China Petroleum & Chemical Corporation
Annual Report 2023

Plain-text annual report

2023 ANNUAL REPORT AND ACCOUNTS CONTENTS 2 3 7 10 17 27 49 51 57 59 68 70 72 74 Company Profile Principal Financial Data and Indicators Chairman’s Address Business Review and Prospects Management’s Discussion and Analysis Corporate Governance Environment and Social Responsibilities Significant Events Connected Transactions Report of the Board of Directors Report of the Supervisory Committee Changes in Share Capital and Shareholdings of Principal Shareholders Bond General Information Principal Wholly-owned and Controlled Subsidiaries Financial Statements Corporate Information Documents for Inspection 75 219 220 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 22 March 2024 and unless required by regulatory authorities, the Company undertakes no obligation to update these forward-looking statements. IMPORTANT NOTICE: THE BOARD OF DIRECTORS, THE SUPERVISORY COMMITTEE, 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 DIRECTORS ATTENDED THE 21ST MEETING OF THE EIGHTH SESSION OF THE BOARD. MR. MA YONGSHENG, CHAIRMAN OF THE BOARD, MR. YU BAOCAI, PRESIDENT, MS. SHOU DONGHUA, CHIEF FINANCIAL OFFICER AND HEAD OF THE FINANCIAL DEPARTMENT OF SINOPEC CORP. WARRANT THE AUTHENTICITY, ACCURACY 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 2023. THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 OF THE COMPANY PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (CASs) AND IFRS ACCOUNTING STANDARDS HAVE BEEN AUDITED BY KPMG HUAZHEN LLP AND KPMG RESPECTIVELY. BOTH FIRMS HAVE ISSUED STANDARD UNQUALIFIED AUDITOR’S REPORT. AS APPROVED AT THE 21ST MEETING OF THE EIGHTH SESSION OF THE BOARD OF DIRECTORS OF SINOPEC CORP., THE BOARD PROPOSED A FINAL CASH DIVIDEND OF RMB0.2 (TAX INCLUSIVE) PER SHARE FOR 2023, COMBINING WITH THE INTERIM CASH DIVIDEND OF RMB0.145 (TAX INCLUSIVE) PER SHARE, THE TOTAL CASH DIVIDEND FOR 2023 WILL BE RMB0.345 (TAX INCLUSIVE) PER SHARE. THE DIVIDEND PROPOSAL IS SUBJECT TO THE SHAREHOLDERS’ APPROVAL AT THE ANNUAL GENERAL MEETING FOR THE YEAR 2023. COMPANY PROFILE Sinopec Corp.’s H shares were listed in Hong Kong Stock Exchange on 18 October 2000 and A shares were listed in the SSE on 8 August 2001. 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; research, development and application of technologies and information; hydrogen energy business and related services such as hydrogen production, storage, transportation and sales; battery charging and swapping, solar energy, wind energy and other new energy business and related services. 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 SSE: Shanghai Stock Exchange RMC: Oil and Natural Gas Reserves Management Committee of the Company Sinopec Finance Co.: Sinopec Finance Co., Ltd. Century Bright: Sinopec Century Bright Capital Investment, Ltd. 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 CONVERSION: For domestic production of crude oil, 1 tonne = 7.1 barrels; For overseas production of crude oil: 1 tonne = 7.26 barrels in 2023, 1 tonne = 7.26 barrels in 2022, 1 tonne = 7.22 barrels in 2021; 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 2023Company ProfileCOMPANY PROFILE1. FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASS (1) Principal financial data Items Operating income Operating profit Profit before taxation Net profit attributable to equity shareholders of the Company Net profit attributable to equity shareholders of the Company excluding extraordinary gains and losses Net cash flow from operating activities 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 (used in)/generated 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 Items Basic earnings per share Diluted earnings per share Basic earnings per share (excluding extraordinary gains and losses) Weighted average return on net assets (%) Weighted average return (excluding extraordinary gains and losses) on net assets (%) For the year ended 31 December 2023 RMB million 2022 RMB million Change (%) 2021 RMB million 3,212,215 86,744 86,116 60,463 3,318,168 96,414 94,515 67,082 60,692 161,475 57,962 116,269 (3.2) (10.0) (8.9) (9.9) 4.7 38.9 2,740,884 112,414 108,348 71,716 72,728 225,174 First Quarter RMB million Second Quarter RMB million 791,331 20,102 802,351 15,009 2023 Third Quarter RMB million 876,259 17,855 Fourth Quarter RMB million 742,274 7,497 Total RMB million 3,212,215 60,463 19,716 (18,397) 13,939 45,959 16,624 70,747 10,413 63,166 60,692 161,475 As of 31 December 2023 RMB million 2,026,674 1,068,019 805,794 119,349,252 2022 RMB million 1,951,121 1,010,664 788,471 119,896,408 Change (%) 3.9 5.7 2.2 (0.5) 2021 RMB million 1,890,964 972,475 777,216 121,071,210 For the year ended 31 December 2023 RMB Yuan 2022 RMB Yuan Change (%) 2021 RMB Yuan 0.505 0.505 0.507 7.59 0.555 0.555 0.479 8.57 7.61 7.40 (9.0) (9.0) 5.9 (0.98) percentage points 0.21 percentage points 40.1 0.592 0.592 0.601 9.40 9.53 1.860 Net cash flow from operating activities per share 1.348 0.962 Items As of 31 December 2023 RMB Yuan 2022 RMB Yuan Change (%) 2021 RMB Yuan Net assets attributable to equity shareholders of the Company per share Liabilities to assets ratio (%) 6.752 52.70 6.576 51.80 2.7 0.90 percentage points 6.420 51.43 3 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Principal Financial Data and IndicatorsPRINCIPAL FINANCIAL DATA AND INDICATORS For the year ended 31 December (Income)/expenses 2023 RMB million 2022 RMB million 2021 RMB million (4,226) 310 (3,533) (931) 797 – 5,955 (1,628) 635 (993) 229 (1,222) (672) 447 (3,826) (13,902) 2,178 – – (15,775) 2,304 (13,471) (9,120) (4,351) Changes (280) (1,286) (5,053) 1 (6,618) (665) 165 (3,085) (259) 4,720 101 – 977 (72) 905 1,012 (107) Unit: RMB million Influence on the profit of the year 10 – 541 10 561 (3) Extraordinary items and corresponding amounts Items Net gain on disposal of non-current assets Donations Government grants Gain on holding and disposal of various investments Other non-operating expenses, net Net loss acquired through business combination under common control during the reporting period One-time impact on loss during the reporting period due to adjustments to laws and regulations Subtotal Tax effect Total Attributable to: Equity shareholders of the Company Minority interests (4) Items measured by fair values Items Other equity instruments investment Receivables financing Derivative financial instruments and cash flow hedging Financial assets held for trading Total Beginning of the year End of the year 730 3,507 12,022 2 16,261 450 2,221 6,969 3 9,643 4 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Principal Financial Data and IndicatorsPRINCIPAL FINANCIAL DATA AND INDICATORS (CONTINUED)(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 of Consolidated Balance Sheet Financial assets held for trading Derivative financial assets Derivative financial liabilities Receivables financing Prepayments Short-term loans Bills payable Taxes payable As of 31 December 2023 RMB million As of 31 December 2022 RMB million Increase/(Decrease) Amount RMB million Percentage (%) Main reasons for changes 3 2 1 50.0 Impact of changes in fair value of funds held by the 9,721 2,752 2,221 5,067 59,815 19,335 7,313 3,507 7,956 21,313 (9,614) (4,561) (1,286) (2,889) 38,502 (49.7) (62.4) (36.7) (36.3) 180.7 29,122 40,008 10,782 28,379 18,340 11,629 170.1 41.0 Company. Impact of changes in fair value of hedging business. Improved efficiency in the use of capital resulting from accelerated turnover of bills. Decrease in prepayments for equipment purchases. Increase in low-interest short-term loans to meet the capital needs of production and operation activities during the reporting period. Increase in bill-settled purchases. The impact of the Company’s provision of levy for mineral rights concessions and the increase in turnover taxes including consumption tax. Non-current liabilities due within one year 30,457 62,844 (32,387) (51.5) Repayment of long-term loans due within one year and Long-term loans Debentures payable 179,347 94,964 84,383 8,513 12,997 (4,484) maturity of debentures payable. 88.9 Increase in low-interest long-term loans to meet the capital needs of investment, production and operation activities. (34.5) Partial amount of debentures payable reclassifying to non- current liabilities due within one year. Items of Consolidated Income Statement Investment income For the year ended 31 December 2023 RMB Million 2022 RMB Million Increase/(Decrease) Amount RMB Million Percentage (%) Main reasons for changes 5,811 14,462 (8,651) (59.8) The impact of gains from the sale of Shanghai SECCO’s Gains/(losses) from changes in fair value Credit impairment reversals Impairment losses 467 243 (8,772) (1,715) 1,084 (12,009) 2,182 (841) 3,237 – (77.6) – Impact of increase in floating profit of hedging business. Decrease in bad debt reversal of accounts receivables. Decrease in impairment of oil and gas assets and refining Asset disposal gains 4,226 672 3,554 528.9 Land and facilities disposal income generated by the and chemical facilities. equity in the previous year and the decline in the profit of affiliates and joint ventures, resulting from the weak chemical market. relocation of Hunan Petrochemical, as well as increase in the disposal income of part of gas stations, oil depots, and pipeline assets. Items of Consolidated Cash Flow Statement Other cash received relating to operating activities Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiaries and other business entities Cash paid for acquisition of investments For the year ended 31 December 2023 RMB Million 2022 RMB Million Increase/(Decrease) Amount RMB Million Percentage (%) Main reasons for changes 165,002 5,363 269,895 212 (104,893) 5,151 (38.9) 2,429.7 Impact of margin changes of derivative business. Proceeds from disposal of fixed assets including Hunan – 10,041 (10,041) (100.0) Impact of cash consideration on the sale of Shanghai Petrochemical increased year-on-year. (5,918) (10,456) 4,538 (43.4) Capital injection to associates and joint ventures in this SECCO’s equity in the previous year. Net cash paid for the acquisition of subsidiaries and other business entities Other cash paid relating to investing activities Cash received from capital contributions (110) (7,881) 7,771 (92,090) 1,509 (33,505) 3,946 (58,585) (2,437) period decreased year-on-year. (98.6) Payment for equity and asset acquisition in the previous year, which did not happen during the reporting period. Increase in time deposits with maturities over three months. 174.9 (61.8) Decrease in capital injection for projects received from minority shareholders year-on-year. 5 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Principal Financial Data and Indicators 2 FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IFRS ACCOUNTING STANDARDS Items Revenue 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) For the year ended 31 December 2022 3,318,168 75,835 94,400 66,933 0.554 0.554 8.73 8.50 0.962 2022 1,427,981 144,245 344,194 151,942 787,600 6.569 6.310 2021 2,740,884 94,628 109,169 72,483 0.599 0.599 11.33 9.34 1.860 As of 31 December 2021 1,332,940 83,256 332,162 141,226 776,296 6.412 6.228 2020 2,104,724 13,669 48,615 34,196 0.282 0.282 6.50 4.57 1.392 2020 1,284,416 67,335 327,517 141,633 747,931 6.178 5.957 Unit: RMB million 2019 2,957,868 86,516 90,161 58,370 0.482 0.482 9.11 7.90 1.275 Unit: RMB million 2019 1,318,889 133,166 302,665 138,486 744,572 6.150 5.995 2023 3,212,215 86,828 83,934 58,310 0.487 0.487 7.22 7.26 1.348 2023 1,490,261 112,641 421,811 152,820 802,989 6.728 6.486 3 MAJOR DIFFERENCES BETWEEN THE AUDITED FINANCIAL STATEMENTS PREPARED UNDER CASs AND IFRS ACCOUNTING STANDARDS PLEASE REFER TO PAGE 213 OF THE REPORT. 6 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Principal Financial Data and IndicatorsPRINCIPAL FINANCIAL DATA AND INDICATORS (CONTINUED)communicated extensively with shareholders. They played an effective role in decision-making, supervision and independence and the provision of professional consultancy. With an aim to enhance the quality, the Company beefed up efforts to deepen corporate reform. Our internal control and risk management mechanisms were constantly improved. Meanwhile, we continued to implement the share repurchase with a view to safeguarding the Company’s market value and shareholders’ interests. In recognition of our strict adherence to high quality information disclosure practice and investor relations management, the Company has been rated grade-A for information disclosure by the SSE for ten consecutive years. Effective improvement in quality and reasonable growth of quantity in each business segment. As for the upstream business, we reinforced our resource base with major breakthroughs in a number of oil and gas explorations. Our efforts to boost reserves and output, reduce costs and enhance profitability bore fruitful results. While the natural gas production, supply, storage and marketing system was further improved, the value-creation capability of entire industrial chain substantially increased. We insisted on the integrated operation in refining and marketing businesses, strengthened orientation of market needs and profitability, dynamic coordinated the resource allocation, and enhanced cost reduction and efficiency improvement. The strategy of adjusting the yield of refined oil products, chemical feedstocks and refining specialities was carried out in a scientific manner. As we vigorously drove market expansion, boosted sales and improved profitability, the refinery throughput and domestic sales volume of refined oil products hit a record high and non- fuel business maintained brisk growth. At the same time, we strengthened the collaborative development of chemicals and refining businesses, whereby improving our profitability, adjusting the utilization rate, strengthening cost management and expanding external sales. As a result, the overall sales volume of chemical products steadily increased. 7 Dear Shareholders and Friends: First of all, on behalf of the board of directors, management and all our employees, I would like to express my sincere gratitude to our shareholders and all walks of life in the community for their care and support for Sinopec Corp. In 2023, the global economy recovered slowly, geopolitical tensions intensified, macro- environment became increasingly unstable and uncertain, and international oil prices fluctuated widely. In domestic China, the economy regained steam, refined oil products demand gradually picked up, new energy developed rapidly, chemical industry faced supply glut and the petroleum and chemical industry changed profoundly. In the face of complicated operating environment and fierce market competition, the Company stepped up efforts to promote high-quality development, drove all-round improvement in production and operations management, and proceeded with the customer- centric strategy. As a result, we achieved promising operating results with new progress and new developments made in various aspects of work. In accordance with IFRS Accounting Standards, the Company realized revenues from primary business and other operating revenues of RMB3.2 trillion. The profit attributable to shareholders of the Company amounted to RMB58.3 billion. The Company retained a stable financial position and saw substantial increase in operating cash flow. Taking into account the Company’s profitability, shareholders’ returns and sustainable development, the board of directors proposed a final cash dividend of RMB0.2 per share (tax inclusive). Together with the interim cash dividend of RMB0.145 per share (tax inclusive) already paid, the total dividend for the year amounted to RMB0.345 per share (tax inclusive), and the total distribution ratio for 2023 reaches 75% including share repurchase. Remarkable enhancement of corporate governance. The board of directors insisted on scientific decision-making, dynamically optimized the development plan, and strengthened the strategic management of ESG. While exercising performing their responsibilities diligently and with due care, the independent directors thoroughly conducted in-depth research on the enterprises and CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Chairman’s AddressCHAIRMAN’S ADDRESSTechnological innovation to enhance development quality and drive business transformation and upgrading. With increased emphasis on technological innovation, we enhanced R&D efforts and strengthened cutting-edge basic research. Persistent efforts were made in oil and gas exploration and the development of high-end new materials. Major breakthroughs were achieved in a number of core technologies with the quality of our patents ranked best among the top in domestic market. We accelerated the transformation and upgrade of refining and chemical business, and completed the transformation of certain refining projects to chemical projects and the upgrading of some ethylene projects. Moreover, our transformation towards an integrated energy service provider of “petrol, gas, hydrogen, power and services” progressed in an orderly manner. The three-year plan for charging network development was kicked off with an aim to vigorously promote battery charging and swapping operation. We created a roadmap for the development of hydrogen energy business with primary focus on hydrogen transportation and green hydrogen for refining and chemical. Meanwhile, the power generated from wind and solar energy steadily grew and breakthroughs were made in the industrialization of the CCUS project, hence reinforcing our competitive edges in green and low-carbon development. Commitment to fulfill the corporate social responsibilities. The Company was actively responding to global climate change and made relentless efforts to promote the development of clean energy. While the action plan for carbon peak went ahead smoothly, we took measures to protect the ecosystem and ensure biodiversity. We stepped up efforts to enhance safety management and intrinsic safety standards. In addition, we supported rural revitalization, participated in domestic emergency and disaster relief programs and the charitable projects such as “Spring Bud Gas Station for Girls” and “Classes Given by Academicians”, which received favourable response in the society. We cared about the staff’s physical and mental health and create stable and harmonious community relationships in our domestic and overseas projects operate. The eighth session of the board of directors (the “Board”) and the supervisory committee (the “Supervisory Committee”) of the Company will complete their terms this year. The past three years were extremely extraordinary and challenging for Sinopec Corp. Faced with a severe and complex external environment and unexpected adversity, the Board steadfastly pursued the new development philosophy, launched the action plan to drive high-quality development, and played the advantages of integrated value chain to the full. Besides, we continued to promote the business layout with “One Foundation of energy and resources, Two Wings of clean fuels and advanced chemicals, and Three Growth Engines in new energy, new materials and new economy “. The management led the entire staff to overcome difficulties and made every effort to strengthen development quality, enhance profitability and stabilize growth. While new progress and achievements were made in all aspects of work, our operating performance remained stable amid volatile market conditions. All operating costs continued to decline, and the Company retained a stable financial position and delivered promising returns to shareholders. Enhanced high-quality development as defining feature of the Company’s over past three years. We continued to push ahead with the seven- year action plan to reinforce the resource base, leading to continual growth in our oil and gas reserves and output. Besides, our efforts to boost reserves, stabilize oil output, ramp up gas output and reduce costs achieved remarkable results. By accelerating the development of world-class refining and chemicals centers, we increased capacity with competitive edges. At the same time, the strategy of shifting refined oil products to chemical feedstocks and refining specialties progressed steadily with the capacity of our refining and polyolefin capacity ranked first in the world. In addition, oil and gas equivalent output and refinery throughput climbed to historic highs, and the high value- added chemical products portion continued growing. As for the marketing business, the advantage of sales network was further enhanced. The number of gas stations ranked second in the world and domestic sales volume of refined oil products achieved a new record. Meanwhile, non-fuel business maintained healthy growth. With an aim to build ourselves into an integrated energy service provider of “petrol, gas, hydrogen, power and services”, we pushed for the development of hydrogen energy, battery charging and swapping, renewable power generation, CCUS operations, etc., creating new competence from green development. With an emphasis on the innovation-driven development strategy, we achieved fruitful results in the development of core technologies in a number of key areas, such as exploration and development, refining, new chemical materials, new energy, and green and low carbon sector, laying a solid foundation for the Company’s high-quality development. Continued strengthening of corporate governance effectiveness in past three years. The Board strengthened strategic planning, studied and formulated the development strategy for the “14th Five-Year Plan” period. While maintaining high cash dividend payout ratio, the Board has implemented the share repurchase in both domestic and overseas markets for two consecutive years to safeguard the Company’s market value and shareholders’ interests. In addition, we improved the fundamental system for corporate governance, enhanced the compliance system, and continuously improved the effectiveness of the internal control system. Our management was enhanced by benchmarking against the world-class standards so as to promote the Company’s professional development. As the quality of information disclosure and investor relations practices further improved, our communication with stakeholders became more effective. The delisting of our American depositary shares was completed in an orderly manner. The Company leveraged the advantage of party-building, strengthened the supervisory and protection work, boosted the employees’ vitality, and improved their motivation. Our outstanding corporate governance has gained wide recognition in various capital markets. 8 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Chairman’s AddressCHAIRMAN’S ADDRESS (CONTINUED)the implementation of pollution prevention and control projects. Meanwhile, greater efforts will be made to promote technological advancement and innovation-driven development. The integration of innovation chain and industrial chain will be further strengthened to support the transition and upgrading of our businesses and the development of strategic emerging businesses, whereby reinforcing our capability of proprietary innovation and original innovation. Ambitious players are most likely to win in fierce competition. I believe that Sinopec Corp. is poised to forge our own path for high-quality development under the leadership of new Board members to be elected, with the joint efforts of the management and all employees, and with the strong support from shareholders and all walks of life in the community. We will expedite our development into a world-class enterprise, and thus deliver greater value for shareholders and the society. Ma Yongsheng Chairman Beijing, China 22 March 2024 Significant progress in ESG practice over past three years. The Board bolstered the ESG governance based on strategic height, attached great importance to the guiding principles and strengthened the management effectiveness. We implemented the low carbon development strategy and action plan for carbon peak. While continuously enhancing the HSE management system, the Company conducted specialized work safety rectification, vigorously promoted pollution prevention and contributed our efforts to promote the development of ecological civilization. In the face of major disasters and emergencies, we actively participated in relief operations, made every effort to ensure the supply of energy and materials, and ensured the stable operation of industrial and supply chains. In addition, we supported rural revitalization, contributed efforts to the Winter Olympics and Paralympics in Beijing, and extensively participated in charities. In adherence to the people-oriented approach, we protected the physical and mental health of employees, promoted the harmoniously development of economies, environment and communities of the sites where our domestic and overseas projects located. As our development brought many benefits to the public, the Company’s corporate image as a responsible enterprise became more prominent. The hard-won achievements were attributable to the joint efforts of the Board, the Supervisory Committee, management and all employees. They would not have been gained without the strong support from shareholders and all walks of life in the community. On behalf of the Board, I would like to express my sincere gratitude to all shareholders and all walks of life in the community for their support. I would also express my sincere gratitude to all of directors, supervisors and management for their dedicated work and outstanding contributions! In 2024, Sinopec Corp. will continue to act on the principle of seeking progress while maintaining stability, promoting stability through progress. We will improve the operation and profitability, transformation and upgrading, reform and innovation, and risk management. In addition, greater emphasis will be put on the value creation and persistent efforts will be carried out to effectively enhance our development quality and ensure the reasonable growth of business volume. By cultivating new quality productivity, we will lay a decisive foundation for the Company to fully complete the goals and tasks for the “14th Five-Year Plan” period. We will improve development quality, enhance profitability, stabilize growth and emphasis on tackling difficulties and creating value. We will leverage on our integrated advantage, coordinate the whole value chain of procurement, transportation, production, storage and marketing, tap the potential of system optimisation, meet market demand, improve service quality, continue to increasing business scale, thereby maximizing the overall profitability of our industrial chain. We will emphasis on promoting transition and upgrading, and push for the development of new growth drivers. The integrative development oil and gas exploration and development operation and new energy business will be expedited, and greater efforts will be made to boost the exploration and development. We will fuel the growth of natural gas business, expand the utilization of green electricity, and establish and promote the collaborative development of a safe and reliable green energy supply system which is complementary to multi-energy consumption. At the same time, the development of world- class, high-tech and integrated refining and chemical center will be accelerated and the plan for developing strategic emerging businesses such as new materials and bio-technology will be formulated. The Company is determined to become the best hydrogen energy company in China. We will take a multi-scenario approach to the expansion of recharging network, create first-tier directly-operated platform, cultivate diversified service models and add value to the sales network across the board. The digital and intelligent transformation of the industry will be vigorously promoted and the coordinated development of a modern service and trading system incorporating the consumer Internet and the industrial Internet will be carried out. Besides, the ProMACE industrial platform will be further strengthened. We will power the green transformation and craft new competitive edges from green development. While driving all-round improvement in ESG management, the Company will vigorously promote the conservation and efficient utilization of resources. The carbon peak strategy will be steadily implemented, and collaborative efforts will be taken to reduce carbon emissions and pollution, promoting green development and business growth. As enhanced efforts will be made to drive the R&D and applications of green and low carbon technology, we will push for the industrialization and large- scale application of CCUS technology, expand carbon trading and enhance carbon footprint management. In order to contribute our efforts to the ecosystem protection, we will accelerate 9 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Chairman’s AddressBUSINESS REVIEW USD/Barrel Movement of International Crude Oil Prices WTI-NYMEX BRENT DTD BRENT ICE DUBAI In 2023, global economy recorded slow growth. China’s economy picked up, registering a GDP growth of 5.2% year on year. International oil prices fluctuated widely. Domestic demand for refined oil products rebounded. Demand for natural gas kept growing and that for chemical products was improving. The Company carried out in-depth high- quality development actions, fully leveraged its integration advantages, optimised production and operation on all fronts, and pressed ahead to generate profit, which helped achieve favorable operating results. 160 120 80 40 0 Jan-2022 Apr-2022 Jul-2022 Oct-2022 Jan-2023 Apr-2023 Jul-2023 Oct-2023 Jan-2024 1 MARKET REVIEW (1) Crude Oil & Natural Gas Market (2) Refined Oil Products Market (3) Chemical Products Market In 2023, international crude oil prices fluctuated in a wide range. The spot price of Platt’s Brent for the year averaged USD82.6 per barrel, down by 18.4% year on year. Based on the statistics of NDRC, domestic apparent consumption of natural gas reached 394.5 billion cubic meters, up by 7.6% year on year. In 2023, domestic demand for refined oil products rebounded. According to the statistics released by NDRC, domestic apparent consumption of refined oil products (including gasoline, diesel and kerosene) was 385 million tonnes, up by 11.8% from the previous year, with gasoline up by 10.1%, diesel up by 5.3% and kerosene up by 90.3%. Domestic demand for chemicals picked up in 2023. Based on our statistics, domestic consumption of ethylene equivalent was up by 8.2% from the previous year, and the apparent consumption of synthetic resin, synthetic fibre and synthetic rubber rose by 6.2%, 7.8% and 6.6% respectively. Affected by newly-released production capacity, domestic chemical product prices down by 7.0% with chemical margin at a low level. 10 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS2 PRODUCTION & OPERATIONS REVIEW (1) Exploration and Production In 2023, the Company made breakthroughs in increasing reserve, production and profit as well as cutting cost. In terms of exploration, we spared no efforts in seeking new discoveries and reserves and obtaining more exploration rights. We strengthened risk exploration, trap pre-exploration and integrated evaluation exploration, and achieved a number of oil and gas discoveries, including breakthroughs in Tarim Basin, deep coal-bed methane in Ordos Basin, continental tight oil and gas in Sichuan Basin and deep shale gas of Permian marine facies in Puguang. We continued to efficiently promote the “Deep Earth Project” and construction of the Shengli Jiyang Shale Oil National Demonstration Zone. Domestic oil and gas reserve replacement ratio amounted to 131%. In terms of crude oil development, we accelerated the capacity building of major oilfields, such as Jiyang, Tahe and West Junggar, and strengthened fine- tuned development of mature oil fields. In natural gas development, we actively promoted the capacity building of key blocks in Shunbei Zone Two and marine facies gas in West Sichuan, scaled up Summary of Operations for the Exploration and Production Segment mid and long term LNG contracts, and further optimised integrated gas system covering production, supply, storage and sales, with profitability greatly enhanced for the whole natural gas business chain. The Company’s production of oil and gas in 2023 was 504.09 million barrels of oil equivalent, up by 3.1%, among which, domestic crude production totaled 251.63 million barrels, and natural gas production reached 1,337.8 billion cubic feet, up by 7.1%. Oil and gas production (mmboe) Crude oil production (mmbbls) China Overseas Natural gas production (bcf) Summary of Reserves of Crude Oil and Natural Gas Items Proved reserves Proved developed reserves China Consolidated companies Shengli Others Overseas Consolidated companies Equity accounted entities Proved undeveloped reserves China Consolidated companies Shengli Others Overseas Consolidated companies Equity accounted entities 2023 504.09 281.12 251.63 29.49 1,337.82 2022 488.99 280.86 250.79 30.07 1,248.75 Change from 2021 2022 to 2023 (%) 479.74 279.76 249.60 30.16 1,199.44 3.1 0.1 0.3 (1.9) 7.1 Crude oil reserves (mmbbls) 31 December 2023 31 December 2022 2,003 1,777 1,507 1,507 1,119 388 270 17 253 226 189 189 67 122 37 3 34 1,962 1,766 1,489 1,489 1,105 384 277 17 260 196 153 153 41 112 43 0 43 11 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and ProspectsNatural gas reserves (bcf) 31 December 2023 31 December 2022 9,311 7,529 7,525 7,525 1,213 1,701 4,611 4 0 4 1,782 1,782 1,782 113 1,669 0 0 0 8,806 7,138 7,135 7,135 1,417 1,632 4,086 3 0 3 1,668　 1,667 1,667 99 1,568 1 0 1 2023 2022 As of 31 December Exploratory Development Exploratory Development Productive 343 343 127 216 0 0 0 343 Dry 105 105 29 76 0 0 0 105 Productive Dry Productive 2,312 2,312 1,379 933 144 0 144 2,456 6 6 3 3 0 0 0 6 364 364 159 205 5 0 5 369 Dry 111 111 48 63 1 0 1 112 Productive Dry 1,958 1,958 1,029 929 200 0 200 2,158 3 3 2 1 0 0 0 3 2023 2022 As of 31 December Gross Exploratory Development Net Exploratory Development Gross Exploratory Development Net Exploratory Development 80 80 19 61 1 0 1 81 184 184 60 124 8 0 8 192 80 80 19 61 1 0 1 81 184 184 60 124 4 0 4 188 103 103 29 74 0 0 0 103 207 207 61 146 2 0 2 209 103 103 29 74 0 0 0 103 As of 31 December 2023 2022 Gross 55,548 55,548 36,024 19,524 5,476 30 5,446 61,024 Net 55,548 55,548 36,024 19,524 2,314 11 2,303 57,862 Gross 54,089 54,089 35,171 18,918 5,460 30 5,430 59,549 207 207 61 146 1 0 1 208 Net 54,089 54,089 35,171 18,918 2,313 11 2,302 56,402 Items Proved reserves Proved developed reserves China Consolidated companies Puguang Fuling Others Overseas Consolidated companies Equity accounted entities Proved undeveloped reserves China Consolidated companies Fuling Others Overseas Consolidated companies Equity accounted entities Exploration and Production Activities Wells drilled China Consolidated companies Shengli Others Overseas Consolidated companies Equity accounted entities Total Wells drilling China Consolidated companies Shengli Others Overseas Consolidated companies Equity accounted entities Total Oil productive wells China Consolidated companies Shengli Others Overseas Consolidated companies Equity accounted entities Total 12 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS (CONTINUED)Natural gas productive wells China Consolidated companies Puguang Fuling Others Total Acreage with exploration licenses China Acreage with development licenses China Overseas (2) Refining In 2023, the Company actively addressed the challenges brought by the wide fluctuation of oil prices and the significant narrowing of margins for some refining products, and insisted on optimisation and integration of production and marketing. Annual crude throughput hit new high. We enhanced coordination among procurement, storage and transportation as well as As of 31 December 2023 2022 Gross 8,256 8,256 90 1,019 7,147 8,256 Net 8,186 8,186 90 1,019 7,077 8,186 Gross 7,779 7,779 82 886 6,811 7,779 Net 7,719 7,719 82 886 6,751 7,719 Unit: Square kilometers As of 31 December 2023 365,219 365,219 47,567 41,596 5,971 2022 372,078 372,078 44,617 38,937 5,680 production to reduce procurement cost. Closely following the market demand, we flexibly adjusted the utilisation rate and product slate. We optimised the rhythm of carrying forward the “oil to chemicals” and “oil to specialties” projects, and increased production of market-oriented products such as refined oil products and lubricating grease. We scaled up export volume and optimised arrangement for exports. Structural adjustment projects were proceeding in an orderly manner. In 2023, the Company processed 258 million tonnes of crude, up by 6.3% and produced 156 million tonnes of refined oil products, up by 11.3% with kerosene output up by 60.7% year on year. 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 (%) Note: Includes 100% of the production from domestic joint ventures. 2023 257.52 156.00 62.51 64.54 28.95 43.29 74.79 94.98 2022 242.27 140.15 59.05 63.09 18.01 42.65 74.06 94.96 Unit: million tonnes Change from 2022 to 2023 (%) 6.3 11.3 5.9 2.3 60.7 1.5 0.73 percentage points 0.02 percentage points 2021 255.28 146.21 65.21 59.85 21.15 45.41 73.83 94.65 (3) Marketing and Distribution In 2023, by seizing the opportunity of rebounded market demand, the Company brought the advantages in integrated business into full play to expand the market and improve profit. Domestic refined oil products sales volume realised a record high. We focused on client demand and carried forward targeted and differentiated marketing tactics. The sales volume of gasoline rose by 15.9% and the retail volume of vehicle LNG was up by 85%. We fully leveraged our strength in existing end-market network, stepped up efforts in developing EV battery charging and swapping business and demonstrating application scenarios of hydrogen mobility, and transforming to an integrated energy service provider of fuel, gas, hydrogen, electricity and non- fuel services. We vigorously expanded our global business, explored the low- sulfur bunker fuel market both home and abroad and became the world’s second largest bunker fuel supplier. We continued to enrich the Easy Joy service ecosystem with the quality and profitability both boosted for the non-fuel business. Total sales volume of refined oil products for the year was 239 million tonnes, up by 15.6%, of which total domestic sales volume accounted for 188 million tonnes, up by 15.8%. 13 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and ProspectsSummary of Operations for the Marketing and Distribution Segment Total sales volume of refined oil products (million tonnes)* Total domestic sales volume of refined oil products (million tonnes) Retail sales (million tonnes) Direct sales and distribution (million tonnes) Annual average throughput per station (tonne/station) 2023 239.05 188.17 120.12 68.05 3,880 2022 206.74 162.55 106.91 55.65 3,470 2021 220.79 171.31 114.30 57.01 3,720 Total number of service stations under the Sinopec brand Number of company-operated stations 30,958 30,958 30,808 30,808 30,725 30,725 Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume. 31 December 2023 31 December 2022 31 December 2021 Change from 2022 to 2023 (%) 15.6 15.8 12.4 22.3 11.8 Change from the end of the previous year to the end of the reporting period (%) 0.5 0.5 (4) Chemicals In 2023, in the face of the tough external environment of the significantly increased domestic chemicals supply and narrowed chemical margins, the Company optimised the structure of feedstock, facilities and products, maintained high utilisation rate in profitable facilities such as aromatics and EVA, and reduced production or shut down units of products with no marginal contribution, thus responding to market demand. We reinforced cost control to bring down cost throughout the chemical value chain. Integration of production, marketing, research and application was further cemented to steadily increase the proportion of high value-added products. Annual ethylene production was 14.31 million tonnes. We actively explored domestic and global market, international business volume grew rapidly. Total chemical sales volume reached 83 million tonnes, up by 1.7%. 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. 2023 14,314 20,574 1,424 7,866 1,113 2022 13,437 18,544 1,284 8,886 1,112 2021 13,380 18,999 1,252 9,201 1,357 Unit: thousand tonnes Change from 2022 to 2023 (%) 6.5 10.9 10.9 (11.5) 0.1 (5) Science and Technology Innovation In 2023, the Company enhanced investment in science and technology innovation, sought breakthrough in key and core technologies, beefed up front- end basic research and further deepened the reform of the science and technology system and mechanism, all contributing to the progress made in innovation. In upstream, breakthroughs were made in the exploration and development theory and technologies for ultra-deep oil and gas as well as continental facies shale oil and gas. In refining, we successfully started up world’s first 3 mtpa catalytic cracking unit for heavy oil RTC. A full range of bio fuel products successfully passed the RSB (Roundtable on Sustainable Biomaterials) certification. In chemicals, the first epoxy butane unit using CHP process and the industrial unit for high-performance liquid rubber were put into operation successfully. In addition, we accelerated research and development of technologies for the whole hydrogen value chain and independently developed key materials for fuel cells. Demonstration projects such as “Industrial Internet+” and “Artificial Intelligence Infrastructure Project” are progressing smoothly. In 2023, the Company filed 9,601 patent applications at home and abroad with 5,483 granted. The Company also won one silver award and four excellent awards in China’s Patent Award competition. 14 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS (CONTINUED)(6) HSE In 2023, the Company continued to improve the HSE management system with professional management further strengthened. We enhanced employee health and safety management, fully implemented grassroots safety responsibility management, carried out health management services for all employees, improved working conditions and enhanced personal protective equipment, thus the occupational, physical and psychological health of employees at home and abroad were safeguarded. We implemented the all-staff work safety responsibility mechanism, launched the scheme of the Safety Management Enhancement Year, made every effort to promote risk control and incident prevention, and continued to reinforce process safety management, so that the operations safety was achieved. (7) Capital Expenditure In 2023, focused on the quality and return of investments, the Company continued to optimise the management of invested projects, with a capital expenditure of RMB176.8 billion for the whole year. The capital expenditure of the E&P segment was RMB78.6 billion, mainly for the crude production capacity building in Tahe and Shengli Offshore, natural gas production capacity building in Shunbei, Western Sichuan, Fuling and Weirong, the development of the Shengli Jiyang Shale Oil National Demonstration Zone, as well as the oil and gas storage and transportation facilities. The capital expenditure of the refining segment was RMB22.9 billion, mainly for Zhenhai Expansion, Yangzi Refining Restructuring, etc. The capital expenditure of the marketing and distribution segment of RMB15.7 billion, mainly for the development of the “petro, gas, hydrogen, power and service” integrated energy station network, the revamping of the existing marketing network, non-fuel business and other projects. The capital expenditure of the chemical segment was RMB55.1 billion, mainly for the ethylene units in the second phase of Zhenhai, Tianjin Nangang, Hainan and Maoming, Baling caprolactam unit relocation, coal chemical projects, etc. The capital expenditure of corporate and others was RMB4.5 billion, mainly for R&D and IT, etc. BUSINESS OUTLOOK 1 Market Outlook Looking forward to 2024, as China’s economy maintains the sustainable trend of recovery, domestic demand for natural gas, refined oil products and chemicals is expected to maintain growth. Due to changes in global supply and demand, geopolitics and inventory levels, international oil prices are expected to fluctuate at medium to high levels. 2 Production & Operation In 2024, the Company will put more focus on value creation with priority given to profit generation, transition, upgrading, reform, innovation, and risk control. E&P: The Company will strengthen risk exploration, intensify efforts in the “Deep Earth Project”, shale oil and gas, and other fields to increase high-quality and large-scale reserves; enhance profitable development and stabilize oil production while increasing gas production and reducing costs. In crude development, we will accelerate the production capacity building in Jiyang, Tahe and Junggar, strengthen the fine-tuned development of mature fields, continue to improve the reserve development ratio and recovery rate, and stabilize conventional oil production and increase the profitable production of shale oil. In natural gas development, the Company will accelerate the capacity building in western Sichuan and Shunbei and drive up the natural gas profitable output; diversify and expand the channels of natural gas resources, focus on reducing resource costs, and continue to improve the natural gas production, supply, storage and marketing system. The planned annual production of crude is 279.06 million barrels, of which 26.65 million barrels from overseas. The planned annual natural gas production is 1,379.7 billion cubic feet. 15 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and Prospectsloads, and improve profit from high- quality assets; continue to intensify the development of new materials and high value-added products, seize the market demand, and create more value; and promote the construction of new capacity with high-quality. At the same time, we will enhance the efforts in meeting differentiated and customised needs, continuously increase the proportion of sales to strategic customers, intensify the export of market-favoured products, and improve international operations. For the whole year, we plan to produce 14.35 million tonnes of ethylene. R&D: The Company will firmly implement the innovation-driven strategy, promote the deep integration of the innovation chain, value chain, capital chain and talent chain, make every effort to develop key technologies, and give full play to the supporting and leading role of science and technology innovation to development. Focusing on stabilising oil production, increasing gas output, reducing costs and improving profitability, the Company will promote oil and gas exploration and development technology research to increase reserves and production; optimise the structure of products in refining and enhance the clean, efficient and low-carbon utilisation of resources; carry out research and application of key technologies relating to “oil to chemicals” and “oil to specialties”, hydrogen energy and CCUS. Based on the upgrading needs of chemicals and materials, we will focus on diversified and green basic chemical production technologies and accelerate the breakthrough of key technologies for the production of high value-added synthetic materials. We will promote the transformation and upgrading of digital intelligence, give full play to the role of data, and strengthen the research of new technologies, digital intelligence application scenarios and the commercialisation of pilot projects. Capital Expenditure: In 2024, the planned capital expenditure for the Company is RMB173 billion, of which RMB77.8 billion will be spent in E&P, mainly for the crude capacity building in Jiyang and Tahe, natural gas production capacity build-up in western Sichuan, and the construction of oil and gas storage and transportation facilities; RMB24.8 billion will be spent in refining, mainly for the Zhenhai refining expansion, the technological upgrading of Guangzhou and Maoming companies; RMB18.4 billion will be spent in marketing and distribution, mainly for the development of the integrated energy station network, the revamping of the existing marketing network, and the non-fuel business; RMB45.8 billion will be spent in chemicals, mainly for the construction of the Zhenhai Phase II ethylene, Maoming ethylene, and Jiujiang aromatics projects; and RMB6.2 billion will be spent in corporate and others, mainly for R&D and IT. Refining: Efficiency and profitability oriented, the Company will coordinate production and marketing, and improve the operating efficiency of the value chain. We will optimise crude procurement to reduce costs; adjust crude throughput, facility utilization and product slate to improve profitability; optimise the structure and pace of export products; carry forward the adjustment to increase the yield of chemical feedstock in an orderly and cost effective manner, and enhance the efforts on shifting from refined products to chemical feedstock and refining specialties such as lubricating grease and needle coke. The annual plan is to process 260 million tonnes of crude and produce 159 million tonnes of refined oil products. Marketing and Distribution: The Company will give full play to its advantages in integration, strengthen digital intelligence empowerment, and expand its market share. We will improve our market monitoring system, dynamically optimise marketing strategy, and consolidate the retail market share; develop high-quality outlets and continuously optimise the network layout; strengthen the development of Sinopec- brand products, diversify services, and build a high-value ecosystem of “customers-vehicles-life”, so as to improve the quality and profitability of our non-fuel business; strengthen international operations and expand the overseas retail market; enhance advantages in the low-sulphur bunker fuel market, and improve the quality of operations; promote the development of charging network and the demonstration application of hydrogen-powered mobility, and accelerate the building-up of the Company into an integrated energy provider covering “petro, gas, hydrogen, power and service”. The planned annual domestic sales volume of refined oil products is 191 million tonnes. Chemicals: The Company will closely track changes in the chemical market, improve production and marketing synergies and scheduling, adhere to “basic + high-end” strategy, and cultivate new advantages in “low-cost + value- added + green and low-carbon”. We will continue to diversify feedstock and reduce costs; dynamically optimise product slates and facility utilization, keep profitable facilities running at high 16 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Business Review and ProspectsBUSINESS REVIEW AND PROSPECTS (CONTINUED)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 ACCOUNTING STANDARDS. THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED TAX. 1 CONSOLIDATED RESULTS OF OPERATIONS In 2023, facing the condition that international crude oil price fluctuated widely, refined oil products demand rebounded, and petrochemical market was weak, the Company vigorously expanded market, actively deepened optimisation of production and operation with the oil and gas equivalent production, refinery throughput, ethylene production, and domestic refined oil products sales volume hitting a record high, and the Company realised operating profit of RMB86.8 billion, increased by 14.5% year-on-year. Due to the decrease in crude oil prices, revenue was RMB3,212.2 billion, decreased by 3.2% year-on-year. The following table sets forth the main revenue and expenses from the Company’s consolidated financial statements in relevant period: Revenue Revenue from primary business 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 wells Personnel expenses Taxes other than income tax Impairment reversals on trade and other receivables Other operating income/(expenses), 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) Revenue Year ended 31 December 2023 RMB million 2022 RMB million Change (%) 3,212,215 3,146,873 65,342 (3,125,387) (2,569,412) (59,575) (113,750) (11,055) (108,017) (272,921) 243 9,100 86,828 (9,922) 7,028 83,934 (16,070) 67,864 3,318,168 3,257,356 60,812 (3,242,333) (2,684,756) (55,809) (109,906) (10,591) (103,585) (263,991) 1,084 (14,779) 75,835 (9,974) 28,539 94,400 (17,901) 76,499 58,310 9,554 66,933 9,566 (3.2) (3.4) 7.4 (3.6) (4.3) 6.7 3.5 4.4 4.3 3.4 (77.6) – 14.5 (0.5) (75.4) (11.1) (10.2) (11.3) (12.9) (0.1) In 2023, the Company’s revenue from primary business was RMB3,146.9 billion, representing a decrease of 3.4% year-on-year. This was mainly due to the decreased prices in products including crude oil, refined oil products and chemical products. The following table sets forth the external sales volume, average realised prices and respective rates of change of the Company’s major products in 2023 and 2022: 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 Change (%) Average realised price (RMB/tonne, RMB/thousand cubic meters) Year ended 31 December Change (%) 2023 7,237 32,223 92,483 86,866 25,962 36,605 6,297 17,938 1,172 1,455 753 2022 8,171 30,845 80,884 81,657 17,361 36,053 7,412 17,471 1,193 1,364 779 (11.4) 4.5 14.3 6.4 49.5 1.5 (15.0) 2.7 (1.8) 6.7 (3.3) 2023 3,962 1,770 8,980 7,182 5,948 5,743 5,409 7,393 7,779 10,545 2,636 2022 4,449 1,808 9,319 7,738 6,545 6,204 6,116 8,272 8,119 11,363 3,015 (10.9) (2.1) (3.6) (7.2) (9.1) (7.4) (11.6) (10.6) (4.2) (7.2) (12.6) 17 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’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 2023, the turnover from crude oil, natural gas and other upstream products sold externally amounted to RMB178.0 billion (accounting for 5.5% of the Company’s revenue and other operating revenues), down by 7.5% year-on-year. The change was mainly due to decreases in crude oil and natural gas prices. In 2023, 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 RMB1,927.3 billion (accounting for 60.0% of the Company’s revenue and other operating revenues), representing an increase of 3.9% over 2022, mainly due to the increase in sales volume of refinery products, such as gasoline, diesel and kerosene, which effectively offset the impact of decrease in price. The sales revenue of gasoline, diesel and kerosene was RMB1,608.7 billion (accounting for 83.5% of the total sales revenue of petroleum products), representing an increase of 7.3% over 2022. Sales revenue of other refined petroleum products was RMB318.6 billion (accounting for 16.5% of the total sales revenue of petroleum products), representing a decrease of 10.7% compared with that of 2022. The Company’s external sales revenue of chemical products was RMB411.4 billion (accounting for 12.8% of the Company’s total revenue), representing a decrease of 8.6% over 2022. This was mainly due to decrease in sales volume and price of most chemical products. (2) Operating expenses In 2023, the Company’s operating expenses was RMB3,125.4 billion, decreased by 3.6% compared with that of 2022. The operating expenses mainly consisted of the following: Purchased crude oil, products and operating supplies and expenses was RMB2,569.4 billion, representing a decrease of 4.3% over the same period of 2022, accounting for 82.2% of the total operating expenses, of which: Crude oil purchasing expenses was RMB944.2 billion, representing a decrease of 5.6% over the same period of 2022. Crude oil purchased externally used for processing in 2023 was 212.61 million tonnes (excluding the volume processed for third parties), representing an increase of 5.3% over the same period of 2022. The average cost of processing crude oil purchased externally was RMB4,441 per tonne, representing a decrease by 10.3% over 2022. The Company’s other purchasing expenses was RMB1,625.2 billion, representing a decrease of 3.5% over the same period of 2022. This was mainly attributable to the decreased prices in outsourced chemical raw materials including naphtha and traded crude oil and refined oil products. Selling, general and administrative expenses was RMB59.6 billion, representing an increase of 6.7% over 2022, mainly due to the increased marketing expenses resulting from the increased sales volume of refined oil products. Depreciation, depletion and amortisation was RMB113.8 billion, representing an increase of 3.5% over the same period of 2022. This was mainly due to the increased scale of assets. Exploration expenses was RMB11.1 billion, representing an increase of 4.4% compared with 2022. That was mainly due to the Company’s increased investment in exploration to consolidate the foundation of oil and gas resource base. Personnel expenses was RMB108.0 billion, representing an increase of 4.3% over 2022. Taxes other than income tax was RMB272.9 billion, representing an increase of 3.4% over the same period of 2022. That was mainly because the consumption tax increased by RMB8.7 billion resulting from the increased sales volume of domestic refined oil products in the refining segment, provision for levy for mineral rights concessions of RMB7.4 billion and the special oil gain levy decreased by RMB7.7 billion resulting from the decreased crude oil price. Other operating income/(expenses), net was RMB9.1 billion, representing an increase of RMB23.9 billion over the same period of 2022. It was mainly attributable to increase in the income from the hedging business of commodity derivatives, income from the disposal of land and equipment from the relocation of Hunan Petrochemical and increase in the disposal income of some gas stations and depots, as well as the year-on- year decrease in the impairment of long-term assets. (3) Operating profit was RMB86.8 billion, representing an increase of 14.5% over the same period of 2022. That was mainly because that the Company seized the opportunity of market demand recovery, actively expanded the throughput and sales volume based on profit, and achieved a significant increase in operating profit year- on-year. 18 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)(4) Investment income and share of profits or losses from associates and joint ventures was RMB7.0 billion, down by 75.4% year-on- year. It was mainly attributable to the gains from Company’s sale of Shanghai SECCO’s equity of RMB13.7 billion last year, and the operating profit of some chemical associates and joint ventures decreased significantly, resulting from the weak market. (5) Profit before taxation was RMB83.9 billion, representing a decrease of 11.1% compared with 2022. (7) Profit attributable to non-controlling shareholders was RMB9.6 billion, representing a decrease of 0.1% over the same period of 2022. (6) Income tax expense was RMB16.1 billion, representing a decrease of 10.2% year-on- year. (8) Profit attributable to shareholders of the Company was RMB58.3 billion, representing a year-on-year decrease of 12.9%. 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 includes 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 As a percentage of consolidated operating revenue before elimination of inter-segment sales Year ended 31 December As a percentage of consolidated operating revenue after elimination of inter-segment sales Year ended 31 December 2023 RMB million 2022 2023 (%) 2022 2023 (%) 2022 183,316 116,703 300,019 174,476 1,355,310 1,529,786 1,800,486 17,943 1,818,429 420,881 94,426 515,307 633,056 905,264 1,538,320 197,499 121,912 319,411 198,714 1,376,425 1,575,139 1,700,453 13,421 1,713,874 459,824 80,328 540,152 761,678 1,028,800 1,790,478 3.2 2.0 5.2 3.1 23.7 26.8 31.6 0.3 31.9 7.4 1.7 9.1 11.1 15.9 27.0 3.3 2.1 5.4 3.3 23.3 26.6 28.6 0.2 28.8 7.7 1.4 9.1 12.8 17.3 30.1 5.7 6.0 5.4 6.0 56.1 51.2 13.1 13.8 19.7 23.0 5,701,861 (2,489,646) 3,212,215 5,939,054 (2,620,886) 3,318,168 100.0 100.0 100.0 100.0 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 Revenue * Other operating revenues are included. 19 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’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 2023 compared to 2022. Year ended 31 December 2023 RMB million 2022 Change (%) 300,019 255,056 44,963 1,529,786 1,509,178 20,608 1,818,429 1,792,490 25,939 515,307 521,343 (6,036) 1,538,320 1,537,716 604 750 319,411 265,695 53,716 1,575,139 1,562,928 12,211 1,713,874 1,689,337 24,537 540,152 554,279 (14,127) 1,790,478 1,789,160 1,318 (1,820) (6.1) (4.0) (16.3) (2.9) (3.4) 68.8 6.1 6.1 5.7 (4.6) (5.9) – (14.1) (14.1) (54.2) – thousand cubic meters, and RMB4,135 per tonne, respectively, representing a decrease of 11.1%, a decrease of 2.3%, an increase of 0.7%, and a decrease of 27.6% respectively over 2022. In 2023, the operating expenses of this segment was RMB255.1 billion, representing a decrease of 4.0% over 2022. That was mainly due to the following: Procurement cost decreased by RMB11.0 billion year on year resulting from decline in import LNG price; Provision for impairment of oil and gas assets decreased by RMB2.0 billion year on year; Depreciation, depletion increased by RMB1.4 billion year on year; Exploration expense increased by RMB0.5 billion year on year. In 2023, the oil and gas lifting cost was RMB755.2 per tonne, representing a decrease of 2.3% year on year. That was mainly attributable to the increase in the Company’s oil and gas production year-on-year, as well as a decrease of outsourced material and fuel costs, resulting from the enhanced efforts in cost control. In 2023, the exploration and production segment seized the opportunity of relative high crude oil prices, spared no efforts to increase reserves, boost production, cut cost, and achieved good performance, but impact by decrease in crude oil price year on year and provision for levy for mineral rights concessions of RMB7.4 billion. The operating profit of the segment was RMB45.0 billion, representing a decrease of RMB8.8 billion and 16.3% over the same period of 2022. (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. Most of gasoline, diesel and kerosene were sold internally to the marketing and distribution segment of the Company; part of the chemical feedstock was sold internally to the chemicals segment of the Company; and other refined petroleum products were sold externally to both domestic and overseas customers. Exploration and Production Segment Operating revenues Operating expenses Operating profit 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 loss Corporate and Others Operating revenues Operating expenses Operating profit Elimination of inter-segment loss/(profit) (1) Exploration and Production Segment Most crude oil and a small portion of the natural gas produced by the exploration and production segment were used for the Company’s refining and chemical production. Most of the natural gas and a small portion of crude oil were sold externally to other customers. In 2023, the operating revenue of this segment was RMB300.0 billion, representing a decrease of 6.1% over 2022. This was mainly attributable to the decrease in prices of crude oil and natural gas. In 2023, the segment sold 34.37 million tonnes of crude oil, representing an increase of 0.3% over 2022. Natural gas sales volume was 33.4 billion cubic meters (bcm), representing an increase of 4.9% over 2022. Regasified LNG sales volume was 17.1 bcm, representing a decrease of 20.7% over 2022. LNG sales volume was 1.41 million tonnes, representing a decrease of 0.8% over 2022. Average realised prices of crude oil, natural gas, regasified LNG, and LNG were RMB3,833 per tonne, RMB1,774 per thousand cubic meters, RMB3,561 per 20 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) In 2023, the operating revenue of this segment was RMB1,529.8 billion, representing a decrease of 2.9% over 2022. This was mainly attributable to the decreases in prices of products including refined oil products. The following table sets forth the sales volumes, average realised prices and the respective changes of the refined oil products of the segment in 2023 and 2022. Gasoline Diesel Kerosene Chemical feedstock Other refined petroleum products In 2023, sales revenue of gasoline was RMB517.5 billion, representing an increase of 0.3% over 2022. The sales revenue of diesel was RMB424.7 billion, representing a decrease of 5.9% over 2022. The sales revenue of kerosene was RMB135.9 billion, representing an increase of 42.1% over 2022. The sales revenue of chemical feedstock was RMB188.0 billion, representing a decrease of 9.6% over 2022. The sales revenue of refined petroleum products other than gasoline, diesel, kerosene and chemical feedstock was RMB259.8 billion, representing a decrease of 13.5% over 2022. In 2023, the segment’s operating expense was RMB1,509.2 billion, representing a decrease of 3.4% over 2022 which was mainly attributable to a decrease in the crude oil and refining feedstock procurement cost. In 2023, the average processing cost for crude oil was RMB4,475 per tonne, representing a decrease of 9.8% over 2022. Total crude oil processed was Sales Volume (thousand tonnes) Average realised price (RMB/tonne) Year ended 31 December Change (%) Year ended 31 December Change (%) 2023 60,926 61,807 23,097 42,035 67,321 2022 57,562 61,169 14,782 41,470 65,945 5.8 1.0 56.3 1.4 2.1 2023 8,494 6,872 5,884 4,473 3,859 2022 8,967 7,376 6,468 5,016 4,553 (5.3) (6.8) (9.0) (10.8) (15.2) 262.52 million tonnes (excluding volume processed for third parties), representing an increase of 6.0% over 2022. The total cost of crude oil processed was RMB1,174.8 billion, representing a decrease of 4.4% over 2022. In 2023, refining margin was RMB353 per tonne, representing an increase of RMB9 per tonne compared with that of the same period of 2022. This was mainly attributable to increase of domestic gasoline and diesel processing margin, resulting from the significant decrease in international crude oil price and overseas freight and insurance cost year-on-year, but partially offset by the significant decrease in inventory gain year on year. In 2023, the refining unit 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 RMB212.3 per tonne, representing a decrease of 4.8% over 2022, which was mainly attributable to the increase of processing volume as well as the decrease in costs of fuels and power resulting from enhanced efforts to reduce cost. In 2023, the segment brought synergy advantages in integrated business chain into full play, flexibly adjusted the utilisation rate and product structure following the market demand, increased exports of refined oil products when appropriate, and realised an operating profit of RMB20.6 billion, increased by RMB8.4 billion or 68.8% year-on-year. (3) Marketing and Distribution Segment The business activities of the marketing and distribution segment include purchasing refined oil products from the refining segment and the third parties, conducting direct sales and wholesale to domestic customers and retailing, distributing oil products through the segment’s retail and distribution network as well as providing related services. In 2023, the operating revenues of this segment was RMB1,818.4 billion, up by 6.1% year-on-year. This was mainly attributable to an increased demand for refined oil products and an increase in the Company’s sales volume of refined oil products year-on-year. The sales revenues of gasoline totalled RMB831.3 billion, up by 10.2% year-on-year; the sales revenues of diesel were RMB625.8 billion, down by 1.3% year-on-year; the sales revenues of kerosene were RMB154.7 billion, up by 35.3% year-on-year. The following table sets forth the sales volumes, average realised prices and respective percentage changes of the segment’s four major refined oil products in 2023 and 2022, including detailed information about retail, direct sales and distribution of gasoline and diesel: Sales volume (thousand tonnes) Average realised price (RMB/tonne) Year ended 31 December Change (%) Year ended 31 December Change (%) Gasoline Retail Direct sales and distribution Diesel Retail Direct sales and distribution Kerosene Fuel oil 2023 92,595 65,833 26,762 87,141 36,772 50,368 26,045 31,996 2022 80,957 56,989 23,968 81,932 34,481 47,451 17,474 26,162 14.4 15.5 11.7 6.4 6.6 6.1 49.0 22.3 2023 8,978 9,453 7,808 7,181 7,673 6,822 5,941 3,985 2022 9,318 9,938 7,845 7,737 8,176 7,419 6,546 4,817 (3.7) (4.9) (0.5) (7.2) (6.1) (8.0) (9.2) (17.3) 21 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand AnalysisIn 2023, the operating expenses of the segment were RMB1,792.5 billion, up by 6.1% year-on-year. This was mainly due to the rising procurement costs resulting from the increase in sales volume of refined oil products. In 2023, the segment’s marketing expense (defined as the operating expenses less the purchase costs, taxes other than income tax, depreciation and amortization, divided by sales volume) was RMB193.4 per tonne, down by 7.3% year on year. This was mainly due to the increase in refined oil products sales volume, and the Company continuously improved competitiveness in cost and effectively reduced various circulation expenses. In 2023, the operating revenues of non- fuel business was RMB42.0 billion, up by RMB3.9 billion year-on-year and the profit of non-fuel business was RMB4.6 billion, up by RMB0.3 billion. This was mainly because the Company actively explored new retail marketing models, proactively promoted the sales volume of Sinopec- branded products, continuously expanded new business models and marketing activities, and promoted quality of non- fuel business. In 2023, the segment seized opportunities of rebounded refined oil products demand, actively expanded total sales volume, accurately carried out various marketing activities, enhanced efforts in expanding market and promoting profitability, and realised an operating profit of RMB25.9 billion, representing an increase of RMB1.4 billion year-on-year, up by 5.7% year-on- year. (4) Chemicals segment The business activities of the chemicals segment include purchasing chemical feedstock from the refining segment and the third parties and producing, marketing and distributing petrochemical and inorganic chemical products. In 2023, the operating revenue of this segment was RMB515.3 billion, down by 4.6% year-on-year. This was mainly due to the decrease in prices of major chemical products year on year. In 2023, the sales revenue generated by the segment’s six major categories of chemical products (namely basic organic chemicals, synthetic resin, synthetic fiber monomer and polymer, synthetic fibre, synthetic rubber, and chemical fertiliser) was approximately RMB476.0 billion, down by 6.5% year-on-year, accounting for 92.4% of the operating revenues of the segment. The following table sets forth the sales volume, average realised prices and respective changes of each of the segment’s six categories of chemical products in 2023 and 2022. Sales Volume (Thousand tonnes) Average realised price (RMB/tonne) Year ended 31 December Change (%) Year ended 31 December Change (%) 2023 49,202 6,350 17,941 1,172 1,456 800 2022 46,972 7,496 17,475 1,193 1,367 812 4.8 (15.3) 2.7 (1.7) 6.5 (1.5) 2023 5,740 5,416 7,393 7,779 10,551 2,619 2022 6,192 6,140 8,272 8,122 11,369 2,988 (7.3) (11.8) (10.6) (4.2) (7.2) (12.4) In 2023, the operating expense of corporate and others was RMB1,537.7 billion, representing a decrease of 14.1% over 2022. In 2023, the operating profit from corporate and others was RMB0.6 billion, representing a decrease of RMB0.7 billion over the same period of 2022. (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 2023, the operating revenue generated from corporate and others was approximately RMB1,538.3 billion, representing a decrease of 14.1% over 2022. This was mainly attributed to the year-on-year decrease in the trading prices of crude oil and refined oil products. Basic organic chemicals Synthetic fibre monomer and polymer Synthetic resin Synthetic fibre Synthetic rubber Chemical fertiliser In 2023, the operating expenses of the chemicals segment was RMB521.3 billion, representing a decrease of 5.9% over 2022, mainly due to decreased procurement cost of chemical feedstock including naphtha, etc. In 2023, facing the tough market situation of oversupply and weak margin in the chemical market, the segment focused on promoting quality and increasing profitability, dynamically adjusted production and operation strategies, continuously promoted structure optimization, and vigorously reduced costs and expenses, with an operating loss of RMB6.0 billion and reduced losses of RMB8.1 billion year-on- year. 22 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’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 2023, the Company’s total assets were RMB2,024.7 billion, representing an increase of RMB73.6 billion compared with that of the end of 2022, of which: Current assets were RMB534.4 billion, representing an increase of RMB11.3 billion compared with that of the end of 2022, mainly because the cash and deposit increased by RMB18.5 billion, international crude oil price decreased year on year resulting in derivative financial assets decreasing by RMB9.6 billion, and inventories increased by RMB6.7 billion as a result of operation volume increase due to market recovery. As of 31 December 2023 As of 31 December 2022 2,024,696 534,435 1,490,261 1,068,887 647,076 421,811 802,989 119,349 683,640 152,820 955,809 1,951,121 523,140 1,427,981 1,011,579 667,385 344,194 787,600 119,896 667,704 151,942 939,542 Unit: RMB million Change 73,575 11,295 62,280 57,308 (20,309) 77,617 15,389 (547) 15,936 878 16,267 Non-current liabilities were RMB421.8 billion, representing an increase of RMB77.6 billion compared with that of the end of 2022. This was mainly because the low-interest long-term domestic loans increased. Total equity attributable to owners of the Company was RMB803.0 billion, representing an increase of RMB15.4 billion compared with that of the end of 2022. Non-current assets were RMB1,490.3 billion, representing an increase of RMB62.3 billion as compared with that of the end of 2022. This was mainly because net value of property, plant and equipment increased by RMB60.2 billion, resulting from the increased investments in refining and chemical bases construction, structural adjustment and new chemical materials business. The Company’s total liabilities were RMB1,068.9 billion, representing an increase of RMB57.3 billion compared with that of the end of 2022, of which: Current liabilities were RMB647.1 billion, representing a decrease of RMB20.3 billion as compared with that of the end of 2022. This was mainly due to decrease in derivative margin. 23 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand Analysis(2) Cash Flow The following table sets forth the major items in the consolidated cash flow statements for 2023 and 2022. Major items of cash flows Net cash generated from operating activities Net cash used in investing activities Net cash generated from/(used in) financing activities Unit: RMB million Year ended 31 December 2023 161,475 (155,865) 22,732 2022 116,269 (95,010) (39,699) In 2023, the net cash generated from operating activities of the Company was RMB161.5 billion, representing an increase of RMB45.2 billion over 2022. This was mainly due to the decrease of occupation in working capital. In 2023, the Company’s net cash used in investing activities was RMB155.9 billion, representing an increase of cash outflow RMB60.9 billion year-on-year. This was mainly due to a RMB58.9 billion year- on-year increase in time deposits with maturities over three months. In 2023, the Company’s net cash generated from financing activities was RMB22.7 billion, representing an increase of RMB62.4 billion year-on-year. This was mainly due to a year-on-year increase of RMB49.3 billion of cash inflow in net interest-bearing debt, and a decrease of RMB16.1 billion of cash outflow in cash dividends distribution. At the end of 2023, the cash and cash equivalents were RMB121.8 billion. (3) Contingent Liabilities Please refer to “Material Guarantee Contracts and their Performance” in the “Significant Events” section of this report Environmental expenditures refer to the normal routine pollutant discharge fees paid by the Company, excluding capitalised cost of pollutant treatment properties. In 2023, the Company paid environmental expenditures of RMB19.2 billion. (4) Capital Expenditure (6) Measurement of fair values of derivatives Please refer to “Capital Expenditure” in the “Business Review and Prospects” section of this report. (5) Research & Development and Environmental Expenditures R&D expenditures include expenses and investment cost in relation to R&D of the Company. In 2023, the expenditures for R&D were RMB23.2 billion, of which expense was RMB14.0 billion, and investment cost was RMB9.2 billion. and relevant system The Company has established and continued improving decision-making mechanism, business process and internal control systems relevant to financial instrument accounting and information disclosure. The following table sets out the items relevant to measurement of fair values. 24 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)Items relevant to measurement of fair values Unit: RMB million Amount at the beginning of the year Amount at the end of the year 2 2 12,022 3,507 730 16,261 3 3 6,969 2,221 450 9,643 Profits and losses from variation of fair values in the current year 1 1 (2,715) – – (2,714) Accumulated variation of fair values recorded as equity Impairment loss provision of the current year – – 7,420 – (13) 7,407 – – – – – – Funding source Purchase amount in the current year – – – – – – – – – 48,330 28 48,358 Sale or redemption amount in the current year – – (800) (49,616) (298) (50,714) Other changes – – (8,958) – 3 (8,955) Items Financial assets held for trading Fund Derivative financial instruments and cash flow hedges Receivables financing Other equity instrument investments Total Derivatives investment: In 2023, the Company traded in commodity and currency derivatives according to the Annual Business Plan for Financial Derivatives approved by the Board. Such business met the regulatory requirements of financial derivatives, operated in a standardized manner, and achieved the goals of suppressing price fluctuation, stabilising operating profit, and preventing market risks. 4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER CASS The major differences between the Company’s financial statements prepared under CASs and IFRS Accounting Standards are set out in Section C of the financial statements of the Company on page 213 of this report. (1) Under CASs, the operating income and operating profit or loss by 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 and losses/gains from changes in fair value Consolidated operating profit Net profit attributable to equity shareholders of the Company For the year ended 31 December 2023 RMB million 2022 RMB million 300,019 1,529,786 1,818,429 515,307 1,538,320 (2,489,646) 3,212,215 37,976 19,358 25,531 (10,273) 1,915 750 11,487 86,744 60,463 319,411 1,575,139 1,713,874 540,152 1,790,478 (2,620,886) 3,318,168 48,538 11,611 25,197 (14,256) 15,480 (1,820) 11,664 96,414 67,082 Operating profit: In 2023, the operating profit of the Company was RMB86.7 billion, representing a decrease of RMB9.7 billion as compared with that of 2022. Net profit: In 2023, the net profit attributable to the equity shareholders of the Company was RMB60.5 billion, representing a decrease of RMB6.6 billion or 9.9% compared with 2022. 25 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand Analysis (2) Financial data prepared under CASs Total assets Non-current liabilities Shareholder’s equity Change analysis: As of 31 December 2023 RMB million As of 31 December 2022 RMB million 2,026,674 420,943 958,655 1,951,121 343,279 940,457 Change 75,553 77,664 18,198 At the end of 2023, the Company’s total assets were RMB2,026.7 billion, representing an increase of RMB75.6 billion compared with that of the end of 2022. This was mainly due to the increased investment in transformation and upgrading, resulting in fixed assets increasing by RMB60.2 billion after construction, derivative financial assets decreased by RMB9.6 billion, and cash at bank and on hand increased by RMB19.9 billion. At the end of 2023, the Company’s non-current liabilities was RMB420.9 billion, representing an increase of RMB77.7 billion compared with that of the end of 2022. This was mainly because the low-interest long-term domestic loans increased by RMB84.4 billion resulting from meeting the capital needs of investment, production and operation activities, and bond payable decreased by RMB4.5 billion. At the end of 2023, total shareholders’ equity of the Company was RMB958.7 billion, representing an increase of RMB18.2 billion compared with that of the end of 2022. (3) The results of the principal operations by segments Segments Exploration and Production Refining Marketing and Distribution Chemicals Corporate and Others Elimination Total Operation income RMB million Operation cost RMB million Gross profit margin* (%) 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 (%) 300,019 1,529,786 1,818,429 515,307 1,538,320 (2,489,646) 3,212,215 207,573 1,253,956 1,720,219 502,009 1,516,294 (2,490,395) 2,709,656 22.1 2.4 5.2 1.8 1.4 N/A 7.1 (6.1) (2.9) 6.1 (4.6) (14.1) N/A (3.2) (3.4) (4.8) 6.3 (5.1) (13.7) N/A (3.9) (2.3) 0.7 (0.2) 0.6 (0.4) N/A 0.0 * Gross profit margin = (operation income – operation cost, tax and surcharges)/operation income. 5 THE CAUSE AND IMPACT OF THE CHANGE IN THE COMPANY’S ACCOUNTING POLICY, ACCOUNTING ESTIMATES AND ACCOUNTING METHODS For details, please refer to Note 3(27) to the financial statements prepared in accordance with CASs and Note 1 to the financial statements prepared in accordance with IFRS Accounting Standards. 26 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Management’s Discussionand AnalysisMANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)During the reporting period, there was no material inconsistency between Sinopec Corp.’s corporate governance and the requirements of the PRC Company Law and relevant regulations of the CSRC. The Supervisory Committee of Sinopec Corp. had no objection to any of the supervised matters. None of Sinopec Corp., the Board, the Directors, the Supervisors, the Senior Management, the controlling shareholder or de facto controller of Sinopec Corp. were under the investigation by the CSRC or received any regulatory sanction or was criticised publicly by the CSRC, the Hong Kong Securities and Futures Commission or received any public censure from SSE or Hong Kong Stock Exchange. 2 GENERAL MEETINGS During the reporting period, Sinopec Corp. convened 2022 Annual General Meeting, First A Shareholders Class Meeting for 2023, and First H Shareholders Class Meeting for 2023 on 30 May 2023, in accordance with the required procedures of noticing, convening and holding the general meetings pursuant to the relevant laws and regulations and the Articles of Association. For details of the meetings, please refer to the poll results announcements published on 31 May 2023 on China Securities Journal, Shanghai Securities News, Securities Times and the website of SSE, as well as those published on 30 May 2023 on the website of Hong Kong Stock Exchange. 1 IMPROVEMENTS IN CORPORATE GOVERNANCE DURING THE REPORTING PERIOD During the reporting period, Sinopec Corp. complied with the Articles of Association as well as domestic and overseas laws and regulations, adhered to the standard operation, operated in compliance with laws, continuously improved the level of corporate governance. The Board strengthened strategic planning, and promoted the implementation of the strategy. The Board attached great importance to shareholder returns, and the cash dividend amount maintained at a high level, and repurchased shares again both domestically and overseas to maintain the Company’s value and shareholders’ interests. The Independent Directors conscientiously fulfilled their duties, played a positive role in “participation in decision-making, supervision checks and balances, professional consultation”, reviewed proposals with due care, listened to the reports on significant decisions, conducted research on a regular basis, and offered advice and suggestions on Company’s reforms and development. The Company followed the latest regulatory requirements, and revised governance rules and regulations of the Company in a timely manner, such as Terms of Reference of the Independent Non-Executive Directors, Terms of Reference of the Audit Committee etc., to strengthen the corporate governance basis. It improved the internal control system, and promoted the effectiveness of the implementation of internal control system continuously. It improved the Company’s transparency by focusing on high-quality information disclosure, and continuously obtained A-level rating of SSE in the assessment of information disclosure. It strengthened communication with investors, organized investor reverse roadshow covering the whole industry chain business and received positive market feedback. It strengthened ESG management, carried out the annual safety management strengthen campaign, enhanced the ecological environmental protection, steadily advanced the Action Plan for Carbon Dioxide Peaking, contributed to rural revitalization, to actively fulfill corporate social responsibility. It boosted the staff morale and enhanced the discipline inspection and supervision through continuously improving the quality of Party building, which contributed to the effective implementation of the Board resolutions and the high-quality development of the Company. 3 EQUITY INTERESTS HELD BY DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT As of 31 December 2023, Mr. Ling Yiqun, former Executive Director, Senior Vice President, held 13,000 A shares of Sinopec Corp. Save as disclosed above, as of 31 December 2023, none of the Directors, Supervisors and senior management of Sinopec Corp. and their respective associates had any interests or short positions (including any interests or short positions that are regarded or treated as being held in accordance with the Securities and Futures Ordinance (SFO)) in any shares, underlying shares or debentures of Sinopec Corp. or any associated corporations (as defined in Part XV of the SFO), as recorded in the registry pursuant to Section 352 of the SFO or as otherwise notified to Sinopec Corp. and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (Model Code) contained in the Hong Kong Listing Rules. As required under the Hong Kong Listing Rules, Sinopec Corp. has formulated Rules Governing Shares and Changes in Shares Held by Company Directors, Supervisors and Senior Management and Rules on Insider Registration and Management (collectively, Rules) to regulate securities transactions by relevant personnel. The standards of the Rules above-mentioned are no less strict than those set out in the Model Code. Upon the specific inquiries made by Sinopec Corp., all the Directors confirmed that they had complied with the required standards in the Model Code as well as those set out in the Rules during the reporting period. 4 COMPANY’S INDEPENDENCE FROM CONTROLLING SHAREHOLDER The Company is independent from its controlling shareholder in terms of, among other matters, business, assets and finances. The controlling shareholder of the Company exercised shareholder’s rights through the general meeting according to applicable laws and didn’t overstep the authority of the general meeting or directly or indirectly interfere with the Company’s operating decisions and operating activities. The Company has well-integrated independent businesses and independent operating capabilities. During the reporting period, the Company did not identify the controlling shareholder taking advantage of its special position to misappropriate and damage the interests of the Company or the other shareholders. 27 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE5 COMPETITION BETWEEN SINOPEC CORP. AND ITS CONTROLLING SHAREHOLDER Please refer to “Performance of the Undertakings by China Petrochemical Corporation” under the section “Significant Events” for details. 6 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. 7 MANAGEMENT CONTROL OF SUBSIDIARIES The Company implements standardized control over different types of subsidiaries in accordance with laws and regulations, the Articles of Association and the internal control system. During the reporting period, the Company did not acquire any subsidiaries that met material criteria. 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 and restrictive mechanisms for Directors, Supervisors and other Senior Management. Sinopec Corp. has implemented incentive policies including 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 During the reporting period, Sinopec Corp. complied with all code provisions of the Corporate Governance Code set out in Appendix C1 of the Hong Kong Listing Rules. A CORPORATE PURPOSE, STRATEGY AND GOVERNANCE A.1 Corporate strategy, business model and culture a. The Board has always adhered to the underlying principle of pursuing progress while ensuring stability, applied the new development philosophy fully, accurately and comprehensively, scientifically formulated the medium-term and long-term development strategy, facilitated the implementation of the strategy, actively promoted the high- quality development, and continuously created value for the stakeholders. b. Sinopec Corp. attaches great importance to the construction of corporate culture. In the long process of reform and development, the Company has cultivated and formed its corporate culture, comprising the enterprise spirit of “loving China, strengthening the petrochemical industry”, as well as such fine traditions as being hardworking, meticulous and rigorous. The Company strives to provide cutting-edge technologies, premium products and quality services. The relevant content is published on Sinopec Corp.’s website at http://www.sinopec.com. A.2 Corporate Governance Functions a. The Board of Sinopec Corp. is responsible for performing duties of corporate governance, formulating and approving related corporate governance rules, adhering to the standard operation, improving the corporate governance, ensuring that the Company complies with domestic and overseas laws and regulations, and disclosing the Company’s compliance with the Corporate Governance Code in the Corporate Governance Report. b. The Board arranged training sessions for Directors, Supervisors and Senior Management, and made relevant records. During the reporting period, the Directors, Supervisors and Senior Management of Sinopec Corp. actively participated in the trainings and attached great importance to continuing professional development to ensure that their contribution to the Sinopec Corp. remains informed and relevant. The Directors’ attendance to the trainings is as follows: Laws and regulations update Accounting/finance/operational management Name Ma Yongsheng Zhao Dong Yu Baocai Li Yonglin Lv Lianggong Cai Hongbin Ng, Kar Ling Johnny Shi Dan Bi Mingjian Positions Chairman, Non-executive Director Non-executive Director Executive Director, President Executive Director, Senior Vice President Executive Director, Senior Vice President Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Independent Non-executive Director Reading materials √ √ √ √ √ √ √ √ √ Training and lectures √ √ √ √ √ √ √ √ √ Reading materials √ √ √ √ √ √ √ √ √ Research √ √ √ √ √ √ √ √ √ 28 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)B BOARD COMPOSITION AND NOMINATION B.1 Board composition, succession and evaluation 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 Board currently consists of nine members, among whom there are three Executive Directors and six Non- executive Directors. Among the Non- executive Directors, there are four Independent Non-executive Directors, accounting for approximately 44% of the total number of the Board. c. Each of the Independent Non-executive Directors has conducted independence self-examination and submitted a letter of confirmation to the Company, regarding their compliance with relevant independence requirements set out in Rule 3.13 of the Hong Kong Listing Rules. The Board considers that each of the Independent Non- executive Directors is independent. The composition and operational mechanism of the Board ensure that independent and objective views and input are available to the Board of Sinopec Corp. For instance, the Company has established the mechanism of the Special Meeting of Independent Directors, and stipulates that matters such as connected transactions that subject to be disclosed, shall be submitted to the Board for consideration after approval by a majority of all the Independent Directors. The Board reviews and evaluates the effectiveness of such operational mechanism on an annual basis. d. The Board established 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 factors in relation to the diversity of the Board, including but not limited to professional experience, skills, knowledge, term of office, regions, culture and educational backgrounds, gender, and age. The provisions of the Articles of Association concerning the term of office of directors help to ensure that the Board has a proper balance between continuous experience and new thinking, and enhance the level of diversity. Sinopec Corp. annually evaluates the implementation of the Board Diversity Policy. Currently, the Board achieved the diversity in terms of gender, culture, educational background and professional expertise. The Directors come from different industries domestically and abroad with rich working experience. Professional backgrounds of Directors include petroleum and petrochemical corporate management, as well as economics, accounting, finance, and industry and energy economy, which are conductive to strategic planning and scientific decision-making. In terms of the candidates of Directors, the Board and the Nomination Committee will, as and when necessary, look for potential female director candidates through self- regulatory organizations, professional recommendation and other channels to achieve gender diversity of the Board. Currently, female Director accounts for 11% of the Board members, and has achieved the numerical targets of at least one female Director. Sinopec Corp. has always devoted to establishing a workplace with diversity and equal opportunities, recruited female employees actively to increase the diversity of the team, and provided equal employment opportunities and environment for all employees, so as to offer them career development spaces to give full play to their personal characteristics and values. In 2023, female employees in the Company account for 30.3% of the total staff number. The Company adhered to the doctrine of gender equality, ensuring female employees have equal labor and social security rights as the males. For details, please refer to the sustainability report of Sinopec Corp. for the year 2023. B.2 Appointment, re-election and removal a. The term of office for each Director is three years, and the consecutive terms of office of any Independent Non-executive Director cannot exceed six years. During the reporting period, Mr. Lv Lianggong was nominated by the Board as a candidate for Executive Director of Sinopec Corp. and elected as an Executive Director of Sinopec Corp. by the general meeting. For details about the tenure of each Director, please refer to the item 11 under this section. b. All Directors of Sinopec Corp. must be elected at the general meeting of shareholders. The Board has no power to appoint temporary Directors. c. Each of the Directors was able to devote sufficient time and efforts to handling the affairs of Sinopec Corp. B.3 Nomination Committee a. The Board established the Nomination Committee, consisting of the Independent Non-executive Director, Ms. Shi Dan, who serves as the chairman, and the Chairman of the Board, Mr. Ma Yongsheng, and the Independent Non-executive Director, Mr. Ng, Kar Ling Johnny, who serve as members. The principal responsibilities of the Nomination Committee are to provide suggestions to the Board on Board’s size and composition, the selecting standards and procedures, and candidates for Directors and Senior Management. When recommending candidates for Directors, the Nomination Committee mainly considers the skills, knowledge, experience and qualifications of the candidates, and also evaluates the time and energy they can devote as well as the Board Diversity Policy. Procedures for Nomination of Director of Sinopec Corp. and Terms of Reference of the Nomination Committee are published on Sinopec Corp.’s website at http://www.sinopec.com. b. The members of the Nomination Committee can engage professionals when performing their duties. Reasonable costs arising from such consultations are borne by Sinopec Corp. In the meantime, the Nomination Committee has also appointed consultant members and can require such members to provide advice. The working expenses of the Nomination Committee are included in the budget of Sinopec Corp. c. During the reporting period, the Nomination Committee held two meetings (please refer to “The Board Committees Meetings and the Special Meeting of Independent Directors” under the section “Report of the Board of Directors” in this annual report). C DIRECTORS’ RESPONSIBILITIES, DELEGATION AND BOARD PROCEEDINGS C.1 Responsibility of Directors a. 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. Sinopec Corp. has purchased liability insurance for all Directors to minimize the potential risks that might arise from the adequate performance of their duties. b. 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 29 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate Governancepowers. The Articles of Association and the Rules and Procedures for Board of Directors’ Meetings clearly prescribe the duties and powers of Directors, and Non-executive Directors including Independent Non-executive Directors, which are published on the Sinopec Corp.’s website at http://www.sinopec.com. c. Each of the Directors confirmed that he/she has complied with the Model Code during the reporting period. Meanwhile, Sinopec Corp. formulated the Rules Governing Shares Held by Company Directors, Supervisors and Senior Managers and Changes in Shares and the Rules on Insider Registration and Management, which is no less exacting than the Model Code, to further regulate the dealings of Sinopec Corp.’s securities by relevant personnel. d. All the Independent Non-executive Directors and other Non-executive Directors of the Sinopec Corp. regularly attended the Board meetings and the meetings held by the Board Committees they served, paid attention to production and operational status of the Company, and offered constructive suggestions on the Company’s reforms and development based on their skills and professional knowledge. For details about each Director’s attendance at relevant meetings, please refer to the section “Report of the Board of Directors” in this annual report. C.2 Chairman and President a. Mr. Ma Yongsheng, elected by all Directors, serves as Chairman of the Board. Mr. Yu Baocai, nominated and appointed by the Board, serves as President of Sinopec Corp. The respective 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. b. The Chairman of the Board ensure that all the Directors could receive full, clear and complete information in time, and be informed of proposals of the Board meetings. c. The Chairman of the Board places great emphasis on communication with the Independent Non- executive Directors. The Chairman independently communicated with the Independent Non-executive Directors in respect of development strategy, medium-term and long- term development plans, corporate governance, and operational management, etc. d. The Chairman of the Board encourages open and active discussions. The Directors fully and deeply participated in the discussions of significant decisions in the Board meetings. C.3 Management functions a. The Board and the Management have clear duties and responsibilities under written rules. The Articles of Association and the Rules and Procedures of Shareholders’ General Meetings and the Rules and Procedures for Board of Directors’ Meetings clearly set forth the scope of duties, powers, and delegation of power of the Board and Management, which are published on the website of Sinopec Corp. at http://www.sinopec.com. C.4 Board Committees a. In addition to the Audit Committee, the Remuneration and Appraisal Committee and the Nomination Committee, the Board had established the Strategy Committee and the Sustainable Development Committee. The Strategy Committee is responsible for overseeing long- term development strategies and significant investment decisions of the Company. The Strategy Committee consists of seven Directors, including the Chairman of the Board, Mr. Ma Yongsheng, who serves as Chairman, Executive Directors, Mr. Yu Baocai, Mr. Li Yonglin, Mr. Lv Lianggong, and Independent Non-executive Directors, Mr. Cai Hongbin, Ms. Shi Dan, and Mr. Bi Mingjian, who serve as members. The Sustainable Development Committee is responsible for preparing policies, governance, strategies and plans for sustainable development of the Company, which consists of four Directors, including the Chairman of the Board, Mr. Ma Yongsheng, who serves as Chairman, the Non- executive Director, Mr. Zhao Dong, the Executive Director, Mr. Lv Lianggong, and the Independent Non-executive Director, Mr. Cai Hongbin, who serve as members. b. Each Board Committee shall report its decisions and recommendations to the Board and has formulated its terms of references. Terms of Reference of the Audit Committee, Terms of Reference of the Remuneration and Appraisal Committee, Terms of Reference of the Sustainable Development Committee and Terms of Reference of the Nomination Committee are published on the website of Sinopec Corp. at http://www.sinopec.com. C.5 Board proceedings and supply of and access to information a. The Articles of Association and the Rules and Procedures for Board of Directors’ Meetings of Sinopec Corp. clearly prescribe the proceedings of Board meetings, which are published on the website of Sinopec Corp. at http://www.sinopec.com. b. The Board of Sinopec Corp. held its meetings at least once a quarter. The Board will usually communicate the time and proposals of the Board meeting 14 days before convening the meeting. The relevant documents and materials for Board meetings and for the Board Committees are usually delivered to each Director 10 days in advance. Before the meetings were held, assigned persons were responsible for answering the possible questions raised by the Directors, ensuring the Directors could participate in the proceedings of the Board meetings effectively and positively, and fully understand the proposals to make decisions. In 2023, Sinopec Corp. held six Board meetings. For details about each Director’s attendance at the 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. The agenda and other documents for reference for meetings of the Board and Board committees are distributed prior to the meetings to allow each Director sufficient time to review the materials so that Directors can make informed decisions. d. 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 Directors can require the Management, or require relevant departments via the Management to provide necessary information or explanations. The Directors can seek advice from professional consultants when necessary. 30 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)e. Resolutions and minutes of Board meetings and the meetings held by the Board Committees were recorded and archived by designated recorders, and were reviewed and confirmed by the Directors attending the relevant meetings. All the matters and final decisions were recorded fully and accurately in the meeting minutes. f. The Board has reviewed and evaluated its performance in 2023 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 has fully communicated, and considered the suggestions from the Party organisation, Supervisory Committee and Management during its decision- making process; and that the Board safeguarded the legitimate rights and interests of Sinopec Corp. and its shareholders. C.6 Company Secretary a. The Hong Kong Stock Exchange recognised the Secretary to the Board as having the relevant qualifications as Company Secretary. The Secretary to the Board, nominated by the Chairman of the Board and appointed by the Board, is a senior management officer of Sinopec Corp. He reports to the Chairman and the President and is responsible for the Company and the Board. The Secretary to the Board gives opinions on corporate governance to the Board and arranges orientation training and professional development for the Directors. b. The Secretary to the Board assists the Directors in handling the day-to-day work of the Board, continuously informs the Directors of the 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. c. During the reporting period, the Secretary to the Board actively participated in career development training for more than 15 training hours. D. AUDIT, INTERNAL CONTROL AND RISK MANAGEMENT D.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 2023 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. The Management of Sinopec Corp. provides Directors with information about the financial, production and operating data of the Company, capital market updates, and securities regulatory developments every month to ensure that the Directors can learn about the latest developments of the Company and regulatory changes in a timely manner. 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 audit responsibilities in the auditor’s report contained in the financial report. D.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 reviewing the effectiveness of its internal control and risk management. The Board and the 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 the Audit Committee. Sinopec Corp. has set up its internal control and risk management department and internal auditing departments, which are equipped with sufficient staff, and these departments periodically (at least twice per year) report to the Audit Committee. The internal control and risk management system of the Company are designed to manage rather than eliminate all the risks of the Company. b. In terms of internal control, Sinopec Corp. adopted the internal control framework prescribed in the internationally accepted report of Committee of Sponsoring Organisations of the Treadway Commission (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. formulates and continuously improves the Internal Control Manual to achieve internal control of all factors of internal environment, risk assessment, controlling 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 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. adopts the enterprise risk management framework provided by COSO, and establishes 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 strategies and measures combined with its internal control system and periodically monitors their implementation to ensure adequate care, monitor and tackling of major risks. The Board attaches great importance to the ESG management approach and strategy, optimises ESG mechanism, strengthens the Board’s role in supervising and participation in ESG related issues, and integrates ESG considerations into the Company’s development strategy, major decision-making processes and production and operation. The Company keeps strictly to the anti- corruption laws and regulations of China, as well as anti-corruption and anti-bribery laws applicable in the country (region) where the business is conducted. The Company fully supports the UN Convention against Corruption, the UN Global Compact and other relevant initiatives, abides by the rules and commitments of the 31 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCompany and business partners on clean practices and anti-corruption, and strengthens the construction of a culture of integrity. The Company has continuously improved the organizational and institutional systems of anti-corruption, organized and carried out anti-corruption training, and attached importance to risk assessment of anti-corruption. The Board has reviewed and evaluated the adequacy of resources, staff qualifications and experience, training programmes and budget of ESG performance and reporting during the reporting period. For details, please refer to the Report of Sustainable Development of Sinopec Corp. for the year 2023. d. Based upon the review and evaluation of internal control and risk management in the reporting period, the Board is of the view that the internal control and risk management of the Company are effective. D.3 Audit Committee a. The Board has established an Audit Committee, formulated the Terms of Reference of the Audit Committee which included the scope of responsibility of the Audit Committee. The Audit Committee is responsible for supervising and evaluating internal and external audit work, reviewing and commenting on the financial reports of the Company, monitoring and evaluating the effectiveness of risk management and internal control system, and coordinating the communication between external auditor and management, internal auditor and related departments. The Audit Committee consists of Independent Non-executive Director, Mr. Ng, Kar Ling Johnny, who serves as the Chairman, and Independent Non-executive Directors, Mr. Cai Hongbin, Ms. Shi Dan, and Mr. Bi Mingjian, who serve as members. b. During the reporting period, the Audit Committee held five meetings (please refer to the “The Board Committees Meetings and the Special Meeting of Independent Directors” 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 can engage professionals when performing its duties. Reasonable costs arising from such consultations are borne by Sinopec Corp. In the meantime, the Audit Committee has appointed consultant members and can request such members to provide advice. 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, internal audit, financial reporting functions and the qualifications and experience of the relevant employees as well as the sufficiency of the training courses and the budget thereof. The 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 reviewed and approved by the Audit Committee, providing several channels, including online reporting, reporting by letters, appeals and complaint mailbox, etc., to employees and others who have dealings with the Company (such as suppliers and customers) to raise concerns on improper matters of the Company secretly and anonymously. The Audit Committee has established an internal procedure, which contains receiving, retaining and handling complaints or anonymous reports concerning accounting, internal control or audit matters. E. REMUNERATION E.1 The level and make-up of remuneration and disclosure a. The remuneration policy of the Director is stipulated in Director’s service contracts approved at the general meeting. Remuneration of Executive Directors is determined according to the relevant regulations of the country and the Implementation Rules of the Remuneration of Senior Management of Sinopec Corp.; Non- executive Directors do not receive remuneration in the Company. Remuneration of Independent Non- executive Directors is approved at the general meeting, and the level is determined with comprehensively consideration of industry conditions, company size and other factors. For details about the annual remuneration of Directors, Supervisors, and other Senior Management, please refer to page 38 to page 45 in this annual report. b. The Board established Remuneration and Appraisal Committee, consisting of Independent Non-executive Director, Mr. Bi Mingjian, who serves as the Chairman, and the Chairman of the Board, Mr. Ma Yongsheng and the Independent Non-executive Director, Mr. Ng, Kar Ling Johnny, who serve as the members. The Remuneration and Appraisal 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 reporting to the Board. c. The Remuneration and Appraisal Committee always consults the Chairman of the Board and the President about the remuneration plans for other Executive Directors. After the Remuneration and Appraisal 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 2023. d. The members of the Remuneration and Appraisal 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 and Appraisal Committee has also appointed consultant members and can require such members to provide advice. The working expenses of the Remuneration and Appraisal 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. shall actively cooperate with the Remuneration and Appraisal Committee. e. During the reporting period, the Remuneration and Appraisal Committee held one meeting (please refer to “The Board Committees Meetings and the Special Meeting of Independent Directors” under the section of “Report of the Board of Directors” in this annual report). F. SHAREHOLDERS ENGAGEMENT F.1 Effective communication a. In accordance with the actual situation on shares repurchase and cancellation of the repurchased shares, Sinopec Corp. revised the relevant provisions of equity structure and registered capital in the Articles of Association, which was reviewed and approved by the Annual General Meeting of 2022. For details, please refer to the announcements published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times, and on the website of SSE on 27 March and 31 May 2023, respectively, and on the website of Hong Kong Stock Exchange on 26 March and 30 May 2023, respectively. 32 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)b. The policy on payment of dividends of Sinopec Corp. is disclosed in the Report of the Board of Directors in this annual report, please refer to page 62 in this annual report. c. Sinopec Corp. attaches considerable significance to investor relations. The Chairman of the Board attended annual and interim results conferences, and the Management attends road shows to answer questions on subjects of concern to investors, such as introducing the development strategies and the production and business performance of the Company. The Independent Director, Mr. Bi Mingjian, attended the annual and interim online performance meetings. The Board Secretariat of Sinopec Corp. is responsible for organizing the communication with investors. In compliance with regulatory provisions, Sinopec Corp. enhances communication with investors by holding meetings with institutional investors, reverse roadshow, setting up an investor hotline, and communicating through internet platform, etc. d. 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 in the “Investor Centre” column on Sinopec Corp.’s website, ensuring that shareholders can get in touch with the Company at any time. During this year, Sinopec Corp. kept on monitoring and evaluating the implementation and effectiveness of the Shareholders’ Communication Policy, in order to ensure its effectiveness. F.2 General meeting a. During the reporting period, separate resolutions were proposed for each substantially separate issue at the general meeting of shareholders. All resolutions were voted by poll in protection of the interest of all shareholders. Notices of the general meeting were dispatched to shareholders 45 days (excluding the date of the general meeting) in advance. b. The Chairman of the Board hosted the Annual General Meeting for 2022 (AGM), the First A Shareholders Class Meeting for 2023, and the First H Shareholders Class Meeting for 2023. Several members of the H. AUDITORS The re-appointment of KPMG Huazhen LLP and KPMG as the external auditors of Sinopec Corp. for the year 2023 and the authorisation of the Board to determine their remunerations were approved at Sinopec Corp.’s Annual General Meeting on 30 May 2023. The audit fee for 2023 is RMB39.862 million (including audit fee of internal control), which was approved at the 21st Meeting of the Eighth Session of the Board. The annual financial statements of the year ended 31 December 2023 have been audited by KPMG Huazhen LLP and KPMG. The Chinese certified public accountants signing the report are Yang Jie and He Shu from KPMG Huazhen LLP. KPMG Huazhen LLP and KPMG have served Sinopec Corp. since 2021. For details of the number of consecutive years in which the current engagement partners and certified public accountants who have served the Company, please refer to the announcement on re-appointment of the external auditors published on China Securities Journal, Shanghai Securities News, Securities Times and the website of SSE on 27 March 2023, and on the website of Hong Kong Stock Exchange on 26 March 2023. During the reporting period, KPMG Huazhen LLP and KPMG and their affiliates firms provided non- audit service, such as tax consulting and due diligence investigation to the Company, and the fee charged was RMB7.45 million. (2) 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 shareholdings of substantial shareholders and changes in share capital, please refer to page 70 to page 71; for information about meetings of the Board, please refer to page 59 to page 60; for information about meetings held by Board Committees, please refer to page 61; for information about tenure of Non-executive Directors, please refer to page 38; for information about equity interests of Directors, Supervisors and other Senior Management, please refer to page 27; for biographies of Directors, Supervisors and other Senior Management, please refer to page 34 to page 44. 10 DETAILED IMPLEMENTATION OF THE SHARE INCENTIVE SCHEME The Company did not implement any share incentive scheme during the reporting period. Board of Directors, the Supervisory Committee, and Senior Management attended the meetings and conducted in-depth communication with the investors. Some members of the Audit Committee, the Nomination Committee, the Remuneration and Appraisal Committee, the Strategy Committee, and the Sustainable Development Committee attended the AGM. The external auditors of the Company attended the AGM. During the AGM, specially-assigned person of the Company recorded questions raised by investors as well as the feedback, which were related to each Board Committee. In the meetings, investors did not raise questions that need to be answered or matters that need to be paid attention to by each Board Committee. After the AGM, the Company communicated specially with investors. c. 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 and Procedures of Shareholders’ General Meetings, 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 aforementioned 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. 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. d. The eligibility for attending the general meeting, the rights of shareholders, the resolutions at the meeting and the voting procedures are clearly set out in the notice and circular of the general meeting of Sinopec Corp. dispatched to the shareholders. e. Sinopec Corp. has established a special department for communication with shareholders and publishes relevant contact details to facilitate shareholders to make enquiries to the Board in accordance with Articles of Association. 33 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceMa Yongsheng Zhao Dong 11 BIOGRAPHICAL DETAILS OF DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT (1) Directors Ma Yongsheng, aged 62, Chairman of the Board of Sinopec Corp. Mr. Ma is a professor level senior engineer with a Ph.D. degree. Mr. Ma is a member of the 13th and 14th National Committee of Chinese People’s Political Consultative Conference (“CPPCC”) and an academician of the Chinese Academy of Engineering. 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.; in May 2008, he was appointed as Deputy Director General of Exploration and Production Department of Sinopec Corp. (Director General Level); 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 was 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 October 2018, he was appointed as President of Sinopec Corp; in April 2019, he was appointed as Director, President and Vice Secretary of the Leading Party Member Group of China Petrochemical Corporation; in November 2021, he was appointed as Chairman and Secretary of the Leading Party Member Group of China Petrochemical Corporation. Mr. Ma was elected as Director of Sinopec Corp. in February 2016, and was elected as the Chairman of the Board of Sinopec Corp. in November 2021. Zhao Dong, aged 53, Director of Sinopec Corp. Mr. Zhao is a professor level senior accountant with a Ph.D. degree. Mr. Zhao is an alternate member of the 20th Central Committee of the Party. 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 Deputy General Manager of CNPC Nile Company; 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. In November 2016, he was appointed as a Member of the Leading Party Member Group and Chief Accountant of China Petrochemical Corporation; in May 2020, he was appointed as Director and Deputy Secretary of the Leading Party Member Group of China Petrochemical Corporation; in June 2022, he was appointed as Director, President and Vice Secretary of the Leading Party Member Group of China Petrochemical Corporation. In June 2017, he was elected as Chairman of Supervisory Committee of Sinopec Corp.; in May 2021, he was elected as Director of Sinopec Corp. 34 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)Yu Baocai Li Yonglin Lv Lianggong Yu Baocai, aged 59, Director and President of Sinopec Corp. Mr. Yu is a senior engineer with a master’s degree in economics. In September 1999, Mr. Yu was appointed as Deputy General Manager and Member of the CPC Committee of PetroChina Daqing Petrochemical Company; in December 2001, he was appointed as General Manager and Deputy Secretary of CPC Committee of PetroChina Daqing Petrochemical Company; in September 2003, he was appointed as General Manager and Secretary of CPC Committee of PetroChina Lanzhou Petrochemical Company; in June 2007, he was appointed as General Manager and Deputy Secretary of CPC Committee of PetroChina Lanzhou Petrochemical Company and General Manager of Lanzhou Petroleum & Chemical Company; in September 2008, he was appointed as a member of the Leading Party Member Group and Deputy General Manager of China National Petroleum Corporation (“CNPC”) and since May 2011, he acted concurrently as Director of PetroChina Company Limited; in June 2018, he was appointed as a Member of the Leading Party Member Group and Vice President of China Petrochemical Corporation; in September 2020, he was appointed as Senior Vice President of Sinopec Corp. Mr. Yu was elected as Director of Sinopec Corp. in October 2018, and was appointed as President of Sinopec Corp. in November 2021. Li Yonglin, aged 57, Director and Senior Vice President of Sinopec Corp. Mr. Li is a professor level senior engineer with a Ph.D. degree. Mr. Li is a member of the 13th National Committee of CPPCC. He was appointed as Vice General Manager of Sinopec Maoming Company in March 2003; in July 2009, he was appointed as Chief of Preparatory Group for the Beihai Refining Off-Site Reconstruction Project of Sinopec Corp.; in November 2011, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Beihai Refining & Chemical Co., Ltd.; in March 2015, he was appointed as Vice Director General of Refining Division of Sinopec Corp. (Director General Level); in December 2016 he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Tianjin Petrochemical Company, General Manager of Sinopec Tianjin Company and Vice Chairman of SINOPEC SABIC Tianjin Petrochemical Co., Ltd.; in October 2019, he was appointed as Secretary of CPC Committee of Sinopec Tianjin Petrochemical Company and Corporate Representative of Sinopec Tianjin Company; in July 2020, he was appointed as Assistant to the President of China Petrochemical Corporation, concurrently serving as Head of Organizational Department of the Leading Party Member Group, General Manager of Human Resources Department, and General Manager of Human Resources Department of Sinopec Corp.; in November 2020, he was appointed as a member of Leading Party Member Group and Vice President of China Petrochemical Corporation.; in May 2021, he was elected as Director of Sinopec Corp. and was appointed as Senior Vice President of Sinopec Corp. Lv Lianggong, aged 58, Director and Senior Vice President of Sinopec Corp. Mr. Lv is a professor level senior engineer with a master’s degree. In December 2001, he was appointed as Deputy Manager of Sinopec Jinan Company; in August 2008, he was appointed as Manager and Deputy Secretary of the CPC Committee of Sinopec Jinan Company; in December 2008, he was appointed as General Manager and Deputy Secretary of the CPC Committee of Sinopec Jinan Company; in December 2016, he was appointed as General Manager and Deputy Secretary of the CPC Committee of Anqing Petrochemical General Plant of China Petrochemical Corporation and General Manager of Sinopec Corp. Anqing Company; in July 2017, he was appointed to serve a temporary position as a member of the Standing Committee of the CPC Anqing Municipal Committee; in September 2018, he was appointed as the General Manager and Deputy Secretary of the CPC Committee of Sinopec Zhenhai Refining & Chemical Company; in December 2019, he was appointed as Representative and Secretary of the CPC Committee of Sinopec Zhenhai Refining & Chemical Company; in December 2020, he was appointed as Deputy Chief Economist, Director General of Organization Department of Leading Party Member Group and General Manager of Human Resources Department of China Petrochemical Corporation. and General Manager of Human Resource Department of Sinopec Corp.; in June 2021, he was appointed as Director General of the Office of the Organizational Structure Establishment Committee of Leading Party Member Group of China Petrochemical Corporation; in August 2022, he was appointed as a Member of the Leading Party Member Group and Deputy General Manager of China Petrochemical Corporation. In October 2022, he concurrently served as Chief Security Officer of China Petrochemical Corporation; in May 2022, he was elected as Supervisor of Sinopec Corp., and in October 2022, he was appointed as Senior Vice President of Sinopec Corp. and in May 2023, he was elected as Director of Sinopec Corp. 35 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCai Hongbin Ng, Kar Ling Johnny Shi Dan Ng, Kar Ling Johnny, aged 63, Independent Director of Sinopec Corp. Mr. Ng currently is a practicing Certified Public Accountant in Hong Kong, a practicing auditor and accountant in Macau, a Fellow of the Hong Kong Institute of Certified Public Accountants (FCPA), a Fellow of the Association of Chartered Certified Accountant (FCCA), and a Fellow 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 Vice Chairman of KPMG China from October 2015 to March 2016. Mr. Ng currently serves as Independent Director of Metallurgical Corporation of China Ltd. and China Telecom Corporation Limited. In May 2018, he was elected as Independent Director of Sinopec Corp. Cai Hongbin, aged 56, Independent Director of Sinopec Corp. Mr. Cai is the Dean and chair professor of Business School of the University of Hong Kong. Mr. Cai has a Ph.D. degree in Economics. From 1997 to 2005, Mr. Cai taught at the 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, and served as Director of the Applied Economics Department, Assistant to the Dean and Vice Dean of Guanghua School of Management of Peking University. From December 2010 to January 2017, he served as Dean of Guanghua School of Management at Peking University. In June 2017, he joined Business School of the University of Hong Kong. Mr. Cai once served as a member of the 12th National People’s Congress, a member of Beijing Municipal Committee of CPPCC, a member of the 11th Central Committee of China Democratic League, Vice Chairman of Beijing Municipal Committee of China Democratic League and a Chartered Auditor of the National Audit Office of China. He currently serves as an Independent Director of CCB International (Holdings) Limited, China Merchants Finance Holdings Company Limited and Ping An Bank Co., Ltd. In May 2018, he was elected as Independent Director of Sinopec Corp. Shi Dan, aged 62, Independent Director of Sinopec Corp. Ms. Shi is the legal representative and Chairman of China Industrial Economics Society, a member of Expert Advisory Committee of the National Energy Commission and a member of National Expert Committee on Climate Change and enjoys special government subsidies from the State Council. Ms. Shi obtained bachelor’s degree in engineering, master’s degree in economics, master’s degree of development economics and Ph.D. degree in management from Changchun University of Technology, Renmin University of China, Australian National University and Huazhong University of Science and Technology respectively. In October 1993, Ms. Shi was appointed as Research Fellow and Assistant to the Dean of the Institute of Industrial Economics of Chinese Academy of Social Sciences (CASS); in August 2010, Ms. Shi was appointed as a Research Fellow and Deputy Dean of National Academy of Economic Strategy of CASS; in November 2013, she was appointed as a Research Fellow and Secretary of CPC Committee (Deputy Dean) of the Institute of Industrial Economics of CASS; from November 2017 to August 2021, she served concurrently as External Director of China Energy Investment Corporation Limited. In March 2019, she was appointed as Dean of Institute of Industrial Economics of CASS. In May 2021, she was elected as Independent Director of Sinopec Corp. 36 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)Bi Mingjian Bi Mingjian, aged 68, Independent Director of Sinopec Corp. Mr. Bi obtained the certificate of diploma majoring in English from East China Normal University in 1982 and master’s degree in business administration from George Mason University in the United States of America in 1993 respectively. Mr. Bi served as a cadre at Shanghai Subei Haifeng Farm from April 1977 to April 1979; he studied at the External Training Program of the Cadre School of the Ministry of State Farms and Land Reclamation, and subsequently he studied at a farm in Saskatchewan Province of Canada from April 1979 to November 1980; he served as a cadre at the Foreign Affairs Bureau of the Ministry of State Farms and Land Reclamation from November 1980 to December 1983; he served as a member and Deputy Division Chief of the State Farms and Land Reclamation Bureau of the Ministry of Agriculture from January 1984 to December 1985; he served as Operation Officer of the World Bank Representative Office in China from December 1985 to June 1988; he served as Deputy Director of the World Bank project office of China Rural Trust and Investment Corporation from June 1988 to October 1988; he served as Project Economist and Advisor of the World Bank from October 1988 to January 1994; he served as a cadre at People’s Construction Bank of China from January 1994 to July 1995; he served as Senior Manager, Deputy Chief Executive Officer, member and Acting Chairman of the Management Committee, Co-Chief Operating Officer and Co-Head of the Investment Banking Department of China International Capital Corporation Limited (“CICC”) from August 1995 to February 2006; he served as a Senior Advisor to CICC from March 2006 to November 2012; he served as a Managing Partner of HOPU Investment Management Co., Ltd. from November 2012 to March 2015; he served as a non-executive director for China Investment Securities Co., Ltd. (currently known as China CICC Wealth Management Securities Company Limited) from March 2017 to January 2020; from March 2015 to December 2019, he served as Chief Executive Officer and Chairman of Management Committee of CICC; from May 2015 to February 2020, he served as Executive Director of CICC. In May 2021, he was elected as Independent Director of Sinopec Corp. 37 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceLIST OF MEMBERS OF THE BOARD Name Ma Yongsheng Zhao Dong Yu Baocai Li Yonglin Lv Lianggong Cai Hongbin Ng, Kar Ling Johnny Shi Dan Bi Mingjian Gender Male Male Male Male Male Male Male Female Male Age 62 53 59 57 58 56 63 62 68 Position in Sinopec Corp. Tenure Chairman of the Board, Non-executive Director Non-executive Director Executive Director, President Executive Director, Senior Vice President Executive Director, Senior Vice President Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director 2016.2-2024.5 2021.5-2024.5 2018.10-2024.5 2021.5-2024.5 2023.5-2024.5 2018.5-2024.5 2018.5-2024.5 2021.5-2024.5 2021.5-2024.5 LIST OF FORMER MEMBERS OF THE BOARD OF DIRECTORS Name Ling Yiqun Liu Hongbin Gender Male Male Age 61 61 Position in Sinopec Corp Tenure Former Executive Director, Senior Vice President Former Executive Director, Senior Vice President 2018.5-2023.4 2020.5-2023.5 Whether paid by the shareholders of the Company or their related entities in 2023 Yes Yes No Yes Yes No No No No Whether paid by the shareholders of the Company or their related entities in 2023 Yes No Remuneration paid by Sinopec Corp. in 2023 (RMB1,000, before tax) – – 1,123.4 – – 450.0 450.0 450.0 450.0 Remuneration paid by Sinopec Corp. in 2023 (RMB1,000, before tax) – 229.7 Equity interests in Sinopec Corp. (as at 31 December) 2023 2022 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Equity interests in Sinopec Corp. (as at 31 December) 2023 13,000 0 2022 13,000 0 38 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)Zhang Shaofeng Qiu Fasen Wu Bo (2) Supervisors Zhang Shaofeng, aged 52, Chairman of Supervisory Committee of Sinopec Corp. Mr. Zhang is a professor level senior accountant with a master’s degree in business administration. In December 2008, he was appointed as Chief Accountant and Member of the CPC Committee of Trans-Asia Gas Pipeline Company Limited of CNPC; in July 2017, he was appointed as General Manager of Finance Department of CNPC (中國石油天 然氣集團公司) and PetroChina Company Limited; in December 2017, he was appointed as General Manager of Finance Department of CNPC (中國石油天然氣集 團有限公司) and PetroChina Company Limited; in July 2020, he was appointed as Member of the Leading Party Member Group and Chief Accountant of China Petrochemical Corporation. In September 2020, he was elected as Director of Sinopec Corp.; in May 2021, he was elected as Chairman of Supervisory Committee of Sinopec Corp. Wu Bo, aged 50, Supervisor of Sinopec Corp. Mr. Wu is a senior economist with a bachelor’s degree. In May 2012, he was appointed as Chief Accountant and Member of CPC Committee of Sinopec Hainan Refining and Chemical Company Limited; in August 2017, he was appointed as Deputy General Manager and Chief Accountant and Member of CPC Committee of Sinopec Chemical Sales Company Limited; in December 2018, he was appointed as Deputy General Manager and Chief Accountant and Member of CPC Committee of China International United Petroleum and Chemical Company Limited; in December 2019, he was appointed as General Manager of Finance Department of China Petrochemical Corporation; in July 2021, he was also appointed as Chairman of Sinopec Century Bright Capital Investment Limited. In May 2022, he was elected as Supervisor of Sinopec Corp. Qiu Fasen, aged 58, Supervisor of Sinopec Corp. Mr. Qiu is a professor level senior auditor with a master’s degree. In December 2001, he was appointed as the Deputy Director General of Audit Bureau of China Petrochemical Corporation and Deputy Director General of Audit Department of Sinopec Corp.; in January 2007, he was appointed as the Director General of Beijing branch of Audit Bureau (Department) of China Petrochemical Corporation; in November 2010, he was appointed as the Deputy Director General of Audit Bureau of China Petrochemical Corporation; in May 2014, he was appointed as Secretary of CPC Committee and Deputy General Manager of Sinopec Xinjiang Oil Products Company; in March 2015, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Xinjiang Oil Products Company; in December 2018, he was appointed as Director General of Mineral Acreage (Community) Management Department of China Petrochemical Corporation; in December 2019, he was appointed as Deputy General Manager of Audit Department and Deputy Director General (Director General Level) of the Office of Audit Committee of Leading Party Member Group of China Petrochemical Corporation and Deputy General Manager of Audit Department of Sinopec Corp.; in April 2021, he was appointed as General Manager of Audit Department and Director General of the Office of Audit Committee of Leading Party Member Group of China Petrochemical Corporation and General Manager of Audit Department of Sinopec Corp.; in July 2021, he was appointed as Secretary of the CPC Committee of the Audit Centre of China Petrochemical Corporation. In May 2022, he was appointed as Chief Auditor of China Petrochemical Corporation. In May 2022, he was elected as Supervisor of Sinopec Corp. 39 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceZhai Yalin Guo Hongjin Yin Zhaolin Zhai Yalin, aged 60, Supervisor of Sinopec Corp. Mr. Zhai is a professor level senior economist with a bachelor’s degree. In December 2001, he was appointed as Deputy Director General of Audit Bureau of China Petrochemical Corporation and Deputy Director General of Audit Department of Sinopec Corp.; in April 2018, he was appointed as Director General of the Inspection Team of Leading Party Member Group and Deputy Director General of Audit Bureau of China Petrochemical Corporation and Deputy Director General of Audit Department of Sinopec Corp; in October 2020, he was appointed as Executive Director and Secretary of the CPC Committee of Sinopec Baichuan Economic and Trade Co., Ltd.; in May 2022, he was appointed as General Manager of Sinopec Logistics Service Center. In May 2023, he was appointed as General Manager of Retired Personnel Service Center of China Petrochemical Corporation and General Manager of Retired Personnel Service Center of Sinopec Corp. In May 2022, he was elected as Supervisor of Sinopec Corp. Guo Hongjin, aged 58, Employee’s Representative Supervisor of Sinopec Corp. Mr. Guo is a professor level senior engineer with a Ph.D. degree. In July 2013, he was appointed as Deputy General Manager of Sinopec Shengli Oilfield Company; in March 2018, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Shengli Petroleum Administrative Bureau Co., Ltd. and General Manager of Sinopec Shengli Oilfield Company; in December 2018, he was appointed as Executive Director, General Manager and Deputy Secretary of CPC Committee of Sinopec Jianghan Petroleum Administrative Bureau Co., Ltd. and General Manager of Sinopec Jianghan Oilfield Company; in July 2019, he was appointed as Executive Director and Secretary of CPC Committee of Sinopec Jianghan Petroleum Administrative Bureau Co., Ltd. and the representative of Sinopec Jianghan Oilfield Company; in April 2020, he was appointed as General Manager of the Petroleum Exploration & Development Department of Sinopec Corp.; in May 2021, he was elected as Supervisor of Sinopec Corp. In May 2022, he was elected as Employee’s Representative Supervisor of Sinopec Corp. Yin Zhaolin, aged 58, Employee’s Representative Supervisor of Sinopec Corp. Mr. Yin is a professor level senior engineer with a master’s degree in engineering. In April 2010, he was appointed as Deputy General Manager of Sinopec Maoming Company; in January 2017, he was appointed as Executive Deputy General Manager of Sinopec Maoming Company (administrated as a General Manager of a Level-I Largescale Enterprise); in April 2017, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Maoming Petrochemical Company and General Manager of Sinopec Maoming Company; in July 2017, he was appointed to serve a temporary position as a member of the Standing Committee of the CPC Maoming Municipal Committee; in October 2020, he was appointed as Executive Director and Secretary of CPC Committee of the Sinopec Maoming Petrochemical Company and the representative of the Sinopec Maoming Company, head of Maoming-Zhanjiang Integration Leading Group; in May 2021, he was elected as Supervisor of Sinopec Corp. In May 2022, he was elected as Employee’s Representative Supervisor of Sinopec Corp. 40 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)Chen Yaohuan Chen Yaohuan, aged 60, Employee’s Representative Supervisor of Sinopec Corp. Mr. Chen is a professor level senior engineer with a Master’s degree awarded by Central Party School of the CPC. In October 2008, he was appointed as Deputy Director General of Refining Department of Sinopec Corp.; in March 2015, he was appointed as Executive Director, General Manager and Deputy Secretary of the CPC Committee of Sinopec Beihai Refining and Chemical Limited Liability Company; in May 2015, he was appointed as a member of the Standing Committee of the CPC Beihai Municipal Committee; in June 2018, he was appointed as General Manager and Deputy Secretary of the CPC Committee of Guanzhou Branch of Sinopec Corp. and General Manager of Guangzhou Branch of Sinopec Group Asset Management Co., Ltd; in July 2019, he was appointed as Deputy Director General (Director General Level) and Chief Engineer of Refining Department of Sinopec Corp.; in October 2019, he was appointed concurrently as Chairman of Sinopec Kantons International Limited and Sinopec Kantons Holdings Limited in December 2019, he was appointed as General Manager and Chief Engineer of Refining Department of Sinopec Corp., Vice Chairman and Chairman of Audit Committee of Yanbu Aramco Sinopec Refining Company Ltd.; in August 2020, he was appointed concurrently as Executive Director and Secretary of CPC Committee of Sinopec Petroleum Marketing Company Limited and Chairman of Sinopec Petroleum Storage and Reserve Limited. In January 2021, he was elected as Employee’s Representative Supervisor of Sinopec Corp. 41 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceLIST OF MEMBERS OF THE SUPERVISORY COMMITTEE Name Zhang Shaofeng Qiu Fasen Wu Bo Zhai Yalin Guo Hongjin Yin Zhaolin Chen Yaohuan Gender Male Male Male Male Male Male Male Age 52 58 50 60 58 58 60 Position in Sinopec Corp. Tenure Chairman of the Supervisory Committee Supervisor Supervisor Supervisor Employee’s Representative Supervisor Employee’s Representative Supervisor Employee’s Representative Supervisor 2021.5-2024.5 2022.5-2024.5 2022.5-2024.5 2022.5-2024.5 2022.5-2024.5 2022.5-2024.5 2021.1-2024.5 LIST OF FORMER MEMBERS OF THE SUPERVISORY COMMITTEE Whether paid by the shareholders of Sinopec Corp. or their related entities in 2023 Yes Yes Yes Yes No No No Remuneration paid by Sinopec Corp. in 2023 (RMB1,000, before tax) – – – – 1,564.6 1,000.6 1,549.7 Whether paid by the shareholders of Sinopec Corp. or their related entities in 2023 Remuneration paid by Sinopec Corp. in 2023 (RMB1,000, before tax) Equity interests in Sinopec Corp. (as at 31 December) 2023 2022 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Equity interests in Sinopec Corp. (as at 31 December) 2023 0 2022 0 Position in Sinopec Corp. Tenure Former Supervisor 2021.5-2023.5 – Yes Name Zhang Zhiguo Gender Male Age 61 42 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)Niu Shuanwen Shou Donghua Huang Wensheng (3) Other Members of Senior Management Niu Shuanwen, aged 49, Senior Vice President of Sinopec Corp. Mr. Niu is a professor level senior engineer with a doctor’s degree. In October 2018, he was appointed as Deputy General Manager of Sinopec Shengli Oilfield Company; in May 2020, he was appointed as General Manager and Deputy Secretary of CPC Committee of Sinopec Shengli Petroleum Administrative Bureau Co., Ltd., and General Manager of Sinopec Shengli Oilfield Company; in January 2022, he was appointed as Executive Director and Secretary of CPC Committee of Sinopec Shengli Petroleum Administrative Bureau Co., Ltd., and Representative of Sinopec Shengli Oilfield Company; in June 2023, he was appointed as Member of the Leading Party Member Group and Vice President of China Petrochemical Corporation. In July 2023, he was appointed as Senior Vice President of Sinopec Corp. Shou Donghua, aged 55, Chief Financial Officer of Sinopec Corp. Ms. Shou is a professor level senior accountant with a Master’s degree of business administration. 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 China Petrochemical Corporation and Deputy Director General of Human Resource Department of Sinopec Corp.; in August 2017, she was appointed as the Secretary of CPC Committee and Deputy General Manager of Sinopec Zhenhai Refining & Chemical Company; in September 2018, she was appointed as the Director General of Finance Department of China Petrochemical Corporation; in December 2019, she was appointed as General Manager of Finance Department of Sinopec Corp.; in January 2020, she was appointed as Chief Financial Officer of Sinopec Corp. Huang Wensheng, aged 57, 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.; in August 2009, he was appointed as the Deputy Director of the General Office of China Petrochemical Corporation, and 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 June 2018, he was appointed as Director General of Department of Capital Management and Financial Services of Sinopec Corp.; in July 2018, he was appointed as Chairman, General Manager and Secretary of CPC Committee of Sinopec Capital Co., Ltd.; in December 2019, he was appointed as General Manager of Department of Capital Management and Financial Services of Sinopec Corp. In May 2012, he was appointed as Secretary to the Board of Directors of Sinopec Corp.; in May 2014, he was appointed as Vice President of Sinopec Corp. 43 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceGuo Xusheng Guo Xusheng, aged 58, Chief Geologist of Sinopec Corp. Mr. Guo is a professor level senior engineer with a doctor’s degree and an academician of the Chinese Academy of Engineering. In January 2007, he was appointed as the deputy manager, Member of CPC Committee, Commander of Sichuan-North China Exploration Headquarter, Secretary of CPC Committee of Sinopec Southern Exploration and Production Company; in March 2007, he was appointed as the Manager of Sinopec Southern Exploration and Production Company; in December 2008, he was appointed as General Manager of Sinopec Southern Exploration and Production Company. In September 2014, he was appointed as General Manager and Member of CPC Committee of Sinopec Exploration Company; in November 2020, he was appointed as Deputy Chief Geologist of Sinopec Corp.; in July 2022, he was appointed as Dean and Deputy Party Secretary of CPC Committee of Sinopec Petroleum Exploration and Production Research Institute, and Executive Director and General Manager of Sinopec Petroleum Exploration and Production Research Institute Co. Ltd. In January 2024, he was appointed as Chief Geologist of Sinopec Corp. 44 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)LIST OF MEMBERS OF THE SENIOR MANAGEMENT Name Niu Shuanwen Shou Donghua Huang Wensheng Guo Xusheng Gender Male Female Male Male Age 49 55 57 58 Position in Sinopec Corp. Senior Vice President Chief Financial Officer Vice President, Board Secretary Chief Geologist LIST OF FORMER MEMBERS OF THE SENIOR MANAGEMENT Name Yu Xizhi Zhao Rifeng Gender Male Male Age 61 61 Position in Sinopec Corp. Former Vice President Former Vice President 12 INFORMATION ON APPOINTMENT OR TERMINATION OF DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT On 6 January 2023, Mr. Ng, Kar Ling Johnny served as the Independent Director of China Telecom Corporation Limited. On 16 May 2023, Mr. Liu Hongbin resigned as Executive Director, member of the Strategy Committee of the Board, Senior Vice President of Sinopec Corp. due to his age; Mr. Zhao Rifeng resigned as Vice President of Sinopec Corp. due to his age. On 9 March 2023, Mr. Yu Xizhi resigned as Vice President of Sinopec Corp. due to his age. On 19 May 2023, Mr. Zhang Zhiguo resigned as Supervisor of Sinopec Corp. due to his age. On 6 April 2023, Mr. Ling Yiqun resigned as Executive Director, member of the Strategy Committee of the Board, Senior Vice President of Sinopec Corp. due to his age. On 30 May 2023, Mr. Lv Lianggong was elected as Executive Director of the eighth session of the Board of Sinopec Corp. Remuneration paid by Sinopec Corp. in 2023 (RMB1,000, before tax) Whether paid by the shareholders of Sinopec Corp. or their related entities in 2023 Equity interests in Sinopec Corp. (as at 31 December) 2023 2022 – 1,632.3 1,617.0 0 Yes No No No 0 0 0 0 0 0 0 0 Remuneration paid by Sinopec Corp. in 2023 (RMB1,000, before tax) 411.4 525.8 Whether paid by the shareholders of Sinopec Corp. or their related entities in 2023 Equity interests in Sinopec Corp. (as at 31 December) 2023 2022 No No 0 0 0 0 On 30 June 2023, Mr. Ng, Kar Ling Johnny ceased to be the Independent Non-Executive Director of China Vanke Co., Ltd. On 25 July 2023, Mr. Niu Shuanwen was appointed as Senior Vice President of Sinopec Corp. On 22 January 2024, Mr. Guo Xusheng was appointed as Chief Geologist of Sinopec Corp. 45 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate Governance13 CHANGE OF SHAREHOLDING OF 15 CONTRACTS WITH DIRECTORS AND 17 THE COMPANY’S EMPLOYEES DIRECTORS, SUPERVISORS, AND THE SENIOR MANAGEMENT There is no change in shareholdings of Sinopec Corp. of Directors, Supervisors and other senior managements during the reporting period. 14 CONTRACTUAL INTERESTS OF DIRECTORS AND SUPERVISORS As of 31 December 2023 or any time during the reporting period, no Director or Supervisor entered into any agreement with Sinopec Corp., its controlling shareholder, any subsidiary or related subsidiary which shall substantially benefit such Director or Supervisor. SUPERVISORS The Company has entered into service contracts with all the Directors and Supervisors. None of the Directors and Supervisors has entered into or will enter into service contracts that are not terminable by the Company within one year without compensation (except for statutory compensation). 16 REMUNERATION OF DIRECTORS, SUPERVISORS, AND THE SENIOR MANAGEMENT During this reporting period, a total of 14 Directors, Supervisors and other senior managers received remuneration from Sinopec Corp. with a total amount of RMB11.4545 million. As at 31 December 2023, the Company has a total of 368,009 employees. There are a total of 296,762 retired employees to be reimbursed by the Company. Sinopec Marketing Co. Limited and China International United Petroleum & Chemicals Co. Limited, the principal subsidiaries of Sinopec Corp., have 119,212 and 568 employees respectively. The male and female ratio of all employees is 2.3:1, achieved the Company’s target for the female representation, and the male and female ratio of the members of senior management is 13.6:1. THE BREAKDOWN OF NUMBER OF EMPLOYEES BY OPERATION SEGMENTS IS AS FOLLOWS: (INCLUDING EXPLORATION AND PRODUCTION, REFINING, MARKETING AND DISTRIBUTION, CHEMICALS, R&D AND OTHERS) Marketing and Distribution 119,212 32.4% R&D 6,506 1.8% Other Segments 4,392 1.2% Exploration and Production 117,344 31.9% Refining 55,357 15% Chemicals 65,198 17.7% EMPLOYEES’ PROFESSIONAL STRUCTURE AS FOLLOWS: (INCLUDING PRODUCTION, SALES, TECHNOLOGY, FINANCE, ADMINISTRATION AND OTHERS) Technology 86,257 23.4% Finance 8,016 2.2% Administration 26,554 7.2% Others 6,157 1.7% Production 134,314 36.5% Sales 106,711 29% 46 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)EDUCATIONAL BACKGROUND STRUCTURE FOR EMPLOYEES AS FOLLOWS: (INCLUDING MASTER’S DEGREE AND ABOVE, UNDERGRADUATE, JUNIOR COLLEGE, SENIOR HIGH SCHOOL AND TECHNICAL SCHOOL DEGREES OR BELOW) Senior high school and technical school degrees or below 115,840 31.5% Master’s degree or above 31,199 8.5% Undergraduate 107,365 29.2% Junior college 86,290 23.4% Technical secondary school 27,315 7.4% R&D PERSONNEL EDUCATIONAL STRUCTURE: (INCLUDING PHD, MASTER’S DEGREE, UNDERGRADUATE AND BELOW) 2,842 2,271 1,393 3,000 2,500 2,000 1,500 1,000 500 0 R&D PERSONNEL AGE STRUCTURE: PHD Master’s Degree Undergraduate or below 2,500 2,000 1,500 1,000 500 0 2,137 1,783 1,212 1,374 21-30 31-40 41-50 51 and above 47 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate Governance18 CHANGES OF CORE TECHNICAL TEAM OR 20 REMUNERATION POLICY 21 TRAINING PROGRAMS KEY TECHNICIANS During the reporting period, there are no significant changes of core technical team or key technicians in the Company. 19 EMPLOYEE BENEFITS SCHEME Details of the Company’s employee benefits scheme are set out in Note 40 of the financial statements prepared under IFRS Accounting Standards of this annual report. As at 31 December 2023, the Company had a total of 296,762 retired employees. All of them participated in the basic pension schemes administered by provincial governments (or those of autonomous regions or municipalities). Government- administered pension funds are responsible for the payments of basic pensions. Based on a relatively unified basic remuneration system, Sinopec Corp. has established its remuneration system based on the value of positions, performance & contribution, with an aim at improving employee capabilities, and has constantly improved employee performance evaluation and incentive & discipline mechanisms. During the reporting period, the Company strengthened coordination and the top-level design for training programs, improved the high-quality training system, and conducted training programs for all types of talents. The headquarter trained 5,139 key talents. The training for managers, experts, technical personnel, and international talents improved the comprehensive quality and performance ability of all kinds of talents. The Company enhanced the intelligent and accurate level of training by promoting the application of training online through which over 50 million hours were trained online this year. 48 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate GovernanceCORPORATE GOVERNANCE (CONTINUED)1 ENVIRONMENTAL INFORMATION 3 MEASURES TAKEN TO MITIGATE CARBON 4 ENVIRONMENTAL PROTECTION Sinopec Corp. established the HSE management system since 2001 and continued to improve it. During the reporting period, Sinopec Corp. has formulated or revised 2 environmental management policies, and formed the environmental protection system consisting of 16 core policies as the main body. 2 WORK CONDUCTED IN ECOLOGICAL PROTECTION, POLLUTION PREVENTION AND ENVIRONMENTAL RESPONSIBILITIES PERFORMANCE BY THE COMPANY IN THE REPORTING PERIOD In the reporting period, the Company deepened the campaign of pollution prevention, built the country’s first pilot of “no waste group”, persistently focused on ecological and environmental protection in the Yangtze and Yellow River basins, promoted energy conservation and carbon reduction actions, persistently carried out Green Enterprise Action. The sewage COD and sulphur dioxide emissions decreased by 4.3% and 5.0% respectively, and the solid waste was 100% properly disposed. EMISSION AND ITS EFFECT During the reporting period, the Company orderly promoted the adjustment and optimization of industrial structure and energy consumption structure, strengthened the development and application of key low-carbon technologies, strengthened the management and control of emission of CO2 and methane and achieved good results in carbon emission reduction. In 2023, the Company decreased GHG emissions by 2.24 million tonnes of CO2 equivalent through energy conservation and consumption reduction, 1.749 million tonnes of CO2 were recycled, used 0.847 million tons of carbon dioxide for EOR, 874 million cubic meters of methane were recovered which was equivalent to reducing 13.00 million tonnes of CO2 emissions. SOLUTIONS OF COMPANIES AND THEIR SUBSIDIARIES AS MAJOR POLLUTANT DISCHARGING COMPANIES IDENTIFIED BY ENVIRONMENTAL PROTECTION DEPARTMENTS (1) Pollutant discharge information In the reporting period, certain subsidiaries of Sinopec Corp. listed as major pollutant discharge units announced by national or local ecological and environmental authorities have acquired their pollutant discharge license in accordance with the requirements of the national list of fixed pollution source emission permit classification management and disclosed environmental information as required by the relevant authorities and local government. The details of such information were published on national pollutant discharge license management information platform (https://permit.mee.gov.cn/permitExt/ defaults/default-index!getInformation. action) and the local government website. Discharge information summarized by category is as follows: (a) Discharge of air pollutants1 Pollutant type SO2 No. 1 Number of vents involved2 Ways of discharge3 Discharge standards implemented4 1,251 continuous 2 NOX 1,243 continuous Discharge Standards for Air Pollutants from Thermal Power Plants (GB 13223-2011) Discharge Standards for Air Pollutants from Boilers (GB13271-2014) Discharge Standards for Pollutants in the Petroleum Refining Industry (GB31570-2015) Discharge Standards for Pollutants in the Petrochemical Industry (GB31571-2015) Discharge Standards for Pollutants in the Synthetic Resin Industry (GB31572-2015) Discharge Standards for Air Pollutants from Thermal Power Plants (GB 13223-2011) Discharge Standards for Air Pollutants from Boilers (GB13271-2014) Discharge Standards for Pollutants in the Petroleum Refining Industry (GB31570-2015) Discharge Standards for Pollutants in the Petrochemical Industry (GB31571-2015) Discharge Standards for Pollutants in the Synthetic Resin Industry (GB31572-2015) Permitted concentration limit5 Actual annual average concentration6 Approved actual discharge amount Discharge compliance 35-200 mg/m3 5-50 mg/m3 4,661 tonnes 50-240 mg/m3 20-100 mg/m3 19,984 tonnes The compliance rate is 99.99%, the details of which are subject to the announcement by the ecological authorities. The compliance rate is 99.99%, the details of which are subject to the announcement by the ecological authorities. Note 1: This report discloses the discharge of the Company’s oilfield, refining and chemical companies and specialized companies that are included in the key management of emission permits. The data is calculated by self-monitoring data and is ultimately subject to the data published by the local ecological authorities. Note 2: Count the number of organized vents involved for this pollutant. Note 3: Intermittent discharge from some vents. Note 4: The discharge standards implemented are the major industrial discharge standards. Other standards such as local emission standards implemented by each company can be found in the public information of the ecological authorities. Note 5: The permitted concentration limit is major industrial discharge standard limit. The limit of other standards implemented by each company can be found in the public information of the ecological authorities. Note 6: The actual annual average concentration of the main discharge outlets is within the corresponding disclosure range, and the public information of the ecological and environmental department can be consulted for details. 49 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Environment and Social ResponsibilitiesENVIRONMENT AND SOCIAL RESPONSIBILITIES (b) Discharge of water pollutants1 No. 1 2 Pollutant type COD Ammonia and nitrogen Number of vents involved Ways of discharge2 Discharge standards implemented3 76 continuous 75 continuous Discharge Standards for Pollutants in the Petroleum Refining Industry (GB31570-2015) Discharge Standards for Pollutants in the Petrochemical Industry (GB31571-2015) Discharge Standards for Pollutants in the Synthetic Resin Industry (GB31572-2015) Discharge Standards for Pollutants in the Petroleum Refining Industry (GB31570-2015) Discharge Standards for Pollutants in the Petrochemical Industry (GB31571-2015) Discharge Standards for Pollutants in the Synthetic Resin Industry (GB31572-2015) Permitted concentration limit4 Actual annual average concentration5 Approved actual discharge amount Discharge compliance 40-60 mg/L 10-50 mg/L 4,550 tonnes Daily average data has 100% compliance rate. 5-8 mg/L 0.5-4 mg/L 71 tonnes Daily average data has 100% compliance rate. Note 1: This report discloses the discharge of the Company’s oilfield, refining and chemical companies and specialized companies that are included in the key management of discharge permits. The data is calculated by self-monitoring data and is ultimately subject to the data published by the local ecological authorities. Note 2: Intermittent discharge from some vents. Note 3: The discharge standards implemented are the major industrial discharge standard. Other standards such as local emission standards implemented by each company can be found in the public information of the ecological authorities. Note 4: The permitted concentration limit is major industrial discharge standard limit. The limit of other standards implemented by each company can be found in the public information of the ecological authorities. Note 5: The actual annual average concentration of the main discharge outlets is within the corresponding disclosure range, and the public information of the ecological and environmental department can be consulted for details. (2) Construction and operation of pollution (4) Contingent scheme for sudden (7) Other environmental information to be prevention facilities In the reporting period, the Company 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, maintained effective and stable operation of pollution prevention and control facilities. For details, please refer to the 2023 Sinopec Corp. Sustainability Report. (3) Environmental influence evaluation for construction projects and other administrative permit for environmental protection In the reporting period, the Company strictly standardized environmental protection management for construction projects, enforced whole process environmental protection management on construction and operation, with measures of the “simultaneous three” of the environmental protection implemented, all new projects have acquired approval for environmental evaluation from government. environmental incident In the reporting period, the Company complied with the requirements for environmental incident contingent scheme by the State and persistently improved its contingent scheme against sudden environmental incidents of enterprises and weather with severe pollution. (5) Scheme for environmental self- monitoring In the reporting period, the Company continuously improved its self-monitoring scheme in accordance with the industry guideline, enforced the requirements for sewage, flue gas and noise monitoring, and disclosed the monitor information as required. (6) Administrative penalties due to environmental problems in the reporting period In the reporting period, to the knowledge of the Company, Sinopec Corp. and its subsidiaries were subject to the environmental administrative penalty of RMB1.7355 million. The details of administrative penalties were published on the websites of local ecological and environmental authorities. disclosed In the reporting period, for subsidiaries not listed as major pollution units, the Company has acquired related permissions from national and local government, and enforced environmental protection measures. The above- mentioned subsidiaries are not obliged to disclose in accordance with the requirements of national and local ecological environment authorities. 5 DONATION AND INVESTMENT IN PUBLIC WELFARE PROJECT During the reporting period, the Company implemented 226 donations with an expenditure over RMB0.3 billion, mainly focusing on expanding achievements in poverty-alleviation and rural revitalization and public welfare programs, including RMB156 million used in rural revitalization. For details, please refer to the 2023 Sinopec Corp. Sustainability Report. 50 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Environment and Social ResponsibilitiesENVIRONMENT AND SOCIAL RESPONSIBILITIES (CONTINUED) (8) Zhenhai 1,500,000 tpa Ethylene and Downstream High-end New Material Industry Cluster Project The project mainly consists of 1,500,000 tpa ethylene units, downstream processing units, supporting utilities and auxiliary facilities, etc. The project began in November 2023 and mechanical completion is expected to finish in December 2025. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB2.7 billion. (9) Maoming ethylene upgrading project The project mainly consists of 3,000,000 tpa RTC united plant, 1,000,000 tpa ethylene unit, supporting utilities and auxiliary facilities, etc. The project began in June 2023 and mechanical completion is expected to finish in December 2026. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB1.8 billion. 1 MAJOR PROJECTS (5) Longkou LNG Project The project mainly consists of a wharf, terminal and power plant warm drainage and water intake. The designed LNG capacity in the first phase is 6 million tons per year. One LNG berth with 0.266 million cubic meters will be modified and four 0.22 million cubic meter storage tanks will be newly built up. The project started in November 2021 and is expected to put into operation by the end of 2024. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB4.5 billion. (6) Chuanxi natural gas project (phase 1) The project mainly consists of 1.77 billion cubic meter per year purified gas capacity and 16 wells. The project started in 2019 and is expected to put into operation in January 2024. The project investment consists of the Company’s self-owned fund, joint stock company’s fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB5.8 billion. (7) Shengli Shale Oil project The project mainly launches shale oil exploration and development in Jiyang depression, planning to build a new production capacity of 1 million tonnes per year in the 14th Five Year Plan. The project started in 2019, has built 113 wells and generated production capacity of 509 thousand tonnes. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB9.7 billion. (1) Zhenhai Refining & Chemical Expansion Project (phase 2) The project mainly consists of building 11,000,000 tpa refinery project and 600,000 tpa propane dehydrogenation and downstream processing units, etc. The project began in June 2022 and mechanical completion is expected to be achieved in December 2024. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB17.9 billion. (2) Tianjin Nangang Ethylene and Downstream High-end New Material Industry Cluster Project The project mainly consists of 1,200,000 tpa ethylene units and downstream processing units, etc. The project began in May 2021 and mechanical completion was achieved in the end of 2023. The project investment consists of the self- owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB14.5 billion. (3) Yizheng PTA Project The Yizheng 3,000,000 tpa PTA project mainly consists of oxidation units, purification units and auxiliary units, etc. The project started in July 2021 and the mechanical completion is expected to be achieved in March 2024. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB4.7 billion. (4) Tianjin LNG Project (phase 2) The project mainly consists of the construction of a new wharf, and five new 220,000-cubic-meter storage tanks etc. LNG capacity will reach 10.8 million tons per year after phase 2 expansion is completed. The project started in January 2019 and was put into operation by end of 2023. The project investment consists of the self-owned fund and bank loan. As of 31 December 2023, the aggregate amount invested was RMB4.6 billion. 51 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Significant EventsSIGNIFICANT EVENTS4. CAPITAL INCREASE IN HUNAN 5. THE ISSUANCE OF A SHARES BY SINOPEC PETROCHEMICAL On 26 October 2023, Sinopec Corp., the Assets Company and Hunan Petrochemical entered into the Capital Increase Agreement. Pursuant to the Capital Increase Agreement, Sinopec Corp. shall make a capital contribution to Hunan Petrochemical with the net assets relating to the production and operation of oil refining and petrochemical of Sinopec Corp. Changling Branch, which were equivalent to RMB5,600.3328 million, and cash of RMB4.3 billion, which was intended to be used for the construction of Hunan Petrochemical’s Ethylene Refining and Petrochemical Integration Project (乙 烯煉化一體化項目); the Assets Company shall make a capital contribution to Hunan Petrochemical with the net assets relating to the production and operation of oil refining and petrochemical of the Assets Company Changling Branch and the Assets Company Baling Branch, which were equivalent to RMB1,077.5839 million. On 1 January 2024, Sinopec Corp. and the Assets Company have transferred the Capital Contribution Assets to Hunan Petrochemical in accordance with the relevant provisions of the Transaction Agreements, and all rights, obligations, liabilities and risks of the Capital Contribution Assets have been transferred to Hunan Petrochemical. For details and definitions, please refer to the announcements published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times, and on the website of SSE on 27 October 2023 and 3 January 2024, respectively, and on the website of Hong Kong Stock Exchange on 26 October 2023 and 2 January 2024, respectively. CORP. TO THE TARGET SUBSCRIBER (CHINA PETROCHEMICAL CORPORATION) On 24 March 2023, the 15th meeting of the eighth session of the Board of Sinopec Corp. considered and approved resolutions regarding the issuance of A Shares to China Petrochemical Corporation, the controlling Shareholder of the Company (the “Issuance”). On 30 May 2023, the annual general meeting of Sinopec Corp. for 2022 considered and approved the above resolutions. The plan of the Issuance is to fully issue A Shares to China Petrochemical Corporation, the controlling Shareholder of Sinopec Corp. The Issue Price is the average trading price of A Shares of Sinopec Corp. in the 20 trading days preceding the Pricing Benchmark Date. The A Shares to be subscribed by China Petrochemical Corporation shall not be transferred within thirty-six (36) months from the completion date of the Issuance. The total gross proceeds to be raised from the Issuance shall be no more than RMB12 billion (inclusive), and all of the net proceeds (after deducting the issuance expenses) will be used for the construction of projects in relation to clean energy and high value-added materials. On 18 March 2024, Sinopec Corp. completed the Issuance and the registration of new Shares. For details and definitions, please refer to the announcements and/or circulars published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times and on the website of SSE on 27 March 2023, 31 May 2023, 16 March 2024 and 20 March 2024 and on the website of Hong Kong Stock Exchange on 26 March 2023, 12 April 2023, 30 May 2023, 15 March 2024 and 19 March 2024. 2. ACTUAL DAILY RELATED TRANSACTIONS ENTERED INTO BY THE COMPANY AND CHINA OIL & GAS PIPELINE NETWORK CORPORATION DURING THE REPORTING PERIOD On 13 January 2023, the Board of Sinopec Corp. approved the daily related transaction cap in relation to refined oil pipeline transportation services between Sinopec Marketing Company Limited and China Oil & Gas Pipeline Network Corporation for the period from 1 January 2023 to 31 December 2023. For details, please refer to the announcements published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times, and on the website of SSE on 14 January 2023 and on the website of Hong Kong Stock Exchange on 13 January 2023. The actual executed amount of the daily related transactions of Sinopec Marketing Company Limited and China Oil & Gas Pipeline Network Corporation regarding refined oil pipeline transportation services from 1 January 2023 to 31 December 2023 was RMB5.355 billion. 3. SINOPEC CORP. HAS DEREGISTERED IN THE U.S. AND TERMINATED ITS INFORMATION DISCLOSURE OBLIGATIONS UNDER THE EXCHANGE ACT Sinopec Corp. has filed a Form 15F with the United States Securities and Exchange Commission on 8 December 2023 (EST) to deregister its American depositary shares (the “ADSs”) and the underlying H shares of Sinopec Corp., and terminated its information disclosure obligations under section 13(a) and section 15(d) of U.S. Securities Exchange Act of 1934 (as amended, the “Exchange Act”) pursuant to Rule 12h-6 under the Exchange Act. Deregistration and termination of Sinopec Corp.’s information disclosure obligations under the Exchange Act have become effective on 7 March 2024 (EST). 52 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Significant EventsSIGNIFICANT EVENTS (CONTINUED)6 PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION Background Undertakings related to Initial Public Offerings (IPOs) Type of Undertaking IPOs Party Contents China Petrochemical Corporation 1. 2. 3. 4. 5. 6. Compliance with the connected transaction agreements; Solving the issues regarding the legality of land- use rights certificates and property ownership rights certificates within a specified period of time; Implementation of the Reorganisation Agreement (please refer to the definition of Reorganisation Agreement in the H share prospectus of Sinopec Corp.); Granting licenses for intellectual property rights; Avoiding competition within the same industry; Abandonment of business competition and conflicts of interest with Sinopec Corp. 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. China Petrochemical Corporation promises not to transfer its subscribed A-shares within 36 months from the completion of this issuance. China Petrochemical Corporation promises that within six months after the completion of this issuance, China Petrochemical Corporation and its controlled enterprises will not reduce their holdings of Sinopec stocks. Term for performance From 22 June 2001 Whether bears deadline or not Whether strictly performed or not No Yes Within 10 years after 29 April 2014 or the date when China Petrochemical Corporation acquires the assets Yes Yes The commitment time is March 2023, and the commitment period is 36 months from the completion date of the issuance The commitment time is March 2023, and the commitment period is within six months after the completion of this issuance Yes Yes Yes Yes Other undertakings Other China Petrochemical Corporation Commitment related to refinancing Restricted sale of shares China Petrochemical Corporation No reduction China Petrochemical Corporation 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 has Sinopec Corp. made any profit forecast in relation to any asset or project. 7 SIGNIFICANT EQUITY INVESTMENT For details, please refer to item 4 “CAPITAL INCREASE IN HUNAN PETROCHEMICAL” of the section “Significant Events”. 8 SIGNIFICANT SALE OF ASSETS OR EQUITY In the reporting period, no significant sale of assets or equity occurred by the Company. 53 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Significant Events 9 MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE External guarantees (excluding guarantees for controlled subsidiaries) Unit: RMB million Period of guarantee Type Principal debt condition April 2018-December 2031 December 2021-December 2035 (the mature date is estimated) Joint and several liability guarantee Joint and several liability guarantee Normal performance Normal performance Whether completed or not Whether overdue or not Amount of overdue guarantee Counter- guaranteed No No No No – – No No guaranty – – Guarantor Sinopec Corp. Sinopec Corp. Relationship with the Company The listed company itself The listed company itself Name of guaranteed company Zhong An United Coal Chemical Co., Ltd. Russian Amur Natural Gas Chemical Integrated LLC Transaction date (date of signing) Apr-18 Amount*1 4,828 3,735*3 Dec-21 Total amount of guarantees provided during the reporting period*4 Total amount of guarantees outstanding at the end of reporting period*4 (A) Guarantees by the Company to the controlled subsidiaries Total amount of guarantee provided to controlled subsidiaries during the reporting period Total amount of guarantee for controlled subsidiaries outstanding at the end of the reporting period (B) Total amount of guarantees for the Company (including those provided for controlled subsidiaries) Total amount of guarantees (A+B) The proportion of the total amount of guarantees to the Sinopec Corp.’s net assets (%) Among which: 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 Whether guaranteed for connected parties (yes or no)*2 No No 62 8,563 0 3,541 12,104 1.5% 0 8,563 0 8,563 None * 1: Guarantee amount refers to the actual amount of guarantee liability that the company may undertake during the reporting period within the approved guarantee limit. * 2: As defined in the Rules Governing the Listing of Stocks on Shanghai Stock Exchange. * 3: Excluding the interest corresponding to the loan principal agreed in the guarantee contract, export credit premium and other expenses * 4: 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. 54 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Significant EventsSIGNIFICANT EVENTS (CONTINUED) 10 SIGNIFICANT LITIGATION AND 13 CREDIBILITY FOR THE COMPANY, 15 ENTRUSTED FINANCING AND LOAN ARBITRATION No significant litigation or arbitration relating to the Company occurred during the reporting period. 11 INSOLVENCY AND RESTRUCTURING During the reporting period, the Company was not involved in any insolvency or restructuring matters. 12 OTHER MATERIAL CONTRACTS Saved as disclosed by Sinopec Corp., the Company did not enter into any material contracts subject to disclosure obligations during the reporting period. CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER During the reporting period, the Company and its controlling shareholder did not fail to perform any effective judgments of the courts or fail to repay any substantial amount of debt due. 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 trust, contracting or lease agreement subject to disclosure obligations. (1) ENTRUSTED FINANCING During the reporting period, the Company was not involved in any entrusted financing. (2) ENTRUSTED LOAN During the reporting period, the Company was not involved in any entrusted loan. (3) OTHER LOAN Type Project construction loan Fund sources Self-owned fund Transaction amount 662 Undue amount 7,288 Overdue 0 Unit: RMB million (4) OTHER FINANCING AND DERIVATIVE INVESTMENT During the reporting period, the Company was not involved in other financing or derivative investment. 16 BUSINESS WITH SINOPEC FINANCE AND CENTURY BRIGHT (1) DEPOSIT Related party Related party relationship Daily Cap Sinopec Finance Century Bright China Petrochemical Corporation 51%; Sinopec Corp. 49% China Petrochemical Corporation 100% RMB80 billion by Sinopec Finance and Century Bright Interest rate range current: 0.35%-1.725%; time deposit: 1.35%-7.4% current: 0%-0.5%; time deposit: 0.5%-6.39% Unit: RMB million Transaction amount Balance at beginning 12,599 Time deposit 9,399 Time deposit withdrawn 9,049 Net changes in current deposit （5,456） Balance in the end 7,493 52,465 572,524 564,294 (2,221) 58,474 Note: generally, the deposit interest rate at Sinopec Finance and Century Bright is no lower than that of the same type of deposits for the same period from major commercial banks. (2) LOAN Related party Related party relationship Annual credit line Interest rate range Balance at beginning Century Bright Sinopec Finance Sinopec Group 100% Sinopec Group 51%; Sinopec Corp. 49% 103,326 1.72%-6.39% 73,793 1.08%-4.99% 1,498 28,049 Unit: RMB million Transaction amount Total withdrawal 345,673 96,690 Total repayment 345,747 88,915 Balance in the end 1,424 35,824 Note: generally, the loan interest rate at Sinopec Finance and Century Bright is no higher than that of the same type of deposits for the same period from major commercial banks. 55 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Significant Events (3) CREDIT OR OTHER FINANCIAL BUSINESS Related party Sinopec Finance Related party relationship Sinopec Group 51%; Sinopec Corp. 49% Note: the occurred amount includes the newly issued bills and discounts in the year Unit: RMB million Business nature Credit Discounted bills Balance in the end Transaction amount 14,145 0 25,015 5,809 In order to regulate connected transactions between the Company and Sinopec Finance Co. (Sinopec Corp.’s domestic settlement center) and to ensure the safety and liquidity of the deposits of the Company at Sinopec Finance Co., 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, ensuring the Company’s discretion to use and control its deposits with Sinopec Finance Co.. At the same time, as the controlling shareholder of Sinopec Finance Co., China Petrochemical Corporation undertook that in case of an emergency when Sinopec Finance Co. has difficulty in making payments, China Petrochemical Corporation would increase the capital of Sinopec Finance Co. to meet the need for the purpose of making payment. In order to regulate connected transactions between the Company and Century Bright (Sinopec Corp.’s overseas settlement center), Century Bright ensures the safety of the deposits of the Company at Century Bright 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 restrictions on Century Bright regarding the provision of overseas financial services. Century Bright 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, China Petrochemical Corporation entered into a keep-well agreement with Century Bright in 2013, in which China Petrochemical Corporation undertakes that when Century Bright has difficulty in making payments, China Petrochemical Corporation will ensure that Century Bright will fulfill its repayment obligation through various channels. The deposits of the Company at Sinopec Finance Co. and Century Bright during the reporting period are in strict compliance with 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 Sinopec Finance Co. and Century Bright. 17 APPROPRIATION OF NON-OPERATIONAL FUNDS BY THE CONTROLLING SHAREHOLDER AND ITS RELATED PARTIES AND THE PROGRESS FOR CLEARING UP Not applicable 18 STRUCTURED ENTITY CONTROLLED BY THE COMPANY None 19 INFLUENCE ON THE INDUSTRY FROM NEWLY-ENFORCED LAW, ADMINISTRATIVE RULES, REGULATIONS AND INDUSTRY POLICIES On 13 January 2023, the General Office of the State Council issued the “Guiding Opinions on Deepening Cross-departmental Comprehensive Supervision”, clarifying that a cross-departmental comprehensive regulatory list management and dynamic update mechanism shall be established by the end of 2023, and the competent industry authorities, together with relevant regulatory departments, shall actively carry out cross- departmental comprehensive supervision of key matters such as hazardous chemicals, gas, special equipment, and construction project quality. On 1 August 2023, the CSRC promulgated the Measures for the Administration of Independent Directors of Listed Companies, which came into effect on 4 September 2023, to continue to strengthen the supervision of independent directors of listed companies and supervise and protect independent directors to play their due roles. In addition, the relevant government departments have also issued other policies and guidance related to ecological and environmental protection, carbon neutrality, carbon peaking, personal information protection, hazardous chemicals management, intellectual property protection, etc., emphasizing the need to strengthen compliance management in terms of sustainable development, energy supply security, and Internet information protection, while focusing on promoting sustainable development and promoting the construction of energy infrastructure suitable for green and low-carbon transformation. 56 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Significant EventsSIGNIFICANT EVENTS (CONTINUED)1 AGREEMENTS ON 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 of the Company and Sinopec Group, the two parties entered into the agreements on continuing connected transactions. On 27 August 2021, Sinopec Corp. and its controlling shareholder, China Petrochemical Corporation, entered into the sixth supplemental agreement on continuing connected transactions. The resolution relating to continuing connected transactions for three years from 2022 to 2024 was approved at the first extraordinary general meeting of Sinopec Corp. for the year of 2021 held on 20 October 2021. For details of the above continuing connected transactions, please refer to relevant announcements published on 30 August 2021 in China Securities Journal, Shanghai Securities News and Securities Times and on the website of the SSE and on 29 August 2021 on the website of the Hong Kong Stock Exchange. 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 THE 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 of the listing rules in relation to the continuing connected transactions between the Company and Sinopec Group. The aggregated amount of the continuing connected transactions for 2023 of the Company is in compliance with the relevant requirements of the Hong Kong Listing Rules and the Shanghai Listing Rules. For actual performance details of continuing connected transaction agreements, please refer to Item 3 below. 3 ACTUAL PERFORMANCE OF CONTINUING CONNECTED TRANSACTIONS ENTERED INTO BY THE COMPANY DURING THE YEAR In the reporting period, purchases expenses of the continuing connected transactions of the Company was RMB264.294 billion, representing 8.22% of the total amount of this type of transactions for the reporting period, including purchases of products and services (procurement, storage, transportation, exploration and production services, and production-related services) of RMB251.007 billion, payment of property rent of RMB1.050 billion (annual value of right-of-use assets for property leasing included in continuing connected transactions of RMB1.958 billion), payment of land rent of RMB10.926 billion (annual value of right- of-use assets for lands leasing included in continuing connected transactions of RMB20.389 billion), and interest expenses of RMB1.311 billion. The sales income of the continuing connected transactions of the Company during the reporting period was RMB136.502 billion, representing 4.15% of the total amount of this type of transactions for the reporting period, including sales of products of RMB133.579 billion, agency commission income of RMB81 million, and interest income of RMB2.842 billion. Entrusted loan provided by the Company to the Connected Subsidiaries was RMB1 million. For definitions, please refer to relevant announcements published on 30 August 2021 in China Securities Journal, Shanghai Securities News and Securities Times and on the website of the Shanghai Stock Exchange, and the website of the Hong Kong Stock Exchange on 29 August 2021 and 3 September 2021. The actual 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. The continuing connected transactions shall be priced in accordance with the following terms: (a) The government-prescribed price; (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 30 August 2021 in China Securities Journal, Shanghai Securities News and Securities Times and on the website of the Shanghai Stock Exchange and on 29 August 2021 the website of the Hong Kong Stock Exchange. 57 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Connected TransactionsCONNECTED TRANSACTIONS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 execute upon the approval of the Board and/ or independent shareholders. For other connected transactions, Sinopec Corp., in strict compliance with domestic and overseas regulatory rules, will publish the announcement and execute 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 39 to the financial statements prepared under the IFRS Accounting Standards 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 were approved at the 2nd meeting of the eighth 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. 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 OCCURRED THIS YEAR For details, please refer to item 2 “ACTUAL DAILY RELATED TRANSACTIONS ENTERED INTO BY THE COMPANY AND CHINA OIL & GAS PIPELINE NETWORK CORPORATION DURING THE REPORTING PERIOD”, item 4 “CAPITAL INCREASE IN HUNAN PETROCHEMICAL” and item 5 “THE ISSUANCE OF A SHARES BY SINOPEC CORP. TO THE TARGET SUBSCRIBER (CHINA PETROCHEMICAL CORPORATION)” in the Chapter “Significant Events”. 5 FUNDS PROVIDED BETWEEN RELATED PARTIES Funds to related parties Funds from related parties Unit: RMB million Related Parties Relations Sinopec Group Other related parties Total Reason for provision of funds between related parties Impacts on the Company Parent company and affiliated companies* Associates and joint ventures * : affiliated companies include subsidiaries, associates and joint ventures. Balance at the beginning of the year 9,114 7,595 16,709 Amount incurred 3,662 647 4,309 58 Balance at the end of the year Balance at the beginning of the year Amount incurred Balance at the end of the year 32,776 5,963 38,739 12,776 8,242 21,018 Loans and other accounts receivable and payable No material negative impact (15,359) (204) (15,563) 17,417 5,759 23,176 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Connected TransactionsCONNECTED TRANSACTIONS (CONTINUED)The Board is pleased to present the report of the Board of Directors for the year ended 31 December 2023 for the shareholders’ review. 1 MEETINGS OF THE BOARD During this reporting period, Sinopec Corp. held six (6) Board meetings. The details are as follows: (1) The 14th meeting of the eighth session of the Board was held by written resolution on 13 January 2023, whereby the proposals in relation to the following matters were approved: (i) the continuing related transactions with China Oil & Gas Pipeline Network Corporation for the year 2023; (ii) Internal Control Manual (2023). (2) The 15th meeting of the eighth session of the Board was held by on-site meeting and video conference on 24 March 2023, whereby the proposals in relation to the following matters were approved: (i) Work Report of the Board for the year 2022; (ii) Report on the Fulfillment of the Key Targets for the year 2022 and the Work Arrangements for the year 2023; (iii) The report on the financial results and business performance of the Company for the year 2022; (iv) provision for impairment for the year 2022; (v) the related transactions for the year 2022; (vi) Continuous Risk Assessment Report of Connected Transactions between Sinopec Corp. and Sinopec Finance Co. and Century Bright; (vii) Report on the Implementation of Derivatives Business for the year 2022 and the Work Plan for the year 2023; (viii) profit distribution plan for the year 2022; (ix) audit costs for the year 2022; (x) Internal Control Assessment Report of Sinopec Corp. for the year 2022; (xi) Financial Statements of Sinopec Corp. for the year 2022; (xii) Annual Report of the Company for the year 2022; (xiii) Sustainability Report of Sinopec Corp. for the year 2022; (xiv) the reappointment of KPMG as the external auditors of Sinopec Corp. for the year 2023 and the authorization of the Board to determine their remunerations; (xv) the resolution in relation to reduction of the registered capital and amendments to the Articles of Association; (xvi) the nomination of Mr. Lv Lianggong as candidate for Executive Director; (xvii) to authorize the Board to determine the interim profit distribution plan of Sinopec Corp. for the year 2023; (xviii) to authorize the Board to determine the issuance of debt financing instrument(s); (xix) to grant to the Board a general mandate to issue new domestic shares and/or overseas-listed foreign shares of Sinopec Corp.; (xx) to grant to the Board a mandate to buy back domestic shares and/or overseas-listed foreign shares of Sinopec Corp.; (xxi) the satisfaction of the conditions of the issuance of A Shares to target subscribers by Sinopec Corp.; (xxii) the resolutions regarding the Plan of the Proposed Issuance of A Shares: (xxii.i) type and par value of shares to be issued, (xxii.ii) manner and timing of issuance, (xxii.iii) subscriber and manner of subscription; (xxii.iv) pricing benchmark date, issue price and pricing principles, (xxii.v) number of shares to be issued, (xxii.vi) lock-up period, (xxii. vii) amount and use of proceeds, (xxii.viii) place of listing, (xxii.ix) arrangement of accumulated undistributed profits, (xxii. x) validity period; (xxiii) the Proposal of the Proposed Issuance of A Shares; (xxiv) the Demonstration and Analysis Report on the Plan of the Proposed Issuance of A Shares; (xxv) the resolution regarding the connected transaction involved in the Proposed Issuance of A Shares; (xxvi) the conditional Subscription Agreement entered into between Sinopec Corp. and China Petrochemical Corporation; (xxvii) the Feasibility Report on the Use of Proceeds Raised from the Proposed Issuance of A Shares; (xxviii) the dilution of current returns by the Proposed Issuance of A Shares, remedial measures and the commitments of related entities; (xxix) the Dividend Distribution and Return Plan for Shareholders for the Next Three Years (2023-2025); (xxx) the resolution regarding the authorisation to the Board with full power to deal with all matters relating to the Proposed Issuance of A Shares; (xxxi) the resolution regarding the authorisation to the Board to amend the Articles of Association in accordance with the situation of the Proposed Issuance of A Shares; (xxxii) Management Measures on Raising Funds; (xxxiii) Notice of Annual General Meeting for 2022, First A Shareholders Class Meeting for 2023, and First H Shareholders Class Meeting for 2023. (3) The 16th meeting of the eighth session of the Board was held through electronic means of communication on 27 April 2023, whereby the proposals in relation to the following matters were approved: (i) First Quarterly Report for 2023; (ii) Form 20-F of the Company for the year 2022. (4) The 17th meeting of the eighth session of the Board was held through electronic means of communication on 25 July 2023, whereby the proposal in relation to the appointment of Senior Vice President of Sinopec Corp. was approved. (5) The 18th meeting of the eighth session of the Board was held by on-site meeting on 25 August 2023, whereby the proposals in relation to the following matters were approved: (i) Report on the Fulfillment of the Key Targets for the first half of the year 2023 and the Work Arrangements for the second half of the year 2023; (ii) profit distribution plan for the first half of the year 2023; (iii) the Continuous Risk Assessment Report of Connected Transactions between Sinopec Corp. and Sinopec Finance Co. and Century Bright for the first half of the year 2023; (iv) Financial Statements for the first half of the year 2023; (v) Interim Report for 2023; (vi) the member adjustment of the Board committees; (vii) the plan on share buy-back by centralized bidding; (viii) Management Regulations of Investor Relations of Sinopec Corp. (6) The 19th meeting of the eighth session of the Board was held through electronic means of communication on 26 October 2023, whereby the proposals in relation to the following matters were approved: (i) Third Quarterly Report for 2023; (ii) Terms of Reference of the Independent Non-executive Directors; (iii) Terms of Reference of the Audit Committee under the Board of Directors; (iv) reform plan of refining and petrochemical integration in Yueyang area. For details of each meeting, please refer to the announcements published in China Securities Journal, Shanghai Securities News and Securities Times after each meeting and on the websites of Shanghai Stock Exchange, Hong Kong Stock Exchange and Sinopec Corp. 59 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS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 and conscientiously implemented the resolutions approved at the general meetings of Sinopec Corp. with due care, and had completed all the tasks delegated to them at the general meetings. 3 DIRECTORS’ ATTENDANCE TO THE BOARD MEETINGS AND TO THE GENERAL MEETINGS DURING THE REPORTING PERIOD (1) Attendance to the Board meetings and general meetings during the reporting period by the Directors of the eighth session of the Board Positions Name Chairman Director Director Director Director Independent Director Independent Director Independent Director Independent Director Ma Yongsheng Zhao Dong Yu Baocai Li Yonglin Lv Lianggong Cai Hongbin Ng, Kar Ling Johnny Shi Dan Bi Mingjian Board meeting Meetings attended through electronic means of communication No. of meetings held On-site attendance General meetings Meetings attended by proxy No. of meetings held Actual attendance Absent 6 6 6 6 3 6 6 6 6 2 2 2 2 1 2 2 2 2 4 4 4 4 2 4 4 4 4 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 3 3 3 3 3 3 3 3 3 3 3 0 3 3 3 3 3 3 (2) Attendance to the Board meetings and general meetings during the reporting period by the former Directors of the eighth session of the Board Positions Former Director Former Director Name Ling Yiqun Liu Hongbin Board meeting Meetings attended through electronic means of communication 1 2 No. of meetings held 2 3 On-site attendance 1 1 General meetings Meetings attended by proxy 0 0 No. of meetings held 0 0 Actual attendance 0 0 Absent 0 0 Note: No Directors were absent from two consecutive meetings of the Board. 60 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED)4 THE BOARD COMMITTEES MEETINGS AND THE SPECIAL MEETING OF INDEPENDENT DIRECTORS During the reporting period, the Board committees held ten (10) meetings, among which, Audit Committee held five (5) meetings, the Remuneration and Appraisal Committee held one (1) meeting, the Sustainable Development Committee held two (2) meetings, and the Nomination Committee held two (2) meetings. All members of each committee attended the relevant meetings. The Company held one (1) Special Meeting of Independent Directors, all Independent Directors attended the meeting. Details of those meetings are as follows: (1) The 8th meeting of the Audit Committee of the eighth session of the Board was held by written resolution on 13 January 2023, whereby the proposal in relation to the Internal Control Manual (2023) was approved. (2) The 3rd meeting of the Nomination Committee of the eighth session of the Board was held by written resolution on 22 March 2023, whereby the proposal in relation to the nomination of Mr. Lv Lianggong as candidate for Executive Director was approved. (3) The 2nd meeting of the eighth session of the Remuneration and Appraisal Committee was held by written resolution on 22 March 2023 whereby the proposal in relation to implementation of the rules of the remuneration of Directors, supervisors and other senior management for 2022 was approved. (4) The 2nd meeting of the Sustainable Development Committee of the eighth session of the Board was held by written resolution on 22 March 2023, whereby the proposals in relation to the following matters were approved: (i) Sustainability Report of Sinopec Corp. for the year 2022; (ii) Report on the Completion of Environmental Protection Key Targets for the year 2022 and the Work Arrangements for the year 2023; (iii) Report on the Anti-corruption Compliance Work of Sinopec Corp. for the year 2022 and the Work Plan of 2023. (5) The 9th meeting of the Audit Committee of the eighth session of the Board was held by on-site meeting and video conference on 23 March 2023, whereby the proposals in relation to the following matters were approved: (i) Report on financial results and business performance of the Company for the year 2022; (ii) Continuous Risk Assessment Report of Connected Transactions between Sinopec Corp. and Sinopec Finance Co., Ltd. and Century Bright; (iii) Report on the Implementation of Derivatives Business for the year 2022 and the Work Plan for the year 2023; (iv) Financial Statements of Sinopec Corp. for the year 2022; (v) Annual Report of the Company for the year 2022; (vi) Internal Control Assessment Report of Sinopec Corp. for the year 2022; (vii) Report on the Main Audit Work in 2022 and the Overall Arrangement of Audit Work in 2023; (viii) Resolutions regarding the Issuance of A Shares by Sinopec Corp. to the Target Subscriber. (6) The 10th meeting of the Audit Committee of the eighth session of the Board was held through electronic means of communication on 27 April 2023, whereby the proposals in relation to the following matters were approved: (i) First Quarterly Report for 2023; (ii) Form 20-F of the Company for the year 2022; (iii) Report on the Implementation of the Internal Audit Plan in the first quarter of 2023. (7) The 4th meeting of the Nomination Committee of the eighth session of the Board was held through electronic means of communication on 25 July 2023, whereby the proposal in relation to the appointment of Senior Vice President of Sinopec Corp. was approved. (8) The 11th meeting of the Audit Committee of the eighth session of the Board was held by on-site meeting and video conference on 23 August 2023, whereby the proposals in relation to the following matters were approved: (i) Report on Financial Results and Business Performance for the first half of the year 2023; (ii) Financial Statements for the first half of the year 2023; (iii) Interim Report for 2023; (iv) Continuous Risk Assessment Report of Connected Transactions between Sinopec Corp. and Sinopec Finance Co., Ltd. and Century Bright for the first half of the year 2023; (v) Report on the Main Audit Work for the first half of 2023 and the Major Arrangement of Audit Work for the second half of 2023. (9) The 3rd meeting of the Sustainable Development Committee of the eighth session of the Board was held through electronic means of communication on 23 August 2023, whereby the proposal in relation to the Report on the Completion of HSE Work for the first half of 2023 and the Work Arrangements for the second half of 2023 was approved. (10) The 12th meeting of the Audit Committee of the eighth session of the Board was held by on-site meeting and video conference on 25 October 2023, whereby the proposals in relation to the following matters were approved: (i) Third Quarterly Report for 2023; (ii) Report on the Implementation of the Internal Audit Plan in the third quarter of 2023. (11) The 1st meeting of the Special Meeting of Independent Directors of the eighth session of the Board was held by on- site meeting and video conference on 25 October 2023, whereby the proposal in relation to the reform plan of refining and petrochemical integration in Yueyang area was approved. 5 BOARD COMMITTEES ISSUED REVIEW OPINIONS TO THE BOARD WHEN PERFORMING THEIR DUTIES DURING THE REPORTING PERIOD WITHOUT OBJECTION. 6 PERFORMANCE OF THE DIRECTORS During the reporting period, The Directors of Sinopec Corp. fulfilled their duties diligently in accordance with the Articles of Association, attended Board meetings and meetings of the Board committees (please refer to the Report of the Board of Directors in this annual report for their attendance of the meetings). The Directors reviewed proposals with due care, used their professional expertise to provide suggestions on decision- making of significant events, maintained timely and effective communication with the management, external auditors and internal audit department, and promoted scientific decision-making by offering advice on the 61 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsCompany’s development strategy, operations and reform. Sinopec Corp. has established the mechanism of the Special Meeting of Independent Directors to built platform for Independent Directors fulfilling their duties. The Independent Directors conscientiously fulfilled their duties as required by Terms of Reference of the Independent Non- executive Directors, played a positive role in “participation in decision-making, supervision and independence, professional consultation”, listened to the reports on significant decisions. The Independent Directors conducted research on a regular basis and visited subsidiaries of Sinopec Corp. in Jiangsu and Hainan to research the situation of business development, actively followed up business operation of the Company. The Independent Directors issued their independent opinions on matters such as nomination of candidate for Director, appointment of senior management, connected transactions, profit distribution plan, re-appointment of accounting firms, issuance of A Shares to target subscriber, share buy-back proposal, and protected the minority shareholders’ legitimate interests. None of the Directors had any objection to the Company’s resolutions, and all the suggestions of Directors on relevant reform and development were accepted. Pursuant to requirements of securities regulatory authority of China, Independent Directors of Sinopec Corp. reviewed the performance of the senior management of Sinopec Corp. who concurrently are senior management in China Petrochemical Corporation, and issued a special opinion as follows: “The President Mr. Yu Baocai, Senior Vice Presidents Mr. Ling Yiqun, Mr. Li Yonglin, Mr. Lv Lianggong and Mr. Niu Shuanwen, each of whom concurrently held position as senior management of China Petrochemical Corporation, have obtained the exemptions for holding concurrent position from CSRC in accordance with the applicable rules. In 2023, Mr. Yu Baocai, Mr. Ling Yiqun, Mr. Li Yonglin, Mr. Lv Lianggong and Mr. Niu Shuanwen strictly abided by the provisions of laws and regulations, the Articles of Association and the service contracts, conscientiously fulfilled their duties of loyalty and diligence, implemented the resolutions of the Board, and gave sufficient time and attention to organize production and operation. They protected the interests of Sinopec Corp. and its shareholders effectively and had not violated the legitimate interests of Sinopec Corp. and its shareholders due to holding aforesaid concurrent positions in China Petrochemical Corporation.” 7 BUSINESS PERFORMANCE The financial results of the Company for the year ended 31 December 2023, which were prepared in accordance with IFRS Accounting Standards and the financial position as at that date and the accompanying analysis are set out from page 154 to page 212 in this annual report. A fair review of the Company’s business, a discussion 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 and included in the sections “Chairman’s Address”, “Business Review and Prospects”, “Management’s Discussion and Analysis” and “Significant Events” of this annual report. All of the above discussions constitute parts of the report of the Board of Directors. 8 DIVIDEND The profit distribution policy of Sinopec Corp. maintains consistency and steadiness and taken into account 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 allowed 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 shall be no less than 30% of the net profits of the Company realised during the corresponding year. The profit distribution plan of the Company for the corresponding year will be carried out in accordance with the policy and procedures stipulated in the Articles of Association, taking into account the advice from the minority shareholders. Proposals for dividend distribution At the 21st meeting of the eighth session of the Board, the Board approved the proposal to distribute a final cash dividend of RMB0.2 (tax inclusive) per share for 2023. Taking into account the distributed interim dividend of RMB0.145 (tax inclusive) per share for the first half of 2023, the total dividend for the whole year is RMB0.345 (tax inclusive) per share. The final cash dividend will be distributed on or before Friday, 26 July 2024 to all shareholders whose names appear on the register of members of Sinopec Corp. on the record date of Monday, 15 July 2024. 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 Tuesday, 9 July 2024 for registration. The H shares register and transfer of members of Sinopec Corp. will be closed from Wednesday, 10 July 2024 to Monday, 15 July 2024 (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 and Shenzhen-Hong Kong Stock Connect Programmes in RMB and to the overseas shareholders in Hong Kong Dollar. The exchange rate for the dividend calculated 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 and distribution of such dividend. In accordance with the Enterprise Income Tax Law of the People’s Republic of China and its implementation regulations which came into effect on 1 January 2008, 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 the cash dividends or issuing bonus shares by way of capitalisation from retained earnings. Any Shares of the Sinopec Corp. which are 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. On such 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. 62 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED)If the individual holders of H shares are residents of Hong Kong, Macau or countries which had an agreed tax rate of 10% for cash dividends or bonus shares by way of capitalisation from retained earnings with China under the relevant tax agreement, Sinopec Corp. should withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. If the individual holders of H Shares are residents of countries which had an agreed tax rate of less than 10% with China under 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 H Shares wish to reclaim the extra amount withheld due to the application of 10% tax rate, Sinopec Corp. would apply for the relevant agreed preferential tax treatment pursuant to the relevant tax agreement provided that the relevant shareholders submit the evidence required by the notice of the tax agreement to the share register of H Shares of Sinopec Corp. in a timely manner. Sinopec Corp. will assist with the tax refund after the approval of the competent tax authority. If the individual holders of H Shares are residents of 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 agreements. If the individual holders of H Shares are residents of countries which had an agreed tax rate of 20% with China, or which had 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 Notice on the Tax Policies Related to the Pilot Program of 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 dividends of 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 dividends of 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 competent tax authorities for the withholding. For investors who are tax residents of other countries which have entered into a tax treaty with the PRC stipulating a dividend tax rate of lower than 10%, the enterprises and individuals may, or may entrust a withholding agent to, apply to the competent tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax authorities, the amount paid in excess of the tax payable based on the tax rate according to such tax treaty will be refunded. The dividend distribution and capital reserve capitalization declared by Sinopec Corp. in the past three years are as follows: Cash dividends (RMB/Share, tax inclusive) Cash dividends paid in other ways (such as repurchase of shares) (RMB million, tax inclusive) Total amount of cash dividends (including dividends paid in other ways) (RMB million, tax inclusive) Net profits attributed to the shareholders of the listed company shown in the consolidated statement for the dividend year (in accordance with CASs, RMB million) Ratio of the dividends to the net profit attributed to the shareholders of the listed company in the consolidated statement (%) Note: The final cash dividend for 2023 is subject to the approval at the 2023 annual general meeting. The aggregate cash dividend declared by Sinopec Corp. during three years from 2021 to 2023 is RMB1.17 per share, with a total amount of RMB140.904 billion, the total paid amount for repurchase of shares was RMB6.504 billion, and the aggregate amount with cash dividend was RMB147.408 billion. The total dividend payment from 2021 to 2023 as a percentage of average net profit attributed to the shareholders of the listed company in the three years is 221.93%. 9 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 2023, 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 defect in relation to the internal control system as of 31 December 2023. The internal control system of Sinopec Corp. related to the financial statements is sound and effective. 2023 0.345 2,325 43,575 60,463 72.1 2022 0.355 4,179 46,930 67,082 70.0 2021 0.47 0 56,903 71,716 79.3 2023 Internal Control Assessment Report of Sinopec Corp. was reviewed and approved at the 21st meeting of the eighth session of the Board on 22 March 2024, 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. 63 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of Directors10 DURING THE REPORTING PERIOD, THE COMPLIANCE OF ENVIRONMENTAL POLICIES BY THE COMPANY During the reporting period, the Company complied with the environmental policy in all material aspects. Details with regard to the Company’s environmental policies and performances are provided in the section “Environmental and Social Responsibilities” in this annual report as well as the 2023 Sustainability Report of Sinopec Corp. 11 DURING THE REPORTING PERIOD, THE COMPANY DID NOT VIOLATE LAWS OR REGULATIONS WHICH HAVE A MATERIAL IMPACT ON THE COMPANY 12 MAJOR SUPPLIERS AND CUSTOMERS The Company maintained a stable cooperation relationship with major suppliers and customers. During the reporting period, the total value of the purchasing from the top five suppliers accounted for 39.38% of the total value of purchasing by the Company, among which, the purchasing value of the largest supplier accounted for 9.63% of the total annual purchasing value and the total value of the purchasing from the connected party Sinopec Group among the five largest supplier was RMB189.671 billion, accounted for 7.00% of the total value of purchasing by the Company. The total revenue from the five largest customers of the Company in 2023 was RMB243.892 billion, accounting for 7.59% of the total revenue of the Company, among which the sales value to the connected party Sinopec Group among the five largest customers was RMB87.761 billion, accounting for 2.73% of the total revenue for the year. During the reporting period, other than disclosed above, to the best knowledge of the Board of the Directors of the Company, none of the Directors of the Company, their close associates, and shareholders holding more than 5% of the shares of the Company had any interest in the top five suppliers or the top five customers of the Company. There were no suppliers, customers, employees or others on which the Company’s success depends. 13 BANK LOANS AND OTHER BORROWINGS Details of bank loans and other borrowings of the Company as of 31 December 2023 are set out in Note 30 to the financial statements prepared in accordance with IFRS Accounting Standards in this annual report. 14 FIXED ASSETS During the reporting period, changes to the fixed assets of the Company are set out in Note 17 to the financial statements prepared in accordance with IFRS Accounting Standards in this annual report. 15 RESERVES During the 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 Accounting Standards in this annual report. 16 DONATIONS During the reporting period, the amount of charity donations made by the Company amounted to approximately RMB310 million. 17 PRE-EMPTIVE RIGHTS Pursuant to the Articles of Association and the laws of the PRC, the shareholders of Sinopec Corp. are not entitled to any pre- emptive rights. Therefore, the existing shareholders cannot request Sinopec Corp. to issue shares to them on a preferential basis in proportion to their shareholdings. 18 REPURCHASE, SALES AND REDEMPTION OF SHARES (1) Progress in the implementation of share repurchase of Sinopec Corp. On 30 May 2023, the Annual General Meeting for 2022, the First A Shareholders Class Meeting for 2023 and the First H Shareholders Class Meeting for 2023 of Sinopec Corp. considered and approved the Resolution to Grant to the Board a Mandate to Buy Back Domestic Shares and/or Overseas-listed Foreign Shares of Sinopec Corp., authorizing the Board (or the director authorised by the Board) to buy back A Shares or H Shares not exceeding 10% of the issued number of A Shares or H Shares of Sinopec Corp. in issue. On 25 August 2023, to preserve the value of both Company and shareholders’ equity interests, the 12th meeting of the eighth session of the Board considered and approved the Plan on Repurchasing the Company’s Shares by Centralized Bidding Transactions. For details, please refer to the announcement disclosed by Sinopec Corp. on the website of the Shanghai Stock Exchange on 28 August 2023. On 28 August 2023, Sinopec Corp. commenced the repurchase of A shares and H shares. Sinopec Corp. has finished the repurchase of A shares on 24 November 2023, and completed the cancellation of all repurchased A shares on 25 December 2023. For details, please refer to the announcements disclosed by Sinopec Corp. on the website of the Shanghai Stock Exchange on 25 November 2023 and 23 December 2023. Sinopec Corp. completed the cancellation of repurchased H shares on 8 September 2023 and 22 December 2023 respectively. For details, please refer to the related announcements disclosed by Sinopec Corp. on the website of the Hong Kong Stock Exchange on 22 December 2023. As of 31 December 2023, Sinopec Corp. has repurchased 143.50 million A shares, accounting for 0.12% of the total issued shares of Sinopec Corp. on 31 December 2023, the highest and lowest repurchase prices were RMB6.17 and RMB5.29 per share respectively, and the total amount paid was RMB816,009,269 (exclusive of transaction fees). For details, please refer to the Announcement on the Results of the Implementation of Share Repurchase disclosed by Sinopec Corp. on the website of the SSE on 25 November 2023. Sinopec Corp. has repurchased 403.656 million H Shares, accounting for approximately 0.34% of the total issued shares of Sinopec Corp. on 31 December 2023, and the total amount paid was HK$1,646,392,242 (exclusive of transaction fees). 64 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED)A Share Repurchase Month 9 10 11 H Share Repurchase Month 8 9 10 11 12 Repurchase Amount 19,600,015 69,719,533 54,180,452 Repurchase Amount 32,688,000 32,582,000 37,744,000 184,120,000 116,522,000 Price per share Highest (RMB/share) Lowest (RMB/share) 6.17 6.02 5.60 6.08 5.37 5.29 Price per share Highest (HK$/share) Lowest (HK$/share) 4.56 4.38 4.15 4.24 4.04 4.48 4.24 4.00 3.98 3.78 Total Amount (RMB) 120,230,857.40 400,969,699.42 294,808,712.62 Total Amount (HK$) 147,866,412.80 139,652,255.20 152,980,647.20 751,261,659.40 454,631,267.60 (2) Progress in the implementation of share 21 MANAGEMENT CONTRACTS repurchase of subsidiaries During the reporting period, Sinopec Shanghai Petrochemical Company Limited, as a subsidiary of the Sinopec Corp. repurchased its H share. For details, please refer to the related announcements disclosed by Sinopec Shanghai Petrochemical Company Limited on the website of the SSE and the Hong Kong Stock Exchange. Save as disclosed above, during the reporting period, neither Sinopec Corp. nor any of its subsidiaries repurchased, sold or redeemed any listed shares of Sinopec Corp. or its subsidiaries. 19 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 (excluding Independent Non-executive Directors) of Sinopec Corp. in the Sinopec Group during the reporting period, please refer to the section “Corporate Governance” of this annual report. 20 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. 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. 22 PERMITTED INDEMNITY PROVISIONS During the reporting period, Sinopec Corp. has purchased liability insurance for all Directors to minimise their risks arising from the performance of their duties. The permitted indemnity provisions are stipulated in such Directors’ liability insurance in respect of the liabilities and costs associated with the potential legal proceedings that may be brought against such Directors. 23 EQUITY-LINKED AGREEMENTS As of 31 December 2023, the Company has not entered into any equity-linked agreement. 24 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 headquarter level oversees the overall reserves estimation process including organisation, coordination, monitoring and major decision-making, and reviews the reserves estimation of the Company. Each of our oilfield 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, being responsible to the RMC of the Company. Our RMC consists of the senior management of the Company, related departments of headquarter, senior managers of International Petroleum Exploration and Production Limited and Petroleum Exploration and Production Research Institute of Sinopec (PEPRIS). Mr. Niu Shuanwen, the Chairman of RMC is Senior Vice President of Sinopec Corp., with about 30 years of experience in oil and gas industry. A majority of our RMC members hold master’s or Ph.D. degrees, and have an average of more than 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 external 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. 65 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of Directors25 CORE COMPETITIVENESS ANALYSIS The Company is a large-scale integrated energy and petrochemical company with upstream, mid-stream and downstream operations, and has overall strong strength of scale. The Company is a large oil and gas producer in China and ranks first globally in terms of refining capacity. The Company ranks domestically first and globally second in terms of ethylene production. The Company is equipped with a well-developed refined oil products sales network, being the largest supplier of refined oil and chemical products in China. The integrated business structure of the Company carries strong advantages in synergy among its various business segments, contributing to the Company by tapping onto potentials in attaining an efficient and comprehensive utilisation of its resources, and endows the Company with strong capabilities in risk resistance and sustaining profitability. The Company enjoys a favourable positioning with its operations located close to the consumer markets. The steady growth in the Chinese economy is helpful to the development of both refined oil business and chemical business of the Company; 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 with expertise 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 an 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 five platforms for technology advancement are taking shape, which includes exploration and development of oil and gas, refining, petrochemicals, utility and strategic emerging technology. With its overall technologies reaching state of the art level in the global arena, and certain technologies taking the lead globally, the Company enjoys a strong technical strength. The Company always attaches great importance to the fulfilment of corporate social responsibilities and carries out the green and clean development strategy to pursue a sustainable development. Moreover, the Company enjoys an outstanding “Sinopec” brand name, plays an important role in the national economy and is a renowned and reputable company in China. The Company formulated a strategy and plan for future green transformation and development, accelerating the development of new energy with hydrogen energy as the core and high-end chemical materials, and focusing on building a globally leading clean energy and chemical company. 26 RISK FACTORS In the course of its production and operations, Sinopec Corp. 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 macroeconomic situation. The global economy experienced insufficient driving force and more uncertainty. The development of economy is increasingly constrained by climate change and environmental issues. The Company’s business could also be adversely affected by other factors such as the impact on export due to carbon tariffs and trade protectionism from certain countries, and impact on the return of the investment of upstream projects and refining and 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 petroleum 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, industry polices, 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 a certain extent. Risks from the macro 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 exploration and mining permits in relation to crude oil and natural gas, 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 refined oil products, the imposition of the special oil income levy; the formulation of refined oil import and export quotas and procedures, the formulation of safety, environmental protection and quality standards and the formulation of energy conservation policies, restrictions on high energy consumption and high pollution projects, etc. In addition, the changes which have occurred or might occur in macro and industry policies such as further opening up of crude oil import licenses and the right of tenure and the continuous control of export quota of refined oil; deepening the reform and improvement in pricing mechanism of natural gas, accelerating the exploration of upstream and downstream price linkage mechanisms, cost supervision of gas pipeline and equal access to third party and accelerating the establishment of a uniform gas energy metering and pricing system; affected by the continuous increase in the penetration rate of new energy vehicles, the scale of substitution of refined oil products has expanded; reforming in resource tax and environmental tax; and the introduction of measures for energy conservation and carbon reduction in key areas to improve energy efficiency; and the introduction of transforming policy from “double control” of energy consumption to “double control” of carbon emissions and intensity, etc. Such factors might further impact the industry development and market environment and the operations and profitability of the Company. Risks with regard to the changes from environmental legislation requirements: The Company’s production activities generate waste water, gases, solids and noise. The Company has built up the corresponding pollution prevention and risk control facilities to prevent and reduce the pollution. However, the relevant government authorities may issue and implement much stricter environmental protection laws and regulations, adopt much stricter environment 66 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsREPORT OF THE BOARD OF DIRECTORS (CONTINUED)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 dependent on our abilities in continuously discovering or acquiring additional oil and natural gas resources to a certain extent. To obtain oil and natural gas resources, the Company faces some inherent risks associated with exploration and development and/or with acquisition activities of oil and gas resources, and the Company has to invest a large amount of money with no guarantee of certainty. If the Company fails to increase the reserves of crude oil and natural gas through further exploration, development and acquisition, 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 mismatch between supply and demand of crude oil, volatile geopolitics, slow global economic recovery 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 petroleum and petrochemical industry is exposed to the high risks of inflammation, explosion, toxicity, harm and environmental pollution and is vulnerable to natural disasters such as extended weather. Such emergencies may cause impacts to the society, financial losses to the Company and grievous injuries to people. The Company has always been laying great emphasis on the safety production, and has implemented a strict HSE management system as an effort to avoid such risks as far as possible. Meanwhile, the main assets and inventories of the Company as well as the possibility of damage to a third party have been insured. However, such measures may not shield the Company from financial losses or adverse impact resulting from such emergencies. Investment risks: Petroleum and chemical sector is a capital-intensive industry. Although the Company has adopted a prudent investment strategy, executed the investment management rules and negative investment lists effectively, conducted rigorous feasibility study and risk evaluation on each investment project, and organized special verifications in raw material market, technical scheme, profitability, safety and environmental protection, legal compliance, etc on major structural adjustment and layout projects to ensure making decision rigorously and scientifically, certain investment risks will still exist due to major changes in factors such as market environment, industrial policies, prices of commodities, 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 and countries overseas. 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 changes in international geopolitics, uncertainty of economic recovery, imbalance of global and regional 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, and political, economic, social, safety, legal, environmental and other risks in the country where overseas business and assets are located, 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., 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. The Company establishes an emergency response mechanism in relation to network security operation and information system, builds an information platform of network security risk management and control, operated by a professional network security team, and devotes significant resources to protecting the digital infrastructure and data of the Company against cyber-attacks. However, continuous attention should be paid to the coverage and efficiency of these protection measures. If our systems against cyber- security risk are proved to be insufficient or ineffective, the Company could be adversely affected by, among other things, disruptions to our business operations, and loss of key information, thus causing harm to our personnel, property, environment and reputation. As cyber-security attacks continue to evolve, the Company may be required to expend additional resources to enhance our protective measures against cyber-security breaches, in particular increase investment in new solutions and technologies such as data security solution, business security solution, cloud computing, and Internet of Things devices to improve the cyber-security protection level. By Order of the Board Ma Yongsheng Chairman Beijing, China, 22 March 2024 67 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Board of DirectorsOn 25 August 2023, the 10th meeting of the eighth session of Supervisory Committee was held, the Interim Financial Statements of Sinopec Corp. for 2023, and the Interim Report of Sinopec Corp. for 2023 were reviewed and approved at the meeting. On 26 October 2023, the 11th meeting of the eighth session of the Supervisory Committee was held, and the Third Quarterly Report of Sinopec Corp. for the three months ended 30 September 2023 was reviewed and approved at the meeting. In addition, the Company organised the supervisors to attend the general meetings of shareholders and meetings of the Board. The company organized some supervisors to go to the Hong Kong Stock Exchange and the SSE in May and September 2023 to conduct communication and research. Through in- depth communication with regulators on ESG construction, private placement, market value management and other matters of concern to the Company, providing solid foundation for supervisors’ performance of its responsibilities and duties according to laws and regulations. In 2023, the world economic recovery continued to be under pressure, and China’s economy came out of a recovery curve with a positive recovery despite the continued pressure. Through supervision and inspection on the production and operation management as well as financial management, the Supervisory Committee and all the supervisors concluded that facing the complex and changeable severe environment, Sinopec Corp. fully executed the management plan of the Board, gave full play to the advantages of integration, made every effort to expand the market, increase sales volume and profitability, steadily promoted transformation and upgrading, focused on scientific and technological innovation and empowerment, deepened the reform of systems and mechanisms, adhered to the bottom line of compliant operation, coordinated and promoted all aspects of work, and achieved high-quality results. The Supervisor Committee had no objection to the supervised issues during the reporting period. Dear Shareholders: In 2023, the Supervisory Committee 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 the reporting period, the Supervisory Committee held five (4) meetings in total, and mainly reviewed and approved the proposals in relation to the Company’s annual report, financial statements, sustainability report, internal control assessment report and working report of the Supervisory Committee etc. Details are as below: On 24 March 2023, the 8th meeting of the eighth session of the Supervisory Committee was held, and the proposals in relation to the Financial Statements of Sinopec Corp. for 2022, Annual Report of Sinopec Corp. for 2022, Sustainability Report of Sinopec Corp. for 2022, Internal Control Assessment Report of Sinopec Corp. for 2022, Work Report of the Supervisory Committee of Sinopec Corp. for 2022, Work Plan of the Supervisory Committee of Sinopec Corp. for 2023, and proposals regarding the issuance of A Shares to China Petrochemical Corporation were reviewed and approved at the meeting. On 27 April 2023, the 9th meeting of the eighth session of the Supervisory Committee was held, and the proposal in relation to the First Quarterly Report of Sinopec Corp. for the three months ended 31 March 2023 and 20-F Report of Sinopec Corp. for 2022 were reviewed and approved at the meeting. 68 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Supervisory CommitteeREPORT OF THE SUPERVISORY COMMITTEEFirstly, the Board and the senior management of Sinopec Corp. performed their responsibilities and duties pursuant to relevant laws and regulations 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, planned overall layout, fully implemented high-quality development actions, optimized production and operation organization in all aspects, and fully promoted quality improvement, efficiency enhancement, and stable growth, resulting in giving full play to achieve the annual target of business operations set by the Board. During the reporting period, the Supervisor Committee did not discover any behavior of any director or senior management which violated laws, regulations, the Articles of Association, or was detrimental to the interests of Sinopec Corp. or its shareholders. Secondly, the annual reports and financial statements prepared by Sinopec Corp. for 2023 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 by persons who prepared and reviewed the financial report was found. Thirdly, the positions in Sinopec Corp.’s internal control have clear responsibilities and duties, and the internal control system was effective. No material defect of internal control system of the Company was found. Fourthly, the consideration for assets transactions made by Sinopec Corp. was fair and reasonable, neither inside trading, damage to shareholders’ interest nor losses of corporate assets were discovered. Fifthly, all connected transactions of the Company were in compliance with the relevant rules and regulations of domestic and overseas listing exchanges. The pricing of all the connected transactions was fair and reasonable. No behavior detrimental to the interests of Sinopec Corp. or its shareholders was discovered. In 2024, the Supervisory Committee 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. Zhang Shaofeng Chairman of the Supervisory Committee 22 March 2024 69 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Report of the Supervisory Committee1 CHANGES IN THE SHARE CAPITAL Item RMB ordinary shares Domestic listed foreign shares Foreign shares listed overseas Others Total number of shares Before change Changes After change Amount 95,115,471,046 – 24,780,936,600 – 119,896,407,646 percentage (%) 79.33 – 20.67 – 100 Amount1 (143,500,000) – (403,656,000) – (547,156,000) Amount 94,971,971,046 – 24,377,280,600 – 119,349,251,646 Unit: share percentage (%) 79.57 – 20.43 – 100 Note 1: During the reporting period, 143,500,000 A shares of Sinopec Corp. were repurchased and cancelled, and 403,656,000 H shares of Sinopec Corp. were repurchased and cancelled. During the reporting period, there was no issue of new shares, stock dividends, or conversion of provident fund into shares. 2 NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS As of 31 December 2023, the total number of shareholders of Sinopec Corp. was 399,412 including 393,981 holders of A shares and 5,431 holders of H shares. As of 29 February 2024, the total number of shareholders of Sinopec Corp. was 378,416. Sinopec Corp. has complied with requirement for public float under the Hong Kong Listing Rules. (1) Shareholdings of top ten shareholders The shareholdings of top ten shareholders as of 31 December 2023 are listed as below: Name of shareholders Nature of Shareholders Percentage of shareholdings % Total number of shares held China Petrochemical Corporation2 HKSCC Nominees Limited3 中國證券金融股份有限公司 中國石油天然氣集團有限公司 香港中央結算有限公司 中國人壽保險股份有限公司 － 傳統 － 普通保險產品 －005L－CT001 滬 中央匯金資產管理有限責任公司 國新投資有限公司 國信證券股份有限公司 中國工商銀行 － 上證50 交易型開放式指數證券投資基金4 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 2022. 67.56 20.30 1.95 1.81 1.03 0.51 0.26 0.20 0.20 0.20 80,633,828,289 24,226,599,699 2,325,374,407 2,165,749,530 1,228,874,968 603,945,092 315,223,600 243,314,589 237,544,524 233,504,214 Unit: share Number of shares subject to pledges, marked or lock-up 0 Unknown 0 0 0 0 0 0 0 0 Changes of Shareholding1 61,660,896 (408,299,599) 0 0 83,074,942 158,325,150 0 243,314,589 2,392,600 118,944,338 Note 2: During the period, due to confidence in the Company’s development prospects, the controlling shareholder China Petrochemical Corporation planned to increase its shareholdings of A shares and H shares of the Company by itself and its wholly-owned subsidiary, by an amount of not less than RMB1 billion (inclusive) and not more than RMB2 billion (inclusive) within 12 months since 11 November 2023 (the “Shareholding Increase Plan”). As of 31 December 2023, the Shareholding Increase Plan was not complete, China Petrochemical Corporation would continue to increase its shareholdings when appropriate according to the Shareholding Increase Plan. For details, please refer to the announcements published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times, the website of Shanghai Stock Exchange on 11 November 2023 and 6 December 2023, on the website of Hong Kong Stock Exchange on 10 November 2023 and 18 December 2023. Note 3: Century Bright, an overseas wholly-owned subsidiary of China Petrochemical Corporation, held 810,388,000 H shares, accounting for 0.68% of the total issued share capital of Sinopec Corp. Those shareholdings were included in the total number of the shares held by HKSCC Nominees Limited. Note 4: During the reporting period, 中國工商銀行 － 上證50 交易型開放式指數證券投資基金, one of the top ten shareholders of Sinopec Corp., participated in the refinancing and lending business. At the beginning of the reporting period, the number of refinancing and lending shares was 30,000, and all of them were returned by the end of the reporting period Statement on the connected relationship or acting in concert among the above-mentioned shareholders: Sinopec Corp. is not aware of any connected relationship or acting in concert among or between the above-mentioned shareholders. 70 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Changes 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 SFO as of 31 December 2023 Name of shareholders Status of shareholders Number of shares interested BlackRock, Inc. Interest of corporation controlled by the 1,709,867,256(L) Schroders PLC substantial shareholder Investment manager 1,247,104,477(L) % of Sinopec Corp.’s issued voting shares (H Share) 7.01(L) 5.12(L) (L) : Long position, (S): Short position 3 ISSUANCE AND LISTING OF SECURITIES (1) Issuance of securities during the reporting period There was no issuance of securities of Sinopec Corp. during the reporting period. (2) Existing employee shares It provides well-drilling services, well- logging services, downhole operation services, services in connection with manufacturing and maintenance of production equipment, engineering construction service, and utility services including water and power and social services. (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 There were no existing employee shares of Sinopec Corp. during the reporting period. Shares of other listed companies directly held by China Petrochemical Corporation as of the end of the reporting period State-owned Assets Supervision and Administration Commission of the State Council 4 CHANGES IN THE CONTROLLING SHAREHOLDERS AND THE DE FACTO CONTROLLER There was no change in the controlling shareholder or the de facto controller of Sinopec Corp. during the reporting period. Name of Company Sinopec Engineering (Group) Co. Ltd Sinopec Oilfield Service Number of Shares Held Shareholding Percentage 2,907,856,000 65.81% Corporation 10,727,896,364 56.51% Sinopec Oilfield Equipment 100% China Petrochemical Corporation 68.24%* Sinopec Corp. (1) Controlling shareholder Corporation 456,756,300 47.79% 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. Ma Yongsheng. Through re-organization in 2000, China Petrochemical Corporation injected its principal petroleum and petrochemical businesses into Sinopec Corp. and retained certain petrochemical facilities. China Merchants Energy Shipping Co., Ltd China National Petroleum 1,095,463,711 13.45% Corporation 1,830,210,000 1.00% (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. * : Inclusive of 810,388,000 H shares held by Century Bright (overseas wholly- owned subsidiary of China Petrochemical Corporation) through HKSCC Nominees Limited. 71 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Changes in Share Capital andShareholdings of Principal Shareholders1. INTERBANK BOND MARKET DEBT FINANCING INSTRUMENT OF NON-FINANCIAL ENTERPRISES Bond name Abbreviation code Issuance date Interest commencement date Maturity date Amount issued (RMB billion) Outstanding balance (RMB billion) Interest rate (%) Principal and interest repayment Investor Qualification Arrangement Applicable trading mechanism Risk of suspension for listed trading (if any), and countermeasures Trading market Use of proceeds Credit rating Special terms for Issuer or investor option or investor protection, whether triggered or executed Guarantee, repayment scheme and other related events during the reporting period The first medium-term notes in 2021 21中石化MTN001 102101386 2021/7/23 2021/7/27 2026/7/27 5 5 3.2 The second medium-term notes in 2021 21中石化MTN002 102101480 2021/8/5 2021/8/6 2024/8/6 2 2 2.95 The first green medium-term notes in 2021 21中石化GN001 132100172 2021/12/27 2021/12/28 2024/12/28 2.55 2.55 2.5 Interest is paid once a year. The principal will be paid at maturity with last instalment of interest. Nationwide inter-bank bond market institutional investors Circulated and transferred in nationwide inter-bank bond market Not applicable Nationwide inter-bank bond market Proceeds from the above-mentioned corporate bonds have been used for their designated purpose as disclosed in the corporate bond prospectus. All the proceeds have been completely used till now. – Not applicable No guarantee. No change on the repayment scheme. Convening of corporate bond holders’ During the reporting period, the bondholders’ meeting was not convened. meeting Performance of corporate bonds trustee Corporate bonds trustee has performed its duties in accordance with regulatory requirements Note: Please refer to offering circular published on the website of Shanghai Stock Exchange ( http://www.sse.com.cn ), China Money Network ( http://www.chinamoney.com.cn ) and other websites for the name, office address, signing auditor, contact person and telephone number of the intermediary institutions providing services for the issuance and during the terms of the above-mentioned in interbank market debt financial instrument of non-financial enterprises and other disclosed information in the offering circular. 72 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Bond General InformationBOND GENERAL INFORMATION Principal accounting data and financial indicators for the two years ended 31 December 2023 Principal data Current ratio Quick ratio Liability-to-asset ratio Loan repayment rate Net profit attributable to equity shareholders of the Company excluding extraordinary gains and losses (RMB million) 31 December 2023 31 December 2022 0.83 0.78 Change 0.05 0.44 52.70% 100% 2023 60,692 0.42 0.02 51.80% 0.90 percentage points – 100% 2022 57,962 Change 2,730 Net profit of the Company excluding extraordinary gains 69,053 63,143 5,910 and losses (RMB million) EBITDA to total debt ratio EBITDA to interest coverage ratio 0.66 10.77 1.02 12.16 Interest coverage ratio 5.59 6.57 Cash interest coverage ratio 22.97 14.80 (0.36) (1.39) (0.98) 8.17 Interest payment rate 100% 100% – Note: Liability-to-asset ratio = total liabilities / total assets Reasons for change Increase in cash at bank and on hand, and significant decrease in accounts payable Increase in cash at bank and on hand, and significant decrease in accounts payable Increase in borrowings – Reasons for change Due to the recovery of market demand, the profits of the refining and chemicals segments increased year-on-year Due to the recovery of market demand, the profits of the refining and chemicals segments increased year-on-year Increase in borrowings Decrease in profit before taxation, and increase in interest expense Decrease in profit before taxation Year-on-year increase in net cash flow from operating activities – During the reporting period, the Company paid in full and on time the interest accrued for the other bonds and debt financing instruments. As at 31 December 2023, the standby credit line provided by several domestic financial institutions to the Company was RMB416.4 billion in total, facilitating the Company to get such amount of unsecured loans. The Company has fulfilled all the relevant undertakings in the bond offering circular and had no significant matters which could influence the Company’s operation and debt repayment 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 totalled USD750 million, with an annual interest rate of 1.250% and had been repaid and delisted; the 5-year notes principal totalled USD1 billion, with an annual interest rate of 1.875% and had been repaid and delisted; the 10-year notes principal totalled USD1.25 billion, with an annual interest rate of 3.125% and had been repaid and delisted; and the 30-year notes principal totalled USD500 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 10 years and 30 years. 73 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Bond General Information On 31 December 2023, details of the principal wholly-owned and controlled subsidiaries of the Company were as follows: Percentage of Shares Held by Sinopec Corp. (%) Registered Capital RMB million Total Assets RMB million Net Assets RMB million Net Profit/ (Net Loss) RMB million Principal Business Name of Company Sinopec International Petroleum 8,250 100 28,512 15,993 3,208 Investment in exploration, production and sale of Exploration and Production Limited Sinopec Great Wall Energy & Chemical Company Limited 22,761 100 50,271 21,370 Sinopec Yangzi Petrochemical Company 15,651 100 31,806 13,644 Limited petroleum and natural gas 73 Coal chemical industry investment management, production and sale of coal chemical products (3,135) Manufacturing of intermediate petrochemical products and petroleum products Sinopec Yizheng Chemical Fibre Limited 4,000 100 13,890 3,532 (1,490) Production and sale of polyester chips and Liability Company polyester fibres Sinopec Lubricant Company Limited 3,374 100 8,767 5,153 307 Production and sale of refined petroleum products, lubricant base oil, and petrochemical materials Sinopec Qingdao Petrochemical 1,595 100 3,332 1,327 374 Manufacturing of intermediate petrochemical Company Limited Sinopec Chemical Sales Company 1,000 100 24,980 6,643 products and petroleum products 1,678 Marketing and distribution of petrochemical products Limited China International United Petroleum and Chemical Company Limited Sinopec Overseas Investment Holding Limited Sinopec Catalyst Company Limited China Petrochemical International Company Limited 5,000 100 230,455 61,887 8,804 Trading of crude oil and petrochemical products 3,598 Million USD 1,500 1,400 100 29,629 20,373 (1,786) Overseas investment and equity holding management 100 100 15,483 22,056 7,096 5,362 910 Production and sale of catalyst products 1,197 Trading of petrochemical products Sinopec Beihai Refining and Chemical 5,294 98.98 18,307 13,990 1,842 Limited Liability Company Import and processing of crude oil, production, storage and sale of petroleum products and petrochemical products Sinopec Qingdao Refining and Chemical 5,000 85 21,393 13,875 Company Limited 1,782 Manufacturing of intermediate petrochemical products and petroleum products Sinopec Hainan Refining and Chemical 9,606 100 46,926 23,745 128 Manufacturing of intermediate petrochemical Company Limited Sinopec Marketing Co., Limited 28,403 70.42 526,621 253,249 products and petroleum products 22,418 Marketing and distribution of refined petroleum Sinopec-SK (Wuhan) Petrochemical 7,193 59 24,640 9,649 (762) Company Limited Sinopec Kantons Holdings Limited Sinopec Shanghai Gaoqiao Petroleum and Chemical Limited 248 Million HKD 10,000 products Production, sale, research and development of petroleum, petrochemical, ethylene and downstream by-products 60.33 14,119 13,657 1,169 Oil jetty and nature gas pipeline 55 33,425 22,268 106 Manufacturing of intermediate petrochemical products and petroleum products Sinopec Shanghai Petrochemical 10,799 50.55 39,658 24,942 (1,409) Manufacturing of synthetic fibres, resin and Company Limited plastics, intermediate petrochemical products and petroleum products Fujian Petrochemical Company Limited 10,492 50 12,591 10,048 (1,196) Manufacturing of plastics, intermediate petrochemical products and petroleum products Note 1: In 2023, all above subsidiaries are audited by KPMG Huazhen LLP or KPMG. 2: The above total assets and net profit have 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 of Sinopec Corp. and, therefore, only those which have material impact on the results or assets of Sinopec Corp. are set out above. 74 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Principal Wholly-Ownedand Controlled SubsidiariesPRINCIPAL WHOLLY-OWNED AND CONTROLLED SUBSIDIARIES KPMG Huazhen LLP 8th Floor, KPMG Tower Oriental Plaza 1 East Chang An Avenue Beijing 100738 China Telephone +86 (10) 8508 5000 +86 (10) 8518 5111 Fax kpmg.com/cn Internet 畢馬威華振會計師事務所 （特殊普通合夥） 中國北京 東長安街1號 東方廣場畢馬威大樓8層 郵政編碼：100738 電話 +86 (10) 8508 5000 傳真 +86 (10) 8518 5111 網址 kpmg.com/cn 畢馬威華振審字第2402028號 AUDITOR’S REPORT The Shareholders of China Petroleum & Chemical Corporation: OPINION We have audited the accompanying financial statements of China Petroleum & Chemical Corporation (“the Company”), which comprise the consolidated and company balance sheets as at 31 December 2023, the consolidated and company income statements, the consolidated and company cash flow statements, the consolidated and company statements of changes in shareholders’ equity for the year then ended, and notes to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and company financial position of the Company as at 31 December 2023, and the consolidated and company financial performance and cash flows of the Company for the year then ended in accordance with Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China. BASIS FOR OPINION We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants (“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 are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the 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. Assessment of impairment of fixed assets relating to oil and gas producing activities Refer to Note 3 (8) Oil and gas properties, (12) Impairment of other non-financial long-term assets, Note 13 Fixed assets, and Note 59 Principal accounting estimates and judgements to the financial statements The Key Audit Matter How the matter was addressed in our audit The Company reported fixed assets of Renminbi (“RMB”) 690,957 million as at 31 December 2023, a portion of which related to oil and gas producing activities. The Company reported impairment losses of RMB777 million for the fixed assets relating to oil and gas producing activities for the year ended 31 December 2023. The Company groups fixed assets relating to oil and gas producing activities into cash-generating units (“CGUs”) for impairment assessment. The Company compares the carrying amount of individual CGU with its value in use, using a discounted cash flow forecast, which was prepared based on the future production profiles included in the oil and gas reserves reports, to determine the impairment loss to be recognised. We identified assessment of impairment of fixed assets relating to oil and gas producing activities as a key audit matter. The value in use amounts of these CGUs are sensitive to the changes to future selling prices and production costs for crude oil and natural gas, future production profiles, and discount rates. Therefore a higher degree of subjective auditor judgment was required to evaluate the Company’s impairment assessment of fixed assets relating to oil and gas producing activities. The following are the primary procedures we performed to address this key audit matter: • we evaluated the design and tested the operating effectiveness of certain internal controls related to the process for impairment assessment of fixed assets relating to oil and gas producing activities; • we assessed the competence, capabilities and objectivity of the Company’s reserves specialists and evaluated the methodology adopted by them in estimating the oil and gas reserves against the recognised industry standards; • we compared future selling prices for crude oil and natural gas used in the discounted cash flow forecasts with the Company’s business plans and forecasts by external analysts; • we compared future production costs and future production profiles used in the discounted cash flow forecasts with oil and gas reserves reports issued by the reserves specialists; and • we involved valuation professionals with specialised skills and knowledge, who assisted in assessing the discount rates applied in the discounted cash flow forecasts against a discount rate range that was independently developed using publicly available market data for comparable companies in the same industry. 75 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)REPORT OF THE PRC AUDITOROTHER INFORMATION The Company’s management is responsible for the other information. The other information comprises all the information included in 2023 annual report of the Company, 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 is responsible for the preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’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 intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the 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 judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’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 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 Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the 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. 76 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)REPORT OF THE PRC AUDITOR (CONTINUED)AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS (Continued) We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and 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. KPMG Huazhen LLP Beijing, China 22 March 2024 Certified Public Accountants Registered in the People’s Republic of China Yang Jie (Engagement Partner) He Shu 77 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)REPORT OF THE PRC AUDITOR (CONTINUED)Notes At 31 December 2023 RMB million At 31 December 2022 RMB million Assets Current assets Cash at bank and on hand Financial assets held for trading Derivative financial assets 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 Other current liabilities 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 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 22 6 23 24 25 26 27 28 29 30 31 32 33 34 19 35 36 37 38 39 40 Total equity attributable to shareholders of the Company Non-controlling interests Total shareholders’ equity Total liabilities and shareholders’ equity These financial statements have been approved for issue by the board of directors on 22 March 2024. 164,960 3 9,721 48,652 2,221 5,067 26,089 250,898 26,824 534,435 234,608 450 690,957 180,250 174,529 138,181 6,472 13,199 20,110 33,483 1,492,239 2,026,674 59,815 2,752 29,122 229,878 127,239 13,941 40,008 93,031 30,457 20,833 647,076 179,347 8,513 163,864 48,269 7,817 13,133 420,943 1,068,019 119,349 117,273 3,060 2,597 223,134 340,381 805,794 152,861 958,655 2,026,674 145,052 2 19,335 46,364 3,507 7,956 27,009 244,241 29,674 523,140 233,941 730 630,758 196,045 178,359 120,694 6,464 12,034 22,433 26,523 1,427,981 1,951,121 21,313 7,313 10,782 258,642 125,444 13,617 28,379 119,892 62,844 19,159 667,385 94,964 12,997 166,407 47,587 7,256 14,068 343,279 1,010,664 119,896 118,875 3,072 2,813 218,009 325,806 788,471 151,986 940,457 1,951,121 Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 78 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)(A) FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES CONSOLIDATED BALANCE SHEET As at 31 December 2023 Assets Current assets Cash at bank and on hand Financial assets held for trading Derivative financial assets 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 Other current liabilities 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 2023 RMB million At 31 December 2022 RMB million 7 9 10 12 13 14 15 65,753 3 482 27,878 367 1,760 50,940 67,922 33,852 248,957 413,572 14 305,494 70,306 84,589 8,312 4,652 6,567 47,004 940,510 1,189,467 39,413 251 5,014 81,628 9,079 8,366 22,103 250,472 16,100 912 433,338 108,427 4,993 86,399 40,077 1,684 241,580 674,918 119,349 61,814 700 1,673 223,134 107,879 514,549 1,189,467 54,578 2 3,892 33,841 703 4,461 38,517 70,376 21,260 227,630 382,879 201 296,530 81,501 91,549 8,095 4,183 9,487 41,365 915,790 1,143,420 4,010 4,299 4,038 107,105 9,769 8,467 12,044 247,480 39,990 1,002 438,204 56,755 9,537 91,878 38,298 2,121 198,589 636,793 119,896 63,628 827 1,745 218,009 102,522 506,627 1,143,420 These financial statements have been approved for issue by the board of directors on 22 March 2024. Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 79 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)BALANCE SHEETAs at 31 December 2023 Notes 2023 RMB million 2022 RMB million 41 41 42 45 46 47 43 48 49 50 51 52 53 54 55 65 65 38 Operating income Less: Operating costs Taxes and surcharges Selling and distribution expenses General and administrative expenses Research and development expenses Financial expenses Including: Interest expenses Interest income Exploration expenses, including dry holes Add: Other income Investment income Including: Income from investment in associates and joint ventures Gains/(losses) from changes in fair value Credit impairment reversals 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: Net profit from continuing operations Net profit from discontinued operations Classification by ownership: Shareholders of the Company Non-controlling interests Basic earnings per share (RMB/share) Diluted earnings per share (RMB/share) Other comprehensive income (1) Other comprehensive income (net of tax) attributable to shareholders of the Company Items that will not be reclassified 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 reclassified to profit or loss under the equity method Cost of hedging reserve Cash flow hedges Foreign currency translation differences (2) Other comprehensive income (net of tax) attributable to non-controlling interests Total other comprehensive income net of tax Total comprehensive income Attributable to: Shareholders of the Company Non-controlling interests These financial statements have been approved for issue by the board of directors on 22 March 2024. 3,212,215 2,709,656 272,921 61,164 59,664 13,969 9,922 18,069 6,828 11,055 10,905 5,811 8,177 467 243 (8,772) 4,226 86,744 1,970 2,598 86,116 16,070 70,046 70,046 – 60,463 9,583 0.505 0.505 2,501 3,318,168 2,819,363 263,991 58,567 57,208 12,773 9,974 16,769 6,266 10,591 8,219 14,462 14,479 (1,715) 1,084 (12,009) 672 96,414 2,960 4,859 94,515 17,901 76,614 76,614 – 67,082 9,532 0.555 0.555 19,126 (8) (65) (4,287) – 5,145 1,651 (1,912) 589 70,635 62,964 7,671 1,610 329 11,174 6,078 2,703 21,829 98,443 86,208 12,235 Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 80 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2023 Operating income Less: Operating costs Taxes and surcharges Selling and distribution expenses General and administrative expenses Research and development expenses Financial expenses Including: Interest expenses Interest income Exploration expenses, including dry holes Add: Other income Investment income Including: Income from investment in associates and joint ventures Gains/(losses) from changes in fair value Credit impairment (losses)/reversal 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: Net profit from continuing operations Net profit from discontinued operations Other comprehensive income Items that will 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 Total other comprehensive income net of tax Total comprehensive income These financial statements have been approved for issue by the board of directors on 22 March 2024. Notes 41 41 50 2023 RMB million 2022 RMB million 1,206,728 962,889 167,354 1,934 24,038 12,201 11,319 19,187 8,027 9,371 7,839 34,870 4,552 284 (4) (5,057) 1,006 56,560 710 2,197 55,073 3,830 51,243 51,243 – 2 (63) 420 359 51,602 1,302,073 1,052,885 165,940 1,964 24,415 11,490 10,459 18,986 8,662 9,087 5,908 29,221 4,449 (980) 9 (6,999) 139 53,131 1,209 1,992 52,348 5,711 46,637 46,637 – – 10 5,726 5,736 52,373 Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 81 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)INCOME STATEMENTFor the year ended 31 December 2023 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 Net cash received from disposal of subsidiaries and other business entities 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 Net cash paid for the acquisition of subsidiaries and other business entities Other cash paid relating to investing activities Sub-total of cash outflows Net cash flow used in investing activities Cash flows from financing activities: Cash received from capital contributions Including: Cash received from non-controlling 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 non-controlling shareholders Other cash paid relating to financing activities Sub-total of cash outflows Net cash flow from/(used in) financing activities Effects of changes in foreign exchange rate Net increase/(decrease) in cash and cash equivalents Add: Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year These financial statements have been approved for issue by the board of directors on 22 March 2024. Notes 2023 RMB million 2022 RMB million 3,577,814 11,530 165,002 3,754,346 (2,919,751) (107,021) (326,774) (239,325) (3,592,871) 161,475 1,580 10,886 5,363 – 95,917 113,746 (171,493) (5,918) (110) (92,090) (269,611) (155,865) 1,509 1,509 699,410 420 701,339 (599,954) (56,734) (7,977) (21,919) (678,607) 22,732 (21) 28,321 93,438 121,759 3,550,138 12,010 269,895 3,832,043 (2,914,966) (102,171) (385,818) (312,819) (3,715,774) 116,269 1,980 13,969 212 10,041 103,157 129,359 (172,527) (10,456) (7,881) (33,505) (224,369) (95,010) 3,946 3,946 564,417 989 569,352 (514,275) (71,831) (5,249) (22,945) (609,051) (39,699) 3,288 (15,152) 108,590 93,438 57(a) 57(d) 57(e) 57(f) 57(h) 57(g) 57(b) 57(c) Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 82 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2023 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 Net cash received from disposal subsidiaries and other business units 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 used in 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/(used in) financing activities Effects of changes in foreign exchange rate Net increase/(decrease) in cash and cash equivalents Add: Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Notes 2023 RMB million 2022 RMB million 1,328,613 7,396 49,015 1,385,024 (988,689) (52,767) (173,711) (92,621) (1,307,788) 77,236 4,241 21,550 1,360 – 45,932 73,083 (80,398) (21,595) (23,481) (125,474) (52,391) 169,988 226,040 396,028 (99,656) (48,816) (231,193) (379,665) 16,363 35 41,243 23,228 64,471 1,455,182 6,627 18,597 1,480,406 (1,085,666) (52,488) (224,935) (72,928) (1,436,017) 44,389 7,174 24,835 26 3,259 233,475 268,769 (82,711) (28,108) (178,354) (289,173) (20,404) 207,045 403,573 610,618 (194,735) (65,474) (385,406) (645,615) (34,997) (335) (11,347) 34,575 23,228 These financial statements have been approved for issue by the board of directors on 22 March 2024. Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 83 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)CASH FLOW STATEMENTFor the year ended 31 December 2023 Specific reserve RMB million Surplus reserves RMB million Retained earnings RMB million Balance at 31 December 2021 Add: Changes in accounting policies (Note 3(27)) Balance at 1 January 2022 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. Decrease of shareholders’ capital: 4. – Purchase of own shares (Note 36) Appropriations of profits: – Appropriations for surplus reserves (Note 40) – Distributions to shareholders (Note 56) Contributions to subsidiaries from non-controlling interests 5. 6. Transaction with non-controlling interests 7. Distributions to non-controlling interests 8. Other contributions to subsidiaries from owners Total transactions with owners, recorded directly in shareholders’ equity 9. Net increase in specific reserve for the year 10. Other equity movements under the equity method 11. Transfer of other comprehensive income to retained earnings 12. Others Balance at 31 December 2022 Balance at 1 January 2023 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. Shareholders’ decrease of capital: – Purchase of own shares (Note 36) Appropriations of profits: – Appropriations for surplus reserves (Note 40) – Distributions to shareholders (Note 56) Contributions to subsidiaries from non-controlling interests 5. 6. Transaction with non-controlling interests 7. Distributions to non-controlling interests Total transactions with owners, recorded directly in shareholders’ equity 8. Net increase in specific reserve for the year 9. Other equity movements under the equity method 10. Others Balance at 31 December 2023 4. Share capital RMB million Capital reserve RMB million 121,071 – 121,071 120,188 – 120,188 – – – – – – – – (1,175) (3,004) – – – – – – (1,175) – – – – 119,896 119,896 – – – – – – – – – 2,678 (326) – (1,009) – 22 118,875 118,875 – – – – (547) (1,778) – – – – – (547) – – – 119,349 – – – – – (1,778) – 220 (44) 117,273 Other comprehensive income RMB million (690) – (690) – 19,126 19,126 (15,363) – – – – – – – – – – (1) – 3,072 3,072 – 2,501 2,501 (2,513) – – – – – – – – – – 3,060 2,664 – 2,664 213,224 122 213,346 – – – – – – – – – – – – 149 – – – 2,813 2,813 – – – – – – – – – – – (216) – – 2,597 – – – – – 4,663 – – – – – 4,663 – – – – 218,009 218,009 – – – – – 5,125 – – – – 5,125 – – – 223,134 Total shareholders’ equity attributable to equity shareholders of the Company RMB million 775,102 2,114 777,216 67,082 19,126 86,208 (15,363) Non- controlling interests RMB million 140,939 334 141,273 9,532 2,703 12,235 (439) Total shareholders’ equity RMB million 916,041 2,448 918,489 76,614 21,829 98,443 (15,802) 318,645 1,992 320,637 67,082 – 67,082 – – (4,179) – (4,179) (4,663) (56,903) – – – – (61,566) – – 1 (348) 325,806 325,806 60,463 – 60,463 – – (56,903) – – – 2,678 (58,404) 149 (1,009) – (326) 788,471 788,471 60,463 2,501 62,964 (2,513) – – 5,395 (1,713) (6,691) 2,191 (818) 30 – – (295) 151,986 151,986 9,583 (1,912) 7,671 (142) – (56,903) 5,395 (1,713) (6,691) 4,869 (59,222) 179 (1,009) – (621) 940,457 940,457 70,046 589 70,635 (2,655) – (2,325) – (2,325) (5,125) (40,760) – – – (45,885) – – (3) 340,381 – (40,760) – – – (43,085) (216) 220 (47) 805,794 – – 2,209 (213) (8,573) (6,577) (32) – (45) 152,861 – (40,760) 2,209 (213) (8,573) (49,662) (248) 220 (92) 958,655 These financial statements have been approved for issue by the board of directors on 22 March 2024. Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 84 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2023 Balance at 31 December 2021 Add: Changes in accounting policies (Note 3(27)) Balance at 1 January 2022 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. Shareholders’ decrease of capital: －Purchase of own shares (Note 36) 4. Appropriations of profits: －Appropriations for surplus reserves (Note 40) －Distributions to shareholders (Note 56) Total transactions with owners, recorded directly in shareholders’ equity 5. Net increase in specific reserve for the year 6. Other equity movements under the equity method 7. Others Balance at 31 December 2022 Balance at 1 January 2023 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. Shareholders’ decrease of capital: －Purchase of own shares (Note 36) 4. Appropriations of profits: －Appropriations for surplus reserves (Note 40) －Distributions to shareholders (Note 56) Total transactions with owners, recorded directly in shareholders’ equity 5. Net increase in specific reserve for the year 6. Other equity movements under the equity method 7. Others Balance at 31 December 2023 Share capital RMB million Capital reserve RMB million 121,071 – 121,071 67,897 – 67,897 – – – – – – – – (1,175) (3,004) – – (1,175) – – – 119,896 119,896 – – – – – – (3,004) – (1,265) – 63,628 63,628 – – – – (547) (1,778) – – (547) – – – 119,349 – – (1,778) – (36) – 61,814 Other comprehensive income RMB million 6,024 – 6,024 – 5,736 5,736 (10,933) – – – – – – – 827 827 – 359 359 (486) – – – – – – – 700 Specific reserve RMB million Surplus reserves RMB million Retained earnings RMB million Total shareholders’ equity RMB million 526,314 1,217 527,531 46,637 5,736 52,373 (10,933) 116,440 1,095 117,535 46,637 – 46,637 – – (4,179) (4,663) (56,903) (61,566) – – (84) 102,522 102,522 51,243 – 51,243 – – (56,903) (61,082) 87 (1,265) (84) 506,627 506,627 51,243 359 51,602 (486) – (2,325) (5,125) (40,760) (45,885) – – (1) 107,879 – (40,760) (43,085) (72) (36) (1) 514,549 1,658 – 1,658 213,224 122 213,346 – – – – – – – – 87 – – 1,745 1,745 – – – – – – – – (72) – – 1,673 – – – – – 4,663 – 4,663 – – – 218,009 218,009 – – – – – 5,125 – 5,125 – – – 223,134 These financial statements have been approved for issue by the board of directors on 22 March 2024. Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The accompanying notes form part of these financial statements. 85 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2023 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 22 March 2024. 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 RMB98,249,084,000. 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 RMB1.00 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 60. 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” revised in 2023 by the China Securities Regulatory Commission (“CSRC”). These financial statements present truly and completely the consolidated and company financial position as at 31 December 2023, and the consolidated and company financial performance and the consolidated and company cash flows for the year ended 31 December 2023. 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. 86 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 20232 BASIS OF PREPARATION (Continued) (5) Materiality criteria: Determination method and selection basis Item Materiality criteria Principal joint ventures and associates Principal construction in progress Goodwill Principal non-wholly-owned subsidiary The carrying amount of long-term equity investments ≥ RMB4,000 million The carrying amount of construction in progress ≥ RMB4,000 million The carrying amount of goodwill ≥ RMB4,000 million The amount of non-controlling interests ≥ RMB4,000 million 3 MATERIAL 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 (Notes 3(7), (8)), measurement of provisions (Note 3(16)), etc. Principal accounting estimates and judgements of the Group are set out in Note 59. (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) Criteria for determining control and method for the 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 non-controlling interest from a subsidiary’s non-controlling 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. 87 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (1) Accounting treatment of business combination involving entities under common control and not under common control (Continued) (c) Criteria for determining control and method for the preparation of consolidated financial statements (Continued) In a business combination involving entities not under common control achieved in stages, the Group remeasures its previously held equity interest in the acquiree on the acquisition date. The difference between the fair value and the net book value is recognised as investment income for the year. If other comprehensive income was recognised regarding the equity interest previously held in the acquiree before the acquisition date, the relevant other comprehensive income is transferred to investment income in the period in which the acquisition occurs. Where control of a subsidiary is lost due to partial disposal of the equity investment held in a subsidiary, or any other reasons, the Group derecognises assets, liabilities, non-controlling 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. Non-controlling interest is presented separately in the consolidated balance sheet within shareholders’ equity. Net profit or loss attributable to non-controlling shareholders is presented separately in the consolidated income statement below the net profit line item. The excess of the loss attributable to the non-controlling interests during the period over the non-controlling interests’ share of the equity at the beginning of the reporting period is deducted from non-controlling 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 non-controlling 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 non-controlling 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. 88 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (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 (a) Inventories categories 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 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. (b) Criteria for recognition and method of provision for diminution in value of inventories 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 and included in the current period profit and loss. 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. (c) Inventory system 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. 89 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (5) Long-term equity investments (Continued) (b) Investment in joint ventures and associates A joint venture is an incorporated entity over which the Group, based on legal form, contractual terms and other facts and circumstances, has joint control with the other parties to the joint venture and rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the Group and the parties sharing control. An associate is the investee that the Group has significant influence on their financial and operating policies. Significant influence represents the right to participate in the financial and operating policy decisions of the investee but is not control or joint control over the establishment of these policies. The Group generally considers the following circumstances in determining whether it can exercise significant influence over the investee: whether there is representative appointed to the board of directors or equivalent governing body of the investee; whether to participate in the investee’s policy-making process; whether there are significant transactions with the investees; whether there is management personnel sent to the investee; whether to provide critical technical information to the investee. An investment in a joint ventures or an associate is accounted for using the equity method, unless the investment is classified as held for sale. The initial cost of investment in joint ventures and associates is stated at the consideration paid except for cash dividends or profits distributions declared but unpaid at the time of acquisition and therefore included in the consideration paid should be deducted if the investment is made in cash. Under the circumstances that the long-term investment is obtained through non-monetary asset exchange, the initial cost of the investment is stated at the fair value of the assets exchanged if the transaction has commercial substance, the difference between the fair value of the assets exchanged and its carrying amount is charged to profit or loss; or stated at the carrying amount of the assets exchanged if the transaction lacks commercial substance. The Group’s accounting treatments when adopting the equity method include: Where the initial investment cost of a long-term equity investment exceeds the Group’s interest in the fair value of the investee’s identifiable net assets at the date of acquisition, the investment is initially recognised at the initial investment cost. Where the initial investment cost is less than the Group’s interest in the fair value of the investee’s identifiable net assets at the time of acquisition, the investment is initially recognised at the investor’s share of the fair value of the investee’s identifiable net assets, and the difference is charged to profit or loss. After the acquisition of the investment, the Group recognises its share of the investee’s net profits or losses and other comprehensive income as investment income or losses and other comprehensive income, and adjusts the carrying amount of the investment accordingly. Once the investee declares any cash dividends or profits distributions, the carrying amount of the investment is reduced by that attributable to the Group. The Group recognises its share of the investee’s net profits or losses after making appropriate adjustments to align the accounting policies or accounting periods with those of the Group based on the fair values of the investee’s net identifiable assets at the time of acquisition. Under the equity accounting method, unrealised profits and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interest in the associates or joint ventures. Unrealised losses resulting from transactions between the Group and its associates or joint ventures are fully recognised in the event that there is an evidence of impairment. The Group discontinues recognising its share of net losses of the investee after the carrying amount of the long-term equity investment and any long-term interest that is in substance forms part of the Group’s net investment in the associate or the joint 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). 90 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (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 (the individual lease asset has a relatively low value when brand 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. (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(20)), 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. The criteria and timing for each type of construction in progress to be transferred to fixed assets are as follows: Category Plants and buildings Equipment, machinery and others Criteria and time point for transfer to fixed assets Asset management relevant departments complete on-site inspection and acceptance with conditions for use. (1) A single set of equipment can be put into operation separately and produce qualified products independently of other equipment or processes, and the relevant departments have issued a commissioning report; (2) Combined devices can be successfully commissioned jointly and produce qualified products normally, and the relevant departments will issue a commissioning report; (3) The supporting facilities are completed with the joint device as a whole and reach the point of the intended usable state; (4) The petrol station has completed on-site acceptance by the relevant management department; (5) The petrol filling station has completed on-site acceptance by the relevant departments and passed the relevant special acceptance by the local law enforcement authorities; (6) Fixed assets not required to be installed have passed acceptance by relevant departments; (7) The long-distance pipeline reaches the conditions for oil injection or section oil injection operation, and the relevant management departments of the enterprise complete the on-site acceptance and pass the relevant special acceptance by the local law enforcement departments. When an enterprise sells products or by-products produced before a fixed asset is available for its intended use, the proceeds and related cost are accounted for in accordance with CAS 14 – Revenue and CAS 1 – Inventories respectively, and recognised in profit or loss for the current period. 91 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 3 MATERIAL ACCOUNTING POLICIES (Continued) (7) Fixed assets and construction in progress (Continued) Where the individual component parts of an item of fixed asset have different useful lives or provide benefits to the Group in different patterns thus necessitating use of different depreciation rates or methods, each part is recognised as a separate fixed asset. The subsequent costs including the cost of replacing part of an item of fixed assets are recognised in the carrying amount of the item if the recognition criteria are satisfied, and the carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of fixed assets are recognised in profit or loss as incurred. The Group terminates the recognition of an item of fixed asset when it is in a state of disposal or it is estimated that it is unable to generate any economic benefits through use or disposal. Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in profit or loss on the date of retirement or disposal. Other than oil and gas properties, the cost of fixed assets less residual value and accumulated impairment losses is depreciated using the straight-line method over their estimated useful lives, unless the fixed asset is classified as held for sale. The estimated useful lives and the estimated rate of residual values adopted for respective classes of fixed assets are as follows: Plants and buildings Equipment, machinery and others Useful lives, residual values and depreciation methods are reviewed at least each year end. Estimated useful life Estimated rate of residual value 12-50 years 4-30 years 3% 3% (8) Oil and gas properties Oil and gas assets refer to the ownership or control of mining interests and the formation of oil and gas wells and related auxiliary equipment through oil and gas exploration and development activities. For mining rights and interests, if proven economically recoverable reserves are discovered in the mining area within the year, the expenses incurred in the current period should be capitalized. If no proven economically recoverable reserves are found in the mining area within the year, the expenses incurred in the current period should be temporarily capitalized; When reserves are subsequently discovered, they should be transferred within the oil and gas assets. For completed exploration wells that have completed exploration tasks, obtained industrial oil and gas flow, and can be economically and effectively included in oil and gas production management, the actual expenses for drilling the well, production costs, and disposal fees determined according to the disposal plan will be converted into oil and gas assets when it is put into production (reaching a usable state), and an estimated liability for oil and gas asset disposal fees will be calculated; Exploration tasks have been completed, and exploration wells that have not obtained industrial oil and gas flow have been identified. If they are economically and effectively utilized for other purposes (co associated resources, injection wells, etc.), the actual expenses and production costs of drilling the well will be converted into corresponding assets when it is put into production (reaching a usable state); Exploration tasks have been completed, and exploration wells that have not obtained industrial oil and gas flow, or exploration wells that have obtained industrial oil and gas flow but do not have the conditions for oil and gas production and cannot be economically and effectively included in oil and gas production management (including other economically and effectively utilized methods), shall be written off. The actual drilling and exploration expenses of the well shall be included in the current period’s profit and loss. For unfinished exploration wells, the drilling support of the well shall be listed as under construction within one year after completion; After one year of completion, it is still uncertain whether the well has obtained industrial oil and gas flow. If further exploration activities of the well are already in progress or have clear plans and are about to be implemented, the expenditure of the well will continue to be included in the construction project. Otherwise, the actual expenditure of the well will be recognized in the current profit and loss. For the development well, if it is determined to obtain industrial oil and gas flow and can be economically and effectively included in oil and gas production management, the actual expenses, production costs, and disposal fees determined according to the disposal plan of the well will be converted into oil and gas assets when it is put into production (reaching a usable state), and an estimated liability for oil and gas asset disposal fees will be calculated. For auxiliary equipment related to oil and gas assets, they will be converted into oil and gas assets when the project is completed and reaches the predetermined usable state. The estimation of the future demolition costs of oil and gas assets by our group is based on current industry practices, taking into account expected demolition methods and referring to the estimates of engineers. The relevant demolition costs are discounted to present value based on the pre tax risk-free rate of return and capitalized as part of the value of oil and gas assets, which are subsequently amortized. The capitalization cost of proven oil and gas assets is amortized based on production and oil and gas reserves using the production method. 92 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (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. The useful life, basis of determination and amortization method of each intangible asset are as follows: Item Land use rights Patents Non-patented technology Operating rights Others Useful life Basis of determination Title registration period Expected years of economic benefits Expected years of economic benefits Contractual period Expected years of economic benefits Amortization method Straight-line method Straight-line method Straight-line method Straight-line method Straight-line method 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. For the sales of products or by-products produced during the research and development process, the group shall conduct accounting treatment for the relevant income and costs in accordance with the Accounting Standards for Business Enterprises No. 14 – Revenue, Accounting Standards for Business Enterprises No. 1 – Inventory, and include in the current profit and loss. (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 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. 93 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (11) Financial Instruments (Continued) (a) Financial assets (Continued) (i) Classification and measurement (Continued) 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 • Expected credit losses measurement 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. 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 and receivables financing arising from ordinary business activities such as sales of goods and rendering of services, 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. • Allowance for doubtful accounts on receivables (a) The type of portfolio for which provision for bad debts is made according to the credit risk characteristics and the basis for its determination Receivables items Basis of determination Accounts receivable Other receivables Receivables financing Based on the historical experience of the Group, there are significant differences in losses across different operating segments. Therefore the Group estimates the allowance for doubtful accounts of the accounts receivable of each operating segment as a separate portfolio respectively. The Group’s other receivables mainly include security deposits and deposits, receivables from related parties, dividends receivable, etc. Based on their credit risk, the Group estimates the allowance for doubtful accounts of the other receivables for different ages as a separate portfolio respectively. The Group’s receivables financing consists of bank acceptance bills held for dual purposes. Due to the high credit ratings of the accepting banks, the Group treats all receivables financing as a single portfolio. (b) According to the criteria for judging the individual provision for bad debts For accounts receivable, other receivables and receivables financing, the Group usually measures its loss allowance according to the combination of credit risk characteristics. If the credit risk characteristics of a counterparty are significantly different from those of other counterparties in the portfolio, or if the credit risk characteristics of the counterparty change significantly, the amount receivable from the counterparty shall be exposed to provision measurement and/or recognition on a separate basis. 94 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 3 MATERIAL ACCOUNTING POLICIES (Continued) (11) Financial Instruments (Continued) (a) Financial assets (Continued) (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. Financial guarantee liabilities Financial guarantees are contracts that requires the Group to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantees issued are initially recognised at fair value, which is determined by reference to fees charged in an arm’s length transaction for similar services, when such information is obtainable, or to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss. Subsequent to initial recognition, the amount initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. (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. 95 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL 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 cash flow hedge reserve is adjusted to the lower of the following in absolute amounts: – The cumulative gain or loss on the hedging instrument from inception of the hedge; – The cumulative change in present value of the expected future cash flows on the hedged item from inception of the hedge. The 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 (i.e. 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. – Fair value hedges A fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognised firm commitment, or a portion of such an asset, liability or firm commitment. The gain or loss from remeasuring the hedging instrument is recognised in profit or loss. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the recognised hedged item not measured at fair value and is recognised in profit or loss. Any adjustment to the carrying amount of a hedged item is amortised to profit or loss if the hedged item is a financial instrument (or a component thereof) measured at amortised cost. The amortisation is based on a recalculated effective interest rate at the date that amortisation begins. 96 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (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, long-term deferred expenses and investments in subsidiaries, associates and joint ventures may be impaired. Assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. The recoverable amounts of goodwill and intangible assets with uncertain useful lives are estimated annually no matter there are any indications of impairment. Goodwill is tested for impairment together with related asset units or groups of asset units. An asset unit is the smallest identifiable group of assets that generates cash inflows largely independent of the cash inflows from other assets or groups of assets. An asset unit comprises related assets that generate associated cash inflows. In identifying an asset unit, the Group primarily considers whether the asset unit is able to generate cash inflows independently as well as the management style of production and operational activities, and the decision for the use or disposal of asset. The recoverable amount is the greater of the fair value less costs to sell and the present value of expected future cash flows generated by the asset (or asset unit, set of asset units). Fair value less costs to sell of an asset is based on its selling price in an arm’s length transaction less any direct costs attributable to the disposal. Present value of expected future cash flows is the estimation of future cash flows to be generated from the use of and upon disposal of the asset, discounted at an appropriate pre-tax discount rate over the asset’s remaining useful life. If the recoverable amount of an asset is less than its carrying amount, the carrying amount is reduced to the recoverable amount. The amount by which the carrying amount is reduced is recognised as an impairment loss in profit or loss. A provision for impairment loss of the asset is recognised accordingly. Impairment losses related to an asset unit or a set of asset units first reduce the carrying amount of any goodwill allocated to the asset unit or set of asset units, and then reduce the carrying amount of the other assets in the asset unit or set of asset units on a pro rata basis. However, the carrying amount of an impaired asset will not be reduced below the highest of its individual fair value less costs to sell (if determinable), the present value of expected future cash flows (if determinable) and zero. Once an impairment loss is recognised, it is not reversed in a subsequent period. (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. 97 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (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. 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; – 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. Loss-making contracts exist when the costs of performing contractual obligations inevitably exceed the expected economic benefits in the contracts entered into by the Group. The projected liability for loss-making contracts is calculated at the present value of the lesser of the expected cost of termination and the net cost of continuing to perform the contract. The cost of performing a contract includes the allocation of incremental costs for the performance of the contract and other costs directly related to the performance of the contract. (17) Specific reserve The Group recognises a safety fund in the specific reserve pursuant to relevant government regulations, with a corresponding increase in the costs of the related products or expenses. When the safety fund is subsequently used for revenue expenditure, the specific reserve is reduced accordingly. When the safety fund is subsequently used for the construction or acquisition of fixed assets, the Group recognises the capitalised expenditure incurred as the cost of the fixed assets when the related assets are ready for their intended use. In such cases, the specific reserve is reduced by the amount that corresponds to the cost of the fixed assets and the credit side is recognised in the accumulated depreciation with respect to the related fixed assets. Consequently, such fixed assets are not depreciated in subsequent periods. 98 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (18) 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. The Group determines whether it is a principal or an agent, based on whether it obtains control of the specified good or service before that good or service is transferred to a customer. The Group is a principal if it controls the specified good or service before that good or service is transferred to a customer, and recognises revenue in the gross amount of consideration which it has received (or which is receivable). Otherwise, the Group is an agent, and recognises revenue in the amount of any fee or commission to which it expects to be entitled. The fee or commission is the net amount of consideration that the Group retains after paying the other party the consideration, or is determined according to the established amount or proportion. The circumstances in which the Group is able to control the goods before transferring them to customers include: – The Group acquires control of the goods or other assets from a third party and then transfers them to the customer; – The Group is able to lead third parties to provide services to customers on behalf of the Group; – After the Group acquires control of a product from a third party, it transfers the product to a customer by integrating the product with other products into a combination of products through the provision of significant services; In determining whether the Group has control over the Goods before the transfer of the Goods to the Customer, the Group takes into account all relevant facts and circumstances, including: – The Group bears the primary responsibility for the transfer of goods to customers; – The Group assumes the inventory risk of the goods before or after the transfer of the goods; – The Group reserves the right to determine the price of the products it trades at its own discretion. (19) Government grants Government grants are non-reciprocal transfers of monetary or non-monetary assets from the government to the Group except for capital contributions from the government in the capacity as an investor in the Group. 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. 99 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (20) 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. (21) Repairs and maintenance expenses Repairs and maintenance (including overhauling expenses) expenses are recognised in profit or loss when incurred. (22) 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. (23) Research and development costs Research costs and development costs that cannot meet the capitalisation criteria are recognised in profit or loss when incurred. (24) 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. (25) 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. In addition to the related parties stated above, the Company determines related parties based on the disclosure requirements of Administrative Procedures on the Information Disclosures of Listed Companies issued by the CSRC. (26) Segment reporting Reportable segments are identified based on operating segments which are determined based on the structure of the Group’s internal organisation, management requirements and internal reporting system. An operating segment is a component of the Group that meets the following respective conditions: – engage in business activities from which it may earn revenues and incur expenses; – whose operating results are regularly reviewed by the Group’s management to make decisions about resource to be allocated to the segment and assess its performance; and – for which financial information regarding financial position, results of operations and cash flows are available. Inter-segment revenues are measured on the basis of actual transaction price for such transactions for segment reporting, and segment accounting policies are consistent with those for the consolidated financial statements. 100 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (27) Changes in significant accounting policies In 2023, the Group has adopted the revised accounting requirements and guidance under CAS newly issued by the Ministry of Finance (“MOF”) as follows: In accordance with CAS Bulletin No.16, the provisions of the Accounting Standards for Business Enterprises No. 18 – Income Taxes on exemption from initial recognition of deferred tax liabilities and deferred tax assets shall not apply to single transactions that are not business combinations, that do not affect accounting profits or taxable income (or deductible losses) upon transaction’s occurrence, and result in equal amount of taxable temporary differences and deductible temporary differences caused by initially recognised assets and liabilities. The Group has made retrospective adjustments in accordance with these provisions for applicable single transactions occurring between 1 January 2022 and the date of initial implementation. With regard to deductible temporary differences and taxable temporary differences arising from lease liabilities and right-of-use assets recognised as at 1 January 2022 as a result of single transactions to which these provisions apply, the Group shall, in accordance with CAS Bulletin No.16 and Accounting Standards for Business Enterprises No. 18 – Income Taxes, adjust the cumulative effect amount with the retained earnings at the beginning of the earliest period presented in the financial statements and other relevant items of the financial statements. (i) The effects on the comparative financial statements The effects of these changes in accounting policies on net profit for the twelve months ended 31 December 2022, and opening and closing balances of shareholders’ equity as at 1 January and 31 December 2022 are summarised as follows: Net profit for the twelve months ended 31 December 2022 RMB million The Group 2022 Closing balance of shareholders’ equity RMB million 2022 Opening balance of shareholders’ equity RMB million Net profit and shareholders’ equity before adjustments The effects of the exemption of initial recognition not applicable to the deferred tax relating to assets and liabilities arising from a single transaction Net profit and shareholders’ equity after adjustments 75,758 937,153 916,041 856 76,614 3,304 940,457 2,448 918,489 The Company Net profit for the twelve months ended 31 December 2022 RMB million 2022 Closing balance of shareholders’ equity RMB million 2022 Opening balance of shareholders’ equity RMB million Net profit and shareholders’ equity before adjustments The effects of the exemption of initial recognition not applicable to the deferred tax relating to assets and liabilities arising from a single transaction Net profit and shareholders’ equity after adjustments 46,104 504,877 526,314 533 46,637 1,750 506,627 1,217 527,531 101 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 20233 MATERIAL ACCOUNTING POLICIES (Continued) (27) Changes in significant accounting policies (Continued) (i) The effects on the comparative financial statements (Continued) The effects of the above changes in accounting policies on each item of the consolidated balance sheet and company balance sheet as at 31 December 2022 are summarised as follows: Non-current assets Deferred tax assets Total non-current assets Total assets Non-current liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Shareholders’ equity Surplus reserves Retained earnings Total equity attributable to shareholders of the Company Non-controlling interests Total shareholders’ equity Total liabilities and shareholders’ equity Non-current assets Deferred tax assets Total non-current assets Total assets Shareholders’ equity Surplus reserves Retained earnings Total shareholders’ equity Total liabilities and shareholders’ equity Before adjustments RMB million The Group The amounts of adjustments RMB million After adjustments RMB million 19,952 1,425,500 1,948,640 8,079 344,102 1,011,487 217,834 323,087 785,577 151,576 937,153 1,948,640 2,481 2,481 2,481 (823) (823) (823) 175 2,719 2,894 410 3,304 2,481 Before adjustments RMB million The Company The amounts of adjustments RMB million 7,737 914,040 1,141,670 217,834 100,947 504,877 1,141,670 1,750 1,750 1,750 175 1,575 1,750 1,750 22,433 1,427,981 1,951,121 7,256 343,279 1,010,664 218,009 325,806 788,471 151,986 940,457 1,951,121 After adjustments RMB million 9,487 915,790 1,143,420 218,009 102,522 506,627 1,143,420 102 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 3 MATERIAL ACCOUNTING POLICIES (Continued) (27) Changes in significant accounting policies (Continued) (i) The effects on the comparative financial statements (Continued) The effects of the above changes in accounting policies on each item of the consolidated income statement and company income statement for the twelve-month period ended 31 December 2022 are summarised as follows: Income tax expense Net profit Classification by continuity of operations Net profit from continuing operations Classification by ownership Shareholders of the Company Non-controlling interests Basic earnings per share (RMB/Share) Diluted earnings per share (RMB/Share) Total comprehensive income Shareholders of the Company Non-controlling interests Income tax expense Net profit Classification by continuity of operations Net profit from continuing operations Total comprehensive income Before adjustments RMB million The Group The amounts of adjustments RMB million After adjustments RMB million 18,757 75,758 75,758 66,302 9,456 0.548 0.548 97,587 85,428 12,159 (856) 856 856 780 76 0.007 0.007 856 780 76 17,901 76,614 76,614 67,082 9,532 0.555 0.555 98,443 86,208 12,235 Before adjustments RMB million The Company The amounts of adjustments RMB million 6,244 46,104 46,104 51,840 (533) 533 533 533 After adjustments RMB million 5,711 46,637 46,637 52,373 (ii) After retrospective adjustments of the above accounting policy changes, the consolidated balance sheet and company balance sheet as at 1 January 2022 are as follows: Assets Current assets Cash at bank and on hand Derivative financial assets 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 The Group RMB million The Company RMB million 221,989 18,371 34,861 5,939 9,267 35,664 207,433 24,500 558,024 209,179 767 598,932 155,939 184,974 119,210 8,594 10,007 21,098 24,240 1,332,940 1,890,964 110,691 4,503 21,146 227 4,540 46,929 63,661 23,408 275,105 360,847 201 284,622 66,146 105,712 9,334 – 2,875 9,932 34,227 873,896 1,149,001 103 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 3 MATERIAL ACCOUNTING POLICIES (Continued) (27) Changes in significant accounting policies (Continued) (ii) After retrospective adjustments of the above accounting policy changes, the consolidated balance sheet and company balance sheet as at 1 January 2022 are as follows: (Continued) 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 Other current liabilities 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 Non-controlling interests Total shareholders’ equity Total liabilities and shareholders’ equity The Group RMB million The Company RMB million 27,366 3,223 11,721 203,919 124,622 14,048 81,267 114,701 28,651 31,762 641,280 49,341 42,649 170,233 43,525 7,171 18,276 331,195 972,475 121,071 120,188 (690) 2,664 213,346 320,637 777,216 141,273 918,489 1,890,964 16,550 1,121 6,058 85,307 7,505 8,398 46,333 211,179 16,737 13,702 412,890 34,258 31,522 104,426 35,271 – 3,103 208,580 621,470 121,071 67,897 6,024 1,658 213,346 117,535 527,531 – 527,531 1,149,001 104 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 4 TAXATION Major types of tax applicable to the Group are value-added tax, resources tax, consumption tax, income tax, crude oil special gain levy, Levy for mineral rights concessions, city construction tax, education surcharge and local education surcharge etc. Tax rate of products is presented as below: Type of taxes Tax rate Value Added Tax (the “VAT”) 13%, 9%, 6% Resource Tax Consumption Tax Corporate Income Tax Crude Oil Special Gain Levy Levy for mineral rights concessions （礦業權出讓收益） City Maintenance and Construction Tax Education surcharges Local Education surcharges 6% RMB2,109.76 per tonnage for Gasoline, RMB1,411.20 per tonnage for Diesel, RMB2,105.20 per tonnage for Naphtha, RMB1,948.64 per tonnage for Solvent oil, RMB1,711.52 per tonnage for Lubricant oil, RMB1,218.00 per tonnage for Fuel oil, and RMB1,495.20 per tonnage for Jet fuel oil. 5% to 50% 20% to 40% Oil, gas, shale gas，Natural gas hydrates 0.8% onshore, 0.6% offshore, coal bed methane 0.3%, mineral salts (rock salt) 2.8% 1%, 5% or 7% 3% 2% 5 CASH AT BANK AND ON HAND The Group Tax basis and method Based on taxable value added amount. Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less current period’s deductible VAT input. Based on the revenue from sales of crude oil and natural gas. Based on quantities Based on taxable income. Based on the sales of domestic crude oil at prices higher than a specific level. Based on revenue from sales of mineral products Based on the actual paid VAT and consumption tax. Based on the actual paid VAT and consumption tax. Based on the actual paid VAT and consumption tax. 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 At 31 December 2023 At 31 December 2022 Original currency million Exchange rates 1,169 3,584 1 7.0827 0.9062 7.8592 8,196 10 7.0827 7.8592 Original currency million Exchange rates 690 5,162 1 6.9646 0.8933 7.4229 7,433 56 6.9646 7.4229 RMB million 1 87,278 8,277 3,248 4 185 98,993 7,602 58,050 76 239 65,967 164,960 RMB million 2 69,282 4,809 4,611 7 1,277 79,988 12,690 51,774 413 187 65,064 145,052 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 2023, time deposits with financial institutions of the Group amounted to RMB41,778 million (2022: RMB51,614 million). 105 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 6 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES Derivative financial assets and derivative financial liabilities of the Group are primarily commodity futures and hedge accounting. See Note 64. Cash flow hedge instruments Other derivatives 7 ACCOUNTS RECEIVABLE Accounts receivable Less: Allowance for doubtful accounts Total Ageing analysis on accounts receivable is as follows: 31 December 2023 RMB Million 31 December 2022 RMB Million Derivative financial assets Derivative financial liabilities Derivative financial assets Derivative financial liabilities 2,883 6,838 9,721 1,768 984 2,752 2,187 17,148 19,335 247 7,066 7,313 The Group The Company At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million 52,668 4,016 48,652 50,443 4,079 46,364 27,949 71 27,878 33,919 78 33,841 At 31 December 2023 At 31 December 2022 The Group Percentage to total accounts receivable % 91.6 0.6 0.3 7.5 100.0 Allowance RMB million 74 47 62 3,833 4,016 Percentage of allowance to accounts receivable balance % 0.2 14.4 53.4 96.7 Amount RMB million 46,097 216 269 3,861 50,443 Percentage to total accounts receivable % 91.4 0.4 0.5 7.7 100.0 Allowance RMB million 58 64 181 3,776 4,079 At 31 December 2023 At 31 December 2022 The Company Percentage to total accounts receivable % 98.0 1.1 0.1 0.8 100.0 Allowance RMB million 4 1 5 61 71 Percentage of allowance to accounts receivable balance % 0.0 0.3 20.8 27.9 Amount RMB million 33,555 108 191 65 33,919 Percentage to total accounts receivable % 98.9 0.3 0.6 0.2 100.0 Allowance RMB million 1 11 1 65 78 Percentage of allowance to accounts receivable balance % 0.1 29.6 67.3 97.8 Percentage of allowance to accounts receivable balance % 0.0 10.2 0.5 100.0 Amount RMB million 48,261 326 116 3,965 52,668 Amount RMB million 27,387 319 24 219 27,949 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 As at 31 December 2023 and 31 December 2022, 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 2023 At 31 December 2022 15,137 28.7% 2,204 15,846 31.4% 2,187 As at 31 December 2023, the carrying amount of accounts receivable under factoring arrangement that are derecognised is RMB12,767 million. 106 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 7 ACCOUNTS RECEIVABLE (Continued) 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 64. During 2023 and 2022, the Group and the Company had no individually significant accounts receivable been fully or substantially provided allowance for doubtful accounts. During 2023 and 2022, 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. Ageing started from the overdue date of accounts receivable. The Group always measured the provision for impairment of accounts receivable based on the amount equivalent to the expected credit loss during the entire duration. The ECLs were calculated based on historical actual credit loss experience. The rates were considered the differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. The Group performed the calculation of ECL rates by the operating segment and geographical location. 31 December 2023 Current and within 1 year past due 1 to 2 years past due 2 to 3 years past due Over 3 years past due Total 31 December 2022 Current and within 1 year past due 1 to 2 years past due 2 to 3 years past due Over 3 years past due Total 8 RECEIVABLES FINANCING Impairment provision on individual basis Impairment provision on provision matrix basis Gross carrying amount RMB million Carrying amount RMB million Impairment provision on individual basis RMB million 48,261 326 116 3,965 52,668 8,958 139 34 3,599 12,730 4 1 25 3,467 3,497 Weighted- average loss rate % 0.2% 24.6% 45.1% 100.0% Impairment provision RMB million Loss allowance RMB million 70 46 37 366 519 74 47 62 3,833 4,016 Impairment provision on individual basis Impairment provision on provision matrix basis Gross carrying amount RMB million Carrying amount RMB million Impairment provision on individual basis RMB million 46,097 216 269 3,861 50,443 7,014 29 193 3,487 10,723 2 25 148 3,405 3,580 Weighted- average loss rate % 0.1% 20.9% 43.4% 99.2% Impairment provision RMB million Loss allowance RMB million 56 39 33 371 499 58 64 181 3,776 4,079 Receivables financing represents mainly the bills of acceptance issued by banks for sales of goods and products and certain trade accounts receivable.The business model of financial assets is achieved both by collecting contractual cash flows and selling of these assets. At 31 December 2023, 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. At 31 December 2023, the Group’s derecognised but outstanding bills due to endorsement or discount amounted to RMB49,616 million (2022: RMB34,978 million). 107 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 9 PREPAYMENTS Prepayments Less: Allowance for doubtful accounts Total Ageing analysis of prepayments is as follows: The Group The Company At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million 5,242 175 5,067 8,067 111 7,956 1,767 7 1,760 4,473 12 4,461 At 31 December 2023 At 31 December 2022 The Group Percentage to total prepayments % Allowance RMB million Percentage of allowance to prepayments balance % 83.4 10.8 2.1 3.7 100.0 – 86 24 65 175 – 15.1 21.4 34.4 Amount RMB million 4,373 568 112 189 5,242 Percentage to total prepayments % Allowance RMB million 94.3 3.1 0.8 1.8 100.0 – 32 10 69 111 Amount RMB million 7,608 249 67 143 8,067 At 31 December 2023 At 31 December 2022 The Company Percentage to total prepayments % Allowance RMB million Percentage of allowance to prepayments balance % 97.7 1.6 – 0.7 100.0 – – – 7 7 – – – 58.3 Amount RMB million 1,726 29 – 12 1,767 Percentage to total prepayments % Allowance RMB million 96.8 0.9 0.3 2.0 100.0 – 1 3 8 12 Amount RMB million 4,331 39 13 90 4,473 Percentage of allowance to prepayments balance % – 12.9 14.9 48.3 Percentage of allowance to prepayments balance % – 2.6 23.1 8.9 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 2023 and 31 December 2022, 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 2023 At 31 December 2022 1,041 19.9% 2,565 31.8% 108 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 10 OTHER RECEIVABLES Other receivables Less: Allowance for doubtful accounts Total Other receivables mainly include security deposits and deposits. Ageing analysis of other receivables is as follows: The Group The Company At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million 27,761 1,672 26,089 28,562 1,553 27,009 51,843 903 50,940 39,416 899 38,517 At 31 December 2023 At 31 December 2022 The Group Percentage to total other receivables % 61.7 1.1 0.5 36.7 100.0 Amount RMB million 17,121 313 152 10,175 27,761 Allowance RMB million 13 34 43 1,582 1,672 Percentage of allowance to other receivables balance % 0.1 10.9 28.3 15.5 Percentage to total other receivables % 62.6 1.7 1.2 34.5 100.0 Amount RMB million 17,846 496 353 9,867 28,562 Allowance RMB million 25 44 139 1,345 1,553 At 31 December 2023 At 31 December 2022 The Company Percentage to total other receivables % Allowance RMB million 70.9 12.9 4.1 12.1 100.0 – 5 3 895 903 Amount RMB million 36,754 6,676 2,118 6,295 51,843 Percentage of allowance to other receivables balance % – 0.1 0.1 14.2 Percentage to total other receivables % Allowance RMB million 65.8 7.2 10.0 17.0 100.0 – 5 2 892 899 Amount RMB million 25,945 2,847 3,929 6,695 39,416 Percentage of allowance to other receivables balance % 0.1 8.9 39.4 13.6 Percentage of allowance to other receivables balance % – 0.2 0.1 13.3 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 2023 and at 31 December 2022, 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 2023 At 31 December 2022 14,545 Within one year, one to two years, two to three years and over three years 52.4% 72.0 13,936 Within one year, one to two years, two to three years and over three years 48.8% 72.0 During the year ended 31 December 2023 and 2022, 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 2023 and 2022, 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. 109 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 11 INVENTORIES The Group Raw materials Work in progress Finished goods Spare parts and consumables Less: Provision for diminution in value of inventories Total At 31 December 2023 RMB million At 31 December 2022 RMB million 138,143 20,375 95,227 2,994 256,739 5,841 250,898 139,307 14,536 93,994 2,987 250,824 6,583 244,241 At 31 December 2023, the provision for diminution in value of inventories of the Group was primarily due to the costs of finished goods and raw materials were higher than net realisable value. 12 LONG-TERM EQUITY INVESTMENTS The Group Balance at 1 January 2023 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 Foreign currency translation differences Movement of provision for impairment Other movements Balance at 31 December 2023 The Company Investments in joint ventures RMB million Investments in associates RMB million Provision for impairment losses RMB million 77,846 9,009 (3,601) (5,079) (7) (3,914) (830) 487 – 488 74,399 159,985 2,152 11,778 (1,604) 227 (7,863) (402) 355 – (499) 164,129 (3,890) – – – – – – (36) 6 – (3,920) Total RMB million 233,941 11,161 8,177 (6,683) 220 (11,777) (1,232) 806 6 (11) 234,608 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 Balance at 1 January 2023 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 Other movement Balance at 31 December 2023 298,045 23,099 – – – – (738) – – 320,406 17,239 7,785 (22) – (12) (1,702) – – 316 23,604 75,524 190 4,574 (63) (24) (2,393) (1) – (316) 77,491 (7,929) – – – – – – – – (7,929) 382,879 31,074 4,552 (63) (36) (4,095) (739) – – 413,572 For the year ended 31 December 2023, 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 60. 110 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 12 LONG-TERM EQUITY INVESTMENTS (Continued) Principal joint ventures and associates of the Group are as follows: (a) Principal joint ventures and associates 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 Name of investees 1. Joint ventures Fujian Refining & Petrochemical Company Limited (“FREP”) BASF-YPC Company Limited (“BASF-YPC”) Taihu Limited (“Taihu”) Sinopec SABIC Tianjin Petrochemical Company Limited (“Sinopec SABIC Tianjin”) Shanghai SECCO Petrochemical Company Limited. (“Shanghai SECCO”)(i) 2. Associates China Oil & Gas Pipeline Network Corporation (“PipeChina”)(ii) Sinopec Finance Company Limited (“Sinopec Finance”) Sinopec Capital Co., Ltd. (“Sinopec Capital”) Zhongtian Synergetic Energy Company Limited (“Zhongtian Synergetic Energy”) China National Aviation Fuel Supply Co., Ltd. (“Aviation Fuel”) PRC PRC Russia PRC PRC PRC PRC PRC PRC PRC PRC PRC Cyprus PRC NA SAMI ALOSAIMI PRC Wang Jingyi Zhang Xiguo Manufacturing refining oil products 14,758 50.00% Gu Yuefeng Manufacturing and distribution of 13,141 40.00% petrochemical products Crude oil and natural gas extraction Manufacturing and distribution of petrochemical products Manufacturing and distribution of petrochemical products 25,000 USD 10,520 49.00% 50.00% 3,115 50.00% PRC PRC PRC PRC PRC Zhang Wei Operation of oil and natural gas pipelines 500,000 14.00% and auxiliary facilities Jiang Yongfu Provision of non-banking financial services 18,000 49.00% Zhou Meiyun Project management, equity investment management, investment consulting, self-owned equity management 10,000 49.00% Yang Dong Mining coal and manufacturing of coal- 17,516 38.75% chemical products Zhang Zhicheng Wholesale of gasoline, kerosene, and 3,800 29.00% diesel within the civil aviation system Joint ventures and associates above are limited companies. (i) The Company and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. (“Gaoqiao Petrochemical”) and INEOS Investment (Shanghai) Company Limited (“INEOS Shanghai”) entered into an equity transfer agreement. According to the agreement, the Company and Gaoqiao Petrochemical transferred 15% and 35% equity interests in Shanghai SECCO to INEOS Shanghai respectively. The transactions were completed on 28 December 2022, and Shanghai SECCO was changed from a subsidiary to a joint venture after the completion of the transaction. (ii) Sinopec is able to exercise significant influence in PipeChina since Sinopec has a member in PipeChina’s Board of Directors and has a member in PipeChina’s Management Board. 111 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 12 LONG-TERM EQUITY INVESTMENTS (Continued) (b) Major financial information of principal joint ventures Summarised balance sheet and reconciliation to their carrying amounts in respect of the Group’s principal joint ventures: FREP BASF-YPC Taihu Sinopec SABIC Tianjin At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million Shanghai SECCO At 31 December 2023 RMB million At 31 December 2022 RMB million Current assets Cash and cash equivalents Other current assets Total current assets Total 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 Summarised income statement 3,258 13,017 16,275 11,752 (827) (12,115) (12,942) (2,738) (223) (2,961) 12,124 3,733 11,311 15,044 12,708 (829) (9,951) (10,780) (3,742) (237) (3,979) 12,993 2,051 4,615 6,666 9,000 (25) (1,963) (1,988) – (123) (123) 13,555 3,061 5,993 9,054 9,244 (63) (2,245) (2,308) – (107) (107) 15,883 654 4,864 5,518 12,254 (42) (2,243) (2,285) (139) (914) (1,053) 14,434 1,625 15,269 16,894 10,488 (55) (2,727) (2,782) (157) (1,852) (2,009) 22,591 2,974 2,455 5,429 17,345 (3,900) (2,262) (6,162) (5,152) (603) (5,755) 10,857 4,506 2,554 7,060 18,466 (2,950) (3,282) (6,232) (6,393) (635) (7,028) 12,266 1,563 3,106 4,669 26,386 (3,582) (2,256) (5,838) (4,303) (1,097) (5,400) 19,817 1,323 3,647 4,970 26,677 (6,609) (2,368) (8,977) – (944) (944) 21,726 12,124 12,993 13,555 15,883 14,034 21,941 10,857 12,266 19,817 21,726 – 6,062 6,062 – 6,497 6,497 – 5,422 5,422 – 6,353 6,353 400 6,876 6,876 650 10,751 10,751 – 5,429 5,429 – 6,133 6,133 – 9,909 9,909 – 10,863 10,863 FREP BASF-YPC Taihu Sinopec SABIC Tianjin 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million Turnover Interest income Interest expense (Loss)/profit before taxation Income tax expense (Loss)/profit for the year Other comprehensive income Total comprehensive income Dividends declared by joint ventures Share of net (loss)/profit from joint ventures Share of other comprehensive income from joint ventures 60,091 136 (315) (1,215) 346 (869) – (869) – 59,347 107 (338) (2,004) 578 (1,426) – (1,426) 910 (435) (713) – – 19,381 67 (4) 430 (108) 322 – 322 1,060 129 – 25,076 116 (7) 3,542 (885) 2,657 – 2,657 2,462 14,090 720 (61) 1,666 (292) 1,374 (9,531) (8,157) – 19,542 975 (274) 1,657 (201) 1,456 7,144 8,600 – 22,915 113 (204) (1,832) 423 (1,409) – (1,409) – 24,294 144 (111) (2,396) 603 (1,793) – (1,793) 454 1,063 660 703 (704) (897) (955) – (4,535) 3,422 – – – Shanghai SECCO 2023 RMB million 17,426 72 (199) (2,551) 642 (1,909) – (1,909) – The share of profit and other comprehensive income of the Group in the year 2023 in all individually immaterial joint ventures accounted for using equity method in aggregate was loss RMB2,296 million (2022: loss RMB18 million) and loss RMB544 million (2022: loss RMB376 million) respectively. As at 31 December 2023, the carrying amount of all individually immaterial joint ventures accounted for using equity method in aggregate was RMB40,701 million (2022: RMB34,194 million). 112 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 12 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: PipeChina At 31 December 2023 RMB million At 31 December 2022 RMB million Sinopec Finance At 31 December 2023 RMB million At 31 December 2022 RMB million Sinopec Capital At 31 December 2023 RMB million At 31 December 2022 RMB million Zhongtian Synergetic Energy At 31 December 2022 RMB million At 31 December 2023 RMB million Aviation Fuel At 31 December 2023 RMB million At 31 December 2022 RMB million 118,631 821,864 (130,331) (225,296) 584,868 104,889 816,301 (132,266) (199,675) 589,249 148,026 66,093 (179,459) (906) 33,754 212,850 57,394 (236,840) (673) 32,731 15,098 409 (74) (1,275) 14,158 14,444 249 (101) (990) 13,602 3,672 48,615 (7,464) (17,563) 27,260 3,212 51,035 (3,811) (23,435) 27,001 25,394 14,158 (17,200) (1,533) 20,819 20,380 13,617 (11,932) (1,561) 20,504 536,607 525,235 33,754 32,731 14,158 13,602 27,260 27,001 18,488 18,429 48,261 75,125 75,125 64,014 73,533 73,533 – 16,539 16,539 – 16,038 16,038 – 6,937 6,937 – 6,665 6,665 – 10,563 10,563 – 10,463 10,463 2,331 5,362 5,362 2,075 5,344 5,344 Current assets Non-current assets Current liabilities Non-current liabilities Net assets Net assets attributable to shareholders of the Company Net assets attributable to non-controlling interests Share of net assets from associates Carrying Amounts Summarised income statement PipeChina 2023 RMB million 2022 RMB million Sinopec Finance 2023 RMB million 2022 RMB million Sinopec Capital 2023 RMB million 2022 RMB million ZTHC Energy 2023 RMB million 2022 RMB million Aviation Fuel 2023 RMB million 2022 RMB million Turnover Profit for the year Other comprehensive income Total comprehensive income Dividends declared by associates Share of profit from associates Share of other comprehensive income 120,943 34,054 – 34,054 2,306 4,035 112,832 31,908 – 31,908 2,019 3,670 5,988 2,205 (182) 2,023 490 1,080 5,636 2,338 89 2,427 319 1,145 from associates – – (89) 44 4 888 52 940 188 435 25 5 1,281 (68) 1,213 73 627 (33) 15,676 2,752 – 2,752 966 1,066 17,551 4,562 – 4,562 632 1,768 181,290 2,515 – 2,515 638 656 105,162 3,026 – 3,026 626 745 – – – – The share of profit and other comprehensive income of the Group in the year 2023 in all individually immaterial associates accounted for using equity method in aggregate was RMB4,506 million (2022: RMB6,386 million) and loss RMB1,540 million (2022: loss RMB201 million) respectively. As at 31 December 2023, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB49,603 million (2022: RMB52,451 million). (d) Long-term equity investment impairment assessment As at 31 December 2023, there are indicators of impairment in the long-term equity investment in Shanghai SECCO. The recoverable amount of this long-term equity investment is estimated based on a value-in-use calculation. The projected future cash flows primarily take into account the five-year profit forecast for Shanghai SECCO approved by the management, which is adjusted based on the historical performance of Shanghai SECCO and relevant industry trends, with cash flows remaining stable after five years. The pre-tax discount rate of 11.29% is calculated based on the weighted average cost of capital. The result of value-in-use calculation indicates that there is no impairment loss in this long-term equity investment as at 31 December 2023. 113 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023At 31 December 2023 RMB million At 31 December 2022 RMB million 690,897 60 690,957 630,700 58 630,758 Plants and buildings RMB million Oil and gas properties RMB million 152,432 250 6,163 1,817 (2,315) 38 158,385 67,898 4,930 230 (1,316) 19 71,761 4,897 149 (356) – 4,690 81,934 79,637 840,719 1,681 54,374 (416) (656) 751 896,453 644,802 31,525 (406) (453) 682 676,150 52,810 775 (237) 48 53,396 166,907 143,107 Equipment, machinery and others RMB million 1,105,325 2,348 90,823 (1,401) (25,791) 60 1,171,364 652,817 52,057 176 (17,868) 38 687,220 44,552 1,567 (4,032) 1 42,088 442,056 407,956 Total RMB million 2,098,476 4,279 151,360 – (28,762) 849 2,226,202 1,365,517 88,512 – (19,637) 739 1,435,131 102,259 2,491 (4,625) 49 100,174 690,897 630,700 At 31 December 2023 RMB million At 31 December 2022 RMB million 305,439 55 305,494 296,480 50 296,530 13 FIXED ASSETS The Group Fixed assets (a) Fixed assets pending for disposal Total (a) Fixed assets Cost: Balance at 1 January 2023 Additions for the year Transferred from construction in progress Reclassifications Decreases for the year Exchange adjustments Balance at 31 December 2023 Less: Accumulated depreciation: Balance at 1 January 2023 Additions for the year Reclassifications Decreases for the year Exchange adjustments Balance at 31 December 2023 Less: Provision for impairment losses: Balance at 1 January 2023 Additions for the year Decreases for the year Exchange adjustments Balance at 31 December 2023 Net book value: Balance at 31 December 2023 Balance at 31 December 2022 The Company Fixed assets (b) Fixed assets pending for disposal Total 114 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 13 FIXED ASSETS (Continued) (b) Fixed assets Cost: Balance at 1 January 2023 Additions for the year Transferred from construction in progress Reclassifications Transferred from subsidiaries Transferred to subsidiaries Decreases for the year Balance at 31 December 2023 Accumulated depreciation: Balance at 1 January 2023 Additions for the year Reclassifications Transferred from subsidiaries Transferred to subsidiaries Decreases for the year Balance at 31 December 2023 Provision for impairment losses: Balance at 1 January 2023 Additions for the year Transferred to subsidiaries Decreases for the year Balance at 31 December 2023 Net book value: Balance at 31 December 2023 Balance at 31 December 2022 Plants and buildings RMB million Oil and gas properties RMB million Equipment, machinery and others RMB million 51,042 43 1,743 472 – (1,731) (391) 51,178 28,099 1,500 153 – (965) (245) 28,542 2,501 47 (61) (48) 2,439 20,197 20,442 681,940 1,342 43,209 (420) 89 (4,994) (678) 720,488 523,939 23,703 (388) 75 (2,259) (464) 544,606 45,816 775 (645) (235) 45,711 130,171 112,185 529,391 354 29,002 (52) 24 (42,096) (10,381) 506,242 340,180 21,313 235 – (26,155) (6,233) 329,340 25,358 577 (2,643) (1,461) 21,831 155,071 163,853 Total RMB million 1,262,373 1,739 73,954 – 113 (48,821) (11,450) 1,277,908 892,218 46,516 – 75 (29,379) (6,942) 902,488 73,675 1,399 (3,349) (1,744) 69,981 305,439 296,480 The additions to oil and gas properties of the Group and the Company for the year ended 31 December 2023 included RMB1,681 million (2022: RMB4,277 million) and RMB1,344 million (2022: RMB3,982 million), respectively of the estimated dismantlement costs for site restoration. In 2023, the impairment loss on fixed assets was mainly due to the impairment loss of the E&P segment of RMB785 million (2022: RMB2,891 million), the impairment loss of the chemical segment of RMB1,280 million (2022: RMB1,790 million), the impairment loss of the refining segment of RMB191 million (2022: RMB2 million), and the impairment loss of the marketing and distribution segment of RMB235 million (2022: RMB398 million). The impairment loss of fixed assets related to oil and gas producing activities was caused by the decline in oil and gas reserves and the excessively high exploitation costs in individual oilfields of the exploration and production segment, resulting in an impairment loss of RMB777 million for oil and gas properties. The recoverable amount used in the impairment assessment of fixed assets in the exploration and production segment was determined based on the present value of the estimated future cash flows of the relevant asset group. The duration of the forecast period and the crude oil and natural gas production during the forecast period were determined based on the proven reserves; the selling prices of crude oil and natural gas during the forecast period were determined based on a comprehensive analysis of energy supply and demand, China’s development requirements for low-carbon transformation, and domestic and international economic situations. The pre-tax discount rate was calculated based on the weighted average cost of capital, ranging from 7.86% to 15.94% (2022: 8.17% to 14.86%). Under the condition that other factors remain unchanged and the forecasted future oil price decreases by 5%, the impairment loss of relevant fixed assets would increase by approximately RMB1,418 million (2022: RMB1,693 million); if the operating costs increase by 5%, the impairment loss would increase by approximately RMB634 million (2022: RMB1.508 billion); and if the discount rate increases by 5%, the impairment loss would increase by approximately RMB8 million (2022: RMB126 million). The impairment provisions for the chemical and refining divisions are related to the refining and chemical production equipment, mainly due to individual production units being shut down due to sustained lower than expected economic performance or having a clear shutdown plan in place, resulting in their book value being written down to their recoverable amount. The recoverable amount mainly considers the profit forecast approved by the management for a five-year period, which refers to the historical operating performance of relevant refining and chemical production facilities and is adjusted according to the development trends of the refining and chemical industry. The predicted cash flow after five years will remain stable, and the pre tax discount rate is calculated based on the weighted average cost of capital, which is 10.30% to 16.50% (2022: 7.64% to 18.68%). At 31 December 2023 and 31 December 2022, the Group and the Company had no individually significant fixed assets which were temporarily idle or pending for disposal, or individually significant fully depreciated fixed assets which were still in use. Details of the determination method of for determining the impairment of fixed assets are set out in Note 59. 115 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 The Group RMB million The Company RMB million 198,692 184,350 (17,623) (6,723) (151,360) (24,372) 27 182,991 2,647 116 (48) 26 2,741 – 180,250 196,045 81,803 85,217 (15,170) (5,708) (73,954) (1,485) – 70,703 302 102 (7) – 397 – 70,306 81,501 Accumulated interest capitalised at 31 December 2023 RMB million 60 32 88 14 CONSTRUCTION IN PROGRESS Cost: Balance at 1 January 2023 Additions for the year Disposals for the year Dry hole costs written off Transferred to fixed assets Reclassification to other assets Exchange adjustments Balance at 31 December 2023 Provision for impairment losses: Balance at 1 January 2023 Additions for the year Decreases for the year Exchange adjustments Balance at 31 December 2023 Net book value: Balance at 31 December 2023 Balance at 31 December 2022 At 31 December 2023, material construction in progress projects of the Group are as follows: Project name Zhenhai Refining and Chemical Refining and High-end Synthetic New Material Project Yangzi Petrochemical Refining Structural Adjustment Project West Sichuan Gas Field Leikoupo Group Gas Reservoir Development and Construction Project Budgeted amount RMB million Balance at 1 January 2023 RMB million Net change for the year RMB million Balance at 31 December 2023 RMB million Percentage of project investment to budgeted amount Source of funding 41,639 6,332 11,180 17,512 41.54% Bank loans & self-financing 5,000 8,591 3,360 3,694 1,600 1,192 4,960 99.20% Bank loans & self-financing 4,886 67.89% Bank loans & self-financing 116 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 15 RIGHT-OF-USE ASSETS The Group Cost： Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Accumulated depreciation: Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Net book value: Balance at 31 December 2023 Balance at 31 December 2022 The Company Cost： Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Accumulated depreciation: Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Net book value: Balance at 31 December 2023 Balance at 31 December 2022 Land RMB million Others RMB million Total RMB million 171,550 3,164 (4,612) 170,102 24,184 6,665 (3,426) 27,423 142,679 147,366 51,800 10,076 (4,233) 57,643 20,807 8,211 (3,225) 25,793 31,850 30,993 223,350 13,240 (8,845) 227,745 44,991 14,876 (6,651) 53,216 174,529 178,359 Land RMB million Others RMB million Total RMB million 102,949 483 (7,092) 96,340 13,408 3,333 (3,199) 13,542 82,798 89,541 4,326 1,258 (1,006) 4,578 2,318 1,367 (898) 2,787 1,791 2,008 107,275 1,741 (8,098) 100,918 15,726 4,700 (4,097) 16,329 84,589 91,549 Depreciation of the right-of-use assets of the Group and Company charged for the year ended 31 December 2023 are RMB14,829 million (2022: RMB13,760 million) and RMB4,700 million (2022: RMB4,764 million) respectively. 117 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 16 INTANGIBLE ASSETS The Group Cost: Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Accumulated amortisation: Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Provision for impairment losses: Balance at 1 January 2023 Additions for the year Decreases for the year Balance at 31 December 2023 Net book value: Balance at 31 December 2023 Balance at 31 December 2022 Land use rights RMB million Patents RMB million Non-patent technology Operation rights RMB million RMB million Others RMB million Total RMB million 117,788 7,209 (656) 124,341 31,054 3,653 (149) 34,558 237 25 (4) 258 89,525 86,497 4,740 495 – 5,235 3,669 271 – 3,940 482 3 – 485 810 589 5,407 636 (69) 5,974 4,032 304 (24) 4,312 130 17 (24) 123 1,539 1,245 54,130 599 (543) 54,186 25,724 2,232 (315) 27,641 397 18 (54) 361 9,252 17,168 (975) 25,445 4,878 984 (557) 5,305 20 – (3) 17 191,317 26,107 (2,243) 215,181 69,357 7,444 (1,045) 75,756 1,266 63 (85) 1,244 26,184 28,009 20,123 4,354 138,181 120,694 Amortisation of the intangible assets of the Group charged for the year ended 31 December 2023 is RMB6,641 million (2022: RMB6,489 million). 17 GOODWILL Goodwill is allocated to the following Group’s cash-generating units: Name of investees Principal activities Sinopec Zhenhai Refining and Chemical Branch Manufacturing of intermediate petrochemical products and petroleum products Other units allocated Total At 31 December 2023 RMB million At 31 December 2022 RMB million 4,043 2,429 6,472 4,043 2,421 6,464 The Group’s goodwill impairment assessment is carried out in conjunction with its related asset group or combination of asset groups, and the recoverable amounts of goodwill are estimated annually based on value in use calculations, which is consistent with prior years. These calculations use cash flow projections based on five-year financial budgets approved by management for a goodwill-related asset group or a combination of asset groups, with cash flow remaining stable after five years. The cash flow forecasts use sales volumes, selling price and discount rates as key assumptions, with sales volumes based on production capacity and/or actual sales volumes for periods prior to the budget period, selling prices based on management’s expectations of future international crude oil and petrochemical price trends, and pre-tax discount rates based on weighted average cost of capital, which ranged from 11.26% to 13.1% (2022: 10.1% to 12.2%). Based on the result of the impairment assessment of goodwill, no major impairment loss was recognised. 18 LONG-TERM DEFERRED EXPENSES Long-term deferred expenses primarily represent catalysts expenditures and improvement expenditures of leased fixed assets. 118 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 19 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 Lease liabilities and right of use assets Others Deferred tax assets/(liabilities) Deferred tax assets Deferred tax liabilities At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million 3,721 2,715 16 17,965 9,036 137 1,084 44,334 2,792 81,800 4,271 3,091 85 21,536 4,643 131 1,067 45,568 1,395 81,787 (20) – (1,142) (26,669) – (7) (92) (40,422) (1,155) (69,507) (17) – (736) (22,341) – (6) (85) (42,264) (1,161) (66,610) 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 offsetting adjustments are as follows: Deferred tax assets Deferred tax liabilities At 31 December 2023 RMB million At 31 December 2022 RMB million 61,690 61,690 59,354 59,354 At 31 December 2023 RMB million At 31 December 2022 RMB million 20,110 7,817 22,433 7,256 At 31 December 2023, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB24,783 million (2022: RMB21,268 million), of which RMB5,496 million (2022: RMB8,972 million) was incurred for the year ended 31 December 2023, because it was not probable that the related tax benefit will be realised. These deductible losses carried forward of RMB1,656 million, RMB3,349 million, RMB5,310 million, RMB8,972 million and RMB5,496 million will expire in 2024, 2025, 2026, 2027, 2028 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. 20 OTHER NON-CURRENT ASSETS Other non-current assets mainly represent long-term receivables, prepayments for construction projects, prepayments for purchases of equipment and time deposits with maturities over one year. 119 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202321 DETAILS OF IMPAIRMENT LOSSES At 31 December 2023, impairment losses of the Group are analysed as follows: Allowance for doubtful accounts Included: Accounts receivable Prepayments Other receivables Other non-current assets Inventories Long-term equity investments Fixed assets Construction in progress Intangible assets Goodwill Others Total Note 7 9 10 11 12 13 14 16 17 Balance at 1 January 2023 RMB million Provision for the year RMB million Written back for the year RMB million Written off for the year RMB million Other increase/ (decrease) RMB million Balance at 31 December 2023 RMB million 4,079 111 1,553 1,185 6,928 6,583 3,890 102,259 2,647 1,266 7,861 57 131,491 313 77 287 – 677 6,300 2 2,491 116 27 – 6 9,619 (372) – (165) (306) (843) (247) – – – – – – (1,090) (68) (5) (9) – (82) (6,840) (8) (4,405) (46) (28) – – (11,409) 64 (8) 6 20 82 45 36 (171) 24 (21) – – (5) 4,016 175 1,672 899 6,762 5,841 3,920 100,174 2,741 1,244 7,861 63 128,606 The reasons for recognising impairment losses are set out in the respective notes of respective assets. 22 SHORT-TERM LOANS The Group’s short-term loans represent: Short-term bank loans －Renminbi loans －US Dollar loans Short-term loans from Sinopec Group Company and fellow subsidiaries －Renminbi loans －US Dollar loans －Euro loans Total At 31 December 2023 At 31 December 2022 Original currency million Exchange rates RMB million Original currency million Exchange rates RMB million – 7.0827 143 – 7.0827 7.8592 51,175 51,175 – 8,640 7,628 1,012 – 59,815 20 6.9646 130 5 6.9646 7.4229 14,461 14,325 136 6,852 5,911 906 35 21,313 At 31 December 2023, the Group’s interest rates on short-term loans were from interest 1.08% to 6.39% (At 31 December 2022: 1.65% to 5.51%) per annum. The majority of the above loans are by credit. At 31 December 2023 and 31 December 2022, the Group had no significant overdue short-term loans. 23 BILLS PAYABLE Bills payable primarily represented bank accepted bills for the purchase of material, goods and products. Bills payable were due within one year. At 31 December 2023 and 31 December 2022, the Group had no overdue unpaid bills. 24 ACCOUNTS PAYABLE Accounts payable primarily represent goods payable or material payable. 25 CONTRACT LIABILITIES As at 31 December 2023 and 31 December 2022, the Group’s contract liabilities primarily represent advances from customers. Related performance obligations are expected to be satisfied and revenue is recognised within one year. 120 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 26 EMPLOYEE BENEFITS PAYABLE (1) Employee benefits payable: Short-term employee benefits Post-employment benefits- defined contribution plans Termination benefits Total (2) Short-term employee benefits Salaries, bonuses, allowances Staff welfare Social insurance Included: Medical insurance Work-related injury insurance Maternity insurance Housing fund Labour union fee, staff and workers’ education fee Other short-term employee benefits Total (3) Post-employment benefits – defined contribution plans Basic pension insurance Unemployment insurance Annuity Total 27 TAXES PAYABLE The Group Value-added tax payable Consumption tax payable Income tax payable Mineral resources compensation fee payable Levy for mineral rights concessions Other taxes Total 28 OTHER PAYABLES Balance at the beginning of the year 13,536 73 8 13,617 Balance at the beginning of the year 11,241 1,635 308 304 3 1 47 265 40 13,536 Accrued during the year Decreased during the year 99,618 14,287 177 114,082 (99,263) (14,316) (179) (113,758) Accrued during the year Decreased during the year 72,778 7,459 6,814 6,209 482 123 7,243 2,747 2,577 99,618 (72,434) (7,469) (6,788) (6,182) (483) (123) (7,255) (2,737) (2,580) (99,263) Balance at the beginning of the year Accrued during the year Decreased during the year 63 2 8 73 9,393 356 4,538 14,287 (9,421) (357) (4,538) (14,316) Balance at the end of the year 13,891 44 6 13,941 Balance at the end of the year 11,585 1,625 334 331 2 1 35 275 37 13,891 Balance at the end of the year 35 1 8 44 At 31 December 2023 RMB million At 31 December 2022 RMB million 2,989 18,275 1,455 2 7,385 9,902 40,008 934 13,038 4,725 6 – 9,676 28,379 At 31 December 2023 and 31 December 2022, other payables of the Group over one year primarily represented payables for constructions. 121 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202329 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR The Group’s non-current liabilities due within one year represent: At 31 December 2023 At 31 December 2022 Original currency million Exchange rates RMB million Original currency million Exchange rates RMB million Long-term bank loans – Renminbi loans – US Dollar loans Long-term loans from Sinopec Group Company and fellow subsidiaries – 7.0827 – Renminbi loans Long-term loans due within one year Debentures payable due within one year – Renminbi debentures Lease liabilities due within one year Others Non-current liabilities due within one year 2,813 – 3,797 6,610 4,546 17,536 1,765 30,457 – 6.9646 13,875 1 440 14,316 30,700 16,004 1,824 62,844 At 31 December 2023 and 31 December 2022, the Group had no significant overdue long-term loans. 30 OTHER CURRENT LIABILITIES At 31 December 2023 and 31 December 2022, other current liabilities mainly represent output VAT to be transferred. 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 4.80% per annum at 31 December 2023 (2022:1.00% to 4.66%) with maturities through 2035 Interest rates at 0.00% per annum at 31 December 2023 (2022:0.00%) with maturities through 2038 Less: Portion with one year (note 29) Long-term bank loans Long-term loans from Sinopec Group Company and fellow subsidiaries – Renminbi loans Interest rates ranging from interest 1.08% to 4.99% per annum at 31 December 2023 (2022:1.08% to 5.23%) with maturities through 2038 Less: Portion with one year (note 29) 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 carried at amortised costs. At 31 December 2023 At 31 December 2022 Original currency million Exchange rates RMB million Original currency million Exchange rates RMB million 157,298 86,532 7 7.0827 51 8 6.9646 53 (2,813) 154,536 28,608 (3,797) 24,811 179,347 (13,876) 72,709 22,695 (440) 22,255 94,964 At 31 December 2023 RMB million At 31 December 2022 RMB million 66,265 84,656 28,426 179,347 10,852 73,387 10,725 94,964 122 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 32 DEBENTURES PAYABLE The Group Debentures payable: – Corporate Bonds (i) Less: Portion within one year (Note 29) Total Note: At 31 December 2023 RMB million At 31 December 2022 RMB million 13,059 4,546 8,513 43,697 30,700 12,997 (i) These corporate bonds are carried at amortised cost, including USD denominated corporate bonds of RMB3,520 million, and RMB denominated corporate bonds of RMB9,541 million on 31 December 2023 (2022: USD denominated corporate bonds of RMB12,164 million, and RMB denominated corporate bonds of RMB31,533 million). 33 LEASE LIABILITY The Group Lease liabilities Deduct: Portion of lease liabilities within one year (Note 29) Total 34 PROVISIONS At 31 December 2023 RMB million At 31 December 2022 RMB million 181,400 17,536 163,864 182,411 16,004 166,407 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 2023 Provision for the year Accretion expenses Decrease for the year Exchange adjustments Balance at 31 December 2023 35 OTHER NON-CURRENT LIABILITIES Other non-current liabilities primarily represent long-term payables, special payables and deferred income. The Group RMB million 43,599 1,681 1,099 (1,195) 38 45,222 123 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 36 SHARE CAPITAL The Group Registered, issued and fully paid: 94,971,971,046 listed A shares (2022: 95,115,471,046) of RMB1.00 each 24,377,280,600 listed H shares (2022: 24,780,936,600) of RMB1.00 each Total At 31 December 2023 RMB million At 31 December 2022 RMB million 94,972 24,377 119,349 95,115 24,781 119,896 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 RMB1.00 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 RMB1.00 each and offer not more than 19.5 billion shares with a par value of RMB1.00 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 RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American Depositary Shares (“ADSs”, each representing 100 H shares), at prices of HKD1.59 per H share and USD20.645 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 RMB1.00 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 RMB1.00 each at RMB4.22 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 RMB1.00 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 RMB1.00 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 RMB1.00 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 RMB1.00 each at the Placing Price of HKD8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD23,970,100,618.00. 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 RMB1.00 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 RMB1.00 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 RMB1.00 each, as a result of conversion by the holders of the 2011 Convertible Bonds. During the year ended 31 December 2022, the Company repurchased 442,300,000 listed A shares and 732,502,000 listed H shares respectively at a price of RMB4.06 per share to RMB4.50 per share for the repurchase of listed A shares, with a total amount of RMB1,888,163,981.61, and a price of HKD3.06 per share to HKD3.75 per share for the repurchase of listed H shares, with a total amount of HKD2,499,261,860.00, which had been cancelled in the year ended 31 December 2022. During the year ended 31 December 2023, the Company repurchased 143,500,000 listed A shares and 403,656,000 listed H shares respectively at a price of RMB5.29 per share to RMB6.17 per share for the repurchase of listed A shares, with a total amount of RMB816,009,269.44, and a price of HKD3.78 per share to HKD4.56 per share for the repurchase of listed H shares, with a total amount of HKD1,646,392,242.20, which had been cancelled in the year ended 31 December 2023. All A shares and H shares rank pari passu in all material aspects. 124 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 36 SHARE CAPITAL (Continued) The Group (Continued) Capital management Management optimises the structure of the Group’s capital, which comprises of equity, debts and bonds. In order to maintain and 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 2023, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 18.9% (2022: 12.0%) and 52.7% (2022: 51.8%), respectively. The schedule of the contractual maturities of loans and commitments are disclosed in Notes 31,32 and 61, 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 2023 Purchase of own shares Other equity movements under the equity method Others Balance at 31 December 2023 RMB million 118,875 (1,778) 220 (44) 117,273 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 non-controlling interests over the carrying amount of the net assets acquired. 125 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 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 Other comprehensive loss that can be converted into profit or loss under the equity method Foreign currency translation differences Other comprehensive income 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 Fair value hedges Changes in fair value of other equity instrument investments Other comprehensive loss that can be converted into profit or loss under the equity method Foreign currency translation differences Other comprehensive income (b) The change of each item in other comprehensive income Equity Attributable to shareholders of the company Before-tax amount RMB million 2023 Tax effect RMB million Net-of-tax amount RMB million 7,420 1,245 6,175 (13) (6,683) 1,946 1,425 (1,075) (234) (841) 5 – – (836) 6,345 1,011 5,334 (8) (6,683) 1,946 589 Before-tax amount RMB million 2022 Tax effect RMB million Net-of-tax amount RMB million 6,667 (8,127) 14,794 149 (79) 2,856 7,254 24,974 (1,675) 1,482 (3,157) – 12 – – (3,145) 4,992 (6,645) 11,637 149 (67) 2,856 7,254 21,829 Other comprehensive income that can be converted into profit or loss under the equity method RMB million (5,765) 1,610 (4,155) (4,155) (4,287) (8,442) Changes in fair value of other equity instrument investments RMB million (18) (65) (83) (83) (8) (91) 1 January 2022 Changes in 2022 31 December 2022 1 January 2023 Changes in 2023 31 December 2023 fair value hedges RMB million Cash flow hedges RMB million (29) 323 294 294 – 294 7,214 (4,190) 3,024 3,024 2,632 5,656 Foreign currency translation differences RMB million (2,092) 6,084 3,992 3,992 1,651 5,643 Subtotal RMB million Non-controlling interests RMB million Total other comprehensive income RMB million (690) 3,762 3,072 3,072 (12) 3,060 (3,315) 2,264 (1,051) (1,051) (2,054) (3,105) (4,005) 6,026 2,021 2,021 (2,066) (45) As at 31 December 2023, cash flow hedge reserve amounted to a gain of RMB5,758 million (31 December 2022: a gain of RMB3,079 million), of which a gain of RMB5,656 million was attribute to shareholders of the Company (31 December 2022: a gain of RMB3,024 million). 39 SPECIFIC RESERVE In accordance with the provisions stipulated in the Regulations on the Extraction and Utilization of Enterprise Safety Production Expenses issued by China’s Ministry of Finance and Ministry of Emergency Management, the Group primarily allocates a proportionate amount of safety production fund from monthly net profits, based on the business-related operating revenue applicable to these regulations or the production volume of raw ore extracted within China, which are then recorded as special reserves. The safety production fund extracted by the enterprise are earmarked solely for enhancing and improving the safety production conditions of the enterprise or its projects, and any expenditures falling within the scope of safety production expenses should be disbursed from these allocated funds. Assets formed through the utilisation of safety production expenses are to be incorporated into relevant asset management. Any surplus funds from the safety production expenses of the current year will be carried forward for use in the subsequent year. 126 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 40 SURPLUS RESERVES Movements in surplus reserves are as follows: Balance at 1 January 2023 Appropriation Balance at 31 December 2023 Statutory surplus reserve RMB million 101,009 5,125 106,134 The Group Discretionary surplus reserves RMB million 117,000 – 117,000 Total RMB million 218,009 5,125 223,134 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. 41 OPERATING INCOME AND OPERATING COSTS Income from principal operations Income from other operations Operating income Operating costs The Group 2023 RMB million 2022 RMB million The Company 2023 RMB million 2022 RMB million 3,146,873 65,342 3,212,215 2,709,656 3,257,356 60,812 3,318,168 2,819,363 1,173,747 32,981 1,206,728 962,889 1,269,093 32,980 1,302,073 1,052,885 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, services providing, 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 63. The Group’s operating income is mainly composed of sales revenue from the products as follows: Income from principal operations Included: Gasoline Diesel Crude oil Chemical feedstock Basic organic chemicals Synthetic resin Kerosene Natural gas Synthetic fiber monomers and polymers Others (i) Income from other operations Included: Sale of materials and others Rental income Total Notes: (i) Others are primarily liquefied petroleum gas and other refinery and chemical byproducts and joint products and so on. (ii) The above operating incomes, except rental income, are all income from contracts. 2023 RMB million 2022 RMB million 3,146,873 861,453 722,307 412,488 38,039 210,216 132,625 216,456 79,681 34,059 439,549 65,342 63,990 1,352 3,212,215 3,257,356 796,667 743,551 517,183 42,785 223,679 144,524 168,017 83,853 45,335 491,762 60,812 59,590 1,222 3,318,168 127 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202342 TAXES AND SURCHARGES The Group Consumption tax City construction tax Special oil income levy Education surcharge Resources tax Levy for mineral rights concessions Others Total The applicable tax rate of the taxes and surcharges are set out in Note 4. 43 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 gains Total 2023 RMB million 2022 RMB million 215,483 17,478 6,223 12,847 8,230 7,412 5,248 272,921 206,838 17,081 13,874 12,337 8,752 – 5,109 263,991 2023 RMB million 2022 RMB million 9,807 1,788 8,951 16,970 1,099 (6,828) (1,319) 9,922 7,877 1,307 9,096 15,666 1,103 (6,266) (529) 9,974 The interest rates per annum at which borrowing costs were capitalised during the year ended 31 December 2023 by the Group ranged from 1.70% to 4.25% (2022: 1.89% to 4.25%). 44 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 45 SELLING AND DISTRIBUTION EXPENSES 2023 RMB million 2022 RMB million 2,569,412 108,017 113,750 11,055 53,274 2,855,508 2,684,756 103,585 109,906 10,591 49,664 2,958,502 Selling expenses mainly include wages and salaries of sales staff, depreciation and amortization of sales equipment and related systems, etc. 46 GENERAL AND ADMINISTRATIVE EXPENSES Administrative expenses mainly include salaries of administrative personnel, depreciation and amortization of office facilities, office systems and software, and repair costs. 47 RESEARCH AND DEVELOPMENT EXPENSES 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. 48 EXPLORATION EXPENSES Exploration expenses include geological and geophysical expenses and written-off of unsuccessful dry hole costs. 128 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202349 OTHER INCOME Classified by characteristic Government grants Others Total 2023 RMB million 2022 RMB million 10,553 352 10,905 7,595 624 8,219 Other income are mainly the government grants related to the business activities. 50 INVESTMENT INCOME Income from investment of subsidiaries accounted for under cost method Income from investment accounted for under equity method Investment income from disposal of business and long-term equity investments(i) 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 from ineffective portion of cash flow hedges Others Total Note: The Group 2023 RMB million 2022 RMB million The Company 2023 RMB million 2022 RMB million – 8,177 303 10 (4,575) 1,380 516 5,811 – 14,479 13,754 76 (15,063) 997 219 14,462 29,431 4,552 15 6 263 (809) 1,412 34,870 20,338 4,449 2,406 4 184 465 1,375 29,221 (i) The Company and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. (“Gaoqiao Petrochemical”) and INEOS Investment (Shanghai) Company Limited (“INEOS Shanghai”) entered into an equity transfer agreement on 28 July 2022. According to the agreement, the Company and Gaoqiao Petrochemical transferred 15% and 35% equity interests in Shanghai SECCO Petrochemical Co., Ltd. to INEOS Shanghai respectively at a total consideration of RMB10,863 million. The above transactions were considered and approved by the 10th Session of 8th Directorate Meeting of the Company. The transactions were completed on 28 December 2022 and the Company lost control over Shanghai SECCO. The Group accounted for its remaining 50% equity interest retained in Shanghai SECCO, at fair value upon initial recognition, as an interest in a joint venture from the date when control was lost. The investment income from disposal of Shanghai SECCO is RMB13,697 million. 51 INCOME FROM CHANGES IN FAIR VALUE The Group Net fair value losses on financial assets and financial liabilities at fair value through loss Unrealised or gains/(losses) from ineffective portion cash flow hedges, net Others Total 52 IMPAIRMENT LOSSES The Group Prepayments Inventories Long-term equity investment Fixed assets Intangible assets Construction in progress Others Total 53 NON-OPERATING INCOME The Group Government grants Others Total 2023 RMB million 2022 RMB million (159) 649 (23) 467 (461) (1,252) (2) (1,715) 2023 RMB million 2022 RMB million 77 6,053 2 2,491 27 116 6 8,772 10 6,322 2 5,082 4 581 8 12,009 2023 RMB million 2022 RMB million 636 1,334 1,970 1,003 1,957 2,960 129 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202354 NON-OPERATING EXPENSES The Group Fines, penalties and compensation Donations Asset scrap, damage loss Others Total 55 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 and temporary differences Write-down of deferred tax assets Adjustment for under provision for income tax in respect of preceding years Actual income tax expense Note: 2023 RMB million 2022 RMB million 43 310 1,231 1,014 2,598 39 447 1,394 2,979 4,859 2023 RMB million 2022 RMB million 15,098 2,442 (1,470) 16,070 18,796 862 (1,757) 17,901 2023 RMB million 2022 RMB million 86,116 21,529 2,987 (4,060) (3,117) (846) (399) 1,374 72 (1,470) 16,070 94,515 23,629 3,697 (5,900) (3,091) (128) (850) 2,243 58 (1,757) 17,901 (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 2023. According to Announcement [2020] No.23 of the MOF “Announcement of the MOF, the State Taxation Administration and the National Development and Reform Commission on continuation of the income tax policy of western development enterprises”, the preferential income tax rate of 15% extends from 1 January 2021 to 31 December 2030. 56 DIVIDENDS (a) Dividends of ordinary shares declared after the balance sheet date Pursuant to a resolution passed at the director’s meeting on 22 March 2024, final dividends in respect of the year ended 31 December 2023 of RMB0.200 (2022: RMB0.195) per share totaling RMB23,870 million (2022: RMB23,380 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 shareholders’ approval at the General Meeting on 25 August 2023, the interim dividends for the year ending 31 December 2023 of RMB0.145 (2022: RMB0.16) per share totaling RMB17,380 million (2022: RMB19,371 million) were approved. Dividends were paid on 15 September 2023. Pursuant to the shareholders’ approval at the Annual General Meeting on 30 May 2023, a final dividend of RMB0.195 per share totaling RMB23,380 million according to total shares on 20 June 2023 was approved. All dividends have been paid in the year ended 31 December 2023. Pursuant to the shareholders’ approval at the General Meeting on 26 August 2022, the interim dividends for the year ending 31 December 2022 of RMB0.16 (2021: RMB0.16) per share totaling RMB19,371 million (2021: RMB19,371 million) were approved. Dividends were paid on 19 September 2022. Pursuant to the shareholders’ approval at the Annual General Meeting on 18 May 2022, a final dividend of RMB0.31 per share totaling RMB37,532 million according to total shares on 9 June 2022 was approved. All dividends have been paid in the year ended 31 December 2022. 130 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202357 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 reversals 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 (gain)/loss on disposal of non-current assets Fair value (gain)/loss Financial expenses Investment income Decrease in deferred tax assets Increase/(decrease) in deferred tax liabilities Increase in inventories Safety fund reserve Decrease 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 increase/(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) Net cash received from disposal of subsidiaries and other business entities： Cash received from disposal of equity interests in the relevant companies, oil and gas pipeline and ancillary facilities (e) Other cash received relating to investing activities： Decrease in time deposits with maturities over three months Interest income Others Total 2023 RMB million 2022 RMB million 70,046 8,772 (243) 14,829 88,512 10,409 6,723 (2,995) (467) 11,241 (5,811) 7 2,435 (12,726) (248) 3,974 (32,983) 161,475 76,614 12,009 (1,084) 13,760 86,178 9,968 6,416 722 1,715 10,503 (14,462) 2,004 (1,142) (45,421) 179 1,974 (43,664) 116,269 2023 RMB million 2022 RMB million 121,759 93,438 28,321 93,438 108,590 (15,152) 2023 RMB million 2022 RMB million 1 121,758 121,759 2 93,436 93,438 2023 RMB million 2022 RMB million – 10,041 2023 RMB million 2022 RMB million 86,975 8,929 13 95,917 93,455 6,918 2,784 103,157 131 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 57 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT (Continued) The Group (Continued) (f) Other cash paid relating to investing activities： Increase in time deposits with maturities over three months Loans from fellow subsidiaries Others Total (g) Other cash paid relating to financing activities： Repayments of lease liabilities Cash payments to purchase own shares Others Total 2023 RMB million 2022 RMB million (90,562) (500) (1,028) (92,090) (31,670) (792) (1,043) (33,505) 2023 RMB million 2022 RMB million (18,991) (2,325) (603) (21,919) (18,672) (4,179) (94) (22,945) (h) Reconciliation of liabilities (excluding lease liabilities) arising from financial activities： Additions for the year Decreases for the year Balance at 1 January 2023 RMB million Cash RMB million Non-cash RMB million Cash RMB million Non-cash RMB million Balance at 31 December 2023 RMB million Long-term and Short-term loans and debentures payable Other non-current liabilities- loans to related parties Total 174,290 5,180 179,470 698,936 474 699,410 25,038 333 25,371 (607,667) (284) (607,951) (31,766) (570) (32,336) 258,831 5,133 263,964 The decrease in cash for the year includes interest actually paid: RMB7,997 million. 132 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202358 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 : : Ma Yongsheng : RMB326,547 million Sinopec Group Company is an enterprise controlled by the PRC government. Sinopec Group Company directly and indirectly holds 68.24% 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: PipeChina Sinopec Finance Sinopec Capital Zhongtian Synergetic Energy Aviation Fuel Joint ventures of the Group: FREP BASF-YPC Taihu Sinopec SABIC Tianjin Shanghai SECCO Note: Sinopec Finance is under common control of a parent company with the Company and is also the associate of the Group. 133 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202358 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 Agency commission income Interest income Interest expense Net deposits placed with related parties Net funds obtained from related parties Note (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (vii) (ix) The Group 2023 RMB million 2022 RMB million 408,554 218,974 29,830 41,783 43,361 179 2,838 1,283 (903) 43,621 352,691 184,986 18,291 37,317 48,465 173 1,203 541 (3,382) 36,608 The amounts set out in the table above in respect of the year ended 31 December 2023 and 2022 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 2023 are: a) purchases by the Group from Sinopec Group Company and fellow subsidiaries amounting to RMB200,604 million (2022: RMB158,874 million) comprising purchases of products and services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB187,117 million (2022: RMB146,114 million), lease charges for land, buildings and others paid by the Group of RMB10,926 million, RMB1,050 million and RMB228 million (2022: RMB11,046 million, RMB938 million and RMB235 million), respectively and interest expenses of RMB1,283 million (2022: RMB541 million); and b) sales by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB87,247 million (2022: RMB58,403 million), comprising RMB84,329 million (2022: RMB57,151 million) for sales of goods, RMB2,838 million (2022: RMB1,203 million) for interest income and RMB80 million (2022: RMB49 million) for agency commission income. For the year ended 31 December 2023, 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 2023 on lease liabilities in respect of amounts due to Sinopec Group Company and fellow subsidiaries, associates and joint ventures was RMB7,637 million (2022: RMB7,811 million). For the year ended 31 December 2023, the amount of rental the Group paid to Sinopec Group Company and fellow subsidiaries, associates and joint ventures for land, buildings and others are RMB10,931 million, RMB1,053 million and RMB273 million (2022: RMB11,051 million, RMB943 million and RMB352 million). Among them, according to the continuing connected transaction agreement signed in 2000, the sixth supplementary agreement for continuing connected transactions signed on August 27, 2021, and the fourth revision memorandum of the land use right lease contract, the actual payment of land, land and land use rights between Sinopec Group and Sinopec Group The rental amount of houses was RMB10,926 million and RMB1,050 million respectively (2022: RMB11,046 million and RMB938 million). As at 31 December 2023 and 31 December 2022, 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 62(b). Guarantees given to banks by the Group in respect of banking facilities to associates and joint ventures are disclosed in Note 62(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) Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities owned by Sinopec Group Company. (vii) 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. 134 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202358 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) Interest expense represents interest charges on the loans obtained from Sinopec Group Company and fellow subsidiaries. (ix) The Group obtained loans, discounted bills and issued the acceptance bills from Sinopec Group Company and fellow subsidiaries, etc. 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 2023. 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 Sixth Supplementary Agreement on 27 August 2021, which took effect on 1 January 2022 and made adjustment to “Mutual Supply Agreement” and “Buildings Leasing Contract”. 135 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202358 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 2023 and 31 December 2022 are as follows: Cash at bank and on hand Accounts receivable Receivables financing Other receivables Prepayments and other current assets Other non-current assets Bills payable Accounts payable Contract liabilities Other payables and other current liabilities Other non-current liabilities Short-term loans Long-term loans (including current portion) Lease liabilities (including current portion) The ultimate holding company Other related companies At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million – 2 – 74 3 – – 16 25 64 – – – 65,228 – 20 – 32 4 – – 299 15 46 – – – 70,860 65,967 12,054 101 14,487 389 9,025 6,938 13,017 4,377 25,988 5,133 8,640 28,608 88,823 65,064 11,460 596 10,017 322 8,633 4,689 33,349 4,721 38,266 5,180 6,852 22,695 85,677 Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term loans and long-term loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms. The terms and conditions associated with short-term loans and long-term loans payable to Sinopec Group Company and fellow subsidiaries are set out in Note 22 and Note 31. As at and for the year ended 31 December 2023, and as at and for the year ended 31 December 2022, 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 59 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS 2023 RMB thousand 2022 RMB thousand 6,757 512 7,269 9,299 566 9,865 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. 136 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202359 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued) (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. Therefore, the Group determines the recoverable amount based on the present value of the expected future cash flows of assets. The expected future cash flows of assets are based on the most recent financial budget or forecast data approved by management, as well as stable or decreasing growth rates for years after the budget or forecast period. If the increasing growth rate is reasonable, then it should be based on the increasing growth rate. In appropriate and reasonable circumstances, the growth rate can be zero or negative. Expected cash flows based on budgets or forecasts typically cover five years, and if a longer period is reasonable, it can cover a longer period. When estimating cash flows for years after the budget or forecast period, the growth rate used should not exceed the long-term average growth rate of the industry or market in which the products operated by the group are located, or the long-term average growth rate of the market in which the asset is located, unless it can prove that a higher growth rate is reasonable. In determining the discount rate, the weighted average cost of capital is usually used as the basis. 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 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 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 ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). 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. 137 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202359 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued) (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. 60 PRINCIPAL SUBSIDIARIES The Company’s principal subsidiaries have been consolidated into the Group’s financial statements for the year ended 31 December 2023. 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 2023 million Percentage of equity interest/ voting right held by the Group % Non-controlling Interests at 31 December 2023 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 Trading of petrochemical products Trading of crude oil and petrochemical products RMB1,400 RMB5,000 RMB1,856 RMB6,585 Sinopec Catalyst Company Limited Sinopec Yangzi Petrochemical Company Limited Production and sale of catalyst products Manufacturing of intermediate petrochemical products and RMB1,500 RMB15,651 RMB2,424 RMB15,756 petroleum products 100.00 100.00 100.00 100.00 Sinopec Lubricant Company Limited Production and sale of refined petroleum products, lubricant base RMB3,374 RMB3,374 100.00 oil, and petrochemical materials Sinopec Yizheng Chemical Fibre Limited Liability Company Marketing Company Sinopec Kantons Holdings Limited (“Sinopec Kantons”) Sinopec Shanghai Petrochemical Company Limited Production and sale of polyester chips and polyester fibres Marketing and distribution of refined petroleum products Provision of pipeline transmission services Manufacturing of synthetic fibres, resin and plastics, intermediate RMB4,000 RMB28,403 HKD248 RMB10,799 RMB7,437 RMB20,000 HKD3,952 RMB5,820 100.00 70.42 60.33 50.55 13 5,820 297 – 68 – 82,330 5,437 12,394 (“Shanghai Petrochemical”) Fujian Petrochemical Company Limited (“Fujian Petrochemical”) (i) (b) Subsidiaries established by the Group: petrochemical products and petroleum products Manufacturing of plastics, intermediate petrochemical products RMB10,492 RMB5,246 50.00 5,024 and petroleum products Sinopec International Petroleum Exploration and Investment in exploration, production and sale of petroleum and RMB8,250 RMB8,250 100.00 6,204 Production Limited (“SIPL”) natural gas Sinopec Overseas Investment Holding Limited (“SOIH”) Sinopec Chemical Sales Company Limited Sinopec Great Wall Energy & Chemical Company Limited Investment holding of overseas business Marketing and distribution of petrochemical products Coal chemical industry investment management, production and USD3,598 RMB1,000 RMB22,761 USD3,598 RMB1,165 RMB26,055 sale of coal chemical products Sinopec Beihai Refining and Chemical Limited Import and processing of crude oil, production, storage and sale RMB5,294 RMB5,240 Liability Company of petroleum products and petrochemical products ZhongKe (Guangdong) Refinery & Petrochemical Crude oil processing and petroleum products manufacturing RMB6,397 RMB5,776 Company Limited Sinopec Qingdao Refining and Chemical Company Limited Manufacturing of intermediate petrochemical products and RMB5,000 RMB4,250 petroleum products Sinopec-SK (Wuhan) Petrochemical Company Limited Production, sale, research and development of ethylene and RMB7,193 RMB7,193 100.00 100.00 100.00 98.98 90.30 85.00 59.00 (“Sinopec-SK”) downstream byproducts (c) Subsidiaries acquired through business combination under common control: Sinopec Hainan Refining and Chemical Company Limited Manufacturing of intermediate petrochemical products and RMB9,606 RMB12,615 100.00 petroleum products Sinopec Qingdao Petrochemical Company Limited Manufacturing of intermediate petrochemical products and RMB1,595 RMB7,233 100.00 petroleum products Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. Manufacturing of intermediate petrochemical products and RMB10,000 RMB4,804 (“Gaoqiao Petrochemical”) petroleum products Sinopec Baling Petrochemical Co. Ltd. Crude oil processing and petroleum products manufacturing RMB3,000 RMB4,284 55.00 55.00 (“Hunan Petrochemical”) – 140 23 143 2,360 2,081 3,693 357 – 10,020 2,870 * The non-controlling interests of subsidiaries which the Group holds 100% of equity interests at the end of the year are the non-controlling 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. 138 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 60 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 whose non- controlling interests that are material to the Group. Summarised consolidated balance sheet Marketing Company At 31 December 2023 RMB million At 31 December 2022 RMB million SIPL Shanghai Petrochemical Fujian Petrochemical At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million At 31 December 2023 RMB million At 31 December 2022 RMB million Sinopec Kantons At 31 December 2023 RMB million At 31 December 2022 RMB million Gaoqiao Petrochemical At 31 December 2023 RMB million At 31 December 2022 RMB million 202,333 (217,315) (14,982) 324,288 (56,057) 268,231 190,697 (212,593) (21,896) 326,170 (56,147) 270,023 19,529 (936) 18,593 8,983 (11,583) (2,600) 25,677 (9,468) 16,209 12,869 (11,892) 977 15,455 (14,573) 882 24,203 (143) 24,060 15,766 (13,998) 1,768 25,477 (873) 24,604 3,729 (1,841) 1,888 8,862 (702) 8,160 1,901 (169) 1,732 10,215 (707) 9,508 6,118 (207) 5,911 8,001 (255) 7,746 5,436 (209) 5,227 7,902 (232) 7,670 18,521 (7,107) 11,414 14,904 (4,050) 10,854 23,991 (10,162) 13,829 15,681 (5,385) 10,296 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 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million Sinopec Kantons 2023 RMB million 2022 RMB million Gaoqiao Petrochemical 2023 RMB million 2022 RMB million Turnover Net profit/(loss) for the year Total comprehensive income Comprehensive income attributable to non-controlling interests Dividends paid to non-controlling interests Net cash generated from/(used in) operating activities 1,814,710 22,418 23,260 8,259 6,749 50,598 1,710,428 20,129 22,644 8,224 3,453 43,408 2,952 3,208 (1,193) (861) – 1,947 3,308 2,576 6,438 2,659 – 1,458 93,014 (1,409) (1,363) (676) 7 807 82,518 (2,868) (2,690) (1,331) 548 (7,337) 4,556 (1,196) (1,196) (598) – 1,660 4,931 (1,925) (1,925) (962) 333 2 549 1,169 1,252 499 195 557 529 346 734 291 169 133 60,156 106 105 47 895 (1,507) 69,298 3,176 3,181 1,431 984 (1,247) 139 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202361 COMMITMENTS Capital commitments At 31 December 2023 and 31 December 2022, capital commitments of the Group are as follows: At 31 December 2023 Authorised and contracted for (i) Authorised but not contracted for Total At 31 December 2023 RMB million At 31 December 2022 RMB million 177,809 61,951 239,760 167,507 94,407 261,914 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) At 31 December 2023, the investment commitments of the Group is RMB5,856 million (2022: RMB1,751 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 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 RMB628 million for the year ended 31 December 2023 (2022: RMB270 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 2023 RMB million At 31 December 2022 RMB million 802 175 176 172 156 875 2,356 369 152 146 115 62 857 1,701 The implementation of commitments in previous year and the Group’s commitments did not have material discrepancy. 140 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202362 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 2023 and 31 December 2022, the guarantees by the Group in respect of facilities granted to the parties below are as follows: Joint ventures(i) Notes: At 31 December 2023 RMB million At 31 December 2022 RMB million 8,563 8,927 (i) The Group provided a guarantee in respect to standby credit facilities granted to Zhongan United Coal Chemical Co., Ltd. (“Zhongan United”) and Amur Gas Chemical Complex Limited Liability Company (“Amur Gas”) by banks amount to RMB7,100 million (31 December 2022: RMB7,100 million) and RMB25,781 million (31 December 2022: RMB25,351 million) respectively. As at 31 December 2023, the amount withdrawn (the portion corresponding to the shareholding ratio of the Group) by Zhongan United from banks and guaranteed by the Group was RMB4,828 million (31 December 2022: RMB5,254 million). As at 31 December 2023, the amount withdrawn (the portion corresponding to the shareholding ratio of the Group) by Amur Gas from banks and guaranteed by the Group was RMB3,735 million (31 December 2022: RMB3,673 million). The Group provided a guarantee in respect to payment obligation under the raw material supply agreement of Amur Gas amount to RMB17,211 million (31 December 2022: RMB16,924 million). As at 31 December 2023, Amur Gas has not yet incurred the relevant payment obligations and therefore the Group has no guarantee amount (31 December 2022: Nil). Management monitors the risk that the specified debtor will default on the contract and recognises a provision when ECLs on the financial guarantees are determined to be higher than the carrying amount in respect of the guarantees. At 31 December 2023 and 2022, the Group estimates that there is no material liability has been accrued for ECLs related to the Group’s obligation under these guarantee arrangements. Environmental contingencies Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable uncertainties which affect the Group’s ability to estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and extent of the contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land development areas, whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of alternative remediation strategies, (iv) changes in environmental remediation requirements, and (v) the identification of new remediation sites. The amount of such future cost is indeterminable due to such factors as the unknown magnitude of possible contamination and the unknown timing and extent of the corrective actions that may be required. Accordingly, the outcome of environmental liabilities under proposed or future environmental legislation cannot reasonably be estimated at present, and could be material. The Group recognised normal routine pollutant discharge fees of approximately RMB19,156 million in the consolidated financial statements for the year ended 31 December 2023 (2022: RMB16,823 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. 141 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202363 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. 142 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202363 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 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 Gains/(losses) from changes in fair value Asset disposal gains Operating profit Add: Non-operating income Less: Non-operating expenses Profit before taxation 2023 RMB million 2022 RMB million 177,980 116,703 294,683 170,691 1,355,310 1,526,001 1,756,575 17,943 1,774,518 411,379 94,426 505,805 630,248 905,264 1,535,512 (2,489,646) 3,146,873 5,336 3,785 43,911 9,502 2,808 65,342 3,212,215 192,330 121,912 314,242 194,839 1,376,425 1,571,264 1,660,924 13,421 1,674,345 449,911 80,328 530,239 759,352 1,028,800 1,788,152 (2,620,886) 3,257,356 5,169 3,875 39,529 9,913 2,326 60,812 3,318,168 2023 RMB million 2022 RMB million 37,976 19,358 25,531 (10,273) 1,915 750 75,257 2,211 (413) 2,619 (2,746) 4,140 5,811 9,922 10,905 467 4,226 86,744 1,970 2,598 86,116 48,538 11,611 25,197 (14,256) 15,480 (1,820) 84,750 3,273 (375) 1,637 17,624 (7,697) 14,462 9,974 8,219 (1,715) 672 96,414 2,960 4,859 94,515 143 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 63 SEGMENT REPORTING (Continued) (1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued) 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 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 144 At 31 December 2023 RMB million At 31 December 2022 RMB million 444,485 331,084 387,557 255,409 153,674 1,572,209 164,960 234,608 20,110 34,787 2,026,674 181,002 53,000 226,798 89,069 196,226 746,095 59,815 30,457 179,347 8,513 7,817 13,133 22,842 1,068,019 412,543 327,706 388,961 242,794 148,014 1,520,018 145,052 233,941 22,433 29,677 1,951,121 172,875 84,220 217,177 82,826 215,386 772,484 21,313 62,844 94,964 12,997 7,256 14,068 24,738 1,010,664 2023 RMB million 2022 RMB million 78,596 22,899 15,735 55,038 4,485 176,753 46,755 20,386 23,995 18,958 3,656 113,750 887 191 278 1,280 – 2,636 83,300 22,863 19,140 58,612 5,181 189,096 45,321 20,588 23,461 17,716 2,820 109,906 2,891 2 415 1,790 571 5,669 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 63 SEGMENT REPORTING (Continued) (2) Geographical information The following tables set out information about the geographical information of the Group’s external sales and the Group’s non-current assets, excluding financial 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 64 FINANCIAL INSTRUMENTS Overview 2023 RMB million 2022 RMB million 2,857,361 157,113 197,741 3,212,215 2,824,140 263,087 230,941 3,318,168 At 31 December 2023 RMB million At 31 December 2022 RMB million 1,426,377 38,068 1,464,445 1,353,771 44,739 1,398,510 Financial assets of the Group include cash at bank and on hand, financial assets held for trading, derivative financial assets, accounts 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 2023, 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, receivables financing, other receivables and long-term receivables, represent the Group’s maximum exposure to credit risk in relation to financial assets. 145 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 64 FINANCIAL INSTRUMENTS (Continued) Credit risk (Continued) (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, 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 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 and receivables financing. To measure the expected credit losses, accounts 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 2023 or 31 December 2022, respectively, and the corresponding historical credit losses experienced within this period and calculate expected credit losses for the above financial assets using an allowance matrix 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 and receivables financing. The detailed analysis of accounts receivable and receivables financing is listed in Note 7 and Note 8. The Group’s other receivables are considered to have low credit risk (Note 10), 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. 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 2023, the Group has standby credit facilities with several PRC financial institutions which provide the Group to borrow up to RMB416,358 million (2022: RMB454,857 million) on an unsecured basis, at a weighted average interest rate of 2.23% per annum (2022: 2.38%). At 31 December 2023, the Group’s outstanding borrowings under these facilities were RMB59,815 million (2022: RMB21,313 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 2023 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 Non-current liabilities due within one year Long-term loans Debentures payable Lease liabilities Total 59,815 2,752 29,122 229,878 93,031 30,457 179,347 8,513 163,864 796,779 60,230 2,752 29,122 229,878 93,031 31,484 193,451 11,821 272,894 924,663 60,230 2,752 29,122 229,878 93,031 31,484 4,322 314 – 451,133 – – – – – – 67,860 314 12,512 80,686 – – – – – – 92,601 5,484 35,821 133,906 – – – – – – 28,668 5,709 224,561 258,938 146 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202364 FINANCIAL INSTRUMENTS (Continued) Liquidity risk (Continued) At 31 December 2022 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 Non-current liabilities due within one year Long-term loans Debentures payable Lease liabilities Total 21,313 7,313 10,782 258,642 119,892 62,844 94,964 12,997 166,407 755,154 21,635 7,313 10,782 258,642 119,892 64,111 102,939 16,657 282,477 884,448 21,635 7,313 10,782 258,642 119,892 64,111 2,149 422 – 484,946 – – – – – – 12,960 4,948 12,905 30,813 – – – – – – 76,473 5,669 36,984 119,126 – – – – – – 11,357 5,618 232,588 249,563 Management believes that the Group’s current cash on hand, expected cash flows from operations and available standby credit facilities from financial institutions will be sufficient to meet the Group’s short-term and long-term capital requirements. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. (a) Currency risk Currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The Group does not have significant financial instruments that are denominated in foreign currencies other than the functional currencies of respective entities as at 31 December, and consequently does not have significant exposure to foreign currency risk. (b) Interest rate risk The Group’s interest rate risk exposure arises primarily from its short-term and long-term loans. Loans carrying interest at variable interest rates and at fixed interest rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The interest rates and terms of repayment of short-term and long-term loans of the Group are disclosed in Note 22 and Note 31, respectively. At 31 December 2023, 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 RMB1,353 million (2022: decrease/increase RMB524 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 2022. (c) Commodity price risk and hedge accounting 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. Based on the dynamic study and judging of the market, combined with the resource demand and production and operation plan, the Group evaluate and monitor the market risk exposure caused by transaction positions, and continuously manage and hedge the risk of commodity price fluctuation caused by market changes. As at 31 December 2023, 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 2023, it is estimated that a general increase/decrease of USD10 per barrel in basic price of derivative financial instruments, with all other variables held constant, would impact the fair value of derivative financial instruments, which would decrease/increase the Group’s net profit for the year by approximately RMB1,139 million (2022: decrease/increase RMB5,104 million), and decrease/increase the Group’s other comprehensive income by approximately RMB4,537 million (2022: increase/ decrease RMB192 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 2022. 147 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 202364 FINANCIAL INSTRUMENTS (Continued) Market risk (Continued) (c) Commodity price risk and hedge accounting (Continued) For the hedge relationship with cash flow hedge accounting applied, the corresponding changes in cash flow hedge reserves are as follows: Beginning of the year Effective portion of changes in fair value of hedging instruments recognised during the year Reclassification adjustments for amounts transferred to the consolidated income statement Amounts transferred to initial carrying amount of hedged items Related tax End of the year The ineffective portion of cash flow hedge relationship is disclosed in Note 50 and Note 51. Fair values (i) Financial instruments carried at fair value The Group 2023 RMB million 2022 RMB million 3,079 7,420 (1,245) (3,078) (418) 5,758 7,244 6,667 8,127 (20,560) 1,601 3,079 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 2023 The Group Assets Financial assets held for trading: – Fund Investments Derivative financial assets: – Derivative financial assets Receivables financing: – Receivables financing 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 3 – 5,942 3,779 – 120 6,065 367 367 – – 3,779 2,385 2,385 – – 2,221 330 2,551 – – 3 9,721 2,221 450 12,395 2,752 2,752 148 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 64 FINANCIAL INSTRUMENTS (Continued) Fair values (Continued) (i) Financial instruments carried at fair value (Continued) At 31 December 2022 The Group Assets Financial assets held for trading: – Fund Investments Derivative financial assets: – Derivative financial assets Receivables financing: – Receivables financing 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 2 – 7,857 11,478 – 114 7,973 1,293 1,293 – – 11,478 6,020 6,020 – – 3,507 616 4,123 – – 2 19,335 3,507 730 23,574 7,313 7,313 During the year ended 31 December 2023 and 2022, 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 receivables financing classified as Level 3 financial assets. (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 2.69% to 5.47% (2022: from 2.66% to 4.35%). 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 2023 and 2022: Carrying amount Fair value At 31 December 2023 RMB million At 31 December 2022 RMB million 170,409 167,014 130,282 125,866 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 2023 and 2022. 149 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 65 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) Impact of repurchasing shares (million shares) Weighted average number of outstanding ordinary shares of the Company at 31 December (million) (ii) Diluted earnings per share 2023 60,463 119,811 0.505 2023 119,896 (85) 119,811 2022 67,082 120,889 0.555 2022 121,071 (182) 120,889 There are no potential dilutive ordinary shares, and diluted earnings per share are equal to the basic earning per share. 66 RETURN ON NET ASSETS AND EARNINGS PER SHARE 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: 2023 2022 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) Net profit attributable to the Company’s ordinary equity shareholders 7.59 0.505 0.505 8.57 0.555 0.555 Net profit deducted extraordinary gains and losses attributable to the Company’s ordinary equity shareholders 67 NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD 7.61 0.507 0.507 7.40 0.479 0.479 Pursuant to the resolutions of the 15th meeting of the 8th session of the Board of Directors held on 24 March 2023 and the 2022 Annual General Meeting of Shareholders held on 30 May 2023, and with the approval for registration by the China Securities Regulatory Commission in the Reply on Agreeing to the Registration of China Petroleum & Chemical Corporation to Issue Shares to Specific Targets (Zheng Jian Xu Ke [2024] No. 110(證監許可[2024]110號)), the Company was approved to issue 2,390,438,247 new shares to specific investors. Based on the actual issuance, the Company issued 2,390,438,247 ordinary shares (par value of RMB1.00 per share at an issue price of RMB5.02 per share) to Sinopec Corporation, a specific investor, raising a total of RMB12 billion, The above-mentioned raised funds has been received on 12 March 2024, and KPMG Huazhen LLP has performed the verification procedure on the above-mentioned raised funds and issued a Capital Verification Report No. 2400292. 68 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” (2023), the extraordinary gains and losses of the Group are as follows: Extraordinary (gains)/losses for the year: Net gains on disposal of non-current assets Donations Government grants Gain on holding and disposal of business and various investments Other non-operating losses, net One-time impact on loss for the current period due to adjustments in laws and regulations Subtotal Tax effect Total Attributable to: Equity shareholders of the Company Non-controlling interests 150 2023 RMB million 2022 RMB million (4,226) 310 (3,533) (931) 797 5,955 (1,628) 635 (993) 229 (1,222) (672) 447 (3,826) (13,902) 2,178 – (15,775) 2,304 (13,471) (9,120) (4,351) CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (PRC)NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2023 KPMG 8th Floor, Prince’s Building Central, Hong Kong G P O Box 50, Hong Kong Telephone +852 2522 6022 Fax +852 2845 2588 Internet kpmg.com/cn 畢馬威會計師事務所 香港中環太子大廈8樓 香港郵政總局信箱50號 電話+852 2522 6022 傳真+852 2845 2588 網址kpmg.com/cn Independent auditor’s report to the shareholders of China Petroleum & Chemical Corporation (established in the People’s Republic of China with limited liability) OPINION We have audited the consolidated financial statements of China Petroleum & Chemical Corporation (“the Company”) and its subsidiaries (“the Group”) set out on pages 154 to 212, which comprise the consolidated statement of financial position as at 31 December 2023, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and notes, comprising material accounting policy information and other explanatory information. In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2023 and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IASB”) 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 are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (“the Code”) together with any ethical requirements that are relevant to our audit of the consolidated financial statements in the People’s Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. KEY AUDIT MATTER Key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements of the current period. The matter was 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 this matter. Assessment of impairment of property, plant and equipment relating to oil and gas producing activities Refer to notes 2(g), 2(n), 8, 17 and 44 to the consolidated financial statements The Key Audit Matter How the matter was addressed in our audit The Company reported property, plant and equipment of Renminbi (“RMB”) 690,897 million as at 31 December 2023, a portion of which related to oil and gas producing activities. The Company reported impairment losses of RMB777 million for the property, plant and equipment relating to oil and gas producing activities for the year ended 31 December 2023. The Company groups property, plant and equipment relating to oil and gas producing activities into cash-generating units (“CGUs”) for impairment assessment. The Company compares the carrying amount of individual CGU with its value in use, using a discounted cash flow forecast, which was prepared based on the future production profiles included in the oil and gas reserves reports, to determine the impairment loss to be recognised. We identified assessment of impairment of property, plant and equipment relating to oil and gas producing activities as a key audit matter. The value in use amounts of these CGUs are sensitive to the changes to future selling prices and production costs for crude oil and natural gas, future production profiles, and discount rates. Therefore a higher degree of subjective auditor judgment was required to evaluate the Company’s impairment assessment of property, plant and equipment relating to oil and gas producing activities. The following are the primary procedures we performed to address this key audit matter: • • • • • we evaluated the design and tested the operating effectiveness of certain internal controls related to the process for impairment assessment of property, plant and equipment relating to oil and gas producing activities; we assessed the competence, capabilities and objectivity of the Company’s reserves specialists and evaluated the methodology adopted by them in estimating the oil and gas reserves against the recognised industry standards; we compared future selling prices for crude oil and natural gas used in the discounted cash flow forecasts with the Company’s business plans and forecasts by external analysts; we compared future production costs and future production profiles used in the discounted cash flow forecasts with oil and gas reserves reports issued by the reserves specialists; and we involved valuation professionals with specialised skills and knowledge, who assisted in assessing the discount rates applied in the discounted cash flow forecasts against a discount rate range that was independently developed using publicly available market data for comparable companies in the same industry. 151 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITORINFORMATION OTHER THAN THE CONSOLIDATED FINANCIAL STATEMENTS AND AUDITOR’S REPORT THEREON The directors are responsible for the other information. The other information comprises all the information included in the annual report, other than the consolidated financial statements and our auditor’s report thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS The directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards as issued by the IASB 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. The directors are assisted by the Audit Committee in discharging their responsibilities 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. This report is made 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 judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 152 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED)• 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 the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and, where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Ho Ying Man, Simon. KPMG Certified Public Accountants 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong 22 March 2024 153 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)REPORT OF THE INTERNATIONAL AUDITOR (CONTINUED)Revenue Revenue from primary business 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 Impairment reversals on trade and other receivables Other operating income/(expenses), net Total operating expenses Operating profit Finance costs Interest expense Interest income Foreign currency exchange 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 Note Year ended 31 December 2023 RMB 2022 RMB 3 4 5 6 7 8 9 10 21,22 11 16 16 3,146,873 65,342 3,212,215 (2,569,412) (59,575) (113,750) (11,055) (108,017) (272,921) 243 9,100 (3,125,387) 86,828 (18,069) 6,828 1,319 (9,922) 829 6,199 83,934 (16,070) 67,864 58,310 9,554 67,864 0.487 0.487 3,257,356 60,812 3,318,168 (2,684,756) (55,809) (109,906) (10,591) (103,585) (263,991) 1,084 (14,779) (3,242,333) 75,835 (16,769) 6,266 529 (9,974) 14,060 14,479 94,400 (17,901) 76,499 66,933 9,566 76,499 0.554 0.554 The notes on pages 161 to 212 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 14. 154 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)(B) FINANCIAL STATEMENTS PREPARED UNDER IFRS ACCOUNTING STANDARDS CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2023 (Amounts in million, except per share data) Note Year ended 31 December Profit for the year Other comprehensive income: 15 Other comprehensive income (net of tax) attributable to shareholders of the Company Items that will not be reclassified to profit or loss Changes in fair value of investments in other equity instruments Items that may be reclassified subsequently to profit or loss Share of other comprehensive income of associates and joint ventures Cash flow hedges Cost of hedging reserve Foreign currency translation differences Other comprehensive income (net of tax) attributable to non-controlling interests Total other comprehensive income net of tax Total comprehensive income for the year Attributable to: Shareholders of the Company Non-controlling interests 2023 RMB 67,864 2,501 2022 RMB 76,499 19,126 (8) (65) (4,287) 5,145 – 1,651 (1,912) 589 68,453 60,811 7,642 1,610 11,174 329 6,078 2,703 21,829 98,328 86,059 12,269 The notes on pages 161 to 212 form part of these consolidated financial statements. 155 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2023(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 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 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 22 March 2024. Note 31 December 2023 RMB 31 December 2022 RMB 17 18 19 20 21 22 26 29 23 24 25 26 27 28 30 30 31 24 33 34 35 30 30 31 29 36 37 690,897 180,250 264,054 6,472 163,066 69,564 450 20,110 95,398 1,490,261 121,759 41,778 3 9,721 48,652 2,221 250,898 59,403 534,435 58,534 12,437 17,536 2,752 259,000 127,239 168,124 1,454 647,076 112,641 1,377,620 163,049 24,811 163,864 7,817 48,269 14,001 421,811 955,809 119,349 683,640 802,989 152,820 955,809 630,700 196,045 264,856 6,464 159,150 74,791 730 22,433 72,812 1,427,981 93,438 51,614 2 19,335 46,364 3,507 244,241 64,639 523,140 59,037 7,292 16,004 7,313 269,424 125,444 178,146 4,725 667,385 144,245 1,283,736 85,706 22,255 166,407 7,256 47,587 14,983 344,194 939,542 119,896 667,704 787,600 151,942 939,542 Ma Yongsheng Chairman (Legal representative) Yu Baocai President Shou Donghua Chief Financial Officer The notes on pages 161 to 212 form part of these consolidated financial statements. 156 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 31 December 2023(Amounts in million) Share capital RMB 121,071 – 121,071 – – – – (1,175) – – – – – – – – (1,175) – – 119,896 Capital reserve RMB 27,062 – 27,062 – – – – – – – – – – 2,678 2,678 – 2,678 (1,009) 22 28,753 Share premium RMB 55,850 – 55,850 – – – – (3,004) – – – – – – – – (3,004) – – 52,846 Statutory surplus reserve RMB Discretionary surplus reserve RMB 96,224 122 96,346 – – – – – – – 4,663 – – – 4,663 – 4,663 – – 101,009 117,000 – 117,000 – – – – – – – – – – – – – – – – 117,000 Total equity attributable to shareholders of the Company RMB 774,182 2,114 776,296 66,933 19,126 86,059 Non- controlling interests RMB 140,892 334 141,226 9,566 2,703 12,269 Total equity RMB 915,074 2,448 917,522 76,499 21,829 98,328 (15,363) (439) (15,802) (4,179) – (4,179) (37,532) (19,371) – – – 2,678 (54,225) – (58,404) (1,009) 21 787,600 – – – (6,691) 5,395 2,191 895 (1,713) (818) – (296) 151,942 (37,532) (19,371) – (6,691) 5,395 4,869 (53,330) (1,713) (59,222) (1,009) (275) 939,542 Retained earnings RMB 354,480 1,992 356,472 66,933 – 66,933 – – (37,532) (19,371) (4,663) – – – (61,566) – (61,566) – (150) 361,689 Other reserves RMB 2,495 – 2,495 – 19,126 19,126 (15,363) – – – – – – – – – – – 149 6,407 Balance at 31 December 2021 Adjustment for accounting policy changes (Note 1(a)) Balance at 1 January 2022 Profit for the year Other comprehensive income (Note 15) Total comprehensive income for the year Amounts transferred to initial carrying amount of hedged items Transactions with owners, recorded directly in equity: Purchase of own shares (Note 37) Contributions by and distributions to owners: Final dividend for 2021 (Note 14) Interim dividend for 2022 (Note 14) Appropriation (Note (a)) Distributions to non-controlling interests Contributions to subsidiaries from non-controlling interests Other contributions Total contributions by and distributions to owners Transaction with non-controlling Interests Total transactions with owners Other equity movements under the equity method Others Balance at 31 December 2022 The notes on pages 161 to 212 form part of these consolidated financial statements. 157 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2022(Amounts in million) Share capital RMB 119,896 – – – – (547) – – – – – – – (547) – – 119,349 Capital reserve RMB 28,753 – – – – – – – – – – – – – 220 (44) 28,929 Share premium RMB 52,846 – – – – (1,778) – – – – – – – (1,778) – – 51,068 Statutory surplus reserve RMB 101,009 – – – Discretionary surplus reserve RMB 117,000 – – – – – – – 5,125 – – 5,125 – 5,125 – – 106,134 – – – – – – – – – – – – 117,000 Other reserves RMB 6,407 – 2,501 2,501 (2,513) – – – – – – – – – – (216) 6,179 Total equity attributable to shareholders of the Company RMB 787,600 58,310 2,501 60,811 Non- controlling interests RMB 151,942 9,554 (1,912) 7,642 Total equity RMB 939,542 67,864 589 68,453 (2,513) (142) (2,655) (2,325) – (2,325) (23,380) (17,380) – – – (40,760) – (43,085) 220 (44) 802,989 – – – (8,573) 2,209 (6,364) (213) (6,577) – (45) 152,820 (23,380) (17,380) – (8,573) 2,209 (47,124) (213) (49,662) 220 (89) 955,809 Retained earnings RMB 361,689 58,310 – 58,310 – – (23,380) (17,380) (5,125) – – (45,885) – (45,885) – 216 374,330 Balance at 1 January 2023 Profit for the year Other comprehensive income (Note 15) Total comprehensive income for the year Amounts transferred to initial carrying amount of hedged items Transactions with owners, recorded directly in equity: Purchase of own shares (Note 37) Contributions by and distributions to owners: Final dividend for 2022 (Note 14) Interim dividend for 2023 (Note 14) 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 Other equity movements under the equity method Others Balance at 31 December 2023 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 2023, the Company transferred RMB5,125 million (2022: RMB4,663 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 2023, the amount of retained earnings available for distribution was RMB107,879 million (2022: RMB102,522 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 IFRS Accounting Standards. (d) The capital reserve mainly 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 213 and 214 of the PRC Company Law. The notes on pages 161 to 212 form part of these consolidated financial statements. 158 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)for the year ended 31 December 2023(Amounts in million) Net cash generated from operating activities Investing activities Capital expenditure Exploratory wells expenditure Purchase of investments Payment for financial assets at fair value through profit or loss Proceeds from settlement of financial assets at fair value through profit or loss Payment for acquisition of subsidiary, net of cash acquired Proceeds from disposal of investments 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 (Payments of)/proceeds from 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 Cash payments to purchase own shares Repayments of lease liabilities Proceeds from other financing activities Repayments of other financing activities Net cash generated from/(used in) financing activities Net increase/(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 Note Year ended 31 December 2023 RMB 2022 RMB (a) 161,475 116,269 (152,325) (19,168) (5,892) (26) – (110) 1,580 5,363 (90,562) 86,975 8,929 10,886 (1,515) (155,865) 699,410 (599,954) 1,509 (40,760) (7,977) (7,997) (203) (2,325) (18,991) 420 (400) 22,732 28,342 93,438 (21) 121,759 (153,744) (18,783) (9,234) (1,222) 1,220 (7,881) 10,801 212 (31,670) 93,455 6,918 13,969 949 (95,010) 564,417 (514,275) 3,946 (56,903) (5,249) (9,679) – (4,179) (18,672) 989 (94) (39,699) (18,440) 108,590 3,288 93,438 The notes on pages 161 to 212 form part of these consolidated financial statements. 159 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2023(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 (Gain)/loss on foreign currency exchange rate changes and derivative financial instruments (Gain)/loss on disposal of property, plant, equipment and other non-current assets, net Impairment losses on assets Impairment reversals on trade and other receivables 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 31 December 2023 RMB million 31 December 2022 RMB million 83,934 94,400 113,750 6,723 (6,199) (829) (6,828) 18,069 (249) (2,995) 8,772 (243) 213,905 3,974 (12,726) (29,489) 175,664 (14,189) 161,475 109,906 6,416 (14,479) (14,060) (6,266) 16,769 3,064 722 12,009 (1,084) 207,397 1,974 (45,421) (30,363) 133,587 (17,318) 116,269 The notes on pages 161 to 212 form part of these consolidated financial statements. 160 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2023(Amounts in million) 1 PRINCIPAL ACTIVITIES, ORGANISATION, BASIS OF PREPARATION AND ACCOUNTING POLICY CHANGES Principal activities China Petroleum & Chemical Corporation (the “Company”) is an energy and chemical company incorporated in the People’s Republic of China (the “PRC”) that, through its subsidiaries (hereinafter collectively referred to as the “Group”), engages in oil and gas and chemical operations. 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 RMB1.00 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 Accounting Standards as issued by the International Accounting Standards Board (“IASB”). IFRS Accounting Standards 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 material accounting policies adopted by the Group are set out in Note 2. Accounting policy changes 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 The IASB has issued the following amendments to IFRS Accounting Standards that are first effective for the current accounting period of the Group: • Amendment to IAS 1, Presentation of financial statements and IFRS Accounting Standards Practice Statement 2, Making materiality judgements: Disclosure of accounting policies • Amendment to IAS 8, Accounting policies changes in accounting estimates and errors: Definition of accounting estimates • Amendment to IAS 12, Deferred tax related to assets and liabilities arising from a single transaction • Amendment to IAS 12, International tax reform-Pillar two model rules The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period. The adoption of the above amended IFRS Accounting Standards does not have a material impact on the Group except as discussed below: Amendment to IAS 12, Deferred tax related to assets and liabilities arising from a single transaction: (i) Accounting treatment of deferred tax related to assets and liabilities arising from a single transaction for which initial recognition exemption does not apply. The International Accounting Standards Board has amended IAS 12 and the scope of the exemption in paragraphs 15 and 24 of the previous standard is amended to “accounting treatment of deferred tax related to assets and liabilities arising from a single transaction for which initial recognition exemption does not apply”, therefore, the Group needs to recognise deferred tax assets and deferred tax liabilities for temporary differences arising from these transactions. The amendment is effective for annual reporting periods beginning on or after 1 January 2023, with earlier application permitted. The Group applies the amendments to transactions occurring on or after the beginning of the earliest comparative period listed, with any cumulative effect recognised as an adjustment to retained earnings and other related financial statement items at that date. 161 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 31 December 20231 PRINCIPAL ACTIVITIES, ORGANISATION, BASIS OF PREPARATION AND ACCOUNTING POLICY CHANGES (Continued) Accounting policy changes (Continued) (a) New and amended standards and interpretations adopted by the Group (Continued) (ii) The effects on the comparative financial statements The effects of the above changes in accounting policies on the profit for the year ended 31 December 2022 and equity at the beginning and the end of 2022 are summarised as follows: Profit for the year or equity before adjustments The effects of the exemption of initial recognition not applicable to the deferred tax relating to assets and liabilities arising out of a single transaction Profit for the year or equity after adjustments Profit for the year ended 31 December 2022 RMB million 75,643 Equity as of 31 December 2022 RMB million 936,238 Equity as of 1 January 2022 RMB million 915,074 856 76,499 3,304 939,542 2,448 917,522 The effects of the above changes in accounting policies on each item of the consolidated income statement for the year ended 31 December 2022 are summarised as follows: 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 earnings per share (RMB/Share) Diluted earnings per share (RMB/Share) Year ended 31 December 2022 before adjustment RMB million 94,400 (18,757) 75,643 66,153 9,490 75,643 0.547 0.547 Adjusted amount RMB million – 856 856 780 76 856 0.007 0.007 Year ended 31 December 2022 after adjustment RMB million 94,400 (17,901) 76,499 66,933 9,566 76,499 0.554 0.554 The effects of the above changes in accounting policies on each item of the consolidated statement of comprehensive income for the year ended 31 December 2022 are summarised as follows: Total comprehensive income for the year Attributable to: Shareholders of the Company Non-controlling interests Year ended 31 December 2022 before adjustment RMB million 97,472 Adjusted amount RMB million 856 Year ended 31 December 2022 after adjustment RMB million 98,328 85,279 12,193 780 76 86,059 12,269 162 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 1 PRINCIPAL ACTIVITIES, ORGANISATION, BASIS OF PREPARATION AND ACCOUNTING POLICY CHANGES (Continued) Accounting policy changes (Continued) (a) New and amended standards and interpretations adopted by the Group (Continued) (ii) The effects on the comparative financial statements (Continued) The effects of the above changes in accounting policies on each item of the consolidated statement of financial position as at 31 December 2022 are summarised as follows: Non-current assets: Deferred tax assets Total non-current assets Total current assets Total current liabilities Net current liabilities Total assets less current liabilities Non-current liabilities: Deferred tax liabilities Total non-current liabilities Equity Reserves Total equity attributable to shareholders of the Company Non-controlling interests Total equity As of 31 December 2022 before adjustment RMB million Adjusted amount RMB million As of 31 December 2022 after adjustment RMB million 19,952 1,425,500 523,140 667,385 144,245 1,281,255 8,079 345,017 664,810 784,706 151,532 936,238 2,481 2,481 – – – 2,481 (823) (823) 2,894 2,894 410 3,304 22,433 1,427,981 523,140 667,385 144,245 1,283,736 7,256 344,194 667,704 787,600 151,942 939,542 163 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 1 PRINCIPAL ACTIVITIES, ORGANISATION, BASIS OF PREPARATION AND ACCOUNTING POLICY CHANGES (Continued) Accounting policy changes (Continued) (a) New and amended standards and interpretations adopted by the Group (Continued) (iii) After retrospective adjustment of the above accounting policy changes, the consolidated statement of financial position as at 1 January 2022 is as follows: 1 January 2022 RMB million 598,925 155,939 268,408 8,594 148,729 60,450 767 21,098 70,030 1,332,940 108,590 113,399 18,371 34,861 5,939 207,433 69,431 558,024 35,252 2,873 15,173 3,223 215,640 124,622 239,688 4,809 641,280 83,256 1,249,684 78,300 13,690 170,233 7,171 43,525 19,243 332,162 917,522 121,071 655,225 776,296 141,226 917,522 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 Long-term prepayments and other assets Total non-current assets Current assets Cash and cash equivalents Time deposits with financial institutions Derivative financial assets Trade accounts 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 164 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 1 PRINCIPAL ACTIVITIES, ORGANISATION, BASIS OF PREPARATION AND ACCOUNTING POLICY CHANGES (Continued) Accounting policy changes (Continued) (b) New and amended standards and interpretations not yet adopted by the Group A number of new accounting standards and interpretations have been published that are not mandatory for 31 December 2023 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 Accounting Standards 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 Accounting Standards that have significant effect on the consolidated financial statements and the major sources of estimation uncertainty are disclosed in Note 44. 2 MATERIAL 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. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered. 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 date of statement of financial position, 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 statement of financial position 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 statement of financial position, 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 42. 165 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (a) Basis of consolidation (Continued) (ii) Associates and joint ventures An associate is an entity, not being a subsidiary, in which the Group exercises significant influence over its management. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Investments in associates and joint ventures are accounted for in the consolidated and separate financial statements using the equity method from the date that significant influence or joint control commences until the date that significant influence or joint control ceases. Under the equity method, the investment is initially recorded at cost and adjusted thereafter for the post acquisition change in the Group’s share of the investee’s net assets and any impairment loss relating to the investment (Note 2(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’s share of losses exceeds its interest in the associate or the joint venture, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the investee. For this purpose, the Group’s interest is the carrying amount of the investment under the equity method, together with any other long-term interests that in substance form part of the Group’s net investment in the associate or the joint venture, after applying the expected credit losses (“ECLs”) model to such other long-term interests where applicable. 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 beginning of the earliest period presented 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. 166 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (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 date of the statement of financial position. 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. The statement of financial position items, including goodwill arising on consolidation of foreign operations are translated into Renminbi at the closing foreign exchange rates at the date of the statement of financial position. 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. (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 loss allowances for ECLs (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: Plants and 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. 167 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (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. Items may be produced while bringing an item of property, plant and equipment to the location and condition necessary for it to be capable of operating in the manner intended by management. The proceeds from selling any such items and the related costs are recognised in profit or loss. 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. (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 on the contractual cash flows of the financial assets, 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. 168 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (j) Financial assets (Continued) (i) Classification and measurement (Continued) 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 ECLs on a financial asset that is measured at amortised cost and a debt instrument that is measured at FVOCI. The Group measures and recognises ECLs, considering reasonable and supportable information about the relevant past events, current conditions and forecasts of future economic conditions. The Group measures the ECLs of financial instruments on different stages at each the date of the statement of financial position. 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 ECLs. 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 ECLs. 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 ECLs. For financial instruments that have low credit risk at the date of the statement of financial position, 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 ECLs. 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 ECLs. 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 amount accumulated in the fair value reserve is transferred to retained earnings. It is not recycled through profit or loss. While on derecognition of other financial assets, this difference is recognised in profit or loss. 169 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (j) Financial assets (Continued) (iv) Financial guarantees issued Financial guarantees are contracts that require the issuer (i.e. the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantees issued are initially recognised at fair value, which is determined by reference to fees charged in an arm’s length transaction for similar services, when such information is obtainable, or to interest rate differentials, by comparing the actual rates charged by lenders when the guarantee is made available with the estimated rates that lenders would have charged, had the guarantees not been available, where reliable estimates of such information can be made. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised in profit or loss. Subsequent to initial recognition, the amount initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. The Group monitors the risk that the specified debtor will default on the contract and recognises a provision when ECLs on the financial guarantees are determined to be higher than the carrying amount in respect of the guarantees (i.e. the amount initially recognised, less accumulated amortisation). (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 date of the statement of financial position, 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. 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. 170 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (m) Derivative financial instruments and hedge accounting (Continued) 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 (i.e. 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. Fair value hedges A fair value hedge is a hedge of the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment, or a portion of such an asset, liability or firm commitment. The gain or loss from remeasuring the hedging instrument is recognised in profit or loss. The gain or loss on the hedged item attributable to the hedged risk adjusts the carrying amount of the recognised hedged item not measured at fair value and is recognised in profit or loss. Any adjustment to the carrying amount of a hedged item is amortised to profit or loss if the hedged item is a financial instrument (or a component thereof) measured at amortised cost. The amortisation is based on a recalculated effective interest rate at the date that amortisation begins. (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 date of the statement of financial position 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 date of the statement of financial position. 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). 171 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL 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 date of the statement of financial position 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 generally are financial liabilities and 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 invoice amounts. (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. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, a separate asset is recognised for any expected reimbursement that would be virtually certain. The amount recognised for the reimbursement is limited to the carrying amount of the provision. 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. An onerous contract exists when the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract. Provisions for onerous contracts are measured at the present value of the lower of the expected cost of terminating the contract and the net cost of continuing with the fulfilling the contract. The cost of fulfilling the contract includes both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling that contract. (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 goods or services (assets), 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 assets; the Group has transferred physical possession of the assets to the customer; the customer has the significant risks and rewards of ownership of the assets; the customer has accepted the assets. 172 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (r) Revenue recognition (Continued) Sales of goods Sales are recognised when control of the goods have transferred. Obtaining control of relevant goods means that a customer can direct the use of the goods and obtain almost all the economic benefits from it. 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. The Group determines whether it is a principal or an agent, based on whether it obtains control of the specified good or service before that good or service is transferred to a customer. The Group is a principal if it controls the specified good or service before that good or service is transferred to a customer, and recognises revenue in the gross amount of consideration which it has received (or which is receivable). Otherwise, the Group is an agent, and recognises revenue in the amount of any fee or commission to which it expects to be entitled. The fee or commission is the net amount of consideration that the Group retains after paying the other party the consideration, or is determined according to the established amount or proportion. The circumstances in which the Group is able to control the goods before transferring them to customers include: – The Group acquires control of the goods or other assets from a third party and then transfers them to the customer; – The Group is able to lead third parties to provide services to customers on behalf of the Group; – After the Group acquires control of a product from a third party, it transfers the product to a customer by integrating the product with other products into a combination of products through the provision of significant services; In determining whether the Group has control over the goods before the transfer of the goods to the customer, the Group takes into account all relevant facts and circumstances, including: – The Group bears the primary responsibility for the transfer of goods to customers; – The Group assumes the inventory risk of the goods before or after the transfer of the goods; – The Group reserves the right to determine the price of the products it trades at its own discretion. (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 recognised to profit or loss on a straight-line basis over the expected lives of the related assets. (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 RMB13,969 million for the year ended 31 December 2023 (2022: RMB12,773 million). 173 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (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 the date of the statement of financial position 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. A lessee shall account for a lease modification as a separate lease if both: (1) the modification increases the scope of the lease by adding the right to use one or more underlying assets; and (2) the consideration for the lease increases by an amount commensurate with the stand- alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the articular contract. For a lease modification that is not accounted for as a separate lease, except for the practical expedient which applies only to rent concessions occurring as a direct consequence of the COVID-19 pandemic, the Group determine the lease term of the modified lease at the effective date of the modification, and remeasure the lease liability by discounting the revised lease payments using a revised discount rate. The Group decrease the carrying amount of the right-of-use asset to reflect the partial or full termination of the lease for lease modifications that decrease the scope or shorten the term of the lease, and shall recognise in profit or loss any gain or loss relating to the partial or full termination of the lease. The Group make a corresponding adjustment to the right-of-use asset for all other lease modifications. (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. (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 40. 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 statement of financial position 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 date of statement of financial position and is reduced to the extent that it is no longer probable that the related tax benefit will be realised. 174 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 20232 MATERIAL ACCOUNTING POLICIES (Continued) (aa) Dividends Dividends and distributions of profits proposed in the profit appropriation plan which will be authorised and declared after the date of statement of financial position, are not recognised as a liability at the date of statement of financial position 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 REVENUE FROM PRIMARY BUSINESS Revenue from primary business mainly represents revenue from the sales of refined petroleum products, chemical products, crude oil and natural gas, which are recognised at a point in time. Gasoline Diesel Crude oil Chemical feedstock Basic organic chemicals Synthetic resin Kerosene Natural gas Synthetic fiber monomers and polymers Others (i) Note: (i) Others are primarily liquefied petroleum gas and other refinery and chemical byproducts and joint products. 4 OTHER OPERATING REVENUES Sale of materials and others Rental income 5 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES The following items are included in selling, general and administrative expenses: Variable lease payments, low-value and short-term lease payment Auditor’s remuneration: – Audit services – Others 6 PERSONNEL EXPENSES Salaries, wages and other benefits Contributions to retirement schemes (Note 40) 2023 RMB million 2022 RMB million 861,453 722,307 412,488 38,039 210,216 132,625 216,456 79,681 34,059 439,549 3,146,873 796,667 743,551 517,183 42,785 223,679 144,524 168,017 83,853 45,335 491,762 3,257,356 2023 RMB million 2022 RMB million 63,990 1,352 65,342 59,590 1,222 60,812 2023 RMB million 2,344 2022 RMB million 2,205 71 7 66 3 2023 RMB million 2022 RMB million 94,085 13,932 108,017 90,395 13,190 103,585 175 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 7 TAXES OTHER THAN INCOME TAX Consumption tax (i) City construction tax (ii) Special oil income levy Education surcharge (ii) Resources tax Levy for mineral rights concessions （礦業權出讓收益） 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 2023 RMB million 2022 RMB million 215,483 17,478 6,223 12,847 8,230 7,412 5,248 272,921 206,838 17,081 13,874 12,337 8,752 – 5,109 263,991 RMB/Ton 2,109.76 1,411.20 2,105.20 1,948.64 1,711.52 1,218.00 1,495.20 (ii) City construction tax and education surcharge is levied on an entity based on its paid amount of value-added tax and consumption tax. 8 OTHER OPERATING INCOME/(EXPENSES), NET Government grants (i) Ineffective portion of change in fair value of cash flow hedges Net realised and unrealised loss on derivative financial instruments not qualified as hedging Impairment losses on long-lived assets (ii) Gain/(loss) on disposal of property, plant, equipment and other non-current assets, net Fines, penalties and compensations Donations Others Notes: 2023 RMB million 2022 RMB million 11,587 2,029 (4,744) (2,636) 2,995 (43) (310) 222 9,100 9,277 (255) (15,535) (5,669) (722) (39) (447) (1,389) (14,779) (i) Government grants for the years ended 31 December 2023 and 2022 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 2023 primarily represent impairment losses recognised in the exploration and production (“E&P”) segment of RMB887 million (2022: RMB2,891 million), the chemicals segment of RMB1,280 million (2022: RMB1,790 million), the refining segment of RMB191 million (2022: RMB2 million), and the marketing and distribution segment of RMB278 million (2022: RMB415 million). The impairment losses in the E&P segment were mainly the impairment losses of properties, plant and equipment relating to oil and gas producing activities. The primary factors resulting in the E&P segment impairment loss were downward revision of oil and gas reserve in certain fields and high extraction cost. 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 Group determines the crude oil and natural gas production for the forecast period and the number of years in the forecast period for impairment assessment based on the results of proved reserves. Meanwhile, the Group determines the sales prices of crude oil and natural gas for the forecast period, taking into account the analysis of the domestic and international economic situation as well as the relationship between energy supply and demand. 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 7.86% to 15.94% (2022: 8.17% to 14.86%). Further future downward revisions to the Group’s oil or nature gas 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 nature gas producing activities by approximately RMB1,418 million (2022: RMB1,693 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 RMB634 million (2022: RMB1,508 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 RMB8 million (2022: RMB126 million). The impairment provisions for the chemical and refining divisions are related to the refining and chemical production equipment, mainly due to individual production units being shut down due to sustained lower than expected economic performance or having a clear shutdown plan in place, resulting in their book value being written down to their recoverable amount. The recoverable amount mainly considers the profit forecast approved by the management for a five-year period, which refers to the historical operating performance of relevant refining and chemical production facilities and is adjusted according to the development trends of the refining and chemical industry. The predicted cash flow after five years will remain stable, and the pre tax discount rate is calculated based on the weighted average cost of capital, which is 10.30%-16.50% (2022: 7.64%-18.68%). 176 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 9 INTEREST EXPENSE Interest expense incurred Less: Interest expense capitalised* Interest expense on lease liabilities Accretion expenses (Note 36) Interest expense * Interest rates per annum at which borrowing costs were capitalised for construction in progress 10 INVESTMENT INCOME Investment income from disposal of business and long-term equity investments (i) Dividend income from holding of other equity instrument investments Others Note: 2023 RMB million 2022 RMB million 7,877 (1,307) 6,570 9,096 1,103 16,769 1.70% to 4.25% 1.89% to 4.25% 9,807 (1,788) 8,019 8,951 1,099 18,069 2023 RMB million 2022 RMB million 303 10 516 829 13,754 76 230 14,060 (i) The Company and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. (“Gaoqiao Petrochemical”) and INEOS Investment (Shanghai) Company Limited (“INEOS Shanghai”) entered into an equity transfer agreement on 28 July 2022. According to the agreement, the Company and Gaoqiao Petrochemical transferred 15% and 35% equity interests in Shanghai SECCO Petrochemical Co., Ltd. (“Shanghai SECCO”) to INEOS Shanghai respectively at a total consideration of RMB10,863 million. The above transactions were considered and approved by the 10th Session of 8th Directorate Meeting of the Company. The transactions were completed on 28 December 2022 and the Company lost control over Shanghai SECCO. The Group accounted for its remaining 50% equity interest retained in Shanghai SECCO, at fair value upon initial recognition, as an interest in a joint venture from the date when control was lost. The investment income from disposal of Shanghai SECCO is RMB13,697 million. 11 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) 2023 RMB million 2022 RMB million 15,098 (1,470) 2,442 16,070 18,796 (1,757) 862 17,901 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 and temporary differences Write-down of deferred tax assets Adjustment of prior years Actual income tax expense Note: 2023 RMB million 2022 RMB million 83,934 20,984 3,049 (3,577) (3,117) (846) (399) 1,374 72 (1,470) 16,070 94,400 23,600 3,653 (5,827) (3,091) (128) (850) 2,243 58 (1,757) 17,901 (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%. According to Announcement [2020] No. 23 of the MOF “Announcement of the MOF, the State Taxation Administration and the National Development and Reform Commission on continuation of the income tax policy of western development enterprises”, the preferential tax rate of 15% extends from 1 January 2021 to 31 December 2030. 177 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 12 DIRECTORS’ AND SUPERVISORS’ EMOLUMENTS (a) Directors’ and supervisors’ emoluments The emoluments of every director and supervisor is set out below: Emoluments paid or receivable in respect of director’s other services in connection with the management of the affairs of the Company or its subsidiary undertaking Salaries, allowances and benefits in kind RMB’000 Bonuses RMB’000 2023 Retirement scheme contributions RMB’000 Emoluments paid The emoluments of every director or receivable and supervisor is set out below: 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 – – 317 – – 108 – – – – – – – – – – 401 372 384 1,582 – – 675 – – 80 – – – – – – – – – – 503 1,072 1,045 3,375 – – 131 – – 42 – – – – – – – – – – 97 121 121 512 – – – – – – – 450 450 450 450 – – – – – – – – 1,800 – – 1,123 – – 230 – 450 450 450 450 – – – – – 1,001 1,565 1,550 7,269 Name Directors Ma Yongsheng Zhao Dong Yu Baocai Ling Yiqun(i) Li Yonglin Liu Hongbin(ii) Lv Lianggong(iii) Independent non-executive directors Cai Hongbin Johnny Karling Ng Shi Dan Bi Mingjian Supervisors Zhang Shaofeng Qiu Fasen Zhang Zhiguo(iv) Wu Bo Zhai Yalin Yin Zhaolin Guo Hongjin Chen Yaohuan Total 178 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 12 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 2022 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 – – 298 – – 298 – – – – – – – – – – – 237 356 155 31 375 1,750 – – 1,291 – – 1,005 – – – – – – – – – – – 140 1,119 858 140 1,196 5,749 – – 116 – – 113 – – – – – – – – – – – 58 113 44 9 113 566 – – – – – – 450 450 450 450 – – – – – – – – – – – – 1,800 – – 1,705 – – 1,416 450 450 450 450 – – – – – – – 435 1,588 1,057 180 1,684 9,865 Name Directors Ma Yongsheng Zhao Dong Yu Baocai Ling Yiqun Li Yonglin Liu Hongbin Independent non-executive directors Cai Hongbin Johnny Karling Ng Shi Dan Bi Mingjian Supervisors Zhang Shaofeng Qiu Fasen(v) Jiang Zhenying(vi) Lv Lianggong(iii) Zhang Zhiguo(iv) Wu Bo(v) Zhai Yalin(v) Yin Zhaolin Guo Hongjin Li Defang(vii) Lv Dapeng(vii) Chen Yaohuan Total Notes： (i) Mr. Ling Yiqun ceased being director from 26 April 2023. (ii) Mr. Liu Hongbin ceased being director from 16 May 2023. (iii) Mr. Lv Lianggong was elected to be supervisor from 18 May 2022; Due to change of working arrangement, Mr. Lv Lianggong has tendered his resignation as supervisor on 17 October 2022. Mr. Lv Lianggong was elected to be director from 30 May 2023. (iv) Mr. Zhang Zhiguo ceased being supervisor from 19 May 2023. (v) Mr. Qiu Fasen was elected to be supervisor from 18 May 2022; Mr. Wu Bo was elected to be supervisor from 18 May 2022; Mr. Zhai Yalin was elected to be supervisor from 18 May 2022. (vi) Due to change of working arrangement, Mr. Jiang Zhenying has tendered his resignation as supervisor from 18 May 2022. (vii) Mr. Li Defang ceased being supervisor from 18 May 2022. Mr. Lv Dapeng ceased being supervisor from 18 May 2022. 179 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 13 SENIOR MANAGEMENT’S EMOLUMENTS For the year ended 31 December 2023, the five highest paid individuals in the Company included one director, two supervisors and two senior management. The total salaries, wages and other benefits was RMB6,872 thousand, and the total amount of their retirement scheme contributions was RMB615 thousand. For the year ended 31 December 2022, the five highest paid individuals in the Company included one director and four senior management. Emoluments HKD1,000,001 to HKD1,500,000 HKD1,500,001 to HKD2,000,000 HKD2,000,001 to HKD2,500,000 Number of individuals 2023 2022 1 4 – – – 5 During 2023 and 2022, the Company did not incur any emoluments paid or receivable in respect of a person accepting office as a director, or any payments to any director for loss of office. 14 DIVIDENDS Dividends payable to shareholders of the Company attributable to the year represent: Dividends declared and paid during the year of RMB0.145 per share (2022: RMB0.16 per share) Dividends declared after the date of the statement of financial position of RMB0.200 per share (2022: RMB0.195 per share) 2023 RMB million 2022 RMB million 17,380 19,371 23,870 41,250 23,380 42,751 Pursuant to the shareholders’ approval at the General Meeting on 25 August 2023, the interim dividends for the year ended 31 December 2023 of RMB0.145 (2022: RMB0.16) per share totaling RMB17,380 million (2022: RMB19,371 million) were approved. Dividends were paid on 15 September 2023. Pursuant to a resolution passed at the director’s meeting on 22 March 2024, final dividends in respect of the year ended 31 December 2023 of RMB0.200 (2022: RMB0.195) per share totaling RMB23,870 million (2022: RMB23,380 million) based on share number at 31 December 2023 were proposed for shareholders’ approval at the Annual General Meeting. Final cash dividend proposed after the date of the statement of financial position has not been recognised as a liability at the date of the statement of financial position. 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 RMB0.195 per share (2022: RMB0.31 per share) 2023 RMB million 2022 RMB million 23,380 37,532 Pursuant to the shareholders’ approval at the Annual General Meeting on 30 May 2023, a final dividend of RMB0.195 per share totaling RMB23,380 million according to total shares on 20 June 2023 was approved. All dividends have been paid in the year ended 31 December 2023. Pursuant to the shareholders’ approval at the Annual General Meeting on 18 May 2022, a final dividend of RMB0.31 per share totaling RMB37,532 million according to total shares on 9 June 2022 was approved. All dividends have been paid in the year ended 31 December 2022. 180 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 15 OTHER COMPREHENSIVE INCOME 2023 Before tax amount RMB million Tax effect RMB million Net of tax amount RMB million Before tax amount RMB million 2022 Tax effect RMB million Net of tax amount RMB million Cash flow hedges: Effective portion of changes in fair value of hedging instruments recognised during the year 7,420 (1,075) 6,345 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 Cost of hedging reserve Share of other comprehensive income of associates and joint ventures Foreign currency translation differences Other comprehensive income Note: (1,245) 6,175 (13) (13) – (6,683) 1,946 1,425 234 (841) 5 5 – – – (836) 6,667 8,127 (1,675) (1,482) 4,992 6,645 (1,011) 5,334 14,794 (3,157) 11,637 (8) (8) – (6,683) 1,946 589 (79) (79) 149 2,856 7,254 24,974 12 12 – – – (3,145) (67) (67) 149 2,856 7,254 21,829 (i) As at 31 December 2023, cash flow hedge reserve amounted to a gain of RMB5,758 million (31 December 2022: a gain of RMB3,079 million), of which a gain of RMB5,656 million was attributable to shareholders of the Company (31 December 2022: a gain of RMB3,024 million). 16 BASIC AND DILUTED EARNINGS PER SHARE The calculation of basic earnings per share for the year ended 31 December 2023 is based on the profit attributable to ordinary shareholders of the Company of RMB58,310 million (2022: RMB66,933 million) and the weighted average number of shares of 119,810,619,257 (2022: 120,889,248,735) during the year. There are no potential dilutive ordinary shares, and diluted earnings per share are equal to the basic earning per share. 181 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 17 PROPERTY, PLANT AND EQUIPMENT Cost: Balance at 1 January 2022 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 2022 Balance at 1 January 2023 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 2023 Accumulated depreciation and impairment losses: Balance at 1 January 2022 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 2022 Balance at 1 January 2023 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 2023 Net book value: Balance at 1 January 2022 Balance at 31 December 2022 Balance at 31 December 2023 Plants and buildings RMB million Oil and gas, properties RMB million Equipment, machinery and others RMB million Total RMB million 143,165 146 8,832 1,042 (64) (66) (830) 207 152,432 152,432 250 6,163 1,817 – (69) (2,246) 38 158,385 68,166 4,736 312 259 (20) (25) (734) 101 72,795 72,795 4,930 149 230 – (36) (1,636) 19 76,451 74,999 79,637 81,934 793,045 4,277 40,397 (289) – (50) (429) 3,768 840,719 840,719 1,681 54,374 (416) – (399) (257) 751 896,453 660,838 31,059 2,754 (209) – (40) (406) 3,616 697,612 697,612 31,525 775 (406) – (396) (294) 730 729,546 132,207 143,107 166,907 1,048,227 3,528 72,738 (753) (150) (1,417) (17,169) 321 1,105,325 1,105,325 2,348 90,823 (1,401) (19) (2,027) (23,745) 60 1,171,364 656,508 50,383 2,016 (50) (60) (160) (11,465) 197 697,369 697,369 52,057 1,567 176 (6) (925) (20,969) 39 729,308 391,719 407,956 442,056 1,984,437 7,951 121,967 – (214) (1,533) (18,428) 4,296 2,098,476 2,098,476 4,279 151,360 – (19) (2,495) (26,248) 849 2,226,202 1,385,512 86,178 5,082 – (80) (225) (12,605) 3,914 1,467,776 1,467,776 88,512 2,491 – (6) (1,357) (22,899) 788 1,535,305 598,925 630,700 690,897 The Group compares the carrying amount of individual cash-generating units which were grouped for the property, plant and equipment related to oil and gas producing activities with its value in use, using a discounted cash flow forecast prepared based on the future production profiles included in the oil and gas reserve reports, and recorded impairment losses amounting to RMB777 million (2022: RMB2,891 million) for the year ended 31 December 2023. The addition to oil and gas properties of the Group for the year ended 31 December 2023 included RMB1,681 million (2022: RMB4,277 million) of estimated dismantlement costs for site restoration. At 31 December 2023 and 31 December 2022, the Group had no individual significant property, plant and equipment which had been pledged. At 31 December 2023 and 31 December 2022, the Group had no individual significant property, plant and equipment which were temporarily idle or pending for disposal. At 31 December 2023 and 31 December 2022, the Group had no individual significant fully depreciated property, plant and equipment which were still in use. 182 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 18 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 2023 RMB million 2022 RMB million 196,045 184,350 (6,723) (151,360) (24,372) (116) (17,575) 1 180,250 155,939 180,741 (6,416) (121,967) (11,492) (581) (240) 61 196,045 As at 31 December 2023, the amount of capitalised cost of exploratory wells included in construction in progress related to the exploration and production segment was RMB18,704 million (2022: RMB17,062 million). The geological and geophysical costs paid during the year ended 31 December 2023 were RMB3,728 million (2022: RMB3,478 million). 19 RIGHT-OF-USE ASSETS Cost Balance at 1 January 2022 Additions Decreases Balance at 31 December 2022 Balance at 1 January 2023 Additions Decreases Balance at 31 December 2023 Accumulated depreciation Balance at 1 January 2022 Additions Decreases Balance at 31 December 2022 Balance at 1 January 2023 Additions Decreases Balance at 31 December 2023 Net book value Balance at 1 January 2022 Balance at 31 December 2022 Balance at 31 December 2023 Land RMB million Others RMB million Total RMB million 263,756 10,981 (5,610) 269,127 269,127 10,372 (5,268) 274,231 27,122 10,045 (1,903) 35,264 35,264 10,342 (3,579) 42,027 236,634 233,863 232,204 46,921 9,108 (4,229) 51,800 51,800 10,076 (4,233) 57,643 15,147 7,519 (1,859) 20,807 20,807 8,211 (3,225) 25,793 31,774 30,993 31,850 310,677 20,089 (9,839) 320,927 320,927 20,448 (9,501) 331,874 42,269 17,564 (3,762) 56,071 56,071 18,553 (6,804) 67,820 268,408 264,856 264,054 183 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 20 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: The name of the investee and the composition of the asset group Principal activities Sinopec Zhenhai Refining and Chemical Branch Manufacturing of intermediate petrochemical products and petroleum products Other units allocated 31 December 2023 RMB million 31 December 2022 RMB million 14,333 (7,861) 6,472 14,325 (7,861) 6,464 31 December 2023 RMB million 31 December 2022 RMB million 4,043 2,429 6,472 4,043 2,421 6,464 The Group’s goodwill impairment assessment is carried out in conjunction with its related asset group or combination of asset groups, and the recoverable amounts of goodwill are estimated annually based on value in use calculations, which is consistent with prior years. These calculations use cash flow projections based on five-year financial budgets approved by management for a goodwill-related asset group or a combination of asset groups, with cash flow remaining stable after five years. The cash flow forecasts use sales volumes, selling price and discount rates as key assumptions, with sales volumes based on production capacity and/or actual sales volumes for periods prior to the budget period, selling prices based on management’s expectations of future international crude oil and petrochemical price trends, and pre-tax discount rates based on weighted average cost of capital, which ranged from 11.26% to 13.1% (2022: 10.1% to 12.2%). Based on the result of the impairment assessment of goodwill, no impairment loss was recognised. 21 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 % of ownership interests Principal activities Measurement method Country of incorporation Principal place of business National Petroleum Pipe Network Group 14.00 (i) Operation of natural gas pipeline and Equity method PRC Co., Ltd. (PipeChina) auxiliary facilities Sinopec Finance Company Limited 49.00 Provision of non-banking financial Equity method PRC (“Sinopec Finance”) services Sinopec Capital Company Limited 49.00 Project and equity investment, Equity method PRC (“Sinopec Capital”) investment management, investment consulting, self-owned equity management Zhongtian Synergetic Energy Company 38.75 Mining coal and manufacturing of coal- Equity method PRC Limited (“Zhongtian Synergetic Energy”) China National Aviation Fuel Supply Co., Ltd. (“Aviation Fuel”) chemical products 29.00 Wholesale of gasoline, kerosene, and Equity method PRC diesel within the civil aviation system PRC PRC PRC PRC PRC (i) The Group has a member in the Board of Directors of PipeChina and has substantive participation in decision-making, so the Group can exercise significant influence on PipeChina. 184 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 21 INTEREST IN ASSOCIATES (Continued) Summarised financial information and reconciliation to their carrying amounts in respect of the Group’s principal associates: PipeChina 31 December 2023 RMB million 31 December 2022 RMB million Sinopec Finance Sinopec Capital 31 December 2023 RMB million 31 December 2022 RMB million 31 December 2023 RMB million 31 December 2022 RMB million Zhongtian Synergetic Energy 31 December 2022 RMB million 31 December 2023 RMB million Aviation Fuel 31 December 2023 RMB million 31 December 2022 RMB million 118,631 821,864 (130,331) (225,296) 584,868 104,889 816,301 (132,266) (199,675) 589,249 148,026 66,093 (179,459) (906) 33,754 212,850 57,394 (236,840) (673) 32,731 15,098 409 (74) (1,275) 14,158 14,444 249 (101) (990) 13,602 3,672 48,615 (7,464) (17,563) 27,260 3,212 51,035 (3,811) (23,435) 27,001 25,394 14,158 (17,200) (1,533) 20,819 20,380 13,617 (11,932) (1,561) 20,504 536,607 525,235 33,754 32,731 14,158 13,602 27,260 27,001 18,488 18,429 48,261 64,014 – – 75,125 75,125 73,533 73,533 16,539 16,539 16,038 16,038 – 6,937 6,937 – 6,665 6,665 – – 10,563 10,563 10,463 10,463 2,331 5,362 5,362 2,075 5,344 5,344 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 PipeChina 2023 RMB million 2022 RMB million Sinopec Finance 2023 RMB million 2022 RMB million Sinopec Capital 2023 RMB million 2022 RMB million Zhongtian Synergetic Energy 2022 RMB million 2023 RMB million Aviation Fuel 2023 RMB million 2022 RMB million Revenue Profit for the year Other comprehensive income Total comprehensive income Dividends declared by associates Share of profit from associates Share of other comprehensive income from associates 120,943 34,054 – 34,054 2,306 4,035 – 112,832 31,908 – 31,908 2,019 3,670 5,988 2,205 (182) 2,023 490 1,080 – (89) 5,636 2,338 89 2,427 319 1,145 44 4 888 52 940 188 435 25 5 1,281 (68) 1,213 73 627 (33) 15,676 2,752 – 2,752 966 1,066 – 17,551 4,562 – 4,562 632 1,768 – 181,290 2,515 – 2,515 638 656 – 105,162 3,026 – 3,026 626 745 – The share of profit and other comprehensive income for the year ended 31 December 2023 in all individually immaterial associates accounted for using equity method in aggregate was RMB4,506 million (2022: RMB6,386 million) and loss RMB1,540 million (2022: loss RMB201 million) respectively. As at 31 December 2023, the carrying amount of all individually immaterial associates accounted for using equity method in aggregate was RMB48,540 million (2022: RMB47,107 million). 185 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202322 INTEREST IN JOINT VENTURES The Group’s principal interests in joint ventures are as follows: Name of entity % of ownership interests Principal activities Measurement method Country of incorporation Principal place of business Fujian Refining & Petrochemical Company 50.00 Manufacturing refining oil products Equity method PRC Limited (“FREP”) BASF-YPC Company Limited (“BASF-YPC”) 40.00 Manufacturing and distribution of Equity method PRC petrochemical products Taihu Limited (“Taihu”) Sinopec SABIC Tianjin Petrochemical 49.00 50.00 Crude oil and natural gas extraction Equity method Cyprus Manufacturing and distribution of Equity method PRC Company Limited (“Sinopec SABIC Tianjin”) petrochemical products PRC PRC Russia PRC Shanghai SECCO Petrochemical Company 50.00 Manufacturing and distribution of Equity method PRC PRC Limited. (“Shanghai SECCO”) petrochemical products Summarised statement of financial position and reconciliation to their carrying amounts in respect of the Group’s principal joint ventures: FREP BASF-YPC Taihu Sinopec SABIC Tianjin Shanghai SECCO (i) 31 December 2023 RMB million 31 December 2022 RMB million 31 December 2023 RMB million 31 December 2022 RMB million 31 December 2023 RMB million 31 December 2022 RMB million 31 December 2023 RMB million 31 December 2022 RMB million 31 December 2023 RMB million 31 December 2022 RMB million Current assets Cash and cash equivalents Other current assets Total current assets Total 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 3,258 13,017 16,275 11,752 (827) (12,115) (12,942) (2,738) (223) (2,961) 12,124 3,733 11,311 15,044 12,708 (829) (9,951) (10,780) (3,742) (237) (3,979) 12,993 2,051 4,615 6,666 9,000 (25) (1,963) (1,988) – (123) (123) 13,555 3,061 5,993 9,054 9,244 (63) (2,245) (2,308) – (107) (107) 15,883 654 4,864 5,518 12,254 (42) (2,243) (2,285) (139) (914) (1,053) 14,434 1,625 15,269 16,894 10,488 (55) (2,727) (2,782) (157) (1,852) (2,009) 22,591 2,974 2,455 5,429 17,345 (3,900) (2,262) (6,162) (5,152) (603) (5,755) 10,857 4,506 2,554 7,060 18,466 (2,950) (3,282) (6,232) (6,393) (635) (7,028) 12,266 1,563 3,106 4,669 26,386 (3,582) (2,256) (5,838) (4,303) (1,097) (5,400) 19,817 1,323 3,647 4,970 26,677 (6,609) (2,368) (8,977) – (944) (944) 21,726 12,124 12,993 13,555 15,883 14,034 21,941 10,857 12,266 19,817 21,726 – 6,062 6,062 – 6,497 6,497 – 5,422 5,422 – 6,353 6,353 400 6,876 6,876 650 10,751 10,751 – 5,429 5,429 – 6,133 6,133 – 9,909 9,909 – 10,863 10,863 Summarised statement of comprehensive income FREP BASF-YPC Taihu Sinopec SABIC Tianjin 2023 RMB million 60,091 (1,575) 136 (315) (1,215) 346 (869) – (869) – (435) 2022 RMB million 59,347 (1,822) 107 (338) (2,004) 578 (1,426) – (1,426) 910 (713) 2023 RMB million 19,381 (1,355) 67 (4) 430 (108) 322 – 322 1,060 129 2022 RMB million 25,076 (1,431) 116 (7) 3,542 (885) 2,657 – 2,657 2,462 1,063 2023 RMB million 14,090 (784) 720 (61) 1,666 (292) 1,374 (9,531) (8,157) – 660 2022 RMB million 19,542 (882) 975 (274) 1,657 (201) 1,456 7,144 8,600 – 703 2023 RMB million 22,915 (1,699) 113 (204) (1,832) 423 (1,409) – (1,409) – (704) 2022 RMB million 24,294 (1,270) 144 (111) (2,396) 603 (1,793) – (1,793) 454 (897) Shanghai SECCO (i) 2023 RMB million 17,426 (539) 72 (199) (2,551) 642 (1,909) – (1,909) – (955) – – – – (4,535) 3,422 – – – Revenue Depreciation, depletion and amortisation Interest income Interest expense (Loss)/profit before taxation Income tax expense Net (loss)/profit for the year Other comprehensive income Total comprehensive income Dividends declared by joint ventures Share of net (loss)/profit from joint ventures Share of other comprehensive income from joint ventures (i) The Company and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. (“Gaoqiao Petrochemical”) and INEOS Investment (Shanghai) Company Limited (“INEOS Shanghai”) entered into an equity transfer agreement on 28 July 2022. According to the agreement, the Company and Gaoqiao Petrochemical transferred 15% and 35% equity interests in Shanghai SECCO to INEOS Shanghai respectively. The transactions were completed on 28 December 2022, and Shanghai SECCO was changed from a subsidiary to a joint venture after the completion of the transaction. 186 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 22 INTEREST IN JOINT VENTURES (Continued) Summarised statement of comprehensive income (Continued) The share of profit and other comprehensive income for the year ended 31 December 2023 in all individually immaterial joint ventures accounted for using equity method in aggregate was loss RMB4,274 million (2022: RMB18 million) and loss RMB544 million (2022: loss RMB376 million) respectively. As at 31 December 2023, the carrying amount of all individually immaterial joint ventures accounted for using equity method in aggregate was RMB35,866 million (2022: RMB34,194 million). Impairment test As at 31 December 2023, there are indicators of impairment in the long-term equity investment in Shanghai SECCO. The recoverable amount of this long-term equity investment is estimated based on a value-in-use calculation. The projected future cash flows primarily take into account the five-year profit forecast for Shanghai SECCO approved by the management, which is adjusted based on the historical performance of Shanghai SECCO and relevant industry trends, with cash flows remaining stable after five years. The pre-tax discount rate of 11.29% is calculated based on the weighted average cost of capital. The result of value-in-use calculation indicates that there is no impairment loss in this long-term equity investment as at 31 December 2023. 23 LONG-TERM PREPAYMENTS AND OTHER ASSETS Operating rights of service stations Long-term receivables from and prepayment to Sinopec Group Company and fellow subsidiaries Prepayments for construction projects to third parties Others (i) Note: 31 December 2023 RMB million 31 December 2022 RMB million 26,184 1,734 4,198 63,282 95,398 28,009 3,235 7,505 34,063 72,812 (i) Others mainly comprise catalyst expenditures, time deposits with maturities over one year and improvement expenditures of property, plant and equipment. 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 2023 RMB million 2022 RMB million 54,130 599 (543) 54,186 26,121 2,250 (369) 28,002 26,184 53,791 880 (541) 54,130 24,077 2,301 (257) 26,121 28,009 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 43. Cash flow hedge instruments Other derivatives 31 December 2023 RMB Million Fair value of assets Fair value of liabilities 2,883 6,838 9,721 1,768 984 2,752 31 December 2022 RMB Million Fair value of assets 2,187 17,148 19,335 Fair value of liabilities 247 7,066 7,313 187 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 25 TRADE ACCOUNTS RECEIVABLE Amounts due from third parties Amounts due from Sinopec Group Company and fellow subsidiaries Amounts due from associates and joint ventures Less: Loss allowance for expected credit losses The ageing analysis of trade accounts receivable (net of loss allowance for expected credit losses) is as follows: Within one year Between one and two years Between two and three years Over three years Loss allowance for expected credit losses 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 2023 RMB million 31 December 2022 RMB million 40,588 5,762 6,318 52,668 (4,016) 48,652 38,942 7,261 4,240 50,443 (4,079) 46,364 31 December 2023 RMB million 31 December 2022 RMB million 48,187 279 54 132 48,652 46,039 152 88 85 46,364 2023 RMB million 2022 RMB million 4,079 313 (372) (68) 64 4,016 4,033 417 (561) (49) 239 4,079 As at 31 December 2023, the carrying amount of accounts receivable under factoring arrangement that are derecognised is RMB12,767 million. 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. 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 the Group’s exposure to credit risk can be found in Note 43. 26 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME Non-current assets Unlisted equity instruments Listed equity instruments Current assets Bills receivable (i) Note: 31 December 2023 RMB million 31 December 2022 RMB million 330 120 2,221 2,671 616 114 3,507 4,237 (i) As at 31 December 2023 and 2022, bills receivable were classified as financial assets at fair value through other comprehensive income, as relevant business model is achieved both by collecting contractual cash flows and selling of these assets. 188 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 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 2023 RMB million 31 December 2022 RMB million 138,143 20,375 95,227 2,994 256,739 (5,841) 250,898 139,307 14,536 93,994 2,987 250,824 (6,583) 244,241 The cost of inventories recognised as an expense in the consolidated income statement amounted to RMB2,663,323 million for the year ended 31 December 2023 (2022: RMB2,774,951 million). It includes the write-down of inventories of RMB6,300 million mainly related to finished goods and raw materials (2022: RMB6,407 million mainly related to finished goods). 28 PREPAID EXPENSES AND OTHER CURRENT ASSETS Receivables Advances to suppliers Value-added input tax to be deducted Prepaid income tax 29 DEFERRED TAX ASSETS AND LIABILITIES Deferred tax assets and liabilities before offset are attributable to the items detailed in the table below: 31 December 2023 RMB million 31 December 2022 RMB million 25,443 5,067 24,990 3,903 59,403 27,311 7,956 25,355 4,017 64,639 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 Lease liabilities and right of use assets Others Deferred tax assets/(liabilities) The offsetting amount between deferred tax assets and liabilities are as follows: Deferred tax assets Deferred tax liabilities Deferred tax assets and liabilities after the offsetting adjustments are as follows: Deferred tax assets Deferred tax liabilities Deferred tax assets Deferred tax liabilities 31 December 2023 RMB million 31 December 2022 RMB million 31 December 2023 RMB million 31 December 2022 RMB million 3,721 2,715 16 17,965 9,036 137 1,084 44,334 2,792 81,800 4,271 3,091 85 21,536 4,643 131 1,067 45,568 1,395 81,787 (20) – (1,142) (26,669) – (7) (92) (40,422) (1,155) (69,507) (17) – (736) (22,341) – (6) (85) (42,264) (1,161) (66,610) 31 December 2023 RMB million 61,690 61,690 31 December 2022 RMB million 59,354 59,354 31 December 2023 RMB million 20,110 7,817 31 December 2022 RMB million 22,433 7,256 As at 31 December 2023, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of RMB24,783 million (2022: RMB21,268 million), of which RMB5,496 million (2022: RMB8,972 million) was incurred for the year ended 31 December 2023, because it was not probable that the future taxable profits will be available. These deductible losses carried forward of RMB1,656 million, RMB3,349 million, RMB5,310 million, RMB8,972 million and RMB5,496 million, will expire in 2024, 2025, 2026, 2027,2028 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. 189 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 29 DEFERRED TAX ASSETS AND LIABILITIES (Continued) 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 Financial assets at fair value through other comprehensive income Intangible assets Lease liabilities and right of use assets Others Net deferred tax assets/(liabilities) 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 Lease liabilities and right of use assets Others Net deferred tax assets/(liabilities) Balance at 1 January 2022 RMB million Recognised in consolidated income statement RMB million Recognised in other comprehensive income RMB million Transferred from reserve RMB million Balance at 31 December 2022 RMB million Others RMB million 3,763 2,858 (2,451) 1,740 4,749 118 516 2,448 186 13,927 514 233 203 (3,341) 525 (5) 80 856 73 (862) – – (3,157) – – 12 – – – (3,145) (23) – (13) 796 (631) – 386 – (25) 490 – – 4,767 – – – – – – 4,767 4,254 3,091 (651) (805) 4,643 125 982 3,304 234 15,177 Balance at 1 January 2023 RMB million Recognised in consolidated income statement RMB million Recognised in other comprehensive income RMB million Transferred from reserve RMB million Balance at 31 December 2023 RMB million Others RMB million 4,254 3,091 (651) (805) 4,643 125 982 3,304 234 15,177 (568) (376) (51) (7,873) 4,392 – 11 608 1,415 (2,442) – – (841) – – 5 – – – (836) 15 – (5) (26) 1 – (1) – (12) (28) – – 422 – – – – – – 422 3,701 2,715 (1,126) (8,704) 9,036 130 992 3,912 1,637 12,293 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 USD 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 Euro denominated Current portion of long-term loans RMB denominated 31 December 2023 RMB million 31 December 2022 RMB million 51,175 51,175 – 2,813 2,813 – 4,546 4,546 58,534 8,640 7,628 1,012 – 3,797 3,797 12,437 70,971 14,461 14,325 136 13,876 13,875 1 30,700 30,700 59,037 6,852 5,911 906 35 440 440 7,292 66,329 The Group’s weighted average interest rates on short-term loans were 2.23% (2022: 2.63%) per annum at 31 December 2023. The above borrowings are unsecured. 190 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 30 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued) Long-term debts represent: Third parties’ debts Long-term bank loans RMB denominated Interest rate and final maturity Interest rates ranging from 1.08% to 4.80% per annum at 31 December 2023 with maturities through 2035 USD denominated Interest rates at 0.00% per annum at 31 December 2023 with maturities through 2038 31 December 2023 RMB million 31 December 2022 RMB million 157,298 51 157,349 86,532 53 86,585 Corporate bonds RMB denominated Fixed interest rates ranging from 2.50% to 3.20% per annum at 31 December 2023 with maturities through 2026 9,541 31,534 USD denominated Fixed interest rate of 4.25% per annum at 31 December 2023 with maturities through 2043 Total third parties’ long-term debts Less: Current portion Long-term loans from Sinopec Group Company and fellow subsidiaries RMB denominated Interest rates ranging from 1.08% to 4.99% per annum at 31 December 2023 with maturities through 2038 Less: Current portion 3,518 13,059 170,408 (7,359) 163,049 28,608 (3,797) 24,811 187,860 12,163 43,697 130,282 (44,576) 85,706 22,695 (440) 22,255 107,961 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. 31 LEASE LIABILITIES Lease liabilities Current Non-current 31 December 2023 RMB million 31 December 2022 RMB million 17,536 163,864 181,400 16,004 166,407 182,411 32 RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES (EXCLUDING LEASE LIABILITIES) At 1 January 2023 Changes from financing cash flows: Proceeds from bank and other loans Repayment of bank and other loans Interest paid Total changes from financing cash flows Other changes: Interest costs (including capitalised interest costs) Others At 31 December 2023 Loans from Sinopec Group Company and fellow subsidiaries and debts RMB million Other long-term liabilities-loans from other related parties RMB million 174,290 5,180 698,936 (599,954) (7,713) 91,269 9,474 (16,202) 258,831 474 – (284) 190 333 (570) 5,133 Total RMB million 179,470 699,410 (599,954) (7,997) 91,459 9,807 (16,772) 263,964 191 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 33 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 34 CONTRACT LIABILITIES 31 December 2023 RMB million 31 December 2022 RMB million 216,847 4,276 8,755 229,878 29,122 259,000 224,994 25,358 8,290 258,642 10,782 269,424 31 December 2023 RMB million 31 December 2022 RMB million 181,241 51,035 26,724 259,000 206,325 43,310 19,789 269,424 As at 31 December 2023 and 2022, the Group’s contract liabilities primarily represent advances from customers. Related performance obligations are expected to be satisfied and revenue is recognised within one year. 35 OTHER PAYABLES Salaries and welfare payable Interest payable Payables for constructions Other payables Taxes other than income tax 36 PROVISIONS 31 December 2023 RMB million 31 December 2022 RMB million 13,941 145 66,928 48,556 38,554 168,124 13,617 549 68,492 71,833 23,655 178,146 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: 2023 RMB million 2022 RMB million 43,599 1,681 1,099 (1,195) 38 45,222 40,495 4,277 1,103 (2,438) 162 43,599 Balance at 1 January Provision for the year Accretion expenses Decrease for the year Exchange adjustments Balance at 31 December 192 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 37 SHARE CAPITAL Registered, issued and fully paid 94,971,971,046 listed A shares (2022: 95,115,471,046) of RMB1.00 each 24,377,280,600 listed H shares (2022: 24,780,936,600) of RMB1.00 each 31 December 2023 RMB million 31 December 2022 RMB million 94,972 24,377 119,349 95,115 24,781 119,896 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 RMB1.00 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 RMB1.00 each and offer not more than 19.5 billion shares with a par value of RMB1.00 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 RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American Depositary Shares (“ADSs”, each representing 100 H shares), at prices of HKD1.59 per H share and USD20.645 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 RMB1.00 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 RMB1.00 each at RMB4.22 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 RMB1.00 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 RMB1.00 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 RMB1.00 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 RMB1.00 each at the Placing Price of HKD8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the commissions and estimated expenses) amounted to approximately HKD23,970,100,618.00. 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 RMB1.00 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 RMB1.00 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 RMB1.00 each, as a result of exercise of conversion by the holders of the 2011 Convertible Bonds. During the year ended 31 December 2022, the Company repurchased 442,300,000 listed A shares and 732,502,000 listed H shares respectively at a price of RMB4.06 per share to RMB4.50 per share for the repurchase of listed A shares, with a total amount of RMB1,888,163,981.61, and a price of HKD3.06 per share to HKD3.75 per share for the repurchase of listed H shares, with a total amount of HKD2,499,261,860.00, which had been cancelled in the year ended 31 December 2022. During the year ended 31 December 2023, the Company repurchased 143,500,000 listed A shares and 403,656,000 listed H shares respectively at a price of RMB5.29 per share to RMB6.17 per share for the repurchase of listed A shares, with a total amount of RMB816,009,269.44, and a price of HKD3.78 per share to HKD4.56 per share for the repurchase of listed H shares, with a total amount of HKD1,646,392,242.20, which had been cancelled in the year ended 31 December 2023. All A shares and H shares rank pari passu in all material aspects. 193 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 37 SHARE CAPITAL (Continued) Capital management Management optimises the structure of the Group’s capital, which comprises of equity, 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, 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 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 2023, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 19.0% (2022: 12.1%) and 52.8% (2022: 51.8%), respectively. The schedule of the contractual maturities of loans and commitments are disclosed in Notes 30 and 38, 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. 38 COMMITMENTS AND CONTINGENT LIABILITIES Capital commitments At 31 December 2023 and 2022, capital commitments of the Group are as follows: Authorised and contracted for (i) Authorised but not contracted for 31 December 2023 RMB million 31 December 2022 RMB million 177,809 61,951 239,760 167,507 94,407 261,914 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 RMB5,856 million (2022: RMB1,751 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 RMB628 million for the year ended 31 December 2023 (2022: RMB270 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 194 31 December 2023 RMB million 31 December 2022 RMB million 802 175 176 172 156 875 2,356 369 152 146 115 62 857 1,701 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 38 COMMITMENTS AND CONTINGENT LIABILITIES (Continued) Contingent liabilities At 31 December 2023 and 2022, the guarantees by the Group in respect of facilities granted to the parties below are as follows: Joint ventures (i) Note: 31 December 2023 RMB million 31 December 2022 RMB million 8,563 8,563 8,927 8,927 (i) The Group provided a guarantee in respect to standby credit facilities granted to Zhongan United Coal Chemical Co., Ltd. (“Zhongan United”) and Amur Gas Chemical Complex Limited Liability Company (“Amur Gas”) by banks amounting to RMB7,100 million (31 December 2022: RMB7,100 million) and RMB25,781 million (31 December 2022: RMB25,351 million) respectively. As at 31 December 2023, the amount withdrawn (the portion corresponding to the shareholding ratio of the Group) by Zhongan United from banks and guaranteed by the Group was RMB4,828 million (31 December 2022: RMB5,254 million). As at 31 December 2023, the amount withdrawn (the portion corresponding to the shareholding ratio of the Group) by Amur Gas from banks and guaranteed by the Group was RMB3,735 million (31 December 2022: RMB3,673 million). The Group provided a guarantee in respect to payment obligation under the raw material supply agreement of Amur Gas amount to RMB17,211 million (31 December 2022: RMB16,924 million). As at 31 December 2023, Amur Gas has not yet incurred the relevant payment obligations and therefore the Group has no guarantee amount (31 December 2022: Nil). Management monitors the risk that the specified debtor will default on the contract and recognises a provision when ECLs on the financial guarantees are determined to be higher than the carrying amount in respect of the guarantees. At 31 December 2023 and 2022, the Group estimates that there is no material liability has been accrued for ECLs related to the Group’s obligation under these guarantee arrangements. Environmental contingencies Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial position or operating results of the Group. The PRC government, however, has moved, and may move further towards more rigorous enforcement of applicable laws, and towards the adoption of more stringent environmental standards. Environmental liabilities are subject to considerable uncertainties which affect 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 RMB19,156 million in the consolidated financial statements for the year ended 31 December 2023 (2022: RMB16,823 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. 39 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. 195 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 39 RELATED PARTY TRANSACTIONS (Continued) (a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued) 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 Agency commission income Interest income Interest expense Net deposits placed with related parties Net funds obtained from related parties Notes (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (vii) (ix) 2023 RMB million 408,554 218,974 29,830 41,783 43,361 179 2,838 1,283 (903) 43,621 2022 RMB million 352,691 184,986 18,291 37,317 48,465 173 1,203 541 (3,382) 36,608 The amounts set out in the table above in respect of the year ended 31 December 2023 and 2022 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 2023 are: a) purchases by the Group from Sinopec Group Company and fellow subsidiaries amounting to RMB200,604 million (2022: RMB158,874 million) comprising purchases of products and services (i.e. procurement, transportation and storage, exploration and development services and production related services) of RMB187,117 million (2022: RMB146,114 million), lease charges for land, buildings and others paid by the Group of RMB10,926 million, RMB1,050 million and RMB228 million (2022: RMB11,046 million, RMB938 million and RMB235 million), respectively and interest expenses of RMB1,283 million (2022: RMB541 million); and b) sales by the Group to Sinopec Group Company and fellow subsidiaries amounting to RMB87,247 million (2022: RMB58,403 million), comprising RMB84,329 million (2022: RMB57,151 million) for sales of goods, RMB2,838 million (2022: RMB1,203 million) for interest income and RMB80 million (2022: RMB49 million) for agency commission income. For the year ended 31 December 2023, 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 2023 on lease liabilities in respect of amounts due to Sinopec Group Company and fellow subsidiaries, associates and joint ventures was RMB7,637 million (2022: RMB7,811 million). For the year ended 31 December 2023, the amount of rental the Group paid to Sinopec Group Company and fellow subsidiaries, associates and joint ventures for land, buildings and others are RMB10,931 million, RMB1,053 million and RMB273 million (2022: RMB11,051 million, RMB943 million and RMB352 million), including pursuant to the continuing connected transaction agreements signed in 2000, the Sixth Supplementary Agreement on 27 August 2021, the amount of rental the Group paid to Sinopec Group Company for land and buildings are RMB10,926 million and RMB1,050 million (2022: RMB11,046 million and RMB938 million). As at 31 December 2023 and 2022, 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 38. Guarantees given to banks by the Group in respect of banking facilities to associates and joint ventures are disclosed in Note 38. 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. 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) Agency commission income represents commission earned for acting as an agent in respect of sales of products and purchase of materials for certain entities owned by Sinopec Group Company. (vii) 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 2023 was RMB65,967 million (2022: RMB65,064 million). (viii) Interest expense represents interest charges on the loans obtained from Sinopec Group Company and fellow subsidiaries. (ix) The Group obtained loans, discounted bills and issued the acceptance bills from Sinopec Group Company and fellow subsidiaries. 196 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202339 RELATED PARTY TRANSACTIONS (Continued) (a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued) In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under which 1) Sinopec Group Company will provide goods and products and a range of ancillary, social and supporting services to the Group and 2) the Group will sell certain goods to Sinopec Group Company. These agreements impacted the operating results of the Group for the year ended 31 December 2023. 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 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. • On the basis of a series of continuing connected transaction agreements signed in 2000, the Company and Sinopec Group Company have signed the Sixth Supplementary Agreement on 27 August 2021, which took effect on 1 January 2022 and made adjustment to “Mutual Supply Agreement” and “Buildings 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 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 2023 RMB million 31 December 2022 RMB million 12,056 101 14,953 9,025 36,135 19,971 4,402 26,052 5,133 12,437 24,811 154,051 246,857 11,480 596 10,375 8,633 31,084 38,337 4,736 38,312 5,180 7,292 22,255 156,537 272,649 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 and for the year ended 31 December 2023, and as at and for the year ended 31 December 2022, no individually significant loss allowance for expected credit losses were recognised in respect of amounts due from Sinopec Group Company and fellow subsidiaries, associates and joint ventures. 197 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202339 RELATED PARTY TRANSACTIONS (Continued) (b) Key management personnel emoluments Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including directors and supervisors of the Group. The key management personnel compensation is as follows: Short-term employee benefits Retirement scheme contributions (c) Contributions to defined contribution retirement plans 2023 RMB’000 6,757 512 7,269 2022 RMB’000 9,299 566 9,865 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 40. As at 31 December 2023 and 2022, the accrual for the contribution to post-employment benefit plans was not material. (d) Transactions with other state-controlled entities in the PRC The Group is a state-controlled energy and chemical enterprise and operates in an economic regime currently dominated by entities directly or indirectly controlled by the PRC government through its government authorities, agencies, affiliations and other organisations (collectively referred as “state-controlled entities”). Apart from transactions with Sinopec Group Company and fellow subsidiaries, the Group has transactions with other state-controlled entities, include but not limited to the followings: • • • sales and purchases of goods and ancillary materials; rendering and receiving services; lease of assets; • depositing and borrowing money; and • uses of public utilities. These transactions are conducted in the ordinary course of the Group’s business on terms comparable to those with other entities that are not state-controlled. 40 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 16.0% 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 2023 were RMB13,932 million (2022: RMB13,190 million). 41 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. 198 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 41 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: Revenue from primary business 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 Revenue from primary business Other operating revenues Exploration and production Refining Marketing and distribution Chemicals Corporate and others Other operating revenues Revenue 2023 RMB million 2022 RMB million 177,980 116,703 294,683 170,691 1,355,310 1,526,001 1,756,575 17,943 1,774,518 411,379 94,426 505,805 630,248 905,264 1,535,512 (2,489,646) 3,146,873 5,336 3,785 43,911 9,502 2,808 65,342 3,212,215 192,330 121,912 314,242 194,839 1,376,425 1,571,264 1,660,924 13,421 1,674,345 449,911 80,328 530,239 759,352 1,028,800 1,788,152 (2,620,886) 3,257,356 5,169 3,875 39,529 9,913 2,326 60,812 3,318,168 199 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 41 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 profit/(loss) from associates and joint ventures – Exploration and production – Refining – Marketing and distribution – Chemicals – Corporate and others Aggregate share of profits from associates and joint ventures Investment income – 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 and other bank balances 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 2023 RMB million 2022 RMB million 44,963 20,608 25,939 (6,036) 604 750 86,828 3,061 (750) 3,383 (4,704) 5,209 6,199 – 30 – (33) 832 829 (9,922) 83,934 53,716 12,211 24,537 (14,127) 1,318 (1,820) 75,835 2,883 (645) 3,142 3,365 5,734 14,479 – 35 31 14,258 (264) 14,060 (9,974) 94,400 31 December 2023 RMB million 31 December 2022 RMB million 445,556 331,116 387,643 255,577 153,740 1,573,632 232,630 450 20,110 163,537 34,337 2,024,696 187,385 55,095 246,586 90,489 206,674 786,229 58,534 1,454 163,049 37,248 7,817 14,556 1,068,887 412,543 327,706 388,961 242,794 148,014 1,520,018 233,941 730 22,433 145,052 28,947 1,951,121 179,151 86,428 237,534 84,472 221,885 809,470 59,037 4,725 85,706 29,547 7,256 15,838 1,011,579 200 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 41 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 2023 RMB million 2022 RMB million 78,596 22,899 15,735 55,038 4,485 176,753 46,755 20,386 23,995 18,958 3,656 113,750 887 191 278 1,280 – 2,636 83,300 22,863 19,140 58,612 5,181 189,096 45,321 20,588 23,461 17,716 2,820 109,906 2,891 2 415 1,790 571 5,669 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 2023 RMB million 2022 RMB million 2,857,361 157,113 197,741 3,212,215 2,824,140 263,087 230,941 3,318,168 31 December 2023 RMB million 31 December 2022 RMB million 1,426,377 38,068 1,464,445 1,353,771 44,739 1,398,510 201 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 42 PRINCIPAL SUBSIDIARIES As at 31 December 2023, 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) RMB22,761 Interests held by the Company % 100.00 Interests held by non-controlling interests % Principal activities – Coal chemical industry investment management, production and sale of coal chemical products Sinopec Yangzi Petrochemical Company Limited RMB15,651 100.00 – Manufacturing of intermediate petrochemical Sinopec Overseas Investment Holding Limited (“SOIH”) USD3,598 100.00 Sinopec International Petroleum Exploration and RMB8,250 100.00 Production Limited (“SIPL”) Sinopec Yizheng Chemical Fibre Limited Liability RMB4,000 100.00 Company Sinopec Lubricant Company Limited RMB3,374 100.00 – – – – products and petroleum products Investment holding of overseas business Sinopec International Petroleum Exploration 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 China International United Petroleum and Chemical RMB5,000 100.00 – Trading of crude oil and petrochemical products Company Limited Sinopec Qingdao Petrochemical Company Limited RMB1,595 100.00 – Manufacturing of intermediate petrochemical Sinopec Catalyst Company Limited China Petrochemical International Company Limited Sinopec Chemical Sales Company Limited RMB1,500 RMB1,400 RMB1,000 100.00 100.00 100.00 products and petroleum products Production and sale of catalyst products Trading of petrochemical products – – – Marketing and distribution of petrochemical products Sinopec Hainan Refining and Chemical Company RMB9,606 100.00 – Manufacturing of intermediate petrochemical Limited Sinopec Beihai Refining and Chemical Limited Liability RMB5,294 98.98 1.02 Company products and petroleum products Import and processing of crude oil, production, storage and sale of petroleum products and petrochemical products ZhongKe (Guangdong) Refinery & Petrochemical RMB6,397 Company Limited Sinopec Qingdao Refining and Chemical Company RMB5,000 Limited Zhongguo Petroleum & Chemical Sales Company RMB28,403 Limited Sinopec Kantons Holdings Limited (“Sinopec Kantons”) HKD248 Sinopec-SK (Wuhan) Petrochemical Company Limited RMB7,193 (“Sinopec-SK”) Sinopec Shanghai Gaoqiao Petrochemical Company RMB10,000 Limited (“Gaoqiao Petrochemical”) Sinopec Hunan Petrochemical Co., Ltd. (“Hunan Petrochemical”) RMB3,000 Sinopec Shanghai Petrochemical Company Limited RMB10,799 (“Shanghai Petrochemical”) 90.30 85.00 70.42 60.33 59.00 55.00 55.00 50.55 Fujian Petrochemical Company Limited (“Fujian RMB10,492 50.00 Petrochemical”) (i) 9.70 Crude oil processing and petroleum products manufacturing 15.00 Manufacturing of intermediate petrochemical products and petroleum products 29.58 Marketing and distribution of refined petroleum products 39.67 Provision of crude oil pipeline transportation services 41.00 Production, sale, research and development of petrochemical products, ethylene and downstream byproducts 45.00 Manufacturing of intermediate petrochemical products and petroleum products 45.00 Crude oil processing and petroleum products manufacturing 49.45 Manufacturing of synthetic fibres, resin and plastics, intermediate petrochemical products and petroleum products 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. Notes: (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. 202 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 42 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 statement of financial position Marketing Company SIPL* At 31 December 2023 RMB million 202,333 (217,315) (14,982) 324,288 (56,057) 268,231 253,249 At 31 December 2022 RMB million 190,697 (212,593) (21,896) 326,170 (56,147) 270,023 248,127 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 At 31 December 2023 RMB million At 31 December 2022 RMB million Shanghai Petrochemical At 31 December 2022 RMB million At 31 December 2023 RMB million Fujian Petrochemical At 31 December 2022 RMB million At 31 December 2023 RMB million Sinopec Kantons At 31 December 2023 RMB million At 31 December 2022 RMB million Gaoqiao Petrochemical At 31 December 2022 RMB million At 31 December 2023 RMB million 19,529 (936) 18,593 8,983 (11,583) (2,600) 15,993 25,677 (9,468) 16,209 12,869 (11,892) 977 17,186 15,455 (14,573) 882 24,110 (63) 24,047 24,929 15,766 (13,998) 1,768 25,370 (783) 24,587 26,355 3,729 (1,841) 1,888 8,862 (702) 8,160 10,048 1,901 (169) 1,732 10,215 (707) 9,508 11,240 6,118 (207) 5,911 8,001 (255) 7,746 13,657 5,436 (209) 5,227 7,902 (232) 7,670 12,897 18,521 (7,107) 11,414 14,904 (4,050) 10,854 22,268 23,991 (10,162) 13,829 15,681 (5,385) 10,296 24,125 Company 170,919 167,747 9,789 10,121 12,542 13,229 5,024 5,620 8,220 7,764 12,248 13,269 Attributable to non-controlling interests 82,330 80,380 6,204 7,065 12,387 13,126 5,024 5,620 5,437 5,133 10,020 10,856 Summarised consolidated statement of comprehensive income Year ended 31 December Marketing Company SIPL* 2023 RMB million 2022 RMB million 1,814,710 22,418 23,260 1,710,428 20,129 22,644 2023 RMB million 2,952 3,208 (1,193) Shanghai Petrochemical 2022 RMB million 2023 RMB million 92,932 (1,349) (1,304) 82,443 (2,842) (2,665) Fujian Petrochemical 2022 RMB million 2023 RMB million 4,556 (1,196) (1,196) 4,931 (1,925) (1,925) 2022 RMB million 3,308 2,576 6,438 8,259 8,224 (861) 2,659 (646) (1,318) (598) (962) Revenue Profit/(loss) for the year Total comprehensive income Comprehensive income attributable to non-controlling interests Dividends paid to non-controlling interests 6,749 3,453 – – 7 548 – 333 Sinopec Kantons 2023 RMB Million 2022 RMB million Gaoqiao Petrochemical 2022 RMB million 2023 RMB million 549 1,169 1,252 499 195 529 346 734 291 169 60,156 106 105 69,298 3,176 3,181 47 1,436 895 984 Summarised statement of cash flows Year ended 31 December Marketing Company SIPL* 2023 RMB million 2022 RMB million 2023 RMB million 2022 RMB million Net cash generated from/(used in) Shanghai Petrochemical 2022 RMB million 2023 RMB million Fujian Petrochemical 2022 RMB million 2023 RMB million Sinopec Kantons 2023 RMB Million 2022 RMB million Gaoqiao Petrochemical 2022 RMB million 2023 RMB Million operating activities 50,598 43,408 1,947 1,458 664 (7,459) 1,660 2 557 133 (1,507) (1,247) Net cash (used in)/generated from investing activities (22,148) (23,490) 509 11,824 1,973 4,390 (1,644) 653 (633) (1,153) 4,735 4,235 Net cash (used in)/generated from financing activities (27,172) (15,984) (8,394) (1,369) 1,378 (1,169) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents 1,278 3,934 (5,938) 11,913 4,015 (4,238) at 1 January 13,204 8,999 20,040 7,068 889 5,112 Effect of foreign currency exchange rate changes Cash and cash equivalents at 31 December 87 271 160 1,059 2 14,569 13,204 14,262 20,040 4,906 15 889 (28) (12) 27 – 15 (682) (501) (434) (3,229) (2,986) (27) (577) (1,454) (1) 54 – 27 2,224 3,432 18 246 1,665 2,224 3 – 2 2 1 – 3 * The non-controlling interests of subsidiaries which the Group holds 100% of equity interests at the end of the year are the non-controlling interests of their subsidiaries. 203 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202343 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, 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 2023, 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 a loss allowance for expected credit losses 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, 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, 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 financial assets at FVOCI, the Group applies the IFRS 9 simplified approach to measuring ECLs which uses a lifetime expected loss allowance for all trade accounts receivable and financial assets at FVOCI. To measure the ECLs, trade accounts receivable and financial assets at FVOCI have been grouped based on shared credit risk characteristics and the days past due. The ECLs were calculated based on historical actual credit loss experience. The rates were considered the differences between economic conditions during the period over which the historical data has been collected, current conditions and the Group’s view of economic conditions over the expected lives of the receivables. The Group performed the calculation of ECL rates by the operating segment. 204 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202343 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued) Credit risk (Continued) (ii) Impairment of financial assets (Continued) The following table provides information about the exposure to credit risk and ECLs for accounts receivable as at 31 December 2023 and 2022. Impairment provision on individual basis Impairment provision on provision matrix basis Gross carrying amount RMB million Carrying amount RMB million 48,261 326 116 3,965 52,668 8,958 139 34 3,599 12,730 Impairment provision on individual basis RMB million 4 1 25 3,467 3,497 Weighted- average loss rate Impairment provision RMB million Loss allowance RMB million 0.2% 24.6% 45.1% 100.0% 70 46 37 366 519 74 47 62 3,833 4,016 Impairment provision on individual basis Impairment provision on provision matrix basis Gross carrying amount RMB million Carrying amount RMB million 46,097 216 269 3,861 50,443 7,014 29 193 3,487 10,723 Impairment provision on individual basis RMB million 2 25 148 3,405 3,580 Weighted- average loss rate Impairment provision RMB million Loss allowance RMB million 0.1% 20.9% 43.4% 99.2% 56 39 33 371 499 58 64 181 3,776 4,079 31 December 2023 Current and within 1 year past due 1 to 2 years past due 2 to 3 years past due Over 3 years past due Total 31 December 2022 Current and within 1 year past due 1 to 2 years past due 2 to 3 years past due Over 3 years past due Total All of the entity’s other receivables 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 there was no significant increase in credit risk for other receivables by taking into account of their past history of making payments when due and current ability to pay, and thus the impairment provision recognised during the period was limited to 12 months expected losses. 205 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 43 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 2023, the Group has standby credit facilities with several PRC financial institutions which provide borrowings up to RMB416,358 million (2022: RMB454,857 million) on an unsecured basis, at a weighted average interest rate of 2.23% per annum (2022: 2.38%). As at 31 December 2023, the Group’s outstanding borrowings under these facilities were RMB59,815 million (2022: RMB21,313 million) and were included in debts. The following table sets out the remaining contractual maturities at the date of the statement of financial position 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 date of the statement of financial position) 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 Lease liabilities Derivative financial liabilities Trade accounts payable and bills payable Other payables Total contractual undiscounted cash flow RMB million 58,964 177,294 40,605 291,252 2,752 259,000 94,796 924,663 Total contractual undiscounted cash flow RMB million 59,774 94,823 32,222 299,176 7,313 269,424 121,716 884,448 Carrying amount RMB million 58,534 163,049 37,248 181,400 2,752 259,000 94,796 796,779 Carrying amount RMB million 59,037 85,706 29,547 182,411 7,313 269,424 121,716 755,154 31 December 2023 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 58,964 3,958 13,305 18,358 2,752 259,000 94,796 451,133 – 59,114 9,060 12,512 – – – 80,686 – 89,223 8,862 35,821 – – – 133,906 – 24,999 9,378 224,561 – – – 258,938 31 December 2022 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 59,774 2,207 7,813 16,699 7,313 269,424 121,716 484,946 – 13,620 4,288 12,905 – – – 30,813 – 68,180 13,962 36,984 – – – 119,126 – 10,816 6,159 232,588 – – – 249,563 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. 206 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 43 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. (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 does not have significant financial instruments that are denominated in foreign currencies other than the functional currencies of respective entities as at 31 December, and consequently does not have significant exposure to foreign currency risk. (b) 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 2023, 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 RMB1,353 million (2022: decrease/increase by approximately RMB524 million). This sensitivity analysis has been determined assuming that the change of interest rates was applied to the Group’s debts outstanding at the date of the statement of financial position with exposure to cash flow interest rate risk. The analysis is performed on the same basis for 2022. (c) Commodity price risk and hedge accounting 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. Based on the dynamic study and judging of the market, combined with the resource demand and production and operation plan, the Group evaluate and monitor the market risk exposure caused by transaction positions, and continuously manage and hedge the risk of commodity price fluctuation caused by market changes. As at 31 December 2023, 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 2023, it is estimated that a general increase/decrease of USD10 per barrel in basic price of derivative financial instruments, with all other variables held constant, would impact the fair value of derivative financial instruments, which would decrease/increase the Group’s profit for the year by approximately RMB1,139 million (2022: decrease/increase RMB5,104 million), and decrease/increase the Group’s other reserves by approximately RMB4,537 million (2022: increase/decrease RMB192 million). This sensitivity analysis has been determined assuming that the change in prices had occurred at the date of the statement of financial position 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 2022. For the hedge relationship with cash flow hedge accounting applied, the corresponding changes in cash flow hedge reserves are as follows: Beginning of the year Effective portion of changes in fair value of hedging instruments recognised during the year Reclassification adjustments for amounts transferred to the consolidated income statement Amounts transferred to initial carrying amount of hedged items Related tax End of the year The ineffective portion of cash flow hedge relationship is disclosed in Note 8. 2023 RMB million 2022 RMB million 3,079 7,420 (1,245) (3,078) (418) 5,758 7,244 6,667 8,127 (20,560) 1,601 3,079 207 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202343 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 date of the statement of financial position 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 2023 Assets Financial assets at fair value through profit or loss: – Fund Investments 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 2022 Assets Financial assets at fair value through profit or loss: – Fund Investments 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 Level 1 RMB million Level 2 RMB million Level 3 RMB million Total RMB million 3 5,942 120 – 6,065 367 367 – 3,779 – – 3,779 2,385 2,385 – – 330 2,221 2,551 – – 3 9,721 450 2,221 12,395 2,752 2,752 Level 1 RMB million Level 2 RMB million Level 3 RMB million Total RMB million 2 7,857 114 – 7,973 1,293 1,293 – 11,478 – – 11,478 6,020 6,020 – – 616 3,507 4,123 – – 2 19,335 730 3,507 23,574 7,313 7,313 During the years ended 31 December 2023 and 2022, 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, which were influenced by historical fluctuation and the probability of market fluctuation, to evaluate the fair value of trade accounts receivable and bills receivable classified as Level 3 financial assets. 208 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 43 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 2.69% to 5.47% (2022: 2.66% to 4.35%). 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 2023 and 2022: Carrying amount Fair value 31 December 2023 RMB million 170,409 167,014 31 December 2022 RMB million 130,282 125,866 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 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 2023 and 2022. 44 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 material 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. 209 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202344 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, including environmental protection and energy structure transition variables, 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. Accordingly, the Group determines the recoverable amount based on the present value in use. The projected future cash flows of an asset are based on data from the most recent financial budget approved by management, as well as on a stabilized growth rate for the years following the period of that budget. In appropriate and reasonable circumstances, the growth rate can be zero or negative. Projected cash flows based on budgets usually cover five years, or longer periods if that is reasonable. When projecting cash flows for years beyond the budgeted period, the growth rate used does not exceed the long-term average growth rate of the business or markets in which products are located, or the long-term average growth rate of the market in which the asset is located, except where a higher growth rate can be justified. In determining the discount rate, the weighted average cost of capital is usually used as the basis. 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 future selling prices of crude oil, natural gas, refined and chemical products, the production costs, the product mix, production volumes, production profiles, the oil and gas reserves 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 ECLs using readiness matrix, 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 ECLs. 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 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. 45 PARENT AND ULTIMATE HOLDING COMPANY The directors consider the parent and ultimate holding company of the Group as at 31 December 2023 is Sinopec Group Company, a state-owned enterprise established in the PRC. This entity does not produce financial statements available for public use. 210 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 202346 STATEMENT OF FINANCIAL POSITION AND RESERVE MOVEMENT OF THE COMPANY STATEMENT OF FINANCIAL POSITION OF THE COMPANY (Amounts in million) Note 31 December 2023 RMB 31 December 2022 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 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 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 305,439 70,306 90,705 312,553 77,415 23,604 14 6,567 53,907 940,510 64,471 350 3 482 27,878 367 1,644 67,922 85,840 248,957 40,545 6,090 6,420 251 86,642 9,079 284,311 433,338 184,381 756,129 107,484 5,936 86,399 40,077 2,495 242,391 513,738 119,349 394,389 513,738 296,480 81,501 97,656 290,191 75,449 17,239 201 9,487 47,586 915,790 23,228 31,350 2 3,892 33,841 703 1,977 70,376 62,261 227,630 35,954 673 6,682 4,299 111,143 9,769 269,684 438,204 210,574 705,216 54,859 11,433 91,878 38,298 2,954 199,422 505,794 119,896 385,898 505,794 (a) 211 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 　 46 STATEMENT OF FINANCIAL POSITION 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 Other equity movements under the equity method Others Balance at 31 December Share premium Balance at 1 January Purchase of own shares 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 Changes in the fair value of investments in other equity instruments, net of deferred tax Share of other comprehensive income 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 14) Appropriation Special reserve Others Balance at 31 December The Company 2023 RMB million 2022 RMB million 7,038 (36) – 7,002 52,846 (1,778) 51,068 101,009 5,125 106,134 117,000 117,000 4,354 2 (63) (66) (72) 4,155 103,651 51,193 (40,760) (5,125) 72 (1) 109,030 394,389 8,303 (1,265) – 7,038 55,850 (3,004) 52,846 96,346 4,663 101,009 117,000 117,000 9,464 – 10 (5,207) 87 4,354 118,645 46,417 (56,903) (4,663) (87) 242 103,651 385,898 47 NON-ADJUSTING EVENTS AFTER THE REPORTING PERIOD Pursuant to the resolutions of the 15th meeting of the 8th session of the Board of Directors held on 24 March 2023 and the 2022 Annual General Meeting of Shareholders held on 30 May 2023, and with the approval for registration by the China Securities Regulatory Commission in the Reply on Agreeing to the Registration of China Petroleum & Chemical Corporation to Issue Shares to Specific Targets (Zheng Jian Xu Ke [2024] No. 110 (證監 許可[2024]110號)), the Company was approved to issue 2,390,438,247 new shares to specific investors. Based on the actual issuance, the Company issued 2,390,438,247 ordinary shares (par value of RMB1.00 per share at an issue price of RMB5.02 per share) to Sinopec Group Company, a specific investor, raising a total of RMB12 billion. The above-mentioned raised funds has been received on 12 March 2024, and KPMG Huazhen LLP has performed verification procedure on the above-mentioned raised funds and issued a Capital Verification Report No. 2400292. 212 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements (International)NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)for the year ended 31 December 2023 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 Accounting Standards. 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 Accounting Standards, 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 Accounting Standards, payments are expensed as incurred, or capitalised as fixed assets and depreciated according to applicable depreciation methods. (iii) CAPITALISATION OF EXCHANGE DIFFERENCE OF SPECIFIC LOANS Under CASs, exchange difference arising on translation of specific loans and related interest denominated in a foreign currency should be capitalised as part of the cost of qualifying assets. Under IFRS Accounting Standards, such exchange difference is recognised in income statement unless the exchange difference represents an adjustment to interest. Effects of major differences between the shareholders’ equity under CASs and the total equity under IFRS Accounting Standards are analysed as follows: Shareholders’ equity under CASs Adjustments: Government grants Capitalisation of exchange difference of specific loans Total equity under IFRS Accounting Standards* Notes (i) (iii) 31 December 2023 RMB million 31 December 2022 RMB million 958,655 940,457 (868) (1,978) 955,809 (915) – 939,542 Effects of major differences between the net profit under CASs and the profit for the year under IFRS Accounting Standards are analysed as follows: Net profit under CASs Adjustments: Government grants Safety production fund Capitalisation of exchange difference of specific loans Others Profit for the year under IFRS Accounting Standards* Notes (i) (ii) (iii) 2023 RMB million 70,046 2022 RMB million 76,614 47 (248) (1,978) (3) 67,864 52 179 – (346) 76,499 * The figures are extracted from the consolidated financial statements prepared in accordance with the accounting policies complying with IFRS Accounting Standards during the year ended 31 December 2022 and 2023 which have been audited by KPMG. 213 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Differences between Consolidated Financial Statements Prepared in Accordance with the Accounting Policies Complying with CASs and IFRS Accounting Standards (Unaudited)(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH THE ACCOUNTING POLICIES COMPLYING WITH CASS AND IFRS ACCOUNTING STANDARDS (UNAUDITED) This section provides supplemental information on oil and gas exploration and producing activities of the Group and its equity method investments at 31 December 2023 and 2022, and for the years then ended in the following four separate tables. Table I provides costs incurred in oil and gas exploration and development. Table II through IV provide 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. Table I: Costs incurred in oil and gas exploration and development The Group Exploration Development Total costs incurred Equity method investments Total China 23,514 56,940 80,454 23,514 56,782 80,296 Share of costs of exploration and development of associates and joint ventures Total of the Group’s and its equity method investments’ 705 81,159 – 80,296 Table II: Reserve quantities information 2023 RMB million Other countries – 158 158 705 863 Total China 23,269 52,984 76,253 23,269 52,984 76,253 2022 RMB million Other countries – – – 1,796 78,049 – 76,253 1,796 1,796 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 2023 and 2022 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. 214 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements Supplemental Informationon Oil and Gas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) Table II: Reserve quantities information (Continued) The Group Proved developed and undeveloped reserves (oil) (million barrels) Beginning of the year Revisions of previous estimates Improved recovery Extensions and discoveries Production End of the year Proved developed reserves Beginning of the year End of the year Proved undeveloped reserves Beginning of the year End of the year Proved developed and undeveloped reserves (gas) (billion cubic feet) Beginning of the year Revisions of previous estimates Improved recovery Extensions and discoveries Production End of the year Proved developed reserves Beginning of the year End of the year Proved undeveloped reserves Beginning of the year End of the year Total China 2023 Other countries Total China 2022 Other countries 1,659 88 89 130 (250) 1,716 1,506 1,524 153 192 8,802 880 20 819 (1,214) 9,307 7,135 7,525 1,667 1,782 1,642 80 89 130 (245) 1,696 1,489 1,507 153 189 8,802 880 20 819 (1,214) 9,307 7,135 7,525 1,667 1,782 17 8 – – (5) 20 17 17 – 3 – – – – – – – – – – 1,440 275 84 108 (248) 1,659 1,315 1,506 125 153 8,449 806 17 664 (1,134) 8,802 6,734 7,135 1,715 1,667 1,416 277 84 108 (243) 1,642 1,291 1,489 125 153 8,449 806 17 664 (1,134) 8,802 6,734 7,135 1,715 1,667 24 (2) – – (5) 17 24 17 – – – – – – – – – – – – 215 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements Supplemental Informationon Oil and Gas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) Total China 2023 Other countries Total China 2022 Other countries 303 1 2 5 (24) 287 260 253 43 34 4 3 – – (3) 4 3 4 1 – 320 307 4 4 309 9 6 4 (25) 303 263 260 46 43 7 – – – (3) 4 6 3 1 1 – – – – – – – – – – – – – – – – – – – – 1,749 1,962 8,456 8,806 1,416 1,642 8,449 8,802 309 9 6 4 (25) 303 263 260 46 43 7 – – – (3) 4 6 3 1 1 333 320 7 4 Table II: Reserve quantities information (Continued) Equity method investments Proved developed and undeveloped reserves of associates and joint ventures (oil) (million barrels) Beginning of the year Revisions of previous estimates Improved recovery Extensions and discoveries Production End of the year Proved developed reserves Beginning of the year End of the year Proved undeveloped reserves Beginning of the year End of the year Proved developed and undeveloped reserves of associates and joint ventures (gas) (billion cubic feet) Beginning of the year Revisions of previous estimates Improved recovery Extensions and discoveries Production End of the year Proved developed reserves Beginning of the year End of the year Proved undeveloped reserves Beginning of the year End of the year 303 1 2 5 (24) 287 260 253 43 34 4 3 – – (3) 4 3 4 1 – – – – – – – – – – – – – – – – – – – – – Total of the Group and its equity method investments Proved developed and undeveloped reserves (oil) (million barrels) Beginning of the year End of the year Proved developed and undeveloped reserves (gas) (billion cubic feet) Beginning of the year End of the year 1,962 2,003 8,806 9,311 1,642 1,696 8,802 9,307 216 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements Supplemental Informationon Oil and Gas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) Table III: Standardised measure of discounted future net cash flows The following table represents the standardised measure of discounted future net cash flows related to the above proved oil and gas reserves. 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 2023 and 2022 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. 2023 RMB million 2022 RMB million Total China Other countries Total China Other countries 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 1,365,530 (576,620) (105,071) (172,520) 511,319 (146,846) 364,473 1,354,246 (571,451) (102,896) (169,975) 509,924 (146,599) 363,325 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 42,746 (16,828) (6,449) (3,426) 16,043 (7,656) 8,387 – – – – – – – 11,284 (5,169) (2,175) (2,545) 1,395 (247) 1,148 42,746 (16,828) (6,449) (3,426) 16,043 (7,656) 8,387 1,490,949 (635,757) (98,212) (190,893) 566,087 (170,126) 395,961 1,479,098 (630,922) (96,575) (187,900) 563,701 (169,810) 393,891 57,107 (18,011) (7,393) (5,831) 25,872 (13,015) 12,857 – – – – – – – 11,851 (4,835) (1,637) (2,993) 2,386 (316) 2,070 57,107 (18,011) (7,393) (5,831) 25,872 (13,015) 12,857 standardised measure of discounted future net cash flows 372,860 363,325 9,535 408,818 393,891 14,927 217 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements Supplemental Informationon Oil and Gas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) Table IV: 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 2023 RMB million 2022 RMB million (121,932) (75,738) (21,664) 61,899 40,389 21,883 52,985 10,690 (31,488) (1,443) (6,646) 335 329 94 343 1,411 1,107 (4,470) (35,958) (137,885) 185,589 (22,685) 58,610 78,310 11,885 32,342 (51,700) 154,466 (2,018) 3,301 (694) 562 505 311 1,388 (647) 2,708 157,174 218 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Financial Statements Supplemental Informationon Oil and Gas Producing Activities (Unaudited)(D) SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) STATUTORY NAME 中國石油化工股份有限公司 ENGLISH NAME China Petroleum & Chemical Corporation CHANGES IN THE PLACES FOR INFORMATION DISCLOSURE AND THE PROVISION OF REPORTS No change during the reporting period CHINESE ABBREVIATION 中國石化 ENGLISH ABBREVIATION Sinopec Corp. LEGAL REPRESENTATIVE Mr. Ma Yongsheng AUTHORISED REPRESENTATIVES Mr. Yu Baocai 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 E-mail addresses : 100728 : 86-10-59960028 : 86-10-59960386 : http://www.sinopec.com : ir@sinopec.com REGISTERED ADDRESS CHANGE INFORMATION No change during the reporting period PLACE OF BUSINESS IN HONG KONG 20th Floor, Office Tower Convention Plaza 1 Harbour Road Wanchai Hong Kong LEGAL ADVISORS Domestic China: Haiwen & Partners 20th Floor, Fortune Financial Centre No. 5, Dong San Huan Central Road Chaoyang District Beijing PRC Postcode: 100020 Hong Kong, China: Zhong Lun Law Firm LLP 4th Floor, Jardine House 1 Connaught Plaza Central, Hong Kong 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 188 Yanggao South Road Shanghai Pilot Free Trade Zone, PRC H Shares: Hong Kong Registrars Limited R1712-1716, 17th Floor, Hopewell Centre 183 Queen’s Road East Hong Kong 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 PLACES OF LISTING OF SHARES, STOCK NAMES AND STOCK CODES A Shares: Shanghai Stock Exchange Stock short name Stock code : SINOPEC CORP : 600028 H Shares: Hong Kong Stock Exchange Stock short name Stock code : SINOPEC CORP : 00386 NAMES AND ADDRESSES OF AUDITORS OF SINOPEC CORP. Domestic Auditors : KPMG Huazhen LLP Certified Public Accountants in China : 8th Floor Address Postcode Overseas Auditors Address KPMG Tower Oriental Plaza 1 East Chang An Avenue, Beijing, PRC : 100738 : KPMG Public Interest Entity Auditor registered in accordance with the Accounting and Financial Reporting Council Ordinance : 8th Floor, Prince’s Building 10 Chater Road Central, Hong Kong 219 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Corporate InformationCORPORATE INFORMATIONThe Company’s 2023 annual report is disclosed on the website of the SSE (http://www.sse.com.cn) and the Company’s designated information disclosure media China Securities News, Shanghai Securities News and Securities Times. The following documents will be available for inspection during normal business hours after 22 March 2024 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 2023 annual report signed by Mr. Ma Yongsheng, the Chairman; b) The original copies of the audited financial statements and consolidated financial sta tements as of 31 Decembe r 2 023 prepared under CASs and IFRS Accounting Standards, signed by Mr. Ma Yongsheng, the Chairman, Mr. Yu Baocai, the President, Ms. Shou Donghua, the Chief Financial Officer and head of the financial department of Sinopec Corp.; c) The above original auditors’ reports signed by the auditors; and d) Copies of the documents that Sinopec Corp. has published during the reporting period. By Order of the Board Ma Yongsheng Chairman Beijing, PRC, 22 March 2024 If there is any inconsistency between the Chinese and English versions of this annual report, the Chinese version shall prevail. 220 CHINA PETROLEUM & CHEMICAL CORPORATIONAnnual Report 2023Documents 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 

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