2
3
6
8
11
19
29
40
43
50
60
62
Company Profile
Principal Financial Data and Indicators
Changes in Share Capital and Shareholdings
of Principal Shareholders
Board’s Statement
Business Review and Prospects
Management’s Discussion and Analysis
Significant Events
Connected Transactions
Corporate Governance
Report of the Board of Directors
Report of the Board of Supervisors
Directors, Supervisors, Senior
Management and Employees
78
Principal Wholly-owned and
Controlled Subsidiaries
Financial Statements
Corporate Information
Documents for Inspection
79
213
214
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.
CONTENTS 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.
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.
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;
Sinopec group: China Petrochemical Corporation and its subsidiaries;
Shanghai SECCO: Shanghai SECCO Petrochemical Company Limited;
Sichuan-to-East China Pipeline Co.: Sinopec Sichuan-to-East China Natural Gas Pipeline Co., Ltd;
RMC: Oil and Natural Gas Reserves Management Committee of the Company;
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.
2
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017COMPANY PROFILECompany Profile 1 FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH ASBE
(1) Principal financial data
Items
Operating income
Operating profit
Profit before taxation
Net profit attributable to equity shareholders of the Company
Net profit attributable to equity shareholders of the Company excluding
extraordinary gains and losses
Net cash flow from operating activities
For the year ended 31 December
2017
RMB million
2,360,193
86,965
86,573
51,119
2016
RMB million
1,930,911
77,389
79,877
46,416
Change
%
22.2
12.4
8.4
10.1
2015
RMB million
2,020,375
51,553
56,093
32,281
45,582
190,935
29,713
214,543
53.4
(11.0)
28,901
165,740
Items
Operating income
Net profit attributable to equity shareholders of the Company
Net profit attributable to equity shareholders of the Company
excluding extraordinary gains and losses
Net cash flow from operating activities
Items
Total assets
Total liabilities
Total equity attributable to equity shareholders of the Company
Total number of shares (1,000 shares)
(2) Principal financial indicators
First
Quarter
RMB million
582,185
16,633
Second
Quarter
RMB million
For the year of 2017
Third
Quarter
RMB million
583,652
10,459
579,118
11,281
Fourth
Quarter
RMB million
615,238
12,746
Total
RMB million
2,360,193
51,119
16,540
13,276
9,559
47,571
10,619
50,346
8,864
79,742
45,582
190,935
As of 31 December
2017
RMB million
1,595,504
741,434
727,244
121,071,210
2016
RMB million
1,498,609
666,084
712,232
121,071,210
Change
%
6.5
11.3
2.1
—
2015
RMB million
1,447,268
657,703
677,538
121,071,210
For the year ended 31 December
Items
Basic earnings per share
Diluted earnings per share
Basic earnings per share (excluding extraordinary gains and losses)
Weighted average return on net assets (%)
2017
RMB
0.422
0.422
0.376
7.14
2016
RMB
0.383
0.383
0.245
6.68
Weighted average return (excluding extraordinary gains and losses)
on net assets (%)
6.37
4.33
Net cash flow from operating activities per share
1.577
1.772
Items
Net assets attributable to equity shareholders of the Company per share
Liabilities to assets ratio (%)
As of 31 December
2016
RMB
2017
RMB
6.007
46.47
5.883
44.45
Change
%
10.2
10.2
53.5
0.46
percentage
points
2.04
percentage
points
(11.0)
Change
%
2.1
2.02
percentage
points
2015
RMB
0.267
0.267
0.239
5.07
4.52
1.371
2015
RMB
5.606
45.44
3
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017PRINCIPAL FINANCIAL DATA AND INDICATORSPrincipal Financial Data and Indicators
(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
Investment income on loss of control and remeasuring interests in pipeline company
Gain on remeasurement of interests in Shanghai SECCO
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
2017
RMB million
2016
RMB million
2015
RMB million
1,518
152
(4,783)
(148)
—
(3,941)
690
—
(6,512)
976
(5,536)
(5,537)
1
1,489
133
(3,987)
(518)
(20,562)
—
1,367
(86)
(22,164)
5,578
(16,586)
(16,703)
117
665
112
(5,002)
(943)
—
—
387
(134)
(4,915)
1,060
(3,855)
(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
Beginning of
the year
262
314
(4,024)
—
(3,448)
End of
the year
178
(522)
(1,617)
51,196
49,235
Unit: RMB million
Influence
on the profit
of the year
41
(1,105)
(1,486)
196
(2,354)
Changes
(84)
(836)
2,407
51,196
52,683
(5) Significant changes of items in the financial statements
The table below sets forth reasons for those changes where the fluctuation was more than 30% during the reporting period:
Items
Accounts receivable
As of 31 December
2017
RMB million
2016
RMB million
Increase/(decrease)
Amount
RMB million
Percentage
(%)
Reasons for change
68,494
50,289
18,205
36.2
(35.7)
(85.3)
36.0
(42.9)
(76.4)
(38.1)
Mainly due to the increase in crude oil price and refined oil products
export.
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.
Parts of debentures payable are converted to non-current liabilities due
within one year.
Mainly due to increase in profit, sufficient capital reserve and increase
in interest revenue
Mainly due to the income from restructuring of pipeline assets in 2016
and the impact of equity acquisition of Shanghai SECCO in 2017.
Other receivables
16,467
25,596
(9,129)
Available-for-sale financial assets
1,676
11,408
(9,732)
Taxes payable
71,940
52,886
19,054
Debentures payable
31,370
54,985
(23,615)
Financial expenses
1,560
6,611
(5,051)
Income of investment
19,060
30,779
(11,719)
4
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017PRINCIPAL FINANCIAL DATA AND INDICATORS (CONTINUED)Principal Financial Data and Indicators
2 FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS
Items
Turnover and other operating revenues
Operating profit
Profit before taxation
Profit attributable to owners of the Company
Basic earnings per share (RMB)
Diluted earnings per share (RMB)
Return on capital employed (%)
Return on net assets (%)
Net cash generated from operating activities per share (RMB)
Items
Non-current assets
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)
Unit: RMB million
For the year ended 31 December
2016
2015
2014
2013
1,930,911
77,193
80,151
46,672
0.385
0.385
7.30
6.56
1.772
2,020,375
56,822
56,411
32,512
0.269
0.269
5.23
4.81
1.371
2,827,566
73,439
65,818
46,639
0.399
0.399
6.06
7.84
1.267
2,881,928
96,763
95,444
66,348
0.571
0.536
8.03
11.62
1.305
Unit: RMB million
As of 31 December
2016
2015
2014
2013
1,086,348
73,282
181,831
120,241
710,994
5.873
5.808
1,113,611
129,175
196,275
111,964
676,197
5.585
5.517
1,094,035
242,892
201,540
54,348
595,255
5.033
4.969
1,012,703
197,440
189,485
54,691
571,087
4.899
4.860
2017
2,360,193
71,470
86,697
51,244
0.423
0.423
8.26
7.06
1.577
2017
1,066,455
50,397
163,168
126,770
726,120
5.997
5.868
3 MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER ASBE AND IFRS PLEASE REFER TO PAGE 206 OF
THE REPORT.
5
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Principal Financial Data and Indicators 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:
Name of shareholders
China Petrochemical Corporation
HKSCC Nominees Limited2
中國證券金融股份有限公司
HKSCC Nominees Limited
中央匯金資產管理有限責任公司
長江證券股份有限公司
中國工商銀行-上證50交易型開放式指數證券投資基金
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
國泰君安證券股份有限公司
全國社保基金一一五組合
Nature of
Shareholders
Percentage of
shareholdings %
Total number of
shares held
Unit: Share
Number of
Changes of shares subject to
shareholding1 pledges or lock-up
State-owned Share
H Share
A Share
A Share
A Share
A Share
A Share
A Share
A Share
A Share
70.86
20.96
2.75
0.33
0.27
0.07
0.07
0.06
0.05
0.04
85,792,671,101
25,379,806,872
3,331,730,143
400,982,945
322,037,900
88,458,695
80,551,930
0
153,819
1,470,304,825
39,831,541
0
17,261,400
2,693,300
68,970,054
54,884,077
54,190,722
23,033,290
(76,251,129)
54,190,722
0
Unknown
0
0
0
0
0
0
0
0
Note 1: As compared with the number of shares held as of 31 December 2016.
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.
Statement on the connected relationship or acting in concert among the above-mentioned shareholders:
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.
Status of shareholders
Interest of corporation controlled by the
substantial shareholder
Beneficial owner
Schroders Plc.
Investment manager
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)
20,400(L)
984,349,338(L)
1,278,173,372(L)
Approximate percentage
of Sinopec Corp.’s issued
share capital (H Share) (%)
8.94(L)
0.02(S)
1.82(L)
0.89(S)
0.07(L)
0.00(L)
3.86(L)
5.01(L)
6
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERSChanges in Share Capital and Shareholdings of Principal Shareholders
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
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. 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.
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.
Shares of other listed companies directly
held by China Petrochemical Corporation
Name of Company
Sinopec Engineering
(Group) Co. Ltd
Sinopec Oilfield Service
Corporation
Sinopec Oilfield Equipment
Corporation
China Merchants Energy
Shipping Co., Ltd
Number of
Shares Held
Shareholding
Percentage
2,907,856,000
65.67%
9,224,327,662
65.22%
351,351,000
58.74%
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
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
*:
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.
7
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Changes in Share Capital and Shareholdings of Principal Shareholders 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
Mr. Dai Houliang, Vice Chairman & President
Dear Shareholders and Friends:
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.
8
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017BOARD’S STATEMENTBoard’s Statement 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.
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
9
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Board’s Statement BUSINESS REVIEW
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.
1 MARKET REVIEW
(1) Crude Oil & Natural Gas Market
(2) Refined Oil Products Market
(3) Chemical Products 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.
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.
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.
11
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017BUSINESS REVIEW AND PROSPECTSBusiness Review and Prospects 2 PRODUCTION & OPERATIONS REVIEW
(1) Exploration and Production
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
and made new discoveries in the Xinjiang
Tahe Basin and the Sichuan Basin.
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
Summary of Operations for the Exploration and Production Segment
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%.
Oil and gas production (mmboe)
Crude oil production (mmbbls)
China
Overseas
Natural gas production (bcf)
Summary of Reserves of Crude Oil and Natural Gas
Items
Proved reserves
Proved developed reserves
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Proved undeveloped reserves
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
2017
448.79
293.66
248.88
44.78
912.50
2016
431.29
303.51
253.15
50.36
766.12
Change from
2015 2016 to 2017 (%)
471.91
349.47
296.34
53.13
734.79
4.1
(3.2)
(1.7)
(11.1)
19.1
Crude oil reserves (mmbbls)
31 December 2017
31 December 2016
1,599
1,429
1,124
1,124
811
313
305
32
273
170
137
137
49
88
33
0
33
1,552
1,393
1,080
1,080
801
279
313
40
273
159
136
136
37
99
23
0
23
12
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017BUSINESS REVIEW AND PROSPECTS (CONTINUED)Business Review and Prospects Items
Proved reserves
Proved developed reserves
China
Consolidated subsidiaries
Puguang
Fuling
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Proved developed reserves
China
Consolidated subsidiaries
Fuling
Others
Exploration and Production Activities
Natural gas reserves (bcf)
31 December 2017
31 December 2016
7,178
6,454
6,436
6,436
2,330
1,226
2,880
18
0
18
724
724
724
0
724
6,997
6,012
6,000
6,000
2,127
1,121
2,752
12
0
12
985
985
985
187
798
2016
Wells drilled (as of 31 December)
2017
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Total
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Total
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Total
Exploratory
Development
Exploratory
Development
Productive
266
266
151
115
2
0
2
268
Dry
149
149
71
78
1
0
1
150
Productive
Dry
Productive
1,442
1,442
845
597
119
0
119
1,561
9
9
1
8
0
0
0
9
266
266
166
100
2
0
2
268
Dry
149
149
73
76
1
0
1
150
Productive
Dry
801
801
462
339
99
0
99
900
6
6
5
1
0
0
0
6
Wells drilling (as of 31 December)
2017
2016
Gross
Net
Gross
Net
Exploratory Development Exploratory Development Exploratory Development Exploratory Development
62
62
19
43
0
0
0
62
147
147
0
147
5
0
5
152
62
62
19
43
0
0
0
62
147
147
0
147
5
0
5
152
78
78
28
50
0
0
0
78
138
138
21
117
2
0
2
140
78
78
28
50
0
0
0
78
Oil productive wells (as of 31 December)
2017
2016
Gross
50,121
50,121
32,105
18,016
7,350
28
7,322
57,471
Net
50,121
50,121
32,105
18,016
3,968
14
3,954
54,089
Gross
49,921
49,921
32,019
17,902
7,432
28
7,404
57,353
138
138
21
117
2
0
2
140
Net
49,921
49,921
32,019
17,902
3,614
14
3,600
53,535
13
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Business Review and Prospects Region
China
Consolidated subsidiaries
Puguang
Fuling
Others
Total
Acreage with exploration licenses
China
Acreage with development licenses
China
Overseas
(2) Refining
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
oil products quality upgrading, the GB
Summary of Operations for the Refining Segment
Natural gas productive wells (as of 31 December)
2017
2016
Gross
4,800
4,800
57
266
4,477
4,800
Net
4,762
4,762
57
266
4,439
4,762
Gross
4,966
4,966
57
253
4,656
4,966
Net
4,932
4,932
57
253
4,622
4,932
Unit: Square kilometers
Area under license (as of 31 December)
2017
621,529
621,529
36,604
31,498
5,106
2016
742,588
742,588
33,305
28,436
4,869
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.
Unit: million tonnes
Change from
2016 to 2017 (%)
2015
1.3
236.49
1.0
148.38
1.2
53.98
(0.9)
70.05
5.5
24.35
38.81
0.2
76.50 (0.48) percentage points
0.18 percentage points
94.75
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
Refinery throughput
Gasoline, diesel and kerosene production
Gasoline
Diesel
Kerosene
Light chemical feedstock production
Light product yield (%)
Refinery yield (%)
Note: Includes 100% of the production of domestic joint ventures.
2017
238.50
150.67
57.03
66.76
26.88
38.60
75.85
94.88
2016
235.53
149.17
56.36
67.34
25.47
38.54
76.33
94.70
(3) Marketing and Distribution
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
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.
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.
14
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017BUSINESS REVIEW AND PROSPECTS (CONTINUED)Business Review and Prospects Summary of Operations for the Marketing and Distribution Segment
Total sales volume of oil products (million tonnes)
Total domestic sales volume of oil products (million tonnes)
Retail sales (million tonnes)
Direct sales and distribution (million tonnes)
Annual average throughput per station (tonne/station)
2017
198.75
177.76
121.56
56.20
3,969
2016
194.84
172.70
120.14
52.56
3,926
Total number of service stations under the Sinopec brand
Number of company-operated stations
30,633
30,627
30,603
30,597
30,560
30,547
0.1
0.1
31 December
2017
31 December
2016
31 December
2015
(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
demand. We optimised production and
operation based on market conditions
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
Summary of Operations for the Chemicals Segment
Ethylene
Synthetic resin
Synthetic rubber
Synthetic fiber monomer and polymer
Synthetic fiber
2017
11,610
15,938
848
9,439
1,220
2016
11,059
15,201
857
9,275
1,242
Change from
2015 2016 to 2017 (%)
189.33
171.37
119.03
52.34
3,896
2.0
2.9
1.2
6.9
1.1
Change from
the end of the
previous year to
the end of the
reporting period
(%)
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.
Unit: thousand tonnes
Change from
2015 2016 to 2017 (%)
11,118
15,065
843
8,994
1,282
5.0
4.8
(1.1)
1.8
(1.8)
Note: Includes 100% of the production of domestic joint ventures.
(5) Research and Development
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
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
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.
15
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Business Review and Prospects (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.
(7) Capital Expenditures
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
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.
BUSINESS PROSPECTS
(1) Market Outlook
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.
(2) Operations
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:
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.
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.
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.
16
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017BUSINESS REVIEW AND PROSPECTS (CONTINUED)Business Review and Prospects 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.
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.
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.
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.
17
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Business Review and Prospects 18
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussionand 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 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%.
The following table sets forth the main revenue and expenses from the Company’s consolidated financial statements:
Turnover and other operating revenues
Turnover
Other operating revenues
Operating expenses
Purchased crude oil, product and operating supplies and expenses
Selling, general and administrative expenses
Depreciation, depletion and amortisation
Exploration expenses, including dry holes
Personnel expenses
Taxes other than income tax
Other operating (expense)/income, net
Operating profit
Net finance costs
Investment income and share of profits less losses from associates and joint ventures
Profit before taxation
Tax expense
Profit for the year
Attributable to:
Owners of the Company
Non-controlling interests
(1) Turnover and other operating revenues
Year ended 31 December
2017
RMB million
2,360,193
2,300,470
59,723
(2,288,723)
(1,770,651)
(64,973)
(115,310)
(11,089)
(74,854)
(235,292)
(16,554)
71,470
(1,560)
16,787
86,697
(16,279)
70,418
2016
RMB million
1,930,911
1,880,190
50,721
(1,853,718)
(1,379,691)
(64,360)
(108,425)
(11,035)
(63,887)
(232,006)
5,686
77,193
(6,611)
9,569
80,151
(20,707)
59,444
51,244
19,174
46,672
12,772
Change (%)
22.2
22.4
17.7
23.5
28.3
1.0
6.4
0.5
17.2
1.4
—
(7.4)
(76.4)
75.4
8.2
(21.4)
18.5
9.8
50.1
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.
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:
Crude oil
Natural gas (million cubic meters)
Gasoline
Diesel
Kerosene
Basic chemical feedstock
Monomer and polymer for synthetic fibre
Synthetic resin
Synthetic fibre
Synthetic rubber
Chemical fertiliser
Sales volume (thousand tonnes)
Year ended 31 December
Average realised price
(RMB/tonne, RMB/thousand cubic meters
Year ended 31 December
2017
6,567
22,529
83,933
88,848
25,557
35,964
10,267
13,199
1,304
1,128
698
2016
6,808
19,008
77,480
91,492
25,164
32,248
7,146
12,223
1,369
1,098
714
Change (%)
(3.5)
18.5
8.3
(2.9)
1.6
11.5
43.7
8.0
(4.7)
2.7
(2.2)
2017
2,390
1,290
6,941
5,038
3,531
4,855
6,038
8,155
8,556
11,913
2,010
2016
1,628
1,258
6,386
4,482
2,807
4,054
5,325
7,488
7,113
9,608
1,612
Change (%)
46.8
2.5
8.7
12.4
25.8
19.8
13.4
8.9
20.3
24.0
24.7
19
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017MANAGEMENT’S DISCUSSION AND ANALYSISManagement’s Discussionand Analysis
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
was mainly due to the increase in crude
oil prices and sales volume of natural gas
in 2017.
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.
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.
(2) Operating expenses
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:
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:
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.
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.
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 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.
Selling, general and administrative
expenses were RMB 65.0 billion,
representing an increase of 1.0% over
2016.
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.
Exploration expenses were RMB 11.1
billion, representing an increase of 0.5%
year on year.
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.
Taxes other than income tax were RMB
235.3 billion, representing an increase of
1.4% compared with 2016.
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.
(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.
(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.
(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.
(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.
(7) Profit attributable to non-controlling
interests was RMB 19.2 billion,
representing an increase of RMB 6.4
billion compared with 2016.
(8) Profit attributable to owners of the
Company was RMB 51.2 billion,
representing an increase of 9.8% year on
year.
20
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)Management’s Discussionand Analysis 2 RESULTS OF SEGMENT OPERATIONS
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
revenues.
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.
Operating revenues
Year ended 31 December
2017
RMB million
2016
RMB million
As a percentage of
consolidated operating
revenue before elimination
of inter-segment sales
Year ended 31 December
2017
(%)
2016
(%)
79,701
77,804
157,505
137,582
874,271
1,011,853
1,220,235
3,962
1,224,197
388,128
49,615
437,743
534,547
440,303
974,850
3,806,148
56,985
58,954
115,939
108,469
747,317
855,786
1,049,377
3,480
1,052,857
296,500
38,614
335,114
419,580
320,367
739,947
3,099,643
2.1
2.0
4.1
3.6
23.0
26.6
32.1
0.1
32.2
10.2
1.3
11.5
14.0
11.6
25.6
100.0
1.8
1.9
3.7
3.5
24.2
27.7
33.9
0.1
34.0
9.6
1.2
10.8
13.5
10.3
23.8
100.0
As a percentage of
consolidated operating
revenue after elimination
of inter-segment sales
Year ended 31 December
2017
(%)
3.4
2016
(%)
3.0
5.8
5.6
51.7
54.3
16.5
15.4
22.6
21.7
(1,445,955)
2,360,193
(1,168,732)
1,930,911
100.0
100.0
Exploration and Production Segment
External sales*
Inter-segment sales
Operating revenues
Refining Segment
External sales*
Inter-segment sales
Operating revenues
Marketing and Distribution Segment
External sales*
Inter-segment sales
Operating revenues
Chemicals Segment
External sales*
Inter-segment sales
Operating revenues
Corporate and Others
External sales*
Inter-segment sales
Operating revenues
Operating revenue before elimination of
inter-segment sales
Elimination of inter-segment sales
Consolidated operating revenue
*: Other operating revenues are included.
21
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Management’s Discussionand Analysis
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.
Year ended 31 December
2017
RMB million
2016
RMB million
Change
(%)
157,505
203,449
(45,944)
1,011,853
946,846
65,007
1,224,197
1,192,628
31,569
437,743
410,766
26,977
974,850
979,334
(4,484)
(1,655)
115,939
152,580
(36,641)
855,786
799,521
56,265
1,052,857
1,020,704
32,153
335,114
314,491
20,623
739,947
736,735
3,212
1,581
35.9
33.3
—
18.2
18.4
15.5
16.3
16.8
(1.8)
30.6
30.6
30.8
31.7
32.9
—
—
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:
‧ 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%.
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.
Exploration and Production Segment
Operating revenues
Operating expenses
Operating loss
Refining Segment
Operating revenues
Operating expenses
Operating profit
Marketing and Distribution Segment
Operating revenues
Operating expenses
Operating profit
Chemicals Segment
Operating revenues
Operating expenses
Operating profit
Corporate and Others
Operating revenues
Operating expenses
Operating (loss)/profit
Elimination of inter-segment (loss)/profit
(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.
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.
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.
22
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)Management’s Discussionand Analysis
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.
Gasoline
Diesel
Kerosene
Chemical feedstock
Other refined petroleum products
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.
In 2017, sales revenues of gasoline
were RMB 354.8 billion, representing an
increase of 14.6% over 2016.
The sales revenues of diesel were RMB
301.1 billion, representing an increase of
13.8% over 2016.
The sales revenues of kerosene were RMB
60.2 billion, representing an increase of
47.3% 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 refined petroleum
products other than gasoline, diesel,
kerosene and chemical feedstock were
RMB 172.2 billion, representing an
increase of 22.2% over 2016.
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.
In 2017, the average processing cost
for crude oil was RMB 2,774 per tonne,
representing an increase of 26.4% over
Sales Volume (thousand tonnes)
Average realised price (RMB/tonne)
Year ended 31 December
Year ended 31 December
2017
54,273
60,680
17,080
36,951
58,801
2016
52,461
58,734
14,529
36,408
55,742
Change (%)
3.5
3.3
17.6
1.5
5.5
2017
6,538
4,962
3,527
3,204
2,929
2016
5,904
4,505
2,814
2,584
2,529
Change (%)
10.7
10.1
25.3
24.0
15.8
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, 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.
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
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 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.
(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 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.
23
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Management’s Discussionand Analysis 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:
Sales Volume (Thousand tonnes)
Average realised price (RMB/tonne)
Year ended 31 December
Year ended 31 December
Gasoline
Retail
Direct sales and wholesale
Diesel
Retail
Direct sales and wholesale
Kerosene
Fuel
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.
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 revenues of non-
fuel business was RMB 27.6 billion,
2017
83,980
66,364
17,616
89,146
44,736
44,410
25,555
23,299
2016
77,613
63,718
13,895
91,998
46,656
45,342
25,164
22,034
Change (%)
8.2
4.2
26.8
(3.1)
(4.1)
(2.1)
1.6
5.7
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 profit of
this segment was RMB 31.6 billion,
representing a decrease of 1.8%
compared with 2016.
(4) Chemicals Segment
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.
2017
6,941
7,346
5,412
5,039
5,588
4,486
3,531
2,251
2016
6,380
6,722
4,812
4,478
5,088
3,851
2,807
1,703
Change (%)
8.8
9.3
12.5
12.5
9.8
16.5
25.8
32.2
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 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.
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.
Basic organic chemicals
Synthetic fibre monomer and polymer
Synthetic resin
Synthetic fibre
Synthetic rubber
Chemical fertiliser
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.
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.
Sales Volume (Thousand tonnes)
Average realised price (RMB/tonne)
Year ended 31 December
Year ended 31 December
2017
46,351
10,332
13,215
1,304
1,138
700
2016
41,605
7,169
12,250
1,369
1,099
714
Change (%)
11.4
44.1
7.9
(4.7)
3.5
(2.0)
2017
4,684
6,047
8,153
8,556
11,957
2,008
2016
3,963
5,328
7,482
7,113
9,609
1,612
Change (%)
18.2
13.5
9.0
20.3
24.4
24.6
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.
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.
(5) Corporate and Others
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.
In 2017, the operating revenues
generated from corporate and others
were RMB 974.9 billion, representing
an increase of 31.8% over 2016. This
In 2017, the operating expenses of
corporate and others were RMB 979.3
billion, representing an increase of 32.9%
over 2016.
In 2017, the operating losses from
corporate and others was RMB 4.48
billion.
24
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)Management’s Discussionand Analysis 3 ASSETS, LIABILITIES, EQUITY AND CASH FLOWS
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.
(1) Assets, liabilities and equity
Total assets
Current assets
Non-current assets
Total liabilities
Current liabilities
Non-current liabilities
Total equity attributable to owners of the Company
Share capital
Reserves
Non-controlling interests
Total equity
As of
31 December
2017
As of
31 December
2016
1,595,504
529,049
1,066,455
742,614
579,446
163,168
726,120
121,071
605,049
126,770
852,890
1,498,609
412,261
1,086,348
667,374
485,543
181,831
710,994
121,071
589,923
120,241
831,235
Unit: RMB million
Change
96,895
116,788
(19,893)
75,240
93,903
(18,663)
15,126
0
15,126
6,529
21,655
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:
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.
Non-current assets were RMB 1,066.5
billion, representing a decrease of RMB
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.
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:
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
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.
(2) Cash Flow
The following table sets forth the major items in the consolidated cash flow statements for 2017 and 2016.
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.
Unit: RMB million
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.
25
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Management’s Discussionand Analysis
(3) Contingent Liabilities
(5) Research & development expenses and
Please refer to “Material Guarantee
Contracts and Their Performances” in the
“Significant Events” section of this report.
(4) Capital Expenditures
Please refer to “Capital Expenditures”
in the “Business Review and Prospects”
section of this report.
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.
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.
(6) Measurement of fair values of derivatives and relevant system
The Company has established sound decision-making mechanism, business process and internal control systems relevant to financial instrument
accounting and information disclosure.
Items relevant to measurement of fair values
Unit: RMB million
Items
Financial assets at fair value through
profit or loss of the reporting period
Structured Deposit
available for sale financial assets
Stock
Derivative financial instruments
Cash flow hedges
Total
Beginning
of the year
End of the year
—
—
262
262
314
(4,024)
(3,448)
51,196
51,196
178
178
(522)
(1,617)
49,235
Profits and
losses from
variation of fair
values in the
current year
Accumulated
variation of fair
values recorded
as equity
Impairment
loss provision
of the
current year
Funding source
196
196
—
—
(353)
103
(54)
—
—
(9)
(9)
—
(1,314)
(1,323)
— Self-owned fund
—
— Self-owned fund
—
— Self-owned fund
— Self-owned fund
—
4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER ASBE
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.
(1) Under ASBE, the operating income and operating profit or loss by reportable segments were as follows:
Operating income
Exploration and Production Segment
Refining Segment
Marketing and Distribution Segment
Chemicals Segment
Corporate and Others
Elimination of inter-segment sales
Consolidated operating income
Operating (loss)/profit
Exploration and Production Segment
Refining Segment
Marketing and Distribution Segment
Chemicals Segment
Corporate and Others
Elimination of inter-segment sales
Financial expenses, investment income, loss from changes in fair value, asset disposal income and
other income
Consolidated operating profit
Net profit attributable to equity shareholders of the Company
Year ended 31 December
2017
RMB million
2016
RMB million
157,505
1,011,853
1,224,197
437,743
974,850
(1,445,955)
2,360,193
(47,399)
64,047
32,011
22,796
(3,160)
(1,655)
20,325
86,965
51,119
115,939
855,786
1,052,857
335,114
739,947
(1,168,732)
1,930,911
(58,531)
55,808
32,385
20,769
2,912
1,581
22,465
77,389
46,416
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.
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.
26
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)Management’s Discussionand Analysis
(2) Financial data prepared under ASBE
Total assets
Non-current liabilities
Shareholders’ equity
As of 31
December 2017
RMB million
As of 31
December 2016
RMB million
1,595,504
161,988
854,070
1,498,609
180,541
832,525
Change
96,895
(18,553)
21,545
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
Segments
Exploration and Production
Refining
Marketing and Distribution
Chemicals
Corporate and Others
Elimination of inter-segment sales
Total
Operation
income
RMB million
Operation
cost
RMB million
Gross profit
margin* (%)
157,505
1,011,853
1,224,197
437,743
974,850
(1,445,955)
2,360,193
154,224
703,743
1,127,374
386,111
963,246
(1,444,300)
1,890,398
(3.5)
8.7
7.6
11.2
1.2
N/A
9.9
Increase/
(decrease) of
operation
income on
a year-on-year
basis (%)
Increase/
(decrease)
of operation
cost on
a year-on-year
basis (%)
Increase/
(decrease)
of gross profit
margin on
a year-on-year
basis (%)
35.9
18.2
16.3
30.6
31.7
N/A
22.2
20.0
26.6
17.2
33.3
32.6
N/A
26.7
11.8
(0.4)
(0.8)
(1.8)
(0.6)
N/A
(0.8)
*: Gross profit margin = (operation income – operation cost, tax and surcharges)/operation income.
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:
Content and Reasons for Changes of Accounting Policy
Items affected
Amount affected
in 2016
(RMB in millions)
Amount affected
in 2015
(RMB in millions)
Gains and losses on disposal of fixed assets and intangible assets
of the Company in 2017 are under the item of asset disposal.
The 2016 and 2015 comparative financial statements have been adjusted.
Loss of asset disposal
Non-operating income
Non-business expenses
1,487
Less 258
Less 1,745
693
Less 264
Less 957
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.
27
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Management’s Discussionand Analysis
28
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTSSignificant Events 1 MAJOR PROJECTS
(3) Zhongke integrated refining and
(5) E-An-Cang gas pipeline project
(1) Fuling shale gas 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.
(2) Tianjin LNG 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.
chemical 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.
(4) Xinqi pipeline project
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.
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.
(6) Wen 23 gas storage project
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.
29
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTSSignificant Events 2 CORPORATE BONDS ISSUED AND INTEREST PAYMENTS
Basic information of corporate bonds
Sinopec Corp.
2010 Corporate bond
10石化02
122052
21 May 2010
21 May 2020
Sinopec Corp.
2012 Corporate bond
12石化01
122149
12石化02
122150
1 June 2012
Sinopec Corp.
2015 Corporate bond (first issue)
15石化01
136039
19 November 2015
15石化02
136040
1 June 2017
1 June 2022
13
0
4.26
7
7
4.90
9
9
4.05
19 November
2018
16
16
3.30
19 November
2020
4
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 and 「12石化01」
had been repaid and delisted from the Shanghai Stock Exchange.
15石化01 and 15石化02 were 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
27th-28th Floor, China World Office 2, 1 Jianguomenwai Avenue, Chaoyang District, Beijing
Huang Xu, Zhai Ying
(010) 6505 1166
United Credit ratings Co., Ltd.
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 10石化02, 12石化
01, 12石化02, 15石化01 and 15石化02and 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)
Bond name
Abbreviation
Code
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
30
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTS (CONTINUED)Significant Events
Principal accounting data and financial indicators for the two years ended 31 December 2017
Principal data
EBITDA (RMB million)
Current ratio
Quick ratio
2017
2016
207,528
196,464
Change
5.63%
0.91
0.85
0.06
0.59
0.53
0.06
Liability-to-asset ratio (%)
46.47
44.45
EBITDA to total debt ratio
Interest coverage ratio
Cash flow interest coverage ratio
EBITDA-to-interest coverage ratio
Loan repayment rate (%)
Interest payment rate (%)
1.11
14.60
39.11
32.59
100
100
0.99
9.85
35.13
21.78
100
100
2.02
percentage
points
0.12
4.74
3.99
10.81
—
—
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.
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
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.
3 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
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
Mainly due to the increase of non-interest-bearing
debts compared with last year
Mainly due to the decrease of interest expense in
cash.
Mainly due to the increase of earnings
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.
31
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Significant Events
(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
Number of lapsed share option:
5,228,900 options
Number of exercised share option:
14,176,600 options
Date of completing registration for
newly increased shares:
27 September 2017
Number of participants who exercised
the option: 199
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
32
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTS (CONTINUED)Significant Events 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.
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.
33
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Significant Events 4 PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION
Background
Undertakings related to Initial
Public Offerings (IPOs)
(IPOs)
Type of
Undertaking
Party
Contents
Initial Public
Offerings (IPOs)
China Petrochemical
Corporation
Term for performance
From 22 June 2001
Whether bears
deadline or not
Whether strictly
performed or not
No
Yes
Within five years, commencing from
15 March 2012
Yes
Yes
Within 10 years after 29 April
2014 or the date when China
Petrochemical Corporation acquires
the assets
Yes
Yes
1
2
3
4
5
6
Compliance with the connected transaction
agreements;
Solving the issues regarding the legality of land-
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.
China Petrochemical Corporation would dispose of its
minor remaining chemicals business within five years
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
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.
Other undertakings
Other
Other undertakings
Other
China Petrochemical
Corporation
China Petrochemical
Corporation
34
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTS (CONTINUED)Significant Events
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.
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.
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.
(2) Significant equity investment
6 SIGNIFICANT ASSETS AND EQUITY SALE
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
During the reporting period, there is no
significant assets or equity sale of the
Company.
35
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Significant Events 7 MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE
Unit: RMB million
Major external guarantees (excluding guarantees for controlled subsidiaries)
Guarantor
Sinopec Corp.
Sinopec Corp.
Sinopec Great Wall
Energy and
Chemical
Industry Co., LTD
SSI
Relationship
with the
Company
The listed
company
itself
The listed
company itself
Name of
guaranteed company
Zhongtian Hechuang
Energy Co., Ltd
Yanbu Aramco
Sinopec Refining
Company(YASREF)
Limited
Wholly owned
subsidiary
Zhong An United Coal
Chemical Co., Ltd.
Amount
13,520
Transaction date
(date of signing)
25 May 2016
31 December 2014
no specific
amount agreed,
gurarantee
on contract
performance
940
Whether
completed
or not
No
Whether
overdue
or not
No
No
No
Period of guarantee
Type
25 May 2016 -
31 December 2023
(the mature date
is estimated)
30 years from the date
YASRFE requires supply
of hydrogen from Air
Liquedie Arabia LLC.
Joint liability
guarantee
Joint liability
guarantee
18 April 2014
18 April 2014 –
17 April 2026
Joint liability
guarantee
No
No
Controlled
subsidiary
New Bright International
Development Ltd./
Sonangol E.P./SSI15
9,732
Joint liability
guarantee
No
No
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)
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)
Amount of debt guarantees provided directly or indirectly to the companies with liabilities to assets ratio over 70% (D)
The amount of guarantees in excess of 50% of the net assets (E)
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.
Whether
guaranteed
for
connected
parties
(yes or
no)*1
Amount of
overdue
guarantee
Counter-
guaranteed
—
—
—
—
No
Yes
No
No
No
No
Yes
No
2,325
19,813
5,881
23,783
43,596
5.99%
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.
36
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTS (CONTINUED)Significant Events
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:
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:
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.
We hereby present the following opinions:
11 OTHER MATERIAL CONTRACTS
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.
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.
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
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.
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.
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
Categories
Used for project construction.
Used for working capital
Source of fund
Self-owned fund
Self-owned fund
(3) Other asset management and derivative investment
Amount
0.6
0.215
Outstanding
balance
0.6
0.215
Unit:RMB billion
Overdue and
uncollected
amount
None
None
During the reporting period, the Company has no other asset management or derivative investment subject to disclosure obligation.
37
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Significant Events 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.
16 APPROPRIATION OF NONOPERATIONAL
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 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.
38
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017SIGNIFICANT EVENTS (CONTINUED)Significant Events (3) 2017 Targeted Poverty Alleviation Work Statistics
Index
I. 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
Data
124.53
3.69
27,759
√□ 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
√□ Others
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
5.1 Input in medical and health care resources in proverty-striken
areas
6. Poverty alleviation through ecological protection
6.1 Items
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
8.2 Input in targeted poverty alleviation programs
8.3 Public Welfare funds for poverty alleviation
9. Other projects
9.1 Number of projects
9.2 Total input
9.3 Number of people lifted out of poverty
√□ Conduct ecological protection and construction
√□ Develop ways for ecological protection and compensation
√□ Set up ecological public welfare positions
√□ Others
275
32.02
13,907
0.62
4,316
1,669
4,275
3.05
3,146
5.96
8.65
1.05
0.27
386
0.48
513
0.01
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.
39
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Significant Events
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 community services to the Company
(Cultural and Educational Hygienic and
Community 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.
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
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.
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
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.
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.
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.
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.
40
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CONNECTED TRANSACTIONSConnected 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.
Principle of pricing for the continuing
connected transactions:
(a) The government-prescribed price will
apply;
(b) when there is no government-prescribed
price but there is a government-guidance
price, the government-guidance price will
apply;
(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.
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.
Decision-making procedures:
The major 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 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.
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 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.
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:
i normal commercial terms; or
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.
(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
There are no other significant connected
transactions during the reporting period.
5 FUNDS PROVIDED BETWEEN RELATED PARTIES
Related Parties
Sinopec Group
Relations
Parent company and
affiliated companies*
Associates and joint ventures
Other related parties
Total
Reason for provision of funds between related parties
Impacts on the Company
*: affiliated companies include subsidiaries, associates and joint ventures.
Unit: RMB million
Funds to related parties
Funds from related parties
Balance
at the
beginning
of the year
Amount
incurred
Balance
at the end
of the year
Balance
at the
beginning
of the year
Amount
incurred
Balance at
the end of
the year
26,464
(2,426)
24,038
29,541
(1,273)
28,268
6,008
32,472
(4,330)
(6,756)
1,678
25,716
55
29,596
(17)
(1,290)
38
28,306
Loans and other accounts receivable and payable
No material negative impact
41
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Connected Transactions
42
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement 1
IMPROVEMENTS IN CORPORATE
GOVERNANCE DURING THE REPORTING
PERIOD
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.
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, 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
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.
2 GENERAL MEETINGS
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.
3 EQUITY INTERESTS OF DIRECTORS,
SUPERVISORS AND OTHER SENIOR
MANAGEMENT
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.
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.
4 PERFORMANCE OF THE INDEPENDENT
DIRECTORS
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.
5 COMPANY’S INDEPENDENCE FROM
CONTROLLING SHAREHOLDER
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.
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 day of this
annual report.
43
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement 8 SENIOR MANAGEMENT APPRAISAL AND
A Board of Directors
e. The Secretary to the Board
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, 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.
9 CORPORATE GOVERNANCE REPORT (IN
ACCORDANCE WITH HONG KONG LISTING
RULES)
(1) Compliance with the Corporate
Governance Code
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.
Save as disclosed above, Sinopec Corp.
complied with all code provisions set out
in the Corporate Governance Code during
the reporting period.
A.1 Board of Directors
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.
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.
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.
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.
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.
A.2 Chairman and President
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.
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
Corp.
44
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement c. The Chairman encourages open
b. All Directors of Sinopec Corp.
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.
A.3 Board composition
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.
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.4 Appointment, re-election and
dismissal
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
six years.
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. Considering that the Board
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.
b. The Board establishes the Policy
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.
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 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.
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.
45
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement 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.
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.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.
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.
A.7 Provision of and access to
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
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 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 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. 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.
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.
C Accountability and Auditing
C.1 Financial reporting
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, its performance and the
cash 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.
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.
46
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement c. Audit Committee members may
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 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 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.
to employees to report behavior
that violates the internal control
system of the Company. The Audit
Committee has reviewed and
approved such policy.
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
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.
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.
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. 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.
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.
47
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement
D Delegation of power by the Board
c. Each Board Committee is required
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.
com.
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.
E
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.
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.
b. Sinopec Corp. pays close attention to
investor relations. The management
conduct road shows every year
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.
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.
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.
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.
F Company Secretary
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.
48
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement (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 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.
b. During the reporting period, the
Secretary to the Board actively
participated in career development
training with more than 15 training
hours.
G Shareholders’ rights
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.
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.
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 supplementary proposal 10
days before the date of the general
meeting.
(2) Auditors
The appointment of
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.
During the reporting period, neither
PricewaterhouseCoopers Zhong Tian LLP
nor PricewaterhouseCoopers provided any
non-audit service to the Company.
49
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE GOVERNANCEChairman’s Statement (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.
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.
The Board is pleased to present the directors’
report for the year ended 31 December 2017 for
shareholders’ review.
1 MEETINGS OF THE BOARD
During this reporting period, Sinopec Corp.
held five(5) Board meetings. The details are
as follows:
(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.
(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
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.
(3) The 13th meeting of the six session of
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.
(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).
50
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017REPORT OF THE BOARD OF DIRECTORSReport of the Board of Directors 3 DIRECTORS’ ATTENDANCE TO THE SIXTH SESSION OF THE BOARD MEETINGS AND THE INDEPENDENT DIRECTOR ‘S ATTENDANCE TO THE
GENERAL MEETINGS.
(1) ATTENDANCE TO THE BOARD MEETINGS
Director Titles
Names
Vice Chairman
Director
Director
Director
Director
Director
Independent Director
Independent Director
Independent Director
Independent Director
Director Titles
Dai Houliang
Li Yunpeng
Wang Zhigang
Zhang Haichao
Jiao Fangzheng
Ma Yongsheng
Jiang Xiaoming
Andrew Y. Yan
Tang Min
Fan Gang
Names
No. of
meeting held
Actual
Attendance
Board Meetings
Attended By
communication
Attended
by proxy
Absent
5
2
5
5
5
5
5
5
5
5
2
1
2
2
2
2
2
2
2
2
3
1
3
3
3
3
3
3
3
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
No. of
meeting held
Actual
Attendance
Board Meetings*1
Attended By
communication
Attended
by proxy
2
Absent
0
Former Chairman
Wang Yupu
4
0
2
1. No directors were absent from two consecutive Board meetings.
2. Mr Wang Zhigang,Mr Zhang Haichao resigned as directors of the Board on 29 January 2018.
3. Mr. Wang Yupu resigned as chairman and the director of the Board on 22 September 2017.
4. Pursuant to Hong Kong Listing Rules, attended by proxy was not counted as attendance by the director himself.
(2) Independent Non-executive Directors’ attendance to the General Meetings.
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.
51
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Report of the Board of Directors 4 MEETINGS HELD BY THE BOARD
(3) The 9th meeting of the sixth session of
COMMITTEES
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:
(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
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.
(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.
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.
(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.
(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.
(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.
(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.
(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.
5 BOARD COMMITTEES HAVE ISSUED REVIEW
OPINIONS WITHOUT ANY OBJECTION TO
THE BOARD WHEN PERFORMING THEIR
DUTIES DURING THE REPORT PERIOD.
6 BUSINESS PERFORMANCE
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.
52
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017REPORT OF THE BOARD OF DIRECTORS (CONTINUED)Report of the Board of Directors 7 DIVIDEND
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.
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.
Proposals for dividend distribution
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.
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)
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 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
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 registration of members for H shares of
Sinopec Corp. as at the record date.
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%.
Pursuant to the Notice on the Tax Policies
Related to the Pilot Program of the
Shanghai-Hong Kong Stock Connect (關於滬
港股票市場交易互聯互通機制試點有關稅收政策
的通知) (Caishui [2014] No. 81):
For domestic investors investing in the H
Shares of Sinopec Corp. through Shanghai-
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.
53
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Report of the Board of Directors 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.
The dividend distribution and bonus shares declared by Sinopec Corp. in the past three years are as follows:
Cash dividends (RMB/Share, tax inclusive)
Total amount of cash dividends (RMB billion, tax inclusive)
Net profits attributed to the shareholders of the listed company shown in
the consolidated statement for the dividend year (RMB billion)
Ratio between the dividends and the net profit attributed to the shareholders
of the listed company in the consolidated statement (%)
Note: The final cash dividend for 2017 is subject to the approval at the 2017 annual general meeting.
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%.
8 RESPONSIBILITIES FOR THE COMPANY’S
INTERNAL CONTROL
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.
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.
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
0.50
60.54
51.12
118.42
2016
0.249
30.15
46.42
64.95
2015
0.15
18.16
32.28
56.26
10 DURING THIS REPORTING PERIOD, THE
COMPANY DID NOT VIOLATE LAWS OR
REGULATIONS WHICH HAVE A MATERIAL
IMPACT ON THE COMPANY
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.
54
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017REPORT OF THE BOARD OF DIRECTORS (CONTINUED)Report of the Board of Directors 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.
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.
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.
13 FIXED ASSETS
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.
14 RESERVES
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.
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.
15 DONATIONS
20 MANAGEMENT CONTRACTS
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.
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.
22 EQUITY-LINKED AGREEMENTS
As of 31 December 2017, the Company has
not entered into any equity-linked agreement.
During this reporting period, the amount
of charity donations made by the Company
amounted to RMB 152 million.
16 PRE-EMPTIVE RIGHTS
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.
17 REPURCHASE, SALES AND REDEMPTION
OF SHARES
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.
18 DIRECTORS’ INTERESTS IN COMPETING
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 chapter Directors, Supervisors,
Senior Management and Employees of this
annual report.
55
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Report of the Board of Directors 23 OIL & GAS RESERVE APPRAISAL
PRINCIPLES
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.
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.
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, 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.
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.
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 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 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.
56
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017REPORT OF THE BOARD OF DIRECTORS (CONTINUED)Report of the Board of Directors 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 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.
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.
25 RISK FACTORS
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.
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.
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
can only counteract the adverse influences of
industry cycle to some extent.
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.
57
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Report of the Board of Directors 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
of international crude oil prices and sudden
disruption of supply of crude oil from certain
regions.
Risks with regard to the operation
and natural disasters: The process of
petroleum chemical production is exposed
to the risks of inflammation, explosion and
environmental pollution and is vulnerable
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
impact resulting from such contingencies.
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.
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.
58
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017REPORT OF THE BOARD OF DIRECTORS (CONTINUED)Report of the Board of Directors 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.
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.
By order of the Board
Dai Houliang
Vice Chairman & President
Beijing, China, 23 March 2018
59
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Report of the Board of Directors 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.
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.
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.
60
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017REPORT OF THE BOARD OF SUPERVISORSReport of the Board of Supervisors 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
61
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Report of the Board of Supervisors Dai Houliang
Li Yunpeng
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.
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.
62
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEESDirectors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 Wang Zhigang
Zhang Haichao
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.
63
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 Jiao Fangzheng
Ma Yongsheng
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
2004, he was appointed
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
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 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
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.,
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.
65
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 Tang Min
Fan Gang
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.
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
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 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.
66
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 List of Members of the Board
Name
Dai Houliang
Li Yunpeng
Wang Zhigang
Zhang Haichao
Jiao Fangzheng
Ma Yongsheng
Jiang Xiaoming
Andrew Y. Yan
Tang Min
Fan Gang
Gender
Age
Male
Male
Male
Male
Male
Male
Male
Male
Male
Male
54
58
60
60
55
56
64
60
64
64
Position in
Sinopec Corp.
Vice Chairman, President
Director
Former Board Director,
Senior Vice President
Former Board Director,
Senior Vice President
Board Director,
Senior Vice President
Board Director,
Senior Vice President
Independent Director
Independent Director
Independent Director
Independent Director
Tenure
2009.05-2018.05
2017.06-2018.05
2006.05-2018.01
2015.05-2018.01
2015.05-2018.05
2016.02-2018.05
2012.05-2018.05
2012.05-2018.05
2015.05-2018.05
2015.05-2018.05
Remuneration
paid by
Sinopec Corp.
in 2017
(RMB 1,000,
before tax)
Whether
paid by
the holding
Company
Equity interests in Sinopec Corp.
(as at 31 December)
2017
2016
843.8
—
769.9
—
—
—
300.0
300.0
300.0
300.0
Remuneration
paid by
Sinopec Corp.
in 2017
(RMB 1,000,
before tax)
No
Yes
No
Yes
Yes
Yes
No
No
No
No
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Whether
paid by
the holding
Company
Yes
Equity interests in Sinopec Corp.
(as at 31 December)
2017
0
2016
0
Name
Wang Yupu
Gender
Male
Age
61
Position in
Sinopec Corp.
Tenure
Former Chairman
2015.05-2017.09
—
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.
67
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Directors, Supervisors,Senior Management and Employees
Zhao Dong
Liu Zhongyun
(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
Supervisors 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
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.
68
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 Zhou Hengyou
Zou Huiping
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
Director General of Finance
& 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
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.
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
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.
69
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 Jiang Zhenying
Yu Renming
Yu Xizhi
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
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 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.
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.
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.
70
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 List of Members of the Board of Supervisors
Name
Zhao Dong
Gender
Male
Liu Zhongyun
Zhou Hengyou
Zou Huiping
Jiang Zhenying
Yu Renming
Yu Xizhi
Male
Male
Male
Male
Male
Male
Name
Liu Yun
Gender
Male
Wang Yajun
Male
Age
47
54
54
57
53
54
55
Age
61
61
Position in
Sinopec Corp.
Chairman of the Board
of Supervisors
Former Supervisor
Supervisor
Supervisor
Employee’s Representative
Supervisor
Employee’s Representative
Supervisor
Employee’s Representative
Supervisor
Tenure
2017.06-2018.05
2015.05-2018.02
2015.05-2018.05
2006.05-2018.05
2010.12-2018.05
2010.12 -2018.05
2017.06-2018.05
Remuneration
paid by
Sinopec Corp.
in 2017
(RMB 1,000,
before tax)
—
—
—
758.2
758.2
758.2
265.9
Whether
paid by
the holding
Company
Equity interests in Sinopec Corp.
(as of 31 December)
2017
2016
Yes
Yes
Yes
No
No
No
No
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Remuneration
paid by
Sinopec Corp.
in 2017
(RMB 1,000,
before tax)
Tenure
2015.05-2017.03
—
2015.05-2017.06
417.3
Whether
paid by
the holding
Company
Yes
No
Equity interests in Sinopec Corp.
(as of 31 December)
2017
2016
0
0
0
0
Position in
Sinopec Corp.
Former Chairman of
the Board of Supervisors
Former Employee’s
Representative Supervisor
Note: Mr. Liu Zhongyun resigned as Supervisor of Sinopec Corp. in February 2018.
71
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Directors, Supervisors,Senior Management and Employees
Wang Dehua
Ling Yiqun
Huang Wensheng
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.
Ling Yiqun, aged 55, former
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.
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
as Executive Director,
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
Corp.
(3) Other Members of Senior
Management
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
2016, he was appointed as
Chief Financial Officer of
Sinopec Corp.
72
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 Chang Zhenyong
Lei Dianwu
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
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.
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
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.
73
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017 List of Members of the Senior Management
Name
Gender
Age
Wang Dehua
Ling Yiqun
Huang Wensheng
Chang Zhenyong
Lei Dianwu
Male
Male
Male
Male
Male
51
55
51
59
55
Position in
Sinopec Corp.
CFO
Former Vice President
Vice President, Board Secretary
Vice President
Vice President
Remuneration
paid by
Sinopec Corp.
in 2017
(RMB 1,000,
before tax)
866.3
—
892.9
892.9
892.9
Remuneration
paid by
Sinopec Corp.
in 2017
(RMB 1,000,
before tax)
Whether
paid by
the holding
Company
No
Yes
No
No
No
Whether
paid by
the holding
Company
No
Equity interests in Sinopec Corp.
(as of 31 December)
2017
0
13,000
0
0
0
2016
0
13,000
0
0
0
Equity interests in Sinopec Corp.
(as of 31 December)
2017
0
2016
0
Name
Gender
Jiang Zhenghong
Male
Age
56
Position in
Sinopec Corp.
Former Vice President
755.4
5 REMUNERATION OF
DIRECTORS, SUPERVISORS,
AND THE SENIOR
MANAGEMENT
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.
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.
Note 1: Mr. Lin Yiqun was appointed as Senior Vice President of Sinopec Corp. in February 2018
2: The members of senior management are in order of the number of strokes of their surname in Chinese.
2
INFORMATION ON
APPOINTMENT OR
TERMINATION OF DIRECTORS,
SUPERVISORS AND SENIOR
MANAGEMENT
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.
On 28 June 2017, Mr. Li
Yunpeng was elected as director
of the Sixth Session of the
Board of Sinopec Corp.
On 28 June 2017, Mr. Zhao
Dong was elected as Chairman
of the Board of Supervisors of
Sinopec Corp.
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. Wang
Yajun resigned as the supervisor
of Sinopec Corp. due to his age.
On 12 September 2017, Mr.
Jiang Zhenghong resigned
as Vice President of Sinopec
Corp. due to change of working
arrangement.
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.
On 8 February 2018, Mr. Lin
Yiqun was appointed as Senior
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. Zhao
Rifeng was appointed as Vice
President of Sinopec Corp.
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.
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.
4 CONTRACTRAL INTERESTS
OF DIRECTORS AND
SUPERVISORS
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.
74
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and Employees
THE BREAKDOWN ACCORDING TO THE MEMBERS OF EACH OPERATION SEGMENT AS FOLLOWS
EMPLOYEES’ PROFESSIONAL STRUCTURE AS FOLLOWS:
EDUCATIONAL BACKGROUND STRUCTURE FOR EMPLOYEES AS FOLLOWS:
75
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Directors, Supervisors,Senior Management and Employees 7 CHANGES OF CORE
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.
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 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.
Government-administered
pension schemes are
responsible for the payments of
basic pensions.
76
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and Employees 10 TRAINNING PROGRAMS
Centring on enterprise
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
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
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.
77
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Directors, Supervisors,Senior Management and Employees On 31 December, 2017, details of the principal wholly-owned and controlled subsidiaries of the Company were as follows:
Registered Capital
RMB million
Percentage of
shares held by
Sinopec Corp.
(%)
8,000
22,761
13,203
12,000
4,000
3,374
1,595
1,000
3,000
USD 1,638
million
1,500
1,400
100
100
100
100
100
100
100
100
100
100
100
100
5,294
98.98
5,000
4,397
3,986
28,403
7,801
6,270
HKD 248
million
10,000
85
75
75
70.42
67.60
65
60.34
55
Name of Company
Sinopec International Petroleum
Exploration and Production Limited
Sinopec Great Wall Energy & Chemical
Company Limited
Sinopec Yangzi Petrochemical
Company Limited
Sinopec Pipeline Storage & Transportation
Company Limited
Sinopec Yizheng Chemical Fibre Limited
Liability Company
Sinopec Lubricant Company Limited
Sinopec Qingdao Petrochemical
Company Limited
Sinopec Chemical Sales Company Limited
China International United Petroleum
and Chemical Company Limited
Sinopec Overseas Investment
Holding Limited
Sinopec Catalyst Company Limited
China Petrochemical International
Company Limited
Sinopec Beihai Refining and Chemical
Limited Liability Company
Sinopec Qingdao Refining and Chemical
Company Limited
Sinopec Zhanjiang Dongxing
Petrochemical Company Limited
Sinopec Hainan Refining and Chemical
Company Limited
Sinopec Marketing Co. Limited
Sinopec Shanghai SECCO
Petrochemical Company Limited
Sinopec-SK(Wuhan) Petrochemical
Company Limited
Sinopec Kantons Holdings Limited
Sinopec Shanghai Gaoqiao
Petroleum and Chemical Limited
Sinopec Shanghai Petrochemical
Company Limited
Total Assets
RMB million
54,324
Net Assets
RMB million
18,683
Net Profit/
(Net Loss)
RMB million
1,075
35,303
16,549
(4,821)
28,786
38,752
8,303
8,552
3,918
20,037
173,035
24,173
8,652
13,947
16,811
17,748
21,642
5,264
3,725
486
2,758
31,994
11,916
4,141
3,604
9,601
18,522
10,181
7,974
12,176
5,188
8,613
409,949
195,555
27,517
24,399
15,234
14,285
25,434
18,485
11,259
9,504
12,000
726
2,733
1,046
2,642
2,277
2,724
6
595
183
1,383
3,853
1,082
2,649
3,780
2,161
1,627
607
317
Production and sale of catalyst products
Trading of petrochemical products
Principal Activities
Investment in exploration, production
and sale of petroleum and natural gas
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
Production and sale of polyester
chips and polyester fibres
Production and sale of refined petroleum
products, lubricant base oil,
and petrochemical materials
Manufacturing of intermediate petrochemical
products and petroleum products
Marketing and distribution
of petrochemical products
Trading of crude oil and
petrochemical products
Overseas investment holding
Import and processing of crude oil,
production, storage and sale of petroleum
products and petrochemical products
Manufacturing of intermediate petrochemical
products and petroleum products
Manufacturing of intermediate petrochemical
products and petroleum products
Manufacturing of intermediate petrochemical
products and petroleum products
Marketing and distribution of refined
petroleum products
Production and sale of petrochemical products
Production, sale, research and development
of ethylene and downstream by-products
Trading of crude oil and petroleum products
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
10,814
50.49
39,609
28,541
6,152
Fujian Petrochemical Company Limited
6,898
50
10,917
9,860
2,757
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017PRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIESPrincipal Wholly-Owned and Controlled Subsidiaries
PwC ZT Shen Zi (2018) No. 10001
To the Shareholders of China Petroleum & Chemical Corporation,
OPINION
What we have audited
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.
KEY AUDIT MATTERS
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.
79
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (PRC)REPORT OF THE PRC AUDITOR 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
How our audit addressed the 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.
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:
– Future crude oil prices;
– Future production profiles;
– Future cost profiles; and
– Discount rates.
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.
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.
‧ Independently estimated a range of discount rates, and found that the
discount rates adopted by management were within the range.
‧ 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.
‧ Assessed the methodology adopted in, and tested mathematical
accuracy of the discounted cash flow projections.
‧ 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 gathered and consistent with our
expectations.
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.
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.
80
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (PRC)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.
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
‧ 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.
‧ 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.
‧ 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.
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)
Signing CPA Gao Peng
81
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (PRC)REPORT OF THE PRC AUDITOR (CONTINUED) Note
At 31 December
2017
RMB million
At 31 December
2016
RMB million
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
22
23
24
25
26
27
28
31
29
30
31
32
19
33
34
35
36
37
38
165,004
51,196
16,207
68,494
16,467
4,901
186,693
20,087
529,049
1,676
131,087
650,774
118,645
97,126
8,634
14,720
15,131
28,662
1,066,455
1,595,504
54,701
6,462
200,073
120,734
7,162
71,940
6,843
84,850
—
26,681
579,446
67,754
31,370
39,958
6,466
16,440
161,988
741,434
121,071
119,557
(4,413)
888
199,682
290,459
727,244
126,826
854,070
1,595,504
142,497
—
13,197
50,289
25,596
3,749
156,511
20,422
412,261
11,408
116,812
690,594
129,581
85,023
6,353
13,537
7,214
25,826
1,086,348
1,498,609
30,374
5,828
174,301
95,928
1,618
52,886
2,006
77,630
6,000
38,972
485,543
62,461
54,985
39,298
7,661
16,136
180,541
666,084
121,071
119,525
(932)
765
196,640
275,163
712,232
120,293
832,525
1,498,609
Assets
Current assets
Cash at bank and on hand
Financial assets at fair value through profit and loss
Bills receivable
Accounts receivable
Other receivables
Prepayments
Inventories
Other current assets
Total current assets
Non-current assets
Available-for-sale financial assets
Long-term equity investments
Fixed assets
Construction in progress
Intangible assets
Goodwill
Long-term deferred expenses
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and shareholders’ equity
Current liabilities
Short-term loans
Bills payable
Accounts payable
Advances from customers
Employee benefits payable
Taxes payable
Dividends payable
Other payables
Short-term debentures payable
Non-current liabilities due within one year
Total current liabilities
Non-current liabilities
Long-term loans
Debentures payable
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Shareholders’ equity
Share capital
Capital reserve
Other comprehensive income
Specific reserve
Surplus reserves
Retained earnings
Total equity attributable to shareholders of the Company
Minority interests
Total shareholders’ equity
Total liabilities and shareholders’ equity
These financial statements have been approved by the board of directors on 23 March 2018.
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
The accompanying notes form part of these financial statements.
82
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(A) FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES CONSOLIDATED BALANCE SHEET as at 31 December 2017Financial Statements (PRC)
Assets
Current assets
Cash at bank and on hand
Financial assets at fair value through profit and loss
Bills receivable
Accounts receivable
Other receivables
Dividends receivable
Prepayments
Inventories
Other current assets
Total current assets
Non-current assets
Available-for-sale financial assets
Long-term equity investments
Fixed assets
Construction in progress
Intangible assets
Long-term deferred expenses
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Liabilities and shareholders’ equity
Current liabilities
Short-term loans
Bills payable
Accounts payable
Advances from customers
Employee benefits payable
Taxes payable
Other payables
Short-term debentures payable
Non-current liabilities due within one year
Total current liabilities
Non-current liabilities
Long-term loans
Debentures payable
Provisions
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Shareholders’ equity
Share capital
Capital reserve
Other comprehensive income
Specific reserve
Surplus reserves
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
These financial statements have been approved by the board of directors on 23 March 2018.
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
The accompanying notes form part of these financial statements.
Note
At 31 December
2017
RMB million
At 31 December
2016
RMB million
8
9
10
13
14
15
92,545
48,179
157
37,609
47,493
16,327
4,429
44,933
27,189
318,861
395
275,557
329,814
50,046
8,340
1,958
6,834
10,690
683,634
1,002,495
17,330
3,155
83,449
3,413
4,854
42,549
143,274
—
19,539
317,563
63,667
20,000
31,405
—
2,591
117,663
435,226
121,071
68,789
196
482
199,682
177,049
567,269
1,002,495
98,250
—
471
38,332
40,189
5,454
3,454
46,942
32,743
265,835
297
268,451
373,020
49,277
7,913
1,980
—
10,952
711,890
977,725
9,256
2,761
75,787
2,360
312
32,423
113,841
6,000
38,082
280,822
58,448
36,000
29,767
505
2,607
127,327
408,149
121,071
68,769
263
393
196,640
182,440
569,576
977,725
83
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017BALANCE SHEETas at 31 December 2017Financial Statements (PRC)
Operating income
Less: Operating costs
Taxes and surcharges
Selling and distribution expenses
General and administrative expenses
Financial expenses
Exploration expenses, including dry holes
Impairment losses
Add: Loss from changes in fair value
Investment income
Asset disposal income
Other income
Operating profit
Add: Non-operating income
Less: Non-operating expenses
Profit before taxation
Less: Income tax expense
Net profit
Including: net profit of acquiree before the consolidation under common control
Classification by going concern:
Continuous operating net profit
Termination of net profit.
Classification by ownership:
Equity shareholders of the Company
Minority interests
Basic earnings per share
Diluted earnings per share
Net profit
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
(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
Total comprehensive income
Attributable to:
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
Wang Dehua
Chief Financial Officer
Note
39
39/42
40
42
42
41
42/43
44
45
46
47
48
49
50
62
62
36
2017
RMB million
2016
RMB million
2,360,193
1,890,398
235,292
56,055
78,928
1,560
11,089
21,791
(13)
19,060
(1,518)
4,356
86,965
1,317
1,709
86,573
16,279
70,294
—
70,294
—
51,119
19,175
0.422
0.422
70,294
(1,580)
(57)
1,053
(3,792)
(4,376)
65,918
47,638
18,280
1,930,911
1,492,165
232,006
49,550
74,155
6,611
11,035
17,076
(216)
30,779
(1,487)
—
77,389
4,706
2,218
79,877
20,707
59,170
86
59,170
—
46,416
12,754
0.383
0.383
59,170
2,014
(24)
45
4,298
6,333
65,503
53,468
12,035
The accompanying notes form part of these financial statements.
84
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2017Financial Statements (PRC)
Operating income
Less: Operating costs
Taxes and surcharges
Selling and distribution expenses
General and administrative expenses
Financial expenses
Exploration expenses, including dry holes
Impairment losses
Add: Gain from changes in fair value
Investment income
Asset disposal income
Other income
Operating profit
Add: Non-operating income
Less: Non-operating expenses
Profit before taxation
Less: Income tax expense
Net profit
Classification by going concern:
Continuous operating net profit
Termination of net profit
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
Total comprehensive income
These financial statements have been approved by the board of directors on 23 March 2018.
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
Note
39
39
46
2017
RMB million
2016
RMB million
857,478
633,114
158,480
2,670
44,982
2,642
10,614
14,372
179
38,058
(887)
1,784
29,738
474
725
29,487
(928)
30,415
30,415
—
53
(120)
(67)
30,348
726,178
513,514
158,373
2,365
41,724
3,851
11,012
14,044
33
43,519
(413)
—
24,434
2,812
1,117
26,129
2,539
23,590
23,590
—
557
(149)
408
23,998
The accompanying notes form part of these financial statements.
85
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017INCOME STATEMENTfor the year ended 31 December 2017Financial Statements (PRC)
Cash flows from operating activities:
Cash received from sale of goods and rendering of services
Refund of taxes and levies
Other cash received relating to operating activities
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
Net cash flow from operating activities
Cash flows from investing 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
Other cash received relating to investing activities
Net cash received from disposal of subsidiaries and other business entities
Sub-total of cash inflows
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
Net cash paid for the acquisition of subsidiaries and other business entities
Sub-total of cash outflows
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
Cash paid for dividends, profits distribution or interest
Including: Subsidiaries’ cash payments for distribution of
dividends or profits to minority shareholders
Other cash paid relating to financing activities
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
Vice Chairman, President
Wang Dehua
Chief Financial Officer
Note
2017
RMB million
2016
RMB million
2,644,126
2,158
57,287
2,703,571
(2,041,977)
(68,260)
(328,304)
(74,095)
(2,512,636)
190,935
4,729
8,506
1,313
52,304
80
66,932
(70,948)
(57,627)
(82,392)
(1,288)
(212,255)
(145,323)
946
946
524,843
525,789
(536,380)
(45,763)
(7,539)
(155)
(582,298)
(56,509)
(353)
(11,250)
2,163,695
2,434
77,436
2,243,565
(1,547,868)
(62,602)
(316,062)
(102,490)
(2,029,022)
214,543
31,489
4,028
440
2,914
2,027
40,898
(72,847)
(16,389)
(17,879)
—
(107,115)
(66,217)
343
343
506,097
506,440
(569,091)
(30,396)
(6,553)
—
(599,487)
(93,047)
256
55,535
52(a)
52(b)
The accompanying notes form part of these financial statements.
86
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2017Financial Statements (PRC)
Cash flows from operating activities:
Cash received from sale of goods and rendering of services
Refund of taxes and levies
Other cash received relating to operating activities
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
Net cash flow from operating activities
Cash flows from investing 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
Other cash received relating to investing activities
Net cash received from disposal of subsidiaries and other business entities
Sub-total of cash inflows
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
Sub-total of cash outflows
Net cash flow from investing activities
Cash flows from financing activities:
Cash received from borrowings
Sub-total of cash inflows
Cash repayments of borrowings
Cash paid for dividends or interest
Sub-total of cash outflows
Net cash flow from financing activities
Net (decrease)/increase in cash and cash equivalents
These financial statements have been approved by the board of directors on 23 March 2018.
Note
2017
RMB million
2016
RMB million
1,000,467
1,304
42,913
1,044,684
(653,412)
(37,054)
(200,995)
(35,502)
(926,963)
117,721
18,919
23,842
252
23,270
1
66,284
(37,139)
(66,913)
(30,116)
(134,168)
(67,884)
106,407
106,407
(133,663)
(38,392)
(172,055)
(65,648)
(15,811)
831,578
1,323
85,932
918,833
(504,152)
(35,190)
(189,557)
(50,638)
(779,537)
139,296
29,002
22,233
1,885
1,488
2,027
56,635
(43,765)
(39,505)
(10,130)
(93,400)
(36,765)
153,790
153,790
(192,828)
(21,826)
(214,654)
(60,864)
41,667
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
The accompanying notes form part of these financial statements.
87
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CASH FLOW STATEMENTfor the year ended 31 December 2017Financial Statements (PRC)
Share
capital
RMB million
121,071
Capital
reserve
RMB million
121,576
Other
comprehensive
income
RMB million
(7,984)
Specific
reserve
RMB million
612
Surplus
reserves
RMB million
196,640
Retained
earnings
RMB million
245,623
Total
shareholders’
equity
attributable
to equity
shareholders of
the Company
RMB million
677,538
Minority
interests
RMB million
112,027
Total
shareholders’
equity
RMB million
789,565
—
—
—
—
—
—
—
—
—
—
—
—
121,071
121,071
—
—
—
—
—
—
—
—
—
—
—
—
(30)
—
—
(2,137)
(2,167)
—
116
119,525
119,525
—
—
—
—
—
(13)
—
—
—
—
121,071
(13)
—
45
119,557
—
7,052
7,052
—
—
—
—
—
—
—
—
—
(932)
(932)
—
(3,481)
(3,481)
—
—
—
—
—
—
—
(4,413)
—
—
—
—
—
—
—
—
—
—
153
—
765
765
—
—
—
—
—
—
—
—
123
—
888
—
—
—
—
—
—
—
—
—
—
—
—
196,640
196,640
—
—
—
3,042
—
—
—
3,042
—
—
199,682
46,416
—
46,416
46,416
7,052
53,468
12,754
(719)
12,035
59,170
6,333
65,503
—
(16,829)
—
—
(16,829)
(30)
—
—
263
—
(16,829)
233
(86)
(6,146)
(47)
—
(39)
(6,146)
(2,137)
2,137
—
(19,043)
153
116
712,232
712,232
51,119
(3,481)
47,638
—
(32,689)
(13)
—
(32,702)
123
(47)
727,244
(3,785)
7
9
120,293
120,293
19,175
(895)
18,280
—
—
724
(12,501)
(11,777)
3
27
126,826
(22,828)
160
125
832,525
832,525
70,294
(4,376)
65,918
—
(32,689)
711
(12,501)
(44,479)
126
(20)
854,070
(47)
—
—
(16,876)
—
—
275,163
275,163
51,119
—
51,119
(3,042)
(32,689)
—
—
(35,731)
—
(92)
290,459
Balance at 1 January 2016
Change for the period
1. Net profit
2. Other comprehensive income (Note 36)
Total comprehensive income
Transactions with owners, recorded directly in
shareholders’ equity:
3. Appropriations of profits:
– Appropriation for surplus reserves
– Distributions to shareholders (Note 51)
4. Transaction with minority interests
5. Distributions to the original shareholders in the
combination of entities under common control
6. Distributions to minority interests
7. Adjustment for the combination of entities under
common control (Note 53)
Total transactions with owners, recorded directly
in shareholders’ equity
8. Net increase in specific reserve for the year
9. Others
Balance at 31 December 2016
Balance at 1 January 2017
Change for the year
1. Net profit
2. Other comprehensive income (Note 36)
Total comprehensive income
Transactions with owners, recorded directly
in shareholders’ equity:
3. Appropriations of profits:
– Appropriation for surplus reserves (Note 38)
– Distributions to shareholders(Note 51)
4. Transaction with minority interests
5. Distributions to minority interests
Total transactions with owners, recorded directly
in shareholders’ equity
6. Net increase in specific reserve for the year
7. Others
Balance at 31 December 2017
These financial statements have been approved by the board of directors on 23 March 2018.
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
The accompanying notes form part of these financial statements.
88
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2017Financial Statements (PRC)
Balance at 1 January 2016
Change for the year
1. Net profit
2. Other comprehensive income
Total comprehensive income
Transactions with owners, recorded directly
in shareholders’ equity:
3. Appropriations of profits:
– Appropriation for surplus reserves
– Distributions to shareholders (Note 49)
Total transactions with owners, recorded directly
in shareholders’ equity
4. Net increase in specific reserve for the year
5. Others
Balance at 31 December 2016
Balance at 1 January 2017
Change for the year
1. Net profit
2. Other comprehensive income
Total comprehensive income
Transactions with owners, recorded directly
in shareholders’ equity:
3. Appropriations of profits:
– Appropriation for surplus reserves
– Distributions to shareholders (Note 49)
Total transactions with owners, recorded directly
in shareholders’ equity
4. Net increase in specific reserve for the year
5. Others
Balance at 31 December 2017
Share
capital
RMB million
Capital
reserve
RMB million
Other
comprehensive
income
RMB million
Specific
reserve
RMB million
Surplus
reserves
RMB million
Retained
earnings
RMB million
Total
shareholders’
equity
RMB million
121,071
68,716
(145)
313
196,640
175,679
562,274
—
—
—
—
—
—
—
—
121,071
121,071
—
—
—
—
—
—
—
—
—
—
—
—
53
68,769
68,769
—
—
—
—
—
—
—
—
121,071
—
—
20
68,789
—
408
408
—
—
—
—
—
263
263
—
(67)
(67)
—
—
—
—
—
196
—
—
—
—
—
—
80
—
393
393
—
—
—
—
—
—
89
—
482
—
—
—
—
—
—
—
—
196,640
196,640
—
—
—
3,042
—
3,042
—
—
199,682
23,590
—
23,590
23,590
408
23,998
—
(16,829)
(16,829)
—
—
182,440
182,440
30,415
—
30,415
(3,042)
(32,689)
(35,731)
—
(75)
177,049
—
(16,829)
(16,829)
80
53
569,576
569,576
30,415
(67)
30,348
—
(32,689)
(32,689)
89
(55)
567,269
These financial statements have been approved by the board of directors on 23 March 2018.
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
The accompanying notes form part of these financial statements.
89
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2017Financial Statements (PRC)
1 STATUS OF THE COMPANY
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.
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”).
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.
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 Company and its subsidiaries (the “Group”) engage in the oil and gas and chemical operations and businesses, including:
(1) the exploration, development and production of crude oil and natural gas;
(2) the refining, transportation, storage and marketing of crude oil and petroleum product; and
(3) the production and sale of chemical.
Details of the Company’s principal subsidiaries are set out in Note 56.
2 BASIS OF PREPARATION
(1) Statement of compliance of China Accounting Standards for Business Enterprises (“ASBE”)
The financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises – Basic
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.
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.
(3) Measurement basis
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))
— Available-for-sale financial assets (see Note 3(10))
— Derivative financial instruments (see Note 3(10))
(4) Functional currency and presentation currency
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.
90
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES
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.
Principal accounting estimates and judgements of the Group are set out in Note 55.
(1) Accounting treatment of business combination involving entities under common control and not under common control
(a) Business combination involving entities 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.
(b) Business combination involving entities not under common control
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.
(c) Method for preparation of consolidated financial statements
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.
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.
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 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.
91
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(1) Accounting treatment of business combination involving entities under common control and not under common control (Continued)
(c) Method for preparation of consolidated financial statements (Continued)
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.
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.
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.
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 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.
(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.
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.
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.
(3) Cash and cash equivalents
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (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 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.
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.
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.
Inventories are recorded by perpetual method.
(5) Long-term equity investments
(a) Investment in subsidiaries
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:
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.
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.
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.
93
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(5) Long-term equity investments (Continued)
(b) Investment in joint ventures and associates
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.
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.
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.
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.
The Group’s accounting treatments when adopting the equity method include:
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 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.
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.
(c) The impairment assessment method and provision accrual on investment
The impairment assessment and provision accrual on investments in subsidiaries, associates and joint ventures are stated in Note 3(11).
94
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(6) Fixed assets and construction in progress
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.
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)).
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.
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.
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.
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.
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.
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:
Plants and buildings
Equipment, machinery and others
Useful lives, residual values and depreciation methods are reviewed at least each year end.
Estimated
useful life
Estimated rate
of residual value
12-50 years
4-30 years
3%
3%
(7) Oil and gas properties
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 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.
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.
Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes produced and reserves.
95
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(8) Intangible assets
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.
Useful lives and amortisation methods are reviewed at least each year end.
(9) Goodwill
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.
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.
(10) 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.
(a) Classification, recognition and measurement of financial instruments
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.
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.
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:
— Financial asset or financial liability with change in fair value recognised through profit or loss
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.
— Loans and Receivables
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
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.
96
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(10) Financial Instruments (Continued)
(a) Classification, recognition and measurement of financial instruments (Continued)
— Available-for-sale financial assets
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.
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)).
— Other financial liabilities
Financial liabilities other than the financial liabilities at fair value through profit or loss are classified as other financial liabilities.
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)).
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.
(b) Disclosure of financial assets and financial liabilities
In the balance sheet, financial assets and liabilities are not offset unless all the following conditions are met:
— the Group has a legally enforceable right to set off financial assets against financial liabilities; and
— the Group intends to settle the financial assets and liabilities on a net basis, or to realise the assets and settle the liabilities
simultaneously.
(c) Determination of fair value
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.
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.
97
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(10) Financial Instruments (Continued)
(d) Hedge accounting
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).
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.
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.
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.
— Cash flow hedges
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):
— the cumulative gain or loss on the hedging instrument from inception of the hedge;
— 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.
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.
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.
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.
98
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(10) Financial Instruments (Continued)
(d) Hedge accounting (Continued)
— 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 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
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.
(e) Derecognition of financial assets and financial liabilities
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.
On derecognition of a financial asset, the difference between the following amounts is recognised in profit or loss:
— the carrying amounts; and
— the sum of the consideration received and any cumulative gain or loss that had been recognised directly in equity.
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
(a) Impairment of financial assets
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.
Objective evidences of impairment include but not limited to:
(i) significant financial difficulty of the debtor;
(ii) a breach of contract, such as a default or delinquency in interest or principal payments;
(iii) it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
(iv) due to the significant financial difficulty of the debtor, financial assets is unable to be traded in active market;
(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
(vi) a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
99
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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.
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.
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.
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).
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.
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
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.
Basic pension insurance
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.
101
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(14) Income tax
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).
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:
— 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
— 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.
Revenue from the sales of goods is measured at fair value of the considerations received or receivable under the sales contract or agreement.
102
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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
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 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 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
Research costs and development costs that cannot meet the capitalisation crateria are recognised in profit or loss when incurred.
(22) Operating leases
Operating lease payments are charged as expenses on a straight-line basis over the period of the respective leases.
(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.
103
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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. 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;
(i) key management personnel of the Group, and close family members of such individuals;
(j) key management personnel of the Company’s holding company;
(k) close family members of key management personnel of the Company’s holding company; and
(l) an entity which is under control, joint control of principle individual investor, key management personnel or close family members of such
individuals.
(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.
104
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(26) Changes in significant accounting policies
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 reason of change
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.
4 TAXATION
Subject
Amount (RMB million)
year of 2016
Asset disposal income
Non-operating income
Non-operating expenses
1,487
Less 258
Less 1,745
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 oil
Jet fuel oil
Effective from
13 January 2015
(RMB/Ton)
2,109.76
1,411.20
2,105.20
1,948.64
1,711.52
1,218.00
1,495.20
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%.
105
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
5 CASH AT BANK AND ON HAND
The Group
Cash on hand
Renminbi
Cash at bank
Renminbi
US Dollars
Hong Kong Dollars
Others
Deposits at related parities
Renminbi
US Dollars
EUR
Others
Total
At 31 December 2017
At 31 December 2016
Original
currency
million
Exchange
rates
3,760
98
6.5342
0.8359
2,336
16
6.5342
7.8023
Original
currency
million
Exchange
rates
1,499
87
6.9370
0.8945
2,619
5
6.9370
7.3068
RMB
million
14
92,711
24,561
82
122
117,490
32,117
15,256
126
15
47,514
165,004
RMB
million
10
91,855
10,406
78
75
102,424
21,843
18,181
34
15
40,073
142,497
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.
At 31 December 2017, time deposits with financial institutions of the Group amounted to RMB 51,786 million (2016: RMB 18,029 million).
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).
6 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Current assets
Structural deposits
Total
At 31 December
2017
RMB million
At 31 December
2016
RMB million
51,196
51,196
—
—
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 gain from changes in fair value.
7 BILLS RECEIVABLE
Bills receivable represents mainly the bills of acceptance issued by banks for sales of goods and products.
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).
106
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
8 ACCOUNTS RECEIVABLE
The Group
The Company
At 31 December
2017
RMB
million
At 31 December
2016
RMB
million
At 31 December
2017
RMB
million
At 31 December
2016
RMB
million
Amounts due from subsidiaries
Amounts due from Sinopec Group Company and fellow subsidiaries
Amounts due from associates and joint ventures
Amounts due from others
Less: Allowance for doubtful accounts
Total
Ageing analysis on accounts receivable is as follows:
—
7,941
4,962
56,203
69,106
612
68,494
—
6,398
4,580
39,994
50,972
683
50,289
30,905
1,417
2,051
3,383
37,756
147
37,609
At 31 December 2017
At 31 December 2016
The Group
Percentage
to total
accounts
receivable
Allowance
% RMB million
98.1
1.0
0.1
0.8
100.0
—
142
44
426
612
Amount
RMB million
67,777
715
87
527
69,106
Percentage
of allowance
to accounts
receivable
balance
Amount
% RMB million
—
19.9
50.6
80.8
49,854
464
225
429
50,972
The Company
Percentage
to total
accounts
receivable
Allowance
% RMB million
97.8
0.9
0.4
0.9
100.0
—
231
48
404
683
At 31 December 2017
At 31 December 2016
Percentage
to total
accounts
receivable
Allowance
% RMB million
Percentage
of allowance
to accounts
receivable
balance
Amount
% RMB million
Percentage
to total
accounts
receivable
Allowance
% RMB million
98.8
0.4
0.4
0.4
100.0
—
17
29
101
147
—
12.7
18.8
73.7
38,023
357
49
131
38,560
98.7
0.9
0.1
0.3
100.0
—
114
10
104
228
Amount
RMB million
37,331
134
154
137
37,756
Within one year
Between one and two years
Between two and three years
Over three years
Total
Within one year
Between one and two years
Between two and three years
Over three years
Total
33,142
1,662
2,036
1,720
38,560
228
38,332
Percentage
of allowance
to accounts
receivable
balance
%
—
49.8
21.3
94.2
Percentage
of allowance
to accounts
receivable
balance
%
—
31.9
20.4
79.4
At 31 December 2017 and 2016, the total amounts of the top five accounts receivable of the Group are set out below:
Total amount (RMB million)
Percentage to the total balance of accounts receivable
Allowance for doubtful accounts
At 31 December
2017
At 31 December
2016
17,920
25.9%
—
14,967
29.4%
—
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.
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.
107
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
9 OTHER RECEIVABLES
The Group
The Company
At 31 December
2017
RMB million
At 31 December
2016
RMB million
At 31 December
2017
RMB million
At 31 December
2016
RMB million
Amounts due from subsidiaries
Amounts due from Sinopec Group Company and fellow subsidiaries
Amounts due from associates and joint ventures
Amounts due from others
Less: Allowance for doubtful accounts
Total
Ageing analysis of other receivables is as follows:
—
4,985
459
12,509
17,953
1,486
16,467
—
8,019
4,841
14,085
26,945
1,349
25,596
46,900
147
—
1,608
48,655
1,162
47,493
At 31 December 2017
At 31 December 2016
The Group
Percentage
to total
other
receivables
Allowance
% RMB million
84.7
2.8
2.4
10.1
100.0
—
82
44
1,360
1,486
Amount
RMB million
15,191
509
433
1,820
17,953
Percentage
of allowance
to other
receivables
balance
Amount
% RMB million
—
16.1
10.2
74.7
24,316
515
254
1,860
26,945
The Company
Percentage
to total
other
receivables
Allowance
% RMB million
90.2
2.0
0.9
6.9
100.0
57
32
13
1,247
1,349
At 31 December 2017
At 31 December 2016
Percentage
to total
other
receivables
Allowance
% RMB million
Percentage
of allowance
to other
receivables
balance
Amount
% RMB million
Percentage
to total
other
receivables
Allowance
% RMB million
49.2
26.6
5.3
18.9
100.0
—
1
2
1,159
1,162
—
—
0.1
12.6
28,763
2,740
5,237
4,573
41,313
69.6
6.6
12.7
11.1
100.0
—
1
1
1,122
1,124
Amount
RMB million
23,946
12,920
2,570
9,219
48,655
Within one year
Between one and two years
Between two and three years
Over three years
Total
Within one year
Between one and two years
Between two and three years
Over three years
Total
35,370
164
3,986
1,793
41,313
1,124
40,189
Percentage
of allowance
to other
receivables
balance
%
0.2
6.2
5.1
67.0
Percentage
of allowance
to other
receivables
balance
%
—
—
—
24.5
At 31 December 2017 and 2016, the total amounts of the top five other receivables of the Group are set out below:
Total amount (RMB million)
Ageing
Percentage to the total balance of other receivables
Allowance for doubtful accounts
At 31 December
2017
At 31 December
2016
7,672
Within one year
42.7%
—
11,226
Within one year
41.7%
—
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.
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.
108
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
10 PREPAYMENTS
Amounts to subsidiaries
Amounts to Sinopec Group Company and fellow subsidiaries
Amounts to associates and joint ventures
Amounts to others
Less: Allowance for doubtful accounts
Total
Ageing analysis of prepayments is as follows:
The Group
The Company
At 31 December
2017
RMB million
At 31 December
2016
RMB million
At 31 December
2017
RMB million
At 31 December
2016
RMB million
—
126
63
4,737
4,926
25
4,901
—
206
24
3,550
3,780
31
3,749
3,766
99
—
568
4,433
4
4,429
3,043
58
—
364
3,465
11
3,454
The Group
At 31 December 2017
At 31 December 2016
Percentage
to total
prepayments
Allowance
% RMB million
Percentage of
allowance to
prepayments
balance
Amount
% RMB million
Percentage
to total
prepayments
Allowance
% RMB million
Percentage of
allowance to
prepayments
balance
%
93.5
3.5
1.7
1.3
100.0
—
14
4
7
25
—
8.1
4.7
11.1
3,465
211
72
32
3,780
91.7
5.6
1.9
0.8
100.0
The Company
—
12
1
18
31
—
5.7
1.4
56.3
Amount
RMB million
4,605
173
85
63
4,926
At 31 December 2017
At 31 December 2016
Percentage
to total
prepayments
Allowance
% RMB million
Percentage of
allowance to
prepayments
balance
Amount
% RMB million
Percentage
to total
prepayments
Allowance
% RMB million
95.3
2.3
0.6
1.8
100.0
—
1
—
3
4
—
1.0
—
3.8
3,306
62
13
84
3,465
95.4
1.8
0.4
2.4
100.0
—
—
—
11
11
Percentage of
allowance to
prepayments
balance
%
—
—
—
13.1
Amount
RMB million
4,227
101
25
80
4,433
Within one year
Between one and two years
Between two and three years
Over three years
Total
Within one year
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:
Total amount (RMB million)
Percentage to the total balance of prepayments
At 31 December
2017
At 31 December
2016
1,472
29.9%
1,354
35.8%
109
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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
14,774
84,448
2,651
187,848
1,155
186,693
75,680
14,141
65,772
1,838
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.
12 AVAILABLE-FOR-SALE FINANCIAL ASSETS
Equity securities, listed and at quoted market price
Other investment, unlisted and at cost
Less: Impairment loss for investments
Total
At 31 December
2017
RMB million
At 31 December
2016
RMB million
178
1,544
1,722
46
1,676
262
11,175
11,437
29
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.
The impairment losses relating to investments for the year ended 31 December 2017 amounted to 17 million (2016: nil).
110
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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
Dividends declared
Disposals for the year
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
Change of other comprehensive loss under the equity method
Dividends declared
Disposals for the year
Investments transferred to subsidiaries
Movement of provision for impairment
Balance at 31 December 2017
Investments in
joint ventures
RMB million
Investments in
associates
RMB million
Provision for
impairment
losses
RMB million
50,696
2,437
10,615
798
(6)
(5,199)
—
(902)
(6,195)
28
—
52,272
66,838
11,129
5,910
255
6
(2,755)
(607)
(387)
—
40
—
80,429
(722)
—
—
—
—
—
—
—
—
—
(892)
(1,614)
Total
RMB million
116,812
13,566
16,525
1,053
—
(7,954)
(607)
(1,289)
(6,195)
68
(892)
131,087
Investments in
subsidiaries
RMB million
Investments in
joint ventures
RMB million
Investments in
associates
RMB million
Provision for
impairment
losses
RMB million
Total
RMB million
245,921
3,743
—
—
—
(375)
3,722
—
253,011
15,496
434
4,804
—
(2,190)
—
(3,722)
—
14,822
14,691
183
970
(120)
(145)
—
—
—
15,579
(7,657)
—
—
—
—
—
—
(198)
(7,855)
268,451
4,360
5,774
(120)
(2,335)
(375)
—
(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.
111
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC) 13 LONG-TERM EQUITY INVESTMENTS (Continued)
Principal joint ventures and associates of the Group are as fllows:
(a) Principal joint ventures and associates
Name of investees
1.Joint ventures
Fujian Refining & Petrochemical Company
Limited (“FREP”)
Principal
place of
business
Register
location
Legal
representative
Principal
activities
PRC
PRC
Gu Yuefeng
BASF-YPC Company Limited (“BASF-YPC”)
PRC
PRC
Wang Jingyi
Taihu Limited (“Taihu”)
Russia
Cyprus
Yanbu Aramco Sinopec Refining
Company Ltd. (“YASREF”)
Sinopec SABIC Tianjin Petrochemical
Company Limited (“Sinopec SABIC
Tianjin”)
2.Associates
Sinopec Sichuan to East China Gas
Pipeline Co., Ltd. (“Pipeline Ltd”)
Sinopec Finance Company Limited
(“Sinopec Finance”)
Saudi Arabia
Saudi Arabia
PRC
PRC
NA
NA
UWAIDH AL-
HARETHI
PRC
PRC
Quan Kai
PRC
PRC
Zhao Dong
PAO SIBUR Holding (“SIBUR”)
Russia
Russia
NA
Zhongtian Synergetic Energy
Company Limited (“Zhongtian
Synergetic Energy”)
PRC
PRC
Peng Yi
Caspian Investments Resources
Ltd. (“CIR”)
The Republic of
Kazakhstan
British Virgin
NA
Islands
Percentage of
equity/voting
right directly
or indirectly
held by the
Company
Registered
Capital RMB
million
14,758
50.00%
12,547
40.00%
25,000 USD
49.00%
1,560 million
USD
9,796
37.50%
50.00%
200
50.00%
18,000
49.00%
21,784 million
10.00%
RUB
17,516
38.75%
10,000 USD
50.00%
Manufacturing
refining oil
products
Manufacturing
and distribution
of petrochemical
products
Crude oil and natural
gas extraction
Petroleum refining
and processing
Manufacturing
and distribution
of petrochemical
products
Operation of natural
gas pipelines and
auxiliary facilities
Provision of non-
banking financial
services
Proccessing
natural gas and
manufacturing
petrochemical
products
Mining coal and
manufacturing
of coal-chemical
products
Crude oil and natural
gas extraction
Except that SIBUR is a public joint stock company, other joint ventures and associates above are limited companies.
112
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
13 LONG-TERM EQUITY INVESTMENTS (CONTINUED)
(b) Major financial information of principal joint ventures
Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group’s principal joint ventures:
FREP
BASF-YPC
Taihu
YASREF
Sinopec SABIC Tianjin
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Current financial liabilities (i)
Other current liabilities
Total current liabilities
Non-current liabilities
Non-current financial liabilities(ii)
Other non-current liabilities
Total non-current liabilities
Net assets
Net assets attributable to owners
of the company
Net assets attributable to
minority interests
Share of net assets from joint ventures
Others (iii)
Carrying Amounts
Summarised income statement
5,772
11,013
16,785
19,740
(1,135)
(5,049)
(6,184)
(13,654)
(236)
(13,890)
16,451
8,172
10,269
18,441
21,903
(1,781)
(4,643)
(6,424)
(19,985)
(252)
(20,237)
13,683
1,800
5,335
7,135
12,075
(233)
(1,982)
(2,215)
(955)
(19)
(974)
16,021
1,394
4,852
6,246
13,530
(783)
(2,107)
(2,890)
(1,492)
(10)
(1,502)
15,384
16,451
13,683
16,021
15,384
—
8,226
—
8,226
—
6,842
—
6,842
—
6,409
—
6,409
—
6,154
—
6,154
2,352
2,462
4,814
7,978
(20)
(1,914)
(1,934)
(72)
(2,686)
(2,758)
8,100
7,818
282
3,831
—
3,831
1,165
1,616
2,781
8,279
(334)
(1,616)
(1,950)
(49)
(2,130)
(2,179)
6,931
4,916
10,816
15,732
51,553
(5,407)
(11,864)
(17,271)
(35,619)
(890)
(36,509)
13,505
1,259
6,826
8,085
57,054
(1,187)
(6,466)
(7,653)
(43,028)
(1,004)
(44,032)
13,454
6,524
2,709
9,233
13,248
(1,236)
(4,546)
(5,782)
(4,101)
(41)
(4,142)
12,557
3,634
1,886
5,520
14,003
—
(2,657)
(2,657)
(5,337)
(32)
(5,369)
11,497
6,690
13,505
13,454
12,557
11,497
241
3,278
743
4,021
—
5,064
—
5,064
—
5,045
—
5,045
—
6,279
—
6,279
—
5,749
—
5,749
Year ended 31 December
FREP
BASF-YPC
Taihu
YASREF
Sinopec SABIC Tianjin
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
Turnover
Interest income
Interest expense
Profit before taxation
Tax expense
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends from joint ventures
Share of net profit from
joint ventures
Share of other comprehensive
49,356
208
(857)
6,977
(1,699)
5,278
—
5,278
1,250
41,764
130
(929)
6,476
(1,574)
4,902
—
4,902
—
21,020
36
(71)
4,565
(1,151)
3,414
—
3,414
1,109
2,639
2,451
1,366
income/(loss) from joint ventures (iv)
—
—
—
17,323
19
(173)
2,606
(648)
1,958
—
1,958
155
783
—
12,520
142
(142)
1,697
(553)
1,144
25
1,169
—
541
12
9,658
40
(113)
2,411
(518)
1,893
1,851
3,744
—
895
875
61,587
45
(1,382)
548
57
605
(554)
51
—
227
(208)
41,286
33
(1,216)
28
56
84
647
731
—
31
243
22,286
104
(223)
5,113
(1,279)
3,834
—
3,834
1,375
16,337
30
(245)
3,184
(783)
2,401
—
2,401
300
1,917
1,201
—
—
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.
113
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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
2017
RMB million
At 31
December
2016
RMB million
Sinopec Finance
At 31
December
2017
RMB million
At 31
December
2016
RMB million
SIBUR (v)
At 31
December
2017
RMB million
Zhongtian Synergetic Energy
At 31
December
2017
RMB million
At 31
December
2016
RMB million
CIR
At 31
December
2017
RMB million
At 31
December
2016
RMB million
11,317
40,972
(933)
(3,176)
48,180
11,835
42,124
(5,009)
(3,350)
45,600
161,187
17,782
(154,212)
(6)
24,751
149,457
16,478
(142,386)
(88)
23,461
20,719
158,938
(20,554)
(61,771)
97,332
8,232
51,553
(10,668)
(31,494)
17,623
7,292
50,301
(8,078)
(32,137)
17,378
48,180
45,600
24,751
23,461
96,761
17,623
17,378
—
24,090
24,090
—
22,800
22,800
—
12,128
12,128
—
11,496
11,496
571
9,676
9,676
—
6,829
6,829
—
6,734
6,734
5,612
1,673
(908)
(170)
6,207
6,207
—
3,104
3,104
5,120
3,842
(928)
(883)
7,151
7,151
—
3,576
3,576
Pipeline Ltd (vi)
2017
RMB million
2016
RMB million
Sinopec Finance
2017
RMB million
2016
RMB million
SIBUR (v)
2017
RMB million
Zhongtian Synergetic Energy
2016
RMB million
2017
RMB million
CIR
2017
RMB million
2016
RMB million
5,644
2,543
—
2,543
—
1,272
—
191
51
—
51
23
26
—
3,542
1,536
(246)
1,290
—
753
(121)
2,442
1,526
(175)
1,351
—
748
(86)
52,496
9,601
(260)
9,341
221
960
(26)
3,569
123
—
123
—
48
—
—
—
—
—
—
—
—
2,563
(610)
(334)
(944)
—
(305)
(167)
2,205
(3,518)
662
(2,856)
—
(1,759)
331
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to owners
of the Company
Net assets attributable to
minority interests
Share of net assets from associates
Carrying Amounts
Summarised income statement
Year ended 31 December
Turnover
Profit/(loss) for the year
Other comprehensive (loss)/income
Total comprehensive income/(loss)
Dividends declared by associates
Share of profit/(loss) from associates
Share of other comprehensive
(loss)/income from associates (iv)
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.
114
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC) 14 FIXED ASSETS
The Group
Cost:
Balance at 1 January 2017
Additions for the year
Transferred from construction in progress
Reclassifications
Decreases for the year
Exchange adjustments
Balance at 31 December 2017
Accumulated depreciation:
Balance at 1 January 2017
Additions for the year
Reclassifications
Decreases for the year
Exchange adjustments
Balance at 31 December 2017
Provision for impairment losses:
Balance at 1 January 2017
Additions for the year
Reclassifications
Decreases for the year
Exchange adjustments
Balance at 31 December 2017
Net book value:
Balance at 31 December 2017
Balance at 31 December 2016
The company
Cost:
Balance at 1 January 2017
Additions for the year
Transferred from construction in progress
Reclassifications
Transferred from subsidiaries
Transferred to subsidiaries
Decreases for the year
Balance at 31 December 2017
Accumulated depreciation:
Balance at 1 January 2017
Additions for the year
Reclassifications
Transferred from subsidiaries
Transferred to subsidiaries
Decreases for the year
Balance at 31 December 2017
Provision for impairment losses:
Balance at 1 January 2017
Additions for the year
Reclassifications
Transferred from subsidiaries
Transferred to subsidiaries
Decreases for the year
Balance at 31 December 2017
Net book value:
Balance at 31 December 2017
Balance at 31 December 2016
Plants and
buildings
RMB million
Oil
and gas
properties
RMB million
Equipment,
machinery
and others
RMB million
Total
RMB million
114,920
854
6,789
(673)
(1,737)
(140)
120,013
45,243
4,075
(122)
(771)
(57)
48,368
3,329
554
—
(51)
—
3,832
67,813
66,348
650,685
1,627
19,881
(50)
(1,913)
(2,573)
667,657
404,919
55,057
(77)
(1,488)
(1,952)
456,459
30,642
8,832
—
(12)
(104)
39,358
171,840
215,124
892,936
11,983
54,605
723
(19,736)
(199)
940,312
463,023
46,585
199
(11,466)
(95)
498,246
20,791
10,450
—
(295)
(1)
30,945
411,121
409,122
Plants and
buildings
RMB million
Oil
and gas
properties
RMB million
Equipment
machinery
and others
RMB million
540,499
982
15,609
(46)
—
—
(1,911)
555,133
337,394
43,305
(75)
—
—
(1,487)
379,137
26,727
7,556
—
—
—
(12)
34,271
443,485
400
19,636
(160)
809
(503)
(6,728)
456,939
255,451
21,397
23
688
(282)
(5,428)
271,849
15,954
6,042
—
19
(27)
(164)
21,824
47,586
46
2,260
206
58
(652)
(482)
49,022
21,401
1,618
52
31
(470)
(230)
22,402
1,623
361
—
16
(165)
(38)
1,797
24,823
24,562
1,658,541
14,464
81,275
—
(23,386)
(2,912)
1,727,982
913,185
105,717
—
(13,725)
(2,104)
1,003,073
54,762
19,836
—
(358)
(105)
74,135
650,774
690,594
Total
RMB million
1,031,570
1,428
37,505
—
867
(1,155)
(9,121)
1,061,094
614,246
66,320
—
719
(752)
(7,145)
673,388
44,304
13,959
—
35
(192)
(214)
57,892
141,725
176,378
163,266
172,080
329,814
373,020
115
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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.
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 fixed assets which were temporarily idle or pending for
disposal.
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
Balance at 31 December 2017
Provision for impairment losses:
Balance at 1 January 2017
Additions for the year
Decreases for the year
Balance at 31 December 2017
Net book value:
Balance at 31 December 2017
Balance at 31 December 2016
At 31 December 2017, major construction projects of the Group are as follows:
Project name
Zhongke Refine Integration Project
Guangxi LNG Project
Budgeted
amount
RMB million
34,667
15,475
Balance at
1 January
2017
RMB million
3,274
4,903
Net change
for the year
RMB million
3,716
(2,538)
Wen 23 gas storage project (first-stage)
13,865
124
1,205
Tianjin LNG Project
13,639
8,213
(5,059)
Xinjiang coal-based substitute natural
gas (SNG) export pipeline
construction project (first-stage)
11,589
651
1,041
116
The Group
RMB million
The Company
RMB million
131,274
85,552
(376)
(6,876)
(81,275)
(7,773)
(101)
120,425
1,693
252
(165)
1,780
118,645
129,581
Balance at
31 December
2017
RMB million
Percentage of
Completion
Source of
funding
6,990
2,365
1,329
3,154
1,692
20%
Bank loans &
self-financing
68% Bank loans &
self-financing
10% Bank loans &
self-financing
Bank loans &
self-financing
15% Bank loans &
self-financing
78%
49,689
45,701
—
(6,567)
(37,505)
(859)
—
50,459
412
47
(46)
413
50,046
49,277
Accumulated
interest
capitalised at
31 December
2017
RMB million
25
670
1
148
—
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
16 INTANGIBLE ASSETS
The Group
Cost:
Balance at 1 January 2017
Additions for the year
Decreases for the year
Balance at 31 December 2017
Accumulated amortisation:
Balance at 1 January 2017
Additions for the year
Decreases for the year
Balance at 31 December 2017
Provision for impairment losses:
Balance at 1 January 2017
Additions for the year
Decreases for the year
Balance at 31 December 2017
Net book value:
Balance at 31 December 2017
Balance at 31 December 2016
Land use
rights
RMB million
Patents
RMB million
Non-patent
technology
RMB million
Operation
rights
RMB million
Others
RMB million
Total
RMB million
68,467
10,752
(3,491)
75,728
14,015
4,082
(1,119)
16,978
211
21
(8)
224
58,526
54,241
4,378
1,075
(293)
5,160
3,261
162
(255)
3,168
483
—
(1)
482
1,510
634
4,134
190
(479)
3,845
2,259
515
—
2,774
24
—
—
24
36,908
11,837
(132)
48,613
9,892
4,338
(24)
14,206
120
23
(4)
139
4,013
898
(249)
4,662
2,596
448
(174)
2,870
16
1
—
17
117,900
24,752
(4,644)
138,008
32,023
9,545
(1,572)
39,996
854
45
(13)
886
1,047
1,851
34,268
26,896
1,775
1,401
97,126
85,023
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).
17 GOODWILL
Goodwill is allocated to the following Group’s cash-generating units:
Name of investees
Principal activities
Sinopec Beijing Yanshan Petrochemical Branch (“Sinopec Yanshan”)
Sinopec Zhenhai Refining and Chemical Branch (“Sinopec Zhenhai”)
Shanghai SECCO Petrochemical Company Limited (“Shanghai SECCO”)
(Note 53)
Sinopec (Hong Kong) Limited
Other units without individual significant goodwill
Total
Manufacturing of intermediate
petrochemical products and
petroleum products
Manufacturing of intermediate
petrochemical products and
petroleum products
Production and sale of
petrochemical products
Trading of petrochemical
products
At 31 December
2017
RMB million
At 31 December
2016
RMB million
1,004
1,157
4,043
2,541
879
167
8,634
4,043
—
941
212
6,353
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.
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.
18 LONG-TERM DEFERRED EXPENSES
Long-term deferred expenses primarily represent prepaid rental expenses over one year and catalysts expenditures.
117
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
19 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities before the consolidated elimination adjustments are as follows:
Receivables and inventories
Accruals
Cash flow hedges
Fixed assets
Tax value of losses carried forward
Available-for-sale securities
Intangible assets
Others
Deferred tax assets/(liabilities)
Deferred tax assets
Deferred tax liabilities
At 31 December
2017
RMB million
At 31 December
2016
RMB million
At 31 December
2017
RMB million
At 31 December
2016
RMB million
381
1,925
165
14,150
2,325
117
227
180
19,470
87
391
27
11,264
2,477
—
260
133
14,639
—
—
(50)
(9,928)
—
—
(563)
(264)
(10,805)
—
—
(242)
(14,615)
—
—
—
(229)
(15,086)
The consolidated elimination amount between deferred tax assets and liabilities are as follows:
Deferred tax assets
Deferred tax liabilities
Deferred tax assets and liabilities after the consolidated elimination adjustments are as follows:
Deferred tax assets
Deferred tax liabilities
At 31 December
2017
RMB million
At 31 December
2016
RMB million
4,339
4,339
7,425
7,425
At 31 December
2017
RMB million
At 31 December
2016
RMB million
15,131
6,466
7,214
7,661
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.
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).
20 OTHER NON-CURRENT ASSETS
Other non-current assets mainly represent prepayments for construction projects and purchases of equipment.
118
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
21 DETAILS OF IMPAIRMENT LOSSES
At 31 December 2017, impairment losses of the Group are analysed as follows:
Allowance for doubtful accounts
Included: Accounts receivable
Other receivables
Prepayments
Inventories
Long-term equity investments
Fixed assets
Construction in progress
Intangible assets
Goodwill
Others
Total
Note
8
9
10
11
13
14
15
16
17
Balance at
1 January
2017
RMB million
Provision for
the year
RMB million
Written back
for the year
RMB million
Written off
for the year
RMB million
Other
increase/
(decrease)
RMB million
Balance at
31 December
2017
RMB million
683
1,349
31
2,063
920
722
54,762
1,693
854
7,663
43
68,720
49
233
2
284
436
936
19,836
252
19
198
17
21,978
(100)
(74)
—
(174)
(13)
—
—
—
—
—
—
(187)
(21)
(18)
—
(39)
(190)
(2)
(372)
(60)
(1)
—
—
(664)
1
(4)
(8)
(11)
2
(42)
(91)
(105)
14
—
(11)
(244)
The reasons for recognising impairment losses are set out in the respective notes of respective assets.
22 SHORT-TERM LOANS
The Group’s short-term loans represent:
Short-term bank loans
–Renminbi loans
–US Dollar loans
Short-term other loans
–Renminbi loans
Short-term loans from Sinopec Group Company and
fellow subsidiaries
–Renminbi loans
–US Dollar loans
–HK Dollar loans
–Euro loans
–Singapore Dollar loans
Total
At 31 December 2017
At 31 December 2016
Original
currency
million
Exchange
rates
1,136
6.5342
3,010
2,277
—
4
6.5342
0.8359
7.8023
4.8831
Original
currency
million
Exchange
rates
146
6.9370
1,957
2,202
1
4
6.9370
0.8945
7.3068
4.7995
RMB
million
31,105
23,685
7,420
299
299
23,297
1,706
19,668
1,903
—
20
54,701
612
1,486
25
2,123
1,155
1,614
74,135
1,780
886
7,861
49
89,603
RMB
million
11,944
10,931
1,013
—
—
18,430
2,858
13,577
1,969
5
21
30,374
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.
At 31 December 2017 and 2016, the Group had no significant overdue short-term loan.
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.
25 ADVANCES FROM CUSTOMERS
At 31 December 2017 and 2016, the Group had no individually significant advances from customers aged over one year.
119
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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
Value-added tax payable
Consumption tax
Income tax
Mineral resources compensation fee
Other taxes
Total
28 OTHER PAYABLES
At 31 December
2017
RMB million
At 31 December
2016
RMB million
8,899
39,623
13,015
175
10,228
71,940
8,668
29,682
6,051
196
8,289
52,886
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
– 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
– US Dollar debentures
Others
Non-current liabilities due within one year
At 31 December 2017
At 31 December 2016
Original
currency
million
Exchange
rates
RMB
million
Original
currency
million
Exchange
rates
4
6.5342
1,000
6.5342
1,379
23
1,402
2,014
2,014
3,416
16,000
6,532
22,532
733
26,681
6
6.9370
—
6.9370
RMB
million
8,753
42
8,795
150
150
8,945
29,500
—
29,500
527
38,972
At 31 December 2017 and 2016, the Group had no significant overdue long-term loan.
120
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
30 LONG-TERM LOANS
The Group’s long-term loans represent:
Long-term bank loans
– Renminbi loans
– US Dollar loans
Interest rate and final maturity
Interest rates ranging from interest
1.08% to 4.66% per annum at 31
December 2017 with maturities
through 2030
Interest rates ranging from interest
1.55% to 4.29% per annum at 31
December 2017 with maturities
through 2031
Less: Current portion
Long-term bank loans
Long-term loans from Sinopec Group Company
and fellow subsidiaries
– Renminbi loans
Interest rates ranging from interest
free to 4.99% per annum at 31
December 2017 with maturities
through 2022
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:
Between one and two years
Between two and five years
After five years
Total
Long-term loans are primarily unsecured, and carried at amortised costs.
At 31 December 2017
At 31 December 2016
Original
currency
million
Exchange
rates
Original
currency
million
Exchange
rates
RMB
million
25,644
RMB
million
26,058
29
6.5342
192
61
6.9370
426
(1,402)
24,434
45,334
(2,014)
43,320
67,754
(8,795)
17,689
44,922
(150)
44,772
62,461
At 31 December
2017
RMB million
At 31 December
2016
RMB million
16,822
48,238
2,694
67,754
3,957
56,725
1,779
62,461
121
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
31 DEBENTURES PAYABLE
The Group
Short-term corporate bonds (i)
Debentures payable:
– Corporate Bonds (ii)
Less: Current portion
Total
Note:
At 31 December
2017
RMB million
At 31 December
2016
RMB million
—
6,000
53,902
(22,532)
31,370
84,485
(29,500)
54,985
(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.
(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.
32 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 2017
Provision for the year
Accretion expenses
Utilised for the year
Exchange adjustments
Balance at 31 December 2017
33 OTHER NON-CURRENT LIABILITIES
Other non-current liabilities primarily represent long-term payables, special payables and deferred income.
The Group
RMB million
36,918
1,627
1,501
(467)
(172)
39,407
122
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
34 SHARE CAPITAL
The Group
Registered, issued and fully paid:
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
Total
At 31 December
2017
RMB million
At 31 December
2016
RMB million
95,558
25,513
121,071
95,558
25,513
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.
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 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 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.
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.
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.
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.
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
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 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.
The schedule of the contractual maturities of loans and commitments are disclosed in Notes 30 and 57, respectively.
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.
123
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
35 CAPITAL RESERVE
The movements in capital reserve of the Group are as follows:
Balance at 1 January 2017
Transaction with minority interests
Others
Balance at 31 December 2017
RMB million
119,525
(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
Before-tax
amount
RMB million
2017
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
Less/(Add): Adjustments of amounts transferred to initial carrying amount of hedged items
Total amounts transferred to profit or loss from
other comprehensive income during the year
Subtotal
Changes in fair value of available-for-sale financial assets recongnised during the year
Less: Total amounts transferred to profit or loss from
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
(1,314)
4
575
(1,893)
(57)
—
(57)
1,053
1,053
(3,792)
(3,792)
(4,689)
240
(1)
(72)
313
—
—
—
—
—
—
—
313
(1,074)
3
503
(1,580)
(57)
—
(57)
1,053
1,053
(3,792)
(3,792)
(4,376)
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
other comprehensive income during the year
Subtotal
Changes in fair value of available-for-sale financial assets recongnised during the year
Less: Total amounts transferred to profit or loss from
other comprehensive income during the year
Subtotal
Share of other comprehensive loss in associates and joint ventures
Subtotal
Translation difference in foreign currency statements
Subtotal
Other comprehensive income
Before-tax
amount
RMB million
2016
Tax effect
RMB million
Net-of-tax
amount
RMB million
(3,813)
(13)
(6,279)
2,479
(17)
—
(17)
45
45
4,298
4,298
6,805
652
2
1,115
(465)
(7)
—
(7)
—
—
—
—
(472)
(3,161)
(11)
(5,164)
2,014
(24)
—
(24)
45
45
4,298
4,298
6,333
124
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
36 OTHER COMPREHENSIVE INCOME (Continued)
The Group (Continued)
(b) Reconciliation of other comprehensive income
The share of other
comprehensive
income which
being reclassified
to profit and
loss in the future
under equity
method
RMB Million
(6,557)
2,396
(4,161)
680
(3,481)
31 December 2015
Changes in 2016
31 December 2016
Changes in 2017
31 December 2017
37 SPECIFIC RESERVE
Equity Attributable to shareholders of the company
Minority interests
Total other
comprehensive
income
Changes in fair
value of
available-for-sale
financial assets
RMB Million
114
(17)
97
(40)
57
Cash flow hedges
RMB Million
(838)
1,970
1,132
(1,642)
(510)
Translation
difference in
foreign currency
statements
RMB Million
(703)
2,703
2,000
(2,479)
(479)
Subtotal
RMB Million
(7,984)
7,052
(932)
(3,481)
(4,413)
RMB Million
RMB Million
(1,169)
(719)
(1,888)
(895)
(2,783)
(9,153)
6,333
(2,820)
(4,376)
(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:
Balance at 1 January 2017
Appropriation
Balance at 31 December 2017
The Group
RMB million
765
3,280
(3,157)
888
Statutory
surplus reserve
RMB million
The Group
Discretionary
surplus reserves
RMB million
79,640
3,042
82,682
117,000
—
117,000
Total
RMB million
196,640
3,042
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.
125
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
39 OPERATING INCOME AND OPERATING COSTS
Income from principal operations
Income from other operations
Total
Operating costs
The Group
2017
RMB million
2,300,470
59,723
2,360,193
1,890,398
2016
RMB million
1,880,190
50,721
1,930,911
1,492,165
The Company
2017
RMB million
2016
RMB million
824,100
33,378
857,478
633,114
696,211
29,967
726,178
513,514
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
Consumption tax
City construction tax
Education surcharge
Resources tax
Other taxes
Total
The applicable tax rate of the taxes and surcharges are set out in Note 4.
41 FINANCIAL EXPENSES
The Group
Interest expenses incurred
Less: Capitalised interest expenses
Net interest expenses
Accretion expenses (Note 32)
Interest income
Net foreign exchange (gain)/loss
Total
2017
RMB million
2016
RMB million
192,907
18,274
13,811
4,841
5,459
235,292
193,836
18,155
13,695
3,871
2,449
232,006
2017
RMB million
2016
RMB million
6,368
723
5,645
1,501
(5,254)
(332)
1,560
9,021
859
8,162
1,057
(3,218)
610
6,611
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%).
42 CLASSIFICATION OF EXPENSES BY NATURE
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:
Purchased crude oil, products and operating supplies and expenses
Personnel expenses
Depreciation, depletion and amortization
Exploration expenses (including dry holes)
Other expenses
Total
43 EXPLORATION EXPENSES
Exploration expenses include geological and geophysical expenses and written-off of unsuccessful dry hole costs.
2017
RMB million
2016
RMB million
1,770,651
74,854
115,310
11,089
64,566
2,036,470
1,379,691
63,887
108,425
11,035
63,867
1,626,905
126
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
44 IMPAIRMENT LOSSES
The Group
Receivables (Note 8,9,10)
Inventories (Note 11)
Long-term equity investment (Note 13)
Fixed assets (Note 14)
Construction in Progress (Note 15)
Intangible assets (Note 16)
Others
Total
45 GAIN FROM CHANGES IN FAIR VALUE
The Group
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
Others
Total
46 INVESTMENT INCOME
2017
RMB million
2016
RMB million
110
423
936
19,836
252
19
215
21,791
231
420
1
14,921
1,486
11
6
17,076
2017
RMB million
2016
RMB million
(157)
103
41
(13)
(160)
11
(67)
(216)
Income from investment of subsidiaries accounted for
under cost method
Income from investment accounted for under equity method
Investment (loss)/income from disposal of long-term
equity investments
Investment income from holding/disposal of
available-for-sale financial assets
Investment income from holding/disposal of financial assets and
liabilities and derivative financial instruments at fair value through
profit or loss
(Losses)/gains from ineffective portion of cash flow hedge
Investment income on loss of control and remeasuring
interests in the Pipeline Ltd (Note 13(vi))
Gain on remeasurement of interests in Shanghai SECCO (Note53)
Others
Total
The Group
2017
RMB million
2016
RMB million
The Company
2017
RMB million
2016
RMB million
—
16,525
(26)
199
(752)
(916)
—
3,941
89
19,060
—
9,306
11
173
355
293
20,562
—
79
30,779
31,118
5,774
17,769
3,749
(21)
13
—
(88)
—
—
1,262
38,058
(6)
4
—
(135)
20,562
—
1,576
43,519
47 OTHER INCOME
Other income are mainly the government grants related to the business activities.
48 NON-OPERATING INCOME
The Group
Government grants
Others
Total
2017
RMB million
2016
RMB million
427
890
1,317
3,987
719
4,706
127
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
49 NON-OPERATING EXPENSES
The Group
Fines, penalties and compensation
Donations
Others
Total
50 INCOME TAX EXPENSE
The Group
Provision for income tax for the year
Deferred taxation
Under-provision for income tax in respect of preceding year
Total
Reconciliation between actual income tax expense and accounting profit at applicable tax rates is as follows:
Profit before taxation
Expected income tax expense at a tax rate of 25%
Tax effect of non-deductible expenses
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
Tax effect of tax losses not recognised
Write-down of deferred tax assets
Adjustment for under provision for income tax in respect of preceding years
Actual income tax expense
Note:
2017
RMB million
2016
RMB million
89
152
1,468
1,709
152
133
1,933
2,218
2017
RMB million
2016
RMB million
26,668
(10,317)
(72)
16,279
21,313
(834)
228
20,707
2017
RMB million
2016
RMB million
86,573
21,643
1,936
(5,939)
(793)
(1,394)
(613)
1,485
26
(72)
16,279
79,877
19,969
1,569
(2,757)
83
299
(453)
958
811
228
20,707
(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.
51 DIVIDENDS
(a) Dividends of ordinary shares declared after the balance sheet date
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.
(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 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.
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 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 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.
128
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
52 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT
The Group
(a) Reconciliation of net profit to cash flows from operating activities:
Net profit
Add:
Impairment losses on 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
Financial expenses
Investment income
(Increase)/decrease in deferred tax assets
Decrease in deferred tax liabilities
Increase in inventories
Safety fund reserve
Increase in operating receivables
Increase 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)/increase 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
2017
RMB million
2016
RMB million
70,294
21,791
106,149
9,161
6,876
1,518
13
676
(19,060)
(4,707)
(5,610)
(28,903)
126
(31,151)
63,762
190,935
59,170
17,076
99,592
8,833
7,467
1,528
216
4,336
(30,779)
1,719
(2,553)
(11,364)
160
(22,549)
81,691
214,543
2017
RMB million
2016
RMB million
113,218
124,468
(11,250)
124,468
68,933
55,535
2017
RMB million
2016
RMB million
14
113,204
113,218
10
124,458
124,468
129
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
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.
Shanghai SECCO is principally engaged in the production and sale of petrochemical products including acrylonitrile, polystyrene, polyethylene,
etc.
Acquiree
Shanghai
SECCO
Time of
acquisition
26/10/2017
Cost of
acquisition
RMB 10,135
million
Share of
acquired
equity
50%
Acquisition
method
Acquisition
date
Cash
26/10/2017
Details of combination cost and goodwill are as follows:
Net profits
of the
acquiree from
the acquisition
date to
end of year
Operating
cash flow
of the
acquiree from
the acquisition
date to
end of year
Net cash
flow of
the acquiree
from
the acquisition
date to
end of year
RMB 726
million
RMB 1,639
million
RMB 7,205
million
Income of the
acquiree from
the acquisition
date to
end of year
RMB 5,222
million
Basis of
determination
on the acquisition
date
Acquirer gaining
actual control
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:
Cash and cash equivalents
Bills receivable
Accounts and other receivables
Inventories
Prepayments
Other current assets
Total current assets
Fixed assets
Construction in progress
Intangible assets
Long-term deferred expenses
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
Accounts and other payables
Bills payable
Advances from customers
Employee benefits payable
Taxes payable
Total current liabilities
Deferred tax liabilities
Net assets acquired
Shanghai SECCO
RMB million
10,135
10,135
20,270
17,729
2,541
Fair value
at the
Acquisition Date
Book value
at the
Acquisition Date
Book value
At December 31
2016
5,653
641
558
1,702
1,349
761
10,664
9,587
231
2,937
117
11
—
12,883
23,547
(2,115)
—
(383)
(96)
(1,438)
(4,032)
(1,786)
17,729
5,653
641
558
1,558
1,349
791
10,550
4,860
229
662
117
12
7
5,887
16,437
(2,115)
—
(383)
(96)
(1,438)
(4,032)
—
12,405
2,343
621
251
1,643
354
386
5,598
5,665
117
613
168
19
—
6,582
12,180
(936)
(35)
(376)
(99)
(538)
(1,984)
—
10,196
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.
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.
130
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
53 BUSINESS COMBAINATION (Continued)
(b) Business combination involving entities under common control
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.
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.
54 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
(1) Related parties having the ability to exercise control over the Group
The name of the company
Unified social credit identifier
Registered address
Principal activities
Relationship with the Group
Types of legal entity
Authorised representative
Registered capital
:
:
:
:
:
:
:
:
China Petrochemical Corporation
9111000010169286X1
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
Wang Yupu
RMB 274,867 million
Sinopec Group Company is an enterprise controlled by the PRC government. Sinopec Group Company directly and indirectly holds 71.32%
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 Assets Management Corporation
Sinopec Engineering Incorporation
Sinopec Century Bright Capital Investment Limited
Sinopec Petroleum Storage and Reserve Limited
Associates of the Group:
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.
131
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
54 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:
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 related parties
Net loans obtained from/(repaid to) related parties
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(vii)
(vii)
(viii)
(ix)
(x)
(ix)
(xi)
The Group
2017
RMB million
2016
RMB million
244,211
165,993
7,716
21,210
20,824
6,653
8,015
510
626
127
807
554
(7,441)
5,279
194,179
118,242
1,333
27,201
10,816
6,584
10,474
449
456
129
209
996
(21,770)
(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.
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).
Note:
(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
(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.
(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.
(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.
(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.
(vii) Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land, buildings and equipment.
(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 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.
(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.
132
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
54 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: (Continued)
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) 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:
‧ the government-prescribed price;
‧ where there is no government-prescribed price, the government-guidance price;
‧ where there is neither a government-prescribed price nor a government-guidance price, the market price; or
‧ 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%.
(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.
(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.
(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.
133
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
54 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(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:
Cash and cash equivalents
Accounts receivable
Other receivables
Prepayments and other current assets
Other non-current assets
Accounts payable
Advances from customers
Other payables
Other non-current liabilities
Short-term loans
Long-term loans (including current portion) (Note)
The ultimate holding company
Other related companies
At 31 December
2017
RMB million
At 31 December
2016
RMB million
At 31 December
2017
RMB million
At 31 December
2016
RMB million
—
19
33
—
—
43
12
104
—
—
—
—
25
33
—
—
3
13
178
—
—
—
47,514
12,884
5,411
189
20,726
22,806
2,763
18,111
10,165
23,297
45,334
40,073
10,953
12,827
570
20,385
19,416
1,969
19,430
9,998
18,430
44,922
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.
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.
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.
(5) 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 compensations are as follows:
Short-term employee benefits
Retirement scheme contributions
Total
2017
RMB thousand
2016
RMB thousand
5,344
424
5,768
5,648
499
6,147
134
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
55 PRINCIPAL 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 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.
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.
(a) Oil and gas properties and reserves
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.
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.
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.
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.
(b) Impairment for assets
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.
(c) Depreciation
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.
(d) Allowances for doubtful accounts
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.
(e) 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 would be higher than estimated.
135
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
56 PRINCIPAL SUBSIDIARIES
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:
Full name of enterprise
Principal activities
Registered
capital/paid-
up capital
million
Actual
investment at
31 December
2017
million
(a) Subsidiaries acquired through group restructuring:
China Petrochemical International Company Limited
China International United Petroleum and Chemical
Company Limited
Sinopec Catalyst Company Limited
Sinopec Yangzi Petrochemical Company Limited
Sinopec Pipeline Storage & Transportation
Company Limited
Sinopec Lubricant Company Limited
Sinopec Yizheng Chemical Fibre Limited
Liability Company
Sinopec Marketing Company Limited
(“Marketing Company”)
Sinopec Kantons Holdings Limited (“Sinopec Kantons”)
Sinopec Shanghai Petrochemical Company Limited
(“Shanghai Petrochemical”)
Fujian Petrochemical Company Limited
(“Fujian Petrochemical”) (i)
(b) Subsidiaries established by the Group:
Trading of petrochemical products
Trading of crude oil and petrochemical products
RMB 1,400
RMB 3,000
RMB 1,856
RMB 4,585
Production and sale of catalyst products
Manufacturing of intermediate petrochemical
products and petroleum products
Pipeline storage and transportation of crude oil
Production and sale of refined petroleum products,
lubricant base oil, and petrochemical materials
Production and sale of polyester chips and polyester
fibres
Marketing and distribution of refined petroleum
products
Trading of crude oil 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
RMB 1,500
RMB 13,203
RMB 1,562
RMB 15,651
RMB 12,000
RMB 12,000
100.00
RMB 3,374
RMB 3,374
100.00
RMB 4,000
RMB 6,713
100.00
RMB 28,403
RMB 20,000
HKD 248
RMB 10,814
HKD 3,952
RMB 5,820
70.42
60.34
50.49
Percentage
of equity
interest/
voting right
held by
the Group
%
100.00
100.00
100.00
100.00
Minority
Interests at
31 December
2017
RMB million
27
4,072
225
—
—
56
—
63,006
3,788
14,275
RMB 6,898
RMB 3,737
50.00
4,930
Sinopec International Petroleum Exploration and
Production Limited (“SIPL”)
Sinopec Overseas Investment Holding Limited (“SOIH”)
Sinopec Chemical Sales Company Limited
Sinopec Great Wall Energy & Chemical
Company Limited
Sinopec Beihai Refining and Chemical Limited
Liability Company
Sinopec Qingdao Refining and Chemical
Company Limited
Sinopec-SK(Wuhan) Petrochemical Company Limited
(“Zhonghan Wuhan”)
Investment in exploration, production and sale of
petroleum and natural gas
Investment holding
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
Manufacturing of intermediate petrochemical
products and petroleum products
Production, sale, research and development of
ethylene and downstream byproducts
RMB 8,000
RMB 8,000
100.00
15,215
USD 1,638
RMB 1,000
RMB 22,761
USD 1,638
RMB 1,165
RMB 22,759
100.00
100.00
100.00
RMB 5,294
RMB 5,240
98.98
RMB 5,000
RMB 4,250
RMB 6,270
RMB 4,076
85.00
65.00
54
68
49
98
1,527
3,941
(c) Subsidiaries acquired through business combination under common control:
Sinopec Hainan Refining and Chemical
Company Limited
Sinopec Qingdao Petrochemical Company Limited
Gaoqiao Petrochemical Company Limited (Note 53)
Manufacturing of intermediate petrochemical
products and petroleum products
Manufacturing of intermediate petrochemical
products and petroleum products
Manufacturing of intermediate petrochemical
products and petroleum products
(d) Subsidiaries acquired through business combination not under common control:
RMB 3,986
RMB 2,990
75.00
2,153
RMB 1,595
RMB 7,233
100.00
—
RMB 10,000
RMB 4,804
55.00
5,400
Sinopec Zhanjiang Dongxing Petrochemical
Company Limited
Shanghai SECCO Petrochemical Company Limited
(“Shanghai SECCO”) (Note 53)
Manufacturing of intermediate petrochemical
products and petroleum products
Production and sale of petrochemical products
RMB 4,397
RMB 3,225
RMB 7,801
RMB 7,801
75.00
67.60
1,297
5,989
* 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, respectively, all of the above principal subsidiaries are
incorporated and operate their businesses principally in the PRC.
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 return through its power over the entity.
136
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
56 PRINCIPAL SUBSIDIARIES (Continued)
Summarised financial information on subsidiaries with material minority interests
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 consolidated balance sheet
Marketing Company
At 31
December
2017
RMB million
At 31
December
2016
RMB million
156,494
(212,620)
121,260
(168,366)
(56,126)
253,455
(1,774)
215,681
(47,106)
246,514
(1,460)
245,054
SIPL
Shanghai Petrochemical
Fujian Petrochemical
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
Sinopec Kantons
At 31
December
2017
RMB million
At 31
December
2016
RMB million
19,555
(7,118)
12,437
34,769
(28,523)
6,246
18,116
(824)
17,292
40,067
(39,322)
745
19,866
(10,922)
8,944
19,743
(146)
19,597
14,876
(8,942)
5,934
19,248
(150)
19,098
992
(376)
616
9,925
(681)
9,244
926
(812)
114
7,845
(721)
7,124
1,196
(2,351)
(1,155)
13,089
(2,430)
10,659
1,352
(2,891)
(1,539)
13,228
(3,101)
10,127
Current assets
Current liabilities
Net current
(liabilities)/assets
Non-current assets
Non-current liabilities
Net non-current assets
Summarised consolidated statement of comprehensive income and cash flow
Year ended 31 December
Marketing Company
SIPL
Shanghai Petrochemical
Fujian Petrochemical
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
4,016
(4,604)
92,014
6,152
77,894
5,969
(2,481)
6,152
5,988
6,068
2,757
2,757
4,968
2,513
2,513
2017
RMB million
1,221,530
27,517
2016
RMB million
1,050,294
26,461
26,983
27,385
9,033
9,544
9,028
4,932
6,136
1,075
396
(38)
—
Turnover
Profit/(loss) for the year
Total comprehensive
income/(loss)
Comprehensive income/
(loss) attributable to
minority interests
Dividends paid to minority
interests
Net cash generated from/
(used in) operating activities
Note:
(3,279)
—
3,081
1,344
7,078
2,966
563
7,211
1,378
1,256
625
(558)
—
617
51,038
50,840
2,758
2,576
Sinopec Kantons
2017
RMB million
2016
RMB million
1,498
1,046
1,146
433
70
968
1,512
860
879
349
51
505
Shanghai
SECCO
At 31
December
2017
RMB million
11,602
(4,174)
7,428
12,797
(1,740)
11,057
Shanghai
SECCO(ii)
2017
RMB million
5,222
726
726
235
—
Zhonghan Wuhan
At 31
December
2017
RMB million
At 31
December
2016
RMB million
1,636
(3,975)
(2,339)
13,598
—
13,598
1,489
(7,521)
(6,032)
14,686
—
14,686
Zhonghan Wuhan
2017
RMB million
2016
RMB million
16,139
2,733
11,703
1,558
2,733
1,558
957
—
545
—
1,639
2,976
3,636
(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.
137
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
57 COMMITMENTS
Operating lease commitments
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.
At 31 December 2017 and 2016, the future minimum lease payments of the Group under operating leases 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
After five years
Total
Capital commitments
At 31 December 2017 and 2016, the capital commitments of the Group are as follows:
Authorised and contracted for (i)
Authorised but not contracted for
Total
At 31 December
2017
RMB million
At 31 December
2016
RMB million
11,114
11,492
10,730
10,552
10,428
202,806
257,122
14,917
14,228
13,966
13,217
12,980
275,570
344,878
At 31 December
2017
RMB million
At 31 December
2016
RMB million
120,386
57,997
178,383
116,379
31,720
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.
Note:
(i) The investment commitments of the Group is RMB 3,364 million (2016: RMB 4,173 million).
Commitments to joint ventures
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.
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:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Total
At 31 December
2017
RMB million
At 31 December
2016
RMB million
205
83
32
28
28
882
1,258
263
123
25
24
25
867
1,327
The implementation of commitments in previous year and the Group’s commitments did not have material discrepancy.
138
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
58 CONTINGENT LIABILITIES
(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.
(b) At 31 December 2017 and 2016, guarantees by the Group in respect of facilities granted to the parties below are as follows:
Joint ventures
Associates (i)
Others
Total
At 31 December
2017
RMB million
At 31 December
2016
RMB million
940
13,520
9,732
24,192
658
11,545
10,669
22,872
(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.
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.
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 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.
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).
Legal contingencies
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.
59 SEGMENT REPORTING
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.
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.
(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.
(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.
(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.
(iv) Chemicals — which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products to external
customers.
(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.
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.
139
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
59 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and 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.
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.
Reportable information on the Group’s operating segments is as follows:
2017
RMB million
2016
RMB million
69,168
77,804
146,972
132,478
874,271
1,006,749
1,191,902
3,962
1,195,864
373,814
49,615
423,429
533,108
440,303
973,411
(1,445,955)
2,300,470
10,533
5,104
28,333
14,314
1,439
59,723
2,360,193
47,443
58,954
106,397
102,983
747,317
850,300
1,027,373
3,480
1,030,853
284,289
38,614
322,903
418,102
320,367
738,469
(1,168,732)
1,880,190
9,542
5,486
22,004
12,211
1,478
50,721
1,930,911
Income from principal operations
Exploration and production
External sales
Inter-segment sales
Refining
External sales
Inter-segment sales
Marketing and distribution
External sales
Inter-segment sales
Chemicals
External sales
Inter-segment sales
Corporate and others
External sales
Inter-segment sales
Elimination of inter-segment sales
Consolidated income from principal operations
Income from other operations
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Consolidated income from other operations
Consolidated operating income
140
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
59 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Operating (loss)/profit
By segment
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Elimination
Total segment operating profit
Investment income
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Total segment investment income
Financial expenses
Loss from changes in fair value
Asset disposal income
Other income
Operating profit
Add: Non-operating income
Less: Non-operating expenses
Profit before taxation
Assets
Segment assets
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Total segment assets
Cash at bank and on hand
Long-term equity investments
Deferred tax assets
Other unallocated assets
Total assets
Liabilities
Segment liabilities
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Total segment liabilities
Short-term loans
Non-current liabilities due within one year
Long-term loans
Debentures payable
Deferred tax liabilities
Other non-current liabilities
Other unallocated liabilities
Total liabilities
2017
RMB million
2016
RMB million
(47,399)
64,047
32,011
22,796
(3,160)
(1,655)
66,640
1,401
1,017
2,951
13,648
43
19,060
(1,560)
(13)
(1,518)
4,356
86,965
1,317
1,709
86,573
(58,531)
55,808
32,385
20,769
2,912
1,581
54,924
19,248
1,071
2,928
5,815
1,717
30,779
(6,611)
(216)
(1,487)
—
77,389
4,706
2,218
79,877
At 31 December
2017
RMB million
At 31 December
2016
RMB million
343,404
273,123
309,727
158,472
170,045
1,254,771
165,004
131,087
15,131
29,511
1,595,504
99,367
101,429
163,680
35,207
117,756
517,439
54,701
26,681
67,754
31,370
6,466
16,440
20,583
741,434
402,476
260,903
292,328
144,371
95,263
1,195,341
142,497
116,812
7,214
36,745
1,498,609
95,883
82,170
132,922
31,989
97,078
440,042
30,374
38,972
62,461
54,985
7,661
16,136
15,453
666,084
141
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
59 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Capital expenditure
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Depreciation, depletion and amortisation
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Impairment losses on long-lived assets
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
2017
RMB million
2016
RMB million
31,344
21,075
21,539
23,028
2,398
99,384
66,843
18,408
15,463
12,873
1,723
115,310
13,556
1,894
675
4,922
211
21,258
32,187
14,347
18,493
8,849
2,580
76,456
61,929
17,209
14,540
12,654
2,093
108,425
11,605
1,655
267
2,898
—
16,425
(2) Geographical information
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.
2017
RMB million
2016
RMB million
1,758,365
269,349
332,479
2,360,193
1,488,117
152,068
290,726
1,930,911
At 31 December
2017
RMB million
At 31 December
2016
RMB million
979,329
48,572
1,027,901
1,000,209
45,887
1,046,096
External sales
Mainland China
Singapore
Others
Non-current assets
Mainland China
Others
142
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
60 FINANCIAL INSTRUMENTS
Overview
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.
The Group has exposure to the following risks from its uses of financial instruments:
‧ credit risk;
‧ liquidity risk;
‧ 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 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
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.
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.
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 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.
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.
143
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
60 FINANCIAL INSTRUMENTS (Continued)
Liquidity risk (Continued)
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:
Short-term loans
Non-current liabilities due within one year
Long-term loans
Debentures payable
Bills payable
Accounts payable
Dividends payable
Other payables and employee benefits payable
Total
Short-term loans
Non-current liabilities due within one year
Short-term debentures payable
Long-term loans
Debentures payable
Bills payable
Accounts payable
Dividends payable
Other payables and employee benefits payable
Total
At 31 December 2017
Total
contractual
undiscounted
cash flow
RMB million
Within
one year or
on demand
RMB million
More than
one year
but less than
two years
RMB million
More than
two years
but less than
five years
RMB million
Carrying
amount
RMB million
More than
five years
RMB million
54,701
26,681
67,754
31,370
6,462
200,073
6,843
92,012
485,896
55,451
27,261
70,613
39,122
6,462
200,073
6,843
92,012
497,837
55,451
27,261
1,003
1,250
6,462
200,073
6,843
92,012
390,355
—
—
17,666
1,250
—
—
—
—
18,916
—
—
49,038
22,285
—
—
—
—
71,323
—
—
2,906
14,337
—
—
—
—
17,243
At 31 December 2016
Total
contractual
undiscounted
cash flow
RMB million
Within
one year or
on demand
RMB million
More than
one year
but less than
two years
RMB million
More than
two years
but less than
five years
RMB million
Carrying
amount
RMB million
More than
five years
RMB million
30,374
38,972
6,000
62,461
54,985
5,828
174,301
2,006
79,248
454,175
30,708
39,934
6,030
64,566
65,503
5,828
174,301
2,006
79,248
468,124
30,708
39,934
6,030
900
1,932
5,828
174,301
2,006
79,248
340,887
—
—
—
4,652
24,717
—
—
—
—
29,369
—
—
—
57,262
16,069
—
—
—
—
73,331
—
—
—
1,752
22,785
—
—
—
—
24,537
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.
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
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.
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:
The Group
Gross exposure arising from loans and borrowings
US Dollars
At 31 December
2017
million
At 31 December
2016
million
USD 204
USD 126
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
same basis for 2016.
144
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
60 FINANCIAL INSTRUMENTS (Continued)
Market risk (Continued)
(a) Currency risk (Continued)
The Group
US Dollars
At 31 December
2017
million
At 31 December
2016
million
50
33
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 22 and Note 30, respectively.
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.
(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, to manage a portion of such risk.
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.
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.
145
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
60 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:
‧ 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
The Group
Assets
Financial assets at fair value through profit and loss
– Structural deposits
Available-for-sale financial assets:
– Listed
Derivative financial instruments:
– Derivative financial assets
Liabilities
Derivative financial instruments:
– Derivative financial liabilities
At 31 December 2016
The Group
Assets
Available-for-sale financial assets:
– Listed
Derivative financial instruments:
– Derivative financial assets
Liabilities
Derivative financial instruments:
– Derivative financial liabilities
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
—
178
343
521
—
—
183
183
1,277
1,277
1,388
1,388
51,196
51,196
—
—
51,196
—
—
178
526
51,900
2,665
2,665
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
262
29
291
2,586
2,586
—
733
733
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.
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.
146
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
60 FINANCIAL INSTRUMENTS (Continued)
Fair values (Continued)
(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:
Carrying amount
Fair value
At 31 December
2017
RMB million
At 31 December
2016
RMB million
79,738
78,040
110,969
109,308
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.
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.
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.
61 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
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))
Other non-operating loss, net
Net gains of combination under common control from 1 January 2017 to the consolidation date
Tax effect
Total
Attributable to:
Equity shareholders of the Company
Minority interests
2017
RMB million
2016
RMB million
1,518
152
(4,783)
(148)
—
(3,941)
690
—
(6,512)
976
(5,536)
(5,537)
1
1,489
133
(3,987)
(518)
(20,562)
—
1,367
(86)
(22,164)
5,578
(16,586)
(16,703)
117
147
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
62 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)
2017
51,119
121,071
0.422
2017
121,071
121,071
2016
46,416
121,071
0.383
2016
121,071
121,071
(ii) Diluted earnings per 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):
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)
63 RETURN ON NET ASSETS AND EARNINGS PER SHARE
2017
51,117
121,071
0.422
2017
121,071
121,071
2016
46,413
121,071
0.383
2016
121,071
121,071
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:
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
2017
2016
Weighted
average
return on
net assets
(%)
Basic
earnings
per share
(RMB/Share)
Diluted
earnings
per share
(RMB/Share)
Weighted
average
return on
net assets
(%)
Basic
earnings
per share
(RMB/Share)
Diluted
earnings
per share
(RMB/Share)
7.14
0.422
0.422
6.68
0.383
0.383
6.37
0.376
0.376
4.33
0.245
0.245
148
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (PRC)
Independent Auditor’s Report
To the Shareholders of China Petroleum & Chemical Corporation
(incorporated in the People’s Republic of China with limited liability)
OPINION
What we have audited
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:
•
•
•
•
•
•
the consolidated balance sheet as at 31 December 2017;
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
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.
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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
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.
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.
149
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR 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”.
Key Audit Matter
How our audit addressed the Key Audit Matter
Recoverability of the carrying amount of property, plant and equipment
related to oil and gas producing activities
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.
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:
– Future crude oil prices;
– Future production profiles;
– Future cost profiles; and
– Discount rates.
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.
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:
‧ 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.
‧ 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.
‧ Independently estimated a range of discount rates, and found that the
discount rates adopted by management were within the range.
‧ 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.
‧ Assessed the methodology adopted in, and tested mathematical
accuracy of, the discounted cash flow projections.
‧ 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 gathered and consistent with our
expectations.
OTHER INFORMATION
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.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance
with IFRSs 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.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
150
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED) 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.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an
opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditor’s report is HON CHONG HENG.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 23 March 2018
151
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED) Turnover and other operating revenues
Turnover
Other operating revenues
Operating expenses
Purchased crude oil, products and operating supplies and expenses
Selling, general and administrative expenses
Depreciation, depletion and amortisation
Exploration expenses, including dry holes
Personnel expenses
Taxes other than income tax
Other operating (expense)/income, net
Total operating expenses
Operating profit
Finance costs
Interest expense
Interest income
Foreign currency exchange gains/(losses), net
Net finance costs
Investment income
Share of profits less losses from associates and joint ventures
Profit before taxation
Tax expense
Profit for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Profit for the year
Earnings per share:
Basic
Diluted
Note
Year ended 31 December
2017
RMB
2016
RMB
3
4
5
6
7
8
9
19, 20
10
15
2,300,470
59,723
2,360,193
(1,770,651)
(64,973)
(115,310)
(11,089)
(74,854)
(235,292)
(16,554)
(2,288,723)
71,470
(7,146)
5,254
332
(1,560)
262
16,525
86,697
(16,279)
70,418
51,244
19,174
70,418
0.423
0.423
1,880,190
50,721
1,930,911
(1,379,691)
(64,360)
(108,425)
(11,035)
(63,887)
(232,006)
5,686
(1,853,718)
77,193
(9,219)
3,218
(610)
(6,611)
263
9,306
80,151
(20,707)
59,444
46,672
12,772
59,444
0.385
0.385
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.
152
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)(B) FINANCIAL STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2017 (Amounts in million, except per share data)
Profit for the year
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
(net of tax and after reclassification adjustments):
Cash flow hedges
Available-for-sale securities
Share of other comprehensive income of associates and joint ventures
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
Note
Year ended 31 December
14
2017
RMB
70,418
(1,580)
(57)
1,053
(3,792)
(4,376)
(4,376)
66,042
47,763
18,279
66,042
2016
RMB
59,444
2,014
(24)
45
4,298
6,333
6,333
65,777
53,724
12,053
65,777
The notes on pages 159 to 205 form part of these consolidated financial statements.
153
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2017(Amounts in million)Financial Statements (International)
Note
31 December
2017
RMB
31 December
2016
RMB
16
17
18
19
20
21
28
22
23
24
25
25
26
27
29
29
30
30
31
29
29
28
32
33
650,774
118,645
8,634
79,726
51,361
1,676
15,131
58,526
81,982
1,066,455
113,218
51,786
51,196
68,494
16,207
186,693
41,455
529,049
55,338
25,311
200,073
6,462
279,247
13,015
579,446
50,397
1,016,058
55,804
43,320
6,466
39,958
17,620
163,168
852,890
121,071
605,049
726,120
126,770
852,890
690,594
129,581
6,353
66,116
50,696
11,408
7,214
54,241
70,145
1,086,348
124,468
18,029
—
50,289
13,197
156,511
49,767
412,261
56,239
18,580
174,301
5,828
224,544
6,051
485,543
73,282
1,013,066
72,674
44,772
7,661
39,298
17,426
181,831
831,235
121,071
589,923
710,994
120,241
831,235
Non–current assets
Property, plant and equipment, net
Construction in progress
Goodwill
Interest in associates
Interest in joint ventures
Available-for-sale financial assets
Deferred tax assets
Lease prepayments
Long-term prepayments and other assets
Total non-current assets
Current assets
Cash and cash equivalents
Time deposits with financial institutions
Financial assets at fair value through profit or loss
Trade accounts receivable
Bills receivable
Inventories
Prepaid expenses and other current assets
Total current assets
Current liabilities
Short-term debts
Loans from Sinopec Group Company and fellow subsidiaries
Trade accounts payable
Bills payable
Accrued expenses and other payables
Income tax payable
Total current liabilities
Net 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 attributable to shareholders of the Company
Non-controlling interests
Total equity
Approved and authorised for issue by the board of directors on 23 March 2018.
Dai Houliang
Vice Chairman, President
Wang Dehua
Chief Financial Officer
The notes on pages 159 to 205 form part of these consolidated financial statements.
154
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CONSOLIDATED BALANCE SHEETAs at 31 December 2017(Amounts in million)Financial Statements (International)
Balance at 1 January 2016
Profit for the year
Other comprehensive income (Note 14)
Total comprehensive income for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2015 (Note 13)
Interim dividend for 2016 (Note 13)
Appropriation (Note (a))
Distributions to non–controlling interests
Profit distribution to SAMC (Note 35)
Distribution to SAMC in the Acquisition of Gaoqiao
Branch of SAMC (Note 35)
Total contributions by and distributions to owners
Changes in ownership interests in subsidiaries that do
not result in a loss of control:
Transaction with non-controlling interests
Total changes in ownership interests in subsidiaries
that do not result in a loss of control
Total transactions with owners
Others
Balance at 31 December 2016
Share
capital
RMB
121,071
—
—
—
—
—
—
—
—
—
—
—
—
—
—
121,071
Capital
reserve
RMB
28,341
—
—
—
—
—
—
—
—
(2,137)
(2,137)
(30)
(30)
(2,167)
116
26,290
Share
premium
RMB
55,850
—
—
—
Statutory
surplus
reserve
RMB
Discretionary
surplus
reserve
RMB
79,640
—
—
—
117,000
—
—
—
Other
reserves
RMB
(6,781)
—
7,052
7,052
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
55,850
—
—
—
79,640
—
—
—
117,000
—
—
—
—
—
—
—
—
—
—
153
424
Total equity
attributable
to
shareholders
of the
Company
RMB
676,197
46,672
7,052
53,724
(7,264)
(9,565)
—
—
(47)
Retained
earnings
RMB
281,076
46,672
—
46,672
(7,264)
(9,565)
—
—
(47)
—
(16,876)
(2,137)
(19,013)
Non-
controlling
interests
RMB
111,964
12,772
(719)
12,053
—
—
—
(6,146)
(39)
2,137
(4,048)
Total
equity
RMB
788,161
59,444
6,333
65,777
(7,264)
(9,565)
—
(6,146)
(86)
—
(23,061)
—
(30)
263
233
—
(16,876)
(153)
310,719
(30)
(19,043)
116
710,994
263
(3,785)
9
120,241
233
(22,828)
125
831,235
The notes on pages 159 to 205 form part of these consolidated financial statements.
155
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2017(Amounts in million)
Balance at 1 January 2017
Profit for the year
Other comprehensive income (Note 14)
Total comprehensive income for the year
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2016 (Note 13)
Interim dividend for 2017 (Note 13)
Appropriation (Note (a))
Distributions to non-controlling interests
Total contributions by and distributions to owners
Changes in ownership interests in subsidiaries that
do not result in a loss of control:
Transaction with non-controlling interests
Total changes in ownership interests in subsidiaries
that do not result in a loss of control
Total transactions with owners
Others
Balance at 31 December 2017
Note:
Share
capital
RMB
121,071
—
—
—
Capital
reserve
RMB
26,290
—
—
—
Share
premium
RMB
55,850
—
—
—
—
—
—
—
—
—
—
—
—
121,071
—
—
—
—
—
(13)
(13)
(13)
49
26,326
—
—
—
—
—
—
—
—
—
55,850
Statutory
surplus
reserve
RMB
Discretionary
surplus
reserve
RMB
117,000
—
—
—
—
—
—
—
—
—
79,640
—
—
—
—
—
3,042
—
3,042
—
—
3,042
—
82,682
Total equity
attributable
to
shareholders
of the
Company
RMB
710,994
51,244
(3,481)
47,763
Non-
controlling
interests
RMB
120,241
19,174
(895)
18,279
(20,582)
(12,107)
—
—
(32,689)
—
—
—
(12,501)
(12,501)
Retained
earnings
RMB
310,719
51,244
—
51,244
(20,582)
(12,107)
(3,042)
—
(35,731)
Total
equity
RMB
831,235
70,418
(4,376)
66,042
(20,582)
(12,107)
—
(12,501)
(45,190)
—
(13)
724
711
Other
reserves
RMB
424
—
(3,481)
(3,481)
—
—
—
—
—
—
—
—
—
117,000
—
—
123
(2,934)
—
(35,731)
(107)
326,125
(13)
(32,702)
65
726,120
724
(11,777)
27
126,770
711
(44,479)
92
852,890
(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.
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.
(b) The usage of the discretionary surplus reserve is similar to that of statutory surplus reserve.
(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”).
(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.
(e) The application of the share premium account is governed by Sections 167 and 168 of the PRC Company Law.
The notes on pages 159 to 205 form part of these consolidated financial statements.
156
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)for the year ended 31 December 2017(Amounts in million)
Net cash generated from operating activities
Investing activities
Capital expenditure
Exploratory wells expenditure
Purchase of investments, investments in associates and investments in joint ventures
Payment for acquisition of subsidiary, net of cash acquired
Proceeds from disposal of investments and investments in associates
Proceeds from disposal of property, plant, equipment and other non-current assets
Increase in time deposits with maturities over three months
Decrease in time deposits with maturities over three months
Interest received
Investment and dividend income received
Net cash used in investing activities
Financing activities
Proceeds from bank and other loans
Repayments of bank and other loans
Contributions to subsidiaries from non–controlling interests
Dividends paid by the Company
Distributions by subsidiaries to non–controlling interests
Interest paid
Finance lease payment
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Effect of foreign currency exchange rate changes
Cash and cash equivalents at 31 December
Note
Year ended 31 December
2017
RMB
2016
RMB
(a)
190,935
214,543
(63,541)
(7,407)
(57,627)
(1,288)
4,809
1,313
(82,577)
48,820
3,669
8,506
(145,323)
524,843
(536,380)
946
(32,689)
(7,539)
(5,535)
(155)
(56,509)
(10,897)
124,468
(353)
113,218
(65,467)
(7,380)
(16,389)
—
33,516
440
(17,896)
600
2,331
4,028
(66,217)
506,097
(569,091)
343
(16,876)
(6,553)
(6,967)
—
(93,047)
55,279
68,933
256
124,468
The notes on pages 159 to 205 form part of these consolidated financial statements.
157
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2017(Amounts in million)
(a) Reconciliation from profit before taxation to net cash generated from operating activities
Operating activities
Profit before taxation
Adjustments for:
Depreciation, depletion and amortisation
Dry hole costs written off
Share of profits from associates and joint ventures
Investment income
Gain on dilution and remeasurement of interests in the Pipeline Ltd
Gain on remeasurement of interests in the Shanghai SECCO (Note 35)
Interest income
Interest expense
(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
Net charges from:
Accounts receivable and other current assets
Inventories
Accounts payable and other current liabilities
Income tax paid
Net cash generated from operating activities
Year ended 31 December
2017
RMB
2016
RMB
86,697
80,151
115,310
6,876
(16,525)
(262)
—
(3,941)
(5,254)
7,146
(1,547)
1,518
21,791
211,809
(31,151)
(28,903)
59,210
210,965
(20,030)
190,935
108,425
7,467
(9,306)
(263)
(20,562)
—
(3,218)
9,219
86
1,528
17,076
190,603
(22,549)
(11,364)
81,089
237,779
(23,236)
214,543
The notes on pages 159 to 205 form part of these consolidated financial statements.
158
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Financial Statements (International)NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2017(Amounts in million)
1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION
Principal activities
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.
Organisation
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.
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.
Basis of preparation
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.
(a) New and amended standards and interpretations adopted by the Group
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:
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.
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.
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.
The Group has not early adopted any new standard or interpretation that is not yet effective for the current accounting period.
159
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2017Financial Statements (International) 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(l) 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.
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International) 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)).
In the Company’s balance sheet, investments in subsidiaries are stated at cost less impairment losses (Note 2(o)).
The particulars of the Group’s principal subsidiaries are set out in Note 39.
(ii) Associates and joint ventures
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.
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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.
162
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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(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.
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
Estimated
residuals rate
12 to 50 years
4 to 30 years
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,
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) 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 (Note 2(o)). The cost of lease prepayments is charged to expense on a straight–line basis
over the respective periods of the rights.
(i) 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.
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.
163
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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.
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(o)). 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)).
(k) Available-for-sale financial assets
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)).
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.
(l) 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.
(n) Hedging
(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.
164
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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.
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 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 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.
165
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(p) 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.
(q) 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.
(r) 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.
(s) Revenue recognition
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.
Interest income is recognised on a time apportioned basis that takes into account the effective yield on the asset.
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.
(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.
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.
(w) Research and development expense
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).
(x) Operating leases
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
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.
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.
166
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(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.
(aa) Dividends
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.
(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 crude oil, natural gas, refined petroleum products and chemical products.
4 OTHER OPERATING REVENUES
Sale of materials, service and others
Rental income
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
– accounts prepayments
6 PERSONNEL EXPENSES
Salaries, wages and other benefits
Contributions to retirement schemes (Note 37)
2017
RMB million
2016
RMB million
58,930
793
59,723
49,812
909
50,721
2017
RMB million
12,104
2016
RMB million
14,410
72
5
(51)
159
2
73
2
230
(12)
13
2017
RMB million
2016
RMB million
65,873
8,981
74,854
55,502
8,385
63,887
167
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
7 TAXES OTHER THAN INCOME TAX
Consumption tax (i)
City construction tax (ii)
Education surcharge
Resources tax
Other
Note:
(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
2017
RMB million
2016
RMB million
192,907
18,274
13,811
4,841
5,459
235,292
193,836
18,155
13,695
3,871
2,449
232,006
Effective from
13 January 2015
RMB/Ton
2,109.76
1,411.20
2,105.20
1,948.64
1,711.52
1,218.00
1,495.20
(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%.
8 OTHER OPERATING (EXPENSE)/INCOME, NET
Government grant (i)
Gain on remeasurement of interests in the Shanghai SECCO (Note 35)
Gain on dilution and remeasurement of interests in the Pipeline Ltd
Impairment losses on long-lived assets (ii)
Loss on disposal of property, plant, equipment and other non-currents assets, net
Net realised and unrealised gain on derivative financial instruments not qualified as hedging
Ineffective portion of change in fair value of cash flow hedges
Donations
Fines, penalties and compensations
Others
Note:
2017
RMB million
2016
RMB million
4,893
3,941
—
(21,258)
(1,518)
(909)
(813)
(152)
(89)
(649)
(16,554)
4,101
—
20,562
(16,425)
(1,489)
195
304
(133)
(152)
(1,277)
5,686
(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.
(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.
168
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
9
INTEREST EXPENSE
Interest expense incurred
Less: Interest expense capitalised*
Accretion expenses (Note 32)
Interest expense
* Interest rates per annum at which borrowing costs were capitalised for construction in progress
10 TAX EXPENSE
Tax expense in the consolidated income statement represents:
Current tax
– Provision for the year
– Adjustment of prior years
Deferred taxation (Note 28)
2017
RMB million
2016
RMB million
9,021
(859)
8,162
1,057
9,219
2.37% to 4.41% 2.65% to 4.82%
6,368
(723)
5,645
1,501
7,146
2017
RMB million
2016
RMB million
26,668
(72)
(10,317)
16,279
21,313
228
(834)
20,707
Reconciliation between actual income tax expense and the expected income tax expense at applicable statutory tax rates is as follows:
Profit before taxation
Expected PRC income tax expense at a statutory tax rate of 25%
Tax effect of non–deductible expenses
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
Tax effect of tax losses not recognised
Write–down of deferred tax assets
Adjustment of prior years
Actual income tax expense
Note:
2017
RMB million
2016
RMB million
86,697
21,674
1,905
(5,939)
(793)
(1,394)
(613)
1,485
26
(72)
16,279
80,151
20,038
1,529
(2,786)
83
299
(453)
958
811
228
20,707
(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.
169
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
11 DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS
(a) Directors’ and supervisors’ emoluments
The emoluments of every director and supervisor is set out below:
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
Bonuses
RMB’000
2017
Retirement
scheme
contributions
RMB’000
—
227
—
207
—
—
—
—
—
—
—
—
—
—
207
207
207
122
—
51
1,228
—
537
—
487
—
—
—
—
—
—
—
—
—
—
480
480
480
103
—
349
2,916
—
76
—
76
—
—
—
—
—
—
—
—
—
—
71
71
71
42
—
17
424
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
—
—
—
—
—
—
—
300
300
300
300
—
—
—
—
—
—
—
—
—
1,200
—
840
—
770
—
—
—
300
300
300
300
—
—
—
758
758
758
267
—
417
5,768
Name
Directors
Wang Yupu (i)
Dai Houliang
Li Yunpeng
Wang Zhigang
Zhang Haichao
Jiao Fangzheng
Ma Yongsheng
Independent non–executive directors
Jiang Xiaoming
Andrew Y. Yan
Tang Min
Fan Gang
Supervisors
Zhao Dong
Liu Zhongyun
Zhou Hengyou
Zou Huiping
Jiang Zhenying
Yu Renming
Yu Xizhi (ii)
Liu Yun (iii)
Wang Yajun (ii)
Total
170
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
11 DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (Continued)
(a) Directors’ and supervisors’ emoluments (Continued)
The emoluments of every director and supervisor is set out below: (Continued)
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
Emoluments paid
or receivable in
respect of a
person’s services
as a director,
whether of the
Company or
its subsidiary
undertaking
Salaries,
allowances and
benefits in kind
RMB’000
2016
Retirement
scheme
contributions
RMB’000
Bonuses
RMB’000
Directors’/
Supervisors’ fee
RMB’000
Total
RMB’000
—
214
196
—
—
—
130
114
—
—
—
—
—
—
—
218
218
218
204
1,512
—
459
431
—
—
—
379
365
—
—
—
—
—
—
—
334
334
309
325
2,936
—
72
72
—
—
—
47
41
—
—
—
—
—
—
—
67
67
67
66
499
—
—
—
—
—
—
—
—
300
300
300
300
—
—
—
—
—
—
—
1,200
—
745
699
—
—
—
556
520
300
300
300
300
—
—
—
619
619
594
595
6,147
Name
Directors
Wang Yupu
Dai Houliang
Wang Zhigang
Zhang Haichao
Jiao Fangzheng
Ma Yongsheng(iv)
Li Chunguang(iv)
Zhang Jianhua(iv)
Independent non-executive directors
Jiang Xiaoming
Andrew Y. Yan
Tang Min
Fan Gang
Supervisors
Liu Yun
Liu Zhongyun
Zhou Hengyou
Zou Huiping
Jiang Zhenying
Yu Renming
Wang Yajun
Total
Notes:
(i) Mr. Wang Yupu ceased being chairman and independent director from 22 September 2017.
(ii) Mr Yu Xizhi were elected to be supervisor from 28 June 2017; Mr Wang Yajun ceased being supervisor from 28 June 2017.
(iii) Mr Liu Yun ceased being supervisor and chairman of board of supervisor from 16 March 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.
171
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
12 SENIOR MANAGEMENT’S EMOLUMENTS
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.
13 DIVIDENDS
Dividends payable to shareholders of the Company attributable to the year represent:
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)
2017
RMB million
2016
RMB million
12,107
48,428
60,535
9,565
20,582
30,147
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.
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:
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)
2017
RMB million
2016
RMB million
20,582
7,264
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.
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.
172
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
14 OTHER COMPREHENSIVE INCOME
2017
Before tax
amount
RMB million
Tax
effect
RMB million
Net of tax
amount
RMB million
Before tax
amount
RMB million
2016
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
(1,314)
240
(1,074)
(3,813)
652
(3,161)
Amounts transferred to initial carrying
amount of hedged items
Reclassification adjustments for amounts transferred
to the consolidated income statement
Net movement during the year recognised
(4)
(575)
1
72
(3)
13
(2)
11
(503)
6,279
(1,115)
5,164
in other comprehensive income
(1,893)
313
(1,580)
2,479
(465)
2,014
Available–for–sale securities:
Changes in fair value recognised during the year
Net movement during the year recognised
in other comprehensive income
Share of other comprehensive profit of
associates and joint ventures
Foreign currency translation differences
Other comprehensive income
15 BASIC AND DILUTED EARNINGS PER SHARE
(57)
(57)
1,053
(3,792)
(4,689)
—
—
—
—
313
(57)
(57)
1,053
(3,792)
(4,376)
(17)
(17)
45
4,298
6,805
(7)
(7)
—
—
(472)
(24)
(24)
45
4,298
6,333
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.
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:
(i) Profit attributable to ordinary shareholders of the Company (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)
(ii) Weighted average number of shares (diluted)
Weighted average number of shares at 31 December
Weighted average number of shares (diluted) at 31 December
2017
RMB million
2016
RMB million
51,244
(2)
51,242
46,672
(3)
46,669
2017
Number
of shares
2016
Number
of shares
121,071,209,646 121,071,209,646
121,071,209,646 121,071,209,646
173
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
16 PROPERTY, PLANT AND EQUIPMENT
Cost:
Balance at 1 January 2016
Additions
Transferred from construction in progress
Reclassifications
Reclassification to lease prepayments and other long–term assets
Disposals
Exchange adjustments
Balance at 31 December 2016
Balance at 1 January 2017
Additions
Transferred from construction in progress
Reclassifications
Reclassification to lease prepayments and other long–term assets
Disposals
Exchange adjustments
Balance at 31 December 2017
Accumulated depreciation:
Balance at 1 January 2016
Depreciation for the year
Impairment losses for the year
Reclassifications
Reclassification to lease prepayments and other long–term assets
Written back on disposals
Exchange adjustments
Balance at 31 December 2016
Balance at 1 January 2017
Depreciation for the year
Impairment losses for the year
Reclassifications
Reclassification to lease prepayments and other long–term assets
Written back on disposals
Exchange adjustments
Balance at 31 December 2017
Net book value:
Balance at 1 January 2016
Balance at 31 December 2016
Balance at 31 December 2017
Plants and
buildings
RMB million
Oil and gas,
properties
RMB million
Equipment,
machinery
and others
RMB million
Total
RMB million
107,873
277
5,901
1,426
(130)
(509)
82
114,920
114,920
854
6,789
(673)
(859)
(878)
(140)
120,013
44,469
3,815
440
369
(14)
(534)
27
48,572
48,572
4,075
554
(122)
(238)
(584)
(57)
52,200
63,404
66,348
67,813
613,134
3,420
31,473
(115)
—
(27)
2,800
650,685
650,685
1,627
19,881
(50)
(1,702)
(211)
(2,573)
667,657
374,191
49,005
10,580
(58)
—
(22)
1,865
435,561
435,561
55,057
8,832
(77)
(1,305)
(195)
(2,056)
495,817
238,943
215,124
171,840
880,711
626
50,025
(1,311)
(2,202)
(35,100)
187
892,936
892,936
11,983
54,605
723
(8,751)
(10,985)
(199)
940,312
449,609
47,914
3,901
(311)
(316)
(17,067)
84
483,814
483,814
46,585
10,450
199
(2,682)
(9,079)
(96)
529,191
431,102
409,122
411,121
1,601,718
4,323
87,399
—
(2,332)
(35,636)
3,069
1,658,541
1,658,541
14,464
81,275
—
(11,312)
(12,074)
(2,912)
1,727,982
868,269
100,734
14,921
—
(330)
(17,623)
1,976
967,947
967,947
105,717
19,836
—
(4,225)
(9,858)
(2,209)
1,077,208
733,449
690,594
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).
174
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
17 CONSTRUCTION IN PROGRESS
Balance at 1 January
Additions
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
Balance at 31 December
2017
RMB million
2016
RMB million
129,581
85,552
(6,876)
(81,229)
(7,773)
(252)
(315)
(43)
118,645
152,325
81,837
(7,467)
(87,399)
(6,900)
(1,486)
(1,445)
116
129,581
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).
18 GOODWILL
Cost
Less: Accumulated impairment losses
Impairment tests for cash–generating units containing goodwill
Goodwill is allocated to the following Group’s cash-generating units:
Sinopec Beijing Yanshan Petrochemical Branch
(“Sinopec Yanshan”)
Sinopec Zhenhai Refining and Chemical Branch
(“Sinopec Zhenhai”)
Shanghai SECCO Petrochemical Company Limited
("Shanghai SECCO") (Note 35)
Sinopec (Hong Kong) Limited
Other units without individually significant goodwill
Principal activities
Manufacturing of intermediate petrochemical
products and petroleum products
Manufacturing of intermediate petrochemical
products and petroleum products
Production and sale of petrochemical products
Trading of petrochemical products
31 December
2017
RMB million
31 December
2016
RMB million
16,495
(7,861)
8,634
14,016
(7,663)
6,353
31 December
2017
RMB million
31 December
2016
RMB million
1,004
4,043
2,541
879
167
8,634
1,157
4,043
—
941
212
6,353
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.
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.
175
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
19 INTEREST IN ASSOCIATES
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.
The Group’s principal associates are as follows:
Name of company
Sinopec Sichuan To East China Gas
Pipeline Co., Ltd. (“Pipeline Ltd”)
Sinopec Finance Company Limited
("Sinopec Finance")
PAO SIBUR Holding ("SIBUR")
Zhongtian Synergetic Energy
Company Limited
("Zhongtian Synergetic Energy")
Caspian Investments Resources Ltd.
("CIR")
% of
ownership
interests
50.00
Principal activities
Operation of natural gas
pipelines and auxiliary
facilities
Measurement
method
Country of
incorporation
Principal place
of business
Equity method
PRC
PRC
PRC
49.00
Provision of non–banking
Equity method
PRC
10.00
financial services
Proccessing natural gas
and manufacturing
petrochemical products
Equity method
Russia
Russia
38.75 Mining coal and
Equity method
PRC
PRC
50.00
manufacturing of
coal–chemical products
Crude oil and natural
gas extraction
Equity method
British
Virgin Islands
The Republic of
Kazakhstan
Summarised financial information and reconciliation to their carrying amounts in respect of the Group’s principal associates:
Current assets
Non–current assets
Current liabilities
Non–current liabilities
Net assets
Net assets attributable to owners of the Company
Net assets attributable to non-controlling interests
Share of net assets from associates
Carrying Amounts
Pipeline Ltd
Sinopec Finance
31 December
2017
RMB million
31 December
2016
RMB million
31 December
2017
RMB million
31 December
2016
RMB million
SIBUR (i)
31 December
2017
RMB million
Zhongtian Synergetic Energy
31 December
2016
RMB million
31 December
2017
RMB million
CIR
31 December
2017
RMB million
31 December
2016
RMB million
11,317
40,972
(933)
(3,176)
48,180
48,180
—
24,090
24,090
11,835
42,124
(5,009)
(3,350)
45,600
45,600
—
22,800
22,800
161,187
17,782
(154,212)
(6)
24,751
24,751
—
12,128
12,128
149,457
16,478
(142,386)
(88)
23,461
23,461
—
11,496
11,496
20,719
158,938
(20,554)
(61,771)
97,332
96,761
571
9,676
9,676
8,232
51,553
(10,668)
(31,494)
17,623
17,623
—
6,829
6,829
7,292
50,301
(8,078)
(32,137)
17,378
17,378
—
6,734
6,734
5,612
1,673
(908)
(170)
6,207
6,207
—
3,104
3,104
5,120
3,842
(928)
(883)
7,151
7,151
—
3,576
3,576
Summarised statement of comprehensive income
Year ended 31 December
Pipeline Ltd (ii)
2017
RMB million
2016
RMB million
Sinopec Finance
2017
RMB million
2016
RMB million
SIBUR(i)
2017
RMB million
Zhongtian Synergetic Energy
2016
RMB million
2017
RMB million
CIR
2017
RMB million
2016
RMB million
Turnover
Profit/(loss) for the year
Other comprehensive (loss)/income
Total comprehensive income/(loss)
Dividends declared by associates
Share of profit/(loss) from associates
Share of other comprehensive (loss)/income from associates (iii)
5,644
2,543
—
2,543
—
1,272
—
191
51
—
51
23
26
—
3,542
1,536
(246)
1,290
—
753
(121)
2,442
1,526
(175)
1,351
—
748
(86)
52,496
9,601
(260)
9,341
221
960
(26)
3,569
123
—
123
—
48
—
—
—
—
—
—
—
—
2,563
(610)
(334)
(944)
—
(305)
(167)
2,205
(3,518)
662
(2,856)
—
(1,759)
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
20 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
interests
50.00
40.00
49.00
37.50
50.00
Principal activities
Manufacturing refining
oil products
Manufacturing and
distribution of
petrochemical products
Crude oil and natural
gas extraction
Petroleum refining and
processing business
Manufacturing and
distribution of
petrochemical products
Measurement
method
Country of
incorporation
Principal place
of business
Equity method
PRC
Equity method
PRC
PRC
PRC
Equity method
Cyprus
Russia
Equity method
Saudi Arabia
Saudi Arabia
Equity method
PRC
PRC
Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group’s principal joint ventures:
FREP
BASF–YPC
Taihu
YASREF
Sinopec SABIC Tianjin
31 December
2017
31 December
2016
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
31 December
2016
31 December
2016
31 December
2016
31 December
2016
31 December
2017
31 December
2017
31 December
2017
31 December
2017
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Current financial liabilities (i)
Other current liabilities
Total current liabilities
Non-current liabilities
Non-current financial liabilities (ii)
Other non-current liabilities
Total non-current liabilities
Net assets
Net assets attributable to owners
of the Company
Net assets attributable to
non-controlling interests
Share of net assets from joint ventures
Other (iii)
Carrying Amounts
5,772
11,013
16,785
19,740
(1,135)
(5,049)
(6,184)
(13,654)
(236)
(13,890)
16,451
8,172
10,269
18,441
21,903
(1,781)
(4,643)
(6,424)
(19,985)
(252)
(20,237)
13,683
1,800
5,335
7,135
12,075
(233)
(1,982)
(2,215)
(955)
(19)
(974)
16,021
1,394
4,852
6,246
13,530
(783)
(2,107)
(2,890)
(1,492)
(10)
(1,502)
15,384
2,352
2,462
4,814
7,978
(20)
(1,914)
(1,934)
(72)
(2,686)
(2,758)
8,100
1,165
1,616
2,781
8,279
(334)
(1,616)
(1,950)
(49)
(2,130)
(2,179)
6,931
4,916
10,816
15,732
51,553
(5,407)
(11,864)
(17,271)
(35,619)
(890)
(36,509)
13,505
1,259
6,826
8,085
57,054
(1,187)
(6,466)
(7,653)
(43,028)
(1,004)
(44,032)
13,454
6,524
2,709
9,233
13,248
(1,236)
(4,546)
(5,782)
(4,101)
(41)
(4,142)
12,557
3,634
1,886
5,520
14,003
—
(2,657)
(2,657)
(5,337)
(32)
(5,369)
11,497
16,451
13,683
16,021
15,384
7,818
6,690
13,505
13,454
12,557
11,497
—
8,226
—
8,226
—
6,842
—
6,842
—
6,409
—
6,409
—
6,154
—
6,154
282
3,831
—
3,831
241
3,278
743
4,021
—
5,064
—
5,064
—
5,045
—
5,045
—
6,279
—
6,279
—
5,749
—
5,749
177
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
20 INTEREST IN JOINT VENTURES (Continued)
Summarised statement of comprehensive income
Year ended 31 December
Turnover
Depreciation, depletion and
amortisation
Interest income
Interest expense
Profit/(loss) before taxation
Tax expense
Profit/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss)
Dividends declared by joint ventures
Share of net profit/(loss) from
joint ventures
Share of other comprehensive
FREP
Sinopec SABIC Tianjin
2016
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
BASF–YPC
YASREF
Taihu
2016
2017
2017
2017
2017
2016
2017
2016
2016
49,356
41,764
21,020
17,323
12,520
9,658
61,587
41,286
22,286
16,337
(16)
208
(857)
6,977
(1,699)
5,278
—
5,278
1,250
(52)
130
(929)
6,476
(1,574)
4,902
—
4,902
—
(1,793)
36
(71)
4,565
(1,151)
3,414
—
3,414
1,109
2,639
2,451
1,366
(2,275)
19
(173)
2,606
(648)
1,958
—
1,958
155
783
—
(715)
142
(142)
1,697
(553)
1,144
25
1,169
—
541
12
(1,043)
40
(113)
2,411
(518)
1,893
1,851
3,744
—
895
875
(2,763)
45
(1,382)
548
57
605
(554)
51
—
227
(208)
(2,754)
33
(1,216)
28
56
84
647
731
—
31
243
(36)
104
(223)
5,113
(1,279)
3,834
—
3,834
1,375
(33)
30
(245)
3,184
(783)
2,401
—
2,401
300
1,917
1,201
—
—
income/(loss) from joint ventures (iv)
—
—
—
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.
21 AVAILABLE-FOR-SALE FINANCIAL ASSETS
Equity securities, listed and at quoted market price
Other investment, unlisted and at cost
Less: Impairment loss for investments
31 December
2017
RMB million
31 December
2016
RMB million
178
1,544
1,722
46
1,676
262
11,175
11,437
29
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.
The impairment losses relating to investments for the year ended 31 December 2017 amounted to RMB 17 million (2016: nil).
178
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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
Balance at 31 December
Accumulated amortisation:
Balance at 1 January
Amortisation charge for the year
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
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:
(i) Others mainly comprise prepaid operating lease charges over one year and catalyst expenditures.
2017
RMB million
2016
RMB million
68,467
2,614
4,151
3,987
(2,603)
(531)
(357)
75,728
14,226
2,076
2,027
(770)
(266)
(91)
17,202
58,526
63,324
300
4,279
994
(229)
(422)
221
68,467
12,275
1,840
132
(12)
(83)
74
14,226
54,241
31 December
2017
RMB million
31 December
2016
RMB million
34,268
20,726
4,999
21,989
81,982
26,896
20,385
2,234
20,630
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
Decreases
Balance at 31 December
Net book value at 31 December
2017
RMB million
2016
RMB million
36,908
11,837
(132)
48,613
10,012
4,361
(28)
14,345
34,268
34,407
2,670
(169)
36,908
8,310
1,777
(75)
10,012
26,896
179
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
24 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Current assets
Structured deposit
31 December
2017
RMB million
31 December
2016
RMB million
51,196
51,196
—
—
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
Amounts due from third parties
Amounts due from Sinopec Group Company and fellow subsidiaries
Amounts due from associates and joint ventures
Less: Impairment losses for bad and doubtful debts
Trade accounts receivable, net
Bills receivable
31 December
2017
RMB million
31 December
2016
RMB million
56,203
7,941
4,962
69,106
(612)
68,494
16,207
84,701
39,994
6,398
4,580
50,972
(683)
50,289
13,197
63,486
The ageing analysis of trade accounts and bills receivables (net of impairment losses for bad and doubtful debts) is as follows:
Within one year
Between one and two years
Between two and three years
Over three years
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
31 December
2017
RMB million
31 December
2016
RMB million
83,984
573
43
101
84,701
63,051
233
177
25
63,486
2017
RMB million
2016
RMB million
683
49
(100)
(21)
1
612
525
238
(8)
(72)
—
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.
180
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
26 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
2017
RMB million
31 December
2016
RMB million
85,975
14,774
84,448
2,651
187,848
(1,155)
186,693
75,680
14,141
65,772
1,838
157,431
(920)
156,511
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
28 DEFERRED TAX ASSETS AND LIABILITIES
31 December
2017
RMB million
31 December
2016
RMB million
17,704
4,901
17,926
398
526
41,455
26,056
3,749
18,055
1,145
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
Tax losses carried forward
Available-for-sale securities
Intangible assets
Others
Deferred tax assets/(liabilities)
Deferred tax assets
Deferred tax liabilities
31 December
2017
RMB million
381
1,925
165
14,150
2,325
117
227
180
19,470
31 December
2016
RMB million
87
391
27
11,264
2,477
—
260
133
14,639
31 December
2017
RMB million
—
—
(50)
(9,928)
—
—
(563)
(264)
(10,805)
31 December
2016
RMB million
—
—
(242)
(14,615)
—
—
—
(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).
181
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
28 DEFERRED TAX ASSETS AND LIABILITIES (Continued)
Movements in the deferred tax assets and liabilities are as follows:
Receivables and inventories
Accruals
Cash flow hedges
Property, plant and equipment
Tax losses carried forward
Available-for-sale securities
Intangible assets
Others
Net deferred tax (liabilities)/assets
Receivables and inventories
Accruals
Cash flow hedges
Property, plant and equipment
Tax losses carried forward
Available-for-sale securities
Intangible assets
Others
Net deferred tax (liabilities)/assets
Balance at
01 January
2016
RMB million
1,552
413
250
(9,131)
5,883
—
203
40
(790)
Recognised in
consolidated
income
statement
RMB million
(1,505)
(22)
—
6,063
(3,426)
(139)
(1)
(136)
834
Recognised
in other
comprehensive
income
RMB million
6
—
(465)
(392)
20
(7)
—
—
(838)
Balance at
31 December
2016
RMB million
87
391
(215)
(3,351)
2,477
—
260
(96)
(447)
Others
RMB million
34
—
—
109
—
146
58
—
347
Balance at
1 January
2017
RMB million
87
391
(215)
(3,351)
2,477
—
260
(96)
(447)
Recognised in
consolidated
income
statement
Recoginsed
in other
comprehensive
income
RMB million
300
1,534
9
8,475
(135)
117
(27)
44
10,317
RMB million
(5)
—
313
287
(17)
—
—
4
582
Acquisition of
Shanghai
SECCO
Balance at
31 December
2017
RMB million
—
—
—
(1,181)
—
—
(569)
(36)
(1,786)
RMB million
381
1,925
115
4,222
2,325
117
(336)
(84)
8,665
Others
RMB million
(1)
—
8
(8)
—
—
—
—
(1)
29 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES
Short-term debts represent:
Third parties’ debts
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
USD denominated
Corporate bonds(i)
Loans from Sinopec Group Company and fellow subsidiaries
Short-term loans
RMB denominated
USD denominated
Hong Kong Dollar (“HKD”) denominated
EUR denominated
Singapore Dollar (“SGD”) denominated
Current portion of long-term loans
RMB denominated
31 December
2017
RMB million
31 December
2016
RMB million
31,105
23,685
7,420
299
299
1,402
1,379
23
22,532
16,000
6,532
23,934
—
55,338
23,297
1,706
19,668
1,903
—
20
2,014
2,014
25,311
80,649
11,944
10,931
1,013
—
—
8,795
8,753
42
29,500
29,500
—
38,295
6,000
56,239
18,430
2,858
13,577
1,969
5
21
150
150
18,580
74,819
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.
182
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
29 SHORT–TERM AND LONG–TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued)
Long–term debts represent:
Third parties’ debts
Long-term bank loans
RMB denominated
USD denominated
Corporate bonds (ii)
RMB denominated
USD denominated
Interest rate and final maturity
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
Fixed interest rates ranging from 3.30% to
5.68% per annum at 31 December 2017
with maturity through 2022
Fixed interest rates ranging from 1.88% to
4.25% per annum at 31 December 2017
with maturities through 2043
Total third parties’ long-term debts
Less: Current portion
Long-term loans from Sinopec Group Company
and fellow subsidiaries
RMB denominated
Interest rates ranging from interest free to
4.99% per annum at 31 December 2017
with maturities through 2022
Less: Current portion
31 December
2017
RMB million
31 December
2016
RMB million
25,644
26,058
192
426
25,836
36,000
26,484
65,500
17,902
18,985
53,902
79,738
(23,934)
55,804
84,485
110,969
(38,295)
72,674
45,334
44,922
(2,014)
43,320
99,124
(150)
44,772
117,446
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) 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.
(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.
183
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
30 TRADE ACCOUNTS AND BILLS PAYABLES
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 and bills payables measured at amortised cost
The ageing analysis of trade accounts and bills payables are as follows:
Within 1 month or on demand
Between 1 month and 6 months
Over 6 months
31 ACCRUED EXPENSES AND OTHER PAYABLES
Salaries and welfare payable
Interest payable
Payables for constructions
Other payables
Financial liabilities carried at amortised costs
Taxes other than income tax
Receipts in advance
Derivative financial instruments
32 PROVISIONS
31 December
2017
RMB million
31 December
2016
RMB million
177,224
13,350
9,499
200,073
6,462
206,535
154,882
13,168
6,251
174,301
5,828
180,129
31 December
2017
RMB million
31 December
2016
RMB million
195,189
8,076
3,270
206,535
159,953
12,693
7,483
180,129
31 December
2017
RMB million
31 December
2016
RMB million
7,162
723
60,010
29,022
96,917
58,925
120,734
2,671
279,247
1,618
1,396
52,827
21,468
77,309
46,835
95,928
4,472
224,544
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:
Balance at 1 January
Provision for the year
Accretion expenses
Utilised for the year
Exchange adjustments
Balance at 31 December
2017
RMB million
2016
RMB million
36,918
1,627
1,501
(467)
(172)
39,407
33,115
3,420
1,057
(843)
169
36,918
184
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
33 SHARE CAPITAL
Registered, issued and fully paid
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
31 December
2017
RMB million
31 December
2016
RMB million
95,558
25,513
121,071
95,558
25,513
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.
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 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 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.
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.
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 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.
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 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.
185
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
33 SHARE CAPITAL (Continued)
Capital management
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.
The schedule of the contractual maturities of loans and commitments are disclosed in Notes 29 and 34, respectively.
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.
34 COMMITMENTS AND CONTINGENT LIABILITIES
Operating lease commitments
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.
At 31 December 2017 and 2016, the future minimum lease payments under operating leases 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
Capital commitments
At 31 December 2017 and 2016, capital commitments are as follows:
Authorised and contracted for (i)
Authorised but not contracted for
31 December
2017
RMB million
31 December
2016
RMB million
11,114
11,492
10,730
10,552
10,428
202,806
257,122
14,917
14,228
13,966
13,217
12,980
275,570
344,878
31 December
2017
RMB million
31 December
2016
RMB million
120,386
57,997
178,383
116,379
31,720
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.
Note:
(i) The investment commitments of the Group is RMB 3,364 million (2016: RMB 4,173 million).
Commitments to joint ventures
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.
186
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2017Financial Statements (International)
34 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
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 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.
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).
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
2017
RMB million
31 December
2016
RMB million
205
83
32
28
28
882
1,258
263
123
25
24
25
867
1,327
Contingent liabilities
At 31 December 2017 and 2016, guarantees by the group in respect of facilities granted to the parties below are as follows:
Joint ventures
Associates(ii)
Others
31 December
2017
RMB million
31 December
2016
RMB million
940
13,520
9,732
24,192
658
11,545
10,669
22,872
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.
Note:
(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.
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 7,851 million in the consolidated financial statements for the year
ended 31 December 2017 (2016: RMB 6,358 million).
Legal contingencies
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.
187
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
35 BUSINESS COMBINATION
(a) Acquisition of Shanghai SECCO
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
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
Other current assets
Total current assets
Property, plant and equipment, net
Lease prepayments
Intangible assets
Construction in progress
Long-term prepaid expenses
Deferred tax assets
Total non-current assets
Total assets
Trade and other payables
Advances received
Employee benefits payable
Tax payable
Total current liabilities
Deferred tax liabilities (Note 28)
Net assets acquired
Goodwill
RMB million
10,135
10,135
20,270
Fair value
RMB million
5,653
641
1,702
558
1,349
761
10,664
9,587
1,920
1,017
231
117
11
12,883
23,547
(2,115)
(383)
(96)
(1,438)
(4,032)
(1,786)
17,729
2,541
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.
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.
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.
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.
188
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
35 BUSINESS COMBINATION (Continued)
(b) Acquisition of Gaoqiao Branch of SAMC
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.
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.
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.
36 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:
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
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(vii)
(vii)
(viii)
(ix)
(x)
(ix)
(xi)
2017
RMB million
2016
RMB million
244,211
165,993
7,716
21,210
20,824
6,653
8,015
510
626
127
807
554
(7,441)
5,279
194,179
118,242
1,333
27,201
10,816
6,584
10,474
449
456
129
209
996
(21,770)
(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.
189
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
36 RELATED PARTY TRANSACTIONS (Continued)
(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.
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.
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.
Note:
(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.
(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.
(vii) Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land, buildings and equipment.
(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.
190
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International) 36 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
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:
•
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
(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%.
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.
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 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.
•
•
•
•
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
Other receivables
Prepaid expenses and other current assets
Long-term prepayments and other assets
Total
Trade accounts payable
Accrued expenses and other payables
Other long–term liabilities
Short–term loans and current portion of long-term loans
from Sinopec Group Company and fellow subsidiaries
Long–term loans excluding current portion from Sinopec Group Company and fellow subsidiaries
Total
31 December
2017
RMB million
31 December
2016
RMB million
12,903
5,444
189
20,726
39,262
22,849
20,990
10,165
25,311
43,320
122,635
10,978
12,860
570
20,385
44,793
19,419
21,590
9,998
18,580
44,772
114,359
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.
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.
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.
191
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
36 RELATED PARTY TRANSACTIONS (Continued)
(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
2017
RMB’000
5,344
424
5,768
2016
RMB’000
5,648
499
6,147
(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 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:
‧ sales and purchases of goods and ancillary materials;
‧ rendering and receiving services;
‧ lease of assets;
‧ depositing and borrowing money; and
‧ uses of public utilities.
These transactions are conducted in the ordinary course of the Group’s business on terms comparable to those with other entities that are not
state–controlled.
37 EMPLOYEE BENEFITS PLAN
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).
38 SEGMENT REPORTING
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.
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.
(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.
(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.
(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.
(iv) Chemicals, which manufactures and sells petrochemical products, derivative petrochemical products and other chemical products mainly to
external customers.
(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.
192
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
38 SEGMENT REPORTING (Continued)
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.
(1) Information of reportable segmental revenues, profits or losses, assets and 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.
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.
Information of the Group’s reportable segments is as follows:
Turnover
Exploration and production
External sales
Inter–segment sales
Refining
External sales
Inter–segment sales
Marketing and distribution
External sales
Inter–segment sales
Chemicals
External sales
Inter–segment sales
Corporate and others
External sales
Inter–segment sales
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
2017
RMB million
2016
RMB million
69,168
77,804
146,972
132,478
874,271
1,006,749
1,191,902
3,962
1,195,864
373,814
49,615
423,429
533,108
440,303
973,411
(1,445,955)
2,300,470
10,533
5,104
28,333
14,314
1,439
59,723
2,360,193
47,443
58,954
106,397
102,983
747,317
850,300
1,027,373
3,480
1,030,853
284,289
38,614
322,903
418,102
320,367
738,469
(1,168,732)
1,880,190
9,542
5,486
22,004
12,211
1,478
50,721
1,930,911
193
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
38 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Result
Operating (loss)/profit
By segment
– Exploration and production
– Refining
– Marketing and distribution
– Chemicals
– Corporate and others
– Elimination
Total segment operating profit
Share of profits/(losses) from associates and joint ventures
– Exploration and production
– Refining
– Marketing and distribution
– Chemicals
– Corporate and others
Aggregate share of profits from associates and joint ventures
Investment income/(losses)
– Exploration and production
– Refining
– Marketing and distribution
– Chemicals
– Corporate and others
Aggregate investment income
Net finance costs
Profit before taxation
Assets
Segment assets
– Exploration and production
– Refining
– Marketing and distribution
– Chemicals
– Corporate and others
Total segment assets
Interest in associates and joint ventures
Available-for-sale financial assets
Deferred tax assets
Cash and cash equivalents and time deposits with financial institutions
Other unallocated assets
Total assets
Liabilities
Segment liabilities
– Exploration and production
– Refining
– Marketing and distribution
– Chemicals
– Corporate and others
Total segment liabilities
Short-term debts
Income tax payable
Long-term debts
Loans from Sinopec Group Company and fellow subsidiaries
Deferred tax liabilities
Other unallocated liabilities
Total liabilities
194
2017
RMB million
2016
RMB million
(45,944)
65,007
31,569
26,977
(4,484)
(1,655)
71,470
1,449
989
2,945
9,621
1,521
16,525
40
28
90
86
18
262
(1,560)
86,697
(36,641)
56,265
32,153
20,623
3,212
1,581
77,193
(1,203)
1,075
2,362
5,696
1,376
9,306
24
(4)
90
119
34
263
(6,611)
80,151
At 31 December
2017
RMB million
At 31 December
2016
RMB million
343,404
273,123
309,727
158,472
170,045
1,254,771
131,087
1,676
15,131
165,004
27,835
1,595,504
99,568
101,429
164,101
35,293
117,781
518,172
55,338
13,015
55,804
68,631
6,466
25,188
742,614
402,476
260,903
292,328
144,371
95,263
1,195,341
116,812
11,408
7,214
142,497
25,337
1,498,609
95,944
82,170
133,303
32,072
97,080
440,569
56,239
6,051
72,674
63,352
7,661
20,828
667,374
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
38 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Capital expenditure
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Depreciation, depletion and amortisation
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Impairment losses on long-lived assets
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
2017
RMB million
2016
RMB million
31,344
21,075
21,539
23,028
2,398
99,384
66,843
18,408
15,463
12,873
1,723
115,310
13,556
1,894
675
4,922
211
21,258
32,187
14,347
18,493
8,849
2,580
76,456
61,929
17,209
14,540
12,654
2,093
108,425
11,605
1,655
267
2,898
—
16,425
(2) Geographical information
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
Others
Non-current assets
Mainland China
Others
2017
RMB million
2016
RMB million
1,758,365
269,349
332,479
2,360,193
1,488,117
152,068
290,726
1,930,911
31 December
2017
RMB million
31 December
2016
RMB million
979,329
48,572
1,027,901
1,000,209
45,887
1,046,096
195
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
39 PRINCIPAL SUBSIDIARIES
At 31 December 2017, the following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the
Group.
Name of company
Sinopec Great Wall Energy & Chemical
Company Limited
Sinopec Yangzi Petrochemical Company Limited
RMB 13,203
100.00
Particulars of
issued capital
(million)
Interests held
Interests
held by
by the non-controlling
Company %
interests % Principal activities
RMB 22,761
100.00
Sinopec Pipeline Storage & Transportation
Company Limited
Sinopec Overseas Investment Holding Limited ("SOIH")
Sinopec International Petroleum Exploration and
Production Limited ("SIPL")
RMB 12,000
100.00
USD 1,638
RMB 8,000
100.00
100.00
— Investment holding
— Investment in exploration,
—
—
—
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
—
—
—
—
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
1.02
15.00
— 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 products and petroleum
products
Manufacturing of intermediate
petrochemical products and petroleum
products
Manufacturing of intermediate
petrochemical products and petroleum
products
Marketing and distribution of refined
petroleum products
Production and sale of petrochemical
products
Production, sale, research and
development of ethylene and downstream
byproducts
Trading of crude oil and petroleum
products
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
25.00
25.00
29.58
32.40
35.00
39.66
45.00
49.51
50.00
Sinopec Yizheng Chemical Fibre Limited
Liability Company
Sinopec Lubricant Company Limited
RMB 4,000
100.00
RMB 3,374
100.00
China International United Petroleum and Chemical
Company Limited
Sinopec Qingdao Petrochemical Company Limited
RMB 3,000
100.00
RMB 1,595
100.00
Sinopec Catalyst Company Limited
China Petrochemical International Company Limited
Sinopec Chemical Sales Company Limited
RMB 1,500
RMB 1,400
RMB 1,000
100.00
100.00
100.00
Sinopec Beihai Refining and Chemical Limited
Liability Company
RMB 5,294
98.98
Sinopec Qingdao Refining and Chemical
Company Limited
RMB 5,000
85.00
Sinopec Zhanjiang Dongxing Petrochemical
Company Limited
RMB 4,397
75.00
Sinopec Hainan Refining and Chemical
Company Limited
RMB 3,986
75.00
Sinopec Marketing Company Limited
("Marketing Company")
Shanghai SECCO Petrochemical Company Limited
("Shanghai SECCO") (Note 35)
Sinopec-SK(Wuhan) Petrochemical Company Limited
("Zhonghan Wuhan")
RMB 28,403
RMB 7,801
RMB 6,270
Sinopec Kantons Holdings Limited ("Sinopec Kantons")
HKD 248
Gaoqiao Petrochemical Company Limited (Note 35)
RMB 10,000
70.42
67.60
65.00
60.34
55.00
Sinopec Shanghai Petrochemical Company Limited
(“Shanghai Petrochemical”)
RMB 10,814
50.49
Fujian Petrochemical Company Limited
(“Fujian Petrochemical”) (i)
RMB 6,898
50.00
196
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
39 PRINCIPAL SUBSIDIARIES (Continued)
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.
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.
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
SIPL
Shanghai Petrochemical
Fujian Petrochemical
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
At 31
December
2017
RMB million
At 31
December
2016
RMB million
Sinopec Kantons
At 31
December
2017
RMB million
At 31
December
2016
RMB million
Shanghai
SECCO
At 31
December
2017
RMB million
Zhonghan Wuhan
At 31
December
2017
RMB million
At 31
December
2016
RMB million
19,555
(7,118)
12,437
34,769
(28,523)
6,246
18,683
18,116
(824)
17,292
40,067
(39,322)
745
18,037
19,866
(10,922)
8,944
19,577
(6)
19,571
28,515
14,876
(8,942)
5,934
19,070
—
19,070
25,004
992
(376)
616
9,925
(681)
9,244
9,860
4,930
4,930
926
(812)
114
7,845
(721)
7,124
7,238
3,619
3,619
1,196
(2,351)
(1,155)
13,089
(2,430)
10,659
9,504
5,716
3,788
1,352
(2,891)
(1,539)
13,228
(3,101)
10,127
8,588
5,162
3,426
11,602
(4,174)
7,428
12,797
(1,740)
11,057
18,485
12,496
5,989
1,636
(3,975)
(2,339)
13,598
—
13,598
11,259
7,318
3,941
1,489
(7,521)
(6,032)
14,686
—
14,686
8,654
5,625
3,029
132,549
134,393
3,468
2,784
14,253
12,500
63,006
63,555
15,215
15,253
14,262
12,504
Summarised consolidated statement of comprehensive income
Year ended 31 December
Marketing Company
SIPL
Shanghai Petrochemical
Fujian Petrochemical
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
Sinopec Kantons
2017
RMB million
2016
RMB million
Shanghai
SECCO(ii)
2017
RMB million
6,136
1,075
396
(38)
—
4,016
(4,604)
91,962
6,154
77,843
5,981
(2,481)
6,153
6,000
(3,279)
—
3,052
1,344
2,964
563
6,068
2,726
2,726
1,363
625
4,968
2,513
2,513
1,256
—
1,498
1,046
1,146
433
70
1,512
860
879
349
51
5,222
726
726
235
—
Marketing Company
At 31
December
2017
RMB million
At 31
December
2016
RMB million
156,494
(212,620)
121,260
(168,366)
(56,126)
253,455
(1,774)
251,681
195,555
(47,106)
246,514
(1,460)
245,054
197,948
Current assets
Current liabilities
Net current
(liabilities)/assets
Non–current assets
Non–current liabilities
Net non–current assets
Net assets
Attributable to owners
of the Company
Attributable to
non-controlling interests
Turnover
Profit/(loss) for the year
Total comprehensive
income/(loss)
Comprehensive income/(loss)
attributable to non-
controlling interests
Dividends paid to
non–controlling interests
2017
RMB million
1,221,530
27,520
2016
RMB million
1,050,294
26,461
26,986
27,385
9,033
9,544
9,028
4,932
Zhonghan Wuhan
2017
RMB million
2016
RMB million
16,139
2,730
11,703
1,558
2,730
1,558
956
—
545
—
197
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
39 PRINCIPAL SUBSIDIARIES (Continued)
Summarised statement of cash flows
Year ended 31 December
Marketing Company
SIPL
Shanghai Petrochemical
Fujian Petrochemical
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
2017
RMB million
2016
RMB million
Sinopec Kantons
2017
RMB million
2016
RMB million
Shanghai
SECCO(ii)
2017
RMB million
Zhonghan Wuhan
2017
RMB million
2016
RMB million
Net cash generated from/
(used in) operating activities
Net cash (used in)/generated
from investing activities
Net cash (used in)/generated
from financing activities
Net (decrease)/increase in
cash and cash equivalents
Cash and cash equivalents
at 1 January
Effect of foreign currency
exchange rate changes
Cash and cash equivalents
at 31 December
51,038
50,840
2,758
(35,738)
(31,573)
(2,211)
(16,499)
(20,424)
(1,199)
(1,157)
243
790
14,373
14,914
3,045
(253)
616
(230)
12,921
14,373
3,605
2,576
2,729
7,061
7,182
(2,401)
(190)
(4,414)
(2,590)
(2,637)
891
2,042
112
3,045
2,070
5,441
(7)
4,355
1,077
9
7,504
5,441
(558)
225
(158)
(491)
717
—
226
617
54
(55)
616
101
—
717
968
193
505
261
(1,093)
(1,338)
1,639
5,567
—
68
289
(14)
343
(572)
7,206
886
(25)
289
—
(1)
7,205
2,976
3,636
(2,415)
(3,080)
(631)
(70)
134
—
64
(682)
(126)
260
—
134
(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.
40 FINANCIAL RISK MANAGEMENT AND FAIR VALUES
Overview
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.
The Group has exposure to the following risks from its uses of financial instruments:
‧ credit risk;
‧ liquidity risk;
‧ 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 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.
Credit risk
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 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.
198
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
40 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 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.
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.
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:
Short-term debts
Long-term debts
Loans from Sinopec Group Company
and fellow subsidiaries
Trade accounts payable
Bills payable
Accrued expenses and other payables
Short-term debts
Long-term debts
Loans from Sinopec Group Company
and fellow subsidiaries
Trade accounts payable
Bills payable
Accrued expenses and other payables
Total
contractual
Carrying undiscounted
cash flow
RMB million
amount
RMB million
55,338
55,804
68,631
200,073
6,462
99,588
485,896
56,562
66,202
68,950
200,073
6,462
99,588
497,837
Total
contractual
Carrying undiscounted
cash flow
amount
RMB million
RMB million
56,239
72,674
63,352
174,301
5,828
81,781
454,175
57,515
85,021
63,678
174,301
5,828
81,781
468,124
31 December 2017
Within More than 1 More than 2
year but less years but less
than 5 years
than 2 years
RMB million
RMB million
1 year or
on demand
RMB million
More than
5 years
RMB million
56,562
2,166
25,504
200,073
6,462
99,588
390,355
—
14,477
4,439
—
—
—
18,916
—
32,316
39,007
—
—
—
71,323
—
17,243
—
—
—
—
17,243
31 December 2016
Within More than 1 More than 2
year but less years but less
than 5 years
than 2 years
RMB million
RMB million
1 year or
on demand
RMB million
More than
5 years
RMB million
57,515
2,672
18,790
174,301
5,828
81,781
340,887
—
27,277
2,092
—
—
—
29,369
—
30,535
42,796
—
—
—
73,331
—
24,537
—
—
—
—
24,537
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.
199
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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
2017
million
31 December
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.
USD
31 December
2017
million
31 December
2016
million
50
33
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. 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.
200
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
40 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.
‧ 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
Available-for-sale financial assets:
– Listed
Derivative financial instruments:
– Derivative financial assets
Liabilities
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
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
—
178
343
521
—
—
183
183
1,277
1,277
1,388
1,388
51,196
51,196
—
—
51,196
—
—
178
526
51,900
2,665
2,665
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
262
29
291
2,586
2,586
—
733
733
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.
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.
201
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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 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.
202
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International) 41 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
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 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
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.
Depreciation
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.
203
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International) 41 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Impairment for bad and doubtful debts
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.
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.
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
BALANCE SHEET OF THE COMPANY (Amounts in million)
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
Interest in joint ventures
Available-for-sale financial assets
Deferred tax assets
Lease prepayments
Long-term prepayments and other assets
Total non–current assets
Current assets
Cash and cash equivalents
Time deposits with financial institutions
Financial assets at fair value through profit or loss
Trade accounts receivable
Bills receivable
Dividends receivable
Inventories
Prepaid expenses and other current assets
Total current assets
Current liabilities
Short-term debts
Loans from Sinopec Group Company and fellow subsidiaries
Trade accounts payable
Bills payable
Accrued expenses and other payables
Total current liabilities
Net current assets/(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
204
329,814
50,046
245,156
15,579
14,822
395
6,834
6,916
14,072
683,634
72,309
20,236
48,179
37,609
157
16,327
44,933
79,111
318,861
33,454
3,214
83,449
3,155
194,291
317,563
1,298
684,932
40,442
43,225
—
31,405
3,613
118,685
566,247
121,071
445,176
566,247
373,020
49,277
238,264
14,691
15,496
297
—
6,114
14,731
711,890
88,120
10,130
—
38,332
471
5,454
46,942
76,386
265,835
50,574
2,703
75,787
2,761
148,997
280,822
(14,987)
696,903
49,676
44,772
505
29,767
3,688
128,408
568,495
121,071
447,424
568,495
(a)
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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:
Capital reserve
Balance at 1 January
Others
Balance at 31 December
Share premium
Balance at 1 January
Balance at 31 December
Statutory surplus reserve
Balance at 1 January
Appropriation
Balance at 31 December
Discretionary surplus reserve
Balance at 1 January
Balance at 31 December
Other reserves
Balance at 1 January
Share of other comprehensive loss of associates and joint ventures, net of deferred tax
Cash flow hedges, net of deferred tax
Others
Balance at 31 December
Retained earnings
Balance at 1 January
Profit for the year
Distribution to owners (Note 13)
Appropriation
Others
Balance at 31 December
The Company
2017
RMB million
2016
RMB million
9,175
20
9,195
55,850
55,850
79,640
3,042
82,682
9,122
53
9,175
55,850
55,850
79,640
—
79,640
117,000
117,000
117,000
117,000
2,438
(120)
53
89
2,460
183,321
30,488
(32,689)
(3,042)
(89)
177,989
445,176
1,950
(149)
557
80
2,438
176,497
23,733
(16,829)
—
(80)
183,321
447,424
205
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2017Financial Statements (International)
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:
(I) GOVERNMENT GRANTS
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:
Shareholders’ equity under ASBE
Adjustments:
Government grants
Total equity under IFRS*
Note
(i)
31 December
2017
RMB million
31 December
2016
RMB million
854,070
832,525
(1,180)
852,890
(1,290)
831,235
Effects of major differences between the net profit under ASBE and the profit for the year under IFRS are analysed as follows:
Net profit under ASBE
Adjustments:
Government grants
Safety production fund
Others
Profit for the year under IFRS*
Note
(i)
(ii)
2017
RMB million
70,294
2016
RMB million
59,170
110
126
(112)
70,418
114
160
—
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
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH THE ACCOUNTING POLICIES COMPLYING WITH ASBE AND IFRS (UNAUDITED)Financial Statements (Differences Between the ASBE and IFRS)(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 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.
Table I: Capitalised costs related to oil and gas producing activities
The Group
Property cost, wells and related equipments
and facilities
Supporting equipments and facilities
Uncompleted wells, equipments and facilities
Total capitalised costs
Accumulated depreciation, depletion, amortisation
and impairment losses
Net capitalised costs
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
2017
RMB million
Other
countries
Total
China
2016
RMB million
Other
countries
Total
China
667,657
210,711
41,397
919,765
625,621
210,694
41,389
877,704
42,036
17
8
42,061
650,686
192,877
52,935
896,498
606,493
192,855
52,931
852,279
44,193
22
4
44,219
(601,318)
318,447
(565,651)
312,053
(35,667)
6,394
(528,636)
367,862
(495,538)
356,741
(33,098)
11,121
6,357
—
6,357
9,337
—
9,337
324,804
312,053
12,751
377,199
356,741
20,458
Table II: Costs incurred in oil and gas exploration and development
The Group
Exploration
Development
Total costs incurred
Equity method investments
Share of costs of exploration and development
of associates and joint ventures
Total of the Group’s and its equity method
Total
China
11,589
30,844
42,433
11,589
30,710
42,299
724
—
investments’ exploration and development costs
43,157
42,299
2017
RMB million
Other
countries
—
134
134
724
858
Total
China
10,942
32,280
43,222
10,942
31,918
42,860
719
—
2016
RMB million
Other
countries
—
362
362
719
43,941
42,860
1,081
207
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)
Table III: Results of operations related to oil and gas producing activities
2017
RMB million
Other
countries
Total
China
2016
RMB million
Other
countries
Total
China
The Group
Revenues
Sales
Transfers
Production costs excluding taxes
Exploration expenses
Depreciation, depletion, amortisation and
impairment losses
Taxes other than income tax
Profit before taxation
Income tax expense
Results of operation from producing activities
Equity method investments
Revenues
Sales
Production costs excluding taxes
Exploration expenses
Depreciation, depletion, amortisation and
impairment losses
Taxes other than income tax
Profit before taxation
Income tax expense
Share of profit for producing activities of
associates and joint ventures
43,644
73,447
117,091
(46,311)
(11,089)
(80,399)
(8,726)
(29,434)
1,188
(28,246)
8,080
8,080
(2,748)
—
(1,243)
(3,628)
461
(347)
114
43,644
67,311
110,955
(44,977)
(11,089)
(74,856)
(8,726)
(28,693)
—
(28,693)
—
—
—
—
—
—
—
—
—
Total of the Group’s and its equity method investments’
results of operations for producing activities
(28,132)
(28,693)
—
6,136
6,136
(1,334)
—
(5,543)
—
(741)
1,188
447
8,080
8,080
(2,748)
—
(1,243)
(3,628)
461
(347)
114
561
36,720
58,571
95,291
(44,077)
(11,035)
(73,534)
(4,576)
(37,931)
(798)
(38,729)
6,352
6,352
(2,205)
—
(2,752)
(2,570)
(1,175)
(195)
(1,370)
36,720
54,555
91,275
(42,652)
(11,035)
(68,594)
(4,576)
(35,582)
—
(35,582)
—
—
—
—
—
—
—
—
—
—
4,016
4,016
(1,425)
—
(4,940)
—
(2,349)
(798)
(3,147)
6,352
6,352
(2,205)
—
(2,752)
(2,570)
(1,175)
(195)
(1,370)
(40,099)
(35,582)
(4,517)
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.
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 2017 and 2016 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.
208
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)
Table IV: Reserve quantities information (Continued)
The Group
Proved developed and undeveloped reserves
(oil) (million barrels)
Beginning of year
Revisions of previous estimates
Improved recovery
Extensions and discoveries
Production
End of year
Non–controlling interest in proved developed and
undeveloped reserves at the end of year
Proved developed reserves
Beginning of year
End of year
Proved undeveloped reserves
Beginning of year
End of year
Proved developed and undeveloped
reserves (gas) (billion cubic feet)
Beginning of year
Revisions of previous estimates
Improved recovery
Extensions and discoveries
Production
End of year
Proved developed reserves
Beginning of year
End of year
Proved undeveloped reserves
Beginning of year
End of year
2017
2016
Total
China
Other
countries
Total
China
Other
countries
1,256
151
90
60
(264)
1,293
14
1,120
1,156
136
137
7,160
(107)
72
769
(909)
6,985
6,436
6,000
724
985
1,216
148
86
60
(249)
1,261
—
1,080
1,124
136
137
7,160
(107)
72
769
(909)
6,985
6,436
6,000
724
985
40
3
4
—
(15)
32
14
40
32
—
—
—
—
—
—
—
—
—
—
—
—
1,957
(505)
35
41
(272)
1,256
18
1,753
1,120
204
136
7,551
(170)
66
475
(762)
7,160
6,439
6,436
1,112
724
1,902
(509)
35
41
(253)
1,216
—
1,701
1,080
201
136
7,551
(170)
66
475
(762)
7,160
6,439
6,436
1,112
724
55
4
—
—
(19)
40
18
52
40
3
—
—
—
—
—
—
—
—
—
—
—
209
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)
Table IV: Reserve quantities information (Continued)
Equity method investments
Proved developed and undeveloped reserves of
associates and joint ventures (oil) (million barrels)
Beginning of year
Revisions of previous estimates
Improved recovery
Extensions and discoveries
Production
End of year
Proved developed reserves
Beginning of year
End of year
Proved undeveloped reserves
Beginning of year
End of year
Proved developed and undeveloped reserves of
associates and joint ventures (gas)
(billion cubic feet)
Beginning of year
Revisions of previous estimates
Improved recovery
Extensions and discoveries
Production
End of year
Proved developed reserves
Beginning of year
End of year
Proved undeveloped reserves
Beginning of year
End of year
Total of the Group and its equity method investments
Proved developed and undeveloped reserves
(oil) (million barrels)
Beginning of year
End of year
Proved developed and undeveloped reserves
(gas) (billion cubic feet)
Beginning of year
End of year
2017
2016
Total
China
Other
countries
Total
China
Other
countries
296
12
8
20
(30)
306
273
273
23
33
18
(2)
—
—
(4)
12
18
12
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,552
1,599
7,178
6,997
1,216
1,261
7,160
6,985
296
12
8
20
(30)
306
273
273
23
33
18
(2)
—
—
(4)
12
18
12
—
—
336
338
18
12
286
(2)
3
41
(32)
296
260
273
26
23
19
3
—
—
(4)
18
18
18
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,243
1,552
7,570
7,178
1,902
1,216
7,551
7,160
286
(2)
3
41
(32)
296
260
273
26
23
19
3
—
—
(4)
18
18
18
1
—
341
336
19
18
210
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)
Table V: Standardised measure of discounted future net cash flows
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.
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.
2017
RMB million
Other
countries
Total
China
2016
RMB million
Other
countries
Total
China
The Group
Future cash flows
Future production costs
Future development costs
Future income tax expenses
Undiscounted future net cash flows
10% annual discount for estimated timing of
cash flows
Standardised measure of discounted
future net cash flows
Discounted future net cash flows attributable to
non–controlling interests
Equity method investments
Future cash flows
Future production costs
Future development costs
Future income tax expenses
Undiscounted future net cash flows
10% annual discount for estimated timing of
cash flows
Standardised measure of discounted future
net cash flows
Total of the Group’s and its equity method
investments’ results of standardised measure of
639,336
(292,789)
(24,999)
(1,374)
320,174
628,187
(287,914)
(20,314)
—
319,959
11,149
(4,875)
(4,685)
(1,374)
215
603,785
(271,650)
(20,241)
(1,405)
310,489
592,389
(266,549)
(15,615)
—
310,225
(97,082)
(97,115)
33
(102,342)
(102,332)
208,147
207,893
223,092
222,844
112
43,587
(12,131)
(4,692)
(4,406)
22,358
(9,803)
12,555
—
—
—
—
—
—
—
—
248
112
43,587
(12,131)
(4,692)
(4,406)
22,358
114
35,690
(10,783)
(3,444)
(3,303)
18,160
(9,803)
(7,969)
12,555
10,191
—
—
—
—
—
—
—
—
11,396
(5,101)
(4,626)
(1,405)
264
(10)
254
114
35,690
(10,783)
(3,444)
(3,303)
18,160
(7,969)
10,191
discounted future net cash flows
235,647
222,844
12,803
218,338
207,893
10,445
211
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)
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
Revisions of previous quantity estimates
Previously estimated development costs incurred during the year
Accretion of discount
Net changes in income taxes
Net changes for the year
Equity method investments
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
Revisions of previous quantity estimates
Previously estimated development costs incurred during the year
Accretion of discount
Net changes in income taxes
Net changes for the year
Total of the Group’s and its equity method investments’ results of net changes for the year
2017
RMB million
2016
RMB million
(62,054)
7,487
(7,320)
29,799
20,608
5,747
20,909
(231)
14,945
(1,704)
2,479
(856)
1,205
688
206
967
(621)
2,364
17,309
(46,637)
(53,715)
6,073
15,113
(48,479)
9,370
30,340
6,363
(81,572)
(1,577)
(3,952)
(534)
1,887
(92)
322
1,308
464
(2,174)
(83,746)
212
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)
STATUTORY NAME
中国石油化工股份有限公司
ENGLISH NAME
China Petroleum & Chemical Corporation
Hong Kong:
Herbert Smith Freehills
23rd Floor, Gloucester Tower
15 Queen’s Road
Central, Hong Kong
PLACES OF LISTING OF SHARES, STOCK
NAMES AND STOCK CODES
A Shares:
Shanghai Stock Exchange
Stock name
Stock code
: SINOPEC CORP
: 600028
H Shares:
Hong Kong Stock Exchange
Stock code
: 00386
ADRs:
New York Stock Exchange
Stock code
: SNP
London Stock Exchange
Stock code
: SNP
NAMES AND ADDRESSES OF AUDITORS OF
SINOPEC CORP.
Domestic Auditors
: PricewaterhouseCoopers
Address
: 11th Floor
Zhong Tian LLP
PricewaterhouseCoopers,
2 Corporate Avenue,
202 Hu Bin Road,
Huangpu District,
Shanghai, PRC 200021
: PricewaterhouseCoopers
: 22nd Floor,
Prince’s Building,
Central, Hong Kong
Overseas Auditors
Address
CHINESE ABBREVIATION
中国石化
ENGLISH ABBREVIATION
Sinopec Corp.
LEGAL REPRESENTATIVE
Mr. Wang Yupu
AUTHORISED REPRESENTATIVES
Mr. Dai Houliang
Mr. Huang Wensheng
SECRETARY TO THE BOARD
Mr. Huang Wensheng
REPRESENTATIVE ON SECURITIES MATTERS
Mr. Zheng Baomin
REGISTERED ADDRESS AND PLACE OF
BUSINESS
No.22 Chaoyangmen North Street,
Chaoyang District
Beijing, PRC
Postcode
Tel.
Fax
Website
E-mail addresses
: 100728
: 86-10-59960028
: 86-10-59960386
: http://www.sinopec.com
: ir@sinopec.com
PLACE OF BUSINESS IN HONG KONG
20th Floor, Office Tower
Convention Plaza
1 Harbour Road
Wanchai
Hong Kong
INFORMATION DISCLOSURE AND PLACES FOR
COPIES OF RELATIVE REPORTS
No change during the reporting period
LEGAL ADVISORS
People’s Republic of China:
Haiwen & Partners
20th Floor, Fortune Financial Centre
No. 5, Dong San Huan Central Road
Chaoyang District
Beijing PRC
Postcode: 100020
U.S.A.:
Skadden, Arps, Slate, Meagher & Flom LLP
30/F, China World Office 2
No. 1, Jian Guo Men Wai Avenue,
Beijing, PRC
REGISTRARS
A Shares:
China Securities Registration and Clearing
Company Limited Shanghai Branch Company
36th Floor, China Insurance Building
166 Lujiazui East Road
Shanghai, PRC
H Shares:
Hong Kong Registrars Limited
R1712-1716, 17th Floor, Hopewell Centre
183 Queen’s Road East
Hong Kong
DEPOSITARY FOR ADRS
The US:
Citibank, N.A.
388 Greenwich St., 14th Floor
New York NY 10013
United States of America
COPIES OF THIS ANNUAL REPORT ARE
AVAILABLE AT
The PRC:
China Petroleum & Chemical Corporation
Board Secretariat
No.22 Chaoyangmen North Street,
Chaoyang District
Beijing, PRC
The US:
Citibank, N.A.
388 Greenwich St., 14th Floor
New York NY 10013
USA
The UK:
Citibank, N.A.
Citigroup Centre
Canada Square, Canary Wharf
London E14 5LB, U.K.
213
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017CORPORATE INFORMATIONCorporate Information 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:
a) The original copies of the 2017 annual
report signed by Mr. Dai Houliang, the Vice
Chairman and President;
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.;
c) The original auditors’ report signed by the
auditors; and
d) Copies of the documents and announcements
that Sinopec Corp. has published in the
newspapers stipulated by the CSRC during
the reporting period.
By Order of the Board
Dai Houliang
Vice Chairman and President
Beijing, PRC, 23 March 2018
If there is any inconsistency between the Chinese
and English versions of this annual report, the
Chinese version shall prevail.
214
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2017Documents for InspectionDOCUMENTS FOR INSPECTION