2019
ANNUAL REPORT
AND ACCOUNTS
2
3
6
8
11
19
31
40
43
50
58
60
76
Company Profile
Principal Financial Data and Indicators
Changes in Share Capital and Shareholdings
of Principal Shareholders
Chairman’s Address
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
Principal Wholly-owned and
Controlled Subsidiaries
77
211
212
Financial Statements
Corporate Information
Documents for Inspection
This annual report includes forward-looking statements. All statements,
other than statements of historical facts, that address activities, events or
developments that the Company expects or anticipates will or may occur
in the future (including but not limited to projections, targets, reserve
and other estimates and business plans) are forward-looking statements.
The Company’s actual results or developments may differ materially
from those indicated by these forward-looking statements as a result
of various factors and uncertainties. The Company makes the forward-
looking statements referred to herein as at 27 March 2020 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. ALL THE DIRECTORS OF SINOPEC CORP. ATTENDED THE 12TH MEETING OF THE SEVENTH SESSION OF
THE BOARD. MR. ZHANG YUZHUO, CHAIRMAN OF THE BOARD, MR. MA YONGSHENG, PRESIDENT, MS. SHOU DONGHUA, CHIEF FINANCIAL
OFFICER AND HEAD OF THE FINANCIAL DEPARTMENT OF SINOPEC CORP. WARRANT THE AUTHENTICITY AND COMPLETENESS OF THE
FINANCIAL STATEMENTS CONTAINED IN THIS ANNUAL REPORT. THE AUDIT COMMITTEE OF SINOPEC CORP. HAS REVIEWED THE ANNUAL
REPORT OF SINOPEC CORP. FOR THE YEAR ENDED 31 DECEMBER 2019.
THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 OF THE COMPANY PREPARED IN ACCORDANCE WITH THE PRC
ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (CASs) AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) HAVE BEEN
AUDITED BY PRICEWATERHOUSECOOPERS ZHONG TIAN LLP AND PRICEWATERHOUSECOOPERS RESPECTIVELY. BOTH FIRMS HAVE ISSUED
STANDARD UNQUALIFIED AUDITOR’S REPORT.
AS APPROVED AT THE 12TH MEETING OF THE SEVENTH SESSION OF THE BOARD OF DIRECTORS OF SINOPEC CORP., THE BOARD PROPOSED A
FINAL CASH DIVIDEND OF RMB 0.19 (TAX INCLUSIVE) PER SHARE FOR 2019, COMBINING WITH THE INTERIM CASH DIVIDEND OF RMB 0.12 (TAX
INCLUSIVE) PER SHARE, THE TOTAL CASH DIVIDEND FOR 2019 WILL BE RMB 0.31 (TAX INCLUSIVE) PER SHARE. THE DIVIDEND PROPOSAL IS
SUBJECT TO THE SHAREHOLDERS’ APPROVAL AT THE ANNUAL GENERAL MEETING FOR THE YEAR 2019.
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 as set out below:
Sinopec Corp.: China Petroleum & Chemical Corporation;
Company: Sinopec Corp. and its subsidiaries;
China Petrochemical Corporation: The controlling shareholder of Sinopec Corp., China Petrochemical Corporation;
Sinopec Group: China Petrochemical Corporation and its subsidiaries;
NDRC: China National Development and Reform Commission
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: Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
New Lease Standard: IFRS 16, ‘Leases’; No. 21 Accounting Standards for Business Enterprises- Leases which was revised and released by the Ministry
of Finance in 2018.
CONVERSION:
For domestic production of crude oil, 1 tonne = 7.1 barrels;
For overseas production of crude oil: 1 tonne = 7.21 barrels;
For production of natural gas, 1 cubic meter = 35.31 cubic feet;
Refinery throughput is converted at 1 tonne = 7.35 barrels.
2
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Company ProfileCOMPANY PROFILE 1 FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASs
(1) Principal financial data
Items
For the year ended 31 December
2019
RMB million
2018
RMB million
Change
%
2017
RMB million
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
2,966,193
90,025
90,016
57,591
2,891,179
101,474
100,502
63,089
54,271
153,420
59,630
175,868
2.6
(11.3)
(10.4)
(8.7)
(9.0)
(12.8)
2,360,193
86,965
86,573
51,119
45,582
190,935
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
For the year of 2019
First
Quarter
RMB million
Second
Quarter
RMB million
Third
Quarter
RMB million
Fourth
Quarter
RMB million
717,579
14,763
781,417
16,575
734,309
11,943
732,888
14,310
Total
RMB million
2,966,193
57,591
14,370
(14,609)
16,081
47,527
11,095
48,480
12,725
72,022
54,271
153,420
As of 31 December
2019
RMB million
1,755,071
878,166
739,169
121,071,210
2018
RMB million
1,592,308
734,649
718,355
121,071,210
Change
%
10.2
19.5
2.9
–
2017
RMB million
1,595,504
741,434
727,244
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 (%)
2019
RMB
0.476
0.476
0.448
7.90
2018
RMB
0.521
0.521
0.493
8.67
Weighted average return (excluding extraordinary gains and losses)
on net assets (%)
7.45
8.20
Net cash flow from operating activities per share
1.267
1.453
Items
Net assets attributable to equity shareholders of the Company per share
Liabilities to assets ratio (%)
As of 31 December
2019
RMB
6.105
50.04
2018
RMB
5.933
46.14
Change
%
(8.7)
(8.7)
(9.1)
(0.77)
percentage
points
(0.75)
percentage
points
(12.8)
Change
%
2.9
3.90
percentage
points
2017
RMB
0.422
0.422
0.376
7.14
6.37
1.577
2017
RMB
6.007
46.47
3
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Principal 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
Gain on remeasurement of interests in Shanghai SECCO
Other non-operating expenses, net
Subtotal
Tax effect
Total
Attributable to: Equity shareholders of the Company
Minority interests
(4) Items measured by fair values
Items
Other equity instruments
Derivative financial instruments
Cash flow hedging
Financial assets held for trading
Total
For the year ended 31 December
(Income)/expenses
2019
RMB million
2018
RMB million
2017
RMB million
1,318
209
(6,857)
(410)
—
729
(5,011)
1,597
(3,414)
(3,320)
(94)
742
180
(7,482)
(1,023)
—
1,613
(5,970)
2,312
(3,658)
(3,459)
(199)
1,518
152
(4,783)
(148)
(3,941)
690
(6,512)
976
(5,536)
(5,537)
1
Beginning
of the year
End
of the year
1,450
1,584
(7,268)
25,732
21,498
1,521
48
(1,940)
3,319
2,948
Unit: RMB million
Influence
on the profit
of the year
492
(4,384)
(2,333)
215
(6,010)
Changes
71
(1,536)
5,328
(22,413)
(18,550)
(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
As of 31 December
2019
RMB million
2018
RMB million
Increase/(decrease)
Amount
RMB million
Percentage
(%) Reasons for change
Financial assets held for trading
Bills receivable
3,319
–
25,732
7,886
(22,413)
(7,886)
(87.1) Structured deposit withdrawal at maturity of RMB 22.8 billion
(100.0) According to the accounting standard, bills receivable held by the
Company at the end of last year are presented in receivables financing
Long-term deferred expenses
8,930
15,659
(6,729)
(43.0)
Financial expenses
Other cash paid relating to
financing activities
Short-term loans
Non-current liabilities due
within one year
Long-term loans
Debentures payable
Impairment losses
Cash received from disposal of
investments
Net cash received from disposal of
fixed assets, intangible assets and
other long-term assets
Cash paid for acquisition of fixed
assets, intangible assets and other
long-term assets
9,967
(17,187)
(1,001)
(436)
31,196
69,490
39,625
19,157
(1,789)
35,996
44,692
17,450
61,576
31,951
(11,605)
56,546
10,968
(16,751)
(13,496)
52,040
(21,951)
(12,794)
9,816
(20,550)
(1,095.7) The impact of New Lease Standard
3,842.0
(30.2) Short-term loans repayment at maturity
298.2
Reclassification of items as some of the long-term loans
and debentures are about to due
(35.6)
(40.0)
(84.6) Decrease of impairment losses in current year
(36.3) Decrease of structured deposit
703
9,666
(8,963)
(92.7)
Relocation compensation entitled by subsidiaries last year not occurred
in current year
(141,142)
(103,014)
(38,128)
37.0
Increase of capital expenditure in natural gas pipelines and product
structure adjustment project
Cash paid for acquisition of
(16,334)
(39,666)
23,332
(58.8) Decrease of structured deposit
investments
Cash paid for dividends, profits
distribution or interest
(59,523)
(87,483)
27,960
(32.0) Decrease of dividend declared
4
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Principal Financial Data and IndicatorsPRINCIPAL FINANCIAL DATA AND INDICATORS (CONTINUED)
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 shareholders 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 shareholders of the Company
Net assets per share (RMB)
Adjusted net assets per share (RMB)
Unit: RMB million
For the year ended 31 December
2018
2017
2016
2015
2,891,179
82,264
99,110
61,618
0.509
0.509
9.25
8.59
1.453
2,360,193
71,470
86,697
51,244
0.423
0.423
8.26
7.06
1.577
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
Unit: RMB million
As of 31 December
2018
2017
2016
2015
1,088,188
60,978
170,675
139,251
717,284
5.924
5.741
1,066,455
50,397
163,168
126,770
726,120
5.997
5.868
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
2019
2,966,193
86,198
89,927
57,465
0.475
0.475
8.99
7.79
1.267
2019
1,309,215
130,518
302,862
137,685
738,150
6.097
5.947
3 MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER CASs AND IFRS PLEASE REFER TO PAGE 204 OF
THE REPORT.
5
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Principal Financial Data and Indicators 1 CHANGES IN THE SHARE CAPITAL
There is no change in the number and nature of shares of Sinopec Corp. during the reporting period
2 NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS
As of 31 December 2019, the total number of shareholders of Sinopec Corp. was 478,617 including 472,818 holders of A shares and 5,799 holders
of H shares. As of 29 February 2020, the total number of shareholders of Sinopec Corp. was 503,142. Sinopec Corp. has complied with requirement
for minimum public float under the Hong Kong Listing Rules.
(1) Shareholdings of top ten shareholders
The shareholdings of top ten shareholders as of 31 December 2019 are listed as below:
Name of shareholders
Nature of
Shareholders
Percentage of
shareholdings %
Total number of
shares held
China Petrochemical Corporation
HKSCC Nominees Limited2
中國證券金融股份有限公司
國新投資有限公司
北京誠通金控投資有限公司
香港中央結算有限公司
中央匯金資產管理有限責任公司
中國人壽保險股份有限公司 － 分紅 － 個人分紅 －005L－FH002滬
中國人壽保險股份有限公司 － 傳統 － 普通保險產品 －005L－CT001滬
匯添富基金管理股份有限公司 － 社保基金1103組合
State-owned Share
H Share
A Share
A Share
A Share
A Share
A Share
A Share
A Share
A Share
Note 1: As compared with the number of shares held as of 31 December 2018.
68.31
20.97
2.16
1.03
0.86
0.47
0.27
0.17
0.14
0.09
82,709,227,393
25,387,409,005
2,609,312,057
1,252,427,354
1,038,859,102
571,844,320
322,037,900
209,777,480
171,333,093
110,000,000
Number of
shares subject
to pledges or
lock-up
0
Unknown
0
0
0
0
0
0
0
0
Changes of
shareholding1
0
(3,251,433)
0
(750,400)
91,254,848
(449,937,840)
0
27,819,820
21,596,954
110,000,000
Note 2: Sinopec Century Bright Capital Investment Limited, an overseas wholly-owned subsidiary of China Petrochemical Corporation, held 553,150,000 H shares,
accounting for 0.46% of the total issued share capital of Sinopec Corp. Those shareholdings are included in the total number of the shares held by HKSCC
Nominees Limited.
Statement on the connected relationship or acting in concert among the above-mentioned shareholders:
Apart from 中國人壽保險股份有限公司 － 分紅 － 個人分紅 －005L－FH002滬and 中國人壽保險股份有限公司 － 傳統 － 普通保險產品 －005L－CT001滬
which were both managed by 中國人壽保險股份有限公司, Sinopec Corp. is not aware of any connected relationship or acting in concert among or
between the above-mentioned shareholders.
6
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Changes in Share Capital andShareholdings of Principal ShareholdersCHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF PRINCIPAL SHAREHOLDERS (2) Information disclosed by the shareholders of H shares in accordance with the Securities and Futures Ordinance (SFO) as of 31 December
2019
Name of shareholders
Status of shareholders
Number of shares interested
% of Sinopec Corp.’s issued
voting shares (H Share)
BlackRock, Inc.
Citigroup Inc.
GIC Private Limited
(L): Long position, (S): Short position
Interest of corporation controlled by
the substantial shareholder
Interest of corporation controlled by
the substantial shareholder
Approved lending agent
Investment manager
2,019,237,567 (L)
1,128,000 (S)
75,490,996 (L)
51,630,422 (S)
2,547,370,819 (L)
1,532,082,422 (L)
7.91 (L)
0.00 (S)
0.30 (L)
0.20 (S)
9.98 (L)
6.01 (L)
3
ISSUANCE AND LISTING OF SECURITIES
(1) Issuance of securities during the
reporting period
Not Applicable.
(2) Existing employee shares
Not Applicable.
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. Zhang Yuzhuo.
Through re-organization in 2000, China
Petrochemical Corporation injected its
principal petroleum and petrochemical
businesses into Sinopec Corp. and
(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
China Petrochemical
Corporation
68.77% *
Sinopec Corp.
*:
Inclusive of 553,150,000 H shares held by
Sinopec Century Bright Capital Investment
Ltd. (overseas wholly-owned subsidiary of
China Petrochemical Corporation) through
HKSCC Nominees Limited.
retained certain petrochemical facilities.
It provides well-drilling services,
well-logging services, downhole operation
services, services in connection with
manufacturing and maintenance of
production equipment, engineering
construction, and utility services including
water and power and social services.
Shares of other listed companies directly
held by China Petrochemical Corporation
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%
10,727,896,364
56.51%
351,351,000
58.74%
912,886,426
15.05%
Note: China Petrochemical Corporation holds
2,595,786,987 H shares of Sinopec Oilfield
Service Corporation (the “SSC”) through
Sinopec Century Bright Capital Investment
Ltd., a wholly-owned overseas subsidiary
of China Petrochemical Corporation,
accounting for 13.67% of the total share
capital of SSC. Such shareholdings are
excluded from the total shares of SSC
directly held by China Petrochemical
Corporation indicated above.
7
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Changes in Share Capital andShareholdings of Principal Shareholders
their duties and functions professionally,
making great contributions to our sustainable
development. The Company also revised and
improved its Articles of Association and other
governing documents, as well as implemented
effective risk control measures. Additionally, the
Company launched the Integrity Compliance
Management Manual in its continued effort to
further strengthen its compliance management
system. Further, the Company deepened
management system reforms and adjusted
internal departments in an orderly manner so
as to continuously improve our professional
management. We attached great importance to
shareholder returns, enhanced communications
with stakeholders, and protected investors’
interests in an effort to consistently increase
corporate transparency. Meanwhile, we strived
to transform the advantage of Party building
into our competitive business advantage through
effective integration of these two efforts.
The Company was awarded “Best Corporate
Governance for a Publicly Listed Company” by
the Golden Bauhinia Awards.
Quality improved in stable operation. We
maintained safe and stable production
operations, continued to deepen supply-side
structural reforms and sped up the construction
of key projects to ensure stable growth and
improve the quality of the industry chain. As
for the upstream business, greater efforts were
made in oil and gas exploration, achieving
satisfactory results in increasing reserves,
stabilizing oil production, increasing gas output,
and reducing costs. The domestic oil and gas
reserve replacement ratio reached 138.7%, and
market share of natural gas further increased.
The refining and marketing businesses navigated
through fierce market competition with product
portfolio better adapted to market demand.
Simultaneously, production and sales volume
increased, and the pace of construction of
comprehensive services and the application
of artificial intelligence at service stations was
accelerated. Underpinned by rapid growth of
the overall volume and strengthening structural
adjustment of the chemicals business,
development of high value-added synthetic
materials achieved remarkable progress. In
addition, we actively nurtured new businesses
and operations and provided new impetus for
transformation and upgrading. Furthermore,
we implemented innovation-driven development
strategies, built joint innovation platforms, and
achieved breakthroughs in major technologies
and a series of R&D projects. The evaluation of
the comprehensive advantages of our patents
also continued to be at the forefront of our
domestic enterprises’ efforts.
Corporate social responsibilities effectively
fulfilled. We took proactive measures to combat
climate change and implement green and
low-carbon development strategies, as well as
Dear Shareholders and Friends:
First, I would like to extend my sincere thanks
for the trust of our shareholders and support
of our directors, and for appointing me as
the Chairman of the Company. On behalf
of the Board of Directors, management and
our entire staff, I would like to express my
sincere gratitude to our shareholders and the
community for your interest and support.
In 2019, global economy slowdown while
China’s economy remained overall stable. With
international oil prices fluctuating within a
wide range and new production capacity for
refinery and petrochemicals being excessively
released, market competition increased
dramatically. As a result, the internal and
external risks and challenges faced by the
Company have increased significantly. In such
a complicated and difficult market, with focus
on both short and long-term goals in mind, the
Board of Directors adhered to the guideline of
pursuing progress while maintaining stability.
Furthermore, it concentrated on modernizing the
company’s corporate governance systems and
capabilities, and deepening reforms to sustain
continuous growth and development. Under
the management’s leadership, our employees
demonstrated dedication and a conscientious
and responsible work spirit, and implemented
all practices with discipline and in a professional
manner. Significantly, the Company achieved
better than expected operating results and made
new progress in all fronts as we continuously
deepened reform, exercised effective risk
management, stabilised growth, and adjusted
the operating structure while guaranteeing
safety.
Progress achieved and stability ensured. In
accordance with International Financial Reporting
Standards, our turnover and other operating
revenues grew by 2.6% year-on-year to RMB
2.97 trillion while operating profit grew by 4.8%
year-on-year to RMB 86.2 billion, and profit
attributable to shareholders of the Company
amounted to RMB 57.5 billion. The Company
remained in a solid financial position with stable
cash flow. In view of the Company’s funding
requirements, return on equity, profitability and
cash flow for future development, the Board of
Directors recommended the payment of a final
dividend of RMB 0.19 per share. Taking into
account the interim dividend of RMB 0.12 per
share, the total dividend for the year was RMB
0.31 per share, with a dividend payout ratio of
65.3%.
Corporate governance continuously improved.
The Board of Directors enhanced its scientific
approach to decision-making and optimised
development strategies and implementation
plans. The independent directors performed
8
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Chairman’s AddressCHAIRMAN’S ADDRESS business, the Company will closely monitor
market demand, optimize the system, promote
construction of advanced production capacity,
and fully develop the potential of the marketing
network and improve the quality of operations.
In terms of the chemicals business, the
Company will accelerate the supply of high-end
synthetic materials, develop a more competitive
and advantageous basic chemical product
chain and improve marketing services and
efficiency, by ways of focusing on technological
progress and extending the production chain,
etc.Additionally, the Company will accelerate
key research on core technologies, enhance the
capability of proprietary innovation, speed up
low-carbon transformation, and improve the
efficiency of energy conversion to reduce carbon
emissions, which we expect will give rise to a
core competency in green development. In 2020,
the planned capital expenditure of the Company
amounts to RMB 143.4 billion.
Only with great courage, ambition and
momentum can a company strive and thrive.
Sinopec Corp. is endowed with a complete
industrial chain, and its integrated competitive
advantages are clear, especially in the
Company’s strong market presence, branding,
capital resources, and human talent. I firmly
believe that with the concerted efforts of our
Board of Directors, management and entire
staff, as well as support from our shareholders
and the community, Sinopec Corp. will surely
develop in distinct ways that are more efficient
and of higher quality, which in turn will
create greater value for shareholders and the
community.
Zhang Yuzhuo
Chairman
Beijing, China
27 March 2020
strived to develop clean energy. Green enterprise
and energy efficiency upgrading campaigns were
undertaken to reduce greenhouse gas emissions
and protect the ecological environment
and biodiversity. We also took great care in
implementing our HSSE management system
that ensures safe production and occupational
health, and protects the physical and mental
health of all employees. We made greater
efforts to implement targeted poverty alleviation
and achieved fruitful results, including poverty
alleviation programs focused on industry,
education and consumption. To benefit as many
people as possible, we actively and consistently
participated in various social welfare initiatives.
In addition, we honored the traditional and
cultural characteristics of the communities where
we operate, and regularly promoted economic
development and environmental protection in the
communities around our projects. In so doing,
we fully demonstrated our commitment to being
a responsible global corporate citizen, which
received high recognition at home and abroad.
The hard-won achievements in 2019 were
attributed to the arduous efforts and altruistic
dedication of the Company’s Board of Directors,
the Board of Supervisors, the management
and the entire staff. Due to reassignment
and retirement, Mr. Dai Houliang, Mr. Li
Yunpeng, and Mr. Liu Zhongyun no longer hold
positions in the Company. During their tenure,
they worked diligently, fulfilled their duties
and contributed greatly to the Company. In
particular, Mr. Dai Houliang, former Chairman of
the Board, made outstanding contributions and
played an essential role in improving corporate
governance, advancing reforms and innovation,
and achieving sustainable growth. On behalf of
the Board of Directors, I would like to extend my
sincere gratitude to all of them!
At the beginning of 2020, the sudden outbreak
of coronavirus struck China and impacted
the global economy. Confronted with the
outbreak, President Xi Jinping attached great
importance to deploying relief actions by giving
overall instructions directly. In response to the
outbreak, the Company acted promptly and
proactively. While maintaining stable production
and operation, the Company gave full play to
its industrial advantages, exerted full force to
produce raw materials for medical and health
supplies, and cooperated with related enterprises
to produce medical supplies in urgent need,
including masks and protective suits for affected
areas. Moreover, with the advantages of our
sales network, the Company spared no effort
to guarantee the market supply of oil and gas,
innovate service models, and enable the public
to purchase articles for daily use conveniently,
thereby making our contribution to win the
battle against the virus.
Looking forward, the global economy will face
more instability and uncertainty brought by the
outbreak. Although the virus may temporarily
impact the Chinese economy, we firmly believe
that China’s solid economic fundamentals
will remain unchanged and the country’s
potential and momentum will remain strong.
A combination of preferential policies and
measures oriented to enterprises set out by the
Chinese government is supporting the rapid
recovery of the economy while reducing the
impact brought by the virus. We believe that as
the control and prevention of outbreak continues
to improve domestically, the domestic demand
for petroleum and petrochemical products that
was suppressed and frozen will rebound quickly.
Challenges always arise with opportunities. The
Company will continue to adhere to the overall
strategy of “making progress while maintaining
stability,” and to that end will implement new
development philosophies and energy security
strategies, as well as further strengthen
corporate governance. The Company will also
continue to focus on supply-side structural
reform. Exercising comprehensive and strict
governance over the Party, coupled with the
strategy of the Talent Empowering Enterprise
Scheme, the Company will continue to leverage
its advantages of integration, aiming to realize
a development pattern with energy resources
as the backbone, clean energy and synthetic
materials as two development wings, and new
energy, new economies, and new fields as
important growth points.
The Company will continue to deepen the
reform of its systems and mechanisms,
further improve its corporate governance
system and enhance governance capabilities.
With headquarters acting as the center of
restructuring, the Company will further advance
reforms of its management system and
market-oriented operation mechanism. It will
strengthen construction of its systems, improve
management, and better mobilize initiatives in
every aspect so as to constantly increase the
ability to create synergies, raise efficiency and
mitigate risks.
The Company will focus on promoting structural
adjustment and continuously improving its
core competence. In the upstream business,
the Company will implement the action plan of
vigorously enhancing oil and gas exploration
and development, focusing on high-quality
exploration and profit-driven production, and
further consolidating the oil and gas resource
base. In the meantime, the Company will adopt
an integrated approach to the clean and efficient
use of new energy, renewable energy and coal
resources, and promote diversification of the
energy mix. As for the refining and marketing
9
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Chairman’s Address 10
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS BUSINESS REVIEW
In 2019, the global economy slowed down
while China maintained an overall stable with
its gross domestic product (GDP) up by 6.1%.
International oil prices fluctuated in a wide
range while domestic market saw rapid growth
demand for natural gas and fierce competition
in oil products due to abundant supply, and
chemicals prices decreased. The Company
actively addressed market changes by pursuing
innovative, coordinated, green, open and shared
development. Through implementing specialised
development, market-oriented operation,
internalisation and overall coordination, we
pushed forward all aspects of our work, and
achieved solid operating results.
US$/barrel
100
80
60
40
20
0
WTI-NYMEX
ICE BRENT
DTD BRENT
DUBAI
1 MARKET REVIEW
(1) Crude Oil & Natural Gas Market
In 2019, international oil prices
fluctuated with a wide range. The
spot price of Platt’s Brent for the year
averaged USD 64.21 per barrel, down by
10.0%. Along with the changes in China’s
energy mix, domestic demand for natural
gas remained strong. Based on statistics
released by the NDRC, domestic apparent
consumption of natural gas reached
306.7 billion cubic meters, up by 9.4%
year on year.
01/2019
04/2019
07/2019
10/2019
01/2020
Trend of International Crude Oil Prices
(2) Refined Oil Products Market
(3) Chemical Products Market
In 2019, domestic demand for refined
oil products maintained its growth while
market supply was in surplus. According
to statistics released by the NDRC, the
apparent consumption of refined oil
products (including gasoline, diesel and
kerosene) was 330 million tonnes, up
by 1.4% from the previous year, with
gasoline up by 2.3%, kerosene up by
6.2% and diesel down by 0.5%. There
were 21 price adjustments for domestic
refined oil products throughout the year
with 15 increases and 6 decreases.
Domestic demand for chemicals kept
stable growth in 2019. Based on our
statistics, domestic consumption of
ethylene equivalent was 52.71 million
tonnes, up by 11.8% from the previous
year, and the apparent consumption
of synthetic resin, synthetic fibre and
synthetic rubber rose by 10.1%, 12.5%
and 3.6%, respectively. Average prices of
domestic chemical products decreased
by 12.6% year on year, and the average
margin of chemical products narrowed.
11
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS 2 PRODUCTION & OPERATIONS REVIEW
(1) Exploration and Production
In 2019, we implemented the action
plan of redoubling efforts in oil and gas
exploration and production, actively
pressed ahead with high-efficiency
exploration and profit-oriented
development, accelerated the
systematic integration of natural
gas production, supply, storage and
marketing, continuously reduced cost
and expenditure on all fronts, and
achieved tangible results in maintaining
oil production, increasing gas output
and cutting cost. We reinforced venture
exploration and preliminary exploration in
new areas which led to new discoveries
in Tarim, Sichuan and Erdos basins. The
Company’s newly added proved reserves
in China reached 587 million barrels
of oil equivalent, with domestic reserve
replacement ratio at 138.7%. In crude
oil development, we proceeded with the
capacity building in Shunbei oilfield,
strengthened profitable production
capacity of hard-to-recover reserves in
mature fields, intensified EOR technology
breakthrough and application, and
ensured steady production. In natural
gas development, we constantly pushed
forward capacity building in Fuling,
Weirong, and West Sichuan gas fields,
expanded the market and sales, and
promoted coordinated development
along the value chain. The Company’s
production of oil and gas reached 458.92
million barrels of oil equivalent, with
domestic crude production reaching
249.43 million barrels and natural gas
production totaling 1,047.78 billion cubic
feet, up by 7.2% year on year.
Summary of Operations for the Exploration and Production Segment
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
2019
458.92
284.22
249.43
34.79
1,047.78
2018
451.46
288.51
248.93
39.58
977.32
2017
448.79
293.66
248.88
44.78
912.50
Change from
2018 to 2019(%)
1.7
(1.5)
0.2
(12.1)
7.2
Crude oil reserves (mmbbls)
31 December 19
31 December 18
1,741
1,588
1,326
1,326
982
344
262
17
245
153
107
107
12
95
46
0
46
1,666
1,533
1,244
1,244
910
334
289
27
261
134
96
96
16
80
38
0
38
12
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS (CONTINUED) Items
Proved reserves
Proved developed reserves
China
Consolidated subsidiaries
Puguang
Fuling
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Proved undeveloped reserves
China
Consolidated subsidiaries
Fuling
Others
Exploration and Production Activities
Natural gas reserves (bcf)
31 December 19
31 December 18
6,807
5,835
5,822
5,822
1,904
1,149
2,769
13
0
13
972
972
972
195
777
7,225
6,035
6,026
6,026
1,814
1,315
2,897
9
0
9
1,190
1,190
1,190
65
1,125
2018
Wells drilled (as of 31 December)
2019
Exploratory
Development
Exploratory
Development
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Total
Productive
350
350
195
155
3
0
3
353
Dry
174
174
81
93
1
0
1
175
Productive
Dry
Productive
2,098
2,098
1,168
930
99
0
99
2,197
5
5
4
1
0
0
0
5
286
286
149
137
0
0
0
286
Dry
131
131
71
60
0
0
0
131
Productive
Dry
1,941
1,941
1,201
740
70
0
70
2,011
6
6
5
1
0
0
0
6
Wells drilling (as of 31 December)
2019
2018
Gross
Net
Gross
Net
Exploratory Development Exploratory Development Exploratory Development Exploratory Development
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Total
China
Consolidated subsidiaries
Shengli
Others
Overseas
Consolidated subsidiaries
Equity accounted entities
Total
117
117
60
57
0
0
0
117
177
177
20
157
0
0
0
177
117
117
60
57
0
0
0
117
176
176
20
156
0
0
0
176
69
69
25
44
0
0
0
69
277
277
72
205
10
0
10
287
69
69
25
44
0
0
0
69
Oil productive wells (as of 31 December)
2019
2018
Gross
52,112
52,112
33,819
18,293
7,248
28
7,220
59,360
Net
52,112
52,112
33,819
18,293
2,855
14
2,841
54,967
Gross
51,030
51,030
32,805
18,225
7,293
28
7,265
58,323
277
277
72
205
10
0
10
287
Net
51,030
51,030
32,805
18,225
3,939
14
3,925
54,969
13
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business 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 2019, with market-oriented approach,
we optimised product mix to produce
more gasoline and jet fuel, increased
production of high value-added products,
and lowered diesel-to-gasoline ratio
to 1.05. We optimised the production
plan for low sulfur fuel oil and reduced
cost. We leveraged our advantage in
Summary of Operations for the Refining Segment
Refinery throughput
Gasoline, diesel and kerosene production
Gasoline
Diesel
Kerosene
Light chemical feedstock production
Light product yield (%)
Refinery yield (%)
Natural gas productive wells (as of 31 December)
2019
2018
Gross
6,420
6,420
61
482
5,877
6,420
Net
6,378
6,378
61
482
5,835
6,378
Gross
5,068
5,068
58
368
4,642
5,068
Net
5,028
5,028
58
368
4,602
5,028
Unit: Square kilometers
Area under license (as of 31 December)
2019
472,017
472,017
38,697
33,467
5,230
2018
525,269
525,269
36,748
31,643
5,106
realised a growth momentum in high
grade lubricants and grease, LPG, asphalt
and sulphur. In 2019, the Company
processed 249 million tonnes of crude
oil, and produced 160 million tonnes of
refined oil products, up by 3.4%, with
gasoline and kerosene up by 2.6% and
7.8% respectively year on year.
production and sales, and moderately
increased export of oil products to keep
a relatively high utilization rate. We
promoted quality upgrading projects
and made structural adjustments,
comprehensively optimized production
and ensured safety and reliability of
the refining facilities. We improved the
marketing and distribution systems and
2019
248.52
159.99
62.77
66.06
31.16
39.78
76.38
94.98
2018
244.01
154.79
61.16
64.72
28.91
38.52
76.00
94.93
Unit: million tonnes
Change from
2018 to 2019 (%)
1.8
3.4
2.6
2.1
7.8
3.3
0.38 percentage points
0.05 percentage points
2017
238.50
150.67
57.03
66.76
26.88
38.60
75.85
94.88
Note: Includes 100% of the production from domestic joint ventures.
(3) Marketing and Distribution
In 2019, confronted with fierce market
competition, the Company brought our
advantages of integrated production
and marketing network into full play,
adhered to the guideline of “achieving
gains in both sales volume and profits”,
coordinated allocation of resources,
expanded sales and increased profit, and
achieved sustained growth in both total
sales volume and retail scale. With focus
on customer need, we adopted a flexible
and targeted marketing strategy, and
improved our services. We upgraded our
distribution network to further strengthen
our existing advantages. We accelerated
the construction and operation of CNG
stations and explored the development
of hydrogen fueling stations. Total sales
volume of refined oil products for the
year was 255 million tonnes, up by
7.3% year on year, of which domestic
sales volume accounted for 184 million
tonnes, up by 2.3%. Meanwhile, we
strengthened development and marketing
of company-owned brands, and promoted
the innovation of non-fuel business model
and its market-oriented reform, to speed
up the development of non-fuel business.
14
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS (CONTINUED) 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)
2019
254.95
184.45
122.54
61.91
3,992
2018
237.69
180.24
121.64
58.61
3,979
Change from
2017 2018 to 2019 (%)
231.21
177.76
121.56
56.20
3,969
7.3
2.3
0.7
5.6
0.3
Change from
the end of the
previous year to
the end of the
reporting period
(%)
31 December
2019
31 December
2018
31 December
2017
Total number of service stations under the Sinopec brand
Number of company-operated stations
30,702
30,696
30,661
30,655
30,633
30,627
0.1
0.1
Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume.
(4) Chemicals
In 2019, the Company followed the
development philosophy of “basic plus
high-end”, sped up advanced capacity
building, and optimised business portfolio
layout. We persistently fine-tuned
chemical feedstock mix to increase
the yield and lower cost. We optimised
products slate, enhanced integration
among production, marketing, R&D and
application, vigorously promoted the
development and application of new
products, and raised the proportion of
new and specialty products. We further
adjusted facility structures to enhance
the dynamic optimisation of facilities
and product chain, and improved the
utilisation based on market demand.
Ethylene production in 2019 reached
12.49 million tonnes, up by 8.5% year
on year. The differential ratio of synthetic
fiber reached 90%, and the ratio of
new and specialty products in synthetic
resin reached 65.3%. We also promoted
targeted marketing and service to further
expand our business, with total chemical
sales volume increased by 3.3% to 89.50
million tonnes, realising full sales.
Summary of Operations for the Chemicals Segment
Ethylene
Synthetic resin
Synthetic rubber
Synthetic fiber monomer and polymer
Synthetic fiber
Note: Includes 100% of the production of domestic joint ventures.
2019
12,493
17,244
1,047
10,029
1,289
2018
11,512
15,923
896
9,343
1,218
Unit: thousand tonnes
Change from
2017 2018 to 2019 (%)
11,610
15,938
848
9,439
1,220
8.5
8.3
16.9
7.3
5.8
(5) Research and Development
In 2019, with the emphasis on
innovation-driven strategy, the Company
accomplished notable results in
deepening reform of R&D mechanism,
promoting innovation platforms such as
joint R&D centers and incubators, and
making breakthrough in key and frontier
technologies. In upstream, research in
gas enrichment theory and exploration
technologies of marine phase medium
and large gas fields in Sichuan Basin
made headway, leading to breakthrough
in gas reserve. Our proprietary rotary
steering drilling system was successfully
applied in Shengli oilfield. In refining,
we developed various formulations
for low sulphur fuel oil and passed
engine tests and endurance tests. Our
high-grade gasoline and diesel engine oil
met the latest international standards
and realised industrial production
and commercialization. In chemicals,
the start-up of the second generation
high-efficiency and environment-friendly
aromatics facilities was successfully
started up. The anthraquinone method
of producing hydrogen peroxide
in fluidised-bed reactor and PPTA
technology realised industrialization.
In addition, the framework type code
of a novel structured zeolite SCM-15
synthesised by us has been approved by
the Structure Commission of International
Zeolite Association. In 2019, the
Company had 6,160 patent applications
at home and abroad, among which 4,076
were granted. We also won six second
prizes of National Sci-Tech Progress and
one second prize of National Technology
Invention, and one gold, three silver and
three excellent prizes of National Patent
Awards.
15
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and Prospects (6) Health, Safety, Security and Environment
In 2019, the Company constantly
promoted and fully implemented the
HSSE management system. We enhanced
overall health management, and
established safeguarding mechanism for
occupational, physical and psychological
health. We surveyed and rectified safety
hazards, took stringent measures to
control risks and supervise safety and
operations of contractors, and achieved
sound results. We upgraded our capacity
in all-dimension risk prevention and
control as well as emergency response,
further enhancing security management.
In 2019, we actively practiced green
and low-carbon growth strategy, further
promoted the green enterprise campaign
and ecological conservation, and
accomplished all emission reduction
targets. Compared with 2018, energy
consumption per 10,000 yuan of output
was down by 0.4%, industrial fresh
water usage was down by 1.1%, COD
of discharged water down by 2.1%,
and SO2 emissions down by 3.9%.
All solid waste was properly treated.
For more detailed information, please
refer to “Communication on Progress
for Sustainable Development 2019 of
Sinopec Corp.”
(7) Capital Expenditures
In 2019, focusing on quality and
profitability of investment, the Company
continuously optimised its capital
projects, with total capital expenditures
of RMB 147.1 billion. Capital expenditure
for the exploration and production
segment was RMB 61.7 billion, mainly
for Shengli and Northwest crude oil
development projects, Fuling and
Weirong shale gas projects, phase
I of Xinqi gas pipeline, phase I of
Erdos-Anping-Cangzhou gas pipeline,
Qingdao-Nanjing gas pipeline, Wen 23
and Jintan gas storage projects, as well
as overseas projects. Capital expenditure
for the refining segment was RMB 31.4
billion, mainly for Zhongke Refining
and Petrochemical project, Zhenhai,
Tianjin, Maoming and Luoyang refining
upgrading projects. Capital expenditure
for the marketing and distribution
segment was RMB 29.6 billion, mainly
for construction of service stations, oil
products depots, pipelines and non-fuel
business. Capital expenditure for the
chemicals segment was RMB 22.4 billion,
mainly for Zhongke, Zhenhai, Gulei and
Hainan projects, ethylene revamping for
Sinopec-SK and Sinopec-SABIC projects,
phase II of Hainan high-efficiency and
environment-friendly aromatics project,
Sinopec-SABIC polycarbonate project and
Zhongan coal chemical project. Capital
expenditure for corporate and others was
RMB 2 billion, mainly for R&D facilities
and information technology projects.
BUSINESS PROSPECTS
(1) Market Outlook
In 2020, despite the increasing instability
and uncertainty of the international
political and economic situation, and the
inevitable impact on China’s economy by
coronavirus outbreak in the short term,
we expect the fundamentals sustaining
sound economic growth in China
remain unchanged. Domestic demand
for energy and chemical products will
be relatively weak in the first half, but
the accumulated demand is expected
to be released rapidly after outbreak.
Considering oil-producing countries’
abundant supply capacity, global demand
growth, inventory levels, and geopolitics,
we expect that the international oil prices
will fluctuate at a low level.
(2) Operations
In 2020, adhering to the principles of
“reform, management, innovation, and
development”, the Company will focus on
optimisation of the entire business value
chain, as well as market expansion, risk
prevention, and seizing opportunities so
as to do our best to reduce the negative
impact of the coronavirus outbreak and
the slump of crude oil price, and strive to
achieve healthy business performance.
Due to the outbreak, the adjustment of
the Company’s production plan for 2020
is currently underway. We will confirm the
production plan according to the market
trends in the future.
Exploration and Production, under
the low oil price circumstance, we will
optimise projects implementation,
enhance high-quality exploration, and
reduce cost and expenditure to expand
resource base and realize sustainable
development. In crude oil development,
more efforts will be made in promoting
capacity building of Shunbei Oilfield,
Tahe Oilfield, and the Oilfield at the
western margin of the Junggar Basin,
and we will strengthen profit-oriented
development of mature fields. In natural
gas development, we will accelerate
capacity construction of key projects,
and promote integration of production,
supply, storage and marketing so as
to maximize the value of the business
chain. Preliminarily, we plan to keep a
stable production volume of curde oil and
realise a positive growth for nature gas.
Refining, under low oil price
circumstance, with the coordination of
production and sales, domestic and
overseas markets, the Company will
optimize utilization rate and production
16
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS (CONTINUED) with focuses on the production capacity
building of Shengli and Northwest
crude oil development projects, Fuling
and Weirong shale gas field, and the
construction of natural gas pipelines and
storage facilities as well as overseas oil
and gas projects. The refining segment
will account for RMB 22.4 billion, mainly
on the construction and commissioning
of the Zhongke project, and structural
adjustment projects of Zhenhai, Tianjin,
Maoming, Luoyang. RMB 22.0 billion is
budgeted for marketing and distribution
with emphasis on service stations,
depots and storage facilities for refined
oil products, pipelines and non-fuel
business. The share for chemicals will
be RMB 32.3 billion which will be used
on the construction of Zhongke, Zhenhai
and Gulei projects, ethylene revamping of
Sinopec-SK and Sinopec-SABIC projects,
Sinopec-SABIC polycarbonate project,
Jiujiang aromatics project and Zhong
An coal chemical project. The capital
expenditure for corporate and others
will be RMB 5.6 billion, mainly for R&D
facilities and information technology
projects.
scheduling, and promote efficient
operation of its refining business chain.
We will optimize the allocation of crude
oil, coordinate crude oil supply chain, and
reduce procurement costs. More efforts
will be made in restructuring product
slate, increasing products tailoring for
market demand and changes. We will
accelerate low-sulfur bunker fuel projects
and the revamping of storage and
transportation facilities to rapidly expand
market share.
Marketing and Distribution, balancing
volume and profit, and leveraging the
advantages of integration of production
and sales, the Company will continuously
improve the quality of its operations. We
will vigorously carry out targeted and
differentiated marketing to continuously
improve our services with focus on
customer need. We will accelerate the
construction of smart service stations,
coordinate the layout of natural gas and
hydrogen stations, and consolidate and
expand network advantages. More efforts
will be made in boosting innovation in
non-fuel business models, vigorously
developing proprietary brands, creating
differentiated competitive advantages,
so as to drive rapid growth in non-fuel
business.
Chemicals, the Company will focus on
the “basic + high-end” development
concept, speed up advanced capacity
building, continuously deepen
structural adjustment, and improve
our competitiveness and profitability.
We will optimize facilities and product
chain, and improve utilization rate and
production scheduling based on market
demand. Efforts will be made in adjusting
feedstock slate to improve product yield
and reduce cost. We will coordinate
production, marketing, research and
application, and redouble our efforts in
developing new products and increase
the production of high value-added
products. Meanwhile, we will improve
targeted marketing and services, enhance
e-commerce platforms, actively explore
overseas markets and continuously
expand market share.
Research and Development, we
will continue to implement the
innovation-driven development strategy,
deepen mechanism reform, accelerate
key technology breakthrough, improve
innovation capabilities to strive for
quality development. In oil and gas
exploration and development, we will
strive to make technology breakthrough
in ultra-deep oil and gas, tight oil and
gas, shale oil and gas, etc. In refining,
we will accelerate the research of heavy
oil processing, oil quality upgrading, and
promote the application of technologies
such as needle coke. In chemicals,
we will continuously improve the
package technologies of ethylene and
aromatics, strengthen the research and
development of photoelectric materials
and degradable materials, and accelerate
the industrialization of large-tow
high-performance carbon fibers. At the
same time, we will focus on advancing
research on cutting-edge technologies
and new areas to achieve future business
development through technology
innovation.
Capital Expenditures, Preliminary
capital expenditures for the year 2020
are budgeted at RMB 143.4 billion.
We will dynamically optimise capital
projects based on future market trends.
Preliminarily, RMB 61.1 billion will be
invested in exploration and production
17
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Business Review and Prospects 18
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY’S AUDITED FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES. PARTS OF THE
FOLLOWING FINANCIAL DATA WERE ABSTRACTED FROM THE COMPANY’S AUDITED FINANCIAL
STATEMENTS THAT HAVE BEEN PREPARED ACCORDING TO THE IFRS, UNLESS OTHERWISE STATED.
THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED TAX.
1 CONSOLIDATED RESULTS OF OPERATIONS
In 2019, the Company’s turnover and other operating revenues was RMB 2,966.2 billion, increased by 2.6% compared with that of 2018. The
operating profit was RMB 86.2 billion, representing a year on year increase of 4.8%.
The following table sets forth the main revenue and expenses from the Company’s consolidated financial statements:
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, net
Operating profit
Net finance costs
Investment income and share of profits less losses from associates and joint ventures
Profit before taxation
Income tax expense
Profit for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
(1) Turnover and other operating revenues
Year ended 31 December
2019
RMB million
2018
RMB million
Change (%)
2,966,193
2,900,488
65,705
(2,879,995)
(2,380,907)
(55,313)
(108,812)
(10,510)
(81,482)
(242,535)
(436)
86,198
(9,967)
13,696
89,927
(17,894)
72,033
2,891,179
2,825,613
65,566
(2,808,915)
(2,292,983)
(65,642)
(109,967)
(10,744)
(77,721)
(246,498)
(5,360)
82,264
1,001
15,845
99,110
(20,213)
78,897
57,465
14,568
61,618
17,279
2.6
2.6
0.2
2.5
3.8
(15.7)
(1.1)
(2.2)
4.8
(1.6)
(91.9)
4.8
—
(13.6)
(9.3)
(11.5)
(8.7)
(6.7)
(15.7)
In 2019, the Company’s turnover was RMB 2,900.5 billion, representing an increase of 2.6% over 2018. This was mainly attributed to expansion
of business scale and trading volume.
The following table sets forth the external sales volume, average realised prices and respective rates of change of the Company’s major products
in 2019 and 2018:
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
2019
6,034
27,073
92,233
87,083
27,041
41,022
14,019
16,103
1,370
1,280
924
2018
Change (%)
6,595
24,197
88,057
84,630
25,787
40,520
11,127
14,433
1,314
1,114
794
(8.5)
11.9
4.7
2.9
4.9
1.2
26.0
11.6
4.3
14.9
16.4
2019
3,000
1,562
7,387
5,811
4,298
4,578
5,714
7,717
8,438
9,583
2,110
2018
Change (%)
3,100
1,400
7,870
5,996
4,562
5,488
6,971
8,634
9,712
10,619
2,096
(3.2)
11.6
(6.1)
(3.1)
(5.8)
(16.6)
(18.0)
(10.6)
(13.1)
(9.8)
0.7
19
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND 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 2019,
the turnover from crude oil, natural
gas and other upstream products sold
externally amounted to RMB 111.1
billion, an increase of 18.8% over 2018.
The change was mainly due to increases
in natural gas sales volume and prices
as the result of promoting natural gas
production-supply-storage-sale system,
and actively expanding market share.
In 2019, petroleum products (mainly
consisting of refined oil products and
other refined petroleum products) sold
by Refining Segment and Marketing and
Distribution Segment achieved external
sales revenues of RMB 1,535.2 billion
(accounting for 51.8% of the Company’s
turnover and other operating revenues),
representing a decrease of 1.5% over
2018, mainly due to the decrease in
petroleum products’ prices. The sales
revenue of gasoline, diesel and kerosene
was RMB 1,303.6 billion, representing
a decrease of 1.1% over 2018, and
accounting for 85% of the total sales
revenue of petroleum products. Turnover
of other refined petroleum products
was RMB 231.6 billion, representing a
decrease of 3.4% compared with 2018,
accounting for 15% of the total sales
revenue of petroleum products.
The Company’s external sales revenue
of chemical products was RMB 425.5
billion, representing a decrease of 7%
over 2018, accounting for 14.3% of
the Company’s total turnover and other
operating revenues. This was mainly
due to the decrease in price of chemical
products, which resulting from the
increase of supply in chemical market.
(2) Operating expenses
In 2019, the Company’s operating
expenses was RMB 2,880 billion,
increased by 2.5% compared with 2018.
The operating expenses mainly consisted
of the following:
Purchased crude oil, products and
operating supplies and expenses was
RMB 2,380.9 billion, representing an
increase of 3.8% over the same period of
2018, accounting for 82.7% of the total
operating expenses, of which:
Crude oil purchasing expenses was RMB
681.2 billion, representing a decrease
of 2.9% over the same period of 2018.
Throughput of crude oil purchased
externally in 2019 was 228.74 million
tonnes (excluding the volume processed
for third parties), representing an
increase of 0.7% over the same period
of 2018. The average cost of crude oil
purchased externally was RMB 3,326 per
tonne, representing a decrease by 3.6%
over 2018.
The Company’s purchasing expenses
of refined oil products was RMB 364.9
billion, representing an increase of 2.6%
over the same period of 2018.
The Company’s purchasing expense
related to trading activities was RMB
738.3 billion, representing an increase of
12.6% over the same period of 2018.
The Company’s other purchasing
expenses was RMB 596.5 billion,
representing an increase of 2.7% over
the same period of 2018.
Selling, general and administrative
expenses was RMB 55.3 billion,
representing a decrease of 15.7%
over 2018. This was mainly because
the company significantly reduced
non-operating costs, and adjusted
accounting of some of the gas station,
land and other rental expenses to
depreciation and interests expense as
required by the New Leasing Rules.
Depreciation, depletion and amortisation
was RMB 108.8 billion, representing a
decrease of 1.1% compared with 2018.
That was mainly due to the depletion of
oil and gas assets decreased as a result
of the Company’s proved reserves of
crude oil and natural gas increased.
Exploration expenses was RMB 10.5
billion, representing a decrease of 2.2%
year on year.
Personnel expenses was RMB 81.5
billion, representing an increase of 4.8%
over 2018.
Taxes other than income tax was RMB
242.5 billion, representing a decrease
of 1.6% compared with 2018. That
was mainly due to the decrease of
RMB 3.2 billion in urban maintenance
and construction tax and education
surcharges resulting from the decrease of
value added tax rate.
Other operating expense, net was RMB
440 million.
(3) Operating profit was RMB 86.2 billion,
representing an increase of 4.8%
compared with 2018. That was mainly
due to a significant increase of profit in
upstream business.
(4) Profit before taxation was RMB 89.9
billion, representing a decrease of 9.3%
compared with 2018. That was mainly
because the margin of major refining
products shrank.
(5) Income tax expense was RMB 17.9
billion, representing a decrease of 11.5%
year on year.
(6) Profit attributable to non-controlling
interests was RMB 14.6 billion,
representing a decrease of RMB 2.7
billion compared with 2018.
(7) Profit attributable to shareholders of
the Company was RMB 57.5 billion,
representing a decrease of 6.7% year on
year.
20
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) 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
2018
RMB million RMB million
2019
121,379
89,315
210,712
104,237
95,954
200,191
147,138
1,077,018
1,224,156
154,319
1,109,088
1,263,407
1,426,804
4,159
1,430,963
1,441,413
5,224
1,446,637
440,369
54,856
495,234
472,898
73,835
546,733
830,485
654,337
1,484,822
4,845,887
(1,879,694)
2,966,193
718,312
650,271
1,368,583
4,825,551
(1,934,372)
2,891,179
As a percentage of
consolidated operating
revenue before elimination
of inter-segment sales
Year ended 31 December
2018
(%)
2019
(%)
As a percentage of
consolidated operating
revenue after elimination
of inter-segment sales
Year ended 31 December
2018
(%)
2019
(%)
2.5
1.8
4.3
3.0
22.4
25.4
29.4
0.1
29.5
9.1
1.1
10.2
17.1
13.5
30.6
100.0
2.2
2.0
4.2
3.2
22.9
26.1
29.9
0.1
30.0
9.8
1.5
11.3
14.9
13.5
28.4
100.0
4.1
3.6
5.0
5.3
48.1
49.9
14.8
16.4
28.0
24.8
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
Turnover and other operating revenues
*: Other operating revenues are included.
21
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’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 2019 compared to 2018.
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
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 2019, the operating revenues of
this segment was RMB 210.7 billion,
representing an increase of 5.3% over
2018. This was mainly attributed to the
rise of realised price and sales volume in
natural gas as a result of the expansion
of natural gas business.
In 2019, the segment sold 34.35 million
tonnes of crude oil, representing a
decrease of 1.3% over 2018. Natural
gas sales volume was 28.78 billion cubic
meters (bcm), representing an increase
of 9.7% over 2018. Regasified LNG sales
volume was 11.16 bcm, representing
an increase of 33.9% over 2018. LNG
sales volume was 4.74 million tonnes,
representing an increase of 65.9% over
2018. Average realised prices of crude
oil, natural gas, Regasified LNG, and LNG
were RMB 2,862 per tonne, RMB 1,566
per thousand cubic meters, RMB 2,040
per thousand cubic meters, and RMB
3,305 per tonne, representing decrease
of 6.0%, increase of 11.1%, 5.5%, and
decrease of 12.6% respectively over
2018.
22
Year ended 31 December
2019
RMB million
2018
RMB million
Change
(%)
210,712
201,428
9,284
1,224,156
1,193,524
30,632
1,430,963
1,401,856
29,107
495,234
478,083
17,151
1,484,822
1,484,758
64
(40)
200,191
210,298
(10,107)
1,263,407
1,208,580
54,827
1,446,637
1,423,173
23,464
546,733
519,726
27,007
1,368,583
1,377,876
(9,293)
(3,634)
5.3
(4.2)
–
(3.1)
(1.2)
(44.1)
(1.1)
(1.5)
24.0
(9.4)
(8.0)
(36.5)
8.5
7.8
—
—
In 2019, the operating expenses of
this segment was RMB 201.4 billion,
representing a decrease of 4.2% over
2018. That was mainly due to the
following:
(cid:127) Depreciation, depletion and
amortisation decreased by RMB 9.6
billion year on year;
(cid:127) Payment of land use right and
community services expenses
decreased by RMB 5.7 billion year on
year;
(cid:127)
Impairment losses on long-lived
assets decreased by RMB 4.3 billion
year on year;
(cid:127) Resource Tax and special oil income
levy decreased by RMB 2.0 billion
year on year;
(cid:127) Procurement cost increased by RMB
10.6 billion year on year, as a result
of expansion of LNG business scale;
(cid:127) Personnel expenses increased by RMB
1.7 billion year on year.
In 2019, the oil and gas lifting cost was
RMB 782 per tonne, representing a year
on year decrease of 1.8%.
In 2019, the operating profit of the
exploration and production segment
was RMB 9.3 billion, representing an
increase of RMB 19.4 billion compared
with 2018. The segment reinforced
efficient exploration and profit-oriented
development, enhanced stable production
of crude oil, accelerated construction of
natural gas production-supply-storage-sale
system and actively expanding market and
promoting sales, strengthened cost control,
and effectively improved profitability.
(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 2019, the operating revenues of
this segment was RMB 1,224.2 billion,
representing a decrease of 3.1% over
2018. This was mainly attributed to the
decrease in products prices compared
with the same period of last year.
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)
The following table sets forth the sales volumes, average realised prices and the respective changes of the Company’s major refined oil products
of the segment in 2019 and 2018.
Gasoline
Diesel
Kerosene
Chemical feedstock
Other refined petroleum products
In 2019, sales revenues of gasoline
was RMB 428.7 billion, representing a
decrease of 2.9% over 2018.
The sales revenues of diesel was RMB
347.8 billion, representing a decrease of
3.7% over 2018.
The sales revenues of kerosene was RMB
101.6 billion, representing an increase of
0.4% over 2018.
The sales revenues of chemical feedstock
was RMB 140.2 billion, representing a
decrease of 6.9% over 2018.
The sales revenues of refined petroleum
products other than gasoline, diesel,
kerosene and chemical feedstock was
RMB 200.3 billion, representing a
decrease of 1.6% over 2018.
In 2019, the segment’s operating
expenses was RMB 1,193.5 billion,
representing a decrease of 1.2% over
2018. This was mainly attributed to the
decrease in procurement cost of crude
oil.
Sales Volume (thousand tonnes)
Average realised price (RMB/tonne)
Year ended 31 December
Year ended 31 December
2019
60,750
63,509
23,890
39,720
61,890
2018 Change (%)
59,746
62,676
22,418
38,524
61,439
1.7
1.3
6.6
3.1
0.7
2019
7,057
5,477
4,252
3,531
3,237
2018 Change (%)
7,386
5,766
4,515
3,910
3,312
(4.5)
(5.0)
(5.8)
(9.7)
(2.3)
In 2019, the average processing cost
for crude oil was RMB 3,403 per tonne,
representing a decrease of 4.1% over
2018. Total crude oil processed was
252.5 million tonnes (excluding volume
processed for third parties), representing
an increase of 1.7% over 2018. The total
cost of crude oil processed was RMB
859.3 billion, representing a decrease of
2.4% over 2018.
In 2019, refining gross margin was RMB
366 per tonne, decreased by RMB 96 per
tonne representing a reduction of 20.8%
compared with 2018. This is mainly due
to the fluctuation of price spread between
heavy and light crude oil, increase of
freight and insurance costs for overseas
shipments, as well as the narrowed gross
margin of refined petroleum products
other than gasoline, diesel and kerosene.
In 2019, the unit refining cash operating
cost (defined as operating expenses
less the processing cost of crude oil
and refining feedstock, depreciation and
amortisation, taxes other than income
tax and other operating expenses, then
divided by the throughput of crude oil
and refining feedstock) was RMB 178 per
tonne, a decrease of 1.4% over 2018.
In 2019, the operating profit of the
segment totaled RMB 30.6 billion,
representing a decline of RMB 24.2
billion compared with 2018.
(3) Marketing and Distribution Segment
The business activities of the marketing
and distribution segment include
purchasing refined oil products from
the refining segment and third parties,
conducting wholesale and direct sales
to domestic customers and distributing
oil products through the segment’s retail
and distribution network, as well as
providing related services.
In 2019, the operating revenues of
this segment was RMB 1,431 billion,
representing a decrease of 1.1% over
2018, of which: the sales revenues of
gasoline totaled RMB 681.5 billion,
representing a decrease of 1.7%
compared with 2018; the sales revenues
of diesel was RMB 507.5 billion,
representing a decrease of 0.3% over
2018, and the sales revenues of kerosene
was RMB 116.3 billion, representing a
decrease of 1.1% over 2018.
The following table sets forth the sales volumes, average realised prices, and the respective percentage changes of the segment’s four major
refined oil products in 2019 and 2018, including breakdown in retail, direct sales and wholesale of gasoline and diesel:
Gasoline
Retail
Direct sales and wholesale
Diesel
Retail
Direct sales and wholesale
Kerosene
Fuel
Sales Volume (Thousand tonnes)
Average realised price (RMB/tonne)
Year ended 31 December
Year ended 31 December
2019
92,261
66,440
25,820
87,335
43,503
43,832
27,068
21,772
2018 Change (%)
88,076
66,855
21,221
84,865
43,327
41,537
25,787
23,372
4.8
(0.6)
21.7
2.9
0.4
5.5
5.0
(6.8)
2019
7,387
7,968
5,892
5,812
6,227
5,399
4,297
3,072
2018 Change (%)
7,870
8,296
6,524
5,998
6,435
5,541
4,562
2,974
(6.1)
(4.0)
(9.7)
(3.1)
(3.2)
(2.6)
(5.8)
3.3
23
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand Analysis In 2019, the operating expenses of
the segment was RMB 1,401.9 billion,
representing a decrease of RMB 21.3
billion or 1.5% as compared with that
of 2018. This was mainly due to the
decrease in refined oil products procured
price which resulting in the decrease of
procurement cost for RMB 22 billion.
In 2019, the segment’s marketing cash
operating cost (defined as the operating
expenses less purchase costs, taxes
other than income tax, depreciation
and amortisation, and then divided by
the sales volume) was RMB 183 per
tonne, representing a decrease of 11.9%
compared with that of 2018. This was
mainly due to the adjusted accounting of
some of the gas station, land and other
right of use assets as required by the
New Leasing Rules.
In 2019, the segment exerted advantages
of integrated business and distribution
network into full play, reinforced the
coordination of internal and external
resources, promoted targeted marketing
and differentiated marketing to improve
service quality, and constantly increased
profits and sales volume. Meanwhile, we
enhanced the development and sales of
company-owned brand and put efforts
to expand non-fuel business scale and
profitability.
In 2019, the operating profit of
this segment was RMB 29.1 billion,
representing an increase of 24%
compared with 2018.
(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.
In 2019, the operating revenue of the
chemicals segment was RMB 495.2
billion, representing a decrease of 9.4%
as compared with that of 2018. This was
mainly due to sharp decrease in prices
of chemical products as a result of the
concentrated release of new capacity,
as well as the change of supply-demand
structure.
The sales revenues generated by the
segment’s six major categories of
chemical products (namely basic organic
chemicals, synthetic resin, synthetic fibre
monomer and polymer, synthetic fibre,
synthetic rubber, and chemical fertiliser)
totaled RMB 465.9 billion, representing
a decrease of 9.7% as compared with
2018, and accounted for 94.1% of the
operating revenues of the segment.
The following table sets forth the sales volume, average realised prices and respective percentage changes of each of the segment’s six major
categories of chemical products in 2019 and 2018.
Basic organic chemicals
Synthetic fibre monomer and polymer
Synthetic resin
Synthetic fibre
Synthetic rubber
Chemical fertiliser
In 2019, the operating expenses of the
chemicals segment was RMB 478.1
billion, representing a decrease of
8.0% over 2018, mainly because of
the decrease in the price of externally
procured raw materials as compared with
the same period in 2018.
In 2019, confronted with the business
cycle correction and decreased
chemical margin, the Company
strengthened the coordination among
research, development, production and
marketing, continuously reinforced the
profit prediction based on the market,
optimised the structures of feedstock,
product and facilities, intensified
Sales Volume (Thousand tonnes)
Average realised price (RMB/tonne)
Year ended 31 December
Year ended 31 December
2019
52,007
14,089
16,131
1,370
1,284
925
2018 Change (%)
52,450
11,252
15,325
1,314
1,278
796
(0.8)
25.2
5.3
4.3
0.5
16.2
2019
4,518
5,722
7,718
8,438
9,595
2,109
2018 Change (%)
5,281
6,978
8,646
9,712
10,750
2,093
(14.4)
(18.0)
(10.7)
(13.1)
(10.7)
0.8
allocation of resources, pushed ahead
with targeted marketing and precise
service strategy, and achieved steadily
growing sales volume of petrochemicals.
The operating profit of this segment was
RMB 17.2 billion
(5) Corporate and Others
The business activities of corporate
and others mainly consist of import
and export business activities of the
Company’s subsidiaries, R&D activities of
the Company, and managerial activities
of headquarters.
In 2019, the operating revenues
generated from corporate and others
was RMB 1,484.8 billion, representing
an increase of 8.5% over 2018. This
was mainly attributed to the increase
in value of trade from crude oil and
overseas refined oil products, as well as
the rapid growth of the equipment and
petrochemicals business transaction
scale through Epec platform.
In 2019, the operating expenses of
corporate and others was RMB 1,484.7
billion, representing an increase of 7.8%
over 2018.
In 2019, the operating profit from
corporate and others was RMB 0.1
billion.
24
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) 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 shareholders of the Company
Share capital
Reserves
Non-controlling interests
Total equity
As of 31 December 2019, the Company’s
total assets was RMB 1,755.1 billion,
representing an increase of RMB 162.8
billion compared with that of the end of
2018, of which:
Current assets was RMB 445.9 billion,
representing a decrease of RMB 58.3
billion compared with that of the end
of 2018, mainly because the cash and
cash equivalents decreased by RMB
51.6 billion, financial assets at fair value
through profit or loss decreased by
RMB 20.8 billion, accounts receivable
and bills receivable decreased by RMB
10.0 billion, and the time deposits with
financial institution increased by RMB
12.5 billion, inventories and other current
assets increased by RMB 11.7 billion.
Non-current assets was RMB 1,309.2
billion, representing an increase of RMB
221.0 billion as compared with that of
the end of 2018. This was mainly due to
the right-of-use assets increased by 267.9
As of
31 December
2019
As of
31 December
2018
1,755,071
445,856
1,309,215
879,236
576,374
302,862
738,150
121,071
617,079
137,685
875,835
1,592,308
504,120
1,088,188
735,773
565,098
170,675
717,284
121,071
596,213
139,251
856,535
Unit: RMB million
Change
162,763
(58,264)
221,027
143,463
11,276
132,187
20,866
0
20,866
(1,566)
19,300
and the lease prepayments decreased
by RMB 64.5 billion in accordance with
New Leasing Rules, construction in
progress and net value of property, plant
and equipment increased by RMB 41.2
billion, equity of associates and joint
ventures increased by RMB 6.2 billion,
and deferred tax assets decreased by
RMB 4.1 billion.
The Company’s total liabilities was RMB
879.2 billion, representing an increase of
RMB 143.5 billion compared with that of
the end of 2018, of which:
Current liabilities was RMB 576.4 billion,
representing an increase of RMB 11.3
billion as compared with that of the end
of 2018. This was mainly due to the
short-term debts and borrowings from
Sinopec Group increased by RMB 22.7
billion, lease liabilities increased by
RMB 15.2 billion, accounts payable, bills
payable and liabilities from contracts
increased by RMB 9.0 billion, and
derivative financial liabilities decreased
by RMB 10.8 billion, other payables
decreased by RMB 21.3 billion.
Non-current liabilities was RMB 302.9
billion, representing an increase of RMB
132.2 billion compared with that of the
end of 2018. This was mainly due to
lease liabilities increased by RMB 177.7
billion in accordance with New Leasing
Rules, long-term debts and borrowings
from Sinopec Group decreased by RMB
34.7 billion, and other non-current assets
decreased by RMB 12.0 billion.
Total equity attributable to owners of
the Company was RMB 738.2 billion,
representing an increase of RMB 20.9
billion compared with that of the end
of 2018, which was mainly due to the
capital reserve increased by RMB 20.9
billion.
25
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand Analysis (2) Cash Flow
The following table sets forth the major items in the consolidated cash flow statements for 2019 and 2018.
Major items of cash flows
Net cash generated from operating activities
Net cash used in investing activities
Net cash used in financing activities
In 2019, the net cash generated from
operating activities of the company
was RMB 153.4 billion, representing
a decrease of RMB 22.4 billion as
compared with 2018. Of which: profit
before taxation decreased by RMB 9.2
billion, loss from assets impairment
decreased by RMB 9.8 billion,
depreciation, depletion & amortization
and amortization for dry wells write-off
decreased by RMB 2.2 billion, interest
expenses increased by RMB 9.7 billion,
exchange rate and derivatives financial
instruments loss/(gain) increased by 5.5
billion, net change of accounts receivable
and other current assets decreased
by RMB 10.8 billion, net change of
inventory decreased by RMB 60.0 billion,
net change of accounts payable and
other current liabilities decreased by
RMB 17.3 billion, and the paid income
tax decreased by RMB 13.6 billion as
compared with 2018.
In 2019, the net cash used in investing
activities was RMB 120.5 billion,
representing an increase of cash outflow
of RMB 54.0 billion over 2018. Of
which: capital expenditure and wildcat
expenditure increased by RMB 38.1
billion, purchasing investment and
associates and joint ventures investments
decreased by RMB 6.6 billion, cash
inflow from changes of financial assets
which are measured at fair value through
profit or loss decreased by RMB 3.0
billion, outcome from time deposit with
maturities over three months increased
by RMB 9.2 billion.
In 2019, the net cash used in the
Company’s financing activities was RMB
84.7 billion, representing a decrease
of cash outflow by RMB 26.5 billion
over 2018. This was mainly due to the
cash out flow from the changes of loans
increased to RMB 13.2 billion, cash paid
for dividends decrease the expenditure by
RMB 21.8 billion, subsidiary companies
allocated to non-controlling shareholders
reduced expenses by 6.3 billion yuan,
investments from non-controlling
shareholders increased by RMB 2.0
billion, and repayment for lease liabilities
increased by RMB 16.8 billion.
At the end of 2019, the cash and cash
equivalents was RMB 60.3 billion.
(3) Contingent Liabilities
Please refer to “Material Guarantee
Contracts and Their Performances” in the
“Significant Events” section of this report.
Unit: RMB million
Year ended 31 December
2019
153,420
(120,463)
(84,713)
2018
175,868
(66,422)
(111,260)
(4) Capital Expenditures
Please refer to “Capital Expenditures”
in the “Business Review and Prospects”
section of this report.
(5) Research & development and
environmental expenditures
R&D expenditures occurred in the period
including R&D expenses, expenditures
for wildcat exploration, seismic data
interpretation, and pilot demonstration
project in upstream, expenditures for
pilot test and relevant utilities of initial
commercial trial in refining segment,
as well as expenditures for research
equipment. In 2019, the expenditures for
R&D was RMB 15.539 billion, of which
expense was RMB 9.395 billion, and
capitalised cost was RMB 6.144 billion.
Environmental expenditures refer to
the normal routine pollutant discharge
fees paid by the Company, excluding
capitalised cost of pollutant treatment
properties. In 2019, the Company paid
environmental expenditures of RMB 9.235
billion.
(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.
26
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) Items relevant to measurement of main fair values
Unit: RMB million
Items
Available for sale financial assets
Structured Deposit
Stock
Derivative financial instruments
Cash flow hedges
Other equity instruments investment
Total
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
215
187
28
(4,384)
(222)
0
(4,391)
0
0
0
0
5,258
(38)
5,220
0
0
0
0
0
0
0
Funding
source
Self-owned fund
Self-owned fund
Self-owned fund
–
–
–
–
Beginning
of the year
End of
the year
25,732
25,550
182
1,584
(7,268)
1,450
21,498
3,319
3,318
1
48
(1,940)
1,521
2,948
4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER CASS
The major differences between the Company’s financial statements prepared under CASs and IFRS are set out in Section C of the financial
statements of the Company on page 204 of this report.
(1) Under CASs, 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 profit/(loss)
Exploration and Production Segment
Refining Segment
Marketing and Distribution Segment
Chemicals Segment
Corporate and Others
Elimination of inter-segment sales
Financial expenses, investment income, gains/(losses) from changes in fair value, asset disposal
expense and other income
Consolidated operating profit
Net profit attributable to equity shareholders of the Company
Year ended 31 December
2019
RMB million
2018
RMB million
210,712
1,224,156
1,430,963
495,234
1,484,822
(1,879,694)
2,966,193
6,289
30,074
29,781
16,586
3,530
(40)
3,805
90,025
57,591
200,191
1,263,407
1,446,637
546,733
1,368,583
(1,934,372)
2,891,179
(11,557)
53,703
24,106
25,970
(8,151)
(3,634)
21,037
101,474
63,089
Operating profit: In 2019, the operating profit of the Company was RMB 90.0 billion, representing a decrease of RMB 11.4 billion as compared
with 2018.
Net profit: In 2019, the net profit attributable to the equity shareholders of the Company was RMB 57.6 billion, representing a decrease of RMB
5.5 billion or 8.7% compared with 2018.
27
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand Analysis
(2) Financial data prepared under CASs
Total assets
Non-current liabilities
Shareholders’ equity
As of 31
December 2019
RMB million
As of 31
December 2018
RMB million
1,755,071
301,792
876,905
1,592,308
169,551
857,659
Change
162,763
132,241
19,246
At the end of 2019, the Company’s total assets was RMB 1,755.1 billion, representing an increase of RMB 162.8 billion compared with that of
the end of 2018.
At the end of 2019, the Company’s non-current liabilities was RMB 301.8 billion, representing an increase of RMB 132.2 billion compared with
that of the end of 2018.
At the end of 2019, the shareholders’ equity of the Company was RMB 876.9 billion, representing an increase of RMB 19.2 billion compared
with that of the end of 2018.
(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
210,712
1,224,156
1,430,963
495,234
1,484,822
(1,879,694)
2,966,193
Operation cost
RMB million
Gross profit
margin* (%)
168,548
943,484
1,333,672
453,951
1,468,851
(1,879,654)
2,488,852
15.5
4.3
6.6
8.0
1.1
N/A
7.9
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 (%)
5.3
(3.1)
(1.1)
(9.4)
8.5
N/A
2.6
1.9
(1.0)
(1.6)
(7.9)
7.6
N/A
3.7
3.9
(2.1)
0.5
(1.4)
0.9
N/A
(0.5)
*: Gross profit margin = (operation income – operation cost, tax and surcharges)/operation income.
28
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) 5 THE CAUSE AND IMPACT OF THE CHANGE IN THE COMPANY’S ACCOUNTING POLICY
Please refer to the note 3(26) in the financial statement complying with the PRC Accounting Standards for Business Enterprises (CASs) and the note
1 in the financial statement complying with the IFRS.
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.
29
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand Analysis 30
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant EventsSIGNIFICANT EVENTS 1 MAJOR PROJECTS
(1) Zhongke integrated refining and
chemical project
Zhongke integrated refining and
petrochemical project mainly consists
of a 10,000,000 tpa refinery project,
800,000 tpa ethylene unit, 300,000
tonne capacity jetty and relevant
utilities project. It achieved mechanical
completion on 28 December 2019. The
Company’s self-owned fund accounts for
30% of the project investment, bank loan
is the main source of the remaining 70%.
As of 31 December 2019, the aggregate
investment was RMB 30.3 billion.
(2) Zhenhai Refining & Chemical expansion
project
Zhenhai Refining & Chemical expansion
project consists of 15,000,000 tpa
refinery project and 1,200,000 tpa
ethylene project. The project was
approved in June 2018, ethylene and
relevant projects started at the end
of October 2018 and is expected to
achieve the mechanical completion
in December 2021. The Company’s
self-owned fund accounts for 30% of
the project investment, bank loan is the
main source of the remaining 70%. As
of 31 December 2019, the aggregate
investment was RMB 3.1 billion.
(3) Hainan Refining and Chemical expansion
project
Hainan Refining and Chemical expansion
project consists of 5,000,000 tpa refinery
project and 1,000,000 tpa ethylene
project, among which second set of
high-efficiency and environment-friendly
aromatics project started in August 2017
and was put into operation in September
2019. The Company’s self-owned fund
accounts for approximately 30% of the
project investment and bank loan is the
main source of the remaining 70%. As
of 31 December 2019, the aggregate
investment was RMB 5.6 billion.
(4) Wuhan de-bottleneck project
Wuhan de-bottleneck project mainly
consists of an 800,000 tpa-to-1,100,000
tpa ethylene capacity expansion project.
The project started at the end of October
2018 and is expected to achieve the
mechanical completion in December
2020. The Company’s self-owned fund
accounts for approximately 30% of the
project investment and bank loan is the
main source of the remaining 70%. As
of 31 December 2019, the aggregate
investment was RMB 2.5 billion.
(5) Weirong shale gas project
Under the guidance of “overall
deployment, stage-wise implementation
and fully consideration”, the building of
first phase of production capacity, which
is 1 billion cubic meters per year, was
promoted comprehensively since August
2018. It is expected to be completed and
put into operation in December 2020.
The Company’s self-owned fund accounts
for 30% of the project investment and
bank loan is the main source of the
remaining 70%. As of 31 December
2019, the aggregate investment was RMB
2.3 billion.
(6) Xinqi pipeline project
The main project of the first phase
of Xinqi pipeline project was the
construction of the pipeline from
Qianjiang to Shaoguan. The total length
of the pipeline is 839.5 kilometers with
a designed transmission capacity of
6 billion cubic meters per year. It is
expected to be completed and put into
operation in July 2020. The Company’s
self-owned fund accounts for 38% of the
project investment and bank loan is the
main source of the remaining 62%. As
of 31 December 2019, the aggregate
investment was RMB 8.0 billion.
(7) Erdos-Anping-Cangzhou gas pipeline
project
The first phase of E-An-Cang gas pipeline
project mainly consists of the main
pipeline from Luquan to Cangzhou
and two branch pipelines Puyang and
Baoding. The total length of the pipeline
is 736 kilometers with a designed
transmission capacity of 9 billion cubic
meters per year. It was completed and
put into operation in September 2019.
The Company’s self-owned fund accounts
for 30% of the project investment and
bank loan is the main source of the
remaining 70%. As of 31 December
2019, the aggregate investment was RMB
6.4 billion.
(8) Wen 23 gas storage project
The first phase of Wen 23 gas
storage project mainly consists of the
construction of injection and production
wells and surface facilities with storage
capacity of 8.431 billion cubic meters.
The gas storage is expected to be
officially put into operation in July 2020.
The Company’s self-owned fund accounts
for 30% of the project investment and
bank loan is the main source of the
remaining 70%. As of 31 December
2019, the aggregate investment was RMB
12.1 billion.
31
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant 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
9
9
4.05
Sinopec Corp
2015 Corporate bond (first issue)
15石化02
136040
19 November 2015
19 November 2020
4
4
3.70
Sinopec Corp.
2012 Corporate bond
12石化02
122150
1 June 2012
1 June 2022
7
7
4.90
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.
15石化02 was publicly offered to qualified investors in accordance with Administration of the Issuance and Trading
of Corporate Bonds.
Shanghai Stock Exchange
China International Capital Corporation Limited
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 as disclosed. All
the proceeds have been completely used.
During the reporting period, United Credit Ratings Co., Ltd. provided credit rating for 10石化02, 12石化02 and 15石
化02 and reaffirmed AAA credit rating in the continuing credit rating report. The long term credit rating of Sinopec
Corp. remained AAA with its outlook being stable. Pursuant to relevant regulations, Sinopec Corp. has published
latest credit rating results through media designated by regulators within six months commencing from the end date
of the reporting period.
During the reporting period, there is no arrangement to credit addition mechanism and change of the repayment
for the above-mentioned corporate bonds. Sinopec Corp. strictly followed the provisions in the corporate bond
prospectus to repay interests of the corporate bonds to bondholders.
The guarantee of 10石化02 and 12石化02 is China Petrochemical Corporation. For more information of the
guarantor, please refer to the annual report of corporate bonds which will be published in April 2020 on website of
Shanghai Stock Exchange by China Petrochemical Corporation.
During the reporting period, the bondholders’ meeting was not 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 fulfil obligations as described in the corporate bond prospectus and exercised
its duty to protect the bondholders’ legitimate rights and interests. The bond trustee will disclose the Trustee
Management Affairs Report after the announcement of annual report. The full disclosure is available on the website
of Shanghai Stock Exchange (http://www.sse.com.cn).
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 exchange
Corporate bonds trustee
Credit rating agency
Use of proceeds
Credit rating
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
32
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant EventsSIGNIFICANT EVENTS (CONTINUED)
Principal accounting data and financial indicators for the two years ended 31 December 2019
Principal data
EBITDA (RMB million)
Current ratio
Quick ratio
Liability-to-asset ratio (%)
EBITDA to total debt ratio
Interest coverage ratio
Cash flow interest coverage ratio
EBITDA-to-interest coverage ratio
Loan repayment rate (%)
Interest payment rate (%)
2019
2018
Change
Reasons for change
214,413
216,352
(1,939) Mainly due to the decrease of earnings compared
0.77
0.44
50.04
1.25
6.42
29.07
12.92
100
100
0.89
0.57
46.14
1.33
16.76
35.92
33.93
100
100
with last year
(0.12) Mainly due to the decrease of current asset
(0.13) Mainly due to the increase of inventories
Due to the impact of New Lease Standard
3.9
percentage
points
(0.08) Due to the decrease of EBITDA
(10.34) Due to the impact of New Lease Standard
(6.85) Due to the impact of New Lease Standard
(21.01) Due to the increase of interest expense as a result of
New Lease Standard
–
–
During the reporting period, the Company
paid in full the interest accrued for the other
bonds and debt financing instruments. As
at 31 December 2019, the standby credit
line provided by several domestic financial
institutions to the Company was RMB 379.6
billion in total, facilitating the Company
to get such amount of unsecured loans.
The Company has fulfilled all the relevant
undertakings in the offering circular of
corporate bonds and had no significant
matters which could influence the Company’s
operation and debt paying ability.
On 18 April 2013, Sinopec Capital
(2013) Limited, a wholly-owned overseas
subsidiary of Sinopec Corp., issued senior
notes guaranteed by the Company with
four different maturities, 3 years, 5 years,
10 years and 30 years. The 3-year notes
principal totaled USD 750 million, with an
annual interest rate of 1.250% and had
been repaid and delisted; the 5-year notes
principal totaled USD 1 billion, with an
annual interest rate of 1.875% and had
been repaid and delisted; the 10-year notes
principal totaled USD 1.25 billion, with an
annual interest rate of 3.125%; and the
30-year notes principal totaled USD 500
million, with an annual interest rate of
4.250%. These notes were listed on the Hong
Kong Stock Exchange on 25 April 2013, with
interest payable semi-annually. The first
payment of interest was made on 24 October
2013. During the reporting period, the
Company has paid in full the current-period
interests of all notes with maturity of 10
years and 30 years.
3 SHARE OPTION INCENTIVE SCHEME OF
SINOPEC CORP.’S SUBSIDIARY, SINOPEC
SHANGHAI PETROCHEMICAL COMPANY
LIMITED (SHANGHAI PETRO), DURING THE
REPORTING PERIOD
The Share Option Incentive Scheme
of Shanghai Petro took effect from 23
December 2014, with a validity period of
10 years until 22 December 2024. The first
grant of Shanghai Petro’s A-share share
options under the Share Option Incentive
Scheme was on 6 January 2015. For details,
please refer to the relevant announcements
uploaded on the websites of Shanghai Stock
Exchange, Hong Kong Stock Exchange and
Shanghai Petro on 6 January 2015. All
the exercise periods of the first grant have
ended on 28 December 2018. For details,
please refer to the relevant announcements
uploaded on the websites of Shanghai Stock
Exchange, Hong Kong Stock Exchange and
Shanghai Petro on 28 December 2018.
At present, Shanghai Petro has no other
granting scheme.
During the reporting period, Shanghai Petro
did not grant A-share share options under
the Share Option Incentive Scheme, nor
did the grantees exercise any A-share share
options, and no A-share share options were
cancelled or lapsed.
33
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant Events
Whether bears
deadline or not
Whether strictly
performed or not
No
Yes
Yes
Yes
4 PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION
Background
Type of
Undertaking
Party
Contents
Term for performance
Undertakings related to Initial
Public Offerings (IPOs)
IPOs
China Petrochemical
Corporation
Other undertakings
Other
China Petrochemical
Corporation
1
2
3
4
5
6
From 22 June 2001
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.
Within 10 years after 29 April 2014
or the date when China Petrochemical
Corporation acquires the assets
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.
34
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant EventsSIGNIFICANT EVENTS (CONTINUED)
As of the date of this report, Sinopec Corp.
had no undertakings in respect of financial
performance, asset injections or asset
restructuring that had not been fulfilled, nor
did Sinopec Corp. make any profit forecast
in relation to any asset or project.
5 CAPITAL INCREASE AND ASSETS
TRANSFER TO SINOPEC-SK (WUHAN)
PETROCHEMICAL CO., LTD. (SINOPEC-SK)
On 29 April 2019, Sinopec Corp. entered into
the Sinopec-SK Capital Increase Agreement
with Sinopec Group Asset Management Co.,
Ltd. (Sinopec Asset), SK GLOBAL CHEMICAL
CO., LTD. (SKGC) and Sinopec-SK, jointly,
to agree upon the Capital Increase in
Sinopec-SK. Pursuant to the Sinopec-SK
Capital Increase Agreement, (i) Sinopec
Corp. shall contribute the Capital Increase
Assets of Sinopec equivalent to RMB 549.0
million to Sinopec-SK, of which to subscribe
for the newly increased registered capital
of Sinopec-SK of RMB 168.37 million and
the remaining part shall be included in the
capital reserve of Sinopec-SK, (ii) Sinopec
Asset shall contribute the Capital Increase
Assets of Sinopec Asset equivalent to RMB
1.5022 billion to Sinopec-SK, of which to
subscribe for the newly increased registered
capital of Sinopec-SK of RMB 431.58 million
and the remaining part shall be included in
the capital reserve of Sinopec-SK, and (iii)
SKGC shall contribute cash in RMB 1.1045
billion or equivalent USD to Sinopec-SK, of
which to subscribe for the newly increased
registered capital of Sinopec-SK of RMB
323.05 million and the remaining part
shall be included in the capital reserve of
Sinopec-SK. Upon completion of the Capital
Increase, Sinopec Corp.’s shareholding in
Sinopec-SK reduced from 65% to 59%,
Sinopec Asset’s shareholding increased
from 0% to 6% and SKGC’s shareholding
remained unchanged at 35%. On the same
date, Sinopec Corp. entered into the Asset
Transfer Agreement with Sinopec-SK.
The Capital Increase will help reduce the
connected transactions between Sinopec
Corp. and China Petrochemical Corporation
and further improve the integrated operation
level of Sinopec Corp., so as to enhance the
comprehensive competitiveness of Sinopec
Corp. in its business locations, the overall
capability of risk resistance and expand its
regional influence. The Sinopec-SK Capital
Increase and the Asset Transfer were
completed on 8 July 2019.
As Sinopec Asset is a subsidiary of the
controlling shareholder of Sinopec Corp.,
China Petrochemical Corporation, pursuant
to Chapter 14A of the Hong Kong Listing
Rules, Sinopec Asset is an associate of
China Petrochemical Corporation and thus
constitutes a connected person of Sinopec
Corp. As the Capital Increase constitutes
deemed disposal of Sinopec Corp. under
Rule 14.29 of the Hong Kong Listing Rules,
accordingly, the Capital Increase constitutes
a connected transaction of Sinopec Corp.
under Chapter 14A of the Hong Kong Listing
Rules. As the highest applicable percentage
ratio in respect of the Capital Increase
exceeds 0.1% but is less than 5%, the
Capital Increase is subject to the reporting
and announcement requirements, but
exempt from the independent shareholders’
approval requirement under Chapter
14A of the Hong Kong Listing Rules. As
Sinopec-SK is a subsidiary of Sinopec
Corp., the Asset Transfer did not constitute
a connected transaction of Sinopec Corp.
under Chapter 14A of the Hong Kong
Listing Rules. In addition, as the highest
applicable percentage ratio in respect of
the Asset Transfer was less than 5%, it did
not constitute a notifiable transaction under
Chapter 14 of the Hong Kong Listing Rules.
For details, please refer to the
announcements published by Sinopec
Corp. in China Securities Journal, Shanghai
Securities News and, Securities Times, and
on the website of Shanghai Stock Exchange
on 30 April 2019 and 9 July 2019, and on
the website of Hong Kong Stock Exchange on
29 April 2019 and on 8 July 2019.
6 SIGNIFICANT EQUITY INVESTMENT
During the reporting period, there is no
significant equity investment made by the
Company.
7 SIGNIFICANT ASSETS AND EQUITY SALE
During the reporting period, there is no
significant assets or equity sale of the
Company.
35
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant Events 8 MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE
Unit: RMB million
Major external guarantees (excluding guarantees for controlled subsidiaries)
Guarantor
Sinopec Corp.
Relationship
with the
Company
Name of
guaranteed
company
The listed
company itself
Zhongtian Hechuang
Energy Co., Ltd
Amount
10,140
Transaction date
(date of signing)
25-May-16
Sinopec Corp.
The listed
company itself
Zhong An United Coal
Chemical Co., Ltd.
7,100
18-Apr-18
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)
Period of guarantee
Type
25 May 2016 -31
December 2023 (the
mature date is estimated)
18 April 2018-31
December 2031
Joint liability
guarantee
Joint liability
guarantee
Whether
completed
or not
Whether
overdue
or not
Amount of
overdue
guarantee
Counter-
guaranteed
No
No
No
No
–
–
No
No
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 Rules Governing the Listing of Stocks on Shanghai Stock Exchange.
Whether
guaranteed
for
connected
parties yes
or no)*1
Yes
No
None
17,240
None
12,157
29,397
3.98%
None
None
None
None
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 2019Significant EventsSIGNIFICANT EVENTS (CONTINUED)
9 SPECIFIC STATEMENTS AND
We hereby present the following opinions:
12 OTHER MATERIAL CONTRACTS
INDEPENDENT OPINIONS FROM
INDEPENDENT NON-EXECUTIVE
DIRECTORS REGARDING EXTERNAL
GUARANTEES PROVIDED BY THE COMPANY
DURING AND BY THE END OF 2019:
We, as independent directors of Sinopec
Corp., hereby make the following statements
after conducting a thorough check of external
guarantees provided by the Company
accumulated up to and during 2019 in
accordance with the requirements of the
domestic regulatory authorities:
The external guarantees prior to 2019 had
been disclosed in previous annual report.
The aggregate balance of external guarantees
provided by Sinopec Corp. for the year
2019 was RMB 29.4 billion, accounting for
approximately 3.98% of the Company’s net
assets.
Sinopec Corp. shall continue to strengthen
its management and actively monitor
guarantee risks. It shall strictly follow the
approval and disclosure procedures in
relation to guarantee businesses for any new
external guarantees provided thereafter.
10 SIGNIFICANT LITIGATION, ARBITRATION
RELATING TO THE COMPANY
No significant litigation, arbitration relating
to the Company occurred during the
reporting period.
11 INSOLVENCY AND RESTRUCTURING
During the reporting period, the Company
was not involved in any insolvency or
restructuring matters.
Saved as disclosed by Sinopec Corp., the
Company did not enter into any material
contracts subject to disclosure obligations
during the reporting period.
13 CREDIBILITY FOR THE COMPANY,
CONTROLLING SHAREHOLDERS AND DE
FACTO CONTROLLER
During the reporting period, the Company
and its controlling shareholder did not have
any unperformed court’s effective judgments
which should be performed or any large
amount of debt which should be repaid.
14 TRUSTEESHIP, CONTRACTING AND LEASES
During the reporting period, the Company
was not involved in any events relating to
significant trusteeship, contracting or leases
for the assets of any other company, nor has
it placed its assets with any other company
under a trusteeship, contracting or lease
agreement subject to disclosure obligations.
37
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant 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 as
the Finance Company) and to ensure the
safety and liquidity of the deposits of the
Company at the Finance Company, Sinopec
Corp. and the Finance Company formulated
the Risk Control System on Connected
Transactions between China Petroleum &
Chemical Corporation and Sinopec Finance
Co., Ltd., which covers the risk control
system and the risk management plan of the
Company to prevent financial risks and to
ensure that the deposits of the Company at
the Finance Company can be utilised at the
Company’s discretion. At the same time, as
the controlling shareholder of the Finance
Company, China Petrochemical Corporation
undertakes that in case of an emergency
when the Finance Company has difficulty
in making payments, China Petrochemical
Corporation will increase the capital of
the Finance Company in accordance with
the actual need for the purpose of making
payment.
In order to regulate connected transactions
between the Company and Sinopec Century
Bright Capital Investment, Ltd. (Sinopec
Corp.’s overseas settlement center,
hereinafter referred at the Century Bright
Company), Century Bright Company ensures
the safety of the deposits of the Company at
Century Bright Company by strengthening
internal risk controls and obtaining support
from China Petrochemical Corporation.
China Petrochemical Corporation has
formulated a number of internal rules,
including the Rules for the Internal Control
System, the Rules for Implementation of
Overseas Capital Management Methods, and
the Provisional Methods for Overseas Fund
Platform Management, to impose strict rules
on Century Bright Company for providing
overseas financial services. Century Bright
Company has also established the Rules for
the Implementation of the Internal Control
System, which ensures the standardisation
and safety of its corporate deposits business.
At the same time, as the wholly controlling
shareholder of Century Bright Company,
China Petrochemical Corporation entered
into a keep-well agreement with Century
Bright Company in 2013, in which China
Petrochemical Corporation undertakes that
when Century Bright Company has difficulty
in making payments, China Petrochemical
Corporation will ensure that Century Bright
Company will fulfill its repayment obligation
through various channels.
The deposits of the Company at the Finance
Company and Century Bright Company
during the reporting period did not exceed
the relevant caps as approved at the general
meeting of Sinopec Corp. During daily
operations, the Company can withdraw the
full amount of its deposits at the Finance
Company and Century Bright Company.
16 APPROPRIATION OF NON-OPERATIONAL
FUNDS BY THE CONTROLLING
SHAREHOLDER AND ITS RELATED PARTIES
AND THE PROGRESS FOR CLEARING UP
Not applicable
17 STRUCTURED ENTITY CONTROLLED BY
THE COMPANY
None
18 DETAILED IMPLEMENTATION OF THE
SHARE INCENTIVE SCHEME DURING THE
REPORTING PERIOD
Sinopec Corp. did not implement any share
incentive scheme during the reporting period.
19 ENVIRONMENTAL PROTECTION
SOLUTIONS OF COMPANIES AND THEIR
SUBSIDIARIES AS MAJOR POLLUTANT
DISCHARGING COMPANIES RECOGNISED
BY ENVIRONMENTAL PROTECTION
DEPARTMENTS
In 2019, certain subsidiaries of Sinopec
Corp. which are listed as major pollutant
discharge units have disclosed environmental
information as required by the relevant
authorities and local government. The
details of such information was published
on national pollutant discharge license
management information platform (http://
permit.mee.gov.cn/permitExt/defaults/
default-index!getInformation.action) and the
local government website. Sinopec Corp. built
prevention and control facilities for sewage,
flue gas, solid waste and noise in accordance
with the requirements of the national and
local pollution prevention and environmental
protection standards, kept effective and
stable operation of pollution prevention and
control facilities, and realised standardised
discharges and emissions of sewage, flue
gas, solid waste and factory noise. For
details, please refer to the Company’s
Communication on Progress for Sustainable
Development. The Company further
regulated environmental management of
construction projects, enhanced assessment,
and implemented “three-simultaneity”
management (environmental facilities shall
be designed, constructed and put into
operation simultaneously with the main
construction). All of the newly-built projects
have been obtained approvals from the
environment authorities. Sinopec Corp.
strictly complies with relevant national
requirements on environment emergency
plan management and continuously improves
the emergency plans for environmental
emergencies and heavy pollution weather.
According to the national pollution permit
and self-monitoring technology guidelines in
relevant industries, we acquired discharge
permit and modified the self-monitoring plan,
implemented new national requirements of
sewage, flue gas and noise monitory, and
disclosed the environmental results. For other
subsidiaries that are not listed as major
pollutant discharge units, the Company also
completed relevant environmental protection
formalities in accordance with the national
and local requirements, and implemented
relevant environmental protection
measures. According to the requirements of
national and local ecological environment
departments, these companies do not need
to disclose relevant information.
20 POVERTY ALLEVIATION PROGRAM
LAUNCHED BY THE COMPANY
(1) Targeted Poverty Alleviation Plan
The Company actively fulfilled our social
responsibilities and strictly followed
the fundamental principles of poverty
alleviation and elimination. Combining
with practical situation, we focused
on poverty alleviation in terms of
industry, consumption, employment and
education, so as to ensure to stably lift
poor household out of poverty, increase
income of poor household and orderly
carry out rural revival strategy.
(2) Overview on 2019 Targeted Poverty
Alleviations
In 2019, the Company invested nearly
RMB 0.19 billion in Targeted Poverty
Alleviation, including RMB 0.12
billion invested in 53 targeted poverty
alleviation programs in Yingshang
county, Yuexi county, Fenghuang county,
Luxi county, Yuepuhu county and
Dongxiang county, mainly including rural
industry development, village tourism
development, labor output trainings and
education assistance.
38
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant EventsSIGNIFICANT EVENTS (CONTINUED) (3) 2019 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
187.44
1.76
31,003
√□ 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
3.2 Input in relocation
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 poverty-stricken 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
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
9.4 Other
274
96.20
41,698
2.65
3,015
10,990
243
4.35
2.19
1,955
23.48
2.76
√□ Conduct ecological protection and construction
√□ Develop ways for ecological protection and compensation
√□ Set up ecological public welfare positions
√□ Others
0.23
0.59
433
0.50
141
123.59
0.60
137
54.49
7,152
(4) Subsequent targeted poverty alleviation plan
In 2020, the Company will further strengthen poverty alleviation key-problem tackling work, continue to carry on targeted poverty alleviation
and targeted lifting of poor people out of poverty. The Company will focus on poverty alleviation in terms of consumption, education, industry,
employment to overcome the bastion of deep poverty and maintain a stable achievement. The Company will strengthen the supervision of
projects and funds, enhance risks and source management, and constantly improve the level of work, to ensure that the actual results of winning
the fight against poverty.
21 OTHER EVENTS
Sinopec Corp. published voluntary announcement and progress update announcements in relation to China International United Petroleum and
Chemical Company Limited. For details, please refer to the announcements published in China Securities Journal, Shanghai Securities News,
Securities Times and the website of the Shanghai Stock Exchange on 28 December 2018, 5 January 2019 and 26 January 2019 and on the website
of Hong Kong Stock Exchange on 27 December 2018, 4 January 2019 and 25 January 2019.
Sinopec Corp. published indicative announcement on the restructuring of oil and gas pipeline network assets. For details, please refer to the
announcements published in China Securities Journal, Shanghai Securities News, Securities Times and the website of the Shanghai Stock Exchange
on 11 December 2019 and on the website of Hong Kong Stock Exchange on 10 December 2019.
39
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Significant 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 auxiliary services to the Company
(Cultural, Educational, Hygiene and
Auxiliary Services Agreement)
(4) China Petrochemical Corporation will
provide leasing services for lands and
certain properties to the Company
(5) China Petrochemical Corporation will
provide comprehensive insurance to the
Company
(6) China Petrochemical Corporation will
provide shareholders’ loans to the
Company; and
(7) The Company will provide franchise
licenses for service stations to China
Petrochemical Corporation.
On 24 August 2018, Sinopec Corp. and
China Petrochemical Corporation entered into
a supplemental agreement of the continuing
connected transactions and the Land Use
Rights Leasing Agreement Amendment
Memo, pursuant to which the scope of
services of the Mutual Supply Agreement
and the Cultural, Educational, Hygienic
and Auxiliary Services Agreement were
adjusted and the term of the Mutual Supply
Agreement and the Cultural, Educational,
Hygienic and Auxiliary Services Agreement
was extended from 1 January 2019 to 31
December 2021; the term of the Properties
Leasing Agreement was extended to 31
December 2021 and the term of Intellectual
Property Licensing Agreements was extended
to 31 December 2029. The area and rent
in the Land Use Rights Leasing Agreement
were also adjusted. The resolution relating
to continuing connected transactions for
the three years from 2019 to 2021 was
approved at the first extraordinary general
meeting of Sinopec Corp. for 2018 held on
23 October 2018. For details of the above
continuing connected transactions, please
refer to relevant announcements published
on 27 August 2018 in the China Securities
Journal, the Shanghai Securities News and
the Securities Times and on the website of
the Shanghai Stock Exchange and on the
website of the Hong Kong Stock Exchange
dated 26 August 2018. The capitalised terms
used in this section shall have the same
meaning as that used in the above-mentioned
announcements.
2 COMPLIANCE OF DISCLOSURE AND
APPROVALS OF CONTINUING CONNECTED
TRANSACTIONS BETWEEN THE COMPANY
AND SINOPEC GROUP WITH HONG KONG
LISTING RULES AND THE SHANGHAI
LISTING RULES
Pursuant to the Hong Kong Listing Rules and
the Shanghai Listing Rules, the continuing
connected transactions between the
Company and Sinopec Group are subject
to disclosure, independent non-executive
directors’ approval and/or independent
shareholders’ approval (if needed) based on
the nature and the value of the transactions.
Sinopec Corp. has fully complied with
the above requirements in relation to the
continuing connected transaction between
the Company and Sinopec Group.
The aggregated amount of the continuing
connected transactions for 2019 of the
Company is in compliance with the relevant
requirements of the Hong Kong Listing
Rules and the Shanghai Listing Rules. For
performance details of connected transaction
agreements, please refer to Item 3 below.
3 ACTUAL CONTINUING CONNECTED
TRANSACTIONS ENTERED INTO BY THE
COMPANY DURING THE YEAR
Pursuant to the above-mentioned agreements
on continuing connected transactions,
the aggregate amount of the continuing
connected transactions of the Company
during the reporting period was RMB
447.608 billion. Among which, purchases
expenses amounted to RMB 286.769 billion,
representing 9.45% of the total amount of
this type of transaction for the reporting
period, including purchases of products
and services (procurement, storage and
transportation, exploration and development
services, and production-related services) of
RMB 270.499 billion, purchases of auxiliary
and community services of RMB 3.097
billion, payment of property rent of RMB 509
million, payment of land use right of RMB
11.330 billion, and the interest expenses
amounted to RMB 1.334 billion. The sales
income amounted to RMB 160.839 billion,
representing 5.17% of the total amount of
this type of transaction for the reporting
period, including RMB 159.681 billion for
sales of products and services, RMB 92
million for agency commission income, and
RMB 1,066 million for interest income.
The amounts of the above continuing
connected transactions between the
Company and Sinopec Group did not
exceed the relevant caps for the continuing
connected transactions as approved by the
general meeting of shareholders and the
Board.
40
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Connected TransactionsCONNECTED TRANSACTIONS Principle of pricing for the continuing
connected transactions:
(a) The government-prescribed price will
apply;
(b) where there is no government-prescribed
price but where there is a
government-guidance price, the
government-guidance price will apply;
(c) where there is neither a
government-prescribed price nor a
government-guidance price, the market
price will apply; or
(d) where none of the above is applicable,
the price for the provision of the products
or services is to be agreed between
the relevant parties, which shall be the
reasonable cost incurred in providing the
same plus 6% or less of such cost.
For details of the pricing principle, please
refer to relevant announcements published
on 27 August 2018 in the China Securities
Journal, the Shanghai Securities News and
the Securities Times and on the website of
the Shanghai Stock Exchange and on the
website of the Hong Kong Stock Exchange on
26 August 2018.
Decision-making procedures:
The continuing connected transaction
agreements were entered into in the ordinary
course of the Company’s business and in
accordance with normal commercial terms
that are fair and reasonable to the Company
and its shareholders. The Company,
according to its internal control procedures,
adjusts the scope and the relevant caps
of continuing connected transactions
every three years, and will announce and
implement upon the approval of the Board
and/or independent shareholders. For the
other connected transactions, Sinopec
Corp., in strict compliance with domestic
and overseas regulatory rules, will publish
the announcement and implement the
transactions only after submitting the
relevant proposals of connected transactions
to the Board and/or the general meeting of
shareholders for consideration and approval
according to internal control procedures.
Related party transactions with the Sinopec
Group that occurred during the year, as set
out in Note 38 to the financial statements
prepared under the IFRS in this annual
report, also fall under the definition of
connected transactions under Chapter 14A of
the Hong Kong Listing Rules.
The above-mentioned connected transactions
between the Company and Sinopec Group
in 2019 were approved at the 12th meeting
of the seventh session of the Board and
have complied with the requirements under
Chapter 14A of the Hong Kong Listing Rules.
The external auditor of Sinopec Corp.
was engaged to report on the Company’s
continuing connected transactions in
accordance with the Hong Kong Standard on
Assurance Engagements 3000, Assurance
Engagement Other Than Audits or Reviews
of Historical Financial Information, and with
reference to Practice Note 740, Auditor’s
Letter on Continuing Connected Transactions
under the Hong Kong Listing Rules, issued
by the Hong Kong Institute of Certified Public
Accountants. The auditor has issued its
unqualified letter containing its conclusions
in respect of the above-mentioned continuing
connected transactions in accordance with
Rule 14A.56 of the Hong Kong Listing Rules.
Sinopec Corp. has submitted a copy of the
auditor’s letter to the Hong Kong Stock
Exchange.
After reviewing the above-mentioned
connected transactions, the independent
non-executive directors of Sinopec Corp.
have confirmed the following:
(a) The transactions have been conducted
in the ordinary course of the Company’s
business;
(b) The transactions have been entered into
based on either of the following terms:
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; and
(c) The transactions were conducted
pursuant to the terms of relevant
agreements, and the terms were fair
and reasonable and in the interests of
Sinopec Corp. and its shareholders as a
whole.
4 OTHER SIGNIFICANT CONNECTED
TRANSACTIONS OCCURED THIS YEAR
For details, please refer to item 5
“Capital Increase and Assets Transfer to
SIONOPEC-SK (Wuhan) Petrochemical Co.,
Ltd. (SINOPEC-SK)” in section “Significant
Events”.
5 FUNDS PROVIDED BETWEEN RELATED PARTIES
Related Parties
Sinopec Group
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
29,415
(18,648)
10,767
30,232
(14,496)
15,736
1,431
30,846
307
(18,341)
1,738
12,505
333
30,565
59
(14,437)
392
16,128
Loans and other accounts receivable and payable
No material negative impact
41
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Connected Transactions
42
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate GovernanceCORPORATE GOVERNANCE 1
IMPROVEMENTS IN CORPORATE
GOVERNANCE DURING THE REPORTING
PERIOD
During the reporting period, Sinopec
Corp. committed itself to comply with the
Articles of Association as well as domestic
and overseas laws and regulations, and
continuously improving its corporate
governance. It timely amended the Articles
of Association and the internal control
procedures, and implemented the campaign
of promoting the execution effectiveness
of internal control with good results.
The role of independent directors is well
played. It also completed the information
disclosure with high quality and further
strengthened investor relations work to
promote enterprise value. Its sustainable
development achieved positive results and
earned social recognition. It carried out
campaign themed “staying true to our
founding mission”, completed related work in
exercising full and rigorous governance over
the Party and implemented the campaign
of “talents strengthening enterprise”. All the
aforesaid work has promoted the company’s
high-quality development.
During the reporting period, there is no
material inconsistency between Sinopec
Corp.’s corporate governance and the
requirements of the PRC Company Law and
relevant regulations of the CSRC. The Board
of Supervisors of Sinopec Corp. agreed with
all supervised matters. None of Sinopec
Corp., the Board, directors, supervisors,
senior management, controlling shareholders
or de facto controllers of Sinopec Corp.
were under the investigation by the CSRC or
received any regulatory sanction or criticised
publicly by the CSRC, the Hong Kong
Securities and Futures Commission, the
Securities and Exchange Commission of the
United States, or received any public censure
from Shanghai Stock Exchange, the Hong
Kong Stock Exchange, the New York Stock
Exchange or the London Stock Exchange.
2 GENERAL MEETINGS
4 PERFORMANCE OF THE INDEPENDENT
During the reporting period, Sinopec
Corp. convened the 2018 annual general
meeting on 9 May 2019 in Beijing, China in
accordance with the required procedures of
noticing, convening and holding procedures
pursuant to the relevant laws and regulations
and the Articles of Association. For meeting
details, please refer to the poll results
announcements published in China Securities
Journal, Shanghai Securities News and
Securities Times on 10 May 2019 and on the
websites of Hong Kong Stock Exchange on 9
May 2019.
3 EQUITY INTERESTS OF DIRECTORS,
SUPERVISORS AND OTHER SENIOR
MANAGEMENT
As of 31 December 2019, apart from 13,000
A shares of Sinopec Corp. held by Director,
Senior Vice President Mr. Ling Yiqun, none
of the directors, supervisors or other senior
management of Sinopec Corp. held any
shares of Sinopec Corp.
Save as disclosed above, during the reporting
period, none of the directors, supervisors and
senior management of Sinopec Corp. and
their associates had any interests or short
positions (including any interest or short
position that is regarded or treated as being
held in accordance with the SFO) in the
shares, debentures and underlying shares of
Sinopec Corp. or any associated corporations
(as defined in Part XV of SFO) would fall
to be disclosed to the Sinopec Corp. and
the Hong Kong Stock Exchange under the
Division 7 and 8 of Part XV of SFO or which
was recorded in the register required to be
kept under section 352 of SFO or otherwise
should notify Sinopec Corp. or the Hong
Kong Stock Exchange pursuant to the Model
Code for Securities Transactions by Directors
of Listed Company under the Hong Kong
Listing Rules.
NON-EXECUTIVE DIRECTORS
During the reporting period, the Independent
Non-Executive Directors of Sinopec Corp.
fulfilled their duties in good faith as
required by Terms of Reference of the
Independent Non-Executive Directors, and
actively contributed to the development
of the Company. They actively attended
Board meetings and meetings of the Board
Committees (please refer to the section
“Report of the Board of Directors” in this
annual report for details of their attendance),
exercised their profession advantages to
offer advice and suggestions to Sinopec
Corp.’s development strategy, operations
and reform, and promoted the company’s
scientific decision-making. The independent
non-executive directors maintained
timely and effective communications with
management, external auditors and the
internal auditing department, gave their
independent opinions on matters such
as connected transactions and dividend
distribution, and protected the legitimate
interests of the minority shareholders’
interests.
Pursuant to requirements of securities
regulatory authority of China, Independent
Non-Executive Directors of Sinopec Corp.
reviewed the performance of the senior
managers of Sinopec Corp. who held
concurrent positions as senior managers
in China Petrochemical Corporation and
published independent opinions as follows:
“The President Mr. Ma Yongsheng, Senior
Vice President Mr. Ling Yiqun and Mr. Liu
Zhongyun, each of whom concurrently held
position as senior management of China
Petrochemical Corporation, have obtained
the exemptions for holding concurrent
position from CSRC. During the reporting
period, Mr. Ma Yongsheng, Mr. Ling Yiqun
and Mr. Liu Zhongyun devoted sufficient
time and energy to fulfil their duties with
diligence and due care. They protected
the interests of the Company and minority
shareholders effectively and didn’t harm
the legitimate interests of Sinopec Corp.
and minority shareholders due to holding
concurrent position in China Petrochemical
Corporation.”
43
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate GovernanceCORPORATE GOVERNANCE 5 COMPANY’S INDEPENDENCE FROM
A Board of Directors
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 date of this
annual report.
8 SENIOR MANAGEMENT APPRAISAL AND
INCENTIVE SCHEMES
Sinopec Corp. has established and is
continuously improving the fairness and
transparency of its performance appraisal
standards, incentive schemes and
requirements for directors, supervisors and
other senior management. Sinopec Corp. has
implemented a number of incentive policies,
including the Measures of Sinopec Corp.
for the Implementation of Remuneration
for Senior Managers and the Measures
of Sinopec Corp. for the Management of
Performance Evaluations.
9 CORPORATE GOVERNANCE REPORT (IN
ACCORDANCE WITH HONG KONG LISTING
RULES)
(1) Compliance with the Corporate
Governance Code
Sinopec Corp. complied with all code
provisions set out in the Corporate
Governance Code during the reporting
period.
A.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 2019, Sinopec Corp. held four
Board meetings. For details about
each Director’s attendance at the
Board meetings and the general
meetings, please refer to the
section “Report of the Board of
Directors” in this annual report.
c. Each Director of the Board can
submit proposals to be included
in the agenda of Board meetings,
and each Director is entitled to
request other related information.
d. The Board has reviewed and
evaluated its performance in 2018
and is of the view that the Board
made decisions in compliance with
domestic and overseas regulatory
authorities’ requirements and
the Company’s internal rules;
that the Board have considered
the suggestions from the Party
organisation, Board of Supervisors
and Management during its
decision making process; and that
the Board safeguarded the rights
and interests of Sinopec Corp. and
its shareholders.
e. The Secretary to the Board assists
the Directors in handling the daily
work of the Board, continuously
informs the Directors of any
regulations, policies or other
requirements of domestic or
overseas regulatory authorities in
relation to corporate governance
and ensures that the Directors
comply with domestic and
overseas laws and regulations
when performing their duties and
responsibilities. Sinopec Corp.
has purchased liability insurance
for all Directors to minimise their
risks that might incur from the
performance of their duties.
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. Zhang Yuzhuo serves as
Chairman of the Board and Mr.
Ma Yongsheng serves as President
of Sinopec Corp.
b. The Chairman of the Board places
great emphasis on communication
with the Independent
Non-executive Directors. The
Chairman independently held two
meetings with the Independent
Non-executive Directors in respect
of development strategy, corporate
governance and operational
management, etc. of the Company.
c. The Chairman encourages open
and active discussions. Directors
actively and deeply participated
in the discussions of significant
decisions made by the Board in
the Board meetings.
44
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED) 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.
b. Sinopec Corp. has received
from each of the Independent
Non-executive directors a letter of
confirmation for 2019 regarding
their compliance with relevant
independence requirements set
out in Rule 3.13 of the Hong
Kong Listing Rules. Sinopec
Corp. considers that each of
the Independent Non-executive
Directors is independent.
A.4 Appointment, re-election and
dismissal
a. During the reporting period,
the Board of Directors has not
nominated any new director
according to the actual situation of
Sinopec Corp., and no re-election
and dismissal of directors
occurred. For details about the
tenure of each director, please
refer to the section “Directors,
Supervisors, Other Senior
Management and Employees”
b. All Directors of Sinopec Corp.
have been elected at the general
meeting of shareholders. The
Board has no power to appoint
temporary Directors.
c. Sinopec Corp. engages
professional consultants to
prepare detailed materials for
newly elected Directors, to notify
them of the regulations of each
listing place of Sinopec Corp. and
to remind them of their rights,
responsibilities and obligations as
Directors.
A.5 Nomination Committee
a. The Board of Sinopec Corp.
established Nomination
Committee, consisting of
Chairman of the Board, Mr.
Zhang Yuzhuo, who serves as
the Chairman, and Independent
Non-Executive Directors Mr.
Tang Min and Mr. Ng, Kar Ling
Johnny, who serve as members.
The major responsibilities of
Nomination Committee are to
provide suggestion on Board’s size
and composition, as well as the
selecting standards, procedures
and candidates for directors and
senior management. Procedures
to Propose a Person for Election
as a Director of Sinopec Corp. is
published on the Sinopec Corp.’s
website at http://www.sinopec.
com/.
b. The Board establishes the
Board Diversity Policy which
stipulates that the members of
the Board shall be nominated
and appointed based on the skills
and experience for the overall
optimum operation of the Board,
while taking into account the
targets and requirements of the
board diversity. When deciding the
composition of the Board, Sinopec
Corp. shall consider several factors
in relation to the diversity of the
Board, including but not limited
to profession experience, skills,
knowledge, length of service,
regions, cultural and educational
backgrounds, gender and age.
Pursuant to Articles of Association,
the term of each session of the
Directors of Sinopec Corp. is
three years, and the consecutive
term of office of an independent
non-executive director cannot
exceed six years, which help to
ensure that the Board of Directors
has a proper balance between
continuous experience and new
thinking, and enhance the level of
diversity. Sinopec Corp. focuses on
the implementation of the Board
Diversity Policy. The Directors
come from different industries at
home and abroad, and have rich
work experience. Professional
backgrounds of Directors include
petroleum and petrochemical, as
well as economics, accounting and
finance, which are conductive to
scientific decision-making.
c. The members of the Nomination
Committee can engage
professions when performing
its duties. Reasonable costs
arising from such consultations
are borne by Sinopec Corp. In
the meantime, the Nomination
Committee has also appointed
consultants member and can
require such member to provide
advice. The working expenses of
the Remuneration Committee are
included in the budget of Sinopec
Corp.
A.6 Responsibility of Directors
a. All Non-executive Directors have
the same duties and powers as the
Executive Directors. In addition,
the Independent Non-executive
Directors are entitled to certain
specific powers. The Articles
of Association and the Rules of
Procedure of Board Meetings
clearly prescribe the duties and
powers of Directors, Non-executive
Directors including Independent
Non-executive Directors, which are
published on the Sinopec Corp.’s
website at http://www.sinopec.
com/
b. Each of the Directors was able to
devote sufficient time and efforts
to handling the matters of Sinopec
Corp.
c. Each of the Directors confirmed
that he has complied with the
Model Code for Securities and
Transactions by Directors of
Listed Companies during the
reporting period. In addition,
Sinopec Corp. formulated the
Rules Governing Shares Held by
Company Directors, Supervisors
and Senior Managers and Changes
in Shares and the Model Code
of Securities Transactions by
Company Employees to regulate
the purchase and sale of Sinopec
Corp.’s securities by relevant
personnel.
d. Sinopec Corp. organised and
arranged training sessions for
Directors and paid the relevant
fees as well as making relevant
records. The Directors actively
participated in the trainings and
paid more attention on continuing
professional development program
to ensure that their contribution to
the Board remains informed and
relevant.
45
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate Governance 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 on their
reporting responsibilities in the
auditor’s report contained in the
financial report.
C.2 Internal Control and Risk
Management
a. Sinopec Corp. has formulated and
implemented its internal control
and risk management system.
The Board as a decision-making
body is responsible for evaluating
and review the effectiveness
of its internal control and risk
management. The Board and
Audit Committee periodically (at
least annually) receive reports of
the Company regarding internal
control and risk management
information from the Management.
All major internal control and
risk management issues are
reported to the Board and Audit
Committee. Sinopec Corp. has
set up its internal control and
risk management department and
internal auditing departments,
which are equipped with sufficient
staff, and these departments
periodically (at least twice
per year) report to the Audit
Committee. The internal control
and risk management system
of the Company are designed to
manage rather than eliminate all
the risks of the Company.
A.7 Provision of and access to
c. The members of the Remuneration
Committee can engage independent
professionals when performing its
duties. Reasonable costs arising
from such consultations are borne by
Sinopec Corp. In the meantime, the
Remuneration Committee has also
appointed consultants member and
can require such member to provide
advices. The working expenses of the
Remuneration Committee are included
in the budget of Sinopec Corp.
According to the policies of Sinopec
Corp., the senior Management and
relevant departments of Sinopec
Corp. must actively cooperate with
the Remuneration Committee.
d. During the reporting period, the
Remuneration Committee held one
meeting (please refer to “Meetings
held by the special committees of the
Board” under the section of “Report
of the Board of Directors” in this
annual report).
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, the performance and the
cash flow of the Company during
the period. The Board approved
the Financial Report for 2019 and
warranted that the annual report
contained no false representations,
no material omissions or
misleading statements and
jointly and severally accepted full
responsibility for the authenticity,
accuracy and completeness of the
content.
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.
information
a. The agenda and other reference
documents for meetings of the
Board and Board committees
will be distributed prior to the
meetings to give each Director
sufficient time to review the
materials so that Directors can
make informed decisions.
b. Each Director can obtain all related
information in a comprehensive
and timely manner. The Secretary
to the Board is responsible
for organising and preparing
the materials for the Board
meetings, including preparation
of explanations for each proposal
to ensure fully understanding by
the Directors. The Management
is responsible for providing
the Directors with necessary
information and materials.
The Director may require the
Management, or require, via
the Management, relevant
departments to provide necessary
information or explanations. The
Directors may seek advices from
professional consultants when
necessary.
B Remuneration and Appraisal Committee
a. Remuneration and Appraisal
Committee (Remuneration Committee)
consists of Independent Non-executive
Director Mr. Fan Gang, who serves
as the Chairman, and Executive
Director Mr. Ma Yongsheng and
Independent Non-executive Director
Mr. Ng, Kar Ling Johnny, who serve
as the members of the Remuneration
Committee. The Remuneration
Committee is responsible for reviewing
the implementation of the annual
remuneration plans for Directors,
Supervisors and other senior
Management as approved at the
general meeting of the shareholders,
and report to the Board.
b. The Remuneration Committee
always consults the Chairman of the
Board and the President about the
remuneration plans for other Executive
Directors. After the Remuneration
Committee’s review, it is of the view
that all the Executive Directors of
Sinopec Corp. have fulfilled the duty
clauses in their service contracts in
2019.
46
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED) b. In terms of internal control,
Sinopec Corp. adopted the internal
control framework prescribed
in the internationally accepted
Committee of Sponsoring
Organisations of the Treadway
Commission Report (COSO).
Based upon the Articles of
Association and the applicable
management policies currently in
effect, as well as in accordance
with relevant domestic and
overseas applicable regulations,
Sinopec Corp. formulated and
continuously improves the Internal
Control Manual to achieve internal
control of all factors of internal
environment, risk assessment,
control activities, information
and communication, and internal
supervision. At the same time,
Sinopec Corp. has constantly
supervised and evaluated its
internal control, and conducted
comprehensive and multi-level
inspections including regular
test, enterprise self-examination
and auditing check, and included
headquarters, branches and
subsidiaries into the scope of
internal control evaluation, with
an internal control evaluation
report being produced. The
Board annually reviews the
internal control evaluation report.
For detailed information about
the internal control during the
reporting period, please refer
to the report on internal control
evaluation prepared by Sinopec
Corp.
Sinopec Corp. has formulated
and implemented its information
disclosure policy and insider
information registration policy.
The Company regularly evaluates
the policy implementation and
makes disclosure in accordance
with relevant regulations. Please
refer to the website of Sinopec
Corp. (http://www.sinopec.com/)
for the details of the information
disclosure policy.
c. In terms of risk management,
Sinopec Corp. adopted the
enterprise risk management
framework provided by COSO, and
established its risk management
policy and risk management
organisation system. The
Company annually conducts risk
evaluation to identify major and
important risks and perform
risk management duties. It has
designed major and important
risks tackling measures combined
with its internal control system
and periodically monitor their
implementation to ensure
adequate care, monitor and
tackling of major risks.
d. Based upon the review and
evaluation of internal control and
risk management of the reporting
period, the Board is of the view
that the internal control and risk
management of the Company are
effective.
C.3 Audit Committee
a. The Board has established
an Audit Committee. The
Audit Committee consists of
Independent Non-executive
Director Mr. Ng, Kar Ling Johnny,
who serves as the Chairman,
and Independent Non-executive
Director Mr. Tang Min and
Independent Non-executive
Director Mr. Cai Hongbin, who
serve as members. As verified,
none of them has served as a
partner or a former partner in our
current auditing firm.
b. During the reporting period,
the Audit Committee held four
meetings (please refer to the
“Meetings held by the special
committees of the Board” under
the section of “Report of the
Board of Directors” in this annual
report). The review opinions
were issued at each meeting and
submitted to the Board. During
the reporting period, the Board
and the Audit Committee had no
disagreement.
c. Audit Committee members can
engage independent professionals
when performing its duties.
Reasonable costs arising from
such consultations are borne by
Sinopec Corp. In the meantime,
the Audit Committee has
appointed consultants members
and can request such member
to provide advices. The working
expenses of the Audit Committee
are included in the budget of
Sinopec Corp. In accordance with
the policies of Sinopec Corp., the
Senior Management and relevant
departments of Sinopec Corp.
shall actively cooperate with the
Audit Committee.
d. The Audit Committee has reviewed
the adequacy and sufficiency
of the resources for accounting
and financial reporting and the
qualifications and experience of
the relevant employees as well
as the sufficiency of the training
courses provided to relevant
employees. Audit Committee is
of the view that the Management
has fulfilled the duties to establish
an effective internal control
system. The Company established
a whistle-blowing policy in its
internal control system, providing
several channels as online
reporting, letter reporting, receipt
of appeals and a complaint
mailbox, etc. to employees to
report behavior that violates the
internal control system of the
Company. The Audit Committee
has reviewed and approved such
policy.
47
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate Governance Investor Relations
a. According to the actual situation
of Sinopec Corp., as approved
at the annual general meeting of
shareholders for the year 2018,
Sinopec Corp. amended the Articles of
Association. For more details, please
refer to the announcement published
in the China Securities Journal, the
Shanghai Securities News and the
Securities Times by Sinopec Corp. as
well as on the website of Shanghai
Stock Exchange on 10 May 2019
and the announcement published on
the website of the Hong Kong Stock
Exchange on 9 May 2019.
b. Sinopec Corp. pays high attention
to investor relations. The team
led by management conduct
road shows every year to answer
questions on subjects of concern to
investors, such as introduction of
the development strategies and the
production and business performance
of the Company. Sinopec Corp.
established a department responsible
for communicating with investors.
In compliance with regulatory
provisions, Sinopec Corp. enhanced
communication with investors by
holding meetings with institutional
investors, setting up an investor
hotline and communicating through
internet platform.
c. During the reporting period, separate
resolution was proposed for each
substantially separate issue at the
general meetings. All resolutions were
voted by poll to ensure the interests
of all shareholders. Notices of the
general meeting were dispatched
to shareholders 45 days (excluding
the date of the general meeting) in
advance.
d. The Chairman of the Board hosted the
annual general meeting for the year
2018. Some members of the Board
of Directors and Board of Supervisors
and senior Management attended the
meeting and communicated with the
investors extensively.
e. According to relevant rules of Sinopec
Corp., the Secretary to the Board
is responsible for establishing an
effective communication channel
between Sinopec Corp. and its
shareholders, for setting up special
departments to communicate with
the shareholders and for passing
the opinions and proposals of the
shareholders to the Board and
Management in a timely manner.
Contact details of Sinopec Corp. can
be found on the Investor Center page
on Sinopec Corp’s website.
F Company Secretary
a. The Hong Kong Stock Exchange
recognised the Secretary to the Board
as having the relevant qualifications
as company Secretary. Nominated
by the Chairman of the Board and
appointed by the Board, the Secretary
to the Board is a Senior Management
Officer of Sinopec Corp. and
responsible for the Company and the
Board. The Secretary gives opinions
on corporate governance to the Board
and arranges orientation training
and professional development for the
Directors.
b. During the reporting period, the
Secretary to the Board actively
participated in career development
training with more than 15 training
hours.
D Delegation of power by the Board
E
a. The Board and the Management
have clear duties and responsibilities
in written rules. The Articles of
Association and the Rules of
Procedure for the General Meetings
of Shareholders and the Rules of
Procedure of the Board Meetings
clearly set forth the scope of duties,
powers and delegation of power of the
Board and Management, which are
published on the website of Sinopec
Corp. at http://www.sinopec.com/.
b. In addition to the Audit Committee,
the Remuneration Committee
and Nomination Committee,
the Board had established the
Strategy Committee and the
Social Responsibility Management
Committee. The Strategy Committee
is responsible for overseeing
long-term development strategies
and significant investment decisions
of the Company. The 7th session of
Strategy Committee consists of five
directors, including Chairman of the
Board Mr. Zhang Yuzhuo, who serves
as Chairman, as well as Executive
Directors Mr. Ma Yongsheng, Mr. Ling
Yiqun and Independent Non-executive
Directors Mr. Fan Gang and Mr. Cai
Hongbin, who serve as members. The
Social Responsibility Management
is responsible for preparing
policies, governance, strategies
and plans for social responsibility
management of the Company. The
Social Responsibility Management
Committee consists of three Directors,
including Chairman of the Board
Mr. Zhang Yuzhuo, who serves as
Chairman, Independent Non-executive
Directors Mr. Tang Min and Mr. Fan
Gang, who serve as members.
c. Each Board Committee is required
to report its decisions and
recommendations to the Board
and has formulated its terms of
references. The terms of reference
of the Audit Committee, the
Remuneration Committee and the
Nomination Committee are published
on the website of Sinopec Corp. at
http://www.sinopec.com/.
48
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED) G Shareholders’ rights
d. Sinopec Corp. established
(3) Other information about Sinopec Corp.’s
corporate governance
Except for their working relationships
with Sinopec Corp., none of the Directors,
Supervisors or other Senior Management
has any financial, business or family
relationship or any relationship in other
material aspects with one another. For
information about changes in share
capital and shareholdings of substantial
shareholders, please refer to page 6 to
page 7; for information about meetings
of the Board, please refer to page 50;
for information about meetings held
by Board Committees, please refer to
page 52; for information about tenure
of non-executive directors, please refer
to page 64; for information about equity
interests of Directors, Supervisors and
other senior Management, please refer
to page 43; for information about the
biographies and annual remuneration of
Directors, Supervisors and other senior
Management, please refer to page 60 to
page 74.
special organisation in charge of
communication with shareholders and
published relevant contact details
to facilitate shareholders to make
enquiries pursuant to Articles of
Association.
(2) Auditors
The appointment of
PricewaterhouseCoopers Zhong Tian
LLP and PricewaterhouseCoopers as
Sinopec Corp.’s external auditors for
2019 and the authorisation of the Board
to determine their remuneration were
approved at Sinopec Corp.’s annual
general meeting for the year 2018 on
9 May 2019. The audit fee for 2019
is RMB 47.48 million (including audit
fee of internal control), which was
approved at the 12th meeting of the
seventh session of the Board. The annual
financial statements have been audited
by PricewaterhouseCoopers Zhong Tian
LLP and PricewaterhouseCoopers. The
Chinese certified accountants signing the
report are Zhao Jianrong and Gao Peng
from PricewaterhouseCoopers Zhong Tian
LLP.
During the reporting period, neither
PricewaterhouseCoopers Zhong Tian LLP
nor PricewaterhouseCoopers provided any
non-audit service to the Company.
a. Shareholders who individually or
collectively hold 10% of the total
voting shares of Sinopec Corp.
may request the Board in writing
to convene the general meeting of
shareholders. If the Board fails to
approve the request to convene the
meeting according to the Rules of
Procedure for General Meetings
of Shareholders, the shareholders
may convene and hold the meeting
at their discretion according to
applicable laws, and reasonable
expenses incurred will be borne by
Sinopec Corp. These provisions are
subject to the following conditions:
the proposals at the general meeting
of shareholders must fall within
the responsibilities of the general
meeting of shareholders, with specific
proposals and resolutions and in
compliance with relevant laws,
administrative regulations and the
Articles of Association.
b. When Sinopec Corp. holds the general
meeting of shareholders, shareholders
who individually or collectively
hold 3% of the total voting shares
of Sinopec Corp. may propose a
supplemental proposal 10 days before
the date of the general meeting.
c. The eligibility for attending the general
meeting, the rights of shareholders,
the resolutions at the meeting and the
voting procedures are clearly stated
in the notice of the general meeting
of Sinopec Corp. dispatched to the
shareholders.
49
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate Governance The Board is pleased to present the directors’
report for the year ended 31 December 2019 for
shareholders’ review.
1 MEETINGS OF THE BOARD
During this reporting period, Sinopec Corp.
held four (4) Board meetings. The details are
as follows:
(1) The 5th meeting of the seventh session
of the Board was held by on site meeting
and via video conference on 22 March
2019, whereby the proposals in relation
to the following matters were approved: (i)
the Work Report of the Board for the year
2018, (ii) the business performance of
2018 and work plan of 2019,(iii) Financial
results and business performance of the
Company for the year 2018(including
A.provision for impairment for the year
2018; B. The connected transactions
for the year 2018; C. Profit distribution
plan for the year 2018; D. Audit costs
for the year 2018; E. the report of Risk
Assessment for Capital Deposits at
Finance Company and Century Bright
Company,), (iv) 2018 Communication on
Progress for Sustainable Development
Report of Sinopec Corp., (v) Financial
Statements of Sinopec Corp. for the
year 2018, (vi) Annual Report and form
20F of the Company for the year 2018,
(vii) Internal control assessment report
of Sinopec Corp. for the year 2018, and
the internal control manual (2019) (viii)
Re-appointment of external auditors of
Sinopec Corp. for the year of 2019 and
to authorise the Board to determine their
remunerations, (ix) the amendments to
the articles of association of Sinopec
Corp. (x) to authorize the Board to
determine the interim profit distribution
plan of Sinopec Corp. for the year 2019
(xi) Authorising the Board to determine
the proposed plan for issuance of debt
financing instrument(s) (xii) Granting
to the Board a general mandate to
issue new domestic shares and/or
overseas-listed foreign shares of Sinopec
Corp., (xiii) Convening the annual general
meeting of Sinopec Corp. for the year
2018 and to dispatch the notice of the
annual general meeting.
(2) The 6th meeting of the seventh session of
the Board was held by written resolution
on 29 April 2019, whereby the proposals
in relation to the following matters
were approved: (i)first quarterly results
of Sinopec Corp. for the three months
ended 31 March 2019 was approved at
the meeting. (ii) the capital increase and
assets transfer to Sinopec-SK.
(3) The 7th meeting of the seventh session
of the Board was held by on site meeting
and via video conference on 23 August
2019, whereby the proposals in relation
to the following matters were approved:
(i) the report on the fulfillment of the
key targets for the first half of the
year 2019 and the work arrangements
for the second half of the year 2019,
(ii) Financial results and business
performance of the Company for the
first half of the year 2019 (including
a.the 2019 interim dividend distribution
plan, b. the report of Risk Assessment
for Capital Deposits at Finance Company
and Century Bright Company), (iii) the
financial statements for the first half the
year 2019, (iv) interim report for the 6
months ended 30 June 2019, (v) Three
years rolling development plan of Sinopec
Corp. (2019 to 2021).
(4) The 8th meeting of the seventh session of
the Board was held by written resolution
on 30 October 2019, whereby the
proposal in relation to the third quarterly
results of Sinopec Corp. for the nine
months ended 30 September 2019 was
approved.
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
various tasks delegated to them at the
general meetings
50
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS 3 DIRECTORS’ ATTENDANCE TO THE BOARD MEETINGS AND TO THE GENERAL MEETINGS.
(1) Directors attendance to the board meeting and general meeting during this reporting period
Director Titles
Names
No. of
meeting held
Actual
Attendance
Board Meetings
Attended By
communication
Attended
by proxy
Absent
General Meetings.
No. of
meeting held
Actual
Attendance
Director
Director
Director
Director
Independent Director
Independent Director
Independent Director
Independent Director
Ma Yongsheng
Yu Baocai
Ling Yiqun
Li Yong
Tang Min
Fan Gang
Cai Hongbin
Ng, Kar Ling Johnny
4
4
4
4
4
4
4
4
2
2
2
1
2
2
2
2
2
2
2
2
2
2
2
2
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
1
1
1
1
1
1
1
1
1
1
0
1
0
0
0
0
(2) Former directors attendance to the board meetings during this reporting period
Director Titles
Names
Former Chairman
Former Director
Former Director
Dai Houliang
Li Yunpeng
Liu Zhongyun
No. of
meeting held
Actual
Attendance
Board Meetings
Attended By
communication
4
4
4
2
2
1
2
2
2
Attended
by proxy
0
0
1
Absent
0
0
0
General Meetings.
No. of
meeting held
Actual
Attendance
1
1
1
1
0
1
1. No directors were absent from two consecutive meetings of the Board.
2. Mr. Liu Zhongyun resigned as a director of the Board on 9 December 2019.
3. Mr. Dai Houliang resigned as the Chairman, director of the Board on 19 January 2020.
4. Mr. Li Yunpeng resigned as a director of the Board on 24 March 2020.
(3) The Independent Director’s attendance to the General Meetings.
During the reporting period, none of the Independent Non-executive Directors had attended the general meetings of shareholders in person due
to official duties.
51
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of Directors 4 MEETINGS HELD BY THE BOARD
COMMITTEES
During the reporting period, the board
committees held eight(8) meetings,
Audit Committee held four (4) meetings.
Strategy Committee held two (2) meetings,
the Remuneration Committee held one
(1) meeting, the Social Responsibility
Management Committee held one (1)
meeting. All members of each committee
had attended the relevant meetings. Details
of those meetings are as follows:
(1) The 4th meeting of the seventh session
of the Audit Committee was held by on
site meeting and via video conference on
20 March 2019, whereby the following
matters were approved in the meeting:
(i) Annual Report and 20F of 2018；
(ii)Financial results and business
performance of the Company for the
year 2018(including A. provision for
impairment for the year 2018; B. The
connected transactions for the year
2018; C. Profit distribution plan for the
year 2018; D. Audit costs for the year
2018; E. the report of Risk Assessment
for Capital Deposits at Finance Company
and Century Bright Company,); (iii)
Internal control assessment report of
the Company for the year 2018 and the
internal control manual (2019) (iv) Work
report on the internal auditing work
for the year 2018; (v) Reports on the
auditing of the financial statements for
the year 2018 prepared by the domestic
and overseas auditors.
(2) The 5th meeting of the seventh
session of the Audit Committee was
held by written resolution on 29 April
2019,whereby the proposals in relation
to the following matters were approved:
(i)first quarterly results of Sinopec Corp.
for the three months ended 31 March
2019 was approved at the meeting. (ii)
the capital increase and assets transfer
to SINOPEC-SK.
(3) The 6th meeting of the seventh session
of the Audit Committee was held by on
site meeting on 21 August 2019, whereby
(i) the financial statements for the first
half year of 2019 (ii) the interim report
for the first half of 2019,(iii) Financial
results and business performance of
the Company for the first half of the
year 2019(including a.the 2019 interim
dividend distribution plan, b. the report
of Risk Assessment for Capital Deposits
at Finance Company and Century Bright
Company) (iv) the reports on internal
auditing work for the first half of 2019
were approved at the meeting.
(4) The 7th meeting of the seventh session of
the Audit Committee was held by written
resolution on 29 October 2019, whereby
the third quarterly report for nine months
ended 30 September 2019 was approved
at the meeting.
(5) The 2nd meeting of the seventh session
of the Strategy Committee was held by
written resolution on 20 March 2019,
whereby the proposal in relation to the
plan of investments of 2019 of Sinopec
Corp. was approved at the meeting.
(6) The 3rd meeting of the seventh session
of the Strategy Committee was held
by written resolution on 21 August
2019, whereby the three years rolling
development plan of Sinopec corp.
(2019-2021) was approved at the
meeting.
(7) The 1st meeting of the seventh session
of the Remuneration Committee was
held by written resolution on 20 March
2019 whereby the proposal in relation
to implementation of the rules of the
remuneration of directors, supervisors
and other senior management for 2018.
(8) The 1st meeting of the seventh session
of the Social Responsibility Management
Committee was held by written resolution
on 20 March 2019, whereby the 2018
Communication on Progress for the
Sustainable Development Report of
Sinopec Corp. was approved at the
meeting.
5 BOARD COMMITTEES ISSUED REVIEW
OPINIONS TO THE BOARD WHEN
PERFORMING THEIR DUTIES DURING
THE REPORTING PERIOD, WITHOUT
OBJECTION.
6 BUSINESS PERFORMANCE
The financial results of the Company for
the year ended 31 December 2019, which
is prepared in accordance with IFRS and
the financial position as at that date and
the accompanying analysis are set out from
page 146 to page 203 in this annual report.
A fair review of the Company’s business,
a discussions and analysis on business
performance using financial key performance
indicators and the material factors
underlying our results and financial position
during the reporting period, particulars of
significant events affecting the Company
and the outlook of the Company’s business
are discussed throughout this annual report
included in the chapters of Chairman’s
Address, Business Review and Prospects,
Management’s Discussion and Analysis and
Significant Events. All above discussions
constitute parts of the report of the Board of
Directors.
7 DIVIDEND
The profit distribution policy of Sinopec
Corp. maintains consistency and steadiness,
and considers the long-term interests
of the Company, overall interests of all
the shareholders and the sustainable
development of the Company. Sinopec Corp.
gives priority to adopting cash dividends
for profit distribution, and is able to deliver
an interim profit distribution. When the net
profits and retained earnings of the Company
are positive in current year, and in the event
that the cash flow of Sinopec Corp. can
satisfy the normal operation and sustainable
development, Sinopec Corp. should adopt
cash dividends, and the distribution profits
in cash every year are no less than 30%
of the net profits of the Company realised
during the corresponding year.
The profit distribution plan of Sinopec Corp.
for the corresponding year will be carried out
in accordance with the policy and procedures
stipulated in the Articles of Association,
with the advice of minority shareholders
being heard and considered. Meanwhile, the
independent directors will issue independent
opinions.
52
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED) Proposals for dividend distribution
At the 12th meeting of the seventh session of
the Board, the Board approved the proposal
to distribute a final cash dividend of RMB
0.19 (tax inclusive) per share, combining
with an interim distributed dividend of RMB
0.12 (tax inclusive) per share, the total
dividend for the whole year is RMB 0.31 (tax
included) per share.
The final cash dividend will be distributed
on or before 19 June 2020 (Friday) to all
shareholders whose names appear on the
register of members of Sinopec Corp. on
the record date of 9 June 2020 (Tuesday).
In order to qualify for the final dividend
for H shares, the holders of H shares must
lodge all share certificates accompanied
by the transfer documents with Hong Kong
Registrars Limited located at 1712-1716,
17th Floor Hopewell Centre, 183 Queen’s
Road East, Wan Chai Hong Kong before
4:30 p.m. on 2 June 2020 (Tuesday)
for registration. The H shares register of
members of Sinopec Corp. will be closed
from 3 June 2020 (Wednesday) to 9 June
2020 (Tuesday) (both dates inclusive).
The dividend will be denominated and
declared in RMB, and distributed to the
domestic shareholders and investors
participating in the Shanghai-Hong Kong
Stock Connect Program in RMB and to
the overseas shareholders in Hong Kong
Dollar. The exchange rate for the dividend
calculation in Hong Kong Dollar is based
on the average benchmark exchange rate of
RMB against Hong Kong Dollar as published
by the People’s Bank of China one week
preceding the date of the declaration of such
dividend.
In accordance with the Enterprise Income
Tax Law of the People’s Republic of China
which came into effect on 1 January 2008
and its implementation regulations, Sinopec
Corp. is required to withhold and pay
enterprise income tax at the rate of 10%
on behalf of the non-resident enterprise
shareholders whose names appear on the
register of members for H Shares of Sinopec
Corp. when distributing cash dividends or
issuing bonus shares by way of capitalisation
from retained earnings. Any H Shares of
the Sinopec Corp. which is not registered
under the name of an individual shareholder,
including those registered under HKSCC
Nominees Limited, other nominees, agents
or trustees, or other organisations or
groups, shall be deemed as shares held
by non-resident enterprise shareholders.
Therefore, on this basis, enterprise income
tax shall be withheld from dividends payable
to such shareholders. If holders of H Shares
intend to change their shareholder status,
please enquire about the relevant procedures
with your agents or trustees. Sinopec Corp.
will strictly comply with the law or the
requirements of the relevant government
authority to withhold and pay enterprise
income tax on behalf of the relevant
shareholders based on the registration of
members for H shares of Sinopec Corp. as
at the record date.
If the individual holders of the H shares
who are Hong Kong or Macau residents or
residents of the countries which had an
agreed tax rate of 10% for the cash dividends
or bonus shares by way of capitalisation
from retained earnings with China under the
relevant tax agreement, Sinopec Corp. will
withhold and pay individual income tax on
behalf of the relevant shareholders at a rate
of 10%. Should the individual holders of
the H Shares are residents of the countries
which had an agreed tax rate of less than
10% with China under the relevant tax
agreement, Sinopec Corp. shall withhold
and pay individual income tax on behalf
of the relevant shareholders at a rate of
10%. In that case, if the relevant individual
holders of the H Shares wish to reclaim
the extra amount withheld (Extra Amount)
due to the application of 10% tax rate,
Sinopec Corp. would apply for the relevant
agreed preferential tax treatment provided
that the relevant shareholders submit the
evidence required by the notice of the tax
agreement to the share register of Sinopec
Corp. in a timely manner. Sinopec Corp. will
assist with the tax refund after the approval
of the competent tax authority. Should
the individual holders of the H Shares are
residents of the countries which had an
agreed tax rate of over 10% but less than
20% with China under the tax agreement,
Sinopec Corp. shall withhold and pay the
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) and the
Shenzhen-Hong Kong Stock Connect《關於深
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[2016] No.127):
For domestic investors investing in the
H Shares of Sinopec Corp. through
Shanghai-Hong Kong and Shenzhen-Hong
Kong Stock Connect Program, the company
shall withhold and pay income tax at the rate
of 20% on behalf of individual investors and
securities investment funds. The company
will not withhold or pay the income tax of
dividends for domestic enterprise investors
and those domestic enterprise investors
shall report and pay the relevant tax by
themselves.
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.
53
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of Directors 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 2019 is subject to the approval at the 2019 annual general meeting.
The aggregate cash dividend declared by
Sinopec Corp. during three years from 2017
to 2019 is RMB 1.23 per share, and the total
dividend payment from 2017 to 2019 as a
percentage of average net profit attributed
to the shareholders of the listed company in
the three years is 262.5%.
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
2019, the Board assessed and evaluated the
internal control of Sinopec Corp. according
to the Basic Standard for Enterprise Internal
Control, Application Guidelines for Enterprise
Internal Control and Assessment Guidelines
for Enterprise Internal Control. There were
no material defects in relation to the internal
control system as of 31 December 2019.
The internal control system of Sinopec Corp.
related to the financial statements is sound
and effective.
2019 Internal Control Assessment Report of
Sinopec Corp. was reviewed and approved
at the 12th meeting of the seventh Session
of the Board on 27 March 2020, and all
members of the Board warrant that the
contents of the report are true, accurate
and complete, and there are no false
representations, misleading statements or
material omissions contained in the report.
9 DURING THIS REPORTING PERIOD, THE
IMPLEMENTATION OF ENVIRONMENTAL
POLICIES BY THE COMPANY
Details with regard to the Company’s
performance in relation to environmental
and social-related policies and performances
are provided in the Chairman’s Address and
Business Review and Prospects in this annual
report as well as the 2019 Communication
on Progress for the Sustainable Development
of Sinopec Corp. Those disclosures in
relation to the environmental policies
constitute part of the Report of the Board of
Directors.
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 49.1% of the total value of the crude
oil purchasing by the Company, of which
the total value of the purchasing from the
largest supplier accounted for 19.3% of the
total value of the crude oil purchasing by the
Company.
The total sales value to the five largest
customers of the Company in 2019 was
RMB 261,811 million, accounted for 8.8%
of the total sales value of the Company,
of which the sales value to the connected
party (Sinopec group) among the five largest
customers was RMB 111,110 million,
accounted for 3.7% of the total sales value
for the year.
2019
0.31
37.53
57.47
65.31
2018
0.42
50.85
61.62
82.52
2017
0.50
60.54
51.12
118.42
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 2019
are set out in Note 30 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.
15 DONATIONS
During this reporting period, the amount
of charity donations made by the Company
amounted to RMB 0.209 billion.
54
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED)
16 PRE-EMPTIVE RIGHTS
21 PERMITTED INDEMNITY PROVISIONS
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
As at the end of the reporting period, the
Company has resolved its competition with
Sinopec Group in the chemical business. For
details for the positions held by the directors
of Sinopec Corp. in the Sinopec Group
during the reporting period, please refer to
the section “Directors, Supervisors, Senior
Management and Employees” of this annual
report.
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.
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.
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 2019, the Company has
not entered into any equity-linked agreement.
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 including organisation, coordination,
monitoring and major decision-making,
and reviews the reserves estimation of
our Company. Each of our branches has
a reserves management committee that
manages and coordinates the reserves
estimation, organises the estimation process
and reviews the reserve estimation report at
the branch level.
Our RMC is led by President of our Company,
related departments of headquarters,
Petroleum Exploration and Production
Research Institute of Sinopec (PEPRIS) and
senior managers of oilfield branches. Mr.
Liu Hongbin, the Chairman of RMC is Senior
Vice President of Sinopec Corp., with over 30
years of experience in oil and gas industry. A
majority of our RMC members hold Ph.D. or
master’s degrees, and our members have an
average of 20 years of technical experience
in relevant professional fields, such as
geology, engineering and economics.
Our reserves estimates are guided by
procedural manuals and technical guidance
formulated by the company. A number of
working divisions at the production bureau
level, including the exploration, development
and financial divisions are responsible
for initial collection and compilation of
information about reserves. Experts from
exploration, development and economic
divisions prepare the initial report on the
reserves estimate which is then reviewed by
the RMC at the subsidiary level to ensure the
qualitative and quantitative compliance with
technical guidance as well as its accuracy
and reasonableness. We also engage outside
consultants to assist in our compliance
with the rules and regulations of the U.S.
Securities and Exchange Commission.
Our reserves estimation process is further
facilitated by a specialised reserves
database, which is improved and updated
periodically.
24 CORE COMPETITIVENESS ANALYSIS
The Company is a large scale integrated
energy and petrochemical company with
upstream, mid-stream and downstream
operations. The Company is a large scaled
oil and gas producer in China; in respect
of refining capacity, it ranks first in China;
equipped with a well-developed refined oil
products sales network, the Company is the
largest supplier of refined oil products in
China; and in terms of ethylene production
capacity, the Company rank first in China,
and has a well-established marketing network
for chemical products.
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.
55
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of Directors 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 strength.
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 geopolitics,
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 refined oil import and export quotas and
procedures, formulation of safety, quality
and environmental protection standards and
formulation of energy conservation policies.
In addition, the changes which have occurred
or might occur in macroeconomic and
industry policies such as the fully opening
up of exploration and mining rights, the
opening up of crude oil import licenses
and the right of tenure, removing the
restriction of share ratio of refining projects
to foreign enterprises, further improvement
in pricing mechanism of refined oil
products, cancellation of wholesale right and
decentralization of retail right of refined oil
products, and gas stations investment are
fully opened to foreign investment, reforming
and improvement in pricing mechanism of
natural gas, cost supervision of gas pipeline
and access to third party, and reforming
in resource tax and environmental tax, will
cause effects on our business operations.
Such changes might further intensify market
competition and have certain effect on the
operations and profitability of the Company.
Risks with regard to the 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
56
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED) 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 over time which may adversely
affect the Company’s financial situation and
operation performance.
Risks with regard to the external purchase
of crude oil: A significant amount of crude
oil as needed by the Company is satisfied
through external purchases. In recent years,
especially influenced by the mismatch
between supply and demand of crude oil,
geopolitics, global economic growth and
other factors, the prices of crude oil fluctuate
sharply. Additionally, the supply of crude
oil may even be interrupted due to some
extreme major incidents in certain regions.
Although the Company has taken flexible
countermeasures, it may not fully avoid risks
associated with any significant fluctuation
of international crude oil prices and sudden
disruption of supply of crude oil from certain
regions.
Risks with regard to the operation and
natural disasters: The process of petroleum
chemical production is exposed to the
high risks of inflammation, explosion and
environmental pollution and is vulnerable
to extreme natural disasters. Such
contingencies may cause serious impacts
to the society, major financial losses to the
Company and grievous injuries to people.
The Company has always been paying great
emphasis on the safety production, and has
implemented a strict HSSE management
system as an effort to avoid such risks as
far as possible. Meanwhile, the main assets
and inventories of the Company as well as
the possibility of damage to a third party
have been insured. However, such measures
may not shield the Company from financial
losses or adverse impact resulting from such
contingencies.
Investment risks: Petroleum and chemical
sector is a capital intensive industry.
Although the Company has adopted a
prudent investment strategy, and as required
by the new procedure and management of
investment decision-making issued in 2017,
conducted rigorous feasibility study on
each investment project, which consists of
special verifications in raw material market,
technical scheme, profitability, safety and
environmental protection, legal compliance,
etc., certain investment risks will still exist
and expected returns may not be achieved
due to major changes in factors such as
market environment, prices of equipment
and raw materials, and construction period
during the implementation of the projects.
Risks with regard to overseas business
development and management: The
Company engages in oil and gas exploration,
refining and chemical, warehouse logistics
and international trading businesses in
some regions outside China. The Company’s
overseas businesses and assets are subject
to the jurisdiction of the host country’s laws
and regulations. In light of the complicated
factors such as imbalance of global economy,
competitiveness of industry and trade
structure, exclusiveness of regional trading
blocs, polarisation of benefits distribution
in trade, and politicisation of economic and
trade issues, including sanctions, barriers to
entry, instability in the financial and taxation
policies, contract defaults, tax dispute, the
Company’s risks with regard to overseas
business development and management
could be increased.
Currency risks: At present, China implements
an administered floating exchange rate
regime based on market supply and
demand which is regulated with reference
to a basket of currencies in terms of the
exchange rate of Renminbi. As the Company
purchases a significant portion of crude oil
in foreign currency which is based on US
dollar-denominated prices, the realized price
of crude oil is based on international crude
oil price. Despite the fact that, the price
of the domestic refined oil products will
change as the exchange rate of the Renminbi
changes according to the pricing mechanism
for the domestic refined oil products, and
the price of other domestic petrochemical
products will also be influenced by the price
of the imported products, which to a large
extent, smooths the impact of the Renminbi
exchange rate on the processing and sales
of the Company’s crude oil refined products.
However, the fluctuation of the Renminbi
exchange rate will still have an effect on the
income of the upstream sector.
Cyber-security risks: the Company has a
well- established network safety system,
information infrastructure and operation
system, and network safety information
platform, devotes significant resources to
protecting our digital infrastructure and
data against cyber-attacks, if our systems
against cyber-security risk prove to be
ineffective, we could be adversely affected
by, among other things, disruptions to our
business operations, and loss of proprietary
information, including intellectual property,
financial information and employer
and customer data, injuries to people,
property, environment and reputation. As
cyber-security attacks continue to evolve,
we may be required to expend additional
resources to enhance our protective
measures against cyber-security breaches.
By Order of the Board
Zhang Yuzhuo
Chairman
Beijing, China, 27 March 2020
57
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of Directors On 30 October 2019, the 7th meeting of the
seventh session of the Board of Supervisors was
held, and the Third Quarterly Report of Sinopec
Corp. for 2019 was reviewed and approved at
the meeting.
In addition, the supervisors attended the general
meetings of shareholders and attended meetings
of the Board. The Board of Supervisors also
organised some of the supervisors to attend
the trainings for directors and supervisors of
listed companies organised by Beijing Securities
Supervisory Bureau under CSRC, which have
further improved the Supervisors’ capabilities in
performing supervisory duties.
Through supervision and inspection on the
production and operation management as well
as financial management conditions, the Board
of Supervisors and all the supervisors conclude
that in 2019, facing the difficult conditions
such as the complex and severe production
and operation situation, rising internal and
external risk challenges, slowing down of global
economic growth, volatile international oil
prices, increasing of domestic refining capacity,
fall of chemical products prices, and the market
competition is extremely fierce, the company
conscientiously implements the decision-making
and deployment of the board of directors,
focuses on laying a decisive foundation for
comprehensive and sustainable development,
strives for progress in stability, takes on
actions, pays close attention to implementation,
promotes all work as a whole to maintains the
growth of production indicators, and achieves
better than expected business performance. The
Board of Supervisors had no objection to the
supervised issues during this reporting period.
Firstly, the Board and the senior management
of Sinopec Corp. performed their responsibilities
pursuant to relevant laws and regulations,
and implemented efficient management. The
Board diligently fulfilled its obligations and
exercised its rights under the PRC Company
Law and the Articles of Association, and made
informed decisions on major issues. The
senior management diligently executed the
resolutions approved by the Board, continued to
intensified refined management and strived to
tap potentials and enhance efficiency, optimise
business structures, committed to achieving the
target of sustaining profit and growth set by the
Board. During the reporting period, the Board of
Supervisors did not discover any behavior of any
director or senior management which violated
laws, regulations, or the Articles of Association,
or was detrimental to the interests of Sinopec
Corp. or its shareholders.
Dear Shareholders:
In 2019, the Board of Supervisors and
each supervisor of Sinopec Corp. diligently
performed their supervision responsibilities,
actively participated in the supervision process
of decision making, carefully reviewed and
effectively supervised the major decisions of
the Company, and endeavored to safeguard the
interests of shareholders and the Company in
accordance with the PRC Company Law and the
Articles of Association of Sinopec Corp.
During this reporting period, the Board of
Supervisors held four (4) meetings in total, and
mainly reviewed and approved the proposals
in relation to the Company’s periodic report,
financial statements, communication on
progress for sustainable development, internal
control assessment report and working report of
the Board of Supervisors etc.
On 22 March 2019, the 4th meeting of the
seventh session of the Board of Supervisors was
held, and the proposals in relation to Annual
Report of Sinopec Corp. for 2018, the Financial
Statements of Sinopec Corp. for 2018, 2018
Communication on Progress for Sustainable
Development of Sinopec Corp., Internal Control
Assessment Report of Sinopec Corp. for 2018,
Work Report of the Board of Supervisors of
Sinopec Corp. for 2018, were reviewed and
approved at the meeting.
On 29 April 2019, the 5th meeting of the
seventh session of the Board of Supervisors
was held, and the proposal in relation to the
First Quarterly Report of Sinopec Corp. for
2019, capital increase and assets transfer to
Sinopec-SK (Wuhan) Petrochemical Co., Ltd.,
(SINOPEC-SK) were reviewed and approved at
the meeting.
On 23 August 2019, the 6th meeting of the
seventh session of the Board of Supervisors was
held, and the Interim Report of Sinopec Corp.
for 2019, the Interim Financial Statements of
Sinopec Corp. for 2019, were reviewed and
approved at the meeting.
58
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of SupervisorsREPORT OF THE BOARD OF SUPERVISORS Secondly, the reports and financial statements
prepared by Sinopec Corp. in 2019 complied
with the relevant regulation of domestic and
overseas securities regulators, the disclosed
information truly, accurately, completely
and fairly reflected Sinopec Corp.’s financial
results and operation performance. The
dividend distribution plan was made after
comprehensive consideration of the long-term
interests of Sinopec Corp. and the interests of
the shareholders. No violation of confidential
provisions of persons who prepared and
reviewed the report was found.
Thirdly, Sinopec Corp.’s internal control system
is effective. No material defects of internal
control were found.
Fourthly, the consideration for the equity
investment made by Sinopec Corp. was fair and
reasonable, neither insider trading, damage to
shareholders’ interest nor losses of corporate
assets was discovered.
Fifthly, all connected transactions between the
Company and Sinopec Group were in compliance
with the relevant rules and regulations of
domestic and overseas listing exchanges. The
pricing of all the connected transaction was
fair and reasonable. No behaviors which is
detrimental to the interests of Sinopec Corp. or
its shareholders was discovered.
In 2020, the Board of Supervisors and each
supervisor will continue to follow the principle
of due diligence and integrity, earnestly perform
the duties of supervision as delegated by the
shareholders, strictly review the significant
decisions, strengthen the process control and
supervision, increase the strength of inspection
and supervision on subsidiaries and protect
Sinopec Corp.’s benefit and its shareholders’
interests.
Zhao Dong
Chairman of the Board of Supervisors
27 March 2020
59
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Report of the Board of Supervisors Zhang Yuzhuo
Ma Yongsheng
1
INTRODUCTION OF
DIRECTORS, SUPERVISORS
AND OTHER SENIOR
MANAGEMENT
(1) Directors
Zhang Yuzhuo, aged 58,
Chairman of the Board
of Directors of Sinopec
Corp. Mr. Zhang is Ph.D.
in engineering, Research
Fellow and Academician
of the Chinese Academy
of Engineering. Mr.
Zhang is an alternate
member of the nineteenth
Central Committee of the
Communist Party of China.
In January 1997, he was
appointed as Vice President
of China Coal Research
Institute. In February 1998,
he temporarily served as
Deputy General Manager of
Yankuang Group Co. Ltd. In
July 1998, he was appointed
as Vice President of China
Coal Research Institute,
Director and Deputy General
Manager of China Coal
Technology Corporation.
In March 1999, he served
as President of China Coal
Research Institute and
Chairman of China Coal
Technology Corporation.
In June 1999, he was
appointed as President and
Deputy Secretary of CPC
Committee of China Coal
Research Institute, Chairman
and Deputy Secretary of CPC
Committee of China Coal
Technology Corporation.
In January 2002, he was
appointed as Deputy
General Manager of Shenhua
Group Corporation Limited,
and served concurrently
as Chairman and General
Manager of China Shenhua
Coal Liquefaction Company
Limited. In August 2003, he
was appointed as Deputy
General Manager and
60
Ma Yongsheng, aged 58,
Director and President of
Sinopec Corp. Mr. Ma is
a professor level senior
engineer with a Ph.D.
degree and an academician
of the Chinese Academy of
Engineering. Mr. Ma is the
member of the thirteenth
national committee of
CPPCC. In April 2002, he
was appointed as Chief
Geologist of Sinopec
Southern Exploration and
Production Company;
in April 2006, he was
appointed as Executive
Deputy Manager (in charge
of overall management),
Chief Geologist of Sinopec
Southern Exploration and
Production Company; in
January 2007, he was
appointed as General
Manager and Party
Secretary of CPC Committee
of Sinopec Southern
Exploration and Production
Company; in March 2007,
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 Pipeline 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 Pipeline Project
Headquarter; in July 2010,
he served as Deputy Chief
Geologist of Sinopec Corp.;
in August 2013, he was
appointed as Chief Geologist
of Sinopec Corp.; in
December 2015, he served
as Vice President of China
Petrochemical Corporation
and appointed as Senior
Vice President of Sinopec
Corp.; in January 2017, he
was appointed as Member
of the Leading Party
Member Group of China
Petrochemical Corporation;
in April 2019, he was
appointed as director,
president and vice Secretary
of the Leading Party
Member Group of China
Petrochemical Corporation;
in October 2018, he was
appointed as President of
Sinopec Corp. In February
2016, he was elected as
Director of Sinopec Corp.
Member of the Leading Party
Member Group of Shenhua
Group Corporation Limited,
and served concurrently as
Chairman of China Shenhua
Coal Liquefaction Company
Limited. In December
2008, he was appointed as
Director, General Manager
and Member of the Leading
Party Member Group of
Shenhua Group Corporation
Limited. In July 2009, he
served concurrently as
Vice Chairman of All-China
Federation of Returned
Overseas Chinese. In May
2014, he was appointed as
Chairman and Secretary of
the Leading Party Member
Group of Shenhua Group
Corporation Limited,
and served concurrently
as Chairman of China
Shenhua Energy Company
Limited. In March 2017,
he served as a member of
the Standing Committee of
the CPC Tianjin Municipal
Committee and Secretary
of the CPC Binhai New Area
Committee. In July 2017,
he served concurrently as
Chairman of Sino-Singapore
Tianjin Eco-City Investment
& Development Co., Ltd.
In May 2018, he served
concurrently as Director of
China (Tianjin) Pilot Free
Trade Zone Administration.
In January 2020, he was
appointed as Chairman and
Secretary of the Leading
Party Member Group
of China Petrochemical
Corporation; in March 2020,
he was appointed as the
Chairman of the Board of
Directors of Sinopec Corp.
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEESDirectors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Yu Baocai
Ling Yiqun
Yu Baocai, aged 55,
Director of Sinopec Corp.
Mr. Yu is a senior engineer
and master in economics.
In September 1999, Mr. Yu
was appointed as the Deputy
General Manager of Daqing
Petrochemical Company;
In December 2001, he was
appointed as the General
Manager and Deputy
Secretary of CPC Committee
of Daqing Petrochemical
Company; In September
2003, he was appointed as
the General Manager and
Secretary of CPC Committee
of Lanzhou Petrochemical
Company; In June 2007,
he was appointed as the
General Manager and Deputy
Secretary of CPC Committee
of Lanzhou Petrochemical
Company and the General
Manager of Lanzhou
Petroleum & Chemical
Company; He had been
a member of the Leading
Party Member Group
and the Deputy General
Manager of China National
Petroleum Corporation since
September 2008 and had
been acting concurrently
as director of Petrochina
Company Limited since
May 2011; Since June
2018, he has been a
member of the Leading
Party Member Group and
the Vice President of China
Petrochemical Corporation.
In October 2018, Mr. Yu
was elected as Director of
Sinopec Corp.
Ling Yiqun, aged 57,
Director and Senior Vice
President of Sinopec Corp.
Mr. Ling is a professor
level senior engineer with
a Ph.D. degree. From
1983, he worked in the
refinery of Beijing Yanshan
Petrochemical Company and
the Refining Department
of Beijing Yanshan
Petrochemical Company Ltd.
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
concurrently as Executive
Director, President and
Secretary of CPC Committee
of Sinopec Refinery Product
Sales Company Limited;
in August 2013, he was
appointed concurrently as
the President of Sinopec
Qilu Company; in March
2017, he was appointed
as Vice President of China
Petrochemical Corporation;
Since April 2019, he
has been a member
of the Leading Party
Member Group of China
Petrochemical Corporation;
in February 2018, he was
appointed as Senior Vice
President of Sinopec Corp.
In May 2018, he was elected
as Director of Sinopec Corp.
61
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Li Yong
Tang Min
Fan Gang
Li Yong, aged 56, Director
of Sinopec Corp. Mr. Li
is a senior engineer with
a master degree. In April
2003, he was appointed as
Deputy General Manager
of Tianjin Branch of China
National Offshore Oil
Corporation (China) Limited;
in October 2005, he was
appointed as Executive
Vice President of China
Oilfield Services Limited;
in April 2009, he was
appointed as President
of China Oilfield Services
Limited; in September
2010, he was appointed as
Chief Executive Officer and
President of China Oilfield
Services Limited; in July
2012, he was appointed as
the Chief Executive Officer,
President and Secretary of
CPC Committee of China
Oilfield Services Limited;
in June 2016, he was
appointed as Assistant
President of China National
Offshore Oil Corporation and
Executive Vice President of
China National Offshore Oil
Corporation Limited, as well
as Chief Director (General
Manager) and Secretary of
CPC Committee of China
National Offshore Oil
Corporation Bohai Petroleum
Administration Bureau
(China National Offshore Oil
Corporation (China) Limited
Tianjin Branch); in March
2017, he was appointed
as Vice President of China
Petrochemical Corporation,
and since July 2017, he
concurrently served as Vice
Chairman of the Board of
Directors, President and
Secretary of CPC Committee
of Sinopec International
Petroleum Exploration and
Production Corporation, as
well as Chairman of Board
of Directors and President
of Sinopec International
Petroleum Exploration and
Production Limited. In May
2018, he was elected as
Director of Sinopec Corp.
Tang Min, aged 66,
Independent Director of
Sinopec Corp. Mr. Tang has
a Ph.D. in economics. He
presently acts as Counsellor
of the State Council of the
PRC and Executive Vice
Chairman of YouChange
China Social Entrepreneur
Foundation, Independent
Director of Baoshang Bank
Co., Ltd, and Independent
Director of China Minmetals
Development Co., Ltd. He
was an economist and
senior economist at the
Economic Research Centre
of the Asian Development
Bank between 1989 and
2000; chief economist at
the Representative office of
the Asian Development Bank
in China between 2000 and
2004; Deputy Representative
at the Representative Office
of the Asian Development
Bank in China between
2004 and 2007 and Deputy
Secretary-General of the
China Development Research
Foundation between 2007
and 2010. In May 2015,
he acted as Independent
Director of Sinopec Corp.
Fan Gang, aged 66,
Independent Director of
Sinopec Corp. Mr. Fan
has a Ph.D. in economics.
He presently acts as Vice
President of China Society
of Economic Reform,
Head of the National
Economic Research
Institution of China Reform
Foundation, President
of China Development
Institute (Shenzhen) and
an economics professor
at Peking University. He
began to work for Chinese
Academy of Social Sciences
in 1988, and subsequently
served as Director of
Editorial Department for
the Economic Research
Journal between 1992 and
1993 and as Deputy Head
of the Institute of Economics
of Chinese Academy of
Social Sciences between
1994 and 1995. In 1996,
he was redesignated to
work for China Society of
Economic Reform, and
subsequently founded the
National Economic Research
Institution. From 2006 to
2010, and between 2015
and 2018, he served as a
member of the Monetary
Policy Committee of the
People’s Bank of China. Mr.
Fan is recognised as one
of the National Young and
Middle-Aged Experts with
Outstanding Contributions.
In May 2015, he acted as
Independent Director of
Sinopec Corp.
62
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Cai Hongbin
Ng, Kar Ling Johnny
Ng, Kar Ling Johnny, aged
59, Independent Director
of Sinopec Corp. Mr. Ng
currently is a practicing
certified public accountant
in Hong Kong, a practicing
auditor and certified public
accountant in Macau, a
fellow member of the Hong
Kong Institute of Certified
Public Accountants (FCPA),
a fellow member of the
Association of Chartered
Certified Accountant (FCCA),
and a Senior member of
the Institute of Chartered
Accountants in England
and Wales (FCA). Mr. Ng
obtained a Bachelor’s degree
and a Master’s degree in
Business Administration
from the Chinese University
of Hong Kong in 1984 and
1999, respectively. Mr. Ng
joined KPMG (Hong Kong)
in 1984 and became a
Partner in 1996. He acted
as a Managing Partner from
June 2000 to September
2015 and the Vice Chairman
of KPMG (China) from
October 2015 to March
2016. Mr. Ng currently
serves as Independent
Non-executive Director and
of China Vanke Co., Ltd. and
Fangdd Network Group Ltd.
In May 2018, Mr. Ng acted
as Independent Director of
Sinopec Corp.
Cai Hongbin, aged 52,
Independent Director of
Sinopec Corp. Mr. Cai is
dean of Faculty of Business
and Economics and
Professor of Economics of
the University of Hong Kong.
Mr. Cai has a Ph.D. degree
in Economics. From 1997
to 2005, Mr. Cai taught
at University of California,
Los Angeles; since 2005,
he served as a professor
and Ph.D. supervisor
in Applied Economics
Department at Guanghua
School of Management
at Peking University, he
once served as Director,
Assistant to the Dean and
Vice Dean of the Applied
Economics Department.
From December 2010 to
January 2017, he served
as the dean of Guanghua
School of Management at
Peking University. In June
2017, he joined the Faculty
of Business and Economics
of the University of Hong
Kong. Professor Cai Hongbin
is a member of the 12th
National People’s Congress
and a member of Beijing
Municipal Committee of
Chinese People’s Political
Consultative Conference,
serving as member of the
eleventh Central Committee
of China Democratic League,
deputy Chairman of Beijing
Municipal Committee of
China Democratic League,
and a special auditor of
the National Audit Office.
Mr. Cai once served as
external director of China
Petrochemical Corporation,
independent directors of
China Unicom and China
Everbright Bank, etc. Mr.
Cai currently serves as
independent director of CCB
International (Holdings) Ltd.,
Rightway Holdings Co., Ltd.
and Ping An Bank Co., Ltd.,
In May 2018, Mr. Cai acted
as Independent Director of
Sinopec Corp.
63
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 LIST OF MEMBERS OF THE BOARD
Name
Gender
Age
Position in
Sinopec Corp.
Tenure
Zhang Yuzhuo
Ma Yongsheng
Yu Baocai
Ling Yiqun
Li Yong
Tang Min
Fan Gang
Cai Hongbin
Ng, Kar Ling Johnny
Male
Male
Male
Male
Male
Male
Male
Male
Male
Chairman 2020.03-2021.05
58
58 Board Director, President 2016.02-2021.05
Board Director 2018.10-2021.05
55
2018.05-2021.05
Board Director,
57
56
66
66
52
59
Senior Vice President
Board Director 2018.05-2021.05
Independent Director 2015.05-2021.05
Independent Director 2015.05-2021.05
Independent Director 2018.05-2021.05
Independent Director 2018.05-2021.05
LIST OF FORMER MEMBERS OF THE BOARD
Name
Gender
Age
Dai Houliang
Li Yunpeng
Liu Zhongyun
Male
Male
Male
56
61
56
Position in
Sinopec Corp.
Tenure
Former Chairman 2009.05-2020.01
Former Director 2017.06-2020.03
2018.05-2019.12
Former Director and
Senior Vice President
Remuneration
paid by
in 2019
(RMB 1,000,
before tax)
–
1,563.0
–
–
–
350.0
350.0
350.0
350.0
Whether
paid by Equity interests in Sinopec Corp.
the holding
Company
No
No
Yes
Yes
Yes
No
No
No
No
(as at 31 December)
2019
0
0
0
13,000
0
0
0
0
0
2018
0
0
0
13,000
0
0
0
0
0
Remuneration
paid by
in 2019
(RMB 1,000,
before tax)
Whether
paid by Equity interests in Sinopec Corp.
the holding
Company
(as at 31 December)
2019
2018
–
–
–
Yes
Yes
Yes
0
0
0
0
0
0
64
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisDirectors, Supervisors,Senior Management and EmployeesDIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED) Zhao Dong
Jiang Zhenying
(2) Supervisors
Zhao Dong, aged 49,
Chairman of Board of
Supervisors of Sinopec Corp.
Mr. Zhao is a professor-level
senior accountant with a
doctor’s degree. In July
2002, he was appointed
as chief accountant and
general manager of financial
assets department of
CNPC International (Nile)
Ltd.; in January 2005, he
was appointed as deputy
chief accountant and
executive deputy director
of financial and capital
operation department
of China National Oil
and Gas Exploration and
Development Corporation;
in April 2005, he was
appointed as deputy chief
accountant and general
manager of financial and
capital operation department
of China National Oil
and Gas Exploration and
Development Corporation;
in June 2008, he was
appointed as chief
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.
Jiang Zhenying, aged 55,
Supervisor of Sinopec Corp.
Mr. Jiang is a professor level
senior economist with a
doctor degree. In December
1998, he was appointed
as the Vice President of
the China Petrochemical
Supplies & Equipment Co.,
Ltd.; in February 2000, he
was appointed as the Deputy
Director General of Sinopec
Procurement Management
Department; in December
2001, he was appointed
as the Director General
of Sinopec Procurement
Management Department
and in November 2005
he concurrently held the
positions of Chairman
of Board of Directors,
President and Secretary of
CPC Committee of China
Petrochemical International
Co., Ltd.; in March 2006,
he was appointed as the
Director General (General
Manager), Executive
Director and Secretary
of the CPC Committee
of Sinopec Procurement
Management Department
(Sinopec International
Co. Ltd.); in April 2010,
he was appointed as the
Director General (General
Manager), Executive Director
and Deputy Secretary
of the CPC Committee
of Sinopec Procurement
Management Department
(Sinopec International Co.
Ltd); in November 2014,
he was appointed as
Director General of Safety
Supervisory Department
of Sinopec Corp.; in May
2017, he was appointed as
Deputy Director of the Office
of Leading Party Member
Group Inspection Work
of China Petrochemical
Corporation and Since
December 2018, he was
appointed as Director of
Audit Bureau of China
Petrochemical Corporation,
and Director of Audit
Department of Sinopec
Corp.; Since December
2019, he was appointed as
president of Audit Bureau
of Sinopec Corp. and the
Director of the Office of
Audit Committee of Leading
Party Member Group
of China Petrochemical
Corporation; since December
2010, he was elected as the
Employee’s Representative
Supervisor of Sinopec Corp.
In May 2018, he was elected
as Supervisor of Sinopec
Corp.
65
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Yang Changjiang
Zhang Baolong
Zhang Baolong, aged 60,
Supervisor of Sinopec
Corp. Mr. Zhang is a
professor-level senior
economist with a Master
degree. In July 1995, he
served as General Manager
of Hong Kong Century
Bright Capital Investment
Limited; in August 1996, he
served as Deputy General
Manager of Sinopec Finance
Co., Ltd.; in December
2001, he was appointed as
Deputy General Manager
and Chief Accountant of
China International United
Petroleum & Chemicals Co.,
Ltd.; in August 2004, he
was appointed concurrently
as Secretary of Disciplinary
Inspection Committee of
China International United
Petroleum & Chemicals
Co., Ltd.; since March
2006, he has served as
General Manager and
Secretary of CPC Committee
of Sinopec Finance Co.,
Ltd. In June 2018, he
was appointed as Deputy
Director of Department of
Capital Management and
Financial Services of China
Petrochemical Corporation.
In December 2019, he
was appointed as Vice
President of Department of
Capital Management and
Financial Services of China
Petrochemical Corporation.
In May 2018, he was elected
as Supervisor of Sinopec
Corp.
Yang Changjiang, aged 59,
Supervisor of Sinopec Corp.
Mr. Yang is a professor-level
senior administration
engineer with a Master’s
degree. In October 2007, he
was appointed as a standing
committee member of
CPC Committee of Shengli
Petroleum Administration
Bureau; in April 2009, he
was appointed as Deputy
Secretary of CPC Committee
and Secretary of Discipline
Inspection Committee
of Shengli Petroleum
Administration Bureau,
as well as a standing
committee member of CPC
Committee of Dongying
City, Shandong Province;
in December 2012, he was
appointed as Secretary of
CPC Committee and Deputy
Director of Southwest
Petroleum Bureau, Deputy
General Manager of Sinopec
Southwest Oil & Gas
Company and a member of
the Coordination Committee
of Sinopec Southwest
Petroleum Bureau, Sinopec
Southwest Oil & Gas
Company and Sinopec
Southern Exploration
Company; in December
2016, he was appointed as
Secretary of CPC Committee
and Deputy Director General
of Shengli Petroleum
Administration Bureau, and
Deputy General Manager of
Shengli Oilfield Company;
in October 2017, he was
appointed as Secretary of
CPC Committee and Deputy
General Manager of Shengli
Petroleum Administration
Bureau Co., Ltd., and
Deputy General Manager
of Sinopec Shengli Oilfield
Company. In March 2018,
he has served as Director
General of Party Affairs
and Employee Relations
Department (Leading Party
Member Group Office),
Deputy Secretary of the
CPC Committee directly
under China Petrochemical
Corporation, Deputy
Director General of Working
Committee of Trade Union,
and Deputy Director of the
Youth Working Committee
of China Petrochemical
Corporation. In December
2019, he has served as
Director General of Party
Affairs and Employee
Relations Department,
Deputy Secretary of the
CPC Committee directly
under China Petrochemical
Corporation, Deputy
Director General of Working
Committee of Trade Union,
and Deputy Director of the
Youth Working Committee
of China Petrochemical
Corporation. In May 2018,
he was elected as Supervisor
of Sinopec Corp.
66
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Zou Huiping
Yu Xizhi
Zou Huiping, aged 59,
Supervisor of Sinopec Corp.
Mr. Zou is a professor
level senior accountant
with a university diploma.
In November 1998, he
was appointed as Chief
Accountant in Guangzhou
Petrochemical General Plant
of China Petrochemical
Corporation; in February
2000, he was appointed
as Deputy Director General
of Finance & Assets
Department of China
Petrochemical Corporation;
in December 2001, he
was appointed as Deputy
Director General of Finance
& Planning Department
of China Petrochemical
Corporation; in March
2006, he was appointed as
Director General of Finance
& Assets Department of
Assets Management Co.,
Ltd. of China Petrochemical
Corporation; in March
2006, he was appointed as
Director General of Auditing
Department of Sinopec
Corp and Director General
of China Petrochemical
Corporation Audit Bureau.
In September 2018, he
was appointed as Chief
Representative of Sinopec
Corp. Hong Kong Office. In
May 2006, he was elected
as Supervisor of Sinopec
Corp.
Yu Xizhi, aged 57,
Employee’s Representative
Supervisor of Sinopec Corp.
Mr Yu is a professor-level
senior engineer with a
Ph.D. in engineering. In
August 1997, he was
appointed as Deputy
General Manager of Anqing
Petrochemical General Plant
and concurrent General
Manager of Fertiliser Plant;
in September 1999, he
became a member of the
CPC Standing Committee
of Anqing Petrochemical
General Plant; in February
2000, he was appointed as
Deputy General Manager of
Sinopec Anqing Company
and in September 2000, he
was appointed as General
Manager of Sinopec Anqing
Company. In January
2005, he was appointed as
General Manager of Anqing
Petrochemical General
Plant and from May 2009
to July 2010, he served
an interim position at the
Standing Committee of
the CPC Anqing Municipal
Committee. In July 2010,
he became General Manager
and Deputy Secretary of the
CPC Committee of Maoming
Petrochemical Company
and General Manager
of Sinopec Maoming
Company; in July 2016,
Mr. Yu was appointed as
head of Maoming-Zhanjiang
Integration Leading Group;
in December 2016, he
became Executive Director,
General Manager and
Deputy Secretary of the
CPC Committee of Zhongke
(Guangdong) Refining and
Petrochemical Co., Ltd.
Since April 2017, Mr. Yu
has been Director General
of Human Resources
Department of Sinopec
Corp. Since December
2019, he was appointed as
president of human resource
department of Sinopec Corp.
and the Director General
of organization department
of China Petrochemical
Corporation. In January
2020, he was elected as
Employee’s Representative
Supervisor of China
Petrochemical Corporation.
In June 2017, he was
elected as Employee’s
Representative Supervisor of
Sinopec Corp.
67
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Zhou Hengyou
Yu Renming
Yu Renming, aged 56,
Employee’s Representative
Supervisor of Sinopec Corp.
Mr. Yu is a professor level
senior engineer with a
university diploma. In June
2000, he was appointed
as the Deputy General
Manager of Sinopec Zhenhai
Refining & Chemical Co.,
Ltd.; in June 2003, he
was appointed as the
Board Director and Deputy
General Manager of Sinopec
Zhenhai Refining & Chemical
Co., Ltd.; in September
2006, he was appointed
as the Vice President of
Sinopec Zhenhai Refining
& Chemical Company; in
September 2007, he was
appointed as the President
and the Vice Secretary of
CPC committee of Sinopec
Zhenhai Refining & Chemical
Company; in January
2008, he was appointed
as the Director General
of Sinopec Production
Management Department;
in December 2017, he
was appointed as the
Director General of Refining
Department of Sinopec
Corp.; Since December
2019, he was elected as
Chairman of Board of
Directors and Secretary of
CPC committee of Sinopec
Engineering(Group) Co., Ltd.;
and in December 2010, he
was elected as Employee’s
Representative Supervisor of
Sinopec Corp.
Zhou Hengyou, aged 56,
Employee’s Representative
Supervisor of Sinopec Corp.
Mr. Zhou is a professor
level senior administration
engineer and with a master
degree. In December 1998,
Mr. Zhou was appointed
as a standing committee
member of CPC Committee
and Vice Chairman of
Trade Union of Jiangsu
Petroleum Exploration
Bureau; in February 1999,
he was appointed as a
standing committee member
of CPC Committee and
Trade Union Chairman
of Jiangsu Petroleum
Exploration Bureau of China
Petrochemical Corporation;
in December 2002, he
was appointed as Deputy
Secretary of CPC Committee
and Trade Union Chairman
of Jiangsu Petroleum
Exploration Bureau; in June
2004, he was appointed as
Deputy Secretary of CPC
Committee and Secretary of
CPC Disciplinary Inspection
Committee of Jiangsu
Petroleum Exploration
Bureau; in August 2005,
he was appointed as
Secretary of CPC Committee
of Jiangsu Petroleum
Exploration Bureau; in March
2011, he was appointed
as Director General and
Secretary of CPC Committee
of China Petrochemical
News. In March 2015,
he was appointed as
Director General of the
General Office of China
Petrochemical Corporation,
Director General of Policy
Research Department of
the General Office of China
Petrochemical Corporation
and Director General
of President’s office of
Sinopec Corp. In August
2015, he was appointed as
Director General of Board of
Directors Office under China
Petrochemical Corporation;
Since December 2019,
he was appointed as the
director of the Office of
Leading Party Member
Group Inspection Work
of China Petrochemical
Corporation. In January
2020, he was appointed
as Secretary of the board
of directors of China
Petrochemical Corporation.
In May 2015, he was elected
as Supervisor of Sinopec
Corp. In May 2018, he
was elected as Employee’s
Representative Supervisor of
Sinopec Corp.
68
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 LIST OF MEMBERS OF THE BOARD OF SUPERVISORS
Position in
Sinopec Corp.
Tenure
Remuneration
paid by
Sinopec Corp.
in 2019
(RMB 1,000,
before tax)
Whether
paid by the Equity interests in Sinopec Corp.
holding
Company
(as of 31 December)
2019
2018
Name
Zhao Dong
Gender
Male
Age
49
Chairman of the 2017.06-2021.05
–
Jiang Zhenying
Yang Changjiang
Zhang Baolong
Zou Huiping
Yu Xizhi
Zhou Hengyou
Yu Renming
Male
Male
Male
Male
Male
Male
Male
Board of Supervisors
Supervisor 2018.05-2021.05
Supervisor 2018.05-2021.05
Supervisor 2006.05-2021.05
Supervisor 2006.05-2021.05
2017.06-2021.05
55
59
60
59
57 Employee’s Representative
Supervisor
56 Employee’s Representative 2018.05-2021.05
Supervisor
56 Employee’s Representative 2010.12-2021.05
Supervisor
1,321.6
–
–
1,445.7
1,337.4
1,330.6
1,346.5
Yes
No
Yes
Yes
No
No
No
No
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
69
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Directors, Supervisors,Senior Management and Employees
Liu Hongbin
Lei Dianwu
(3) Other Members of Senior
Management
Liu Hongbin, aged 57. Mr.
Liu is a senior engineer
with a bachelor degree.
In June 1995, he was
appointed as the chief
engineer of Tuha Petroleum
Exploration & Development
Headquarters; in July
1999, he was appointed
as the deputy general
manager of PetroChina Tuha
Oilfield Company; in July
2000, he was appointed
as the commander and
Deputy Secretary of
CPC Committee of Tuha
Petroleum Exploration &
Development Headquarters;
in March 2002, he served
as the general manager of
the Planning Department
of PetroChina Company
Limited (“PetroChina”);
in September 2005, he
served as the director of
the Planning Department of
China National Petroleum
Corporation (“CNPC”);
in June 2007, he was
appointed as the Vice
President of PetroChina,
and in November 2007,
he served concurrently as
the general manager and
Secretary of CPC Committee
of the Marketing Branch of
PetroChina; in June 2009,
he served concurrently as
the general manager and
Deputy Secretary of CPC
Committee of the Marketing
Branch of PetroChina; in
July 2013, he was appointed
as Member of the Leading
Party Member Group and
the deputy general manager
of CNPC and in August
2013, he served concurrently
as an executive director and
general manager of Daqing
Oilfield Company Limited,
director of Daqing Petroleum
Administration Bureau
and Deputy Secretary of
CPC Committee of Daqing
Oilfield; in May 2014, he
served concurrently as a
director of PetroChina; in
November 2019, he was
appointed as Member of
the Leading Party Member
Group and Vice President
of China Petrochemical
Corporation; in March
2020, he was concurrently
appointed as the Senior Vice
President of Sinopec Corp.
Lei Dianwu, aged 57, Senior
Vice President of Sinopec
Corp. Mr. Lei is a Professor
level Senior Engineer with
a university diploma. In
October 1995, he was
appointed as Vice President
of Yangzi Petrochemical
Corporation; in December
1997, he was appointed as
Director General of Planning
& Development Department
in China Eastern United
Petrochemical (Group) Co.,
Ltd. in May 1998, he was
appointed as Vice President
of Yangzi Petrochemical
Corporation; in August
1998 he was appointed as
Vice President of Yangzi
Petrochemical Co., Ltd.
in March 1999, he was
appointed temporarily
as Deputy Director
General of Development
& Planning Department
of China Petrochemical
Corporation; in February
2000, he was appointed as
Deputy Director General of
Development & Planning
Department of Sinopec
Corp.; in March 2001, he
was appointed as Director
General of Development
& Planning Department of
Sinopec Corp.; in March
2009, he was appointed
as Assistant to President
of China Petrochemical
Corporation; in May 2009,
he was appointed as Vice
President of Sinopec
Corp.; in August 2013,
he was appointed as the
Chief Economist of China
Petrochemical Corporation;
in October 2015, he was
appointed as Secretary
to the Board of Directors
of China Petrochemical
Corporation; in June
2018, he was appointed
concurrently as Director
General of International
Cooperation Department of
Sinopec Corp. In October
2018, he was appointed
as Senior Vice President of
Sinopec Corp.
70
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Chen Ge
Shou Donghua
Chen Ge, aged 57, Senior
Vice President of Sinopec
Corp. Mr. Chen is a senior
economist with a master
degree. In February 2000,
he was appointed as
Deputy Director General of
the Board Secretariat of
Sinopec Corp. In December
2001, he was appointed
as Director General of
the Board Secretariat of
Sinopec Corp. In April
2003, he was appointed as
Secretary to the Board of
Directors of Sinopec Corp.
From April 2005 to August
2013, he was appointed
concurrently as Director
General of Corporate
Reform & Management
Dept. of Sinopec Corp.
In July 2010, he was
appointed as Assistant
to President of China
Petrochemical Corporation.
From December 2013 to
December 2015, he was
appointed temporarily as
Deputy Secretary-General of
Guizhou Provincial People’s
Government and a member
of the Leading Party
Member Group of Guizhou
Provincial General Office.
In November 2015, he was
appointed as Employee’s
Representative Director
of China Petrochemical
Corporation. In December
2017, he was appointed
concurrently as Director
General of Corporate Reform
& Management Dept. of
Sinopec Corp. In October
2018, he was appointed
as Senior Vice President of
Sinopec Corp.
Shou Donghua, aged 50,
Chief Financial Officer of
Sinopec Corp. Ms. Shou
is a professor level senior
accountant with a MBA
degree. In July 2010, she
was appointed as the Chief
Financial Officer of Sinopec
Zhenhai Refining & Chemical
Company; in October 2014,
she was appointed as Deputy
Director General of Human
Resource Department of
Sinopec Corp.; in August
2017, she was appointed
as the Secretary of CPC
Committee of Sinopec
Zhenhai Refining & Chemical
Company and Deputy
General Manager of Sinopec
Zhenhai Refining & Chemical
Company; in August 2018,
she was appointed as the
Director General of Finance
Department of China
Petrochemical Corporation
and concurrently served as
the Chairman of Sinopec
Century Bright Capital
Investment Limited; in
December 2019, she was
appointed as General
Manager of Finance
Department of Sinopec
Corp. and concurrently
served as the Chairman
of Sinopec Century Bright
Capital Investment Limited.;
in January 2020, she was
appointed as Chief Financial
Officer of Sinopec Corp.
71
Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 Zhao Rifeng
Huang Wensheng
Zhao Rifeng, aged 57, Vice
President of Sinopec Corp.
Mr. Zhao is a Professor
level Senior Engineer with a
master degree. In July 2000,
he was appointed as Deputy
General Manager of Sinopec
Jinling Petrochemical Co.,
Ltd and Deputy Manager of
Sinopec Jinling Company;
in October 2004, he was
appointed as General
Manager of Sinopec Jinling
Company; in October
2006, he was appointed
as Vice Chairman and
General Manager of Sinopec
Jinling Petrochemical Co.,
Ltd; in November 2010,
he was appointed as
Chairman, General Manger,
Deputy Secretary of CPC
Committee of Sinopec
Jinling Petrochemical Co.,
Ltd; in August 2013, he
was appointed as Director
General of Refining
Department of Sinopec
Corp.; and in December
2017, he was appointed
as the Director General of
the Marketing Department
of China Petrochemical
Corporation and Chairman
and Secretary of CPC
Committee of Sinopec
Marketing Company Limited.
In December 2019, he was
appointed as the president
of the Marketing Department
of China Petrochemical
Corporation and Chairman
and Secretary of CPC
Committee of Sinopec
Marketing Company Limited.
In February 2018, he was
appointed as Vice President
of Sinopec Corp.
Huang Wensheng, aged 53,
Vice President of Sinopec
Corp., Secretary to the Board
of Directors. Mr. Huang
is a professor level senior
economist with a university
diploma. In March 2003, he
was appointed as Deputy
Director General of the
Board Secretariat of Sinopec
Corp.; in May 2006, he was
appointed as Representative
on Securities Matters of
Sinopec Corp.; since August
2009, He has served as the
Deputy Director General
of President’s office of
Sinopec Corp. In September
2009, he was appointed
as Director General of the
Board Secretariat of Sinopec
Corp.; In May 2012, he
was appointed as Secretary
to the Board of Directors
of Sinopec Corp.; In June
2018, he was appointed
concurrently as Director
General of Department of
Capital Management and
Financial Services of China
Petrochemical Corporation.
Since July 2018, he was
appointed concurrently as
Chairman, and Secretary
of CPC Committee of
Sinopec Capital Co.,
Ltd.; In December 2019,
he was appointed as
President of Department of
Capital Management and
Financial Services of China
Petrochemical Corporation.
In May 2014, he was
appointed as Vice President
of Sinopec Corp.
72
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED)Directors, Supervisors,Senior Management and EmployeesCHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2018 LIST OF MEMBERS OF THE SENIOR MANAGEMENT
Name
Liu Hongbin
Lei Dianwu
Chen Ge
Shou Donghua
Zhao Rifeng
Huang Wensheng
Gender
Male
Male
Male
Female
Male
Male
Position in
Sinopec Corp.
Senior Vice President
Senior Vice President
Senior Vice President
CFO
Vice President
Vice President, Board Secretary
Age
57
57
57
50
57
53
LIST OF FORMER MEMBERS OF THE SENIOR MANAGEMENT
Name
Wang Dehua
Gender
Age
Male
53
Position in
Sinopec Corp.
Former CFO
Remuneration
paid by
Sinopec Corp.
in 2019
(RMB 1,000,
before tax)
–
1,592.8
1,600.4
–
1,457.5
1,497.3
Remuneration
paid by
Sinopec Corp.
in 2019
(RMB 1,000,
before tax)
1,487.0
Whether
paid by Equity interests in Sinopec Corp.
the holding
Company
(as of 31 December)
2019
2018
Yes
No
No
Yes
No
No
0
0
0
0
0
0
0
0
0
0
0
0
Whether
paid by Equity interests in Sinopec Corp.
the holding
Company
No
(as of 31 December)
2019
0
2018
0
2
INFORMATION ON
APPOINTMENT OR
TERMINATION OF DIRECTORS,
SUPERVISORS AND SENIOR
MANAGEMENT
On 9 December 2019, Mr. Liu
Zhongyun resigned as Executive
Director, member of Strategy
Committee of the Board and
the Senior Vice President of
Sinopec Corp. due to change of
working arrangement
On 9 December 2019, Mr.
Wang Dehua resigned as CFO of
Sinopec Corp. due to change of
working arrangement.
On 13 January 2020, Ms. Shou
Donghua was appointed as CFO
of Sinopec Corp.
On 19 January 2020, Mr. Dai
Houliang resigned as Chairman
of the Board, Non-executive
Director and Chairman of each
of the Strategy Committee,
Nomination Committee
and Social Responsibility
Management Committee of the
Board of Sinopec Corp. due to
change of working arrangement.
On 24 March 2020, Mr.
Li Yunpeng resigned as
Non-executive Director and
member of Remuneration and
Appraisal Committee of Sinopec
Corp.
Chairman of each of the
Strategy Committee, Nomination
Committee and Social
Responsibility Management
Committee of the Board of
Sinopec Corp.
On 25 March 2020, Mr.
Zhang Yuzhuo was appointed
as Chairman of the Board,
Non-executive Director and
On 25 March 2020, Mr. Liu
Hongbin was appointed as
Senior Vice President of Sinopec
Corp.
73
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Directors, Supervisors,Senior Management and Employees 3 CHANGE OF SHAREHOLDING
4 CONTRACTUAL INTERESTS
5 REMUNERATION OF DIRECTORS,
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.
OF DIRECTORS AND
SUPERVISORS
As of 31 December 2019 or
any time during the reporting
period, there is no Director
or Supervisor of the Company
entered into any agreement
with any of Sinopec Corp., its
controlling shareholder, any
subsidiary or related subsidiary
which shall significantly benefit
such Director or Supervisor.
SUPERVISORS, AND THE
SENIOR MANAGEMENT
During this reporting period,
there is a total of 15 directors,
supervisors and other senior
management received
remuneration from Sinopec
Corp. with a total amount of
RMB 17.3798 million, including
11 persons’ bonus from 2016
to 2018 of them (does not
contain independent directors).
6 THE COMPANY’S EMPLOYEES
As at 31 December 2019, the
Company has a total of 402,206
employees. There are a total of
250,175 retired employees to
be reimbursed by Sinopec Corp.
Sinopec Marketing Co. Limited,
principal subsidiary of Sinopec
Corp., has 131,039 employees.
THE BREAKDOWN ACCORDING TO THE MEMBERS OF EACH OPERATION SEGMENT AS FOLLOWS:
Marketing and Distribution
131,039
33%
R&D
Other Segments
5,874
5,601
2%
1%
Exploration and Production
136,980
34%
Refining
65,268
16%
Chemicals
57,444
14%
Technology
82,341
21%
Finance
Administration
Others
8,937
32,176
13,050
2%
8%
3%
Production
146,610
36%
Sales
119,092
30%
EMPLOYEES’ PROFESSIONAL STRUCTURE AS FOLLOWS:
74
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Management’s Discussionand AnalysisDirectors, Supervisors,Senior Management and EmployeesDIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES (CONTINUED) EDUCATIONAL BACKGROUND STRUCTURE FOR EMPLOYEES AS FOLLOWS:
Senior high school and
technical school degrees or below
153,296
38%
Master’s degree or above
18,123
5%
Undergraduate
107,740
27%
Junior college
89,642
22%
Technical secondary school
33,405
8%
7 CHANGES OF CORE
TECHNICAL TEAM OR KEY
TECHNICIANS
During the reporting period,
there are no significant changes
of core technical team or key
technicians.
8 EMPLOYEE BENEFITS SCHEME
Details of the Company’s
employee benefits scheme
are set out in Note 39 of the
financial statements prepared
under IFRS of this annual
report. As at 31 December
2019, the Company has a total
of 250,175 retired employees.
All of them participated in
the basic pension schemes
administered by provincial
(autonomous region or
municipalities) governments.
Government-administered
pension schemes are
responsible for the payments of
basic pensions.
9 REMUNERATION POLICY
Based on a relatively united
basic remuneration system,
Sinopec Corp. has established
its remuneration distribution
system based on the value
of positions, performance
& contribution, with an
aim to improve employee
capabilities, and constantly
improve employee performance
evaluation and incentive &
discipline mechanisms.
10 TRAINING PROGRAMS
In 2019, the Company
continuously improved the
management training system.
With an arm to cultivate a
team with ‘firm political stance,
strong will and highly skilled’,
the Company launched training
courses for 145 leaders,
middle-youth-age cadres and
young cadres. Centring on
enterprise development strategy
and key work of the year, the
Company organised training
programs at headquarters
level which were attended
by 3,700 Key employees. To
highlight high-end guidance
and demonstration drive, the
Company held strategic expert
innovation leading project,
senior expert integration
innovation project, scientific
research team leader innovation
and development project, and
realised the breakthrough in
“top” talent training mode.
To enhance the management
of transnational operation,
finance, taxation, law marketing
and trading, the company
organised a series of training
programs covering 780
overseas managers. In addition,
the Company focused on the
inheritance of craftsman spirit
and skills, and continuously
enhanced the training of famous
craftsmen, chief technicians and
top skilled personnel.
75
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Directors, Supervisors,Senior Management and Employees On 31 December, 2019, details of the principal wholly-owned and controlled subsidiaries of the Company were as follows:
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 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
Percentage
of
shares held
by Sinopec
Corp.
(%)
100
100
100
100
100
100
100
100
Total Assets
RMB million
32,385
Net Assets
RMB million
14,977
33,061
14,219
Net Profit/
(Net Loss)
RMB million
Principal Activities
2,831 Investment in exploration, production and
sale of petroleum and natural gas
(795) Coal chemical industry investment
management, production and
sale of coal chemical products
30,763
19,985
1,609 Manufacturing of intermediate petrochemical
43,756
21,767
8,372
5,468
products and petroleum products
2,525 Pipeline storage and transportation
of crude oil
4 Production and sale of polyester chips and
polyester fibres
9,219
4,091
478 Production and sale of refined petroleum
products, lubricant base oil,
and petrochemical materials
4,226
519
29 Manufacturing of intermediate petrochemical
17,019
3,460
products and petroleum products
787 Marketing and distribution of
petrochemical products
100
153,897
32,415
3,129 Trading of crude oil and
Registered
Capital
RMB million
8,000
22,761
15,651
12,000
4,000
3,374
1,595
1,000
5,000
USD 1,662
million
1,500
1,400
100
100
100
20,985
12,552
petrochemical products
(139) Overseas investment holding
10,417
19,468
5,129
4,279
763 Production and sale of catalyst products
136 Trading of petrochemical products
5,294
98.98
18,063
13,020
1,362 Import and processing of crude oil, production,
storage and sale of petroleum products and
petrochemical products
5,000
9,628
85
75
18,951
10,285
1,070 Manufacturing of intermediate petrochemical
products and petroleum products
30,426
17,914
1,961 Manufacturing of intermediate petrochemical
28,403
70.42
469,622
218,784
products and petroleum products
22,984 Marketing and distribution of refined
petroleum products
7,801
67.60
23,331
18,508
3,137 Production and sale of petrochemical products
7,193
59
26,904
11,860
HKD 248
million
10,000
60.33
14,061
10,942
10,824
50.44
45,636
30,016
664 Production, sale, research and development of
petroleum, petrochemical, ethylene and
downstream by-products
1,131 Oil jetty and nature gas pipeline
products and petroleum products
2,225 Manufacturing of synthetic fibres, resin
and plastics, intermediate petrochemical
products and petroleum products
477 Manufacturing of plastics, intermediate
petrochemical products and
petroleum products
55
37,744
17,791
2,452 Manufacturing of intermediate petrochemical
Fujian Petrochemical Company Limited
8,140
50
13,346
11,854
Note 1: All above subsidiaries except Fujian Petrochemical Company Limited are audited by PricewaterhouseCoopers Zhong Tian LLP or PricewaterhouseCoopers in 2019.
KPMG Huazhen LLP served the exception.
2: The above indicated total assets and net profit has been prepared in accordance with CASs. Except for Sinopec Kantons Holdings Limited and Sinopec Overseas
Investment Holdings Ltd, which are incorporated in Bermuda and Hong Kong SAR, respectively, all of the above wholly-owned and non-wholly-owned subsidiaries
are incorporated in the PRC. All of the above wholly-owned and controlling subsidiaries are limited liability companies except for Sinopec Shanghai Petrochemical
Company Limited, Sinopec Marketing Co., Limited and Sinopec Kantons Holdings Limited. The Board of Directors considered that it would be redundant to disclose
the particulars of all subsidiaries and, therefore, only those which have material impact on the results or assets of Sinopec Corp. are set out above.
76
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Principal Wholly-Ownedand Controlled SubsidiariesPRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIES
To the Shareholders of China Petroleum & Chemical Corporation,
OPINION
What we have audited
We have audited the accompanying financial statements China Petroleum & Chemical Corporation (hereinafter “Sinopec Corp.”), which comprise:
PwC ZT Shen Zi (2020) No. 10001
(cid:127)
the consolidated and company balance sheets as at 31 December 2019;
(cid:127)
the consolidated and company income statements for the year then ended;
(cid:127)
the consolidated and company cash flow statements for the year then ended;
(cid:127)
the consolidated and company statements of changes in shareholders’ equity for the year then ended; and
(cid:127) notes to the financial statements.
Our opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company’s financial position of
Sinopec Corp. as at 31 December 2019, and their financial performance and cash flows for the year then ended in accordance with the requirements of
Accounting Standards for Business Enterprises (“CASs”).
BASIS FOR OPINION
We conducted our audit in accordance with China Standards on Auditing (“CSAs”). Our responsibilities under those standards are further described in
the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
We are independent of Sinopec Corp. in accordance with the Code of Ethics for Professional Accountants of the Chinese Institute of Certified Public
Accountants (“CICPA Code”), and we have fulfilled our other ethical responsibilities in accordance with the CICPA Code.
77
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)REPORT OF THE PRC AUDITOR 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.
The key audit matter identified in our audit is “Recoverability of the carrying amount of fixed assets relating to oil and gas producing activities”.
Key Audit Matter
How our audit addressed the Key Audit Matter
Recoverability of the carrying amount of fixed assets relating to oil
and gas producing activities
In auditing the respective value in use calculations of fixed assets relating to
oil and gas producing activities, we performed the following key procedures
on the relevant discounted cash flow projections prepared by management:
Refer to Note 14 “Fixed assets” and Note 56 “Principal accounting
estimates and judgements” to the financial statements.
Low crude oil prices gave rise to possible indication that the carrying
amount of fixed assets relating to oil and gas producing activities as at
31 December 2019 might be impaired. The Group has adopted value
in use as the respective recoverable amounts of fixed assets relating
to oil and gas producing activities, which involved key estimations or
assumptions including:
– Future crude oil prices;
– Future production profiles;
– Future cost profiles; and
– Discount rates.
Because of the significance of the carrying amount of fixed assets
relating to oil and gas producing activities as at 31 December 2019,
together with the use of significant estimations or assumptions in
determining their respective value in use, we had placed our audit
emphasis on this matter.
(cid:127) Evaluated and tested the key controls in respect of the preparation of
the discounted cash flow projections of fixed assets relating to oil and
gas producing activities.
(cid:127) Assessed the methodology adopted in the discounted cash flow
projections, tested mathematical accuracy of the projections, and the
completeness, accuracy, and relevance of underlying data used in the
projections.
(cid:127) Compared estimates of future crude oil prices adopted by the Group
against a range of published crude oil price forecasts.
(cid:127) Compared the future production profiles against the oil and gas
reserve estimation report approved by the management. Evaluated
the competence, capability and objectivity of the management’s
experts engaged in estimating the oil and gas reserves. Assessed key
estimations or assumptions used in the reserve estimation, by reference
to historical data, management plans and/or relevant external data.
(cid:127) Compared the future cost profiles against historical costs and relevant
budgets of the Group.
(cid:127) 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.
(cid:127) Used professionals with specialized skill and knowledge to assist in
the evaluation of the appropriateness of discount rates adopted by the
management.
(cid:127) Evaluated the sensitivity analyses prepared by the Group, and assessed
the potential impacts of a range of possible outcomes.
Based on our work, we found the key assumptions and input data adopted
were supported by the evidence we obtained.
78
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)REPORT OF THE PRC AUDITOR (CONTINUED) OTHER INFORMATION
Management of Sinopec Corp. is responsible for the other information. The other information comprises all of the information included in 2019 annual
report of Sinopec Corp. other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
Management of Sinopec Corp. is responsible for the preparation and fair presentation of these financial statements in accordance with the CASs,
and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing these financial statements, management is responsible for assessing Sinopec Corp.’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless management either intend to liquidate Sinopec
Corp. or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing Sinopec Corp.’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether these financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:
(cid:127)
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.
(cid:127) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
(cid:127) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.
(cid:127) 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.
(cid:127) Evaluate the overall presentation (including the disclosures), structure and content of the financial statements, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
(cid:127) 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.
79
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)REPORT OF THE PRC AUDITOR (CONTINUED) AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (Cont’d)
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
27 March 2020
Signing CPA Zhao Jianrong
(Engagement Partner)
Signing CPA Gao Peng
80
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)REPORT OF THE PRC AUDITOR (CONTINUED) Assets
Current assets
Cash at bank and on hand
Financial assets held for trading
Derivative financial assets
Bills receivable
Accounts receivable
Receivables financing
Prepayments
Other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Long-term equity investments
Other equity instrument investments
Fixed assets
Construction in progress
Right-of-use assets
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
Derivative financial liabilities
Bills payable
Accounts payable
Contract liabilities
Employee benefits payable
Taxes payable
Other payables
Non-current liabilities due within one year
Total current liabilities
Non-current liabilities
Long-term loans
Debentures payable
Lease liabilities
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 for issue by the board of directors on 27 March 2020.
Notes
At 31 December
2019
RMB million
At 31 December
2018
RMB million
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
23
7
24
25
26
27
28
29
30
31
32
33
34
20
35
36
37
38
39
127,927
3,319
837
–
54,865
8,622
5,066
24,109
192,442
28,669
445,856
152,204
1,521
622,423
173,482
198,051
108,956
8,697
8,930
17,616
17,335
1,309,215
1,755,071
31,196
2,729
11,834
187,958
126,735
4,769
69,339
72,324
69,490
576,374
39,625
19,157
177,674
43,163
6,809
15,364
301,792
878,166
121,071
122,127
(321)
1,741
207,423
287,128
739,169
137,736
876,905
1,755,071
167,015
25,732
7,887
7,886
56,993
–
5,937
25,312
184,584
22,774
504,120
145,721
1,450
617,812
136,963
—
103,855
8,676
15,659
21,694
36,358
1,088,188
1,592,308
44,692
13,571
6,416
186,341
124,793
7,312
87,060
77,463
17,450
565,098
61,576
31,951
—
42,800
5,948
27,276
169,551
734,649
121,071
119,192
(6,774)
1,706
203,678
279,482
718,355
139,304
857,659
1,592,308
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
81
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)(A) FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES CONSOLIDATED BALANCE SHEET As at 31 December 2019
Assets
Current assets
Cash at bank and on hand
Financial assets held for trading
Derivative financial assets
Bills receivable
Accounts receivable
Receivables financing
Prepayments
Other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Long-term equity investments
Other equity instrument investments
Fixed assets
Construction in progress
Right-of-use assets
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
Derivative financial liabilities
Bills payable
Accounts payable
Contract liabilities
Employee benefits payable
Taxes payable
Other payables
Non-current liabilities due within one year
Total current liabilities
Non-current liabilities
Long-term loans
Debentures payable
Lease liabilities
Provisions
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
Notes
At 31 December
2019
RMB million
At 31 December
2018
RMB million
8
10
11
13
14
15
16
54,072
–
940
–
21,544
207
2,665
78,872
49,116
25,149
232,565
304,687
395
291,547
60,493
112,832
8,809
2,630
7,315
2,490
791,198
1,023,763
19,919
157
4,766
75,352
5,112
1,214
43,025
118,064
59,596
327,205
12,680
7,000
107,783
34,514
4,471
166,448
493,653
121,071
68,841
1,181
949
207,423
130,645
530,110
1,023,763
82,879
22,500
–
156
29,989
–
2,488
57,432
45,825
15,835
257,104
289,207
395
302,082
51,598
—
8,571
2,480
11,021
9,145
674,499
931,603
3,961
967
2,075
82,343
4,230
4,294
54,764
119,514
16,729
288,877
48,104
20,000
—
33,094
4,332
105,530
394,407
121,071
68,795
(485)
989
203,678
143,148
537,196
931,603
These financial statements have been approved for issue by the board of directors on 27 March 2020.
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
82
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)BALANCE SHEETAs at 31 December 2019
Operating income
Less: Operating costs
Taxes and surcharges
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Financial expenses
Exploration expenses, including dry holes
Add: Other income
Investment income
(Losses)/gains from changes in fair value
Credit impairment losses
Impairment losses
Asset disposal losses
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
Classification by ownership:
Equity shareholders of the Company
Minority interests
Basic earnings per share
Diluted earnings per share
Other comprehensive income
Items that may not be reclassified subsequently to profit or loss
Changes in fair value of other equity instrument investments
Items that may be reclassified subsequently to profit or loss
Other comprehensive income that can be converted into profit or loss under the equity method
Cash flow hedges
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 for issue by the board of directors on 27 March 2020.
Notes
40
40/43
41
43
43
43/44
42
43/45
46
47
48
49
50
51
52
63
63
38
2019
RMB million
2018
RMB million
2,966,193
2,488,852
242,535
63,516
62,112
9,395
9,967
10,510
5,973
12,628
(3,511)
(1,264)
(1,789)
(1,318)
90,025
2,598
2,607
90,016
17,894
72,122
72,122
–
57,591
14,531
0.476
0.476
2,891,179
2,401,012
246,498
59,396
73,390
7,956
(1,001)
10,744
6,694
11,428
2,656
(141)
(11,605)
(742)
101,474
2,070
3,042
100,502
20,213
80,289
80,289
–
63,089
17,200
0.521
0.521
(31)
(53)
(810)
4,941
1,480
5,580
77,702
63,006
14,696
(229)
(9,741)
3,399
(6,624)
73,665
55,471
18,194
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
83
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2019
Operating income
Less: Operating costs
Taxes and surcharges
Selling and distribution expenses
General and administrative expenses
Research and development expenses
Financial expenses
Exploration expenses, including dry holes
Add: Other income
Investment income
Losses from changes in fair value
Credit impairment losses
Impairment losses
Asset disposal gains
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
Other comprehensive income that can be converted into profit or loss under the equity method
Cash flow hedges
Total other comprehensive income
Total comprehensive income
These financial statements have been approved for issue by the board of directors on 27 March 2020.
Notes
40
40
47
2019
RMB million
2018
RMB million
1,021,272
799,566
161,820
3,420
28,302
8,597
7,628
9,417
3,497
28,062
(278)
132
(534)
6,407
39,808
665
1,135
39,338
1,886
37,452
37,452
–
201
1,384
1,585
39,037
1,058,493
812,355
168,905
3,078
36,169
7,453
1,029
9,796
2,777
28,336
(20)
(42)
(6,766)
12
44,005
599
1,687
42,917
2,960
39,957
39,957
–
(64)
(617)
(681)
39,276
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
84
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)INCOME STATEMENTFor the year ended 31 December 2019
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
Other cash received relating to financing activities
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 in cash and cash equivalents
These financial statements have been approved for issue by the board of directors on 27 March 2020.
Notes
2019
RMB million
2018
RMB million
3,174,862
2,027
98,327
3,275,216
(2,598,630)
(83,082)
(315,668)
(124,416)
(3,121,796)
153,420
35,996
10,272
703
97,804
–
144,775
(141,142)
(16,334)
(106,731)
(1,031)
(265,238)
(120,463)
3,919
3,919
599,866
320
604,105
(612,108)
(59,523)
(7,354)
(17,187)
(688,818)
(84,713)
147
(51,609)
3,189,004
1,681
90,625
3,281,310
(2,565,392)
(77,048)
(329,387)
(133,615)
(3,105,442)
175,868
56,546
10,720
9,666
87,696
11
164,639
(103,014)
(39,666)
(85,193)
(3,188)
(231,061)
(66,422)
1,886
1,886
746,655
190
748,731
(772,072)
(87,483)
(13,700)
(436)
(859,991)
(111,260)
518
(1,296)
54(a)
54(d)
54(b)
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
85
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2019
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
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
Other cash received relating to financing activities
Sub-total of cash inflows
Cash repayments of borrowings
Cash paid for dividends or interest
Other cash paid relating to financing activities
Sub-total of cash outflows
Net cash flow from financing activities
Net decrease in cash and cash equivalents
These financial statements have been approved for issue by the board of directors on 27 March 2020.
Notes
2019
RMB million
2018
RMB million
1,162,870
1,769
6,239
1,170,878
(842,996)
(45,524)
(209,863)
(18,719)
(1,117,102)
53,776
23,584
31,385
690
42,037
97,696
(64,100)
(16,884)
(53,138)
(134,122)
(36,426)
109,579
91,865
201,444
(106,920)
(50,230)
(104,780)
(261,930)
(60,486)
(43,136)
1,228,816
1,481
19,380
1,249,677
(867,259)
(41,770)
(206,305)
(26,211)
(1,141,545)
108,132
65,930
43,693
2,838
28,724
141,185
(54,792)
(40,169)
(28,759)
(123,720)
17,465
109,915
–
109,915
(176,757)
(71,944)
–
(248,701)
(138,786)
(13,189)
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
86
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)CASH FLOW STATEMENTFor the year ended 31 December 2019
Other
comprehensive
income
RMB million
Specific
reserve
RMB million
Surplus
reserves
RMB million
Retained
earnings
RMB million
Total
shareholders’
equity
attributable
to equity
shareholders of
the Company
RMB million
Minority
interests
RMB million
Total
shareholders’
equity
RMB million
(4,413)
(12)
(4,425)
–
(7,618)
(7,618)
5,269
–
–
–
–
–
–
–
–
(6,774)
(6,774)
–
5,415
5,415
1,038
–
–
–
–
–
–
–
–
(321)
888
–
888
–
–
–
–
–
–
–
–
–
–
818
–
1,706
1,706
–
–
–
–
–
–
–
–
–
–
35
–
1,741
199,682
–
199,682
–
–
–
–
3,996
–
–
–
–
3,996
–
–
203,678
203,678
–
–
–
–
3,745
–
–
–
–
3,745
–
–
207,423
290,459
12
290,471
63,089
–
63,089
–
(3,996)
(67,799)
–
–
–
(71,795)
–
(2,283)
279,482
279,482
57,591
–
57,591
–
(3,745)
(46,008)
–
–
–
(49,753)
–
(192)
287,128
727,244
–
727,244
63,089
(7,618)
55,471
5,269
–
(67,799)
–
(12)
–
(67,811)
818
(2,636)
718,355
718,355
57,591
5,415
63,006
1,038
–
(46,008)
–
2,933
–
(43,075)
35
(190)
739,169
126,826
–
126,826
17,200
994
18,194
–
–
–
2,060
(299)
(7,476)
(5,715)
91
(92)
139,304
139,304
14,531
165
14,696
55
–
–
5,495
(2,933)
(18,989)
(16,427)
34
74
137,736
854,070
–
854,070
80,289
(6,624)
73,665
5,269
–
(67,799)
2,060
(311)
(7,476)
(73,526)
909
(2,728)
857,659
857,659
72,122
5,580
77,702
1,093
–
(46,008)
5,495
–
(18,989)
(59,502)
69
(116)
876,905
Share
capital
RMB million
Capital
reserve
RMB million
121,071
–
121,071
119,557
–
119,557
–
–
–
–
–
–
–
–
–
–
–
–
121,071
121,071
–
–
–
–
–
–
–
–
–
–
–
–
121,071
–
–
–
–
–
–
–
(12)
–
(12)
–
(353)
119,192
119,192
–
–
–
–
–
–
–
2,933
–
2,933
–
2
122,127
Balance at 31 December 2017
Change in accounting policy
Balance at 1 January 2018
Change for the year
1. Net profit
2. Other comprehensive income (Note 38)
Total comprehensive income
Amounts transferred to initial carrying amount of hedged items
Transactions with owners, recorded directly in shareholders’ equity:
3.
Appropriations of profits:
– Appropriations for surplus reserves
– Distributions to shareholders (Note 53)
Contributions to subsidiaries from minority interests
4.
5.
Transaction with minority interests
6. Distributions to minority interests
Total transactions with owners, recorded directly in shareholders’ equity
7. Net increase in specific reserve for the year
8. Others
Balance at 31 December 2018
Balance at 1 January 2019
Change for the year
1. Net profit
2. Other comprehensive income (Note 38)
Total comprehensive income
Amounts transferred to initial carrying amount of hedged items
Transactions with owners, recorded directly in shareholders’ equity:
3.
Appropriations of profits:
– Appropriations for surplus reserves
– Distributions to shareholders (Note 53)
Contributions to subsidiaries from minority interests
4.
5.
Transaction with minority interests
6. Distributions to minority interests
Total transactions with owners, recorded directly in shareholders’ equity
7. Net increase in specific reserve for the year
8. Others
Balance at 31 December 2019
These financial statements have been approved for issue by the board of directors on 27 March 2020.
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
87
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2019
Balance at 31 December 2017
Change in accounting policy
Balance at 1 January 2018
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:
－Appropriations for surplus reserves
－Distributions to shareholders (Note 53)
Total transactions with owners, recorded directly in shareholders’ equity
4. Net increase in specific reserve for the year
5. Others
Balance at 31 December 2018
Balance at 1 January 2019
Change for the year
1. Net profit
2. Other comprehensive income
Total comprehensive income
Amounts transferred to initial carrying amount of hedged items
Transactions with owners, recorded directly in shareholders’ equity:
3. Appropriations of profits:
－Appropriations for surplus reserves
－Distributions to shareholders (Note 53)
Total transactions with owners, recorded directly in shareholders’ equity
4. Net increase in specific reserve for the year
5. Others
Balance at 31 December 2019
Share capital Capital reserve
RMB million
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
–
121,071
–
–
–
–
–
–
–
–
121,071
121,071
–
–
–
–
–
–
–
–
–
121,071
68,789
–
68,789
–
–
–
–
–
–
–
6
68,795
68,795
–
–
–
–
–
–
–
–
46
68,841
196
–
196
–
(681)
(681)
–
–
–
–
–
(485)
(485)
–
1,585
1,585
81
–
–
–
–
–
1,181
482
–
482
–
–
–
–
–
–
507
–
989
989
–
–
–
–
–
–
–
(40)
–
949
199,682
–
199,682
–
–
–
3,996
–
3,996
–
–
203,678
203,678
–
–
–
–
3,745
–
3,745
–
–
207,423
177,049
–
177,049
39,957
–
39,957
(3,996)
(67,799)
(71,795)
–
(2,063)
143,148
143,148
37,452
–
37,452
–
(3,745)
(46,008)
(49,753)
–
(202)
130,645
567,269
–
567,269
39,957
(681)
39,276
–
(67,799)
(67,799)
507
(2,057)
537,196
537,196
37,452
1,585
39,037
81
–
(46,008)
(46,008)
(40)
(156)
530,110
These financial statements have been approved for issue by the board of directors on 27 March 2020.
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The accompanying notes form part of these financial statements.
88
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2019
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 27 March 2020.
According to the State Council’s approval to the “Preliminary Plan for the Reorganisation of China Petrochemical Corporation” (the “Reorganisation”),
the Company was established by China Petrochemical Corporation, which transferred its core businesses together with the related assets and
liabilities at 30 September 1999 to the Company. Such assets and liabilities had been valued jointly by China United Assets Appraisal Corporation,
Beijing Zhong Zheng Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa International Properties Valuation Corporation. The net
asset value was determined at RMB 98,249,084,000. The valuation was reviewed and approved by the Ministry of Finance (the “MOF”) (Cai Ping
Zi [2000] No. 20 “Comments on the Review of the Valuation Regarding the Formation of a Joint Stock Limited Company by China Petrochemical
Corporation”).
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 57, and there are no significant changes related to the consolidation scope in the
current year.
2 BASIS OF PREPARATION
(1) Statement of compliance of China Accounting Standards for Business Enterprises (“CASs”)
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 CASs collectively) issued by the MOF on or after 15 February
2006. These financial statements also comply with the disclosure requirements of “Regulation on the Preparation of Information Disclosures of
Companies Issuing Public Shares, No. 15: General Requirements for Financial Reports” issued by the China Securities Regulatory Commission
(“CSRC”). These financial statements present truly and completely the consolidated and company financial position as at 31 December 2019,
and the consolidated and company financial performance and the consolidated and company cash flows for the year ended 31 December 2019.
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 assets held for trading (see Note 3(11))
– Other equity instrument investments (see Note 3(11))
– Derivative financial instruments (see Note 3(11))
– Receivables financing (see Note 3(11))
(4) Functional currency and presentation currency
The functional currency of the Company’s and most of its subsidiaries are Renminbi. The Company and its subsidiaries determine their functional
currency according to the main economic environment in where they operate. The Group’s consolidated financial statements are presented in
Renminbi. Some of subsidiaries use other currency as the functional currency. The Company translates the financial statements of subsidiaries
from their respective functional currencies into Renminbi (see Note 3(2)) if the subsidiaries’ functional currencies are not Renminbi.
89
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2019 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 financial assets (Note 3(11)), valuation of inventories (Note 3(4)), depreciation of fixed assets
and depletion of oil and gas properties (Note 3(7), (8)), measurement of provisions (Note 3(16)), etc.
Principal accounting estimates and judgements of the Group are set out in Note 56.
(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(10)) if it is an excess, otherwise in
the profit or loss. The expense incurred for equity securities and debt securities issued as the consideration of the combination is recognised
in the initial cost of the securities. Any other expense directly attributable to the business combination is recognised in the profit or loss
for the year. The difference between the fair value and the book value of the assets given is recognised in profit or loss. The acquiree’s
identifiable assets, liabilities and contingent liabilities, if satisfying the recognition criteria, are recognised by the Group at their fair value at
the acquisition date. The acquisition date is the date on which the acquirer effectively obtains control of the acquiree.
(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.
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.
90
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 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)
Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the Group
derecognises assets, liabilities, minority interests and other equity items related to the subsidiary. The remaining equity investment is
remeasured to fair value at the date in which control is lost. The sum of consideration received from disposal of equity investment and the
fair value of the remaining equity investment, net of the fair value of the Group’s previous share of the subsidiary’s identifiable net assets
recorded from the acquisition date, is recognised in investment income in the period in which control is lost. Other comprehensive income
related to the previous equity investment in the subsidiary, is transferred to investment income when control is lost. Other comprehensive
income related to the equity investment of the original subsidiary shall be converted into the current investment income in the event of loss
of control.
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 other equity
instrument investments; 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.
(4) Inventories
Inventories are initially measured at cost. Cost includes the cost of purchase and processing, and other expenditures incurred in bringing the
inventories to their present location and condition. The cost of inventories is mainly calculated using the weighted average method. In addition to
the cost of purchase of raw material, work in progress and finished goods include direct labour and an appropriate allocation of manufacturing
overhead costs.
At the balance sheet date, inventories are stated at the lower of cost and net realisable value.
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.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Inventories (Continued)
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(12)) 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.
(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.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(5) Long-term equity investments (Continued)
(b) Investment in joint ventures and associates (Continued)
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 venture is reduced to
zero, except to the extent that the Group has an obligation to assume additional losses. However, if the Group has incurred obligations for
additional losses and the conditions on recognition of provision are satisfied in accordance with the accounting standard on contingencies,
the Group continues recognising the investment losses and the provision. Where net profits are subsequently made by the associate or joint
venture, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised.
The Group adjusts the carrying amount of the long-term equity investment for changes in owners’ equity of the investee other than those
arising from net profits or losses and other comprehensive income, and recognises the corresponding adjustment in capital reserve.
(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(12).
(6) Leases
A lease is a contract that a lessor transfers the right to use an identified asset for a period of time to a lessee in exchange for consideration.
(a) As Lessee
The Group recognises a right-of-use asset at the commencement date, and recognises the lease liability at the present value of the lease
payments that are not paid at that date. The lease payments include fixed payments, the exercise price of a purchase option if the Group is
reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease term reflects the Group exercising
that option, etc. Variable payments that are based on a percentage of sales are not included in the lease payments, and should be recognised
in profit or loss when incurred. Lease liabilities to be paid within one year (including one year) from balance sheet date is presented in non-
current liabilities due within one year.
Right-of-use assets of the Group mainly comprise land. Right-of-use assets are measured at cost which comprises the amount of the initial
measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the
lessee, less any lease incentives received. The Group depreciates the right-of-use assets over the shorter of the asset’s useful life and the
lease term on a straight-line basis. When the recoverable amount of a right-of-use asset is less than its carrying amount, the carrying amount
is reduced to the recoverable amount.
Payments associated with short-term leases with lease terms within 12 months and leases for which the underlying assets are individually
of low value when it is new are recognised on a straight-line basis over the lease term as an expense in profit or loss or as cost of relevant
assets, instead of recognising right-of-use assets and lease liabilities.
(b) As Lessor
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a
lease other than a finance lease.
When the Group leases self-owned plants and buildings, equipment and machinery, lease income from an operating lease is recognised on a
straight-line basis over the period of the lease. The Group recognises variable lease income which is based on a certain percentage of sales
as rental income when occurred.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(7) 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(12)). Construction in
progress is stated in the balance sheet at cost less impairment losses (see Note 3(12)).
The cost of a purchased fixed asset comprises the purchase price, related taxes, and any directly attributable expenditure for bringing the asset
to working condition for its intended use. The cost of self-constructed assets includes the cost of materials, direct labour, capitalised borrowing
costs (see Note 3(19)), and any other costs directly attributable to bringing the asset to working condition for its intended use. According to legal
or contractual obligations, costs of dismantling and removing the items and restoring the site on which the related assets located are included in
the initial cost.
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
12-50 years
4-30 years
Estimated rate
of residual value
3%
3%
(8) 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.
(9) 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(12)). For an intangible asset with finite useful life, its cost less estimated residual value and accumulated
impairment losses is amortised on a straight-line basis over the expected useful lives, unless the intangible assets are classified as held for sale.
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.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(10) 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(12)). On disposal of an asset group or a set of
asset groups, any attributable amount of purchased goodwill is written off and included in the calculation of the profit or loss on disposal.
(11) Financial Instruments
Financial instruments, refer to the contracts that form one party’s financial assets and form the financial liabilities or equity instruments of the
other party. The Group recognises a financial asset or a financial liability when the Group enters into and becomes a party to the underlining
contract of the financial instrument.
(a) Financial assets
(i) Classification and measurement
The Group classifies financial assets into different categories depending on the business model for managing the financial assets and the
contractual terms of cash flows of the financial assets: (1) financial assets measured at amortised cost, (2) financial assets measured at
fair value through other comprehensive income, (3) financial assets measured at fair value through profit or loss. A contractual cash flow
characteristic which could have only a de minimis effect, or could have an effect that is more than de minimis but is not genuine, does
not affect the classification of the financial asset.
Financial assets are initially recognised at fair value. For financial assets measured at fair value through profit or loss, the relevant
transaction costs are recognised in profit or loss. The transaction costs for other financial assets are included in the initially recognised
amount. However, accounts receivable or bills receivable arising from sales of goods or rendering services, without significant financing
component, are initially recognised based on the transaction price expected to be entitled by the Group.
Debt instruments
The debt instruments held by the Group refer to the instruments that meet the definition of financial liabilities from the perspective of the
issuer, and are measured in the following ways:
– Measured at amortised cost:
The business model for managing such financial assets by the Group are held for collection of contractual cash flows. The contractual
cash flow characteristics are to give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding. Interest income from these financial assets is recognised using the effective interest rate method. The
financial assets include cash at bank and on hand and receivables.
– Measured at fair value through other comprehensive income:
The business model for managing such financial assets by the Group are held for collection of contractual cash flows and for
selling the financial assets, the contractual cash flow characteristics of such financial assets are consistent with the basic lending
arrangements. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of
impairment gains or losses, foreign exchange gains and losses and interest income calculated using the effective interest rate method,
which are recognised in profit or loss. The financial assets include receivables financing.
Equity instruments
Equity instruments that the Group has no power to control, jointly control or exercise significant influence over, are measured at fair value
through profit or loss and presented as financial assets held for trading.
In addition, the Group designates some equity instruments that are not held for trading as financial assets at fair value through other
comprehensive income, and presented in other equity instrument investments. The relevant dividends of these financial assets are
recognised in profit or loss. When derecognised, the cumulative gain or loss previously recognised in other comprehensive income is
transferred to retained earnings.
(ii) Impairment
The Group recognises a loss allowance for expected credit losses on financial assets measured at amortised cost and receivables
financing measured at fair value through other comprehensive income.
The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past
events, current conditions and forecasts of future economic conditions.
The Group measures the expected credit losses of financial instruments on different stages at each balance sheet date. For financial
instruments that have no significant increase in credit risk since the initial recognition, on first stage, the Group measures the loss
allowance at an amount equal to 12-month expected credit losses. If there has been a significant increase in credit risk since the initial
recognition of a financial instrument but credit impairment has not occurred, on second stage, the Group recognises a loss allowance
at an amount equal to lifetime expected credit losses. If credit impairment has occurred since the initial recognition of a financial
instrument, on third stage, the Group recognises a loss allowance at an amount equal to lifetime expected credit losses.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(a) Financial assets (Continued)
(ii) Impairment (Continued)
For financial instruments that have low credit risk at the balance sheet date, the Group assumes that there is no significant increase in
credit risk since the initial recognition, and measures the loss allowance at an amount equal to 12-month expected credit losses.
For financial instruments on the first stage and the second stage, and that have low credit risk, the Group calculates interest income
according to carrying amount without deducting the impairment allowance and effective interest rate. For financial instruments on the
third stage, interest income is calculated according to the carrying amount minus amortised cost after the provision of impairment
allowance and effective interest rate.
For accounts receivable, bills receivable and receivables financing related to revenue, the Group measures the loss allowance at an
amount equal to lifetime expected credit losses.
The Group recognises the loss allowance accrued or written back in profit or loss.
(iii) Derecognition
The Group derecognises a financial asset when a) the contractual right to receive cash flows from the financial asset expires; b) the Group
transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset; c) the financial assets have
been transferred and the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but
the Group has not retained control.
On derecognition of other equity instrument investments, the difference between the carrying amounts and the sum of the consideration
received and any cumulative gain or loss previously recognised in other comprehensive income, is recognised in retained earnings. While
on derecognition of other financial assets, this difference is recognised in profit or loss.
(b) Financial liabilities
The Group, at initial recognition, classifies financial liabilities as either financial liabilities subsequently measured at amortised cost or
financial liabilities at fair value through profit or loss.
The Group’s financial liabilities are mainly financial liabilities measured at amortised cost, including bills payable, accounts payable, other
payables, loans and debentures payable, etc. These financial liabilities are initially measured at the amount of their fair value after deducting
transaction costs and use the effective interest rate method for subsequent measurement.
Where the present obligations of financial liabilities are completely or partially discharged, the Group derecognises these financial liabilities
or discharged parts of obligations. The differences between the carrying amounts and the consideration received are recognised in profit or
loss.
(c) Determination of fair value
If there is an active market for financial instruments, the quoted price in the active market is used to measure fair values of the financial
instruments. If no active market exists for financial instruments, valuation techniques are used to measure fair values. In valuation, the Group
adopts valuation techniques that are applicable in the current situation and have sufficient available data and other information to support it,
and selects input values that are consistent with the asset or liability characteristics considered by market participants in the transaction of
relevant assets or liabilities, and gives priority to relevant observable input values. Use of unobservable input values where relevant observable
input values cannot be obtained or are not practicable.
(d) Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or
loss on remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for hedge accounting.
Hedge accounting is a method which recognises the offsetting effects on profit or loss of changes in the fair values of the hedging instrument
and the hedged item in the same accounting period, to represent the effect of risk management activities.
Hedged items are the items that expose the Group to risks of changes in future cash flows and that are designated as being hedged and that
must be reliably measurable. The Group’s hedged items include a forecast transaction that is settled with an undetermined future market
price and exposes the Group to risk of variability in cash flows, etc.
A hedging instrument is a designated derivative whose changes in cash flows are expected to offset changes in the cash flows of the hedged
item.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(d) Derivative financial instruments and hedge accounting (Continued)
The hedging relationship meets all of the following hedge effectiveness requirements:
(1) There is an economic relationship between the hedged item and the hedging instrument, which share a risk and that gives rise to opposite
changes in fair value that tend to offset each other.
(2) The effect of credit risk does not dominate the value changes that result from that economic relationship.
(3) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually
hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. However, that
designation shall not reflect an imbalance between the weightings of the hedged item and the hedging instrument.
– Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a
component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable
forecast transaction, and could affect profit or loss. As long as a cash flow hedge meets the qualifying criteria for hedge accounting,
the hedging relationship shall be accounted for as follows:
– 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 gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income.
The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.
If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a hedged
forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge
accounting is applied, the entity shall remove that amount from the cash flow hedge reserve and include it directly in the initial cost
or other carrying amount of the asset or the liability. This is not a reclassification adjustment and hence it does not affect other
comprehensive income.
For cash flow hedges, other than those covered by the preceding two policy statements, that amount shall be reclassified from the
cash flow hedge reserve to profit or loss as a reclassification adjustment in the same period or periods during which the hedged
expected future cash flows affect profit or loss.
If the amount that has been accumulated in the cash flow hedge reserve is a loss and the Group expects that all or a portion of that
loss will not be recovered in one or more future periods, the Group immediately reclassify the amount that is not expected to be
recovered into profit or loss.
When the hedging relationship no longer meets the risk management objective on the basis of which it qualified for hedge accounting (ie
the entity no longer pursues that risk management objective), or when a hedging instrument expires or is sold, terminated, exercised,
or there is no longer an economic relationship between the hedged item and the hedging instrument or the effect of credit risk starts
to dominate the value changes that result from that economic relationship or no longer meets the criteria for hedge accounting, the
Group discontinues prospectively the hedge accounting treatments. If the hedged future cash flows are still expected to occur, that
amount shall remain in the cash flow hedge reserve and shall be accounted for as cash flow hedges. If the hedged future cash flows
are no longer expected to occur, that amount shall be immediately reclassified from the cash flow hedge reserve to profit or loss as a
reclassification adjustment. A hedged future cash flow that is no longer highly probable to occur may still be expected to occur, if the
hedged future cash flows are still expected to occur, that amount shall remain in the cash flow hedge reserve and shall be accounted
for as cash flow hedges.
(12) 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, right-of-use assets, 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.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(12) Impairment of other non-financial long-term assets (Continued)
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.
(13) Long-term deferred expenses
Long-term deferred expenses are amortised on a straight-line basis over their beneficial periods.
(14) 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.
(15) 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 realise 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.
98
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(15) Income tax (Continued)
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.
(16) 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.
(17) Revenue recognition
Revenue arises in the course of the Group’s ordinary activities, and increases in economic benefits in the form of inflows that result in an
increase in equity, other than those relating to contributions from equity participants.
The Group sells crude oil, natural gas, petroleum and chemical products, etc. Revenue is recognised according to the expected consideration
amount, when a customer obtains control over the relevant goods or services. To determine whether a customer obtains control of a promised
asset, the Group shall consider indicators of the transfer of control, which include, but are not limited to, the Group has a present right to
payment for the asset; the Group has transferred physical possession of the asset to the customer; the customer has the significant risks and
rewards of ownership of the asset; the customer has accepted the asset.
Sales of goods
Sales are recognised when control of the goods have transferred, being when the products are delivered to the customer. Advance from
customers but goods not yet delivered is recorded as contract liabilities and is recognised as revenues when a customer obtains control over the
relevant goods.
(18) 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.
(19) 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 in the capitalisable period.
Except for the above, other borrowing costs are recognised as financial expenses in the income statement when incurred.
99
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(20) Repairs and maintenance expenses
Repairs and maintenance (including overhauling expenses) expenses are recognised in profit or loss when incurred.
(21) Environmental expenditures
Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations is expensed as incurred.
Liabilities related to future remediation costs are recorded when environmental assessments and/or cleanups are probable and the costs can
be reliably estimated. As facts concerning environmental contingencies become known to the Group, the Group reassesses its position both with
respect to accrued liabilities and other potential exposures.
(22) Research and development costs
Research costs and development costs that cannot meet the capitalisation criteria are recognised in profit or loss when incurred.
(23) Dividends
Dividends and distributions of profits proposed in the profit appropriation plan which will be authorised and declared after the balance sheet
date, are not recognised as a liability at the balance sheet date and are separately disclosed in the notes to the financial statements. Dividends
are recognised as a liability in the period in which they are declared.
(24) Related parties
If a party has the power to control, jointly control or exercise significant influence over another party, or vice versa, or where two or more parties
are subject to common control, joint control from another party, they are considered to be related parties, except for the two parties significantly
influenced by a party. Related parties may be individuals or enterprises. Where enterprises are subject to state control but are otherwise
unrelated, they are not related parties. Related parties of the Group and the Company include, but not limited to:
(a) the holding company of the Company;
(b) the subsidiaries of the Company;
(c) the parties that are subject to common control with the Company;
(d) investors that have joint control or exercise significant influence over the Group;
(e) enterprises or individuals if a party has control, joint control over both the enterprises or individuals and the Group;
(f) joint ventures of the Group, including subsidiaries of the joint ventures;
(g) associates of the Group, including subsidiaries of the associates;
(h) principle individual investors of the Group and close family members of such individuals;
(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:
(cid:127) engage in business activities from which it may earn revenues and incur expenses;
(cid:127) 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
(cid:127)
for which financial information regarding financial position, results of operations and cash flows are available.
Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting, and segment
accounting policies are consistent with those for the consolidated financial statements.
100
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(26) Changes in significant accounting policies
Ministry of Finance (MOF) issued revised “No. 21 Accounting Standards for Business Enterprises – Lease” (“New Lease Standard”) in 2018,
then also issued Cai Kuai [2019] No. 6 “Announcement of the revision of general enterprise financial statements format for 2019” and the
revised Accounting Standards for Business Enterprises No. 7 – Exchange of Non-monetary Assets (hereinafter referred to as “revised standards
for exchange of non-monetary assets) and Accounting Standards for Business Enterprises No. 12 – Debt Restructuring (hereinafter referred to
as “revised standards for debt restructuring). The Group has adopted the above standards and guidelines to prepare the financial statements
of 2019. The revised standards for exchange of non-monetary assets and debt restructuring have no significant impacts on the Group and the
Company, the impact of other revises to the Group and the Company’s financial statements is as follows:
(a) Lease
According to the provisions of new lease standard, the Group and the Company would not reassess the contracts that have already existed
prior to the date of initial application. The Group and the Company adjust the cumulative impact of first implementation of the standards into
relevant items in the financial statements of 2019, and the comparative financial statements of 2018 have not been restated.
(i) For operating lease contracts that already exist before the first implementation of the new lease standard, the Group and the Company
apply different methods based on the remaining lease period:
If the remaining lease term is more than one year, the Group and the Company recognise the lease liabilities based on the remaining
lease payment and the incremental borrowing interest rate on 1 January 2019. Right-of-use assets are measured at the amount equivalent
to lease liabilities and adjusted as necessary depending on prepaid rent.
If the remaining lease period is 12 months or less, or leases for which the underlying assets are individually of low value when it is new,
the Group and the Company adopt the simplified method that do not recognise the right-of-use assets and lease liabilities, which has no
significant impact on the financial statements.
The affected financial statement line item
Right-of-use assets
Lease liabilities
Current portion of non-current liabilities
Long-term deferred expenses
Prepayments
Affected amount on January 1 2019
(RMB million)
The Group
The Company
207,455
184,670
13,894
(8,125)
(766)
119,776
112,322
7,454
–
–
On 1 January 2019, the Group and the Company use the same discount rate for lease contracts with similar characteristics when
measuring lease liabilities. The incremental borrowing interest rates range from 4.35% to 4.90%.
(ii) On 1 January 2019, the Group reconciled the unpaid minimum operating lease payment that disclosed under the original lease standard
to the lease liabilities recognised under the new lease standard as follows:
The minimum future operating lease payments disclosed on 31 December 2018
The present value of the above-mentioned minimum operating lease payments discounted
at the incremental borrowing rate
Deduct: Present value of payments with terms of 12 months or less and leases for
which the underlying assets are individually of low value when it is new
Lease liabilities recognised on 1 January 2019 (including Non-current liabilities
due within one year) (Note 33)
(b) The revision of general enterprise financial statements format
(i) The impact to the Group’s financial statements is as follows:
The Group
(RMB million)
352,794
200,867
(2,303)
198,564
Contents and reasons of the changes
Item
The Group separately presents bills
and accounts receivable into bills
receivable and accounts receivable
The Group separately presents bills
and accounts payable into bills
payable and accounts payable
Accounts receivable
Bills receivable
Bills receivable and accounts receivable
Accounts payable
Bills payable
Bills payable and accounts payable
31 December
2018
RMB million
1 January
2018
RMB million
56,993
7,886
(64,879)
186,341
6,416
(192,757)
68,494
16,207
(84,701)
200,073
6,462
(206,535)
101
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(26) Changes in significant accounting policies (Continued)
(b) The revision of general enterprise financial statements format (Continued)
(ii) The impact to the Company’s financial statements is as follows:
Contents and reasons of the changes
Item
The Company separately presents bills and
accounts receivable into bills receivable and
accounts receivable
The Company separately presents bills
and accounts payable into bills payable
and accounts payable
Accounts receivable
Bills receivable
Bills receivable and accounts receivable
Accounts payable
Bills payable
Bills payable and accounts payable
31 December
2018
RMB million
1 January
2018
RMB million
29,989
156
(30,145)
82,343
2,075
(84,418)
37,609
157
(37,766)
83,449
3,155
(86,604)
4 TAXATION
Major types of tax applicable to the Group are income tax, consumption tax, resources tax, value-added tax, city construction tax, education
surcharge and local education surcharge.
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
5 CASH AT BANK AND ON HAND
The Group
Cash on hand
Renminbi
Cash at bank
Renminbi
US Dollar
Hong Kong Dollar
EUR
Others
Deposits at related parities
Renminbi
US Dollar
EUR
Others
Total
Effective from
13 January 2015
(RMB/Ton)
2,109.76
1,411.20
2,105.20
1,948.64
1,711.52
1,218.00
1,495.20
At 31 December 2019
At 31 December 2018
Original
currency Exchange
rates
million
1,889
17
1
6.9762
0.8958
7.8155
2,560
14
6.9762
7.8155
Original
currency Exchange
rates
million
3,377
39
1
6.8632
0.8762
7.8473
2,389
4
6.8632
7.8473
RMB
million
14
78,924
13,174
15
8
85
92,220
17,684
17,862
106
55
35,707
127,927
RMB
million
82
102,572
23,179
35
11
79
125,958
24,625
16,374
33
25
41,057
167,015
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 2019, time deposits with financial institutions of the Group amounted to RMB 67,614 million (2018: RMB 55,093 million).
At 31 December 2019, structured deposits included in cash at bank and on hand with financial institutions of the Group amounted to RMB 19,210
million (2018: RMB 77,909 million).
102
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
6 FINANCIAL ASSETS HELD FOR TRADING
Structured deposits
Equity investments, listed and at quoted market price
Total
At 31 December
2019
RMB million
3,318
1
At 31 December
2018
RMB million
25,550
182
3,319
25,732
The financial assets are primarily the structured deposits with financial institutions, which are presented as current assets since they are expected
to be expired within 12 months from the end of the reporting period.
7 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
Derivative financial assets and derivative financial liabilities of the Group are primarily commodity futures and swaps contracts. See Note 61.
8 ACCOUNTS RECEIVABLE
Accounts receivable
Less: Allowance for doubtful accounts
Total
Ageing analysis on accounts receivable is as follows:
The Group
The Company
At 31 December
2019
RMB million
56,713
1,848
At 31 December
2018
RMB million
57,599
606
At 31 December
2019
RMB million
21,675
131
At 31 December
2018
RMB million
30,120
131
54,865
56,993
21,544
29,989
At 31 December 2019
At 31 December 2018
The Group
Percentage
to total
accounts
receivable
%
98.2
0.5
0.2
1.1
Allowance
RMB million
1,204
70
65
509
Percentage
of allowance
to accounts
receivable
balance
%
2.2
26.9
50.4
84.4
Percentage
to total
accounts
receivable
%
97.9
0.8
0.5
0.8
Allowance
RMB million
–
83
165
358
Amount
RMB million
56,431
436
289
443
Amount
RMB million
55,721
260
129
603
56,713
100.0
1,848
57,599
100.0
606
At 31 December 2019
At 31 December 2018
The Company
Percentage
to total
accounts
receivable
%
98.6
0.5
0.2
0.7
Allowance
RMB million
–
17
15
99
Percentage
of allowance
to accounts
receivable
balance
%
–
16.2
29.4
65.6
Percentage
to total
accounts
receivable
%
98.9
0.4
0.2
0.5
Allowance
RMB million
–
15
10
106
Amount
RMB million
29,797
125
54
144
Amount
RMB million
21,368
105
51
151
21,675
100.0
131
30,120
100.0
131
Percentage
of allowance
to accounts
receivable
balance
%
–
19.0
57.1
80.8
Percentage
of allowance
to accounts
receivable
balance
%
–
12.0
18.5
73.6
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 2019 and 31 December 2018, 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
2019
9,878
17.4%
–
At 31 December
2018
15,699
27.3%
–
Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from
China Petrochemical Corporation (“Sinopec Group Company”) and fellow subsidiaries are repayable under the same terms.
Accounts receivable (net of allowance for doubtful accounts) primarily represent receivables that are neither past due nor impaired. These
receivables relate to a wide range of customers for whom there is no recent history of default. Information about the impairment of accounts
receivable and the Group exposure to credit risk can be found in Note 61.
During 2019 and 2018, the Group and the Company had no individually significant accounts receivable been fully or substantially provided
allowance for doubtful accounts.
During 2019 and 2018, the Group and the Company had no individually significant write-off or recovery of doubtful debts which had been fully or
substantially provided for in prior years.
103
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
9 RECEIVABLES FINANCING
Receivables financing represents mainly the bills of acceptance issued by banks for sales of goods and products.
At 31 December 2019, the Group’s derecognised but outstanding bills due to endorsement or discount amounted to RMB 31,004 million.
At 31 December 2019, the Group considers that its bills of acceptance issued by banks do not pose a significant credit risk and will not cause any
significant loss due to the default of drawers.
10 PREPAYMENTS
Prepayments
Less: Allowance for doubtful accounts
Total
Ageing analysis of prepayments is as follows:
The Group
The Company
At 31 December
2019
RMB million
At 31 December
2018
RMB million
At 31 December
2019
RMB million
At 31 December
2018
RMB million
5,146
80
5,066
5,990
53
5,937
2,671
6
2,665
2,493
5
2,488
At 31 December 2019
At 31 December 2018
The Group
Percentage
to total
prepayments
%
85.6
11.5
0.6
2.3
100.0
Amount
RMB million
4,405
589
33
119
5,146
Allowance
RMB million
–
26
5
49
80
Percentage of
allowance to
prepayments
balance
%
–
4.4
15.2
41.2
Percentage
to total
prepayments
%
94.9
2.8
1.0
1.3
100.0
Amount
RMB million
5,683
169
60
78
5,990
Allowance
RMB million
–
38
5
10
53
At 31 December 2019
At 31 December 2018
The Company
Percentage
to total
prepayments
%
90.7
4.6
1.5
3.2
100.0
Amount
RMB million
2,424
123
39
85
2,671
Allowance
RMB million
–
1
2
3
6
Percentage of
allowance to
prepayments
balance
%
–
0.8
5.1
3.5
Percentage
to total
prepayments
%
92.6
2.8
1.4
3.2
100.0
Amount
RMB million
2,306
70
36
81
2,493
Allowance
RMB million
–
1
1
3
5
Percentage of
allowance to
prepayments
balance
%
–
22.5
8.3
12.8
Percentage of
allowance to
prepayments
balance
%
–
1.4
2.8
3.7
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 2019 and 31 December 2018, 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
2019
At 31 December
2018
1,940
37.7%
2,009
33.5%
104
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
11 OTHER RECEIVABLES
Other receivables
Less: Allowance for doubtful accounts
Total
Ageing analysis of other receivables is as follows:
The Group
The Company
At 31 December
2019
RMB million
At 31 December
2018
RMB million
At 31 December
2019
RMB million
At 31 December
2018
RMB million
25,565
1,456
24,109
26,793
1,481
25,312
79,827
955
78,872
58,549
1,117
57,432
At 31 December 2019
At 31 December 2018
The Group
Percentage
to total other
receivables
%
86.5
6.1
0.8
6.6
100.0
Amount
RMB million
22,115
1,554
198
1,698
25,565
Allowance
RMB million
87
52
71
1,246
1,456
Percentage
of allowance
to other
receivables
balance
%
0.4
3.3
35.9
73.4
Percentage
to total other
receivables
%
90.7
1.2
1.2
6.9
100.0
Amount
RMB million
24,301
329
320
1,843
26,793
Allowance
RMB million
–
53
21
1,407
1,481
At 31 December 2019
At 31 December 2018
The Company
Percentage
to total other
receivables
%
55.6
17.3
8.7
18.4
100.0
Amount
RMB million
44,402
13,826
6,933
14,666
79,827
Allowance
RMB million
–
3
1
951
955
Percentage
of allowance
to other
receivables
balance
%
–
–
–
6.5
Percentage
to total other
receivables
%
46.3
22.6
16.6
14.5
100.0
Amount
RMB million
27,088
13,233
9,747
8,481
58,549
Allowance
RMB million
–
1
–
1,116
1,117
Percentage
of allowance
to other
receivables
balance
%
–
16.1
6.6
76.3
Percentage
of allowance
to other
receivables
balance
%
–
–
–
13.2
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 2019 and at 31 December 2018, 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
2019
At 31 December
2018
10,561
Within one year
41.3%
–
6,837
Within one year
25.5%
–
During the year ended 31 December 2019 and 2018, the Group and the Company had no individually significant other receivables been fully or
substantially provided allowance for doubtful accounts.
During the year ended 31 December 2019 and 2018, the Group and the Company had no individually significant write-off or recovery of doubtful
debts which had been fully or substantially provided for in prior years.
105
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
12 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
2019
RMB million
At 31 December
2018
RMB million
88,465
12,615
91,368
2,576
195,024
2,582
192,442
85,469
13,690
88,929
2,872
190,960
6,376
184,584
For the year ended 31 December 2019, the provision for diminution in value of inventories of the Group was primarily due to the costs of finished
goods were higher than net realisable value.
13 LONG-TERM EQUITY INVESTMENTS
The Group
Balance at 1 January 2019
Additions for the year
Share of profits less losses under the equity method
Change of other comprehensive loss under the equity method
Other equity movements under the equity method
Dividends declared
Disposals for the year
Foreign currency translation differences
Other movements
Movement of provision for impairment
Balance at 31 December 2019
The Company
Investments in
joint ventures
RMB million
Investments
in associates
RMB million
Provision for
impairment
losses
RMB million
Total
RMB million
57,134
2,884
4,385
(788)
101
(6,494)
(68)
279
–
–
57,433
90,273
1,697
8,392
(22)
(8)
(3,695)
(398)
267
(25)
–
96,481
(1,686)
–
–
–
–
–
–
(27)
–
3
(1,710)
145,721
4,581
12,777
(810)
93
(10,189)
(466)
519
(25)
3
152,204
Balance at 1 January 2019
Additions for the year
Share of profits less losses under the equity method
Change of other comprehensive income under the equity method
Other equity movements under the equity method
Dividends declared
Disposals for the year
Movement of provision for impairment
Balance at 31 December 2019
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
259,934
15,272
–
–
–
–
(986)
–
274,220
16,093
362
2,069
–
40
(3,034)
–
–
15,530
21,163
39
1,510
201
1
(54)
(44)
–
22,816
(7,983)
–
–
–
–
–
–
104
(7,879)
289,207
15,673
3,579
201
41
(3,088)
(1,030)
104
304,687
For the year ended 31 December 2019, 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 57.
106
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
13 LONG-TERM EQUITY INVESTMENTS (Continued)
Principal joint ventures and associates of the Group are as follows:
(a) Principal joint ventures and associates
Name of investees
Principal place
of business
Register
location
Legal
representative
Principal
activities
Registered Capital
RMB million
Percentage of
equity/voting
right directly or
indirectly held
by the Company
1. Joint ventures
Fujian Refining & Petrochemical Company
Limited (“FREP”)
BASF-YPC Company Limited (“BASF-YPC”)
PRC
PRC
PRC
PRC
Gu Yuefeng
Manufacturing refining oil
products
14,758
50.00%
Hong Jianqiao
Manufacturing
12,704
40.00%
Taihu Limited (“Taihu”)
Russia
Cyprus
Yanbu Aramco Sinopec Refining
Company Ltd. (“YASREF”)
Sinopec SABIC Tianjin Petrochemical Company
Limited (“Sinopec SABIC Tianjin”)
Saudi Arabia
Saudi Arabia
PRC
PRC
2. Associates
Sinopec Sichuan to East China Gas
Pipeline Co., Ltd. (“Pipeline Ltd”)
Sinopec Finance Company Limited
(“Sinopec Finance”)
PAO SIBUR Holding (“SIBUR”) (i)
PRC
PRC
PRC
PRC
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
Islands
NA
NA
NA
UWAIDH AL(cid:127)
HARETHI
Quan Kai
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
25,000 USD
49.00%
1,560 million
USD
9,796
37.50%
50.00%
200
50.00%
Zhao Dong
Provision of non-banking
18,000
49.00%
financial services
Processing natural gas and
manufacturing
petrochemical products
Mining coal and
manufacturing of
coal-chemical products
Crude oil and natural gas
extraction
21,784 million
RUB
10.00%
17,516
38.75%
10,000 USD
50.00%
Except that SIBUR is a public joint stock company, other joint ventures and associates above are limited companies.
107
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
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
Taihu
Sinopec SABIC Tianjin
At
At
At
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2018
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
At
At
At
At
At
BASF-YPC
At
YASREF
At
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Current financial liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Non-current financial liabilities
Other non-current liabilities
Total non-current liabilities
Net assets
Net assets attributable to
shareholders of the company
Net assets attributable to
minority interests
Share of net assets from
joint ventures
Carrying Amounts
Summarised income statement
5,603
11,977
17,580
17,267
(1,280)
(7,090)
(8,370)
(11,185)
(290)
(11,475)
15,002
7,388
9,248
16,636
19,271
(1,200)
(4,939)
(6,139)
(12,454)
(279)
(12,733)
17,035
1,154
4,937
6,091
10,498
(237)
(1,808)
(2,045)
–
(35)
(35)
14,509
1,582
5,795
7,377
11,086
(725)
(1,822)
(2,547)
(218)
(17)
(235)
15,681
4,485
2,336
6,821
10,453
(57)
(1,815)
(1,872)
(125)
(1,984)
(2,109)
13,293
3,406
3,689
7,095
9,216
(59)
(2,124)
(2,183)
(72)
(2,271)
(2,343)
11,785
733
11,311
12,044
50,548
(7,445)
(12,504)
(19,949)
(29,445)
(1,963)
(31,408)
11,235
930
10,267
11,197
51,873
(4,806)
(12,217)
(17,023)
(32,364)
(937)
(33,301)
12,746
3,242
4,501
7,743
14,878
(500)
(2,896)
(3,396)
(4,592)
(368)
(4,960)
14,265
5,110
4,007
9,117
13,990
(500)
(2,507)
(3,007)
(3,651)
(331)
(3,982)
16,118
15,002
17,035
14,509
15,681
12,829
11,373
11,235
12,746
14,265
16,118
–
7,501
7,501
–
8,518
8,518
–
5,804
5,804
–
6,272
6,272
464
6,286
6,286
412
5,573
5,573
–
4,213
4,213
–
4,780
4,780
–
7,133
7,133
–
8,059
8,059
FREP
BASF-YPC
Taihu
YASREF
Sinopec SABIC Tianjin
2019
2018
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
2018
2018
2018
2018
2019
2019
2019
2019
Turnover
Interest income
Interest expense
Profit/(loss) before taxation
Tax expense
Profit/(loss) for the year
Other comprehensive loss/(income)
Total comprehensive
income/(loss)
Dividends from joint ventures
Share of net profit/(loss)
from joint ventures
Share of other comprehensive
loss/(income) from joint
ventures (ii)
57,047
124
(597)
964
(197)
767
–
767
1,400
52,469
157
(647)
3,920
(935)
2,985
–
2,985
1,200
19,590
32
(26)
2,314
(579)
1,735
–
1,735
1,224
21,574
41
(43)
3,625
(897)
2,728
–
2,728
1,226
15,222
94
(265)
3,320
(708)
2,612
(1,105)
1,507
–
14,944
141
(151)
3,493
(729)
2,764
921
3,685
–
75,940
58
(1,470)
(1,292)
(8)
(1,300)
(261)
(1,561)
–
384
1,493
694
1,091
1,235
1,307
(488)
77,561
101
(1,382)
(1,569)
(249)
(1,818)
1,059
(759)
–
(682)
20,541
171
(134)
2,178
(533)
1,645
–
1,645
1,750
23,501
169
(167)
3,916
(993)
2,923
–
2,923
–
823
1,462
–
–
–
–
(522)
435
(98)
397
–
–
The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial joint ventures accounted
for using equity method in aggregate was RMB 1,737 million (2018: RMB 2,052 million) and RMB 168 million (2018: RMB 839 million)
respectively. As at 31 December 2019, the carrying amount of all individually immaterial joint ventures accounted for using equity method in
aggregate was RMB 25,530 million (31 December 2018: RMB 22,982 million).
108
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
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
Sinopec Finance
At
At
At
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2018
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
At
At
At
At
SIBUR
At
Zhongtian Synergetic Energy
At
At
CIR
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Net assets attributable to
shareholders of
the Company
Net assets attributable
to minority interests
Share of net assets from associates
Carrying Amounts
Summarised income statement
13,245
37,842
(721)
(2,910)
47,456
12,498
39,320
(1,020)
(3,026)
47,772
180,383
18,926
(170,621)
(582)
28,106
209,837
16,359
(200,402)
(332)
25,462
31,634
182,646
(31,295)
(71,289)
111,696
22,502
170,796
(23,293)
(58,628)
111,377
4,219
56,424
(13,887)
(26,227)
20,529
7,477
49,961
(7,252)
(31,436)
18,750
47,456
47,772
28,106
25,462
111,250
110,860
20,529
18,750
–
23,728
23,728
–
23,886
23,886
–
13,772
13,772
–
12,476
12,476
446
11,125
11,125
517
11,086
11,086
–
7,955
7,955
–
7,266
7,266
7,612
971
(936)
(166)
7,481
7,481
–
3,741
3,741
6,712
1,828
(961)
(673)
6,906
6,906
–
3,453
3,453
Pipeline Ltd
2019
Sinopec Finance
2019
2018
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
2018
2018
2018
2018
2019
2019
2019
SIBUR
Zhongtian Synergetic Energy
CIR
Turnover
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends declared by associates
Share of profit from associates
Share of other comprehensive
5,008
2,191
–
2,191
1,259
1,096
4,746
2,022
–
2,022
1,207
1,011
4,966
2,234
411
2,645
–
1,095
4,536
1,868
(157)
1,711
490
915
56,706
6,513
(1,435)
5,078
468
651
59,927
10,400
6,410
16,810
271
1,040
13,329
1,994
–
1,994
219
773
12,235
1,142
–
1,142
–
443
2,334
424
151
575
–
212
2,856
583
116
699
–
292
income/(loss) from associates (ii)
–
–
201
(77)
(144)
641
–
–
76
58
The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial associates accounted for
using equity method in aggregate was RMB 4,565 million (2018: RMB 3,550 million) and RMB 155 million (2018: RMB 844 million) respectively.
As at 31 December 2019, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB
35,416 million (31 December 2018: RMB 31,370 million).
Notes:
(i) Sinopec is able to exercise significant influence in SIBUR since Sinopec has a member in SIBUR’s Board of Director and has a member in SIBUR’s Management
Board.
(ii) Including foreign currency translation differences.
109
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
At 31 December
2019
RMB million
At 31 December
2018
RMB million
622,409
14
622,423
617,762
50
617,812
Plants and
buildings
RMB million
Oil and gas
properties
RMB million
122,041
160
6,192
1,051
(993)
42
128,493
51,205
4,095
292
(609)
21
55,004
3,929
11
–
(151)
–
3,789
695,724
1,408
31,378
(76)
(1,549)
667
727,552
506,771
36,289
(46)
(6)
621
543,629
43,517
–
–
–
46
43,563
Equipment,
machinery
and others
RMB million
965,495
3,856
54,275
(975)
(14,499)
71
1,008,223
528,459
47,583
(246)
(10,149)
39
565,686
31,617
185
–
(1,615)
1
30,188
Total
RMB million
1,783,260
5,424
91,845
–
(17,041)
780
1,864,268
1,086,435
87,967
–
(10,764)
681
1,164,319
79,063
196
–
(1,766)
47
77,540
69,700
66,907
140,360
145,436
412,349
405,419
622,409
617,762
At 31 December
2019
RMB million
At 31 December
2018
RMB million
291,544
3
291,547
302,048
34
302,082
14 FIXED ASSETS
The Group
Fixed assets (a)
Fixed assets pending for disposal
Total
(a) Fixed assets
Cost:
Balance at 1 January 2019
Additions for the year
Transferred from construction in progress
Reclassifications
Decreases for the year
Exchange adjustments
Balance at 31 December 2019
Accumulated depreciation:
Balance at 1 January 2019
Additions for the year
Reclassifications
Decreases for the year
Exchange adjustments
Balance at 31 December 2019
Provision for impairment losses:
Balance at 1 January 2019
Additions for the year
Reclassifications
Decreases for the year
Exchange adjustments
Balance at 31 December 2019
Net book value:
Balance at 31 December 2019
Balance at 31 December 2018
The Company
Fixed assets (a)
Fixed assets pending for disposal
Total
110
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
14 FIXED ASSETS (Continued)
The Company (Continued)
(a) Fixed assets
Cost:
Balance at 1 January 2019
Additions for the year
Transferred from construction in progress
Reclassifications
Transferred from subsidiaries
Transferred to subsidiaries (i)
Decreases for the year
Balance at 31 December 2019
Accumulated depreciation:
Balance at 1 January 2019
Additions for the year
Reclassifications
Transferred from subsidiaries
Transferred to subsidiaries (i)
Decreases for the year
Balance at 31 December 2019
Provision for impairment losses:
Balance at 1 January 2019
Additions for the year
Reclassifications
Transferred from subsidiaries
Transferred to subsidiaries (i)
Decreases for the year
Balance at 31 December 2019
Net book value:
Balance at 31 December 2019
Balance at 31 December 2018
Plants and
buildings
RMB million
Oil and gas
properties
RMB million
Equipment,
machinery
and others
RMB million
48,827
66
946
715
262
(629)
(1,187)
49,000
23,169
1,527
240
112
(325)
(491)
24,232
1,880
2
–
66
(24)
(129)
1,795
574,937
1,131
23,780
(78)
–
(1,458)
(8)
598,304
417,573
29,069
(43)
–
(521)
(2)
446,076
38,297
–
–
–
(914)
–
37,383
467,357
656
20,189
(637)
1,777
(8,751)
(8,341)
472,250
286,038
20,904
(197)
1,530
(5,270)
(5,323)
297,682
22,116
127
–
174
(194)
(1,381)
20,842
Total
RMB million
1,091,121
1,853
44,915
–
2,039
(10,838)
(9,536)
1,119,554
726,780
51,500
–
1,642
(6,116)
(5,816)
767,990
62,293
129
–
240
(1,132)
(1,510)
60,020
22,973
23,778
114,845
119,067
153,726
159,203
291,544
302,048
(i) In 2019, the total amount transferred to subsidiaries is RMB 10,838 million, which is mainly caused by Sinopec Wuhan Petrochemical
Branch transferring its fixed assets related to refining production to its subsidiary Sinopec-SK (Wuhan) Petrochemical Company Limited
(“Sinopec-SK”). The original cost of transferred fixed assets is RMB 9,122 million, the depreciation is RMB 5,537 million, the impairment is
RMB 22 million, and the total net book value of transferred fixed assets is RMB 3,563 million.
The additions to oil and gas properties of the Group and the Company for the year ended 31 December 2019 included RMB 1,408 million (2018:
RMB 1,567 million) (Note 34) and RMB 1,131 million (2018: RMB 1,292 million), respectively of the estimated dismantlement costs for site
restoration.
Impairment losses on fixed assets for the year ended 31 December 2019 primarily represent impairment losses recognised in the refining
segment of RMB 140 million (2018: RMB 353 million), the marketing and distribution segment of RMB 52 million (2018: RMB 254 million), the
chemicals segment of RMB 4 million (2018: RMB 1,252 million) and the exploration and production (“E&P”) segment of RMB 0 million (2018:
RMB 4,274 million). The primary factor resulting in the E&P segment impairment loss in the prior year was downward revision of oil and gas
reserve in certain fields. Exploration and production (“E&P”) segment determines recoverable amounts of fixed assets relating to oil and gas
producing activities include significant judgments and assumptions. The recoverable amounts were determined based on the present values of
the expected future cash flows of the assets using a pre-tax discount rate 10.47% (2018: 10.47%). Further future downward revisions to the
Group’s oil price outlook would lead to further impairments which, in aggregate, are likely to be material. It is estimated that a general decrease
of 5% in oil price, with all other variables held constant, would result in additional impairment loss in Group’s fixed assets relating to oil and
gas producing activities by approximately RMB 184 million (2018: RMB 312 million). It is estimated that a general increase of 5% in operating
cost, with all other variables held constant, would result additional impairment loss in Group’s fixed assets relating to oil and gas producing
activities by approximately RMB 180 million (2018: RMB 315 million). It is estimated that a general increase of 5% in discount rate, with all
other variables held constant, would result additional impairment loss in Group’s fixed assets relating to oil and gas producing activities by
approximately RMB 7 million (2018: less RMB 5 million).
At 31 December 2019 and 31 December 2018, the Group and the Company had no individually significant fixed assets which were pledged.
At 31 December 2019 and 31 December 2018, the Group and the Company had no individually significant fixed assets which were temporarily
idle or pending for disposal.
At 31 December 2019 and 31 December 2018, the Group and the Company had no individually significant fully depreciated fixed assets which
were still in use.
111
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
15 CONSTRUCTION IN PROGRESS
Cost:
Balance at 1 January 2019
Additions for the year
Disposals for the year
Transferred to subsidiaries
Dry hole costs written off
Transferred to fixed assets
Reclassification to other assets
Exchange adjustments
Balance at 31 December 2019
Provision for impairment losses:
Balance at 1 January 2019
Additions for the year
Decreases for the year
Exchange adjustments
Balance at 31 December 2019
Net book value:
Balance at 31 December 2019
Balance at 31 December 2018
At 31 December 2019, major construction projects of the Group are as follows:
The Group
RMB million
The Company
RMB million
138,817
144,369
(115)
–
(5,831)
(91,845)
(10,086)
17
175,326
1,854
135
(161)
16
1,844
52,011
61,438
(163)
(903)
(5,432)
(44,915)
(1,130)
–
60,906
413
–
–
–
413
173,482
136,963
60,493
51,598
Budgeted
amount
RMB million
34,667
13,865
Balance at
1 January
2019
RMB million
17,779
3,428
Net change
for the year
RMB million
10,803
8,692
11,589
5,682
26,787
9,961
309
51
2,248
1,499
Percentage
of project
investment
to budgeted
amount
Source of funding
87%
87%
Bank loans & self-financing
Bank loans & self-financing
68%
Bank loans & self-financing
12%
Self-financing
Balance at
31 December
2019
RMB million
28,582
12,120
7,930
1,808
973
1,024
10%
Bank loans & self-financing
Accumulated
interest
capitalised at
31 December
2019
RMB million
720
267
204
–
6
Project name
Zhongke Refine Integration Project
Wen 23 Gas Storage Project (First-stage)
Xinjiang Coal-based Substitute Natural
Gas (SNG) Export Pipeline Construction
Project (First-stage)
Zhenhai Refining and Chemical ethylene
expansion project
Western Sichuan Gas Field Leikoupo Formation
Gas Reservoir Development and Construction
Project
112
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
16 RIGHT-OF-USE ASSETS
The Group
Cost:
Balance at 31 December 2018
Change in accounting policy
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Accumulated depreciation:
Balance at 31 December 2018
Change in accounting policy
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Provision for impairment losses:
Balance at 31 December 2018
Change in accounting policy
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Net book value:
Balance at 31 December 2019
Balance at 31 December 2018
The Company
Cost:
Balance at 31 December 2018
Change in accounting policy
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Accumulated depreciation:
Balance at 31 December 2018
Change in accounting policy
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Provision for impairment losses:
Balance at 31 December 2018
Change in accounting policy
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Net book value:
Balance at 31 December 2019
Balance at 31 December 2018
Land
RMB million
Others
RMB million
Total
RMB million
–
180,074
180,074
1,072
(5,014)
176,132
–
–
–
6,578
(11)
6,567
–
–
–
–
–
–
–
27,381
27,381
7,555
(748)
34,188
–
–
–
5,728
(26)
5,702
–
–
–
–
–
–
–
207,455
207,455
8,627
(5,762)
210,320
–
–
–
12,306
(37)
12,269
–
–
–
–
–
–
169,565
–
28,486
–
198,051
–
Land
RMB million
Others
RMB million
Total
RMB million
–
119,142
119,142
29
(3,098)
116,073
–
–
–
3,801
(5)
3,796
–
–
–
–
–
–
–
634
634
624
(137)
1,121
–
–
–
584
(18)
566
–
–
–
–
–
–
–
119,776
119,776
653
(3,235)
117,194
–
–
–
4,385
(23)
4,362
–
–
–
–
–
–
112,277
–
555
–
112,832
–
113
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
17 INTANGIBLE ASSETS
The Group
Cost:
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Accumulated amortisation:
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Provision for impairment losses:
Balance at 1 January 2019
Additions for the year
Decreases for the year
Balance at 31 December 2019
Net book value:
Balance at 31 December 2019
Balance at 31 December 2018
Land use
rights
RMB million
Patents
RMB million
Non-patent
technology
RMB million
Operation
rights
RMB million
Others
RMB million
Total
RMB million
84,731
8,252
(423)
92,560
19,986
2,655
(118)
22,523
231
12
(15)
228
69,809
64,514
5,230
114
–
5,344
3,397
204
–
3,601
482
–
–
482
1,261
1,351
4,029
1,002
–
5,031
2,997
278
–
3,275
24
3
–
27
52,216
1,494
(161)
53,549
17,137
2,357
(103)
19,391
145
–
–
145
5,265
643
(241)
5,667
3,200
448
(142)
3,506
17
–
–
17
151,471
11,505
(825)
162,151
46,717
5,942
(363)
52,296
899
15
(15)
899
1,729
1,008
34,013
34,934
2,144
2,048
108,956
103,855
Amortisation of the intangible assets of the Group charged for the year ended 31 December 2019 is RMB 5,695 million (2018: RMB 5,414 million).
18 GOODWILL
Goodwill is allocated to the following Group’s cash-generating units:
Name of investees
Principal activities
Sinopec Zhenhai Refining and Chemical Branch
(“Sinopec Zhenhai”)
Shanghai SECCO Petrochemical Company Limited
(“Shanghai SECCO”)
Sinopec Beijing Yanshan Petrochemical Branch
(“Sinopec Yanshan”)
Other units without individual significant goodwill
Total
Manufacturing of intermediate petrochemical
products and petroleum products
Production and sale of petrochemical products
Manufacturing of intermediate petrochemical
products and petroleum products
At 31 December
2019
RMB million
At 31 December
2018
RMB million
4,043
2,541
1,004
1,109
8,697
4,043
2,541
1,004
1,088
8,676
Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the
above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial
budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 11.0% to 11.9% (2018: 11.7% to
12.3%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss
was recognised.
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.
19 LONG-TERM DEFERRED EXPENSES
Long-term deferred expenses primarily represent catalysts expenditures and improvement expenditures of fixed assets.
114
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
20 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities before the consolidated elimination adjustments are as follows:
Receivables and inventories
Payables
Cash flow hedges
Fixed assets
Tax value of losses carried forward
Other equity instrument investments
Intangible assets
Others
Deferred tax assets/(liabilities)
Deferred tax assets
Deferred tax liabilities
At 31 December
2019
RMB million
At 31 December
2018
RMB million
At 31 December
2019
RMB million
At 31 December
2018
RMB million
2,546
1,142
116
16,463
3,594
131
595
318
24,905
2,563
1,808
1,131
15,427
3,709
117
474
174
25,403
–
–
(384)
(12,317)
–
(7)
(508)
(882)
(14,098)
–
–
(27)
(8,666)
–
(1)
(535)
(428)
(9,657)
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
2019
RMB million
At 31 December
2018
RMB million
7,289
7,289
3,709
3,709
At 31 December
2019
RMB million
At 31 December
2018
RMB million
17,616
6,809
21,694
5,948
At 31 December 2019, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB 16,605 million
(2018: RMB 18,308 million), of which RMB 1,992 million (2018: RMB 2,437 million) was incurred for the year ended 31 December 2019, because
it was not probable that the related tax benefit will be realised. These deductible losses carried forward of RMB 3,163 million, RMB 3,156 million,
RMB 5,938 million, RMB 2,356 million and RMB 1,992 million will expire in 2020, 2021, 2022, 2023, 2024 and after, respectively.
Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax
assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable
that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the
tax losses result from identifiable causes which are unlikely to recur. During the year ended 31 December 2019, write-down of deferred tax assets
amounted to RMB 189 million (2018: RMB 188 million) (Note 52).
115
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 21 OTHER NON-CURRENT ASSETS
Other non-current assets mainly represent long-term receivables, prepayments for construction projects and purchases of equipment.
22 DETAILS OF IMPAIRMENT LOSSES
At 31 December 2019, impairment losses of the Group are analysed as follows:
Allowance for doubtful accounts
Included: Accounts receivable
Prepayments
Other receivables
Inventories
Long-term equity investments
Fixed assets
Construction in progress
Intangible assets
Goodwill
Others
Total
Note
8
10
11
12
13
14
15
17
18
Balance at
1 January
2019
Provision for
the year
Written back
for the year
Written off
for the year
2019
RMB million RMB million RMB million RMB million RMB million RMB million
Other
increase/
(decrease)
Balance at
31 December
606
53
1,481
2,140
6,376
1,686
79,063
1,854
899
7,861
102
99,981
1,566
35
165
1,766
1,616
–
196
135
–
–
1
3,714
(283)
(5)
(167)
(455)
(189)
–
–
–
–
–
(17)
(661)
(41)
(3)
(24)
(68)
(5,233)
(1)
(1,692)
(110)
–
–
(81)
(7,185)
–
–
1
1
12
25
(27)
(35)
–
–
1
(23)
1,848
80
1,456
3,384
2,582
1,710
77,540
1,844
899
7,861
6
95,826
The reasons for recognising impairment losses are set out in the respective notes of respective assets.
23 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
– Hong Kong Dollar loans
– Euro loans
Total
At 31 December 2019
At 31 December 2018
Original
currency
million
Exchange
rates
13
6.9762
321
553
3
6.9762
0.8958
7.8155
Original
currency
million
Exchange
rates
566
6.8632
3,319
1,645
3
6.8632
0.8762
7.8473
RMB
million
25,709
25,619
90
22
22
5,465
2,709
2,236
495
25
31,196
RMB
million
17,088
13,201
3,887
300
300
27,304
3,061
22,780
1,441
22
44,692
At 31 December 2019, the Group’s interest rates on short-term loans were from interest 0.80% to 6.53% (At 31 December 2018: from interest 0.80%
to 5.22%) per annum. The majority of the above loans are by credit.
At 31 December 2019 and 31 December 2018, the Group had no significant overdue short-term loans.
116
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
24 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 2019 and 31 December 2018, the Group had no overdue unpaid bills.
25 ACCOUNTS PAYABLE
At 31 December 2019 and 31 December 2018, the Group had no individually significant accounts payable aged over one year.
26 CONTRACT LIABILITIES
As at 31 December 2019, the Group’s contract liabilities primarily represent advances from customers. Related performance obligations are satisfied
and revenue is recognised within one year.
27 EMPLOYEE BENEFITS PAYABLE
At 31 December 2019 and 31 December 2018, the Group’s employee benefits payable primarily represented wages payable and social insurance
payables.
28 TAXES PAYABLE
The Group
Value-added tax payable
Consumption tax payable
Income tax payable
Mineral resources compensation fee payable
Other taxes
Total
29 OTHER PAYABLES
At 31 December
2019
RMB million
At 31 December
2018
RMB million
4,932
52,863
3,264
136
8,144
69,339
9,810
59,944
6,699
138
10,469
87,060
At 31 December 2019 and 31 December 2018, other payables of the Group over one year primarily represented payables for constructions.
30 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
Debentures payable due within one year
Lease liabilities due within one year
Others
Non-current liabilities due within one year
At 31 December 2019
At 31 December 2018
Original
currency
million
Exchange
rates
RMB
million
Original
currency
million
Exchange
rates
RMB
million
4
6.9762
1,765
25
37,824
39,614
13,000
13,000
15,198
1,678
69,490
5
6.8632
12,039
35
4,361
16,435
–
–
–
1,015
17,450
At 31 December 2019 and 31 December 2018, the Group had no significant overdue long-term loans.
117
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
31 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 5.23% per annum at
31 December 2019 with maturities
through 2034
Interest rates ranging from interest
1.55% to 4.29% per annum at
31 December 2019 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 5.50% per annum at
31 December 2019 with maturities
through 2034
Less: Current portion
Long-term loans from Sinopec Group Company and fellow subsidiaries
Total
The maturity analysis of the Group’s long-term loans is as follows:
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.
32 DEBENTURES PAYABLE
The Group
Debentures payable:
– Corporate Bonds (i)
Less: Current portion
Total
Note:
At 31 December 2019
At 31 December 2018
Original
currency
million
Exchange
rates
Original
currency
million
Exchange
rates
RMB
million
31,714
RMB
million
31,025
11
6.9762
75
16
6.8632
109
(1,790)
29,999
47,450
(37,824)
9,626
39,625
(12,074)
19,060
46,877
(4,361)
42,516
61,576
At 31 December
2019
RMB million
At 31 December
2018
RMB million
5,089
12,123
22,413
39,625
40,004
11,999
9,573
61,576
At 31 December
2019
RMB million
At 31 December
2018
RMB million
32,157
(13,000)
19,157
31,951
–
31,951
(i) These corporate bonds are carried at amortised cost, including USD denominated corporate bonds of RMB 12,157 million, and RMB denominated corporate bonds
of RMB 20,000 million (2018: USD denominated corporate bonds of RMB 11,951 million, and RMB denominated corporate bonds of RMB 20,000 million). At 31
December 2019, corporate bonds of RMB 12,157 million (2018: RMB 11,951 million) are guaranteed by Sinopec Group Company.
118
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
33 LEASE LIABILITY
The Group
Lease liabilities
Deduct: Current portion of lease liabilities (Note 30)
Total
34 PROVISIONS
At 31 December
2019
RMB million
At 31 December
2018
RMB million
192,872
15,198
177,674
–
–
–
Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has established certain standardised
measures for the dismantlement of its retired oil and gas properties by making reference to the industry practices and is thereafter constructively
obligated to take dismantlement measures of its retired oil and gas properties. Movement of provision of the Group’s obligations for the
dismantlement of its retired oil and gas properties is as follows:
Balance at 1 January 2019
Provision for the year
Accretion expenses
Decrease for the year
Exchange adjustments
Balance at 31 December 2019
35 OTHER NON-CURRENT LIABILITIES
The Group
RMB million
42,007
1,408
1,418
(2,439)
44
42,438
Other non-current liabilities primarily represent long-term payables, special payables and deferred income.
36 SHARE CAPITAL
The Group
Registered, issued and fully paid:
95,557,771,046 listed A shares (2018: 95,557,771,046) of RMB 1.00 each
25,513,438,600 listed H shares (2018: 25,513,438,600) of RMB 1.00 each
Total
At 31 December
2019
RMB million
At 31 December
2018
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 SAR and overseas investors. As part of the global initial public offering,
1,678,049,000 state-owned ordinary shares of RMB 1.00 each owned by Sinopec Group Company were converted into H shares and sold to Hong
Kong SAR and overseas investors.
In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a public offering to natural
persons and institutional investors in the PRC.
During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a result of exercise of
188,292 warrants entitled to the Bonds with Warrants.
119
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
36 SHARE CAPITAL (Continued)
The Group (Continued)
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 reserve 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 shareholders
of the Company and long-term loans (excluding current portion) and debentures payable, and liability-to-asset ratio, which is calculated by dividing
total liabilities by total assets. Management’s strategy is to make appropriate adjustments according to the Group’s operating and investment needs
and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group at a range considered
reasonable. As at 31 December 2019, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 7.4% (2018: 11.5%) and 50.0% (2018:
46.1%), respectively.
The schedule of the contractual maturities of loans and commitments are disclosed in Notes 31 and 58, respectively.
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.
37 CAPITAL RESERVE
The movements in capital reserve of the Group are as follows:
Balance at 1 January 2019
Transaction with minority interests
Others
Balance at 31 December 2019
RMB million
119,192
2,933
2
122,127
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.
120
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 38 OTHER COMPREHENSIVE INCOME
The Group
(a) The changes of other comprehensive income in consolidated income statement
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments
recognised during the year
Less: Reclassification adjustments for amounts transferred to the consolidated
income statement
Subtotal
Changes in fair value of other equity instrument investments
Subtotal
Other comprehensive income that can be converted into profit or loss under
the equity method
Subtotal
Foreign currency translation differences
Subtotal
Other comprehensive income
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments
recognised during the year
(Less)/Add: Reclassification adjustments for amounts transferred to the
consolidated income statement
Subtotal
Changes in fair value of other equity instrument investments
Subtotal
Other comprehensive income that can be converted into profit or loss under
the equity method
Subtotal
Foreign currency translation differences
Subtotal
Other comprehensive income
Before-tax
amount
RMB million
2019
Tax
effect
RMB million
Net-of-tax
amount
RMB million
5,258
(853)
6,111
(39)
(39)
(810)
(810)
1,480
1,480
6,742
(974)
196
(1,170)
8
8
–
–
–
–
(1,162)
4,284
(657)
4,941
(31)
(31)
(810)
(810)
1,480
1,480
5,580
Before-tax
amount
RMB million
2018
Tax
effect
RMB million
Net-of-tax
amount
RMB million
(12,500)
2,159
(10,341)
(730)
(11,770)
(41)
(41)
(240)
(240)
3,399
3,399
(8,652)
130
2,029
(12)
(12)
11
11
–
–
2,028
(600)
(9,741)
(53)
(53)
(229)
(229)
3,399
3,399
(6,624)
121
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
38 OTHER COMPREHENSIVE INCOME (Continued)
The Group (Continued)
(b) The change of each item in other comprehensive income
Equity Attributable to shareholders of the company
Other
comprehensive
income that can
be converted
into profit or
loss under the
equity method
RMB million
Changes in
fair value of
available-for-sale
financial assets
RMB million
(3,481)
–
(3,481)
(183)
(3,664)
(3,664)
(424)
(4,088)
57
(57)
—
—
—
—
—
—
Changes in
fair value of
other equity
instrument
investments
RMB million
—
45
45
(41)
4
4
(20)
(16)
Foreign
currency
translation
differences
RMB million
(479)
–
(479)
2,282
1,803
1,803
943
2,746
Cash flow
hedges
RMB million
(510)
–
(510)
(4,407)
(4,917)
(4,917)
5,954
1,037
Minority
interests
RMB million
Total other
comprehensive
income
RMB million
Subtotal
RMB million
(4,413)
(12)
(4,425)
(2,349)
(6,774)
(6,774)
6,453
(321)
(2,783)
–
(2,783)
994
(1,789)
(1,789)
220
(1,569)
(7,196)
(12)
(7,208)
(1,355)
(8,563)
(8,563)
6,673
(1,890)
31 December 2017
Change in accounting policy
1 January 2018
Changes in 2018
31 December 2018
1 January 2019
Changes in 2019
31 December 2019
As at 31 December 2019, cash flow hedge reserve amounted to a gain of RMB 1,102 million (31 December 2018: a loss of RMB 4,932 million),
of which a gain of RMB 1,037 million was attribute to shareholders of the Company (31 December 2018: a loss of RMB 4,917 million).
39 SURPLUS RESERVES
Movements in surplus reserves are as follows:
Balance at 1 January 2019
Appropriation
Balance at 31 December 2019
Statutory
surplus reserve
RMB million
The Group
Discretionary
surplus reserves
RMB million
86,678
3,745
90,423
117,000
–
117,000
Total
RMB million
203,678
3,745
207,423
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.
122
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 40 OPERATING INCOME AND OPERATING COSTS
Income from principal operations
Income from other operations
Total
Operating costs
The Group
2019
RMB million
2018
RMB million
The Company
2019
RMB million
2018
RMB million
2,900,488
65,705
2,966,193
2,488,852
2,825,613
65,566
2,891,179
2,401,012
984,185
37,087
1,021,272
799,566
1,022,195
36,298
1,058,493
812,355
The income from principal operations mainly represents revenue from the sales of refined petroleum products, chemical products, crude oil and
natural gas. The income from other operations mainly represents revenue from sale of materials, service, rental income and others. Operating costs
primarily represent the products cost related to the principal operations. The Group’s segmental information is set out in Note 60.
The detailed information about the Group’s operating income is as follows:
Income from principal operations
Gasoline
Diesel
Crude oil
Basic chemical feedstock
Kerosene
Synthetic resin
Synthetic fiber monomers and polymers
Natural gas
Others (i)
Income from other operations
Sale of materials and others
Rental income
Total
Note:
(i) Others are primarily liquefied petroleum gas and other refinery and chemical by-products and joint products.
41 TAXES AND SURCHARGES
The Group
Consumption tax
City construction tax
Education surcharge
Resources tax
Others
Total
The applicable tax rate of the taxes and surcharges are set out in Note 4.
2019
RMB million
2018
RMB million
2,900,488
699,202
615,342
553,848
214,911
191,636
124,271
80,100
53,839
367,339
65,705
64,489
1,216
2,966,193
2,825,613
711,236
594,008
519,910
250,884
168,823
124,618
77,572
43,205
335,357
65,566
64,503
1,063
2,891,179
2019
RMB million
2018
RMB million
202,671
16,247
12,011
5,883
5,723
242,535
201,901
18,237
13,187
6,021
7,152
246,498
123
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 42 FINANCIAL EXPENSES
The Group
Interest expenses incurred
Less: Capitalised interest expenses
Add: Interest expense on lease liabilities
Net interest expenses
Accretion expenses (Note 34)
Interest income
Net foreign exchange loss/(gain)
Total
2019
RMB million
2018
RMB million
6,954
1,015
9,646
15,585
1,418
(7,206)
170
9,967
6,376
493
—
5,883
1,438
(7,726)
(596)
(1,001)
The interest rates per annum at which borrowing costs were capitalised during the year ended 31 December 2019 by the Group ranged from 2.92%
to 4.66% (2018: 2.37% to 4.66%).
43 CLASSIFICATION OF EXPENSES BY NATURE
The operating costs, selling and distribution expenses, general and administrative expenses, research and development expenses and exploration
expenses (including dry holes) in consolidated income statement classified by nature are as follows:
Purchased crude oil, products and operating supplies and expenses
Personnel expenses
Depreciation, depletion and amortisation
Exploration expenses (including dry holes)
Other expenses
Total
44 RESEARCH AND DEVELOPMENT EXPENSES
2019
RMB million
2018
RMB million
2,380,907
81,482
108,812
10,510
52,674
2,634,385
2,292,983
77,721
109,967
10,744
61,083
2,552,498
The research and development expenditures are mainly used for the replacement of resources in upstream, optimising structure and operation
upgrades in refining sector, structured adjustment of materials and products in chemical segment.
45 EXPLORATION EXPENSES
Exploration expenses include geological and geophysical expenses and written-off of unsuccessful dry hole costs.
46 OTHER INCOME
Other income are mainly the government grants related to the business activities.
47 INVESTMENT INCOME
Income from investment of subsidiaries accounted for under cost method
Income from investment accounted for under equity method
Investment income/(loss) from disposal of long-term equity investments
Dividend income from holding of other equity instrument investments
Investment (loss)/income from holding/disposal of financial assets and
liabilities and derivative financial instruments at fair value
through profit or loss
Gain/(loss) from ineffective portion of cash flow hedges
Others
Total
The Group
2019
RMB million
2018
RMB million
The Company
2019
RMB million
2018
RMB million
–
12,777
185
492
(1,467)
587
54
12,628
–
13,974
397
515
(1,940)
(1,604)
86
11,428
25,416
3,579
(1,543)
53
142
1
414
28,062
25,390
4,259
(2,768)
14
692
7
742
28,336
124
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
48 (LOSSES)/GAINS FROM CHANGES IN FAIR VALUE
The Group
Net fair value (losses)/gains on financial assets and financial liabilities at fair value through profit or loss
Unrealised losses from ineffective portion cash flow hedges, net
Others
Total
49 IMPAIRMENT LOSSES
The Group
Prepayments
Inventories
Long-term equity investment
Fixed assets
Construction in progress
Others
Total
50 NON-OPERATING INCOME
The Group
Government grants
Others
Total
51 NON-OPERATING EXPENSES
The Group
Fines, penalties and compensation
Donations
Others
Total
2019
RMB million
2018
RMB million
(2,702)
(809)
–
(3,511)
3,008
(374)
22
2,656
2019
RMB million
2018
RMB million
30
1,427
–
196
135
1
1,789
–
5,421
7
6,149
28
–
11,605
2019
RMB million
2018
RMB million
884
1,714
2,598
788
1,282
2,070
2019
RMB million
2018
RMB million
173
209
2,225
2,607
276
180
2,586
3,042
125
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 52 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
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:
2019
RMB million
2018
RMB million
14,976
3,385
(467)
17,894
27,176
(6,244)
(719)
20,213
2019
RMB million
2018
RMB million
90,016
22,504
2,278
(4,458)
(2,003)
(312)
(335)
498
189
(467)
17,894
100,502
25,126
1,989
(5,019)
(1,259)
77
(779)
609
188
(719)
20,213
(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the
relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of
15% through the year 2020.
53 DIVIDENDS
(a) Dividends of ordinary shares declared after the balance sheet date
Pursuant to a resolution passed at the director’s meeting on 27 March 2020, final dividends in respect of the year ended 31 December 2019
of RMB 0.19 (2018: RMB 0.26) per share totaling RMB 23,004 million (2018: RMB 31,479 million) were proposed for shareholders’ approval
at the Annual General Meeting. Final cash dividend proposed after the balance sheet date has not been recognised as a liability at the balance
sheet date.
(b) Dividends of ordinary shares declared during the year
Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on 23 August 2019, the directors authorized
to declare the interim dividends for the year ending 31 December 2019 of RMB 0.12 (2018: RMB 0.16) per share totaling RMB 14,529 million
(2018: RMB 19,371 million).
Pursuant to the shareholders’ approval at the Annual General Meeting on 9 May 2019, a final dividend of RMB 0.26 per share totaling RMB
31,479 million according to total shares on 10 June 2019 was approved. All dividends have been paid in the year ended 31 December 2019.
Pursuant to the shareholders’ approval at the Annual General Meeting on 15 May 2018, a final dividend of RMB 0.40 per share totaling RMB
48,428 million according to total shares on 4 June 2018 was approved. All dividends have been paid in the year ended 31 December 2018.
126
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 54 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
Credit impairment losses
Depreciation of right-of-use assets
Depreciation of fixed assets
Amortisation of intangible assets and long-term deferred expenses
Dry hole costs written off
Net loss on disposal of non-current assets
Fair value loss/(gain)
Financial expenses
Investment income
Decrease/(increase) in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Increase in inventories
Safety fund reserve
Increase in operating receivables
Decrease in operating payables
Net cash flow from operating activities
(b) Net change in cash:
Cash balance at the end of the year
Less: Cash at the beginning of the year
Net decrease of cash
(c) The analysis of cash held by the Group is as follows:
Cash at bank and on hand
– Cash on hand
– Demand deposits
Cash at the end of the year
(d) Other cash paid relating to financing activities:
Repayments of lease liabilities
Others
Total
2019
RMB million
2018
RMB million
72,122
1,789
1,264
12,246
87,612
8,954
5,831
1,918
3,511
10,352
(12,628)
3,124
261
(9,285)
69
(11,802)
(21,918)
153,420
80,289
11,605
141
–
99,462
10,505
6,921
1,526
(2,656)
(359)
(11,428)
(5,079)
(1,165)
(3,312)
909
(1,043)
(10,448)
175,868
2019
RMB million
2018
RMB million
60,313
111,922
(51,609)
111,922
113,218
(1,296)
2019
RMB million
2018
RMB million
14
60,299
60,313
82
111,840
111,922
2019
RMB million
2018
RMB million
16,859
328
17,187
–
436
436
127
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
(1) Related parties having the ability to exercise control over the Group
The name of the company
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
Zhang Yuzhuo
RMB 326,547 million
Sinopec Group Company is an enterprise controlled by the PRC government. Sinopec Group Company directly and indirectly holds 68.77%
shareholding of the Company.
(2) Related parties not having the ability to exercise control over the Group
Related parties under common control of a parent company with the Company:
Sinopec Finance (Note)
Sinopec Shengli Petroleum Administration Bureau
Sinopec Zhongyuan Petroleum Exploration Bureau
Sinopec 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.
128
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were
carried out in the ordinary course of business, are as follows:
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 withdrawn from related parties
Net funds obtained from related parties
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(vii)
(vii)
(viii)
(ix)
(x)
(ix)
(xi)
The Group
2019
RMB million
295,532
197,308
8,206
33,310
38,668
3,098
–
–
–
116
1,066
1,334
5,350
3,438
2018
RMB million
272,789
192,224
7,319
23,489
28,472
6,664
7,765
521
869
113
848
1,110
6,457
31,684
The amounts set out in the table above in respect of the year ended 31 December 2019 and 2018 represent the relevant costs and income as
determined by the corresponding contracts with the related parties.
Included in the transactions disclosed above, for the year ended 31 December 2019 are: a) purchases by the Group from Sinopec Group
Company and fellow subsidiaries amounting to RMB 159,086 million (2018: RMB 140,427 million) comprising purchases of products and
services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB 142,433
million (2018: RMB 123,772 million), ancillary and social services provided by Sinopec Group Company and fellow subsidiaries of RMB 3,097
million (2018: RMB 6,664 million), lease charges for land, buildings and others paid by the Group of RMB 11,330 million, RMB 509 million and
RMB 383 million (2018: RMB 7,636 million, RMB 643 million and RMB 602 million), respectively and interest expenses of RMB 1,334 million
(2018: RMB 1,110 million); and b) sales by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB 74,453 million
(2018: RMB 59,472 million), comprising RMB 73,365 million (2018: RMB 58,606 million) for sales of goods, RMB 1,066 million (2018: RMB
848 million) for interest income and RMB 22 million (2018: RMB 18 million) for agency commission income.
For the year ended 31 December 2019, no individually significant right-of-use assets were leased from Sinopec Group Company and fellow
subsidiaries, associates and joint ventures by the Group. The interest expense recognised for the year ended 31 December 2019 on lease
liabilities in respect of amounts due to Sinopec Group Company and fellow subsidiaries, associates and joint ventures was RMB 8,518 million.
For the year ended 31 December 2019, the amount of rental the Group paid to Sinopec Group Company and fellow subsidiaries, associates and
joint ventures for land, buildings and others are RMB 11,333 million, RMB 518 million and RMB 468 million (2018: RMB 7,636 million, RMB
653 million and RMB 836 million).
As at 31 December 2019 and 31 December 2018, there was no guarantee given to banks by the Group in respect of banking facilities to Sinopec
Group Company and fellow subsidiaries, associates and joint ventures, except for the disclosure set out in Note 59(b). Guarantees given to banks
by the Group in respect of banking facilities to associates and joint ventures are disclosed in Note 59(b).
Notes:
(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
(ii) Purchases represent the purchase of materials and utility supplies directly related to the Group’s operations such as the procurement of raw and ancillary
materials and related services, supply of water, electricity and gas.
(iii) Transportation and storage represent the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.
(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well
measurement services.
(v) Production related services represent ancillary services rendered in relation to the Group’s operations such as equipment repair and general maintenance,
insurance premium, technical research, communications, firefighting, security, product quality testing and analysis, information technology, design and engineering,
construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management and
environmental protection, and management services.
(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation,
accommodation, canteens and property maintenance.
(vii) Operating lease charges represent the rental incurred for operating leases in respect of land, buildings and equipment leased from Sinopec Group Company and
fellow subsidiaries, associates and joint ventures. No lease charges have incurred in the current year because of the adoption of the new lease standard.
129
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were
carried out in the ordinary course of business, are as follows (Continued):
Notes (Continued):
(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 obtained from Sinopec Group Company and fellow subsidiaries.
(xi) The Group obtained loans, discounted bills and others from Sinopec Group Company and fellow subsidiaries.
In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec
Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell
certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2019.
The terms of these agreements are summarised as follows:
(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.
(f) On the basis of a series of continuing connected transaction agreements signed in 2000, the Company and Sinopec Group Company have
signed the Fifth Supplementary Agreement and the Fourth Revised Memorandum of land use rights leasing contract on 24 August 2018,
which took effect on 1 January 2019 and made adjustment to “Mutual Supply Agreement”, “Agreement for Provision of Cultural and
Educational, Health Care and Community Services”, “Buildings Leasing Contract”, “Intellectual Property Contract” and “Land Use Rights
Leasing Contract”, etc.
130
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 55 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(4) Balances with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
The balances with Sinopec Group Company and fellow subsidiaries, associates and joint ventures at 31 December 2019 and 31 December 2018
are as follows:
Cash at bank and on hand
Bills receivable
Accounts receivable
Receivables financing
Other receivables
Prepayments and other current assets
Other non-current assets
Bills payable
Accounts payable
Contract liabilities
Other payables
Other non-current liabilities
Short-term loans
Long-term loans (including current portion) (Note)
Lease liabilities (including current portion)
The ultimate holding company
Other related companies
At 31 December
2019
RMB million
At 31 December
2018
RMB million
At 31 December
2019
RMB million
At 31 December
2018
RMB million
–
–
52
–
8
6
–
17
94
51
64
–
–
–
82,255
–
–
11
–
33
–
–
16
3
25
2
–
–
–
–
35,707
–
12,916
407
11,424
1,285
734
3,801
21,384
4,413
16,077
–
5,465
47,450
89,147
41,057
74
7,470
–
6,901
731
23,482
1,991
15,520
3,248
18,158
12,470
27,304
46,877
–
Note: As at 31 December 2019, the long-term borrowings (including current portion) mainly include an interest-free loan with a maturity period of 20 years amounting
to RMB 35,560 million from Sinopec Group Company through Sinopec Finance. This borrowing is a special arrangement to reduce financing costs and improve
liquidity of the Company during its initial global offering in 2000.
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term
loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated
with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 23 and Note 31.
As at and for the year ended 31 December 2019, and as at and for the year ended 31 December 2018, no individually significant impairment
losses for bad and doubtful debts were recorded in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates
and joint ventures.
(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
2019
RMB thousand
2018
RMB thousand
9,209
536
9,745
5,745
351
6,096
131
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 56 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, the Group’s earnings could be affected by changes in depreciation expense or an immediate write-down of the
carrying amount of oil and properties.
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 “CASs 8 – Impairment of Assets”. The carrying amounts of long-lived assets are
reviewed periodically in order to assess whether the recoverable amounts have declined below the carrying amounts. These assets are tested for
impairment whenever events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a
decline has occurred, the carrying amount is reduced to recoverable amount. For goodwill, the recoverable amount is estimated annually. The
recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows. It is difficult to precisely
estimate the fair value because quoted market prices for the Group’s assets or cash-generating units are not readily available. In determining
the value of expected future cash flows, expected cash flows generated by the asset or the cash-generating unit are discounted to their present
value, which requires significant judgement relating to sales volume, selling price, amount of operating costs and discount rate. The Group uses
all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based
on reasonable and supportable assumptions and projections of sales volume, selling price, amount of operating costs and discount rate.
(c) Depreciation
Fixed assets are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual
value. Management reviews the estimated useful lives of the assets at least annually in order to determine the amount of depreciation expense
to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and taking into
account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous
estimates.
(d) Measurement of expected credit losses
The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past events,
current conditions and forecasts of future economic conditions. The Group regularly monitors and reviews the assumptions used for estimating
expected credit losses.
(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.
132
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 57 PRINCIPAL SUBSIDIARIES
The Company’s principal subsidiaries have been consolidated into the Group’s financial statements for the year ended 31 December 2019. The
following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the Group:
Full name of enterprise
Principal activities
Actual
investment at
31 December
2019
million
Percentage of
equity
interest/voting
right held by
the Group
%
Minority
Interests at
31 December
2019
RMB million
Registered
capital/
paid-up capital
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 Co. 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:
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
Trading of petrochemical products
Trading of crude oil and petrochemical products
RMB 1,400
RMB 5,000
RMB 1,856
RMB 6,585
Production and sale of catalyst products
Manufacturing of intermediate petrochemical products and
RMB 1,500
RMB 15,651
RMB 2,424
RMB 15,651
petroleum products
100.00
100.00
100.00
100.00
Pipeline storage and transportation of crude oil
RMB 12,000
RMB 12,000
100.00
Production and sale of refined petroleum products, lubricant
RMB 3,374
RMB 3,374
100.00
base oil, and petrochemical materials
Production and sale of polyester chips and polyester fibres
RMB 4,000
RMB 6,713
100.00
24
4,593
298
–
–
70
–
Marketing and distribution of refined petroleum products
Provision of crude oil jetty services and natural gas pipeline
RMB 28,403
HKD 248
RMB 20,000
HKD 3,952
70.42
60.33
70,528
4,359
transmission services
Manufacturing of synthetic fibres, resin and plastics,
RMB 10,824
RMB 5,820
50.44
14,942
intermediate petrochemical products and petroleum
products
Manufacturing of plastics, intermediate petrochemical
RMB 8,140
RMB 4,646
50.00
5,927
products and petroleum products
Investment in exploration, production and sale of petroleum
RMB 8,000
RMB 8,000
100.00
8,669
and natural gas
Investment holding of overseas business
Marketing and distribution of petrochemical products
Coal chemical industry investment management, production
USD 1,662
RMB 1,000
RMB 22,761
USD 1,662
RMB 1,165
RMB 22,795
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
RMB 5,294
RMB 5,240
RMB 5,000
RMB 4,250
Production, sale, research and development of ethylene and
RMB 7,193
RMB 7,193
100.00
100.00
100.00
98.98
85.00
59.00
–
74
(88)
133
1,543
4,863
(c) Subsidiaries acquired through business combination under common control:
downstream byproducts
Sinopec Hainan Refining and Chemical Company
Limited
Sinopec Qingdao Petrochemical Company Limited
Manufacturing of intermediate petrochemical products and
RMB 9,628
RMB 7,205
75.00
4,479
petroleum products
Manufacturing of intermediate petrochemical products and
RMB 1,595
RMB 7,233
100.00
–
petroleum products
Gaoqiao Petrochemical Company Limited
Manufacturing of intermediate petrochemical products and
RMB 10,000
RMB 4,804
55.00
8,006
petroleum products
(d) Subsidiaries acquired through business combination not under common control:
Shanghai SECCO
Production and sale of petrochemical products
RMB 7,801
RMB 7,801
67.60
5,997
* The minority interests of subsidiaries which the Group holds 100% of equity interests at the end of the year are the minority interests of their subsidiaries.
Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and Hong Kong SAR, respectively, all of the above principal subsidiaries
are incorporated and operate their businesses principally in the PRC.
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.
133
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
57 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 whose minority
interests that are material to the Group.
Summarised consolidated balance sheet
Marketing Company
SIPL
Shanghai Petrochemical
Fujian Petrochemical
Sinopec Kantons
Shanghai SECCO
At
31 December
2019
RMB million
At
31 December
2018
RMB million
At
31 December
2019
RMB million
At
31 December
2018
RMB million
At
31 December
2019
RMB million
At
31 December
2018
RMB million
At
31 December
2019
RMB million
At
31 December
2018
RMB million
At
31 December
2019
RMB million
At
31 December
2018
RMB million
At
31 December
2019
RMB million
At
31 December
2018
RMB million
Sinopec-SK
At
31 December
2019
RMB million
At
31 December
2018
RMB million
129,266
(192,106)
(62,840)
340,356
(58,732)
130,861
(181,766)
(50,905)
261,062
(2,086)
19,151
(456)
18,695
13,234
(16,952)
16,731
(483)
16,248
38,020
(31,050)
22,309
(15,479)
6,830
23,327
(141)
25,299
(13,913)
11,386
19,241
(140)
1,788
(804)
984
11,558
(688)
816
(50)
766
11,444
(688)
1,284
(2,961)
(1,677)
12,777
(158)
1,209
(3,722)
(2,513)
12,895
(132)
11,858
(3,196)
8,662
11,473
(1,627)
9,537
(2,233)
7,304
12,301
(1,698)
5,337
(15,037)
(9,700)
21,567
(7)
2,750
(2,333)
417
12,612
–
281,624
258,976
(3,718)
6,970
23,186
19,101
10,870
10,756
12,619
12,763
9,846
10,603
21,560
12,612
Current assets
Current liabilities
Net current (liabilities)/assets
Non-current assets
Non-current liabilities
Net non-current assets/
(liabilities)
Summarised consolidated statement of comprehensive income and cash flow
Year ended 31 December
Marketing Company
SIPL
Shanghai Petrochemical
Fujian Petrochemical
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
Sinopec Kantons
2019
RMB million
2018
RMB million
Shanghai SECCO
2019
RMB million
2018
RMB million
Sinopec-SK
2019
RMB million
2018
RMB million
Turnover
Profit for the year
Total comprehensive income
Comprehensive income
attributable to minority
interests
Dividends paid to
minority interests
Net cash generated from/
(used in) operating activities
1,427,705
22,984
23,354
1,443,698
21,995
22,538
3,282
2,831
2,693
5,037
3,272
4,536
100,346
2,225
2,233
107,765
5,277
5,270
8,285
4,830
7,780
3,964
1,651
2,737
10,926
–
40,260
24,825
2,128
3,467
1,112
1,344
5,121
2,612
1,616
6,695
5,535
477
477
238
650
622
5,261
1,595
1,595
798
600
38
1,274
1,131
1,140
433
159
716
1,398
1,065
1,067
399
104
738
28,341
3,137
3,137
1,016
822
4,601
26,320
3,099
3,099
1,004
1,191
3,766
31,016
664
664
232
–
17,134
1,879
1,879
658
–
5,532
3,308
58 COMMITMENTS
Capital commitments
At 31 December 2019 and 31 December 2018, the capital commitments of the Group are as follows:
Authorised and contracted for (i)
Authorised but not contracted for
Total
At 31 December
2019
RMB million
At 31 December
2018
RMB million
138,088
63,967
202,055
141,045
54,392
195,437
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 6,100 million (2018: RMB 5,553 million).
134
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
58 COMMITMENTS (Continued)
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 Natural Resources. The maximum term of the Group’s exploration
licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term.
The Group is obligated to make progressive annual minimum exploration investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Natural Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant
authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum
term of the production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group’s
production license is renewable upon application by the Group 30 days prior to expiration.
The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Natural Resources annually
which are expensed. Expenses recognised were approximately RMB 179 million for the year ended 31 December 2019 (2018: RMB 231 million).
Estimated future annual payments are as follows:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Thereafter
Total
At 31 December
2019
RMB million
At 31 December
2018
RMB million
302
69
34
30
29
845
1,309
380
79
33
28
28
852
1,400
The implementation of commitments in previous year and the Group’s commitments did not have material discrepancy.
59 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 2019 and 31 December 2018, the guarantees by the Group in respect of facilities granted to the parties below are as follows:
Joint ventures
Associates (i)
Others (ii)
Total
Notes:
At 31 December
2019
RMB million
At 31 December
2018
RMB million
7,100
10,140
–
17,240
5,033
12,168
7,197
24,398
(i) The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy by banks amount to RMB 17,050 million. At 31
December 2019, the amount withdrawn by Zhongtian Synergetic Energy from banks and guaranteed by the Group was RMB 10,140 million (31 December 2018:
RMB 12,168 million).
(ii) The Group provided a guarantee in respect to the loan of New Bright International Development Limited borrowed from Sinopec Overseas Oil & Gas Limited. As at
31 December 2019, the loan agreement was terminated, in consequence, the guarantee agreement was terminated.
The Group monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss will occur, and recognises
any such losses under guarantees when those losses are reliably estimable. At 31 December 2019 and 31 December 2018, the Group estimates
that there is no need to pay for the guarantees. Thus no liabilities have been accrued for a loss related to the Group’s obligation under these
guarantee arrangements.
135
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 59 CONTINGENT LIABILITIES (Continued)
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 recognised normal routine pollutant discharge fees of approximately RMB 9,235 million in the consolidated financial statements for the
year ended 31 December 2019 (2018: RMB 7,940 million).
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.
60 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.
(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, non-current liabilities due within one year, long-term loans, debentures payable,
deferred tax liabilities, other non-current liabilities and other unallocated liabilities.
136
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 60 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Reportable information on the Group’s operating segments is as follows:
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
2019
RMB million
2018
RMB million
111,114
89,315
200,429
141,674
1,077,018
1,218,692
1,393,557
4,159
1,397,716
425,508
54,865
480,373
828,635
654,337
1,482,972
(1,879,694)
2,900,488
10,283
5,464
33,247
14,861
1,850
65,705
2,966,193
93,499
95,954
189,453
148,930
1,109,088
1,258,018
1,408,989
5,224
1,414,213
457,406
73,835
531,241
716,789
650,271
1,367,060
(1,934,372)
2,825,613
10,738
5,389
32,424
15,492
1,523
65,566
2,891,179
137
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
60 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Operating profit/(loss)
By segment
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Elimination
Total segment operating profit
Investment income
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Total segment investment income
Less: Financial expenses
Add: Other income
(Losses)/gains from changes in fair value
Asset disposal losses
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
138
2019
RMB million
2018
RMB million
6,289
30,074
29,781
16,586
3,530
(40)
86,220
3,148
(580)
3,499
5,178
1,383
12,628
9,967
5,973
(3,511)
(1,318)
90,025
2,598
2,607
90,016
(11,557)
53,703
24,106
25,970
(8,151)
(3,634)
80,437
2,595
429
2,676
6,905
(1,177)
11,428
(1,001)
6,694
2,656
(742)
101,474
2,070
3,042
100,502
At 31 December
2019
RMB million
At 31 December
2018
RMB million
410,950
321,080
399,242
175,884
131,686
1,438,842
127,927
152,204
17,616
18,482
1,755,071
162,262
120,617
219,381
53,515
136,420
692,195
31,196
69,490
39,625
19,157
6,809
15,364
4,330
878,166
321,686
271,356
317,641
156,865
152,799
1,220,347
167,015
145,721
21,694
37,531
1,592,308
93,874
103,709
159,028
37,380
144,138
538,129
44,692
17,450
61,576
31,951
5,948
27,276
7,627
734,649
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
60 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
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
(2) Geographical information
2019
RMB million
2018
RMB million
61,739
31,372
29,566
22,438
1,979
147,094
50,732
19,676
21,572
13,966
2,866
108,812
3
245
80
17
–
345
42,155
27,908
21,429
19,578
6,906
117,976
60,331
18,164
16,296
13,379
1,797
109,967
4,274
353
264
1,374
16
6,281
The following tables set out information about the geographical information of the Group’s external sales and the Group’s non-current assets,
excluding financial assets and deferred tax assets. In presenting information on the basis of geographical segments, segment revenue is based
on the geographical location of customers, and segment assets are based on the geographical location of the assets.
External sales
Mainland China
Singapore
Others
Non-current assets
Mainland China
Others
2019
RMB million
2018
RMB million
2,131,078
505,672
329,443
2,966,193
2,119,580
395,129
376,470
2,891,179
At 31 December
2019
RMB million
At 31 December
2018
RMB million
1,235,676
52,705
1,288,381
989,668
50,892
1,040,560
139
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
61 FINANCIAL INSTRUMENTS
Overview
Financial assets of the Group include cash at bank and on hand, financial assets held for trading, derivative financial assets, accounts receivable,
bills receivable, receivables financing, other receivables and other equity instrument investments. Financial liabilities of the Group include short-term
loans, derivative financial liabilities, bills payable, accounts payable, employee benefits payable, other payables, long-term loans, debentures payable
and lease liabilities.
The Group has exposure to the following risks from its uses of financial instruments:
‧ credit risk;
‧ liquidity risk; and
‧ market risk.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework, and developing
and monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, and set appropriate risk limits and
controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular
and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group’s audit committee.
Credit risk
(i) Risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s deposits placed with financial institutions (including structured deposits) and receivables
from customers. To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial
institutions in the PRC with acceptable credit ratings. The majority of the Group’s accounts receivable relates to sales of petroleum and chemical
products to related parties and third parties operating in the petroleum and chemical industries. No single customer accounted for greater than
10% of total accounts receivable at 31 December 2019, except for the amounts due from Sinopec Group Company and fellow subsidiaries. The
Group performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral on accounts receivable.
The Group maintains an impairment loss for doubtful accounts and actual losses have been within management’s expectations.
The carrying amounts of cash at bank and on hand, financial assets held for trading, derivative financial assets, accounts receivable, bills
receivable, receivables financing and other receivables, represent the Group’s maximum exposure to credit risk in relation to financial assets.
(ii) Impairment of financial assets
The Group’s primary type of financial assets that are subject to the expected credit loss model is accounts receivable, bills receivable, receivables
financing and other receivables.
The Group’s cash deposits are placed only with large financial institutions with acceptable credit ratings, and there is no material impairment
loss identified.
For accounts receivable, bills receivable and receivables financing, the Group applies the “No. 22 Accounting Standards for Business Enterprises
– Financial instruments: recognition and measurement” simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all accounts receivable, bills receivable and receivables financing.
To measure the expected credit losses, accounts receivable, bills receivable and receivables financing have been grouped based on shared credit
risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2019 or 1 January 2019,
respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the accounts receivable, bills receivable
and receivables financing.
The detailed analysis of accounts receivable and receivables financing is listed in note 8 and note 9.
The Group’s other receivables are considered to have low credit risk, and the loss allowance recognised during the year was therefore limited to
12 months expected credit losses. The Group considers “low credit risk” for other receivables when they have a low risk of default and the issuer
has a strong capacity to meet its contractual cash flow obligations in the near term.
140
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 61 FINANCIAL INSTRUMENTS (Continued)
Liquidity risk
Liquidity risk is the risk that the Group encounters short fall of capital when meeting its obligation of financial liabilities. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal
and stressed capital conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group prepares monthly
cash flow budget to ensure that they will always have sufficient liquidity to meet its financial obligations as they fall due. The Group arranges and
negotiates financing with financial institutions and maintains a certain level of standby credit facilities to reduce the liquidity risk.
At 31 December 2019, the Group has standby credit facilities with several PRC financial institutions which provide the Group to borrow up to RMB
379,649 million (2018: RMB 387,748 million) on an unsecured basis, at a weighted average interest rate of 3.57% per annum (2018: 3.87%). At 31
December 2019, the Group’s outstanding borrowings under these facilities were RMB 2,947 million (2018: RMB 21,236 million) and were included
in loans.
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:
At 31 December 2019
Total
contractual
undiscounted
cash flow
Within one
year or
on demand
More than
one year
but less than
two years
More than
two years
but less than
five years
Carrying
amount
More than
five years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term loans
Derivative financial liabilities
Bills payable
Accounts payable
Other payables and employee benefits payable
Non-current liabilities due within one year
Long-term loans
Debentures payable
Lease liabilities
Total
31,196
2,729
11,834
187,958
77,093
69,490
39,625
19,157
177,674
616,756
31,633
2,729
11,834
187,958
77,093
72,180
49,604
24,400
351,223
808,654
31,633
2,729
11,834
187,958
77,093
72,180
404
764
–
384,595
–
–
–
–
–
–
6,492
764
15,676
22,932
–
–
–
–
–
–
15,610
16,667
45,008
77,285
–
–
–
–
–
–
27,098
6,205
290,539
323,842
At 31 December 2018
Total
contractual
undiscounted
cash flow
Within one
year or
on demand
More than
one year but
less than
two years
More than
two years
but less than
five years
Carrying
amount
More than
five years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term loans
Derivative financial liabilities
Bills payable
Accounts payable
Other payables and employee benefits payable
Non-current liabilities due within one year
Long-term loans
Debentures payable
Total
44,692
13,571
6,416
186,341
84,775
17,450
61,576
31,951
446,772
45,040
13,571
6,416
186,341
84,775
18,053
66,387
38,674
459,257
45,040
13,571
6,416
186,341
84,775
18,053
792
1,269
356,257
–
–
–
–
–
–
40,885
14,030
54,915
–
–
–
–
–
–
13,807
17,124
30,931
–
–
–
–
–
–
10,903
6,251
17,154
Management believes that the Group’s current cash on hand, expected cash flows from operations and available standby credit facilities from
financial institutions will be sufficient to meet the Group’s short-term and long-term capital requirements.
141
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 61 FINANCIAL INSTRUMENTS (Continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.
(a) Currency risk
Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured.
The Group’s currency risk exposure primarily relates to short-term and long-term debts denominated in USD and lease liabilities denominated in
SGD. The Group enters into foreign exchange contracts to manage currency risk exposure.
Included primarily in short-term and long-term debts and lease liabilities are the following amounts denominated in a currency other than the
functional currency of the entity to which they relate:
The Group
Gross exposure arising from loans and lease liabilities
US Dollar
Singapore Dollar
At 31 December
2019
million
At 31 December
2018
million
103
4
668
–
A 5 percent strengthening/weakening of Renminbi against the following currencies at 31 December 2019 and 31 December 2018 would have
increased/decreased net profit for the year of the Group by the amounts shown below. This analysis has been determined assuming that the
change in foreign exchange rates had occurred at the balance sheet date and had been applied to the foreign currency balances to which
the Group has significant exposure as stated above, and that all other variables, in particular interest rates, remain constant. The analysis is
performed on the same basis for 2018.
The Group
US Dollar
Singapore Dollar
At 31 December
2019
RMB million
At 31 December
2018
RMB million
27
1
172
–
Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in
the functional currency of respective entity of the Group.
(b) Interest rate risk
The Group’s interest rate risk exposure arises primarily from its short-term and long-term loans. Loans carrying interest at variable interest rates
and at fixed interest rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The interest rates and
terms of repayment of short-term and long-term loans of the Group are disclosed in Note 23 and Note 31, respectively.
At 31 December 2019, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held
constant, would decrease/increase the Group’s net profit for the year by approximately RMB 352 million (2018: decrease/increase RMB 424
million). This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group’s debts outstanding
at the balance sheet date with exposure to cash flow interest rate risk. The analysis is performed on the same basis for 2018.
(c) Commodity price risk
The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products
and chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the
Group. The Group uses derivative financial instruments, including commodity futures and swaps contracts, to manage a portion of such risk.
At 31 December 2019, the Group had certain commodity contracts of crude oil, refined oil products and chemical products designated as
qualified cash flow hedges and economic hedges. At 31 December 2019, the fair value of such derivative hedging financial instruments is
derivative financial assets of RMB 788 million (2018: RMB 7,844 million) and derivative financial liabilities of RMB 2,728 million (2018: RMB
13,568 million).
At 31 December 2019, it is estimated that a general increase/decrease of USD 10 per barrel in basic price of derivative financial instruments,
with all other variables held constant, would impact the fair value of derivative financial instruments, which would increase/decrease the Group’s
net profit for the year by approximately RMB 3,134 million (2018: decrease/increase RMB 197 million), and decrease/increase the Group’s other
comprehensive income by approximately RMB 4,289 million (2018: increase/decrease RMB 6,850 million). This sensitivity analysis has been
determined assuming that the change in prices had occurred at the balance sheet date and the change was applied to the Group’s derivative
financial instruments at that date with exposure to commodity price risk. The analysis is performed on the same basis for 2018.
142
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
61 FINANCIAL INSTRUMENTS (Continued)
Fair values
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments measured at fair value at the balance sheet date across the three levels
of the fair value hierarchy. With the fair value of each financial instrument categorised in its entirely based on the lowest level of input that is
significant to that fair value measurement. The levels are defined as follows:
‧ 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 2019
The Group
Assets
Financial assets held for trading:
– Structured deposits
– Equity investments, listed and at quoted market price
Derivative financial assets:
– Derivative financial assets
Receivables financing:
– Receivables financing
Other equity instrument investments:
– Other Investments
Liabilities
Derivative financial liabilities:
– Derivative financial liabilities
At 31 December 2018
The Group
Assets
Financial assets held for trading:
– Structured deposits
– Equity investments (listed and at quoted market price)
Derivative financial assets:
– Derivative financial assets
Other equity instrument investments:
– Other Investments
Liabilities
Derivative financial liabilities:
– Derivative financial liabilities
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
–
1
128
–
90
219
–
–
709
–
–
709
3,318
–
–
3,318
1
837
8,622
8,622
1,431
13,371
1,521
14,299
1,209
1,209
1,520
1,520
–
–
2,729
2,729
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
–
182
874
127
1,183
5,500
5,500
–
–
7,013
–
7,013
8,071
8,071
25,550
–
25,550
182
–
7,887
1,323
26,873
–
–
1,450
35,069
13,571
13,571
During the year ended 31 December 2019, there was no transfer between instruments in Level 1 and Level 2.
Management of the Group uses discounted cash flow model with inputted interest rate and commodity index, which were influenced by historical
fluctuation and the probability of market fluctuation, to evaluate the fair value of the structured deposits and receivables financing classified as
Level 3 financial assets.
143
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
61 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 2.37% to 4.90% (2018: from 2.76% to 4.90%). The following table presents the carrying
amount and fair value of the Group’s long-term indebtedness other than loans from Sinopec Group Company and fellow subsidiaries at 31
December 2019 and 31 December 2018:
Carrying amount
Fair value
At 31 December
2019
RMB million
At 31 December
2018
RMB million
63,946
62,594
63,085
62,656
The Group has not developed an internal valuation model necessary to estimate the fair value of loans from Sinopec Group Company and
fellow subsidiaries as it is not considered practicable to estimate their fair value because the cost of obtaining discount and borrowing rates
for comparable borrowings would be excessive based on the Reorganisation of the Group, its existing capital structure and the terms of the
borrowings.
Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values
at 31 December 2019 and 31 December 2018.
62 EXTRAORDINARY GAINS AND LOSSES
Pursuant to “Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public- Extraordinary Gain
and Loss” (2008), the extraordinary gains and losses of the Group are as follows:
Extraordinary (gains)/losses for the year:
Net loss on disposal of non-current assets
Donations
Government grants
Gain on holding and disposal of various investments
Other non-operating loss, net
Tax effect
Total
Attributable to:
Equity shareholders of the Company
Minority interests
2019
RMB million
2018
RMB million
1,318
209
(6,857)
(410)
729
(5,011)
1,597
(3,414)
(3,320)
(94)
742
180
(7,482)
(1,023)
1,613
(5,970)
2,312
(3,658)
(3,459)
(199)
144
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019
63 BASIC AND DILUTED EARNINGS PER SHARE
(i) Basic earnings per share
Basic earnings per share is calculated by the net profit attributable to equity shareholders of the Company and the weighted average number of
outstanding ordinary shares of the Company:
Net profit attributable to equity shareholders of the Company (RMB million)
Weighted average number of outstanding ordinary shares of the Company (million)
Basic earnings per share (RMB/share)
The calculation of the weighted average number of ordinary shares is as follows:
Weighted average number of outstanding ordinary shares of the Company at 1 January (million)
Weighted average number of outstanding ordinary shares of the Company at 31 December (million)
(ii) Diluted earnings per share
2019
57,591
121,071
0.476
2019
121,071
121,071
2018
63,089
121,071
0.521
2018
121,071
121,071
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)
64 RETURN ON NET ASSETS AND EARNINGS PER SHARE
2019
57,591
121,071
0.476
2019
121,071
121,071
2018
63,089
121,071
0.521
2018
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:
2019
2018
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)
7.90
0.476
0.476
8.67
0.521
0.521
7.45
0.448
0.448
8.20
0.493
0.493
Net profit attributable to the Company’s ordinary equity
shareholders
Net profit deducted extraordinary gains and losses
attributable to the Company’s ordinary equity
shareholders
65 EVENTS AFTER THE BALANCE SHEET DATE
In early 2020, the outbreak of Coronavirus Disease 2019 (“COVID-19”) has significant impacts on the consumption of refined oil products and sales
of chemical products of the Group. The Group has taken a series of strong and effective measures, and has coordinated the prevention and control
of the COVID-19 and the resumption of work and production with all-out efforts to minimize its impact.
International crude oil prices dropped significantly in March 2020 under the impact of the outbreak of the COVID-19 and the breakdown of OPEC’s
production reduction negotiation, which has a significant impact on the Group’s operation.
The COVID-19 and international crude oil prices drop in March 2020 are events arose after the balance sheet date, which are non-adjusting events
after the balance sheet date. The Group will keep continuous attention on the situation of the COVID-19 and future fluctuation in oil prices, take
responsive tackling measures, and assess the impact on the financial position and operating results of the Group after the balance sheet date. Up to
the date of the issuance of this report, the assessment is still in progress.
145
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2019 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
149 to 203, which comprise:
‧ the consolidated balance sheet as at 31 December 2019;
‧ the consolidated income statement for the year then ended;
‧ the consolidated statement of comprehensive income for the year then ended;
‧ the consolidated statement of changes in equity for the year then ended;
‧ the consolidated statement of cash flows for the year then ended; and
‧ the notes to the consolidated financial statements, which include a summary of significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December
2019, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial
Reporting Standards (“IFRSs”) issued by the International Accounting Standard Board and have been properly prepared in compliance with the
disclosure requirements of the Hong Kong Companies Ordinance.
BASIS FOR OPINION
We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements section of our report.
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.
146
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements
of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
The key audit matter identified in our audit is “Recoverability of the carrying amount of property, plant and equipment relating to oil and gas producing
activities”.
Key Audit Matter
How our audit addressed the Key Audit Matter
Recoverability of the carrying amount of property, plant and equipment
relating to oil and gas producing activities
Refer to note 8 “Other operating expense, net”, note 16 “Property, plant
and equipment” and note 43 “Accounting estimates and judgements” to
the consolidated financial statements.
Low crude oil prices gave rise to possible indication that the carrying
amount of property, plant and equipment relating to oil and gas producing
activities as at 31 December 2019 might be impaired. The Group has
adopted value in use as the respective recoverable amounts of property,
plant and equipment relating to oil and gas producing activities, which
involved key estimations or assumptions including:
– Future crude oil prices;
– Future production profiles;
– Future cost profiles; and
– Discount rates.
Because of the significance of the carrying amount of property, plant and
equipment relating to oil and gas producing activities as at 31 December
2019, together with the use of significant estimations or assumptions
in determining their respective value in use, we had placed our audit
emphasis on this matter.
In auditing the respective value in use calculations of property, plant and
equipment relating to oil and gas producing activities, we performed the
following key procedures on the relevant discounted cash flow projections
prepared by management:
‧ Evaluated and tested the key controls in respect of the preparation of
the discounted cash flow projections of property, plant and equipment
relating to oil and gas producing activities.
‧ Assessed the methodology adopted in the discounted cash flow
projections, tested mathematical accuracy of the projections, and the
completeness, accuracy, and relevance of underlying data used in the
projections.
‧ Compared estimates of future crude oil prices adopted by the Group
against a range of published crude oil price forecasts.
‧ Compared the future production profiles against the oil and gas
reserve estimation report approved by the management. Evaluated
the competence, capability and objectivity of the management’s
experts engaged in estimating the oil and gas reserves. Assessed
key estimations or assumptions used in the reserve estimation, by
reference to historical data, management plans and/or relevant
external data.
‧ Compared the future cost profiles against historical costs and relevant
budgets of the Group.
‧ Tested selected other key data inputs, such as natural gas prices and
production profiles in the projections by reference to historical data
and/or relevant budgets of the Group.
‧ Used professionals with specialized skill and knowledge to assist in
the evaluation of the appropriateness of discount rates adopted by the
management.
‧ Evaluated the sensitivity analyses prepared by the Group, and assessed
the potential impacts of a range of possible outcomes.
Based on our work, we found the key assumptions and input data adopted
were supported by the evidence we obtained.
OTHER INFORMATION
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.
147
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED) RESPONSIBILITIES OF DIRECTORS AND THOSE CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance
with IFRSs and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the directors determine is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. 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:
(cid:127)
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.
(cid:127) 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.
(cid:127) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the
directors.
(cid:127) 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.
(cid:127) 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.
(cid:127) 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 CHAN KWONG TAK.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 27 March 2020
148
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial 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, net
Total operating expenses
Operating profit
Finance costs
Interest expense
Interest income
Foreign currency exchange (losses)/gains, net
Net finance costs
Investment income
Share of profits less losses from associates and joint ventures
Profit before taxation
Income tax expense
Profit for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Profit for the year
Earnings per share:
Basic
Diluted
Notes
Year ended 31 December
2019
RMB
2018
RMB
3
4
5
6
7
8
9
20, 21
10
15
2,900,488
65,705
2,966,193
(2,380,907)
(55,313)
(108,812)
(10,510)
(81,482)
(242,535)
(436)
(2,879,995)
86,198
(17,003)
7,206
(170)
(9,967)
919
12,777
89,927
(17,894)
72,033
57,465
14,568
72,033
0.475
0.475
2,825,613
65,566
2,891,179
(2,292,983)
(65,642)
(109,967)
(10,744)
(77,721)
(246,498)
(5,360)
(2,808,915)
82,264
(7,321)
7,726
596
1,001
1,871
13,974
99,110
(20,213)
78,897
61,618
17,279
78,897
0.509
0.509
The notes on pages 156 to 203 form part of these consolidated financial statements. Details of dividends payable to shareholders of the Company
attributable to the profit for the year are set out in Note 13.
149
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)(B) FINANCIAL STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2019 (Amounts in million, except per share data)
Profit for the year
Other comprehensive income:
Items that may not be reclassified subsequently to profit or loss
Equity investments at fair value through other comprehensive income
Total items that may not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Share of other comprehensive loss of associates and joint ventures
Cash flow hedges
Foreign currency translation differences
Total items that may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income for the year
Attributable to:
Shareholders of the Company
Non-controlling interests
Total comprehensive income for the year
Notes
Year ended 31 December
14
2019
RMB
72,033
(31)
(31)
(810)
4,941
1,480
5,611
5,580
77,613
62,880
14,733
77,613
2018
RMB
78,897
(53)
(53)
(229)
(9,741)
3,399
(6,571)
(6,624)
72,273
54,000
18,273
72,273
The notes on pages 156 to 203 form part of these consolidated financial statements.
150
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2019(Amounts in million)
Non-current assets
Property, plant and equipment, net
Construction in progress
Right-of-use assets
Goodwill
Interest in associates
Interest in joint ventures
Financial assets at fair value through other comprehensive income
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
Derivative financial assets
Trade accounts receivable and bills receivable
Financial assets at fair value through other comprehensive income
Inventories
Prepaid expenses and other current assets
Total current assets
Current liabilities
Short-term debts
Loans from Sinopec Group Company and fellow subsidiaries
Lease liabilities
Derivative financial liabilities
Trade accounts payable and bills payable
Contract liabilities
Other payables
Income tax payable
Total current liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Long-term debts
Loans from Sinopec Group Company and fellow subsidiaries
Lease liabilities
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 27 March 2020.
Notes
31 December 31 December
2018
RMB
2019
RMB
16
17
18, 1(a)
19
20
21
26
29
22
23
24
25
26
27
28
30
30
31, 1(a)
24
32
33
34
30
30
31, 1(a)
29
35
36
622,409
173,482
267,860
8,697
95,737
56,467
1,521
17,616
—
65,426
1,309,215
60,313
67,614
3,319
837
54,865
8,622
192,442
57,844
445,856
40,521
43,289
15,198
2,729
199,792
126,735
144,846
3,264
576,374
130,518
1,178,697
49,156
9,626
177,674
6,809
43,163
16,434
302,862
875,835
121,071
617,079
738,150
137,685
875,835
617,762
136,963
—
8,676
89,537
56,184
1,450
21,694
64,514
91,408
1,088,188
111,922
55,093
25,732
7,887
64,879
–
184,584
54,023
504,120
29,462
31,665
—
13,571
192,757
124,793
166,151
6,699
565,098
60,978
1,027,210
51,011
42,516
—
5,948
42,800
28,400
170,675
856,535
121,071
596,213
717,284
139,251
856,535
Zhang Yuzhuo
Chairman
Ma Yongsheng
President
Shou Donghua
Chief Financial Officer
The notes on pages 156 to 203 form part of these consolidated financial statements.
151
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)CONSOLIDATED BALANCE SHEETAs at 31 December 2019(Amounts in million)
Balance at 31 December 2017
Change in accounting policy
Balance at 1 January 2018
Profit for the year
Other comprehensive income (Note 14)
Total comprehensive income for the year
Amounts transferred to initial carrying amount of
hedged items
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2017 (Note 13)
Interim dividend for 2018 (Note 13)
Appropriation (Note (a))
Distributions to non-controlling interests
Contributions to subsidiaries from non-controlling
interests
Total contributions by and distributions to owners
Transaction with non-controlling interests
Total transactions with owners
Others
Balance at 31 December 2018
Share
capital
RMB
121,071
–
121,071
–
–
–
–
–
–
–
–
Capital
reserve
RMB
26,326
–
26,326
–
–
–
Share
premium
RMB
55,850
–
55,850
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
121,071
–
–
(12)
(12)
(261)
26,053
–
–
–
–
–
55,850
Statutory
surplus
reserve
RMB
Discretionary
surplus
reserve
RMB
82,682
–
82,682
–
–
–
–
–
–
3,996
–
–
3,996
–
3,996
–
86,678
117,000
–
117,000
–
–
–
–
–
–
–
–
–
–
–
–
–
117,000
Other
reserves
RMB
(2,934)
(12)
(2,946)
–
(7,618)
(7,618)
5,269
–
–
–
–
–
–
–
–
818
(4,477)
Total equity
attributable
to
shareholders
of the
Company
RMB
726,120
–
726,120
61,618
(7,618)
54,000
Retained
earnings
RMB
326,125
12
326,137
61,618
–
61,618
Non-
controlling
interests
RMB
126,770
–
126,770
17,279
994
18,273
Total
equity
RMB
852,890
–
852,890
78,897
(6,624)
72,273
–
5,269
–
5,269
(48,428)
(19,371)
(3,996)
–
–
(71,795)
–
(71,795)
(851)
315,109
(48,428)
(19,371)
–
–
–
(67,799)
(12)
(67,811)
(294)
717,284
–
–
–
(7,476)
2,060
(5,416)
(299)
(5,715)
(77)
139,251
(48,428)
(19,371)
–
(7,476)
2,060
(73,215)
(311)
(73,526)
(371)
856,535
The notes on pages 156 to 203 form part of these consolidated financial statements.
152
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2018(Amounts in million)
Share
capital
RMB
121,071
–
–
–
Capital
reserve
RMB
26,053
–
–
–
Share
premium
RMB
55,850
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
121,071
–
–
2,933
2,933
7
28,993
–
–
–
–
–
55,850
Statutory
surplus
reserve
RMB
Discretionary
surplus
reserve
RMB
86,678
–
–
–
–
–
–
3,745
–
–
3,745
–
3,745
–
90,423
117,000
–
–
–
–
–
–
–
–
–
–
–
–
–
117,000
Total equity
attributable
to
shareholders
of the
Company
RMB
717,284
57,465
5,415
62,880
Other
reserves
RMB
(4,477)
–
5,415
5,415
Retained
earnings
RMB
315,109
57,465
–
57,465
Non-
controlling
interests
RMB
139,251
14,568
165
14,733
Total
equity
RMB
856,535
72,033
5,580
77,613
1,038
–
1,038
55
1,093
–
–
–
–
–
–
–
–
(35)
1,941
(31,479)
(14,529)
(3,745)
–
–
(49,753)
–
(49,753)
51
322,872
(31,479)
(14,529)
–
–
–
(46,008)
2,933
(43,075)
23
738,150
–
–
–
(18,989)
5,495
(13,494)
(2,933)
(16,427)
73
137,685
(31,479)
(14,529)
–
(18,989)
5,495
(59,502)
–
(59,502)
96
875,835
Balance at 1 January 2019
Profit for the year
Other comprehensive income (Note 14)
Total comprehensive income for the year
Amounts transferred to initial carrying amount of
hedged items
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2018 (Note 13)
Interim dividend for 2019 (Note 13)
Appropriation (Note (a))
Distributions to non-controlling interests
Contributions to subsidiaries from
non-controlling interests
Total contributions by and distributions to owners
Transaction with non-controlling interests
Total transactions with owners
Others
Balance at 31 December 2019
Notes:
(a) According to the PRC Company Law and the Articles of Association of the Company, the Company is required to transfer 10% of its net profit determined in accordance
with the accounting policies complying with Accounting Standards for Business Enterprises (“CASs”), adopted by the Group to statutory surplus reserve. In the event
that the reserve balance reaches 50% of the registered capital, no transfer is required. The transfer to this reserve must be made before distribution of a dividend to
shareholders. Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by issuing of new shares to
shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is
not less than 25% of the registered capital.
During the year ended 31 December 2019, the Company transferred RMB 3,745 million (2018: RMB 3,996 million) to the statutory surplus reserve, being 10% of the
current year’s net profit determined in accordance with the accounting policies complying with CASs.
(b) The usage of the discretionary surplus reserve is similar to that of statutory surplus reserve.
(c) As at 31 December 2019, the amount of retained earnings available for distribution was RMB 130,645 million (2018: RMB 143,148 million), being the amount
determined in accordance with CASs. According to the Articles of Association of the Company, the amount of retained earnings available for distribution to shareholders
of the Company is lower of the amount determined in accordance with the accounting policies complying with CASs and the amount determined in accordance with the
accounting policies complying with International Financial Reporting Standards (“IFRS”).
(d) The capital reserve represents (i) the difference between the total amount of the par value of shares issued and the amount of the net assets transferred from Sinopec
Group Company in connection with the Reorganisation (Note 1); and (ii) the difference between the considerations paid over or received the amount of the net assets of
entities and related operations acquired from or sold to Sinopec Group Company and non-controlling interests.
(e) The application of the share premium account is governed by Sections 167 and 168 of the PRC Company Law.
The notes on pages 156 to 203 form part of these consolidated financial statements.
153
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)for the year ended 31 December 2019(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 financial assets at fair value through profit or loss
Proceeds from sale of financial assets at fair value through profit or loss
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
Repayments of other investing activities
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
Payments made to acquire non-controlling interests
Repayments of lease liabilities (2018: Finance lease payment)
Proceeds from other financing activities
Repayments of other financing activities
Net cash used in financing activities
Net decrease 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
Notes
Year ended 31 December
2019
RMB
2018
RMB
(a)
153,420
175,868
(129,645)
(11,497)
(3,483)
(12,851)
35,292
(1,031)
704
703
(103,231)
90,710
7,094
10,272
(3,500)
(120,463)
599,866
(612,108)
3,919
(46,008)
(7,354)
(6,161)
(8)
(16,859)
320
(320)
(84,713)
(51,756)
111,922
147
60,313
(94,753)
(8,261)
(10,116)
(29,550)
55,000
(3,188)
1,557
9,666
(81,708)
78,401
5,810
10,720
–
(66,422)
746,655
(772,072)
1,886
(67,799)
(13,700)
(5,984)
(160)
(86)
–
–
(111,260)
(1,814)
113,218
518
111,922
The notes on pages 156 to 203 form part of these consolidated financial statements.
154
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2019(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
Interest income
Interest expense
Loss/(gain) on foreign currency exchange rate changes and derivative financial instruments
Loss on disposal of property, plant, equipment and other non-current assets, net
Impairment losses on assets
Credit impairment losses
Net changes 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
2019
RMB
2018
RMB
89,927
99,110
108,812
5,831
(12,777)
(919)
(7,206)
17,003
3,624
1,918
1,789
1,264
209,266
(11,802)
(9,285)
(15,236)
172,943
(19,523)
153,420
109,967
6,921
(13,974)
(1,871)
(7,726)
7,321
(1,835)
1,526
11,605
141
211,185
(1,043)
(3,312)
2,111
208,941
(33,073)
175,868
The notes on pages 156 to 203 form part of these consolidated financial statements.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2019(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.
The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of new and amended standards as
set out below.
(a) New and amended standards and interpretations adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group had changed its accounting policies
as a result of adopting IFRS 16 Leases.
IFRS 16 Leases – Impact of adoption
The Group has adopted IFRS 16 Leases from 1 January 2019, but has not restated comparative amounts for the 2018 reporting period, as
permitted under the specific transition provision in the standard. The reclassifications and the adjustments arising from IFRS 16 Leases are
therefore recognised in the opening balance sheet on 1 January 2019.
Lease accounting policy applied until 31 December 2018 is disclosed in Note 2(x)(iii).
On adoption of IFRS 16 Leases, the Group recognised lease liabilities in relation to leases which had previously been classified as ‘operating
leases’. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate as of 1 January 2019. The lessee’s incremental borrowing rates applied to the lease liabilities on 1 January 2019 ranged from
4.35% to 4.90%.
(i) Practical expedients applied
In applying IFRS 16 Leases for the first time, the Group has used the following practical expedients permitted by the standard:
‧ the use of a single discount rate to a portfolio of leases with reasonably similar characteristics,
‧ the accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases.
The Group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 2019 1 PRINCIPAL ACTIVITIES, ORGANISATION AND BASIS OF PREPARATION (Continued)
Basis of preparation (Continued)
(a) New and amended standards and interpretations adopted by the Group (Continued)
(ii) Measurement of lease liabilities
Operating lease commitments disclosed as at 31 December 2018
Discounted using the lessee’s incremental borrowing rate of at the date of initial application
(Less): short-term leases and low-value leases recognised on a straight-line basis as expense
Lease liabilities recognised as at 1 January 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
(iii) Measurement of right-of-use assets
RMB million
352,794
200,867
(2,303)
198,564
13,894
184,670
198,564
Right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease
payments relating to that lease recognised in the balance sheet as at 31 December 2018.
The recognised right-of-use assets relate to the following types of assets:
31 December
2019
RMB million
239,374
28,486
267,860
1 January
2019
RMB million
244,588
27,381
271,969
Land
Others
Total right-of-use assets
(iv) Adjustments recognised in the balance sheet on 1 January 2019
The change in accounting policy affected the following items in the balance sheet on 1 January 2019:
‧ right-of-use assets – increase by RMB 271,969 million
‧ lease prepayments – decrease by RMB 64,514 million
‧ prepaid expenses and other current assets – decrease by RMB 766 million
‧ long-term prepayments and other assets – decrease by RMB 8,125 million
‧ lease liabilities – increase by RMB 198,564 million
(v) Impact on segment disclosures
Segment assets and segment liabilities for 31 December 2019 all increased as a result of the changes in accounting policy. The following
segments were affected by the changes in accounting policy:
Exploration and production
Refining
Marketing and distribution
Chemicals
Corporate and others
Increase in
Segment assets Segment liabilities
RMB million
RMB million
79,263
32,839
120,983
19,124
15,651
267,860
78,041
26,094
62,237
12,252
14,248
192,872
Comparative segment information has not been restated. As a consequence, the segment information disclosure for the items noted above is
not entirely comparable to the information disclosed for the prior year.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
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
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2019 reporting periods and
have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
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 43.
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(j)) 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(n)).
The particulars of the Group’s principal subsidiaries are set out in Note 41.
(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.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(a) Basis of consolidation (Continued)
(ii) Associates and joint ventures (Continued)
Investments in associates and joint ventures are accounted for in the consolidated and separate financial statements using the equity method
from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. Under the
equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the
investee’s net assets and any impairment loss relating to the investment (Notes 2(i) and (n)).
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(j)) or, when appropriate, the cost on initial recognition of an investment in an associate.
(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.
(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 approximates the spot exchange rates on the transaction dates. The resulting exchange differences are recognised in
other comprehensive income and accumulated in equity in the other reserves.
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.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(d) Trade, bills and other receivables
Trade, bills and other receivables are recognised initially at their transaction price, unless they contain significant financing components when
they are recognised at fair value. They are subsequently measured at amortised cost using the effective interest method, less impairment losses
for bad and doubtful debts (Note 2(j)). Trade, bills and other receivables are derecognised if the Group’s contractual rights to the cash flows
from these financial assets expire or if the Group transfers these financial assets to another party without retaining control or substantially all
risks and rewards of the assets.
(e) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost mainly includes the cost of purchase computed using the weighted
average method and, in the case of work in progress and finished goods, direct labour and an appropriate proportion of production overheads.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
costs necessary to make the sale.
(f) Property, plant and equipment
An item of property, plant and equipment is initially recorded at cost, less accumulated depreciation and impairment losses (Note 2(n)). The cost
of an asset comprises its purchase price, any directly attributable costs of bringing the asset to working condition and location for its intended
use. The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when
that cost is incurred, when it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the
item can be measured reliably. All other expenditure is recognised as an expense in the consolidated income statement in the year in which it is
incurred.
Gains or losses arising from the retirement or disposal of an item of property, plant and equipment, other than oil and gas properties, are
determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised as income or expense
in the consolidated income statement on the date of retirement or disposal.
Depreciation is provided to write off the cost amount of items of property, plant and equipment, other than oil and gas properties, over its
estimated useful life on a straight-line basis, after taking into account its estimated residual value, as follows:
Buildings
Equipment, machinery and others
Estimated
usage period
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 to explore for or use oil and natural gas, are expensed as incurred. Capitalised costs of proved oil and gas properties are amortised on a
unit-of-production method based on volumes produced and reserves.
Management estimates future dismantlement costs for oil and gas properties with reference to engineering estimates after taking into
consideration the anticipated method of dismantlement required in accordance with the industry practices and the future cash flows are adjusted
to reflect such risks specific to the liability, as appropriate. These estimated future dismantlement costs are discounted at pre-tax risk-free rate
and are capitalised as oil and gas properties, which are subsequently amortised as part of the costs of the oil and gas properties.
(h) Construction in progress
Construction in progress represents buildings, oil and gas properties, various plant and equipment under construction and pending installation,
and is stated at cost less impairment losses (Note 2(n)). Cost comprises direct costs of construction as well as interest charges, and foreign
exchange differences on related borrowed funds to the extent that they are regarded as an adjustment to interest charges, during the periods of
construction.
Construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.
No depreciation is provided in respect of construction in progress.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(i) 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(n)). In respect of associates or joint ventures, the carrying amount of goodwill is included in the carrying amount of the interest in the
associate or joint venture and the investment as a whole is tested for impairment whenever there is objective evidence of impairment (Note 2(n)).
(j) Financial assets
(i) Classification and measurement
The Group classifies financial assets into different categories depending on the business model for managing the financial assets and the
contractual terms of cash flows of the financial assets: a) financial assets measured at amortised cost, b) financial assets measured at fair
value through other comprehensive income (“FVOCI”), c) financial assets measured at fair value through profit or loss. A contractual cash flow
characteristic which could have only a de minimis effect, or could have an effect that is more than de minimis but is not genuine, does not
affect the classification of the financial asset.
Financial assets are initially recognised at fair value. For financial assets measured at fair value through profit or loss, the relevant
transaction costs are recognised in profit or loss. The transaction costs for other financial assets are included in the initially recognised
amount. However, trade accounts receivable and bills receivable arising from sale of goods or rendering services, without significant financing
component, are initially recognised based on the transaction price expected to be entitled by the Group.
Debt instruments
Debt instruments held by the Group mainly includes cash and cash equivalents, time deposits with financial institutions, receivables. These
financial assets are measured at amortised cost and FVOCI.
‧ Amortised cost: The business model for managing such financial assets by the Group are held for collection of contractual cash flows. The
contractual cash flow characteristics are to give rise on specified dates to cash flows that are solely payments of principal and interest on
the principal amount outstanding. Interest income from these financial assets is recognised using the effective interest rate method.
‧ FVOCI: The business model for managing such financial assets by the Group are held for collection of contractual cash flows and for
selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest on the principal amount
outstanding. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment
gains or losses, foreign exchange gains and losses and interest income calculated using the effective interest rate method, which are
recognised in profit or loss.
Equity instruments
Equity instruments that the Group has no power to control, jointly control or exercise significant influence over, are measured at fair value
through profit or loss and presented in financial assets at fair value through profit or loss.
In addition, the Group designates some equity instruments that are not held for trading as financial assets at FVOCI, are presented in
financial assets at FVOCI. The relevant dividends of these financial assets are recognised in profit or loss. When derecognised, the cumulative
gain or loss previously recognised in other comprehensive income is transferred to retained earnings.
(ii) Impairment
The Group recognises a loss allowance for expected credit losses on a financial asset that is measured at amortised cost and a debt
instrument that is measured at FVOCI.
The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past
events, current conditions and forecasts of future economic conditions.
The Group measures the expected credit losses of financial instruments on different stages at each balance sheet date. For financial
instruments that have no significant increase in credit risk since the initial recognition, on first stage, the Group measures the loss allowance
at an amount equal to 12-month expected credit losses. If there has been a significant increase in credit risk since the initial recognition of
a financial instrument but credit impairment has not occurred, on second stage, the Group recognises a loss allowance at an amount equal
to lifetime expected credit losses. If credit impairment has occurred since the initial recognition of a financial instrument, on third stage, the
Group recognises a loss allowance at an amount equal to lifetime expected credit losses.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Financial assets (Continued)
(ii) Impairment (Continued)
For financial instruments that have low credit risk at the balance sheet date, the Group assumes that there is no significant increase in credit
risk since the initial recognition, and measures the loss allowance at an amount equal to 12-month expected credit losses.
For financial instruments on the first stage and the second stage, and that have low credit risk, the Group calculates interest income
according to carrying amount without deducting the impairment allowance and effective interest rate. For financial instruments on the third
stage, interest income is calculated according to the carrying amount minus amortised cost after the provision of impairment allowance and
effective interest rate.
For trade accounts receivable and bills receivable and financial assets at FVOCI related to revenue, the Group measures the loss allowance at
an amount equal to lifetime expected credit losses.
The Group recognises the loss allowance accrued or written back in profit or loss.
(iii) Derecognition
The Group derecognises a financial asset when: a) the contractual right to receive cash flows from the financial asset expires; b) the Group
transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset; c) the financial asset has been
transferred and the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but the
Group has not retained control.
On derecognition of equity instruments at FVOCI, the difference between the carrying amounts and the sum of the consideration received
and any accumulated gain or loss previously recognised in other comprehensive income, is recognised in retained earnings. While on
derecognition of other financial assets, this difference is recognised in profit or loss.
(k) Financial liabilities
The Group, at initial recognition, classifies financial liabilities as either financial liabilities subsequently measured at amortised cost or financial
liabilities at fair value through profit or loss.
The Group’s financial liabilities are mainly financial liabilities measured at amortised cost, including trade accounts payable and bills payable,
other payables, and loans, etc. These financial liabilities are initially measured at the amount of their fair value after deducting transaction costs
and use the effective interest rate method for subsequent measurement.
Where the present obligations of financial liabilities are completely or partially discharged, the Group derecognises these financial liabilities or
discharged parts of obligations. The differences between the carrying amounts and the consideration received are recognised in profit or loss.
(l) Determination of fair value for financial instruments
If there is an active market for financial instruments, the quoted price in the active market is used to measure fair values of the financial
instruments. If no active market exists for financial instruments, valuation techniques are used to measure fair values. In valuation, the Group
adopts valuation techniques that are applicable in the current situation and have sufficient available data and other information to support it,
and selects input values that are consistent with the asset or liability characteristics considered by market participants in the transaction of
relevant assets or liabilities, and gives priority to relevant observable input values. Use of unobservable input values where relevant observable
input values cannot be obtained or are not practicable.
(m) Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss on
remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for hedge accounting.
Hedge accounting is a method which recognises the offsetting effects on profit or loss (or other comprehensive income) of changes in the fair
values of the hedging instrument and the hedged item in the same accounting period, to represent the effect of risk management activities.
Hedged items are the items that expose the Group to risks of changes in future cash flows and that are designated as being hedged and that
must be reliably measurable. The Group’s hedged items include a forecast transaction that is settled with an undetermined future market price
and exposes the Group to risk of variability in cash flows, etc.
A hedging instrument is a designated derivative whose changes in cash flows are expected to offset changes in cash flows of the hedged item.
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CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(m) Derivative financial instruments and hedge accounting (Continued)
The hedging relationship meets all of the following hedge effectiveness requirements:
(i) There is an economic relationship between the hedged item and the hedging instrument, which shares a risk and that gives rise to opposite
changes in fair value that tend to offset each other.
(ii) The effect of credit risk does not dominate the value changes that result from that economic relationship.
(iii) The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges
and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. However, that designation
does not reflect an imbalance between the weightings of the hedged item and the hedging instrument.
Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component
of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable forecast transaction,
and could affect profit or loss. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective
effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
As long as a cash flow hedge meets the qualifying criteria for hedge accounting, the separate component of equity associated with the hedged
item (cash flow hedge reserve) is adjusted to the lower of the following (in absolute amounts):
(i) The cumulative gain or loss on the hedging instrument from inception of the hedge; and
(ii) The cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative change in the hedged
expected future cash flows) from inception of the hedge.
The gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income.
The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.
If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a hedged forecast
transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the
entity removes that amount from the cash flow hedge reserve and include it directly in the initial cost or other carrying amount of the asset or
the liability. This is not a reclassification adjustment and hence it does not affect other comprehensive income.
For cash flow hedges, other than those covered by the preceding policy statements, that amount is reclassified from the cash flow hedge reserve
to profit or loss as a reclassification adjustment in the same period or periods during which the hedged expected future cash flows affect profit
or loss.
If the amount that has been accumulated in the cash flow hedge reserve is a loss and the Group expects that all or a portion of that loss will not
be recovered in one or more future periods, the Group immediately reclassifies the amount that is not expected to be recovered into profit or
loss.
When the hedging relationship no longer meets the risk management objective on the basis of which it qualified for hedge accounting (ie the
entity no longer pursues that risk management objective), or when a hedging instrument expires or is sold, terminated, exercised, or there is no
longer an economic relationship between the hedged item and the hedging instrument or the effect of credit risk starts to dominate the value
changes that result from that economic relationship or no longer meets the criteria for hedge accounting, the Group discontinues prospectively
the hedge accounting treatments. If the hedged future cash flows are still expected to occur, that amount remains in the cash flow hedge
reserve and is accounted for as cash flow hedges. If the hedged future cash flows are no longer expected to occur, that amount is immediately
reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment. A hedged future cash flow that is no longer highly
probable to occur may still be expected to occur, if the hedged future cash flows are still expected to occur, that amount remains in the cash
flow hedge reserve and is accounted for as cash flow hedges.
(n) Impairment of assets
The carrying amounts of assets, including property, plant and equipment, construction in progress, right-of-use assets and other assets, are
reviewed at each balance sheet date to identify indicators that the assets may be impaired. These assets are tested for impairment whenever
events or changes in circumstances indicate that their recorded carrying amounts may not be recoverable. When such a decline has occurred,
the carrying amount is reduced to the recoverable amount. For goodwill, the recoverable amount is estimated at each balance sheet date.
The recoverable amount is the greater of the fair value less costs to disposal and the value in use. In determining the value in use, expected
future cash flows generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent
of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e.
a cash-generating unit).
163
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Impairment of assets (Continued)
The amount of the reduction is recognised as an expense in the consolidated income statement. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce
the carrying amount of the other assets in the unit on a pro rata basis, except that the carrying value of an asset will not be reduced below its
individual fair value less costs to disposal, or value in use, if determinable.
Management assesses at each balance sheet date whether there is any indication that an impairment loss recognised for an asset, except in the
case of goodwill, in prior years may no longer exist. An impairment loss is reversed if there has been a favourable change in the estimates used
to determine the recoverable amount. A subsequent increase in the recoverable amount of an asset, when the circumstances and events that led
to the write-down or write-off cease to exist, is recognised as an income. The reversal is reduced by the amount that would have been recognised
as depreciation had the write-down or write-off not occurred. An impairment loss in respect of goodwill is not reversed.
(o) Trade, bills and other payables
Trade, bills and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would
be immaterial, in which case they are stated at cost.
(p) Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the
consolidated income statement over the period of borrowings using the effective interest method.
(q) Provisions and contingent liability
A provision is recognised for liability of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a
past event, when it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made.
When it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is
disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only
be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability
of outflow of economic benefits is remote.
Provisions for future dismantlement costs are initially recognised based on the present value of the future costs expected to be incurred in
respect of the Group’s expected dismantlement and abandonment costs at the end of related oil and gas exploration and development activities.
Any subsequent change in the present value of the estimated costs, other than the change due to passage of time which is regarded as interest
cost, is reflected as an adjustment to the provision and oil and gas properties.
(r) Revenue recognition
Revenue arises in the course of the Group’s ordinary activities, and increases in economic benefits in the form of inflows that result in an
increase in equity, other than those relating to contributions from equity participants.
The Group sells crude oil, natural gas, petroleum and chemical products, etc. Revenue is recognised according to the expected consideration
amount, when a customer obtains control over the relevant goods or services. To determine whether a customer obtains control of a promised
asset, the Group shall consider indicators of the transfer of control, which include, but are not limited to, the Group has a present right to
payment for the asset; the Group has transferred physical possession of the asset to the customer; the customer has the significant risks and
rewards of ownership of the asset; the customer has accepted the asset.
Sales of goods
Sales are recognised when control of the goods have transferred, being when the products are delivered to the customer. Advance from
customers but goods not yet delivered is recorded as contract liabilities and is recognised as revenues when a customer obtains control over the
relevant goods.
(s) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the
Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the profit or loss over the period necessary to match them with the costs
that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are
credited to profit or loss on a straight-line basis over the expected lives of the related assets.
164
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(t) Borrowing costs
Borrowing costs are expensed in the consolidated income statement in the period in which they are incurred, except to the extent that they are
capitalised as being attributable to the construction of an asset which necessarily takes a period of time to get ready for its intended use.
(u) Repairs and maintenance expenditure
Repairs and maintenance expenditure is expensed as incurred.
(v) Environmental expenditures
Environmental expenditures that relate to current ongoing operations or to conditions caused by past operations are expensed as incurred.
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 9,395 million for the year ended 31 December 2019 (2018: RMB 7,956 million).
(x) Leases
A lease is a contract that a lessor transfers the right to use an identified asset for a period of time to a lessee in exchange for consideration.
(i) As lessee
The Group recognises a right-of-use asset at the date at which the leased asset is available for use by the Group, and recognises a lease
liability measured at the present value of the remaining lease payments. The lease payments include fixed payments, the exercise price of
a purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if the lease
term reflects the Group exercising that option, etc. Variable payments that are based on a percentage of sales are not included in the lease
payments, and should be recognised in profit or loss when incurred. Lease liabilities to be paid within one year (including one year) from
balance sheet date is presented in current liabilities.
Right-of-use assets of the Group mainly comprise land. Right-of-use assets are measured at cost which comprises the amount of the initial
measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred by the
lessee, less any lease incentives received. The Group depreciates the right-of-use assets over the shorter of the asset’s useful life and the
lease term on a straight-line basis. When the recoverable amount of a right-of-use asset is less than its carrying amount, the carrying amount
is reduced to the recoverable amount.
Payments associated with short-term leases with lease terms within 12 months and all leases of low-value assets are recognised on a
straight-line basis over the lease term as an expense in profit or loss or as cost of relevant assets, instead of recognising right-of-use assets
and lease liabilities.
(ii) As lessor
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a
lease other than a finance lease.
When the Group leases self-owned plants and buildings, equipment and machinery, lease income from an operating lease is recognised on a
straight-line basis over the period of the lease. The Group recognises variable lease income which is based on a certain percentage of sales
as rental income when occurred.
(iii) Accounting policy applied until 31 December 2018
Lease prepayments
Lease prepayments represent land use rights paid to the relevant government authorities. Land use rights are carried at cost less
accumulated amount charged to expense and impairment losses. The cost of lease prepayments is charged to expense on a straight-line
basis over the respective periods of the rights.
Operating leases
Operating lease payments are charged to the consolidated income statement on a straight-line basis over the period of the respective leases.
165
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(y) Employee benefits
The contributions payable under the Group’s retirement plans are recognised as an expense in the consolidated income statement as incurred
and according to the contribution determined by the plans. Further information is set out in Note 39.
Termination benefits, such as employee reduction expenses, are recognised when, and only when, the Group demonstrably commits itself to
terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic
possibility of withdrawal.
(z) Income tax
Income tax comprises current and deferred tax. Current tax is calculated on taxable income by applying the applicable tax rates. Deferred tax is
provided using the balance sheet liability method on all temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes only to the extent that it is probable that future taxable income will be available
against which the assets can be utilised. Deferred tax is calculated on the basis of the enacted tax rates or substantially enacted tax rates that
are expected to apply in the period when the asset is realised or the liability is settled. The effect on deferred tax of any changes in tax rates is
charged or credited to the consolidated income statement, except for the effect of a change in tax rate on the carrying amount of deferred tax
assets and liabilities which were previously charged or credited to other comprehensive income or directly in equity.
The tax value of losses expected to be available for utilisation against future taxable income is set off against the deferred tax liability within the
same legal tax unit and jurisdiction to the extent appropriate, and is not available for set off against the taxable profit of another legal tax unit.
The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
(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 refined petroleum products, chemical products, crude oil and natural gas.
Gasoline
Diesel
Crude oil
Basic chemical feedstock
Kerosene
Synthetic resin
Synthetic fiber monomers and polymers
Natural gas
Others (i)
(i) Others are primarily liquefied petroleum gas and other refinery and chemical by-products and joint products.
4 OTHER OPERATING REVENUES
Sale of materials and others
Rental income
2019
RMB million
2018
RMB million
699,202
615,342
553,848
214,911
191,636
124,271
80,100
53,839
367,339
2,900,488
711,236
594,008
519,910
250,884
168,823
124,618
77,572
43,205
335,357
2,825,613
2019
RMB million
2018
RMB million
64,489
1,216
65,705
64,503
1,063
65,566
166
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
5 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The following items are included in selling, general and administrative expenses:
Operating lease charges
Auditor’s remuneration:
– audit services
– others
Impairment losses:
– trade accounts receivable
– other receivables
6 PERSONNEL EXPENSES
Salaries, wages and other benefits
Contributions to retirement schemes (Note 39)
7 TAXES OTHER THAN INCOME TAX
Consumption tax (i)
City construction tax (ii)
Education surcharge
Resources tax
Others
Notes:
(i) Consumption tax was levied based on sales quantities of taxable products, tax rate of products is presented as below:
Products
Gasoline
Diesel
Naphtha
Solvent oil
Lubricant oil
Fuel oil
Jet fuel oil
(ii) City construction tax is levied on an entity based on its total paid amount of value-added tax and consumption tax.
2019
RMB million
1,856
2018
RMB million
12,297
70
6
1,283
(2)
94
9
6
9
2019
RMB million
2018
RMB million
69,817
11,665
81,482
68,425
9,296
77,721
2019
RMB million
2018
RMB million
202,671
16,247
12,011
5,883
5,723
242,535
201,901
18,237
13,187
6,021
7,152
246,498
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
167
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
8 OTHER OPERATING EXPENSE, NET
Government grants (i)
Ineffective portion of change in fair value of cash flow hedges
Net realised and unrealised (loss)/gain on derivative financial instruments not qualified as hedging
Impairment losses on long-lived assets (ii)
Loss on disposal of property, plant, equipment and other non-current assets, net
Fines, penalties and compensations
Donations
Others
2019
RMB million
2018
RMB million
6,911
(222)
(4,384)
(345)
(1,918)
(173)
(209)
(96)
(436)
7,539
(1,978)
191
(6,281)
(1,526)
(276)
(180)
(2,849)
(5,360)
Notes:
(i) Government grants for the years ended 31 December 2019 and 2018 primarily represent financial appropriation income and non-income tax refunds received from
respective government agencies without conditions or other contingencies attached to the receipts of the grants.
(ii) Impairment losses on long-lived assets for the year ended 31 December 2019 primarily represent impairment losses recognised in the refining segment of RMB 245
million (2018: RMB 353 million), the marketing and distribution segment of RMB 80 million (2018: RMB 264 million), the chemicals segment of RMB 17 million (2018:
RMB 1,374 million) and the exploration and production (“E&P”) segment of RMB 3 million (2018: RMB 4,274 million). The primary factor resulting in the E&P segment
impairment loss in the prior year was downward revision of oil and gas reserve in certain fields. E&P segment determines recoverable amounts of properties, plant and
equipment relating to oil and gas producing activities, which include significant judgments and assumptions. The recoverable amounts were determined based on the
present values of the expected future cash flows of the assets using a pre-tax discount rate 10.47% (2018: 10.47%). Further future downward revisions to the Group’s
oil price outlook would lead to further impairments which, in aggregate, are likely to be material. It is estimated that a general decrease of 5% in oil price, with all
other variables held constant, would result in additional impairment loss on the Group’s properties, plant and equipment relating to oil and gas producing activities by
approximately RMB 184 million (2018: RMB 312 million). It is estimated that a general increase of 5% in operating cost, with all other variables held constant, would
result in additional impairment loss on the Group’s properties, plant and equipment relating to oil and gas producing activities by approximately RMB 180 million (2018:
RMB 315 million). It is estimated that a general increase of 5% in discount rate, with all other variables held constant, would result in additional impairment loss on
the Group’s properties, plant and equipment relating to oil and gas producing activities by approximately RMB 7 million (2018: less RMB 5 million).
9
INTEREST EXPENSE
Interest expense incurred
Less: Interest expense capitalised*
Interest expense on lease liabilities
Accretion expenses (Note 35)
Interest expense
* Interest rates per annum at which borrowing costs were capitalised for construction in progress
10 INCOME TAX EXPENSE
Income tax expense in the consolidated income statement represents:
Current tax
– Provision for the year
– Adjustment of prior years
Deferred taxation (Note 29)
2019
RMB million
2018
RMB million
6,376
(493)
5,883
—
1,438
7,321
2.92% to 4.66% 2.37% to 4.66%
6,954
(1,015)
5,939
9,646
1,418
17,003
2019
RMB million
2018
RMB million
14,976
(467)
3,385
17,894
27,176
(719)
(6,244)
20,213
168
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
10 INCOME TAX EXPENSE (Continued)
Reconciliation between actual income tax expense and the expected income tax expense at applicable statutory tax rates is as follows:
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
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:
2019
RMB million
2018
RMB million
89,927
22,482
2,300
(4,458)
(2,003)
(312)
(335)
498
189
(467)
17,894
99,110
24,778
2,351
(5,033)
(1,259)
77
(779)
609
188
(719)
20,213
(i) The provision for PRC current income tax is based on a statutory income tax rate of 25% of the assessable income of the Group as determined in accordance with the
relevant income tax rules and regulations of the PRC, except for certain entities of the Group in western regions in the PRC are taxed at preferential income tax rate of
15% through the year 2020.
11 DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS
(a) Directors’ and supervisors’ emoluments
The emoluments of every director and supervisor is set out below:
Name
Directors
Dai Houliang
Ma Yongsheng
Li Yunpeng
Yu Baocai
Ling Yiqun
Liu Zhongyun (i)
Li Yong
Independent non-executive directors
Tang Min
Fan Gang
Cai Hongbin
Johnny Karling Ng
Supervisors
Zhao Dong
Jiang Zhenying
Yang Changjiang
Zhang Baolong
Zou Huiping
Yu Xizhi
Zhou Hengyou
Yu Renming
Total
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
2019
Retirement
scheme
contributions
RMB’ 000
Emoluments paid
or receivable
in respect of a
person’s services
as a director,
whether of the
Company or
its subsidiary
undertaking
Directors’/
Supervisors’ fee
RMB’ 000
Total
RMB’ 000
–
294
–
–
–
–
–
–
–
–
–
–
369
–
–
369
369
369
369
2,139
–
1,173
–
–
–
–
–
–
–
–
–
–
865
–
–
989
880
874
889
5,670
–
96
–
–
–
–
–
–
–
–
–
–
88
–
–
88
88
88
88
536
–
–
–
–
–
–
–
350
350
350
350
–
–
–
–
–
–
–
–
1,400
–
1,563
–
–
–
–
–
350
350
350
350
–
1,322
–
–
1,446
1,337
1,331
1,346
9,745
169
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
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
Salaries,
allowances and
benefits in kind
RMB’ 000
Bonuses
RMB’ 000
2018
Retirement
scheme
contributions
RMB’ 000
Emoluments paid
or receivable
in respect of a
person’s services
as a director,
whether of the
Company or
its subsidiary
undertaking
Directors’/
Supervisors’ fee
RMB’ 000
Total
RMB’ 000
224
–
–
53
–
–
–
21
–
–
–
–
–
–
–
–
–
–
–
–
298
174
298
298
1,366
179
–
–
328
–
–
–
456
–
–
–
–
–
–
–
–
–
–
–
–
663
122
613
636
2,997
65
–
–
14
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
74
44
74
74
351
–
–
–
–
–
–
–
–
–
–
333
333
233
233
125
125
–
–
–
–
–
–
–
–
1,382
468
–
–
395
–
–
–
483
–
–
333
333
233
233
125
125
–
–
–
–
1,035
340
985
1,008
6,096
Name
Directors
Dai Houliang
Li Yunpeng
Yu Baocai
Ma Yongsheng
Ling Yiqun
Liu Zhongyun (i)
Li Yong
Wang Zhigang (ii)
Zhang Haichao (ii)
Jiao Fangzheng (iii)
Independent non-executive directors
Tang Min
Fan Gang
Cai Hongbin
Johnny Karling Ng
Jiang Xiaoming (iv)
Andrew Y. Yan (iv)
Supervisors
Zhao Dong
Jiang Zhenying
Yang Changjiang
Zhang Baolong
Zou Huiping
Zhou Hengyou
Yu Renming
Yu Xizhi
Total
Notes:
(i) Mr. Liu Zhongyun was elected to be director from 15 May 2018. Due to change of working arrangement, Mr. Liu Zhongyun has tendered his resignation as
executive director, member of Strategy Committee of the Board and Senior Vice President of the Company from 9 December 2019.
(ii) Mr. Wang Zhigang ceased being director from 29 January 2018; Mr. Zhang Haichao ceased being director from 29 January 2018.
(iii) Mr. Jiao Fangzheng ceased being director from 7 June 2018.
(iv) Mr. Jiang Xiaoming ceased being independent non-executive director from 15 May 2018; Mr. Andrew Y. Yan ceased being independent non-executive director from
15 May 2018.
12 SENIOR MANAGEMENT’S EMOLUMENTS
For the year ended 31 December 2019, the five highest paid individuals in the Company included one director and four senior management. The
emolument paid to each of one director and four senior management was above RMB 1,000 thousand. The total salaries, wages and other benefits
was RMB 7,294 thousand, and the total amount of their retirement scheme contributions was RMB 448 thousand. For the year ended 31 December
2018, the five highest paid individuals in the Company included two supervisors and three senior management.
170
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
13 DIVIDENDS
Dividends payable to shareholders of the Company attributable to the year represent:
Dividends declared and paid during the year of RMB 0.12 per share (2018: RMB 0.16 per share)
Dividends declared after the balance sheet date of RMB 0.19 per share (2018: RMB 0.26 per share)
2019
RMB million
2018
RMB million
14,529
23,004
37,533
19,371
31,479
50,850
Pursuant to the Company’s Articles of Association and a resolution passed at the Directors’ meeting on 23 August 2019, the directors authorised to
declare the interim dividends for the year ending 31 December 2019 of RMB 0.12 (2018: RMB 0.16) per share totaling RMB 14,529 million (2018:
RMB 19,371 million). Dividends were paid on 17 September 2019.
Pursuant to a resolution passed at the director’s meeting on 27 March 2020, final dividends in respect of the year ended 31 December 2019 of
RMB 0.19 (2018: RMB 0.26) per share totaling RMB 23,004 million (2018: RMB 31,479 million) were proposed for shareholders’ approval at the
Annual General Meeting. Final cash dividend proposed after the balance sheet date has not been recognised as a liability at the balance sheet date.
Dividends payable to shareholders of the Company attributable to the previous financial year, approved during the year represent:
Final cash dividends in respect of the previous financial year, approved during the year of
RMB 0.26 per share (2018: RMB 0.40 per share)
2019
RMB million
2018
RMB million
31,479
48,428
Pursuant to the shareholders’ approval at the Annual General Meeting on 9 May 2019, a final dividend of RMB 0.26 per share totaling RMB 31,479
million according to total shares on 10 June 2019 was approved. All dividends have been paid in the year ended 31 December 2019.
Pursuant to the shareholders’ approval at the Annual General Meeting on 15 May 2018, a final dividend of RMB 0.40 per share totaling RMB 48,428
million according to total shares on 4 June 2018 was approved. All dividends have been paid in the year ended 31 December 2018.
14 OTHER COMPREHENSIVE INCOME
Cash flow hedges:
Effective portion of changes in fair value of hedging
instruments recognised during the year
Reclassification adjustments for amounts transferred
to the consolidated income statement
Net movement during the year recognised in other
comprehensive income (i)
Changes in the fair value of instruments at fair value
through other comprehensive income
Net movement during the year recognised in other
comprehensive income
Share of other comprehensive loss of associates and
joint ventures
Foreign currency translation differences
Other comprehensive income
Note:
2019
Before tax
amount
RMB million
Tax
effect
RMB million
Net of tax
amount
RMB million
Before tax
amount
RMB million
2018
Tax
effect
RMB million
Net of tax
amount
RMB million
5,258
853
(974)
(196)
4,284
(12,500)
2,159
(10,341)
657
730
(130)
600
6,111
(1,170)
4,941
(11,770)
2,029
(9,741)
(39)
(39)
(810)
1,480
6,742
8
8
–
–
(1,162)
(31)
(31)
(810)
1,480
5,580
(41)
(41)
(240)
3,399
(8,652)
(12)
(12)
11
–
2,028
(53)
(53)
(229)
3,399
(6,624)
(i) As at 31 December 2019, cash flow hedge reserve amounted to a gain of RMB 1,102 million (31 December 2018: a loss of RMB 4,932 million), of which a gain of
RMB 1,037 million was attribute to shareholders of the Company (31 December 2018: a loss of RMB 4,917 million).
171
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
15 BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic earnings per share for the year ended 31 December 2019 is based on the profit attributable to ordinary shareholders
of the Company of RMB 57,465 million (2018: RMB 61,618 million) and the weighted average number of shares of 121,071,209,646 (2018:
121,071,209,646) during the year.
The calculation of diluted earnings per share for the year ended 31 December 2019 is based on the profit attributable to ordinary shareholders of
the Company (diluted) of RMB 57,465 million (2018: RMB 61,618 million) and the weighted average number of shares of 121,071,209,646 (2018:
121,071,209,646) calculated as follows:
(i) Profit attributable to ordinary shareholders of the Company (diluted)
Profit attributable to ordinary shareholders of the Company
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
16 PROPERTY, PLANT AND EQUIPMENT
Cost:
Balance at 1 January 2018
Additions
Transferred from construction in progress
Reclassifications
Reclassification to other long-term assets
Disposals
Exchange adjustments
Balance at 31 December 2018
Balance at 1 January 2019
Additions
Transferred from construction in progress
Reclassifications
Invest into the joint ventures and associated companies
Reclassification to other long-term assets
Disposals
Exchange adjustments
Balance at 31 December 2019
Accumulated depreciation:
Balance at 1 January 2018
Depreciation for the year
Impairment losses for the year
Reclassifications
Reclassification to other long-term assets
Written back on disposals
Exchange adjustments
Balance at 31 December 2018
Balance at 1 January 2019
Depreciation for the year
Impairment losses for the year
Reclassifications
Invest into the joint ventures and associated companies
Reclassification to other long-term assets
Written back on disposals
Exchange adjustments
Balance at 31 December 2019
Net book value:
Balance at 1 January 2018
Balance at 31 December 2018
Balance at 31 December 2019
172
2019
RMB million
2018
RMB million
57,465
57,465
61,618
61,618
2018
Number of shares Number of shares
2019
121,071,209,646 121,071,209,646
121,071,209,646 121,071,209,646
Equipment,
machinery
and others
RMB million
940,312
3,856
45,103
(1,772)
(3,828)
(18,323)
147
965,495
965,495
3,856
54,275
(975)
(303)
(729)
(13,467)
71
1,008,223
529,191
47,250
1,848
(570)
(1,390)
(16,331)
78
560,076
560,076
47,583
185
(246)
(216)
(94)
(11,454)
40
595,874
411,121
405,419
412,349
Total
RMB million
1,727,982
5,644
73,210
–
(4,311)
(21,652)
2,387
1,783,260
1,783,260
5,424
91,845
–
(311)
(1,477)
(15,253)
780
1,864,268
1,077,208
99,904
6,149
–
(1,510)
(18,251)
1,998
1,165,498
1,165,498
87,967
196
–
(216)
(91)
(12,223)
728
1,241,859
650,774
617,762
622,409
Plants and
buildings
RMB million
Oil and gas,
properties
RMB million
120,013
221
3,741
1,634
(483)
(3,183)
98
122,041
122,041
160
6,192
1,051
(8)
(748)
(237)
42
128,493
52,200
4,038
274
494
(120)
(1,795)
43
55,134
55,134
4,095
11
292
–
3
(763)
21
58,793
67,813
66,907
69,700
667,657
1,567
24,366
138
–
(146)
2,142
695,724
695,724
1,408
31,378
(76)
–
–
(1,549)
667
727,552
495,817
48,616
4,027
76
–
(125)
1,877
550,288
550,288
36,289
–
(46)
–
–
(6)
667
587,192
171,840
145,436
140,360
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
16 PROPERTY, PLANT AND EQUIPMENT (Continued)
The additions to oil and gas properties of the Group for the year ended 31 December 2019 included RMB 1,408 million (2018: RMB 1,567 million)
of estimated dismantlement costs for site restoration (Note 35).
At December 31, 2019 and December 31, 2018, the Group had no individual substantial property, plant and equipment which have been pledged.
At December 31, 2019 and December 31, 2018, the Group had no individual significant property, plant and equipment which were temporarily idle
or pending for disposal.
At December 31, 2019 and December 31, 2018, the Group had no individual significant fully depreciated property, plant and equipment which were
still in use.
17 CONSTRUCTION IN PROGRESS
Balance at 1 January
Additions
Dry hole costs written off
Transferred to property, plant and equipment
Reclassification to other long-term assets
Impairment losses for the year
Disposals and others
Exchange adjustments
Balance at 31 December
2019
RMB million
2018
RMB million
136,963
144,369
(5,831)
(91,845)
(10,086)
(135)
46
1
173,482
118,645
108,555
(6,921)
(73,210)
(10,066)
(28)
(19)
7
136,963
As at 31 December 2019, the amount of capitalised cost of exploratory wells included in construction in progress related to the exploration and
production segment was RMB 8,961 million (2018: RMB 7,296 million). The geological and geophysical costs paid during the year ended 31
December 2019 were RMB 4,024 million (2018: RMB 3,511 million).
18 RIGHT-OF-USE ASSETS
Cost:
Change in accounting policy (Note 1(a))
Balance at 1 January 2019
Increase
Decrease
Balance at 31 December 2019
Accumulated depreciation:
Balance at 1 January 2019
Increase
Decrease
Balance at 31 December 2019
Impairment loss:
Balance at 1 January 2019
Increase
Decrease
Balance at 31 December 2019
Net book value:
Balance at 1 January 2019
Balance at 31 December 2019
Land
RMB million
Others
RMB million
Total
RMB million
244,588
244,588
8,650
(4,760)
248,478
–
9,233
(129)
9,104
–
–
–
–
27,381
27,381
7,555
(748)
34,188
–
5,728
(26)
5,702
–
–
–
–
271,969
271,969
16,205
(5,508)
282,666
–
14,961
(155)
14,806
–
–
–
–
244,588
239,374
27,381
28,486
271,969
267,860
173
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
19 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:
Principal activities
Sinopec Zhenhai Refining and Chemical Branch
(“Sinopec Zhenhai”)
Shanghai SECCO Petrochemical Company Limited
(“Shanghai SECCO”)
Sinopec Beijing Yanshan Petrochemical Branch
(“Sinopec Yanshan”)
Other units without individually significant goodwill
Manufacturing of intermediate petrochemical
products and petroleum products
Production and sale of petrochemical products
Manufacturing of intermediate petrochemical
products and petroleum products
31 December
2019
RMB million
31 December
2018
RMB million
16,558
(7,861)
8,697
16,537
(7,861)
8,676
31 December
2019
RMB million
31 December
2018
RMB million
4,043
2,541
1,004
1,109
8,697
4,043
2,541
1,004
1,088
8,676
Goodwill represents the excess of the cost of purchase over the fair value of the underlying assets and liabilities. The recoverable amounts of the
above cash generating units are determined based on value in use calculations. These calculations use cash flow projections based on financial
budgets approved by management covering a one-year period and pre-tax discount rates primarily ranging from 11.0% to 11.9% (2018: 11.7% to
12.3%). Cash flows beyond the one-year period are maintained constant. Based on the estimated recoverable amount, no major impairment loss
was recognised.
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.
20 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”) (i)
% of
ownership
interests
Principal activities
Measurement
method
Country of
incorporation
Principal place
of business
50.00 Operation of natural gas pipelines
Equity method PRC
and auxiliary facilities
49.00 Provision of non-banking financial
Equity method PRC
PRC
PRC
10.00
services
Processing natural gas and
manufacturing petrochemical
products
Equity method
Russia
Russia
Zhongtian Synergetic Energy Company
Limited (“Zhongtian Synergetic Energy”)
Caspian Investments Resources Ltd.
(“CIR”)
38.75 Mining coal and manufacturing of
Equity method PRC
PRC
coal-chemical products
50.00 Crude oil and natural gas
Equity method British Virgin
extraction
Islands
The Republic of
Kazakhstan
174
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
20 INTEREST IN ASSOCIATES (Continued)
Summarised financial information and reconciliation to their carrying amounts in respect of the Group’s principal associates:
Pipeline Ltd
Sinopec Finance
SIBUR
31 December
2019
RMB million
31 December
2018
RMB million
31 December
2019
RMB million
31 December
2018
RMB million
31 December
2019
RMB million
31 December
2018
RMB million
Zhongtian Synergetic Energy
31 December
2018
RMB million
31 December
2019
RMB million
CIR
31 December
2019
RMB million
31 December
2018
RMB million
13,245
37,842
(721)
(2,910)
47,456
12,498
39,320
(1,020)
(3,026)
47,772
180,383
18,926
(170,621)
(582)
28,106
209,837
16,359
(200,402)
(332)
25,462
31,634
182,646
(31,295)
(71,289)
111,696
22,502
170,796
(23,293)
(58,628)
111,377
4,219
56,424
(13,887)
(26,227)
20,529
7,477
49,961
(7,252)
(31,436)
18,750
47,456
47,772
28,106
25,462
111,250
110,860
20,529
18,750
–
23,728
23,728
–
23,886
23,886
–
13,772
13,772
–
12,476
12,476
446
11,125
11,125
517
11,086
11,086
–
7,955
7,955
–
7,266
7,266
7,612
971
(936)
(166)
7,481
7,481
–
3,741
3,741
6,712
1,828
(961)
(673)
6,906
6,906
–
3,453
3,453
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
Summarised statement of comprehensive income
Year ended 31 December
Pipeline Ltd
2019
RMB million
2018
RMB million
Sinopec Finance
2019
RMB million
2018
RMB million
SIBUR
2019
RMB million
2018
RMB million
Zhongtian Synergetic Energy
2018
RMB million
2019
RMB million
CIR
2019
RMB million
2018
RMB million
Turnover
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income
Dividends declared by associates
Share of profit from associates
Share of other comprehensive income/(loss)
from associates (ii)
5,008
2,191
–
2,191
1,259
1,096
–
4,746
2,022
–
2,022
1,207
1,011
–
4,966
2,234
411
2,645
–
1,095
201
4,536
1,868
(157)
1,711
490
915
56,706
6,513
(1,435)
5,078
468
651
59,927
10,400
6,410
16,810
271
1,040
13,329
1,994
–
1,994
219
773
12,235
1,142
–
1,142
–
443
(77)
(144)
641
–
–
2,334
424
151
575
–
212
76
2,856
583
116
699
–
292
58
The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial associates accounted for using
equity method in aggregate was RMB 4,565 million (2018: RMB 3,550 million) and RMB 155 million (2018: RMB 844 million) respectively. As at
31 December 2019, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB 35,416
million (2018: RMB 31,370 million).
Notes:
(i) Sinopec is able to exercise significant influence in SIBUR since Sinopec has a member in SIBUR’s Board of Director and has a member in SIBUR’s Management Board.
(ii) Including foreign currency translation differences.
21 INTEREST IN JOINT VENTURES
The Group’s principal interests in joint ventures are as follows:
Name of entity
Fujian Refining & Petrochemical
Company Limited (“FREP”)
BASF-YPC Company Limited
(“BASF-YPC”)
% of
ownership
interests
Principal activities
Measurement
method
Country of
incorporation
Principal place
of business
50.00 Manufacturing refining
Equity method
PRC
40.00
oil products
Manufacturing and
distribution of
petrochemical products
Equity method
PRC
PRC
PRC
Taihu Limited (“Taihu”)
49.00 Crude oil and natural gas
Equity method
Cyprus
Russia
Yanbu Aramco Sinopec Refining
Company Ltd. (“YASREF”)
Sinopec SABIC Tianjin Petrochemical
Company Limited
(“Sinopec SABIC Tianjin”)
extraction
37.50 Petroleum refining and
Equity method
Saudi Arabia
Saudi Arabia
50.00
processing business
Manufacturing and
distribution of
petrochemical products
Equity method
PRC
PRC
175
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
21 INTEREST IN JOINT VENTURES (Continued)
Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group’s principal joint ventures:
FREP
Taihu
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2018
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
Sinopec SABIC Tianjin
BASF-YPC
YASREF
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non-current assets
Current liabilities
Current financial liabilities
Other current liabilities
Total current liabilities
Non-current liabilities
Non-current financial liabilities
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
Carrying Amounts
5,603
11,977
17,580
17,267
(1,280)
(7,090)
(8,370)
(11,185)
(290)
(11,475)
15,002
15,002
–
7,501
7,501
7,388
9,248
16,636
19,271
(1,200)
(4,939)
(6,139)
(12,454)
(279)
(12,733)
17,035
17,035
–
8,518
8,518
1,154
4,937
6,091
10,498
(237)
(1,808)
(2,045)
–
(35)
(35)
14,509
14,509
–
5,804
5,804
1,582
5,795
7,377
11,086
(725)
(1,822)
(2,547)
(218)
(17)
(235)
15,681
15,681
–
6,272
6,272
4,485
2,336
6,821
10,453
(57)
(1,815)
(1,872)
(125)
(1,984)
(2,109)
13,293
12,829
464
6,286
6,286
3,406
3,689
7,095
9,216
(59)
(2,124)
(2,183)
(72)
(2,271)
(2,343)
11,785
11,373
412
5,573
5,573
733
11,311
12,044
50,548
(7,445)
(12,504)
(19,949)
(29,445)
(1,963)
(31,408)
11,235
11,235
–
4,213
4,213
930
10,267
11,197
51,873
(4,806)
(12,217)
(17,023)
(32,364)
(937)
(33,301)
12,746
12,746
–
4,780
4,780
3,242
4,501
7,743
14,878
(500)
(2,896)
(3,396)
(4,592)
(368)
(4,960)
14,265
14,265
–
7,133
7,133
5,110
4,007
9,117
13,990
(500)
(2,507)
(3,007)
(3,651)
(331)
(3,982)
16,118
16,118
–
8,059
8,059
Summarised statement of comprehensive income
Year ended 31 December
FREP
BASF-YPC
Taihu
YASREF
Sinopec SABIC Tianjin
Turnover
Depreciation, depletion and amortisation
Interest income
Interest expense
Profit/(loss) before taxation
Tax expense
Profit/(loss) for the year
Other comprehensive (loss)/income
Total comprehensive income/(loss)
Dividends declared by joint ventures
Share of net profit/(loss) from joint ventures
Share of other comprehensive (loss)/income
from joint ventures (i)
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
57,047
(2,541)
124
(597)
964
(197)
767
–
767
1,400
384
52,469
(2,250)
157
(647)
3,920
(935)
2,985
–
2,985
1,200
1,493
19,590
(1,474)
32
(26)
2,314
(579)
1,735
–
1,735
1,224
694
21,574
(1,521)
41
(43)
3,625
(897)
2,728
–
2,728
1,226
1,091
15,222
(629)
94
(265)
3,320
(708)
2,612
(1,105)
1,507
–
1,235
14,944
(664)
141
(151)
3,493
(729)
2,764
921
3,685
–
1,307
75,940
(3,048)
58
(1,470)
(1,292)
(8)
(1,300)
(261)
(1,561)
–
(488)
77,561
(2,823)
101
(1,382)
(1,569)
(249)
(1,818)
1,059
(759)
–
(682)
20,541
(1,094)
171
(134)
2,178
(533)
1,645
–
1,645
1,750
823
23,501
(1,104)
169
(167)
3,916
(993)
2,923
–
2,923
–
1,462
–
–
–
–
(522)
435
(98)
397
–
–
The share of profit and other comprehensive loss for the year ended 31 December 2019 in all individually immaterial joint ventures accounted for
using equity method in aggregate was RMB 1,737 million (2018: RMB 2,052 million) and RMB 168 million (2018: RMB 839 million) respectively.
As at 31 December 2019, the carrying amount of all individually immaterial joint ventures accounted for using equity method in aggregate was RMB
25,530 million (2018: RMB 22,982 million).
Note:
(i) Including foreign currency translation differences.
176
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
22 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)
Note:
(i) Others mainly comprise catalyst expenditures and improvement expenditures of property, plant and equipment.
31 December
2019
RMB million
31 December
2018
RMB million
34,013
1,562
3,926
25,925
65,426
34,934
26,513
5,502
24,459
91,408
The cost of operating rights of service stations is charged to expense on a straight-line basis over the respective periods of the rights. The movement
of operating rights of service stations is as follows:
Operating rights of service stations
Cost:
Balance at 1 January
Additions
Decreases
Balance at 31 December
Accumulated amortisation:
Balance at 1 January
Additions
Decreases
Balance at 31 December
Net book value at 31 December
23 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Structured deposits
Equity investments, listed and at quoted market price
2019
RMB million
2018
RMB million
52,216
1,494
(161)
53,549
17,282
2,357
(103)
19,536
34,013
48,613
3,948
(345)
52,216
14,345
3,019
(82)
17,282
34,934
31 December
2019
RMB million
31 December
2018
RMB million
3,318
1
3,319
25,550
182
25,732
The financial assets are the structured deposits with financial institutions, which are presented as current assets since they are expected to be
expired within 12 months from the end of the reporting period.
24 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
Derivative financial assets and derivative financial liabilities of the Group are primarily commodity futures and swaps contracts. See Note 42.
177
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
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
2019
RMB million
31 December
2018
RMB million
43,728
6,570
6,415
56,713
(1,848)
54,865
–
54,865
50,108
3,170
4,321
57,599
(606)
56,993
7,886
64,879
The ageing analysis of trade accounts receivable and bills receivable (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
2019
RMB million
31 December
2018
RMB million
54,517
190
64
94
54,865
64,317
353
124
85
64,879
2019
RMB million
2018
RMB million
606
1,566
(283)
(41)
–
1,848
612
83
(77)
(19)
7
606
Sales are generally on a cash term. Credit is generally only available for major customers with well-established trading records. Amounts due from
Sinopec Group Company and fellow subsidiaries are repayable under the same terms.
Trade accounts receivable and bills receivable (net of impairment losses for bad and doubtful debts) primarily represent receivables that are neither
past due nor impaired. These receivables relate to a wide range of customers for whom there is no recent history of default.
Information about the impairment of trade accounts receivable and bills receivable and the Group’s exposure to credit risk can be found in Note 42.
178
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
26 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Non-current assets
Unlisted equity instruments
Listed equity instruments
Current assets
Trade accounts receivable and bills receivable (i)
Note:
31 December
2019
RMB million
31 December
2018
RMB million
1,431
90
8,622
10,143
1,323
127
–
1,450
(i) As at 31 December 2019, bills receivable and certain trade accounts receivable were classified as financial assets at FVOCI, as the Group’s business model is achieved
both by collecting contractual cash flows and selling of these assets.
27 INVENTORIES
Crude oil and other raw materials
Work in progress
Finished goods
Spare parts and consumables
Less: Allowance for diminution in value of inventories
31 December
2019
RMB million
31 December
2018
RMB million
88,465
12,615
91,368
2,576
195,024
(2,582)
192,442
85,469
13,690
88,929
2,872
190,960
(6,376)
184,584
The cost of inventories recognised as an expense in the consolidated income statement amounted to RMB 2,450,911 million for the year ended 31
December 2019 (2018: RMB 2,366,199 million). It includes the write-down of inventories of RMB 1,616 million mainly related to finished goods
(2018: RMB 5,535 million mainly related to crude oil, finished goods and work in progress of refined oil products and chemical products).
28 PREPAID EXPENSES AND OTHER CURRENT ASSETS
Other receivables
Advances to suppliers
Value-added input tax to be deducted
Prepaid income tax
31 December
2019
RMB million
31 December
2018
RMB million
25,586
5,066
25,313
1,879
57,844
26,455
5,937
21,331
300
54,023
179
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
29 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and deferred tax liabilities before offset are attributable to the items detailed in the table below:
Receivables and inventories
Payables
Cash flow hedges
Property, plant and equipment
Tax losses carried forward
Financial assets at fair value through other comprehensive income
Intangible assets
Others
Deferred tax assets/(liabilities)
Deferred tax assets
Deferred tax liabilities
31 December
2019
RMB million
31 December
2018
RMB million
31 December
2019
RMB million
31 December
2018
RMB million
2,546
1,142
116
16,463
3,594
131
595
318
24,905
2,563
1,808
1,131
15,427
3,709
117
474
174
25,403
–
–
(384)
(12,317)
–
(7)
(508)
(882)
(14,098)
–
–
(27)
(8,666)
–
(1)
(535)
(428)
(9,657)
As at 31 December 2019, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB 16,605
million (2018: RMB 18,308 million), of which RMB 1,992 million (2018: RMB 2,437 million) was incurred for the year ended 31 December 2019,
because it was not probable that the future taxable profits will be realised. These deductible losses carried forward of RMB 3,163 million, RMB 3,156
million, RMB 5,938 million, RMB 2,356 million and RMB 1,992 million will expire in 2020, 2021, 2022, 2023,2024 and after, respectively.
Periodically, management performed assessment on the probability that future taxable profit will be available over the period which the deferred tax
assets can be realised or utilised. In assessing the probability, both positive and negative evidence was considered, including whether it is probable
that the operations will have sufficient future taxable profits over the periods which the deferred tax assets are deductible or utilised and whether the
tax losses result from identifiable causes which are unlikely to recur. During the year ended 31 December 2019, write-down of deferred tax assets
amounted to RMB 189 million (2018: RMB 188 million) (Note 10).
Movements in the deferred tax assets and liabilities are as follows:
Receivables and inventories
Payables
Cash flow hedges
Property, plant and equipment
Tax losses carried forward
Available-for-sale financial assets
Financial assets at fair value through other
comprehensive income
Intangible assets
Others
Net deferred tax assets/(liabilities)
Balance at
1 January
2018
RMB million
381
1,925
115
4,222
2,325
117
–
(336)
(84)
8,665
Recognised in
consolidated
Recognised
in other
income comprehensive
income
RMB million
statement
RMB million
2,176
(117)
(10)
2,650
1,414
–
–
273
(142)
6,244
3
–
2,029
(130)
6
–
(1)
–
(2)
1,905
Others
RMB million
3
–
1
19
(36)
(117)
117
2
(26)
(37)
Balance at
1 January
2019
RMB million
Recognised in
consolidated
Recognised
in other
income comprehensive
statement
RMB million
income
RMB million
Others
RMB million
Transferred
Balance at
from 31 December
2018
RMB million
reserve
RMB million
–
–
(1,031)
–
–
–
–
–
–
(1,031)
2,563
1,808
1,104
6,761
3,709
–
116
(61)
(254)
15,746
Transferred
Balance at
from 31 December
2019
RMB million
reserve
RMB million
Receivables and inventories
Payables
Cash flow hedges
Property, plant and equipment
Tax losses carried forward
Financial assets at fair value through other
comprehensive income
Intangible assets
Others
Net deferred tax assets/(liabilities)
2,563
1,808
1,104
6,761
3,709
116
(61)
(254)
15,746
(17)
(667)
73
(2,575)
(151)
–
148
(196)
(3,385)
–
–
(1,195)
(39)
38
8
–
(49)
(1,237)
–
1
–
(1)
(2)
–
–
(65)
(67)
–
–
(250)
–
–
–
–
–
(250)
2,546
1,142
(268)
4,146
3,594
124
87
(564)
10,807
180
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES
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
Loans from Sinopec Group Company and fellow subsidiaries
Short-term loans
RMB denominated
USD denominated
Hong Kong Dollar (“HKD”) denominated
EUR denominated
Current portion of long-term loans
RMB denominated
31 December
2019
RMB million
31 December
2018
RMB million
25,709
25,619
90
22
22
1,790
1,765
25
13,000
13,000
14,790
40,521
5,465
2,709
2,236
495
25
37,824
37,824
43,289
83,810
17,088
13,201
3,887
300
300
12,074
12,039
35
–
–
12,074
29,462
27,304
3,061
22,780
1,441
22
4,361
4,361
31,665
61,127
The Group’s weighted average interest rates on short-term loans were 3.11% (2018: 3.37%) per annum at 31 December 2019. The above
borrowings are unsecured.
181
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued)
Long-term debts represent:
Interest rate and final maturity
Third parties’ debts
Long-term bank loans
RMB denominated
USD denominated
Corporate bonds (i)
RMB denominated
USD denominated
Interest rates ranging from 1.08% to
5.23% per annum at 31 December 2019
with maturities through 2034
Interest rates ranging from 1.55% to
4.29% per annum at 31 December 2019
with maturities through 2031
Fixed interest rates ranging from 3.70% to
4.90% per annum at 31 December 2019
with maturities through 2022
Fixed interest rates ranging from 3.13% to
4.25% per annum at 31 December 2019
with maturities through 2043
Total third parties’ long-term debts
Less: Current portion
Long-term loans from Sinopec Group Company and fellow subsidiaries
RMB denominated
Less: Current portion
Interest rates ranging from interest free to
5.50% per annum at 31 December 2019
with maturities through 2034
31 December
2019
RMB million
31 December
2018
RMB million
31,714
31,025
75
109
31,789
20,000
31,134
20,000
12,157
11,951
32,157
63,946
(14,790)
49,156
31,951
63,085
(12,074)
51,011
47,450
46,877
(37,824)
9,626
58,782
(4,361)
42,516
93,527
Short-term and long-term bank loans, short-term other loans and loans from Sinopec Group Company and fellow subsidiaries are primarily
unsecured and carried at amortised cost.
Note:
(i) These corporate bonds are carried at amortised cost. As at 31 December 2019, RMB 12,157 million (2018: RMB 11,951 million) (USD denominated corporate bonds)
are guaranteed by Sinopec Group Company.
31 LEASE LIABILITIES
Lease liabilities
Current
Non-current
31 December
2019
RMB million
1 January
2019
RMB million
15,198
177,674
192,872
13,894
184,670
198,564
182
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
32 TRADE ACCOUNTS PAYABLE AND BILLS PAYABLE
Amounts due to third parties
Amounts due to Sinopec Group Company and fellow subsidiaries
Amounts due to associates and joint ventures
Bills payable
Trade accounts payable and bills payable measured at amortised cost
The ageing analysis of trade accounts payable and bills payable is as follows:
Within 1 month or on demand
Between 1 month and 6 months
Over 6 months
33 CONTRACT LIABILITIES
31 December
2019
RMB million
31 December
2018
RMB million
166,480
11,370
10,108
187,958
11,834
199,792
170,818
9,142
6,381
186,341
6,416
192,757
31 December
2019
RMB million
31 December
2018
RMB million
185,377
8,808
5,607
199,792
182,763
6,670
3,324
192,757
As at 31 December 2019, the Group’s contract liabilities primarily represent advances from customers. Related performance obligations are satisfied
and revenue is recognised within one year.
34 OTHER PAYABLES
Salaries and welfare payable
Interest payable
Payables for constructions
Other payables
Financial liabilities carried at amortised costs
Taxes other than income tax
35 PROVISIONS
31 December
2019
RMB million
31 December
2018
RMB million
4,769
612
50,612
22,778
78,771
66,075
144,846
7,312
634
54,992
22,852
85,790
80,361
166,151
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
Decrease for the year
Exchange adjustments
Balance at 31 December
2019
RMB million
2018
RMB million
42,007
1,408
1,418
(2,439)
44
42,438
39,407
1,567
1,438
(598)
193
42,007
183
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
36 SHARE CAPITAL
Registered, issued and fully paid
95,557,771,046 listed A shares (2018: 95,557,771,046) of RMB 1.00 each
25,513,438,600 listed H shares (2018: 25,513,438,600) of RMB 1.00 each
31 December
2019
RMB million
31 December
2018
RMB million
95,558
25,513
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 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
exercise of conversion by the holders of the 2011 Convertible Bonds.
All A shares and H shares rank pari passu in all material aspects.
Capital management
Management optimises the structure of the Group’s capital, which comprises of equity and debts. In order to maintain or adjust the capital structure
of the Group, management may cause the Group to issue new shares, adjust the capital expenditure plan, sell assets to reduce debt, or adjust
the proportion of short-term and long-term loans. Management monitors capital on the basis of the debt-to-capital ratio, which is calculated by
dividing long-term loans (excluding current portion), including long-term debts and loans from Sinopec Group Company and fellow subsidiaries, by
the total of equity attributable to shareholders of the Company and long-term loans (excluding current portion), and liability-to-asset ratio, which is
calculated by dividing total liabilities by total assets. Management’s strategy is to make appropriate adjustments according to the Group’s operating
and investment needs and the changes of market conditions, and to maintain the debt-to-capital ratio and the liability-to-asset ratio of the Group
at a range considered reasonable. As at 31 December 2019, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 7.4% (2018:
11.5%) and 50.1% (2018: 46.2%), respectively.
The schedule of the contractual maturities of loans and commitments are disclosed in Notes 30 and 37, 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.
184
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
37 COMMITMENTS AND CONTINGENT LIABILITIES
Operating lease commitments
The Group leases land and other assets under non-cancellable operating leases expiring within three months to thirty years. These operating leases
do not contain provisions for contingent lease rentals. None of the rental agreements contains escalation provisions that may require higher future
rental payments.
From 1 January 2019, the Group has recognised right-of-use assets for these leases, except for short-term and low-value leases, see Note 1(a) and
Note 18 for further information.
As at 31 December 2019 and 2018, the future minimum lease payments under operating leases are as follows:
Within one year
Later than one year but not later than five years
Later than five years
Capital commitments
At 31 December 2019 and 2018, capital commitments of the Group are as follows:
Authorised and contracted for (i)
Authorised but not contracted for
31 December
2019
RMB million
31 December
2018
RMB million
–
–
–
–
15,625
55,882
281,287
352,794
31 December
2019
RMB million
31 December
2018
RMB million
138,088
63,967
202,055
141,045
54,392
195,437
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 6,100 million (2018: RMB 5,553 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 Natural Resources. The maximum term of the Group’s exploration
licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original term with each renewal being for a two-year term.
The Group is obligated to make progressive annual minimum exploration investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Natural Resources also issues production licenses to the Group on the basis of the reserve reports approved by relevant
authorities. The maximum term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum
term of production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State Council. The Group’s
production license is renewable upon application by the Group 30 days prior to expiration.
The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Natural Resources annually
which are expensed. Expenses recognised were approximately RMB 179 million for the year ended 31 December 2019 (2018: RMB 231 million).
Estimated future annual payments are as follows:
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Thereafter
31 December
2019
RMB million
31 December
2018
RMB million
302
69
34
30
29
845
1,309
380
79
33
28
28
852
1,400
185
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
37 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Contingent liabilities
At 31 December 2019 and 2018, the guarantees by the Group in respect of facilities granted to the parties below are as follows:
Joint ventures
Associates (ii)
Others (iii)
31 December
2019
RMB million
31 December
2018
RMB million
7,100
10,140
–
17,240
5,033
12,168
7,197
24,398
Management monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss will occur, and recognises any
such losses under guarantees when those losses are reliably estimable. At 31 December 2019 and 2018, the Group estimates that there is no need
to pay for the guarantees. Thus no liability has been accrued for a loss related to the Group’s obligation under these guarantee arrangements.
Notes:
(ii) The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy Company Limited (“Zhongtian Synergetic Energy”)
by banks amount to RMB 17,050 million. As at 31 December 2019, the amount withdrawn by Zhongtian Synergetic Energy and guaranteed by the Group was RMB
10,140 million (2018: RMB 12,168 million).
(iii) The Group provided a guarantee in respect to the loan of New Bright International Development Limited borrowed from Sinopec Overseas Oil & Gas Limited. As at 31
December 2019, the loan agreement was terminated, in consequence, the guarantee agreement was terminated.
Environmental contingencies
Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial
position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement
of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable
uncertainties which affect management’s ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature
and extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development
areas,whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of alternative remediation strategies, (iv)
changes in environmental remediation requirements, and (v) the identification of new remediation sites. The amount of such future cost is
indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective
actions that may be required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot
reasonably be estimated at present, and could be material.
The Group paid normal routine pollutant discharge fees of approximately RMB 9,235 million in the consolidated financial statements for the year
ended 31 December 2019 (2018: RMB 7,940 million).
Legal contingencies
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.
186
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
38 RELATED PARTY TRANSACTIONS
Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control or jointly control the party or exercise
significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to
control or common control. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their
close family members) or other entities and include entities which are under the significant influence of related parties of the Group where those
parties are individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is a related
party of the Group.
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
The Group is part of a larger group of companies under Sinopec Group Company, which is controlled by the PRC government, and has significant
transactions and relationships with Sinopec Group Company and fellow subsidiaries. Because of these relationships, it is possible that the terms
of these transactions are not the same as those that would result from transactions among wholly unrelated parties.
The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures, which were carried
out in the ordinary course of business are as follows:
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 withdrawn from related parties
Net funds obtained from related parties
Note
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(vii)
(vii)
(viii)
(ix)
(x)
(ix)
(xi)
2019
RMB million
2018
RMB million
295,532
197,308
8,206
33,310
38,668
3,098
–
–
–
116
1,066
1,334
5,350
3,438
272,789
192,224
7,319
23,489
28,472
6,664
7,765
521
869
113
848
1,110
6,457
31,684
The amounts set out in the table above in respect of the year ended 31 December 2019 and 2018 represent the relevant costs and income as
determined by the corresponding contracts with the related parties.
Included in the transactions disclosed above, for the year ended 31 December 2019 are: a) purchases by the Group from Sinopec Group
Company and fellow subsidiaries amounting to RMB 159,086 million (2018: RMB 140,427 million) comprising purchases of products and
services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB 142,433
million (2018: RMB 123,772 million), ancillary and social services provided by Sinopec Group Company and fellow subsidiaries of RMB 3,097
million (2018: RMB 6,664 million), lease charges for land, buildings and others paid by the Group of RMB 11,330 million, RMB 509 million and
RMB 383 million (2018: RMB 7,636 million, RMB 643 million and RMB 602 million), respectively and interest expenses of RMB 1,334 million
(2018: RMB 1,110 million); and b) sales by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB 74,453 million
(2018: RMB 59,472 million), comprising RMB 73,365 million (2018: RMB 58,606 million) for sales of goods, RMB 1,066 million (2018: RMB
848 million) for interest income and RMB 22 million (2018: RMB 18 million) for agency commission income.
For the year ended 31 December 2019, no individually significant right-of-use assets were leased from Sinopec Group Company and fellow
subsidiaries, associates and joint ventures by the Group. The interest expense recognised for the year ended 31 December 2019 on lease
liabilities in respect of amounts due to Sinopec Group Company and fellow subsidiaries, associates and joint ventures was RMB 8,518 million.
For the year ended 31 December 2019, the amount of rental the Group paid to Sinopec Group Company and fellow subsidiaries, associates and
joint ventures for land, buildings and others are RMB 11,333 million, RMB 518 million and RMB 468 million (2018: RMB 7,636 million, RMB
653 million and RMB 836 million).
As at 31 December 2019 and 2018, there was no guarantee given to banks by the Group in respect of banking facilities to Sinopec Group
Company and fellow subsidiaries, associates and joint ventures, except for the guarantees disclosed in Note 37. Guarantees given to banks by
the Group in respect of banking facilities to associates and joint ventures are disclosed in Note 37.
The directors of the Company are of the opinion that the above transactions with related parties were conducted in the ordinary course of
business and on normal commercial terms or in accordance with the agreements governing such transactions, and this has been confirmed by
the independent non-executive directors.
187
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 38 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
Notes:
(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary materials.
(ii) Purchases represent the purchase of materials and utility supplies directly related to the Group’s operations such as the procurement of raw and ancillary
materials and related services, supply of water, electricity and gas.
(iii) Transportation and storage represent the cost for the use of railway, road and marine transportation services, pipelines, loading, unloading and storage facilities.
(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as geophysical, drilling, well testing and well
measurement services.
(v) Production related services represent ancillary services rendered in relation to the Group’s operations such as equipment repair and general maintenance,
insurance premium, technical research, communications, firefighting, security, product quality testing and analysis, information technology, design and engineering,
construction of oilfield ground facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project management,
environmental protection and management services.
(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational facilities, media communication services, sanitation,
accommodation, canteens, and property maintenance.
(vii) Operating lease charges represent the rental incurred for operating leases in respect of land, buildings and equipment leased from Sinopec Group Company and
fellow subsidiaries, associates and joint ventures. No lease charges have incurred during the current year because of the adoption of IFRS 16 Leases.
(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. The balance of deposits at
31 December 2019 was RMB 35,707 million (2018: RMB 41,057 million).
(x) Interest expense represents interest charges on the loans obtained from Sinopec Group Company and fellow subsidiaries.
(xi) The Group obtained loans, discounted bills and others from Sinopec Group Company and fellow subsidiaries.
In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec
Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell
certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2019.
The terms of these agreements are summarised as follows:
‧ The Company has entered into a non-exclusive “Agreement for Mutual Provision of Products and Ancillary Services” (“Mutual Provision
Agreement”) with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to provide the
Group with certain ancillary production services, construction services, information advisory services, supply services and other services and
products. While each of Sinopec Group Company and the Company is permitted to terminate the Mutual Provision Agreement upon at least
six months notice, Sinopec Group Company has agreed not to terminate the agreement if the Group is unable to obtain comparable services
from a third party. The pricing policy for these services and products provided by Sinopec Group Company to the Group is as follows:
(1) the government-prescribed price;
(2) where there is no government-prescribed price, the government-guidance price;
(3) where there is neither a government-prescribed price nor a government-guidance price, the market price; or
(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.
188
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 38 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
‧ On the basis of a series of continuing connected transaction agreements signed in 2000, the Company and Sinopec Group Company have
signed the Fifth Supplementary Agreement and the Fourth Revised Memorandum of land use rights leasing contract on 24 August 2018,
which took effect on 1 January 2019 and made adjustment to “Mutual Supply Agreement”, “Agreement for Provision of Cultural and
Educational, Health Care and Community Services”, “Buildings Leasing Contract”, “Intellectual Property Contract” and “Land Use Rights
Leasing Contract”, etc.
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures included in the following accounts captions
are summarised as follows:
Trade accounts receivable and bills receivable
Financial assets at fair value through other comprehensive income
Prepaid expenses and other current assets
Long-term prepayments and other assets
Total
Trade accounts payable and bills payable
Contract liabilities
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
Lease liabilities (including to be paid within one year)
Total
31 December
2019
RMB million
31 December
2018
RMB million
12,968
407
12,723
734
26,832
25,296
4,464
16,141
–
43,289
9,626
171,402
270,218
7,555
–
7,665
23,482
38,702
17,530
3,273
18,160
12,470
31,665
42,516
—
125,614
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term
loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated
with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 30.
As at 31 December 2019, the current portion of long-term loans mainly include an interest-free loan with a maturity period of 20 years
amounting to RMB 35,560 million from Sinopec Group Company (a state-owned enterprise) through Sinopec Finance. This borrowing is a special
arrangement to reduce financing costs and improve liquidity of the Company during its initial global offering in 2000.
As at and for the year ended 31 December 2019, and as at and for the year ended 31 December 2018, no individually significant impairment
losses for bad and doubtful debts were recognised in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates
and joint ventures.
(b) Key management personnel emoluments
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the
Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensation is as follows:
Short-term employee benefits
Retirement scheme contributions
(c) Contributions to defined contribution retirement plans
2019
RMB’ 000
9,209
536
9,745
2018
RMB’ 000
5,745
351
6,096
The Group participates in various defined contribution retirement plans organised by municipal and provincial governments for its staff. The
details of the Group’s employee benefits plan are disclosed in Note 39. As at 31 December 2019 and 2018, the accrual for the contribution to
post-employment benefit plans was not material.
189
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
38 RELATED PARTY TRANSACTIONS (Continued)
(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.
39 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 13.0% to 20.0% of
the salaries, bonuses and certain allowances of its staff. In addition, the Group provides a supplementary retirement plan for its staff at rates not
exceeding 8% of the salaries. The Group has no other material obligation for the payment of pension benefits associated with these plans beyond
the annual contributions described above. The Group’s contributions for the year ended 31 December 2019 were RMB 11,665 million (2018: RMB
9,296 million).
40 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.
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.
190
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 40 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities
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 debts, income tax
payable, long-term debts, loans from Sinopec Group Company and fellow subsidiaries, deferred tax liabilities and other unallocated liabilities.
Information of the Group’s reportable segments is as follows:
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
2019
RMB million
2018
RMB million
111,114
89,315
200,429
141,674
1,077,018
1,218,692
1,393,557
4,159
1,397,716
425,508
54,865
480,373
828,635
654,337
1,482,972
(1,879,694)
2,900,488
10,283
5,464
33,247
14,861
1,850
65,705
2,966,193
93,499
95,954
189,453
148,930
1,109,088
1,258,018
1,408,989
5,224
1,414,213
457,406
73,835
531,241
716,789
650,271
1,367,060
(1,934,372)
2,825,613
10,738
5,389
32,424
15,492
1,523
65,566
2,891,179
191
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
40 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Result
Operating profit/(loss)
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 (losses)/income
– 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
Financial assets at fair value through other comprehensive income
Deferred tax assets
Cash and cash equivalents, 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
192
2019
RMB million
2018
RMB million
9,284
30,632
29,107
17,151
64
(40)
86,198
3,167
(640)
3,309
4,611
2,330
12,777
(19)
59
73
578
228
919
(9,967)
89,927
(10,107)
54,827
23,464
27,007
(9,293)
(3,634)
82,264
2,598
109
3,155
6,298
1,814
13,974
(3)
315
43
596
920
1,871
1,001
99,110
31 December
2019
RMB million
31 December
2018
RMB million
410,950
321,080
399,242
175,884
131,686
1,438,842
152,204
1,521
17,616
127,927
16,961
1,755,071
167,933
122,264
226,531
54,462
137,881
709,071
40,521
3,264
49,156
52,915
6,809
17,500
879,236
321,686
271,356
317,641
156,865
152,799
1,220,347
145,721
1,450
21,694
167,015
36,081
1,592,308
94,170
103,809
159,536
37,413
144,216
539,144
29,462
6,699
51,011
74,181
5,948
29,328
735,773
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
40 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
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
(2) Geographical information
2019
RMB million
2018
RMB million
61,739
31,372
29,566
22,438
1,979
147,094
50,732
19,676
21,572
13,966
2,866
108,812
3
245
80
17
–
345
42,155
27,908
21,429
19,578
6,906
117,976
60,331
18,164
16,296
13,379
1,797
109,967
4,274
353
264
1,374
16
6,281
The following tables set out information about the geographical information of the Group’s external sales and the Group’s non-current assets,
excluding financial 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
2019
RMB million
2018
RMB million
2,131,078
505,672
329,443
2,966,193
2,119,580
395,129
376,470
2,891,179
31 December
2019
RMB million
31 December
2018
RMB million
1,235,676
52,705
1,288,381
989,668
50,892
1,040,560
193
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
41 PRINCIPAL SUBSIDIARIES
As at 31 December 2019, the following list contains the particulars of subsidiaries which principally affected the results, assets and liabilities of the
Group.
Name of company
Sinopec Great Wall Energy & Chemical
Company Limited
Particulars
of issued
capital
(million)
Interests
held by the
Company %
RMB 22,761
100.00
Sinopec Yangzi Petrochemical Company Limited
RMB 15,651
100.00
Sinopec Pipeline Storage & Transportation
Company Limited
Sinopec Overseas Investment Holding Limited
(“SOIH”)
Sinopec International Petroleum Exploration and
Production Limited (“SIPL”)
Sinopec Yizheng Chemical Fibre Limited
Liability Company
Sinopec Lubricant Company Limited
China International United Petroleum and Chemical
Company Limited
Sinopec Qingdao Petrochemical Company Limited
RMB 12,000
100.00
USD 1,662
100.00
RMB 8,000
100.00
RMB 4,000
100.00
RMB 3,374
100.00
RMB 5,000
100.00
Interests
held by
non-controlling
interests % Principal activities
–
Coal chemical industry investment
management, production and sale
of coal chemical products
– Manufacturing of intermediate
petrochemical products and petroleum
products
Pipeline storage and transportation of
crude oil
Investment holding of overseas business
Investment in exploration, production and
sale of petroleum and natural gas
Production and sale of polyester chips
and polyester fibres
Production and sale of refined petroleum
products, lubricant base oil, and
petrochemical materials
Trading of crude oil and petrochemical
products
–
–
–
–
–
–
RMB 1,595
100.00
– Manufacturing of intermediate
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
petrochemical products and petroleum
products
Production and sale of catalyst products
Trading of petrochemical products
–
–
– Marketing and distribution of
petrochemical products
Import and processing of crude oil,
production, storage and sale of petroleum
products and petrochemical products
1.02
Sinopec Qingdao Refining and Chemical
Company Limited
Sinopec Hainan Refining and Chemical
Company Limited
Sinopec Marketing Company Limited
(“Marketing Company”)
Shanghai SECCO
Sinopec-SK (Wuhan) Petrochemical Company
Limited (“Sinopec-SK”)
Sinopec Kantons Holdings Limited
(“Sinopec Kantons”)
Gaoqiao Petrochemical Company Limited
Sinopec Shanghai Petrochemical Company Limited
(“Shanghai Petrochemical”)
Fujian Petrochemical Company Limited
(“Fujian Petrochemical”) (i)
RMB 5,000
RMB 9,628
RMB 28,403
RMB 7,801
RMB 7,193
HKD 248
RMB 10,000
RMB 10,824
85.00
75.00
70.42
67.60
59.00
60.33
55.00
50.44
15.00 Manufacturing of intermediate petrochemical
products and petroleum products
25.00 Manufacturing of intermediate petrochemical
products and petroleum products
29.58 Marketing and distribution of refined
32.40
41.00
39.67
petroleum products
Production and sale of petrochemical
products
Production, sale, research and development
of petrochemical products, ethylene and
downstream byproducts
Provision of crude oil jetty services and
natural gas pipeline transmission services
45.00 Manufacturing of intermediate petrochemical
products and petroleum products
49.56 Manufacturing of synthetic fibres, resin and
plastics, intermediate petrochemical
products and petroleum products
RMB 8,140
50.00
50.00 Manufacturing of plastics, intermediate
petrochemical products and petroleum
products
Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and Hong Kong SAR respectively, all of the above principal subsidiaries
are incorporated and operate their businesses principally in the PRC. All of the above principal subsidiaries are limited companies.
Note:
(i) The Group consolidated the financial statements of the entity because it is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity.
194
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
41 PRINCIPAL SUBSIDIARIES (Continued)
Summarised financial information on subsidiaries with material non-controlling interests
Set out below are the summarised financial information which the amount before inter-company eliminations for each subsidiary that has
non-controlling interests that are material to the Group.
Summarised consolidated balance sheet
Marketing Company
SIPL
At
At
At
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2018
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2019
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
2018
RMB million
At
At
At
At
At
At
At
At
Shanghai Petrochemical
At
At
Fujian Petrochemical
Sinopec Kantons
Shanghai SECCO
Sinopec-SK
At
Current assets
Current liabilities
Net current
(liabilities)/assets
Non-current assets
Non-current liabilities
Net non-current
assets/(liabilities)
Net assets
Attributable to owners of
the Company
Attributable to
non-controlling interests
129,266
(192,106)
130,861
(181,766)
(62,840)
340,356
(58,732)
(50,905)
261,062
(2,086)
281,624
218,784
258,976
208,071
19,151
(456)
18,695
13,234
(16,952)
(3,718)
14,977
16,731
(483)
16,248
38,020
(31,050)
6,970
23,218
22,309
(15,479)
25,299
(13,913)
6,830
23,185
(21)
23,164
29,994
11,386
19,087
(10)
19,077
30,463
148,256
141,244
6,308
5,266
14,998
15,295
70,528
66,827
8,669
17,952
14,996
15,168
1,788
(804)
984
11,558
(688)
10,870
11,854
5,927
5,927
816
(50)
766
11,444
(688)
10,756
11,522
5,761
5,761
1,284
(2,961)
(1,677)
12,777
(158)
12,619
10,942
6,583
4,359
1,209
(3,722)
(2,513)
12,895
(132)
12,763
10,250
11,858
(3,196)
8,662
11,473
(1,627)
9,846
18,508
9,537
(2,233)
7,304
12,301
(1,698)
10,603
17,907
6,165
12,511
12,105
4,085
5,997
5,802
5,337
(15,037)
2,750
(2,333)
(9,700)
21,567
(7)
21,560
11,860
6,997
4,863
417
12,612
–
12,612
13,029
8,469
4,560
Summarised consolidated statement of comprehensive income
Year ended 31 December
Marketing Company
SIPL
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
Shanghai Petrochemical
2018
RMB million
2019
RMB million
Fujian Petrochemical
2019
RMB million
2018
RMB million
Sinopec Kantons
2019
RMB million
2018
RMB million
Shanghai SECCO
2019
RMB million
2018
RMB million
Sinopec-SK
2019
RMB million
2018
RMB million
Turnover
Profit for the year
Total comprehensive income
Comprehensive income
attributable to
non-controlling interests
Dividends paid to
non-controlling interests
1,427,705
22,992
23,362
1,443,698
22,046
22,589
3,282
2,831
2,693
5,037
3,272
4,536
100,270
2,227
2,235
107,689
5,336
5,336
8,289
4,830
7,794
1,651
2,737
3,964
10,926
–
1,113
1,344
2,645
1,616
5,535
477
477
238
650
5,261
1,576
1,576
788
600
1,274
1,131
1,140
433
159
1,398
1,065
1,067
399
104
28,341
3,137
3,137
1,016
822
26,320
3,099
3,099
1,004
1,191
31,016
701
701
17,134
1,879
1,879
245
–
658
–
Summarised statement of cash flows
Year ended 31 December
Marketing Company
SIPL
2019
RMB million
2018
RMB million
2019
RMB million
2018
RMB million
Shanghai Petrochemical
2018
RMB million
2019
RMB million
Fujian Petrochemical
2019
RMB million
2018
RMB million
Sinopec Kantons
2019
RMB million
2018
RMB million
Shanghai SECCO
2019
RMB million
2018
RMB million
Sinopec-SK
2019
RMB million
2018
RMB million
Net cash generated from
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
40,260
24,825
2,128
3,467
5,057
6,659
(25,923)
8,339
678
4,096
(4,623)
(1,928)
(21,535)
(32,084)
(116)
(5,419)
(1,737)
(3,507)
622
(472)
(163)
38
(215)
716
397
738
648
4,601
3,766
5,532
3,308
(91)
(480)
(4,987)
(3,099)
43
(1,208)
(1,551)
(2,050)
(3,676)
2,144
(1,303)
1,224
(13)
(134)
(95)
(165)
2,460
(390)
(7,198)
1,080
14,142
12,921
(43)
141
2,690
5,993
150
3,605
8,742
7,504
244
11
14
6,901
14,142
8,833
5,993
7,450
8,742
9,278
6,817
1,593
92
–
79
226
–
92
198
14
117
343
20
198
6,817
7,205
1
2
250
795
798
–
525
734
64
–
798
195
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES
Overview
Financial assets of the Group include cash and cash equivalents, time deposits with financial institutions, financial assets at fair value through
profit or loss, derivative financial assets, trade accounts receivable and bills receivable, amounts due from Sinopec Group Company and fellow
subsidiaries, amounts due from associates and joint ventures, financial assets at FVOCI and other receivables. Financial liabilities of the Group
include short-term debts, loans from Sinopec Group Company and fellow subsidiaries, derivative financial liabilities, trade accounts payable and bills
payable, amounts due to Sinopec Group Company and fellow subsidiaries, amounts due to associates and joint ventures, other payables, long-term
debts and lease liabilities.
The Group has exposure to the following risks from its uses of financial instruments:
‧ credit risk;
‧ liquidity risk; and
‧ market risk.
The Board of Directors has overall responsibility for the establishment, oversight of the Group’s risk management framework, and developing and
monitoring the Group’s risk management policies.
The Group’s risk management policies are established to identify and analyse the risks faced by the Group, and set appropriate risk limits and
controls to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group, through its training and management controls and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their roles and obligations. Internal audit department undertakes both regular
and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Group’s audit committee.
Credit risk
(i) Risk management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s deposits placed with financial institutions (including structured deposits) and receivables
from customers. To limit exposure to credit risk relating to deposits, the Group primarily places cash deposits only with large financial
institutions in the PRC with acceptable credit ratings. The majority of the Group’s trade accounts receivable relate to sales of petroleum and
chemical products to related parties and third parties operating in the petroleum and chemical industries. No single customer accounted for
greater than 10% of total trade accounts receivable at 31 December 2019, except the amounts due from Sinopec Group Company and fellow
subsidiaries. Management performs ongoing credit evaluations of the Group’s customers’ financial condition and generally does not require
collateral on trade accounts receivable. The Group maintains an impairment loss for doubtful accounts and actual losses have been within
management’s expectations.
The carrying amounts of cash and cash equivalents, time deposits with financial institutions, financial assets at fair value through profit or loss,
derivative financial assets, trade accounts receivable and bills receivable, financial assets at FVOCI and other receivables, represent the Group’s
maximum exposure to credit risk in relation to financial assets.
(ii) Impairment of financial assets
The Group’s primary type of financial assets that are subject to the expected credit loss model is trade accounts receivable and bills receivable,
financial assets at FVOCI and other receivables.
The Group’s cash deposits are placed only with large financial institutions with acceptable credit ratings, and there is no material impairment
loss identified.
For trade accounts receivable and bills receivable and financial assets at FVOCI, the Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all trade accounts receivable and bills receivable and financial assets at
FVOCI.
To measure the expected credit losses, trade accounts receivable and bills receivable and financial assets at FVOCI have been grouped based on
shared credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 December 2019 or 1 January 2019,
respectively, and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
The detailed analysis of trade accounts receivable and bills receivable and financial assets at FVOCI, based on which the Group generated its
payment profile is listed in Notes 25 and 26.
All of the entity’s other receivables (Note 28) are considered to have low credit risk, and the loss allowance recognised during the period was
therefore limited to 12 months expected losses. The Group considers ‘low credit risk’ for other receivables when they have a low risk of default
and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term.
196
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Management prepares monthly cash flow budget
to ensure that the Group will always have sufficient liquidity to meet its financial obligations as they fall due. The Group arranges and negotiates
financing with financial institutions and maintains a certain level of standby credit facilities to reduce the Group’s liquidity risk.
As at 31 December 2019, the Group has standby credit facilities with several PRC financial institutions which provide borrowings up to RMB
379,649 million (2018: RMB 387,748 million) on an unsecured basis, at a weighted average interest rate of 3.57% per annum (2018: 3.87%). As
at 31 December 2019, the Group’s outstanding borrowings under these facilities were RMB 2,947 million (2018: RMB 21,236 million) and were
included in debts.
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
Lease liabilities
Derivative financial liabilities
Trade accounts payable and bills payable
Other payables
Short-term debts
Long-term debts
Loans from Sinopec Group Company and
fellow subsidiaries
Derivative financial liabilities
Trade accounts payable and bills payable
Other payables
Total
contractual
undiscounted
cash flow
RMB million
42,240
62,903
54,508
367,711
2,729
199,792
78,771
808,654
Total
contractual
undiscounted
cash flow
RMB million
30,123
61,809
75,207
13,571
192,757
85,790
459,257
Carrying
amount
RMB million
40,521
49,156
52,915
192,872
2,729
199,792
78,771
616,756
Carrying
amount
RMB million
29,462
51,011
74,181
13,571
192,757
85,790
446,772
31 December 2019
Within
1 year or
on demand
RMB million
More than 1
year but less
than 2 years
RMB million
More than 2
years but less
than 5 years
RMB million
More than
5 years
RMB million
42,240
952
43,623
16,488
2,729
199,792
78,771
384,595
–
6,271
985
15,676
–
–
–
22,932
31 December 2018
–
25,189
7,088
45,008
–
–
–
77,285
–
30,491
2,812
290,539
–
–
–
323,842
Within
1 year or
on demand
RMB million
More than 1
year but less
than 2 years
RMB million
More than 2
years but less
than 5 years
RMB million
More than
5 years
RMB million
30,123
1,889
32,127
13,571
192,757
85,790
356,257
–
16,938
37,977
–
–
–
54,915
–
27,190
3,741
–
–
–
30,931
–
15,792
1,362
–
–
–
17,154
Management believes that the Group’s current cash on hand, expected cash flows from operations and available standby credit facilities from
financial institutions will be sufficient to meet the Group’s short-term and long-term capital requirements.
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.
197
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Currency risk
Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The
Group’s currency risk exposure primarily relates to short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries
denominated in USD and lease liabilities denominated in Singapore Dollar (“SGD”). The Group enters into foreign exchange contracts to manage its
currency risk exposure.
Included primarily in short-term and long-term debts and loans from Sinopec Group Company and fellow subsidiaries of the Group and lease
liabilities are the following amounts denominated in a currency other than the functional currency of the entity to which they relate:
Gross exposure arising from loans and lease liabilities
USD
SGD
31 December
2019
million
31 December
2018
million
103
4
668
–
A 5 percent strengthening/weakening of RMB against the following currencies at 31 December 2019 and 2018 would have increased/decreased
profit for the year of the Group by the amounts shown below. This analysis has been determined assuming that the change in foreign exchange rates
had occurred at the balance sheet date and had been applied to the foreign currency balances to which the Group has significant exposure as stated
above, and that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2018.
USD
SGD
31 December
2019
RMB million
31 December
2018
RMB million
27
1
172
–
Other than the amounts as disclosed above, the amounts of other financial assets and liabilities of the Group are substantially denominated in the
functional currency of respective entity within the Group.
Interest rate risk
The Group’s interest rate risk exposure arises primarily from its short-term and long-term debts and loans from Sinopec Group Company and fellow
subsidiaries. Debts bearing interest at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate
risk respectively. The interest rates and terms of repayment of short-term and long-term debts, and loans from Sinopec Group Company and fellow
subsidiaries of the Group are disclosed in Note 30.
As at 31 December 2019, it is estimated that a general increase/decrease of 100 basis points in variable interest rates, with all other variables held
constant, would decrease/increase the Group’s profit for the year by approximately RMB 352 million (2018: decrease/increase by approximately
RMB 424 million). This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group’s debts
outstanding at the balance sheet date with exposure to cash flow interest rate risk. The analysis is performed on the same basis for 2018.
Commodity price risk
The Group engages in oil and gas operations and is exposed to commodity price risk related to price volatility of crude oil, refined oil products and
chemical products. The fluctuations in prices of crude oil, refined oil products and chemical products could have significant impact on the Group.
The Group uses derivative financial instruments, including commodity futures and swaps contracts, to manage a portion of this risk.
As at 31 December 2019, the Group had certain commodity contracts of crude oil, refined oil products and chemical products designated as
qualified cash flow hedges and economic hedges. As at 31 December 2019, the fair value of such derivative hedging financial instruments is
derivative financial assets of RMB 788 million (2018: RMB 7,844 million) and derivative financial liabilities of RMB 2,728 million (2018: RMB
13,568 million).
As at 31 December 2019, it is estimated that a general increase/decrease of USD 10 per barrel in basic price of derivative financial instruments,
with all other variables held constant, would impact the fair value of derivative financial instruments, which would increase/decrease the Group’s
profit for the year by approximately RMB 3,134 million (2018: decrease/increase RMB 197 million), and decrease/increase the Group’s other
reserves by approximately RMB 4,289 million (2018: increase/decrease RMB 6,850 million). This sensitivity analysis has been determined assuming
that the change in prices had occurred at the balance sheet date and the change was applied to the Group’s derivative financial instruments at that
date with exposure to commodity price risk. The analysis is performed on the same basis for 2018.
198
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Fair values
(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 2019
Assets
Financial assets at fair value through profit or loss:
– Structured deposits
– Equity investments, listed and at quoted market price
Derivative financial assets:
– Derivative financial assets
Financial assets at fair value through other comprehensive income:
– Equity instruments
– Trade accounts receivable and bills receivable
Liabilities
Derivative financial liabilities
– Derivative financial liabilities
At 31 December 2018
Assets
Financial assets at fair value through profit or loss:
– Structured deposits
– Equity investments, listed and at quoted market price
Derivative financial assets:
– Derivative financial assets
Financial assets at fair value through other comprehensive income:
– Equity instruments
Liabilities
Derivative financial liabilities
– Derivative financial liabilities
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
–
1
128
90
–
219
–
–
709
–
–
709
1,209
1,209
1,520
1,520
3,318
–
–
1,431
8,622
13,371
–
–
3,318
1
837
1,521
8,622
14,299
2,729
2,729
Level 1
RMB million
Level 2
RMB million
Level 3
RMB million
Total
RMB million
–
182
874
127
1,183
5,500
5,500
–
–
7,013
–
7,013
8,071
8,071
25,550
–
–
1,323
26,873
–
–
25,550
182
7,887
1,450
35,069
13,571
13,571
During the years ended 31 December 2019 and 2018, there was no transfer between instruments in Level 1 and Level 2.
Management of the Group uses discounted cash flow model with inputted interest rate and commodity index, which were influenced by historical
fluctuation and the probability of market fluctuation, to evaluate the fair value of the structured deposits and trade accounts receivable and bills
receivable classified as Level 3 financial assets.
199
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
42 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Fair values (Continued)
(ii) Fair values of financial instruments carried at other than fair value
The disclosures of the fair value estimates, and their methods and assumptions of the Group’s financial instruments, are made to comply
with the requirements of IFRS 7 and IFRS 9 and should be read in conjunction with the Group’s consolidated financial statements and related
notes. The estimated fair value amounts have been determined by the Group using market information and valuation methodologies considered
appropriate. However, considerable judgement is required to interpret market data to develop the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts the Group could realise in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair values of the Group’s financial instruments carried at other than fair value (other than long-term indebtedness and investments in
unquoted equity securities) approximate their carrying amounts due to the short-term maturity of these instruments. The fair values of long-term
indebtedness are estimated by discounting future cash flows using current market interest rates offered to the Group for debt with substantially
the same characteristic and maturities range from 2.37% to 4.90% (2018: 2.76% to 4.90%). The following table presents the carrying amount
and fair value of the Group’s long-term indebtedness other than loans from Sinopec Group Company and fellow subsidiaries at 31 December
2019 and 2018:
Carrying amount
Fair value
31 December
2019
RMB million
63,946
62,594
31 December
2018
RMB million
63,085
62,656
The Group has not developed an internal valuation model necessary to estimate the fair values of loans from Sinopec Group Company and
fellow subsidiaries as it is not considered practicable to estimate their fair values because the cost of obtaining discount and borrowing rates for
comparable borrowings would be excessive based on the Reorganisation of the Group, the Group’s existing capital structure and the terms of the
borrowings.
Except for the above items, the financial assets and liabilities of the Group are carried at amounts not materially different from their fair values
at 31 December 2019 and 2018.
43 ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group’s financial condition and results of operations are sensitive to accounting methods, assumptions and estimates that underlie the
preparation of the consolidated financial statements. Management bases the assumptions and estimates on historical experience and on
various other assumptions that it believes to be reasonable and which form the basis for making judgements about matters that are not readily
apparent from other sources. On an ongoing basis, management evaluates its estimates. Actual results may differ from those estimates as facts,
circumstances and conditions change.
The selection of critical accounting policies, the judgements and other uncertainties affecting application of such policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be considered when reviewing the consolidated financial statements. The
significant accounting policies are set forth in Note 2. Management believes the following critical accounting policies involve the most significant
judgements and estimates used in the preparation of the consolidated financial statements.
Oil and gas properties and reserves
The accounting for the exploration and production’s oil and gas activities is subject to accounting rules that are unique to the oil and gas industry.
There are two methods to account for oil and gas business activities, the successful efforts method and the full cost method. The Group has elected
to use the successful efforts method. The successful efforts method reflects the volatility that is inherent in exploring for mineral resources in that
costs of unsuccessful exploratory efforts are charged to expense as they are incurred. These costs primarily include dry hole costs, seismic costs
and other exploratory costs. Under the full cost method, these costs are capitalised and written-off or depreciated over time.
Engineering estimates of the Group’s oil and gas reserves are inherently imprecise and represent only approximate amounts because of the
subjective judgements involved in developing such information. There are authoritative guidelines regarding the engineering criteria that have to be
met before estimated oil and gas reserves can be designated as “proved”. Proved and proved developed reserves estimates are updated at least
annually and take into account recent production and technical information about each field. In addition, as prices and cost levels change from
year to year, the estimates of proved and proved developed reserves also change. This change is considered a change in estimate for accounting
purposes and is reflected on a prospective basis in relation to depreciation rates. Oil and gas reserves have a direct impact on the assessment of
the recoverability of the carrying amounts of oil and gas properties reported in the financial statements. If proved reserves estimates are revised
downwards, earnings could be affected by changes in depreciation expense or an immediate write-down of the property’s carrying amount.
Future dismantlement costs for oil and gas properties are estimated with reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with industry practices in similar geographic area, including estimation of economic
life of oil and gas properties, technology and price level. The present values of these estimated future dismantlement costs are capitalised as oil and
gas properties with equivalent amounts recognised as provisions for dismantlement costs.
Despite the inherent imprecision in these engineering estimates, these estimates are used in determining depreciation expense, impairment loss
and future dismantlement costs. Capitalised costs of proved oil and gas properties are amortised on a unit-of-production method based on volumes
produced and reserves.
200
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 43 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
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 units are discounted to their present value, which requires significant judgement relating to level of sale volume, selling price,
amount of operating costs and discount rate. Management uses all readily available information in determining an amount that is a reasonable
approximation of recoverable amount, including estimates based on reasonable and supportable assumptions and projections of sale volume, selling
price, amount of operating costs and discount rate.
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.
Measurement of expected credit losses
The Group measures and recognises expected credit losses, considering reasonable and supportable information about the relevant past events,
current conditions and forecasts of future economic conditions. The Group regularly monitors and reviews the assumptions used for estimating
expected credit losses.
Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realisable values, an allowance for diminution in value of inventories is recognised. Net
realisable value represents the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated
costs necessary to make the sale. Management bases the estimates on all available information, including the current market prices of the finished
goods and raw materials, and historical operating costs. If the actual selling prices were to be lower or the costs of completion were to be higher
than estimated, the actual allowance for diminution in value of inventories could be higher than estimated.
44 EVENTS AFTER THE BALANCE SHEET DATE
In early 2020, the outbreak of Coronavirus Disease 2019 (“COVID-19”) has significant impacts on the consumption of refined oil products and sales
of chemical products of the Group. The Group has taken a series of strong and effective measures, and has coordinated the prevention and control
of the COVID-19 and the resumption of work and production with all-out efforts to minimize its impact.
International crude oil prices dropped significantly in March 2020 under the impact of the outbreak of the COVID-19 and the breakdown of OPEC’s
production reduction negotiation, which has a significant impact on the Group’s operation.
The COVID-19 and international crude oil prices drop in March 2020 are events arose after the balance sheet date, which are non-adjusting events
after the balance sheet date. The Group will keep continuous attention on the situation of the COVID-19 and future fluctuation in oil prices, take
responsive tackling measures, and assess the impact on the financial position and operating results of the Group after the balance sheet date. Up to
the date of the issuance of the consolidated financial statements, the assessment is still in progress.
45 PARENT AND ULTIMATE HOLDING COMPANY
The directors consider the parent and ultimate holding company of the Group as at 31 December 2019 is Sinopec Group Company, a state-owned
enterprise established in the PRC. This entity does not produce financial statements available for public use.
201
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019 46 BALANCE SHEET AND RESERVE MOVEMENT OF THE COMPANY
BALANCE SHEET OF THE COMPANY (Amounts in million)
Note
31 December
2019
RMB
31 December
2018
RMB
Non-current assets
Property, plant and equipment, net
Construction in progress
Right-of-use assets
Investment in subsidiaries
Interest in associates
Interest in joint ventures
Financial assets at fair value through other comprehensive income
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
Derivative financial assets
Trade accounts receivable and bills receivable
Financial assets at fair value through other comprehensive income
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
Lease liabilities
Derivative financial liabilities
Trade accounts payable and bills payable
Contract liabilities
Other payables
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
Lease liabilities
Provisions
Other long-term liabilities
Total non-current liabilities
Equity
Share capital
Reserves
Total equity
291,544
60,493
120,037
266,359
22,798
15,530
395
7,315
—
6,727
791,198
15,984
38,088
–
940
21,544
207
41
49,116
106,645
232,565
32,329
39,439
7,198
157
80,118
5,112
162,852
327,205
94,640
696,558
12,999
6,681
107,783
34,514
5,404
167,381
529,177
121,071
408,106
529,177
302,048
51,598
—
251,970
21,143
16,094
395
11,021
7,101
13,129
674,499
59,120
23,759
22,500
–
30,145
–
2,313
45,825
73,442
257,104
14,511
5,815
—
967
84,418
4,230
178,936
288,877
31,773
642,726
27,200
40,904
—
33,094
5,310
106,508
536,218
121,071
415,147
536,218
(a)
202
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
46 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 income/(loss) of associates and joint ventures, net of deferred tax
Cash flow hedges, net of deferred tax
Special reserve
Balance at 31 December
Retained earnings
Balance at 1 January
Profit for the year
Distribution to owners (Note 13)
Appropriation
Special reserve
Others
Balance at 31 December
The Company
2019
RMB million
2018
RMB million
9,201
46
9,247
55,850
55,850
86,678
3,745
90,423
9,195
6
9,201
55,850
55,850
82,682
3,996
86,678
117,000
117,000
117,000
117,000
2,286
201
1,465
(40)
3,912
144,132
37,256
(46,008)
(3,745)
40
(1)
131,674
408,106
2,460
(64)
(617)
507
2,286
177,989
38,460
(67,799)
(3,996)
(507)
(15)
144,132
415,147
203
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2019
Other than the differences in the classifications of certain financial statements captions and the accounting for the items described below, there are no
material differences between the Group’s consolidated financial statements prepared in accordance with the accounting policies complying with CASs
and IFRS. The reconciliation presented below is included as supplemental information, is not required as part of the basic financial statements and
does not include differences related to classification, presentation or disclosures. Such information has not been subject to independent audit or review.
The major differences are:
(i) GOVERNMENT GRANTS
Under CASs, grants from the government are credited to capital reserve if required by relevant governmental regulations. Under IFRS, government
grants relating to the purchase of fixed assets are recognised as deferred income and are transferred to the income statement over the useful life of
these assets.
(ii) SAFETY PRODUCTION FUND
Under CASs, safety production fund should be recognised in profit or loss with a corresponding increase in reserve according to PRC regulations.
Such reserve is reduced for expenses incurred for safety production purposes or, when safety production related fixed assets are purchased, is
reduced by the purchased cost with a corresponding increase in the accumulated depreciation. Such fixed assets are not depreciated thereafter.
Under IFRS, payments are expensed as incurred, or capitalised as fixed assets and depreciated according to applicable depreciation methods.
Effects of major differences between the shareholders’ equity under CASs and the total equity under IFRS are analysed as follows:
Shareholders’ equity under CASs
Adjustments:
Government grants
Total equity under IFRS*
Note
(i)
31 December
2019
RMB million
31 December
2018
RMB million
876,905
857,659
(1,070)
875,835
(1,124)
856,535
Effects of major differences between the net profit under CASs and the profit for the year under IFRS are analysed as follows:
Net profit under CASs
Adjustments:
Government grants
Safety production fund
Others
Profit for the year under IFRS*
Note
(i)
(ii)
2019
RMB million
72,122
2018
RMB million
80,289
54
69
(212)
72,033
56
909
(2,357)
78,897
* The figures are extracted from the consolidated financial statements prepared in accordance with the accounting policies complying with IFRS during the year ended
31 December 2018 and 2019 which have been audited by PricewaterhouseCoopers.
204
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Differences between Consolidated Financial Statements Prepared in Accordance with the Accounting Policies Complying with CASs and IFRS (Unaudited)(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH THE ACCOUNTING POLICIES COMPLYING WITH CASS AND IFRS (UNAUDITED)
In accordance with “Accounting Standards Codification (ASC) Topic 932 Extractive Activities – Oil and Gas”, issued by the Financial Accounting
Standards Board of the United States, “Rule 4-10 of Regulation S-X”, issued by Securities and Exchange Commission (SEC), and in accordance with
“Industrial Information Disclosure Guidelines for Public Company – No.8 Oil and Gas Exploitation”, issued by Shanghai Stock Exchange, this section
provides supplemental information on oil and gas exploration and producing activities of the Group and its equity method investments at 31 December
2019 and 2018, and for the years then ended in the following six separate tables. Tables I through III provide historical cost information under IFRS
pertaining to capitalised costs related to oil and gas producing activities; costs incurred in oil and gas exploration and development; and results of
operation related to oil and gas producing activities. Tables IV through VI present information on the Group’s and its equity method investments’
estimated net proved reserve quantities; standardised measure of discounted future net cash flows; and changes in the standardised measure of
discounted cash flows.
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
2019
RMB million
Other
countries
Total
China
2018
RMB million
Other
countries
Total
China
727,552
202,208
46,712
976,472
684,246
202,192
46,526
932,964
43,306
16
186
43,508
695,724
199,321
40,778
935,823
651,531
199,304
40,770
891,605
44,193
17
8
44,218
(702,392)
274,080
(661,177)
271,787
(41,215)
2,293
(658,093)
277,730
(618,593)
273,012
(39,500)
4,718
5,743
–
5,743
6,304
–
6,304
279,823
271,787
8,036
284,034
273,012
11,022
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
16,295
37,412
53,707
16,295
37,245
53,540
747
–
investments’ exploration and development costs
54,454
53,540
2019
RMB million
Other
countries
–
167
167
747
914
Total
China
12,108
27,453
39,561
12,108
27,329
39,437
793
–
40,354
39,437
2018
RMB million
Other
countries
–
124
124
793
917
205
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
Table III: Results of operations related to oil and gas producing activities
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
Total of the Group’s and its equity method investments’
results of operations for producing activities
2019
RMB million
Other
countries
2018
RMB million
Other
countries
Total
China
Total
China
59,552
83,633
143,185
(47,969)
(10,510)
(48,630)
(9,395)
26,681
338
27,019
9,325
9,325
(2,516)
–
(1,124)
(4,068)
1,617
(486)
1,131
59,262
80,641
139,903
(46,725)
(10,510)
(47,580)
(9,395)
25,693
–
25,693
–
–
–
–
–
–
–
–
–
290
2,992
3,282
(1,244)
–
(1,050)
–
988
338
1,326
9,325
9,325
(2,516)
–
(1,124)
(4,068)
1,617
(486)
57,860
89,569
147,429
(47,227)
(10,744)
(62,832)
(11,400)
15,226
709
15,935
9,530
9,530
(2,455)
–
(1,163)
(4,075)
1,837
(667)
1,131
1,170
57,860
84,532
142,392
(45,953)
(10,744)
(60,877)
(11,400)
13,418
–
13,418
–
–
–
–
–
–
–
–
–
28,150
25,693
2,457
17,105
13,418
–
5,037
5,037
(1,274)
–
(1,955)
–
1,808
709
2,517
9,530
9,530
(2,455)
–
(1,163)
(4,075)
1,837
(667)
1,170
3,687
The results of operations for producing activities for the years ended 31 December 2019 and 2018 are shown above. Revenues include sales to
unaffiliated parties and transfers (essentially at third-party sales prices) to other segments of the Group. Income taxes are based on statutory tax
rates, reflecting allowable deductions and tax credits. General corporate overhead and interest income and expense are excluded from the results of
operations.
206
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
Table IV: Reserve quantities information
The Group’s and its equity method investments’ estimated net proved underground oil and gas reserves and changes thereto for the years ended 31
December 2019 and 2018 are shown in the following table.
Proved oil and gas reserves are those quantities of oil and gas, which by analysis of geoscience and engineering data, can be estimated with reasonable
certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods,
and government regulation before contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain,
regardless of whether the estimate is a deterministic estimate or probabilistic estimate. Due to the inherent uncertainties and the limited nature of
reservoir data, estimates of underground reserves are subject to change as additional information becomes available.
Proved developed oil and gas reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and
operating methods or in which the cost of the required equipment is relatively minor compared with the cost of a new well.
“Net” reserves exclude royalties and interests owned by others and reflect contractual arrangements and obligation of rental fee in effect at the time of
the estimate.
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
2019
2018
Total
China
Other
countries
Total
China
Other
countries
1,367
81
160
98
(256)
1,450
8
1,271
1,343
96
107
6,793
123
469
875
(1,044)
7,216
5,822
6,026
971
1,190
1,339
85
160
98
(249)
1,433
–
1,244
1,326
95
107
6,793
123
469
875
(1,044)
7,216
5,822
6,026
971
1,190
28
(4)
–
–
(7)
17
8
27
17
1
–
–
–
–
–
–
–
–
–
–
–
1,293
160
95
79
(260)
1,367
12
1,156
1,271
137
96
6,985
(40)
142
680
(974)
6,793
6,000
5,822
985
971
1,261
158
90
79
(249)
1,339
–
1,124
1,244
137
95
6,985
(40)
142
680
(974)
6,793
6,000
5,822
985
971
32
2
5
–
(11)
28
12
32
27
–
1
–
–
–
–
–
–
–
–
–
–
207
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
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
2019
2018
Total
China
Other
countries
Total
China
Other
countries
299
(8)
2
25
(28)
290
261
245
38
45
13
(1)
–
–
(3)
9
13
9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,666
1,740
6,806
7,225
1,339
1,433
6,793
7,216
299
(8)
2
25
(28)
290
261
245
38
45
13
(1)
–
–
(3)
9
13
9
–
–
327
307
13
9
306
12
4
5
(28)
299
273
261
33
38
12
2
2
–
(3)
13
12
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,599
1,666
6,997
6,806
1,261
1,339
6,985
6,793
306
12
4
5
(28)
299
273
261
33
38
12
2
2
–
(3)
13
12
13
–
–
338
327
12
13
208
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
Table V: Standardised measure of discounted future net cash flows
The standardized measure of discounted future net cash flows, related to the above proved oil and gas reserves, is calculated in accordance with
the requirements of “ASC Topic 932 Extractive Activities – Oil and Gas”, “SEC Rule 4-10 of Regulation S-X”, and “Industrial Information Disclosure
Guidelines for Public Company – No.8 Oil and Gas Exploitation”. Estimated future cash inflows from production are computed by applying the average,
first-day-of-the-month price adjusted for differential for oil and gas during the twelve-month period before the ending date of the period covered by
the report to year-end quantities of estimated net proved reserves. Future price changes are limited to those provided by contractual arrangements in
existence at the end of each reporting year. Future development and production costs are those estimated future expenditures necessary to develop and
produce year-end estimated proved reserves based on year-end cost indices, assuming continuation of year-end economic conditions. Estimated future
income taxes are calculated by applying appropriate year-end statutory tax rates to estimated future pre-tax net cash flows, less the tax basis of related
assets. Discounted future net cash flows are calculated using 10% discount factors. This discounting requires a year-by-year estimate of when the future
expenditure will be incurred and when the reserves will be produced.
The information provided does not represent management’s estimate of the Group’s and its equity method investments’ expected future cash flows or
value of proved oil and gas reserves. Estimates of proved reserve quantities are imprecise and change over time as new information becomes available.
Moreover, probable and possible reserves, which may become proved in the future, are excluded from the calculations. The arbitrary valuation requires
assumptions as to the timing and amount of future development and production costs. The calculations are made for the years ended 31 December
2019 and 2018 and should not be relied upon as an indication of the Group’s and its equity method investments’ future cash flows or value of its oil
and gas reserves.
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
2019
RMB million
Other
countries
Total
China
2018
RMB million
Other
countries
Total
China
869,402
(384,417)
(27,065)
(40,720)
417,200
856,037
(377,692)
(22,216)
(39,634)
416,495
13,365
(6,725)
(4,849)
(1,086)
705
868,058
(381,893)
(22,310)
(42,728)
421,127
854,563
(376,532)
(19,300)
(40,651)
418,080
13,495
(5,361)
(3,010)
(2,077)
3,047
(126,203)
(126,175)
(28)
(126,910)
(126,617)
(293)
294,217
291,463
290,997
290,320
305
41,796
(13,141)
(5,603)
(3,995)
19,057
(8,852)
10,205
–
–
–
–
–
–
–
–
677
305
41,796
(13,141)
(5,603)
(3,995)
19,057
1,239
48,778
(12,462)
(4,433)
(5,632)
26,251
(8,852)
(13,012)
10,205
13,239
2,754
1,239
48,778
(12,462)
(4,433)
(5,632)
26,251
(13,012)
13,239
–
–
–
–
–
–
–
–
of discounted future net cash flows
301,202
290,320
10,882
307,456
291,463
15,993
209
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
Table VI: Changes in the standardised measure of discounted cash flows
The Group
Sales and transfers of oil and gas produced, net of production costs
Net changes in prices and production costs
Net changes in estimated future development cost
Net changes due to extensions, discoveries and improved recoveries
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
2019
RMB million
2018
RMB million
(85,821)
(25,442)
(10,108)
61,465
12,995
9,737
32,407
1,547
(3,220)
(2,741)
(2,804)
(881)
1,321
(423)
355
1,438
701
(3,034)
(6,254)
(88,802)
98,952
(5,468)
41,385
22,040
9,507
22,405
(28,894)
71,125
(3,001)
1,620
(196)
341
818
272
1,196
(366)
684
71,809
210
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Financial StatementsSupplemental Information on Oil andGas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED)
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
Overseas Auditors
Address
Zhong Tian LLP
: 11th Floor
PricewaterhouseCoopers,
2 Corporate Avenue,
202 Hu Bin Road,
Huangpu District,
Shanghai, PRC 200021
: PricewaterhouseCoopers
: 22nd Floor,
Prince’s Building,
Central, Hong Kong
CHINESE ABBREVIATION
中国石化
ENGLISH ABBREVIATION
Sinopec Corp.
AUTHORISED REPRESENTATIVES
Mr. Ma Yongsheng
Mr. Huang Wensheng
SECRETARY TO THE BOARD
Mr. Huang Wensheng
REPRESENTATIVE ON SECURITIES MATTERS
Mr. Zhang Zheng
REGISTERED ADDRESS AND PLACE OF
BUSINESS
No.22 Chaoyangmen North Street,
Chaoyang District
Beijing, PRC
Postcode
Tel.
Fax
Website
: 100728
: 86-10-59960028
: 86-10-59960386
: http://www.sinopec.com/
E-mail addresses
: ir@sinopec.com
listco/
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.
211
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Corporate InformationCORPORATE INFORMATION The following documents will be available for
inspection during normal business hours after
27 March 2020 at the registered address of
Sinopec Corp. upon requests by the relevant
regulatory authorities and shareholders in
accordance with the Articles of Association and
the laws and regulations of PRC:
a) The original copies of the 2019 annual report
signed by Mr. Zhang Yuzhuo, the Chairman;
b) The original copies of financial statements
and consolidated financial statements as of
31 December 2019 prepared under IFRS
and CASs, signed by Mr. Zhang Yuzhuo, the
Chairman, Mr. Ma Yongsheng, the President,
Ms. Shou Donghua, the Chief Financial
Officer and head of the financial department
of Sinopec Corp.;
c) The original auditors’ reports signed by the
auditors; and
d) Copies of the documents and announcements
that Sinopec Corp. has published in the
newspapers designated by the CSRC during
the reporting period.
By Order of the Board
Zhang Yuzhuo
Chairman
Beijing, PRC, 27 March 2020
If there is any inconsistency between the Chinese
and English versions of this annual report, the
Chinese version shall prevail.
212
CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2019Documents for InspectionDOCUMENTS FOR INSPECTION 中國北京市朝陽區朝陽門北大街 22 號
22 Chaoyangmen North Street, Chaoyang District,
Beijing, China
www.sinopec.com
Printed on environmentally friendly paper