management:
+How our audit addressed the Key Audit Matter
+Because of the significance of the carrying amount of property, plant
+and equipment related to oil and gas producing activities as at 31
+December 2017, together with the use of significant estimations or
+assumptions in determining their respective values in use, we had
+placed our audit emphasis on this matter.
+Future crude oil prices;
+Future production profiles;
+Future cost profiles; and
+Discount rates.
+Low crude oil prices gave rise to possible indication that the carrying
+amount of property, plant and equipment related to oil and gas
+producing activities as at 31 December 2017 might be impaired. The
+Group has adopted values in use as the respective recoverable amounts
+of property, plant and equipment related to oil and gas producing
+activities, which involved key estimations or assumptions including:
+Refer to note 8 "OTHER OPERATING (EXPENSE)/INCOME, NET", note
+16 “PROPERTY, PLANT AND EQUIPMENT", and note 41 "ACCOUNTING
+ESTIMATES AND JUDGEMENTS" to the consolidated financial
+statements.
+Recoverability of the carrying amount of property, plant and equipment
+related to oil and gas producing activities
+Key Audit Matter
+The key audit matter identified in our audit is "Recoverability of the carrying amount of property, plant and equipment related to oil and gas producing
+activities".
+As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional scepticism 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.
+Operating expenses
+50,721
+1,930,911
+1,880,190
+2,300,470
+59,723
+2,360,193
+4
+Other operating revenues
+3
+Turnover
+Turnover and other operating revenues
+2016
+RMB
+RMB
+Year ended 31 December
+2017
+Note
+(Amounts in million, except per share data)
+REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED)
+for the year ended 31 December 2017
+Financial Statements (International)
+Financial Statements (International)
+151
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Hong Kong, 23 March 2018
+PricewaterhouseCoopers
+Certified Public Accountants
+The engagement partner on the audit resulting in this independent auditor's report is HON CHONG HENG.
+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.
+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.
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the
+directors.
+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.
+(B) FINANCIAL STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
+CONSOLIDATED INCOME STATEMENT
+19, 20
+Financial Statements (International)
+Taxes other than income tax
+7
+(235,292)
+(232,006)
+(16,554)
+5,686
+(2,288,723)
+71,470
+(1,853,718)
+77,193
+9
+(7,146)
+(9,219)
+Interest income
+5,254
+3,218
+Foreign currency exchange gains/(losses), net
+332
+(610)
+Net finance costs
+Investment income
+(63,887)
+(1,560)
+262
+(74,854)
+819
+Purchased crude oil, products and operating supplies and expenses
+(1,770,651)
+(1,379,691)
+Selling, general and administrative expenses
+5
+(64,973)
+(64,360)
+Depreciation, depletion and amortisation
+(115,310)
+(108,425)
+Exploration expenses, including dry holes.
+(11,089)
+(11,035)
+Personnel expenses
+Other operating (expense)/income, net
+Total operating expenses
+Operating profit
+Finance costs
+Interest expense
+6
+(6,611)
+263
+(834)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+168
+Financial Statements (International)
+Financial Statements (International)
+167
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+8,385
+63,887
+55,502
+65,873
+8,981
+74,854
+RMB million
+RMB million
+2016
+2017
+13
+2
+(12)
+159
+230
+(51)
+2
+5
+73
+72
+14,410
+RMB million
+RMB million
+12,104
+2016
+for the year ended 31 December 2017
+7 TAXES OTHER THAN INCOME TAX
+Consumption tax (i)
+City construction tax (ii)
+(613)
+(453)
+Tax effect of tax losses not recognised
+1,485
+958
+Write-down of deferred tax assets
+Adjustment of prior years
+Actual income tax expense
+Note:
+(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the
+relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of
+15% through the year 2020.
+(ii) It is mainly due to the foreign operation in the Republic of Angola ("Angola") calculated the assessable income in accordance with the relevant income tax rules and
+regulations of Angola, and taxed at 50% of the assessable income as determined.
+26
+811
+2017
+(72)
+16,279
+20,707
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+169
+Financial Statements (International)
+RMB million
+192,907
+2016
+2017
+Products
+(i) Consumption tax was levied based on sales quantities of taxable products, tax rate of products is presented as below:
+Note:
+Other
+Education surcharge
+Resources tax
+228
+299
+50,721
+793
+59,723
+The contributions payable under the Group's retirement plans are recognised as an expense in the consolidated income statement as incurred
+and according to the contribution determined by the plans. Further information is set out in Note 37.
+Operating lease payments are charged to the consolidated income statement on a straight-line basis over the period of the respective leases.
+(y) Employee benefits
+Research and development expenditures that cannot be capitalised are expensed in the period in which they are incurred. Research and
+development expense amounted to RMB 6,423 million for the year ended 31 December 2017 (2016: RMB 5,941 million).
+(w) Research and development expense
+Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations are expensed as incurred.
+Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable and the costs can
+be reliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with
+respect to accrued liabilities and other potential exposures.
+(v) Environmental expenditures
+Repairs and maintenance expenditure is expensed as incurred.
+(u) Repairs and maintenance expenditure
+Borrowing costs are expensed in the consolidated income statement in the period in which they are incurred, except to the extent that they are
+capitalised as being attributable to the construction of an asset which necessarily takes a period of time to get ready for its intended use.
+(t) Borrowing costs
+A government grant that becomes receivable as compensation for expenses or losses already incurred with no future related costs is recognised
+as income in the period in which it becomes receivable.
+Interest income is recognised on a time apportioned basis that takes into account the effective yield on the asset.
+Revenues associated with the sale of crude oil, natural gas, petroleum and chemical products and ancillary materials are recorded when the
+customer accepts the goods and the significant risks and rewards of ownership and title have been transferred to the buyer. Revenue from the
+rendering of services is recognised in the consolidated income statement upon performance of the services. No revenue is recognised if there are
+significant uncertainties regarding recovery of the consideration due, the possible return of goods, or when the amount of revenue and the costs
+incurred or to be incurred in respect of the transaction cannot be measured reliably.
+(s) Revenue recognition
+Provisions for future dismantlement costs are initially recognised based on the present value of the future costs expected to be incurred in
+respect of the Group's expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities.
+Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest
+cost, is reflected as an adjustment to the provision and oil and gas properties.
+A provision is recognised for liability of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a
+past event, when it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made.
+When it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is
+disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only
+be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability
+of outflow of economic benefits is remote.
+(r) Provisions and contingent liability
+Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
+bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the consolidated
+income statement over the period of borrowings using the effective interest method.
+(q) Interest-bearing borrowings
+Trade, bills and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would
+be immaterial, in which case they are stated at cost.
+(p) Trade, bills and other payables
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+166
+Financial Statements (International)
+165
+Termination benefits, such as employee reduction expenses, are recognised when, and only when, the Group demonstrably commits itself to
+terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic
+possibility of withdrawal.
+Financial Statements (International)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+49,812
+2016
+RMB million
+2017
+RMB million
+58,930
+Salaries, wages and other benefits
+Contributions to retirement schemes (Note 37)
+6 PERSONNEL EXPENSES
+- accounts prepayments
+- other receivables
+- trade accounts receivable
+Impairment losses:
+others
+- audit services
+Auditor's remuneration:
+Operating lease charges
+909
+The following items are included in selling, general and administrative expenses:
+Sale of materials, service and others
+Rental income
+4 OTHER OPERATING REVENUES
+Turnover primarily represents revenue from the sales of crude oil, natural gas, refined petroleum products and chemical products.
+3 TURNOVER
+Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial
+information provided regularly to the Group's chief operating decision maker for the purposes of allocating resources to, and assessing the
+performance of the Group's various lines of business.
+(bb) Segment reporting
+Dividends and distributions of profits proposed in the profit appropriation plan which will be authorized and declared after the balance sheet
+date, are not recognised as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends
+are recognised as a liability in the period in which they are declared.
+(aa) Dividends
+The tax value of losses expected to be available for utilisation against future taxable income is set off against the deferred tax liability within the
+same legal tax unit and jurisdiction to the extent appropriate, and is not available for set off against the taxable profit of another legal tax unit.
+The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable
+that the related tax benefit will be realised.
+Income tax comprises current and deferred tax. Current tax is calculated on taxable income by applying the applicable tax rates. Deferred tax is
+provided using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities for financial
+reporting purposes and the amounts used for taxation purposes only to the extent that it is probable that future taxable income will be available
+against which the assets can be utilised. Deferred tax is calculated on the basis of the enacted tax rates or substantially enacted tax rates that
+are expected to apply in the period when the asset is realised or the liability is settled. The effect on deferred tax of any changes in tax rates is
+charged or credited to the consolidated income statement, except for the effect of a change in tax rate on the carrying amount of deferred tax
+assets and liabilities which were previously charged or credited to other comprehensive income or directly in equity.
+(z) Income tax
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2017
+5 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
+16,279
+(1,394)
+(793)
+Less: Interest expense capitalised*
+Interest expense incurred
+9 INTEREST EXPENSE
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+(ii) Impairment losses on long-lived assets for the year ended 31 December 2017 primarily represent impairment losses recognised in the exploration and production
+("E&P") segment of RMB 13,556 million (2016: RMB 11,605 million), the chemicals segment of RMB 4,922 million (2016: RMB 2,898 million) and for the refining
+segment of RMB 1,894 million (2016: RMB 1,655 million) (Note 38), most of which are impairment losses on property, plant and equipment (Note 16). The primary
+factors resulting in the E&P segment impairment loss were downward revision of oil and gas reserve due to price change and high operating and development cost
+for certain oil fields. The carrying values of these E&P properties were written down to recoverable amounts which were determined based on the present values of
+the expected future cash flows of the assets using a pre-tax discount rate 10.47% (2016: 10.47%). Further future downward revisions to the Group's oil price outlook
+would lead to further impairments which, in aggregate, are likely to be material. It is estimated that a general decrease of 5% in oil price, with all other variables held
+constant, would result in additional impairment loss on the Group's properties, plant and equipment relating to oil and gas producing activities by approximately RMB
+3,145 million. It is estimated that a general increase of 5% in operating cost, with all other variables held constant, would result in additional impairment loss on the
+Group's properties, plant and equipment relating to oil and gas producing activities by approximately RMB 2,659 million. It is estimated that a general increase of
+5% in discount rate, with all other variables held constant, would result in additional impairment loss on the Group's properties, plant and equipment relating to oil
+and gas producing activities by approximately RMB 461 million. The assets in the refining segment were written down due to the suspension of operations of certain
+production facilities, while the assets in the chemical segment were written down because of evidence indicates the economic performance of certain production
+facilities are worse than expected and due to the suspension of operations of certain production facilities.
+(i) Government grants for the years ended 31 December 2017 and 2016 primarily represent financial appropriation income and non-income tax refunds received from
+respective government agencies without conditions or other contingencies attached to the receipts of the grants.
+Note:
+5,686
+(16,554)
+(1,277)
+(649)
+Others
+(152)
+(89)
+Fines, penalties and compensations
+(133)
+(152)
+Donations
+304
+(813)
+195
+(909)
+Net realised and unrealised gain on derivative financial instruments not qualified as hedging
+Ineffective portion of change in fair value of cash flow hedges
+(1,489)
+(1,518)
+Accretion expenses (Note 32)
+Interest expense
+* Interest rates per annum at which borrowing costs were capitalised for construction in progress
+10 TAX EXPENSE
+228
+21,313
+(10,317)
+26,668
+(72)
+RMB million
+RMB million
+2016
+2017
+Deferred taxation (Note 28)
+- Adjustment of prior years
+- Provision for the year
+Current tax
+2.65% to 4.82%
+Loss on disposal of property, plant, equipment and other non-currents assets, net
+2.37% to 4.41%
+7,146
+1,057
+1,501
+8,162
+5,645
+(859)
+(723)
+9,021
+RMB million
+RMB million
+6,368
+2016
+2017
+Tax expense in the consolidated income statement represents:
+9,219
+83
+(16,425)
+Impairment losses on long-lived assets (ii)
+13,695
+13,811
+18,155
+18,274
+193,836
+RMB million
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+20,707
+Reconciliation between actual income tax expense and the expected income tax expense at applicable statutory tax rates is as follows:
+2017
+2016
+Tax effect of non-deductible expenses
+Profit before taxation
+Expected PRC income tax expense at a statutory tax rate of 25%
+Tax effect of non-taxable income
+Tax effect of preferential tax rate (i)
+Effect of income taxes at foreign operations (ii)
+Tax effect of utilisation of previously unrecognised tax losses and temporary differences
+RMB million
+86,697
+RMB million
+80,151
+21,674
+20,038
+1,905
+1,529
+(5,939)
+(2,786)
+4,841
+3,871
+5,459
+2,449
+20,562
+3,941
+2016
+RMB million
+4,101
+RMB million
+4,893
+Gain on dilution and remeasurement of interests in the Pipeline Ltd
+Gain on remeasurement of interests in the Shanghai SECCO (Note 35)
+Government grant (i)
+2017
+8 OTHER OPERATING (EXPENSE)/INCOME, NET
+(ii) City construction tax is levied on an entity based on its total paid amount of value-added tax, consumption tax and business tax. Pursuant to the 'Circular on the
+Overall Promotion of Pilot Program of Levying VAT in place of Business Tax'(Cai Shui [2016] 36) jointly issued by the Ministry of Finance and the State Administration
+of Taxation, revenue from modern service of the subsidiaries of the Group, are subject to VAT from 1 May 2016, and the applicable tax rate is 6%. Before May 1,
+2016, revenue from modern service of the subsidiaries of the Group, are subject to the business tax with a tax rate of 3% to 5%.
+1,495.20
+1,218.00
+1,711.52
+(21,258)
+1,948.64
+1,411.20
+2,109.76
+Jet fuel oil
+Fuel oil
+Lubricant oil
+Solvent oil
+Naphtha
+Diesel
+Gasoline
+13 January 2015
+RMB/Ton
+Effective from
+232,006
+235,292
+2,105.20
+Management assesses at each balance sheet date whether there is any indication that an impairment loss recognised for a long-lived asset,
+except in the case of goodwill, in prior years may no longer exist. An impairment loss is reversed if there has been a favourable change in the
+estimates used to determine the recoverable amount. A subsequent increase in the recoverable amount of an asset, when the circumstances
+and events that led to the write-down or write-off cease to exist, is recognised as an income. The reversal is reduced by the amount that
+would have been recognised as depreciation had the write-down or write-off not occurred. An impairment loss in respect of goodwill is not
+reversed.
+(x) Operating leases
+The recoverable amount is the greater of the fair value less costs to disposal and the value in use. In determining the value in use,
+expected future cash flows generated by the asset 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. Where an asset does not generate cash inflows largely
+independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows
+independently (i.e. a cash-generating unit).
+The investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and
+obligations each investor has rather than the legal structure of the joint arrangement. 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.
+Investments in associates and joint ventures are accounted for in the consolidated and separate financial statements using the equity method
+from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. Under the
+equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group's share of the
+investee's net assets and any impairment loss relating to the investment (Note 2(j) and (o)).
+The Group's share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the
+consolidated income statement, whereas the Group's share of the post-acquisition, post-tax items of the investees' other comprehensive
+income is recognised in the consolidated statement of comprehensive income.
+When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of
+the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee
+at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial
+recognition of a financial asset (see Note 2(k)) or, when appropriate, the cost on initial recognition of an investment in an associate (see Note
+2(a) (ii)).
+(iii)Transactions eliminated on consolidation
+Inter-company balances and transactions and any unrealised gains arising from inter-company transactions are eliminated on consolidation.
+Unrealised gains arising from transactions with associates and joint ventures are eliminated to the extent of the Group's interest in the entity.
+Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
+161
+Financial Statements (International)
+162
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(a) Basis of consolidation (Continued)
+(iv) Merger accounting for common control combination
+The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common
+control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the
+control of the controlling party. The net assets of the combining entities or businesses are combined using the existing book values from the
+controlling parties' perspective. No amount is recognised as consideration for goodwill or excess of acquirers' interest in the net fair value of
+acquiree's identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the
+continuation of the controlling party's interest.
+The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented or
+since the date when the combining entities or businesses first came under the common control, where there is a shorter period, regardless
+of the date of the common control combination. The comparative amounts in the consolidated financial statements are presented as if the
+entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is
+shorter.
+A uniform set of accounting policies is adopted by those entities. All intra-group transactions, balances and unrealised gains on transactions
+between combining entities or businesses are eliminated on consolidation. Transaction costs, including professional fees, registration fees,
+costs of furnishing information to shareholders, costs or losses incurred in combining operations of the previously separate businesses, etc.,
+incurred in relation to the common control combination that is to be accounted for by using merger accounting is recognised as an expense
+in the period in which it is incurred.
+(b) Translation of foreign currencies
+The presentation currency of the Group is Renminbi. Foreign currency transactions during the year are translated into Renminbi at the applicable
+rates of exchange quoted by the People's Bank of China ("PBOC") prevailing on the transaction dates. Foreign currency monetary assets and
+liabilities are translated into Renminbi at the PBOC's rates at the balance sheet date.
+Exchange differences, other than those capitalised as construction in progress, are recognised as income or expense in the "finance costs"
+section of the consolidated income statement.
+The results of foreign operations are translated into Renminbi at the applicable rates quoted by the PBOC prevailing on the transaction dates.
+Balance sheet items, including goodwill arising on consolidation of foreign operations are translated into Renminbi at the closing foreign
+exchange rates at the balance sheet date. The income and expenses of foreign operation are translated into Renminbi at the spot exchange rates
+or an exchange rate that approximents the spot exchange rates on the transaction dates. The resulting exchange differences are recognised in
+other comprehensive income and accumulated in equity in the other reserves.
+On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from
+equity to the consolidated income statement when the profit or loss on disposal is recognised.
+(c) Cash and cash equivalents
+Cash equivalents consist of time deposits with financial institutions with an initial term of less than three months when purchased. Cash
+equivalents are stated at cost, which approximates fair value.
+(d) Trade, bills and other receivables
+Trade, bills and other receivables are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method,
+less impairment losses for bad and doubtful debts (Note 2(o)). Trade, bills and other receivables are derecognised if the Group's contractual
+rights to the cash flows from these financial assets expire or if the Group transfers these financial assets to another party without retaining
+control or substantially all risks and rewards of the assets.
+(e) Inventories
+Inventories are stated at the lower of cost and net realisable value. Cost includes the cost of purchase computed using the weighted average
+method and, in the case of work in progress and finished goods, direct labour and an appropriate proportion of production overheads. Net
+realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs
+necessary to make the sale.
+Financial Statements (International)
+An associate is an entity, not being a subsidiary, in which the Group exercises significant influence over its management. Significant influence
+is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
+(ii) Associates and joint ventures
+The particulars of the Group's principal subsidiaries are set out in Note 39.
+In the Company's balance sheet, investments in subsidiaries are stated at cost less impairment losses (Note 2(o)).
+The amount of the reduction is recognised as an expense in the consolidated income statement. Impairment losses recognised in respect
+of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to
+reduce the carrying amount of the other assets in the unit on a pro rata basis, except that the carrying value of an asset will not be reduced
+below its individual fair value less costs to disposal, or value in use, if determinable.
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION (Continued)
+Basis of preparation (Continued)
+(b) New and amended standards and interpretations not yet adopted by the Group
+The following relevant IFRS, amendments to existing IFRS and interpretation of IFRS have been published and are mandatory for accounting
+periods beginning on or after 1 January 2018 or later periods and have not been early adopted by the Group. Management is in the process of
+making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial
+application and has so far concluded that, except for IFRS 16, the adoption of these amendments, new standards and new interpretations is
+unlikely to have a significant impact on the Group's results of operations and financial position.
+IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. The
+complete version of IFRS 9 was issued in July 2014. It replaces the whole of IAS 39. IFRS 9 introduces a new model for the recognition of
+impairment losses - the expected credit losses model, which constitutes a change from the incurred loss model in IAS 39. IFRS 9 applies to all
+hedging relationships, with the exception of portfolio fair value hedges of interest rate risk. The new guidance better aligns hedge accounting
+with the risk management activities of an entity and provides relief from the more “rule-based" approach of IAS 39. IFRS 9 is effective for annual
+periods beginning on 1 January 2018. Earlier application is permitted.
+IFRS 15, 'Revenue from contracts with customers', establishes a comprehensive framework for determining when to recognise revenue and
+how much revenue to recognise through a 5-step approach. IFRS 15 provides specific guidance on capitalisation of contract cost and licence
+arrangements. It also includes a cohesive set of disclosure requirements about the nature, amount, timing and uncertainty of revenue and cash
+flows arising from the entity's contracts with customers. The core principle is that a company should recognise revenue to depict the transfer
+of promised goods or services to the customer in an amount that reflects the consideration to which the company expects to be entitled in
+exchange for those goods or services. IFRS 15 replaces the previous revenue standards: IAS 18 'Revenue' and IAS 11 'Construction Contracts'
+and the related Interpretations on revenue recognition: IFRIC 13 'Customer Loyalty Programmes', IFRIC 15 'Agreements for the Construction of
+Real Estate', IFRIC 18 'Transfers of Assets from Customers' and SIC-31 'Revenue-Barter Transactions Involving Advertising Services'. IFRS 15 is
+effective for annual reporting periods beginning on 1 January 2018. Earlier application is permitted.
+IFRS 16, 'Leases', provides updated guidance on the definition of leases, and the guidance on the combination and separation of contracts.
+Under IFRS 16, 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. IFRS 16 requires lessees to recognise lease liability reflecting future lease payments and a ‘right-of-use-asset'
+for almost all lease contracts, with an exemption for certain short-term leases and leases of low-value assets. The lessors accounting stays
+almost the same as under IAS 17 'Leases'. IFRS 16 is effective for annual reporting periods beginning on 1 January 2019. Earlier application is
+permitted if IFRS 15 is also applied.
+Amendments to IFRS 10 and IAS 28 on sale or contribution of assets between an investor and its associate or joint venture. The amendments
+address an inconsistency between IFRS 10 and IAS 28 in the sale and contribution of assets between an investor and its associate or joint
+venture. A full gain or loss is recognised when a transaction involves a business. A partial gain or loss is recognised when a transaction involves
+assets that do not constitute a business, even if those assets are in a subsidiary. The amendments were originally intended to be effective for
+annual periods beginning on or after 1 January 2016. The effective date has now been deferred/removed. Early application of the amendments
+continues to be permitted.
+The accompanying consolidated financial statements are prepared on the historical cost basis except for the remeasurement of available-for-sale
+securities (Note 2(k)), securities held for trading (Note 2(k)) and derivative financial instruments (Note 2(1) and (n)) to their fair values.
+The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and
+assumptions that affect the application of policies and reported amounts of assets and liabilities and disclosure of contingent assets and
+liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. The
+estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under
+the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not
+readily apparent from other sources. Actual results could differ from those estimates.
+The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
+which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both
+current and future periods.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Key assumptions and estimation made by management in the application of IFRS that have significant effect on the consolidated financial
+statements and the major sources of estimation uncertainty are disclosed in Note 41.
+160
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+2 SIGNIFICANT ACCOUNTING POLICIES
+(a) Basis of consolidation
+The consolidated financial statements comprise the Company and its subsidiaries, and interest in associates and joint ventures.
+(i) Subsidiaries and non-controlling interests
+Subsidiaries are those entities controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable
+returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
+The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively
+commences until the date that control effectively ceases.
+Non-controlling interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests that
+are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet and
+consolidated statement of changes in equity within equity, separately from equity attributable to the shareholders of the Company. Non-
+controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated
+statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between non-
+controlling interests and the shareholders of the Company.
+Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby
+adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative
+interests, but no adjustments are made to goodwill and no gain or loss is recognised.
+If a business combination involving entities not under common control is achieved in stages, the acquisition date carrying value of the
+acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from
+such remeasurement are recognised in the consolidated income statement.
+When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain
+or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair
+value and this amount is regarded as the fair value on initial recognition of a financial asset (Note 2(k)) or, when appropriate, the cost on
+initial recognition of an investment in an associate or joint venture (Note 2(a) (ii)).
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(I) Derivative financial instruments
+Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss
+on remeasurement to fair value is recognised immediately in other operating (expense)/income, net, except where the derivatives qualify for cash
+flow hedge accounting or hedge the net investment in a foreign operation, in which case recognition of any resulting gain or loss depends on the
+nature of the item being hedged (Note 2(n)).
+(m) Offsetting financial instruments
+Financial assets and liabilities are presented respectively in the consolidated balance sheet, without any offset. However, they are offset and
+reported in the balance sheet when satisfied the following: (i) There is a legally enforceable right to offset the recognised amounts. (ii) There
+is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be
+contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of
+the Company or the counterparty.
+for the year ended 31 December 2017
+(i) Cash flow hedges
+Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or a highly
+probable forecast transaction or the foreign currency risk of a committed future transaction, the effective portion of any gains or losses on
+remeasurement of the derivative financial instrument to fair value are recognised in other comprehensive income and accumulated separately
+in equity in other reserves. The ineffective portion of any gain or loss is recognised immediately in the consolidated income statement.
+If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset, the associated gain or loss is reclassified
+from equity to be included in the initial cost or other carrying amount of the non-financial asset.
+If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gain
+or loss is reclassified from equity to the consolidated income statement in the same period or periods during which the asset acquired or
+liability assumed affects the consolidated income statement (such as when interest income or expense is recognised).
+For cash flow hedges, other than those covered by the preceding two policy statements, the associated gain or loss is reclassified from equity
+to the consolidated income statement in the same period or periods during which the hedged forecast transaction affects the consolidated
+income statement.
+When a hedging instrument expires or is sold, terminated, exercised, or the entity revokes designation of the hedge relationship but the
+hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity until the transaction occurs
+and it is recognised in accordance with the above policy. If the hedged transaction is no longer expected to take place, the cumulative
+unrealised gain or loss is reclassified from equity to the consolidated income statement immediately.
+Financial Statements (International)
+164
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Investments in securities held for trading are classified as current assets. Any attributable transaction costs are recognised in the consolidated
+income statement as incurred. At each balance sheet date, the fair value is remeasured, with any resultant gain or loss being recognised in the
+consolidated income statement.
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(n) Hedging (Continued)
+(ii) Fair value hedges
+A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm commitment,
+or an identified portion of such an asset, liability or unrecognised firm commitment.
+The gain or loss from remeasuring the hedging instrument at fair value is recognised in the consolidated income statement. The gain or loss
+on the hedged item attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised in the consolidated
+income statement.
+When a hedging instrument expires or is sold, terminated or exercised, or no longer meets the criteria for hedge accounting, the Group
+discontinues prospectively the hedge accounting treatments. If the hedged item is a financial instrument measured at amortised cost, any
+adjustment to the carrying amount of the hedged item is amortised to profit or loss from the adjustment date to the maturity date using the
+recalculated effective interest rate at the adjustment date.
+(iii)Hedge of net investments in foreign operations
+The portion of the gain or loss on remeasurement to fair value of an instrument used to hedge a net investment in a foreign operation that is
+determined to be an effective hedge is recognised in other comprehensive income and accumulated separately in equity in the other reserve
+until the disposal of the foreign operation, at which time the cumulative gain or loss is reclassified from equity to the consolidated income
+statement. The ineffective portion is recognised immediately in the consolidated income statement. In this year no hedge of net investment in
+foreign operations was hold by the Group.
+(o) Impairment of assets
+(i) Trade accounts receivable, other receivables and investment in equity securities that do not have a quoted market price in an active market
+are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, an
+impairment loss is determined and recognised.
+The impairment loss is measured as the difference between the asset's carrying amount and the estimated future cash flows, discounted at
+the current market rate of return for a similar financial asset where the effect of discounting is material, and is recognised as an expense
+in the consolidated income statement. Impairment losses for trade and other receivables are reversed through the consolidated income
+statement if in a subsequent period the amount of the impairment losses decreases. Impairment losses for equity securities carried at cost
+are not reversed.
+For investments in associates and joint ventures accounted under the equity method (Note 2(a) (ii)), the impairment loss is measured by
+comparing the recoverable amount of the investment as a whole with its carrying amount in accordance with the accounting policy set out
+in Note 2(o) (ii). The impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable
+amount in accordance with the accounting policy set out in Note 2(o) (ii).
+(ii) Impairment of other long-lived assets is accounted as follows:
+The carrying amounts of other long-lived assets, including property, plant and equipment, construction in progress, lease prepayments and
+other assets, are reviewed at each balance sheet date to identify indicators that the assets may be impaired. These assets are tested for
+impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such
+a decline has occurred, the carrying amount is reduced to the recoverable amount. For goodwill, the recoverable amount is estimated at each
+balance sheet date.
+for the year ended 31 December 2017
+Investments in available-for-sale securities are carried at fair value with any change in fair value recognised in other comprehensive income
+and accumulated separately in equity in other reserves. When these investments are derecognised or impaired, the cumulative gain or loss is
+reclassified from equity to the consolidated income statement. Investments in equity securities, other than investments in associates and joint
+ventures, that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognised in the
+balance sheet at cost less impairment losses (Note 2(o)).
+(n) Hedging
+Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating
+unit, or groups of cash-generating units, that is expected to benefit the synergies of the combination and is tested annually for impairment
+(Note 2(0)). In respect of associates or joint ventures, the carrying amount of goodwill is included in the carrying amount of the interest in the
+associate or joint venture and the investment as a whole is tested for impairment whenever there is objective evidence of impairment (Note 2(o)).
+163
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.
+No depreciation is provided in respect of construction in progress.
+Construction in progress represents buildings, oil and gas properties, various plant and equipment under construction and pending installation,
+and is stated at cost less impairment losses (Note 2(o)). Cost comprises direct costs of construction as well as interest charges, and foreign
+exchange differences on related borrowed funds to the extent that they are regarded as an adjustment to interest charges, during the periods of
+construction.
+(i) Construction in progress
+Lease prepayments represent land use rights paid to the relevant government authorities. Land use rights are carried at cost less accumulated
+amount charged to expense and impairment losses (Note 2(o)). The cost of lease prepayments is charged to expense on a straight-line basis
+over the respective periods of the rights.
+(h) Lease prepayments
+Management estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into
+consideration the anticipated method of dismantlement required in accordance with the industry practices and the future cash flows are adjusted
+to reflect such risks specific to the liability, as appropriate. These estimated future dismantlement costs are discounted at pre-tax risk-free rate
+and are capitalised as oil and gas properties, which are subsequently amortised as part of the costs of the oil and gas properties.
+The Group uses the successful efforts method of accounting for its oil and gas producing activities. Under this method, costs of development
+wells, the related supporting equipment and proved mineral interests in properties are capitalised. The cost of exploratory wells is initially
+capitalised as construction in progress pending determination of whether the well has found proved reserves. The impairment of exploratory well
+costs occurs upon the determination that the well has not found proved reserves. The exploratory well costs are usually not carried as an asset
+for more than one year following completion of drilling, unless (i) the well has found a sufficient quantity of reserves to justify its completion as
+a producing well if the required capital expenditure is made; (ii) drilling of the additional exploratory wells is under way or firmly planned for the
+near future; or (iii) other activities are being undertaken to sufficiently progress the assessing of the reserves and the economic and operating
+viability of the project. All other exploration costs, including geological and geophysical costs, other dry hole costs and annual lease rentals,
+are expensed as incurred. Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes
+produced and reserves.
+(g) Oil and gas properties
+Financial Statements (International)
+Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis
+between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reassessed annually.
+3%
+residuals rate
+Estimated
+usage period
+12 to 50 years
+4 to 30 years
+Equipment, machinery and others
+Buildings
+Estimated
+Depreciation is provided to write off the cost amount of items of property, plant and equipment, other than oil and gas properties, over its
+estimated useful life on a straight-line basis, after taking into account its estimated residual value, as follows:
+Gains or losses arising from the retirement or disposal of an item of property, plant and equipment, other than oil and gas properties, are
+determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised as income or expense
+in the consolidated income statement on the date of retirement or disposal.
+An item of property, plant and equipment is initially recorded at cost, less accumulated depreciation and impairment losses (Note 2(o)). The cost
+of an asset comprises its purchase price, any directly attributable costs of bringing the asset to working condition and location for its intended
+use. The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when
+that cost is incurred, when it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the
+item can be measured reliably. All other expenditure is recognised as an expense in the consolidated income statement in the year in which it is
+incurred.
+(f) Property, plant and equipment
+(k) Available-for-sale financial assets
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+3%
+for the year ended 31 December 2017
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(j) Goodwill
+Goodwill represents amounts arising on acquisition of subsidiaries, associates or joint ventures. Goodwill represents the difference between the
+cost of acquisition and the fair value of the net identifiable assets acquired.
+Prior to 1 January 2008, the acquisition of the non-controlling interests of a consolidated subsidiary was accounted for using the acquisition
+method whereby the difference between the cost of acquisition and the fair value of the net identifiable assets acquired (on a proportionate
+share) was recognised as goodwill. From 1 January 2008, any difference between the amount by which the non-controlling interest is adjusted
+(such as through an acquisition of the non-controlling interests) and the cash or other considerations paid is recognised in equity.
+(77)
+Balance at 1 January 2016
+Net book value:
+1,077,208
+(2,209)
+(96)
+529,191
+495,817
+52,200
+Balance at 31 December 2017
+(2,056)
+(57)
+(9,079)
+(9,858)
+63,404
+(195)
+(584)
+Written back on disposals
+(4,225)
+(2,682)
+(1,305)
+(238)
+Reclassification to lease prepayments and other long-term assets
+199
+Exchange adjustments
+238,943
+Balance at 31 December 2016
+733,449
+Balance at 31 December 2017
+67,813
+171,840
+411,121
+650,774
+The additions to oil and gas properties of the Group for the year ended 31 December 2017 included RMB 1,627 million (2016: RMB 3,420 million)
+of estimated dismantlement costs for site restoration (Note 32).
+690,594
+174
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+17 CONSTRUCTION IN PROGRESS
+431,102
+Balance at 1 January
+Dry hole costs written off
+Transferred to property, plant and equipment
+Reclassification to lease prepayments and other long-term assets
+Impairment losses for the year
+Disposals
+Exchange adjustments
+2017
+409,122
+215,124
+66,348
+2016
+Additions
+(122)
+2017
+19,836
+Zhongtian Synergetic Energy
+31 December
+CIR
+31 December 31 December
+31 December
+2017
+RMB million
+2016
+RMB million
+129,581
+2016
+RMB million
+RMB million
+RMB million
+SIBUR (i)
+31 December
+2017
+RMB million
+Current assets
+11,835
+161,187
+149,457
+20,719
+8,232
+7,292
+5,612
+5,120
+Non-current assets
+40,972
+42,124
+11,317
+Reclassifications
+2016
+RMB million
+Sinopec Finance
+31 December 31 December
+2016
+2017
+RMB million RMB million
+10,450
+8,832
+554
+Impairment losses for the year
+105,717
+46,585
+55,057
+4,075
+967,947
+483,814
+435,561
+31 December
+48,572
+967,947
+483,814
+435,561
+48,572
+Balance at 31 December 2016
+of the Group's principal associates:
+British
+Virgin Islands
+The Republic of
+Kazakhstan
+Pipeline Ltd
+31 December
+2017
+RMB million
+Balance at 1 January 2017
+RMB million
+The Group's principal associates are as follows:
+85,552
+Provision of non-banking
+49.00
+Sinopec Finance Company Limited
+pipelines and auxiliary
+facilities
+Pipeline Co., Ltd. ("Pipeline Ltd")
+of business
+PRC
+PRC
+Equity method
+Operation of natural gas
+Principal place
+Country of
+incorporation
+Measurement
+method
+Principal activities
+% of
+ownership
+interests
+50.00
+Sinopec Sichuan To East China Gas
+Name of company
+The Group's investments in associates are with companies primarily engaged in the oil and gas, petrochemical, and marketing and distribution
+operations in the PRC.
+19 INTEREST IN ASSOCIATES
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+Financial Statements (International)
+175
+Equity method
+PRC
+PRC
+("Sinopec Finance")
+17,782
+Equity method
+Russia
+Russia
+and manufacturing
+petrochemical products
+Zhongtian Synergetic Energy
+Company Limited
+("Zhongtian Synergetic Energy")
+Caspian Investments Resources Ltd.
+("CIR")
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+38.75
+Equity method
+PRC
+PRC
+50.00
+manufacturing of
+coal-chemical products
+Crude oil and natural
+Equity method
+gas extraction
+Summarised financial information and reconciliation to their carrying amounts in respect
+financial services
+Proccessing natural gas
+10.00
+PAO SIBUR Holding ("SIBUR")
+Mining coal and
+Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross
+margin based on the gross margin achieved in the period immediately before the budget period and management's expectation on the future trend
+of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period
+immediately before the budget period.
+Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the
+above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial
+budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 10.8% to 11.4% (2016: 10.4% to
+11.0%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss
+was recognised.
+6,353
+(7,861)
+16,495
+31 December
+2017
+RMB million
+Impairment tests for cash-generating units containing goodwill
+Goodwill is allocated to the following Group's cash-generating units:
+Less: Accumulated impairment losses
+Cost
+18 GOODWILL
+As at 31 December 2017, the amount of capitalised cost of exploratory wells included in construction in progress related to the exploration and
+production segment was RMB 9,737 million (2016: RMB 12,192 million). The geological and geophysical costs paid during the year ended 31
+December 2017 were RMB 3,710 million (2016: RMB 2,899 million).
+129,581
+Balance at 31 December
+118,645
+8,634
+116
+(1,445)
+(315)
+(1,486)
+(252)
+(6,900)
+(7,773)
+(87,399)
+(81,229)
+(7,467)
+(6,876)
+81,837
+(43)
+152,325
+31 December
+2016
+RMB million
+(7,663)
+6,353
+212
+8,634
+167
+Other units without individually significant goodwill
+941
+879
+Trading of petrochemical products
+Sinopec (Hong Kong) Limited
+2,541
+4,043
+4,043
+14,016
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Production and sale of petrochemical products
+1,157
+1,004
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Sinopec Zhenhai Refining and Chemical Branch
+("Sinopec Zhenhai")
+Sinopec Beijing Yanshan Petrochemical Branch
+("Sinopec Yanshan")
+4,852
+31 December
+2016
+RMB million
+RMB million
+2017
+31 December
+Principal activities
+Shanghai SECCO Petrochemical Company Limited
+("Shanghai SECCO") (Note 35)
+16,478
+BASF-YPC
+51,553
+(2,856)
+23
+221
+Share of profit/(loss) from associates
+1,272
+26
+753
+748
+Share of other comprehensive (loss)/income from associates (iii)
+(121)
+(86)
+960
+(26)
+48
+(305)
+(1,759)
+(167)
+331
+The share of profit and other comprehensive income for the year ended 31 December 2017 in all individually immaterial associates accounted for
+using equity method in aggregate was RMB 3,182 million (2016: RMB 2,869 million) and RMB 569 million (2016: other comprehensive loss RMB
+384 million) respectively. As at 31 December 2017, the carrying amount of all individually immaterial associates accounted for using equity method
+in aggregate was RMB 23,899 million (2016: RMB 21,510 million).
+Note:
+(i) Sinopec is able to exercise significant influence in SIBUR since Sinopec has a member in SIBUR's Board of Director and has a member in SIBUR's Management Board.
+(ii) The summarised income statement for the year 2016 of Pipeline Ltd presents the operating results from the date when the Group lost control to 31 December 2016.
+(iii) Including foreign currency translation differences.
+176
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+(944)
+123
+9,341
+1,351
+191
+3,542
+2,442
+52,496
+3,569
+2,563
+2,205
+2,543
+51
+1,536
+1,526
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+9,601
+(610)
+(3,518)
+-
+(246)
+(175)
+(260)
+(334)
+662
+2,543
+51
+1.290
+123
+for the year ended 31 December 2017
+20 INTEREST IN JOINT VENTURES
+The Group's principal interests in joint ventures are as follows:
+Cyprus
+Russia
+gas extraction
+Yanbu Aramco Sinopec Refining
+37.50
+Petroleum refining and
+Equity method
+Saudi Arabia
+Saudi Arabia
+Company Ltd. ("YASREF")
+processing business
+Equity method
+Sinopec SABIC Tianjin
+Manufacturing and
+Equity method
+PRC
+PRC
+Petrochemical Company Limited
+distribution of
+("Sinopec SABIC Tianjin")
+petrochemical products
+Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal joint ventures:
+YASREF
+FREP
+50.00
+5,644
+Crude oil and natural
+Taihu Limited ("Taihu")
+Name of entity
+Fujian Refining & Petrochemical
+Company Limited ("FREP")
+% of ownership
+interests
+Principal activities
+Measurement
+method
+Country of
+incorporation
+of business
+Principal place
+50.00
+49.00
+Manufacturing refining
+oil products
+PRC
+PRC
+BASF-YPC Company Limited
+40.00
+Manufacturing and
+Equity method
+PRC
+PRC
+("BASF-YPC")
+distribution of
+petrochemical products
+Equity method
+158,938
+Total comprehensive income/(loss)
+Dividends declared by associates
+Profit/(loss) for the year
+97,332
+17,623
+17,378
+6,207
+7,151
+Net assets attributable to owners of the Company
+Taihu
+5,335
+10,269
+11,013
+Other current assets
+3,634
+6,524
+1,259
+4,916
+1,165
+2,352
+1,394
+1,800
+8,172
+5,772
+Cash and cash equivalents
+Current assets
+23,461
+24,751
+45,600
+48,180
+50,301
+1,673
+3,842
+Current liabilities
+(933)
+(5,009)
+(154,212)
+(142,386)
+(20,554)
+(10,668)
+(8,078)
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
+(908)
+Non-current liabilities
+(3,176)
+(3,350)
+(6)
+(88)
+(61,771)
+(31,494)
+(32,137)
+(170)
+(883)
+Net assets
+(928)
+Sinopec SABIC Tianjin
+1,976
+48,180
+6,734
+3,104
+3,576
+Summarised statement of comprehensive income
+Year ended 31 December
+Pipeline Ltd (ii)
+2017
+Sinopec Finance
+2016
+RMB million
+RMB million
+2017
+RMB million
+6,829
+2016
+RMB million
+Zhongtian Synergetic Energy
+CIR
+2017
+RMB million
+RMB million
+2016
+RMB million
+2017
+2016
+RMB million
+RMB million
+Turnover
+SIBUR(i)
+2017
+Other comprehensive (loss)/income
+9,676
+12,128
+45,600
+24,751
+23,461
+96,761
+17,623
+17,378
+6,207
+7,151
+Net assets attributable to non-controlling interests
+571
+Share of net assets from associates
+11,496
+24,090
+12,128
+11,496
+9,676
+6,829
+6,734
+3,104
+3,576
+Carrying
+Amounts
+24,090
+22,800
+22,800
+84
+Depreciation for the year
+27
+5,064
+5,045
+6,279
+5,749
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+177
+Financial Statements (International)
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+20 INTEREST IN JOINT VENTURES (Continued)
+Summarised statement of comprehensive income
+Year ended 31 December
+FREP
+BASF-YPC
+Taihu
+YASREF
+Sinopec SABIC Tianjin
+2017
+2016
+2017
+4,021
+3,831
+6,154
+6,409
+12,557
+11,497
+Net assets attributable to
+non-controlling interests
+282
+241
+Share of net assets from joint ventures
+8,226
+6,842
+6,409
+2016
+6,154
+3,278
+5,064
+5,045
+6,279
+5,749
+Other (iii)
+743
+Carrying Amounts
+8,226
+6,842
+3,831
+2017
+2016
+RMB million RMB million RMB million RMB million RMB million RMB million
+208
+130
+36
+19
+142
+40
+45
+33
+104
+30
+(33)
+Interest expense
+(929)
+(71)
+(173)
+(142)
+(113)
+(1,382)
+(1,216)
+(223)
+(245)
+Profit/(loss) before taxation
+(857)
+13,454
+(36)
+(2,763)
+Turnover
+Depreciation, depletion and
+amortisation
+Interest income
+49,356
+41,764
+21,020
+17,323
+12,520
+9,658
+(2,754)
+2017
+2016
+RMB million RMB million
+61,587
+41,286
+2016
+RMB million RMB million
+22,286
+16,337
+(16)
+(52)
+(1,793)
+(2,275)
+(715)
+(1,043)
+2017
+13,505
+6,690
+7,818
+(1,187)
+(1,236)
+Other current liabilities
+(5,049)
+(4,643)
+(1,982)
+(2,107)
+(1,914)
+(1,616)
+(11,864) (6,466)
+(5,407)
+(4,546)
+Total current liabilities
+(6,184)
+(6,424)
+(2,215)
+(2,890)
+(1,934)
+(1,950)
+(17,271)
+(7,653)
+(5,782)
+(2,657)
+(2,657)
+(334)
+(783)
+4,814
+2,781
+15,732
+8,085
+9,233
+5,520
+Non-current assets
+19,740
+21,903
+12,075
+(20)
+13,530
+8,279
+51,553
+57,054
+13,248
+14,003
+Current liabilities
+Current financial liabilities (i)
+(1,135)
+(1,781)
+(233)
+7,978
+6,977
+Non-current liabilities
+(13,654)
+(2,179)
+(36,509)
+(44,032)
+(4,142)
+(5,369)
+Net assets
+16,451
+13,683
+16,021
+15,384
+(2,758)
+8,100
+13,505
+13,454
+12,557
+11,497
+Net assets attributable to owners
+of the Company
+16,451
+13,683
+16,021
+15,384
+6,931
+Non-current financial liabilities (ii)
+(1,502)
+(20,237)
+(19,985)
+(955)
+(1,492)
+(72)
+(49)
+(35,619)
+(43,028)
+(4,101)
+(5,337)
+Other non-current liabilities
+(974)
+(236)
+(19)
+1,865
+(2,686)
+(2,130)
+(890)
+(1,004)
+(41)
+(32)
+Total non-current liabilities
+(13,890)
+(252)
+6,476
+4,565
+2,606
+68,467
+14,226
+12,275
+2,076
+1,840
+2,027
+132
+(770)
+(12)
+(266)
+75,728
+(83)
+74
+17,202
+14,226
+58,526
+54,241
+Operating rights of service stations
+Long-term receivables from and prepayment to Sinopec Group Company and fellow subsidiaries
+Prepayments for construction projects to third parties
+Others (i)
+Balance at 31 December
+Note:
+(91)
+31 December
+221
+(422)
+Transferred from other long-term assets
+Reclassification to other assets
+Written back on disposals
+Exchange adjustments
+Balance at 31 December
+Net book value:
+23 LONG-TERM PREPAYMENTS AND OTHER ASSETS
+2017
+2016
+RMB million
+(357)
+RMB million
+63,324
+2,614
+300
+4,151
+4,279
+3,987
+994
+(2,603)
+(229)
+(531)
+68,467
+Amortisation charge for the year
+2017
+31 December
+2016
+RMB million
+2016
+RMB million
+36,908
+11,837
+34,407
+2,670
+(132)
+(169)
+48,613
+36,908
+10,012
+2017
+8,310
+1,777
+(28)
+(75)
+14,345
+10,012
+34,268
+26,896
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+179
+Financial Statements (International)
+4,361
+RMB million
+Net book value at 31 December
+Decreases
+RMB million
+34,268
+26,896
+20,726
+20,385
+4,999
+2,234
+21,989
+20,630
+81,982
+Balance at 31 December
+70,145
+The cost of operating rights of service stations is charged to expense on a straight-line basis over the respective periods of the rights. The
+movement of operating rights of service stations is as follows:
+Operating rights of service stations
+Cost:
+Balance at 1 January
+Additions
+Decreases
+Balance at 31 December
+Accumulated amortisation:
+Balance at 1 January
+Additions
+(i) Others mainly comprise prepaid operating lease charges over one year and catalyst expenditures.
+6,246
+Balance at 1 January
+Balance at 31 December
+3,834
+2,401
+Other comprehensive income/(loss)
+25
+1,851
+(554)
+647
+Total comprehensive income/(loss)
+5,278
+4,902
+84
+3,414
+1,169
+3,744
+51
+731
+3,834
+2,401
+Dividends declared by joint ventures
+1,250
+1,109
+155
+1,958
+1,375
+605
+1,144
+1,697
+2,411
+548
+28
+5,113
+3,184
+Tax expense
+(1,699)
+(1,574)
+(1,151)
+1,893
+(648)
+(518)
+57
+56
+(1,279)
+(783)
+Profit/(loss) for the year
+5,278
+4,902
+3,414
+1,958
+(553)
+Accumulated amortisation:
+300
+joint ventures
+178
+1,544
+1,722
+262
+11,175
+11,437
+Less: Impairment loss for investments
+46
+29
+1,676
+11,408
+Other investment, unlisted and at cost, represents the Group's interests in privately owned enterprises which are mainly engaged in oil and natural
+gas activities and chemical production.
+Equity securities, listed and at quoted market price
+Other investment, unlisted and at cost
+The impairment losses relating to investments for the year ended 31 December 2017 amounted to RMB 17 million (2016: nil).
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+22 LEASE PREPAYMENTS
+Cost:
+Balance at 1 January
+Additions
+Transferred from construction in progress
+Transferred from other long-term assets
+Reclassification to other assets
+Disposals
+Exchange adjustments
+178
+Share of net profit/(loss) from
+31 December
+2016
+RMB million
+21 AVAILABLE-FOR-SALE FINANCIAL ASSETS
+2,639
+2,451
+1,366
+783
+541
+895
+227
+31
+1,917
+1,201
+31 December
+2017
+RMB million
+Share of other comprehensive
+12
+875
+(208)
+243
+The share of profit and other comprehensive income for the year ended 31 December 2017 in all individually immaterial joint ventures accounted
+for using equity method in aggregate was RMB 3,925 million (2016: RMB 2,061 million) and RMB 994 million (2016: other comprehensive loss
+RMB 934 million) respectively. As at 31 December 2017, the carrying amount of all individually immaterial joint ventures accounted for using equity
+method in aggregate was RMB 21,552 million (2016: RMB 22,885 million).
+Note:
+(i) Excluding trade accounts payable and other payables.
+(ii) Excluding provisions.
+(iii) Other reflects the excess of fair value of the consideration transferred over the Group's share of the fair value of the investee's identifiable assets and liabilities as of
+the transaction date.
+(iv) Including foreign currency translation differences.
+income/(loss) from joint ventures (iv)
+7,135
+(10)
+16,785
+6,805
+4,298
+4,298
+(3,792)
+(4,376)
+313
+(3,792)
+(4,689)
+18,441
+45
+1,053
+1,053
+(24)
+(7)
+(17)
+(57)
+(57)
+Other comprehensive income
+Foreign currency translation differences
+associates and joint ventures
+Share of other comprehensive profit of
+in other comprehensive income
+Net movement during the year recognised
+(472)
+6,333
+15 BASIC AND DILUTED EARNINGS PER SHARE
+The calculation of basic earnings per share for the year ended 31 December 2017 is based on the profit attributable to ordinary shareholders
+of the Company of RMB 51,244 million (2016: RMB 46,672 million) and the weighted average number of shares of 121,071,209,646 (2016:
+121,071,209,646) during the year.
+Plants and
+buildings
+RMB million
+16 PROPERTY, PLANT AND EQUIPMENT
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+Financial Statements (International)
+173
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+of shares
+121,071,209,646
+121,071,209,646
+2016
+Number
+(24)
+2017
+Number
+of shares
+121,071,209,646
+121,071,209,646
+(2)
+51,242
+2016
+RMB million
+46,672
+RMB million
+51,244
+2017
+Weighted average number of shares (diluted) at 31 December
+Weighted average number of shares at 31 December
+(ii) Weighted average number of shares (diluted)
+Profit attributable to ordinary shareholders of the Company
+After tax effect of employee share option scheme of Shanghai Petrochemical
+Profit attributable to ordinary shareholders of the Company (diluted)
+(i) Profit attributable to ordinary shareholders of the Company (diluted)
+The calculation of diluted earnings per share for the year ended 31 December 2017 is based on the profit attributable to ordinary shareholders of
+the Company (diluted) of RMB 51,242 million (2016: RMB 46,669 million) and the weighted average number of shares of 121,071,209,646 (2016:
+121,071,209,646) calculated as follows:
+(3)
+46,669
+(7)
+(17)
+(57)
+(3,161)
+652
+(3,813)
+(1,074)
+240
+(1,314)
+instruments recognised during the year
+Amounts transferred to initial carrying
+Effective portion of changes in fair value of hedging
+Cash flow hedges:
+amount
+RMB million
+amount of hedged items
+effect
+RMB million
+Tax
+Before tax
+amount
+RMB million
+Net of tax
+amount
+RMB million
+RMB million RMB million
+Tax
+effect
+amount
+Before tax
+2016
+2017
+14 OTHER COMPREHENSIVE INCOME
+Net of tax
+Oil and gas,
+properties
+RMB million
+(4)
+(3)
+(57)
+Changes in fair value recognised during the year
+Available-for-sale securities:
+2,014
+(465)
+2,479
+(1,580)
+313
+(1,893)
+in other comprehensive income
+1
+Net movement during the year recognised
+(1,115)
+6,279
+(503)
+72
+(575)
+to the consolidated income statement
+Reclassification adjustments for amounts transferred
+11
+(2)
+13
+5,164
+Equipment,
+machinery
+and others
+RMB million
+Total
+RMB million
+Cost:
+374,191
+44,469
+Balance at 1 January 2016
+Accumulated depreciation:
+1,727,982
+(2,912)
+(12,074)
+(11,312)
+723
+(8,751)
+(10,985)
+(199)
+940,312
+667,657
+449,609
+120,013
+(2,573)
+(140)
+Exchange adjustments
+(211)
+(878)
+Disposals
+(1,702)
+(859)
+Reclassification to lease prepayments and other long-term assets
+(50)
+Balance at 31 December 2017
+(673)
+868,269
+3,815
+Exchange adjustments
+(17,623)
+(17,067)
+(22)
+(534)
+Written back on disposals
+(330)
+(316)
+(14)
+Reclassification to lease prepayments and other long-term assets
+Depreciation for the year
+(311)
+369
+Reclassifications
+14,921
+3,901
+10,580
+440
+Impairment losses for the year
+100,734
+47,914
+49,005
+(58)
+for the year ended 31 December 2017
+Reclassifications
+54,605
+Disposals
+(2,332)
+(2,202)
+(130)
+Reclassification to lease prepayments and other long-term assets
+(1,311)
+(115)
+1,426
+Reclassifications
+4,323
+87,399
+(509)
+1,601,718
+31,473
+5,901
+Transferred from construction in progress
+626
+880,711
+613,134
+3,420
+277
+Additions
+107,873
+Balance at 1 January 2016
+50,025
+81,275
+(27)
+(35,636)
+19,881
+6.789
+Transferred from construction in progress
+14,464
+11,983
+1,627
+854
+Additions
+1,658,541
+1,658,541
+892,936
+(35,100)
+650,685
+Balance at 1 January 2017
+892,936
+650,685
+114,920
+Balance at 31 December 2016
+3,069
+187
+2,800
+82
+Exchange adjustments
+114,920
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+45
+172
+300
+300
+300
+|||| ||1=2
+424
+2,916
+1,228
+349
+51
+103
+122
+480
+207
+480
+207
+480
+207
+770
+840
+76
+487
+300
+300
+300
+300
+respect of a
+person's services
+as a director,
+whether of the
+Company or
+its subsidiary
+undertaking
+or receivable in
+Emoluments paid
+Emoluments paid or receivable in respect of
+director's other services in connection with the
+management of the affairs of the Company or
+its subsidiary undertaking
+The emoluments of every director and supervisor is set out below: (Continued)
+(a) Directors' and supervisors' emoluments (Continued)
+11 DIRECTORS' AND SUPERVISORS' EMOLUMENTS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+5,768
+207
+1,200
+17
+267
+42
+758
+71
+758
+71
+758
+71
+300
+417
+-
+76
+537
+Ma Yongsheng
+Jiao Fangzheng
+Zhang Haichao
+Wang Zhigang
+Li Yunpeng
+Dai Houliang
+Wang Yupu (i)
+Directors
+Name
+The emoluments of every director and supervisor is set out below:
+Independent non-executive directors
+(a) Directors' and supervisors' emoluments
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+2,462
+1,616
+10,816
+6,826
+2,709
+1,886
+Total current assets
+11 DIRECTORS' AND SUPERVISORS' EMOLUMENTS
+Name
+Jiang Xiaoming
+Tang Min
+227
+RMB'000
+Total
+Supervisors' fee
+RMB'000
+RMB'000
+Directors'/
+2017
+Retirement
+scheme
+contributions
+Bonuses
+RMB'000
+Company or
+its subsidiary
+undertaking
+or receivable in
+respect of a
+person's services
+as a director,
+whether of the
+Andrew Y. Yan
+Emoluments paid
+Emoluments paid or receivable in respect of
+director's other services in connection with the
+management of the affairs of the Company or
+its subsidiary undertaking
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Total
+Wang Yajun (ii)
+Yu Xizhi (ii)
+Liu Yun (iii)
+Zou Huiping
+Jiang Zhenying
+Yu Renming
+Liu Zhongyun
+Zhou Hengyou
+Supervisors
+Zhao Dong
+Fan Gang
+Salaries,
+allowances and
+benefits in kind
+RMB'000
+Directors
+Wang Yupu
+Dai Houliang
+Wang Zhigang
+Zhang Haichao
+170
+Ma Yongsheng(iv)
+Financial Statements (International)
+171
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+(iv) Mr. Zhang Jianhua ceased being director from 13 July 2016; Mr. Li Chunguang ceased being director from 26 August 2016; Mr. Ma Yongsheng was elected as
+director from 25 February 2016.
+(iii) Mr Liu Yun ceased being supervisor and chairman of board of supervisor from 16 March 2017.
+(ii) Mr Yu Xizhi were elected to be supervisor from 28 June 2017; Mr Wang Yajun ceased being supervisor from 28 June 2017.
+(i) Mr. Wang Yupu ceased being chairman and independent director from 22 September 2017.
+Notes:
+Wang Yajun
+Total
+Yu Renming
+Financial Statements (International)
+6,147
+499
+2,936
+1,512
+595
+66
+325
+204
+594
+67
+309
+1,200
+218
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+12 SENIOR MANAGEMENT'S EMOLUMENTS
+Jiao Fangzheng
+Pursuant to the shareholders' approval at the Annual General Meeting on 18 May 2016, a final dividend of RMB 0.06 per share totaling RMB 7,264
+million according to total shares of 23 June 2016 was approved. All dividends have been paid in the year ended 31 December 2016.
+Pursuant to the shareholders' approval at the Annual General Meeting on 28 June 2017, a final dividend of RMB 0.17 per share totaling RMB
+20,582 million according to total shares of 18 July 2017 was approved. All dividends have been paid in the year ended 31 December 2017.
+7,264
+RMB million
+2016
+20,582
+2017
+RMB million
+Final cash dividends in respect of the previous financial year, approved and paid during the year of
+RMB 0.17 per share (2016: RMB 0.06 per share)
+Pursuant to a resolution passed at the director's meeting on 23 March 2018, final dividends in respect of the year ended 31 December 2017 of
+RMB 0.40 (2016: RMB 0.17) per share totaling RMB 48,428 million (2016: RMB 20,582 million) were proposed for shareholders' approval at the
+Annual General Meeting. Final cash dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date.
+Dividends payable to shareholders of the Company attributable to the previous financial year, approved during the year represent:
+for the year ended 31 December 2017
+Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 25 August 2017, the directors authorised to
+declare the interim dividends for the year ending 31 December 2017 of RMB 0.10 (2016: RMB 0.079) per share totaling RMB 12,107 million (2016:
+RMB 9,565 million). Dividends were paid on 20 September 2017.
+9,565
+20,582
+60,535
+12,107
+48,428
+RMB million
+RMB million
+2017
+Dividends declared and paid during the year of RMB 0.10 per share (2016: RMB 0.079 per share)
+Dividends declared after the balance sheet date of RMB 0.40 per share (2016: RMB 0.17 per share)
+Dividends payable to shareholders of the Company attributable to the year represent:
+13 DIVIDENDS
+For the year ended 31 December 2017, the five highest paid individuals in the Company included one director and four senior management. The
+emolument paid to each of one director and four senior management was below RMB 1,000 thousand. The total salaries, wages and other benefits
+was RMB 3,996 thousand, and the total amount of their retirement scheme contributions was RMB 360 thousand. For the year ended 31 December
+2016, the five highest paid individuals in the Company included one director and four senior management.
+30,147
+619
+2016
+334
+459
+214
+Total
+RMB'000
+Directors'/
+Supervisors' fee
+RMB'000
+RMB'000
+scheme
+contributions
+Bonuses
+RMB'000
+2016
+Retirement
+Salaries,
+allowances and
+benefits in kind
+RMB'000
+Jiang Zhenying
+196
+Zou Huiping
+Liu Yun
+Supervisors
+Fan Gang
+Tang Min
+Andrew Y. Yan
+Jiang Xiaoming
+Independent non-executive directors
+Zhang Jianhua(iv)
+67
+Li Chunguang(iv)
+Liu Zhongyun
+431
+Zhou Hengyou
+745
+218
+619
+12211177
+67
+334
+218
+300
+300
+300
+300
+300
+300
+699
+300
+520
+41
+365
+114
+556
+47
+130
+300
+379
+641
+1,702
+558
+1,349
+23,547
+12,883
+11
+117
+9,587
+1,017
+1,920
+10,664
+5,653
+(2,115)
+761
+231
+(383)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+(1,438)
+Pursuant to the resolution passed at the Directors' meeting on 29 October 2015, the Company entered into the JV Agreement with Sinopec
+Assets Management Corporation ("SAMC") in relation to the formation of the Gaoqiao Petrochemical Co., Ltd. According to the JV Agreement,
+the Company and SAMC jointly set up Gaoqiao Petrochemical Co., Ltd. for RMB 100 million in cash in 2016. Subsequently, the Company
+subscribed capital contribution with the net assets of Gaoqiao Branch of the Company and SAMC subscribed capital contribution with the net
+assets of Gaoqiao Branch of SAMC. The capital contribution was completed on 1 June 2016, after which the Company held 55% of Gaoqiao
+Petrochemical Co., Ltd.'s voting rights and became the parent company of Gaoqiao Petrochemical Co., Ltd.
+(b) Acquisition of Gaoqiao Branch of SAMC
+RMB million
+35 BUSINESS COMBINATION (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+(96)
+If the acquisition had occurred on 1 January 2017, consolidated pro-forma revenue and profit for the year ended 31 December 2017 would
+have been RMB 2,365,632 million and RMB 74,930 million respectively. These amounts have been calculated using the subsidiary's results and
+adjusting them for the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property,
+plant and equipment and intangible assets had applied from 1 January 2017, together with the consequential tax effects.
+As of Acquisition Date, a gain of RMB 3,941 million was recognised as a result of remeasuring the 50% equity interest held before the
+Transaction to its fair value, which is included in other operating (expense)/income in the Group's consolidated income statement for the year
+ended 31 December 2017.
+The goodwill is attributable to the high profitability of the acquired business and synergy to be achieved post the Transaction among Shanghai
+SECCO and the Group's existing petrochemical operations located in eastern China.
+2,541
+17,729
+(1,786)
+(4,032)
+Shanghai SECCO contributed revenue of RMB 5,222 million and net profit of RMB 726 million to the Group for the period from the Acquisition
+Date to 31 December 2017.
+Net assets acquired
+Goodwill
+20,270
+Total current liabilities
+As Sinopec Group Company controls both the Group and SAMC, the non-cash transaction described above between Sinopec and SAMC has been
+accounted as business combination under the common control and it has been reflected in the accompanying consolidated financial statements
+as combination of entities under common control in a manner of predecessor value accounting. Accordingly, the assets and liabilities of Gaoqiao
+Branch of SAMC have been accounted for at historical cost, and the consolidated financial statements of the Group prior to these acquisitions
+have been restated to include the results of operation and the assets and liabilities of Gaoqiao Branch of SAMC on a combined basis.
+On 26 October 2017, a subsidiary of the Company, Gaoqiao Petrochemical Co., Ltd., purchased 50% equity interest in Shanghai SECCO from
+BP Chemicals East China Investment Limited with a cash consideration of RMB 10,135 million ("the Transaction"). Before the Transaction, the
+Company and one of its subsidiaries held 30% and 20% equity interest in Shanghai SECCO, respectively. After the Transaction, the Company,
+together with its subsidiaries, hold 100% equity interest of Shanghai SECCO, which became a subsidiary of the Company.
+Shanghai SECCO is principally engaged in the production and sale of petrochemical products including acrylonitrile, polystyrene, polyethylene,
+etc.
+Based on the purchase price allocation performed, details of the purchase consideration, the net assets acquired and goodwill are as follows:
+Purchase consideration :
+Acquisition Date (26 October 2017)
+- Cash consideration for the purchase of 50% equity interest acquired
+- Acquisition-date fair value of the 50% equity interest held before the acquisition
+Total purchase consideration
+RMB million
+10,135
+10,135
+Fair value
+The assets and liabilities recognised as a result of the acquisition are as follows:
+Cash and cash equivalents
+Bills receivable
+Inventories
+Trade and other receivables
+Prepayments
+Tax payable
+Employee benefits payable
+Advances received
+Trade and other payables
+Total assets
+Total non-current assets
+Deferred tax liabilities (Note 28)
+Deferred tax assets
+Construction in progress
+Intangible assets
+Lease prepayments
+Property, plant and equipment, net
+Total current assets
+Other current assets
+Long-term prepaid expenses
+At the completion date, the non-controlling interests amount to RMB 2,137 million was recognized in relation to SAMC's 45% interest in Gaoqiao
+Branch of the Company.
+127
+Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control or jointly control the party or exercise
+significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to
+control or common control. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their
+close family members) or other entities and include entities which are under the significant influence of related parties of the Group where those
+parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related
+party of the Group.
+(vi)
+6,653
+6,584
+(vii)
+8,015
+10,474
+(vii)
+510
+449
+(vii)
+626
+456
+(viii)
+129
+(ix)
+807
+209
+(a) Acquisition of Shanghai SECCO
+Financial Statements (International)
+189
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+The amounts set out in the table above in respect of the year ended 31 December 2017 and 2016 represent the relevant costs and income as
+determined by the corresponding contracts with the related parties.
+(24,877)
+10,816
+5,279
+(21,770)
+(7,441)
+(ix)
+996
+554
+(x)
+(xi)
+36 RELATED PARTY TRANSACTIONS
+20,824
+27,201
+(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
+The Group is part of a larger group of companies under Sinopec Group Company, which is controlled by the PRC government, and has significant
+transactions and relationships with Sinopec Group Company and fellow subsidiaries. Because of these relationships, it is possible that the terms
+of these transactions are not the same as those that would result from transactions among wholly unrelated parties.
+The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were carried
+out in the ordinary course of business are as follows:
+Sales of goods
+Purchases
+Transportation and storage
+Exploration and development services
+Production related services
+Ancillary and social services
+Operating lease charges for land
+Operating lease charges for buildings
+Other operating lease charges
+Agency commission income
+Interest income
+Interest expense
+Net deposits placed with from related parties
+Net loans obtained from/(repaid to) related parties
+21,210
+(iv)
+1,333
+7,716
+(iii)
+RMB million
+194,179
+118,242
+(v)
+165,993
+244,211
+(i)
+RMB million
+2016
+2017
+Note
+(ii)
+35 BUSINESS COMBINATION
+95,928
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+The cost of inventories recognised as an expense in the consolidated income statement amounted to RMB 1,854,629 million for the year ended
+31 December 2017 (2016: RMB 1,461,285 million). It includes the write-down of inventories of RMB 436 million (2016: RMB 430 million) and the
+reversal of write-down of inventories made in prior years of RMB 13 million (2016: RMB 10 million), which were recorded in purchased crude oil,
+products and operating supplies and expenses in the consolidated income statement. The write-down of inventories of RMB 190 million for the year
+ended 31 December 2017 (2016: RMB 4,021 million) was realised primarily with the sales of inventories. The write-down of inventories is mainly
+related to the spare parts and consumables in refining segment and chemical segment.
+27 PREPAID EXPENSES AND OTHER CURRENT ASSETS
+Other receivables
+Advances to suppliers
+Value-added input tax to be deducted
+Prepaid income tax
+Derivative financial instruments
+(920)
+156,511
+28 DEFERRED TAX ASSETS AND LIABILITIES
+RMB million
+17,704
+31 December
+2016
+RMB million
+26,056
+3,749
+4,901
+17,926
+31 December
+2017
+18,055
+(1,155)
+186,693
+187,848
+Finished goods
+Spare parts and consumables
+Less: Allowance for diminution in value of inventories
+31 December
+2017
+RMB million
+31 December
+2016
+157,431
+RMB million
+75,680
+14,774
+14,141
+84,448
+65,772
+2,651
+1,838
+85,975
+Work in progress
+398
+526
+41,455
+14,150
+11,264
+(50)
+(9,928)
+(242)
+(14,615)
+2,325
+2,477
+117
+27
+227
+1,013
+7,420
+11.944
+10,931
+23,685
+31,105
+Short-term loans
+Loans from Sinopec Group Company and fellow subsidiaries
+299
+1,145
+165
+87
+762
+49,767
+Deferred tax assets and deferred tax liabilities before offset are attributable to the items detailed in the table below:
+Receivables and inventories
+Accruals
+Cash flow hedges
+Property, plant and equipment
+391
+Tax losses carried forward
+Intangible assets
+Deferred tax assets
+31 December
+2017
+RMB million
+381
+1,925
+31 December
+2016
+RMB million
+Deferred tax liabilities
+31 December
+2017
+RMB million
+31 December
+2016
+RMB million
+Available-for-sale securities
+Corporate bonds(i)
+Crude oil and other raw materials
+for the year ended 31 December 2017
+Less: Impairment losses for bad and doubtful debts
+Trade accounts receivable, net
+Bills receivable
+56,203
+39,994
+7,941
+6,398
+4,962
+Amounts due from associates and joint ventures
+4,580
+50,972
+(612)
+(683)
+68,494
+50,289
+16,207
+13,197
+69,106
+84,701
+Amounts due from Sinopec Group Company and fellow subsidiaries
+RMB million
+for the year ended 31 December 2017
+24 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
+31 December
+2017
+31 December
+2016
+RMB million
+Current assets
+Structured deposit
+Amounts due from third parties
+RMB million
+The financial assets are the structured deposit with financial institutions and cannot be readily convertible to known amounts of cash, which are
+presented as current assets since they are expected to be expired within 12 months from the end of the reporting period.
+The changes in the financial assets at fair value through profit or loss for the year ended 31 December 2017 amounted to RMB 196 million (2016: nil),
+which has been recorded in other operating (expense)/income, net.
+25 TRADE ACCOUNTS RECEIVABLE AND BILLS RECEIVABLE
+31 December
+2017
+31 December
+2016
+RMB million
+51,196
+51,196
+26 INVENTORIES
+63,486
+31 December
+2017
+RMB million
+2016
+RMB million
+683
+525
+49
+238
+(100)
+2017
+RMB million
+(8)
+(72)
+1
+612
+683
+Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from
+Sinopec Group Company and fellow subsidiaries are repayable under the same terms.
+Trade accounts receivable and bills receivables (net of impairment losses for bad and doubtful debts) primarily represent receivables that are
+neither past due nor impaired. These receivables relate to a wide range of customers for whom there is no recent history of default.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+(21)
+The ageing analysis of trade accounts and bills receivables (net of impairment losses for bad and doubtful debts) is as follows:
+Balance at 31 December
+Provision for the year
+31 December
+2016
+RMB million
+Within one year
+Between one and two years
+Between two and three years
+Over three years
+83,984
+573
+Written back for the year
+Written off for the year
+Others
+63,051
+43
+177
+101
+84,701
+25
+63,486
+Impairment losses for bad and doubtful debts are analysed as follows:
+Balance at 1 January
+233
+USD denominated
+RMB denominated
+Current portion of long-term corporate bonds
+413
+(22)
+391
+250
+(465)
+(215)
+(9,131)
+87
+6,063
+109
+(3,351)
+5,883
+(3,426)
+20
+2,477
+(139)
+(392)
+(7)
+34
+(1,505)
+Intangible assets
+Others
+Net deferred tax (liabilities)/assets
+Balance at
+01 January
+2016
+RMB million
+1,552
+consolidated
+in other
+income comprehensive
+6
+Balance at
+statement
+RMB million
+income
+Others
+2016
+RMB million
+RMB million
+RMB million
+31 December
+Available-for-sale securities
+146
+(1)
+Acquisition of
+Shanghai
+SECCO
+Balance at
+31 December
+2017
+RMB million
+RMB million
+RMB million
+Others
+RMB million
+RMB million
+Receivables and inventories
+87
+300
+(5)
+(1)
+for the year ended 31 December 2017
+RMB million
+203
+income
+income comprehensive
+58
+260
+40
+(136)
+(96)
+(790)
+834
+statement
+(838)
+(447)
+Recognised in
+Recoginsed
+Balance at
+consolidated
+in other
+1 January
+2017
+347
+Tax losses carried forward
+Property, plant and equipment
+Cash flow hedges
+(96)
+(447)
+(336)
+(569)
+(27)
+260
+117
+117
+44
+Net deferred tax (liabilities)/assets
+Intangible assets
+Available-for-sale securities
+2,325
+(17)
+(135)
+2,477
+4,222
+Others
+(1,181)
+10,317
+(1)
+USD denominated
+RMB denominated
+Current portion of long-term bank loans
+RMB denominated
+Short-term other loans
+US Dollar ("USD") denominated
+RMB denominated
+4
+582
+Short-term bank loans
+31 December
+Third parties' debts
+Short-term debts represent:
+29 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES
+8,665
+(84)
+(36)
+(1,786)
+31 December
+2016
+RMB million
+(8)
+287
+8,475
+(264)
+(10,805)
+(229)
+(15,086)
+At 31 December 2017, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB 20,821 million
+(2016: RMB 19,194 million), of which RMB 5,938 million (2016: RMB 3,833 million) was incurred for the year ended 31 December 2017, because
+it was not probable that the future taxable profits will be realised. These deductible losses carried forward of RMB 2,508 million, RMB 4,462 million,
+RMB 4,080 million, RMB 3,833 million and RMB 5,938 million will expire in 2018, 2019, 2020, 2021, 2022 and after, respectively.
+Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax
+assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable
+that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the
+tax losses result from identifiable causes which are unlikely to recur. During the year ended 31 December 2017, write-down of deferred tax assets
+amounted to RMB 26 million (2016: RMB 811 million) (Note 10).
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017 181
+Financial Statements (International)
+133
+14,639
+Financial Statements (International)
+for the year ended 31 December 2017
+28 DEFERRED TAX ASSETS AND LIABILITIES (Continued)
+Movements in the deferred tax assets and liabilities are as follows:
+Recognised in
+Recognised
+Receivables and inventories
+Accruals
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+19,470
+180
+Deferred tax assets/(liabilities)
+(3,351)
+115
+8
+313
+9
+(215)
+Tax losses carried forward
+Property, plant and equipment
+Cash flow hedges
+1,925
+1,534
+391
+Accruals
+381
+260
+(563)
+Others
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+2017
+RMB million
+299
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
+186
+Financial Statements (International)
+Financial Statements (International)
+185
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+33 SHARE CAPITAL (Continued)
+All A shares and H shares rank pari passu in all material aspects.
+During the year ended 31 December 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus issues of 2 shares
+converted from the retained earnings, and 1 share transferred from the share premium for every 10 existing shares.
+On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the Placing") with a par value of RMB 1.00 each at the Placing Price
+of HKD 8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD 24,042,227,300.00 and the aggregate net
+proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD 23,970,100,618.00.
+During the year ended 31 December 2012, the Company issued 117,724,450 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2011, the Company issued 34,662 listed A shares with a par value of RMB 1.00 each, as a result of conversion
+by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a result of exercise of
+188,292 warrants entitled to the Bonds with Warrants.
+During the year ended 31 December 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to natural
+persons and institutional investors in the PRC.
+Capital management
+The schedule of the contractual maturities of loans and commitments are disclosed in Notes 29 and 34, respectively.
+31 December
+2017
+31 December
+Authorised and contracted for (i)
+Authorised but not contracted for
+At 31 December 2017 and 2016, capital commitments are as follows:
+Capital commitments
+Between four and five years
+Thereafter
+Management optimises the structure of the Group's capital, which comprises of equity and debts. In order to maintain or adjust the capital structure
+of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce debt, or adjust the
+proportion of short-term and long-term loans. Management monitors capital on the basis of the debt-to-capital ratio, which is calculated by dividing
+long-term loans (excluding current portion), including long-term debts and loans from Sinopec Group Company and fellow subsidiaries, by the total
+of equity attributable to shareholders of the Company and long-term loans (excluding current portion), and liability-to-asset ratio, which is calculated
+by dividing total liabilities by total assets. Management's strategy is to make appropriate adjustments according to the Group's operating and
+investment needs and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group at a
+range considered reasonable. As at 31 December 2017, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 12.0% (2016: 14.2
+%) and 46.5% (2016: 44.5 %), respectively.
+Between three and four years
+Between one and two years
+Within one year
+At 31 December 2017 and 2016, the future minimum lease payments under operating leases are as follows:
+The Group leases land and buildings, service stations and other equipment through non-cancellable operating leases. These operating leases do not
+contain provisions for contingent lease rentals. None of the rental agreements contains escalation provisions that may require higher future rental
+payments.
+Operating lease commitments
+34 COMMITMENTS AND CONTINGENT LIABILITIES
+There were no changes in the management's approach to capital management of the Group during the year. Neither the Company nor any of its
+subsidiaries is subject to externally imposed capital requirements.
+Between two and three years
+RMB million
+In October 2000, the Company issued 15,102,439,000 H shares with a par value of RMB 1.00 each, representing 12,521,864,000 H shares and
+25,805,750 American Depositary Shares ("ADSS", each representing 100 H shares), at prices of HKD 1.59 per H share and USD 20.645 per ADS,
+respectively, by way of a global initial public offering to Hong Kong and overseas investors. As part of the global initial public offering, 1,678,049,000
+state-owned ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong Kong and
+overseas investors.
+121,071
+1,057
+1,501
+3,420
+1,627
+33,115
+2016
+RMB million
+RMB million
+36,918
+(467)
+2017
+Accretion expenses
+Utilised for the year
+Exchange adjustments
+Balance at 31 December
+Balance at 1 January
+Provision for the year
+Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has mainly committed to the PRC
+government to establish certain standardised measures for the dismantlement of its oil and gas properties by making reference to the industry
+practices and is thereafter constructively obligated to take dismantlement measures of its oil and gas properties.
+Movement of provision of the Group's obligations for the dismantlement of its oil and gas properties is as follow:
+224,544
+279,247
+4,472
+2,671
+184 Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+The Company was established on 25 February 2000 with a registered capital of 68.8 billion domestic state-owned shares with a par value of RMB
+1.00 each. Such shares were issued to Sinopec Group Company in consideration for the assets and liabilities transferred to the Company (Note 1).
+Pursuant to the resolutions passed at an Extraordinary General Meeting held on 25 July 2000 and approvals from relevant government authorities,
+the Company is authorised to increase its share capital to a maximum of 88.3 billion shares with a par value of RMB 1.00 each and offer not more
+than 19.5 billion shares with a par value of RMB 1.00 each to investors outside the PRC. Sinopec Group Company is authorised to offer not more
+than 3.5 billion shares of its shareholdings in the Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors
+outside the PRC would be converted into H shares.
+(843)
+169
+121,071
+25,513
+95,558
+95,558
+25,513
+RMB million
+RMB million
+2016
+(172)
+31 December
+2017
+95,557,771,046 listed A shares (2016: 95,557,771,046) of RMB 1.00 each
+25,513,438,600 listed H shares (2016: 25,513,438,600) of RMB 1.00 each
+Registered, issued and fully paid
+33 SHARE CAPITAL
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+36,918
+39,407
+31 December
+2016
+RMB million
+11,114
+14,917
+Joint ventures
+Associates(ii)
+Others
+31 December
+2016
+RMB million
+31 December
+2017
+RMB million
+At 31 December 2017 and 2016, guarantees by the group in respect of facilities granted to the parties below are as follows:
+Contingent liabilities
+1,327
+1,258
+940
+867
+25
+28
+24
+28
+25
+32
+123
+882
+83
+13,520
+658
+11,545
+10,669
+Financial Statements (International)
+180
+188
+Financial Statements (International)
+187
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+The Group is defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course of business. Management
+has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other proceedings and believes that any resulting
+liabilities will not have a material adverse effect on the financial position, operating results or cash flows of the Group.
+9,732
+Legal contingencies
+Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial
+position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement
+of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable
+uncertainties which affect management's ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature
+and extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development
+areas, whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of alternative remediation strategies, (iv)
+changes in environmental remediation requirements, and (v) the identification of new remediation sites. The amount of such future cost is
+indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective
+actions that may be required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot
+reasonably be estimated at present, and could be material.
+Environmental contingencies
+(ii) The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy by banks amount to RMB 17,050 million. As at 31
+December 2017, the amount withdrawn by Zhongtian Synergetic Energy and guaranteed by the Group was RMB 13,520 million.
+Note:
+Management monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss will occurr, and recognises any
+such losses under guarantees when those losses are estimable. At 31 December 2017 and 2016, it was not probable that the Group will be required
+to make payments under the guarantees. Thus no liability has been accrued for a loss related to the Group's obligation under these guarantee
+arrangements.
+22,872
+24,192
+The Group paid normal routine pollutant discharge fees of approximately RMB 7,851 million in the consolidated financial statements for the year
+ended 31 December 2017 (2016: RMB 6,358 million).
+263
+205
+RMB million
+178,383
+116,379
+31,720
+120,386
+57,997
+31 December
+2016
+RMB million
+31 December
+2017
+RMB million
+344,878
+257,122
+148,099
+275,570
+12,980
+10,428
+13,217
+10,552
+13,966
+14,228
+11,492
+202,806
+These capital commitments relate to oil and gas exploration and development, refining and petrochemical production capacity expansion projects,
+the construction of service stations and oil depots and investment commitments.
+Note:
+(i) The investment commitments of the Group is RMB 3,364 million (2016: RMB 4,173 million).
+RMB million
+2016
+31 December
+31 December
+2017
+Between four and five years
+Thereafter
+Between one and two years
+Between two and three years
+Between three and four years
+Within one year
+Estimated future annual payments are as follows:
+The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Land and Resources annually
+which are expensed. Payments incurred were approximately RMB 308 million for the year ended 31 December 2017 (2016: RMB 333 million).
+Exploration licenses for exploration activities are registered with the Ministry of Land and Resources. The maximum term of the Group's exploration
+licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term.
+The Group is obligated to make progressive annual exploration investment relating to the exploration blocks in respect of which the license is
+issued. The Ministry of Land and Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant
+authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum
+term of production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group's
+production license is renewable upon application by the Group 30 days prior to expiration.
+Exploration and production licenses
+34 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Pursuant to certain of the joint venture agreements entered into by the Group, the Group is obliged to purchase products from the joint ventures
+based on market prices.
+Commitments to joint ventures
+120,734
+46,835
+10,730
+77,309
+2016
+RMB million
+31 December
+25,644
+RMB million
+31 December
+2017
+Interest rates ranging from 1.08% to
+4.66% per annum at 31 December 2017
+with maturities through 2030
+Interest rates ranging from 1.55% to
+4.29% per annum at 31 December 2017
+with maturities through 2031
+USD denominated
+26,058
+Interest rate and final maturity
+29 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued)
+Long-term debts represent:
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+182
+The Group's weighted average interest rates on short-term loans were 2.72% (2016: 2.42 %) at 31 December 2017. The above borrowings are
+unsecured.
+74,819
+Third parties' debts
+Long-term bank loans
+RMB denominated
+80,649
+192
+25,836
+Long-term loans from Sinopec Group Company
+and fellow subsidiaries
+Less: Current portion
+Total third parties' long-term debts
+4.25% per annum at 31 December 2017
+with maturities through 2043
+18,985
+17,902
+Fixed interest rates ranging from 1.88% to
+426
+USD denominated
+5.68% per annum at 31 December 2017
+65,500
+36,000
+Fixed interest rates ranging from 3.30% to
+RMB denominated
+Corporate bonds (ii)
+26,484
+with maturity through 2022
+18,580
+150
+2,014
+55,338
+6,000
+38,295
+23,934
+6,532
+29,500
+16,000
+56,239
+29,500
+42
+23
+8,753
+1,379
+58,925
+8,795
+1,402
+22,532
+23,297
+18,430
+RMB denominated
+150
+2,014
+21
+20
+5
+1,969
+1,903
+13,577
+19,668
+RMB denominated
+Current portion of long-term loans
+Singapore Dollar ("SGD") denominated
+EUR denominated
+Hong Kong Dollar ("HKD") denominated
+USD denominated
+2,858
+1,706
+RMB denominated
+Less: Current portion
+25,311
+53,902
+Derivative financial instruments
+Receipts in advance
+Taxes other than income tax
+Financial liabilities carried at amortised costs
+Other payables
+Payables for constructions
+Interest payable
+RMB million
+Salaries and welfare payable
+Over 6 months
+Between 1 month and 6 months
+Within 1 month or on demand
+31 December
+2016
+RMB million
+31 December
+2017
+5,828
+180,129
+31 ACCRUED EXPENSES AND OTHER PAYABLES
+174,301
+195,189
+8,076
+96,917
+21,468
+29,022
+Interest rates ranging from interest free to
+4.99% per annum at 31 December 2017
+with maturities through 2022
+52,827
+60,010
+1,396
+159,953
+1,618
+RMB million
+31 December
+2016
+31 December
+2017
+RMB million
+180,129
+7,483
+3,270
+206,535
+12,693
+7,162
+723
+6,251
+32 PROVISIONS
+43,320
+Short-term and long-term bank loans, short-term other loans and loans from Sinopec Group Company and fellow subsidiaries are primarily
+unsecured and carried at amortised cost.
+117,446
+44,772
+(150)
+99,124
+84,485
+(2,014)
+(i) The Company issued 182-day corporate bonds of face value RMB 6 billion to corporate investors in the PRC debenture market on 12 September 2016 at par value of
+RMB 100. The effective cost of the 182-day corporate bonds is 2.54% per annum. The short-term bonds were due on 14 March 2017 and have been fully paid by the
+Group at maturity.
+44,922
+72,674
+55,804
+(38,295)
+(23,934)
+177,224
+13,350
+9,499
+200,073
+6,462
+206,535
+110,969
+79,738
+45,334
+(ii) These corporate bonds are carried at amotised cost. At 31 December 2017, RMB 17,902 million (USD denominated corporate bonds) are guaranteed by Sinopec
+Group Company.
+Note:
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+13,168
+154,882
+RMB million
+2016
+31 December
+RMB million
+31 December
+2017
+Trade accounts and bills payables measured at amortised cost
+The ageing analysis of trade accounts and bills payables are as follows:
+Amounts due to Sinopec Group Company and fellow subsidiaries
+Amounts due to associates and joint ventures
+Amounts due to third parties
+30 TRADE ACCOUNTS AND BILLS PAYABLES
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+Financial Statements (International)
+Financial Statements (International)
+183
+Bills payable
+149
+801
+266
+9
+266
+1,442
+149
+Consolidated subsidiaries
+2
+801
+149
+266
+9
+1,442
+149
+266
+6
+China
+6
+Shengli
+76
+71
+Dry
+Overseas
+1
+339
+100
+8
+1
+597
+78
+115
+Others
+5
+462
+73
+166
+1
+845
+151
+Productive
+6,436
+Productive
+18
+1200
+12
+2,880
+2,752
+1,226
+1,121
+2,330
+2,127
+6,436
+6,000
+6,000
+6,454
+6,012
+6,997
+119
+7,178
+0
+12
+18
+985
+Dry
+Dry Productive
+Productive
+Development
+Exploratory
+Development
+Exploratory
+2016
+Dry
+2017
+798
+0
+187
+724
+985
+724
+985
+724
+724
+0
+80 80 17202
+1
+Consolidated subsidiaries
+Overseas
+43
+147
+43
+Others
+19
+0
+19
+Shengli
+138
+78
+147
+62
+138
+78
+147
+Equity accounted entities
+Total
+62
+2000
+50
+Wells drilled (as of 31 December)
+21
+28
+138
+78
+138
+78
+62
+0
+0
+505
+50
+147
+28
+0
+113000N
+5052
+0
+147
+147
+62
+Consolidated subsidiaries
+1
+2
+0
+119
+1
+2
+Equity accounted entities
+0
+99
+0
+0
+0
+0
+0
+0
+Consolidated subsidiaries
+0
+99
+0
+2
+0
+268
+62
+China
+Exploratory Development
+Exploratory Development Exploratory Development Exploratory Development
+Net
+Gross
+Net
+Gross
+Total
+2016
+Wells drilling (as of 31 December)
+6
+900
+150
+268
+9
+1,561
+150
+2017
+31 December 2017 31 December 2016
+60
+Exploration and Production Activities
+12
+Business Review and Prospects
+11
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+In 2017, domestic demand for chemicals
+grew fast. According to our statistics,
+domestic consumption of ethylene
+equivalent was up by 11.3% from
+the previous year, and the apparent
+consumption of synthetic resin, synthetic
+fibre and synthetic rubber rose by
+8.6%, 5.0% and 6.4%, respectively.
+Domestic average chemical product
+prices increased compared with the
+previous year, in line with movements of
+international chemical product prices.
+(3) Chemical Products Market
+In 2017, domestic demand for refined
+oil products maintained its growth while
+market supply was in surplus. According
+to the statistics, apparent consumption
+of refined oil products (including
+gasoline, diesel and kerosene) was 306
+million tonnes, up by 6.6% from the
+previous year, with gasoline up by 10.1%
+and kerosene up by 11.7%, and diesel
+made a turnaround, up by 2.9%. Prices
+for domestic refined oil products were
+adjusted in line with international oil
+prices trend. In 2017, the government
+made 17 times of price adjustments with
+11 increases and 6 decreases.
+(2) Refined Oil Products Market
+(1) Crude Oil & Natural Gas Market
+In 2017, international crude oil prices.
+fluctuated at low level among the first
+three quarters, and rapidly went up in
+the 4th quarter. The average spot price
+of Platt's Brent for the year was USD
+54.19 per barrel, up by 23.9% from the
+previous year. Along with the adjustments
+of China's energy structure, domestic
+demand for natural gas became robust.
+Domestic apparent consumption of
+natural gas reached 237.3 billion cubic
+meters, up by 15.3% year on year.
+1 MARKET REVIEW
+Trend of International Crude Oil Prices
+2/2018
+1/2018
+12/2017
+11/2017
+DUBAI
+DTD BRENT
+Business Review and Prospects
+BUSINESS REVIEW AND PROSPECTS (CONTINUED)
+2 PRODUCTION & OPERATIONS REVIEW
+(1) Exploration and Production
+Others
+Shengli
+Consolidated subsidiaries
+China
+Proved developed reserves
+Proved reserves
+Items
+Summary of Reserves of Crude Oil and Natural Gas
+ICE BRENT
+Natural gas production (bcf)
+China
+Crude oil production (mmbls)
+Oil and gas production (mmboe)
+Hangjinqi of Nei Mongol and Dongpo
+of west Sichuan, and completed 10
+bcm(billion cubic meter) per year shale
+gas capacity building in Fuling. The
+Company's production of oil and gas was
+448.79 million barrels of oil equivalent,
+with domestic crude production down by
+3.2% from the previous year and natural
+gas production up by 19.1%.
+Summary of Operations for the Exploration and Production Segment
+The Company's newly added proved
+reserve reached 462.73 million barrels
+of oil equivalent, with crude oil reserve
+replacement ratio reaching 116.0%. In
+crude oil development, we constantly
+adopted a profit-oriented approach,
+deepened structural adjustment, focused
+on cost control, reduced natural decline
+rate and ensured steady production. In
+natural gas development, we actively
+pushed forward capacity building in
+and made new discoveries in the Xinjiang
+Tahe Basin and the Sichuan Basin.
+In 2017, faced with low oil prices, we
+constantly strengthened measures
+to increase proved reserves and rein
+in development costs, which helped
+achieving better results. We gave priority
+to high-efficiency exploration activities
+Overseas
+Overseas
+WTH-NYMEX
+9/2017
+30
+80
+40
+50
+70
+80
+90
+00
+US$/barrel
+In 2017, global economy recovered gradually,
+while China maintained stable and favourable
+economic growth with gross domestic product
+(GDP) up by 6.9%. International oil prices
+fluctuated and climbed from the low level, and
+domestic natural gas demand increased rapidly.
+With fast development of independent refineries,
+domestic oil products market witnessed strong
+competition. Demand for chemicals grew
+steadily, and China's environmental regulations
+became more stringent. The Company actively
+addressed market changes through a focus
+on the improvement of assets quality and
+profitability, as well as operation upgrades. We
+pressed ahead with measures for specialised
+business development, market-oriented
+operation and overall coordination. Following
+the supply-side structural reform, we focused on
+optimisation, cost reduction, market expansion,
+structural adjustment, reform promotion,
+foundation building and risk management,
+coordinating all aspects of our work, which
+helped deliver solid operating results.
+BUSINESS REVIEW
+BUSINESS REVIEW AND PROSPECTS
+exc
+EPEZCAL SINOPES
+4
+ODEC
+117
+20
+20
+1/2016
+2/2016
+8/2017
+7/2017
+6/2017
+5/2017
+4/2017
+3/2017
+2/2017
+1/2017
+10/2017
+12/2016
+10/2016
+9/2016
+8/2016
+7/2016
+6/2016
+5/2016
+4/2016
+3/2016
+11/2016
+Consolidated subsidiaries
+Equity accounted entities
+Proved undeveloped reserves
+88
+37
+49
+136
+137
+136
+137
+159
+170
+273
+273
+40
+32
+313
+305
+279
+313
+33
+830
+99
+23
+Others
+Fuling
+Consolidated subsidiaries
+China
+Proved developed reserves
+Equity accounted entities
+Consolidated subsidiaries
+Overseas
+801
+Others
+Consolidated subsidiaries
+China
+Proved developed reserves
+Proved reserves
+Items
+23
+33
+0
+Puguang
+Fuling
+811
+1,080
+1,124
+303.51
+293.66
+4.1
+471.91
+431.29
+448.79
+2016 to 2017 (%)
+2015
+349.47
+2016
+Change from
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Equity accounted entities
+Consolidated subsidiaries
+Overseas
+Others
+Consolidated subsidiaries
+Shengli
+China
+2017
+Natural gas reserves (bcf)
+(3.2)
+253.15
+1,080
+1,124
+1,393
+1,429
+1,552
+1,599
+31 December 2017 31 December 2016
+Crude oil reserves (mmbbls)
+248.88
+19.1
+766.12
+912.50
+(11.1)
+53.13
+50.36
+44.78
+(1.7)
+296.34
+734.79
+0
+1.1
+0
+(108,425)
+(115,310)
+Depreciation, depletion and amortisation
+1.0
+(64,360)
+(64,973)
+2
+(1,379,691)
+23.5
+(1,853,718)
+17.7
+6.4
+50,721
+1,880,190
+2,300,470
+59,723
+(2,288,723)
+(1,770,651)
+Selling, general and administrative expenses
+Purchased crude oil, product and operating supplies and expenses
+Operating expenses
+Other operating revenues
+Turnover
+22.2
+Change (%)
+2016
+RMB million
+1,930,911
+22.4
+2,360,193
+Exploration expenses, including dry holes
+(11,035)
+75.4
+9,569
+16,787
+Investment income and share of profits less losses from associates and joint ventures
+(76.4)
+(6,611)
+(1,560)
+Net finance costs
+(7.4)
+77,193
+71,470
+(11,089)
+Operating profit
+(16,554)
+Other operating (expense)/income, net
+1.4
+(232,006)
+(235,292)
+Taxes other than income tax
+17.2
+(63,887)
+(74,854)
+Personnel expenses
+0.5
+5,686
+Profit before taxation
+Turnover and other operating revenues
+Year ended 31 December
+2017
+16
+Business Review and Prospects
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017 15
+on-line trading platform developed
+rapidly, as a result of the integration of
+IT application and industrialisation. In
+2017, the Company filed 5,876 patent
+applications at home and abroad, 3,640
+patents granted. The Company also won
+two first prizes and one second prize in
+the National Scientific and Technological
+Progress Awards, two second prizes in
+the National Technology and Innovation
+Awards, and eight excellent patent awards
+in China's Patent Award competition.
+Tahe fractured-vuggy carbonate reservoir,
+bringing down the natural decline rate.
+In refining, our demonstration unit of
+fluidised bed residue hydro-treating
+achieved long-cycle operation at its
+full capacity, and we completed the
+industrial test of super solid-acid C5
+and C6 isomerisation technology. In
+chemicals, the syngas to ethylene glycol
+demonstration unit ran smoothly, and
+we accomplished commercial production
+of low-volatility polypropylene for
+automobile use and high-transparency
+& low-extraction polypropylene. Our
+1.8
+(1.8)
+1,282
+1,242
+1,220
+8,994
+9,275
+Business Review and Prospects
+9,439
+843
+857
+848
+4.8
+15,065
+15,201
+15,938
+5.0
+11,118
+Change from
+2016 to 2017 (%)
+2015
+(1.1)
+RMB million
+BUSINESS REVIEW AND PROSPECTS (CONTINUED)
+(7) Capital Expenditures
+The following table sets forth the main revenue and expenses from the Company's consolidated financial statements:
+In 2017, the Company's turnover and other operating revenues were RMB 2,360.2 billion, increased by 22.2% compared with that of 2016. The
+profit before taxation was RMB 86.7 billion, representing a year on year increase of 8.2%.
+1 CONSOLIDATED RESULTS OF OPERATIONS
+THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
+COMPANY'S AUDITED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES. PARTS OF THE
+FOLLOWING FINANCIAL DATA WERE ABSTRACTED FROM THE COMPANY'S AUDITED FINANCIAL
+STATEMENTS THAT HAVE BEEN PREPARED ACCORDING TO THE IFRS, UNLESS OTHERWISE STATED.
+THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED TAX.
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+Business Review and Prospects
+17
+Annual Report 2017
+CHINA PETROLEUM & CHEMICAL CORPORATION
+Capital Expenditures: In 2018, we
+will devote attention to the quality
+and profitability of investments, and
+constantly optimise our investment
+projects. Capital expenditures for the
+year are budgeted at RMB 117 billion.
+The exploration and production segment
+will account for expenditures of RMB
+48.5 billion, mainly for the shale gas
+development in southwest China, the
+natural gas project in north China and
+crude capacity building in northwest
+China, as well as natural gas pipelines
+and storage projects, and overseas oil
+and gas projects. The refining segment
+will account for RMB 28.8 billion, mainly
+for Zhongke Refining and Petrochemical
+Project, the structural adjustments of
+refining business in Zhenhai, Maoming
+and Tianjin subsidiaries, and the quality
+upgrading of GB VI standard gasoline and
+diesel. The marketing and distribution
+segment will account for RMB 18.5
+billion, mainly for construction of depots
+and storage facilities, pipelines and
+service stations. The chemicals segment
+will account for RMB 17.7 billion, mainly
+for Zhongke Refining and Petrochemical
+Project, the high-efficiency and phase II of
+Hainan high-efficiency and environmental-
+friendly aromatics project, the integrated
+refining and petrochemical project in
+Gulei and the resource utilisation and
+structural adjustment projects in Zhenhai,
+Yangzi, Jinling, Maoming and Wuhan
+subsidiaries. The corporate and others
+segment will account for RMB 3.5 billion,
+mainly for R&D facilities and information
+technology projects.
+Research and Development: We will
+continue to deeply implement our
+strategy of development driven by
+innovation and reform of mechanisms
+for technological innovation.
+We will accelerate key technical
+breakthroughs, reinforce research on
+leading technologies, and step up the
+commercial application of technological
+achievements to highlight the prominent
+role of technologies. In key technical
+breakthroughs, focus will be given to
+new discoveries of oil and gas resources,
+low-cost development of oil and gas
+resources, high-efficiency conversion of
+heavy crude, refined oil products quality
+upgrading, cost reduction and efficiency
+enhancement of chemical business, new
+products development of high-value-
+added materials, energy conservation
+and environmental protection. In leading
+technologies, priorities lie in the basic
+and prospective research of ultra-deep
+and deepwater oil and gas exploration
+and production, molecular-level
+intelligent refining and new energies. In
+innovative development, the Company
+plans to establish a joint R&D centre for
+cutting-edge technologies to facilitate
+the innovation from basic research
+to commercialisation. Meanwhile, the
+integration of information technologies
+and industrialisation will carry on
+by further enhancing integration of
+information systems and the application
+of intelligent pipeline management
+systems.
+(6) Health, Safety and the Environment
+In 2017, the Company pressed ahead the
+formation of a long-term safe production
+scheme, strengthened safety measures at
+basic levels to control risks and remove
+potential hazards in all aspects. We
+promoted on-site safety supervision and
+management to continuously improve our
+safety management level. The Company
+actively implemented its green and low-
+carbon strategy to integrate energy
+conservation, emissions cutting and
+carbon reduction. We comprehensively
+strengthened environmental risk and
+air pollution control, steadily pushed
+forward our "Efficiency Doubling Plan",
+continuously consolidated our carbon
+asset management, and accomplished
+all emissions reduction targets. For
+more detailed information, please refer
+to our Communication on Progress for
+Sustainable Development.
+Chemicals: We will further optimise
+feedstock mix and product slate. The
+constant feedstock optimisation would
+further lower feedstock costs. We will put
+more efforts on optimising product mix,
+enhancing the dynamic evaluation and
+monitoring of profitability of facilities and
+product chains, increasing more popular
+and profitable products production and
+advancing the R&D, production and sales
+of high-end chemicals. We will step up
+research on the industrial chain and
+optimise the rapid response mechanism
+combining production, marketing
+and research. Internal and external
+resources will be fully tapped to actively
+expand sales volume and market share.
+Meanwhile, refined marketing and tailor-
+made services will be adopted to provide
+our customers with full process solutions
+and value-added services. In 2018, we
+plan to produce 11.6 million tonnes of
+ethylene.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Marketing and Distribution: We will
+intensify our marketing strategy of
+balancing profits and volume by
+optimising resources allocation and
+operational efficiency. We will put effort to
+expand markets and our business scale.
+We will further improve our marketing
+network to reinforce existing advantages.
+Refining: We will comprehensively
+optimise our production plans along
+with market changes to consolidate
+the competitive advantage of refining
+business. We will continue to adjust
+our product structure by further
+lowering the diesel-to-gasoline ratio and
+increasing the production of naphtha
+and jet fuel. The quality upgrading of
+GB VI standard refined oil products will
+complete on time with strengthened
+coordination. We will fine-tune crude oil
+procurement and resource allocation
+to reduce procurement cost. We will
+optimise our marketing mechanism
+to enlarge the trading volume of other
+refined oil products. In 2018, we plan to
+process 239 million tonnes of crude and
+produce 152 million tonnes of refined oil
+products.
+Exploration and Production: We will
+maintain high-efficiency exploration
+and profitable production activities to
+continually increase proved reserve and
+expand resource base. In oil development,
+we will enhance refined reservoir
+characterisation, deepen the structural
+adjustments of mature fields, control
+natural decline rate, lower operational
+cost and improve economic recovery
+rate. In natural gas development, we will
+keep advancing key projects for capacity
+construction, optimise production and
+marketing operations, and promote the
+coordinated development along the value
+chain. In 2018, we plan to produce 290
+million barrels of crude oil, of which
+overseas production will account for 41
+million barrels. We plan to produce 974.1
+billion cubic feet of natural gas.
+In 2018, the Company will persist with
+our objective of progressing at a steady
+pace to continually focus on growth
+stabilisation, adhere to the principle of
+quality first and profitability prioritised.
+The Company will deepen the supply-
+side structural reform as main direction
+to further implement the operation
+objectives of reform, management,
+innovation and development, to fully
+improve operational performance. We will
+undertake the following work during the
+year:
+(2) Operations
+Looking ahead to 2018, we expect
+world economy continuing to recover,
+and China's economy would maintain
+steady growth. Meanwhile, the constant
+stream of reform measures by Chinese
+government to revitalise its substantial
+economy, the further development of the
+Belt and Road Initiative, the synergic
+development of Beijing-Tianjin-Hebei and
+the growth along Yangtze River Economic
+Belt will bring up demand for refined oil
+products and petrochemicals. Natural gas
+as clean energy will see rapid growth with
+structural adjustment of domestic energy
+mix. International oil price in 2018 is
+expected to maintain its stabilising
+momentum.
+(1) Market Outlook
+BUSINESS PROSPECTS
+the chemicals segment were RMB 23.028
+billion, mainly for Zhongke Refining
+and Petrochemical project, phase II of
+Hainan high-efficiency and environment.
+friendly aromatics project, Gulei and
+Zhong'an projects, acquisition of interest
+in Shanghai SECCO, as well as projects
+regarding resource comprehensive
+utilisation and product structure
+adjustments. Capital expenditures for the
+corporate and others segment were RMB
+2.398 billion, mainly for R&D facilities
+and information technology application
+projects.
+In 2017, focusing on quality and
+profitability of investment, the Company
+continuously optimised its investment
+projects. Total capital expenditures were
+RMB 99.384 billion. Capital expenditures
+for the exploration and production
+segment were RMB 31.344 billion, mainly
+for Fuling shale gas and Hangjinqi natural
+gas field development projects, Shengli
+and Northwest crude development
+projects, LNG terminals in Tianjin, Wen-
+23 gas storage and phase I of Xinjiang
+gas pipeline, as well as overseas projects.
+Capital expenditures for the refining
+segment were RMB 21.075 billion, mainly
+for Zhongke Refining and Petrochemical
+project, adjustments in the product mix
+of Zhenhai and Maoming refineries,
+and gasoline and diesel GB VI quality
+upgrading projects. Capital expenditures
+for the marketing and distribution
+segment were RMB 21.539 billion, mainly
+for construction of service stations and
+refined oil product pipelines, depots and
+storage facilities. Capital expenditures for
+We will accelerate the construction of
+oil products export infrastructure and
+amplify the profitability of overseas oil
+products marketing. We will deepen the
+integration of fuel and non-fuel business,
+so to create a new mode of coordinating
+oil products retailing, non-fuel products
+marketing and third-party vendors
+cooperation, and thus step up the growth
+of non-fuel business. In 2018, we plan to
+sell 179 million tonnes of oil products in
+the domestic market.
+2016
+11,059
+86,697
+8.2
+8.0
+12,223
+13,199
+Synthetic resin
+13.4
+5,325
+6,038
+43.7
+7,146
+10,267
+Monomer and polymer for synthetic fibre.
+8,155
+19.8
+4,855
+11.5
+32,248
+35,964
+Basic chemical feedstock
+25.8
+2,807
+3,531
+1.6
+25,164
+25,557
+4,054
+Kerosene
+7,488
+Synthetic fibre
+and Analysis
+Management's Discussion
+19
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+24.7
+1,612
+2,010
+(2.2)
+714
+698
+Chemical fertiliser
+8.9
+24.0
+11,913
+2.7
+1,098
+1,128
+Synthetic rubber
+20.3
+7,113
+8,556
+(4.7)
+1,369
+1,304
+9,608
+80,151
+12.4
+5,038
+Change (%)
+2016
+2017
+Average realised price
+(RMB/tonne, RMB/thousand cubic meters
+Year ended 31 December
+Sales volume (thousand tonnes)
+Year ended 31 December
+The following table sets forth the external sales volume, average realised prices and respective rates of change of the Company's major products
+in 2017 and 2016:
+In 2017, the Company's turnover was RMB 2,300.5 billion, representing an increase of 22.4% over 2016. This was mainly attributed to the
+increase in crude oil prices. Meanwhile, major petroleum and petrochemical products prices and sales volume also increased as a result of the
+Company's efforts in seizing opportunities to expand the market and sales volume.
+(1) Turnover and other operating revenues
+50.1
+12,772
+19,174
+2017
+Non-controlling interests
+46,672
+51,244
+Owners of the Company
+Attributable to:
+(21.4)
+18.5
+59,444
+70,418
+Profit for the year
+(20,707)
+(16,279)
+Tax expense
+9.8
+4,482
+2016
+Crude oil
+(2.9)
+91,492
+88,848
+Diesel
+8.7
+6,386
+6,941
+8.3
+77,480
+83,933
+Gasoline
+Change (%)
+2.5
+1,290
+18.5
+19,008
+22,529
+Natural gas (million cubic meters)
+46.8
+1,628
+2,390
+(3.5)
+6,808
+6,567
+1,258
+11,610
+28.3
+In 2017, the Company pushed ahead
+with its innovation-driven strategy,
+deepened reform of R&D mechanism, and
+accomplished notable results driven by
+R&D progresses. In upstream business,
+further breakthroughs in geological
+evaluation and exploration technologies
+of deep carbonate and deep shale gas
+reservoirs underpinned the growing
+resources base of Shunbei oilfield and
+south Sichuan as well as discoveries of
+new formations in Sichuan Basin. We
+improved development technologies for
+57
+57
+57
+57
+Puguang
+Fuling
+4,932
+4,966
+4,762
+4,800
+Consolidated subsidiaries
+4,932
+266
+4,966
+4,800
+Net
+Gross
+Net
+Gross
+Region
+China
+2016
+2017
+Natural gas productive wells (as of 31 December)
+BUSINESS REVIEW AND PROSPECTS (CONTINUED)
+Business Review and Prospects
+4,762
+14
+266
+253
+4,869
+28,436
+33,305
+742,588
+2016
+742,588
+5,106
+31,498
+36,604
+621,529
+2017
+621,529
+Area under license (as of 31 December)
+253
+Unit: Square kilometers
+Acreage with development licenses
+China
+Acreage with exploration licenses
+4,932
+4,966
+4,622
+4,656
+4,439
+4,762
+4,477
+4,800
+Others
+Total
+China
+Overseas
+(2) Refining
+Business Review and Prospects
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+50,121
+50,121
+Shengli
+Consolidated subsidiaries
+49,921
+49,921
+Net
+Gross
+Net
+50,121
+50,121
+China
+49,921
+Gross
+2017
+Oil productive wells (as of 31 December)
+140
+78
+140
+78
+152
+62
+2
+0
+0
+2016
+13
+49,921
+32,105
+3,600
+53,535
+7,404
+57,353
+3,954
+54,089
+57,471
+Total
+7,322
+Equity accounted entities
+14
+28
+14
+28
+32,105
+Consolidated subsidiaries
+7,432
+3,968
+7,350
+Overseas
+2017
+17,902
+18,016
+18,016
+Others
+32,019
+32,019
+3,614
+In 2017, with the market-oriented
+approach, we optimised product mix
+to produce more gasoline and jet fuel,
+and the production volume of high-
+value-added products have been further
+increased, with the diesel-to-gasoline
+ratio further declined to 1.17. The
+Company actively promoted refined
+17,902
+Summary of Operations for the Refining Segment
+the end of the
+Change from
+6.9
+1.2
+3,896
+3,926
+3,969
+Annual average throughput per station (tonne/station)
+52.34
+52.56
+56.20
+previous year to
+the end of the
+reporting period
+Direct sales and distribution (million tonnes)
+120.14
+121.56
+Retail sales (million tonnes)
+2.9
+171.37
+172.70
+177.76
+Total domestic sales volume of oil products (million tonnes)
+2.0
+189.33
+194.84
+119.03
+Total number of service stations under the Sinopec brand
+Number of company-operated stations
+(4) Chemicals
+In 2017, the Company continued the
+"basic and high-end" chemical business
+development concept to promote effective
+supply. We fine-tuned chemical feedstock
+mix to lower costs, optimised product mix
+and increased high-value-added products
+production based on the customer
+oil products quality upgrading, the GB
+(5) Research and Development
+Note: Includes 100% of the production of domestic joint ventures.
+Synthetic fiber
+Synthetic fiber monomer and polymer
+Synthetic rubber
+Synthetic resin
+Ethylene
+Unit: thousand tonnes
+and new products as a percentage
+of synthetic resin reached 63%. By
+fully exerting our network advantage,
+implementing precision marketing and
+further expanding the market, our full-
+year chemical sales volume increased by
+12.2% from the previous year to 78.5
+million tonnes, marking a historic record.
+0.1
+0.1
+(%)
+and intensified dynamic modelling
+and monitoring of profit to increase
+profitability. Ethylene output was 11.61
+million tonnes, up by 5.0% from the
+previous year. The Company intensified
+its efforts to enhance research and
+development, production, marketing and
+sales of new high-value-added products.
+Our differential ratio of synthetic fibre
+reached 89.0% and the specialty
+30,560
+30,547
+30,597
+30,603
+30,633
+30,627
+2015
+2016
+31 December
+31 December
+31 December
+2017
+Summary of Operations for the Chemicals Segment
+demand. We optimised production and
+operation based on market conditions.
+198.75
+Total sales volume of oil products (million tonnes)
+117
+2015
+149.17
+150.67
+1.3
+236.49
+235.53
+238.50
+Change from
+2016 to 2017 (%)
+2015
+2016
+2017
+In 2017, confronted with stronger
+competition, the Company brought
+our advantages in integrated business
+and distribution network into full
+play, optimised internal and external
+resources, intensified market efforts
+and achieved sustained growth in both
+148.38
+(3) Marketing and Distribution
+Refinery yield (%)
+Light chemical feedstock production
+Kerosene
+Diesel
+Gasoline
+Gasoline, diesel and kerosene production
+Refinery throughput
+Unit: million tonnes
+centralised marketing took full play, and
+profitability of LPG, asphalt and other
+products were further improved. In 2017,
+the Company processed 239 million
+tonnes of crude, up by 1.3% from the
+previous year, and produced 151 million
+tonnes of refined oil products, with
+gasoline up by 1.2% and kerosene up by
+5.5% from the previous year.
+V standard diesel quality upgrading
+completed, and advanced the refined.
+oil products quality upgrading of GB
+VI standard. We adapted to market
+changes by taking full advantages of
+our integrated business, and moderately
+increasing export volume of refined oil
+products. We comprehensively optimised
+our production plans to ensure safe and
+reliable operations. The advantages of
+2016 to 2017 (%)
+Note: Includes 100% of the production of domestic joint ventures.
+1.0
+Light product yield (%)
+56.36
+2017
+2016
+57.03
+Change from
+Summary of Operations for the Marketing and Distribution Segment
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+In 2017, the total sales volume of oil
+products was 199 million tonnes, of
+which domestic sales accounted for
+178 million tonnes, up by 2.9% year on
+year. We strengthened self-owned brand
+development and marketing, and non-fuel
+business maintained its rapid growth with
+increased scale and profits.
+76.50 (0.48) percentage points
+94.75 0.18 percentage points
+76.33
+94.70
+94.88
+75.85
+0.2
+total sales volume and retail scale. We
+innovated operational models, optimised
+layout of service stations, and expedited
+revamping of storage and transportation
+facilities of refined oil products to further
+improve our distribution network. In
+addition, we proactively promoted and
+cultivated vehicle natural gas business.
+38.54
+1.2
+38.81
+67.34
+70.05
+66.76
+26.88
+(0.9)
+25.47
+24.35
+5.5
+38.60
+53.98
+RMB million
+RMB million
+12,903
+5,444
+2016
+31 December
+Other long-term liabilities
+Long-term loans excluding current portion from Sinopec Group Company and fellow subsidiaries
+Total
+from Sinopec Group Company and fellow subsidiaries
+Short-term loans and current portion of long-term loans
+Accrued expenses and other payables
+Trade accounts payable
+10,978
+12,860
+Total
+31 December
+2017
+189
+43,320
+570
+20,385
+Long-term prepayments and other assets
+The long-term borrowings mainly include an interest-free loan with a maturity period of 20 years amounting to RMB 35,560 million from the
+Sinopec Group Company (a state-owned enterprise) through the Sinopec Finance. This borrowing is a special arrangement to reduce financing
+costs and improve liquidity of the Company during its initial global offering in 2000.
+Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term
+loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated
+with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 29.
+114,359
+122,635
+44,772
+18,580
+20,726
+25,311
+10,165
+21,590
+20,990
+19,419
+22,849
+44,793
+39,262
+9,998
+Prepaid expenses and other current assets
+(iii) Transportation and storage represent the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.
+(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well
+measurement services.
+Trade accounts receivable
+(vii) Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land, buildings and equipment.
+(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation,
+accommodation, canteens, property maintenance and management services.
+(v) Production related services represent ancillary services rendered in relation to the Group's operations such as equipment repair and general maintenance,
+insurance premium, technical research, communications, firefighting, security, product quality testing and analysis, information technology, design and engineering,
+construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management and
+environmental protection.
+As at and for the year ended 31 December 2017, and as at and for the year ended 31 December 2016, no individually significant impairment
+losses for bad and doubtful debts were recognised in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates
+and joint ventures.
+(ii) Purchases represent the purchase of materials and utility supplies directly related to the Group's operations such as the procurement of raw and ancillary
+materials and related services, supply of water, electricity and gas.
+(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
+Note:
+The directors of the Company are of the opinion that the above transactions with related parties were conducted in the ordinary course of
+business and on normal commercial terms or in accordance with the agreements governing such transactions, and this has been confirmed by
+the independent non-executive directors.
+At 31 December 2017 and 2016, there was no guarantee given to banks by the Group in respect of banking facilities to related parties, except
+for the guarantees disclosed in Note 34.
+(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
+Included in the transactions disclosed above, for the year ended 31 December 2017 are: a) purchases by the Group from Sinopec Group
+Company and fellow subsidiaries amounting to RMB 128,350 million (2016: RMB 114,526 million) comprising purchases of products and
+services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB 112,619
+million (2016: RMB 96,023 million), ancillary and social services provided by Sinopec Group Company and fellow subsidiaries of RMB 6,652
+million (2016: RMB 6,584 million), operating lease charges for land and buildings paid by the Group of RMB 8,015 million and RMB 510 million
+(2016: RMB 10,474 million and RMB 449 million), respectively and interest expenses of RMB 554 million (2016: RMB 996 million); and b) sales
+by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB 60,045 million (2016: RMB 56,251 million), comprising
+RMB 59,213 million (2016: RMB 56,010 million) for sales of goods, RMB 807 million (2016: RMB 209 million) for interest income and RMB 25
+million (2016: RMB 32 million) for agency commission income.
+36 RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+190
+(viii) Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities
+owned by Sinopec Group Company.
+(ix) Interest income represents interest received from deposits placed with Sinopec Finance Company Limited and Sinopec Century Bright Capital Investment Limited,
+finance companies controlled by Sinopec Group Company. The applicable interest rate is determined in accordance with the prevailing saving deposit rate. The
+balance of deposits at 31 December 2017 was RMB 47,514 million (2016: RMB 40,073 million).
+(x) Interest expense represents interest charges on the loans and advances obtained from Sinopec Group Company and fellow subsidiaries.
+(xi) The Group obtained or repaid loans from or to Sinopec Group Company and fellow subsidiaries.
+Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures included in the following accounts captions
+are summarised as follows:
+The Company has entered into a service stations franchise agreement with Sinopec Group Company effective from 1 January 2000 under
+which its service stations and retail stores would exclusively sell the refined products supplied by the Group.
+The Company has entered into agreements with Sinopec Group Company effective from 1 January 2000 under which the Group has been
+granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group Company.
+The Company has entered into a series of lease agreements with Sinopec Group Company to lease certain lands and buildings effective
+on 1 January 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively. The Company and Sinopec Group
+Company can renegotiate the rental amount every three years for land. The Company and Sinopec Group Company can renegotiate the rental
+amount for buildings every year. However such amount cannot exceed the market price as determined by an independent third party.
+The Company has entered into a non-exclusive "Agreement for Provision of Cultural and Educational, Health Care and Community Services"
+with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the Group with certain
+cultural, educational, health care and community services on the same pricing terms and termination conditions as described in the above
+Mutual Provision Agreement.
+(4) where none of the above is applicable, the price to be agreed between the parties, which shall be based on a reasonable cost incurred in
+providing such services plus a profit margin not exceeding 6%.
+(3) where there is neither a government-prescribed price nor a government-guidance price, the market price; or
+Other receivables
+(2) where there is no government-prescribed price, the government-guidance price;
+•
+In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec
+Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell
+certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2017.
+The terms of these agreements are summarised as follows:
+(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
+36 RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+The Company has entered into a non-exclusive "Agreement for Mutual Provision of Products and Ancillary Services" ("Mutual Provision
+Agreement") with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the
+Group with certain ancillary production services, construction services, information advisory services, supply services and other services and
+products. While each of Sinopec Group Company and the Company is permitted to terminate the Mutual Provision Agreement upon at least
+six months notice, Sinopec Group Company has agreed not to terminate the agreement if the Group is unable to obtain comparable services
+from a third party. The pricing policy for these services and products provided by Sinopec Group Company to the Group is as follows:
+(1) the government-prescribed price;
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017 191
+depositing and borrowing money; and
+Financial Statements (International)
+External sales
+Exploration and production
+RMB million
+RMB million
+2016
+2017
+Information of the Group's reportable segments is as follows:
+Assets and liabilities dedicated to a particular segment's operations are included in that segment's total assets and liabilities. Segment assets
+include all tangible and intangible assets, except for interest in associates and joint ventures, investments, deferred tax assets, cash and cash
+equivalents, time deposits with financial institutions and other unallocated assets. Segment liabilities exclude short-term, income tax payable,
+long-term debts, loans from Sinopec Group Company and fellow subsidiaries, deferred tax liabilities and other unallocated liabilities.
+The Group's chief operating decision maker evaluates the performance and allocates resources to its operating segments on an operating profit
+basis, without considering the effects of finance costs or investment income. Inter-segment transfer pricing is based on the market price or cost
+plus an appropriate margin, as specified by the Group's policy.
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities
+The segments were determined primarily because the Group manages its exploration and production, refining, marketing and distribution,
+chemicals, and corporate and others businesses separately. The reportable segments are each managed separately because they manufacture and/
+or distribute distinct products with different production processes and due to their distinct operating and gross margin characteristics.
+38 SEGMENT REPORTING (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Inter-segment sales
+(v) Corporate and others, which largely comprises the trading activities of the import and export companies of the Group and research and
+development undertaken by other subsidiaries.
+Refining
+Inter-segment sales
+Other operating revenues
+Corporate and others
+Marketing and distribution
+Chemicals
+Exploration and production
+Refining
+Other operating revenues
+Elimination of inter-segment sales
+Turnover
+Inter-segment sales
+External sales
+Corporate and others
+Inter-segment sales
+External sales
+Chemicals
+Inter-segment sales
+External sales
+Marketing and distribution
+External sales
+(iv) Chemicals, which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products mainly to
+external customers.
+(iii) Marketing and distribution, which owns and operates oil depots and service stations in the PRC, and distributes and sells refined petroleum
+products (mainly gasoline and diesel) in the PRC through wholesale and retail sales networks.
+(ii) Refining, which processes and purifies crude oil, that is sourced from the exploration and production segment of the Group and external
+suppliers, and manufactures and sells petroleum products to the chemicals and marketing and distribution segments of the Group and external
+customers.
+(c) Contributions to defined contribution retirement plans
+6,147
+5,768
+5,648
+499
+424
+RMB'000
+2016
+2017
+RMB'000
+5,344
+Short-term employee benefits
+Retirement scheme contributions
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
+Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensation is as follows:
+(b) Key management personnel emoluments
+36 RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+192
+The Group participates in various defined contribution retirement plans organised by municipal and provincial governments for its staff. The
+details of the Group's employee benefits plan are disclosed in Note 37. As at 31 December 2017 and 2016, the accrual for the contribution to
+post-employment benefit plans was not material.
+(d) Transactions with other state-controlled entities in the PRC
+The Group is a state-controlled energy and chemical enterprise and operates in an economic regime currently dominated by entities directly
+or indirectly controlled by the PRC government through its government authorities, agencies, affiliations and other organisations (collectively
+referred as "state-controlled entities").
+Apart from transactions with Sinopec Group Company and fellow subsidiaries, the Group has transactions with other state-controlled entities,
+include but not limited to the followings:
+(i) Exploration and production, which explores and develops oil fields, produces crude oil and natural gas and sells such products to the refining
+segment of the Group and external customers.
+In a manner consistent with the way in which information is reported internally to the Group's chief operating decision maker for the purposes of
+resource allocation and performance assessment, the Group has identified the following five reportable segments. No operating segments have been
+aggregated to form the following reportable segments.
+Segment information is presented in respect of the Group's business segments. The format is based on the Group's management and internal
+reporting structure.
+38 SEGMENT REPORTING
+As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans organised by municipal and
+provincial governments for its staff. The Group is required to make contributions to the retirement plans at rates ranging from 15.0% to 20.0% of
+the salaries, bonuses and certain allowances of its staff. In addition, the Group provides a supplementary retirement plan for its staff at rates not
+exceeding 5% of the salaries. The Group has no other material obligation for the payment of pension benefits associated with these plans beyond
+the annual contributions described above. The Group's contributions for the year ended 31 December 2017 were RMB 8,981 million (2016: RMB
+8,385 million).
+37 EMPLOYEE BENEFITS PLAN
+state-controlled.
+Financial Statements (International)
+These transactions are conducted in the ordinary course of the Group's business on terms comparable to those with other entities that are not
+•
+•
+• lease of assets;
+rendering and receiving services;
+•
+sales and purchases of goods and ancillary materials;
+•
+uses of public utilities.
+Turnover
+RMB million
+65,007
+production and sale of petroleum and
+natural gas
+Investment in exploration,
+Investment holding
+Pipeline storage and transportation of
+crude oil
+petrochemical products and petroleum
+products
+Manufacturing of intermediate
+Coal chemical industry investment
+management, production and sale of coal
+chemical products
+Principal activities
+100.00
+RMB 3,374
+100.00
+RMB 4,000
+Production and sale of polyester chips
+and polyester fibres
+Sinopec Lubricant Company Limited
+Sinopec Yizheng Chemical Fibre Limited
+Production Limited ("SIPL")
+100.00
+RMB 8,000
+Sinopec International Petroleum Exploration and
+100.00
+USD 1,638
+Sinopec Overseas Investment Holding Limited ("SOIH")
+Company Limited
+100.00
+RMB 12,000
+Sinopec Pipeline Storage & Transportation
+Liability Company
+100.00
+Production and sale of refined petroleum
+petrochemical materials
+100.00
+RMB 1,400
+China Petrochemical International Company Limited
+100.00
+RMB 1,500
+Sinopec Catalyst Company Limited
+100.00
+RMB 1,595
+Sinopec Qingdao Petrochemical Company Limited
+Company Limited
+100.00
+RMB 3,000
+products, lubricant base oil, and
+China International United Petroleum and Chemical
+petrochemical products and petroleum
+products
+Manufacturing of intermediate
+petroleum products and petrochemical
+products
+oil, production, storage and sale of
+Import and processing of crude
+petrochemical products
+Marketing and distribution of
+Trading of petrochemical products
+Production and sale of catalyst products
+petrochemical products and petroleum
+products
+Manufacturing of intermediate
+Trading of crude oil and petrochemical
+products
+Manufacturing of intermediate
+Sinopec Chemical Sales Company Limited
+RMB 13,203
+Company Limited
+Others
+Non-current assets
+Mainland China
+Others
+Singapore
+Mainland China
+External sales
+The following tables set out information about the geographical information of the Group's external sales and the Group's non-current assets,
+excluding financial instruments and deferred tax assets. In presenting information on the basis of geographical segments, segment revenue is
+based on the geographical location of customers, and segment assets are based on the geographical location of the assets.
+21,258
+16,425
+211
+2,898
+267
+2017
+RMB million
+(2) Geographical information
+Marketing and distribution
+Chemicals
+Refining
+Exploration and production
+11,605
+1.655
+4,922
+675
+13,556
+1,894
+108,425
+115,310
+2,093
+1,723
+12,654
+Corporate and others
+Sinopec Yangzi Petrochemical Company Limited
+2016
+RMB million
+290,726
+by the non-controlling
+Company % interests %
+100.00
+RMB 22,761
+(million)
+Interests held
+Interests
+held by
+Particulars of
+issued capital
+Sinopec Great Wall Energy & Chemical
+Name of company
+At 31 December 2017, the following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the
+Group.
+39 PRINCIPAL SUBSIDIARIES
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+1,488,117
+152,068
+Financial Statements (International)
+Financial Statements (International)
+195
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+45,887
+1,046,096
+1,000,209
+2016
+RMB million
+979,329
+48,572
+1,027,901
+RMB million
+31 December
+1,758,365
+269,349
+332,479
+2,360,193
+2017
+1,930,911
+31 December
+196
+12,873
+RMB 1,000
+Sinopec Beihai Refining and Chemical Limited
+Liability Company
+December
+December
+SECCO
+Sinopec Kantons
+At 31
+At 31
+At 31
+Fujian Petrochemical
+At 31
+December
+December
+Shanghai Petrochemical
+At 31
+At 31
+December
+At 31
+December
+SIPL
+At 31
+December
+2017
+December
+2016
+2017
+December
+December
+Marketing Company
+At 31
+Shanghai
+Summarised consolidated balance sheet
+Set out below are the summarised financial information which the amount before inter-company eliminations for each subsidiary that has non-
+controlling interests that are material to the Group.
+Summarised financial information on subsidiaries with material non-controlling interests
+(i) The Group consolidated the financial statements of the entity because it is exposed to, or has rights to, variable returns from its involvement with the entity and has
+the ability to affect those returns through its power over the entity.
+Note:
+Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and Hong Kong respectively, all of the above principal subsidiaries are
+incorporated and operate their businesses principally in the PRC. All of the above principal subsidiaries are limited companies.
+39 PRINCIPAL SUBSIDIARIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+At 31
+products and petroleum products
+Manufacturing of plastics, intermediate
+petrochemical products and petroleum
+products
+At 31
+December
+At 31
+156,494
+Current assets
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+Zhonghan Wuhan
+At 31
+RMB million
+2016
+2017
+2017
+2016
+2017
+2016
+2017
+2016
+2017
+2016
+December
+December
+RMB million
+100.00
+Manufacturing of synthetic fibres, resin
+and plastics, intermediate petrochemical
+Manufacturing of intermediate
+Marketing and distribution of refined
+petroleum products
+("Marketing Company")
+29.58
+70.42
+RMB 28,403
+Sinopec Marketing Company Limited
+petrochemical products and petroleum
+products
+Company Limited
+Manufacturing of intermediate
+25.00
+75.00
+RMB 3,986
+Shanghai SECCO Petrochemical Company Limited
+("Shanghai SECCO") (Note 35)
+Sinopec Hainan Refining and Chemical
+petrochemical products and petroleum
+25.00
+75.00
+RMB 4,397
+Sinopec Zhanjiang Dongxing Petrochemical
+Company Limited
+Company Limited
+15.00
+RMB 5,000
+Sinopec Qingdao Refining and Chemical
+1.02
+98.98
+RMB 5,294
+products
+petrochemical products and petroleum
+products
+RMB 7,801
+32.40
+Trading of crude oil and petroleum
+products
+development of ethylene and downstream
+byproducts
+Production, sale, research and
+Production and sale of petrochemical
+("Fujian Petrochemical") (i)
+50.00
+50.00
+RMB 6,898
+Fujian Petrochemical Company Limited
+49.51
+50.49
+RMB 10,814
+67.60
+Sinopec Shanghai Petrochemical Company Limited
+("Shanghai Petrochemical")
+55.00
+RMB 10,000
+Gaoqiao Petrochemical Company Limited (Note 35)
+39.66
+60.34
+HKD 248
+Sinopec Kantons Holdings Limited ("Sinopec Kantons")
+35.00
+65.00
+RMB 6,270
+Sinopec-SK(Wuhan) Petrochemical Company Limited
+("Zhonghan Wuhan")
+products
+45.00
+14,540
+15,463
+17,209
+2,945
+1,075
+989
+- Marketing and distribution
+- Refining
+(1,203)
+1,449
+- Exploration and production
+Share of profits/(losses) from associates and joint ventures
+77,193
+71,470
+Total segment operating profit
+2,362
+1,581
+3,212
+(4,484)
+20,623
+26,977
+32,153
+31,569
+56,265
+(36,641)
+(45,944)
+- Elimination
+- Corporate and others
+- Chemicals
+(1,655)
+- Marketing and distribution
+- Chemicals
+5,696
+263
+262
+34
+18
+119
+86
+90
+90
+(4)
+28
+Profit before taxation
+Aggregate investment income
+Net finance costs
+9,621
+- Corporate and others
+- Marketing and distribution
+- Refining
+24
+40
+- Exploration and production
+Investment income/(losses)
+9,306
+16,525
+Aggregate share of profits from associates and joint ventures
+1,376
+1,521
+Corporate and others
+- Chemicals
+(1,560)
+- Refining
+– Exploration and production
+(1,445,955)
+973,411
+320,367
+440,303
+418,102
+533,108
+322,903
+423,429
+284,289
+38,614
+373,814
+49,615
+3,480
+1,030,853
+1,027,373
+738,469
+(1,168,732)
+1,191,902
+3,962
+1,195,864
+1,006,749
+747,317
+874,271
+102,983
+132,478
+106,397
+146,972
+58,954
+77,804
+47,443
+69,168
+Turnover and other operating revenues
+850,300
+-
+2,300,470
+10,533
+By segment
+Operating (loss)/profit
+Result
+2016
+RMB million
+RMB million
+2017
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+38 SEGMENT REPORTING (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+194
+1,880,190
+Financial Statements (International)
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+1,478
+50,721
+1,930,911
+2,360,193
+59,723
+1,439
+12,211
+14,314
+22,004
+28,333
+5,486
+5,104
+9,542
+193
+86,697
+At 31 December
+2017
+RMB million
+Exploration and production
+Capital expenditure
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+38 SEGMENT REPORTING (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+667,374
+742,614
+Total liabilities
+20,828
+25,188
+Refining
+Other unallocated liabilities
+6,466
+63,352
+68,631
+Loans from Sinopec Group Company and fellow subsidiaries
+Deferred tax liabilities
+72,674
+55,804
+Long-term debts
+6,051
+13,015
+Income tax payable
+56,239
+55,338
+7,661
+Short-term debts
+Marketing and distribution
+Corporate and others
+18,408
+61,929
+66,843
+76,456
+99,384
+2,580
+2,398
+8,849
+23,028
+18,493
+21,539
+14,347
+Chemicals
+21,075
+31,344
+RMB million
+RMB million
+2016
+2017
+Impairment losses on long-lived assets
+Corporate and others
+Chemicals
+Marketing and distribution
+Refining
+Exploration and production
+Depreciation, depletion and amortisation
+32,187
+440,569
+518,172
+Total segment liabilities
+116,812
+131,087
+Interest in associates and joint ventures
+1,195,341
+1,254,771
+95,263
+170,045
+144,371
+158,472
+292,328
+309,727
+260,903
+Available-for-sale financial assets
+273,123
+343,404
+Total segment assets
+Corporate and others
+- Chemicals
+- Marketing and distribution
+- Exploration and production
+- Refining
+Segment assets
+Assets
+RMB million
+2016
+At 31 December
+(6,611)
+80,151
+402,476
+1,676
+11,408
+Deferred tax assets
+97,080
+117,781
+32,072
+35,293
+133,303
+164,101
+82,170
+101,429
+Corporate and others
+- Chemicals
+- Marketing and distribution
+- Refining
+95,944
+99,568
+· Exploration and production
+Segment liabilities
+Liabilities
+1,498,609
+1,595,504
+Total assets
+25,337
+27,835
+142,497
+165,004
+Cash and cash equivalents and time deposits with financial institutions
+Other unallocated assets
+7,214
+15,131
+121,260
+19.555
+85.00
+19,866
+14,373
+at 1 January
+Cash and cash equivalents
+(126)
+(70)
+7,206
+(572)
+68
+68
+919
+616
+(491)
+14,914
+4,355
+891
+g0
+790
+(1,157)
+(1,199)
+cash and cash equivalents
+Net (decrease)/increase in
+(682)
+(631)
+I
+(1,338)
+(1,093)
+2,070
+(55)
+3.045
+5,441
+226
+5,441
+7,504
+3,045
+3,605
+18,116
+12,921
+at 31 December
+(1)
+(25)
+(14)
+9
+2,042
+(7)
+(230)
+616
+(253)
+Effect of foreign currency
+exchange rate changes
+Cash and cash equivalents
+260
+34
+134
+886
+289
+101
+717
+1,077
+112
+717
+(158)
+(2,590)
+19
+(558)
+7,182
+7,061
+2,576
+2,758
+50,840
+51,038
+(used in) operating activities
+Net cash generated from/
+RMB million
+RMB million
+617
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+2016
+Zhonghan Wuhan
+2017
+2017
+RMB million
+(2,637)
+88
+505
+(4,414)
+243
+(20,424)
+(16,499)
+from financing activities
+Net cash (used in)/generated
+(3,080)
+(2,415)
+5,567
+261
+193
+54
+968
+54
+25
+(190)
+(2,401)
+2,729
+(2,211)
+(31,573)
+(35,738)
+from investing activities
+Net cash (used in)/generated
+3,636
+2,976
+1,639
+225
+343
+289
+7,205
+More than
+5 years
+More than 2
+years but less
+than 5 years
+RMB million
+More than 1
+year but less
+than 2 years
+RMB million
+1 year or
+on demand
+RMB million
+cash flow
+RMB million
+RMB million
+amount
+Carrying undiscounted
+Within
+contractual
+Total
+31 December 2016
+RMB million
+Accrued expenses and other payables
+Trade accounts payable
+and fellow subsidiaries
+Loans from Sinopec Group Company
+Long-term debts
+Short-term debts
+17,243
+71,323
+18,916
+99,588
+390,355
+497,837
+485,896
+99,588
+Bills payable
+99,588
+56,239
+72,674
+Financial Statements (International)
+199
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Management believes that the Group's current cash on hand, expected cash flows from operations and available standby credit facilities from
+financial institutions will be sufficient to meet the Group's short-term and long-term capital requirements.
+24,537
+73,331
+29,369
+81,781
+340,887
+81,781
+468,124
+81,781
+454,175
+5,828
+5,828
+57,515
+5,828
+174,301
+174,301
+42,796
+2,092
+18,790
+63,678
+63,352
+24,537
+30,535
+27,277
+57,515
+2,672
+85,021
+174,301
+Accrued expenses and other payables
+6,462
+6,462
+Total
+31 December 2017
+The following table sets out the remaining contractual maturities at the balance sheet date of the Group's financial liabilities, which are based on
+contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on prevailing rates current
+at the balance sheet date) and the earliest date the Group would be required to repay:
+At 31 December 2017, the Group has standby credit facilities with several PRC financial institutions which provide borrowings up to RMB 361,852
+million (2016: RMB 256,375 million) on an unsecured basis, at a weighted average interest rate of 3.40% per annum (2016: 3.57%). At 31
+December 2017, the Group's outstanding borrowings under these facilities were RMB 56,567 million (2016: RMB 36,933 million) and were included
+in debts.
+Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach in managing
+liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
+conditions, without incurring unacceptable losses or risking damage to the Group's reputation. Management prepares monthly cash flow budget
+to ensure that the Group will always have sufficient liquidity to meet its financial obligations as they fall due. The Group arranges and negotiates
+financing with financial institutions and maintains a certain level of standby credit facilities to reduce the Group's liquidity risk.
+Liquidity risk
+40 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+198
+The carrying amounts of cash and cash equivalents, time deposits with financial institutions, trade accounts and bills receivables, derivative financial
+instruments, financial assets at fair value through profit or loss and other receivables, represent the Group's maximum exposure to credit risk in
+relation to financial assets.
+Carrying
+amount
+Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations,
+and arises principally from the Group's deposits placed with financial institutions (including structured deposit) and receivables from customers.
+To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial institutions in the PRC with
+acceptable credit ratings. The majority of the Group's trade accounts receivable relate to sales of petroleum and chemical products to related
+parties and third parties operating in the petroleum and chemical industries. No single customer accounted for greater than 10% of total accounts
+receivable at 31 December 2017, except the amounts due from Sinopec Group Company and fellow subsidiaries. Management performs ongoing
+credit evaluations of the Group's customers' financial condition and generally does not require collateral on trade accounts receivable. The Group
+maintains an impairment loss for doubtful accounts and actual losses have been within management's expectations.
+The Group's risk management policies are established to identify and analyse the risks faced by the Group, and set appropriate risk limits and
+controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
+conditions and the Group's activities. The Group, through its training and management controls and procedures, aims to develop a disciplined and
+constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular
+and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group's audit committee.
+The Board of Directors has overall responsibility for the establishment, oversight of the Group's risk management framework, and developing and
+monitoring the Group's risk management policies.
+market risk.
+liquidity risk;
+⚫credit risk;
+The Group has exposure to the following risks from its uses of financial instruments:
+Financial assets of the Group include cash and cash equivalents, time deposits with financial institutions, investments, financial assets at fair value
+through profit or loss, trade accounts receivable, bills receivable, amounts due from Sinopec Group Company and fellow subsidiaries, amounts due
+from associates and joint ventures, available-for-sale financial assets, derivative financial instruments and other receivables. Financial liabilities of the
+Group include short-term and long-term debts, loans from Sinopec Group Company and fellow subsidiaries, trade accounts payable, bills payable,
+amounts due to Sinopec Group Company and fellow subsidiaries, derivative financial instruments and other payables.
+Overview
+40 FINANCIAL RISK MANAGEMENT AND FAIR VALUES
+(ii) The summarized consolidated statement of comprehensive income and the summarized statement of cash flow of Shanghai SECCO present the results from the
+acquisition date to 31 December 2017.
+134
+64
+Credit risk
+RMB million
+contractual
+undiscounted
+cash flow
+RMB million
+Within
+1 year or
+on demand
+RMB million
+6,462
+Bills payable
+200,073
+200,073
+200,073
+39,007
+4,439
+25,504
+68,950
+68,631
+17,243
+32,316
+14,477
+56,562
+2,166
+66,202
+55,804
+56,562
+55,338
+Trade accounts payable
+and fellow subsidiaries
+Loans from Sinopec Group Company
+Long-term debts
+Short-term debts
+More than
+5 years
+RMB million
+RMB million
+More than 2
+years but less
+than 5 years
+More than 1
+year but less
+than 2 years
+RMB million
+2016
+SECCO (ii)
+14,373
+2016
+8,588
+9,504
+7,238
+9,860
+25,004
+28,515
+18,037
+18,683
+197,948
+195,555
+Net assets
+14,686
+18,485
+13,598
+10,127
+10,659
+7,124
+9,244
+19,070
+19,571
+745
+6,246
+245,054
+251,681
+Net non-current assets
+(1,740)
+11,057
+(3,101)
+11,259
+Attributable to owners
+3,426
+3,788
+3,619
+4,930
+12,504
+14,262
+15.253
+15,215
+63,555
+63,006
+non-controlling interests
+Attributable to
+8,654
+5,625
+12,496
+5,162
+5,716
+3,619
+4,930
+12,500
+14,253
+2,784
+3,468
+134,393
+132,549
+of the Company
+7,318
+5.989
+(2,430)
+(681)
+(47,106)
+(56,126)
+(liabilities)/assets
+Net current
+(7,521)
+(3,975)
+(4,174)
+(2,891)
+(2,351)
+(812)
+(376)
+(8,942)
+12,437
+(10,922)
+(7,118)
+(168,366)
+(212,620)
+Current liabilities
+1,489
+Sinopec Kantons
+2017
+11,602
+1.352
+1,196
+926
+992
+14,876
+(824)
+(721)
+17,292
+5,934
+(6)
+(39,322)
+(1,460) (28,523)
+(1,774)
+Non-current liabilities
+14,686
+13,598
+12,797
+13,228
+13,089
+7,845
+9,925
+8,944
+19.070
+40,067
+34,769
+246,514
+253,455
+Non-current assets
+(6,032)
+(2,339)
+7,428
+(1,539)
+(1,155)
+114
+616
+19,577
+3.941
+1,636
+Summarised consolidated statement of comprehensive income
+1,256
+1,363
+2,964
+3,052
+(3,279)
+(38)
+9,028
+9.033
+controlling interests
+attributable to non-
+Comprehensive income/(loss)
+1,558
+433
+2,730
+726
+879
+1,146
+2,513
+2,726
+6,000
+6,153
+(2,481)
+96
+396
+27,385
+26,986
+26
+349
+35
+235
+3,029
+Fujian Petrochemical
+2017
+2016
+2017
+2016
+2016
+Shanghai Petrochemical
+SIPL
+Marketing Company
+2017
+Year ended 31 December
+Shanghai
+Summarised statement of cash flows
+39 PRINCIPAL SUBSIDIARIES (Continued)
+for the year ended 31 December 2017
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+Financial Statements (International)
+197
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+- 1344 563 625 - 70 51 ---
+4,932
+9,544
+non-controlling interests
+Dividends paid to
+545
+90
+956
+income/(loss)
+Total comprehensive
+2017
+2,730
+RMB million
+RMB million
+RMB million
+RMB million
+6,136
+1,050,294
+1,221,530
+Turnover
+RMB million
+RMB million
+2016
+Zhonghan Wuhan
+2017
+2017
+2016
+SECCO (ii)
+Sinopec Kantons
+2017
+2016
+Fujian Petrochemical
+2017
+2016
+Shanghai Petrochemical
+2017
+2016
+2017
+2016
+Marketing Company
+2017
+Year ended 31 December
+1,558
+RMB million
+RMB million
+SIPL
+RMB million
+726
+RMB million
+860
+1,046
+2.513
+2,726
+5,981
+6,154
+(4,604)
+1,075
+26,461
+27,520
+Profit/(loss) for the year
+Shanghai
+16,139
+RMB million
+RMB million
+RMB million
+4,016
+91,962
+11,703
+5,222
+6,068
+1,512
+4,968
+1,498
+77,843
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Impairment for bad and doubtful debts
+41 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
+for the year ended 31 December 2017
+Financial Statements (International)
+204
+Management estimates impairment losses for bad and doubtful debts resulting from the inability of the Group's customers to make the required
+payments. Management bases the estimates on the ageing of the accounts receivable balance, customer credit-worthiness, and historical write-off
+experience. If the financial condition of the customers were to deteriorate, actual write-offs would be higher than estimated.
+Financial Statements (International)
+203
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Allowance for diminution in value of inventories
+BALANCE SHEET OF THE COMPANY (Amounts in million)
+42 PARENT AND ULTIMATE HOLDING COMPANY
+The directors consider the parent and ultimate holding company of the Group as at 31 December 2017 is Sinopec Group Company, a state-owned
+enterprise established in the PRC. This entity does not produce financial statements available for public use.
+43 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
+Note
+31 December
+2017
+RMB
+31 December
+2016
+RMB
+Non-current assets
+Property, plant and equipment, net
+Construction in progress
+Investment in subsidiaries
+Interest in associates
+If the costs of inventories become higher than their net realisable values, an allowance for diminution in value of inventories is recognised. Net
+realisable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
+costs necessary to make the sale. Management bases the estimates on all available information, including the current market prices of the finished
+goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were to be higher
+than estimated, the actual allowance for diminution in value of inventories could be higher than estimated.
+Property, plant and equipment, other than oil and gas properties, are depreciated on a straight-line basis over the estimated useful lives of the
+assets, after taking into account the estimated residual value. Management reviews the estimated useful lives of the assets at least annually in order
+to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group's historical
+experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if
+there are significant changes from previous estimates.
+The accounting for the exploration and production's oil and gas activities is subject to accounting rules that are unique to the oil and gas industry.
+There are two methods to account for oil and gas business activities, the successful efforts method and the full cost method. The Group has elected
+to use the successful efforts method. The successful efforts method reflects the volatility that is inherent in exploring for mineral resources in that
+costs of unsuccessful exploratory efforts are charged to expense as they are incurred. These costs primarily include dry hole costs, seismic costs
+and other exploratory costs. Under the full cost method, these costs are capitalised and written-off or depreciated over time.
+If circumstances indicate that the net book value of a long-lived asset may not be recoverable, the asset may be considered “impaired", and an
+impairment loss may be recognised in accordance with IAS 36 "Impairment of Assets". The carrying amounts of long-lived assets are reviewed
+periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment
+whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has
+occurred, the carrying amount is reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The recoverable
+amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for
+the Group's assets or cash-generating units are not readily available. In determining the value in use, expected cash flows generated by the asset
+or the cash-generating unit are discounted to their present value, which requires significant judgement relating to level of sale volume, selling price,
+amount of operating costs and discount rate. Management uses all readily available information in determining an amount that is a reasonable
+approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sale volume, selling
+price, amount of operating costs and discount rate.
+202
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Interest in joint ventures
+for the year ended 31 December 2017
+40 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Fair values (Continued)
+(ii) Fair values of financial instruments carried at other than fair value
+The disclosures of the fair value estimates, and their methods and assumptions of the Group's financial instruments, are made to comply
+with the requirements of IFRS 7 and IAS 39 and should be read in conjunction with the Group's consolidated financial statements and related
+notes. The estimated fair value amounts have been determined by the Group using market information and valuation methodologies considered
+appropriate. However, considerable judgement is required to interpret market data to develop the estimates of fair value. Accordingly, the
+estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange. The use of
+different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
+The fair values of the Group's financial instruments carried at other than fair value (other than long-term indebtedness and investments in
+unquoted equity securities) approximate their carrying amounts due to the short-term maturity of these instruments. The fair values of long-term
+indebtedness are estimated by discounting future cash flows using current market interest rates offered to the Group that range from 1.79% to
+4.90% (2016: 1.06% to 4.90%). The following table presents the carrying amount and fair value of the Group's long-term indebtedness other
+than loans from Sinopec Group Company and fellow subsidiaries at 31 December 2017 and 2016:
+Carrying amount
+Fair value
+31 December
+2017
+RMB million
+79,738
+78,040
+31 December
+2016
+RMB million
+110,969
+109,308
+The Group has not developed an internal valuation model necessary to estimate the fair values of loans from Sinopec Group Company and
+fellow subsidiaries as it is not considered practicable to estimate their fair values because the cost of obtaining discount and borrowing rates for
+comparable borrowings would be excessive based on the Reorganisation, the Group's existing capital structure and the terms of the borrowings.
+Investments in unquoted equity securities are individually and in the aggregate not material to the Group's financial condition or results of
+operations. There are no listed market prices for such interests in the PRC and, accordingly, a reasonable estimate of fair value could not be
+made without incurring excessive costs. The Group intends to hold these unquoted other investments in equity securities for long term purpose.
+Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values at
+31 December 2017 and 2016.
+41 ACCOUNTING ESTIMATES AND JUDGEMENTS
+The selection of critical accounting policies, the judgements and other uncertainties affecting application of such policies and the sensitivity of
+reported results to changes in conditions and assumptions are factors to be considered when reviewing the consolidated financial statements. The
+significant accounting policies are set forth in Note 2. Management believes the following critical accounting policies involve the most significant
+judgements and estimates used in the preparation of the consolidated financial statements.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+41 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
+Oil and gas properties and reserves
+Engineering estimates of the Group's oil and gas reserves are inherently imprecise and represent only approximate amounts because of the
+subjective judgements involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have to be
+met before estimated oil and gas reserves can be designated as "proved". Proved and proved developed reserves estimates are updated at least
+annually and take into account recent production and technical information about each field. In addition, as prices and cost levels change from
+year to year, the estimate of proved and proved developed reserves also changes. This change is considered a change in estimate for accounting
+purposes and is reflected on a prospective basis in relation to depreciation rates. Oil and gas reserves have a direct impact on the assessment of
+the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved reserves estimates are revised
+downwards, earnings could be affected by changes in depreciation expense or an immediate write-down of the property's carrying amount.
+Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration the
+anticipated method of dismantlement required in accordance with industry practices in similar geographic area, including estimation of economic
+life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are capitalised as oil and
+gas properties with equivalent amounts recognised as provisions for dismantlement costs.
+Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment loss
+and future dismantlement costs. Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes
+produced and reserves.
+Impairment for long-lived assets
+Depreciation
+The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the
+preparation of the consolidated financial statements. Management bases the assumptions and estimates on historical experience and on
+various other assumptions that it believes to be reasonable and which form the basis for making judgements about matters that are not readily
+apparent from other sources. On an ongoing basis, management evaluates its estimates. Actual results may differ from those estimates as facts,
+circumstances and conditions change.
+72,309
+Deferred tax assets
+48,179
+Trade accounts receivable
+37,609
+38,332
+Bills receivable
+157
+471
+Dividends receivable
+16,327
+5,454
+Inventories
+Financial assets at fair value through profit or loss
+44,933
+Prepaid expenses and other current assets
+Total current assets
+79,111
+76,386
+318,861
+265,835
+Current liabilities
+Short-term debts
+33,454
+Financial Statements (International)
+Loans from Sinopec Group Company and fellow subsidiaries
+Trade accounts payable
+50,574
+46,942
+10,130
+20,236
+Time deposits with financial institutions
+Lease prepayments
+Long-term prepayments and other assets
+Total non-current assets
+Current assets
+329,814
+373,020
+50,046
+49,277
+245,156
+238,264
+15,579
+14,691
+14,822
+15,496
+395
+297
+6,834
+6,916
+6,114
+14,072
+14,731
+683,634
+711,890
+Cash and cash equivalents
+88,120
+Available-for-sale financial assets
+201
+Derivative financial instruments:
+Management of the Group evaluates the fair value of Level 3 financial assets using discounted cash flow model based on the interest rate and
+commodity index which were influenced by historical fluctuation and the probability of market fluctuation as input value for evaluating the fair
+value of the structural deposits.
+Interest rate risk
+The Group's interest rate risk exposure arises primarily from its short-term and long-term debts. Debts bearing interest at variable rates and at fixed
+rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The interest rates of short-term and long-term
+debts, and loans from Sinopec Group Company and fellow subsidiaries of the Group are disclosed in Note 29.
+As at 31 December 2017, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held
+constant, would decrease/increase the Group's net profit for the year by approximately RMB 450 million (2016: decrease/increase by approximately
+RMB 327 million). This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group's debts
+outstanding at the balance sheet date with exposure to cash flow interest rate risk. The analysis is performed on the same basis for 2016.
+Commodity price risk
+The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products and
+chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the Group.
+The Group uses derivative financial instruments, including commodity futures and swaps, to manage a portion of this risk. As at 31 December 2017,
+the Group had certain commodity contracts of crude oil, refined oil products and chemical products designated as qualified cash flow hedges and
+economic hedges. The fair values of these derivative financial instruments as at 31 December 2017 are set out in Notes 27 and 31.
+As at 31 December 2017, it is estimated that a general increase/decrease of USD 10 per barrel in basic price of derivative financial instruments,
+with all other variables held constant, would impact the fair value of derivative financial instruments, which would decrease/increase the Group's
+profit for the period by approximately RMB 4,049 million (2016: decrease/increase RMB 634 million), and decrease/increase the Group's other
+reserves by approximately RMB 701 million (2016: decrease/increase RMB 4,007 million). This sensitivity analysis has been determined assuming
+that the change in prices had occurred at the balance sheet date and the change was applied to the Group's derivative financial instruments at that
+date with exposure to commodity price risk. The analysis is performed on the same basis for 2016.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+40 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Fair values
+USD
+Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in the
+functional currency of respective entity within the Group.
+(i) Financial instruments carried at fair value
+its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:
+•
+Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments.
+•
+Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which
+all significant inputs are directly or indirectly based on observable market data.
+•
+Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.
+At 31 December 2017
+Assets
+Financial assets at fair value through profit and loss:
+- Structured deposit
+The following table presents the carrying value of financial instruments measured at fair value at the balance sheet date across the three levels
+of the fair value hierarchy defined in IFRS 7, 'Financial Instruments: Disclosures', with the fair value of each financial instrument categorised in
+33
+50
+million
+3,214
+42,433
+200
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+40 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Market risk
+Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is
+to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
+Currency risk
+Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The
+Group's currency risk exposure primarily relates to short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries
+denominated in USD. The Group enters into foreign exchange contracts to manage its currency risk exposure.
+Included in short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries of the Group are the following amounts
+denominated in a currency other than the functional currency of the entity to which they relate:
+Gross exposure arising from loans
+USD
+31 December
+31 December
+2017
+million
+2016
+million
+USD 204
+USD 126
+A 5 percent strengthening/weakening of RMB against the following currencies at 31 December 2017 and 2016 would have increased/decreased net
+profit for the year of the Group by the amounts shown below. This analysis has been determined assuming that the change in foreign exchange rates
+had occurred at the balance sheet date and had been applied to the foreign currency balances to which the Group has significant exposure as stated
+above, and that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2016.
+31 December
+31 December
+2017
+2016
+million
+Available-for-sale financial assets:
+- Listed
+Derivative financial assets
+Liabilities
+1,277
+1,388
+1,277
+1,388
+2,665
+2,665
+Level 1
+Level 2
+RMB million
+RMB million
+Level 3
+RMB million
+Total
+RMB million
+262
+29
+733
+291
+733
+2,586
+2,586
+1,886
+1,886
+262
+762
+1,024
+4,472
+4,472
+During the years ended 31 December 2017 and 2016, there was no transfer among instruments in Level 1, Level 2, Level 3.
+51,900
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+51,196
+521
+Derivative financial instruments:
+- Derivative financial liabilities
+At 31 December 2016
+Assets
+Available-for-sale financial assets:
+- Listed
+Derivative financial instruments:
+Derivative financial assets
+Liabilities
+Derivative financial instruments:
+- Derivative financial liabilities
+Level 1
+Level 2
+Level 3
+RMB million
+RMB million
+RMB million
+Total
+RMB million
+51,196
+51,196
+178
+178
+343
+183
+526
+183
+2,703
+42,299
+75,787
+1,293
+End of year
+(19)
+(253)
+(272)
+(15)
+(249)
+(264)
+Production
+41
+41
+60
+60
+Extensions and discoveries
+35
+1,261
+35
+32
+1,216
+52
+1,701
+1,753
+40
+1,080
+1,120
+Beginning of year
+Proved developed reserves
+18
+18
+14
+14
+undeveloped reserves at the end of year
+Non-controlling interest in proved developed and
+40
+1,256
+End of year
+4
+(505)
+Total
+countries
+China
+Total
+Other
+2016
+2017
+Table IV: Reserve quantities information (Continued)
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+"Net" reserves exclude royalties and interests owned by others and reflect contractual arrangements and obligation of rental fee in effect at the time of
+the estimate.
+Proved developed oil and gas reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and
+operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.
+Proved oil and gas reserves are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable
+certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods,
+and government regulation before contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain,
+regardless of whether the estimate is a deterministic estimate or probabilistic estimate. Due to the inherent uncertainties and the limited nature of
+reservoir data, estimates of underground reserves are subject to change as additional information becomes available.
+The Group's and its equity method investments' estimated net proved underground oil and gas reserves and changes thereto for the years ended 31
+December 2017 and 2016 are shown in the following table.
+Table IV: Reserve quantities information
+China
+(509)
+Other
+countries
+Proved developed and undeveloped reserves
+55
+1,902
+1,957
+234
+86
+90
+Improved recovery
+148
+151
+Revisions of previous estimates
+40
+1,216
+1,256
+Beginning of year
+(oil) (million barrels)
+The Group
+1,156
+1,124
+32
+(170)
+(170)
+7,551
+7,551
+985
+985
+End of year
+724
+724
+Beginning of year
+Proved undeveloped reserves
+6,000
+6,000
+End of year
+6,436
+66
+6,436
+66
+475
+83,449
+209
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+724
+724
+1,112
+1,112
+6,436
+6,436
+6,439
+6,439
+7,160
+7,160
+(762)
+(762)
+475
+Beginning of year
+Proved developed reserves
+|| | | | | | |
+136
+136
+137
+137
+End of year
+3
+201
+204
+136
+136
+Beginning of year
+Proved undeveloped reserves
+40
+1,080
+1,120
+Proved developed and undeveloped
+reserves (gas) (billion cubic feet)
+Beginning of year
+7,160
+6,985
+6,985
+End of year
+(909)
+(909)
+Production
+769
+The results of operations for producing activities for the years ended 31 December 2017 and 2016 are shown above. Revenues include sales to
+unaffiliated parties and transfers (essentially at third-party sales prices) to other segments of the Group. Income taxes are based on statutory tax
+rates, reflecting allowable deductions and tax credits. General corporate overhead and interest income and expense are excluded from the results of
+operations.
+769
+72
+72
+Improved recovery
+(107)
+(107)
+Revisions of previous estimates
+7,160
+Extensions and discoveries
+Supplemental Information on Oil and
+(4,517)
+(1,370)
+110,955
+117,091
+4,016
+54,555
+58,571
+6,136
+67,311
+73,447
+36,720
+36,720
+43,644
+43,644
+Transfers
+Sales
+Revenues
+6,136
+The Group
+95,291
+4,016
+(80,399)
+impairment losses
+Depreciation, depletion, amortisation and
+(11,035)
+(11,035)
+(11,089)
+(11,089)
+Exploration expenses
+(1,425)
+(42,652)
+(44,077)
+(1,334)
+(44,977)
+(46,311)
+Production costs excluding taxes
+91,275
+(74,856)
+2016
+RMB million
+Other
+countries
+Total
+42,299
+43,157
+investments' exploration and development costs
+Total of the Group's and its equity method
+719
+719
+724
+724
+of associates and joint ventures
+Share of costs of exploration and development
+Equity method investments
+362
+42,860
+43,222
+134
+858
+China
+43,941
+1,081
+Other
+countries
+China
+Total
+2017
+RMB million
+Table III: Results of operations related to oil and gas producing activities
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Supplemental Information on Oil and
+Gas Producing Activities (Unaudited)
+Financial Statements
+208
+Gas Producing Activities (Unaudited)
+Supplemental Information on Oil and
+Financial Statements
+207
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+42,860
+(5,543)
+(73,534)
+(68,594)
+|||||
+114
+461
+(347)
+associates and joint ventures
+Share of profit for producing activities of
+Income tax expense
+Profit before taxation
+(3,628)
+Taxes other than income tax
+(1,243)
+impairment losses
+Depreciation, depletion, amortisation and
+Exploration expenses
+(2,205)
+6,352
+Total of the Group's and its equity method investments'
+6,352
+results of operations for producing activities
+(28,693)
+(40,099)
+561
+(1,370)
+114
+(195)
+(195)
+(1,175)
+(1,175)
+461
+(347)
+(2,570)
+(2,570)
+(3,628)
+(2,752)
+(2,752)
+(1,243)
+(28,132)
+(2,205)
+(2,748)
+6,352
+1,188
+Income tax expense
+(2,349)
+(35,582)
+(37,931)
+(741)
+(28,693)
+(29,434)
+Profit before taxation
+(4,576)
+(4,576)
+(8,726)
+(8,726)
+Taxes other than income tax
+(4,940)
+1,188
+(798)
+(798)
+Results of operation from producing activities
+8,080
+6,352
+8,080
+(2,748)
+Production costs excluding taxes
+8,080
+8,080
+(35,582)
+Sales
+Equity method investments
+(3,147)
+(35,582)
+(38,729)
+447
+(28,693)
+(28,246)
+Revenues
+Gas Producing Activities (Unaudited)
+Financial Statements
+Effects of major differences between the net profit under ASBE and the profit for the year under IFRS are analysed as follows:
+59,444
+*
+The figures are extracted from the consolidated financial statements prepared in accordance with the accounting policies complying with IFRS during the year ended
+31 December 2016 and 2017 which have been audited by PricewaterhouseCoopers.
+206
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
+In accordance with the Accounting Standards Update 2010-03, “Extractive Activities - Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and
+Disclosures" ("ASU 2010-03"), issued by the Financial Accounting Standards Board of the United States, and in accordance with “Industrial Information
+Disclosure Guidelines for Public Company - No.8 Oil and Gas Exploitation", issued by Shanghai Stock Exchange, this section provides supplemental
+information on oil and gas exploration and producing activities of the Group and its equity method investments at 31 December 2017 and 2016, and
+for the years then ended in the following six separate tables. Tables I through III provide historical cost information under IFRS pertaining to capitalised
+costs related to oil and gas producing activities; costs incurred in oil and gas exploration and development; and results of operation related to oil and
+gas producing activities. Tables IV through VI present information on the Group's and its equity method investments' estimated net proved reserve
+quantities; standardised measure of discounted future net cash flows; and changes in the standardised measure of discounted cash flows.
+Tables | to VI of supplemental information on oil and gas producing activities set out below represent information of the Company and its consolidated
+subsidiaries and equity method investments.
+Table I: Capitalised costs related to oil and gas producing activities
+2017
+RMB million
+Total
+China
+Other
+countries
+70,418
+2016
+RMB million
+Other
+China
+countries
+The Group
+Property cost, wells and related equipments
+and facilities
+667,657
+Supporting equipments and facilities
+210,711
+625,621
+210,694
+42,036
+17
+650,686
+192,877
+606,493
+192,855
+Total
+Profit for the year under IFRS*
+(112)
+160
+Under ASBE, grants from the government are credited to capital reserve if required by relevant governmental regulations. Under IFRS, government
+grants relating to the purchase of fixed assets are recognised as deferred income and are transferred to the income statement over the useful life of
+these assets.
+(II) SAFETY PRODUCTION FUND
+Under ASBE, safety production fund should be recognised in profit or loss with a corresponding increase in reserve according to PRC regulations.
+Such reserve is reduced for expenses incurred for safety production purposes or, when safety production related fixed assets are purchased, is
+reduced by the purchased cost with a corresponding increase in the accumulated depreciation. Such fixed assets are not depreciated thereafter.
+Under IFRS, payments are expensed as incurred, or capitalised as fixed assets and depreciated according to applicable depreciation methods.
+Effects of major differences between the shareholders' equity under ASBE and the total equity under IFRS are analysed as follows:
+Note
+31 December
+2017
+RMB million
+854,070
+31 December
+2016
+RMB million
+Shareholders' equity under ASBE
+Adjustments:
+832,525
+Government grants
+(i)
+(1,180)
+Total equity under IFRS*
+852,890
+(1,290)
+831,235
+Note
+2017
+Net profit under ASBE
+RMB million
+70,294
+2016
+RMB million
+59,170
+Adjustments:
+Government grants
+Safety production fund
+Others
+(i)
+(ii)
+110
+114
+126
+44,193
+22
+Uncompleted wells, equipments and facilities
+41,397
+324,804
+312,053
+12,751
+377,199
+356,741
+20,458
+Table II: Costs incurred in oil and gas exploration and development
+2017
+RMB million
+Total
+China
+Other
+countries
+Total
+China
+2016
+RMB million
+Other
+countries
+The Group
+Exploration
+11,589
+11,589
+10,942
+10,942
+Development
+30,844
+30,710
+134
+32,280
+31,918
+362
+Total costs incurred
+investments' net capitalised costs
+(I) GOVERNMENT GRANTS
+Total of the Group's and its equity method
+9,337
+41,389
+8
+52,935
+52,931
+4
+Total capitalised costs
+919,765
+877,704
+42,061
+896,498
+852,279
+Accumulated depreciation, depletion, amortisation
+and impairment losses
+(601,318)
+(565,651)
+Net capitalised costs
+318,447
+312,053
+(35,667)
+6,394
+(528,636)
+(495,538)
+(33,098)
+367,862
+356,741
+11,121
+Equity method investments
+Share of net capitalised costs of associates and
+joint ventures
+6,357
+6,357
+9,337
+Other than the differences in the classifications of certain financial statements captions and the accounting for the items described below, there are no
+material differences between the Group's consolidated financial statements prepared in accordance with the accounting policies complying with ASBE
+and IFRS. The reconciliation presented below is included as supplemental information, is not required as part of the basic financial statements and
+does not include differences related to classification, presentation or disclosures. Such information has not been subject to independent audit or review.
+The major differences are:
+44,219
+(Unaudited)
+29,767
+3,613
+3,688
+118,685
+128,408
+566,247
+568,495
+121,071
+121,071
+(a)
+445,176
+447,424
+566,247
+31,405
+568,495
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2017
+43 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (Continued)
+(a) RESERVES MOVEMENT OF THE COMPANY
+The reconciliation between the opening and closing balances of each component of the Group's consolidated reserves is set out in the
+consolidated statement of changes in equity. Details of the change in the Company's individual component of reserves between the beginning
+and the end of the year are as follows:
+The Company
+2017
+RMB million
+2016
+RMB million
+Capital reserve
+Balance at 1 January
+Others
+Balance at 31 December
+Share premium
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+505
+44,772
+43,225
+(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH
+THE ACCOUNTING POLICIES COMPLYING WITH ASBE AND IFRS (UNAUDITED)
+Accrued expenses and other payables
+Net current assets/(liabilities)
+Bills payable
+Total current liabilities
+.............
+Total assets less current liabilities
+Non-current liabilities
+Long-term debts
+Loans from Sinopec Group Company and fellow subsidiaries
+Deferred tax liabilities
+Provisions
+Other long-term liabilities
+Total non-current liabilities
+Equity
+Share capital
+Reserves
+Total equity
+3,155
+2,761
+194,291
+148,997
+317,563
+280,822
+1,298
+(14,987)
+696,903
+40,442
+49,676
+Balance at 1 January
+Balance at 31 December
+684,932
+Balance at 1 January
+Others
+89
+80
+Balance at 31 December
+2,460
+2,438
+Retained earnings
+Balance at 1 January
+183,321
+176,497
+Profit for the year
+Distribution to owners (Note 13)
+Appropriation
+Others
+30,488
+23,733
+(32,689)
+(16,829)
+(3,042)
+(89)
+177,989
+(80)
+183,321
+445,176
+447,424
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+205
+Financial Statements (International)
+Statutory surplus reserve
+Financial Statements
+(Differences Between the ASBE and IFRS)
+557
+53
+Balance at 31 December
+(149)
+9,175
+20
+9,122
+Cash flow hedges, net of deferred tax
+53
+9,195
+9,175
+55,850
+55,850
+55,850
+79,640
+79,640
+Appropriation
+3,042
+Balance at 31 December
+82,682
+55,850
+Other reserves
+Discretionary surplus reserve
+Balance at 1 January
+117,000
+117,000
+Balance at 31 December
+(120)
+117,000
+117,000
+Share of other comprehensive loss of associates and joint ventures, net of deferred tax
+Balance at 1 January
+2,438
+1,950
+79,640
+18
+18
+Proved developed and undeveloped reserves
+12
+(4)
+(4)
+18
+12
+18
+18
+18
+18
+1
+(oil) (million barrels)
+(4)
+1
+82
+3
+ནྭསྱེ|||€ས
+23
+18
+Beginning of year
+23
+19
+(2)
+3
+|||||||||||||
+19
+|| || |||||||||||||
+(2)
+3
+41
+(32)
+296
+260
+273
+26
+286
+1,552
+Table V: Standardised measure of discounted future net cash flows
+336
+6,997
+6,985
+12
+7,178
+7,160
+18
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+End of year
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+The information provided does not represent management's estimate of the Group's and its equity method investments' expected future cash flows or
+value of proved oil and gas reserves. Estimates of proved reserve quantities are imprecise and change over time as new information becomes available.
+Moreover, probable and possible reserves, which may become proved in the future, are excluded from the calculations. The arbitrary valuation requires
+assumptions as to the timing and amount of future development and production costs. The calculations are made for the years ended 31 December
+2017 and 2016 and should not be relied upon as an indication of the Group's and its equity method investments' future cash flows or value of its oil
+and gas reserves.
+Total
+China
+2017
+RMB million
+Other
+countries
+2016
+RMB million
+33
+Total
+The standardised measure of discounted future net cash flows, related to the above proved oil and gas reserves, is calculated in accordance with the
+requirements of ASU 2010-03 and “Industrial Information Disclosure Guidelines for Public Company - No.8 Oil and Gas Exploitation". Estimated future
+cash inflows from production are computed by applying the average, first-day-of-the-month price for oil and gas during the twelve-month period before
+the ending date of the period covered by the report to year-end quantities of estimated net proved reserves. Future price changes are limited to those
+provided by contractual arrangements in existence at the end of each reporting year. Future development and production costs are those estimated
+future expenditures necessary to develop and produce year-end estimated proved reserves based on year-end cost indices, assuming continuation of
+year-end economic conditions. Estimated future income taxes are calculated by applying appropriate year-end statutory tax rates to estimated future
+pre-tax net cash flows, less the tax basis of related assets. Discounted future net cash flows are calculated using 10% discount factors. This discounting
+requires a year-by-year estimate of when the future expenditure will be incurred and when the reserves will be produced.
+1,216
+19
+7,570
+2,243
+1,902
+341
+End of year
+1,599
+1,261
+338
+7,551
+1,552
+336
+Proved developed and undeveloped reserves
+(gas) (billion cubic feet)
+Beginning of year
+7,178
+7,160
+18
+1,216
+26
+associates and joint ventures (oil) (million barrels)
+273
+Extensions and discoveries
+Production
+End of year
+Proved developed reserves
+8
+20
+(30)
+Improved recovery
+Beginning of year
+306
+273
+273
+210
+Beginning of year
+End of year
+Proved developed and undeveloped reserves of
+End of year
+associates and joint ventures (gas)
+12
+296
+China
+Financial Statements
+Supplemental Information on Oil and
+Gas Producing Activities (Unaudited)
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Table IV: Reserve quantities information (Continued)
+2017
+2016
+Revisions of previous estimates
+Total
+Other
+countries
+Total
+China
+Other
+countries
+Equity method investments
+Proved developed and undeveloped reserves of
+Beginning of year
+China
+23
+(billion cubic feet)
+Revisions of previous estimates
+| | |
+296
+286
+12
+(2)
+8
+3
+|||||||||||||
+20
+(30)
+(32)
+306
+296
+273
+260
+273
+41
+Beginning of year
+82
+18
+Improved recovery
+Extensions and discoveries
+Production
+End of year
+Proved developed reserves
+Beginning of year
+End of year
+12
+Proved undeveloped reserves
+End of year
+Total of the Group and its equity method investments
+23
+33
+18
+(2)
+(4)
+12
+Beginning of year
+Other
+countries
+Proved undeveloped reserves
+Future cash flows
+Haiwen & Partners
+People's Republic of China:
+LEGAL ADVISORS
+No change during the reporting period
+COPIES OF RELATIVE REPORTS
+INFORMATION DISCLOSURE AND PLACES FOR
+Hong Kong
+Wanchai
+1 Harbour Road
+Convention Plaza
+20th Floor, Office Tower
+PLACE OF BUSINESS IN HONG KONG
+http://www.sinopec.com
+ir@sinopec.com
+: 86-10-59960386
+: 86-10-59960028
+20th Floor, Fortune Financial Centre
+No. 5, Dong San Huan Central Road
+Chaoyang District
+Beijing PRC
+Postcode: 100020
+Hong Kong:
+R1712 1716, 17th Floor, Hopewell Centre
+183 Queen's Road East
+Hong Kong Registrars Limited
+H Shares:
+Shanghai, PRC
+China Securities Registration and Clearing
+Company Limited Shanghai Branch Company
+36th Floor, China Insurance Building
+166 Lujiazui East Road
+A Shares:
+REGISTRARS
+: 100728
+Beijing, PRC
+30/F, China World Office 2
+Skadden, Arps, Slate, Meagher & Flom LLP
+U.S.A.:
+Central, Hong Kong
+15 Queen's Road
+23rd Floor, Gloucester Tower
+Herbert Smith Freehills
+No. 1, Jian Guo Men Wai Avenue,
+Hong Kong
+E-mail addresses
+Fax
+中国石油化工股份有限公司
+STATUTORY NAME
+CORPORATE INFORMATION
+(83,746)
+17,309
+(2,174)
+2,364
+464
+(621)
+1,308
+967
+322
+206
+(92)
+688
+ENGLISH NAME
+China Petroleum & Chemical Corporation
+CHINESE ABBREVIATION
+中国石化
+Tel.
+Postcode
+Beijing, PRC
+No.22 Chaoyangmen North Street,
+Chaoyang District
+REGISTERED ADDRESS AND PLACE OF
+BUSINESS
+Mr. Zheng Baomin
+REPRESENTATIVE ON SECURITIES MATTERS
+Website
+Mr. Huang Wensheng
+Mr. Huang Wensheng
+Mr. Dai Houliang
+AUTHORISED REPRESENTATIVES
+Mr. Wang Yupu
+LEGAL REPRESENTATIVE
+Sinopec Corp.
+ENGLISH ABBREVIATION
+SECRETARY TO THE BOARD
+1,887
+DEPOSITARY FOR ADRS
+Citibank, N.A.
+DOCUMENTS FOR INSPECTION
+Documents for Inspection
+Corporate Information
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017 213
+Prince's Building,
+Central, Hong Kong
+: 22nd Floor,
+: PricewaterhouseCoopers
+Shanghai, PRC 200021
+Huangpu District,
+2 Corporate Avenue,
+202 Hu Bin Road,
+PricewaterhouseCoopers,
+Zhong Tian LLP
+11th Floor
+: PricewaterhouseCoopers
+Overseas Auditors
+Address
+Address
+214
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+The following documents will be available for
+inspection during normal business hours after
+23 March 2018 at the registered address of
+Sinopec Corp. upon requests by the relevant
+regulatory authorities and shareholders in
+accordance with the Articles of Association and
+the laws and regulations of PRC:
+The Group
+Printed on environmentally friendly paper
+www.sinopec.com
+Beijing, China
+22 Chaoyangmen North Street, Chaoyang District,
+中國北京市朝陽區朝陽門北大街22號
+SINOPEC CORP.
+中国石油化工股份有限公司
+Domestic Auditors
+If there is any inconsistency between the Chinese
+and English versions of this annual report, the
+Chinese version shall prevail.
+Vice Chairman and President
+Dai Houliang
+By Order of the Board
+d) Copies of the documents and announcements
+that Sinopec Corp. has published in the
+newspapers stipulated by the CSRC during
+the reporting period.
+c) The original auditors' report signed by the
+auditors; and
+b) The original copies of financial statements
+and consolidated financial statements as of
+31 December 2017 prepared under IFRS
+and ABSE, signed by Mr. Dai Houliang, Vice
+Chairman and President, Mr. Wang Dehua,
+the Chief Financial Officer and head of the
+financial department of Sinopec Corp.;
+report signed by Mr. Dai Houliang, the Vice
+Chairman and President;
+Beijing, PRC, 23 March 2018
+The US:
+SINOPEC CORP.
+: SNP
+USA
+New York NY 10013
+388 Greenwich St., 14th Floor
+Citibank, N.A.
+The US:
+Beijing, PRC
+Chaoyang District
+No.22 Chaoyangmen North Street,
+Board Secretariat
+China Petroleum & Chemical Corporation
+The PRC:
+COPIES OF THIS ANNUAL REPORT ARE
+AVAILABLE AT
+United States of America
+New York NY 10013
+388 Greenwich St., 14th Floor
+The UK:
+Citibank, N.A.
+Citigroup Centre
+Canada Square, Canary Wharf
+London Stock Exchange
+Stock code
+: SNP
+New York Stock Exchange
+Stock code
+: 00386
+ADRs:
+Hong Kong Stock Exchange
+Stock code
+: 600028
+NAMES AND ADDRESSES OF AUDITORS OF
+: SINOPEC CORP
+Stock code
+Stock name
+Shanghai Stock Exchange
+A Shares:
+NAMES AND STOCK CODES
+PLACES OF LISTING OF SHARES, STOCK
+London E14 5LB, U.K.
+H Shares:
+1,205
+a) The original copies of the 2017 annual
+(856)
+(3,303)
+(4,406)
+(4,406)
+Future income tax expenses
+(3,444)
+(3,444)
+(4,692)
+(4,692)
+Future development costs
+(3,303)
+(10,783)
+(12,131)
+(12,131)
+Future production costs
+35,690
+35,690
+43,587
+43,587
+Future cash flows
+Equity method investments
+(10,783)
+Undiscounted future net cash flows
+22,358
+22,358
+10,445
+207,893
+218,338
+12,803
+222,844
+235,647
+investments' results of standardised measure of
+discounted future net cash flows
+Total of the Group's and its equity method
+10,191
+10,191
+12,555
+12,555
+net cash flows
+Standardised measure of discounted future
+(7,969)
+(7,969)
+(9,803)
+(9,803)
+10% annual discount for estimated timing of
+cash flows
+18,160
+18,160
+114
+114
+112
+112
+(1,374)
+Future income tax expenses
+(4,626)
+(15,615)
+(20,241)
+(4,685)
+(20,314)
+(24,999)
+Future development costs
+(5,101)
+(266,549)
+11,396
+592,389
+603,785
+(271,650)
+(4,875)
+(287,914)
+11,149
+628,187
+639,336
+(292,789)
+Future production costs
+(534)
+(1,374)
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Undiscounted future net cash flows
+319,959
+non-controlling interests
+Discounted future net cash flows attributable to
+254
+207,893
+208,147
+248
+222,844
+223,092
+future net cash flows
+Standardised measure of discounted
+(10)
+(102,332)
+(102,342)
+33
+(97,115)
+(97,082)
+264
+310,225
+(1,405)
+(1,405)
+310,489
+215
+320,174
+211
+10% annual discount for estimated timing of
+cash flows
+Supplemental Information on Oil and
+2016
+RMB million
+(62,054)
+(46,637)
+7,487
+(53,715)
+(7,320)
+6,073
+29,799
+15,113
+20,608
+(48,479)
+5,747
+9,370
+20,909
+30,340
+(231)
+6,363
+(81,572)
+(1,704)
+(1,577)
+2,479
+(3,952)
+Financial Statements
+RMB million
+2017
+14,945
+Total of the Group's and its equity method investments' results of net changes for the year
+212
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Financial Statements
+Supplemental Information on Oil and
+Gas Producing Activities (Unaudited)
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Table VI: Changes in the standardised measure of discounted cash flows
+The Group
+Sales and transfers of oil and gas produced, net of production costs
+Net changes in prices and production costs
+Net changes in estimated future development cost
+Net changes due to extensions, discoveries and improved recoveries
+Gas Producing Activities (Unaudited)
+Previously estimated development costs incurred during the year
+Accretion of discount
+Revisions of previous quantity estimates
+Accretion of discount
+Previously estimated development costs incurred during the year
+Net changes due to extensions, discoveries and improved recoveries
+Revisions of previous quantity estimates
+Net changes in income taxes
+Sales and transfers of oil and gas produced, net of production costs
+Net changes in prices and production costs
+Equity method investments
+Net changes for the year
+Net changes in income taxes
+Net changes in estimated future development cost
+Net changes for the year
+7,482
+5,328
+8,153
+7.9
+12,250
+46,351
+13,215
+Synthetic resin
+13.5
+Synthetic fibre monomer and polymer
+44.1
+7,169
+10,332
+18.2
+3,963
+4,684
+11.4
+41,605
+6,047
+9.0
+11,957
+1,304
+Chemical fertiliser
+Basic organic chemicals
+Synthetic rubber
+24.6
+1,612
+2,008
+(2.0)
+714
+700
+24.4
+9,609
+3.5
+1,099
+1,138
+20.3
+7,113
+8,556
+(4.7)
+1,369
+Synthetic fibre
+Change (%)
+23,299
+2017
+2,807
+3,531
+1.6
+25,164
+25,555
+16.5
+3,851
+4,486
+(2.1)
+45,342
+44,410
+Direct sales and wholesale
+9.8
+5,088
+5,588
+(4.1)
+46,656
+44,736
+Retail
+25.8
+In 2017, the operating expenses of the
+chemicals segment were RMB 410.8
+billion, representing an increase of
+30.6% over 2016, mainly because of
+the significant increase in the price of
+externally procured raw materials.
+22,034
+5.7
+Change (%)
+2016
+2017
+Average realised price (RMB/tonne)
+Year ended 31 December
+Sales Volume (Thousand tonnes)
+Year ended 31 December
+The following table sets forth the sales volume, average realised prices and respective percentage changes of each of the segment's six major
+categories of chemical products in 2017 and 2016.
+The sales revenues generated by the
+segment's six major categories of
+chemical products (namely basic organic
+chemicals, synthetic resin, synthetic fibre
+monomer and polymer, synthetic fibre,
+synthetic rubber, and chemical fertiliser)
+totaled RMB 413.5 billion, representing
+an increase of 30.8% as compared with
+2016, and accounted for 94.5% of the
+operating revenues of the segment.
+In 2017, the operating revenues of the
+chemicals segment were RMB 437.7
+billion, representing an increase of
+30.6% as compared with that of 2016,
+This was mainly due to increase in sales
+volume and price of chemical products
+as compared with 2016.
+The business activities of the chemicals
+segment include purchasing chemical
+feedstock from the refining segment and
+third parties, producing, marketing and
+distributing petrochemical and inorganic
+chemical products.
+2016
+(4) Chemicals Segment
+representing an increase of RMB 6.2
+billion compared with 2016; the profit of
+non-fuel business was RMB 2.2 billion,
+representing an increase of RMB 0.7
+billion compared with 2016.
+In 2017, the operating revenues of non-
+fuel business was RMB 27.6 billion,
+In 2017, the segment's marketing cash
+operating cost (defined as the operating
+expenses less purchase costs, taxes
+other than income tax, depreciation
+and amortisation, and then divided by
+the sales volume) was RMB 198.7 per
+tonne, representing an increase of 0.7%
+compared with that of 2016.
+In 2017, the operating expenses of the
+segment were RMB 1,192.6 billion,
+representing an increase of RMB 171.9
+billion or 16.8% as compared with
+that of 2016. This was mainly due to
+increased procurement prices of refined
+oil products and volume of gasoline.
+Fuel
+Kerosene
+32.2
+1,703
+2,251
+In 2017, the operating profit of
+this segment was RMB 31.6 billion,
+representing a decrease of 1.8%
+compared with 2016.
+In 2017, the segment seized the
+opportunities of the improving market
+conditions, coordinated production with
+sales, intensified structural adjustment,
+increased the production of synthetic
+resin, rubber and some organic products
+which were more profitable, positively
+expanded the market, strictly controlled
+costs and expenses, thus, resulting in
+remarkable profits.
+Current assets were RMB 529.0 billion,
+representing an increase of RMB 116.8
+billion compared with that of the end of
+2016, of which, inventory and accounts
+receivable increased by RMB 30.2 billion
+and RMB 18.2 billion respectively, mainly
+due to the increase in crude oil prices,
+cash flow improved further, structural
+deposit increased by RMB 51.2 billion
+and time deposit at financial institutions
+increased by RMB 33.8 billion.
+(5) Corporate and Others
+6,529
+21,655
+increase in crude oil price, which resulted
+in account payable increased by RMB
+25.8 billion, accrued expenses and other
+payable increased by RMB 54.7 billion.
+Non-current liabilities were RMB 163.2
+billion, representing a decrease of RMB
+18.7 billion compared with that of the
+end of 2016. This was mainly due to
+long-term debts decreased by RMB 16.9
+billion.
+Total equity attributable to owners of
+the Company was RMB 726.1 billion,
+representing an increase of RMB 15.1
+billion compared with that of the end
+of 2016, which was mainly due to the
+increase in profit during the year.
+The following table sets forth the major items in the consolidated cash flow statements for 2017 and 2016.
+Unit: RMB million
+Major items of cash flows
+Net cash generated from operating activities
+Net cash used in investing activities
+Net cash generated used financing activities
+In 2017, the net cash generated from
+operating activities of the company
+was RMB 190.9 billion, representing
+a decrease of RMB 23.6 billion as
+compared with 2016. This was mainly
+due to the increase in crude oil price
+and volume of inventory, which resulted
+in increase in inventory and accounts
+receivable.
+In 2017, the net cash used in investing
+activities was RMB 145.3 billion,
+representing an increase of RMB 79.1
+billion over 2016. This was mainly
+due to the increase in time deposit
+with maturities over 3 months and the
+increase in purchase of investments,
+investments in associates and
+investments in joint ventures.
+Year ended 31 December
+2017
+190,935
+(145,323)
+(56,509)
+2016
+214,543
+(66,217)
+(93,047)
+In 2017, the net cash used in the
+Company's financing activities was RMB
+56.5 billion, representing a decrease
+of cash out flow by RMB 36.5 billion
+over 2016. This was mainly due to the
+decrease in borrowing repayment.
+At the end of 2017, the cash and cash
+equivalents were RMB 113.2 billion.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+25
+Management's Discussion
+and Analysis
+26
+Management's Discussion
+Current liabilities were RMB 579.4
+billion, representing an increase of RMB
+93.9 billion as compared with that of
+the end of 2016. This was mainly due to
+and Analysis
+579,446
+19.9 billion as compared with that of
+the end of 2016. This was mainly due
+to optimisation of investment scale,
+which decreased the property, plant and
+equipment (net) by RMB 39.8 billion,
+construction in progress decreased by
+RMB 10.9 billion. Equity of associates
+and joint ventures increased by RMB 13.6
+billion, long-term prepayment and other
+assets increased by RMB 11.8 billion.
+93,903
+163,168
+181,831
+(18,663)
+726,120
+710,994
+15,126
+485,543
+121,071
+121,071
+0
+605,049
+589,923
+15,126
+126,770
+120,241
+852,890
+12.5
+831,235
+The Company's total liabilities were RMB
+742.6 billion, representing an increase of
+RMB 75.2 billion compared with that of
+the end of 2016, of which:
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+(3) Contingent Liabilities
+Please refer to "Material Guarantee
+Contracts and Their Performances" in the
+"Significant Events" section of this report.
+Share capital
+Total equity attributable to owners of the Company
+Non-current liabilities
+Current liabilities
+Total liabilities
+Non-current assets
+Current assets
+Total assets
+(1) Assets, liabilities and equity
+The major funding sources of the Company are its operating activities and short-term and long-term loans. The major use of funds includes
+operating expenses, capital expenditures, and repayment of the short-term and long-term debts.
+3 ASSETS, LIABILITIES, EQUITY AND CASH FLOWS
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+24
+24
+In 2017, the operating losses from
+corporate and others was RMB 4.48
+billion.
+In 2017, the operating expenses of
+corporate and others were RMB 979.3
+billion, representing an increase of 32.9%
+over 2016.
+was mainly attributed to the increase in
+international crude oil prices as well as
+increased revenue from crude oil trading
+business as compared with 2016.
+In 2017, the operating revenues
+generated from corporate and others
+were RMB 974.9 billion, representing
+an increase of 31.8% over 2016. This
+The business activities of corporate
+and others mainly consist of import
+and export business activities of the
+Company's subsidiaries, research and
+development activities of the Company,
+and managerial activities of headquarters.
+Reserves
+Non-controlling interests
+Total equity
+As of 31 December 2017, the Company's
+total assets were RMB 1,595.5 billion,
+representing an increase of RMB 96.9
+billion compared with that of the end of
+2016, of which:
+(4) Capital Expenditures
+Please refer to "Capital Expenditures"
+75,240
+667,374
+742,614
+(19,893)
+1,086,348
+1,066,455
+116,788
+In 2017, the operating profit of
+this segment was RMB 27.0 billion,
+representing an increase of RMB 6.4
+billion or 30.8% as compared with 2016.
+96,895
+2016
+1,498,609
+412,261
+1,595,504
+529,049
+2017
+31 December
+As of
+As of
+31 December
+Unit: RMB million
+(2) Cash Flow
+Non-current assets were RMB 1,066.5
+billion, representing a decrease of RMB
+Change
+4,478
+(36,641)
+(3.1)
+2017
+2016
+Change (%)
+54,273
+52,461
+3.5
+6,538
+5,904
+10.7
+60,680
+58,734
+3.3
+4,962
+4,505
+10.1
+17,080
+14,529
+17.6
+3,527
+Change (%)
+2016
+2016
+Average realised price (RMB/tonne)
+Year ended 31 December
+•
+.
+Depreciation, depletion and
+amortisation increased by RMB 4.9
+billion year on year;
+Impairment loss increased by RMB
+2.0 billion year on year;
+Personnel expenses increased by 1.7
+billion year on year;
+Resource Tax increased by RMB 1.0
+billion year on year, as a result of
+increase in crude oil price;
+Procurement cost increased by RMB
+15.1 billion year on year, as a result
+of expansion of LNG business;
+With the restructuring of Sichuan-
+to-East China Pipeline Co. in 2016,
+other expenses (net) increased by
+RMB 20.6 billion.
+In 2017, the oil and gas lifting cost was
+RMB 788.3 per tonne, representing a
+year on year increase of 0.3%.
+(4,484)
+(1,655)
+In 2017, the operating loss of the
+exploration and production segment
+were RMB 45.9 billion, representing
+an expanded loss by RMB 9.3 billion.
+as compared with 2016. By deducting
+the non-operating income from capital
+injection of Sichuan-to-East China
+Pipeline Co. in 2016, the Company
+realized a significant reduction in loss by
+RMB 11.3 billion in 2017.
+(2) Refining Segment
+Business activities of the refining
+segment include purchasing crude oil
+from third parties and the exploration
+and production segment of the Company,
+as well as processing crude oil into
+refined petroleum products. Gasoline,
+diesel and kerosene are sold internally to
+the marketing and distribution segment
+of the Company; part of the chemical
+feedstock is sold to the chemicals
+segment of the Company; and other
+refined petroleum products are sold
+externally to both domestic and overseas
+customers.
+In 2017, the operating revenues of this
+segment were RMB 1,011.9 billion,
+representing an increase of 18.2% over
+2016. This was mainly attributed to the
+increase in products prices.
+22
+22
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+The following table sets forth the sales volumes, average realised prices and the respective changes of the Company's major refined oil products
+of the segment in 2017 and 2016.
+Sales Volume (thousand tonnes)
+Year ended 31 December
+2017
+.
+in the "Business Review and Prospects"
+section of this report.
+The following table sets forth the sales volumes, average realised prices, and the respective percentage changes of the segment's four major
+refined oil products in 2017 and 2016, including breakdown in retail, direct sales and wholesale of gasoline and diesel:
+Other refined petroleum products
+Chemical feedstock
+Kerosene
+Diesel
+Gasoline
+15.8
+2,529
+2,929
+5.5
+55,742
+58,801
+24.0
+2,584
+3,204
+1.5
+36,408
+36,951
+25.3
+2,814
+In 2017, domestic gasoline and diesel
+prices were adjusted 17 times with 11
+increases and 6 decreases. The aggregate
+price increased (tax inclusive) of 90#
+gasoline and 0# diesel in 2017 were
+RMB 435 per tonne and 420 per tonne
+respectively.
+Average realised price (RMB/tonne)
+Year ended 31 December
+In 2017, sales revenues of gasoline
+were RMB 354.8 billion, representing an
+increase of 14.6% over 2016.
+The sales revenues of kerosene were RMB
+60.2 billion, representing an increase of
+47.3% over 2016.
+Sales Volume (Thousand tonnes)
+Year ended 31 December
+2017
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+and Analysis
+Management's Discussion
+and Analysis
+Management's Discussion
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017 23
+In 2017, the operating revenues of this
+segment were RMB 1,224.2 billion,
+representing an increase of 16.3% over
+2016, of which: the sales revenues of
+gasoline totaled RMB 582.9 billion,
+representing an increase of 17.7%
+compared with 2016; the sales revenues
+of diesel were RMB 449.2 billion,
+representing an increase of 9.0% over
+2016, and the sales revenues of kerosene
+were RMB 90.2 billion, representing an
+increase of 27.8% over 2016.
+The business activities of the marketing
+and distribution segment include
+purchasing refined oil products from
+the refining segment and third parties,
+conducting wholesale and direct sales to
+domestic customers and distributing oil
+products through the segment's retail
+and distribution network, as well as
+providing related services.
+(3) Marketing and Distribution Segment
+In 2017, the operating profit of the
+segment totaled RMB 65.0 billion,
+representing an increase of RMB 8.7
+billion or 15.5% as compared with 2016.
+tonne over 2016, mainly because of
+increased operating expenses resulting
+from newly operated facilities related to
+quality upgrading of refined oil products
+as well as safety enhancement and
+environment protection.
+In 2017, the unit refining cash operating
+cost (defined as operating expenses
+less the processing cost of crude oil
+and refining feedstock, depreciation and
+amortisation, taxes other than income
+tax and other operating expenses, then
+divided by the throughput of crude oil
+and refining feedstock) was RMB 175.2
+per tonne, an increase of RMB 9.5 per
+In 2017, refining gross margin was
+RMB 510.7 per tonne, representing
+an increase of RMB 38.8 per tonne
+compared with 2016. This is mainly
+due to the increased proportion of high
+value added products (volume of gasoline
+with high octane number and jet fuel
+increased by 0.7% and 5.6% over 2016
+and diesel to gasoline ratio down to 1.17),
+the promotion of quality upgrading of
+refined oil products (output of gasoline
+and diesel with GB V standard or above
+increased by 58% over 2016), enlarged
+total refinery throughput by increasing
+the export volume, and further improved
+margins for LPG, asphalt and other
+refined oil products by our centralized
+marketing advantages brought fully into
+play.
+2016. Total crude oil processed was
+230.30 million tonnes (excluding volume
+processed for third parties), representing
+an increase of 4.2% over 2016. The total
+cost of crude oil processed was RMB
+638.8 billion, representing an increase of
+31.8% over 2016.
+In 2017, the average processing cost
+for crude oil was RMB 2,774 per tonne,
+representing an increase of 26.4% over
+In 2017, the segment's operating
+expenses were RMB 946.8 billion,
+representing an increase of 18.4% over
+2016. This is mainly attributed to the
+increase in procurement cost of crude oil.
+The sales revenues of refined petroleum
+products other than gasoline, diesel,
+kerosene and chemical feedstock were
+RMB 172.2 billion, representing an
+increase of 22.2% over 2016.
+The sales revenues of chemical feedstock
+were RMB 118.4 billion, representing an
+increase of 25.8% over 2016.
+The sales revenues of diesel were RMB
+301.1 billion, representing an increase of
+13.8% over 2016.
+.
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+The following table sets forth the operating revenues, operating expenses and operating profit by each segment before elimination of the inter-
+segment transactions for the periods indicated, and the percentage change of 2017 compared to 2016.
+Change (%)
+2016
+2017
+Change (%)
+In 2017, the segment sold 35.31 million
+tonnes of crude oil, representing a
+decrease of 2.9% over 2016. Natural
+gas sales volume was 24.48 bcm,
+representing an increase of 19.1% over
+2016. Regased LNG sales volume was
+4.82 bcm, representing an increase of
+118.9% over 2016. LNG sales volume
+was 2.283 million tonnes, representing
+an increase of 43.7% over 2016. Average
+realised prices of crude oil, natural gas,
+regased LNG, and LNG were RMB 2,341
+per tonne, RMB 1,296 per thousand
+cubic meters, RMB 1,742 per thousand
+cubic meters, and RMB 3,056 per tonne,
+representing increase of 35.0%, 2.3%,
+2.0%, and 24.0% respectively over 2016.
+In 2017, the operating revenues of
+this segment were RMB 157.5 billion,
+representing an increase of 35.9% over
+2016. This was mainly attributed to the
+rise of realised price of crude oil and
+natural gas as well as expansion of LNG
+business.
+(1) Exploration and Production Segment
+Most crude oil and a small portion of the
+natural gas produced by the exploration
+and production segment were used for
+the Company's refining and chemical
+production. Most of the natural gas and
+a small portion of crude oil were sold
+externally to other customers.
+Elimination of inter-segment (loss)/profit
+Operating (loss)/profit
+Operating expenses
+Operating revenues
+Operating revenues
+Operating expenses
+Operating profit
+Corporate and Others
+Operating profit
+Chemicals Segment
+3,212
+1,581
+32.9
+736,735
+979,334
+31.7
+739,947
+Gasoline
+Retail
+974,850
+83,980
+8.2
+91,998
+89,146
+Diesel
+12.5
+4,812
+5,412
+26.8
+13,895
+17,616
+Direct sales and wholesale
+9.3
+6,722
+7,346
+4.2
+63,718
+66,364
+8.8
+6,380
+6,941
+77,613
+30.8
+20,623
+26,977
+18.2
+855,786
+1,011,853
+(45,944)
+33.3
+152,580
+203,449
+35.9
+115,939
+157,505
+Operating revenues
+Refining Segment
+Operating expenses
+Operating loss
+Operating revenues
+Exploration and Production Segment
+(%)
+Change
+2016
+RMB million
+Year ended 31 December
+2017
+RMB million
+Operating expenses
+946,846
+799,521
+18.4
+30.6
+314,491
+410,766
+30.6
+335,114
+437,743
+(1.8)
+32,153
+16.8
+5,039
+1,020,704
+1,052,857
+1,224,197
+1,192,628
+31,569
+Operating expenses
+Operating revenues
+Marketing and Distribution Segment
+15.5
+56,265
+65,007
+Operating profit
+16.3
+(5) Research & development expenses and
+environmental expenditures
+Research & development expenses
+refer to the expenses recognised as
+expenditures when they occur. In
+2017, the expenditure for research &
+development was RMB 6.423 billion.
+Refining Segment
+Environmental expenditures refer to
+the normal routine pollutant discharge
+fees paid by the Company, excluding
+capitalised cost of pollutant treatment
+properties. In 2017, the Company paid
+environmental expenditures of RMB 7.851
+billion.
+RMB million
+Operating revenues
+Year ended 31 December
+2017
+As a percentage of
+consolidated operating
+revenue after elimination
+of inter-segment sales
+Year ended 31 December
+of inter-segment sales
+Year ended 31 December
+As a percentage of
+consolidated operating
+revenue before elimination
+The following table shows the operating revenues by each segment, the contribution of external sales and inter-segment sales as a percentage
+of operating revenues before elimination of inter-segment sales, and the contribution of external sales as a percentage of consolidated operating
+revenues (i.e. after elimination of inter-segment sales) for the periods indicated.
+revenues.
+The Company manages its operations through four business segments, namely exploration and production segment, refining segment, marketing
+and distribution segment and chemicals segment, and corporate and others. Unless otherwise specified, the inter-segment transactions have not
+been eliminated from financial data discussed in this section. In addition, the operating revenue data of each segment include other operating
+2 RESULTS OF SEGMENT OPERATIONS
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+(8) Profit attributable to owners of the
+Company was RMB 51.2 billion,
+representing an increase of 9.8% year on
+year.
+(7) Profit attributable to non-controlling
+interests was RMB 19.2 billion,
+representing an increase of RMB 6.4
+billion compared with 2016.
+(6) Tax expense was RMB 16.3 billion,
+representing a decrease of 21.4% year on
+year. That was mainly due to the increase
+in exempt investment income.
+(5) Profit before taxation was RMB 86.7
+billion, after eliminating the impact
+of capital injection of the Sichuan-to-
+East China Pipeline Co. in 2016 and
+acquisition of interest in Shanghai SECCO
+in 2017, it represents an increase of
+38.9% compared with 2016.
+(4) Net finance costs were RMB 1.6 billion,
+representing a decrease of 76.4%
+over 2016, of which: interest expense
+decreased by RMB 2.1 billion over
+2016 as a result of significant reduction
+in interest bearing debt; net income
+from foreign exchange was RMB 0.3
+billion, increased by RMB 0.9 billion as
+compared with 2016; interest income
+increased by RMB 2.0 billion as a result
+of increased cash reserve as compared
+with the same period of 2016.
+(3) Operating profit was RMB 71.5 billion,
+representing a decrease of 7.4%
+compared with 2016. After eliminating
+the impact of capital injection of Sichuan-
+to-East China Pipeline Co. in 2016 and
+acquisition of interest in Shanghai SECCO
+in 2017, operating profit increased by
+19.2% year on year.
+Other operating (expense)/income, net
+were RMB 16.6 billion, increased by
+RMB 22.2 billion over the same period of
+2016. That was mainly due to the non-
+operating income from capital injection of
+Sichuan-to-East China Pipeline Co.
+Taxes other than income tax were RMB
+235.3 billion, representing an increase of
+1.4% compared with 2016.
+Personnel expenses were RMB 74.9
+billion, representing an increase of 17.2%
+over 2016. That was mainly because
+the Company promoted the reform of
+employment system, transferred some
+labours into contracted employees, which
+increased salary and other expenses. To
+implement the requirement of deepening
+the reform as required by the Central
+government, the Company handed over
+parts of its subsidiaries' social insurance
+to local government, and paid relevant
+fees according to the local government's
+requirements. As the Company improved
+its profit in 2017, income of employee
+was increased accordingly in line with its
+incentive mechanism.
+2016
+RMB million
+Exploration expenses were RMB 11.1
+billion, representing an increase of 0.5%
+year on year.
+2017
+(%)
+(%)
+100.0
+100.0
+(1,445,955) (1,168,732)
+2,360,193
+1,930,911
+100.0
+100.0
+*.
+Other operating revenues are included.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+21
+Management's Discussion
+and Analysis
+Management's Discussion
+and Analysis
+•
+External sales*
+Exploration and Production Segment
+Operating revenues
+2016
+3,099,643
+Depreciation, depletion and amortisation
+were RMB 115.3 billion, representing
+an increase of RMB 6.9 billion and
+6.4% as compared with 2016. That was
+mainly due to the depreciation, depletion
+and amortisation of the Exploration &
+Development Segment, which increased
+by RMB 4.9 billion over 2016.
+The Company's other purchasing
+expenses were RMB 469.2 billion,
+representing an increase of 27.6% over
+the same period of 2016. This was
+mainly due to the increase in prices of
+externally purchased oil related products
+in line with the increase in prices of
+crude oil.
+The first phase of Xinqi gas pipeline
+project mainly consists of pipeline
+from Qianjiang to Shaoguan with total
+length of 839.5 kilometres and designed
+transmission capacity of 6 billion cubic
+meters per year. It is expected to be
+completed and put into operation in
+July 2020. The Company's self-owned
+fund accounts for 38% of the project
+investment and bank loan is the main
+source of the remaining 62%. By the end
+of 2017, the aggregate investment was
+RMB 1.692 billion.
+(4) Xinqi pipeline project
+Zhongke integrated refining and
+petrochemical project consists mainly
+of a 10,000,000 tpa refinery, 800,000
+tpa ethylene unit, 300,000- tonne jetty
+and relevant utilities. The mechanical
+completion is expected to be achieved in
+June 2020. The Company's self-owned
+fund accounts for 30% of the project
+investment, bank loan is the main source
+for the remaining 70%. By the end of
+2017, the aggregate investment was RMB
+6.99 billion.
+(3) Zhongke integrated refining and
+chemical project
+The first phase of Tianjin LNG project
+with designed receiving capacity of 3
+million tonnes per year consists mainly
+of the construction of wharf, terminal and
+transportation pipelines. It was completed
+and put into operation at the end of
+January 2018. The Company's self-
+owned fund accounts for approximately
+40% of the project investment and bank
+loan is the main source of the remaining
+60%. By the end of 2017, the aggregate
+investment was RMB 10.651 billion.
+(2) Tianjin LNG project
+In accordance with the guidance of
+"overall deployment and stage-wise
+implementation", the second phase
+of production capacity building was
+promoted comprehensively in 2017. The
+Company's self-owned fund accounts for
+30% of the project investment and bank
+loan is the main source of the remaining
+70%. By the end of 2017, the aggregate
+realised investment was RMB 33.152
+billion and total production capacity was
+10 billion cubic meters per year.
+(1) Fuling shale gas project
+1 MAJOR PROJECTS
+SIGNIFICANT EVENTS
+FEFEREN
+Management's Discussion
+and Analysis
+27
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+693
+Less 264
+Less 957
+1,487
+Less 258
+Less 1,745
+6 SIGNIFICANT CHANGES IN MAJOR ASSETS DURING THE REPORTING PERIOD
+During the reporting period, there are no significant changes in the Company's major assets.
+Loss of asset disposal
+Non-operating income
+Non-business expenses
+The 2016 and 2015 comparative financial statements have been adjusted.
+(5) E-An-Cang gas pipeline project
+Selling, general and administrative
+expenses were RMB 65.0 billion,
+representing an increase of 1.0% over
+2016.
+The first phase of E-An-Cang gas pipeline
+project mainly consists of the main
+pipeline from Luquan to Cangzhou and
+two branch pipeline named Puyang and
+Baoding respectively. Total length of
+pipeline is 736 kilometres and designed
+transmission capacity is 9 billion cubic
+meters per year. It is expected to be
+completed and put into operation in
+December 2019. The Company's self-
+owned fund accounts for 30% of the
+project investment and bank loan is
+the main source of the remaining 70%.
+By the end of 2017, the aggregate
+investment was RMB 107 million.
+The first phase of Wen 23 gas storage
+project mainly consists of construction
+of injection and production wells and
+surface facilities with storage capacity
+of 8.431 billion cubic meters. The
+Company's self-owned fund accounts for
+30% of the project investment and bank
+loan is the main source of the remaining
+70%. By the end of 2017, the aggregate
+investment was RMB 1.329 billion.
+The Company's purchasing expense
+related to trading activities were RMB
+503.9 billion, representing an increase
+of 27.7% over the same period of 2016.
+This was mainly due to the increase in
+prices of externally purchased crude oil
+and refined oil products in the trading
+business.
+The Company's purchasing expenses of
+refined oil products were RMB 300.5
+billion, representing an increase of 23.3%
+over the same period of 2016. This was
+mainly due to the increase in prices of
+externally purchased refined oil products,
+which were in line with the increase in
+prices of crude oil.
+Crude oil purchasing expenses were RMB
+497.1 billion, representing an increase
+of 33.0% over the same period of 2016.
+Throughput of crude oil purchased
+externally in 2017 was 211.03 million
+tonnes (excluding the volume processed
+for third parties), representing an
+increase of 4.3% over the same period
+of 2016. The average cost of crude oil
+purchased externally was RMB 2,655 per
+tonne, representing an increase by 27.4%
+over 2016.
+Purchased crude oil, products and
+operating supplies and expenses were
+RMB 1,770.7 billion, representing an
+increase of 28.3% over the same period
+of 2016, accounting for 77.4% of the
+total operating expenses, of which:
+In 2017, the Company's operating
+expenses were RMB 2,288.7 billion,
+increased by 23.5% compared with 2016,
+and it is mainly due to the increase in
+prices of crude oil and other related
+petroleum and chemical products. The
+operating expenses mainly consisted of
+the following:
+(2) Operating expenses
+Chemical products sold by Chemicals
+Segment achieved external sales revenue
+of RMB 373.8 billion, representing an
+increase of 31.5% over 2016, accounting
+for 15.8% of the Company's total
+turnover and other operating revenues.
+This was mainly due to the increase
+in price and sales volume of chemical
+products.
+In 2017, petroleum products (mainly
+consisting of refined oil products and
+other refined petroleum products) sold
+by Refining Segment and Marketing and
+Distribution Segment achieved external
+sales revenues of RMB 1,324.4 billion,
+accounting for 56.1% of the Company's
+turnover and other operating revenues,
+representing an increase of 17.2%
+over 2016, mainly due to the increase
+in various refined oil products' prices.
+The sales revenue of gasoline, diesel
+and kerosene was RMB 1120.4 billion,
+representing an increase of 14.8%
+over 2016, and accounting for 84.6%
+of the total sales revenue of petroleum
+products. Turnover of other refined
+petroleum products was RMB 204.0
+billion, representing an increase of
+31.8% compared with 2016, accounting
+for 15.4% of the total sales revenue of
+petroleum products.
+Most crude oil and a small portion of
+natural gas produced by the Company
+were internally used for refining and
+chemical production, with the remaining
+sold to external customers. In 2017, the
+turnover from crude oil, natural gas and
+other upstream products sold externally
+amounted to RMB 69.2 billion, an
+increase of 45.8% over 2016. The change
+I was mainly due to the increase in crude
+oil prices and sales volume of natural gas
+in 2017.
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+and Analysis
+Management's Discussion
+20
+20
+Inter-segment sales
+Significant Events
+29
+29
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+(6) Wen 23 gas storage project
+3,806,148
+23.8
+25.6
+5.8
+5.6
+Inter-segment sales
+874,271
+747,317
+23.0
+24.2
+Operating revenues
+1,011,853
+855,786
+26.6
+27.7
+Marketing and Distribution Segment
+External sales*
+1,220,235
+1,049,377
+32.1
+33.9
+51.7
+3.5
+54.3
+3.6
+137,582
+79,701
+56,985
+2.1
+1.8
+77,804
+58,954
+2.0
+1.9
+157,505
+115,939
+4.1
+3.7
+817
+2017
+(%)
+2016
+(%)
+3.4
+3.0
+External sales*
+108,469
+Inter-segment sales
+Operating revenues
+3,962
+1,224,197
+437,743
+335,114
+11.5
+10.8
+6200
+16.5
+15.4
+534,547
+419,580
+14.0
+13.5
+22.6
+21.7
+440,303
+320,367
+11.6
+10.3
+974,850
+739,947
+1.2
+1.3
+38,614
+49,615
+3,480
+0.1
+0.1
+1,052,857
+32.2
+34.0
+Chemicals Segment
+External sales*
+External sales*
+Inter-segment sales
+Operating revenues
+Gains and losses on disposal of fixed assets and intangible assets
+of the Company in 2017 are under the item of asset disposal.
+Corporate and Others
+Operating revenues
+Operating revenue before elimination of
+inter-segment sales
+Elimination of inter-segment sales
+Consolidated operating revenue
+388,128
+296,500
+10.2
+9.6
+Inter-segment sales
+Content and Reasons for Changes of Accounting Policy
+Amount affected
+in 2015
+(RMB in millions)
+Amount affected
+in 2016
+(RMB in millions)
+Exploration and Production Segment
+1,930,911
+2,360,193
+(1,168,732)
+(1,445,955)
+Operating (loss)/profit
+Consolidated operating income
+Elimination of inter-segment sales
+739,947
+335,114
+437,743
+974,850
+1,052,857
+1,224,197
+855,786
+1,011,853
+Corporate and Others
+Chemicals Segment
+Marketing and Distribution Segment
+Refining Segment
+(47,399)
+115,939
+(58,531)
+64,047
+77,389
+86,965
+Consolidated operating profit
+22,465
+20,325
+Financial expenses, investment income, loss from changes in fair value, asset disposal income and
+other income
+1,581
+(1,655)
+Elimination of inter-segment sales
+2,912
+(3,160)
+Corporate and Others
+20,769
+22,796
+Chemicals Segment
+32,385
+32,011
+Marketing and Distribution Segment
+55,808
+Refining Segment
+157,505
+Exploration and Production Segment
+Operating income
+51,196
+Self-owned fund
+196
+51,196
+Funding source
+Impairment
+loss provision
+of the
+current year
+Accumulated
+variation of fair
+values recorded
+as equity
+Profits and
+losses from
+variation of fair
+values in the
+current year
+End of the year
+Beginning
+of the year
+Derivative financial instruments
+Cash flow hedges
+Total
+Stock
+available for sale financial assets
+profit or loss of the reporting period
+Structured Deposit
+Financial assets at fair value through
+Items
+Unit: RMB million
+Items relevant to measurement of fair values
+The Company has established sound decision-making mechanism, business process and internal control systems relevant to financial instrument
+accounting and information disclosure.
+196
+262
+178
+(9)
+2016
+RMB million
+Year ended 31 December
+2017
+RMB million
+(1) Under ASBE, the operating income and operating profit or loss by reportable segments were as follows:
+The major differences between the Company's financial statements prepared under ASBE and IFRS are set out in Section C of the financial
+statements of the Company from page 206 of this report.
+4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER ASBE
+(1,323)
+(54)
+Self-owned fund
+(1,314)
+Net profit attributable to equity shareholders of the Company
+103
+(4,024)
+(3,448)
+Self-owned fund
+(353)
+(522)
+314
+(9)
+178
+262
+Self-owned fund
+(1,617)
+49,235
+(6) Measurement of fair values of derivatives and relevant system
+51,119
+Operating profit: In 2017, the operating profit of the Company was RMB 87.0 billion, representing an increase of RMB 9.6 billion as compared
+with 2016.
+Corporate and Others
+(1.8)
+33.3
+30.6
+11.2
+386,111
+437,743
+Chemicals
+(0.8)
+17.2
+16.3
+7.6
+1,127,374
+1,224,197
+Marketing and Distribution
+(0.4)
+26.6
+18.2
+8.7
+974,850
+703,743
+963,246
+31.7
+Items affected
+5 THE CAUSE AND IMPACT OF THE CHANGE IN THE COMPANY'S ACCOUNTING POLICY
+Ministry of Finance issued "No.42 Accounting Standards for Business Enterprises - non-current assets held for sale, disposition and discontinuing
+operation”, revised “No.16 Accounting Standards for Business Enterprises-government grants" and Cai Kuai [2017] No. 30 “Announcement of the
+revision of general enterprise financial statements format." the Company has adopted the above guidelines to prepare financial statements of 2017
+and adjusted the 2016 and 2015 comparative financial statements retrospectively. The impact to the Company's financial statements is presented
+as below:
+Gross profit margin = (operation income - operation cost, tax and surcharges)/operation income.
+(0.8)
+26.7
+22.2
+9.9
+1,890,398
+2,360,193
+Total
+N/A
+N/A
+N/A
+N/A
+(1,444,300)
+(1,445,955)
+Elimination of inter-segment sales
+(0.6)
+32.6
+1.2
+11.8
+20.0
+35.9
+832,525
+180,541
+21,545
+(18,553)
+96,895
+1,498,609
+RMB million
+Change
+As of 31
+December 2016
+161,988
+854,070
+1,595,504
+RMB million
+As of 31
+December 2017
+Shareholders' equity
+Non-current liabilities.
+Total assets
+(2) Financial data prepared under ASBE
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Net profit: In 2017, the net profit attributable to the equity shareholders of the Company was RMB 51.1 billion, representing an increase of RMB
+4.7 billion or 10.1% comparing with 2016.
+At the end of 2017, the Company's total assets were RMB 1,595.5 billion, representing an increase of RMB 96.9 billion compared with that
+of the end of 2016. This was mainly due to the combined results of increase in crude oil price and improved cash flow, which resulted in an
+increase of current assets by RMB 116.8 billion.
+As the end of 2017, the Company's non-current liabilities were RMB 162.0 billion, representing a decrease of RMB 18.6 billion compared with
+that of the end of 2016. This was mainly due to the repayment of matured long term bonds payable and parts of the bond turned to non-current
+liabilities due within one year.
+At the end of 2017, the shareholders' equity of the Company was RMB 854.1 billion, representing an increase of RMB 21.5 billion compared
+with that of the end of 2016. This was mainly due to the increasing in the profit of the Company.
+(3) The results of the principal operations by segments
+(3.5)
+154,224
+157,505
+1,011,853
+Refining
+Exploration and Production
+basis (%)
+a year-on-year
+margin on
+of gross profit
+46,416
+Increase/
+(decrease)
+cost on
+Increase/
+(decrease)
+of operation
+a year-on-year
+basis (%)
+Increase/
+(decrease) of
+operation
+income on
+Gross profit
+margin* (%)
+RMB million
+Operation
+cost
+Operation
+income
+RMB million
+Segments
+a year-on-year
+basis (%)
+In 2017, the operating expenses of
+this segment were RMB 203.4 billion,
+representing an increase of 33.3%
+over 2016. That was mainly due to the
+following:
+Save as disclosed above, during
+the reporting period, Shanghai
+Petro granted no A share option in
+accordance with the Scheme, none of
+the share options was exercised by
+the Participant and none of the share
+option was cancelled or lapsed.
+amount
+Whether
+Amount of
+parties
+Name of
+Guarantor
+Company
+Sinopec Corp.
+The listed
+company
+itself
+guaranteed company
+Zhongtian Hechuang
+Energy Co., Ltd
+Amount
+13,520
+Transaction date
+(date of signing)
+completed
+overdue
+overdue Counter-
+(yes or
+Period of guarantee
+Whether
+Relationship
+with the
+connected
+for
+As of the date of this report, Sinopec Corp.
+had no undertakings in respect of profits,
+asset injections or asset restructuring that
+had not been fulfilled, nor did Sinopec Corp.
+make any profit forecast in relation to any
+asset or project.
+5 ANALYSIS OF INVESTMENT
+(1) General analysis of external equity
+investment
+In 2017, the external equity investment
+of the Company totalled RMB 10.369
+billion, mainly for acquisition of interest
+in Shanghai SECCO and subscribing
+for shareholding interest in China Boqi
+Environmental (Holding) Co., Ltd, by way
+of capital injection.
+(2) Significant equity investment
+On 27 April 2017, Sinopec Corp.,
+Sinopec Shanghai Gaoqiao Petrochemical
+Co., Ltd. (Gaoqiao Petrochemical) and
+BP Chemicals East China Investments
+Limited (BP Chemicals) entered
+into an equity interest purchase
+agreement. Pursuant to which,
+Gaoqiao Petrochemical aquired 50%
+shareholdings of Shanghai SECCO from
+BP Chemicals (Acquisition). Upon the
+completion of the acquisition, Shanghai
+SECCO is held as to 50% by Gaoqiao
+Petrochemical, 30% by Sinopec Corp.
+and 20% by Shanghai Petro. For more
+details, please refer to the announcement
+published in China Securities Journal,
+Shanghai Securities News and Securities
+Times by Sinopec Corp. on 28 April 2017
+and the announcement on the website of
+Hong Kong Stock Exchange on 27 April
+2017.
+6 SIGNIFICANT ASSETS AND EQUITY SALE
+During the reporting period, there is no
+significant assets or equity sale of the
+Company.
+Туре
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Significant Events
+36
+Significant Events
+SIGNIFICANT EVENTS (CONTINUED)
+7 MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE
+Major external guarantees (excluding guarantees for controlled subsidiaries)
+Unit: RMB million
+Whether
+guaranteed
+35
+or not
+or not
+guarantee guaranteed
+30 years from the date Joint liability
+YASRFE requires supply guarantee
+No
+No
+No
+No
+of hydrogen from Air
+Liquedie Arabia LLC.
+Sinopec Great Wall
+amount agreed,
+gurarantee
+on contract
+Energy and
+Zhong An United Coal
+Chemical Co., Ltd.
+performance
+940
+18 April 2014
+18 April 2014 -
+17 April 2026
+Joint liability
+guarantee
+No
+No
+Wholly owned
+subsidiary
+Since 2012, China Petrochemical
+Corporation has earnestly fulfilled its
+undertaking in eliminating competitions
+in chemical business with Sinopec Corp.
+through: (1) subscribing capital contribution
+of joint ventures controlled by Sinopec
+Corp., by way of injecting net assets of
+certain chemical business and cash; (2)
+authorising Sinopec Corp. to be in charge
+of production plan, management and sales
+of the remaining chemical business. The
+competition in chemical business between
+China Petrochemical Corporation and
+Sinopec Corp. has been eliminated.
+Limited
+Sinopec Refining
+no)*1
+25 May 2016
+25 May 2016.
+Joint liability
+No
+No
+No
+Yes
+Company(YASREF)
+31 December 2023
+(the mature date
+is estimated)
+Sinopec Corp.
+The listed
+Yanbu Aramco
+no specific
+31 December 2014
+company itself
+guarantee
+No
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+of the completion of such acquisition, after a thorough
+analysis from political, economic and other perspectives,
+Sinopec Corp. is entitled to require China Petrochemical
+Corporation to sell these assets to Sinopec Corp. China
+Petrochemical Corporation undertakes to transfer the
+assets as required by Sinopec Corp. under aforesaid
+items (i) and (ii) to Sinopec Corp., provided that the
+exercise of such option complies with applicable laws and
+regulations, contractual obligations and other procedural
+requirements.
+Exercise price: RMB3.85/share
+(iii) Outstanding share options of
+Directors, chief executive and
+substantial shareholder as at the end
+of the Reporting Period
+As at the end of the Reporting Period,
+the total number of outstanding A
+shares share options held by the
+following 4 persons, Vice Chairman
+and Vice President of Shanghai Petro
+Mr. Gao Jinping, Director and Vice
+President of Shanghai Petro Mr. Jin
+Qiang, Director, Vice President and
+Secretary to the Board of Shanghai
+Petro Mr. Guo Xiaojun and Vice
+President of Shanghai Petro Mr.
+Jin Wenmin were 966,000 options.
+Former Director, Vice President and
+Chief Financial Officer of Shanghai
+Petro Mr. Ye Guohua resigned on
+26 January 2017. Pursuant to the
+Share Option Incentive Scheme,
+430,000 outstanding A share options
+granted to him have lapsed. Former
+Chairman and President of Shanghai
+Petro Mr. Wang Zhiqing resigned
+on 4 Decemeber 2017. Pursuant to
+the Share Option Incentive Scheme,
+300,000 outstanding A share options
+granted to him have lapsed. Please
+refer to Shanghai Petro's Annual
+Report for details of "Share options
+held by the Directors, Supervisors
+and senior management during the
+Reporting Period".
+(iv) Outstanding share options granted
+to employees other than the persons
+mentioned in item (iii)
+At the beginning of the report period,
+a total number of 35,970,000
+outstanding A shares share options
+were held by Shanghai Petro's key
+business personnel.
+During the reporting period, a total
+number of 13,332,600 share options
+had been exercised by Shanghai
+Petro's key business personnel during
+the first exercise period.
+During the reporting period, a total
+of 4,498,900 A shares share options
+granted to Shanghai Petro's key
+business personnel had been lapsed
+due to their resignations and etc,.
+At the end of the Reporting Period,
+the number of outstanding A shares
+share options held by Shanghai
+Petro's key business personnel was
+18,138,500.
+(v) Exercise price of the initial grant and
+exercise price adjustment
+According to the principle
+disclosed by Shanghai Petro on the
+determination of exercise price, the
+exercise price of the initial grant was
+RMB4.20 per share (in the event of
+dividends payment, capitalisation
+of capital reserves, bonus issue,
+subdivision or reduction of shares
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+or allotment of shares during the
+validity period, the exercise price
+shall be adjusted according to the
+Share Option Incentive Scheme). On
+15 June 2016, the 2015 annual profit
+distribution plan was considered and
+passed at Shanghai Petro's 2015
+annual general meeting, whereby cash
+dividend of RMB1.00 was paid for
+each 10 shares. On 15 June 2017,
+the 2016 annual profit distribution
+plan was considered and passed at
+Shanghai Petro's 2016 annual general
+meeting, whereby cash dividend of
+RMB2.50 was paid for each 10 shares
+and the exercise price was adjusted
+to RMB3.85 per share accordingly.
+(vi) Validity of and exercise arrangements
+for the initial grant
+The validity period of the share
+options shall be five years
+commencing from the grant date, but
+is subject to exercise arrangement
+of the Scheme. Please refer to the
+section "Validity Period" on Page 32
+of Sinopec Corp.'s 2015 annual report
+published on 29 March 2016.
+(vii) The progress of share option incentive
+up to the date of Shanghai Petro's
+2017 annual report
+On 8 January, 2018, Shanghai Petro
+deliberated and approved proposal
+on Adjustment of the Participants
+List and Numbers of Share option
+for A-share Share option Incentive
+Scheme of Shanghai Petro and the
+proposal on the Satisfaction of the
+Conditions of the Second Exercise
+Period of Share option Granted
+under First Grant and Determination
+of the Exercise Arrangement (e.g.
+Exercise Date., etc) for A-share
+Share option Incentive Scheme of
+Shanghai Petro on the 9th meeting
+of the sixth session of the board of
+Shanghai Petro. The non-exercised
+share options which were granted to
+4 participants shall be lapsed and
+cancelled due to their resignations;
+The non-exercised share options for
+the second exercising period which
+were granted to 2 participants shall
+be cancelled due to their failing in
+the performance appraisals in 2016;
+and the share options granted to 8
+participants has been adjusted and
+cancelled by resolutions on the third
+meeting of the ninth session of the
+board of Shanghai Petro held on on
+23 August 2017 due to their changes
+of internal positions. After adjustment,
+the total amount of share option for
+cancellation shall be 820,700 and the
+total amount of granted non-exercised
+share options shall be 18,583,800.
+185 participants can exercise the
+share option in second exercising
+period; and the number of exercisable.
+share options in the second exercising
+period is 9,636,900. On 14 February
+2018, Shanghai Petro completed
+registration for newly increased
+9,636,900 A shares and the total
+issued shares Shanghai Petro were
+increased to 10,823,813,500. As of
+the date of Shanghai Petro's 2017
+annual report, the total number of
+issued shares of Shanghai Petro is
+10,823,813,500 shares.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Number of participants who exercised
+the option: 199
+Date of completing registration for
+newly increased shares:
+27 September 2017
+Number of exercised share option:
+14,176,600 options
+Number of lapsed share option:
+5,228,900 options
+500 million, with an annual interest rate
+of 4.250%. These notes were listed on the
+Hong Kong Stock Exchange on 25 April
+2013, with interest payable semi-annually.
+The first payment of interest was on 24
+October 2013. During the reporting period,
+the Company has paid in full the current-
+period interests of all notes with maturity of
+5 years, 10 years and 30 years.
+SHARE OPTION INCENTIVE SCHEME OF
+SINOPEC CORP.'S SUBSIDIARY, SINOPEC
+SHANGHAI PETROCHEMICAL COMPANY
+LIMITED (SHANGHAI PETRO), DURING THE
+REPORTING PERIOD
+Pursuant to the requirements of the Hong
+Kong Listing Rules, the resolution relating to
+the Shanghai Petro A Share Option Incentive
+Scheme (Draft) was considered and passed
+at the 18th meeting of the fifth session of
+the Board and the first extraordinary general
+meeting of Sinopec Corp. for 2014. The
+Share Option Incentive Scheme (Scheme)
+came into effect on 23 December 2014 with
+a validity period of 10 years. The expiry date
+of the Scheme is 22 December 2024. Under
+the Scheme, the total number of underlying
+shares to be granted shall neither exceed
+10% of the total share capital of Shanghai
+Petro (10,800 million shares) nor exceed
+10% of the total A share capital of Shanghai
+Petro (7,305 million shares). As of the
+date of the 2017 annual report of Shanghai
+Petro, the number of the underlying shares
+of the share options to be exercised by
+Shanghai Petro to the participants was
+8,946,900 A shares, which represents 0.08%
+of the total share capital of Shanghai Petro
+(10,823,813,500 shares). As of the date of
+the 2017 annual report of Shanghai Petro,
+the number of the underlying shares of the
+share options to be granted by Shanghai
+Petro to the participants was 691,740,000
+A shares, which represents 6.4% of the
+total share capital of Shanghai Petro
+(10,823,813,500 shares). The vesting period
+for each grant under the Scheme shall be no
+less than two years.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+31
+Significant Events
+32
+33
+32
+SIGNIFICANT EVENTS (CONTINUED)
+(1) Summary of the Scheme
+For the details of the purpose of the
+Scheme, eligible participants and
+maximum entitlement of each participant,
+underlying shares and incentive
+instrument, validity period and the basis
+for the exercise price, please refer to
+page 31.33 of Sinopec Corp's 2015
+Annual Report published on 29 March
+2016.
+(2) Information on the Initial Grant of the
+Share Option
+(i) Initial Grant of the Share Option:
+Grant Date: 6 January 2015
+Number of Participants: 214 persons
+Number of Share Options Granted:
+38,760,000
+(ii) The exercise condition of the first
+grant of first exercise schedule of
+share option
+Exercise date: 29 August 2017
+Number of exercisable share option:
+14,212,500 options
+Significant Events
+Significant Events
+Significant Events
+SIGNIFICANT EVENTS (CONTINUED)
+Within five years, commencing from Yes
+15 March 2012
+Yes
+Within 10 years after 29 April
+2014 or the date when China
+Petrochemical Corporation acquires
+the assets
+Yes
+Yes
+Compliance with the connected transaction
+agreements;
+2 Solving the issues regarding the legality of land-
+use rights certificates and property ownership rights
+certificates within a specified period of time;
+3 Implementation of the Reorganisation Agreement
+(please refer to the definition of Reorganisation
+Agreement in the H share prospectus of Sinopec
+Corp.);
+Yes
+Granting licenses for intellectual property rights;
+5
+Avoiding competition within the same industry;
+6
+Abandonment of business competition and conflicts
+of interest with Sinopec Corp.
+China Petrochemical China Petrochemical Corporation would dispose of its
+Corporation minor remaining chemicals business within five years
+China Petrochemical
+Corporation
+in order to avoid competition with Sinopec Corp. in the
+chemicals business.
+Given that China Petrochemical Corporation engages in
+the same or similar businesses as Sinopec Corp. with
+regard to the exploration and production of overseas
+petroleum and natural gas, China Petrochemical
+Corporation hereby grants a 10-year option to Sinopec
+Corp. with the following provisions: (i) after a thorough
+analysis from political, economic and other perspectives,
+Sinopec Corp. is entitled to require China Petrochemical
+Corporation to sell its overseas oil and gas assets
+owned as of the date of the undertaking and still in its
+possession upon Sinopec Corp.'s exercise of the option
+to Sinopec Corp.; (ii) in relation to the overseas oil and
+gas assets acquired by China Petrochemical Corporation
+after the issuance of the undertaking, within 10 years
+4
+34
+No
+deadline or not
+4 PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION
+Background
+Type of
+Undertaking
+Party
+Contents
+Undertakings related to Initial
+Initial Public
+Public Offerings (IPOs)
+performed or not
+Offerings (IPOs)
+(IPOs)
+Other undertakings
+Other
+Other undertakings
+Other
+Whether bears
+Whether strictly
+Term for performance
+From 22 June 2001
+China Petrochemical 1
+Corporation
+No
+Chemical
+Industry Co., LTD
+☑ Poverty alleviation through agriculture and forestry development
+☑ Poverty alleviation through tourism development
+☑ Poverty alleviation through e-commerce
+☑Poverty alleviation through assets income
+☑ Poverty alleviation through science and technology development
+1.2 Number of poverty alleviation programs
+1.3 Input in poverty alleviation projects through
+industrial development
+1.4 Number of people lifted out of poverty
+2. Poverty elimination through provision of employment
+2.1 Input in professional skill training
+2.2 Participants of professional skill trainings (person time)
+2.3 Number of people employed
+3. Poverty elimination through relocation
+3.1 Number of relocated people provided with employment
+4. Poverty elimination through education
+4.1 Input in students funding
+4.2 Number of students who received funding assistance
+4.3 Input in education resources in poverty-stricken areas
+5. Poverty alleviation through healthcare
+27,759
+3.69
+124.53
+Data
+19 ENVIROMENTAL PROTECTION BY SINOPEC
+CORP AND ITS SUBSIDIARIES
+In 2017, the Company further improved
+environment protection management of
+projects construction, enhanced evaluation
+and examination of projects environment
+protection, as well as ensuring the
+environment protection facilities to be
+designed, built and put into operation with
+the main project simultaneously. All of
+the new projects of the Company obtained
+environmental evaluation approvals by
+governments. The Company, pursuant to
+new standards in respect of oil refining and
+petrochemicals, completed the treatment
+of effluents, actively pushed forward the
+comprehensive treatment of volatile organic
+compounds, and ensured all of pollution
+prevention and control facilities operated
+effectively and stably. The Company revised
+the self-monitoring scheme in accordance
+with the national pollutants discharge
+license and guidance for self-monitoring
+technology of relevant industries, promoted
+relevant work in accordance with new
+requirements for monitoring effluents,
+and disclosed environmental monitoring
+information publicly in accordance
+with relevant requirements; revised the
+contingency schemes in respects of
+environmental emergencies and severe
+pollution weather and others in accordance
+with requirements of national environmental
+emergencies contingency schemes. For
+more detailed information, please refer
+to our Communication on Progress for
+Sustainable Development. Certain branches
+and subsidiaries of Sinopec Corp. are
+major pollutant discharging companies as
+stipulated by China's environment protection
+authorities. Pursuant to relevant regulations
+and specific requirements of local related
+authorities, environmental information of
+those companies has been disclosed publicly.
+For more details, please refer to the website
+of local government.
+20 POVERTY ALLEVIATION PROGRAM
+LAUNCHED BY SINOPEC CORP.
+(1) Targeted Poverty Alleviation Plan
+The Company has strictly followed the
+nation's poverty elimination program
+under the thirteenth five-year plan,
+and the fundamental principles of
+poverty alleviation and elimination. The
+Company focused on increasing fund
+input, enhancing fund management,
+targeted poverty alleviation, innovation,
+supervision, guaranteeing work efficiency
+to ensure the effectiveness of the targeted
+poverty alleviation plan.
+(2) Overview on 2017 Targeted Poverty
+Alleviations
+In 2017, the Company implemented 44
+targeted poverty elimination programs
+in Yingshang county, Yuexi county,
+Fenghuang county, Luxi county, Yuepuhu
+county and Dongxiang county, mainly
+including rural industry development,
+village tourism development, labor output
+trainings and education assistance. We
+input RMB 128.22 million in targeted
+poverty alleviation, helped 27,759
+registered people out of poverty and
+funded the education of 3,146 students.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+5.1 Input in medical and health care resources in proverty-striken
+(3) 2017 Targeted Poverty Alleviation Work Statistics
+I.
+Index
+Overview
+1.
+Funds
+2. Value of goods and materials
+3. Number of people lifted out of poverty
+II. Input breakdowns
+1. Poverty elimination through industrial development
+1.1 Categories of poverty alleviation programs through
+industrial development
+Unit: RMB million
+areas
+6. Poverty alleviation through ecological protection
+6.1 Items
+3.05
+3,146
+5.96
+8.65
+1.05
+0.27
+386
+0.48
+4,275
+513
+49.26
+1.58
+261
+21.57
+13,852
+(4) 2018 Targeted Poverty Alleviation Plan
+In 2018, we will further enhance our efforts on targeted poverty alleviation and elimination, continual focusing on poverty alleviation in extreme
+poverty areas, targeted assistance for special people in poverty, and solving the most urgent problems of the people in poverty. We will optimise
+the measures of poverty alleviation by strengthening education and training, industrial development and expanding local products trade through
+EasyJoy convenience stores etc., to eliminate poverty and enhance people's sense of satisfaction.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+0.01
+Sinopec Corp. did not implement any share
+incentive scheme during the reporting period.
+1,669
+0.62
+6.2 Input in ecological protection
+7. Guarantee basic living standard
+7.1 Input in left-behind children, women and senior people
+7.2 Number of left-behind children, women and senior people
+assisted
+7.3 Input in assisting the disabled
+7.4 Number of the disabled helped
+8. Poverty alleviation through social projects
+8.1 Input in coordinated poverty alleviation
+in East and West China
+4,316
+8.2 Input in targeted poverty alleviation programs
+8.3 Public Welfare funds for poverty alleviation
+9.1 Number of projects
+9.2 Total input
+9.3 Number of people lifted out of poverty
+✓ Others
+☑ Conduct ecological protection and construction
+☑ Develop ways for ecological protection and compensation
+☑ Set up ecological public welfare positions
+✓ Others
+275
+32.02
+13,907
+9. Other projects
+18 DETAILED IMPLEMENTATION OF THE
+SHARE INCENTIVE SCHEME DURING THE
+REPORTING PERIOD
+17 STRUCTURED ENTITY CONTROLLED BY
+THE COMPANY
+None
+16 APPROPRIATION OF NONOPERATIONAL
+FUNDS BY THE CONTROLLING
+SHAREHOLDER AND ITS RELATED PARTIES
+AND THE PROGRESS FOR CLEARING UP
+Not applicable
+Total amount of the above three guarantee items (C+D+E)
+Statement of guarantee undue that might be involved in any joint and several liabilities
+Statement of guarantee status
+*1: As defined in the Listing Rules of the Shanghai Stock Exchange.
+2,325
+19,813
+5,881
+23,783
+The amount of guarantees in excess of 50% of the net assets (E)
+43,596
+1.794
+2,491
+None
+4,285
+None
+None
+*2: The amount of guarantees provided during the reporting period and the outstanding balance of guarantees amount at the end of the reporting period include the
+guarantees provided by the controlled subsidiaries to external parties. The amount of the guarantees provided by these subsidiaries is derived from multiplying the
+guarantees provided by Sinopec Corp.'s subsidiaries by the percentage of shareholding of Sinopec Corp. in such subsidiaries.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+5.99%
+8 SPECIFIC STATEMENTS AND INDEPENDENT
+OPINIONS FROM INDEPENDENT NON-
+EXECUTIVE DIRECTORS REGARDING
+EXTERNAL GUARANTEES PROVIDED BY
+SINOPEC CORP. DURING AND BY THE END
+OF 2017:
+Amount of debt guarantees provided directly or indirectly to the companies with liabilities to assets ratio over 70% (D)
+The proportion of the total amount of guarantees to the Sinopec Corp.'s net assets
+SSI
+Controlled
+New Bright International 9,732
+subsidiary
+Development Ltd./
+Joint liability
+guarantee
+No
+No
+Guarantees provided for shareholder, de facto controller and its related parties (C)
+Yes
+Sonangol E.P./SSI15
+Total amount of guarantees provided during the reporting period *2
+Total amount of guarantees outstanding at the end of reporting period*2 (A)
+Guarantees by the Company to the controlled subsidiaries
+Total amount of guarantee provided to controlled subsidiaries during the reporting period
+Total amount of guarantee for controlled subsidiaries outstanding at the end of the reporting period (B)
+Total amount of guarantees for the Company (including those provided for controlled subsidiaries)
+Total amount of guarantees(A+B)
+No
+3
+We, as independent directors of Sinopec
+Corp., hereby make the following statements
+after conducting a thorough check of external
+guarantees provided by the Company
+accumulated up to and during 2017 in
+accordance with the requirements of the
+domestic regulatory authorities:
+We hereby present the following opinions:
+Sinopec Corp. shall continue to strengthen
+its management and actively monitor
+guarantee risks. It shall strictly follow the
+approval and disclosure procedures in
+relation to guarantee businesses for any new
+external guarantees provided thereafter.
+0.215
+balance
+0.6
+0.215
+(3) Other asset management and derivative investment
+During the reporting period, the Company has no other asset management or derivative investment subject to disclosure obligation.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Overdue and
+uncollected
+None
+None
+0.6
+37
+38
+Significant Events
+SIGNIFICANT EVENTS (CONTINUED)
+15 DEPOSITS AT SINOPEC FINANCE CO., LTD.
+AND SINOPEC CENTURY BRIGHT CAPITAL
+INVESTMENT, LTD.
+In order to regulate connected transactions
+between the Company and Sinopec Finance
+Co., Ltd. (Sinopec Corp.'s domestic
+settlement center, hereinafter referred to
+as the Finance Company) and to ensure the
+safety and liquidity of the deposits of the
+Company in the Finance Company, Sinopec
+Corp. and the Finance Company formulated
+the Risk Control System on Connected
+Transactions between China Petroleum &
+Chemical Corporation and Sinopec Finance
+Co., Ltd., which covers the risk control
+system and the risk management plan of the
+Company to prevent financial risks and to
+ensure that the deposits of the Company in
+the Finance Company can be utilised at the
+Company's discretion. At the same time, as
+the controlling shareholder of the Finance
+Company, China Petrochemical Corporation
+undertakes that in case of an emergency
+where the Finance Company has difficulty
+in making payments, China Petrochemical
+Corporation will increase the capital of
+the Finance Company in accordance with
+the actual need for the purpose of making
+payment.
+In order to regulate connected transactions
+between the Company and Sinopec Century
+Bright Capital Investment, Ltd. (Sinopec
+Corp.'s overseas settlement center,
+hereinafter referred to as the Century Bright
+Company), Century Bright Company ensures
+the safety of the deposits of the Company in
+Century Bright Company by strengthening
+internal risk controls and obtaining support
+from China Petrochemical Corporation.
+China Petrochemical Corporation has
+formulated a number of internal rules,
+including the Rules for the Internal Control
+System, the Rules for Implementation of
+Overseas Capital Management Methods, and
+the Provisional Methods for Overseas Fund
+Platform Management, to impose strict rules
+on Century Bright Company for providing
+overseas financial services. Century Bright
+Company has also established the Rules for
+the Implementation of the Internal Control
+System, which ensures the standardisation
+and safety of its corporate deposits business.
+At the same time, as the wholly controlling
+shareholder of Century Bright Company,
+China Petrochemical Corporation entered
+into a keep-well agreement with Century
+Bright Company in 2013, in which China
+Petrochemical Corporation undertakes that
+when Century Bright Company has difficulty
+in making payments, China Petrochemical
+Corporation will ensure that Century Bright
+Company will fulfill its repayment obligation
+through various channels.
+The deposits of the Company in the Finance.
+Company and Century Bright Company
+during the reporting period did not exceed
+the cap as approved at the general meeting
+of shareholders. During daily operations,
+Sinopec Corp. can withdraw the full amount
+of its deposits in the Finance Company and
+Century Bright Company.
+Significant Events
+The external guarantees prior to 2017 had
+been disclosed in previous annual report.
+The aggregate balance of external guarantees
+provided by Sinopec Corp. for the year 2017
+was RMB 43.596 billion, accounting for
+approximately 5.99% of the Company's net
+assets.
+Amount
+Source of fund
+Self-owned fund
+Self-owned fund
+9 SIGNIFICANT LITIGATION, ARBITRATION
+RELATING TO SINOPEC CORP.
+No significant litigation, arbitration relating
+to the Company occurred during the
+reporting period.
+10 INSOLVENCY AND RESTRUCTURING
+During the reporting period, the Company
+was not involved in any insolvency or
+restructuring matters.
+11 OTHER MATERIAL CONTRACTS
+Saved as disclosed by Sinopec Corp., the
+Company did not enter into any significant
+contracts subject to disclosure obligations
+during the reporting period.
+12 CREDIBILITY FOR THE COMPANY,
+CONTROLLING SHAREHOLDERS AND DE
+FACTO CONTROLLER
+Outstanding
+During the reporting period, the Company
+and its controlling shareholder did not have
+any unperformed court's effective judgments
+which should be performed or any large
+amount of debt which should be repaid.
+14 ENTRUSTED ASSET MANAGEMENT AND ENTRUSTED LOANS
+(1) Entrusted Asset Management
+During the reporting period, the Company has no entrusted asset management subject to disclosure obligation.
+(2) Entrusted loans
+Unit:RMB billion
+Categories
+Used for project construction.
+Used for working capital
+13 TRUSTEESHIP, CONTRACTING AND LEASES
+During the reporting period, the Company
+was not involved in any events relating to
+significant trusteeship, contracting or leases
+for the assets of any other company, nor has
+it placed its assets with any other company
+under a trusteeship, contracting or lease
+agreement subject to disclosure obligations.
+39
+On 18 April 2013, Sinopec Capital (2013)
+Limited, a wholly-owned overseas subsidiary
+of Sinopec Corp., issued senior notes
+guaranteed by Sinopec Corp. with four
+different maturities, 3 years, 5 years,
+10 years and 30 years. The 3-year notes
+principal totaled USD 750 million, with an
+annual interest rate of 1.250% and had
+been repaid and delisted; the 5-year notes
+principal totaled USD 1 billion, with an
+annual interest rate of 1.875%; the 10-year
+notes principal totaled USD 1.25 billion,
+with an annual interest rate of 3.125%; and
+the 30-year notes principal totaled USD
+100
+100
+12石化02
+122150
+15石化01
+136039
+15石化02
+136040
+21 May 2010
+1 June 2012
+19 November 2015
+21 May 2020
+1 June 2017
+1 June 2022
+19 November
+19 November
+2018
+122149
+2020
+9
+13
+0
+7
+16
+4
+7
+16
+4
+4.05
+4.26
+4.90
+3.30
+3.70
+9
+12石化01
+2015 Corporate bond (first issue)
+Sinopec Corp.
+During the reporting period, the Company
+paid in full the interest accrued for the other
+bonds and debt financing instruments. As
+at 31 December 2017, the standby credit
+line provided by several domestic financial
+institutions to the Company was RMB 361.9
+billion in total, facilitating the Company to
+get such amount of unsecured loans. During
+the reporting period, the Company fulfilled
+relevant undertakings in the offering circular
+of corporate bonds. During the reporting
+period, Sinopec Corp. had no significant
+matters which could influence the Company's
+operation and debt paying ability.
+30
+Significant Events
+SIGNIFICANT EVENTS (CONTINUED)
+2 CORPORATE BONDS ISSUED AND INTEREST PAYMENTS
+Basic information of corporate bonds
+Bond name
+Code
+Abbreviation
+Issuance date
+Maturity date
+Amount issued (RMB billion)
+Outstanding balance (RMB billion)
+Interest rate (%)
+Principal and interest repayment
+Payment of interests
+Investor Qualification Arrangement
+Listing place
+Corporate bonds trustee
+Credit rating agency
+Use of proceeds
+Credit rating agency
+Credit addition mechanism, repayment scheme and other
+relative events for corporate bonds
+during the reporting period
+Convening of corporate bond holders' meeting
+Performance of corporate bonds trustee
+Sinopec Corp.
+2010 Corporate bond
+10石化02
+122052
+Sinopec Corp.
+2012 Corporate bond
+Simple interest is calculated and paid on an annual basis without compounding interests. The principal will be paid
+at maturity with last installment of interest.
+Sinopec Corp. had paid in full the interest accrued for the current period interest payment year and [1201]
+had been repaid and delisted from the Shanghai Stock Exchange.
+Significant Events
+Shanghai Stock Exchange
+EBITDA to total debt ratio
+1.11
+0.99
+0.12
+Reasons for change
+Mainly due to the increase of earnings compared
+with last year
+Mainly due to the increase of cash at bank and on
+hand, structured deposit and inventories compared
+with last year
+Mainly due to the increase of cash at bank and on
+hand and structured deposit compared with last
+year
+Mainly due to the increase of non-interest-bearing
+debts compared with last year
+Mainly due to the increase of earnings
+Interest coverage ratio
+14.60
+9.85
+points
+4.74
+Cash flow interest coverage ratio
+39.11
+35.13
+3.99
+EBITDA-to-interest coverage ratio
+32.59
+21.78
+10.81
+Mainly due to the increase of earnings
+Loan repayment rate (%)
+Interest payment rate (%)
+100
+1501 and 15102 were publicly offered to qualified investors in accordance with Administration of the Issuance
+and Trading of Corporate Bonds
+100
+Mainly due to the increase of non-interest-bearing
+debts compared with last year
+2.02
+percentage
+Mainly due to the decrease of interest expense in
+cash.
+46.47
+44.45
+China International Capital Corporation Limited
+Huang Xu, Zhai Ying
+(010) 6505 1166
+27th-28th Floor, China World Office 2, 1 Jianguomenwai Avenue, Chaoyang District, Beijing
+12th Floor, PICC building, No.2 Jianguomenwai Avenue, Chaoyang District, Beijing
+Proceeds from the above-mentioned corporate bonds have been used for their designated purpose disclosed in the
+relevant announcements. All the proceeds have been completely used.
+During the reporting period, United Credit ratings Co., Ltd. provided continuing credit rating for 1002, 12
+01, 1202, 1501 and 1502and reaffirmed AAA credit rating. The long term credit rating and outlook of
+the. remained at AAA and stable respectively. Pursuant to relevant regulations, the Company will publish latest credit
+rating results through medias designated by regulators within two months commencing from the announcement date
+of annual report.
+During the reporting period, there is no credit addition mechanism and change of the repayment arrangement for the
+above-mentioned corporate bonds Sinopec Corp. strictly followed the provisions in the corporate bond prospectus to
+repay principals and interests of the corporate bonds.
+During the reporting period, the bondholders' meeting has not been convened.
+During the durations of the above-mentioned bonds, the bond trustee, China International Capital Corporation
+Limited, has strictly followed the Bond Trustee Management Agreement and continuously tracked the Company's
+credit status, utilisation of bond proceeds and repayment of principals and interests of the bond. The bond trustee
+has also advised the company to satisfy obligations as described in the corporate bond prospectus and exercised its
+duty to protect the bondholders' legitimate rights and interests. The bond trustee is expected to disclose the Trustee
+Management Affairs Report after disclosure of the Company's annual report. The full disclosure will be available on
+the website of Shanghai Stock Exchange (http://www.sse.com.cn)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Principal accounting data and financial indicators for the two years ended 31 December 2017
+Principal data
+United Credit ratings Co., Ltd.
+EBITDA (RMB million)
+2017
+0.06
+0.53
+Quick ratio
+0.06
+0.59
+Liability-to-asset ratio (%)
+0.91
+Current ratio
+Change
+5.63%
+2016
+196,464
+0.85
+207,528
+(17)
+(1,290)
+38
+28,306
+Connected Transactions
+*: affiliated companies include subsidiaries, associates and joint ventures.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+55
+29,596
+41
+Reason for provision of funds between related parties
+Impacts on the Company
+Loans and other accounts receivable and payable
+No material negative impact
+Balance at
+the end of
+the year
+28,268
+(6,756)
+1,678
+(4,330)
+6,008
+32,472
+(1,273)
+Funds from related parties
+Balance
+Unit: RMB million
+Amount
+incurred
+of the year
+29,541
+24,038
+at the
+beginning
+25,716
+CORPORATE GOVERNANCE
+5
+1 IMPROVEMENTS IN CORPORATE
+Sinopec Corp. has established and is
+continuously improving the fairness and
+transparency of its performance appraisal
+standards, incentive schemes and
+Balance
+Amount at the end
+incurred of the year
+(2,426)
+INCENTIVE SCHEMES
+8 SENIOR MANAGEMENT APPRAISAL AND
+CORPORATE GOVERNANCE
+Chairman's Statement
+43
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+7 IMPROVEMENT AND IMPLEMENTATION OF
+THE INTERNAL CONTROL SYSTEM
+For details of internal control self-assessment
+and internal control auditing, please refer to
+the internal control assessment report and
+the internal control auditing report disclosed
+by the Company on the same day of this
+annual report.
+COMPETITION BETWEEN SINOPEC CORP
+AND ITS CONTROLLING SHAREHOLDER
+Please refer to "Performance of Undertaking
+by China Petrochemical Corporation" under
+the section "Significant Events" in this
+annual report for details.
+The Company is independent from its
+controlling shareholder in terms of, among
+other matters, business, assets and
+finances. The Company has a well-integrated
+independent business and independent
+operational capabilities.
+COMPANY'S INDEPENDENCE FROM
+CONTROLLING SHAREHOLDER
+During the reporting period, the independent
+non-executive directors of Sinopec Corp.
+fulfilled their duties in good faith as required
+by laws and regulations and the Articles
+of Association, and actively contributed
+to the development of the Company.
+They actively attended Board meetings
+and meetings of the Board committees
+(please refer to the Report of the Board
+of Directors in this annual report for
+details of their attendance), reviewed the
+relevant documents with due care and
+exercised their profession advantages to
+offer advice and suggestions to Sinopec
+Corp.'s development strategy, operations
+and reform. The independent non-executive
+directors gave their independent opinions
+on matters such as connected transactions,
+external guarantee, dividend distributions
+and appointments of senior management of
+the Company as required by relevant rules
+and regulations, and maintained timely and
+effective communications with the executive
+directors, management, external auditors
+and the internal auditing department.
+The independent non-executive directors
+strengthened the communications with
+the shareholders and independently and
+objectively protected the legitimate interests
+of the Company and the shareholders,
+especially the minority shareholders, when
+performing their duties.
+6
+4 PERFORMANCE OF THE INDEPENDENT
+DIRECTORS
+Save as disclosed above, during the reporting
+period, none of the directors, supervisors
+and senior management of Sinopec Corp.
+and their associates had any interests or
+short positions (including any interest or
+short position that is regarded or treated as
+being held in accordance with the Securities
+and Futures Ordinance (SFO)) in the shares,
+debentures and underlying shares of Sinopec
+Corp. or any associated corporations (as
+defined in Part XV of SFO) would fall to
+be disclosed to the Sinopec Corp. and
+the Hong Kong Stock Exchange under the
+Division 7 and 8 of Part XV of SFO or which
+was recorded in the register required to be
+kept under section 352 of SFO or otherwise
+notified to Sinopec Corp. and the Hong Kong
+Stock Exchange pursuant to the Model Code
+for Securities Transactions by Directors of
+Listed Company under the Hong Kong Listing
+Rules.
+As of 31 December 2017, apart from
+13,000 A shares of Sinopec Corp. held
+by Vice President Mr. Ling Yiqun, none of
+the directors, supervisors or other senior
+management of Sinopec Corp. held any
+shares of Sinopec Corp.
+3 EQUITY INTERESTS OF DIRECTORS,
+SUPERVISORS AND OTHER SENIOR
+MANAGEMENT
+During the reporting period, Sinopec Corp.
+convened the 2016 annual general meeting,
+2017 first A shareholders class meeting and
+2017 first H shareholder class meeting on 28
+June 2017 in Beijing, China in accordance
+with the required procedures of noticing,
+convening and holding pursuant to the
+relevant laws and regulations and the Articles
+of Association. For meeting details, please
+refer to the poll results announcements
+published in China Securities Journal,
+Shanghai Securities News and Securities
+Times and on the websites of Hong Kong
+Stock Exchange after the general meeting.
+2 GENERAL MEETINGS
+CSRC. The Board of Supervisors of Sinopec
+Corp. agreed with all supervised matters.
+None of Sinopec Corp., the Board, directors,
+supervisors, senior management, controlling
+shareholders or de facto controllers of
+Sinopec Corp. were under the investigation
+by the CSRC or received any regulatory
+sanction or criticised publicly by the CSRC,
+the Hong Kong Securities and Futures.
+Commission, the Securities and Exchange
+Commission of the United States, or received
+any public censure from Shanghai Stock
+Exchange, the Hong Kong Stock Exchange,
+the New York Stock Exchange or the London
+Stock Exchange.
+During the reporting period, there are no
+material inconsistency between Sinopec
+Corp.'s corporate governance and the
+requirements in the PRC Company Law and
+relevant regulations on securities of the
+During the Reporting Period, the composition
+of the Board, the Board of Supervisors,
+and the Board Committees have been
+adjusted and optimised in a timely manner.
+The independent directors have played an
+active and good role with diligence. The
+internal control system has been further
+improved and effectively implemented. The
+work concerning investor relations has been
+further refined, and the required information
+has been disclosed in time. With the internal
+management and the transparency of
+operation improved, the capital market has
+positively recognised the Company. The
+Company's active performance of its social
+responsibilities has earned the appreciation
+from the whole society.
+During the Reporting Period, Sinopec Corp.
+was in full compliance with the Articles of
+Association as well as domestic and overseas
+laws and regulations and has not received
+any regulatory sanction imposed by securities
+regulatory authorities. There is no insider
+trading of the Company's shares discovered
+in the Company. Taking into account the
+actual situation, Sinopec Corp. amended
+the Articles of Association and Rules and
+Procedures for the Board Meetings. With
+the amendments, corporate governance
+mechanism in scientific decision-making,
+efficient implementation and supervision
+was promoted. When making decisions on
+significant matters such as directions for
+reform and development, key targets and
+projects arrangements, and nominations and
+employment of executives of the Company,
+the Board would seek advice from the Party
+organisation, which further strengthened
+the Company's democratic and scientific
+decision-making process. In respect of
+resolutions made by the Board, the Party
+organisations motivate party members to
+actively play an exemplary and leading
+role on implementations based on their
+responsibilities and inspires the initiative and
+enthusiasm of employees, which has helped
+the effective implementation of the Board's
+decisions by the management. In addition,
+the Party organisations have strengthened
+the supervision and accountability on
+anti-corruption and self-discipline of the
+Party members which promote the clean
+governance and risk-management level.
+GOVERNANCE DURING THE REPORTING
+PERIOD
+Chairman's Statement
+of the year
+26,464
+(b) when there is no government-prescribed
+price but there is a government-guidance
+price, the government-guidance price will
+apply;
+affiliated companies*
+Associates and joint ventures
+Principle of pricing for the continuing
+connected transactions:
+The amounts of the above continuing
+connected transactions between the
+Company and Sinopec Group did not exceed
+the caps for the continuing connected
+transactions as approved by the general
+meeting of shareholders and the Board.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+40
+Pursuant to the above-mentioned agreements
+on continuing connected transactions,
+the aggregate amount of the continuing
+connected transactions of the Company
+during the year was RMB 340.543 billion.
+Among the transaction amount, purchases
+expenses amounted to RMB 226.600 billion,
+representing 9.45% of the total amount of
+this type of transaction for the reporting
+period, including purchases of products
+and services (procurement, storage and
+transportation, exploration and development
+services, and production-related services)
+of RMB 210.869 billion, purchases of
+auxiliary and community services of RMB
+6.652 billion. The housing rent paid by the
+Company amounted to RMB 510 million. The
+rent for use of land was RMB 8.015 billion.
+Interest expenses amounted to RMB 554
+million. The sales income amounted to RMB
+113.943 billion, representing 4.63% of the
+total amount of this type of transaction for
+the reporting period, including RMB 113.096
+billion for sales of products and services,
+RMB 41 million for agency commission
+income, and RMB 807 million for interest
+income.
+3 ACTUAL CONTINUING CONNECTED
+TRANSACTIONS ENTERED INTO BY THE
+COMPANY DURING THE YEAR
+Sinopec Corp. and China Petrochemical
+Corporation have implemented the relevant
+framework agreements in relation to the
+continuing connected transactions, including
+Mutual Supply Agreement, Cultural,
+Educational, Hygiene and Community
+Services Agreement, Land Use Rights Leasing
+Agreement, Properties Leasing Agreement,
+Intellectual Property Licence Agreements and
+SPI Fund Document.
+There was no change to the above-mentioned
+supplementary agreements on continuing
+connected transactions during the reporting
+period. The aggregated amount of the
+continuing connected transactions for 2017
+of the Company is in compliance with the
+relevant requirements of the Hong Kong
+Listing Rules and the Shanghai Listing
+Rules. For performance details of connected
+transaction agreements, please refer to Item
+3 below.
+Pursuant to the Hong Kong Listing Rules and
+the Shanghai Listing Rules, the continuing
+connected transactions between the
+Company and Sinopec Group are generally
+subject to full disclosure based on the nature
+and the value of the transactions, and are
+also subject to approvals of independent
+non-executive directors and/or independent
+shareholders. The Hong Kong Stock
+Exchange and Shanghai Stock Exchange
+exempted Sinopec Corp. from full compliance
+with the relevant listing rules regarding the
+above continuing connected transactions and
+conditionally exempted Sinopec Corp. from
+complying with the continuous disclosure
+obligations.
+2 COMPLIANCE OF DISCLOSURES AND
+APPROVALS OF CONTINUING CONNECTED
+TRANSACTIONS BETWEEN THE COMPANY
+AND SINOPEC GROUP WITH HONG KONG
+LISTING RULES AND THE SHANGHAI
+LISTING RULES
+extended from 1 January 2016 to 31
+December 2018. The resolution relating to
+continuing connected transactions for the
+three years from 2016 to 2018 was approved
+at the first extraordinary general meeting
+for 2015 held on 23 October 2015. For
+details of the above continuing connected
+transactions, please refer to relevant
+announcements published on 27 August
+2015 in the China Securities Journal, the
+Shanghai Securities News and the Securities
+Times and on the websites of the Shanghai
+Stock Exchange and the Hong Kong Stock
+Exchange (dated 26 August 2015). The
+capitalised terms used in this section shall
+have the same meaning as that used in the
+above-mentioned announcements.
+On 26 August 2015, Sinopec Corp. and
+China Petrochemical Corporation entered
+into a supplementary agreement of the
+continuing connected transactions, whereby
+the terms of the Mutual Supply Agreement
+and the Cultural and Educational, Hygienic
+and Community Services Agreement were
+(a) The government-prescribed price will
+apply;
+(7) The Company will provide franchise
+licenses for service stations to China
+Petrochemical Corporation.
+(5) China Petrochemical Corporation will
+provide comprehensive insurance to the
+Company
+(4) China Petrochemical Corporation will
+provide leasing services for lands and
+certain properties to the Company
+(3) China Petrochemical Corporation will
+provide cultural and educational, hygienic
+and community services to the Company
+(Cultural and Educational Hygienic and
+Community Services Agreement)
+will provide trademarks, patents and
+computer software to the Company for
+use free of charge
+(2) China Petrochemical Corporation
+(1) The Company and China Petrochemical
+Corporation will mutually supply ancillary
+services for products, production and
+construction services (Mutual Supply
+Agreement)
+Prior to Sinopec Corp.'s overseas listing,
+in order to ensure the smooth continuation
+of production and business conducted by
+the Company and China Petrochemical
+Corporation, the two parties entered into
+a number of agreements on continuing
+connected transactions, details of which are
+as follows:
+BETWEEN SINOPEC CORP. AND CHINA
+PETROCHEMICAL CORPORATION
+1 AGREEMENTS CONCERNING CONTINUING
+CONNECTED TRANSACTIONS
+CONNECTED TRANSACTIONS
+Connected Transactions
+(6) China Petrochemical Corporation will
+provide shareholders' loans to the
+Company and
+requirements for directors, supervisors and
+other senior management. Sinopec Corp. has
+implemented a number of incentive policies,
+including the Measures of Sinopec Corp.
+for the Implementation of Remuneration
+for Senior Managers, the Measures of
+Sinopec Corp. for the Management of Annual
+Performance Evaluations and the Measures
+of the Leadership of Companies Directly
+under Sinopec Corp. and the Headquarters
+Departments for the Management of
+Performance Evaluation.
+(c) when there is neither a government.
+prescribed price nor a government.
+guidance price, the market price will
+apply; or
+(d) when none of the above is applicable, the
+price for the provision of the products
+or services is to be agreed upon by
+the relevant parties, and shall be the
+reasonable cost incurred in providing the
+products or services plus 6% or less of
+such cost.
+Parent company and
+Relations
+Total
+Other related parties
+Sinopec Group
+Related Parties
+5 FUNDS PROVIDED BETWEEN RELATED PARTIES
+4 OTHER SIGNIFICANT CONNECTED
+TRANSACTIONS OCCURED THIS YEAR
+There are no other significant connected
+transactions during the reporting period.
+(c) The transactions were conducted
+pursuant to the terms of relevant
+agreements, and the terms were fair
+and reasonable and in the interests of
+Sinopec Corp. and its shareholders as a
+whole.
+terms not less favorable than those
+available from or to independent third
+parties, where there is no available
+comparison to determine whether
+such terms are on normal commercial
+terms.
+ii
+¡ normal commercial terms; or
+(b) The transactions have been entered into
+based on either of the following terms:
+(a) The transactions have been conducted
+in the ordinary course of the Company's
+business.
+After reviewing the above-mentioned
+connected transactions, the independent
+non-executive directors of Sinopec Corp.
+have confirmed the following:
+under the Hong Kong Listing Rules, issued
+by the Hong Kong Institute of Certified Public
+Accountants. The auditor has issued its
+unqualified letter containing its conclusions
+in respect of the above-mentioned continuing
+connected transactions in accordance with
+Rule 14A.56 of the Hong Kong Listing Rules.
+Sinopec Corp. has submitted a copy of the
+auditor's letter to the Hong Kong Stock
+Exchange.
+The external auditor of Sinopec Corp.
+was engaged to report on the Company's
+continuing connected transactions in
+accordance with the Hong Kong Standard on
+Assurance Engagements 3000, Assurance
+Engagement Other Than Audits or Reviews
+of Historical Financial Information, and with
+reference to Practice Note 740, Auditor's
+Letter on Continuing Connected Transactions
+The above-mentioned connected transactions
+between the Company and Sinopec Group
+in 2017 were reviewed at the 17th meeting
+of the sixth session of the Board and have
+complied with the requirements under
+Chapter 14A of the Hong Kong Listing Rules.
+Related party transactions with the Sinopec
+Group that occurred during the year, as set
+out in Note 36 to the financial statements
+prepared under the IFRS in this annual
+report, also fall under the definition of
+connected transactions under Chapter 14A of
+the Hong Kong Listing Rules.
+the Company and its shareholders. The
+Company, according to internal control
+procedures, adjusts the scope and the
+caps of continuing connected transactions
+every three years, and will be announced
+and implemented upon the approval of the
+Board and/or independent shareholders.
+For the other connected transactions,
+Sinopec Corp., in strict compliance with
+domestic and overseas regulatory rules, will
+publish the announcement and implement
+the transactions only after submitting the
+relevant proposals of connected transactions
+to the Board and/or the general meeting of
+shareholders for consideration and approval
+according to internal control procedures.
+terms that are fair and reasonable to
+in accordance with normal commercial
+The major continuing connected transaction
+agreements were entered into in the ordinary
+course of the Company's business and
+Decision-making procedures:
+For details of the pricing principle, please
+refer to relevant announcements published
+on 27 August 2015 in the China Securities
+Journal, the Shanghai Securities News and
+the Securities Times and on the websites of
+the Shanghai Stock Exchange and the Hong
+Kong Stock Exchange.
+Funds to related parties
+Balance
+at the
+beginning
+9 CORPORATE GOVERNANCE REPORT (IN
+ACCORDANCE WITH HONG KONG LISTING
+RULES)
+did not establish a Nomination
+Committee, the Board performs
+the duties of the Nomination
+Committee prescribed in the
+Corporate Governance Code.
+The rules in relation to the
+nomination of Directors has been
+prescribed clearly in the Articles
+of Association and Rules of
+Procedure for the Shareholders'
+Meeting. Nomination of Directors
+may be proposed by shareholders
+who individually or collectively
+hold 3% of the total voting
+shares of Sinopec Corp. (1% for
+the nomination of Independent
+Directors), by the Board or by
+the Board of Supervisors for
+approval at the general meeting
+of shareholders. When the
+Board nominates a candidate
+for Director, Independent Non-
+executive Directors shall give
+their independent opinions on the
+nomination in advance. Eleven out
+of total thirteen Directors of the
+Board were elected at the annual
+general meeting for the year
+2014; one was elected at the first
+extraordinary general meeting for
+the year 2016; one was elected at
+the annual general meeting for the
+year 2016.
+Sinopec Corp. did not establish
+a Nomination Committee of the
+Board according to section A.5 of
+the Corporate Governance Code and
+Corporate Governance Report (Corporate
+Governance Code) as set out in Appendix
+14 of the Hong Kong Listing Rules.
+Sinopec Corp. is of the view that the
+nomination of Director Candidates by
+all members of the Board would be
+better suited the actual situation of the
+Company. The board of directors of
+Sinopec Corp. (Board) performed the
+duties of the Nomination Committee
+prescribed in the Corporate Governance
+Code.
+com.
+D Delegation of power by the Board
+a. The Board and the Management have
+clear terms of reference in writing.
+The Articles of Association and the
+Rules of Procedure for the General
+Meetings of Shareholders and the
+Rules of Procedure for the Board
+Meetings clearly set forth the scope
+of duties, powers and delegation of
+power of the Board and Management,
+which are published on the website of
+Sinopec Corp. at http://www.sinopec.
+CORPORATE GOVERNANCE
+Chairman's Statement
+48
+47
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+to employees to report behavior
+that violates the internal control
+system of the Company. The Audit
+Committee has reviewed and
+approved such policy.
+d. The Audit Committee has reviewed
+the adequacy of the resources
+for accounting and financial
+reporting and the qualifications
+and experience of the employees
+as well as the sufficiency of
+the training courses provided
+to relevant employees. Audit
+Committee is of the view that
+the Management has fulfilled the
+duties to establish an effective
+internal control system. The
+Company established a whistle-
+blowing policy in its internal
+control system, providing several
+channels as online reporting,
+letter reporting, receipt of appeals
+and a complaint mailbox, etc.
+appointed consultants to provide
+advices. The working expenses
+of the Audit Committee are
+included in the budget of Sinopec
+Corp. In accordance with the
+policies of Sinopec Corp., the
+senior Management and relevant
+departments of Sinopec Corp.
+shall actively cooperate with the
+Audit Committee.
+engage independent professionals
+when performing its duties.
+Reasonable costs arising from
+such consultations are borne by
+Sinopec Corp. In the meantime,
+the Audit Committee has
+c. Audit Committee members may
+b. During the reporting period,
+the Audit Committee held four
+meetings (please refer to the
+section Meetings held by the
+special committees of the Board
+under the Report of the Board of
+Directors in this annual report).
+The review opinions were issued
+at each meeting and submitted
+to the Board after signed by the
+members of the Audit Committee.
+During the reporting period, the
+Board and the Audit Committee
+had no disagreement.
+a. The Board has established
+an Audit Committee. The
+Audit Committee consists of
+Independent Non-executive
+Director Mr. Andrew Y. Yan,
+who serves as the Chairman,
+and Independent Non-executive
+Director Mr. Jiang Xiaoming
+and Independent Non-executive
+Director Mr. Tang Min, who serve
+as members. As verified, none of
+them has served as a partner or
+a former partner in our current
+auditing firm.
+C.3 Audit Committee
+d. Based upon the review and
+evaluation of internal control and
+risk management of the reporting
+period, the Board is of the view
+that the internal control and risk
+management of the Company are
+effective.
+c. In terms of risk management,
+Sinopec Corp. adopted the
+enterprise risk management
+framework provided by COSO, and
+established its risk management
+policy and risk management
+organisation system. The
+Company annually conducts risk
+evaluation to identify major and
+important risks and perform
+risk management duties. It has
+designed major and important
+risks tackling measures combined
+with its internal control system
+and periodically monitor their
+implementation to ensure
+adequate care, monitor and
+tackling of major risks.
+Sinopec Corp. has formulated
+and implemented its information
+disclosure policy and insider
+information registration policy. The
+corporation regularly evaluates the
+policy implementation and makes
+disclosure in accordance with
+relevant regulations. Please refer
+to the website of Sinopec Corp.
+for the details of the information
+disclosure policy.
+subsidiaries into the scope of
+internal control evaluation, with
+an internal control evaluation
+report being produced. The Board
+annually review the internal control
+evaluation report. For detailed
+information about the internal
+control during the reporting
+period, please refer to the report
+on internal control prepared by
+Sinopec Corp.
+b. In terms of internal control,
+Sinopec Corp. adopted the internal
+control framework prescribed
+in the internationally accepted
+Committee of Sponsoring
+Organisations of the Treadway
+Commission Report (COSO).
+Based upon the Articles of
+Association and the applicable
+management policies currently in
+effect, as well as in accordance
+with relevant domestic and
+overseas applicable regulations,
+Sinopec Corp. formulated and
+continuously improves the Internal
+Control Manual to achieve internal
+control of all factors of internal
+environment, risk evaluation,
+control activities, information
+and communication, and internal
+supervision. At the same time,
+Sinopec Corp. has constantly
+supervised and evaluate its
+internal control, and conducted
+comprehensive and multi-level
+checks including regular test,
+enterprise self-examination and
+auditing check, and subsumed
+headquarters, branches and
+CORPORATE GOVERNANCE
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+46
+b. In addition to the Audit Committee
+and the Remuneration Committee,
+the Board had established the
+Strategy Committee and the
+Social Responsibility Management
+Committee. The Strategy Committee
+is responsible for overseeing long-term
+development strategies and significant
+investment decisions of the Company.
+The Strategy Committee consists
+of eight directors, including former
+Chairman of the Board Mr. Wang
+Yupu, who serves as Chairman, as
+well as Vice Chairman of the Board &
+President Mr. Dai Houliang, Executive
+Director Mr. Wang Zhigang, Mr.
+Zhang Haichao, Mr. Jiao Fangzheng,
+Mr. Ma Yongsheng and Independent
+Non-executive Directors Mr. Andrew Y.
+Yan and Mr. Fan Gang, who serve as
+members. The Social Responsibility
+Management is responsible for
+preparing policies, governance,
+strategies and plans for social
+responsibility management of the
+Company. The Social Responsibility
+Management Committee consists
+of three Directors, including former
+Chairman of the Board Mr. Wang
+Yupu, who serves as Chairman, Vice
+Chairman of the Board & President
+Mr. Dai Houliang and Independent
+Non-executive Director Mr. Tang Min,
+who serve as members.
+c. Each Board Committee is required
+to report its decisions and
+recommendations to the Board.
+The terms of reference of the Audit
+Committee and the Remuneration
+Committee are published on the
+website of Sinopec Corp. at http://
+www.sinopec.com.
+E Investor Relations
+a. In order to further enhance corporate
+governance and satisfy business
+expansion needs of the Company,
+as being approved at the annual
+general meeting of shareholders for
+the year 2016, Sinopec Corp. amends
+the Articles of Association and its
+appendix Rules and Procedures for
+Board Meetings. For more details,
+please refer to the announcement
+published in the China Securities
+Journal, the Shanghai Securities
+News and the Securities Times by
+Sinopec Corp. on 29 June 2017 and
+the announcement published on
+the website of the Hong Kong Stock
+Exchange on 28 June 2017.
+Chairman's Statement
+49
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Except for their working relationships
+with Sinopec Corp., none of the
+Directors, Supervisors or other Senior
+Management has any financial, business
+or family relationship or any relationship
+in other material aspects with one
+another. For information about changes
+in share capital and shareholdings of
+substantial shareholders, please refer to
+page 6 to page 7; for information about
+meetings of the Board, please refer to
+page 51; for information about equity
+interests of Directors, Supervisors and
+other senior Management, please refer
+to page 43; for information about the
+biographies and annual remuneration of
+Directors, Supervisors and other senior
+Management, please refer to page 62 to
+page 74.
+(3) Other information about Sinopec Corp.'s
+corporate governance
+During the reporting period, neither
+PricewaterhouseCoopers Zhong Tian LLP
+nor PricewaterhouseCoopers provided any
+non-audit service to the Company.
+PricewaterhouseCoopers Zhong Tian
+LLP and PricewaterhouseCoopers as
+Sinopec Corp.'s external auditors for
+2017 and the authorisation of the Board
+to determine their remuneration were
+approved at Sinopec Corp.'s annual
+general meeting for the year 2016 on
+28 June 2017. The audit fee for 2017
+is RMB 51.58 million (including audit
+fee of internal control), which was
+approved at the 17th meeting of the
+sixth session of the Board. The annual
+financial statements have been audited
+by PricewaterhouseCoopers Zhong Tian
+LLP and PricewaterhouseCoopers. The
+Chinese certified accountants signing the
+report are Zhao Jianrong and Gao Peng
+from PricewaterhouseCoopers Zhong Tian
+LLP.
+The appointment of
+(2) Auditors
+c. The eligibility for attending the general
+meeting, the rights of shareholders,
+the proposals at the meeting and the
+voting procedures are clearly stated
+in the notice of the general meeting
+of Sinopec Corp. dispatched to the
+shareholders.
+general meeting of shareholders,
+shareholders who individually or
+collectively hold 3% of the total
+voting shares of Sinopec Corp. may
+propose a supplementary proposal 10
+days before the date of the general
+meeting.
+a. Sinopec Corp. has formulated
+and implemented its internal
+control and risk management
+system. The Board as a decision-
+making body is responsible
+for evaluating and review the
+effectiveness of its internal
+control and risk management.
+The Board and Audit Committee
+periodically (at least annually)
+receive reports of the Company
+regarding internal control and risk
+management information from the
+Management. All major internal
+control and risk management
+issues are reported to the Board
+and Audit Committee. Sinopec
+Corp. has set up its internal
+control and risk management
+department and internal auditing
+departments, which are equipped
+with sufficient staff, and these
+departments periodically (at least
+twice per year) report to the Audit
+Committee. The internal control
+and risk management system
+of the Company are designed to
+manage rather than eliminate all
+the risks of the Company.
+b. When Sinopec Corp. holds the
+G Shareholders' rights
+b. During the reporting period, the
+Secretary to the Board actively
+participated in career development
+training with more than 15 training
+hours.
+CORPORATE GOVERNANCE
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+a. The Hong Kong Stock Exchange
+recognized the Secretary to the Board
+as having the relevant qualifications
+as company Secretary. Nominated
+by the Chairman of the Board and
+appointed by the Board, the Secretary
+to the Board is a Senior Management
+Officer of Sinopec Corp. and
+responsible for the Company and the
+Board. The Secretary gives opinions
+on corporate governance to the Board
+and arranges orientation training
+and professional development for the
+Directors.
+F Company Secretary
+e. According to relevant rules of
+Sinopec Corp., the Board Secretary
+is responsible for establishing an
+effective communication channel
+between Sinopec Corp. and its
+shareholders, for setting up special
+departments to communicate with
+the shareholders and for passing
+the opinions and proposals of the
+shareholders to the Board and
+Management in a timely manner.
+Contact details of Sinopec Corp. can
+be found on the Investor Center page
+on Sinopec Corp's website.
+d. The Chairman of the Board hosted the
+annual general meeting for the year
+2016. Some members of the Board
+and senior Management attended the
+meeting and communicated with the
+investors extensively.
+c. During the reporting period, separate
+resolution was proposed for each
+substantially separate issue at the
+general meeting. All resolutions were
+voted by poll to ensure the interests
+of all shareholders. Notices of the
+general meeting were dispatched
+to shareholders 45 days (excluding
+the date of the general meeting) in
+advance.
+to answer questions on subjects
+of concern to investors, such as
+development strategies and the
+production and business performance
+of the Company. Sinopec Corp.
+established a department responsible
+for communicating with investors.
+In compliance with regulatory
+provisions, Sinopec Corp. enhanced
+communication with investors by
+holding meetings with institutional
+investors, setting up an investor
+hotline and communicating through
+internet platform.
+b. Sinopec Corp. pays close attention to
+investor relations. The management
+conduct road shows every year
+a. Shareholders who individually or
+collectively hold 10% of the total
+voting shares of Sinopec Corp.
+may request the Board in writing
+to convene the general meeting of
+shareholders. If the Board fails to
+grant the request to convene the
+meeting according to the Rules of
+Procedure for Meetings of Boards
+of Directors, the shareholders may
+convene and hold the meeting at their
+discretion according to applicable
+laws, and reasonable expenses
+incurred will be borne by Sinopec
+Corp. These provisions are subject
+to the following conditions: the
+proposals at the general meeting
+of shareholders must fall within
+the responsibilities of the general
+meeting of shareholders, with specific
+proposals and resolutions and in
+compliance with relevant laws,
+administrative regulations and the
+Articles of Association.
+(1) Compliance with the Corporate
+Governance Code
+C.2 Internal Control and Risk
+Management
+c. Sinopec Corp. has adopted an
+internal control mechanism to
+ensure that the Management
+and relevant departments have
+provided the Board and the Audit
+Committee with sufficient financial
+data and related explanations and
+materials.
+six years.
+a. The term of each session of the
+Directors of Sinopec Corp. is three
+years, and the consecutive term
+of office of an Independent Non-
+executive Director cannot exceed
+A.4 Appointment, re-election and
+dismissal
+b. Sinopec Corp. has received from
+each of the Independent Directors
+a letter of confirmation for 2017
+regarding their compliance
+with relevant independence
+requirements set out in Rule 3.13
+of the Hong Kong Listing Rules.
+Sinopec Corp. considers that each
+of the Independent Non-executive
+Directors is independent.
+a. For details of the composition of
+the Board of Directors, please
+refer to the section "Directors,
+Supervisors, Other Senior
+Management and Employees"
+of this annual report. The Board
+has a fairly good diversity. The
+Chairman, Executive Directors
+and Non-executive Director of
+Sinopec Corp. have petroleum
+and petrochemical technical
+background and/or extensive
+management experience in large.
+scale enterprises. The Independent
+Non-executive Directors have rich
+experience in economics, capital
+management and investment.
+A.3 Board composition
+c. The Chairman encourages open
+and active discussions. Directors
+have spoken freely at the Board
+meetings and actively and deeply
+participated in the discussions of
+significant decision made by the
+Board in the Board meetings.
+Chairman's Statement
+CORPORATE GOVERNANCE
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+44
+b. All Directors of Sinopec Corp.
+have been elected at the general
+meeting of shareholders. The
+Board has no power to appoint
+temporary Directors.
+44
+b. The Chairman of the Board places
+great emphasis on communication
+with the Independent Directors.
+The Chairman independently
+held two meetings with the
+Independent Directors in respect
+of development strategy, corporate
+governance and operational
+management, etc. of Sinopec
+a. The Chairman of the Board is
+elected by a majority vote of all
+Directors, and the President is
+nominated and appointed by
+the Board. The main duties and
+responsibilities of the Chairman
+and the President are clearly
+distinguished from each other, and
+the scope of their respective duties
+and responsibilities are set out
+in the Articles of Association. Mr.
+Wang Yupu serves as Chairman
+of the Board and tendered his
+resignation on 22 September
+2017. Mr. Dai Houliang serves as
+Vice Chairman of the Board and
+President of Sinopec Corp. and
+performs duties as Chairman upon
+Mr. Wang Yupu's resignation.
+A.2 Chairman and President
+e. The Secretary to the Board
+assists the Directors in handling
+the daily work of the Board,
+continuously informs the Directors
+of any regulations, policies or
+other requirements of domestic
+or overseas regulatory bodies in
+relation to corporate governance
+and ensures that the Directors
+comply with domestic and
+overseas laws and regulations
+when performing their duties and
+responsibilities. Sinopec Corp.
+has purchased liability insurance
+for all Directors to minimise their
+risks that might incur, arising
+from the performance of their
+duties.
+d. The Board has reviewed and
+evaluated its performance in
+2017 and is of the view that
+the Board made decisions in
+compliance with domestic and
+overseas regulatory authorities'
+requirements and the Company's
+internal rules; that the Board have
+received the suggestions from
+the Board of Supervisors and
+Management during its decision
+making process; and that the
+Board safeguarded the rights and
+interests of Sinopec Corp. and its
+shareholders.
+c. Each Director of the Board may
+submit proposals to be included
+in the agenda of Board meetings,
+and each Director is entitled to
+request other related information.
+b. The meeting of the Board is held
+at least once a quarter. The Board
+will usually communicate the
+time and proposals of the Board
+meeting 14 days before convening
+of the meeting. The relevant
+documents and materials for
+Board meetings are usually sent to
+each Director 10 days in advance.
+In 2017, Sinopec Corp. held five
+Board meetings. For details about
+the attendance of each Director,
+please refer to the Report of the
+Board of Directors in this annual
+report.
+a. The Board is the decision-making
+body of Sinopec Corp. and abides
+by good corporate governance
+practices and procedures. All
+decisions made by the Board are
+implemented by the Management
+of Sinopec Corp.
+A.1 Board of Directors
+A Board of Directors
+Save as disclosed above, Sinopec Corp.
+complied with all code provisions set out
+in the Corporate Governance Code during
+the reporting period.
+Corp.
+d. The external auditors of Sinopec
+Corp. made a statement about
+their reporting responsibilities in
+the auditor's report contained in
+the financial report.
+c. Sinopec Corp. engages
+professional consultants to
+prepare detailed materials for
+newly elected Directors, to notify
+them of the regulations of each
+listing place of Sinopec Corp. and
+to remind them of their rights,
+responsibilities and obligations as
+Directors.
+a. Considering that the Board
+b. Sinopec Corp. provides Directors
+with information about the
+financial, production and operating
+data of the Company every month
+to ensure that the Directors
+can learn about the latest
+developments of the Company in a
+timely manner.
+Directors are responsible for
+supervising the preparation of
+accounts for each fiscal period to
+ensure that the accounts truly and
+fairly reflect the condition of the
+business, its performance and the
+Icash flow of the Company during
+the period. The Board approved
+the Financial Report for 2017 and
+warranted that the annual report
+contained no false representations,
+no material omissions or
+misleading statements and
+jointly and severally accepted full
+responsibility for the authenticity,
+accuracy and completeness of the
+content.
+a.
+C.1 Financial reporting
+C Accountability and Auditing
+c. The members of the Remuneration
+Committee may engage independent
+professionals when performing its
+duties. Reasonable costs arising
+from such consultations are borne
+by Sinopec Corp. In the meantime,
+the Remuneration Committee has
+also appointed consultants to provide
+advices. The working expenses of the
+Remuneration Committee are included
+in the budget of Sinopec Corp.
+According to the policies of Sinopec
+Corp., the senior Management and
+relevant departments of Sinopec
+Corp. must actively cooperate with
+the Remuneration Committee.
+b. The Remuneration Committee
+always consults the Chairman of the
+Board and the President about the
+remuneration plans for other Executive
+Directors. After the Remuneration
+Committee's review, it is of the view
+that all the Executive Directors of
+Sinopec Corp. have fulfilled the duty
+clauses in the service contracts of the
+Directors in 2017.
+Committee (Remuneration
+Committee) consists of Independent
+Non-executive Director Mr. Fan
+Gang, who serves as the Chairman,
+and the Vice Chairman of the Board
+& President Mr. Dai Houliang and
+Independent Non-executive Director
+Mr. Jiang Xiaoming, who serve as
+the members of the Remuneration
+Committee. The Remuneration
+Committee is responsible for reviewing
+the implementation of the annual
+remuneration plans for Directors,
+Supervisors and other senior
+Management as approved at the
+general meeting of the shareholders,
+and report to the Board.
+B Remuneration and Appraisal Committee
+a. Remuneration and Appraisal
+all related information in a
+comprehensive and timely
+manner. The Secretary to the
+Board is responsible for organising
+and preparing the materials for
+the Board meetings, including
+preparation of explanations for
+each proposal to ensure fully
+understanding by the Directors.
+The Management is responsible
+for providing the Directors with
+necessary information and
+materials. The Director may
+ask the Management, or ask,
+via the Management, relevant
+departments to provide necessary
+information or explanations. The
+Directors may seek advices from
+professional consultants when
+necessary.
+b. Each Director can obtain
+A.5 Nomination Committee
+a. The agenda and other reference
+documents for meetings of the
+Board and Board committees
+will be distributed prior to the
+meetings to give each Director
+sufficient time to review the
+materials so that Directors can
+make informed decisions.
+d. Sinopec Corp. organised and
+arranged training sessions for
+Directors and paid the relevant
+fees. The Directors actively
+participated in the trainings
+and continuing professional
+development program.
+CORPORATE GOVERNANCE
+Chairman's Statement
+45
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+c. Each of the Directors confirmed
+that he has complied with the
+Model Code for Securities and
+Transactions by Directors of
+Listed Companies during the
+reporting period. In addition,
+Sinopec Corp. formulated the
+Rules Governing Shares Held by
+Company Directors, Supervisors
+and Senior Managers and Changes
+in Shares and the Model Code
+of Securities Transactions by
+Company Employees to regulate
+the purchase and sale of Sinopec
+Corp.'s securities by relevant
+personnel.
+b. Each of the Directors was able to
+devote sufficient time and efforts
+to handling the matters of Sinopec
+Corp.
+a. All Non-executive Directors have
+the same duties and powers as the
+Executive Directors. In addition,
+the Independent Non-executive
+Directors are entitled to certain
+specific powers. The Articles
+of Association and the Rules of
+Procedure for Boards Meetings
+clearly prescribe the duties and
+powers of Directors, Non-executive
+Directors including Independent
+Non-executive Directors. The above
+duties and powers are published
+on the Sinopec Corp.'s website at
+http://www.sinopec.com.
+A.6 Responsibility of Directors
+Concerning Diversity of Board
+Members which stipulates that
+the members of the Board shall
+be nominated and appointed
+based on the skills and experience
+required by the Board as well
+as the principles on diversity of
+the Board. When deciding the
+composition of the Board, Sinopec
+Corp. shall consider several
+factors in relation to the diversity
+of the Board, including but not
+limited to, gender, age, culture
+and background of education,
+locations, profession and
+experience, skills, knowledge and
+service term.
+b. The Board establishes the Policy
+A.7 Provision of and access to
+information
+Chairman's Statement
+Report of the Board of Directors
+59
+3 DIRECTORS' ATTENDANCE TO THE SIXTH SESSION OF THE BOARD MEETINGS AND THE INDEPENDENT DIRECTOR 'S ATTENDANCE TO THE
+GENERAL MEETINGS.
+Actual
+No. of
+Board Meetings*
+Names
+Director Titles
+0
+0
+3
+2
+5
+Fan Gang
+Independent Director
+0
+0
+3
+2
+5
+Tang Min
+Independent Director
+0
+0
+3
+2
+5
+Andrew Y. Yan
+0
+0
+3
+2
+Attended By
+5
+meeting held
+communication
+5
+(6) The 4th meeting of the sixth session
+of the Strategy Committee was held
+by written resolution on 23 August
+2017, whereby the three years rolling
+development plan of Sinopec corp. (2017-
+2019) was approved in the meeting.
+(5) The 3rd meeting of the sixth session
+of the Strategy Committee was held by
+written resolution on 22 March 2017,
+whereby the proposal in relation to the
+2017 investments plan was approved in
+the meeting.
+(4) The 10th meeting of the sixth session of
+the Audit Committee was held by written.
+resolution on 30 October 2017, whereby
+the third quarterly report for three
+months ended 30 September 2017 was
+approved in the meeting.
+(3) The 9th meeting of the sixth session of
+the Audit Committee was held by on site
+meeting on 23 August 2017, whereby (i)
+Interim report for the first half of 2017;
+(ii) Financial statements for the first half
+year of 2017; (iii) Business performance
+and financial results of the first half year
+of 2017; (iv) Reports on internal auditing
+work for the first half of 2017 were
+approved in the meeting.
+(2) The 8th meeting of the sixth session of
+Audit Committee was held by written
+resolution on 27 April 2017, whereby the
+first quarterly report for three months
+ended 31 March 2017 was approved in
+the meeting.
+(1) The 7th meeting of the sixth session of
+the Audit Committee was held by written
+resolutions on 22 March 2017, whereby
+the proposals in relation to the following
+matters were approved in the meeting:
+(i) 2016 Annual Report; (ii) 20F of
+2016; (iii) Financial results and business
+performance of the Company for the year
+2016; (iv) Internal control assessment
+report of the Company for the year 2016
+and the internal control manual (2017);
+(v) Work report on the internal auditing
+I work for the year 2016; (vi) Reports on
+the auditing of the financial statements
+for the year 2016 prepared by the
+domestic and overseas auditors.
+During the reporting period, the Audit
+Committee held four (4) meetings. Strategy
+Committee held two (2) meetings, and each
+of the Remuneration Committee and the
+Social Responsibility Management Committee
+held one (1) meeting. All members of
+each committee had attended the relevant
+meetings. Details of those meetings are as
+follows:
+4 MEETINGS HELD BY THE BOARD
+COMMITTEES
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Report of the Board of Directors
+Report of the Board of Directors
+51
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+During the reporting period, Mr. Tang Min, the Independent Non-executive directors of the Company attended the 2016 annual general meeting,
+2017 first A shareholders class meeting and 2017 first H shareholder class meeting. No other Independent Non-executive Directors had attended
+the general meetings in person.
+(2) Independent Non-executive Directors' attendance to the General Meetings.
+4. Pursuant to Hong Kong Listing Rules, attended by proxy was not counted as attendance by the director himself.
+3. Mr. Wang Yupu resigned as chairman and the director of the Board on 22 September 2017.
+2. Mr Wang Zhigang, Mr Zhang Haichao resigned as directors of the Board on 29 January 2018.
+1. No directors were absent from two consecutive Board meetings.
+0
+2
+2
+0
+4
+Wang Yupu
+Former Chairman
+Absent
+Attended
+by proxy
+Attendance
+(7) The 2nd meeting of the sixth session
+of the Remuneration Committee was
+held by written resolution on 22 March
+2017 whereby the proposal in relation to
+implementation of the remuneration rules
+for directors, supervisors and other senior
+management for 2016 was reviewed and
+approved.
+Jiang Xiaoming
+Independent Director
+Dai Houliang
+Director
+Director
+Director
+Director
+Vice Chairman
+Absent
+Attended
+by proxy
+Board Meetings
+Attended By
+communication
+Actual
+Attendance
+No. of
+meeting held
+Names
+Director Titles
+(1) ATTENDANCE TO THE BOARD MEETINGS
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+2 IMPLEMENTATION OF RESOLUTIONS
+APPROVED AT THE GENERAL MEETINGS
+OF SHAREHOLDERS BY THE BOARD
+During this reporting period, in accordance
+with relevant laws and regulations as well
+as the Articles of Association, all members
+of the Board diligently implemented the
+resolutions approved at the general meetings
+of Sinopec Corp., and have completed all
+the tasks delegated to them at the general
+meetings.
+(5) The 15th meeting of the six session of the
+Board was held by written resolution on
+30 October 2017, whereby the proposals
+in relation to the following matters were
+approved: (i) the third quarterly results of
+the Company for the nine months ended
+30 September 2017. (ii) Optimisation
+adjustment to the 2017 investment plan.
+For details of each meeting, please refer
+to the announcements published in China
+Securities Journal, Shanghai Securities News
+and Securities Times on the next working
+day after each meeting and on the websites
+of Shanghai Stock Exchange, Hong Kong
+Stock Exchange and Sinopec Corp.
+(4) The 14th meeting of the sixth session of
+the Board was held by on site meeting on
+25 August 2017, whereby the proposals
+in relation to the following matters were
+approved: (i) Business performance of the
+first half year of 2017 and work plan of
+the latter half year of 2017, (ii) Financial
+results and business performance of the
+Company for the first half of 2017, (iii)
+The interim financial statements for the
+first half of 2017 (vi) The interim report
+for the first half of 2017, (v) Three years
+rolling development plan of Sinopec Corp.
+(2017 to 2019).
+(3) The 13th meeting of the six session of
+the Board to determine the proposed
+plan for issuance of debt financing
+instrument(s) (xii) Granting to the Board
+a general mandate to issue new domestic
+shares and/or overseas-listed foreign
+shares of Sinopec Corp., (xiii) Convening
+the annual general meeting of Sinopec
+Corp. for the year 2016 and to dispatch
+the notice of the annual general meeting.
+(2) The 12th meeting of the six session of
+the Board was held by on site meeting
+and via video conference on 24 March
+2017, whereby the proposals in relation
+to the following matters were approved:
+(i) 2016 Work Report of the Board, (ii)
+Business performance of 2016 and work
+plan of 2017, (iii) Financial results and
+business performance of the Company for
+the year 2016, (iv) 2016 Communication
+on Progress for Sustainable Development
+Report of Sinopec Corp., (v) Financial
+Statements of Sinopec Corp. for the year
+2016, (vi) Annual Report and form 20F
+of the Company for the year 2016, (vii)
+Internal control assessment report of
+Sinopec Corp. for the year 2016, (viii)
+Re-appointment of external auditors of
+Sinopec Corp. for the year of 2017 and
+to authorise the Board to determine
+their remunerations, (ix) Resolution
+on proposed election of supervisor of
+Sinopec Corp. at the General meeting; (x)
+Authorising the Board to determine the
+interim profit distribution plan of Sinopec
+Corp. for the year 2017, (xi) Authorising
+(1) The 11th meeting of the six session of
+the Board was held by written resolution
+on 16 February 2017, whereby the
+proposals in relation to the acquisition
+of the downstream assets of Chevron
+South Africa and Botswana and provide
+shareholder performance guarantee were
+approved in the meeting.
+During this reporting period, Sinopec Corp.
+held five (5) Board meetings. The details are
+as follows:
+1 MEETINGS OF THE BOARD
+The Board is pleased to present the directors'
+report for the year ended 31 December 2017 for
+shareholders' review.
+REPORT OF THE BOARD OF DIRECTORS
+Report of the Board of Directors
+50
+50
+Li Yunpeng
+Wang Zhigang
+Zhang Haichao
+Jiao Fangzheng
+Independent Director
+5
+3
+0
+0
+3
+2
+5
+Ma Yongsheng
+Director
+0
+0
+3
+2
+5
+0
+0
+3
+2
+5
+0
+0
+3
+2
+5
+0
+0
+1
+1
+2
+0
+0
+2
+(8) The 2nd meeting of the sixth session of
+the Social Responsibility Management
+Committee was held by written resolution
+on 22 March 2017, whereby the 2016
+Communication on Progress for the
+Sustainable Development Report of
+Sinopec Corp. was approved in the
+meeting.
+the Board was held by written resolution
+on 27 April 2017, whereby the proposals
+in relation to the following matters were
+approved: (i)first quarterly results of the
+Company for the three months ended 31
+March 2017. (ii) The acquisition of equity
+interest in Shanghai SECCO by Gaoqiao
+Petrochemical (iii) Adjusting parameters
+for appraisal of project returns of
+Sinopec Corp. (iv) Proposed election of
+director of Sinopec Corp. at the general
+meeting; (v) Proposed amendments to
+the Articles of Association and the Rules
+of the Procedures of Board Meeting.
+(vi) The Overseas listing plan of Sinopec
+Marketing Co. Ltd.
+6 BUSINESS PERFORMANCE
+The Company has formulated a well-
+established technology system and
+mechanism, and owns competent teams
+specialised in R&D covering a wide range of
+subjects; the four platforms for technology
+advancement is taking shape, which includes
+exploration and development of oil and
+gas, refining, petrochemicals and strategic
+emerging technology. With its overall
+technologies reaching state of the art level in
+the global arena, and some of them taking
+the lead globally, the Company enjoys a
+strong technical.
+The Company enjoys a favourable positioning
+with its operations located close to the
+consumer markets. Along with the steady
+growth in the Chinese economy, sales volume
+of both oil products and chemical products
+of the Company has been increasing steadily
+over the years; through continuous and
+specialised marketing efforts, the Company's
+capability in international operations and
+market expansion has been further enhanced.
+The Company owns a team of professionals
+and expertise engaged in the production
+of oil and gas, operation of refineries and
+chemical plants, as well as marketing
+activities. The Company applies outstanding
+fine management measures with its
+remarkable capabilities in management
+of operations, and enjoys a favourable
+operational cost advantage in its downstream
+businesses.
+The integrated business structure of
+the Company carries strong advantages
+in synergy among its various business
+segments, enabling the Company to
+continuously tap onto potentials in attaining
+an efficient and comprehensive utilisation
+of its resources, and endowed the Company
+with strong resistance against risks, as well
+as remarkable capabilities in sustaining
+profitability.
+24 CORE COMPETITIVENESS ANALYSIS
+The Company is a large scale integrated
+energy and petrochemical company with
+upstream, mid-stream and downstream
+operations. The Company is a large scaled
+oil and gas producer in China; in respect
+of refining capacity, it ranks first in China;
+equipped with a well-developed refined oil
+products sales network, the Company is the
+largest supplier of refined oil products in
+China; and in terms of ethylene production
+capacity, the Company takes the first
+position in China, and has a well-established
+marketing network for chemical products.
+bureau level, including the exploration,
+development, financial and legal divisions,
+are responsible for initial collection and
+compilation of information about reserves.
+Exploration and development division
+prepares the initial report on the reserves
+estimate. Together with technical experts,
+reserves management committees at the
+subsidiary level then review the report
+to ensure qualitative and quantitative
+compliance with technical guidance and the
+accuracy and reasonableness of the reserves
+estimation. At corporate level, the RMC is
+primarily responsible for the management
+and coordination of the reserves estimation
+process, review and approval the annual
+changes and results in the reserves estimate,
+and disclose of our proved reserves. We also
+engage outside consultants to assist in our
+compliance with the rules and regulations
+of the U.S. Securities and Exchange
+Commission. Our reserves estimation
+process is further facilitated by a specialised
+reserves database, which is improved and
+updated periodically.
+Our reserves estimates are guided by
+procedural manuals and technical guidance
+formulated by the company. A number
+of working divisions at the production
+Our RMC is led by a couple of senior vice
+presidents, as well as experts and directors
+general of Sinopec's exploration and
+production segment. Mr. Jiao Fangzheng, the
+chairman of RMC holds a Ph.D. in petroleum
+and natural gas engineering and has over
+30 years of experience in the oil and gas
+industry. Our RMC also includes other
+members who are senior managers in charge
+of exploration and development activities at
+the production bureau level. A majority of
+our RMC members hold Ph.D. or master's
+degrees, and our members have an average
+of 20 years of technical experience in
+relevant professional fields, such as geology,
+engineering and economics.
+We manage our reserves estimation through
+a two-tier management system. Our Oil
+and Natural Gas Reserves Management
+Committee, or RMC, at the headquarters
+level oversees the overall reserves estimation
+process and reviews the reserves estimation
+of our company. Each of our branches has
+a reserves management committee that
+manages the reserves estimation process
+and reviews the reserve estimation report at
+the branch level.
+23 OIL & GAS RESERVE APPRAISAL
+PRINCIPLES
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Report of the Board of Directors
+56
+Report of the Board of Directors
+55
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+As of 31 December 2017, the Company has
+not entered into any equity-linked agreement.
+22 EQUITY-LINKED AGREEMENTS
+21 PERMITTED INDEMNITY PROVISIONS
+During the reporting period, Sinopec Corp.
+has purchased liability insurance for all
+directors to minimise their risks arising
+from the performance of their duties. The
+permitted indemnity provisions are stipulated
+in such directors liability insurance in
+respect of the liabilities and costs associated
+with the potential legal proceedings that may
+be brought against such directors.
+No contracts concerning management
+or administration of the whole or any
+substantial part of the business of the
+Company were entered into or existed during
+the reporting period.
+20 MANAGEMENT CONTRACTS
+19 DIRECTORS' INTERESTS IN CONTRACTS
+No director had a material interest, either
+directly or indirectly, in any contract of
+significance to the business of the Company
+to which Sinopec Corp. or any of its holding
+companies, subsidiaries or fellow subsidiaries
+was a party during the reporting period.
+For details for the positions held by the
+directors of Sinopec Corp. in the Sinopec
+Group, during the reporting period please
+refer to the chapter Directors, Supervisors,
+Senior Management and Employees of this
+annual report.
+18 DIRECTORS' INTERESTS IN COMPETING
+BUSINESS
+During this reporting period, neither
+Sinopec Corp. nor any of its subsidiaries
+repurchased, sold or redeemed any listed
+shares of Sinopec Corp. or its subsidiaries.
+17 REPURCHASE, SALES AND REDEMPTION
+OF SHARES
+Pursuant to the Articles of Association
+and the laws of the PRC, the shareholders
+of Sinopec Corp. are not entitled to any
+pre-emptive rights. Therefore the existing
+shareholders cannot request Sinopec Corp.
+for the right of first refusal in proportion to
+their shareholdings.
+16 PRE-EMPTIVE RIGHTS
+During this reporting period, the amount
+of charity donations made by the Company
+amounted to RMB 152 million.
+15 DONATIONS
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+During this reporting period, the changes
+to the reserves of the Company are set out
+in the consolidated statement of changes
+in shareholders' equity in the financial
+statements prepared in accordance with
+IFRS in this annual report.
+The Company always attaches great
+importance to fulfilling social responsibilities,
+and carries out the green and low carbon
+development strategy to pursue a sustainable
+development. Moreover, the Company enjoys
+an outstanding "Sinopec" brand name, plays
+an important role in the national economy
+and is a renowned and reputable company in
+China.
+In the course of its production and
+operations, the Company will actively take
+various measures to circumvent operational
+risks. However, in practice, it may not be
+possible to prevent the occurrence of all
+risks and uncertainties described below.
+BOARD COMMITTEES HAVE ISSUED REVIEW
+OPINIONS WITHOUT ANY OBJECTION TO
+THE BOARD WHEN PERFORMING THEIR
+DUTIES DURING THE REPORT PERIOD.
+Annual Report 2017
+CHINA PETROLEUM & CHEMICAL CORPORATION
+Beijing, China, 23 March 2018
+Vice Chairman & President
+Dai Houliang
+By order of the Board
+Currency risks: At present, China
+implements an administered floating
+exchange rate regime based on market
+supply and demand which is regulated with
+reference to a basket of currencies in terms
+of the exchange rate of Renminbi. As the
+Company purchases a significant portion of
+crude oil in foreign currency which is based
+on US dollar-denominated prices, fluctuations
+in the exchange rate of Renminbi against US
+dollars and certain other foreign currencies
+may affect the Company's purchasing
+costs of crude oil. Meanwhile, according to
+domestic pricing mechanism of refined oil
+products, the prices of domestic refined oil
+products fluctuate with Renminbi exchange
+rate, and the prices of other domestic
+refined and chemical products would also be
+influenced by import price.
+Risks with regard to overseas business
+development and management: The
+Company engages in oil and gas exploration,
+refining and chemical, warehouse logistics
+and international trading businesses in
+some regions outside China. The Company's
+overseas businesses and assets are subject
+to the jurisdiction of the host country's laws
+and regulations. In light of the complicated
+factors such as imbalance of global economy,
+competitiveness of industry and trade
+structure, exclusiveness of regional trading
+blocs, polarisation of benefits distribution
+trade, and politicisation of economic and
+trade issues, including sanctions, barriers to
+entry, instability in the financial and taxation
+policies, contract defaults, tax dispute, the
+Company's risks with regard to overseas
+business development and management
+could be increased.
+Investment risks: Petroleum and chemical
+sector is a capital intensive industry.
+Although the Company adopted a prudent
+investment strategy, and as required by
+the new procedure and management of
+investment decision-making issued in 2017,
+conducted rigorous feasibility study on
+each investment project, which consists of
+special verifications in raw material market,
+technical scheme, profitability, safety and
+environmental protection, legal compliance,
+etc., certain investment risks will still exist
+and expected returns may not be achieved
+due to major changes in factors such as
+market environment, prices of equipment
+and raw materials, and construction period
+during the implementation of the projects.
+impact resulting from such contingencies.
+to natural disasters. Such contingencies
+may cause serious impacts to the society,
+major financial losses to the Company and
+grievous injuries to people. The Company
+has always been paying great emphasis on
+the safety production, and has implemented
+a strict HSE management system as an
+effort to avoid such risks as far as possible.
+Meanwhile, the main assets and inventories
+of the Company as well as the possibility of
+damage to a third party have been insured.
+However, such measures may not shield the
+Company from financial losses or adverse
+and natural disasters: The process of
+petroleum chemical production is exposed
+to the risks of inflammation, explosion and
+environmental pollution and is vulnerable
+Risks with regard to the operation
+of international crude oil prices and sudden
+disruption of supply of crude oil from certain
+regions.
+Risks with regard to the external purchase
+of crude oil: A significant amount of crude
+oil as needed by the Company is satisfied
+through external purchases. In recent years,
+especially influenced by the mismatch
+between supply and demand of crude oil,
+geopolitics, global economic growth and
+other factors, the prices of crude oil fell
+sharply. Additionally, the supply of crude
+oil may even be interrupted due to some
+extreme major incidents in certain regions.
+Although the Company has taken flexible
+counter measures, it may not fully avoid risks
+associated with any significant fluctuation
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+58
+Report of the Board of Directors
+Report of the Board of Directors
+57
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Risks from the uncertainties of obtaining
+additional oil and gas resources: The future
+sustainable development of the Company
+is partly dependent to a certain extent on
+our abilities in continuously discovering
+or acquiring additional oil and natural
+gas resources. To obtain additional oil
+and natural gas resources, the Company
+faces some inherent risks associated with
+exploration and development and/or with
+acquisition activities, and the Company has
+to invest a large amount of money with no
+guarantee of certainty. If the Company fails
+to acquire additional resources through
+further exploration, development and
+acquisition to increase the reserves of crude
+oil and natural gas, the oil and natural gas
+reserves and production of the Company
+may decline overtime which may adversely
+affect the Company's financial situation and
+operation performance.
+Risks with regard to the changes from
+environmental legislation requirements:
+Our production activities generate waste
+liquids, gases and solids. The Company has
+built up the supporting effluent treatment
+systems to prevent and reduce the pollution
+to the environment. However, the relevant
+government authorities may issue and
+implement much stricter environmental
+protection laws and regulations, adopt much
+stricter environment protection standards.
+Under such situations, the Company
+may increase expenses in relation to the
+environment protection accordingly.
+Risks from the macroeconomic policies
+and government regulation: Although the
+Chinese government is gradually liberalizing
+the market entry regulations on petroleum
+and petrochemicals sector, the petroleum
+and petrochemical industries in China are
+still subject to entry regulations to a certain
+degree, which include: issuing licenses in
+relation to exploration and development
+of crude oil and natural gas, issuing
+business licenses for trading crude oil and
+refined oil, setting caps for retail prices of
+gasoline, diesel and other oil products, the
+imposing of the special oil income levy,
+formulation of import and export quotas and
+procedures, formulation of safety, quality
+and environmental protection standards
+and formulation of energy conservation
+policies. In addition, the changes which have
+occurred or might occur in macroeconomic
+and industry policies such as the opening
+up of crude oil import licenses, and further
+improvement in pricing mechanism of refined
+oil products, reforming and improvement
+in pricing mechanism of natural gas, cost
+supervision of gas pipeline and access to
+third party, and reforming in resource tax
+and environmental tax, will cause effects
+on our business operations. Such changes
+might further intensify market competition
+and have certain effect on the operations and
+profitability of the Company.
+I can only counteract the adverse influences of
+industry cycle to some extent.
+Risks with regard to the cyclical effects
+from the industry: The majority of the
+Company's operating income comes
+from the sales of refined oil products and
+petrochemical products, and part of those
+businesses and their related products are
+cyclic and are sensitive to macro-economy,
+cyclic changes of regional and global
+economy, the changes of the production
+capacity and output, demand of consumers,
+prices and supply of the raw materials, as
+well as prices and supply of the alternative
+products etc. Although the Company is
+an integrated company with upstream,
+midstream and downstream operations, it
+Risks with regard to the variations from
+macroeconomic situation: The business
+results of the Company are closely related to
+China's and global economic situation. The
+development of Chinese economy has entered
+New Normal. Although various countries have
+adopted different kinds of macroeconomic
+policies to eliminate negative effects caused
+by lower growth of global economy, the
+turnaround of economic recovery still
+remains uncertain. The Company's business
+could also be adversely affected by other
+factors such as the impact on export due to
+trade protectionism from certain countries,
+impact on import which is likely caused by
+regional trade agreements, and negative
+impact on the investment of overseas oil
+and gas exploration and development and
+refining and chemical storage projects which
+results from the uncertainty of international
+crude oil price and etc.
+25 RISK FACTORS
+14 RESERVES
+Cyber-security risks: the Company devotes
+significant resources to protecting our digital
+infrastructure and data against cyber-attacks,
+if our systems against cyber-security risk
+prove to be ineffective, we could be adversely
+affected by, among other things, disruptions
+to our business operations, and loss of
+proprietary information, including intellectual
+property, financial information and employer
+and customer data, injury to people,
+property, environment and reputation. As
+cyber-security attacks continue to evolve,
+we may be required to expend additional
+resources to enhance our protective
+measures against cyber-security breaches.
+13 FIXED ASSETS
+Cash dividends (RMB/Share, tax inclusive)
+For investors of the Hong Kong Stock Exchange (including enterprises and individuals) investing in the A Shares of Sinopec Corp. through Shanghai-
+Hong Kong Stock Connect Program, the Company will withhold and pay income taxes at the rate of 10% on behalf of those investors and will
+report to the tax authorities for the withholding. For investors who are tax residents of other countries, whose country of domicile is a country
+having entered into a tax treaty with the PRC stipulating a dividend tax rate of lower than 10%, the enterprises and individuals may, or may entrust
+a withholding agent to, apply to the competent tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax
+authorities, the amount paid in excess of the tax payable based on the tax rate according to such tax treaty will be refunded.
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Report of the Board of Directors
+54
+Report of the Board of Directors
+53
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Hong Kong Stock Connect Program, the
+company shall withhold and pay income tax
+at the rate of 20% on behalf of individual
+investors and securities investment funds.
+The company will not withhold or pay
+the income tax of dividends for domestic
+enterprise investors and those domestic
+enterprise investors shall report and pay the
+relevant tax by themselves.
+Shares of Sinopec Corp. through Shanghai-
+For domestic investors investing in the H
+Shanghai-Hong Kong Stock Connect (
+港股票市場交易互聯互通機制試點有關稅收政策
+)(Caishui [2014] No. 81):
+Pursuant to the Notice on the Tax Policies
+Related to the Pilot Program of the
+If the individual holders of the H shares
+who are Hong Kong or Macau residents or
+residents of the countries which had an
+agreed tax rate of 10% for the cash dividends
+or bonus shares by way of capitalisation
+from retained earnings with China under
+the relevant tax agreement, Sinopec Corp.
+should withhold and pay individual income
+tax on behalf of the relevant shareholders
+at a rate of 10%. Should the individual
+holders of the H Shares are residents of the
+countries which had an agreed tax rate of
+less than 10% with China under the relevant
+tax agreement, Sinopec Corp. shall withhold
+and pay individual income tax on behalf
+of the relevant shareholders at a rate of
+10%. In that case, if the relevant individual
+holders of the H Shares wish to reclaim
+the extra amount withheld (Extra Amount)
+due to the application of 10% tax rate,
+Sinopec Corp. would apply for the relevant
+agreed preferential tax treatment provided
+that the relevant shareholders submit the
+evidence required by the notice of the tax
+agreement to the share register of Sinopec
+Corp. in a timely manner. Sinopec Corp. will
+assist with the tax refund after the approval
+of the competent tax authority. Should
+the individual holders of the H Shares are
+residents of the countries which had an
+agreed tax rate of over 10% but less than
+20% with China under the tax agreement,
+Sinopec Corp. shall withhold and pay the
+individual income tax at the agreed actual
+rate in accordance with the relevant tax
+agreement. In the case that the individual
+holders of the H Shares are residents of the
+countries which had an agreed tax rate of
+20% with China, or which has not entered
+into any tax agreement with China, or
+otherwise, Sinopec Corp. shall withhold and
+pay the individual income tax at a rate of
+20%-
+Sinopec Corp. as at the record date.
+the registration of members for H shares of
+In accordance with the Enterprise Income
+Tax Law of the People's Republic of China
+which came into effect on 1 January 2008
+and its implementation regulations, Sinopec
+Corp. is required to withhold and pay
+enterprise income tax at the rate of 10%
+on behalf of the non-resident enterprise
+shareholders whose names appear on the
+register of members for H Shares of Sinopec
+Corp. when distributing cash dividends or
+issuing bonus shares by way of capitalisation
+from retained earnings. Any H Shares of
+the Sinopec Corp. which is not registered
+under the name of an individual shareholder,
+including those registered under HKSCC
+Nominees Limited, other nominees, agents
+or trustees, or other organisations or groups,
+shall be deemed as shares held by non-
+resident enterprise shareholders. Therefore,
+on this basis, enterprise income tax shall
+be withheld from dividends payable to such
+shareholders. If holders of H Shares intend to
+change its shareholder status, please enquire
+about the relevant procedures with your
+agents or trustees. Sinopec Corp. will strictly
+comply with the law or the requirements
+of the relevant government authority to
+withhold and pay enterprise income tax on
+behalf of the relevant shareholders based on
+The dividend will be denominated and
+declared in RMB, and distributed to the
+domestic shareholders and investors
+participating in the Shanghai-Hong Kong
+Stock Connect Program in RMB and to
+the overseas shareholders in Hong Kong
+Dollar. The exchange rate for the dividend
+calculation in Hong Kong Dollar is based
+on the average benchmark exchange rate of
+RMB against Hong Kong Dollar as published
+by the People's Bank of China one week
+preceding the date of the declaration of such
+dividend.
+for registration. The H shares register of
+members of Sinopec Corp. will be closed
+from 29 May 2018 (Tuesday) to 4 June 2018
+(Monday) (both dates are inclusive).
+The final cash dividend will be distributed
+on or before 14 June 2018 (Thursday) to all
+shareholders whose names appear on the
+register of members of Sinopec Corp. on
+the record date of 4 June 2018 (Monday).
+In order to qualify for the final dividend
+for H shares, the holders of H shares must
+lodge all share certificates accompanied
+by the transfer documents with Hong Kong
+Registrars Limited located at 1712-1716
+17th Floor Hopewell Centre, 183 Queen's
+Road East, Wan Chai Hong Kong before
+4:30 p.m. on 28 May 2018 (Monday)
+At the 17th meeting of the sixth session of
+the Board, the Board approved the proposal
+to distribute a final cash dividend of RMB
+0.40 (tax inclusive) per share, combining
+with an interim distributed dividend of RMB
+0.10 (tax inclusive) per share, the total
+dividend for the whole year is RMB 0.50 (tax
+included) per share.
+Proposals for dividend distribution
+The profit distribution plan of Sinopec Corp.
+for the current year will be carried out in
+accordance with the policy and procedures
+stipulated in the Articles of Association,
+with the advice of minority shareholders
+being heard and considered, meanwhile, the
+independent directors will issue independent
+opinions.
+7 DIVIDEND
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+42
+52
+During this reporting period, changes to the
+fixed assets of the Company are set out in
+Note 16 to the financial statements prepared
+in accordance with IFRS in this annual
+report.
+The financial results of the Company
+for the year ended 31 December 2017,
+which is prepared in accordance with
+IFRS and the financial position as at that
+date and the accompanying analysis are
+set out from page149 to page 205 in this
+annual report. The Company's business
+review, a discussions and analysis on
+business performance using financial key
+performance indicators and the material
+factors underlying our results and financial
+position during the reporting period,
+particulars of significant events affecting the
+Company and the outlook of the Company's
+business are disclosed in this annual report
+under the relevant chapters of Chairman's
+Statement, Business Review and Prospects,
+Management's Discussion and Analysis and
+Significant Events. All the sections above
+constitute parts of this Report of the Board
+of Directors.
+The dividend distribution and bonus shares declared by Sinopec Corp. in the past three years are as follows:
+2017
+The profit distribution policy of Sinopec Corp.
+maintains consistency and steadiness, and
+gives further consideration to the long-term
+interests of the Company, overall interests
+of all the shareholders and the sustainable
+development of the Company. Sinopec Corp.
+gives priority to adopting cash dividends
+for profit distribution, and is able to deliver
+an interim profit distribution. When the net
+profits and retained earnings of the Company
+are positive in current year, and in the event
+that the cash flow of Sinopec Corp. can
+satisfy the normal operation and sustainable
+development, Sinopec Corp. should adopt
+cash dividends, and the distribution profits
+in cash every year are no less than 30% of
+the net profits of the Company in current
+year.
+2015
+2016
+The total sales value to the five largest
+customers of the Company in 2017 was RMB
+159,918 million and accounted for 6.8%
+of the total sales value of the Company,
+of which the sales value to the connected
+party (Sinopec group) among the five largest
+customers was RMB 87,349 million and
+accounted for 3.7% of the total sales value
+for the year.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+11 MAJOR SUPPLIERS AND CUSTOMERS
+During this reporting period, the total value
+of the purchasing from the top five crude
+oil suppliers of the Company accounted
+for 48.8% of the total value of the crude
+oil purchasing by the Company, of which
+the total value of the purchasing from the
+largest supplier accounted for 15.5% of the
+total value of the crude oil purchasing by the
+Company.
+9 DURING THIS REPORTING PERIOD,
+THE COMPANY DID NOT VIOLATE
+ENVIRONMENTAL POLICIES
+Details with regard to the Company's
+performance in relation to environmental
+and social-related policies and performances
+are provided in the Board Statement and
+Business Review and Prospects in this annual
+report as well as the 2017 Communication
+on Progress for the Sustainable Development
+Report of Sinopec Corp. Those disclosures
+in regard to the environmental policies
+constitute part of the Report of the Board of
+Directors.
+2017 Annual Internal Control Assessment
+Report of Sinopec Corp. was reviewed and
+approved on the 17th meeting of the sixth
+Session of the Board on 23 March 2018,
+and all members of the Board warrant that
+the contents of the report are true, accurate
+and complete, and there are no false
+representations, misleading statements or
+material omissions contained in the report.
+The Board is fully responsible for establishing
+and maintaining the internal control system
+related to the financial statements as well
+as ensuring its effective implementation. In
+2017, the Board assessed and evaluated the
+internal control of Sinopec Corp. according
+to the Basic Standard for Enterprise Internal
+Control, Application Guidelines for Enterprise
+Internal Control and Assessment Guidelines
+for Enterprise Internal Control. There were
+no material defects in relation to the internal
+control system as of 31 December 2017.
+The internal control system of Sinopec Corp.
+related to the financial statements is sound
+and effective.
+INTERNAL CONTROL
+8 RESPONSIBILITIES FOR THE COMPANY'S
+12 BANK LOANS AND OTHER BORROWINGS
+Details of bank loans and other borrowings
+of the Company as of 31 December 2017
+are set out in Note 29 to the financial
+statements prepared in accordance with
+IFRS in this annual report.
+The aggregate cash dividend declared by
+Sinopec Corp. during three years from 2015
+to 2017 is RMB 0.899 per share, and the
+total dividend payment from 2015 to 2017
+as a percentage of average net profit in the
+three years is 251.27%.
+Note: The final cash dividend for 2017 is subject to the approval at the 2017 annual general meeting.
+of the listed company in the consolidated statement (%)
+Ratio between the dividends and the net profit attributed to the shareholders
+10 DURING THIS REPORTING PERIOD, THE
+COMPANY DID NOT VIOLATE LAWS OR
+REGULATIONS WHICH HAVE A MATERIAL
+IMPACT ON THE COMPANY
+During the reporting period, other than
+disclosed above, all the top five crude
+oil suppliers and the other four largest
+customers of the Company were independent
+third parties. There were no supplier,
+customer, employee or others that have a
+significant impact on the Company and on
+which the Company's success depends.
+the consolidated statement for the dividend year (RMB billion)
+0.249
+0.15
+60.54
+30.15
+18.16
+51.12
+0.50
+32.28
+118.42
+64.95
+56.26
+Total amount of cash dividends (RMB billion, tax inclusive)
+46.42
+Net profits attributed to the shareholders of the listed company shown in
+(2) Supervisors
+Zhao Dong, aged 47,
+Chairman of Board of
+Supervisors of Sinopec Corp.
+Mr. Zhao is a professor-
+level senior accountant with
+a doctor's degree. In July
+2002, he was appointed
+as chief accountant and
+manager of financial
+assets department of
+CNPC International (Nile)
+Ltd.; in January 2005, he
+was appointed as deputy
+chief accountant and
+executive deputy director
+of financial and capital
+operation department
+of China National Oil
+and Gas Exploration and
+Development Corporation;
+in April 2005, he was
+appointed as deputy chief
+accountant and manager
+of financial and capital
+operation department
+of China National Oil
+and Gas Exploration and
+Development Corporation;
+in June 2008, he was
+appointed as chief
+accountant of China National
+Oil and Gas Exploration and
+Development Corporation;
+in October 2009, he
+was appointed as chief
+accountant of China National
+Oil and Gas Exploration and
+Development Corporation
+and chief financial officer
+of PetroChina International
+Investment Company
+Limited; in September 2012,
+he was appointed as vice
+general manager of CNPC
+Nile Company and in August
+2013, he was appointed as
+general manager of CNPC
+Nile Company; in November
+2015, he was appointed
+as chief financial officer
+of PetroChina Company
+Limited. He has been a
+member of the Leading
+Party Member Group and
+chief accountant of China
+Petrochemical Corporation
+since November 2016; in
+June 2017, he was elected
+as Chairman of Board of
+July 2010, he was appointed
+as General Manager of
+Sinopec Northwest Oilfield
+Company, Director General
+of Northwest Petroleum
+Bureau under China
+Petrochemical Corporation.
+Since August 2014, Mr.
+Liu has acted as Assistant
+to President and Director
+General of HR Department
+of China Petrochemical
+Corporation, and in May
+2015, he was elected as
+Supervisor of Sinopec Corp.;
+in March 2017, he was
+appointed as Vice President
+of China Petrochemical
+Corporation; in February
+2018, he resigned as
+Supervisor of Sinopec Corp.;
+in February 2018, he was
+appointed as Senior Vice
+President of Sinopec Corp.
+Liu Zhongyun, aged 54,
+former Supervisor of
+Sinopec Corp. Mr. Liu is
+a professor level senior
+engineer with a Ph.D. in
+engineering. In December
+2002, he was appointed
+as a standing committee
+member of CPC Committee
+and Director of Organisation
+Department of Shengli
+Petroleum Administration
+Bureau; in November
+2004, he was appointed
+as Deputy Secretary of
+CPC Committee of Shengli
+Petroleum Administration
+Bureau; in December
+2005, he was appointed as
+Manager of Sinopec Shengli
+Oilfield Branch; in December
+2008, he was appointed as
+Secretary of CPC Committee
+of Sinopec International
+Petroleum Exploration and
+Production Corporation; in
+68
+Liu Zhongyun
+Zhou Hengyou
+Zou Huiping
+Supervisors of Sinopec Corp.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+in 2017
+(RMB 1,000,
+before tax)
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Senior Management and E
+Directors, Super Employees
+Directors, Supervisors,
+Senior Management and Employees
+67
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Yes
+2015.05-2017.09
+2017
+Equity interests in Sinopec Corp.
+(as at 31 December)
+Zhou Hengyou, aged 54,
+Supervisor of Sinopec Corp.
+Mr. Zhou is a professor
+level senior administration
+engineer and with a master
+degree. In December 1998,
+Mr. Zhou was appointed
+as a standing committee
+member of CPC Committee
+and Deputy Labour Union
+Chairman of Jiangsu
+Petroleum Exploration
+Bureau; in February 1999,
+he was appointed as a
+standing committee member
+of CPC Committee and
+Labour Union Chairman
+of Jiangsu Petroleum
+Exploration Bureau of China
+Petrochemical Corporation;
+in December 2002, he
+was appointed as Deputy
+Secretary of CPC Committee
+and Labour Union Chairman
+of Jiangsu Petroleum
+Exploration Bureau; in June
+2004, he was appointed as
+Deputy Secretary of CPC
+Committee and Secretary of
+CPC Disciplinary Inspection
+the holding
+Company
+Whether
+paid by
+Zhao Dong
+0
+Male
+Zou Huiping, aged 57,
+Supervisor of Sinopec Corp.
+Mr. Zou is a professor
+level senior accountant
+with a university diploma.
+In November 1998, he
+was appointed as Chief
+Accountant in Guangzhou
+Petrochemical General Plant
+of China Petrochemical
+Corporation; in February
+2000, he was appointed
+as Deputy Director General
+of Finance & Assets
+Department of China
+Petrochemical Corporation;
+in December 2001, he
+was appointed as Deputy
+No
+0
+0
+Tenure
+Director
+60
+Former Board Director,
+2017.06-2018.05
+2006.05-2018.01
+Yes
+0
+0
+769.9
+No
+0
+0
+Zhang Haichao
+60
+60
+Senior Vice President
+Former Board Director,
+Senior Vice President
+2015.05-2018.01
+Senior Management and Employees
+Directors, Supervisors,
+69
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+2006, he was appointed as
+Director General of Auditing
+Department of Sinopec
+Corp.; and in May 2006, he
+was elected as Supervisor of
+Sinopec Corp.
+& Planning Department
+of China Petrochemical
+Corporation; in March
+2006, he was appointed as
+Director General of Finance
+& Assets Department of
+Assets Management Co.,
+Ltd. of China Petrochemical
+Corporation; in March
+Director General of Finance
+Committee of Jiangsu
+Petroleum Exploration
+Bureau; in August 2005,
+he was appointed as
+Secretary of CPC Committee
+of Jiangsu Petroleum
+Exploration Bureau; in March
+2011, he was appointed
+as Director General and
+Secretary of CPC Committee
+of China Petrochemical
+News. In March 2015, he
+was appointed as Director
+General of the General Office
+of China Petrochemical
+Corporation, Director
+General of Policy Research
+Department of the General
+Office and Director General
+of President's office of
+Sinopec Corp. In August
+2015, he was appointed as
+Director General of Board of
+Directors Office under China
+Petrochemical Corporation;
+and in May 2015, he was
+elected as Supervisor of
+Sinopec Corp.
+0
+300.0
+Note 1: Mr Wang Zhigang resigned as a director, a member of Strategy Committee of the Board and the Senior Vice President of Sinopec Corp. in January 2018.
+2: Mr Zhang Haichao resigned as a director, a member of Strategy Committee of the Board and the Senior Vice President of Sinopec Corp. in January 2018.
+2222
+Male
+Fan Gang
+Male
+Tang Min
+Male
+Andrew Y. Yan
+Male
+Jiang Xiaoming
+0
+0
+Yes
+64
+2016.02-2018.05
+0
+Yes
+2015.05-2018.05
+Board Director,
+Senior Vice President
+Board Director,
+Senior Vice President
+|g|
+56
+Male
+Ma Yongsheng
+55
+843.8
+Male
+Jiao Fangzheng
+0
+Independent Director
+2012.05-2018.05
+No
+Wang Yupu
+Position in
+Sinopec Corp.
+Former Chairman
+Age
+61
+Gender
+Male
+Name
+paid by
+Sinopec Corp.
+Remuneration
+0
+0
+0
+0
+0000
+No
+300.0
+Independent Director 2015.05.2018.05
+64
+No
+300.0
+2015.05-2018.05
+Independent Director
+Yes
+64
+No
+300.0
+2012.05-2018.05
+Independent Director
+60
+2016
+2009.05.2018.05
+19
+2017
+1 INTRODUCTION OF
+DIRECTORS, SUPERVISORS
+AND OTHER SENIOR
+MANAGEMENT
+(1) Directors
+Dai Houliang, aged 54, Vice
+Chairman of the Board and
+the President of Sinopec
+Corp. Mr. Dai is a professor
+level senior engineer with
+a Ph.D. degree and an
+academician of the Chinese
+Academy of Engineering.
+Mr. Dai is the alternate
+member of the nineteenth
+Central Committee of the
+Communist Party of China.
+In December 1997, he was
+appointed as Vice President
+of Yangzi Petrochemical
+Corporation; in April 1998,
+he served as Director and
+Vice President of Yangzi
+Petrochemical Co., Ltd.;
+in July 2002, he served as
+Vice Chairman of Board
+of Directors, President of
+Yangzi Petrochemical Co.,
+Ltd. and Director of Yangzi
+Petrochemical Corporation;
+in December 2003, he
+served as Chairman of
+Board of Directors and
+President of Yangzi
+Petrochemical Co., Ltd. and
+concurrently as Chairman of
+Board of Directors of Yangzi
+Petrochemical Corporation;
+in December 2004, he
+served concurrently as
+Chairman of Board of
+Directors of BASF-YPC
+Company Limited; in
+September 2005, he was
+appointed as Deputy CFO of
+Sinopec Corp.; in November
+2005, he was appointed as
+Vice President of Sinopec
+Corp.; in May 2006, he
+served as Director, Senior
+Vice President and CFO of
+Sinopec Corp.; in June 2008,
+he served as a member
+of the Leading Party
+Member Group of China
+Petrochemical Corporation;
+in August 2012, he was
+appointed concurrently as
+Chairman of Sinopec Great
+Wall Energy & Chemical
+Co., Ltd.; in March 2013, he
+was appointed concurrently
+as Chairman of Sinopec
+Catalyst Co., Ltd.; and in
+May 2009, he was elected
+as Director and appointed
+as Senior Vice President
+of Sinopec Corp. in May
+2016, he was appointed as
+the President and Deputy
+Secretary of the Leading
+Party Member Group
+of China Petrochemical
+Corporation and since
+August 2016, he was elected
+as the Vice Chairman of the
+Board and appointed as
+President of Sinopec Corp.
+Li Yunpeng, aged 58,
+Director of Sinopec Corp. Mr.
+Li is a senior administration
+engineer with a master
+degree in engineering.
+In January 1998, he was
+appointed as deputy General
+Manager of Executive
+Division of China Ocean
+Shipping (Group) Company
+("COSCO"); in September
+1998, he served as Deputy
+Secretary of Discipline
+Inspection Committee,
+Director of Supervision
+Office and concurrently
+served as General Manager
+of Supervision Division
+of COSCO; in November
+1999, he was appointed
+as General Manager of
+Human Resource Division of
+COSCO; and in September
+2000, he served as Head
+of Organisation Department
+of COSCO; in December
+2000, he was appointed
+as Secretary of Communist
+Youth League Committee of
+COSCO; in April 2003, he
+was appointed as Assistant
+President of COSCO; in
+April 2004, he served as a
+member of the Leading Party
+Member Group and Team
+Leader of the Discipline
+Inspection Group of CPC
+Leading Group of COSCO;
+in December 2011, he was
+appointed as Executive Vice
+President and a member
+of the Leading Party
+Member Group of COSCO;
+in June 2013, he served as
+President and a member of
+the Leading Party Member
+Group of COSCO; in July
+2013, he served as Director
+of COSCO; and in February
+2017, Mr. Li was appointed
+as Deputy Secretary of
+the Leading Party Member
+Group and Vice President
+of China Petrochemical
+Corporation. In June 2017,
+he was elected as Director
+of Sinopec Corp.
+Senior Management and E
+Directors, Sup Employees
+62
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Li Yunpeng
+Wang Zhigang
+Wang Zhigang, aged
+60, former Director and
+Senior Vice President of
+Sinopec Corp. Mr. Wang
+is a professor level senior
+engineer with a Ph.D.
+Degree. In February 2000,
+he was appointed as Vice
+President of Sinopec Shengli
+Oilfield Co., Ltd.; in June
+2000, he served as Board
+Director and President of
+Shengli Oilfield Co., Ltd.;
+in November 2001, he was
+appointed temporarily as
+Deputy Director General
+and Deputy Secretary of
+Leading Party Member
+Group of Economic and
+Trade Commission, Ningxia
+Hui Autonomous Region;
+in April 2003, he was
+appointed as Vice President
+of Sinopec Corp.; in June
+2003, he was appointed
+concurrently as Director
+General of Exploration and
+Production Department
+of Sinopec Corp.; in Feb
+2005, he was appointed
+as Member of the Leading
+Party Member Group
+of China Petrochemical
+Corporation; in March 2005,
+he was appointed as Senior
+Vice President of Sinopec
+Corp.; in January 2007, he
+was appointed concurrently
+as Vice Chairman of Sinopec
+International Petroleum
+Exploration and Production
+Corporation; in September
+2014, he was appointed
+concurrently as Chairman
+of Board of Directors of
+Sinopec International
+Petroleum Exploration and
+Production Corporation; and
+in May 2006, he was elected
+as Director and appointed
+as Senior Vice President of
+Sinopec Corp. In January
+2018, he resigned as an
+executive director, a member
+of Strategy Committee of the
+Board and the Senior Vice
+President of Sinopec Corp.
+Zhang Haichao, aged
+60, former Director and
+Senior Vice President of
+Sinopec Corp. Mr. Zhang
+is a professor level senior
+economist with a master
+degree. In March 1998,
+he was appointed as Vice
+President of Zhejiang
+Petroleum Corporation; in
+September 1999, he was
+appointed as President
+of Zhejiang Petroleum
+Corporation; in February
+2000, he was appointed
+as President of Sinopec
+Zhejiang Petroleum Co.,
+Ltd.; in April 2003, he
+was elected as Employee's
+Representative Supervisor of
+Sinopec Corp.; in April 2004,
+he served as Chairman
+of Board of Directors
+of Sinopec BP Zhejiang
+Petroleum Sales Co., Ltd.; in
+October 2004, he served as
+Secretary of CPC Committee,
+Vice Chairman of Board of
+Directors, and Vice President
+of Sinopec Sales Co., Ltd.;
+in November 2005 he
+served as Vice President of
+Sinopec Corp., Secretary of
+the Leading Party Member
+Group, Chairman of Board
+of Directors, and President
+of Sinopec Sales Co., Ltd.;
+in June 2006, he served
+as Chairman of Board of
+Directors, and President of
+Sinopec Sales Co., Ltd.; in
+July 2014, he was appointed
+as Member of the Leading
+Party Member Group and
+Vice President of China
+Petrochemical Corporation;
+and in May 2015, he was
+elected as Board Director
+and appointed as Senior
+Vice President of Sinopec
+Corp. In January 2018, he
+resigned as an executive
+director, a member of
+Strategy Committee of the
+Board and the Senior Vice
+President of Sinopec Corp.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+63
+Directors, Supervisors,
+Senior Management and Employees
+Directors, Sup Employees
+Senior Management and E
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Zhang Haichao
+2016
+Dai Houliang
+Report of the Board of Supervisors
+0
+60
+Report of the Board of Supervisors
+REPORT OF THE BOARD OF SUPERVISORS
+Dear Shareholders:
+In 2017, the Board of Supervisors and
+each supervisor of Sinopec Corp. diligently
+performed their supervision responsibilities,
+actively participated in the supervision process
+of decision making, carefully reviewed and
+effectively supervised the major decisions of
+the Company, and endeavored to safeguard the
+interests of shareholders and the Company in
+accordance with the PRC Company Law and the
+Articles of Association of Sinopec Corp.
+During this reporting period, the Board of
+Supervisors held five (5) meetings in total, and
+mainly reviewed and approved the proposals
+in relation to the Company's periodic report,
+financial statements, communication on progress
+report for sustainable development, internal
+control assessment report, working report of the
+board of supervisors and share acquisition etc.
+On 24 March 2017, the 8th meeting of the sixth
+session of the Board of Supervisors was held,
+and the proposals in relation to the Financial
+Statements of Sinopec Corp. for 2016, Annual
+Report of Sinopec Corp. for 2016, 2016
+Communication on Progress for Sustainable
+Development Report of Sinopec Corp., Internal
+Control Assessment Report of Sinopec Corp.
+for 2016, Report on the Work of Board of
+Supervisors of Sinopec Corp. for 2016 were
+reviewed and approved at the meeting.
+On 27 April 2017, the 9th meeting of the
+sixth session of the Board of Supervisors was
+held, and the proposals in relation to the First
+Quarterly Report of Sinopec Corp. for 2017, the
+acquisition of equity interest in Shanghai SECCO
+Petrochemical Company Limited by Sinopec
+Shanghai Gaoqiao Petroleum and Chemical
+Limited., the adjusting parameters for appraisal
+of project returns of Sinopec Corp. and the
+Overseas Listing Plan of Sinopec Marketing Co.,
+Ltd. were approved at the meeting.
+On 28 June 2017, the 10th meeting of the sixth
+session of the Board of Supervisors was held,
+and Mr. Zhao Dong was elected as Chairman of
+the Board of Supervisors of Sinopec Corp.
+On 25 August 2017, the 11th meeting of the
+sixth session of the Board of Supervisors was
+held, and the Interim Financial Statements
+of Sinopec Corp. for 2017 as well as Interim
+Report of Sinopec Corp. for 2017 were reviewed
+and approved at the meeting.
+On 30 October 2017, the 12th meeting of the
+sixth session of the Board of Supervisors was
+held, and the Third Quarterly Report of Sinopec
+Corp. for 2017 was approved at the meeting.
+In addition, the supervisors attended the general
+meetings of shareholders and presented at
+meetings of the Board. The Board of Supervisors
+also organised supervisors to attend the
+trainings for directors and supervisors of listed
+companies organised by Beijing Securities
+Supervisory Bureau under CSRC, which have
+further improved their capabilities in performing
+supervisory duties.
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES
+Through supervision and inspection on the
+production and operation management as well
+as financial management conditions, the Board
+of Supervisors and all the supervisors conclude
+that under the severe operating environment
+of excessive supply of refined oil products in
+domestic market and fluctuation of international
+crude oil prices at low level in 2017, the
+Company focused on transformation of its
+growth mode, improve asset quality, increase
+asset efficiency and upgrade the asset structure,
+with an aim to optimise resource and structure
+adjustment; made every effort to expand the
+market, optimise structure, reduce costs, and
+control risks, all contributing to a hard-won
+business result. The Board of Supervisors had
+no objection to the supervised issues during this
+reporting period.
+Firstly, the Board and the management of
+Sinopec Corp. performed their responsibilities
+pursuant to relevant laws and regulations,
+and implemented efficient management. The
+Board diligently fulfilled its obligations and
+exercised its rights under the PRC Company
+Law and the Articles of Association, and made
+informed decisions on major issues concerning
+change in growth mode, structure adjustment,
+as well as development and profitability. The
+senior management diligently implemented the
+resolutions approved by the Board, continued
+to deepen the reform, focus on innovations,
+regulate operations, intensified strict
+management and strived to tap potentials and
+enhance efficiency, optimise business structures,
+committed to achieving the aim of sustaining
+profit and growth set by the Board. During
+the reporting period, the Board of Supervisors
+did not discover any behaviour of any director
+or senior management which violated laws,
+regulations, or the Articles of Association, or was
+detrimental to the interests of Sinopec Corp. or
+its shareholders.
+Secondly, the reports and financial statements
+prepared by Sinopec Corp. in 2017 complied
+with the relevant regulation of domestic and
+overseas securities regulators, the disclosed
+information truly, accurately, completely
+and fairly reflected Sinopec Corp.'s financial
+reasults and operation performance. The
+dividend distribution plan was made after
+comprehensively consideration of the long-term
+interests of Sinopec Corp. and the interest of
+the shareholder. No violation of confidential
+provisions of persons who prepared and
+reviewed the report was found.
+Thirdly, Sinopec Corp.'s internal control system
+is robust and effective, no material defects of
+internal control were found. In the meantime,
+Sinopec Corp. actively fulfilled its social
+responsibilities and promoted the sustainable
+development of social economy. Information
+disclosed in the sustainable development report
+was in compliance with requirements made by
+Shanghai Stock Exchange and Hong Kong Stock
+Exchange for listed companies with regard to
+the publication of social responsibility report.
+Fourthly, the consideration for the share
+acquisition made by Sinopec Corp. was fair and
+reasonable, neither insider trading, damage to
+shareholders' interest nor losses of corporate
+assets was discovered.
+Fifthly, all connected transactions between the
+Company and Sinopec Group were in compliance
+with the relevant rules and regulations of
+domestic and overseas listing places. The
+pricing of all the connected transaction was fair
+and reasonable. No insider trading or asset loss
+which is detrimental to the interests of Sinopec
+Corp. or its shareholders was discoverd.
+In 2018, the Board of Supervisors and each
+supervisor will continue to follow the principle
+of due diligence and integrity, earnestly perform
+the duties of supervision as delegated by the
+shareholders, strictly review the significant
+decisions, strengthen the process control and
+supervision, increase the strength of inspection
+and supervision on subsidiaries and protect
+Sinopec Corp.'s benefit and its shareholders'
+interests.
+Zhao Dong
+Chairman of the Board of Supervisors
+Beijing, China, 23 March 2018
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+61
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Ma Yongsheng
+Jiao Fangzheng
+2004, he was appointed
+List of Members of the Board
+Name
+Gender
+Age
+Dai Houliang
+Male
+54
+Li Yunpeng
+Male
+58
+Wang Zhigang
+Male
+Jiao Fangzheng, aged 55,
+Director and Senior Vice
+President of Sinopec Corp.
+Mr. Jiao is a professor
+level senior engineer with
+a Ph.D. degree. In January
+1999, he was appointed
+as Chief Geologist in
+Zhongyuan Petroleum
+Exploration Bureau of China.
+Petrochemical Corporation;
+in February 2000, he was
+appointed as Vice President
+and Chief Geologist of
+Sinopec Zhongyuan Oilfield
+Company; in July 2000, he
+was appointed as Deputy
+Director General of Sinopec
+Petroleum Exploration &
+Development Research
+Institute; in March 2001, he
+was appointed as Deputy
+Director General of Sinopec
+Exploration & Production
+Department; in June
+2%
+(RMB 1,000,
+Remuneration
+paid by
+Sinopec Corp.
+in 2017
+Whether
+the holding
+paid by
+Equity interests in Sinopec Corp.
+(as at 31 December)
+Tenure
+before tax)
+Company
+Position in
+Sinopec Corp.
+Vice Chairman, President
+66
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+of the Institute of Economics
+as President of Sinopec
+Northwest Oilfield Company;
+in October 2006, he was
+appointed as Vice President
+of Sinopec Corp. in July
+2010, he was appointed
+as the Director General
+of Sinopec Exploration &
+Production Department; in
+July 2014, he was appointed
+as Member of the Leading
+Party Member Group and
+Vice President of China
+Petrochemical Corporation;
+in September 2014, he
+was elected concurrently
+as Chairman of Board of
+Directors of Sinopec Oilfield
+Service Corporation and
+Vice Chairman of Board
+of Directors of Sinopec
+International Petroleum
+Exploration and Production
+Corporation; and in May
+2015, he was elected as
+Director and appointed as
+Senior Vice President of
+Sinopec Corp.
+Ma Yongsheng, aged 56,
+Director and Senior Vice
+President of Sinopec Corp.
+Mr. Ma is a professor level
+senior engineer with a Ph.D.
+degree and an academician
+of the Chinese Academy of
+Engineering. Mr. Ma is the
+member of the thirteenth
+national committee of
+CPPCC. In April 2002, he
+was appointed as Chief
+Geologist of Sinopec
+Southern Exploration and
+Production Company;
+in April 2006, he was
+appointed as Executive
+Deputy Manager (in charge
+of overall management),
+Chief Geologist of Sinopec
+Southern Exploration and
+Production Company; in
+January 2007, he was
+appointed as Manager and
+Party Secretary of CPC
+Committee of Sinopec
+Southern Exploration and
+Production Company; in
+March 2007, he served
+as General Manager and
+Deputy Party Secretary of
+CPC Committee of Sinopec
+Exploration Company; in
+May 2007, he was appointed
+as Deputy Commander of
+Sichuan East China Gas
+Transmission Construction
+Project Headquarter of
+Sinopec Corp., General
+Manager and Deputy
+Secretary of CPC Committee
+of Sinopec Exploration
+Company; in May 2008,
+he was appointed as
+Deputy Director General of
+Exploration and Production
+Department of Sinopec Corp.
+(Director General Level)
+and Deputy Commander
+of Sichuan-East China Gas
+Transmission Construction
+Project Headquarter; in
+July 2010, he served as
+Deputy Chief Geologist of
+Sinopec Corp.; in August
+2013, he was appointed as
+Chief Geologist of Sinopec
+Corp.; in December 2015,
+he served as Vice President
+of China Petrochemical
+Corporation and appointed
+as Senior Vice President of
+Sinopec Corp.; in January
+2017, he was appointed
+as Member of the Leading
+Party Member Group
+of China Petrochemical
+Corporation. In February
+2016, he was elected as
+Director of Sinopec Corp.
+64
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Jiang Xiaoming
+Andrew Y. Yan
+Jiang Xiaoming, aged
+64, Independent Director
+of Sinopec Corp. Mr.
+Jiang has a Ph.D. in
+economics. Presently, he
+acts as the member of the
+United Nations Board of
+Investment, Chairman of the
+Board of Directors of Hong
+Kong Saibo International Co.
+Ltd., Independent Director of
+COSCO International, Senior
+Fellow of the University
+of Cambridge Business
+School, and trustee of
+University of Cambridge
+China Development Fund.
+Between 1992 and 1998, he
+acted as the Vice President
+of United Nations Staff
+Retirement Fund; between
+1999 and 2003, he acted as
+the Chairman of the Board
+of Directors of Frasers
+Property (China) Co., Ltd.;
+and he has previously
+acted as the member of
+the Eleventh and Twelfth
+national committee of
+CPPCC, the Board Director
+of JSW Energy Ltd., member
+of the Advisory Committee
+of American Capital Group
+and Rothschild, the British
+Investment Bank, and
+Independent Director of
+China Oilfield Services
+Limited. From May 2012 to
+the present, he has acted
+as Independent Director of
+Sinopec Corp.
+Andrew Y. Yan, aged 60,
+Independent Director of
+Sinopec Corp. Mr. Yan is
+the founding Managing
+Partner of SAIF Partners.
+He studied in Nanjing
+University of Aeronautics
+and Astronautics, Peking
+University and Princeton
+University and earned
+of Chinese Academy of
+Social Sciences between
+1994 and 1995. In 1996,
+he was redesignated to
+work for China Society of
+Economic Reform, and
+subsequently founded the
+National Economic Research
+Institution. From 2006 to
+2010, and from 2015 to the
+present, he has served as
+a member of the Monetary
+Policy Committee of
+People's Bank of China. Mr.
+Fan is recognised as one
+of the National Young and
+Middle-Aged Experts with
+Outstanding Contributions.
+From May 2015 to the
+present, he has acted as
+Independent Director of
+Sinopec Corp.
+Ltd and TCL Group; and the
+Director of ATA Co., Ltd and
+Ata Online(Beijing)Education
+Technology Co., Ltd.. From
+1989 to 1994, he acted
+as Economist of the World
+Bank headquarters in
+Washington, research Fellow
+of Hudson Institute, an
+American famous research
+think tank, and acted as the
+director of APAC Strategic
+Planning & Business
+Development of Sprint
+International Corporation;
+between 1994 and 2001,
+he acted as the Managing
+Director of Emerging
+Markets Partnership and
+Director of Hong Kong Office
+of AIG Asia Infrastructural
+Investment Fund. From May
+2012 to the present, he
+has acted as Independent
+Director of Sinopec Corp.
+a master degree from
+Princeton University.
+Presently, he acts as the
+Independent Non-executive
+Director of China Resources
+Land Limited, the Non-
+executive Director of China
+Huiyuan Juice Group
+Limited, Feng Deli Holdings
+Limited and Guodian
+Technology & Environment
+Group Corporation Limited;
+the Independent Director
+of Beijing BlueFocus Brand
+Management Consulting Co.,
+65
+in 1988, and subsequently
+served as Director of
+Editorial Department for
+the Economic Research
+Journal between 1992 and
+1993 and as Deputy Head
+of China Development
+Institute (Shenzhen) and
+an economics professor
+at Peking University. He
+began to work for Chinese
+Academy of Social Sciences
+Fan Gang, aged 64,
+Independent Director of
+Sinopec Corp. Mr. Fan
+has a Ph.D. in economics.
+He presently acts as Vice
+President of China Society
+of Economic Reform,
+Head of the National
+Economic Research
+Institution of China Reform
+Foundation, President
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Tang Min, aged 64,
+Independent Director of
+Sinopec Corp. Mr. Tang
+has a Ph.D. in economics.
+He presently acts as a
+Counsellor of the State
+Council of the PRC and the
+Executive Vice Chairman
+of YouChange China Social
+Entrepreneur Foundation,
+Independent Director of
+Minmetals Development Co.,
+Ltd, Origin Agritech Limited
+and Baoshang Bank Co., Ltd.
+He has served as economist
+and senior economist at the
+Economic Research Centre
+of the Asian Development
+Bank between 1989 and
+2000; chief economist at
+the Representative office of
+the Asian Development Bank
+in China between 2000 and
+2004; deputy representative
+at the Representative Office
+of the Asian Development
+Bank in China between 2004
+and 2007 and the deputy
+secretary-general of the
+China Development Research
+Foundation between 2007
+and 2010. From May 2015
+to the present, he has acted
+as Independent Director of
+Sinopec Corp.
+Tang Min
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Directors, Supervisors,
+Senior Management and Employees
+Senior Management and Employees
+Directors, Supervisors,
+Fan Gang
+0
+Sinopec Overseas Investment
+and Chemical Company Limited
+Trading of crude oil and
+2,733
+100
+Sinopec Shanghai Gaoqiao
+10,000
+55
+25,434
+12,000
+2,642
+million
+Manufacturing of intermediate
+Sinopec Shanghai Petrochemical
+10,814
+50.49
+39,609
+28,541
+6,152
+Petroleum and Chemical Limited
+petrochemical products and
+Trading of crude oil and petroleum products
+9,504
+Petrochemical Company Limited
+Sinopec SK(Wuhan) Petrochemical
+6,270
+65
+15,234
+11,259
+1,046
+3,853
+Company Limited
+of ethylene and downstream by-products
+Sinopec Kantons Holdings Limited
+HKD 248
+60.34
+14,285
+Production, sale, research and development
+petroleum products
+Manufacturing of synthetic fibres, resin
+Company Limited
+We have audited the accompanying financial statements of China Petroleum & Chemical Corporation (hereinafter "Sinopec Corp."), which comprise the
+consolidated and company balance sheets as at 31 December 2017, the consolidated and company income statements for the year then ended, the
+consolidated and company cash flow statements for the year then ended, the consolidated and company statements of changes in shareholders' equity
+for the year then ended, and notes to the financial statements.
+Our opinion
+In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company's financial position of
+Sinopec Corp. as at 31 December 2017, and their financial performance and cash flows for the year then ended in accordance with the requirements of
+Accounting Standards for Business Enterprises ("CASS").
+BASIS FOR OPINION
+We conducted our audit in accordance with China Standards on Auditing ("CSAS"). Our responsibilities under those standards are further described in
+the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is
+sufficient and appropriate to provide a basis for our opinion.
+We are independent of Sinopec Corp. in accordance with the Code of Ethics for Professional Accountants of the Chinese Institute of Certified Public
+Accountants ("CICPA Code"), and we have fulfilled our other ethical responsibilities in accordance with the CICPA Code.
+What we have audited
+KEY AUDIT MATTERS
+PricewaterhouseCoopers Zhongtian LLP
+11/F PricewaterhouseCoopers Center, Link Square 2, 202 Hu Bin Road, Huangpu District, Shanghai 200021, PRC
+Tel: +86 (21) 2323 8888, Fax: +86 (21) 2323 8800, www.pwccn.com
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+79
+Financial Statements (PRC)
+21,642
+Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
+period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
+not provide a separate opinion on these matters.
+OPINION
+To the Shareholders of China Petroleum & Chemical Corporation,
+PwC ZT Shen Zi (2018) No. 10001
+and plastics, intermediate petrochemical
+Fujian Petrochemical Company Limited
+6,898
+50
+10,917
+9,860
+2,757
+products and petroleum products
+Manufacturing of plastics, intermediate
+petrochemical products and
+petroleum products
+Note 1: All above subsidiaries except Fujian Petrochemical Company Limited are audited by PricewaterhouseCoopers Zhong Tian LLP or PricewaterhouseCoopers in 2017.
+KPMG Huazhen LLP served the exception.
+2: The above indicated total assets and net profit has been prepared in accordance with ASBE. Except for Sinopec Kantons Holdings Limited and Sinopec Overseas
+Investment Holdings Ltd, which are incorporated in Bermuda and Hong Kong SAR, respectively, all of the above wholly-owned and non-wholly-owned subsidiaries are
+incorporated in the PRC. All of the above wholly-owned and controlling subsidiaries are limited liability companies except for Sinopec Shanghai Petrochemical Company
+Limited and Sinopec Kantons Holdings Limited. The Board of Directors considered that it would be redundant to disclose the particulars of all subsidiaries and,
+therefore, only those which have material impact on the results or assets of Sinopec Corp. are set out above.
+78
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+REPORT OF THE PRC AUDITOR
+pwc
+普华永道
+Production and sale of petrochemical products
+USD 1,638
+726
+24,399
+317
+Trading of petrochemical products
+Company Limited
+Sinopec Beihai Refining and Chemical
+5,294
+98.98
+3,604
+16,811
+2,649
+Import and processing of crude oil,
+Limited Liability Company
+production, storage and sale of petroleum
+products and petrochemical products
+Sinopec Qingdao Refining and Chemical
+9,601
+5,000
+13,947
+1,400
+24,173
+11,916
+1.082
+petrochemical products
+Overseas investment holding
+Holding Limited
+million
+100
+Sinopec Catalyst Company Limited
+100
+8,652
+4,141
+607
+Production and sale of catalyst products
+China Petrochemical International
+1,500
+85
+18,522
+10,181
+Manufacturing of intermediate petrochemical
+Company Limited
+products and petroleum products
+Sinopec Marketing Co. Limited
+28,403
+70.42
+1,627
+409,949
+27,517
+Marketing and distribution of refined
+petroleum products
+Sinopec Shanghai SECCO
+7,801
+67.60
+195,555
+8,613
+12,176
+75
+3,780
+Manufacturing of intermediate petrochemical
+Company Limited
+products and petroleum products
+Sinopec Zhanjiang Dongxing
+4,397
+75
+7,974
+5,188
+2,161
+Manufacturing of intermediate petrochemical
+Petrochemical Company Limited
+products and petroleum products
+Sinopec Hainan Refining and Chemical
+3,986
+18,485
+31,994
+38,752
+100
+On 12 September 2017, Mr.
+Jiang Zhenghong resigned
+as Vice President of Sinopec
+Corp. due to change of working
+arrangement.
+On 28 June 2017, Mr. Wang
+Yajun resigned as the supervisor
+of Sinopec Corp. due to his age.
+On 28 June 2017, Mr. Yu
+Xizhi was elected as employee
+representative supervisor of the
+Sixth Session of the Board of
+Supervisors.
+On 28 June 2017, Mr. Zhao
+Dong was elected as Chairman
+of the Board of Supervisors of
+Sinopec Corp.
+On 28 June 2017, Mr. Li
+Yunpeng was elected as director
+of the Sixth Session of the
+Board of Sinopec Corp.
+On 16 March 2017, Mr. Liu Yun
+resigned as the Chairman of
+the Board of Supervisors and
+supervisor of Sinopec Corp. due
+to his age.
+TERMINATION OF DIRECTORS,
+SUPERVISORS AND SENIOR
+MANAGEMENT
+APPOINTMENT OR
+2 INFORMATION ON
+2: The members of senior management are in order of the number of strokes of their surname in Chinese.
+Note 1: Mr. Lin Yiqun was appointed as Senior Vice President of Sinopec Corp. in February 2018
+Former Vice President
+Position in
+Sinopec Corp.
+0
+0
+2016
+Equity interests in Sinopec Corp.
+(as of 31 December)
+2017
+Company
+No
+the holding
+(RMB 1,000,
+before tax)
+755.4
+Age
+56
+On 22 September 2017,
+Mr. Wang Yupu resigned
+as Chairman of the Board,
+Director and Chairmen of
+Strategy Committee and Social
+Responsibility Management
+Committee of the Board of
+Sinopec Corp. due to change of
+working arrangement.
+On 29 January 2018, Mr. Wang
+Zhigang resigned as director,
+member of Strategy Committee
+of the Board and the Senior
+Vice President of Sinopec Corp.
+due to his age.
+On 29 January 2018, Mr. Zhang
+Haichao resigned as director,
+member of Strategy Committee
+of the Board and the Senior
+Vice President of Sinopec Corp.
+due to his age.
+On 7 February 2018, Mr. Liu
+Zhongyun resigned as the
+supervisor of Sinopec Corp.
+due to change of working
+arrangement.
+1.3%
+5,819
+R&D
+34.5%
+153,804
+Marketing and Distribution
+THE BREAKDOWN ACCORDING TO THE MEMBERS OF EACH OPERATION SEGMENT AS FOLLOWS
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+74
+Directors, Super Employees
+Senior 
+Management and E
+Male
+6 THE COMPANY'S EMPLOYEES
+As at 31 December 2017, the
+Company has a total of 446,225
+employees. There are a total of
+197,083 retired employees to
+be reimbursed by Sinopec Corp.
+Sinopec Marketing Co. Limited
+and Shanghai Petro, both
+principal subsidiaries of Sinopec
+Corp., have 153,804 employees
+and 10,226 employees
+respectively.
+DIRECTORS, SUPERVISORS,
+AND THE SENIOR
+MANAGEMENT
+REMUNERATION OF
+5
+As of 31 December 2017 or
+any time during the reporting
+period, there is no Director
+or Supervisor of the Company
+entered into any agreement
+with any of Sinopec Corp., its
+controlling shareholder, any
+subsidiary or related subsidiary
+which shall significantly benefit
+such Director or Supervisor.
+4 CONTRACTRAL INTERESTS
+OF DIRECTORS AND
+SUPERVISORS
+3 CHANGE OF SHAREHOLDING
+OF DIRECTORS, SUPERVISORS,
+AND THE SENIOR
+MANAGEMENT
+There is no change in
+shareholdings of the Company
+by Directors, Supervisors and
+other senior managements
+during the reporting period.
+For details, please refer to the
+announcements, published
+in China Securities Journal,
+Shanghai Securities News
+and Securities Times after
+the meetings and on websites
+of Shanghai Stock Exchange,
+Hong Kong Stock Exchange and
+Sinopec Corp.
+On 8 February 2018, Mr. Zhao
+Rifeng was appointed as Vice
+President of Sinopec Corp.
+On 8 February 2018, Mr. Liu
+Zhongyun was appointed as
+Senior Vice President of Sinopec
+Corp.
+On 8 February 2018, Mr. Lin
+Yiqun was appointed as Senior
+Vice President of Sinopec Corp.
+During this reporting period,
+there is a total of 16 directors,
+supervisors and other senior
+management received
+remuneration from Sinopec
+Corp. with a total amount of
+RMB 10.0385 million.
+Gender
+Jiang Zhenghong
+Name
+51
+Male
+Huang Wensheng
+13,000
+13,000
+Yes
+Former Vice President
+55
+Male
+Ling Yiqun
+Vice President, Board Secretary
+0
+No
+866.3
+2016
+2017
+Company
+(as of 31 December)
+the holding
+Equity interests in Sinopec Corp.
+paid by
+Whether
+0
+Other Segments
+892.9
+0
+Whether
+paid by
+in 2017
+Sinopec Corp.
+paid by
+Remuneration
+0
+0
+No
+892.9
+Vice President
+No
+55
+Lei Dianwu
+0
+0
+No
+892.9
+Vice President
+59
+Male
+Chang Zhenyong
+0
+Male
+5,353
+1.2%
+Exploration and Production
+(%)
+RMB million
+Total Assets
+Net Profit/
+Percentage of
+shares held by
+Sinopec Corp.
+Registered Capital
+Name of Company
+On 31 December, 2017, details of the principal wholly-owned and controlled subsidiaries of the Company were as follows:
+PRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIES
+Principal Wholly-Owned
+and Controlled Subsidiaries
+RMB million
+Directors, Supervisors,
+Senior Management and Employees
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+refining technology for 1,205
+high-level professional and
+technical personnel. With roles
+of craftsmanship spirit and
+heritage of skills as the focus,
+the Company launched the first
+chief technician training classes
+and training programs for 10
+types of work such as oil and
+gas gathering and transferring,
+catalytic cracking for top skilled
+talents covering 245 people.
+To enhance the management
+of transnational operation and
+risk prevention, the company
+organised a series of training
+programs covering 920 overseas
+project managers. The branch
+companies and subsidiaries
+adopted various ways to carry
+out different kinds of personnel
+training according to their
+conditions, and organised
+off-job training for a total of
+328,000 employees, as well
+as basic training for a total of
+386,000 employees.
+seminars with topics such as
+Innovation & Development for
+1,822 employees. The Company
+strengthened the training of
+young and middle-aged reserve
+managers, and organised
+trainings for 100 employees.
+With an aim to solve key
+problems related to scientific
+research and production, the
+Company organised workshops
+for leading experts in the field
+of oil & gas exploration and
+development strategy and key
+work of the year, the Company
+organised training programs
+at headquarters level which
+were attended by 4,292 high-
+level personnel. With an aim
+to enhance the professional
+capability, the Company
+launched a series of training
+programs for new management
+personnel, and organised
+Centring on enterprise
+10 TRAINNING PROGRAMS
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+76
+9 REMUNERATION POLICY
+Based on a relatively united
+basic remuneration system,
+Sinopec Corp. has established
+its remuneration distribution
+system based on the value
+of positions, performance
+& contribution, with an
+aim to improve employee
+capabilities, and constantly
+improve employee performance
+evaluation and incentive &
+discipline mechanisms.
+responsible for the payments of
+basic pensions.
+77
+pension schemes are
+Sinopec International Petroleum
+100
+173,035
+100
+12,000
+Sinopec Pipeline Storage & Transportation
+Company Limited
+2,277
+17,748
+28,786
+100
+13,203
+8,000
+Sinopec Yangzi Petrochemical
+16,549
+35,303
+100
+22,761
+Sinopec Great Wall Energy & Chemical
+Exploration and Production Limited
+1,075
+(Net Loss) Principal Activities
+RMB million
+Net Assets
+RMB million
+18,683
+54,324
+Company Limited
+Remuneration
+paid by
+Sinopec Corp.
+in 2017
+(RMB 1,000,
+before tax)
+Government-administered
+During the reporting period,
+there are no significant changes
+of core technical team or key
+technicians.
+163,319
+Production
+EDUCATIONAL BACKGROUND STRUCTURE FOR EMPLOYEES AS FOLLOWS:
+2.2%
+9,617
+Others
+8%
+35,698
+Administration
+2.4%
+36.6%
+10,951
+83,816 18.8%
+Technology
+EMPLOYEES' PROFESSIONAL STRUCTURE AS FOLLOWS:
+14.1%
+63,052
+Chemicals
+15.7%
+70,128
+Refining
+148,069 33.2%
+Finance
+8 EMPLOYEE BENEFITS SCHEME
+Details of the Company's
+employee benefits scheme
+are set out in Note37 of the
+financial statements prepared
+under IFRS of this annual
+report. As at 31 December
+2017, the Company has a total
+of 197,083 retired employees.
+All of them participated in
+the basic pension schemes
+administered by provincial
+(autonomous region or
+municipalities) governments.
+Sales
+32%
+TECHNICAL TEAM OR KEY
+TECHNICIANS
+7 CHANGES OF CORE
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Directors, Supervisors,
+Senior Management and Employees
+Senior Management and Employees
+Directors, Supervisors,
+75
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+9%
+40,272
+142,824
+Technical secondary school
+Junior college
+24.5%
+109,274
+Undergraduate
+3.5%
+15,707
+Master's degree or above
+40.8%
+181,989
+Senior high school and
+technical school degrees or below
+22.2%
+CFO
+98,983
+Position in
+Equity interests in Sinopec Corp.
+the holding
+paid by
+Whether
+in 2017
+Sinopec Corp.
+paid by
+Remuneration
+(RMB 1,000,
+before tax)
+Tenure
+Sinopec Corp.
+Age
+Gender
+Name
+Position in
+List of Members of the Board of Supervisors
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+70
+Yu Xizhi, aged 55,
+Employee's Representative
+Supervisor of Sinopec Corp.
+Mr Yu is a professor-level
+senior engineer with a Ph.D.
+in engineering. In August
+1997, he was appointed as
+Deputy Manager of Anqing
+Petrochemical Complex
+and Manager of Fertiliser
+Plant; in September 1999,
+he became a member of the
+CPC Standing Committee
+of Anqing Petrochemical
+Complex; in February 2000,
+he was appointed as Deputy
+Manager of Sinopec Anqing
+Company and in September
+2000, he was appointed as
+Manager of Sinopec Anqing
+Company. In January 2005,
+he was appointed as Manager
+of Anqing Petrochemical
+Complex and from May 2009
+to July 2010, he served a
+temporary position at the
+Standing Committee of
+the CPC Anqing Municipal
+Committee. In July 2010,
+he became General Manager
+and Deputy Secretary of the
+CPC Committee of Maoming
+Petrochemical Company and
+General Manager of Sinopec
+Maoming Company; in July
+2016, Mr. Yu was appointed
+as head of Maoming.
+Zhanjiang Integration
+Leading Group; in December
+2016, he became Executive
+Director, General Manager
+and Deputy Secretary of the
+CPC Committee of Zhongke
+(Guangdong) Refining and
+Petrochemical Co., Ltd. Since
+April 2017, Mr. Yu has been
+Director General of Human
+Resources Department
+of China Petrochemical
+Corporation and Sinopec
+Corp. In June 2017, he
+was elected as Employee's
+Representative Supervisor of
+Sinopec Corp.
+Yu Renming, aged 54,
+Employee's Representative
+Supervisor of Sinopec Corp.
+Mr. Yu is a professor level
+senior engineer with a
+university diploma. In June
+2000, he was appointed
+as the Deputy General
+Manager of Sinopec Zhenhai
+Refining & Chemical Co.,
+Ltd.; in June 2003, he
+was appointed as the
+Board Director and Deputy
+General Manager of Sinopec
+Zhenhai Refining & Chemical
+Co., Ltd.; in September
+2006, he was appointed
+as the Vice President of
+Sinopec Zhenhai Refining
+& Chemical Company; in
+September 2007, he was
+appointed as the President
+and the Vice Secretary of
+CPC committee of Sinopec
+Zhenhai Refining & Chemical
+Company; in January 2008,
+he was appointed as the
+Director General of Sinopec
+Production Management
+Department; in December
+2017, he was appointed
+as the Director General
+of Refining Department
+of Sinopec Corp.; and in
+December 2010, he was
+elected as Employee's
+Representative Supervisor of
+Sinopec Corp.
+of the CPC Committee
+of Sinopec Procurement
+Management Department
+(Sinopec International
+Co. Ltd.); in April 2010,
+he was appointed as the
+Director General (General
+Manager), Executive Director
+and Deputy Secretary
+of the CPC Committee
+of Sinopec Procurement
+Management Department
+(Sinopec International Co.
+Ltd); in November 2014,
+he was appointed as
+Director General of Safety
+Supervisory Department of
+Sinopec Corp.; in May 2017,
+he was appointed as Deputy
+Director of the Leading
+Group Office of Party
+Inspection Work of China
+Petrochemical Corporation
+and the leader of overseas
+enterprises inspection
+group; and since December
+2010, he was elected as the
+Employee's Representative
+Supervisor of Sinopec Corp.
+(as of 31 December)
+Company
+Zhao Dong
+Male
+54
+Yes
+2015.05-2018.02
+0
+2016
+0
+2017
+Yes
+2017.06.2018.05
+Chairman of the Board
+of Supervisors
+Former Supervisor
+Director and Secretary
+3|ཐ|
+Jiang Zhenying
+57
+Male
+Zou Huiping
+Male
+Zhou Hengyou
+54
+Male
+Liu Zhongyun
+47
+Male
+Jiang Zhenying, aged 53,
+Employee's Representative
+Supervisor of Sinopec Corp.
+Mr. Jiang is a professor level
+senior economist with a
+doctor degree. In December
+1998, he was appointed
+as the Vice President of
+the China Petrochemical
+Supplies & Equipment Co.,
+Ltd.; in February 2000, he
+was appointed as the Deputy
+Director General of Sinopec
+Procurement Management
+Department; in December
+2001, he was appointed
+as the Director General
+of Sinopec Procurement
+Management Department
+and in November 2005
+he concurrently held the
+positions of Chairman
+of Board of Directors,
+President and Secretary of
+CPC Committee of China
+Petrochemical International
+Co., Ltd.; in March 2006,
+he was appointed as the
+Director General (General
+Manager), Executive
+Yu Xizhi
+Yu Renming
+products, lubricant base oil,
+Sinopec Qingdao Petrochemical
+1,595
+100
+3,918
+486
+183
+Company Limited
+Sinopec Chemical Sales Company Limited
+1,000
+Production and sale of refined petroleum
+100
+2,758
+1,383
+and petrochemical materials
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Marketing and distribution
+of petrochemical products
+China International United Petroleum
+Sinopec Corp.
+3,000
+20,037
+53
+595
+8,552
+Jiang Zhenying
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Directors, Super Employees
+Senior Management and E
+2,724
+Company Limited
+Investment in exploration, production
+and sale of petroleum and natural gas
+(4,821) Coal chemical industry investment
+management, production and sale
+of coal chemical products
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Pipeline storage and transportation
+3,725
+of crude oil
+4,000
+100
+8,303
+5,264
+Production and sale of polyester
+Liability Company
+chips and polyester fibres
+Sinopec Lubricant Company Limited
+3,374
+100
+Sinopec Yizheng Chemical Fibre Limited
+Yu Renming
+6
+54
+2016, he was appointed as
+Chief Financial Officer of
+Sinopec Corp.
+Wang Dehua, aged 51, Chief
+Financial Officer of Sinopec
+Corp. Mr.Wang is a senior
+accountant with university
+diploma. In January 2001,
+he was appointed as
+Deputy Director General
+of Finance Department
+of Sinopec Corp.; in May
+2014, he was appointed
+as Acting Director General
+of Finance Department of
+Sinopec Corp.; in October
+2015, he was promoted
+to Director General of
+Finance Department of
+Sinopec Corp.; in November
+2015, he was appointed
+as Director General of
+Finance Department of
+China Petrochemical
+Corporation; in August
+2016, he was appointed
+as Director General of
+Finance Department of
+Sinopec Corp.. Mr. Wang
+now concurrently acts as
+Vice Chairman of Sinopec
+Finance CO., Ltd. and
+Taiping & Sinopec Financial
+Leasing Co., in September
+(3) Other Members of Senior
+Management
+Huang Wensheng
+Ling Yiqun
+Wang Dehua
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Directors, Sup Employees
+Senior Management and E
+Senior Management and Employees
+Ling Yiqun, aged 55, former
+Vice President of Sinopec
+Corp. Mr. Ling is a professor
+level senior engineer with
+Directors, Supervisors,
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+0
+0
+No
+417.3
+0
+0
+Yes
+2016
+2017
+71
+(as of 31 December)
+a Ph.D. degree. From
+1983, he worked in the
+refinery of Beijing Yanshan
+Petrochemical Company and
+the Refining Department
+of Beijing Yanshan
+Petrochemical Company Ltd.
+In February 2000, he was
+appointed as the Deputy
+Director General of Refining
+Department of Sinopec
+Corp.; in June 2003, he
+was appointed as the
+Director General of Refining
+Department of Sinopec
+Corp.; in July 2010, he was
+appointed as Vice President
+of Sinopec Corp; in May
+2012, he was appointed
+President and Secretary of
+CPC Committee of Sinopec
+Refinery Product Sales
+Company Limited; in August
+2013, he was appointed as
+the President of Sinopec
+Qilu Company; in December
+2016, he was elected
+concurrently as Chairman
+of Board of Directors of
+Sinopec Engineering(Group)
+Co. Ltd.; in March 2017,
+he was appointed as
+Vice President of China
+Petrochemical Corporation
+and in February 2018, he
+was appointed as Senior
+Vice President of Sinopec
+Corp.
+51
+Male
+Male
+Wang Dehua
+Age
+Gender
+Name
+List of Members of the Senior Management
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Senior Management and Employees
+as Executive Director,
+Directors, Supervisors,
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+2000, he was appointed as
+Deputy Director General of
+Development & Planning
+Department of Sinopec
+Corp.; in March 2001, he
+was appointed as Director
+General of Development
+& Planning Department of
+Sinopec Corp.; in March
+2009, he was appointed
+as Assistant to President
+of China Petrochemical
+Corporation; in August 2013,
+he was appointed as the
+Chief Economist of China
+Petrochemical Corporation;
+in October 2015, he was
+appointed as Secretary
+to the Board of Directors
+of China Petrochemical
+Corporation; and in May
+2009, he was appointed as
+Vice President of Sinopec
+Corp.
+Lei Dianwu, aged 55, Vice
+President of Sinopec Corp.
+Mr. Lei is a Professor
+level Senior Engineer with
+a university diploma. In
+October 1995, he was
+appointed as Vice President
+of Yangzi Petrochemical
+Corporation; in December
+1997, he was appointed as
+Director General of Planning
+& Development Department
+in China Eastern United
+Petrochemical (Group) Co.,
+Ltd.; in May 1998, he was
+appointed as Vice President
+of Yangzi Petrochemical
+Corporation; in August
+1998 he was appointed as
+Vice President of Yangzi
+Petrochemical Co., Ltd.;
+in March 1999, he was
+appointed temporarily
+as Deputy Director
+General of Development
+& Planning Department
+of China Petrochemical
+Corporation; in February
+of Qilu Petrochemical
+Company and President
+of Sinopec Qilu Company;
+in April 2010, he was
+appointed as Employee's
+Representative Supervisor
+of Sinopec Corp.; in July
+2010, he was appointed as
+Deputy Chief Engineer and
+concurrently as Director
+General of Chemicals
+Department of Sinopec
+Corp.; in August 2012, he
+was appointed concurrently
+as Vice Chairman of Board
+of Directors of Sinopec Great
+Wall Energy & Chemical Co.,
+Ltd.; in November 2014, he
+was appointed as Executive
+Director and President
+of Sinopec Chemical
+Products Sales Co. Ltd and
+concurrently as Chairman
+of Board of Directors of
+Sinopec Chemical Products
+Sales (Hong Kong) Co. Ltd.;
+and in May 2014, he was
+appointed as Vice President
+of Sinopec Corp.
+Chang Zhenyong, aged
+59, Vice President of
+Sinopec Corp. Mr. Chang
+is a professor level senior
+engineer with a master's
+degree. In September
+1997, he was appointed as
+Vice President of Tianjin
+Petrochemical Company;
+in February 2000, he
+was appointed as Vice
+President of Sinopec Tianjin
+Company; and in September
+2000, he was promoted to
+President of Sinopec Tianjin
+Company; from February
+2004, he was appointed
+temporarily as member
+of Standing Committee of
+CPC Committee of Beihai,
+Guangxi; in March 2004, he
+was appointed temporarily
+as deputy mayor of Beihai,
+Guangxi; in November 2005,
+he was appointed as Director
+General of Production and
+Operation Management
+Department of Sinopec
+Corp.; in December 2007, he
+was appointed as President
+Lei Dianwu
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+72
+Corp.
+Huang Wensheng, aged 51,
+Vice President of Sinopec
+Corp., Secretary to the Board
+of Directors. Mr. Huang
+is a professor level senior
+economist with a university
+diploma. In March 2003, he
+was appointed as Deputy
+Director General of the
+Board Secretariat of Sinopec
+Corp.; in May 2006, he was
+appointed as Representative
+on Securities Matters of
+Sinopec Corp.; since August
+2009, He has served as the
+Deputy Director General
+of President's office of
+Sinopec Corp. In September
+2009, he was appointed
+as Director General of the
+Board Secretariat of Sinopec
+Corp.; in May 2012, he was
+appointed as Secretary to
+the Board of Directors of
+Sinopec Corp.; and in May
+2014, he was appointed as
+Vice President of Sinopec
+73
+Equity interests in Sinopec Corp.
+Chang Zhenyong
+the holding
+lo
+oooo o
+0
+No
+265.9
+2017.06-2018.05
+0
+No
+758.2
+2010.12 2018.05
+0
+0000
+2010.12.2018.05
+No
+758.2
+2006.05-2018.05
+Yes
+Supervisor 2015.05-2018.05
+Supervisor
+Employee's Representative
+Supervisor
+Employee's Representative
+Supervisor
+Employee's Representative
+Supervisor
+Yu Xizhi
+Company
+55
+Male
+758.2
+Name
+No
+Wang Yajun
+(RMB 1,000,
+before tax)
+Whether
+paid by
+in 2017
+Liu Yun
+paid by
+Remuneration
+Mr. Liu Zhongyun resigned as Supervisor of Sinopec Corp. in February 2018.
+Representative Supervisor
+2015.05-2017.06
+Former Employee's
+61
+Sinopec Corp.
+the Board of Supervisors
+2015.05-2017.03
+Former Chairman of
+Male
+Gender
+Male
+Tenure
+Sinopec Corp.
+Note:
+Position in
+Age
+61
+29,767
+196,640
+177,049
+182,440
+Total shareholders' equity
+567,269
+1,002,495
+These financial statements have been approved by the board of directors on 23 March 2018.
+199,682
+569,576
+977,725
+Dai Houliang
+Vice Chairman, President
+Total liabilities and shareholders' equity
+Retained earnings
+196
+393
+The accompanying notes form part of these financial statements.
+505
+2,607
+2,591
+117,663
+127,327
+Surplus reserves
+435,226
+121,071
+121,071
+68,789
+68,769
+263
+482
+408,149
+Wang Dehua
+235,292
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+40
+232,006
+Selling and distribution expenses
+42
+56,055
+49,550
+1,492,165
+General and administrative expenses
+78,928
+74,155
+Financial expenses
+31,405
+41
+1,560
+42
+1,890,398
+39/42
+1,930,911
+83
+Financial Statements (PRC)
+Financial Statements (PRC)
+CONSOLIDATED INCOME STATEMENT
+for the year ended 31 December 2017
+Note
+2017
+2016
+RMB million
+RMB million
+Operating income
+Less: Operating costs
+Taxes and surcharges
+39
+2,360,193
+Chief Financial Officer
+36,000
+8,340
+58,448
+329,814
+373,020
+50,046
+49,277
+7,913
+1.958
+268,451
+1,980
+10,690
+10,952
+683,634
+711,890
+1,002,495
+977,725
+6,834
+17,330
+297
+345
+10
+6,611
+4,429
+3,454
+44,933
+46,942
+395
+275,557
+27,189
+318,861
+265,835
+777
+13
+14
+15
+32,743
+20,000
+9,256
+2,761
+Non-current liabilities
+Long-term loans
+Debentures payable
+Provisions
+Deferred tax liabilities
+Other non-current liabilities
+280,822
+Total non-current liabilities
+Shareholders' equity
+Share capital
+Capital reserve
+Other comprehensive income
+Specific reserve
+63,667
+Total liabilities
+3,155
+317,563
+38,082
+83,449
+75,787
+3,413
+2,360
+4,854
+312
+Total current liabilities
+42,549
+143,274
+113,841
+Short-term debentures payable
+6,000
+Non-current liabilities due within one year
+19,539
+32,423
+Exploration expenses, including dry holes
+65,503
+11,089
+INCOME STATEMENT
+12,035
+18,280
+53,468
+47,638
+65,918
+6,333
+(4,376)
+4,298
+(3,792)
+45
+1,053
+(24)
+(57)
+2,014
+(1,580)
+59,170
+62
+62
+22
+36
+16
+51,119
+for the year ended 31 December 2017
+46,416
+12,754
+0.422
+0.383
+0.422
+0.383
+70,294
+19,175
+Operating income
+Less: Operating costs
+Taxes and surcharges
+Other comprehensive income
+Items that may be reclassified subsequently to profit or loss
+(net of tax and after reclassification adjustments):
+Cash flow hedges
+Share of other comprehensive loss of associates
+Total other comprehensive income
+Termination of net profit
+Total comprehensive income
+Dai Houliang
+Vice Chairman, President
+The accompanying notes form part of these financial statements.
+Wang Dehua
+Chief Financial Officer
+5,454
+These financial statements have been approved by the board of directors on 23 March 2018.
+66
+Continuous operating net profit
+Net profit
+Selling and distribution expenses
+General and administrative expenses
+Financial expenses
+Exploration expenses, including dry holes
+Impairment losses
+Add: Gain from changes in fair value
+Classification by going concern:
+Investment income
+Other income
+Operating profit
+Add: Non-operating income
+Less: Non-operating expenses
+Profit before taxation
+Less: Income tax expense
+Asset disposal income
+Chief Financial Officer
+Wang Dehua
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+30,779
+(1,518)
+(1,487)
+47
+4,356
+86,965
+19,060
+77,389
+1,317
+4,706
+49
+1,709
+2,218
+86,573
+48
+79,877
+46
+Less: Non-operating expenses
+11,035
+Impairment losses
+44
+21,791
+17,076
+Add: Loss from changes in fair value
+Profit before taxation
+45
+(216)
+Investment income
+Asset disposal income
+Other income
+Operating profit
+Add: Non-operating income
+(13)
+42/43
+Less: Income tax expense
+16,279
+(net of tax and after reclassification adjustments):
+Cash flow hedges
+Changes in fair value of available-for-sale financial assets
+Share of other comprehensive income of associates and joint ventures
+Foreign currency translation differences
+Total other comprehensive income
+Items that may be reclassified subsequently to profit or loss
+Total comprehensive income
+Equity shareholders of the Company
+Minority interests
+These financial statements have been approved by the board of directors on 23 March 2018.
+Dai Houliang
+Vice Chairman, President
+The accompanying notes form part of these financial statements.
+84
+Attributable to:
+50
+Other comprehensive income
+Basic earnings per share
+20,707
+Net profit
+70,294
+59,170
+Including: net profit of acquiree before the consolidation under common control
+86
+Diluted earnings per share
+Net profit
+Classification by going concern:
+70,294
+59,170
+Termination of net profit.
+Classification by ownership:
+Equity shareholders of the Company
+Minority interests
+Continuous operating net profit
+16,327
+Total non-current assets
+47,493
+Share capital
+Shareholders' equity
+Total liabilities
+Total non-current liabilities
+Other non-current liabilities
+Deferred tax liabilities
+Provisions
+Debentures payable
+Long-term loans
+Non-current liabilities
+Total current liabilities
+Non-current liabilities due within one year
+Short-term debentures payable
+Other payables
+Dividends payable
+Taxes payable
+Employee benefits payable
+Long-term equity investments
+Fixed assets
+Construction in progress
+Intangible assets
+Goodwill
+Long-term deferred expenses
+Capital reserve
+Deferred tax assets
+Total assets
+Liabilities and shareholders' equity
+Current liabilities
+Short-term loans
+Bills payable
+Accounts payable
+Advances from customers
+Other non-current assets
+Other comprehensive income
+Specific reserve
+Surplus reserves
+142,497
+51,196
+7
+16,207
+13,197
+68,494
+165,004
+50,289
+25,596
+4,901
+3,749
+11
+186,693
+156,511
+16,467
+Available-for-sale financial assets
+5698901
+At 31 December
+2017
+RMB million
+Retained earnings
+Minority interests
+Total equity attributable to shareholders of the Company
+Total shareholders' equity
+Total liabilities and shareholders' equity
+These financial statements have been approved by the board of directors on 23 March 2018.
+At 31 December
+2016
+RMB million
+Dai Houliang
+The accompanying notes form part of these financial statements.
+82
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Wang Dehua
+Chief Financial Officer
+Note
+Vice Chairman, President
+Non-current assets
+Total current assets
+Other current assets
+Based on our work, we found the key assumptions and input data adopted
+were supported by the evidence we gathered and consistent with our
+expectations.
+Financial Statements (PRC)
+OTHER INFORMATION
+Management of Sinopec Corp. is responsible for the other information. The other information comprises all of the information included in 2017 annual
+report of Sinopec Corp. other than the financial statements and our auditor's report thereon.
+Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the
+other information is materially inconsistent with the 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.
+• Evaluated the sensitivity analyses prepared by the Group, and assessed
+the potential impacts of a range of possible outcomes.
+RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
+In preparing these financial statements, management is responsible for assessing Sinopec Corp.'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 management either intend to liquidate Sinopec
+Corp. or to cease operations, or have no realistic alternative but to do so.
+Those charged with governance are responsible for overseeing Sinopec Corp.'s financial reporting process.
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+REPORT OF THE PRC AUDITOR (CONTINUED)
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
+Our objectives are to obtain reasonable assurance about whether these 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. Reasonable assurance is a high level of assurance, but is not a
+guarantee that an audit conducted in accordance with CSAS 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 financial statements.
+Management of Sinopec Corp. is responsible for the preparation and fair presentation of these financial statements in accordance with the CASS,
+and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material
+misstatement, whether due to fraud or error.
+As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
+• Assessed the methodology adopted in, and tested mathematical
+accuracy of the discounted cash flow projections.
+Independently estimated a range of discount rates, and found that the
+discount rates adopted by management were within the range.
+Note
+80
+REPORT OF THE PRC AUDITOR (CONTINUED)
+The key audit matter identified in our audit is "Recoverability of the carrying amount of fixed assets related to oil and gas producing activities".
+Key Audit Matter
+Recoverability of the carrying amount of fixed assets related to oil and
+gas producing activities
+Refer to note 14 "FIXED ASSETS", note 44 “IMPAIRMENT LOSSES", and
+note 55 "PRINCIPAL ACCOOUNTING ESTIMATES AND JUDGEMENTS"
+to the consolidated financial statements.
+• Tested selected other key data inputs, such as natural gas prices and
+production profiles in the projections by reference to historical data
+and/or relevant budgets of the Group.
+Low crude oil prices gave rise to possible indication that the carrying
+amount of fixed assets related to oil and gas producing activities as
+at 31 December 2017 might be impaired. The Group has adopted
+discounted future cash flow as the respective recoverable amounts of
+fixed assets related to oil and gas producing activities, which involved
+key estimations or assumptions including:
+Because of the significance of the carrying amount of fixed assets
+related to oil and gas producing activities as at 31 December 2017,
+together with the use of significant estimations or assumptions in
+determining their respective discounted cash flow, we had placed our
+audit emphasis on this matter.
+How our audit addressed the Key Audit Matter
+In auditing the respective discounted cash flow of fixed assets related
+to oil and gas producing activities, we have performed the following key
+procedures on the relevant discounted cash flow projections prepared by
+management:
+• Evaluated and tested the key controls, relating to the preparation of the
+discounted cash flow projections of fixed assets related to oil and gas
+producing activities.
+•
+Compared estimates of future crude oil prices adopted by the Group
+against a range of reputable published crude oil price forecasts.
+Compared the future production profiles against the oil and gas
+reserve estimation report approved by the management. Evaluated
+the competence, capability and objectivity of the management's
+experts engaged in estimating the oil and gas reserves. Assessed key
+estimations or assumptions used in the reserve estimation, by reference
+to historical data, management plans and/or reputable external data.
+Compared the future cost profiles against historical costs or relevant
+budgets of the Group.
+Future crude oil prices;
+Future production profiles;
+Future cost profiles; and
+Discount rates.
+20,087
+• Identify and assess the risks of material misstatement of the 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.
+•
+Financial Statements (PRC)
+Financial Statements (PRC)
+(A)
+FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES
+CONSOLIDATED BALANCE SHEET
+as at 31 December 2017
+Assets
+81
+Current assets
+Financial assets at fair value through profit and loss
+Bills receivable
+Accounts receivable
+Other receivables
+Prepayments
+Inventories
+Cash at bank and on hand
+•
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+Signing CPA
+•
+•
+Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
+management.
+Conclude on the appropriateness of management's 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 Sinopec Corp.'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
+these 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 Sinopec Corp. to cease to continue as a going concern.
+Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements
+represent the underlying transactions and events in a manner that achieves fair presentation.
+Gao Peng
+• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Sinopec Corp. 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 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 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.
+PricewaterhouseCoopers Zhong Tian LLP
+Shanghai, the People's Republic of China
+23 March 2018
+Signing CPA
+Zhao Jianrong
+(Engagement Partner)
+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.
+20,422
+529,049
+412,261
+712,232
+126,826
+120,293
+854,070
+832.525
+1,595,504
+727,244
+1,498,609
+as at 31 December 2017
+Assets
+Current assets
+Cash at bank and on hand
+Financial assets at fair value through profit and loss
+Bills receivable
+Accounts receivable
+BALANCE SHEET
+Other receivables
+275,163
+196,640
+34
+121,071
+121,071
+35
+119,557
+119,525
+290,459
+36
+(932)
+37
+888
+765
+38
+199,682
+(4,413)
+666,084
+Dividends receivable
+Inventories
+Employee benefits payable
+Taxes payable
+Other payables
+Note
+At 31 December
+2017
+RMB million
+At 31 December
+Advances from customers
+2016
+92,545
+48,179
+157
+98,250
+88
+37,609
+471
+38,332
+9
+RMB million
+Prepayments
+Accounts payable
+Current liabilities
+Other current assets
+Total current assets
+Non-current assets
+Available-for-sale financial assets
+Long-term equity investments
+Fixed assets
+Bills payable
+Construction in progress
+Long-term deferred expenses
+Deferred tax assets
+Other non-current assets
+Total non-current assets
+Total assets
+Liabilities and shareholders' equity
+Intangible assets
+40,189
+741,434
+161,988
+18
+14,720
+13,537
+19
+15,131
+7,214
+6,353
+20
+25,826
+1,066,455
+1,595,504
+1,086,348
+1,498,609
+222222
+23
+28,662
+24
+8,634
+85,023
+12
+1,676
+11,408
+13
+131,087
+116,812
+17
+14
+690,594
+15
+118,645
+129,581
+16
+97,126
+650,774
+180,541
+234
+30,374
+26,681
+579,446
+38,972
+485,543
+01203
+67,754
+62,461
+29
+31,370
+39,958
+39,298
+6,466
+7,661
+16,440
+16,136
+54,985
+54,701
+6,000
+2,006
+6,462
+200,073
+5,828
+174,301
+25
+120,734
+95,928
+26
+77,630
+27
+1,618
+52,886
+232
+819
+28
+6,843
+84,850
+7,162
+71,940
+2017
+Short-term loans.
+RMB million
+51,119
+Change for the year
+832,525
+120,293
+712,232
+275,163
+196,640
+765
+(932)
+119,525
+121,071
+Balance at 1 January 2017
+832,525
+120,293
+712,232
+275,163
+196,640
+153
+153
+7
+160
+9. Others
+116
+51,119
+116
+125
+Balance at 31 December 2016
+121,071
+119,525
+(932)
+765
+9
+19,175
+70,294
+(3,481)
+5. Distributions to minority interests
+Total transactions with owners, recorded directly
+in shareholders' equity
+| | |
+6.
+Net increase in specific reserve for the year
+Transaction with minority interests
+7. Others
+121,071
+(13)
+(13)
+45
+119,557
+(4,413)
+Balance at 31 December 2017
+Net increase in specific reserve for the year
+- Distributions to shareholders(Note 51)
+4.
+(3,481)
+(3,481)
+(895)
+(4,376)
+51,119
+47,638
+- Appropriation for surplus reserves (Note 38)
+18,280
+1. Net profit
+2. Other comprehensive income (Note 36)
+Total comprehensive income
+Transactions with owners, recorded directly
+in shareholders' equity:
+3. Appropriations of profits:
+65,918
+8.
+(22,828)
+(3,785)
+equity
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+interests
+(7,984)
+196.640
+245,623
+677,538
+112,027
+789,565
+46,416
+612
+46,416
+the Company
+Total
+shareholders'
+Share
+capital
+Capital comprehensive
+Specific
+reserve
+RMB million
+121,071
+earnings
+RMB million
+121,576
+reserve
+RMB million
+Surplus
+reserves
+Retained
+shareholders of
+Minority
+income
+RMB million
+3,042
+12,754
+- 7.052 40,410
+(39)
+(86)
+(6,146)
+(6,146)
+7. Adjustment for the combination of entities under
+common control (Note 53)
+(47)
+(2,137)
+2.137
+Total transactions with owners, recorded directly
+in shareholders' equity
+(2,167)
+(16,876)
+(19,043)
+(2,137)
+59.170
+233
+(30)
+7,052
+(719)
+6,333
+7,052
+46,416
+53,468
+263
+12,035
+combination of entities under common control
+-----(16,829)
+(30)
+··· (47) (4
+(16,829)
+(16,829)
+65,503
+to equity
+(3,042)
+(32,689)
+30,415
+(67)
+(67)
+(67)
+66
+Total comprehensive income
+2. Other comprehensive income
+30,415
+30,415
+1. Net profit
+Change for the year
+569,576
+182,440
+196,640
+393
+263
+68,769
+80
+80
+5. Others
+53
+53
+Balance at 31 December 2016
+30.348
+Balance at 1 January 2017
+68,769
+263
+393
+196,640
+182,440
+569,576
+121,071
+121,071
+Transactions with owners, recorded directly
+in shareholders' equity:
+3. Appropriations of profits:
+68,789
+196
+482
+199,682
+177,049
+(55)
+567,269
+121,071
+Dai Houliang
+The accompanying notes form part of these financial statements.
+Wang Dehua
+Chief Financial Officer
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+89
+Financial Statements (PRC)
+Vice Chairman, President
+4. Net increase in specific reserve for the year
+(75)
+89
+- Appropriation for surplus reserves ----- 3,042
+(3,042)
+- Distributions to shareholders (Note 49)
+(32,689)
+(32,689)
+Total transactions with owners, recorded directly
+20
+in shareholders' equity
+(35,731)
+(32,689)
+4. Net increase in specific reserve for the year
+5. Others
+Balance at 31 December 2017
+These financial statements have been approved by the board of directors on 23 March 2018.
+89
+3,042
+(16,829)
+----- (16,829)
+in shareholders' equity
+290,459
+727,244
+126,826
+854,070
+These financial statements have been approved by the board of directors on 23 March 2018.
+Dai Houliang
+199,682
+Vice Chairman, President
+88
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Wang Dehua
+Chief Financial Officer
+STATEMENT OF CHANGES IN EQUITY
+for the year ended 31 December 2017
+The accompanying notes form part of these financial statements.
+Balance at 1 January 2016
+888
+27
+(13)
+724
+(12,501)
+(32,689)
+711
+(12,501)
+3,042
+(35,731)
+(32,702)
+(20)
+(11,777)
+123
+123
+3
+126
+(92)
+(47)
+(44,479)
+(32,689)
+Change for the year
+2. Other comprehensive income
+earnings
+RMB million
+equity
+RMB million
+175,679
+562,274
+23,590
+reserves
+RMB million
+196.640
+23,590
+408
+23,590
+23,998
+(16,829)
+(16,829)
+Total transactions with owners, recorded directly
+408
+408
+1. Net profit
+reserve
+RMB million
+313
+reserve
+RMB million
+68.716
+Total comprehensive income
+Transactions with owners, recorded directly
+in shareholders' equity:
+3. Appropriations of profits:
+- Appropriation for surplus reserves
+- Distributions to shareholders (Note 49)
+income
+RMB million
+(145)
+Other
+Capital comprehensive
+Specific
+Surplus
+Retained
+Total
+shareholders'
+capital
+RMB million
+121,071
+Share
+Other
+2016
+Distributions to the original shareholders in the
+Sub-total of cash outflows
+Net cash flow from financing activities
+Effects of changes in foreign exchange rate
+Net (decrease)/increase in cash and cash equivalents
+These financial statements have been approved by the board of directors on 23 March 2018.
+Dai Houliang
+Other cash paid relating to financing activities
+Vice Chairman, President
+Annual Report 2017 CHINA PETROLEUM & CHEMICAL CORPORATION
+Wang Dehua
+Chief Financial Officer
+Note
+2017
+RMB million
+2,644,126
+2,158
+The accompanying notes form part of these financial statements.
+57,287
+dividends or profits to minority shareholders
+Cash paid for dividends, profits distribution or interest
+Net cash received from disposal of fixed assets, intangible assets and other long-term assets
+Other cash received relating to investing activities
+Sub-total of cash inflows
+Net cash received from disposal of subsidiaries and other business entities
+Cash paid for acquisition of fixed assets, intangible assets and other long-term assets
+Cash paid for acquisition of investments
+Other cash paid relating to investing activities
+Including: Subsidiaries' cash payments for distribution of
+Net cash paid for the acquisition of subsidiaries and other business entities
+Net cash flow from investing activities
+Cash flows from financing activities:
+Cash received from capital contributions
+Including: Cash received from minority shareholders' capital contributions to subsidiaries
+Cash received from borrowings
+Sub-total of cash inflows
+Cash repayments of borrowings
+Sub-total of cash outflows
+Cash received from returns on investments
+2,703,571
+(2,041,977)
+8,506
+4,028
+1,313
+440
+52,304
+2,914
+31,489
+80
+66,932
+40,898
+(70,948)
+(72,847)
+(57,627)
+(16,389)
+2,027
+-------------
+4,729
+190,935
+(68,260)
+(328,304)
+2016
+RMB million
+2,163,695
+2,434
+77,436
+2,243,565
+214,543
+-----------
+(62,602)
+(316,062)
+(74,095)
+(2,512,636)
+(102,490)
+(2,029,022)
+52(a)
+(1,547,868)
+(82,392)
+Cash received from disposal of investments
+Net cash flow from operating activities
+10,614
+11,012
+14,372
+14,044
+179
+33
+3,851
+46
+43,519
+(887)
+(413)
+1,784
+29,738
+24,434
+38,058
+474
+2,642
+44,982
+6. Distributions to minority interests
+RMB million
+39
+39
+33
+66
+41,724
+857,478
+633,114
+513,514
+158,480
+158,373
+2,670
+2,365
+726,178
+Cash flows from investing activities:
+2,812
+1,117
+Financial Statements (PRC)
+Financial Statements (PRC)
+86
+CONSOLIDATED CASH FLOW STATEMENT
+for the year ended 31 December 2017
+Cash flows from operating activities:
+85
+Refund of taxes and levies
+Sub-total of cash inflows
+Cash paid for goods and services
+Cash paid to and for employees
+Payments of taxes and levies
+Other cash paid relating to operating activities
+Sub-total of cash outflows
+Other cash received relating to operating activities
+725
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+30,348
+29,487
+26,129
+(928)
+2,539
+30,415
+23,590
+23,998
+30,415
+53
+557
+(120)
+(149)
+(67)
+408
+23,590
+(17,879)
+Cash received from sale of goods and rendering of services.
+(212,255)
+106,407
+153,790
+106,407
+(36,765)
+(67,884)
+(93,400)
+(134,168)
+(10,130)
+(30,116)
+These financial statements have been approved by the board of directors on 23 March 2018.
+Net (decrease)/increase in cash and cash equivalents
+Net cash flow from financing activities
+Sub-total of cash outflows
+Cash paid for dividends or interest
+Cash repayments of borrowings
+Sub-total of cash inflows
+Cash received from borrowings
+Net cash received from disposal of subsidiaries and other business entities
+Sub-total of cash inflows
+1
+2,027
+66,284
+56,635
+Cash paid for acquisition of fixed assets, intangible assets and other long-term assets
+Cash paid for acquisition of investments
+153,790
+(37,139)
+(66,913)
+(39,505)
+Other cash paid relating to investing activities
+Sub-total of cash outflows
+Net cash flow from investing activities
+Cash flows from financing activities:
+(43,765)
+(133,663)
+(192,828)
+(38,392)
+equity
+attributable
+Balance at 1 January 2016
+Change for the period
+1. Net profit
+2. Other comprehensive income (Note 36)
+Total comprehensive income
+Total
+shareholders'
+Transactions with owners, recorded directly in
+shareholders' equity:
+4.
+5.
+- Appropriation for surplus reserves
+- Distributions to shareholders (Note 51)
+(1,288)
+Transaction with minority interests
+3. Appropriations of profits:
+1,488
+for the year ended 31 December 2017
+Financial Statements (PRC)
+(21,826)
+(214,654)
+(65,648)
+(60,864)
+(15,811)
+41,667
+CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+Dai Houliang
+The accompanying notes form part of these financial statements.
+Wang Dehua
+Chief Financial Officer
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2017
+87
+Financial Statements (PRC)
+Vice Chairman, President
+23,270
+(172,055)
+252
+(56,509)
+(599,487)
+(93,047)
+(353)
+52(b)
+(11,250)
+256
+55,535
+(6,553)
+CASH FLOW STATEMENT
+Note
+2017
+RMB million
+2016
+RMB million
+Cash flows from operating activities:
+Other cash received relating to operating activities
+for the year ended 31 December 2017
+Cash received from sale of goods and rendering of services.
+(7,539)
+(155)
+(45,763)
+(107,115)
+(145,323)
+1,885
+(66,217)
+946
+343
+(30,396)
+946
+524,843
+506,097
+525,789
+506,440
+(536,380)
+(569,091)
+343
+Refund of taxes and levies
+(582,298)
+Cash paid for goods and services
+(35,190)
+(200,995)
+(189,557)
+(35,502)
+(926,963)
+(779,537)
+117,721
+139,296
+18,919
+29,002
+Cash received from returns on investments
+Sub-total of cash inflows
+23,842
+Net cash received from disposal of fixed assets, intangible assets and other long-term assets
+Other cash received relating to investing activities
+22,233
+(37,054)
+(504,152)
+(50,638)
+1,000,467
+1,304
+(653,412)
+--------------
+918,833
+1,044,684
+85,932
+Payments of taxes and levies
+42,913
+831,578
+1,323
+Other cash paid relating to operating activities
+Cash received from disposal of investments
+Cash flows from investing activities:
+Net cash flow from operating activities
+Sub-total of cash outflows
+Cash paid to and for employees
+1.577
+Adjusted net assets per share (RMB)
+1.772
+1.267
+Net cash generated from operating activities per share (RMB)
+1.453
+1.371
+Non-current liabilities
+Items
+2019
+Non-current assets
+Net current liabilities
+Net assets per share (RMB)
+Non-controlling interests
+Total equity attributable to shareholders of the Company
+4.81
+Unit: RMB million
+6.56
+0.509
+8.59
+0.385
+0.269
+1,309,215
+0.423
+Diluted earnings per share (RMB)
+0.475
+0.423
+0.385
+0.269
+Return on capital employed (%)
+8.99
+9.25
+8.26
+7.30
+5.23
+Return on net assets (%)
+7.79
+7.06
+As of 31 December
+2018
+2017
+1,088,188 1,066,455
+3 MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER CASS AND IFRS PLEASE REFER TO PAGE 204 OF
+THE REPORT.
+2015
+676,197
+6.097
+5.947
+5.924
+5.741
+5.997
+5.873
+5.585
+5.868
+5.808
+5.517
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+5
+LO
+Principal Financial Data and Indicators
+of Principal Shareholders
+Shareholdings Share Capital and
+0.509
+CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERS
+710,994
+2016
+726,120
+738,150
+1,086,348
+1,113,611
+130,518
+60,978
+50,397
+73,282
+129,175
+302,862
+170,675
+163,168
+181,831
+196,275
+137,685
+139,251
+126,770
+120,241
+111,964
+717,284
+0.475
+Debentures payable
+32,512
+(21,951)
+(12,794)
+9,816
+(20,550)
+Reclassification of items as some of the long-term loans
+(35.6) and debentures are about to due
+(40.0)
+(84.6) Decrease of impairment losses in current year
+(36.3) Decrease of structured deposit
+investments
+Net cash received from disposal of
+703
+9,666
+(8,963)
+fixed assets, intangible assets and
+other long-term assets
+Cash paid for acquisition of fixed
+(141,142)
+(103,014)
+(38,128)
+assets, intangible assets and other
+(92.7) Relocation compensation entitled by subsidiaries last year not occurred
+in current year
+(11,605)
+56,546
+37.0 Increase of capital expenditure in natural gas pipelines and product
+structure adjustment project
+35,996
+(1,789)
+1
+financing activities
+Short-term loans
+31,196
+44,692
+Non-current liabilities due
+69,490
+17,450
+(13,496)
+52,040
+(30.2) Short-term loans repayment at maturity
+298.2
+within one year
+Long-term loans
+39,625
+61,576
+19,157
+31,951
+Impairment losses
+Cash received from disposal of
+long-term assets
+Cash paid for acquisition of
+(16,334)
+2016
+1,930,911
+2015
+2,020,375
+86,198
+82,264
+71,470
+77,193
+56,822
+89,927
+99,110
+86,697
+80,151
+56,411
+Profit attributable to shareholders of the Company
+57,465
+61,618
+51,244
+46,672
+2017
+2,360,193
+For the year ended 31 December
+2018
+2,891,179
+2,966,193
+2019
+(39,666)
+23,332
+(58.8) Decrease of structured deposit
+investments
+Cash paid for dividends, profits
+(59,523)
+(87,483)
+27,960
+Basic earnings per share (RMB)
+(32.0) Decrease of dividend declared
+4
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+2 FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS
+Unit: RMB million
+Operating profit
+Items
+Turnover and other operating revenues
+Profit before taxation
+distribution or interest
+CHANGES IN THE SHARE CAPITAL
+8
+2 NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS
+351,351,000
+58.74%
+China Merchants Energy
+Shipping Co., Ltd
+912,886,426
+15.05%
+Note: China Petrochemical Corporation holds
+2,595,786,987 H shares of Sinopec Oilfield
+Service Corporation (the "SSC") through
+Sinopec Century Bright Capital Investment
+Ltd., a wholly-owned overseas subsidiary
+of China Petrochemical Corporation,
+accounting for 13.67% of the total share
+capital of SSC. Such shareholdings are
+excluded from the total shares of SSC
+directly held by China Petrochemical
+Corporation indicated above.
+1,128,000 (S)
+% of Sinopec Corp.'s issued
+voting shares (H Share)
+7.91 (L)
+0.00 (S)
+75,490,996 (L)
+0.30 (L)
+51,630,422 (S)
+0.20 (S)
+2,547,370,819 (L)
+9.98 (L)
+Sinopec Oilfield Equipment
+Corporation
+1,532,082,422 (L)
+56.51%
+Corporation
+reporting period
+Not Applicable.
+(2) Existing employee shares
+Not Applicable.
+CHANGES IN THE CONTROLLING
+SHAREHOLDERS AND THE DE FACTO
+CONTROLLER
+There was no change in the controlling
+shareholder and the de facto controller of
+Sinopec Corp. during the reporting period.
+(1) Controlling shareholder
+The controlling shareholder of
+Sinopec Corp. is China Petrochemical
+Corporation. Established in July 1998,
+China Petrochemical Corporation is a
+state-authorised investment organisation
+and a state-owned enterprise. The legal
+representative is Mr. Zhang Yuzhuo.
+Through re-organization in 2000, China
+Petrochemical Corporation injected its
+principal petroleum and petrochemical
+businesses into Sinopec Corp. and
+Number of shares interested
+2,019,237,567 (L)
+retained certain petrochemical facilities.
+It provides well-drilling services,
+well-logging services, downhole operation
+services, services in connection with
+manufacturing and maintenance of
+production equipment, engineering
+construction, and utility services including
+water and power and social services.
+Shares of other listed companies directly
+held by China Petrochemical Corporation
+Number of Shareholding
+Shares Held Percentage
+Name of Company
+Sinopec Engineering (Group)
+Co. Ltd
+2,907,856,000
+65.67%
+Sinopec Oilfield Service
+10,727,896,364
+6.01 (L)
+(2) Other than HKSCC Nominees Limited,
+there was no other legal person
+shareholder holding 10% or more of the
+total issued share capital of Sinopec
+Corp.
+(3) Basic information of the de facto
+controller
+Corporate social responsibilities effectively
+fulfilled. We took proactive measures to combat
+climate change and implement green and
+low-carbon development strategies, as well as
+Chairman's Address
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+strived to develop clean energy. Green enterprise
+and energy efficiency upgrading campaigns were
+undertaken to reduce greenhouse gas emissions
+and protect the ecological environment
+and biodiversity. We also took great care in
+implementing our HSSE management system
+that ensures safe production and occupational
+health, and protects the physical and mental
+health of all employees. We made greater
+efforts to implement targeted poverty alleviation
+and achieved fruitful results, including poverty
+alleviation programs focused on industry,
+education and consumption. To benefit as many
+people as possible, we actively and consistently
+participated in various social welfare initiatives.
+In addition, we honored the traditional and
+cultural characteristics of the communities where
+we operate, and regularly promoted economic
+development and environmental protection in the
+communities around our projects. In so doing,
+we fully demonstrated our commitment to being
+a responsible global corporate citizen, which
+received high recognition at home and abroad.
+The hard-won achievements in 2019 were
+attributed to the arduous efforts and altruistic
+dedication of the Company's Board of Directors,
+the Board of Supervisors, the management
+and the entire staff. Due to reassignment
+and retirement, Mr. Dai Houliang, Mr. Li
+Yunpeng, and Mr. Liu Zhongyun no longer hold
+positions in the Company. During their tenure,
+they worked diligently, fulfilled their duties
+and contributed greatly to the Company. In
+particular, Mr. Dai Houliang, former Chairman of
+the Board, made outstanding contributions and
+played an essential role in improving corporate
+governance, advancing reforms and innovation,
+and achieving sustainable growth. On behalf of
+the Board of Directors, I would like to extend my
+sincere gratitude to all of them!
+At the beginning of 2020, the sudden outbreak
+of coronavirus struck China and impacted
+the global economy. Confronted with the
+outbreak, President Xi Jinping attached great
+importance to deploying relief actions by giving
+overall instructions directly. In response to the
+outbreak, the Company acted promptly and
+proactively. While maintaining stable production
+and operation, the Company gave full play to
+its industrial advantages, exerted full force to
+produce raw materials for medical and health
+supplies, and cooperated with related enterprises
+to produce medical supplies in urgent need,
+including masks and protective suits for affected
+areas. Moreover, with the advantages of our
+sales network, the Company spared no effort
+to guarantee the market supply of oil and gas,
+innovate service models, and enable the public
+to purchase articles for daily use conveniently,
+thereby making our contribution to win the
+battle against the virus.
+Looking forward, the global economy will face
+more instability and uncertainty brought by the
+outbreak. Although the virus may temporarily
+impact the Chinese economy, we firmly believe
+that China's solid economic fundamentals
+will remain unchanged and the country's
+potential and momentum will remain strong.
+A combination of preferential policies and
+measures oriented to enterprises set out by the
+Chinese government is supporting the rapid
+recovery of the economy while reducing the
+impact brought by the virus. We believe that as
+the control and prevention of outbreak continues
+to improve domestically, the domestic demand
+for petroleum and petrochemical products that
+was suppressed and frozen will rebound quickly.
+Challenges always arise with opportunities. The
+Company will continue to adhere to the overall
+strategy of "making progress while maintaining
+stability," and to that end will implement new
+development philosophies and energy security
+strategies, as well as further strengthen
+corporate governance. The Company will also
+continue to focus on supply-side structural
+reform. Exercising comprehensive and strict
+governance over the Party, coupled with the
+strategy of the Talent Empowering Enterprise
+Scheme, the Company will continue to leverage
+its advantages of integration, aiming to realize
+a development pattern with energy resources
+as the backbone, clean energy and synthetic
+materials as two development wings, and new
+energy, new economies, and new fields as
+important growth points.
+The Company will continue to deepen the
+reform of its systems and mechanisms,
+further improve its corporate governance
+system and enhance governance capabilities.
+With headquarters acting as the center of
+restructuring, the Company will further advance
+reforms of its management system and
+market-oriented operation mechanism. It will
+strengthen construction of its systems, improve
+management, and better mobilize initiatives in
+every aspect so as to constantly increase the
+ability to create synergies, raise efficiency and
+mitigate risks.
+The Company will focus on promoting structural
+adjustment and continuously improving its
+core competence. In the upstream business,
+the Company will implement the action plan of
+vigorously enhancing oil and gas exploration
+and development, focusing on high-quality
+exploration and profit-driven production, and
+further consolidating the oil and gas resource
+base. In the meantime, the Company will adopt
+an integrated approach to the clean and efficient
+use of new energy, renewable energy and coal
+resources, and promote diversification of the
+energy mix. As for the refining and marketing
+business, the Company will closely monitor
+market demand, optimize the system, promote
+construction of advanced production capacity,
+and fully develop the potential of the marketing
+network and improve the quality of operations.
+In terms of the chemicals business, the
+Company will accelerate the supply of high-end
+synthetic materials, develop a more competitive
+and advantageous basic chemical product
+chain and improve marketing services and
+efficiency, by ways of focusing on technological
+progress and extending the production chain,
+etc.Additionally, the Company will accelerate
+key research on core technologies, enhance the
+capability of proprietary innovation, speed up
+low-carbon transformation, and improve the
+efficiency of energy conversion to reduce carbon
+emissions, which we expect will give rise to a
+core competency in green development. In 2020,
+the planned capital expenditure of the Company
+amounts to RMB 143.4 billion.
+Only with great courage, ambition and
+momentum can a company strive and thrive.
+Sinopec Corp. is endowed with a complete
+industrial chain, and its integrated competitive
+advantages are clear, especially in the
+Company's strong market presence, branding,
+capital resources, and human talent. I firmly
+believe that with the concerted efforts of our
+Board of Directors, management and entire
+staff, as well as support from our shareholders
+and the community, Sinopec Corp. will surely
+develop in distinct ways that are more efficient
+and of higher quality, which in turn will
+create greater value for shareholders and the
+community.
+Zhang Yuzhuo
+Chairman
+Beijing, China
+27 March 2020
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+9
+Quality improved in stable operation. We
+maintained safe and stable production
+operations, continued to deepen supply-side
+structural reforms and sped up the construction
+of key projects to ensure stable growth and
+improve the quality of the industry chain. As
+for the upstream business, greater efforts were
+made in oil and gas exploration, achieving
+satisfactory results in increasing reserves,
+stabilizing oil production, increasing gas output,
+and reducing costs. The domestic oil and gas
+reserve replacement ratio reached 138.7%, and
+market share of natural gas further increased.
+The refining and marketing businesses navigated
+through fierce market competition with product
+portfolio better adapted to market demand.
+Simultaneously, production and sales volume
+increased, and the pace of construction of
+comprehensive services and the application
+of artificial intelligence at service stations was
+accelerated. Underpinned by rapid growth of
+the overall volume and strengthening structural
+adjustment of the chemicals business,
+development of high value-added synthetic
+materials achieved remarkable progress. In
+addition, we actively nurtured new businesses
+and operations and provided new impetus for
+transformation and upgrading. Furthermore,
+we implemented innovation-driven development
+strategies, built joint innovation platforms, and
+achieved breakthroughs in major technologies
+and a series of R&D projects. The evaluation of
+the comprehensive advantages of our patents
+also continued to be at the forefront of our
+domestic enterprises' efforts.
+their duties and functions professionally,
+making great contributions to our sustainable
+development. The Company also revised and
+improved its Articles of Association and other
+governing documents, as well as implemented
+effective risk control measures. Additionally, the
+Company launched the Integrity Compliance
+Management Manual in its continued effort to
+further strengthen its compliance management
+system. Further, the Company deepened
+management system reforms and adjusted
+internal departments in an orderly manner so
+as to continuously improve our professional
+management. We attached great importance to
+shareholder returns, enhanced communications
+with stakeholders, and protected investors'
+interests in an effort to consistently increase
+corporate transparency. Meanwhile, we strived
+to transform the advantage of Party building
+into our competitive business advantage through
+effective integration of these two efforts.
+The Company was awarded "Best Corporate
+Governance for a Publicly Listed Company" by
+the Golden Bauhinia Awards.
+Corporate governance continuously improved.
+The Board of Directors enhanced its scientific
+approach to decision-making and optimised
+development strategies and implementation
+plans. The independent directors performed
+Progress achieved and stability ensured. In
+accordance with International Financial Reporting
+Standards, our turnover and other operating
+revenues grew by 2.6% year-on-year to RMB
+2.97 trillion while operating profit grew by 4.8%
+year-on-year to RMB 86.2 billion, and profit
+attributable to shareholders of the Company
+amounted to RMB 57.5 billion. The Company
+remained in a solid financial position with stable
+cash flow. In view of the Company's funding
+requirements, return on equity, profitability and
+cash flow for future development, the Board of
+Directors recommended the payment of a final
+dividend of RMB 0.19 per share. Taking into
+account the interim dividend of RMB 0.12 per
+share, the total dividend for the year was RMB
+0.31 per share, with a dividend payout ratio of
+65.3%.
+China Petrochemical Corporation is the
+de facto controller of Sinopec Corp.
+(4) Diagram of the equity and controlling
+relationship between Sinopec Corp. and
+its de facto controller
+China Petrochemical
+Corporation
+68.77%
+Sinopec Corp.
+*:
+Inclusive of 553,150,000 H shares held by
+Sinopec Century Bright Capital Investment
+Ltd. (overseas wholly-owned subsidiary of
+China Petrochemical Corporation) through
+HKSCC Nominees Limited.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+(1) Issuance of securities during the
+7
+Changes phareholders
+Shareholdings of Principal S
+3,842.0
+CHAIRMAN'S ADDRESS
+Dear Shareholders and Friends:
+First, I would like to extend my sincere thanks
+for the trust of our shareholders and support
+of our directors, and for appointing me as
+the Chairman of the Company. On behalf
+of the Board of Directors, management and
+our entire staff, I would like to express my
+sincere gratitude to our shareholders and the
+community for your interest and support.
+In 2019, global economy slowdown while
+China's economy remained overall stable. With
+international oil prices fluctuating within a
+wide range and new production capacity for
+refinery and petrochemicals being excessively
+released, market competition increased
+dramatically. As a result, the internal and
+external risks and challenges faced by the
+Company have increased significantly. In such
+a complicated and difficult market, with focus
+on both short and long-term goals in mind, the
+Board of Directors adhered to the guideline of
+pursuing progress while maintaining stability.
+Furthermore, it concentrated on modernizing the
+company's corporate governance systems and
+capabilities, and deepening reforms to sustain
+continuous growth and development. Under
+the management's leadership, our employees
+demonstrated dedication and a conscientious
+and responsible work spirit, and implemented
+all practices with discipline and in a professional
+manner. Significantly, the Company achieved
+better than expected operating results and made
+new progress in all fronts as we continuously
+deepened reform, exercised effective risk
+management, stabilised growth, and adjusted
+the operating structure while guaranteeing
+safety.
+I and
+There is no change in the number and nature of shares of Sinopec Corp. during the reporting period
+4
+the substantial shareholder
+Approved lending agent
+Investment manager
+Unknown
+A Share
+2.16
+2,609,312,057
+0
+0
+國新投資有限公司
+北京誠通金控投資有限公司
+香港中央結算有限公司
+A Share
+1.03
+1,252,427,354
+(750,400)
+0
+A Share
+0.86
+1,038,859,102
+(3,251,433)
+91,254,848
+25,387,409,005
+H Share
+As of 31 December 2019, the total number of shareholders of Sinopec Corp. was 478,617 including 472,818 holders of A shares and 5,799 holders
+of H shares. As of 29 February 2020, the total number of shareholders of Sinopec Corp. was 503,142. Sinopec Corp. has complied with requirement
+for minimum public float under the Hong Kong Listing Rules.
+(1) Shareholdings of top ten shareholders
+The shareholdings of top ten shareholders as of 31 December 2019 are listed as below:
+Number of
+shares subject
+Name of shareholders
+China Petrochemical Corporation
+HKSCC Nominees Limited²
+中國證券金融股份有限公司
+Nature of Percentage of
+Shareholders shareholdings %
+Total number of
+State-owned Share
+68.31
+shares held
+82,709,227,393
+Changes of
+shareholding¹
+to pledges or
+lock-up
+0
+0
+20.97
+0
+A Share
+0.47
+110,000,000
+0
+Note 1: As compared with the number of shares held as of 31 December 2018.
+Note 2: Sinopec Century Bright Capital Investment Limited, an overseas wholly-owned subsidiary of China Petrochemical Corporation, held 553,150,000 H shares,
+accounting for 0.46% of the total issued share capital of Sinopec Corp. Those shareholdings are included in the total number of the shares held by HKSCC
+Nominees Limited.
+Statement on the connected relationship or acting in concert among the above-mentioned shareholders:
+Apart from 中國人壽保險股份有限公司-分红-個人分紅-005L-FH002滬and 中國人壽保險股份有限公司 - 傳統 -普通保險產品-005L-CTO01滬
+which were both managed by +\, Sinopec Corp. is not aware of any connected relationship or acting in concert among or
+between the above-mentioned shareholders.
+6
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(2) Information disclosed by the shareholders of H shares in accordance with the Securities and Futures Ordinance (SFO) as of 31 December
+2019
+Name of shareholders
+BlackRock, Inc.
+Citigroup Inc.
+GIC Private Limited
+(L): Long position, (S): Short position
+Status of shareholders
+Interest of corporation controlled by
+the substantial shareholder
+Interest of corporation controlled by
+0
+21,596,954
+171,333,093
+110,000,000
+0.09
+571,844,320
+(449,937,840)
+0
+中央匯金資產管理有限責任公司
+A Share
+0.27
+322,037,900
+0
+3 ISSUANCE AND LISTING OF SECURITIES
+0
+A Share
+0.17
+209,777,480
+27,819,820
+0
+A Share
+0.14
+A Share
+中國人壽保險股份有限公司分紅一個人分紅-005L-FH002滬
+中國人壽保險股份有限公司 - 傳統 - 普通保險產品 -005L-CT001滬
+匯添富基金管理股份有限公司-社保基金1103組合
+(16,751)
+(0.75)
+(17,187)
+Company: Sinopec Corp. and its subsidiaries;
+In this report, unless the context otherwise requires, the following terms shall have the meaning as set out below:
+Sinopec Corp.: China Petroleum & Chemical Corporation;
+DEFINITIONS:
+Sinopec Corp. is one of the largest integrated energy and chemical companies in China. Its principal operations include the exploration and
+production, pipeline transportation and sale of petroleum and natural gas; the production, sale, storage and transportation of refinery products,
+petrochemical products, coal chemical products, synthetic fibre, and other chemical products; the import and export, including an import and export
+agency business, of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and
+research, development and application of technologies and information.
+COMPANY PROFILE
+AS APPROVED AT THE 12TH MEETING OF THE SEVENTH SESSION OF THE BOARD OF DIRECTORS OF SINOPEC CORP., THE BOARD PROPOSED A
+FINAL CASH DIVIDEND OF RMB 0.19 (TAX INCLUSIVE) PER SHARE FOR 2019, COMBINING WITH THE INTERIM CASH DIVIDEND OF RMB 0.12 (TAX
+INCLUSIVE) PER SHARE, THE TOTAL CASH DIVIDEND FOR 2019 WILL BE RMB 0.31 (TAX INCLUSIVE) PER SHARE. THE DIVIDEND PROPOSAL IS
+SUBJECT TO THE SHAREHOLDERS' APPROVAL AT THE ANNUAL GENERAL MEETING FOR THE YEAR 2019.
+THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 OF THE COMPANY PREPARED IN ACCORDANCE WITH THE PRC
+ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (CASS) AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) HAVE BEEN
+AUDITED BY PRICEWATERHOUSECOOPERS ZHONG TIAN LLP AND PRICEWATERHOUSECOOPERS RESPECTIVELY. BOTH FIRMS HAVE ISSUED
+STANDARD UNQUALIFIED AUDITOR'S REPORT.
+IMPORTANT NOTICE: THE BOARD OF DIRECTORS, THE BOARD OF SUPERVISORS, DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT OF
+SINOPEC CORP. WARRANT THAT THERE ARE NO FALSE REPRESENTATIONS, MISLEADING STATEMENTS OR MATERIAL OMISSIONS IN THIS
+ANNUAL REPORT, AND JOINTLY AND SEVERALLY ACCEPT FULL RESPONSIBILITY FOR THE AUTHENTICITY, ACCURACY AND COMPLETENESS
+OF THE INFORMATION CONTAINED IN THIS ANNUAL REPORT. THERE IS NO OCCUPANCY OF NON-OPERATING FUNDS BY THE CONTROLLING
+SHAREHOLDERS OF SINOPEC CORP. ALL THE DIRECTORS OF SINOPEC CORP. ATTENDED THE 12TH MEETING OF THE SEVENTH SESSION OF
+THE BOARD. MR. ZHANG YUZHUO, CHAIRMAN OF THE BOARD, MR. MA YONGSHENG, PRESIDENT, MS. SHOU DONGHUA, CHIEF FINANCIAL
+OFFICER AND HEAD OF THE FINANCIAL DEPARTMENT OF SINOPEC CORP. WARRANT THE AUTHENTICITY AND COMPLETENESS OF THE
+FINANCIAL STATEMENTS CONTAINED IN THIS ANNUAL REPORT. THE AUDIT COMMITTEE OF SINOPEC CORP. HAS REVIEWED THE ANNUAL
+REPORT OF SINOPEC CORP. FOR THE YEAR ENDED 31 DECEMBER 2019.
+COMPANY PROFILE
+Company Profile
+2
+This annual report includes forward-looking statements. All statements,
+other than statements of historical facts, that address activities, events or
+developments that the Company expects or anticipates will or may occur
+in the future (including but not limited to projections, targets, reserve
+and other estimates and business plans) are forward-looking statements.
+The Company's actual results or developments may differ materially
+from those indicated by these forward-looking statements as a result
+of various factors and uncertainties. The Company makes the forward-
+looking statements referred to herein as at 27 March 2020 and unless
+required by regulatory authorities, the Company undertakes no obligation
+to update these statements.
+Documents for Inspection
+212
+Corporate Information
+211
+Financial Statements
+China Petrochemical Corporation: The controlling shareholder of Sinopec Corp., China Petrochemical Corporation;
+Sinopec Group: China Petrochemical Corporation and its subsidiaries;
+77
+NDRC: China National Development and Reform Commission
+CSRC: China Securities Regulatory Commission.
+Profit before taxation
+Operating profit
+Operating income
+Items
+2017
+Change
+2018
+For the year ended 31 December
+2019
+(1) Principal financial data
+1 FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASS
+PRINCIPAL FINANCIAL DATA AND INDICATORS
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+For domestic production of crude oil, 1 tonne = 7.1 barrels;
+For overseas production of crude oil: 1 tonne = 7.21 barrels;
+For production of natural gas, 1 cubic meter = 35.31 cubic feet;
+Refinery throughput is converted at 1 tonne = 7.35 barrels.
+CONVERSION:
+New Lease Standard: IFRS 16, 'Leases'; No. 21 Accounting Standards for Business Enterprises- Leases which was revised and released by the Ministry
+of Finance in 2018.
+Hong Kong Listing Rules: Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
+Hong Kong Stock Exchange: The Stock Exchange of Hong Kong Limited
+RMC: Oil and Natural Gas Reserves Management Committee of the Company;
+RMB million
+Controlled Subsidiaries
+76
+Principal Financial Data and Indicators
+Company Profile
+CONTENTS
+236
+中国石化 SINOPEC
+SINOPEC CORP.
+中国石油化工股份有限公司
+AND ACCOUNTS
+ANNUAL REPORT
+2019
+|lopec
+ODEC SINOPEC
+中国石化
+中国石化
+2019
+2018
+Change
+Changes in Share Capital and Shareholdings
+Principal Wholly-owned and
+of Principal Shareholders
+Business Review and Prospects
+Senior Management and Employees
+Directors, Supervisors,
+60
+Report of the Board of Supervisors
+58
+Report of the Board of Directors
+50
+Corporate Governance
+43
+Connected Transactions
+40
+Significant Events
+31
+19
+11
+8
+Management's Discussion and Analysis
+Chairman's Address
+RMB million
+%
+RMB million
+48,480
+47,527
+54,271
+12,725
+11,095
+16,081
+14,370
+(14,609)
+57,591
+14,310
+11,943
+16,575
+2,966,193
+732,888
+734,309
+781,417
+717,579
+14,763
+RMB million
+72,022
+RMB million
+153,420
+2019
+RMB million
+121,071,210
+121,071,210
+727,244
+2.9
+718,355
+739,169
+741,434
+1,595,504
+19.5
+734,649
+10.2
+1,592,308
+1,755,071
+878,166
+2017
+RMB million
+%
+Change
+2018
+RMB million
+As of 31 December
+Total
+Quarter
+Quarter
+RMB million
+51,119
+(8.7)
+63,089
+57,591
+Net profit attributable to equity shareholders of the Company
+86,573
+(10.4)
+100,502
+90,016
+86,965
+(11.3)
+101,474
+90,025
+2,360,193
+2.6
+2,891,179
+2,966,193
+Net profit attributable to equity shareholders of the Company excluding
+extraordinary gains and losses
+Net cash flow from operating activities
+54,271
+153,420
+59,630
+(9.0)
+Fourth
+Third
+Second
+Quarter
+RMB million
+First
+Quarter
+RMB million
+For the year of 2019
+(2) Principal financial indicators
+Total equity attributable to equity shareholders of the Company
+Total number of shares (1,000 shares)
+Total liabilities
+2017
+Total assets
+Chairman's Address
+Net profit attributable to equity shareholders of the Company
+Net profit attributable to equity shareholders of the Company
+excluding extraordinary gains and losses
+Operating income
+Items
+190,935
+(12.8)
+175,868
+45,582
+Items
+(436)
+Items
+RMB
+Other equity instruments
+Derivative financial instruments
+Cash flow hedging
+Financial assets held for trading
+Total
+(5) Significant changes of items in the financial statements
+Beginning
+End
+of the year
+1,450
+of the year
+1,521
+Changes
+71
+Unit: RMB million
+Influence
+on the profit
+of the year
+Items
+492
+1
+(94)
+(410)
+(1,023)
+(148)
+(3,941)
+729
+(5,011)
+1,613
+(5,970)
+690
+(6,512)
+1,597
+2,312
+976
+(3,414)
+(3,658)
+(5,536)
+(3,320)
+(3,459)
+(5,537)
+(199)
+(4,783)
+1,584
+(1,536)
+Bills receivable
+7,886
+RMB million
+(22,413)
+(7,886)
+(%) Reasons for change
+(87.1) Structured deposit withdrawal at maturity of RMB 22.8 billion
+(100.0) According to the accounting standard, bills receivable held by the
+Company at the end of last year are presented in receivables financing
+Long-term deferred expenses
+8,930
+15,659
+(6,729)
+(43.0)
+Financial expenses
+9,967
+(1,001)
+10,968
+(1,095.7) The impact of New Lease Standard
+Other cash paid relating to
+25,732
+48
+Percentage
+2018
+RMB million
+(4,384)
+(7,268)
+(1,940)
+5,328
+(2,333)
+25,732
+21,498
+3,319
+2,948
+(22,413)
+215
+(18,550)
+(6,010)
+The table below sets forth reasons for those changes where the fluctuation was more than 30% during the reporting period:
+As of 31 December
+2019
+Increase/(decrease)
+Items
+Financial assets held for trading
+RMB million
+3,319
+Amount
+(7,482)
+(6,857)
+152
+percentage
+points
+Weighted average return (excluding extraordinary gains and losses)
+on net assets (%)
+7.45
+8.20
+6.37
+percentage
+points
+Net cash flow from operating activities per share
+1.267
+1.453
+(12.8)
+1.577
+As of 31 December
+2019
+Items
+RMB
+7.14
+2018
+RMB
+(0.77)
+7.90
+%
+RMB
+Basic earnings per share
+0.476
+0.521
+(8.7)
+0.422
+Diluted earnings per share
+0.476
+0.521
+(8.7)
+0.422
+Basic earnings per share (excluding extraordinary gains and losses)
+Weighted average return on net assets (%)
+0.448
+0.493
+(9.1)
+0.376
+8.67
+Change
+2017
+%
+Gain on remeasurement of interests in Shanghai SECCO
+Other non-operating expenses, net
+Subtotal
+Tax effect
+Total
+Attributable to: Equity shareholders of the Company
+Minority interests
+(4) Items measured by fair values
+For the year ended 31 December
+(Income)/expenses
+2019
+2018
+RMB million
+RMB million
+1,318
+742
+2017
+RMB million
+1,518
+209
+180
+Gain on holding and disposal of various investments
+Government grants
+Net loss on disposal of non-current assets
+Donations
+Items
+RMB
+Net assets attributable to equity shareholders of the Company per share
+Liabilities to assets ratio (%)
+6.105
+5.933
+2.9
+6.007
+50.04
+46.14
+RMB
+3.90
+percentage
+points
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+3
+Principal Financial Data and Indicators
+Principal Financial Data and Indicators
+PRINCIPAL FINANCIAL DATA AND INDICATORS (CONTINUED)
+(3) Extraordinary items and corresponding amounts
+46.47
+Net cash flow from operating activities
+For the year ended 31 December
+121,071,210
+Intangible assets, where the estimated useful life is finite, are stated in the balance sheet at cost less accumulated amortisation and provision
+for impairment losses (see Note 3(12)). For an intangible asset with finite useful life, its cost less estimated residual value and accumulated
+impairment losses is amortised on a straight-line basis over the expected useful lives, unless the intangible assets are classified as held for sale.
+Equity instruments
+The business model for managing such financial assets by the Group are held for collection of contractual cash flows and for
+selling the financial assets, the contractual cash flow characteristics of such financial assets are consistent with the basic lending
+arrangements. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of
+impairment gains or losses, foreign exchange gains and losses and interest income calculated using the effective interest rate method,
+which are recognised in profit or loss. The financial assets include receivables financing.
+Measured at fair value through other comprehensive income:
+The business model for managing such financial assets by the Group are held for collection of contractual cash flows. The contractual
+cash flow characteristics are to give rise on specified dates to cash flows that are solely payments of principal and interest on the
+principal amount outstanding. Interest income from these financial assets is recognised using the effective interest rate method. The
+financial assets include cash at bank and on hand and receivables.
+Measured at amortised cost:
+The debt instruments held by the Group refer to the instruments that meet the definition of financial liabilities from the perspective of the
+issuer, and are measured in the following ways:
+Debt instruments
+Financial assets are initially recognised at fair value. For financial assets measured at fair value through profit or loss, the relevant
+transaction costs are recognised in profit or loss. The transaction costs for other financial assets are included in the initially recognised
+amount. However, accounts receivable or bills receivable arising from sales of goods or rendering services, without significant financing
+component, are initially recognised based on the transaction price expected to be entitled by the Group.
+The Group classifies financial assets into different categories depending on the business model for managing the financial assets and the
+contractual terms of cash flows of the financial assets: (1) financial assets measured at amortised cost, (2) financial assets measured at
+fair value through other comprehensive income, (3) financial assets measured at fair value through profit or loss. A contractual cash flow
+characteristic which could have only a de minimis effect, or could have an effect that is more than de minimis but is not genuine, does
+not affect the classification of the financial asset.
+(i) Classification and measurement
+(a) Financial assets
+Financial instruments, refer to the contracts that form one party's financial assets and form the financial liabilities or equity instruments of the
+other party. The Group recognises a financial asset or a financial liability when the Group enters into and becomes a party to the underlining
+contract of the financial instrument.
+(11) Financial Instruments
+Goodwill is not amortised and is stated at cost less accumulated impairment losses (see Note 3(12)). On disposal of an asset group or a set of
+asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal.
+The initial cost of goodwill represents the excess of cost of acquisition over the acquirer's interest in the fair value of the identifiable net assets
+of the acquiree under the business combination involving entities not under common control.
+(10) Goodwill
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+For the year ended 31 December 2019
+Equity instruments that the Group has no power to control, jointly control or exercise significant influence over, are measured at fair value
+through profit or loss and presented as financial assets held for trading.
+In addition, the Group designates some equity instruments that are not held for trading as financial assets at fair value through other
+comprehensive income, and presented in other equity instrument investments. The relevant dividends of these financial assets are
+recognised in profit or loss. When derecognised, the cumulative gain or loss previously recognised in other comprehensive income is
+transferred to retained earnings.
+(ii) Impairment
+The Group recognises a loss allowance for expected credit losses on financial assets measured at amortised cost and receivables
+financing measured at fair value through other comprehensive income.
+On derecognition of other equity instrument investments, the difference between the carrying amounts and the sum of the consideration
+received and any cumulative gain or loss previously recognised in other comprehensive income, is recognised in retained earnings. While
+on derecognition of other financial assets, this difference is recognised in profit or loss.
+The Group derecognises a financial asset when a) the contractual right to receive cash flows from the financial asset expires; b) the Group
+transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset; c) the financial assets have
+been transferred and the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but
+the Group has not retained control.
+The Group recognises the loss allowance accrued or written back in profit or loss.
+(iii) Derecognition
+For accounts receivable, bills receivable and receivables financing related to revenue, the Group measures the loss allowance at an
+amount equal to lifetime expected credit losses.
+For financial instruments on the first stage and the second stage, and that have low credit risk, the Group calculates interest income
+according to carrying amount without deducting the impairment allowance and effective interest rate. For financial instruments on the
+third stage, interest income is calculated according to the carrying amount minus amortised cost after the provision of impairment
+allowance and effective interest rate.
+For financial instruments that have low credit risk at the balance sheet date, the Group assumes that there is no significant increase in
+credit risk since the initial recognition, and measures the loss allowance at an amount equal to 12-month expected credit losses.
+(ii) Impairment (Continued)
+(a) Financial assets (Continued)
+(11) Financial Instruments (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+96
+Financial Statements (PRC)
+95
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+The Group measures the expected credit losses of financial instruments on different stages at each balance sheet date. For financial
+instruments that have no significant increase in credit risk since the initial recognition, on first stage, the Group measures the loss
+allowance at an amount equal to 12-month expected credit losses. If there has been a significant increase in credit risk since the initial
+recognition of a financial instrument but credit impairment has not occurred, on second stage, the Group recognises a loss allowance
+at an amount equal to lifetime expected credit losses. If credit impairment has occurred since the initial recognition of a financial
+instrument, on third stage, the Group recognises a loss allowance at an amount equal to lifetime expected credit losses.
+The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past
+events, current conditions and forecasts of future economic conditions.
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+94
+94
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+93
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+When the Group leases self-owned plants and buildings, equipment and machinery, lease income from an operating lease is recognised on a
+straight-line basis over the period of the lease. The Group recognises variable lease income which is based on a certain percentage of sales
+as rental income when occurred.
+A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a
+lease other than a finance lease.
+(b) As Lessor
+Payments associated with short-term leases with lease terms within 12 months and leases for which the underlying assets are individually
+of low value when it is new are recognised on a straight-line basis over the lease term as an expense in profit or loss or as cost of relevant
+assets, instead of recognising right-of-use assets and lease liabilities.
+Right-of-use assets of the Group mainly comprise land. Right-of-use assets are measured at cost which comprises the amount of the initial
+measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the
+lessee, less any lease incentives received. The Group depreciates the right-of-use assets over the shorter of the asset's useful life and the
+lease term on a straight-line basis. When the recoverable amount of a right-of-use asset is less than its carrying amount, the carrying amount
+is reduced to the recoverable amount.
+The Group recognises a right-of-use asset at the commencement date, and recognises the lease liability at the present value of the lease
+payments that are not paid at that date. The lease payments include fixed payments, the exercise price of a purchase option if the Group is
+reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease term reflects the Group exercising
+that option, etc. Variable payments that are based on a percentage of sales are not included in the lease payments, and should be recognised
+in profit or loss when incurred. Lease liabilities to be paid within one year (including one year) from balance sheet date is presented in non-
+current liabilities due within one year.
+A lease is a contract that a lessor transfers the right to use an identified asset for a period of time to a lessee in exchange for consideration.
+(a) As Lessee
+The impairment assessment and provision accrual on investments in subsidiaries, associates and joint ventures are stated in Note 3(12).
+(6) Leases
+(c) The impairment assessment method and provision accrual on investment
+The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment
+and any long-term interest that is in substance forms part of the Group's net investment in the associate or the joint venture is reduced to
+zero, except to the extent that the Group has an obligation to assume additional losses. However, if the Group has incurred obligations for
+additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standard on contingencies,
+the Group continues recognising the investment losses and the provision. Where net profits are subsequently made by the associate or joint
+venture, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
+The Group adjusts the carrying amount of the long-term equity investment for changes in owners' equity of the investee other than those
+arising from net profits or losses and other comprehensive income, and recognises the corresponding adjustment in capital reserve.
+The Group recognises its share of the investee's net profits or losses after making appropriate adjustments to align the accounting policies
+or accounting periods with those of the Group based on the fair values of the investee's net identifiable assets at the time of acquisition.
+Under the equity accounting method, unrealised profits and losses resulting from transactions between the Group and its associates or joint
+ventures are eliminated to the extent of the Group's interest in the associates or joint ventures. Unrealised losses resulting from transactions
+between the Group and its associates or joint ventures are fully recognised in the event that there is an evidence of impairment.
+After the acquisition of the investment, the Group recognises its share of the investee's net profits or losses and other comprehensive income
+as investment income or losses and other comprehensive income, and adjusts the carrying amount of the investment accordingly. Once the
+investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the
+Group.
+(b) Investment in joint ventures and associates (Continued)
+(5) Long-term equity investments (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(b) Financial liabilities
+(7) Fixed assets and construction in progress
+Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses (see Note 3(12)). Construction in
+progress is stated in the balance sheet at cost less impairment losses (see Note 3(12)).
+Useful lives and amortisation methods are reviewed at least each year end.
+An intangible asset is regarded as having an indefinite useful life and is not amortised when there is no foreseeable limit to the year over which
+the asset is expected to generate economic benefits for the Group.
+Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes produced and reserves.
+(9) Intangible assets
+The Group estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into consideration
+the anticipated method of dismantlement required in accordance with the industry practices. These estimated future dismantlement costs are
+discounted at credit-adjusted risk-free rate and are capitalised as oil and gas properties, which are subsequently amortised as part of the costs
+of the oil and gas properties.
+The acquisition cost of mineral interest is capitalised as oil and gas properties. Costs of development wells and related support equipment are
+capitalised. The cost of exploratory wells is initially capitalised as construction in progress pending determination of whether the well has found
+proved reserves. Exploratory well costs are charged to expenses upon the determination that the well has not found proved reserves. However,
+in the absence of a determination of the discovery of proved reserves, exploratory well costs are not carried as an asset for more than one
+year following completion of drilling. If, after one year has passed, a determination of the discovery of proved reserves cannot be made, the
+exploratory well costs are impaired and charged to expense. All other exploration costs, including geological and geophysical costs, are charged
+to profit or loss in the year as incurred.
+Oil and gas properties include the mineral interests in properties, wells and related support equipment arising from oil and gas exploration and
+production activities.
+(8) Oil and gas properties
+Useful lives, residual values and depreciation methods are reviewed at least each year end.
+Equipment, machinery and others
+Plants and buildings
+Financial Statements (PRC)
+3%
+Estimated Estimated rate
+useful life of residual value
+12.50 years
+3%
+4-30 years
+Other than oil and gas properties, the cost of fixed assets less residual value and accumulated impairment losses is depreciated using the
+straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale. The estimated useful lives and the
+estimated rate of residual values adopted for respective classes of fixed assets are as follows:
+The Group terminates the recognition of an item of fixed asset when it is in a state of disposal or it is estimated that it is unable to generate
+any economic benefits through use or disposal. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined
+as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of
+retirement or disposal.
+The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the
+recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed
+assets are recognised in profit or loss as incurred.
+Where the individual component parts of an item of fixed asset have different useful lives or provide benefits to the Group in different patterns
+thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset.
+Construction in progress is transferred to fixed assets when the asset is ready for its intended use. No depreciation is provided against
+construction in progress.
+The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset
+to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing
+costs (see Note 3(19)), and any other costs directly attributable to bringing the asset to working condition for its intended use. According to legal
+or contractual obligations, costs of dismantling and removing the items and restoring the site on which the related assets located are included in
+the initial cost.
+Fixed assets represent the tangible assets held by the Group using in the production of goods, rendering of services and for operation and
+administrative purposes with useful life over one year.
+The Group, at initial recognition, classifies financial liabilities as either financial liabilities subsequently measured at amortised cost or
+financial liabilities at fair value through profit or loss.
+The Group's financial liabilities are mainly financial liabilities measured at amortised cost, including bills payable, accounts payable, other
+payables, loans and debentures payable, etc. These financial liabilities are initially measured at the amount of their fair value after deducting
+transaction costs and use the effective interest rate method for subsequent measurement.
+Where the present obligations of financial liabilities are completely or partially discharged, the Group derecognises these financial liabilities
+or discharged parts of obligations. The differences between the carrying amounts and the consideration received are recognised in profit or
+loss.
+The carrying amount of deferred tax assets is reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset
+against the benefit of deferred tax asset, the carrying amount of the deferred tax assets is written down. Any such write-down should be
+subsequently reversed where it becomes probable that sufficient taxable income will be available.
+At the balance sheet date, the amounts of deferred tax recognised is measured based on the expected manner of recovery or settlement of the
+carrying amount of the assets and liabilities, using tax rates that are expected to be applied in the period when the asset is recovered or the
+liability is settled in accordance with tax laws.
+(15) Income tax (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Temporary differences arise in a transaction, which is not a business combination, and at the time of transaction, does not affect accounting
+profit or taxable profit (or unused tax losses), will not result in deferred tax. Temporary differences arising from the initial recognition of goodwill
+will not result in deferred tax.
+At the balance sheet date, deferred tax assets and liabilities are offset if all the following conditions are met:
+Deferred tax assets and liabilities are recognised based on deductible temporary differences and taxable temporary differences respectively.
+Temporary difference is the difference between the carrying amounts of assets and liabilities and their tax bases. Unused tax losses and unused
+tax credits able to be utilised in subsequent years are treated as temporary differences. Deferred tax assets are recognised to the extent that it
+is probable that future taxable income will be available to offset the deductible temporary differences.
+Current tax is the expected tax payable calculated at the applicable tax rate on taxable income for the year, plus any adjustment to tax payable
+in respect of previous years.
+Current tax and deferred tax are recognised in profit or loss except to the extent that they relate to business combinations and items recognised
+directly in equity (including other comprehensive income).
+(15) Income tax
+When the Group terminates the employment relationship with employees before the employment contracts expire, or provides compensation
+as an offer to encourage employees to accept voluntary redundancy, a provision for the termination benefits provided is recognised in profit
+or loss under the conditions of both the Group has a formal plan for the termination of employment or has made an offer to employees for
+voluntary redundancy, which will be implemented shortly; and the Group is not allowed to withdraw from termination plan or redundancy
+offer unilaterally.
+(c) Termination benefits
+Employees of the Group participate in the social insurance system established and managed by local labor and social security department.
+The Group makes basic pension insurance to the local social insurance agencies every month, at the applicable benchmarks and rates
+stipulated by the government for the benefits of its employees. After the employees retire, the local labor and social security department has
+obligations to pay them the basic pension. When an employee has rendered service to the Group during an accounting period, the Group
+shall recognise the accrued amount according to the above social security provisions as a liability and charge to the cost of an asset or to
+profit or loss in the same period.
+Basic pension insurance
+The Group classifies post-employment benefits into either Defined Contribution Plan (DC plan) or Defined Benefit Plan (DB plan). DC plan
+means the Group only contributes a fixed amount to an independent fund and no longer bears other payment obligation; DB plan is post-
+employment benefits other than DC plan. In this reporting period, the post-employment benefits of the Group primarily comprise basic
+pension insurance and unemployment insurance and both of them are DC plans.
+At the balance sheet date, current tax assets and liabilities are offset if the Group has a legally enforceable right to set them off and also intends
+either to settle on a net basis or to realise the asset and settle the liability simultaneously.
+the taxable entity has a legally enforceable right to offset current tax assets and current tax liabilities; and
+they relate to income taxes levied by the same tax authority on either:
+the same taxable entity; or
+Financial Statements (PRC)
+99
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Except for the above, other borrowing costs are recognised as financial expenses in the income statement when incurred.
+Borrowing costs incurred on borrowings for the acquisition, construction or production of qualified assets are capitalised into the cost of the
+related assets in the capitalisable period.
+(19) Borrowing costs
+Government grants received in relation to assets are recorded as deferred income, and recognised evenly in profit or loss over the assets'
+useful lives. Government grants received in relation to revenue are recorded as deferred income, and recognised as income in future periods as
+compensation when the associated future expenses or losses arise; or directly recognised as income in the current period as compensation for
+past expenses or losses.
+Government grants are recognised when there is reasonable assurance that the grants will be received and the Group is able to comply with
+the conditions attaching to them. Government grants in the form of monetary assets are recorded based on the amount received or receivable,
+whereas non-monetary assets are measured at fair value.
+Government grants are the gratuitous monetary assets or non-monetary assets that the Group receives from the government, excluding capital
+injection by the government as an investor. Special funds such as investment grants allocated by the government, if clearly defined in official
+documents as part of "capital reserve" are dealt with as capital contributions, and not regarded as government grants.
+(18) Government grants
+Sales are recognised when control of the goods have transferred, being when the products are delivered to the customer. Advance from
+customers but goods not yet delivered is recorded as contract liabilities and is recognised as revenues when a customer obtains control over the
+relevant goods.
+Sales of goods
+The Group sells crude oil, natural gas, petroleum and chemical products, etc. Revenue is recognised according to the expected consideration
+amount, when a customer obtains control over the relevant goods or services. To determine whether a customer obtains control of a promised
+asset, the Group shall consider indicators of the transfer of control, which include, but are not limited to, the Group has a present right to
+payment for the asset; the Group has transferred physical possession of the asset to the customer; the customer has the significant risks and
+rewards of ownership of the asset; the customer has accepted the asset.
+Revenue arises in the course of the Group's ordinary activities, and increases in economic benefits in the form of inflows that result in an
+increase in equity, other than those relating to contributions from equity participants.
+(17) Revenue recognition
+Provisions for future dismantlement costs are initially recognised based on the present value of the future costs expected to be incurred in
+respect of the Group's expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities.
+Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest
+costs, is reflected as an adjustment to the provision of oil and gas properties.
+Provisions are recognised when the Group has a present obligation as a result of a contingent event, it is probable that an outflow of economic
+benefits will be required to settle the obligations and a reliable estimate can be made. Where the effect of time value of money is material,
+provisions are determined by discounting the expected future cash flows.
+(16) Provisions
+different taxable entities which either to intend to settle the current tax liabilities and assets on a net basis, or to realise the assets and
+settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to
+be settled or recovered.
+(b) Post-employment benefits
+Short term compensation includes salaries, bonuses, allowances and subsidies, employee benefits, medical insurance premiums, work-
+related injury insurance premium, maternity insurance premium, contributions to housing fund, unions and education fund and short-term
+absence with payment etc. When an employee has rendered service to the Group during an accounting period, the Group shall recognise the
+short term compensation actually incurred as a liability and charge to the cost of an asset or to profit or loss in the same period, and non-
+monetary benefits are valued with the fair value.
+(a) Short term compensation
+Employee benefits are all forms of considerations and compensation given in exchange for services rendered by employees, including short term
+compensation, post-employment benefits, termination benefits and other long term employee benefits.
+Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a
+component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable
+forecast transaction, and could affect profit or loss. As long as a cash flow hedge meets the qualifying criteria for hedge accounting,
+the hedging relationship shall be accounted for as follows:
+Cash flow hedges
+(3) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually
+hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. However, that
+designation shall not reflect an imbalance between the weightings of the hedged item and the hedging instrument.
+(2) The effect of credit risk does not dominate the value changes that result from that economic relationship.
+(1) There is an economic relationship between the hedged item and the hedging instrument, which share a risk and that gives rise to opposite
+changes in fair value that tend to offset each other.
+The hedging relationship meets all of the following hedge effectiveness requirements:
+(d) Derivative financial instruments and hedge accounting (Continued)
+(11) Financial Instruments (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+A hedging instrument is a designated derivative whose changes in cash flows are expected to offset changes in the cash flows of the hedged
+item.
+Hedged items are the items that expose the Group to risks of changes in future cash flows and that are designated as being hedged and that
+must be reliably measurable. The Group's hedged items include a forecast transaction that is settled with an undetermined future market
+price and exposes the Group to risk of variability in cash flows, etc.
+Hedge accounting is a method which recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument
+and the hedged item in the same accounting period, to represent the effect of risk management activities.
+Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or
+loss on remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for hedge accounting.
+(d) Derivative financial instruments and hedge accounting
+If there is an active market for financial instruments, the quoted price in the active market is used to measure fair values of the financial
+instruments. If no active market exists for financial instruments, valuation techniques are used to measure fair values. In valuation, the Group
+adopts valuation techniques that are applicable in the current situation and have sufficient available data and other information to support it,
+and selects input values that are consistent with the asset or liability characteristics considered by market participants in the transaction of
+relevant assets or liabilities, and gives priority to relevant observable input values. Use of unobservable input values where relevant observable
+input values cannot be obtained or are not practicable.
+(c) Determination of fair value
+-
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+The cumulative gain or loss on the hedging instrument from inception of the hedge;
+For cash flow hedges, other than those covered by the preceding two policy statements, that amount shall be reclassified from the
+cash flow hedge reserve to profit or loss as a reclassification adjustment in the same period or periods during which the hedged.
+expected future cash flows affect profit or loss.
+Long-term deferred expenses are amortised on a straight-line basis over their beneficial periods.
+(14) Employee benefits
+(13) Long-term deferred expenses
+Impairment losses for assets are not reversed.
+If the recoverable amount of an asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount. The amount
+by which the carrying amount is reduced is recognised as an impairment loss in profit or loss. A provision for impairment loss of the asset
+is recognised accordingly. Impairment losses related to an asset unit or a set of asset units first reduce the carrying amount of any goodwill
+allocated to the asset unit or set of asset units, and then reduce the carrying amount of the other assets in the asset unit or set of asset units on
+a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair value less costs
+to sell (if determinable), the present value of expected future cash flows (if determinable) and zero.
+Fair value less costs to sell of an asset is based on its selling price in an arm's length transaction less any direct costs attributable to the
+disposal. Present value of expected future cash flows is the estimation of future cash flows to be generated from the use of and upon disposal of
+the asset, discounted at an appropriate pre-tax discount rate over the asset's remaining useful life.
+The recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows generated by the
+asset (or asset unit, set of asset units).
+(12) Impairment of other non-financial long-term assets (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+Financial Statements (PRC)
+98
+Financial Statements (PRC)
+97
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+An asset unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or
+groups of assets. An asset unit comprises related assets that generate associated cash inflows. In identifying an asset unit, the Group primarily
+considers whether the asset unit is able to generate cash inflows independently as well as the management style of production and operational
+activities, and the decision for the use or disposal of asset.
+Assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The
+recoverable amounts of goodwill and intangible assets with uncertain useful lives are estimated annually no matter there are any indications of
+impairment. Goodwill is tested for impairment together with related asset units or groups of asset units.
+(12) Impairment of other non-financial long-term assets
+When the hedging relationship no longer meets the risk management objective on the basis of which it qualified for hedge accounting (ie
+the entity no longer pursues that risk management objective), or when a hedging instrument expires or is sold, terminated, exercised,
+or there is no longer an economic relationship between the hedged item and the hedging instrument or the effect of credit risk starts
+to dominate the value changes that result from that economic relationship or no longer meets the criteria for hedge accounting, the
+Group discontinues prospectively the hedge accounting treatments. If the hedged future cash flows are still expected to occur, that
+amount shall remain in the cash flow hedge reserve and shall be accounted for as cash flow hedges. If the hedged future cash flows
+are no longer expected to occur, that amount shall be immediately reclassified from the cash flow hedge reserve to profit or loss as a
+reclassification adjustment. A hedged future cash flow that is no longer highly probable to occur may still be expected to occur, if the
+hedged future cash flows are still expected to occur, that amount shall remain in the cash flow hedge reserve and shall be accounted
+for as cash flow hedges.
+If the amount that has been accumulated in the cash flow hedge reserve is a loss and the Group expects that all or a portion of that
+loss will not be recovered in one or more future periods, the Group immediately reclassify the amount that is not expected to be
+recovered into profit or loss.
+The cumulative change in present value of the expected future cash flows on the hedged item from inception of the hedge.
+The gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income.
+The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.
+If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a hedged
+forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge
+accounting is applied, the entity shall remove that amount from the cash flow hedge reserve and include it directly in the initial cost
+or other carrying amount of the asset or the liability. This is not a reclassification adjustment and hence it does not affect other
+comprehensive income.
+For the year ended 31 December 2019
+Internal and external sources of information are reviewed at each balance sheet date for indications that the following assets, including fixed
+assets, construction in progress, right-of-use assets, goodwill, intangible assets and investments in subsidiaries, associates and joint ventures
+may be impaired.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+The unrealised profit or loss arising from the sale of assets by the Company to its subsidiaries is eliminated in full against the net profit
+attributed to shareholders; the unrealised profit or loss from the sale of assets by subsidiaries to the Company is eliminated according to the
+distribution ratio between shareholders of the parent company and minority interests. For sale of assets that occurred between subsidiaries,
+the unrealised gains and losses is eliminated according to the distribution ratio for its subsidiaries seller between net profit attributable to
+shareholders of the parent company and minority interests.
+Where the accounting policies and accounting period adopted by the subsidiaries are different from those adopted by the Company,
+adjustments are made to the subsidiaries' financial statements according to the Company's accounting policies and accounting period. Intra-
+group balances and transactions, and any unrealised profit or loss arising from intra-group transactions, are eliminated in preparing the
+consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised
+gains but only to the extent that there is no evidence of impairment.
+The excess of the loss attributable to the minority interests during the period over the minority interests' share of the equity at the beginning
+of the reporting period is deducted from minority interests.
+Minority interest is presented separately in the consolidated balance sheet within shareholders' equity. Net profit or loss attributable to
+minority shareholders is presented separately in the consolidated income statement below the net profit line item.
+Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the Group
+derecognises assets, liabilities, minority interests and other equity items related to the subsidiary. The remaining equity investment is
+remeasured to fair value at the date in which control is lost. The sum of consideration received from disposal of equity investment and the
+fair value of the remaining equity investment, net of the fair value of the Group's previous share of the subsidiary's identifiable net assets
+recorded from the acquisition date, is recognised in investment income in the period in which control is lost. Other comprehensive income
+related to the previous equity investment in the subsidiary, is transferred to investment income when control is lost. Other comprehensive
+income related to the equity investment of the original subsidiary shall be converted into the current investment income in the event of loss
+of control.
+(c) Method for preparation of consolidated financial statements (Continued)
+(1) Accounting treatment of business combination involving entities under common control and not under common control (Continued)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+In a business combination involving entities not under common control achieved in stages, the Group remeasures its previously held equity
+interest in the acquiree on the acquisition date. The difference between the fair value and the net book value is recognised as investment
+income for the year. If other comprehensive income was recognised regarding the equity interest previously held in the acquiree before the
+acquisition date, the relevant other comprehensive income is transferred to investment income in the period in which the acquisition occurs.
+Where the Company acquired a minority interest from a subsidiary's minority shareholders, the difference between the investment cost and
+the newly acquired interest into the subsidiary's identifiable net assets at the acquisition date is adjusted to the capital reserve (capital
+surplus) in the consolidated balance sheet. Where the Company partially disposed an investment of a subsidiary that do not result in a loss
+of control, the difference between the proceeds and the corresponding share of the interest into the subsidiary is adjusted to the capital
+reserve (capital surplus) in the consolidated balance sheet. If the credit balance of capital reserve (capital surplus) is insufficient, any excess
+is adjusted to retained profits.
+Where the Company acquires a subsidiary during the reporting year through a business combination involving entities not under common
+control, the identifiable assets, liabilities and results of operations of the subsidiaries are consolidated into consolidated financial statements
+from the date that control commences, based on the fair value of those identifiable assets and liabilities at the acquisition date.
+Where the Company combines a subsidiary during the reporting period through a business combination involving entities under common
+control, the financial statements of the subsidiary are included in the consolidated financial statements as if the combination had occurred at
+the beginning of the earliest comparative year presented or, if later, at the date that common control was established. Therefore the opening
+balances and the comparative figures of the consolidated financial statements are restated. In the preparation of the consolidated financial
+statements, the subsidiary's assets, liabilities and results of operations are included in the consolidated balance sheet and the consolidated
+income statement, respectively, based on their carrying amounts in the subsidiary's financial statements, from the date that common control
+was established.
+The scope of consolidated financial statements is based on control and the consolidated financial statements comprise the Company and its
+subsidiaries. Control means an entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
+to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial
+statements from the date that control commences until the date that control ceases.
+(c) Method for preparation of consolidated financial statements
+(b) Business combination involving entities not under common control
+A business combination involving entities or businesses under common control is a business combination in which all of the combining
+entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that
+control is not transitory. The assets and liabilities that the acquirer receives in the acquisition are accounted for at the acquiree's carrying
+amount on the acquisition date. The difference between the carrying amount of the acquired net assets and the carrying amount of the
+consideration paid for the acquisition (or the total nominal value of shares issued) is recognised in the share premium of capital reserve, or
+the retained earnings in case of any shortfall in the share premium of capital reserve. Any costs directly attributable to the combination shall
+be recognised in profit or loss for the current period when occurred. The expense incurred for equity securities and debt securities issued as
+the consideration of the combination is recognised in the initial cost of the securities. The combination date is the date on which the acquirer
+effectively obtains control of the acquiree.
+(a) Business combination involving entities under common control
+(1) Accounting treatment of business combination involving entities under common control and not under common control
+Principal accounting estimates and judgements of the Group are set out in Note 56.
+The Group determines specific accounting policies and accounting estimates based on the characteristics of production and operational activities,
+mainly reflected in the accounting for allowance for financial assets (Note 3(11)), valuation of inventories (Note 3(4)), depreciation of fixed assets
+and depletion of oil and gas properties (Note 3(7), (8)), measurement of provisions (Note 3(16)), etc.
+3 SIGNIFICANT ACCOUNTING POLICIES
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+90
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+(2) Transactions in foreign currencies and translation of financial statements in foreign currencies
+Foreign currency transactions are, on initial recognition, translated into Renminbi at the spot exchange rates quoted by the People's Bank of
+China ("PBOC rates") at the transaction dates.
+A business combination involving entities or businesses not under common control is a business combination in which all of the combining
+entities or businesses are not ultimately controlled by the same party or parties both before and after the business combination. Difference
+between the consideration paid by the Group as the acquirer, comprises of the aggregate of the fair value at the acquisition date of assets
+given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree, and the Group's
+interest in the fair value of the identifiable net assets of the acquiree, is recognised as goodwill (Note 3(10)) if it is an excess, otherwise in
+the profit or loss. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised
+in the initial cost of the securities. Any other expense directly attributable to the business combination is recognised in the profit or loss
+for the year. The difference between the fair value and the book value of the assets given is recognised in profit or loss. The acquiree's
+identifiable assets, liabilities and contingent liabilities, if satisfying the recognition criteria, are recognised by the Group at their fair value at
+the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
+The assets and liabilities of foreign operation are translated into Renminbi at the spot exchange rates at the balance sheet date. The equity
+items, excluding "Retained earnings", are translated into Renminbi at the spot exchange rates at the transaction dates. The income and expenses
+of foreign operation are translated into Renminbi at the spot exchange rates or an exchange rate that approximates the spot exchange rates on
+the transaction dates. The resulting exchange differences are separately presented as other comprehensive income in the balance sheet within
+equity. Upon disposal of a foreign operation, the cumulative amount of the exchange differences recognised in which relate to that foreign
+operation is transferred to profit or loss in the year in which the disposal occurs.
+Where the initial investment cost of a long-term equity investment exceeds the Group's interest in the fair value of the investee's identifiable
+net assets at the date of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is
+less than the Group's interest in the fair value of the investee's identifiable net assets at the time of acquisition, the investment is initially
+recognised at the investor's share of the fair value of the investee's identifiable net assets, and the difference is charged to profit or loss.
+Foreign currency monetary items are translated at the PBOC rates at the balance sheet date. Exchange differences, except for those directly
+related to the acquisition, construction or production of qualified assets, are recognised as income or expenses in the income statement. Non-
+monetary items denominated in foreign currency measured at historical cost are not translated. Non-monetary items denominated in foreign
+currency that are measured at fair value are translated using the exchange rates at the date when the fair value was determined. The difference
+between the translated amount and the original currency amount is recognised as other comprehensive income, if it is classified as other equity
+instrument investments; or charged to the income statement if it is measured at fair value through profit or loss.
+The Group's accounting treatments when adopting the equity method include:
+The initial cost of investment in joint ventures and associates is stated at the consideration paid except for cash dividends or profits
+distributions declared but unpaid at the time of acquisition and therefore included in the consideration paid should be deducted if the
+investment is made in cash. Under the circumstances that the long-term investment is obtained through non-monetary asset exchange, the
+initial cost of the investment is stated at the fair value of the assets exchanged if the transaction has commercial substance, the difference
+between the fair value of the assets exchanged and its carrying amount is charged to profit or loss; or stated at the carrying amount of the
+assets exchanged if the transaction lacks commercial substance.
+An investment in a joint ventures or an associate is accounted for using the equity method, unless the investment is classified as held for
+sale.
+An associate is the investee that the Group has significant influence on their financial and operating policies. Significant influence represents
+the right to participate in the financial and operating policy decisions of the investee but is not control or joint control over the establishment
+of these policies. The Group generally considers the following circumstances in determining whether it can exercise significant influence
+over the investee: whether there is representative appointed to the board of directors or equivalent governing body of the investee; whether
+to participate in the investee's policy-making process; whether there are significant transactions with the investees; whether there is
+management personnel sent to the investee; whether to provide critical technical information to the investee.
+A joint venture is an incorporated entity over which the Group, based on legal form, contractual terms and other facts and circumstances,
+has joint control with the other parties to the joint venture and rights to the net assets of the joint venture. Joint control is the contractually
+agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of
+the Group and the parties sharing control.
+(b) Investment in joint ventures and associates
+For a long-term equity investment obtained through a business combination not involving enterprises under common control, the initial
+investment cost comprises the aggregate of the fair values of assets transferred, liabilities incurred or assumed, and equity securities issued
+by the Company, in exchange for control of the acquiree. For a long-term equity investment obtained through a business combination not
+involving enterprises under common control, if it is achieved in stages, the initial cost comprises the carrying value of previously-held equity
+investment in the acquiree immediately before the acquisition date, and the additional investment cost at the acquisition date.
+The initial investment cost of a long-term equity investment obtained through a business combination involving entities under common
+control is the Company's share of the carrying amount of the subsidiary's equity at the combination date. The difference between the initial
+investment cost and the carrying amounts of the consideration given is adjusted to share premium in capital reserve. If the balance of the
+share premium is insufficient, any excess is adjusted to retained earnings.
+In the Company's separate financial statements, long-term equity investments in subsidiaries are accounted for using the cost method.
+Except for cash dividends or profits distributions declared but not yet distributed that have been included in the price or consideration paid
+in obtaining the investments, the Company recognises its share of the cash dividends or profit distributions declared by the investee as
+investment income irrespective of whether these represent the net profit realised by the investee before or after the investment. Investments
+in subsidiaries are stated at cost less impairment losses (see Note 3(12)) in the balance sheet. At initial recognition, such investments are
+measured as follows:
+(a) Investment in subsidiaries
+(5) Long-term equity investments
+Inventories are recorded by perpetual method.
+Inventories include raw materials, work in progress, semi-finished goods, finished goods and reusable materials. Reusable materials include
+low-value consumables, packaging materials and other materials, which can be used repeatedly but do not meet the definition of fixed assets.
+Reusable materials are amortised in full when received for use. The amounts of the amortisation are included in the cost of the related assets or
+profit or loss.
+An investment in a subsidiary acquired otherwise than through a business combination is initially recognised at actual purchase cost if the
+Group acquires the investment by cash, or at the fair value of the equity securities issued if an investment is acquired by issuing equity
+securities, or at the value stipulated in the investment contract or agreement if an investment is contributed by investors.
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+Cash and cash equivalents comprise cash on hand, demand deposits, short-term and highly liquid investments which are readily convertible into
+known amounts of cash and are subject to an insignificant risk of change in value.
+(3) Cash and cash equivalents
+(4) Inventories (Continued)
+(4) Inventories
+Inventories are initially measured at cost. Cost includes the cost of purchase and processing, and other expenditures incurred in bringing the
+inventories to their present location and condition. The cost of inventories is mainly calculated using the weighted average method. In addition to
+the cost of purchase of raw material, work in progress and finished goods include direct labour and an appropriate allocation of manufacturing
+overhead costs.
+At the balance sheet date, inventories are stated at the lower of cost and net realisable value.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+91
+Any excess of the cost over the net realisable value of each item of inventories is recognised as a provision for diminution in the value of
+inventories. Net realisable value is the estimated selling price in the normal course of business less the estimated costs of completion and the
+estimated costs necessary to make the sale and relevant taxes. The net realisable value of materials held for use in the production is measured
+based on the net realisable value of the finished goods in which they will be incorporated. The net realisable value of the quantity of inventory
+held to satisfy sales or service contracts is measured based on the contract price. If the quantities held by the Group are more than the
+quantities of inventories specified in sales contracts, the net realisable value of the excess portion of inventories is measured based on general
+selling prices.
+Financial Statements (PRC)
+92
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+12.8
+Amount
+The Company
+At 31 December 2019
+10
+At 31 December 2018
+15380
+Percentage
+to total
+prepayments
+RMB million
+Percentage
+prepayments
+Allowance
+balance
+%%
+70
+RMB million
+8.3
+Amount
+RMB million
+%
+Percentage of
+allowance to
+22.5
+1.0
+8030
+Between two and three years
+to total
+prepayments
+33
+0.6
+5
+15.2
+60
+Over three years
+Total
+119
+2.3
+49
+41.2
+78
+1.3
+5,146
+100.0
+80
+5,990
+100.0
+8503
+Percentage of
+allowance to
+prepayments
+85
+balance
+1.4
+1
+2.8
+Over three years
+Total
+2.8
+3.2
+3
+36
+3.5
+3.2
+3
+3.7
+2,671
+100.0
+6
+2,493
+100.0
+81
+5.1
+2
+1.5
+%
+RMB million
+0%
+Within one year
+Between one and two years
+Between two and three years
+2,424
+90.7
+2,306
+92.6
+123
+4.6
+1
+0.8
+70
+2.8
+1
+1.4
+39
+Allowance
+94.9
+At 31 December
+2018
+RMB million
+4.4
+At 31 December
+2019
+9,878
+17.4%
+2018
+15,699
+27.3%
+Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from
+China Petrochemical Corporation ("Sinopec Group Company") and fellow subsidiaries are repayable under the same terms.
+Accounts receivable (net of allowance for doubtful accounts) primarily represent receivables that are neither past due nor impaired. These
+receivables relate to a wide range of customers for whom there is no recent history of default. Information about the impairment of accounts
+receivable and the Group exposure to credit risk can be found in Note 61.
+During 2019 and 2018, the Group and the Company had no individually significant accounts receivable been fully or substantially provided
+allowance for doubtful accounts.
+At 31 December
+During 2019 and 2018, the Group and the Company had no individually significant write-off or recovery of doubtful debts which had been fully or
+substantially provided for in prior years.
+103
+Financial Statements (PRC)
+104
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+9 RECEIVABLES FINANCING
+Receivables financing represents mainly the bills of acceptance issued by banks for sales of goods and products.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Percentage to the total balance of accounts receivable
+Allowance for doubtful accounts
+Total amount (RMB million)
+At 31 December 2019 and 31 December 2018, the total amounts of the top five accounts receivable of the Group are set out below:
+15
+29.4
+54
+0.2
+10
+18.5
+151
+21,675
+0.7
+99
+65.6
+144
+0.5
+106
+73.6
+100.0
+131
+30,120
+100.0
+131
+At 31 December 2019, the Group's derecognised but outstanding bills due to endorsement or discount amounted to RMB 31,004 million.
+At 31 December 2019, the Group considers that its bills of acceptance issued by banks do not pose a significant credit risk and will not cause any
+significant loss due to the default of drawers.
+10 PREPAYMENTS
+Prepayments
+RMB million
+70
+RMB million
+%
+Amount
+RMB million
+Percentage
+to total
+prepayments
+At 31 December 2018
+Percentage of
+allowance to
+prepayments
+%
+Allowance
+RMB million
+balance
+01
+70
+Within one year
+4,405
+85.6
+Between one and two years
+589
+11.5
+26
+balance
+5,683
+169
+Allowance
+Percentage
+to total
+prepayments
+Less: Allowance for doubtful accounts
+Total
+Ageing analysis of prepayments is as follows:
+The Group
+The Company
+At 31 December
+At 31 December
+2019
+RMB million
+5,146
+80
+5,066
+2018
+RMB million
+5,990
+53
+5,937
+At 31 December
+2019
+RMB million
+2,671
+6
+5
+2,493
+2,665
+5
+2,488
+The Group
+At 31 December 2019
+Amount
+Percentage of
+allowance to
+prepayments
+At 31 December 2019 and 31 December 2018, the total amounts of the top five prepayments of the Group are set out below:
+58,549
+Percentage to the total balance of prepayments
+%
+balance
+Allowance
+receivables
+Amount
+RMB million
+%
+0.2
+RMB million
+RMB million
+%
+balance
+Allowance
+receivables
+Amount
+to other
+receivables
+Percentage
+to total other
+to other
+receivables
+Percentage
+to total other
+RMB million
+Within one year
+44,402
+55.6
+292
+Share of other comprehensive
+income/(loss) from associates (ii)
+201
+(77)
+(144)
+641
+76
+58
+The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial associates accounted for
+using equity method in aggregate was RMB 4,565 million (2018: RMB 3,550 million) and RMB 155 million (2018: RMB 844 million) respectively.
+As at 31 December 2019, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB
+35,416 million (31 December 2018: RMB 31,370 million).
+Notes:
+(i) Sinopec is able to exercise significant influence in SIBUR since Sinopec has a member in SIBUR's Board of Director and has a member in SIBUR's Management
+Board.
+(ii) Including foreign currency translation differences.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+109
+Financial Statements (PRC)
+Between one and two years
+46.3
+27,088
+of allowance
+212
+of allowance
+Percentage
+35.9
+71
+0.8
+198
+Between two and three years
+16.1
+53
+1.2
+320
+329
+52
+6.1
+1,554
+Between one and two years
+90.7
+24,301
+0.4
+87
+3.3
+1.2
+21
+6.6
+At 31 December 2018
+At 31 December 2019
+The Company
+1,481
+100.0
+26,793
+1,456
+100.0
+25,565
+Total
+76.3
+1,407
+6.9
+1,843
+73.4
+1,246
+6.6
+1,698
+Over three years
+Percentage
+443
+773
+1,040
+At 31 December
+At 31 December
+2019
+RMB million
+2018
+RMB million
+26,793
+The Group
+1,481
+25,312
+At 31 December
+2018
+RMB million
+79,827
+1,117
+57,432
+At 31 December 2019
+Percentage
+of allowance
+Percentage
+to total other
+to other
+receivables
+Percentage
+to total other
+Amount
+955
+78,872
+The Company
+1,456
+24,109
+25,565
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+At 31 December
+At 31 December
+2019
+2018
+1,940
+2,009
+37.7%
+33.5%
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+11 OTHER RECEIVABLES
+Other receivables
+Less: Allowance for doubtful accounts
+Total
+Ageing analysis of other receivables is as follows:
+The Group
+At 31 December
+2019
+RMB million
+receivables
+Allowance
+balance
+RMB million
+5,078
+16,810
+1,994
+1,142
+575
+699
+Dividends declared by associates
+1,259
+1,207
+490
+468
+271
+219
+Share of profit from associates
+1,096
+1,011
+1,095
+915
+651
+1,711
+Total amount (RMB million)
+2,645
+2,191
+%
+RMB million
+%
+Amount
+RMB million
+receivables
+Allowance
+At 31 December 2018
+Percentage
+of allowance
+to other
+receivables
+balance
+%
+RMB million
+Within one year
+22,115
+86.5
+(1,435)
+6,410
+151
+116
+Total comprehensive income
+2,022
+51
+56,713
+1,848
+54,865
+15
+RMB million
+29,989
+156
+(30,145)
+82,343
+37,609
+157
+(37,766)
+2,075
+(84,418)
+83,449
+2018
+3,155
+Major types of tax applicable to the Group are income tax, consumption tax, resources tax, value-added tax, city construction tax, education
+surcharge and local education surcharge.
+Consumption tax was levied based on sales quantities of taxable products, tax rate of products is presented as below:
+Products
+Gasoline
+Diesel
+Naphtha
+Solvent oil
+Lubricant oil
+Fuel
+(86,604)
+1 January
+RMB million
+31 December
+2018
+Financial Statements (PRC)
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(26) Changes in significant accounting policies (Continued)
+(b) The revision of general enterprise financial statements format (Continued)
+(ii) The impact to the Company's financial statements is as follows:
+4 TAXATION
+Contents and reasons of the changes
+The Company separately presents bills and
+accounts receivable into bills receivable and
+accounts receivable
+The Company separately presents bills
+and accounts payable into bills payable
+and accounts payable
+Item
+Accounts receivable
+Bills receivable
+Bills receivable and accounts receivable
+Accounts payable
+Bills payable
+Bills payable and accounts payable
+oil
+101
+Jet fuel oil
+The Group
+At 31 December 2019
+At 31 December 2018
+Original
+currency Exchange
+million
+Original
+rates
+RMB
+million
+currency
+million
+Exchange
+rates
+1,495.20
+RMB
+million
+82
+17
+1
+1,889 6.9762
+0.8958
+7.8155
+78,924
+13,174
+102,572
+3,377
+6.8632
+14
+1,218.00
+1,711.52
+1,948.64
+Cash on hand
+Renminbi
+Cash at bank
+Renminbi
+US Dollar
+Hong Kong Dollar
+EUR
+Others
+Deposits at related parities
+Renminbi
+US Dollar
+EUR
+Others
+Total
+Effective from
+13 January 2015
+(RMB/Ton)
+2,109.76
+1,411.20
+2,105.20
+5 CASH AT BANK AND ON HAND
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+6,462
+(206,535)
+6,416
+(192,757)
+(25) Segment reporting
+Reportable segments are identified based on operating segments which are determined based on the structure of the Group's internal
+organisation, management requirements and internal reporting system. An operating segment is a component of the Group that meets the
+following respective conditions:
+engage in business activities from which it may earn revenues and incur expenses;
+whose operating results are regularly reviewed by the Group's management to make decisions about resource to be allocated to the segment
+and assess its performance; and
+for which financial information regarding financial position, results of operations and cash flows are available.
+Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting, and segment
+accounting policies are consistent with those for the consolidated financial statements.
+100
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(I) an entity which is under control, joint control of principle individual investor, key management personnel or close family members of such
+individuals.
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(26) Changes in significant accounting policies
+Ministry of Finance (MOF) issued revised "No. 21 Accounting Standards for Business Enterprises - Lease" ("New Lease Standard") in 2018,
+then also issued Cai Kuai [2019] No. 6 “Announcement of the revision of general enterprise financial statements format for 2019" and the
+revised Accounting Standards for Business Enterprises No. 7 - Exchange of Non-monetary Assets (hereinafter referred to as "revised standards
+for exchange of non-monetary assets) and Accounting Standards for Business Enterprises No. 12 - Debt Restructuring (hereinafter referred to
+as "revised standards for debt restructuring). The Group has adopted the above standards and guidelines to prepare the financial statements
+of 2019. The revised standards for exchange of non-monetary assets and debt restructuring have no significant impacts on the Group and the
+Company, the impact of other revises to the Group and the Company's financial statements is as follows:
+(a) Lease
+According to the provisions of new lease standard, the Group and the Company would not reassess the contracts that have already existed
+prior to the date of initial application. The Group and the Company adjust the cumulative impact of first implementation of the standards into
+relevant items in the financial statements of 2019, and the comparative financial statements of 2018 have not been restated.
+(i) For operating lease contracts that already exist before the first implementation of the new lease standard, the Group and the Company
+apply different methods based on the remaining lease period:
+If the remaining lease term is more than one year, the Group and the Company recognise the lease liabilities based on the remaining
+lease payment and the incremental borrowing interest rate on 1 January 2019. Right-of-use assets are measured at the amount equivalent
+to lease liabilities and adjusted as necessary depending on prepaid rent.
+If the remaining lease period is 12 months or less, or leases for which the underlying assets are individually of low value when it is new,
+the Group and the Company adopt the simplified method that do not recognise the right-of-use assets and lease liabilities, which has no
+significant impact on the financial statements.
+For the year ended 31 December 2019
+(k) close family members of key management personnel of the Company's holding company; and
+(j) key management personnel of the Company's holding company;
+(i) key management personnel of the Group, and close family members of such individuals;
+3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(20) Repairs and maintenance expenses
+Repairs and maintenance (including overhauling expenses) expenses are recognised in profit or loss when incurred.
+(21) Environmental expenditures
+Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations is expensed as incurred.
+Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable and the costs can
+be reliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with
+respect to accrued liabilities and other potential exposures.
+(22) Research and development costs
+Research costs and development costs that cannot meet the capitalisation criteria are recognised in profit or loss when incurred.
+(23) Dividends
+Dividends and distributions of profits proposed in the profit appropriation plan which will be authorised and declared after the balance sheet
+date, are not recognised as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends
+are recognised as a liability in the period in which they are declared.
+(24) Related parties
+If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties
+are subject to common control, joint control from another party, they are considered to be related parties, except for the two parties significantly
+influenced by a party. Related parties may be individuals or enterprises. Where enterprises are subject to state control but are otherwise
+unrelated, they are not related parties. Related parties of the Group and the Company include, but not limited to:
+(a) the holding company of the Company;
+(b) the subsidiaries of the Company;
+(c) the parties that are subject to common control with the Company;
+(d) investors that have joint control or exercise significant influence over the Group;
+(e) enterprises or individuals if a party has control, joint control over both the enterprises or individuals and the Group;
+(f) joint ventures of the Group, including subsidiaries of the joint ventures;
+(g) associates of the Group, including subsidiaries of the associates;
+(h) principle individual investors of the Group and close family members of such individuals;
+Affected amount on January 1 2019
+(RMB million)
+The affected financial statement line item
+Right-of-use assets
+Accounts receivable
+Bills receivable
+Bills receivable and accounts receivable
+Accounts payable
+Bills payable
+Bills payable and accounts payable
+The Group
+(RMB million)
+352,794
+200,867
+(2,303)
+198,564
+31 December
+2018
+RMB million
+1 January
+2018
+RMB million
+56,993
+7,886
+(64,879)
+68,494
+16,207
+(84,701)
+186,341
+200,073
+Item
+23,179
+and accounts receivable into bills
+receivable and accounts receivable
+The Group separately presents bills
+and accounts payable into bills
+payable and accounts payable
+(i) The impact to the Group's financial statements is as follows:
+Lease liabilities
+Current portion of non-current liabilities
+Long-term deferred expenses
+Prepayments
+The Group
+207,455
+184,670
+13,894
+(8,125)
+(766)
+The Company
+119,776
+112,322
+7,454
+On 1 January 2019, the Group and the Company use the same discount rate for lease contracts with similar characteristics when
+measuring lease liabilities. The incremental borrowing interest rates range from 4.35% to 4.90%.
+(ii) On 1 January 2019, the Group reconciled the unpaid minimum operating lease payment that disclosed under the original lease standard
+to the lease liabilities recognised under the new lease standard as follows:
+The minimum future operating lease payments disclosed on 31 December 2018
+The present value of the above-mentioned minimum operating lease payments discounted
+at the incremental borrowing rate
+Deduct: Present value of payments with terms of 12 months or less and leases for
+which the underlying assets are individually of low value when it is new
+Lease liabilities recognised on 1 January 2019 (including Non-current liabilities
+due within one year) (Note 33)
+(b) The revision of general enterprise financial statements format
+Contents and reasons of the changes
+The Group separately presents bills
+15
+39
+0.8762
+84.4
+443
+0.8
+8858
+83
+19.0
+165
+57.1
+509
+358
+Total
+56,713
+100.0
+1,848
+57,599
+100.0
+606
+The Company
+80.8
+1.1
+603
+Over three years
+55,721
+98.2
+1,204
+2.2
+56,431
+97.9
+260
+0.5
+70
+26.9
+436
+0.8
+Between two and three years
+129
+0.2
+65
+50.4
+289
+0.5
+At 31 December 2019
+Percentage
+Percentage
+of allowance
+70
+RMB million
+%
+RMB million
+%
+Allowance
+RMB million
+receivable
+balance
+07
+21,368
+98.6
+29,797
+98.9
+105
+0.5
+17
+16.2
+125
+0.4
+%
+Between one and two years
+RMB million
+Amount
+At 31 December 2018
+Percentage
+of allowance
+Percentage
+Within one year
+Between one and two years
+Between two and three years
+Over three years
+Total
+to total
+accounts
+to accounts
+receivable
+to total
+accounts
+to accounts
+Amount
+receivable
+Allowance
+balance
+receivable
+12.0
+Within one year
+balance
+102
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+6 FINANCIAL ASSETS HELD FOR TRADING
+Structured deposits
+Equity investments, listed and at quoted market price
+Total
+At 31 December 2019, structured deposits included in cash at bank and on hand with financial institutions of the Group amounted to RMB 19,210
+million (2018: RMB 77,909 million).
+At 31 December
+2019
+RMB million
+1
+3,319
+At 31 December
+2018
+RMB million
+25,550
+182
+25,732
+3,318
+At 31 December 2019, time deposits with financial institutions of the Group amounted to RMB 67,614 million (2018: RMB 55,093 million).
+Deposits at related parties represent deposits placed at Sinopec Finance Company Limited and Sinopec Century Bright Capital Investment Limited.
+Deposits interest is calculated based on market rate.
+167,015
+35
+8
+1
+7.8473
+11
+85
+79
+92,220
+125,958
+17,684
+2,560
+14
+6.9762
+7.8155
+17,862
+106
+55
+35,707
+127,927
+4
+2,389 6.8632
+7.8473
+24,625
+16,374
+33
+25
+41,057
+The financial assets are primarily the structured deposits with financial institutions, which are presented as current assets since they are expected
+to be expired within 12 months from the end of the reporting period.
+7 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
+Derivative financial assets and derivative financial liabilities of the Group are primarily commodity futures and swaps contracts. See Note 61.
+8 ACCOUNTS RECEIVABLE
+Accounts receivable
+Percentage
+Percentage
+of allowance
+Amount
+to total
+accounts
+receivable
+to accounts
+receivable
+to total
+accounts
+to accounts
+receivable
+RMB million
+%
+Allowance
+RMB million
+balance
+Amount
+receivable
+%
+RMB million
+%
+Allowance
+RMB million
+At 31 December 2018
+%
+of allowance
+Percentage
+Less: Allowance for doubtful accounts
+Total
+Ageing analysis on accounts receivable is as follows:
+The Group
+The Company
+At 31 December
+2019
+RMB million
+At 31 December
+2018
+RMB million
+At 31 December
+2019
+RMB million
+At 31 December
+2018
+RMB million
+(157)
+57,599
+606
+56,993
+21,675
+131
+21,544
+30,120
+131
+29,989
+The Group
+At 31 December 2019
+Percentage
+411
+3
+583
+10.00%
+21,784 million
+Processing natural gas and
+ΝΑ
+Russia
+Russia
+PAO SIBUR Holding ("SIBUR") (i)
+financial services
+manufacturing
+49.00%
+Provision of non-banking
+Zhao Dong
+PRC
+PRC
+Sinopec Finance Company Limited
+("Sinopec Finance")
+facilities
+pipelines and auxiliary
+50.00%
+18,000
+RUB
+petrochemical products
+Zhongtian Synergetic Energy Company Limited
+("Zhongtian Synergetic Energy")
+Financial Statements (PRC)
+107
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Except that SIBUR is a public joint stock company, other joint ventures and associates above are limited companies.
+50.00%
+10,000 USD
+Crude oil and natural gas
+extraction
+ΝΑ
+British Virgin
+Islands
+The Republic of
+Kazakhstan
+Caspian Investments Resources Ltd. ("CIR")
+coal-chemical products
+manufacturing of
+38.75%
+17,516
+Mining coal and
+Peng Yi
+PRC
+PRC
+200
+Financial Statements (PRC)
+Operation of natural gas
+PRC
+49.00%
+25,000 USD
+Crude oil and natural gas
+extraction
+ΝΑ
+Cyprus
+Russia
+Taihu Limited ("Taihu")
+petrochemical products
+Yanbu Aramco Sinopec Refining
+and distribution of
+12,704
+Manufacturing
+Hong Jianqiao
+PRC
+PRC
+BASF YPC Company Limited ("BASF-YPC")
+50.00%
+14,758
+40.00%
+Saudi Arabia
+Saudi Arabia
+ΝΑ
+PRC
+Sinopec Sichuan to East China Gas
+Pipeline Co., Ltd. ("Pipeline Ltd")
+2. Associates
+petrochemical products
+distribution of
+HARETHI
+Limited ("Sinopec SABIC Tianjin")
+50.00%
+9,796
+Manufacturing and
+UWAIDH AL⚫
+PRC
+Sinopec SABIC Tianjin Petrochemical Company PRC
+USD
+processing
+Company Ltd. ("YASREF")
+37.50%
+1,560 million
+Petroleum refining and
+Quan Kai
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+13 LONG-TERM EQUITY INVESTMENTS (Continued)
+Current financial liabilities
+Current liabilities
+13,990
+14,878
+51,873
+50,548
+9,216
+10,453
+(1,280)
+11,086
+19,271
+17,267
+Non-current assets
+9,117
+7,743
+11,197
+12,044
+7,095
+10,498
+(1,200)
+(237)
+(725)
+(8,370)
+Total current liabilities
+(2,507)
+(2,896)
+(12,217)
+(12,504)
+(2,124)
+(1,815)
+(1,822)
+(1,808)
+(4,939)
+(7,090)
+Other current liabilities
+(500)
+(500)
+(4,806)
+(7,445)
+(59)
+(57)
+6,821
+7,377
+6,091
+16,636
+Cash and cash equivalents
+Current assets
+RMB million
+2018
+2018
+RMB million RMB million
+At
+At
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2019
+2018
+2019
+2018
+2019
+2018
+2019
+2019
+RMB million RMB million RMB million
+RMB million RMB million
+At
+Sinopec SABIC Tianjin
+At
+At
+YASREF
+At
+Taihu
+At
+At
+BASF-YPC
+At
+At
+RMB million RMB million
+FREP
+Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal joint ventures:
+(b) Major financial information of principal joint ventures
+5,603
+Manufacturing refining oil
+products
+7,388
+1,582
+17,580
+Total current assets
+4,007
+4,501
+10,267
+11,311
+3,689
+2,336
+5,795
+4,937
+9,248
+11,977
+Other current assets
+5,110
+3,242
+930
+733
+3,406
+4,485
+1,154
+Gu Yuefeng
+PRC
+PRC
+Total
+Less: Provision for diminution in value of inventories
+190,960
+195,024
+2,872
+2,576
+88,929
+91,368
+2,582
+192,442
+13,690
+85,469
+88,465
+RMB million
+2018
+At 31 December
+RMB million
+At 31 December
+2019
+Spare parts and consumables
+12,615
+6,376
+184,584
+For the year ended 31 December 2019, the provision for diminution in value of inventories of the Group was primarily due to the costs of finished
+goods were higher than net realisable value.
+Other equity movements under the equity method
+Change of other comprehensive income under the equity method
+Share of profits less losses under the equity method
+Additions for the year
+Balance at 1 January 2019
+The Company
+Balance at 31 December 2019
+Movement of provision for impairment
+Other movements
+Foreign currency translation differences
+Disposals for the year
+Dividends declared
+Other equity movements under the equity method
+Change of other comprehensive loss under the equity method
+Share of profits less losses under the equity method
+Additions for the year
+Balance at 1 January 2019
+The Group
+13 LONG-TERM EQUITY INVESTMENTS
+Finished goods
+Work in progress
+Raw materials
+The Group
+13.2
+1,116
+14.5
+8,481
+6.5
+951
+18.4
+14,666
+79,827
+Total
+Over three years
+16.6
+9,747
+1
+8.7
+6,933
+Between two and three years
+1
+22.6
+13,233
+100.0
+Dividends declared
+955
+100.0
+12 INVENTORIES
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+106
+Financial Statements (PRC)
+105
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+During the year ended 31 December 2019 and 2018, the Group and the Company had no individually significant write-off or recovery of doubtful
+debts which had been fully or substantially provided for in prior years.
+During the year ended 31 December 2019 and 2018, the Group and the Company had no individually significant other receivables been fully or
+substantially provided allowance for doubtful accounts.
+2018
+6,837
+Within one year
+25.5%
+2019
+10,561
+Within one year
+41.3%
+At 31 December
+At 31 December
+Percentage to the total balance of other receivables
+Allowance for doubtful accounts
+Ageing
+Total amount (RMB million)
+At 31 December 2019 and at 31 December 2018, the total amounts of the top five other receivables of the Group are set out below:
+1,117
+58,549
+(6,139)
+Disposals for the year
+Balance at 31 December 2019
+274,220
+(1,030)
+(44)
+(986)
+(3,088)
+(54)
+41
+201
+15,530
+1
+201
+3,579
+15,673
+289,207
+Total
+RMB million
+RMB million
+(7,983)
+21,163
+39
+1,510
+2,069
+40
+(3,034)
+22,816
+104
+(7,879)
+104
+Fujian Refining & Petrochemical Company
+Limited ("FREP")
+1. Joint ventures
+Percentage of
+equity/voting
+right directly or
+indirectly held
+by the Company
+Registered Capital
+RMB million
+Principal
+activities
+representative
+Legal
+Register
+location
+Principal place
+of business
+Name of investees
+(a) Principal joint ventures and associates
+Principal joint ventures and associates of the Group are as follows:
+13 LONG-TERM EQUITY INVESTMENTS (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Details of the Company's principal subsidiaries are set out in Note 57.
+For the year ended 31 December 2019, the Group and the Company had no individually significant long-term investment impairment.
+304,687
+16,093
+362
+259,934
+15,272
+losses
+associates
+RMB million
+(810)
+12,777
+145,721
+4,581
+(8)
+101
+(22)
+(788)
+8,392
+4,385
+1,697
+2,884
+Total
+RMB million
+losses
+RMB million
+(1,686)
+Provision for
+impairment
+in associates
+RMB million
+90,273
+57,134
+joint ventures
+RMB million
+Investments
+Investments in
+93
+Movement of provision for impairment
+(6,494)
+(10,189)
+RMB million
+Provision for
+impairment
+Investments in Investments in Investments in
+subsidiaries joint ventures
+RMB million
+152,204
+(1,710)
+96,481
+57,433
+3
+3
+(25)
+(25)
+519
+(27)
+267
+279
+13,826
+(466)
+(398)
+(68)
+(3,695)
+(2,045)
+(2,547)
+(1,872)
+RMB million
+2018
+2018
+2019
+RMB million RMB million
+7,612
+7,477
+RMB million
+4,219
+2019
+2018
+RMB million
+22,502
+17.3
+6,712
+209,837
+RMB million
+RMB million
+180,383
+12,498
+13,245
+Current assets
+RMB million
+RMB million
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2019
+RMB million
+Non-current assets
+37,842
+39,320
+Non-current liabilities
+(961)
+(936)
+(7,252)
+(23,293) (13,887)
+(31,295)
+(200,402)
+(170,621)
+(1,020)
+(721)
+Current liabilities
+1,828
+971
+49,961
+56,424
+170,796
+182,646
+16,359
+18,926
+2019
+2018
+2019
+2018
+loss/(income) from joint
+Share of other comprehensive
+1,462
+823
+(682)
+(488)
+1,307
+1,235
+1,091
+694
+1,493
+384
+from joint ventures
+Share of net profit/(loss)
+1,750
+1,226
+1,224
+1,200
+1,400
+ventures (ii)
+(2,910)
+(522)
+(98)
+At
+At
+CIR
+Zhongtian Synergetic Energy
+At
+At
+At
+SIBUR
+At
+At
+Sinopec Finance
+At
+At
+Pipeline Ltd
+At
+Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal associates:
+(c) Major financial information of principal associates
+13 LONG-TERM EQUITY INVESTMENTS (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+108
+The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial joint ventures accounted
+for using equity method in aggregate was RMB 1,737 million (2018: RMB 2,052 million) and RMB 168 million (2018: RMB 839 million)
+respectively. As at 31 December 2019, the carrying amount of all individually immaterial joint ventures accounted for using equity method in
+aggregate was RMB 25,530 million (31 December 2018: RMB 22,982 million).
+397
+435
+Dividends from joint ventures
+(3,026)
+(332)
+4,536
+4,966
+4,746
+5,008
+Turnover
+RMB million RMB million RMB million RMB million
+2018
+Sinopec Finance
+2019
+56,706
+2018
+Summarised income statement
+3,453
+3,741
+7,266
+7,955
+11,086
+11,125
+12,476
+Pipeline Ltd
+2019
+SIBUR
+2019
+2018
+RMB million RMB million
+59,927
+Zhongtian Synergetic Energy
+CIR
+424
+1,142
+1,994
+10,400
+6,513
+1,868
+2,234
+2,022
+2,191
+Profit for the year
+2,856
+2,334
+12,235
+13,329
+RMB million RMB million RMB million RMB million
+2018
+2019
+2018
+2019
+13,772
+23,886
+23,728
+Carrying Amounts
+47,772
+47,456
+the Company
+shareholders of
+Net assets attributable to
+6,906
+7,481
+18,750
+20,529
+(673)
+(166)
+(31,436)
+(26,227)
+(71,289) (58,628)
+111,696 111,377
+25,462
+28,106
+47,772
+47,456
+Net assets
+28,106
+(582)
+25,462
+110,860
+3,453
+3,741
+7,266
+7,955
+11,086
+11,125
+12,476
+13,772
+23,886
+23,728
+Share of net assets from associates
+517
+446
+to minority interests
+Net assets attributable
+6.906
+7,481
+18,750
+20,529
+111,250
+Other comprehensive income/(loss)
+2,923
+(759)
+464
+minority interests
+Net assets attributable to
+16,118
+14,265
+12,746
+11,235
+11,373
+412
+12,829
+14,509
+17,035
+15,002
+shareholders of the company
+Net assets attributable to
+16,118
+14,265
+12,746
+15,681
+Share of net assets from
+joint ventures
+7,501
+7,133
+4,780
+4,213
+5,573
+6,286
+6,272
+5,804
+8,518
+7,501
+Carrying Amounts
+8,059
+7,133
+4,780
+4,213
+5,573
+6,286
+6,272
+5,804
+8,518
+11,235
+11,785
+13,293
+15,681
+(279)
+(290)
+Other non-current liabilities
+(3,651)
+(4,592)
+(32,364)
+(29,445)
+(72)
+(125)
+(218)
+(12,454)
+(11,185)
+Non-current financial liabilities
+Non-current liabilities
+(3,007)
+(3,396)
+(17,023)
+(19,949)
+(2,183)
+(35)
+8,059
+(17)
+(2,271)
+14,509
+17,035
+15,002
+Net assets
+(3,982)
+(4,960)
+(33,301)
+(31,408)
+(2,343)
+(2,109)
+(235)
+(35)
+(12,733)
+(11,475)
+Total non-current liabilities
+(331)
+(368)
+(937)
+(1,963)
+(1,984)
+1,645
+Summarised income statement
+BASF-YPC
+767
+Profit/(loss) for the year
+(993)
+(533)
+(249)
+(8)
+(729)
+(708)
+2,985
+(897)
+(935)
+(197)
+Tax expense
+3,916
+2,178
+(1,569)
+(1,292)
+3,493
+(579)
+1,735
+2,728
+2,612
+(1,561)
+3,685
+1,507
+2,728
+1,735
+2,985
+767
+income/(loss)
+Total comprehensive
+1,059
+(261)
+921
+(1,105)
+Other comprehensive loss/(income)
+2,923
+1,645
+(1,818)
+(1,300)
+2,764
+3,320
+3,625
+2,314
+3.920
+41
+32
+157
+2019
+2018
+RMB million RMB million
+Sinopec SABIC Tianjin
+YASREF
+2019
+2018
+RMB million RMB million
+2018
+2019
+RMB million RMB million
+14,944
+15,222
+2019
+2018
+RMB million RMB million
+21,574
+19,590
+52,469
+57,047
+124
+Interest income
+Turnover
+RMB million RMB million
+2018
+2019
+Taihu
+94
+FREP
+141
+77,561
+964
+Profit/(loss) before taxation
+(167)
+(134)
+(1,382)
+(1,470)
+(151)
+(265)
+(43)
+(26)
+(647)
+For the year ended 31 December 2019
+(597)
+Interest expense
+169
+171
+101
+23,501
+20,541
+75,940
+58
+31,634
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+5,728
+6,578
+210,320
+34,188
+176,132
+(5,762)
+(748)
+(5,014)
+8,627
+7,555
+1,072
+207,455
+207,455
+27,381
+27,381
+180,074
+180,074
+Total
+RMB million
+Others
+RMB million
+Additions for the year
+Decreases for the year
+Balance at 31 December 2019
+Provision for impairment losses:
+Balance at 31 December 2018
+Change in accounting policy
+Balance at 1 January 2019
+12,306
+Additions for the year
+Balance at 31 December 2019
+Net book value:
+Balance at 31 December 2019
+Balance at 31 December 2018
+The Company
+Land
+RMB million
+Decreases for the year
+Balance at 1 January 2019
+(12,317)
+(37)
+Decreases for the year
+Additions for the year
+Balance at 1 January 2019
+Change in accounting policy
+Balance at 31 December 2018
+Provision for impairment losses:
+Balance at 31 December 2019
+Decreases for the year
+Additions for the year
+Balance at 1 January 2019
+119,142
+RMB million
+Change in accounting policy
+Balance at 31 December 2018
+Accumulated depreciation:
+Balance at 31 December 2019
+Decreases for the year
+6,567
+5,702
+12,269
+169,565
+28,486
+198,051
+(26)
+Land
+Total
+RMB million
+Cost:
+Balance at 31 December 2018
+Change in accounting policy
+Balance at 1 January 2019
+Additions for the year
+Others
+RMB million
+(11)
+Change in accounting policy
+Accumulated depreciation:
+Gas (SNG) Export Pipeline Construction
+Xinjiang Coal-based Substitute Natural
+267
+Bank loans & self-financing
+87%
+12,120
+8,692
+3,428
+13,865
+Wen 23 Gas Storage Project (First-stage)
+720
+Bank loans & self-financing
+87%
+28,582
+10,803
+17,779
+34,667
+Zhongke Refine Integration Project
+Budgeted
+amount
+RMB million
+Balance at
+1 January
+2019
+RMB million
+Net change
+for the year
+RMB million
+31 December
+2019
+RMB million
+Project (First-stage)
+Balance at
+of project
+investment
+to budgeted
+amount
+Accumulated
+interest
+capitalised at
+31 December
+Source of funding
+2019
+RMB million
+Percentage
+Balance at 31 December 2018
+11,589
+2,248
+Balance at 31 December 2019
+Decreases for the year
+Additions for the year
+Balance at 31 December 2018
+Change in accounting policy
+Balance at 1 January 2019
+Cost:
+The Group
+16 RIGHT-OF-USE ASSETS
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+112
+6
+Bank loans & self-financing
+10%
+1,024
+973
+51
+7,930
+68%
+Bank loans & self-financing
+204
+Zhenhai Refining and Chemical ethylene
+expansion project
+5,682
+26,787
+1,499
+1,808
+12%
+Self-financing
+Western Sichuan Gas Field Leikoupo Formation
+Gas Reservoir Development and Construction
+Project
+9,961
+309
+Balance at 31 December 2019
+Net book value:
+Balance at 31 December 2019
+Balance at 31 December 2018
+634
+482
+231
+Balance at 1 January 2019
+Provision for impairment losses:
+52,296
+3,506
+19,391
+3,275
+3,601
+22,523
+Balance at 31 December 2019
+(363)
+(142)
+(103)
+(118)
+Decreases for the year
+5,942
+Accumulated amortisation:
+Balance at 1 January 2019
+19,986
+3,397
+2,997
+17,137
+24
+3,200
+Additions for the year
+2,655
+204
+278
+2,357
+448
+46,717
+162,151
+145
+899
+Shanghai SECCO Petrochemical Company Limited
+("Shanghai SECCO")
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Sinopec Zhenhai Refining and Chemical Branch
+("Sinopec Zhenhai")
+Principal activities
+Name of investees
+Goodwill is allocated to the following Group's cash-generating units:
+18 GOODWILL
+2,048
+108,956
+2,144
+34,013
+34,934
+1,729
+1,008
+1,261
+1,351
+Amortisation of the intangible assets of the Group charged for the year ended 31 December 2019 is RMB 5,695 million (2018: RMB 5,414 million).
+103,855
+Balance at 31 December 2019
+Balance at 31 December 2018
+69,809
+64,514
+Additions for the year
+12
+3
+15
+Decreases for the year
+(15)
+17
+(15)
+228
+482
+27
+145
+17
+899
+Balance at 31 December 2019
+Net book value:
+Project name
+5,667
+5,031
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+113
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+112,832
+555
+112,277
+4,362
+566
+3,796
+(23)
+(18)
+(5)
+4,385
+584
+119,776
+119,142
+634
+119,776
+29
+624
+17 INTANGIBLE ASSETS
+653
+(137)
+(3,235)
+116,073
+1,121
+117,194
+3,801
+(3,098)
+53,549
+The Group
+Non-patent
+5,344
+92,560
+Balance at 31 December 2019
+(825)
+(241)
+(161)
+(423)
+Decreases for the year
+11,505
+643
+1,494
+1,002
+114
+8,252
+Additions for the year
+151,471
+5,265
+Operation
+Patents
+technology
+RMB million
+RMB million
+rights
+RMB million
+Land use
+rights
+RMB million
+Others
+RMB million
+Cost:
+Balance at 1 January 2019
+84,731
+5,230
+4,029
+52,216
+Total
+RMB million
+Production and sale of petrochemical products
+51,598
+173,482
+136,963
+The Company
+622,409
+617,762
+405,419
+145,436
+66,907
+Balance at 31 December 2018
+412,349
+140,360
+69,700
+Balance at 31 December 2019
+Net book value:
+(1,766)
+47
+77,540
+30,188
+43,563
+3,789
+Balance at 31 December 2019
+(1,615)
+1
+39
+565,686
+(10,764)
+681
+1,164,319
+Provision for impairment losses:
+Balance at 1 January 2019
+43,517
+Additions for the year
+Fixed assets (a)
+11
+79,063
+196
+Reclassifications
+Decreases for the year
+(151)
+Exchange adjustments
+46
+31,617
+185
+621
+543,629
+Fixed assets pending for disposal
+Total
+At 31 December
+2019
+RMB million
+1,853
+1,091,121
+467,357
+656
+574,937
+1,131
+23,780
+946
+48,827
+66
+Balance at 31 December 2019
+Decreases for the year
+Transferred to subsidiaries (i)
+Transferred from subsidiaries
+Reclassifications
+Transferred from construction in progress
+Additions for the year
+Balance at 1 January 2019
+Cost:
+Total
+RMB million
+Equipment,
+machinery
+and others
+RMB million
+291,544
+3
+291,547
+At 31 December
+2018
+RMB million
+302,048
+34
+302,082
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+14 FIXED ASSETS (Continued)
+The Company (Continued)
+(a) Fixed assets
+RMB million
+Plants and
+buildings
+Oil and gas
+properties
+RMB million
+For the year ended 31 December 2019
+20,189
+55,004
+21
+6,192
+122,041
+160
+Accumulated depreciation:
+Balance at 31 December 2019
+Exchange adjustments
+Decreases for the year
+Reclassifications
+Transferred from construction in progress
+Additions for the year
+Balance at 1 January 2019
+Cost:
+617,812
+617,762
+50
+622,423
+14
+RMB million
+2018
+15,427
+110
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+14 FIXED ASSETS
+31,378
+The Group
+Fixed assets pending for disposal
+Total
+(a) Fixed assets
+At 31 December
+2019
+RMB million
+622,409
+At 31 December
+Fixed assets (a)
+Balance at 31 December 2019
+Plants and
+buildings
+Oil and gas
+properties
+RMB million
+Exchange adjustments
+(246)
+(10,149)
+(46)
+(6)
+(609)
+Decreases for the year
+292
+1,086,435
+87,967
+47,583
+36,289
+4,095
+528,459
+506,771
+51,205
+Reclassifications
+Additions for the year
+Balance at 1 January 2019
+(17,041)
+780
+1,864,268
+695,724
+1,408
+Equipment,
+machinery
+and others
+RMB million
+Total
+RMB million
+1,783,260
+5,424
+91,845
+965,495
+3,856
+RMB million
+54,275
+(993)
+42
+128,493
+(76)
+(1,549)
+667
+727,552
+(975)
+(14,499)
+71
+1,008,223
+1,051
+60,493
+44,915
+(78)
+Balance at 31 December 2019
+Exchange adjustments
+Disposals for the year
+Transferred to subsidiaries
+Dry hole costs written off
+Transferred to fixed assets
+Reclassification to other assets
+Additions for the year
+Balance at 1 January 2019
+Cost:
+15 CONSTRUCTION IN PROGRESS
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+Financial Statements (PRC)
+Financial Statements (PRC)
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019 111
+At 31 December 2019 and 31 December 2018, the Group and the Company had no individually significant fully depreciated fixed assets which
+were still in use.
+At 31 December 2019 and 31 December 2018, the Group and the Company had no individually significant fixed assets which were temporarily
+idle or pending for disposal.
+At 31 December 2019 and 31 December 2018, the Group and the Company had no individually significant fixed assets which were pledged.
+Impairment losses on fixed assets for the year ended 31 December 2019 primarily represent impairment losses recognised in the refining
+segment of RMB 140 million (2018: RMB 353 million), the marketing and distribution segment of RMB 52 million (2018: RMB 254 million), the
+chemicals segment of RMB 4 million (2018: RMB 1,252 million) and the exploration and production ("E&P") segment of RMB 0 million (2018:
+RMB 4,274 million). The primary factor resulting in the E&P segment impairment loss in the prior year was downward revision of oil and gas
+reserve in certain fields. Exploration and production ("E&P") segment determines recoverable amounts of fixed assets relating to oil and gas
+producing activities include significant judgments and assumptions. The recoverable amounts were determined based on the present values of
+the expected future cash flows of the assets using a pre-tax discount rate 10.47% (2018: 10.47%). Further future downward revisions to the
+Group's oil price outlook would lead to further impairments which, in aggregate, are likely to be material. It is estimated that a general decrease
+of 5% in oil price, with all other variables held constant, would result in additional impairment loss in Group's fixed assets relating to oil and
+gas producing activities by approximately RMB 184 million (2018: RMB 312 million). It is estimated that a general increase of 5% in operating
+cost, with all other variables held constant, would result additional impairment loss in Group's fixed assets relating to oil and gas producing
+activities by approximately RMB 180 million (2018: RMB 315 million). It is estimated that a general increase of 5% in discount rate, with all
+other variables held constant, would result additional impairment loss in Group's fixed assets relating to oil and gas producing activities by
+approximately RMB 7 million (2018: less RMB 5 million).
+The additions to oil and gas properties of the Group and the Company for the year ended 31 December 2019 included RMB 1,408 million (2018:
+RMB 1,567 million) (Note 34) and RMB 1,131 million (2018: RMB 1,292 million), respectively of the estimated dismantlement costs for site
+restoration.
+(i) In 2019, the total amount transferred to subsidiaries is RMB 10,838 million, which is mainly caused by Sinopec Wuhan Petrochemical
+Branch transferring its fixed assets related to refining production to its subsidiary Sinopec-SK (Wuhan) Petrochemical Company Limited
+("Sinopec-SK"). The original cost of transferred fixed assets is RMB 9,122 million, the depreciation is RMB 5,537 million, the impairment is
+RMB 22 million, and the total net book value of transferred fixed assets is RMB 3,563 million.
+(194)
+(1,132)
+(129)
+1,795
+37,383
+(1,381)
+20,842
+Provision for impairment losses:
+(1,510)
+Balance at 31 December 2018
+22,973
+23,778
+114,845
+119,067
+153,726
+159,203
+291,544
+302,048
+60,020
+(914)
+Balance at 1 January 2019
+Decreases for the year
+413
+1,844
+16
+413
+60,906
+1,854
+135
+(161)
+175,326
+17
+(1,130)
+(10,086)
+(44,915)
+(91,845)
+(5,432)
+(5,831)
+(903)
+(163)
+(115)
+Exchange adjustments
+Balance at 31 December 2019
+Net book value:
+Balance at 31 December 2019
+Balance at 31 December 2018
+At 31 December 2019, major construction projects of the Group are as follows:
+Additions for the year
+The Group
+RMB million
+RMB million
+138,817
+52,011
+144,369
+61,438
+The Company
+715
+(24)
+174
+112
+Transferred from subsidiaries
+(197)
+(43)
+240
+Reclassifications
+726,780
+51,500
+20,904
+29,069
+1,527
+Additions for the year
+286,038
+417,573
+23,169
+Balance at 1 January 2019
+Accumulated depreciation:
+1,119,554
+(637)
+262
+1,777
+(629)
+(1,458)
+(8,751)
+1,530
+2,039
+(10,838)
+(8)
+(8,341)
+(9,536)
+49,000
+598,304
+472,250
+(1,187)
+240
+1,642
+(325)
+66
+129
+127
+2
+Balance at 31 December 2019
+Net book value:
+Balance at 31 December 2019
+Decreases for the year
+Transferred to subsidiaries (i)
+Transferred from subsidiaries
+Reclassifications
+Additions for the year
+62,293
+22,116
+38,297
+1,880
+Balance at 1 January 2019
+(521)
+(5,270)
+(6,116)
+Decreases for the year
+(491)
+(2)
+Transferred to subsidiaries (i)
+(5,323)
+Balance at 31 December 2019
+24,232
+446,076
+297,682
+767,990
+Provision for impairment losses:
+(5,816)
+Manufacturing of intermediate petrochemical
+products and petroleum products
+3,929
+Other units without individual significant goodwill
+Total
+300
+5,465
+27,304
+2,709
+3,061
+321
+6.9762
+2,236
+3,319
+6.8632
+22,780
+553
+3
+0.8958
+7.8155
+495
+1,645
+0.8762
+1,441
+At 31 December 2019 and 31 December 2018, the Group had no individually significant accounts payable aged over one year.
+25 ACCOUNTS PAYABLE
+At 31 December 2019 and 31 December 2018, the Group had no overdue unpaid bills.
+Bills payable primarily represented bank accepted bills for the purchase of material, goods and products. Bills payable were due within one year.
+24 BILLS PAYABLE
+For the year ended 31 December 2019
+22
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+At 31 December 2019 and 31 December 2018, the Group had no significant overdue short-term loans.
+At 31 December 2019, the Group's interest rates on short-term loans were from interest 0.80% to 6.53% (At 31 December 2018: from interest 0.80%
+to 5.22%) per annum. The majority of the above loans are by credit.
+22
+44,692
+7.8473
+3
+25
+31,196
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+26 CONTRACT LIABILITIES
+300
+3,887
+- US Dollar loans
+Short-term other loans
+- Renminbi loans
+Short-term loans from Sinopec Group Company and
+fellow subsidiaries
+- Renminbi loans
+- US Dollar loans
+- Hong Kong Dollar loans.
+- Euro loans
+Total
+At 31 December 2019
+Original
+At 31 December 2018
+Original
+currency
+Exchange
+million
+rates
+6.8632
+566
+90
+6.9762
+13
+13,201
+22
+25,619
+25,709
+RMB
+million
+rates
+Exchange
+currency
+million
+RMB
+million
+17,088
+Renminbi loans
+As at 31 December 2019, the Group's contract liabilities primarily represent advances from customers. Related performance obligations are satisfied
+and revenue is recognised within one year.
+At 31 December 2019 and 31 December 2018, the Group's employee benefits payable primarily represented wages payable and social insurance
+payables.
+RMB
+million
+Long-term bank loans
+- Renminbi loans
+4
+6.9762
+1,765
+25
+12,039
+5
+6.8632
+35
+- US Dollar loans
+Long-term loans from Sinopec Group Company and
+fellow subsidiaries
+- Renminbi loans
+Long-term loans due within one year
+Debentures payable due within one year
+- Renminbi debentures
+1,015
+17,450
+4,361
+16,435
+At 31 December 2019 and 31 December 2018, the Group had no significant overdue long-term loans.
+69,490
+1,678
+15,198
+Exchange
+rates
+13,000
+39,614
+37,824
+Non-current liabilities due within one year
+Others
+Lease liabilities due within one year
+Debentures payable due within one year
+13,000
+27 EMPLOYEE BENEFITS PAYABLE
+currency
+million
+Exchange
+rates
+28 TAXES PAYABLE
+The Group
+Value-added tax payable
+Consumption tax payable
+Income tax payable
+Mineral resources compensation fee payable
+Other taxes
+Total
+29 OTHER PAYABLES
+At 31 December
+2019
+At 31 December
+2018
+RMB million
+RMB million
+4,932
+52,863
+9,810
+59,944
+At 31 December 2018
+Original
+Original
+currency
+million
+At 31 December 2019
+The Group's non-current liabilities due within one year represent:
+30 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR
+At 31 December 2019 and 31 December 2018, other payables of the Group over one year primarily represented payables for constructions.
+RMB
+million
+87,060
+10,469
+8,144
+138
+136
+6,699
+3,264
+69,339
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Short-term bank loans
+23 SHORT-TERM LOANS
+At 31 December
+2018
+RMB million
+21,694
+5,948
+At 31 December 2019, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB 16,605 million
+(2018: RMB 18,308 million), of which RMB 1,992 million (2018: RMB 2,437 million) was incurred for the year ended 31 December 2019, because
+it was not probable that the related tax benefit will be realised. These deductible losses carried forward of RMB 3,163 million, RMB 3,156 million,
+RMB 5,938 million, RMB 2,356 million and RMB 1,992 million will expire in 2020, 2021, 2022, 2023, 2024 and after, respectively.
+Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax
+assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable
+that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the
+tax losses result from identifiable causes which are unlikely to recur. During the year ended 31 December 2019, write-down of deferred tax assets
+amounted to RMB 189 million (2018: RMB 188 million) (Note 52).
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+115
+Financial Statements (PRC)
+116
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+21 OTHER NON-CURRENT ASSETS
+Other non-current assets mainly represent long-term receivables, prepayments for construction projects and purchases of equipment.
+22 DETAILS OF IMPAIRMENT LOSSES
+1,848
+(41)
+(283)
+1,566
+606
+Included: Accounts receivable
+17,616
+6,809
+Allowance for doubtful accounts
+Written off
+for the year
+RMB million
+1 January Provision for Written back
+2019 the year for the year
+RMB million RMB million RMB million
+Note
+Other
+Balance at
+At 31 December 2019, impairment losses of the Group are analysed as follows:
+Balance at
+increase/ 31 December
+(decrease)
+2019
+RMB million RMB million
+Prepayments
+2019
+RMB million
+Deferred tax assets
+Deferred tax liabilities
+(27)
+(8,666)
+Sinopec Beijing Yanshan Petrochemical Branch
+("Sinopec Yanshan")
+3,594
+3,709
+Other equity instrument investments
+Intangible assets
+131
+117
+(7)
+(1)
+595
+474
+(508)
+(535)
+Others
+318
+174
+Deferred tax assets/(liabilities)
+3,709
+3,709
+At 31 December
+2018
+RMB million
+2019
+RMB million
+7,289
+7,289
+At 31 December
+Deferred tax assets and liabilities after the consolidated elimination adjustments are as follows:
+At 31 December
+Deferred tax liabilities
+The consolidated elimination amount between deferred tax assets and liabilities are as follows:
+(9,657)
+(428)
+(882)
+(14,098)
+25,403
+24,905
+Deferred tax assets
+The Group's short-term loans represent:
+Other receivables
+Long-term equity investments
+196
+(1,692)
+(27)
+77,540
+1,854
+135
+(110)
+(35)
+1,844
+17
+899
+899
+Goodwill
+18
+7,861
+7,861
+Others
+The reasons for recognising impairment losses are set out in the respective notes of respective assets.
+95,826
+(23)
+(7,185)
+(661)
+3,714
+79,063
+99,981
+1
+(81)
+(17)
+1
+102
+Total
+6
+Inventories
+1,710
+(1)
+Fixed assets
+Construction in progress
+Intangible assets
+10
+53
+35
+(5)
+(3)
+-
+80
+11
+1,481
+165
+(167)
+(24)
+1
+1,456
+1,686
+2,582
+12
+(5,233)
+(189)
+1,616
+25
+6,376
+3,384
+1
+(68)
+(455)
+1,766
+2,140
+2345
+117
+8
+Financial Statements (PRC)
+2019
+RMB million
+At 31 December
+2018
+RMB million
+95,558
+25,513
+121,071
+95,558
+25,513
+121,071
+Total
+The Company was established on 25 February 2000 with a registered capital of 68.8 billion domestic state-owned shares with a par value of RMB 1.00
+each. Such shares were issued to Sinopec Group Company in consideration for the assets and liabilities transferred to the Company (Note 1).
+Pursuant to the resolutions passed at an Extraordinary General Meeting held on 25 July 2000 and approvals from relevant government authorities,
+the Company is authorised to increase its share capital to a maximum of 88.3 billion shares with a par value of RMB 1.00 each and offer not more
+than 19.5 billion shares with a par value of RMB 1.00 each to investors outside the PRC. Sinopec Group Company is authorised to offer not more
+than 3.5 billion shares of its shareholdings in the Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors
+outside the PRC would be converted into H shares.
+In October 2000, the Company issued 15,102,439,000 H shares with a par value of RMB 1.00 each, representing 12,521,864,000 H shares and
+25,805,750 American Depositary Shares ("ADSS", each representing 100 H shares), at prices of HKD 1.59 per H share and USD 20.645 per
+ADS, respectively, by way of a global initial public offering to Hong Kong SAR and overseas investors. As part of the global initial public offering,
+1,678,049,000 state-owned ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong
+Kong SAR and overseas investors.
+In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to natural
+persons and institutional investors in the PRC.
+During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a result of exercise of
+188,292 warrants entitled to the Bonds with Warrants.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+119
+Financial Statements (PRC)
+At 31 December
+42,438
+44
+(2,439)
+192,872
+15,198
+177,674
+34 PROVISIONS
+Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has established certain standardised
+measures for the dismantlement of its retired oil and gas properties by making reference to the industry practices and is thereafter constructively
+obligated to take dismantlement measures of its retired oil and gas properties. Movement of provision of the Group's obligations for the
+dismantlement of its retired oil and gas properties is as follows:
+Balance at 1 January 2019
+Provision for the year
+Accretion expenses
+Decrease for the year
+At 31 December
+2019
+Exchange adjustments
+35 OTHER NON-CURRENT LIABILITIES
+Other non-current liabilities primarily represent long-term payables, special payables and deferred income.
+36 SHARE CAPITAL
+The Group
+Registered, issued and fully paid:
+95,557,771,046 listed A shares (2018: 95,557,771,046) of RMB 1.00 each
+25,513,438,600 listed H shares (2018: 25,513,438,600) of RMB 1.00 each
+42,007
+1,408
+1,418
+Balance at 31 December 2019
+RMB million
+At 31 December
+2018
+RMB million
+4,043
+RMB million
+Deferred tax liabilities
+At 31 December
+At 31 December
+RMB million
+2018
+Receivables and inventories
+Payables
+Cash flow hedges
+2019
+Fixed assets
+2,546
+2,563
+1,142
+1,808
+116
+1,131
+(384)
+16,463
+Financial Statements (PRC)
+Tax value of losses carried forward
+2018
+RMB million
+At 31 December
+2018
+RMB million
+At 31 December
+4,043
+2,541
+2,541
+1,004
+1,004
+1,109
+1,088
+8,697
+8,676
+2019
+RMB million
+Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the
+above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial
+budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 11.0% to 11.9% (2018: 11.7% to
+12.3%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss
+was recognised.
+19 LONG-TERM DEFERRED EXPENSES
+Long-term deferred expenses primarily represent catalysts expenditures and improvement expenditures of fixed assets.
+114
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+20 DEFERRED TAX ASSETS AND LIABILITIES
+Deferred tax assets and liabilities before the consolidated elimination adjustments are as follows:
+Deferred tax assets
+Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross
+margin based on the gross margin achieved in the period immediately before the budget period and management's expectation on the future trend
+of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period
+immediately before the budget period.
+At 31 December
+The Group
+RMB million
+At 31 December
+2019
+currency
+million
+RMB million
+million
+rates
+RMB
+Exchange
+Between two and five years
+currency
+million
+Original
+Original
+At 31 December 2018
+At 31 December 2019
+Interest rates ranging from interest
+1.55% to 4.29% per annum at
+31 December 2019 with maturities
+through 2031
+31 December 2019 with maturities
+through 2034
+Interest rates ranging from interest
+1.08% to 5.23% per annum at
+- US Dollar loans
+- Renminbi loans
+Long-term bank loans
+Interest rate and final maturity
+Exchange
+rates
+RMB
+million
+31,714
+31,025
+47,450
+31 December 2019 with maturities
+through 2034
+Less: Current portion
+Long-term loans from Sinopec Group Company and fellow subsidiaries
+Total
+The maturity analysis of the Group's long-term loans is as follows:
+(37,824)
+9,626
+39,625
+Interest rates ranging from interest
+free to 5.50% per annum at
+The Group's long-term loans represent:
+- Renminbi loans
+Long-term bank loans
+Less: Current portion
+109
+6.8632
+Between one and two years
+16
+75
+6.9762
+11
+Long-term loans from Sinopec Group Company and fellow subsidiaries
+31 LONG-TERM LOANS
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+12,123
+22,413
+9,573
+118
+39,625
+61,576
+At 31 December
+2019
+RMB million
+32,157
+(13,000)
+19,157
+11,999
+At 31 December
+2018
+RMB million
+31,951
+(i) These corporate bonds are carried at amortised cost, including USD denominated corporate bonds of RMB 12,157 million, and RMB denominated corporate bonds
+of RMB 20,000 million (2018: USD denominated corporate bonds of RMB 11,951 million, and RMB denominated corporate bonds of RMB 20,000 million). At 31
+December 2019, corporate bonds of RMB 12,157 million (2018: RMB 11,951 million) are guaranteed by Sinopec Group Company.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+33 LEASE LIABILITY
+The Group
+Lease liabilities
+Deduct: Current portion of lease liabilities (Note 30)
+Total
+31,951
+29,999
+(1,790)
+5,089
+After five years
+Total
+Long-term loans are primarily unsecured, and carried at amortised costs.
+32 DEBENTURES PAYABLE
+The Group
+Debentures payable:
+- Corporate Bonds (i)
+Less: Current portion
+Total
+40,004
+Note:
+46,877
+(4,361)
+42,516
+61,576
+At 31 December
+2019
+At 31 December
+2018
+RMB million
+RMB million
+(12,074)
+19,060
+2019
+Financial Statements (PRC)
+(a) The changes of other comprehensive income in consolidated income statement
+During the year ended 31 December 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB 1.00 each, as a result of
+exercise of conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a result of exercise
+of conversion by the holders of the 2011 Convertible Bonds.
+In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus issues of 2 shares
+converted from the retained earnings, and 1 share transferred from capital reserve for every 10 existing shares.
+On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the Placing") with a par value of RMB 1.00 each at the Placing Price
+of HKD 8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD 24,042,227,300.00 and the aggregate net
+proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD 23,970,100,618.00.
+During the year ended 31 December 2012, the Company issued 117,724,450 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2011, the Company issued 34,662 listed A shares with a par value of RMB 1.00 each, as a result of conversion
+by the holders of the 2011 Convertible Bonds.
+The Group (Continued)
+36 SHARE CAPITAL (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+120
+46 OTHER INCOME
+Other income are mainly the government grants related to the business activities.
+47 INVESTMENT INCOME
+Before-tax
+During the year ended 31 December 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+All A shares and H shares rank pari passu in all material aspects.
+Capital management
+Management optimises the structure of the Group's capital, which comprises of equity and debts and bonds. In order to maintain or adjust the
+capital structure of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce
+debt, or adjust the proportion of short-term and long-term loans and bonds. Management monitors capital on the basis of the debt-to-capital ratio,
+which is calculated by dividing long-term loans (excluding current portion) and debentures payable, by the total of equity attributable to shareholders
+of the Company and long-term loans (excluding current portion) and debentures payable, and liability-to-asset ratio, which is calculated by dividing
+total liabilities by total assets. Management's strategy is to make appropriate adjustments according to the Group's operating and investment needs
+and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group at a range considered
+reasonable. As at 31 December 2019, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 7.4% (2018: 11.5%) and 50.0% (2018:
+46.1%), respectively.
+The schedule of the contractual maturities of loans and commitments are disclosed in Notes 31 and 58, respectively.
+The Group
+38 OTHER COMPREHENSIVE INCOME
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Capital reserve represents mainly: (a) the difference between the total amount of the par value of shares issued and the amount of the net assets
+transferred from Sinopec Group Company in connection with the Reorganisation; (b) share premiums derived from issuances of H shares and
+A shares by the Company and excess of cash paid by investors over their proportionate shares in share capital, the proportionate shares of
+unexercised portion of the Bond with Warrants at the expiration date, and the amount transferred from the proportionate liability component and
+the derivative component of the converted portion of the 2011 Convertible Bonds; (c) difference between consideration paid for the combination of
+entities under common control and the transactions with minority interests over the carrying amount of the net assets acquired.
+122,127
+Cash flow hedges:
+Balance at 31 December 2019
+RMB million
+Others
+Transaction with minority interests
+Balance at 1 January 2019
+The movements in capital reserve of the Group are as follows:
+37 CAPITAL RESERVE
+There were no changes in the management's approach to capital management of the Group during the year. Neither the Company nor any of its
+subsidiaries is subject to externally imposed capital requirements.
+119,192
+2,933
+2
+amount
+(53)
+Net-of-tax
+(12)
+(41)
+Changes in fair value of other equity instrument investments
+Subtotal
+(9,741)
+2,029
+(11,770)
+Subtotal
+(600)
+(53)
+130
+(Less)/Add: Reclassification adjustments for amounts transferred to the
+consolidated income statement
+(10,341)
+2,159
+(12,500)
+recognised during the year
+Effective portion of changes in fair value of hedging instruments
+Cash flow hedges:
+amount
+RMB million
+(730)
+RMB million
+(41)
+The Group
+2019
+2,028
+(8,652)
+Other comprehensive income
+3,399
+3,399
+Subtotal
+3,399
+3,399
+(12)
+Foreign currency translation differences
+11
+(229)
+11
+EE
+(240)
+Subtotal
+(240)
+Other comprehensive income that can be converted into profit or loss under
+the equity method
+(229)
+RMB million
+Net-of-tax
+Tax
+effect
+(39)
+Changes in fair value of other equity instrument investments
+Subtotal
+4,941
+(1,170)
+6,111
+Subtotal
+(657)
+196
+8
+(853)
+4,284
+(974)
+5,258
+recognised during the year
+Effective portion of changes in fair value of hedging instruments
+amount
+RMB million
+RMB million
+RMB million
+Less: Reclassification adjustments for amounts transferred to the consolidated
+income statement
+(31)
+(39)
+8
+Before-tax
+amount
+2018
+5,580
+(1,162)
+6,742
+1,480
+1,480
+1,480
+1,480
+Foreign currency translation differences
+(810)
+(810)
+Other comprehensive income
+Subtotal
+Subtotal
+(810)
+(810)
+Other comprehensive income that can be converted into profit or loss under
+the equity method
+(31)
+Tax
+effect
+RMB million
+Fines, penalties and compensation
+Donations
+The Company
+2019
+RMB million
+52 INCOME TAX EXPENSE
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+126
+Financial Statements (PRC)
+125
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+3,042
+2,607
+180
+2,586
+2,225
+209
+276
+173
+2018
+RMB million
+RMB million
+2019
+2,070
+2,598
+788
+1,282
+1,714
+884
+RMB million
+RMB million
+2018
+2019
+11,605
+1,789
+The Group
+1
+2019
+RMB million
+(4,458)
+Tax effect of non-taxable income
+1,989
+2,278
+Tax effect of non-deductible expenses
+25,126
+22,504
+Expected income tax expense at a tax rate of 25%
+100,502
+90,016
+Profit before taxation
+RMB million
+RMB million
+2018
+2019
+Reconciliation between actual income tax expense and accounting profit at applicable tax rates is as follows:
+20,213
+17,894
+Total
+(719)
+(467)
+Under-provision for income tax in respect of preceding year
+(6,244)
+3,385
+27,176
+14,976
+Deferred taxation
+Provision for income tax for the year
+RMB million
+2018
+28
+135
+6,149
+Others
+RMB million
+Net fair value (losses)/gains on financial assets and financial liabilities at fair value through profit or loss
+Unrealised losses from ineffective portion cash flow hedges, net
+The Group
+48 (LOSSES)/GAINS FROM CHANGES IN FAIR VALUE
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+124
+28,336
+742
+414
+28,062
+7
+692
+142
+1
+(1,940)
+(1,604)
+86
+11,428
+54
+12,628
+Total
+(1,467)
+587
+Gain/(loss) from ineffective portion of cash flow hedges
+Others
+14
+25,390
+4,259
+(2,768)
+(1,543)
+53
+515
+25,416
+3,579
+13,974
+397
+12,777
+185
+492
+Income from investment of subsidiaries accounted for under cost method
+Income from investment accounted for under equity method
+Investment income/(loss) from disposal of long-term equity investments
+Dividend income from holding of other equity instrument investments
+Investment (loss)/income from holding/disposal of financial assets and
+liabilities and derivative financial instruments at fair value
+through profit or loss
+2018
+RMB million
+Total
+49 IMPAIRMENT LOSSES
+The Group
+Prepayments
+196
+5,421
+7
+1,427
+2018
+RMB million
+RMB million
+30
+2019
+2,656
+(3,511)
+22
+(374)
+(809)
+3,008
+(2,702)
+RMB million
+2018
+RMB million
+2018
+Total
+Others
+(6,624)
+The Group
+51 NON-OPERATING EXPENSES
+Government grants
+Others
+Total
+The Group
+50 NON-OPERATING INCOME
+Total
+Others
+Construction in progress
+Fixed assets
+Long-term equity investment
+Inventories
+2019
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Statutory
+surplus reserve
+RMB million
+Financial Statements (PRC)
+Gasoline
+Diesel
+Crude oil
+Basic chemical feedstock
+The research and development expenditures are mainly used for the replacement of resources in upstream, optimising structure and operation
+upgrades in refining sector, structured adjustment of materials and products in chemical segment.
+2,552,498
+2,634,385
+61,083
+52,674
+10,744
+10,510
+109,967
+108,812
+44 RESEARCH AND DEVELOPMENT EXPENSES
+Total
+Exploration expenses (including dry holes)
+Other expenses
+Depreciation, depletion and amortisation
+Personnel expenses
+(5,019)
+Purchased crude oil, products and operating supplies and expenses
+77,721
+RMB million
+2,292,983
+2018
+2,380,907
+81,482
+2019
+RMB million
+The operating costs, selling and distribution expenses, general and administrative expenses, research and development expenses and exploration
+expenses (including dry holes) in consolidated income statement classified by nature are as follows:
+43 CLASSIFICATION OF EXPENSES BY NATURE
+The interest rates per annum at which borrowing costs were capitalised during the year ended 31 December 2019 by the Group ranged from 2.92%
+to 4.66% (2018: 2.37% to 4.66%).
+(1,001)
+Income from principal operations
+9,967
+1,063
+2,891,179
+64,503
+812,355
+The income from principal operations mainly represents revenue from the sales of refined petroleum products, chemical products, crude oil and
+natural gas. The income from other operations mainly represents revenue from sale of materials, service, rental income and others. Operating costs
+primarily represent the products cost related to the principal operations. The Group's segmental information is set out in Note 60.
+The detailed information about the Group's operating income is as follows:
+2019
+RMB million
+2018
+RMB million
+2,900,488
+2,825,613
+699,202
+711,236
+615,342
+594,008
+553,848
+519,910
+214,911
+250,884
+191,636
+168,823
+124,271
+124,618
+80,100
+77,572
+53,839
+43,205
+367,339
+335,357
+65,705
+65,566
+64,489
+1,216
+2,966,193
+Total
+(596)
+Kerosene
+5,723
+242,535
+6,021
+5,883
+13,187
+12,011
+18,237
+16,247
+201,901
+202,671
+Others
+Total
+Education surcharge
+Resources tax
+City construction tax
+Consumption tax
+RMB million
+RMB million
+2018
+2019
+The Group
+41 TAXES AND SURCHARGES
+(i) Others are primarily liquefied petroleum gas and other refinery and chemical by-products and joint products.
+Note:
+Total
+Rental income
+Sale of materials and others
+Income from other operations
+Others (i)
+Natural gas
+Synthetic fiber monomers and polymers
+Synthetic resin
+7,152
+246,498
+The applicable tax rate of the taxes and surcharges are set out in Note 4.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+170
+Net foreign exchange loss/(gain)
+(7,726)
+(7,206)
+1,438
+1,418
+5,883
+15,585
+9,646
+493
+1,015
+6,376
+6,954
+Interest income
+1,058,493
+Accretion expenses (Note 34)
+Add: Interest expense on lease liabilities
+Less: Capitalised interest expenses
+Interest expenses incurred
+RMB million
+2018
+RMB million
+2019
+The Group
+42 FINANCIAL EXPENSES
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+123
+Net interest expenses
+121
+36,298
+1,022,195
+RMB million
+RMB million
+RMB million
+(3,481)
+57
+(57)
+(510)
+(479)
+(4,413)
+(2,783)
+(7,196)
+45
+(12)
+(12)
+(3,481)
+45
+(510)
+(479)
+(4,425)
+(2,783)
+(7,208)
+(183)
+(41)
+(4,407)
+2,282
+(2,349)
+994
+(1,355)
+(3,664)
+4
+RMB million
+(4,917)
+income
+Subtotal
+Financial Statements (PRC)
+122
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+38 OTHER COMPREHENSIVE INCOME (Continued)
+The Group (Continued)
+(b) The change of each item in other comprehensive income
+Equity Attributable to shareholders of the company
+31 December 2017
+Change in accounting policy
+1 January 2018
+Changes in 2018
+31 December 2018
+1 January 2019
+Changes in 2019
+31 December 2019
+Other
+comprehensive
+income that can
+be converted
+into profit or
+loss under the
+equity method
+RMB million
+Changes in
+fair value of
+available-for-sale
+financial assets
+Changes in
+fair value of
+other equity
+Foreign
+currency
+RMB million
+instrument
+investments
+RMB million
+Cash flow
+hedges
+RMB million
+translation
+Minority
+Total other
+comprehensive
+differences
+interests
+1,803
+(6,774)
+(1,789)
+207,423
+(a) 10% of the net profit is transferred to the statutory surplus reserve. In the event that the reserve balance reaches 50% of the registered capital,
+no transfer is needed;
+(b) After the transfer to the statutory surplus reserve, a transfer to discretionary surplus reserve can be made upon the passing of a resolution at the
+shareholders' meeting.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+40 OPERATING INCOME AND OPERATING COSTS
+Income from principal operations
+Income from other operations
+Total
+Operating costs
+The Group
+2019
+RMB million
+2018
+RMB million
+2,900,488
+2,825,613
+65,705
+65,566
+2,966,193
+2,488,852
+2,891,179
+2,401,012
+The Company
+2019
+RMB million
+984,185
+37,087
+2018
+RMB million
+RMB million
+203,678
+3,745
+Total
+The PRC Company Law and Articles of Association of the Company have set out the following profit appropriation plans:
+117,000
+(8,563)
+(3,664)
+4
+(4,917)
+1,803
+(6,774)
+(1,789)
+(8,563)
+(424)
+(4,088)
+(20)
+5,954
+943
+6,453
+220
+1,021,272
+799,566
+6,673
+1,037
+2,746
+(321)
+(1,569)
+(1,890)
+As at 31 December 2019, cash flow hedge reserve amounted to a gain of RMB 1,102 million (31 December 2018: a loss of RMB 4,932 million),
+of which a gain of RMB 1,037 million was attribute to shareholders of the Company (31 December 2018: a loss of RMB 4,917 million).
+39 SURPLUS RESERVES
+Movements in surplus reserves are as follows:
+The Group
+Discretionary
+surplus reserves
+RMB million
+117,000
+Balance at 1 January 2019
+Appropriation
+86,678
+3,745
+Balance at 31 December 2019
+90,423
+(16)
+Tax effect of preferential tax rate (i)
+Included in the transactions disclosed above, for the year ended 31 December 2019 are: a) purchases by the Group from Sinopec Group
+Company and fellow subsidiaries amounting to RMB 159,086 million (2018: RMB 140,427 million) comprising purchases of products and
+services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB 142,433
+million (2018: RMB 123,772 million), ancillary and social services provided by Sinopec Group Company and fellow subsidiaries of RMB 3,097
+million (2018: RMB 6,664 million), lease charges for land, buildings and others paid by the Group of RMB 11,330 million, RMB 509 million and
+RMB 383 million (2018: RMB 7,636 million, RMB 643 million and RMB 602 million), respectively and interest expenses of RMB 1,334 million
+(2018: RMB 1,110 million); and b) sales by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB 74,453 million
+(2018: RMB 59,472 million), comprising RMB 73,365 million (2018: RMB 58,606 million) for sales of goods, RMB 1,066 million (2018: RMB
+848 million) for interest income and RMB 22 million (2018: RMB 18 million) for agency commission income.
+(1,259)
+Pipeline Ltd
+Sinopec Finance
+SIBUR
+Zhongtian Synergetic Energy
+CIR
+Joint ventures of the Group:
+FREP
+BASF-YPC
+Taihu
+YASREF
+Sinopec SABIC Tianjin
+Note: Sinopec Finance is under common control of a parent company with the Company and is also the associate of the Group.
+128
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
+(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were
+carried out in the ordinary course of business, are as follows:
+Note
+The Group
+2019
+RMB million
+2018
+RMB million
+Sales of goods
+Purchases
+Transportation and storage
+Exploration and development services
+Production related services
+Ancillary and social services
+Associates of the Group:
+Operating lease charges for land
+Sinopec Century Bright Capital Investment Limited
+Sinopec Petroleum Storage and Reserve Limited
+Sinopec Assets Management Corporation
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
+(1) Related parties having the ability to exercise control over the Group
+The name of the company
+:
+China Petrochemical Corporation
+Unified social credit identifier
+:
+9111000010169286X1
+Registered address
+Principal activities
+:
+Relationship with the Group
+Types of legal entity
+Authorised representative
+Registered capital
+No. 22, Chaoyangmen North Street, Chaoyang District, Beijing
+Exploration, production, storage and transportation (including pipeline transportation), sales and
+utilisation of crude oil and natural gas; refining; wholesale and retail of gasoline, kerosene and diesel;
+production, sales, storage and transportation of petrochemical and other chemical products; industrial
+investment and investment management; exploration, construction, installation and maintenance of
+petroleum and petrochemical constructions and equipments; manufacturing electrical equipment;
+research, development, application and consulting services of information technology and alternative
+energy products; import & export of goods and technology.
+Ultimate holding company
+State-owned
+Zhang Yuzhuo
+: RMB 326,547 million
+Sinopec Group Company is an enterprise controlled by the PRC government. Sinopec Group Company directly and indirectly holds 68.77%
+shareholding of the Company.
+(2) Related parties not having the ability to exercise control over the Group
+Related parties under common control of a parent company with the Company:
+Sinopec Finance (Note)
+Sinopec Shengli Petroleum Administration Bureau
+Sinopec Zhongyuan Petroleum Exploration Bureau
+Sinopec Engineering Incorporation
+Operating lease charges for buildings
+Other operating lease charges
+Agency commission income
+Net deposits withdrawn from related parties
+Net funds obtained from related parties
+(x)
+1,334
+1,110
+(ix)
+(xi)
+5,350
+6,457
+3,438
+31,684
+The amounts set out in the table above in respect of the year ended 31 December 2019 and 2018 represent the relevant costs and income as
+determined by the corresponding contracts with the related parties.
+For the year ended 31 December 2019, no individually significant right-of-use assets were leased from Sinopec Group Company and fellow
+subsidiaries, associates and joint ventures by the Group. The interest expense recognised for the year ended 31 December 2019 on lease
+liabilities in respect of amounts due to Sinopec Group Company and fellow subsidiaries, associates and joint ventures was RMB 8,518 million.
+For the year ended 31 December 2019, the amount of rental the Group paid to Sinopec Group Company and fellow subsidiaries, associates and
+joint ventures for land, buildings and others are RMB 11,333 million, RMB 518 million and RMB 468 million (2018: RMB 7,636 million, RMB
+653 million and RMB 836 million).
+As at 31 December 2019 and 31 December 2018, there was no guarantee given to banks by the Group in respect of banking facilities to Sinopec
+Group Company and fellow subsidiaries, associates and joint ventures, except for the disclosure set out in Note 59(b). Guarantees given to banks
+by the Group in respect of banking facilities to associates and joint ventures are disclosed in Note 59(b).
+Notes:
+(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
+(ii) Purchases represent the purchase of materials and utility supplies directly related to the Group's operations such as the procurement of raw and ancillary
+materials and related services, supply of water, electricity and gas.
+(iii) Transportation and storage represent the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.
+(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well
+measurement services.
+(v) Production related services represent ancillary services rendered in relation to the Group's operations such as equipment repair and general maintenance,
+insurance premium, technical research, communications, firefighting, security, product quality testing and analysis, information technology, design and engineering,
+construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management and
+environmental protection, and management services.
+(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation,
+accommodation, canteens and property maintenance.
+(vii) Operating lease charges represent the rental incurred for operating leases in respect of land, buildings and equipment leased from Sinopec Group Company and
+fellow subsidiaries, associates and joint ventures. No lease charges have incurred in the current year because of the adoption of the new lease standard.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+129
+Financial Statements (PRC)
+(2,003)
+45 EXPLORATION EXPENSES
+Interest expense
+848
+1,066
+(ix)
+Interest income
+(i)
+295,532
+272,789
+(ii)
+197,308
+192,224
+(iii)
+8,206
+7,319
+(iv)
+33,310
+23,489
+Financial Statements (PRC)
+(v)
+28,472
+(vi)
+3,098
+6,664
+(vii)
+7,765
+(vii)
+521
+(vii)
+869
+(viii)
+116
+113
+38,668
+Financial Statements (PRC)
+Exploration expenses include geological and geophysical expenses and written-off of unsuccessful dry hole costs.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Net profit
+Add: Impairment losses on assets
+Credit impairment losses
+Depreciation of right-of-use assets
+Depreciation of fixed assets
+Amortisation of intangible assets and long-term deferred expenses
+Dry hole costs written off
+Net loss on disposal of non-current assets
+Fair value loss/(gain)
+Financial expenses
+Investment income
+Decrease/(increase) in deferred tax assets
+Increase/(decrease) in deferred tax liabilities
+Increase in inventories
+Safety fund reserve
+Increase in operating receivables
+Decrease in operating payables
+Net cash flow from operating activities
+(b) Net change in cash:
+Cash balance at the end of the year
+Less: Cash at the beginning of the year
+Net decrease of cash
+(c) The analysis of cash held by the Group is as follows:
+Cash at bank and on hand
+- Cash on hand
+- Demand deposits
+Cash at the end of the year
+(a) Reconciliation of net profit to cash flows from operating activities:
+(d) Other cash paid relating to financing activities:
+The Group
+For the year ended 31 December 2019
+127
+Effect of income taxes at foreign operations
+(312)
+77
+Tax effect of utilisation of previously unrecognised tax losses and temporary differences
+Tax effect of tax losses not recognised
+(335)
+(779)
+498
+609
+Write-down of deferred tax assets
+189
+188
+Adjustment for under provision for income tax in respect of preceding years
+Actual income tax expense
+(467)
+(719)
+17,894
+20,213
+Note:
+(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the
+relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of
+15% through the year 2020.
+53 DIVIDENDS
+(a) Dividends of ordinary shares declared after the balance sheet date
+Pursuant to a resolution passed at the director's meeting on 27 March 2020, final dividends in respect of the year ended 31 December 2019
+of RMB 0.19 (2018: RMB 0.26) per share totaling RMB 23,004 million (2018: RMB 31,479 million) were proposed for shareholders' approval
+at the Annual General Meeting. Final cash dividend proposed after the balance sheet date has not been recognised as a liability at the balance
+sheet date.
+(b) Dividends of ordinary shares declared during the year
+Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 23 August 2019, the directors authorized
+to declare the interim dividends for the year ending 31 December 2019 of RMB 0.12 (2018: RMB 0.16) per share totaling RMB 14,529 million
+(2018: RMB 19,371 million).
+Pursuant to the shareholders' approval at the Annual General Meeting on 9 May 2019, a final dividend of RMB 0.26 per share totaling RMB
+31,479 million according to total shares on 10 June 2019 was approved. All dividends have been paid in the year ended 31 December 2019.
+Pursuant to the shareholders' approval at the Annual General Meeting on 15 May 2018, a final dividend of RMB 0.40 per share totaling RMB
+48,428 million according to total shares on 4 June 2018 was approved. All dividends have been paid in the year ended 31 December 2018.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+54 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT
+Repayments of lease liabilities
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Total
+(11,802)
+(1,043)
+(21,918)
+(10,448)
+153,420
+175,868
+2019
+2018
+RMB million
+60,313
+RMB million
+111,922
+(51,609)
+113,218
+(1,296)
+2019
+RMB million
+2018
+RMB million
+14
+60,299
+60,313
+82
+111,840
+111,922
+2019
+RMB million
+16,859
+2018
+RMB million
+Others
+436
+436
+328
+17,187
+909
+69
+111,922
+(9,285)
+2018
+2019
+RMB million
+72,122
+RMB million
+(3,312)
+80,289
+1,789
+11,605
+1,264
+141
+87,612
+99,462
+8,954
+10,505
+5,831
+12,246
+6,921
+(1,165)
+261
+(5,079)
+(11,428)
+(12,628)
+(359)
+3,124
+(2,656)
+1,918
+1,526
+3,511
+10,352
+Deferred tax liabilities
+734,649
+878,166
+Total liabilities
+7,627
+4,330
+27,276
+6,809
+15,364
+Other non-current liabilities
+5,948
+Financial Statements (PRC)
+Other unallocated liabilities
+139
+At 31 December
+989,668
+50,892
+1,040,560
+RMB million
+31,951
+2,131,078
+505,672
+2,119,580
+329,443
+2,966,193
+2019
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+RMB million
+52,705
+1,288,381
+395,129
+376,470
+2,891,179
+At 31 December
+2018
+RMB million
+1,235,676
+19,157
+18,482
+61,576
+103,709
+120,617
+93,874
+162,262
+1,592,308
+1,755,071
+219,381
+37,531
+17,616
+145,721
+152,204
+167,015
+127,927
+2018
+21,694
+Debentures payable
+159,028
+37,380
+39,625
+Long-term loans
+17,450
+69,490
+Non-current liabilities due within one year
+44,692
+53,515
+31,196
+538,129
+692,195
+Total segment liabilities
+144,138
+136,420
+Corporate and others
+Short-term loans
+2019
+RMB million
+Depreciation, depletion and amortisation
+Non-current assets
+Mainland China
+Exploration and production
+Refining
+Marketing and distribution
+Chemicals
+Corporate and others
+(2) Geographical information
+Impairment losses on long-lived assets
+2019
+RMB million
+RMB million
+61,739
+42,155
+31,372
+27,908
+2018
+29,566
+Corporate and others
+Marketing and distribution
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+60 SEGMENT REPORTING (Continued)
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+Capital expenditure
+Chemicals
+Exploration and production
+Marketing and distribution
+Chemicals
+Corporate and others
+1,220,347
+Exploration and production
+Refining
+Refining
+Others
+21,429
+19,578
+245
+353
+80
+264
+17
+1,374
+4,274
+16
+6,281
+The following tables set out information about the geographical information of the Group's external sales and the Group's non-current assets,
+excluding financial assets and deferred tax assets. In presenting information on the basis of geographical segments, segment revenue is based
+on the geographical location of customers, and segment assets are based on the geographical location of the assets.
+External sales
+Mainland China
+Singapore
+Others
+345
+22,438
+3
+108,812
+1,979
+6,906
+147,094
+117,976
+50,732
+60,331
+109,967
+19,676
+21,572
+16,296
+13,966
+13,379
+2,866
+1,797
+18,164
+1,438,842
+Chemicals
+131,686
+Financial Statements (PRC)
+138
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+60 SEGMENT REPORTING (Continued)
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+Operating profit/(loss)
+By segment
+Exploration and production
+Refining
+Marketing and distribution
+Chemicals
+Corporate and others
+Elimination
+Total segment operating profit
+Investment income
+Assets
+Less: Non-operating expenses
+Profit before taxation
+Add: Non-operating income
+Operating profit
+Asset disposal losses
+(Losses)/gains from changes in fair value
+137
+Add: Other income
+Total segment investment income
+Corporate and others
+Chemicals
+Marketing and distribution
+Refining
+Exploration and production
+Less: Financial expenses
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+2,891,179
+2,966,193
+654,337
+716,789
+828,635
+531,241
+480,373
+73,835
+650,271
+54,865
+425,508
+5,224
+1,414,213
+4,159
+1,397,716
+1,408,989
+1,393,557
+1,258,018
+457,406
+Segment assets
+1,482,972
+(1,879,694)
+65,566
+65,705
+1,523
+1,850
+15,492
+14,861
+1,367,060
+32,424
+5,389
+5,464
+10,738
+10,283
+2,900,488
+(1,934,372)
+33,247
+Exploration and production
+Refining
+Marketing and distribution
+Chemicals
+Corporate and others
+101,474
+90,025
+(742)
+(1,318)
+2,656
+(3,511)
+2,598
+6,694
+(1,001)
+9,967
+11,428
+12,628
+(1,177)
+1,383
+5,973
+6,905
+2,070
+3,042
+156,865
+175,884
+317,641
+399,242
+271,356
+321,080
+2,607
+321,686
+2018
+RMB million
+At 31 December
+100,502
+RMB million
+At 31 December
+2019
+90,016
+410,950
+152,799
+5,178
+3,499
+RMB million
+RMB million
+2018
+2019
+Marketing and distribution
+Exploration and production
+Refining
+6,289
+Segment liabilities
+Total assets
+Other unallocated assets
+Deferred tax assets
+Long-term equity investments
+Cash at bank and on hand
+Total segment assets
+Liabilities
+2,676
+(11,557)
+53,703
+429
+(580)
+2,595
+3,148
+80,437
+86,220
+30,074
+(3,634)
+(8,151)
+3,530
+25,970
+16,586
+24,106
+29,781
+(40)
+2,825,613
+Elimination of inter-segment sales
+1,109,088
+RMB 22,795
+RMB 22,761
+74
+100.00
+RMB 1,165
+RMB 1,000
+Marketing and distribution of petrochemical products
+Coal chemical industry investment management, production
+and sale of coal chemical products
+100.00
+100.00
+USD 1,662
+Investment holding of overseas business
+and natural gas
+8,669
+100.00
+RMB 8,000
+RMB 8,000
+USD 1,662
+(88)
+Import and processing of crude oil, production, storage and
+sale of petroleum products and petrochemical products
+Manufacturing of intermediate petrochemical products and
+petroleum products
+RMB 5,294
+4,479
+75.00
+RMB 7,205
+RMB 9,628
+Manufacturing of intermediate petrochemical products and
+petroleum products
+4,863
+59.00
+RMB 7,193
+RMB 7,193
+Production, sale, research and development of ethylene and
+downstream byproducts
+1,543
+85.00
+RMB 4,250
+RMB 5,000
+133
+98.98
+RMB 5,240
+Investment in exploration, production and sale of petroleum
+products and petroleum products
+5,927
+50.00
+100.00
+RMB 3,374
+RMB 3,374
+Production and sale of refined petroleum products, lubricant
+base oil, and petrochemical materials
+Production and sale of polyester chips and polyester fibres
+100.00
+RMB 12,000
+RMB 12,000
+Pipeline storage and transportation of crude oil
+100.00
+RMB 15,651
+RMB 15,651
+Manufacturing of intermediate petrochemical products and
+petroleum products
+298
+100.00
+RMB 2,424
+RMB 1,500
+Production and sale of catalyst products
+70
+Sinopec Qingdao Petrochemical Company Limited
+RMB 4,000
+100.00
+RMB 4,646
+RMB 8,140
+Manufacturing of plastics, intermediate petrochemical
+14,942
+50.44
+RMB 5,820
+RMB 10,824
+Manufacturing of synthetic fibres, resin and plastics,
+intermediate petrochemical products and petroleum
+products
+4,359
+60.33
+HKD 3,952
+HKD 248
+70,528
+70.42
+RMB 20,000
+RMB 28,403
+Marketing and distribution of refined petroleum products
+Provision of crude oil jetty services and natural gas pipeline
+transmission services
+RMB 6,713
+Manufacturing of intermediate petrochemical products and
+petroleum products
+RMB 1,595
+RMB 7,233
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+2019
+2018
+2019
+2018
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2019
+2018
+2019
+2018
+2019
+2018
+2019
+RMB million
+At
+RMB million
+RMB million
+11,858
+1,209
+1,284
+816
+1,788
+25,299
+22,309
+16,731
+19,151
+130,861
+129,266
+Current assets
+RMB million
+RMB million
+2018
+2019
+2018
+RMB million
+RMB million
+4,593
+Sinopec-SK
+At
+Shanghai SECCO
+At
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+(i) The Group consolidated the financial statements of the entity because it is exposed to, or has rights to, variable returns from its involvement with the entity and has
+the ability to affect those return through its power over the entity.
+Note:
+The minority interests of subsidiaries which the Group holds 100% of equity interests at the end of the year are the minority interests of their subsidiaries.
+Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and Hong Kong SAR, respectively, all of the above principal subsidiaries
+are incorporated and operate their businesses principally in the PRC.
+5.997
+67.60
+RMB 7,801
+RMB 7,801
+Production and sale of petrochemical products
+(d) Subsidiaries acquired through business combination not under common control:
+Shanghai SECCO
+8,006
+55.00
+RMB 4,804
+RMB 10,000
+Manufacturing of intermediate petrochemical products and
+petroleum products
+Gaoqiao Petrochemical Company Limited
+100.00
+133
+At
+Financial Statements (PRC)
+Financial Statements (PRC)
+At
+Sinopec Kantons
+At
+At
+Fujian Petrochemical
+At
+At
+Shanghai Petrochemical
+At
+At
+SIPL
+At
+At
+At
+Marketing Company
+Summarised consolidated balance sheet
+Set out below are the summarised financial information which the amount before inter-company eliminations for each subsidiary whose minority
+interests that are material to the Group.
+Summarised financial information on subsidiaries with material minority interests
+57 PRINCIPAL SUBSIDIARIES (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+134
+100.00
+RMB 6,585
+RMB 5,000
+7,470
+12,916
+11
+52
+74
+41,057
+35,707
+RMB million
+Long-term loans (including current portion) (Note)
+Short-term loans
+Other non-current liabilities
+Other payables
+Contract liabilities.
+Accounts payable
+Bills payable
+Other non-current assets
+Prepayments and other current assets
+-
+Other receivables
+806
+407
+11,424
+1,285
+3,248
+4,413
+15,520
+21,384
+1,991
+3,801
+6352
+64
+51
+94
+16
+17
+23,482
+734
+-
+731
+6,901
+33
+16,077
+Receivables financing
+Bills receivable
+.
+where there is no government-prescribed price, the government-guidance price;
+•
+the government-prescribed price;
+•
+(a) The Company has entered into a non-exclusive "Agreement for Mutual Provision of Products and Ancillary Services" ("Mutual Provision
+Agreement") with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the
+Group with certain ancillary production services, construction services, information advisory services, supply services and other services and
+products. While each of Sinopec Group Company and the Company is permitted to terminate the Mutual Provision Agreement upon at least
+six months' notice, Sinopec Group Company has agreed not to terminate the agreement if the Group is unable to obtain comparable services
+from a third party. The pricing policy for these services and products provided by Sinopec Group Company to the Group is as follows:
+In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec
+Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell
+certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2019.
+The terms of these agreements are summarised as follows:
+(xi) The Group obtained loans, discounted bills and others from Sinopec Group Company and fellow subsidiaries.
+(x) Interest expense represents interest charges on the loans obtained from Sinopec Group Company and fellow subsidiaries.
+(ix) Interest income represents interest received from deposits placed with Sinopec Finance and Sinopec Century Bright Capital Investment Limited, finance companies
+controlled by Sinopec Group Company. The applicable interest rate is determined in accordance with the prevailing saving deposit rate.
+(viii) Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities
+owned by Sinopec Group Company.
+Notes (Continued):
+(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were
+carried out in the ordinary course of business, are as follows (Continued):
+55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+Financial Statements (PRC)
+130
+where there is neither a government-prescribed price nor a government-guidance price, the market price; or
+1,218,692
+where none of the above is applicable, the price to be agreed between the parties, which shall be based on a reasonable cost incurred in
+providing such services plus a profit margin not exceeding 6%.
+(c) The Company has entered into a number of lease agreements with Sinopec Group Company to lease certain lands and buildings effective
+on 1 January 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively. The Company and Sinopec Group
+Company can renegotiate the rental amount every three years for land. The Company and Sinopec Group Company can renegotiate the rental
+amount for buildings every year. However such amount cannot exceed the market price as determined by an independent third party.
+Cash at bank and on hand
+At 31 December At 31 December
+2019
+2018
+RMB million
+Other related companies
+At 31 December
+2018
+RMB million
+RMB million
+2019
+At 31 December
+The ultimate holding company
+The balances with Sinopec Group Company and fellow subsidiaries, associates and joint ventures at 31 December 2019 and 31 December 2018
+are as follows:
+(4) Balances with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
+55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(f) On the basis of a series of continuing connected transaction agreements signed in 2000, the Company and Sinopec Group Company have
+signed the Fifth Supplementary Agreement and the Fourth Revised Memorandum of land use rights leasing contract on 24 August 2018,
+which took effect on 1 January 2019 and made adjustment to "Mutual Supply Agreement”, “Agreement for Provision of Cultural and
+Educational, Health Care and Community Services", "Buildings Leasing Contract", "Intellectual Property Contract" and "Land Use Rights
+Leasing Contract", etc.
+(e) The Company has entered into a service station franchise agreement with Sinopec Group Company effective from 1 January 2000 under
+which its service stations and retail stores would exclusively sell the refined products supplied by the Group.
+(d) The Company has entered into agreements with Sinopec Group Company effective from 1 January 2000 under which the Group has been
+granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group Company.
+(b) The Company has entered into a non-exclusive "Agreement for Provision of Cultural and Educational, Health Care and Community Services"
+with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the Group with certain
+cultural, educational, health care and community services on the same pricing terms and termination conditions as agreed to in the above
+Mutual Provision Agreement.
+9,537
+18,158
+5,465
+Sinopec Overseas Investment Holding Limited ("SOIH")
+Sinopec Chemical Sales Company Limited
+Sinopec Great Wall Energy & Chemical Company
+Limited
+Sinopec International Petroleum Exploration and
+Production Limited ("SIPL")
+(b) Subsidiaries established by the Group:
+Fujian Petrochemical Company Limited
+("Fujian Petrochemical") (i)
+Sinopec Shanghai Petrochemical Company Limited
+("Shanghai Petrochemical")
+Sinopec Marketing Co. Limited ("Marketing Company")
+Sinopec Kantons Holdings Limited
+("Sinopec Kantons")
+Sinopec Yizheng Chemical Fibre Limited Liability
+Company
+Sinopec Lubricant Company Limited
+Sinopec Pipeline Storage & Transportation
+Company Limited
+Sinopec Yangzi Petrochemical Company Limited
+Sinopec Catalyst Company Limited
+(a) Subsidiaries acquired through group restructuring:
+China Petrochemical International Company Limited
+China International United Petroleum and Chemical
+Company Limited
+Full name of enterprise
+Percentage of
+The Company's principal subsidiaries have been consolidated into the Group's financial statements for the year ended 31 December 2019. The
+following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the Group:
+57 PRINCIPAL SUBSIDIARIES
+For the year ended 31 December 2019
+Sinopec Beihai Refining and Chemical Limited
+Liability Company
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Sinopec Qingdao Refining and Chemical
+Company Limited
+Trading of petrochemical products
+Trading of crude oil and petrochemical products
+24
+100.00
+RMB 1,856
+RMB 1,400
+RMB million
+%
+2019
+Interests at
+31 December
+Minority
+equity
+interest/voting
+right held by
+the Group
+2019
+million
+million
+Actual
+investment at
+31 December
+Registered
+capital/
+paid-up capital
+Principal activities
+(c) Subsidiaries acquired through business combination under common control:
+Sinopec Hainan Refining and Chemical Company
+Limited
+Sinopec-SK
+12,470
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+If the costs of inventories become higher than their net realisable values, an allowance for diminution in value of inventories is recognised.
+Net realisable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the
+estimated costs necessary to make the sale. Management bases the estimates on all available information, including the current market prices of
+the finished goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were
+to be higher than estimated, the actual allowance for diminution in value of inventories would be higher than estimated.
+2018
+RMB thousand
+5,745
+RMB thousand
+9,209
+536
+9,745
+2019
+Total
+Retirement scheme contributions
+Short-term employee benefits
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
+Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensations are as follows:
+(5) Key management personnel emoluments
+As at and for the year ended 31 December 2019, and as at and for the year ended 31 December 2018, no individually significant impairment
+losses for bad and doubtful debts were recorded in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates
+and joint ventures.
+Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term
+loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated
+with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 23 and Note 31.
+Note: As at 31 December 2019, the long-term borrowings (including current portion) mainly include an interest-free loan with a maturity period of 20 years amounting
+to RMB 35,560 million from Sinopec Group Company through Sinopec Finance. This borrowing is a special arrangement to reduce financing costs and improve
+liquidity of the Company during its initial global offering in 2000.
+Lease liabilities (including current portion)
+89,147
+82,255
+46,877
+47,450
+27,304
+351
+6,096
+132
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Financial Statements (PRC)
+(e) Allowance for diminution in value of inventories
+The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past events,
+current conditions and forecasts of future economic conditions. The Group regularly monitors and reviews the assumptions used for estimating
+expected credit losses.
+(d) Measurement of expected credit losses
+Fixed assets are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual
+value. Management reviews the estimated useful lives of the assets at least annually in order to determine the amount of depreciation expense
+to be recorded during any reporting period. The useful lives are based on the Group's historical experience with similar assets and taking into
+account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous
+estimates.
+If circumstances indicate that the net book value of a long-lived asset may not be recoverable, the asset may be considered “impaired", and
+an impairment loss may be recognised in accordance with "CASS 8 - Impairment of Assets". The carrying amounts of long-lived assets are
+reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for
+impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a
+decline has occurred, the carrying amount is reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The
+recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows. It is difficult to precisely
+estimate the fair value because quoted market prices for the Group's assets or cash-generating units are not readily available. In determining
+the value of expected future cash flows, expected cash flows generated by the asset or the cash-generating unit are discounted to their present
+value, which requires significant judgement relating to sales volume, selling price, amount of operating costs and discount rate. The Group uses
+all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based
+on reasonable and supportable assumptions and projections of sales volume, selling price, amount of operating costs and discount rate.
+(c) Depreciation
+(b) Impairment for assets
+Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment
+expense and future dismantlement costs. Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based
+on volumes produced and reserves.
+Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration
+the anticipated method of dismantlement required in accordance with industry practices in the similar geographic area, including estimation
+of economic life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are
+capitalised as oil and gas properties with equivalent amounts recognised as provisions for dismantlement costs.
+Engineering estimates of the Group's oil and gas reserves are inherently imprecise and represent only approximate amounts because of the
+subjective judgements involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have
+to be met before estimated oil and gas reserves can be designated as “proved". Proved and proved developed reserves estimates are updated
+at least annually and take into account recent production and technical information about each field. In addition, as prices and cost levels
+change from year to year, the estimate of proved and proved developed reserves also changes. This change is considered a change in estimate
+for accounting purposes and is reflected on a prospective basis in related depreciation rates. Oil and gas reserves have a direct impact on
+the assessment of the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved reserves
+estimates are revised downwards, the Group's earnings could be affected by changes in depreciation expense or an immediate write-down of the
+carrying amount of oil and properties.
+The accounting for the exploration and production segment's oil and gas activities is subject to accounting rules that are unique to the oil and
+gas industry. The Group has used the successful efforts method to account for oil and gas business activities. The successful efforts method
+reflects the volatility that is inherent in exploring for mineral resources in that costs of unsuccessful exploratory efforts are charged to expense.
+These costs primarily include dry hole costs, seismic costs and other exploratory costs.
+(a) Oil and gas properties and reserves
+The selection of critical accounting policies, the judgements and other uncertainties affecting application of those policies and the sensitivity of
+reported results to changes in conditions and assumptions are factors to be considered when reviewing the financial statements. The significant
+accounting policies are set forth in Note 3. The Group believes the following critical accounting policies involve the most significant judgements and
+estimates used in the preparation of the financial statements.
+The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the
+preparation of the financial statements. The Group bases the assumptions and estimates on historical experience and on various other assumptions
+that it believes to be reasonable and which form the basis for making judgements about matters that are not readily apparent from other sources.
+On an on-going basis, management evaluates its estimates. Actual results may differ from those estimates as facts, circumstances and conditions
+change.
+56 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+131
+5,337
+Accounts receivable
+Current liabilities
+At 31 December
+2018
+At 31 December
+2019
+Estimated future annual payments are as follows:
+The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Natural Resources annually
+which are expensed. Expenses recognised were approximately RMB 179 million for the year ended 31 December 2019 (2018: RMB 231 million).
+Exploration licenses for exploration activities are registered with the Ministry of Natural Resources. The maximum term of the Group's exploration
+licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term.
+The Group is obligated to make progressive annual minimum exploration investment relating to the exploration blocks in respect of which the license
+is issued. The Ministry of Natural Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant
+authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum
+term of the production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group's
+production license is renewable upon application by the Group 30 days prior to expiration.
+Exploration and production licenses
+Pursuant to certain of the joint venture agreements entered into by the Group, the Group is obliged to purchase products from the joint ventures
+based on market prices.
+Commitments to joint ventures
+58 COMMITMENTS (Continued)
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(i) The investment commitments of the Group is RMB 6,100 million (2018: RMB 5,553 million).
+Note:
+These capital commitments relate to oil and gas exploration and development, refining and petrochemical production capacity expansion projects,
+the construction of service stations and oil depots and investment commitments.
+195,437
+141,045
+54,392
+RMB million
+138,088
+63,967
+202,055
+RMB million
+Between one and two years
+Between two and three years
+Between three and four years
+Between four and five years
+Thereafter
+Total
+(a) The Company has been advised by its PRC lawyers that, except for liabilities constituting or arising out of or relating to the business assumed
+by the Company in the Reorganisation, no other liabilities were assumed by the Company, and the Company is not jointly and severally liable for
+other debts and obligations incurred by Sinopec Group Company prior to the Reorganisation.
+59 CONTINGENT LIABILITIES
+The implementation of commitments in previous year and the Group's commitments did not have material discrepancy.
+1,400
+1,309
+852
+845
+28
+29
+28
+30
+33
+34
+79
+69
+380
+302
+Within one year
+(b) At 31 December 2019 and 31 December 2018, the guarantees by the Group in respect of facilities granted to the parties below are as follows:
+RMB million
+2019
+RMB million
+40,260
+(used in) operating activities
+Net cash generated from/
+1,191
+822
+22
+104
+14
+159
+00
+600
+50
+650
+1,616
+1,344
+10,926
+3,964
+24.825
+At 31 December
+2018
+2,128
+5,121
+At 31 December
+Total
+Authorised but not contracted for
+Authorised and contracted for (i)
+At 31 December 2019 and 31 December 2018, the capital commitments of the Group are as follows:
+Capital commitments
+58 COMMITMENTS
+3,308
+5.532
+3,766
+4,601
+738
+716
+38
+38
+622
+6.695
+3,467
+4,830
+At 31 December At 31 December
+Associates (i)
+Others (ii)
+Total
+Consolidated income from principal operations
+Inter-segment sales
+External sales
+Corporate and others
+Inter-segment sales
+External sales
+Chemicals
+Inter-segment sales
+External sales
+Marketing and distribution
+Inter-segment sales
+External sales
+Refining
+Inter-segment sales
+External sales
+Exploration and production
+Income from principal operations
+Income from other operations
+Reportable information on the Group's operating segments is as follows:
+Exploration and production
+Marketing and distribution
+1,077,018
+2,750
+148,930
+141,674
+189,453
+200,429
+95,954
+89,315
+93,499
+111,114
+RMB million
+RMB million
+2018
+2019
+Consolidated income from other operations
+Consolidated operating income
+Corporate and others
+Chemicals
+Refining
+Joint ventures
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+For the year ended 31 December 2019
+For the year ended 31 December 2019
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (PRC)
+Financial Statements (PRC)
+135
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+The Group monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss will occur, and recognises
+any such losses under guarantees when those losses are reliably estimable. At 31 December 2019 and 31 December 2018, the Group estimates
+that there is no need to pay for the guarantees. Thus no liabilities have been accrued for a loss related to the Group's obligation under these
+guarantee arrangements.
+(ii) The Group provided a guarantee in respect to the loan of New Bright International Development Limited borrowed from Sinopec Overseas Oil & Gas Limited. As at
+31 December 2019, the loan agreement was terminated, in consequence, the guarantee agreement was terminated.
+(i) The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy by banks amount to RMB 17,050 million. At 31
+December 2019, the amount withdrawn by Zhongtian Synergetic Energy from banks and guaranteed by the Group was RMB 10,140 million (31 December 2018:
+RMB 12,168 million).
+24,398
+17,240
+7,197
+12,168
+5,033
+2018
+RMB million
+2019
+RMB million
+7,100
+10,140
+Notes:
+59 CONTINGENT LIABILITIES (Continued)
+60 SEGMENT REPORTING (Continued)
+Environmental contingencies
+The Group recognised normal routine pollutant discharge fees of approximately RMB 9,235 million in the consolidated financial statements for the
+year ended 31 December 2019 (2018: RMB 7,940 million).
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+136
+Assets and liabilities dedicated to a particular segment's operations are included in that segment's total assets and liabilities. Segment assets
+include all tangible and intangible assets, except for cash at bank and on hand, long-term equity investments, deferred tax assets and other
+unallocated assets. Segment liabilities exclude short-term loans, non-current liabilities due within one year, long-term loans, debentures payable,
+deferred tax liabilities, other non-current liabilities and other unallocated liabilities.
+The Group's chief operating decision maker evaluates the performance and allocates resources to its operating segments on an operating profit
+basis, without considering the effects of finance costs or investment income. Inter-segment transfer pricing is based on the market price or cost
+plus an appropriate margin, as specified by the Group's policy.
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities
+The segments were determined primarily because the Group manages its exploration and production, refining, marketing and distribution,
+chemicals, and corporate and others businesses separately. The reportable segments are each managed separately because they manufacture and/
+or distribute distinct products with different production processes and due to their distinct operating and gross margin characteristics.
+(v) Corporate and others - which largely comprise the trading activities of the import and export companies of the Group and research and
+development undertaken by other subsidiaries.
+(iv) Chemicals which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products to external
+customers.
+(iii) Marketing and distribution - which owns and operates oil depots and service stations in the PRC, and distributes and sells refined petroleum
+products (mainly gasoline and diesel) in the PRC through wholesale and retail sales networks.
+(ii) Refining - which processes and purifies crude oil, which is sourced from the exploration and production segment of the Group and external
+suppliers, and manufactures and sells petroleum products to the chemicals and marketing and distribution segments of the Group and external
+customers.
+(i) Exploration and production - which explores and develops oil fields, produces crude oil and natural gas and sells such products to the refining
+segment of the Group and external customers.
+In a manner consistent with the way in which information is reported internally to the Group's chief operating decision maker for the purposes of
+resource allocation and performance assessment, the Group has identified the following five reportable segments. No operating segments have been
+aggregated to form the following reportable segments.
+Segment information is presented in respect of the Group's operating segments. The format is based on the Group's management and internal
+reporting structure.
+60 SEGMENT REPORTING
+The Group is a defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course of business.
+Management has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other proceedings and believes that any
+resulting liabilities will not have a material adverse effect on the financial position, operating results or cash flows of the Group.
+Legal contingencies
+Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial
+position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement
+of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable
+uncertainties which affect the Group's ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and
+extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development areas,
+whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of alternative remediation strategies, (iv) changes
+in environmental remediation requirements, and (v) the identification of new remediation sites. The amount of such future cost is indeterminable
+due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be
+required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot reasonably be estimated at
+present, and could be material.
+minority interests
+(16,952)
+658
+281,624 258,976
+(liabilities)
+Net non-current assets/
+(7)
+(1,698)
+(1,627)
+(132)
+(158)
+(688)
+(688)
+(140)
+(141)
+(31,050)
+(58,732) (2,086)
+Non-current liabilities
+12,612
+21,567
+(3,718)
+12,301
+6,970
+19,101
+2018
+Shanghai Petrochemical
+2019
+2018
+2019
+2018
+SIPL
+Marketing Company
+2019
+Year ended 31 December
+Summarised consolidated statement of comprehensive income and cash flow
+12,612
+21,560
+10,603
+9,846
+12,763
+12,619
+10.756
+10,870
+23,186
+Fujian Petrochemical
+2019
+11,473
+12,777
+(50,905)
+(62,840)
+Net current (liabilities)/assets
+(2,333)
+(15,037)
+(2,233)
+(3,722)
+(2,961)
+(50)
+(804)
+(13,913)
+(15,479)
+(483)
+(456)
+(192,106)
+Dividends paid to
+(181,766)
+18,695
+12,895
+16,248
+11,386
+11.444
+11,558
+19,241
+23,327
+38,020
+13,234
+261,062
+340,356
+Non-current assets
+417
+(9,700)
+7,304
+8,662
+(2,513)
+(1,677)
+766
+984
+6,830
+Sinopec Kantons
+(3,196)
+Sinopec-SK
+1,140
+1.595
+477
+5,270
+2,233
+4,536
+2,693
+22,538
+23,354
+Total comprehensive income
+1,879
+664
+3,099
+3,137
+1,065
+1,131
+1,595
+1,067
+477
+3,137
+664
+1,004
+Shanghai SECCO
+232
+1,016
+399
+433
+798
+2,612
+1,112
+2,737
+1,651
+7.780
+8,285
+interests
+attributable to minority
+Comprehensive income
+1,879
+3,099
+5,277
+238
+3,272
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million RMB million
+2018
+2018
+2019
+2018
+2018
+2,225
+2019
+RMB million
+RMB million
+2019
+Turnover
+RMB million
+Profit for the year
+22,984
+31,016
+26,320
+28,341
+1,398
+1,274
+17,134
+2.831
+1,427,705
+5,261
+3,282
+5,037
+1,443,698
+100,346
+5,535
+107,765
+21,995
+Financial Statements (PRC)
+145
+REPORT OF THE INTERNATIONAL AUDITOR
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+The COVID-19 and international crude oil prices drop in March 2020 are events arose after the balance sheet date, which are non-adjusting events
+after the balance sheet date. The Group will keep continuous attention on the situation of the COVID-19 and future fluctuation in oil prices, take
+responsive tackling measures, and assess the impact on the financial position and operating results of the Group after the balance sheet date. Up to
+the date of the issuance of this report, the assessment is still in progress.
+pwc
+Independent Auditor's Report
+In early 2020, the outbreak of Coronavirus Disease 2019 ("COVID-19") has significant impacts on the consumption of refined oil products and sales
+of chemical products of the Group. The Group has taken a series of strong and effective measures, and has coordinated the prevention and control
+of the COVID-19 and the resumption of work and production with all-out efforts to minimize its impact.
+0.493
+0.493
+8.20
+0.448
+0.448
+Financial Statements (International)
+International crude oil prices dropped significantly in March 2020 under the impact of the outbreak of the COVID-19 and the breakdown of OPEC's
+production reduction negotiation, which has a significant impact on the Group's operation.
+8.67
+0.521
+Basic
+net assets
+To the Shareholders of China Petroleum & Chemical Corporation
+(incorporated in the People's Republic of China with limited liability)
+Diluted
+earnings earnings
+per share
+per share
+(%) (RMB/Share) (RMB/Share)
+Weighted
+average
+return on
+net assets
+Diluted
+earnings
+7.45
+Basic
+earnings
+per share
+per share
+(%) (RMB/Share) (RMB/Share)
+0.476
+0.476
+0.521
+Net profit attributable to the Company's ordinary equity
+shareholders
+Net profit deducted extraordinary gains and losses
+attributable to the Company's ordinary equity
+shareholders
+65 EVENTS AFTER THE BALANCE SHEET DATE
+7.90
+OPINION
+Independence
+羅兵咸永道
+146
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED)
+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.
+The key audit matter identified in our audit is "Recoverability of the carrying amount of property, plant and equipment relating to oil and gas producing
+activities".
+T: +852 2289 8888, F: +852 2810 9888, www.pwchk.com
+Key Audit Matter
+Refer to note 8 “Other operating expense, net", note 16 "Property, plant
+and equipment" and note 43 "Accounting estimates and judgements" to
+the consolidated financial statements.
+Low crude oil prices gave rise to possible indication that the carrying
+amount of property, plant and equipment relating to oil and gas producing
+activities as at 31 December 2019 might be impaired. The Group has
+adopted value in use as the respective recoverable amounts of property,
+plant and equipment relating to oil and gas producing activities, which
+involved key estimations or assumptions including:
+Future crude oil prices;
+Future production profiles;
+Weighted
+average
+return on
+Future cost profiles; and
+Recoverability of the carrying amount of property, plant and equipment
+relating to oil and gas producing activities
+PricewaterhouseCoopers, 22/F, Prince's Building, Central, Hong Kong
+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.
+The consolidated financial statements of China Petroleum & Chemical Corporation (the "Company") and its subsidiaries (the "Group") set out on pages
+149 to 203, which comprise:
+• the consolidated balance sheet as at 31 December 2019;
+• the consolidated income statement for the year then ended;
+•
+the consolidated statement of comprehensive income for the year then ended;
+•
+the consolidated statement of changes in equity for the year then ended;
+•
+the consolidated statement of cash flows for the year then ended; and
+•
+the notes to the consolidated financial statements, which include a summary of significant accounting policies.
+Our 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
+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 Standard Board and have been properly prepared in compliance with the
+disclosure requirements of the Hong Kong Companies Ordinance.
+BASIS FOR OPINION
+We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAS") issued by the Hong Kong Institute of Certified Public
+Accountants ("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.
+What we have audited
+2018
+(3,658)
+In accordance with "Regulation on the Preparation of Information Disclosures of Companies Issuing Public Shares No. 9 - Calculation and Disclosure
+of the Return on Net Assets and Earnings Per Share" (2010 revised) issued by the CSRC and relevant accounting standards, the Group's return on
+net assets and earnings per share are calculated as follows:
+RMB million
+2018
+RMB million
+1,318
+209
+(6,857)
+742
+180
+(7,482)
+2019
+(410)
+729
+(5,011)
+1,613
+(5,970)
+1,597
+2,312
+(3,414)
+(1,023)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Equity shareholders of the Company
+Minority interests
+Attributable to:
+Discount rates.
+At 31 December
+2019
+RMB million
+63,946
+62,594
+At 31 December
+2018
+RMB million
+63,085
+62,656
+The Group has not developed an internal valuation model necessary to estimate the fair value of loans from Sinopec Group Company and
+fellow subsidiaries as it is not considered practicable to estimate their fair value because the cost of obtaining discount and borrowing rates
+for comparable borrowings would be excessive based on the Reorganisation of the Group, its existing capital structure and the terms of the
+borrowings.
+Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values
+at 31 December 2019 and 31 December 2018.
+62 EXTRAORDINARY GAINS AND LOSSES
+Pursuant to "Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public- Extraordinary Gain
+and Loss" (2008), the extraordinary gains and losses of the Group are as follows:
+Extraordinary (gains)/losses for the year:
+Net loss on disposal of non-current assets
+Donations
+Government grants
+Gain on holding and disposal of various investments
+Other non-operating loss, net
+Tax effect
+Total
+(3,320)
+2019
+(3,459)
+(199)
+Net profit attributable to equity shareholders of the Company (diluted) (RMB million)
+Weighted average number of outstanding ordinary shares of the Company (diluted) (million)
+Diluted earnings per share (RMB/share)
+The calculation of the weighted average number of ordinary shares (diluted) is as follows:
+Weighted average number of the ordinary shares issued at 31 December (million)
+Weighted average number of the ordinary shares issued at 31 December (diluted) (million)
+64 RETURN ON NET ASSETS AND EARNINGS PER SHARE
+2019
+57,591
+121,071
+0.476
+2018
+Diluted earnings per share is calculated by the net profit attributable to equity shareholders of the Company (diluted) and the weighted average
+number of ordinary shares of the Company (diluted):
+63,089
+0.521
+2019
+2018
+121,071
+121,071
+121,071
+121,071
+121,071
+121,071
+121,071
+2018
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+63 BASIC AND DILUTED EARNINGS PER SHARE
+(i) Basic earnings per share
+Basic earnings per share is calculated by the net profit attributable to equity shareholders of the Company and the weighted average number of
+outstanding ordinary shares of the Company:
+Net profit attributable to equity shareholders of the Company (RMB million)
+Weighted average number of outstanding ordinary shares of the Company (million)
+Basic earnings per share (RMB/share)
+The calculation of the weighted average number of ordinary shares is as follows:
+Weighted average number of outstanding ordinary shares of the Company at 1 January (million)
+Weighted average number of outstanding ordinary shares of the Company at 31 December (million)
+(ii) Diluted earnings per share
+2019
+57,591
+121,071
+0.476
+2018
+63,089
+121,071
+0.521
+2019
+121,071
+121,071
+(94)
+Because of the significance of the carrying amount of property, plant and
+equipment relating to oil and gas producing activities as at 31 December
+2019, together with the use of significant estimations or assumptions
+in determining their respective value in use, we had placed our audit
+emphasis on this matter.
+Interest expense
+In auditing the respective value in use calculations of property, plant and
+equipment relating to oil and gas producing activities, we performed the
+following key procedures on the relevant discounted cash flow projections
+prepared by management:
+(2,808,915)
+82,264
+(7,321)
+Interest income
+7,206
+7,726
+Foreign currency exchange (losses)/gains, net
+(17,003)
+(170)
+Net finance costs
+(9,967)
+1,001
+Investment income
+919
+1,871
+596
+9
+86,198
+(2,879,995)
+Taxes other than income tax
+Other operating expense, net
+Total operating expenses
+Operating profit
+Finance costs
+Carrying amount
+Fair value
+6
+(81,482)
+(77,721)
+7
+(242,535)
+(246,498)
+8
+(436)
+(5,360)
+Share of profits less losses from associates and joint ventures
+Personnel expenses
+20, 21
+13,974
+78,897
+Earnings per share:
+Basic
+Diluted
+15
+15
+72,033
+0.475
+0.475
+0.509
+The notes on pages 156 to 203 form part of these consolidated financial statements. Details of dividends payable to shareholders of the Company
+attributable to the profit for the year are set out in Note 13.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+149
+Financial Statements (International)
+0.509
+Profit for the year
+17,279
+14,568
+Profit before taxation
+89,927
+99,110
+Income tax expense
+10
+(17,894)
+(20,213)
+Profit for the year
+72,033
+78,897
+Attributable to:
+Shareholders of the Company
+57,465
+61,618
+Non-controlling interests
+12.777
+How our audit addressed the Key Audit Matter
+(10,744)
+Exploration expenses, including dry holes.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+147
+Financial Statements (International)
+REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED)
+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 and the disclosure requirements of 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.
+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.
+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.
+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. We report our opinion solely to you, as a body, 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 scepticism 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.
+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.
+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.
+Those charged with governance are responsible for overseeing the Group's financial reporting process.
+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.
+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 all of the information included in the annual
+report other than the consolidated financial statements and our auditor's report thereon.
+•
+.
+•
+•
+•
+Evaluated and tested the key controls in respect of the preparation of
+the discounted cash flow projections of property, plant and equipment
+relating to oil and gas producing activities.
+Assessed the methodology adopted in the discounted cash flow
+projections, tested mathematical accuracy of the projections, and the
+completeness, accuracy, and relevance of underlying data used in the
+projections.
+Compared estimates of future crude oil prices adopted by the Group
+against a range of published crude oil price forecasts.
+Compared the future production profiles against the oil and gas
+reserve estimation report approved by the management. Evaluated
+the competence, capability and objectivity of the management's
+experts engaged in estimating the oil and gas reserves. Assessed
+key estimations or assumptions used in the reserve estimation, by
+reference to historical data, management plans and/or relevant
+external data.
+Compared the future cost profiles against historical costs and relevant
+budgets of the Group.
+Tested selected other key data inputs, such as natural gas prices and
+production profiles in the projections by reference to historical data
+and/or relevant budgets of the Group.
+Used professionals with specialized skill and knowledge to assist in
+the evaluation of the appropriateness of discount rates adopted by the
+management.
+Evaluated the sensitivity analyses prepared by the Group, and assessed
+the potential impacts of a range of possible outcomes.
+Based on our work, we found the key assumptions and input data adopted
+were supported by the evidence we obtained.
+OTHER INFORMATION
+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.
+(10,510)
+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 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.
+2,900,488
+65,705
+2,966,193
+2,825,613
+65,566
+2,891,179
+Operating expenses
+Purchased crude oil, products and operating supplies and expenses
+(2,380,907)
+4
+(2,292,983)
+5
+(55,313)
+(65,642)
+Depreciation, depletion and amortisation
+(108,812)
+(109,967)
+Selling, general and administrative expenses
+Other operating revenues
+3
+Turnover
+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 this independent auditor's report is CHAN KWONG TAK.
+Financial Statements (International)
+PricewaterhouseCoopers
+Certified Public Accountants
+Hong Kong, 27 March 2020
+148
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(B) FINANCIAL STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
+CONSOLIDATED INCOME STATEMENT
+for the year ended 31 December 2019
+(Amounts in million, except per share data)
+Notes
+Year ended 31 December
+2019
+RMB
+2018
+RMB
+Turnover and other operating revenues
+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.
+The fair values of the Group's financial instruments carried at other than fair value (other than long-term indebtedness and investments in
+unquoted equity securities) approximate their carrying amounts due to the short-term maturity of these instruments. The fair values of long-term
+indebtedness are estimated by discounting future cash flows using current market interest rates offered to the Group for debt with substantially
+the same characteristic and maturities range from 2.37% to 4.90% (2018: from 2.76% to 4.90%). The following table presents the carrying
+amount and fair value of the Group's long-term indebtedness other than loans from Sinopec Group Company and fellow subsidiaries at 31
+December 2019 and 31 December 2018:
+Derivative financial assets:
+Fair values (Continued)
+45,008
+6,205
+290,539
+77,285
+323,842
+Total
+contractual
+Carrying undiscounted
+15,676
+22,932
+amount
+RMB million RMB million
+Within one
+year or
+on demand
+RMB million
+At 31 December 2018
+More than
+one year but
+less than
+two years
+RMB million
+More than
+two years
+but less than
+five years
+RMB million
+cash flow
+More than
+384,595
+616,756
+404
+6,492
+15,610
+27,098
+Debentures payable
+19,157
+808,654
+24,400
+764
+16,667
+Lease liabilities
+177,674
+351,223
+Total
+764
+five years
+RMB million
+Short-term loans
+44,692
+18,053
+Long-term loans
+61,576
+66,387
+792
+40,885
+18,053
+13,807
+Debentures payable
+31,951
+38,674
+1,269
+14,030
+17,124
+10,903
+Non-current liabilities due within one year
+84,775
+84,775
+45,040
+Derivative financial liabilities
+13,571
+13,571
+45,040
+13,571
+Bills payable
+6,416
+6,416
+6,416
+Accounts payable
+186,341
+186,341
+186,341
+Other payables and employee benefits payable
+84,775
+49,604
+39,625
+Long-term loans
+72,180
+-
+For accounts receivable, bills receivable and receivables financing, the Group applies the "No. 22 Accounting Standards for Business Enterprises
+Financial instruments: recognition and measurement" simplified approach to measuring expected credit losses which uses a lifetime expected
+loss allowance for all accounts receivable, bills receivable and receivables financing.
+To measure the expected credit losses, accounts receivable, bills receivable and receivables financing have been grouped based on shared credit
+risk characteristics and the days past due.
+The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2019 or 1 January 2019,
+respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current
+and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the accounts receivable, bills receivable
+and receivables financing.
+The detailed analysis of accounts receivable and receivables financing is listed in note 8 and note 9.
+The Group's other receivables are considered to have low credit risk, and the loss allowance recognised during the year was therefore limited to
+12 months expected credit losses. The Group considers "low credit risk" for other receivables when they have a low risk of default and the issuer
+has a strong capacity to meet its contractual cash flow obligations in the near term.
+The Group's cash deposits are placed only with large financial institutions with acceptable credit ratings, and there is no material impairment
+loss identified.
+140
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+61 FINANCIAL INSTRUMENTS (Continued)
+Liquidity risk
+Liquidity risk is the risk that the Group encounters short fall of capital when meeting its obligation of financial liabilities. The Group's approach to
+managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal
+and stressed capital conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group prepares monthly
+cash flow budget to ensure that they will always have sufficient liquidity to meet its financial obligations as they fall due. The Group arranges and
+negotiates financing with financial institutions and maintains a certain level of standby credit facilities to reduce the liquidity risk.
+At 31 December 2019, the Group has standby credit facilities with several PRC financial institutions which provide the Group to borrow up to RMB
+379,649 million (2018: RMB 387,748 million) on an unsecured basis, at a weighted average interest rate of 3.57% per annum (2018: 3.87%). At 31
+December 2019, the Group's outstanding borrowings under these facilities were RMB 2,947 million (2018: RMB 21,236 million) and were included
+in loans.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+The Group's primary type of financial assets that are subject to the expected credit loss model is accounts receivable, bills receivable, receivables
+financing and other receivables.
+The carrying amounts of cash at bank and on hand, financial assets held for trading, derivative financial assets, accounts receivable, bills
+receivable, receivables financing and other receivables, represent the Group's maximum exposure to credit risk in relation to financial assets.
+(ii) Impairment of financial assets
+Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
+obligations, and arises principally from the Group's deposits placed with financial institutions (including structured deposits) and receivables
+from customers. To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial
+institutions in the PRC with acceptable credit ratings. The majority of the Group's accounts receivable relates to sales of petroleum and chemical
+products to related parties and third parties operating in the petroleum and chemical industries. No single customer accounted for greater than
+10% of total accounts receivable at 31 December 2019, except for the amounts due from Sinopec Group Company and fellow subsidiaries. The
+Group performs ongoing credit evaluations of its customers' financial condition and generally does not require collateral on accounts receivable.
+The Group maintains an impairment loss for doubtful accounts and actual losses have been within management's expectations.
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+61 FINANCIAL INSTRUMENTS
+Overview
+Financial assets of the Group include cash at bank and on hand, financial assets held for trading, derivative financial assets, accounts receivable,
+bills receivable, receivables financing, other receivables and other equity instrument investments. Financial liabilities of the Group include short-term
+loans, derivative financial liabilities, bills payable, accounts payable, employee benefits payable, other payables, long-term loans, debentures payable
+and lease liabilities.
+The Group has exposure to the following risks from its uses of financial instruments:
+•
+credit risk;
+• liquidity risk; and
+• market risk.
+The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework, and developing
+and monitoring the Group's risk management policies.
+The Group's risk management policies are established to identify and analyse the risks faced by the Group, and set appropriate risk limits and
+controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
+conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and
+constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular
+and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group's audit committee.
+Credit risk
+(i) Risk management
+The following table sets out the remaining contractual maturities at the balance sheet date of the Group's financial liabilities, which are based on
+contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on prevailing rates at the
+balance sheet date) and the earliest date the Group would be required to repay:
+6,251
+Total
+amount
+RMB million RMB million
+11.834
+11,834
+11,834
+Accounts payable
+187,958
+187,958
+Bills payable
+187,958
+77,093
+77,093
+77,093
+Non-current liabilities due within one year
+69,490
+72,180
+Other payables and employee benefits payable
+2,729
+2,729
+2,729
+Carrying undiscounted
+cash flow
+At 31 December 2019
+More than
+Within one one year
+year or but less than
+on demand
+two years
+RMB million RMB million
+More than
+two years
+but less than
+More than
+five years
+five years
+RMB million
+RMB million
+Short-term loans
+31,196
+31,633
+31,633
+Derivative financial liabilities
+contractual
+Total
+446,772
+459,257
+837
+8,622
+8,622
+90
+219
+1,431
+1,521
+709
+709
+14,299
+1,209
+1,520
+1,209
+1,520
+2,729
+13,371
+128
+1
+1
+Assets
+Financial assets held for trading:
+- Structured deposits
+– Equity investments (listed and at quoted market price)
+Derivative financial assets:
+- Derivative financial assets
+Other equity instrument investments:
+- Other Investments
+Liabilities
+Level 1
+RMB million
+Level 2
+RMB million
+Level 3
+RMB million
+Total
+RMB million
+3,318
+3,318
+2,729
+The Group
+Level 1
+Level 2
+RMB million
+5,500
+8,071
+During the year ended 31 December 2019, there was no transfer between instruments in Level 1 and Level 2.
+13,571
+13,571
+Management of the Group uses discounted cash flow model with inputted interest rate and commodity index, which were influenced by historical
+fluctuation and the probability of market fluctuation, to evaluate the fair value of the structured deposits and receivables financing classified as
+Level 3 financial assets.
+8,071
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Financial Statements (PRC)
+144
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+61 FINANCIAL INSTRUMENTS (Continued)
+143
+5,500
+- Derivative financial liabilities
+Derivative financial liabilities:
+Level 3
+RMB million
+Total
+RMB million
+25,550
+25,550
+182
+182
+874
+7,013
+7,887
+127
+1,183
+7,013
+1,323
+26,873
+1,450
+35,069
+RMB million
+(ii) Fair values of financial instruments carried at other than fair value
+At 31 December 2018
+Derivative financial liabilities:
+At 31 December
+2019
+million
+2018
+million
+Gross exposure arising from loans and lease liabilities
+US Dollar
+Singapore Dollar
+103
+4
+668
+At 31 December
+A 5 percent strengthening/weakening of Renminbi against the following currencies at 31 December 2019 and 31 December 2018 would have
+increased/decreased net profit for the year of the Group by the amounts shown below. This analysis has been determined assuming that the
+change in foreign exchange rates had occurred at the balance sheet date and had been applied to the foreign currency balances to which
+the Group has significant exposure as stated above, and that all other variables, in particular interest rates, remain constant. The analysis is
+performed on the same basis for 2018.
+US Dollar
+Singapore Dollar
+At 31 December
+2019
+At 31 December
+2018
+RMB million
+The Group
+The Group
+Included primarily in short-term and long-term debts and lease liabilities are the following amounts denominated in a currency other than the
+functional currency of the entity to which they relate:
+Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured.
+The Group's currency risk exposure primarily relates to short-term and long-term debts denominated in USD and lease liabilities denominated in
+SGD. The Group enters into foreign exchange contracts to manage currency risk exposure.
+356,257
+54,915
+30,931
+17,154
+Management believes that the Group's current cash on hand, expected cash flows from operations and available standby credit facilities from
+financial institutions will be sufficient to meet the Group's short-term and long-term capital requirements.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+141
+Financial Statements (PRC)
+Financial Statements (PRC)
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+61 FINANCIAL INSTRUMENTS (Continued)
+Market risk
+Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is
+to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
+(a) Currency risk
+RMB million
+- Derivative financial liabilities
+27
+1
+Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which
+all significant inputs are directly or indirectly based on observable market data.
+Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.
+At 31 December 2019
+The Group
+Assets
+Financial assets held for trading:
+•
+- Structured deposits
+- Derivative financial assets
+Receivables financing:
+- Receivables financing
+Other equity instrument investments:
+- Other Investments
+Liabilities
+– Equity investments, listed and at quoted market price
+•
+Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments.
+•
+Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in
+the functional currency of respective entity of the Group.
+(b) Interest rate risk
+The Group's interest rate risk exposure arises primarily from its short-term and long-term loans. Loans carrying interest at variable interest rates
+and at fixed interest rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The interest rates and
+terms of repayment of short-term and long-term loans of the Group are disclosed in Note 23 and Note 31, respectively.
+At 31 December 2019, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held
+constant, would decrease/increase the Group's net profit for the year by approximately RMB 352 million (2018: decrease/increase RMB 424
+million). This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group's debts outstanding
+at the balance sheet date with exposure to cash flow interest rate risk. The analysis is performed on the same basis for 2018.
+(c) Commodity price risk
+The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products
+and chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the
+Group. The Group uses derivative financial instruments, including commodity futures and swaps contracts, to manage a portion of such risk.
+At 31 December 2019, the Group had certain commodity contracts of crude oil, refined oil products and chemical products designated as
+qualified cash flow hedges and economic hedges. At 31 December 2019, the fair value of such derivative hedging financial instruments is
+derivative financial assets of RMB 788 million (2018: RMB 7,844 million) and derivative financial liabilities of RMB 2,728 million (2018: RMB
+13,568 million).
+At 31 December 2019, it is estimated that a general increase/decrease of USD 10 per barrel in basic price of derivative financial instruments,
+with all other variables held constant, would impact the fair value of derivative financial instruments, which would increase/decrease the Group's
+net profit for the year by approximately RMB 3,134 million (2018: decrease/increase RMB 197 million), and decrease/increase the Group's other
+comprehensive income by approximately RMB 4,289 million (2018: increase/decrease RMB 6,850 million). This sensitivity analysis has been
+determined assuming that the change in prices had occurred at the balance sheet date and the change was applied to the Group's derivative
+financial instruments at that date with exposure to commodity price risk. The analysis is performed on the same basis for 2018.
+142 Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
+For the year ended 31 December 2019
+61 FINANCIAL INSTRUMENTS (Continued)
+Fair values
+(i) Financial instruments carried at fair value
+The following table presents the carrying value of financial instruments measured at fair value at the balance sheet date across the three levels
+of the fair value hierarchy. With the fair value of each financial instrument categorised in its entirely based on the lowest level of input that is
+significant to that fair value measurement. The levels are defined as follows:
+172
+17,450
+617,762
+150
+(48,428) (48,428)
+(48,428)
+(19,371)
+(19,371)
+(19,371)
+3,996
+(3,996)
+(7,476)
+(7,476)
+5,269
+2,060
+3,996
+(71,795)
+(67,799)
+(5,416)
+(73,215)
+(12)
+(12)
+(299)
+(311)
+2,060
+5,269
+5,269
+72,273
+26,326
+55,850
+82,682
+117,000
+(2,946)
+326,137
+726,120
+126,770
+852,890
+61,618
+61,618
+17,279
+78,897
+(7,618)
+(7,618)
+994
+(6,624)
+(7,618)
+61,618
+54,000
+18,273
+(12)
+3,996
+(71,795)
+(67,811)
+Other comprehensive income (Note 14)
+Total comprehensive income for the year
+Amounts transferred to initial carrying amount of
+hedged items
+Transactions with owners, recorded directly in equity:
+Contributions by and distributions to owners:
+Final dividend for 2018 (Note 13)
+Interim dividend for 2019 (Note 13)
+Appropriation (Note (a))
+Distributions to non-controlling interests
+Contributions to subsidiaries from
+non-controlling interests
+Total contributions by and distributions to owners
+Transaction with non-controlling interests
+Total transactions with owners
+Others
+Balance at 31 December 2019
+Notes:
+Total equity
+attributable
+to
+Share
+capital
+Capital
+Profit for the year
+121,071
+Balance at 1 January 2019
+for the year ended 31 December 2019
+(5,715)
+(73,526)
+(261)
+818
+(851)
+(294)
+(77)
+(371)
+121,071
+26,053
+55,850
+86,678
+117,000
+(4,477)
+315,109
+717,284
+139,251
+856,535
+The notes on pages 156 to 203 form part of these consolidated financial statements.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
+(Amounts in million)
+Share
+12
+852,890
+Shou Donghua
+Chief Financial Officer
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+151
+Financial Statements (International)
+Financial Statements (International)
+152
+CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+for the year ended 31 December 2018
+The notes on pages 156 to 203 form part of these consolidated financial statements.
+(Amounts in million)
+Balance at 1 January 2018
+Profit for the year
+Other comprehensive income (Note 14)
+Total comprehensive income for the year
+Amounts transferred to initial carrying amount of
+hedged items
+Transactions with owners, recorded directly in equity:
+Contributions by and distributions to owners:
+Final dividend for 2017 (Note 13)
+Balance at 31 December 2017
+Change in accounting policy
+Ma Yongsheng
+President
+Zhang Yuzhuo
+Chairman
+Approved and authorised for issue by the board of directors on 27 March 2020.
+Equity
+302,862
+170,675
+875,835
+856,535
+Share capital
+Reserves
+Total equity attributable to shareholders of the Company
+Non-controlling interests
+Total equity
+36
+121,071
+121,071
+617,079
+596,213
+738,150
+717,284
+137,685
+139,251
+875,835
+856,535
+Interim dividend for 2018 (Note 13)
+Appropriation (Note (a))
+Distributions to non-controlling interests
+Contributions to subsidiaries from non-controlling
+Total
+equity
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+121,071
+26,326
+55,850
+82,682
+117,000
+(2,934)
+326,125
+726,120
+126,770
+Non-
+controlling
+interests
+(12)
+of the
+Company
+reserves
+interests
+Total contributions by and distributions to owners
+Transaction with non-controlling interests
+Total transactions with owners
+Others
+Balance at 31 December 2018
+Total equity
+attributable
+to
+Share
+Capital
+Share
+surplus
+Statutory Discretionary
+surplus
+shareholders
+Other
+capital
+reserve
+premium
+reserve
+reserve
+Retained
+earnings
+Total non-current liabilities
+surplus
+shareholders
+(5,984)
+(6,161)
+(13,700)
+(7,354)
+Distributions by subsidiaries to non-controlling interests
+Interest paid
+(67,799)
+(46,008)
+1,886
+3,919
+Payments made to acquire non-controlling interests
+Contributions to subsidiaries from non-controlling interests
+(612,108)
+599,866
+(66,422)
+(120,463)
+(3,500)
+10,720
+10,272
+5,810
+7,094
+746,655
+(772,072)
+(8)
+(160)
+Repayments of lease liabilities (2018: Finance lease payment)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+154
+The notes on pages 156 to 203 form part of these consolidated financial statements.
+111,922
+60,313
+518
+147
+(1,814)
+113,218
+111,922
+(51,756)
+(111,260)
+(84,713)
+(320)
+Cash and cash equivalents at 31 December
+Effect of foreign currency exchange rate changes
+Net cash used in financing activities
+Net decrease in cash and cash equivalents
+Cash and cash equivalents at 1 January
+Repayments of other financing activities
+320
+Proceeds from other financing activities
+(86)
+(16,859)
+78,401
+90,710
+Dividends paid by the Company
+Repayments of bank and other loans
+(8,261)
+(11,497)
+Exploratory wells expenditure
+(94,753)
+(129,645)
+Capital expenditure
+Investing activities
+175,868
+153,420
+(a)
+Net cash generated from operating activities
+RMB
+RMB
+2018
+2019
+Year ended 31 December
+Notes
+(Amounts in million)
+for the year ended 31 December 2019
+CONSOLIDATED STATEMENT OF CASH FLOWS
+Financial Statements (International)
+Purchase of investments, investments in associates and investments in joint ventures
+Payment for financial assets at fair value through profit or loss
+NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
+(3,483)
+(12,851)
+Proceeds from bank and other loans
+Net cash used in investing activities
+Financing activities
+Repayments of other investing activities
+Investment and dividend income received
+Decrease in time deposits with maturities over three months
+Interest received
+(81,708)
+(103,231)
+Increase in time deposits with maturities over three months
+9,666
+703
+Proceeds from disposal of property, plant, equipment and other non-current assets
+1,557
+704
+Proceeds from disposal of investments and investments in associates
+(3,188)
+(1,031)
+Payment for acquisition of subsidiary, net of cash acquired
+55,000
+35,292
+Proceeds from sale of financial assets at fair value through profit or loss
+(29,550)
+(10,116)
+Statutory Discretionary
+surplus
+for the year ended 31 December 2019
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+86.678
+117.000
+(4,477)
+315,109
+717.284
+139,251
+856,535
+57,465
+57,465
+55,850
+14,568
+5,415
+5,415
+165
+5,580
+5,415
+57,465
+Financial Statements (International)
+62,880
+Financial Statements (International)
+72,033
+26.053
+121,071
+RMB
+Other
+Retained
+reserve
+premium
+reserve
+reserve
+reserves
+earnings
+of the
+Company
+Non-
+controlling
+interests
+Total
+equity
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+RMB
+14,733
+77,613
+1,038
+1,038
+(16,427)
+(59,502)
+(35)
+73
+121,071
+28,993
+55,850
+90.423
+117,000
+1,941
+322,872
+738,150
+137,685
+875,835
+(a) According to the PRC Company Law and the Articles of Association of the Company, the Company is required to transfer 10% of its net profit determined in accordance
+with the accounting policies complying with Accounting Standards for Business Enterprises ("CASS"), adopted by the Group to statutory surplus reserve. In the event
+that the reserve balance reaches 50% of the registered capital, no transfer is required. The transfer to this reserve must be made before distribution of a dividend to
+shareholders. Statutory surplus reserve can be used to make good previous years' losses, if any, and may be converted into share capital by issuing of new shares to
+shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is
+not less than 25% of the registered capital.
+During the year ended 31 December 2019, the Company transferred RMB 3,745 million (2018: RMB 3,996 million) to the statutory surplus reserve, being 10% of the
+current year's net profit determined in accordance with the accounting policies complying with CASS.
+(b) The usage of the discretionary surplus reserve is similar to that of statutory surplus reserve.
+(c) As at 31 December 2019, the amount of retained earnings available for distribution was RMB 130,645 million (2018: RMB 143,148 million), being the amount
+determined in accordance with CASS. According to the Articles of Association of the Company, the amount of retained earnings available for distribution to shareholders
+of the Company is lower of the amount determined in accordance with the accounting policies complying with CASS and the amount determined in accordance with the
+accounting policies complying with International Financial Reporting Standards ("IFRS”).
+(d) The capital reserve represents (i) the difference between the total amount of the par value of shares issued and the amount of the net assets transferred from Sinopec
+Group Company in connection with the Reorganisation (Note 1); and (ii) the difference between the considerations paid over or received the amount of the net assets of
+entities and related operations acquired from or sold to Sinopec Group Company and non-controlling interests.
+(e) The application of the share premium account is governed by Sections 167 and 168 of the PRC Company Law.
+The notes on pages 156 to 203 form part of these consolidated financial statements.
+(43,075)
+(Amounts in million)
+(49,753)
+(2.933)
+55
+55
+1,093
+(31,479)
+(31,479)
+(31,479)
+(14,529)
+(14,529)
+(14,529)
+3,745
+(3,745)
+(18,989)
+(18,989)
+5,495
+5,495
+3,745
+(49,753)
+(46,008) (13,494)
+(59,502)
+2.933
+2.933
+2.933
+3,745
+28,400
+16,434
+42,800
+In applying IFRS 16 Leases for the first time, the Group has used the following practical expedients permitted by the standard:
+(i) Practical expedients applied
+On adoption of IFRS 16 Leases, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating
+leases'. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental
+borrowing rate as of 1 January 2019. The lessee's incremental borrowing rates applied to the lease liabilities on 1 January 2019 ranged from
+4.35% to 4.90%.
+Lease accounting policy applied until 31 December 2018 is disclosed in Note 2(x)(iii).
+The Group has adopted IFRS 16 Leases from 1 January 2019, but has not restated comparative amounts for the 2018 reporting period, as
+permitted under the specific transition provision in the standard. The reclassifications and the adjustments arising from IFRS 16 Leases are
+therefore recognised in the opening balance sheet on 1 January 2019.
+IFRS 16 Leases - Impact of adoption
+A number of new or amended standards became applicable for the current reporting period and the Group had changed its accounting policies
+as a result of adopting IFRS 16 Leases.
+(a) New and amended standards and interpretations adopted by the Group
+The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of new and amended standards as
+set out below.
+Financial Statements (International)
+The accompanying consolidated financial statements have been prepared in accordance with all applicable IFRS as issued by the International
+Accounting Standards Board ("IASB"). IFRS includes International Accounting Standards ("IAS") and related interpretations ("IFRIC"). These
+consolidated financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock
+Exchange of Hong Kong Limited. A summary of the significant accounting policies adopted by the Group are set out in Note 2.
+As part of the Reorganisation, certain of Sinopec Group Company's core oil and gas and chemical operations and businesses together with the
+related assets and liabilities were transferred to the Company. On 25 February 2000, in consideration for Sinopec Group Company transferring such
+oil and gas and chemical operations and businesses and the related assets and liabilities to the Company, the Company issued 68.8 billion domestic
+state-owned ordinary shares with a par value of RMB 1.00 each to Sinopec Group Company. The shares issued to Sinopec Group Company on 25
+February 2000 represented the entire registered and issued share capital of the Company on that date. The oil and gas and chemical operations and
+businesses transferred to the Company were related to (i) the exploration, development and production of crude oil and natural gas, (ii) the refining,
+transportation, storage and marketing of crude oil and petroleum products, and (iii) the production and sales of chemicals.
+The Company was established in the PRC on 25 February 2000 as a joint stock limited company as part of the reorganisation (the "Reorganisation")
+of China Petrochemical Corporation ("Sinopec Group Company"), the ultimate holding company of the Group and a ministry-level enterprise under
+the direct supervision of the State Council of the PRC. Prior to the incorporation of the Company, the oil and gas and chemical operations of the
+Group were carried on by oil administration bureaux, petrochemical and refining production enterprises and sales and marketing companies of
+Sinopec Group Company.
+Organisation
+China Petroleum & Chemical Corporation (the "Company") is an energy and chemical company that, through its subsidiaries (hereinafter collectively
+referred to as the "Group"), engages in oil and gas and chemical operations in the People's Republic of China (the "PRC"). Oil and gas operations
+consist of exploring for, developing and producing crude oil and natural gas; transporting crude oil and natural gas by pipelines; refining crude oil
+into finished petroleum products; and marketing crude oil, natural gas and refined petroleum products. Chemical operations include the manufacture
+and marketing of a wide range of chemicals for industrial uses.
+Principal activities
+1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
+for the year ended 31 December 2019
+Financial Statements (International)
+155
+Basis of preparation
+•
+the use of a single discount rate to a portfolio of leases with reasonably similar characteristics,
+the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases.
+198,564
+184,670
+13,894
+198,564
+(2,303)
+352,794
+200,867
+RMB million
+Non-current lease liabilities
+Current lease liabilities
+Of which are:
+Discounted using the lessee's incremental borrowing rate of at the date of initial application
+(Less): short-term leases and low-value leases recognised on a straight-line basis as expense
+Lease liabilities recognised as at 1 January 2019
+Operating lease commitments disclosed as at 31 December 2018
+(ii) Measurement of lease liabilities
+(a) New and amended standards and interpretations adopted by the Group (Continued)
+Basis of preparation (Continued)
+1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION (Continued)
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+156
+The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+The notes on pages 156 to 203 form part of these consolidated financial statements.
+175,868
+153,420
+1,918
+Loss on disposal of property, plant, equipment and other non-current assets, net
+(1,835)
+3,624
+Loss/(gain) on foreign currency exchange rate changes and derivative financial instruments
+7,321
+17,003
+Interest expense
+(7,726)
+(7,206)
+Interest income
+(1,871)
+(919)
+Investment income
+(13,974)
+(12,777)
+Share of profits from associates and joint ventures
+6,921
+109,967
+108,812
+5,831
+99,110
+1,526
+(iii)Measurement of right-of-use assets
+Impairment losses on assets
+Net changes from:
+(33,073)
+(19,523)
+208,941
+172,943
+2,111
+(15,236)
+(3,312)
+(9,285)
+(1,043)
+(11,802)
+211,185
+209,266
+141
+1,264
+11,605
+1,789
+Net cash generated from operating activities
+Income tax paid
+Accounts payable and other current liabilities
+Inventories
+Accounts receivable and other current assets
+Credit impairment losses
+89,927
+Right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
+payments relating to that lease recognised in the balance sheet as at 31 December 2018.
+Land
+Others
+The investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and
+obligations each investor has rather than the legal structure of the joint arrangement. 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.
+An associate is an entity, not being a subsidiary, in which the Group exercises significant influence over its management. Significant influence
+is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
+(ii) Associates and joint ventures
+The particulars of the Group's principal subsidiaries are set out in Note 41.
+In the Company's balance sheet, investments in subsidiaries are stated at cost less impairment losses (Note 2(n)).
+When the Group loses control of a subsidiary, it is accounted for as a disposal of the entire interest in that subsidiary, with a resulting gain
+or loss being recognised in profit or loss. Any interest retained in that former subsidiary at the date when control is lost is recognised at fair
+value and this amount is regarded as the fair value on initial recognition of a financial asset (Note 2(j)) or, when appropriate, the cost on
+initial recognition of an investment in an associate or joint venture (Note 2(a)(ii)).
+If a business combination involving entities not under common control is achieved in stages, the acquisition date carrying value of the
+acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from
+such remeasurement are recognised in the consolidated income statement.
+Changes in the Group's interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions, whereby
+adjustments are made to the amounts of controlling and non-controlling interests within consolidated equity to reflect the change in relative
+interests, but no adjustments are made to goodwill and no gain or loss is recognised.
+Non-controlling interests at the balance sheet date, being the portion of the net assets of subsidiaries attributable to equity interests
+that are not owned by the Company, whether directly or indirectly through subsidiaries, are presented in the consolidated balance sheet
+and consolidated statement of changes in equity within equity, separately from equity attributable to the shareholders of the Company.
+Non-controlling interests in the results of the Group are presented on the face of the consolidated income statement and the consolidated
+statement of comprehensive income as an allocation of the total profit or loss and total comprehensive income for the year between
+non-controlling interests and the shareholders of the Company.
+158
+The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively
+commences until the date that control effectively ceases.
+(i) Subsidiaries and non-controlling interests
+The consolidated financial statements comprise the Company and its subsidiaries, and interest in associates and joint ventures.
+(a) Basis of consolidation
+2 SIGNIFICANT ACCOUNTING POLICIES
+Key assumptions and estimation made by management in the application of IFRS that have significant effect on the consolidated financial
+statements and the major sources of estimation uncertainty are disclosed in Note 43.
+The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
+which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both
+current and future periods.
+The preparation of the consolidated financial statements in accordance with IFRS requires management to make judgements, estimates and
+assumptions that affect the application of policies and reported amounts of assets and liabilities and disclosure of contingent assets and
+liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. The
+estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under
+the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not
+readily apparent from other sources. Actual results could differ from those estimates.
+Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and
+have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future
+reporting periods and on foreseeable future transactions.
+(b) New and amended standards and interpretations not yet adopted by the Group
+Subsidiaries are those entities controlled by the Group. The Group controls an entity when the Group is exposed to, or has rights to, variable
+returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+159
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Cash equivalents consist of time deposits with financial institutions with an initial term of less than three months when purchased. Cash
+equivalents are stated at cost, which approximates fair value.
+(c) Cash and cash equivalents
+On disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation is reclassified from
+equity to the consolidated income statement when the profit or loss on disposal is recognised.
+The results of foreign operations are translated into Renminbi at the applicable rates quoted by the PBOC prevailing on the transaction dates.
+Balance sheet items, including goodwill arising on consolidation of foreign operations are translated into Renminbi at the closing foreign
+exchange rates at the balance sheet date. The income and expenses of foreign operation are translated into Renminbi at the spot exchange rates
+or an exchange rate that approximates the spot exchange rates on the transaction dates. The resulting exchange differences are recognised in
+other comprehensive income and accumulated in equity in the other reserves.
+Exchange differences, other than those capitalised as construction in progress, are recognised as income or expense in the "finance costs"
+section of the consolidated income statement.
+The presentation currency of the Group is Renminbi. Foreign currency transactions during the year are translated into Renminbi at the applicable
+rates of exchange quoted by the People's Bank of China ("PBOC") prevailing on the transaction dates. Foreign currency monetary assets and
+liabilities are translated into Renminbi at the PBOC's rates at the balance sheet date.
+(b) Translation of foreign currencies
+A uniform set of accounting policies is adopted by those entities. All intra-group transactions, balances and unrealised gains on transactions
+between combining entities or businesses are eliminated on consolidation. Transaction costs, including professional fees, registration fees,
+costs of furnishing information to shareholders, costs or losses incurred in combining operations of the previously separate businesses, etc.,
+incurred in relation to the common control combination that is to be accounted for by using merger accounting is recognised as an expense
+in the period in which it is incurred.
+The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented or
+since the date when the combining entities or businesses first came under the common control, where there is a shorter period, regardless
+of the date of the common control combination. The comparative amounts in the consolidated financial statements are presented as if the
+entities or businesses had been combined at the previous balance sheet date or when they first came under common control, whichever is
+shorter.
+The consolidated financial statements incorporate the financial statements of the combining entities or businesses in which the common
+control combination occurs as if they had been combined from the date when the combining entities or businesses first came under the
+control of the controlling party. The net assets of the combining entities or businesses are combined using the existing book values from the
+controlling parties' perspective. No amount is recognised as consideration for goodwill or excess of acquirers' interest in the net fair value of
+acquiree's identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the
+continuation of the controlling party's interest.
+(iv) Merger accounting for common control combination
+Inter-company balances and transactions and any unrealised gains arising from inter-company transactions are eliminated on consolidation.
+Unrealised gains arising from transactions with associates and joint ventures are eliminated to the extent of the Group's interest in the entity.
+Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
+(iii)Transactions eliminated on consolidation
+When the Group ceases to have significant influence over an associate or joint control over a joint venture, it is accounted for as a disposal of
+the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee
+at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial
+recognition of a financial asset (see Note 2(j)) or, when appropriate, the cost on initial recognition of an investment in an associate.
+The Group's share of the post-acquisition, post-tax results of the investees and any impairment losses for the year are recognised in the
+consolidated income statement, whereas the Group's share of the post-acquisition, post-tax items of the investees' other comprehensive
+income is recognised in the consolidated statement of comprehensive income.
+Investments in associates and joint ventures are accounted for in the consolidated and separate financial statements using the equity method
+from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. Under the
+equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group's share of the
+investee's net assets and any impairment loss relating to the investment (Notes 2(i) and (n)).
+(ii) Associates and joint ventures (Continued)
+(a) Basis of consolidation (Continued)
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+Basis of preparation (Continued)
+1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION (Continued)
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Exploration and production
+Segment assets and segment liabilities for 31 December 2019 all increased as a result of the changes in accounting policy. The following
+segments were affected by the changes in accounting policy:
+(v) Impact on segment disclosures
+271,969
+27,381
+244,588
+1 January
+2019
+RMB million
+267,860
+239,374
+28,486
+RMB million
+31 December
+2019
+lease liabilities - increase by RMB 198,564 million
+•
+• long-term prepayments and other assets - decrease by RMB 8,125 million
+• prepaid expenses and other current assets - decrease by RMB 766 million
+lease prepayments - decrease by RMB 64,514 million
+•
+⚫ right-of-use assets - increase by RMB 271,969 million
+The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
+(iv) Adjustments recognised in the balance sheet on 1 January 2019
+Total right-of-use assets
+Refining
+The recognised right-of-use assets relate to the following types of assets:
+Marketing and distribution
+Corporate and others
+Financial Statements (International)
+Financial Statements (International)
+157
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Comparative segment information has not been restated. As a consequence, the segment information disclosure for the items noted above is
+not entirely comparable to the information disclosed for the prior year.
+192,872
+267,860
+14,248
+15,651
+12,252
+19,124
+62,237
+120,983
+26,094
+32,839
+78,041
+79,263
+RMB million
+RMB million
+Segment assets Segment liabilities
+Increase in
+Chemicals
+Dry hole costs written off
+Depreciation, depletion and amortisation
+Adjustments for:
+64,879
+26
+8,622
+27
+192,442
+184,584
+57,844
+54,023
+Total current assets
+54,865
+Current liabilities
+Lease liabilities
+Derivative financial liabilities
+Trade accounts payable and bills payable
+Contract liabilities
+Other payables
+Income tax payable
+Total current liabilities
+Net current liabilities
+Total assets less current liabilities
+Short-term debts
+25
+7,887
+837
+-------
+Total non-current assets
+Current assets
+1,309,215
+1,088,188
+Cash and cash equivalents
+60,313
+111,922
+Time deposits with financial institutions
+67,614
+55,093
+Financial assets at fair value through profit or loss
+23
+Derivative financial assets
+24
+Trade accounts receivable and bills receivable
+Financial assets at fair value through other comprehensive income
+Inventories
+Prepaid expenses and other current assets
+2222280
+3,319
+25,732
+445,856
+504,120
+30
+40,521
+1,027,210
+Non-current liabilities
+Long-term debts
+Loans from Sinopec Group Company and fellow subsidiaries
+Lease liabilities
+Deferred tax liabilities
+30
+49,156
+51,011
+30
+9,626
+42,516
+31, 1(a)
+177,674
+29
+6,809
+5,948
+Provisions
+Other long-term liabilities
+35
+43,163
+60,978
+91,408
+130,518
+1,178,697
+576,374
+29,462
+Loans from Sinopec Group Company and fellow subsidiaries
+30
+43,289
+31,665
+31, 1(a)
+15,198
+24
+2,729
+13,571
+32
+199,792
+192,757
+33
+126,735
+124,793
+34
+144,846
+166,151
+3,264
+6,699
+565,098
+65,426
+22
+Long-term prepayments and other assets
+2018
+RMB
+RMB
+72,033
+78,897
+14
+(31)
+(53)
+(31)
+(53)
+(810)
+(229)
+4,941
+(9,741)
+1,480
+3,399
+5,611
+(6,571)
+5,580
+(6,624)
+77,613
+2019
+72,273
+Year ended 31 December
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Profit before taxation
+Operating activities
+RMB
+RMB
+2018
+Year ended 31 December
+2019
+(a) Reconciliation from profit before taxation to net cash generated from operating activities
+CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
+for the year ended 31 December 2019
+(Amounts in million)
+Profit for the year
+Other comprehensive income:
+Items that may not be reclassified subsequently to profit or loss
+Equity investments at fair value through other comprehensive income
+Total items that may not be reclassified subsequently to profit or loss
+Items that may be reclassified subsequently to profit or loss
+Share of other comprehensive loss of associates and joint ventures
+Cash flow hedges
+Foreign currency translation differences
+Total items that may be reclassified subsequently to profit or loss
+Total other comprehensive income
+Total comprehensive income for the year
+Attributable to:
+Shareholders of the Company
+Non-controlling interests
+Total comprehensive income for the year
+The notes on pages 156 to 203 form part of these consolidated financial statements.
+Notes
+Financial Statements (International)
+62,880
+14,733
+19
+8,697
+8,676
+Interest in associates
+20
+95,737
+89,537
+Interest in joint ventures
+21
+56,467
+56,184
+Financial assets at fair value through other comprehensive income
+26
+1,521
+1,450
+Deferred tax assets
+29
+17,616
+21,694
+Lease prepayments
+64,514
+Goodwill
+54,000
+267,860
+Right-of-use assets
+18,273
+77,613
+72,273
+CONSOLIDATED BALANCE SHEET
+As at 31 December 2019
+(Amounts in million)
+Non-current assets
+Notes
+31 December
+31 December
+2019
+2018
+RMB
+RMB
+Property, plant and equipment, net
+16
+622,409
+Construction in progress
+17
+173,482
+136,963
+18, 1(a)
+153
+Zhou Hengyou
+Yu Renming
+Total
+169
+Financial Statements (International)
+166
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(y) Employee benefits
+The contributions payable under the Group's retirement plans are recognised as an expense in the consolidated income statement as incurred
+and according to the contribution determined by the plans. Further information is set out in Note 39.
+Termination benefits, such as employee reduction expenses, are recognised when, and only when, the Group demonstrably commits itself to
+terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic
+possibility of withdrawal.
+(z) Income tax
+Income tax comprises current and deferred tax. Current tax is calculated on taxable income by applying the applicable tax rates. Deferred tax is
+provided using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities for financial
+reporting purposes and the amounts used for taxation purposes only to the extent that it is probable that future taxable income will be available
+against which the assets can be utilised. Deferred tax is calculated on the basis of the enacted tax rates or substantially enacted tax rates that
+are expected to apply in the period when the asset is realised or the liability is settled. The effect on deferred tax of any changes in tax rates is
+charged or credited to the consolidated income statement, except for the effect of a change in tax rate on the carrying amount of deferred tax
+assets and liabilities which were previously charged or credited to other comprehensive income or directly in equity.
+The tax value of losses expected to be available for utilisation against future taxable income is set off against the deferred tax liability within the
+same legal tax unit and jurisdiction to the extent appropriate, and is not available for set off against the taxable profit of another legal tax unit.
+The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable
+that the related tax benefit will be realised.
+165
+(aa) Dividends
+(bb) Segment reporting
+Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial
+information provided regularly to the Group's chief operating decision maker for the purposes of allocating resources to, and assessing the
+performance of the Group's various lines of business.
+3 TURNOVER
+Turnover primarily represents revenue from the sales of refined petroleum products, chemical products, crude oil and natural gas.
+2019
+RMB million
+2018
+RMB million
+Gasoline
+699,202
+711,236
+Diesel
+Crude oil
+Dividends and distributions of profits proposed in the profit appropriation plan which will be authorized and declared after the balance sheet
+date, are not recognised as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends
+are recognised as a liability in the period in which they are declared.
+Basic chemical feedstock
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Operating leases
+Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to match them with the costs
+that they are intended to compensate.
+Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are
+credited to profit or loss on a straight-line basis over the expected lives of the related assets.
+164 Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(t) Borrowing costs
+Borrowing costs are expensed in the consolidated income statement in the period in which they are incurred, except to the extent that they are
+capitalised as being attributable to the construction of an asset which necessarily takes a period of time to get ready for its intended use.
+(u) Repairs and maintenance expenditure
+Repairs and maintenance expenditure is expensed as incurred.
+(v) Environmental expenditures
+Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations are expensed as incurred.
+Operating lease payments are charged to the consolidated income statement on a straight-line basis over the period of the respective leases.
+Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable and the costs can
+be reliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with
+respect to accrued liabilities and other potential exposures.
+Research and development expenditures that cannot be capitalised are expensed in the period in which they are incurred. Research and
+development expense amounted to RMB 9,395 million for the year ended 31 December 2019 (2018: RMB 7,956 million).
+(x) Leases
+A lease is a contract that a lessor transfers the right to use an identified asset for a period of time to a lessee in exchange for consideration.
+(i) As lessee
+The Group recognises a right-of-use asset at the date at which the leased asset is available for use by the Group, and recognises a lease
+liability measured at the present value of the remaining lease payments. The lease payments include fixed payments, the exercise price of
+a purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease
+term reflects the Group exercising that option, etc. Variable payments that are based on a percentage of sales are not included in the lease
+payments, and should be recognised in profit or loss when incurred. Lease liabilities to be paid within one year (including one year) from
+balance sheet date is presented in current liabilities.
+Right-of-use assets of the Group mainly comprise land. Right-of-use assets are measured at cost which comprises the amount of the initial
+measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the
+lessee, less any lease incentives received. The Group depreciates the right-of-use assets over the shorter of the asset's useful life and the
+lease term on a straight-line basis. When the recoverable amount of a right-of-use asset is less than its carrying amount, the carrying amount
+is reduced to the recoverable amount.
+Payments associated with short-term leases with lease terms within 12 months and all leases of low-value assets are recognised on a
+straight-line basis over the lease term as an expense in profit or loss or as cost of relevant assets, instead of recognising right-of-use assets
+and lease liabilities.
+(ii) As lessor
+A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a
+lease other than a finance lease.
+When the Group leases self-owned plants and buildings, equipment and machinery, lease income from an operating lease is recognised on a
+straight-line basis over the period of the lease. The Group recognises variable lease income which is based on a certain percentage of sales
+as rental income when occurred.
+(iii) Accounting policy applied until 31 December 2018
+Lease prepayments
+Lease prepayments represent land use rights paid to the relevant government authorities. Land use rights are carried at cost less
+accumulated amount charged to expense and impairment losses. The cost of lease prepayments is charged to expense on a straight-line
+basis over the respective periods of the rights.
+(w) Research and development expense
+Kerosene
+615,342
+594,008
+65,705
+65,566
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+5 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
+The following items are included in selling, general and administrative expenses:
+Operating lease charges
+Auditor's remuneration:
+- audit services
+- others
+Impairment losses:
+- trade accounts receivable
+- other receivables
+1,063
+6 PERSONNEL EXPENSES
+RMB million
+1,856
+2018
+RMB million
+12,297
+70
+94
+6
+9
+1,283
+(2)
+9
+607
+2019
+2019
+1,216
+64,503
+64,489
+553,848
+519,910
+214,911
+250,884
+191,636
+168,823
+Synthetic resin
+Synthetic fiber monomers and polymers
+124,271
+124,618
+80,100
+77,572
+Natural gas
+Others (i)
+53,839
+43,205
+367,339
+335,357
+2,900,488
+2,825,613
+(i) Others are primarily liquefied petroleum gas and other refinery and chemical by-products and joint products.
+4 OTHER OPERATING REVENUES
+Sale of materials and others
+Rental income
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+2019
+RMB million
+2018
+RMB million
+Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the
+Group will comply with all attached conditions.
+(s) Government grants
+Sales are recognised when control of the goods have transferred, being when the products are delivered to the customer. Advance from
+customers but goods not yet delivered is recorded as contract liabilities and is recognised as revenues when a customer obtains control over the
+relevant goods.
+Sales of goods
+Goodwill represents amounts arising on acquisition of subsidiaries, associates or joint ventures. Goodwill represents the difference between the
+cost of acquisition and the fair value of the net identifiable assets acquired.
+Prior to 1 January 2008, the acquisition of the non-controlling interests of a consolidated subsidiary was accounted for using the acquisition
+method whereby the difference between the cost of acquisition and the fair value of the net identifiable assets acquired (on a proportionate
+share) was recognised as goodwill. From 1 January 2008, any difference between the amount by which the non-controlling interest is adjusted
+(such as through an acquisition of the non-controlling interests) and the cash or other considerations paid is recognised in equity.
+Goodwill is stated at cost less accumulated impairment losses. Goodwill arising on a business combination is allocated to each cash-generating
+unit, or groups of cash-generating units, that is expected to benefit the synergies of the combination and is tested annually for impairment
+(Note 2(n)). In respect of associates or joint ventures, the carrying amount of goodwill is included in the carrying amount of the interest in the
+associate or joint venture and the investment as a whole is tested for impairment whenever there is objective evidence of impairment (Note 2(n)).
+(j) Financial assets
+(i) Classification and measurement
+The Group classifies financial assets into different categories depending on the business model for managing the financial assets and the
+contractual terms of cash flows of the financial assets: a) financial assets measured at amortised cost, b) financial assets measured at fair
+value through other comprehensive income ("FVOCI"), c) financial assets measured at fair value through profit or loss. A contractual cash flow
+characteristic which could have only a de minimis effect, or could have an effect that is more than de minimis but is not genuine, does not
+affect the classification of the financial asset.
+Financial assets are initially recognised at fair value. For financial assets measured at fair value through profit or loss, the relevant
+transaction costs are recognised in profit or loss. The transaction costs for other financial assets are included in the initially recognised
+amount. However, trade accounts receivable and bills receivable arising from sale of goods or rendering services, without significant financing
+component, are initially recognised based on the transaction price expected to be entitled by the Group.
+Debt instruments
+Debt instruments held by the Group mainly includes cash and cash equivalents, time deposits with financial institutions, receivables. These
+financial assets are measured at amortised cost and FVOCI.
+•
+Amortised cost: The business model for managing such financial assets by the Group are held for collection of contractual cash flows. The
+contractual cash flow characteristics are to give rise on specified dates to cash flows that are solely payments of principal and interest on
+the principal amount outstanding. Interest income from these financial assets is recognised using the effective interest rate method.
+• FVOCI: The business model for managing such financial assets by the Group are held for collection of contractual cash flows and for
+selling the financial assets, where the assets' cash flows represent solely payments of principal and interest on the principal amount
+outstanding. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment
+gains or losses, foreign exchange gains and losses and interest income calculated using the effective interest rate method, which are
+recognised in profit or loss.
+(i) Goodwill
+Equity instruments
+In addition, the Group designates some equity instruments that are not held for trading as financial assets at FVOCI, are presented in
+financial assets at FVOCI. The relevant dividends of these financial assets are recognised in profit or loss. When derecognised, the cumulative
+gain or loss previously recognised in other comprehensive income is transferred to retained earnings.
+(ii) Impairment
+The Group recognises a loss allowance for expected credit losses on a financial asset that is measured at amortised cost and a debt
+instrument that is measured at FVOCI.
+The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past
+events, current conditions and forecasts of future economic conditions.
+The Group measures the expected credit losses of financial instruments on different stages at each balance sheet date. For financial
+instruments that have no significant increase in credit risk since the initial recognition, on first stage, the Group measures the loss allowance
+at an amount equal to 12-month expected credit losses. If there has been a significant increase in credit risk since the initial recognition of
+a financial instrument but credit impairment has not occurred, on second stage, the Group recognises a loss allowance at an amount equal
+to lifetime expected credit losses. If credit impairment has occurred since the initial recognition of a financial instrument, on third stage, the
+Group recognises a loss allowance at an amount equal to lifetime expected credit losses.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+161
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(j) Financial assets (Continued)
+Equity instruments that the Group has no power to control, jointly control or exercise significant influence over, are measured at fair value
+through profit or loss and presented in financial assets at fair value through profit or loss.
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(d) Trade, bills and other receivables
+Trade, bills and other receivables are recognised initially at their transaction price, unless they contain significant financing components when
+they are recognised at fair value. They are subsequently measured at amortised cost using the effective interest method, less impairment losses
+for bad and doubtful debts (Note 2(j)). Trade, bills and other receivables are derecognised if the Group's contractual rights to the cash flows
+from these financial assets expire or if the Group transfers these financial assets to another party without retaining control or substantially all
+risks and rewards of the assets.
+(e) Inventories
+Inventories are stated at the lower of cost and net realisable value. Cost mainly includes the cost of purchase computed using the weighted
+average method and, in the case of work in progress and finished goods, direct labour and an appropriate proportion of production overheads.
+Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
+costs necessary to make the sale.
+(f) Property, plant and equipment
+An item of property, plant and equipment is initially recorded at cost, less accumulated depreciation and impairment losses (Note 2(n)). The cost
+of an asset comprises its purchase price, any directly attributable costs of bringing the asset to working condition and location for its intended
+use. The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when
+that cost is incurred, when it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the
+item can be measured reliably. All other expenditure is recognised as an expense in the consolidated income statement in the year in which it is
+incurred.
+Gains or losses arising from the retirement or disposal of an item of property, plant and equipment, other than oil and gas properties, are
+determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised as income or expense
+in the consolidated income statement on the date of retirement or disposal.
+Depreciation is provided to write off the cost amount of items of property, plant and equipment, other than oil and gas properties, over its
+estimated useful life on a straight-line basis, after taking into account its estimated residual value, as follows:
+Buildings
+Equipment, machinery and others
+Estimated
+usage period
+12 to 50 years
+4 to 30 years
+Estimated
+residuals rate
+3%
+3%
+Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis
+between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reassessed annually.
+(g) Oil and gas properties
+The Group uses the successful efforts method of accounting for its oil and gas producing activities. Under this method, costs of development
+wells, the related supporting equipment and proved mineral interests in properties are capitalised. The cost of exploratory wells is initially
+capitalised as construction in progress pending determination of whether the well has found proved reserves. The impairment of exploratory well
+costs occurs upon the determination that the well has not found proved reserves. The exploratory well costs are usually not carried as an asset
+for more than one year following completion of drilling, unless (i) the well has found a sufficient quantity of reserves to justify its completion
+as a producing well if the required capital expenditure is made; (ii) drilling of the additional exploratory wells is under way or firmly planned
+for the near future; or (iii) other activities are being undertaken to sufficiently progress the assessing of the reserves and the economic and
+operating viability of the project. All other exploration costs, including geological and geophysical costs, other dry hole costs and annual lease
+rentals to explore for or use oil and natural gas, are expensed as incurred. Capitalised costs of proved oil and gas properties are amortised on a
+unit-of-production method based on volumes produced and reserves.
+Management estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into
+consideration the anticipated method of dismantlement required in accordance with the industry practices and the future cash flows are adjusted
+to reflect such risks specific to the liability, as appropriate. These estimated future dismantlement costs are discounted at pre-tax risk-free rate
+and are capitalised as oil and gas properties, which are subsequently amortised as part of the costs of the oil and gas properties.
+(h) Construction in progress
+Construction in progress represents buildings, oil and gas properties, various plant and equipment under construction and pending installation,
+and is stated at cost less impairment losses (Note 2(n)). Cost comprises direct costs of construction as well as interest charges, and foreign
+exchange differences on related borrowed funds to the extent that they are regarded as an adjustment to interest charges, during the periods of
+construction.
+Construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.
+No depreciation is provided in respect of construction in progress.
+160
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(ii) Impairment (Continued)
+2018
+RMB million
+For financial instruments that have low credit risk at the balance sheet date, the Group assumes that there is no significant increase in credit
+risk since the initial recognition, and measures the loss allowance at an amount equal to 12-month expected credit losses.
+For trade accounts receivable and bills receivable and financial assets at FVOCI related to revenue, the Group measures the loss allowance at
+an amount equal to lifetime expected credit losses.
+For cash flow hedges, other than those covered by the preceding policy statements, that amount is reclassified from the cash flow hedge reserve
+to profit or loss as a reclassification adjustment in the same period or periods during which the hedged expected future cash flows affect profit
+or loss.
+If the amount that has been accumulated in the cash flow hedge reserve is a loss and the Group expects that all or a portion of that loss will not
+be recovered in one or more future periods, the Group immediately reclassifies the amount that is not expected to be recovered into profit or
+loss.
+When the hedging relationship no longer meets the risk management objective on the basis of which it qualified for hedge accounting (ie the
+entity no longer pursues that risk management objective), or when a hedging instrument expires or is sold, terminated, exercised, or there is no
+longer an economic relationship between the hedged item and the hedging instrument or the effect of credit risk starts to dominate the value
+changes that result from that economic relationship or no longer meets the criteria for hedge accounting, the Group discontinues prospectively
+the hedge accounting treatments. If the hedged future cash flows are still expected to occur, that amount remains in the cash flow hedge
+reserve and is accounted for as cash flow hedges. If the hedged future cash flows are no longer expected to occur, that amount is immediately
+reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment. A hedged future cash flow that is no longer highly
+probable to occur may still be expected to occur, if the hedged future cash flows are still expected to occur, that amount remains in the cash
+flow hedge reserve and is accounted for as cash flow hedges.
+(n) Impairment of assets
+The carrying amounts of assets, including property, plant and equipment, construction in progress, right-of-use assets and other assets, are
+reviewed at each balance sheet date to identify indicators that the assets may be impaired. These assets are tested for impairment whenever
+events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred,
+the carrying amount is reduced to the recoverable amount. For goodwill, the recoverable amount is estimated at each balance sheet date.
+The recoverable amount is the greater of the fair value less costs to disposal and the value in use. In determining the value in use, expected
+future cash flows generated by the asset 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. Where an asset does not generate cash inflows largely independent
+of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e.
+a cash-generating unit).
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+163
+Financial Statements (International)
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a hedged forecast
+transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the
+entity removes that amount from the cash flow hedge reserve and include it directly in the initial cost or other carrying amount of the asset or
+the liability. This is not a reclassification adjustment and hence it does not affect other comprehensive income.
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+The amount of the reduction is recognised as an expense in the consolidated income statement. Impairment losses recognised in respect of
+cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce
+the carrying amount of the other assets in the unit on a pro rata basis, except that the carrying value of an asset will not be reduced below its
+individual fair value less costs to disposal, or value in use, if determinable.
+Management assesses at each balance sheet date whether there is any indication that an impairment loss recognised for an asset, except in the
+case of goodwill, in prior years may no longer exist. An impairment loss is reversed if there has been a favourable change in the estimates used
+to determine the recoverable amount. A subsequent increase in the recoverable amount of an asset, when the circumstances and events that led
+to the write-down or write-off cease to exist, is recognised as an income. The reversal is reduced by the amount that would have been recognised
+as depreciation had the write-down or write-off not occurred. An impairment loss in respect of goodwill is not reversed.
+(o) Trade, bills and other payables
+Trade, bills and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would
+be immaterial, in which case they are stated at cost.
+(p) Interest-bearing borrowings
+Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
+interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the
+consolidated income statement over the period of borrowings using the effective interest method.
+(q) Provisions and contingent liability
+A provision is recognised for liability of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a
+past event, when it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made.
+When it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is
+disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only
+be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability
+of outflow of economic benefits is remote.
+Provisions for future dismantlement costs are initially recognised based on the present value of the future costs expected to be incurred in
+respect of the Group's expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities.
+Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest
+cost, is reflected as an adjustment to the provision and oil and gas properties.
+(r) Revenue recognition
+Revenue arises in the course of the Group's ordinary activities, and increases in economic benefits in the form of inflows that result in an
+increase in equity, other than those relating to contributions from equity participants.
+The Group sells crude oil, natural gas, petroleum and chemical products, etc. Revenue is recognised according to the expected consideration
+amount, when a customer obtains control over the relevant goods or services. To determine whether a customer obtains control of a promised
+asset, the Group shall consider indicators of the transfer of control, which include, but are not limited to, the Group has a present right to
+payment for the asset; the Group has transferred physical possession of the asset to the customer; the customer has the significant risks and
+rewards of ownership of the asset; the customer has accepted the asset.
+(n) Impairment of assets (Continued)
+The gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income.
+The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.
+(ii) The cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative change in the hedged
+expected future cash flows) from inception of the hedge.
+(i) The cumulative gain or loss on the hedging instrument from inception of the hedge; and
+The Group recognises the loss allowance accrued or written back in profit or loss.
+(iii) Derecognition
+The Group derecognises a financial asset when: a) the contractual right to receive cash flows from the financial asset expires; b) the Group
+transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset; c) the financial asset has been
+transferred and the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but the
+Group has not retained control.
+On derecognition of equity instruments at FVOCI, the difference between the carrying amounts and the sum of the consideration received
+and any accumulated gain or loss previously recognised in other comprehensive income, is recognised in retained earnings. While on
+derecognition of other financial assets, this difference is recognised in profit or loss.
+(k) Financial liabilities
+The Group, at initial recognition, classifies financial liabilities as either financial liabilities subsequently measured at amortised cost or financial
+liabilities at fair value through profit or loss.
+The Group's financial liabilities are mainly financial liabilities measured at amortised cost, including trade accounts payable and bills payable,
+other payables, and loans, etc. These financial liabilities are initially measured at the amount of their fair value after deducting transaction costs
+and use the effective interest rate method for subsequent measurement.
+Where the present obligations of financial liabilities are completely or partially discharged, the Group derecognises these financial liabilities or
+discharged parts of obligations. The differences between the carrying amounts and the consideration received are recognised in profit or loss.
+(I) Determination of fair value for financial instruments
+If there is an active market for financial instruments, the quoted price in the active market is used to measure fair values of the financial
+instruments. If no active market exists for financial instruments, valuation techniques are used to measure fair values. In valuation, the Group
+adopts valuation techniques that are applicable in the current situation and have sufficient available data and other information to support it,
+and selects input values that are consistent with the asset or liability characteristics considered by market participants in the transaction of
+relevant assets or liabilities, and gives priority to relevant observable input values. Use of unobservable input values where relevant observable
+input values cannot be obtained or are not practicable.
+(m)Derivative financial instruments and hedge accounting
+Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss on
+remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for hedge accounting.
+Hedge accounting is a method which recognises the offsetting effects on profit or loss (or other comprehensive income) of changes in the fair
+values of the hedging instrument and the hedged item in the same accounting period, to represent the effect of risk management activities.
+Hedged items are the items that expose the Group to risks of changes in future cash flows and that are designated as being hedged and that
+must be reliably measurable. The Group's hedged items include a forecast transaction that is settled with an undetermined future market price
+and exposes the Group to risk of variability in cash flows, etc.
+A hedging instrument is a designated derivative whose changes in cash flows are expected to offset changes in cash flows of the hedged item.
+Financial Statements (International)
+162 Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
+(m)Derivative financial instruments and hedge accounting (Continued)
+The hedging relationship meets all of the following hedge effectiveness requirements:
+(i) There is an economic relationship between the hedged item and the hedging instrument, which shares a risk and that gives rise to opposite
+changes in fair value that tend to offset each other.
+(ii) The effect of credit risk does not dominate the value changes that result from that economic relationship.
+(iii) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges
+and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. However, that designation
+does not reflect an imbalance between the weightings of the hedged item and the hedging instrument.
+Cash flow hedges
+Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component
+of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable forecast transaction,
+and could affect profit or loss. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective
+effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
+As long as a cash flow hedge meets the qualifying criteria for hedge accounting, the separate component of equity associated with the hedged
+item (cash flow hedge reserve) is adjusted to the lower of the following (in absolute amounts):
+For financial instruments on the first stage and the second stage, and that have low credit risk, the Group calculates interest income
+according to carrying amount without deducting the impairment allowance and effective interest rate. For financial instruments on the third
+stage, interest income is calculated according to the carrying amount minus amortised cost after the provision of impairment allowance and
+effective interest rate.
+Financial Statements (International)
+68,425
+Contributions to retirement schemes (Note 39)
+(335)
+(779)
+Tax effect of tax losses not recognised
+498
+609
+Write-down of deferred tax assets
+189
+188
+Adjustment of prior years
+Actual income tax expense
+(467)
+(719)
+Tax effect of utilisation of previously unrecognised tax losses and temporary differences
+17,894
+Note:
+(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the
+relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of
+15% through the year 2020.
+11 DIRECTORS' AND SUPERVISORS' EMOLUMENTS
+(a) Directors' and supervisors' emoluments
+The emoluments of every director and supervisor is set out below:
+Name
+Directors
+Dai Houliang
+Ma Yongsheng
+Li Yunpeng
+Yu Baocai
+Ling Yiqun
+20,213
+Liu Zhongyun (i)
+77
+Effect of income taxes at foreign operations
+3,385
+(6,244)
+17,894
+20,213
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+10 INCOME TAX EXPENSE (Continued)
+Reconciliation between actual income tax expense and the expected income tax expense at applicable statutory tax rates is as follows:
+2019
+2018
+Profit before taxation
+RMB million
+89,927
+(312)
+RMB million
+Expected PRC income tax expense at a statutory tax rate of 25%
+22,482
+24,778
+Tax effect of non-deductible expenses
+2,300
+2,351
+Tax effect of non-taxable income
+(4,458)
+(5,033)
+Tax effect of preferential tax rate (i)
+(2,003)
+(1,259)
+99,110
+Li Yong
+Independent non-executive directors
+Tang Min
+350
+350
+350
+1,322
+369
+989
+88
+1,446
+369
+880
+88
+1,337
+350
+369
+88
+1,331
+369
+889
+88
+1,346
+2,139
+5,670
+536
+1,400
+9,745
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+874
+350
+350
+350
+Fan Gang
+Cai Hongbin
+Johnny Karling Ng
+Supervisors
+Zhao Dong
+Jiang Zhenying
+Yang Changjiang
+Yu Xizhi
+Emoluments paid or receivable in respect of director's
+other services in connection with the management of the
+affairs of the Company or its subsidiary undertaking
+2019
+Retirement
+scheme
+contributions
+RMB'000
+Salaries,
+allowances and
+benefits in kind
+RMB'000
+Bonuses
+RMB'000
+Emoluments paid
+or receivable
+in respect of a
+person's services
+as a director,
+whether of the
+Company or
+its subsidiary
+undertaking
+Directors'/
+Supervisors' fee
+RMB'000
+Total
+RMB'000
+294
+1,173
+96
+369
+865
+88
+1,563
+350
+(719)
+27,176
+14,976
+(467)
+RMB million
+13,187
+5,883
+6,021
+5,723
+7,152
+242,535
+246,498
+Effective from
+13 January 2015
+RMB/Ton
+2,109.76
+1,411.20
+12,011
+2,105.20
+1,711.52
+1,218.00
+1,495.20
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+167
+Financial Statements (International)
+168
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+8 OTHER OPERATING EXPENSE, NET
+Government grants (i)
+1,948.64
+18,237
+16,247
+201,901
+RMB million
+69,817
+11,665
+81,482
+7 TAXES OTHER THAN INCOME TAX
+City construction tax (ii)
+Consumption tax (i)
+Education surcharge
+Resources tax
+Others
+Notes:
+(i) Consumption tax was levied based on sales quantities of taxable products, tax rate of products is presented as below:
+Products
+Gasoline
+Diesel
+Naphtha
+Solvent oil
+Lubricant oil
+Fuel oil
+Jet fuel oil
+(ii) City construction tax is levied on an entity based on its total paid amount of value-added tax and consumption tax.
+9,296
+77,721
+2019
+RMB million
+2018
+RMB million
+202,671
+Ineffective portion of change in fair value of cash flow hedges
+Salaries, wages and other benefits
+Net realised and unrealised (loss)/gain on derivative financial instruments not qualified as hedging
+Impairment losses on long-lived assets (ii)
+Fines, penalties and compensations
+Interest expense on lease liabilities
+6,954
+6,376
+(1,015)
+(493)
+5,939
+5,883
+9,646
+Accretion expenses (Note 35)
+1,418
+1,438
+Interest expense
+Less: Interest expense capitalised*
+17,003
+* Interest rates per annum at which borrowing costs were capitalised for construction in progress
+2.92% to 4.66%
+2.37% to 4.66%
+10 INCOME TAX EXPENSE
+Income tax expense in the consolidated income statement represents:
+Current tax
+Provision for the year
+- Adjustment of prior years
+Deferred taxation (Note 29)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+2019
+2018
+RMB million
+7,321
+Interest expense incurred
+RMB million
+2018
+Donations
+Others
+2019
+RMB million
+6,911
+2018
+RMB million
+7,539
+(222)
+(1,978)
+(4,384)
+191
+(345)
+(6,281)
+(1,918)
+(1,526)
+(173)
+(276)
+(209)
+(180)
+(96)
+(2,849)
+(436)
+(5,360)
+Notes:
+(i) Government grants for the years ended 31 December 2019 and 2018 primarily represent financial appropriation income and non-income tax refunds received from
+respective government agencies without conditions or other contingencies attached to the receipts of the grants.
+(ii) Impairment losses on long-lived assets for the year ended 31 December 2019 primarily represent impairment losses recognised in the refining segment of RMB 245
+million (2018: RMB 353 million), the marketing and distribution segment of RMB 80 million (2018: RMB 264 million), the chemicals segment of RMB 17 million (2018:
+RMB 1,374 million) and the exploration and production ("E&P") segment of RMB 3 million (2018: RMB 4,274 million). The primary factor resulting in the E&P segment
+impairment loss in the prior year was downward revision of oil and gas reserve in certain fields. E&P segment determines recoverable amounts of properties, plant and
+equipment relating to oil and gas producing activities, which include significant judgments and assumptions. The recoverable amounts were determined based on the
+present values of the expected future cash flows of the assets using a pre-tax discount rate 10.47% (2018: 10.47%). Further future downward revisions to the Group's
+oil price outlook would lead to further impairments which, in aggregate, are likely to be material. It is estimated that a general decrease of 5% in oil price, with all
+other variables held constant, would result in additional impairment loss on the Group's properties, plant and equipment relating to oil and gas producing activities by
+approximately RMB 184 million (2018: RMB 312 million). It is estimated that a general increase of 5% in operating cost, with all other variables held constant, would
+result in additional impairment loss on the Group's properties, plant and equipment relating to oil and gas producing activities by approximately RMB 180 million (2018:
+RMB 315 million). It is estimated that a general increase of 5% in discount rate, with all other variables held constant, would result in additional impairment loss on
+the Group's properties, plant and equipment relating to oil and gas producing activities by approximately RMB 7 million (2018: less RMB 5 million).
+9 INTEREST EXPENSE
+2019
+RMB million
+Loss on disposal of property, plant, equipment and other non-current assets, net
+Zhang Baolong
+Zou Huiping
+RMB million
+Financial Statements (International)
+170
+2018
+for the year ended 31 December 2019
+23,886
+23,728
+Carrying Amounts
+3,453
+3,741
+7,266
+7,955
+11,086
+11,125
+12,476
+13,772
+23,886
+13,772
+23,728
+517
+446
+non-controlling interests
+Net assets attributable to
+6,906
+7,481
+18,750
+20,529
+110,860
+111,250
+25,462
+28.106
+Share of net assets from associates
+12,476
+11,125
+11,086
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+179
+Financial Statements (International)
+2019
+2018
+RMB million
+CIR
+Zhongtian Synergetic Energy
+2019
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+RMB million
+2018
+SIBUR
+2019
+2018
+2019
+2018
+2019
+Sinopec Finance
+Pipeline Ltd
+Year ended 31 December
+Summarised statement of comprehensive income
+3,453
+3,741
+7,266
+7,955
+47,772
+47,456
+of the Company
+Net assets attributable to owners
+(721)
+Current liabilities
+1,828
+971
+49,961
+56,424
+170,796
+182,646
+16,359
+18,926
+39,320
+37,842
+6,712
+7,612
+RMB million
+2018
+2019
+RMB million
+31 December 31 December 31 December 31 December
+2019
+2018
+RMB million RMB million
+4,219
+7,477
+22,502
+31,634
+209,837
+180,383
+12,498
+13,245
+Current assets
+Non-current assets
+31 December 31 December 31 December
+2018
+2019
+2018
+RMB million RMB million RMB million
+31 December 31 December
+2018
+2019
+RMB million
+(1,020)
+54,023
+(170,621)
+(31,295)
+6,906
+7,481
+18,750
+20,529
+111,377
+111,696
+25,462
+28,106
+47,772
+47,456
+Net assets
+(673)
+(166)
+(31,436)
+(26,227)
+(58,628)
+(71,289)
+(332)
+(582)
+(3,026)
+(2,910)
+Non-current liabilities
+(961)
+(936)
+(7,252)
+(13,887)
+(23,293)
+(200,402)
+RMB million
+57,844
+1,879
+85
+54,865
+64,879
+Impairment losses for bad and doubtful debts are analysed as follows:
+Balance at 1 January
+Provision for the year
+Written back for the year
+Written off for the year
+Others
+Balance at 31 December
+2019
+2018
+RMB million
+94
+RMB million
+612
+1,566
+83
+(283)
+(77)
+(41)
+(19)
+7
+1,848
+606
+Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from
+Sinopec Group Company and fellow subsidiaries are repayable under the same terms.
+Trade accounts receivable and bills receivable (net of impairment losses for bad and doubtful debts) primarily represent receivables that are neither
+past due nor impaired. These receivables relate to a wide range of customers for whom there is no recent history of default.
+606
+Over three years
+124
+64
+50,108
+6,570
+3,170
+Amounts due from associates and joint ventures
+6,415
+4,321
+56,713
+57,599
+Less: Impairment losses for bad and doubtful debts
+Trade accounts receivable, net
+Bills receivable
+(1,848)
+(606)
+54,865
+56,993
+7,886
+54,865
+64,879
+The ageing analysis of trade accounts receivable and bills receivable (net of impairment losses for bad and doubtful debts) is as follows:
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+Within one year
+Between one and two years
+54,517
+64,317
+190
+353
+Between two and three years
+Information about the impairment of trade accounts receivable and bills receivable and the Group's exposure to credit risk can be found in Note 42.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+88,929
+2,576
+2,872
+195,024
+190,960
+(2,582)
+(6,376)
+192,442
+184,584
+The cost of inventories recognised as an expense in the consolidated income statement amounted to RMB 2,450,911 million for the year ended 31
+December 2019 (2018: RMB 2,366,199 million). It includes the write-down of inventories of RMB 1,616 million mainly related to finished goods
+(2018: RMB 5,535 million mainly related to crude oil, finished goods and work in progress of refined oil products and chemical products).
+28 PREPAID EXPENSES AND OTHER CURRENT ASSETS
+Other receivables
+Advances to suppliers
+Value-added input tax to be deducted
+Prepaid income tax
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+25,586
+26,455
+5,066
+5,937
+25,313
+21,331
+91,368
+300
+13,690
+85,469
+26 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
+Non-current assets
+Unlisted equity instruments
+Listed equity instruments
+Current assets
+Trade accounts receivable and bills receivable (i)
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+1,431
+90
+1,323
+127
+8,622
+10,143
+1,450
+Note:
+(i) As at 31 December 2019, bills receivable and certain trade accounts receivable were classified as financial assets at FVOCI, as the Group's business model is achieved
+both by collecting contractual cash flows and selling of these assets.
+27 INVENTORIES
+Crude oil and other raw materials
+Work in progress
+Finished goods
+Spare parts and consumables
+Less: Allowance for diminution in value of inventories
+31 December
+2019
+31 December
+RMB million
+2018
+RMB million
+88,465
+12,615
+43,728
+RMB million
+31 December
+(91,845)
+(6,921)
+(5,831)
+108,555
+144,369
+118,645
+2018
+RMB million
+2019
+RMB million
+136,963
+Transferred to property, plant and equipment
+Dry hole costs written off
+Additions
+Balance at 1 January
+(73,210)
+17 CONSTRUCTION IN PROGRESS
+At December 31, 2019 and December 31, 2018, the Group had no individual significant property, plant and equipment which were temporarily idle
+or pending for disposal.
+At December 31, 2019 and December 31, 2018, the Group had no individual substantial property, plant and equipment which have been pledged.
+The additions to oil and gas properties of the Group for the year ended 31 December 2019 included RMB 1,408 million (2018: RMB 1,567 million)
+of estimated dismantlement costs for site restoration (Note 35).
+16 PROPERTY, PLANT AND EQUIPMENT (Continued)
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+172
+622,409
+412,349
+140,360
+69,700
+At December 31, 2019 and December 31, 2018, the Group had no individual significant fully depreciated property, plant and equipment which were
+still in use.
+Reclassification to other long-term assets
+Impairment losses for the year
+(10,086)
+(10,066)
+RMB million
+RMB million
+Others
+Land
+Decrease
+Increase
+Balance at 1 January 2019
+Accumulated depreciation:
+Balance at 31 December 2019
+Decrease
+Increase
+Balance at 1 January 2019
+Change in accounting policy (Note 1(a))
+Cost:
+18 RIGHT-OF-USE ASSETS
+As at 31 December 2019, the amount of capitalised cost of exploratory wells included in construction in progress related to the exploration and
+production segment was RMB 8,961 million (2018: RMB 7,296 million). The geological and geophysical costs paid during the year ended 31
+December 2019 were RMB 4,024 million (2018: RMB 3,511 million).
+136,963
+173,482
+Balance at 31 December
+7
+1
+(19)
+46
+Exchange adjustments
+Disposals and others
+(28)
+(135)
+617,762
+405,419
+145,436
+66,907
+11
+Impairment losses for the year
+47,583
+36,289
+4,095
+Depreciation for the year
+1,165,498
+560,076
+550,288
+55,134
+Balance at 1 January 2019
+(1,510)
+(18,251)
+1,998
+1,165,498
+(570)
+(1,390)
+(16,331)
+78
+560,076
+550,288
+55,134
+Balance at 31 December 2018
+1,877
+43
+Exchange adjustments
+(125)
+(1,795)
+Written back on disposals
+(120)
+Reclassification to other long-term assets
+76
+494
+Reclassifications
+185
+Total
+RMB million
+87,967
+196
+292
+650,774
+411,121
+171,840
+67,813
+Balance at 31 December 2019
+Balance at 31 December 2018
+Balance at 1 January 2018
+Net book value:
+(12,223)
+728
+1,241,859
+40
+595,874
+(11,454)
+(6)
+667
+587,192
+58,793
+21
+(763)
+(91)
+(94)
+3
+Balance at 31 December 2019
+Exchange adjustments
+Written back on disposals
+Reclassification to other long-term assets
+(216)
+(216)
+Invest into the joint ventures and associated companies
+(246)
+(46)
+Reclassifications
+2019
+244,588
+244,588
+manufacturing petrochemical
+products
+10.00 Processing natural gas and
+ownership Principal activities
+interests
+PAO SIBUR Holding ("SIBUR") (i)
+Pipeline Co., Ltd. ("Pipeline Ltd")
+Sinopec Finance Company Limited
+("Sinopec Finance")
+Sinopec Sichuan To East China Gas
+Name of company
+% of
+The Group's principal associates are as follows:
+The Group's investments in associates are with companies primarily engaged in the oil and gas, petrochemical, and marketing and distribution
+operations in the PRC.
+20 INTEREST IN ASSOCIATES
+Key assumptions used for cash flow forecasts for these entities are the gross margin and sales volume. Management determined the budgeted gross
+margin based on the gross margin achieved in the period immediately before the budget period and management's expectation on the future trend
+of the prices of crude oil and petrochemical products. The sales volume was based on the production capacity and/or the sales volume in the period
+immediately before the budget period.
+50.00 Operation of natural gas pipelines
+and auxiliary facilities
+Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the
+above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial
+budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 11.0% to 11.9% (2018: 11.7% to
+12.3%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss
+was recognised.
+8,697
+1,088
+1,109
+1,004
+1,004
+2,541
+2,541
+4,043
+4,043
+RMB million
+RMB million
+31 December
+2018
+8,676
+Measurement
+method
+Equity method
+Country of
+incorporation
+PRC
+CIR
+SIBUR
+Sinopec Finance
+Pipeline Ltd
+Zhongtian Synergetic Energy
+Summarised financial information and reconciliation to their carrying amounts in respect of the Group's principal associates:
+20 INTEREST IN ASSOCIATES (Continued)
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+The Republic of
+Kazakhstan
+British Virgin
+Islands
+Equity method
+PRC
+PRC
+Equity method
+38.75 Mining coal and manufacturing of
+coal-chemical products
+50.00 Crude oil and natural gas
+extraction
+Zhongtian Synergetic Energy Company
+Limited ("Zhongtian Synergetic Energy")
+Caspian Investments Resources Ltd.
+("CIR")
+Russia
+Russia
+Equity method
+PRC
+PRC
+Equity method
+49.00 Provision of non-banking financial
+services
+Principal place
+of business
+PRC
+2019
+31 December
+(7,861)
+8,676
+8,697
+Balance at 1 January 2019
+Net book value:
+Balance at 31 December 2019
+Decrease
+Increase
+Balance at 1 January 2019
+Impairment loss:
+Balance at 31 December 2019
+(155)
+14,806
+5,702
+9,104
+(26)
+(129)
+14,961
+5,728
+9,233
+282,666
+34,188
+248,478
+(5,508)
+(748)
+(4,760)
+16,205
+7,555
+8,650
+271,969
+271,969
+27,381
+Balance at 31 December 2019
+27,381
+244,588
+239,374
+271,969
+267,860
+(7,861)
+16,537
+16,558
+RMB million
+2018
+31 December
+RMB million
+31 December
+2019
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Production and sale of petrochemical products
+Other units without individually significant goodwill
+Sinopec Beijing Yanshan Petrochemical Branch
+("Sinopec Yanshan")
+Shanghai SECCO Petrochemical Company Limited
+("Shanghai SECCO")
+Sinopec Zhenhai Refining and Chemical Branch
+("Sinopec Zhenhai")
+Principal activities
+Goodwill is allocated to the following Group's cash-generating units:
+Impairment tests for cash-generating units containing goodwill
+Less: Accumulated impairment losses
+Cost
+19 GOODWILL
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+174
+Financial Statements (International)
+Financial Statements (International)
+173
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+27,381
+28,486
+6,149
+Amounts due from Sinopec Group Company and fellow subsidiaries
+RMB million
+14,878
+13,990
+Current liabilities
+Current financial liabilities
+(1,280)
+(1,200)
+(237)
+(725)
+(57)
+(59)
+(7,445)
+(4,806)
+51,873
+(500)
+Other current liabilities
+(7,090)
+(4,939)
+(1,808)
+(1,822)
+(1,815)
+(2,124)
+(12,504)
+(12,217)
+(2,896)
+(2,507)
+Total current liabilities
+(500)
+50,548
+9,216
+10,453
+Other current assets
+11,977
+9.248
+4,937
+5,795
+2,336
+3,689
+11,311
+10,267
+4,501
+4,007
+Total current assets
+17,580
+16,636
+6,091
+7,377
+6,821
+7,095
+12,044
+11,197
+7,743
+9,117
+Non-current assets
+17,267
+19,271
+10,498
+11,086
+(8,370)
+(6,139) (2,045)
+(2,547)
+(1,872)
+(235)
+(2,109)
+(2,343)
+(31,408)
+(33,301)
+(4,960)
+(3,982)
+Net assets
+15,002
+17,035
+14,509
+15,681
+13,293
+11,785
+11,235
+12,746
+14,265
+16,118
+Net assets attributable to owners of the company
+15,002
+17,035
+14,509
+15,681
+12,829
+11,373
+11,235
+12,746
+(35)
+5,110
+(12,733)
+Total non-current liabilities
+(2,183)
+(19,949)
+(17,023)
+(3,396)
+(3,007)
+Non-current liabilities
+Other non-current liabilities
+Non-current financial liabilities
+(11,185)
+(12,454)
+(218)
+(125)
+(72)
+(29,445)
+(32,364)
+(4,592)
+(3,651)
+(290)
+(279)
+(35)
+(17)
+(1,984)
+(2,271)
+(1,963)
+(937)
+(368)
+(331)
+(11,475)
+14,265
+3,242
+733
+2,191
+2,022
+2,645
+1,711
+5,078
+16,810
+1,994
+1,142
+575
+699
+Dividends declared by associates
+1,259
+Total comprehensive income
+1,207
+468
+271
+219
+Share of profit from associates
+1,096
+1,011
+1,095
+915
+651
+1,040
+773
+443
+490
+116
+151
+6,410
+RMB million
+Turnover
+5,008
+4,746
+4,966
+4,536
+56,706
+59,927
+13,329
+12,235
+2,334
+2,856
+Profit for the year
+2,191
+2,022
+2,234
+1,868
+6,513
+10,400
+1,994
+1,142
+424
+583
+Other comprehensive income/(loss)
+411
+(157)
+(1,435)
+212
+292
+Share of other comprehensive income/(loss)
+from associates (ii)
+Russia
+Saudi Arabia
+Saudi Arabia
+Equity method
+PRC
+PRC
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+175
+Financial Statements (International)
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+21 INTEREST IN JOINT VENTURES (Continued)
+Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group's principal joint ventures:
+FREP
+BASF-YPC
+Taihu
+YASREF
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2019
+2018
+2019
+2018
+2019
+2018
+2019
+RMB million RMB million RMB million RMB million RMB million RMB million RMB million
+Sinopec SABIC Tianjin
+31 December 31 December
+2018
+2019
+2018
+RMB million RMB million RMB million
+Current assets
+Cash and cash equivalents
+5,603
+7,388
+1,154
+1,582
+4,485
+3,406
+Cyprus
+930
+Equity method
+Equity method
+PRC
+201
+(77)
+(144)
+641
+76
+58
+The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial associates accounted for using
+equity method in aggregate was RMB 4,565 million (2018: RMB 3,550 million) and RMB 155 million (2018: RMB 844 million) respectively. As at
+31 December 2019, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB 35,416
+million (2018: RMB 31,370 million).
+Notes:
+(i) Sinopec is able to exercise significant influence in SIBUR since Sinopec has a member in SIBUR's Board of Director and has a member in SIBUR's Management Board.
+(ii) Including foreign currency translation differences.
+21 INTEREST IN JOINT VENTURES
+The Group's principal interests in joint ventures are as follows:
+Name of entity
+Fujian Refining & Petrochemical
+Company Limited ("FREP")
+BASF-YPC Company Limited
+("BASF-YPC")
+Taihu Limited ("Taihu")
+Yanbu Aramco Sinopec Refining
+Company Ltd. ("YASREF")
+Sinopec SABIC Tianjin Petrochemical
+Company Limited
+("Sinopec SABIC Tianjin”)
+% of
+ownership Principal activities
+interests
+50.00 Manufacturing refining
+oil products
+40.00 Manufacturing and
+distribution of
+petrochemical products
+49.00 Crude oil and natural gas
+extraction
+37.50 Petroleum refining and
+processing business
+50.00 Manufacturing and
+distribution of
+petrochemical products
+Measurement
+method
+Equity method
+Country of
+incorporation
+PRC
+Principal place
+of business
+PRC
+Equity method
+PRC
+Amounts due from third parties
+16,118
+464
+(522)
+435
+(98)
+397
+The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial joint ventures accounted for
+using equity method in aggregate was RMB 1,737 million (2018: RMB 2,052 million) and RMB 168 million (2018: RMB 839 million) respectively.
+As at 31 December 2019, the carrying amount of all individually immaterial joint ventures accounted for using equity method in aggregate was RMB
+25,530 million (2018: RMB 22,982 million).
+Note:
+(i) Including foreign currency translation differences.
+176
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+22 LONG-TERM PREPAYMENTS AND OTHER ASSETS
+from joint ventures (i)
+Operating rights of service stations
+Note:
+(i) Others mainly comprise catalyst expenditures and improvement expenditures of property, plant and equipment.
+31 December
+2019
+31 December
+2018
+RMB million
+RMB million
+34,013
+34,934
+1,562
+26.513
+3,926
+Long-term receivables from and prepayment to Sinopec Group Company and fellow subsidiaries
+Prepayments for construction projects to third parties
+Others (i)
+Share of other comprehensive (loss)/income
+1,462
+823
+921
+(261)
+1.059
+767
+2,985
+1,735
+2,728
+1,507
+3,685
+(1,561)
+(759)
+1,645
+2,923
+Dividends declared by joint ventures
+Share of net profit/(loss) from joint ventures
+1,400
+1,200
+1,224
+1,226
+1,750
+384
+1,493
+694
+1,091
+1,235
+1,307
+(488)
+(682)
+5,502
+25,925
+24,459
+65,426
+2,357
+3,019
+(103)
+(82)
+19,536
+17,282
+34,013
+34,934
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+3,318
+1
+3,319
+25,550
+182
+25,732
+The financial assets are the structured deposits with financial institutions, which are presented as current assets since they are expected to be
+expired within 12 months from the end of the reporting period.
+24 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
+Derivative financial assets and derivative financial liabilities of the Group are primarily commodity futures and swaps contracts. See Note 42.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019 177
+Financial Statements (International)
+Financial Statements (International)
+178
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+25 TRADE ACCOUNTS RECEIVABLE AND BILLS RECEIVABLE
+31 December
+2019
+RMB million
+31 December
+2018
+14,345
+(1,105)
+17,282
+53,549
+91,408
+The cost of operating rights of service stations is charged to expense on a straight-line basis over the respective periods of the rights. The movement
+of operating rights of service stations is as follows:
+Operating rights of service stations
+Cost:
+Balance at 1 January
+Additions
+Decreases
+Balance at 31 December
+Accumulated amortisation:
+Balance at 1 January
+Additions
+Decreases
+Balance at 31 December
+Net book value at 31 December
+23 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
+Structured deposits
+Equity investments, listed and at quoted market price
+2019
+2018
+RMB million
+RMB million
+52,216
+48,613
+1,494
+3,948
+(161)
+(345)
+52,216
+Net assets attributable to non-controlling interests
+2,923
+(1,818)
+2018
+2019
+2018
+YASREF
+2019
+Sinopec SABIC Tianjin
+2018
+2019
+2018
+RMB million RMB million
+RMB million RMB million
+RMB million
+RMB million
+Taihu
+Turnover
+52,469
+19,590
+21,574
+15,222
+14,944
+75,940
+77,561
+20,541
+23,501
+Depreciation, depletion and amortisation
+(2,541)
+(2,250)
+57,047
+BASF-YPC
+2019
+RMB million RMB million
+RMB million RMB million
+2018
+412
+Share of net assets from joint ventures
+7,501
+8,518
+5,804
+6,272
+6,286
+5,573
+4,213
+4,780
+7,133
+8,059
+Carrying Amounts
+7,501
+8,518
+5,804
+6,272
+6,286
+5,573
+4,213
+4,780
+7,133
+8,059
+Summarised statement of comprehensive income
+Year ended 31 December
+FREP
+2019
+(1,474)
+(1,521)
+(629)
+(664)
+3,320
+3,493
+(1,292)
+(1,569)
+2,178
+3,916
+Tax expense
+Profit/(loss) for the year
+Other comprehensive (loss)/income
+Total comprehensive income/(loss)
+(197)
+(935)
+(579)
+(897)
+(708)
+(729)
+(8)
+(249)
+(533)
+(993)
+767
+2,985
+1,735
+2,728
+2,612
+2,764
+(1,300)
+3,625
+1,645
+2,314
+964
+(3,048)
+(2,823)
+(1,094)
+(1,104)
+Interest income
+124
+157
+32
+41
+94
+141
+58
+101
+171
+169
+Interest expense
+(597)
+(647)
+(26)
+(43)
+(265)
+(151)
+(1,470)
+(1,382)
+(134)
+(167)
+Profit/(loss) before taxation
+3,920
+1,848
+4,027
+274
+13 DIVIDENDS
+Dividends payable to shareholders of the Company attributable to the year represent:
+Dividends declared and paid during the year of RMB 0.12 per share (2018: RMB 0.16 per share)
+Dividends declared after the balance sheet date of RMB 0.19 per share (2018: RMB 0.26 per share)
+RMB million
+2019
+2018
+for the year ended 31 December 2019
+RMB million
+19,371
+23,004
+31,479
+37,533
+50,850
+Pursuant to the Company's Articles of Association and a resolution passed at the Directors' meeting on 23 August 2019, the directors authorised to
+declare the interim dividends for the year ending 31 December 2019 of RMB 0.12 (2018: RMB 0.16) per share totaling RMB 14,529 million (2018:
+RMB 19,371 million). Dividends were paid on 17 September 2019.
+14,529
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+For the year ended 31 December 2019, the five highest paid individuals in the Company included one director and four senior management. The
+emolument paid to each of one director and four senior management was above RMB 1,000 thousand. The total salaries, wages and other benefits
+was RMB 7,294 thousand, and the total amount of their retirement scheme contributions was RMB 448 thousand. For the year ended 31 December
+2018, the five highest paid individuals in the Company included two supervisors and three senior management.
+985
+298
+636
+74
+1,008
+1,366
+2,997
+351
+1,382
+6,096
+(i) Mr. Liu Zhongyun was elected to be director from 15 May 2018. Due to change of working arrangement, Mr. Liu Zhongyun has tendered his resignation as
+executive director, member of Strategy Committee of the Board and Senior Vice President of the Company from 9 December 2019.
+(ii) Mr. Wang Zhigang ceased being director from 29 January 2018; Mr. Zhang Haichao ceased being director from 29 January 2018.
+(iii) Mr. Jiao Fangzheng ceased being director from 7 June 2018.
+(iv) Mr. Jiang Xiaoming ceased being independent non-executive director from 15 May 2018; Mr. Andrew Y. Yan ceased being independent non-executive director from
+15 May 2018.
+12 SENIOR MANAGEMENT'S EMOLUMENTS
+Pursuant to a resolution passed at the director's meeting on 27 March 2020, final dividends in respect of the year ended 31 December 2019 of
+RMB 0.19 (2018: RMB 0.26) per share totaling RMB 23,004 million (2018: RMB 31,479 million) were proposed for shareholders' approval at the
+Annual General Meeting. Final cash dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date.
+Dividends payable to shareholders of the Company attributable to the previous financial year, approved during the year represent:
+74
+Final cash dividends in respect of the previous financial year, approved during the year of
+RMB 0.26 per share (2018: RMB 0.40 per share)
+2018
+4,284
+(12,500)
+2,159
+(10,341)
+853
+(196)
+(974)
+657
+(130)
+600
+6,111
+(1,170)
+4,941
+(11,770)
+730
+5,258
+Effective portion of changes in fair value of hedging
+instruments recognised during the year
+Reclassification adjustments for amounts transferred
+to the consolidated income statement
+Net movement during the year recognised in other
+comprehensive income (i)
+Cash flow hedges:
+RMB million
+RMB million
+31,479
+48,428
+Pursuant to the shareholders' approval at the Annual General Meeting on 9 May 2019, a final dividend of RMB 0.26 per share totaling RMB 31,479
+million according to total shares on 10 June 2019 was approved. All dividends have been paid in the year ended 31 December 2019.
+Pursuant to the shareholders' approval at the Annual General Meeting on 15 May 2018, a final dividend of RMB 0.40 per share totaling RMB 48,428
+million according to total shares on 4 June 2018 was approved. All dividends have been paid in the year ended 31 December 2018.
+14 OTHER COMPREHENSIVE INCOME
+2019
+2018
+Before tax
+amount
+RMB million
+Tax
+effect
+RMB million
+Net of tax
+amount
+RMB million
+Before tax
+amount
+RMB million
+Tax
+effect
+RMB million
+Net of tax
+amount
+RMB million
+2019
+613
+298
+340
+Johnny Karling Ng
+Jiang Xiaoming (iv)
+Andrew Y. Yan (iv)
+Supervisors
+Zhao Dong
+Jiang Zhenying
+Yang Changjiang
+Zhang Baolong
+Zou Huiping
+Cai Hongbin
+Zhou Hengyou
+Notes:
+Emoluments paid or receivable in respect of director's
+other services in connection with the management of the
+affairs of the Company or its subsidiary undertaking
+Salaries,
+allowances and
+benefits in kind
+RMB'000
+224
+Emoluments paid
+or receivable
+in respect of a
+person's services
+as a director,
+whether of the
+Company or
+its subsidiary
+undertaking
+Yu Renming
+Yu Xizhi
+Total
+Fan Gang
+Tang Min
+Independent non-executive directors
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+(a) Directors' and supervisors' emoluments (Continued)
+The emoluments of every director and supervisor is set out below: (Continued)
+Name
+Directors
+Dai Houliang
+Li Yunpeng
+Yu Baocai
+Ma Yongsheng
+Ling Yiqun
+Liu Zhongyun (i)
+Li Yong
+Wang Zhigang (ii)
+Zhang Haichao (ii)
+Jiao Fangzheng (iii)
+Bonuses
+RMB'000
+2018
+Retirement
+scheme
+contributions
+RMB'000
+Directors'/
+Supervisors' fee
+233
+233
+233
+233
+125
+125
+125
+125
+298
+663
+74
+1,035
+174
+122
+44
+333
+2,029
+333
+333
+Total
+RMB'000
+RMB'000
+179
+65
+468
+53
+3
+328
+14
+21
+456
+6
+395
+483
+333
+(9,741)
+11 DIRECTORS' AND SUPERVISORS' EMOLUMENTS (Continued)
+(39)
+2,387
+1,783,260
+Balance at 1 January 2019
+122,041
+695,724
+965,495
+147
+965,495
+1,783,260
+160
+1,408
+3,856
+Transferred from construction in progress
+6,192
+31,378
+Additions
+695,724
+122,041
+2,142
+1,634
+138
+(1,772)
+Reclassification to other long-term assets
+Disposals
+Exchange adjustments
+Balance at 31 December 2018
+(483)
+(3,828)
+(4,311)
+(3,183)
+(146)
+(18,323)
+(21,652)
+98
+54,275
+5,424
+91,845
+Reclassifications
+1,051
+1,008,223
+1,864,268
+Accumulated depreciation:
+Balance at 1 January 2018
+52,200
+495,817
+529,191
+1,077,208
+Depreciation for the year
+4,038
+48,616
+47,250
+Changes in the fair value of instruments at fair value
+through other comprehensive income
+99,904
+Impairment losses for the year
+780
+73,210
+(15,253)
+(1,549)
+667
+727,552
+(76)
+Invest into the joint ventures and associated companies
+(8)
+(303)
+(311)
+Reclassification to other long-term assets
+(748)
+(729)
+(1,477)
+Disposals
+(237)
+Exchange adjustments
+42
+Balance at 31 December 2019
+128,493
+(13,467)
+71
+45,103
+(975)
+3,741
+Foreign currency translation differences
+1,480
+1,480
+3,399
+3,399
+Other comprehensive income
+6,742
+(1,162)
+5,580
+(8,652)
+2,028
+(6,624)
+Note:
+(i) As at 31 December 2019, cash flow hedge reserve amounted to a gain of RMB 1,102 million (31 December 2018: a loss of RMB 4,932 million), of which a gain of
+RMB 1,037 million was attribute to shareholders of the Company (31 December 2018: a loss of RMB 4,917 million).
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019 171
+(229)
+Financial Statements (International)
+(240)
+(810)
+8
+(31)
+(41)
+24,366
+(12)
+(53)
+Net movement during the year recognised in other
+comprehensive income
+(39)
+8
+(31)
+(41)
+(12)
+(53)
+Share of other comprehensive loss of associates and
+joint ventures
+(810)
+Financial Statements (International)
+11
+for the year ended 31 December 2019
+121,071,209,646
+121,071,209,646
+Plants and
+buildings
+RMB million
+Oil and gas,
+properties
+RMB million
+667,657
+1,567
+Total
+RMB million
+Balance at 1 January 2018
+Additions
+120,013
+221
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+940,312
+3,856
+1,727,982
+5,644
+Reclassifications
+Transferred from construction in progress
+121,071,209,646
+121,071,209,646
+Number of shares Number of shares
+Equipment,
+machinery
+and others
+RMB million
+2018
+The calculation of diluted earnings per share for the year ended 31 December 2019 is based on the profit attributable to ordinary shareholders of
+the Company (diluted) of RMB 57,465 million (2018: RMB 61,618 million) and the weighted average number of shares of 121,071,209,646 (2018:
+121,071,209,646) calculated as follows:
+(i) Profit attributable to ordinary shareholders of the Company (diluted)
+The calculation of basic earnings per share for the year ended 31 December 2019 is based on the profit attributable to ordinary shareholders
+of the Company of RMB 57,465 million (2018: RMB 61,618 million) and the weighted average number of shares of 121,071,209,646 (2018:
+121,071,209,646) during the year.
+Profit attributable to ordinary shareholders of the Company
+Profit attributable to ordinary shareholders of the Company (diluted)
+(ii) Weighted average number of shares (diluted)
+15 BASIC AND DILUTED EARNINGS PER SHARE
+Weighted average number of shares (diluted) at 31 December
+Weighted average number of shares at 31 December
+Cost:
+2019
+RMB million
+57,465
+57,465
+2018
+RMB million
+61,618
+61,618
+2019
+16 PROPERTY, PLANT AND EQUIPMENT
+31 December
+2018
+RMB million
+352,794
+Note:
+15,625
+55,882
+281,287
+At 31 December 2019 and 2018, capital commitments of the Group are as follows:
+138,088
+63,967
+31 December
+2018
+RMB million
+Authorised and contracted for (i)
+Authorised but not contracted for
+These capital commitments relate to oil and gas exploration and development, refining and petrochemical production capacity expansion projects,
+the construction of service stations and oil depots and investment commitments.
+141,045
+54,392
+202,055
+195,437
+31 December
+2019
+RMB million
+31 December
+2019
+RMB million
+Capital commitments
+Management optimises the structure of the Group's capital, which comprises of equity and debts. In order to maintain or adjust the capital structure
+of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce debt, or adjust
+the proportion of short-term and long-term loans. Management monitors capital on the basis of the debt-to-capital ratio, which is calculated by
+dividing long-term loans (excluding current portion), including long-term debts and loans from Sinopec Group Company and fellow subsidiaries, by
+the total of equity attributable to shareholders of the Company and long-term loans (excluding current portion), and liability-to-asset ratio, which is
+calculated by dividing total liabilities by total assets. Management's strategy is to make appropriate adjustments according to the Group's operating
+and investment needs and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group
+at a range considered reasonable. As at 31 December 2019, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 7.4% (2018:
+11.5%) and 50.1% (2018: 46.2%), respectively.
+Later than one year but not later than five years
+During the year ended 31 December 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a result of exercise
+of conversion by the holders of the 2011 Convertible Bonds.
+(i) The investment commitments of the Group is RMB 6,100 million (2018: RMB 5,553 million).
+In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus issues of 2 shares
+converted from the retained earnings, and 1 share transferred from the share premium for every 10 existing shares.
+During the year ended 31 December 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB 1.00 each, as a result of
+exercise of conversion by the holders of the 2011 Convertible Bonds.
+During the year ended 31 December 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB 1.00 each, as a result of
+exercise of conversion by the holders of the 2011 Convertible Bonds.
+All A shares and H shares rank pari passu in all material aspects.
+Capital management
+The schedule of the contractual maturities of loans and commitments are disclosed in Notes 30 and 37, respectively.
+Later than five years
+There were no changes in the management's approach to capital management of the Group during the year. Neither the Company nor any of its
+subsidiaries is subject to externally imposed capital requirements.
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+37 COMMITMENTS AND CONTINGENT LIABILITIES
+Operating lease commitments
+The Group leases land and other assets under non-cancellable operating leases expiring within three months to thirty years. These operating leases
+do not contain provisions for contingent lease rentals. None of the rental agreements contains escalation provisions that may require higher future
+rental payments.
+From 1 January 2019, the Group has recognised right-of-use assets for these leases, except for short-term and low-value leases, see Note 1(a) and
+Note 18 for further information.
+As at 31 December 2019 and 2018, the future minimum lease payments under operating leases are as follows:
+Within one year
+184 Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Commitments to joint ventures
+At 31 December 2019 and 2018, the guarantees by the Group in respect of facilities granted to the parties below are as follows:
+Exploration and production licenses
+1,400
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+185
+Financial Statements (International)
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+37 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
+Contingent liabilities
+Joint ventures
+Associates (ii)
+Others (iii)
+31 December
+2019
+31 December
+2018
+RMB million
+7,100
+RMB million
+5,033
+On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the Placing") with a par value of RMB 1.00 each at the Placing Price
+of HKD 8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD 24,042,227,300.00 and the aggregate net
+proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD 23,970,100,618.00.
+10,140
+852
+845
+1,309
+28
+29
+Exploration licenses for exploration activities are registered with the Ministry of Natural Resources. The maximum term of the Group's exploration
+licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term.
+The Group is obligated to make progressive annual minimum exploration investment relating to the exploration blocks in respect of which the license
+is issued. The Ministry of Natural Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant
+authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum
+term of production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group's
+production license is renewable upon application by the Group 30 days prior to expiration.
+The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Natural Resources annually
+which are expensed. Expenses recognised were approximately RMB 179 million for the year ended 31 December 2019 (2018: RMB 231 million).
+Estimated future annual payments are as follows:
+Within one year
+Between one and two years
+Between two and three years
+Between three and four years
+Between four and five years
+Thereafter
+31 December
+2019
+31 December
+2018
+Pursuant to certain of the joint venture agreements entered into by the Group, the Group is obliged to purchase products from the joint ventures
+based on market prices.
+RMB million
+302
+380
+69
+79
+34
+33
+30
+28
+RMB million
+During the year ended 31 December 2012, the Company issued 117,724,450 listed A shares with a par value of RMB 1.00 each, as a result of
+conversion by the holders of the 2011 Convertible Bonds.
+3,324
+During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a result of exercise of
+188,292 warrants entitled to the Bonds with Warrants.
+Financial liabilities carried at amortised costs
+Taxes other than income tax
+31 December
+2019
+RMB million
+4,769
+612
+31 December
+2018
+RMB million
+7,312
+634
+50,612
+54,992
+22,778
+22,852
+78,771
+85,790
+66,075
+80,361
+144,846
+Other payables
+Payables for constructions
+Interest payable
+Salaries and welfare payable
+12,168
+6,416
+192,757
+31 December
+2019
+RMB million
+31 December
+2018
+Within 1 month or on demand
+Between 1 month and 6 months
+Over 6 months
+RMB million
+166,151
+185,377
+8,808
+6,670
+5,607
+199,792
+192,757
+33 CONTRACT LIABILITIES
+As at 31 December 2019, the Group's contract liabilities primarily represent advances from customers. Related performance obligations are satisfied
+and revenue is recognised within one year.
+34 OTHER PAYABLES
+182,763
+During the year ended 31 December 2011, the Company issued 34,662 listed A shares with a par value of RMB 1.00 each, as a result of conversion
+by the holders of the 2011 Convertible Bonds.
+35 PROVISIONS
+Balance at 1 January
+Registered, issued and fully paid
+95,557,771,046 listed A shares (2018: 95,557,771,046) of RMB 1.00 each
+25,513,438,600 listed H shares (2018: 25,513,438,600) of RMB 1.00 each
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+95,558
+25,513
+95,558
+25,513
+121,071
+121,071
+The Company was established on 25 February 2000 with a registered capital of 68.8 billion domestic state-owned shares with a par value of RMB 1.00
+each. Such shares were issued to Sinopec Group Company in consideration for the assets and liabilities transferred to the Company (Note 1).
+Pursuant to the resolutions passed at an Extraordinary General Meeting held on 25 July 2000 and approvals from relevant government authorities,
+the Company is authorised to increase its share capital to a maximum of 88.3 billion shares with a par value of RMB 1.00 each and offer not more
+than 19.5 billion shares with a par value of RMB 1.00 each to investors outside the PRC. Sinopec Group Company is authorised to offer not more
+than 3.5 billion shares of its shareholdings in the Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors
+outside the PRC would be converted into H shares.
+In October 2000, the Company issued 15,102,439,000 H shares with a par value of RMB 1.00 each, representing 12,521,864,000 H shares and
+25,805,750 American Depositary Shares ("ADSS", each representing 100 H shares), at prices of HKD 1.59 per H share and USD 20.645 per ADS,
+respectively, by way of a global initial public offering to Hong Kong and overseas investors. As part of the global initial public offering, 1,678,049,000
+state-owned ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong Kong and
+overseas investors.
+In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to natural
+persons and institutional investors in the PRC.
+36 SHARE CAPITAL
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+Provision for the year
+Accretion expenses
+Decrease for the year
+Exchange adjustments
+Balance at 31 December
+2019
+RMB million
+42,007
+1,408
+1,418
+2018
+RMB million
+39,407
+1,567
+Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has mainly committed to the PRC
+government to establish certain standardised measures for the dismantlement of its oil and gas properties by making reference to the industry
+practices and is thereafter constructively obligated to take dismantlement measures of its oil and gas properties.
+Movement of provision of the Group's obligations for the dismantlement of its oil and gas properties is as follow:
+1,438
+(598)
+44
+193
+42,438
+42,007
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+183
+Financial Statements (International)
+(2,439)
+7,197
+16,141
+17,240
+•
+The Company has entered into agreements with Sinopec Group Company effective from 1 January 2000 under which the Group has been
+granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group Company.
+The Company has entered into a service stations franchise agreement with Sinopec Group Company effective from 1 January 2000 under
+which its service stations and retail stores would exclusively sell the refined products supplied by the Group.
+188
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+38 RELATED PARTY TRANSACTIONS (Continued)
+(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
+•
+On the basis of a series of continuing connected transaction agreements signed in 2000, the Company and Sinopec Group Company have
+signed the Fifth Supplementary Agreement and the Fourth Revised Memorandum of land use rights leasing contract on 24 August 2018,
+which took effect on 1 January 2019 and made adjustment to "Mutual Supply Agreement”, “Agreement for Provision of Cultural and
+Educational, Health Care and Community Services", "Buildings Leasing Contract", "Intellectual Property Contract" and "Land Use Rights
+Leasing Contract", etc.
+Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures included in the following accounts captions
+are summarised as follows:
+Trade accounts receivable and bills receivable
+Financial assets at fair value through other comprehensive income
+Prepaid expenses and other current assets
+Long-term prepayments and other assets
+Total
+Trade accounts payable and bills payable
+Contract liabilities
+•
+• The Company has entered into a series of lease agreements with Sinopec Group Company to lease certain lands and buildings effective
+on 1 January 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively. The Company and Sinopec Group
+Company can renegotiate the rental amount every three years for land. The Company and Sinopec Group Company can renegotiate the rental
+amount for buildings every year. However such amount cannot exceed the market price as determined by an independent third party.
+The Company has entered into a non-exclusive "Agreement for Provision of Cultural and Educational, Health Care and Community Services"
+with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the Group with certain
+cultural, educational, health care and community services on the same pricing terms and termination conditions as described in the above
+Mutual Provision Agreement.
+(4) where none of the above is applicable, the price to be agreed between the parties, which shall be based on a reasonable cost incurred in
+providing such services plus a profit margin not exceeding 6%.
+(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
+Notes:
+(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
+(ii) Purchases represent the purchase of materials and utility supplies directly related to the Group's operations such as the procurement of raw and ancillary
+materials and related services, supply of water, electricity and gas.
+(iii) Transportation and storage represent the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.
+(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well
+measurement services.
+(v) Production related services represent ancillary services rendered in relation to the Group's operations such as equipment repair and general maintenance,
+insurance premium, technical research, communications, firefighting, security, product quality testing and analysis, information technology, design and engineering,
+construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management,
+environmental protection and management services.
+(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation,
+accommodation, canteens, and property maintenance.
+(vii) Operating lease charges represent the rental incurred for operating leases in respect of land, buildings and equipment leased from Sinopec Group Company and
+fellow subsidiaries, associates and joint ventures. No lease charges have incurred during the current year because of the adoption of IFRS 16 Leases.
+Other payables
+(viii) Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities
+owned by Sinopec Group Company.
+(x) Interest expense represents interest charges on the loans obtained from Sinopec Group Company and fellow subsidiaries.
+(xi) The Group obtained loans, discounted bills and others from Sinopec Group Company and fellow subsidiaries.
+In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec
+Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell
+certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2019.
+The terms of these agreements are summarised as follows:
+• The Company has entered into a non-exclusive "Agreement for Mutual Provision of Products and Ancillary Services" ("Mutual Provision
+Agreement") with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the
+Group with certain ancillary production services, construction services, information advisory services, supply services and other services and
+products. While each of Sinopec Group Company and the Company is permitted to terminate the Mutual Provision Agreement upon at least
+six months notice, Sinopec Group Company has agreed not to terminate the agreement if the Group is unable to obtain comparable services
+from a third party. The pricing policy for these services and products provided by Sinopec Group Company to the Group is as follows:
+•
+(1) the government-prescribed price;
+(2) where there is no government-prescribed price, the government-guidance price;
+(3) where there is neither a government-prescribed price nor a government-guidance price, the market price; or
+(ix) Interest income represents interest received from deposits placed with Sinopec Finance and Sinopec Century Bright Capital Investment Limited, finance companies
+controlled by Sinopec Group Company. The applicable interest rate is determined in accordance with the prevailing saving deposit rate. The balance of deposits at
+31 December 2019 was RMB 35,707 million (2018: RMB 41,057 million).
+38 RELATED PARTY TRANSACTIONS (Continued)
+Other long-term liabilities
+and fellow subsidiaries
+171,402
+270,218
+125,614
+Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term
+loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated
+with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 30.
+As at 31 December 2019, the current portion of long-term loans mainly include an interest-free loan with a maturity period of 20 years
+amounting to RMB 35,560 million from Sinopec Group Company (a state-owned enterprise) through Sinopec Finance. This borrowing is a special
+arrangement to reduce financing costs and improve liquidity of the Company during its initial global offering in 2000.
+As at and for the year ended 31 December 2019, and as at and for the year ended 31 December 2018, no individually significant impairment
+losses for bad and doubtful debts were recognised in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates
+and joint ventures.
+(b) Key management personnel emoluments
+Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
+Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensation is as follows:
+Short-term employee benefits
+Retirement scheme contributions
+2019
+RMB'000
+9,209
+536
+2018
+RMB'000
+5,745
+351
+9,745
+6,096
+(c) Contributions to defined contribution retirement plans
+The Group participates in various defined contribution retirement plans organised by municipal and provincial governments for its staff. The
+details of the Group's employee benefits plan are disclosed in Note 39. As at 31 December 2019 and 2018, the accrual for the contribution to
+post-employment benefit plans was not material.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+42,516
+9,626
+31,665
+43,289
+Long-term loans excluding current portion from Sinopec Group Company and fellow subsidiaries
+Lease liabilities (including to be paid within one year)
+Total
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+12,968
+407
+7,555
+12,723
+7,665
+Short-term loans and current portion of long-term loans from Sinopec Group Company
+734
+26,832
+38,702
+25,296
+17,530
+4,464
+3,273
+18,160
+12,470
+23,482
+24,398
+for the year ended 31 December 2019
+Financial Statements (International)
+Production related services
+Ancillary and social services
+Operating lease charges for land
+Operating lease charges for buildings
+Other operating lease charges
+Agency commission income
+Interest income
+Interest expense
+Net deposits withdrawn from related parties
+Net funds obtained from related parties
+Note
+2019
+(i)
+RMB million
+295,532
+2018
+RMB million
+272,789
+(ii)
+197,308
+Exploration and development services
+Transportation and storage
+Purchases
+Sales of goods
+Management monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss will occur, and recognises any
+such losses under guarantees when those losses are reliably estimable. At 31 December 2019 and 2018, the Group estimates that there is no need
+to pay for the guarantees. Thus no liability has been accrued for a loss related to the Group's obligation under these guarantee arrangements.
+Notes:
+(ii) The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy Company Limited ("Zhongtian Synergetic Energy")
+by banks amount to RMB 17,050 million. As at 31 December 2019, the amount withdrawn by Zhongtian Synergetic Energy and guaranteed by the Group was RMB
+10,140 million (2018: RMB 12,168 million).
+(iii) The Group provided a guarantee in respect to the loan of New Bright International Development Limited borrowed from Sinopec Overseas Oil & Gas Limited. As at 31
+December 2019, the loan agreement was terminated, in consequence, the guarantee agreement was terminated.
+Environmental contingencies
+Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial
+position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement
+of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable
+uncertainties which affect management's ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature
+and extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development
+areas, whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of alternative remediation strategies, (iv)
+changes in environmental remediation requirements, and (v) the identification of new remediation sites. The amount of such future cost is
+indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective
+actions that may be required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot
+reasonably be estimated at present, and could be material.
+The Group paid normal routine pollutant discharge fees of approximately RMB 9,235 million in the consolidated financial statements for the year
+ended 31 December 2019 (2018: RMB 7,940 million).
+Legal contingencies
+192,224
+The Group is defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course of business. Management
+has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other proceedings and believes that any resulting
+liabilities will not have a material adverse effect on the financial position, operating results or cash flows of the Group.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+38 RELATED PARTY TRANSACTIONS
+Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control or jointly control the party or exercise
+significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to
+control or common control. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their
+close family members) or other entities and include entities which are under the significant influence of related parties of the Group where those
+parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related
+party of the Group.
+(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
+The Group is part of a larger group of companies under Sinopec Group Company, which is controlled by the PRC government, and has significant
+transactions and relationships with Sinopec Group Company and fellow subsidiaries. Because of these relationships, it is possible that the terms
+of these transactions are not the same as those that would result from transactions among wholly unrelated parties.
+The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were carried
+out in the ordinary course of business are as follows:
+186
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+(iii)
+7,319
+1,334
+1,110
+(ix)
+(xi)
+5,350
+6,457
+3,438
+31,684
+The amounts set out in the table above in respect of the year ended 31 December 2019 and 2018 represent the relevant costs and income as
+determined by the corresponding contracts with the related parties.
+Included in the transactions disclosed above, for the year ended 31 December 2019 are: a) purchases by the Group from Sinopec Group
+Company and fellow subsidiaries amounting to RMB 159,086 million (2018: RMB 140,427 million) comprising purchases of products and
+services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB 142,433
+million (2018: RMB 123,772 million), ancillary and social services provided by Sinopec Group Company and fellow subsidiaries of RMB 3,097
+million (2018: RMB 6,664 million), lease charges for land, buildings and others paid by the Group of RMB 11,330 million, RMB 509 million and
+RMB 383 million (2018: RMB 7,636 million, RMB 643 million and RMB 602 million), respectively and interest expenses of RMB 1,334 million
+(2018: RMB 1,110 million); and b) sales by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB 74,453 million
+(2018: RMB 59,472 million), comprising RMB 73,365 million (2018: RMB 58,606 million) for sales of goods, RMB 1,066 million (2018: RMB
+848 million) for interest income and RMB 22 million (2018: RMB 18 million) for agency commission income.
+For the year ended 31 December 2019, no individually significant right-of-use assets were leased from Sinopec Group Company and fellow
+subsidiaries, associates and joint ventures by the Group. The interest expense recognised for the year ended 31 December 2019 on lease
+liabilities in respect of amounts due to Sinopec Group Company and fellow subsidiaries, associates and joint ventures was RMB 8,518 million.
+For the year ended 31 December 2019, the amount of rental the Group paid to Sinopec Group Company and fellow subsidiaries, associates and
+joint ventures for land, buildings and others are RMB 11,333 million, RMB 518 million and RMB 468 million (2018: RMB 7,636 million, RMB
+653 million and RMB 836 million).
+As at 31 December 2019 and 2018, there was no guarantee given to banks by the Group in respect of banking facilities to Sinopec Group
+Company and fellow subsidiaries, associates and joint ventures, except for the guarantees disclosed in Note 37. Guarantees given to banks by
+the Group in respect of banking facilities to associates and joint ventures are disclosed in Note 37.
+The directors of the Company are of the opinion that the above transactions with related parties were conducted in the ordinary course of
+business and on normal commercial terms or in accordance with the agreements governing such transactions, and this has been confirmed by
+the independent non-executive directors.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+187
+Financial Statements (International)
+(x)
+848
+1,066
+(ix)
+(iv)
+33,310
+23,489
+(v)
+38,668
+28,472
+(vi)
+3,098
+8,206
+6,664
+7,765
+(vii)
+521
+(vii)
+869
+(viii)
+116
+113
+(vii)
+186,341
+Third parties' debts
+6,381
+(142)
+(2)
+(26)
+(254)
+Net deferred tax assets/(liabilities)
+8,665
+6,244
+1,905
+(37)
+(1,031)
+15,746
+Recognised in
+Recognised
+Balance at
+consolidated
+in other
+Transferred
+(84)
+116
+(61)
+2
+273
+(130)
+19
+6,761
+2,325
+1,414
+56
+(36)
+3,709
+Balance at
+Available-for-sale financial assets
+117
+(117)
+comprehensive income
+Intangible assets
+Others
+(1)
+117
+(336)
+Financial assets at fair value through other
+2,650
+1 January
+2019
+from 31 December
+(250)
+(268)
+Property, plant and equipment
+6,761
+(2,575)
+(39)
+(1)
+4,146
+Tax losses carried forward
+3,709
+(151)
+38
+(2)
+3,594
+Financial assets at fair value through other
+comprehensive income
+116
+-
+(1,195)
+73
+1,104
+income
+RMB million
+RMB million
+RMB million
+Others
+RMB million
+reserve
+2019
+RMB million
+income comprehensive
+statement
+RMB million
+2,563
+Payables
+1,808
+(17)
+(667)
+2,546
+1
+1,142
+Cash flow hedges
+Receivables and inventories
+4,222
+1,104
+(1,031)
+116
+1,131
+Property, plant and equipment
+16,463
+15,427
+(384)
+(12,317)
+(27)
+(8,666)
+Tax losses carried forward
+3,594
+3,709
+Financial assets at fair value through other comprehensive income
+Intangible assets
+131
+117
+(7)
+(1)
+595
+474
+Cash flow hedges
+1,808
+1,142
+Payables
+189
+180
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+29 DEFERRED TAX ASSETS AND LIABILITIES
+Deferred tax assets and deferred tax liabilities before offset are attributable to the items detailed in the table below:
+31 December
+(508)
+Deferred tax liabilities
+31 December
+2019
+RMB million
+Deferred tax assets
+31 December
+2019
+31 December
+2018
+RMB million
+RMB million
+Receivables and inventories
+2,546
+2,563
+2018
+RMB million
+(535)
+Others
+Deferred tax assets/(liabilities)
+Payables
+Cash flow hedges
+Property, plant and equipment
+Tax losses carried forward
+381
+2,176
+3
+3
+Receivables and inventories
+2,563
+(117)
+-
+-
+1,808
+115
+(10)
+2,029
+1
+1,925
+8
+2018
+RMB million
+Transferred
+from
+reserve
+RMB million
+318
+24,905
+174
+25,403
+(882)
+(14,098)
+(428)
+(9,657)
+As at 31 December 2019, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB 16,605
+million (2018: RMB 18,308 million), of which RMB 1,992 million (2018: RMB 2,437 million) was incurred for the year ended 31 December 2019,
+because it was not probable that the future taxable profits will be realised. These deductible losses carried forward of RMB 3,163 million, RMB 3,156
+million, RMB 5,938 million, RMB 2,356 million and RMB 1,992 million will expire in 2020, 2021, 2022, 2023,2024 and after, respectively.
+Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax
+assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable
+that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the
+tax losses result from identifiable causes which are unlikely to recur. During the year ended 31 December 2019, write-down of deferred tax assets
+amounted to RMB 189 million (2018: RMB 188 million) (Note 10).
+Balance at
+31 December
+Movements in the deferred tax assets and liabilities are as follows:
+Recognised in
+consolidated
+Recognised
+in other
+income comprehensive
+statement
+income
+RMB million
+RMB million
+RMB million
+Others
+RMB million
+Balance at
+1 January
+2018
+187,958
+124
+(61)
+12,157
+11,951
+Total third parties' long-term debts
+Less: Current portion
+Long-term loans from Sinopec Group Company and fellow subsidiaries
+RMB denominated
+Less: Current portion
+Interest rates ranging from interest free to
+5.50% per annum at 31 December 2019
+with maturities through 2034
+32,157
+31,951
+63,946
+63,085
+(14,790)
+(12,074)
+49,156
+51,011
+47,450
+46,877
+20,000
+20,000
+Fixed interest rates ranging from 3.70% to
+4.90% per annum at 31 December 2019
+with maturities through 2022
+Fixed interest rates ranging from 3.13% to
+4.25% per annum at 31 December 2019
+with maturities through 2043
+USD denominated
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued)
+Long-term debts represent:
+Interest rate and final maturity
+Third parties' debts
+Long-term bank loans
+RMB denominated
+USD denominated
+Interest rates ranging from 1.08% to
+5.23% per annum at 31 December 2019
+with maturities through 2034
+Interest rates ranging from 1.55% to
+4.29% per annum at 31 December 2019
+with maturities through 2031
+(37,824)
+31 December
+2019
+RMB million
+2018
+RMB million
+31,714
+31,025
+75
+109
+31,789
+31,134
+Corporate bonds (i)
+RMB denominated
+31 December
+Financial Statements (International)
+9,626
+(4,361)
+32 TRADE ACCOUNTS PAYABLE AND BILLS PAYABLE
+31 December
+2019
+RMB million
+31 December
+2018
+RMB million
+Amounts due to third parties
+Amounts due to Sinopec Group Company and fellow subsidiaries
+Amounts due to associates and joint ventures
+Bills payable
+Trade accounts payable and bills payable measured at amortised cost
+The ageing analysis of trade accounts payable and bills payable is as follows:
+166,480
+170,818
+11,370
+9,142
+10,108
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+198,564
+192,872
+42,516
+93,527
+Short-term and long-term bank loans, short-term other loans and loans from Sinopec Group Company and fellow subsidiaries are primarily
+unsecured and carried at amortised cost.
+Note:
+(i) These corporate bonds are carried at amortised cost. As at 31 December 2019, RMB 12,157 million (2018: RMB 11,951 million) (USD denominated corporate bonds)
+are guaranteed by Sinopec Group Company.
+31 LEASE LIABILITIES
+Lease liabilities
+Current
+Non-current
+58,782
+182
+31 December
+2019
+RMB million
+1 January
+2019
+RMB million
+15,198
+177,674
+13,894
+184,670
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Financial Statements (International)
+181
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+2018
+RMB million
+Short-term bank loans
+RMB denominated
+US Dollar ("USD") denominated
+Short-term other loans
+RMB denominated
+Current portion of long-term bank loans
+RMB denominated
+USD denominated
+Current portion of long-term corporate bonds
+RMB denominated
+25,709
+17,088
+25,619
+13,201
+90
+31 December
+RMB million
+31 December
+2019
+Short-term debts represent:
+148
+87
+Others
+(254)
+Net deferred tax assets/(liabilities)
+15,746
+(196)
+(3,385)
+(49)
+3,887
+(65)
+(1,237)
+(67)
+(250)
+10,807
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES
+(564)
+22
+300
+22
+EUR denominated
+Current portion of long-term loans
+RMB denominated
+2,236
+22,780
+495
+1,441
+25
+Hong Kong Dollar ("HKD") denominated
+22
+4,361
+37,824
+4,361
+43,289
+31,665
+83,810
+61,127
+The Group's weighted average interest rates on short-term loans were 3.11% (2018: 3.37%) per annum at 31 December 2019. The above
+borrowings are unsecured.
+37,824
+Intangible assets
+USD denominated
+2,709
+300
+1,790
+12,074
+1,765
+12,039
+25
+35
+13,000
+3,061
+13,000
+12,074
+40,521
+29,462
+Loans from Sinopec Group Company and fellow subsidiaries
+Short-term loans
+5,465
+27,304
+RMB denominated
+14,790
+11,834
+199,792
+Financial Statements (International)
+155
+Change from
+the end of the
+previous year to
+Total number of service stations under the Sinopec brand
+Number of company-operated stations
+31 December
+31 December
+2019
+2018
+31 December
+2017
+the end of the
+reporting period
+(%)
+0.3
+30,702
+30,633
+0.1
+30,655
+30,627
+0.1
+30,696
+Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume.
+(4) Chemicals
+In 2019, the Company followed the
+development philosophy of "basic plus
+high-end", sped up advanced capacity
+building, and optimised business portfolio
+layout. We persistently fine-tuned
+chemical feedstock mix to increase
+the yield and lower cost. We optimised
+products slate, enhanced integration
+30,661
+3,969
+3,979
+3,992
+2017 2018 to 2019 (%)
+Total sales volume of oil products (million tonnes)*
+254.95
+237.69
+231.21
+7.3
+Total domestic sales volume of oil products (million tonnes)
+184.45
+180.24
+177.76
+2.3
+Retail sales (million tonnes)
+122.54
+121.64
+121.56
+0.7
+Direct sales and distribution (million tonnes)
+Annual average throughput per station (tonne/station)
+61.91
+58.61
+56.20
+5.6
+Summary of Operations for the Chemicals Segment
+2018
+among production, marketing, R&D and
+application, vigorously promoted the
+development and application of new
+products, and raised the proportion of
+new and specialty products. We further
+adjusted facility structures to enhance
+the dynamic optimisation of facilities
+and product chain, and improved the
+utilisation based on market demand.
+Unit: thousand tonnes
+9,343
+9,439
+7.3
+1,218
+1,220
+5.8
+applied in Shengli oilfield. In refining,
+we developed various formulations
+for low sulphur fuel oil and passed
+engine tests and endurance tests. Our
+high-grade gasoline and diesel engine oil
+met the latest international standards
+and realised industrial production
+and commercialization. In chemicals,
+the start-up of the second generation
+high-efficiency and environment-friendly
+aromatics facilities was successfully
+started up. The anthraquinone method
+of producing hydrogen peroxide
+in fluidised-bed reactor and PPTA
+technology realised industrialization.
+In addition, the framework type code
+of a novel structured zeolite SCM-15
+synthesised by us has been approved by
+the Structure Commission of International
+Zeolite Association. In 2019, the
+Company had 6,160 patent applications
+at home and abroad, among which 4,076
+were granted. We also won six second
+prizes of National Sci-Tech Progress and
+one second prize of National Technology
+Invention, and one gold, three silver and
+three excellent prizes of National Patent
+Awards.
+10,029
+1,289
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Business Review and Prospects
+16
+Business Review and Prospects
+BUSINESS REVIEW AND PROSPECTS (CONTINUED)
+(6) Health, Safety, Security and Environment
+In 2019, the Company constantly
+promoted and fully implemented the
+HSSE management system. We enhanced
+overall health management, and
+established safeguarding mechanism for
+occupational, physical and psychological
+health. We surveyed and rectified safety
+hazards, took stringent measures to
+control risks and supervise safety and
+operations of contractors, and achieved
+sound results. We upgraded our capacity
+in all-dimension risk prevention and
+control as well as emergency response,
+further enhancing security management.
+In 2019, we actively practiced green
+and low-carbon growth strategy, further
+promoted the green enterprise campaign
+and ecological conservation, and
+accomplished all emission reduction
+targets. Compared with 2018, energy
+consumption per 10,000 yuan of output
+I was down by 0.4%, industrial fresh
+water usage was down by 1.1%, COD
+of discharged water down by 2.1%,
+and SO2 emissions down by 3.9%.
+All solid waste was properly treated.
+For more detailed information, please
+refer to "Communication on Progress
+for Sustainable Development 2019 of
+Sinopec Corp."
+(7) Capital Expenditures
+In 2019, focusing on quality and
+profitability of investment, the Company
+continuously optimised its capital
+projects, with total capital expenditures
+of RMB 147.1 billion. Capital expenditure
+for the exploration and production
+segment was RMB 61.7 billion, mainly
+for Shengli and Northwest crude oil
+development projects, Fuling and
+Weirong shale gas projects, phase
+I of Xinqi gas pipeline, phase I of
+Erdos-Anping-Cangzhou gas pipeline,
+Qingdao-Nanjing gas pipeline, Wen 23
+and Jintan gas storage projects, as well
+as overseas projects. Capital expenditure
+for the refining segment was RMB 31.4
+billion, mainly for Zhongke Refining
+and Petrochemical project, Zhenhai,
+Tianjin, Maoming and Luoyang refining
+upgrading projects. Capital expenditure
+for the marketing and distribution
+segment was RMB 29.6 billion, mainly
+for construction of service stations, oil
+products depots, pipelines and non-fuel
+business. Capital expenditure for the
+chemicals segment was RMB 22.4 billion,
+mainly for Zhongke, Zhenhai, Gulei and
+Hainan projects, ethylene revamping for
+Sinopec SK and Sinopec-SABIC projects,
+phase II of Hainan high-efficiency and
+environment-friendly aromatics project,
+Sinopec SABIC polycarbonate project and
+Zhongan coal chemical project. Capital
+expenditure for corporate and others was
+RMB 2 billion, mainly for R&D facilities
+and information technology projects.
+BUSINESS PROSPECTS
+15
+16.9
+848
+896
+Change from
+Ethylene
+Synthetic resin
+Synthetic rubber
+Synthetic fiber monomer and polymer
+Synthetic fiber
+Note: Includes 100% of the production of domestic joint ventures.
+(5) Research and Development
+In 2019, with the emphasis on
+innovation-driven strategy, the Company
+accomplished notable results in
+deepening reform of R&D mechanism,
+promoting innovation platforms such as
+joint R&D centers and incubators, and
+making breakthrough in key and frontier
+technologies. In upstream, research in
+gas enrichment theory and exploration
+technologies of marine phase medium
+and large gas fields in Sichuan Basin
+made headway, leading to breakthrough
+in gas reserve. Our proprietary rotary
+steering drilling system was successfully
+2019
+2018
+2017 2018 to 2019 (%)
+12,493
+11,512
+11,610
+8.5
+17,244
+15,923
+15,938
+8.3
+1,047
+Ethylene production in 2019 reached
+12.49 million tonnes, up by 8.5% year
+on year. The differential ratio of synthetic
+fiber reached 90%, and the ratio of
+new and specialty products in synthetic
+resin reached 65.3%. We also promoted
+targeted marketing and service to further
+expand our business, with total chemical
+sales volume increased by 3.3% to 89.50
+million tonnes, realising full sales.
+2019
+Change from
+Summary of Operations for the Marketing and Distribution Segment
+China
+Acreage with development licenses
+China
+Overseas
+(2) Refining
+In 2019, with market-oriented approach,
+we optimised product mix to produce
+more gasoline and jet fuel, increased
+production of high value-added products,
+and lowered diesel-to-gasoline ratio
+to 1.05. We optimised the production
+plan for low sulfur fuel oil and reduced
+cost. We leveraged our advantage in
+Summary of Operations for the Refining Segment
+production and sales, and moderately
+increased export of oil products to keep
+a relatively high utilization rate. We
+promoted quality upgrading projects
+and made structural adjustments,
+comprehensively optimized production
+and ensured safety and reliability of
+the refining facilities. We improved the
+marketing and distribution systems and
+2019
+472,017
+Acreage with exploration licenses
+472,017
+33,467
+5,230
+2018
+525,269
+36,748
+31,643
+5,106
+realised a growth momentum in high
+grade lubricants and grease, LPG, asphalt
+and sulphur. In 2019, the Company
+processed 249 million tonnes of crude
+oil, and produced 160 million tonnes of
+refined oil products, up by 3.4%, with
+gasoline and kerosene up by 2.6% and
+7.8% respectively year on year.
+Unit: million tonnes
+38,697
+Area under license (as of 31 December)
+Unit: Square kilometers
+5,028
+6,378
+5,068
+5,028
+Puguang
+61
+61
+58
+58
+Total
+Fuling
+Others
+482
+482
+368
+368
+5,877
+6.420
+5,835
+4,642
+4,602
+6,378
+5,068
+Change from
+Refinery throughput
+Gasoline, diesel and kerosene production
+Gasoline
+64.72
+66.76
+2.1
+31.16
+28.91
+26.88
+7.8
+39.78
+38.52
+38.60
+3.3
+76.38
+76.00
+75.85
+94.98
+94.93
+94.88
+0.38 percentage points
+0.05 percentage points
+on customer need, we adopted a flexible
+and targeted marketing strategy, and
+improved our services. We upgraded our
+distribution network to further strengthen
+our existing advantages. We accelerated
+the construction and operation of CNG
+stations and explored the development
+of hydrogen fueling stations. Total sales
+volume of refined oil products for the
+year was 255 million tonnes, up by
+7.3% year on year, of which domestic
+sales volume accounted for 184 million
+tonnes, up by 2.3%. Meanwhile, we
+strengthened development and marketing
+of company-owned brands, and promoted
+the innovation of non-fuel business model
+and its market-oriented reform, to speed
+up the development of non-fuel business.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+66.06
+(1) Market Outlook
+2.6
+61.16
+Diesel
+Kerosene
+Light chemical feedstock production
+Light product yield (%)
+Refinery yield (%)
+Note: Includes 100% of the production from domestic joint ventures.
+(3) Marketing and Distribution
+In 2019, confronted with fierce market
+competition, the Company brought our
+advantages of integrated production
+and marketing network into full play,
+adhered to the guideline of "achieving
+gains in both sales volume and profits”,
+coordinated allocation of resources,
+expanded sales and increased profit, and
+achieved sustained growth in both total
+sales volume and retail scale. With focus
+2019
+2018
+2017
+2018 to 2019 (%)
+248.52
+244.01
+238.50
+1.8
+159.99
+154.79
+150.67
+3.4
+62.77
+57.03
+In 2020, despite the increasing instability
+and uncertainty of the international
+political and economic situation, and the
+inevitable impact on China's economy by
+coronavirus outbreak in the short term,
+we expect the fundamentals sustaining
+sound economic growth in China
+remain unchanged. Domestic demand
+for energy and chemical products will
+be relatively weak in the first half, but
+the accumulated demand is expected
+to be released rapidly after outbreak.
+Considering oil-producing countries'
+abundant supply capacity, global demand
+growth, inventory levels, and geopolitics,
+we expect that the international oil prices
+will fluctuate at a low level.
+(2) Operations
+In 2020, adhering to the principles of
+"reform, management, innovation, and
+development", the Company will focus on
+optimisation of the entire business value
+chain, as well as market expansion, risk
+prevention, and seizing opportunities so
+as to do our best to reduce the negative
+impact of the coronavirus outbreak and
+the slump of crude oil price, and strive to
+achieve healthy business performance.
+1,400
+11.6
+Gasoline
+92,233
+88,057
+4.7
+7,387
+7,870
+(6.1)
+1,562
+Diesel
+84,630
+2.9
+5,811
+5,996
+(3.1)
+Kerosene
+27,041
+25,787
+4.9
+87,083
+11.9
+24,197
+27,073
+17,279
+(15.7)
+(1) Turnover and other operating revenues
+In 2019, the Company's turnover was RMB 2,900.5 billion, representing an increase of 2.6% over 2018. This was mainly attributed to expansion
+of business scale and trading volume.
+The following table sets forth the external sales volume, average realised prices and respective rates of change of the Company's major products
+in 2019 and 2018:
+Sales volume (thousand tonnes)
+Year ended 31 December
+Average realised price
+(RMB/tonne, RMB/thousand cubic meters
+Year ended 31 December
+2019
+Crude oil
+6,034
+2018
+6,595
+Change (%)
+2019
+2018 Change (%)
+(8.5)
+3,000
+3,100
+(3.2)
+Natural gas (million cubic meters)
+4,298
+4,562
+(5.8)
+Basic chemical feedstock
+8,438
+9,712
+(13.1)
+Synthetic rubber
+1,280
+1,114
+14.9
+9,583
+10,619
+(9.8)
+Chemical fertiliser
+924
+794
+16.4
+2,110
+2,096
+0.7
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+19
+Management's Discussion
+and Analysis
+93
+14,568
+4.3
+1,370
+41,022
+40,520
+1.2
+4,578
+5,488
+(16.6)
+Monomer and polymer for synthetic fibre
+14,019
+11,127
+26.0
+5,714
+6,971
+(18.0)
+Synthetic resin
+16,103
+14,433
+11.6
+7,717
+8,634
+(10.6)
+Synthetic fibre
+1,314
+6,420
+Non-controlling interests
+61,618
+Turnover and other operating revenues
+2,966,193
+2,891,179
+2.6
+Turnover
+2,900,488
+2,825,613
+2.6
+Other operating revenues
+Change (%)
+65,705
+0.2
+Operating expenses
+(2,879,995)
+(2,808,915)
+2.5
+Purchased crude oil, products and operating supplies and expenses
+(2,380,907)
+(2,292,983)
+3.8
+65,566
+2018
+RMB million
+RMB million
+Year ended 31 December
+2019
+Due to the outbreak, the adjustment of
+the Company's production plan for 2020
+is currently underway. We will confirm the
+production plan according to the market
+trends in the future.
+Exploration and Production, under
+the low oil price circumstance, we will
+optimise projects implementation,
+enhance high-quality exploration, and
+reduce cost and expenditure to expand
+resource base and realize sustainable
+development. In crude oil development,
+more efforts will be made in promoting
+capacity building of Shunbei Oilfield,
+Tahe Oilfield, and the Oilfield at the
+western margin of the Junggar Basin,
+and we will strengthen profit-oriented
+development of mature fields. In natural
+gas development, we will accelerate
+capacity construction of key projects,
+and promote integration of production,
+supply, storage and marketing so as
+to maximize the value of the business
+chain. Preliminarily, we plan to keep a
+stable production volume of curde oil and
+realise a positive growth for nature gas.
+Refining, under low oil price
+circumstance, with the coordination of
+production and sales, domestic and
+overseas markets, the Company will
+optimize utilization rate and production
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Business Review and Prospects
+scheduling, and promote efficient
+operation of its refining business chain.
+We will optimize the allocation of crude
+oil, coordinate crude oil supply chain, and
+reduce procurement costs. More efforts
+I will be made in restructuring product
+slate, increasing products tailoring for
+market demand and changes. We will
+accelerate low-sulfur bunker fuel projects
+and the revamping of storage and
+transportation facilities to rapidly expand
+market share.
+Marketing and Distribution, balancing
+volume and profit, and leveraging the
+advantages of integration of production
+and sales, the Company will continuously
+improve the quality of its operations. We
+will vigorously carry out targeted and
+differentiated marketing to continuously
+improve our services with focus on
+customer need. We will accelerate the
+construction of smart service stations,
+coordinate the layout of natural gas and
+hydrogen stations, and consolidate and
+expand network advantages. More efforts
+will be made in boosting innovation in
+non-fuel business models, vigorously
+developing proprietary brands, creating
+differentiated competitive advantages,
+so as to drive rapid growth in non-fuel
+business.
+Chemicals, the Company will focus on
+the "basic high-end" development
+concept, speed up advanced capacity
+building, continuously deepen
+structural adjustment, and improve
+our competitiveness and profitability.
+We will optimize facilities and product
+chain, and improve utilization rate and
+production scheduling based on market
+demand. Efforts will be made in adjusting
+feedstock slate to improve product yield
+and reduce cost. We will coordinate
+production, marketing, research and
+application, and redouble our efforts in
+developing new products and increase
+the production of high value-added
+products. Meanwhile, we will improve
+targeted marketing and services, enhance
+e-commerce platforms, actively explore
+overseas markets and continuously
+expand market share.
+Research and Development, we
+will continue to implement the
+innovation-driven development strategy,
+deepen mechanism reform, accelerate
+key technology breakthrough, improve
+innovation capabilities to strive for
+quality development. In oil and gas
+exploration and development, we will
+strive to make technology breakthrough
+in ultra-deep oil and gas, tight oil and
+gas, shale oil and gas, etc. In refining,
+we will accelerate the research of heavy
+oil processing, oil quality upgrading, and
+promote the application of technologies
+such as needle coke. In chemicals,
+we will continuously improve the
+package technologies of ethylene and
+aromatics, strengthen the research and
+development of photoelectric materials
+and degradable materials, and accelerate
+the industrialization of large-tow
+high-performance carbon fibers. At the
+same time, we will focus on advancing
+research on cutting-edge technologies
+and new areas to achieve future business
+development through technology
+innovation.
+Capital Expenditures, Preliminary
+capital expenditures for the year 2020
+are budgeted at RMB 143.4 billion.
+We will dynamically optimise capital
+projects based on future market trends.
+Preliminarily, RMB 61.1 billion will be
+invested in exploration and production
+with focuses on the production capacity
+building of Shengli and Northwest
+crude oil development projects, Fuling
+and Weirong shale gas field, and the
+construction of natural gas pipelines and
+storage facilities as well as overseas oil
+and gas projects. The refining segment
+will account for RMB 22.4 billion, mainly
+on the construction and commissioning
+of the Zhongke project, and structural
+adjustment projects of Zhenhai, Tianjin,
+Maoming, Luoyang. RMB 22.0 billion is
+budgeted for marketing and distribution
+with emphasis on service stations,
+depots and storage facilities for refined
+oil products, pipelines and non-fuel
+business. The share for chemicals will
+be RMB 32.3 billion which will be used
+on the construction of Zhongke, Zhenhai
+and Gulei projects, ethylene revamping of
+Sinopec SK and Sinopec-SABIC projects,
+Sinopec SABIC polycarbonate project,
+Jiujiang aromatics project and Zhong
+An coal chemical project. The capital
+expenditure for corporate and others
+will be RMB 5.6 billion, mainly for R&D
+facilities and information technology
+projects.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+17
+RA
+N
+MANAGEMENT'S DISCUSSION AND ANALYSIS
+THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
+COMPANY'S AUDITED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES. PARTS OF THE
+FOLLOWING FINANCIAL DATA WERE ABSTRACTED FROM THE COMPANY'S AUDITED FINANCIAL
+STATEMENTS THAT HAVE BEEN PREPARED ACCORDING TO THE IFRS, UNLESS OTHERWISE STATED.
+THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED TAX.
+1 CONSOLIDATED RESULTS OF OPERATIONS
+In 2019, the Company's turnover and other operating revenues was RMB 2,966.2 billion, increased by 2.6% compared with that of 2018. The
+operating profit was RMB 86.2 billion, representing a year on year increase of 4.8%.
+The following table sets forth the main revenue and expenses from the Company's consolidated financial statements:
+Selling, general and administrative expenses
+(55,313)
+(65,642)
+(15.7)
+(9,967)
+1,001
+Investment income and share of profits less losses from associates and joint ventures
+13,696
+15,845
+(13.6)
+Profit before taxation
+89,927
+99,110
+(9.3)
+Income tax expense
+(17,894)
+(20,213)
+(11.5)
+Profit for the year
+72,033
+78,897
+(8.7)
+Attributable to:
+Shareholders of the Company
+57,465
+Net finance costs
+(6.7)
+4.8
+86,198
+Depreciation, depletion and amortisation
+(108,812)
+(109,967)
+(1.1)
+Exploration expenses, including dry holes
+(10,510)
+(10,744)
+(2.2)
+Personnel expenses
+(81,482)
+(77,721)
+4.8
+Taxes other than income tax
+(242,535)
+(246,498)
+(1.6)
+Other operating expense, net
+(436)
+(5,360)
+(91.9)
+Operating profit
+82,264
+Consolidated subsidiaries
+525,269
+5,068
+Items
+Proved reserves
+Proved developed reserves
+China
+Consolidated subsidiaries
+Puguang
+Fuling
+Others
+Overseas
+Consolidated subsidiaries
+Equity accounted entities
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Proved undeveloped reserves
+Consolidated subsidiaries
+Fuling
+Others
+Exploration and Production Activities
+Natural gas reserves (bcf)
+31 December 19
+31 December 18
+7,225
+6,807
+6,035
+China
+38
+46
+Equity accounted entities
+334
+262
+289
+17
+27
+245
+261
+153
+134
+107
+96
+107
+96
+12
+16
+95
+80
+46
+38
+0
+0
+5,835
+6,026
+5,822
+6,026
+2018
+Exploratory
+Development
+Exploratory
+Development
+Productive
+Dry Productive
+Dry
+Productive
+Dry
+Productive
+Dry
+China
+350
+174
+2,098
+5
+286
+131
+1,941
+6
+2019
+344
+Wells drilled (as of 31 December)
+1,125
+5,822
+1,814
+1,904
+1,315
+1,149
+2,897
+5,028
+9
+13
+0
+0
+9
+13
+1,190
+972
+1,190
+972
+1,190
+972
+65
+195
+777
+Consolidated subsidiaries
+Consolidated subsidiaries
+Others
+In 2019, domestic demand for refined
+oil products maintained its growth while
+market supply was in surplus. According
+to statistics released by the NDRC, the
+apparent consumption of refined oil
+products (including gasoline, diesel and
+kerosene) was 330 million tonnes, up
+by 1.4% from the previous year, with
+gasoline up by 2.3%, kerosene up by
+6.2% and diesel down by 0.5%. There
+were 21 price adjustments for domestic
+refined oil products throughout the year
+with 15 increases and 6 decreases.
+(3) Chemical Products Market
+Domestic demand for chemicals kept
+stable growth in 2019. Based on our
+statistics, domestic consumption of
+ethylene equivalent was 52.71 million
+tonnes, up by 11.8% from the previous
+year, and the apparent consumption
+of synthetic resin, synthetic fibre and
+synthetic rubber rose by 10.1%, 12.5%
+and 3.6%, respectively. Average prices of
+domestic chemical products decreased
+by 12.6% year on year, and the average
+margin of chemical products narrowed.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+11
+Business Review and Prospects
+12
+Business Review and Prospects
+BUSINESS REVIEW AND PROSPECTS (CONTINUED)
+(2) Refined Oil Products Market
+2 PRODUCTION & OPERATIONS REVIEW
+In 2019, we implemented the action
+plan of redoubling efforts in oil and gas
+exploration and production, actively
+pressed ahead with high-efficiency
+exploration and profit-oriented
+development, accelerated the
+systematic integration of natural
+gas production, supply, storage and
+marketing, continuously reduced cost
+and expenditure on all fronts, and
+achieved tangible results in maintaining
+oil production, increasing gas output
+and cutting cost. We reinforced venture
+exploration and preliminary exploration in
+new areas which led to new discoveries
+in Tarim, Sichuan and Erdos basins. The
+Company's newly added proved reserves
+in China reached 587 million barrels
+of oil equivalent, with domestic reserve
+replacement ratio at 138.7%. In crude
+oil development, we proceeded with the
+capacity building in Shunbei oilfield,
+strengthened profitable production
+capacity of hard-to-recover reserves in
+mature fields, intensified EOR technology
+Summary of Operations for the Exploration and Production Segment
+breakthrough and application, and
+ensured steady production. In natural
+gas development, we constantly pushed
+forward capacity building in Fuling,
+Weirong, and West Sichuan gas fields,
+expanded the market and sales, and
+promoted coordinated development
+along the value chain. The Company's
+production of oil and gas reached 458.92
+million barrels of oil equivalent, with
+domestic crude production reaching
+249.43 million barrels and natural gas
+production totaling 1,047.78 billion cubic
+feet, up by 7.2% year on year.
+Oil and gas production (mmboe)
+Crude oil production (mmbbls)
+China
+Overseas
+(1) Exploration and Production
+(1) Crude Oil & Natural Gas Market
+In 2019, international oil prices
+fluctuated with a wide range. The
+spot price of Platt's Brent for the year
+averaged USD 64.21 per barrel, down by
+10.0%. Along with the changes in China's
+energy mix, domestic demand for natural
+gas remained strong. Based on statistics
+released by the NDRC, domestic apparent
+consumption of natural gas reached
+306.7 billion cubic meters, up by 9.4%
+year on year.
+1 MARKET REVIEW
+01/2020
+A
+BUSINESS REVIEW AND PROSPECTS
+BUSINESS REVIEW
+In 2019, the global economy slowed down
+while China maintained an overall stable with
+its gross domestic product (GDP) up by 6.1%.
+International oil prices fluctuated in a wide
+range while domestic market saw rapid growth
+demand for natural gas and fierce competition
+in oil products due to abundant supply, and
+chemicals prices decreased. The Company
+actively addressed market changes by pursuing
+innovative, coordinated, green, open and shared
+development. Through implementing specialised
+development, market-oriented operation,
+internalisation and overall coordination, we
+pushed forward all aspects of our work, and
+achieved solid operating results.
+US$/barrel
+100
+80
+60
+40
+40
+20
+20
+0
+01/2019
+04/2019
+07/2019
+10/2019
+Trend of International Crude Oil Prices
+WTI-NYMEX
+ICE BRENT
+DTD BRENT
+DUBAI
+Natural gas production (bcf)
+Summary of Reserves of Crude Oil and Natural Gas
+Change from
+2019
+Proved developed reserves
+1,741
+1,666
+1,588
+1,533
+China
+Consolidated subsidiaries
+Shengli
+1,326
+1,244
+1,326
+1,244
+982
+910
+Others
+Overseas
+Consolidated subsidiaries
+Equity accounted entities
+Proved undeveloped reserves
+China
+Consolidated subsidiaries
+Shengli
+Proved reserves
+Overseas
+31 December 18
+Items
+2018
+458.92
+451.46
+2017
+448.79
+2018 to 2019(%)
+1.7
+284.22
+288.51
+293.66
+(1.5)
+249.43
+248.93
+248.88
+34.79
+39.58
+44.78
+1,047.78
+977.32
+912.50
+0.2
+(12.1)
+7.2
+Crude oil reserves (mmbbls)
+31 December 19
+350
+2,769
+2,098
+0
+0
+10
+0
+10
+117
+176
+69
+287
+0
+69
+China
+Consolidated subsidiaries
+Shengli
+174
+Overseas
+Consolidated subsidiaries
+Equity accounted entities
+Total
+Oil productive wells (as of 31 December)
+2019
+287
+0
+0
+0
+277
+69
+277
+60
+20
+25
+72
+25
+72
+57
+156
+44
+205
+44
+205
+0
+0
+10
+0
+10
+0
+2018
+69
+Gross
+Gross
+7,220
+59,360
+2,841
+54,967
+7,265
+58,323
+3,925
+54,969
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+13
+Business Review and Prospects
+14
+Business Review and Prospects
+14
+BUSINESS REVIEW AND PROSPECTS (CONTINUED)
+2019
+2018
+Region
+China
+Gross
+Net
+Gross
+Net
+6,420
+6,378
+Natural gas productive wells (as of 31 December)
+28
+14
+28
+Net
+52,112
+52,112
+51,030
+51,030
+52,112
+52,112
+51,030
+51,030
+33,819
+33,819
+32,805
+32,805
+18,293
+18,293
+18,225
+18,225
+7,248
+2,855
+7,293
+3,939
+Net
+176
+Others
+10007
+0
+0
+0
+70
+0
+Consolidated subsidiaries
+0
+0
+0
+99
+0
+0
+0
+0
+Equity accounted entities
+3
+1
+99
+0
+0
+0
+1
+3
+Overseas
+5
+286
+131
+1,941
+6
+Shengli
+117
+81
+1,168
+4
+149
+71
+1,201
+5
+Others
+930
+1
+137
+60
+740
+1
+0
+70
+195
+Total
+277
+Consolidated subsidiaries
+117
+177
+Shengli
+60
+20
+Others
+57
+157
+Overseas
+0
+Consolidated subsidiaries
+0
+Equity accounted entities
+0
+Total
+177
+165
+ONOOON
+0
+69
+277
+117
+176
+69
+175
+2,197
+286
+131
+2,011
+6
+Wells drilling (as of 31 December)
+2019
+2018
+5
+Net
+117
+Gross
+177
+117
+China
+353
+Exploratory Development Exploratory Development Exploratory Development
+Net
+Exploratory Development
+Gross
+Chemicals
+1,077,018
+148,930
+141,674
+189,453
+200,429
+95,954
+93,499
+111,114
+89,315
+2018
+RMB million
+2019
+Inter-segment sales
+Corporate and others
+Inter-segment sales
+External sales
+Inter-segment sales
+1,109,088
+RMB million
+External sales
+828,635
+1,258,018
+10,283
+External sales
+2,825,613
+(1,934,372)
+(1,879,694)
+1,367,060
+1,482,972
+650,271
+1,218,692
+654,337
+73,835
+531,241
+480,373
+457,406
+425,508
+54,865
+5,224
+1,414,213
+4,159
+1,397,716
+1,408,989
+1,393,557
+716,789
+Marketing and distribution
+As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans organised by municipal and
+provincial governments for its staff. The Group is required to make contributions to the retirement plans at rates ranging from 13.0% to 20.0% of
+the salaries, bonuses and certain allowances of its staff. In addition, the Group provides a supplementary retirement plan for its staff at rates not
+exceeding 8% of the salaries. The Group has no other material obligation for the payment of pension benefits associated with these plans beyond
+the annual contributions described above. The Group's contributions for the year ended 31 December 2019 were RMB 11,665 million (2018: RMB
+9,296 million).
+External sales
+state-controlled.
+These transactions are conducted in the ordinary course of the Group's business on terms comparable to those with other entities that are not
+• uses of public utilities.
+• depositing and borrowing money; and
+lease of assets;
+•
+• rendering and receiving services;
+sales and purchases of goods and ancillary materials;
+39 EMPLOYEE BENEFITS PLAN
+•
+The Group is a state-controlled energy and chemical enterprise and operates in an economic regime currently dominated by entities directly
+or indirectly controlled by the PRC government through its government authorities, agencies, affiliations and other organisations (collectively
+referred as "state-controlled entities").
+(d) Transactions with other state-controlled entities in the PRC
+38 RELATED PARTY TRANSACTIONS (Continued)
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+190
+10,738
+Apart from transactions with Sinopec Group Company and fellow subsidiaries, the Group has transactions with other state-controlled entities,
+include but not limited to the followings:
+Inter-segment sales
+40 SEGMENT REPORTING
+In a manner consistent with the way in which information is reported internally to the Group's chief operating decision maker for the purposes of
+resource allocation and performance assessment, the Group has identified the following five reportable segments. No operating segments have been
+aggregated to form the following reportable segments.
+Refining
+Inter-segment sales
+External sales
+Exploration and production
+Turnover
+Assets and liabilities dedicated to a particular segment's operations are included in that segment's total assets and liabilities. Segment assets
+include all tangible and intangible assets, except for interest in associates and joint ventures, investments, deferred tax assets, cash and cash
+equivalents, time deposits with financial institutions and other unallocated assets. Segment liabilities exclude short-term debts, income tax
+payable, long-term debts, loans from Sinopec Group Company and fellow subsidiaries, deferred tax liabilities and other unallocated liabilities.
+Information of the Group's reportable segments is as follows:
+The Group's chief operating decision maker evaluates the performance and allocates resources to its operating segments on an operating profit
+basis, without considering the effects of finance costs or investment income. Inter-segment transfer pricing is based on the market price or cost
+plus an appropriate margin, as specified by the Group's policy.
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities
+Segment information is presented in respect of the Group's business segments. The format is based on the Group's management and internal
+reporting structure.
+40 SEGMENT REPORTING (Continued)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+The segments were determined primarily because the Group manages its exploration and production, refining, marketing and distribution,
+chemicals, and corporate and others businesses separately. The reportable segments are each managed separately because they manufacture and/
+or distribute distinct products with different production processes and due to their distinct operating and gross margin characteristics.
+(v) Corporate and others, which largely comprises the trading activities of the import and export companies of the Group and research and
+development undertaken by other subsidiaries.
+(iv) Chemicals, which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products mainly to
+external customers.
+(iii) Marketing and distribution, which owns and operates oil depots and service stations in the PRC, and distributes and sells refined petroleum
+products (mainly gasoline and diesel) in the PRC through wholesale and retail sales networks.
+(ii) Refining, which processes and purifies crude oil, that is sourced from the exploration and production segment of the Group and external
+suppliers, and manufactures and sells petroleum products to the chemicals and marketing and distribution segments of the Group and external
+customers.
+(i) Exploration and production, which explores and develops oil fields, produces crude oil and natural gas and sells such products to the refining
+segment of the Group and external customers.
+for the year ended 31 December 2019
+5,464
+Non-current assets
+Mainland China
+33,247
+2019
+RMB million RMB million
+2018
+2019
+2018
+RMB million
+RMB million
+19,151
+RMB million
+16,731
+25,299
+1,788
+816
+1,284
+1,209
+11,858
+9,537
+22,309
+RMB million
+RMB million RMB million
+RMB million
+2019
+2018
+2019
+2018
+2019
+31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
+2019
+2018
+2018
+2019
+2018
+Current assets
+129,266
+Current liabilities
+(192,106)
+RMB million RMB million
+130,861
+(181,766)
+RMB million
+RMB million
+RMB million
+5,337
+At
+2,750
+(483)
+7,304
+(9,700)
+417
+Non-current assets
+340,356
+261,062
+13,234
+8,662
+38,020
+19,087
+11,558
+11,444
+12,777
+12,895
+11,473
+12,301
+23,185
+(2,513)
+(1,677)
+766
+(15,479)
+(13,913)
+(804)
+(50)
+(2,961)
+(3,722)
+(3,196)
+(2,233)
+(15,037)
+(2,333)
+Net current
+(liabilities)/assets
+(62,840) (50,905) 18,695
+16,248
+6,830
+11,386
+984
+(456)
+Sinopec-SK
+At
+At
+Shanghai SECCO
+At
+29.58
+Marketing and distribution of refined
+("Marketing Company")
+petroleum products
+Shanghai SECCO
+RMB 7,801
+67.60
+70.42
+32.40
+Sinopec SK (Wuhan) Petrochemical Company
+RMB 7,193
+Limited ("Sinopec-SK")
+Sinopec Kantons Holdings Limited
+HKD 248
+("Sinopec Kantons")
+Gaoqiao Petrochemical Company Limited
+Production and sale of petrochemical
+RMB 28,403
+Sinopec Marketing Company Limited
+products and petroleum products
+Coal chemical industry investment
+management, production and sale
+of coal chemical products
+Manufacturing of intermediate
+petrochemical products and petroleum
+products
+Pipeline storage and transportation of
+crude oil
+Investment holding of overseas business
+Investment in exploration, production and
+sale of petroleum and natural gas
+Production and sale of polyester chips
+and polyester fibres
+Production and sale of refined petroleum
+products, lubricant base oil, and
+petrochemical materials
+Trading of crude oil and petrochemical
+products
+Manufacturing of intermediate
+petrochemical products and petroleum
+products
+Production and sale of catalyst products
+Trading of petrochemical products
+Marketing and distribution of
+petrochemical products
+Import and processing of crude oil,
+production, storage and sale of petroleum
+products and petrochemical products
+Manufacturing of intermediate petrochemical
+Manufacturing of intermediate petrochemical
+RMB 10,000
+Sinopec Shanghai Petrochemical Company Limited
+("Shanghai Petrochemical")
+RMB 10,824
+Fujian Petrochemical Company Limited
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+41 PRINCIPAL SUBSIDIARIES (Continued)
+Summarised financial information on subsidiaries with material non-controlling interests
+Set out below are the summarised financial information which the amount before inter-company eliminations for each subsidiary that has
+non-controlling interests that are material to the Group.
+Summarised consolidated balance sheet
+Marketing Company
+At
+At
+SIPL
+At
+At
+Shanghai Petrochemical
+At
+At
+Fujian Petrochemical
+At
+At
+Sinopec Kantons
+At
+At
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+21,567
+194
+50.00
+("Fujian Petrochemical") (i)
+products
+Production, sale, research and development
+of petrochemical products, ethylene and
+downstream byproducts
+Provision of crude oil jetty services and
+natural gas pipeline transmission services
+Manufacturing of intermediate petrochemical
+products and petroleum products
+Manufacturing of synthetic fibres, resin and
+plastics, intermediate petrochemical
+products and petroleum products
+Manufacturing of plastics, intermediate
+petrochemical products and petroleum
+products
+Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and Hong Kong SAR respectively, all of the above principal subsidiaries
+are incorporated and operate their businesses principally in the PRC. All of the above principal subsidiaries are limited companies.
+Note:
+(i) The Group consolidated the financial statements of the entity because it is exposed to, or has rights to, variable returns from its involvement with the entity and has
+the ability to affect those returns through its power over the entity.
+59.00
+41.00
+60.33
+39.67
+55.00
+45.00
+50.44
+49.56
+RMB 8,140
+50.00
+Company Limited
+12,612
+(58,732)
+RMB million RMB million
+Turnover
+1,427,705 1,443,698
+3,282
+5,037
+100,270
+107,689
+RMB million
+5,535
+1,274
+1,398
+28,341
+26,320
+31,016
+17,134
+Profit for the year
+5,261
+RMB million
+RMB million
+RMB million
+2018
+2019
+2018
+RMB million RMB million RMB million
+RMB million
+2019
+RMB million RMB million
+2018
+2019
+2018
+2019
+2018
+2019
+2018
+Sinopec-SK
+2019
+2018
+RMB million
+RMB million
+22,992
+Shanghai SECCO
+22,046
+3,272
+3,137
+3,099
+701
+1,879
+Comprehensive income
+attributable to
+non-controlling interests
+1,067
+8,289
+1,651
+2,737
+1,113
+2,645
+238
+788
+33
+7,794
+1.140
+1,576
+477
+2,227
+5,336
+477
+1,576
+1,131
+1,065
+3,137
+3,099
+701
+1,879
+Total comprehensive income
+23,362
+22,589
+2,693
+4,536
+2,235
+5,336
+2,831
+Sinopec Kantons
+Fujian Petrochemical
+Shanghai Petrochemical
+10,756
+12,619
+12,763
+9,846
+10,603
+21,560
+12,612
+10,870
+Net assets
+208,071
+14,977
+23,218
+29,994
+30,463
+11.854
+11,522
+218,784
+19,077
+23,164
+6,970
+(2,086)
+(16,952)
+(31,050)
+(21)
+(10)
+(688)
+(688)
+(158)
+(132)
+(1,627)
+(1,698)
+(7)
+Net non-current
+assets/(liabilities)
+281,624
+258,976
+(3,718)
+10,942
+10,250
+18,508
+17,907
+66,827
+8,669
+17,952
+14,996
+15,168
+5,927
+5,761
+4,359
+4,085
+5,997
+5,802
+4,863
+4,560
+Summarised consolidated statement of comprehensive income
+Year ended 31 December
+Marketing Company
+2019
+SIPL
+70,528
+Non-current liabilities
+non-controlling interests
+8,469
+11,860
+13,029
+Attributable to owners of
+the Company
+148,256
+141,244
+6,308
+5,266
+14,998
+15.295
+5.927
+5,761
+6,583
+6,165
+12,511
+12,105
+6,997
+Attributable to
+25.00
+75.00
+RMB 9,628
+Segment assets
+- Marketing and distribution
+Corporate and others
+410,950
+321,686
+321,080
+271,356
+Assets
+399,242
+175,884
+156,865
+131,686
+152,799
+Total segment assets
+1,438,842
+1,220,347
+317,641
+- Chemicals
+RMB million
+RMB million
+Aggregate investment income
+Net finance costs
+Profit before taxation
+73
+43
+578
+596
+228
+920
+919
+1,871
+(9,967)
+1,001
+89,927
+99,110
+31 December
+2019
+31 December
+2018
+Interest in associates and joint ventures
+- Corporate and others.
+152,204
+Financial assets at fair value through other comprehensive income
+Deferred tax assets
+122,264
+103,809
+226,531
+159,536
+54,462
+37,413
+137,881
+94,170
+144,216
+709,071
+539,144
+Short-term debts
+40,521
+29,462
+Income tax payable
+3.264
+Total segment liabilities
+167,933
+- Corporate and others.
+- Chemicals
+1,521
+1,450
+17,616
+21,694
+Cash and cash equivalents, time deposits with financial institutions
+Other unallocated assets
+127,927
+167,015
+16,961
+36,081
+1,755,071
+1,592,308
+Total assets
+Liabilities
+Segment liabilities
+· Exploration and production
+- Refining
+- Marketing and distribution
+145,721
+- Chemicals
+- Marketing and distribution
+315
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+40 SEGMENT REPORTING (Continued)
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+2019
+RMB million
+2018
+192
+RMB million
+Operating profit/(loss)
+By segment
+- Exploration and production
+- Refining
+- Marketing and distribution
+- Chemicals
+- Corporate and others
+Result
+Financial Statements (International)
+Financial Statements (International)
+191
+32,424
+14,861
+15,492
+1,850
+65,705
+2,966,193
+1,523
+65,566
+2,891,179
+Elimination of inter-segment sales
+Turnover
+Other operating revenues
+Exploration and production
+Refining
+Marketing and distribution
+Chemicals
+Corporate and others
+Other operating revenues
+Turnover and other operating revenues
+2,900,488
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+- Elimination
+9,284
+(10,107)
+30,632
+109
+3,309
+3,155
+4,611
+6,298
+2,330
+1,814
+Aggregate
+share of profits from associates and joint ventures
+12,777
+13,974
+Investment (losses)/income
+- Exploration and production
+(19)
+(3)
+- Refining
+59
+(640)
+6,699
+- Corporate and others
+- Refining
+54,827
+29,107
+23,464
+17,151
+27,007
+64
+(9,293)
+(40)
+(3,634)
+Total segment operating profit
+86,198
+82,264
+Share of profits/(losses) from associates and joint ventures
+- Exploration and production
+3,167
+2,598
+- Chemicals
+- Marketing and distribution
+Long-term debts
+49,156
+51,011
+As at 31 December 2019, the following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the
+Group.
+Name of company
+Particulars
+of issued
+capital
+(million)
+Interests
+Interests
+held by
+RMB 22,761
+41 PRINCIPAL SUBSIDIARIES
+held by the non-controlling
+Company % interests %
+100.00
+Sinopec Great Wall Energy & Chemical
+Company Limited
+Sinopec Yangzi Petrochemical Company Limited
+RMB 15,651
+100.00
+Sinopec Pipeline Storage & Transportation
+RMB 12,000
+100.00
+Principal activities
+for the year ended 31 December 2019
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Financial Statements (International)
+RMB million
+2,131,078
+2,119,580
+395,129
+505,672
+329,443
+2,966,193
+31 December
+2019
+RMB million
+376,470
+2,891,179
+31 December
+2018
+RMB million
+989,668
+1,235,676
+52,705
+1,288,381
+50,892
+1,040,560
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+193
+Financial Statements (International)
+Company Limited
+Sinopec Overseas Investment Holding Limited
+USD 1,662
+100.00
+China Petrochemical International Company Limited
+RMB 1,400
+100.00
+Sinopec Chemical Sales Company Limited
+RMB 1,000
+100.00
+Sinopec Beihai Refining and Chemical Limited
+Liability Company
+RMB 5,294
+98.98
+1.02
+Sinopec Qingdao Refining and Chemical
+RMB 5,000
+85.00
+15.00
+Company Limited
+products and petroleum products
+Sinopec Hainan Refining and Chemical
+100.00
+2018
+RMB 1,500
+100.00
+("SOIH")
+Sinopec International Petroleum Exploration and
+RMB 8,000
+100.00
+Production Limited ("SIPL")
+Sinopec Yizheng Chemical Fibre Limited
+RMB 4,000
+100.00
+Liability Company
+Sinopec Lubricant Company Limited
+RMB 3,374
+100.00
+China International United Petroleum and Chemical
+Company Limited
+RMB 5,000
+100.00
+Sinopec Qingdao Petrochemical Company Limited
+RMB 1,595
+Sinopec Catalyst Company Limited
+5,389
+2019
+RMB million
+Others
+Chemicals
+Corporate and others
+Depreciation, depletion and amortisation
+Exploration and production
+Refining
+Marketing and distribution
+Chemicals
+Marketing and distribution
+Corporate and others
+Exploration and production
+Refining
+Marketing and distribution
+Chemicals
+Corporate and others
+(2) Geographical information
+2019
+Impairment losses on long-lived assets
+Refining
+Exploration and production
+Capital expenditure
+Loans from Sinopec Group Company and fellow subsidiaries
+52,915
+74,181
+Deferred tax liabilities
+6,809
+5,948
+Other unallocated liabilities
+17,500
+29,328
+Total liabilities
+879,236
+735,773
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+40 SEGMENT REPORTING (Continued)
+(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
+2018
+RMB million
+RMB million
+61,739
+108,812
+109,967
+3
+4,274
+245
+353
+80
+264
+17
+1,374
+16
+345
+6,281
+The following tables set out information about the geographical information of the Group's external sales and the Group's non-current assets,
+excluding financial instruments and deferred tax assets. In presenting information on the basis of geographical segments, segment revenue is
+based on the geographical location of customers, and segment assets are based on the geographical location of the assets.
+External sales
+Mainland China
+Singapore
+1,797
+Others
+2,866
+13,966
+42,155
+31,372
+27,908
+29,566
+21,429
+22,438
+19,578
+1,979
+6,906
+147,094
+117,976
+50,732
+60,331
+19,676
+18,164
+21,572
+16,296
+13,379
+- Exploration and production
+- Refining
+Dividends paid to
+(1,551)
+6,901
+14,142
+8,833
+5,993
+7,450
+8,742
+79
+92
+92
+117
+at 31 December
+198
+6.817
+1,593
+798
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+195
+Financial Statements (International)
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES
+98
+Cash and cash equivalents
+2
+1
+7,504
+92
+92
+226
+198
+18
+343
+6,817
+7,205
+78
+798
+64
+Effect of foreign currency
+exchange rate changes
+(43)
+141
+150
+244
+11
+14
+14
+20
+20
+Overview
+8,742
+Financial assets of the Group include cash and cash equivalents, time deposits with financial institutions, financial assets at fair value through
+profit or loss, derivative financial assets, trade accounts receivable and bills receivable, amounts due from Sinopec Group Company and fellow
+subsidiaries, amounts due from associates and joint ventures, financial assets at FVOCI and other receivables. Financial liabilities of the Group
+include short-term debts, loans from Sinopec Group Company and fellow subsidiaries, derivative financial liabilities, trade accounts payable and bills
+payable, amounts due to Sinopec Group Company and fellow subsidiaries, amounts due to associates and joint ventures, other payables, long-term
+debts and lease liabilities.
+⚫credit risk;
+Total
+contractual
+undiscounted
+RMB million
+cash flow
+RMB million
+Within
+1 year or
+on demand
+RMB million
+More than 1
+year but less
+than 2 years
+RMB million
+More than 2
+years but less
+than 5 years
+RMB million
+More than
+5 years
+RMB million
+Short-term debts
+40,521
+Carrying
+amount
+42,240
+49,156
+62,903
+42,240
+952
+6,271
+25,189
+30,491
+Loans from Sinopec Group Company and
+fellow subsidiaries
+52,915
+54,508
+Long-term debts
+31 December 2019
+The following table sets out the remaining contractual maturities at the balance sheet date of the Group's financial liabilities, which are based on
+contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on prevailing rates current
+at the balance sheet date) and the earliest date the Group would be required to repay:
+As at 31 December 2019, the Group has standby credit facilities with several PRC financial institutions which provide borrowings up to RMB
+379,649 million (2018: RMB 387,748 million) on an unsecured basis, at a weighted average interest rate of 3.57% per annum (2018: 3.87%). As
+at 31 December 2019, the Group's outstanding borrowings under these facilities were RMB 2,947 million (2018: RMB 21,236 million) and were
+included in debts.
+liquidity risk; and
+• market risk.
+The Board of Directors has overall responsibility for the establishment, oversight of the Group's risk management framework, and developing and
+monitoring the Group's risk management policies.
+The Group's risk management policies are established to identify and analyse the risks faced by the Group, and set appropriate risk limits and
+controls to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
+conditions and the Group's activities. The Group, through its training and management controls and procedures, aims to develop a disciplined and
+constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular
+and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group's audit committee.
+Credit risk
+(i) Risk management
+Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
+obligations, and arises principally from the Group's deposits placed with financial institutions (including structured deposits) and receivables
+from customers. To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial
+institutions in the PRC with acceptable credit ratings. The majority of the Group's trade accounts receivable relate to sales of petroleum and
+chemical products to related parties and third parties operating in the petroleum and chemical industries. No single customer accounted for
+greater than 10% of total trade accounts receivable at 31 December 2019, except the amounts due from Sinopec Group Company and fellow
+subsidiaries. Management performs ongoing credit evaluations of the Group's customers' financial condition and generally does not require
+collateral on trade accounts receivable. The Group maintains an impairment loss for doubtful accounts and actual losses have been within
+management's expectations.
+The carrying amounts of cash and cash equivalents, time deposits with financial institutions, financial assets at fair value through profit or loss,
+derivative financial assets, trade accounts receivable and bills receivable, financial assets at FVOCI and other receivables, represent the Group's
+maximum exposure to credit risk in relation to financial assets.
+(ii) Impairment of financial assets
+The Group's primary type of financial assets that are subject to the expected credit loss model is trade accounts receivable and bills receivable,
+financial assets at FVOCI and other receivables.
+The Group's cash deposits are placed only with large financial institutions with acceptable credit ratings, and there is no material impairment
+loss identified.
+For trade accounts receivable and bills receivable and financial assets at FVOCI, the Group applies the IFRS 9 simplified approach to measuring
+expected credit losses which uses a lifetime expected loss allowance for all trade accounts receivable and bills receivable and financial assets at
+FVOCI.
+To measure the expected credit losses, trade accounts receivable and bills receivable and financial assets at FVOCI have been grouped based on
+shared credit risk characteristics and the days past due.
+The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2019 or 1 January 2019,
+respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current
+and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
+The detailed analysis of trade accounts receivable and bills receivable and financial assets at FVOCI, based on which the Group generated its
+payment profile is listed in Notes 25 and 26.
+All of the entity's other receivables (Note 28) are considered to have low credit risk, and the loss allowance recognised during the period was
+therefore limited to 12 months expected losses. The Group considers 'low credit risk' for other receivables when they have a low risk of default
+and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.
+196
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Liquidity risk
+Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing
+liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
+conditions, without incurring unacceptable losses or risking damage to the Group's reputation. Management prepares monthly cash flow budget
+to ensure that the Group will always have sufficient liquidity to meet its financial obligations as they fall due. The Group arranges and negotiates
+financing with financial institutions and maintains a certain level of standby credit facilities to reduce the Group's liquidity risk.
+The Group has exposure to the following risks from its uses of financial instruments:
+43,623
+3.605
+12,921
+Shanghai Petrochemical
+2019
+2018
+RMB million RMB million RMB million RMB million RMB million RMB million
+Fujian Petrochemical
+2019
+2018
+RMB million RMB million
+Sinopec Kantons
+2019
+RMB million RMB million
+2018
+Shanghai SECCO
+2019
+2018
+Sinopec-SK
+2019
+2018
+2018
+RMB million RMB million
+Net cash generated from
+operating activities
+40,260 24,825
+2,128
+3,467
+5,057
+6,659
+622
+38
+716
+738
+RMB million RMB million
+2019
+SIPL
+2018
+non-controlling interests
+4,830
+3,964
+10,926
+1,344
+1.616
+650
+650
+600
+600
+159
+14
+399
+1,016
+1,004
+245
+658
+104
+822
+1.191
+Summarised statement of cash flows
+Year ended 31 December
+Marketing Company
+2019
+4,601
+5,993
+3,766
+3,308
+(3,676)
+250
+525
+Net (decrease)/increase in
+cash and cash equivalents
+(7,198)
+1.080
+2,690
+2.144
+(1,303)
+(2,050)
+1,224
+139
+(134)
+(95)
+(165) 2,460
+(390)
+795
+734
+Cash and cash equivalents
+at 1 January
+14.142
+(13)
+(1,208)
+43
+(163)
+Net cash (used in)/generated
+from investing activities
+(25,923)
+8.339
+678
+4,096
+(4,623)
+(1,928)
+(472)
+(215)
+397
+648
+(91)
+(480)
+(4,987)
+(3,099)
+Net cash (used in)/generated
+from financing activities
+(21,535)
+(32,084)
+(116)
+(5,419)
+(1,737)
+(3,507)
+5,532
+Lease liabilities
+9.278
+367,711
+Financial assets at fair value through profit or loss:
+Level 1
+Level 2
+Level 3
+RMB million
+RMB million
+RMB million
+Total
+RMB million
+Structured deposits
+3,318
+Assets
+3,318
+1
+1
+Derivative financial assets:
+- Derivative financial assets
+128
+709
+837
+Financial assets at fair value through other comprehensive income:
+- Equity instruments
+90
+1,431
+- Equity investments, listed and at quoted market price
+At 31 December 2019
+Level 3 (lowest level): fair values measured using valuation techniques in which any significant input is not based on observable market data.
+•
+172
+1
+SGD
+Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in the
+functional currency of respective entity within the Group.
+Interest rate risk
+The Group's interest rate risk exposure arises primarily from its short-term and long-term debts and loans from Sinopec Group Company and fellow
+subsidiaries. Debts bearing interest at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate
+risk respectively. The interest rates and terms of repayment of short-term and long-term debts, and loans from Sinopec Group Company and fellow
+subsidiaries of the Group are disclosed in Note 30.
+As at 31 December 2019, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held
+constant, would decrease/increase the Group's profit for the year by approximately RMB 352 million (2018: decrease/increase by approximately
+RMB 424 million). This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group's debts
+outstanding at the balance sheet date with exposure to cash flow interest rate risk. The analysis is performed on the same basis for 2018.
+Commodity price risk
+The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products and
+chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the Group.
+The Group uses derivative financial instruments, including commodity futures and swaps contracts, to manage a portion of this risk.
+As at 31 December 2019, the Group had certain commodity contracts of crude oil, refined oil products and chemical products designated as
+qualified cash flow hedges and economic hedges. As at 31 December 2019, the fair value of such derivative hedging financial instruments is
+derivative financial assets of RMB 788 million (2018: RMB 7,844 million) and derivative financial liabilities of RMB 2,728 million (2018: RMB
+13,568 million).
+As at 31 December 2019, it is estimated that a general increase/decrease of USD 10 per barrel in basic price of derivative financial instruments,
+with all other variables held constant, would impact the fair value of derivative financial instruments, which would increase/decrease the Group's
+profit for the year by approximately RMB 3,134 million (2018: decrease/increase RMB 197 million), and decrease/increase the Group's other
+reserves by approximately RMB 4,289 million (2018: increase/decrease RMB 6,850 million). This sensitivity analysis has been determined assuming
+that the change in prices had occurred at the balance sheet date and the change was applied to the Group's derivative financial instruments at that
+date with exposure to commodity price risk. The analysis is performed on the same basis for 2018.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Fair values
+(i) Financial instruments carried at fair value
+The following table presents the carrying value of financial instruments measured at fair value at the balance sheet date across the three levels
+of the fair value hierarchy defined in IFRS 7, ‘Financial Instruments: Disclosures', with the fair value of each financial instrument categorised in
+its entirety based on the lowest level of input that is significant to that fair value measurement. The levels are defined as follows:
+•
+Level 1 (highest level): fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments.
+•
+Level 2: fair values measured using quoted prices in active markets for similar financial instruments, or using valuation techniques in which
+all significant inputs are directly or indirectly based on observable market data.
+1,521
+27
+Trade accounts receivable and bills receivable
+8,622
+874
+7,013
+7,887
+Financial assets at fair value through other comprehensive income:
+- Equity instruments
+127
+1,323
+1,450
+1,183
+7,013
+26,873
+- Derivative financial assets
+35,069
+Derivative financial liabilities
+- Derivative financial liabilities
+5,500
+5,500
+8,071
+8,071
+13,571
+13,571
+During the years ended 31 December 2019 and 2018, there was no transfer between instruments in Level 1 and Level 2.
+Management of the Group uses discounted cash flow model with inputted interest rate and commodity index, which were influenced by historical
+fluctuation and the probability of market fluctuation, to evaluate the fair value of the structured deposits and trade accounts receivable and bills
+receivable classified as Level 3 financial assets.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+199
+Financial Statements (International)
+Liabilities
+Derivative financial assets:
+182
+182
+219
+709
+13,371
+14,299
+Liabilities
+Derivative financial liabilities
+- Derivative financial liabilities
+At 31 December 2018
+192,872
+1,209
+1,520
+1,209
+1,520
+2,729
+2,729
+Level 1
+RMB million
+Level 2
+RMB million
+Level 3
+RMB million
+Total
+RMB million
+Financial assets at fair value through profit or loss:
+- Structured deposits
+25,550
+25,550
+– Equity investments, listed and at quoted market price
+8,622
+RMB million
+Assets
+2018
+contractual
+undiscounted
+cash flow
+Within
+1 year or
+on demand
+RMB million
+More than 1
+year but less
+than 2 years
+RMB million
+More than 2
+years but less
+More than
+than 5 years
+RMB million
+5 years
+RMB million
+Short-term debts
+29,462
+30,123
+Long-term debts
+51.011
+61,809
+30,123
+1,889
+16,938
+27,190
+15,792
+Loans from Sinopec Group Company and
+fellow subsidiaries
+74,181
+RMB million
+75,207
+RMB million
+31 December 2018
+RMB million
+16,488
+985
+15,676
+7,088
+45,008
+2,812
+290,539
+Derivative financial liabilities
+2,729
+2,729
+2,729
+Trade accounts payable and bills payable
+199,792
+199,792
+199,792
+Other payables
+78,771
+78,771
+78,771
+616,756
+808,654
+384,595
+22,932
+323,842
+Total
+Carrying
+amount
+32,127
+77,285
+3,741
+198
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Currency risk
+Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The
+Group's currency risk exposure primarily relates to short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries
+denominated in USD and lease liabilities denominated in Singapore Dollar ("SGD"). The Group enters into foreign exchange contracts to manage its
+currency risk exposure.
+Included primarily in short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries of the Group and lease
+liabilities are the following amounts denominated in a currency other than the functional currency of the entity to which they relate:
+Gross exposure arising from loans and lease liabilities
+31 December
+Financial Statements (International)
+2019
+million
+USD
+SGD
+103
+4
+668
+A 5 percent strengthening/weakening of RMB against the following currencies at 31 December 2019 and 2018 would have increased/decreased
+profit for the year of the Group by the amounts shown below. This analysis has been determined assuming that the change in foreign exchange rates
+had occurred at the balance sheet date and had been applied to the foreign currency balances to which the Group has significant exposure as stated
+above, and that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2018.
+USD
+31 December
+31 December
+37,977
+2019
+2018
+million
+197
+31 December
+192,757
+13,571
+Trade accounts payable and bills payable
+192,757
+1,362
+192,757
+Other payables
+85,790
+Derivative financial liabilities
+85,790
+13,571
+85,790
+459,257
+356,257
+54,915
+30,931
+17,154
+Management believes that the Group's current cash on hand, expected cash flows from operations and available standby credit facilities from
+financial institutions will be sufficient to meet the Group's short-term and long-term capital requirements.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Market risk
+433
+Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is
+to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
+446,772
+13,571
+536,218
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+for the year ended 31 December 2019
+Financial Statements (International)
+529,177
+Balance at 1 January
+408,106
+(a)
+121,071
+121,071
+536,218
+529,177
+415,147
+46 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY (Continued)
+Share premium
+The reconciliation between the opening and closing balances of each component of the Group's consolidated reserves is set out in the
+consolidated statement of changes in equity. Details of the change in the Company's individual component of reserves between the beginning
+and the end of the year are as follows:
+The Company
+2019
+RMB million
+2018
+RMB million
+Capital reserve
+Balance at 1 January
+Others
+Balance at 31 December
+Balance at 1 January
+Balance at 31 December
+Appropriation
+106,508
+Statutory surplus reserve
+(a) RESERVES MOVEMENT OF THE COMPANY
+167,381
+Total non-current liabilities
+5,404
+Total assets less current liabilities
+Net current liabilities
+9,201
+46
+less cu
+Non-current liabilities
+Long-term debts
+Loans from Sinopec Group Company and fellow subsidiaries
+Lease liabilities
+Provisions
+Other long-term liabilities.
+Equity
+Share capital
+Reserves
+Total equity
+5,112
+5,310
+4,230
+178,936
+327,205
+288,877
+94,640
+31,773
+696,558
+642,726
+12,999
+27,200
+6,681
+40,904
+107,783
+34,514
+33,094
+162,852
+9,195
+38,460
+(67,799)
+9,247
+Retained earnings
+Balance at 1 January
+Profit for the year
+Distribution to owners (Note 13)
+Appropriation
+Special reserve
+Others
+Balance at 31 December
+144,132
+177,989
+37,256
+(46,008)
+(3,745)
+40
+(1)
+(3,996)
+(507)
+(15)
+131,674
+144,132
+408,106
+415,147
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+203
+Financial Statements (International)
+Differences between Consolidated Financial Statements
+Prepared in Accordance with the Accounting Policies
+Complying with CASS and IFRS (Unaudited)
+(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH
+THE ACCOUNTING POLICIES COMPLYING WITH CASS AND IFRS (UNAUDITED)
+Total current liabilities
+Other than the differences in the classifications of certain financial statements captions and the accounting for the items described below, there are no
+material differences between the Group's consolidated financial statements prepared in accordance with the accounting policies complying with CASS
+and IFRS. The reconciliation presented below is included as supplemental information, is not required as part of the basic financial statements and
+does not include differences related to classification, presentation or disclosures. Such information has not been subject to independent audit or review.
+The major differences are:
+2,286
+507
+(40)
+3,912
+Balance at 31 December
+9,201
+55,850
+55,850
+55,850
+55,850
+86,678
+82,682
+3,745
+3,996
+Balance at 31 December
+90,423
+86,678
+Discretionary surplus reserve
+Balance at 1 January
+6
+117,000
+Balance at 31 December
+117,000
+117,000
+Other reserves
+Balance at 1 January
+2,286
+2,460
+Share of other comprehensive income/(loss) of associates and joint ventures, net of deferred tax
+201
+(64)
+Cash flow hedges, net of deferred tax
+1,465
+(617)
+Special reserve
+117,000
+Other payables
+to non-controlling interests
+84,418
+Measurement of expected credit losses
+The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past events,
+current conditions and forecasts of future economic conditions. The Group regularly monitors and reviews the assumptions used for estimating
+expected credit losses.
+Allowance for diminution in value of inventories
+If the costs of inventories become higher than their net realisable values, an allowance for diminution in value of inventories is recognised. Net
+realisable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
+costs necessary to make the sale. Management bases the estimates on all available information, including the current market prices of the finished
+goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were to be higher
+than estimated, the actual allowance for diminution in value of inventories could be higher than estimated.
+44 EVENTS AFTER THE BALANCE SHEET DATE
+In early 2020, the outbreak of Coronavirus Disease 2019 ("COVID-19") has significant impacts on the consumption of refined oil products and sales
+of chemical products of the Group. The Group has taken a series of strong and effective measures, and has coordinated the prevention and control
+of the COVID-19 and the resumption of work and production with all-out efforts to minimize its impact.
+International crude oil prices dropped significantly in March 2020 under the impact of the outbreak of the COVID-19 and the breakdown of OPEC's
+production reduction negotiation, which has a significant impact on the Group's operation.
+The COVID-19 and international crude oil prices drop in March 2020 are events arose after the balance sheet date, which are non-adjusting events
+after the balance sheet date. The Group will keep continuous attention on the situation of the COVID-19 and future fluctuation in oil prices, take
+responsive tackling measures, and assess the impact on the financial position and operating results of the Group after the balance sheet date. Up to
+the date of the issuance of the consolidated financial statements, the assessment is still in progress.
+45 PARENT AND ULTIMATE HOLDING COMPANY
+The directors consider the parent and ultimate holding company of the Group as at 31 December 2019 is Sinopec Group Company, a state-owned
+enterprise established in the PRC. This entity does not produce financial statements available for public use.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+201
+Financial Statements (International)
+202
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+46 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
+BALANCE SHEET OF THE COMPANY (Amounts in million)
+Note
+31 December
+2019
+RMB
+31 December
+2018
+RMB
+Non-current assets
+Property, plant and equipment, net
+Construction in progress
+Right-of-use assets
+291,544
+302,048
+Property, plant and equipment, other than oil and gas properties, are depreciated on a straight-line basis over the estimated useful lives of the
+assets, after taking into account the estimated residual value. Management reviews the estimated useful lives of the assets at least annually in order
+to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group's historical
+experience with similar assets and take into account anticipated technological changes. The depreciation expense for future periods is adjusted if
+there are significant changes from previous estimates.
+Depreciation
+If circumstances indicate that the net book value of a long-lived asset may not be recoverable, the asset may be considered “impaired", and an
+impairment loss may be recognised in accordance with IAS 36 “Impairment of Assets". The carrying amounts of long-lived assets are reviewed
+periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for impairment
+whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has
+occurred, the carrying amount is reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The recoverable
+amount is the greater of the net selling price and the value in use. It is difficult to precisely estimate selling price because quoted market prices for
+the Group's assets or cash-generating units are not readily available. In determining the value in use, expected cash flows generated by the asset or
+the cash-generating units are discounted to their present value, which requires significant judgement relating to level of sale volume, selling price,
+amount of operating costs and discount rate. Management uses all readily available information in determining an amount that is a reasonable
+approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sale volume, selling
+price, amount of operating costs and discount rate.
+Impairment for long-lived assets
+(i) GOVERNMENT GRANTS
+Financial Statements (International)
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
+Fair values (Continued)
+(ii) Fair values of financial instruments carried at other than fair value
+The disclosures of the fair value estimates, and their methods and assumptions of the Group's financial instruments, are made to comply
+with the requirements of IFRS 7 and IFRS 9 and should be read in conjunction with the Group's consolidated financial statements and related
+notes. The estimated fair value amounts have been determined by the Group using market information and valuation methodologies considered
+appropriate. However, considerable judgement is required to interpret market data to develop the estimates of fair value. Accordingly, the
+estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange. The use of
+different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
+The fair values of the Group's financial instruments carried at other than fair value (other than long-term indebtedness and investments in
+unquoted equity securities) approximate their carrying amounts due to the short-term maturity of these instruments. The fair values of long-term
+indebtedness are estimated by discounting future cash flows using current market interest rates offered to the Group for debt with substantially
+the same characteristic and maturities range from 2.37% to 4.90% (2018: 2.76% to 4.90%). The following table presents the carrying amount
+and fair value of the Group's long-term indebtedness other than loans from Sinopec Group Company and fellow subsidiaries at 31 December
+2019 and 2018:
+Carrying amount
+Fair value
+31 December
+2019
+RMB million
+31 December
+2018
+63,946
+62,594
+RMB million
+60,493
+63,085
+62,656
+Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values
+at 31 December 2019 and 2018.
+43 ACCOUNTING ESTIMATES AND JUDGEMENTS
+The Group's financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the
+preparation of the consolidated financial statements. Management bases the assumptions and estimates on historical experience and on
+various other assumptions that it believes to be reasonable and which form the basis for making judgements about matters that are not readily
+apparent from other sources. On an ongoing basis, management evaluates its estimates. Actual results may differ from those estimates as facts,
+circumstances and conditions change.
+The selection of critical accounting policies, the judgements and other uncertainties affecting application of such policies and the sensitivity of
+reported results to changes in conditions and assumptions are factors to be considered when reviewing the consolidated financial statements. The
+significant accounting policies are set forth in Note 2. Management believes the following critical accounting policies involve the most significant
+judgements and estimates used in the preparation of the consolidated financial statements.
+Oil and gas properties and reserves
+The accounting for the exploration and production's oil and gas activities is subject to accounting rules that are unique to the oil and gas industry.
+There are two methods to account for oil and gas business activities, the successful efforts method and the full cost method. The Group has elected
+to use the successful efforts method. The successful efforts method reflects the volatility that is inherent in exploring for mineral resources in that
+costs of unsuccessful exploratory efforts are charged to expense as they are incurred. These costs primarily include dry hole costs, seismic costs
+and other exploratory costs. Under the full cost method, these costs are capitalised and written-off or depreciated over time.
+Engineering estimates of the Group's oil and gas reserves are inherently imprecise and represent only approximate amounts because of the
+subjective judgements involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have to be
+met before estimated oil and gas reserves can be designated as “proved”. Proved and proved developed reserves estimates are updated at least
+annually and take into account recent production and technical information about each field. In addition, as prices and cost levels change from
+year to year, the estimates of proved and proved developed reserves also change. This change is considered a change in estimate for accounting
+purposes and is reflected on a prospective basis in relation to depreciation rates. Oil and gas reserves have a direct impact on the assessment of
+the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved reserves estimates are revised
+downwards, earnings could be affected by changes in depreciation expense or an immediate write-down of the property's carrying amount.
+Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration the
+anticipated method of dismantlement required in accordance with industry practices in similar geographic area, including estimation of economic
+life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are capitalised as oil and
+gas properties with equivalent amounts recognised as provisions for dismantlement costs.
+Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment loss
+and future dismantlement costs. Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes
+produced and reserves.
+200
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
+for the year ended 31 December 2019
+43 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
+The Group has not developed an internal valuation model necessary to estimate the fair values of loans from Sinopec Group Company and
+fellow subsidiaries as it is not considered practicable to estimate their fair values because the cost of obtaining discount and borrowing rates for
+comparable borrowings would be excessive based on the Reorganisation of the Group, the Group's existing capital structure and the terms of the
+borrowings.
+Contract liabilities
+51,598
+Investment in subsidiaries
+21,544
+30,145
+Financial assets at fair value through other comprehensive income
+Dividends receivable
+207
+41
+2,313
+Inventories
+49,116
+45,825
+Prepaid expenses and other current assets.
+106,645
+73,442
+Total current assets
+232,565
+257,104
+Current liabilities
+Short-term debts
+32,329
+14,511
+Loans from Sinopec Group Company and fellow subsidiaries
+39,439
+5,815
+Lease liabilities
+7,198
+Derivative financial liabilities
+157
+967
+Trade accounts payable and bills payable
+80,118
+Trade accounts receivable and bills receivable
+940
+Derivative financial assets
+22,500
+266,359
+251,970
+Interest in associates
+22,798
+21,143
+Interest in joint ventures
+15,530
+16,094
+Financial assets at fair value through other comprehensive income
+395
+395
+Deferred tax assets
+7,315
+11,021
+120,037
+Lease prepayments
+Current assets
+7,101
+Long-term prepayments and other assets
+6,727
+13,129
+791,198
+674,499
+Cash and cash equivalents
+15,984
+59,120
+Time deposits with financial institutions
+38,088
+23,759
+Financial assets at fair value through profit or loss
+Total non-current assets
+Under CASs, grants from the government are credited to capital reserve if required by relevant governmental regulations. Under IFRS, government
+grants relating to the purchase of fixed assets are recognised as deferred income and are transferred to the income statement over the useful life of
+these assets.
+(ii) SAFETY PRODUCTION FUND
+Under CASS, safety production fund should be recognised in profit or loss with a corresponding increase in reserve according to PRC regulations.
+Such reserve is reduced for expenses incurred for safety production purposes or, when safety production related fixed assets are purchased, is
+reduced by the purchased cost with a corresponding increase in the accumulated depreciation. Such fixed assets are not depreciated thereafter.
+Under IFRS, payments are expensed as incurred, or capitalised as fixed assets and depreciated according to applicable depreciation methods.
+Effects of major differences between the shareholders' equity under CASS and the total equity under IFRS are analysed as follows:
+(8)
+(8)
+12
+306
+12
+Improved recovery
+Extensions and discoveries
+Production
+End of year
+Proved developed reserves
+2
+2
+4
+4
+25
+25
+5
+5
+Revisions of previous estimates
+306
+299
+299
+Gas Producing Activities (Unaudited)
+208
+Financial Statements
+Supplemental Information on Oil and
+Gas Producing Activities (Unaudited)
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Table IV: Reserve quantities information (Continued)
+Total
+2019
+(28)
+2018
+Other
+countries
+Total
+China
+Other
+countries
+Equity method investments
+Proved developed and undeveloped reserves of
+associates and joint ventures (oil) (million barrels)
+Beginning of year
+China
+Supplemental Information on Oil and
+(28)
+(28)
+245
+245
+261
+261
+38
+45
+85
+38
+33
+33
+45
+38
+38
+13
+31
+13
+(1)
+End of year
+Production
+Extensions and discoveries
+Improved recovery
+290
+290
+299
+299
+Beginning of year
+261
+261
+273
+(28)
+273
+End of year
+Proved undeveloped reserves
+End of year
+Proved developed and undeveloped reserves
+of associates and joint ventures (gas)
+(billion cubic feet)
+Beginning of year
+Revisions of previous estimates
+Beginning of year
+(1)
+Financial Statements
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+End of year
+107
+107
+96
+95
+1
+Proved developed and undeveloped reserves
+(gas) (billion cubic feet)
+Beginning of year
+6,793
+6,793
+6,985
+6,985
+Revisions of previous estimates
+123
+123
+(40)
+137
+137
+1
+95
+Proved developed reserves
+Beginning of year
+1,271
+1,244
+27
+1,156
+1,124
+32
+(40)
+End of year
+1,326
+17
+1,271
+1,244
+27
+Proved undeveloped reserves
+Beginning of year
+96
+1,343
+207
+Improved recovery
+Production
+6,000
+End of year
+6,026
+6,026
+5,822
+5,822
+Proved undeveloped reserves
+Beginning of year
+971
+971
+985
+985
+End of year
+1,190
+1,190
+971
+971
+6,000
+5,822
+5,822
+Beginning of year
+469
+469
+142
+142
+875
+875
+680
+680
+Extensions and discoveries
+(1,044)
+(974)
+(974)
+End of year
+7,216
+7,216
+6,793
+6,793
+Proved developed reserves
+(1,044)
+12
+Proved developed reserves
+End of year
+290,997
+290,320
+677
+294,217
+291,463
+2,754
+Gas Producing Activities (Unaudited)
+Supplemental Information on Oil and
+Financial Statements
+209
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+15,993
+291,463
+307,456
+10,882
+290,320
+301,202
+net cash flows
+Standardised measure of discounted future
+(293)
+(126,617)
+(39,634)
+(1,086)
+(42,728)
+(40,651)
+(2,077)
+Undiscounted future net cash flows
+417,200
+416,495
+investments' results of standardised measure
+of discounted future net cash flows
+705
+418,080
+3,047
+10% annual discount for estimated timing
+of cash flows
+(126,203)
+(126,175)
+(28)
+(126,910)
+421,127
+(40,720)
+Total of the Group's and its equity method
+13,239
+(5,603)
+(5,603)
+Future development costs
+(12,462)
+(12,462)
+48,778
+48,778
+41,796
+(13,141)
+(13,141)
+Future production costs
+41,796
+Future cash flows
+Equity method investments
+1,239
+1,239
+305
+305
+(4,433)
+(4,433)
+Future income tax expenses
+(3,995)
+10,205
+10,205
+net cash flows
+Standardised measure of discounted future
+(13,012)
+(13,012)
+(8,852)
+(8,852)
+13,239
+of cash flows
+26,251
+26,251
+19,057
+19,057
+Undiscounted future net cash flows
+(5,632)
+(5,632)
+(3,995)
+10% annual discount for estimated timing
+Beginning of year
+Future income tax expenses
+(19,300)
+2
+Total of the Group and its equity method investments
+Proved developed and undeveloped reserves
+(oil) (million barrels)
+Beginning of year
+1,666
+1,339
+327
+1,599
+1,261
+338
+End of year
+1,740
+1,433
+1,666
+1,339
+327
+12
+222
+13
+13
+Proved undeveloped reserves
+Beginning of year
+End of year
+2
+(3)
+(3)
+(3)
+(3)
+Proved developed and undeveloped reserves
+9
+13
+13
+13
+13
+12
+12
+9
+9
+9
+(3,010)
+(gas) (billion cubic feet)
+6,806
+2018
+RMB million
+Other
+countries
+The Group
+Future cash flows
+Future production costs
+869,402
+(384,417)
+856,037
+(377,692)
+13,365
+(6,725)
+868,058
+(381,893)
+854,563
+13,495
+(376,532)
+(5,361)
+Future development costs
+(27,065)
+(22,216)
+(4,849)
+(22,310)
+China
+Total
+2019
+RMB million
+Other
+countries
+China
+6,793
+13
+6,997
+6,985
+12
+End of year
+7,225
+7,216
+Beginning of year
+9
+6,793
+13
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Table V: Standardised measure of discounted future net cash flows
+The standardized measure of discounted future net cash flows, related to the above proved oil and gas reserves, is calculated in accordance with
+the requirements of "ASC Topic 932 Extractive Activities - Oil and Gas", "SEC Rule 4-10 of Regulation S-X", and "Industrial Information Disclosure
+Guidelines for Public Company - No.8 Oil and Gas Exploitation". Estimated future cash inflows from production are computed by applying the average,
+first-day-of-the-month price adjusted for differential for oil and gas during the twelve-month period before the ending date of the period covered by
+the report to year-end quantities of estimated net proved reserves. Future price changes are limited to those provided by contractual arrangements in
+existence at the end of each reporting year. Future development and production costs are those estimated future expenditures necessary to develop and
+produce year-end estimated proved reserves based on year-end cost indices, assuming continuation of year-end economic conditions. Estimated future
+income taxes are calculated by applying appropriate year-end statutory tax rates to estimated future pre-tax net cash flows, less the tax basis of related
+assets. Discounted future net cash flows are calculated using 10% discount factors. This discounting requires a year-by-year estimate of when the future
+expenditure will be incurred and when the reserves will be produced.
+The information provided does not represent management's estimate of the Group's and its equity method investments' expected future cash flows or
+value of proved oil and gas reserves. Estimates of proved reserve quantities are imprecise and change over time as new information becomes available.
+Moreover, probable and possible reserves, which may become proved in the future, are excluded from the calculations. The arbitrary valuation requires
+assumptions as to the timing and amount of future development and production costs. The calculations are made for the years ended 31 December
+2019 and 2018 and should not be relied upon as an indication of the Group's and its equity method investments' future cash flows or value of its oil
+and gas reserves.
+Total
+6,806
+12
+8
+8
+Total
+China
+Other
+countries
+Total
+China
+Other
+countries
+The Group
+Exploration
+16,295
+16,295
+12,108
+12,108
+Development
+37,412
+37,245
+167
+27,453
+2018
+RMB million
+RMB million
+2019
+Table II: Costs incurred in oil and gas exploration and development
+277,730
+273,012
+4,718
+Equity method investments
+Share of net capitalised costs of associates
+and joint ventures
+Total of the Group's and its equity method
+investments' net capitalised costs
+27,329
+5,743
+6,304
+6,304
+279,823
+271,787
+8,036
+284,034
+273,012
+11,022
+5,743
+(39,500)
+124
+53,707
+Financial Statements
+Supplemental Information on Oil and
+Gas Producing Activities (Unaudited)
+206
+Financial Statements
+Supplemental Information on Oil and
+Gas Producing Activities (Unaudited)
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Table III: Results of operations related to oil and gas producing activities
+2019
+RMB million
+Other
+2018
+RMB million
+Total
+China
+countries
+Total
+China
+Other
+countries
+The Group
+205
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+917
+39,437
+53,540
+167
+39,561
+39,437
+124
+Equity method investments
+Share of costs of exploration and development
+of associates and joint ventures
+Total costs incurred
+747
+793
+793
+Total of the Group's and its equity method
+investments' exploration and development costs
+54,454
+53,540
+914
+40,354
+747
+Revenues
+Sales
+(618,593)
+(41,215)
+2,293
+Government grants
+Safety production fund
+Others
+(i)
+(ii)
+54
+56
+69
+909
+Profit for the year under IFRS*
+(212)
+72,033
+(2,357)
+78,897
+*
+The figures are extracted from the consolidated financial statements prepared in accordance with the accounting policies complying with IFRS during the year ended
+31 December 2018 and 2019 which have been audited by PricewaterhouseCoopers.
+204
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
+In accordance with "Accounting Standards Codification (ASC) Topic 932 Extractive Activities - Oil and Gas", issued by the Financial Accounting
+Standards Board of the United States, “Rule 4-10 of Regulation S-X", issued by Securities and Exchange Commission (SEC), and in accordance with
+“Industrial Information Disclosure Guidelines for Public Company - No.8 Oil and Gas Exploitation", issued by Shanghai Stock Exchange, this section
+provides supplemental information on oil and gas exploration and producing activities of the Group and its equity method investments at 31 December
+2019 and 2018, and for the years then ended in the following six separate tables. Tables I through III provide historical cost information under IFRS
+pertaining to capitalised costs related to oil and gas producing activities; costs incurred in oil and gas exploration and development; and results of
+operation related to oil and gas producing activities. Tables IV through VI present information on the Group's and its equity method investments'
+estimated net proved reserve quantities; standardised measure of discounted future net cash flows; and changes in the standardised measure of
+discounted cash flows.
+Adjustments:
+80,289
+2018
+RMB million
+RMB million
+72,122
+Note
+31 December
+2019
+RMB million
+876,905
+31 December
+2018
+RMB million
+Shareholders' equity under CASS
+Adjustments:
+857,659
+Tables I to VI of supplemental information on oil and gas producing activities set out below represent information of the Company and its consolidated
+subsidiaries and equity method investments.
+Government grants
+(1,070)
+Total equity under IFRS*
+875,835
+(1,124)
+856,535
+Effects of major differences between the net profit under CASS and the profit for the year under IFRS are analysed as follows:
+Note
+2019
+Net profit under CASS
+(i)
+(658,093)
+Table I: Capitalised costs related to oil and gas producing activities
+Other
+44,193
+17
+40,770
+Total capitalised costs
+976,472
+932,964
+43,508
+935,823
+891,605
+8
+44,218
+Accumulated depreciation, depletion, amortisation
+and impairment losses
+(702,392)
+(661,177)
+Net capitalised costs
+274,080
+271,787
+651,531
+199,304
+695,724
+199,321
+40,778
+186
+46,526
+2018
+RMB million
+Other
+Total
+China
+countries
+Total
+China
+countries
+The Group
+2019
+RMB million
+Property cost, wells and related equipments
+727,552
+Supporting equipments and facilities
+202,208
+684,246
+202,192
+43,306
+16
+Uncompleted wells, equipments and facilities
+46,712
+and facilities
+Transfers
+59,552
+59,262
+The results of operations for producing activities for the years ended 31 December 2019 and 2018 are shown above. Revenues include sales to
+unaffiliated parties and transfers (essentially at third-party sales prices) to other segments of the Group. Income taxes are based on statutory tax
+rates, reflecting allowable deductions and tax credits. General corporate overhead and interest income and expense are excluded from the results of
+operations.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Table IV: Reserve quantities information
+The Group's and its equity method investments' estimated net proved underground oil and gas reserves and changes thereto for the years ended 31
+December 2019 and 2018 are shown in the following table.
+Proved oil and gas reserves are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable
+certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods,
+and government regulation before contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain,
+regardless of whether the estimate is a deterministic estimate or probabilistic estimate. Due to the inherent uncertainties and the limited nature of
+reservoir data, estimates of underground reserves are subject to change as additional information becomes available.
+Proved developed oil and gas reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and
+operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.
+"Net" reserves exclude royalties and interests owned by others and reflect contractual arrangements and obligation of rental fee in effect at the time of
+the estimate.
+2019
+2018
+Total
+China
+Other
+countries
+Other
+Total
+China
+countries
+3,687
+13,418
+17,105
+2,457
+Profit before taxation
+1,617
+1,617
+1,837
+1,837
+Income tax expense
+(486)
+(486)
+The Group
+(667)
+Share of profit for producing activities of associates
+and joint ventures
+1,131
+1,131
+1,170
+1,170
+Total of the Group's and its equity method investments'
+results of operations for producing activities
+28,150
+25,693
+(667)
+(4,075)
+Proved developed and undeveloped reserves (oil)
+Beginning of year
+79
+Production
+(256)
+(249)
+(7)
+(260)
+(249)
+(11)
+End of year
+1,450
+1,433
+17
+1,367
+1,339
+28
+Non-controlling interest in proved developed
+and undeveloped reserves at the end of year
+79
+98
+98
+Extensions and discoveries
+1,367
+1,339
+28
+1,293
+1,261
+32
+Revisions of previous estimates
+81
+(million barrels)
+85
+160
+158
+Improved recovery
+160
+160
+95
+90
+125
+(4)
+(4,075)
+(4,068)
+(4,068)
+Exploration expenses
+(10,510)
+(10,510)
+(10,744)
+(10,744)
+Depreciation, depletion, amortisation and
+impairment losses
+(48,630)
+(47,580)
+(1,050)
+(62,832)
+(60,877)
+(1,955)
+Taxes other than income tax
+(9,395)
+(9,395)
+(11,400)
+(1,274)
+(45,953)
+(47,227)
+(1,244)
+290
+57,860
+57,860
+83,633
+80,641
+2,992
+89,569
+84,532
+(11,400)
+5,037
+139,903
+3,282
+147,429
+142,392
+5,037
+Production costs excluding taxes
+(47,969)
+(46,725)
+143,185
+Profit before taxation
+26,681
+25,693
+(2,516)
+9,325
+9,530
+9,325
+9,530
+(2,516)
+(2,455)
+9,530
+Production costs excluding taxes
+9,530
+Exploration expenses
+Depreciation, depletion, amortisation and
+impairment losses
+(1,124)
+(1,124)
+(1,163)
+(1,163)
+Taxes other than income tax
+(2,455)
+Discounted future net cash flows attributable
+9,325
+Sales
+988
+15,226
+13,418
+1,808
+Income tax expense
+338
+338
+709
+9,325
+709
+27,019
+25,693
+1,326
+15,935
+13,418
+2,517
+Equity method investments
+Revenues
+Results of operation from producing activities
+307
+NAMES AND STOCK CODES
+b) The original copies of financial statements
+and consolidated financial statements as of
+31 December 2019 prepared under IFRS
+and CASS, signed by Mr. Zhang Yuzhuo, the
+Chairman, Mr. Ma Yongsheng, the President,
+Ms. Shou Donghua, the Chief Financial
+Officer and head of the financial department
+of Sinopec Corp.;
+ENGLISH ABBREVIATION
+中国石化
+CHINESE ABBREVIATION
+China Petroleum & Chemical Corporation
+ENGLISH NAME
+中国石油化工股份有限公司
+STATUTORY NAME
+CORPORATE INFORMATION
+71,809
+684
+(3,034)
+(6,254)
+(366)
+701
+1,196
+1,438
+272
+355
+818
+(423)
+341
+1,321
+Sinopec Corp.
+(196)
+AUTHORISED REPRESENTATIVES
+Mr. Huang Wensheng
+Convention Plaza
+20th Floor, Office Tower
+PLACE OF BUSINESS IN HONG KONG
+:ir@sinopec.com
+listco/
+: http://www.sinopec.com/
+: 86-10-59960386
+: 86-10-59960028
+: 100728
+E-mail addresses
+Website
+Fax
+Tel.
+Postcode
+Beijing, PRC
+No.22 Chaoyangmen North Street,
+Chaoyang District
+REGISTERED ADDRESS AND PLACE OF
+BUSINESS
+Mr. Zhang Zheng
+REPRESENTATIVE ON SECURITIES MATTERS
+Mr. Huang Wensheng
+SECRETARY TO THE BOARD
+Mr. Ma Yongsheng
+1 Harbour Road
+(881)
+(2,804)
+Total of the Group's and its equity method investments' results of net changes for the year
+Net changes for the year
+Net changes in income taxes
+Previously estimated development costs incurred during the year
+Accretion of discount
+Net changes due to extensions, discoveries and improved recoveries
+Revisions of previous quantity estimates
+Net changes in estimated future development cost
+Net changes in prices and production costs
+Sales and transfers of oil and gas produced, net of production costs
+Equity method investments
+Net changes for the year
+Net changes in income taxes
+Previously estimated development costs incurred during the year
+Accretion of discount
+Net changes in estimated future development cost
+Net changes in prices and production costs
+Sales and transfers of oil and gas produced, net of production costs
+The Group
+Table VI: Changes in the standardised measure of discounted cash flows
+(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
+Gas Producing Activities (Unaudited)
+Supplemental Information on Oil and
+Financial Statements
+210
+1,620
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+RMB million
+(3,001)
+(2,741)
+71,125
+(3,220)
+(28,894)
+1,547
+22,405
+32,407
+9,507
+9,737
+22,040
+12,995
+41,385
+61,465
+(5,468)
+(10,108)
+98,952
+(25,442)
+(88,802)
+(85,821)
+2018
+RMB million
+2019
+Wanchai
+Net changes due to extensions, discoveries and improved recoveries
+Revisions of previous quantity estimates
+INFORMATION DISCLOSURE AND PLACES FOR
+Huangpu District,
+Shanghai, PRC 200021
+: PricewaterhouseCoopers
+2 Corporate Avenue,
+202 Hu Bin Road,
+PricewaterhouseCoopers,
+: 11th Floor
+Zhong Tian LLP
+: PricewaterhouseCoopers
+Overseas Auditors
+Address
+Address
+Domestic Auditors
+NAMES AND ADDRESSES OF AUDITORS OF
+SINOPEC CORP.
+: SNP
+London Stock Exchange
+Stock code
+: SNP
+New York Stock Exchange
+Stock code
+: 00386
+ADRs:
+Hong Kong Stock Exchange
+Stock code
+H Shares:
+: 600028
+Stock code
+: SINOPEC CORP
+: 22nd Floor,
+Stock name
+Prince's Building,
+Central, Hong Kong
+Corporate Information
+Hong Kong
+Printed on environmentally friendly paper
+www.sinopec.com
+Beijing, China
+22 Chaoyangmen North Street, Chaoyang District,
+中國北京市朝陽區朝陽門北大街22號
+中国石油化工股份有限公司
+If there is any inconsistency between the Chinese
+and English versions of this annual report, the
+Chinese version shall prevail.
+Beijing, PRC, 27 March 2020
+Chairman
+Zhang Yuzhuo
+By Order of the Board
+newspapers designated by the CSRC during
+the reporting period.
+d) Copies of the documents and announcements
+that Sinopec Corp. has published in the
+c) The original auditors' reports signed by the
+auditors; and
+a) The original copies of the 2019 annual report
+signed by Mr. Zhang Yuzhuo, the Chairman;
+The following documents will be available for
+inspection during normal business hours after
+27 March 2020 at the registered address of
+Sinopec Corp. upon requests by the relevant
+regulatory authorities and shareholders in
+accordance with the Articles of Association and
+the laws and regulations of PRC:
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+212
+DOCUMENTS FOR INSPECTION
+Documents for Inspection
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019 211
+Shanghai Stock Exchange
+SINOPEC CORP.
+PLACES OF LISTING OF SHARES, STOCK
+H Shares:
+China Securities Registration and Clearing
+Company Limited Shanghai Branch Company
+36th Floor, China Insurance Building
+166 Lujiazui East Road
+Shanghai, PRC
+A Shares:
+REGISTRARS
+No. 1, Jian Guo Men Wai Avenue,
+Beijing, PRC
+Skadden, Arps, Slate, Meagher & Flom LLP
+30/F, China World Office 2
+U.S.A.:
+Central, Hong Kong
+15 Queen's Road
+23rd Floor, Gloucester Tower
+Herbert Smith Freehills
+Hong Kong:
+Postcode: 100020
+Beijing PRC
+No. 5, Dong San Huan Central Road
+Chaoyang District
+20th Floor, Fortune Financial Centre
+People's Republic of China:
+LEGAL ADVISORS
+No change during the reporting period
+A Shares:
+COPIES OF RELATIVE REPORTS
+Hong Kong Registrars Limited
+R1712·1716, 17th Floor, Hopewell Centre
+Haiwen & Partners
+Hong Kong
+183 Queen's Road East
+Citigroup Centre
+Citibank, N.A.
+USA
+New York NY 10013
+388 Greenwich St., 14th Floor
+Citibank, N.A.
+London E14 5LB, U.K.
+The US:
+Beijing, PRC
+The UK:
+No.22 Chaoyangmen North Street,
+DEPOSITARY FOR ADRS
+The US:
+Chaoyang District
+Citibank, N.A.
+388 Greenwich St., 14th Floor
+New York NY 10013
+Canada Square, Canary Wharf
+United States of America
+COPIES OF THIS ANNUAL REPORT ARE
+AVAILABLE AT
+The PRC:
+China Petroleum & Chemical Corporation
+Board Secretariat
+39,720
+22,418
+23,890
+62,676
+63,509
+59,746
+60,750
+2018 Change (%)
+2018 Change (%)
+Other refined petroleum products
+2019
+Average realised price (RMB/tonne)
+Year ended 31 December
+In 2019, the segment's operating
+expenses was RMB 1,193.5 billion,
+representing a decrease of 1.2% over
+2018. This was mainly attributed to the
+decrease in procurement cost of crude
+oil.
+The sales revenues of chemical feedstock
+was RMB 140.2 billion, representing a
+decrease of 6.9% over 2018.
+The sales revenues of kerosene was RMB
+101.6 billion, representing an increase of
+0.4% over 2018.
+The sales revenues of diesel was RMB
+347.8 billion, representing a decrease of
+3.7% over 2018.
+38,524
+In 2019, sales revenues of gasoline
+was RMB 428.7 billion, representing a
+decrease of 2.9% over 2018.
+2019
+The sales revenues of refined petroleum
+products other than gasoline, diesel,
+kerosene and chemical feedstock was
+RMB 200.3 billion, representing a
+decrease of 1.6% over 2018.
+7,057
+61,439
+(9.7)
+3,910
+Chemical feedstock
+3,531
+(5.8)
+4,515
+4,252
+(5.0)
+5,766
+5,477
+(4.5)
+7,386
+73617
+0.7
+3.1
+6.6
+1.3
+1.7
+19630
+61,890
+Kerosene
+In 2019, the operating revenues of
+this segment was RMB 210.7 billion,
+representing an increase of 5.3% over
+2018. This was mainly attributed to the
+rise of realised price and sales volume in
+natural gas as a result of the expansion
+of natural gas business.
+Gasoline
+Elimination of inter-segment (loss)/profit
+Operating loss
+Operating expenses
+Operating revenues
+Operating revenues
+Operating expenses
+Operating profit
+Corporate and Others
+Operating profit
+Chemicals Segment
+7.8
+1,377,876
+8.5
+1,368,583
+1,484,822
+1,484,758
+(36.5)
+27,007
+17,151
+(8.0)
+519,726
+478,083
+3,237
+(9.4)
+(1) Exploration and Production Segment
+Diesel
+Most crude oil and a small portion of the
+natural gas produced by the exploration
+and production segment were used for
+the Company's refining and chemical
+production. Most of the natural gas and
+a small portion of crude oil were sold
+externally to other customers.
+In 2019, the operating expenses of
+this segment was RMB 201.4 billion,
+representing a decrease of 4.2% over
+2018. That was mainly due to the
+following:
+Sales Volume (thousand tonnes)
+Year ended 31 December
+The following table sets forth the sales volumes, average realised prices and the respective changes of the Company's major refined oil products
+of the segment in 2019 and 2018.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+22
+22
+In 2019, the operating revenues of
+this segment was RMB 1,224.2 billion,
+representing a decrease of 3.1% over
+2018. This was mainly attributed to the
+decrease in products prices compared
+with the same period of last year.
+Business activities of the refining
+segment include purchasing crude oil
+from third parties and the exploration
+and production segment of the Company,
+as well as processing crude oil into
+refined petroleum products. Gasoline,
+diesel and kerosene are sold internally to
+the marketing and distribution segment
+of the Company; part of the chemical
+feedstock is sold to the chemicals
+segment of the Company; and other
+refined petroleum products are sold
+externally to both domestic and overseas
+customers.
+(2) Refining Segment
+In 2019, the operating profit of the
+exploration and production segment
+was RMB 9.3 billion, representing an
+increase of RMB 19.4 billion compared
+with 2018. The segment reinforced
+efficient exploration and profit-oriented
+development, enhanced stable production
+of crude oil, accelerated construction of
+natural gas production-supply-storage-sale
+system and actively expanding market and
+promoting sales, strengthened cost control,
+and effectively improved profitability.
+(9,293)
+(3,634)
+64
+(40)
+In 2019, the oil and gas lifting cost was
+RMB 782 per tonne, representing a year
+on year decrease of 1.8%.
+Personnel expenses increased by RMB
+1.7 billion year on year.
+Procurement cost increased by RMB
+10.6 billion year on year, as a result
+of expansion of LNG business scale;
+Resource Tax and special oil income
+levy decreased by RMB 2.0 billion
+year on year;
+Impairment losses on long-lived
+assets decreased by RMB 4.3 billion
+year on year;
+Payment of land use right and
+community services expenses
+decreased by RMB 5.7 billion year on
+year;
+Depreciation, depletion and
+amortisation decreased by RMB 9.6
+billion year on year;
+•
+In 2019, the segment sold 34.35 million
+tonnes of crude oil, representing a
+decrease of 1.3% over 2018. Natural
+gas sales volume was 28.78 billion cubic
+meters (bcm), representing an increase
+of 9.7% over 2018. Regasified LNG sales
+volume was 11.16 bcm, representing
+an increase of 33.9% over 2018. LNG
+sales volume was 4.74 million tonnes,
+representing an increase of 65.9% over
+2018. Average realised prices of crude
+oil, natural gas, Regasified LNG, and LNG
+were RMB 2,862 per tonne, RMB 1,566
+per thousand cubic meters, RMB 2,040
+per thousand cubic meters, and RMB
+3,305 per tonne, representing decrease
+of 6.0%, increase of 11.1%, 5.5%, and
+decrease of 12.6% respectively over
+2018.
+3,312
+5.5
+In 2019, the average processing cost
+for crude oil was RMB 3,403 per tonne,
+representing a decrease of 4.1% over
+2018. Total crude oil processed was
+252.5 million tonnes (excluding volume
+processed for third parties), representing
+an increase of 1.7% over 2018. The total
+cost of crude oil processed was RMB
+859.3 billion, representing a decrease of
+2.4% over 2018.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+3.3
+2,974
+3,072
+(6.8)
+23,372
+21,772
+Fuel
+(5.8)
+4,562
+4,297
+5.0
+25,787
+27,068
+Kerosene
+(2.6)
+5,541
+5,399
+41,537
+23
+43,832
+Management's Discussion
+Management's Discussion
+546,733
+Synthetic fibre
+Synthetic resin
+Synthetic fibre monomer and polymer
+Basic organic chemicals
+Sales Volume (Thousand tonnes)
+Year ended 31 December
+The following table sets forth the sales volume, average realised prices and respective percentage changes of each of the segment's six major
+categories of chemical products in 2019 and 2018.
+The sales revenues generated by the
+segment's six major categories of
+chemical products (namely basic organic
+chemicals, synthetic resin, synthetic fibre
+monomer and polymer, synthetic fibre,
+synthetic rubber, and chemical fertiliser)
+totaled RMB 465.9 billion, representing
+a decrease of 9.7% as compared with
+2018, and accounted for 94.1% of the
+operating revenues of the segment.
+as well as the change of supply-demand
+structure.
+In 2019, the operating revenue of the
+chemicals segment was RMB 495.2
+billion, representing a decrease of 9.4%
+as compared with that of 2018. This was
+mainly due to sharp decrease in prices
+of chemical products as a result of the
+concentrated release of new capacity,
+distributing petrochemical and inorganic
+chemical products.
+The business activities of the chemicals
+segment include purchasing chemical
+feedstock from the refining segment and
+third parties, producing, marketing and
+(4) Chemicals Segment
+In 2019, the operating profit of
+this segment was RMB 29.1 billion,
+representing an increase of 24%
+compared with 2018.
+In 2019, the segment exerted advantages
+of integrated business and distribution
+network into full play, reinforced the
+coordination of internal and external
+resources, promoted targeted marketing
+and differentiated marketing to improve
+service quality, and constantly increased
+profits and sales volume. Meanwhile, we
+enhanced the development and sales of
+company-owned brand and put efforts
+to expand non-fuel business scale and
+profitability.
+In 2019, the segment's marketing cash
+operating cost (defined as the operating
+expenses less purchase costs, taxes
+other than income tax, depreciation
+and amortisation, and then divided by
+the sales volume) was RMB 183 per
+tonne, representing a decrease of 11.9%
+compared with that of 2018. This was
+mainly due to the adjusted accounting of
+some of the gas station, land and other
+right of use assets as required by the
+New Leasing Rules.
+In 2019, the operating expenses of
+the segment was RMB 1,401.9 billion,
+representing a decrease of RMB 21.3
+billion or 1.5% as compared with that
+of 2018. This was mainly due to the
+decrease in refined oil products procured
+price which resulting in the decrease of
+procurement cost for RMB 22 billion.
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+and Analysis
+and Analysis
+(2.3)
+Direct sales and wholesale
+6,435
+66,440
+(6.1)
+2018 Change (%)
+7,870
+7,387
+4.8
+88,076
+92,261
+Gasoline
+Retail
+2019
+Change (%)
+2019
+Average realised price (RMB/tonne)
+Year ended 31 December
+Sales Volume (Thousand tonnes)
+Year ended 31 December
+2018
+The following table sets forth the sales volumes, average realised prices, and the respective percentage changes of the segment's four major
+refined oil products in 2019 and 2018, including breakdown in retail, direct sales and wholesale of gasoline and diesel:
+In 2019, the operating revenues of
+this segment was RMB 1,431 billion,
+representing a decrease of 1.1% over
+2018, of which: the sales revenues of
+gasoline totaled RMB 681.5 billion,
+representing a decrease of 1.7%
+compared with 2018; the sales revenues
+of diesel was RMB 507.5 billion,
+representing a decrease of 0.3% over
+2018, and the sales revenues of kerosene
+was RMB 116.3 billion, representing a
+decrease of 1.1% over 2018.
+(3) Marketing and Distribution Segment
+The business activities of the marketing
+and distribution segment include
+purchasing refined oil products from
+the refining segment and third parties,
+conducting wholesale and direct sales
+to domestic customers and distributing
+oil products through the segment's retail
+and distribution network, as well as
+providing related services.
+In 2019, the operating profit of the
+segment totaled RMB 30.6 billion,
+representing a decline of RMB 24.2
+billion compared with 2018.
+In 2019, the unit refining cash operating
+cost (defined as operating expenses
+less the processing cost of crude oil
+and refining feedstock, depreciation and
+amortisation, taxes other than income
+tax and other operating expenses, then
+divided by the throughput of crude oil
+and refining feedstock) was RMB 178 per
+tonne, a decrease of 1.4% over 2018.
+In 2019, refining gross margin was RMB
+366 per tonne, decreased by RMB 96 per
+tonne representing a reduction of 20.8%
+compared with 2018. This is mainly due
+to the fluctuation of price spread between
+heavy and light crude oil, increase of
+freight and insurance costs for overseas
+shipments, as well as the narrowed gross
+margin of refined petroleum products
+other than gasoline, diesel and kerosene.
+66,855
+(3.2)
+(0.6)
+8,296
+0.4
+43,327
+43,503
+Retail
+(3.1)
+5,998
+5,812
+2.9
+84,865
+87,335
+Diesel
+(9.7)
+6,524
+5,892
+21.7
+21,221
+25,820
+Direct sales and wholesale
+(4.0)
+7,968
+495,234
+Operating revenues
+23,464
+5.3
+5.0
+3.2
+3.0
+154,319
+147,138
+External sales*
+4.2
+4.3
+200,191
+210,712
+2.0
+1.8
+95,954
+3.6
+4.1
+2.2
+2.5
+104,237
+Inter-segment sales
+121,379
+89,315
+1,077,018 1,109,088
+22.9
+1,446,637
+0.1
+0.1
+5,224
+4,159
+1,430,963
+Average realised price (RMB/tonne)
+Year ended 31 December
+Inter-segment sales
+49.9
+48.1
+29.9
+29.4
+1,441,413
+1,426,804
+External sales*
+Marketing and Distribution Segment
+26.1
+25.4
+1,224,156 1,263,407
+Operating revenues
+22.4
+29.5
+Refining Segment
+Inter-segment sales
+Other operating expense, net was RMB
+440 million.
+Taxes other than income tax was RMB
+242.5 billion, representing a decrease
+of 1.6% compared with 2018. That
+was mainly due to the decrease of
+RMB 3.2 billion in urban maintenance
+and construction tax and education
+surcharges resulting from the decrease of
+value added tax rate.
+Personnel expenses was RMB 81.5
+billion, representing an increase of 4.8%
+over 2018.
+Exploration expenses was RMB 10.5
+billion, representing a decrease of 2.2%
+year on year.
+Depreciation, depletion and amortisation
+was RMB 108.8 billion, representing a
+decrease of 1.1% compared with 2018.
+That was mainly due to the depletion of
+oil and gas assets decreased as a result
+of the Company's proved reserves of
+crude oil and natural gas increased.
+Selling, general and administrative
+expenses was RMB 55.3 billion,
+representing a decrease of 15.7%
+over 2018. This was mainly because
+the company significantly reduced
+non-operating costs, and adjusted
+accounting of some of the gas station,
+land and other rental expenses to
+depreciation and interests expense as
+required by the New Leasing Rules.
+The Company's other purchasing
+expenses was RMB 596.5 billion,
+representing an increase of 2.7% over
+the same period of 2018.
+The Company's purchasing expense
+related to trading activities was RMB
+738.3 billion, representing an increase of
+12.6% over the same period of 2018.
+The Company's purchasing expenses
+of refined oil products was RMB 364.9
+billion, representing an increase of 2.6%
+over the same period of 2018.
+Crude oil purchasing expenses was RMB
+681.2 billion, representing a decrease
+of 2.9% over the same period of 2018.
+Throughput of crude oil purchased
+externally in 2019 was 228.74 million
+tonnes (excluding the volume processed
+for third parties), representing an
+increase of 0.7% over the same period
+of 2018. The average cost of crude oil
+purchased externally was RMB 3,326 per
+tonne, representing a decrease by 3.6%
+over 2018.
+Purchased crude oil, products and
+operating supplies and expenses was
+RMB 2,380.9 billion, representing an
+increase of 3.8% over the same period of
+2018, accounting for 82.7% of the total
+operating expenses, of which:
+In 2019, the Company's operating
+expenses was RMB 2,880 billion,
+increased by 2.5% compared with 2018.
+The operating expenses mainly consisted
+of the following:
+(2) Operating expenses
+The Company's external sales revenue
+of chemical products was RMB 425.5
+billion, representing a decrease of 7%
+over 2018, accounting for 14.3% of
+the Company's total turnover and other
+operating revenues. This was mainly
+due to the decrease in price of chemical
+products, which resulting from the
+increase of supply in chemical market.
+In 2019, petroleum products (mainly
+consisting of refined oil products and
+other refined petroleum products) sold
+by Refining Segment and Marketing and
+Distribution Segment achieved external
+sales revenues of RMB 1,535.2 billion
+(accounting for 51.8% of the Company's
+turnover and other operating revenues),
+representing a decrease of 1.5% over
+2018, mainly due to the decrease in
+petroleum products' prices. The sales
+revenue of gasoline, diesel and kerosene
+was RMB 1,303.6 billion, representing
+a decrease of 1.1% over 2018, and
+accounting for 85% of the total sales
+revenue of petroleum products. Turnover
+of other refined petroleum products
+was RMB 231.6 billion, representing a
+decrease of 3.4% compared with 2018,
+accounting for 15% of the total sales
+revenue of petroleum products.
+Most crude oil and a small portion of
+natural gas produced by the Company
+were internally used for refining and
+chemical production, with the remaining
+sold to external customers. In 2019,
+the turnover from crude oil, natural
+gas and other upstream products sold
+externally amounted to RMB 111.1
+billion, an increase of 18.8% over 2018.
+The change was mainly due to increases
+in natural gas sales volume and prices
+as the result of promoting natural gas
+production-supply-storage-sale system,
+and actively expanding market share.
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+and Analysis
+Management's Discussion
+(3) Operating profit was RMB 86.2 billion,
+representing an increase of 4.8%
+compared with 2018. That was mainly
+due to a significant increase of profit in
+upstream business.
+Operating revenues
+(4) Profit before taxation was RMB 89.9
+billion, representing a decrease of 9.3%
+compared with 2018. That was mainly
+because the margin of major refining
+products shrank.
+(6) Profit attributable to non-controlling
+interests was RMB 14.6 billion,
+representing a decrease of RMB 2.7
+billion compared with 2018.
+External sales*
+Exploration and Production Segment
+(%)
+(%)
+(%)
+(%)
+2019
+Operating revenues
+Year ended 31 December
+2019
+2018
+RMB million RMB million
+As a percentage of
+consolidated operating
+revenue after elimination
+of inter-segment sales
+Year ended 31 December
+2018
+As a percentage of
+consolidated operating
+revenue before elimination
+of inter-segment sales
+Year ended 31 December
+2019
+2018
+The following table shows the operating revenues by each segment, the contribution of external sales and inter-segment sales as a percentage
+of operating revenues before elimination of inter-segment sales, and the contribution of external sales as a percentage of consolidated operating
+revenues (i.e. after elimination of inter-segment sales) for the periods indicated.
+revenues.
+The Company manages its operations through four business segments, namely exploration and production segment, refining segment, marketing
+and distribution segment and chemicals segment, and corporate and others. Unless otherwise specified, the inter-segment transactions have not
+been eliminated from financial data discussed in this section. In addition, the operating revenue data of each segment include other operating
+2 RESULTS OF SEGMENT OPERATIONS
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+20
+20
+year.
+(7) Profit attributable to shareholders of
+the Company was RMB 57.5 billion,
+representing a decrease of 6.7% year on
+(5) Income tax expense was RMB 17.9
+billion, representing a decrease of 11.5%
+year on year.
+24.0
+30.0
+External sales*
+201,428
+5.3
+200,191
+210,712
+Operating revenues
+Refining Segment
+Operating expenses
+Operating loss
+Operating revenues
+Exploration and Production Segment
+(%)
+Change
+2018
+RMB million
+RMB million
+Year ended 31 December
+2019
+The following table sets forth the operating revenues, operating expenses and operating profit by each segment before elimination of the
+inter-segment transactions for the periods indicated, and the percentage change of 2019 compared to 2018.
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+and Analysis
+Management's Discussion
+and Analysis
+210,298
+Management's Discussion
+(4.2)
+(10,107)
+(1.5)
+1,423,173
+(1.1)
+1,446,637
+1,430,963
+1,401,856
+29,107
+Operating expenses
+Operating revenues
+Marketing and Distribution Segment
+(44.1)
+54,827
+30,632
+Operating profit
+(1.2)
+1,208,580
+1,193,524
+Operating expenses
+(3.1)
+1,263,407
+1,224,156
+9,284
+Chemicals Segment
+21
+*. Other operating revenues are included.
+External sales*
+11.3
+10.2
+1.5
+1.1
+16.4
+14.8
+9.8
+9.1
+216
+546,733
+495,234
+73,835
+54,856
+472,898
+440,369
+Corporate and Others
+Operating revenues
+Inter-segment sales
+830,485
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+718,312
+14.9
+100.0
+100.0
+100.0
+100.0
+4,845,887 4,825,551
+(1,879,694) (1,934,372)
+2,966,193 2,891,179
+Turnover and other operating revenues
+Elimination of inter-segment sales
+Operating revenue before elimination of inter-segment sales
+28.4
+30.6
+1,484,822 1,368,583
+Operating revenues
+13.5
+13.5
+650,271
+654,337
+Inter-segment sales
+24.8
+28.0
+17.1
+2019
+6,227
+2019
+25,970
+16,586
+Chemicals Segment
+24,106
+29,781
+Marketing and Distribution Segment
+53,703
+30,074
+Corporate and Others
+Refining Segment
+6,289
+2,891,179
+2,966,193
+(1,934,372)
+(1,879,694)
+1,368,583
+546,733
+1,446,637
+(11,557)
+495,234
+3,530
+Elimination of inter-segment sales
+Management's Discussion
+28
+Management's Discussion
+and Analysis
+27
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Net profit: In 2019, the net profit attributable to the equity shareholders of the Company was RMB 57.6 billion, representing a decrease of RMB
+5.5 billion or 8.7% compared with 2018.
+Operating profit: In 2019, the operating profit of the Company was RMB 90.0 billion, representing a decrease of RMB 11.4 billion as compared
+with 2018.
+63,089
+(8,151)
+57,591
+101,474
+90,025
+Consolidated operating profit
+21,037
+3,805
+Financial expenses, investment income, gains/(losses) from changes in fair value, asset disposal
+expense and other income
+(3,634)
+(40)
+Net profit attributable to equity shareholders of the Company
+1,430,963
+1,484,822
+Exploration and Production Segment
+1,521
+0
+5,258
+(222)
+(1,940)
+(7,268)
+1,450
+Total
+Other equity instruments investment
+0
+Cash flow hedges
+(4,384)
+48
+1,584
+Self-owned fund
+0
+0
+28
+1
+0
+(38)
+0
+21,498
+Operating profit/(loss)
+Consolidated operating income
+Elimination of inter-segment sales
+Corporate and Others
+Chemicals Segment
+200,191
+1,263,407
+2018
+RMB million
+210,712
+1,224,156
+Marketing and Distribution Segment
+Refining Segment
+Exploration and Production Segment
+Operating income
+Year ended 31 December
+2019
+RMB million
+(1) Under CASs, the operating income and operating profit or loss by reportable segments were as follows:
+The major differences between the Company's financial statements prepared under CASS and IFRS are set out in Section C of the financial
+statements of the Company on page 204 of this report.
+4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER CASS
+5,220
+(4,391)
+2,948
+and Analysis
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+(2) Financial data prepared under CASS
+Total assets
+7.6
+8.5
+1.1
+1,468,851
+1,484,822
+(1.4)
+(7.9)
+(9.4)
+0.9
+8.0
+495,234
+0.5
+(1.6)
+(1.1)
+6.6
+1,333,672
+1,430,963
+(2.1)
+453,951
+(1,879,694)
+2,966,193
+(1,879,654)
+N/A
+and Analysis
+Management's Discussion
+29
+29
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+During the reporting period, there are no significant changes in the Company's major assets.
+6 SIGNIFICANT CHANGES IN MAJOR ASSETS DURING THE REPORTING PERIOD
+Please refer to the note 3(26) in the financial statement complying with the PRC Accounting Standards for Business Enterprises (CASS) and the note
+1 in the financial statement complying with the IFRS.
+5 THE CAUSE AND IMPACT OF THE CHANGE IN THE COMPANY'S ACCOUNTING POLICY
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+*: Gross profit margin = (operation income operation cost, tax and surcharges)/operation income.
+(0.5)
+3.7
+2.6
+7.9
+2,488,852
+N/A
+N/A
+N/A
+(1.0)
+182
+(3.1)
+943,484
+Segments
+(3) The results of the principal operations by segments
+At the end of 2019, the shareholders' equity of the Company was RMB 876.9 billion, representing an increase of RMB 19.2 billion compared
+with that of the end of 2018.
+At the end of 2019, the Company's non-current liabilities was RMB 301.8 billion, representing an increase of RMB 132.2 billion compared with
+that of the end of 2018.
+At the end of 2019, the Company's total assets was RMB 1,755.1 billion, representing an increase of RMB 162.8 billion compared with that of
+the end of 2018.
+857,659
+169,551
+19,246
+Exploration and Production
+Refining
+162,763
+132,241
+As of 31
+December 2018
+RMB million
+1,592,308
+301,792
+876,905
+1,755,071
+RMB million
+December 2019
+As of 31
+Shareholders' equity
+Non-current liabilities
+Change
+Marketing and Distribution
+Chemicals
+Corporate and Others
+Elimination of inter-segment sales
+1.9
+5.3
+15.5
+168,548
+210,712
+1,224,156
+basis (%) year basis (%)
+margin* (%)
+3.9
+basis (%)
+year-on-year
+margin on a
+2018 Change (%)
+Increase/
+(decrease) of
+operation (decrease) of
+income on operation cost
+Gross profit a year-on-year on a year-on-
+Increase
+Increase/
+(decrease) of
+income Operation cost
+RMB million RMB million
+Operation
+Total
+4.3
+Self-owned fund
+gross profit
+0
+162,763
+Change
+2018
+1,592,308
+1,755,071
+445,856
+2019
+31 December
+As of
+As of
+31 December
+Unit: RMB million
+Non-current assets was RMB 1,309.2
+billion, representing an increase of RMB
+221.0 billion as compared with that of
+the end of 2018. This was mainly due to
+the right-of-use assets increased by 267.9
+504,120
+Current assets was RMB 445.9 billion,
+representing a decrease of RMB 58.3
+billion compared with that of the end
+of 2018, mainly because the cash and
+cash equivalents decreased by RMB
+51.6 billion, financial assets at fair value
+through profit or loss decreased by
+RMB 20.8 billion, accounts receivable
+and bills receivable decreased by RMB
+10.0 billion, and the time deposits with
+financial institution increased by RMB
+12.5 billion, inventories and other current
+assets increased by RMB 11.7 billion.
+Total equity
+Non-controlling interests
+Reserves
+Share capital
+Total equity attributable to shareholders of the Company
+Non-current liabilities
+Current liabilities
+Total liabilities
+Non-current assets
+Current assets
+As of 31 December 2019, the Company's
+total assets was RMB 1,755.1 billion,
+representing an increase of RMB 162.8
+billion compared with that of the end of
+2018, of which:
+Total assets
+(58,264)
+1,088,188
+(1,566)
+139,251
+137,685
+20,866
+596,213
+617,079
+0
+121,071
+121,071
+20,866
+1,309,215
+717,284
+132,187
+170,675
+302,862
+11,276
+565,098
+576,374
+143,463
+735,773
+879,236
+221,027
+738,150
+The major funding sources of the Company are its operating activities and short-term and long-term loans. The major use of funds includes
+operating expenses, capital expenditures, and repayment of the short-term and long-term debts.
+3 ASSETS, LIABILITIES, EQUITY AND CASH FLOWS
+(1) Assets, liabilities and equity
+1,314
+1,370
+(10.7)
+8,646
+7,718
+5.3
+15,325
+16,131
+(18.0)
+6,978
+4.3
+5,722
+11,252
+14,089
+(14.4)
+5,281
+4,518
+(0.8)
+52,450
+52,007
+2018 Change (%)
+0
+25.2
+8,438
+9,712
+(13.1)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+24
+In 2019, the operating profit from
+corporate and others was RMB 0.1
+billion.
+In 2019, the operating expenses of
+corporate and others was RMB 1,484.7
+billion, representing an increase of 7.8%
+over 2018.
+In 2019, the operating revenues
+generated from corporate and others
+was RMB 1,484.8 billion, representing
+The business activities of corporate
+and others mainly consist of import
+and export business activities of the
+Company's subsidiaries, R&D activities of
+the Company, and managerial activities
+of headquarters.
+(5) Corporate and Others
+allocation of resources, pushed ahead
+with targeted marketing and precise
+service strategy, and achieved steadily
+growing sales volume of petrochemicals.
+The operating profit of this segment was
+RMB 17.2 billion
+In 2019, confronted with the business
+cycle correction and decreased
+chemical margin, the Company
+strengthened the coordination among
+research, development, production and
+marketing, continuously reinforced the
+profit prediction based on the market,
+optimised the structures of feedstock,
+product and facilities, intensified
+In 2019, the operating expenses of the
+chemicals segment was RMB 478.1
+billion, representing a decrease of
+8.0% over 2018, mainly because of
+the decrease in the price of externally
+procured raw materials as compared with
+the same period in 2018.
+Synthetic rubber
+Chemical fertiliser
+0.8
+2,093
+2,109
+16.2
+796
+925
+(10.7)
+10,750
+9,595
+0.5
+1,278
+1,284
+875,835
+856,535
+an increase of 8.5% over 2018. This
+was mainly attributed to the increase
+in value of trade from crude oil and
+overseas refined oil products, as well as
+the rapid growth of the equipment and
+petrochemicals business transaction
+scale through Epec platform.
+and the lease prepayments decreased
+by RMB 64.5 billion in accordance with
+New Leasing Rules, construction in
+progress and net value of property, plant
+and equipment increased by RMB 41.2
+billion, equity of associates and joint
+ventures increased by RMB 6.2 billion,
+and deferred tax assets decreased by
+RMB 4.1 billion.
+Structured Deposit
+Available for sale financial assets
+Items
+End of
+Beginning
+variation of
+Stock
+variation of
+fair values
+losses from
+Profits and
+Unit: RMB million
+Items relevant to measurement of main fair values
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+26
+Accumulated
+of the year
+25,732
+25,550
+the year
+in the
+current year
+3,318
+Self-owned fund
+0
+0
+215
+3,319
+source
+19,300
+187
+Funding
+current year
+as equity
+loss
+provision
+of the
+Impairment
+fair values
+recorded
+26
+The Company has established sound
+decision-making mechanism, business
+process and internal control systems
+relevant to financial instrument
+accounting and information disclosure.
+Derivative financial instruments
+Environmental expenditures refer to
+the normal routine pollutant discharge
+fees paid by the Company, excluding
+capitalised cost of pollutant treatment
+properties. In 2019, the Company paid
+environmental expenditures of RMB 9.235
+billion.
+Unit: RMB million
+The following table sets forth the major items in the consolidated cash flow statements for 2019 and 2018.
+(2) Cash Flow
+MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
+and Analysis
+Management's Discussion
+(6) Measurement of fair values of derivatives
+and relevant system
+Management's Discussion
+25
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Total equity attributable to owners of
+the Company was RMB 738.2 billion,
+representing an increase of RMB 20.9
+billion compared with that of the end
+of 2018, which was mainly due to the
+capital reserve increased by RMB 20.9
+billion.
+Non-current liabilities was RMB 302.9
+billion, representing an increase of RMB
+132.2 billion compared with that of the
+end of 2018. This was mainly due to
+lease liabilities increased by RMB 177.7
+billion in accordance with New Leasing
+Rules, long-term debts and borrowings
+from Sinopec Group decreased by RMB
+34.7 billion, and other non-current assets
+decreased by RMB 12.0 billion.
+increased by RMB 9.0 billion, and
+derivative financial liabilities decreased
+by RMB 10.8 billion, other payables
+decreased by RMB 21.3 billion.
+Current liabilities was RMB 576.4 billion,
+representing an increase of RMB 11.3
+billion as compared with that of the end
+of 2018. This was mainly due to the
+short-term debts and borrowings from
+Sinopec Group increased by RMB 22.7
+billion, lease liabilities increased by
+RMB 15.2 billion, accounts payable, bills
+payable and liabilities from contracts
+The Company's total liabilities was RMB
+879.2 billion, representing an increase of
+RMB 143.5 billion compared with that of
+the end of 2018, of which:
+Major items of cash flows
+Net cash generated from operating activities
+Net cash used in investing activities
+Net cash used in financing activities
+and Analysis
+(66,422)
+2018
+175,868
+Year ended 31 December
+2019
+153,420
+(120,463)
+(84,713)
+In 2019, the net cash generated from
+operating activities of the company
+was RMB 153.4 billion, representing
+a decrease of RMB 22.4 billion as
+compared with 2018. Of which: profit
+before taxation decreased by RMB 9.2
+billion, loss from assets impairment
+decreased by RMB 9.8 billion,
+depreciation, depletion & amortization
+and amortization for dry wells write-off
+decreased by RMB 2.2 billion, interest
+expenses increased by RMB 9.7 billion,
+exchange rate and derivatives financial
+instruments loss/(gain) increased by 5.5
+billion, net change of accounts receivable
+and other current assets decreased
+by RMB 10.8 billion, net change of
+inventory decreased by RMB 60.0 billion,
+net change of accounts payable and
+other current liabilities decreased by
+RMB 17.3 billion, and the paid income
+tax decreased by RMB 13.6 billion as
+compared with 2018.
+(111,260)
+(4) Capital Expenditures
+Please refer to "Capital Expenditures"
+(5) Research & development and
+environmental expenditures
+in the "Business Review and Prospects"
+section of this report.
+(3) Contingent Liabilities
+At the end of 2019, the cash and cash
+equivalents was RMB 60.3 billion.
+In 2019, the net cash used in the
+Company's financing activities was RMB
+84.7 billion, representing a decrease
+of cash outflow by RMB 26.5 billion
+over 2018. This was mainly due to the
+cash out flow from the changes of loans
+increased to RMB 13.2 billion, cash paid
+for dividends decrease the expenditure by
+RMB 21.8 billion, subsidiary companies
+allocated to non-controlling shareholders
+reduced expenses by 6.3 billion yuan,
+investments from non-controlling
+shareholders increased by RMB 2.0
+billion, and repayment for lease liabilities
+increased by RMB 16.8 billion.
+decreased by RMB 6.6 billion, cash
+inflow from changes of financial assets
+which are measured at fair value through
+profit or loss decreased by RMB 3.0
+billion, outcome from time deposit with
+maturities over three months increased
+by RMB 9.2 billion.
+R&D expenditures occurred in the period
+including R&D expenses, expenditures
+for wildcat exploration, seismic data
+interpretation, and pilot demonstration
+project in upstream, expenditures for
+pilot test and relevant utilities of initial
+commercial trial in refining segment,
+as well as expenditures for research
+equipment. In 2019, the expenditures for
+R&D was RMB 15.539 billion, of which
+expense was RMB 9.395 billion, and
+capitalised cost was RMB 6.144 billion.
+In 2019, the net cash used in investing
+activities was RMB 120.5 billion,
+representing an increase of cash outflow
+of RMB 54.0 billion over 2018. Of
+which: capital expenditure and wildcat
+expenditure increased by RMB 38.1
+billion, purchasing investment and
+associates and joint ventures investments
+Please refer to "Material Guarantee
+Contracts and Their Performances" in the
+"Significant Events" section of this report.
+32
+2 CORPORATE BONDS ISSUED AND INTEREST PAYMENTS
+SIGNIFICANT EVENTS (CONTINUED)
+Significant Events
+32
+21 May 2020
+31
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+storage project mainly consists of the
+construction of injection and production
+wells and surface facilities with storage
+capacity of 8.431 billion cubic meters.
+The gas storage is expected to be
+officially put into operation in July 2020.
+The Company's self-owned fund accounts
+for 30% of the project investment and
+bank loan is the main source of the
+remaining 70%. As of 31 December
+2019, the aggregate investment was RMB
+12.1 billion.
+Basic information of corporate bonds
+The first phase of Wen 23 gas
+Significant Events
+Bond name
+Maturity date
+Code
+(8) Wen 23 gas storage project
+21 May 2010
+None
+Sinopec Corp.
+2010 Corporate bond
+10石化02
+122052
+Convening of corporate bond holders' meeting
+Performance of corporate bonds trustee
+Credit addition mechanism, repayment scheme and
+other relative events for corporate bonds during the
+reporting period
+Credit rating
+Use of proceeds
+Abbreviation
+Credit rating agency
+Listing exchange
+Investor Qualification Arrangement
+Payment of interests
+Principal and interest repayment
+Interest rate (%)
+Outstanding balance (RMB billion)
+Amount issued (RMB billion)
+Issuance date
+Corporate bonds trustee
+The first phase of E-An-Cang gas pipeline
+project mainly consists of the main
+pipeline from Luquan to Cangzhou
+and two branch pipelines Puyang and
+Baoding. The total length of the pipeline
+is 736 kilometers with a designed
+transmission capacity of 9 billion cubic
+meters per year. It was completed and
+put into operation in September 2019.
+The Company's self-owned fund accounts
+for 30% of the project investment and
+bank loan is the main source of the
+remaining 70%. As of 31 December
+2019, the aggregate investment was RMB
+6.4 billion.
+During the reporting period, the bondholders' meeting was not convened.
+(7) Erdos-Anping-Cangzhou gas pipeline
+12th Floor, PICC building, No.2 Jianguomenwai Avenue, Chaoyang District, Beijing
+Proceeds from the above-mentioned corporate bonds have been used for their designated purpose as disclosed. All
+the proceeds have been completely used.
+During the reporting period, United Credit Ratings Co., Ltd. provided credit rating for 10102, 1202 and 15
+102 and reaffirmed AAA credit rating in the continuing credit rating report. The long term credit rating of Sinopec
+Corp. remained AAA with its outlook being stable. Pursuant to relevant regulations, Sinopec Corp. has published
+latest credit rating results through media designated by regulators within six months commencing from the end date
+of the reporting period.
+During the reporting period, there is no arrangement to credit addition mechanism and change of the repayment
+for the above-mentioned corporate bonds. Sinopec Corp. strictly followed the provisions in the corporate bond
+prospectus to repay interests of the corporate bonds to bondholders.
+The guarantee of 1002 and 1202 is China Petrochemical Corporation. For more information of the
+guarantor, please refer to the annual report of corporate bonds which will be published in April 2020 on website of
+Shanghai Stock Exchange by China Petrochemical Corporation.
+9
+During the durations of the above-mentioned bonds, the bond trustee, China International Capital Corporation
+Limited, has strictly followed the Bond Trustee Management Agreement and continuously tracked the Company's
+credit status, utilisation of bond proceeds and repayment of principals and interests of the bond. The bond trustee
+has also advised the Company to fulfil obligations as described in the corporate bond prospectus and exercised
+its duty to protect the bondholders' legitimate rights and interests. The bond trustee will disclose the Trustee
+Management Affairs Report after the announcement of annual report. The full disclosure is available on the website
+of Shanghai Stock Exchange (http://www.sse.com.cn).
+United Credit Ratings Co., Ltd.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Principal data
+2019
+EBITDA (RMB million)
+214,413
+2018
+216,352
+Change
+(1,939)
+Current ratio
+Principal accounting data and financial indicators for the two years ended 31 December 2019
+project
+(010) 6505 1166
+27th-28th Floor, China World Office 2, 1 Jianguomenwai Avenue, Chaoyang District, Beijing
+a designed transmission capacity of
+6 billion cubic meters per year. It is
+expected to be completed and put into
+operation in July 2020. The Company's
+self-owned fund accounts for 38% of the
+project investment and bank loan is the
+main source of the remaining 62%. As
+of 31 December 2019, the aggregate
+investment was RMB 8.0 billion.
+The main project of the first phase
+of Xinqi pipeline project was the
+construction of the pipeline from
+Qianjiang to Shaoguan. The total length
+of the pipeline is 839.5 kilometers with
+(6) Xinqi pipeline project
+Under the guidance of "overall
+deployment, stage-wise implementation
+and fully consideration", the building of
+first phase of production capacity, which
+is 1 billion cubic meters per year, was
+promoted comprehensively since August
+2018. It is expected to be completed and
+put into operation in December 2020.
+The Company's self-owned fund accounts
+for 30% of the project investment and
+bank loan is the main source of the
+remaining 70%. As of 31 December
+2019, the aggregate investment was RMB
+2.3 billion.
+(5) Weirong shale gas project
+Wuhan de-bottleneck project mainly
+consists of an 800,000 tpa-to-1,100,000
+tpa ethylene capacity expansion project.
+The project started at the end of October
+2018 and is expected to achieve the
+mechanical completion in December
+2020. The Company's self-owned fund
+accounts for approximately 30% of the
+project investment and bank loan is the
+main source of the remaining 70%. As
+of 31 December 2019, the aggregate
+investment was RMB 2.5 billion.
+(4) Wuhan de-bottleneck project
+Huang Xu, Zhai Ying
+2019. The Company's self-owned fund
+accounts for approximately 30% of the
+project investment and bank loan is the
+main source of the remaining 70%. As
+of 31 December 2019, the aggregate
+investment was RMB 5.6 billion.
+4
+3.70
+Simple interest is calculated and paid on an annual basis without compounding interests. The principal will be paid
+at maturity with last installment of interest.
+Sinopec Corp. had paid in full the interest accrued for the current period interest payment year.
+15102 was publicly offered to qualified investors in accordance with Administration of the Issuance and Trading
+of Corporate Bonds.
+Shanghai Stock Exchange
+China International Capital Corporation Limited
+Hainan Refining and Chemical expansion
+project consists of 5,000,000 tpa refinery
+project and 1,000,000 tpa ethylene
+project, among which second set of
+high-efficiency and environment-friendly
+aromatics project started in August 2017
+and was put into operation in September
+Sinopec Corp.
+None
+1 June 2012
+In order to regulate connected transactions
+between the Company and Sinopec Finance
+Co., Ltd. (Sinopec Corp.'s domestic
+settlement center, hereinafter referred as
+the Finance Company) and to ensure the
+safety and liquidity of the deposits of the
+Company at the Finance Company, Sinopec
+Corp. and the Finance Company formulated
+the Risk Control System on Connected
+Transactions between China Petroleum &
+Chemical Corporation and Sinopec Finance
+Co., Ltd., which covers the risk control
+system and the risk management plan of the
+Company to prevent financial risks and to
+ensure that the deposits of the Company at
+the Finance Company can be utilised at the
+Company's discretion. At the same time, as
+the controlling shareholder of the Finance
+Company, China Petrochemical Corporation
+undertakes that in case of an emergency
+when the Finance Company has difficulty
+in making payments, China Petrochemical
+Corporation will increase the capital of
+the Finance Company in accordance with
+the actual need for the purpose of making
+payment.
+In order to regulate connected transactions
+between the Company and Sinopec Century
+Bright Capital Investment, Ltd. (Sinopec
+Corp.'s overseas settlement center,
+hereinafter referred at the Century Bright
+Company), Century Bright Company ensures
+the safety of the deposits of the Company at
+Century Bright Company by strengthening
+internal risk controls and obtaining support
+from China Petrochemical Corporation.
+China Petrochemical Corporation has
+formulated a number of internal rules,
+including the Rules for the Internal Control
+System, the Rules for Implementation of
+Overseas Capital Management Methods, and
+the Provisional Methods for Overseas Fund
+Platform Management, to impose strict rules
+on Century Bright Company for providing
+overseas financial services. Century Bright
+Company has also established the Rules for
+the Implementation of the Internal Control
+System, which ensures the standardisation
+and safety of its corporate deposits business.
+At the same time, as the wholly controlling
+shareholder of Century Bright Company,
+China Petrochemical Corporation entered
+into a keep-well agreement with Century
+Bright Company in 2013, in which China
+Petrochemical Corporation undertakes that
+when Century Bright Company has difficulty
+in making payments, China Petrochemical
+Corporation will ensure that Century Bright
+Company will fulfill its repayment obligation
+through various channels.
+The deposits of the Company at the Finance
+Company and Century Bright Company
+during the reporting period did not exceed
+the relevant caps as approved at the general
+meeting of Sinopec Corp. During daily
+operations, the Company can withdraw the
+full amount of its deposits at the Finance
+Company and Century Bright Company.
+16 APPROPRIATION OF NON-OPERATIONAL
+FUNDS BY THE CONTROLLING
+SHAREHOLDER AND ITS RELATED PARTIES
+AND THE PROGRESS FOR CLEARING UP
+Not applicable
+17 STRUCTURED ENTITY CONTROLLED BY
+THE COMPANY
+None
+18 DETAILED IMPLEMENTATION OF THE
+SHARE INCENTIVE SCHEME DURING THE
+REPORTING PERIOD
+Sinopec Corp. did not implement any share
+incentive scheme during the reporting period.
+19 ENVIRONMENTAL PROTECTION
+SOLUTIONS OF COMPANIES AND THEIR
+SUBSIDIARIES AS MAJOR POLLUTANT
+DISCHARGING COMPANIES RECOGNISED
+BY ENVIRONMENTAL PROTECTION
+DEPARTMENTS
+In 2019, certain subsidiaries of Sinopec
+Corp. which are listed as major pollutant
+discharge units have disclosed environmental
+information as required by the relevant
+authorities and local government. The
+details of such information was published
+on national pollutant discharge license
+management information platform (http://
+permit.mee.gov.cn/permitExt/defaults/
+default-index!getInformation.action) and the
+local government website. Sinopec Corp. built
+prevention and control facilities for sewage,
+flue gas, solid waste and noise in accordance
+with the requirements of the national and
+local pollution prevention and environmental
+protection standards, kept effective and
+stable operation of pollution prevention and
+control facilities, and realised standardised
+discharges and emissions of sewage, flue
+gas, solid waste and factory noise. For
+details, please refer to the Company's
+Communication on Progress for Sustainable
+Development. The Company further
+regulated environmental management of
+construction projects, enhanced assessment,
+and implemented “three-simultaneity"
+management (environmental facilities shall
+be designed, constructed and put into
+operation simultaneously with the main
+construction). All of the newly-built projects
+have been obtained approvals from the
+environment authorities. Sinopec Corp.
+strictly complies with relevant national
+requirements on environment emergency
+plan management and continuously improves
+the emergency plans for environmental
+emergencies and heavy pollution weather.
+According to the national pollution permit
+and self-monitoring technology guidelines in
+relevant industries, we acquired discharge
+permit and modified the self-monitoring plan,
+implemented new national requirements of
+sewage, flue gas and noise monitory, and
+disclosed the environmental results. For other
+subsidiaries that are not listed as major
+pollutant discharge units, the Company also
+completed relevant environmental protection
+formalities in accordance with the national
+and local requirements, and implemented
+relevant environmental protection
+measures. According to the requirements of
+national and local ecological environment
+departments, these companies do not need
+to disclose relevant information.
+20 POVERTY ALLEVIATION PROGRAM
+LAUNCHED BY THE COMPANY
+15 DEPOSITS AT SINOPEC FINANCE CO., LTD.
+AND SINOPEC CENTURY BRIGHT CAPITAL
+INVESTMENT, LTD.
+The external guarantees prior to 2019 had
+been disclosed in previous annual report.
+The aggregate balance of external guarantees
+provided by Sinopec Corp. for the year
+2019 was RMB 29.4 billion, accounting for
+approximately 3.98% of the Company's net
+assets.
+SIGNIFICANT EVENTS (CONTINUED)
+Significant Events
+We hereby present the following opinions:
+0.77
+Sinopec Corp. shall continue to strengthen
+its management and actively monitor
+guarantee risks. It shall strictly follow the
+approval and disclosure procedures in
+relation to guarantee businesses for any new
+external guarantees provided thereafter.
+10 SIGNIFICANT LITIGATION, ARBITRATION
+RELATING TO THE COMPANY
+No significant litigation, arbitration relating
+to the Company occurred during the
+reporting period.
+11 INSOLVENCY AND RESTRUCTURING
+During the reporting period, the Company
+was not involved in any insolvency or
+restructuring matters.
+12 OTHER MATERIAL CONTRACTS
+Saved as disclosed by Sinopec Corp., the
+Company did not enter into any material
+contracts subject to disclosure obligations
+during the reporting period.
+13 CREDIBILITY FOR THE COMPANY,
+CONTROLLING SHAREHOLDERS AND DE
+FACTO CONTROLLER
+During the reporting period, the Company
+and its controlling shareholder did not have
+any unperformed court's effective judgments
+which should be performed or any large
+amount of debt which should be repaid.
+14 TRUSTEESHIP, CONTRACTING AND LEASES
+During the reporting period, the Company
+was not involved in any events relating to
+significant trusteeship, contracting or leases
+for the assets of any other company, nor has
+it placed its assets with any other company
+under a trusteeship, contracting or lease
+agreement subject to disclosure obligations.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+37
+Significant Events
+INDEPENDENT OPINIONS FROM
+INDEPENDENT NON-EXECUTIVE
+DIRECTORS REGARDING EXTERNAL
+GUARANTEES PROVIDED BY THE COMPANY
+DURING AND BY THE END OF 2019:
+We, as independent directors of Sinopec
+Corp., hereby make the following statements
+after conducting a thorough check of external
+guarantees provided by the Company
+accumulated up to and during 2019 in
+accordance with the requirements of the
+domestic regulatory authorities:
+9 SPECIFIC STATEMENTS AND
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Total amount of guarantee for controlled subsidiaries outstanding at the end of the reporting period (B)
+Total amount of guarantee provided to controlled subsidiaries during the reporting period
+Guarantees by the Company to the controlled subsidiaries
+Total amount of guarantees outstanding at the end of reporting period² (A)
+Total amount of guarantees provided during the reporting period"²
+17,240
+9
+19 November 2020
+19 November 2015
+15石化02
+136040
+2015 Corporate bond (first issue)
+Sinopec Corp
+7
+4.90
+7
+1 June 2022
+Total amount of guarantees for the Company (including those provided for controlled subsidiaries)
+Total amount of guarantees(A+B)
+The proportion of the total amount of guarantees to the Sinopec Corp.'s net assets
+Guarantees provided for shareholder, de facto controller and its related parties (C)
+*2: The amount of guarantees provided during the reporting period and the outstanding balance of guarantees amount at the end of the reporting period include the
+guarantees provided by the controlled subsidiaries to external parties. The amount of the guarantees provided by these subsidiaries is derived from multiplying the
+guarantees provided by Sinopec Corp.'s subsidiaries by the percentage of shareholding of Sinopec Corp. in such subsidiaries.
+None
+None
+None
+None
+None
+3.98%
+2012 Corporate bond
+12石化02
+122150
+29,397
+None
+*1: As defined in the Rules Governing the Listing of Stocks on Shanghai Stock Exchange.
+Statement of guarantee status
+Statement of guarantee undue that might be involved in any joint and several liabilities
+Total amount of the above three guarantee items (C+D+E)
+The amount of guarantees in excess of 50% of the net assets (E)
+Amount of debt guarantees provided directly or indirectly to the companies with liabilities to assets ratio over 70% (D)
+12,157
+Quick ratio
+SIGNIFICANT EQUITY INVESTMENT
+0.89
+0.57
+Unit: RMB million
+Whether
+guaranteed
+for
+Relationship
+with the
+Name of
+Whether
+Whether
+Amount of
+connected
+guaranteed
+Guarantor
+Sinopec Corp.
+Company
+company
+The listed
+Major external guarantees (excluding guarantees for controlled subsidiaries)
+Zhongtian Hechuang
+8 MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE
+Significant Events
+5 CAPITAL INCREASE AND ASSETS
+TRANSFER TO SINOPEC-SK (WUHAN)
+PETROCHEMICAL CO., LTD. (SINOPEC-SK)
+On 29 April 2019, Sinopec Corp. entered into
+the Sinopec-SK Capital Increase Agreement
+with Sinopec Group Asset Management Co.,
+Ltd. (Sinopec Asset), SK GLOBAL CHEMICAL
+CO., LTD. (SKGC) and Sinopec-SK, jointly,
+to agree upon the Capital Increase in
+Sinopec-SK. Pursuant to the Sinopec-SK
+Capital Increase Agreement, (i) Sinopec
+Corp. shall contribute the Capital Increase
+Assets of Sinopec equivalent to RMB 549.0
+million to Sinopec-SK, of which to subscribe
+for the newly increased registered capital
+of Sinopec-SK of RMB 168.37 million and
+the remaining part shall be included in the
+capital reserve of Sinopec-SK, (ii) Sinopec
+Asset shall contribute the Capital Increase
+Assets of Sinopec Asset equivalent to RMB
+1.5022 billion to Sinopec-SK, of which to
+subscribe for the newly increased registered
+capital of Sinopec-SK of RMB 431.58 million
+and the remaining part shall be included in
+the capital reserve of Sinopec-SK, and (iii)
+SKGC shall contribute cash in RMB 1.1045
+billion or equivalent USD to Sinopec-SK, of
+which to subscribe for the newly increased
+registered capital of Sinopec SK of RMB
+323.05 million and the remaining part
+shall be included in the capital reserve of
+Sinopec-SK. Upon completion of the Capital
+Increase, Sinopec Corp.'s shareholding in
+Sinopec-SK reduced from 65% to 59%,
+Sinopec Asset's shareholding increased
+from 0% to 6% and SKGC's shareholding
+remained unchanged at 35%. On the same
+date, Sinopec Corp. entered into the Asset
+Transfer Agreement with Sinopec-SK.
+The Capital Increase will help reduce the
+connected transactions between Sinopec
+Corp. and China Petrochemical Corporation
+and further improve the integrated operation
+level of Sinopec Corp., so as to enhance the
+comprehensive competitiveness of Sinopec
+Corp. in its business locations, the overall
+capability of risk resistance and expand its
+regional influence. The Sinopec-SK Capital
+Increase and the Asset Transfer were
+completed on 8 July 2019.
+As Sinopec Asset is a subsidiary of the
+controlling shareholder of Sinopec Corp.,
+China Petrochemical Corporation, pursuant
+to Chapter 14A of the Hong Kong Listing
+Rules, Sinopec Asset is an associate of
+China Petrochemical Corporation and thus
+constitutes a connected person of Sinopec
+Corp. As the Capital Increase constitutes
+deemed disposal of Sinopec Corp. under
+Rule 14.29 of the Hong Kong Listing Rules,
+accordingly, the Capital Increase constitutes
+a connected transaction of Sinopec Corp.
+under Chapter 14A of the Hong Kong Listing
+6
+Rules. As the highest applicable percentage
+ratio in respect of the Capital Increase
+exceeds 0.1% but is less than 5%, the
+Capital Increase is subject to the reporting
+and announcement requirements, but
+exempt from the independent shareholders'
+approval requirement under Chapter
+14A of the Hong Kong Listing Rules. As
+Sinopec-SK is a subsidiary of Sinopec
+Corp., the Asset Transfer did not constitute
+a connected transaction of Sinopec Corp.
+under Chapter 14A of the Hong Kong
+Listing Rules. In addition, as the highest
+applicable percentage ratio in respect of
+the Asset Transfer was less than 5%, it did
+not constitute a notifiable transaction under
+Chapter 14 of the Hong Kong Listing Rules.
+For details, please refer to the
+announcements published by Sinopec
+Corp. in China Securities Journal, Shanghai
+Securities News and, Securities Times, and
+on the website of Shanghai Stock Exchange
+on 30 April 2019 and 9 July 2019, and on
+the website of Hong Kong Stock Exchange on
+29 April 2019 and on 8 July 2019.
+During the reporting period, there is no
+significant equity investment made by the
+Company.
+7 SIGNIFICANT ASSETS AND EQUITY SALE
+During the reporting period, there is no
+significant assets or equity sale of the
+Company.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+35
+Significant Events
+36
+SIGNIFICANT EVENTS (CONTINUED)
+Amount
+10,140
+Transaction date
+(date of signing)
+completed
+No
+No
+Joint liability
+guarantee
+25 May 2016-31
+December 2023 (the
+mature date is estimated)
+Energy Co., Ltd
+company itself
+25-May-16
+or no)"¹
+guarantee guaranteed
+or not
+or not
+Туре
+Period of guarantee
+parties yes
+Counter-
+No
+Yes
+Sinopec Corp.
+The listed
+overdue
+overdue
+(1) Targeted Poverty Alleviation Plan
+The Company actively fulfilled our social
+responsibilities and strictly followed.
+the fundamental principles of poverty
+alleviation and elimination. Combining
+with practical situation, we focused
+on poverty alleviation in terms of
+industry, consumption, employment and
+education, so as to ensure to stably lift
+poor household out of poverty, increase
+income of poor household and orderly
+carry out rural revival strategy.
+guarantee
+December 2031
+Chemical Co., Ltd.
+company itself
+As of the date of this report, Sinopec Corp.
+had no undertakings in respect of financial
+performance, asset injections or asset
+restructuring that had not been fulfilled, nor
+did Sinopec Corp. make any profit forecast
+in relation to any asset or project.
+No
+No
+No
+Joint liability
+18 April 2018-31
+18-Apr-18
+7,100
+Zhong An United Coal
+No
+Yes
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+34
+Reasons for change
+Mainly due to the decrease of earnings compared
+with last year
+Mainly due to the decrease of current asset
+Mainly due to the increase of inventories
+Due to the impact of New Lease Standard
+(0.08) Due to the decrease of EBITDA
+(10.34)
+(6.85)
+(21.01)
+Due to the impact of New Lease Standard
+Due to the impact of New Lease Standard
+Due to the increase of interest expense as a result of
+New Lease Standard
+Loan repayment rate (%)
+Interest payment rate (%)
+During the reporting period, the Company
+paid in full the interest accrued for the other
+bonds and debt financing instruments. As
+at 31 December 2019, the standby credit
+line provided by several domestic financial
+institutions to the Company was RMB 379.6
+billion in total, facilitating the Company
+to get such amount of unsecured loans.
+The Company has fulfilled all the relevant
+undertakings in the offering circular of
+corporate bonds and had no significant
+matters which could influence the Company's
+operation and debt paying ability.
+On 18 April 2013, Sinopec Capital
+(2013) Limited, a wholly-owned overseas
+subsidiary of Sinopec Corp., issued senior
+notes guaranteed by the Company with
+four different maturities, 3 years, 5 years,
+10 years and 30 years. The 3-year notes
+principal totaled USD 750 million, with an
+annual interest rate of 1.250% and had
+been repaid and delisted; the 5-year notes
+principal totaled USD 1 billion, with an
+annual interest rate of 1.875% and had
+been repaid and delisted; the 10-year notes
+principal totaled USD 1.25 billion, with an
+annual interest rate of 3.125%; and the
+30-year notes principal totaled USD 500
+million, with an annual interest rate of
+4.250%. These notes were listed on the Hong
+Kong Stock Exchange on 25 April 2013, with
+interest payable semi-annually. The first
+payment of interest was made on 24 October
+2013. During the reporting period, the
+Company has paid in full the current-period
+interests of all notes with maturity of 10
+years and 30 years.
+3 SHARE OPTION INCENTIVE SCHEME OF
+SINOPEC CORP.'S SUBSIDIARY, SINOPEC
+SHANGHAI PETROCHEMICAL COMPANY
+LIMITED (SHANGHAI PETRO), DURING THE
+REPORTING PERIOD
+The Share Option Incentive Scheme
+of Shanghai Petro took effect from 23
+December 2014, with a validity period of
+10 years until 22 December 2024. The first
+grant of Shanghai Petro's A-share share
+options under the Share Option Incentive
+Scheme was on 6 January 2015. For details,
+please refer to the relevant announcements
+uploaded on the websites of Shanghai Stock
+Exchange, Hong Kong Stock Exchange and
+Shanghai Petro on 6 January 2015. All
+the exercise periods of the first grant have
+ended on 28 December 2018. For details,
+please refer to the relevant announcements
+uploaded on the websites of Shanghai Stock
+Exchange, Hong Kong Stock Exchange and
+Shanghai Petro on 28 December 2018.
+At present, Shanghai Petro has no other
+granting scheme.
+During the reporting period, Shanghai Petro
+did not grant A-share share options under
+the Share Option Incentive Scheme, nor
+did the grantees exercise any A-share share
+options, and no A-share share options were
+cancelled or lapsed.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+100
+100
+100
+100
+33.93
+Liability-to-asset ratio (%)
+50.04
+46.14
+(0.12)
+(0.13)
+3.9
+percentage
+points
+EBITDA to total debt ratio
+1.25
+33
+1.33
+6.42
+16.76
+Cash flow interest coverage ratio
+29.07
+35.92
+EBITDA-to-interest coverage ratio
+12.92
+Interest coverage ratio
+0.44
+Significant Events
+SIGNIFICANT EVENTS (CONTINUED)
+agreements;
+2 Solving the issues regarding the legality of land-
+3
+4
+5
+6
+use rights certificates and property ownership rights
+certificates within a specified period of time;
+Implementation of the Reorganisation Agreement
+(please refer to the definition of Reorganisation
+Agreement in the H share prospectus of Sinopec
+Corp.);
+Granting licenses for intellectual property rights;
+Avoiding competition within the same industry;
+Abandonment of business competition and conflicts
+of interest with Sinopec Corp.
+Given that China Petrochemical Corporation engages in
+the same or similar businesses as Sinopec Corp. with
+regard to the exploration and production of overseas
+petroleum and natural gas, China Petrochemical
+Corporation hereby grants a 10-year option to Sinopec
+Corp. with the following provisions: (i) after a thorough
+analysis from political, economic and other perspectives,
+Sinopec Corp. is entitled to require China Petrochemical
+Corporation to sell its overseas oil and gas assets
+owned as of the date of the undertaking and still in its
+possession upon Sinopec Corp.'s exercise of the option
+to Sinopec Corp.; (ii) in relation to the overseas oil and
+gas assets acquired by China Petrochemical Corporation
+after the issuance of the undertaking, within 10 years
+of the completion of such acquisition, after a thorough
+analysis from political, economic and other perspectives,
+Sinopec Corp. is entitled to require China Petrochemical
+Corporation to sell these assets to Sinopec Corp. China
+Petrochemical Corporation undertakes to transfer the
+assets as required by Sinopec Corp. under aforesaid
+items (i) and (ii) to Sinopec Corp., provided that the
+exercise of such option complies with applicable laws and
+regulations, contractual obligations and other procedural
+requirements.
+Within 10 years after 29 April 2014 Yes
+or the date when China Petrochemical
+Corporation acquires the assets
+China Petrochemical
+Corporation
+China Petrochemical 1 Compliance with the connected transaction
+Yes
+No
+4 PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION
+Background
+Undertakings related to Initial
+Type of
+Undertaking
+IPOs
+Party
+Public Offerings (IPOs)
+Corporation
+Significant Events
+Other undertakings
+Contents
+Whether bears
+Whether strictly
+Term for performance
+deadline or not
+performed or not
+From 22 June 2001
+Other
+(2) Overview on 2019 Targeted Poverty
+Alleviations
+0.59
+38
+8.1 Input in coordinated poverty alleviation
+8. Poverty alleviation through social projects
+7.4 Number of the disabled helped
+7.3 Input in assisting the disabled
+7.2 Number of left-behind children, women and senior people assisted
+7.1 Input in left-behind children, women and senior people
+7. Guarantee basic living standard
+6.2 Input in ecological protection
+35
+Living
+SINOPEC
+tape
+中国石化
+N
+SIGNIFICANT EVENTS
+1 MAJOR PROJECTS
+(1) Zhongke integrated refining and
+chemical project
+Zhongke integrated refining and
+petrochemical project mainly consists
+of a 10,000,000 tpa refinery project,
+800,000 tpa ethylene unit, 300,000
+tonne capacity jetty and relevant
+utilities project. It achieved mechanical
+completion on 28 December 2019. The
+Company's self-owned fund accounts for
+30% of the project investment, bank loan
+is the main source of the remaining 70%.
+As of 31 December 2019, the aggregate
+investment was RMB 30.3 billion.
+(2) Zhenhai Refining & Chemical expansion
+project
+Zhenhai Refining & Chemical expansion
+project consists of 15,000,000 tpa
+refinery project and 1,200,000 tpa
+ethylene project. The project was
+approved in June 2018, ethylene and
+relevant projects started at the end
+of October 2018 and is expected to
+achieve the mechanical completion
+in December 2021. The Company's
+self-owned fund accounts for 30% of
+the project investment, bank loan is the
+main source of the remaining 70%. As
+of 31 December 2019, the aggregate
+investment was RMB 3.1 billion.
+(3) Hainan Refining and Chemical expansion
+project
+8.2 Input in targeted poverty alleviation programs
+☑ Set up ecological public welfare positions
+✓ Others
+8.3 Public Welfare funds for poverty alleviation
+9.1 Number of projects
+In 2019, the Company invested nearly
+RMB 0.19 billion in Targeted Poverty
+Alleviation, including RMB 0.12
+billion invested in 53 targeted poverty
+alleviation programs in Yingshang
+county, Yuexi county, Fenghuang county,
+Luxi county, Yuepuhu county and
+Dongxiang county, mainly including rural
+industry development, village tourism
+development, labor output trainings and
+education assistance.
+Significant Events
+39
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Sinopec Corp. published indicative announcement on the restructuring of oil and gas pipeline network assets. For details, please refer to the
+announcements published in China Securities Journal, Shanghai Securities News, Securities Times and the website of the Shanghai Stock Exchange
+on 11 December 2019 and on the website of Hong Kong Stock Exchange on 10 December 2019.
+Sinopec Corp. published voluntary announcement and progress update announcements in relation to China International United Petroleum and
+Chemical Company Limited. For details, please refer to the announcements published in China Securities Journal, Shanghai Securities News,
+Securities Times and the website of the Shanghai Stock Exchange on 28 December 2018, 5 January 2019 and 26 January 2019 and on the website
+of Hong Kong Stock Exchange on 27 December 2018, 4 January 2019 and 25 January 2019.
+21 OTHER EVENTS
+In 2020, the Company will further strengthen poverty alleviation key-problem tackling work, continue to carry on targeted poverty alleviation
+and targeted lifting of poor people out of poverty. The Company will focus on poverty alleviation in terms of consumption, education, industry,
+employment to overcome the bastion of deep poverty and maintain a stable achievement. The Company will strengthen the supervision of
+projects and funds, enhance risks and source management, and constantly improve the level of work, to ensure that the actual results of winning
+the fight against poverty.
+7,152
+54.49
+137
+0.60
+123.59
+141
+0.50
+433
+4.05
+0.23
+(4) Subsequent targeted poverty alleviation plan
+9.3 Number of people lifted out of poverty
+9.4 Other
+9.2 Total input
+9. Other projects
+☐ Develop ways for ecological protection and compensation
+4
+2.76
+3.2 Input in relocation
+3.1 Number of relocated people provided with employment
+3. Poverty elimination through relocation
+2.3 Number of people employed
+2.2 Participants of professional skill trainings (person time)
+2.1 Input in professional skill training
+2. Poverty elimination through provision of employment
+1.4 Number of people lifted out of poverty
+1.2 Number of poverty alleviation programs
+1. Poverty elimination through industrial development
+1.1 Categories of poverty alleviation programs through
+industrial development
+4. Poverty elimination through education
+II. Input breakdowns
+2. Value of goods and materials
+1. Funds
+Overview
+I.
+Index
+Unit: RMB million
+(3) 2019 Targeted Poverty Alleviation Work Statistics
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+38
+☑ Conduct ecological protection and construction
+3. Number of people lifted out of poverty
+4.1 Input in students funding
+1.3 Input in poverty alleviation projects through
+industrial development
+4.3Input in education resources in poverty-stricken areas
+1,955
+4.2 Number of students who received funding assistance
+2.19
+4.35
+243
+2.65
+3,015
+10,990
+96.20
+41,698
+☐ Poverty alleviation through science and technology development
+☑Others
+☑ Poverty alleviation through assets income
+☑ Poverty alleviation through e-commerce
+☑ Poverty alleviation through tourism development
+274
+31,003
+5. Poverty alleviation through healthcare
+☑ Poverty alleviation through agriculture and forestry development
+6. Poverty alleviation through ecological protection
+6.1 Items
+Data
+5.1 Input in medical and health care resources in poverty-stricken areas
+1.76
+23.48
+187.44
+Corporate Governance
+A.6 Responsibility of Directors
+a. All Non-executive Directors have
+the same duties and powers as the
+Executive Directors. In addition,
+the Independent Non-executive
+Directors are entitled to certain
+specific powers. The Articles
+of Association and the Rules of
+Procedure of Board Meetings
+clearly prescribe the duties and
+powers of Directors, Non-executive
+Directors including Independent
+Non-executive Directors, which are
+published on the Sinopec Corp.'s
+website at http://www.sinopec.
+com/
+b. Each of the Directors was able to
+devote sufficient time and efforts
+to handling the matters of Sinopec
+Corp.
+c. Each of the Directors confirmed
+that he has complied with the
+Model Code for Securities and
+Transactions by Directors of
+Listed Companies during the
+reporting period. In addition,
+Sinopec Corp. formulated the
+Rules Governing Shares Held by
+Company Directors, Supervisors
+and Senior Managers and Changes
+in Shares and the Model Code
+of Securities Transactions by
+Company Employees to regulate
+the purchase and sale of Sinopec
+Corp.'s securities by relevant
+personnel.
+d. Sinopec Corp. organised and
+arranged training sessions for
+Directors and paid the relevant
+fees as well as making relevant
+records. The Directors actively
+participated in the trainings and
+paid more attention on continuing
+professional development program
+to ensure that their contribution to
+the Board remains informed and
+relevant.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+45
+CORPORATE GOVERNANCE (CONTINUED)
+d. During the reporting period, the
+Remuneration Committee held one
+meeting (please refer to "Meetings
+held by the special committees of the
+Board" under the section of "Report
+of the Board of Directors" in this
+annual report).
+information
+a. The agenda and other reference
+documents for meetings of the
+Board and Board committees
+will be distributed prior to the
+meetings to give each Director
+sufficient time to review the
+materials so that Directors can
+make informed decisions.
+b. Each Director can obtain all related
+information in a comprehensive
+and timely manner. The Secretary
+to the Board is responsible
+for organising and preparing
+the materials for the Board
+meetings, including preparation
+of explanations for each proposal
+to ensure fully understanding by
+the Directors. The Management
+is responsible for providing
+the Directors with necessary
+information and materials.
+The Director may require the
+Management, or require, via
+the Management, relevant
+departments to provide necessary
+information or explanations. The
+Directors may seek advices from
+professional consultants when
+necessary.
+B Remuneration and Appraisal Committee
+a. Remuneration and Appraisal
+Committee (Remuneration Committee)
+consists of Independent Non-executive
+Director Mr. Fan Gang, who serves
+as the Chairman, and Executive
+Director Mr. Ma Yongsheng and
+Independent Non-executive Director
+Mr. Ng, Kar Ling Johnny, who serve
+as the members of the Remuneration
+Committee. The Remuneration
+Committee is responsible for reviewing
+the implementation of the annual
+remuneration plans for Directors,
+Supervisors and other senior
+Management as approved at the
+general meeting of the shareholders,
+and report to the Board.
+b. The Remuneration Committee
+always consults the Chairman of the
+Board and the President about the
+remuneration plans for other Executive
+Directors. After the Remuneration
+Committee's review, it is of the view
+that all the Executive Directors of
+Sinopec Corp. have fulfilled the duty
+clauses in their service contracts in
+2019.
+c. The members of the Remuneration
+Committee can engage independent
+professionals when performing its
+duties. Reasonable costs arising
+from such consultations are borne by
+Sinopec Corp. In the meantime, the
+Remuneration Committee has also
+appointed consultants member and
+can require such member to provide
+advices. The working expenses of the
+Remuneration Committee are included
+in the budget of Sinopec Corp.
+According to the policies of Sinopec
+Corp., the senior Management and
+relevant departments of Sinopec
+Corp. must actively cooperate with
+the Remuneration Committee.
+require such member to provide
+advice. The working expenses of
+the Remuneration Committee are
+included in the budget of Sinopec
+Corp.
+C Accountability and Auditing
+A.7 Provision of and access to
+Committee has also appointed
+consultants member and can
+A.2 Chairman and President
+b. The Board establishes the
+Board Diversity Policy which
+stipulates that the members of
+the Board shall be nominated
+and appointed based on the skills
+and experience for the overall
+optimum operation of the Board,
+while taking into account the
+targets and requirements of the
+board diversity. When deciding the
+composition of the Board, Sinopec
+Corp. shall consider several factors
+in relation to the diversity of the
+Board, including but not limited
+to profession experience, skills,
+knowledge, length of service,
+regions, cultural and educational
+backgrounds, gender and age.
+Pursuant to Articles of Association,
+the term of each session of the
+Directors of Sinopec Corp. is
+three years, and the consecutive
+term of office of an independent
+non-executive director cannot
+exceed six years, which help to
+ensure that the Board of Directors
+has a proper balance between
+continuous experience and new
+thinking, and enhance the level of
+diversity. Sinopec Corp. focuses on
+the implementation of the Board
+Diversity Policy. The Directors
+come from different industries at
+home and abroad, and have rich
+work experience. Professional
+backgrounds of Directors include
+petroleum and petrochemical, as
+well as economics, accounting and
+finance, which are conductive to
+scientific decision-making.
+e. The Secretary to the Board assists
+the Directors in handling the daily
+work of the Board, continuously
+informs the Directors of any
+regulations, policies or other
+requirements of domestic or
+overseas regulatory authorities in
+relation to corporate governance
+and ensures that the Directors
+comply with domestic and
+overseas laws and regulations
+when performing their duties and
+responsibilities. Sinopec Corp.
+has purchased liability insurance
+for all Directors to minimise their
+risks that might incur from the
+performance of their duties.
+C.1 Financial reporting
+a. The Chairman of the Board is
+elected by a majority vote of all
+Directors, and the President is
+nominated and appointed by
+the Board. The main duties and
+responsibilities of the Chairman
+and the President are clearly
+distinguished from each other,
+and the scope of their respective
+duties and responsibilities are set
+out in the Articles of Association.
+Mr. Zhang Yuzhuo serves as
+Chairman of the Board and Mr.
+Ma Yongsheng serves as President
+of Sinopec Corp.
+b. The Chairman of the Board places
+great emphasis on communication
+with the Independent
+Non-executive Directors. The
+Chairman independently held two
+meetings with the Independent
+Non-executive Directors in respect
+of development strategy, corporate
+governance and operational
+management, etc. of the Company.
+c. The Chairman encourages open
+and active discussions. Directors
+actively and deeply participated
+in the discussions of significant
+decisions made by the Board in
+the Board meetings.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Corporate Governance
+A.3 Board composition
+a. For details of the composition of
+the Board of Directors, please
+refer to the section "Directors,
+Supervisors, Other Senior
+c. The members of the Nomination
+Committee can engage
+professions when performing
+its duties. Reasonable costs
+arising from such consultations
+are borne by Sinopec Corp. In
+the meantime, the Nomination
+Management and Employees" of
+this annual report.
+from each of the Independent
+Non-executive directors a letter of
+confirmation for 2019 regarding
+their compliance with relevant
+independence requirements set
+out in Rule 3.13 of the Hong
+Kong Listing Rules. Sinopec
+Corp. considers that each of
+the Independent Non-executive
+Directors is independent.
+A.4 Appointment, re-election and
+dismissal
+a. During the reporting period,
+the Board of Directors has not
+nominated any new director
+according to the actual situation of
+Sinopec Corp., and no re-election
+and dismissal of directors
+occurred. For details about the
+tenure of each director, please
+refer to the section "Directors,
+Supervisors, Other Senior
+Management and Employees"
+b. All Directors of Sinopec Corp.
+have been elected at the general
+meeting of shareholders. The
+Board has no power to appoint
+temporary Directors.
+c. Sinopec Corp. engages
+professional consultants to
+prepare detailed materials for
+newly elected Directors, to notify
+them of the regulations of each
+listing place of Sinopec Corp. and
+to remind them of their rights,
+responsibilities and obligations as
+Directors.
+A.5 Nomination Committee
+a. The Board of Sinopec Corp.
+established Nomination
+Committee, consisting of
+Chairman of the Board, Mr.
+Zhang Yuzhuo, who serves as
+the Chairman, and Independent
+Non-Executive Directors Mr.
+Tang Min and Mr. Ng, Kar Ling
+Johnny, who serve as members.
+The major responsibilities of
+Nomination Committee are to
+provide suggestion on Board's size
+and composition, as well as the
+selecting standards, procedures
+and candidates for directors and
+senior management. Procedures
+to Propose a Person for Election
+as a Director of Sinopec Corp. is
+published on the Sinopec Corp.'s
+website at http://www.sinopec.
+com/.
+b. Sinopec Corp. has received
+a. Directors are responsible for
+supervising the preparation of
+accounts for each fiscal period to
+ensure that the accounts truly and
+fairly reflect the condition of the
+business, the performance and the
+cash flow of the Company during
+the period. The Board approved
+the Financial Report for 2019 and
+warranted that the annual report
+contained no false representations,
+no material omissions or
+misleading statements and
+jointly and severally accepted full
+responsibility for the authenticity,
+accuracy and completeness of the
+content.
+have clear duties and responsibilities
+in written rules. The Articles of
+Association and the Rules of
+Procedure for the General Meetings
+of Shareholders and the Rules of
+Procedure of the Board Meetings
+clearly set forth the scope of duties,
+powers and delegation of power of the
+Board and Management, which are
+published on the website of Sinopec
+Corp. at http://www.sinopec.com/.
+c. Sinopec Corp. has adopted an
+internal control mechanism to
+ensure that the Management
+and relevant departments have
+provided the Board and the Audit
+Committee with sufficient financial
+data and related explanations and
+materials.
+c. During the reporting period, separate
+resolution was proposed for each
+substantially separate issue at the
+general meetings. All resolutions were
+voted by poll to ensure the interests
+of all shareholders. Notices of the
+general meeting were dispatched
+to shareholders 45 days (excluding
+the date of the general meeting) in
+advance.
+d. The Chairman of the Board hosted the
+annual general meeting for the year
+2018. Some members of the Board
+of Directors and Board of Supervisors
+and senior Management attended the
+meeting and communicated with the
+investors extensively.
+e. According to relevant rules of Sinopec
+Corp., the Secretary to the Board
+is responsible for establishing an
+effective communication channel
+between Sinopec Corp. and its
+shareholders, for setting up special
+departments to communicate with
+the shareholders and for passing
+the opinions and proposals of the
+shareholders to the Board and
+Management in a timely manner.
+Contact details of Sinopec Corp. can
+be found on the Investor Center page
+on Sinopec Corp's website.
+F Company Secretary
+a. The Hong Kong Stock Exchange
+recognised the Secretary to the Board
+as having the relevant qualifications
+as company Secretary. Nominated
+by the Chairman of the Board and
+appointed by the Board, the Secretary
+to the Board is a Senior Management
+Officer of Sinopec Corp. and
+responsible for the Company and the
+Board. The Secretary gives opinions
+on corporate governance to the Board
+and arranges orientation training
+and professional development for the
+Directors.
+b. During the reporting period, the
+Secretary to the Board actively
+participated in career development
+training with more than 15 training
+hours.
+48
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Corporate Governance
+G Shareholders' rights
+a. Shareholders who individually or
+collectively hold 10% of the total
+voting shares of Sinopec Corp.
+may request the Board in writing
+to convene the general meeting of
+shareholders. If the Board fails to
+approve the request to convene the
+meeting according to the Rules of
+Procedure for General Meetings
+of Shareholders, the shareholders
+may convene and hold the meeting
+at their discretion according to
+applicable laws, and reasonable
+expenses incurred will be borne by
+Sinopec Corp. These provisions are
+subject to the following conditions:
+the proposals at the general meeting
+of shareholders must fall within
+the responsibilities of the general
+meeting of shareholders, with specific
+proposals and resolutions and in
+compliance with relevant laws,
+administrative regulations and the
+Articles of Association.
+b. When Sinopec Corp. holds the general
+meeting of shareholders, shareholders
+who individually or collectively
+hold 3% of the total voting shares
+of Sinopec Corp. may propose a
+supplemental proposal 10 days before
+the date of the general meeting.
+c. The eligibility for attending the general
+meeting, the rights of shareholders,
+the resolutions at the meeting and the
+voting procedures are clearly stated
+in the notice of the general meeting
+of Sinopec Corp. dispatched to the
+shareholders.
+d. Sinopec Corp. established
+special organisation in charge of
+communication with shareholders and
+published relevant contact details
+to facilitate shareholders to make
+enquiries pursuant to Articles of
+Association.
+(2) Auditors
+The appointment of
+PricewaterhouseCoopers Zhong Tian
+LLP and PricewaterhouseCoopers as
+Sinopec Corp.'s external auditors for
+2019 and the authorisation of the Board
+to determine their remuneration were
+approved at Sinopec Corp.'s annual
+general meeting for the year 2018 on
+9 May 2019. The audit fee for 2019
+is RMB 47.48 million (including audit
+fee of internal control), which was
+approved at the 12th meeting of the
+seventh session of the Board. The annual
+financial statements have been audited
+by PricewaterhouseCoopers Zhong Tian
+LLP and PricewaterhouseCoopers. The
+Chinese certified accountants signing the
+report are Zhao Jianrong and Gao Peng
+from PricewaterhouseCoopers Zhong Tian
+LLP.
+During the reporting period, neither
+PricewaterhouseCoopers Zhong Tian LLP
+nor PricewaterhouseCoopers provided any
+non-audit service to the Company.
+(3) Other information about Sinopec Corp.'s
+corporate governance
+Except for their working relationships
+with Sinopec Corp., none of the Directors,
+Supervisors or other Senior Management
+has any financial, business or family
+relationship or any relationship in other
+material aspects with one another. For
+information about changes in share
+capital and shareholdings of substantial
+shareholders, please refer to page 6 to
+page 7; for information about meetings
+of the Board, please refer to page 50;
+for information about meetings held
+by Board Committees, please refer to
+page 52; for information about tenure
+of non-executive directors, please refer
+to page 64; for information about equity
+interests of Directors, Supervisors and
+other senior Management, please refer
+to page 43; for information about the
+biographies and annual remuneration of
+Directors, Supervisors and other senior.
+Management, please refer to page 60 to
+page 74.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+49
+b. Sinopec Corp. pays high attention
+to investor relations. The team
+led by management conduct
+road shows every year to answer
+questions on subjects of concern to
+investors, such as introduction of
+the development strategies and the
+production and business performance
+of the Company. Sinopec Corp.
+established a department responsible
+for communicating with investors.
+In compliance with regulatory
+provisions, Sinopec Corp. enhanced
+communication with investors by
+holding meetings with institutional
+investors, setting up an investor
+hotline and communicating through
+internet platform.
+b. Sinopec Corp. provides Directors
+with information about the
+financial, production and operating
+data of the Company every month
+to ensure that the Directors
+can learn about the latest
+developments of the Company in a
+timely manner.
+a. According to the actual situation
+of Sinopec Corp., as approved
+at the annual general meeting of
+shareholders for the year 2018,
+Sinopec Corp. amended the Articles of
+Association. For more details, please
+refer to the announcement published
+in the China Securities Journal, the
+Shanghai Securities News and the
+Securities Times by Sinopec Corp. as
+well as on the website of Shanghai
+Stock Exchange on 10 May 2019
+and the announcement published on
+the website of the Hong Kong Stock
+Exchange on 9 May 2019.
+c. Each Board Committee is required
+to report its decisions and
+recommendations to the Board
+and has formulated its terms of
+references. The terms of reference
+of the Audit Committee, the
+Remuneration Committee and the
+Nomination Committee are published
+on the website of Sinopec Corp. at
+http://www.sinopec.com/.
+d. The external auditors of Sinopec
+Corp. made a statement on their
+reporting responsibilities in the
+auditor's report contained in the
+financial report.
+C.2 Internal Control and Risk
+Management
+a. Sinopec Corp. has formulated and
+implemented its internal control
+and risk management system.
+The Board as a decision-making
+body is responsible for evaluating
+and review the effectiveness
+of its internal control and risk
+management. The Board and
+Audit Committee periodically (at
+least annually) receive reports of
+the Company regarding internal
+control and risk management
+information from the Management.
+All major internal control and
+risk management issues are
+reported to the Board and Audit
+Committee. Sinopec Corp. has
+set up its internal control and
+risk management department and
+internal auditing departments,
+which are equipped with sufficient
+staff, and these departments
+periodically (at least twice
+per year) report to the Audit
+Committee. The internal control
+and risk management system
+of the Company are designed to
+manage rather than eliminate all
+the risks of the Company.
+46
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Corporate Governance
+b. In terms of internal control,
+Sinopec Corp. adopted the internal
+control framework prescribed
+in the internationally accepted
+Committee of Sponsoring
+Organisations of the Treadway
+Commission Report (COSO).
+Based upon the Articles of
+Association and the applicable
+management policies currently in
+effect, as well as in accordance
+with relevant domestic and
+overseas applicable regulations,
+Sinopec Corp. formulated and
+continuously improves the Internal
+Control Manual to achieve internal
+control of all factors of internal
+environment, risk assessment,
+control activities, information
+and communication, and internal
+supervision. At the same time,
+Sinopec Corp. has constantly
+supervised and evaluated its
+internal control, and conducted
+comprehensive and multi-level
+inspections including regular
+test, enterprise self-examination
+and auditing check, and included
+headquarters, branches and
+subsidiaries into the scope of
+internal control evaluation, with
+an internal control evaluation
+report being produced. The
+Board annually reviews the
+internal control evaluation report.
+For detailed information about
+the internal control during the
+reporting period, please refer
+to the report on internal control
+evaluation prepared by Sinopec
+Corp.
+Sinopec Corp. has formulated
+and implemented its information
+disclosure policy and insider
+information registration policy.
+The Company regularly evaluates
+the policy implementation and
+makes disclosure in accordance
+with relevant regulations. Please
+refer to the website of Sinopec
+Corp. (http://www.sinopec.com/)
+for the details of the information
+disclosure policy.
+c. In terms of risk management,
+Sinopec Corp. adopted the
+enterprise risk management
+framework provided by COSO, and
+established its risk management
+policy and risk management
+organisation system. The
+Company annually conducts risk
+evaluation to identify major and
+important risks and perform
+risk management duties. It has
+designed major and important
+risks tackling measures combined
+with its internal control system
+and periodically monitor their
+implementation to ensure
+adequate care, monitor and
+tackling of major risks.
+d. Based upon the review and
+evaluation of internal control and
+risk management of the reporting
+period, the Board is of the view
+that the internal control and risk
+management of the Company are
+effective.
+C.3 Audit Committee
+a. The Board has established
+an Audit Committee. The
+Audit Committee consists of
+Independent Non-executive
+Director Mr. Ng, Kar Ling Johnny,
+who serves as the Chairman,
+and Independent Non-executive
+Director Mr. Tang Min and
+Independent Non-executive
+Director Mr. Cai Hongbin, who
+serve as members. As verified,
+none of them has served as a
+partner or a former partner in our
+current auditing firm.
+b. During the reporting period,
+the Audit Committee held four
+meetings (please refer to the
+"Meetings held by the special
+committees of the Board" under
+the section of "Report of the
+Board of Directors" in this annual
+report). The review opinions
+were issued at each meeting and
+submitted to the Board. During
+the reporting period, the Board
+and the Audit Committee had no
+disagreement.
+c. Audit Committee members can
+engage independent professionals
+when performing its duties.
+Reasonable costs arising from
+such consultations are borne by
+Sinopec Corp. In the meantime,
+the Audit Committee has
+appointed consultants members
+and can request such member
+to provide advices. The working
+expenses of the Audit Committee
+are included in the budget of
+Sinopec Corp. In accordance with
+the policies of Sinopec Corp., the
+Senior Management and relevant
+departments of Sinopec Corp.
+shall actively cooperate with the
+Audit Committee.
+d. The Audit Committee has reviewed
+the adequacy and sufficiency
+of the resources for accounting
+and financial reporting and the
+qualifications and experience of
+the relevant employees as well
+as the sufficiency of the training
+courses provided to relevant
+employees. Audit Committee is
+of the view that the Management
+has fulfilled the duties to establish
+an effective internal control
+system. The Company established
+a whistle-blowing policy in its
+internal control system, providing
+several channels as online
+reporting, letter reporting, receipt
+of appeals and a complaint
+mailbox, etc. to employees to
+report behavior that violates the
+internal control system of the
+Company. The Audit Committee
+has reviewed and approved such
+policy.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+47
+Corporate Governance
+CORPORATE GOVERNANCE (CONTINUED)
+D Delegation of power by the Board
+a. The Board and the Management
+d. The Board has reviewed and
+evaluated its performance in 2018
+and is of the view that the Board
+made decisions in compliance with
+domestic and overseas regulatory
+authorities' requirements and
+the Company's internal rules;
+that the Board have considered
+the suggestions from the Party
+organisation, Board of Supervisors
+and Management during its
+decision making process; and that
+the Board safeguarded the rights
+and interests of Sinopec Corp. and
+its shareholders.
+b. In addition to the Audit Committee,
+the Remuneration Committee
+and Nomination Committee,
+the Board had established the
+Strategy Committee and the
+Social Responsibility Management
+Committee. The Strategy Committee
+is responsible for overseeing
+long-term development strategies
+and significant investment decisions
+of the Company. The 7th session of
+Strategy Committee consists of five
+directors, including Chairman of the
+Board Mr. Zhang Yuzhuo, who serves
+as Chairman, as well as Executive
+Directors Mr. Ma Yongsheng, Mr. Ling
+Yiqun and Independent Non-executive
+Directors Mr. Fan Gang and Mr. Cai
+Hongbin, who serve as members. The
+Social Responsibility Management
+is responsible for preparing
+policies, governance, strategies
+and plans for social responsibility
+management of the Company. The
+Social Responsibility Management
+Committee consists of three Directors,
+including Chairman of the Board
+Mr. Zhang Yuzhuo, who serves as
+Chairman, Independent Non-executive
+Directors Mr. Tang Min and Mr. Fan
+Gang, who serve as members.
+E Investor Relations
+c. Each Director of the Board can
+submit proposals to be included
+in the agenda of Board meetings,
+and each Director is entitled to
+request other related information.
+As of 31 December 2019, apart from 13,000
+A shares of Sinopec Corp. held by Director,
+Senior Vice President Mr. Ling Yiqun, none
+of the directors, supervisors or other senior
+management of Sinopec Corp. held any
+shares of Sinopec Corp.
+a. The Board is the decision-making
+body of Sinopec Corp. and abides
+by good corporate governance
+practices and procedures. All
+decisions made by the Board are
+implemented by the Management
+of Sinopec Corp.
+Decision-making procedures:
+The continuing connected transaction
+agreements were entered into in the ordinary
+course of the Company's business and in
+accordance with normal commercial terms
+that are fair and reasonable to the Company
+and its shareholders. The Company,
+according to its internal control procedures,
+adjusts the scope and the relevant caps
+of continuing connected transactions
+every three years, and will announce and
+implement upon the approval of the Board
+and/or independent shareholders. For the
+other connected transactions, Sinopec
+Corp., in strict compliance with domestic
+and overseas regulatory rules, will publish
+the announcement and implement the
+transactions only after submitting the
+relevant proposals of connected transactions
+to the Board and/or the general meeting of
+shareholders for consideration and approval
+according to internal control procedures.
+Related party transactions with the Sinopec
+Group that occurred during the year, as set
+out in Note 38 to the financial statements
+prepared under the IFRS in this annual
+report, also fall under the definition of
+connected transactions under Chapter 14A of
+the Hong Kong Listing Rules.
+The above-mentioned connected transactions
+between the Company and Sinopec Group
+in 2019 were approved at the 12th meeting
+of the seventh session of the Board and
+have complied with the requirements under
+Chapter 14A of the Hong Kong Listing Rules.
+The external auditor of Sinopec Corp.
+was engaged to report on the Company's
+continuing connected transactions in
+accordance with the Hong Kong Standard on
+Assurance Engagements 3000, Assurance
+Engagement Other Than Audits or Reviews
+of Historical Financial Information, and with
+reference to Practice Note 740, Auditor's
+Letter on Continuing Connected Transactions
+under the Hong Kong Listing Rules, issued
+by the Hong Kong Institute of Certified Public
+Accountants. The auditor has issued its
+unqualified letter containing its conclusions
+in respect of the above-mentioned continuing
+connected transactions in accordance with
+Rule 14A.56 of the Hong Kong Listing Rules.
+Sinopec Corp. has submitted a copy of the
+auditor's letter to the Hong Kong Stock
+Exchange.
+After reviewing the above-mentioned
+connected transactions, the independent
+non-executive directors of Sinopec Corp.
+have confirmed the following:
+(a) The transactions have been conducted
+in the ordinary course of the Company's
+business;
+(b) The transactions have been entered into
+based on either of the following terms:
+For details of the pricing principle, please
+refer to relevant announcements published
+on 27 August 2018 in the China Securities
+Journal, the Shanghai Securities News and
+the Securities Times and on the website of
+the Shanghai Stock Exchange and on the
+website of the Hong Kong Stock Exchange on
+26 August 2018.
+i
+ii terms not less favorable than those
+available from or to independent third
+parties, where there is no available
+comparison to determine whether
+such terms are on normal commercial
+terms; and
+(c) The transactions were conducted
+pursuant to the terms of relevant
+agreements, and the terms were fair
+and reasonable and in the interests of
+Sinopec Corp. and its shareholders as a
+whole.
+4 OTHER SIGNIFICANT CONNECTED
+TRANSACTIONS OCCURED THIS YEAR
+For details, please refer to item 5
+"Capital Increase and Assets Transfer to
+SIONOPEC-SK (Wuhan) Petrochemical Co.,
+Ltd. (SINOPEC-SK)" in section "Significant
+Events".
+5 FUNDS PROVIDED BETWEEN RELATED PARTIES
+Related Parties
+Sinopec Group
+Other related parties
+Total
+Relations
+Parent company and
+normal commercial terms; or
+affiliated companies*
+Associates and joint ventures
+(d) where none of the above is applicable,
+the price for the provision of the products
+or services is to be agreed between
+the relevant parties, which shall be the
+reasonable cost incurred in providing the
+same plus 6% or less of such cost.
+(c) where there is neither a
+Connected Transactions
+CONNECTED TRANSACTIONS
+1 AGREEMENTS CONCERNING CONTINUING
+CONNECTED TRANSACTIONS
+BETWEEN SINOPEC CORP. AND CHINA
+PETROCHEMICAL CORPORATION
+Prior to Sinopec Corp.'s overseas listing,
+in order to ensure the smooth continuation
+of production and business conducted by
+the Company and China Petrochemical
+Corporation, the two parties entered into
+a number of agreements on continuing
+connected transactions, details of which are
+as follows:
+(1) The Company and China Petrochemical
+Corporation will mutually supply ancillary
+services for products, production and
+construction services (Mutual Supply
+Agreement)
+(2) China Petrochemical Corporation
+will provide trademarks, patents and
+computer software to the Company for
+use free of charge
+(3) China Petrochemical Corporation will
+provide cultural and educational, hygienic
+and auxiliary services to the Company
+(Cultural, Educational, Hygiene and
+Auxiliary Services Agreement)
+(4) China Petrochemical Corporation will
+provide leasing services for lands and
+certain properties to the Company
+(5) China Petrochemical Corporation will
+provide comprehensive insurance to the
+Company
+(6) China Petrochemical Corporation will
+provide shareholders' loans to the
+Company; and
+(7) The Company will provide franchise
+licenses for service stations to China
+Petrochemical Corporation.
+government-prescribed price nor a
+government-guidance price, the market
+price will apply; or
+On 24 August 2018, Sinopec Corp. and
+China Petrochemical Corporation entered into
+a supplemental agreement of the continuing
+connected transactions and the Land Use
+Rights Leasing Agreement Amendment
+2 COMPLIANCE OF DISCLOSURE AND
+APPROVALS OF CONTINUING CONNECTED
+TRANSACTIONS BETWEEN THE COMPANY
+AND SINOPEC GROUP WITH HONG KONG
+LISTING RULES AND THE SHANGHAI
+LISTING RULES
+Pursuant to the Hong Kong Listing Rules and
+the Shanghai Listing Rules, the continuing
+connected transactions between the
+Company and Sinopec Group are subject
+to disclosure, independent non-executive
+directors' approval and/or independent
+shareholders' approval (if needed) based on
+the nature and the value of the transactions.
+Sinopec Corp. has fully complied with
+the above requirements in relation to the
+continuing connected transaction between
+the Company and Sinopec Group.
+The aggregated amount of the continuing
+connected transactions for 2019 of the
+Company is in compliance with the relevant
+requirements of the Hong Kong Listing
+Rules and the Shanghai Listing Rules. For
+performance details of connected transaction
+agreements, please refer to Item 3 below.
+3 ACTUAL CONTINUING CONNECTED
+TRANSACTIONS ENTERED INTO BY THE
+COMPANY DURING THE YEAR
+Pursuant to the above-mentioned agreements
+on continuing connected transactions,
+the aggregate amount of the continuing
+connected transactions of the Company
+during the reporting period was RMB
+447.608 billion. Among which, purchases
+expenses amounted to RMB 286.769 billion,
+representing 9.45% of the total amount of
+this type of transaction for the reporting
+period, including purchases of products
+and services (procurement, storage and
+transportation, exploration and development
+services, and production-related services) of
+RMB 270.499 billion, purchases of auxiliary
+and community services of RMB 3.097
+billion, payment of property rent of RMB 509
+million, payment of land use right of RMB
+11.330 billion, and the interest expenses
+amounted to RMB 1.334 billion. The sales
+income amounted to RMB 160.839 billion,
+representing 5.17% of the total amount of
+this type of transaction for the reporting
+period, including RMB 159.681 billion for
+sales of products and services, RMB 92
+million for agency commission income, and
+RMB 1,066 million for interest income.
+The amounts of the above continuing
+connected transactions between the
+Company and Sinopec Group did not
+exceed the relevant caps for the continuing
+connected transactions as approved by the
+general meeting of shareholders and the
+Board.
+40
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Principle of pricing for the continuing
+connected transactions:
+(a) The government-prescribed price will
+apply;
+(b) where there is no government-prescribed
+price but where there is a
+government-guidance price, the
+government-guidance price will apply;
+Memo, pursuant to which the scope of
+services of the Mutual Supply Agreement
+and the Cultural, Educational, Hygienic
+and Auxiliary Services Agreement were
+adjusted and the term of the Mutual Supply
+Agreement and the Cultural, Educational,
+Hygienic and Auxiliary Services Agreement
+was extended from 1 January 2019 to 31
+December 2021; the term of the Properties
+Leasing Agreement was extended to 31
+December 2021 and the term of Intellectual
+Property Licensing Agreements was extended
+to 31 December 2029. The area and rent
+in the Land Use Rights Leasing Agreement
+were also adjusted. The resolution relating
+to continuing connected transactions for
+the three years from 2019 to 2021 was
+approved at the first extraordinary general
+meeting of Sinopec Corp. for 2018 held on
+23 October 2018. For details of the above
+continuing connected transactions, please
+refer to relevant announcements published
+on 27 August 2018 in the China Securities
+Journal, the Shanghai Securities News and
+the Securities Times and on the website of
+the Shanghai Stock Exchange and on the
+website of the Hong Kong Stock Exchange
+dated 26 August 2018. The capitalised terms
+used in this section shall have the same
+meaning as that used in the above-mentioned
+announcements.
+b. The meeting of the Board is held
+at least once a quarter. The Board
+will usually communicate the
+time and proposals of the Board
+meeting 14 days before convening
+of the meeting. The relevant
+documents and materials for
+Board meetings are usually sent to
+each Director 10 days in advance.
+In 2019, Sinopec Corp. held four
+Board meetings. For details about
+each Director's attendance at the
+Board meetings and the general
+meetings, please refer to the
+section "Report of the Board of
+Directors" in this annual report.
+Funds to related parties
+Balance
+Amount
+incurred
+(18,648)
+Save as disclosed above, during the reporting
+period, none of the directors, supervisors and
+senior management of Sinopec Corp. and
+their associates had any interests or short
+positions (including any interest or short
+position that is regarded or treated as being
+held in accordance with the SFO) in the
+shares, debentures and underlying shares of
+Sinopec Corp. or any associated corporations
+(as defined in Part XV of SFO) would fall
+to be disclosed to the Sinopec Corp. and
+the Hong Kong Stock Exchange under the
+Division 7 and 8 of Part XV of SFO or which
+was recorded in the register required to be
+kept under section 352 of SFO or otherwise
+should notify Sinopec Corp. or the Hong
+Kong Stock Exchange pursuant to the Model
+Code for Securities Transactions by Directors
+of Listed Company under the Hong Kong
+Listing Rules.
+4 PERFORMANCE OF THE INDEPENDENT
+NON-EXECUTIVE DIRECTORS
+During the reporting period, the Independent
+Non-Executive Directors of Sinopec Corp.
+fulfilled their duties in good faith as
+required by Terms of Reference of the
+Independent Non-Executive Directors, and
+actively contributed to the development
+of the Company. They actively attended
+Board meetings and meetings of the Board
+Committees (please refer to the section
+"Report of the Board of Directors" in this
+annual report for details of their attendance),
+exercised their profession advantages to
+offer advice and suggestions to Sinopec
+Corp.'s development strategy, operations
+and reform, and promoted the company's
+scientific decision-making. The independent
+non-executive directors maintained
+timely and effective communications with
+management, external auditors and the
+internal auditing department, gave their
+independent opinions on matters such
+as connected transactions and dividend
+distribution, and protected the legitimate
+interests of the minority shareholders'
+interests.
+Pursuant to requirements of securities
+regulatory authority of China, Independent
+Non-Executive Directors of Sinopec Corp.
+reviewed the performance of the senior
+managers of Sinopec Corp. who held
+concurrent positions as senior managers
+in China Petrochemical Corporation and
+published independent opinions as follows:
+"The President Mr. Ma Yongsheng, Senior
+Vice President Mr. Ling Yiqun and Mr. Liu
+Zhongyun, each of whom concurrently held
+position as senior management of China
+Petrochemical Corporation, have obtained
+the exemptions for holding concurrent
+position from CSRC. During the reporting
+period, Mr. Ma Yongsheng, Mr. Ling Yiqun
+and Mr. Liu Zhongyun devoted sufficient
+time and energy to fulfil their duties with
+diligence and due care. They protected
+the interests of the Company and minority
+shareholders effectively and didn't harm
+the legitimate interests of Sinopec Corp.
+and minority shareholders due to holding
+concurrent position in China Petrochemical
+Corporation."
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+43
+Corporate Governance
+44
+Corporate Governance
+CORPORATE GOVERNANCE (CONTINUED)
+3 EQUITY INTERESTS OF DIRECTORS,
+SUPERVISORS AND OTHER SENIOR
+MANAGEMENT
+5 COMPANY'S INDEPENDENCE FROM
+CONTROLLING SHAREHOLDER
+6 COMPETITION BETWEEN SINOPEC CORP
+AND ITS CONTROLLING SHAREHOLDER
+Please refer to "Performance of Undertaking
+by China Petrochemical Corporation" under
+the section "Significant Events" in this
+annual report for details.
+7 IMPROVEMENT AND IMPLEMENTATION OF
+THE INTERNAL CONTROL SYSTEM
+For details of internal control self-assessment
+and internal control auditing, please refer to
+the internal control assessment report and
+the internal control auditing report disclosed
+by the Company on the same date of this
+annual report.
+8 SENIOR MANAGEMENT APPRAISAL AND
+INCENTIVE SCHEMES
+Sinopec Corp. has established and is
+continuously improving the fairness and
+transparency of its performance appraisal
+standards, incentive schemes and
+requirements for directors, supervisors and
+other senior management. Sinopec Corp. has
+implemented a number of incentive policies,
+including the Measures of Sinopec Corp.
+for the Implementation of Remuneration
+for Senior Managers and the Measures
+of Sinopec Corp. for the Management of
+Performance Evaluations.
+9 CORPORATE GOVERNANCE REPORT (IN
+ACCORDANCE WITH HONG KONG LISTING
+RULES)
+(1) Compliance with the Corporate
+Governance Code
+Sinopec Corp. complied with all code
+provisions set out in the Corporate
+Governance Code during the reporting
+period.
+A Board of Directors
+A.1 Board of Directors
+The Company is independent from its
+controlling shareholder in terms of, among
+other matters, business, assets and
+finances. The Company has a well-integrated
+independent business and independent
+operational capabilities.
+at the
+beginning
+of the year
+29,415
+During the reporting period, Sinopec
+Corp. convened the 2018 annual general
+meeting on 9 May 2019 in Beijing, China in
+accordance with the required procedures of
+noticing, convening and holding procedures
+pursuant to the relevant laws and regulations
+and the Articles of Association. For meeting
+details, please refer to the poll results
+announcements published in China Securities
+Journal, Shanghai Securities News and
+Securities Times on 10 May 2019 and on the
+websites of Hong Kong Stock Exchange on 9
+May 2019.
+During the reporting period, there is no
+material inconsistency between Sinopec
+Corp.'s corporate governance and the
+requirements of the PRC Company Law and
+relevant regulations of the CSRC. The Board
+of Supervisors of Sinopec Corp. agreed with
+all supervised matters. None of Sinopec
+Corp., the Board, directors, supervisors,
+senior management, controlling shareholders
+or de facto controllers of Sinopec Corp.
+were under the investigation by the CSRC or
+received any regulatory sanction or criticised
+publicly by the CSRC, the Hong Kong
+Securities and Futures Commission, the
+Securities and Exchange Commission of the
+United States, or received any public censure
+from Shanghai Stock Exchange, the Hong
+Kong Stock Exchange, the New York Stock
+Exchange or the London Stock Exchange.
+Balance
+at the end
+of the year
+10,767
+1,431
+30,846
+1,738
+12,505
+Unit: RMB million
+Funds from related parties
+Balance
+at the
+beginning
+of the year
+30,232
+Amount
+incurred
+(14,496)
+Balance at
+2 GENERAL MEETINGS
+the end
+of the year
+15,736
+59
+(14,437)
+392
+16,128
+Reason for provision of funds between related parties
+Impacts on the Company
+*. affiliated companies include subsidiaries, associates and joint ventures.
+Loans and other accounts receivable and payable
+No material negative impact
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+41
+Connected Transactions
+CORPORATE GOVERNANCE
+1 IMPROVEMENTS IN CORPORATE
+GOVERNANCE DURING THE REPORTING
+PERIOD
+During the reporting period, Sinopec
+Corp. committed itself to comply with the
+Articles of Association as well as domestic
+and overseas laws and regulations, and
+continuously improving its corporate
+governance. It timely amended the Articles
+of Association and the internal control
+procedures, and implemented the campaign
+of promoting the execution effectiveness
+of internal control with good results.
+The role of independent directors is well
+played. It also completed the information
+disclosure with high quality and further
+strengthened investor relations work to
+promote enterprise value. Its sustainable
+development achieved positive results and
+earned social recognition. It carried out
+campaign themed "staying true to our
+founding mission", completed related work in
+exercising full and rigorous governance over
+the Party and implemented the campaign
+of "talents strengthening enterprise". All the
+aforesaid work has promoted the company's
+high-quality development.
+333
+30,565
+307
+(18,341)
+Risks with regard to the operation and
+natural disasters: The process of petroleum
+chemical production is exposed to the
+high risks of inflammation, explosion and
+environmental pollution and is vulnerable
+to extreme natural disasters. Such
+contingencies may cause serious impacts
+to the society, major financial losses to the
+Company and grievous injuries to people.
+The Company has always been paying great
+emphasis on the safety production, and has
+implemented a strict HSSE management
+system as an effort to avoid such risks as
+far as possible. Meanwhile, the main assets
+and inventories of the Company as well as
+the possibility of damage to a third party
+have been insured. However, such measures
+may not shield the Company from financial
+losses or adverse impact resulting from such
+contingencies.
+0
+65.31
+Ratio between the dividends and the net profit attributed to the shareholders of the
+listed company in the consolidated statement (%)
+51.12
+61.62
+57.47
+Net profits attributed to the shareholders of the listed company shown in the
+consolidated statement for the dividend year (RMB billion)
+60.54
+50.85
+37.53
+Total amount of cash dividends (RMB billion, tax inclusive)
+0.50
+0.42
+0.31
+Cash dividends (RMB/Share, tax inclusive)
+2017
+82.52
+118.42
+Note: The final cash dividend for 2019 is subject to the approval at the 2019 annual general meeting.
+The aggregate cash dividend declared by
+Sinopec Corp. during three years from 2017
+to 2019 is RMB 1.23 per share, and the total
+dividend payment from 2017 to 2019 as a
+percentage of average net profit attributed
+to the shareholders of the listed company in
+the three years is 262.5%.
+15 DONATIONS
+During this reporting period, the changes
+to the reserves of the Company are set out
+in the consolidated statement of changes
+in shareholders' equity in the financial
+statements prepared in accordance with
+IFRS in this annual report.
+14 RESERVES
+During this reporting period, changes to the
+fixed assets of the Company are set out in
+Note 16 to the financial statements prepared
+in accordance with IFRS in this annual
+report.
+13 FIXED ASSETS
+12 BANK LOANS AND OTHER BORROWINGS
+Details of bank loans and other borrowings
+of the Company as of 31 December 2019
+are set out in Note 30 to the financial
+statements prepared in accordance with
+IFRS in this annual report.
+During the reporting period, other than
+disclosed above, all the top five crude
+oil suppliers and the other four largest
+customers of the Company were independent
+third parties. There were no supplier,
+customer, employee or others that have a
+significant impact on the Company and on
+which the Company's success depends.
+2018
+The total sales value to the five largest
+customers of the Company in 2019 was
+RMB 261,811 million, accounted for 8.8%
+of the total sales value of the Company,
+of which the sales value to the connected
+party (Sinopec group) among the five largest
+customers was RMB 111,110 million,
+accounted for 3.7% of the total sales value
+for the year.
+10 DURING THIS REPORTING PERIOD, THE
+COMPANY DID NOT VIOLATE LAWS OR
+REGULATIONS WHICH HAVE A MATERIAL
+IMPACT ON THE COMPANY
+9 DURING THIS REPORTING PERIOD, THE
+IMPLEMENTATION OF ENVIRONMENTAL
+POLICIES BY THE COMPANY
+Details with regard to the Company's
+performance in relation to environmental
+and social-related policies and performances
+are provided in the Chairman's Address and
+Business Review and Prospects in this annual
+report as well as the 2019 Communication
+on Progress for the Sustainable Development
+of Sinopec Corp. Those disclosures in
+relation to the environmental policies
+constitute part of the Report of the Board of
+Directors.
+2019 Internal Control Assessment Report of
+Sinopec Corp. was reviewed and approved
+at the 12th meeting of the seventh Session
+of the Board on 27 March 2020, and all
+members of the Board warrant that the
+contents of the report are true, accurate
+and complete, and there are no false
+representations, misleading statements or
+material omissions contained in the report.
+as ensuring its effective implementation. In
+2019, the Board assessed and evaluated the
+internal control of Sinopec Corp. according
+to the Basic Standard for Enterprise Internal
+Control, Application Guidelines for Enterprise
+Internal Control and Assessment Guidelines
+for Enterprise Internal Control. There were
+no material defects in relation to the internal
+control system as of 31 December 2019.
+The internal control system of Sinopec Corp.
+related to the financial statements is sound
+and effective.
+The Board is fully responsible for establishing
+and maintaining the internal control system
+related to the financial statements as well
+INTERNAL CONTROL
+8 RESPONSIBILITIES FOR THE COMPANY'S
+11 MAJOR SUPPLIERS AND CUSTOMERS
+During this reporting period, the total value
+of the purchasing from the top five crude
+oil suppliers of the Company accounted
+for 49.1% of the total value of the crude
+oil purchasing by the Company, of which
+the total value of the purchasing from the
+largest supplier accounted for 19.3% of the
+total value of the crude oil purchasing by the
+Company.
+During this reporting period, the amount
+of charity donations made by the Company
+2019
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Proposals for dividend distribution
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+42
+52
+The profit distribution plan of Sinopec Corp.
+for the corresponding year will be carried out
+in accordance with the policy and procedures
+stipulated in the Articles of Association,
+with the advice of minority shareholders
+being heard and considered. Meanwhile, the
+independent directors will issue independent
+opinions.
+The profit distribution policy of Sinopec
+Corp. maintains consistency and steadiness,
+and considers the long-term interests
+of the Company, overall interests of all
+the shareholders and the sustainable
+development of the Company. Sinopec Corp.
+gives priority to adopting cash dividends
+for profit distribution, and is able to deliver
+an interim profit distribution. When the net
+profits and retained earnings of the Company
+are positive in current year, and in the event
+that the cash flow of Sinopec Corp. can
+satisfy the normal operation and sustainable
+development, Sinopec Corp. should adopt
+cash dividends, and the distribution profits
+in cash every year are no less than 30%
+of the net profits of the Company realised
+during the corresponding year.
+7 DIVIDEND
+The financial results of the Company for
+the year ended 31 December 2019, which
+is prepared in accordance with IFRS and
+the financial position as at that date and
+the accompanying analysis are set out from
+page 146 to page 203 in this annual report.
+A fair review of the Company's business,
+a discussions and analysis on business
+performance using financial key performance
+indicators and the material factors
+underlying our results and financial position
+during the reporting period, particulars of
+significant events affecting the Company
+and the outlook of the Company's business
+are discussed throughout this annual report
+included in the chapters of Chairman's
+Address, Business Review and Prospects,
+Management's Discussion and Analysis and
+Significant Events. All above discussions
+constitute parts of the report of the Board of
+Directors.
+BUSINESS PERFORMANCE
+BOARD COMMITTEES ISSUED REVIEW
+OPINIONS TO THE BOARD WHEN
+PERFORMING THEIR DUTIES DURING
+THE REPORTING PERIOD, WITHOUT
+OBJECTION.
+5
+(8) The 1st meeting of the seventh session
+of the Social Responsibility Management
+Committee was held by written resolution
+on 20 March 2019, whereby the 2018
+Communication on Progress for the
+Sustainable Development Report of
+Sinopec Corp. was approved at the
+meeting.
+(7) The 1st meeting of the seventh session
+of the Remuneration Committee was
+held by written resolution on 20 March
+2019 whereby the proposal in relation
+to implementation of the rules of the
+remuneration of directors, supervisors
+and other senior management for 2018.
+(6) The 3rd meeting of the seventh session
+of the Strategy Committee was held
+by written resolution on 21 August
+2019, whereby the three years rolling
+development plan of Sinopec corp.
+(2019-2021) was approved at the
+meeting.
+(5) The 2nd meeting of the seventh session
+of the Strategy Committee was held by
+written resolution on 20 March 2019,
+whereby the proposal in relation to the
+plan of investments of 2019 of Sinopec
+Corp. was approved at the meeting.
+At the 12th meeting of the seventh session of
+the Board, the Board approved the proposal
+to distribute a final cash dividend of RMB
+0.19 (tax inclusive) per share, combining
+with an interim distributed dividend of RMB
+0.12 (tax inclusive) per share, the total
+dividend for the whole year is RMB 0.31 (tax
+included) per share.
+The final cash dividend will be distributed
+on or before 19 June 2020 (Friday) to all
+shareholders whose names appear on the
+register of members of Sinopec Corp. on
+the record date of 9 June 2020 (Tuesday).
+In order to qualify for the final dividend
+for H shares, the holders of H shares must
+lodge all share certificates accompanied
+by the transfer documents with Hong Kong
+Registrars Limited located at 1712-1716,
+17th Floor Hopewell Centre, 183 Queen's
+Road East, Wan Chai Hong Kong before
+4:30 p.m. on 2 June 2020 (Tuesday)
+for registration. The H shares register of
+members of Sinopec Corp. will be closed
+from 3 June 2020 (Wednesday) to 9 June
+2020 (Tuesday) (both dates inclusive).
+The dividend will be denominated and
+declared in RMB, and distributed to the
+domestic shareholders and investors.
+participating in the Shanghai-Hong Kong
+Stock Connect Program in RMB and to
+the overseas shareholders in Hong Kong
+Dollar. The exchange rate for the dividend
+calculation in Hong Kong Dollar is based
+on the average benchmark exchange rate of
+RMB against Hong Kong Dollar as published
+by the People's Bank of China one week
+preceding the date of the declaration of such
+dividend.
+In accordance with the Enterprise Income
+Tax Law of the People's Republic of China
+which came into effect on 1 January 2008
+and its implementation regulations, Sinopec
+Corp. is required to withhold and pay
+enterprise income tax at the rate of 10%
+on behalf of the non-resident enterprise
+shareholders whose names appear on the
+register of members for H Shares of Sinopec
+Corp. when distributing cash dividends or
+issuing bonus shares by way of capitalisation
+Report of the Board of Directors
+Report of the Board of Directors
+53
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+For investors of the Hong Kong Stock
+Exchange (including enterprises and
+individuals) investing in the A Shares of
+Sinopec Corp. through Shanghai-Hong Kong
+Stock Connect Program, the Company
+will withhold and pay income taxes at the
+rate of 10% on behalf of those investors
+and will report to the tax authorities for
+the withholding. For investors who are tax
+residents of other countries, whose country
+of domicile is a country having entered into a
+tax treaty with the PRC stipulating a dividend
+tax rate of lower than 10%, the enterprises
+and individuals may, or may entrust a
+withholding agent to, apply to the competent
+tax authorities for the entitlement of the rate
+under such tax treaty. Upon approval by the
+tax authorities, the amount paid in excess
+of the tax payable based on the tax rate
+according to such tax treaty will be refunded.
+Shanghai Hong Kong and Shenzhen-Hong
+Kong Stock Connect Program, the company
+shall withhold and pay income tax at the rate
+of 20% on behalf of individual investors and
+securities investment funds. The company
+will not withhold or pay the income tax of
+dividends for domestic enterprise investors
+and those domestic enterprise investors
+shall report and pay the relevant tax by
+themselves.
+H Shares of Sinopec Corp. through
+The dividend distribution and bonus shares declared by Sinopec Corp. in the past three years are as follows:
+For domestic investors investing in the
+Shenzhen-Hong Kong Stock Connect
+Shanghai-Hong Kong Stock Connect (
+滬港股票市場交易互聯互通機制試點有關稅收政
+)(Caishui [2014] No. 81) and the
+Related to the Pilot Program of the
+Pursuant to the Notice on the Tax Policies
+individual income tax at the agreed actual
+rate in accordance with the relevant tax
+agreement. In the case that the individual
+holders of the H Shares are residents of the
+countries which had an agreed tax rate of
+20% with China, or which has not entered
+into any tax agreement with China, or
+otherwise, Sinopec Corp. shall withhold and
+pay the individual income tax at a rate of
+20%-
+If the individual holders of the H shares
+who are Hong Kong or Macau residents or
+residents of the countries which had an
+agreed tax rate of 10% for the cash dividends
+or bonus shares by way of capitalisation
+from retained earnings with China under the
+relevant tax agreement, Sinopec Corp. will
+withhold and pay individual income tax on
+behalf of the relevant shareholders at a rate
+of 10%. Should the individual holders of
+the H Shares are residents of the countries
+which had an agreed tax rate of less than
+10% with China under the relevant tax
+agreement, Sinopec Corp. shall withhold
+and pay individual income tax on behalf
+of the relevant shareholders at a rate of
+10%. In that case, if the relevant individual
+holders of the H Shares wish to reclaim
+the extra amount withheld (Extra Amount)
+due to the application of 10% tax rate,
+Sinopec Corp. would apply for the relevant
+agreed preferential tax treatment provided
+that the relevant shareholders submit the
+evidence required by the notice of the tax
+agreement to the share register of Sinopec
+Corp. in a timely manner. Sinopec Corp. will
+assist with the tax refund after the approval
+of the competent tax authority. Should
+the individual holders of the H Shares are
+residents of the countries which had an
+agreed tax rate of over 10% but less than
+20% with China under the tax agreement,
+Sinopec Corp. shall withhold and pay the
+from retained earnings. Any H Shares of
+the Sinopec Corp. which is not registered
+under the name of an individual shareholder,
+including those registered under HKSCC
+Nominees Limited, other nominees, agents
+or trustees, or other organisations or
+groups, shall be deemed as shares held
+by non-resident enterprise shareholders.
+Therefore, on this basis, enterprise income
+tax shall be withheld from dividends payable
+to such shareholders. If holders of H Shares
+intend to change their shareholder status,
+please enquire about the relevant procedures
+with your agents or trustees. Sinopec Corp.
+will strictly comply with the law or the
+requirements of the relevant government
+authority to withhold and pay enterprise
+income tax on behalf of the relevant
+shareholders based on the registration of
+members for H shares of Sinopec Corp. as
+at the record date.
+港股票市場交易互聯互通機制試點有關稅收政策
+Caishui[2016] No.127):
+amounted to RMB 0.209 billion.
+54
+54
+In addition, the supervisors attended the general
+meetings of shareholders and attended meetings
+of the Board. The Board of Supervisors also
+organised some of the supervisors to attend
+the trainings for directors and supervisors of
+listed companies organised by Beijing Securities
+Supervisory Bureau under CSRC, which have
+further improved the Supervisors' capabilities in
+performing supervisory duties.
+Through supervision and inspection on the
+production and operation management as well
+as financial management conditions, the Board
+of Supervisors and all the supervisors conclude
+that in 2019, facing the difficult conditions
+such as the complex and severe production
+and operation situation, rising internal and
+external risk challenges, slowing down of global
+economic growth, volatile international oil
+prices, increasing of domestic refining capacity,
+fall of chemical products prices, and the market
+competition is extremely fierce, the company
+conscientiously implements the decision-making
+and deployment of the board of directors,
+focuses on laying a decisive foundation for
+comprehensive and sustainable development,
+strives for progress in stability, takes on
+actions, pays close attention to implementation,
+promotes all work as a whole to maintains the
+growth of production indicators, and achieves
+better than expected business performance. The
+Board of Supervisors had no objection to the
+supervised issues during this reporting period.
+Firstly, the Board and the senior management
+of Sinopec Corp. performed their responsibilities
+pursuant to relevant laws and regulations,
+and implemented efficient management. The
+Board diligently fulfilled its obligations and
+exercised its rights under the PRC Company
+Law and the Articles of Association, and made
+informed decisions on major issues. The
+senior management diligently executed the
+resolutions approved by the Board, continued to
+intensified refined management and strived to
+tap potentials and enhance efficiency, optimise
+business structures, committed to achieving the
+target of sustaining profit and growth set by the
+Board. During the reporting period, the Board of
+Supervisors did not discover any behavior of any
+director or senior management which violated
+laws, regulations, or the Articles of Association,
+or was detrimental to the interests of Sinopec
+Corp. or its shareholders.
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Secondly, the reports and financial statements
+prepared by Sinopec Corp. in 2019 complied
+with the relevant regulation of domestic and
+overseas securities regulators, the disclosed
+information truly, accurately, completely
+and fairly reflected Sinopec Corp.'s financial
+results and operation performance. The
+dividend distribution plan was made after
+comprehensive consideration of the long-term
+interests of Sinopec Corp. and the interests of
+the shareholders. No violation of confidential
+provisions of persons who prepared and
+reviewed the report was found.
+Thirdly, Sinopec Corp.'s internal control system
+is effective. No material defects of internal
+control were found.
+Fourthly, the consideration for the equity
+investment made by Sinopec Corp. was fair and
+reasonable, neither insider trading, damage to
+shareholders' interest nor losses of corporate
+assets was discovered.
+Fifthly, all connected transactions between the
+Company and Sinopec Group were in compliance
+with the relevant rules and regulations of
+domestic and overseas listing exchanges. The
+pricing of all the connected transaction was
+fair and reasonable. No behaviors which is
+detrimental to the interests of Sinopec Corp. or
+its shareholders was discovered.
+In 2020, the Board of Supervisors and each
+supervisor will continue to follow the principle
+of due diligence and integrity, earnestly perform
+the duties of supervision as delegated by the
+shareholders, strictly review the significant
+decisions, strengthen the process control and
+supervision, increase the strength of inspection
+and supervision on subsidiaries and protect
+Sinopec Corp.'s benefit and its shareholders'
+interests.
+Zhao Dong
+Chairman of the Board of Supervisors
+27 March 2020
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+59
+59
+On 30 October 2019, the 7th meeting of the
+seventh session of the Board of Supervisors was
+held, and the Third Quarterly Report of Sinopec
+Corp. for 2019 was reviewed and approved at
+the meeting.
+On 23 August 2019, the 6th meeting of the
+seventh session of the Board of Supervisors was
+held, and the Interim Report of Sinopec Corp.
+for 2019, the Interim Financial Statements of
+Sinopec Corp. for 2019, were reviewed and
+approved at the meeting.
+On 29 April 2019, the 5th meeting of the
+seventh session of the Board of Supervisors
+was held, and the proposal in relation to the
+First Quarterly Report of Sinopec Corp. for
+2019, capital increase and assets transfer to
+Sinopec SK (Wuhan) Petrochemical Co., Ltd.,
+(SINOPEC-SK) were reviewed and approved at
+the meeting.
+On 22 March 2019, the 4th meeting of the
+seventh session of the Board of Supervisors was
+held, and the proposals in relation to Annual
+Report of Sinopec Corp. for 2018, the Financial
+Statements of Sinopec Corp. for 2018, 2018
+Communication on Progress for Sustainable
+Development of Sinopec Corp., Internal Control
+Assessment Report of Sinopec Corp. for 2018,
+Work Report of the Board of Supervisors of
+Sinopec Corp. for 2018, were reviewed and
+approved at the meeting.
+Investment risks: Petroleum and chemical
+sector is a capital intensive industry.
+Although the Company has adopted a
+prudent investment strategy, and as required
+by the new procedure and management of
+investment decision-making issued in 2017,
+conducted rigorous feasibility study on
+each investment project, which consists of
+special verifications in raw material market,
+technical scheme, profitability, safety and
+environmental protection, legal compliance,
+etc., certain investment risks will still exist
+and expected returns may not be achieved
+due to major changes in factors such as
+market environment, prices of equipment
+and raw materials, and construction period
+during the implementation of the projects.
+Risks with regard to overseas business
+development and management: The
+Company engages in oil and gas exploration,
+refining and chemical, warehouse logistics
+and international trading businesses in
+some regions outside China. The Company's
+overseas businesses and assets are subject
+to the jurisdiction of the host country's laws
+and regulations. In light of the complicated
+factors such as imbalance of global economy,
+competitiveness of industry and trade
+structure, exclusiveness of regional trading
+blocs, polarisation of benefits distribution
+in trade, and politicisation of economic and
+trade issues, including sanctions, barriers to
+entry, instability in the financial and taxation
+policies, contract defaults, tax dispute, the
+Company's risks with regard to overseas
+business development and management
+could be increased.
+Currency risks: At present, China implements
+an administered floating exchange rate
+regime based on market supply and
+demand which is regulated with reference
+to a basket of currencies in terms of the
+exchange rate of Renminbi. As the Company
+purchases a significant portion of crude oil
+in foreign currency which is based on US
+dollar-denominated prices, the realized price
+of crude oil is based on international crude
+oil price. Despite the fact that, the price
+of the domestic refined oil products will
+change as the exchange rate of the Renminbi
+changes according to the pricing mechanism
+for the domestic refined oil products, and
+the price of other domestic petrochemical
+products will also be influenced by the price
+of the imported products, which to a large
+extent, smooths the impact of the Renminbi
+exchange rate on the processing and sales
+of the Company's crude oil refined products.
+However, the fluctuation of the Renminbi
+exchange rate will still have an effect on the
+income of the upstream sector.
+Cyber-security risks: the Company has a
+well-established network safety system,
+information infrastructure and operation
+system, and network safety information
+platform, devotes significant resources to
+protecting our digital infrastructure and
+data against cyber-attacks, if our systems
+against cyber-security risk prove to be
+ineffective, we could be adversely affected
+by, among other things, disruptions to our
+business operations, and loss of proprietary
+information, including intellectual property,
+financial information and employer
+and customer data, injuries to people,
+property, environment and reputation. As
+cyber-security attacks continue to evolve,
+we may be required to expend additional
+resources to enhance our protective
+measures against cyber-security breaches.
+By Order of the Board
+Zhang Yuzhuo
+Chairman
+Beijing, China, 27 March 2020
+Report of the Board of Supervisors
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Report of the Board of Directors
+58
+Report of the Board of Supervisors
+REPORT OF THE BOARD OF SUPERVISORS
+Dear Shareholders:
+In 2019, the Board of Supervisors and
+each supervisor of Sinopec Corp. diligently
+performed their supervision responsibilities,
+actively participated in the supervision process
+of decision making, carefully reviewed and
+effectively supervised the major decisions of
+the Company, and endeavored to safeguard the
+interests of shareholders and the Company in
+accordance with the PRC Company Law and the
+Articles of Association of Sinopec Corp.
+During this reporting period, the Board of
+Supervisors held four (4) meetings in total, and
+mainly reviewed and approved the proposals
+in relation to the Company's periodic report,
+financial statements, communication on
+progress for sustainable development, internal
+control assessment report and working report of
+the Board of Supervisors etc.
+57
+Risks with regard to the external purchase
+of crude oil: A significant amount of crude
+oil as needed by the Company is satisfied
+through external purchases. In recent years,
+especially influenced by the mismatch
+between supply and demand of crude oil,
+geopolitics, global economic growth and
+other factors, the prices of crude oil fluctuate
+sharply. Additionally, the supply of crude
+oil may even be interrupted due to some
+extreme major incidents in certain regions.
+Although the Company has taken flexible
+countermeasures, it may not fully avoid risks
+associated with any significant fluctuation
+of international crude oil prices and sudden
+disruption of supply of crude oil from certain
+regions.
+Risks from the uncertainties of obtaining
+additional oil and gas resources: The future
+sustainable development of the Company
+is partly dependent to a certain extent on
+our abilities in continuously discovering
+or acquiring additional oil and natural
+gas resources. To obtain additional oil
+and natural gas resources, the Company
+faces some inherent risks associated with
+exploration and development and/or with
+acquisition activities, and the Company has
+to invest a large amount of money with no
+guarantee of certainty. If the Company fails
+to acquire additional resources through
+further exploration, development and
+acquisition to increase the reserves of crude
+oil and natural gas, the oil and natural gas
+reserves and production of the Company
+may decline over time which may adversely
+affect the Company's financial situation and
+operation performance.
+stricter environment protection standards.
+Under such situations, the Company
+may increase expenses in relation to the
+environment protection accordingly.
+Our RMC is led by President of our Company,
+related departments of headquarters,
+Petroleum Exploration and Production
+Research Institute of Sinopec (PEPRIS) and
+senior managers of oilfield branches. Mr.
+Liu Hongbin, the Chairman of RMC is Senior
+Vice President of Sinopec Corp., with over 30
+years of experience in oil and gas industry. A
+majority of our RMC members hold Ph.D. or
+master's degrees, and our members have an
+average of 20 years of technical experience
+in relevant professional fields, such as
+geology, engineering and economics.
+We manage our reserves estimation through
+a two-tier management system. Our Oil
+and Natural Gas Reserves Management
+Committee, or RMC, at the headquarters
+level oversees the overall reserves estimation
+process including organisation, coordination,
+monitoring and major decision-making,
+and reviews the reserves estimation of
+our Company. Each of our branches has
+a reserves management committee that
+manages and coordinates the reserves
+estimation, organises the estimation process
+and reviews the reserve estimation report at
+the branch level.
+23 OIL & GAS RESERVE APPRAISAL
+PRINCIPLES
+As of 31 December 2019, the Company has
+not entered into any equity-linked agreement.
+22 EQUITY-LINKED AGREEMENTS
+21 PERMITTED INDEMNITY PROVISIONS
+During the reporting period, Sinopec Corp.
+has purchased liability insurance for all
+directors to minimise their risks arising
+from the performance of their duties. The
+permitted indemnity provisions are stipulated
+in such directors liability insurance in
+respect of the liabilities and costs associated
+with the potential legal proceedings that may
+be brought against such directors.
+No contracts concerning management
+or administration of the whole or any
+substantial part of the business of the
+Company were entered into or existed during
+the reporting period.
+Our reserves estimates are guided by
+procedural manuals and technical guidance
+formulated by the company. A number of
+working divisions at the production bureau
+level, including the exploration, development
+and financial divisions are responsible
+for initial collection and compilation of
+information about reserves. Experts from
+exploration, development and economic
+divisions prepare the initial report on the
+reserves estimate which is then reviewed by
+the RMC at the subsidiary level to ensure the
+qualitative and quantitative compliance with
+technical guidance as well as its accuracy
+and reasonableness. We also engage outside
+consultants to assist in our compliance
+with the rules and regulations of the U.S.
+Securities and Exchange Commission.
+Our reserves estimation process is further
+facilitated by a specialised reserves
+database, which is improved and updated
+periodically.
+20 MANAGEMENT CONTRACTS
+As at the end of the reporting period, the
+Company has resolved its competition with
+Sinopec Group in the chemical business. For
+details for the positions held by the directors
+of Sinopec Corp. in the Sinopec Group
+during the reporting period, please refer to
+the section "Directors, Supervisors, Senior
+Management and Employees" of this annual
+report.
+18 DIRECTORS' INTERESTS IN COMPETING
+BUSINESS
+During this reporting period, neither
+Sinopec Corp. nor any of its subsidiaries
+repurchased, sold or redeemed any listed
+shares of Sinopec Corp. or its subsidiaries.
+17 REPURCHASE, SALES AND REDEMPTION
+OF SHARES
+Pursuant to the Articles of Association
+and the laws of the PRC, the shareholders
+of Sinopec Corp. are not entitled to any
+pre-emptive rights. Therefore the existing
+shareholders cannot request Sinopec Corp.
+for the right of first refusal in proportion to
+their shareholdings.
+16 PRE-EMPTIVE RIGHTS
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+19 DIRECTORS' INTERESTS IN CONTRACTS
+No director had a material interest, either
+directly or indirectly, in any contract of
+significance to the business of the Company
+to which Sinopec Corp. or any of its holding
+companies, subsidiaries or fellow subsidiaries
+I was a party during the reporting period.
+(4) The 7th meeting of the seventh session of
+the Audit Committee was held by written
+resolution on 29 October 2019, whereby
+the third quarterly report for nine months
+ended 30 September 2019 was approved
+at the meeting.
+24 CORE COMPETITIVENESS ANALYSIS
+The Company is a large scale integrated
+energy and petrochemical company with
+upstream, mid-stream and downstream
+operations. The Company is a large scaled
+oil and gas producer in China; in respect
+of refining capacity, it ranks first in China;
+equipped with a well-developed refined oil
+products sales network, the Company is the
+largest supplier of refined oil products in
+China; and in terms of ethylene production
+capacity, the Company rank first in China,
+and has a well-established marketing network
+for chemical products.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Risks with regard to the changes from
+environmental legislation requirements:
+Our production activities generate waste
+liquids, gases and solids. The Company has
+built up the supporting effluent treatment
+systems to prevent and reduce the pollution
+to the environment. However, the relevant
+government authorities may issue and
+implement much stricter environmental
+protection laws and regulations, adopt much
+Risks from the macroeconomic policies
+and government regulation: Although the
+Chinese government is gradually liberalizing
+the market entry regulations on petroleum
+and petrochemicals sector, the petroleum
+and petrochemical industries in China are
+still subject to entry regulations to a certain
+degree, which include: issuing licenses in
+relation to exploration and development of
+crude oil and natural gas, issuing business
+licenses for trading crude oil and refined
+oil, setting caps for retail prices of gasoline,
+diesel and other oil products, the imposing
+of the special oil income levy, formulation
+of refined oil import and export quotas and
+procedures, formulation of safety, quality
+and environmental protection standards and
+formulation of energy conservation policies.
+In addition, the changes which have occurred
+or might occur in macroeconomic and
+industry policies such as the fully opening
+up of exploration and mining rights, the
+opening up of crude oil import licenses
+and the right of tenure, removing the
+restriction of share ratio of refining projects
+to foreign enterprises, further improvement
+in pricing mechanism of refined oil
+products, cancellation of wholesale right and
+decentralization of retail right of refined oil
+products, and gas stations investment are
+fully opened to foreign investment, reforming
+and improvement in pricing mechanism of
+natural gas, cost supervision of gas pipeline
+and access to third party, and reforming
+in resource tax and environmental tax, will
+cause effects on our business operations.
+Such changes might further intensify market
+competition and have certain effect on the
+operations and profitability of the Company.
+Risks with regard to the cyclical effects
+from the industry: The majority of the
+Company's operating income comes from
+the sales of refined oil products and
+petrochemical products, and part of those
+businesses and their related products are
+cyclic and are sensitive to macro-economy,
+cyclic changes of regional and global
+economy, the changes of the production
+capacity and output, demand of consumers,
+prices and supply of the raw materials, as
+well as prices and supply of the alternative
+products etc. Although the Company is
+an integrated company with upstream,
+midstream and downstream operations, it
+I can only counteract the adverse influences of
+industry cycle to some extent.
+Risks with regard to the variations from
+macroeconomic situation: The business
+results of the Company are closely related to
+China's and global economic situation. The
+development of Chinese economy has entered
+New Normal. Although various countries have
+adopted different kinds of macroeconomic
+policies to eliminate negative effects caused
+by lower growth of global economy, the
+turnaround of economic recovery still
+remains uncertain. The Company's business
+could also be adversely affected by other
+factors such as the impact on export due to
+trade protectionism from certain countries,
+impact on import which is likely caused by
+regional trade agreements, and negative
+impact on the investment of overseas oil
+and gas exploration and development and
+refining and chemical storage projects which
+results from the uncertainty of geopolitics,
+international crude oil price and etc.
+In the course of its production and
+operations, the Company will actively take
+various measures to circumvent operational
+risks. However, in practice, it may not be
+possible to prevent the occurrence of all
+risks and uncertainties described below.
+25 RISK FACTORS
+The integrated business structure of
+the Company carries strong advantages
+in synergy among its various business
+segments, enabling the Company to
+continuously tap onto potentials in attaining
+an efficient and comprehensive utilisation
+of its resources, and endowed the Company
+with strong resistance against risks, as well
+as remarkable capabilities in sustaining
+profitability.
+The Company always attaches great
+importance to fulfilling social responsibilities,
+and carries out the green and low carbon
+development strategy to pursue a sustainable
+development. Moreover, the Company enjoys
+an outstanding "Sinopec" brand name, plays
+an important role in the national economy
+and is a renowned and reputable company in
+China.
+The Company owns a team of professionals
+and expertise engaged in the production
+of oil and gas, operation of refineries and
+chemical plants, as well as marketing
+activities. The Company applies outstanding
+fine management measures with its
+remarkable capabilities in management
+of operations, and enjoys a favourable
+operational cost advantage in its downstream
+businesses.
+The Company enjoys a favourable positioning
+with its operations located close to the
+consumer markets. Along with the steady
+growth in the Chinese economy, sales volume
+of both oil products and chemical products
+of the Company has been increasing steadily
+over the years; through continuous and
+specialised marketing efforts, the Company's
+capability in international operations and
+market expansion has been further enhanced.
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Report of the Board of Directors
+56
+Report of the Board of Directors
+55
+The Company has formulated a
+well-established technology system and
+mechanism, and owns competent teams
+specialised in R&D covering a wide range of
+subjects; the four platforms for technology
+advancement is taking shape, which includes
+exploration and development of oil and
+gas, refining, petrochemicals and strategic
+emerging technology. With its overall
+technologies reaching state of the art level in
+the global arena, and some of them taking
+the lead globally, the Company enjoys a
+strong technical strength.
+(3) The 6th meeting of the seventh session
+of the Audit Committee was held by on
+site meeting on 21 August 2019, whereby
+(i) the financial statements for the first
+half year of 2019 (ii) the interim report
+for the first half of 2019, (iii) Financial
+results and business performance of
+the Company for the first half of the
+year 2019(including a.the 2019 interim
+dividend distribution plan, b. the report
+of Risk Assessment for Capital Deposits
+at Finance Company and Century Bright
+Company) (iv) the reports on internal
+auditing work for the first half of 2019
+were approved at the meeting.
+6
+(2) The 5th meeting of the seventh
+2
+4
+1
+1
+0
+0
+2
+2
+4
+(2) Former directors attendance to the board meetings during this reporting period
+Ng, Kar Ling Johnny
+Fan Gang
+Cai Hongbin
+Li Yong
+Tang Min
+Ling Yiqun
+Independent Director
+Independent Director
+Independent Director
+2
+0
+0
+1
+4
+1
+1
+0
+session of the Audit Committee was
+held by written resolution on 29 April
+2019, whereby the proposals in relation
+to the following matters were approved:
+(i)first quarterly results of Sinopec Corp.
+for the three months ended 31 March
+2019 was approved at the meeting. (ii)
+the capital increase and assets transfer
+to SINOPEC-SK.
+2
+1
+Independent Director
+4
+1
+0
+0
+2
+2
+4
+1
+0
+2
+Director
+Director
+2 IMPLEMENTATION OF RESOLUTIONS
+APPROVED AT THE GENERAL MEETINGS
+OF SHAREHOLDERS BY THE BOARD
+During this reporting period, in accordance
+with relevant laws and regulations as well
+as the articles of association, all members
+of the Board diligently implemented the
+resolutions approved at the general meetings
+of Sinopec Corp., and have completed
+various tasks delegated to them at the
+general meetings
+For details of each meeting, please refer
+to the announcements published in China
+Securities Journal, Shanghai Securities News
+and Securities Times on the next working
+day after each meeting and on the websites
+of Shanghai Stock Exchange, Hong Kong
+Stock Exchange and Sinopec Corp.
+(4) The 8th meeting of the seventh session of
+the Board was held by written resolution
+on 30 October 2019, whereby the
+proposal in relation to the third quarterly
+results of Sinopec Corp. for the nine
+months ended 30 September 2019 was
+approved.
+first half of the year 2019 (including
+a.the 2019 interim dividend distribution
+plan, b. the report of Risk Assessment
+for Capital Deposits at Finance Company
+and Century Bright Company), (iii) the
+financial statements for the first half the
+year 2019, (iv) interim report for the 6
+months ended 30 June 2019, (v) Three
+years rolling development plan of Sinopec
+Corp. (2019 to 2021).
+(3) The 7th meeting of the seventh session
+of the Board was held by on site meeting
+and via video conference on 23 August
+2019, whereby the proposals in relation
+to the following matters were approved:
+(i) the report on the fulfillment of the
+key targets for the first half of the
+year 2019 and the work arrangements
+for the second half of the year 2019,
+(ii) Financial results and business
+performance of the Company for the
+(2) The 6th meeting of the seventh session of
+the Board was held by written resolution
+on 29 April 2019, whereby the proposals
+in relation to the following matters
+were approved: (i)first quarterly results
+of Sinopec Corp. for the three months
+ended 31 March 2019 was approved at
+the meeting. (ii) the capital increase and
+assets transfer to Sinopec-SK.
+remunerations, (ix) the amendments to
+the articles of association of Sinopec
+Corp. (x) to authorize the Board to
+determine the interim profit distribution
+plan of Sinopec Corp. for the year 2019
+(xi) Authorising the Board to determine
+the proposed plan for issuance of debt
+financing instrument(s) (xii) Granting
+to the Board a general mandate to
+issue new domestic shares and/or
+overseas-listed foreign shares of Sinopec
+Corp., (xiii) Convening the annual general
+meeting of Sinopec Corp. for the year
+2018 and to dispatch the notice of the
+annual general meeting.
+A. provision for impairment for the year
+2018; B. The connected transactions
+for the year 2018; C. Profit distribution
+plan for the year 2018; D. Audit costs
+for the year 2018; E. the report of Risk
+Assessment for Capital Deposits at
+Finance Company and Century Bright
+Company,), (iv) 2018 Communication on
+Progress for Sustainable Development
+Report of Sinopec Corp., (v) Financial
+Statements of Sinopec Corp. for the
+year 2018, (vi) Annual Report and form
+20F of the Company for the year 2018,
+(vii) Internal control assessment report
+of Sinopec Corp. for the year 2018, and
+the internal control manual (2019) (viii)
+Re-appointment of external auditors of
+Sinopec Corp. for the year of 2019 and
+to authorise the Board to determine their
+(1) The 5th meeting of the seventh session
+of the Board was held by on site meeting
+and via video conference on 22 March
+2019, whereby the proposals in relation
+to the following matters were approved: (i)
+the Work Report of the Board for the year
+2018, (ii) the business performance of
+2018 and work plan of 2019, (iii) Financial
+results and business performance of the
+Company for the year 2018(including
+During this reporting period, Sinopec Corp.
+held four (4) Board meetings. The details are
+as follows:
+MEETINGS OF THE BOARD
+1
+The Board is pleased to present the directors'
+report for the year ended 31 December 2019 for
+shareholders' review.
+REPORT OF THE BOARD OF DIRECTORS
+Report of the Board of Directors
+50
+50
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+3 DIRECTORS' ATTENDANCE TO THE BOARD MEETINGS AND TO THE GENERAL MEETINGS.
+Director
+Yu Baocai
+Ma Yongsheng
+Actual
+Attendance
+meeting held
+No. of
+Absent
+Director
+Attended
+by proxy
+Board Meetings
+Attended By
+communication
+Actual
+Attendance
+meeting held
+No. of
+Names
+Director Titles
+(1) Directors attendance to the board meeting and general meeting during this reporting period
+General Meetings.
+2
+1
+0
+2
+1
+0
+1
+0
+0
+2
+2
+4
+4
+0
+Former Director
+1
+1
+0
+2
+1
+0
+1
+1
+(1) The 4th meeting of the seventh session
+of the Audit Committee was held by on
+site meeting and via video conference on
+20 March 2019, whereby the following
+matters were approved in the meeting:
+(i) Annual Report and 20F of 2018;
+(ii)Financial results and business
+performance of the Company for the
+year 2018(including A. provision for
+impairment for the year 2018; B. The
+connected transactions for the year
+2018; C. Profit distribution plan for the
+year 2018; D. Audit costs for the year
+2018; E. the report of Risk Assessment
+for Capital Deposits at Finance Company
+and Century Bright Company,); (iii)
+Internal control assessment report of
+the Company for the year 2018 and the
+internal control manual (2019) (iv) Work
+report on the internal auditing work
+for the year 2018; (v) Reports on the
+auditing of the financial statements for
+the year 2018 prepared by the domestic
+and overseas auditors.
+During the reporting period, the board
+committees held eight(8) meetings,
+Audit Committee held four (4) meetings.
+Strategy Committee held two (2) meetings,
+the Remuneration Committee held one
+(1) meeting, the Social Responsibility
+Management Committee held one (1)
+meeting. All members of each committee
+had attended the relevant meetings. Details
+of those meetings are as follows:
+COMMITTEES
+4 MEETINGS HELD BY THE BOARD
+REPORT OF THE BOARD OF DIRECTORS (CONTINUED)
+Report of the Board of Directors
+Report of the Board of Directors
+2
+51
+During the reporting period, none of the Independent Non-executive Directors had attended the general meetings of shareholders in person due
+to official duties.
+(3) The Independent Director's attendance to the General Meetings.
+Mr. Li Yunpeng resigned as a director of the Board on 24 March 2020.
+4.
+3. Mr. Dai Houliang resigned as the Chairman, director of the Board on 19 January 2020.
+2. Mr. Liu Zhongyun resigned as a director of the Board on 9 December 2019.
+1. No directors were absent from two consecutive meetings of the Board.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+4
+Liu Zhongyun
+Former Chairman
+Former Director
+1
+0
+0
+2
+2
+Dai Houliang
+Li Yunpeng
+0
+1
+0
+0
+2
+2
+4
+0
+1
+0
+4
+4
+2
+Actual
+Attendance
+2
+by proxy
+No. of
+Absent
+Attended
+General Meetings.
+Board Meetings
+Actual Attended By
+Attendance communication
+meeting held
+No. of
+Names
+Director Titles
+0
+1
+0
+0
+meeting held
+Ma Yongsheng, aged 58,
+Director and President of
+Sinopec Corp. Mr. Ma is
+a professor level senior
+engineer with a Ph.D.
+degree and an academician
+of the Chinese Academy of
+Engineering. Mr. Ma is the
+member of the thirteenth
+national committee of
+CPPCC. In April 2002, he
+was appointed as Chief
+Geologist of Sinopec
+Southern Exploration and
+Production Company;
+in April 2006, he was
+appointed as Executive
+Deputy Manager (in charge
+of overall management),
+Chief Geologist of Sinopec
+Southern Exploration and
+Production Company; in
+January 2007, he was
+appointed as General
+Manager and Party
+Secretary of CPC Committee
+of Sinopec Southern
+Exploration and Production
+Company; in March 2007,
+Member of the Leading Party
+Member Group of Shenhua
+Group Corporation Limited,
+and served concurrently as
+Chairman of China Shenhua
+Coal Liquefaction Company
+Limited. In December
+2008, he was appointed as
+Director, General Manager
+and Member of the Leading
+Party Member Group of
+Shenhua Group Corporation
+Limited. In July 2009, he
+served concurrently as
+Vice Chairman of All-China
+Federation of Returned
+Overseas Chinese. In May
+2014, he was appointed as
+Chairman and Secretary of
+the Leading Party Member
+Group of Shenhua Group
+Corporation Limited,
+and served concurrently
+as Chairman of China.
+Shenhua Energy Company
+Limited. In March 2017,
+he served as a member of
+the Standing Committee of
+the CPC Tianjin Municipal
+Committee and Secretary
+of the CPC Binhai New Area
+Committee. In July 2017,
+he served concurrently as
+Chairman of Sino-Singapore
+Tianjin Eco-City Investment
+& Development Co., Ltd.
+In May 2018, he served
+concurrently as Director of
+China (Tianjin) Pilot Free
+Trade Zone Administration.
+In January 2020, he was
+appointed as Chairman and
+Secretary of the Leading
+Party Member Group
+of China Petrochemical
+Corporation; in March 2020,
+he was appointed as the
+Chairman of the Board of
+Directors of Sinopec Corp.
+of Engineering. Mr.
+Zhang is an alternate
+member of the nineteenth
+Central Committee of the
+Communist Party of China.
+In January 1997, he was
+appointed as Vice President
+of China Coal Research
+Institute. In February 1998,
+he temporarily served as
+Deputy General Manager of
+Yankuang Group Co. Ltd. In
+July 1998, he was appointed
+as Vice President of China
+Coal Research Institute,
+Director and Deputy General
+Manager of China Coal
+Technology Corporation.
+In March 1999, he served
+as President of China Coal
+Research Institute and
+Chairman of China Coal
+Technology Corporation.
+In June 1999, he was
+appointed as President and
+Deputy Secretary of CPC
+Committee of China Coal
+Research Institute, Chairman
+and Deputy Secretary of CPC
+Committee of China Coal
+Technology Corporation.
+In January 2002, he was
+appointed as Deputy
+General Manager of Shenhua
+Group Corporation Limited,
+and served concurrently
+as Chairman and General
+Manager of China Shenhua
+Coal Liquefaction Company
+Limited. In August 2003, he
+was appointed as Deputy
+General Manager and
+Zhang Yuzhuo, aged 58,
+Chairman of the Board
+of Directors of Sinopec
+Corp. Mr. Zhang is Ph.D.
+in engineering, Research
+Fellow and Academician
+of the Chinese Academy
+(1) Directors
+AND OTHER SENIOR
+MANAGEMENT
+DIRECTORS, SUPERVISORS
+Zhang Yuzhuo
+Ma Yongsheng
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES
+Danagement and Employees
+Supervisors,
+2012, he was appointed
+he served as General
+1 INTRODUCTION OF
+Manager and Deputy Party
+Secretary of CPC Committee
+of Sinopec Exploration
+Company; in May 2007, he
+was appointed as Deputy
+Commander of Sichuan-East
+China Gas Pipeline Project
+Headquarter of Sinopec
+Corp., General Manager
+as Director of Sinopec Corp.
+in April 2019, he was
+appointed as director,
+president and vice Secretary
+of the Leading Party
+Member Group of China
+Petrochemical Corporation;
+in October 2018, he was
+appointed as President of
+Sinopec Corp. In February
+2016, he was elected as
+Director of Sinopec Corp.
+0
+350.0
+No
+0
+|이이이이이
+LIST OF FORMER MEMBERS OF THE BOARD
+Name
+No
+Gender
+Dai Houliang
+Male
+56
+Li Yunpeng
+Male
+61
+Liu Zhongyun
+Age
+350.0
+0
+No
+66
+Fan Gang
+Male
+66
+Cai Hongbin
+Male
+52
+Ng, Kar Ling Johnny
+Male
+59
+Board Director 2018.05-2021.05
+Independent Director 2015.05-2021.05
+Independent Director 2015.05-2021.05
+Independent Director 2018.05-2021.05
+Independent Director 2018.05-2021.05
+Yes
+0
+350.0
+No
+0
+350.0
+Male
+Male
+56
+Former Chairman
+0
+Yes
+0
+2000
+Zhao Dong
+Jiang Zhenying
+(2) Supervisors
+Yes
+Zhao Dong, aged 49,
+Chairman of Board of
+Supervisors of Sinopec Corp.
+Mr. Zhao is a professor-level
+senior accountant with a
+doctor's degree. In July
+2002, he was appointed
+as chief accountant and
+general manager of financial
+assets department of
+CNPC International (Nile)
+Ltd.; in January 2005, he
+was appointed as deputy
+chief accountant and
+executive deputy director
+of financial and capital
+operation department
+of China National Oil
+and Gas Exploration and
+Development Corporation;
+in April 2005, he was
+appointed as deputy chief
+accountant and general
+manager of financial and
+capital operation department
+of China National Oil
+and Gas Exploration and
+Development Corporation;
+in June 2008, he was
+appointed as chief
+Oil and Gas Exploration and
+Development Corporation;
+in October 2009, he
+was appointed as chief
+accountant of China National
+Oil and Gas Exploration and
+Development Corporation
+and chief financial officer
+of PetroChina International
+Investment Company
+Limited; in September 2012,
+he was appointed as vice
+general manager of CNPC
+Nile Company and in August
+2013, he was appointed as
+general manager of CNPC
+Nile Company; in November
+2015, he was appointed
+as chief financial officer
+of PetroChina Company
+Limited. He has been a
+member of the Leading
+Party Member Group and
+chief accountant of China
+Petrochemical Corporation
+since November 2016; in
+June 2017, he was elected
+as Chairman of Board of
+Supervisors of Sinopec Corp.
+Jiang Zhenying, aged 55,
+Supervisor of Sinopec Corp.
+Mr. Jiang is a professor level
+senior economist with a
+doctor degree. In December
+1998, he was appointed
+as the Vice President of
+the China Petrochemical
+Supplies & Equipment Co.,
+Ltd.; in February 2000, he
+was appointed as the Deputy
+Director General of Sinopec
+Procurement Management
+Department; in December
+2001, he was appointed
+as the Director General
+of Sinopec Procurement
+Management Department
+and in November 2005
+he concurrently held the
+positions of Chairman
+of Board of Directors,
+President and Secretary of
+CPC Committee of China
+Petrochemical International
+Co., Ltd.; in March 2006,
+he was appointed as the
+Director General (General
+Manager), Executive
+Director and Secretary
+of the CPC Committee
+of Sinopec Procurement
+Management Department
+(Sinopec International
+Co. Ltd.); in April 2010,
+he was appointed as the
+Director General (General
+Manager), Executive Director
+and Deputy Secretary
+of the CPC Committee
+of Sinopec Procurement
+Management Department
+(Sinopec International Co.
+Ltd); in November 2014,
+he was appointed as
+Director General of Safety
+Supervisory Department
+of Sinopec Corp.; in May
+2017, he was appointed as
+Deputy Director of the Office
+of Leading Party Member
+Group Inspection Work
+of China Petrochemical
+Corporation and Since
+December 2018, he was
+appointed as Director of
+Audit Bureau of China
+Petrochemical Corporation,
+and Director of Audit
+Department of Sinopec
+Corp.; Since December
+2019, he was appointed as
+president of Audit Bureau
+of Sinopec Corp. and the
+Director of the Office of
+Audit Committee of Leading
+Party Member Group
+of China Petrochemical
+Corporation; since December
+2010, he was elected as the
+Employee's Representative
+Supervisor of Sinopec Corp.
+In May 2018, he was elected
+as Supervisor of Sinopec
+Corp.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2018
+accountant of China National
+0
+Yes
+2019
+Former Director
+Tenure
+2009.05-2020.01
+2017.06-2020.03
+Former Director and 2018.05-2019.12
+Senior Vice President
+19
+64
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Remuneration
+paid by
+in 2019
+(RMB 1,000,
+before tax)
+the holding
+Company
+Whether
+paid by
+Equity interests in Sinopec Corp.
+(as at 31 December)
+2018
+Position in
+Sinopec Corp.
+65
+Tang Min
+Male
+Cai Hongbin, aged 52,
+Independent Director of
+Sinopec Corp. Mr. Cai is
+dean of Faculty of Business
+and Economics and
+Professor of Economics of
+the University of Hong Kong.
+Mr. Cai has a Ph.D. degree
+in Economics. From 1997
+to 2005, Mr. Cai taught
+at University of California,
+Los Angeles; since 2005,
+he served as a professor
+and Ph.D. supervisor
+in Applied Economics
+Department at Guanghua
+School of Management
+at Peking University, he
+once served as Director,
+Assistant to the Dean and
+Vice Dean of the Applied
+Economics Department.
+From December 2010 to
+January 2017, he served.
+as the dean of Guanghua
+School of Management at
+Peking University. In June
+2017, he joined the Faculty
+of Business and Economics
+of the University of Hong
+Kong. Professor Cai Hongbin
+is a member of the 12th
+National People's Congress
+and a member of Beijing
+Municipal Committee of
+Chinese People's Political
+Consultative Conference,
+serving as member of the
+eleventh Central Committee
+of China Democratic League,
+deputy Chairman of Beijing
+Municipal Committee of
+China Democratic League,
+and a special auditor of
+the National Audit Office.
+Mr. Cai once served as
+external director of China
+Petrochemical Corporation,
+independent directors of
+China Unicom and China
+Everbright Bank, etc. Mr.
+Cai currently serves as
+independent director of CCB
+International (Holdings) Ltd.,
+Rightway Holdings Co., Ltd.
+and Ping An Bank Co., Ltd.,
+In May 2018, Mr. Cai acted
+as Independent Director of
+Sinopec Corp.
+Ng, Kar Ling Johnny, aged
+59, Independent Director
+of Sinopec Corp. Mr. Ng
+currently is a practicing
+certified public accountant
+in Hong Kong, a practicing
+auditor and certified public
+accountant in Macau, a
+fellow member of the Hong
+Kong Institute of Certified
+Public Accountants (FCPA),
+a fellow member of the
+Association of Chartered
+Certified Accountant (FCCA),
+and a Senior member of
+the Institute of Chartered
+Accountants in England
+and Wales (FCA). Mr. Ng
+obtained a Bachelor's degree
+and a Master's degree in
+Business Administration
+from the Chinese University
+of Hong Kong in 1984 and
+1999, respectively. Mr. Ng.
+joined KPMG (Hong Kong)
+in 1984 and became a
+Partner in 1996. He acted
+as a Managing Partner from
+June 2000 to September
+2015 and the Vice Chairman
+of KPMG (China) from
+October 2015 to March
+2016. Mr. Ng currently
+serves as Independent
+Non-executive Director and
+of China Vanke Co., Ltd. and
+Fangdd Network Group Ltd.
+In May 2018, Mr. Ng acted
+as Independent Director of
+Sinopec Corp.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2018
+63
+Directors, Supervisors,
+Ng, Kar Ling Johnny
+Senior Management and Employees
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+LIST OF MEMBERS OF THE BOARD
+Position in
+(RMB 1,000,
+Remuneration
+paid by
+in 2019
+Whether
+Directors, Supervisors,
+Senior Management and Employees
+Cai Hongbin
+Annual Report 2018 CHINA PETROLEUM & CHEMICAL CORPORATION
+62
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2018
+and Deputy Secretary of
+CPC Committee of Sinopec
+Exploration Company; in
+May 2008, he was appointed
+as Deputy Director
+General of Exploration and
+Production Department of
+Sinopec Corp. (Director
+General Level) and Deputy
+Commander of Sichuan-East
+China Gas Pipeline Project
+Headquarter; in July 2010,
+he served as Deputy Chief
+Geologist of Sinopec Corp.;
+in August 2013, he was
+appointed as Chief Geologist
+of Sinopec Corp.; in
+December 2015, he served
+as Vice President of China
+Petrochemical Corporation
+and appointed as Senior
+Vice President of Sinopec
+Corp.; in January 2017, he
+was appointed as Member
+of the Leading Party
+Member Group of China
+Petrochemical Corporation;
+61
+Directors, Supervisors,
+Senior Management and Employees
+Supervisors,
+Danagement and Employees
+Senior
+Li Yong
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Tang Min
+Fan Gang
+Li Yong, aged 56, Director
+of Sinopec Corp. Mr. Li
+is a senior engineer with
+a master degree. In April
+2003, he was appointed as
+Deputy General Manager
+of Tianjin Branch of China
+National Offshore Oil
+Corporation (China) Limited;
+in October 2005, he was
+appointed as Executive
+Vice President of China
+Oilfield Services Limited;
+in April 2009, he was
+appointed as President
+of China Oilfield Services
+Limited; in September
+2010, he was appointed as
+Chief Executive Officer and
+President of China Oilfield
+Services Limited; in July
+2012, he was appointed as
+the Chief Executive Officer,
+President and Secretary of
+CPC Committee of China
+Oilfield Services Limited;
+in June 2016, he was
+appointed as Assistant
+President of China National
+Offshore Oil Corporation and
+Executive Vice President of
+China National Offshore Oil
+Corporation Limited, as well
+as Chief Director (General
+Manager) and Secretary of
+CPC Committee of China
+National Offshore Oil
+Corporation Bohai Petroleum
+Administration Bureau
+(China National Offshore Oil
+Corporation (China) Limited
+Tianjin Branch); in March
+2017, he was appointed
+as Vice President of China
+Petrochemical Corporation,
+and since July 2017, he
+concurrently served as Vice
+Chairman of the Board of
+Directors, President and
+Secretary of CPC Committee
+of Sinopec International
+Petroleum Exploration and
+Production Corporation, as
+well as Chairman of Board
+of Directors and President
+of Sinopec International
+Petroleum Exploration and
+Production Limited. In May
+2018, he was elected as
+Director of Sinopec Corp.
+Tang Min, aged 66,
+Independent Director of
+Sinopec Corp. Mr. Tang has
+a Ph.D. in economics. He
+presently acts as Counsellor
+of the State Council of the
+PRC and Executive Vice
+Chairman of YouChange
+China Social Entrepreneur
+Foundation, Independent
+Director of Baoshang Bank
+Co., Ltd, and Independent
+Director of China Minmetals
+Development Co., Ltd. He
+was an economist and
+senior economist at the
+Economic Research Centre
+of the Asian Development
+Bank between 1989 and
+2000; chief economist at
+the Representative office of
+the Asian Development Bank
+in China between 2000 and
+2004; Deputy Representative
+at the Representative Office
+of the Asian Development
+Bank in China between
+2004 and 2007 and Deputy
+Secretary-General of the
+China Development Research
+Foundation between 2007
+and 2010. In May 2015,
+he acted as Independent
+Director of Sinopec Corp.
+Fan Gang, aged 66,
+Independent Director of
+Sinopec Corp. Mr. Fan
+has a Ph.D. in economics.
+He presently acts as Vice
+President of China Society
+of Economic Reform,
+Head of the National
+Economic Research
+Institution of China Reform
+Foundation, President
+of China Development
+Institute (Shenzhen) and
+an economics professor
+at Peking University. He
+began to work for Chinese
+Academy of Social Sciences
+in 1988, and subsequently
+served as Director of
+Editorial Department for
+the Economic Research
+Journal between 1992 and
+1993 and as Deputy Head
+of the Institute of Economics
+of Chinese Academy of
+Social Sciences between
+1994 and 1995. In 1996,
+he was redesignated to
+work for China Society of
+Economic Reform, and
+subsequently founded the
+National Economic Research
+Institution. From 2006 to
+2010, and between 2015
+and 2018, he served as a
+member of the Monetary
+Policy Committee of the
+People's Bank of China. Mr.
+Fan is recognised as one
+of the National Young and
+Middle-Aged Experts with
+Outstanding Contributions.
+In May 2015, he acted as
+Independent Director of
+Sinopec Corp.
+the holding
+56
+paid by
+(as at 31 December)
+2018
+2020.03-2021.05
+No
+0
+0
+1,563.0
+No
+2019
+0
+Yes
+0
+0
+Yes
+13,000
+13,000
+Li Yong
+0
+before tax)
+Tenure
+Board Director, President 2016.02-2021.05
+Board Director 2018.10-2021.05
+Board Director, 2018.05-2021.05
+Senior Vice President
+Name
+Gender
+Age
+Zhang Yuzhuo
+Male
+58
+Ma Yongsheng
+Male
+58
+Yu Baocai
+Male
+55
+Ling Yiqun
+Male
+57
+Sinopec Corp.
+Chairman
+Equity interests in Sinopec Corp.
+59
+Company
+Senior Management and Employees
+Male
+56 Employee's Representative 2018.05-2021.05
+Supervisor
+56 Employee's Representative 2010.12.2021.05
+Supervisor
+1,330.6
+No
+0
+0
+1,346.5
+Yu Renming
+No
+0
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+69
+Directors, Supervisors,
+Senior Management and Employees
+of Sinopec Corp.; in May
+In May 2018, he was elected
+0
+Male
+Zhou Hengyou
+0
+59
+Supervisor 2018.05-2021.05
+Yes
+0
+0
+60
+Supervisor 2006.05-2021.05
+Supervisor 2006.05-2021.05
+57 Employee's Representative 2017.06.2021.05
+Supervisor
+Yes
+0
+0
+1,445.7
+No
+0
+0
+1,337.4
+No
+0
+Corp.; in July 2010, he was
+appointed as Vice President
+0
+Sinopec Corp.
+President of Sinopec Corp.
+Ling Yiqun, aged 57,
+Director and Senior Vice
+President of Sinopec Corp.
+Mr. Ling is a professor
+level senior engineer with
+a Ph.D. degree. From
+1983, he worked in the
+refinery of Beijing Yanshan
+Petrochemical Company and
+the Refining Department
+of Beijing Yanshan
+Petrochemical Company Ltd.
+Company Limited since
+been acting concurrently
+as director of Petrochina
+Party Member Group
+and the Deputy General
+Manager of China National
+Petroleum Corporation since
+September 2008 and had
+Company; He had been
+a member of the Leading
+Petroleum & Chemical
+Manager of Lanzhou
+concurrently as Executive
+In September 1999, Mr. Yu
+was appointed as the Deputy
+General Manager of Daqing
+Petrochemical Company;
+In December 2001, he was
+appointed as the General
+Manager and Deputy
+Secretary of CPC Committee
+Yu Baocai, aged 55,
+Director of Sinopec Corp.
+Mr. Yu is a senior engineer
+Ling Yiqun
+Yu Baocai
+Annual Report 2018 CHINA PETROLEUM & CHEMICAL CORPORATION
+Directors, Supervisors,
+60
+Senior
+and master in economics.
+Director, President and
+Secretary of CPC Committee
+of Sinopec Refinery Product
+Sales Company Limited;
+in August 2013, he was
+appointed concurrently as
+the President of Sinopec
+Qilu Company; in March
+2017, he was appointed
+as Vice President of China
+Petrochemical Corporation;
+BEE
+in February 2018, he was
+appointed as Senior Vice
+Since April 2019, he
+has been a member
+of the Leading Party
+Member Group of China
+Petrochemical Corporation;
+Department of Sinopec
+Corp.; in June 2003, he
+was appointed as the
+Director General of Refining
+Department of Sinopec
+appointed as the Deputy
+Director General of Refining
+In February 2000, he was
+Petrochemical Corporation.
+the Vice President of China
+Party Member Group and
+May 2011; Since June
+2018, he has been a
+member of the Leading
+Company and the General
+of Lanzhou Petrochemical
+Secretary of CPC Committee
+he was appointed as the
+General Manager and Deputy
+Company; In June 2007,
+of Lanzhou Petrochemical
+the General Manager and
+Secretary of CPC Committee
+of Daqing Petrochemical
+Company; In September
+2003, he was appointed as
+was elected as Director of
+0
+In October 2018, Mr. Yu
+1,321.6
+67
+Directors, Supervisors,
+Senior Management and Employees
+Supervisors,
+Danagement and Employees
+Senior
+Zhou Hengyou
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Yu Renming
+Zhou Hengyou, aged 56,
+Employee's Representative
+Supervisor of Sinopec Corp.
+Mr. Zhou is a professor
+level senior administration
+engineer and with a master
+degree. In December 1998,
+Mr. Zhou was appointed
+as a standing committee
+member of CPC Committee
+and Vice Chairman of
+Trade Union of Jiangsu
+Petroleum Exploration
+Bureau; in February 1999,
+he was appointed as a
+standing committee member
+of CPC Committee and
+Trade Union Chairman
+of Jiangsu Petroleum
+Exploration Bureau of China.
+Petrochemical Corporation;
+in December 2002, he
+was appointed as Deputy
+Secretary of CPC Committee
+and Trade Union Chairman
+of Jiangsu Petroleum
+Exploration Bureau; in June
+2004, he was appointed as
+Deputy Secretary of CPC
+Committee and Secretary of
+CPC Disciplinary Inspection
+Committee of Jiangsu
+Petroleum Exploration
+Bureau; in August 2005,
+he was appointed as
+Secretary of CPC Committee
+of Jiangsu Petroleum
+Exploration Bureau; in March
+2011, he was appointed
+as Director General and
+Secretary of CPC Committee
+of China Petrochemical
+News. In March 2015,
+he was appointed as
+Director General of the
+General Office of China
+Petrochemical Corporation,
+Director General of Policy
+Research Department of
+the General Office of China
+Petrochemical Corporation
+and Director General
+of President's office of
+Sinopec Corp. In August
+2015, he was appointed as
+Director General of Board of
+Directors Office under China
+Petrochemical Corporation;
+Since December 2019,
+he was appointed as the
+director of the Office of
+Leading Party Member
+Group Inspection Work
+of China Petrochemical
+Corporation. In January
+2020, he was appointed
+as Secretary of the board
+of directors of China
+Petrochemical Corporation.
+In May 2015, he was elected
+as Supervisor of Sinopec
+Corp. In May 2018, he
+was elected as Employee's
+Representative Supervisor of
+Sinopec Corp.
+Yu Renming, aged 56,
+Employee's Representative
+Supervisor of Sinopec Corp.
+Mr. Yu is a professor level
+senior engineer with a
+university diploma. In June
+2000, he was appointed
+as the Deputy General
+Manager of Sinopec Zhenhai
+Refining & Chemical Co.,
+Ltd.; in June 2003, he
+was appointed as the
+Board Director and Deputy
+General Manager of Sinopec
+Zhenhai Refining & Chemical
+Co., Ltd.; in September
+2006, he was appointed
+as the Vice President of
+Sinopec Zhenhai Refining
+& Chemical Company; in
+September 2007, he was
+appointed as the President
+and the Vice Secretary of
+CPC committee of Sinopec
+Zhenhai Refining & Chemical
+Company; in January
+2008, he was appointed
+as the Director General
+of Sinopec Production
+Management Department;
+in December 2017, he
+was appointed as the
+Director General of Refining
+Department of Sinopec
+Corp.; Since December
+2019, he was elected as
+Chairman of Board of
+Directors and Secretary of
+CPC committee of Sinopec
+Engineering(Group) Co., Ltd.;
+and in December 2010, he
+was elected as Employee's
+Representative Supervisor of
+Sinopec Corp.
+68
+Annual Report 2018 CHINA PETROLEUM & CHEMICAL CORPORATION
+LIST OF MEMBERS OF THE BOARD OF SUPERVISORS
+Remuneration
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2018
+paid by
+Representative Supervisor of
+Sinopec Corp.
+of China Petrochemical
+Corporation; in March
+2006, he was appointed as
+Director General of Finance
+& Assets Department of
+Assets Management Co.,
+Ltd. of China Petrochemical
+Corporation; in March
+2006, he was appointed as
+Director General of Auditing
+Department of Sinopec
+Corp and Director General
+of China Petrochemical
+Corporation Audit Bureau.
+In September 2018, he
+was appointed as Chief
+Representative of Sinopec
+Corp. Hong Kong Office. In
+May 2006, he was elected
+as Supervisor of Sinopec
+Corp.
+Yang Changjiang
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Zhang Baolong
+No
+Yang Changjiang, aged 59,
+Supervisor of Sinopec Corp.
+Mr. Yang is a professor-level
+senior administration
+engineer with a Master's
+degree. In October 2007, he
+was appointed as a standing
+committee member of
+CPC Committee of Shengli
+Petroleum Administration
+Bureau; in April 2009, he
+was appointed as Deputy
+Secretary of CPC Committee
+and Secretary of Discipline.
+Inspection Committee
+of Shengli Petroleum
+Administration Bureau,
+as well as a standing
+committee member of CPC
+Committee of Dongying
+City, Shandong Province;
+in December 2012, he was
+appointed as Secretary of
+CPC Committee and Deputy
+Director of Southwest
+Petroleum Bureau, Deputy
+General Manager of Sinopec
+Southwest Oil & Gas
+Company and a member of
+the Coordination Committee
+of Sinopec Southwest
+Petroleum Bureau, Sinopec
+Southwest Oil & Gas
+Company and Sinopec
+Southern Exploration
+Company; in December
+2016, he was appointed as
+Secretary of CPC Committee
+and Deputy Director General
+of Shengli Petroleum
+Administration Bureau, and
+Deputy General Manager of
+Shengli Oilfield Company;
+in October 2017, he was
+appointed as Secretary of
+CPC Committee and Deputy
+General Manager of Shengli
+Petroleum Administration
+Bureau Co., Ltd., and
+Deputy General Manager
+of Sinopec Shengli Oilfield
+Company. In March 2018,
+he has served as Director
+General of Party Affairs
+and Employee Relations
+Department (Leading Party
+Member Group Office),
+Deputy Secretary of the
+CPC Committee directly
+under China Petrochemical
+Corporation, Deputy
+Director General of Working
+Committee of Trade Union,
+and Deputy Director of the
+Youth Working Committee
+of China Petrochemical
+Corporation. In December
+2019, he has served as
+Director General of Party
+Affairs and Employee
+Relations Department,
+Deputy Secretary of the
+CPC Committee directly
+under China Petrochemical
+Corporation, Deputy
+Director General of Working
+Committee of Trade Union,
+and Deputy Director of the
+Youth Working Committee
+of China Petrochemical
+Corporation. In May 2018,
+he was elected as Supervisor
+of Sinopec Corp.
+Zhang Baolong, aged 60,
+Supervisor of Sinopec
+Corp. Mr. Zhang is a
+professor-level senior
+economist with a Master
+degree. In July 1995, he
+served as General Manager
+of Hong Kong Century
+Bright Capital Investment
+Limited; in August 1996, he
+served as Deputy General
+Manager of Sinopec Finance
+Co., Ltd.; in December
+2001, he was appointed as
+Deputy General Manager
+and Chief Accountant of
+China International United
+Petroleum & Chemicals Co.,
+Ltd.; in August 2004, he
+was appointed concurrently
+as Secretary of Disciplinary
+Inspection Committee of
+China International United
+Petroleum & Chemicals
+Co., Ltd.; since March
+2006, he has served as
+General Manager and
+Secretary of CPC Committee
+of Sinopec Finance Co.,
+Ltd. In June 2018, he
+was appointed as Deputy
+Director of Department of
+Capital Management and
+Financial Services of China
+Petrochemical Corporation.
+In December 2019, he
+was appointed as Vice
+President of Department of
+Capital Management and
+Financial Services of China
+Petrochemical Corporation.
+In May 2018, he was elected
+as Supervisor of Sinopec
+Corp.
+Supervisors,
+Danagement and Employees
+Senior
+66
+Annual Report 2018 CHINA PETROLEUM & CHEMICAL CORPORATION
+Zou Huiping
+Yu Xizhi
+Zou Huiping, aged 59,
+Supervisor of Sinopec Corp.
+Mr. Zou is a professor
+level senior accountant
+with a university diploma.
+In November 1998, he
+was appointed as Chief
+Accountant in Guangzhou
+Petrochemical General Plant
+of China Petrochemical
+Corporation; in February
+2000, he was appointed
+as Deputy Director General
+of Finance & Assets
+Department of China
+Petrochemical Corporation;
+in December 2001, he
+was appointed as Deputy
+Director General of Finance
+& Planning Department
+CPC Committee of Maoming
+Petrochemical Company
+and General Manager
+of Sinopec Maoming
+Company; in July 2016,
+Mr. Yu was appointed as
+head of Maoming-Zhanjiang
+Integration Leading Group;
+in December 2016, he
+became Executive Director,
+General Manager and
+Deputy Secretary of the
+CPC Committee of Zhongke
+(Guangdong) Refining and
+Petrochemical Co., Ltd.
+Since April 2017, Mr. Yu
+has been Director General
+of Human Resources
+Department of Sinopec
+Corp. Since December
+2019, he was appointed as
+president of human resource
+department of Sinopec Corp.
+and the Director General
+of organization department
+of China Petrochemical
+Corporation. In January
+2020, he was elected as
+Employee's Representative
+Supervisor of China
+Petrochemical Corporation.
+In June 2017, he was
+elected as Employee's
+Sinopec Corp.
+Yu Xizhi, aged 57,
+Employee's Representative
+Supervisor of Sinopec Corp.
+Mr Yu is a professor-level
+senior engineer with a
+Ph.D. in engineering. In
+August 1997, he was
+appointed as Deputy
+General Manager of Anqing
+Petrochemical General Plant
+and concurrent General
+Manager of Fertiliser Plant;
+in September 1999, he
+became a member of the
+CPC Standing Committee
+of Anqing Petrochemical
+General Plant; in February
+2000, he was appointed as
+Deputy General Manager of
+Sinopec Anqing Company
+and in September 2000, he
+was appointed as General
+Manager of Sinopec Anqing
+Company. In January
+2005, he was appointed as
+General Manager of Anqing
+Petrochemical General
+Plant and from May 2009
+to July 2010, he served
+an interim position at the
+Standing Committee of
+the CPC Anqing Municipal
+Committee. In July 2010,
+he became General Manager
+and Deputy Secretary of the
+55
+Supervisor 2018.05-2021.05
+Yes
+0
+0
+Board of Supervisors
+Jiang Zhenying
+Male
+49
+Male
+Male
+Zhang Baolong
+Male
+Zou Huiping
+Male
+༐g|g| |
+in 2019
+Yang Changjiang
+Male
+Chairman of the 2017.06-2021.05
+2018
+Whether
+paid by the
+Equity interests in Sinopec Corp.
+Position in
+(RMB 1,000,
+Zhao Dong
+(as of 31 December)
+Name
+holding
+Age
+2019
+Gender
+Company
+Yu Xizhi
+Tenure
+Sinopec Corp.
+before tax)
+Others
+Finance
+82,341
+2%
+Administration
+32,176
+21%
+8%
+8,937
+4 CONTRACTUAL INTERESTS
+OF DIRECTORS AND
+SUPERVISORS
+3%
+74
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Production
+146,610
+36%
+Sales
+119,092
+30%
+EDUCATIONAL BACKGROUND STRUCTURE FOR EMPLOYEES AS FOLLOWS:
+Senior high school and
+technical school degrees or below
+13,050
+Technology
+R&D
+14%
+As of 31 December 2019 or
+any time during the reporting
+period, there is no Director
+or Supervisor of the Company
+entered into any agreement
+with any of Sinopec Corp., its
+controlling shareholder, any
+subsidiary or related subsidiary
+which shall significantly benefit
+such Director or Supervisor.
+There is no change in
+shareholdings of the Company
+by Directors, Supervisors and
+other senior managements
+during the reporting period.
+153,296
+5 REMUNERATION OF DIRECTORS,
+SUPERVISORS, AND THE
+SENIOR MANAGEMENT
+During this reporting period,
+there is a total of 15 directors,
+supervisors and other senior
+management received
+remuneration from Sinopec
+Corp. with a total amount of
+RMB 17.3798 million, including
+11 persons' bonus from 2016
+to 2018 of them (does not
+contain independent directors).
+THE BREAKDOWN ACCORDING TO THE MEMBERS OF EACH OPERATION SEGMENT AS FOLLOWS:
+6 THE COMPANY'S EMPLOYEES
+As at 31 December 2019, the
+Company has a total of 402,206
+employees. There are a total of
+250,175 retired employees to
+be reimbursed by Sinopec Corp.
+Sinopec Marketing Co. Limited,
+principal subsidiary of Sinopec
+Corp., has 131,039 employees.
+Marketing and Distribution
+131,039
+33%
+5,874
+EMPLOYEES' PROFESSIONAL STRUCTURE AS FOLLOWS:
+2%
+5,601
+1%
+Exploration and Production
+136,980
+34%
+Refining
+65,268
+16%
+Chemicals
+57,444
+Other Segments
+38%
+8,000
+18,123
+On 31 December, 2019, details of the principal wholly-owned and controlled subsidiaries of the Company were as follows:
+Percentage
+of
+shares held
+Registered
+Capital
+by Sinopec
+Corp.
+Name of Company
+Sinopec International Petroleum
+RMB million
+(%)
+100
+32,385
+PRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIES
+Total Assets Net Assets
+RMB million RMB million
+14,977
+Sinopec Great Wall Energy & Chemical
+22,761
+100
+33,061
+14,219
+Company Limited
+Sinopec Yangzi Petrochemical
+OF DIRECTORS, SUPERVISORS,
+AND THE SENIOR
+MANAGEMENT
+100
+15,651
+Exploration and Production Limited
+and Controlled Subsidiaries
+Principal Wholly-Owned
+Senior Management and Employees
+5%
+Undergraduate
+107,740
+27%
+Junior college
+89,642
+22%
+Technical secondary school
+33,405
+8%
+7 CHANGES OF CORE
+TECHNICAL TEAM OR KEY
+TECHNICIANS
+During the reporting period,
+there are no significant changes
+of core technical team or key
+technicians.
+8 EMPLOYEE BENEFITS SCHEME
+Details of the Company's
+employee benefits scheme
+are set out in Note 39 of the
+financial statements prepared
+under IFRS of this annual
+report. As at 31 December
+2019, the Company has a total
+of 250,175 retired employees.
+All of them participated in
+the basic pension schemes
+administered by provincial
+(autonomous region or
+municipalities) governments.
+Government-administered
+pension schemes are
+responsible for the payments of
+basic pensions.
+9 REMUNERATION POLICY
+Based on a relatively united
+basic remuneration system,
+Sinopec Corp. has established
+its remuneration distribution
+system based on the value
+of positions, performance
+& contribution, with an
+aim to improve employee
+capabilities, and constantly
+improve employee performance
+evaluation and incentive &
+discipline mechanisms.
+10 TRAINING PROGRAMS
+In 2019, the Company
+continuously improved the
+management training system.
+With an arm to cultivate a
+team with 'firm political stance,
+strong will and highly skilled',
+the Company launched training
+courses for 145 leaders,
+middle-youth-age cadres and
+young cadres. Centring on
+enterprise development strategy
+and key work of the year, the
+Company organised training
+programs at headquarters
+level which were attended
+by 3,700 Key employees. To
+highlight high-end guidance
+and demonstration drive, the
+Company held strategic expert
+innovation leading project,
+senior expert integration
+innovation project, scientific
+research team leader innovation
+and development project, and
+realised the breakthrough in
+"top" talent training mode.
+To enhance the management
+of transnational operation,
+finance, taxation, law marketing
+and trading, the company
+organised a series of training
+programs covering 780
+overseas managers. In addition,
+the Company focused on the
+inheritance of craftsman spirit
+and skills, and continuously
+enhanced the training of famous
+craftsmen, chief technicians and
+top skilled personnel.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+75
+Directors, Supervisors,
+Master's degree or above
+3 CHANGE OF SHAREHOLDING
+Remuneration
+Directors, Supervisors,
+Senior Management and Employees
+in 2019
+Whether
+paid by
+(RMB 1,000,
+before tax)
+the holding
+Equity interests in Sinopec Corp.
+(as of 31 December)
+Company
+2019
+Male
+Sinopec Corp.
+Male
+Male
+Male
+655653
+57
+57
+Senior Vice President
+Senior Vice President
+Senior Vice President
+Yes
+0
+2018
+0
+1,592.8
+Female
+No
+paid by
+Age
+57
+Danagement and Employees
+30,763
+Senior
+Zhao Rifeng
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Huang Wensheng
+Zhao Rifeng, aged 57, Vice
+President of Sinopec Corp.
+Mr. Zhao is a Professor
+level Senior Engineer with a
+master degree. In July 2000,
+he was appointed as Deputy
+General Manager of Sinopec
+Jinling Petrochemical Co.,
+Ltd and Deputy Manager of
+Sinopec Jinling Company;
+in October 2004, he was
+appointed as General
+Manager of Sinopec Jinling
+Company; in October
+2006, he was appointed
+as Vice Chairman and
+General Manager of Sinopec
+Jinling Petrochemical Co.,
+Ltd; in November 2010,
+he was appointed as
+Chairman, General Manger,
+Deputy Secretary of CPC
+Committee of Sinopec
+Jinling Petrochemical Co.,
+Ltd; in August 2013, he
+was appointed as Director
+General of Refining
+Department of Sinopec
+Corp.; and in December
+2017, he was appointed
+as the Director General of
+the Marketing Department
+of China Petrochemical
+Corporation and Chairman
+and Secretary of CPC
+Committee of Sinopec
+Marketing Company Limited.
+In December 2019, he was
+appointed as the president
+of the Marketing Department
+of China Petrochemical
+Corporation and Chairman
+and Secretary of CPC
+Committee of Sinopec
+Marketing Company Limited.
+In February 2018, he was
+appointed as Vice President
+of Sinopec Corp.
+Huang Wensheng, aged 53,
+Vice President of Sinopec
+Corp., Secretary to the Board
+of Directors. Mr. Huang
+is a professor level senior
+economist with a university
+diploma. In March 2003, he
+was appointed as Deputy
+Director General of the
+Board Secretariat of Sinopec
+Corp.; in May 2006, he was
+appointed as Representative
+on Securities Matters of
+Sinopec Corp.; since August
+2009, He has served as the
+Deputy Director General
+of President's office of
+Sinopec Corp. In September
+2009, he was appointed
+as Director General of the
+Board Secretariat of Sinopec
+Corp.; In May 2012, he
+was appointed as Secretary
+to the Board of Directors
+of Sinopec Corp.; In June
+2018, he was appointed
+concurrently as Director
+General of Department of
+Capital Management and
+Financial Services of China
+Petrochemical Corporation.
+Since July 2018, he was
+appointed concurrently as
+Chairman, and Secretary
+of CPC Committee of
+Sinopec Capital Co.,
+Ltd.; In December 2019,
+he was appointed as
+President of Department of
+Capital Management and
+Financial Services of China
+Petrochemical Corporation.
+In May 2014, he was
+appointed as Vice President
+of Sinopec Corp.
+Position in
+Sinopec Corp.
+72
+LIST OF MEMBERS OF THE SENIOR MANAGEMENT
+Name
+Liu Hongbin
+Lei Dianwu
+Chen Ge
+Shou Donghua
+Zhao Rifeng
+Huang Wensheng
+Gender
+Male
+Annual Report 2018 CHINA PETROLEUM & CHEMICAL CORPORATION
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+0
+No
+the holding
+Company
+No
+Equity interests in Sinopec Corp.
+(as of 31 December)
+2019
+0
+2018
+0
+2 INFORMATION ON
+APPOINTMENT OR
+TERMINATION OF DIRECTORS,
+SUPERVISORS AND SENIOR
+MANAGEMENT
+On 9 December 2019, Mr. Liu
+Zhongyun resigned as Executive
+Director, member of Strategy
+Committee of the Board and
+the Senior Vice President of
+Sinopec Corp. due to change of
+working arrangement
+On 9 December 2019, Mr.
+Wang Dehua resigned as CFO of
+Sinopec Corp. due to change of
+working arrangement.
+On 13 January 2020, Ms. Shou
+Donghua was appointed as CFO
+of Sinopec Corp.
+Whether
+paid by
+On 19 January 2020, Mr. Dai
+Houliang resigned as Chairman
+of the Board, Non-executive
+Director and Chairman of each
+of the Strategy Committee,
+Nomination Committee
+and Social Responsibility
+Management Committee of the
+Board of Sinopec Corp. due to
+change of working arrangement.
+On 25 March 2020, Mr.
+Zhang Yuzhuo was appointed
+as Chairman of the Board,
+Non-executive Director and
+Chairman of each of the
+Strategy Committee, Nomination
+Committee and Social
+Responsibility Management
+Committee of the Board of
+Sinopec Corp.
+On 25 March 2020, Mr. Liu
+Hongbin was appointed as
+Senior Vice President of Sinopec
+Corp.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+73
+13
+Directors, Supervisors,
+Senior Management and Employees
+On 24 March 2020, Mr.
+Li Yunpeng resigned as
+Non-executive Director and
+member of Remuneration and
+Appraisal Committee of Sinopec
+Corp.
+1,600.4
+in 2019
+(RMB 1,000,
+before tax)
+1,487.0
+Remuneration
+0
+50
+CFO
+Yes
+0
+57
+Vice President
+Vice President, Board Secretary
+1,457.5
+No
+0
+paid by
+Sinopec Corp.
+1,497.3
+0
+oooooo
+0
+Name
+Wang Dehua
+Gender
+Age
+Male
+53
+Position in
+Sinopec Corp.
+Former CFO
+No
+19,985
+KEY AUDIT MATTERS
+Sinopec Pipeline Storage &
+pwc
+普华永道
+PwC ZT Shen Zi (2020) No. 10001
+To the Shareholders of China Petroleum & Chemical Corporation,
+OPINION
+What we have audited
+We have audited the accompanying financial statements China Petroleum & Chemical Corporation (hereinafter "Sinopec Corp."), which comprise:
+•
+the consolidated and company balance sheets as at 31 December 2019;
+•
+REPORT OF THE PRC AUDITOR
+the consolidated and company income statements for the year then ended;
+the consolidated and company cash flow statements for the year then ended;
+•
+the consolidated and company statements of changes in shareholders' equity for the year then ended; and
+notes to the financial statements.
+Our opinion
+In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company's financial position of
+Sinopec Corp. as at 31 December 2019, and their financial performance and cash flows for the year then ended in accordance with the requirements of
+Accounting Standards for Business Enterprises ("CASS").
+BASIS FOR OPINION
+We conducted our audit in accordance with China Standards on Auditing ("CSAS"). Our responsibilities under those standards are further described in
+the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is
+sufficient and appropriate to provide a basis for our opinion.
+We are independent of Sinopec Corp. in accordance with the Code of Ethics for Professional Accountants of the Chinese Institute of Certified Public
+Accountants ("CICPA Code"), and we have fulfilled our other ethical responsibilities in accordance with the CICPA Code.
+PricewaterhouseCoopers Zhongtian LLP
+•
+11/F PricewaterhouseCoopers Center, Link Square 2, 202 Hu Bin Road, Huangpu District, Shanghai 200021, PRC
+Tel: +86 (21) 2323 8888, Fax: +86 (21) 2323 8800, www.pwccn.com
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+2: The above indicated total assets and net profit has been prepared in accordance with CASS. Except for Sinopec Kantons Holdings Limited and Sinopec Overseas
+Investment Holdings Ltd, which are incorporated in Bermuda and Hong Kong SAR, respectively, all of the above wholly-owned and non-wholly-owned subsidiaries
+are incorporated in the PRC. All of the above wholly-owned and controlling subsidiaries are limited liability companies except for Sinopec Shanghai Petrochemical
+Company Limited, Sinopec Marketing Co., Limited and Sinopec Kantons Holdings Limited. The Board of Directors considered that it would be redundant to disclose
+the particulars of all subsidiaries and, therefore, only those which have material impact on the results or assets of Sinopec Corp. are set out above.
+50
+13,346
+11,854
+Net Profit/
+(Net Loss)
+RMB million
+2,831
+Principal Activities
+Investment in exploration, production and
+sale of petroleum and natural gas
+(795) Coal chemical industry investment
+management, production and
+sale of coal chemical products
+1,609 Manufacturing of intermediate petrochemical
+products and petroleum products
+2,525 Pipeline storage and transportation
+of crude oil
+76
+4 Production and sale of polyester chips and
+polyester fibres
+29 Manufacturing of intermediate petrochemical
+products and petroleum products
+787 Marketing and distribution of
+petrochemical products
+3,129 Trading of crude oil and
+petrochemical products
+(139) Overseas investment holding
+763 Production and sale of catalyst products
+136 Trading of petrochemical products
+1,362 Import and processing of crude oil, production,
+storage and sale of petroleum products and
+petrochemical products
+1,070 Manufacturing of intermediate petrochemical
+products and petroleum products
+1,961 Manufacturing of intermediate petrochemical
+products and petroleum products
+22,984 Marketing and distribution of refined
+petroleum products
+3,137 Production and sale of petrochemical products
+664 Production, sale, research and development of
+petroleum, petrochemical, ethylene and
+downstream by-products
+1,131 Oil jetty and nature gas pipeline
+2,452 Manufacturing of intermediate petrochemical
+products and petroleum products
+2,225 Manufacturing of synthetic fibres, resin
+and plastics, intermediate petrochemical
+products and petroleum products
+477 Manufacturing of plastics, intermediate
+petrochemical products and
+petroleum products
+Note 1: All above subsidiaries except Fujian Petrochemical Company Limited are audited by PricewaterhouseCoopers Zhong Tian LLP or PricewaterhouseCoopers in 2019.
+KPMG Huazhen LLP served the exception.
+478 Production and sale of refined petroleum
+products, lubricant base oil,
+and petrochemical materials
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+77
+Financial Statements (PRC)
+Our opinion on the 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 financial statements, our responsibility is to read the other information and, in doing so, consider whether the
+other information is materially inconsistent with the 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 MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
+Management of Sinopec Corp. is responsible for the preparation and fair presentation of these financial statements in accordance with the CASS,
+and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material
+misstatement, whether due to fraud or error.
+In preparing these financial statements, management is responsible for assessing Sinopec Corp.'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 management either intend to liquidate Sinopec
+Corp. or to cease operations, or have no realistic alternative but to do so.
+Those charged with governance are responsible for overseeing Sinopec Corp.'s financial reporting process.
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
+Our objectives are to obtain reasonable assurance about whether these 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. Reasonable assurance is a high level of assurance, but is not a
+guarantee that an audit conducted in accordance with CSAs 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 financial statements.
+As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
+•
+Management of Sinopec Corp. is responsible for the other information. The other information comprises all of the information included in 2019 annual
+report of Sinopec Corp. other than the financial statements and our auditor's report thereon.
+•
+Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
+Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
+management.
+Conclude on the appropriateness of management's 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 Sinopec Corp.'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
+these 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 Sinopec Corp. to cease to continue as a going concern.
+Evaluate the overall presentation (including the disclosures), structure and content of the financial statements, and whether the 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 Sinopec Corp. 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.
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+12
+79
+Financial Statements (PRC)
+Supervisors,
+Identify and assess the risks of material misstatement of the 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.
+OTHER INFORMATION
+REPORT OF THE PRC AUDITOR (CONTINUED)
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+78
+Financial Statements (PRC)
+REPORT OF THE PRC AUDITOR (CONTINUED)
+Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
+period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
+not provide a separate opinion on these matters.
+The key audit matter identified in our audit is “Recoverability of the carrying amount of fixed assets relating to oil and gas producing activities”.
+Key Audit Matter
+Recoverability of the carrying amount of fixed assets relating to oil
+and gas producing activities
+Refer to Note 14 "Fixed assets" and Note 56 "Principal accounting
+estimates and judgements" to the financial statements.
+Low crude oil prices gave rise to possible indication that the carrying
+amount of fixed assets relating to oil and gas producing activities as at
+31 December 2019 might be impaired. The Group has adopted value
+in use as the respective recoverable amounts of fixed assets relating
+to oil and gas producing activities, which involved key estimations or
+assumptions including:
+Future crude oil prices;
+Future production profiles;
+Future cost profiles; and
+Discount rates.
+Because of the significance of the carrying amount of fixed assets
+relating to oil and gas producing activities as at 31 December 2019,
+together with the use of significant estimations or assumptions in
+determining their respective value in use, we had placed our audit
+emphasis on this matter.
+•
+How our audit addressed the Key Audit Matter
+In auditing the respective value in use calculations of fixed assets relating to
+oil and gas producing activities, we performed the following key procedures
+on the relevant discounted cash flow projections prepared by management:
+Evaluated and tested the key controls in respect of the preparation of
+the discounted cash flow projections of fixed assets relating to oil and
+gas producing activities.
+Assessed the methodology adopted in the discounted cash flow
+projections, tested mathematical accuracy of the projections, and the
+completeness, accuracy, and relevance of underlying data used in the
+projections.
+Compared estimates of future crude oil prices adopted by the Group
+against a range of published crude oil price forecasts.
+Compared the future production profiles against the oil and gas
+reserve estimation report approved by the management. Evaluated
+the competence, capability and objectivity of the management's
+experts engaged in estimating the oil and gas reserves. Assessed key
+estimations or assumptions used in the reserve estimation, by reference
+to historical data, management plans and/or relevant external data.
+Compared the future cost profiles against historical costs and relevant
+budgets of the Group.
+Tested selected other key data inputs, such as natural gas prices and
+production profiles in the projections by reference to historical data
+and/or relevant budgets of the Group.
+Used professionals with specialized skill and knowledge to assist in
+the evaluation of the appropriateness of discount rates adopted by the
+management.
+Evaluated the sensitivity analyses prepared by the Group, and assessed
+the potential impacts of a range of possible outcomes.
+Based on our work, we found the key assumptions and input data adopted
+were supported by the evidence we obtained.
+8,140
+Company Limited
+Fujian Petrochemical Company Limited
+30,016
+3,460
+China International United Petroleum
+5,000
+100
+153,897
+32,415
+and Chemical Company Limited
+Sinopec Overseas Investment
+USD 1,662
+100
+17,019
+20,985
+Holding Limited
+million
+Sinopec Catalyst Company Limited
+1,500
+100
+10,417
+China Petrochemical International
+1,400
+100
+19,468
+12,552
+5,129
+4,279
+100
+Sinopec Chemical Sales Company
+Limited
+12,000
+100
+43,756
+21,767
+Transportation Company Limited
+Sinopec Yizheng Chemical Fibre
+4,000
+100
+8,372
+5,468
+1,000
+Limited Liability Company
+3,374
+100
+9,219
+4,091
+Sinopec Qingdao Petrochemical
+1,595
+100
+4,226
+519
+Company Limited
+Sinopec Lubricant Company Limited
+Company Limited
+Sinopec Beihai Refining and Chemical
+5,294
+Sinopec-SK(Wuhan) Petrochemical
+7,193
+59
+26,904
+11,860
+Company Limited
+Sinopec Kantons Holdings Limited
+HKD 248
+60.33
+14,061
+Company Limited
+10,942
+Sinopec Shanghai Gaoqiao Petroleum
+10,000
+55
+37,744
+17,791
+and Chemical Limited
+Sinopec Shanghai Petrochemical
+10,824
+50.44
+45,636
+million
+18,508
+23,331
+67.60
+98.98
+18,063
+13,020
+Limited Liability Company
+Sinopec Qingdao Refining and
+5,000
+85
+18,951
+10,285
+Chemical Company Limited
+Sinopec Hainan Refining and
+9,628
+75
+30,426
+17,914
+Chemical Company Limited
+Sinopec Marketing Co., Limited
+28,403
+70.42
+469,622
+218,784
+Sinopec Shanghai SECCO Petrochemical
+7,801
+Company Limited
+Senior Management and Employees
+LIST OF FORMER MEMBERS OF THE SENIOR MANAGEMENT
+71
+Directors, Supervisors,
+Supervisors,
+Danagement and Employees
+DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)
+Liu Hongbin
+Lei Dianwu
+(3) Other Members of Senior
+Management
+Liu Hongbin, aged 57. Mr.
+Liu is a senior engineer
+with a bachelor degree.
+In June 1995, he was
+appointed as the chief
+engineer of Tuha Petroleum
+Exploration & Development
+Headquarters; in July
+1999, he was appointed
+as the deputy general
+manager of PetroChina Tuha
+Oilfield Company; in July
+2000, he was appointed
+as the commander and
+Deputy Secretary of
+CPC Committee of Tuha
+Petroleum Exploration &
+Development Headquarters;
+in March 2002, he served
+as the general manager of
+the Planning Department
+of PetroChina Company
+Limited ("PetroChina");
+in September 2005, he
+served as the director of
+the Planning Department of
+China National Petroleum
+Corporation ("CNPC");
+in June 2007, he was
+appointed as the Vice
+President of PetroChina,
+and in November 2007,
+he served concurrently as
+the general manager and
+Secretary of CPC Committee
+of the Marketing Branch of
+PetroChina; in June 2009,
+he served concurrently as
+the general manager and
+Deputy Secretary of CPC
+Committee of the Marketing
+Branch of PetroChina; in
+July 2013, he was appointed
+as Member of the Leading
+Party Member Group and
+the deputy general manager
+of CNPC and in August
+2013, he served concurrently
+as an executive director and
+general manager of Daqing
+Oilfield Company Limited,
+director of Daqing Petroleum
+Administration Bureau
+and Deputy Secretary of
+CPC Committee of Daqing
+Oilfield; in May 2014, he
+served concurrently as a
+director of PetroChina; in
+November 2019, he was
+appointed as Member of
+the Leading Party Member
+Group and Vice President
+of China Petrochemical
+Corporation; in March
+2020, he was concurrently
+appointed as the Senior Vice
+President of Sinopec Corp.
+Lei Dianwu, aged 57, Senior
+Vice President of Sinopec
+Corp. Mr. Lei is a Professor
+level Senior Engineer with
+a university diploma. In
+October 1995, he was
+appointed as Vice President
+of Yangzi Petrochemical
+Corporation; in December
+1997, he was appointed as
+Director General of Planning
+& Development Department
+in China Eastern United
+Petrochemical (Group) Co.,
+Ltd. in May 1998, he was
+appointed as Vice President
+of Yangzi Petrochemical
+Corporation; in August
+1998 he was appointed as
+Vice President of Yangzi
+Petrochemical Co., Ltd.
+in March 1999, he was
+appointed temporarily
+as Deputy Director
+General of Development
+& Planning Department
+of China Petrochemical
+Corporation; in February
+2000, he was appointed as
+Deputy Director General of
+Development & Planning
+Senior
+70
+Department of Sinopec
+Corp.; in March 2001, he
+was appointed as Director
+General of Development
+& Planning Department of
+Sinopec Corp.; in March
+2009, he was appointed
+as Assistant to President
+of China Petrochemical
+Corporation; in May 2009,
+he was appointed as Vice
+President of Sinopec
+Corp.; in August 2013,
+he was appointed as the
+Chief Economist of China
+Petrochemical Corporation;
+in October 2015, he was
+appointed as Secretary
+to the Board of Directors
+of China Petrochemical
+Corporation; in June
+2018, he was appointed
+concurrently as Director
+General of International
+Cooperation Department of
+Sinopec Corp. In October
+2018, he was appointed
+as Senior Vice President of
+Sinopec Corp.
+Company; in August 2018,
+she was appointed as the
+Director General of Finance
+Department of China
+Petrochemical Corporation
+and concurrently served as
+the Chairman of Sinopec
+Century Bright Capital
+Investment Limited; in
+December 2019, she was
+appointed as General
+Manager of Finance
+Department of Sinopec
+Corp. and concurrently
+served as the Chairman
+of Sinopec Century Bright
+Capital Investment Limited.;
+in January 2020, she was
+appointed as Chief Financial
+Officer of Sinopec Corp.
+Petrochemical Corporation.
+From December 2013 to
+December 2015, he was
+appointed temporarily as
+Deputy Secretary-General of
+Guizhou Provincial People's
+Government and a member
+of the Leading Party
+Member Group of Guizhou
+Provincial General Office.
+In November 2015, he was
+appointed as Employee's
+Representative Director
+of China Petrochemical
+Corporation. In December
+2017, he was appointed
+concurrently as Director
+General of Corporate Reform
+& Management Dept. of
+Sinopec Corp. In October
+2018, he was appointed
+as Senior Vice President of
+Sinopec Corp.
+Chen Ge, aged 57, Senior
+Vice President of Sinopec
+Corp. Mr. Chen is a senior
+economist with a master
+degree. In February 2000,
+he was appointed as
+Deputy Director General of
+the Board Secretariat of
+Sinopec Corp. In December
+2001, he was appointed
+as Director General of
+the Board Secretariat of
+Sinopec Corp. In April
+2003, he was appointed as
+Secretary to the Board of
+Directors of Sinopec Corp.
+From April 2005 to August
+2013, he was appointed
+concurrently as Director
+General of Corporate
+Reform & Management
+Dept. of Sinopec Corp.
+In July 2010, he was
+appointed as Assistant
+to President of China
+Shou Donghua, aged 50,
+Chief Financial Officer of
+Sinopec Corp. Ms. Shou
+is a professor level senior
+accountant with a MBA
+degree. In July 2010, she
+was appointed as the Chief
+Financial Officer of Sinopec
+Zhenhai Refining & Chemical
+Company; in October 2014,
+she was appointed as Deputy
+Director General of Human
+Resource Department of
+Sinopec Corp.; in August
+2017, she was appointed
+as the Secretary of CPC
+Committee of Sinopec
+Zhenhai Refining & Chemical
+Company and Deputy
+General Manager of Sinopec
+Zhenhai Refining & Chemical
+Chen Ge
+Annual Report 2018 CHINA PETROLEUM & CHEMICAL CORPORATION
+70
+Shou Donghua
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2018
+35
+3,745
+(59,502)
+(16,427)
+(43,075)
+(49,753)
+5,495
+(18,989)
+(2,933)
+2,933
+5,495
+(46,008)
+(46,008)
+35
+(18,989)
+34
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+1,741
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Chief Financial Officer
+Shou Donghua
+The accompanying notes form part of these financial statements.
+Ma Yongsheng
+President
+Zhang Yuzhuo
+Chairman
+(46,008)
+876.905
+137,736
+739,169
+(116)
+74
+(190)
+(192)
+287,128
+207,423
+69
+(3,745)
+72,122
+(321)
+8གླུ 8g g88
+1,038
+14,696
+63,006
+57,591
+5,415
+2,060
+1,038
+5,415
+14,531
+57,591
+57,591
+139,304
+718,355
+5.415
+(299)
+(311)
+(7,476)
+122,127
+2
+2,933
+2,933
+121,071
+1,093
+77,702
+5,580
+87
+857,659
+857,659
+(2,728)
+(92)
+909
+(73,526)
+3,745
+Financial Statements (PRC)
+Transactions with owners, recorded directly in shareholders' equity:
+Financial Statements (PRC)
+121,071
+567,269
+177,049
+199,682
+482
+196
+68,789
+68,789
+RMB million
+RMB million
+RMB million
+RMB million
+equity
+earnings
+121,071
+196
+482
+199,682
+(71,795)
+3,996
+(67,799)
+(67,799)
+(3,996)
+3,996
+39,276
+39,957
+(681)
+(681)
+(681)
+39,957
+39,957
+567,269
+177,049
+reserves
+88
+reserve
+Share capital Capital reserve
+RMB million RMB million
+4. Net increase in specific reserve for the year
+Total transactions with owners, recorded directly in shareholders' equity
+-Distributions to shareholders (Note 53)
+-Appropriations for surplus reserves
+3. Appropriations of profits:
+279,482
+5. Others
+Total comprehensive income
+1. Net profit
+Change for the year
+Balance at 1 January 2018
+Balance at 31 December 2017
+Change in accounting policy
+For the year ended 31 December 2019
+STATEMENT OF CHANGES IN EQUITY
+2. Other comprehensive income
+Balance at 31 December 2018
+Balance at 1 January 2019
+Change for the year
+Retained shareholders'
+Surplus
+Specific
+comprehensive
+Total
+Other
+Total transactions with owners, recorded directly in shareholders' equity
+-Distributions to shareholders (Note 53)
+-Appropriations for surplus reserves
+Transactions with owners, recorded directly in shareholders' equity:
+3. Appropriations of profits:
+Amounts transferred to initial carrying amount of hedged items
+Total comprehensive income
+Other comprehensive income
+2.
+1. Net profit
+income
+RMB million
+203,678
+119,192
+(6,774)
+Distributions to minority interests
+6.
+Transaction with minority interests
+5.
+Contributions to subsidiaries from minority interests
+4.
+Total transactions with owners, recorded directly in shareholders' equity
+- Distributions to shareholders (Note 53)
+3. Appropriations of profits:
+Transactions with owners, recorded directly in shareholders' equity:
+Amounts transferred to initial carrying amount of hedged items
+---------------
+Total comprehensive income
+2. Other comprehensive income (Note 38)
+- Appropriations for surplus reserves
+7. Net increase in specific reserve for the year
+8. Others
+Balance at 31 December 2019
+reserve
+Total
+shareholders'
+Minority
+equity
+attributable
+to equity
+shareholders of
+Retained
+Surplus
+Specific
+Capital comprehensive
+income
+RMB million
+RMB million
+RMB million
+reserve
+capital
+Share
+Other
+Total
+shareholders'
+1. Net profit
+reserves
+Change for the year
+Balance at 31 December 2018
+Change in accounting policy
+Balance at 31 December 2017
+For the year ended 31 December 2019
+CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
+Chief Financial Officer
+Shou Donghua
+Balance at 1 January 2018
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Ma Yongsheng
+President
+Chairman
+Zhang Yuzhuo
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+(13,189)
+(138,786)
+The accompanying notes form part of these financial statements.
+Change for the year
+1. Net profit
+2. Other comprehensive income (Note 38)
+8. Others
+7. Net increase in specific reserve for the year
+Total transactions with owners, recorded directly in shareholders' equity
+Distributions to minority interests
+6.
+5. Transaction with minority interests
+Contributions to subsidiaries from minority interests
+4.
+- Distributions to shareholders (Note 53)
+- Appropriations for surplus reserves
+3. Appropriations of profits:
+Transactions with owners, recorded directly in shareholders' equity:
+Amounts transferred to initial carrying amount of hedged items
+-----------------
+Total comprehensive income
+Balance at 1 January 2019
+1,706
+RMB million
+earnings
+RMB million
+(12)
+(7,476)
+(12)
+(12)
+2,060
+(67,799)
+3,996
+(67,799)
+(3,996)
+3,996
+5,269
+5,269
+73.665
+18.194
+(67,799)
+(71,795)
+(67,811)
+(5,715)
+119,192
+121,071
+139,304
+718,355
+279,482
+203,678
+1,706
+(6,774)
+(67,799)
+121,071
+(2,636)
+(2,283)
+(353)
+818
+818
+55,471
+RMB million
+63.089
+994
+854,070
+126.826
+727,244
+290,459
+199,682
+888
+(12)
+(4,413)
+121.071
+RMB million
+equity
+interests
+RMB million
+RMB million
+the Company
+119,557
+12
+121,071
+119,557
+(7,618)
+5.269
+(7,618)
+(7,618)
+80,289
+17,200
+63,089
+63,089
+854,070
+126,826
+727,244
+290,471
+199,682
+888
+(4,425)
+(6,624)
+507
+121,071
+(2,063)
+Selling and distribution expenses
+General and administrative expenses
+Research and development expenses
+Taxes and surcharges
+Less: Operating costs
+Operating income
+For the year ended 31 December 2019
+INCOME STATEMENT
+Financial expenses
+Financial Statements (PRC)
+Financial Statements (PRC)
+83
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Chief Financial Officer
+Shou Donghua
+The accompanying notes form part of these financial statements.
+84
+Exploration expenses, including dry holes
+Add: Other income
+Investment income
+2019
+Notes
+Items that may be reclassified subsequently to profit or loss
+Other comprehensive income
+Termination of net profit
+Continuous operating net profit
+Classification by going concern:
+Less: Income tax expense
+Net profit
+Less: Non-operating expenses
+Profit before taxation
+Add: Non-operating income
+Operating profit
+Asset disposal gains
+Impairment losses
+Credit impairment losses
+Losses from changes in fair value
+Ma Yongsheng
+President
+2018
+Zhang Yuzhuo
+Chairman
+18,194
+Total other comprehensive income
+Foreign currency translation differences
+0.521
+0.476
+0.521
+0.476
+Total comprehensive income
+338
+63
+63
+17,200
+14,531
+63,089
+57,591
+38
+Attributable to:
+Equity shareholders of the Company
+Minority interests
+14,696
+55,471
+63,006
+73,665
+77,702
+(6,624)
+5,580
+3,399
+1,480
+(9,741)
+4,941
+(229)
+(810)
+(53)
+(31)
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+80,289
+RMB million
+40
+1,585
+Total other comprehensive income
+(617)
+1,384
+(64)
+201
+(681)
+Other comprehensive income that can be converted into profit or loss under the equity method
+Cash flow hedges
+37,452
+39,957
+37,452
+2,960
+1,886
+42,917
+39,957
+Total comprehensive income
+39,037
+39,276
+Refund of taxes and levies
+Cash received from sale of goods and rendering of services
+Cash flows from operating activities:
+2019
+RMB million
+Notes
+For the year ended 31 December 2019
+CONSOLIDATED CASH FLOW STATEMENT
+Chief Financial Officer
+Shou Donghua
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+The accompanying notes form part of these financial statements.
+Ma Yongsheng
+President
+Chairman
+Zhang Yuzhuo
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+39,338
+RMB million
+1,687
+599
+7,453
+8,597
+36,169
+28,302
+3,078
+3,420
+7,628
+168,905
+161,820
+812,355
+799,566
+40
+1,058,493
+1,021,272
+Cash at bank and on hand
+1,029
+9,417
+9,796
+665
+44,005
+39,808
+12
+(6,766)
+(534)
+6,407
+(42)
+132
+(20)
+(278)
+28,336
+28,062
+47
+2,777
+3,497
+1,135
+72,122
+80,289
+72,122
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+The accompanying notes form part of these financial statements.
+Ma Yongsheng
+President
+Chairman
+Zhang Yuzhuo
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+Shou Donghua
+530,110
+207,423
+949
+1,181
+68,841
+121,071
+Balance at 31 December 2019
+130,645
+Chief Financial Officer
+NOTES TO THE FINANCIAL STATEMENTS
+For the year ended 31 December 2019
+Basic
+-
+(1) Statement of compliance of China Accounting Standards for Business Enterprises ("CASS")
+2 BASIS OF PREPARATION
+Details of the Company's principal subsidiaries are set out in Note 57, and there are no significant changes related to the consolidation scope in the
+current year.
+(3) the production and sale of chemical.
+(2) the refining, transportation, storage and marketing of crude oil and petroleum product; and
+(1) the exploration, development and production of crude oil and natural gas;
+The Company and its subsidiaries (the "Group") engage in the oil and gas and chemical operations and businesses, including:
+The Company took over the exploration, development and production of crude oil and natural gas, refining, chemicals and related sales and
+marketing business of Sinopec Group Company after the establishment of the Company.
+Pursuant to the notice Guo Jing Mao Qi Gai [2000] No. 154 "Reply on the Formation of China Petroleum and Chemical Corporation", the Company
+obtained the approval from the State Economic and Trade Commission on 21 February 2000 for the formation of a joint stock limited company.
+In addition, pursuant to the notice Cai Guan Zi [2000] No. 34 "Reply to the Issue Regarding Management of State-Owned Equity by China Petroleum
+and Chemical Corporation" issued by the MOF, 68.8 billion domestic state-owned shares with a par value of RMB 1.00 each were issued to Sinopec
+Group Company, the amount of which is equivalent to 70% of the above net asset value transferred from Sinopec Group Company to the Company
+in connection with the Reorganisation.
+According to the State Council's approval to the “Preliminary Plan for the Reorganisation of China Petrochemical Corporation" (the "Reorganisation"),
+the Company was established by China Petrochemical Corporation, which transferred its core businesses together with the related assets and
+liabilities at 30 September 1999 to the Company. Such assets and liabilities had been valued jointly by China United Assets Appraisal Corporation,
+Beijing Zhong Zheng Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa International Properties Valuation Corporation. The net
+asset value was determined at RMB 98,249,084,000. The valuation was reviewed and approved by the Ministry of Finance (the "MOF") (Cai Ping
+Zi [2000] No. 20 “Comments on the Review of the Valuation Regarding the Formation of a Joint Stock Limited Company by China Petrochemical
+Corporation").
+China Petroleum & Chemical Corporation (the "Company") was established on 25 February 2000 as a joint stock limited company. The company is
+registered in Beijing, the People's Republic of China, and the headquarter is located in Beijing, the People's Republic of China. The approval date of
+the financial report is 27 March 2020.
+1 STATUS OF THE COMPANY
+(156)
+The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises
+Standards, specific standards and relevant regulations (hereafter referred as CASS collectively) issued by the MOF on or after 15 February
+2006. These financial statements also comply with the disclosure requirements of "Regulation on the Preparation of Information Disclosures of
+Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports" issued by the China Securities Regulatory Commission
+("CSRC"). These financial statements present truly and completely the consolidated and company financial position as at 31 December 2019,
+and the consolidated and company financial performance and the consolidated and company cash flows for the year ended 31 December 2019.
+(202)
+(40)
+143,148
+203,678
+989
+(485)
+68,795
+(60,486)
+(43,136)
+537,196
+537,196
+203,678
+989
+(485)
+68,795
+121,071
+(2,057)
+143.148
+37,452
+37,452
+1,585
+(40)
+4. Net increase in specific reserve for the year
+5. Others
+(46,008)
+(49,753)
+3,745
+(46,008)
+(46,008)
+(3,745)
+3,745
+81
+39,037
+37,452
+1,585
+81
+1,585
+46
+These financial statements are prepared on a basis of going concern.
+(2) Accounting period
+The accounting year of the Group is from 1 January to 31 December.
+Basic earnings per share
+Minority interests
+Equity shareholders of the Company
+Classification by ownership:
+Termination of net profit
+Continuous operating net profit
+Diluted earnings per share
+Classification by going concern:
+Less: Income tax expense
+Profit before taxation
+Less: Non-operating expenses
+Add: Non-operating income
+Operating profit
+(742)
+Net profit
+Other comprehensive income
+Items that may not be reclassified subsequently to profit or loss
+Changes in fair value of other equity instrument investments
+20,213
+17,894
+52
+100,502
+90,016
+3,042
+2,607
+51
+2,070
+2,598
+50
+101,474
+90,025
+Other comprehensive income that can be converted into profit or loss under the equity method
+Cash flow hedges
+Items that may be reclassified subsequently to profit or loss
+(1,318)
+Asset disposal losses
+(11,605)
+(1,789)
+43/45
+Exploration expenses, including dry holes
+(1,001)
+9,967
+Financial Statements (PRC)
+89
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+The functional currency of the Company's and most of its subsidiaries are Renminbi. The Company and its subsidiaries determine their functional
+currency according to the main economic environment in where they operate. The Group's consolidated financial statements are presented in
+Renminbi. Some of subsidiaries use other currency as the functional currency. The Company translates the financial statements of subsidiaries
+from their respective functional currencies into Renminbi (see Note 3(2)) if the subsidiaries' functional currencies are not Renminbi.
+(4) Functional currency and presentation currency
+Receivables financing (see Note 3(11))
+Derivative financial instruments (see Note 3(11))
+Other equity instrument investments (see Note 3(11))
+-
+The financial statements of the Group have been prepared under the historical cost convention, except for the assets and liabilities set out below:
+Financial assets held for trading (see Note 3(11))
+(3) Measurement basis
+10,510
+507
+10,744
+46
+49
+Impairment losses
+(141)
+(1,264)
+Credit impairment losses
+2,656
+(3,511)
+48
+(Losses)/gains from changes in fair value
+11,428
+12,628
+47
+Investment income
+6,694
+5,973
+Add: Other income
+(248,701)
+17,465
+(104,780)
+Cash paid for dividends, profits distribution or interest
+(59,523)
+(87,483)
+Including: Subsidiaries' cash payments for distribution of dividends or
+profits to minority shareholders
+(7,354)
+(772,072)
+(13,700)
+54(d)
+(17,187)
+(436)
+Sub-total of cash outflows
+Net cash flow from financing activities
+(688,818)
+(84,713)
+Other cash paid relating to financing activities
+(612,108)
+Cash repayments of borrowings
+190
+748,731
+(120,463)
+(66,422)
+Cash flows from financing activities:
+Cash received from capital contributions
+3,919
+1,886
+Including: Cash received from minority shareholders' capital contributions to subsidiaries
+Cash received from borrowings
+3,919
+1,886
+599,866
+746,655
+Other cash received relating to financing activities
+320
+Sub-total of cash inflows
+604,105
+(859,991)
+Net cash flow from investing activities
+(111,260)
+147
+2,966,193
+40
+40/43
+Taxes and surcharges
+Less: Operating costs
+Operating income
+2018
+RMB million
+2,891,179
+RMB million
+Notes
+For the year ended 31 December 2019
+CONSOLIDATED INCOME STATEMENT
+Chief Financial Officer
+Shou Donghua
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+2019
+2,488,852
+2,401,012
+41
+Net decrease in cash and cash equivalents
+54(b)
+(51,609)
+518
+Research and development expenses
+73,390
+62,112
+43
+General and administrative expenses
+59,396
+63,516
+43
+Selling and distribution expenses
+246,498
+242,535
+Effects of changes in foreign exchange rate
+82
+(231,061)
+(3,188)
+Sub-total of cash inflows
+Cash paid for goods and services
+Cash paid to and for employees
+Payments of taxes and levies
+Other cash paid relating to operating activities
+Sub-total of cash outflows
+90,625
+Net cash flow from operating activities
+Cash received from disposal of investments
+Cash received from returns on investments
+Net cash received from disposal of fixed assets, intangible assets
+and other long-term assets
+3,275,216
+3,281,310
+Cash flows from investing activities:
+98,327
+3,189,004
+1.681
+2018
+RMB million
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+Zhang Yuzhuo
+Chairman
+Ma Yongsheng
+President
+The accompanying notes form part of these financial statements.
+Shou Donghua
+Chief Financial Officer
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+81
+Financial Statements (PRC)
+Financial Statements (PRC)
+BALANCE SHEET
+As at 31 December 2019
+Other cash received relating to operating activities
+3,174,862
+2,027
+(2,598,630)
+(265,238)
+(2,565,392)
+(77,048)
+Net cash received from disposal of subsidiaries and other business entities
+Sub-total of cash inflows
+11
+144,775
+164,639
+Cash paid for acquisition of fixed assets, intangible assets and other long-term assets
+Cash paid for acquisition of investments
+(141,142)
+87,696
+(103,014)
+(39,666)
+Other cash paid relating to investing activities
+(106,731)
+(85,193)
+Net cash paid for the acquisition of subsidiaries and other business entities
+Sub-total of cash outflows
+(1,031)
+(16,334)
+97,804
+Other cash received relating to investing activities
+9,666
+Current assets
+(315,668)
+(329,387)
+(124,416)
+(133,615)
+(3,121,796)
+(3,105,442)
+54(a)
+153,420
+175,868
+35,996
+56,546
+10,272
+10,720
+703
+(83,082)
+The accompanying notes form part of these financial statements.
+Ma Yongsheng
+President
+Chairman
+232,565
+15,835
+25,149
+45,825
+49,116
+57,432
+257,104
+78,872
+2,488
+2,665
+10
+207
+156
+29,989
+21,544
+11
+13
+3
+304,687
+2,490
+11,021
+7,315
+2,480
+2,630
+8,571
+8,809
+51,598
+60,493
+112,832
+302,082
+291,547
+456
+395
+395
+289,207
+8
+9,145
+940
+54,072
+Fixed assets
+Other equity instrument investments
+Long-term equity investments
+Non-current assets
+Total current assets
+Other current assets
+Construction in progress
+Inventories
+Prepayments
+Receivables financing
+Accounts receivable
+Bills receivable
+Derivative financial assets
+Financial assets held for trading
+Other receivables
+Right-of-use assets
+Intangible assets
+Long-term deferred expenses
+RMB million
+2018
+At 31 December
+RMB million
+At 31 December
+2019
+Notes
+Contract liabilities
+Accounts payable
+Bills payable
+Derivative financial liabilities
+Short-term loans
+Liabilities and shareholders' equity
+Current liabilities
+Total assets
+Other non-current assets
+Total non-current assets
+Deferred tax assets
+82,879
+22,500
+791,198
+674,499
+1,023,763
+121,071
+121,071
+394,407
+493,653
+105,530
+166,448
+68,841
+4,332
+33,094
+34,514
+107,783
+20,000
+7,000
+48,104
+4,471
+68,795
+1,181
+(485)
+Zhang Yuzhuo
+931,603
+537,196
+530,110
+1,023,763
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+Total liabilities and shareholders' equity
+Total shareholders' equity
+143,148
+130,645
+203,678
+207,423
+Retained earnings
+Surplus reserves
+989
+949
+12,680
+Specific reserve
+Other comprehensive income
+Capital reserve
+54,764
+43,025
+Taxes payable
+4,294
+1,214
+Employee benefits payable
+4,230
+5,112
+82,343
+75,352
+2,075
+4,766
+3,961
+967
+19,919
+157
+931,603
+Other payables
+1,592,308
+118,064
+Non-current liabilities due within one year
+Share capital
+Shareholders' equity
+Total liabilities
+Total non-current liabilities
+Other non-current liabilities
+Provisions
+Lease liabilities
+Debentures payable
+Long-term loans
+Non-current liabilities
+288,877
+327,205
+Total current liabilities
+16,729
+59,596
+119,514
+(261,930)
+857,659
+139,304
+Financial expenses
+7,956
+9,395
+43/44
+Financial Statements (PRC)
+REPORT OF THE PRC AUDITOR (CONTINUED)
+42
+AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (Cont'd)
+From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of
+the 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.
+PricewaterhouseCoopers Zhong Tian LLP
+Shanghai, the People's Republic of China.
+27 March 2020
+80
+Annual Report 2019 CHINA PETROLEUM & CHEMICAL CORPORATION
+Signing CPA Zhao Jianrong
+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.
+(1,296)
+These financial statements have been approved for issue by the board of directors on 27 March 2020.
+Zhang Yuzhuo
+Chairman
+Other cash received relating to operating activities
+Cash flows from operating activities:
+2019
+RMB million
+Notes
+For the year ended 31 December 2019
+CASH FLOW STATEMENT
+Financial Statements (PRC)
+86
+Financial Statements (PRC)
+85
+CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2019
+Chief Financial Officer
+Shou Donghua
+The accompanying notes form part of these financial statements.
+Ma Yongsheng
+President
+(Engagement Partner)
+Cash received from sale of goods and rendering of services
+Signing CPA Gao Peng
+As at 31 December 2019
+7,886
+9
+10
+11
+8162
+54,865
+7,887
+56,993
+5,066
+5,937
+24,109
+25,312
+192,442
+184,584
+8,622
+167,015
+25,732
+3,319
+837
+127,927
+Notes
+At 31 December
+2019
+RMB million
+At 31 December
+2018
+RMB million
+Assets
+Current assets
+Cash at bank and on hand
+Financial assets held for trading
+Derivative financial assets
+Bills receivable
+Accounts receivable
+Receivables financing
+Prepayments
+Other receivables
+Inventories
+567
+(A) FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES
+CONSOLIDATED BALANCE SHEET
+Other current assets
+Refund of taxes and levies
+Cash paid for goods and services
+Cash repayments of borrowings
+Sub-total of cash inflows
+Other cash received relating to financing activities
+Cash received from borrowings
+Cash flows from financing activities:
+------------
+Cash paid for dividends or interest
+Net cash flow from investing activities
+Other cash paid relating to investing activities
+(40,169)
+(16,884)
+(54,792)
+(64,100)
+Cash paid for acquisition of fixed assets, intangible assets and other long-term assets
+Cash paid for acquisition of investments
+Sub-total of cash outflows
+Other cash paid relating to financing activities
+Sub-total of cash outflows
+Net cash flow from financing activities
+(71,944)
+(50,230)
+(176,757)
+(106,920)
+109,915
+201,444
+91,865
+109,915
+109,579
+(36,426)
+(123,720)
+(134,122)
+(28,759)
+(53,138)
+Net decrease in cash and cash equivalents
+141,185
+Sub-total of cash inflows
+97,696
+28,724
+------
+1,170,878
+19,380
+6,239
+1,228,816
+1,481
+2018
+RMB million
+1,249,677
+1,162,870
+1,769
+Cash flows from investing activities:
+Net cash flow from operating activities
+Sub-total of cash outflows
+Other cash paid relating to operating activities
+Payments of taxes and levies
+Cash paid to and for employees
+Cash received from disposal of investments
+(842,996)
+(45,524)
+(209,863)
+(867,259)
+(41,770)
+42,037
+2,838
+690
+Net cash received from disposal of fixed assets, intangible assets and other long-term assets
+Other cash received relating to investing activities
+43,693
+31,385
+Cash received from returns on investments
+65,930
+23,584
+108,132
+53,776
+(26,211)
+(1,141,545)
+(1,117,102)
+(18,719)
+(206,305)
+Sub-total of cash inflows
+28,669
+22,774
+Total current assets
+Shareholders' equity
+Share capital
+Capital reserve
+31
+39,625
+61,576
+Total liabilities
+32
+31,951
+33
+177,674
+34
+43,163
+42,800
+19,157
+Total non-current liabilities
+Other non-current liabilities
+Deferred tax liabilities
+69,339
+87,060
+29
+72,324
+77,463
+30
+69,490
+17,450
+Total current liabilities
+576,374
+565,098
+Non-current liabilities
+Long-term loans
+Debentures payable
+Lease liabilities
+Provisions
+20
+28
+6,809
+35
+Total liabilities and shareholders' equity
+38
+(321)
+(6,774)
+1,741
+1,706
+Total shareholders' equity
+39
+203,678
+287,128
+279,482
+739,169
+718,355
+137,736
+207,423
+Minority interests
+Total equity attributable to shareholders of the Company
+Retained earnings
+15,364
+27,276
+301,792
+169,551
+878,166
+734,649
+36
+121,071
+121,071
+37
+122,127
+119,192
+Other comprehensive income
+Specific reserve
+Surplus reserves
+5,948
+7,312
+4,769
+124,793
+Long-term deferred expenses
+Deferred tax assets
+Other non-current assets
+Total assets
+Liabilities and shareholders' equity
+Current liabilities
+Goodwill
+Short-term loans
+18
+19
+20
+45678222
+622,423
+617,812
+17
+Intangible assets
+Total non-current assets
+16
+445,856
+504,120
+Non-current assets
+Long-term equity investments
+13
+152,204
+145,721
+Other equity instrument investments
+1,521
+1,450
+Fixed assets
+14
+Construction in progress
+15
+Right-of-use assets
+173,482
+136,963
+198,051
+108,956
+Other payables
+Non-current liabilities due within one year
+272222222
+23
+31,196
+44,692
+2,729
+13,571
+24
+11,834
+6,416
+187,958
+186,341
+26
+126,735
+Taxes payable
+876,905
+1,755,071
+Employee benefits payable
+25
+103,855
+8,697
+8,676
+8,930
+15,659
+17,616
+21,694
+17,335
+36,358
+1,309,215
+1,755,071
+1,088,188
+1,592,308
+Derivative financial liabilities
+Bills payable
+Accounts payable
+Contract liabilities
+Assets